NAFCU Compliance Blog

Research Tip: Tracking Rulemakings in the Federal Register

Written by Steve Van Beek

We often get questions about the status of certain rulemakings.  For example:

• Has NCUA finalized their Emergency Liquidity proposal?

• Has the CFPB finalized (for the third time) the Remittance Transfer proposal?

• What about NCUA's CUSO proposal?

• Loan Participations?

You get the picture.  To help with this, we created a Pending Regulations Chart which can be found at the end of our Compliance Calendar.  You do not need to be a NAFCU member to view the Compliance Calendar; however, some of the linked resources are for members-only.  

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Federal Register.  There is also a great way to track the rulemakings in the Federal Register automatically.  You can subscribe to the topic "credit unions" to be sure you are emailed whenever a credit union-related rulemaking is published in the Federal Register.  This is especially important as - we are all aware - rulemakings impacting credit unions do not come from just NCUA.  Of course, this isn't a perfect science as some rules might not be coded with the "credit union" topic.  But, I've found it works pretty well.

To subscribe, start out be going to the "credit union" topic page.  Click the "Subscribe" button on the right-hand side.

From here, you'll get a pop-up box that you can enter your e-mail address (or subscribe via RSS feed).

You can choose to receive all "credit union" topics or only those labeled as "significant actions."  For me, I'm not one to trust the self-labeling of "significant" by the regulators - so I subscribe to the broader group.

Have a great week!

FinCEN’s Rule on Non-Bank Residential Mortgage Lenders and Originators

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this month, FinCEN issued a notice and reminder to non-bank residential mortgage lenders and originators (RMLOs) to remind them of their new compliance obligations under FinCEN’s regulations.  On February 14, 2012, FinCEN published a final rule requiring RMLOs to develop an anti-money laundering (AML) program and report suspicious activity.  The effective date of this rule was April 16, 2012, and the compliance date was August 13, 2012.

The rule does not impose new requirements on credit unions which are already subject to AML and suspicious activity reporting requirements.  However, the rule does apply to credit union service organizations (CUSOs) involved in residential mortgage services that meet the definition of an RMLO under 31 CFR 1010.100(lll)(1):

“(1) Residential mortgage lender or originator. A residential mortgage lender or originator includes:

(i) Residential mortgage lender. The person to whom the debt arising from a residential mortgage loan is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement, or to whom the obligation is initially assigned at or immediately after settlement. The term “residential mortgage lender” shall not include an individual who finances the sale of the individual's own dwelling or real property.

(ii) Residential mortgage originator. A person who accepts a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan.”

A CUSO that meets the definition of an RMLO must establish an AML program that includes:

• Internal policies, procedures, and controls
• A designated compliance officer
• Ongoing training
• Periodic independent testing

 RMLOs are also required to file suspicious activity reports (SARs) but they are not required to comply with currency transaction reporting (CTR) requirements.  (Note: these large currency transactions remain subject to reporting on FinCEN Form 8300).

 In addition to the notice and reminder, FinCEN has created a page on its website with more information for RMLOs subject to the rule.

CFPB Releases Semiannual Regulatory Agenda - Spring 2012; Seminar in Seattle

Written by Steve Van Beek

CFPB Regulatory Agenda.  Yesterday, the CFPB posted its Semiannual Regulatory Agenda - for spring 2012.  The previous Semiannual Regulatory Agenda was released in February 2012.  The latest release follows the same format and includes a listing of regulations in the various rulemaking stages: prerule stage, proposed rule stage, final rule stage, long-term actions and completed actions.  

Below is a listing of the various future regulations - organized by rulemaking stage.  Keep in mind the agenda is current as of April 13, 2012 and the CFPB has taken numerous actions since putting this agenda together.    

Prerule Stage:

• Registration of Certain Nonbank Covered Persons
• Supervision of Larger Depository Institutions and Affiliates
• Home Mortgage Disclosure Act (Regulation C)
• Requirements for Prepaid Cards (Regulation E) 

Proposed Stage:

• Amendments to TILA and FIRREA Concerning Appraisals
• Disclosure Rules and Substantive Protection for Certain High Cost Mortgage Loans (Regulation Z)** (proposed on July 9th)
• Mortgage Originator Standards (Regulation Z)
• Mortgage Servicing (Regulation X; Regulation Z)
• TILA/RESPA Mortgage Disclosure Integration (Regulation X; Regulation Z)** (proposed on July 9th)
• Credit Card Pre-Opening Account Fees (Regulation Z)
• Procedural Rule To Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination
• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets (LP 2) 
• Copies of Appraisals or Other Valuations To Be Furnished by Creditor (Regulation B)

Final Rule Stage:

• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets (LP 1)** (finalized on July 16th)
• Disclosure of Records and Information
• State Official Notification Rule
• Rules Relating to Investigations
• Rules of Practice for Adjudication Proceedings
• Restatement of Federal Consumer Financial Law Regulations
• Requirements for Escrow Accounts (Regulation Z)
• TILA Ability to Repay (Regulation Z)
• Confidential Treatment of Privileged Information
• Disclosure Rules for Remittance Transactions (Regulation E)

Long-Term Actions:

• Alternative Mortgage Transaction Parity (Regulation D)
• Business Lending Data (Regulation B)
• TILA Mortgage Amendments (Regulation Z) 

Completed Actions: 

• Disclosure Rules for Remittance Transactions (Regulation E)

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Only 27 potential rulemakings!!  The Regulatory Agenda also includes a short summary of each rulemaking that is useful for providing a quick overview of what will be covered by the rulemaking.  However, as last Monday's proposed rules show - a short summary doesn't do much when the proposals are 1099 pages and 293 pages.  

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NAFCU's 2012 Regulatory Compliance Seminar.  Luckily, you don't have to read and understand all 27 potential rulemakings on your own.  We'll be covering quite a few of them at our 2012 Regulatory Compliance Seminar in Seattle, Washington - October 23-26.

The program-at-a-glance is available here (and we'll be including additional sessions as the proposals continue to flow).  We already have a session on the TILA/RESPA mortgage disclosures, the upcoming mortgage servicing proposal (including the periodic statement requirement) as well as a session on the remittances final rule.  Detailed session descriptions can be found here.

Remember - you do not need to be a NAFCU member to attend.  And, Save $100 if you Register by August 31st!

CUSO & Loan Participation Proposals; Regulatory Review; Q&A with NAFCU Compliance

Written by Steve Van Beek

Yesterday, NCUA announced an extended delay (via Twitter) for both the CUSO and Loan Participation proposed rule.  Remember, we revisited both of these proposals recently on the blog:

• Finalizing the CUSO Proposal
• Revisiting the Loan Participation Proposal

This extended delay (and, hopefully, complete rescission) of these proposals follows NAFCU's advice in our comment letters to NCUA (CUSO Comment Letter and Loan Participation Comment Letter).   

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NCUA Regulatory Review.  NAFCU is still looking for comments for our Comment Letter to NCUA on their annual regulatory review of 1/3 of their regulations.  NAFCU's Regulatory Alert (12-EA-12) has additional details.  Feel free to send along any and all suggestions for changes to NCUA's regulations to reduce the regulatory burden on credit unions.  Comments are due to NAFCU by July 6th and to NCUA directly by August 3rd.  

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Q&A with NAFCU's Compliance Team.  The July/August issue of NAFCU's The Federal Credit Union magazine has a lengthy Q&A with JiJi, Bernadette, Mike, Shari and myself.  If you always wanted to put a face to the folks writing the blog posts or helping with compliance questions - here is your chance!  Enjoy!

Have a great weekend everyone!   

Member Complaints & Reputation Risk; CUSO Rule Delayed

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday we blogged about the CFPB's new Consumer Complaint Database. We mentioned that unfounded complaints can present a reputation risk to credit unions. Today we want to focus on NCUA's procedures and guidance for complaints made to NCUA, and some steps that credit unions can take to manage their reputation risk.

NCUA's Office of Consumer Protection (OCP) is NCUA's newest office and is responsible for member complaints. OCP maintains a Consumer Assistance Center which contains the page "Help With My Credit Union" designed to help members with the complaint process. NCUA states the following regarding when to file a complaint with NCUA:

"First, Attempt to Resolve the Complaint Directly with Your Credit Union 

Before you contact NCUA, please contact the credit union directly to attempt to correct the problem. You can do this over the phone, in person or in writing. If you believe the credit union's staff is unresponsive to your inquiry or complaint, address your concerns in writing to the president or chief executive officer of the credit union or the credit union’s supervisory committee."(emphasis added).

As you can see, NCUA stresses the importance of trying to resolve the complaint directly with the credit union before submitting a complaint to NCUA. This is a great opportunity for your credit union to manage your reputation risk. As we have talked about in the past, there are bound to be some complaints received at your credit union, but poor handling of member complaints can negatively affect your credit union's reputation. Here are some steps that your credit union can take to mitigate these reputation risks arising from complaints:  

• Establish a process for handling member complaints and train your staff to implement it. Prompt responses to member complaints will hopefully resolve the issue and prevent a complaint from being submitted to NCUA.
• Create written policies and procedures for member complaints.
• Monitor the complaints that you receive. This will help you identify patterns in complaints and help you take corrective action where necessary.

Even with effective reputation risk management and an effective complaint response program at your credit union, some complaints may still be submitted to NCUA.  We'll talk more about the actual complaint process in a future blog post.

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CUSO Rule Pulled.  Yesterday, NCUA heeded NAFCU's advice and removed their CUSO rule from their June Board Meeting.  And, since the CUSO rule was the only agenda item - canceled the open meeting.  NAFCU Today has more information.

Finalizing the CUSO Proposal

Written By JiJi Bahhur, Regulatory Compliance Counsel

 

NCUA will be discussing its final rule on credit union service organizations (CUSOs) at its next Board Meeting on June 21.  As you may recall, the proposal has been around for about a year, but with the 290 or so comment letters received, including one from NAFCU, finalizing the proposal has required NCUA to take a look at some of its provisions as initially written in the proposal.  The likelihood of potential changes to the original proposal stems from the fact that a large number of commenters opposed many of the agency’s proposed provisions. 

As released last summer, the CUSO proposal:

• Would extend NCUA’s regulatory reach over CUSOs by requiring CUSOs to submit financial reports annually to the NCUA and state regulators.  The reports would provide the regulators with financial information, a list of services the CUSO provides, a customer list, and information about the CUSO’s board and management.

• Would extend the CUSO rule, including the proposed financial reporting requirement, to CUSO subsidiaries.

• Would extend a number of provisions in the CUSO rule that only apply to federal credit unions to federally-insured state chartered credit unions (FISCUs) as well. 

In a recent Washington Post article, NCUA Chairwoman Debbie Matz stated that some items for consideration before the proposal is finalized is the frequency of the reporting requirements and also giving CUSOs 60 days, rather than the proposed 30, to register with the agency.  Other considerations will relate to placing parameters or limitations on the investment cap.

For more details on what the original proposal entails, here is the proposal from last summer.  Affected sections of NCUA’s rules and regulations include Parts 712 and 741.222.  

Some other resources on the matter:

• NAFCU’s Comment Letter (available to the public)

• NAFCU’s Regulatory Alert (available to members only)
• NAFCU's On-Demand CUSO Webcast (available to all credit unions, regardless of membership or charter type)

 

Member Complaints; NAFCU's 2012 Regulatory Compliance Seminar

Written by Steve Van Beek

Consumer and member complaints are at the forefront of quite a few conversations right now (including quite a few news articles).  The CFPB's promotion of their complaint process is one reason for this uptick in discussion as is the centralized complaint process for financial products.  

The CFPB issued their 2011 Annual Report on Consumer Complaints and it is full of useful information to review.  Here is a snapshot of the results:

"Between July 21 and December 31, 2011 the CFPB received 13,210 consumer complaints, including 9,307 credit card complaints and 2,326 mortgage complaints.

Forty-four percent of all complaints were submitted through the CFPB's website and 14.7 percent via telephone calls.  Referrals from other regulators accounted for 34.9 percent of all complaints received.  The rest were submitted by mail, email, and fax."

Future reports will include even more details - including complaints in new areas such as private student loans, auto loans and checking accounts.  Be sure to review the full report or pass it along to the appropriate person at your credit union.   

NCUA.  The March 2012 edition of the NCUA Report also included an article on Trends in Member Complaints and Consumer Inquiries.  Of note, the article indicates that of the complaints received in 2011 less than 1 percent involved a consumer compliance violation.  Of that 1 percent, half of those were related to timing issues related to the error resolution process under Regulation E.  

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NAFCU Regulatory Compliance Seminar.  October seems like a long way off but it will be here before you know it.  We are in the process of putting together the content and agenda - so please feel free to send in any comments, ideas or suggestions.  We love your input and this conference is really about you all so let us know what you need.

Here is what we are tentatively looking at so far (topics are subject to change, of course):

• TILA/RESPA Mortgage Disclosures
• Upcoming Mortgage Servicing Requirements
• The Latest on Overdraft Protection
• Remittance Transfers under Regulation E
• CUSOs
• Loan Participations
• Bank Secrecy Act Changes
• Social Media
• NCUA Update
• CFPB Update

I think that is a pretty good start - but let us know what you are looking for and how we can make NAFCU's 2012 Regulatory Compliance Seminar even better than the past.  

Recertification for NCCOs.  Remember, attending Regulatory Compliance Seminar is the best way to recertify your NAFCU Certified Compliance Officer (NCCO) designation.  Seminar offers 24 CEUs which is enough to fully recertify for two years.

Seattle, Washington.  Did I mention Seminar was in Seattle?  Right Downtown?  Well, now I have.  Hope to see you October 23-26, 2012!    

The CFPB and NonBanks; Upcoming NAFCU Webcasts

Written by Steve Van Beek

Last week, the CFPB issued a proposed rule to define "larger participants" in two consumer financial services markets.  The proposal targets the debt collection and consumer reporting markets.  Earlier this year, the CFPB issued a Notice and Request for Comment on how best to define "larger participants" and on which markets to focus on.

The Notice and Request for Comment was issued when the CFPB did not have a Director.  Without a Director, the CFPB had been unable to regulate nonbank institutions - including defining "larger participants."  Now that the CFPB has a Director, it can move forward with its NonBank Supervision Program.  

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Dodd-Frank gave the CFPB authority to supervise any nonbank entity in three markets: (1) mortgage origination and servicing; (2) payday lending; and (3) private education lending.  The CFPB has the ability to supervise entities operating in these markets regardless of their size.

For other consumer markets, the CFPB must define "larger participants" and their recent proposed rule for the debt collection and credit reporting markets was their first steps in that direction.

The CFPB's Notice and Request for Comment indicating the CFPB was also going to be looking at the following consumer financial services markets:

• Consumer Credit and Related Activities;
• Money Transmitting, Check Cashing, and Related Activities;
• Prepaid Cards; and
• Debt Relief Services.

The CFPB still has the ability to define "larger participants" in these markets in the future.  The CFPB would need to propose a separate proposed rule to cover these markets (or add new markets) in the nonbank supervision process.

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March NAFCU Webcasts.  NAFCU has a pair of webcasts coming up in March that might be of interest.  Remember, NAFCU's webcasts are open to everyone.  They are also available for viewing for a year after the original live webcast.  Thus, if you and your colleagues can't make the live webcast - you can still view the content at a later date.  This "on-demand" feature also works great for sharing the webcast with others at your credit union who could benefit from the information.

• Wednesday, March 7, 2012:  Preparing for the Heightened Scrutiny of CUSOs featuring Katherine Weber of The Weber Law Firm.
• Thursday, March 15, 2012:  Powers of Attorney and Subpoenas - The Risks, Abuses and Potential Liabilities of Credit Unions featuring Andy Keeney of Kaufman & Canoles. 

The full listing of NAFCU's live and on-demand webcasts can be found here.  Additionally, we are always looking for webcast ideas that would be useful to credit unions.  If you have ideas or suggestions, please email us at compliance@nafcu.org.   

NCUA Legal Opinion Letters - CUSOs; MBLs

Written by Steve Van Beek

NCUA recently published two legal opinion letters.  One discusses a credit union service organization's (CUSO) ability to lease property to credit unions and the members of affiliated credit unions.  The letter, NCUA Legal Opinion Letter 11-0642, is very detailed and fact specific so be sure to view the full letter.   

The second letter, NCUA Legal Opinion Letter 11-0734, discusses loans to professional musicians to purchase musical instruments.  From the letter:

"We do not consider IRS treatment of an expense to be determinative of whether a loan qualifies for MBL treatment under NCUA Part 723. Similarly, the fact that an item may be purchased for a non-business purpose is not controlling.  For example, a $50,000 loan to purchase an automobile for use as a taxicab or package delivery truck is an MBL and not a personal loan.  It is the loan’s actual purpose and amount, absent any applicable exemptions, that determine whether the loan is an MBL.

It is our view the instrument loan provides a means for your professional musician members to purchase a musical instrument for use in their trade as paid musicians.  The musical instrument is a tool of the musician’s trade and is acquired for use in a business capacity.  Therefore, where a loan to a member for this purpose totals $50,000 or more when aggregated with other such loans to the member,  the loan is an MBL and subject to Part 723."  (emphasis added).

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Michigan Alert:  Perhaps not the most scientific poll - but Good Morning America viewers did name Sleeping Bear Dunes on Lake Michigan the "Most Beautiful Place in America."  

If you get a chance to visit northern Michigan, you will not be disappointed.   

Uncertainty; Reg Alerts and Finals; College Football

Written by Steve Van Beek

The CFPB now has authority for the consumer laws and regulations.  This means they are the agency with authority to interpret Regulation Z; the Fair Credit Reporting Act; the SAFE Act regulations; Regulation B; Regulation E; Truth in Savings regulations and the list goes on.  

Unfortunately, this is leaving financial institutions with a lot of uncertainty.  Let's use a concrete example - the recent clarifications to the Credit CARD Act - implemented in Regulation Z. 

• The clarifications were proposed and finalized by the Federal Reserve;
• The CFPB took over authority for Regulation Z on July 21, 2011;
• The clarifications become effective October 1, 2011; and
• Credit unions below $10 billion in assets will be examined by NCUA.

So, we have one agency finalizing a regulation but authority transfers to a new agency soon after and a third agency examines institutions.  

I know the paint isn't even dry on the CFPB - but I guess I was hoping the CFPB would be providing some guidance to the industry.  Currently, their webpage is completely consumer focused with three guidance documents (none clarifying existing requirements) tucked on the very bottom of the page.   

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NAFCU's issued Regulatory Alerts on the CFPB's Disclosure of Records and Information proposal as well as NCUA's Credit Union Service Organization (CUSO) proposal.  Both can be found here.

We've also issued our Regulatory Final on NCUA's interim final rule for Remittances under 12 C.F.R. 701.30.   

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I may have missed the 100 day countdown to the wedding - but I didn't miss the 30 day countdown to college football - specifically Michigan football (YouTube) - yesterday.  This doesn't reflect my priorities, however.  I will continue to argue it is extremely difficult to track 100 days when months have different number of days.  

My brothers and I at the 2006 Michigan-Wisconsin game.

If you are not a Michigan fan - you are still welcome at the Big House.  You just might not have as good of seats (and you will be a bit outnumbered).