NAFCU Compliance Blog

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

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And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

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More Form Changes - The FCRA: Regulation V; The "Real" Deal, as Promised

Written by JiJi Bahhur, Regulatory Compliance Counsel

The Consumer Financial Protection Bureau (CFPB) issued changes to several FCRA forms – which are implemented in Regulation V.  The following forms were affected by these changes:

• Appendix I – Summary of Consumer Identity Theft Rights
• Appendix K – Summary of Consumer Rights
• Appendix M – Notice of Furnisher Responsibilities
• Appendix N – Notice of User Responsibilities.

Of particular importance to credit unions is the “Summary of Your Rights Under the Fair Credit Reporting Act” form (Summary of Consumer Rights), which can be found in Appendix K of the final rule.  Changes to this form included removing the reference to the Federal Trade Commission and replacing it with CFPB instead; updating the addresses for contacting the Assistant General Counsel for Aviation Enforcement and Proceedings and the Surface Transportation Board; and correction of typographical errors in the Spanish language translation at the top of Appendix K. 

Credit unions that use credit reports as part of the hiring, promoting, or firing process (i.e., for an employment purpose) should be cognizant of these changes, as this form must go to employees, or applicants, after the credit union has acquired a consumer report, but before it has taken adverse action based on that report.  Credit unions that use consumer reports for employment purposes should be aware of the requirements, and should have a detailed policy and procedures to ensure compliance. 

Although the effective date of the form changes was November 14, 2012, it looks like the CFPB is giving some leeway on the timeframe to make the changes.  In the meantime, the old model forms will be construed as being in compliance with the FCRA provisions requiring such forms.  From the rule:

“To mitigate the impact of these changes on users of the model forms in the Bureau’s Appendices I, K, M, and N published December 21, 2011, the Bureau will regard the use of those model forms to constitute compliance with the FCRA provisions requiring such forms and will regard those forms to be substantially similar to the corrected forms published today, until further notice. The Bureau anticipates providing that further, notice along with ample time to allow for the orderly discontinuation of the December 21, 2011 model forms, when it issues a final rule to restate Regulation V in 2013.”

That being said, if your credit union uses these forms, it would be a good idea to start taking steps to update to these new forms.  Additionally, it looks like the CFPB has plans to make additional changes to Regulation V in 2013 – so stay tuned.  

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It's a miracle!  The professional photographer was able to catch several photos of all four of us looking at the camera at the same time.  So, as promised, here is the family photo we chose...and of course I had to purchase the rights to all of the pics taken because there were some other memorable photos I just had to have (and I've shared one of those with you all as well).

CFPB Defines Larger Participants for Credit Reporting Market; NAFCU's Economic and CU Issues Monitor

Written by Steve Van Beek

Larger Participants.  The CFPB's regulatory and supervision authority extends beyond depository institutions and into nonbanks.  One part of this authority is the CFPB's ability to define "larger participants" in consumer markets that it will then regulate.  The CFPB had issued proposed rules for the consumer reporting market and the debt collection market and had also issued a general request for comment on other consumer markets for future regulation.    

Consumer Reporting Market.  On Monday, the CFPB announced a final rule that defines "larger participant" for the credit reporting market.  As part of the rulemaking, the CFPB also provided additional information including:

• A Fact Sheet on Regulating the Credit Reporting Market
• Blog Post on How Many Consumer Reporting Companies Exist
• A List of Consumer Reporting Agencies
• A Consumer Advisory Encouraging Consumers to Check their Credit Reports
• A Press Release on the CFPB's Actions to Regulate the Consumer Reporting Market   
• Director Cordray's Speech on Credit Reporting
• An Archived Version of the CFPB's July 16th Field Hearing
• The Final Rule

The CFPB indicates in their final rule that they intend to define "larger participants" in other consumer markets in the near future - most likely next with the debt collection market.  

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Economic Monitor.  The latest issue of NAFCU's Economic and CU Issues Monitor is now available for download.  The Economic and CU Issues Monitor is NAFCU's monthly update on the macroeconomic and financial trends affecting credit unions.  Each month, a "Special Topic" is addressed, concerning various issues of interest to the credit union community.  NAFCU members can download the latest issue here.  Additional resources and information from NAFCU's Research division can be found here.     

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!

Keeping a Record of NCUA's Regs; NAFCU's Comment Letter on TILA/RESPA

Written by Steve Van Beek

On Tuesday we blogged about the FTC's rescission of their regulations that transferred to the CFPB.  We also indicated that NCUA was likely to follow soon after and rescind their rules.  We also included this information about making a copy of the current rules:

"Prior to this occurring, it might be a good business practice to make a copy of the soon-to-be rescinded regulations to ensure your credit union has a copy of the regulations in effect in the past in the case of a member complaint, exam issue or lawsuit."

A very helpful comment highlighted that the Government Printing Office (GPO) retains a copy of each year's CFR in PDF or XML format.  Below are the 2011 PDFs of the rules that transferred from the NCUA to the CFPB.   

Main Rules.  These three rules were transferred either completely (Privacy and SAFE Act) or almost completely (Fair Credit Reporting Act).

• Part 716 - Privacy of Consumer Financial Information
• Part 717 - Fair Credit Reporting
• Part 761 - Registration of Residential Mortgage Loan Originators 

There are a few other regulations listed in the CFPB's Federal Register notice on the transferred regulations but they are not major changes and only impact certain situations.  Part 707 - NCUA's Truth in Savings regulation - is also included on the list but rulemaking authority for Part 707 remains with NCUA.

Note:  Prior years of regulations can be found by using this GPO starting page.  Hat tip to Kennyb.      

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TILA/RESPA Disclosure Combination.  On Monday, NAFCU submitted a comment letter to the CFPB on their plans to combine the TILA and RESPA disclosures.  The comment letter is 7 pages long and highlights areas of concerns as the CFPB continues along their Dodd-Frank mandate.  

Remember:  The CFPB has to have an official proposal out for the TILA/RESPA combined disclosures by July 21, 2012.  Their Know Before You Own project was not an official proposed rule and was not part of the Administrative Procedures Act.   

Consumer Compliance Outlook: Common Compliance Violations

Written by Steve Van Beek

Hope everyone had a great weekend - below is a great resource that might be useful.

Consumer Compliance Outlook.  The Philadelphia Federal Reserve publishes a Quarterly Consumer Compliance Outlook that is usually a valuable resource.  This month's material is especially useful as they walk through common compliance issues seen during examinations.  The PDF of the 1st Quarter 2012 Issue is here and includes: 

• Fair Lending Webinar Questions and Answers
• View from the Field: Commonly Cited Compliance Violations in 2011
• Risk-Based Pricing Notice Requirements: Questions and Answers
• News from Washington: Regulatory Updates
• On the Docket: Recent Federal Court Opinions
• Compliance Alert
• Index of Articles
• Calendar of Events

The Commonly Cited Compliance Violations include:

• Regulation B's requirement for joint intent for joint credit (spousal signatures);
• Regulation B's adverse action notices (lacking content and specificity);
• RESPA's Tolerance Cures;
• Reg C/HMDA Rate Spread, Loan Purpose Definitions and Type of Action Taken; and
• Reg Z Account Opening Disclosures for Open-end Credit. 

We'll look at some of these violations in more detail later this week.  

For now, I'm just glad the Philadelphia Federal Reserve has continued this publication even though authority for the consumer regulations passed to the CFPB.  In the future, I'm hoping the CFPB (and NCUA) realize how useful an informal publication like the Consumer Compliance Outlook can be in highlighting common issues and explaining the requirements to increase compliance among financial institutions.  

More Republishing; Part 707 - Truth in Savings; Wish Granted

Written by Steve Van Beek

A Quick Note:  NAFCU's offices will be closed Friday, December 23rd and Monday, December 26th for the Christmas holiday.  We will be back blogging on Tuesday.  We hope you all have a wonderful holiday weekend!

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We've tracked the CFPB's republishing in Monday and Tuesday's blog posts.  The CFPB hasn't slowed down.  

• Published in the Federal Register on Wednesday, December 21:
  • Equal Credit Opportunity (Regulation B)
  • Fair Credit Reporting (Regulation V)
  • Interstate Land Sales Registration Program (Regulations J, K, and L)
  • Privacy of Consumer Financial Information (Regulation P)
  • Truth in Savings (Regulation DD)

• Published in the Federal Register on Thursday, December 22:
  • Truth in Lending (Regulation Z)

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On December 7th, we blogged on the possibility of the CFPB combining consumer regulations when it conducted its republishing.  Now that the CFPB has made progress on their republishing, we know additional information.  

NCUA will retain authority over Part 707 - implementing the Truth in Savings Act for credit unions.  Footnote 2 of the Proposed Rule contains this information:

"2. Dodd-Frank section 1029 generally excludes from this transfer of authority, subject to certain exceptions, any rulemaking authority over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both. Further, Dodd-Frank section 1100B did not grant the Bureau TISA rulemaking authority over credit unions or repeal the NCUA's TISA rulemaking authority over credit unions under 12 U.S.C. 4311."  (emphasis added)

The proposed regulation (12 CFR 1030) mirrors the current Regulation DD (12 CFR 230) and includes this language in Part 1030.1(c):

"(c) Coverage. This part applies to depository institutions except for credit unions. In addition, the advertising rules in § 1030.8 of this part apply to any person who advertises an account offered by a depository institution, including deposit brokers."

What this means is that NCUA will need to follow the CFPB's lead on Truth in Savings issues just as they did in the past following the Federal Reserve.  The U.S. Code section cited by the CFPB - 12 U.S.C. 4311 - still requires NCUA to adopt a "substantially similar" regulation within 90 days.  NCUA's regulation, which will still be located in 12 C.F.R. 707, will continue to reflect the unique nature of credit unions.  

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This year - my Christmas gift came early.  Two months ago, in fact.       

Michigan's victory over Ohio State wasn't too bad either.  I was able to enjoy The Game with my father-in-law (as he is from Ohio, he didn't enjoy it as much).  Luckily, we were able to get a photo before the game where we both were happy.  

Have a wonderful holiday weekend!

NAFCU's CFPB Page; CFPB Studies; FTC Mortgage Rule

Written by Steve Van Beek

Keeping track of the issues surrounding the CFPB can be quite difficult.  NAFCU's Regulatory Affairs team has created a webpage to help track and monitor the CFPB's actions.  Click here to see the new page.  The page includes links to the CFPB's guidance documents and reports as well as NAFCU comment letters to the CFPB and recent NAFCU Today stories.  

Also, don't forget that the blog itself has categories which allow you to view prior blog posts related to a certain area - such as the CFPB.   

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The CFPB has released two reports that were required by Dodd-Frank.  

• Credit Scores (differences between the score consumers receive and the score lenders use).  Full report is here.

• Remittances (relating to transparency of pricing and their potential use in credit scores).  Full report is here.  

These reports have the potential to be the groudwork for future rulemakings and guidance - so just keep these issues on your radar.  

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With only a few days to spare before the CFPB took over rulemaking authority, the FTC finalized a rule on deceptive mortgage advertisements.  The FTC, CFPB and individual states will have the ability to enforce the new rule - which becomes effective August 19, 2011.  The rule applies to state-chartered credit unions as they fall under the FTC's jurisdiction.  Federally-chartered credit unions are not covered by the new rule but are covered by NCUA's requirements regarding accuracy of advertisements.

Upcoming Compliance Dates

Written by Steve Van Beek

Thursday marks the one-year anniversary of the signing of Dodd-Frank Act.  Of course, that day, July 21, 2011, also marks the day that current federal regulators - including NCUA - transfer authority of consumer regulations to the CFPB.

Dodd-Frank also provided credit unions some wonderful anniversary gifts (isn't it supposed to the other way around?)  A number of provisions of Dodd-Frank become effective on July 21, 2011.  Including:

Regulation CC.  A change in Regulation CC from $100 to $200 for next-day availability.  The Federal Reserve has proposed changes to Reg CC that have not been finalized.  This change to $200 becomes effective though the Federal Reserve has not changed the language of Reg CC.  

This change requires credit unions to review their policies and make sure they are updated.  This present from Dodd-Frank also triggers 229.18(e) of Reg CC which requires credit unions to provide notice of the change to their policy.  This notice is required even though the change is beneficial to members.

Reality Check: Why didn't the Fed propose two different rules?  Rather than confuse the entire financial industry, the Fed could have easily issued one rule to implement the Dodd-Frank change and a separate rule to propose its other changes to Reg CC.

Exemptions to Reg Z & Reg M.  Dodd-Frank also increased the exemptions in Regulation Z and Regulation M from $25,000 to $50,000.  These exemptions were also tied to inflation and will increase to $51,800 after January 1, 2012.

Credit Score Information.  Section 1100F of Dodd-Frank - which requires credit score information to be disclosed on adverse action and risk-based pricing notices - becomes effective July 21, 2011.  The Federal Reserve has issued model forms for credit unions to use and obtain a safe harbor.  

If you are looking for a recap of past blog posts on these changes, see our FCRA category.

NAFCU Members:  The Regulatory Finals on both the adverse action and risk-based pricing notices are available here.

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Outside of the Dodd-Frank requirements, there are other compliance dates impacting credit unions.

Financial Literacy Requirement for Directors.  The financial literacy requirement for credit union directors becomes effective July 27, 2011.  Anthony did a great post  in February which stresses the importance of having a policy in place to document the credit union's efforts.  

Remember that this rule applies to new directors going forward as well.  Within six months of election, directors will need to have the financial skills expected by NCUA.  This means if your election occurs in August - new directors have six months to get up to speed.  Your policy should cover these situations as well as how the CU will address situations where a new director comes aboard between elections.

SAFE Act.  The initial registration for the SAFE Act ends July 29, 2011.  Credit unions need to have their mortgage loan originators registered and ready to go by that date.  Only registered MLOs can originate mortgage loans after July 29, 2011.  NCUA implemented the SAFE Act requirements in Part 761 of NCUA's Regulations.  

Clarifications to the Credit CARD Act.  It has been amazing how many pages of regulations came out of the 33-page Credit CARD Act.  In March, the Federal Reserve issued "clarifications" to its previous three final rules of Regulation Z.  These changes become effective October 1, 2011.  

NAFCU webcast:  Sarah and I will be doing a webcast on August 10, 2011 discussing these new clarifications and potential changes credit unions will need to make prior to October 1.       

Changes to NCUA's Advertising Rules.  In May, NCUA finalized a rule to amend its requirements for the display of the "official advertising logo" on advertisements.  This blog post from May 20 highlights the changes which become effective January 1, 2012.  Importantly, there is no "grandfathering" so existing advertisements are not exempt from these requirements.  Any advertisement used after January 1, 2012 would need to comply with these new requirements.      

Adverse Action & Risk-Based Notices; NCUA Board Agenda; CAN-SPAM

Written by Steve Van Beek

We expect that both the adverse action notices and the risk-based pricing notices will be published in the Federal Register today.  We are not clairvoyant, but there is a process that allows you to see what will be included in the next day's Federal Register pages.  This is the "Public Inspection Desk."    

We will update this blog post when links to the Federal Register become available.  Update (7/15/2011):  

Regulation B (adverse action model forms) here.  

Regulation V (risk-based pricing notices) here.  

Note:  While both the amendments indicate they are effective in 30 days, the underlying requirements of Section 1100F from Dodd-Frank become effective on July 21, 2011.  Credit unions should do their best to get their notices updated and ready for July 21, 2011.

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NCUA has posted the agenda for its July Board Meeting.  On the rulemaking side, there are three items of interest:

1. Final Rule – Parts 700, 701, 702, and 741 of NCUA’s Rules and Regulations, Net Worth and Equity Ratio Definitions.
2. Interim Final Rule – Section 701.30 of NCUA’s Rules and Regulations, Remittance Transfers.
3. Proposed Rule – Part 712 of NCUA’s Rules and Regulations, Credit Union Service Organizations (CUSOs).

The text of these proposals and final rules will be available on the morning of the Board meeting - a familiar date - July 21, 2011.  

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The Federal Trade Commission announced a new CAN-SPAM education tool for small businesses.  The new video discusses "seven things you need to know to comply with CAN-SPAM."  There is also a useful transcript of the video at the bottom of the page.