Written by Ricardo Piñeres, Regulatory Compliance Counsel
CFPB Extends Privacy Notice Comment Period. On Wednesday, the CFPB extended the comment period for its proposed rule regarding annual privacy notices. The substance of the proposal remains unchanged, but the deadline for comments has been moved from June 12 to July 14. A brief summary of the proposed rule can be found in our May 9, 2014, blog post. Furthermore, NAFCU has published a Regulatory Alert regarding the proposed rule (NAFCU member log-in required to access the alert).
More on NCUA’s Associational Common Bond Proposed Rule. Our April 25, 2014, recap of the April NCUA Board Meeting included a brief summary of NCUA’s Associational Common Bond Proposed Rule. The summary covers two of the three parts of the proposal: the new purpose of formation threshold and the new factors regarding corporate separateness to the “totality of the circumstances” test.
The final portion of the proposal would make the process for adding some associational groups easier. In reviewing past determinations, NCUA has identified certain associational groups that it has historically and regularly determined satisfy the associational common bond requirements. These groups are:
- Alumni associations;
- Religious organizations (including churches or groups of related churches);
- Electric cooperatives;
- Homeowners associations;
- Labor unions;
- Scouting groups; and
- Associations that have a mission based on preserving or furthering the culture of a particular national or ethnic origin.
When a federal credit union applies for one of these groups to be added to its field of membership, the proposal would call for the associational group to be automatically approved, thus not having to go through the threshold or “totality of the circumstances” determinations. While the proposed rule identified the above groups for this fast-track approval, NCUA is seeking public comment on whether other categories of associational groups should be included when the final rule is released. Comments on this issue and the rest of the proposed rule are due by June 30.
Outside of the proposed rule’s changes to the Chartering and Field of Membership Manual, the preamble section of the proposal makes mention of NCUA’s ongoing associational group quality review process. The preamble says:
“[ ] NCUA is finding that associational groups, in conjunction with or at an FCU’s instigation, are adding members outside of the FCU’s historical operating area to increase FCU membership. This practice does not comply with the limitations in the Chartering Manual. Other associations have changed significantly since they were added to an FCU’s [field of membership], and no longer meet the criteria for the totality of the circumstances test they once met. NCUA is currently reviewing several associations. If any of these associations no longer meet the totality of the circumstances test or an association is not operating according to their official bylaws in a way that impermissibly affects credit union membership, NCUA will remove the association from the FCU's [field of membership].”
This is the first instance, that NAFCU is aware of, where NCUA has publically announced this quality review process. That said, the agency notes that it is already in place and is an ongoing program run by NCUA’s Office of Consumer Protection. The program reviews associational groups on a case-by-case basis to determine their compliance with the current associational common bonds requirements. While nothing in the proposal would change this program, NCUA chose to highlight it in the proposed rule in light of the agency’s increasing concerns that federal credit unions are artificially using associational groups for the sole purpose of increasing a credit union’s membership. This concern is also highlighted in NCUA’s September 2013 Letter to Federal Credit Unions where the agency stated its concerns regarding advertisements that claim that a federal credit union’s fields of membership is “open to anyone.” NAFCU will continue to monitor and talk to NCUA about this quality review process.
Lastly, NAFCU has released a helpful Regulatory Alert (NAFCU member log-in required) on the proposed rule, and is currently in the process of developing a comment letter on behalf of our members. NAFCU member credit unions that would like to provide us with input that can be used in our comment letter are highly encouraged to fill out our Associational Common Bond Survey by June 6, 2014.
Free Kick. I am taking a break from my World Cup group previews, so that I can take a moment to express my joy over the fact that the long, nine-year wait for silverware has finally come to an end! It wasn’t pretty, but somehow Arsenal was able to claw their way back after digging themselves an early 0-2 hole in the FA Cup Final. I still believe that the squad needs to be improved during the summer transfer window, and Arsene Wenger must do a better job of ensuring that the team doesn’t start big matches in such a flat manner. That said, I will categorize this season as a success.
Well done, Gunners! Proud to be a supporter of the 2014 FA Cup Champions!!!
Programming Note. NAFCU’s offices will close at noon today for the Memorial Day Holiday and will reopen on Tuesday, May 27. We will be back to blogging on Wednesday, May 28.