NAFCU Compliance Blog

Overdraft Extension; NLRB Notice Delay; MBL Appraisal Opinion Letter

Written by Steve Van Beek

A pretty eventful Spring so far as the CFPB seems to be hitting their stride.  Apologies for politely asking the CFPB to start issuing guidance - who knew they'd begin blasting out Bulletins left and right?  I guess that does show how complex and confusing the existing regulatory environment has become.

Below are a couple of quick items.  Additionally, if you didn't catch yesterday's free webcast with CFPB Director Cordray you can still view the on-demand version (just register first and then view).  

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Overdraft Comment Period Extended.  The CFPB issued a notice in today's Federal Register that it would be extending the comment period for its Overdraft Inquiry until June 29, 2012.  If your CU hasn't submitted comments yet, be sure to take this additional time to do so.  NAFCU's Regulatory Alert is here (12-EA-07) but feel free to send your comments directly to the CFPB as well.  

NLRB Notice.  The deadline for the National Labor Relations Board (NLRB) poster was scheduled for April 30th, 2012.  However, a recent court decision has delayed this requirement until further notice.  Here is from the NLRB's website:

"Important note: The DC Circuit Court of Appeals has temporarily enjoined the NLRB’s rule requiring the posting of employee rights under the National Labor Relations Act. The rule, which had been scheduled to take effect on April 30, 2012, will not take effect until the legal issues are resolved. There is no new deadline for the posting requirement at this time."   

Prior blog postings on this issue can be found here and here.  

NCUA Opinion Letter.  NCUA recently issued their third opinion letter of 2012 - this one on appraisals when selling a participation interest in a member business loan.  If your CU is involved in these types of issues it is best to review the full letter - 11-1126.    

Upcoming Compliance Deadlines - Spring 2012

Written by Steve Van Beek

There are a few upcoming deadlines to make sure your credit union is making progress on.  

HMDA Reporting.  The deadline for HMDA submissions is March 1, 2012.  NCUA issued a Regulatory Alert earlier this month - 12-RA-01 - that highlights the reporting deadline.  

ADA & ATMs.  The March 15, 2012 deadline for compliance with the ADA requirements for ATMs is quickly approaching.  Remember, document your process and your communications with your vendors as it could be useful if there are delays and the CU faces a lawsuit.   

The speech output requirements apply to all ATMs and need to be in place by March 15, 2012.  The physical access requirements apply to ATMs that are altered after March 15, 2012.  The physical access requirements also apply to any new ATMs added after March 15, 2012.  Existing ATMs that comply with the 1991 ADA standards for physical access and are not altered would not need to be modified.  Additional information is available in last month's blog post.

Durbin - Unaffiliated Networks.  The requirement for unaffiliated networks goes into place on April 1, 2012.  This requirement means credit unions need to have two unaffiliated networks - such as one PIN network and one signature network - for processing transactions.  Additional information and details on this requirement can be found in our January 30th blog post.   

NLRB Notice.  Credit unions should be posting the National Labor Relations Board (NLRB) Employee Rights poster by April 30, 2012.  A couple past NAFCU blog posts discussed this issue in more detail:  January 4, 2012 and December 2, 2011.  

NLRB Notice; NCUA Webpages on Corporates & NGN Program

Written by Steve Van Beek

Below are a pair of items for your Wednesday morning.

NLRB Notice.  The National Labor Relations Board has pushed back the deadline for providing the required notice.  Here is from their website:

"As of April 30, 2012, most private sector employers will be required to post a notice advising employees of their rights under the National Labor Relations Act. (The original effective date was postponed.) The notice should be posted in a conspicuous place, where other notifications of workplace rights and employer rules and policies are posted. Employers also should publish a link to the notice on an internal or external website if other personnel policies or workplace notices are posted there."

Information on the rationale behind the postponement is here.  If your credit union is ready, it is probably best to provide the notice now and move on to the next compliance challenge.  We've discussed the NLRB notice requirement in a previous blog post.

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NCUA Webpages on Corporate Resolution & NGN Program.  Last week (and last year), NCUA announced two new webpages that provide additional information on the Corporate Resolution Costs and the NCUA Guaranteed Notes (NGN) Program.  The announcement is here.  

• Corporate Resolution Costs starting page
• NCUA Guaranteed Notes (NG) Program starting page

Each page also contains additional links on the right-hand side with more detailed information.  

NLRB Employee Rights Notice

Written by Steve Van Beek

As of January 31, 2012 most private sector employers will need to post a notice advising employees of their rights under the National Labor Relations Act. While some employers, such as agricultural, airline, and railroad employers, are exempt, credit unions are not specifically exempt and should post the notice by the effective date.

For more information on these requirements, the NLRB has a handy FAQ page and the poster can be downloaded from this page. 

The FAQs are useful.  Below are few examples:

• What if my organization is a non-profit?  Non-profit organizations are not exempted from the NLRA and are thus required to post the Notice.

• What if I am a federal contractor?  Federal contractors already are required by the Department of Labor to post a similar notice of employee rights. A contractor will be regarded as complying with the Board’s Notice posting rule if it posts the Department of Labor’s notice.

• What if I operate a small business?  The Board’s jurisdiction extends to most small business owners. However, some very small employers whose annual volume of business is not large enough to have more than a slight effect on interstate commerce are exempted.  

There are two different standards (retail and non-retail) that determine if the Board has jurisdiction.  The standard is $500,000 for retail businesses and $50,000 for non-retail businesses.  

Naturally, the question is which standard applies to credit unions?  A resource of the NLRB indicates that either standard could apply to credit unions.  Here is what it states:

"1-310  Credit Unions  280-6140 

Credit unions (nonprofit corporations engaged in the extension of consumer credit) are within the Board’s jurisdiction. Credit unions’ operations, like those of many financial institutions, have aspects of both retail and nonretail enterprises. To the extent credit unions lend money to or secure deposits from individuals, their operations appear to be retail in nature. To the extent they invest their funds in Treasury notes or commercial ventures, their activities are nonretail in nature. Thus, the impact on commerce of credit union operations may be measured by either the retail or nonretail standard. East Division, Federal Credit Union, 193 NLRB 682 (1971)."  

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At the end of the day, I don't think either standard provides a useful guide as they are based on volume which is different than an asset threshold.  Rather than wade through the details of the exceptions, the easiest path might be to post the notices and move on to the next compliance challenge.

The FAQs and the main poster page itself provide very useful information.  

Have a great weekend everyone!  

Credit Unions & The Vow to Hire Heroes Act

Written by Quincy Enoch, Associate Director of Legislative Affairs & Military Liason

As you may know, last week, President Obama signed into law The Vow to Hire Heroes Act of 2011 (Heroes Act), which generally provides tax incentives for businesses to hire veterans. 

While federal credit unions are exempt from income taxation, the Heroes Act contains provisions that would enable a FCU to claim tax credits on certain payroll taxes.  Generally, the tax credit is a work opportunity credit.   FCUs, and other qualified tax exempt organizations, may claim:

• 26% (or 16.25% if the employee worked more than 120 hours and less than 400 hours) of the qualified first-year wages with a cap of:
  • $6,000 for veterans unemployed for more than 4 weeks but less than 6 months – Maximum credit of $1,560
  • $14,000 for veterans unemployed for more than 6 months – Maximum credit of $3,640
  • $24,000 for veterans with a service connect disability and unemployed for more than 6 months – Maximum credit of $6,240

The IRS tax form for claiming the credit is IRS Form 5884, but the current form will need to be updated to conform to the Heroes Act. 

To receive the credit, the employer must request and be issued a certification for each employee by a State employment security agency or execute and submit to the IRS a pre-screening notice.  The employer must receive the certification by the day the individual begins work or complete IRS Form 8850, the Pre-Screening Notice and Certification Request for the Work Opportunity Credit.  The IRS Form 8850 can be filled out and submitted up to 28 calendar days after the hire date.

A veteran will be treated as certified if: (1) such veteran is certified by a State employment security agency as being in receipt of unemployment compensation under State or Federal law for not less than 6 months during the 1-year period ending on the hiring date; or (2) the veteran is certified by such agency as being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks (but less than 6 months) during the 1-year period ending on the hiring date.  The time period will determine the tax credit.  The legislation gives Treasury/IRS the authority to provide alternative methods for certification of a veteran. 

In calculating the tax credit, a tax exempt organization may only take into account wages paid to a qualified veteran for services in the furtherance of the activities related to the purpose or function constituting the basis of the organization's exemption.  In addition, the newly hired employee must work for at least 120 hours for any eligibility and 400 hours for full eligibility.  The potential employee must be a first time hire and cannot have been employed by the employer at any time in the past.  

If you have any questions, please feel free to contact Quincy Enoch at qenoch@nafcu.org

Ex Parte Communications; Upcoming Webcasts

Written by Steve Van Beek

The CFPB's General Counsel penned a recent blog post discussing the CFPB's Policy on Ex Parte Communications during the rulemaking process.  The CFPB's policy can be found here.

The blog post provides an overview of which discussions and conversations will be subject to this policy - as well as when the policy starts for a particular rulemaking:

"This policy generally requires public disclosure of ex parte presentations made to CFPB staff concerning a pending rulemaking. This way, the general public will have access to the input that CFPB is receiving.......

.......Once the CFPB publishes a proposed rule in the Federal Register or on the CFPB’s website, the ex partepolicy comes into play. The policy also comes into play when the CFPB publishes an interim final rule with a request for comment. During this stage, the primary way CFPB collects public input is through written comments that are posted on the public rulemaking docket.............................

.........................However, during this stage, members of the public may wish to provide oral or written comments directly to CFPB staff regarding the rulemaking, or CFPB staff may wish to obtain information directly from members of the public. The input CFPB receives in this manner is considered ex parte because it is outside of or in addition to the formal comment process. The CFPB’s policy requires that these ex parte presentations be summarized and disclosed on the public docket. In this way, members of the public can be informed of the input CFPB is receiving. This policy recognizes that ex parte communications can be a valuable source of information that can improve the quality of CFPB’s rulemaking. At the same time, the policy recognizes the need for disclosure to promote openness and fairness." 

Keep in mind that this policy comes into play after a rule has been proposed.  The blog post doesn't discuss if it applies to existing proposed rules that the CFPB inherited from other agencies.  For example, the Fed had quite a few Reg Z proposals that it did not finalize before authority transferred to the CFPB.

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NAFCU has two upcoming HR webcasts that might be of interest to your credit union.  First is an August 31st webcast on Managing Leave under the ADA and the FMLA.  The second webcast is an September 21st webcast on Complying with Wage and Hour Laws.  Both webcasts will feature Manesh Rath, a partner at Keller & Heckman. 

We have a combo package available where credit unions can register for both webcasts and save $100 on the bundle.  For NAFCU members, the webcasts are $199 each or $299 for both.       

Bankruptcy Discrimination; Listen to What They Say; I Read This So You Don't Have To

Posted by Anthony Demangone

Here are a few items worth noting on this fine Wednesday morning.

Bankruptcy Discrimination in Employment.  Is bankruptcy discrimination impermissible for credit unions in the employment context?  Read this fine blog post to dive into the issue. (Kaufman & Canoles.)  Here's their take:

That depends.  According to the Bankruptcy Code, private employers may not terminate or discriminate against current employees on the basis of bankruptcy.  By comparison, public or governmental employers are forbidden not only from terminating employment or discriminating against current employees on the basis of bankruptcy, but also from denying employment on the basis of bankruptcy.  Interestingly, what that means is private employers are not prohibited from denying employment on the basis of bankruptcy.  As a practical matter, private employers who may wish to deny employment on the basis of bankruptcy are reminded to not hire employees until proper credit checks are complete.  Once hired, the additional protections applied to employees complicate matters significantly.

Some of you may have groaned when you read the first two words of their post: It depends.  Stop that groaning!  There are so few black and white areas of the law or compliance these days, I tend to get very nervous when I don't see that phrase.  You may want to forward this post to your HR division.

Listen to What They Say.  Sometimes, you can get a peek into the future with what appears to be a casual statement.  I call this "reading the tea leaves."  One does have to be careful when trying to read too much into such things, but I think it is not wise to look for such statements.  Examples?

1.  CFPB and Credit Cards. Following a recent conference that looked at credit cards since the CARD Act, the CFPB took away four lessons.  Here's one of their take-aways. 

Prior to the CARD Act, there was a wide gap between the initial stated interest rate for a credit card and the actual cost of the credit over time. The CARD Act curtailed certain practices in the credit card industry that created unanticipated costs for consumers. The result has been more transparent pricing: while front end pricing has increased, the overall cost of credit has not.

Now, look at what they said.  The CARD Act curtailed the ability of the credit card industry to led to unanticipated costs for consumers.  This leads to better "front-end" pricing.  I see this to mean the following: All things being equal, the CFPB would like to see front-end pricing.  Non-interest income on loans, and fee-income on share accounts will be under increased pressure from the CFPB and other regulators.  In the past, we've seen credit card penalty fees and overdraft fees being regulated. Next year, it could be NSF fees, account maintenance fees, and the like.  

2.  NCUA and Risk.  If you read NCUA Letter to Credit Unions 11-CU-03, you'll see that NCUA is concerned about three major areas.  

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  • Credit risk.
  • Interest rate risk.
  • Concentration risk.

I am no rocket scientist, but when I see a list like this, and NCUA says it will "continue to close monitor and supervise" in these areas - I pay attention. 

I Read This Stuff So You Don't Have To.  I really like Inside Counsel.  While the magazine is focused on in-house law departments, many of the articles are very useful for any business. And as far as I can tell, it is free.  From the latest issue:

1. Here's a nice article on some basic principles regarding attorney-client privilege.  Yes, discussions with in-house attorneys can gain the protections of this privilege. 
2. This article talks about possible ways to improve ethics training.  
3. The print edition had an article about a recent decision from the 1st Circuit.  In Ahern v. Shinseki, the court basically held that anti-discrimination rules do not protect employees against every "unpleasant" work experience. Here's a snippet:

Toiling under a boss who is tough, insensitive, unfair, or unreasonable can be burdensome, but Title VII does not protect employees from the "ordinary slings and arrows that suffuse the workplace every day." Smith v. F.W. Morse & Co., 76 F.3d 413, 425 (1st Cir. 1996). Nevertheless, generally disagreeable behavior and discriminatory animus are two different things.

Absent some showing that gender-based discrimination polluted the workplace, the plaintiffs' constructive discharge claim must fail. See Wagner v. Devine, 122 F.3d 53, 55 n.4 (1st Cir. 1997) (explaining that "a finding of constructive discharge . . . require[s] some showing that the challenged conduct actually was attributable to the alleged discrimination"); see also Carter v. George Washington Univ., 387 F.3d 872, 883 (D.C. Cir. 2004); Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 718 (3d Cir. 1997).   We add that, notwithstanding the plaintiffs' repeated references to employees taking stress leaves, the work environment that they depict, though far from ideal, was not so difficult or noxious that a reasonable person would have felt compelled to resign. Roman v. Potter, 604 F.3d 34, 42 (1st Cir. 2010); Suárez, 229 F.3d at 54-55. Indeed, the vast majority of the employees who worked under Khatib, male and female, were subjected to the same treatment and chose to stay. This fact underscores the absence of any foundation for a claim of constructive discharge. See Greenberg v. Union Camp Corp., 48 F.3d 22, 28 (1st Cir. 1995).

Now, you may think that because the court ruled in favor of the employer, that this was a victory for the employer. I sure don't see it that way.  This case made it to the federal circuit court.  This employer likely has paid a king's ransom in legal bills.  I'm betting that the affected workplace was full of stress during depositions, discovery, etc. Claims of discrimination can tear a workplace apart.  Boorish behavior by management, while not always impermissible - can lead to large expenses and disruptions.  I've always felt that such behavior increases the risk that an organization will receive a claim of discrimination.   

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Tons of This and That

Posted by Anthony Demangone

When it rains, it pours.  There's a ton to write about, friends.

Interchange. Yesterday, a major hearing was held on the debit interchange issue in the House.  In the Senate, another hearing on Dodd-Frank touched on the debit interchange issue as well.  One newsworthy event was that Fed Chairman Bernanke indicated that the "small issuer" exemption language of the Durbin Amendment may be ineffective in shielding smaller credit unions and community banks from the rules limitations on interchange income.  Here comes a real shocker - Senator Durbin said the Fed Chairman was wrong.   (I tend to agree with Ben on this one, Mr. Senator.)  And interestingly, news stories about a possible Congressional delay on the rule began to bubble up. Our lobbyists were on the Hill all day, making our case. The fight continues. 

NCUA held its monthly board meeting yesterday.  You can access the board materials here.  NCUA provides a recap of the meeting here. Of note:

• The 18 percent usury ceiling was extended.
• NCUA's incentive-based compensation proposal was issued. (I'll blog about this next week.)
• NCUA released an IRPS on chartering new corporate federal credit unions. 
• NCUA issued a rule to replace or remove references to credit ratios from NCUA's regulations.  (They had to thanks to Dodd-Frank.)
• NCUA also issued its monthly share insurance fund report. 

CFPB.  On Wednesday, I had the pleasure of accompanying a number of federal credit union CEOs and NAFCU staffers on a visit with Elizabeth Warren.  Read the NAFCU Today article about the trip. Ms. Warren is very charismatic, friendly, and engaging.  She truly cares for consumers.  She is convinced that if she accomplishes her goals, consumers will be better off, and credit union compliance burdens will drop. Some takeaways from that meeting...

• She has three major priorities.  1. Credit cards.  2.  Mortgage disclosures. 3.  Getting the formerly unregulated to play by the existing rules.  She already has teams working on the credit card and mortgage disclosure issues.
• She has appointed Elizabeth Vale as the Assistant Director for Community Banks and Credit Unions.  We met with Ms. Vale, who seems genuinely eager to hear our side of the story on issues.  

I believe that Ms. Warren means what she says, but I will second her thought that the proof of the pudding is in the tasting.  As one of the CEOs stated to me before the meeting, every time someone talks about streamlining regulatory burdens, there seems to be 5 new documents that must be signed or produced.  As I listened to Ms. Warren, I thought of political stump speeches.  You know, where they promise what they will accomplish once they are in office.  I love those speeches. But they rarely translate into political realities.

In her efforts to protect consumers while reducing our regulatory burdens and leveling the playing field so that bad actors and credit unions play by the same rules, I wish her all the success in the world.  But my job is to worry about federal credit union compliance officers.  I've heard talk of easing regulatory burdens before.  I'm still waiting for that to take place.

By the way, here's a picture of me meeting Ms. Vale. This is clearly my best side. 

Really, that is my best side.  Don't believe me?  Here's the alternative.   That photo clearly shows what twins and Regulation Z will do to a man!

Have a great long weekend, everyone.  Until Tuesday, stay compliant. 

Health Care Reform and Breastfeeding

Posted by Anthony Demangone

We've received a number of questions regarding a component of health care reform law that addresses breastfeeding.  In short, the new law will require larger employers (those with 50 or more employees) to provide a location that is shielded from view and free from intrusion.  Smaller institutions are exempt if complying would create an "undue hardship."  Also the rule states that employers are not required to pay employees who take a breastfeeding break, unless state law requires you to do this.  This part of health care reform became effective when the Affordable Care Act became effective on March 23, 2010.  The Department of Labor is seeking comment on this new requirement.   

 It is worth noting that the DOL is aware of how complicated this rule may be for certain employers.  Imagine fast food restaurants, bus lines and construction sites.  Their response shows that while they are interested in feedback, they do expect people to find a way to comply. Here's what they said in their "request for information:"

The Department is aware that there are many work settings that are not in office buildings, and that this can pose unique challenges to providing an adequate space for nursing mothers to express milk. For example, there are nursing employees who work in retail settings, quick service food stores and restaurants, construction or outdoor work sites, factories, or in other non-office building settings. Some of these workplaces may have limited space available to convert into a designated space to express breast milk. In order to meet the obligations of the law, employers need not create a permanent, dedicated space for expressing milk.    

The Department is aware that many such employers have found ways to provide break time and space for nursing employees even though there was no readily available "unused" space. For example, in restaurants and small retail settings, employers have made spaces normally designated for other purposes available when needed by the nursing mother. Malls or retail shopping centers have designated shared space to be used by employees of the various tenant businesses. The Department would appreciate comments that address the conditions under which spaces such as manager's offices, storage spaces, utility closets, and other such spaces normally used for other purposes could be considered adequate spaces for use by nursing mothers under the statute. In addition, the Department solicits comments on the kinds of shared space arrangements that would be acceptable under the law.    

Similarly, the Department would appreciate comments that address how employers can provide adequate break time and space for nursing employees who are not in a fixed place during a work shift (e.g., bus drivers, mail or parcel delivery workers, law enforcement officers, emergency medical technicians, etc.). In general, the Department would appreciate comments that describe creative solutions to providing break time and space for nursing mothers so that we can share these examples more broadly.

NAFCU is not an HR expert, but here are some resources that might be useful. 

• The Department of Labor has a page dedicated to the "nursing mothers" issue.  The page is a wonderful resource that will really clarify what your credit union has to do.  Keep in mind, though, that no regulations have been issued. 
• The page has this "question and answer" document on this issue. Here are 3 of those "questions and answers" that I found fairly useful:

Do employers need to create a permanent, dedicated space for use by nursing mother employees?
ANSWER: No. A space temporarily created or converted into a space for expressing milk or made available when needed by the nursing mother is sufficient provided that the space is shielded from view, and free from any intrusion from co-workers and the public. The location provided must be functional as a space for expressing breast milk. If the space is not dedicated to the nursing mothers’ use, it must be available when needed in order to meet the statutory requirement. Of course, employers may choose to create permanent, dedicated space if they determine that is the best way to meet their obligations under the law.  

Do employers have to provide a lactation space even if they don’t have any nursing mother employees?
ANSWER: No. The statute requires employers to provide a space for a nursing employee “each time such employee has need to express the milk.” If there is no employee with a need to express breast milk, then the employer would not have an obligation to provide a space.  

If the only space available at a work site is a bathroom, can employers require employees to express breast milk there?
ANSWER: No. The statute specifically states that the space provided for employees to express breast milk cannot be a bathroom. 

• Finally, it is important for credit unions to consider reaching out to other organizations that might be helpful when looking at HR issues.  Perhaps you have an employee that belongs to SHRM or your credit union belongs to the U.S. Chamber of Commerce.   If so, take advantage of those connections. 

 

Exam Issues "On the Radio"; Other "Stuff"

Posted by Anthony Demangone

Yesterday, I had the opportunity to take part in a panel discussion on examination issues, hosted by the Credit Union Times.  You can listen in here.  (Warning - the broadcast will start automatically. Length: roughly 30 minutes.) The discussion was lively, focusing on what credit unions are experiencing, what they can expect, and how they can prepare themselves for examinations. With that in mind, here's a link to NAFCU's "Managing Exams in Challenging Times" white paper.  It is free to NAFCU members and non-members alike. 

Here's some other "stuff."

• EEOC complaints are on the rise.  (Kaufman & Canoles.) Here's a link to the EEOC report.  And if you want to see a very detailed chart showing a historical breakdown of EEOC charges by type, go here. Why do I mention this?  This shows a general up-tick in EEOC claims, which in my mind signals a possible increased risk of an EEOC claim at your credit union. How would you tap down that increased risk?  Training.  For employees and management. 
• The NMLS, the SAFE Act registration system, has announced a series of training programs for financial institutions who will need to register MLOs.   The "how to" series breaks the process into four training programs. 
• The CFPB has a proposal out regarding how it will handle consumer complaints. As I read this, the CFPB plans to share complaint-related information with...well, just about anyone it wishes.  Check out the "routine uses" section on page 2 of their proposal.   When their system is up and running, just be aware that the CFPB will (assuming this proposal makes its way into final form in a similar form) be able to share a consumer complaint about your credit union with NCUA, a Member of Congress in some instances, or law enforcement. For this reason, it may be wise to see how your credit union currently handles member complaints.  Do you track complaints?  How are those complaints resolved?  While I have no data to back this up, it seems to me that the better you handle direct complaints, the less likely it will be that this CFPB complaint process will be problematic.