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.    

Ask CFPB; Reg School; New MBL Bill; 5 Months

Written by Steve Van Beek

A couple of items for Monday morning.

Ask CFPB.  The CFPB announced a new initiative - Ask CFPB - which includes answers to over 350 common questions from consumers (mostly on credit cards and mortgages for now).  The CFPB's blog post is here and the press release is here.

For a split second I thought the CFPB might have taken a step to help regulated entities understand the confusing regulatory requirements.  Alas, we'll keep plowing through piles of cross-references and staff commentary to find the actual requirements. 

Regulatory Compliance School.  We had a great crowd at Reg School with over 150 attendees and 90 of those taking their NAFCU Certified Compliance Officer (NCCO) exams.  Here are a couple of NAFCU Today stories on School:  March 20 (with photo) and March 26.

For those who took the NCCO exams, we hope to have the results to you by the end of this week.  

MBL in Senate.  The Small Business Lending Enhancement Act was reintroduced in the Senate last week as S. 2331.  The new bill is identical to S. 509 but was reintroduced due to procedural reasons which might allow a vote in a shorter period of time.  The NAFCU Today has news stories from last Thursday and Today.    

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Last Friday marked 5 months since our wedding.  I wanted to put together a "Top 5 Things I've Learned" list but it really just comes down to one thing:  Happy Wife, Happy Life.

NAFCU Today: On the Hill; Derivatives; CFPB Expands Complaint Program

Written by Steve Van Beek

As we mentioned on Friday, the NAFCU Compliance Team will be in and out of the office this week as we'll have nearly 150 compliance officers in town for our Regulatory Compliance School.

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NAFCU Today.  I wanted to pass along a couple of recent stories from the NAFCU Today which is written by NAFCU's Communications Team.  If you or someone at your organization wants to receive this daily news feature, you can subscribe to the NAFCU Today here.

As with the Compliance Blog, the NAFCU Today is open to everyone that is interested in learning more about issues impacting credit unions.

Member Business Lending.  Grassroots efforts initiated to urge support of S. 509 - the Small Business Lending Enhancement Act.  

Exam Bill.  Senate bill S. 2160 has been introduced.  This bill is a companion bill to H.R. 3461 and would bring additional transparency and consistency to bank and credit union examinations.    

CFPB Complaints.  The Consumer Financial Protection Bureau has recently expanded their complaint process and are now accepting complaints on consumer checking accounts and private student loans.  

Note:  All the links below will take you to recent NAFCU Today stories.  To see the March 12 edition of the NAFCU Today, you can go to the NAFCU homepage.  

Regulatory Compliance School; NCUA Board Meeting & NCUA Report; Division 3 Update

Written by Steve Van Beek

Just wanted to provide a short note regarding next week.  

Reg School.  NAFCU's Regulatory Compliance School takes place next week.  Our Compliance Team will be in and out of the office next week giving presentations, so please bear with us as our response times will be a little longer than normal.  The blog will continue as usual.  

Study Guide & GPS.  For those attending school next week, we've put together a handy Study Guide to help if you will be taking the exams to obtain your NAFCU Certified Compliance Officer (NCCO) designation.  Additionally, be sure to download your version of the Updated 2012 NAFCU Credit Union Compliance GPS (you will also receive a hard copy of the GPS at School).

Note:  For those not attending Compliance School, the Updated GPS will be available for purchase very shortly.  Blog readers will be the first to know when the Updated GPS is available.    

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NCUA Board Meeting.  Late yesterday, NCUA announced their agenda for next Thursday's NCUA Board Meeting.  You can find the agenda here.

NCUA Report.  NCUA also released their March 2012 issue of the NCUA Report.  This looks to be a good one to read, here is what is discussed:

• Chairman Matz's Corner: CFPB Director Cordray Answers Key Questions on NCUA Webinar 
• Building Wealth and Deposits: An Opportunity for Credit Unions – Individual Development Accounts, Part II
• Board Perspective: Interest Rate Risk Policy and Program
• Board Perspective: The Rites of Spring
• Understanding Credit Union Indirect Lending Programs
• Elements of an Effective Member Business Lending Program
• Trends in Member Complaints and Consumer Inquiries

Quite a few of those look like good reads.  Be sure to pass those along to others at your credit union who might be interested.  

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A quick update on the potential Division 3 basketball matchup between Hope College (my alma mater) and the College of Wooster (my wife's alma mater).  Wooster held up their end of the bargain but Hope fell in double-overtime.

I was really hoping for this matchup as I thought it would be a lot of fun.  I can't say the same about my wife.  Wooster's game finished a good half hour before Hope finally lost.  She spent the majority of that time on the phone with her Dad - who works at the College of Wooster - discussing the potential matchup and rooting against Hope.  As she so elegantly stated it:  "I want Wooster to win and that means Hope needs to lose, so be it."   

MBL Testimony; Repealing Durbin; State of CU Industry; Best Practices

Written by Steve Van Beek

Below are just a couple of items for your Friday.  

NAFCU Today has a detailed recap of Wednesday's testimony on H.R. 1418 - a bill to increase the credit union member business lending cap.

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On Wednesday, Rep. Jason Chaffetz (R-UT) and Rep. Owens (D-NY) introduced H.R. 3156 which would repeal the Durbin Amendment.  NAFCU Today has additional information on this first step of an uphill climb.

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NCUA issued Letter to Credit Unions 11-CU-16 which discusses the State of the Credit Union Industry and includes Financial Trends.  Included in the Letter is this information:

"While overall loan growth remains relatively flat, historically low-rate first mortgage real estate loans continue to grow.  This trend could impact credit unions’ future earnings potential.  Accordingly, NCUA is focusing supervisory efforts on credit unions with elevated levels of credit, interest rate, concentration, and strategic risk." 

NCUA follows this language with additional details on each of these risks that is worth taking a look at.  

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I wanted to thank everyone for the great advice as the Wedding Day approaches (currently in the single digits at 8 days!!)

I also wanted to share my own advice to those who may be in a similar situation now or in the future:

• Try not to move within 30 days of the wedding - especially when your move date coincides with the RSVP response date.  The USPS might be pushing their mail service reliability - but it can take a while for that RSVP from Aunt Edna to finally hit your new mailbox.
• No matter how much you want to say it, please do not mention the fact that if your favorite team continues on in the playoffs they will have a championship game during the wedding.  If you fail this, please do not compound the mistake by indicating the cocktail reception room - with the large TVs - would make a great viewing area.
• And on a serious note - remember that it is not possible to say Thank You enough to your significant other.

Have a great weekend - and Go Blue!      

MBL Hearing; Cordray; BSA Blast

Written by Steve Van Beek

This afternoon the House Financial Institutions Subcommittee will hear testimony on H.R. 1418 - the Small Business Lending Enhancement Act.  In September, we blogged on the details of H.R. 1418.  The increase in each credit union's Member Business Lending cap would not be automatic if this legislation passed and was signed by President Obama.

Gary Grinnell, CEO of Corning CU, will testify on behalf of NAFCU.  NAFCU Today has additional details on today's hearing.  

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The Senate Banking Committee voted last Thursday on Richard Cordray's nomination to be Director of the Consumer Financial Protection Bureau.  The Committee voted along party lines (12 Democrats for, 10 Republicans against).  It is unclear when and if the full Senate will take up Cordray's nomination.

Without changes to the CFPB's structure, it may continue to be a waiting game for a CFPB Director.  

Even without a Senate-confirmed Director, the CFPB can amend existing regulations impacting credit unions (such as Truth in Savings).  For a more detailed discussion of the CFPB's powers without a Director, check out this June 2011 blog post.     

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NAFCU Members.  The October issue of the BSA Blast is now available.

Section 1071; Reg B and the CFPB; MLB

Written by Steve Van Beek

The Federal Reserve recently finalized a regulation regarding Section 1071 of Dodd-Frank.  Section 1071 will require creditors to collect and report data on women-owned and minority-owned businesses and by small businesses.  

Importantly, the CFPB will have authority for Section 1071 for credit unions.  The Federal Reserve's authority extends only to motor vehicle dealers.  Back in April, the General Counsel for the CFPB issued guidance indicating Section 1071 will not become effective until the CFPB proposes and finalizes regulations to implement the data and collection requirements.    

The recent final rule on Reg B indicates the Fed will follow the CFPB's lead and delay the collecting and reporting requirements until detailed regulations are written. 

Thus, while the new requirements of Section 1071 are not currently effective - it is something to keep on your radar if your credit union offers business loans.

In June, a NAFCU witness testified about the increased burden of Dodd-Frank - including Section 1071.

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Apparently, there were some baseball games on last night.  I'm not sure there is any way to describe what happened.  If the playoffs were sneaking up on you (like they did me) - last night was a wake-up call.  

Member Business Lending Cap

Written by Steve Van Beek

Yesterday, NAFCU sent a letter to Speaker Boehner and Minority Leader Pelosi on H.R. 1418 - urging their action to increase the member business lending cap for credit unions.  This bill, The Small Business Lending Enhancement Act of 2011, would increase the member business lending cap to 27.5% of total assets if certain conditions are met.  The legislation is H.R. 1418 in the House, and S.509 in the Senate.

Under the proposed legislation, credit unions would be eligible for the increase if they meet the following:

• Must be considered well capitalized (currently 7% net worth ratio);
• Must have at least 5 years of member business lending experience;
• Must be at or above 80% of the current 12.25% cap for at least one year prior to applying for the increase; and
• Must be able to demonstrate sound underwriting and servicing based on historical performance and strong leadership management.

Additional information on NAFCU's attempts to increase the MBL cap can be found here.

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Have a great weekend!  

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.   

Hearings on Business Lending; Changes at NCUA

Written by Steve Van Beek

Last Thursday was a busy day on the Hill with NAFCU testimony in both houses of Congress.  Mike Lussier, President/CEO of Webster First FCU and NAFCU Board Chair, testified before the Senate Banking Committee on raising the member business lending cap.  The hearing focused on S. 509 which would raise the member business lending cap from the current 12.25% up to 27.5% if certain conditions are met.  Additional information on this bill and a similar version in the House can be found here.

In the House, Mark Sekula, Executive Vice President and Chief Lending Officer of Randolph-Brooks FCU, testified on NAFCU's behalf before the House Small Business Subcommittee on Economic Growth, Tax and Capital Access.  One of the points raised by Sekula was the impact Dodd-Frank would have on member business lending.  Specifically, Section 1071 of Dodd-Frank includes a new collection and reporting requirement for business lending. 

As I've mentioned before, the CFPB has issued one piece of regulatory guidance - which is on the effective date of Section 1071.  A letter from the CFPB's General Counsel indicates these requirements will not take effect until regulations are finalized by the CFPB.

The Federal Reserve maintains oversight of Section 1071 requirements for certain motor vehicle dealers and followed the CFPB's lead - issuing a proposal that delays the effective date of Section 1071 for these entities as well.

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Earlier this week, NCUA announced a few retirements and a couple of promotions.  Bob Fenner, the longtime NCUA General Counsel, will retire August 1st and be replaced by current Deputy General Counsel Mike McKenna.  In the Office of Examination & Insurance, Larry Fazio will be taking over as Director.  Current Director Melinda Love will move to Fazio's current position as Deputy Executive Director until her retirement at the end of the year.  The changes take place August 1st.