NAFCU Compliance Blog

The Federal Credit Union (TFCU) Magazine; Flood; NCUA Regulatory Review

Written by Steve Van Beek

A couple of weeks back, we highlighted the Compliance Central articles in past The Federal Credit Union magazine editions.  Well, NAFCU has recently updated and enhanced The Federal Credit Union and released a reader-friendly digital version.

To view the May/June issue of The Federal Credit Union go here and click on the image.  The digital version is interactive allowing you to click on a particular article and be taken directly to that page.  This month's issue includes articles on:

• The 55+ Advantage - How credit unions are leverageing opportunities with older Americans.
• In the Year 2022 - Are credit unions prepard for the mobile future?

This is in addition to the usual Compliance Central articles and views from NAFCU's President/CEO Fred Becker and NAFCU's Chair.  Again, the digital version is available here.  

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Flood.  The House seems on track to pass a flood insurance extension - providing an additional 60-days of coverage.  Something tells me we'll have similar stories and discussions in a few months on flood.  Additional information is available in the NAFCU Today.

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NCUA's Regulatory Review.  NAFCU has released its Regulatory Alert (12-EA-12) on NCUA's Annual Regulatory Review of its regulations.  Take a minute to analyze the regulations under review and send along your comments.  Now is the time to voice your comments and frustrations with the existing regulations.  And, by sending your comments to NAFCU - you can get your message to NCUA anonymously.  

More on Prepaids; NCUA Grants Available; NCUA on YouTube; Flood Insurance Update

Written by Steve Van Beek

Below are just a couple short items to help you ease into the upcoming long weekend.

CFPB ANPR on Prepaids.  The CFPB's ANPR was published today in the Federal Register.  Comments are due by July 23, 2012.  NAFCU members - our Regulatory Affairs team will have a Regulatory Alert out in the near future.

For more on prepaids, the CFPB's press release is here and Director Cordray's speech is here.  

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NCUA Grants and Loans.  Credit unions with a low-income designation might want to take a look at NCUA grants and loans through their Community Development Revolving Loan Fund (CDRLF).  NCUA has a YouTube video with additional details on the program.  

Importantly, NCUA has prioritized its 2012 grants for the following:

• Financial literacy and education in school branches;
• New product and service development;
• Staff, official, and board member training;
• Student and job creation internships; and
• Volunteer Income Tax Assistance. (emphasis added).

Additional information on the process can be found in Letter to Credit Unions 12-CU-04 and the Enclosure (which includes the grant guidelines).  

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NCUA's May Economic Update.  NCUA has a new Youtube video with their May 2012 Economic Update.  

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Flood Insurance.  The NAFCU Today has the latest on a possible Flood Insurance extension.  If you are interested in having the NAFCU Today emailed to you each day, you can sign up here.  The NAFCU Today is open to everyone who is interested.   

Regulatory Burden: Piles of Old Guidance

Written by Steve Van Beek

Today we'll continue an irregular series on different types of regulatory burden.  We've already looked at short-term regulatory burden and used NCUA's sloppy implementation of a new Equal Housing Lender Poster as a prime example. 

Regulatory Burden from Guidance.  This issue - guidance - is a difficult one as credit unions (and trade associations like NAFCU) regularly ask regulators for guidance on particular issues.  And, we usually prefer flexible guidance over stiff and rigid regulations.  

That being said, there are numerous issues that develop when regulatory agencies simply pump out more and more guidance without ever taking a holistic view of what they've said in the past and whether it is still accurate and up-to-date.  

Guidance Doesn't Go Away.  One of the issues with guidance is that it doesn't usually get swept into normal regulatory review processes.  For example, it doesn't look like NCUA plans on reviewing their past Letters to Credit Unions or Opinion Letters in their annual regulatory review.  

I've mentioned before that NCUA has written 30 legal opinion letters just on 12 CFR 701.33 (compensation for officials).  I don't think credit unions would be expecting too much if NCUA were to condense and consolidate their various opinions (and perhaps amend the actual regulation if it is written in such a confusing manner to prompt continuous letters of interpretation).    

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Examples from Other Regulators.  Of course, NCUA isn't the only regulator that has a problem with piles and piles of past guidance stretching back decades.  However, it does seem other regulators have started taking steps to help those trying to comply by rescinding outdated guidance.  This helps entities as there is less "noise" to wade through when finding and analyzing the regulator's expectations.  

Fed Removes Outdated Supervisory Letters.  Bravo!!  What a small, yet important step especially as the Dodd-Frank regulatory train continues to chug along dropping 400-page proposals and regulations at each stop.  On April 12th, the Fed issued a Letter which identified forty-three past Supervisory Letters that were "outdated."  Here is from the release:

"Federal Reserve Board staff have identified certain previously issued guidance that should now be inactive.  Forty-three SR letters have been determined to be inactive and no longer applicable to the Federal Reserve’s supervision program.  In many cases, the information transmitted in these issuances has become outdated or has been superseded by subsequent regulations, policies, and guidance."  (emphasis added).

FDIC Financial Institution Letters.  The FDIC's main Financial Institutions Letters page has links for both existing letters as well as inactive letters.  An easy, simple method to prevent confusion and clarify which letters are still active and up-to-date.  Note: NCUA uses this method for IRPS but not for Letters to Credit Unions or Opinion Letters.    

OTS and OCC.  These are essentially one and the same now due to Dodd-Frank.  This also means there is a lot of duplicative guidance that had been issued by the OCC and the OTS.  How are they handling this?  Very nicely.  Check out this example of a 2004 Thrift Bulletin that was duplicative with an OCC Bulletin.  

Ok, that is a special situation, right?  Well, the OTS was rescinding - and making clear a letter was rescinded - well before Dodd-Frank came along.  Here is an example of a 2004 Letter that OTS had rescinded as outdated.  And, the OTS threw in an extra bonus by including a link to the Regulatory Bulletin that made the 2004 Letter outdated.   

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NCUA.  As I mentioned earlier, NCUA is in the process of reviewing one-third of their regulations.  This provides them with the perfect opportunity to expand their review beyond the regulations and to the numerous guidance documents they have issued over the years.  If they did, I'd guess they would find piles of past guidance that is no longer applicable and is causing unnecessary confusion throughout the credit union industry.  

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Wow - that got a little long and winded.  Congratulations if you made it this far - have a great Mother's Day weekend! 

If you made it this far - and had forgot about Mother's Day - you're welcome!   

CFPB to Study Arbitration Agreements; NCUA on YouTube

Written by Bernadette Clair, Regulatory Compliance Counsel

The CFPB has announced the beginning of its inquiry into arbitration clauses.  You can find the CFPB’s press release here. 

Why arbitration agreements? Section 1028(a) of Dodd-Frank requires the CFPB to study arbitration agreements.  From Dodd-Frank:

“SEC. 1028. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.

(a) STUDY AND REPORT.—The Bureau shall conduct a study of, and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.”

As a preliminary step, the CFPB issued a notice and request for information last week.  At this point, the CFPB is not asking how it might exercise rulemaking authority over arbitration agreements, or even whether it should regulate in this area.  Rather, the CFPB is looking for information from the public that will help define the scope of its study, as well as appropriate methods and sources of data for conducting the study.

Questions in the CFPB’s request for information focus on:

• The prevalence of arbitration clauses in consumer financial products and services;
• What claims consumers bring in arbitration against financial services companies;
• If claims are brought by financial services companies against consumers in arbitration;
• How consumers and companies are affected by actual arbitrations; and
• How consumers and companies are affected by arbitration clauses outside of actual arbitrations.

The comment deadline is June 23, 2012.

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NCUA Posts Economic Update on YouTube.  Last week, NCUA posted an economic update video on YouTube.  This latest video discusses the current economy and its likely impact on credit unions, and provides credit unions with information about accessing economic data on NCUA’s website.  NCUA’s press release on the economic update is here.

If you haven’t checked out NCUA’s YouTube channel before, you can find it here. 

Compliance Resources: Newsletters; Webinars; Webcasts

Written by Steve Van Beek

Today's post seeks to aggregate some useful compliance resources. 

NCUA Listening Session.  The first of NCUA's six listening sessions is today in Boston.  Registration for all sessions is now available here.  

NAFCU Members.  The May 2012 NAFCU Compliance Monitor is now available.  This month the articles look at the CFPB's movements in mortgage servicing as well as third-party service providers.  For those who missed the April 2012 BSA Blast, it is available here.    

Both the Compliance Monitor and the BSA Blast are NAFCU-member publications.  If your credit union is interested in NAFCU membership, check out our trial membership program.  Additional member benefits are discussed here.  

If you are a NAFCU-member and would like to be added to the Compliance Monitor and BSA Blast email notification lists, just send us an email - compliance@nafcu.org.  

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Vendor Risk Management Webinar.  The Philadelphia Federal Reserve is hosting a free Risk Management Webinar today at 2:00 Eastern.  The slides are already up and available here.  

FinCEN Webinar.  FinCEN will be hosting a free May 8th webinar discussing the technical specifications of the new SAR, CTR and DOEP forms.  Registration is here.   

Note:  This webinar promises to be very, very technical and geared toward IT folks.  Be sure to pass this along to anyone at your CU who fits the bill.  FinCEN will be conducting a future webinar for compliance professionals. 

CU Online Upgrade Webinar.  NCUA recently announced an upcoming upgrade to CU Online.  The upgrade is scheduled for May 28th and NCUA is hosting a free May 15th webinar discussing the upgrade.  Registration is here.  

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NAFCU Webcasts.  We also have a series of upcoming webcasts that might be of interest:

• May 9th:  Essential Financial Literacy Education (Sign up today and save $100)
• May 17th:  IRA Compliance: Managing a Successful IRA Program
• May 24th:  An Inside Look at NCUA's Interest Rate Risk Rule

Remember, all NAFCU webcasts are available for one-year after the purchase date and can be viewed numerous times.  The Financial Literacy webcast is a good example.  Not many credit union Boards meet at 2:00 p.m. on a Wednesday - but your credit union can use the webcast at a Board meeting or training session by accessing the "on-demand" version. 

All NAFCU webcasts are listed here (both upcoming live webcasts and on-demand webcasts).  

Plain Writing Act of 2010; NAFCU Blog Search

Written by Steve Van Beek

Usually, the laws we discuss on the blog are ones that cause additional headaches and issues for credit union compliance officers.  Today we wanted to focus on a law that is intended to ease the confusion surrounding the laws, regulations and guidance impacting credit unions.  I'm not sure of a great mechanism to enforce this law but at least it is a step in the right direction.

Plain Writing Act of 2010.  On October 13, 2010, President Obama signed into law the Plain Writing Act.  In short, the law requires federal agencies to use clear, concise information when communicating with the public to ease understanding of the numerous regulations pumped out from Washington on a daily basis.  Stop laughing.

One of the requirements of the law is that federal agencies - including NCUA and the CFPB - need to maintain Plain Writing Act webpages on their websites as well as file annual reports with Congress (the first annual report was due April 13, 2012).    

• The CFPB's Plain Writing Act webpage is here and their April 13, 2012 report is here.
• NCUA's Plain Writing Act webpage is here and their April 13, 2012 report is not available yet (at least it hasn't been posted on their website as of this morning).    

Not so Fast.  Now, you may be very excited to find out that the federal agencies now have a legal requirement to make their regulations clear and straightforward.  Unfortunately, this is the real word so there are exceptions.  The agencies need to use Plain Writing for "covered documents."  The definition of "covered documents" specifically excludes regulations.  

While this exception might make sense for very, very technical regulations from the Environmental Protection Agency, for example, it shouldn't give the NCUA and the CFPB free rein to continue to blast out pages and pages of completely indecipherable regulatory requirements without making their best efforts to ensure the information is readable.  

Soap Box  Credit unions need to make these efforts in their communications with their members.  Why shouldn't the federal agencies have to at least take efforts to do the same?  The more clear and straightforward the requirements the higher the compliance rates and the greater the consumer/member protection.  

Hopefully the CFPB and NCUA start to grasp this concept.  It just isn't possible for credit unions - of any size - to read and translate every piece of information from the regulatory agencies (including the regulations themselves) from *regulator speak* to plain English.

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Blog Search Bar.  On Friday, we announced the new Blog Search Bar.  The post includes the process for conducting a search and sorting your results - by either "best match" or "most recent."  

To use the search bar, go to the main NAFCU Compliance Blog page and look to the upper left-hand side.  We accidently put the right-hand side in the initial blog last Friday and, well, you can tell our readers are compliance officers as we were quickly informed of our mistake.  

If you didn't try the search bar on Friday, give it a try today (more detailed instructions here).  We hope it cuts down on some of the frustration of tracking down an old blog post or other information.     

CFPB Bulletin on Mortgage Loan Compensation; NCUA Report - EHL Poster

Written by Steve Van Beek

I've been wondering if and when the CFPB would start issuing guidance to regulated entities on the existing regulatory requirements the CFPB inherited.  It seemed the CFPB's focus - outside of examinations and inquiries - was placed on making sure they met their Dodd-Frank deadlines for adding new regulatory requirements on financial institutions.  

With that lead-up, on April 2nd the CFPB issued Bulletin 2012-02 which seeks to clarify an area of 12 CFR 1026.36 of Reg Z on mortgage loan compensation.  Prior Bulletins from the CFPB can be found here.

Bulletin 2012-02.  The CFPB stepped into an area that had caused quite a bit of confusion since it was enacted (and the Fed's Webinar last March seemed to muddy the waters more).  The rule itself - 12 CFR 1026.36 - prohibits the payment of compensation based on the loan terms or conditions.  The staff commentary takes this prohibition into grayer waters by extending the prohibition to any factor that might be used "as a proxy for a term or condition."  As you can imagine, there has been quite a bit of confusion and the CFPB's Bulletin seeks to provide clarity in one area.

Qualified Plans  The Bulletin includes this description of the questions received:

"The Bureau has received several questions about whether and how the Compensation Rules apply to qualified profit sharing, 401(k), and employee stock ownership plans (collectively, "Qualified Plans"). 

The CFPB answers the Qualified Plan question as follows:

"To provide clarify at this juncture, the Bureau's view is that the Compensation Rules permit employers to contribute to Qualified Plans out of a profit pool derived from loan originations.  That is, financial institutions may make contributions to Qualified Plans for loan originators out of a pool of profits derived from loans originated by employees under the Compensation Rules."

Non-Qualified Plans.  The CFPB declined to comment or provide clarity on other profit-arrangements/plans that are not Qualified Plans.  However, the CFPB indicated they would address this in a future rulemaking required by Dodd-Frank.

Not the Last Word.  While clarity is usually welcomed, this particular clarity might not be long-lived as Section 1403 of Dodd-Frank requires the CFPB to adopt loan originator compensation rules by January 21, 2013.  According to the Bulletin, "the Bureau anticipates issuing a proposed rule for public comment in the near future on the loan origination provisions in the Dodd-Frank Act."  These new rules will also have the potential to change the CFPB's interpretation on Qualified Plans (but credit unions can rely on the Bulletin until then).  

In other words - we'll have continued confusion and lack of clarity as well as another round of proposed and final regulations on mortgage loan compensation.  And people wonder why Dodd-Frank creates regulatory burden?  

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The April 2012 NCUA Report is now available.  I was very glad to see this put in writing by NCUA regarding the timeframe for the Equal Housing Lending poster:

• Updates nondiscrimination requirements for credit union operations (Part 701) to reflect the recent designation of NCUA’s Office of Consumer Protection to hear Fair Housing Act and Equal Credit Opportunity Act complaints. Credit unions engaging in real estate-related lending will have a reasonable amount of time to post updated Equal Housing Lender signs in public areas.

From Page 5.  As usual, the NCUA Report is a useful resource to review to get the latest directly from NCUA.    

NCUA Meeting; Vendor Risk Management; Current Issues in Credit Unions

Written by Steve Van Beek

Just a couple of quick items for your Tuesday.

NCUA Cancels Board Meeting.  Last week, NCUA announced it would cancel its April Board meeting.  This is the second canceled meeting in 2012 for NCUA.  Hopefully, it means NCUA is putting extra effort and attention on reducing the regulatory burden on credit unions.  

Consumer Compliance "Outlook Live."  Yesterday we mentioned the resource Consumer Compliance Outlook from the Philadelphia Federal Reserve.  This group also provides free webinars and recently announced a May 2nd webinar on Vendor Risk Management.    

There are also archived webinars available for viewing:

• Consumer Compliance Hot Topics (December 15, 2011)
• Fair Lending Issues and Hot Topics (November 2, 2011)
• Real Estate Owned (REO) Disposition Risks and CRA Opportunities (October 4, 2011)
• Proposed Ability to Repay Standards for Mortgage Loans (May 26, 2011)
• Loan Originator Compensation (March 17, 2011)
• Risk Based Pricing Notices (February 17, 2011)
• Tips for Reporting Accurate HMDA and CRA Data  (November 17, 2010)
• Consumer Compliance “Top Ten” Lists  (May 20, 2010)
  

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Current Issues in Credit Unions.  The latest Current Issues in Credit Unions podcast (Episode #69) is now available for download and listening.  You can find the agenda as well as past episodes here.    

Rob Rutkowski of Weltman, Weinberg & Reis does a great job with organizing and conducting these podcasts (including the live taping at our 2011 Compliance Seminar - Episode 64).

Rob will also be presenting at two upcoming NAFCU webcasts in April:

• April 11, 2012 (Tomorrow!):  Complying with Regulation B under the CFPB: Protecting Your Credit Union from Unlawful Lending
• April 25, 2012:  Managing Risks for Online Deposit Accounts (Early Bird Pricing ends April 18th)

NCUA Listening Sessions; CFPB Files Amicus Brief in TILA Case; Reg Alert on Overdrafts

Written by Steve Van Beek

NCUA recently announced a series of listening sessions that will be conducted throughout the country.  Here is a snapshot of the dates and locations:

The full information on the upcoming listening sessions can be found here.  Registration for the first two sessions (May 2 in Boston and May 9 in Alexandria, VA) are now open. 

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Yesterday, the CFPB announced it had filed an amicus brief (Wikipedia.org) in an ongoing case regarding the right of rescission under the Truth in Lending Act.  The CFPB's press release can be found here and the actual brief is here.

While the issues in the case are very important, equally important is the additional information about the CFPB's intent as a regulator.  The press release indicates the CFPB will continue to be an active participant in lawsuits in order to protect consumer rights:

"The CFPB is committed to filing amicus briefs in litigation involving the federal consumer financial protection laws that it oversees and in which the CFPB determines its views will assist the courts in correctly resolving the matters. Amicus briefs are an important way for the CFPB to ensure that the statutes it oversees are correctly and consistently interpreted by the courts, even in cases in which the CFPB is not itself a named party."

I hinted at this on Monday - but it does seem the only thing missing from the CFPB's regulatory toolbox is actual guidance or clarity to the entities it regulates.  Wouldn't that be something, huh? 

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NAFCU Members:  Our Regulatory Alert on the CFPB's Overdraft Inquiry (12-EA-07) is available.  Please consider providing your feedback and comments to help NAFCU draft our comment letter to the CFPB.  Comments are due to NAFCU by April 6th.    

Tidbits on FDCPA, CDRLF and More

Written by JiJi Bahhur, Regulatory Compliance Counsel

TGIF!  And as my gift to you, I thought I’d keep Friday nice and simple with a few tidbits that have surfaced in the past week or so. 

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Fair Debt Collections Practices Act.  The CFPB has submitted to Congress its first annual report summarizing its past year’s activities to administer the Fair Debt Collection Practices Act (FDCPA).  These activities are part of the CFPB’s overall scheme to inhibit deceptive, unfair, and abusive debt collection practices in the marketplace.  To view the report, click here. 

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CDRLF Loan Available to Low-Income-Designated CUs.  NCUA will be taking applications from low-income credit unions who are interested in receiving loans from the Community Development Revolving Loan Fund (CDRLF) for several purposes, including the development of new products or services for members, partnership agreements with community-based service organizations or government agencies, loan programs, operational programs, and/or acquisition, expansion or improvement of office space or equipment. 

Applications will be taken from May 22 to December 31 of this year.  For more information on this program, check out the Federal Register notice. 

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March Madness Compliance Webcast Series.  If you were busy at School or with other issues – don’t you fret – you can still purchase the on-demand versions of the three compliance webcasts offered by NAFCU in March.

Preparing for the Heightened Scrutiny of CUSOs
Learn More

Powers of Attorney and Subpoenas:
The Risks, Abuses and Potential Liabilities to Credit Unions
Learn More

Credit Union Litigation: Protect Your Credit Union from Member Lawsuits
Learn More

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