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.  

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!   

Overdraft Programs Under Attack; Recap of Reg Burden Hearing

Written by Steve Van Beek

As if the CFPB's Inquiry into Overdrafts wasn't enough, there are continued pushes by both consumer groups and lawmakers to drastically change overdraft protection programs.  Oh, and the New York Times stepped in as well to write an op-ed.   

Congress.  This seems like the Credit CARD Act all over again.  Remember how the Federal Reserve was working on amending and changing the credit card disclosures and rules but Congress forced the Credit CARD Act through anyway?  You know, the Credit CARD Act that is still being clarified, tweaked and amended because it was so poorly written.     

Well, even as the CFPB conducts its "inquiry" into Overdraft Protection (comment period extended to June 29th) - Congress is at it again.  

Overdraft Protection Act.  Representative Carolyn Maloney (and 46 co-sponsors) announced she would introduce legislation that would:

• Extend the opt-in requirement to paper checks, ACHs and recurring debit transactions;
• Define overdraft fees as finance charges for Truth in Lending Act disclosures (Ed: Huh??);
• Prohibit the ordering of transactions to maximize overdrafts;
• Require that fees be "reasonable and proportional" to the amount of the overdraft;
• Cap the number of fees at one per month and six per year;
• Add new disclosures prior to opt-in and whenever an overdraft fee is charged; and
• Require the CFPB to study overdraft fees on prepaid debit cards.

I guess when they say they want to "Stop Overdraft Protection" they are serious.  This bill (we haven't seen the full text yet) would pretty much do just that.  I can't imagine too many institutions continuing to provide this service if a bill along these lines would actually pass.  

But, I wonder if Congress is worried that if they prohibited overdraft protection it would force consumers to actually keep track of their spending and take some responsibility.  Now, that would be draconian.  

Consumer Groups.  If you haven't seen the recent Pew Study on Overdrafts, it is worth a read.  Also be sure to pass around your credit union.  This is what is being handed out to the CFPB and Congress in pushes to change the current overdraft rules.

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On the Hill.  The NAFCU Today has a great recap of yesterday's hearing on Rising Regulatory Compliance Costs.  

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.     

ATM Fee Disclosure Bill; Complying with Current ATM Fee Disclosure Requirements

Written by Steve Van Beek

Yesterday, Representatives Blaine Luetkemeyer (R-MO) and David Scott (D-GA) introduced a bill, H.R. 4367, that would eliminate the requirement to include the ATM fee disclosure notice on the ATM itself (the on-screen notice would still be required).  

This would remove compliance and legal headaches from financial institutions who are continuously checking, photographing and documenting their ATMs to have defenses against the cottage industry of individuals suing ATM owners alleging inadequate notice.   

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Existing Disclosure Requirements.  While the bill being introduced is a good first step, the unnecessarily confusing regulatory requirements remain in place.  In other words, the legal and compliance risks for credit unions do not change until this bill is passed (if it is passed).  

NAFCU Resources.  In the meantime, below are some NAFCU Compliance resources on the Regulation E ATM Fee Disclosure issue:

• ATM Fee Disclosures - September 2011 NAFCU Compliance Monitor Article (made available to everyone).  Note: The article references the prior 12 CFR 205 rather than 12 CFR 1005.  Update: The ATM Fee Disclosure article with the CFPB citations is available here.   
• NAFCU Comment Letter to the CFPB on Regulatory Streamlining - March 2, 2012 (see page 6-7 for ATM Fee Disclosure discussion).
• Joint Letter to the Hill - February 8th, 2012.  Summary in NAFCU Today.
• January 11, 2011 Blog Post - with a link to That Credit Union Blog on defending against class actions.
• April 26, 2011 Blog Post - with a link to Bankersonline.com on defenses against torn-down disclosures.
• April 27, 2011 Blog Post - looking at the unnecessarily confusing and complex disclosure requirement in Regulation E which is part of the problem.  

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Regulatory Burden.  Think about the unnecessary burden this way:  The current legal and regulatory environment has financial institutions and ATM operators taking time away from serving their customers/members to go out and photograph their ATMs in order to provide defenses against class action lawsuits.  

CFPB.  If the CFPB wants to protect consumers and ensure financial institutions are working to help consumers, they need to get on their soapbox and talk to Congress about removing this unnecessary burden.  Additionally, they should take a good, hard look at their regulatory authority under the Electronic Funds Transfer Act and determine if they can remove this ridiculous requirement and get institutions back to providing services to their members rather than taking photos of their ATMs.  

FTC Rescinds Regulations Transferred to CFPB; NCUA to Follow Soon?

Written by Steve Van Beek

FTC Rescinds Rules.  Last week, the Federal Trade Commission rescinded regulations that transferred over to the Consumer Financial Protection Bureau according to Dodd-Frank.  The FTC's regulations - including the publishing in the Electronic Code of Federal Regulations - will no longer be available and entities need to be sure to look to the CFPB's republished regulations.

The FTC's rescission notice indicated they would be removing the rules and including cross-references to the CFPB's regulations.  For example, 16 CFR 321.1 has been revised to:

"Cross-Reference:  The rules formally at 16 CFR 321 have been republished by the Consumer Financial Protection Bureau at 12 CFR 1014, "Mortgage Acts and Practices Advertising (Regulation N)."

I'm usually not a fan of cross-references, but this one makes a lot of sense.  In the future, anyone trying to find the rules that used to be located in 16 CFR 321 will be directed to the CFPB's rules in 12 CFR 1014.

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NCUA Following Soon?  It is expected that NCUA will take a similar action in the future and formally rescind the regulations they lost due to Dodd-Frank.  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.  

Note:  The FTC's rescission was made effective immediately after publishing in the Federal Register.  As of this morning, the old, FTC regulations can no longer be found in the Electronic Code of Federal Regulations.    

Regulatory Burden: Short-Term

Written by Steve Van Beek

There has been quite a bit of talk about regulatory burden in the past years and there are no signs of a slowdown in the near future as Dodd-Frank provisions are implemented.  In fact, the blog has a Regulatory Burden category.

But what is regulatory burden?  Is it simply the weight of new regulations, guidance and best practices piled on top of mountains of existing regulations, guidance and best practices?  Or are we talking about unnecessary regulatory burden - such as what the CFPB's Streamlining Initiative and NCUA's Annual Review of their Regulations strive to remove?  Is it a combination?  Is it in the eye of the beholder?

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I'd like to suggest that regulatory burden exists in many different forms and that one of biggest issues is that credit unions are regulated by numerous regulators, agencies, offices as well as Congress.  Each regulator looks at an issue from their point of view without consideration for what burdens are being placed on credit unions by other parties.  I like to call this regulatory "tunnel vision." 

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In this post, we'll look at a couple of recent issues that cause short-term regulatory burden.  

Short-Term Regulatory Burden.  A good example of this would be NCUA's recent changes to the Equal Housing Lender Poster for FCUs.  NCUA made the change to their poster in 12 C.F.R. 701.31(d)(3) to reflect NCUA's Office of Consumer Protection and their formal announcement indicated the change would become effective immediately.  NCUA staff indicated that credit unions would have a reasonable amount of time to update their signs.  Ok, that is fair.  Would have been nice to have that in writing in the Technical Amendments - but at least it was some flexibility.  

The problem?  As credit unions contacted NCUA for the updated posters they were told the signs would not be available for at least a month.  This begs the question as to why the change was made effective immediately when NCUA wasn't prepared to provide credit unions with the updated posters.     

If you are looking for a non-fuzzy version of the Equal Housing Lending Poster, a blog reader passed along this clean PDF that might be useful.

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Bonus:  Inside of 12 CFR 701.31 is a citation to Regulation B.  Unfortunately, it references 12 CFR 202.2(f) rather than the accurate citations of 12 CFR 1002.2(f).  While this seems minor it does cause confusion and unnecessary headaches and really should have been addressed during NCUA's Technical Amendments to Part 701.31.  

"§ 701.31   Nondiscrimination requirements.

(a) Definitions. As used in this part, the term:

(1) Application carries the meaning of that term as defined in 12 CFR 202.2(f) (Regulation B), which is as follows:

An oral or written request for an extension of credit that is made in accordance with procedures established by a creditor for the type of credit requested;"

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Hopefully NCUA's Annual Regulatory Review will include a thorough review of their regulations to ensure the citations accurately reflect the CFPB's authority over the consumer regulations.  

One can hope, can't he?  Have a great weekend!  

Updated 2012 NAFCU Credit Union Compliance GPS is Now Available!

Written by Steve Van Beek

Shameless Plug Alert!

We are very pleased to announce the availability of the Updated 2012 NAFCU Credit Union Compliance GPS.  Over the course of the last year, there have been many small tweaks and changes that have made life difficult for credit unions and, specifically, compliance officers (and many others as well).  These included technical changes to regulations as well as substantive changes to regulations and regulators.  

The Updated 2012 GPS has been thoroughly updated and edited to reflect these changes and provide those researching credit union issues a useful, electronic guide. 

For example, the Updated GPS includes:

• A New Section on the Consumer Financial Protection Bureau;
• Updated Links after NCUA's Website Change;
• Updated Regulatory Citations Reflecting the CFPB's Ownership of the Consumer Regulations;
• Links to the CFPB's Version of the Electronic Code of Federal Regulations;
• An Expanded Bank Secrecy Act Section;
• A Separate Section on Vendor Management; and
• Many more additional updates and edits to ensure accuracy.   

In non-bullet format, the Updated 2012 GPS contains all new links to the updated NCUA website (including Legal Opinion Letters and Letters to Credit Unions).  The GPS also contains the new, correct citation to the CFPB's regulations (i.e., 12 C.F.R. 1026 rather than 12 C.F.R. 226 for Regulation Z) as well as links to the CFPB's regulations to help you find the most up-to-date version of the consumer regulations.       

Pricing.  The Updated 2012 GPS is $399 for NAFCU members and $499 for anyone else.  The GPS is not limited to credit unions and can be purchased by anyone interested in learning more about credit union laws and regulations. 

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Table of Contents.  To get a feel for the Updated 2012 GPS, take a look at the following Tables of Contents which list the Sections that are included in each Chapter (plus the Appendix).

• Main Table of Content - 1-Page Snapshot of the 2012 GPS
• Chapter Specific Cover Pages - Listing of the Sections by Chapter
• Complete Table of Content - Listing the Contents of Each Section
• The Consumer Financial Protection Bureau Section Table of Contents 

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Below are a couple of additional items about the Updated GPS.  

Electronic Manual.  The GPS is designed to be a an electronic manual as it contains numerous links to regulations and guidance documents.  Of course, you can print off your own copy of the GPS and use the hardcopy as a quick resource guide.  But, the best bang for your buck is being able to use the electronic links and be taken directly to the NCUA Legal Opinion Letter being described or NCUA's Statutory Lien regulation in 12 C.F.R. 701.39.

Available to Everyone.  The GPS is available for purchase by anyone and everyone.  We've had law firms and audit firms purchase the GPS in the past in addition to numerous credit unions.  Additionally, your credit union does not need to be a NAFCU member to purchase.  We hope the GPS serves as a valuable resource for anyone seeking to learn more about credit unions and the regulations that impact their daily operations.

One GPS Per Credit Union.  Remember - the purchase of the GPS provides access to your entire credit union or organization!  Please feel free to share the GPS with your colleagues at your credit union.  However, we put a lot of time and effort into creating and editing the GPS and we ask that you not share your GPS with other credit unions or third-parties.  

Regulatory Compliance School.  If your credit union sent someone to NAFCU's 2012 Regulatory Compliance School last week, that person should already have an electronic copy of the Updated GPS.  Be sure to track that copy down and share throughout your credit union.  No additional purchase would be required.  

Streamlining Tool; Maturity Limits & Regulatory Review; March Madness

Written by Steve Van Beek

The CFPB's overdraft inquiry (more on this tomorrow) pushed back a couple of items I wanted to discuss.

CFPB's Streamlining Tool.  A couple of weeks ago, the CFPB announced their web-based streamlining tool.  If your credit union has one or two issues you'd like to raise - this is a good format as you wouldn't need to send a formal comment letter.  The web-based streamlining tool is here.

NCUA Opinion Letter.  In mid-February, NCUA made public an Opinion Letter on maturity limits for modified mortgage loans.  The letter is very detailed and includes examples.  The letter is also hard to summarize.  The best approach is to review the complete letter - 11-0903.

NCUA's Reg Review.  The letter interprets 12 C.F.R. 701.21(g) which is one of the sections under NCUA's current regulatory review.  This looks like a perfect place for NCUA to provide clarity in the regulation rather than requiring credit unions to:

• Know the existence of this legal opinion letter;
• Be able to find this opinion letter;
• Properly understand the complicated letter; and 
• Ensure the legal opinion letter has not been superseded by another interpretation by NCUA.

By incorporating this letter into NCUA's regulations, NCUA would help credit unions and those working with credit unions find NCUA's interpretation for the maturity limits for modified mortgage loans.  It may seem counterintuitive, but incorporating the letter into the regulation eases the regulatory burden on credit unions.  

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The language of the letter indicates NCUA has received multiple requests on the same issue.  There are undoubtedly numerous other credit unions who have had the same questions and concerns who may not have taken the formal approach of reaching out to NCUA.  

One of the things about guidance is that it exists somewhere on the internet.  With NCUA's recent approach to look at rules that are "outmoded, ineffective, insufficient or excessively burdensome", this opportunity is served up on a silver platter as NCUA could ensure its opinion was clear and easy for credit unions to find and understand by amending 12 C.F.R. 701.21(g) to reflect their interpretation on maturity limits for loan modifications.  

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March Madness - D3 Edition.  March Madness usually starts a bit early in the Van Beek household as both my wife and I went to Division 3 schools.  She went to the College of Wooster in Ohio and I went to Hope College in Michigan.  Well, the Division 3 brackets were just announced and there is a possibility our alma maters could be facing off next Friday.  Each team would need to win two games but both teams are hosting their games this weekend.  And, both teams have a pretty good pedigree as Wooster finished runner-up for the championship last year and Hope is currently ranked #1 (you can find Wooster way down at #15).

Blog Readers:  If your teams are in - let's hear about your rooting interests in the blog comments (click the title of the blog post to go to the blog itself).  The full bracket can be found here.      

NCUA's Annual Review of Regulations; CFPB's Streamlining

Written by Steve Van Beek

Last week, NCUA issued their listing of their annual review.  The listing includes Parts 700 through 710 of NCUA's regulations - including all the subparts of Part 701.

In the press release, NCUA Chairman Debbie Matz indicated NCUA would focus on reducing the regulatory burden on credit unions:

"Each year we take a fresh look at a different one-third of NCUA regulations to ensure that our standards are up to date,” said NCUA Board Chairman Debbie Matz. “This year, in the spirit of President Obama’s Executive Order 13579 on Regulations and Independent Regulatory Agencies, we are particularly seeking comments on rules that may be ‘outmoded, ineffective, insufficient, or excessively burdensome.’ We are committed to ‘modify, streamline, expand, or repeal’ rules that are not required by statute and would not jeopardize safety and soundness.”    

Comments.  NCUA will be taking comments until August 3, 2012.  NAFCU's Regulatory Affairs team will be preparing a Regulatory Alert and soliciting comments from NAFCU member credit unions.  Keep an eye out for the alert and consider sharing your comments on which areas could be updated (or removed) to ease the regulatory burden.  A "top three" wish list might be a good way to handle this issue.      

Below are links to the regulations being reviewed by NCUA:

• Part 700 - Definitions
• Part 701 - Organization and Operation of Federal Credit Unions [Parts 701.1 through 701.39]
• Appendix A to Part 701 - Model Federal Credit Union Bylaws
• Appendix B to Part 701 - Chartering and Field of Membership Manual
• Part 702 - Prompt Corrective Action
• Part 703 - Investment and Deposit Activities
• Part 704 - Corporate Credit Unions
• Part 705 - Community Development Revolving Loan Fund Access for Credit Unions
• Part 706 - Unfair or Deceptive Acts or Practices
• Part 707 - Truth in Savings
• Part 708a - Bank Conversions and Mergers
• Part 708b - Mergers of Federally-Insured Credit Unions; Voluntary Termination or Conversion of Insured Status
• Part 709 - Involuntary Liquidation of Federal Credit Unions and Adjudication of Creditor Claims Involving Federally Insured Credit Unions in Liquidation
• Part 710 - Voluntary Liquidation 

Obviously, each regulation listed above has a different impact on credit unions and, specifically, on compliance officers.  Over the next couple of months, it might be a good idea to keep track of areas that are "excessively burdensome" and provide comments to NCUA on ways they could make the lives of credit union compliance officers easier.  

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CFPB Streamlining.  Today is NAFCU's internal deadline for submitting your comments on the CFPB's efforts to streamline the consumer regulations it inherited.  NAFCU Regulatory Alert 11-EA-32 contains the details.  If you haven't gotten your comments to NAFCU on which actions the CFPB should take to streamline their new regulations - now is your chance.  If you have comments, send them to Dillon Shea - dshea@nafcu.org - and we'll pass your concerns along to the CFPB in NAFCU's comment letter.  Comments are due to the CFPB by March 5, 2012.