NAFCU Compliance Blog

Member Complaints; NAFCU's 2012 Regulatory Compliance Seminar

Written by Steve Van Beek

Consumer and member complaints are at the forefront of quite a few conversations right now (including quite a few news articles).  The CFPB's promotion of their complaint process is one reason for this uptick in discussion as is the centralized complaint process for financial products.  

The CFPB issued their 2011 Annual Report on Consumer Complaints and it is full of useful information to review.  Here is a snapshot of the results:

"Between July 21 and December 31, 2011 the CFPB received 13,210 consumer complaints, including 9,307 credit card complaints and 2,326 mortgage complaints.

Forty-four percent of all complaints were submitted through the CFPB's website and 14.7 percent via telephone calls.  Referrals from other regulators accounted for 34.9 percent of all complaints received.  The rest were submitted by mail, email, and fax."

Future reports will include even more details - including complaints in new areas such as private student loans, auto loans and checking accounts.  Be sure to review the full report or pass it along to the appropriate person at your credit union.   

NCUA.  The March 2012 edition of the NCUA Report also included an article on Trends in Member Complaints and Consumer Inquiries.  Of note, the article indicates that of the complaints received in 2011 less than 1 percent involved a consumer compliance violation.  Of that 1 percent, half of those were related to timing issues related to the error resolution process under Regulation E.  

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NAFCU Regulatory Compliance Seminar.  October seems like a long way off but it will be here before you know it.  We are in the process of putting together the content and agenda - so please feel free to send in any comments, ideas or suggestions.  We love your input and this conference is really about you all so let us know what you need.

Here is what we are tentatively looking at so far (topics are subject to change, of course):

• TILA/RESPA Mortgage Disclosures
• Upcoming Mortgage Servicing Requirements
• The Latest on Overdraft Protection
• Remittance Transfers under Regulation E
• CUSOs
• Loan Participations
• Bank Secrecy Act Changes
• Social Media
• NCUA Update
• CFPB Update

I think that is a pretty good start - but let us know what you are looking for and how we can make NAFCU's 2012 Regulatory Compliance Seminar even better than the past.  

Recertification for NCCOs.  Remember, attending Regulatory Compliance Seminar is the best way to recertify your NAFCU Certified Compliance Officer (NCCO) designation.  Seminar offers 24 CEUs which is enough to fully recertify for two years.

Seattle, Washington.  Did I mention Seminar was in Seattle?  Right Downtown?  Well, now I have.  Hope to see you October 23-26, 2012!    

Financial Literacy; NCUA LCU 12-CU-04; Remittance Transfers; NCUA IRR Video

Written by JiJi Bahhur, Regulatory Compliance Counsel

Financial Literacy Month.  April is Financial Literacy Month and NAFCU is conducting a survey of members seeking general information about the different types of financial literacy programs they offer and how the credit union determines the effectiveness of its program. 

For background information on Financial Literacy Month and where to obtain the results of NAFCU’s survey, check out this NAFCU Today story. 

NCUA also announced a twitter campaign for Financial Literacy Month.  The CFPB will also be active this month with information for consumers.

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NCUA Letter to Credit Unions 12-CU-04.  NCUA announced, in its Letter to Credit Unions 12-CU-04, that it’s making $1.3 million in grants available to low-income credit unions.  Any credit union with a low-income designation may apply for up to $25,000 in grants for initiatives covering financial literacy and education in school branches; new product/service development; staff, official and board member training; student and job creation internship; and/or volunteer income tax assistance. 

The LCU has an attached enclosure – 2012 Grant Guidelines for Low-Income Credit Unions – which provides examples of projects that these grants could fund, the grant process, and the application.  The deadline to apply for a grant under this program is June 29, 2012. 

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Remittance Transfers.  The CFPB recently blogged on the consumer benefits of the new remittance transfer rule, which goes in effect in February 2013:

“Better Disclosures: Under this rule, remittance transfer providers must generally disclose the exchange rate, any fees related to the remittance, the amount of money that will be delivered abroad, and the date the money will be available. Certain disclosures must be provided both before and after the consumer pays for a remittance transfer. Consumers will generally receive these disclosures in English and sometimes in other languages. The CFPB thinks the clarity provided by these disclosures will help inform consumer decisions and instill confidence.

Option to Cancel: Typically, consumers will have at least 30 minutes after payment to cancel a remittance. If they cancel within the 30 minute window, they will get their money back, whether they make a mistake, change their minds, or feel something isn’t right.

Correction of Errors: With this rule, remittance transfer providers will generally be held accountable for errors. If a remittance sender reports a problem with a transfer within 180 days, the provider must generally investigate and correct errors. Companies that provide remittance transfers may also be responsible for mistakes made by their agents. The CFPB believes this will encourage remittance transfer providers to use reliable agents and partners in the U.S. and abroad, helping to weed out the bad actors.” 

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NCUA IRR Video.  NCUA released its third economic update series, which features an in-depth discussion on NCUA’s Interest Rate Risk (IRR) rule.  The rule essentially requires a written policy to address IRR management and an effective IRR program for successful asset liability management.  To see the free video, go here (Youtube.com). 

Also, NAFCU Members, the April Compliance Monitor features an article on Interest Rate Risk with additional information and resources on the new requirement (Effective September 30, 2012).  

Playing Catch-Up: SAFE Act Procedures; Compliance Monitor; Final Regulations

Written by Steve Van Beek

Initially, I want to say Thank You to all the attendees at last week's Regulatory Compliance School.  It was a great week, made even better by the great questions and interaction among attendees.  Thank You - and hope to see you at Regulatory Compliance Seminar in the future (no tests - I promise!)  

And - good luck to everyone who took the NCCO Exams!  

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Strange as it sounds, it feels good to be back in the office after a long week at School.  I'm sure there are more than a few items to get up to speed on, but first a few older items that might be useful.

CFPB's SAFE Act Examination Procedures.  On March 7, the CFPB announced their SAFE Act examination procedures.  While the CFPB's primary examination authority extends only to credit unions above $10 billion in assets, all credit unions offering mortgage loans need to follow Regulation G - 12 CFR 1007.  I'd pass these examinations procedures along to the appropriate folks at your credit union as NCUA might take a similar approach in its future examinations.  If nothing else, the examination procedures could serve as a useful internal audit tool.      

NAFCU's March Compliance Monitor.  The March 2012 NAFCU Compliance Monitor is available.  The Worth Noting section highlights issues over the past month or so that might impact your credit union and there are articles on the CFPB and small blurbs on Health Care Reform and Periodic Statements for Mortgages.  

The Compliance Monitor is a NAFCU member-only publication.  If your credit union is interested in learning more about NAFCU membership, take a peek at our trial membership program.

NAFCU Final Regulation - Reg E:  International Remittances.  NAFCU-members, our Final Regulation on the Remittances rule is available (12-EF-02).  Compliance is required by February 7, 2013. 

NAFCU Final Regulation - NCUA:  Interest Rate Risk Policy.  Our Final Regulation on NCUA's Interest Rate Risk Policy and Management is also available (12-EF-01).  Remember, compliance is required by September 30, 2012.

The CFPB's Ability to Finalize Existing Proposed Regulations

Written by Steve Van Beek

One of the areas of the CFPB's regulatory authority that hasn't received very much attention is the CFPB's ability to finalize a regulation that was proposed by another regulator.  We saw the CFPB take this action with the Remittances final rule - which was originally proposed by the Federal Reserve.

Section 1063(j).  Dodd-Frank specifically indicated that proposed rules - to amend a consumer regulation - would transfer to the CFPB as well.  This allows the CFPB to finalize a proposed rule without having to "repropose" the regulation in the Federal Register.  Section 1063(j) of Dodd-Frank:

"(j) STATUS OF RULES PROPOSED OR NOT YET EFFECTIVE.— (1) PROPOSED RULES.—Any proposed rule of a transferor agency which that agency, in performing consumer financial protection functions transferred by this title, has proposed before the designated transfer date, but has not been published as a final rule before that date, shall be deemed to be a proposed rule of the Bureau."

Remittances.  As we saw with remittances, the CFPB decided to finalize the remittances rule (by their statutory deadline of January 21, 2012) and issue a proposed rule at the same time.  NAFCU members:  Our Regulatory Alert (12-EA-05) on the remittances proposal is now available.    

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Existing Proposed Rules.  There are quite a few other proposed rules that are "hanging out there" and which could be finalized by the CFPB without further warning (i.e., without a new proposed rule).  Of course, the CFPB could reissue a new proposed rule if it wanted to take a different approach than was taken by the Federal Reserve.    

Below is a listing of a few proposed rules that the CFPB inherited on July 21, 2011 when it obtained its regulatory authority.

Regulation Z:  Ability-to-Repay for Mortgages.  Originally proposed by the Federal Reserve in April 2011, the CFPB has indicated it will finalize this rule in Spring 2012.  

Regulation Z:  Escrow Accounts.  Originally proposed by the Federal Reserve in February 2011.  I wouldn't be surprised if we saw this rule finalized sometime in 2012.     

Regulation Z:  Credit Insurance; Right of Rescission; HELOCs.  The Federal Reserve had proposed changes in August 2010.  In February 2011, the Federal Reserve announced it would not finalize these proposals as the CFPB would gain authority over Regulation Z on July 21, 2011.  

Regulation Z:  Closed-End Mortgages; HELOCs.  The Federal Reserve also had proposed changes to Closed-End Mortgage disclosures and HELOC disclosures.  The Fed issued these proposals in July 2009.  These proposals were also tabled by the Federal Reserve in February 2011 - passing authority on to the CFPB.    

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Credit Insurance.  We've blogged on the credit insurance issue a couple of times in the past.  

• A September 2010 blog post highlights the proposed model form and how it will definitely lead to fewer policies.
• A March 2011 blog post highlights a GAO study focused on credit insurance products.    

If your credit union offers these products, this is definitely an area to keep an eye on.  

When It Rains, It Pours............Regulations

Written by Steve Van Beek

The DC area has had some unseasonably warm weather the past couple of weeks - but the flood of regulations coming from the regulators make it seem like we need to have our galoshes with us at all times.  The past couple of weeks have been a good example of regulatory onslaught from multiple angles - making the lives of compliance officers everywhere very difficult.

Given the fast-paced nature of the recent proposals and finalized regulations, I thought a quick blog post highlighting where to find the new rules was a good start up this mountain I like to call "regulatory change."  As an aside, I'm very interested to see Chairman Matz discuss NCUA's efforts to ease the regulatory burden on credit unions during NCUA's February 8th webinar (which also features CFPB Director Richard Cordray).

Interest Rate Risk Policy - Final Rule.  Recently NCUA issued a final rule on interest rate risk policies.  That rule will be published in the Federal Register this morning.  This final rule becomes effective September 30, 2012.    

Loan Workouts, Nonaccrual Policy & TDRs - Proposed Rule.  At its January Board meeting, NCUA also proposed a new rule that would require all federally-insured credit unions to have a written loan workout/modification policy.  The proposal also contains an Interpretive Ruling & Policy Statement discussing nonaccrual status and troubled debt restructuring reporting.  This proposal was published in the Federal Register yesterday and includes a short, 30-day comment period.

Derivatives - Advanced Notice of Proposed Rulemaking (ANPR).  NCUA also issued a ANPR on derivatives that would provide opportunities for credit unions to use derivatives to manage interest rate risk.  This proposal has not been published yet, but it will have a 60-day comment period (from the date it is published in the Federal Register).

Regulation E (Remittances) - Final Rule.  We discussed this final rule yesterday and I'm fairly certain we'll all become good friends with this rule over the next year.  The final rule will become effective February 7, 2013.

Regulation E (Remittances) - Proposed Rule.  Quite possibly a new record - proposing a rule to amend a final rule that was published on the same day.  Bravo!  The CFPB issue a proposed rule that would tweak the recent final rule.  Rest assured (warning - you may need to adjust your snark meter), the CFPB has indicated they will finalize this proposed rule before the finalized rule that it amends becomes effective.

Junior Lien Loan Loss Allowances - Guidance.  On Tuesday, NCUA along with the other regulators who make up the Federal Financial Institutions Examination Council (FFIEC) announced new guidance for junior lien loan loss allowances.  The Interagency Guidance is here and NCUA also issued Accounting Bulletin 12-1.

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On a happier note, all this talk about raining, pouring and galoshes got me thinking about a wonderful trip with my (now) wife in Seattle.  Good times!  

CFPB Issues Final Rule on Remittance Transfers; Proposes Changes As Well

Written by Bernadette Clair, Regulatory Compliance Counsel

On January 20, 2012, the CFPB adopted a final rule amending Regulation E (Electronic Fund Transfers) to include consumer protections for various types of remittance transfers.  The rule was originally proposed by the Federal Reserve Board last May; however, authority to finalize the rulemaking transferred to the CFPB on July 21, 2011.

Effective Date.  The rule will be effective February 7, 2013.  The rule is slated to be published in the Federal Register on February 7, 2012.  The final rule and a proposed rule are both available at the Federal Register Public Inspection Desk (click the links that say "pre-publication PDF version" to find the full language).

Location in Regulation E.  The new rules will be located in a new Subpart B to Regulation E.  The rule creates new sections 12 CFR 1005.30-36 along with new model forms (A-30 through A-41).  After the rule is published in the Federal Register, the new requirements will be added to the CFPB's Reg E in the Electronic Code of Federal Regulations.  

Coverage.  The rule was issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which creates comprehensive consumer protections for remittance transfers.  Remittance transfer is defined broadly and includes most electronic transfers of funds sent by consumers in the United States to recipients in other countries – including international wire and ACH transactions.  Remittance transfer provider is also broadly defined as any person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person.  This definition includes credit unions.

Key provisions of the final rule include: 

• A requirement that the remittance transfer provider provide certain pre-payment disclosures to a sender containing information about the specific transfer – such as the exchange rate, applicable fees and taxes, and the amount to be received by the recipient.  The remittance transfer provider is also generally required to provide disclosures when payment is made, including the same information provided on the pre-payment disclosure, plus additional disclosures. Alternatively, the final rule permits remittance transfer providers to give senders a single written disclosure prior to payment containing all of the information required on the receipt, so long as the provider also provides proof of payment. 

• The establishment of sender cancellation and refund rights.  The rule contains error resolution standards that are similar to those that currently exist under Regulation E for electronic fund transfers.  Note that the proposed rule originally provided for a one business day cancellation period – that has been reduced in the final rule to 30 minutes. 

• Adoption of liability standards under which a remittance transfer provider will be liable for violations by an agent, when such agent acts for the provider.

Model Forms.  You can find model forms on the CFPB’s website here.

Exceptions.  The rule does contain a temporary exception permitting certain estimated disclosures where an insured depository institution or credit union is unable to determine the exact amount for reasons beyond its control.  The exception sunsets five years from the date of enactment of Dodd-Frank (i.e., July 21, 2015), unless extended by the CFPB.

A second exception applies when the remittance transfer provider cannot determine certain amounts because of the laws of the recipient country, or the method by which transactions are made in the recipient country. The CFPB expects to issue a safe harbor list of countries to which this second exception applies.

Regulatory Final.  NAFCU's Regulatory Affairs team is working on a Final Regulation summary of this rule for NAFCU members. 

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Proposed Rule.  Concurrent with the final rule, the CFPB also issued a proposed rule detailing further amendments to the remittance transfer rule.  Under the proposal, a person making no more than 25 remittance transfers per year would generally not be deemed to be providing remittance transfers in the normal course of business.  The CFPB is seeking comments on whether this threshold should be higher or lower.

Changes to disclosure and cancellation requirements for certain transfers are also proposed.   The CFPB intends to complete any further rulemaking on matters raised in this proposed rule before the end of the one-year implementation period.

NAFCU's CFPB Page; CFPB Studies; FTC Mortgage Rule

Written by Steve Van Beek

Keeping track of the issues surrounding the CFPB can be quite difficult.  NAFCU's Regulatory Affairs team has created a webpage to help track and monitor the CFPB's actions.  Click here to see the new page.  The page includes links to the CFPB's guidance documents and reports as well as NAFCU comment letters to the CFPB and recent NAFCU Today stories.  

Also, don't forget that the blog itself has categories which allow you to view prior blog posts related to a certain area - such as the CFPB.   

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The CFPB has released two reports that were required by Dodd-Frank.  

• Credit Scores (differences between the score consumers receive and the score lenders use).  Full report is here.

• Remittances (relating to transparency of pricing and their potential use in credit scores).  Full report is here.  

These reports have the potential to be the groudwork for future rulemakings and guidance - so just keep these issues on your radar.  

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With only a few days to spare before the CFPB took over rulemaking authority, the FTC finalized a rule on deceptive mortgage advertisements.  The FTC, CFPB and individual states will have the ability to enforce the new rule - which becomes effective August 19, 2011.  The rule applies to state-chartered credit unions as they fall under the FTC's jurisdiction.  Federally-chartered credit unions are not covered by the new rule but are covered by NCUA's requirements regarding accuracy of advertisements.