Written by Eliott C. Ponte, Law Clerk
NCUA Hosting Free Webinar on Business Continuity Planning and Disaster Recovery
NCUA will be hosting a webinar on business continuity planning and disaster recovery on Wednesday, August 20, 2014, at 2 P.M. eastern standard time. Speakers will outline effective continuity planning and practices for credit unions, including (1) communicating with members, regulators, and vendors; (2) establishing back-up and recovery sites in separate locations; (3) restoring IT services; and (4) returning to normal operations. Participants will hear from NCUA Staff and CEOs of credit unions who will recount their experiences and lessons learned while recovering from Superstorm Sandy and Hurricane Katrina.
Interested credit unions can register for the webinar by clicking this link. Participants may submit questions in advance at [email protected]. The NCUA has requested that the subject line of the email include the phrase “Business Continuity Planning Webinar.”
CFPB Now Accepting Complaints on Virtual Currency Products and Services, and Issues Consumer Advisory On Virtual Currencies
Earlier this week the CFPB announced that as of August 11, 2014, the CFPB would be accepting consumer complaints on virtual currency like Bitcoin. At the same time, Director Richard Cordray warned consumers “virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.” While Cordray did acknowledge that virtual currencies do have potential benefits, he warned consumers that they “need to be asking the right questions” before buying virtual currency.”
In addition to warning consumers, the CFPB also released a Consumer Advisory on virtual currencies. The Advisory states that virtual currency users are susceptible to a great deal of risks that include hackers and fraudsters. Furthermore, the CFPB warned that virtual currencies offer few protections for consumers if something bad happens, and that virtual currencies can cost consumers much more to use than credit cards or good ole American greenbacks.
This statement and advisory notices comes almost one month after Benjamin Lawsky, superintendent for New York’s Department of Financial Services, proposed new rules for virtual currency businesses in order to protect consumers, reduce money laundering, and combat cyber fraud. Lawsky stated that the proposed rules were aimed at regulating virtual currency firms, but according to the text of proposed rules, any holder of virtual currency, including credit unions, would be subject to the new virtual currency rules. While I am not aware of a credit union in New York currently accepting virtual currency for deposit, regulations like the ones proposed by New York would almost certainly put the brakes on any virtual coin deposit systems due to the compliance burden of the rule. Readers of the proposed rule will agree that the proposed regulations are more burdensome than those imposed on traditional money service businesses, which is the designation FinCEN gives to virtual currency firms. While the rules appear to create safeguard for consumers, the rigidness of the rules and capital requirements provides several disincentives for financial institutions, including credit unions, doing business with virtual currency companies.
If credit unions are considering a business relationship with a virtual currency system, compliance officers should take notice that federal regulations might be on their way. After all, when the CFPB begins collecting data (whether though complaints or doing research on the negative effects on consumers) and given the tone of Director Corday’s remarks on virtual currency, it is likely that the CFPB will be promulgating regulations on virtual currency. Furthermore, if regulations are promulgated, it is likely the compliance burden will be high given how the CFPB perceives the state of virtual currency market. After all, if the CFPB is going to regulate the Wild West, it will need strong regulations to do so.
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