NAFCU Compliance Blog

NCUA's Official Advertising Statement: The Exceptions

Written by Jennifer Aguilar, Regulatory Compliance Counsel

In our compliance inbox, we often get asked about advertising requirements. The questions can range from whether a particular message is considered an advertisement to the specific content requirements for advertisements. If any of you have ever asked us an advertising question, you probably got some version of this somewhere in the response: "'Advertisement' is defined very broadly in [insert applicable regulation here] to cover any commercial message that promotes your [insert product or service here]." So, the basic point is that if your credit union puts out any message about a product or service, it's probably going to be an advertisement.

In addition to the rules in the applicable regulation, NCUA also has some general advertising rules. The basic point of these rules is that your ad must be accurate. But there is one unique thing about NCUA's advertising rules. The other regulations that govern advertisements, such as Truth in Savings and Regulation Z, do not require credit unions to always have a particular disclosure in an advertisement. The rules instead work around "trigger terms" – if a credit union states a particular terms in the advertisement, certain additional disclosures are required. The unique thing about NCUA's advertising rule is that it actually requires a disclosure to appear in all advertisements – the official advertising statement.

Section 740.5(a) states that "each insured credit union must include the official advertising statement . . . in all of its advertisements." In the long version, the official advertising statement reads: "This credit union is federally insured by the National Credit Union Administration." In the short version, the statement reads: "Federally insured by NCUA." Credit unions can also use a reproduction of the official sign as the advertising statement.  Here's where I'd normally put the spiel about how pretty much everything is an advertisement so you need to include the official statement on pretty much everything, but no need to bore you with that again. So, I'll just say that even when a message is considered an "advertisement," you may not actually need to include the official advertising statement thanks to some exceptions. Section 740.5(c) provides a rather long list of advertisements that do not have to include the official advertising statement.  Here are some of these exceptions:

• Credit union supplies such as envelopes, deposit slips or signature cards;
• Listings in directories;
• Advertisements that do not state the name of the insured credit union;
• Group advertisements of credit union services where names of insured and noninsured credit unions are listed; and
• Radio and television advertisements that are less than 15 seconds.

These can all come in handy from time to time, but, the most important exception, in my humble opinion, appears last on the list: advertisements that do not relate to member accounts. When you think about it, this is a very comprehensive exception. The rule provides a couple of examples of the types of advertisements this exception covers: advertisements for loans, safety deposit boxes, traveler's checks and credit disability insurance. Since these examples are not exhaustive, a number of other products and services can be covered under this exception.

As first glance, this seems a bit counterintuitive to NCUA's advertising rules. The whole point of defining "advertisement" broadly is to ensure all messages about all products and services are covered. Then, the rule goes and exempts this huge category of advertisements from the official advertising statement requirements. However, upon further review, this does actually make sense. See, the advertising statement is all about how your credit union is insured but only your accounts are insured. So, a member who is interested in a loan does not really care about your insured status since the loan is not insured. Likewise, safety deposit boxes aren't insured either, so there's no need to highlight in the advertisement that your credit union is insured. While, of course, credit unions may include the official advertising statement on advertisements that do not relate to member accounts (except for noninsured investment products), it is one thing you can take off your checklist for these types of advertisements.

“New Year, New Products and Services-Frequently Asked Questions: Advertising”

Written by André B. Cotten, Regulatory Compliance Counsel

Greetings, compliance comrades! As we head towards the start of a new year, we have noticed an uptick in advertising related questions. Before we get into the details of the advertising requirements, it is useful to remember that the type of products or services and the definition of terms have impact on the scope of regulatory requirements.

In regards to the Truth in Savings Act, an advertisement is defined by section 707.2 as a commercial message that appears in any medium and that promotes directly or indirectly the availability of, or a deposit in, a share account. This is a very broad definition. However, the official commentary provides additional guidance.

Similarly, a key to understanding Regulation Z’s advertising rule is determining which rules apply to your proposed advertisement. Regulation Z has different rules depending on whether the product is open-end or closed-end. There are also special regulatory provisions for HELOCs and promotion rate advertisements. In order to know which rules apply you will need to determine what product you are advertising.

This blog covers some of the more frequently asked questions on advertisements.

If a credit union offers deferred interest on credit cards for an introductory period, should it be concerned about advertising requirements under Regulation Z?

Regulation Z contains advertising requirements specific to deferred interest programs. The term deferred interest is defined as “finance charges, accrued on balances or transactions, that a consumer is not obligated to pay or that will be waived or refunded to a consumer if those balances or transactions are paid in full by a specified date.” See, 12 C.F.R. § 1026.16(h)(2). If a deferred interest offer is advertised for a credit card (or other non-home-secured open-end loan), Regulation Z requires the credit union to state the deferred interest period in a clear and conspicuous manner in the advertisement, and include information about the terms that would apply when the transaction is not paid in full within the deferred interest period or if the account is in default before the end of the deferred interest period. These disclosures must be stated in a prominent location closely proximate to the first statement of “no interest,” “no payments,” “deferred interest,” “same as cash” or similar term. The language must be similar to that provided in Sample G-24 in Appendix G to Regulation Z.

Are there different requirements for advertisements that are inside the credit union, versus those that exist outside of a branch?

Truth in Savings has some different requirements for advertisements in these situations, but Regulation Z does not. Truth in Savings carves out advertisement-related exceptions for certain types of advertisements. Specifically, the regulation eases advertising requirements for broadcast or electronic media such as TV or radio (but not credit union websites), outdoor media (such as billboards), telephone response machines, and signs inside the premises of a credit union. See, 12 C.F.R. § 707.8(e).

Regulation Z regulates advertisements for both open and closed-end loans. See, 12 C.F.R. §§ 1026.16, 1026.24. If a credit union plans to advertise its loan products, it must comply with all of Regulation Z’s requirements regardless of whether the advertisement is placed inside or outside of the branch. However, the staff commentary does have alternative disclosure options for radio and television ads set forth in sections 1026.16(e) and 1026.24(g).

Must the credit union obtain its members’ consent under Truth in Savings or Regulation Z before delivering its advertising materials through email?

The advertising requirements of Truth in Savings (TISA) and Truth in Lending Acts (TILA) may be implicated when sending email advertisements, but credit unions do not need member consent to send email advertisements under these statutes/regulations. However, the requirements of the CAN-SPAM Act, which applies to unsolicited commercial emails, may also be triggered. CAN-SPAM generally requires unsolicited commercial ads to be labeled as an advertisement or solicitation and to include opt-out instructions along with the sender’s physical and electronic address. NCUA Regulatory Alert 04-RA-07 provides guidance on complying with CAN-SPAM. The FTC also has a document on CAN-SPAM compliance available on its website

If a “trigger term” is stated in the negative, is the credit union required to provide the additional advertising disclosures?

Under Regulation Z, “trigger terms” do require additional advertising disclosures when stated in the negative, or even when not stated explicitly, but readily implied. See, 12 C.F.R. Part 1026, Supp. I, comments 1026.16(b)(1)-1 and -2. For instance, if a credit union states its credit card had “no annual fee” is a statement of the term, this would trigger the additional disclosures. See, 12 C.F.R. § 1026.16(b)(1). Similarly, if the credit union were to claim “we will not charge you an annual fee” – the additional disclosures are still required as this statement is the same as stating “no annual fee.”

Given the differences between the rules for open-end and closed-end loans, how could a credit union convert an advertisement if a product is converted?

There are separate advertising requirements for open-end and closed-end loans in Regulation Z. The advertising requirements for open-end loans are found in 12 C.F.R. § 1026.16 and the requirements for closed-end loans are found in 12 C.F.R. § 1026.24. Unfortunately, there is no shortcut to converting open-end marketing pieces into compliant closed-end advertisements. A credit union would need to review the closed-end advertising rules and make sure its advertising includes all the necessary disclosures. The staff commentary to section 1026.24 contains additional details on the requirements.

Final Thoughts

Advertising compliance is the result of having a strong compliance management system that includes effective policies, procedures, education and communication about the applicable regulatory requirements. The advertising rules pursuant to the Truth in Savings Act and Regulation Z both generally prohibit commercial messages that are misleading, inaccurate or misrepresent a credit union’s deposit accounts or loan products.

Credit unions that fail to comply with the advertising rules also run the risk of potential UDAAP issues. The following three prongs are used to determine if an act or practice is “deceptive”: 1) it causes or is likely to cause substantial injury to consumers; 2) the injury is not reasonably avoidable by consumers; and 3) the injury is not outweighed by countervailing benefits to consumers or to competition. A “substantial injury” typically takes the form of monetary harm because of an unfair act or practice.

Also keep in mind that NCUA has an overarching advertising rule in Part 740 that prohibits all federally-insured credit unions from using any advertising that is “inaccurate or deceptive in any particular, or which in any way misrepresents its services, contracts, or financial condition…” Overall, clear and conspicuous advertisements and oversight of advertising materials can minimize potential confusion and complaints, fosters good member relations, and help reduce credit, legal, and other risks to the institution.  

Happy Holidays!

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Programming Note:

NAFCU will be closed Friday, December 23^rd and Monday, December 26^th for the Christmas Holidays.

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The Regulatory Compliance Team really enjoyed the photo booth last week at NAFCU’s Annual Holiday Party!

Deceptive Advertising Practices – A Primer and Some Resources

Written by Benjamin M. Litchfield, Regulatory Compliance Counsel

Happy Friday to all of you out there in regulatory compliance land. Creating an advertisement that catches the eye of a consumer and encourages further inquiries about a product can be a challenge for any financial institution. On top of that, advertisements happen to be one of the more regulated areas of consumer financial law. Federal laws such as the Truth in Lending Act (TILA) and the Truth in Savings Act (TISA) impose additional disclosure requirements when certain trigger terms are used in advertisements while laws such as the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM), Telephone Consumer Protection Act (TCPA), and Telemarketing and Consumer Fraud Abuse Prevention Act regulate the time, place, and manner of marketing messages.

Even where a credit union complies with these requirements, an advertisement may still be considered deceptive under certain circumstances. An act or practice is generally considered to be deceptive if there is a representation, omission, or practice that is likely to mislead a reasonable consumer and that is likely to affect the consumer’s decision to purchase or use a product or service. See, FTC Policy Statement on Deception, 103 F.T.C. 110, 174-84 (1984). The Federal Trade Commission Act, the Consumer Financial Protection Act, and various state laws prohibit deceptive acts or practices and compliance with laws such as TILA or TISA does not necessarily prevent a consumer from bringing an otherwise valid deception claim. See, e.g., Williams v. First Gov’t Mortgage & Investors Corp., 176 F.3d 497 (D.C. Cir. 1999) (discussing the D.C. Consumer Protection Procedures Act).

Unfortunately, whether an advertisement is considered deceptive is almost always decided on a case-by-case basis except for certain mortgage-related advertising practices addressed in Regulation N that the Federal Trade Commission determined to be deceptive in themselves such as misrepresentations regarding negative amortization and misleading comparisons between rates or payments. See, 75 Fed. Reg. 60352, 60353 (Sept. 30, 2010) (“all conduct prohibited…is itself deceptive.”). That being said, both the Federal Trade Commission and the Consumer Financial Protection Bureau have issued guidance documents that may provide helpful guideposts for compliance officers reviewing advertisements for compliance with federal consumer financial law. A good place to start may be the FTC’s guidance on digital disclosures since it clearly lists and describes what are commonly known as the “Four 4Ps of Deception” – prominence, presentation, placement, and proximity – and provides other helpful guidance on how to make effective digital disclosures.

For example, the guidance on digital disclosures notes that size, color, and graphics in an advertisement can impact the prominence of a required disclosure – one of the Four Ps of Deception. Disclosures that are at least as large as other language in the advertisement, in a color that emphasizes the text of the disclosure, and that contain graphics to highlight the disclosures are more likely to be considered prominent and therefore the advertisement as a whole may be less likely to be considered deceptive. When determining the prominence of these kinds of disclosures, the guidance also states that advertisers should design these kinds of disclosures to be viewed on different types of devices such as desktop computers and mobile phones in order to account for the multiple ways in which consumers may be exposed to online advertisements. See, (Dot)Com Disclosures: How to Make Effective Disclosures in Digital Advertising, pp. 17-18.

Other potentially useful guidance documents include:

• Guide Concerning Use of the Word “Free” and Similar Representations, 16 C.F.R. § 251.1.

• Guides Concerning Use of Endorsements and Testimonials in Advertising, 16 C.F.R. §§ 255.0 – 255.5.

• Marketing of Credit Card Add-on Products, CFPB Bulletin 2012-06 (Jul. 18, 2012).

• Marketing of Credit Card Promotional APR Offers, CFPB Bulletin 2014-02 (Sept. 03, 2014).

In addition, the Federal Trade Commission maintains a landing page with numerous resources for businesses seeking to comply with the Commission’s rules. While the Commission may not have enforcement authority over federal credit unions, many of these resources may still be helpful since they address what conduct may be “deceptive” under the Federal Trade Commission Act and may be used by other regulators such as the CFPB and NCUA when determining compliance with federal consumer financial law. Additional information on the Commission's jurisdiction can be found in an earlier blog post on debt collection.

Even following these guidelines may not eliminate all potential litigation risk surrounding representations made in advertisements. I can recall a case in my first year of law school where a person sued PepsiCo demanding a Harrier jet in exchange for millions of rewards points he collected based on what was clearly an exaggeration made in a television advertisement. Cases like this are probably unavoidable but can be very instructive for law students struggling to understand the intricacies of “offer,” “acceptance,” and “consideration” in first year Contracts. For that, we thank you.

Have a good weekend.

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CFPB Releases Additional Resources for HMDA Filers – The CFPB recently released additional resources for financial institutions required to file HMDA data including the 2017 and 2018 Filing Instruction Guides, a Technology Preview that provides resources for financial institutions preparing their systems to file HMDA data with the CFPB, and Frequently Asked Questions. These resources are available here.

Abbreviating “Annual Percentage Rate” When Advertising Rates for Closed-End Consumer Credit

Written by Benjamin M. Litchfield, Regulatory Compliance Counsel

Greetings compliance fans and Happy Leap Day! We have received questions lately about whether credit unions are required to use the term “annual percentage rate” in advertisements for closed-end consumer credit or, in the alternative, whether credit unions can use the abbreviation “APR.” This may be the result of some confusion regarding the different regulatory requirements under NCUA’s Truth in Savings Rule and the CFPB’s Regulation Z. This blog post will (hopefully) clarify this issue for you.

Truth in Savings requires credit union advertisements to state the rate of return on share, share draft, and share certificate accounts as an “annual percentage yield,” using that term. In parenthesis, the rule clarifies that

“The abbreviation “APY” may be used provided the term ‘annual percentage yield’ is stated at least once in the advertisement.”

12 C.F.R. § 707.8(b). This means that somewhere in the advertisement, the credit union must spell out the phrase “annual percentage yield” at least once in order to comply with NCUA’s rule.

Regulation Z has a similar requirement for advertisements for closed-end consumer credit. The rule states that

“If an advertisement states a rate of finance charge, it shall state the rate as an “annual percentage rate,” using that term. If the annual percentage rate may be increased after consummation,  the advertisement shall state that fact…”

12 C.F.R. § 1026.24(c). Based on a strict reading of the text of the rule, and with some knowledge of the disclosure regime under Truth in Savings, it might seem like Section 1026.24 would require credit unions (and other financial institutions) to use the phrase “annual percentage rate” at least once in closed-end advertisements.

The Official Interpretations to Regulation Z, however, appear to allow credit unions to use the abbreviation “APR” rather than fully spelling out “annual percentage rate” in advertisements:

“Advertised rates must be stated in terms of an annual percentage rate, as defined in § 1026.22. Even though state or local law permits the use of add-on, discount, time-price differential, or other methods of stating rates, advertisements must state them as annual percentage rates. Unlike the transactional disclosure of an annual percentage rate under § 1026.18(e), the advertised annual percentage rate need not include a descriptive explanation of the term and may be expressed using the abbreviation APR…”

Official Interpretations, § 1026.24(c)-1. On the surface, it would seem that the text of the rule and the text of the commentary are in tension. The rule requires credit unions to state the rate as an annual percentage rate, “using that term.” On the other hand, the commentary allows credit unions to use the abbreviation “APR.”

A closer reading of the commentary, however, appears to suggest that the Federal Reserve’s (the agency that drafted the original rule) primary concern when drafting the rule was that credit unions disclose the cost of credit as an “annual percentage rate” as defined in Section 1026.22 and calculated according to Appendix J. It seems that it was also important to distinguish the “annual percentage rate” under Regulation Z from the simple interest calculation methodologies described in the commentary that may be allowed under state or local law.

It also appears that given the requirement in Section 1026.18(e) that credit unions disclose and provide a brief description of the “annual percentage rate” in the account opening disclosures, the Federal Reserve was less concerned about whether the credit unions used “annual percentage rate” or “APR” in advertisements. Read this way, the rule and commentary appear to allow credit unions to use the abbreviation “APR” in advertisements without first spelling out “annual percentage rate” provided that the rate disclosed otherwise meets the Regulation Z definition of “annual percentage rate” and uses Regulation Z calculation methodology.

On the other hand, the preamble to NCUA’s Truth in Savings Rule shows that the NCUA Board was very concerned with distinguishing the “annual percentage rate” disclosed under Regulation Z with the “annual percentage yield” disclosed under Truth in Savings. See, 58 Fed. Reg. 50394, 50401-402 (Sept. 27, 1993). This concern may have led to the Board adopting a conservative approach that requires credit unions to define “APY” in advertisements at least once to prevent member confusion.

I hope this brief history lesson has clarified this issue for you. Have a Happy Leap Day!

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Free Webcast!

NCUA’s MBL Changes Explained: What you need to know

Live Webcast: Thursday, March 3 | 2:00 p.m. – 3:30 p.m. EST

In this free webcast you’ll get a thorough overview of NCUA’s Member Business Lending (MBL) rule that eliminate the rule's from its architect, Larry Fazio, director of NCUA’s Office of Examination and Insurance. You’ll cover the process allowing credit unions to decide for themselves if a borrower should be exempt from a personal guarantee. You’ll also review details of how the final rule requires credit unions currently engaged in commercial lending, as well as those considering stepping into this space, to develop board-approved policies that thoughtful delineate their individual commercial underwriting standards and infrastructure.

Annual Privacy Notice Update; Rates They Are A-Changin’ Part II: Advertising and Marketing Variable Rate Products; The Truth About Ollie; Programming Note & Happy Holidays from the NAFCU Blog

Written by Elizabeth M. Young LaBerge, Regulatory Compliance Counsel

Annual Privacy Notice Update

When the relief measures regarding privacy notices were signed into law earlier this month as part of the transportation authorization bill, focus turned to the CFPB in hopes it would implement regulatory changes to the privacy notice requirements. Hearing the need for clarity from credit unions, NAFCU President and CEO Dan Berger wrote Director Cordray last week urging the Bureau to "act swiftly to implement these statutory changes and clarify the controlling law through a formal announcement or the promulgation of an interim final rule."​As you may have already read, the CFPB responded to NAFCU’s call for clarity yesterday and explained that it is conveying to its supervision and enforcement staff that no financial institution is expected to comply with the regulatory requirements which were superseded by that law. In the meantime, the CFPB is working with other regulators on a rulemaking to reconcile regulatory requirements with the law on the books. The full text of the response is available here. We will keep you updated as we hear more from the regulators on these changes.

Advertising and Marketing Variable Rate Products

 

Now that rates have budged for the first time in six years, we thought it might be good to refresh your memory regarding regulations specific to variable rate products. Last week, Benjamin Litchfield provided a summary of the disclosures requirements on variable rate products. Below is a quick outline of common regulations involved in advertising variable rate products.

Truth in Savings (TIS)

Section 707.8 of NCUA’s Truth in Savings regulations addresses advertising, and would apply to the advertisement of share or deposit accounts. If the advertisement states a rate of return, it must state the rate as an “annual percentage yield,” though if that phrase has been stated once, the term “APY” may be used thereafter. See 12 C.F.R. § 707.8(b). Under the regulation, the annual percentage yield (APY) is a trigger term, and if it is included in the advertisement, additional information must also be included, including whether the APY is variable. If the APY is variable, the advertisement must clearly and conspicuously state that the rate may change after the account is opened. See section 707.8(c)(1).

There are exemptions to this requirement for certain media outlets or methods of advertisement. If an advertisement is done over broadcast or electronic media (e.g. television or radio), outdoor media (e.g. billboards) or telephone response machines, then it is allowed to only use the shorter phrase “APY,” and the variable APY statement is not required. Also, if the advertisement is on a sign located inside a credit union or a share or deposit broker, or in a newsletter sent by the credit union, APY can be used throughout, and the variable statement if not required, though it must contain a statement advising members to contact an employee for further information about applicable fees and terms. See section 707.8(e).

Regulation Z

With regard to loans, Regulation Z contains multiple sections and subsections on advertising. More than one section may come into play, depending on the product advertised, the method of advertisement and the content of the advertisement.

When advertising variable rate, closed-end credit, if the APR is stated in the advertisement, it must also state that the APR is subject to increase. See 12 C.F.R. § 1026.24(d)(2)(iii). If the loan is also secured by a dwelling, the advertisement must state a simple rate based on a reasonably current index and margin, the period of time each rate will apply and an APR. See section 1026.24(f)(2)(i). In subsection 1026.24(i), there are strict requirements for certain practices, such as using the word “fixed” in connection with a variable rate transaction or advertising comparisons of payments and rates. As in Truth in Savings, there are disclosure exceptions and alternatives related to the advertising media or method ― consult the full regulation for details.

Regarding open-end credit, Regulation Z requires that when the periodic rate is stated in the advertisement, it should be stated as an annual percentage rate. If the rate is variable, that must be disclosed. See section 1026.16(b)(1)(ii). To disclose the APR for a variable rate plan, a credit union can use an insert showing the current rate or provide a rate as of a specified recent date. When advertising home equity plans, the advertisement must clearly and conspicuously state the maximum annual percentage rate (APR) that may be imposed. See section 1026.16(d)(1)(iii). Again, the regulations includes exceptions and alternatives for disclosures with certain methods of advertisements. For example, television and radio advertisements can avoid some disclosures by listing a toll free number to obtain additional information. See section 1026.16(e).

When advertising promotional rates, there are similar requirements for both home secured and non-home secured open-end credit plans. The advertisements must disclose that the rate will be variable and disclose a “reasonably current” APR that will apply after the promotional period ends. See subsections 1026.16(d)(2) and (g)(4). An APR is reasonably current if it is based on an index and margin current within 60 days before mailing to a physical address, or 30 days before e-mailing, posting on a website or printing in a generally available publication. See sections 1026.60, 1026.16 and Supplement I to Part 1026, comment 1026.16(d)-6. For non-home secured open end credit, if the rate or margin is determined by the consumer’s creditworthiness, the advertisement must disclose a list or range of rates that could apply. See section 1026.16(g)(4)(ii). There are slight differences between home secured and non-home secured disclosures, so be sure to check the correct subsection of 1026.16 when reviewing open-end credit advertisements.

If sending solicitations for credit cards, consult section 1026.60 which contains detailed requirements for solicitations, separated by the method of solicitation. For NAFCU members, the October 2015 Compliance Monitor contained an article entitled Opening Credits: Reminders For Advertising, Soliciting, Underwriting and Other Regulations Regarding Opening Credit Card Accounts which contains details regarding credit card solicitations and may be useful.

As always, if you are a NAFCU member struggling with finding the advertisement guidance you need, contact your NAFCU compliance team for assistance. We are here to help!

The Truth About Ollie

Earlier this month, I mentioned that I had ordered a genetic test to determine the breed of my dog Ollie. Guesses as to Ollie’s breed included Maltese, Lhasa Apso, Maltipoo, Maltichons, Havenese, Cotonese, Coton de Tulear, and a variety of other breeds I have never heard of before. Who knew the universe of tiny, white dogs is so big? In the end, no one nailed it exactly.

The results are in and Ollie is…

My husband and I have been referring to him as a Bichon-Maltijack, but a quick google search indicates that we may have made that up. If you are interested in reading the full report, it is here.

Programming Note & Happy Holidays From the NAFCU Blog

NAFCU will be closed on December 24^th and 25^th for the holidays, but we will be back to blogging on Monday, December 28^th. From everyone here, we wish you and yours a safe and happy holiday!

Learning from NewDay: Referral Fees and Deceptive Practices

Written by Eliott C. Ponte, Regulatory Compliance Counsel

On February 10, 2015, the CFPB announced a consent order with NewDay Financial, LLC (NewDay) regarding two violations resulting from its marketing practices. First, the order states that NewDay’s marketing constituted unfair and deceptive acts and practices (UDAAP) in violation of Dodd-Frank. Second, NewDay engaged in referral arrangements with a veteran’s group that violate the Real Estate Settlement Procedures Act’s (RESPA) prohibition against kickbacks for referrals of federally related mortgage loans.  The CFPB assessed a $2 million civil money penalty under the consent order.  The facts as described in the consent order do not involve typical marketing service agreements; however, the consent order makes clear that endorsements of a company in advertisements are considered referrals by the CFPB, and failing to disclose material information to consumers regarding a marketing relationship is deceptive under UDAAP. 

UDAAP Violation. The marketing agreement listed NewDay as the exclusive lender and “lender-of-choice” of a not-for-profit Veterans’ Organization (the organization was not named in the consent order).  Under the marketing agreement, NewDay sent direct advertisements under the Veterans’ Organization’s name, which promoted the relationship between the two companies and recommended the use of NewDay’s mortgage products.  One advertisement also stated the Veterans’ Organization endorsed NewDay after spending significant time with NewDay’s management and loan professionals.  Another advertisement indicated that NewDay had become the “exclusive provider” of mortgages based on NewDay’s “high standards for service and the excellent value of their programs.”  Veterans’ Organization members were not made aware of the agreement between NewDay and the Veteran Organization and this information was not made public.   Based on these facts, the CFPB found that NewDay’s failure to disclose its arrangements with the Veterans’ Organization would likely be material to consumers choosing a lender and likely be misleading to “reasonable” consumers.  Accordingly, the CFPB concluded that NewDay engaged in deceptive acts or practices in violation of UDAAP. 

RESPA Violation. Recall that under RESPA, “[n]o person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person.” RESPA also broadly defines the terms “referral” and “thing of value.” See 12 C.F.R. § 1024.14. 

NewDay's marketing agreement with a not-for-profit Veterans’ Organization was arranged and coordinated by a Broker Company (unnamed in the Order), which contracted directly with NewDay on behalf of the Veterans’ Organization.  Under the agreement, NewDay paid a monthly “licensing fee” of $15,000 to the Broker Company.  In addition, NewDay paid “lead generation fees” to both the Broker Company and the Veterans’ Organization for members who contacted NewDay to inquire about loan products.  The Broker Company also paid the Veterans’ Organization a portion of the fees the Broker received from NewDay. The CFPB found that the payments made by NewDay to the Veterans’ Organization and the Broker constituted payments for referrals in violation of Section 8 of RESPA. 

The key takeaway form this consent order is that marketing agreements involving third-parties can carry risks relating to both UDAAP and RESPA.  Referrals exist in many forms and fees cannot be paid for those referrals. Meanwhile, to the extent that the content of an advertisement contains a particular endorsement, credit unions should note that in the CFPB’s eyes, that conduct may be deemed as a misleading representation in violation of UDAAP.  This enforcement action highlights the importance of ensuring that members are informed about marketing agreements and lenders avoid referrals for federally-related mortgage loans. Credit unions considering omitting material information should proceed with caution, and when appropriate, seek advice from local counsel familiar with UDAAP. For more information on RESPA kickbacks, NAFCU members can check out this month’s Compliance Monitor (log in required).

CFPB Issues Consent Order against Bank for Deceptive Marketing of Credit Card Add-On Products and Discriminatory Credit Card Practices

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Last week, the CFPB ordered Synchrony Bank, formerly known as GE Capital Retail Bank (“Bank”), to pay an estimated $225 million to consumers harmed by deceptive marketing of credit card add-on products and borrowers excluded from credit card debt relief offers because of their national origin. Of that amount, $56 million goes to approximately 638,000 consumers who were subjected to deceptive marketing practices, and the remaining $169 million goes to approximately 108,000 borrowers who were excluded from debt relief offers as part of a joint enforcement action by the CFPB and Department of Justice. The CFPB also assessed a civil money penalty of $3.5 million for the deceptive marketing practices. The CFPB’s press release is available here.

Deceptive Marketing. Similar to a CFPB order that we blogged about a couple of months ago against Bank of America, N.A. and FIA Card Services, N.A., the marketing practices cited in this order focus on credit card add-on products, specifically debt-cancellation products.  From the press release:

“The Bureau found that GE Capital’s telemarketers misrepresented these products to consumers in four main ways:

• Marketed the product as free of charge: Telemarketers led consumers to believe they would not have to pay for these products as long as they paid off the balance on their billing statement. In fact, consumers could only avoid the fee in very specific circumstances, such as if the account was not in use or if the customer had paid off the balance prior to GE Capital issuing its monthly billing statement.

 

• Failed to disclose consumers’ ineligibility: In calls with telemarketers, many consumers mentioned that they were retired or disabled, which would mean that they were not eligible for key benefits of the products. Even after hearing this, the telemarketers neglected to tell the consumers that they would not be eligible for key debt cancellation benefits, and the consumers bought the products without this important information.

 

• Failed to disclose that consumers were making a purchase: In many cases, the telemarketers did not make it clear that consumers were purchasing a product. Rather, they made it seem like the consumers were receiving a benefit, updating their accounts, or that the telemarketers were handling other administrative tasks. In these conversations, it was not obvious to consumers that they were buying something and would be charged a fee.

 

• Marketed products as a limited time offer: Many customer service representatives falsely told consumers that these debt cancellation products were a “limited time offer.” In reality, nothing about the availability      of these products was limited. However, leading consumers to believe they had a short timeframe to sign up may have created a false sense of pressure and pushed them to enroll in the products.”

Under the order, the Bank is required to submit a compliance plan to prevent future violations to its CFPB Regional Director before marketing, soliciting, or selling credit card add-on products by phone.  The order also requires the Bank to strengthen oversight over any third-party vendors used in connection with marketing or selling add-on products.  These requirements are similar to those contained in the order issued against Bank of America, N.A. and FIA Card Services, N.A. for deceptive marketing practices.

***

Discriminatory Credit Card Practices. The CFPB also found that the Bank engaged in discriminatory practices related to credit card debt relief offers.  According to the order, the Bank offered two promotions to credit card customers with delinquent accounts that allowed the customers to settle their balance by paying off a portion of their debt. However, this offer was not extended to customers who indicated a preference to communicate in Spanish or who had a mailing address in Puerto Rico, even if the customers otherwise met the criteria for the offer. 

Pursuant to the order, the Bank must provide remediation of at least $169 million to affected consumers in the form of monetary payments, credits, and waivers on accounts, representing the value of the excluded offer, lost interest, and indirect damages.  Additionally, the Bank is required to work with credit reporting agencies to remove any negative information in consumers’ credit histories as a result of these violations. 

Although the CFPB assessed a civil money penalty for the deceptive marketing practices, it did not assess a civil money penalty for the discriminatory debt relief offer exclusions – the CFPB indicated that this was based on a totality of the circumstances, including the Bank’s self-policing, prompt reporting to the CFPB, self-initiated consumer remediation, and cooperation with the CFPB’s investigation.

For complete details, the CFPB’s order is available in its entirety here.

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Free Compliance Training. Another great perk of being a NAFCU member! Now you can access six full compliance webcasts and self-paced modules free, and experience the convenient benefits of NAFCU’s Compliance Webcast & Online Training Subscription firsthand. Log in now and select NAFCU Member Online Sampler (you may have to click the blue plus sign in the lower right corner first). If you don't have a login, you can sign up for a username and password. Let the new Compliance Webcast & Online Training Subscription make your compliance training easy now.

CFPB Releases Guide to Completing TILA/RESPA Integrated Disclosure Forms; NCUA Board Meeting Agenda; Deadline Alert-Submission of First Quarter 2014 Call Report and Profile Information; Past Due Twin Check-In

Written by JiJi Bahhur, Director of Regulatory Compliance

TILA/RESPA Integrated Disclosure Forms Guide.  Last Thursday, the CFPB released a guide to assist with the completion of the new Truth in Lending Act and Real Estate Settlement Procedures Act (TILA/RESPA) integrated disclosure forms.  The guide provides instructions for completing loan estimate and closing disclosure forms as well as models and samples of these forms. The guide comes as a companion to the recently released Small Entity Compliance Guide which we blogged about here.   

It is important to note that the TILA/RESPA rule does not allow creditors the ability to comply early.  In other words, creditors may not use the new integrated disclosures prior to the rule’s effective date, August 1, 2015.  Between now and then, creditors should follow the current disclosure requirements under Regulations Z and X, and use the existing forms for applications received before the effective date.

NAFCU’s compliance team recently made available a scope and applicability chart and the first of a series of articles on the TILA/RESPA integrated disclosure rule.  NAFCU’s resources on the TILA/RESPA integrated disclosure rule can be found here.  We will continue to update this page with any NAFCU-created resources as they become available.

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NCUA’s Board Meeting Agenda.  NCUA’s April Board Meeting will take place tomorrow, Thursday, April 24, 2014.  Matters to be considered during the open session include, among other items, the following:

• Proposed Rule, Appendix B of Part 701, Associational Common Bond Requirements.
• Final Rule, Part 702, Credit Union Capital Planning and Stress Testing.

We’ll be sure to blog on the outcome of the meeting once that information is available.

***

Deadline Approaching! Submit First Quarter 2014 Call Report and Profile Info by Friday!  The deadline for submitting first quarter 2014 Call Report and Profile information is Friday, April 25^th (11:59:59 pm, Eastern Daylight Time). 

Credit unions that fail to meet the filing deadline may potentially be subject to civil money penalties.  According to the April 2014 NCUA Report, “each penalty will vary based on the reason for the delay or inaccuracy, ranging from $10 per day to a maximum of $1 million per day or one percent of total assets, whichever is less.” 
 
For more information on this issue, take a look at the related Letter to Credit Unions (14-CU-03) here.

***

Past Due Twin Check-In.  I’ve received some emails that I’m past due for sharing more pictures of the twins.  My sweet buds, Kyse and Ava, turned 20 months old on Easter Sunday.  Here are a few recent photos!

 

NCUA January Board Meeting Results; 18 Percent Interest Rate Cap to Continue through September 2015; NAFCU Webcast – Advertising and Regulation Z.

Written by JiJi Bahhur, Director of Regulatory Compliance

NCUA January Board Meeting Results. Yesterday, the NCUA Board held its January Board meeting. The agenda for the open meeting included the following action items:

1. NCUA’s      Strategic Plan for 2014 through 2017, and Annual      Plan for 2014 and 2015.
2. Federal      Credit Union Loan Interest Rate Ceiling.
3. Final      Rule, Parts 703, 715 and 741, Financial Derivative Transactions to      Mitigate Interest Rate Risk.
4. Proposed      Rule, Part 702, Prompt Corrective Action and Risk-Based Capital Measures.

By a unanimous vote, all actions presented at the open meeting were approved.  Since it’s Friday, I won’t go into the nitty and the gritty of every action item above, but you can get those details here in this message from NAFCU’s President and CEO, Dan Berger.  Also, you can find the details here in NCUA’s Board Action Bulletin.  And keep a lookout for future blog posts on the final derivatives rule and the proposed risk-based capital rule. 

***

18 Percent Interest Rate Cap to Continue.  During yesterday's NCUA Board meeting, the NCUA Board voted to extend the current interest rate cap of 18 percent for most federal credit union loans through September 10, 2015. Had this action not been approved, the cap would have reverted to 15 percent on March 11, 2014.

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Webcast: Advertising and Regulation Z: Are You Covered? As your credit union creates fresh ideas to advertise loan products, make sure you know the latest Reg Z rules regarding social media, print, web and other marketing vehicles. Register by Feb. 12 to save $100 and learn important information to stay in compliance.

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TGIF!  Last weekend, I came to the realization that my children really don't like to share.  Unlike the kiddos, I love to share and below I have shared two pictures that get me giggling each time I see them.  The first is a photo of Ava - she's taking Kyse's car for a spin.  The second photo was snapped right after Kyse hijacked the car back from Ava.

 

Have a great weekend!

NCUA Letter to Federal Credit Unions on Potential Violations of Common Bond Advertising Requirements

Written by Michael Coleman, Regulatory Compliance Counsel

NCUA recently released Letter to Federal Credit Unions 13-FCU-03 which concerns potential violations of common bond advertising requirements. The letter expresses strong concern over some advertising practices which imply that the field of membership in federal credit unions is “open to anyone” without any limitations. Specifically, the letter is directed at what it considers “overly aggressive marketing campaigns” advertising membership in FCUs through associational groups that NCUA feels is “providing consumers with misleading information about single and multiple common bond membership requirements.”

The letter warns FCUs that if they are advertising that membership is open to anyone without limitations they may be in violation of the common bond requirements of the Federal Credit Union Act (FCUA) and NCUA regulations, NCUA’s accuracy in advertising rules (See, 12 C.F.R. 740.2) and the consequences of non-compliance with these requirements.  

What should federal credit unions take away from this letter? I think the most important take away is that FCUs should review their advertising practices concerning field of membership (FOM). The letter states that advertisements which include language to the effect that “anyone can join” or “membership is open to everyone” that do not contain qualifying language on the FOM restrictions would violate the prohibition on inaccurate or deceptive advertisements contained in 12 C.F.R. 740.2. If you have been advertising membership in your FCU through an associational group, make sure the ads conform to these directives from the NCUA.

Another thing to keep in mind is the requirements for associational common bonds, which are explained in NCUA’s Chartering and Field of Membership Manual (Chapter 2, Section III.A.1). Here is an excerpt from the letter:  

“NCUA determines whether a group satisfies the associational common bond requirements based on a “totality of the circumstances” test, which has the following seven factors:⁴

 1) Whether members pay dues;

 2) Whether members participate in the furtherance of the goals of the association;

 3) Whether the members have voting rights;

 4) Whether the association maintains a membership list;

 5) Whether the association sponsors other activities;

 6) The association’s membership eligibility requirements; and

 7) The frequency of meetings.

 NCUA’s Office of Consumer Protection has begun conducting quality control reviews of federal credit unions that may be improperly using associations to sign up members without a common bond.”

This letter is a must read, be sure to take a look at the full letter and pass it along to your marketing department.

August 2013 NCUA Report Released; Illinois Follows Suit with ATM Fee Disclosure Requirements; NAFCU’s 2013 Compliance GPS Updated; NAFCU Office Closures

Written by JiJi Bahhur, Regulatory Compliance Counsel

August 2013 NCUA Report.  Earlier this week, the NCUA released its August 2013 NCUA Report.  There are several featured articles, but I’d like to bring attention to the Region II Report: Understanding Member Business Loan Waivers (Report). 

Member business loan (MBL) waivers were addressed in NCUA Letter to Credit Unions 13-CU-02.  The purpose was to clarify the waiver process under Part 723 of the NCUA Rules and Regulations.  However, even with the guidance, the subject remains confusing and has resulted in a number of frequently asked questions (FAQs).  In this Report, NCUA provides the FAQs that it receives on MBL waivers.  The combination of 13-CU-02 and these FAQs can assist credit unions with proper management of their MBL programs.

To review the FAQs, click here.  To review the August 2013 NCUA Report in full, click here.

***

ATM Fee Disclosures.  You may recall that the federal requirement for an “on the machine” fee notice for ATMs was removed in late 2012 when President Obama signed the ATM Fee Disclosure Bill (the CFPB officially amended Reg E in March). However, there are still state laws that could require this "on the machine" notice. New York was one of those states until August 1, when Governor Andrew Cuomo signed legislation to remove the requirement from New York law.  And, Illinois Governor Pat Quinn signed legislation to remove the “on the machine” requirement – effective on August 16 – from Illinois law.

***

NAFCU’s 2013 Credit Union Compliance GPS has been updated to include recent regulatory changes.  What is this GPS, you ask?  It is a compliance officer’s dream!  NAFCU’s GPS is a must-have, electronic resource for all credit union compliance officers and staff. It explains complex regulatory language in plain English and covers everything from the basic anatomy of a federal credit union to specifics of the NCUA, CFPB, and important credit union regulations including Regulation E, BSA and much more.  For more information and a sneak-peek into the GPS, click here.

***

Programming Note.  NAFCU’s offices will close today at noon and remain closed Monday for the long holiday weekend.  We’ll be back to blogging next Wednesday!  Have a great weekend!

Unfair, Deceptive or Abusive Acts or Practices: Airline Taxes Edition

Written by Steve Van Beek

Ok, we're going a bit off-topic for a couple of reasons.

1. It is Friday.
2. Why not?
3. It is interesting to think of the issues facing compliance officers in other industries.

The Washington Post ran a recent opinion piece from George Will which highlighted a requirement for airlines when they disclose taxes and fees:

"Spirit, Allegiant and Southwest are low-cost carriers that have thrived since the deregulation of the airline industry, which began in 1978. The government retains a narrow authority to prevent deceptive advertising practices. But as the airlines argued in petitioning the Supreme Court to hear their case, the government is micromanaging their speech merely to prevent the public from understanding the government’s tax burdens.

The government’s total price rule forbids the airlines from calling attention to the tax component of the price of a ticket by listing the price the airline charges and then the tax component with equal prominence. The rule mandates that any listing of the tax portion of a ticket’s price “not be displayed prominently and be presented in significantly smaller type than the listing of the total price.” The government is trying to prevent people from clearly seeing the burdens of government.

These three low-cost carriers compete for the most price-conscious travelers, and they want to tell those travelers which portion of a ticket’s cost the airlines control. The government, far from regulating to prevent customer confusion, is trying to prevent customers from understanding the taxes and fees that comprise approximately 20 percent of the average airline ticket." (Emphasis added).

I'm not trying to get political - but I found it very interesting that airlines face regulations which tell them their tax and fee disclosures cannot be displayed prominently. 

***

I wonder what the CFPB would say about such a regulation......Have a great weekend!

FFIEC's Proposed Social Media Guidance

Editor's Note by Steve Van Beek

NAFCU's offices are technically closed today due to the weather in the Washington D.C. area.  Of course, we'll still be available to help NAFCU member credit unions.  To help ensure employee safety, some of our compliance team is working remotely.  If you have a compliance question, the best way to reach us is via email: [email protected].

NAFCU's Ability to Repay/Qualified Mortgage Webcast.  Today's webcast will continue as planned.  Andy Keeney from Kaufman & Canoles will be speaking and I'll be moderating.  If you're joining us - see you there (or, at least, you'll see me there)!  If the weather prevents your credit union from viewing today, the webcast - as with all NAFCU webcasts - will be available for on-demand viewing allowing you to reschedule and watch at a more convenient time.

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Written by Bernadette Clair, Regulatory Compliance Counsel

The FFIEC is seeking comment on proposed social media risk management guidance designed to address the applicability of federal consumer protection and compliance laws, regulations, and policies to activities conducted via social media by credit unions and other financial institutions.  The guidance would cover credit unions’ activities on Facebook, Twitter, blogs, forums, and YouTube, to name just a few of the covered social media tools.

The proposed guidance discusses various risks associated with social media –such as compliance, legal, reputation, and operational risks – and sets forth a framework for establishing a risk-based management program designed to identify, measure, monitor, and control these risks.  Of note, the proposed guidance states that the components of a risk management program should include the following:

• A governance structure with clear roles and responsibilities whereby the board of directors or senior management direct how using social media contributes to the strategic goals of the institution (for example, through increasing brand awareness, product advertising, or researching new customer bases) and establishes controls and ongoing assessment of risk in social media activities;
• Policies and procedures (either stand-alone or incorporated into other policies and procedures) regarding the use and monitoring of social media and compliance with all applicable consumer protection laws, regulations, and guidance. Further, policies and procedures should incorporate methodologies to address risks from online postings, edits, replies, and retention;
• A due diligence process for selecting and managing third-party service provider relationships in connection with social media;
• An employee training program that incorporates the institution's policies and procedures for official, work-related use of social media, and potentially for other uses of social media, including defining impermissible activities;
• An oversight process for monitoring information posted to proprietary social media sites administered by the financial institution or a contracted third party;
• Audit and compliance functions to ensure ongoing compliance with internal policies and all applicable laws, regulations, and guidance; and
• Parameters for providing appropriate reporting to the financial institution's board of directors or senior management that enable periodic evaluation of the effectiveness of the social media program and whether the program is achieving its stated objectives.

The FFIEC invites comments on any aspect of the proposal, but is specifically requesting comments on the following questions:

1. Are there other types of social media, or ways in which financial institutions are using social media, that are not included in the proposed guidance but that should be included?
2. Are there other consumer protection laws, regulations, policies or concerns that may be implicated by financial institutions’ use of social media that are not discussed in the proposed guidance but that should be discussed?
3. Are there any technological or other impediments to financial institutions’ compliance with applicable laws, regulations, and policies when using social media of which the Agencies should be aware?

If you would like to weigh in on this proposed guidance, comments must be received by the FFEIC on or before March 25, 2013.

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

***

And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

***

Upcoming Webinars and Webcasts; NAFCU's October Compliance Monitor

Written by Steve Van Beek

Webinars and Webcasts.  There are quite a few free webinars to keep on your radar:

• October 4 at 3:00 p.m. EDT - Town Hall with Chairman Matz - Registration is Still Open

• October 16 at 2:30 p.m. EDT - New Requirements for Remittance Transfer Providers - Sign-Up by sending an email to [email protected] by October 9.  If you have a question you'd like answered during the webinar - send it to [email protected] by October 5.  

• October 17 at 2:00 p.m. EDT - Fair Lending Hot Topics by the Philadelphia Federal Reserve's Consumer Compliance Outlook

• Archived:  Servicemember Financial Protection (Compliance with the SCRA) - Slides are here.

NAFCU also has a couple of upcoming webcasts that might be of interest:

• October 10 - BSA/OFAC for Directors and Supervisory Committee  - Keep in mind that you can watch the archived webcast for up to one year - making this perfect for a future Board meeting or training event.  Sign up by October 3 and Save $100.  

• October 24 - Social Media and Website Compliance - This webcast will also be viewed live by all Regulatory Compliance Seminar attendees.  Sign up by October 17 and Save $100.  

• November 7 - CFPB's Latest Mortgage Proposals - NAFCU's Compliance team will overview the mortgage loan originator proposal, interagency higher-risk appraisal proposal and the Regulation B appraisal proposal.  Sign up by October 31 and Save $100.    

***

NAFCU's October Compliance Monitor.  NAFCU Members: Our October Compliance Monitor is now available for download.  This issue includes lengthy articles on the "high-cost" mortgage proposal (including a discussion of the potential change to the definition of "finance charge") and the CFPB's mortgage servicing proposals.  We've also attached a six-page chart which helps organize the 20 new notices included in the mortgage servicing proposals.  Happy reading!

Changes to Equal Housing Lender Poster (for FCUs); NCUA Letter on Corporates

Written by Steve Van Beek

Last Thursday, the NCUA Board approved a couple of Technical Corrections at their March Board Meeting.  One of these changes provides clarity for Federal Credit Unions in an area full of confusion since the creation of NCUA's Office of Consumer Protection:  the address required on the Equal Housing Lender poster.

Equal Housing Poster.  NCUA amended Part 701.31(d)(3) of their regulations to update the address that Federal Credit Unions are required to have on their posters.  In the past, the address was the Office of Examination & Insurance but it should now be NCUA's Office of Consumer Protection.  

Updated Language.  This rule change was included in the Federal Register yesterday and the Electronic Code of Federal Regulations for 12 C.F.R. 701.31(d)(3) should be updated in the next couple of days.  The language for the updated poster can be found here.

Federal Credit Unions.  Part 701.31 only applies to federal credit unions.  State-chartered credit unions should look to the HUD's Equal Housing Poster in 24 C.F.R. 110.25.  

Note:  NCUA did not make the distinction in their technical corrections but the existing language of 12 C.F.R. 701.31 indicates NCUA's poster requirement only applies to federal credit unions - here is from Subsection (d)(2):

"(2) Lobby notice of nondiscrimination. Every federal credit union that engages in real estate-related lending must display a notice of nondiscrimination. The notice must be placed in the public lobby of the credit union and in the public area of each office where such loans are made and must be clearly visible to the general public. The notice must incorporate either a facsimile of the logotype and language appearing in paragraph (d)(3) of this section or the logotype and language appearing at 24 CFR 110.25(a). Posters containing the logotype and language appearing in paragraph (d)(3) of this section may be obtained from the regional offices of the National Credit Union Administration."  (emphasis added).

Technically, Federal Credit Unions could use either NCUA's poster of the HUD poster - but it makes much more sense to use the NCUA specific language with the new updated address for the Office of Consumer Protection.

Timing?  The changed rule became effective immediately - March 21, 2012.  However, NCUA staff did indicate at the Board meeting that credit unions would have a reasonable amount of time to update their posters.

While I'm sure a lot of credit unions appreciate the informal implementation time, I'm hoping NCUA has passed this flexible interpretation to their examiners as well.  

***

On Tuesday, NCUA issued Letter to Credit Unions 12-CU-03 which indicates that the unlimited share insurance coverage for shares invested with Corporate Credit Unions will end - as scheduled - on December 31, 2012.  The program is formally known as the Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) - See Letter 09-CU-01 for more information on the program.

If your credit union has funds with a corporate, make sure your credit union is aware of Letter 12-CU-03 as it does a very good job of explaining how the expiration of the unlimited share insurance could impact credit unions.

Note:  This does not impact share insurance coverage for funds held at natural person credit unions.  Similarly, it does not alter the timeframe for the unlimited share insurance for noninterest-bearing transaction accounts (which is also slated to expire on December 31, 2012 according to Dodd-Frank).

ATM Fee Disclosures; CFPB & Privilege; Footnotes

Written by Steve Van Beek

Just a quick update on a few issues you might have seen in the news.

ATM Fee Disclosures.  NAFCU, CUNA, the ABA and other trade associations have joined together to call for an amendment to the Electronic Funds Transfer Act to end the "ATM Fee Disclosure" class action lawsuits.  You can read more on this issue in the NAFCU Today.  The letter sent to the Hill is available here.  

CFPB and Privileged Information.  NAFCU also sent a letter to the Hill urging support of a bill that would change the law to ensure information shared with the CFPB would remain confidential.  The law currently provides this protection for information shared with NCUA.  More from the NAFCU Today here and here.

***

Footnotes.  The NAFCU Compliance Team is currently updating NAFCU's Credit Union Compliance GPS with new information, updated links and citations.  I felt a duty to share with the blog readers this footnote from the Regulation Z chapter.

Here is the text:

"Disclosures included in a footnote⁶ are not considered 'in a prominent location.'"

The footnote material is here....and very true:

"6 You read this footnote because you are a compliance officer and required to follow very detailed laws and regulations. Regulators are starting to disallow disclosures in footnotes through the increased use of “clear and conspicuous” requirements. This trend will most likely continue under the CFPB."

The "prominent location" reference in this situation comes from the promotional rate and fee disclosures from Reg Z's open-end advertising requirements in 12 C.F.R. 1026.16(g).  Of course, the restriction on using footnotes to provide the required disclosures is included in the official staff commentary!! 

What is the saying?  Do as I say……

More on Advertising; BSA Advisory Group

Written by Steve Van Beek

Yesterday's blog post mentioned the difference between the requirements for the "official sign" and the requirements for the "official advertising statement."  

Thanks to a helpful commenter, we were informed of our inaccurate discussion of when the "official sign" is required.  It is required at teller windows and:

"Each insured credit union must also display the official sign on its Internet page, if any, where it accepts deposits or open accounts, but it may vary the font sizes from that depicted in paragraph (b) of this section to ensure its legibility."  

Yesterday's post (which has been updated) indicated the official sign was required on the CU's main Internet page.  However, 12 CFR 740.5(a) indicates that credit unions need to use the official advertising statement on their main Internet page:

"§ 740.5   Requirements for the official advertising statement.

(a) Each insured credit union must include the official advertising statement, prescribed in paragraph (b) of this section, in all of its advertisements including, but not limited to, annual reports and statements of condition required to be published by law, and on its main Internet page, except as provided in paragraph (c) of this section. For annual reports and statements of condition required to be published by law, an insured credit union must place the official advertising statement in a prominent position on the cover page of such documents or on the first page a reader sees if there is no cover page."

Thus, for pages where the credit union accepts deposits or opens accounts the official sign would be required.  However, if the credit union does not accept deposits or open accounts on its main Internet page - the credit union could use any of the three versions of the official advertising statement discussed yesterday.

That being said, I think it makes a lot of sense to include the official sign on your main Internet page.

• The official sign (NCUA logo) is one that members are accustomed to seeing on credit union main pages.
• Non-members searching your website would be informed of your insured status upfront via the official sign - which catches the eye more than "Federally insured by NCUA."
• The use or non-use of the official sign is an easy item for examiners or auditors to catch.  Even if the official sign is not a requirement on your main Internet page, the credit union might need to defend its decision to use the official advertising statement rather than the official sign. 

***

The Financial Crimes Enforcement Network (FinCEN) requested nominations to fill 14 seats on its Bank Secrecy Act Advisory Group (BSAAG).  One seat is designated for a representative of a credit union trade group.  NAFCU is seeking individuals who are interested in serving on the BSAAG and wish to be nominated.  The term runs for three years. 

The group is tasked with providing policy recommendations to the Treasury regarding the BSA.  The BSAAG is comprised of representatives from federal regulatory and law enforcement agencies, financial institutions and trade groups, whose members are subject to the BSA. 

The nomination notice can be found here.

If you are interested in being nominated, please contact Dillon Shea, NAFCU’s regulatory affairs counsel at [email protected] or at 703-842-2212.

NCUA Official Sign; Official Advertising Statement; NAFCU Services Video Ads

Written by Steve Van Beek

As the January 1, 2012 compliance date approachs, we've seen a steady influx of questions related to the changes in NCUA's advertising regulations.  

Part of the confusion stems from the terminology used in the regulation.  Part 740 of NCUA's regulation discusses the "Official Sign" as well as the "Official Advertising Statement."  

For example, Section 740.4(a) requires that the official sign be used at teller windows and on the credit union's main Internet page on Internet pages where the credit union accepts deposits or opens accounts (edited: Nov. 29 at 12:45 p.m.):

"§ 740.4   Requirements for the official sign.

(a) Each insured credit union must continuously display the official sign described in paragraph (b) of this section at each station or window where insured account funds or deposits are normally received in its principal place of business and in all its branches, 30 days after its first day of operation as an insured credit union. Each insured credit union must also display the official sign on its Internet page, if any, where it accepts deposits or open accounts, but it may vary the font sizes from that depicted in paragraph (b) of this section to ensure its legibility."

To meet this requirement, credit unions need to use the official sign itself.

***

For advertisements, credit unions have flexibility in disclosing the official advertising statement.  Credit unions can use any of the following:

1. The Official Sign
2. The long version - "This credit union is Federally insured by the National Credit Union Administration"
3. The short version - "Federally insured by NCUA"  

That flexibility comes from 12 CFR 740.5(b).  The credit union only needs to include one of these disclosures on its advertisements.

***

NAFCU Services Corporation, a subsidiary of NAFCU, has video ads for NAFCU-members.  These ads can be customized for credit unions for $150.

Importantly, the ads have been updated to reflect the new advertising rule changes.  

If you haven't seen the ads before, take a look and see if one or more might be of use for your credit union.  For example, there are ads on the benefits of credit unions as well as ads describing the federally-insured status of credit unions.  These might be useful for attracting new members and educating those new members of their insurance coverage.   

Upcoming Compliance Dates; Veterans Day

Written by Sarah Zimmermann

I believe we've touched on these upcoming compliance issues separately but we thought it might be helpful to put them together in a cohesive post. Below are three compliance issues that are coming up soon.

SAFE Act Renewal.  MLOs that were registered before July 1 are required to renew their registrations before December 31 and they will not need to pay a renewal fee this year. Individual employees who registered after July 1 are not required to renew their registrations by the December 31 deadline but must do so in coming years. All institution accounts need to renew on an annual basis regardless of when the initial registration occurred and will pay a $100 fee. For more information the Nationwide Mortgage Licensing System & Registry has a Federal Registry Renewal and Reactivation Handbook.

 

NCUA's Advertising Rule.   NCUA's final advertising rule has a mandatory compliance date of January 1, 2012. This rule requires credit unions to include the agency’s official advertising statement on annual reports and financial statements of condition required to be published by law and shortens the radio and television advertisement exemption requiring the statement with advertisements that are 15 seconds or longer. This final rule also defines the term “advertisement” and details the size requirement for NCUA’s official advertisement statement in print materials. NAFCU members, you can read more about this in NAFCU's Final Regulation 11-EF-15, which can be accessed from this page.

Member online authentication. In June, NCUA issued Letter to CUs 11-CU-09 which included supplemental guidance to the 2005 FFIEC guidance on online member authentication. NCUA notes in the letter that examiners will evaluate authentication controls under the enhanced expectations outlined in the supplemental guidance, which includes further guidance on layered security.

***

 

In honor of Veterans Day, NAFCU offices will be closed tomorrow, November 11. As always, we'd like to extend our gratitude and appreciation to those who have served, do serve, and will serve. Your service allows us to the live the lives we do. On that note, Anthony penned a great blog last year reminding us of the laws that protect servicemembers financially. Rather than recreate, I figured we could link to it.

Have a great weekend everyone. We'll be back on Monday.

Upcoming Compliance Dates

Written by Steve Van Beek

Thursday marks the one-year anniversary of the signing of Dodd-Frank Act.  Of course, that day, July 21, 2011, also marks the day that current federal regulators - including NCUA - transfer authority of consumer regulations to the CFPB.

Dodd-Frank also provided credit unions some wonderful anniversary gifts (isn't it supposed to the other way around?)  A number of provisions of Dodd-Frank become effective on July 21, 2011.  Including:

Regulation CC.  A change in Regulation CC from $100 to $200 for next-day availability.  The Federal Reserve has proposed changes to Reg CC that have not been finalized.  This change to $200 becomes effective though the Federal Reserve has not changed the language of Reg CC.  

This change requires credit unions to review their policies and make sure they are updated.  This present from Dodd-Frank also triggers 229.18(e) of Reg CC which requires credit unions to provide notice of the change to their policy.  This notice is required even though the change is beneficial to members.

Reality Check: Why didn't the Fed propose two different rules?  Rather than confuse the entire financial industry, the Fed could have easily issued one rule to implement the Dodd-Frank change and a separate rule to propose its other changes to Reg CC.

Exemptions to Reg Z & Reg M.  Dodd-Frank also increased the exemptions in Regulation Z and Regulation M from $25,000 to $50,000.  These exemptions were also tied to inflation and will increase to $51,800 after January 1, 2012.

Credit Score Information.  Section 1100F of Dodd-Frank - which requires credit score information to be disclosed on adverse action and risk-based pricing notices - becomes effective July 21, 2011.  The Federal Reserve has issued model forms for credit unions to use and obtain a safe harbor.  

If you are looking for a recap of past blog posts on these changes, see our FCRA category.

NAFCU Members:  The Regulatory Finals on both the adverse action and risk-based pricing notices are available here.

***

Outside of the Dodd-Frank requirements, there are other compliance dates impacting credit unions.

Financial Literacy Requirement for Directors.  The financial literacy requirement for credit union directors becomes effective July 27, 2011.  Anthony did a great post  in February which stresses the importance of having a policy in place to document the credit union's efforts.  

Remember that this rule applies to new directors going forward as well.  Within six months of election, directors will need to have the financial skills expected by NCUA.  This means if your election occurs in August - new directors have six months to get up to speed.  Your policy should cover these situations as well as how the CU will address situations where a new director comes aboard between elections.

SAFE Act.  The initial registration for the SAFE Act ends July 29, 2011.  Credit unions need to have their mortgage loan originators registered and ready to go by that date.  Only registered MLOs can originate mortgage loans after July 29, 2011.  NCUA implemented the SAFE Act requirements in Part 761 of NCUA's Regulations.  

Clarifications to the Credit CARD Act.  It has been amazing how many pages of regulations came out of the 33-page Credit CARD Act.  In March, the Federal Reserve issued "clarifications" to its previous three final rules of Regulation Z.  These changes become effective October 1, 2011.  

NAFCU webcast:  Sarah and I will be doing a webcast on August 10, 2011 discussing these new clarifications and potential changes credit unions will need to make prior to October 1.       

Changes to NCUA's Advertising Rules.  In May, NCUA finalized a rule to amend its requirements for the display of the "official advertising logo" on advertisements.  This blog post from May 20 highlights the changes which become effective January 1, 2012.  Importantly, there is no "grandfathering" so existing advertisements are not exempt from these requirements.  Any advertisement used after January 1, 2012 would need to comply with these new requirements.      

This and That: CIiCU; SCRA; NAFCU Comment Letters & Finals

Written by Steve Van Beek

The latest Current Issues in Credit Unions podcast is now available.  Rob Rutkowski does a great job with these monthly podcasts and both he and Katherine Weber will be down at NAFCU's Regulatory Compliance Seminar in late October to do a live taping of the podcast.  

Speaking of Seminar........the agenda for this year's Seminar is now out - take a look for yourself.  We also have time set aside for "Compliance Hot Topics" as we all know there is a good chance for some regulatory shenanigans between now and October.  During those sessions Sarah and I will cover some of the latest rules and guidance issued.

Also, keep in mind that anyone can attend: NAFCU member; non-member; attorney; consultant; vendor - you name it - we'd love to see you in Florida.  Diversity of background and viewpoints are terrific things.   

***

A couple months back, Buckley Sandler delivered a webinar on SCRA issues.  The webinar and slides are here and might prove useful to review SCRA issues at your credit union in anticipation of increased scrutiny.

***

NAFCU has sent a couple of comment letters to NCUA recently.  One was our comment letter on Incentive-Based Compensation and the other our comment letter on NCUA's Proposed Voluntary Prepayment plan.

Our Regulatory Affairs team was also busy publishing Final Regulations on the Noninterest-bearing Transaction Account rule and the NCUA's Accuracy in Advertising rule.  NAFCU Members can access those Finals and others here.  

NCUA Finalizes Changes to Its Advertising Rules; Dallas

Written by Steve Van Beek

Yesterday, NCUA held their monthly Board meeting.  One of the final rules will impact every credit union.  NCUA finalized an amendment to change its requirements for the "official advertising statement."  In 2008, NCUA amended the "official advertising statement" to allow credit unions three options.

Those three options are:

1. The full text version.  "This credit union is federally insured by the National Credit Union Administration."
2. The short title.  "Federally insured by NCUA."
3. Use of the official NCUA share insurance logo.  

This latest amendment changes when the "official advertisement statement" is required.  

Part 740 - Accuracy of Advertising and Notice of Insured Status

Exemptions.  NCUA had proposed to remove three exemptions to its requirement to disclose the "official advertising statement."  After reviewing the comments, NCUA ended up eliminating one of the exemptions and limiting (rather than removing) the two other exemptions.  

Currently, section 740.5(c) of NCUA's regulations include these three exemptions (among others):

(c) The following advertisements need not include the official advertising statement:

(1) Statements of condition and reports of condition of an insured credit union which are required to be published by state or federal law or regulation;

.................

(8) Advertisements by radio that do not exceed thirty (30) seconds in time;

(9) Advertisements by television, other than display advertisements, that do not exceed thirty (30) seconds in time;"

NCUA completely removed the exemption for "Statements of condition and reports of condition."  After January 1, 2012, these statements need to include the "official advertising statement" in "a prominent position on the front cover of the document or on the first page readers see if there is no cover page."

After reviewing the comments to the proposal, NCUA decided not to completely eliminate the radio and TV exemptions.  Instead, NCUA reduced the exemptions to 15 seconds.  Thus, radio and TV advertisements longer than 15 seconds need to include the "official advertising statement."

Definition of Advertisement.  NCUA also defined the term "advertisement" for the purposes of Part 740.  The finalized definition is:  "(b) Advertisement as used in this part means a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business."  12 C.F.R. 740.1(b).  This definition is identical to the FDIC's definition.  

However, keep in mind that Part 740 relates to member accounts and when the "official advertising statement" is required.  One of the current exemptions (which was not changed in this final rule) indicates that loan advertisements do not fall within the realm of this rule.  

"(c) The following advertisements need not include the official advertising statement:

.......

(12) Advertisements that do not relate to member accounts, including but not limited to advertisements relating to loans by the credit union, safekeeping box business or services, traveler's checks on which the credit union is not primarily liable, and credit life or disability insurance." 

And, this makes sense as these products are not federally-insured.  

Font Size for Print Advertisements.  NCUA's rule also attempted to clarify its requirement that the "official advertising statement" be clearly legible.  The new standard after January 1, 2012 is that the official advertising statement (whether it be the text in the NCUA logo or the "Federally insured by NCUA" text) must be "in a size and print that is clearly legible and may be no smaller than the smallest font size used in other portions of the advertisement...."  

The good news is NCUA did not mandate a font size requirement.  The bad news is the credit union will need to review its advertisements to make sure the "official advertising statement" is not smaller than other language used.

Mandatory Compliance Date.  Compliance with these changes will be required by January 1, 2012.  However, if you want your advertising campaign to be able to extend into 2012 you would need to review your ads for compliance at an earlier date as NCUA declined to "grandfather" existing advertising campaigns.  

The full language of the rule is here.  Cover letter is here.  

Pro Tip:  If you are new to compliance or want to improve your understanding of the rulemaking process, this is a great rule to read.  NCUA does a very good job explaining its proposal, the comments submitted and the rationale for their final decision.    

***

My fiance, my (future) in-laws and I are headed to downtown Dallas for a short 3-day trip.  If you have any must-sees, must-dos or especially must-eats in or around Dallas - don't be shy!  We are open to ideas.  

***

Also, considering it appears to be an early "rivalry week" for Michigan-Ohio State on the blog - I had to share this photo of my soon-to-be Divided House.  

 That photo was obviously taken before last November's meeting. 

Tuesday This and That; Time Flies

Posted by Anthony Demangone

Happy Tuesday, everyone.  I survived and thoroughly enjoyed my weekend alone with the Dynamic Duo.  But let me say this: if you hear anyone utter words to the effect that stay-at-home parents have a cushy existence, feel free to give them the evil-eye on my behalf.

Maybe when things slow down a bit (say, in 2015), I can write more blog postings on single issues. But my in-box says otherwise. I hope you don't mind these "This and That" posts. 

MERS.  By now, I'm sure you've read one of a number of stories regarding MERS.  According to its website:

MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.

Most of the recent stories about MERS are stories about foreclosures challenges based on the use of the MERS system. Here's just one example. The quote below was made about BOA and other major mortgage lenders.

“They're recognizing the writing on the wall, that there are serious problems associated with the basic business model and legal theories of the MERS system,” Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City who has written articles on Reston, Virginia-based MERS, said yesterday.

Now, not every court appears to be coming to the same conclusions about mortgages perfected via the MERS system, so I won't try to generalize.  But if your credit union is relying on the MERS system for its mortgages, just be aware of the current situation. 

More compliance.  Here's a blog post that talks about the current state of compliance for banks. (BankNews.) (And a hat tip to C. Bruen.)  The author argues that more compliance is rolling down the hill at financial institutions, arguing that institutions might want to attack the burden more proactively.

To manage the upcoming regulations as well as the ones already in place, Michael Brauneis, managing director in the regulatory risk practice for Protiviti, an industry consulting firm, believes banks will have to change the way they manage compliance. No longer will an informal committee of management team members be able to keep up.

Brauneis also believes many banks need to shift away from the whack-a-mole game — where one mole (or compliance problem) pops up in one particular area so the bank focuses on that one, meanwhile other problems are popping up in other areas.

“I think a lot of community bankers feel today like that’s the game they’re playing continuously, and they can’t get ahead of problems the regulators keep finding and can’t get ahead of new regulatory changes because they keep coming out,” said Brauneis.

The more banks can do to shift from that type of reactive firing model to a more proactive model that focuses on risk assessment, the better. A risk-based approach, for example, identifies the business environment, the risks associated with that environment and the requirements to comply. It then looks at the controls in place to manage that compliance and allocates resources for automating compliance controls to the areas of highest risk.

I wonder how many credit unions use a risk assessment for their entire compliance program? 

Speaking of Compliance.  Read this CFPB blog post about how Ms. Warren hopes to improve consumer protections. Here's a portion of the post:

The CFPB is working to change that. When prices and risks are clear up front, consumers can make the choices that are best for themselves and their families. In other words, we want a credit market that works for consumers.

During this week, we will be listening directly to American families, and we’ll outline our vision for protecting consumers. Richard Cordray, Assistant Director for Enforcement and the former Attorney General of Ohio, will discuss how we can partner with the states to ensure consistent enforcement of consumer financial protections across the nation. Holly Petraeus, the Director of the CFPB’s Office of Servicemember Affairs, will talk about the unique challenges facing the men and women in the armed services. And I will travel to the Anacostia neighborhood of Washington, DC, to hear directly from families who are turning their finances around in the wake of the economic crisis.

I raise two points.  Ms. Warren has consistently talked about clear, up-front pricing.  To me, that signals that she'd love to see costs for products incorporated in the APR or in fees that are clearly disclosed "up front." Anything that a reasonable person could view as "rope a dope" in nature - a product that lures people in with what looks like a low cost only to be followed by "hidden" fees - is subject to "regulatory risk."  You may want to scan your products and services to see if any "rope-a-dopes" are there.  You've been warned.

Also, note that the CFPB will actively work with State Attorney Generals to enforce consumer protection laws. This should push compliance risk up, as cooperation between these two entities will only bring additional attention to state law issues that possibly were unknown or given low priority before.

Advertisements in statements.  This article (MSNBC.com) talks about this growing trend. As I've stated earlier, federal credit unions can do this as well.   Of course, whether one wishes to do this is a business decision. The article and NCUA's opinion do give some important risk-related questions to ask.  

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At some point, your kids stop being babies and become toddlers.  There's nothing that trumpets the arrival of such an event. But then someone takes a photo of your kid, like this one of Kate below just after she got a haircut, and you realize that it already happened. 

 

 

Thursday Recap

Posted by Anthony Demangone

Oh what a tangle web we weave, when first we decide to work in regulatory compliance. Yep, yesterday was one of those days that did tangle up one's workflow.  I'll keep this as brief as possible, highlighting what I think are key takeaways from yesterday's regulatory downpour.  

NCUA.  NCUA was a busy beaver yesterday.  Here's a link to all of the items that the board approved.

Fiduciary Duties.  NCUA issued its long-awaited final rule on Fiduciary Duties, Mergers and Conversions.  The compliance deadline is quickly approaching, as this rule becomes effective 30 days after the rule is published in the federal register.  That means likely a late January/early February effective date.  In a nutshell, the rule creates federal standards of duty and care for federal credit union directors.  It closely tracks the proposal, but there were some changes.  Most notably, new directors will have six months to become financially literate.  (The proposal only gave them 90 days.)  NAFCU is preparing an overview of the new rule.  In addition, NCUA plans on issuing additional guidance on this issue, so stay tuned.

Training myths and realities. Many of you were wondering about the training requirements in the rule.  Let me be clear: The rule creates no training mandate.  It creates expected levels of performance, and some directors may need training to meet those expectations.  Example: new directors need to be financially literate within 6 months.  If you have a CPA join your board, I'm sure he or she is A-OK.  But someone with a marketing or HR background likely will need some training.  And that can be done in one of a number of ways.  In addition, the rule mandates that boards somehow ensure that management operates the credit union in conformity with the FCU Act, NCUA regulations, other laws and regulations, and sound business practices.  There's no training mandate there, but how in the world could a director meet that expectation without ongoing education?  Here's what I would do: take a look at your training program and tweak it as necessary.  Consider in-person training at board meetings, conferences, or learn-at-your-own-pace training solutions.  Shameless plug warning.  As an example, NAFCU has a volunteer's conference and an annual conference that can help your directors meet these new expectations.  In addition, I developed an online training program for federal credit union directors that can do the same. The online training program has a free 2-week trial that can let you kick the tires a bit. 

Indemnification. I know there was a good deal of angst concerning this rule's possible affect on indemnification.  Many directors told me that they were scared that they'd lose indemnification if any business deal went south.  That's not what the rule says.  Here's what it says, and I think you'll see that the rule's "loss of indemnification" provisions will rarely, if ever, come into play. But they are a possibility, I have to say that. 

"...a Federal credit union may not indemnify an official or employee for personal liability related to any decision made by that individual on a matter significantly affecting the fundamental rights and interests of the Federal credit union’s members where the decision giving rise to the claim for indemnification is determined by a court to have constituted gross negligence, recklessness, or willful misconduct. Matters affecting the fundamental rights and interests of Federal credit union members include charter and share insurance conversions and terminations." (Emphasis added.)

I'll only add this: when is the last time a lawsuit against your board progressed all the way to a judge's decision?  (And that's not to say that it couldn't happen next year if it hasn't happened already.)

Proposal for Unlimited Share Insurance for Non-Interest Bearing Transaction Accounts.  NCUA issued a proposal to clarify the definition of the term "noninterest bearing transaction account," that the insurance is separate and in addition to, other share insurance coverage amounts, and to note certain notice and disclosure requirements. NCUA notes that the unlimited share insurance protection, while temporary, is already in place as mandated by the Dodd-Frank Act.  Read the proposal if you need additional details. 

Proposal for Accuracy of Advertising and Notice of Insured Status.  NCUA issued a proposal to revise provisions of its advertising statement rule. In short, insured credit unions, under the proposal, would be required to include the statement in all radio and television advertisements, annual reports, and statements of condition required to be published by law.  Currently, for example, radio and television advertisements that are not longer than 30 seconds do not need to official advertising statement.  This rule would zap that and other exemptions. The proposal does a number of other things, so please read it.  But here's one that caught my eye: the proposal would clarify what it means when it says the official advertisement must be in a size and print that is clearly legible.  The proposal doesn't require a specific font size.  But it would require that in addition to legibility, the font size for the official advertising statement has to be no smaller than the smallest font size used in other portions of the ad that are designed to convey information. We'll have 60 days to comment on the proposal.

Interchange.  Yesterday, the Fed issued its long-awaited proposal to address debit card interchange fees. The proposal sets out two alternatives, but both would cap debit card interchange fees at 12 cents per transaction - roughly 70 percent less than the 2009 average.  While Dodd-Frank stated that this restriction was only supposed to affect institutions with more than $10 billion in assets, Federal Reserve staff acknowledged that card companies very well may set one set of rates for all institutions, regardless of size.  For a shorter read, consider reading this memo prepared by Federal Reserve Staff for the Fed Board. Ultimately, final restrictions will take effect by July 21, 2011. NAFCU is preparing an overview of the proposal for its members.  Ugh. This one hurts. 

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Have a great weekend, everyone.  Even you, Senator Durbin. 

This and That...

Posted by Anthony Demangone

I'll cover a ton of ground in this one, as my e-mail inbox is overflowing at the moment.  I've include links to a number of interesting articles and blog postings today. Well, hopefully you'll find them to be interesting...

ADA and ATMs. The National Federation of the Blind has sued United Airlines , claiming their electronic kiosks violate two California laws, one of which protects disabled California citizens.  If someone at your credit union does not understand the importance of coming into compliance with the new ADA expectations, just show them the press release from the NFB.

Reg D adjustments.  The Fed has announced its annual adjustment for reserve calculations and deposit reporting for Regulation D. 

Reg E.  The Fed has issued Consumer Affairs Letter CA 10-12, which announces revised inter-agency exam procedures for Regulation E. It is a fantastic resource for Regulation E issues.

Board minutes. Here's a great article that discusses numerous issues regarding board minutes.  (The Metropolitan Corporate Counsel, written by Christopher S. Connell of Stradley, Ronon, Stevens & Young, LLP)  Who should take the notes? What should the minutes contain?  Can and should individual directors take notes?  Pass this along to your board parliamentarian. 

NCUA.  NCUA has released its board meeting schedule for 2011. It may be worthwhile to place these dates on your calendar, as these are the dates when new rules and proposals would be issued from NCUA.  Those rules have a tendency to throw a wrench into the works of an otherwise normal compliance officer workday. 

Social media.  Are attorneys and compliance officers "social media killers?"  Here's a nice discussion of the issue. (Bank Lawyer's Blog.)

Compliance. Here's a nice discussion on the role of compliance within a corporate entity. (The Metropolitan Corporate Counsel, Hubert Klein, Lily Bradow.) 

This and That...

Posted by Anthony Demangone

Here are a few items of interest on this first Friday of the Fall.

Flood Insurance.  The House passed an extension of the NFIP through September 30, 2011.  It is now on to President Obama for his signature.   The temporary extension doesn't reform the system.  But lawmakers say they plan to attempt reforms next year.  (Reuters.)

 Mortgage advertising  The FTC announced a notice of proposed rulemaking  concerning mortgage advertising.  The proposal would apply to state-chartered credit unions, but not federally-chartered credit unions.  But Los Federales may not be completely out of the woods.  If your credit union works with a CUSO, that CUSO should be aware of the proposal.  Interested parties must comment by November 15th.  

Changing times.  Yesterday, Blockbuster filed for Chapter 11 bankruptcy.   (The Street.)  I think the news strikes close to home on a day when NCUA will release its corporate credit union overhaul, and as we look down the double barrels of the CFPB.  Time marches on, and change is the only constant.  Blockbuster had a stranglehold on the U.S. no more than ten years ago.  Since that time, the way we watch movies has changed on a revolutionary scale.  Netflix, Redbox, and "on demand" systems dominate today.  Something else may dominate in 2020.  For credit union compliance officers, the industry that we serve will also change.  Drastically.  The way we serve members will change, and we, as compliance officers, must be ready to handle the inevitable regulatory changes that will come with it.

I'm Back!; This and That

Posted by Anthony Demangone

Chicago was a great conference, and it reminded me how valuable in-person training events can be.  While presentations can provide a good deal of information, networking with fellow credit union peeps can be even more rewarding.  You see how other credit unions are organized, how they view the world, and how they solve problems.  It is very good stuff.  If you want to read articles about the conference, please scan through the news items at www.nafcu.org.

***

NCUA Board Meeting.  The agenda for this week's board meeting is now available. 

Share insurance.  Not all of Reg Reform was bad.  The share insurance level of $250,000 is now permanent.    You may want to check on how your credit union had been advertising share insurance levels.  Some credit unions advertised it as $250,000, but noted via a disclaimer that the level was only authorized through the end of 2013.  Now that the $250,000 is permanent, such disclaimers are no longer accurate.  

Comparative advertisements.  I've always said that comparative advertisements that say that your credit union or that credit unions in general are better than banks run a bit of a risk.   People will see your ad, and they'll see if they can poke a hole in it.  I'm not saying credit unions should not run such ads.  But they should be aware of the risks involved.  One such ad was run recently, and here was the reaction. 

Compliance and Social Media

Posted By Anthony Demangone

Here's a thought-provoking blog posting from the Bank 2.0 blog about how compliance and social media interact.  The author argues that compliance divisions need to learn how to say "yes" more often.

Compliance needs to understand the negative risk of increasing workload on the frontline in respect of customer service perception, and decreasing the ability of the organization to respond to social media events in real time. They need to start thinking about their function as an enabler of the core business with customers, rather than just risk mitigation. They can also be lobbying regulators to help regulators adapt and make their processes more user-friendly, while retaining security of identity and the assets of the customer.

Customer experience is being hampered by compliance heavy processes that look to reduce risk, but make the engagement unnecessarily complex. Translating the Terms and Conditions from a paper application form onto the first 7 pages of a web-based application process might seem legally sound, but is quite ridiculous from a Usability and Customer Experience perspective.

If you look through the comments to the posting, you'll see where I stand.  I fired off a semi-cranky, response at 11 p.m. last Thursday.  I'm not sure that the author truly understands that certain disclosures and practices are legal requirements.  That being said, there might be a lesson here. 

1. Do we communicate to our "customer base" why we take our positions?  Are we saying no out of a gut reaction, or out of clear legal or regulatory mandate? 
2. Do we start out by saying no, and then look for ways to support that decision?  A better way of approaching an issue is to do the necessary research and see if there is a way for something to be done in a legal way. 

In any event, an "us versus them" mentality between compliance and marketing staff will accomplish little.  Everyone needs to be on the same page for the process to work well. 

Whoops; Training; Advertising; So, You Think You Can Speak?

Posted by Anthony Demangone

Yesterday, I spoke about a wonderful article by NCUA that showed you how to challenge an examination finding.  And I provided the wrong link.  I apologize.  Here's where you can read that article.  I promise.

***

The Credit Union Times has a new blog, and they asked me to blog about something.  So I wrote about my views on training.  In short, people want the elusive silver bullet for training.  What is a silver bullet?  It is a very simple solution to an extremely complicated problem.   I'm not sure one exists.  At least not for training.  Creating a training program for your credit union is no easy task.  But enough about that...I'll let you read the rest via the link if you are interested.

***

Here's another example of why it doesn't pay to get too cute with an ad campaign.  Have you seen the GM advertisement that states how they've repaid the government's loan "in full" and ahead of schedule? Here's the ad.  (Via YouTube.)  Well, someone has a problem with the ad.  The Competitive Enterprise Institute says the ad is misleading, and they issued a formal complaint to the FTC.  They argue that GM's commercial makes it sound like they've repaid all federal "bailout" funds, which GM has not done.  Whether you side with GM or CEI, there is a lesson here.  When reviewing an advertisement, ask yourself this question: Is any part of this ad untrue or misleading?  If the answer is yes, you have work to do.

***

Calling all speakers!  I know the blog is read by a ton of compliance experts.  Some of you work inside credit unions. Some at law firms.  Some at consulting firms. I'd like to put together a speaker list for NAFCU's Events and Education team.  With that in mind, let me know if you'd be interested in speaking at a NAFCU event.  If you are, please send us an email with your name, contact information, speaking experience, and areas of expertise.  I cannot make any guarantees, but I would think that the list would be useful when NAFCU puts together conferences.  A word of advice.  If you are interested, great!  But you may want to speak with your boss before letting us know, as speaking engagements require time away from the office.  

Never use Always, and Other Absolute Tips of Gold

Posted by Anthony Demangone

I always like news that reinforces compliance officer positions.  We often are referred to as "no" people, or worse, because we slow down processes that might pose problems from a compliance point of view.  This happens sometimes in advertising, especially if the ad copy is a bit aggressive.  This news item shows how aggressive ad copy can get a company into hot water.  The FTC and Life Lock entered into an agreement, whereby Life Lock will pay the FTC and 35 state attorney generals a total of $12 million to settle claims that its advertisements were false.  You might remember Life Lock from one of its advertisements where the CEO would drive around with his SSN on the side of a truck.  They sold protection against identity theft, and their ads made strong claims.   I just love this quote:

“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz. “This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Illinois Attorney General Lisa Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”

I highlighted the term "absolute," because such terms can get organizations into hot water.  Always, never, and other similar terms often can be proven wrong with just one exception.  Stay away from them whenever possible in advertisements and disclosures.  They rarely are true.  For example...all good compliance officers read the NAFCU Compliance Blog each day.  That isn't true.  You know that, and I know that.

(Some read it every other day.)

This and That

Posted by Anthony Demangone

We'll get back to Regulation CC tomorrow.  Today, I'd like to share some items that have been getting dusty in my e-mail in-box.

• The Fed makes it official regarding the completion of the check processing restructuring.
• Have you seen the Ally Bank "pony" ad?  Cute and funny, right? Well, perhaps not for everyone. Read ICBA's take on this.  They were outraged that Ally implied that most banks are unethical and misleading.  Their letter is a strong reminder that other people see your advertisements.  Before you throw a competitor or a class of institutions under the bus in an advertisement, make sure you understand the risks.
• OFAC released its Annual Terrorist Assets Report.  It is a fairly interesting read, and it shows just how much has been blocked.  The charts/data could come in handy if you had to make an OFAC training presentation to staff.
• FEMA issued this letter last week to give folks a heads up that Congress was close to letting the National Flood Insurance Program lapse. (It has now officially lapsed, although action may be taken soon to fix the problem.) The letter includes a link to "guidelines" that FEMA created to address what happens in such "lapse" situations. 

• Rob Rutkowsi has put together a "best of issue" for the Current Issues in Credit Unions podcast.

Grab Bag

Posted by Anthony Demangone

Please let me pause our Regulation Z discussion to touch upon some things that have been bouncing around my in-box.  I understand how important Reg Z is, but other things continue to happen.

• HUD has updated its RESPA FAQs again.
• The FTC settled charges against an apparel company for alleged violations of COPPA.  You don't see these very often, so the settlement serves as a nice reminder that COPPA is alive and well.  And yes, it applies to credit unions.  The announcement also provides background information on COPPA.
• Earlier this month, the Fed announced its annual adjustments to the Regulation D reserve tranches.  I like this update each year, because it is the only time get to use the word tranche.
• NCUA issued Letter to Credit Unions 09-CU-21to remind credit unions about how to properly use the NCUA official sign.  This would be a good piece of guidance to share with marketing.

• HOEPA's higher-priced mortgage loans will affect HMDA reporting.  The OTS has updated its exam procedures, and they do a great job of highlighting these changes.

• The free go-to-webinar that will discuss our on-line training program will take place next Tuesday from 1 until 2 p.m. EST.  I had the wrong time in yesterday's blog posting.  Register here.

***

The Saturday after our Regulatory Compliance Seminar, I had the pleasure of watching Penn State play Michigan with my colleague, Steve.  Steve is a big Michigan fan, and I went to Penn State.  I didn't watch all of it, as I was distracted by a couple of brand new Penn State fans who joined us to watch the game.  Kate was so excited to wear her Penn State shirt that she couldn't sit still for the photo.

A Little of This; A Little of That

Posted by Anthony Demangone.

Here are a number of things that caught my eye recently:

1. If you're credit union does "drawings" or other types of incentive-based marketing contests, please read this blog postingby Robert Rutkowski.   Good, good stuff.  There are more compliance issues than meet the eye.

2. Our paralegal, Shari Pogach, wrote a nice summary of a Federal Reserve study that examined violations by banks and thrifts in the areas of Regulations Z, B, DD (Truth in Savings), CC, E, and P (privacy).  Available for members here, the article could serve as a simple auditing tool.  Review the errors made by others to see how you measure up.

3. Here's a good flood insurance update that I recently read.

4. Our Book of Answers keeps being updated.  NAFCU members can access the latest version here.

5. NCUA has released the agenda for next week's board meeting.  The only compliance related item will be a final rule concerning the "Official Sign."  Access the agenda here.

6. It is official.  HUD has delayed enforcement of the "required use" provision from the RESPA final rule for 90 days.  Access its Federal Register notice here.

***

NAFCU's offices will be closed next Monday and Tuesday.   My goals are to finish assembling the twins' cribs and watch my Steelers win against Baltimore.  I mentioned those goals to someone else earlier this week, and this is what following:

 

Coworker: You should really enjoy the game this weekend.
Compliance Guy:  I plan on it.

Coworker: I don't think you understand.  This may be the last time you get to see the Steelers play in peace for the next 18 years.  Once the twins come, forget about it.

Compliance Guy: (Blank stare.)
Coworker: You know that I'm serious, right?  And that assumes they leave the house at age 18.  It could be 20 years.

Compliance Guy: (Blank stare.)

 

Have a great weekend, everyone!  Even you Ravens' fans!  Until Wednesday, stay warm!

This and That; The Cookbook!

Posted by Anthony Demangone

My head is still spinning from last week.  Here's a little of this, and a little of that.  

• Note that on Thusday, the Fed issued a final rule to amend Regulation DD.  That's the bank version of Truth in Savings.  The changes take affect January 1, 2010, and they address overdraft protection programs.  NCUA has its own Truth in Savings reg, and I fully expect NCUA to follow suit quickly.  Here's a link to the final Reg DD rule.  What will it do?   It will require all depository institutions to disclose aggregate overdraft fees on periodic statements, and not solely institutions that promote the payment of overdrafts. The final rule also addresses balance disclosures provided to consumers through automated systems.
• NCUA has extended the CU Harp Deadline to December 29, 2008.  I thought the original deadline seemed a bit rushed.  I guess someone else agreed with me.

• On Thursday, the Fed announced its annual asset size bump for Reg C (HMDA.)  Credit unions with assets of $39 million or less as of December 31, 2008, are exempt from collecting data in 2009.

• The FDIC released the Winter 2008 issue of Supervisory Insights.   This is good reading.  This issue talks aobut liquidity risk (timely, eh?), reverse mortgages, and a discussion of "unfair and dececptive acts and practices." 

• NCUA issued Letter to Credit Unions 08-CU-25.  The guidance addresses holding foreclosed properties as Foreclosed and Repossessed Assets.  (Unfortunately, this is timely as well.) 

***

Download Holiday Recipes!  The previous link takes you to the first annual, NAFCU Holiday Treats and Assorted Diet Busters Compliance Guide.  Enjoy, enjoy!  And many thanks for those who shared their wonderful recipes.

NCUA Board Meeting; Major FDIC Insurance Tweak Regarding Trusts?

Yesterday, NCUA held its monthly Board meeting.  You can access the results and the relevant documents here.  Overall, it was a good day for credit unions compliance officers. 

• NCUA issued a proposed rulemaking to amend its RegFlex rule to provide additional flexibility to qualifying federal credit unions when acquiring unimproved land for future expansion.  Now, when a credit union acquires unimproved land for future expansion and does not fully occupy it within a year, the credit union must partially occupy the completed premises within three years, or obtain a waiver.  The proposal would increase the three years to six years without necessitating a waiver.  NCUA also proposes to make conforming amendments to its fixed asset rule to provide consistency with the RegFlex changes.
• NCUA also issued a final rule that amends Part 740 of its rules and regs.  You may recall that in April, NCUA proposed that Part 740 be revised to allow insured credit unions greater flexibility in meeting the requirement of giving notice of their insured status. The final rule amends §740.5(b) as proposed to allow insured credit unions to satisfy the advertising statement requirement by using one of three methods:
  • The basic official advertising statement itself; or 
  • The shortened version of the official advertising statement, “Federally insured by NCUA” alone; or
  • The official insurance sign alone, as shown in §740.4(b).  That's right - you'd only need to use the sign, should you wish.

***

Yesterday, the FDIC announced that it will broadcast its Board of Director's Meeting today at 10 a.m.  You can access information about that meeting here.  There is a very eye-catching agenda item:

  Memorandum and resolution re: Simplification of Deposit Insurance Rules for Trust Accounts.

The word on the street is that the FDIC may propose a major change regarding how trust accounts are insured.  NCUA's insurance system is very similar to the FDIC's, so this is something that you will want to keep a eye on.  We certainly will, for sure.

Have a great weekend, everyone!  (With the exception of the Illinois football team, that is.)

Email Signatures; Das Photos

Many credit unions (and NAFCU for that matter) use the email signature area to market products and services.  But here's a thought: how many have reviewed their email signature for compliance with Regulation Z, Truth in Savings, and NCUA's advertising requirements? 

It seems to me that an email signature that promotes a savings or loan product would qualify as an advertisement.  Regulation Z contains no exceptions whatsoever for its advertising requirements.  TIS has some exceptions for certain advertisements, as does NCUA's advertising rules.  I haven't gone through the entire analysis in my head yet, but I think it is something worth thinking about.  And how many of you compliance gurus review signature lines of a marketing nature before they go final?

***

OK, you wanted wedding photos. Here they are! 

Have a great weekend, everyone!

Marketing Opt-Out?; NAFCU Swept

NCUA's privacy regulation and the ever-approaching affiliate marketing rules raise an interesting issue for credit unions.  I call it the consumer opt out confusion issue.  Under both regulatory structures, credit unions might have to offer members the right to opt out of certain information sharing practices. 

Where does the confusion come in?  The opt-outs noted above are very limited in scope.  One limits the ability of a credit union to share information with third parties, and the other limits the ability of credit unions to share/use information with affiliates for marketing purposes.  There are a number of exceptions to these opt-outs; some are large enough to drive a truck through.  For credit unions that do or will offer opt-outs, I wonder whether members understand what they are really opting out from. (Yes, I know that sentence ended in a preposition.  What was I thinking of?)  My guess is that many members do not.  They may view these opt outs as a way to "unsubscribe" from marketing campaigns.  At the very least, members that select an opt-out are raising their hand to let you know how much they value their personal information and privacy. 

With that in mind, I spoke with a credit union today that gives their members the right to a "marketing opt-out."  These members have the right to exclude themselves from all credit union marketing campaigns.  (Interestingly, this credit union currently does not need to offer their members an opt-out under the privacy rules and does not plan on offering an affiliate information opt-out.)  I asked how it worked, and the compliance officer said that it seemed to keep a very specific segment of their membership happy.  "And happy members deposit more," she added.

The affiliate marketing rule contains a model disclosure (in Appendix C) along these lines.  Here's what it says:

C–5—Model Form for Voluntary ‘‘No  Marketing’’ Notice—Your Choice To Stop Marketing
• [Name of Affiliate] is providing this notice.
• You may choose to stop all marketing from us and our affiliates. To stop all marketing, contact us [include
all that apply]:
• By telephone: 1–877–###–####
• On the Web: www.---.com
• By mail: Check the box and complete the form below, and send the form to:
[Company name]
[Company address]
____ Do not market to me.

While there's no requirement to offer such an opt out, I think it is a good way to manage member expectations and manage your reputation risk.  Do any of you offer this marketing opt-out?  How is it working?  (To add a comment if you received this posting via email, you'll need to click on the title above, scroll to the bottom of the posting, and then...well, follow directions.)

***

Last Thursday, NAFCU's softball squad (4-8) was pummelled by the undefeated Llamas.  I'm not even going to share the scores.  Let's put it this way, one at bat by our opponents lasted 45 minutes.  No joke.  If it weren't for the fence, some of their hits would still be rolling.  Now, I'm not saying that the Llamas were using ringers, but 4 of their women hit from the left side and looked like they were employed as college softball hitting coaches.  Not that I'm bitter about it.

Proposals Available; NAFCU Softball

Yesterday, the NCUA Board was very, very busy.  They approved three compliance related proposals.  Those materials are now available as outlined below.  I didn't provide a whole lot of analysis here.  Rather, I pulled much of the purpose for each rule from the NCUA proposals and provided links to the actual language.  I suggest that you read the material below.  If you think that a specific proposal would affect your credit union, then by all means download the proposal and give it a read.  Our Reg Affairs staff will issue Regulatory Alerts on these shortly.  (Thanks, Carrie!)  In the mean time, I'll read through these over the next few days and holler if anything catches my eye.

1. NCUA issued a proposal to use median family income (MFI) to determine if a credit union qualifies for a low-income designation and assistance from the Community Development Revolving Loan Fund (CDRLF).   NCUA indicated that it designed the proposal to eliminate the confusion associated with adjusting median household income (MHI) in metropolitan areas with higher costs of living.   NCUA also indicates that it will better align NCUA criteria for a low-income designation with the criteria for the addition of an underserved area to a federal credit union (FCU) field of membership and certification as a Community Development Financial Institution (CDFI).  You may access the proposal here.
2. NCUA also issued a proposal to revise the requirements for use of the official insurance sign and official advertising statement to permit insured credit unions to use the basic form of the official advertising statement, a shortened form, or the official sign in advertisements. NCUA hopes the proposal will give credit unions added flexibility in advertisements. As compared to the current requirement, credit unions will be able to use the shortened form or the official insurance sign in advertisements as alternatives to the basic official advertising statement; under the current rule, credit unions may only use the shortened form if they also include the official sign.  You may access the proposal here.
3. NCUA also issued a proposal to change its credit union service organization (CUSO) rule by adding two new categories of permissible CUSO activities: credit card loan origination and payroll processing services. The proposal would also add new examples of permissible CUSO activities within existing categories and would expand the scope of two categories of services to include persons eligible for credit union membership. The proposal would impose new regulatory limits on the ability of credit unions to recapitalize their CUSOs in certain circumstances. While the CUSO rule generally only applies to federal credit unions (FCUs), the proposal would revise and extend to all federally insured credit unions the provisions ensuring that credit union regulators have access to books and records and that CUSOs are operated as separate legal entities. The proposal would also clarify that CUSOs may buy and sell participations in loans they are authorized to originate under the current rule. Finally, NCUA proposes to delete as unnecessary the section in the current rule concerning amendment requests. These amendments will clarify the rule while enhancing CUSO operations and addressing safety and soundness concerns.   You may access this proposal here.

***

Last evening, NAFCU's softball team (0-2) lost both ends of a doubleheader, 15-5 and 6-3.   Gold stars go to Eddie "Arnold Palmer" Ambrose, Quincy "We Are Marshall" Enoch (4-for-4 in the second game), and Larry "The Acrobat" Palmer, who reportedly did a flip after a gold-glove catch in center field.  They are just a few of the folks who work their tails off for NAFCU's members.  Many of you haven't met many of our staff, so here's a pic of some of the team members. Most importantly, everyone had a great time, no one was hurt, and we spent the better part of 2 hours extolling the virtues of financial cooperatives to the opposing team.  Have a great weekend, everyone.