NAFCU Compliance Blog

NCUA Reverses Position on "Individual Policy" Requirements for Fidelity Bonds

Written by Pamela Yu, Special Counsel for Compliance and Research

NCUA's Office of General Counsel (OGC) recently issued its third formal legal opinion of 2017.  Dated September 26, 2017, the opinion letter concludes that the "individual policy" requirement in NCUA's fidelity bond rule does not prohibit a credit union from purchasing a fidelity bond that covers both the credit union and its credit union service organization (CUSO), provided the credit union owns at least 50 percent of the CUSO or the CUSO qualifies as a "nominee," as defined in the letter.  See, NCUA Legal Opinion 17-0959. 

Notably, the opinion represents a reversal from OGC's previous interpretations of the rule.  Opinion 17-0959 supersedes two previous legal opinions on this topic issued in 2004 and 2014, respectively. See, NCUA Legal Opinions 04-0744 and 14-0311.

Background

The Federal Credit Union Act (FCU Act) directs NCUA to require fidelity bond coverage for credit union employees who handle funds or collateral.  See, 12 U.S.C. §1766(h).  Part 713 of NCUA's regulations, which implements that provision, describes the fidelity bond and insurance coverage required for federal credit unions (the provision is also applicable to federally insured state-chartered credit unions by §741.221). 

The fidelity bond rule requires, among other things, that a bond (at a minimum) must be purchased in "an individual policy."  See, 12 C.F.R. §713.3(a).  According to NCUA, the "individual policy" requirement was added to the rule in 1999 to address specific concerns raised during the public comment period about jointly purchased fidelity bonds:

"[One] commenter was concerned that in [joint fidelity bond policies] a loss suffered by one or two of the joint policy holders could reduce the amount of coverage available for the other joint policy holders below the required minimum amount, i.e. two losses equal to the single loss limit of liability would exhaust the coverage available for all credit unions to zero even though some of these credit unions would not have suffered a loss. This commenter also noted a concern with the joint purchase of fidelity bond policies even when the policy purchased does not have an aggregate limit of liability. While it is true that a loss suffered by one credit union would not reduce the amount of coverage available to the other credit unions purchasing the policy, this commenter suggested that, when several credit unions purchase a policy in a group, they may not give adequate attention to providing for the specific risks faced by individual credit unions. Compromises might be made in coverage amounts that would not be made if the policy were purchased individually.  In addition, this commenter argued that the joint policy holders might not adjust coverages in a timely manner because of the difficulty of doing so in a group purchasing scenario." See, 64 Fed. Reg. 28718, 28719 (May 27, 1999).   

Based on these and other concerns, the NCUA Board clarified the rule to provide that a fidelity bond must be individually purchased by each credit union, but it did not define "individual policy."

Previous Opinions

In 2004, OGC was asked if a CUSO that provided management services for several credit unions could purchase a single fidelity bond with all its credit unions named as insureds. In opinion 04-0744, the office found that the joint bond was not permissible under §713.3(a), noting that "the principal reason for not permitting a credit union’s bond to cover additional insureds is to ensure that the coverage of the other insureds does not conflict with or in any way dilute the individual credit union’s required coverage."

In 2014, the office was asked to consider whether a credit union could include one or more CUSOs as additional insureds under its fidelity bond.  Again, OGC opined that a federally insured credit union is required to obtain fidelity bond coverage under an individual policy, and could not include one or more CUSOs or other parties as additional insureds under its fidelity bond.  See, NCUA Legal Opinion 14-0311. Citing the 2004 opinion and its rationale, OGC further noted that the requirement "prevents a claim against one insured from depleting coverage limits for the credit union."

Reversal

In a departure from its position since 1999, OGC has now changed its opinion of the permissibility of certain joint coverage fidelity bond provisions.  The reversal was precipitated by the office's recent review of bond forms approved by NCUA pursuant to §713.3(b), and the realization that several already-approved bond forms included joint coverage provisions.  For example, some of the approved forms, which NCUA approved before the 1999 rule change, included nominee provisions, joint insureds provisions, and definitions of "insured" that include subsidiaries that are more than 50 percent owned by the insured.  Given the "inconsistency between NCUA's approvals and [OGC's] legal opinions," the office now says that the "individual policy" requirement does not prohibit a credit union from covering its majority owned CUSO under its fidelity bond.   A CUSO may also be covered if it otherwise qualifies as a nominee.  However, joint coverage of non-majority-owned CUSOs or other entities continues to be impermissible.  See, NCUA Legal Opinion 17-0959. 

This change in position may lead to formal amendments or other revisions to the fidelity bond rule.  The opinion notes that NCUA recently published a proposed regulatory reform agenda, which includes a recommendation to consider revisions to Part 713.  See, 82 Fed. Reg. 39702, 39707 (Aug. 21, 2017).

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Programming Note. NAFCU's offices will close at noon today and also be closed on Thursday and Friday in observance of Thanksgiving. We wish you all a safe and wonderful holiday. We'll be open and back to blogging on Monday.  Happy Thanksgiving!

NCUA’s CUSO Registry Reaffirmation Period Begins February 1; Webinar on January 25

Written by Pamela Yu, Special Counsel for Compliance and Research

NCUA recently announced that CUSOs may begin their required annual reaffirmation with NCUA’s online CUSO Registry beginning on February 1.  CUSOs have until March 1 to complete this mandatory process.  This will be the first round of reaffirmations—NCUA’s CUSO Registry was first launched a year ago to implement changes made to the agency’s CUSO rule in 2013.

To assist CUSOs in complying with this annual requirement, NCUA will host a free 90-minute training webinar on the annual reaffirmation process this Wednesday, January 25 at 2:30 p.m. ET.  Those who wish to learn how to update their CUSO Registry information for the upcoming annual registration period can register for the webinar here. The webinar will offer registrants the opportunity to ask NCUA staff questions about the annual registration process.  Questions can also be sent beforehand to NCUA at [email protected]. 

Don’t forget that the annual registration requirement is a contractual obligation of the CUSO; credit unions are not obligated to complete this process for their CUSOs.  NCUA’s CUSO rule provides, among other things, that a credit union may invest in or loan to a CUSO only if certain conditions are met.  One of those conditions is that the credit union must obtain a written agreement from a CUSO, before making an investment or loan to that CUSO, that the CUSO will directly submit annual reports to NCUA on an annual basis (a newly formed CUSO must file a report within 60 days of its formation).  See, 12 C.F.R. §712.3(d)(4).  Nevertheless, NCUA has made it clear that it will examine credit unions for their CUSO’s adherence to its contract and “credit unions may not make additional investments or loans to the CUSO until the CUSO satisfies the annual registration requirement.”  See, NCUA 16-CU-02 (January 2016).  As such, credit unions are expected to monitor for its CUSO’s compliance with the registration requirement as part of its ongoing due diligence.  This can be accomplished with relative ease, since NCUA added a search feature to its registry in June 2016. 

One thing that may have tripped up some CUSOs during the initial registration process last year was the initial screening questions that present to a user when attempting to log in to the registry. For example, one screening question asks: “Does your organization primarily serve credit unions or credit union members?”

Since this is an issue that continues to pop up from time to time, and is raised by CUSOs and credit unions alike, let’s take this opportunity to revisit what it means to “primarily serve” credit unions or their members.

Under the CUSO rule, a “CUSO” is defined as “any entity in which a FICU has an ownership interest or to which a FICU has extended a loan, and that entity is engaged primarily in providing products or services to credit unions or credit union members.”  It also includes a CUSO subsidiary, or “any entity in which a CUSO has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members.”  12 C.F.R. §712.1(d) (Emphasis added). 

In addition, the rule imposes a customer base requirement for CUSOs: “An FCU can invest in or loan to a CUSO only if the CUSO primarily serves credit unions, its membership, or the membership of credit unions contracting with the CUSO. . .” 12 C.F.R. §712.3(b) (Emphasis added).

But how do we determine if an entity “primarily serves” credit unions or their members?

The “primarily serves” test was first addressed in the preamble to a 1986 final rule.  In that rulemaking, the NCUA Board stated:

“In light of the comments, the Board again considered providing a definition of the term "primarily." As it had concluded in the proposed rule, the Board believes that defining the term as a percentage of business or percentage of customers served would be arbitrary. The lack of a definition is not deemed critical since the wording in §701.27(d)(4) reiterates the statutory requirement and will provide the Board with a sufficient basis to deal with any clear abuses.”   

50 Fed. Reg. 10353, 10355 (March 26, 1986) (Emphasis added). 

While NCUA purposefully did not define the term “primarily” in the regulation, in the past, the agency has determined that a majority, or 50 percent or greater, may be sufficient to meet the “primarily serves” requirement. See NCUA OGC Ops. 96-0741 (September 20, 1996); 01-0746 (August 7, 2001); 11-0642 (August 3, 2011).

But as every good Compliance Officer knows: The rule is the rule, except when it isn’t. 

A 1996 legal opinion explains:

"[While NCUA has indicated that] "50% or greater" is often used as a rough indicator of "primarily," [it has] also stated that "50% or greater" is not the only definition of "primarily." In the past the definition of the term "primarily" has depended upon several variables, such as: type of business(es) provided; number of affiliated members served; gross or net revenues derived from affiliated members; amount of affiliated members assets under management; number of policies sold to affiliated members; number of services provided to affiliated members; and availability/access of services to affiliated members.”

NCUA OGC Op. 96-1214 (January 22, 1997).

Thus, while in some cases a “50% or greater” standard may meet the “primarily serves” test for CUSOs, this is not always true.  A number of variables must be considered, as noted in 96-1214, to determine if an entity meets the customer base requirement to qualify as a CUSO for the purposes of NCUA’s rule.

Clear as mud?  For more information on the CUSO annual reporting requirements, be sure to register for Wednesday’s training webinar, or visit NCUA’s CUSO Registry webpage.

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Upcoming NAFCU Webcast:

Benefits of Being a Community Development Financial Institution (CDFI)

FREE Live Webcast Wednesday, January 25, 2017 | 2:00-3:30 p.m. ET

Many credit unions have discovered, just in the past few years, that being recognized as a Low-Income Credit Union (LICU) provided new and untapped benefits, such as an exemption from the MBL cap. More recently, many LICUs are discovering another designation can provide even more opportunities for strategic growth: the Community Development Financial Institution (CDFI) certification. Obtaining a CDFI designation can provide benefits such as grant funding, awards, and exclusion from certain rules, like the QM/ATR rule. This webcast will provide you with an overview of the certification process and specific examples of CDFI designation benefits.

Department of Labor Drops Fiduciary Duty Rule: What it Means For Credit Unions

Written by Shereefat Balogun, Regulatory Compliance Counsel

As many of you know, the Department of Labor recently issued its Fiduciary Duty final rule. Generally, the rule imposes a fiduciary standard of care on broker-dealers and investment advisers that provide investment advice to retirement plan investors. “But credit unions are prohibited from offering investment advice, why is this important to me?” you ask. Great question! The rule affects investment advisory services provided through vendors and credit union service organizations. As such, a credit union that offers investment advisory services through a third-party arrangement or through a CUSO may want to consider how it structures its agreements, and ensure that its third party brokers are compliant. Moreover, while credit unions may not offer investment advice directly, credit unions may at times provide general education on retirement savings. Therefore, it is important to understand what type of communications a credit union may have with its members about retirement accounts without triggering a fiduciary duty.

First things first. Federal credit unions are not authorized to sell nondeposit securities directly to their members. 12 C.F.R. § 721.3(g) states that a credit union may provide investment services to its members through a third party vendor as a finder activity. Moreover, § 721.6 explains that a credit union may earn income for such services. Also, NCUA Letter to Federal Credit Unions 10-FCU-03 reaffirms that credit unions are not authorized to sell nondeposit investments directly to their members. However, the letter explains that while credit unions cannot sell these investments directly to their members, credit unions may offer these services by employing third party brokerage arrangements. Generally, there are three ways to structure these arrangements: (i) CUSOs; (ii) shared employee arrangements with a third party brokerage firm; and (iii) credit union can act as a finder.

Now moving on to the final rule. We’ll break up the Final Rule to make it easier to digest and create a series of usable tools as you delve into it.

• Here’s a link to the Final Rule. This final regulation defines who is a fiduciary, and includes the preamble with rulemaking background, and a section-by section analysis with the provisions of the final rule and public comments.
• There’s a 3-page summary of the major changes which gives a high-level discussion of the major provisions of the rule. View the overview here.
• The actual regulatory text, which is just 6 pages, can be found here.
• Best Interest Contract Exemption. This document contains an exemption from the general prohibition on fiduciaries receiving compensation from third parties in connection with retirement plans and IRAs.

Here’s our general overview of the rule and its regulatory compliance impact on credit unions. The final rule expands the definition of “fiduciary,” and now includes any person who provides recommendations for compensation with respect to a retirement plan or IRA. It is important to note that only recommendations are subject to the rule. A “recommendation” is any communication that would reasonably be viewed as a suggestion that the investor engage in or refrain from taking a particular course of action. The more narrowly tailored the advice is, the more likely the communication will be considered a recommendation. Notably, the rule does delineate activities that are not considered recommendations, and thus are not subject to the fiduciary requirements, such as education. For instance, financial institutions, including credit unions, can provide general education on retirement savings without triggering fiduciary duties under the rule. Similarly, general circulation newsletters and general marketing materials would not fall into the category of recommendations, and are also excluded from the rule’s scope.

As compliance professionals, we understand the importance of rules. We also appreciate the relief that comes with the exceptions to the rules. The final rule provides the “Best Interest Contract Exemption”, which allows a financial institution to continue to use certain compensation arrangements if it meets certain conditions. For example, the exemption requires the financial institution and the adviser to sign a contract with the investor: (i) acknowledging fiduciary status; (ii) committing to adhere to basic standards of impartial conduct; (iii) committing to adopt anti-conflict policies and procedures; and (iv) disclosing any conflicts of interest and the cost of their advice. Credit unions were concerned about the rule’s impact on situations where a credit union shares employees with a broker-dealer. The preamble appears to suggest that in these circumstances, a credit union would not be required to comply with the exemption requirements. Specifically, the text says that the credit union would not have to act as the financial institution, but the broker-dealer would. Credit unions should remember that a shared employee may provide investment advice when doing so exclusively on behalf of the third-party broker-dealer; but not in the employee’s capacity as an employee of a federal credit union.  Accordingly, any third-party arrangement should be structured to clearly outline when a shared employee is acting on behalf of the broker-dealer and not as a credit union employee. 

For most credit unions offering brokerage services through a third party broker-dealer, compliance with this rule will rest on the third party broker-dealer.  The third party offering retirement or IRA services will be responsible for their own compliance with applicable laws and compliance standards.  However, credit unions want to ensure that contracts with their third party vendors specifically and clearly outline the duties, responsibilities, and liabilities of each party in the arrangement. Similarly, credit unions may want to make sure that it monitors the vendor’s compliance, as with any third party vendor management relationship.  For more information on this rule, NAFCU has issued a Final Regulation which may be helpful.

Also, in case you need a refresher course on NCUA’s guidance concerning credit unions’ ability to offer investment services, please refer to the NCUA letters below:

• NCUA Letter to Credit Unions 10-FCU-03Re: Sales of Nondeposit Investments
• NCUA Legal Opinion Letter 09-0511 Re: Investment Advice Services
• NCUA Legal Opinion Letter 03-0308 Re: Investment Advice and Financial Counseling
• NCUA Legal Opinion Letter 11-0124 Re: Sales of Nondeposit Investments
• NCUA Legal Opinion Letter 03-0736 Re: Providing Investment Services to Nonmembers

FinCEN Issues Advisory on FATF’s October 2015 Update; CUSO Registry Webinar

Written by Eliott C. Ponte, Regulatory Compliance Counsel

On January 19, the Financial Crimes Enforcement Network (FinCEN) issued an advisory, FIN-2016-A001, to provide guidance on the list of jurisdictions identified by the Financial Action Task Force (FATF).  The release of this advisory comes in response to FATF updating its list of jurisdiction with strategic Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) deficiencies.

FATF is an inter-governmental policymaking body that proposes international standards and policies to combat money laundering and terrorist financing.  Since the late 1980’s, FATF has issued several recommendations that aim to protect the international financial system from money laundering and financing of terrorism risks.  Moreover, FATF encourages greater compliance with the anti-money laundering standards.  Most recently, FATF published two statements identifying those jurisdictions that are deemed to have “strategic deficiencies” in their anti-money laundering and counter terrorist financing regimes. 

FinCENs advisory acknowledges FATF’s update and provides guidance for financial institutions engaging with listed jurisdiction.  These jurisdictions appear in two documents: (1) “FATF Public Statement”, which consists of  jurisdictions that are subject to FATF’s call for countermeasures or are subject to Enhanced Due Diligence due to their Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) deficiencies; and, (2) “Improving Global AML/CFT Compliance: On-going Process,” which consists of jurisdictions identified by FATF to have AML/CFT deficiencies.

Based on FATF’s recent changes, FinCEN is recommending that financial institutions impose countermeasures or consider the risk arising due to a lack of sufficient progress in addressing AML/CFT deficiencies in the countries of Iran and the Democratic People’s Republic of Korea.  FinCEN is also recommending that institutions apply enhanced due diligence for the country of Myanmar.  FinCEN notes, however, that the country of Aleria has made progress in addressing its FATF action plan.  As a result, Algeria has been removed from the “FATF Public Statement” and now includes this jurisdiction in its “Improving Global AML/CFT Compliance: On-going Process” document.  The list of these countries in this document include Afghanistan, Algeria, Angola, Bosnia and Herzegovina, Guyana, Iraq, Lao PDR, Panama, Papua New Guinea, Syria, Uganda, and Yemen.

FinCEN instructs financial institutions to continue to apply countermeasures to protect against AML/CFT risks. For more information, credit unions should consult the FinCEN Advisory.

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CUSO Registry Webinar

Tomorrow, the NCUA will host a free webinar on how to use the new CUSO Registry system.  The webinar is schedule to start at 2:30 P.M. EST.  NAFCU Blog Readers can register online for this free webinar here. Questions about the registry may be submitted in advance by emailing your question to [email protected]. The NCUA requests that the subject line of the email read, “CUSO Registry Training.”

NCUA’s CUSO Registry – Resources and Background for Credit Unions; DMDC Extends MLA Database Deadline

Written by Benjamin M. Litchfield, Regulatory Compliance Counsel

Greetings compliance fans! Today begins the initial registration period for NCUA’s CUSO Registry. The CUSO Registry is the online system through which credit union service organizations (CUSOs) will report information directly to NCUA. Some of you may be wondering what impacts the CUSO Registry will have on federally insured credit unions and what resources are available for compliance officers. This blog post covers some of these issues, while providing some background for those of you who may be new to this issue.

For those of you who may be new to compliance or may need a refresher, prior to investing in or lending to a CUSO, federally insured credit unions must obtain an agreement from the CUSO that it will submit annual reports directly to NCUA and, if applicable, the appropriate state supervisory authority. See, 12 C.F.R. § 712.3(d)(4). Newly formed CUSOs must file a report within 60 days of formation. Starting today, these reports will be submitted through NCUA’s CUSO Registry.

All reports must contain the same basic registration information:

• The CUSO’s legal name;

• Tax identification number;

• Address;

• Telephone number;

• Web site;

• Primary point of contact;

• Services offered;

• The name(s) and charter(s) of credit union(s) investing in, lending to, or receiving services from the CUSO; and

• Investor and/or subsidiary CUSO(s).

CUSOs engaged in complex or high-risk activities such as lending, information technology, custody and safekeeping, or investment management services for credit unions must report additional information specified in NCUA’s CUSO Rule. See, 12 C.F.R. § 712.3(d)(4), (5). Credit unions are prohibited from making new loans to CUSOs that fail to satisfy the annual registration requirement and will be examined for compliance with the CUSO Rule.

The rule makes clear that the obligation for the credit union is to obtain an agreement from the CUSO that it will register with NCUA prior to investing in or lending to the CUSO. The rule does not require the credit union to register the CUSO with NCUA. Instead, the credit union is required to monitor the CUSO to ensure that it has fulfilled its contractual agreement to register on the CUSO Registry.

A few weeks ago, NCUA issued Letter to Credit Unions 16-CU-02 (Jan. 2016), discussing the CUSO Registry and providing credit unions with some resources that may be useful for meeting the compliance obligations of the credit union. Some highlights from this letter include:

• A reminder that the CUSO regulation applies to all levels, or tiers, of a CUSO’s structure. This means that any subsidiaries in which the CUSO has an ownership interest are treated as CUSOs if they are engaged primarily in providing products or services to credit unions or credit union members.

• A notice that beginning today, CUSOs can access the CUSO Registry and related training materials at https://cusoregistry.ncua.gov. Credit unions and CUSOs can also find additional information, including FAQs, the CUSO Registry User Manual, and several quick guides on the CUSO Registry landing page here.

• Some important dates to keep in mind:

• February 1, 2016 – CUSO Registry registration window opens for CUSOs

• March 31, 2016 – Registration window closes for CUSOs

• June 1, 2016 – CUSO Registry search function becomes available to all credit unions and the public.

The full text of the letter can be found here. Additional information on credit unions’ responsibilities when involved with CUSOs can be found here and here.

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DMDC Extends MLA Database Deadline. In response to a letter sent by NAFCU and other financial trades, DMDC agreed to extend the deadline to seek direct access to the MLA database until February 15, 2016. If you have any questions about this deadline or the database, please email Brandy Bruyere, NAFCU’s Director of Regulatory Compliance, [email protected].

RBC2: A Penny for Your Thoughts, pt 3.

Written by Alicia Nealon, Director of Regulatory Affairs

Welcome back to the third installment of our series of posts where NAFCU’s Compliance Blog will break down different portions of RBC2 and highlight the key issues that we are looking for your feedback on.  Today’s topic is the treatment of CUSO activity.

One key change between this proposal and the original involves the risk-weighting of investments in CUSOs and loans to CUSOs.  Under the original proposal, investments in CUSOs were assigned a risk-weight of 250 percent and loans to CUSOs were assigned a risk-weight of 100 percent. RBC2, however, would lower the risk-weight to 150 percent for equity investments in CUSO, and retain the 100 percent risk-weight for outstanding loan balances to CUSOs.  Also, RBC2 will exclude loans and investments in CUSOs if those assets were already consolidated into the credit union’s statement of financial condition under generally accepted accounting principles (GAAP) - a move sought by NAFCU during the original proposal.   

While RBC2 reduces the investment risk-weighting and accounts for the CUSOs consolidated into a credit union’s books, it continues to assign different risk-weights to investments in CUSOs and loans to CUSOs.  Despite many commenters, including NAFCU, arguing that there should be only one risk-weight for CUSO activity and that it should not exceed 100 percent, NCUA retained different treatments for investments in CUSOs and loans to CUSOs.  The agency explains that they are risk-weighted differently because they are treated differently in the event of liquidation or bankruptcy. 

While NCUA lowered the risk-weight for investments in CUSOs, the proposed 150 percent risk weight still fails to consider the different types of services provided by a given CUSO.  For example, an investment in a CUSO engaged in low-risk activities like providing compliance assistance would be assigned the same risk-weight as an investment in a CUSO engaged in mortgage or commercial loan underwriting.  Despite being lowered, the proposed 150 percent risk-weight could still be improved to assess a more meaningful risk distinction between the risks various types of CUSOs pose…..at least that is my humble opinion, but I’d love to hear yours….

It is also worth mentioning that under FDIC's rules, equity investments that are less than 10 percent of a bank’s capital are risk-weighted at 100 percent. FDIC characterizes such investments as "insignificant." Because NCUA already restricts federal credit unions to only investing up to 1% of their assets in CUSOs in the aggregate, an argument could be made that credit union’s investments in CUSOs should be considered “insignificant” for the sake of the agency’s capital rules and be weighted at 100 percent as in the FDIC system. Again, my opinion...whats yours?

What does everyone think? Does your credit union believe the revised risk-weights reflect the real risks associated with investments in CUSOs and loans to CUSOs? Would the proposed 150 risk-weight force your credit union to reconsider current and future investments in CUSOs? Should investments in CUSOs be risk-weighted at 100 percent like FDIC equity investments? 

As you consider these questions, be sure to take a look at NAFCU’s Regulatory Alert 15-EA-02, our Capital Reform Issue Page, or reach out to me directly ([email protected], 703-842-2266) with your thoughts. 

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NAFCU Webcast. A Deep Dive into the Final Privacy Rule -You may be able to reduce your regulatory burden! Now, if your credit union meets the CFPB’s eligibility requirements, you can save money by posting your annual privacy notice online. Find out if your credit union meets the eligibility requirements, examine the posting requirements, and get detailed instruction on how to use the required model form with this good-news NAFCU webcast.

December NCUA Report Discusses CUSO Rule; Introducing Nolan

Written by Brandy Bruyere, Regulatory Compliance Counsel

Since it is Friday, and I am a bit rusty on blogging, we will keep it rather short today. On December 10, The NCUA issued this month’s issue of The NCUA Report. While this issue largely focuses on NCUA budget issues, the Region III Report focuses on the CUSO rule which went into effect in June, 2014. This article aims to clear up “some confusion as to what the rule does or what is required from a credit union and its CUSO” by providing a summary of the rule’s main requirements:

• An extension, for consistency, of the CUSO rule to all federally insured credit unions. Prior to this change in November 2013, rules governing CUSOs only applied to federal credit unions.
• The requirement that a CUSO must agree to:
  • Prepare quarterly financial statements.
  • Account for its transactions in accordance with generally accepted accounting principles.
  • Obtain an annual financial statement audit by a licensed certified public accountant.

The Report also reminds credit unions that in addition to the CUSO reporting requirements, credit unions must continue to conduct risk assessments of their relationships with CUSOs. Here are questions the Report suggests credit unions ask when evaluating a CUSO relationship:

• Does the service provided by the CUSO benefit the existing members of the credit union?
• Does the CUSO conform to the requirement of primarily serving credit union members and not other interests or parties?
• Is a legal opinion needed to determine permissibility of the proposed structure of the CUSO?
• Is the investment in or loan to the CUSO a suitable avenue for revenue growth or expanded services for members?

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Introducing Nolan! I have been absent from blogging for a while because my husband and I welcomed baby Nolan in early October. Nolan was 9 pounds, 8 ounces at birth, good thing he came a few weeks early! Here are a few photos of our little guy, including one with his best dog buddy, Lemmy.

NCUA Officially Clarifies CUSO Confusion; First Vacation with the Family

Written by JiJi Bahhur, Director of Regulatory Compliance

Over the last several months, NAFCU’s compliance team has received a number of questions from our members who have experienced some confusion with the CUSO rule.  Today, I’d like to share a real-life question we’ve received over a dozen of times, the response we’ve been providing to our members, and the clarification provided late last week by the National Credit Union Administration (NCUA).  The purpose of sharing our members’ question is to illustrate why the confusion arose.  I’ve also provided the response from NAFCU’s compliance team to our members, and although it is accurate, you’ll want to use and rely on NCUA’s clarification which is located in NCUA Letter to Credit Unions 14-CU-07 (discussed further below).

Real-Life Question:

We do not invest in or lend to a CUSO, but we do have a CUSO that we do other business with.  Do we have to amend our written agreement with this CUSO?  NCUA Letter to Credit Unions 13-CU-13 states that credit unions are required “to ensure that the CUSOs with which they do business agree to provide certain information directly to NCUA and the state supervisory authority, as applicable, on an annual basis.”  This statement seems to include all CUSOs with which a credit union does business and not just those that the credit union invests in or lends to.

NAFCU’s Response (Prior to 14-CU-07):

NCUA’s Letter to Credit Unions 13-CU-13 appears to have caused confusion amongst credit unions by including language that is broader than that required by the regulatory text.  NAFCU has received a number of inquiries from our members on this issue and we are looking into it. 

In the meantime, although 13-CU-13 seems to indicate broader coverage of the requirement to amend written agreements between credit unions and CUSOs, the regulatory text of the CUSO rule is limited to those CUSOs with which the credit union lends to or invests in.  Usually, the regulatory text prevails which would mean that the requirement to amend agreements applies only to those CUSOs the credit union invests in or lends to; however, we hope to see further clarification from NCUA in the near future to clear up some of this confusion.

NCUA’s Clarification:

Late last week, the NCUA released 14-CU-07 which clarifies whether a credit union must amend written agreements with all CUSOs it does business with or just those with which it lends to or invests in.  From the Letter:

“[T]here has been some confusion as to which credit unions must enter into a written agreement requiring a CUSO to submit annual reports. This letter clarifies that only those FICUs investing in or lending to a CUSO are subject to this part of the CUSO rule.

A FICU that only receives products or services from a CUSO—but does not have an investment in or a loan outstanding to a CUSO—is not subject to the requirement.“

NCUA further clarifies this issue in Legal Opinion Letter 14-0502. 

“You have asked for clarification of a provision in NCUA’s newly amended credit union service organization (CUSO) regulation. Specifically, you have asked if a federally insured credit union (FICU) receiving products or services from a CUSO must enter into a written agreement in which the CUSO is obligated to submit an annual report to NCUA even if the FICU does not have an investment in or loan outstanding to the CUSO. The answer is no. The amended CUSO rule requires only those FICUs investing in or lending to a CUSO to obtain a written agreement requiring the CUSO to submit annual reports.

The NCUA Board amended the CUSO rule on November 21, 2013. The new rule requires, among other things, a FICU to contractually bind a CUSO to submit an annual report to NCUA. Specifically, new §712.3(d)(4) states: “A FICU must obtain a written agreement from a CUSO before investing in or lending to the CUSO” that the CUSO will “annually submit . . . a report directly to NCUA and the appropriate state supervisory authority, if applicable.” (Emphasis added).

Accordingly, it is clear that a FICU that invests in or lends to a CUSO must comply with the new §712.3(d)(4) annual reporting requirement. However, §712.3(d)(3) of the CUSO rule, which addresses access to CUSO books and records, makes reference to FISCUs with an investment in, loan to, or “contractual agreement for products or services with the CUSO.” You have asked if the contractual agreement language in §712.3(d)(3) infers that FICUs with only a service contract with a CUSO must also obtain a written agreement for the CUSO to submit an annual report under new §712.3(d)(4). No, it does not.” 

In short, the confusion (regarding the above question) has come to an end.  A credit union does not need to amend written agreements with all CUSOs with which it does business; rather, it must amend written agreements with those CUSOs it invests in or lends to. 

***

First Vacation with the Family.  Last weekend, my husband, children and I took our first vacation together as a family.  We went to Virginia Beach and had a fabulous time.  Here are some photos of the fun we had!

NCUA Reveals Regulatory Review Report; NAFCU's 2014 Technology and Security Conference; BSA Blast

Written by Alicia Nealon, Regulatory Compliance Counsel

Last week, NCUA’s Office of General Counsel released  its 2013 Regulatory Review report, concluding its annual review of one-third of  NCUA’s rules and regulations, which this year included CUSOs, appraisals, member business lending and the Central Liquidity Facility. The report confirms that NCUA will be addressing a number of issues that NAFCU continues to fight for to ease regulatory burden on credit unions. Particularly, the Office of General Counsel recommended that the NCUA Board consider eliminating or amending several of the regulations raised in NAFCU’s “Dirty Dozen.” 

For those of you who haven’t had a chance to see it, NAFCU prepared a list of twelve regulations- the “dirty dozen”-  that regulators need to eliminate or amend because they are unnecessary, outdated, or overly burdensome on credit unions. This Regulatory Review report affirms that NCUA is considering a number of recommendations included on the "dirty dozen" list as it reviews possible changes in rules on incidental powers, member business lending and appraisals.

The first of NAFCU’s “Dirty Dozen” is a call to expand credit union investment authority to include permissible investments in derivatives, securitization and mortgage servicing rights. The review notes that the NCUA Board may look into expanding credit unions’ incidental powers in allowing them to securitize their own loans. The agency is also expected to issue a rule on derivatives at the board meeting on Jan. 23.

The report mentions possible updates to the agency’s MBL rule, a change NAFCU pushed for as the fifth of its “Dirty Dozen.” These proposed updates would “reflect the current business climate” and address issues such as calculating market value in construction-related business loans and valuation-related issues. The report also raised the prospect of changes to the MBL rule’s personal guarantee requirement and its two-year direct experience requirement.

Addressing the final recommendation of the “Dirty Dozen,” the report recommends that the Board amend Section 722 to eliminate redundant NCUA requirements on credit unions to provide copies of appraisals upon request. 

Finally, the report acknowledges that the Dodd-Frank Act transferred the Fair Credit Reporting regulation to the CFPB and advises that Section 717 should be transferred to the CFPB. It also gives hope that NCUA may tackle other issues including modernizing advertising rules, and rules on notification of credit unions’ insurance status. 

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NAFCU's 2014 Technology and Security Conference.  NAFCU’s 2014 Technology and Security Conference, which will be held February 11-13 in Las Vegas, is a great place to discover the latest credit union security and technology trends. Conference topics include fraud trends, core processing issues, big data and credit union crisis management.  Check out more information about the conference and register here.

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BSA Blast – The January 2014 edition of NAFCU’s BSA Blast is now available (a NAFCU member login is needed).  This issue is all about enforcement – from FinCEN’s enhanced focus on holding financial institutions responsible for Bank Secrecy Act (BSA) violations and its enforcement action against JP Morgan Chase in connection with the Madoff scandal to recent OFAC enforcement actions against three banks. In addition the issue contains a new BSA quiz for use in staff training.

NCUA Letter to Credit Unions on the CUSO Rule; NAFCU Webcast

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Recently, JiJi blogged about the NCUA’s adoption of a credit union service organization (CUSO) final rule. NCUA has issued Letter to Credit Unions 13-CU-13, outlining the primary changes to the CUSO-related rules, and providing an overview of what credit unions need to do as a result of the changes. These regulatory changes will become effective June 30, 2014. CUSOs will begin submitting reports to NCUA under new section 712.3(d)(4) when NCUA’s reporting system becomes fully operational by December 31, 2015.

One aspect of the rule that I'd like to highlight today is that it clarifies how the new CUSO regulations apply to CUSO subsidiaries. From the letter:

“CUSO Subsidiaries

The new CUSO regulations apply to all levels, or tiers, of a CUSO’s structure. Any subsidiary in which a CUSO has an ownership interest of any amount is treated as a CUSO, and is subject to the regulations if it is engaged primarily in providing products or services to credit unions or credit union members.⁴

There is an inherent risk that a subsidiary CUSO could adversely affect the investing credit union and, ultimately, the NCUSIF. This provision was explicitly included in the regulation to ensure that credit unions and CUSOs are aware that the requirements of the NCUA regulations, and applicable state rules, apply to all subsidiary entities in which a CUSO invests. This includes entities with the appearance of being formed to evade the CUSO-related rules.” (Footnote omitted)

For complete details, Letter 13-CU-13 is available in its entirety here.  Also note, NAFCU’s Regulatory Affairs team will issue a Final Regulation summarizing the key aspects of this rule. Once it is available, it will be located here.

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NAFCU Webcast – NCUA Update: Looking Ahead to 2014. On Tuesday, December 10th, from 2:00 – 3:30 p.m. ET, NAFCU’s Regulatory Affairs team will be discussing NCUA’s recent and expected actions for 2014, with a special focus on the newly-issued CUSO rule. Registration is still open - Sign Up Today! Remember, NAFCU's webcasts are available to anyone and everyone. On-demand webcasts are archived and available for up to 12 months after the live broadcast.

Have a great weekend!

NCUA’s November 2013 Board Meeting and the Final CUSO Rule

Written by JiJi Bahhur, Director of Regulatory Compliance

During last week’s open board meeting, the National Credit Union Administration (NCUA) took several important actions, including unanimously approving the final Credit Union Service Organization (CUSO) rule.

Effective June 30, 2014, the final CUSO rule will require CUSOs to annually provide basic profile information to the NCUA and the appropriate state supervisory authority. CUSOs engaging in certain complex or high-risk activities, such as credit lending, information technology and custody and investment management, will be required to report more detailed information, including audited financial statements and general customer information.  The reporting burden is on the CUSO, not the credit union, but credit unions will need to update their written CUSO agreements to include the new requirements in the final rule.

From NCUA’s Board Action Bulletin:

“Other provisions of the new rule include:

• Extension, for consistency, of sections of the current CUSO rule, which currently apply only to federal credit unions, to all federally insured credit unions. A CUSO must agree to:

- Account for its transactions in accordance with generally accepted accounting principles;

- Prepare quarterly financial statements; and

- Obtain an annual financial statement audit by a licensed certified public accountant.

• A new requirement that CUSOs must agree to report information directly to NCUA and to the state regulator, as applicable. CUSOs that offer complex or high-risk services—like credit and lending; information technology; and custody, safekeeping and investment management services—must report more detailed information, including financial statements and general customer information.

 

• Any subsidiary in which a CUSO has an ownership interest in any amount will be subject to the rule if the subsidiary is primarily engaged in providing products or services to credit unions or their members.

 

• A requirement that a state-chartered credit union that is or would be rendered less than adequately capitalized by additional investment in a CUSO must obtain approval from its state regulator and notify an NCUA regional director prior to making the investment.”

CUSOs will begin submitting reports to NCUA under new section 712.3(d)(4) when NCUA’s reporting system becomes fully operational by December 31, 2015.

You can find the final CUSO rule here.  Also note, NAFCU’s Regulatory Affairs staff will issue a Final Regulation summarizing the key aspects of this rule.  Once it is available, it will be located here.

Other actions taken during the open board meeting include:

• An announcement that federally insured credit unions will likely pay no Corporate Stabilization Fund assessment in 2014;
• Approval of a budget of $268.3 million to fund NCUA’s activities in 2014, including no increase in authorized staffing levels;
• Approval of a decrease of 18.4 percent in the 2014 federal credit union Operating Fee scale that also exempts 303 credit unions with assets below $1 million; and
• Approval of a 2014 Overhead Transfer Rate of 69.2 percent to fund the Share Insurance Fund’s activities.

For detailed information on all actions taken during the open meeting, take a look at this message from NAFCU and NCUA’s Board Action Bulletin. 

Research Tip: Tracking Rulemakings in the Federal Register

Written by Steve Van Beek

We often get questions about the status of certain rulemakings.  For example:

• Has NCUA finalized their Emergency Liquidity proposal?

• Has the CFPB finalized (for the third time) the Remittance Transfer proposal?

• What about NCUA's CUSO proposal?

• Loan Participations?

You get the picture.  To help with this, we created a Pending Regulations Chart which can be found at the end of our Compliance Calendar.  You do not need to be a NAFCU member to view the Compliance Calendar; however, some of the linked resources are for members-only.  

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Federal Register.  There is also a great way to track the rulemakings in the Federal Register automatically.  You can subscribe to the topic "credit unions" to be sure you are emailed whenever a credit union-related rulemaking is published in the Federal Register.  This is especially important as - we are all aware - rulemakings impacting credit unions do not come from just NCUA.  Of course, this isn't a perfect science as some rules might not be coded with the "credit union" topic.  But, I've found it works pretty well.

To subscribe, start out be going to the "credit union" topic page.  Click the "Subscribe" button on the right-hand side.

From here, you'll get a pop-up box that you can enter your e-mail address (or subscribe via RSS feed).

You can choose to receive all "credit union" topics or only those labeled as "significant actions."  For me, I'm not one to trust the self-labeling of "significant" by the regulators - so I subscribe to the broader group.

Have a great week!

FinCEN’s Rule on Non-Bank Residential Mortgage Lenders and Originators

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this month, FinCEN issued a notice and reminder to non-bank residential mortgage lenders and originators (RMLOs) to remind them of their new compliance obligations under FinCEN’s regulations.  On February 14, 2012, FinCEN published a final rule requiring RMLOs to develop an anti-money laundering (AML) program and report suspicious activity.  The effective date of this rule was April 16, 2012, and the compliance date was August 13, 2012.

The rule does not impose new requirements on credit unions which are already subject to AML and suspicious activity reporting requirements.  However, the rule does apply to credit union service organizations (CUSOs) involved in residential mortgage services that meet the definition of an RMLO under 31 CFR 1010.100(lll)(1):

“(1) Residential mortgage lender or originator. A residential mortgage lender or originator includes:

(i) Residential mortgage lender. The person to whom the debt arising from a residential mortgage loan is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement, or to whom the obligation is initially assigned at or immediately after settlement. The term “residential mortgage lender” shall not include an individual who finances the sale of the individual's own dwelling or real property.

(ii) Residential mortgage originator. A person who accepts a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan.”

A CUSO that meets the definition of an RMLO must establish an AML program that includes:

• Internal policies, procedures, and controls
• A designated compliance officer
• Ongoing training
• Periodic independent testing

 RMLOs are also required to file suspicious activity reports (SARs) but they are not required to comply with currency transaction reporting (CTR) requirements.  (Note: these large currency transactions remain subject to reporting on FinCEN Form 8300).

 In addition to the notice and reminder, FinCEN has created a page on its website with more information for RMLOs subject to the rule.

CFPB Releases Semiannual Regulatory Agenda - Spring 2012; Seminar in Seattle

Written by Steve Van Beek

CFPB Regulatory Agenda.  Yesterday, the CFPB posted its Semiannual Regulatory Agenda - for spring 2012.  The previous Semiannual Regulatory Agenda was released in February 2012.  The latest release follows the same format and includes a listing of regulations in the various rulemaking stages: prerule stage, proposed rule stage, final rule stage, long-term actions and completed actions.  

Below is a listing of the various future regulations - organized by rulemaking stage.  Keep in mind the agenda is current as of April 13, 2012 and the CFPB has taken numerous actions since putting this agenda together.    

Prerule Stage:

• Registration of Certain Nonbank Covered Persons
• Supervision of Larger Depository Institutions and Affiliates
• Home Mortgage Disclosure Act (Regulation C)
• Requirements for Prepaid Cards (Regulation E) 

Proposed Stage:

• Amendments to TILA and FIRREA Concerning Appraisals
• Disclosure Rules and Substantive Protection for Certain High Cost Mortgage Loans (Regulation Z)** (proposed on July 9th)
• Mortgage Originator Standards (Regulation Z)
• Mortgage Servicing (Regulation X; Regulation Z)
• TILA/RESPA Mortgage Disclosure Integration (Regulation X; Regulation Z)** (proposed on July 9th)
• Credit Card Pre-Opening Account Fees (Regulation Z)
• Procedural Rule To Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination
• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets (LP 2) 
• Copies of Appraisals or Other Valuations To Be Furnished by Creditor (Regulation B)

Final Rule Stage:

• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets (LP 1)** (finalized on July 16th)
• Disclosure of Records and Information
• State Official Notification Rule
• Rules Relating to Investigations
• Rules of Practice for Adjudication Proceedings
• Restatement of Federal Consumer Financial Law Regulations
• Requirements for Escrow Accounts (Regulation Z)
• TILA Ability to Repay (Regulation Z)
• Confidential Treatment of Privileged Information
• Disclosure Rules for Remittance Transactions (Regulation E)

Long-Term Actions:

• Alternative Mortgage Transaction Parity (Regulation D)
• Business Lending Data (Regulation B)
• TILA Mortgage Amendments (Regulation Z) 

Completed Actions: 

• Disclosure Rules for Remittance Transactions (Regulation E)

***

Only 27 potential rulemakings!!  The Regulatory Agenda also includes a short summary of each rulemaking that is useful for providing a quick overview of what will be covered by the rulemaking.  However, as last Monday's proposed rules show - a short summary doesn't do much when the proposals are 1099 pages and 293 pages.  

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NAFCU's 2012 Regulatory Compliance Seminar.  Luckily, you don't have to read and understand all 27 potential rulemakings on your own.  We'll be covering quite a few of them at our 2012 Regulatory Compliance Seminar in Seattle, Washington - October 23-26.

The program-at-a-glance is available here (and we'll be including additional sessions as the proposals continue to flow).  We already have a session on the TILA/RESPA mortgage disclosures, the upcoming mortgage servicing proposal (including the periodic statement requirement) as well as a session on the remittances final rule.  Detailed session descriptions can be found here.

Remember - you do not need to be a NAFCU member to attend.  And, Save $100 if you Register by August 31st!

CUSO & Loan Participation Proposals; Regulatory Review; Q&A with NAFCU Compliance

Written by Steve Van Beek

Yesterday, NCUA announced an extended delay (via Twitter) for both the CUSO and Loan Participation proposed rule.  Remember, we revisited both of these proposals recently on the blog:

• Finalizing the CUSO Proposal
• Revisiting the Loan Participation Proposal

This extended delay (and, hopefully, complete rescission) of these proposals follows NAFCU's advice in our comment letters to NCUA (CUSO Comment Letter and Loan Participation Comment Letter).   

***

NCUA Regulatory Review.  NAFCU is still looking for comments for our Comment Letter to NCUA on their annual regulatory review of 1/3 of their regulations.  NAFCU's Regulatory Alert (12-EA-12) has additional details.  Feel free to send along any and all suggestions for changes to NCUA's regulations to reduce the regulatory burden on credit unions.  Comments are due to NAFCU by July 6th and to NCUA directly by August 3rd.  

***

Q&A with NAFCU's Compliance Team.  The July/August issue of NAFCU's The Federal Credit Union magazine has a lengthy Q&A with JiJi, Bernadette, Mike, Shari and myself.  If you always wanted to put a face to the folks writing the blog posts or helping with compliance questions - here is your chance!  Enjoy!

Have a great weekend everyone!   

Member Complaints & Reputation Risk; CUSO Rule Delayed

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday we blogged about the CFPB's new Consumer Complaint Database. We mentioned that unfounded complaints can present a reputation risk to credit unions. Today we want to focus on NCUA's procedures and guidance for complaints made to NCUA, and some steps that credit unions can take to manage their reputation risk.

NCUA's Office of Consumer Protection (OCP) is NCUA's newest office and is responsible for member complaints. OCP maintains a Consumer Assistance Center which contains the page "Help With My Credit Union" designed to help members with the complaint process. NCUA states the following regarding when to file a complaint with NCUA:

"First, Attempt to Resolve the Complaint Directly with Your Credit Union 

Before you contact NCUA, please contact the credit union directly to attempt to correct the problem. You can do this over the phone, in person or in writing. If you believe the credit union's staff is unresponsive to your inquiry or complaint, address your concerns in writing to the president or chief executive officer of the credit union or the credit union’s supervisory committee."(emphasis added).

As you can see, NCUA stresses the importance of trying to resolve the complaint directly with the credit union before submitting a complaint to NCUA. This is a great opportunity for your credit union to manage your reputation risk. As we have talked about in the past, there are bound to be some complaints received at your credit union, but poor handling of member complaints can negatively affect your credit union's reputation. Here are some steps that your credit union can take to mitigate these reputation risks arising from complaints:  

• Establish a process for handling member complaints and train your staff to implement it. Prompt responses to member complaints will hopefully resolve the issue and prevent a complaint from being submitted to NCUA.
• Create written policies and procedures for member complaints.
• Monitor the complaints that you receive. This will help you identify patterns in complaints and help you take corrective action where necessary.

Even with effective reputation risk management and an effective complaint response program at your credit union, some complaints may still be submitted to NCUA.  We'll talk more about the actual complaint process in a future blog post.

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CUSO Rule Pulled.  Yesterday, NCUA heeded NAFCU's advice and removed their CUSO rule from their June Board Meeting.  And, since the CUSO rule was the only agenda item - canceled the open meeting.  NAFCU Today has more information.

Finalizing the CUSO Proposal

Written By JiJi Bahhur, Regulatory Compliance Counsel

 

NCUA will be discussing its final rule on credit union service organizations (CUSOs) at its next Board Meeting on June 21.  As you may recall, the proposal has been around for about a year, but with the 290 or so comment letters received, including one from NAFCU, finalizing the proposal has required NCUA to take a look at some of its provisions as initially written in the proposal.  The likelihood of potential changes to the original proposal stems from the fact that a large number of commenters opposed many of the agency’s proposed provisions. 

As released last summer, the CUSO proposal:

• Would extend NCUA’s regulatory reach over CUSOs by requiring CUSOs to submit financial reports annually to the NCUA and state regulators.  The reports would provide the regulators with financial information, a list of services the CUSO provides, a customer list, and information about the CUSO’s board and management.

• Would extend the CUSO rule, including the proposed financial reporting requirement, to CUSO subsidiaries.

• Would extend a number of provisions in the CUSO rule that only apply to federal credit unions to federally-insured state chartered credit unions (FISCUs) as well. 

In a recent Washington Post article, NCUA Chairwoman Debbie Matz stated that some items for consideration before the proposal is finalized is the frequency of the reporting requirements and also giving CUSOs 60 days, rather than the proposed 30, to register with the agency.  Other considerations will relate to placing parameters or limitations on the investment cap.

For more details on what the original proposal entails, here is the proposal from last summer.  Affected sections of NCUA’s rules and regulations include Parts 712 and 741.222.  

Some other resources on the matter:

• NAFCU’s Comment Letter (available to the public)

• NAFCU’s Regulatory Alert (available to members only)
• NAFCU's On-Demand CUSO Webcast (available to all credit unions, regardless of membership or charter type)

 

Member Complaints; NAFCU's 2012 Regulatory Compliance Seminar

Written by Steve Van Beek

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

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

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

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

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

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

***

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

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

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

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

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

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

The CFPB and NonBanks; Upcoming NAFCU Webcasts

Written by Steve Van Beek

Last week, the CFPB issued a proposed rule to define "larger participants" in two consumer financial services markets.  The proposal targets the debt collection and consumer reporting markets.  Earlier this year, the CFPB issued a Notice and Request for Comment on how best to define "larger participants" and on which markets to focus on.

The Notice and Request for Comment was issued when the CFPB did not have a Director.  Without a Director, the CFPB had been unable to regulate nonbank institutions - including defining "larger participants."  Now that the CFPB has a Director, it can move forward with its NonBank Supervision Program.  

***

Dodd-Frank gave the CFPB authority to supervise any nonbank entity in three markets: (1) mortgage origination and servicing; (2) payday lending; and (3) private education lending.  The CFPB has the ability to supervise entities operating in these markets regardless of their size.

For other consumer markets, the CFPB must define "larger participants" and their recent proposed rule for the debt collection and credit reporting markets was their first steps in that direction.

The CFPB's Notice and Request for Comment indicating the CFPB was also going to be looking at the following consumer financial services markets:

• Consumer Credit and Related Activities;
• Money Transmitting, Check Cashing, and Related Activities;
• Prepaid Cards; and
• Debt Relief Services.

The CFPB still has the ability to define "larger participants" in these markets in the future.  The CFPB would need to propose a separate proposed rule to cover these markets (or add new markets) in the nonbank supervision process.

***

March NAFCU Webcasts.  NAFCU has a pair of webcasts coming up in March that might be of interest.  Remember, NAFCU's webcasts are open to everyone.  They are also available for viewing for a year after the original live webcast.  Thus, if you and your colleagues can't make the live webcast - you can still view the content at a later date.  This "on-demand" feature also works great for sharing the webcast with others at your credit union who could benefit from the information.

• Wednesday, March 7, 2012:  Preparing for the Heightened Scrutiny of CUSOs featuring Katherine Weber of The Weber Law Firm.
• Thursday, March 15, 2012:  Powers of Attorney and Subpoenas - The Risks, Abuses and Potential Liabilities of Credit Unions featuring Andy Keeney of Kaufman & Canoles. 

The full listing of NAFCU's live and on-demand webcasts can be found here.  Additionally, we are always looking for webcast ideas that would be useful to credit unions.  If you have ideas or suggestions, please email us at [email protected].   

NCUA Legal Opinion Letters - CUSOs; MBLs

Written by Steve Van Beek

NCUA recently published two legal opinion letters.  One discusses a credit union service organization's (CUSO) ability to lease property to credit unions and the members of affiliated credit unions.  The letter, NCUA Legal Opinion Letter 11-0642, is very detailed and fact specific so be sure to view the full letter.   

The second letter, NCUA Legal Opinion Letter 11-0734, discusses loans to professional musicians to purchase musical instruments.  From the letter:

"We do not consider IRS treatment of an expense to be determinative of whether a loan qualifies for MBL treatment under NCUA Part 723. Similarly, the fact that an item may be purchased for a non-business purpose is not controlling.  For example, a $50,000 loan to purchase an automobile for use as a taxicab or package delivery truck is an MBL and not a personal loan.  It is the loan’s actual purpose and amount, absent any applicable exemptions, that determine whether the loan is an MBL.

It is our view the instrument loan provides a means for your professional musician members to purchase a musical instrument for use in their trade as paid musicians.  The musical instrument is a tool of the musician’s trade and is acquired for use in a business capacity.  Therefore, where a loan to a member for this purpose totals $50,000 or more when aggregated with other such loans to the member,  the loan is an MBL and subject to Part 723."  (emphasis added).

 ***

Michigan Alert:  Perhaps not the most scientific poll - but Good Morning America viewers did name Sleeping Bear Dunes on Lake Michigan the "Most Beautiful Place in America."  

If you get a chance to visit northern Michigan, you will not be disappointed.   

Uncertainty; Reg Alerts and Finals; College Football

Written by Steve Van Beek

The CFPB now has authority for the consumer laws and regulations.  This means they are the agency with authority to interpret Regulation Z; the Fair Credit Reporting Act; the SAFE Act regulations; Regulation B; Regulation E; Truth in Savings regulations and the list goes on.  

Unfortunately, this is leaving financial institutions with a lot of uncertainty.  Let's use a concrete example - the recent clarifications to the Credit CARD Act - implemented in Regulation Z. 

• The clarifications were proposed and finalized by the Federal Reserve;
• The CFPB took over authority for Regulation Z on July 21, 2011;
• The clarifications become effective October 1, 2011; and
• Credit unions below $10 billion in assets will be examined by NCUA.

So, we have one agency finalizing a regulation but authority transfers to a new agency soon after and a third agency examines institutions.  

I know the paint isn't even dry on the CFPB - but I guess I was hoping the CFPB would be providing some guidance to the industry.  Currently, their webpage is completely consumer focused with three guidance documents (none clarifying existing requirements) tucked on the very bottom of the page.   

***

NAFCU's issued Regulatory Alerts on the CFPB's Disclosure of Records and Information proposal as well as NCUA's Credit Union Service Organization (CUSO) proposal.  Both can be found here.

We've also issued our Regulatory Final on NCUA's interim final rule for Remittances under 12 C.F.R. 701.30.   

***

I may have missed the 100 day countdown to the wedding - but I didn't miss the 30 day countdown to college football - specifically Michigan football (YouTube) - yesterday.  This doesn't reflect my priorities, however.  I will continue to argue it is extremely difficult to track 100 days when months have different number of days.  

My brothers and I at the 2006 Michigan-Wisconsin game.

If you are not a Michigan fan - you are still welcome at the Big House.  You just might not have as good of seats (and you will be a bit outnumbered).

CUSOs; CFPB Reform?; Hot Dog

Proposed CUSO Rule. At last Thursday's Board meeting, NCUA introduced a proposed rule regarding CUSO's. If your credit union works with a CUSO (or CUSOs), this is an issue to follow. The proposed rule would require CUSOs to file financial reports directly with the NCUA and the appropriate state supervisory authority and it would require any CUSO subsidiaries to follow rules and regulations applicable to CUSOs. Additionally, it would implement investment limits for federally-insured state-chartered credit unions that are "less than adequately capitalized." The proposed rule can be found here.

CFPB Reform? The House passed HR 1315, The Consumer Financial Protection Safety And Soundness Improvement Act of 2011, late last Thursday. It would replace the CFPB director with a 5-person commission and allow the Financial Stability Oversight Council to challenge the CFPB with a majority vote rather than the 2/3 vote currently required. The bill would of course have to pass the Senate and be signed by the President. You can find more on this in this NAFCU News item.

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Hot Dog.  So, the members we've talked to this past week have been asking us just how hot is it in DC? Well, the picture below should give you a good idea (I cannot take credit for the picture - that came to us from our fearless leader Fred Becker, or rather, his better half). Some of you have been experiencing temperatures just as hot, if not hotter, so stay cool everyone.

CUSO LOL; FRB annual dollar adjustments

Written by Sarah Loats Zimmermann

NCUA LOL. NCUA has issued a legal opinion letter that discusses the CUSO customer base issue. For a credit union to be able to invest in a CUSO, that CUSO must primarily serve credit union members. As NCUA points out in the letter there is no bright line test for this  "primarily serves" requirement. The letter notes some of the factors to be considered and expresses NCUA's stance that the requirement is ongoing throughout the credit union's investment.

 

FRB. Yesterday, the Federal Reserve released two press releases regarding annual dollar amount adjustments. The first is in relation to HOEPA loans (also known as high-cost loans or section 32 loans). The Fed is required on an annual basis to adjust the dollar amount of the fee-based trigger. For 2012 that dollar amount will be $611. As the press release notes, this does not affect higher-priced mortgage loans, which are determined using a different rate-based trigger.

Second, the Federal Reserve has announced the exemption threshold for Regulations M and Z. For 2012, the threshold will be $51,800, meaning that leases/loans at or below $51,800 will be subject to Regs M/Z (note that private education loans and mortgage loans are subject to Reg Z regardless of amount).

 

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Maybe it's all of that compliance training, but our blog readers sure do notice the small details. A couple of weeks ago I quietly changed my name, but it didn't get past you guys. Yes I did get married and I truly thank you all for your well wishes! We were actully married this past October in my home state of Ohio. We took a chance on the weather for an outdoor ceremony and got lucky with a gorgeous sunny weekend. I've had many requests for pictures over the last few months so here we go - I had a hard time picking just a couple to capture the day but here's my best shot.

 

From pretty lace shawl...

 

...to feather boa.

 
 

ATM Lawsuits; No Closing Costs? Really?; CUSOs

Posted by Anthony Demangone

I think Spring is finally here in Washington, D.C.  I know that for two reasons:

• Each morning, there is a green coating of pollen on my car.
• It is very hard to find nasal decongestant at the local pharmacy.

Now, on to the compliance stuff.

ATM Lawsuits. There have been a rash of news stories about ATM lawsuits. Here's one example. (Dayton Business Journal.).  It seems the lawsuits are claiming that ATM disclosures, which are governed by Regulation E, are inadequate. With that in mind, I would like to point out the following:

1. A 2009 FDIC financial institution letter that outlines exactly what should be on the ATM. 
2. This BankersOnline.com discussion contains some pretty wicked good ideas on how to manage this risk. Wicked good.  Their wicked good ideas are based on this paragraph from the Electronic Funds Transfer Act:

(d) Exception for damaged notices. If the notice required to be posted pursuant to section 1693b(d)(3)(B)(i) of this title by an automated teller machine operator has been posted by such operator in compliance with such section and the  notice is subsequently removed, damaged, or altered by any person other than the operator of the automated teller machine, the operator shall have no liability under this section for failure to comply with section 1693b(d)(3)(B)(i) of this title.

No closing costs. Really?  You might remember that we wrote a bit about the use of "free" when writing ad copy for share accounts.  Are there similar restrictions for claims of "no closing costs" for open end home equity loans?  Yep. The following comes from the Staff Commentary to Part 16(d) of Regulation Z: 

4. Misleading terms prohibited. Under §226.16(d)(5), advertisements may not refer to home-equity plans as free money or use other misleading terms. For example, an advertisement could not state “no closing costs” or “we waive closing costs” if consumers may be required to pay any closing costs, such as recordation fees. In the case of property insurance, however, a creditor may state, for example, “no closing costs” even if property insurance may be required, as long as the creditor also provides a statement that such insurance may be required. (See the commentary to this section regarding fees to open a plan.)

I always forget about that one.  Hat tip to Bill, for reminding me of that restriction. Mahalo, Bill.

CUSOs.  There's been a good deal of compliance "internet chatter" about NCUA examinations and CUSOs.  If your credit union has a CUSO, does that CUSO have its own business plan?  Its own BSA risk assessment and anti-money laundering program? Does your credit union's board have a clear picture of the various risks involved with the CUSO's activities? These questions appear to be popping up during exams.  To be honest, the questions don't appear to be all that unreasonable.

CUSOs and Separate Corporate Identities; NAFCU Opens 2 Hours Later Today

Editor's Note: NAFCU follows the Federal Government's operating schedule.  Due to an ice storm, Los Federales are under a "2 hours delay." NAFCU will do the same, opening at 11 a.m. (EST) today.

Posted by Anthony Demangone

Many credit unions are rethinking how they do their business and who they do their business with.  Many credit unions have found out that a credit union service organization, or CUSO, might be just the thing.  CUSOs can be a great way to better serve a credit union's membership, either as a business partner or the credit union's affiliate.

We've had so many questions about CUSOs recently that I wanted to highlight NCUA expectations regarding CUSOs and the need for a separate corporate identity. In short, when a credit union establishes a CUSO, it must be done in a way that ensures the CUSO is a legally separate entity.  NCUA's CUSO rule discusses this issue at 12 C.F.R. Part 712.4.  Here are a few snippets:

• The credit union and CUSO must be held out to the public as a separate enterprise.
• The federal credit union may not dominate the CUSO to the extent that the CUSO is no more than a department of the credit union.
• In addition, before a credit union may invest in a CUSO, the federal credit union must obtain written legal advice as to whether the CUSO is structured in a way that preserves legal separateness. 

The section isn't that long, so if your credit union is interested in establishing or investing in a CUSO, it is well worth a read.

 

A Busy Year

Posted by Anthony Demangone

Not too long ago, I shared my general outlook for 2011.   That post dealt more with general trends.  But we do expect some specific things.  Regarding NCUA, look out for the following in 2011.

• Regulations on interest rate and concentration risks.  If you've been keeping up with the Material Loss Reviews issued by NCUA's Office of Inspector General, you already know that concentration risk has played a huge role in credit union failures.  And that risk affects more than just credit unions.  I was at a meeting recently where an OTS and OCC official both agreed that concentration risks played a role in every major bank failure as well.
• Member business lending. Rather than a major overhaul, look for NCUA to incorporate guidance documents into the regulation.
• CUSOs.  NCUA will ramp up its focus on CUSOs, and they may seek examination authority.
• Examinations.  NCUA will overhaul its examiner's manual.  This is one process to track closely.  In my view, the examiner's manual is a massive guidance document that can affect your operations and NCUA examinations.  For that reason, it is very important to see how they change it. 
• This and That.  NCUA may also overhaul its investment rule (Part 703) and it may direct examiners to review new credit union products/services at each exam. 

Keep in mind that we can't say for certain that NCUA will act on any one of these issues.  But based on our conversations with NCUA officials, these are some of the areas of interest.  Stay tuned!

Fed Proposal; Other Stuff

Posted by Anthony Demangone

Earlier this week, the Federal Reserve issued a proposed rule designed to (in my own words) shut down a few loopholes found within Regulation Z's rules for credit cards. The rule does three main things.

1. If you waive interest charges, such a practice is deemed to be a promotion and will need to follow promotion requirements.  Some credit card issuers were planning to manage credit risk by charging a member, for example, a 16 percent APR. But as long as the member would pay on time, the issuer would waive 3 percent of the APR.  So, the member would have, in effect, a 13 percent APR credit card. If the member slips up, the issuer would revoke the benefit. This proposal says that such a practice is a promotion, so you have to give them a firm time, not less than six months, for how long the "interest waiver" will be in place, and what the rate will be after that.  You won't be able to end promotions simply because a card holder makes one late payment, for example. In addition, the proposal clarifies that existing balances earned under a waiver promotional program are protected at the lower balance, unless the borrower becomes more than 60 days delinquent.
2. Under the proposal, application and similar fees that a consumer is required to pay before a credit card account is opened are covered by the same limitations as fees charged during the first year after the account is opened. The Fed gives a good example: "Because the total amount of these fees cannot exceed 25 percent of the account's initial credit limit, a card issuer that, for example, charges a $75 fee to apply for a credit card with a $400 credit limit generally would not be permitted to charge more than $25 in additional fees during the first year after account opening." I don't think that this is necessarily bad for credit unions.  This clarification makes it much harder for credit card "sharks" to offer these fee-heavy credit cards.  That makes our credit cards more attractive.
3. Finally, if the proposal goes final in its current form, when you evaluate a consumer's ability to make the required payments before opening a new credit card account or increase the credit limit on an existing account, you'll have to consider information regarding the member's independent, individual income, rather than his or her household income. That shouldn't be a big deal, but it could trigger a change to your policy and procedures.

Finally, here are some other things of note:

• This is a proposal, so these proposals may be tweaked when the Fed issues a final rule.  
• While the proposal tackles the three main issues noted above, it addresses quite a few other issues as well. It clarifies what would be considered a credit card and charge card, and it addresses employee preferential rates.  If your shop offers credit cards, you'll need to work through the whole rule.  NAFCU is preparing a Regulatory Alert on the Fed's proposal, so stay tuned. 

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Here are some other items of note:

• NCUA holds its NCUA Board Meeting today.  They're addressing their RegFlex regulation and its Merger Partner Registry, among other things.  The draft board items will be available this morning here.
• The Fed's Outlook Live seminar series will be offering a free webinar on HMDA and CRA reporting, to be held November 17th. Hopefully, they'll hit the HMDA stuff first.
• NCUA has issued Legal Opinion Letter 10-0856 to clarify that, for purposes of NCUA's rules and regulations, a CUSO may serve as a loan broker for loans used to finance the purchase of New York City tax cab medallions.  NCUA stresses, though, that other laws and regulations may apply. 

Left Coast; NCUA issues Legal Opinion Letter

NCUA Issues Legal Opinion Letter on CUSO and MBL Expertise

Last week, NCUA issued Legal Opinion Letter 08-0302 (May 1, 2008).  You may access it here.  In the guidance, NCUA clarified how a CUSO may provide the "direct experience" needed under NCUA's member business lending regulation and further discussed "conflict of interest issues" surrounding member business lending.

In the legal opinion letter, NCUA clarified that a credit union may use the services of a CUSO to satisfy the direct experience even though the CUSO may not be independent of the transaction.  That being said, NCUA appeared to find issues with a specific fee arrangement between a credit union and its CUSO.

...We noted, however, the CUSO appears to be compensated on a fee basis, collecting fees in connection with origination, servicing, participations, referral and document preparation. Under this fee structure, the CUSO appears to be paid only or primarily when a loan is funded. This situation creates an inherent conflict of interest as the CUSO has a direct interest in recommending a loan be funded and not denied. We recommend you address any questions or concerns regarding the nature of this arrangement or specific transactions with the appropriate regional director. (Emphasis added.)

As always, I recommend that you read the letter in its entirety, especially if your credit union does member business lending.

CU Benefits for CUSO Employees; Bachelor Party

This week, NCUA issued NCUA Legal Opinion 08-0218 (April 4, 2008), which addresses whether a credit union may provide HR benefits for CUSO employees, or in the alternative, manage the benefits if the CUSO pays the costs.  NCUA indicated the following:

You have asked if a federal credit union (FCU) may provide employee benefits to the employees of a CUSO that is wholly-owned or majority-owned by the FCU. You specify that by “provide,” you mean obtain, administer and pay for the benefits. No, that is not permissible. You also have asked, in the alternative, if the FCU may obtain and administer benefits for the CUSO employees if the CUSO pays for them. Yes, this is permissible subject to the conditions discussed below.

An FCU is authorized to provide employee benefits, including retirement benefits, to its employees and officers. 12 C.F.R. §701.19(a). The kind and amount of these benefits must be reasonable given the FCU’s size, financial condition, and the duties of the employees. Id. This authority is expressly limited to the FCU’s employees. It does not extend to the employees of a CUSO, which is a legal entity separate and distinct from the FCU, even if wholly-owned or majority-owned by the FCU. Also, an FCU may provide employee benefits to an FCU employee, who also performs some duties for a CUSO, but only for the duties that employee performs for the FCU.

We believe, as you suggest, that an FCU may obtain and administer employee benefits for CUSO employees, as part of a program for its own employees, if the FCUA does not pay for the benefits for CUSO employees and subject to certain conditions. By “obtain and administer,” you mean the FCU will combine CUSO employees with FCU employees to form a larger employee group solely for administrative convenience and as a cost savings measure to obtain better rates as a result of having a larger group of beneficiaries.

NCUA went on to clarify that if the credit union obtains and administers employee benefits for CUSO employees as noted above, the credit union must take steps to ensure the practice does not alter the legal separateness of the credit union and the CUSO.

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This weekend, the Compliance Guy is off to Pittsburgh for his bachelor party.  The plan is to watch as much baseball as possible (the Pirates take on the Phillies), eat poorly (Fatheads and Churchbrew), and try not to end up in the Ohio, Allegheny or Monongahela Rivers.  I should easily accomplish two out of three goals.

Have a great weekend, everyone!

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.

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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.

Crowded Agenda; Smile!

The agenda for this week's NCUA Board Meeting has been released.  And it is a doozy!  Here's what NCUA is looking at:

1. The Official Advertising Statement.  NCUA is looking at proposed changes to Part 740 of its rules and regs.  From our sources, the change doesn't sound major, but it might affect credit union advertising.
2. NCUA is looking at proposed changes to Parts 712 and 741, which will affect credit unions with CUSOs.
3. NCUA will also look at proposed changes to Parts 701 and 705 of its rules and regs to clarify the definition of "low-income." 

There are other minor items on the agenda, which you can access here.

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As I noted last week, NAFCU recently held its annual Regulatory Compliance School in Alexandria, Virginia.  123 attended.  76 sat for exams.   Hats off to them all!  Here are a few photos from the event. 

January NCUA Newsletter Available; And the Winner Is...

NCUA recently released its January 2008 newsletter.  You can access it here.   Of note, the newsletter details NCUA's 2008 regulatory review.  NCUA states the following:

NCUA reviews all regulations every three years to “update, clarify and simplify existing regulations and eliminate redundant or unnecessary provisions,” in compliance with IRPS 87-2, Developing and Reviewing Government Regulations. The Office of General Counsel reviews one-third of the regulations each year, identifying those we think should be amended.

While NCUA may review or revise other regulations as well, NCUA is scheduled, in 2008, to review the second third of its regulations, Parts 711 2008 regulation review through 747, to make recommendations for amendments. The following four regulations have been identified for possible amendments:
• Part 712 Credit Union Service Organizations
• Part 721 Incidental Powers
• Part 723 Member Business Loans
• Part 740 Advertising

Those are fairly meaty regulations.  Stay tuned.

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The First Annual NAFCU Compliance Blog Holiday Decoration Contest winner is "Blue Christmas." First of all, you have to appreciate people that decorate themselves. Also, how can you argue against the King? For all of you who participated, thank you. Thank you very much.

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For those who are calling me today, here's a good barometer of my mood:  the score of Saturday's Steelers-Jags game.   Hint: I'm a Steelers fan.