March 25, 2016
Thirteen recommendations for regulatory changes in six different areas – some which would amend existing rules, and others which suggest exempting state-chartered credit unions from existing rules -- were made by NASCUS in a comment letter this week responding to NCUA’s review of its regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). In making recommendations, NASCUS focused on areas where regulatory burden on federally insured, state-chartered credit unions (FISCUs) could be reduced either by amending existing rules or exempting the state credit unions in areas where alternate state regulation provides “comparable safe and sound risk mitigation.”
Since 2014, NASCUS has commented on all four EGRPRA call for comments by NCUA, racking up about 40 recommendations in more than a dozen different areas, including lending, capital, share insurance, corporate credit unions, regulatory relief and more. A recurring recommendation in NASCUS comments over the last two years has been for the agency to consolidate its share insurance rules applicable to FISCUs within a single section, or sections, of its rules. “As currently organized, NCUA’s rules are confusing at best, and unacceptably burdensome at worst,” NASCUS wrote in its latest letter. “All of this confusion would be resolved, and a substantial regulatory relief granted, if NCUA reorganized its rules,” adding that doing so would further the goals of the regulations and aid in compliance. Another theme in NASCUS letters since 2014 is that NCUA should take steps to limit its presence in FISCUs and increase its reliance on state reports of examination. “As both the FCUA, and NCUA’s own regulations make clear, the agency should be relying on state examinations for the preponderance of FISCU exams,” NASCUS wrote in the latest offering.
For a brief, video summary (about one minute) of the NASCUS letter, click on the link below or on the image; a link to the full text of the NASCUS letter is also below.
NCUA began the process of modernizing its core of information technology applications (including examination and reporting software) when the agency board Thursday approved the addition of two temporary positions to lead its “Enterprise Solutions Modernization Program.” The board also approved a corresponding reduction of two positions to its field staff. The aim of the overall ESM program: reduce on-site examination costs of CUs by way of the modernized systems’ facilitating more off-site monitoring, and spending less on-site examination time at credit unions. NASCUS President and CEO Lucy Ito welcomed the move and offered state system collaboration with NCUA throughout the process. “This decision is long overdue and supported by state credit union regulators,” she said. “We also believe that state supervisory authorities’ input into this initiative will be invaluable given state examiner direct experience with other federal banking regulators' examination systems, and their own efforts at such modernization.” In other action, the board approved the annual report for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), during which is was noted that no rebates from the National Credit Union Share Insurance Fund should be expected before 2021 as the fund continues to repay Treasury for funds borrowed. About $1.7 billion in loans are still outstanding.
An interim final rule and two new reports on consumer affairs (with an advisory for credit unions and banks) were all part of a busy week for the Consumer Financial Protection Bureau (CFPB). Under the interim final rule (which implements the Helping Expand Lending Practices in Rural Communities, or “HELP” Act), small creditors that operate in rural or underserved areas could avail themselves of certain special lending provisions outlined in the law, enacted last year. For example, the rule would allow financial institutions to originate balloon-payment qualified and high-cost mortgages in those areas. The interim final rule takes effect March 31.
Meanwhile, the agency also released two studies, on military service members’ debt collection complaints and on elder financial abuse prevention, with an advisory for financial institutions accompanying the latter. The report on debt collection and service members noted that complaints have been made by service members at nearly twice the rate of non-military consumers who submit complaints to the CFPB, and that roughly 44 percent of the debt collection complaints submitted involved companies’ attempts to collect debt that the service member believes is not owed. Regarding the report on elder financial abuse, the bureau reported that– although nearly one in five elder consumers report financial exploitation -- few cases ever come to the attention of protective services, perhaps out of embarrassment or physical frailty by elder consumers to make a report. The accompanying advisory includes recommendations for banks and credit unions on how to prevent, recognize, report, and respond to financial exploitation of older Americans.
If a group of potential credit union members who are 50 years old or more, and reside in a specific state but share additional traits, it is possible that those additional traits would qualify that group for an associational common bond under a federal credit union charter, NCUA wrote in a recent legal opinion letter. Agency General Counsel Mike McKenna wrote that “commonality of age and residency alone is not enough to establish a permissible FOM under NCUA’s regulations.” However, McKenna added that if the group “were also to share other commonalities in addition to age and residency, then it is possible that those additional commonalities could be sufficient to satisfy the associational common bond provisions of NCUA’s regulations, which specifically require a substantial degree of commonality.” McKenna did qualify his response, however, noting that NCUA “would need to know more details about those additional commonalities to determine if they are sufficient to satisfy the associational common bond requirements.”
Letters to all five federal financial institution regulators – and FinCEN – asking them to issue combined guidance governing how financial institutions can effectively serve marijuana-related business have been sent by four senators representing states that have recently legalized marijuana use. The letters, sent to chairs of NCUA, the Fed and the FDIC, as well as the leaders of the Treasury, OCC and FinCEN, notes that without guidance from prudential regulators, credit unions and banks will continue to “lack the certainty they need to operate in this market.” The letter was signed by Sens. Jeff Merkley and Ron Wyden (both D-Oregon), Patty Murray (D-Wash.) and Michael Bennet (D-Colo.). “Many marijuana-related businesses are experiencing difficulty accessing financial services and must operate all-cash operations,” the senators wrote. “Most banks and credit unions have been reluctant to provide financial services to marijuana-related businesses due to concerns their CAMELS supervisory rating will be penalized by examiners.” The senators added that with “clearer guidance” offered by regulators, financial institutions will be more likely to serve legal marijuana businesses, allowing them banking system access without “fear of repercussion.”
Thanks to the more than 50 credit union directors, CEOs, and other senior staff members who joined our Credit Union Executive Forum in Seattle this week, which featured presentations by four regulatory agencies (WA, ID, OR and NCUA). Aside from the agenda (which included an overview of national issues, national and local economic trends, earthquake/volcanic activity preparedness and commercial lending), discussion was also held on incentive-based compensation rules, social media, patent trolls, marijuana business banking, exam cycles, interstate branching and supplemental capital. Thanks also to the Northwest Credit Union Association for its support and involvement in the program.
Congratulations to NASCUS Credit Union Council Member Cathie Tierney, president and CEO of Community First Credit Union in Appleton, Wis., who was profiled in an article that ran in the USA Today Network-Wisconsin (and which was picked up by her hometown paper, the Appleton Post-Crescent (see link below) … Best wishes and thank you to Jane Watkins, retiring as president and CEO of VACU of Richmond, Va., after more than 30 years of service (and support for NASCUS) … and welcome to Christopher M. Shockley (currently EVP/Member Service) as CEO; Chris takes the reins at VACU as CEO April 1 … Our MBL School, June 7-8, is receiving its share of interest – check out the complete agenda at the link below.
Cathie Tierney profile
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974