May 20, 2016
A 60-day comment period, and an industry focus group, will be among the methods used for collecting feedback in the process of modernizing the NCUA 5300 Call Report – which will work in conjunction with a review of the overall exam process. In a new “board briefing” section of yesterday’s NCUA Board meeting (instituted Thursday by new Chairman Rick Metsger), agency Office of Examination and Insurance Director Larry Fazio outlined the impetus for the call report modernization as “the first concrete step in a much broader and longer-term retooling of how NCUA approaches its role in the credit union system.” He noted, for example, advances in technology could result in the agency spending less time on site at credit unions – and even that periodic exams, whether annual or every 18 months, “may be an antiquated concept in the future.”
Fazio indicated that NCUA will spend 2016 gathering information through a comment period and focus groups, among other things, to build background on what data a new call report would collect. Noting that other federal financial regulatory agencies are also modernizing their call reports, he added that NCUA could be dropping some data points the agency has long collected. And, he added, the agency wants to tap into resources credit unions are already using themselves, “so we don’t have to burden the credit union” in asking them to collect the data.
NASCUS has long advocated for modernization of the call reports – and President and CEO Lucy Ito recommended that state supervisors have representation on any focus or working groups regarding call reports and the overall exam process. “As was noted at Thursday’s meeting, the call report is a fundamental tool that is used by state regulators in their supervision of credit unions,” Ito said. “State regulators have keen insight to how this tool works for financial institutions and need to be involved in the modernization process – and the overall review of the exam process.” The NASCUS leader pointed out that, as many state regulators routinely work with both credit union and bank call reports, they appreciate the pros and cons and relative effectiveness of both, and can offer constructive suggestions.
Meanwhile, Metsger announced that he has asked agency Region IV Director C. Keith Morton to head up a working group on the overall exam process. (Last week, Metsger announced an overall initiative to review and overhaul the exam process.) He said he would be looking for a report from the group in 90 to 120 days. He also noted that the board would review any recommendations -- including any related to possibly extending the exam cycle--early enough in 2016 to make adjustment to the agency’s strategic plan for implementation in 2017.
Consumer protection laws applicable to deposits is the focus of a new letter to credit unions, emphasizing that violations of federal law could occur if “credit discrepancies” are permitted or are not resolved in a timely manner. The letter (LTCU 16-CU-04) -- issued by NCUA Wednesday in conjunction with the Federal Reserve, CFPB, FDIC and OCC – includes interagency guidance and notes the violations could occur under the Expedited Funds Availability Act (as implemented by Regulation CC), the Federal Trade Commission Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The guidance issued with the letter addresses discrepancies that may occur between amounts deposited by a member or customer and the dollar amount credited to that account. However, the letter states that the guidance does not mandate specific practices, rather it emphasizes “the need to reconcile variances resulting from encoding errors, poor image capture, and other issues.”
Following up on action taken by NCUA in late April, five other federal financial regulators have issued an interagency proposed rule to prohibit incentive-based compensation arrangements that encourage inappropriate risks at large financial institutions. The proposal was issued by the FDIC, OCC, Federal Reserve, Federal Housing Finance Agency and the SEC (in addition to NCUA). Comments are due by July 22. NCUA issued the proposal April 21, largely because the agency's board was meeting before scheduled meetings of other agencies’ ruling bodies. According to NCUA, the proposal would affect 258 large federally insured credit unions – both federal and state chartered – who would be required to report certain executive compensation in “sufficient detail” to allow regulators to gauge whether it is excessive or could lead to material loss. CUSOs are not covered by the NCUA portion of the proposed rule. The agency plans to issue guidance for credit unions about the rule once it is finalized.
Payday lending (and auto title lending and similar products), prepaid accounts, mortgage servicing (and mortgage disclosures) overdraft protection and more are on the CFPB’s semiannual update of its rulemaking agenda, with action expected for most by late this spring or during the summer. CFPB has planned a June 2 field hearing on payday/small dollar lending for 10 a.m. CDT, at the Kansas City Convention Center; Municipal Auditorium Complex. The bureau has also indicated it intends to issue a proposed rule on small dollar loan products “in the next several weeks.” According to the rulemaking agenda, the proposed payday lending rule will address “failure (by lenders) to determine whether consumers have the ability to repay without default or reborrowing and certain payment collection practices.” Additionally, the agenda notes that the bureau will issue a final rule this summer “to create a comprehensive set of consumer protections for prepaid financial products,” such as general purpose reloadable cards and other similar products. A final rule on mortgage servicing is also expected this summer, and a “notice of proposed rulemaking” on the “Know Before You Owe” mortgage disclosure rule. CFPB gave no timetable for action with regard to overdraft protection other than to say it is “engaged in activities to consider potential regulation of overdraft services on checking accounts.” The bureau also noted its ANPR issued earlier this month on arbitration of future disputes between covered persons and consumers in connection with consumer financial products or services, stating it has gathered “extensive feedback” in preparation for rulemaking.
Just a reminder that the NASCUS MBL School is coming up in just three weeks (June 7-8 in New Orleans), and a head’s up that we’ve scheduled a Directors’ College July 14 for Massachusetts, New Hampshire and Rhode Island. The MBL School is a comprehensive program to give state CU examiners and practitioners strong backgrounds in commercial underwriting well in advance of the Jan. 1, 2017, effective date of NCUA’s new MBL rule. The July 14 Directors’ College (at the Cooperative Credit Union Association’s headquarters in Marlborough, Mass.), is a day-long event for credit union directors to stay on top of critical statutory, fiduciary and regulatory responsibilities as well as emerging issues. Like all of our Directors’ Colleges, it’s open to all (including CU senior staff) and offers a regulators-eye view of their expectations for directors. See the links below for more information on either. This event will feature regulators from all three states – MA, NH and RI.
BRIEFLY: Stabilization fund pay-down; National exam group meets; 5 FISCUs among late call report filers
NCUA will make a $700 million payment by month’s end to the Treasury against borrowings by the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), which NCUA said this week will decrease borrowings from Treasury to $1 billion. The agency also reiterated that no immediate rebate will be available to credit unions for assessments they paid into the fund until after the agency repays all “outstanding borrowings from the U.S. Treasury” and satisfies “any outstanding NCUA Guaranteed Notes obligations” … The National Examination Committee (NEC) met at NCUA HQ this week, gathering comments from examiners regarding the Examiner’s Guide, exam process, procedures, and emerging issues affecting exams, and to review and update various chapters in the NCUA Examiner’s Guide (such as the Draft Earnings content). State representatives are Lori Jones (OH), Denise St. Pierre (NH) and Edward Schutte (OR). … Five FISCUs were among the 22 federally insured credit unions that have consented to penalties for filing late Call Reports in the fourth quarter of 2015, NCUA stated this week. In a release, the agency stated that the late filers will pay a total of $13,548 in penalties, with individual penalties ranging from $157 to $2,580; the median penalty was $356. Of the 22 credit unions agreeing to pay penalties for the fourth quarter of 2015, 15 had assets of less than $10 million; five had assets between $10 million and $50 million, and; two had assets between $50 million and $250 million.
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974