July 1, 2016
Legislation mandating increased transparency for the calculation of the transfer of funds from the NCUSIF to the NCUA budget via the “overhead transfer rate” – including a breakdown of costs – will be introduced as stand-alone legislation, a member of Congress told a Washington group this week. Rep. Mick Mulvaney, R-S.C. (and a member of the House Financial Services Committee), in remarks to the National Association of Federal Credit Unions, said he would introduce the legislation as a stand-alone, although the provision is also contained in the Financial CHOICE Act, proposed by House Financial Services Committee Chairman Jeb Hensarling, R-Texas. The “CHOICE” bill (which stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs”) is a sweeping reform of the Dodd-Frank legislation enacted in the wake of the financial crisis of the last decade. However, Mulvaney gave no particular timetable for introducing the legislation as a stand-alone. In early June, Hensarling said he would introduce his overall reform bill “later this month” (although that has not happened yet).
The OTR transparency provision (which is under Subtitle S on the last page of Hensarling’s 498-page CHOICE bill), according to the text of the discussion draft of the measure, would require the NCUA Board to accompany each annual budget with ‘‘a detailed analysis of how the expenses of the Administration are assigned between prudential activities and insurance-related activities and the extent to which those expenses are paid from the fees collected” or from the insurance fund. The report would also have to explain the “Board’s supporting rationale for any proposed use of amounts in the Fund contained in such budget, including detailed breakdowns and supporting rationales.” The provision further mandates that each report be available to the public.
NASCUS President and CEO Lucy Ito voiced interest in working with Rep. Mulvaney on the provision. “NASCUS has repeatedly recommended greater transparency for the OTR, out of our long-held concern regarding the OTR methodology, and the agency’s management of its complex role as both a chartering authority and an insurance fund administrator,” she said.
“Regulatory capture” at NCUA, as well as three other federal financial institution regulatory agencies, is the focus of a study by the Government Accountability Office (GAO), the Wall Street Journal reported this week. Originally aimed at the Federal Reserve Bank of New York and the Federal Reserve system, the probe was recently expanded to include NCUA, the OCC, and the FDIC. The initial scope was to determine whether the Fed’s bank supervisors are improperly influenced by Wall Street firms. However, according to the Journal, a new “work stream” was created as the study proceeded to review the other federal financial institution regulators, including NCUA.
“Regulatory capture” is defined as occurring when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating. The original probe was begun in March, after an October request from Reps. Maxine Waters (D-Calif.) and Al Green (D-Texas), both top Democrats on the House Financial Services Committee, who expressed concern with whether the Fed was too close to the institutions it supervises. The study was expanded to NCUA and the other agencies this month, according to the Journal. A spokesman for NCUA told the Journal that “we look forward to working with GAO in its review.” The OCC and FDIC had no comment.
Consumers continue to complain about issues managing their loans and problems they encounter when they are unable to pay off the loans, according to the latest Consumer Complaint Snapshot published by the CFPB this week. The bureau based its report on the 38,500 complaints in the consumer loan category the agency says it has received since it began accepting consumer complaints in July 2011. The “consumer loan” category in the CFPB’s consumer complaint database includes complaints about vehicle loans and leases, installment loans, pawn loans, title loans, and personal lines of credit.
Complaints about vehicle loans made up the majority (52%) of the complaints about consumer loans; instalment-loan complaints came in second (31%), CFPB stated. Two in every five complaints (43%) emanated from consumers struggling to manage their loan, lease, or line of credit, and about payment processing issues on loans -- such as not having payments applied to their accounts in a timely or proper manner. Overall, the CFPB reported, it has handled more than 900,000 complaints nationally as of June 1, with debt collection the leader. Credit reporting and mortgages, respectively, were the next highest in complaints. Meanwhile, student loans complaints showed the greatest increase in grievances over the period of March to May, CFPB reported, with a 61% increase.
The loan approval process for federally insured, state-chartered credit unions for the Community Development Revolving Loan Fund (CDRLF) would be streamlined under NCUA’s proposed rule, according to a new summary posted by NASCUS. Under the proposal (made at the board’s June 16 meeting at agency headquarters in Alexandria, Va.), rather than requiring a FISCU to obtain concurrence from its state regulator before the federal agency considers the credit union’s loan application, NCUA proposes to obtain formal state regulator concurrence directly after it has received a loan application. In other areas, the summary points out that NCUA proposes a substantive change related to the current §705.5(b) maximum aggregate loan amount of $300,000 for CDRLF loans. The proposed rule would eliminate the reference to a maximum loan amount because NCUA has discretion to issue loans in any amount it deems appropriate. The agency would publish any future self-imposed loan limits in its Notice of Funding Opportunity. Comments are due on the proposal to NCUA by Aug. 22. Feedback to NASCUS for consideration for inclusion in the association’s official comment letter is due to NASCUS by Aug. 15.
There is growing interest among credit unions in blockchain/shared ledger technology – as exemplified by the Credit Union National Association this past week, announcing an initiative related to the technology, which NASCUS, state regulators and credit unions welcome. That’s especially the case as the state groups have been talking about these payment techniques over the last eight years in NASCUS conferences, seminars and workshops (including virtual currencies at our Bank Secrecy Act Conference in 2008). To that end, NASCUS will continue to educate regulators and credit unions about the complex and important issues related to the technological underpinnings of digital currencies, including the blockchain. Those complexities include BSA and consumer protection issues as well as questions of regulatory jurisdiction. In the meantime, states continue to look at the potential value and challenges of blockchain. A report released early this year by the state of Vermont concludes that "the benefits of adoption of blockchain technology by state agencies is, at this time, not outweighed by the costs and challenges of such implementation." However, the report also recognized the validity and utility of blockchain technology, calling for new legislation to cover instances where blockchain applications are not covered by the state's Uniform Electronic Transactions Act. "Regarding economic advantages to legal recognition of blockchain technology, Vermont is currently a hospitable environment for commerce related to blockchain technology even though the State has not recognized this technology in statute at this time," the report stated.
Condolences to the Rhode Island Department of Business Regulation on the death of Jeffrey L. Asermely, assistant supervisor of examinations, who died June 24. He was with the DBR for nearly 30 years, and appreciated among regulators for his wit and insights … Act now if you plan to attend the NASCUS/CUNA Cybersecurity Symposium next month (Aug. 1-2) in Chicago, and you still need to reserve your hotel room. Today is the cutoff date for obtaining our special room rate for the symposium at the Westin Chicago River North hotel. To register or to contact the hotel, see the link below … To everyone: Enjoy a terrific and safe Fourth of July holiday!
LINK:2016 Cybersecurity Symposium registration, hotel information
Patrick Keefe, NASCUS Communications, firstname.lastname@example.org or (703) 528-5974