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Aug. 4, 2017


August emerges as comments-due time

Typically, August in Washington is a sleepy time of year, especially as the weather turns hot and muggy. But this year is a tad different, at least for NASCUS and those others following federal credit union regulatory oversight: five comment periods are closing this month, including that for a revised methodology for the Overhead Transfer Rate (OTR). By this time next week, NASCUS will have filed three comment letters, and will be putting the final touches on two more. After that: NASCUS will turn to two more comments to be filed in early September.

Here’s a quick rundown of the issues NASCUS will be filing comments on this month:

  • Supervisory review committee (comments due Monday (Aug. 7)): NCUA is proposing to expand the subjects appealable to the Supervisory Review Committee, broaden SRC composition situationally to respond based on subject matter specialization, and provide credit unions an option for additional review by the Director of NCUA’s Office of Examination and Insurance (E&I). 
  • Appeals Procedures (comments due Monday): NCUA is proposing streamlining and replacing the process for appeals to the NCUA Board for those agency regulations that have existing embedded appeals processes. The procedures would apply in cases in which a decision rendered by a regional director or other program office director is subject to appeal to the Board. These kinds of decisions are regarded as “informal” decisions by NCUA. “Formal” agency determinations would not be covered. 
  • Conversions, Mergers and Voluntary Mergers (comments due Monday): NCUA is proposing changes to their regulations Parts 701, 708a, and 708b to amend the rules pertaining to voluntary mergers. NCUA notes in the preamble to the proposal that it is concerned that in some mergers, prospective merger partners may be seeking to influence the merging credit union by offering financial incentives to management and certain highly compensated employees to support the merger that the Board believes should be disclosed to members.
  • Regulatory review (comments due Aug. 18): NCUA maintains a rolling review schedule that identifies 1/3 of its existing regulations for review each year and provides notice to the public of those regulations under review so the public may have an opportunity to comment. In this segment of its review, NCUA is asking for comment in 12 areas, focusing largely on contractors, budget, representation, and certification.
  • Overhead Transfer Rate (OTR) methodology (comments due Aug. 29): NCUA has proposed revisions to its Overhead Transfer Rate Methodology (OTR) which would streamline the formula for determining how much of its operating expenses should be allocated to the National Credit Union Share Insurance fund (NCUSIF). NCUA notes that applying its proposed OTR changes to the current budget would result in an OTR of 60% instead of the current 67.7%.

NASCUS President and CEO Lucy Ito said the association, in consultation with its Legislative and Regulatory Committee, would complete its comment letter on the OTR in advance of the comment-due date, to share with the state credit union system as talking points for additional comment letters.

“The state credit union system will certainly have a voice in front of the federal regulator in August,” Ito said. “A central part of our mission is to represent the state system in key, national issues. The positions that NASCUS outlines this coming month in these five areas ensures that we are pursuing our mission. And there is more to come: four more comments are scheduled to be filed in September – including those on emergency mergers and closing the Temporary Corporate Credit Union Stabilization Fund. Stay tuned.”

LINKS:
Summary: NCUA Supervisory Review Committee; Procedures for Appealing Material Supervisory Determinations (Comments due Aug. 7)

Summary: NCUA proposed Appeal Procedures(Comments due Aug. 7)

Summary: Mergers of Federally Insured Credit Unions (Comments due Aug. 7)

Summary: NCUA Regulatory Review (2017) (Comments due Aug. 14)

Summary: NCUA Proposed revised Overhead Transfer Rate Methodology (Comments due Aug. 29)


CONSIDERATION OF BUDGET BILL FOR NCUA, OTHERS BUMPED TO SEPTEMBER

The Senate joined the House in August recess yesterday, and both houses of Congress are now out until Sept. 5. When they return, the full House is expected to take up more spending bills – including the package holding the provision which subjects NCUA’s budget (and other federal financial institution regulatory agencies) to the congressional appropriations process. Meanwhile, the Senate appropriations subcommittee on Financial Services and General Government is expected to begin marking up its version of the budget bill that week. But time is running short: Congress has until the end of September (the end of the current fiscal year) to pass legislation funding the government for FY 2018. If Congress fails to do so, temporary funding must be approved to keep the government open. On top of that: an increase in the federal “debt ceiling” will also have to be approved – new spending bills approved or not – to likewise keep the government from shutting down. Look for a busy September.


BILL TO DROP FEDERAL PROHIBITION ON MARIJUANA JOINS GROWING LIST

Legislation that would drop the federal prohibition on marijuana use and possession – and encourage states to legalize both (as eight states have already done) -- was introduced this week in the Senate, joining a growing list of similar bills already pending. Sen. Cory Booker (D-N.J.) introduced the “Marijuana Justice Act,” which aims to remove marijuana from the Controlled Substances Act. The proposal would also withhold federal money for building jails and prisons, along with other funds, from states whose cannabis laws are shown to disproportionately incarcerate minorities. Booker’s home state of New Jersey is also considering legislation legalizing marijuana (which Gov. Chris Christie (R) opposes). While Booker’s bill has almost no chance of advancing, given Attorney General Jeff Sessions’ resistance to legalizing marijuana, it joins about a dozen other bills in the Senate and House (by both Republicans and Democrats) that call for either dropping or easing prohibitions on marijuana use or possession, or to reduce the gap between federal and state marijuana policy.

LINK:
Current listing of marijuana-related legislation pending in 115th Congress


REPORT: AGENCY WORKING TO RENEGOTIATE LAWYER FEES FOR CORPORATE RECOVERIES

NCUA’s payments to law firms in fees, totaling more than $1 billion “is raising alarms among House GOP members” out of concern that the agency is overpaying for recovery agreements reached with Wall Street banks over corporate credit union securities, a Washington publication reported this week. Politico reported this week that NCUA is seeking to renegotiate terms of a 2009 contingency fee agreement with the law firms of KoreinTillery and Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC, which NCUA has said possess the “requisite resources and securities and litigation expertise.” The $1 billion in fees paid so far represents about one-fifth of the total $5.1 billion in legal recoveries that NCUA has realized to date. NCUA points out that net proceeds from recoveries are used to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund (which NCUA has proposed merging into the National Credit Union Share Insurance Fund in October). NCUA has also stated that, without the contingency fee arrangement, “there would have been no legal investigation of potential claims, no litigation and no legal recoveries.”

LINK:
NCUA web pages: Legal Recoveries from the Corporate Crisis


CFPB RELEASES OVERDRAFT COVERAGE DISCLOSURE PROTOTYPES

Overdraft disclosure prototypes designed to improve the model form that credit unions and banks already provide to consumers weighing overdraft coverage were released by the Consumer Financial Protection Bureau (CFPB) overnight. In a release, CFPB said that it is testing four prototypes, each with a one-page design, which the bureau said is aimed at making the costs and risks of opting in to overdraft coverage easier to understand and evaluate. CFPB stated that, according to a study published in conjunction with the prototypes, persons who frequently attempt to overdraw their checking accounts typically pay almost $450 more in fees if they opted in to debit card and ATM overdraft coverage. The study, CFPB stated, found that most of these frequent overdrafters are financially vulnerable, with lower daily balances and lower credit scores than people who do not overdraft as often. 

LINKS:
Prototypes of the Know Before You Owe overdraft disclosure

CFPB overdraft report


CONSUMER BUREAU ISSUES WARNING ABOUT ‘PAY-BY-PHONE’ FEES

Concerned about financial services and other companies that are “tricking consumers” into paying expensive fees for remitting by phone, the CFPB issued a warning this week about charging the fees. The bureau also issued guidance that it says will assist in compliance with the law. The bureau provided two examples of “harmful practices” regarding pay-by-phone fees:

  • Misleading consumers about pay-by-phone fees, which the bureau said can result in consumers incurring charges for services they don’t need.
  • Keeping consumers “in the dark” about much cheaper payment options, which results when the companies do not disclose their fees in writing upfront to consumers, and when phone representatives fail to inform consumers about “significant price differences between available pay-by-phone options.”

The bureau recommended that financial services companies review state and federal laws to confirm the companies may charge pay-by-phone fees, and to “review their policies and procedures,” including reviewing consumer complaints about fees that are charged.

LINK:
CFPB Compliance Bulletin 2017-01: Phone Pay Fees


TUESDAY (AUG. 8) IS CUTOFF FOR SUMMIT ‘17 HOTEL RATE

Cutoff date for the NASCUS State System Summit hotel rate is Tuesday (Aug. 8), so get those reservations in as soon as possible. Our headquarters for this year’s event is the Westin Gaslamp Quarter Hotel, located on the border of the historic Gaslamp Quarter, and close to many attractions in San Diego. Among those who are gathering to speak during the Summit about future trends and issues for the state system: NCUA Board Member Rick Metsger, former NCUA Board Chairman Dennis Dollar, cybersecurity expert Jim Stickley, marijuana business banking expert Sundie Seefried (CEO of Partner Colorado Credit Union in Denver) and many more. Key topics at the event include fintech, evolving field of membership (FOM) requirements, the future of the corporate system, cybersecurity, outlook for CFPB – and others. Find out more about the 2017 Summit – including registration and hotel reservations – at the event’s website, linked below.

LINK:
Hotel info, registration: 2017 NASCUS State System Summit, Aug. 29-Sept. 1, San Diego


BRIEFLY: Treasury liaison confirmed; OH CU Day; CECL training; West Coast visits

Before going out on recess yesterday, the Senate confirmed Christopher Campbell as Treasury assistant secretary for financial institutions, a key liaison to federal financial institution regulators, including NCUA (Campbell is also a tax expert, having formerly served as a staff member of the Senate Finance Committee) … More than 70 credit union leaders will be on hand Aug. 14 at the Ohio Credit Union Day, sponsored by NASCUS and the Ohio Division of Financial Institutions, with breaks sponsored by the Ohio Credit Union League; registration is still open … A one-day training program about the new CECL accounting standard is set for Nov. 7 in Charlotte, N.C.; co-sponsored by the North Carolina Credit Union Division, the Carolinas Credit Union League and NASCUS, the program addresses critical issues about the new accounting standard … On the Road: NASCUS’ Lucy Ito continues to visit credit unions and regulators throughout the West Coast, discussing issues, challenges and membership in the state credit union system’s top advocacy group

LINKS:
OH Credit Union Day, Aug. 14

CECL Symposium, Nov. 7; Charlotte, N.C.



Information Contact:
Patrick Keefe, pkeefe@nascus.org