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Nov. 3, 2017

Summaries offer closer look at 3 key regulatory actions

Three summaries of recent, significant regulatory actions have been posted by NASCUS, presenting outlines of NCUA final board action about closing the corporate credit union fund (and setting the “normal operating level”), and agency proposals about advertising and capital planning and supervisory stress testing.

NCUA’s final action on closing the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and setting the “normal operating level” (NOL) of the National Credit Union Share Insurance Fund (NCUSIF), the summary notes, begins the process by which credit unions can begin receiving distribution of the excess funds currently accumulated by the TCCUSF. However, the summary states, NCUA has not resolved the methodology by which it would distribute the excess funds to credit unions. “Until this issue is resolved, it is unknown how much money each individual credit union will receive,” the summary states.

The summary also points that, after reviewing the equity needs of the NCUSIF and providing an analysis to stakeholders, if NCUA determines a need to change the NOL by more than 1 basis point, the agency will publish a request for comments. A list of “miscellaneous facts” is also contained in the final action summary, derived from the discussion of the more than 600 comments the agency received in proposing the final action.

The other two summaries address:

  • Accuracy of advertising and notice of insured status, which proposes the addition of a fourth short statement “Insured by NCUA” for official advertising of insured status, as well as an expansion of an exemption from the advertising statement requirement regarding radio and television advertisements.
  • Capital planning and stress testing, which proposes three tiers to be created for credit unions with $10 billion or more in assets for planning and testing. Each tier would have differing obligations under the Capital Planning and Supervisory Stress Testing Rule; all credit unions with at least $10 billion in assets would be required to develop annual capital plans and submit those plans to NCUA.

LINKS:
Summary: NCUA Board Action: Closing the TCCUSF & Setting the Normal Operating Level

Summary: Accuracy of Advertising and Notice of Insured Status

Summary: Capital Planning and Stress Testing


LETTER OUTLINES APPRAISAL EXCEPTIONS FOR STORM-RELATED AREAS

Appraisal requirements were eased for real estate-related financial transactions in areas declared to be a major disaster – including those affected by severe storms and flooding related to Hurricanes Harvey, Irma, and Maria – in NCUA Letter to Credit Unions (LTCU 17-CU-06) issued in October. The NCUA letter was issued in conjunction with actions taken by NCUA and the federal banking regulators (FDIC, Federal Reserve and the OCC).

The letter affects federally insured credit unions in areas of three states and two U.S. territories: Florida, Georgia, Puerto Rico, Texas, and the U.S. Virgin Islands. The appraisal exceptions expire three years after the date the president declared each area a major disaster. According to the letter, whether or not a credit union elects to take advantage of the exceptions “is a business decision that should be determined by the credit union on a case-by-case basis.” A credit union may only take advantage of the exception if it meets the requirements of the joint statement and order issued by the regulators, the letter states.

LINK:
NCUA LTCU 17-CU-06: Real Estate Appraisal Waiver for Credit Unions Affected by Severe Storms and Flooding in Florida, Georgia, Puerto Rico, Texas, and U.S. Virgin Islands


AGENCY CLOSES 4TH CU OF YEAR; ANNOUNCES PROHIBITION ORDERS

An 82-year-old credit union last week became the fourth nationwide to be liquidated in 2017, NCUA said late last week. New York State Employees Federal Credit Union of New York, N.Y., had about $2 million in assets and served nearly 1,200 members, the agency said in a release. Most of the liquidated credit union’s assets – and all its loans, savings (shares) and members -- were assumed by Palisades Federal Credit Union of Pearl River, N.Y., a nearly $200 million credit union with about 14,000 members, the agency said. Its decision to liquidate the credit union, NCUA said, was made after determining the credit union was insolvent with no prospect for restoring viable operations on its own.

In a report on prohibition orders this week, NCUA said in October five individuals – including one sentenced to a five-year prison term and ordered to pay restitution of more than $400,000 -- were prohibited from participating in the affairs of any federally insured financial institution. Two of the individuals were from state-chartered credit unions (including the Wisconsin former credit union employee who earned the $400,000 restitution order and prison sentence).

LINKS:
NCUA Issues Prohibition Notices

New York State Employees Closes; Palisades Assumes Members, Shares, Loans


WITH SIGNATURE, TRUMP PUTS END TO RULE ON ARBITRATION AGREEMENTS

A congressional repeal of the rule banning use of arbitration agreements in contracts for most financial products was formally signed into law by President Donald Trump Wednesday, following a close vote in the Senate and a personal appeal by Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to the president to veto the legislation.

Earlier in the week, Cordray wrote to Trump in a personal appeal to veto the repeal of the CFPB rule, which would have allowed consumers to join in class actions over disputes about financial products, including credit cards and bank accounts. The Senate on Oct. 24 passed the repeal resolution by a one-vote margin (51-50), cast by Vice President Mike Pence; the House passed the resolution earlier this year. The repeal was passed under the auspices of the Congressional Review Act (CRA).

“I think you really don't like to see American families, including veterans and service members, get cheated out of their hard-earned money and be left helpless to fight back," Cordray wrote. Despite Cordray’s plea, Trump signed the repeal bill; the White House issued no statement about his action.

However, Acting Comptroller of the Currency Keith Noreika – who publicly challenged the CFPB’s data supporting the rule – issued a statement, saying he applauded Congress and the president for vacating the rule. “The rule would have harmed consumers even as it provided no benefit in deterring bank misbehavior or preventing customer abuse,” Noreika said.

Under the CRA, once a rule is repealed it may not be reissued in substantially the same form – nor may a new rule that is substantially the same be issued – “unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original,” according to the statute, passed in 1996.


FED CHAIR NOMINEE POWELL BACKS TRADITIONAL ROLE, KNOWS CUS

In nominating Jerome H. “Jay” Powell to be chairman of the Federal Reserve Board this week, President Donald Trump has selected a candidate who has said – repeatedly and recently – that the mission and structure of the central bank should be left as is, and who has become familiar with credit unions and their representatives over the years.

Trump nominated Powell, 64, Thursday to be chairman of the board to succeed current chair Janet Yellen, whose terms expires in February. Powell is now a member of the Fed board; his term expires in 2028. The Senate must confirm Powell’s nomination.

Thursday, after Trump introduced him as his Fed chair nominee, Powell indicated he supported actions taken by the Fed during and since the financial crisis. “Our financial system is without doubt far stronger and more resilient than it was before the crisis. Our banks have much higher capital and liquidity, they are more aware of the risks that they run, and they are better at managing those risks,” he said.

In remarks last month, the Fed board chair nominee said that the “best thing” the Federal Reserve can do, for both the U.S. and the global economy at large as a sustainable recovery materializes, is to keep its house in order “in continued pursuit of its dual mandate of maximizing employment and stabilizing prices.” In a March speech at West Virginia University in Morgantown, Powell said that the structure of the Federal Reserve should not be changed lightly, as it achieves a practical balance that serves the country well.

As both a Fed board member and a former Treasury official (he served in the administration of President George H.W. Bush in the early 1990s as assistant secretary for financial institutions, and as undersecretary of domestic finance – both positions that interface with federal regulatory agencies, including NCUA), Powell has met with credit union representatives and their advocates over the years about a variety of issues.

FINANCIAL SERVICES CHAIRMAN WILL STEP DOWN AT END OF CONGRESS

The chairman of the House Financial Services Committee, and sponsor of legislation that envisioned sweeping changes to the federal financial institution regulatory scheme – the Financial CHOICE Act (H.R. 10) – will not be returning to Congress after next year’s election, he announced this week. Rep. Jeb Hensarling (R-Texas) said in a statement that he never intended to make service in Congress a “lifetime commitment.”

However, Hensarling said that, over the 14 months remaining in his term, “much work remains … in the areas of financial regulations, housing finance, cyber security and capital formation.” Hensarling’s tenure as committee chairman will end after this Congress, the result of committee chairman term limits imposed by the House Republican Caucus. He led the committee for three terms. Possible successors include Reps. Ed Royce (R-Calif.), Blaine Leutkemeyer (R-Mo.) and Patrick McHenry (R-N.C.).

HR 10, which passed the House this summer but has not yet been taken up in the Senate, would require NCUA to publish a draft version of its budget in the Federal Register; hold a public hearing on its budget and accept public comments; and respond to the public’s comments on its budget.


CU TAX EXEMPTION INTACT IN PROPOSAL – FOR NOW

The proposed tax reform/tax cut legislation released Thursday by House Republican leaders contains no apparent changes to the credit union tax preference, credit union trade groups quickly announced after quick reviews of the proposal. However, the Credit Union National Association (CUNA) in a message to credit unions, said it would “keep our guard up for any threat to the credit union tax status or added barriers that prevent credit unions from more fully serving their members.” The legislation is expected to be considered by the tax-writing House Ways and Means Committee next week; a Senate tax bill is expected then, too. House leaders hope to move the bill to the floor before Thanksgiving.


CFPB RELEASES REPORTS ON EXTENDED CAR LOANS, MILITARY FAMILIES

Longer-term, six-year auto loans – which cost more, are used by consumers with lower credit scores to finance larger amounts, and have higher rates of default – accounted for 42% of car loans made in the last year, compared to just 26% in 2009, the CFPB said in a report Wednesday. The growth in the longer-term loans (which CFPB called riskier) came at the expense of five-year loans, which declined over the same period, the agency said. Also this week: In a 50-state snapshot, they bureau said complaints show military families and non-military families have different experiences in the financial marketplace, as challenges that servicemembers face are often complicated further by factors related to a military career, and complaint data indicates situations where servicemember families may have different experiences than non-servicemember families.

LINKS:
Longer-term, ‘riskier’ auto loans growing substantially, report says

Snapshot: military/non-military families have different financial experiences


BRIEFLY: FinCEN notice on storm/fire fraud; SOLD OUT for CECL, CT conferences

The Financial Crimes Enforcement Network (FinCEN) issued an advisory this week warning financial institutions about the potential for fraudulent transactions in the wake of disasters, including recent hurricanes and wild fires. FinCEN said it issued the advisory to help financial institutions identify and prevent fraudulent activity that may interfere with legitimate relief efforts … The NASCUS educational events next week in Rocky Hill, Conn. (NASCUS Executive Forum, Monday, Nov. 6) and in Charlotte, N.C. (CECL Symposium, Tuesday, Nov. 7) are both SOLD OUT following overwhelming response by interested participants. Upcoming NASCUS meetings include the Nov. 12-15 BSA Conference in Las Vegas; the Nov. 28 NASCUS Mortgage Symposium in Newton, Mass.; and the Dec. 5 MBL Symposium in Nashville, Tenn.

LINK:
FinCEN advisory on fraud in wake of hurricanes, fires, other disasters



Information Contact:
Patrick Keefe, pkeefe@nascus.org