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June 1, 2018

Summary offers detailed outline of PALs II proposal

Although NCUA’s proposed alternative “payday alternative loans” (PALs) rules do not apply directly to state chartered credit unions (which should look to state law and regulation for their abilities to make the loans), NASCUS has posted a detailed outline of the rule, which does apply to federally chartered credit unions.

In its summary of the proposed PALs II rules (issued last week by the NCUA Board), NASCUS notes that the NCUA plan does not replace existing PALs (which are short-term, small-dollar loans offered by credit unions), but creates a second variation (PALS II). The second variation, the NASCUS summary notes, incorporates four key differences from existing PALs loans:

  • Minimum and maximum amount of the loans;
  • Number of loans a member may receive in a 6-month period;
  • No minimum length of membership requirement;
  • Maximum maturity.

The NASCUS summary also points out that, in its payday lending rule issued in November 2017, the BCFP (formerly known as the CFPB) granted a safe harbor for any loans made pursuant to NCUA’s PALs I rule, exempting PALs I loans from the Payday Loan Rule.

However, the proposed PALs II loans do not automatically qualify for the PALs I safe harbor/exemption, the summary states. The BCFP rule does provides a partial exemption for “alternative loans” that meet all of the requirements of the current PALs I rule, not including: the minimum membership requirement; nor the limit on the number of loans provided to any one borrower in a six-month period.

“Therefore, an FCU could structure PALs II loans to qualify for an exemption from the (bureau’s) Payday Loan Rule,” the summary states. “However so doing would mean foregoing the option of making PALs II loans up to $2,000 and issuing 12-month terms. This would be a business decision for the FCU.”

LINK:
NASCUS Summary: Proposed payday alternative loans (PALS II)


FOR THE MOST PART, PROVISIONS OF REG RELIEF LAW ARE IN EFFECT

Many of the items having a direct or mostly direct impact on federally insured credit unions in the newly enacted regulatory relief legislation went into effect immediately – but it may still be a while before even many of those individual provisions become effective.

Under the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155), signed into law last week by President Donald Trump, at least six provisions will have a direct or mostly direct impact on credit unions – and all of those are in effect now. However, there are some caveats: for example, the provision requiring NCUA to publish and seek public comment on its budget won’t be realized until this fall when the agency begins its budgeting process.

Some provisions in the bill have “hardwired” effective dates. For example, a provision that requires that credit bureaus include in the file of a consumer any fraud alerts for at least a year under certain circumstances -- and provide a consumer unlimited free security freezes and removals of security freezes -- takes effect 120 days (in September) from the May 24 enactment date of the bill.

But many others do not have such “hard” dates, including provisions having a greater impact on credit unions. Many of those took effect immediately, (although some of these may still be subject to various federal agency rulemaking, yet to come). Credit union provisions include those:

  • Reclassifying one-to-four unit, non-owner occupied residential loans as real estate loans, so the loan would not count against the member business lending cap.

(NOTE: On Friday (June 1), NCUA announced that the NCUA Board met and unanimously voted to change its rules to no longer require federally insured credit unions to count loans made on any 1-to-4-unit family dwellings as member business loans. “As such, these loans will not count toward the aggregate member business loan cap imposed on each federally insured credit union,” the agency said in a release. The board voted May 30 on the change by notation vote, according to NCUA. The change removed the member’s occupancy requirement for loans secured by liens on 1-to-4-unit family dwellings. Previously, the rule required those dwellings to be the primary residence of a member in order to be excluded. The change conforms agency rules with changes made to the Federal Credit Union Act incorporated into the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, signed into law by President Trump on May 24.)

  • Requiring NCUA to make public a draft of its proposed budget, hold a hearing with public notice at which the draft would be discussed; and solicit and consider public comment about the draft budget.
  • Rescinding additional data points required under the Home Mortgage Disclosure Act (HMDA) for insured credit unions that originate fewer than 500 closed-end and/or 500 open-end lines of credit.
  • Removal of a three-day wait period required for the combined TILA-RESPA Integrated Disclosure (TRID) mortgage disclosure if a creditor extends to a consumer a second offer of credit with a lower annual percentage rate.
  • Establishment of a safe harbor from certain requirements for a loan to be considered a Qualified Mortgage.
  • Providing a safe harbor for properly trained financial employees who report alleged elder financial abuse. (However, training is required and spelled out in the legislation. That training, the act indicates, must take place “as soon as reasonably practicable” and, “with respect to an individual who begins employment, or becomes affiliated or associated, with a covered financial institution after the date of enactment of this Act, not later than 1 year after the date on which the individual becomes employed by, or affiliated or associated with” a financial institution as a trainer.)

LINK:
S.2155, enrolled version of bill

NCUA press release: Board Approves Changes to Member Business Lending Rule


CREDIT, CONSUMER REPORTING AT TOP OF COMPLAINTS HEAP

Credit or consumer reporting was the most-complained about financial product or service category in March, the BCFP said this week, with perennial complaint generator “debt collections” coming in second. According to the bureau, 37% of about 30,300 complaints received that month by the agency were about credit or consumer reporting. Debt collection generated 27% of the complaints received by BCFP (about 22,000). The complaints were outlined in the bureau’s Complaint snapshot: Debt collection.

Historically, the consumer bureau said, complaints about debt collection have generated approximately 400,500 debt collection complaints since July 2011, when the agency first began accepting the complaints. That number represents 27% of the total complaints the agency has received since then, it said. As of April 1, the bureau reported, it has received approximately 1.5 million complaints on a variety of consumer financial products.

In third place for complaints received in March were those about mortgages, the agency also reported, accounting for 10% of that month’s protests.

LINK:
BCFP Complaint snapshot: Debt collection


CONSUMER BUREAU’S FINTECH ‘SANDBOX’ WILL LOOK TO STATES FOR CUES

A “sandbox” for fintech ideas is under development by the BCFP, the acting director told a Washington audience this week, with the idea of facilitating testing for financial innovations – and taking cues from state actions. (A “sandbox” is loosely defined as a space where fintech startups are provided relief from certain regulatory requirements and can test products while regulatory authorities can offer guidance.) Acting Director Mick Mulvaney provided few details in his remarks (to the Washington group Women in Housing Finance (WHF). However, he said the bureau is reviewing what states have already done in the area, and that his agency is working closely with the Commodity Futures Trading Commission (CFTC) with regard to the project. Following his remarks, he told the American Banker (a trade publication) that, with fintech, “if you don’t give any regulation at all, it has the chance to go off the rails and completely burn itself out, which is where I was fearing bitcoin was going to a couple months ago if they haven’t already. And at the same time, if you over-regulate, you sort of tamp down that creativity and you discourage the innovation.”

In another development this week, Mulvaney announced (in a memo to his staff) that the agency would lift its freeze on collection of private consumer data, which helps its examiners oversee financial institutions. The freeze was imposed last year by Mulvaney out of a concern for privacy of consumers’ information. However, The Wall Street Journal reported, Mulvaney told his staff that his concern had been lessened after an independent review of the bureau’s cybersecurity defenses.


NCUA ANNOUNCES LOW-INCOME CU LOAN AVAILABILITY …

NCUA said this week it has $2 million available for technical assistance grants and $5.3 million for loans to low-income-designated credit unions through the Community Development Revolving Loan Fund (CDRLF). Funds are to help credit unions serve members and stimulate economic activity in their communities. The fund provides grants and assistance to federal credit unions with NCUA’s low-income designation, or state-chartered credit unions with equivalent designations. (Requirements are detailed in Title 12, Part 701.34 of the Code of Federal Regulations.)

There are three technical assistance grant initiatives this year, the agency said. The initiatives, and maximum per award in each, are: Digital Services and Security, $10,000; Leadership Development, $10,000; and Underserved Outreach, $20,000. The application period opens at 9 a.m. ET July 1 and closes at 11:59 p.m. ET Aug. 18.

Loans from the CDRLF carry a low interest rate and have a maximum maturity of five years. NCUA has set a maximum loan amount of $500,000. Applications will be accepted at any time and until funds are exhausted. The $5.3 million available for loans will change as loans are issued and as others amortize, that is, are repaid to the revolving fund.

LINK:
Notice of Funding Opportunity, Community Development Revolving Loan Fund


… AND A WEBINAR ON GRANTS PROGRAMS SET FOR JUNE 13

Meanwhile, the agency also announced that grants programs related to community development, and success stories from past awardees of the grants, will be highlighted during a June 13 webinar on the CDRLF, sponsored by the regulator. The hour-long session will be held beginning at 2 p.m. NCUA said that staff from its Office of Credit Union Resources and Expansion (CURE) and the Office of the Chief Financial Officer will lead the discussion. The agency said registrants can submit questions in advance at WebinarQuestions@ncua.gov. The email’s subject line should read, “NCUA Grants.” See the

LINKS:
Registration for NCUA webinar, CDRLF

Press release: NCUA Will Host Grant Initiatives Webinar


MORTGAGE SYMPOSIUM FOCUSES ON KEY ISSUES

Understanding compensation issues for real estate lending personnel, pricing loans for sale and cybersecurity were among the issues up for presentation and discussion at the NASCUS Mortgage Symposium held this week in the Boston area. The capacity crowd listened to such speakers as (at right; from left) Kevin Cuff, Chad Nordstrom, Nathan Hagen, Jennifer DeWitt. NASCUS worked closely with the Massachusetts Division of Banking to provide their staff with professional development training through the program. For other upcoming NASCUS education events, see our listings on the NASCUS Website.

LINK:
NASCUS 2018 Education-Training Agenda


FIFTH ANNUAL SESSION ON CYBERSECURITY OPENS MONDAY

Cybersecurity – including understanding evolving expectations for risk assessments and new credit union cybersecurity examination tools – are on the agenda for the NASCUS/CUNA Cybersecurity Conference next week in Nashville, Tenn. The two-day event (opening Monday and running through Tuesday, with a pre-conference session set for Sunday) is the fifth straight year that the two national organizations have sponsored the conference, which has grown considerably in both size and reputation over that time. Aimed at all roles in credit union security and technology, as well as CEOs, risk managers, compliance professionals, policy makers, state examiners and others, the program includes sessions on latest trends in resilience, response and continuity, the value of cyber intelligence and effective third-party management. The pre-conference session looks at cybersecurity incident response.

LINK:
NASCUS/CUNA Cybersecurity Conference ‘18


SHELTON ROULHAC IS NEW NASCUS VP COMMUNICATIONS

Please welcome Shelton Roulhac as NASCUS vice president of communications; he came on board this week. He joins NASCUS with 10 years’ experience in communications, government relations, and public policy. For the past five years, he has worked at the Credit Union National Association (CUNA) in Washington, D.C., most recently as senior director of advocacy specializing in state legislation and other issues. In addition to drafting op-eds and articles championing credit union issues for CUNA, he has written legislative/regulatory blog posts, created state-level website content, and led CUNA’s social media engagement on state issues. Before that, he held positions at the Council on Foundations as a senior policy analyst, and the Mortgage Bankers Association as a specialist in public policy and corporate relations. He earned a B.S. in economics from Florida A&M University and a J.D.  from the University of Wisconsin-Madison. 


ON THE ROAD: In IL, WI, and WA

NASCUS President and CEO Lucy Ito visited several states over the past week or so, as she keeps in touch with the state credit union system, including: a visit to Alliant Credit Union in the Chicago area to discuss current state credit union issues; huddling with the Wisconsin Credit Union League (and the Wisconsin Office of Credit Unions) in Madison, Wis., about local issues; and joining with the Northwest Credit Union Association (NWCUA) in Seattle to participate in the association’s state issues working group, join a panel discussion with credit union CEOs, and visit the Washington Department of Financial Institutions (DFI).


BRIEFLY: 2018 Summit edges closer; New members continue to join

It’s just around the corner: join NASCUS in Orlando July 16-19 for the 2018 NASCUS State System Summit to network with credit union and league leaders, industry experts and state regulators from across the country. The Summit is a unique event bringing together credit union regulators and practitioners for mutual exchange and dialog. It's a rewarding opportunity for both groups, as they listen to ideas, share thoughts and look for solutions to the challenges and opportunities facing the state credit union system through dialog and networking … NASCUS welcomes its newest members: Ent Credit Union of Colorado Springs, Colo. ($5.2 billion in assets, more than 314,000 members), led by President and CEO Chad Graves, and; Corporate America Credit Union, of Irondale, Ala., a corporate credit union serving 500 natural person credit unions, led by President and CEO Pete Pritts.

LINK:
NASCUS 2018 State System Summit/Agenda, registration

Information Contact:
Patrick Keefe, pkeefe@nascus.org