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Sept. 22, 2017

Closing of corporate fund – and distributions to CUs – on agenda

Adoption of a final rule to merge the credit union share insurance fund with a fund set up to stabilize corporate credit unions in the wake of the financial crisis will be considered by the NCUA Board during its open meeting next week in Alexandria, Va.

If the board adopts the rule as proposed, federally insured credit unions across the country could see a distribution to them of between $600 million to $800 million early in 2018. The rule, as proposed, would also raise the fund’s equity ratio above the current “normal operating level” of 1.3% to a proposed 1.39%. Both provisions of the proposal have raised considerable interest within the credit union industry: as of this week, more than 600 comment letters had been filed by credit unions, industry trade groups, other organizations and individuals.

In its comments on the proposed rule, NASCUS wrote that the association supports closing the corporate fund (the “Temporary Corporate Credit Union Stabilization Fund,” TCCUSF), merging it into the National Credit Union Share Insurance Fund and distributing the corporate fund’s surplus to credit unions, but acknowledged that doing so has risks. Those include exposing the NCUSIF to the financial obligations of the corporate resolution program, including the risk associated with any economic downturn that impairs the value of the legacy assets, which in turn could trigger a decline in the NCUSIF’s equity ratio.

NASCUS, in its letter, also noted that the proposal to raise the “normal operating level” of the insurance fund comes without any guarantee that a higher level “will not become the new normal.” To address that, the NASCUS letter recommended the agency consider a mechanism that guarantees any increase in the insurance fund’s normal operating level as a hedge against a recession, which would sunset automatically when the corporate resolution concludes in 2021.

Also on the agenda for the Sept. 28 meeting:

  • A proposed rule on accuracy of advertising and notice of insured status by federally insured credit unions;
  • A quarterly report on the condition of the “corporate” fund;
  • A review of the agency’s 2018-22 strategic plan.

NCUA Board Agenda, Sept. 28 (meeting materials linked when the meeting begins)

NASCUS comments: Stabilization fund closure (and setting of “normal operating level”)


Two actions against alleged fraudulent lending practices were taken this week by the CFPB, focusing on students and consumers. In the first case, the bureau imposed multi-million-dollar fines and an audit against a student loan trust and its debt collector (National Collegiate Student Loan Trusts and Transworld Systems, Inc., respectively), alleging that the companies illegally sued borrowers for private student loan debt that the companies which made the loans couldn’t prove was owed or was too old to sue over. Overall, CFPB said in a press release, the action affects all 800,000 loans held by the trust; the companies will pay at least $21.6 million and stop suing for invalid or unverified debts. Further, the trust company – and any company that it hires – is prohibited from attempting to collect, report negative credit information, or file lawsuits on any loan the audit shows is unverified or invalid.

In the second case, CFPB alleged that individuals awaiting payment from legal settlements – including former professional football players suffering from neurological disorders, victims of the Deepwater Horizon oil-rig disaster, 9/11 first responders and others awaiting recompense from victim-compensation funds -- were offered loans by a New Jersey company (Top Notch Funding of Verona, N.J.), which lied about the cost of the loans in the long run, among other important facts. CFPB, in its court filings, claims that the firm and its principals in marketing the loans were engaging in deceptive acts and practices in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

For example, CFPB pointed out that Top Notch told consumers they could obtain loans with a low “2% Annual Percentage Rate” or “1% interest rate.” But every loan that Top Notch brokered (the organization did not make the loans, but served as a broker earning commissions on completed loan transactions) was significantly more expensive for consumers. A typical loan that Top Notch brokered carried a rate greater than 20%.


CFPB takes action against National Collegiate Student Loan Trusts, Transworld Systems for illegal student loan debt collection lawsuits

CFPB takes action against Top Notch Funding for lying in loan offers to NFL players, Deepwater Horizon Victims, and 9/11 first responders


A modification in federal mortgage rules that CFPB said is aimed at providing additional flexibility for lenders in collecting consumer ethnicity and race information was finalized and published Wednesday by the bureau. Additionally, the consumer bureau said it is seeking comment on proposed policy guidance it unveiled the same day regarding information gathered about borrowers under the Home Mortgage Disclosure Act (Regulation C), making that information public, and modifying some data to protect consumers’ privacy.

The changes to the lending rules, under the Equal Credit Opportunity Act (ECOA; Regulation B) – proposed in March – affect the questions a lender may ask a consumer when considering whether to lend money. Under the rules finalized Wednesday, CFPB said, mortgage lenders will not be required to maintain different practices depending on their loan volume or other characteristics. The agency said that change would allow more lenders to adopt application forms that include expanded requests for information regarding a consumer’s ethnicity and race, including the revised Uniform Residential Loan Application.

Under the proposed guidance policy about modifying information to protect the privacy of consumers before releasing HMDA data, the bureau said it proposes, for example, excluding certain data fields from what is shared publicly, including the property address and applicant’s credit score. CFPB said it also proposes to disclose certain information with reduced precision, for instance by disclosing an applicant’s age as a range rather than a specific number. The bureau proposes making the data available to the public beginning in 2019.

CFPB amends rules to provide flexibility and clarity to certain mortgage lenders in collecting information


A guide intended to be an easy-to-use summary of CFPB’s Arbitration Agreements Rule -- and to highlight information that may be helpful when implementing the rule – has been published by the bureau. The 40-page Small entity compliance guide: Arbitration agreements rule 1.0 looks at coverage of the rule, general requirements, prohibitions on relying on pre-dispute arbitration agreements to block class actions and submission of records.

The guide notes the obligations and restrictions on “providers” of persons providing certain consumer financial products and services covered by the rule. “Providers” are defined as a person (or an affiliate of that person, in some cases) who engages in a “covered consumer financial product or service” (as defined in the rule), unless specifically excluded from coverage, such as those already regulated by the Securities and Exchange Commission, or those regulated by a state securities commission.

Compliance with the rule, issued this summer, is required for pre-dispute arbitration agreements entered into or after March 19, 2018. However, the future of rule itself is not clear. The arbitration rule took effect Monday, but the House this summer passed a resolution under the Congressional Review Act disapproving of the final rulemaking. Under the review act, Congress can overrule new federal regulations within 60 legislative days after regulators have submitted the rule to Congress for review. The Senate, however, has yet to vote on the resolution.

Small entity compliance guide: Arbitration agreements rule 1.0


An advisory group with a membership featuring a “who’s who” of federal financial regulation over the past 30 years has urged the Treasury to rethink some of its recommendations issued in June to reform the federal financial institution regulatory scheme. In particular, the Systemic Risk Council (in a comment letter) told Treasury it is concerned that some of its report’s main recommendations would “jeopardize the resilience of the financial system, the public finances and the welfare of citizens.”

The group said its opposes an “off-ramp” that would exempt large and complex firms from other prudential regulations if they exceed a specified leverage ratio. Also, the group opposed making financial regulatory rule-making subject to formal cost-benefit analysis (CBA), as recommended in the Treasury report. Doing so, the group said, could impair the capacity of independent agencies to fulfill the mission given to them by Congress to preserve a safe and sound system.

The Treasury released its 149-page report, “A financial system that creates economic opportunities: Banks and credit unions,” in June. It was the first of an expected four reports from the agency in response to a Feb. 3 executive order by President Donald Trump calling for a comprehensive review of financial regulations.

The Systemic Risk Council describes itself as an independent, non-partisan group formed to monitor and encourage regulatory reform of U.S. and global capital markets, with a focus on systemic risk. Among the members listed by the Council are: Former Federal Reserve Board Chairman Paul Volcker (listed as a “senior adviser”), former FDIC Board Chair Sheila Bair (chair emeritus of the group), former Sen. Bill Bradley (D-N.J.), former Commodity Futures Trading Commission Chair Brooksley Born, former Treasury Secretary Paul O’Neill, and former Federal Reserve Board Vice Chair Alice Rivlin.

Systemic Risk Council (SRC) comment letter to Treasury

Treasury Report, June 12: A financial system that creates economic opportunities


Action last week in the House removing the NCUA budget from the congressional appropriations process better protects credit union money, keeps the federal agency unencumbered and offers a model for the continued independence of the credit union regulatory system around the nation, NASCUS President and CEO Lucy Ito said.

“NASCUS, as a professional regulators association advocating on behalf of a strong state system, values the autonomy of the credit union regulatory system,” Ito said. “The result, which was fostered last week by the national credit union system – including CUNA, the state leagues and credit unions – indicates that the state and national systems are in sync in supporting an independent supervision regime.”

Last week, the House agreed to an amendment (offered by Reps. Reps. Mark Amodei (R-Nev.) and Pete Aguilar (D-Calif.)), supported NASCUS, removing a provision from a spending bill that would have inserted the NCUA budget into the congressional oversight process. The Amodei-Aguilar was adopted only after a furious campaign organized by national and state trade associations, and waged by credit unions nationwide, to convince their congressional representatives to do so. Their argument was that placing the budget under congressional appropriations would amount to a hidden tax on credit unions and their members.


Cybersecurity professionals and system integrators, among others, are invited to attend the Oct. 5 Technology Demonstration Day for the finance sector in New York City.

The one-day program, sponsored by the Transition to Practice (TTP) program of the U.S. Homeland Security Department, will feature the TTP program’s fifth cohort of eight innovative cybersecurity technologies. According to HSD, the technologies featured at the event were selected from Department of Energy and Department of Defense affiliated Laboratories, FFRDCs and academia and “have the potential to strengthen an organization’s cybersecurity posture.” During the technology demonstration event, participants will hear from research teams that have developed the technologies and have the opportunity to join discussions with technology investors from private industry on piloting or licensing the technologies and driving further development of cybersecurity solutions.

The event will be held at the New York Academy of Sciences, 7 World Trade Center, 250 Greenwich Street, 40th floor New York, N.Y., from 9 a.m. – 4:30 p.m., with registration opening at 8 a.m. Registration is complimentary; however, space is limited.

Registration: Technology Demonstration Day for the finance sector

BRIEFLY: New FCU chartered; Basel Committee updates FAQs

A new federal credit union has been chartered in Colorado to serve members of the American Solar Energy Society, the NCUA announced this week. Clean Energy Federal Credit Union of Boulder will serve 4,300 members of the society, the credit union regulator said, and will offer regular savings and certificates of deposit (known as share accounts and share certificates at credit unions). It will also provide consumer financing for purchase and installation of solar panels, high-efficiency home energy improvements and purchase of electric and hybrid vehicles, NCUA stated in a release … Updates to frequently asked questions (FAQs) on the definition of capital were published this week by the Basel Committee (the international group that recommends capital benchmarks for financial institutions). The FAQs are supplemented by two flowcharts added to the annex to the document, designed to aid understanding of the application of the Basel III transitional arrangements to capital instruments issued by banks. According to the Bank for International Settlements, the FAQs correspond to the definition of capital sections of the Basel III standards and 2011 statement on the loss absorbency of capital “at the point of non-viability.”

Basel III definition of capital - Frequently asked questions

NCUA Charters Clean Energy Federal Credit Union

Information Contact:
Patrick Keefe,