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June 15, 2018

Final rules on voluntary mergers, FOM top NCUA agenda next week

Final rules on voluntary mergers and chartering and field of membership are on the agenda for the NCUA Board meeting Thursday. The board will also hear briefings on the modernization of its systems and on its recent changes to business lending rules.

On voluntary mergers, in June of last year NCUA proposed changes to its rules for federally insured credit unions, including (among other things) that the rules be revised to:

  • revise and clarify the contents and format of the member notice;
  • require merging FCUs to disclose all merger-related financial arrangements for covered persons (currently only material increases need be disclosed);
  • Expand the pool of covered individuals required to disclose compensation;
  • increase the minimum member notice period;
  • provide for member-to-member communications regarding the proposed merger;
  • make conforming amendments to regulations governing termination of federal share insurance when the continuing credit union is not a federal credit union (FCU).

NASCUS, in its comment letter filed last August questioned whether the proposed rule was properly tailored, particularly with respect to federally insured, state-chartered credit unions (FISCUs). “With respect to a FISCU, NCUA’s sole concern should be mitigating risk to the National Credit Union Share Insurance Fund (NCUSIF),” NASCUS wrote. “In the absence of any clear and compelling nexus between the activity being regulated and risk to the NCUSIF, NCUA should defer to state law. Nowhere in the preamble to the proposed rule does NCUA articulate a NCUSIF risk that would compel extension of this proposal to FISCUs.”

NASCUS also outlined a number of other proposed changes would prove more problematic than productive. Those included: an expansion of the scope of compensation that must be disclosed; and creating a member-to-member communication mechanism to empower dissenting members wishing to persuade their fellow members to oppose the proposed merger.

On chartering and field of membership, the agency in October 2016 proposed amending its chartering and field of membership rules to give FCU applicants for community charter approval the opportunity to submit a narrative to establish common interests or interaction among residents of the area it proposed to serve, thus qualifying the area as a well-defined local community. 

The agency also proposed to increase up to 10 million the population limit on a community consisting of a statistical area or portion thereof. In addition, NCUA proposed permitting a credit union to designate a portion of the area as its community without regard to division boundaries, when such area is subdivided into metropolitan divisions.

In other action, the board will hear a update (briefing) on the status of its efforts to modernize its systems (referred to as the “Enterprise Solution Modernization Program Update”), and a briefing on its final rule changing its member business lending regulations to conform with the “Economic Growth, Regulatory Relief and Consumer Protection Act” (S.2155, signed into law by President Donald Trump on May 24). On June 5, changes conforming the agency’s rules with provisions affecting credit union business lending went into effect; the board approved the rules by notation vote May 30.

NASCUS comment letter: Voluntary Mergers of Federally Insured Credit Unions

NASCUS Summary: Proposed rule, FCU Field of Membership


The definition of a federally insured credit union member business loan under NCUA rules now excludes all extensions of credit fully secured by a lien on a 1-4 family dwelling, regards of whether it’s status as the primary residence of the borrower, a new NASCUS summary points out.

The summary outlines the actions NCUA took in implementing the new Economic Growth, Regulatory Relief and Consumer Protection Act (S.2155, the “Economic Growth Act”), enacted on President Trump’s signature May 24. The following week (on May 30), the NCUA Board voted by notation to change its rules to bring them into conformity with the new law; the new rule went into effect June 5. The action by the NCUA Board was one of the first to be taken by a federal financial institution regulator in response to the new law.

“Prior to the passage of the Economic Growth Act, the FCUA defined an MBL as any loan, line of credit, or letter of credit, the proceeds of which will be used for a commercial, corporate or other business investment property or venture, or agricultural purpose,” the NASCUS summary notes. The Economic Growth Act, the summary notes, removed the “primary residence of the member” qualifier, meaning the loans are no longer considered MBLs. Thus, the summary notes, “they do not count toward the aggregate MBL cap imposed on each federally insured credit union by the FCUA.”

The summary also notes that the final rule makes corresponding changes to Part 702, NCUA’s Prompt Corrective Action rule, by amending outdated citations to the MBL rule.

NASCUS final rule summary: changes to NCUA rules, commercial lending


One week remains in the appointment of the acting director of the BCFP, unless President Trump nominates someone between now and next Friday (June 22), and names for that nomination were emerging this week. Additionally, Acting Director Mick Mulvaney told reporters this week that he expects a nomination by the middle of next week.

President Trump appointed Mulvaney to his current role on Nov. 24, under the Federal Vacancies Reform Act of 1998 (FVRA). Under that statute, an acting officer appointed by the president under that provision serves “subject to the time limitations” spelled out in the law. Those include that an appointee may serve “for no longer than 210 days beginning on the date the vacancy occurs.” The 210-day period ends next Friday.

However, if the president nominates a permanent director for the agency next week, the law states that the appointee may serve “from the date of such nomination for the period that the nomination is pending in the Senate.” In other words, if the president nominates someone by next week, Mulvaney may continue serving in his current role as long as the nomination is pending.

Additionally, the statute outlines that if the president’s first nomination is rejected, withdrawn, or returned by the Senate, the acting officer can continue to serve for no more than 210 days after the date of the rejection, withdrawal or return.


Legal haggling over the BCFP’s regulation of payday loans took a new turn in federal court in Texas this week when a district court judge found the regulation's effective date of August 2019 remains in force. Federal Judge Lee Yeakal of the U.S. District Court for the Western District of Texas (in Austin) denied a request by bureau Acting Director Mick Mulvaney and two payday lender advocacy groups to delay the effective date.

The court received motions filed by four consumer groups challenging efforts by the payday lenders’ trade groups (with BCFP support) to delay the compliance date of the rule. The filings by the four consumer groups – Americans for Financial Reform Education Fund, Center for Responsible Lending, National Consumer Law Center, Public Citizen, Inc. – outlined their opposition to the agency’s plan to hold off on enforcing its rule, which was finalized in November 2017.

The consumer groups were responding to a joint May 31 motion by the bureau and the two payday lenders’ groups -- Community Financial Services Association of America, Ltd., and Consumer Service Alliance of Texas -- that had sued the bureau to prevent enforcement of the rule. The two groups describe themselves in court filings as trade associations with members who are engaged “in the business of offering or facilitating payday loans and similar consumer financial products.”


Beginning today, the BCFP is conducting an assessment via an email survey of its Ability to Repay/Qualified Mortgage (ATR/QM) rule as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) – and you may be able to participate. The bureau is issuing a voluntary survey to a sampling of HMDA mortgage lending respondents. Although the bureau plans to contact approximately 700 institutions via email to participate in the survey, it is also inviting feedback from HMDA mortgage lending respondents that have not been contacted directly. Those institutions interested in participating should send an email to: NASCUS is also working with the bureau to disseminate survey information to state supervisory agencies.


Bipartisan legislation that would give states authority over regulation of cannabis without federal interference earned the stated support of the president last week – although there may still be hurdles ahead for the bill. President Trump, on his way late last week to visits with foreign leaders, told reporters that he would “probably support” the bipartisan Strengthening the Tenth Amendment Through Entrusting States Act (STATES Act). The bill was introduced last week by Sens. Cory Gardner (R-Colo.) and Elizabeth Warren (D-Mass.). A House version has been brought forward by Reps. David Joyce (R-Ohio) and Earl Blumenauer (D-Ore.).

The legislation would amend the federal Controlled Substances Act (CSA) to provide for a new rule regarding the application of the law to marijuana. Specifically, the legislation states that the CSA “shall not apply to any person acting in compliance with State law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.”

The president’s support for the proposals may put him at odds with Attorney General Jeff Sessions, who has indicated he does not support legalization of marijuana. Under his watch, the Department of Justice rescinded the Obama-era policy that permitted legalized cannabis to expand in states across the country. However, The Wall Street Journal reported this week, DOJ’s own prosecutors have yet to bring federal charges against pot businesses that are abiding by state law. 

Recreational marijuana is legal in nine states and medical marijuana is legal in 29 states. Currently in states that have legalized some form of marijuana, legitimate cannabis-related businesses are blocked from accessing the basic banking services. If the STATES Act is enacted, these businesses would be permitted to obtain services at credit unions and other financial institutions. 

Strengthening the Tenth Amendment Through Entrusting States Act


The connection between corrupt senior foreign political figures and their enabling of human rights abuses, how those figures seek to use the U.S. financial system, and financial institutions’ obligations to report related suspicious activities are the topics of an advisory issued this week by the Treasury’s financial crimes unit.

The Financial Crimes Enforcement Network (FinCEN) advisory reminds financial institutions of their Bank Secrecy Act (BSA) obligations regarding the filing of suspicious activity reports (SARs) related to facilitators of corrupt officials. It notes that U.S. financial institutions may expose themselves to risks by holding the accounts of these corrupt individuals directly or indirectly through correspondent banking relationships.

Descriptions of the typologies used by bad actors to access the U.S. financial system, and obscure and further illicit activity are also outlined in the FinCEN advisory. It provides “red flags” to look out for, and it highlights the activities of those who have been subject to sanctions for providing facilitation services to human rights abusers and others engaged in corruption.

The advisory was sent the same day Treasury’s Office of Foreign Assets Control (OFAC) issued new sanctions under a 2017 executive order regarding the blocking of property of those involved in “serious human rights abuse or corruption.” The order builds on the Global Magnitsky Human Rights Accountability Act of 2016.

FinCEN advisory FIN 2018-A003


A new framework for risk-based capital requirements and a revised minimum leverage capital requirement for federal housing agencies Fannie Mae and Freddie Mac were proposed by the Federal Housing Finance Agency (FHFA) this week; the proposal is considered by many as essential to housing finance reform.

The two Government Sponsored Enterprises (GSEs) had their regulatory capital requirements suspended in 2008 after the FHFA placed the organizations into conservatorships.  The capital requirements in this proposal would also be suspended while the GSEs remain in conservatorship. 

Despite the suspension of the rule’s requirements, the FHFA explained it is appropriate to communicate the agency’s views about capital adequacy for the GSEs in the future. The agency is also now seeking public comment on its proposal to allow market participants and all stakeholders to comment on the proposed capital requirements. 

FHFA is proposing a regulatory capital framework for the GSEs that includes two components:

  • A new framework for risk-based capital requirements; and
  • Two alternative approaches to setting minimum capital requirements for the Enterprises. 

The first alternative, the “2.5% alternative,” would require the companies to hold equal to 2.5% of total assets. The second alternative, the “bifurcated alternative,” would require the GSEs to hold capital equal to 1.5% of trust assets and 4% of non-trust assets.

(FHFA) released a proposed rule on capital requirements for the Government Sponsored Enterprises (GSEs)


Following up on the release last week of first quarter results for federally insured credit unions, NCUA released this week its further analysis highlighting individual state successes. The agency’s state-level data showed:

  • Oregon had the highest median loan growth rate at 11%.
  • Vermont had the highest median asset growth rate at 7.2% and the highest median growth in shares deposits at 5.9%.
  • Nevada (89 basis points) had the highest median annualized return on average assets.

NCUA State Credit Union Data Show Positive Trends Continue in Q1 2018

BRIEFLY: Panel OKs two for Fed board consideration; RBC two-year delay OK’d by committee

Nominations of Richard Clarida and state regulator Michelle (“Miki”) Bowman to the Federal Reserve Board won votes of support by the Senate Banking Committee, which sent the names onto the full Senate for final votes on confirmation. Clarida has been nominated to a four-year term as the Fed’s vice chairman and as a Fed Board governor representing Region 1 (Boston, Mass.). Bowman has been nominated as the Fed Board’s community bank representative for Region 8 (St. Louis, Mo.). She is currently the commissioner of the Kansas State Bank Commission. No date has been set yet for a vote by the Senate for confirmation … The House Appropriations Committee this week approved a spending plan that includes a provision delaying the effective date of NCUA’s risk-based capital rule, from Jan. 1, 2019 to Jan. 1, 2021. The provision is included in the Financial Services and General Government (FSGG) Appropriations Act for Fiscal Year 2019; it still must be approved by the full House before moving on to the Senate.

Information Contact:
Patrick Keefe,