March 1, 2019 NASCUS Report

NCUA Board nominees headed for full Senate consideration

Nominees for two seats on the NCUA Board were approved this week on a voice vote by the Senate Banking Committee; the nominations now head to the full Senate for consideration, perhaps within the next two weeks.

If the two nominees for the seats – Rodney E. Hood (a Republican) and Todd M. Harper (a Democrat) – are ultimately approved by the full Senate and seated, the membership of the three-member board will be complete for the first time since 2016. Hood is nominated to take the place of Democrat Rick Metsger, whose term ended in August 2017 (he has been serving as a holdover since then). Harper would take the seat formerly held by former Chairman Debbie Matz (a Democrat), who left the board in 2016. If confirmed, Hood’s term would run until August 2023; Harper’s term would run until April 2021. The term of board Chairman J. Mark McWatters (a Republican) expires in August of this year. However, if he chooses, McWatters may continue to serve on the board until a successor is approved by the Senate.

The Banking Committee, in its executive session Tuesday morning, also approved for full Senate consideration: Mark Anthony Calabria to be director of the Federal Housing Finance Agency (on a party-line vote); Bimal Patel to be assistant Treasury secretary for financial institutions (on voice vote); and; Dino Falaschetti to be director of Treasury’s Office of Financial Research (on voice vote).

CFPB UNDER HOUSE PANEL SPOTLIGHT NEXT WEEK

The CFPB will be the focus of an oversight hearing next week (March 7) by the House Financial Services Committee, the first such hearing for the agency since Democrats took power in the House. Judging by the headline on the press release issued by committee Chairman Maxine Waters (D-Calif.) — “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau” — the hearing will likely be somewhat pointed. No witness list has yet been released for the hearing.

The bureau is required under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to issue a semiannual report of its activities and condition. New Director Kathleen (“Kathy”) Kraninger issued the first semiannual report in her five-year term Feb. 12. However, the report covered a period before Kraninger became chairman (in early December), from April 1 to Sept. 30. In the opening message of the report, Kraninger acknowledged that – but also said the report would “provide a backdrop and a launching pad for a fresh start at this agency.”

LINK:
Chairwoman Waters Announces March Hearings

CU, OTHER BUREAU ADVISORY GROUPS TO MEET NEXT MONTH

The CFPB’s Credit Union Advisory Council (CUAC) is scheduled by the bureau to meet March 14 in Washington, at the same time that the bureau’s advisory groups for consumers and community banks get together. CUAC, the Consumer Advisory Board (CAB) and the Community Bank Advisory Council (CBAC) will each meet concurrently that day from 9:30 a.m. to 5:15 p.m. at bureau headquarters (1700 G Street, NW, Washington, D.C.). The three groups will each consider “policy issues related to financial technology and other trends and themes in consumer finance,” according to the notice published by the bureau – with (more specifically) the CUAC and CBAC in the morning session discussing the Home Mortgage Disclosure Act (HMDA) and consumer reporting trends, and the CAB in its morning meeting discussing digital identity and faster payments. The three groups meet jointly in the afternoon; no agenda items for that session have been released.

LINKS:
Consumer Advisory Board meeting notice

Community Bank Advisory Council meeting notice

Credit Union Advisory Council meeting notice

ELDER ABUSE SPAWNING ‘THOUSANDS’ OF SARS, ANALYSIS FINDS

Older customers who are increasingly becoming victims of exploitation at banks and other such firms are the subjects of “hundreds of thousands” of suspicious activity reports (SARs) being filed by the financial institutions, CFPB said in a first-ever report published this week.

In its Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends, CFPB wrote that it analyzed 180,000 elder financial exploitation SARs filed with the Treasury’s Financial Crimes Enforcement Network (FinCEN) from 2013 to 2017, involving more than $6 billion. The reports are filed by credit unions, banks and others — including casinos — the bureau said.

According to CFPB, the analysis showed:

• SAR filings on elder financial exploitation grew four-fold from 2013 to 2017, with 63,500 SARs reporting elder financial abuse filed in 2017. “Yet these SARs likely represent only a tiny fraction of the actual 3.5 million incidents of elder financial exploitation estimated to have happened that year,” the bureau stated
• Elder financial exploitation happens at other places than financial institutions (such as banks or credit unions): Money services businesses (MSBs) — used by some people to wire money — filed 58% of the SARs in 2017, the CFPB said.
• Older adults ages 70 to 79 lost on average $43,300. And when the older adult knew the suspect, the average loss was even larger–about $50,000, the bureau said.
• Fewer than one-third of elder financial exploitation SARs specify that the financial institution reported the activity to adult protective services, law enforcement, or other authorities. “If the financial institution is not reporting to these authorities, this is a missed opportunity to strengthen prevention and response,” CFPB said.

LINK:
Financial institutions report widespread elder financial abuse

PREPAID ISSUERS CAN BEGIN REGISTERING NOW UNDER NEW RULE

Prepaid account issuers can begin registering now on CFPB’s “streamlined” submission system as issuers prepare to submit their prepaid agreements to the agency under its rule set to take effect April 1, the bureau announced this week. Under CFPB’s rule, prepaid account issuers are required to submit their prepaid account agreements, including fee information.

The first submissions, to be made via the bureau’s “Collect” system, are due May 1. After that, issuers will be required to make a submission to the bureau within 30 days whenever a new agreement is offered, a previously submitted agreement is amended, or a previously submitted agreement is no longer offered.

The bureau also this week announced the release of compliance materials for prepaid issuers, including a user guide, a quick reference guide, FAQs, and a recorded webinar.

The CFPB’s prepaid rule was adopted in 2016 and revised early last year. The 2016 final rule set requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The 2018 revisions adjusted the requirements for resolving errors on unregistered accounts, provided greater flexibility for credit cards linked to digital wallets, and extended the effective date of the rule by one year to the start of next month.

LINK:
Consumer Financial Protection Bureau Announces System for Prepaid Issuers to Submit Account Agreements

FED’S POWELL WANTS CLARITY IN CANNABIS BANKING, TOO

Count Federal Reserve Board Chairman Jerome H. (“Jay”) Powell as among those (including NASCUS) supporting clarity in providing legal state cannabis and related businesses access to financial services. During questions and answers before the Senate Banking Committee this week, Powell told Sen. Robert Menendez (D-N.J.), that “I think it would be great to have clarity” for financial services on this issue. “Financial institutions and their supervisors are in a very difficult situation here, with marijuana being illegal under federal law, and legal under a growing number of state laws,” Powell said. “It puts financial institutions in a very difficult place and puts the supervisors in a difficult place too. It would be nice to have clarity in that supervisory relationship.”

Menendez had noted, in leading up to his question, that “as the number of legitimate cannabis businesses grow across the country, the vast majority of banks and credit unions are not offering services to these enterprises for legitimate fear of legal and regulatory risk.” In addition, Menendez said, his home state is considering legitimizing recreational marijuana. “I have concerns that these new businesses, as well as the existing medical marijuana businesses in my state will continue to be shut out of the banking business for these businesses. And when these businesses operative exclusively in cash it creates serious public safety risks in our communities,” he said.

Legislation is being prepared in the House (although it has not yet been introduced) to bar federal financial institution regulators from taking actions against financial institutions serving legal cannabis-related businesses. The Secure and Fair Enforcement Banking Act of 2019 (SAFE Banking Act)  – offered by Reps. Ed Perlmutter (D-Colo.), Denny Heck (D-Wash.), Steve Stivers (R-Ohio), and Warren Davidson (R-Ohio) – is intended to “harmonize federal and state law concerning cannabis-related businesses and allow these businesses access to banking services,” according to a draft of the bill.

ITO: NEBRASKA FOM NOTICE BILL ‘BURDENSOME’

Legislation proposed in Nebraska that would require the state’s regulator to contact local banks every time a credit union seeks a field of membership change would be burdensome for state regulators, take away from their focus on safety and soundness, and push more credit unions to consider moving to a federal charter, NASCUS President and CEO Lucy Ito told a trade publication this week.

Quoted in the Credit Union Journal, Ito said the bill – supported by state banker associations, and opposed by the Nebraska Credit Union League – if enacted “would mean a huge increase in their (credit unions’) regulatory burden, which is at odds with what banks and credit unions are trying to accomplish in reducing their regulatory burden.”

The NASCUS leader also noted that FOM expansions do not constitute a safety and soundness question – the focus of state regulators. “So why would the state regulator have to notify banks,” she asked.

“Would the state banking regulator have to notify all credit unions if they want to open another branch,” she added, noting that “state agencies have very restrictive budgets, so this would take away from their needed focus on safety and soundness.”

Ito pointed out that the 12 state credit unions in Nebraska  are already subject to the state’s Financial Institutions Tax and must file tax returns. The 48 federal credit unions in the state are not subject to the tax. She told the Journal that the FOM notice bill creates a third public policy issue: “If this makes more state-chartered credit unions in Nebraska convert to a federal charter, that is not good for the state,” she said.

LINK:
CU Journal: Banks want a say in Nebraska credit unions’ expansion efforts (subscription required)

TRANSITIONS: New faces in FL, IL

Congratulations to Ronald Rubin, named Florida’s top financial regulator this week by Gov. Ron DeSantis (R). A former senior counsel and chief adviser for regulatory policy on the majority staff of the House Financial Services Committee, he served with the Securities and Exchange Commission from 1996 to 2003. He has also been a senior special counsel for the private Financial Industry Regulatory Authority (Finra). Also vying for the office of commissioner of Florida Office of Financial Regulation (FLOFR) was Linda Charity, a former director of the state’s division of financial institutions who has previously served as interim commissioner of the FLOFR.

Also recently appointed (with congratulations due): Deborah Hagan as the new Secretary of the Illinois Department of Financial and Professional Regulation, by Gov. J.B. Pritzker (D). A consumer advocate in Illinois for nearly four decades, Hagan was the former chief of the Consumer Protection Division of the Illinois Attorney General’s office, dealing with such issues as mortgage origination and servicing, student loan services, debt collection, identity theft, and other areas. Hagan’s appointment is subject to confirmation by the state senate.

BRIEFLY: CDFI loans awards available; comments due April 26 on audit proposal

Loan awards are available for low-income designated credit unions (LICUs) through the program that helps the credit unions support the communities in which they operate, NCUA announced this week. In a notice published publication in the Federal Register, the agency announced that $3.6 million will be available for loans. Typically, the agency said, the loans range in size from $250,000 to $500,000 … Comments are due April 26 on NCUA’s proposed revisions to the its supervisory committee audit rules for federally insured credit unions; the proposal is aimed at providing some simplification in credit union audit requirements.

LINKS:
Community Development Revolving Loan Fund Access for Credit Unions

Supervisory Committee Audit Rule Changes Proposed