A rule aimed at enhancing transparency of mergers between federal credit unions – but that could be applied to mergers between federally insured, state chartered credit unions — was proposed today for a 60-day comment period by the NCUA Board, among other things.

As the agency noted in its overview of the proposal, the rule would amend the “procedures and timeframes that a federal credit union (FCU) must follow for voluntary mergers with another credit union.” In particular, staff noted during the meeting, the proposal addresses concerns of the agency that “merger packets” presented to members in advance of merger decisions are not “serving members’ needs.” The proposal is also aimed, staff said, at clarifying contents and format of the member notice of the merger “so that members of merging federal credit unions have better information about the merger transaction.

Further, the proposal would require merging FCUs to disclose all merger-related compensation for certain employees and officials of the merging FCU.

NCUA Board Acting Chairman J. Mark McWatters expanded on all of those points, noting that the proposal pushes credit unions to “tell the story” about why a merger is being proposed.

Board Member Rick Metsger said that the proposal is “important to me; (credit union) management has a responsibility to tell members a merger is being proposed,” noting that “full transparency” is necessary.

Metsger also said that, during the comment period, he hoped that stakeholders would weigh in on whether federally insured, state chartered credit unions should be included under the proposal (rather than only FCUs).

“I’m prepared to entertain requests to not pre-empt state laws or rules if they provide substantially similar, or stronger, disclosures and communication opportunities for the members of federally-insured state chartered credit unions,” Metsger added.

NASCUS President and CEO Lucy Ito, following the board meeting, said that while some state supervisors may share NCUA’s concerns over transparency and member interests, states may also view this as a credit union governance issue and business decision as opposed to an insurance matter.

“Under this view, application of merger rules should properly be left to state supervisors to decide as the chartering agency of state-chartered credit unions,” she said. “This view, among others, will be reflected in our comments.”

In other action, the NCUA Board today:

• Issued a proposed rule to set up procedures for appeals directly to the NCUA board of agency regulations that now have their own embedded appeals provisions; a comment period of 60 days was set.
• Issued a proposed rule to codify the process for appealing material supervisory determinations to the NCUA Supervisory Review Committee – with the aim of being more consistent with the practices now used by federal banking agencies; the proposal was issued for a 60-day comment period.
• Heard a first quarter 2017 report of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), which showed the fund with net income of $43.8 million in the first quarter, and total assets of $1.58 billion (up from $1.53 billion at YE’16).

LINKS:
Lucy Ito statement on merger rule proposal

Proposed rule: Voluntary Mergers of Federal Credit Unions

Proposed rule: Appeals Procedures

 

Comments regarding the small business lending market, in response to the CFPB’s recent “request for information,” are due July 14, according to a new summary posted by NASCUS.

Earlier this month, the bureau announced it was seeking information about the small business lending market. Section 1071 of the 2010 Dodd-Frank Act requires financial institutions to “compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses.” According to the bureau’s public notice announcing the request, the information will assist it in the development of a business lending data collection rulemaking to implement Section 1071.

The NASCUS summary outlines five areas of focus in the bureau’s information request, with the aim  of learning more about the small business financing market, including the products offered to small businesses (such as women/minority-owned small businesses) and the institutions that offer such credit.

LINK:
NASCUS Summary: Request for Information Regarding the Small Business Lending Market

An advisory council of federally insured credit unions intended to provide NCUA with advice and guidance about issues related to credit union federal share insurance regulation and supervision is supported by NASCUS, the result of action taken by the association’s board this week.

In a policy adopted at its quarterly meeting (in concurrence with the NASCUS Credit Union Advisory Council, a group of directors elected by NASCUS-member state-chartered credit unions from around the country), the NASCUS Board stated that a council of federally insured credit unions would provide NCUA with advice and guidance on issues related to insurance regulation and supervision. “Such an advisory council should consist of equal numbers of state chartered and federally chartered credit unions and should convene at least twice annually with the NCUA board in public meetings,” the resolution states.

The NASCUS policy echoes a proposal made by Acting NCUA Board Chairman J. Mark McWatters earlier this year. McWatters, in outlining 15 areas for reducing the regulatory and supervisory burden on credit unions, called for a Credit Union Advisory Council at the agency in order to hear – and learn – directly from the credit union community “as we work collaboratively to identify needless regulatory burden and create cost-effective solutions.”

In a letter to McWatters in February, NASCUS President and CEO Lucy Ito urged the acting chairman to consider an advisory council. She wrote that establishment of a “Credit Union Advisory Council” at the agency would follow what 22 out of 45 states have already done, and which, she noted, generate “common sense solutions that simultaneously assure appropriate safety measures and foster credit union growth.”

In its policy statement this week, NASCUS also noted that “properly balanced regulation and supervision considers not just the risk to be mitigated,” but should also take into account the burden of compliance and the need for business flexibility and innovation. “To help achieve that proper balance, there should robust dialogue between the regulator and the regulated,” the association’s leadership agreed.

An advisory council of federally insured credit unions intended to provide NCUA with advice and guidance about issues related to credit union federal share insurance regulation and supervision is supported by NASCUS, the result of action taken by the association’s board this week.

e regulated,” the association’s leadership agreed.

Up to 13 different areas of comment are being sought by the CFPB as the agency seeks comment about the credit card marketplace, according to a new NASCUS summary.

Comments are due June 8, the summary notes.

In March, CFPB published a “notice and request for information” regarding the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act or Act), which requires the bureau to conduct a review of the consumer credit card market, within the limits of the market’s existing resources available for reporting purposes.

Specifically, the summary points out, the CFPB is seeking information about how the credit card market is functioning, and is seeking comment on consumer experiences and the overall health of the market.

Among the 13 items the bureau seeks comment on are: terms of credit card agreements and practices of credit card issuers; effectiveness of disclosure of terms, fees, and other expenses of credit card plans, and; adequacy of protections against unfair or deceptive acts or practices or unlawful discrimination relating credit card plans.

LINK:
NASCUS Summary: CFPB Request for Information Regarding Consumer Credit Card Market

Conversions of federally chartered credit unions to state charters is continuing in 2017, with larger credit unions converting to the state charter, resuming a four-year trend going back to 2012 (but interrupted in 2016).

According to the latest charter conversion figures compiled and analyzed by NASCUS, three federally chartered credit unions, with combined assets of $1.4 billion, have made the switch to a state charter so far this year (through February). From 2012 on, the NASCUS compilation shows, 47 credit unions have switched from federal to state charters, with combined assets of $28.7 billion.

Over the same period, only 15 state credit unions (with combined assets of $2.8 billion) have made the move to a federal charter, the NASCUS analysis shows.

However, in 2016 five state charters (with assets of $530 million) moved to a federal charter, while only four federals switched to state (with assets of $251 million), the only year in the period 2012-17 that state-to-federal conversions outdistanced federal-to-state.

A six-month delay of the effective date of the CFPB’s final rule on pre-paid accounts, to April 1, 2018, is supported by the state credit union system because it will ensure credit unions and other industry participants have the time to prepare for the rule, NASCUS has written to the bureau.

In the association’s official comment letter, NASCUS pointed out that the bureau’s final rule regarding Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) has raised concerns about the lack of sufficient time to implement the changes to policies and procedures that are needed in order to comply with the current effective date of the final rule (now Oct. 1).

“NASCUS believes it is important to strike a balance between enforcing reasonable regulation while not stifling institutions’ ability to provide the products and services that are beneficial and desired by consumers,” wrote NASCUS Vice President and Legislative and Regulatory Counsel Nichole Seabron.

“State regulators are often required to balance ensuring the safety and soundness of the state banking system with the need to not quell or stifle innovation and delivery of products/services,” she added. “We believe that extending the time institutions will have to implement regulatory compliance changes in this instance strikes the right balance between ensuring proper consumer protections are in place and making certain that institutions have adequate time to respond to new regulatory requirements.”

LINK:
NASCUS Comments: CFPB Proposal to Delay the Effective Date of the Prepaid Accounts Final Rule

Any changes to “regulatory and enforcement systems” for marijuana by the federal government should be preceded by engagement with their states, four western governors have recommended to U.S. Attorney General Jeff Sessions, especially as doing so could pose safety risks to both the public and state regulators enforcing those systems.

In a letter from the governors of Alaska, Colorado, Oregon and Washington to Sessions, the governors noted that the 2013 “Cole Memorandum” from the Justice Department struck a balanced that has been “indispensable – providing the necessary framework for state regulatory programs on public safety and health protections.”

The “Cole Memo,” issued in 2013 by Deputy Attorney General James M. Cole, provided new guidance for federal prosecutors regarding marijuana enforcement. The guidance generally suggested that such state-licensed marijuana suppliers needn’t worry about federal prosecution or asset forfeiture as long as they complied with state law and did not impinge upon federal “enforcement priorities.”

However, Govs. Bill Walker (I-Alaska), John Hickenlooper (D-Colo.), Kate Brown (D-Oregon) and Jay Inslee (D-Wash.) told Sessions that it is their understanding that the attorney general and others in the administration of President Donald Trump have concerns regarding marijuana. But, they noted, altering the Cole Memo may not be the way to address those concerns.

“Overhauling the Cole Memo is sure to produce unintended and harmful consequences,” the four governors wrote. “Changes that hurt the regulated market would divert existing marijuana product into the black market and increase dangerous activity in both our states and our neighboring states.”

The governors also pointed out that without related Financial Crimes Enforcement Network (FinCEN) guidance, financial institutions will be less willing to provide services to marijuana-related businesses. “This would force industry participants to be even more cash reliant, posing safety risks both to the public and to state regulators conducting enforcement activity,” they stated.

They added that both the Cole Memo and the FinCEN guidance are critical to the success of collaboration between state and federal governments. “Twenty-eight states, representing more than 60 percent of Americans, have authorized some form of marijuana-related conduct,” they wrote. “As we face the reality of these legalizations, we stand eager to work with our federal partners to address implementation and enforcement concerns cooperatively.”

LINK:

Letter from four governors on marijuana laws

A summary of CFPB’s call for comments on the effectiveness of the bureau’s rule on remittances has been prepared and posted by NASCUS, noting six areas in which comments are being sought. Comments are due by May 23.

In its notice announcing the “assessment” of its rule (which is required by law every five years), CFPB stated that it included a request for suggestions of sources of data and to generally provide information that “would help with the assessment.”

A report on assessment of the remittance rule , the agency said, will be issued in the fall of 2018, and will (as required by law) address the rule’s effectiveness in “meeting the purposes and objectives of Title X of the Dodd-Frank Act and the specific goals of the remittance rule, using available evidence and data.”

The NASCUS summary provides a quick outline of the six-page request for comments, as well as access to information needed to submit comments.

LINK:
NASCUS Summary: Request for Information Regarding Remittance Rule Assessment Plan

NCUA intends to substantially revise the risk-based net worth rule and permit credit unions to issue supplemental capital for risk-based net worth purposes, according to comments by agency Acting Chairman Mark McWatters contained in a joint report by federal regulators sent to Congress this week.

Additionally, McWatters wrote in the “NCUA Report” section of the Joint Report to Congress: Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), published by the members of the Federal Financial Institution Examination Council (FFIEC), NCUA also plans to revise and finalize the proposed field of membership and securitization rules, and; modernize the agency’s rules with respect to the Central Liquidity Facility, stress-testing, and corporate credit union rules (among others). The changes will be made, he wrote, “without limitation.”

Additionally, McWatters stated, all of these changes will be “in strict compliance with the Federal Credit Union Act and other applicable law.” The acting chairman also noted that the agency will “work with Congress to update the Federal Credit Union Act (FCUA to facilitate credit union operations and growth so as to ensure the safety and soundness of the NCUSIF.”

The agency is not required under the law to participate in the EGRPRA process (as are the Federal Reserve, OCC and FDIC). However, the report notes that the current NCUA board “embraces the objectives of EGRPRA and in keeping with the spirit of the law, the Board has participated in the review process. (The NCUA also participated in the first EGRPRA review, which ended in 2006).”

NASCUS has participated in all four of the recent comment calls made under EGRPRA from 2014-15.

LINKS:
Joint Report to Congress: Economic Growth and Regulatory Paperwork Reduction Act

Archives of NASCUS letters on EGRPRA, Rounds 1-4

An NCUA board with five seats – one of which is designated for a person with state credit union regulatory experience – contained in financial regulation reform legislation in the House, and which is being readied for introduction, continues to have the support of the state credit union system, NASCUS has written.

In a letter to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), NASCUS President and CEO Lucy Ito reiterated the association’s support for provisions in last year’s Financial CHOICE Act that would increase the number of NCUA Board members from its current three members to five.

However, Ito noted that a recent memo from the chairman to committee leaders, outlining a revised CHOICE Act for this year, recommends that the NCUA Board consist of three members instead of five.

“In our July 2016 correspondence to your office, we noted that increasing the number of NCUA Board members has been a long-championed goal of NASCUS,” Ito wrote. “From our perspective, such a fundamental change in the NCUA’s leadership structure would enhance the Board’s deliberative process, expand its collective expertise and improve the efficient administration of NCUA’s business.”

However, Ito wrote, whether the agency’s board has five or three members, the association believes that having an individual on the board with state credit union regulatory experience ensures a diversity of voices and supervisory experience. That diversity and experience, she added, “will encourage broader, more robust discussion and will bolster NCUA’s accountability to all of its stakeholders including the state credit union system.”

The Financial CHOICE Act (which stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs”) was first introduced last summer (in the previous Congress). A new version of the bill for the current Congress is expected to be introduced soon.

LINK:

02-27-17 Hensarling CHOICE Act

Although it is titled a “summary,” NASCUS has developed a comprehensive look at the “alternative capital” proposal issued by the NCUA Board at its January meeting; this rule is out for comment to May 9 (a 90-day period).

The 3,400-word NASCUS summary looks at the 50-page proposal through the lens a dozen key issues outlined in the proposal, including: Current use of alternative capital, secondary capital, supplemental capital, taxation, mutual ownership, applicability of securities law, prudential standards for issuing and counting alternative capital for PCA and  counting alternative capital for regulatory net worth.

Additionally, the summary notes that the proposal includes six questions from the 2015 rulemaking regarding risk-based capital. “Noting that it received few responses to the questions, NCUA has again asked those six questions,” the summary points out.

The summary also points out that limitations on supplemental imposed on federal credit unions do not apply to state credit unions. “State credit unions may issue whatever forms of supplemental capital might be authorized under state law so long as those offerings are not explicitly prohibited by NCUA through share insurance regulation,” the summary states. “Current rules limit FISCU borrowing to 50% of paid-in and unimpaired capital with the ability to seek a waiver up to any higher limit imposed by the state.”

NASCUS has urged participants throughout the state system to weigh in on the proposal. “There is much to be considered in the 50-page proposal, particularly the challenges it outlines,” NASCUS President and CEO Lucy Ito said last month when the proposal was issued.” The state system, however, believes that these challenges can be overcome — and that credit unions will ultimately have access to the tools they need to maintain safe capital levels during good and bad economic times.”

LINK:
NASCUS Summary: Advance Notice of Proposed Rulemaking (ANPR), Alternative Capital