CU Volunteer Archives - Page 22 of 29

Summary: Proposed Rule re: Qualified Mortgage Definition Under the Truth in Lending Act (Regulation Z): Extension of Sunset Date

12 CFR Part 1026

The Consumer Financial Protection Bureau

Prepared by the Legislative and Regulatory Affairs Department

July 2020

The Bureau issued a proposal intended to amend Regulation Z to coordinate the sunset date of the Temporary GSE qualified mortgage (QM) loan definition with the effective date of final amendments to the General QM loan definition. This is being done to ensure that responsible, affordable mortgage credit remains available to consumers who may be affected if the Temporary GSE QM loan definition expires before the amendments to the General QM loan definition take effect. The proposal is designed to address the Bureau’s concern that a significant number of Temporary GSE QM loans would not qualify as General QM loan under the current regulations after the Temporary GSE QM loan definition expires.

In addition, the Bureau is issuing a separate proposal to remove the General QM loan definition’s DTI limit and replace it with a limit based on the loan’s pricing. The Bureau expects the proposed amendments to the General QM loan definition would allow some portion of loans that currently could receive QM status under the Temporary GSE QM loan definition to receive QM status under the General QM loan definition if they are made after the Temporary GSE QM loan definition expires.

Comments must be received no later than August 10, 2020. The proposed rule can be found here.

Summary

The Ability to Repay/Qualified Mortgage Rule (ATR/QM) requires a creditor to make a reasonable, good faith determination of a consumer’s ability to repay a residential mortgage loan according to its terms. Loans that meet the rule’s requirements for qualified mortgages (QMs) obtain certain protections from liability. There are several categories of QMs including the two described below:

General Qualified Mortgages:
General QM loans must comply with the ATR/QM’s prohibitions on certain loan features, its points and fees limits and its underwriting requirements. For these loans, the ratio of the consumer’s total monthly debt to total monthly income (DTI ratio) must not exceed 43 percent. Creditors must calculate, consider, and verify debt and income for purposes of determining the consumer’s DTI ratio using the standards contained in Appendix Q of Regulation Z.
Appendix Q contains standards for calculating and verifying debt and income for purposes of determining whether a mortgage satisfies the 43 percent DTI limit for General QM loans. Specifically, Appendix Q addresses how to determine a consumer’s employment-related income; non-employment related income; and liabilities including recurring and contingent liabilities and projected obligations.

Temporary Qualified Mortgages:
Temporary QMs are mortgages that (i) comply with the same loan-feature prohibitions and points-and-fees limits as General QMs and (ii) are eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac while under the conservatorship of the FHFA. This proposal refers to these loans as “Temporary GSE QM loans,” and the provision that created this loan category is commonly known as the GSE Patch.
Unlike General QMs, the ATR/QM rule does not prescribe a DTI limit for Temporary GSE QMs. As such, a loan can qualify as a Temporary GSE QM loan even if the consumer’s DTI ratio exceeds 43 percent, so long as the loan is eligible to be purchased or guaranteed by either of the GSEs. In addition, the rule does not require creditors to use Appendix Q to determine the consumer’s income, debt, or DTI ratio. The Temporary GSE QM loan definition expires with respect to each GSE when that GSE exits conservatorship or on January 10, 2021, whichever comes first. The GSEs are currently in conservatorship.

Under this proposal, the Bureau proposes to amend Regulation Z to coordinate dates such that the sunset date of the Temporary GSE QM loan definition will be the same as the effective date of final amendments to the General QM loan definition. The Bureau does not intend for the Temporary GSE QM loan definition expiration date or the General QM loan definition final amendment effective date to be prior to April 1, 2021.

Comments Requested:

The Bureau seeks comment on the proposal generally, as well as comments to the specific queries below:

The Bureau seeks comment on whether a different sunset date for the Temporary GSE QM loan definition would better ensure the availability of responsible, affordable mortgage credit to consumers and better address the risk of disruption as the market transitions away from the Temporary GSE QM loan definition.
The Bureau seeks comment on its analysis, and additional information or data which could inform quantitative estimates of the number of borrowers whose documentation cannot satisfy Appendix Q, or the costs to borrowers or covered persons of complying with Appendix Q documentation requirements.
The Bureau seeks comment or additional information which could inform quantitative estimates of the availability, underwriting and pricing of non-QM alternatives to loans made under the Temporary GSE QM loan definition.

MERIT

NCUA AIRES Updates

NCUA Call for Training

NCUA Partner Gateway

NCUA Regional Operating Agreements

NCUA Training Updates

National Supervision Policy Manual

Summary: Procedural Rule re: Advisory Opinions Pilot

The Consumer Financial Protection Bureau (CFPB)

Prepared by the Legislative and Regulatory Affairs Department

12 CFR Chapter X

July 2020

Summary:

The Consumer Financial Protection Bureau (CFPB) has established a new pilot advisory opinion program. The Bureau is establishing the Pilot Advisory Opinion (AO) Program in response to feedback received from external stakeholders encouraging the Bureau to provide written guidance in cases of regulatory uncertainty. The program is intended to provide guidance with interpretive content that is: (i) focused on regulatory uncertainty identified by requestors; (ii) reliable for the requestor and all similarly situated parties as the Bureau’s authoritative interpretation of the law; and (iii) publicly released for the awareness of all affected persons.

The procedural rule became effective as of June 22, 2020 and can be accessed here.

Parameters of the Advisory Opinion Program

The primary purpose of the program is to provide a mechanism through which the Bureau may more effectively carry out its statutory purposes and objectives by better enabling compliance in the face of regulatory uncertainty. Under the program, parties will be able to request interpretative guidance, in the form of an advisory opinion, to resolve such regulatory uncertainty.

Submission and Content of Requests

Requests may be submitted by email to [email protected] or through any other means designated by the Bureau. Requests must identify the party requesting the advisory opinion.

For the pilot program, requestors will be limited to covered persons or service providers that are subject to the Bureau’s supervisory authority. The Bureau will not accept requests from third parties, such as trade associations or law firms, on behalf of unnamed entities as part of the pilot program.
Upon notification, the Bureau would treat as confidential any information the requestor submits that would not normally make public, the Bureau intends to treat it as confidential. The Bureau encourages requestors to identify any such information to the extent they choose to include it in their submissions.

Characteristics of Advisory Opinions

Advisory opinions under the pilot program will be interpretive rules under the APA that respond to specific request for clarity on an interpretive question. Advisory opinions will be published in the Federal Register and on the Bureau’s website. Each advisory opinion will be applicable to the requestor and to similarly situated parties. Advisory opinions will denote when an applicable statutory safe harbor is available.

Factors in Bureau Selection of Advisory Opinion Topics

The Bureau intends to consider the following factors as part of its consideration of whether to address topics through advisory opinions. Initial factors weighing for the appropriateness of an advisory opinion include:

The interpretative issue has been noted during prior Bureau examinations as one that might benefit from additional regulatory clarity;
The issue is one of substantive importance or impact or one whose clarification would provide significant benefit; and/or
The issue concerns an ambiguity that the Bureau has not previously addressed through an interpretative rule or other authoritative source.

Factors weighing strongly for a presumption that an advisory opinion is not an appropriate tool include:

The interpretive issue is the subject of an ongoing Bureau investigation or enforcement action;
The interpretive issue is the subject of an ongoing or planned rulemaking;
The issue is better suited for the notice-and-comment process;
The issue could be addressed effectively through a Compliance Aid; or that there is clear Bureau or court precedent that is already available to the public on the issue.

The Bureau intends to further evaluate potential topics for advisory opinions based on additional factors, including:

Alignment with the Bureau’s statutory objectives;
Size of the benefit offered to consumers by resolution of the interpretive issue;
Known impact on the actions of other regulators; and
Impact on available Bureau resources.

The pilot program will primarily focus on the following statutory objectives of the Bureau:

Consumers are provided with timely and understandable information to make responsible decisions about financial transactions;
Outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;
Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition;
Markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.

The pilot advisory opinion program will focus primarily on clarifying ambiguities in the Bureau’s regulations, although advisory opinions may clarify statutory ambiguities. The Bureau will not issue advisory opinions on issues that require notice and comment rulemaking under the APA or that are better addressed through the process.

NCUA Request for Information (RFI): Strategies for Future Examination & Supervision Utilizing Digital Technology

Prepared by NASCUS Legislative & Regulatory Affairs Department
July 2020

Summary

NCUA has published a Request for information (RFI) to gather stakeholder input as the agency considers alternative procedures to modernize its examination program to improve the program’s efficiency and effectiveness. NCUA seeks to leverage data and technology to transition to a predominately offsite examination and supervision model.

NCUA hopes to:

Reduce burden on credit unions and increase agency efficiency by reducing onsite examination time
Improve offsite supervision capabilities
Provide more consistency and standardization for the examination and supervision process
Improve communication between examiners, credit unions, and state supervisory authorities
Explore and evaluate technology utilization and appetite for adoption.

NCUA will use stakeholder RFI response to:

Refine a strategy for leveraging technology in the future examination and supervision process
Determine how much onsite examination activity would still be required with an examination primarily done offsite
Develop an implementation strategy that reduces burden while maintaining supervisory effectiveness

The RFI may be read here. Comments are due to NCUA August 31, 2020.

Summary

During the traditional onsite examination, conducted generally every 18 months, examiners gather information, conduct analysis, review documents and controls, hold meetings, develop recommendations, and deliver a final report to a credit union’s board of directors. In response to examiner requests, credit unions provide data from multiple sources and in multiple formats. Before 1995, the NCUA collected data from credit unions in written format. In 1995, the agency initiated its first electronic data collection program when it instituted the AIRES Examination Program and encouraged federally insured credit unions to provide member data to examiners electronically:

In October 2016, NCUA issued its Exam Flexibility Initiative report. One of the 10 recommendations made in the report was for NCUA to evaluate alternative approaches to its current examination program by seeking ways to reduce onsite presence. As a result, NCUA piloted the Flexible Examination Program (FLEX) in 2017 to assess examiners’ ability to work remotely on elements of examinations of well-run credit unions that have appropriate technology and platforms to securely provide electronic data.

During the pilot, NCUA states that examiners were, on average, able to reduce their time onsite by 30%. NCUA also learned it needed a secure file transfer portal to support the transmission of data remotely and securely. In July 2018, NCUA deployed a secure file transfer portal, however most of NCUA’s examination work is still conducted onsite (pre-COVID 19).

NCUA developed a secure file transfer portal in July 2018. However, most of the review of credit union information and data is still conducted onsite. In 2018, NCUA established the Virtual Examination Program to explore ways for NCUA to move to a more virtual-based exam program within the next 5-10 years.

NCUA’s goal is to adopt an exam model in which examiners would review a credit union’s operational and financial condition remotely. NCUA is also looking for “innovative methods to augment the agency’s evaluation of a credit union’s financial and operational condition.”

As NCUA considers how to modernize its examination program, its set the following principles:

Evaluate all material risk exposures and compliance matters fully
Leverage new data and analytical techniques to achieve desired supervisory outcomes efficiently and effectively
Optimize the benefits of utilizing technology for examinations without increasing the risk to the safety and soundness of the credit union system
Minimize the burden on supervised institutions

In the RFI, NCUA seeks feedback on the following questions:

What capabilities can federally insured credit unions adopt to facilitate the NCUA’s transition toward more offsite exam work?

What capabilities do you recommend the NCUA adopt to be able to conduct more examination work offsite?

How would such offsite capabilities increase the efficiency and effectiveness of the exam and supervision process from the credit union perspective?

Do you think the NCUA can do significantly more offsite work without compromising its safety and soundness responsibilities?

What credit union data can be provided to examiners to facilitate more

offsite supervision and reduce time onsite during the examination?

(a-b)

(a) What credit union data is currently provided to other parties that NCUA could potentially leverage to reduce the burden on credit unions?

(b) To ease the administrative burden, should the NCUA ask third party service providers for data on credit unions directly?

Are credit unions moving from a physical presence in member services to more reliance on digital or mobile banking platforms? How should the examination program evolve to accommodate these changes?

What other methodologies or approaches should NCUA include in this exam study?

Would credit unions benefit from more clarity and consistency on the timing and types of documents and data examiners need to conduct examinations?

(a-b)

(a) Would it be easier or less burdensome for credit unions to provide documents and data to the NCUA on a more scheduled, flow basis throughout the year so the time spent onsite would be more efficient and the majority of the examination/supervision could primarily be conducted offsite?

(b) If this process could lead to more frequent/ offsite contacts using technology and reduce the time and frequency of full- scope onsite examinations, do you think this would be an improvement and/or less burdensome than the current examination process or cause more disruption?

What do you see as the most significant challenges facing the NCUA’s move to an offsite examination/ supervision model that utilizes technology?

(a-b)

(a) What difficulties do you foresee with moving to a future examination model for federal and state charted credit unions?

(b) How could we better coordinate with the states in this approach?

What concerns do you have, if any, about a diminished NCUA onsite presence, and can these be mitigated?

What impact, positive or negative, do you anticipate this future examination program strategy will have on your credit union and its operation?

Will moving offsite create any noticeable change in credit unions’ ability to provide services to members, particularly during major disruptions, like pandemics?

Are there resiliency tests that can be performed by examiners offsite that could not be performed when examiners are onsite? If so, please detail them.

If rebuilding the examination process from scratch, how might you redesign what is currently done today in order to reduce the burden on credit unions and/or minimize time that examiners need to be onsite at credit unions?

What new or emerging technologies could enable the NCUA to examine a credit union with less time onsite?

Are video and telecommunications capabilities sufficient to maintain good lines of communication between examiners and credit union management and officials with reduced in-person meeting opportunities? What other methods of communication or communication protocols would support quality communications between the credit union and examination staff?

What types of artificial intelligence and/or machine learning techniques are you currently using or anticipate using?

Does the NCUA have regulations/ policies that are sufficiently flexible to allow you to leverage various technological advances such as artificial intelligence, machine learning, process robotics, Fintech, Regtech, and Suptech etc.?

Do the current regulations/policies create unnecessary hurdles or burdens with respect to adopting technology? Are there ways we can update our regulations/policies to help facilitate a greater use of technology?

Do you feel comfortable using the NCUA’s secure file transfer portal as a means to transfer data electronically, including personally identifiable information and confidential credit union data, to NCUA staff?

If not, please provide details regarding your concerns and recommendations on ways the NCUA could mitigate these concerns.

(a-c)

(a) What issues are unique to smaller institutions regarding the use and implementation of innovative products, services, or processes that the NCUA should consider?

(b) Additionally, by moving to an offsite exam posture, will this negatively affect small credit unions that may not have the technology required to transmit requested documentation?

With respect to the future examination model, should the NCUA consider alternative exam approaches for smaller credit unions?

Are there better ways for the NCUA to support your financial inclusion and financial education mission by using technology? Additionally, are there better ways for the NCUA to use technology to help low-income designated credit unions and minority depository institutions to better serve their members?

Do you feel there are circumstances that would disqualify or preclude a credit union from participating in this examination model where the majority of work is completed offsite?

What documentation and measures should be collected and used to assess a credit union’s financial education efforts or programs?

Are there better ways for the NCUA to receive important contextual information regarding how you serve the low-income, underserved, and unbanked communities in your field of membership?

What baseline data protection and privacy safeguards would enable credit unions to comply with consumer protection statutes and federal/state law when sharing data for remote examinations?

How could an offsite posture affect the oversight of consumer financial protection and BSA/anti- money laundering laws and regulations at your credit union? What changes should the NCUA make to address your concerns?

All technology is coupled with internal and external security risks. As credit unions remain diligent in addressing these risks, what can the NCUA do to support credit unions’ security posture?

What cybersecurity challenges do you see with the NCUA moving to this future examination model?

Are there digital banking activities or issues that are not covered by this RFI that the NCUA should address?

(a-c)

In response to the pandemic, the NCUA moved to an offsite posture. Did you participate in an exam during this time?

(a) From your perspective, what has worked well?

(b) What exam steps could continue to be completed offsite after we return to an onsite posture?

Are there issues the NCUA should consider in light of changes in the banking system that have occurred in response to the COVID–19 pandemic?

XXX

NCUA Proposed Rule: Part 745 (741.212 FISCUs) Joint Accounts

Prepared by NASCUS Legislative & Regulatory Affairs Department
June 2020

NCUA is proposing to amend its share insurance regulations, Part 745, related to establishing co-ownership of accounts for share insurance purposes. The proposed rule would provide an alternative method for satisfying the signature card requirement by allowing credit unions to demonstrate co-ownership with information contained in the account records. The change would mirror a 2019 change in FDIC rules for join accounts in FDIC insured banks.

The rule applies to Federally Insured State Credit Unions (FISCUs) by reference in § 741.212

The proposed rule may be read here. Comments are due to NCUA July 6, 2020.

Summary

For a joint account to qualify for individual share insurance coverage for each co-owner, Part 745.8(c) currently requires:

(c) Qualifying joint accounts. A joint account is a qualifying joint account if each of the co-owners has personally signed a membership or account signature card and has a right of withdrawal on the same basis as the other co-owners. The signature requirement does not apply to share certificates, or to any accounts maintained by an agent, nominee, guardian, custodian or conservator on behalf of two or more persons if the records of the credit union properly reflect that the account is so maintained.

Under the proposal, in the event a federally insured credit union (FICU) could not produce membership cards or account signature cards, the FICU would be permitted to use of other documentation in its records to satisfy the signature card requirement. Other documentation could include evidence that each co-owner has been issued a means to access the account such as a debit card to each co-owner of the account or evidence that each co-owner of the account has conducted transactions using the share account.

-End-

Summary: CFPB Advisory Opinion Proposal

12 CFR Chapter X

The Consumer Financial Protection Bureau

Prepared by the Legislative and Regulatory Affairs Department

July 2020

The Consumer Financial Protection Bureau invites the public to comment on a new advisory opinion program and a proposed information collection associated with requests submitted by personal requesting advisory opinions.

Comments must be received by August 21, 2020. The proposed rule can be accessed here.

Summary:

According to the CFPB, the primary purpose of the proposed advisory opinion program is to provide a mechanism through which the Bureau may more effectively carry out its statutory purposes and objectives by better enabling compliance in the face of regulatory uncertainty.

The proposed advisory opinion program will primarily focus on the following statutory objectives of the Bureau:

That consumers are provided with timely and understandable information to make responsible decisions about financial transactions
That outdated, unnecessary or unduly burdensome regulations are regularly identified and addressed to reduce unwarranted regulatory burdens
That Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, to promote fair competition
That markets for consumer financial products/services operate transparently and efficiently to facilitate access and innovation.

The proposed program would focus primarily on clarifying ambiguities in the Bureau’s regulations, although advisory opinions might be issued to clarify statutory ambiguities as well. The Bureau will not issue advisory opinions on issues that require notice and comment rulemaking under the APA.

Submission and content of requests

Requests would be submitted through processes designated by the Bureau (such as email) and requestors would be required to provide certain information such as:

Requestor’s identification – whether the request is submitted on the requestor’s behalf or on behalf of a third party; if request submitted on behalf of a third party, the request must include a statement as to whether the third party is the subject of an ongoing Bureau enforcement investigation.
Request must include material facts and circumstances including a detailed specification of the legal question and supporting facts; a proposed interpretation, identification of the potential uncertainty or ambiguity that the interpretation would address and
Requests may also include additional information such as an explanation of the potential consumer benefits and risks associated with resolution of the interpretative question and the proposed interpretation; and an explanation of how the proposed interpretation relates to the Bureau’s statutory objectives.

Characteristics of Advisory Opinions

Advisory opinions would be considered interpretative rules under the Administrative Procedures Act (APA) and would respond to a specific request for clarity on an interpretive question.
Advisory opinions would be published in the Federal Register or on the consumerfinance.gov site.
Each advisory opinion will be applicable to the requestor and similarly situated parties to the extent that their situations conform to the Bureau’s summary of material faces of the advisory opinions. Where a statutory safe harbor is applicable to an advisory opinion, the advisory opinion will explain that fact.

Factors in Bureau Selection of Topics of Advisory Opinions

The Bureau intends to consider the following factors when considering whether to address a specific request.

That the interpretive issue has been noted during prior Bureau examinations as one that might benefit from additional regulatory clarity
The issue is one of substantive importance or impact or one whose clarification would provide significant benefit; and/or
That the issue concerns an ambiguity that the Bureau has not previously addressed through an interpretive rule or other authoritative source.

Factors weighing strongly in favor of the presumption that an advisory opinion is not appropriate include:

The interpretive issue is the subject of an ongoing Bureau investigation or enforcement action
That the issue is better suited for the notice and comment process
That the issue could be addressed effectively through a compliance aid or
That there is clear Bureau or court precedent that is available to the public on the issue.

The Bureau intends to take into consideration the following additional factors when determining the appropriateness of an advisory opinion:

Alignment with the Bureau’s statutory objectives
Size of the benefit offered to consumers by resolution of the interpretive issue
Known impact on the actions of other regulators
Impact on available Bureau resources

Comments

The Bureau solicits comment on all aspects of the proposed advisory opinion program. In particular, the Bureau is requesting comment on:

Application elements the Bureau should require from parties requesting advisory opinions, and accommodations that should be made for requestors with limited legal resources
How the Bureau should prioritize requests for advisory opinion guidance
How the Bureau should quantify benefit to consumers when evaluating advisory opinion requests
Improvements that could be made to the proposed advisory opinion program to further enhance compliance
How the Bureau should handle sensitive information submitted by requestors
How the Bureau can make advisory opinion guidance that has not been incorporated into the Official Interpretations codified in the Code of Federal Regulations available to the public in a useful format

Letter to Credit Unions 20-CU-21 Field of Membership Rural Districts

July 2020

As a result of the SCOTUS (Supreme Court of the United States) denial of the ABA appeal of the Appellate decision in the FCU FOM litigation, NCUA will begin reinstating the rural districts for 18 FCUs that had their “new” rural FOMs suspended when the ABA filed suit. NCUA will also renew processing of rural district FOM applications that were in process at the time of suit and immediately begin accepting new applications for the broader FOM for eligible FCU community charters.

FCU Rural District FOM

Under NCUA’s rules, a FCU rural district FOM qualifies if it meets all of the following criteria:

Well defined contiguous geographic boundaries
A total population of 1 million people or less
Either 1) more than 50% of the population resides in census blocks or other geographic units designated as rural by CFPB or Census Bureau; or 2) the district has a population density of 100 persons or fewer per square mile
The boundaries of the proposed FOM do not exceed the contiguous boundaries of the state in which the FCU is headquartered and (including) the immediate neighboring states of the headquarter state

NCUA’s chartering manual contains the rules for FCU FOM and may be found in Appendix B of Part 701.

The SCOTUS decision also permits NCUA to reinstate its FOM provisions for Combined Statistical Areas (CSA), however for the CSA, NCUA will have to re-adopt a final CSA rule. NCUA had proposed a rule in November 2019.

Letter to Credit Unions 20-CU-20: Phased Approach to On-site Operations

June 2020

NCUA issued LTCU 20-CU-20 to inform stakeholders of NCUA’s current “multi-phase transition plan” for resuming its normal on-site operations (Return to Normal Operations or RTNO). NCUA notes that its transition to RTNO may begin as early as July 6, 2020.

In Phase 1 of its RTNO, NCUA will:

continue to encourage both field and office staff to work remotely when possible
place limits on the number of staff working in NCUA offices
implement social distancing and other precautionary measures in offices
will distribute PPEs to both field and office staff

NCUA states that examiners may begin (after July 6) conducting voluntary on-site examinations and that more specific implementation details will be published before that begins. NCUA notes that it will continue to coordinate examination and supervision efforts with SSAs.

Letter to Credit Unions 20-CU-19: Additional Guidance Regarding Servicing Hemp-Related Businesses

June 2020

NCUA has issued an update to guidance for credit unions related to serving Hemp businesses. The original guidance, 19-RA-02, was issued in 2019 after the USDA published its initial Interim Final Rule for growing Hemp pursuant to the 2018 Farm Bill. The updated guidance, LTCU 20-CU-19 provides credit unions with the following 17 FAQs (summarized & edited for brevity):

What is the status of the USDA’s Interim Final Rule on hemp production?

The USDA’s Interim Final Rule (IFR) was issued on 10/31/19 and took effect upon publication. The USDA website has hemp-related resources and a webpage dedicated to rulemaking documents.

Does the IFR mean that hemp can be legally produced in every state?

No. The 2018 Farm Bill did not preempt state or tribal laws regarding the production of hemp that are more stringent than federal law or that may prohibit hemp in its entirety. If permitted by the state, hemp may be grown pursuant to the USDA rules and the 2018 Farm Bill or the 2014 Farm Bill (2014 Farm Bill authority will expire on November 1, 2020).

How can I determine if a state or Native American tribe has submitted a hemp production plan to the USDA for approval?

The USDA provides detailed information on state and Tribal plans submitted for approval on its website.

What if the state or tribal territory we serve has not had a hemp production plan approved by the USDA?

In states that permit hemp production but do not have USDA approved regulatory plans, hemp producers have 2 options:

- They can operate pursuant to the 2014 Farm Bill until November 1, 2020
- They can apply for a license from the USDA directly pursuant to the USDA’s regulatory plan
Who is responsible for ensuring that hemp producers comply with a state, Tribal, or USDA-approved hemp production plan?

In states or Tribal territories with USDA approved plans, enforcement and regulation is conducted by the designated state or Tribal authority. For producers operating under the USDA plan, enforcement and regulation is overseen directly by the USDA.

Aside from hemp production, does the USDA IFR cover other hemp-related businesses such as manufacturing, processing, distribution, shipping, and retail?

No. The USDA only sets forth the requirements for engaging in hemp production as authorized by the 2018 Farm Bill. As noted in the August 2019 NCUA Regulatory Alert regarding Hemp, credit union should be aware of other statutes and regulations that may affect the distribution, shipping, sale, and use of hemp products. In particular, substantial issues may be raised by the Federal Food, Drug, and Cosmetic Act and the Public Health Service Act. The U.S. Food and Drug Administration (FDA) has a webpage dedicated to hemp.

Where can I learn more about FDA requirements applicable to cannabis-derived products, including cannabidiol (CBD)?

The FDA has created a webpage dedicated to cannabis derived products such as CBD. The legality of the sale of CBD is a complicated issue with implications for how the product is used, labeled, and marketed. In addition, whether the CBD is infuse into food and beverages or dietary supplements will determine whether or not the sale of the product violates the Federal Food Drug and Cosmetics Act and other applicable federal regulations related to consumer products and safety.

Has FinCEN provided any guidance related to hemp?

Yes. FinCEN, the Board of Governors of the Federal Reserve System, the FDIC, the OCC, and CSBS issued a joint statement in December, 2019 that aligned with NCUA’s 2019 Regulatory Alert.

Will NCUA examinations conducted in 2020 cover hemp?

In 2020, NCUA examiners will be collecting data through the examination process concerning the types of services credit unions are providing to hemp-related businesses to help the agency better understand how it can assist credit unions serving hemp-related businesses.

Does the NCUA prohibit credit unions from providing services to hemp-related businesses?

No. Credit unions may provide the customary range of financial services for business accounts, including loans, to lawfully operating hemp-related businesses within their fields of membership.

What should a credit union board consider when evaluating whether to provide services to a hemp business?

Credit unions need to be aware of the federal, state, and Native American tribal laws and regulations that apply to any hemp-related businesses they serve and understand the complexities and risks involved.

Can a credit union provide loans to a hemp-related business?

Lending to a lawfully operating hemp-related business is permissible. Such loans are commercial loans subject to § 723 of NCUA’s rules or any state specific commercial lending rules where applicable. Credit unions should understand the complex regulatory regime governing such businesses and remain mindful of the unique risks when underwriting and managing hemp-related loans.

What is the credit union expected to do to ensure the hemp business is operating lawfully?

As they would with any account, credit unions must maintain appropriate due diligence procedures for hemp-related accounts. The extent and nature of the due diligence will likely vary by accounts and is a business decision for the credit union. NCUA suggests credit unions consult legal counsel when determining the appropriate level of due diligence. Credit unions should verify that hemp growers possess a valid state or USDA license to grow hemp. However, credit unions are not expected to serve as the enforcement authority tasked with policing the hemp industry for illegal activity.

Can a credit union decide not to serve hemp-related businesses?

The decision to serve any business is made by each individual credit union.

Is there a list of credit unions that serve hemp-related businesses?

NCUA notes that the agency does not maintain a list of credit unions serving hemp-related businesses “at this time.”

Do credit unions need to file marijuana related SARs on legally operating hemp businesses, provided the activity is not unusual for that business?

No, unless a credit union reasonably believes the hemp business is operating unlawfully and there is no other unusual activity, than a marijuana-related SARs need not be filed.

Where can I learn more?

The USDA has published numerous resources. Credit unions with questions regarding state or Native American tribal laws and regulations should contact the state or Native American tribe government. Credit unions with hemp-related food, drug, and cosmetic questions should contact the FDA.

Letter to Credit Unions 20-CU-18: PCA Regulatory Relief Measures in Response to the COVID-19 Pandemic

June 2020

In May, 2020, the NCUA Board approved changes to the Prompt Corrective Action (PCA) requirements in Part 702 of its Rules and Regulations. Part 702 applies to federally insured state credit union (FISCUs) by reference in § 741.3(a)(1). The Interim Final Rule took effect upon publication on May 28, 2020.

NCUA’s LTCU 20-CU-18 discusses the agency’s Administrative Order temporarily decreasing the earnings retention requirement for adequately capitalized credit unions pursuant to § 702.201(b)(2) as well as the authority for undercapitalized credit unions to submit a streamlined net worth restoration plan (NWRP) if their net worth ratio declined predominantly due to temporary share growth during the COVID-19 pandemic.

Administrative Order & Part 702.201 Adequately Capitalized Credit Unions

Per the Order, between March 31, 2020 and December 31, 2020, adequately capitalized natural person credit unions that are unable to meet the earnings retention requirement may decrease their earnings retention requirement to zero without submitting an application to the NCUA Regional Director. After December 31, 2020, the requirements of part 702 apply as before, including the earnings-retention requirement and the requirement to seek a waiver on case-by-case basis.

Credit unions posing an undue risk to the NCUSIF or exhibiting material safety and soundness issues may be required to submit an application for a decrease in the earnings retention requirement in accordance with § 702.201(b).

Part 702.206(c) & Streamlined Net Worth Restoration Plans

Recognizing that some credit unions may experience substantial COVID-19 related short-term increases in shares from stimulus deposits or consumer flight to safety, NCUA will temporarily permit credit unions to submit a streamlined NWRP. The streamlined NWRP must attest that the reduction in the credit union’s net worth ratio was predominantly caused by share growth and that such share growth is a temporary condition due to COVID-19.

When approving streamlined NWRPs, NCUA Regional Directors will:

verify that the decline in the NWR was driven by an increase in total assets, and that the increase in total assets is attributed to an increase in shares, not borrowings or other sources of funds; and
Consult with the applicable SSA for FISCU submissions.

FISCUs must comply with applicable state requirements when submitting an NWRP for state supervisory authority approval.

Furthermore, NCUA notes the fllowing:

A Credit union expecting a decline in NWR to below 4% should notify their NCUA examiner and submit a NWRP in accordance with 702.206.
NCUA will evaluate compliance with outstanding NWRPs, including those approved under this temporary provision, on a case-by-case basis.
Less than adequately capitalized credit unions continuing to experiencing capital deficiencies may be required to submit a revised NWRP pursuant to 702.206(c).

Regulatory Alert 20-RA-05 Remittance Transfers under the EFT Act

June 2020

NCUA’s Regulatory Alert provides credit unions information regarding changes to the CFPB’s Remittance Rule (Regulation E) which implements the Electronic Fund Transfer Act (EFT Act). The changes take effect July 21, 2020.

The CFPB’s new rule makes the following changes:

The new rule increases the safe harbor threshold, and removes from coverage of the rule, credit unions and banks that provide 500 or fewer transfers annually. This is an increase from the current threshold of 100 or fewer transfers.
Establishes 2 new permanent exceptions to the rule which allow credit unions and banks to disclose estimates of the exchange rate and covered third-party fees instead of exact amounts:
Entities may provide an estimate of the exchange rate for transfers to a particular country if the credit union or bank made 1,000 or fewer transfers in the prior calendar year to the particular country in which the transfer recipients received funds in that country’s local currency and the credit union or bank cannot determine the exact exchange rate for that transaction.
Credit unions and banks may estimate the 3^rd-party fee for a transfer to a designated recipient’s institution if 1) the financial institution made 500 or fewer transfers to the designated recipient’s institution in the prior calendar year; 2) at the time the disclosure must be given the credit union or bank cannot determine the exact amount of the 3^rd-party fee; and 3) the remittance is sent from the sender’s credit union account (not including pre-paid accounts).

Additional Changes

The final rule includes a transition period for credit unions and banks that exceed the new exception thresholds.
The final rule also adds an exception to allow a credit union or bank to estimate 3^rd-party fees when another federal statute or regulation prohibits the institution from determining the exact amount of the fee.
The CFPB will develop improved procedures to consider requests to make changes to the exchange rate countries list.

NCUA’s Office of Consumer Financial Protection may be contacted by phone (703.518.1140) or e-mail ([email protected]).

Federal Reserve Interim Final Rule

Regulation D

Part 204: Reserve Requirements of Depository Institutions

Summary

Prepared by NASCUS Legislative & Regulatory Affairs Department

June 2020

The Board of Governors of the Federal Reserve System (Federal Reserve Board or ‘‘FRB’’) is amending its 12 CFR Part 204, Regulation D, to delete the numeric limits on certain kinds of transfers and withdrawals that may be made each month from ‘‘savings deposits.’’ The amendments are intended to allow consumers more convenience in accessing their funds and to ease administrative burdens for depository institutions.

The Interim Final Rule may be read here. The rule became effective April 24, 2020.

Comments are due to the Federal Reserve June 29, 2020.

Summary

Section 19(b)(2) of the Federal Reserve Act (FRA) authorizes the FRB to impose reserve requirements on certain types of deposits and other liabilities of depository institutions for the purpose of implementing monetary policy. Specifically, the FRA requires depository institutions to maintain reserves against its certain accounts, including transaction accounts, as prescribed by the FRB’s regulations. On March 26, 2020, the FRB set that reserve ratio for transaction accounts to zero percent.

Regulation D distinguishes between reservable ‘‘transaction accounts’’ and non-reservable ‘‘savings deposits’’ based on the ease with which the depositor may make transfers or withdrawals. Prior to issuing the Interim Final Rule (IFR) the FRB’s Regulation D limited the number of certain transfers or withdrawals that an account holder may make from a ‘‘savings deposit’’ to no more than six/month. Prior to the IFR, Regulation D also required depository institutions:

to prevent transactions in excess of the regulatory limit (6/month)
to monitor accounts for violations of the limit

When the FRB responded to the economic disruption of the pandemic by eliminating the reserve requirement on transaction accounts, the need to distinguish between reservable ‘‘transaction accounts’’ and non-reservable ‘‘savings deposits’’ became superfluous.

Therefore, the FRB subsequently is issuing the IFR to amend Regulation D by deleting the six transfer limit from the ‘‘savings deposit’’ definition as well as the provisions that require depository institutions to prevent transfers and withdrawals in excess of the limit or to monitor the accounts for violations when excess transactions were inadvertently allowed. The IFR makes conforming changes to other definitions in Regulation D that refer to ‘‘savings deposit’’ as necessary.

As a result, depository institutions are permitted, but not required, to suspend enforcement of the 6/month transfer limit. Furthermore, the IFR does not mandate any change to how depository institutions report deposits.

The IFR includes a series of FAQs to help explain the implications of the changes.

FAQ #1 – Reiterates that the IFR permits depository institutions to suspend enforcement of the 6-transfer limit, but it does not require them to do so.
FAQ #2 & #3 – Clarifies that depository institutions may continue to report accounts as ‘‘savings deposits’’ on their FR 2900 deposit reports even after they suspend enforcement of the limit on those accounts (#2) or may report that account as a ‘‘transaction account’’ on the FR 2900 reports (#3).
FAQ #4 – Addresses Regulation D’s §204.2(d)(1) ‘‘reservation of right,’’ and confirms that the ‘‘reservation of right’’ continues to be a part of the definition of ‘‘savings deposit.’’
FAQ #5 – The IFR interim final rule does not require a depository institution to change the way it calculates or reports interest on an account where the depository institution has suspended enforcement of the transfer limit.
FAQ #6 – Notes that a depository institution with account agreements with its ‘‘savings deposit’’ customers requiring the depository institution to enforce the 6-transfer limit may, if it chooses, amend those agreements in any manner.
FAQ #7 – Notes that the IFR does not require depository institutions to change the names of accounts if a depository institution chooses to suspend regardless of whether the 6-transfer limit is suspended.
FAQ #8 – **The Federal Register notice is missing FAQ #8.
FAQ #9 – Clarifies that depository institutions may suspend enforcement of the 6-transfer limit on a temporary basis, such as for six months.
FAQ #10 – Noting that some depository institutions charges fees to savings deposit customers for transfers and withdrawals that exceed the Regulation D limit, the FRB clarifies that the IFR does not require or prohibit depository institutions from charging their customers fees for transfers and withdrawals in excess of the limit.

-End-