Summary
Prepared by NASCUS Legislative & Regulatory Affairs Department
June 2019

NCUA is proposing changes to federal credit union (FCU) rules for public unit and non-member shares. These rules apply to federally insured state credit unions (FISCUs) by reference in §741.204. Currently, §701.32(b) of NCUA’s rules limits a FCU’s total public unit and non-member shares to the greater of 20% of total share or $3 million. An NCUA Regional Director may approve a waiver request to exceed the limits.

NCUA is proposing to amend its rules to:

1. Allow FCUs (and by reference in §741.204(a) FISCUs) to receive public unit and non-member shares up to 50% of the credit union’s paid-in and unimpaired capital and surplus less any public unit and non-member shares
2. Eliminate the alternative $3 million limit
3. Eliminate the waiver process for deposits in excess of the proposed limit
4. Require an FCU (and FISCUs by reference) to develop and maintain a written plan if its public unit and non-member shares, taken together with borrowings, exceed 70% of paid-in and unimpaired capital and surplus

NCUA’s proposed rule may be read here. Comments are due to NCUA by July 29, 2019.

Summary

Section 701.32(b) of the NCUA’s rules limits the total amount of public unit (regardless of whether the public unit is a member of the FCU or not) and non-member shares a FCU may have to the greater of 20% its total shares or $3 million, unless the shares are U.S. Treasury accounts or matching funds accounts required by the NCUA’s Community Development Revolving Loan Fund Program.  If state law allows a FISCU to accept public deposits or non-member deposits, Section 741.204(a) of NCUA’s rules require FISCUs adhere to the FCU limits of §701.32(b).

NCUA’s rule provides a process by which a credit union may seek a waiver to the limits by submitting a written request to the NCUA Regional Director.

Proposed Changes

• Increase threshold to 50% percent of paid-in and unimpaired capital and surplus less any public unit and non-member shares

The proposal increases the limit and the way the limit is calculated. By changing from 20% of total shares to 50% ‘‘paid-in and unimpaired capital and surplus less any public unit and non-member shares’’ provides credit unions with greater ability to accept public unit and non-member deposits because undivided earnings are included in the measurement of a credit union’s paid-in and unimpaired capital and surplus.

The proposed rule does not include public unit and non-member shares in the calculation of unimpaired capital and surplus for purposes of the 50% limit. By excluding the public and non-member deposits from the calculation NCUA seeks to
limit the ability of a credit union to increase its leverage indefinitely, which could pose a risk to the National Credit Union Share Insurance Fund (NCUSIF).

• Elimination of the alternative $3 million limit

NCUA states that because the proposed 50% of paid-in and unimpaired capital and surplus limit is “sufficiently high” the alternative $3 million limit is unnecessary. However, NCUA specifically requests comments on whether the elimination the $3 million threshold would harm smaller credit unions that might rely on larger volumes of nonmember shares as a necessary source of funding.

NCUA also seeks comments on whether smaller credit unions, or low-income designated credit unions, should be allowed to apply for a higher threshold than the proposed 50% limit or whether the $3 million (or higher) alternative dollar threshold should be retained.

• Elimination of waiver from NCUA Regional Director process to exceed the 50% limit

The proposed rule also eliminates the option for a credit union to obtain a waiver from the NCUA Regional Director to exceed the limit. While NCUA is expanding the amount of public unit and non-member deposits a credit union may hold, the agency DOES NOT believe it should allow a credit union to have public unit and non-member shares in excess of 50% of paid-in and unimpaired capital and surplus.

• Requirement to maintain a written plan regarding use of funds

Under the proposed rule, an FCU must develop and maintain a written plan regarding the intended use of any borrowings, public unit, or non-member shares that, taken together, exceed 70% of the credit union’s paid-in and unimpaired capital and surplus. The plan would not have to be submitted to NCUA for prior approval. NCUA would review the plans during regular examination.

6/1719

Delaware does not have a state credit union statute and therefore has no state-chartered credit unions. Please visit one of our other states for the latest news on the state credit union system.

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Summary: Overdraft Rule Review Pursuant to the Regulatory Flexibility Act

12 CFR Part 1005

Consumer Financial Protection Bureau
Prepared by the NASCUS Legislative & Regulatory Division
May 2019

The Consumer Financial Protection Bureau (Bureau) is conducting a review of the 2009 Overdraft rule in compliance with Section 610 of the Regulatory Flexibility Act.  The Bureau is seeking comment on the economic impact of the overdraft rule on small entities.  The Bureau intends to use the comments received to determine whether the rule should be continued without change or amended/rescinded to minimize significant economic impact on small entities.

The RFA request for comments can be found here.  Comments are due to the Bureau no later than July 1, 2019.

Summary

The Overdraft Rule was issued in 2009 and limits the ability of financial institutions to assess overdraft fees for paying automated teller machine (ATM) and one-time debit card transactions that overdraw consumer accounts.

Under the Regulatory Flexibility Act (RFA), agencies are required to consider the effect on small entities for certain rules.  Section 610 of the RFA requires agencies to publish a plan for periodic review of rules that will or have had a significant economic impact on small entities.  During the RFA review, agencies are required to consider the following factors:

• The continued need for the rule;
• The nature of public complaints or comments on the rule;
• The complexity of the rule;
• The extent to which the rule overlaps, duplicates or conflicts with Federal, State or other rules; and
• The time since the rule was evaluated or the degree to which technology, market conditions, or other factors have changed the relevant market.

The Bureau is requesting feedback on the following:

• The nature and extent of the economic impacts of the Rule as a whole and of its major components on small entities, including impacts of the reporting, recordkeeping, and other compliance requirements of the Overdraft Rule, as well as benefits of the Rule;
• Whether and how the Bureau by rule could reduce the costs of the Overdraft Rule on small entities, consistent with state objectives of EFTA and the Overdraft Rule; and
• Any other information relevant to the factors that the Bureau considers in completing a Section 610 Review under the Regulatory Flexibility Act.

Summary: Proposed rule with request for comments re: the Home Mortgage Disclosure Act

12 CFR Part 1003

Consumer Financial Protection Bureau

Prepared by the NASCUS Legislative & Regulatory Division

May 2019

The Consumer Financial Protection Bureau (Bureau) is proposing two alternatives to amend Regulation C to increase the origination threshold that would trigger HMDA compliance requirements for closed-end mortgage loans.  In addition, the proposal would extend the temporarily increased origination threshold for open-end lines of credit as well as set a higher permanent origination threshold for open in lines of credit.

The proposed rule can be found here.  Comments on the proposed rule are due to the Bureau by June, 12, 2019.  Comments on the Paperwork Reduction Act analysis in Part VIII of the Supplementary Information are due to the Bureau no later than July 12, 2019.

Summary

The Home Mortgage Disclosure Act (HMDA) provides for institutional and transactional coverage thresholds that determine whether certain financial institutions are required to collect, record and report any HMDA data on closed-end mortgage loans or open-end lines of credit.  The Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA) provides partial exemptions from HMDA requirements for certain insured depository institutions (including credit unions).  In 2015, the Bureau determined that institutions that originated: (i) at least 25 closed end mortgage loans in each of the two preceding calendar years or (ii) at least 100 open-end lines of credit in each of the two preceding calendar years would be required to collect, record and report HMDA data.  The Bureau then issued an updated HMDA rule in 2017 that temporarily increased the open-end line of credit threshold to 500 open-end lines of credit for calendar years 2018 and 2019.

The Bureau is now proposing amendments to Regulation C that would increase the closed-end mortgage loan origination threshold that would trigger HMDA requirements.  Under the proposal, institutions originating fewer than either 50 closed-end mortgage loans or alternatively 100 closed-end mortgage loans, in either of the two preceding calendar years would not have to report such data as of January 1, 2020.  The proposal would also adjust the threshold for reporting data about open-end lines of credit by extending the current temporary threshold of 500 open-end lines of credit until January 1, 2020.  After that date, the open-end lines of credit threshold will be set to 200.  The proposal would also incorporate into Regulation C the interpretations/procedures from the interpretive/procedural rule the Bureau issued on August 31, 2018.

The Bureau is seeking comments on the following among other things:

• On whether the data that would be reported at thresholds of 50 or 100 closed-end mortgage loans would achieve the purposes of HMDA?
• On whether other closed-end and open-end coverage thresholds may be appropriate?
• Whether the value of the data that would be reported by institutions that originate between 25 and 50 closed-end mortgage loans or alternatively between 25 and 100 closed end mortgage loans is outweighed by the burden on those institutions of reporting HMDA data and undergoing examinations to validate the accuracy of their submissions?
• How the proposed increase to the closed-end coverage threshold to 50, 100 or another number would affect the number of depository institutions required to report data on closed end mortgage loans?
• The significance of the data that would not be available for achieving HMDA’s purposes as a result of the proposed increase to the closed-end coverage threshold to 50, 100 or another number?
• The reduction in burden that would result from the proposed increase for institutions that would not be required to report (addressing separately the burden reduction for depository institutions that are eligible for the EGRRCPA’s partial exemption for closed-end mortgage loans and the burden reduction for depository institutions that are not)?
• Whether it should extend the temporary institutional coverage threshold of 500 open-end lines of credit as proposed, and if so, for how long?
• Whether to increase permanently the open-end institutional coverage threshold when the proposed temporary extension expires? And, if so, whether a threshold of 200 or some other threshold would most appropriately balance the benefits and burdens of covering institutions based on their open-end lending beginning in 2022?
• How the proposed temporary and permanent increases would affect the number of financial institutions required to report data on open-end lines of credit?
• The significance of the data that would not be available as a result of the proposed temporary and permanent increases?
• The reduction in burden that would result from the proposed temporary and permanent increases for institutions that would not be required to report their open-end lines of credit (addressing separately the burden reduction for institutions that are eligible for the EGRRCPA’s partial exemption for open-end lines of credit and for institutions that are not)?