Letter to Credit Unions 22-CU-06: NCUA to Begin Phase 2 of Resuming Onsite Operations
April 2022
Based on new guidance from the Centers for Disease Control and Prevention (CDC) and the Safer Federal Workforce Task Force, the NCUA will enter the second phase (Phase 2) of resuming its onsite operations on April 11, 2022.
Phase 2 permits NCUA staff to volunteer to work onsite, including conducting examination and supervision work at credit unions located in counties with low or moderate COVID-19 community levels, as defined by the CDC. Onsite work in counties with high COVID-19 community levels may be allowed when necessary and with prior approval from NCUA management.
During Phase 2, the agency will continue to conduct examination steps offsite when feasible and appropriate. NCUA staff working onsite in credit unions will generally be expected to follow credit union policies related to safety, to the extent they exceed the NCUA’s safety protocols for Phase 2. Also, the NCUA will continue to maintain heightened safeguards in the agency’s facilities to ensure the health and safety of staff and visitors. The agency will continue to monitor the course of the pandemic closely and adjust workforce safety plans, as necessary.
Letter to Credit Unions 22-FCU-02: Final Rule on Definition of Service Facility
March 2022
The final rule amending the definition of “service facility” for multiple common-bond FCUs became effective December 27, 2021. The final rule provides that shared locations are service facilities for purposes of multiple common-bond FCU additions of groups and/or underserved areas, regardless of whether the FCU has an ownership interest in the shared branching network providing the locations. Qualifying shared locations include electronic facilities offering required services such as video teller machines.
The final rule only changes the ownership requirement related to shared locations. All other requirements related to service facilities, eligibility of groups, and the qualifications of underserved areas remain unchanged.
The letter outlines requirements for multiple common-bond FCUs looking to add occupational or associational groups, or an underserved area. NCUA emphasizes that the process for establishing an area qualifying as an underserved area remains the same. The agency also notes that it will remove an underserved area from an FCU’s field of membership and reserves the right to take other supervisory action if it determines that an FCU has not maintained a service facility in the underserved area.
Finally, multiple common-bond FCUs expanding around a shared facility must continue to comply with all applicable consumer financial protection and anti-discrimination laws.
Federal Reserve Board Issues Discussion Paper: “Money and Payments: The U.S. Dollar in the Age of Digital Transformation”
January 2022
SUMMARY
In January, the Federal Reserve Board (Fed) issued a discussion paper entitled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” (Paper). The Paper explores:
- The advantages and disadvantages of the Fed issuing a central bank digital currency (CBDC or digital dollar); and
- The key design considerations of such a currency
The Fed also solicited feedback from the public, with comments due May 20, 2022.
For the purpose of the Paper, the Fed defined a CBDC as a digital liability of a central bank that is widely available to the general public: a CBDC would be analogous to a digital form of paper money.
SUMMARY
The Paper intentionally does not take a position in favor of or opposing the creation of a digital dollar. Rather, it raises several high-level but critical potential benefits and risks of a digital dollar. The Fed views the Paper as a “first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies.” Issuance of a digital dollar “is not imminent.” The Paper does, however, reiterate Chairman Powell’s publicly expressed view that the Fed should only create a digital dollar if Congress clearly authorizes the Fed to do so and the President supports the creation of one.
Were the Fed to create a CBDC, the following principles would guide the Fed in that effort:
- A digital dollar’s benefits should outweigh the costs;
- A digital dollar’s benefits should be provided more effectively by the digital dollar than alternatives;
- A digital dollar should complement existing forms of money and financial services;
- A digital dollar should protect consumer privacy and protect against crime; and
- A digital dollar should have broad-based support.
To this end, the Paper argues that any digital dollar should be “privacy-protected, intermediated, widely transferable, and identity-verified.” Such a design could “provide households and businesses a convenient, electronic form of central bank money” that would support “faster and cheaper payments (including cross-border payments)” and promote financial inclusion.
However, the Fed is concerned that a digital dollar could reduce deposits in banks and credit unions, resulting in negative affects to credit markets and financial stability. Critically, the Paper notes that “Under an intermediated model, the private sector would offer accounts or digital wallets to facilitate the management of CBDC holdings and payments. Potential intermediaries could include commercial banks and regulated nonbank financial service providers and would operate in an open market for CBDC services.”
The Paper also raises concerns that a “CBDC could fundamentally change the structure of the U.S. financial system.” In particular, the Fed is concerned that a digital dollar could potentially reduce deposits in the banking system, thereby undermining credit availability and reduce demand for T-Bills and similar low risk assets (particularly if the digital dollar is interest bearing); encourage runs on financial institutions in times of stress (due to relatively safety and liquidity); and change the way the Fed can implement monetary policy. The Fed is also focused on privacy risks; and money laundering deterrence as well as cybersecurity and resiliency risks to the Fed’s payment systems.
The Fed’s Questions
The Fed is seeking public feedback on 22 questions. The questions are divided into two categories: the first 14 questions address CBDC Benefits, Risks, and Policy Considerations and the last 7 questions address the CBDC Design.
With respect to costs, benefits and policy considerations, the Fed seeks feedback on several relatively high level, wide-ranging issues. For instance, the Fed asks:
- Whether the benefits of a CBDC could be achieved via other means and whether a CBDC would improve financial inclusion;
- How a digital dollar may affect financial stability and the Fed’s ability to implement monetary policy;
- How financial institutions would be affected (and how these affects would be different from privately issued stablecoins);
- How to protect end users’ privacy without undermining anti-money laundering tools;
- Whether a digital dollar should be legal tender; and
- Methods by which to ensure cyber and operational resistance.
With respect to design, the Fed is interested in:
- Whether a digital dollar should pay interest (and if so, via which mechanism);
- Whether the amount of a digital dollar held by any specific end user should be limited;
- Which entities should serve as intermediaries for a CBDC and how should they be regulated;
- Whether the Fed should “maximize the ease of use and acceptance at point of sale”; and
- How a digital dollar could be designed to achieve transferability across multiple payment platforms, including offline capabilities.
Additional Considerations
Development of a digital dollar is politically salient and controversial. For instance, Senate Banking Committee Chairman Sherrod Brown (D-OH) has called the Report a “good first step toward designing a central bank digital currency” that will promote financial inclusion and maintain the United States’ global financial leadership. Senator Brown has previously sponsored legislation authoring the Fed to issue a digital dollar and to create pass through Federal Bank accounts for certain consumers.
The Committee’s (outgoing) Ranking Member, Pat Toomey (R-PA), praised the Federal Reserve for focusing on the need for privacy protections and cautioning against retail Federal Reserve bank accounts. However, the Senator expressed concern about data security and whether a digital dollar could be used for peer-to-peer transactions. Ultimately, he praised the report as an “important step by the Fed in acknowledging the permanence of cryptocurrencies and their underlying technologies.”
Earlier this month, Congressman Tom Emmer (R-MN), a co-chair of the Congressional Blockchain Caucus, introduced legislation prohibiting the Federal Reserve from issuing a digital dollar whereas Congressman Don Beyer (D-VA) has introduced legislation authorizing the Fed to issue a digital dollar. Numerous Senators on the Banking Committee and other members of Congress have urged Chairman Powell not to discourage the co-existence of private stablecoins in the event that the Fed issues a digital dollar; the Chairman has stated publicly that privately issued stablecoins can continue to function in a system that includes a digital dollar.
Internationally, the Bank of International Settlements and the International Monetary Fund have been in favor of all major countries developing interoperable central bank digital currencies, in part due to concerns over perceived financial stability risks posed by stablecoins.
NCUA Risk Alert: 22-RISK-01 Heightened Risk of Social Engineering and Phishing Attack
March 2022
The on-going conflict in Ukraine has raised concerns about potential cyberattacks in the U.S., including those against the financial services sector. All credit unions and vendors, regardless of size, are potential targets for cyberattacks, like social engineering and phishing attacks, and must remain vigilant. Credit unions should report any cyber incidents to the NCUA, your local FBI field office or the Internet Crime Complaint Center, and the Cybersecurity and Infrastructure Security Agency (CISA).
Phishing is a technique that uses email or malicious websites to solicit personal information or to get victims to download malicious software by posing as a trustworthy entity. Another variant of phishing, known as smishing, uses SMS or other text messaging applications to get victims to click on malicious links to achieve similar goals to email phishing. NCUA’s Risk Alert outlines common indicators to watch out for along with tips to avoid being a victim of phishing.
The NCUA encourages credit unions to review CISA’s Shields-Up website, which provides information about cybersecurity threats, including several resources and mitigation strategies. The NCUA recently created the Automated Cybersecurity Evaluation Toolbox or ACET, a free tool for federally insured credit unions to use when evaluating their levels of cybersecurity preparedness. The ACET is a downloadable, standalone app developed to be a holistic cybersecurity resource for credit unions.
Additional cybersecurity resources are also available at www.ncua.gov/cybersecurity.
In December 2021, the Consumer Financial Protection Bureau (CFPB) opened market monitoring orders, inquiring into Buy-Now-Pay-Later (BNPL) products in the United States to gain information about the size, scope and business practices of the BNPL market. The information will help the Bureau better understand how consumers interact with BNPL providers and how BNPL business models impact the broader e-commerce and consumer credit marketplaces.
Comments are due on March 25, 2022. The notice and request for comments can be found here.
Summary
The Bureau’s market monitoring orders required five providers of BNPL products in the US to provide information about their size, scope, and business practices. The Bureau listed six areas of specific interest:
- Business model and transaction metrics
- Loan performance metrics
- Consumer protections
- User contacts and demographics
- Data harvesting
- Data monetization
The Bureau invites all interested parties to submit comments to inform the agency’s inquiry. In addition, the Bureau encourages comments re: particular aspects of BNPL products such as:
- The consumer experience with BNPL products
- The benefits/risks from BNPL products to consumers
- The merchant experience with BNPL products
- Regulator/Attorneys General perspectives on BNPL products
- Ways the BNPL market can be improved
The Consumer Financial Protection Bureau (CFPB) is seeking comments from the public related to fees that are not subject to competitive processes that ensure fair pricing. The submissions to this request for information will serve to assist the CFPB and policymakers in exercising its enforcement, supervision, regulatory and other authorities to create fairer, more transparent and competitive consumer financial markets.
Comments are due by March 31, 2022. You can access the RFI here.
Summary
The CFPB is concerned that “exploitative junk fees” charged by banks and non-bank financial institutions have become widespread, with the potential effect of shielding substantial portions of the true price of consumer financial products/services from competition. The Bureau is seeking information from the how such fees have impacted their lives. The Bureau is particularly interested in hearing from individuals (including older consumers, students, servicemembers, consumers of color and lower-income consumers), social services organizations, consumer rights and advocacy organizations, legal aid attorneys, academics/researchers, small businesses, financial institutions and state/local government officials.
The Bureau has posed specific questions below. However, the Bureau is interested in receiving any comments related to fees in consumer finance.
- If you are a consumer, please tell us about your experiences with fees associated with your bank, credit union, prepaid or credit card account, mortgage, loan or payment transfers including:
- Fees for things you believed were covered by the baseline price of a product/service
- Unexpected fees for a product or service
- Fees that seemed too high for the purported service
- Fees where it was unclear why they were charged
- What types of fees for financial products/services obscure the true costs of the product/service by not being built into the upfront price?
- What fees exceed the cost to the entity that the fee purports to cover? For example, is the amount charged for NSF fees necessary to cover the cost of processing a returned check and associated losses to the depository institution?
- What companies or markets are obtaining significant revenue from backend fees, or consumer costs that are not incorporated into the sticker price?
- What obstacles, if any, are there to building fees into up-front prices consumers shop for? How might this vary based on the type of fee?
- What data and evidence exist with respect to how consumers consider back-end fees, both inside and outside of financial services?
- What data and evidence exist that suggest that consumer do, or do not, understand fee structures disclosed in fine print or boilerplate contracts?
- What data and evidence exist that suggest consumers do or do not make decisions based on fees, even if well disclosed and understood?
- What oversight and/or policy tools should the CFPB use to address the escalation of excessive fees or fees that shift revenue away from the front-end price?
LTCU: (22-CU-01): Submission for 2021 Voluntary Credit Union Diversity Self-Assessment Extended to January 31, 2022
January 2022
NCUA’s LTCU was issued to extend the deadline for credit unions to submit the 2021 voluntary Credit Union Diversity Self-Assessment. Submissions for 2021 will now be accepted until January 31, 2022. After that date, the self-assessment portal will remain open, but submissions will become part of the 2022 data set.
This tool is designed to help credit unions evaluate and advance their diversity policies and practices. The voluntary self-assessment is not part of the examination process. Data collected via the assessment will not impact a credit union’s CAMELS rating or be used in the supervisory process.
The NCUA will use anonymized data from the self-assessment to report on progress and trends in credit union diversity-related activities. The agency will not publish any information identifying a particular credit union or individual without written approval.
21-RA-10 2022 Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages)
December 2021
The CFPB has published its Truth in Lending (Regulation Z) Annual Threshold Adjustments (for credit cards, HOEPA, & QM). The thresholds adjustments are based on the annual percentage change reflected in the Consumer Price Index (CPI) in effect June 1, 2021. The adjusted thresholds are effective January 1, 2022.
Credit card/Open-end Annual Adjustments
- Minimum Interest Charge Disclosure – For all open-end consumer credit plans under the TILA, the threshold to disclose minimum interest charges will remain unchanged at $1.00.
- Safe Harbor Penalty Fees – For open-end consumer credit plans under the CARD Act amendments to TILA (§ 1026.52(b)(1)(ii)(A)), the adjusted dollar amount for the safe harbor for a first violation penalty fee will increase to $30 for the year 2022. The adjusted dollar amount for the safe harbor for a subsequent violation penalty fee (§ 1026.52(b)(1)(ii)(B)) will increase to $41 for the year 2022.
HOEPA Adjustments
- HOEPA – For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages for the year 2022 will be $22,969, an increase from $22,052 in 2021. The adjusted points and fees dollar trigger for high-cost mortgages (§ 1026.32(a)(1)(ii)(B)) for the year 2022 will be $1,148, an increase from $1,103 in 2021.
Qualified Mortgages – To determine consumers’ ability to repay mortgage loans, the maximum thresholds for total points and fees for qualified mortgages in 2022 will be:
Qualified Mortgage Amounts
| Reg Z Provision | 2022 Amounts | 2021 Amounts |
|---|---|---|
| 3% of total loan amount for loan amount > $100,000 | Greater than or equal to $114,847 | Greater than or equal to $110,260 |
| $3,000 for a loan amount greater than or equal to $60,000 but less than $100,000 | $3,445 for loans greater than or equal to $68,908 but less than $114,847 | $3,308 for loans greater than or equal to $66,156 but less than $110,260 |
| 5% of total loan amount for loans greater than or equal to $20,000 but less than $60,000 | 5% for loans greater than or equal to $22,969 but less than $68,908 | 5% for loans greater than or equal to $22,052 but less than $66,156 |
| $1,000 for a loan amount greater than or equal to $12,500 but less than $20,000 | $1,148 for loans greater than or equal to $14,356 but less than $22,969 | $1,103 for loans greater than or equal to $13,783 but less than $22,052 |
| 8% of the total loan amount for loans less than $12,500 | 8% for loans less than $14,356 | 8% for loans less than $13,783 |
Summary
On October 21, 2021, the Consumer Financial Protection Bureau (CFPB) ordered six large technology companies operating payment systems in the US to provide information about certain of their business practices. The information will help the CFPB better understand how these firms use personal payments data and manage data access to users so the Bureau can ensure adequate consumer protection.
The Bureau invites any interested parties, including consumers, small businesses, advocates, financial institutions, investors and experts in privacy, technology, and national security to submit comments to inform the agency’s inquiry.
Comments must be received by December 6, 2021. The notice and comment request can be found here.
Congress has tasked the Bureau with ensuring that markets for consumer financial products and services are fair, transparent and competitive. It has authorized the Bureau to require participants in the marketplace to provide information that helps the Bureau monitor risks to consumers and to publish aggregated findings that are in the public interest. Little is known publicly about how Big Tech companies will exploit their payment platforms. As a result, the Bureau has published the October 21, 2021 statement from Director Chopra within this notice and is asking for comment on the statement as well as the questions posed within.
The full statement can be accessed via the link to the notice provided above and the questions posed are found below:
- Will big tech companies engage in invasive financial surveillance and combine the data they collect on consumers with their geolocation and browsing data?
- Will they in turn use this data to deepen behavioral advertising, engage in price discrimination, or sell to third parties?
- Will these companies operate their payment platforms in a manner that interferes with fair, transparent, and competitive markets?
- Will the payment platforms be truly neutral, or will they use their scale to extract rents from market participants?
- Will small businesses feel coerced into participating in the payment platforms out of fear of being suppressed or hidden in search or product listings? If these tech companies enter a market that competes with other providers on the platform, will these providers be removed or otherwise disadvantaged?
- What factors will these tech companies use when disqualifying or delisting an individual or business from participating on the platform?
- How will these payment platforms ensure that key consumer protections are adhered to?
- How effectively do they manage complaints, disputes and errors?
- Are they sufficiently staffed to ensure adequate steps are taken to address consumer protection and provide responsive customer service when things go wrong?
The Bureau’s inquiry will help to inform regulators and policymakers about the future of our payments system. It will also yield insights that may help the Bureau to implement other statutory responsibilities, including any potential rulemaking under Section 1033 of the Dodd Frank Act.
How to get started: Select the dropdown preferences based on the section topic and the state(s) of interest, then press “search.” Once the results pop up, use the “export” or “print” features on the right side to save your search findings.
DISCLAIMER
The NASCUS State System Profile is an online open-content collaborative database; that is, a voluntary association of individuals and groups working to develop a resource of state supervisory information. The structure of this project allows for approved state-specific supervisory editors to alter its content. Please be advised that data found here has not been peer-reviewed by NASCUS staff. That is not to say that you won’t find this to be a valuable and accurate source of information. However, NASCUS cannot guarantee the validity of the information found here. Copyright 2022 National Association of State Credit Union Supervisors (NASCUS)
Introduction:
The following is a Compendium of Part 741 of the Code of Federal Regulations (“CFR”). Part
741 governs Federally-Insured State-Chartered Credit Unions (“FISCUs”). Part 741 is divided
into two subparts. Subpart A contains regulations that apply directly to FISCUs and are not
codified elsewhere in the U.S. Code (“U.S.C.”) or CFR. While the regulations of Subpart A are
not fully codified elsewhere, they regularly reference other provisions of the U.S.C. and CFR.
Subpart B incorporates by reference complete provisions of the U.S.C. and CFR and applies
them to FISCUs.
Some provisions of Part 741 refer to sections of the U.S.C. or CFR that discuss activities that
may not be permitted under the law of the state in which the FISCU is chartered. Please note that
Part 741 does not enlarge the scope of a FISCU’s authority beyond what is permitted under
applicable state law.
How to use this Compendium:
This document is an integrated roadmap of Part 741. Each Section of Part 741 is listed in its
entirety. Where the text of Part 741 includes a cross-reference to other provisions of the U.S.C.
or CFR, such a cross-reference is indicated in bold. Click the bold text and your web browser will
automatically open the relevant provision at www.gpo.gov (for the U.S.C.) or www.ecfr.gov (for
the CFR).
Some provisions include a “Special Notes” section. These notes are not part of the text of Part
Rather, they are helpful links and guidance meant to make use the Compendium more
efficient.
Regulatory Alert 20-RA-09 2021 Exemption Thresholds Adjustments Under the Truth in Lending Act (Regulation Z) and the Consumer Leasing Act
December 2020
NCUA’s Regulatory Alert notifies credit unions of the three annual exemption thresholds for 2021 related to 1) special appraisal requirements for higher-priced mortgage loans; and 2) consumer credit; and 3) lease transactions. The 2021 thresholds will be the same as the 2020 thresholds.
The exemption threshold for 2021 will remain at $27,200 based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect as of 6/1/2020.
- Consumer Credit and Consumer Lease Exemption Thresholds (Regulation Z and Regulation M)
The exemption threshold for 2021 will remain at $58,300 based on the CPI-W in effect as of 6/1/2020.