April 19, 2019 NASCUS Report

New, full NCUA Board meets, issues proposal
on loan compensation plans; notes state roles

Permitting credit unions to offer competitive compensation plans related to loans and lines of credit without encouraging inappropriate risk in the lending operation is the aim of a proposal issued unanimously by the NCUA Board Thursday.

Meeting for the first time since 2016 with a full three-member complement (and led by new Chairman Rodney Hood and new Board Member Todd Harper; former Chairman J. Mark McWatters remains on the board as a member), the board issued an advanced notice of proposed rulemaking (ANPR) on credit union executive compensation for loans and lines of credit to members. (In the photo, NASCUS President and CEO Lucy Ito touches base with new NCUA Chairman Rodney Hood at Thursday’s meeting.)

(NASCUS President and CEO Lucy Ito touches base with new NCUA Chairman Rodney Hood at Thursday’s meeting.)

The ANPR follows a final report issued in December by the NCUA Regulatory Reform Rask Force on rules the agency intends to amend or repeal because they are outdated, ineffective, or excessively burdensome (and consistent with the spirit of regulatory reform agenda released by President Donald Trump early in his term). The final report retained an earlier recommendation that the rules be revised to offer flexibility regarding senior executive compensation plans “that incorporate lending as part of a broad and balanced set of organizational goals and performance measures.” It also moved this issue from the Tier 2 list of recommendations to Tier 1, for which action was recommended by May of this year.

Issued for a 60-day comment period, the ANPR states that the board is specifically looking at how to update its regulations so credit unions can offer competitive compensation plans without encouraging inappropriate risks, incentivizing bad loans, or negatively affecting safety and soundness. The board also seeks input on how its regulations governing loan-related compensation can be modernized generally.

“Given the degree of confusion and uncertainty this regulation has caused, the Board seeks comment as to how the NCUA should modernize its regulations generally governing the compensation of credit union officials and employees in connection with loans made by credit unions and specifically with respect to defining ‘overall financial performance,’” the board added in its draft Federal Register notice on the ANPR.

Only new board member Todd Harper had questions about the proposal, in particular asking about limits set by any of the states for executive compensation in lending.

“Are there any states that are more restrictive than we are,” Harper asked at the conclusion of his questions.

NCUA Senior Staff Attorney Frank Kressman said he had spoken to NASCUS Executive Vice President and General Counsel Brian Knight about state regulations. Kressman said the NASCUS executive pointed the agency to North Carolina regulations which, he told Harper, have language “that is similar to our current language. We haven’t seen any other states yet that are that restrictive.”

(Click on the image at left to view a short video with NCUA Board Member Todd Harper questioning NCUA Senior Staff Attorney Frank Kressman about the lending compensation rules in the states.)




Ito: Happy to provide background, ready to review proposal

In a press statement released following Thursday’s meeting, NASCUS’ Ito noted that the state system was pleased to work with the agency to provide information prior to the ANPR – and going forward.

“NASCUS appreciates the Board for soliciting stakeholder feedback on this complex issue,” she said. “We were pleased to provide background information to the agency ahead of the ANPR and will closely examine the ANPR to supply additional comments on behalf of the state system. We look forward to engaging in a thorough examination of compensation related to loans to members by the fully impaneled NCUA Board.”

With new faces on board come new, shuffled staff roles

The appearance of a three-member board Thursday (for the first time 2016) also was the debut of some new top staff members on the scene, as well as continuing top agency staff members in new roles.

Owen Cole was introduced (by now-Board Member McWatters) as acting chief of staff for new Chairman Hood. Cole, a veteran at the agency (he joined in 1993, working formerly as a banker in Washington, D.C.), previously served as the associate director for policy and markets in the agency’s Office of Examination and Insurance. He has also served as president of the NCUA Central Liquidity Facility. Cole has additional senior executive experience too: He served from November 2004 through August 2005 as NCUA Deputy Executive Director.

Meanwhile, Michael Radway is now senior policy advisor to NCUA Board Member Harper. He previously served in the same capacity under former NCUA Board Member (and former Chairman) Rick Metsger. (Harper and Radway also share past experience on Capitol Hill: Both worked for former Rep. Paul Kanjorski (D-Pa.)).

Finally, Sarah Vega – former chief of staff to former Chairman McWatters – is now serving a dual role as senior advisor to Chairman Hood and McWatters. She is also a veteran in senior roles at the agency: She served previously as chief of staff to former NCUA Board Chairman Michael Fryzel. She is herself a former state regulator (having served as director of the Illinois Department of Financial Institutions) and a former chair of NASCUS.

State supervisors speak out about cannabis clarity

It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space, 24 state financial institution supervisors, and one from Puerto Rico, wrote to congressional leaders this week.

The supervisors told House Speaker Nancy Pelosi (D-Calif.), House Republican Leader Kevin McCarthy (Calif.), Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Democratic Leader Chuck Schumer (N.Y.) that barriers for financial institutions to serve legal marijuana and related businesses create a commercial risk from the lack of comprehensive regulation and supervision and a diminished ability to identify operators acting to circumvent federal and state licensing and regulatory frameworks. “This raises concerns with respect to tracking the flow of funds, issues of public safety because of cash volume, and a loss of economic activity, workforce development and community development opportunities,” they wrote.

“While there are unresolved and differing opinions concerning marijuana policy, at the state and federal level, banking services availability has bipartisan support and is agnostic about the other issues pertaining to marijuana,” the letter stated.

The supervisors urge the congressional leaders to allow Congress to consider legislation that creates a safe harbor for financial institutions to serve a state-compliant business or “entrusts sovereign states with the full oversight and jurisdiction of marijuana-related activity.”

“Establishing a safe harbor for banks to serve these entities would help reduce the risk associated with large cash-and-carry operations and bring the safeguards, activities, and sales associated with this business into the regulatory reporting compliance framework,” they wrote.

“We must work together to look for solutions rather than ignoring the new policy landscape.”

The April 15 letter was signed by:

  • Robin Wiessmann, Secretary, Pennsylvania Dept. of Banking and Securities
  • Patrice Walsh, Director, Alaska Division of Banking and Securities
  • Ken Boldt, Acting Bank Commissioner, Colorado Division of Banking
  • Jorge L. Perez, Commissioner, Connecticut Department of Banking
  • Kevin B. Hagler, Commissioner, Georgia Department of Banking and Finance
  • Iris Ikeda, Commissioner of Financial Institutions, Hawaii Department of Commerce and Consumer Affairs
  • John Ducrest, Commissioner, Louisiana Office of Financial Institutions
  • Lloyd P. LaFountain III, Superintendent, Maine Bureau of Financial Institutions
  • Merrily S. Gerrish, Acting Commissioner, Massachusetts Division of Banks
  • Anita G. Fox, Director, Michigan Department of Insurance and Financial Services
  • Steve Kelly, Commissioner, Minnesota Department of Commerce
  • George E. Burns, Commissioner, Nevada Financial Institutions Division Department of Business and Industry
  • Marlene Caride, Commissioner, New Jersey Department of Banking and Insurance
  • Marguerite Salazar, Superintendent, New Mexico Regulation and Licensing Department
  • Christopher Moya, Director, New Mexico Financial Institutions Division
  • Linda A. Lacewell, Acting Superintendent, New York State Department of Financial Services
  • Lise Kruse, Commissioner, North Dakota Department of Financial Institutions
  • Mick Thompson, Commissioner, Oklahoma State Banking Department
  • Andrew R. Stolfi, Administrator, Oregon Division of Financial Regulation
  • George R. Joyner, Commissioner, Puerto Rico Office of the Commissioner of Financial Institutions
  • Charles Clark, Director, Washington Department of Financial Institutions
  • Dawn E Holstein, Commissioner, West Virginia Division of Financial Institutions, and
  • Kathy Blumenfeld, Secretary, Wisconsin Department of Financial Institutions.
  • Ed O’Leary, Commissioner, Utah Department of Financial Institutions


Letter from state regulators on cannabis banking issues calls for clarity

Safe banking act builds co-sponsorship to 166

Meanwhile, legislation is pending on the House floor to accomplish much of what the state regulators are seeking. Last month, the House Financial Services Committee sent to the House for consideration the “Secure and Fair Enforcement (SAFE) Banking Act of 2019,” (HR 1595), which would protect credit unions, banks and other entities from federal regulatory action if they provide financial services to legal cannabis-related organizations. Authored by Rep. Ed Perlmutter (D-Colo.) along with Reps. Denny Heck (D-Wash.), Steve Stivers (R-Ohio ), and Warren Davidson (R-Ohio), the legislation had 166 co-sponsors as of this week.

As approved by the Financial Services Committee, the bill is intended to “harmonize federal and state law concerning cannabis-related businesses and allow these businesses access to banking services.”. It would bar federal financial institution regulators from taking several actions against financial institutions serving legal cannabis-related businesses.

NASCUS has long been a leader (since 2014) in advocating for clarity in federal law for financial institutions serving legal marijuana businesses. In addition to adopting policy on clarity, NASCUS has hosted a number of sessions at it conferences and events about the issue – and is hosting a two-day symposium June 25-26 in Los Angeles focusing on cannabis banking.

HR 1595 awaits further action in the House.


SAFE Banking Act of 2019 (H.R. 1595)

NASCUS June 25-26 Cannabis Symposium (Universal City, Calif.)

Bureau will look at ‘abusive practices,’ fair debt collection

CFPB Director Kathleen L. Kraninger this week outlined her vision for the agency in the coming year that includes a look at clarifying the meaning of “abusive acts or practices,” and issuing proposed rules to implement the Fair Debt Collection Practices Act (FDCPA). In a speech to a Washington group (the Bipartisan Policy Center) she said her vision for the upcoming year was formed after a three-month listening tour. Among other things, she said she that included using all tools to prevent consumer harm, holding bad actors to account, and “ensuring a culture of compliance through supervision.”

More specifically, however, Kraninger indicated action ahead by the bureau on two key issues: “unfair, deceptive and abusive acts and practices” (known widely as “UDAAP”) and fair debt collection. With regard to UDAAP, Kraninger said the bureau will convene a symposia series over the coming year on a variety of topics related to the Bureau’s mission — the first topic of which will center on clarifying the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act.

“Congress gave the Bureau authority to protect consumers from unfair, deceptive, or abusive acts and practices and from discrimination – a fundamental and critical responsibility. Whereas unfairness and deception doctrines have been substantially developed under the [Federal Trade Commission] Act, abusiveness does not have the same record,” she said in prepared remarks. “While the statute defines abusive, some clarification, particularly with regard to reasonableness standards, may be useful. In last fall’s Unified Regulatory Agenda, the Bureau stated it is ‘considering whether rulemaking or other activities may be helpful to clarify the meaning of abusiveness.’ We are now taking the next step to explore this issue.”

Regarding fair debt collection practices, Kraninger said her agency will propose clarifying rules to better enable the use of modern communications technology in collections activity. “The proposed rules also would protect consumers with clear, bright-line limits on the number of calls they may receive from debt collectors on a weekly basis,” she said. “We will propose to provide clarity on how collectors may communicate via newer technology such as email or text messages. We will propose that collectors provide consumers with more and better information at the outset of collection to help them identify debts and understand their options, including their rights in disputing debts or paying them.

Late Thursday, the bureau officially announced the “symposia,” but offered no dates or names of participants.


Speech by CFPB Director Kathleen Kraninger Before the Bipartisan Policy Center

Consumer Financial Protection Bureau Announces Symposia Series

Georgia prize-linked savings legislation passes …

After an extensive advocacy campaign by the Georgia Credit Union Affiliates (GCUA), the state legislature passed a bill that would permit credit unions and other financial institutions to offer savings accounts that include a “sweepstakes” component as an option to help encourage savings among members.

To keep the bill moving forward, GCUA testified in hearings, lobbied legislators and held multiple private meetings with key leaders. The bill was amended in the House to strengthen the bill and make it explicitly clear that it was not “gambling,” and work was put forth to fight back against unwanted pro-gambling amendments.

The measure now awaits the signature of Gov. Brian Kemp (R).

… while Kansas credit union legislation enacted

Last week, legislation modernizing the Kansas Credit Union Act was signed by Gov. Laura Kelly (D) after passing both the state Senate and House.  The Heartland Credit Union Association spearheaded the bill, which makes 67 changes to the state statutes to brings Kansas law up-to-date and continue to protect the locally operated, not-for-profit structure of credit unions. Key aspects of the bill include:

  • Technical corrections of the credit union statutes to bring them in line with other statutes and federal law, and remove outdated requirements.
  • Removal of language that duplicates what is already spelled out in a credit union’s bylaws to protect local control and flexibility.
  • Modernizing consumer notification requirements by giving members the option to receive electronic notifications rather than mailed notifications.
  • Protects Kansans from financial fraud by limiting use of the term “credit union.”

The changes in the Kansas legislation take effect July 1.

It’s here: NASCUS 101 next week

It’s finally here: next Thursday is NASCUS 101, a one-hour (no charge) webinar that brings together members, prospective members or anyone else interested in NASCUS to better understand the unique tools and benefits NASCUS offers. The one-hour, packed-with-information program also offers attendees an opportunity to hear from their peers in NASCUS—a member network of state regulators, credit unions, credit union leagues, and other system supporters—and how they leverage their NASCUS membership. The webinar ends with a Q&A session. Advance registration required; sign up today!


Agenda, registration for April 25 NASCUS 101 webinar (no charge)

Information contact: Patrick Keefe/[email protected]

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