April 20, ’18 NASCUS Report

Board gives approval to capital planning/stress testing for large FICUs …

A final rule requiring capital planning and stress testing for federally insured credit unions with assets of $10 billion or more, but including some changes from last fall’s proposal, was approved by the NCUA Board Thursday.

Under the final rule approved by the board (meeting in open session for its regular monthly meeting), some of the capital planning and stress testing requirements now applicable to the larger credit unions would be removed. As of June 1, credit unions with assets of less than $20 billion will continue to develop annual capital plans, but those plans will no longer be submitted to the NCUA each year by May 31. Credit unions with assets greater than $20 billion will continue to submit plans (by May 31) that must be approved by the agency.

NCUA will no longer be required to conduct supervisory stress tests; the credit unions subject to the rule (those with $10 billion or more in assets) will conduct stress testing themselves. The agency said it has reserved the right to conduct stress tests on covered credit unions if it deems such action necessary. Beyond that, credit unions covered by the rule with assets of less than $15 billion will no longer be subject to stress-testing requirements. Credit unions with assets equal to or greater than $15 billion will be required to conduct stress testing, though credit unions with assets greater than $20 billion will be subject to a 5% minimum stress test capital ratio.

NCUA Board Chairman J. Mark McWatters said the final rule “gets to the core of our responsibility as stewards of the share insurance fund.” However, McWatters drew a distinction between the NCUA rules and recent capital planning and stress-testing rules adopted by federal banking agencies for “systemically important financial institutions.” McWatters said protecting the insurance fund “is the standard response.” But he said the agency’s actions go beyond that response. “It’s not just protection for the insurance fund. It’s about protecting the credit union community — 111 million account holders mostly in the middle class, and historically underserved households. Large banks have other responsibilities; ours is to protect credit unions and their members,” McWatters said.

Board Member Rick Metsger (who made the vote for the proposal unanimous) noted that Thursday’s meeting marked two full years that he and McWatters have served together as the sole members of the NCUA Board. He said those 24 months have been marked by cooperation and non-partisanship between the two: Metsger a Democrat, McWatters a Republican. “If other agencies worked the way that we did, our nation wouldn’t be suffering from the partisanship and gridlock that we do,” he said.

NCUA Final Rule, Part 702, Capital Planning and Stress Testing


In other action, the NCUA Board approved a final rule giving federally insured credit unions a fourth, shorter version (expanded from the three versions now in force) of the agency’s official statement intended for use in TV and radio ads, allowing the credit unions to state (simply) “insured by NCUA.” The new rule takes effect 30 days after publication in the Federal Register.

Under NCUA rules, in most cases federally insured credit unions (FICUs) must use the NCUA’s official statement when advertising; until Thursday, three versions of that statement were permitted: “This credit union is federally insured by the National Credit Union Administration” (the agency’s official advertising statement); the shorter version, “Federally insured by the NCUA;” and, as a third option, the official sign may be displayed in advertisements in lieu of the advertising statement.

In adding the fourth option, NCUA said it is providing regulatory relief to credit unions and is focusing on the exemptions relating to radio and TV advertisements that are less than 15 seconds in duration.

NCUA final rule: Accuracy of Advertising and Notice of Insured Status


A summary of NCUA’s recent bylaws proposal for federal credit unions is posted on the NASCUS website as a tool for any states that wish to review their own bylaw requirements for federally insured, state-chartered credit unions in light of the federal agency’s initiative. The summary, which makes clear that the proposal only applies to FCUs, notes that NCUA’s advanced notice of proposed rulemaking for the bylaws proposal, issued last month (with comments due May 21), focuses on five key areas for FCU bylaw reform:

  • Improving the process by which FCUs amend their bylaws;
  • Limitation of service or expulsion of members;
  • Improving FCU bylaws to facilitate recruitment of qualified directors;
  • Attendance at annual meeting (the summary notes that Washington state has issued guidance to its FISCUs regarding “hybrid” virtual meetings); and,
  • Overlapping requirements.

The summary also notes that, since 2007, NCUA has incorporated standard bylaws into its regulations for FCUs, citing a need to continue to regulate in this area.

Summary: NCUA Proposed Changes to its Bylaws for Federal Credit Unions (FCUs)


A members-only summary of an NCUA legal opinion letter on field of membership issues has been developed and posted by NASCUS. The opinion letter, dated March 9, holds that a federal credit union chartered to serve certain religious groups (such as Anabaptists and Mennonites) is also permitted under the Federal Credit Union (FCU) Act to serve “individuals who share a core doctrinal belief and set of practices with those communities.” The NCUA letter notes that religious organizations, including churches or groups of related churches, “are recognized associations within the meaning of the FOM rules and are automatically approved as satisfying the associational common bond requirements of the FCU Act.”

NASCUS Summary: NCUA Legal Opinion Letter 17-1219: FOM, religious groups (members only)


All tax-exempt organizations filing annual returns – such as Form 990s filed by state-chartered credit unions – would be required to file their documents electronically, under tax-reporting related legislation adopted by the House this week. Additionally, the IRS would be required to make the returns publicly available in “machine readable” format (that is, in a structure that can be easily processed by a computer).

In requiring electronic format, HR 5443 (sponsored by Rep. Mike Kelly, R-Pa. and passed by voice vote) would extend the requirement to “e-file” to all tax-exempt organizations required to file statements or returns in the Form 990 series, including state-chartered credit unions. Federal credit unions are exempt from filing the returns. If adopted by the Senate (and signed into law by the president), the provision would take effect for returns filed for taxable years beginning after the date of the bill’s enactment.

Also this week: The House adopted HR 5445 (the “21st Century IRS Act,” sponsored by Rep. Mike Bishop, R-Mich.) which aims to provide improved transparency, accountability, and information security at the IRS. The bill calls on the Treasury Department (and its selected agencies, such as the IRS) to consult with financial institutions and submit a report to Congress within two years describing how the tax agency can utilize new payment methods and platforms to increase the number of tax refunds that can be paid by electronic funds transfer. The House adopted the measure on a vote of 414-3.

Both bills now head to the Senate for consideration.

HR 5443: Requiring electronic filing for tax-exempt organizations

HR 5445: 21st Century IRS Act


Senators voted 51-47 Wednesday to disapprove a CFPB rule – adopted five years ago as guidance – outlining indirect auto lenders’ compliance with fair lending requirements, including caps on interest rates. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) indicated after the Senate vote that the House would act on the bill; President Donald Trump is expected to sign the measure into law.

According to some reports, the vote on Senate Joint Resolution 57 (S.J.Res.57) marks the first time since legislation giving Congress power to overturn federal rules became law – under the 1996 Congressional Review Act — that the Senate has voted to rescind action taken by an agency years ago, instead of just within the narrow window prescribed by the law (60 business days since the rule goes into effect).

The rule was initially adopted as guidance by the CFPB in 2013. The guidance contained the consumer agency’s views on the applicability of federal fair lending laws to “indirect” auto lending (that is, indirect financing facilitated by a car dealer through a third-party lender).

The guidance outlined indirect auto lenders’ compliance with the fair lending requirements of the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. The bulletin related to policies used by some indirect auto lenders that allow dealers to mark up the interest rate charged to the consumer above the indirect auto lender’s “buy rate.” According to the bulletin, the lender then compensates the auto dealer based on the difference in interest revenues between the buy rate and the actual rate charged to the consumer in the contract executed with the auto dealer. In the bulletin, CFPB stated that the incentives created by such policies allow for a significant risk for pricing disparities on the basis of race, national origin or other prohibited bases.

Late last year, however, in response to a letter from Sen. Patrick Toomey (R-Pa.), the Government Accountability Office (GAO) found that the guidance was, in fact, a rule – and thus subject to the CRA.

Text of S.J.Res.57, disapproving CFPB guidance on indirect lending under Congressional Review Act


A key Senate supporter of clarifying states’ rights in dealing with marijuana issues (including business banking by credit unions) says he has received a commitment from President Donald Trump that the president backs a “federalism-based legislative solution” to allow states to decide how to address the issues. Sen. Cory Gardner (R-Colo.) released a statement last week saying that he has been assured by Trump that the president supports the legislative approach. In addition, Gardner stated, he received a commitment from Trump that the Department of Justice’s rescission in January of the Cole memo (outlining federal policy toward state legalization of marijuana) “will not impact Colorado’s legal marijuana industry.” NASCUS supports federal legislation that clarifies the permissibility of financial institutions providing financial services to state-authorized cannabis businesses.

Gardner statement on status of Trump administration toward legalized marijuana


Key session topics have been released for the 2018 NASCUS State System Summit, July 16-19 in Orlando, Fla. The four-day conference — the only national conference dedicated to the interests and future of the state credit union system – will look at topics including:

  • 5 Changes we should make to the CU system right now
  • Six Easy Pieces: Essentials of Cybersecurity
  • Blip or a Wave: What to make of the upcoming mid-terms
  • Surveying the Litigation Landscape
  • NASCUS’s State of the State System

The 2018 Summit, with about 22 hours of presentation and discussion, features topics chosen in consultation with NASCUS members which reflect the interests of the state system, and especially how to effectively address and resolve issues that have arisen in those topics. For more information, including registration, see the link below.

2018 NASCUS State System Summit, July 16-19, Orlando/information and registration

BRIEFLY: Time getting short to register for NASCUS 101

There is still time to sign up for the April 30 webinar “NASCUS 101,” a no-charge event featuring an overview of the benefits of membership in the association. Participants will learn about the NASCUS commitment to the state credit union system, and NASCUS’ unique role. Also under review: NASCUS Advocacy, training and education agendas for 2018; how NASCUS facilitates access to all state CU regulators; and how members can participate in dialogue sessions with regulators to gain national perspective on regulatory and compliance issues.

Info/registration for NASCUS 101; Monday, April 30, 2-3 p.m. ET

Information Contact:
Patrick Keefe, [email protected]

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