This Week: CORONAVIRUS RESPONSE – Matrix offers quick reference; StateFocus reports latest actions; CARES Act provisions outlined; NCUA offsite exams to run to May 1; Comment periods extended; State system appreciates extra time; Loans, grants for LICUs available; Reporting guidance under CARES offered; FIs urged to make use of loans under CARES
Matrix offers quick reference to state actions in face of crisis …
Making good on its commitment to disseminate critical information from states about the coronavirus crisis, NASCUS this week published on-line a matrix of each state’s actions or orders in response to the pandemic – including state-at-home orders, business closures, essential employee lists and more.
According to NASCUS President and CEO Lucy Ito, the matrix provides all states and credit unions a quick reference to how supervision and operations of credit unions across the states. “As the coronavirus crisis continues to affect an increasing number of Americans, state officials are taking unprecedented steps to safeguard the physical and economic health of their residents,” Ito said. “Our website page offers a comprehensive look at the swift actions taken by states to help their credit unions and citizens face this crisis and maintain needed financial services.”
Among other things, the NASCUS page provides details of executive or public health orders in each state (along with supporting documents), effective dates of the directives, and in which states credit unions and their workers have been deemed “essential” by state governments (which turns out to be all states in which orders have been issued).
NASCUS’ website also contains a complete list of federal guidance and resources, including from NCUA, CFPB, FDIC, Treasury Department, Small Business Administration (SBA) and more.
StateFocus reports on latest actions by states …
Meanwhile, NASCUS members this week received the latest issue of StateFocus, the monthly publication for members only highlighting regulatory and legislative activities in the states. This month’s issue takes a close look at individual state responses to the pandemic. Among the items in this week’s report: state guidance issued to credit unions forced to temporarily close branches during the crisis (out of concern for members’ and staffs’ health and safety), suspension of requirements for credit union annual meetings and state foreclosure moratoriums. StateFocus is available only to NASCUS members at no cost; see the link below for this month’s issue, as well as more information about how to subscribe.
Key provisions under CARES Act outlined …
During a webinar this week on the coronavirus crisis – and congressional and regulator response – NCUA Acting General Counsel Frank Kressman offered an outline of the impact on credit unions of the new Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted into law late last week. Among other things, the outline notes:
- NCUA may increase by an unlimited amount, the share insurance coverage provided by the National Credit Union Share Insurance Fund on any non-interest bearing transaction account in any federally insured credit union without exception. Any such increase must terminate no later than December 31, 2020.
- Credit unions and other financial institutions may suspend requirements under generally accepted accounting principles (GAAP) for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as troubled debt restructurings. Credit unions may also suspend any determination of a loan modified as a result of the effects of the COVID-19 pandemic as being a troubled debt restructuring, including impairment for accounting purposes.
- Federally insured credit unions and banks may participate in the “Paycheck Protection Program,” to the extent that the participation does not impair safety and soundness (see below for more information on the program).
- The new law makes several changes to NCUA’s Central Liquidity Facility (CLF), which serves as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls. Among the changes in the new law:
- The reference to “primarily serving natural persons” under the Federal Credit Union Act’s definition of “liquidity needs” is removed so as to permit temporary access for corporate credit unions in addition to natural person credit unions.
- The membership provision is amended to provide greater flexibility to corporate credit unions serving as agent members with respect to the amount they need to pay to subscribe to the capital stock of the CLF.
- It now requires the NCUA Board to obtain evidence from applicants for liquidity that the applicant has made reasonable efforts to first use primary sources of liquidity of the applicant, including balance sheet and market funding sources, to address the liquidity needs of the applicant.
- The borrowing authority of NCUA on behalf of the CLF is temporarily increased through Dec. 31. During the temporary increase period, the authority increases to 16 times the subscribed capital stock and surplus of the CLF (it was 12 times that amount).
- Foreclosures on all single-family federally backed mortgage loans for a 60-day period beginning on March 18 are prohibited; up to 180 days of forbearance for borrowers of a federally backed mortgage loan who have experienced a financial hardship related to the COVID-19 emergency, as attested by the borrower with no further documentation required is also provided.
- Up to 90 days of forbearance for multi-family borrowers with a federally backed multi-family mortgage loan who have experienced a financial hardship is also provided.
- A 4-month moratorium on eviction proceedings on certain single-family and multi-family properties, including those secured by federally backed mortgages is provided.
Kressman also noted that the new law contains a number of programs meant to support more lending to small- and mid-sized businesses (such as the Federal Reserve’s Main Street Lending Program). He said NCUA would be “monitoring the establishment of these programs, working with Treasury and the Federal Reserve to make them workable for the credit union system, and we’ll be updating you regularly as new information becomes available.”
Offsite exams prominent in NCUA priorities …
Continuation of offsite examinations (at least until May 1), attention to credit unions experiencing problems, and discussion with all supervised institutions are the three actions the NCUA is citing as priorities in confronting the coronavirus crisis, the agency said this week.
In a letter to federally insured credit unions (LTCU 20-CU-05), NCUA also said its offsite policy for all of its employees and contractors, imposed as of March 16, will “remain in effect until further notice. “We will reevaluate this approach through the duration of the COVID-19 pandemic and will notify credit unions of any changes to the procedures described herein,” the agency stated in its letter.
The letter states that the agency’s top priority is safety of agency staff, credit union employees, and credit union members. NCUA said it would “limit the burden imposed on credit unions so that they can focus on providing uninterrupted service to their members.”
The three priorities listed in the letter, the agency noted, outline its approach to examination and supervision for the duration of the COVID-19 pandemic.
In conducting exams offsite, NCUA said, examiners will not require a credit union to provide information to conduct offsite examination work – unless approved by the agency’s office of executive director. Further, the agency stated, if a credit union is occupied with addressing the impact of the coronavirus crisis on its operations, workers or members, the credit union “should not be required to address an offsite examination request unless it is a serious or time-sensitive matter.” However, the agency said, when a credit union is able to provide examination documents and make staff available, NCUA examiners will continue to conduct offsite examination work.
In prioritizing attention to federally insured credit unions experiencing problems, the agency said that would be focused on institutions having “significant financial or operational problems in our supervision efforts.” That includes credit unions that have asked for assistance and those that the agency determines may need assistance based on financial and operational conditions. “Examiners will work with credit unions to identify what assistance is needed,” the agency said.
The agency said it would contact each supervised credit union to discuss its operational and financial status, including any challenges or need for assistance. Outreach was scheduled to begin Monday and run through April 10; that period would serve as the “baseline for monitoring each credit union’s condition,” NCUA said.
The letter also outlines procedures for how NCUA plans to conduct exams during the coronavirus crisis.
“Consistent with long standing practices, examiners will consider the extraordinary circumstances credit unions are facing when reviewing a credit union’s financial and operational condition over the coming months,” the letter states.
More comment time given to pair of proposals …
Two comment periods were extended this week by NCUA – one on the very day that comments were (previously, at least) due. The agency announced it extended the comment periods for 60 more days of both the proposals on combination transactions with non-credit unions (bank asset acquisitions) and on corporate credit unions.
No reason was given for the comment period extensions, although NCUA and other federal banking agencies are taking actions to ease up regulatory requirements (where possible, and not affecting safety and soundness) during the coronavirus crisis.
The extension for the bank asset acquisitions was issued on the same day – Monday — that comments were originally due on the proposal, which is intended to clarify requirements for a federally insured credit union (FICU) when it proposes to acquire or merge with a bank or other institution. The proposal was issued in late January.
The NCUA announcement gave no reason for the comment period extension; however, the agency noted that the board voted last week (March 27) to extend the comment date. As of Thursday, the federal website regulations.gov showed only 13 comments received so far. (NASCUS, which was still putting the finishing touches on its comment letter when the extension was announced, will file at a later date.)
Later in the week, NCUA extended the corporate credit union proposal comment period, which was originally set at May 26. Proposed in February, the proposal would allow corporate credit unions to invest in subordinated debt instruments issued by credit unions – action proposed in a regulation in January – but would be required to fully deduct the amount of the instrument from their top capital amounts.
With the extensions, comments on the bank asset acquisitions proposal would likely be due in early June; the bank asset acquisitions proposal likely in late July.
Loans, grants for LICUs made available …
A total of $8.5 million – “approximately” $7 million for loans and $1.5 million for grants – is being made available to any qualified low-income-designated credit union (federally insured or privately insured) for coronavirus (COVID-19) pandemic response and other needs through NCUA’s revolving loan fund.
The agency said specific designation of funding — $4 million for loans and $800,000 for grants – for hardships due to the coronavirus (COVID-19) crisis is provided so credit unions can help members, businesses, and communities facing economic hardships from the pandemic.
The application deadline for COVID-19 assistance is May 22, for both loans and grants, according to notices published this week in the Federal Register. The NCUA Board approved the funding availability notices March 26.
The funding is provided through the Community Development Revolving Loan Fund (CDRLF), originally seeded with a congressional appropriation. Loans and grants can go to any low-income-designated credit union – federally insured or non-federally insured – if the credit union meets program eligibility requirements and its federal or, in the case of a non-federally insured institution, state supervisor concurs with the request.
The CDRLF can provide loans to support a wide range of activities (development of new products or services, partnership arrangements with community-based service organizations or government agencies, loan programs, operational needs, pandemic and other emergency response), and loans typically range from $250,000 to $500,000. Repayment terms can vary but won’t exceed five years, NCUA said.
COVID-19 emergency loans have a maximum award of $250,000 and will mature in three years.
The agency’s grant notice said the COVID-19 Emergency Support initiative is intended to help credit unions assist members experiencing economic hardships due to the coronavirus, particularly members that are most impacted by the situation. COVID-19 grants, with a maximum award of $10,000, will be extended on a rolling basis throughout the open application period. Minority depository institutions and credit unions with less than $100 million in assets will receive priority, the agency said. Awards will be made on a first-come, first-serve basis until the allocated funds are fully exhausted.
“Funds may be used to address the financial needs of impacted members, to help credit unions respond to the unexpected and unforeseen challenges of COVID-19, and to alleviate the impact of the crisis on the credit union and its community,” it said. “Due to the severity of the situation, the NCUA may relax some of the administrative and programmatic requirements for Applicants under this initiative.”
For other loan purposes, the agency said it accepts applications on a continuous basis (beyond May 22) subject to funding availability. For other grant purposes, the agency said it will accept applications from May 1 to June 30, and late applications will not be considered.
Bureau offers reporting guidance under CARES
Compliance responsibilities of credit reporting agencies and furnishers of report information under the consumer and business relief provisions of the $2.2 trillion economic relief legislation enacted last week are outlined in a policy statement issued this week by the CFPB.
The bureau noted that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) requires lenders to report to credit bureaus that consumers are current on their loans if consumers have sought relief from their lenders due to the coronavirus (COVID-19) pandemic. The bureau is also encouraging lenders to provide such relief and to continue to report accurate information to reporting agencies.
“Many furnishers are or will be offering consumers affected by COVID-19 various forms of payment flexibility, including allowing consumers to defer or skip payments, as required by the CARES Act or voluntarily,” according to the policy statement. “Such payment accommodations will avoid the reporting of delinquencies resulting from the effects of COVID-19.” The bureau said it supports furnishers’ voluntary efforts to provide payment relief, and that it “does not intend to cite in examinations or take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.”
Due to staffing and resources constraints on lenders and credit bureaus caused by the pandemic, the CFPB statement also provides flexibility for lenders and credit bureaus in the time they take to investigate disputes. “In evaluating compliance with the FCRA (Fair Credit Reporting Act) as a result of the pandemic, the Bureau will consider a consumer reporting agency’s or furnisher’s individual circumstances and does not intend to cite in an examination or bring an enforcement action against a consumer reporting agency or furnisher making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory timeframe,” according to the statement.
The CFPB also noted statutory and regulatory provisions that eliminate the obligation of reporting agencies and furnishers to investigate disputes submitted by credit repair organizations “and disputes they reasonably determine to be frivolous or irrelevant.” The agency said it “will consider the significant current constraints on furnisher and consumer reporting agency time, information, and other resources in assessing if such a determination is reasonable.”
FIs urged to begin making loans under CARES Act
Credit unions, banks and other financials are being urged by the Treasury Department to consider utilizing new programs for loans to small businesses created through the CARES Act, and which get underway today (Friday, April 3).
In a joint statement with the FDIC, Treasury urged financial institutions to use the programs “in a prudent manner as they actively work with small business borrowers with less financial flexibility to weather near-term operations challenges” of the coronavirus crisis.
One of the programs, the Paycheck Protection Program (PPP) – which provides loans to encourage certain qualified small businesses to retain employees through the COVID-19 pandemic and includes loan forgiveness subject to certain conditions – specifically includes credit unions as eligible to make the loans (however, as of now, it does not appear that credit unions may borrow under the program). The program is offered through the Small Business Administration (SBA).
According to the SBA, a PPP loan is designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive PPP loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
Credit, consumer reporting complaints up 23%
Credit or consumer reporting made up 44% of all complaints received by the CFPB in 2019 – a 23% increase from the previous year and the largest number of complaints in a category, the agency said in a report released this week. Additionally, the bureau said in its Consumer Response Annual Report for 2019, that complaints about prepaid cards spiked last year, recording a 59% increase from 2018.
By contrast, student loan grievances – while only 3% of the total – saw complaints drop by 12%, the bureau said, from 2018.
Overall, the bureau said it received 352,400 complaints in 2019 (including receipt of complaint number two million during the year since the agency began fielding the grievances in 2011). The credit or consumer reporting complaints accounted for 154,500; prepaid card reports, 4,100 (1.1%).
Rounding out the top five in complaints received (other than credit or consumer reporting) were:
- Debt collection, 21% of all complaints (at 75,200 – down 8% from 2018);
- Credit cards, 8% (29,000 – up 4%);
- Mortgages, 8% (27,300 – down 9%);
- Checking or savings account, 8% (26,900 – up 4%).
CFPB said that more than four in five complaints (81%) were sent directly to companies that were the subject of the grievances for review and responses. The remaining were sent either to other regulatory agencies (14%) or were found to be incomplete (5%).
Although the report states that the bureau received complaints from all 50 states and the District of Columbia during the previous year; there were some hot spots. On a per capita basis, the agency said, it received more complaints from consumers in Washington, D.C., Florida, Georgia, Nevada, and Delaware (in that order of most complaints). Consumers in South Dakota submitted the fewest complaints of any state per capita, the bureau stated.
Report details state engagement in FFIEC education
More than 100 state supervisors and examiners took part in training by FFIEC in 2019, according to the 2019 Annual Report of the exam council, issued last week (the first digital-only report issued by the group). According to the report, popular training sessions attended by the state representatives (offered by the exam council’s Examiner Education Office (EEO)) included those focusing on: financial crimes, liquidity risk, BSA/AML, fraud, emerging issues for community financial institutions, information technology, and interest rate risk.
BRIEFLY: CFPB seeks input on consumer financial law (RR); streamlined CDFI app process opened (RR); House leader notes extended insurance coverage
A CFPB task force is seeking public input – by June 1 – to identify areas of consumer protection the group should focus on as it works to prepare a final set of recommendations for “harmonizing, modernizing, and updating the federal consumer financial laws.” The group is looking for comments on such things as: federal and state coordination; expanding access to consumer financial products and services; protection and use of consumer data; and regulations the bureau writes and enforces … Low-income-designated, federally insured credit unions are now (as of Sunday) able to access NCUA’s qualification process for “streamlined” community development financial institution (CDFI) certification. Credit unions certified as CDFIs can apply for training and competitive award programs provided by the Treasury CDFI Fund for their work serving underserved communities. The intake period for the streamlined certification process closes May 31, NCUA said … Federally insured credit unions, minority depository institutions (MDIs) community banks, and other financial institutions will be able to offer federally insured, noninterest-bearing member and customer accounts under the reauthorized Transaction Account Guarantee (TAG) Program, a financial crisis era program, that was contained in the CARES Act, according to a statement issued this week by House Financial Services Committee Chairwoman Maxine Waters (D-Calif.). Also in her statement, Waters urged financial regulators (including NCUA) to “focus all of their energy on the current crisis. They should immediately suspend any rulemaking or other efforts that have nothing to do with this crisis,” she said.