Improvements to reduce burden urged in call report modernization
Material improvements that can result in further regulatory burden relief for credit unions is recommended by NASCUS in its comment letter to NCUA on its proposal to modernize its call reports and credit union profiles.
While NASCUS said it generally supported the proposed changes (which included changes related to commercial and business lending, the Financial Accounting Standards Board’s (FASB) accounting standard on current expected credit loss (CECL), risk-based capital and others), the association also recommended changes that would streamline entries made by credit unions, or clarified definitions.
NASCUS also recommended a minimum 18-month implementation period to give credit unions time to adjust their systems and familiarize themselves with the revised reports.
Specifically, NASCUS recommended:
- Self-aggregating account codes: NCUA should automate the codes (that is, those that aggregate to equal a separate “total” field) so that the total is automatically populated based on submissions for the underlying fields.
- CECL early adopter fields: NCUA should clarify whether the account codes and information collected for early CECL adopters will be the accounts codes and information collected when implementation becomes mandatory (which would help credit unions that are not early adopters to design their implementation to the call report).
- Commercial/member business loans: NCUA should work with the states and NASCUS about the terminology used in this area, since, to date, seven states have NCUA-approved, state-specific member business lending rules that do not distinguish between “commercial loans” and “member business loans.” The proposal is silent as to how state-chartered credit unions in those states should complete these account codes given that reporting state “member business loans” might over-report “commercial loans” as defined by NCUA. The agency should also: define the term “junior liens” used in the report; and clarify what sort of data on “junior liens” is being sought (such as in relation to “superior liens.”)
- Risk-based capital: Comprehensive instructions for each line item are needed for information in this area, as the level of detail “is new for the call report.”
- Form 5300 definitions: In addition to the “junior lien” definition, those for “MSBs” under “money transmitters,” and for “loan amount” under “member business loan” (to clarify whether deferred costs are included), should be included.
“In addition to modernizing and harmonizing the Call Report and the Credit Union Profile, we encourage NCUA to review AIRES and other supervisory data collection in conjunction with the Call Report modernization to ensure the regulatory relief (balanced by supervisory need) in one area is not offset by increased burden in another,” NASCUS added.
SUMMARY OUTLINES IMPACT OF ‘LOAN PARTICIPATION’ LEGAL OPINION
A NASCUS summary of an NCUA legal opinion outlining how provisions of a loan participation transaction at a credit union must meet regulatory requirements throughout the life of the loan is posted to nascus.org; it is available to members only. On March 22, the agency posted the legal opinion which states that and each loan must be treated independently. In the letter, NCUA General Counsel Michael McKenna wrote that certain provisions of the agency’s loan participation regulation outline the lifetime requirements for transactions. He pointed to Sec. 701.22(d) of the regulation which “emphasizes the need for adequate documentation and due diligence from before the time of purchase throughout the life of the loan.”
IN ADVANCE OF TESTIMONY, CFPB LEADER CALLS FOR CHANGE
Likely previewing his testimony next week before Senate and House committees, CFPB Acting Director Mick Mulvaney this week proposed sweeping changes to the role and governance of the consumer agency, including in its funding and instituting close oversight by the White House.
Mulvaney is scheduled to testify before the House Financial Services Committee (on April 11) and the Senate Banking Committee (the following day) to give the panels the semi-annual report on the agency. However, in the introduction to his written report unveiled this week, the CFPB acting director said he is requesting that Congress make four changes to the law establishing the bureau “to establish meaningful accountability” for the agency. Those changes include:
- funding the agency through the congressional appropriations process (rather than from the Federal Reserve);
- requiring legislative/congressional approval of major rules;
- ensuring that the agency director answers to the president “in the exercise of executive authority;”
- creating an independent inspector general for the agency.
“Per the statute, in the normal course the Bureau’s Director simultaneously serves in three roles: as a one-man legislature empowered to write rules to bind parties in new ways; as an executive officer subject to limited control by the President; and as an appellate judge presiding over the Bureau’s in-house court-like adjudications,” Mulvaney wrote.
“By structuring the Bureau the way it has, Congress established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism,” he stated.
11TH ‘RFI’ FROM CONSUMER AGENCY LOOKS AT FINANCIAL EDUCATION
Delivery of consumer financial education through online tools and other means makes up the 11th “request for information” (in a series of 12) issued this week by the CFPB in Acting Director Mulvaney’s quest for “evidence” that the agency is fulfilling its statutory role. Specifically, the agency is looking for comments (among others) about how it can eliminate or minimize duplication of efforts performed by other entities. The RFI was issued with a 90-day comment period (and is expected to be published on April 9).
In the RFI, the bureau noted that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) listed “conducting financial education programs” as one of six primary functions of the agency. Along those lines, the RFI notes, is that the legislation directs the agency to “develop and implement ‘initiatives intended to educate and empower consumers to make better informed financial decisions.’”
Dodd-Frank also directs, the bureau states, that CFPB “develop and implement a strategy to improve consumers’ financial literacy by, among other things, providing opportunities for consumers to access information and resources related to a range of financial topics including credit products, histories, and scores; savings, borrowing and other services found at mainstream financial institutions; preparing for major purchases such as education; debt reduction; improving the consumer’s financial situation; the development of long-term savings strategies; and wealth-building.”
The RFI seeks specific comments in three areas, related to its mission as required by the law, on how to:
- Improve the bureau’s existing programs and delivery mechanisms;
- Better measure and evaluate the effectiveness of the bureau’s financial education
- work; and
- Eliminate or minimize the duplication of the bureau’s financial education work with that performed by other entities, including federal, state, and local agencies.
The last of the RFIs – which were introduced in late January — will be issued next week, the agency said, and will focus on consumer inquiries.
SUMMARIES LOOK AT CFPB INFO REQUESTS ON ADOPTED, INHERITED REGS
Two new summaries of “requests for information” by the CFPB – on adopted and new regulations, as well as inherited regulations — have been posted by NASCUS. The summaries look at the eighth and ninth RFIs issued (respectively) by the agency last month. The first RFI focuses on the rules the CFPB has promulgated since the bureau’s creation, and whether those should be amended or new rules issued. The second looks at the regulations the bureau inherited from other agencies, and whether the bureau should amend those regulations, or exercise the rulemaking authorities the agency inherited. Both summaries offer a concise view of the RFIs, including convenient access to additional information and important dates (including comments and due dates). NASCUS has posted summaries of nine of the 11 RFIs issued by the bureau to date, with more to follow.
CREDIT REPORTING COMPLAINTS NO. 1 AT BUREAU IN 2017
Complaints about credit or consumer reporting made up nearly one-third (31%) of the 320,000 grievances received in 2017 by the CFPB — the most of one category received — according to a report issued by the agency this week. In its Consumer Response Annual Report for 2017, the bureau said the top five complaint areas were rounded out by complaints about: Debt collection (26% of all complaints), mortgages (12%), credit cards (8%), and checking or savings accounts (8%). As the leader in complaints for 2017, credit or consumer reporting supplanted debt collections, which led the list of top complaints in both 2016 and 2015 (30% and 31%, respectively), according to the report. In fact, complaints about debt collections have been the leader of those received by the consumer bureau since 2011, when the agency began accepting complaints. Over those years, of the more than 1.4 million complaints received, about 27%, have been about debt collections.
CFPB said in its report that debt collection, mortgage, and credit or consumer reporting complaints are the most-complained-about consumer financial products and services, noting that “complaints submitted to the Bureau about these products and services account for approximately 960,000 (68%)” of all the complaints it has received.
‘ABOUT NASCUS’ FREE WEBINAR OFFERED AT END OF MONTH
How to make NASCUS work for you is the focus of a live webinar April 30 from 2-3 p.m. ET featuring an overview of the benefits of membership. Learn about the NASCUS commitment to the industry and gain a better understanding of the association’s unique role in the credit union system. On the agenda: advocacy and training and education agendas for 2018; how NASCUS facilitates access to all 45 state regulators (where state charters exist and who are also NASCUS members); and how members can participate in dialogue sessions with regulators to gain national perspective on regulatory and compliance issues — and much more!
ON THE ROAD: In IN, MN and WI
Teachers Credit Union in South Bend, Ind., and the Minnesota Credit Union Network (MCUN) were both recent stops on the road for NASCUS President and CEO Lucy Ito as she travels the Midwest talking to credit unions and NASCUS partners. In her visits, Ito discusses current issues facing the state system; how credit unions, state associations and regulators can work to promote the safety and soundness of the system; and how to keep individual state charters up to date and competitive for credit unions in their respective states. In addition to meetings at Teachers CU in South Bend, IN, and at the Minnesota Credit Union Network in Minneapolis, Ito met with Brandon Riechers, CEO of Royal CU in WI; Amy Sink, CEO of Interra CU in IN; Financial Center First CU CEO Kevin Ryan in IN; Indiana CU League CEO John McKenzie; and Indiana Department of Financial Institutions Director Tom Fite.
BRIEFLY: L&R Committee talks FOM decision; analysis of FOM decision posted; educational sessions near; Filene survey
The NASCUS Legislative and Regulatory Committee met this week to discuss a variety of current topics, including last week’s decision by a federal court overturning portions of the agency’s new field of membership issues (and what that means for state-chartered credit unions) … along those lines, NASCUS this week posted an analysis (and summary) of the court’s decision (members only), which points out the court’s decision also leaves some important areas undecided … we have added two additional programs to our 2018 educational calendar: the NASCUS Mortgage Symposium, May 31 in Newton, Mass., and the Michigan “Industry Day,” Oct. 16 in Ann Arbor; check out the links below for more details … NASCUS members may participate by April 13 in a survey on credit union boards conducted by the Filene Research Institute, in conjunction with the Fullbrook Board Effectiveness, on optimizing board composition, which gauges the skills, demographics and culture that make boards work best. Filene seeks to create tailored insights and tools for the credit union system to help boards optimize their composition, and ultimately their effectiveness. Results will be shared via a webinar.
Patrick Keefe, firstname.lastname@example.org