Aug. 28, 2020 NASCUS Report

THIS WEEK: 2020 VIRTUAL SUMMIT – Key issues outlined … leadership passes gavel … state system transitions noted … the whole shebang in one place; Summary outlines payday lending rule alert … while another looks at COVID-19 risk notice; McWatters legacy on OTR reviewed; Putting some ‘PEP’ into rules’ meaning; In-depth look at CARD Act rules planned; FDIC plans new office, looks for examiners; BRIEFLY: EIP guidance offered; ‘NeighborWorks’ webinar slated; PPP webinar rescheduled for Sept. 3; NASCUS Report takes a break – happy Labor Day holiday!

2020 (virtual) SUMMIT

Key issues outlined …

A rundown of NASCUS’ key issues in 2020 was a feature of this week’s 2020 virtual NASCUS Summit and Annual Meeting, an online gathering that drew participants from throughout the state system nationwide.

In addition to a summary of the key issues presented by NASCUS President and CEO Lucy Ito, the video session also featured installation of new leadership for the association – for both the state regulator board and credit union advisory council – and a celebration of transitioning members of the state system. An educational session on meeting the new challenges to the state system on readiness for the future.

(Click on the image above to view a short video of highlights of Ito’s remarks to the Summit)

Here’s a summary of those key events:

NCUA Board reform, subordinated debt among top issues:
NASCUS’ Ito told participants the association continues to advocate in Congress for reform of the federal regulator board – from three members to five members – and for at least one member of the board to have state credit union regulatory experience. While she indicated action on the Federal Credit Union Act in the waning days of the current Congress is unlikely, she said the state system’s advocacy on these issues sets the stage for the future.

On the regulatory side, Ito said the association supports making permanent the changes made to NCUA’s Central Liquidity Facility through this year’s Coronavirus Aid, Relief and Economic Security (CARES) Act, and told the agency as much in its comment letter on the issue (one of 12 filed by the association over the past year with a variety of agencies, including NCUA, the Small Business Association and the Federal Reserve).

Likewise, she said, NASCUS supported in another comment letter NCUA’s proposal on subordinated debt – something the association has worked toward for 20 years.

Specifically noting the association’s efforts on the proposal with NCUA over the past three years, Ito said “we had originally hoped that we would be able to finalize the rule before the next (financial) crisis, but we didn’t quite make it.” NCUA Board Chairman Rodney Hood earlier this month indicated that the NCUA Board would consider a final rule on subordinated debt before year’s end.

Broad overview of regulatory actions for members:
The NASCUS leader also told the group that the association  had published and made available to its members over the past year 45 summaries of proposed and final regulations, letters, regulatory and risk alerts and other actions from a variety of federal agencies, including NCUA, CFPB, SBA and the Financial Crimes Enforcement Network (FinCEN).

Membership expands among FCUs:
Ito shared with the Summit participants that the association now has three federal credit unions as members. In addition to Navy Federal Credit Union, which joined last year, two new FCUs have joined: SchoolsFirst FCU of Santa Ana, Calif., and Pacific Cascades FCU of Eugene, Oregon. “These FCUs support the dual-charter system; they have joined NASCUS because they believe a robust state system benefits both state and federal charters,” she said.

Pressure on state budgets:
NASCUS expects the continuing economic recession to put pressure on state spending, Ito said – and training often is a first victim when budget forces build. She encouraged states to tap the National Institute for State Credit Union Examination (NISCUE, the NASCUS Foundation, which supports training of state examiners) to help pay for their training needs. She thanked the credit unions, state association and leagues, and other system stakeholders that have contributed to NISCUE over the past year, which she said is helping to meet the needs of training expenses.

New leadership installed …

The virtual Summit also provided the opportunity to introduce the new leadership for the association for the next year. Rose Conner, administrator, North Carolina Credit Union Division, is the new chairman of the NASCUS Regulator Board. She replaces in the position John Kolhoff, commissioner, Texas Credit Union Department, who remains on the board as secretary/treasurer.

Serving as vice chairman of the board is Janet Powell, manager, Credit Union Program, Oregon Dept. of Consumer and Business Services. Rounding out the members of the Regulator Board for the next year are directors: Mary Ellen O’Neill, director, financial institution division, Connecticut Department of Banking; Steve Pleger, senior deputy commissioner, Georgia Department of Banking & Finance; Charles Vice, commissioner, Kentucky Department of Financial Institutions; Katie Averill, superintendent, Iowa Department of Commerce, Division of Credit Unions; and Yolanda Ford, deputy superintendent of banks community & regional banks, New York State Department of Financial Services.

At the same time, Mike Williams, president and CEO of Colorado Credit Union in Denver, is now the chairman of the NASCUS Credit Union Advisory Council. He replaces Rick Stipa, president and CEO of TruMark Finanical CU in Washington, Penn., who remains on the board as immediate past chairman. Serving as vice chairman is Jason Boesch, president and CEO of Energize CU of Oklahoma City.

Rounding out the Advisory Council’s membership as directors are: Patty Idol, Mountain CU of Waynesville, N.C.; Cathie Tierney, president and CEO of Community First CU in Appleton, Wis.; Mike Ryan, senior vice president and general counsel of BECU in Tukwila, Wash.; Brian Wolfburg, president and CEO of VyStar CU in Jacksonville, Fla.; and Jeff Dahlstrom, president, Southeast Financial Corporate CU in Nashville, Tenn.

(Click on the image below to view a short video of the passing of gavels between the past and current chairmen of the leadership groups.)

Resolutions honor transitions within state system …

NASCUS leadership approved 20 resolutions acknowledging persons who are making transitions within and without the state system, to both thank and honor them.

The resolutions recognized state supervisors:


Scott Cameron, California Department of Business Oversight

Charlotte Corley, Mississippi Dept. of Banking and Consumer Finance

JD Fields, Louisiana Office of Financial Institutions

Mary Hughes, Idaho Department of Finance

Tom Hunt, New Jersey Department of Banking and Insurance

Tina Miller, Tennessee Department of Financial Institutions

Gloria Papiez, Washington Division of Credit Unions

Mark Powell, Indiana Department of Financial Institutions

Anthony Rogers, Tennessee Department of Financial Institutions

Kim Santos, Wisconsin Office of Credit Unions.


The resolutions also recognized credit union leaders:


Kevin Foster-Keddie, WSECU, WA

Greg Hilbert, Fox Communities Credit Union, WI

Patty Idol, Mountain Credit Union, NC

Mike Litzau, Sooper Credit Union, CO

Mike Mercer, Georgia Credit Union Affiliates

Dave Mooney, Alliant Credit Union, IL

Karen Reams, Millstream Credit Union, OH

Curt Robson, American Share Insurance

Mendell Thompson, America’s Christian Credit Union, CA

Janice Welch, Kimberly Clark Credit Union, TN

See the whole Summit presentation for yourself

A video recording of the 2020 Summit is available on-line for review, as well as the printed materials for the association’s annual meeting, on Both will remain available for review until further notice. Click the image or link below to view either/both.

NASCUS State System Summit — Virtual

Summary offers contours of payday lending rule alert

NASCUS has published a summary of NCUA’s Regulatory Alert on its Payday Loans rule, which noted the impact of the final rule on credit union payday loans.

Issued Aug. 13, the NCUA alert highlighted at the outset that that compliance with the rule – which went into effect in 2018 – is essentially on hold until a federal court in Texas lifts a stay it issued that same year. In the meantime, NCUA said, its alert (20-RA-07) points out the impact of the final rule on loans known as NCUA “payday alternative loans” (PALs) and non-PALs.

The NASCUS summary is available to members only.


NASCUS Summary: Regulatory Alert 20-RA-07 CFPB Issues Amendments to Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (members only)

… while another summary looks at COVID-19 Risk Alert

Meanwhile, NASCUS this week produced another summary, this one on NCUA’s Aug. 7 “Risk Alert” focusing on fraud linked to the coronavirus crisis. The summary is available to members only.

The alert from the agency noted that persons out to commit fraud try to “take advantage of opportunities made possible through new or expanded large government programs arising from emergency situations, such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).”

NCUA said the alert describes the increased risks associated with routine operations, outlines red flags of the fraud schemes, offers references and ways to report fraud or misconduct, and lists member education resources.

Among the specific fraud issues the alert pinpoints are those associated with: the Small Business Administration’s (SBA) Paycheck Protection Program (PPP); business tax credits; and unemployment insurance.

Summary: NCUA Risk Alert: 20-Risk-02 COVID-19 Fraud Schemes

McWatters’ work on OTR ‘a huge thing’ for state system

Commenting on the legacy of NCUA Board Member (and former chairman) J. Mark McWatters, NASCUS’ Lucy Ito this week cited his efforts in making the overhead transfer rate (OTR) more equitable to the state system, in remarks to a credit union trade publication.

Ito told the Credit Union Journal that McWatters, who will be leaving the board as soon as his replacement is confirmed by the Senate (as early as next month), that McWatters was the “first board member in 20 years to … look at the overhead transfer rate and try to understand it.”

“He found it confounding and said … why can’t we come up with a system that’s more transparent and more equitable,” Ito told the publication. “That’s a huge thing for the state system that a new methodology was created instead, and instead of just tweaking the [existing] methodology it was a complete overhaul.”

McWatters has been serving in a holdover capacity since his official term expired a year ago. President Donald Trump has nominated Kyle Hauptman, an aide to Sen. Tom Cotton (R-Ark.) to take his place. Hauptman was recommended for confirmation by the full Senate on a split vote by the Senate Banking Committee earlier this month; the Senate has not yet scheduled a vote on his confirmation, although it is expected soon after the Senate returns from its summer recess after Labor Day.

In other comments to the publication, Ito said McWatters’ views on risk-based capital reflected an evolving approach by the entire board. “The board has come to realize the necessity of taking a holistic view” of capital, she said. “They’re all connected — risk-based capital, subordinated debt, prompt corrective action — it’s like whack-a-mole. If you deal with one without considering what’s going to happen with others, you create problems. It is something that needs to be addressed globally and not just in a siloed fashion.”

Agencies put ‘PEP’ into rules’ meaning

NCUA, banking regulators and law enforceent this week sought to clarify how the institutions they regulate can apply a risk-based approach to “politically exposed persons (PEPs)” in their customer due diligence under the Bank Secrecy Act (BSA).

The agencies – NCUA, the FDIC, Federal Reserve, OCC and FinCEN – also sought to clarify that PEPs do not include U.S. public officials.

The regulators and law enforcement agency noted that financial institutions have sought clarification on how to apply a risk-based approach to PEPs consistent with the customer due diligence (CDD) requirements contained in FinCEN’s 2016 final rule. BSA/anti-money laundering (AML) regulations do not define PEPs, they noted, but the term is commonly used in the financial industry to refer to foreign individuals “who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates.”

By virtue of their public position of relationship, such individuals may present a higher risk that their funds may be proceeds of corruption of other illicit activity. “The level of risk associated with PEPs, however, varies and not all PEPs are automatically higher risk,” the agencies wrote. They added that PEPs “should not be confused with the term ‘senior foreign political figure’ (SFPF) as defined under the BSA private banking regulation, a subset of PEPs.”

“Like all bank accounts, those held by PEPs are subject to BSA/AML regulatory requirements,” the statement reads. “These include requirements related to suspicious activity reporting, customer identification, CDD, and beneficial ownership, as applicable.

The joint statement reminded institutions of their obligation to identify and report suspicious activity, including transactions that may involve the proceeds of corruption. Financial institutions “must adopt appropriate risk-based procedures for conducting CDD; however, under the CDD rule, there is no regulatory requirement or supervisory expectation for banks to have unique, additional due diligence steps for customers whom the banks consider to be PEPs,” they said.

Agencies Issue Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons

Bureau plans in-depth look at CARD Act rules

Rules applying credit card consumer protections will be subject to a review to consider whether the regulations should still stand, be revised or rescinded, the CFPB said this week. In a request for information (RFI) the bureau said it is looking for comments on the rules, which were issued following the 2009 adoption of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). Comments are due in 60 days.

More specifically, the RFI seeks comments of the economic impact of the rules on small entities (including credit unions) and about how the consumer credit card market is functioning under the CARD Act.

In reviewing the rules’ effect on small entities, the bureau said it was looking for comments on (among other things) the current scale of the economic effects of the rules as a whole (and their major components) on small entities including on reporting, recordkeeping, and other compliance requirements, and how those effects can be reduced (consistent with the statute).

As for the credit card marketplace, the bureau said it sought comments on (again, among other things): terms of credit card agreements and the practices of credit card issuers; effectiveness of disclosure of terms, fees, and other expenses of credit card plans; adequacy of protections against unfair or deceptive acts or practices relating to credit card plans; and the cost and availability of consumer credit cards; and product innovation.

CFPB RFI notice on CARD Act rules review

Bank deposit insurer plans new office, staffed from outside

A new office to consider supervisory appeals, which would be independent with final authority to make resolutions, would be established under a proposal issued late last week by the FDIC. To staff up the new office, the FDIC plans to hire from outside of the agency – specifically, individuals with bank supervisory or examination experience.

Under the FDIC’s proposal, the supervision appeals review committee within the agency would be replaced with a new office that the FDIC called “an independent, standalone Office of Supervisory Appeals.”

The changes being proposed to the supervisory review process, the agency said, are based on outreach sessions its ombudsman held with bankers and other interested parties about a year ago. According to the FDIC, creating the proposed office “would promote independence and help alleviate perceived conflicts of interest, among other important goals.”

FDIC Board Chairman Jelena McWilliams said the proposed new office would establish a fair, independent process for a bank to appeal material supervisory decisions. “Such an appeals process is key to promoting consistency among examiners across the country, ensuring accountability at the agency, and ultimately, maintaining stability and public confidence in the nation’s financial system,” McWilliams said.

Comments on the proposal are due Oct. 20.

FDIC Proposes Changes to Its Supervisory Appeals Process

BRIEFLY: Guide aims to help with EIPs; ‘NeighborWorks’ webinar planned; PPP webinar rescheduled; No NASCUS Report next week, have a great Labor Day holiday

The CFPB late this week issued a guide meant to assist intermediaries (including credit unions) serving individuals in accessing their federal economic impact payments (EIPs). The guide, titled “Helping Consumers Claim the Economic Impact Payment: A guide for intermediary organizations,” provides step-by-step instructions for frontline staff on how to address the EIPs, CFPB said. That includes: discussing the EIP with members or clients; determining if members or clients need to take action; and supporting members or clients with “what to expect and how to troubleshoot common issues” … NCUA will host on Sept. 15 a webinar on community development, with an eye to collaborating with local organizations, including the network of NeighborWorks America. The “Partnering with NeighborWorks” webinar gets underway at 2 p.m. that day. It will feature a panel of credit union and NeighborWorks participants. For more information, including registration, see the link below … Loan forgiveness and other issues related to the Paycheck Protection Program (PPP) will be the focus of a webinar scheduled for next week (Sept. 3) by NCUA and federal and state banking regulators. The session had been set for Thursday, Aug. 27 … NASCUS Report is taking a one-week break next week (Sept. 4), but will resume publication the Friday after the Labor Day holiday (Sept. 11) for continuing coverage for the state credit union system. In the meantime, have a happy, healthy and safe Labor Day!

New CFPB Guide for Intermediaries to Assist Non-Filers to Access their Economic Impact Payments

NCUA Webinar Will Discuss Credit Union, NeighborWorks Partnerships

Webinar: Loan Forgiveness and Other Matters Relative to the Paycheck Protection Program

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