Aug. 9, 2019 NASCUS Report

2019 Summit opens next week
with 3 key events, solid program

More than 18 hours of educational sessions covering a wide variety of topics of specific interest to the state credit union system – plus discussion and networking – gets underway next week in San Francisco as the 2019 NASCUS State System Summit gets underway at the Westin St. Francis San Francisco Hotel on Union Square.

The Summit is the annual conference for NASCUS, bringing together senior credit union regulators and practitioners in a unique event for mutual exchange and dialog. The conference runs Tuesday through Thursday.

In addition to the educational sessions, three key events are also scheduled:

  • Signing of a new “document of cooperation” among NCUA, NASCUS and state supervisory authorities (SSA) which outlines how state regulators and the NCUA agree that a strong cooperative relationship between the two strengthens the state and federal regulatory agencies and fosters efficient and effective supervisory programs. NCUA Board Chairman Rodney Hood and NASCUS Regulator Board Chairman John Kolhoff will be on hand to sign the document.
  • Presentation to Mary Hughes, acting director for the Idaho Department of Finance, of the 2019 Pierre Jay Award, the annual honor from NASCUS which recognizes individuals whose contributions have benefited the state credit union system in a significant way. The award honors Hughes’ career commitment to advance the state credit union system, spanning her nearly 30 years with the state agency. She has served as a NASCUS officer and director, participating in several NASCUS committees and taskforces. Notably, she served on the NASCUS Board of Directors from 2009-13 and has served on the NASCUS Legislative and Regulatory Committee since 2006.
  • Demonstration by the winner of the “The Next Big Idea” awarded by the National Association of Credit Union Service Organizations (NACUSO). This year’s winner is Zogo Inc., which is building a “white-labeled” financial wellness application for smart phones which the firm says is backed by science to help teenagers become better at personal finance. The app would be provided by financial institutions

NASCUS President and CEO Lucy Ito will also provide a “state of the state system” briefing, based on her perspective as leader of the national association for the state credit union system and her travels throughout the states.

Topics for the 18 hours of educational sessions include: the federal legislative outlook for state credit unions, effective enterprise risk management, interstate branching, addressing sexual harassment claims, the latest in compliance trends, cannabidiol (CBD) and hemp banking, the credit union of the future – and much more.

Registration for the conference, which ends on next Friday afternoon, is open until Tuesday.

Agenda, registration: 2019 NASCUS State System Summit

Hood: agency won’t sanction deposits related to cannabis

Credit unions accepting deposits from legal cannabis-related business will not be sanctioned by NCUA as long as the financial institutions are adhering to federal anti-money laundering and Bank Secrecy Act (AML/BSA) requirements, as well as the agency’s own safety and soundness rules, Chairman Rodney Hood said last week.

Trade publication Credit Union Times reported that Hood indicated in an interview that his agency won’t get involved in decisions credit unions make about services offered to their members. “It’s a business decision for the credit unions if they want to take the deposits,” Hood said.

“We don’t get involved with micro-managing credit unions,” Hood said.

The NCUA chairman asserted that, if credit unions providing services to cannabis-related businesses comply with rules by Treasury’s Financial Crimes Enforcement Network (FinCEN), file suspicious activity reports (SARs) and follow other rules, then they will not be cited for doing business with cannabis firms.

However, Hood also told the publication that Congress could remove all ambiguity about credit unions and other financial institutions serving cannabis businesses through legislation. NASCUS and others have called on Congress to pass legislation to ensure credit unions and other financials in states that have legalized cannabis use may continue to provide secure financial services to legal businesses of their members dealing with the substance.

CUs Won’t Be Sanctioned for Providing Marijuana Banking: NCUA Chairman Hood | Credit Union Times

Ito: support for chairman’s comments, action

NASCUS supports Chairman Rodney Hood’s decision not to penalize credit unions for serving state-authorized cannabis-related businesses, association President and CEO Lucy Ito said, adding that the association calls on Congress to provide additional clarity. “A credit union’s decision to serve these businesses, is based on a wide-range of factors, including the needs of their community, public safety and the potential for criminal and civil penalties,” Ito said in a press statement. “We commend the chairman for providing credit unions with this clarification from NCUA which will assist credit unions in weighing the risks associated with serving or not serving legal cannabis businesses.” The NASCUS leader also reiterated its call on Congress to provide additional clarity by passing legislation permitting credit unions to serve legal, state-authorized cannabis-related businesses.

NASCUS CEO Lucy Ito responds to Chairman Hood’s cannabis banking comments

‘Alert’ advises about email compromise fraud

Credit unions and other victims of fraud such as business email compromise are urged to file a complaint with federal law enforcement as soon as they identify suspicious activity, NCUA said in a “risk alert” published this week. In issuing its first “risk alert” since 2013, NCUA noted the increasing frequency of and losses related to business email compromise fraud schemes, and that credit unions can take steps to prevent the fraud and report it, when it occurs, to the FBI’s Internet Crime Complaint Center.

“Credit unions that report incidents to the Internet Crime Complaint Center promptly increase their opportunity to recover funds that have been wired under fraudulent pretenses,” NCUA Board Chairman Rodney Hood wrote in the alert.

Credit unions that identify business email compromise or a similar wire-transfer fraud scheme should also contact the originating financial institution as soon as possible to request a recall or reversal, as well as a “Hold Harmless Letter” or “Letter of Indemnity,” the letter adds. The agency said it also encourage those credit unions to file a Suspicious Activity Report (SAR) with the Treasury’s Financial Crimes Enforcement Network (FinCEN).

The alert also lists 10 steps credit unions can take to help prevent business email compromise fraud:

NCUA Risk Alert (19-RISK-01), Business Email Compromise Fraud

CURE office unveils new digital chartering tool

NCUA has officially unveiled a new web portal with information to assist credit union organizers and that offers pre-developed business models that organizing groups can use chartering new credit unions.

In a release Thursday, NCUA said its “Chartering Proof of Concept tool” is an automated system that helps credit union organizers better understand the process and how to prepare a charter application. According to the agency, the new digital tool streamlines the chartering process by allowing the agency’s Office of Credit Union Resources and Expansion (CURE) to preview the information to be included in an application.

“Organizers will use the tool to evaluate how well they meet the requirements for starting a credit union by reviewing the four critical application elements: purpose and core values, field of membership, capital, and subscribers,” the agency said. “They will address questions specific to these critical areas and submit answers to the agency for review.”

The agency last publicly discussed the new tool during its May 23 board meeting.

NCUA Chartering Proof of Concept tool

Fed sees round-the-clock payment service by 2023-24

A new, round-the-clock real-time payment settlement service will be developed by the Federal Reserve, becoming available in four to five years, the agency said Monday. The new service will be called the “FedNow Service,” and is aimed at supporting faster payments in the United States.

The Fed also announced it is seeking comment for 90 days on how the new service might be designed “to most effectively support the full set of payment system stakeholders and the functioning of the broader U.S. payment system.”

Additionally, the Fed said it would also explore a round-the-clock expansion of Fedwire Funds Service and National Settlement Service hours to facilitate liquidity management in private-sector real-time gross settlement services for faster payments and to support a wide range of payment activities, beyond those related to faster payments.

In its announcement, the central bank pointed out that, late last year, it requested public comment on potential services that it could develop to support faster payments. “Of the more than 350 comments that took a position on whether the Federal Reserve should develop a new service for faster payments, over 90% supported the Federal Reserve operating a round-the-clock real-time payment and settlement service alongside services provided by the private sector,” the agency said in a press release.

The Fed explained its decision to proceed with the FedNow service in its notice for publication set for today in the Federal Register. The agency said today’s technology presents “a pivotal opportunity for the Federal Reserve and the payment industry to modernize the nation’s payment system to establish a safe and efficient foundation for the future.”

“The U.S. payment system faces a critical juncture in its evolution,” the Fed noted. “Advances in technology have created an opportunity for significant improvements to the way individuals and businesses make payments in today’s economy. Smartphones, high-speed computing and cloud capabilities, extensive communication networks, and other innovations allow individuals and businesses to send and receive messages, post and consume content online, search for and obtain information, and conduct myriad other activities almost immediately and at any time.”

Federal Reserve announces plan to develop a new round-the-clock real-time payment and settlement service to support faster payments

Bureau says ‘alternative data’ use increase applicants, cut rates

Use of an “alternative data” model for determining credit worthiness has resulted in 27% more applicants being approved, and 16% lower interest rates, than traditional models have recorded, the CFPB said this week.

In an update on the results of its 2017 “no action letter” to a company that uses alternative data and machine learning in making credit underwriting and pricing decisions, the agency reported the approval and interest rate results. (A “no-action” letter is intended for “innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty about whether or how specific provisions of certain statutes implemented or regulations issued would be applied.” For example, according to the bureau’s policy statement on the practice, if, because of intervening technological developments, the “application of statutes and regulations to a new product is novel and complicated”).

The bureau said the letter, to Upstart Network Inc. (which uses traditional underwriting data and various categories of alternative data, including information related to borrowers’ education and employment history, in underwriting and pricing) required the company to provide information about how its model, in use, compared to more traditional models of underwriting and pricing. In exchange for providing the information, CFPB noted, the company was given leeway in the application of the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, to Upstart’s use of alternative data and machine learning for its model.

The bureau said that the reported expansion of credit access was reflected across tested race, ethnicity and gender segments, resulting in increased acceptance rates of 23% to 29%, and decreasing interest rates (annual percentage rates (APR)) between 15% to 17%.

“In many consumer segments, the results provided show that the tested model significantly expands access to credit compared to the traditional model,” the bureau stated. In particular:

  • “Near prime” consumers with FICO scores from 620 to 660 are approved approximately twice as frequently.
  • Applicants under 25 years of age are 32% more likely to be approved.
  • Consumers with incomes under $50,000 are 13% more likely to be approved.

“With regard to fair lending testing, which compared the tested model with the traditional model, the approval rate and APR analysis results provided for minority, female, and 62 and older applicants show no disparities that require further fair lending analysis under the compliance plan,” the CFPB stated.

An update on credit access and the Bureau’s first No-Action Letter

ON THE ROAD: At home, with NCUA Board Member Harper

NCUA Board Member Todd Harper was on the road last week – just up the pike, in fact, from agency headquarters in Alexandria, Va., to meet with NASCUS at association offices in Arlington, Va. NASCUS CEO Lucy Ito met with Harper as part of a continuing dialog between the state system and the newest member of the NCUA Board. NASCUS Executive Vice President and General Counsel Brian Knight also participated in the meeting.

… and in NC, hosting AACUC Annual Conference

NASCUS Vice President of Communications Shelton Roulhac this week served as master of ceremonies for the 21st Annual African American Credit Union Coalition (AACUC) Conference in Charlotte, N.C. The conference theme was Investing in Our Future – The 8th Cooperative Principle. The conference recognized trailblazers in the credit union industry with the AACUC’s African American Credit Union Hall of Fame. The keynote and general session speakers included NCUA Board Chairman Hood, Ancin Cooley, Dan Schline, Dr. Tammie Moore and Hannibal Brumskine.

Website poised to soar with new look, technology

It’s blue, it’s new — and it’s improved: the NASCUS website now sports the look and efficiency the state system expects from its national association, following a revamp and retooling unveiled this week., the association’s official website, underwent the revamping and retooling to reflect the changes undertaken by the association over the last several years — and to improve service to members and the state system in general, said NASCUS President and CEO Lucy Ito. now employs the latest in website technology, which allows for more efficient management by the staff and, most importantly, more efficient delivery of services and information to the state system,” Ito said.

She said the association also wanted to give it members more access to information compiled and analyzed by NASCUS. “Membership has its benefits, and our new website and its system have the capabilities to open the doors more widely to what NASCUS has to offer,” she said.

The new website was developed by NASCUS after extensive discussion between NASCUS and its members, as well as with others within the state system. Watch the website over the next few weeks and months for more resources and features as they are added.

LINK: new, blue, improved

BRIEFLY: Welcome in CO; position opening in KS; split for NCUA forms sought

Welcome to Tuan Nguyen, now the deputy commissioner of financial services in the Colorado Department of Regulatory Agencies (DORA) … The Kansas Department of Credit Unions has a position opening for a financial examiner; the position is now posted on the NASCUS website under “career opportunities.” Watch this space, as we add more position openings in the coming weeks and months … NCUA is proposing to split its Call Report and Credit Union Profile — forms 5300  and 4501A, respectively) and now both contained in one vehicle – into two separate forms “due to technology resources constraints that create different revision cycles.” Comments – on such things as better ways to enhance the clarity of information collected, and methods for automating collection of the information – will be due in 90 days.

NASCUS Career Opportunities/KS Dept. of CUs, financial examiner

Agency Information Collection Activities: Proposed Collection; Comment Request; NCUA Call Report and Profile

Information contact: Patrick Keefe ([email protected])

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