Feb. 17, ’17 NASCUS Report

Op fee letter prompts deeper dive
into impact of OTR decrease

A letter to federal credit unions about their 2017 NCUA operating fee notes that two-thirds of the 25% increase in this year’s fee is due to a decrease in the overhead transfer rate – an assertion that NASCUS President and CEO Lucy Ito said needs some further explanation. In the letter (LFCU 17-FCU-01) issued last week, the agency states that the OTR decrease from 2016 “accounts for most of the (operating fee) rate adjustment increase” of 25.5%. However, the NASCUS leader pointed out, a lower OTR keeps more money in the insurance fund, and helps to moderate the need of an insurance premium.

“FCUs and federally insured SCUs benefit from the lower OTR because the share insurance fund is retaining more dollars that can now be counted toward the equity ratio and possibly fend off the necessity of charging a premium,” Ito said. “NCUA’s 2017 budget is $298.16 million; if the OTR had stayed at the 2016 level of 73.1%, the agency would have transferred $217.95 million from the share insurance fund to cover its 2017 budget. Instead, with the OTR going down to 67.7% this year, NCUA transferred $201.85 million, a $16.1 million difference. The agency is leaving those millions in the share insurance fund, which keeps the fund equity higher.” Additionally, Ito pointed to two other factors that led to an increased operating fee cited by the agency: long-term capital investments by the agency (making up 24% of the increase in the fee), and changes to the NCUA operating budget (making up 10% of the fee adjustment).

NCUA LFCU 17-FCU-01: NCUA operating fee schedule for 2017
NCUA staff 2017 OTR summary
NCUA History of OTR


The federal credit union interest rate ceiling will be under consideration by the NCUA Board when it meets next Thursday in Alexandria, Va., for its regular monthly board meeting. Under the Federal Credit Union Act, FCUs may not charge a rate of interest that exceeds 15%. However, the board may adopt a higher rate for an 18-month period if — after consultation with “appropriate committees of Congress,” the Treasury and other federal financial institution regulators — it determines that rates have risen over the preceding six-month period and that “prevailing interest rate levels threaten the safety and soundness of individual credit unions as evidenced by adverse trends in liquidity, capital, earnings, and growth …” The current rate is 18%, set in June, 2015 (which was an extension of the rate set 18 months before that), which expires March 10. In other action, the board is scheduled to hear a report on the National Credit Union Share Insurance Fund.

NCUA Board Agenda, Feb. 23


With an aim of developing an “Agency Action Plan” for NCUA, former NCUA Chairman Michael Fryzel, the lead transition liaison to the agency for the Trump administration, has been meeting with board members and key staff, as well as reviewing budgets, strategic plans and documents, he reports in a series of columns published this week by CUToday.info. Fryzel reports that he is charged with objectively reviewing the agency’s structure and programs to develop a plan that would “enable the new administration to achieve the goals of a smaller government, less regulation and greater efficiency.” To that end, he states, he has conducted a series of interviews, including with both the board chairman and member, as well as “24 staff members including senior administrative personnel, regional directors, Congressional affairs and legal counsel.” In talking to the board members, he reported that he discussed with them the goals of the transition team, as well as their thoughts on the status of the agency and what they believed needed to be accomplished moving forward. With staff, he stated, his discussions ranged from examinations to consumer protection to pending legal actions and to budget reviews.

CUToday.info: An inside look at the presidential transition process


The CFPB has been granted a review by a federal appeals court of a ruling from last fall that effectively found the structure of the agency unconstitutional. In a decision released Thursday, the U.S. Appeals Court for the District of Columbia ordered that the CFPB petition for a review of the Oct. 11 decision by the full panel of judges in the circuit be granted. A hearing has been set for May 24. The ruling effectively keeps CFPB Director Richard Cordray in his seat at the agency, at least until the full panel renders its decision, as the October ruling is stayed. Cordray has said he would not resign. In the October ruling (CFPB v. PHH), the appeals court overturned a lower court decision, ruling that the single-director structure of the CFPB as devised is unconstitutional, representing too great a concentration of executive power – and that the director, consequently, must serve at the will of the president (and not be subject for removal only “for cause”).

Ruling granting en banc review of CFPB v. PHH; hearing set for May 24


“Alternative data” to determine credit-worthiness of consumers who lack enough credit history to obtain a credit score is the subject of a “request for information” issued this week by the CFPB. The inquiry into “alternative data” focuses on “credit invisible” consumers, according to the consumer bureau. In their case, use of “alternative data” sources such as history of payment for mobile phone usage or rent might be considered when making lending decisions, rather than traditional credit history (based on such payments as mortgages and credit card bills).

According to bureau Director Richard Cordray, the idea is to investigate whether the non-traditional approach can offer opportunity to the 26 million consumers the agency estimates are credit invisible. The agency also estimates that another 19 million consumers have a credit history that has gone stale, or is insufficient to produce a credit score under most scoring models. CFPB is also looking at how to limit risks posed by the use of alternative data. For example, aside from considering history of mobile phone and rent payments, the agency is also looking at the risks (and benefits) of tapping history of electronic transactions such as deposits, withdrawals or transfers, with the aim of discerning a track record of meeting obligations that may not turn up in a credit history. However, CFPB conceded that alternative data may be inconsistent, incomplete, incorrect, overgeneralized, or biased. “Such flaws could adversely affect credit access for low-income and underserved populations, or others,” the agency stated.

The agency has issued a “request for information” on the entire subject area, with comments due by May 19.

CFPB request for information/use of “alternative data” in determining credit worthiness


Legislation aimed at giving regulatory relief to smaller credit unions and banks by requiring their federal regulators (including NCUA and the CFPB) to tailor their rules to fit financial institutions’ business models and risk profiles has been reintroduced in the Senate. As he did in the previous Congress, Sen. Mike Rounds (R-S.C.) has introduced the “Taking Account of Institutions with Low Operational Risk Act” (the TAILOR Act, S. 366), which mirrors House legislation of the same name that was also introduced in the previous Congress. That bill, H.R. 2896, was sent by the House Financial Services Committee to the House floor, but no further action was taken. In addition to requiring regulators to take risk into account, Rounds’ bill would require regulators to provide an annual report to Congress outlining the steps taken to “tailor” their regulations, and; review all regulations issued by the agencies since the Dodd-Frank Act was passed in 2010, and revise those that do not conform to the new TAILOR Act.

The House version of last year’s bill was incorporated into the 2016 Financial CHOICE Act, the sweeping reform of the Dodd-Frank Act proposed by House Financial Services Committee Chairman Jeb Hensarling (R-Texas). The committee leader is reportedly preparing a new version of his reform bill; introduction is expected soon.


Former NCUA Board Chairman (and now Board Member) Rick Metsger joins a quickly growing lineup of expert speakers for the 2017 Cybersecurity Symposium, June 5-6, in San Diego, joining keynoter Jim Stickley of Stickley on Security at the two-day conference, sponsored by NASCUS and the Credit Union National Association (CUNA). Metsger, who served as NCUA Board Chairman from April 2016 until last month (and has served on the NCUA Board since 2013), will discuss the agency’s commitment to cybersecurity at credit unions, and other topics. Other speakers are:

  • Randy Romes of CliftonLarsonAllen (CLA), will serve as the master of ceremonies for the event; he is a principal in the Financial Institutions and Information Security Services group at CLA, where he leads a team of technology and industry specialists providing IT audits and security assessments.
  • David Anderson (who presented at the 2016 symposium in Chicago) is a manager and information security consultant for CLA, with wide experience in performing and providing project management for network penetration testing, internal vulnerability assessments, and social engineering engagements within a wide range of industries.
  • Chad Carrington (who also presented at the 2016 symposium), of Golden 1 Credit Union is vice president for IT, cybersecurity, and facilities, where he leads complex hardware and software environments and large scale system upgrades, all while keeping a close eye on information security.
  • Matthew Froning, CIO of Security Compliance Associates, served the U.S. Air Force for more than 20 years leading technical assessments, evaluations and integration of multiple complex Network Warfare products, identifying shortfalls, gaps and capabilities critical to the Air Force’s network operation mission.
  • Chad Nordstrom (another alumnus of the 2016 program) is manager in the Information Security Services Group for CLA, providing IT and security audits, security assessments, and incident response for clients; he is actively involved in the information security and forensics industry.
  • Tim Segerson, NCUA Deputy Director of the Office of Examination and Insurance (E&I) (also a presenter in 2016) is responsible for overseeing the day to day operations of E&I, and speaks regularly on cybersecurity issues related to credit unions supervised and insured by the agency.
  • Patrick Sickels of CU*Answers, has completed extensive work in designing risk models and control frameworks for a vast array of commercial, manufacturing, and financial firms. His specialty is the design of compliance models which meet legal standards at low costs for organizations.

Speakers, agenda, registration (and more): 2017 Cybersecurity Symposium

BRIEFLY: Exam committee meets; welcome new CU leader

The NASCUS/NCUA National Examination Committee (NEC) met recently at NCUA’s Region V offices in Tempe, Ariz., to review and edit various chapters of the examiners guide including: Board and Operational Management, CUSOs, Lending, Electronic Payment Systems; Dawn McCaskill (GA), Denise St. Pierre (NH) and Edward Schutte (OR) are the NASCUS representatives on the committee … Welcome to Kathy Elser as new president and CEO of San Francisco Fire Credit Union in California; she is the former CFO/SVP of finance and administration for NASCUS-member BECU in Tukwila, Wash.


Information Contact:
Patrick Keefe, NASCUS Communications, [email protected] or (703) 528-5974

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