check ‘carte blanche’
of NCUA over the OTR
Placing a check on NCUA so that it no longer has “carte blanche” authority to determine what expenses go into the overhead transfer rate (OTR) calculation would be an ideal outcome of the comment period over the rate’s methodology, NASCUS President and CEO Lucy Ito told an Web interview show this week. Appearing on the “CUBroadcast” Internet-based video interview program, Ito agreed with host Mike Lawson that, right now, the methodology is mysterious and that a bright light should be shined on it. “We do think there are inequities in the system; by shedding light on them, we think they will become apparent. Right now there is no check and balance on the OTR system; NCUA decides unilaterally what is going to go into the OTR,” she said. “An ideal outcome for us: To introduce a check on the NCUA so that it does not have carte blanche authority to determine what expenses go into the OTR.”
The issues at hand go beyond an impact on state-chartered credit unions, Ito said on the program. “The OTR affects federal credit unions as well. The higher the OTR, the slower it is that NCUA is able to, for instance, pay off borrowings of the corporate stabilization program. Before the crisis, CUs would receive a dividend from the share insurance fund,” she said. The higher the OTR, Ito said, the less likely there will be excess in the fund which would entitle all CUs to dividends from the fund. ‘That’s something that affects both federal and state chartered credit unions,” she added.
Comments are due April 26 on the methodology for determining the OTR; NASCUS is urging all stakeholders to weigh in with letters to NCUA.
Meanwhile, the first discussions about comments from NASCUS on NCUA’s OTR methodology were among the actions taken by the association’s legislative and regulation committee at its conference call this week. Other topics discussed by the group, which recommends positions on issues to NASCUS leadership, included the fourth and final EGRPRA notice, the NCUA 2017-21 strategic plan (and 2016 regulatory review), expectations for NCUA’s final MBL/commercial lending rule, expected rulemaking from the CFPB, and 2016 BSA/AML initiatives. The next call of the committee is scheduled for March 2.
The credit union service organizations (CUSO) registry promised by NCUA is up and running, launched officially on Monday (Feb. 1). The online system is aimed at collecting information from CUSOs about their operations, and reporting that information directly to NCUA. CUSOs have 60 days between Feb. 1 and March 31 to register; there is no fee. According to NCUA, “federally insured credit unions are responsible for ensuring the CUSOs they make loans to or invest in agree to provide financial and operational information directly to NCUA.” The registry was authorized under a 2013 rule adopted by the NCUA Board.
While CUSOs are initially required to do the registering during the 60-day period, NASCUS understands that NCUA will be on the lookout for non-registered CUSOs as the agency conducts its exams of credit unions later in the year (the agency has also asked state supervisory authorities to report to NCUA if a state regulator comes across a non-registered CUSO in the course of a state exam). To introduce CUSOs, state and federal credit unions and state regulators to the system and registration process, NCUA is hosting a webinar about the new registry Thursday, Feb. 11 at 2:30 p.m. ET.
Citing concern over “inaccuracies” and that “lack of account options” is keeping some consumers out of the banking system, the CFPB this week issued a flurry of letters and a warning to credit unions and banks that failure to accurately report negative account histories to credit reporting companies could result in Bureau action. CFPB stated that, as more banks have adopted automated overdraft programs, they have placed greater emphasis on screening new applicants for potential risks that may arise if a consumer exceeds his or her account balance. The CFPB said that one way that banks and credit unions screen account applicants for risk is to use information provided by credit and checking account reporting companies, which, CFPB stated in a press release, “have databases of information on involuntary closures of consumer checking accounts supplied by banks and credit unions.”
A regulatory alert on “enhanced share insurance coverage” for three types of credit union accounts – including “interest on lawyer trust accounts” (IOLTAs) – was issued by NCUA this week, following up on action taken by the agency board last month. The alert, 16-RA-02, notes that as of Jan. 27, the three types of accounts are IOLTAs, Real Estate Escrow Accounts, and Prepaid Funeral Accounts. “In any of these accounts, if the primary account holder (the lawyer or escrow agent) is a member of a federally insured credit union, then all other depositors who contributed money to the account will likewise be federally insured by NCUA—even if they are not members of that credit union,” the alert advises. The alert includes guidance from the agency’s Office of General Counsel, which describes principles that will determine how NCUA could qualify other similar escrow accounts, on a case-by-case basis, for insurance coverage to pass through from a member to non-members. NASCUS has prepared and posted a summary and analysis of the alert (available to members only).
Both Idaho and Vermont have been approved for reaccreditation by NASCUS) and CSBS following recent reviews. The Idaho Department of Finance was reaccredited in late December; the Vermont Department of Financial Regulation was approved for reaccreditation in early January. This is fifth NASCUS accreditation for Idaho since the state agency was first accredited in 1990; Vermont was first accredited in 1996. NASCUS President and CEO Lucy Ito noted that reaccreditation is a significant achievement and represents the effectiveness and sound supervision of the state credit union regulatory system. She offered congratulations to the two states for their commitment and dedication to maintaining their certifications, and to Idaho Director Gavin Gee and Vermont Commissioner Susan Donegan for their leadership.
NCUA Board Chairman Debbie Matz is confirmed to speak at the March 14-15 NASCUS 2016 National Meeting (for regulators only) in Washington, D.C. The two-day program for senior state regulators takes a long look at the issues, topics and trends resonating through the state credit union regulatory environment today, with an eye toward the year ahead … Registration is open for the CFPB’s March 1 webinar (2-3 p.m.) focusing on its Truth in Lending Act-Real Estate Settlement Procedures (TRID) integrated disclosures (TRID), which became effective Oct. 3. The webinar focuses on construction lending. NASCUS was among those who advocated for a safe harbor period to protect lenders making good faith efforts to comply.
Patrick Keefe, NASCUS Communications, email@example.com or (703) 528-5974