Jan. 18, 2018 NASCUS Report

Plan sees SSAs working closely with NCUA;
alternating exam pilot, MERIT emphasized

A 2019 performance plan that includes an objective to “work closely with the state supervisory authorities to ensure necessary action to mitigate risk within the state credit union program” was adopted by the NCUA Board Thursday during its first regular meeting of the New Year.

The plan, which the agency said outlines the resources and strategies it will use to set priorities and improve performance in 2019, calls for working closely with the SSAs under the “performance goal” of “fully and efficiently” executing the requirements of the agency’s examination and supervision program.

More specifically regarding work with state supervisory authorities, the plan includes:

  • An outline of the alternating-year examination program for federally insured state-chartered credit unions, which will run for one full alternating cycle (about three years) among six states. The agency said the program is aimed at helping NCUA and state regulators determine how an alternating examination program could improve coordination and make the best use of federal and state resources. “The results of the pilot will provide valuable insight into the advantages and risks of such an approach prior to finalizing a decision about a permanent alternating-year exam cycle,” the plan states. NCUA also said it would “effectively train” federal and state examiners participating in the alternating state exam pilot.
  • A pledge to provide training for state and NCUA examiners in “higher and emerging risk areas” to enhance examination effectiveness. The plan also calls for applying a new, internal “Learn Management System” for NCUA employees and state examiners.

In another area, the plan notes that the agency will conduct joint exams with state regulators in North Carolina and Washington starting Oct. 7 for very large credit unions (those with assets of more than $10 billion) using the Modern Examination and Risk Identification Tool (MERIT). The exams on the NCUA side will be conducted through the agency’s Office of National Examinations and Supervision (ONES). The plan notes that supervision contacts for all federal credit unions with assets greater than $10 billion will also be included in the exams.

NCUA 2019 Annual Performance Plan


In other action at its Thursday meeting, the NCUA Board:

  • Finalized inflation adjustments for the maximum amount for civil monetary penalties (CMPs) that can be assessed on credit unions, as required by federal law.
  • Approved a request from the Illinois Department of Financial and Professional Regulation (DFPR) for a revised member business lending rule that is in conformance with NCUA’s regulation. Under NCUA’s business lending rule, states that adopt their own versions of that rule affecting federally insured, state-chartered credit unions must receive NCUA Board approval. Last summer, the agency revised its rules (removing the member-occupancy requirement for loans secured by liens on 1-to-4-unit family dwellings) in conformance with the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA, S. 2155). The Illinois rule makes a similar revision, also reflecting the change in federal law. The NCUA Board has previously approved changes to the Illinois law, to conform with the agency’s own rules.

NASCUS has through the years advocated for state authority to effect state-specific member business and commercial lending rules which supplant Part 723 of NCUA rules for FISCUs in those states where a state-specific rule is approved by NCUA.

NCUA action on approval of revisions to IL business lending rule

CMP inflation adjustment


Shared NCUA-state supervisory agency oversight of federally insured, state-chartered credit unions is one of four “carryover” audits from last year to this year for the agency’s Office of Inspector General (OIG), according to the office’s 2019 annual performance plan made public this week.

The “carryover” audit from 2018 (meaning, it was begun last year and continues into this one) is listed as “State Supervisory Authority (SSA) Examination Process.” It states an objective of determining “whether NCUA provides shared oversight of FISCUs to assess their condition and address material risks that may negatively affect the Share Insurance Fund.”

The SSA exam audit is one of four outlined in the OIG’s 2019 performance plan continuing from last year, which was released this week in advance (and conjunction with) the overall 2019 agency performance plan. Other carryover audits include: address NCUA’s information technology (IT) equipment inventory policies, procedures, and practices; the efficiency and effectiveness of NCUA’s processing of consumer complaints; and audits of the agency’s four permanent funds, reports of which are due out in mid-February.

The OIG is also planning “new starts” in 2019, including: material loss reviews of the largest 2018 failures of insured credit unions following heavy losses from involvement in the taxicab medallion market; whether all credit unions should be required to obtain certified public accountant (CPA) audits; whether NCUA adequately assesses credit union real estate portfolios; whether the agency’s exam process adequately assesses the risk of credit union service organizations (CUSOs), and more.

NCUA 2019 Office of Inspector General Annual Performance Plan


Even though NCUA has listed its priorities for 2019 in a letter to credit unions, released last week, NASCUS points out in a summary of the letter that most exams of federally insured, state-chartered credit unions will continue to be conducted primarily by state examiners.

The summary – available to NASCUS members only – notes that NCUA’s letter (LTCU 19-CU-01, released last week) was the first of the year and is aimed at providing stakeholders an overview of the agency’s supervisory priorities for the year. In particular, the summary points out, the extended exam cycle introduced in 2017 will be fully implemented this year, in accordance with past NCUA letters to credit unions (and summarized by NASCUS).

For more detail, NASCUS members can access the complete summary at the link below.

NASCUS Summary: LTCU 19-CU-01: NCUA Supervisory Priorities 2019 (members only)


Rodney Hood, a Republican, has been re-nominated by the White House for a second term on the NCUA Board, to take the place of Democrat Rick Metsger whose term expired last year. The White House sent the nominations to the Senate Wednesday. Hood had been nominated by President Donald Trump last summer, but no action was taken by the Senate and his nomination was returned to the president when the 115th Congress ended Jan. 3. If confirmed, Hood would serve his second tour as an NCUA Board member; he previously served on the board from 2005-09, including as vice chairman.


The constitutionality of the Consumer Financial Protection Bureau (CFPB) due to its single-director governance won’t be subject to Supreme Court review – at least, not yet – the high court decided this week, turning back a review of claims by a Texas bank.

State National Bank of Big Spring, Texas, and two other plaintiffs had been suing to have the bureau declared unconstitutional over its single-director leadership structure and funding mechanism (which is not through congressional appropriations). The complaint was dismissed by the U.S. District Court for the District of Columbia over lack of standing, but on appeal the D.C. Circuit court found the bank did have standing and remanded it to the district court. The court dismissed the claim after the bureau’s constitutionality was upheld in another case (PHH Corp. vs. Consumer Financial Protection Bureau).

The Department of Justice, in a brief filed in December, said the question of the CFPB’s constitutionality warrants Supreme Court review. However, it said this case “would be a poor vehicle for considering the constitutionality of the Bureau’s structure because it is unlikely that the question would be considered by the full Court in this case and, even if it were, there is a substantial jurisdictional question that could prevent the Court from reaching the merits of this dispute.” In fact, Justice Brett Kavanaugh, who as a D.C. Circuit court judge opined that the CFPB is unconstitutional, did not participate in Monday’s decision.

The bureau’s future, at least in the courts, is not clear however. As the DOJ pointed out this week, one or more other cases about the bureau are still proceeding through the court system. The DOJ said those cases “may not present the same obstacles that could impede the full Court from considering the merits of this important issue” of the agency’s constitutionality.

SCOTUS Jan. 14 orders list

DOJ brief from December


The former acting director of the CFPB may have moved on to become acting White House Chief of Staff, but his actions at his former agency are squarely in the crosshairs of Congress, the new chairwoman of the House Financial Services Committee said this week.

“I have written to Mick Mulvaney that while his time at the bureau may be over, the time for accountability for his actions is about to begin,” Committee Chairman Maxine Waters (D-Calif.) said in a speech to the Center for American Progress. Mulvaney, appointed by President Donald Trump as acting director of the bureau in late 2017 (following the resignation of Richard Cordray in the position) served as acting director until December of last year. Kathleen “Kathy” Kraninger, confirmed by the Senate also last month for a five-year term as permanent CFPB director, succeeded Mulvaney.

“This Congress will be working diligently to undo the damage that Mulvaney has wrought during his time at the consumer bureau,” Waters told the group. “I have a bill, the Consumers First Act, that reverses many of the known, harmful acts which I will soon be reintroducing.”

Waters also indicated that the former acting director of the Consumer Financial Protection Bureau (CFPB) would not be the only financial institution regulator coming under scrutiny during her time as chairman of the committee, which has oversight of the agencies. “I will be keeping a watchful eye on all of the financial regulators to make sure they are carrying out their statutory duties – including holding bad actors accountable and promoting financial stability,” Waters said.

Waters had a more tentative tone to current Director Kraninger. “We’ll see what she does,” Waters said.

In other comments, the new committee chairwoman said the Financial Services Committee will be paying close attention through numerous hearings as to whether financial regulators are attempting to weaken important reforms of the 2010 Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Waters Outlines Agenda in First Policy Speech as Committee Chairwoman


CFPB Director Kathy Kraninger Thursday sent House Speaker Nancy Pelosi, Vice President Mike Pence and key House and Senate Committees draft legislation that she says would give her agency clear authority to supervise for compliance with the Military Lending Act (MLA). In letters to Pelosi and Pence (as president of the Senate), Kraninger said she is asking Congress to “explicitly” grant the bureau authority to examine specifically for MLA compliance. “The Bureau is committed to the financial well-being of America’s service members. This commitment includes ensuring that lenders subject to our jurisdiction comply with the Military Lending Act so our service members and their families are provided with the protections of that law,” Kraninger wrote.

Consumer Financial Protection Bureau Asks Congress for Clear Authority to Supervise for Compliance with the Military Lending Act

AROUND THE STATES: Transitions in FL, IL

Jessica A. Baer is the new acting secretary of the Illinois DFPR, succeeding Bryan Schneider, who stepped down from his post this week as the new state administration, the result of last fall’s election, took office. (In a statement NASCUS President and CEO Lucy Ito thanked Schneider for his service at the state, and as a member of the NASCUS Regulator Board, where he served as vice chairman. “Bryan has been a voice for regulatory right-sizing coupled with firm consumer protection—all within the framework of well-coordinated multi-state supervision and cooperation with state and federal partners,” she said in a statement.)

Also this week: The Florida Financial Services Commission (FSC) advertised for a new commissioner, who serves as the director of financial regulation for the state. The director is responsible for state regulatory oversight of state-chartered credit unions and other financial institutions, securities firms, finance companies, money services businesses, and debt collectors. The position has been vacant since Commissioner Drew Breakspear resigned last summer; Deputy Commissioner Pam Epting has been leading the office since then.

BRIEFLY: Position of VP of State Programs, Supervision opens

NASCUS has a position open for a highly qualified individual with bank or credit union examination experience for the newly created role of vice president of State Programs and Supervisory Policy at the association. For details, and to apply, see the link below.

NASCUS career opportunity: Vice President of State Programs & Supervisory Policy

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