Jan. 19, ’18 NASCUS Report

Board to consider strategic plan,
liquidation rule, call report updates

A strategic plan for the next four years, a proposed rule on involuntary liquidations, and board briefings on call report modernization and inflation adjustments for civil money penalties (CMPs) are all included on the agenda for next week’s NCUA Board meeting.

The strategic plan, proposed in September, outlines three strategic goals for the agency:
Ensuring a safe and sound credit union system; providing a regulatory framework that is transparent, efficient and improves consumer access, and; “maximizing organizational performance to enable mission success.”

In its comment letter on the plan, NASCUS urged the agency to improve the shared supervision program of federally insured state chartered credit unions, and made another appeal to organize rules applicable to the state-chartered credit unions in one or contiguous sections. Specifically regarding training to help examiners deal with future challenges, NASCUS recommended that the agency work with state regulators to identify new course material needed, and work with NASCUS to improve the administration of National Credit Union Share Insurance Fund (NCUSIF) training of state examiners.

NASCUS also: Suggested that overall supervisory risk tolerance should be developed in conjunction with state regulators as the prudential regulators of FISCUs, and; noted that NCUA’s governance would benefit from an expanded NCUA Board and consistent representation of the state regulatory system (which NASCUS continues to advocate for in Congress).

The NCUA Board meets in open session Thursday (Jan. 25) at 10 a.m. ET.

NASCUS Comments: NCUA 2018-22 Draft Strategic Plan


Adjustments to capitalization deposits are due April 17 for the NCUSIF from all federally insured credit unions, NCUA said in its “Letter to Federal Credit Unions” 18-FCU-01 (Operating Fee Scale Adjusted for 2018) sent to all FCUs this week. The letter also points out that FCU operating fees are due that day as well. The NCUSIF deposit adjustments, and the operating fees, will be based on invoices to be sent to credit unions in March.

In the letter, NCUA points out that the decrease in the “overhead transfer rate” (the rate at which NCUA transfers funds from the NCUSIF to the operating budget of the agency to cover “insurance-related expenses”) was one of two factors affecting the operating fees FCUs will be charged. The other is the growth of FCU assets, the agency said. “For 2018, the Overhead Transfer Rate decreased from 67.7% to 61.5%, which raised the Operating Fee,” the letter states. “Generally, if the Overhead Transfer Rate increases, the Operating Fee collected from federal credit unions decreases. Conversely, if the Overhead Transfer Rate decreases, the Operating Fee collected from federal credit unions increases.” Federal credit unions with less than $1 million in assets are exempt from paying the operating fee, the letter adds.

NCUA LTFCU 18-FCU-O1: Operating Fee Scale Adjusted for 2018


A series of “requests for information” to determine if the Consumer Financial Protection Bureau (CFPB) is fulfilling its “proper and appropriate functions to best protect consumers” will be published in coming days, the acting director of the federal agency said Wednesday. In a release, Acting CFPB Director Mick Mulvaney said he is issuing the call for “evidence” of the agency’s functions in performing its role through the RFIs to provide the public an opportunity to provide feedback and suggest ways to “improve outcomes for both consumers and covered entities.”

The information requests, Mulvaney said, would seek comment on enforcement, supervision, rulemaking, market monitoring, and education activities.

“In this New Year, and under new leadership, it is natural for the Bureau to critically examine its policies and practices to ensure they align with the Bureau’s statutory mandate,” Mulvaney said. “Moving forward, the Bureau will consistently seek out constructive feedback and welcome ideas for improvement.

The acting director said much can be done to facilitate greater consumer choice and efficient markets “while vigorously enforcing consumer financial law in a way that guarantees due process.” According to the agency’s release, the first RFI will seek comment on Civil Investigative Demands (CIDs), which are issued during enforcement investigations. Comments, the agency said, will help the Bureau evaluate existing CID processes and procedures, and to determine whether changes are warranted.

Acting Director Mulvaney Announces Call for Evidence Regarding Consumer Financial Protection Bureau Functions


Earlier, the agency signaled that the new payday loan rule (scheduled to take effect Tuesday) may be reconsidered. In a statement, the bureau said it intends to engage in a rulemaking process that may lead it to reconsider the rule.

Although most provisions of the Payday Rule (officially known as the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule) do not require compliance until Aug. 19 of next year, Tuesday’s effective date marks codification of the Payday Rule in the Code of Federal Regulations (CFR). The bureau said it may also waive a deadline for registered information systems (RIS) associated with the rule. “However, the Bureau may waive this deadline pursuant to 12 C.F.R. 1041.11(c)(3)(iii),” the bureau’s statement said. “Recognizing that this preliminary application deadline might cause some entities to engage in work in preparing an application to become a RIS, the Bureau will entertain waiver requests from any potential applicant,” it added.

The final rule, as approved by the agency in October, required payday lenders and others to determine upfront whether consumers can repay their loans Under the 1,690-page rule, the agency had set a goal of stopping “debt traps” by installing ability-to repay protections which apply to loans requiring consumers to repay all or most of the debt at once. Lenders are required to conduct a “full-payment test” to determine upfront that borrowers can afford to repay their loans without re-borrowing. For certain short-term loans, lenders can skip the full-payment test if they offer a “principal-payoff option” that allows borrowers to pay off the debt more gradually.

The rule requires lenders to use credit reporting systems (RIS) registered with the agency to report and obtain information on certain loans. According to the bureau, the rule allows less risky loan options, including certain loans typically offered by community banks and credit unions, to forgo the full-payment test. The rule also includes a “debit attempt cutoff” for any short-term loan, balloon-payment loan, or longer-term loan with account access and an annual percentage rate higher than 36% that includes authorization for the lender to access the borrower’s checking or prepaid account.

CFPB Statement on Payday Rule

NASCUS Fact Sheet Summary: CFPB Final Rule Re: Payday, Vehicle Title and Certain High-Cost Installment Loans


Modernizing the Bank Secrecy Act (BSA) and anti-money laundering (AML) regime has “clear bipartisan interest,” the chairman of the Senate Banking Committee said Wednesday in opening a hearing, calling for coordination and information sharing among all stakeholders. “There seems to be space to improve information and coordination between industry, regulators, and law enforcement,” said committee Chairman Mike Crapo (R-Idaho). “The breadth of each of these areas merit further consideration and discussion.”

Crapo said a hearing held last week by the committee highlighted a need to work with bank examiners to ensure that AML compliance “is not just a ‘check-the-box’ exercise. He noted that while technology now provides new ways to catch criminals and facilitate compliance, it also poses challenges to law enforcement. He pointed to the rise of cryptocurrencies and their potential to facilitate sanctions evasion “and perhaps, other crimes.”

Testimony at the Senate committee’s Wednesday hearing (titled “Combating Money Laundering and Other Forms of Illicit Finance: Administration Perspectives on Reforming and Strengthening BSA Enforcement”) included that from a Treasury official who called for increasing the transparency and accountability of the U.S. financial system. Sigal Mandelker, Treasury undersecretary, terrorism and financial intelligence, told the senators that the Treasury Department is taking “a hard look” at both BSA and the broader AML/CFT regime. “We need to continuously upgrade and modernize our system – a statutory and regulatory construct originally adopted in the 1970s – and make sure that we have the right framework in place to take us into the 2030s and beyond,” he said.

Senate Banking Committee: Combating Money Laundering and Other Forms of Illicit Finance: Administration Perspectives on Reforming and Strengthening BSA Enforcement


Legislation exempting credit unions and other financials originating less than 500 closed-end mortgages and 500 open-end lines of credit in the previous two years from mortgage lending reporting rules was adopted by the House Thursday, 243-184. The Home Mortgage Disclosure Adjustment Act (H.R. 2954), introduced by Rep. Tom Emmer (R-Minn.) amends Home Mortgage Disclosure Act’s (HMDA) reporting and recordkeeping requirements, which were issued by the CFPB and went into effect Jan. 1. Under that rule, credit unions must report HMDA data if they (among other things, including asset-size, location, and more) and they originate 25 or more covered closed-end mortgage loans or 500 or more covered open-end lines of credit in each of the two preceding calendar years. In 2020, under the rule, the covered open-end lines of credit threshold reverts to 100.

Executive Summary of the Home Mortgage Disclosure Act (Regulation C), Final Rule


More “regulatory relief” measures were approved and sent to the House floor by the Financial Services Committee Thursday, including several of particular interest to credit unions:

  • CFPB exemption: H.R. 1264, the Community Financial Institution Exemption Act” which exempts “insured depository institutions or credit unions” with less than $50 billion in assets “from all rules and regulations issued by the Consumer Financial Protection Bureau (CFPB).” Introduced by Rep. Roger Williams (R-Texas), the provision does allow the consumer bureau to revoke the exemption for a certain regulation – or class of institutions – “under specified circumstances” and with the written agreement of the Federal Reserve Board and other specified federal banking agencies.
  • NCUA under EGRPRA: H.R. 4607, the Comprehensive Regulatory Review Act (introduced by Rep. Barry Loudermilk, R-Ga.) extends the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) to  NCUA and the CFPB, which are not now covered under EGRPRA, and requires all members of the FFIEC to conduct every seven years (at least) a comprehensive review of all their regulations issued after 2006. The aim is to “identify outdated or otherwise unnecessary regulations and tailor other regulations related to insured depository institutions” or any entity that offers consumer financial products or services.
  • Truth in Lending: H.R. 2226, Portfolio Lending and Mortgage Access Act (introduced by Rep. Andy Barr, R-Ky.) amends TILA to allow certain mortgage loans that are originated and retained in portfolio by an insured bank or credit union with less than $10 billion in assets be considered as qualified mortgages.

Mark-up details: House Financial Services Committee

AROUND THE STATES: CA fills deputy commissioner’s job

Caitlin Sanford is the new deputy commissioner of the division of credit unions for the California Department of Business Oversight (DBO), and will take the job Feb. 1. The appointment to the position was announced by Gov. Edmund G. “Jerry” Brown Jr. Dec. 29. A user-experience researcher for mobile financial services at Facebook since 2016, Sanford previously held positions for Bankable Frontier Associates, a consulting firm specializing in finance solutions for low-income people. Among her roles at the firm were director of consumer insights, acting director and associate. Prior that, she was a research intern at the World Bank in Brazil, and a program assistant at the United Nations Poverty Environment Initiative in Panama and in Kenya.

BRIEFLY: Who’s open in a gov’t shutdown; ‘solvency risk’ stays low

NCUA will not be among the federal agencies forced to stop operations if the Congress cannot reach a funding agreement by tonight at midnight, triggering a federal government shutdown. That’s because the agency is not (for the most part) funded through the congressional appropriations process (notwithstanding proposals from some in Congress to impose that process on the agency). The FDIC, the Federal Reserve and the CFPB will similarly continue operations … “Solvency/leverage risk” – which looks at risk-based capital at U.S. banks and bank holding companies, as well as leverage among banks, bank holding companies, insurance companies and others – is rated as “low” for the third quarter of 2017, the sixth straight quarter the area has received the low rating, according to the “Financial System Vulnerabilities Monitor,” maintained by the Treasury’s Office of Financial Research (OFR). On the other hand, market risk – including excessive valuations, low-risk premiums, and excesses in financial risk appetite and risk taking – continued to be at its highest level; it was the fourth straight quarter that “market risk” received the high warning.

OFR Financial System Vulnerabilities Monitor (heat map)

Information Contact:
Patrick Keefe, pkeefe@nascus.org

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