March 22, 2019 NASCUS REPORT

House panel to consider bill giving clarity
for serving cannabis-related businesses

Legislation giving credit unions and other financial institutions more breathing room in providing services to cannabis-related businesses will be marked up next week in the House – a significant step for the effort, but not necessarily one that will end in the legislation becoming law.

The House Financial Services Committee on Tuesday will consider the Secure and Fair Enforcement Banking Act (The SAFE Banking Act, H.R. 1595) which, as drafted, would give legal cannabis-related businesses access to financial institution services and exempt financial institutions and employees from federal prosecution (or investigation) solely for providing services to state-authorized cannabis-related businesses. It’s the first time that such legislation has reached this stage of the lawmaking process.

The bill, introduced by Rep. Ed Perlmutter (D-Colo.) with Reps. Denny Heck (D-Wash.), Steve Stivers (R-Ohio), and Warren Davidson (R-Ohio) — and 138 cosponsors — is intended to “harmonize federal and state law concerning cannabis-related businesses and allow these businesses access to banking services,” according to the draft. It would bar federal financial institution regulators from taking several actions against financial institutions serving legal cannabis-related businesses, including:

  • Terminating or limiting deposit insurance at a bank or credit union “solely because the depository institution provides or has provided financial services to a cannabis-related legitimate business”;
  • Prohibiting, penalizing, or discouraging a bank or credit union from providing financial services to (first) a cannabis-related legitimate business or (second) to a state (and its political subdivisions or Indian Tribe) that exercises jurisdiction over cannabis-related legitimate businesses;
  • Encouraging (in any way) a bank or credit union not to offer or to downgrade financial services to account holders solely because they own or become an owner of a cannabis-related legitimate business;
  • Taking any “adverse or corrective supervisory action on a loan made to an owner or operator” of a cannabis-related legitimate business or for real estate or equipment leased to that business.

NASCUS, beginning in 2014, was among the first organizations representing credit unions or financial institutions to call for clarity in federal law for financial institutions serving legal marijuana businesses. Since then, in addition to adopting policy on clarity, NASCUS has hosted a number of sessions at it conferences and events about the issue – and is hosting a two-day symposium June 25-26 in Los Angeles focusing on cannabis banking.

The legislation has a long way to go, however. Even if the legislation is voted out of committee next week and sent to the House floor, its prospects there are unclear. That’s also true of the bill’s future in the Senate, including when (or if) it will be taken up there.

The Financial Services Committee markup hearing is scheduled to get underway at 2 p.m. Tuesday.

SAFE Banking Act of 2019 (H.R. 1595)

Financial Services Committee website/link to video feed of hearing

2019 NASCUS Symposium: Cannabis Banking


In the same markup hearing as the cannabis bill, the Financial Services Committee will also consider the Consumers First Act (H.R. 1500), which — as released in draft form earlier this month – is intended to reverse Consumer Financial Protection Bureau (CFPB) actions carried out under the direction of Acting Director John (“Mick”) Mulvaney in 2018 with respect to the bureau’s staffing, funding, operations, supervision, advisory councils, and more. The measure would express the “sense of the Congress,” offering a point-by-point repudiation of actions taken by the bureau at Mulvaney’s direction in areas such as fair lending enforcement, the publicly available consumer complaint database, pending legal actions against payday lenders, focus on rules’ impact on providers vs. consumers, and more.

In addition, it would set stricter parameters for the appointment of members to the Consumer Advisory Board (CAB), requiring the CFPB director to appoint no fewer than 25 members to CAB (six of those, as provided before, selected at the recommendation of the Federal Reserve Bank presidents) and would reinstate those removed last year. (See related story below.)

Consumers First Act (H.R. 1500)


A new “proof of concept” application for groups wishing to obtain a federal credit union charter is out for comment until May 10, according to a recently published NCUA notice. The application, submitted over an automated system, is intended to “assist organizing groups in demonstrating that they have thoroughly evaluated the proposed credit union’s operations by documenting the most critical elements of a new charter, such as the purpose and core values, field of membership, capital, and subscribers,” according to the notice published March 11 in the Federal Register.  The notice states NCUA will review the data received and provide guidance before a formal application for a new FCU charter is submitted. “The purpose of this information collection is to identify the level of understanding an organizing group has before they make a formal charter application submission,” it states. NCUA estimates it will receive proof-of-concept applications from 24 respondents annually.

Proposed Collection; Proof of Concept Application for New Charter Organizing Groups


NCUA’s proposed rule on supervisory committee audits and verification is the subject of NASCUS’ latest summary, posted to the website this week. Comments on the proposal – which was issued last month by the NCUA Board – are due April 26.

The NASCUS summary notes that the proposal makes some key changes to existing regulations regarding audit standards, including those for large credit unions (those with $500 million or more in assets) which are required to obtain annual independent audits. Among the changes: Revoking the agency’s Supervisory Committee Guide as an audit alternative (and eliminating references to it) and replacing the guide with an option to conduct an audit to meet certain minimum requirements (as outlined in a new appendix to existing regulations). The summary points out that the agency wants to know if other areas should be included in the audit, such as loans to insiders, pay and benefits to employees and board members, regulatory compliance, compliance with the Bank Secrecy Act, or other topics.

In other changes, the summary notes, NCUA proposes:

  • eliminating a specified 120-day target date for completing and delivering an audit report by an outside, compensated auditor;
  • removing a mostly unused option for a credit union to obtain “a report on examination of internal controls over call reporting” as an alternative to obtaining a financial statement audit.”

In addition, the summary notes, NCUA seeks comment on eliminating the “balance sheet audit” alternative, largely because the alternative is rarely used by credit unions (about 2.5%).

NASCUS summary: NCUA proposal on Supervisory Committee Audits and Verifications


Look for a notice of proposed rulemaking related to debt collection this spring, the director of the Consumer Financial Protection Bureau (CFPB) stated this week in her message for the agency’s annual report to Congress on administration of the Fair Debt Collection Practices Act (FDCPA). The debt collection proposal, CFPB Director Kathleen (“Kathy”) Kraninger said, will address issues such as communication practices and consumer disclosures.

Kraninger noted debt collection is one of the most prevalent topics of consumer complaints about financial products and services received by the bureau. She pointed out approximately 81,500 complaints about first-party and third-party debt collection were posted in 2018.

The FDCPA report is among the resources listed on NASCUS’ CFPB “latest developments” pages, which tracks the key actions and proposals by the agency week by week.

NASCUS CFPB ‘Latest Developments’ pages (including Report on 2018 Administration of FDCPA


Texas, California, Florida and Georgia were the leading states (in that order) in complaints from members of the U.S. armed services, veterans and their families, according to the latest “complaint snapshot” published Tuesday by the CFPB. Nationwide, the bureau reported, complaints by servicemembers were up 12% in 2018 from the previous year.

According to the Complaince Snapshot: Complaints submitted by servicemembers, veterans, and military families, the bureau said complaints from Texas totaled 3,741, followed by California with 3,556 Florida with 3,191; and Georgia with 2,355.

The top complaint among the servicemembers – making up 38% of all complaints (for a total of 12,966) – was credit or consumer reporting. In fact, that category is the top complaint among non-servicemembers, the bureau said. According to the report, “incorrect information on the report” was cited in 54% of the 6,977 complaints received.

The snapshot report is designed to provide a national overview of servicemember complaints, along with complaint information by state. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), CFPB is charged with coordinating financial protection for servicemembers, which the bureau says “includes working to make sure that when servicemembers encounter problems they get timely responses to their complaints so they can stay mission-focused.”

The second-highest servicemember complaint received in 2018, according to the CFPB report, regarded debt collection, making up 26% (8,825) of complaints received (running slightly ahead of complaints in that category received by non-servicemembers, 25%). “Attempts to collect debt not owed” made up 40% (3,495) of the complaints received.

Rounding out the top five complaints were: mortgages (10% of all complaints), with “trouble during payment process” cited in 45% of the complaints; credit cards (8%), with “problem with a purchase shown on your statement” cited in 26%; and checking or savings (6%), with “managing an account” cited in 58% of the complaints.

NASCUS CFPB ‘Latest Developments’ pages (Servicemembers complaint snapshot)


The credit union advisory group to the CFPB, as well as three other such councils, will expand its focus to broad policy matters and meet three times a year, the bureau’s director announced this week. In a release, CFPB Director Kraninger said the Credit Union Advisory Council (CUAC), Consumer Advisory Board (CAB), Academic Research Council (ARC), and the Community Bank Advisory Council (CBAC) would all expand their focus. Additionally, the CUAC, CAB and CBAC will continue joint public meetings. The ARC, Kraninger said, will meet separately, in-person and twice a year – and will be elevated to a director-level advisory committee.

The bureau also said will begin now to accept applications for membership on the panels; which will be due May 5. Membership terms for the committees will be extended from a one-year term to two-year terms, and terms will be staggered. The one-year term of all existing members expires in September. A one-year term extension will be provided to half of the current members in order to achieve the staggered terms and ensure continuity, the bureau said. In addition to a chair, each committee will be assigned a vice-chair, and both the chair and the vice-chair will serve one-year terms in their respective positions, with the vice-chair assuming the chair position the following year

The changes announced this week undo many of those implemented by former Acting Director Mulvaney, and which are now the subject of legislation slated for mark-up next week by the House Financial Services Committee (see story above). Mulvaney had revised the councils’ charters to provide for only six members each, with each member serving one year and the panels meeting less frequently.

“I’ve seen firsthand how the Bureau benefits from the valuable input provided by committee members. I have also seen how the joint committee meeting is resulting in members sharpening their ideas by engaging in a thorough dialogue,” Kraninger said in a statement with Thursday’s announcement. “These enhancements demonstrate my commitment to ensuring that the Bureau’s advisory committees are helping to improve our work on behalf of consumers.”

CFPB Announces Enhancements to Advisory Committees and Opening of Member Applications


Interchange fees across all debit and general-use prepaid cards (exempt and covered) totaled $20.73 billion in 2017, an increase of 5.9% since 2016, the Federal Reserve said Thursday. In its 2017 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions, the Fed also reported that the average interchange fee for covered transactions on both dual-message and single-message networks, in addition to the average interchange fee for exempt transactions on dual-message networks, has not changed materially since Regulation II took effect in the fourth quarter of 2011.

Federal Reserve Board publishes report containing summary information on debit card transactions in 2017


Nominations for the 2019 Pierre Jay Award – which recognizes the individuals, programs or organizations whose contributions have benefited the state credit union system in a significant way – opened this week. Deadline for the nominations is close of business May 13.

The award honors those who have demonstrated outstanding service, leadership and commitment to NASCUS and the state system. It was first conferred in 1997, and has been presented to an individual nearly annually since then. It honors the first Commissioner of Banks in Massachusetts, Pierre Jay. The 2018 winner was Ron McDaniel, former president and of California Credit Union in Glendale, Calif.

Nominees for the 2019 award will be considered by a six-member panel, which reflects the association’s diverse membership from the state credit union system. Those are: NASCUS Board Chairman John Kolhoff; NASCUS Credit Union Advisory Council Chairman Rick Stipa; Robert Cashman, president and CEO of Metro Credit Union in Boston, Mass. (who, as leader of a Massachusetts credit union, honors the legacy of Pierre Jay); last year’s winner McDaniel; Diana Dykstra, California/Nevada Credit Union Leagues president & CEO (representing San Francisco, Calif., the city and state where the NASCUS 2019 Summit will be held and where the award will be presented), and; Lucy Ito, NASCUS President and CEO.

Pierre Jay Award: Details, nomination form


Happy Spring! Just a reminder that seven big meetings and events are ahead for April, presented and hosted by NASCUS, including:

  • 2019 State Regulators’ National Meeting (April 1-3, National Harbor, MD); for regulators only, the program brings state credit union regulators from across the country for an intensive program that takes a deep dive into the issues, topics and trends resonating through the state credit union regulatory environment.
  • CECL Symposium (April 10-11, Charlotte, NC); co-sponsored by NASCUS, the Carolinas Credit Union League and the North Carolina Credit Union Division, the two-day session focuses on the “current expected credit loss” (CECL) accounting standard for recognition and measurement of credit losses for loans and debt securities.
  • Credit Union Association of the Dakotas Directors College (April 11, Fargo, ND) co-sponsored by NASCUS, this one-day educational session is designed for CEO’s, upper management, and volunteers seeking specific training for their duties and board responsibilities.
  • NASCUS/CUNA BSA (April 23-24, Columbus, OH); a joint program of NASCUS, CUNA and the Ohio Department of Commerce. The program takes an in-depth look at issues related to topics that include marijuana business banking, money-service businesses (MSBs), cybersecurity, elder abuse, human trafficking, payments and enforcement actions. This two-day conference is followed later in the year (Nov. 18-21) by the BSA/AML Certification Conference in Tempe, Ariz. (also sponsored by NASCUS and CUNA).
  • NASCUS 101 Member Orientation (April 25; webinar); a no-charge, one-hour event that brings together members, prospective members or anyone else interested in NASCUS (the voice of the state credit union system) to better understand the unique tools and benefits NASCUS offers.
  • NASCUS Washington Examiners School (April 29-May 1, Seattle) co-sponsored with the State of Washington, Division of Credit Unions, this two-day conference looks at a variety of issues including ERM training, fintech, CECL, fraud issues – and more!
  • Michigan Directors College (April 30, Midland, MI); co-sponsored with the Michigan Office of Credit Unions, this one-day event looks at key topic including: CECL, national credit union issues, compliance developments – and more.

 For more about these events (including agendas and registration), or any other upcoming events at NASCUS, see our 2019 education agenda at the link below.

NASCUS 2019 Education Agenda

BRIEFLY: Two sessions announced — in MA (May), in WA (July); Summit ’19 registration opens

In addition to the April sessions noted above, NASCUS has added two more sessions for late spring and mid-summer – in Massachusetts and Washington, respectively. The May 30 session in Worcester (at the College of the Holy Cross) is the Commonwealth of Massachusetts Division of Banks Annual Training Symposium, sponsored with NASCUS. The one-day session focuses on key issues affecting credit unions in the state. The July 10 session at the Northwest Credit Union Association Office Building in SeaTac, Wash., is the NASCUS Washington Executive Forum. Hosted with the Washington Department of Financial Institutions, Oregon Department of Financial Institution, Idaho Department of Finance and the Northwest Credit Union Association, the one-day session will focus on state issues in the states for both credit union volunteers and staff. See the links below for details … Registration for the 2019 NASCUS State System Summit – in San Francisco Aug. 13-16 at the Westin St. Francis (on Union Square, in the heart of the city) – is now open. A unique event which brings together credit union regulators and practitioners for mutual exchange and dialog, the Summit is a rewarding opportunity for both groups, as they listen to ideas, share thoughts and look for solutions to the challenges and opportunities facing the state credit union system through dialog and networking. Sign up today and don’t miss out!

NASCUS 2019 Education Agenda

2019 NASCUS State System Summit (Aug. 13-16, San Francisco), registration and agenda

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