March 23, ’18 NASCUS Report

Regulators gather in Washington to cover key issues for 2018

Credit union growth through acquisition of banks and other financials, cannabis banking, real estate appraisal requirements, the role for corporate credit unions and “initial coin offerings” – an unregulated, digital currency-based method of raising capital — are among the subjects state regulators will be tackling when they meet beginning this weekend in the Washington, D.C. area.

The annual, regulators-only NASCUS State Credit Union Regulators National Meeting at National Harbor in Washington, D.C., brings state credit union regulators from across the country for a two-day, intensive program that 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.

About 70 regulators from 36 states will be on hand at the event, which gets underway Monday and runs through Tuesday. The agenda covers 10 topic areas; it also includes a dialogue with members of NCUA senior staff and an open forum focusing on NASCUS business and key issues brought to the group by the regulators themselves. All in all, the two-day program includes nearly 16 hours of program time.

The topics areas of the meeting are:

  • Credit Union Growth by Way of Acquisitions
  • Rethinking Credit Union Field of Membership and Interstate Branching
  • Credit Union Cybersecurity Preparedness: NCUA’s ACET Program and Federal Banking Agency Coordination
  • Cannabis Banking: What Happens Now?
  • Small-Dollar Loans: A Proposal for New Standards So Credit Unions Can Disrupt Payday Lending
  • Re-Thinking Real Estate Appraisal Requirements
  • Litigation in the Financial Services Sector
  • Dialogue with the CFPB Ombudsman
  • The Role for Corporate Credit Unions
  • Outlook for the Midterm Elections
  • Emerging Issue: Initial Coin Offerings

“A key part of our mission at NASCUS is to serve as a forum for the state regulatory system, where the driving issues of the day facing the state system at large can be discussed, challenges and opportunities can be identified, and ideas and methods for proceeding on those issues can be developed,” said Lucy Ito, president and CEO of NASCUS. “In that way, this important session helps to set the stage for the state credit union system for the remainder of the year.”


All credit union loans would be exempted from the CFPB’s payday lending rule under legislation approved by the House Financial Services Committee this week, and now ready for Senate consideration.

The Ensuring Quality Unbiased Access to Loans Act (EQUAL Act/H.R. 4861), introduced by Rep. Trey Hollingsworth (R-Ind.), would nullify 2013 FDIC guidance on deposit-advance products. It would require all federal prudential regulators – including NCUA — to consult and coordinate with each other in creating rules to establish standards for short-term, small-dollar loans or lines of credit and exempt conforming loans from the CFPB’s payday rule.

Many credit union loans are already exempt from the rule if they conform to the short-term, small dollar loan rule from NCUA.

The CFPB finalized its payday lending rules last October. Under the rule, as finalized, lenders must determine if consumers have the ability to repay loans that require all or most of the debt to be paid back at once.

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


NCUA’s funding will apparently remain independent of the congressional appropriations process under the $1.3 trillion spending bill passed by Congress early Friday morning; the bill now heads to President Donald Trump for his signature. (Some drama around the bill continued this morning: Trump tweeted he is considering vetoing the bill, as it does not “fully fund” a wall on the southern U.S. border. The bill must be signed into law by tonight to avoid another government shutdown.)

Some proposals over the last year would have subjected the agency’s budget to annual congressional approval through the appropriations process. However, over the last several months, the credit union industry pushed back. Last year, a provision that would have placed NCUA under appropriations was removed during House floor debate via an amendment offered by Reps. Mark Amodei (R-Nev.) and Pete Aguilar (D-Calif.).

The spending bill also includes funding for the Treasury Department’s Community Development Financial Institutions Fund (CDFI) of $250 million, a $2 million increase from the previous year. NCUA’s Community Development Revolving Loan Fund (CDRLF) received $2 million, the same as previous year.


The “Fiduciary Rule” – which imposes a standard of care on broker-dealers and investment advisers that provide investment advice to retirement plan investors, including investment advisory services provided through credit union service organizations (CUSOs) – reportedly will not be enforced by the Labor Department following federal court decisions both striking down and supporting the rule.

Last week, by a vote of 2-1, the Fifth Circuit Court of Appeals in New Orleans voided the rule, adopted in 2016 by the Obama Administration (and opposed by a broad swath of the financial industry) as an “arbitrary exercise of administrative power.” The decision last week by the New Orleans-based court is in opposition to a ruling, also last week, by the 10th Circuit Court of Appeals in Denver, which ruled in favor of the regulation. The opposing rulings could set the stage for an appeal to the U.S. Supreme Court; it’s unclear if such action will be mounted.

However, the Labor Department said late last week (in a statement to cable news’ CNBC) that “Pending further review, the [Labor Department] will not be enforcing the 2016 fiduciary rule.” No other details were provided (and no statement is posted on the agency’s website). If Labor decides to let the Fifth Circuit decision stand, the impact would be nationwide (and not just in the Fifth Circuit states of Texas, Louisiana and Mississippi).

Last year, Labor delayed implementation of some fiduciary rule exemption changes from Jan. 1, 2018, to July 1, 2019. The extensions applied to the rule’s “best interest contract” and “principal transactions” exemptions.

CNBC: Labor Department won’t enforce investor protection rule after court decision


Mortgage servicing rules “frequently asked questions” — largely dealing with issues related to bankruptcies – about compliance with revised rules effective April 19 were published by the CFPB this week. The FAQs concern recent revisions by the agency to its mortgage servicing rules under Regulations X (implementing the Real Estate Settlement Procedures Act (RESPA) and Z (implementing the Truth in Lending Act (TILA)). The revisions to the servicing rules take effect in the middle of next month.

“These questions and answers are not a substitute for Regulation X, Regulation Z, or their official interpretations (also known as the commentary),” the agency points out in its brief comments about the FAQs, adding that Regs X and Z — and their official interpretations – “are the definitive sources of information regarding their requirements.”

The final rules amend certain areas of the bureau’s 2013 mortgage servicing regulations, including successors in interest, definition of delinquency, requests for information, force-placed insurance notices, early intervention, loss mitigation, prompt payment crediting, periodic statements and other issues. The FAQs largely respond to questions regarding bankruptcies, including periodic statements, coupon books, reaffirmation, successors in interest, and effective date.

CFPB FAQs: Mortgage servicing rules (effective April 19, 2018)


Inherited regulations and rulemaking authorities are topics for the ninth “request for information” issued this week by the CFPB in the agency’s efforts to uncover “evidence” that it is doing the job it was created to do. Under this week’s RFI (the latest in a series of 12 total to be ultimately issued by the bureau), comments and information are sought about whether the agency “should amend the regulations or exercise the rulemaking authorities that it inherited from other federal government agencies,” the agency said in a statement. The bureau inherited a variety of rules and authorities when it was created in 2010 from the Federal Reserve, Federal Deposit Insurance Corp. (FDIC), Office of the Comptroller of the Currency (OCC) and other federal agencies related to federal financial institution regulation. Meanwhile, in a release, the bureau also revealed the topic areas for the final three RFIs expected over the next three weeks. Those topic areas are: Guidance and Implementation Support; Consumer Education; and Consumer Inquiries.

RFI on inherited rules and rulemaking authorities


Public comment deadlines have been extended for three CFPB requests for information (RFIs) under a call for evidence regarding the bureau’s proper execution of its consumer protection function. The new deadlines – all extended by 30 days (for 90 days total) — are for RFIs on: CFPB investigative demands and associated processes (April 26), rules of practice for adjudication proceedings (May 7), and; bureau enforcement processes (May 14). Comment periods for the other six RFIs were all for 90 days. NASCUS has developed summaries for each of the RFIs with extended comments-due dates.

NASCUS CFPB Rules and Summaries


NASCUS has posted two additional summaries of CFPB RFIs, issued over the last few weeks. The latest summaries look at the bureau’s information requests about its rulemaking processes (comments due June 7), and the RFI for CFPB’s consumer complaint process (comments due June 4). The former seeks information to assist CFPB in assessing the overall efficiency and effectiveness of its rulemaking processes, and to consider whether any changes to its rulemaking processes would be appropriate (consistent with the law). The latter seeks input to assist the agency in assessing potential changes that can be implemented to its public reporting practices of consumer complaint information, and to consider whether any changes to the practices would be appropriate (consistent with law).

NASCUS Summary: RFI — Bureau Rulemaking Processes

NASCUS Summary: RFI — Bureau Public Reporting Practices of Consumer Complaint Information


Educational materials outlining the lifecycles, security characteristics and relevant laws and regulations for the most common payment types were published last week as the last act of a Federal Reserve group dedicated to studying payments systems. The Payment Lifecycles and Security Profiles was published by the Secure Payments Task Force, a group formed in 2015 by the Fed, but which officially ended its service on March 1. The next role of the group, the Federal Reserve said then, is a transition into the “FedPayments Improvement Community.” That body, the agency said, will “provide stakeholders with opportunities to engage in the Federal Reserve’s ongoing payment improvement initiatives.”

The Profiles published last week look at: The lifecycles of the most common payment types, covering enrollment, transaction flow and reconciliation; Security methods, identity management controls and sensitive data occurring at each step in the payment lifecycles; and, Relevant laws and regulations, and other references, as well as challenges and improvement opportunities related to each payment type.

According to the group, the Profiles have a consistent format for describing the lifecycle of each payment type. It is designed, the group said, “as a broad taxonomy that can be applied across different payment types for understanding and comparing controls and risks.” The group also noted that the “improvement opportunities” outlined in the Profiles“highlight areas for further industry exploration and are not intended as guidance or specific solutions to be implemented.”

Payment Lifecycles and Security Profiles


Just a reminder that you can learn how to make NASCUS work for you in a live webinar featuring an overview of the benefits of membership, April 30 from 2-3 p.m. ET. Learn about the NASCUS commitment to the industry and gain a better understanding of the association’s unique role in the credit union system. On the agenda: advocacy and training and education agendas for 2018; how NASCUS facilitates access to all 45 state regulators (where state charters exist and who are also NASCUS members); and how members can participate in dialogue sessions with regulators to gain national perspective on regulatory and compliance issues — and much more!

NASCUS 101 Orientation/Onboarding Webinar Outline; April 30 2 p.m. ET

BRIEFLY: FFIEC sets areas of focus for ‘exam modernization;’ CECL session around the corner

Four areas that have potential to provide “the most meaningful supervisory burden reduction” will be the focus of the members of the Federal Financial Institutions Examination Council (FFIEC) – including state regulators – as they pursue examination modernization, the group said this week. The four areas are: Highlight and reinforce regulator communication objectives before, during, and after examinations; Leverage technology and shift, as appropriate, examination work from onsite to offsite; Continue to tailor examinations based on risk; and Improve electronic file transfer systems to facilitate the secure exchange of information between institutions and supervisory offices or examiners … a reminder that the NASCUS CECL Symposium is just around the corner: April 12 in Versailles, Ky. The one-day program, focusing on FASB’s Current Expected Credit Loss (CECL) accounting standard, offers seven hours of intense focus on the standard. For more information, see the link below.

FFIEC Provides Update of Examination Modernization Project

Registration/program for April 12 NASCUS CECL Symposium

Information Contact:
Patrick Keefe, [email protected]

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