March 27, 2020 NASCUS Report

THIS WEEK: CORONAVIRUS RESPONSE – NASCUS engaged for state system; Stories sought from state system; CARES bill addresses CECL, CLF; CFPB puts hold on data collections; Agencies pledge to ease up on TDRs; Low-income grants available; 30-day call report delay OK; FCUs can join states with virtual meetings; New sick leave rules outlined; CU takes on dual challenges to serve members; BRIEFLY: CU workers are ‘essential;’ Treichel role shifts at NCUA


NASCUS engaged, uniting state system …

As the coronavirus crisis ramped up this week – triggering an unprecedented number of unemployment claims nationwide at more than 3 million, and spurring passage of a record $2.2 trillion in emergency response legislation – NASCUS was bringing the state system together, sharing information and advocating in its interests.

NASCUS President and CEO Lucy Ito noted that the association has this week, while the crisis escalated, advocated on behalf of state regulators and credit unions on key issues, continued to accredit state supervisory agencies, distributed critical information, and served as a forum for sharing ideas.

“We understand the ramifications of the coronavirus pandemic on credit union operations and the stability of the broader credit union system,” Ito said. “NASCUS is committed to doing everything we can to help the state system manage the crisis over the coming months.”

Among other things, Ito noted this week that NASCUS:

  • Continued to stay plugged in to state and federal regulator channels, to help credit unions navigate this dynamic period.
  • Participated in interagency conference calls and webinars (including with the Treasury Department’s Financial and Banking Information Infrastructure Committee (FBIIC), which is charged with facilitating coordination and communication among financial regulators) and working directly with state credit union regulatory agencies, in preparation for the effects of the global crisis.
  • Hosted a teleconference with NASCUS state credit union, credit union leagues, corporate credit unions, and other state system supporting member to outline the latest developments and to solicit industry feedback to share with state regulators.
  • Established a 30-minute weekly teleconference with state regulators, to share information, obtain their counsel, and assist in collaboration with federal agencies, and provide the credit union industry feedback.
  • Focused on a collaborative approach to learn and share critical information with members. “We also want to be prepared, so we are looking at this crisis through a proactive lens,” Ito said.
  • Posted resources on a dedicated page on the NASCUS website, with links to state-by-state guidance and updates as they are issued, as well as numerous federal resources including from NCUA, FDIC, FinCEN, the Department of Homeland Security’s (DHS) Cybersecurity & Infrastructure Security Agency (CISA), and the Centers for Disease Control and Prevention (CDC).
  • Kept the state system and general public informed about the latest relevant developments through NASCUS Report, social media, email and more.
  • Followed a social distancing policy, with staff working remotely but with one staff person in the office (on a rotating basis) three to four times a week. Staff travel has been limited to essential travel only.
  • Postponed or canceled NASCUS regularly scheduled in-person educational events through May.
  • Hosted a call with NASCUS’ member credit union leagues’ state issues and policy professionals (SIPPs) to report on state and federal regulators’ response to COVID-19 and to collect feedback to share with state regulators.

However, the NASCUS accreditation program, which works to apply national standards of performance to a state’s credit union regulatory program, continues in operation using remote techniques.

“The entire state system is standing together to serve credit unions and their members during this unprecedented crisis,” Ito said. “Our role will continue to be to support state credit union regulators and to facilitate—with credit unions—their members’ interests, most importantly ensuring that they have safe and sound places to save their money and obtain needed credit.”

Stories sought to describe how state system responds …

NASCUS initiated this week an effort to collect – and, ultimately, disseminate – stories from the state system about how it is responding to the coronavirus crisis. The aim: to highlight the extraordinary steps the state system is taking to assist credit union members and to protect employees. Those stories may be submitted directly to NASCUS through a new page on the NASCUS website (see the link below). All stories and ideas are welcome.

Credit Union Responses to COVID-19

Emergency bill carries some CECL relief, role for CLF …

Emergency legislation to shore up the economy, including the nation’s workforce, is pending in the House today after the Senate passed (by 96-0) the record $2.2 trillion package late Wednesday. The president is expected to sign the bill once the House takes action, expected to be today.

According to the Credit Union Natl. Assn. (CUNA), items in the Coronavirus Aid, Relief and Economic Security Act (CARES Act, S.3548) that directly affect credit unions include:

  • Counting credit unions in a delay of the current expected credit loss (CECL) accounting standard for those entities now required to comply with the standard. Those credit unions would have the option to delay CECL implementation until the conclusion of the national emergency or Dec. 31, 2020, whichever comes first. The standard replaces the allowance for loan and lease losses, or ALLL, and focuses on estimation of expected losses over the life of loans rather than incurred losses.
  • Expanding access for corporate credit unions to NCUA’s Central Liquidity Facility (CLF), which serves as a funding source for credit unions experiencing unusual or unexpected liquidity shortfalls, thus enhancing access to liquidity for natural person credit unions. (NASCUS strongly supported the action, noting it can ensure a funding source for many modestly sized credit unions should any financial emergency occur.)
  • Allowing credit unions to participate in troubled debt restructuring, giving them the latitude to further modify existing loans.
  • Making credit unions eligible to participate in the paycheck protection program, which would allow for 100% federally guaranteed loans to small businesses that maintain their payroll.
  • Reestablishing the Transaction Account Guarantee Program, in which the government guarantees certain noninterest-bearing transaction accounts.

NASCUS will continue to monitor developments about the legislation and its impact on the state system, including any additional information about the contents of the 1,000-plus page bill, as it becomes publicly available.

Coronavirus Aid, Relief and Economic Security Act (CARES Act, S.3548)

Bureau puts hold on data collections, some exams …

Data collections are postponed on such items as home mortgage disclosures and credit card and prepaid accounts until further notice to allow financial institutions firms time to focus on consumer needs during the coronavirus crisis, the CFPB said Thursday. The agency also announced it would work with financial institutions to reschedule examinations “and other supervisory activities,” including enforcement actions, to “minimize disruption and burden.”

In a release, the bureau said it will not expect quarterly information reporting by certain mortgage lenders under the Home Mortgage Disclosure Act (HMDA) and Regulation C, nor will it expect reporting under the Truth in Lending Act (TILA), Regulation Z, and Regulation E for credit card and prepaid accounts.

For HMDA reporting, the agency said, entities should continue collecting and recording data in anticipation of making annual submissions. “The Bureau will provide information on when and how institutions will be expected to commence what would have been new quarterly HMDA data submissions,” CFPB said.

For TILA reporting, the bureau said the delay includes the annual submissions concerning agreements between credit card issuers and institutions of higher education; quarterly submission of consumer credit card agreements; collection of certain credit card price and availability information; and submission of prepaid account agreements and related information.

In addition to those postponements, the bureau said, it was also delaying surveys on cost of compliance with pending rulemaking on Property Assessed Clean Energy (PACE) financing. CFPB said policy statements will be issued in those instances where information submission in these areas are required by law. The statements will indicate that the agency does not intend to cite in an examination or initiate an enforcement action against any entity for failure to submit such information when required, the agency said.

Regarding delaying exams and other actions, the agency said when it is conducting examinations and other supervisory activities — and in determining whether to take enforcement action – it will consider the circumstances that the entities may face as a result of the COVID-19 pandemic and “will be sensitive to good-faith efforts demonstrably designed to assist consumers.”

CFPB Provides Flexibility During COVID-19 Pandemic

Agencies pledge to ease up on TDR classifications …

Federal regulators, including NCUA, this week said their examiners will not, in examinations, criticize financial institutions that are working with borrowers “in a safe and sound manner” in response to the COVID-19 disease. In addition, the regulators said, they will not direct supervised credit unions, banks and savings associations to automatically categorize loan modifications as troubled debt restructurings (TDRs).

The statement from the five regulators – NCUA, CFPB, FDIC, the Federal Reserve and the OCC (which was also signed by CSBS on behalf of state banking regulators) also provided supervisory views on past-due and nonaccrual regulatory reporting of loan modification programs.

“The agencies view prudent loan modification programs offered to financial institution customers affected by COVID-19 as positive and proactive actions that can manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk,” the agencies said in their statement. Not all modifications of loan terms result in a TDR, the agencies advised. “Short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs,” they said. “This includes short-term – for example, six months – modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.”

In reviewing modifications (including TDRs), the agencies said examiners will exercise judgment and will not automatically adversely risk-rate credits that are affected, including those considered TDRs. “Regardless of whether modifications are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify terms on existing loans for affected customers,” they said.

Agencies provide additional information to encourage financial institutions to work with borrowers affected by COVID-19

NCUA makes low-income CU grants available …

Grants to cover unexpected costs – including for such things as computers, software, consulting services and more – related to providing financial services and assistance to members affected by the coronavirus crisis are available to federally insured, low-income designated credit unions, NCUA said this week. In a release, the agency said the “urgent needs grants” of up to $7,500 to the low-income credit unions will be provided by the agency’s Office of Credit Union Resources and Expansion (CURE).

Specifically, the agency said, the grants may be applied to:

  • Hardware, software, or other equipment to help them provide financial products and services from remote locations;
  • Consulting services to develop programs and partnerships to assist those affected by COVID-19, such as small businesses or schools;
  • Development of marketing materials to assure members their insured deposits are safe.

Eligible credit unions may apply for the grants through the agency’s cybergrants portal, NCUA said. Loans are also available to the low-income credit unions through the agency’s Community Development Revolving Loan Fund (CDRLF), the agency said; applications can also be made for those through the portal.

NCUA: Urgent Needs Grants Available to Help Credit Unions Affected by COVID-19

Regulator council OKs 30-day call report delay …

Along those lines, NASCUS participated this week in a meeting of the FFIEC (as the representative of state credit union regulators on the council’s State Liaison Committee (SLC)) to identify and discuss “appropriate measures, both collaboratively and individually” to maintain safety and soundness while protecting consumers, according to an FFIEC press release. A key takeaway from the meeting: federal banking agencies will not take action against any institution for submitting its March 31, 2020, Report of Condition and Income (call report) after the respective filing deadline — as long as the report is submitted within 30 days of the official filing date, the council said. “Institutions are encouraged to contact their primary federal regulator in advance of the official filing date if they anticipate a delayed submission,” the council said.

Financial Regulators Highlight Coordination and Collaboration of Efforts to Address COVID-19  

Agency gives FCUs green light for virtual meetings …

Following the lead of several state agencies, NCUA late last week told federal credit unions that they could conduct annual meetings virtually – or postpone them – to promote “social distancing” called for in connection with the coronavirus crisis. The agency made the announcement in a “letter to federal credit unions (FCUs).” In the letter the agency said that, because of President Donald Trump’s national emergency proclamation of March 13, effective immediately an FCU could adopt by a two-thirds vote of its board a bylaw amendment allowing for the virtual meetings without undergoing further bylaw approval processes with NCUA. FCUs that choose to adopt this amendment should ensure that the cross-citations conform to their version of the bylaws, the agency advised. A number of states have had similar provisions already in place for their institutions.

NCUA Letter to FCUs (20-FCU-02)

Q&A outlines new sick-leave for smaller employers …

New sick federal leave requirements for businesses with less than 500 employees are outlined in a “question and answer” format released by the Department of Labor this week. The Q&A was issued in response to Families First Coronavirus Response Act (H.R. 6201), enacted into law by President Donald Trump March 18, which among other things provides paid sick leave, tax credits, and free COVID-19 testing. The new law mandates that employers with fewer than 500 workers must provide paid sick leave or expanded family and medical leave to those workers. The Q&A provides details about which employees to include (for example, the requirement does not include workers who are independent contractors under the Fair Labor Standards Act (FLSA)). The new requirements go into effect April 1 and apply to leave taken between that date and Dec. 31.

Families First Coronavirus Response Act: Questions and Answers

CU meets challenge of tornadoes, coronavirus with determination

The time-honored maxim that “timing is everything” has grave meaning for at least one NASCUS-member credit union, as it has found itself dealing with two major crises this month – one local (devastation from tornadoes earlier this month) and one national (the coronavirus crisis, in the latter half of the month).

Despite the challenges, NASCUS-member Enbright Credit Union of Nashville, Tenn. – in the spirit of the credit union system’s credo of “not for profit but for service” – continues to serve its members and its community.

The March 3 tornadoes devastated both the headquarters office (at right in photo) and the Donelson, Tenn., branch (at left) of the credit union. Once the storm had passed that morning, the credit union assembled a team to secure the branch and re-allocate resources to other branches to ensure continued service its members. After learning it would take up to two months to make the branch operational, the credit union began investigating alternatives – which resulted in a temporary branch set up in the parking lot of the damaged office (and which opened for business last week). Among other things, the credit union is using the temporary branch to offer Small Business Administration (SBA) emergency loans now.

“The resilience and commitment of Enbright in bouncing back from the storms earlier this month is indicative of the entire credit union system,” said NASCUS’ Lucy Ito. “And the credit union has the same determination in meeting any challenges presented by the coronavirus crisis. As CEO Ron Smith told us at NASCUS: “We have a great team that is committed to our members and keeping Enbright available to help our members during this time of need.”

BRIEFLY: CU, bank workers are ‘essential;’ Treichel leans out at NCUA

Certain credit union, bank and other financial service sector workers are on the list of “critical infrastructure sector” workers who, during the coronavirus crisis, are needed to ensure continuity of functions “critical to public health and safety, as well as economic and national security,” according to a March 19 list issued by the Department of Homeland Security’s (DHS) Critical Infrastructure Security Agency (CISA). The agency noted that the list is advisory only; it shouldn’t be considered a federal directive or standard (see the list via NASCUS’ COVID-19 Resources page) … NCUA said this week that it had transferred the board delegations of authority made to Executive Director Mark Treichel to incoming ED Larry Fazio. The transfer was made this week, rather than May 1 as planned, the agency said, according to “At Mark’s recommendation, the Board decided the agency would be best served by transferring the Board delegations to Larry now because experience taught Mark that moving the Executive Director delegations midstream during the coronavirus crisis would not best serve the agency,” the agency said in a statement released to press. “Mark and Larry will continue to serve double encumbered as Executive Director until June 30, 2020.”

NCUA LTCU 20-CU-03: Identification of Essential Critical Infrastructure Workers During COVID-19

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