March 31, ’17 NASCUS Report

GAO: Privately insured CUs disclose, but states/CUs need more guidance

A long-awaited (since late 2015) report issued this week by the Government Accountability Office (GAO) about privately insured credit unions’ compliance with insurance disclosure requirements found that the credit unions have largely complied, but state supervisors and credit unions need better guidance from the CFPB about the disclosure rules. The guidance, GAO stated in its report, would help state credit union supervisors and privately insured credit unions better interpret CFPB regulations, and inform consumers when an institution is not federally insured. “Privately insured credit unions largely complied with the Bureau of Consumer Financial Protection (CFPB) requirements to disclose that they do not have federal deposit insurance,” GAO wrote in its report. “For instance, 45 of 47 credit unions GAO visited displayed required disclosures at teller windows, and 99 of 102 websites GAO reviewed included the disclosure on their main Internet page, as required.”

But GAO also noted that disclosure signs were missing at some drive-through windows at credit union facilities, as were printed materials (brochures and flyers) at some credit unions. “The regulations require all advertising to include a disclosure, but do not define what constitutes advertising,” GAO stated. “In some cases, disclosure signs or text size were too small to be easily read, or were not placed conspicuously. CFPB’s regulations on disclosures for privately insured credit unions do not specify signage dimensions or font size. Without clear disclosure requirements, state credit union supervisors and credit unions may not be consistent in how they interpret disclosure requirements and some consumers may not be informed that their deposits are not federally insured,” GAO added.

In its recommendations, GAO directed that CFPB issue guidance “to help state credit union supervisors and privately insured credit unions better interpret Regulation I (of FDIC disclosure rules, used as a guide by GAO) and inform consumers when an institution is not federally insured,” by clarifying whether drive-through windows require disclosure, describing what constitutes clear and conspicuous disclosure — including minimum signage dimensions and font size — and explaining and providing examples of which communications are, in fact, advertising.

The report was mandated by a provision of the 2015 “Fixing America’s Surface Transportation Act” (FAST Act), which (among other things) gave privately insured credit unions access to Federal Home Loan Bank membership. Specifically, the legislation required GAO to review private deposit insurers’ and credit unions’ compliance with disclosure requirements. NASCUS provided insights and suggestions to GAO as the agency developed its report.

Credit Unions Largely Complied with Disclosure Rules, but Rules Should Be Clarified (GA)-17-259)


A dozen regulations will be studied by NCUA in 2017 as part of its regulatory review, a process in which the agency examines all of its existing regulations over a three-year period, the agency recently announced. Comments are due by Aug. 14. Among the rules subject to review: rules of NCUA board procedure and public observation of board meetings and; Bank Secrecy Act (BSA) compliance. In a one-page notice posted on its website, the office of general counsel listed the 12 rules that are part of the review (see following item on NASCUS analysis of the notice).

“NCUA’s goal is to ensure that all of our regulations are clearly articulated and easily understood,” the NCUA notice states. “Comments are welcome on that aspect, as well as substantive suggestions for regulatory changes. The notice also states that the agency general counsel maintains a rolling review schedule that identifies one third of NCUA’s existing regulations for review each year and provides notice to the public of those regulations under review so the public may have an opportunity to comment. Comments may be e-mailed to [email protected] or mailed to Regulatory Review (2017), Office of General Counsel, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. For e-mailed comments, please include the words “Regulatory Review (2017)” in the subject line.

NASCUS matrix of proposed rules (with link to regulatory review notice)


A summary/analysis of the NCUA review of 12 agency rules pinpoints the impact of the rules on federally insured, state-chartered credit unions (FISCUs), especially with regard to rules governing security programs, records preservation, golden parachute and indemnification payments, loans in flood hazard areas, and registration of residential mortgage loan originators. The NASCUS analysis also notes that the agency’s review is a not an exclusive list of agency rulemaking this year. NASCUS is preparing a comment letter on the review; recommendations for the association’s letter should be submitted to NASCUS by July 31 for consideration.

Summary: NCUA 2017 Regulatory Review


Financial regulatory reform for this year may be falling victim to protracted congressional attention to other key issues, such as healthcare, as time is beginning to run short for major actions by the 115th Congress. It’s not that regulatory reform – such as that embodied in House Financial Services Chairman Jeb Hensarling’s (R-Texas) Financial CHOICE legislation – is unwanted. The culprit is the long list of “to-dos” facing the legislative branch and the administration, including tax reform, perhaps another go at healthcare, approval of a Supreme Court justice (on the Senate side) in the face of a threatened filibuster, and keeping the government open for business (which may become an issue as some in Congress balk at approving federal spending for the president’s border wall). Before last week’s healthcare bill developments, a revamped version of Hensarling’s CHOICE bill was expected to be introduced by June. Now, however, an introduction is not considered “in the near future.” (NASCUS has written to Hensarling supporting a five-member NCUA Board, with one seat reserved with an individual with state credit union regulatory experience, in his legislation.)

The chairman of the Senate Banking Committee Thursday added to the timing uncertainty; news reports quoted Sen. Mike Crapo (R-Idaho) saying that he would like to move regulatory reform (and/or housing finance reform) to late this year or in early 2018 (“I’m not looking further than that,” he said).

Aside from the congressional schedule, financial regulatory reform legislation may have to wait until after Treasury Secretary Steven Mnuchin delivers his report (expected in June) about how the financial system meets the “core principles” mandated in President Donald Trump’s Feb. 3 executive order. The order includes six “core principles” for regulating the U.S. financial system, the sixth of which calls for “restoring public accountability within federal financial regulatory agencies” and “rationalizing” the federal financial regulatory framework. Mnuchin’s report, developed with the Financial Stability Oversight Council (FSOC), is directed to describe how the current financial system makeup meets the core principles, and what changes are needed (if necessary) to meet those principles.

Presidential Executive Order on Core Principles for Regulating the United States Financial System


Perhaps in the face of the upcoming “core principles” report (and any changes it may recommend), at least two top federal regulators are signaling that changes to the federal financial institution regulatory regime should be considered carefully. In a March 9 speech, Comptroller of the Currency Tom Curry said that “now is not the time” to fundamentally change regulatory course, but to continue maintaining bank capital standards, ensuring stable sources of liquidity, and providing effective regulation and supervision. “Critics suggest that capital requirements restrict lending and hold back the economy,” Curry said. “While that’s a legitimate policy question, the (financial) crisis provided the troubling answer of what happens when banks fail to hold capital levels commensurate with their risks. In an economic downturn, undercapitalized banks are simply incapable of lending and restabilizing the economy.” This week Federal Reserve Board Gov. Jerome Powell in a speech said the structure of the Federal Reserve should not be changed lightly, as it achieves a practical balance that serves the country well. “Current discussions of Fed reforms echo these past debates. But it is important to understand that history in both advanced and emerging economies across the world has consistently demonstrated the need for a central bank, and both the existence and the structure of the Federal Reserve are products of that historical experience,” he said.


Providing additional flexibility to some mortgage lenders concerning the collection of consumer demographic information is the aim of a proposed amendment to Regulation B (Equal Credit Opportunity Act/ECOA) issued by the CFPB last week. According to the agency, the proposal (which will be issued for a 30-day comment period, once published in the Federal Register) would let mortgage lenders be more nimble while supporting the industry’s ability to use consistent forms and practices. “We believe this will help the mortgage industry as it works to adopt new application forms, including the revised Uniform Residential Loan Application,” CFPB stated in an announcement. The bureau stated that its rules implementing ECOA include restrictions on lenders’ ability to request certain information from consumers. The rules also include requirements on federal agencies to collect certain information from consumers, “so that we and other government agencies can help ensure lenders are following the law.” The proposal, CFPB stated, amends those requirements to increase mortgage lenders’ flexibility in collecting certain demographic information provided by mortgage applicants.

CFPB Issues Proposal to Provide Flexibility to Certain Mortgage Lenders in Collecting Information


The speaker slate for the 2017 NASCUS-CUNA Cybersecurity Symposium has grown to 18 experts drawn from the cybersecurity community, who will offer their views and insights over more than 14 hours of the two-day program in San Diego. Hotel cutoff for rooms at the headquarters Westin Gaslamp Quarter Hotel is May 15 (just a bit over six weeks from now). The June 5-6 event looks at cutting-edge techniques and best practices and procedures to protect organizations from the latest cyber threats and challenges. Sessions include: international trends; combating cyber-enabled financial crimes; incident response-forensic and crisis communication in breaches; 10 things that make a hackers job easy; understanding the vulnerabilities of the cloud; cyber risk rating an institution — and more. Experts include: Keynoter Jim Stickley of Stickley on Security, and host Randy Romes of CliftonLarsonAllen, with thoughts from the NCUA Board by NCUA Board Member Rick Metsger — all discussing their insights and the latest challenges and solutions in cybersecurity.

Speaker line up for 2017 Cybersecurity Symposium

Agenda/registration: NASCUS-CUNA 2017 Cybersecurity Symposium, June 5-6, San Diego

BRIEFLY: Welcome to 2 CUs; discussing cybersecurity

NASCUS welcomes two new member credit unions: San Diego County CU of San Diego, Calif., and Alta Vista CU in Redlands, Calif. Watch this space for more new NASCUS members in coming weeks … NASCUS was in attendance this week for a meeting of the Financial and Banking Information Infrastructure Committee (FBIIC) at the Treasury to discuss a variety of critical infrastructure matters, including cybersecurity, in the financial services industry with representatives of other state and federal regulatory agencies.


Information Contact:
Patrick Keefe, NASCUS Communications, [email protected] or (703) 528-5974

For more information about NASCUS's news and/or public relations, please contact our Marketing and Communications Department.