May 15, 2020 NASCUS Report

THIS WEEK: Remittance rule ‘finally’ issued; Board to look at overdrafts, joint accounts, PCA; ‘S’ for CAMEL still on agenda; CORONAVIRUS REPONSE — Alert urges advising members on loan waiting periods … Summaries outline latest reg actions … Website offers housing advice … Pandemic pushes up complaint volume … Hood outlines legislative goals in hearings … New bill is big on pages, small on CU stuff … Webinar looks at employment law in pandemic; BRIEFLY: Deadline for CDRLF grants approaching

Remittance rule issued with permanent,
tailored exceptions, expanded safe harbor

Permanent “tailored” exceptions to remittance rule requirements for credit unions’ and banks’ disclosures of exchange rates and covered third-party fees, and an increase of the safe harbor to 500 transfers annually from 100 transfers, is outlined in a final rule on remittances issued this week by the CFPB.

The rule takes effect July 21, when the statutory exception on the above-noted cost disclosures expires.

The remittance rule implements provisions of the Electronic Fund Transfer Act (EFTA) and is included in the bureau’s EFTA implementing rule, Regulation E. The CFPB’s previous rule applied only to institutions that provide more than 100 remittances each in the previous and current calendar years. Under the final rule, only those providing more than 500 remittances annually in each of those years are covered by the rule.

For affected institutions, the final rule provides permanent exceptions from the requirement to provide exact amounts of exchange rates and third-party fees based in part on the number of remittances handled annually, and it provides a transition period for compliance once those thresholds are exceeded. That is:

  • Exchange rates: An estimate of the exchange rate for a remittance transfer to a particular country may be made if, among other things, the designated recipient will receive funds in the country’s local currency and the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to that country when the designated recipients received funds in the country’s local currency.
  • Third-party fees: An estimate of covered third-party fees for a remittance transfer to a designated recipient’s institution may be made if, among other things, the insured institution made 500 or fewer remittance transfers to that designated recipient’s institution in the prior calendar year.
  • Transition period: Institutions that exceed either of the above two thresholds may continue to provide estimates “for a reasonable period of time” – the later of six months in the calendar year in which that event occurs, or Jan. 1 of the following year – while they work to comply with the rule’s requirement for providing exact amounts.

The final rule also reiterates the special consideration in effect due to the COVID-19 pandemic: For remittance transfers that occur on or after July 21, 2020, and before Jan. 1, 2021, the bureau does not intend to cite in an examination or initiate an enforcement action in connection with the disclosure of exact third-party fees and exchange rates against “any insured institution that will be newly required to disclose exact third-party fees and exchange rates after the temporary exception expires.”

Consumer Financial Protection Bureau Issues Final Remittance Rule

Overdraft policy, joint accounts, PCA on board agenda

The NCUA Board will consider three issues related to its rules and regulations at its next regularly scheduled meeting May 21 on joint ownership of share accounts, overdraft policy, and prompt corrective action, according to filings by the agency.

The agency listed the actions in an agenda of the board’s meeting scheduled to be published Friday in the Federal Register. The agenda also shows the board will also hear a quarterly report on the National Credit Union Share Insurance Fund (NCUSIF).

In March, NCUA Board Chairman Rodney Hood signed a letter to credit unions (20-CU-02) outlining strategies credit unions may consider when determining how to work with their members to address the impact and challenges of COVID-19, the coronavirus. Among the strategies the agency suggested was waiver of overdraft fees.

The NCUA Board meeting May 21 is scheduled to begin at 10 a.m.; a closed meeting is scheduled for 11:45 a.m. The agency said that, due to the COVID-19 pandemic, the meeting will be open to the public via live webcast only.

NCUA Board Sunshine Act: Notice of Agency Meeting

‘S’ for CAMEL still in crosshairs for agency

Installing an “S” element into the agency’s examination rating system, oversight of credit union service organizations (CUSOs) and other third-party providers, and a projected increase in “material loss reports” due to the coronavirus crisis, are among the key points of the NCUA’s inspector general’s most recent semiannual report to Congress.

The report, which covers activity from Oct. 1, 2019, through March 31, 2020, includes items detailing that:

  • December 2021 remains NCUA’s target for implementing the “S” (for sensitivity to market sensitivity) element of its credit union rating system (CAMEL, currently focusing on capital adequacy, asset quality, management, earnings, and liquidity). The recommendation was first made in 2015 in a report reviewing the agency’s interest rate risk program. In addition to adding an S to CAMEL, the OIG recommended revising the L component to include only liquidity content and criteria; this recommendation also remains open. (NASCUS, which supports including the S component in the agency’s rating system, has determined that at least 24 states have already adopted the “S” component in their rating system.)
  • Four audits are currently under way, focusing on the agency’s consumer complaint program; NCUA’s examination process and oversight authority of CUSOs and other (non-CUSO) third-party vendors; the agency’s handling of personally identifiable information at liquidated credit unions; and its governance of information technology (IT) initiatives.
  • While the only material loss review in the report period was for the failed C B S Employees Federal Credit Union (which cost the NCUSIF some $39.5 million), the report’s introductory message notes that “given the economic impact of the COVID-19 [coronavirus] pandemic, we anticipate an increase in required MLRs in the coming year.”

NCUA OIG Semiannual Report to Congress (Oct. 1, 2019, to March 31, 2020)


‘Alert’ urges advising members on loan waiting periods …

Credit unions are encouraged to advise mortgage borrowers with a need for immediate access to funds that they can forego waiting periods for some of the loans, due to the coronavirus crisis, NCUA said this week in a “regulatory alert” to federally insured credit unions.

The agency noted that in late April the CFPB issued an interpretative rule that consumers affected by the coronavirus pandemic can exercise their rights to modify or waive certain required waiting periods under the Truth in Lending Act/Real Estate Settlement Procedures Act (TILA-RESPA) integrated disclosure rule (also known as the “TRID” rule) and Regulation Z rescission rules.

In its alert (20-RA-03), the agency said the interpretive rule (which took effect May 4) “provides that the need to obtain funds and not delay closing for reasons related to the COVID-19 pandemic may be a ‘changed circumstance’ or ‘bona fide personal emergency’ which would permit borrowers to waive waiting periods under both rules, or permit a credit union to amend some TRID documents.”

NCUA Board Chairman Rodney Hood (who signed the alert) said that, although the rule does not require credit unions to inform borrowers of their ability to forego the waiting periods, “I encourage you to advise borrowers with a need for immediate access to funds of the right and manner to utilize these waiver provisions.”

He also noted that the interpretive rule provides that credit unions that make certain changes to disclosures for reasons related to the pandemic can still be considered to be acting in good faith under the TRID rule.

Consumer Financial Protection Bureau Issues Interpretive Rule on Waiver of TRID and TILA Waiting Periods

New summaries outline latest reg actions …

New summaries of actions taken by the CFPB and NCUA over the last several weeks related to the coronavirus crisis have been posted by NASCUS on the association website.

The summaries, publicly available, include:

NCUA Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans– In April, NCUA issued an interim final rule (following a notation vote by the agency board) stating that loans made through the paycheck protection program will receive a 0% risk weight under regulatory risk-based net worth requirements, and will not be counted toward the credit union business lending cap. The action amends both the agency’s capital adequacy and member business loans and commercial lending regulations. NCUA has noted that March’s Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – which created the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) – requires that PPP loans made by federally insured credit unions receive a 0% risk weighting under the agency’s risk-based capital requirements.

CFPB Application of TILA-RESPA (TRID) Integrated Disclosure Rule and Regulation Z Right of Rescission Rules during COVID-19 Pandemic: Citing COVID-19 disruptions, CFPB in late April issued an interpretive rule (effective immediately) that allows the waiver of waiting periods under mortgage disclosure and rescission rules. The bureau said its rule provides that a consumer has a “bona fide personal financial emergency” that would permit them to utilize the TRID modification and waiver provisions if they determine their need to obtain funds due to the COVID-19 pandemic (1) necessitates consummating the credit transaction before the end of the TRID rule waiting periods or (2) must be met before the end of the Regulation Z rescission rules waiting period. (NCUA issued a “regulatory alert” about the rule this week; see related item.)

CFPB interpretive rule, Treatment of Pandemic Relief Payments Under Regulation E and Application of the Compulsory Use Prohibition: Certain coronavirus relief payments from the government will not be considered “government benefits” and thus may be issued to consumers via prepaid cards, according to the interpretive rule issued in April by the CFPB. Under the interpretive rule – which took effect upon its April 27 publication in Federal Register, certain pandemic-relief payments are not “government benefits” for purposes of Regulation E, and those payments are not subject to the compulsory use prohibition in the Electronic Funds Transfer Act (EFTA) and Regulation E, the bureau (said.

NASCUS Summary: NCUA Interim Final Rule Parts 702 & 723 PPP Loans & PCA and MBL

NASCUS Summary: Application of TILA-RESPA (TRID) Integrated Disclosure Rule and Regulation Z Right of Rescission Rules during COVID-19 Pandemic

NASCUS Summary: Treatment of Pandemic Relief Payments under Regulation E and Application of the Compulsory Use Prohibition

Website offers housing advice for victims …

A website to provide mortgage and housing assistance to homeowners and renters facing difficulties amid the coronavirus (COVID-10) pandemic is the focus of a website launched jointly this week by the CFPB and federal housing agencies (Federal Housing Finance Agency (FHFA, which regulates Fannie Mae and Freddie Mac), and the Department of Housing and Urban Development (HUD)). The website, according to the agencies, consolidates the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) mortgage relief, protections for renters, resources for additional help, and information on how to avoid COVID-19 related scams. The agencies said the website also provides lookup tools for homeowners to determine if their mortgage is federally backed, and for renters to find out if their rental unit is financed by the Federal Housing Administration (FHA, housed within HUD), Fannie Mae, or Freddie Mac.

Mortgage/housing assistance website

CFPB release

Pandemic sparks largest complaint volume to CFPB …

The coronavirus crisis sparked the highest number of consumer complaints in the history of the CFPB in March and April, the agency’s director said this week, with 36,700 and 42,500 tallied, respectively, and mostly focusing on consumer concerns about mortgage and other payments in the face of the economic fallout of the pandemic.

In remote remarks to two groups, CFPB Director Kathleen Kraninger said that, while credit reporting and debt collection continue to receive the most complaints overall, for consumers mentioning COVID-19 and related terms, mortgages and credit cards currently top the list.

“A significant portion of complaints as a result of the pandemic are about issues consumers encounter when seeking alternative payment options for their mortgages, credit cards, auto loans and leases, student loans, and other loans,” according to her released remarks for legislative meetings of the National Association of Realtors and a public meeting of the Financial Literacy and Education Commission (FLEC), where she is vice chair. “Consumers report that they are seeking changes to loan terms, such as suspension of payments, lower interest rates, longer loan terms, and other ways to postpone or lower monthly payments because they have lost their jobs or are working fewer hours.”

Kraninger Remarks – National Association of Realtors 2020 Legislative Meetings

Kraninger remarks – Financial Literacy and Education Commission Public Meeting

Hood outlines legislative goals to deal with pandemic

NCIUA Board Chairman Rodney Hood joined other federal financial institution regulators in testifying before both the Senate Banking and House Financial Services Committees this week in oversight hearings, both held virtually via the Internet (and which the House Financial Services Committee termed a “roundtable”). In both hearings, Hood outlined the credit union agency’s legislative “wish list” for dealing with the coronavirus crisis, which includes: Temporary reductions by 1% in the capital levels at which credit unions would qualify as adequately and well-capitalized, to provide the institutions a measure of relief during the pandemic; temporarily raise credit unions’ statutory member business lending (MBL) cap from 12.25% of assets to 20%; authority to waive, for up to 180 days, the requirement of a net worth restoration plan for credit unions that are less than adequately capitalized during the pandemic; permanently authorize all credit union charters to apply to serve areas designated as underserved; and permanently remove or significantly amend the “reasonable proximity” requirement for select employee groups or associations seeking to become part of a multiple common-bond credit union’s field of membership.

May 12 Senate Banking hearing materials (including testimony), video

New bill is big, but holds limited action for CUs …

Speaking of legislation, Democratic House leaders this week unveiled a massive, $3 trillion (and 1,800-plus page) bill dubbed the “Heroes Act” (HR 6800) as the next legislative action in providing consumers and businesses relief from the coronavirus crisis.

However, the legislation was called “dead on arrival” by Republican Senate leaders (for provisions they said were unrelated to the crisis) – and even some industry representatives from credit unions who said the bill fell short, asserting that a draft of the bill “makes it clear that there is a lot more work for Congress to do.” For example, the bill does not contain any provisions temporarily removing or raising the statutory member business lending cap for credit unions, which would increase access to credit for small businesses. According to Ryan Donovan, chief advocacy officer for the Credit Union Natl. Assn. (CUNA), “the good news is that this is the first step, not the last word.”

A positive provision for credit unions in the bill (the future of which is unclear): it provides $1 billion for economic support and recovery in distressed communities by providing financial and technical assistance to community development financial institutions (CDFIs).

Another potentially positive aspect for credit unions: it contains a provision that would allow cannabis-related legitimate businesses – which, it notes, in many states have remained open during the COVID-19 pandemic as essential services, along with their service providers — to access banking services and products, as well as insurance. The provision would also require reports to Congress on access to financial services and barriers to marketplace entry for potential and existing minority-owned cannabis-related legitimate businesses.

Section by section summary of Heroes Act (HR 6800)

Webinar looks at employment law during pandemic …

“Employment Law Challenges During (or After) the Pandemic: Returning Employees to the Office or Managing Them at Home” is the topic for a webinar set for May 28 by NASCUS. In keeping with its practice of providing resources to its members and the state system to deal with the coronavirus crisis, there is no charge for the event.

Led by Steven R. Peltin, a principal with the Seattle-based law firm Foster Garvey PC focusing on employment and labor law, the one hour session will address common issues employers face as they prepare for the future, including: who and how of returning to the office; employee rights under federal and state law; best practices for keeping employees safe; screening, testing and addressing potentially ill workers; continuing work-from-home measures and effectively managing remote employees and teams.

For more information, including registration, see the link below.

NASCUS Webinar: Returning Employees to the Office or Managing Them at Home (May 28, 2-3 p.m. ET); no charge

BRIEFLY: LICUs can apply for grants through next week

Eligible low-income credit unions have until next Friday (May 22) to apply for Community Development Revolving Loan Fund (CDRLF) grants to meet their needs and needs of their members during the COVID-19 pandemic, NCUA said this week. According to the agency, it is committing $1.375 million in grants— most of the 2020 Community Development Revolving Loan Fund (CDRLF)appropriation—to COVID-19-related efforts. Credit unions may apply for the grants, which have a maximum award of $10,000 and are awarded on a rolling basis throughout the open application period, through the portal on its website, the agency said. Minority depository institutions and credit unions with less than $100 million in assets will receive priority; awards will be made on a first-come, first-serve basis until the earmarked funds are fully exhausted.

NCUA CyberGrants portal

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