May 3, 2019 NASCUS Report

NASCUS seeks changes in audit proposal

While NASCUS supports many of the changes in NCUA’s proposed rule on supervisory committee audits, the association in its comment letter also noted some significant disagreements– including on audits of executive compensation.

In the letter, which commented on the agency’s proposed changes to its regulations on supervisory committee audits and verifications (Part 715 of NCUA rules), NASCUS wrote that it was not convinced that the agency should add specific subject areas as loans to insiders, pay and benefits and compliance with Bank Secrecy Act (BSA) to an appendix to its audit requirements. The association indicated that doing so would not produce enough supervisory value to justify the increased cost for credit unions.

“With respect to pay and benefits, it is unclear exactly what including those reviews in an audit would accomplish, although it should be noted that if the intent is to provide some transparency or review of executive compensation, FISCUs (federally insured, state-chartered credit unions) already file IRS Form 990 reporting such information,” NASCUS wrote. “There is no compelling reason to include FISCUs in a requirement for an audit of executive compensation.”

NASCUS also urged the federal regulator to reconsider its proposal to publish reference material on how to conduct procedures that would meet the minimum requirements to be established under the appendix. “While NASCUS supports NCUA’s providing credit unions resources to meet supervisory expectations, we caution against promulgating regulation through guidance. We strongly encourage NCUA to work with state regulators, accounting professionals and credit union stakeholders to cooperatively develop reference material.”

In other comments, NASCUS:

  • Reminded the agency that not all states require credit unions to have supervisory committees(which the proposal assumes by coupling its audit requirements for all federally insured credit unions “with the concept that the audit is managed by the credit union’s Supervisory Committee”). “In some states, the mandatory audit functions of the credit union are overseen by an Audit Committee, and in others it is left to the credit union’s board to determine how best to oversee the annual audit,” NASCUS wrote. “We recommend NCUA incorporate neutral language in Part 715 and Part 741.202 [of its regulations], replacing ‘Supervisory Committee’ with references to a credit union’s responsibility to obtain (or conduct) an audit.”
  • Urged the agency to reorganize its rules, placing those sections applying to state credit unions in one separate, distinct section.Reiterating a long-held tenet of the state credit union system that the agency’s rules should be easy to find and use, NASCUS urged the agency to consolidate its rules that apply to FISCUs in one part of its regulations – Part 741 – to make it easier for FISCUs as well as state and NCUA examiners to find what rules apply to FISCUs. “It would not be difficult for NCUA to obviate any confusion related to applicability of audit provisions to FISCUs. By so doing would provide meaningful regulatory relief to 40% of federally insured credit unions by eliminating the unnecessary burden of trying to figure out which rules apply, and which do not,” NASCUS wrote.

NASCUS comments: Proposed Rulemaking, Proposed Rulemaking — Supervisory Committee Audits & Verifications

IN’s Fite, TN’s Gonzales to continue SLC roles

Tom Fite, director of the Indiana Department of Financial Institutions, will continue on the State Liaison Committee (SLC) of the Federal Financial Institutions Examination Council (FFIEC), for a full two-year term that started May 1. He has been a member of the SLC since 2017, when he first joined to complete a partial-term vacancy.

In addition to his SLC service, Fite has served as the state regulatory agencies’ representative on the FFIEC Task Force on Supervision and on the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) Bank Secrecy Act Advisory Group.

Meanwhile, the SLC also re-elected Greg Gonzales, commissioner of the Tennessee Department of Financial Institutions, as its chairman for a one-year term that starts May 1 and runs through April 30. Gonzales has served on the SLC since 2016, when he was appointed to complete a partial-term vacancy; on April 1, he was reappointed to serve his second two-year term which runs through March 31, 2021.

Fite Re-Appointed to FFIEC State Liaison Committee

Gonzales Elected as State Liaison Committee Chairman

Senator hints at cannabis clarity hurdle

Legislation that would provide some clarity for credit unions and others about serving legal cannabis-related businesses may be facing some hurdles in the Senate, based on comments this week by the chairman of the Senate Banking Committee.

Sen. Mike Crapo (R-Idaho), in remarks to a group of bankers meeting in Washington this week, said he cannot commit to supporting (or signing off on) such legislation, as cannabis remains illegal at the federal level. “I cannot make a commitment as to whether we will take up legislation yet because we want to see how we can resolve this difference between criminal law and our financial law,” he said.

Last month, the House Financial Services Committee sent to the full House for consideration 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 remains pending in the House.

NASCUS has long beena leader (since 2014) in advocating for clarity in federal law for financial institutions serving legal marijuana businesses in their states. NASCUS has hosted a number of sessions at its conferences and events about the issue – and is hosting a two-day symposium June 25-26 in Los Angeles focusing on cannabis banking.

NASCUS June 25-26 Cannabis Symposium (Universal City, Calif.)

Higher thresholds for HMDA data reporting proposed

Raising the coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under federal disclosure rules was proposed Thursday by the CFPB. In a release, the bureau indicated its notice of proposed rulemaking (NPRM) is aimed at providing relief to smaller lenders (such as credit unions and community banks) from the Home Mortgage Disclosure Act’s (HMDA) data reporting requirements. The agency also said the proposal would also clarify partial exemptions from certain disclosure requirements enacted in last year’s regulatory relief legislation, the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), S. 2155.

For closed-end mortgage loans, two alternatives to permanently increase the reporting requirement are proposed: from 25 to either 50 or 100, the bureau said in a release. For open-end lines of credit, the proposal would extend for two years the current temporary coverage threshold of 500 open-end lines of credit. The bureau said once that extension expires, it proposes that the open-end threshold would be set permanently at 200 open-end lines of credit.

Information on the costs and benefits of reporting “certain data points under HMDA” is also being sought by the bureau. The information collection would be done under an advance notice of proposed rulemaking. The costs and benefits collection is also in keeping with recent pronouncements from the agency to do more along those lines with its rules. The bureau said it also wants input about costs and benefits of requiring institutions to report certain commercial-purpose loans made to a non-natural person and secured by a multifamily dwelling.

Consumer Financial Protection Bureau Proposes Changes to HMDA Rules

Debt collection town hall possible venue for proposal

A town hall meeting on debt collection – at which new regulations on the topic could be unveiled — is slated by the CFPB next week (May 8) in Philadelphia. The event, the bureau said, will be aired live and will feature remarks from bureau Director Kathleen Kraninger. The one-day event, held at the University of Pennsylvania, gets underway at noon. Comments from community groups, industry representatives, and members of the public will also be accepted during the town hall, the bureau said.

In March, Kraninger said a notice of proposed rulemaking related to debt collection was planned for issuance this spring. Some in the financial industry are speculating that the Wednesday gathering will serve as the venue for revealing the debt collection rule proposal. Similar events in the past have been used for unveiling proposals.

CFPB town hall in Philadelphia, Pa.

NCUA, SBA link up for a 3-year program of small biz awareness

Bringing small businesses and credit unions together to expand awareness about federal programs to develop small business is the aim of a joint program unveiled this week by NCUA and the Small Business Administration (SBA).

NCUA has entered into a joint agreement with SBA to take the initiatives over a three-year period aimed at helping credit unions better understand and make use of SBA-backed loans and resources, the credit regulator said in a release. These initiatives may include webinars, training events, and media outreach, NCUA said.

Commercial lending by federally insured credit unions has grown in recent years, according to the agency, reaching more than $71 billion in commercial loans outstanding at the end of last year. SBA reported that, nearly 200 credit unions have participated in the SBA loan guaranty program since October 2017.

“The credit union mission is grounded in the concept of providing affordable financial products and services tailored to meet their members’ needs, and that includes helping Americans start or expand businesses,” NCUA Board Chairman Rodney Hood said in a statement. “Credit unions are well-situated to understand and work with their local businesses and entrepreneurs to extend affordable credit.”

NCUA/SBA Partnership Will Help Credit Unions Support Small Businesses

ON THE ROAD: Informing directors, examiners in MI, WA …

NASCUS sponsored two educational events last week – simultaneously – in two parts of the nation, bringing fresh insights and ideas to credit union supervisors, executives and directors on a wide variety of issues.

In Midland, Mich., NASCUS sponsored the one-day Michigan Directors’ College – featuring (at left) Steve Peltin, Partner, Foster Pepper PLLC, discussing employment law with the gathered credit union volunteers and staff. Other speakers at the event included Glory LeDu, CEO, LeagueInfoSight; and Brian Knight, NASCUS EVP and general counsel (discussing cannabis banking issues).

In Seattle, NASCUS hosted the three-day Washington Examiners’ School, featuring a regulatory update from (center) Erin O’Hern, Director of League Compliance Services for PolicyWorks, and; an overview of developments in the “fintech” sector from (right) Zach Blumenfeld, Founder/CEO, of CultureCon. Otherspeakers at the event included David Reed, partner, Reed & Jolly, PLLC; Ken Otsuka, senior consultant, and Doug Roossien, consultant risk and compliance solutions, both of CUNA Mutual Group; and Bryan Mogensen, principal, financial institutions, and Crystal Hernandez, manager, financial institutions, both of CLA. (More such events are coming up this spring through the summer; see the link below for information, including registration opportunities.)

NASCUS Spring/Summer education agenda/program, 2019

… reaching out to AZ, CO, ID, WA regulators, state CUs

NASCUS President and CEO Lucy Ito moderated a regulatory panel at last week’s Mountain West Credit Union Association (MWCUA) in Scottsdale, Ariz.,  featuring Marie Corral (credit union division manager of the Arizona Department Financial Institutions), Cheri Freed (NCUA western region director), and Mark Robey (MWCUA senior vice president of regulatory affairs for).

This week the NASCUS leader visited state chartered credit union leaders throughout the Pacific Northwest,  including Kent Oram, CEO of NASCUS member Idaho Central Credit Union in Chubbuck, Idaho; Carla Cicero, CEO of NASCUS member Numerica Credit Union in Spokane, Wash.; and Jeff Adams, CEO of Horizon Credit Union (a potential member) in Spokane, Wash..  Discussion topics included interstate branching, capital reform, and collaboration among NASCUS, state agencies, and NCUA.

Nominations for honorees of service to state system now open

Nominations are due at the end of this month (May 31) for the 2019 Pierre Jay Award, the annual honor bestowed by the state credit union system on the individuals or entities making significant contributions to state credit unions by demonstrating outstanding service, leadership and commitment.

The award, established in 1997, is named after the firstCommissioner of Banks in Massachusetts, Pierre Jay, who championed credit union development in the United States. Jay’s commitment at strengthening and enhancing the state credit union system is reflected by those honored annually with the award.

The winner of this year’s honor will be announced this summer at the NASCUS State System Summit (Aug. 13-16 in San Francisco); an award presentation will be held during the Summit program.

For more information – and to nominate a person or entity using the official online entry form – visit see the NASCUS website at the link below. Or, contact Alicia Valencia Erb, NASCUS vice president of member relations at [email protected].

2019 Pierre Jay Award; information, entry requirements, nomination form

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