Nov. 10, ’17 NASCUS Report

OTR methodology on tap for NCUA Board

The methodology for the overhead transfer rate (OTR) – the rate at which NCUA transfers funds from the National Credit Union Share Insurance Fund (NCUSIF) to the agency’s operating budget to cover “insurance-related expenses” — will be among the items the NCUA Board will consider at its open meeting next week at agency headquarters.

The methodology has been front and center for NASCUS and the state system over the past nearly two years, since NCUA issued a call for comments in early 2016, and then proposed a new methodology this summer. Overall, NASCUS has been urging the agency to address the methodology for the past 20 years.

Under the proposal, NCUA would adopt what it calls a “simplified approach” reflecting that “safety and soundness is not the sole domain of the insurer.” The annual rate would be set at 60%, down from the 2017 rate of 67.7%, and the lowest rate since 2013 (when it was set at 59.1%). The average rate over the past 16 years is 61.2%; from1986-2000, the OTR was 50%.

In comments to the NCUA Board at its budget briefing last month, NASCUS President and CEO Lucy Ito noted that the OTR “is inextricably tied to NCUA’s implementation of its budget.” She reiterated themes established in NASCUS’ comment letter on the OTR methodology filed in late August: NCUA’s safety and soundness responsibility as the chartering authority for FCUs; elements that go into the OTR, including the imputed value of state regulator work (that is, the value of the work state regulators perform that lessens the financial burden on NCUA, such as safety and soundness exams); the importance of future notice and comment for the OTR methodology; and the OTR methodology’s inverse impact on FCU operating fees.

But she also pointed out that the effect of the new methodology had it been applied to 2017, as proposed, would have reduced the amount of funds transferred from the NCUSIF to cover NCUA’s operating costs. “That is, in reconsidering the OTR methodology, the NCUA Board is, in effect, partly fulfilling its stewardship of the NCUSIF. This benefits all insured credit unions,” she said.

Also at next week’s meeting, the NCUA Board will consider:

  • The agency’s 2018-19 operating fund budget;
  • A final rule on corporate credit unions;
  • A quarterly report on the Temporary Corporate Credit Union Stabilization Fund (TCCUSF)

Lucy Ito written comments for Oct. 19 NCUA Board budget briefing

NASCUS comment letter: OTR methodology

NASCUS comment letter: NCUA proposal on corporate credit unions


Taking a “fresh look at everything,” including better ways to tailor regulations for financial institutions, were the first public words uttered by the Federal Reserve’s newly installed vice chair for supervision this week. Randal K. Quarles, who joined the Federal Reserve Board Oct. 13 (after being confirmed by the Senate for his post earlier in the month) told a conference audience in New York that the Fed will be “proceeding right away on that front in proposing ways to make sure our engagement with each specific firm is appropriate to that specific firm.” The new central banker also said the Fed and other regulators need to watch trends in fintech and cybersecurity for risks posed to the financial system. (Note: the state credit union system can keep its eye on cybersecurity through the annual NASCUS-CUNA Cybersecurity Symposium, set in 2018 for June 3-5 in Nashville.)

Loan officers report credit demand weakening; standards eased

Demand for commercial and industrial (C&I), residential real estate, and commercial real estate (CRE) loans weakened in the three-month period of August-October, even though many lending standards on many of those loans were either eased or remained unchanged from the previous period, the Federal Reserve reported this week. In its October 2017 “Senior Loan Officer Opinion Survey on Bank Lending Practices,” the Fed stated that banks eased standards and terms on C&I loans, and had weaker demand for the loans during the three-month period. Demand for CRE loans, according to the Fed, was reported weaker by the banks (although standards remained “basically unchanged”).

The Fed said its survey results show that, for loans to households, banks reported that their lending standards on all categories of residential real estate (RRE) loans either eased or remained basically unchanged over the three-month period (on balance). Demand for all categories of RRE loans weakened, the Fed said. “In contrast, banks reportedly tightened their standards and terms on credit card and auto loans, while demand for these loans reportedly remained basically unchanged,” the Fed report noted.

Senior Loan Officer Opinion Survey on Bank Lending Practices


A California state government group has issued a report calling for a multi-state consortium to advocate for removal of federal legal and regulatory roadblocks to financial institutions offering banking services to the marijuana industry. Additionally, the report calls for creation of a state-chartered corporate credit union or banker’s bank to serve the cannabis industry in the state.

“The final step in providing banking services to the cannabis industry is removing federal legal and regulatory roadblocks, the end game of which would allow cannabis to be treated like other cash-intensive regulated industries, such as casinos and pawnshops,” states the report, issued by a group set up by California State Treasurer John Chiang.

To accomplish that, the report advisesa multistate consortium should be created which includes representatives of cannabis-legal states, local governments, the cannabis and financial services industries, and law enforcement.” The consortium would (among other things) engage in “congressional and executive-branch policy advocacy, which should be coordinated to make sure that cannabis-legal states speak with one voice.”

Chiang wrote in the report that “the clash between state and federal law threatens to cripple legal California cannabis businesses before they even get up and running.” He added that “one of the main threats to legalization” is that banks generally will not open accounts for cannabis businesses out of fear they will be penalized under federal law.

Other recommendations in the report include creation of a publicly owned or supported, state-chartered financial institution in California to serve the cannabis industry. “A feasibility study should be conducted to determine whether creation of a public cannabis financial institution or a bankers’ bank or corporate credit union is advisable,” the report states.

Report: Banking Access Strategies for Cannabis-Related Businesse


Deceiving consumers, including charging them without settling their debts as promised, is among several charges brought against the nation’s largest debt settlement services provider in a lawsuit this week Wednesday by the CFPB. The action, filed against Freedom Debt Relief (of San Mateo, Calif.) and its co-CEO Andrew Housser, also alleges that the company makes customers negotiate their own settlements, misleads them about its fees and the reach of its services, and fails to inform them of their rights to funds they deposited with the company. The consumer agency said it is seeking compensation for harmed consumers, civil penalties and an injunction against Freedom and the executive to halt unlawful conduct.

In a release, CFPB said Freedom, in its operations, claims it has successfully negotiated and settled more than $7 billion in debts for more than 300,000 consumers. Using telemarketing contacts with prospective customers, CFPB said Freedom learns who consumers’ creditors are, the amounts owed to each, and the nature of the debts.  The bureau said Freedom requires customers enrolled in its debt-settlement program to deposit money into dedicated accounts with an FDIC-insured bank. The firm then tells consumers, CFPB said, that when the accounts have sufficient funds to make settlement offers, Freedom will negotiate with consumers’ creditors to persuade them to accept less than the actual amounts owed. When a debt is settled, Freedom charges consumers fees that range between 18% and 25% of the amount of debt the consumer owed on the day they signed up for the program.

CFPB Sues Freedom Debt Relief For Misleading Consumers About Its Debt-Settlement Services


Consumer experience in access to free credit scores – and the performance of organizations, including companies and non-profits, in offering access to the scores – is the subject of a request for information announced by CFPB. The bureau is also updating its public list of companies that offer customers free access to a credit score, and seeking comments.

In a Federal Register notice dated Nov. 13 (but posted today), the consumer bureau said it wants input about consumer experiences, knowledge of industry practices that best support educating and empowering consumers, and educational content that is providing the most value to consumers about access to free credit scores. The bureau said it is looking for responses from consumers and their advocacy groups, but also from credit card companies and other lenders, credit and financial counseling providers, and the general public. The request for information was issued for a 90-day period.

Additionally, the bureau said it is updating its list of free credit score access providers (first published in March 2017); organizations may submit responses (or updates, if they have provided information for the first publication) over a 60-day period. If a company was included in the March 2017 list, and wants to be included in the updated list, the company must submit a new entry.

Request for Information Regarding Consumers’ Experience with Free Access to Credit Scores

Update to the Public List of Companies that Offer Customers Free Access to a Credit Score


A tabletop exercise focusing on a cybersecurity disaster scenario will be led by Treasury Department experts at a Nov. 20 event in the Washington, D.C. area. The exercise, held in conjunction with a one-day conference hosted by the Metropolitan Washington Council of Governments (MWCOG) and the Mid-Atlantic FIRST Coalition (MA1st), is geared toward financial institution cybersecurity and emergency management professionals.

Registration information: Nov. 20 MA1st workshop/tabletop demonstration

BRIEFLY: Fiduciary rule reported delayed again; Senate tax bill leaves CU preference intact; BSA conference kicks off; mortgage symposium upcoming

The Department of Labor has reportedly delayed its “fiduciary rule” by 18 months (from the Jan. 1, 2018 effective date), pushing the new date to July 2019. The regulation, as it stands now, holds financial advisers to a “fiduciary standard” affecting how they may advise clients on retirement savings … No changes to the credit union tax preference are made in the Senate version of tax legislation unveiled Thursday, according to reports from the credit union trade groups … Sunday kicks off the annual NASCUS-CUNA Bank Secrecy Act (BSA) Conference, this year being held in Las Vegas and running through Wednesday;  the four-day program offers compliance officers, state and federal examiners, industry experts and regulators a forum for discussing and learning about the very latest about the complex federal BSA laws … also this month: the NASCUS Mortgage Symposium is Nov. 28 in Newton, Mass.; it’s a one -day training session providing a high-level overview on topics such as Real Estate Loan workflow, Fannie/Freddie as Investor/Servicer, the Business of Loan Servicing, Economics of Servicing, Servicing Components and Loss Mitigation.

Program information/registration: BSA Conference (Nov. 12-15, Las Vegas)

Program information/registration NASCUS Mortgage Symposium (Nov. 28, Newton, Mass.)


Information Contact:
Patrick Keefe, [email protected]

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