Sept. 15, ’17 NASCUS Report

House strips NCUA budget provision from bill

The House approved a spending plan Thursday that no longer includes a provision rolling the NCUA budget under the congressional appropriations process. On Wednesday, lawmakers approved an amendment to the 2018 Department of the Interior, Environment, and Related Agencies Appropriations Act (H.R. 3354) which removed a section in that bill that would have subjected the NCUA budget to annual congressional review in the appropriations process. The amendment, passed on voice vote, was offered by Reps. Mark Amodei (R-Nev.) and Pete Aguilar (D-Calif.).

H.R. 3354, as originally offered to the House, would have rolled the annual budgets of NCUA, OCC and the FDIC into the appropriations process. As independent agencies, their budgets are now outside of congressional approval. If the spending bill had become law as originally presented, it would have marked the first time the federal credit union regulator, as an independent regulator, would face congressional budget approval.

The Amodei-Aguilar amendment affected only NCUA; it was widely supported in the credit union industry, which argued that placing the agency under congressional appropriations processes would amount to a hidden tax on credit unions and their members. NASCUS supports the amendment as it better protects credit union money as well as NCUA’s independence. As for states, in practice, they are split pretty much evenly.  Legislative branch oversight of their state credit union regulators’ budget is the norm in 23 states.  That is, about half of the state agencies responding reported in the 2016 NASCUS State System Profile that their legislatures have total or partial “final approval authority” over agency budgets.

2016 NASCUS State System Profile (members only)


Meanwhile, NCUA said this week that, following the Oct. 2 release of its 2018-19 proposed budget, it plans for an Oct. 18 public briefing on the spending plan, with an aim of “budget transparency” according to Board Chairman J. Mark McWatters.

“The NCUA needs to be accountable to credit unions for the use of their money, and this public briefing is a key component to how we fulfill our commitment,” said McWatters in a press release. “While final budget decisions remain with the Board, we look forward to hearing constructive comments from stakeholders. The NCUA intends to continue its prudent stewardship of its finances, but suggestions for ways to make improvements will always be considered.”

Last year, NASCUS participated in the briefing with President and CEO Lucy Ito offering remarks, mostly focusing on the overhead transfer rate (OTR) and its future.

The agency stated that public comments about the proposed budget could be aired at the briefing next month, following a request to the agency accompanied with written remarks by Oct. 13 (5 p.m. ET). While the NCUA Boardroom will be the venue for the briefing, the agency also plans to livestream the event via the web.

In addition, the agency stated it would accept written comments for the record about the proposed budget until Friday, Oct. 27 (5 p.m. ET). When it releases details of the proposed budget Oct. 2, NCUA also stated that it will provide the briefing agenda as well as contact information for requesting attendance and submitting comments.

NCUA Sets Budget Briefing for Oct. 18

Lucy Ito comments to 2016 NCUA Board briefing, 2017-18 agency budgets


The proposal to merge the federal credit union fund that insures members’ deposits with the fund to stabilize corporate credit unions may be necessary to avoid recapitalizing the insurance fund through an assessment, NCUA Board Member Rick Metsger suggested in comments this week. “Nobody wants an assessment,” he added.

Speaking before a gathering in Washington sponsored by the National Association of Federally-insured Credit Unions (NAFCU), Metsger suggested that the impact on credit union members of hurricanes in the southeast, coupled with falling values of loans connected to taxicab medallions, could affect the insurance fund.  He said he considers the operating level of the insurance fund – which he said is now at 1.25% of equity in the fund to insured shares – to be “half empty” and that, “if something happens,” the insurance fund would “get to empty very, very quickly.”

Along with the proposal to merge the funds (which could, as proposed, result in a distribution of between $600 million to $800 million to insured credit unions), the agency also sought comments on its proposal to raise the “normal operating level” of the fund to 1.39%. More than 200 letters were filed on the proposal at the close of the comment period, Sept. 5. NCUA hopes to decide about the proposal at its Sept. 28 board meeting, to begin merging the funds starting Oct. 1. Distributions would be made in early 2018.

In its comment letter on the issues, NASCUS supported merging the corporate stabilization fund with the share insurance fund, but acknowledged that doing so doesn’t come without risks — including that associated with any economic downturn that impairs the value of the legacy assets, which in turn could trigger a decline in the NCUSIF’s equity ratio. Regarding setting the “normal operating level” at 1.39%, NASCUS recommended a mechanism that guarantees any increase would sunset automatically when the corporate resolution concludes.

NASCUS comments: Closing the Temporary Corporate Credit Union Stabilization Fund and Setting the Share Insurance Fund Normal Operating Level


Submitting a study on appropriate credit union capital requirements to Congress – before the final NCUA risk-based capital rule goes into effect in 2019 – would be mandated for the federal credit union regulator under legislation introduced this week in the House.

The Risk-Based Capital Study Act of 2017 (H.R. 3736), reintroduced by Reps. Bill Posey (R-Fla.) and Denny Heck (D-Wash.) and based on a proposal in the last Congress (H.R. 2769), would require the agency to study and report back to Congress within nine months on four key areas: the “clear, legal” authority of the agency to issue a two-tier risk-based capital proposal; how the RBC requirement compares to bank capital requirements; the rationale of the risk-weighting scheme used by the agency; and the impact of the rule on credit union capital.

In addition to the study, NCUA would be required to submit to Congress legislative recommendations to improve the credit union capital system. (NASCUS has consistently encouraged NCUA, Congress and others to embrace capital reform for credit unions as a tool for enhancing safety and soundness.) Additionally, if the bill becomes law, the agency would not be able to implement the RBC rule until 120 days after the report is sent to Congress.

H.R. 3736: Risk-Based Capital Study Act of 2017


New examiner transaction testing guidelines for Home Mortgage Disclosure Act (HMDA) data go into effect Jan. 1, with fewer credit unions required to correct and resubmit their HMDA Loan Application Registers (LARs), NCUA points out in its recent “Letter to Credit Unions” (LTCU 17-CU-04). In the letter (dated Aug. 22), NCUA notes that the new guidelines will apply to 2017 data and to all other data collected or reported after that date. “The guidelines represent a joint effort by the FFIEC agencies to provide, for the first time, uniform guidelines across all federal HMDA supervisory agencies,” the letter states. Additionally, the agency noted, the guidelines will be incorporated into its Fair Lending Guide soon. NCUA stated that its new guidelines are based on standards announced last month by the Federal Financial Institutions Examination Council (FFIEC) last month, which apply to all financial institutions that report HMDA data. The NCUA’s changes, the agency stated, are consistent with these guidelines.


NCUA Fair Lending Guide


The threshold for collecting and reporting data about open-end lines of credit will increase for some financial institutions for a two-year period, beginning Jan. 1, according to a final rule published by the CFPB Wednesday. The lower collection and reporting threshold will apply to financial institutions that originated fewer than 500 open-end lines of credit in either of the preceding two years; those institutions would not be required to begin collecting such data until Jan. 1, 2020. The agency also said it is adopting a new reporting exclusion.

The final rule amends the bureau’s Home Mortgage Disclosure Act (Regulation C) final rule of 2015. Now, institutions with fewer than 100 open-end lines of credit are required to collect and report the information, for Reg C purposes. The final rule raises the threshold beginning the first day of 2018 for those institutions that meet the criteria.

In its Federal Register notice, CFPB stated that since issuing the 2015 HMDA Final Rule (in October of that year), it has heard concerns that the open-end threshold at 100 transactions is too low. “On July 20, 2017, the Bureau published a proposal (July 2017 HMDA Proposal) to address the threshold for reporting open-end lines of credit. The Bureau is publishing final amendments to Regulation C pursuant to the April 2017 HMDA Proposal and the July 2017 HMDA Proposal,” the agency noted.

CFPB stated that, in addition to increasing threshold to 500 or more open-end lines of credit for two years (calendar years 2018 and 2019), the final rule corrects a drafting error by clarifying both the open-end and closed-end thresholds so that only financial institutions that meet the threshold for two years in a row are required to collect data in the following calendar years.

“With these amendments, financial institutions that originated between 100 and 499 open-end lines of credit in either of the two preceding calendar years, will not be required to begin collecting data on their open-end lending before Jan. 1, 2020,” the bureau stated. “This temporary increase in the open-end threshold will provide time for the Bureau to consider whether to initiate another rulemaking to address the appropriate level for the open-end threshold for data collected beginning January 1, 2020.”

Final rule: Home Mortgage Disclosure (Regulation C)


Banks, auto lenders, credit card companies, debt collectors, mortgage lenders, and more are singled out for “illegal practices” against consumers in a CFPB report summarizing the bureau’s recoveries in the first half of the year. According to the bureau, through supervisory actions, it returned $14 million to more than 100,000 consumers from January through June of this year. The agency said it took the actions (and obtained the recoveries) after it found “companies deceiving consumers and violating the law.”

Among the key actions summarized by CFPB:

  • Banks deceived consumers about checking account fees and overdraft coverage.
  • Credit card companies deceived consumers about the cost and availability of pay-by-phone options.
  • Auto lenders wrongly repossessed borrowers’ vehicles.
  • Debt collectors improperly communicated about debt.
  • Mortgage companies failed to follow ‘Know Before You Owe’ mortgage disclosure rules.
  • Mortgage servicers failed to follow the Bureau’s servicing rules.

Other issues of concern named by the bureau in the report included remittances, service providers, short-term small-dollar lending, and fair lending.

Supervisory Highlights: CFPB activities from January through June 2017


A full line-up of fall educational offerings gets underway in Denver Tuesday, with the Colorado Directors’ Executive Forum, held at Denver Community Credit Union. The one-day session offers credit union directors a 360-degree look at issues, trends and the regulatory environment. Featured speakers include Mark Valente, Deputy Commissioner, Colorado Department of Regulatory Agencies Division of Financial Services; and Brian Knight, NASCUS EVP and general counsel. Other upcoming sessions include:

  • MI Industry Day, Mt. Pleasant, MI (Oct. 3)
  • MI Examiner School, Mt. Pleasant, MI (Oct. 2-6)
  • MI BSA Conference, Mt. Pleasant, MI (Oct. 4-5)
  • CT Executive Forum, Rocky Hill, CT (Nov. 6)
  • NASCUS CECL Symposium, Charlotte, N.C (Nov. 7)
  • NASCUS/CUNA BSA Conference, Las Vegas (Nov. 12-15)
  • NASCUS Mortgage Symposium, Newton, Mass. (Nov. 28)

Events upcoming in 2018 include: March 26-27: State Credit Union Regulator National Meeting (regulators only), National Harbor/Washington, DC; June 3-5: NASCUS/CUNA Cybersecurity Symposium, Nashville; July 16-19: NASCUS State System Summit, Disney Yacht Club, Orlando, Fla.

NASCUS Educational Calendar, fall 2017 (with selected 2018 events)

BRIEFLY: Oregon job opportunity; on the road with NASCUS; thanks to Stuart

The Oregon Department of Consumer and Business Services (DCBS) is recruiting for a principal executive/manager G (DFR Administrator), to fill a current opening. The position is with the state’s Division of Financial Regulation (DFR). See the link below for more details … NASCUS is on the road again this week, with Lucy Ito visiting regulators and credit unions in California and Arizona and Virginia and speaking at the Virginia Credit Union League’s Executive Leadership Conference … thanks to Cynthia Stuart, Deputy Commissioner of the Vermont Department of Financial Regulation for her work on the NASCUS Audit Committee and Performance Standards Committee.  Cynthia left her position on September 11 to pursue other career opportunities.

NASCUS career opportunities


Information Contact:
Patrick Keefe, [email protected]

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