CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: December 14, 2012

Good afternoon.  Here is an update on the issues that CUNA’s Regulatory Advocacy group has been pursuing in recent days. 

  • NCUA Launches Budget Web Page
  • CFPB May Allow Financial Services Companies to Float Trial Disclosures
  • CUNA Plans More Outreach to Credit Unions on CFPB International Remittances Rule
  • ATM Fee Disclosure Legislation and Current Regulatory Requirements
  • CFPB Report on Credit Reporting and Credit Bureaus
  • Treasury Settlement with HSBC Bank on BSA and OFAC Violations
  • Federal Reserve Reviewing Liquidity Sources at Largest Banks
  • CUNA Chart of Current Rulemakings: Updated 12/14/12

NCUA Launches Budget Web Page

At the urging of CUNA, NCUA has developed a new webpage on its budget. The webpage provides a range of materials regarding the 2013 agency budget, including information about budget components, agency pay and benefits, budget trends, the overhead transfer rate (used to transfer funds from the National Credit Union Share Insurance Fund to defray NCUA supervisory costs) and NCUA’s operating fee for federal credit unions.

This is more information about the agency’s budget in one place than the agency has provided in the past and goes a long way toward addressing concerns about the lack of transparency in the agency’s budget.  Another positive step regarding the management of NCUA costs was the agency’s decision in November to decrease the 2013 budget for the Temporary Corporate Credit Unions Stabilization Fund by 20%, or $1.56 million from the current $7.7 million. 

Of course, the webpage and the reductions in the TCCUSF budget do not address the other major issue about the agency’s resource allocation — the increases in the budget for the last four years.  Importantly, these increases fly in the face of directives from the Obama Administration that independent agencies should contain costs and were approved despite a decrease in the number of credit unions and improving health of the credit union system.

NCUA’s budget 6.1% budget increase is also contrary to the action taken by the Federal Deposit Insurance Corporation this week to reduce its 2013 budget by 18.2% and a net reduction of 687 positions.  The FDIC said it was taking steps to reduce its budget in light of the improving health of the banking system and other factors. FDIC’s budget is $2.68 billion and includes authorization for 8,026 positions in 2013.  NCUA’s budget is $251 million and includes 1,261.5 positions for 2013.   

NCUA has also provided more information on its web page on the agency’s Office of Small Credit Union Initiatives (OSCUI).  Below are links to information on that page:

CFPB May Allow Financial Services Companies to Float Trial Disclosures

The Consumer Financial Protection Bureau (CFPB) is considering whether to allow credit unions and other financial services companies to conduct trial consumer disclosure programs on a case-by-case basis. Click here for the CFPB press release issued on December 13, 2012.

In announcing the bureau’s request for public comment on the proposed policy change, CFPB Director Richard Cordray said the innovation would allow companies to conduct “real-world trials of disclosure alternatives.” Click here for the proposal.

If adopted, the policy would fall under the auspices of the CFPB’s Project Catalyst; an initiative announced a month ago and intended to encourage consumer-friendly innovation in markets for consumer financial products and services.  The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, authorized the CFPB to facilitate innovation and to approve trial disclosure programs.

The proposal would enable the CFPB to approve individual companies, on a case-by-case basis, for limited-time exemptions from current federal disclosure laws in order for those companies to research and test informative, cost-effective disclosures. 

The companies involved would then share the results of their trial disclosure with the CFPB. The CFPB would use that information to improve its disclosure rules and model forms. Public comments will be accepted by the CFPB for 60 days after the proposed policy is published in the Federal Register, which likely will be within the next week or two.

CUNA is meeting with CFPB officials Tuesday to discuss the intended impact of this approach, along with other issues, and will provide more information to leagues and credit unions next week if not sooner.  

-CUNA NewsNow, Lisa McCue 

CUNA Plans More Outreach to Credit Unions on CFPB International Remittances Rule

Later this month or possibly in early January, the Consumer Financial Protection Bureau (CFPB) will issue its new proposal on international remittance transfers. CUNA is developing a new survey to accompany our updated Comment Call once the proposal is issued. We are also planning other outreach, in coordination with leagues, regarding the proposal to address continuing concerns with the rule and will be addressing these efforts next month.

As we have reported, the rule was adopted earlier this year and would have taken effect February 7, 2013. However, after meeting with CUNA’s Remittances Working Group, and based on concerns raised by CUNA, leagues and credit unions, CFPB Director Richard Cordray last month announced the agency is revisiting three issues under the rule, all of which CUNA flagged to the agency.

  • Incorrect Account Numbers. If a sender, such as a credit union, could show that the consumer provided the wrong account number, the credit union would not be liable for misdirected funds if the credit union’s efforts to recover the fund were unsuccessful.
  • Third-Party Fees and Foreign Taxes. The CFPB is planning to allow senders to base fee disclosures on published schedules. It will also provide further guidance on foreign tax disclosures.
  • Regional and Local Taxes. The CFPB will clarify that disclosures of national taxes that apply to International remittance transfers do not include foreign state and local taxes.

The CFPB has indicated that it will delay the effective date of the international remittance rule until 90 days after the revised rule is adopted next year, expected sometime in the Spring.

ATM Fee Disclosure Legislation and Current Regulatory Requirements

As you know, on Tuesday, the U.S. Senate passed our ATM fee disclosure legislation that CUNA, Leagues, and credit unions strongly supported and lobbied for, to reduce regulatory burdens and frivolous lawsuits.  This bill eliminates the requirement under the Electronic Fund Transfer Act that ATMs carry a physical disclosure of potential fees on the outside of the machine; the on-screen notice requirement remains unchanged.  With both House and Senate passage, we are urging the President to sign this legislation soon. 

Credit unions should not remove any decals, however, or ignore missing ones, until the legislation actually becomes law; CUNA will keep you posted on that. 

Also, credit unions should continue to follow other ATM requirements under Regulation E and other applicable provisions, including state laws.  Research conducted by the American Association of Credit Union Leagues on state laws regarding ATM signage requirements is below:

  • These states require placard and electronic display: IL, NV, NH (non-financial institution), NY (exempts financial institution from liability if placard is removed, damaged or altered by any person other than the operator of the machine), VT, WY
  • These states require placard or electronic display: AL, CA (ATMs are required to have the electronic disclosure, and POS terminals are required to have a placard), ME, MD, MT, NH, NM
  • These states require an electronic display disclosure: OR, RI
  • This state requires compliance with 12 CFR part 205 (Regulation E signage requirements): FL
  • These states require disclosures to be provided at a time and in a manner that allows a user to avoid the transaction without incurring a fee: MS, ND, TX, UT

In a related development, earlier this month, CUNA filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit, arguing that the court should affirm the District Court’s judgment in the Sheryl Johnson v. Cardtronics Inc., et al case, and hold that (1) good faith compliance sufficient to establish an acceptable  defense when a credit union faces a legal challenge regarding its ATM notice should be measured by a standard of reasonableness,, and (2) ATM operators are not required to establish the identity of the vandal or third party that removes an ATM decal in order to establish a legal defense. 

In addition, CUNA has met with the CFPB to advocate that the agency should remove the requirement for the duplicative ATM fee disclosure on the machine through regulation, as part of the Streamlining Inherited Regulations proposal.  CUNA will continue to work with the CFPB, NCUA, and others after enactment of the law to ensure that Regulation E and other regulatory materials are updated soon.

CFPB Report on Credit Reporting and Credit Bureaus

The CFPB has released a report on how the nation’s three largest credit bureaus manage consumer data and the credit reporting process.  The report highlights the consumer experience with Equifax, Experian, and TransUnion, which each have more than 200 million files on consumers.  Among other things, the report notes that about 40% of disputes involving credit information are regarding collections.  In addition, the report provided information on inaccuracies in credit files and reports, as well as disputing credit report errors.  CUNA and our Consumer Protection Subcommittee continue to monitor developments from, and are working with, the CFPB on this and other consumer protection issues.   

Treasury Settlement with HSBC Bank on BSA and OFAC Violations

The U.S. Department of the Treasury announced this week a collective settlement with HSBC Bank, reached by the Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC), and the Office of Foreign Assets Control (OFAC), as part of a combined federal, local, and international government action.  It was the largest bank settlement regarding the Bank Secrecy Act (BSA) and sanctions in U.S. history, and is more than $1.9 billion dollars in total.  In FinCEN’s assessment of civil money penalty, the agency determined that the bank willfully violated the BSA by: (1) lacking an effective anti-money laundering program reasonably designed to manage risks of money laundering and other illicit activity; (2) failing to conduct due diligence on certain foreign correspondent accounts; and (3) failing to detect and adequately report evidence of money laundering and other illicit activity.  Additional information is on the Department of Justice webpage.  Financial institutions, including credit unions, are encouraged to review the settlement materials to understand the problem areas with HSBC, and ensure that their BSA and OFAC procedures are compliant with legal requirements.    

Federal Reserve Reviewing Liquidity Sources at Largest Banks

The Federal Reserve Board (Fed) is examining liquidity sources at some of the largest U.S. banks to improve the agency’s oversight of systemic risk, according to several news articles this week.  The Fed’s review includes the mix of short- and long-term liabilities these banks use to fund their holdings of loans and securities.  Further, the reviews include access to liquidity sources and backup plans in the event of emergency or special circumstances.  While the Fed is currently undertaking these review efforts at the largest banks, CUNA will be monitoring these developments to ensure NCUA does not ‘borrow’ requirements developed for the largest banks.

Conclusion

As always, we appreciate the positive comments we continue to receive about this report and suggestions for items you would like us to cover are always welcome.  For any questions about this week’s report please feel free to contact Eric Richard, Mary Dunn, or me.

Best regards,
Bill Cheney

Posted in CUNA.