NCUA Plan to Levy Fines for Late Call Reports ‘Excessive,’ NWCUA’s Stang Says

Plans by the National Credit Union Administration to levy fines against credit unions that miss quarterly filing deadlines for their 5300 Call Reports drew immediate reactions from national and regional executives Thursday, with NWCUA President/CEO Troy Stang calling the move “excessive.”

“I am certainly supportive of timely filings,” Stang said, “but I am concerned that the agency is reaching too far for a solution. There are many other tools and resources the NCUA could employ, including engaging with industry leaders and organizations to assist with education and training about the importance of timely and accurate reporting.”

CUNA President/CEO Bill Cheney agreed with Stang.

“We do not believe these penalties are necessary,” Cheney said. “Education and awareness of reporting requirements should be the keys to addressing problems, not punitive charges borne ultimately by the members.”

Stang said this week’s announcement by the NCUA “is the first time I have even heard from the agency that this issue existed” at a level that would require punitive action.

“I am certainly supportive
of timely filings, but I am
concerned that the agency
is reaching too far
for a solution.”Troy Stang, NWCUA president/CEO

In a letter to federally chartered credit unions late Wednesday, the NCUA said that it would begin assessing civil money penalties against credit unions that miss the April 25 deadline for filing call reports for the first quarter of 2014. Filers who miss the Jan. 24 deadline for 2013:Q4 reports will get a warning letter from the NCUA with an estimate of the fines that would have been imposed.

The agency said that that the number of late filings has been trending lower over the past year, and that reports filed more than 10 days late dropped from 198 in December 2012 to 24 in September 2013. Still, more than 1,000 credit unions filed their call reports after the 2013 third-quarter deadline had passed, the NCUA said, and a large percentage of those late filers have been chronically late.

“Such late filing impacts NCUA’s ability to conduct effective off-site supervision and delays the release of quarterly industry data to the general public,” the NCUA’s letter said, creating a drain on NCUA resources by requiring follow-up visits by field examiners.

The letter highlights the maximum statutory fines allowed under Section 202 of the Federal Credit Union Act:

  • Up to a maximum of $2,000 per day may be assessed for each day a required report is “minimally” late or contains uncorrected false/misleading information if the late or false/misleading filing is unintentional and the credit union has reasonable procedures in place to avoid such errors.
  • Up to a maximum of $20,000 per day may be assessed for each day a required report is late or contains false/misleading information if the late or false/misleading filing is not covered by the “unintentional” safe harbor outlined above.
  • Up to a maximum of $1 million (or 1 percent of total assets, whichever is less) per day may be assessed if a federally insured credit union knowingly or with reckless disregard for accuracy submits a false or misleading report and fails to correct it.

NCUA said there would be some exceptions to the fines, and that it would consider mitigating factors outlined in Section 206 of the Federal Credit Union Act. These include:

  • The size of financial resources and good faith of the credit union;
  • The gravity of the violation;
  • The history of previous violations; and
  • Other matters as justice may require regarding the circumstances of late or false/misleading submissions, such as natural disasters, incapacitation of key employees, etc.

The vast majority of credit unions that file late call reports are small institutions (under $50 million), according to John Trull, the NWCUA’s director of regulatory advocacy. “Many of these credit unions have minimal staff, and one person getting the flu could delay the filing of the Call Report,” Trull said. “The NCUA is required to take this into account before leveling a fine.”

NCUA would not be alone in imposing financial penalties for late filings; the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and Federal Reserve all do so. Proceeds from the fines will go to the U.S. Treasury and not to the regulatory agency, the NCUA said.

Questions? Contact Gary Stein: 503.350.2216, gstein@nwcua.org.

Posted in CUNA, Federal, NCUA.