CUNA Regulatory Advocacy Report

RBC, IRR Highlighted in CUNA Meeting with NCUA Vice Chairman Rick Metsger

CUNA Chief Operating Officer and Chief of Staff Rich Meade and other CUNA senior staff met earlier today with NCUA Vice Chairman Rick Metsger and Senior Policy Advisor Mike Radway to continue to address concerns about the regulation of risk-based capital and interest rate risk. Also attending the meeting for CUNA were Chief Economist and Chief Policy Officer Bill Hampel, EVP and General Counsel Eric Richard, and SVP and Deputy General Counsel Mary Dunn.

CUNA discussed with NCUA a range of RBC issues that should be revised and more positively addressed in the new proposal expected to be issued January 15, 2015 for a ninety-day comment period.

While NCUA has already signaled its willingness to address risk weightings, the time for implementation of the final rule, and the authority to require additional minimum capital, among other issues, CUNA is also urging NCUA to reduce the 10.5% RBC requirement for well-capitalized credit unions and make other key changes. In addition, CUNA is urging the use of supplementary capital for risk-based capital purposes for any federally insured credit union.

The meeting also focused on interest rate risk. CUNA does not think that a new IRR rule is needed in light of the fact that the current rule just took effect a little over two years ago. CUNA would like to work with the agency to avoid further regulation and to address any material safety and soundness concerns regarding IRR outside of a rulemaking process.

CUNA welcomed the dialogue with Vice Chairman Metsger, Meade said, and added that CUNA looks forward to continuing our discussions with him and Mike Radway as the agency concludes its work on the RBC proposal in the coming weeks.

In addition to discussing RBC and interest rate risk, Vice Chairman Metsger also expressed his interest in working to draft a rule in 2015 to address inequities in Field of Membership rules for credit unions.

CUNA Meets With SBA Administrator on Expanding CU Participation

CUNA President/CEO Jim Nussle sat down with U.S. Small Business Administration (SBA) Administrator Maria Contreras-Sweet Thursday to discuss ways CUNA can partner with the SBA to help more credit unions and small businesses make use of SBA lending programs, particularly the 7(a) guaranteed loan program.

Contreras-Sweet has noted her support of credit union and community bank participation in SBA lending and CUNA staff said the meeting dialogue was very productive.

SBA loans can be an important lending tool for credit unions, since the portions of the loan guaranteed by the SBA, usually from 50% to 90%, do not count against a credit union’s member business lending (MBL) cap.

SBA loans at credit unions have grown in both the average size and total dollar amount by nearly 50% over the past two and a half years. Average loans have risen to $147,000 (up from $101,000) and the outstanding dollar amount has risen to nearly $1.2 billion from around $800 million. While these numbers represent an increase, they are still below the average credit union MBLs, which average $225,000 per loan and have an outstanding dollar amount at $48.8 billion.

Under Contreras-Sweet’s leadership, the SBA has focused on simplifying its loan processes so more credit unions can access the agency’s guaranteed loan products. These efforts have included streamlining the SBA 7(a) loan guarantee process and making credit scores part of the review and documentation process for term loans of $350,000 or less.

CUNA will be following up its meeting by helping connect interested credit unions with the SBA and looking for ways current SBA lending credit unions may be able to expand their programs. Ann Marie Mehlum, SBA Associate Administrator of Capital Access, and Isabella Casillas Guzman, Senior Advisor, Office of the Administrator, also participated along with CUNA’s Deputy General Counsel Mary Dunn.

At the beginning of 2015, the SBA is expected to institute a web-based application and loan management process, called SBA One, that may be of benefit to credit unions with little or no current SBA lending activity. The platform is meant to be interactive and user-friendly while allowing automated document uploads, generation of forms for 7(a) loans, and electronic signatures. According to the agency, SBA One is intended to eliminate factors that have been historically troublesome to some lenders.

NCUA’s Final Board Meeting of 2014 This Thursday

NCUA’s Board will meet for the last time in 2014 on Thursday. The main item on the agenda is a final rule on appraisal exemptions. The final rule, which we generally supported in our comment letter, would revise Parts 701 and 722 to:

  • Eliminate the requirement that federal credit unions make available a copy of an appraisal used in connection with a member’s application for a loan secured by a first lien on a dwelling;
  • For a loan secured by a subordinate lien on a dwelling, it would require that the credit union make the appraisal available for 25 months after an applicant has received notice of action taken on an application;
  • Exempt from the appraisal requirement transactions involving an existing extension of credit at the lending federally-insured credit union; and
  • Make a technical amendment to the definition of “application,” to align NCUA’s definition with that of the CFPB’s.

The Board agenda will also include a request for comment on the agency’s Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) review and a look at the 2015 Corporate Stabilization Fund Oversight budget. As usual, CUNA Regulatory Advocacy will send out a summary following the Board meeting.

CUNA Weighs in on TCPA Exemption With FCC

Today, CUNA filed a comment in support of a Petition for Exemption from the Telephone Consumer Protection Act filed earlier this year by the American Bankers Association. The ABA asked the Commission to exercise its statutory authority to exempt from the Telephone Consumer Protection Act’s prior express consent requirement automated calls and texts to cell phones to alert consumers about data security breaches and potentially fraudulent activity affecting their financial accounts.

The petition limits the potential TCPA exemption to situations where time is of the essence. Specifically, the petition requests relief that would permit communications concerning: (1) transactions and events that suggest a risk of fraud or identity theft; (2) possible breaches of the security of customers’ personal information; (3) steps consumers can take to prevent or remedy harm caused by data security breaches; and (4) actions needed to arrange for receipt of pending money transfers. Communications in these situations serve consumers’ interests and can be conveyed most efficiently and reliably by automated calls to consumers’ telephones, which increasingly are wireless devices.

CUNA told the FCC it strongly supports the petition because it is pro-consumer. At a time in which financial data security is being continually put at risk by merchants, the FCC can provide relief to credit unions by allowing institutions to notify their members in the most efficient ways possible—automatic calls and texts. Consumers potentially impacted by data security breaches need rapid notification so that they can immediately initiate remedial action, such as aggressive account monitoring to locate fraudulent activity, credit report monitoring, or filing for a freeze on applications for new credit. Consumers play a key role in order to effectively deal with compromised data, and providing them with the knowledge quickly can allow for the process to begin.

Federal Reserve Board Approves Changes to Reserve Bank Posting Rules for ACH and Commercial Checks

The Federal Reserve Board (Fed) approved new rules for posting automated clearing house (ACH) and commercial check transactions. The new plan changes the times when the Reserve Banks will post ACH debit transactions and commercial checks that are processed overnight. The Fed noted the changes, adopted as originally proposed, are intended to enhance the efficiency of the payments system. The changes “to these posting rules are intended to align them with current operations and processing times and to strategically position the rules for future advancements in the speed of clearing and settlement.”

Under the new set of rules, ACH debit transactions processed overnight will post at 8:30 AM ET to banks’ Federal Reserve accounts. The change makes the posts better align with the time that ACH credit transactions post and is 2 1/2 hours earlier than the 11 AM ET time set by the Fed’s former rule. For commercial checks, the Fed adopted moving the posting time for receiving most credits for deposits and debits for presentments to 8:30 AM ET, and establishing two other posting times at 1:00 PM and 5:30 PM ET. The posting rule changes for ACH debit and commercial check transactions will become effective July 23, 2015.

CUNA had urged the Fed to minimize the costs and impact on credit unions, corporate credit unions, and other payment providers that may be affected, and to provide at least six months or more for implementation. The Fed cited concerns from smaller institutions and credit unions, including CUNA’s comment letter, and performed additional analysis to address concerns regarding smaller institutions. In addition, last week, the agency adopted a set of principles for establishing future posting rules for the Reserve Banks’ same-day ACH service. It also adopted  companion amendments  to Regulation J.

CFPB Mortgage Servicing Proposal: Quick Summary    

As discussed in a previous Regulatory Advocacy Report, the CFPB has proposed several amendments to its mortgage servicing regulations, Regulation Z, which implements the Truth in Lending Act, and Regulation X, which implements the Real Estate Settlement Procedures Act.In this week’s Report, we wanted to share with you a high-level summary of the CFPB’s proposal, which includes sample forms.

The proposed rule, including the sample forms, will be open for public comment for 90 days after publication in the Federal Register.

The proposal covers nine major topics:

  • Successors in interest;
  • Definition of delinquency;
  • Requests for information;
  • Force-placed insurance;
  • Early intervention;
  • Loss mitigation;
  • Prompt payment crediting;
  • Periodic statements; and
  • Small servicers.

Additionally, the proposed rule makes a number of technical corrections to several provisions of Regulations X and Z.

CUNA staff has created a comprehensive Quick Summary of the proposed changes regarding the nine major topics above. Click here for the entire Quick Summary.

CUNA will be working with Leagues, credit unions and others to file a comprehensive comment letter on the proposal with the agency as we enter 2015. If you have specific concerns or suggestions regarding the proposal, please email Mary Dunn or Jared Ihrig.

FFIEC Updates Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual

A revised BSA/AML examination manual was issued last week by the Federal Financial Institutions Examination Council (FFIEC). The updates clarify supervisory expectations regarding compliance and incorporate regulatory changes since the manual was last updated in 2010. The revision was conducted by the NCUA, along with the Federal Reserve Board, FDIC, OCC, and the State Liaison Committee. The Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control collaborated on the revisions, which incorporated comments from the financial services industry and examination staff. Credit unions should direct questions about the revisions to NCUA.

CUNA continues to participate on the U.S. Treasury Bank Secrecy Act Advisory Group (BSAAG) to advocate for changes to minimize BSA regulatory burdens on credit unions and smaller financial institutions, as well as clearer regulatory expectations.

CUNA Working With GSEs on Revisions to Uniform Residential Loan Application

Freddie Mac and Fannie Mae are considering revisions to the Uniform Residential Loan Application. CUNA was approached by the GSEs, and is working with them to provide input on the revisions on behalf of credit unions. CUNA will keep you up-to-date as proposed changes become public and will continue to weigh in on behalf of the industry.

Current CUNA Regulatory Calls to Action

  • CUNA Seeks Input on Petition to FCC to Exempt Time-Sensitive Informational Calls from TCPA Prior Consent Requirements (comments due by December 8)
  • CFPB Proposes Policy on No-Action Letters (comments due by December 15)
  • Department of Defense Proposes Changes to Military Lending Act Rule (comments due by December 26)
  • NCUA Issues Joint Proposal on Flood Insurance (comments due by December 29)
  • NCUA Proposes Changes to its Corporate Credit Union Rule (comments due by January 5)
  • IRS Proposes to Remove 36-Month Non-Payment Testing Period Rule (comments due by January 13)

For other items of interest, visit CUNA’s Regulatory Advocacy page.

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