CUNA Regulatory Advocacy Report

NCUA Announces Two Working Groups at Last Week’s Board Meeting

At last week’s Board meeting, NCUA Chairman Matz announced the development of two new working groups: one to explore issues associated with NCUA’s field of membership rules and the other to address supplemental capital. This is a significant and welcome development in these two key areas, and CUNA is ready and willing to help however we can to move regulatory improvements forward. CUNA has been invited to be involved with these groups and we will be providing input directly to them as well as recommending others to be included. NCUA is still working through the details of the groups but we are weighing in on the scope, general composition, and timeline for the groups, and will provide more details as soon as they are available.

In the meantime, we are developing our own list of recommendations on these and other regulatory relief topics. We have continually advocated for supplemental sources of capital and urged NCUA to consider adding a supplemental capital provision as part of its revised risk-based capital (RBC) regulation. CUNA also has urged major changes on field-of-membership issues with the agency, including recommendations to facilitate greater service to rural districts and other communities, in the near future.

The Board also adopted a final rule on appraisals, approved a request for comments related to a review of NCUA’s regulations, and approved a 2015 Temporary Corporate Credit Union Stabilization Fund Oversight Budget of $4,121,519, which is an 8.9% decrease from the 2014 budget.

The final rule makes several changes to NCUA’s regulations under Parts 701 and 722 regarding appraisals. No substantive changes from the proposed rule were made; CUNA supported the proposal and encouraged the Board to adopt it. Specifically, the final rule: (1) Eliminates the duplicative requirement that federal credit unions make available a copy of the appraisal used in connection with that member’s application fo r a loan secured by a first lien on a dwelling; and (2) Expands the current exemption for certain transactions involving an existing extension of credit.

The Board approved for a 90-day comment period the second Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) regulatory review of 2014. EGRPRA calls for the Federal bank regulatory agencies and the Federal Financial Institutions Examination Council to conduct a decennial review of their regulations and to eliminate unnecessary regulatory burden.

NCUA Responds to Concerns about Examination Process

NCUA recently responded to the League of Southeastern Credit Union’s President/CEO Patrick W. La Pine regarding concerns about the examination process. Larry Fazio, Director of the Office of Examination and Insurance, shared a letter detailing the agency’s responses to the process concerns. Director Fazio’s letter addresses steps the agency has taken to improve the use of documents of resolutions (DOR), examination consistency, and the examination appeals process.

The letter notes that NCUA finalized a new DOR process in October 2013 with training on the new process taking place in April 2014. The new DOR process has only been in place for 5-months but the agency said that it has already resulted in a drop in DORs given by examiners. Fazio also stated the agency has taken action to improve consistency and transparency, which include: sharing internal agency examiner guidance with the credit union industry; implementation and publication of, and training on, the National Supervision Policy Manual; and segmentation and establishment of uniform examination procedures for small institutions versus large, complex ones.

The letter also addresses the appeals process, an issue on which CUNA continues to express concern. NCUA “believes direct responsiveness through the informal and formal agency appeals process appropriately address complaints.” The agency further states that it would not support an independent appeals process through an FFIEC Ombudsman as has been proposed. The agency has “concerns with the concept of final supervisory determinations being removed from the charge of the agency responsible for maintaining safety and soundness and the integrity of the NCUSIF.” We believe these statements fail to consider the difficulty in ensuring that an appeal is fair to all parties when the same NCUA staff are involved in policy design, implementation, enforcement, and the appeal process.

CUNA continues to press these and other issues through our Examination and Supervision Subcommittee, which meets with Director Fazio in person and through conference calls several times a year, including this Thursday.

NCUA’s Myers Clarifies Role and Mission of OSCUI in Recent Meeting

The role and mission of NCUAcs Office of Small Credit Union Initiatives was clarified by OSCUI Director William Myers in a recent meeting with CUNA.

“OSCUI is committed to assisting small, new, minority and Low-Income credit unions to survive and thrive. We want to avoid duplication of efforts as we all support these two-thirds of all credit unions,” Myers said during the meeting. “There’s plenty of room to share with trade associations and vendors.”

NCUA OSCUI Deputy Director Martha Ninichuk also participated. Representing CUNA at the meeting were General Counsel Eric Richard, Deputy General Counsel Mary Dunn, and VP of Economics and Research Mike Schenk, who is the chief liaison to CUNA’s Small Credit Union Committee. Wes Millar, SVP of Credit Union Strategic Services, was included in the meeting as well.

Myers said the agency wants to help identify small credit unions that have the ability to provide the services their members need into the future and wants to work with leagues and CUNA in that effort.

Issues regarding the objectives of OSCUI arose with the launching of an agency web portal providing listings of registered credit union service providers. The Credit Union Service Providers Portal, CUSP, provides credit unions a basic service to quickly identify potential vendors by service type. CUSP provides no ratings, no endorsements, and no user feedback. Vendor registration in CUSP is maintained by the General Services Administration through the existing federal System for Awards Management (SAM.gov). The registration process is simple and free. NCUA cannot modify, restrict, or remove listings.

Leagues and league-endorsed vendors, CSS, and CUNA are encouraged to register for CUSP. “We felt the meeting was productive and helped to reinforce the separate roles that leagues, CUNA, and NCUA have in addressing the needs of small credit unions. We were pleased that Bill emphasized that OSCUI wants to continue the dialogue with us and leagues to avoid overlaps regarding our distinct roles in order that support for a network of strong, small credit unions will continue” CUNA’s Deputy General Counsel Mary Dunn said.

NACHA Issues New Same-Day ACH P roposed Rule

NACHA – The Electronic Payments Association has issued a proposed rule that would amend NACHA Operating Rules to enable a same-day processing option for most ACH payments. Current ACH schedules and capabilities would continue to apply to transactions that are not designated as same-day ACH. Payments that could benefit from same-day ACH include business-to-business, same-day payroll, expedited bill, and account-to-account. Comments will be accepted by NACHA through February 6. “In today’s environment, everyone wants things faster, including payments,” NACHA President/CEO Janet Estep said in a statement.

NACHA’s proposal would mandate that all Receiving Depository Financial Institutions (RDFIs) receive same-day ACH files and make the funds available to consumers by the end of the business day. The proposal also introduces a fee which would allow RDFIs to recover costs. The fee would be paid to the RDFI, which would be required to implement and support same-day payments and by the Originating Depository Financial Institution (ODFI). ODFIs would not be required to originate same-day ACH transactions.

NACHA estimates that a fee of 8.2 cents per same-day ACH transaction, from the ODFI to the RDFI, would cover RDFI costs to build and operate the same-day ACH capability. Implementation would occur in three phases, with the deadlines for the phases proposed as: Sept. 16, 2016; Sept. 15, 2017; and March 16, 2018.

CUNA’s Payments Subcommittee will be reviewing the proposed rule in detail to assess the potential impact, including the costs and benefits for credit unions. We will be providing a Comment Call that summarizes the proposed rule shortly, and will seek feedback from credit unions. In addition, we continue to meet and discuss same-day ACH and faster payments issues with NACHA, the Federal Reserve banks, financial trade associations, and other stakeholders.

Cybersecurity Coordination and Legislation a Priority at Senate Banking Hearing; CUNA Attends FSSCC Meeting at U.S. Treasury

Last week, members of the Senate Banking Committee agreed with Sen. Chuck Schumer (D-N.Y.) during a committee hearing Wednesday when he said cybersecurity legislation is needed. Schumer expressed hope that the 114th Congress could enact such legislation, and when he asked the committee members present if they believed legislation was needed, all raised their hands in agreement. The hearing covered ways to enhance data security coordination to protect the financial sector, and featured a number of government cybersecurity officials as witnesses.

Committee Chair Tim Johnson (D-S.D.) opened the hearing by saying cybersecurity is “one of the most important issues facing the financial services industry,” and expressed hope that the next legislature will work on addressing the issue. Sen. Elizabeth Warren (D-Mass.) said if the goal is to minimize consumer information falling into the wrong hands, then security standards need to be toughened for all parties involved in the commerce system, starting with retailers. Valerie Abend, Senior Critical Infrastructure Officer for the OCC, also said the recent data breaches highlight the need for better data security on the part of merchants.

Also last week, CUNA staff attended a meeting of the Financial Services Sector Coordinating Council for Critical Infrastructure (FSSCC) held at the U.S. Treasury to discuss cybersecurity coordination efforts among key government and industry entities.

CUNA has stepped up its advocacy efforts to protect credit unions and other financial institutions, as well as consumers’ data, from ever-increasing data breaches. Resources recently made available include a Stop the Data Breaches website, a video providing an overview of retailer data breaches, and increased communications to legislators and other stakeholders pressing for stricter merchant security standards.

CUNA Supports CFPB’s Proposed Policy on No-Action Letters

Today, CUNA filed a comment letter in support of CFPB’s proposed policy on No-Action Letters (NAL).

Under the proposed policy, CFPB staff would issue NALs to specific applicants in instances involving “innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty” whether or how certain statutes or CFPB regulations would be applied.

Specifically, a NAL would advise the recipient that CFPB staff does not presently intend to recommend an enforcement or supervisory action against the requester regarding a specified matter.

CUNA supports the proposed policy on NALs and offers a few suggestions for improvement in our letter. While we expect only a few credit unions will on occasion request NALs, we believe NALs have the potential to drive innovation and competition in the financial marketplace.

Current CUNA Regulatory Calls to Action

  • 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)
  • FHFA Proposes Changes to FHLB Membership Rules (comments due by January 12)
  • 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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