CUNA Regulatory Advocacy Report

RBC Proposal on NCUA Agenda

This week will be one of the busiest of the year for regulatory issues with the new risk based capital proposal expected at Thursday’s NCUA Board meeting. We continue to press NCUA for significant changes on:

  • risk weightings;
  • a lower RBC component for well capitalized credit unions;
  • several years for implementation;
  • clarification of the very limited use of additional minimum capital requirements; and
  • good will and credit unions’ NCUSIF deposit factored in RBC calculations and others.

CUNA is already hard at work developing and planning resources to help credit unions understand the impact of the new proposal. Among many tools we have in the works is our standard board meeting report that will be out soon after the meeting concludes. Other planned resources will focus on the CUNA Governmental Affairs Conference, which will occur during the 90-day comment period.

We expect the proposal and description from NCUA will lengthy but CUNA urges credit unions to consider its impact on their operations and share their views with CUNA, their leagues and NCUA. We want to work together to pursue the best outcome that is possible with this proposal.

CUNA Seeks Feedback on CFPB Prepaid Accounts Proposed Rule by March 9

CUNA is also seeking feedback from credit unions on our Comment Call, through March 9, on the CFPB’s proposed rule on prepaid accounts. The rule would apply to prepaid accounts (including general-purpose reloadable cards as well as other types of prepaid accounts such as digital wallets) that are offered to consumers. Prepaid products are amongst the fastest growing types of consumer financial products in the U.S.; the total dollar value loaded onto general-purpose reloadable cards is expected to grow to nearly $100 billion through 2014. The CFPB also included a related blog post and press release.

Specifically, the proposed rule would extend to prepaid accounts, many consumer protections under Regulation E, as well as protections under Regulation Z for prepaid accounts that offer credit options.

CUNA has a variety of concerns about the impact of the proposal on these financial products now and into the future, such as treating overdraft coverage on prepaid cards as loans. While only a limited number of credit unions directly offer prepaid cards as issuers, we will be working with the CUNA Consumer Protection Subcommittee, the CUNA Payments Subcommittee, and CUNA Council members to identify all concerns and develop recommendations to improve various provisions in the proposal.

CUNA’s Recent Comment Letters to NCUA

CUNA recently filed two comment letters with NCUA. On December 24, 2014, CUNA filed a comment letter with NCUA addressing the proposed interagency flood insurance rule and on January 5, 2015, CUNA filed a comment letter with NCUA addressing the proposed corporate credit union rule.

NCUA proposed the flood insurance rule with several other regulatory agencies. The rule implements requirements from the Homeowner Flood Insurance Affordability Act of 2014, which amended some requirements in the Biggert-Waters Flood Insurance Reform Act of 2012. The proposed rule would exclude certain detached structures from flood insurance requirements. The proposed rule would also exempt home equity lines of credit (HELOC) from the flood insurance requirements.

The corporate credit union proposed rule would make technical amendments to the current corporate regulation by updating definitions and removing outdated provisions. The rule, however, fails to remedy the onerous treatment of perpetual contributed capital, the amount of which corporates can include in their “Tier 1” capital ratios will be reduced in 2016 with increased deductions in 2020. This impacts working capital available to corporates.

While not the subject of the proposed rule, there are several important issues regarding corporate credit unions that we will urge the Board to consider as the year unfolds. These issues include the role of corporate credit unions in providing liquidity to natural person credit unions and the weighted average life treatment for government issued or guaranteed securities.

CUNA Opposes FHFA Proposal on Federal Home Loan Bank Membership Eligibility

CUNA filed a letter today with the Federal Housing Finance Agency (FHFA) regarding its proposal on membership requirements for Federal Home Loan Banks (FHLBs). The proposal would require the initial tests financial institutions must meet to become members of the FHLBs—including a requirement that 10% of assets must be directed to housing—to be met at all times.

CUNA is adamantly opposed to the proposed regulation and urges FHFA to withdraw it. We do not believe the proposed changes are warranted or required to meet statutory requirements. Moreover, we do not believe the agency has provided sufficient analysis as to why the proposed membership requirements are needed. Most important, we are concerned the proposal would require FHLB-member credit unions to make business decisions that may not be in their members’ overall best interests. If this proposal does move forward, at a minimum, we urge FHFA to correct the disparate treatment between banks and credit unions. We recognize FHFA has an interest in ensuring that FHLB members maintain a commitment to housing finance. However, we do not believe that this proposal is necessary to achieve that objective, especially since the agency has not demonstrated that the proposed changes are warranted in light of the results the current system has produced.

CUNA will be following up with FHFA Director Mel Watt to request a meeting to discuss our concerns with this proposal.

Next Phase of CUNA-SBA Partnership: Development of a Comprehensive List of Credit Unions Interested in Pursuing SBA Lending

As discussed in previous Regulatory Advocacy Reports, CUNA has recently reinvigorated its working relationship with the Small Business Administration in an effort to help credit unions take advantage of SBA’s loan programs, primarily the 7(a) Loan Program. CUNA President and CEO Jim Nussle and Deputy General Counsel Mary Dunn met with SBA Administrator Maria Contreras-Sweet recently to strategize how best to facilitate credit union participation in SBA lending. We believe there are a number of credit unions that are not participating in SBA programs that could benefit from participation, as well as credit unions that could benefit from increasing current levels of participation.

As part of this effort, CUNA, together with the CUNA Lending Council, has developed an online form to collect information from interested credit unions. We will then share the list of interested credit unions with the SBA for further outreach on SBA’s loan programs.

We encourage any interested credit unions to complete the form with your relevant information, such as, what you would like to achieve from interaction/increased interaction with the SBA and its loan programs.

Thank you for your interest in participating with the SBA. We will provide updates on our work with the SBA in future Regulatory Advocacy Reports.

HMDA and HPML Thresholds for 2015

Credit unions with assets of $44 million or less as of December 31, 2014 will be exempted from the data collection and reporting requirements under the Home Mortgage Disclosure Act (HMDA) for 2015. This threshold number is $1 million more than 2014’s threshold, and is adjusted annually based on the annual percentage increase in the average Consumer Price Index for urban wage earners and clerical workers. CUNA has raised numerous concerns about an outstanding proposal issued by the CFPB on HMDA reporting requirements, and we continue to monitor this important rulemaking for further changes, which may impact credit unions.

Separately from the HMDA threshold increase, the CFPB, the Federal Reserve Board and the OCC announced the threshold for 2015 to determine whether a small loan is exempt from certain appraisal requirements for higher-priced mortgage loans (HPMLs). For 2015, if a loan is in an amount of $25,500 or less, the loan will be exempt from the HPML appraisal requirements. Currently, exemptions are allowed for loans of $25,000 or less.

For more  information concerning these threshold adjustments, click here for the HPML announcementand here for the HMDA announcement. 

CUNA Seeks Feedback on NACHA Same Day ACH Proposed Rule by January 23; Chicago Fed Faster Payments Update

Same Day ACH Proposal

CUNA is seeking feedback from credit unions on our Comment Call through January 23 regarding NACHA–the Electronic Payments Association’s Same Day ACH proposed rule. The proposed rule would provide a new, ubiquitous capability for moving ACH payments faster. Currently, most ACH payments are settled on the next business day; current ACH schedules and capabilities would continue to apply to transactions that are not designated as Same Day ACH. The proposal would amend the NACHA Operating Rules to enable the option for same-day processing of virtually any ACH payment (for all types of credits and debits) except for international transactions and individual transactions above $25,000. NACHA believes there are many uses of ACH payments for which businesses and consumers could benefit from same-day processing, including business-to-business, same-day payroll, expedited bill, and account-to-account payments.

Specifically, all Receiving Depository Financial Institutions (RDFIs) would be required to receive Same Day ACH payments in order to provide certainty to Originators that desire same-day processing and settlement the option to send Same Day ACH transactions to accounts at any RDFI.

CUNA and its Payments Subcommittee will be reviewing the proposed rule in detail to assess the potential impact, including the costs and benefits for credit unions. We continue to meet and discuss Same Day ACH and faster payments issues with NACHA, the Federal Reserve Banks, financial trade associations, corporate credit unions, and other key stakeholders. For further information and our summary of the NACHA rule changes, please visit the CUNA website.

Chicago Fed Letter on Roadmap to Faster, Improved Payments

Older payment methods are still commonplace with American consumers and businesses, due to concerns over new methods that have yet to be adopted on a widespread level. This is according to Anna Neumann, a payments policy analyst at the Federal Reserve Bank of Chicago, writing on payments innovations in this month’s Chicago Fed Letter. The article builds off discussions at the Chicago Fed’s Payments Symposium, which took place last September.

“Those bringing new payment methods to the marketplace face concerns from consumers and merchants about these products’ security, as well as interoperability with traditional payment products and infrastructure,” Neumann writes. “Such concerns prevent new payment methods from gaining broad customer adoption. Payments regulators also struggle to adjust laws and standards to allow for technological innovation while maintaining protections for consumers.”

One of the main advances used around the world is payment systems that allow for immediate processing. The Federal Reserve Banks have assessed these faster payment options and released initial findings, and are expected to release a more detailed roadmap for U.S. payment system improvements. The highest potential groups that would benefit from increase payment speeds include person-to-person, business-to-supplier, insurance claims, legal settlements and wage payments to temporary workers.

Ultimately, large-scale coordination among the thousands of financial institutions and payment service providers would be needed to speed up payments; much like various European nations did to form the Single Euro Payments Area.

Chick-fil-A Investigating Data Breach

Last week, KrebsOnSecurity announced that a number of financial institutions are seeing a pattern of credit card fraud that can be linked to Chick-fil-A restaurants around the country. Krebs apparently first began hearing from banks about possible compromised payment systems at Chick-fil-A establishments in November, but the reports were spotty at best. Then, just before Christmas, one of the major credit card associations issued an alert to several financial institutions about a breach at an unnamed retailer that lasted between December 2, 2013 and September 30, 2014. CUNA is continuing to monitor for additional data breach activity which may impact credit unions and their members, and we also continue to urge Congress to make needed changes in the law to hold merchants accountable for the spiraling costs associated with credit card fraud.

Fixed Assets Proposed Rule

CUNA anticipates that the NCUA Board will release a final fixed assets proposal this year. NCUA released a proposed fixed assets rule last July and CUNA commented last October. The proposal would add a measure of regulatory relief by increasing flexibility in credit unions’ ability to manage fixed assets. The major change is that an FCU could choose to exceed the limit of 5% of shares and retained earnings on the ownership of fixed assets without requiring a waiver from NCUA as currently required. Instead, a credit union would be required to implement a fixed assets management (FAM) program. The FAM would then be reviewed and approved by NCUA staff.

CUNA’s comment letter urged NCUA to add more flexibility to the rule by eliminating the 5% threshold entirely. We also urged the agency to extend the occupancy requirements and create a “de minimis ownership exception” under which land that is not valued at more than three percent, for example, of a credit union’s shares and retained earnings could avoid the restrictions regarding occupancy. We continue to discuss these issues with the NCUA and Board and Staff.

Current CUNA Regulatory Calls to Action

  • FHFA Proposes Changes to Federal Home Loan Bank Membership (comments due by January 12)
  • IRS Proposes to Remove the 36-Month Non-Payment Testing Period Rule (comments due by January 13)
  • NACHA Issues Same Day ACH Proposal (comments due by February 6)
  • CFPB Proposes Prepaid Card Rule (comments due by March 23)

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

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