CUNA Regulatory Advocacy Report

CUNA Seeks Comments on NCUA’s Regulatory Review

CUNA is still looking for comments on NCUA’s second Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) regulatory review. EGRPRA is different from NCUA’s annual review of a third of its regulations. Instead, EGRPRA requires certain agencies, including most federal banking regulators, to review all of their regulations at least once every ten years. While NCUA is not mandated by EGRPRA to review its regulations, we support NCUA’s decision to conduct such a review. NCUA’s current EGRPRA review includes the following topics:

Agency Programs

  • Community Development Revolving Loan Program – 12 CFR 705
  • Central Liquidity Facility – 12 CFR 725
  • Designation of low-income status; receipt of secondary capital accounts by low-income designated credit unions – 12 CFR 701.34

Capital

  • Prompt corrective action – 12 CFR 702
  • Adequacy of reserves – 12 CFR 741.3(a) 

Consumer Protection

  • Nondiscrimination requirement (Fair Housing) – 12 CFR 701.31
  • Truth in Savings (TIS) – 12 CFR 707
  • Loans in areas having special flood hazards – 12 CFR 760
  • Fair Credit Reporting – identity theft red flags – 12 CFR 717, Subpart J
  • Fair Credit Reporting – disposal of consumer information – 12 CFR 717.83
  • Fair Credit Reporting – duties regarding address discrepancies – 12 CFR 717.82
  • Share insurance – 12 CFR 745
  • Advertising – 12 CFR 740
  • Disclosure of share insurance – 12 CFR 741.10
  • Notice of termination of excess insurance coverage – 12 CFR 741.5
  • Uninsured membership shares – 12 CFR 741.9
  • Member inspection of credit union books, records, and minutes – 12 CFR 701.3 

Please email all comments to Senior Director of Advocacy and Counsel Lance Noggle by March 1.

CUNA Seeks Real-Life Regulatory Burden Examples for Senate Banking Committee

CUNA launched a new tool last week to help credit unions collect real-life examples of how growing regulatory burden results in reduced service for members and/or increased costs to credit unions—a request made last week by the Senate Banking Committee.

At a recent Senate Banking Committee hearing, at which CUNA testified, Sen. Richard Shelby (R-Ala.) asked credit unions and community banks to submit concrete examples of how regulations negatively affect service to consumers. Several other senators echoed the Senate Banking Committee chair’s request for more information.

CUNA believes that the committee’s interest in learning more about the regulatory environment signals a serious and welcomed attempt to roll back some of the tide of regulatory and compliance burden that credit unions have been subjected to over the past decade.

It is vital that the Senate receives real examples of the negative consequences of unnecessary regulation, and CUNA requests that credit unions use the form to provide examples of how regulatory burden has caused the credit union to: not offer a new service, terminate an existing service, offer a service to fewer members, offer a service at a less attractive price, or generally offer a service in a less beneficial way to members because of a rule or regulation.

CUNA will forward all examples to the Senate Banking Committee. Although the form asks credit unions to identify themselves so CUNA can follow up if necessary, a credit union may choose to not be identified in the information provided to the Senate. Please send questions to RegRelief@cuna.coop .

CUNA also last week announced a groundbreaking initiative to identify true dollar costs of the “creeping crisis of regulatory complexity.” In a recent Senate Banking Committee hearing also investigating small financial institution regulatory burden, the panel pressed federal and state regulators for costs associated with regulatory requirements.

CUNA Still Accepting Input on CFPB’s Prepaid Accounts Proposal 

CUNA continues to review the prepaid accounts proposal, which 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.

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. While only a limited number of credit unions offer prepaid cards directly as issuers, we have several 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.

Even though we are not aware of any credit unions that currently offer prepaid accounts with overdraft features, we are quite concerned with the potential broader implications this rule could have on overdraft regulation generally. The CFPB has indicated that it does not intend to address overdraft regulation in the same way that it is proposing in regard to overdraft of prepaid accounts. However, CUNA continues to press the CFPB to deal with any regulation of overdraft in a focused manner that does not directly or indirectly curb credit unions ability to provide a very important service to their members.

CUNA is working with credit unions, leagues, and other financial trade associations to ensure its comments to the CFPB address all potential issues with the proposal. CFPB is accepting comments until March 23; please send CUNA your comments by March 9.

NCUA Holds February Board Meeting

NCUA held its February open board meeting last week. The Board issued a proposal to amend the Regulatory Flexibility Act definition of “small entity” for consideration of regulatory relief, as well as received an update on the condition of the National Credit Union Share Insurance Fund. In addition, the Board approved a request from Taunton Federal Credit Union of Taunton MA, to expand its community charter. CUNA’s full board summary is available here.

CUNA Reiterates Concerns about Credit Losses Proposal in Letter to FASB

Last week, Jim Nussle sent a follow-up letter to the Financial Accounting Standards Board (FASB) to reiterate concerns communicated previously to FASB regarding the negative unintended consequences proposed changes may have on the credit union industry. Specifically, the changes, which were proposed in December 2012, would implement the CECL (current expected credit loss) approach for determining credit impairment. This contrasts with the current method because instead of using information on past performance the CECL model would require reporting entities, including credit unions, to estimate the present value of cash flows associated with all loans and other assets that are not expected to be collected over the life of the loan or asset. Further, the proposal would remove the triggering event for realizing whether a particular asset has become impaired.

We are concerned that FASB’s proposal would require greater loan loss allowances in many cases than under current GAAP. In addition to the direct affect the proposal will have on credit unions’ financial positions, credit unions are very concerned with the compliance burden the proposal will impose. The proposed rule changes will require extensive resources to analyze the loan portfolio on a granular level to calculate and project life of loan losses. Even those credit unions able to allocate the resources necessary to comply with the proposal will likely encounter major challenges since the level of data analytics that would be required is less common among credit unions, unlike much larger, complex banks.

During a recent meeting, FASB indicated that it expects to issue a final rule in the third quarter of 2015.

Current CUNA Regulatory Calls to Action

  • CFPB Issues Amendments to 2013 Mortgage Rules under RESPA (Reg X) and TILA (Reg Z)(comments due by March 16)
  • NCUA Seeks Input on its EGRPRA Regulatory Review (comments due by March 19)
  • CFPB Proposes Prepaid Card Rule (comments due by March 23)
  • NCUA Proposes Changes to Schedule for Capital Planning & Stress Testing (comments due by March 27)
  • CFPB Issues Proposal on Rural and Underserved Areas (comments due by March 30)
  • CFPB Proposes Safe Student Account Scorecard (comments due by March 30)
  • NCUA Issues New Risk-Based Capital Proposal (RBC2) (comments due by April 27)

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

Posted in Article Post.