CUNA Regulatory Advocacy Report

CUNA Regulatory Advocacy Report: April 6, 2012
Good afternoon. Another busy week has passed and we wanted to fill you in on some of the issues we have been pursuing since the last report.

  • NCUA Finalizes & Proposes Several Rules at Board Meeting
    • Associational Common Bonds Final Rule
    • Share Insurance Coverage for IOLTAs Proposal
    • Corporate Credit Union Final and Proposed Rules
    • NCUSIF Sees Slight Improvement over Previous Quarter
  • Still Time to Register for Webinars on Cybersecurity and TILA-RESPA Disclosures

NCUA Finalizes & Proposes Several Rules at Board Meeting

At its April meeting, the NCUA Board issued final rules on associational common bonds and technical amendments to the corporate credit union regulation. The Board also proposed another amendment to the corporate credit union regulation, and proposed updates to the insurance regulation that would fully implement recent legislation that allows for insurance on Interest on Lawyers’ Trust Accounts (IOLTA). Lastly, the Board was briefed on the status of the share insurance fund.

Associational Common Bonds Final Rule

The Board adopted a final associational common bond rule, which adopts many of the amendments in an April 2014 proposal. The final rule primarily clarifies the requirements of the existing regulation. A number of CUNA-recommended changes to the original proposal were incorporated into the final rule.

The final rule is intended to simplify the process for adding certain types of associations to a credit union’s field of member by defining which associational groups qualify for membership in a FCU. Up from seven in the proposal, the final rule includes twelve pre-approved categories for automatic inclusion:

  • Alumni associations;
  • Religious organizations, including churches or groups of related churches;
  • Electric cooperatives;
  • Homeowner associations;
  • Labor unions;
  • Scouting groups;
  • Parent-teacher associations organized at the local level to serve a single school district;
  • Chamber of commerce groups (members only and not employees of members);
  • Athletic booster clubs whose members have voting rights;
  • Fraternal organizations or civic groups with a mission of community service whose members have voting rights;
  • Organizations having a mission based on preserving or furthering the culture of a particular national or ethnic origin; and
  • Organizations promoting social interaction or educational initiatives among persons sharing a common occupational profession.

CUNA appreciates the changes to the rule, which should make it less burdensome for credit unions. However, we remain concerned over the actual application of several provisions. Even though improved, the threshold common-bond test that an association cannot be formed primarily for expanding credit union membership could still be problematic for credit unions forming their own associations. In addition, the rule expands the criteria for the agency’s totality-of-circumstances test, used to determine whether an association that is not automatically approved satisfies the common-bond requirements to qualify for manual inclusion in a FCU’s field of membership.

The final rule will also require guidance that NCUA has not published. The rule will become effective 60 days after publication in the Federal Register.

Share Insurance Coverage for IOLTAs Proposal

The Board issued for a 60-day comment period a proposed rule that would amend Part 745 to incorporate provisions of the Credit Union Share Insurance Parity Act that require NCUA to extend pass-through share insurance to IOLTAs and other similar trust accounts.

The proposal would require only the person administering the escrow account to be a member of the federally insured credit union in which such account is maintained for share insurance coverage to flow through to each client or principal, regardless of that person’s membership status.

CUNA has strongly advocated to NCUA for the insurance coverage to extend to other accounts. The proposed rule would extend insurance coverage to realtor escrow accounts and prepaid funeral accounts. NCUA seeks comments on other similar escrow accounts that could be considered for pass-through coverage. Unfortunately, the proposal would not extend insurance coverage for prepaid accounts beyond what is currently available.

The law became effective for lawyers’ trust accounts when enacted in December of last year.

Corporate Credit Union Final and Proposed Rules

The Board issued a final rule and proposed rule regarding Part 704, corporate credit unions. The final rule makes several technical amendments to “simplify and clarify parts of the rule and facilitate compliance,” according to NCUA. The final rule extends corporate credit unions’ maximum secured borrowing term from 30 to 180 days. It also allows surviving corporate credit unions to count retained earnings acquired in mergers going forward. The final rule did not change NCUA’s treatment of perpetual contributed capital (PCC) as CUNA had sought.

The final rule will become effective 30 days after publication in the Federal Register.

The proposed rule would make it easier for corporates to provide short-term bridge loans to credit unions awaiting funding from the Central Liquidity Facility.

NCUSIF Sees Slight Improvement over Previous Quarter

NCUA staff briefed the Board on the condition of the NCUSIF, which so far has seen 3 credit union failures as of March 31. Staff reported that the NCUSIF has an equity ratio of 1.30%, up from 1.29% as of year-end 2014. The NCUSIF’s reserves stand at approximately $170 million, down $8 million from the previous quarter. There are currently 258 CAMEL 4 and 5 credit unions, which represent 1.14% of insured shares. NCUA staff also noted that there are 1,355 CAMEL 3 credit unions, which represent 9.07% of insured shares. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent 10.57% of total insured shares, or $92.2 billion.

Still Time to Register for Webinars on Cybersecurity and TILA-RESPA Disclosures

There is still time to register for upcoming webinars that may be of interest. TheFederal Reserve is hosting a May 26 webinar that will answer FAQs regarding the CFPB’s TILA-RESPA Integrated Disclosure rule. Click here to register.

In addition, NCUA is hosting a May 20 webinar where credit unions can learn more about cyber-threats and deterring cybercrime. Tim Segerson, Deputy Director of NCUA’s Office of Examination and Insurance, Chris Gill, Risk Management Consultant with CUNA Mutual Group, and Jessica Cromer, Corporate Sales Associate for Financial Services, Citrix Sharefile will discuss the FFIEC’s work to develop a self-assessment guide for use by credit unions, among other topics. Click here to register.

Current CUNA Regulatory Calls to Action

  • NCUA Proposes to Revise Definition of “Small Entity”(comments due by May 4)
  • FAF Seeks Comments on Effectiveness of Private Company Council(comments due by May 11)
  • Financial Regulators (excluding NCUA) Issue EGRPRA Review(comments due by May 14)
  • CFPB Seeks Input on Credit Card Market(comments due by May 18)
  • CFPB Requests Comments on Consumer Complaint Database (comments due by May 26)
  • NCUA Seeks Comments on 2015 Annual Regulatory Review(comments due by August 5)

To write directly to regulators click here.

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

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