Compliance Center: NCUA Releases Letter to Federal Credit Unions on FOM Rule Changes

The National Credit Union Administration (NCUA) sent Letter to Federal Credit Unions 15-FCU-03, which includes guidance on the Associational Common Bond rule that recently went into effect.

The Letter includes information on the rule’s Implementation Policy and a Supervisory Letter to field staff.

On April 30, 2015, a majority of the NCUA Board approved the new FOM rule which went into effect on July 6, 2015.  The rule allows for automatic approval of 12 categories of associations which include:

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

The NCUA also updated the Field of Membership Internet Application (FOMIA) system to accommodate the 12 categories of association that automatically qualify as valid associations.

For associations that do not qualify for the above categories of pre-approved association groups, NCUA is streamlining the approval process. The rule clarifies the four most important criteria NCUA considers to approve a valid association:

  1. Whether the association provides opportunities for members to participate in the furtherance of the goals of the association;
  2. Whether the association maintains a membership list;
  3. Whether the association sponsors other activities; and
  4. Whether the association’s membership eligibility requirements are authoritative.

Compliance Question of the Week

If an account has three beneficiaries listed and one beneficiary passed away, should the remaining funds be split between the two remaining beneficiaries, or should one third go to the estate of the deceased beneficiary?

Typically, the division of property among multiple beneficiaries is determined by the member in writing before his/her death.  This can be done on the account card.  If there is nothing written, the default assumption is that the money is split evenly among the beneficiaries.  In the event of a beneficiary dying before the member, it is as if he or she were never listed on the card at all.  The remaining beneficiaries split the money equally (default), or in the ratio set out by the member with the dead beneficiary’s share being split equally.

In practice, you can make the check closing the account out to all beneficiaries jointly, rather than three individual checks.

Related Links:

Legal Briefs

National Credit Union Administration (NCUA) 

Chairman Matz commented on the Government Accountability Office’s recommendation to Congress that the NCUA’s examination authority over third-party technology service providers be enhanced. The enhanced examination authority recommendation stems from a report issued by the GAO on cybersecurity risks at financial institutions.

The June NCUA Board video is now available.

Consumer Financial Protection Bureau (CFPB)

The CFPB released a report that outlines the continued roadblocks that servicemembers face from student loan servicers. The report states that servicemembers are still struggling to obtain protections under the Servicemember Civil Relief Act (SCRA), their loans are sent to collections due to errors, and certain student loan discharge issues are still occurring.

CFPB Director Cordray issued a statement on the GAO report on financial literacy in the workplace. In his statement, Cordray encourages employers to take steps to promote financial well-being in the workplace.

The CFPB issued a document outlining the Consumer Protection Principals aimed at protecting consumers as new faster payment systems are developed. The CFPB encourages the private sector that is creating these new payment networks to do so with the consumer protections in mind.

Federal Reserve Board (FRB)

The FRB will be hosting a series of outreach sessions focused on its regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). The sessions will include presentations from industry participants, consumer groups, and community groups and the information will be presented to the FRB, OCC, and FDIC.

The FRB, along with the FDIC and OCC, announced the availability of the 2015 list of distressed or underserved nonmetropolitan middle-income geographies.

The minutes for the June 15th Federal Open Market Committee have been published.

FRB Chair Janet Yellen delivered a speech at the City Club of Cleveland and discussed the economic outlook, implications for monetary policy, current conditions in the labor market, and recent inflation developments.    

Federal Housing Administration (FHA)

The FHA issued a proposal to establish a maximum time period for lenders to file insurance claims and to revise its policy on reimbursement of eligible expenses when foreclosure and claim filing deadlines are missed. The proposed rule would require lenders to submit claims three months from the point they obtain marketable title to the property or sell the property to a third party.

Federal Deposit Insurance Corporation (FDIC)

The FDIC posted the public sections of resolution plans for 12 large financial firms. The plans detail the financial firm’s strategy for resolution in the event of a failure of the company.

The FDIC issued a proposed rule that would refine the deposit insurance assessment for small insured depository banks that have been federally insured for at least five years.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of July 9, 2015. The last update prior to this was July 2, 2015.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, Federal, NCUA.