Compliance Center: Oregon Department of Consumer and Business Services Issued Rulemaking for Reasonable Compensation
December 21, 2015
December 21, 2015
The Oregon State Department of Consumer and Business Services released Permanent Administrative Rules for OAR 441-710-0305 which creates the DCBS’s final rule on reasonable compensation. Oregon state chartered credit unions were authorized to pay reasonable compensation to their directors and supervisory committee members per 2015 Senate Bill 582.
The DCBS’s rule creates a new section of credit union corporate governance under OAR 441-710 that credit unions will want to review and take steps to comply with if they are wishing to pay compensation to their directors or supervisory committee members.
Reasonable compensation is defined as compensation that is:
- Proportional to the size and complexity of the credit union;
- Consistent with the credit union’s mission, needs and goals, to the extent the mission, needs and goals of the credit union are congruent with safety and soundness, and applicable law;
- Proportional to the market conditions in which the credit union operates; and
- Related to the financial strength of the credit union.
The rule also creates certain requirements a credit union must meet before it may pay reasonable compensation to its board and supervisory committee members. These requirements include:
- Operates in a safe and sound manner;
- Authorizes through its bylaws the payment of compensation to its board of directors or supervisory committee members. The bylaws must include provisions for adopting policies on the payment of compensation;
- Adopts polices and procedure, consistent with its bylaws and the rule, for the payment of compensation that is reasonable. Policies and procedures must address:
- The types and amount of compensation;
- Due diligence activities, including considering comparative studies on the compensation structures of other organizations of like size, location, complexity and mission;
- Why, when and how compensation may be suspended;
- Review criteria and frequency of review to ascertain whether compensation remains reasonable; and oDocumenting how the credit union followed its policies and procedures on compensation.
An Oregon state chartered credit union is required to provide notice to the Director of the Department of Consumer and Business Services of its intent to adopt a policy to compensate board or supervisory committee members prior to any final decision to pay compensation.
In addition, a credit union that is electing to pay reasonable compensation to its board and supervisory committee members must disclose the following information to all members, prior to or during the next scheduled annual meeting before compensation is adopted:
- A description of the compensation in detail, including compensation paid last year and compensation scheduled to be paid;
- A description of the duties of the board and supervisory committee members that demonstrates the need for compensation being sought and how the compensation comports with the needs and goals of the credit union;
- Information on the financial performance of the credit union, as it relates to whether compensation paid is reasonable; and
- The process the credit union followed to complete its due diligence in comparing compensation to other like organizations.
This final rule will be effective on January 1, 2016.
Compliance Question of the Week
Can the credit union charge a garnishment fee on a Federal Benefit Payment?
Credit unions may not charge or collect a garnishment fee against a protected amount, and may not charge or collect a garnishment fee after the date of the account review. However, if there are funds in excess of the protected amount, a credit union may charge a garnishment fee on those amounts.
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Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.