Regulators Update CECL FAQs

9/19/17

The NCUA along with the other federal regulators recently issued updates to their FAQs on the current expected credit losses methodology (CECL).

The original 23 FAQs were released in December 2016, and this update includes 14 new FAQs that credit unions will want to review.

Question of the Week

Under the Military Lending Act, what is a reasonable bona fide fee?

A bona fide fee is a fee charged to a credit card account for items like cash advances, rewards programs, and foreign transaction fees. In order for the fee to be reasonable, the creditor has the option of complying with one of two tests to determine the reasonableness:

(ii) Safe harbor. A bona fide fee is reasonable under paragraph (d)(1) of this section if the amount of the fee is less than or equal to an average amount of a fee for the same or a substantially similar product or service charged by five or more creditors, each of whose U.S. credit cards in force is at least $3 billion in an outstanding balance (or at least $3 billion in loans on U.S. credit card accounts initially extended by the creditor) at any time during the three-year period preceding the time such average is computed.

(iii) Reasonable fee. A bona fide fee that is higher than an average amount, as calculated under paragraph (d)(3)(ii) of this section, also may be reasonable under paragraph (d)(1) of this section depending on other factors relating to the credit card account. A bona fide fee charged by a creditor is not unreasonable solely because other creditors do not charge a fee for the same or a substantially similar product or service.

(iv) Indicia of reasonableness for a participation fee. An amount of a bona fide fee for participation in a credit card account may be reasonable under paragraph (d)(1) of this section if that amount reasonably corresponds to the credit limit in effect or credit made available when the fee is imposed, to the services offered under the credit card account, or to other factors relating to the credit card account. For example, even if other creditors typically charge $100 per annum for participation in credit card accounts, a $400 fee nevertheless may be reasonable if (relative to other accounts carrying participation fees) the credit made available to the covered borrower is significantly higher or additional services or other benefits are offered under that account.

It is important to note that fees must be compared to like-kind fees. A cash advance fee cannot be compared to a foreign transaction fee—it must be compared to another creditor’s cash advance fee.

Resources

32 CFR 232.4(c)(3)

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that it will hold a public hearing on its 2018-2019 proposed budget on Wednesday, October 18th.  The agency will release its draft budget during the first week of October and will be accepting written comments through Friday, October 27, 2017.

The NCUA released its Quarterly U.S. Map Review, which shows that all states had positive loan growth in the second quarter. The report also shows strong asset growth, share and deposit growth, and positive net income for the second quarter of 2017.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced release of its September Supervisory Highlights, which details the findings it has issued through the first half of 2017, along with the associated penalties. The findings include deceptive overdraft practices, deceptive pay-by-phone options, wrongful repossession, and improper debt communication.

The CFPB issued a no-action letter to Upstart Network, Inc., that will require the company to report lending and compliance information to the CFPB. The CFPB will use the information to gain a better understanding of how the mix of traditional credit data along with alternative data, aids the company in making credit decisions.

Federal Reserve Board (FRB)

The FRB, jointly with the FDIC and OCC, issued a proposed rule to amend CRA regulations to conform to the HMDA regulation changes.

U.S. Treasury (Treasury)

The Treasury issued a final rule adopting the NACHA Same Day ACH rules, with some exceptions.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of September 14, 2017. The last update prior to this was September 6, 2017.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News, Compliance News.