NCUA and CFPB Issue Proposed and Final Rules

The NCUA and CFPB recently issued multiple proposed and final rules that credit unions should be aware of.

CFPB Final Rule – HMPL Escrow Exemption Threshold Increase

The CFPB released a final rule which updates the asset threshold for the exemption from the requirement that creditors establish escrow accounts for certain higher priced mortgage loans (HMPLs) under Regulation Z. In order to be exempt from the escrow requirement, a credit union needs to meet the following:

  • Must be under $10 billion in assets;
  • Must have originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year;
  • Must have extended credit in a rural or underserved area; and
  • Must not have maintained escrow accounts other than those required for HPMLs (under the previous requirements) or to distressed members.

The final rule will be effective when it is published in the Federal Register.

NCUA Proposed Rule – Field of Membership for Shared Facility Requirements

For purposes of consistency, the NCUA is proposing to make the definition for federal credit union service facilities the same for purposes of adding underserved areas and for adding groups. The proposal would include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a federal credit union that participates in a shared branching network.

Comments are due Feb. 10.

NCUA Proposed Rule – Purchase of Mortgage Servicing Rights

The NCUA released a proposed rule to amend the NCUA’s investment regulation to permit federally chartered credit unions to purchase mortgage servicing rights (MSR) from other federally insured credit unions as long as the following conditions are met:

  • The underlying mortgage loans of the mortgage servicing rights are loans the Federal credit union is empowered to grant;
  • The Federal credit union purchases the mortgage servicing rights within the limitations of its board of directors’ written purchase policies; and
  • The board of directors or investment committee approves the purchase.

Comments are due on Feb. 1.

NCUA Proposed Rule – Overdraft Flexibility

The NCUA released a proposed rule to amend the overdraft rule requirement for federal credit unions to include within their overdraft policy the time limit not to exceed forty-five calendar days for a member to either deposit funds or obtain an approved loan from the credit union to cover each overdraft. Otherwise, the credit union will have to charge off the negative balance after that time period. The proposal will remove the forty-five calendar days and replace it with “establish a specific time limit that is reasonable and universally applicable for a member either to deposit funds or obtain an approved loan from the credit union to cover each overdraft.”

Comments are due on Feb. 16.

NCUA Proposed Rule – Bank Secrecy Act – Allow Exemptions from SAR Requirements

The NCUA released a proposed rule that would amend the NCUA’s Suspicious Activity Report (SAR) regulation. The proposed regulation would permit the NCUA to issue, on a case-by-case basis, exemptions from SAR filing requirements to federally insured credit unions, when the exemption is consistent with safe and sound practices and can improve the effectiveness and efficiency of Bank Secrecy Act reporting. The proposed rule would also make it possible for the NCUA to grant exemptions, in conjunction with the Financial Crimes Enforcement Network, to federally insured credit unions that develop innovative solutions to meet Bank Secrecy Act requirements.

Exemptions under this process will apply only as expressly stated in the exemption, and the NCUA will provide written response to the federally insured credit union that submitted the exemption request.

Comments are due on Feb. 22.

NCUA Proposed Rule – Increase Asset Threshold for “Complex Credit Unions” under Risk-based Capital Rule

The NCUA released a proposed rule to increase the asset threshold for defining a credit union as “complex” for purposes of being subject to any risk-based net worth requirements. The proposal will provide that any risk-based net worth requirement will be applicable to only federally insured natural-person credit unions with quarter-end assets in excess of $500 million and a risk-based net worth requirement that exceeds six percent.

Comments are due by 30 days from the date of publication in the federal register.

NCUA Advanced Notice of Proposed Rulemaking – Capital Requirements

The NCUA issued an ANPR to solicit comments on two approaches to simplify risk-based capital requirements. The first approach would replace the risk-based capital rule with a Risk-based Leverage Ratio (RBLR) requirement, which uses relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital (buffers). The second approach would retain the 2015 risk-based capital rule but enable eligible complex FICUs to opt-in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements. The CCULR approach would be modeled on the “Community Bank Leverage Ratio” framework, which is available to certain banks

Comments are due by 60 days from the date of publication in the federal register.

NCUA Proposed Rule – CAMEL “S”

The NCUA issued a proposed rule that would add the “S” (Sensitivity to Market Risk) component to the existing CAMEL rating system and redefine the “L” (Liquidity Risk) component, thus updating the rating system from CAMEL to CAMELS. The proposal to add the “S” component will enhance transparency and allow the NCUA, State Supervisory Authorities, and federally insured credit unions to better distinguish between liquidity risk (“L”) and sensitivity to market risk (“S”). The amendment would also enhance consistency between the regulation of credit unions and other financial institutions. The Board is proposing to implement the addition of the “S” rating component and a redefined “L” rating as early as the first quarter of 2022.

Comments are due by 60 days from the date of publication in the federal register.

NCUA Proposed Rule – Expanding Permissible Activities and Services for CUSOs

The NCUA released a proposed rule that would amend the NCUA’s credit union service organization (CUSO) regulation. The proposed rule would allow CUSOs to:

  • Loan origination, originating, purchasing, selling, and holding any type of loan permissible for federal credit unions to originate, purchase, sell, and hold, including the authority to purchase and sell participation interests that are permissible for federal credit unions to purchase and sell; and
  • Other categories of activities as approved in writing by the NCUA and published on the NCUA’s website. Once the NCUA has approved an activity and published that activity on its website, the NCUA will not remove that particular activity from the approved list, or make substantial changes to the content or description of that approved activity, except through formal rulemaking procedures.

Comments are due by 30 days from the date of publication in the federal register.

Question of the Week

Q. Does a court-appointed guardian have access to a person’s safe deposit box?

A. In Washington, after the credit union is satisfied with the guardian’s identity and authority as a guardian (e.g., Letter of Guardianship), statute allows the guardian access to the safe deposit box. Remember that a guardian is appointed to safeguard the assets of another person who has been deemed by the court to be incapacitated. In order to accomplish these duties, the guardian is allowed access to an already opened safe deposit box, as well as opening a box when necessary.

In Oregon and Idaho, the power would be granted to a conservator.

Resources

RCW 11.92.096
ORS 125.420
IDS 15-5-424

Compliance Alerts

National Credit Union Administration

NCUA Hosting Feb. 3 Webinar on Treasury’s Emergency Capital Investment Program
The NCUA is hosting a webinar for eligible credit unions interested in the U.S. Treasury’s Emergency Capital Investment Program to provide valuable information on the program. Congress created this program as part of the Consolidated Appropriations Act, 2021 to help community-based financial institutions support consumers and local small businesses in low-income and underserved communities that have been disproportionately affected by the economic effects of the COVID-19 pandemic. A federally insured credit union must be certified as a Community Development Financial Institution or as a minority depository institution to participate in the program.

Internal Revenue Service

IRS Updates FAQs on Paid Sick Leave Credit and Family Leave Credit
The IRS has posted updated FAQs about recent legislation that extended and amended tax relief to certain small- and mid-sized employers under the FFCRA. The updates to the FAQs cover how the COVID-related Tax Relief Act of 2020, enacted Dec. 27, 2020, extends the availability of the tax credits created by the FFCRA to eligible employers for paid sick and family leave provided through March 31, as well as other amendments to the credits.

Federal Crimes Enforcement Network

FinCEN Extends Reopened Comment Period for Proposed Rulemaking on Certain CVC and Digital Asset Transactions
FinCEN has extended the due date for comments on the recent reopened Notice of Proposed Rulemaking regarding certain transactions involving convertible virtual currency (CVC) and digital assets with legal tender status (LTDA). All comments to the NPRM are due within 60 days from the date of publication in the Federal Register.

Federal Reserve

Federal Reserve lifts temporary coin allocation
The Federal Reserve has lifted the temporary coin allocation that has been in place since June 2020, and financial institutions can now order coin from the Federal Reserve without caps.

CUNA

CUNA Provides Fourth-Quarter 2020 Update to the Credit Card MLA Fee Comparison Spreadsheet
The recently updated fourth-quarter 2020 fee comparison spreadsheet has been uploaded in CUNA’s Compliance Community in the CUNA Compliance Tool folder in the file share library.

Office of Foreign Assets Control

OFAC has updated the SDN list as of Jan. 19. The last update prior to this was Jan. 15.

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

Posted in Compliance, Compliance News.