Regulators Release Updated Rulemaking Agendas

The Consumer Financial Protection Bureau and the National Credit Union Administration have released their updated rulemaking agendas which have been published in the Unified Agenda. The Unified Agenda includes rule making actions in pre-rule, proposed rule, and final rule stages.

Pending CFPB rule making that stands out as having implications for credit unions includes:

  • Small Business Lending Data: Section 1071 of the Dodd-Frank Act requires financial institutions to collect, report, and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses. The data to be collected also includes:
    • The number of the application;
    • The date the application was received;
    • The type and purpose of the loan or credit applied for;
    • The amount of credit applied for and approved;
    • The type of action taken with respect to the application and the date taken;
    • The census track of the applicant’s principal place of business;
    • The gross annual revenue; and
    • The race, sex, and ethnicity of the principal owners of the business.
    • The CFPB anticipates releasing a notice of proposed rulemaking in September.
  • Availability of Electronic Consumer Financial Account Data: Section 1033 of the Dodd-Frank Act provides that a covered person shall make available to consumers, upon request, transaction data and other information concerning a consumer financial product or service that the consumer obtains from a covered person. The CFPB is considering rulemaking to implement section 1033 to address the availability of consumer financial account data in electronic form. The CFPB is reviewing comments received during the ANPRM and intends to move into the pre-rule stage around April 2022.
  • Property Assessed Clean Energy (PACE) Financing: Section 103 of the Economic Growth, Regulatory Relief, and Consumer Protection Act requires the CFPB to prescribe certain regulations related to PACE financing. PACE financing is a tool for consumers to finance certain improvements to residential real property and is authorized by State and local governments, typically for projects promoting energy and water conservation, among other public policy goals identified in state statute. The CFPB intends to move into the pre-rule stage around October.
  • Standards for Automated Valuation Models: The CFPB, NCUA, and other federal regulators, intend to develop regulations to implement the Dodd-Frank Act changes to the Financial Institutions Reform, Recovery, and Enforcement Act concerning appraisals. The FIRREA amendments require implementing regulations for quality control standards for automated valuation models. These standards are designed to ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, seek to avoid conflicts of interest, require random sample testing and reviews, and account for any other such factor that the Agencies determine to be appropriate. The CFPB intends to issue a proposed rule in December.
  • Facilitating Transition Away from LIBOR Index: The CFPB’s LIBOR rulemaking is designed to facilitate compliance by open-end and closed-end creditors and to lessen the impact to consumers by providing examples of replacement indices that meet Regulation Z requirements. For creditors for HELOCs and card issuers, the rule would facilitate the transition of existing accounts to an alternative index, beginning around April 2022, well in advance of LIBOR’s anticipated expiration in June 2023. The rule also addresses change-in-terms notice provisions for HELOCs and credit card accounts and how they apply to the transition away from LIBOR. The CFPB expects to issue a final rule in January 2022.

Pending NCUA rulemaking of note includes:

  • Capitalization of Interest in Connection with Loan Workouts and Modifications: The NCUA intends to release a final rule to remove the prohibition against federally insured credit unions’ capitalization of interest in connection with loan workouts and modifications. The rule would require consumer protection and safety and soundness safeguards for credit unions engaging in the practice.
  • Risk-Based Net Worth – COVID-19 Regulatory Relief (Complex Credit Union Threshold): The NCUA is finalizing amendments to provide that any risk-based net worth requirement will apply only to federally insured credit unions with quarter-end assets that exceed $500 million and a risk-based net worth requirement that exceeds six percent.
  • Loans in Areas Having Special Flood Hazards – Interagency FAQs: The NCUA, along with the other federal regulators, are updating the Flood Insurance FAQs. The FAQs are being updated to include questions and answers on private flood insurance as well as escrowing of flood insurance premiums, the detached structure exemption, and force-placement procedures.
  • Transition to CECL: The NUCA intends to issue final rules to address the implementation of the new current expected credit losses (CECL) methodology by federally insured credit unions. The rule is intended to temporarily mitigate the adverse consequences of the day-one capital adjustments required by CECL.
  • CAMELS Rating: The NCUA plans on adding the ‘S’ (sensitivity to market risk) to their CAMEL exam ratings. The S component will enhance transparency and allow the NCUA and federally insured credit unions to better distinguish between liquidity risk and sensitivity to market risk.
  • Credit Union Service Organizations: The NCUA is working on amendments to part 712 to expand the permissible lending activities for CUSOSs. The rule potentially will include amendments to permissible investments in CUSOs by federal credit unions.
  • Complex Credit Union Leverage Ratio: The NCUA is working on a proposed rule to integrate an analog to the community bank leverage ratio into the NCUA’s capital standards. The option may allow qualifying credit unions to comply with a simplified leverage measure of capital adequacy.
  • Incentive-Based Compensation Arrangements: The NCUA is the only federal financial institution regulator that lists this joint rule in their rulemaking agenda. The rule comes out of Dodd-Frank and would require financial institutions with assets of more than $1 billion to implement incentive-based compensation arrangement plans for senior management to discourage undue risk-taking.
  • Simplification of Risk-Based Capital Requirements: The NCUA board issued an advanced notice of proposed rulemaking to solicit comments on two potential approaches to simplify risk-based capital requirements.

Pending FinCEN rulemaking of note includes:

  • Voluntary Information Sharing Among Financial Institutions Under Section 314(b): FinCEN is considering issuing a rule to strengthen the administration of the 314(b) rules implementing the statutory safe harbor which allows eligible financial institutions and associations of financial institutions to voluntarily share information regarding activities that may involve terrorist acts or money laundering.
  • Anti-Money Laundering Program Effectiveness: FinCEN intends to issue a proposed rule to clarify that financial institutions’ anti-money laundering programs, including automated ones, assess and manage risks as informed by the financial institution’s risk assessment, including consideration of anti-money laundering priorities issued by FinCEN. In addition, the AML programs must provide for compliance with the BSA requirements and provide for the reporting of information with a high degree of usefulness to government authorities.
  • Threshold for Requirements to Collect, Retain, and Transmit Information on Funds Transfers and Transmittals of Funds That Begin or End Outside the United States: FinCEN is looking at reducing the $3,000 threshold for the wire transfer travel rule.
  • Requirements for Certain Transactions Involving Virtual Currency or Digital Assets: FinCEN is proposing to amend the BSA regulations to require banks and money service businesses (MSBs) to submit reports, keep records, and verify the identity of customers in relation to transactions involving convertible virtual currency or digital assets with legal tender status.

Question of the Week

Q. We are looking at making a loan on a piece of property. The member has an appraisal that was completed by an approved appraiser three months ago for another financial institution that turned them down for the loan. Can we use that appraisal?

A. Generally, a credit union should not rely on an evaluation prepared by or for another institution because it will not have sufficient information relative to that institution’s risk management practices for developing evaluations. That being said, a credit union may use an appraisal that was prepared by an appraiser directly engaged by another financial services institution, provided that the credit union determines that the appraisal conforms to relevant appraisal regulations and your own credit union’s standards. Your credit union should independently assess the appraisal with the same level of review that it would an appraisal it obtains directly from similar properties, and document its review, before making the credit decision. This includes confirming that the appraisal was engaged directly by the other financial services institution and it, rather than the potential borrower, ordered the appraisal, that the appraiser had no direct, indirect, or prospective interest, financial or otherwise, in the transaction.

Related Link

Interagency Appraisal Guidelines

 Compliance Alerts

National Credit Union Administration

NCUA to Host 2021 Diversity, Equity, and Inclusion Summit for Credit Union System Stakeholders: The NCUA will host credit union leaders, credit union trade, support organizations, and diversity and inclusion professionals during the NCUA’s second Diversity, Equity, and Inclusion summit. This three-day event will take place virtually Nov. 2-4.

Federal Financial Institutions Examination Council

Federal and State Regulators Release Updates to the BSA/AML Examination Manual: The FFIEC released updates to four sections of the BSA/AML Examination Manual today.

FFIEC Announces Availability of 2020 Data on Mortgage Lending: The FFIEC announces the availability of data on 2020 mortgage lending transactions as reported under HMDA.

Office of Foreign Assets Control

OFAC has updated the SDN list as of June 21. The last update prior to this was June 10.

Questions? Contact the Compliance Hotline: 1.800.546.4465;

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