Idaho Department of Finance Shares Checklist to Aid in Preparation of FOM Expansion

The Idaho Department of Finance has created a checklist to assist Idaho-chartered credit unions with the preparation of a field of membership (FOM) expansion. The checklist, which can be located on the department’s website, reviews the application letter and supporting enclosures that credit unions wishing to expand their FOM will need to complete. Please note that the checklist is for informational purposes and is not intended to be guidance.

Washington state-chartered credit unions would continue to follow the DCU guidelines for submitting FOM changes to their bylaws, and federally chartered credit unions would want to review the FOM expansion resources that the NCUA has available online.

Question of the Week

Q. For closed-end loans covered by Reg Z, are we required to provide disclosures to all borrowers on the loan? Or is delivery to one of the primary borrowers sufficient?

A. The answer to this question depends on the type of transaction.

In most cases, when there are two or more primary obligors on a loan, delivery of disclosures to one of them will suffice under Reg Z, specifically 12 CFR 1026.17(d). However, if the transaction is rescindable under 1026.23, then all of those subject to the right of rescission must receive the Closing Disclosure (if applicable to the loan) and notice of their right to rescind.

The commentary to 1026.17(d) states:
2. Multiple consumers. When two consumers are joint obligors with primary liability on an obligation, the disclosures may be given to either one of them. If one consumer is merely a surety or guarantor, the disclosures must be given to the principal debtor. In rescindable transactions, however, separate disclosures must be given to each consumer who has the right to rescind under §1026.23, although the disclosures required under §1026.19(b) need only be provided to the consumer who expresses an interest in a variable-rate loan program. When two consumers are joint obligors with primary liability on an obligation, the early disclosures required by §1026.19(a), (e), or (g), as applicable, may be provided to any one of them. In rescindable transactions, the disclosures required by §1026.19(f) must be given separately to each consumer who has the right to rescind under §1026.23. In transactions that are not rescindable, the disclosures required by §1026.19(f) may be provided to any consumer with primary liability on the obligation. See §§1026.2(a)(11), 1026.17(b), 1026.19(a), 1026.19(f), and 1026.23(b).

Of course, credit unions should also ensure that their delivery of disclosures is not only in compliance with Reg Z requirements but also with its own internal policies and procedures. And if the loan is sold on the secondary market, the credit union will want to determine how disclosures should be handled when there are multiple consumers with a primary obligation on the loan.

Related Links

12 CFR 1026.17(d)
Official Interpretation to 1026.17(d)

Compliance Alerts

National Credit Union Administration

NCUA Board Extends Current 18% Interest Rate Ceiling for Federal Credit UnionsThe NCUA Board approved maintaining the current temporary 18% interest rate ceiling on loans made by federal credit unions for a new 18-month period.

NCUA Board Approves Final Rule to Allow the Capitalization of Interest with Loan Workouts and ModificationsThe NCUA Board approved a final rule that removes the prohibition on the capitalization of interest on loan modifications. The rule also includes consumer financial protection provisions such as the ability to repay requirements.

NCUA Board Approves Final Rule to Phase-in Day-One CECL Adverse EffectsThe NCUA Board approved a final rule which facilitates the transition of federally insured credit unions to the Current Expected Credit Loss (CECL), which allows for the phasing in of the day-one adverse effects on regulatory capital that may result from the adoption of CECL.

Interagency Statement on the Issuance of Anti-Money Laundering/Countering the Financing of Terrorism National PrioritiesThe NCUA, along with the other financial regulators, issued an interagency statement regarding the AML/CFT Priorities. Credit unions are not required to incorporate the priorities until a final regulation implementing the priorities becomes effective.

Consumer Financial Protection Bureau

Supervisory Highlights, Summer 2021The CFPB released the 24th edition of its Supervisory Highlights. The findings included in this report cover examinations in the areas of auto servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination, mortgage servicing, payday lending, private education loan origination, and student loan servicing that were completed between Jan. 1, 2020, to Dec. 31, 2020.

Commercial Credit on Consumer Credit ReportsThe CFPB issued a report which examines the trends of commercial credit reporting on consumer credit.

CFPB Consumer Complaint Bulletin Highlights Consumers’ Difficulties During PandemicThe CFPB released a bulletin that summarizes consumer complaints related to the relief provided in response to the COVID-19 pandemic. Highlights include the negative impact of an eviction on consumer credit histories from reports by debt collectors, not receiving the full benefit of economic impact payments as a result of overdraft practices, and student loan borrowers not receiving timely information regarding relief provisions under the CARES Act.

Federal Reserve Board

FRB Announces it Will Soon Release New Tool to Help Implement CECL StandardThe FRB announced it will soon release a new tool to help implement the Current Expected Credit Losses (CECL) accounting standard. Known as the Scaled CECL Allowance for Losses Estimator, the spreadsheet-based tool draws on publicly available regulatory and industry data to aid financial institutions with assets of less than $1 billion in calculating their CECL allowances.

Financial Crimes Enforcement Network

FinCEN Issues First National AML/CFT Priorities and Accompanying StatementsFinCEN issued the first government-wide priorities for anti-money laundering and countering the financing of terrorism (AML\CFT) policy. The priorities identify and describe the most significant AML/CFT threats currently facing the United States. In no particular order, these include corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organizations, drug trafficking organizations, human trafficking, and human smuggling, and proliferation financing. FinCEN today also issued two statements (the “AML/CFT Priorities Statements”) to guide covered institutions on how to approach the Priorities.

Federal Financial Institutions Examination Council

FFIEC Updates Examiner Guidance on Financial Institutions’ Information Technology Architecture, Infrastructure, and OperationsThe FFIEC issued a new booklet in the FFIEC Information Technology Examination Handbook series. The booklet provides expanded guidance to help financial institution examiners assess the risk profile and adequacy of an entity’s information technology architecture, infrastructure, and operations. The new booklet replaces the “Operations” booklet issued in July 2004, and it provides examiners with fundamental examination expectations regarding architecture and infrastructure planning, governance and risk management, and operations of regulated entities. The booklet discusses the interconnectedness among an entity’s assets, processes, and third-party service providers along with the principles, processes, potential threats, and examination procedures to help examiners assess whether a financial entity’s management adequately addresses risks and complies with applicable laws and regulations.

Federal Housing Finance Agency

Policy Statement on Fair LendingThe FHFA issued a policy statement on Fair Lending which communicates the agency’s general position on monitoring and information gathering, supervisory examinations, and administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act.

Office of Foreign Assets Control

OFAC has updated the SDN list as of July 2. The last update prior to this was June 28.

Questions? Contact the Compliance Hotline: 1.800.546.4465;

Posted in Compliance News, Compliance Question.