Compliance News

While the ultimate goal is to prevent or mitigate burdensome regulations, the reality is that regulation never stops, and therefore the need for credit unions to comply won’t either. The League remains a constant source for your credit union to understand rules and regulations that impact you.

Throughout the year, League staff research regulatory compliance questions posed by member credit unions and disseminate the answers. Educational sessions are held periodically to reinforce information distributed through InfoSight and Compblog Updates, as well as other written information.

In the News

Promoting Youth Savings Programs: Guidance from NCUA

The National Credit Union Administration, along with the other four federal financial regulators, issued guidance Tuesday designed to encourage all financial institutions to offer youth savings programs. The guidance contains answers to frequently asked questions regarding young consumers’ accounts, as well as compliance information for opening such accounts. The guidance does not create any new regulatory policy or establish new industry expectations. In addition to the NCUA, the guidance also was sent out by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corp.                        (CUNA News Now)

NCUA: Small CU Threshold Proposal Approved

The NCUA Board recently approved a proposal to raise the definition of a small credit union from assets less than $50 million to assets less than $100 million, saying the estimated proposed change would allow an additional 745 credit unions to receive consideration for regulatory relief under the Regulatory Flexibility Act.

NCUA staff said it found that smaller federally insured credit unions had slower deposit growth, slower membership growth and slower growth in loan originations. NCUA staff also told the board small federally insured credit unions typically have higher operating expenses.

Board Member Mark McWatters supported the proposal, but said he preferred raising the asset threshold to less than $250 million to cover more credit unions.        (cutimes.com)

NCUA: 2015 Regulation Review List

Public comments are now being accepted by the NCUA on the agency’s list of regulations it will review in 2015.

Most notable among the more than 30 regulations the agency will review this year are:

  • Field of membership modifications, including the Chartering and Field of Membership Manual;
  • Loans and lines of credit to members as well as services for nonmembers within the field of membership;
  • Designation of low-income status, which includes the acceptance of secondary capital accounts by low-income designated credit unions;
  • Federal credit union ownership of fixed assets; and
  • Community Development Revolving Loan Fund access for credit unions.

Since 1987, the NCUA has conducted a rolling review on a regular basis, covering one-third of its regulations each year in an attempt to streamline, modernize or eliminate regulations where appropriate.     (CUNA News Now)

 Comments may be filed by email or standard mail and must be received by Aug. 3. Commenters using email should send to OGCMail@NCUA.gov with the subject line “Regulatory Review 2015.” The address for mailing comments is Regulatory Review 2015, Office of General Counsel, NCUA, 1775 Duke Street, Alexandria, VA 22314-3428.             (ncua.gov)

IOLTA Bill Questions

The passage of the Credit Union Share Insurance Fund Parity Act has raised a number of questions from credit unions about its potential applications, questions summarized by the CUNA in a letter to the NCUA.

The bill was signed into law in December. While it allows IOLTAs to be covered by the NCUSIF, it also provides coverage for “other similar escrow accounts,” according to the bill’s text. Credit unions have inquired as to whether this includes accounts such as prepaid funeral accounts and realtor escrow accounts.

CUNA also asked the NCUA to address questions on:

  • Expectations from the agency regarding the types of records that need to be maintained to keep track of beneficial owners of IOLTAs and similar accounts, and who is expected to maintain the records;
  • Bank Secrecy Act (BSA) compliance requirements on IOLTAs and similar accounts, since those accounts can hold nonmember funds; and
  • Whether IOLTAs and similar accounts are exempt from NCUA regulations that limit public unit and nonmember shares to 20% of the credit union’s total shares or $3 million, whichever is greater.

Credit unions have also asked if the NCUA will use its authority to resolve questions about pass-through insurance of prepaid card programs. CUNA urged the agency to allow member businesses to offer payroll cards to employees, regardless of whether individual employees are members of the credit unions. The FDIC has determined that such accounts receive the same insurance coverage as other deposit accounts, and CUNA has urged the NCUA to follow suit.      (CUNA News Now)

‘Patent Trolls’ Update

The U.S. Congress must act to combat abusive patent demand letters. Deceptive demand letters and litigation from entities asserting low quality patents are major challenges facing the financial services industry, leading CUNA and other trade organizations to express their concerns to members of Congress. These groups recently sent Congress a letter, which outlines concerns about such lawsuits and urges Congress to take action against the “patent trolls” that bring them. The letter highlights a set of principles adopted by the financial services industry that it feels are needed to address the issue. The principles fall into three categories, and are as follows:

  • Efficiency of the litigation process: Improvements need to be made to make the cost and burdens of patent litigation equitable and more efficient;
  • Enhanced transparency: Abuse of the patent system through the use of vaguely worded demand letters must be ended by requiring such letters to provide more details about the patent and who claims to assert it; and
  • Patent quality: Improvements are needed in the post-grant review of patents such as making the Covered Business Method (patents that claim a method or operation used in practice, administration or management of a financial product or service) permanent and more useable for smaller entities.           (CUNA News Now)

CFPB Proposes Broader ‘Small Creditor’ & ‘Rural’ Area Definitions

The Consumer Financial Protection Bureau has proposed a broader definition of “small” credit union and bank, as well as an expanded designation for what comprises a “rural” area. If finalized, the proposal would increase the number of financial institutions able to offer certain types of mortgages in rural and underserved areas by exempting more small creditors from the CFPB’s tough new mortgage rules.

The CFPB’s new proposal would define “small creditor” as one that originates no more than 2,000 first-lien mortgage loans, up from a 500 loan origination limit.  It also would expand the definition of “rural” by adding “census blocks that are not in an urban area as defined by the Census Bureau” to its current description.

The bureau also proposes a compliance grace periods for creditors that suddenly push past the loan threshold qualifying for the relief. Among other things, the CFPB proposal considers extending small creditors’ exemption from limits on balloon-payment loans by about three months, which would bring it to April 2016, among other changes. Interested parties have until March 30 to comment.  (CUNA News Now)

Graduated Payment Loan Guidance for Private Student Lenders

The NCUA, in concert with the other federal financial regulatory agencies, has issued guidance on private student loans with graduated repayment terms at origination. The guidance is intended to provide credit unions and other private student lenders with principles that financial institutions should consider in their policies and procedures for originating such loans.

The joint-regulators’ guidance notes that while graduated repayment terms are available under certain federal student loan programs, credit risk associated with loans guaranteed and originated by the federal government differ from that of private student loans.

The guidance recommends the following principles for private student loans with graduated repayment terms at origination:

  • Ensure orderly repayment;
  • Avoid payment shock;
  • Align payment terms with a borrower’s income;
  • Provide borrowers with clear disclosures;
  • Comply with all applicable federal and state consumer laws and regulations and reporting standards; and
  • Contact borrowers before reset dates.            (CUNA News Now)

Mortgage Disclosure Rule gets Tweaked by CFPB

The Consumer Financial Protection Bureau (CFPB) finalized minor modifications to rules governing when consumers receive loan information. The rules, first proposed in October, address when consumers will receive updated disclosures after locking in an interest rate, and how consumers receive information regarding certain construction loans.

One change requires creditors provide a revised Loan Estimate within three business days after a consumer locks in a floating interest rate. The original rule required creditors to provide the revised Loan Estimate on the date the rate is locked.

The second change creates a space on the Loan Estimate form where creditors could include language informing consumers that they may receive a revised Loan Estimate for a construction loan that is expected to take more than 60 days to settle.

Both changes are part of the bureau’s Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosure rule , which becomes effective Aug. 1. According to the CFPB, it does not anticipate that the modifications will affect the industry’s ability to come into compliance with the rules.            (CUNA News Now)

Qualified Charitable Distributions Extended through 2014

The House and Senate recently passed the Tax Increase Prevention Act of 2014 to retroactively extend a host of temporary tax provisions that expired at the end of 2013—including qualified charitable distributions from Traditional and Roth IRAs—after efforts to make the provision permanent failed. The one-year extension, from December 31, 2013, to December 31, 2014, means that the provision has sunset and qualified charitable distributions are no longer permitted under current tax laws.

Qualified charitable distributions are tax-free distributions of Traditional or Roth IRA taxable assets paid directly to a qualified charity after the IRA owner (or IRA beneficiary) reached age 70½. A qualified charity is a charitable organization under Internal Revenue Code Section 170, which generally is a charity for which a taxpayer could claim income tax deductions. Qualified charitable distributions also satisfied the IRA owner’s required minimum distribution (or IRA beneficiary’s required distribution (e.g., single life expectancy payments.))

IRA owners now must wait to see whether the 114th Congress will extend the legislation or make it permanent. But failure to make the provision permanent last year means that the future of qualified charitable distributions may now be tied to comprehensive tax reform.       (cuinsight.com)  

IRAs and HSAs in 2015

The new year brings questions about what changes have gone into effect that impact IRAs and HSAs, as well as what new compliance challenges and opportunities can be expected.Although it’s too early to know what unexpected changes might come as a result of a new Congress—rest assured there are plenty of twists and turns in store.

As of January 1, 2015, IRA owners may complete only one IRA rollover in any 12-month period, regardless of how many IRAs they own. This is a big change from the previous rule that allowed IRA owners to rollover one distribution per IRA that they owned during any 12-month period. There are huge tax and penalty implications, and there is no way to tell which members are using the old practice. The best way to protect your credit union is to amend your IRA disclosure statements as soon as possible to inform your members of the change.

While there are no changes in HSA reporting or rules for 2015, the sheer number of credit unions entering the HSA space is raising many questions throughout the credit union market on how best to handle offering HSAs. In 2013, twice as many banks offered HSAs versus credit unions, creating a void in the product set for many existing and potential credit union members. In addition, HSAs also have become a cornerstone of many health plans offered through the federal and state-run healthcare exchanges.                                (CU Insight)

 

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