Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive

Washington

CUs Told What Examiners Look For On Risk Management

 Permanent link
ALEXANDRIA, Va. (11/13/13/)--The National Credit Union Administration took action Tuesday to clarify its supervisory expectations regarding credit unions' risk management systems.
 
In a Letter to Federally Insured Credit Union (13-CU-12), the agency noted that sound enterprise risk management (ERM) is crucial to the success of any credit union, but effective management can take different approaches at different organizations.
 
Natural person credit unions are not required to implement a formal ERM, said the letter signed by Director Larry Fazio of NCUA's Office of Examination and Insurance, and that is because most do not "possess the size, depth of resources, or range and level of risk exposure to warrant the significant investment necessary" to implement such a program.  
 
However, these credit unions are expected to have processes "sufficient to manage the risk associated with their business model and strategies," the letter reminded.
 
In large and complex natural person credit unions, however, examiners "should ensure the credit union employs a comprehensive risk management approach, which may or may not include a formal ERM program."
 
In all cases, the letter continued, examiners are expected to evaluate a credit union by considering:
  • The credit union's risk exposure, risk appetite, and risk-management strategies;
  • The depth and breadth of potential exposures, including the types of products and services offered by the credit union;
  • The strategic objectives and operational policies, procedures, and controls in relation to potential exposures;
  • Concentration of risk;
  • Risk-mitigating factors;
  • Capability and resources of management;
  • Current and historical performance of management; and,
  • The financial strength of the credit union in relation to assets and activities.
When the letter is posted to the NCUA website, it can be accessed using the resource link below.

Cordray Clarifies QM Compliance Leeway To Congress

 Permanent link
WASHINGTON (11/13/13)--Consumer Financial Protection Bureau Director Richard Cordray on Tuesday described what agency examiners will consider "good faith efforts" at qualified mortgage (QM) regulation compliance.

Cordray made the remarks as he presented his agency's semiannual report before the Senate Banking Committee.

Examiners will give institutions some leeway in the early months after the QM regulation is implemented in January, Cordray reiterated on Tuesday. Examiners, he said, will be looking for financial institutions to have taken the responsibilities seriously and have compliance monitoring in place. It doesn't mean that every detail will be perfect, but that they have made real efforts, he said.

The bureau is not looking to play "gotcha" with institutions that are still implementing the changes needed to comply with the regulations, Cordray emphasized. The CFPB director said he could not give an official cutoff date for when this leeway would end, but said the leeway would be granted for several months.

The Credit Union National Association has called on the CFPB and Congress to delay until September 2014 possible sanctions and legal liability under QM and other mortgage rules. CUNA has also sought a one-year mortgage regulation implementation delay. More than 100 U.S. House members last week also urged the bureau to defer implementation of pending mortgage rules until Jan. 1, 2015 to ensure financial institutions are able to transition their systems into full compliance with the rules.

The CFPB's data collection and market monitoring practices were also addressed during the hearing. Cordray, in an exchange with Sen. Mike Crapo (Idaho), who is the ranking Republican member of the committee, said that the bureau is not monitoring individual consumer credit card accounts. The agency's intent when it collects consumer data is to monitor trends and the practices of large institutions, Cordray said. The CFPB does not have any different data than the institutions themselves or other regulators have, he added.

Cordray, in response to a questions, told Sen. Sherrod Brown (D-Ohio) that the CFPB plans to move forward to address privacy notice issues soon. He said he has not fully defined what the bureau's approach will be, but he believes the agency and Congress are moving in the same direction.

Brown is a leading cosponsor of legislation that would eliminate a requirement that privacy notices be sent on an annual basis. It would instead allow the notices to be sent only when the privacy policy of a financial institution has changed. The Credit Union National Association supports the legislation.

If Congress acts in the area, the CFPB will implement what Congress approves, Cordray said.

Interchange Oral Arguments Set For Jan. 17

 Permanent link
WASHINGTON (11/13/13)--The next round in an ongoing interchange legal battle between the Federal Reserve and merchants has been set: Oral arguments for both sides are set for 9:30 a.m.  (ET) on Jan. 17. The arguments will be heard by a three-judge panel in the U.S. Court of Appeals for the District of Columbia Circuit.

Circuit Judges David Tatel, Harry Edwards, and Stephen Williams will hear the appeal.

The oral arguments follow U.S. District Judge Richard Leon's July decision in favor of a merchant request to strike down the Fed's price caps on debit card interchange fees. He said that the Fed did not follow narrow congressional intent when it implemented the cap. The Fed has appealed that decision.

The Fed on Oct. 20 filed a brief in support of its rule implementing the debit card interchange cap required by the Dodd-Frank Act. The Credit Union National Association and financial services partners also filed an amicus brief on that date.

Merchant briefs in the case will be filed on Nov. 20.

The current Fed interchange fee cap rule limits debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards.

The interchange regulations will remain in effect as the court case moves forward.

Credit unions under $10 billion are exempt from the interchange fee cap rule, but not the network exclusivity provisions. CUNA maintains all credit unions, including those under $10 billion in assets, are negatively affected by these price controls in the marketplace.

CFPB Instructs Lenders On Providing Housing Counseling Lists

 Permanent link
WASHINGTON (11/13/14)--The Consumer Financial Protection Bureau (CFPB) recently released an interpretive rule that provides instructions for generating lists of housing counseling agencies.
 
Credit unions and other lenders can use a CFPB-generated consumer list tool to meet 2013 HOEPA requirements that lenders provide mortgage borrowers with a written list of housing counseling agencies approved by the U.S. Department of Housing and Urban Development. There is a Jan. 10, 2014 effective date for generating housing counseling lists for those using the CFPB tool.
 
The CFPB launched the online list to help consumers find local housing counseling agencies. The tool uses a search box and mapping function to show borrowers the ten closest counseling agencies to their zip code. When counselors are listed, the tool shows the borrower which type of services are available from pre-purchase counseling to default resolution counseling, as well as the languages, other than English, each agency offers.
 
As an alternative to using the CFPB list tool, lenders can comply with the counseling rule by generating their own lists using the same HUD data that CFPB uses--as long as the data is used in accordance with the instructions provided with the data. The CFPB is allowing for an interim procedure for lenders choosing to generate their own lists and who will not be ready by the Jan. 10 effective date.
 
Use the resource link for more on the counseling rule.

NEW: CU Share Insurance Parity Bill Introduced

 Permanent link
WASHINGTON (11/13/13, UPDATED: 5:14 p.m. ET)--Legislation that would extend share insurance coverage to trust accounts held in the name of nonmembers has just been introduced in the U.S. House.
 
The bill, supported by the Credit Union National Association, is known as the Credit Union Share Insurance Fund Parity Act (H.R. 3468) and was introduced by Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.), as expected. (News Now Nov. 12)
 
Specifically, the bill would provide National Credit Union Share Insurance Fund coverage for accounts such as Interest on Lawyers Trust Accounts (IOLTAs) so they are treated for deposit insurance purposes on the same basis as similar accounts insured by the Federal Deposit Insurance Corporation.
 
Upon the bill's introduction, CUNA sent a letter of support saying the credit union relief legislation is needed to correct a National Credit Union Administration interpretation of the Federal Credit Union Act that puts credit unions at a disadvantage. The NCUA has said that for a credit union to attract IOLTA accounts, all the clients must be members, rather than just the attorney establishing the account.
 
The inability of federally insured credit unions to extend share insurance coverage to IOLTAs means that despite the wishes of members to hold these accounts at credit unions, they must use a bank or thrift in order to receive the maximum deposit insurance coverage for all owners of the funds held in such an account, the CUNA letter to House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Waters (D-Calif.) said. That committee has scheduled a Thursday markup on the bill.

NCUA Security Office Plan Noted In CUNA Reg Advocacy Report

 Permanent link
WASHINGTON (11/13/13)--In this week's Regulatory Advocacy Report, the Credit Union National Association details the National Credit Union Administration's plans for a new security department.

The new office will focus on agency security and the continuity of operations, which includes natural disasters and other emergency events.

According to NCUA, this office is meant to consolidate the agency's various security functions under one office instead of the current decentralized model.

CUNA noted the office is unlikely to directly impact the operations of credit unions. "We agree security is important, but we have concerns about agency costs and urge the agency to minimize them whenever possible," CUNA Deputy General Counsel Mary Dunn said.

Other items addressed in this week's Regulatory Advocacy Report include:
  • CUNA's continued mortgage regulation advocacy efforts;
  • A Consumer Financial Protection Bureau Advance Notice of Proposed Rulemaking on debt collection;
  • Proposed interagency diversity assessment standards;
  • The NCUA's posting of comment letters on its charitable donation account proposal; and
  • An update on payment card industry data security standards.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link.