2003 CUNA Comment Letters
NCUA
NCUA’s Proposed Rule and Guidance on Response Programs for Unauthorized Access to Member Information
(December 23, 2003)
CUNA generally supports the proposed rule and guidance with regard to response programs for unauthorized access
to member information. However, CUNA has concerns with the provisions on submitting notices to NCUA or the state
regulator and the provisions on monitoring accounts, as well as suggestions on the provisions with regard to
sending notices to members when there has been unauthorized access to information.
Suretyship and
Guaranty/Maximum Borrowing Authority
(December 1, 2003)
CUNA supports allowing state-chartered credit unions to obtain waivers from the maximum borrowing limitation and also
wants to work with NCUA to achieve the necessary statutory changes so that federal credit unions can also request such
waivers. CUNA also supports providing credit unions with the option of entering into surety and guaranty agreements.
However, NCUA should carefully review this rule after it has been in effect for one year in order to address operational
issues that arise.
Conversion
of Credit Unions to Thrifts
(November 26, 2003)
CUNA supports the Board’s proposal regarding increased disclosure requirements for federal credit unions seeking
to convert to a thrift charter. Further, CUNA recommends that member disclosures regarding a conversion be separate
from other information or financial disclosures provided to members. CUNA also recommends the agency require converting
credit unions to provide their members with an opportunity to file written comments with the credit union on the
conversion before the membership vote and to share such comments prior to the vote with the membership.
Agency Review to Reduce Regulatory Burden
(October 1, 2003)
CUNA provides numerous suggestions in reponse to the agency's request for comments to identify outdated, unnecessary
or burdensome regulatory requirements imposed on federally insured credit unions. NCUA and the other federal
financial requlators are required by a 1996 paperwork reduction law to review their regulations at least once every
ten years. NCUA will seek comments on ten categories of its regulations between now and the end of the cycle (2006).
In this first round, NCUA requested comments on two categories of its regulations: applications and reporting as
well as powers and activities.
NCUA Examination Survey
(September 11, 2003)
CUNA supports the revised Examination Survey, which NCUA furnishes to credit unions following the completion
of an examination of their credit union. CUNA commends NCUA for updating the Examination Survey to center on
the agency's new risk-focused examination process and makes suggestions to further improve the Survey.
CUNA Comments on Share Insurance Proposal
(September 2, 2003)
The Credit Union National Association (CUNA) appreciates the opportunity to comment on NCUA’s proposed rule
regarding changes to the share insurance regulations. The proposed rule clarifies how revocable trust
accounts are established and insured, provides continuation of coverage following the death of a member and
after the merger of credit unions for a limited period of time, and clarifies that there is coverage for
Coverdell Education Savings Accounts. CUNA represents more than 90% of our nation’s 10,000 state and federal
credit unions.
CUNA Comments on Loan Participation Proposal
(September 2, 2003)
The Credit Union National Association (CUNA) appreciates this opportunity to comment on the proposed
revisions to NCUA’s loan participation rule. The proposal clarifies and amends the definition of “credit
union organization” to conform to the credit union service organizations (CUSOs) rule. The definition of
“financial organization” will also be broadened to include state and federal government agencies.
CUNA Comments on NCUA's MBL Proposal and Refutes ABA
(June 3, 2003)
CUNA's 15 page comment letter addresses the ABA's false or misleading charges against the proposal and NCUA.
It strongly supports the proposal with several recommended changes. The letter was developed under the
auspices of CUNA's Examination and Supervision Subcommittee and CUNA's Business/SEG's Services Committee.
Proposed Rule on Swap Agreements
(March 28, 2003)
CUNA supports this proposal that will amend NCUA's involuntary liquidation rules to designate swap
agreements as qualified financial contracts (QFCs). This will limit swap counterparty exposure when a
federally insured credit union is placed into involuntary liquidation or conservatorship by allowing the
counterparty to terminate and net QFCs in order to protect itself from selective assumption of the QFCs by a
liquidating agent, receiver, or conservator.
Proposed Rule on Investment Activities
(February 25, 2003)
CUNA strongly supports NCUA's efforts to review the area of investments and propose changes to its
regulations that will facilitate investment activities for federal credit unions. This initiative in fully
consistent with the changes in the incidental powers regulation and with NCUA's Regulatory Flexibility
program, which CUNA wholeheartedly endorsed. We believe this proposal contains important and beneficial
changes for federal credit unions in the area of investments and successfully incorporates a number of the
comments received in response to the Advance Notice of Proposed Rulemaking (ANPR) that NCUA issued on
October 18, 2001 with regard to possible changes to the investment rules.
CUNA Supports Proposed Revisions to Corporate
FCU Bylaws
(February 25, 2003)
CUNA commends NCUA's move to modernize the current Bylaws, which were last formally updated in 1983. In
particular, CUNA applauds the amendments to the Bylaws that provide for electronic delivery of
communications between a corporate and its member credit unions. CUNA supports the amendment stating that a
member of a corporate may remain a member of that corporate until the person or entity withdraws or is
expelled. CUNA does not believe the costs of credit unions to retain membership in corporates will increase
as a result of the proposed changes. Instead, these proposed amendments should allow for greater
technological and operational efficiencies for corporates, which ultimately will benefit credit unions and
their members.
NCUA Proposes Field Of Membership Policy
Changes For Federal Credit Unions
(February 3, 2003)
CUNA strongly supports the agency's comprehensive and ongoing effort to review and modify its Chartering and
Field of Membership Manual for Federal Credit Unions (Interpretative Ruling and Policy Statement 02-5) to
enhance the ability of federal credit unions to add new groups, make charter changes, and better serve their
fields of membership. CUNA requests that NCUA include additional recommendations to: expand and clarify the
concept of a common bond based on a trade, industry, or profession to remove unnecessary limitations; permit
multiple group credit unions to add groups based on a trade, industry or profession; allow credit unions
that have a substantial interest in an ATM network or machine to include new members based on ATM locations,
as long as there is sufficient, demonstrable indication of support from the credit union for the area to be
served; and allow credit unions to use a shared service facility for purposes of adding new members even if
the credit union does not have an ownership interest in the facility as long as the credit union's
participation in the facility results in a demonstrable connection with the service area.
Revision of the Definition of Small Credit
Union
(February 3, 2003)
CUNA strongly supports the agency's efforts to review its definition of "small entities" (currently defined
as credit unions with assets under $1 million) to determine whether more credit unions should be covered by
NCUA's analyses under the Regulatory Flexibility Act (RF Act). Based on CUNA's review of the RF Act and its
legislative history, CUNA believes that the threshold could be reasonably higher than the agency's proposal
of credit unions with assets of less than $10 million. We believe it is entirely appropriate for NCUA to
consider raising the threshold to at least $50 million in assets or higher. CUNA also urges NCUA to agree to
a one-year review of its new definition and to reconsider the threshold every year thereafter. CUNA also
supports the clarification that NCUA will review one-third of existing agency regulations every year and
that the public will receive notice of the rules that will be subject to review. CUNA urges the agency to
announce at its December Board meeting every year which rules will be reviewed by the agency in the
following year and include this information throughout the year on the agency's website.
NCUA Proposes Abbreviated Net Worth Restoration
Plan Under PCA
(January 28, 2003)
CUNA strongly supports the concept of providing meaningful relief for credit unions that are earning at
sufficient rates to capitalize significant growth, but are concerned about the approval of net worth
restoration plans (NWRPs). While CUNA appreciates the Board's efforts to consider those concerns and
consider innovative approaches in response, CUNA believes the Tier I NWRP is not responsive to credit
unions' concerns and will not afford meaningful relief. Credit unions are concerned that despite a strong
income statement and balance sheet that will restore net worth, and faced with significant uninduced savings
growth, they may not have a NWRP approved for any number of reasons. The maintenance of the requirement to
submit a statement about controlling risks associated with new activities retains that regulatory risk of a
NWRP. They receive no guidance ahead of the fact about how much net income is enough, and what is a
"reasonable assumption." CUNA suggests that the "default" or safe harbor option only be available to credit
unions that are "inadequately" capitalized (net worth ratio over 4%) and not to those that are
"significantly" or "critically" undercapitalized.
Proposed Changes to the Suspicious Activity
Report (SAR) Form
(January 3, 2003)
CUNA supports the three minor proposed revisions to the SAR report: (1) updating the language in the Safe
Harbor provision of the Instructions section to conform to the wording of Safe Harbor provision regarding
suspicious activity reporting contained in the USA PATRIOT Act and (2) adding two new check boxes in Part
III - Suspicious Activity Information (Box 35, Summary Characterization of Suspicious Activity) -- Terrorist
Financing and Identity Theft. CUNA suggests that the SAR form provide more detailed guidance on when those
boxes should be checked.
BITS
BITS Revised Framework on IT Outsourcing
(October 29, 2003)
CUNA supports the proposed revisions to update the Framework regarding requirements for disaster recovery and
business continuity. CUNA agrees with the inclusion of high-level expectations for security providers that deal
with the protection of a financial service company's information and security assets. CUNA recommends several
changes in the section on ongoing vendor relationship management.
FARM CREDIT ADMINISTRATION
Proposed Rule on Farm Credit System Lending
(October 10, 2003)
CUNA supports this proposal that will reduce the amount of capital that a Farm Credit System Bank needs to hold
with regard to loans made to credit unions; will allow credit unions to apply for services from any System Bank,
regardless of location; and will allow System Banks to disclose credit union information, upon consent of the
credit union.
FEDERAL COMMUNICATIONS COMMISSION
Unsolicited Fax Rule
(September 4, 2003)
CUNA requests that the Office of Management and Budget (OMB) deny approval under the Paperwork Reduction Act
for the information collections that are required under the Federal Communications Commission's rule regarding
unsolicited faxes. OMB's denial would prevent the rule from going into effect.
FEDERAL RESERVE BOARD
Proposed Guidance on the Anti-Tying Restrictions
of the Bank Holding Company Act
(September 30, 2003)
CUNA urges the Federal Reserve Board to review carefully its proposed guidance regarding the anti-tying restrictions
of the Bank Holding Company Act. The Act is intended to control tying arrangements, in which banks pressure
consumers to purchase additional products and services that they may not want or need. CUNA urges the Fed to review
this guidance to ensure that consumer choice is not limited and to ensure that credit unions can compete effectively
when faced with these types of bank practices.
Fed Consumer Advisory Council Meeting
(June 26, 2003)
In connection with the June meeting of the Federal Reserve Board's Consumer Advisory Council, CUNA offers
comments on the preemption provisions of the Fair Credit Reporting Act, financial privacy and the possible
uses of short form notices, examples of practices to combat predatory lending, and the issuance of
additional debit and credit cards.
Proposed Revisions to the Regulation C
Commentary
(April 8, 2003)
CUNA supports these changes to the Regulation C official staff commentary, which will reduce the burden for
credit unions as they continue their preparation for compliance with the Home Mortgage Disclosure Act rules
that will be effective on January 1, 2004.
Proposed Expansion of Fedwire Operating
Hours
(March 4, 2003)
CUNA supports this proposal to expand the operating hours of Fedwire by starting service at an earlier time.
This proposal should be beneficial to credit unions. In addition, CUNA believes that the Federal Reserve
Banks should retain the discretion to grant extensions to the Fedwire closing time in emergencies.
Proposed Revisions to the Regulation Z
Commentary
(January 27, 2003)
CUNA supports the proposal of the Federal Reserve Board that will permit the issuance of more than one
credit card as a renewal or substitute for a previously accepted card. However, CUNA opposes any
requirement to change the disclosure requirements in connection with ordering a credit card in an expedited
manner or for making an expedited credit card payment. CUNA also opposes the inclusion of fees in
connection with a "bounce protection" service as a "finance charge" that would be included in the annual
percentage rate.
INTERNAL REVENUE SERVICE (IRS)
Reporting Requirements for
Coverdell Education Savings Accounts.
(October 17, 2003)
CUNA comments to the IRS on the reporting requirements in IRS Notice 2003-53 for Coverdell Education Savings
Accounts (ESAs). Although the current transition rules in the IRS Notice help credit unions meet the reporting
requirements, it is only a temporary fix. CUNA urges that the IRS maintain current reporting requirements,
where basis and earnings calculations are the responsibility of each ESA account holder.
TREASURY
Federal Government Participation in ACH
(October 20, 2003)
Overall, CUNA opposes this proposal because it creates rules for ACH transactions processed by the federal government
that differ significantly from the rules for ACH transactions processed by the private sector. As discussed below,
specifically, CUNA opposes Treasury's proposal to convert items that have traditionally been ineligible for ACH
processing and Treasury's proposal to expand the usage of Accounts Receivable Entry (ARC). These changes would
impose inefficiency on the ACH system and create burdens for ACH participants.
Additional Comments re. Member/Customer
ID Program (CIP) Regs - Identification
(July 23, 2003)
CUNA does not believe that the final rule should be changed to eliminate or prohibit the use of Matricula or
other consular identification cards. Rather than changing the rule, CUNA would encourage Treasury and the
other regulators to work together to develop guidelines to assist institutions that choose to rely on such
documents. Such guidelines should not be mandatory for those institutions accepting consular identification
cards, but rather, should be a resource to help institutions comply with the rule’s requirements concerning
the use of documents to verify identity.
Additional Comments re. Member/Customer
ID Program (CIP) Regs - Recordkeeping
(July 23, 2003)
CUNA opposes any new requirement to photocopy documents provided at account opening. In CUNA's view, the
recordkeeping requirements under Section 326 of the USA PATRIOT Act are substantial, and CUNA questions
whether proponents of additional, photocopying requirements are aware of what the final rule requires now.
CUNA does not think sufficient evidence has been presented to justify the imposition of additional
photocopying requirements on institutions; such requirements would be a substantial regulatory burden on a
number of institutions. CUNA urges the Treasury Department to continue the final rule as adopted.
Revision of Regulations Governing the
Endorsement and Payment of Checks Drawn on the Treasury
(June 23, 2003)
CUNA responds to the Treasury proposal that would revise regulations governing the endorsement and payment
of checks drawn on Treasury. The proposal limits the time Treasury has to reverse final payments; allocates
losses for forgeries and counterfeits; and clarifies protest procedures against Treasury decisions.
DEPARTMENT OF COMMERCE
The Uniform Commercial Code Exception to
the Electronic Signatures in Global and National Commerce Act
(E-SIGN Act)
(February 24, 2003)
- CUNA believes that check truncation legislation currently being considered by Congress may facilitate the use of electronic negotiable instruments (electronic checks). As a result, the E-SIGN Act exception should be maintained for the present to see how that legislation progresses. This exception prevent e-checks from being considered the functional equivalent of paper checks, under the laws that apply to paper checks.
- If check truncation legislation is not forthcoming, then amending the E-SIGN Act may be necessary. These amendments can be done without harming consumers since there are sufficient consumer protections in other current laws. However, removing the UCC exception should be done only after adequate public hearings have been held and public comments have been received.
E-Sign Exception for Housing Foreclosure,
Repossession, and
Default Notices
(January 31, 2003)
CUNA believes that the E-Sign Act exception for residential default and foreclosure notices should only be
removed if adequate consumer protections are maintained, which is not clear at this time. Credit unions'
current ability to provide mortgages electronically has not been hampered by this exception with regard to
these notices.
Financial Crimes Enforcement Network (FinCEN)
Proposed Revisions to the Currency
Transaction Report (CTR) Form
(July 18, 2003)
CUNA supports the proposed revisions to the CTR form because they would serve to improve the usefulness of the CTR to law
enforcement. In particular, the addition of two distinct data collection blocks designated for transactions involving foreign
currency -- “Foreign cash in” and “Foreign cash out” -- would assist law enforcement to better identify potential money laundering
or terrorist financing activities. CUNA encourages FinCEN to designate a Web site for financial institutions to use to obtain
exchange rate information for CTRs.
Anti-money Laundering re: Real
Estate
(June 9, 2003)
FinCEN anticipates that persons that are already subject to separate anti-money laundering program rules will not also be
subject to the anti-money laundering rules for persons involved in real estate closings and settlements. CUNA supports this
position as it would exempt credit unions from being covered by such a rule.
CUNA Supports Use of Name and Address in
Funds Transmittals
(April 21, 2003)
CUNA supports FinCEN's decision to require the use of the true name and address of a member on funds transmittals greater than $3,000
because credit unions will be able to comply with this rule by June 1, 2003. This is currently required by the Banks Secrecy Act and
FinCEN is allowing an exception to that law to expire.
NACHA
Consumer Opt
Out for Conversion of Checks to ACH
(December 2, 2003)
CUNA supports the modification to the NACHA Operating Rules to require that a merchant provide the consumer with
notice that the consumer has the ability to choose not to allow the merchant to convert his or her share draft into
an ACH item. CUNA supports a one-time notice about this option and opposes the proposed requirement for more frequent
notification.
ACH Returns Issues: ACH Operator Requirements
(August 18, 2003)
CUNA supports the proposed changes to: (1) remove an ACH Operator edit related to the Original
Receiving DFI (Depository Financial Institution) Identification Field within the addenda records of the dishonored return
and contested dishonored return entries that is inconsistent with the definition of the field and (2) require ACH Operators
to settle return entries no earlier than the effective entry date in the original Company/Batch Header Record.
ACH Returns - Invalid SEC Codes and Fraudulent Entries
(August 18, 2003)
CUNA opposes the creation of a return reason code that a Receiving Depository Financial Institution could use to return
entries it believes are fraudulent. CUNA recommends that NACHA establish 2 new return reason codes: one code fore
returning a corporate entry that was initiated to a member/consumer account and subsequently reported as unauthorized and
another code for returning an entry with an SEC Code that is inappropriate for the type of account being debited or
credited.
ACH Requirements for Social Security Number Security
(July 15, 2003)
CUNA responds to the various alternatives proposed regarding modification of the NACHA Operating Rules
(Rules) to comply with state laws that forbid that mailing of social security numbers (SSNs). Specifically,
the proposal addresses the issue of whether the Rules should be amended to address the inclusion of a
consumer’s SSN within an automated clearing house (ACH) entry.
ACH Data Security Requirements
(July 15, 2003)
CUNA basically supports NACHA’s proposal to enhance Internet data security requirements for all
automated clearing house (ACH) transactions, not just Internet-initiated (WEB) Entries. The proposed changes would apply to
any banking information (including ACH entries, ACH entry data, routing numbers, account numbers and PINs or other personal
identification symbols) that is transmitted or exchanged between ACH participants via an Unsecured Electronic Network. CUNA
makes recommendations regarding the definition of “banking information” and suggests a later compliance date.
Operational Efficiency of the ACH Network
(June 27, 2003)
CUNA generally supports NACHA's proposal to enhance the operatonal efficiency of the ACH network
Proposed Warranties for Third-Party-Service Providers
(April 1, 2003)
CUNA supports NACHA's proposal to make Third-Party Senders and Originators more accountable to the NACHA Operating Rules in those cases
where ODFIs do not have contracts directly with the Originators.
CUNA Supports Electronic Conversion of Corporate Checks
(January 31, 2003)
In general, CUNA this proposal that would allow the conversion of corporate checks; limit the maximum amount of share drafts/checks
eligible for conversion to $25,000; eliminate the requirement that an Originator (usually a merchant) retain a copy of the back of the
Receiver's (consumer or corporate that pays the ACH debit) share draft for two years; and establish a requirement that the receiving
depository financial institution (RDFI) send or make available to the Receivers the check serial number for certain applications. However,
CUNA recommends delaying the effective date until 9/04.
CUNA Supports Mandatory Arbitration of ACH Disputes
(May 30, 2003)
CUNA supports mandatory arbitration of smaller ACH disputes at the request of one party and supports the usage of one arbitrator for
these smaller disputes. For larger disputes, CUNA support the usage of three arbitrators to decide a claim. The largest disputes
would still require both parties to agree before arbitration could be used. In addition, CUNA supports extending the deadline to
three years to submit arbitration claims. In contrast to the proposal, however, CUNA supports fixed stipends for arbitrators instead
of stipends that vary with the amount of the award.
OFFICE OF FOREIGN ASSETS CONTROL (OFAC)
Updated OFAC Internal Economic Sanctions Enforcement Guidelines
(March 31, 2003)
CUNA believes that publishing the Guidelines in the Code of Federal Regulations as an appendix to the other OFAC regulations will assist
regulated entities in better understanding the OFAC enforcement process. CUNA makes 3 recommendations with regard to the Guidelines.
We feel the $50 million figure would also be a reasonable threshold for OFAC to consider in determining whether a warning letter should
be sent instead of a prepenalty notice. While we do not think the list of mitigating factors in the Guidelines should be exhaustive,
it is important that the Guidelines include small asset size as a mitigating factor; we recommend that the penalty be pro-rated to the
size of the entity involved. In our opinion, no penalty should be assessed for reporting first offenses; and penalties for subsequent
violations that are voluntarily reported should be mitigated by at least 50% or more.
DEPARTMENT OF DEFENSE (DoD)
Personal Commercial Soliciation on DoD Installations
(August 22, 2003)
CUNA comments on the DoD's policy governing personal commercial solicitation of insurance sales and securities on DoD
installations. The DoD is in the process of rewriting its Directive (DoDD) Number 1344.7. CUNA recommends that a new
provision should be added explicitly permitting financial institutions to offer life insurance, securities and other
financial services directly and/or through subsidiaries or CUSOs.
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)
Proposal re. Allowance for Credit Losses
(September 18, 2003)
CUNA generally supports the proposed standards regarding the recognition and measurement by creditors of
the allowance for credit losses related to all loans, as that term is defined in FAS No. 114, with certain
exceptions. The proposed standards are consistent with NCUA's guidance regarding methodologies used to calculate
the allowance for loan and lease losses and related documentation requirements.
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