2005 CUNA Comment Letters

Call Reports
(November 21, 2005)
Although these changes to the Call Report may increase the paperwork burden to some extent for small credit unions, the filing of the revised Call Reports on a quarterly period will not be significantly more burdensome than filing the current Call Reports, along with the abbreviated reports in the first and third quarters. However, CUNA believes NCUA could significantly reduce the compliance burden of the Call Reports even further and has provided a number of examples of how this can be accomplished. Credit unions should also be given sufficient time before use of the new Form 5300 is required. If the new form is not approved by the end of this year, then the use of the new Form 5300 should not be required prior to the first quarter of 2007.

FCU Bylaws Proposal
(October 13, 2005)
"CUNA commends the NCUA for the thorough review of its bylaws. CUNA generally supports the agency’s efforts to improve the bylaws. However, CUNA is recommending several amendments to enhance those provisions that we believe are consistent with NCUA’s objectives and with the ability of credit unions to make their own decisions. These changes concern: NCUA approval of bylaw amendments; the purpose of a credit union as stated in the bylaws; whether paper ballots should be mailed to members in an election conducted by mail ballot; the time frame for replacing board and committee members; the number of signatures required for a special meeting; and other issues.

EGRPRA Review - Rules Regarding Directors/Officers/Employees and Rules of Procedure
(October 5, 2005)
CUNA responds to NCUA’s fifth request for comments to identify outdated, unnecessary or burdensome regulatory requirements imposed on federally insured credit unions. CUNA recommends modifications to NCUA’s rule concerning benefits for employees of federal credit unions and the agency's rule regarding loans and lines of credit to officials. In addition, CUNA reiterates suggestions made with respect to the recent proposal to revise the fidelity bond and insurance coverage rule.

RegFlex Program Eligibility - Minimum Net Worth Requirements
(September 27, 2005)
CUNA supports the proposal's provision that would lower the RegFlex qualifying net worth ratio requirement from 9% to 7%. However, CUNA does not support the accompanying requirement that credit unions must also maintain the well-capitalized level for six consecutive quarters prior to RegFlex status. CUNA suggests adding a provision that would allow credit unions to appeal a decision from a regional office that denies RegFlex status. CUNA supports revisions that would allow credit unions to suggest additional RegFlex exemptions.

Proposed Rule Part 741.8
(September 27, 2005)
In our comment letter to NCUA, CUNA supports the clarification that purchase and assumption transactions between federally-insured credit unions do not require NCUA approval. However, with regard to possible changes to the rules involving nonconforming investments by state-chartered credit unions, we cannot at this time support the removal of the requirement to establish special reserves and replacing it with a requirement that such investments be of “investment grade.”

Low-Income Designated Credit Unions (LICUs)
(September 27, 2005)
In our comment letter to NCUA, CUNA supports allowing low-income designated credit unions (LICUs) offering uninsured secondary capital accounts to redeem the funds in those accounts at the same rate they are discounted when they are within five years of maturity. We also support extending this to additional LICUs, not just those that are at least "adequately capitalized" under the prompt corrective action requirements. However, we oppose NCUA's proposal to require prior approval before LICUs can offer secondary accounts.

Post-Employment Restrictions for Certain NCUA Examiners
(September 27, 2005)
In our comment letter to NCUA, CUNA supports NCUA's proposal prohibiting an NCUA senior examiner of a federally insured credit union from accepting employment with that credit union for one year after leaving NCUA employment and believes that NCUA's proposed regulation strikes an appropriate balance between the Congressional intent in the Intelligence Reform Act and the preservation of at-will employment.

NCUA Internal Regulatory Review (2005)
(August 5, 2005)
CUNA responded to NCUA’s notice identifying existing agency regulations undergoing review in 2005. CUNA indicated it would be helpful for NCUA’s rules concerning Bank Secrecy Act (BSA) compliance to contain a reference to the Federal Financial Institutions Examination Council's Bank Secrecy Act/Anti-Money Laundering Examination Manual. CUNA also encouraged NCUA to consider conducting BSA/anti-money laundering outreach for the credit union industry. In addition, CUNA made recommendations with respect to Appendix B – Guidance on Response Programs for Unauthorized Access to Member Information and Member Notice to NCUA’s rules regarding security programs as well as NCUA’s records preservation regulation.

CUNA Supports Changes on Fidelity Bond and Insurance Coverage
(July 25, 2005)
CUNA filed a comment letter with NCUA on July 25, 2005 suporting the agency's proposal to raise the deductible for larger, well-managed credit unions. While not opposing the agency's efforts to update maximum insurance coverage, CUNA urged the agency to ensure credit unions, particularly smaller ones, may work with their regional office to apply for a waiver from the requirement for additional coverage or to request additional time to meet new requirements.

CUNA Urges NCUA to Postpone Proposal on Sales of Securities Through Third Party Brokers
(July 25, 2005)
CUNA filed another comment letter with NCUA on July 25, 2005 requesting the agency to hold off on a regulation that would govern the sale of securities through third-party brokers. CUNA raised a number of concerns about the agency's proposal, including the fact that NCUA would require the credit union to monitor compliance by the broker. CUNA recommended NCUA postpone its proposal until the Securities and Exchange Commission, which is working on related issues, has adopted its rule and establish an external working group to help identify issues and practical approaches, consistent with safety and soundness.

Fair Credit Reporting - Medical Information Interim Final Rule
(July 11, 2005)
CUNA supports the recent interim final rule that will provide exceptions to the provisions of the Fair and Accurate Credit Transactions Act that severely restrict the use of medical information and appreciate the agencies' efforts to expand the scope of the rule to ensure that state-chartered credit unions will also be able to use these exceptions.

Amendments to NCUA's MBL Rule
(June 20, 2005)
CUNA provides comments in response to NCUA's request for comment on further modifications to its member business loan (MBL) rule. CUNA commends NCUA for its ongoing efforts to improve the MBL rule but raises issues regarding the implementation of the MBL rule and related matters. CUNA supports several changes the agency has proposed but does not support the proposed revision to the definition of "construction or development loan" at this time. CUNA also urges NCUA to use the full extent of its authority to facilitate member business lending.

CUSO Financial Statement Audits
(May 23, 2005)
CUNA supports this proposal to amend NCUA’s credit union service organization (CUSO) regulation to allow a wholly-owned CUSO to avoid the requirement to obtain a separate financial statement audit from a certified public accountant (CPA), as long as the CUSO’s statement is included in the consolidated financial statement of the parent federal credit union (FCU). The proposal would conform its rule to agency practice. CUNA commends NCUA efforts to reduce regulatory burden for credit unions and CUSOs. However, CUNA urges NCUA to reconsider limiting the proposed amendment to wholly-owned CUSOs. GAAP permits consolidated financial statements when the parent owns more than 50 percent of the subsidiary. NCUA should allow a consolidated audit for a majority-owned CUSO that meets this standard if the CUSO so chooses.

Economic Growth and Regulatory Paperwork Reduction Act
(May 12, 2005)
CUNA provides comments in response to NCUA's request for comments to identify outdated, unnecessary, or burdensome regulatory requirements imposed on federally insured credit unions. In our letter, CUNA applauds the NCUA Board for its ongoing efforts to enhance the credit union charter and to minimize regulatory burdens within the confines of safety and soundness for well-managed credit unions.

Changes to NCUA Lending Rules
(January 25, 2005)
In our Comment Letter to NCUA, CUNA supports NCUA’s proposed rule that will amend the agency’s lending regulations for federal credit unions. We feel the proposal is fully consistent with the Federal Credit Union Act and sound public policy. The changes will provide additional flexibility to federal credit unions and facilitate the ability of credit unions to serve their members’ lending needs.

Reg Z Rules Required Under the Bankruptcy Act
(December 16, 2005)
CUNA outlines numerous, detailed suggestions in response to the Federal Reserve Board's request for comments on changes to Regulation Z that are required under the provisions of the Bankruptcy Act that amend the Truth in Lending Act. These amendments include new disclosures for periodic statements and for credit card applications and solicitations.

Regulation E ATM Disclosures
(October 7, 2005)
CUNA provides comments to the Federal Reserve Board's request for comments on its proposal amending Regulation E to permit ATM operatirs to state that a fee "may" be imposed rather than “will” be imposed if there are circumstances under which some consumers would not be charged for services. CUNA supports the Board’s proposal to Regulation E and its commentary, as this change will clarify an ATM operator’s fee structure particularly to credit unions as they tend to not charge for balance inquiries or transfers. CUNA agrees that both the Regulation and Official Staff Commentary should be amended since the Regulation currently states that a notice must state that a fee will be imposed when a fee is charged for any transaction.

Fair Credit Reporting - Medical Information Interim Final Rule
(July 11, 2005)
CUNA supports the recent interim final rule that will provide exceptions to the provisions of the Fair and Accurate Credit Transactions Act that severely restrict the use of medical information and appreciate the agencies' efforts to expand the scope of the rule to ensure that state-chartered credit unions will also be able to use these exceptions.

Check 21 Draft Survey
(July 11, 2005)
CUNA responds to the Federal Reserve Board’s (Board’s) request for comments on a draft Check 21 survey. CUNA supports the Board's initiative for conducting the survey, but believes that several of the specific statistical questions would be difficult to answer because financial institutions do not typically keep that type of information. CUNA suggests the survey request information on funds availability policies as well as how often and under what circumstances an institution uses an exception hold, or does not place a hold on a deposited check. In its comments, CUNA requests that the Board provide adequate notice to those institutions that are randomly selected so that they will have time to train staff to track specific information and make any program adjustments to accurately track information. CUNA suggests that the Board delay initiating any changes to the maximum hold periods mandated by Regulation CC until it has had sufficient time to accurately determine the effect Check 21 has had on our check processing system.

Remotely Created Checks
(May 3, 2005)
The Credit Union National Association (CUNA) comments in response to the Federal Reserve Board's request for comments to amend Regulations CC and J to set forth rules governing remotely created checks and to conform cross-references to the warranties that are proposed. The proposed amendments to Regulation CC would create transfer and presentment warranties under which the depositary financial institution would warrant that the person on whose account the check is drawn authorizes the remotely created check.

Review of Regulation Z Open-end Credit Rules
(March 28, 2005)
The Credit Union National Association (CUNA) comments in response to the Federal Reserve Board's advance notice of proposed rulemaking (ANPR) on possible changes to the open-end credit rules under Regulation Z, the Truth in Lending Act. The ANPR is the first stage of a comprehensive review of Regulation Z in its entirety, and this first stage focuses on open-end credit accounts that are not home secured, specifically general-purpose credit cards and merchant-specific credit plans. CUNA provides a number of suggestions to simplify and clarify a number of credit card disclosures.

OFAC and Operator Related Changes to the ACH Network
(December 19, 2005)
CUNA filed a comment letter in response to NACHA's proposal on OFAC and Operator Related Changes to the ACH Network. CUNA strongly supports combating terrorism and supports efforts to help financial institutions comply with OFAC's regulations. CUNA supports expanding the definition of cross-border ACH transactions, but believes believes the proposed definition may unintentionally sweep domestic transactions under the new requirements. CUNA supports NACHA's proposal to include the "Travel Rule" fields in the addenda records and supports creating a new return reason code for cross-border entries, but does not believe allowing up to 9,999 addenda records for cross-border transactions will be beneficial.

Stored Value Cards
(November 7, 2005)
CUNA responds to the FDIC's proposed rule that would clarify whether the funds held at insured banks for stored value cards qualify as “deposits”. CUNA believes the method by which an account holder can access his or her funds should not be a basis for how the funds in the account is insured and that insurance coverage should continue to be applied with the same criteria. CUNA also believes that issuing rules addressing stored value cards at this time may be premature.

Revised FinCEN Designation of Exempt Person Form
(March 4, 2005)
CUNA commends FinCEN for its efforts to revise the “Designation of Exempt Person” form in response to suggestions received from regulators and financial institutions as well as in response to questions received on the FinCEN Helpline. Specifically, CUNA believes that the proposed simplification of the data elements and reformatting of the boxes, the proposed expanded instructions section, and the proposed instructions indicating that the form can be e-filed through the Patriot Act Communications System (PACS) will all serve to make the form more user-friendly and the filing process more expeditious.

Application of ADA Standards Revisions
(May 31, 2005)
CUNA provides comments in response to the Department of Justice's Advance Notice of Proposed Rulemaking on the application of the Americans with Disability Act of 1990 (ADA) Standards. CUNA strongly supports the goals of the ADA and supports the Justice Department's view of previously used equipment that is built into a structure as an alteration and not new construction. CUNA believes additional regulatory provisions are not necessary for free-standing equipment, such as ATMs and believes an effective date of eighteen months after publicaion of the final rule is consistent with a compliance date used with the ADA as a whole.

COPPA Letter
(June 27, 2005)
CUNA supports the COPPA rules and believes they achieve the goal of providing more privacy protections for children. This goal can be achieved through the continued use of a “sliding scale” approach with regard to the requirements for obtaining parental consent to use the child's information, in which less stringent means for obtaining such consent would apply if the information is used internally by the website operator, as opposed to being disclosed to third parties. As part of this process, CUNA supports a requirement that the e-mails sent to parents as a means of obtaining such consent contain contact information for the website operator. However, CUNA does not believe that using a credit card is a reasonable means of verifying whether the person providing consent is the child’s parent since children may easily be able to obtain and use their parent’s credit card.

CAN-SPAM Letter
(June 27, 2005)
CUNA questions the proposed change that will shorten from ten to three days the opt-out processing time that a sender has to honor an opt-out request from a recipient of the commercial e-mail. CUNA also believes that: 1) post office boxes and commercial mail drop addresses should not be considered “valid physical postal addresses” that are required to be included in the commercial e-mail messages; 2) debt collection e-mails should be covered under the “transactional or relationship” exception to the CAN-SPAM Act requirements; 3) the CAN-SPAM Act requirements should apply to e-mails sent to consumers whose membership in an organization has lapsed, but only after a reasonable time after the membership has lapsed; and 4) senders of commercial e-mails may, but should not be required to, honor opt-out requests indefinitely.

Disclosures for Non-Federally Insured Depository Institutions
(June 15, 2005)
CUNA supports the objective of Federal Deposit Insurance Corporation Improvements Act and the FTC's rules to help ensure consumers are fully aware of the nature of the insurance that guarantees their shares or deposits. However, CUNA has concerns with the proposal relating to obtaining the signed acknowledgment from existing members. Under the proposal, institutions without federal deposit insurance would not be able to accept any shares or deposits in connection with a new or existing account unless the member or depositor has signed a written acknowledgement that they have received the required disclosures -- that the institution does not have federal deposit insurance and that if the institution fails, the federal government does not guarantee that depositors will get their money back.

Children's Online Privacy Protection Act (COPPA)
(February 15, 2005)
CUNA supports the proposal from the Federal Trade Commission to make permanent the temporary provision in the Children's Online Privacy Protection Act (COPPA) allowing website operators to obtain parental consent by e-mail when they collect information from children that is used only for internal purposes, which is less strict than the consent requirements for information that may be shared with third parties.

HSA Comparability Rules
(November 23, 2005)
Under Section 4980G of the Internal Revenue Code, if an employer fails to make comparable contributions to the health savings accounts (HSAs) of its employees during a calendar year, the employer is subject to an excise tax equal to 35% of the aggregate amount contributed by the employer to the HSAs of its employees during that calendar year. This proposed guidance would clarify certain aspects of the comparability rules. CUNA applauds the IRS (Service) for issuing a great deal of regulatory guidance in a timely fashion so that credit unions can begin offering HSAs, which are still fairly new. CUNA believes the rules concerning calculation of comparable contributions make sense. CUNA agrees with the approach laid out in the proposed guidance explaining the procedures for making comparable contributions. However, CUNA feels the proposed guidance can provide employers with more flexibility in determining eligible individuals and comparability based on class distinctions. Further, CUNA believes that if the Service imposes limits on matching contributions, they should be consistent with those limits for qualified retirement benefit plans.

Roth Contributions to 401(k) Plans
(May 31, 2005)
CUNA supports the proposal to permit an employee who makes elective contributions under a 401(k) plan designate some or all of those contributions as Roth contributions beginning in 2006. CUNA believes that the regulations would allow more credit union officials and staff to take advantage of the Roth option through automatic payroll deduction options of a 401(k) plan. Further, a Roth 401(k) plan would allow participants a wider array of investment options than they would have with a stand-alone IRA. CUNA agrees with the separate accounting and recordkeeping requirements and urges the Service to state in the final guidance that the separate accounting requirements can be fulfilled by maintaining separate records for each type of contribution (Roth and regular). CUNA also encourages the IRS to publish model amendments for plan sponsors to use in implementing a Roth 401(k) plan.

Guidance on Deferred Compensation Under Section 409A
(April 4, 2005)
Section 409A of the Internal Revenue Code establishes specific requirements that certain deferred compensation plans must meet to receive tax deferral treatment. CUNA urged the IRS to make the short-term deferral exception contained in 409A permanent and clarify that the exception applies to employer-funded 457(f) plans. This is an important issue to many credit unions and other tax-exempt employers because they use 457(f) plans as a part of a comprehensive benefits package to attract and retain talented executives and officers. CUNA also supported the exception of severance plans from the application of Section 409A rules. Finally, CUNA asked the IRS to modify the provisions in Section 409A regarding changes in timing and form of distributions so that if an employee participating in a deferred compensation plan elects to change a the form of payment, for example from a lump sum to installment payments, the employee should not have to wait 5 years to start receiving the payments. It should be sufficient for the employee to notify the plan administrator one year in advance.

Distributions From a Pension Plan Under a Phased Retirement Program
(February 8, 2005)
In our Comment Letter to NCUA, CUNA supports NCUA’s proposed rule that will amend the agency’s lending regulations for federal credit unions. We feel the proposal is fully consistent with the Federal Credit Union Act and sound public policy. The changes will provide additional flexibility to federal credit unions and facilitate the ability of credit unions to serve their members’ lending needs.

Indorsement and Payment of Checks Drawn on the United States Treasury
(January 18, 2005)
CUNA provides comments on the Treasury's interim rule regarding the presentment of Treasury checks for payment by electronic images.

FASB Proposed Guidance on Mergers
(October 28, 2005)
Because of the uniqueness of credit unions and users of their financial statements, CUNA cited several concerns with the Exposure Draft. We foresee several difficulties in fair valuing the credit union acquired in a merger. We believe organizations should be allowed to continue carrying over the acquired entity's valuation allowance balance as it presents a useful financial picture for users of financial statements. We disagree with the proposal's creation of a separate equity classification on the books of the acquiring institution for the amount equal to the fair value of the acquiree. We do not support the change in the Exposure Draft providing that the costs the acquirer incurs in connection with a business combination, such as legal fees, should be expensed. We think it makes more sense to record the estimated cost amounts associated with restructuring or exit activities at the time the merger deal is completed as is done currently than to record such costs in the income statement when they occur as required under the Exposure Draft.

FASB Proposal re. Loan Participations
(October 10, 2005)
CUNA believes that this proposal, prescribing how loan participations should be conducted to qualify for accounting treatment as a sale, will not impact the credit unions that are involved with loan participations without recourse. However, as there are credit unions that are interested in loan participations with recourse or have a portfolio of such loans, CUNA requests FASB to consider revising the definition of participation interest to enable loans with limited recourse to achieve sales accounting treatment. This would help institutions avoid the costly and time- consuming process of setting up and running a "special purpose entity" (SPE), which the proposal would require. CUNA requests that the provision requiring loan participation transactions with recourse shown on an institution?s books as a sale to be recharacterized as a secured borrowing upon issuance of the final rule be modified so that it is prospective instead of retroactive. Alternatively, the effective/transition date should be delayed for one year to allow institutions time for implementation of the rule, including the establishment of an SPE.

Other-Than-Temporary Impairment and Its Application to Certain Investments
(March 25, 2005)
The proposal provides measurement and recognition guidance regarding debt securities that are impaired because of interest rate and/or sector spread increases. The FSP establishes a three-step process for determining when an investment is impaired, whether that impairment is other than temporary, and how to measure the impairment loss if the impairment is deemed to be other than temporary. This process is to be applied to individual securities. CUNA urges FASB to provide for a degree of acceptable "minor impairment" for mutual funds that consist solely of debt securities. In addition, CUNA encourages FASB to adopt the more flexible qualitative approach to determining an acceptable amount of impairment in a particular portfolio of investment. If the board proceeds with changes to the rules, Board should provide an ample transition period as the changes could have a significant impact on the income statements of affected credit unions. Finally, CUNA requests FASB to allow a phase-in period as well as a grandfathering of assets.

FFIEC Advisory on the Limitation of ' Liability Provisions in Audit Engagement Letters
(June 9, 2005)
The FFIEC's proposed advisory cautions financial institutions' boards of directors, audit committees and management not to enter into any agreement that contains external auditor limitation of liability provisions with respect to financial statement audits. This would apply regardless of the size of the financial institution, whether the financial institution is public or not, and whether the external audit is required or voluntary. In general, CUNA is supportive of the proposed advisory. CUNA believes that the limitation of liability provisions are inappropriate for all financial institution external audits. However, CUNA encourages the FFIEC to amend the provisions regarding the effective date of the advisory so that if limitation of liability provisions contained in engagement letters for the current year cannot be renegotiated in good faith, then the institution can retain the agreement until next year (and amend the contractual provisions for calendar year 2006 and beyond).

Personal Commercial Solicitation on DoD Installations
(June 20, 2005)
CUNA and the Defense Credit Union Council support the proposed revision of DoD's existing policy governing personal commercial solicitation of insurance sales and securities on DoD installations. Some of the key provisions include: the authorization of on-base credit unions (and banks) to provide exclusive on-base delivery of financial services to the installations; the prohibition of distribution of competitive literature by off-base credit unions and banks; and the requriement for on-base credit unions and banks to provide financial education/training. CUNA and DCUC also make several recommendations to further strengthen and clarify specific elements of the rule.

National Summit on Retirement Savings (2006)
(July 5, 2005)
CUNA provides recommendations to the Department of Labor regarding the National Summit on Retirement Savings scheduled for March 2006. CUNA addresses certain specific issues on which the Labor Department wanted input, including: suggested topics for discussing the current state of retirement savings education in America and its effect on the national retirement savings rate; success stories and model programs on retirement savings; public outreach and media efforts; ideas for creating new partnerships among public and private sector organizations; and consolidation of efforts. In addition, CUNA indicates that we would welcome the opportunity to participate in the Summit on behalf of our credit union and League members.

Gulf Opportunity Pilot Loan Program
(December 14, 2005)
CUNA commends SBA for its efforts to aid in the recovery efforts in the aftermath of Hurricanes Katrina and Rita. Under the GO Loan Pilot, the SBA will provide its full guaranty and streamlined centralized loan processing to qualified lending partners that agree to make expedited SBA 7(a) loans available to small businesses located in the disaster areas. However, CUNA noted that it is difficult to locate information on the SBA website about how credit unions and other financial institution 7(a) lenders not currently authorized as SBAExpress lenders can qualify and apply to participate in the GO Loan Pilot. Therefore, we urge the SBA to ensure that such information is posted in a conspicuous spot on its GO Loan Pilot web page. CUNA believes that as a result of compliance with NCUA’s MBL rule, credit unions would also meet SBA’s requirements for the GO Loan Pilot, but it would be helpful for the SBA to provide guidance about this issue that is readily available on the GO Loan Pilot home page.

Real Estate Settlement Procedures Act (RESPA)
(September 1, 2005)
CUNA submits written comment to the Department of Housing and Urban Development on a number of issues regarding HUD's recent renewed efforts to reform the Real Estate Settlement Procedures Act. They address issues that were discussed at a July 14, 2005 meeting with HUD that included CUNA and others. These comments oppose significant changes to the Good Faith Estimate, as contemplated by HUD, and also generally oppose regulatory efforts to facilitate the packaging of mortgage settlement costs.

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