2006 CUNA Comment Letters

General Maturity Limit and Providing Certain Services to Nonmembers
December 23, 2006
CUNA supports the rule implementing the following two provisions of the Reg Relief Act: (1) An increase in the general maturity for loan limits from 12 to 15 years and (2) authority to provide certain, limited financial services to nonmembers within their field of membership, which include: (a) selling negotiable checks including travelers checks, money orders, and other similar money transfer instruments; (b) cashing checks and money orders; and (c) receiving international and domestic electronic fund transfers. However, to address the number of regulatory and operational issues regarding providing services to nonmembers raised by the rule, CUNA would like to help facilitate a working group to include a small number of FCU operational staff.

Proposed Illustrations for Nontraditional Loans
December 4, 2006
CUNA urges NCUA and the other financial institution regulators to contine to emphasize that the use of these illustrations, or disclosures, are voluntary and also encourages the regulators to test with consumers both these disclosures and those developed by credit unions and other financial institutions. CUNA also suggest that changes be made to these disclosures to clearly show how payments for nontraditional loans may increase substantially over time, and offers a number of other suggested revisions.

Repurchase Investments
September 25, 2006
CUNA supports this proposal that will allow federal credit unions to invest in mortgage note transactions involving nonmembers, although we do express concerns with certain of the proposed safety and soundness requirements.

Identify Theft Red-Flags Guidelines and Rules
September 18, 2006
In our comment letter in response to the agencies proposal regarding the identity theft "red-flag" guidelines, which requires financial institutions to implement identity theft programs, CUNA stresses that the issue of security breaches needs to be addressed in order to alleviate identity theft. CUNA expresses concern regarding the duplication of these rules with those issued under the USA PATRIOT Act, as well as the cumulative burden of all the rules issued under the Fair and Accurate Credit Transactions Act. CUNA also requests clarification that credit unions are not required to use all the red-flags in their individual identity theft programs and clarification with regard to credit unions’ relationship with service providers. CUNA also requests that: 1) no additional obligations be imposed on the board of directors with regard to these rules; 2) the “clear and conspicuous” requirement be deleted with regard to address change notices that are sent to consumers; and 3) mandatory compliance not be required until at least eighteen months after the final rules are issued. In addition, CUNA offers a number of specific suggestions with regard to the red-flags. The proposal from the National Credit Union Administration will apply to federally-chartered credit unions while the proposal from the Federal Trade Commission will apply to state-chartered credit unions.

Proposed Changes to NCUA’s Rules On Conversions to Mutual Savings Banks
August 28, 2006
CUNA comments on NCUA's proposed changes to its rules on the conversion of federally insured credit unions to mutual savings banks. CUNA generally supports the proposal with recommendations for change. CUNA urges NCUA to define the "fiduciary duty"of a credit union's board as it relates to protecting members' interests in the conversion process. As bylaw provisions for special meetings and other corporate governance issues relating to conversion are relevant to NCUA's rule change, CUNA also urges NCUA to reverse its decision not to enforce bylaws for federal credit unions.

NCUA Filing Requirements for SARs
August 28, 2006
CUNA supports NCUA’s proposal to include fundamental SAR filing guidance directly in the agency’s regulation. This may make it easier for some credit union staff to look up that information. However, we believe that NCUA should clarify several aspects of the provision on director notification in order to eliminate potential confusion. Given the number of issues that come up from time to time relating to SARs, we urge the agency to add an appendix to the rule enumerating reference materials that credit unions may find useful in answering some of their questions.

Share Insurance Official Sign (2006)
August 11, 2006
In our comment letter letter to NCUA regarding the proposal for the share insurance official sign, CUNA suggests changes in the wording of the share insurance official sign to clarify the new limits for certain retirement accounts and to improve readability. CUNA also requests clarification as to whether the time period in which credit unions must display the new official sign at each station and window at the credit union and on the website would also apply to other materials that include the sign, and outlines the hardships posed by the proposed 60-day time period for compliance.

NCUA Annual Regulatory Review (2006)
August 1, 2006
Under the agency’s policy, NCUA reevaluates one-third of its current rules each year and all rules are reviewed every three years. CUNA comments on the following regulations up for review this year: field of membership, prompt corrective action (PCA); the definitions section of NCUA's rules; corporate credit unions; low-income credit unions; loans to members and lines of credit to members; and investment and deposit activities. In addition, CUNA indicates it would be beneficial for NCUA to provide a yearly summary of the rules it has reviewed, comments that were provided, and what the agency plans to do to address recommendations that are obtained through the Regulatory Review process.

Share Insurance
May 22, 2006
CUNA generally supports NCUA’s proposal to provide pass-through insurance coverage to each participant of an employee benefit plan. We believe there should be a meaningful membership connection with plan participants, such as requiring the plan trustee or employer sponsoring the plan to be a member and nonmember plan participants to be eligible for membership.

Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies
May 22, 2006
CUNA agrees that furnishers of the consumer information should develop policies and procedures to ensure the accuracy and integrity of the information. However, these rules required under the FACT Act should not dictate the specific policies and procedures that furnishers should adopt. They should instead outline general expectations as to what should be included in these policies and procedures.

Supervisory Commitee Audits
April 24, 2006
CUNA does not agree with an attestation requirement for credit unions. CUNA argues that a regulatory approach that allows credit unions to exercise their business judgment and voluntarily obtain attestations is preferable to new, unwarranted regulation that mandates such action. CUNA is not aware of, and NCUA has not cited, any material incidents at credit unions necessitating such a change in its regulation. With an attestation, there is duplication of effort, which means increased costs for the credit union and a corresponding lower level of benefits for the members. If NCUA decides to institute an attestation requirement, CUNA believes the minimum asset threshold for requiring an attestation should be set at $1 billion, which is the threshold for banks. The “audit” options for small credit unions should not be eliminated because they generally are cost effective and provide needed information without having to incur the expense of obtaining a certified public accountant (CPA) audit.

SAR Form Revisions
April 18, 2006
In general, CUNA is supportive of the proposed revisions and reformatting to make the SAR form more understandable and user-friendly. CUNA urges the regulators to: provide more detailed guidance as what constitutes an “amended or corrected” SAR vs. an “updated” SAR; make the instructions in the Narrative Section (Part V) more orderly; and retain a definition of “computer intrusion” for purposes of SAR reporting in the General Instructions section. In addition, CUNA offers several suggestions to reduce the burden of SAR filing, including encouraging the regulators to issue additional guidance on when to file a SAR to lessen the number of “defensive" SAR filings.

Proposed Rule on Service to Underserved Areas
March 28, 2006
CUNA urges NCUA to include provisions in the final rule that will permit: (1) non-multiple group credit unions to continue serving existing underserved areas; (2) non-multiple group credit unions to add new members to existing underserved areas; (3) existing facilities within a reasonable proximity of an underserved areas to continue serving those areas; and (4) any type of facility that meets NCUA’s requirements to be utilized to serve underserved areas. In addition, CUNA urges NCUA to work with Congress on an expedited basis to pursue legislative amendments such as those suggested in Appendix B of the letter that will leave no doubt that all federal credit unions may add underserved areas.
[Appendix A - Underserved Area Survey Summary Results (March 27, 2006)]
[Appendix B - Federal Credit union Act Amendments]

Interagency Guidance on Nontraditional Loans
(March 27, 2006)
In our comment letter to NCUA, CUNA generally supports the proposed guidance for nontraditional mortgages and the need for borrowers to show they have the ability to make more than the minimum payments on these types of loans, as well as the need for separate disclosures to ensure that borrowers understand these complex loans. However, the guidance should be defined to only apply to first lien interest-only mortgages or mortgages with negative amortization features, such as those commonly referred to as “Option ARM” loans, and should not include other types of interest-only loans, such as bridge loans and home equity lines of credit.

NCUA's Sixth EGRPRA Notice
(March 22, 2006)
CUNA provides comments to the National Credit Union Administration’s sixth request for comments to identify outdated, unnecessary or burdensome regulatory requirements imposed on federally insured credit unions. The regulatory categories that are the subject of this latest request include the rules addressing net worth and prompt corrective action for natural person credit unions, secondary capital for low-income credit unions and corporate credit unions.

Data Collection Pilot Program
(February 28, 2006)
CUNA submits comments to NCUA on the data collection pilot program involving 481 federal credit unions. The purpose of the pilot is to provide information about the types of services federal credit unions provide and the economic status and financial needs of the members receiving those services. Some credit union representatives have raised the concern that the data collection is tantamount to Community Reinvestment Act requirements for credit unions. Such statements do not reflect an accurate understanding of CRA. CUNA does not support any efforts to impose federal CRA standards on credit unions, which would be unwarranted, unnecessary and inappropriate.

Specialized Lending Activities
(February 21, 2006)
CUNA recommends that NCUA consider several changes and clarifications to the proposed rule to regulate purchases by federally-insured credit unions of indirect vehicle loans serviced by third-parties. The rule will limit the aggregate amount of these loans serviced by any single third-party to 50% of a credit union’s net worth during the first 30 months of a new third-party servicing relationship and to 100% of the credit union’s net worth after the initial 30-month period. The rule also includes provisions allowing credit unions to request a waiver to exceed these aggregate limits, as well as a “grandfather” provision so credit unions will not be required to divest these types of loans if they currently exceed the limitations.

Truth In Savings - Overdraft Privilege Plans.
(February 3, 2006)
CUNA generally supports the changes to the Truth in Savings Act rules that will require additional disclosures for overdraft privilege plans, but requests a delay in the mandatory compliance date so that credit unions, and their vendors, will have sufficient time to prepare for these new requirements.

Regulation E Interim Final Rule
September 29, 2006
CUNA supports the Regulation E interim final rule, especially the clarification that the financial institution is not required to provide notice or obtain authorization from the consumer regarding the fee assessed for insufficient or uncollected funds, unless the financial institution is the payee.

Wire Funds Transfers
(August 21, 2006)
CUNA responds to a request for comments on the benefits and burdens of lowering or eliminating the threshold in the recordkeeping rule for wire funds transfers. As outlined in the letter, CUNA would not necessarily oppose the lowering of elimination of the threshold, as long as it is shown that the additional information generated would be useful to the regulators and law enforcement and will not lead to additional regulatory burdens in this area.

Home Equity Lending Hearings
(August 15, 2006)
CUNA submits written comments in response to a series of Federal Reserve Board hearings that address home equity lending. In the letter, CUNA supports additional disclosures for certain types of complex, nontraditional loans. CUNA would also support additional laws that address predatory lending to the extent they do not adversely affect legitimate subprime lending. CUNA also emphasizes the need for additional financial education as a means to combat predatory lending and highlights credit unions' efforts in these financial education efforts.

Reg E Interim Rule on Payroll Card Accounts
(March 10, 2006)
CUNA provides comments to the Federal Reserve Board’s interim final rule on the modifications to its proposed rule on the coverage of payroll card accounts under Regulation E. CUNA believes payroll card products can serve as substitutes for traditional accounts at financial institutions and can benefit those consumers who are currently without financial services and support the Board’s modification of proposed rule by providing alternative means to provide periodic statement information to consumers.

Modifications to the NACHA Operating Rules Related to Revisions to Regulation E
July 31, 2006
CUNA supports NACHA’s proposal to modify its Operating Rules so that they are consistent with the mandatory changes required by Regulation E. CUNA supports NACHA’s proposed modifications to the authorization requirements for point of purchase (POP) and Accounts Receivable (ARC) entries to incorporate the Regulation E safe harbor language for the required notice. CUNA supports these modifications but notes that the likelihood of duplicate transactions may increase and research may take longer since checks and ACH transactions are cleared through separate payment systems.

Customer Service Telephone Number
July 31, 2006
CUNA comments on NACHA’s proposal to re-define the ACH record to accommodate a customer service telephone number (CSTN). CUNA supports this proposal and believes using an originator’s telephone number rather than an agency’s telephone number or third party service provider’s number would better serve RDFI’s managing risk. The second phase of NACHA’s proposal – to include the originator’s CSTN in the RDFI’s periodic statement – would be beneficial to credit union members, but we encourage NACHA to make the inclusion of the telephone number on the receiver’s periodic statements optional.

Back Office Conversions
(January 31, 2006)
CUNA supports allowing the back office conversion of checks in amounts of $25,000.00 or less and without Auxiliary On-Us fields, which identifies corporate or business checks. We believe this will be consistent with the new rules governing the conversion of business checks and will make it easier for merchants to implement.

Identify Theft Red-Flags Guidelines and Rules
September 18, 2006
In our comment letter in response to the agencies proposal regarding the identity theft "red-flag" guidelines, which requires financial institutions to implement identity theft programs, CUNA stresses that the issue of security breaches needs to be addressed in order to alleviate identity theft. CUNA expresses concern regarding the duplication of these rules with those issued under the USA PATRIOT Act, as well as the cumulative burden of all the rules issued under the Fair and Accurate Credit Transactions Act. CUNA also requests clarification that credit unions are not required to use all the red-flags in their individual identity theft programs and clarification with regard to credit unions’ relationship with service providers. CUNA also requests that: 1) no additional obligations be imposed on the board of directors with regard to these rules; 2) the “clear and conspicuous” requirement be deleted with regard to address change notices that are sent to consumers; and 3) mandatory compliance not be required until at least eighteen months after the final rules are issued. In addition, CUNA offers a number of specific suggestions with regard to the red-flags. The proposal from the National Credit Union Administration will apply to federally-chartered credit unions while the proposal from the Federal Trade Commission will apply to state-chartered credit unions.

Revisions to the SAR Form (Second Round)
(July 19, 2006)
CUNA generally supports the draft SAR revisions, as they should make the form more understandable and user-friendly for institution staff. We strongly urge the regulators to issue additional guidance on when to file a SAR to lessen the number of “defensive” SAR filings as well as to reconsider their decision to maintain existing reporting thresholds and filing deadlines. We request that the regulators publish the guidance on joint SAR filing for public comment before it is issued in final form. CUNA makes some specific recommendations to improve the form, including providing in the Instructions the FinCEN Financial Institutions Helpline to facilitate credit unions reporting suspected terrorist-related activity. While the agencies have increased the estimated time to complete a SAR, CUNA believes the estimate remains too low.

FinCEN Survey on Reporting Cross Border Electronic Transfer of Funds
(April 14, 2006)
In our comment letter to FinCEN, CUNA supports efforts to combat money laundering and terrorist financing and commends FinCEN for seeking input from credit unions and other financial institutions. However, CUNA believes that mandating reporting of cross border transfers may be problamatic for smaller institutions. Cross border and domestic transfer information is typically stored in the account holder's file, which makes segregating cross border wires difficult without new procedures and data processing enhancements.

OFAC Economic Sanctions Enforcement Procedures for Financial Institutions
(March 13, 2006)
CUNA generally supports OFAC's separate enforcement process for credit unions and other financial institutions, which is designed to take into consideration the role of such institutions, the nature of the transactions in which they engage, and the fact that they are heavily regulated. CUNA supports OFAC’s approach to take into consideration in its enforcement procedures that the OFAC compliance program at each institution should be tailored to its unique circumstances. Under the rule, OFAC generally will review violations or suspected violations by a particular institution over a period of time, rather than evaluating each apparent violation independently. CUNA expresses some concerns, including the definition of "voluntary" in the context of disclosures to OFAC. CUNA requests that OFAC provide institutions more time to respond to any charges OFAC brings after its review and suggests that OFAC review/assess the guidelines after one year and allow institutions and regulators the opportunity to provide feedback for improvements.

Proposed Changes to Individual Taxpayer Identification Number
(March 9, 2006)
CUNA comments on whether the IRS should no longer issue individual taxpayer identification numbers (ITIN) to nonresident aliens (NRA) whose only purpose for obtaining an ITIN is to open an interest bearing deposit or share account. CUNA does not support the elimination of ITINs. The unintended consequence of this proposal will be that nonresident aliens will have fewer financial services available to them. An ITIN provides consistency and uniformity for institutions that accept them when an account is opened, making the identification process more reliable. Financial institutions would no longer be able to use ITINs to retrieve financial histories from credit bureaus. The elimination of ITINs for new accounts will require expensive data processing changes to accommodate various identification number formats.

Junk Fax Regulation
(January 18, 2006)
CUNA urges the FCC to employ its authority under the Junk Fax Prevention Act to allow professional or trade associations that are tax-exempt nonprofit organizations to send unsolicited fax advertisements to the members in furtherance of the association’s tax-exempt purpose that do not contain the “opt-out” notice that would otherwise be required on the first page of every fax.

SBA Lender Examination and Review Fees
October 5, 2006
CUNA opposes the imposition on 7(a) lenders of exam and review fees by the SBA. Lenders participating in the SBA program already pay sufficient fees through the guarantee and servicing fees assessed by the agency. This new fee, combined with current SBA fees, would dampen enthusiasm for participation in the SBA’s program. Ultimately, the fee could hinder the goal of the 7(a) program to provide loans to small businesses that would otherwise not be able to obtain a loan. CUNA also argues that the proposed risk-based methodology, based on the overall size of the lender’s portfolio, seems arbitrary. NCUA already scrutinizes the guaranteed loan programs when examiners conduct reviews of credit unions’ member business loan (MBL) programs. SBA should rely on those exams, working cooperatively with the NCUA.

SBA Lender Risk Rating System
(July 13, 2006)
CUNA appreciates SBA’s work to formulate a methodology for a lender risk rating system as part of its efforts to continuously enhance the agency’s 7(a) and 504 guaranteed loan programs. CUNA encourages the SBA to spell out in more detail how the rating components and peer comparisons are actually factored together to obtain the composite rating. It is important to provide for flexibility for a lender’s composite rating to be adjusted (overridden) in appropriate situations, but the agency should make the process as objective as possible so there is no appearance of impropriety or favoritism. If SBA decides to proceed with implementation of a lender risk rating system, CUNA recommends a testing period prior to roll out so the agency can ascertain whether the system reflects what it is intended to reflect and make adjustments as necessary.

Federal Home Loan Bank Rating System
(October 23, 2006)
In our letter to the Federal Housing Finance Board in response to a new exam rating system for Federal Home Loan Banks, CUNA supports a strong examination system while urging that the Board consult with all the affected parties before the system is finalized.

Excess Stock Restrictions and Retained Earnings Requirement for the Federal Home Loan Banks
(June 26, 2006)
CUNA urges the Federal Housing Finance Board to withdraw the proposed rule that will impose additional new requirements on Federal Home Loan Banks (FHLBs), including new retained earnings requirements that may possibly result in reduced dividends for credit unions that are members of the FHLBs. CUNA recognizes that the intent of the proposal is to enhance safety and soundness of the FHLBs, which CUNA generally supports, but believes that more input from the industry is needed before proposing these or other specific requirements that may result in dividend reductions.

Federal Home Loan Bank Director Elections
(June 1, 2006)
CUNA generally supports the proposed rule that will allow the Federal Home Loan Banks (Banks) to provide more information about the experience and skills of directors as part of the election process, as long as the Bank members have an opportunity to provide input in this process. CUNA would also like the opportunity to work with the Federal Housing Finance Board to ensure that the board of directors of each Bank includes at least a reasonable number of credit union representatives.

Private Company Financial Reporting
(August 18, 2006)
CUNA is generally supportive of the joint FASB-AICPA proposal to: (1) implement enhancements to FASB’s current due processes in order to ensure that the perspectives and needs of private companies are considered when accounting rules are established and (2) form a new committee that would provide recommendations to help FASB determine whether there should be differences in prospective and existing accounting standards for private companies. CUNA does not believe a new, separate set of GAAP standards for private companies is needed. We encourage FASB to conduct the assessment with an eye toward decreasing the compliance burden for private companies where possible.

Automatic Enrollment in 401(k) Plans
(November 13, 2006)
CUNA supports the proposal because generally automatic enrollment programs are beneficial to both the employee and employer. They increase participation and can help the employer meet the regulatory requirements associated with a 401(k) program. The requirements of the QDIA (qualified default investment alternative) -- safe harbor for sponsors who must invest participant accounts when the participant has failed to provide any investment instructions -- as defined in the proposal do not appear to impose unreasonable problems or costs that would be especially burdensome. CUNA makes several suggestions, including modifying the rule to grandfather participants whose accounts are invested under prior default provisions.

Standards for Attestation Engagements
(May 19, 2006)
This proposal is of interest to CUNA and credit unions due to NCUA’s recent Advance Notice of Proposed Rulemaking (ANPR) on Supervisory Committee Audits. If NCUA ultimately determines that attestations should be required, the applicable guidance for CPAs conducting those attestations would likely be AT 501. As CUNA argued in comments to NCUA, CUNA strongly feels that credit unions should be able to exercise their sound business judgment and voluntarily obtain an attestation if they deem it appropriate rather than having attestations mandated by regulation. If NCUA should ultimately decide to implement an attestation requirement for credit unions and that those attestations should adhere to AT 501 standards, CUNA is concerned that AT 501 would not be sufficiently tailored to the specific needs and circumstances of credit unions and other non-public companies.

Bank and Thrift Agency Guidance on Commercial Real Estate Lending
(April 14, 2006)
CUNA supports the bank and thrift regulators' recent proposed guidance that addresses concentrations in real estate commercial lending as a reasonable measure to ensure against problems in the bank and thrift industries that may result from such lending.

Application and Criteria to Serve as Financial Counselors and Instructors
September 5, 2006
In our comment letter to the Executive Office for United States Trustees regarding the recent proposal to implement the bankruptcy law provisions on bankruptcy counseling and education, CUNA acknowledged that credit unions will not be permitted to provide the required pre-bankruptcy counseling if the member has an outstanding loan with the credit union out of concern that there could be a conflict of interest. CUNA outlines one possibility to resolve this conflict, which would be the formation of a nonprofit CUSO. Even if this is not acceptable, credit unions will be able to provide the required pre-discharge education, if they meet the required criteria, as well as other general counseling and education services that they currently provide.

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