CUNA Regulatory Comment Call
March 3, 2000
Request for Comments on Ways To Reduce E-Banking Barriers
(A MAJOR PROPOSAL)
EXECUTIVE SUMMARY
- The Office of the Comptroller of the Currency (OCC) requests public comments concerning its policies or regulations that need to be adapted in order to facilitate national banks' use of electronic banking and other new technologies. CUNA plans to use this comment request as a catalyst for the Payments System Subcommittee to develop a white paper on electronic banking; assist NCUA in forming regulations and policies conducive to electronic banking; and ensure that credit unions and banks are treated commensurately.
- These comments are due to OCC by April 3, 2000. Please submit comments to CUNA by March 29, 2000. Comments may be sent to mdunn@cuna.com or mprofit@cuna.com or by fax at 202/371-8240.
QUESTIONS
The OCC authorizes national banks to conduct through electronic means or facilities any activity that they are otherwise authorized to conduct and permits banks to sell excess electronic capacities acquired or developed in good faith for banking purposes. Do NCUA regulations go far enough?
The Comptroller's Handbook, Other Income Producing Activities, Internet Banking (Oct. 1999) (Handbook) describes procedures for examining Internet banking activities in national banks. It also provides guidance to national banks that are conducting, or considering, Internet banking activities by outlining business and technical issues associated with offering banking products and services through the Internet. This Handbook explains previous OCC guidance on electronic banking issues, including certification authority systems, technology risk management, retail personal computer banking, Web privacy statements, cyber terrorism, reporting computer-related crime, and consumer compliance. Should NCUA develop a handbook on electronic banking similar to the OCC's handbook? If so, what categories listed above should the Handbook include?
Please place a check in the box by each activity that OCC has approved that you believe the NCUA should specifically approve for credit unions. The NCUA should:
- Allow credit unions to offer Internet banking services
- Charter credit unions to deliver products and services to customers primarily through electronic means
- Permit credit unions to host commercially enabled Web sites for small retailers
- Provide an opinion letter that a credit union may offer a credit union hosted set of Web pages with a collection of links to third party Web sites organized according to product types so that credit union members can shop for a range of financial and non-financial products and services via these links to third party vendors;
- Permit a CUSO to provide links to merchant processing-related third party vendors on its Internet site
- Authorize a credit union to operate a Web site providing consumers and dealers with detailed information on used cars offered by third party sellers that meet purchaser preferences
- Permit a credit union to provide full Internet access service in connection with its Internet banking services and, incidental to that, allow the credit union to sell good faith excess capacity in access service to persons who are not Internet banking customers.
- State that electronic bill presentment is part of the business of banking
- Allow CUSOs to invest in an electronic interbank switch to support electronic bill presentment over the Internet
- Conclude that the creation, sale and redemption of electronic stored value in exchange for dollars is part of the business of banking
- Opine that electronic data interchange services are part of or incidental to the business of banking
- Find that a credit union may dispense alternate media, such as prepaid phone cards, public transportation system tickets and promotional and advertising materials, from ATM machines
- Allow a credit union to act as a certification authority to enable subscribers to generate digital signatures that verify the identity of a sender of an electronic messages
- Permit credit unions to invest in a multiple CUSO, credit union or bank venture to establish an entity that will support a multiple owner certification authority system
- Approve a credit union CUSO that sells computer network services and related hardware to other financial institutions as a correspondent banking service
If you believe that making some of these activities permissible should be a priority, please specify which ones are more important and why. If you do not believe that any of these activities should be approved for credit unions only, please specify why.
Should NCUA modify specific regulations because they impede the use of developing technology? Which ones should be modified?
Are there areas where conducting electronic banking activities could particularly benefit from a single set of standards that can be applied uniformly on a nationwide basis?
Are there areas where credit unions would benefit from additional clarification in our rules or in other guidance on the risks associated with electronic banking activities? For example, are credit unions experiencing problems related to the permissibility, validity, and enforceability of electronic transactions? What can the NCUA do to provide greater legal certainty in these or other areas?
Are there specific areas in which regulatory changes are needed to enhance consumer acceptance of, confidence in, or access to, electronic banking?
Many regulations and laws applicable to credit unions reference where the credit union is located. Do new developments in technology require the NCUA to address how "location" applies in the context of activities conducted via the Internet? Specifically, is the determination of "location" for purposes of the statutes an impediment to credit unions conducting all or part of their operations on the Internet? If so, should NCUA further clarify its regulations on this issue? Is there a uniform approach to "location" that works for all the relevant statutes or should NCUA address each statute separately?
Under some marketing arrangements, the credit union is the dominant brand and refers its customers to nonbank third parties for additional products and services not provided by the credit union directly. In other cases, the non-bank is the dominant brand and it uses a credit union to provide its customers with access to credit union services while minimizing the credit union's brand. A credit union must maintain a separate corporate existence from a CUSO. These conditions, which are currently set forth in the NCUA's regulation governing the corporate separateness of CUSOs, are intended to minimize customer confusion. Should NCUA issue similar regulations for similar electronic marketing arrangements? Please address whether any or all of the supervisory conditions set forth on corporate separateness are relevant in the electronic banking context and whether other conditions intended to minimize customer confusion should apply to these arrangements.
Specifically, are existing regulations sufficient to permit members of technology-based credit unions to make deposits in the credit union by cash or share draft in an efficient and expeditions manner?
Are there types of transactions that credit unions are considering where geographical restrictions create impediments or that could benefit from the development of alternative delivery systems?
The United States General Accounting Office (GAO) study recommends that regulators identify what institutions offer which Internet banking services. This study notes that Office of Thrift Supervision (OTS) requires that institutions notify it in advance of plans to establish a transactional Web site. OTS keeps this information in a centralized electronic database. Federal Deposit Insurance Corporation (FDIC) gathers information on institutions' plans through its examiners and not the institutions. The FDIC collects this data in a central database. Should NCUA require a credit union to notify it beforehand of its plans or should the NCUA gather this information through its examiners?
The GAO study also found that FDIC and OTS expected their examiners to review an institution's Internet banking activities during the first examination of the institution after it has gone on-line. The Federal Reserve and the OCC, in contrast, did not require that an institution's new Internet banking activities be examined. They reasoned that the disproportionately small size of these assets did not make them a safety or soundness issue for the institution. Should NCUA examine a credit union as soon as it goes online or not?
Should CUNA send a reply to the OCC regarding any possible changes? What should the comment state?
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Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com |
