NCUA Office of General Counselís 2013 Regulation Review 

The NCUA reviews all of its rules, reviewing one-third on a rotating basis every three years. On Aug. 5, MCUL & Affiliates provided several comments to the NCUA on suggestions for improvements on those regulations reviewed in 2013.

Specifically, MCUL provided suggestions for improvements on Credit Union Service Organizations, Fidelity Bond and Insurance Coverage for Federal Credit Unions, Leasing, Privacy of Consumer Financial Information, Fair Credit Reporting, Incidental Powers, Appraisals, Member Business Lending, Accuracy of Advertising and Notice of Insured Status, Requirements for Insurance and National Credit Union Share Insurance Fund. The MCUL’s comment letter can be found here.

The NCUA’s Office of General Counsel has reviewed all of the comments received and published their review of the regulations and recommendations on each rule to the NCUA, which can be found here.

MCUL made many suggestions that were referenced in the general counsel’s recommendations, which are outlined below.

Part 740 – Accuracy of Advertising and Notice of Insured Status
MCUL suggested that with the prevalence of mobile and text banking that the NCUA revise its regulations to address the use of the official statements in these contexts. The league also suggested revising the regulation to provide consistency with the NCUA Letter to Credit Unions regarding web linking and credit unions hard coding the NCUA logo on their website, without realizing they cannot include this information on pages advertising non-deposit investment products. The existing regulation does not address this. The Office of General Counsel concurred, stating “We believe the commenters have raised some practical concerns about the current rule. We recommend the board consider amending the rule to modernize it in light of the growing use of quickly advancing technology and to meet consumer needs.”

Part 717 – Fair Credit Reporting
MCUL suggested the update to Part 717 to identify the transfer of rulemaking authority for the Fair Credit Reporting Act to the CFPB to avoid confusion. The Office of General Counsel also agreed and recommended that update.

Part 723 – Member Business Loans
In its comment letter, MCUL expressed concern over the personal guarantee requirements identified in an NCUA Supervisor Letter. The letter states: “… There is no limitation to the guarantee in rule; thus, the full, joint and several personal guarantees are required from all of the principals in the borrowing entity. Any partial or limited guarantee or a guarantee that does not include a controlling interest requires a waiver from the NCUA.”

Michigan credit unions were concerned about the potential loss of loans due to these requirements and subsequently, MCUL urged an approach and an interpretation that is consistent with commercial lending standards and that will not prevent credit unions from making safe loans to credit-worthy members. MCUL also expressed its concerns over the waiver application process and the length of time associated with those requests.

In response to MCUL’s letter and other commenters, the Office of General Counsel stated that the MBL rule should be “revisited and updated to reflect the current business climate and to address certain other pressing issues facing credit unions.” It went on to say it would look to modernize the MBL rule and provide reasonable regulatory relief. It recommended exempting well-capitalized credit unions with sufficiently high CAMEL ratings over a stated period of time from the MBL rule’s personal guarantee requirement.

Penalties for Late Call Report Submissions
The NCUA issued a letter to all federally insured credit unions – 14-CU-03 – addressing late filings of quarterly call report and profile data and the NCUA’s exercise of their authority to impose civil money penalties on credit unions.  In their letter, the NCUA stated that late filing impacts their ability to “conduct effective off-site supervision and delays the release of quarterly industry data to the general public.” 

NCUA will assess penalties to tardy federally insured credit unions each day a required report is late or contains inaccurate information. The amount will vary based on the reason for the delay or the types of inaccuracies. According to the Federal Credit Union Act, a maximum of $2,000 per day may be assessed if the late or false/misleading filing is unintentional and the credit union has reasonable procedures in place to avoid those errors; up to $20,000 per day if the late or false/misleading filing is not unintentional; or up to $1 million per day if the credit union knowingly or with reckless disregard for accuracy submits a false or misleading report and fails to correct it. The NCUA stated that funds collected through civil money penalties will be sent to the U.S. Treasury, not retained for NCUA’s use. 

The NCUA will consider mitigating factors before assessing penalties, such as the financial resources and good faith of the credit union, the gravity of the violation, the history of previous violations and other matters that lead to the late or false/misleading submissions such as natural disasters or incapacitation of key employees, etc.

Civil money penalties will be imposed against late filers beginning with the first-quarter 2014 Call Report and Profile reporting cycle, submissions of which are due April 25. The NCUA will make public the list of credit unions that are assessed civil money penalties.

Resources are available to credit unions on the NCUA’s website, located here.

The call report deadlines are also listed below for reference.

Call report deadlines are as follows: 2013 Q4 – Jan. 24; 2014 Q1 – April 25; 2014 Q2 – July 25, and 2014 Q3 – Oct. 24. 

Submissions to Monitor may be emailed. Bryan Laviolette is the editor of Monitor. Contact him by email or call (800) 262-6285, ext. 233. The newsletter of the Michigan Credit Union League is published Monday mornings or Tuesday mornings when Monday is a holiday. There is no Monitor the week after Christmas and the week after the Annual Convention and Exposition. The MCUL reserves the right to edit submissions for clarity and space.
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