NCUA & CFPB Update:

What You Need to Know, Now

NAFCU’s Regulatory Affairs Team

May 7, 2014: 2:00pm-3:30pm

NAFCU

Webcast Presented by:

• Michael J. Coleman, Esq., NCCO

Director of Regulatory Affairs

• Alicia Nealon, Esq.

Regulatory Affairs Counsel

• PJ Hoffman, Esq.

Regulatory Affairs Counsel

Agenda

• NCUA

– Risk Based Capital

– Stress Testing and Capital Planning

– Associational Common Bonds

– Voluntary Liquidations

– Exam Sites

– Upcoming Issues

Agenda continued

• CFPB

– Home Mortgage Disclosure Act (HMDA)

– Remittances

– Prepaid Cards

– Payday Loans

– Overdraft

– E-closings

– Amendments to Regulation Z

– Privacy

NCUA

Risk-Based Capital • January 23, 2014- NCUA issued a proposed rule regarding risk-

based capital. – This rule would apply to credit unions with over $50 million in total

assets.

• The proposal would replace the current RBNW method with a new risk-based capital ratio method – New risk-based capital ratio = % of a credit union’s net worth available

to cover losses, divided by the credit union’s defined risk-weighted asset base

• Comments due to NCUA by May 28, 2014

NCUA

Risk-Based Capital • Areas of Concerns

– Risk Weights

– Implementation Timeframe

– Individual Minimum Capital Requirement

NCUA

Risk-Based Capital • Resources

– Talking Points

– Regulatory Alert 14-EA-03

– NAFCU Compliance Blog Posts: Jan. 31, Feb. 21, Feb. 28, Mar. 14, Apr. 4

– NAFCU’s risk-based net-worth calculator

– NAFCU’s Capital Reform Issue Page

• NCUA’s Listening Sessions – June 26 in Los Angeles, CA; July 10 in Chicago, IL; and July

17 in Alexandria, VA

NCUA

Stress Testing and Capital Planning • April 24, 2014 - NCUA approved final rule on stress testing and

capital planning.

• Requires annual stress testing and submission of capital plans for credit unions with more than $10 billion in assets.

• Differences between proposed and final rule

NCUA

Associational Common Bond • April 24, 2014- NCUA propose to amend the associational

common bond provisions of its Chartering and Field of Membership manual.

• Amendment seeks to: – Establish a threshold requirement that an association not be formed

primarily for the purpose of expanding credit union membership

– Expand the “totality of the circumstances” test by adding an eighth factor regarding corporate separateness

– Grant automatic qualification to certain categories of groups

NCUA

Voluntary Liquidation • February 20, 2014- NCUA proposed rule to clarify existing

requirements and provide more flexibility in implementing voluntary liquidations.

• Proposal seeks to: – Allow liquidating FCUs to publish creditor notice(s)in electronic media

– Increase the asset-size threshold for requiring multiple creditor notices

– Require that preliminary partial distributions to members not exceed the insured limit for any member share account

– Specify when liquidating FCUs must determine member share balances for the purposes of distributions

– Permit liquidating FCUs to distribute member share payouts either by wire or other electronic means or by mail or personal delivery

NCUA

Exam Sites • December 12, 2013- NCUA proposed a rule regarding

regulatory requirements for contacts with FCUs

• Contact between NCUA staff and FCU required to occur in FCU’s business office or other public locations.

• Requires FCU to maintain an email address, telephone number, or both, exclusively for credit unions business purposes.

NCUA

McWatters • Mark McWatters nominated by President Obama to succeed

Michael Fryzel to serve in the Republican spot on NCUA Board.

• April 29, 2014- McWatters was approved by Senate Banking Committee.

• Next his nomination will be addressed in the Senate.

NCUA

Member Business Lending • A part of NAFCU’s “Dirty Dozen” campaign.

• NAFCU has met with NCUA to discuss: – Changes to waiver requirements and process,

– Expanding opportunities to obtain waivers,

– Removing five year requirement to obtain personal guarantee waiver,

– NCUA’s use of its authority granted in Federal Credit Union Act to provide an exception to limitations on MBL cap.

• NAFCU expects the NCUA Board to review and potentially amend its MBL regulation in 2014.

NCUA

Bylaws • The Federal Credit Union Bylaws were last updated in 2007.

• NAFCU expects the NCUA Board to issue an updated version of the Federal Credit Union Bylaws in 2014.

NCUA

Marijuana Accounts • February 2014 - Financial Crimes Enforcement Network

(FinCEN) released guidance for serving marijuana businesses.

• Credit unions are subject to same Bank Secrecy Act rules when handling monetary transactions for a marijuana business as they have to follow when dealing with any other business.

• NCUA has not weighed in yet, but NCUA staff have advised that the agency is working with other baking regulators to issue a joint (HA!) statement on marijuana accounts

NCUA

Supervisory Focus • January 2014 - NCUA released its Supervisory Focus

• Noted areas of risk:

– Interest Rate Risk,

– Cybersecurity Threats,

– Money Services Business and Private Student Lending

• Compliance

– Loan Participation Rule

– Credit Union Service Organization Rule

– CFPB’s Ability to Repay

– Qualified Mortgage Standards

• Examiners have flexibility to “Narrow or expand the scope of an exam”

CFPB

Home Mortgage Disclosure Act • The Dodd-Frank Act transferred the Home Mortgage

Disclosure Act (HMDA) to CFPB and asked the Bureau to expand the dataset and the collection of loan information.

• Dodd-Frank mandated changes vs. additional changes

• CFPB is seeking data about how increased reporting requirements will monetarily affect reporting entities.

CFPB

Remittances • April 15, 2014- the CFPB released proposed amendments to

Regulation E’s international transfer rule, which would: – Extend an exception for international remittance transfers discloses

– Address the treatment of transfers from non consumer accounts

– Amend error resolution procedures and remedies.

• The CFPB seeks clarification and comments on treatment of U.S. military installations abroad.

CFPB

Payday Loans • 2013 – the CFPB released a Payday Lending White Paper on

the Bureau’s comprehensive study on short term, small dollar loan markets.

• Recently, the CFPB held a field hearing and credit union roundtable.

• NAFCU expects a rulemaking in 2014.

CFPB

Prepaid Cards • The CFPB is seeking feedback on prepaid card disclosures

• The proposed rule will likely: – Bring prepaid cards under Regulation E,

– Require static model disclosures to be made available on the outside package of packages

• The CFPB is currently testing model forms and will continue testing after the proposed rule is out.

CFPB

Overdraft • June 2013 – CFPB released a Study of Overdraft Programs that

looked at market and contextual factors in the offering of overdraft services since the 2010 implementation of a consumer opt-in requirement under Regulation E.

• The CFPB plans future studies of account-level data to better understand how differences in bank practices affect consumers.

• If the Bureau finds that current policies or practices do not protect consumers in accordance with federal consumer protection law, it will use its authorities to provide such protection.

CFPB

E-Closings • The CFPB’s has planned an eClosings pilot program

• Credit unions that are interested in being a part of the eClosings pilot program should review the CFPB’s eClosing Pilot Guidelines and the CFPB’s solicitation announcement.

CFPB

Amendments to the 2013 Mortgage Rules • April 2014- the CFPB proposed amendments to certain

mortgage rules issued in 2013

• Ability to “cure” points and fees for qualified mortgages

• The CFPB is also requesting comment on:

1. A cure or correction of debt-to-income overages

2. The credit extension limit for the small creditor definition

CFPB

Privacy • May 6, 2014- the CFPB proposed amendments to Regulation P

that would allow credit unions, under certain conditions, to post their annual privacy notices online rather than delivering them individually

• Requirements to qualify for online disclosure method

Questions?

Contact Information

Michael Coleman, Esq., NCCO

Alicia Nealon, Esq.

PJ Hoffman, Esq.

http://www.nafcu.org/contactus/#Regulatory_Affairs