2014 Utah Volunteers Conference Compliance Update Compliance Issues Facing Credit Unions Julie Kappenman Director of Association Compliance Services Jkappenman@mwcua.com 307-757-6692 COMPLIANCE UPDATE • Compliance is a GROWTH industry • Compliance is a learning OPPORTUNITY WHO IS REGULATING CREDIT UNIONS? NCUA State Regulator Credit Union Consumer Financial Protection Bureau Federal Reserve, FinCen, Attorney General, HUD, NACHA, GAAP, IRS, FTC, etc History of Regulation Changes • 27 Regulation Changes were effective in 2013 • 14 Regulation Changes were effective in 2014 • So far 2 Regulation changes will go into effect in 2015 but there is still time!!!! Regulations Effective 2014 – Review Effective Date Regulation Agency January 1, 2014 Mortgage CFPB Originator Compensation Reg Z January 1, 2014 Filing Financial and NCUA Other Reports January 3, 2014 BSA Definitions: Transmittal of Funds and Funds Transfer FinCEN, Federal Reserve Regulations Effective 2014 - Review Effective Date January 10, 2014 January 10, 2014 January 10, 2014 Regulation Ability to Repay and “Qualified Mortgage” - Reg Z High-Cost Mortgage and Homeownership Counseling – HOEPA Reg Z Mortgage Servicing Reg X & Reg Z Agency CFPB CFPB CFPB Regulations Effective 2014 - Review Effective Date January 10, 2014 Regulation Agency Financing of Credit CFPB Insurance – Reg Z January 18, 2014 Appraisals - Reg B CFPB January 18, 2014 Appraisals for higher-priced mortgages requiring physical inspections and other provisions NCUA, FDIC, OCC, CFPB, Fed Regulations Effective 2014 Effective Date Regulation Agency March 3, 2014 Derivatives NCUA March 31, 2014 Liquidity and Contingency Funding Plans NCUA May 30, 2014 Capital Planning and Stress Testing NCUA Regulations Effective 2014 Effective Date Regulation Agency June 30, 2014 Credit Union Service Organizations NCUA July 1, 2014 FATCA - Foreign Account Tax Compliance Act (IRS) IRS July 28, 2014 Voluntary Liquidations NCUA Regulations Effective 2014 Effective Date October 2014 Regulation Regulation E – Remittance Transfers Agency CFPB Confusion with the 2014 Regulations Mortgage Originator Compensation Ability to Repay and Qualified Mortgages High Cost Mortgages – Homeownership Counseling Mortgage Servicing Points and Fees Liquidity and Contingency Funding Plans Credit Union Service Organizations Regulations Effective 2015 (So far) Effective Date Regulation Agency July 18, 2015 Appraisals for higher-priced mortgage loans: modified exemptions for loans secured by manufactured homes under Regulation Z Know Before You Owe Disclosures – Reg X & Z NCUA, FDIC, OCC, CFPB, Fed August 1, 2015 CFPB Considerations for New Rules • • • • • • • Start Now Work with your vendors Train Staff Assess impact on operations Staff time Policies and procedures Budget requirements CFPB RULE LIST SPRING 2014 – Proposed Rules Potential Regulation Requirements for prepaid Cards (Regulation E) Annual Privacy Notice Further Amendments to 2013 Mortgage Rules (Regulations X and Z) Amendments to FIRREA Concerning Appraisals Extension of the Temporary Exception for Certain Disclosures Under the Remittance Transfer Rule Defining larger participants in a Market for Auto Lending CFPB Rule List Spring 2014 Pre-Rule Regulations Potential Regulation Home Mortgage Disclosure Act (Regulation C) Payday Loans and Deposit advance Products Overdrafts Debt Collection Rule NCUA 2014 Planned Regulation Review • Part 748: Security Program, Report of Suspected Crimes, Suspicious Transactions, Catastrophic Acts and Bank Secrecy Act Compliance • Part 749: Records Preservation Program and Appendices – Record Retention Guidelines; Catastrophic Act Preparedness Guidelines • Part 750: Golden Parachute and Indemnification Payments • Part 760: Loans in Areas Having Special Flood Hazards NCUA 2014 Planned Regulation Review • Part 761: Registration of Residential Mortgage Loan Originators • Part 790: Description of NCUA; Request for Agency Action • Part 791: Rules of NCUA Board Procedure; Promulgation of NCUA Rules and Regulations; Public Observation of NCUA Board Meetings NCUA 2014 Planned Regulation Review • Part 792: Requests for Information under the Freedom of Information Act and Privacy Act, and by Subpoena; Security Procedures for Classified Information • Part 793: Tort Claims Against the Government • Part 794: Enforcement of Nondiscrimination on the Basis of Handicap in Programs or Activities Conducted by the National Credit Union Administration NCUA 2014 Planned Regulation Review • Part 796: Post-Employment Restrictions for Certain NCUA Examiners • Part 797: Procedures for Debt Collection Recent Proposed Regulations • Amendments to the 2013 Mortgage Rules (Reg Z) Comments were due 7-7-2014 • Amendment to the Annual Privacy Notice Requirement Under the Gramm-Leach-Bliley Act (GLBA) (Regulation P) – Comments were 7-14-2014 • Annual Regulatory Review List – Comments were due 8-4-2014 • Regulatory Publication and Review Under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 – Comments were due 9-2-2014 Recent Proposed Regulations • Mobile Financial Services – Comments were due September 10, 2014 • FinCen Customer Due Diligence – Comments were due October 3, 2014 • Fixed assets – Comments were due October 10, 2014 • HMDA – Comments are due by October 29,2014 Customer Due Diligence - FinCen • Establish and maintain written CDD procedures that are reasonably designed to identify and verify “beneficial owners” of legal entity members subject to certain exemptions • Clarify and strengthen CDD obligations of financial institutions: – Identifying and verifying the identity of members – Identifying and verifying the identity of beneficial owners of legal entity members (natural persons who own or control legal entities) – Understanding the nature and purpose of customer relationships; and – Conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions Fixed Assets - NCUA • Federal Credit unions >$1million will be able to exceed the 5% fixed asset limitation without obtaining a waiver if it implements a fixed assets management program (FAM) FAM program – Must demonstrate the credit union has analyzed the investment that would cause it to exceed the 5% limit prior to purchase – Ensure the credit union can afford any impact on earnings and net worth levels – Would be subject to NCUA’s supervisory scrutiny and must provide for close ongoing oversight of fixed asset levels and their effect on the financial performance of the FCU – Include a written FAM board approved policy that establishes limits on the aggregate amount of the FCUs fixed assets Home Mortgage Disclosure Act (HMDA) - CFPB The tests determining which credit unions would be covered would be revised Credit union that originate 25 covered loans other than open end line of credit loans and commercial lines of credit Unsecured home improvement loans would no longer have to be reported All closed end loans, open end line of credit loans, and reverse mortgages secured by dwellings would be required Expand the amount of information that is reported HMDA Proposed Regulation Data required to be reported • Applicant age Applicant credit score • Application channel • Postal address and location of subject property • Property value Points and fees • Introductory period Non-amortizing features • Prepayment Penalty Universal loan identifier • Reasons for denial Occupancy type • Loan terms Lien Priority • HOEPA status Loan type and amount Risk Based Capital Update • NCUA – Comments were due May 28th, 2014 • Make various revisions, including replacing the agency’s current risk-based net worth requirements with new riskbased capital requirements for federally insured ‘‘natural person’’ credit unions; • Would revise the risk-weights for many of NCUA’s current asset classifications; • Require higher minimum levels of capital for federally insured natural person credit unions with concentrations of assets in real estate loans, member business loans (MBLs) or higher levels of delinquent loans Risk Based Capital • Set forth the process for NCUA to require an individual federally insured natural person credit union to hold higher levels of risk-based capital to address unique supervisory concerns raised by NCUA. • Over 1850 Comment Letters Received from credit unions • Update – they will be issuing a new revised risk based capital rule with a new comment period as a result of significant structural changes being considered. Comment Process • Your opportunity to provide direct input on how the rules could impact your credit union • NCUA reviews and updates every Federal Credit Union rule and regulation on a 3 year cycle • Congress Passes laws and requires regulators to establish new rules and regulations to implement the new laws • Review every credit union response • Comments can ultimately influence the content of the final rule NCUA’s Regulatory Comment Process Tips • Read the proposals and other comment letters on NCUA’s website – Seeing what others have written may give you ideas • Decide whether you support or oppose – The numbers are tallied • Consider unintended consequences – Get on the record of the changes you will need to make at your credit union to comply with the proposed rule • Propose alternative solutions – Reasonable and workable solutions that achieve congressional intent and sound public policy Comment Letter Writing Tips • • • • • • • • CUNA comment calls Follow the instructions provided Include an introduction paragraph Include the background of your credit union Stick to the facts Be respectful Include the basis for your view Offer alternatives Comment Letter Writing Tips • Describe why this is a burden or why this is positive • Copy CUNA and local trade association • Never duplicate another letter – put it into your own words – 5000 comment letters can turn into 1 if there is duplication • They are required to read all of the letters • Involve all levels of government that you feel are appropriate Who is responsible for compliance at your credit union? NOT ME Resources • • • • • • Info Site Policy Pro CFPB CUNA Local trade organization NCUA Resources • • • • • • • • NADA Guidelines NACHA Guidance Letters to Credit Unions Small Entity Compliance Guide Blogs List serves Webinars CUNA’s Compliance Effective Date Chart QUESTIONS????? • THANK YOU FOR YOUR TIME AND ATTENTION!!!!