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
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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
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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
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Info Site
Policy Pro
CFPB
CUNA
Local trade organization
NCUA
Resources
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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!!!!