Compliance Update with Amy k
by Amy Kleinschmit
Chief Compliance Officer

Fall Hike the Hill Revamped

The Credit Union Association of the Dakotas’ annual fall Legislative and Regulatory Hike the Hill event that was scheduled for September 14-17 will not be an in-person experience as in prior years. Like so many other 2020 events, CUAD has reviewed this event and decided to cancel the in-person hike to Washington DC, based on information from our partners at CUNA that it is unlikely that the regulators or our congressional members will be taking ‘in-person’ meetings in September.  

CUAD is working on an alternative option where we can connect our members with both our congressional leaders and our regulatory leadership. As the details for a virtual event come together we will make these opportunities for engagement known.


ACH Fraud Alert – Unemployment Insurance

The US Secret Service issued this alert about “massive fraud” it is seeing against state unemployment insurance programs. At the time of the alert the primary state targeted so far is Washington, while there is also evidence of attacks in North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming and Florida. It is extremely likely every state is vulnerable to this scheme and will be targeted if they have not been already. 

In the state of Washington, individuals residing out-of-state are receiving multiple ACH deposits from the State of Washington Unemployment Benefit Program, all in different individuals’ names with no connection to the account holder. The banks targeted have been at all levels including local banks, credit unions, and large national banks.  


Small Dollar Loans

Federal regulatory agencies, which included the NCUA, recently issued Interagency Lending Principles for Offering Responsible Small-Dollar Loans.”

This recent guidance advises that credit unions seeking to develop new programs or expand existing responsible small-dollar lending programs should do so in a manner consistent with sound risk management principles, inclusive of appropriate policies. The agencies’ core lending principles for financial institutions that offer small-dollar loan products include:

  • Loan products are consistent with safe and sound banking, treat customers fairly, and comply with applicable laws and regulations.
  • Financial institutions effectively manage the risks associated with the products they offer, including credit, operational, and compliance.
  • Loan products are underwritten based on prudent policies and practices governing the amounts borrowed, frequency of borrowing, and repayment requirements.

Reasonable loan policies and sound risk management practices and controls for responsible small-dollar lending would generally address the following: Loan structures; loan pricing; loan underwriting; loan marketing and disclosures; and loan servicing and safeguards. Each of these provisions are discussed in more detail at the above link.


FHFA Announces Refinance and Home Purchase Eligibility for Borrowers in Forbearance

In a recent press release, the FHFA announced that Fannie Mae and Freddie Mac have issued temporary guidance regarding the eligibility of borrowers who are in forbearance, or have recently ended their forbearance, looking to refinance or buy a new home.

FHFA is also extending the Enterprises previously announced ability to purchase single-family mortgages in forbearance. The Enterprises are now able to buy forborne loans, with note dates on or before June 30, 2020, as long as they are delivered to the Enterprises by August 31, 2020 and where only one mortgage payment has been missed. The previous policy was set to expire on May 31, 2020.


NCUA – Joint Ownership Share Account Proposed Rule

At the NCUA recent board meeting a proposed rule relating to joint ownership share account share insurance requirements was issued. This would impact Part 745 – Share Insurance. This proposal can be found here and is open to a 30 day comment period.

Currently, section 745.8 requires that “a joint account is a qualifying joint account if each of the co-owners has personally signed a membership or account signature card and has a right of withdrawal on the same basis as the other co-owners….”

The proposal would add an alternative method to satisfy membership or account card requirements. Specifically proposing that the signature card requirement noted above “also may be satisfied by information contained in the account records of the federally insured credit union establishing co-ownership of the share account, such as evidence that the institution has issued a mechanism for accessing the account to each co-owner or evidence of usage of the share account by each co-owner.”

The discussion of this proposed rule explains that this change would only affect a requirement in the NCUA’s regulations that must be satisfied for a share account to be separately insured as a joint account; it would not affect any other legal requirements applicable to FICUs. FICUs may, for legal or other reasons, find it appropriate or necessary to continue collecting customers’ signatures.


NCUA - Temporary Regulatory Relief in Response to COVID-19 – Prompt Corrective Action

Finally, the NCUA also issued another interim final rule, found here, that becomes effective when published in the Federal Register. However, this rule is temporary and will only be in place until December 31, 2020.

NCUA is temporarily modifying certain regulatory requirements to help ensure that FICUs continue to operate efficiently, to ensure that FICUs maintain sufficient liquidity, and to account for the potential temporary increase in shares that FICUs may experience during the COVID-19 pandemic.

The NCUA has determined that it is appropriate to amend §702.201, relating to earnings retention for “adequately capitalized” FICUS, to provide express regulatory authority for the NCUA to issue a single order waiving the earnings retention requirement for all FICUs that are classified as adequately capitalized, subject to the applicable Regional Director retaining authority to subsequently require an application if a particular FICU poses undue risk to the NCUSIF or exhibits material safety and soundness concerns. As noted above, this is only temporary relief.

The NCUA plans to issue through a separate action an order consistent with this new provision to set forth the terms of relief from the earnings retention requirement.

Through this interim final rule (that is temporary) the NCUA also waives the net worth restoration plan content requirements for FICUs that become classified as undercapitalized (has a net worth ratio of 4 percent to 5.99 percent) predominantly as a result of share growth. In these cases, the FICU may submit a significantly simpler net worth restoration plan to the applicable Regional Director noting that the FICU fell to undercapitalized because of share growth. Specifically, a FICU would be required to attest that its reduction in capital was caused by share growth and that such share growth is a temporary condition due to the COVID-19 pandemic.

Please note - federally insured, state chartered credit unions must comply with applicable state requirements when submitting NWRPs for state supervisory authority approval.

As always, CUAD members may contact Amy Kleinschmit with any compliance related questions.



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