Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer
11/6/2020

Fair Lending & Consumer Compliance Webinar

The National Credit Union Administration (NCUA) will be hosting a FREE webinar on fair lending and consumer compliance updates on November 17 at 2:00 p.m. (CT). Register for this webinar here.

The information presented in this webinar reinforces the NCUA’s commitment to expand the availability of safe and affordable credit to meet the needs of diverse and underserved communities, which is a pillar of the agency’s financial inclusion initiative, ACCESS: Advancing Communities through Credit, Education, Stability, and Support.

Staff from the NCUA’s Office of Consumer Financial Protection will discuss the focus areas for the agency’s consumer compliance exams in 2021, including a review of COVID-19-related loan modifications and credit reporting, and fair lending policies and procedures. The discussion will also include the findings from the 2020 consumer compliance exam reviews.  

Payday Alternative Loans & Short-Term Lending Webinar

The NCUA is also hosting a free webinar on November 16 at 2:00 p.m. (CT) on payday alternative loans and other forms of short-term lending. Register for this webinar here.

Staff from the NCUA’s Office of Consumer Financial Protection and Office of Credit Union Resources and Expansion will discuss how credit unions can offer responsible small-dollar loans to help members meet temporary cash-flow needs and transition into mainstream financial products. This webinar is open to credit unions and parties interested in working with credit unions to expand access to safe and affordable short-term lending options.

Proposed Rule – Role of Supervisory Guidance

The National Credit Union Administration (NCUA), along with four other regulatory agencies, recently issued a proposed rule regarding the role of supervisory guidance. This proposed rule can be found here and is open for a 30 day comment period. The proposal seeks to codify the Interagency Statement Clarifying the Role of Supervisory Guidance issued by the agencies on September 11, 2018.

The proposal includes a number of questions that the agencies are seeking feedback on – such as the proposed Statement provides that in some situations, examiners may reference (including in writing) supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations. Should examiners reference supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations when criticizing (through the issuance of matters requiring attention, matters requiring immediate attention, matters requiring board attention, documents of resolution, supervisory recommendations, or otherwise) a supervised financial institution? Are there specific situations where providing such examples would be appropriate, or specific situations where providing such examples would not be appropriate?

Also, is it sufficiently clear what types of agency communications constitute supervisory guidance? If not, what steps could the agencies take to clarify this? Are there any additional clarifications to the 2018 Statement that would be helpful? Are there other aspects of the proposal where you would like to offer comment?

FinCEN Proposed Rule

The Financial Crimes Enforcement Network (FinCEN) has also issued a proposed rule to decrease the threshold for the requirement to collect, retain and transmit information on international funds transfers and transmittal of funds. The proposed rule also adds the requirement to collect/retain/transmit information on transactions involving convertible virtual currencies and digital assets. This proposed rule can be found here and comments must be submitted by November 27.

As credit unions are aware, the Bank Secrecy Act requires the collection and retention of information on certain funds transfers and transmittals of funds (record retention rule). The BSA also requires certain information be transmitted to other financial institutions in the payment chain information on funds transfers and transmittals of funds that begin or end outside the United States (travel rule).

The Recordkeeping Rule and Travel Rule collectively require banks and nonbank financial institutions to collect, retain, and transmit information on funds transfers and transmittals of funds in amounts of $3,000 or more. The proposed modification would reduce this threshold from $3,000 to $250 for funds transfers and transmittals of funds that begin or end outside the United States.

FinCEN is also proposing to clarify the meaning of “money” as used in these same rules to ensure that the rules apply to domestic and cross-border transactions involving convertible virtual currency (“CVC”), which is a medium of exchange (such as cryptocurrency) that either has an equivalent value as currency, or acts as a substitute for currency, but lacks legal tender status. The Agencies further propose to clarify that these rules apply to domestic and cross-border transactions involving digital assets that have legal tender status.

TILA Threshold Updates

The Consumer Financial Protection Bureau (CFPB) has issued its final rule that annually updates certain thresholds under Regulation Z. These adjustments are effective January 1, 2021. The final rule can be found here.

  • For open-end consumer credit plans under the CARD Act amendments to TILA, the adjusted dollar amount in 2021 for the safe harbor for a first violation penalty fee will remain unchanged at $29 and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will also remain unchanged at $40.
  • For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2021 will be $22,052.  The adjusted points-and-fees dollar trigger for high-cost mortgages in 2021 will be $1,103. 
  • For qualified mortgages, which provide creditors with certain protections from liability under the Ability-to-Repay Rule, the maximum thresholds for total points and fees in 2021 will be 3 percent of the total loan amount for a loan greater than or equal to $110,260; $3,308 for a loan amount greater than or equal to $66,156 but less than $110,260; 5 percent of the total loan amount for a loan greater than or equal to $22,052 but less than $66,156; $1,103 for a loan amount greater than or equal to $13,783 but less than $22,052; and 8 percent of the total loan amount for a loan amount less than $13,783.

InfoSight Highlight - Payday Lending

In July 2020, the CFPB issued a final rule to revoke the mandatory underwriting provisions of their Payday Lending Rule (12 CFR 1041). Removed were the applicable sections related to the ability-to-repay determinations for covered short-term loans or covered longer term balloon-payment loans. Within the final rule, there continues to be an exemption from the requirement for “Alternative Loans” (1041.3(e)). The final rule goes on to say that financial institutions offering a loan program that meets the requirements outlined are exempt from the requirements within the rule. The requirements outlined in the exemption replicate the NCUA rules (701.21) governing payday alternative loans (PAL I and PAL II).

Therefore, both federally and state-chartered credit unions can benefit from this exemption (and therefore, not required to comply with the CFPB rules) by creating a PAL program that complies with the NCUA rules.  The Payday Lending channel has additional information!

As always, Dakota Credit Union Association members may contact Amy Kleinschmit with any compliance related questions.

 

 

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