By The Way
The By The Way newsletter is a great way to keep Kentucky credit unions informed of the latest updates in governmental affairs, compliance and regulations, education and training. In addition, By the Way highlights the difference credit unions are making on a daily basis.
Credit Union News
- Service One CU and WKU Sponsor the Great American Eclipse Premier Event
Tiffany Ge, Senate Majority Leader Mitch McConnell's Counsel, visited the League office on Monday, August 28th for a legislative/regulatory issues discussion. Prior to joining Leader McConnell's office, Tiffany was General Counsel for Kentucky's Department of Financial Institutions. Topics of discussion included credit/debit card fraud, the CFPB's massive amount of regulations to include their latest proposed rule on small dollar loans and the preservation of the credit union tax exemption.
In attendance were Myron Moore and John Graham/Kentucky Employees Credit Union, Jim Spradlin/Park Community Credit Union, Karen Harbin/Commonwealth Credit Union, Mike Biagi/The Rotunda Group, Debbie Painter/League and Ray Springsteen/Fort Knox Federal Credit Union.
It’s Time for the Kentucky Recognition Award Nominations!
The Kentucky Recognition Awards Banquet is fast approaching and we are still looking for nominations. If you would like to nominate a credit union professional or volunteer for an award, please nominate him or her this week! The deadline for nominations is Friday, September 15th.
Steve Brody Outstanding Volunteer Award
The purpose of the Steve Brody Outstanding Volunteer Award is to recognize the outstanding accomplishments, time and effort in support and promotion of the credit union idea put forth by volunteers in the Commonwealth of Kentucky. Deadline is September 15th.
Frank Moore Outstanding Professional Award
The purpose of the Frank Moore Outstanding Professional Award is to recognize the outstanding accomplishments, time and effort in support and promotion of the credit union idea put forth by the credit union professionals in the Commonwealth of Kentucky. Deadline is September 15th.
Richard Zimmerman Outstanding Young Credit Union Leader Memorial Award
The Richard Zimmerman Outstanding Young Credit Union Leader Memorial Award is presented to recognize the accomplishments of young people who have made significant contributions to the support and promotion of the credit union idea. Deadline is September 15th.
Wayne R. Woodward Philosophy in Action Award
The Wayne R. Woodward Philosophy in Action Award was established to recognize an individual, group of individuals, or organization that by act or deed, above and beyond the norm, personifies the credit union philosophy of "People Helping People." Deadline is September 15th.
We are also accepting submissions for Most Effective Chapter and Chapter in Attendance awards.
For further information on these categories, and to submit a nomination, please click HERE.
Take Charge at the Event for Credit Union Trainers
CUNA Experience Learning Live! is your chance to discover best practices, breakthrough ideas and perceptive insights into modern credit union training. Over three days of sessions hosted by top minds in the training field, you’ll learn how to create a better learning environment at your credit union that enables your staff to realize their true potential.
Who should attend?
This conference is beneficial for credit union professionals looking to start, build and grow training and development at their credit union.
CPE Credits: You can earn group-live credits for this program. No advance preparation or prerequisites are required. For more information regarding administrative policies, such as complaint and refund, please contact CUNA at 800-356-9655, ext. 4249. To view all programs that offer CPE credits, click here.
Credit Union National Association (CUNA) is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.
The Kentucky Credit Union League is proud to provide our credit unions with this distinguished opportunity for improvement, growth, and Infinite Possibilities.
The 83rd KCUL Annual Meeting and Convention features a comprehensive agenda on top-of-mind issues, the KCUL Business Meeting, a golf outing, an awards banquet, entertainment and an extensive showcase of business partners and exhibitors.
Whether you are a credit union professional or volunteer, from a small or large credit union, you will find useful information geared towards your needs.
$475 – until 9/15
$499 – after 9/15
Wednesday Golf Outing
September 19-20 | League Office
Educational Investment: $239 per person per day
The Only Sure Thing about IRA Rules...is Change.
Day 1: IRA Essentials
9:00 a.m. – 4:30 p.m.
IRA Essentials gives attendees a solid foundation of IRA knowledge. Exercises are included throughout the day to help participants apply information to job-related situations. Attendees will leave this session able to work with IRA owners and process basic IRA transactions with confidence. This is a beginner’s session; no previous IRA knowledge is assumed.
Introduction and Establishing IRAs
- Identify the tax differences of a Traditional and Roth IRA
- Examine the process for establishing an IRA and the required documents
- Differentiate between the types of beneficiaries
- Learn about the Traditional and Roth IRA eligibility requirements
- Identify the contribution limit and deadline
- Communicate contribution reporting deadlines
- Identify federal income tax withholding requirements
- Examine IRS penalties and penalty exceptions
- Summarize the tax consequences of IRA distributions
- Communicate distribution reporting deadlines
- Differentiate between a rollover and a transfer
- Recognize rollovers between IRAs and employer- sponsored retirement plans
Who Should Attend?
You should attend this seminar if you:
- need to learn the basics of Traditional and Roth IRAs or
- want an updated, general refresher on IRA rules.
Day 2: Advance IRAs
9:00 a.m. – 4:30 p.m.
Advanced IRAs builds on the attendees’ basic knowledge to address more complex IRA issues their financial organizations may handle. This is an advanced session; previous IRA knowledge is assumed. The instructor uses real-world exercises to help participants apply information to job-related situations.
- Explain the recent changes affecting IRA owners.
- Discuss the 2017 Roth modified adjusted growth income limits.
- Recognize how recent changes may affect your financial organization.
Required Minimum Distributions
- Calculate a required minimum distribution (RMD).
- Discuss the RMD rules and reporting requirements.
- Describe beneficiary distribution options.
- Recognize the differences for spouse, nonspouse, and nonperson beneficiaries.
- Explain beneficiary payment deadlines.
- Summarize the restrictions on the movement between IRAs.
- Recognize the options available when moving from an employer-sponsored retirement plan to an IRA.
- Explain the result of violating the portability restrictions.
- Roth IRA Conversion Contributions
- Describe a conversion.
- Explain the effect of withholding on a conversion.
- Report a conversion.
- Define the consequences of an ineligible conversion.
IRA Owners Tax Forms and You
- Determine which tax forms an IRA owner must complete when certain IRA activity occurs.
- Understand which IRS penalty taxes may apply to IRA owners.
Who Should Attend?
You should attend this seminar if you:
- are an IRA administrator or member service representative who has working knowledge of basic IRA operations and wish to expand your expertise;
- are a compliance specialist with procedural oversight of IRA policies and practices; or
- are support personnel responsible for promotional materials that describe the services provided by your credit union.
Small can be mighty when it comes to stealing market share and serving it better than the banks.
By: Jon Jeffreys, Callahan & Associates
It’s planning season! The time of year when I find myself talking with credit union executives and their boards on nearly a daily basis. This morning on my way into work, something hit me ―an “ah-ha!” moment ― and more on that in a minute.
Be the mouse that roars. Nationwide, credit unions hold about 6% deposit market share. In autos, we hold about 18% and in mortgages about 8%. This from a movement of just more than 5,800 credit unions.
In the broader context of financial services, even the largest of us is small. Many argue that because of that we need to wave the white flag and merge. And 200 to 400 credit unions a year have been doing just that.
But being small means we can tackle opportunities that larger organizations can’t or won’t.
Because we’re closer to our “customers” we can pivot faster. We can better understand what opportunities members are “hiring” us for, and what it would take for them to “fire” their bank.
“Jobs to be done” has become a catchphrase for that approach and it is indeed a perfect fit for the financial cooperative space, a movement arguably born of the need to be nimble in responding to the financial needs of its member-owners.
Being nimble allows us to take market share others don’t want or even know they’re losing until it’s too late.
I was working with a smaller credit union ― $60 million in assets and 6,000 members. They found a niche serving an assisted care facility in their community. The facility had 20 employees, and this credit union’s managers were wondering if other facilities in the community would have the same need this SEG did.
I assured them that M&T Bank, with its 30% market share in the community, would not be going after 20-person opportunities. Yet, if this credit can get four or five of these assisted care facilities, they just grew their own membership significantly. This is a real win for the credit union and the new members, and it’s certainly in an area of significant growth now and into the future: caring for an aging population.
Stockholders’ lust for immediate returns forces banks to look for big, high margin lines of business. That’s why 20-person opportunities just don’t make sense for them. Our opportunity is to use their investment time horizon and profit formula ― grow gross margin and ROE ― against them.
That’s why it’s critical for us to identify where can we find these niches and grow them. If we do well, over time this can turn into big opportunities. Over time, we can get so entrenched with these niches it’s hard for a new competitor to come take it away from us.
Now that I think about it. This gets to my “ah-ha” moment. I heard a radio ad for Navy Federal Credit Union this morning. Normally in the DC area, the radio ads are for PenFed Credit Union and their jingle “Great Rates for Everyone”.
Navy’s TV spots on Monday night football are great: funny and really well done. This one, though, had two guys talking about what it meant to serve and how Navy was uniquely positioned to help their specific needs. There was no rate or product mentioned. It was all about community.
Many may read this and think, well, Navy is so big they can do whatever they want. Navy is the largest credit union by far, but they would be something like the 38th biggest bank, about the size of an average regional bank.
Navy, too, started small like every other credit union. Over the years they worked their niche and found unique things that matter to their members. That’s why they get hired far more often than they get fired.
I think it’s a reminder to all to get out there, talk to members, and get your arms around what it would take for more people to hire your credit union. Last but not least, make sure you understand how close you are to getting fired. And then do something about it.
John Jeffries is a Managing Partner at Callahan & Associates. Callahan & Associates will be an exhibitor at the Annual Meeting & Convention.
Truly living the purpose of “We Better Lives,” Commonwealth CU employees partnered with members throughout the state to collect donations for our friends in Texas who are suffering from the effects of Hurricane Harvey. The collection period of three days brought in $12,500. At the beginning of the donation drive, Commonwealth Credit Union pledged to provide a 100% match to the donation total.
In the end, $25,000 was donated through CUAid.coop, the National Credit Union’s online disaster relief system.
Commonwealth CU’s Lawrenceburg Branch teamed up with Shred-It and local law enforcement to host their annual Community Shred Day on July 29, 2017. This year, 172 cars brought 4,500 lbs. of personal documents to be shredded safely and securely. This free event also served as a collection point for donations to the Anderson County Senior Center. More than $80 and numerous boxes of cleaning supplies were delivered to the center from donations collected that day.
Collaboration was the key when Commonwealth CU partnered with the United Way and other community businesses to install new playground equipment at a local elementary school. Working together, the volunteers installed $30,000 in new equipment, saving the school approximately $8,500 in labor fees. This project has doubled the capacity of the playground, which can accommodate 70 students per recess period.
Henry Wheatley of Fort Knox Federal Inducted into DCUC Hall of Honor
Fort Knox Federal Credit Union Board of Director, Henry Wheatley, was inducted into the Defense Credit Union Council (DCUC) Hall of Honor this month at the council’s 54th Annual Conference in San Diego, CA.
First elected to Fort Knox Federal’s Board in 1977, Wheatley has been a dedicated volunteer for over 40 years. Henry has long championed the credit union’s “People Helping People” philosophy and is always looking for ways to improve the financial lives of Fort Knox Federal’s member-owners. Having served as a member of the U.S. Marine Corps himself, Wheatley has close ties to DCUC and actively promotes providing impeccable service to those men and woman who have served - and are serving - our country.
Throughout his tenure at Fort Knox Federal, Henry has served two terms as Chairman and played an integral role in the financial growth of the organization. During his service, Fort Knox Federal has grown from a closed field of membership (Fort Knox post community) credit union with less than $50 million in assets to a well-diversified, community-based financial service organization with $1.4 billion in assets. In fact, Fort Knox Federal is now the largest credit union based in Kentucky.
“Henry’s passion for the credit union spans more than four decades,” said Fort Knox Federal President and CEO Ray Springsteen. “Fort Knox Federal’s strategy of constantly looking for ways to improve members’ financial lives and enhance the communities served by the credit union is driven by Henry’s leadership.”
Henry also played a vital leadership role in fashioning Fort Knox Federal’s efforts to go the ‘extra mile’ during the 2005 Defense Base Realignment and Closure Commission (BRAC) to serve men and women in uniform and their families. As thousands of soldiers and Department of Defense civilian workers were set to come to Fort Knox, the credit union added a Relocation and Liaison Specialist position to help these families transition to their new duty station. This service was provided free of charge to the soldiers, workers and their families and Fort Knox Federal were awarded the Department of the Army’s Distinguished Service Award for Credit Unions in 2011 for their efforts.
L&N is pleased to announce our 2017 Frank Moore Scholarship Winners. Each student will receive a scholarship of $10,000 over a 4-year period in undergraduate study.
We commend these students for their commitment to academic excellence, leadership and community service.
Louisville Metro | Northern Kentucky Area Winner
Name: Zachary Taylor
Attended: Bullitt East High School
College Choice: University of Louisville
Southeastern Kentucky Area Winner
Name: Michael Laun
Attended: Corbin High School
College Choice: University of North Georgia
For more info on our winners please visit: www.LNFCUcom/pages/2017-frank-moore-winners.html
Park Community Credit Union announces a new Chief Operating Officer and four Assistant Vice Presidents.
Lisa Bannon has been promoted to the role of Chief Operating Officer. “Lisa brings more than 21 years of financial services experience and a wealth of knowledge to her new role. Her input and involvement will be vital to the future efforts for continued growth and success of the organization,” said Jim Spradlin President/CEO for Park Community.
Lisa is a graduate of the University of Louisville. She is a certified Sales Strategies coach and serves on the KYCUL Education Committee. She has held the position of Training Manager, VP of Training, Sr VP of Information Technology & Process Development, and Sr VP of Support Operations.
Jennifer Marks has been promoted to AVP of Project Management. She has worked at Park Community since 2000 and has held the position as Project Manager since 2012.
Lisa Brangers has been promoted to AVP of Training and Employee Development. Lisa has worked at Park Community for 12 years. She has been the Manager of Training and Development for 6 years.
Cindy Bingham was promoted to AVP of Retail Operations. Cindy has worked at the credit union since 2002. In 2011 she assumed the role as Regional Manager of Retail Operations.
Donna Baugh was promoted to AVP of Retail Operations. Donna has worked for Park Community since 2008. In 2011 she assumed the role as Regional Manager of Retail Operations.
Park Community Credit Union is proud to announce the latest graduates from the University of Park, also known as the UP program. This group has completed a rigorous amount of coursework while continuing to juggle their daily responsibilities. They were pushed out of their comfort zone, taking them to the next level in their growth and development both personally and professionally.
Part of the program requires the group to organize a service project. This group chose to hold a book drive to help start a library for pre-teens and young adults at the Riverview Opportunity Center in Shepherdsville, Kentucky. Riverview is part of the Bullitt County Public School system and houses the College and Career Readiness Center, the Bullitt Advanced Math and Science Program, and the Teenage Parenting Program. Through the help of the staff and members of the credit union, the group collected over 1,500 books.
Graduates from the class pictured from left to right: Andrew Pope, Brooke Sizemore, Jesseica Melton, Melanie Watson, Lisa Brangers (AVP Training), Chong Harlow, Taylor Spalding, Nickie Vance, and Kim Etherton. Shavonne Johnston not pictured.
In an effort to help with the terrible damage from Hurricane Harvey, Park Community Credit Union has partnered with the Red Cross to collect donations. Park Community has agreed to match donations made from their collection efforts up to $5,000.
Service One. Rebecca Stone, Executive Vice President/Chief Operating Officer, and Garth Griese, President/CEO, attended welcome receptions in Elizabethtown and Owensboro for Dr. Timothy Caboni, newly appointed President of Western Kentucky University.
On Monday, August 21, 2017, a total solar eclipse was visible for the first time in 38 years from the continental United States. Totality was during the middle of a sunny day at Bowling Green, Kentucky's Western Kentucky University (WKU), with thousands of WKU students, community members, and K-12 grade students looking on in awe. One of the happenings held on WKU's campus was Service One Credit Union's Great American Eclipse VIP Viewing Event, held at the WKU L. T. Smith Stadium.
Service One gave gift bags, which were filled with several items to safely view the spectacular, once-in-a-lifetime Kentucky eclipse, including solar viewers, sun visor, lip balm, and sunscreen combined. Keynote speaker and eclipse expert Dr. Gordon Emslie presented on the total solar eclipse, with other special guests WKU President Dr. Timothy Caboni and WKU Head Football Coach Mike Sanford.
Along with supporting event activities, Service One gave out solar viewers to members at each of its branches and also provided their staff with commemorative Great American Eclipse T-Shirts.
Furnisher Data Reporting and Process Requirement Changes
To All Data Furnishers
Immediate Action Required
In accordance with the National Consumer Assistance Plan, the four remaining initiatives will be implemented in September, 2017. As previously communicated, the initiatives provide for updates to mandatory data reporting requirements and data collection procedures. The resulting initiatives impact Data Furnisher reporting. The initiatives listed are in addition to reporting requirements of any individual CRA.
Below is a summary of the upcoming initiatives, impacted furnishers, and the Effective Dates. These data reporting changes must be implemented in advance of the Effective Dates. Details of each initiative are provided further down:
Who is Impacted?
What is Required?
Collection Agencies and Debt Buyers
Do not report Medical Debt collection accounts less than 180 days old
Collection Agencies and Debt Buyers
Report a delete for accounts that are being paid or were paid in full through insurance
All Data Furnishers
Report using the newly established minimum reporting requirements for consumer personally identifiable information
Reporters of Authorized User Data
Report full Date of Birth for new Authorized Users on all accounts
Data Furnishers must:
- Review the list of initiatives and the details that follow to understand which changes will affect you.
- Distribute this communication within your organizations to share the requirements (Technology, Compliance, Operations, etc.).
- Ensure that your organizations successfully implement these requirements in all affected systems and departments on or before the Effectie Dates listed above.
- Monitor your data on an ongoing basis to ensure these initiatives are completed.
Initiative Details by Furnisher
Collection Agencies/Debt Buyers
Do not report Medical Debt collection accounts less than 180 days old
Do not report Medical Debt collection accounts (as defined by Creditor Classification Code 02) until they are at least 180 days past the Date of the First Delinquency with the original creditor that led to the account being sold or placed for collection.
Remove Debt paid or being paid by insurance
Report a delete for accounts that are being paid by insurance or were paid in full through insurance (not by the consumer).
All Data Furnishers
Reporting of consumer personally identifiable information
A new minimum standard has been established to expand the CRAs' capabilities to match credit data to the file of the appropriate consumer.
This new minimum standard will apply to accounts reported with a Date Opened on or after 9/15/2017 in order for the CRAs to accept these records for processing.
Following the Metro 2® format, Furnishers must report:
If full Social Security Number is not available, full Date of Birth (MMDDYYYY) will be required.
Data will be monitored to ensure these requirements are met.
Reporters of Authorized User Data
Report full Date of Birth for new Authorized Users on all accounts
Report the full Date of Birth (month, day, and year - MMDDYYYY) for newly added authorized users (ECOA "3") on ALL pre-existing and newly opened accounts.
Should you have any questions, please contact:
NCUA Awards More Than $1.8 Million in Grants
251 Low-Income Credit Unions Will Expand Services, Train Staff, Improve Security
More than $1.8 million in grants will help 251 low-income credit unions expand digital services to underserved communities, provide leadership training, and improve cybersecurity, the National Credit Union Administration announced today.
A list of grantees is available on the NCUA’s Office of Small Credit Union Initiatives’ grants information page. The agency received applications from 328 credit unions for more than $2.4 million.
The Office of Small Credit Union Initiatives administers the grant funding provided by the Community Development Revolving Loan Fund, which offers grants and loans to credit unions serving low-income communities. Congress established the fund to provide grants and loans to credit unions serving low-income communities. Since 2001, Congress has provided the NCUA with more than $18.8 million for these grants.
In the most recent round, the NCUA awarded grants in three initiative areas:
- Digital services and security: the NCUA awarded 151 grants, totaling $1,065,395, to help credit unions expand financial access to underserved communities through digital products and to help credit unions do a better job of protecting members’ information.
- Leadership development: the NCUA awarded 57 grants, totaling $504,190, to help credit unions provide leadership training to staff.
- Small low-income credit union capacity: the NCUA awarded 43 grants, totaling $283,500, to help credit unions improve technology systems and enhance their capacity to serve low-income members.
Urgent needs grants for emergency assistance are available year-round, subject to funding availability. More information about those grants is available online here.
The NCUA’s Office of Small Credit Union Initiatives fosters credit union development and the effective delivery of financial services for small credit unions, new credit unions, minority depository institutions and credit unions with a low-income designation.
Congratulations to Labor Management FCU, Green River FCU, Morehead Community FCU, and Lexington Postal FCU, who each received grants of $7,500 for Digital Services and Security.
DOL Fiduciary Rule Update
Current Status of the Rule
On June 9, 2017, several elements of the Department of Labor's (DOL) Fiduciary Rule went into effect. The implementation of these provisions followed a DOL announcement on May 22 confirming the June 9 date and indicating that the DOL continues to evaluate the rule as the final implementation deadline approaches. To gather information, the DOL issued a Request for Information on July 6, soliciting additional public comment on further delays to the rule as well as specific data on the impact of the rule. On August 9, 2017, a DOL court filing revealed that a proposed rule was in progress that would extend the applicability date of January 1, 2018 to July 1, 2019, providing yet another turn in this winding road.
In the May 22 announcement, DOL updated its policy on initial enforcement of the DOL Fiduciary Rule as well as issued additional FAQs. On enforcement, DOL indicated that during 2017, the DOL and IRS "will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary rule and exemptions." While the enforcement policy provides some initial guidance, the rule's future direction and ultimate status remain uncertain as we wait to see the proposed extension language and other potential rules that may alter the rule itself.
Credit Union Issues
For good reason, credit unions have been concerned about how the DOL's fiduciary rule may apply to their activities, particularly their involvement with third parties making securities referrals pursuant to a networking agreement. The Fiduciary Rule defines investment advice broadly to include paid referral agreements under NCUA guidelines for networking agreements. While the NCUA networking agreement guidelines prohibit the giving of investment advice that would bring the credit union under federal or state securities regulation, the Fiduciary Rule is neither of these.
When the final DOL Fiduciary Rule was published, included was extensive comment on the permissibility of networking agreement referrals. The rule explained that by nature, the arrangement between the credit union and broker-dealer made additional consumer protections unnecessary. In the rule, the DOL referred to the already-required and underlying due diligence required to support the networking agreement as well as the nominal compensation paid for referrals as rationale for the special treatment. While the DOL kept language in the final version of the rule to make referrals a fiduciary act subject to the impartial conduct standard, the DOL made clear that credit unions will not be required to enter into a "best interest contract" with members to make such referrals.
Let’s discuss the deceptive prong of the Consumer Financial Protection Bureau's (CFPB) prohibition against unfair, deceptive and abusive acts and practices (UDAAP). Specifically, identifying language that may be included in your credit union's demand letters that likely won't pass the UDAAP smell test.
The CFPB considers an act or practice to be deceptive when:
- The act or practice misleads or is likely to mislead the consumer;
- The consumer's interpretation is reasonable under the circumstances; and
- The misleading act or practice is material.
Clear as mud, right?
We have a bit of additional guidance from the CFPB that we can lean on for purposes of today's post. In July 2013, the Bureau issued a bulletin (2013-07) identifying several debt collection practices it considers to be in violation of UDAAP. Among these, the CFPB states that it is deceptive for a creditor to "threaten any action that is not intended or the covered person or service provider does not have authorization to pursue."
With that background, consider the following example:
If a member is 60-days delinquent on his mortgage loan with your credit union, you will send a demand letter that contains the following language:
You have 30 days to cure this default by paying the full amount due on your loan. If you do not cure this default, the credit union will take all legal action available to it, up to and including foreclosure.
Does this paragraph of your demand letter put your cooperative at risk of a UDAAP violation?
Absolutely. Remember, Section 1024.41 of Regulation X (the Real Estate Settlement Procedures Act) prohibits a creditor from proceeding to foreclosure until a borrower is at least 120-days delinquent. In the example above, your member is 60-days delinquent and you've given 30-days to cure the default. You've also threatened foreclosure if he fails to cure the default within the stated time frame (90-days). However, you are prohibited under Federal law from proceeding to foreclosure until the member is at least 120-days delinquent. Thus, you are threatening an action that you do not have authorization to pursue. This is in direct contradiction to bulletin 2013-07 and will likely be identified as a deceptive act or practice.
The Final Countdown to Same-Day ACH; Don't Get Caught Flat Footed. There Are No Bystanders
September 15 is almost upon us: the date of the second- and most significant- rollout of Same-Day ACH capabilities. If this comes as news to you, it's safe to assume your credit union does not plan to originate Same-Day Debits for members in the early stages of its availability. This does not mean you're able to sit on the sidelines as a spectator, however.
Unlike the ACH network's highly successful fall 2016 rollout of ACH credits, this month's introduction of Same Day Debits has the potential to impact payors unaware of the situation. Actually, let me be more specific. In the ACH credit workflow, it's the payor's institution that initiates the process. Payees at the receiving financial institution (FI) are impacted- but positively. As one credit union professional told us, "As a consumer, if I'm credited with funds a day or two early, I have no problem with that."
Debits are a different matter, however. These transactions are originated by the FI of the payee- most likely a business collecting funds from a customer. A solid majority of these will likely be last-minute payments for bills about to come due (or already overdue) for which the consumer has given one-time authorization. Given that over half of ACH payments flow from consumers to businesses, however, some potential for confusion does exist.
To be clear, there is no reason to suspect a surge in exception items in late September. Nonetheless, out of an abundance of caution credit unions should familiarize front line staff with the new process so they can recognize and address any member questions that may arise.
OMB Approves DOLs Proposal to Delay Fiduciary Rule by 18 Months
The Office of Management and Budget (OMB) approved the DOL’s proposal for pushing the Fiduciary Rule’s effective date by 18 months, from January 1, 2018 to July 1, 2019.
Earlier in August, the DOL filed a brief indicating that it was proposing an 18-month delay to its Fiduciary Rule. In the brief, the DOL indicated that it submitted to the OMB a proposal to delay implementing the remaining parts of the fiduciary rule for 18 months. Now that the OMB has approved the proposal, the DOL is expected to have a short comment period before finalizing the delay.
CUNA has sent several comment letters urging the DOL to delay the applicability of the Fiduciary Rule to give credit unions time to resolve any additional compliance ambiguities. CUNA has also supported additional research efforts to ensure that credit union members are not harmed by unintended consequences of overly broad rules, and additional analysis about whether choices may be limited for moderate or low-income consumers.
CUNA is pleased with the news of the delay which will allow time for the credit union industry to understand any changes that are made to the rule and allow additional time to understand any compliance and applicability complexities associated with the rule.
CFPB Issues Final Rule Regarding Arbitration Agreements
The CFPB has issued a final rule regarding agreements that provide for the arbitration of any future disputes between consumers and providers of certain consumer financial products and services.
In the Dodd-Frank Act, Congress directed the CFPB to conduct a study on the use of pre-dispute arbitration agreements in relation with the offering or providing of consumer financial products or services and submit a report to Congress on the findings. The Dodd-Frank Act also authorized the CFPB, after completing its study, to issue regulations restricting or prohibiting the use of arbitration agreements if the CFPB found that such rules would be in the public interest and for the protection of consumers. Congress stipulated that the findings in the rule must be consistent with the study.
Summary of the Final Rule
The final rule imposes two sets of limitations: (1) prohibiting credit unions from using a pre-dispute arbitration agreement to block member class actions in court, and requiring most providers to insert language into their arbitration agreements to reflect this limitation; and (2) requiring credit unions that use pre-dispute arbitration agreements to submit certain records relating to arbitral and court proceedings to the CFPB.
The final rule describes a provider of covered consumer financial products and services as:
- A person or entity that engages in an activity that is a ”covered” product or service; or
- Any affiliate when acting as a service provider, unless otherwise excluded.
Certain persons excluded from coverage are:
- A person regulated by the Securities and Exchange Commission (SEC);
- A person regulated by a state securities regulator as either a broker-dealer or investment adviser;
- A person regulated by the Commodity Futures Trading Commission (CFTC) or with respect to contracts/transactions subject to CFTC jurisdiction;
- All federal agencies, states, recognized Indian tribes and others with sovereign immunity;
- Any person not subject to the CFPB's rulemaking authority, including auto dealers and attorneys, among others;
- Any person who does not regularly offer consumer financial products or services (i.e., providing to 25 or fewer consumers in each of the current and preceding calendar years);
- A merchant, retailer, or other seller of non-financial goods or services under certain specified circumstances; and
- Any employer to the extent it is offering or providing a product or service to its employee as an employee benefit.
Covered Consumer Financial Products and Services
The final rule indicates certain covered consumer financial products and services as:
- Extending consumer credit;
- Participating in consumer credit decisions;
- Engaging in creditor referral or selection activity for consumer credit;
- Acquiring or selling consumer credit;
- Servicing an extension of consumer credit;
- Extending or brokering automobile leases;
- Providing debt relief services;
- Providing credit repair services;
- Providing credit reporting and credit monitoring;
- Providing deposit accounts under the Truth in Savings Act (TISA) and electronic fund transfers and remittance transfers subject to the Electronic Fund Transfer Act (EFTA);
- Payment processing services, check cashing, check collection, or check guaranty; and
- Debt collection services.
Pre-Dispute Arbitration Agreement
The final rule describes a ”pre-dispute arbitration agreement” as any agreement between a covered person and a consumer providing for arbitration of any future disputes concerning a consumer financial product or service regardless of the form or structure of the agreement. This can include a stand-alone agreement or a single clause included in a larger agreement.
The final rule prohibits a credit union from relying on a pre-dispute arbitration agreement with respect to any aspect of a class action that concerns any covered consumer financial product or service. For example, if an automobile dealer includes a pre-dispute arbitration agreement in a member’s vehicle installment sales contract, a credit union, who may be the indirect automobile lender, is prohibited from relying on such a pre-dispute arbitration agreement in a dispute concerning the installment sales contract.
The final rule also requires that certain language be included in pre-dispute arbitration agreements that informs the member that the arbitration agreement may not be used to block class actions. If an agreement does not contain the specific language, the credit union must amend the agreement to include language required by the rule or provide a written notice to members within 60 days of entering into the agreement. In addition, if certain conditions are met, the requirement to add certain language does not apply to a pre-dispute arbitration agreement for a general-purpose reloadable prepaid card if the agreement was packaged with the card prior to the compliance date.
The final rule provides examples when a credit union enters into a pre-dispute arbitration agreement:
- The credit union provides to a member a new product or service that is subject to a pre-existing agreement to arbitrate future disputes between the parties, and the credit union is a party to that agreement;
- The credit union acquires or purchases a product or service that is subject to a pre-dispute arbitration agreement and becomes a party to that pre-dispute arbitration agreement; or
- The credit union adds a pre-dispute arbitration agreement to an existing product or service.
Submission of Records to the CFPB
Per the final rule, credit unions are required to submit certain records relating to arbitral proceedings to the CFPB. The requirement to submit these records applies to:
- The following records filed in any arbitration or court proceedings in which a party relies on a pre-dispute arbitration agreement:
- The initial claim and any counterclaim;
- The answer to any initial claim and/or counterclaim, if any;
- The pre-dispute arbitration agreement filed with the arbitrator or arbitration administrator;
- The judgment or award, if any, issued by the arbitrator or arbitration administrator; and
- If an arbitrator or arbitration administrator refuses to administer or dismisses a claim due to the credit union’s failure to pay the required filing or administrative fees.
- Any communication the credit union receives from an arbitrator or an arbitration administrator pertaining to a determination that a pre-dispute arbitration agreement does not comply with an administrator’s fairness standards.
- Any communication the credit union receives from an arbitrator or arbitral administrator regarding a dismissal of or refusal to administer a claim due to the provider’s failure to pay required filing or administrative fees.
If a credit union is required to submit a record to the CFPB, it must do so within 60 days of the date the record was filed with the arbitrator, arbitration administrator, or court. Prior to submission of any records, the credit union is required to redact certain information. The CFPB will post the redacted records it obtains from credit unions on a publicly available website that the CFPB will establish and maintain by July 1, 2019.
The final rule is effective September 18, 2017. The final rule will apply to pre-dispute arbitration agreements entered into on or after March 19, 2018.
Click here to view the final rule.
Click here to view the CFPB’s arbitration rule implementation page.
CFPB Announces 2018 TILA/Regulation Z Thresholds
The Home Ownership and Equity Protection Act of 1994 (HOEPA), the CARD Act of 2009 and the Dodd-Frank Act of 2010 each require the Consumer Financial Protection Bureau (CFPB) to adjust on an annual basis certain thresholds under the Truth-in-Lending Act (TILA) / Regulation Z. Adjustments are made based on the annual percentage change in the Consumer Price Index (CPI).
On August 30th the CFPB published the thresholds that will be effective January 1, 2018. They are as follows:
Section 1026.32 – Requirements for High-Cost Mortgages
A loan can be classified as a high-cost mortgage based on one of three independent triggers. Among these are the points and fees charged in connection with the transaction. Beginning 1/1/2018, a loan will be classified as high-cost if the total points and fees charged in connection with the transaction exceed:
- 5% of the loan amount for loans greater than $21,032; or
- For loans of less than $21,032, the lesser of 8% of the loan amount or $1,052
Section 1026.52 - Limitation on Fees (Credit Cards)
Section 1026.52 of Regulation Z establishes a safe harbor for the imposition of penalty fees in association with credit card accounts. A credit union is considered to be compliant with Section 1026.52 so long as their penalty fees do not exceed the following amounts:
- $27 for a first violation
- $38 for a subsequent violation
These thresholds remain unchanged from their current 2017 levels.
Section 1026.43 - Ability to Repay / Qualified Mortgages
One way in which a credit union may satisfy the ability to repay requirements of Regulation Z is to originate the loan as a qualified mortgage (QM). A QM has very specific requirements, including a limitation on the points and fees charged in connection with the transaction. Beginning 1/1/2018, the points and fees limits will be as follows:
- 3% of the total loan amount for loans of greater than $105,158
- $3,155 for loans between $63,095 and $105,158
- 5% of the total loan amount for loans between $21,032 and $63,095
- $1,052 for loans between $13,145 and $21,032
- 8% of the total loan amount for loans of less than $13,145
CFPB Issues Rule Amending HMDA and Raises Reporting Threshold for CUs!
The CFPB granted some much-needed relief to CUs and community banks when it issued a rule amending HMDA that raises the HELOC reporting threshold for 2018 and 2019 from 100 loans to 500 loans. CUNA has been pushing the CFPB to raise the reporting threshold for credit unions and while they would have liked to see it raised even higher, they are grateful for at least some relief for the next two years. The Bureau will revisit the thresholds prior to 2020 to determine whether this will be a permanent change.
In addition to the threshold requirement, the rule makes some technical corrections and minor changes to HMDA, such as clarifying terms like "temporary financing" and "automated underwriting system" in addition to establishing transition rules for reporting certain loans purchased by financial institutions. The text of the final rule is available here, and updates to the technical instructions for filers can be found here. Additionally, the CFPB's HMDA implementation page has also been updated to reflect the new amendments. Please reach out to CUNA Compliance if you have any questions.
Over the past couple of months, we have discussed ADA website compliance, at varying degrees. Credit Unions across the country have received demand letters from attorneys (and attorneys representing members), demanding compliance. While guidance has been somewhat sketchy, to date, below are some references that may assist you in being as prepared as possible:
- Free - http://wave.webaim.org
- Free - http://achecker.ca/checker/index.php
- ADA Website Audit Kit
- Law Firms Allege ADA Non-Compliance Related to Website Accessibility