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.
- Links for CUNA Awards
Credit Union News
The Kentucky Credit Union League is pleased to announce that its board of directors has selected Debbie Painter to be its new President and CEO, effective January 1, 2019.
“Debbie has been an integral part of the League’s success and we are thrilled to promote her to this position,” said Board Chair, Karen Harbin. “She is not only a visionary leader and strategic thinker, but her strong business acumen and outstanding relationship skills, distinguish Debbie as a dynamic leader. The Board of the Kentucky Credit Union League could not be more pleased and supportive to have Debbie at the helm as she leads us into the next phase of our growth and success.”
“I am so humbled and honored to be named the next President/CEO of the Kentucky Credit Union League,” said Debbie. “We have tremendous opportunities ahead and I am excited to help lead our credit unions forward and to assist in their growth and success.”
Debbie began her career with credit unions in 1979 at Fort Knox FCU. Almost twenty years later, she joined the Kentucky Credit Union League staff and currently serves as Executive Vice President. Painter received a Bachelor’s of Science Degree from Sullivan University in Business Management and is a graduate of the Credit Union Management Institute (CUMI) and CUNA Management School (Madison, WI).
Debbie will succeed Wendell Lyons, who will retire at the end of 2018 after more than 30 years of service at the Kentucky Credit Union League.
“I would like to congratulate Debbie on her appointment as the next President/CEO of the Kentucky Credit Union League,” Lyons said. “As my right-hand executive for the past 18 years, I can say without reservation that Debbie will be a tireless advocate for Kentucky’s Credit Unions in both the Commonwealth and Washington, DC.”
Wendell Lyons, President/CEO of the Kentucky Credit Union League, has been inducted into the Credit Union House Hall of Leaders.
Wendell’s induction caps his astounding career in the credit union movement and comes as he announces his retirement from the League at the end of 2018.
Wendell has served as the Kentucky Credit Union League President and CEO for the last 18 years. Prior, he served as the Director of Governmental Affairs. In his work furthering the credit union movement, Wendell has also spent four years on the CUNA board of directors and served as AACUL Chair from 2013 to 2014.
Wendell received his plaque from Karen Harbin, KCUL Board Chair, during the Credit Union House Annual Meeting in Washington D.C.
The Credit Union House Hall of Leaders provides recognition at its Capitol Hill facility for a distinguished group of individuals whose leadership serves as a model for credit union leaders throughout the country.
We are happy to announce the CUNA awards websites are ready and open for your submissions. Nominations are open from now until June 30.
Administered by the Kentucky Credit Union League & Affiliates and CUNA, the Louise Herring, Dora Maxwell and Alphonse Desjardins awards programs are a wonderful way for credit unions to showcase all the great things they do for their members and their communities.
Below you'll find a brief description of each of the programs:
Louise Herring Award
The purpose of this award is to promote credit union philosophy by formally recognizing credit unions that demonstrate in an extraordinary way the practical application of that philosophy for their members.
Dora Maxwell Award
The purpose of this award is to promote social responsibility among credit unions by formally recognizing their community service achievements.
Alphonse Desjardins Award
Alphonse Desjardins was a credit union pioneer who was instrumental in forming the Canadian and U.S. credit union movements. Besides helping to found the first credit unions in Canada and the U.S., Desjardins pioneered youth savings clubs and in-school "banks", known as caisses scolaires. This award honors leadership within the credit union movement on behalf of youth and adult financial literacy.
In an effort to streamline the submission process for our member credit unions and to reduce financial and human resources spent on the submission process, CUNA and the Leagues have collaborated to produce one standardized format and online submission process for our member credit unions.
You will automatically establish an account when you create an application to submit your first project by clicking on the designated link below. You may save your work and return to the submission site as often as needed as long as you complete and submit all parts of the project submission by the due date of June 30, 2018. State winners will advance to national competition for judging.
The 2018 session of the Southeast CUNA Management School will be held Friday, June 8, 2018 – Friday, June 15, 2018 at the University of Georgia Center for Continuing Education in Athens, GA. Registration is now open for the 2018 session; click here to register online.
Through collaboration with CUNA and Affiliates, the first SRCUS Management School was established in 1970 and has a long history of providing quality programming to credit union professionals. The two-week school was initially held at Oglethorpe University in Atlanta had an original first-year class of 30 plus students.
Since the school’s formation, it has graduated over 1,200 credit union management professionals from 21 states and the District of Columbia. The curriculum is reviewed and revised each year to continue meeting the ever-changing needs of today’s credit union professionals. The program provides a well-rounded curriculum and experiential opportunities for professional and personal growth, challenging each participant to achieve their highest potential by engaging them in learning activities that stimulate critical thinking and increase confidence. The school is currently held each year in June at the University of Georgia, Georgia Center for Continuing Education in Athens, GA.
During the three years of SRCUS, participants focus on coursework that helps develop their operational, managerial and leadership abilities. The curriculum addresses the following topics:
July 15-18 | The Breakers in Palm Beach
1 S County Rd
Palm Beach, FL 33480
Attendee Registration: $879
Save the date and make plans to join your peers from credit union boards across the Southeast for the 2018 Southeast Directors Conference, set for July 15 – 18, 2018. This conference features a full range of informative sessions on critical, timely issues, with first-rate speakers to address the economy, lending environment, and much more.
The Southeast Regional Directors Conference is designed for credit union directors and committee members. The conference location rotates among the ten Southeastern states, giving each state an opportunity to host their fellow credit union volunteers and showcase the best of what their state has to offer. This conference features a full range of informative educational sessions that provide a conduit for learning about critical issues important to today’s ever-changing financial industry.
The 2018 program will be hosted by the League of Southeastern Credit Unions and held at The Breakers in West Palm Beach, Florida. One of America’s legendary resort destinations, The Breakers is a modern-classic resort situated on 140 acres on the island of Palm Beach, Florida; conveniently located six miles from Palm Beach International Airport, 42 miles from Fort Lauderdale International Airport and 72 miles from Miami International Airport. Both Interstate 95 and the Florida Turnpike provide easy access to South County Road), which leads to the entrance of The Breakers.
During CUNA’s Governmental Affairs Conference in February, CUNA honored the 2017 national recipients of the Dora Maxwell, Louise Herring, and Desjardins awards at a reception. CUNA would like to thank everyone that attended the event and participated in celebrating the remarkable works of these exceptional credit unions.
Below are links to award winner videos, a pdf of the Award Winners’ Magazine, and photos from the reception, which you are welcome to download.
Cove Federal CU came in second place in the Dora Maxwell $50 million to $250 million category for their campaign to fight against drug addiction in their community. Read more by clicking the links below:
May 14-16 | French Lick Springs Hotel
French Lick, IN 47432
We can expect that 2018 will be full of challenges – and opportunities – for credit unions. The question is: How will you meet them?
Kentucky and Indiana are joining forces this year to become Partners in Progress. The 2018 Management Conference will include a full agenda of informative and engaging speakers meant to equip you with the knowledge and perspective to view some specific challenges – unique to the credit union industry – as opportunities to better serve your members and grow as an organization.
Who Should Attend?
This conference is designed for credit union CEOs, Executive Management, and Board Chairpersons.
April 12, 2018 | Kentucky Community and Technical College System
300 North Main Street
Versailles, KY 40383
In the aftermath of the Great Recession, the Financial Accounting Standards Board (FASB) issued new guidance for estimating the allowance for loan losses (ALL). This new allowance methodology, which applies to credit unions, is commonly referred to as the Current Expected Credit Loss (CECL) model.
CECL represents the most significant change to generally accepted accounting principles (GAAP) in many years and would fundamentally change the way many credit unions will have to calculate ALL.
CECL will require allowance reserves to be established for estimated “life of loan” losses instead of the current practice of reserving for estimated losses considered probable over the next operating cycle.
While the effective date for CECL is a few years, most experts are recommending credit unions begin preparing now to change their approach for calculating their allowance to both prepare for the changes and to establish “clean data.”
This seminar will survey the process for implementing CECL, and help credit unions and examiners understand the pending changes and best practices for preparing for compliance.
April 16, 2018
April 17, 2018
April 18, 2018
April 19, 2018
Educational Investment: $299 per Credit Union
ONE LOW PRICE FOR ALL THREE SESSIONS!
Price includes unlimited attendees from each registered credit union and program materials.
3:00 p.m. - 5:00 p.m. Compliance Officers & Trainers
6:00 p.m. - 7:00 p.m. Frontline Employees
7:00 p.m. - 8:00 p.m. Volunteers
April 23, 2018 | League Office
3615 Newburg Road
Louisville, KY 40218
Educational Investment: $239
Bankruptcy and collections training continues to be one of those areas where training really pays off for credit unions. Knowing what you are doing can easily help your credit union recover thousands of dollars each year that might otherwise be lost. Not knowing what you are doing can lead to mistakes that bring lawsuits and complaints to regulators. Keeping collectors well-informed isn't just a legal duty---it makes financial sense.
Credit union attorney Eric North has worked with the Kentucky Credit Union League, CUNA and other state leagues for more than 25 years to help credit unions understand, comply with, and obtain the most benefit from the laws that govern them.
Join us on April 23rd as he returns to talk with Kentucky credit unions about...
- Recent Changes to Proof of Claim Rules
- Recent Changes to Chapter 13 Plan Objection Rules
- Recent Sixth Circuit and Bankruptcy Court Decisions, including
- Denial of Discharge for Failure to Reaffirm
- Sealing Settlement Agreements
- Modification of Chapter 13 Plans
- Handling Credit Reporting Disputes
- Collecting MLA-Voided Debt
Have other bankruptcy or collection issues you would like covered?
by Bryan Gray, CEO of Revenue Path Group
Messaging doesn’t work anymore in sales situations. The Convincing Advantages approach works much better.
With tens of thousands of competing messages hitting your prospects on a daily basis, it’s important that your communication is clear, convincing and focused solely on how you solve your prospect’s pain. (Because that’s ALL they’re interested in.) You’re not just trying to “out-message” your direct competitors; you also want to drive your prospects’ prioritization of you up – by shutting down the distracting noise from other, unrelated solutions.
When does your messaging need an overhaul?
- If you’re finding your prospects are, too often, choosing not to make any buying decision – aka “no decision”.
- If you’ve recently lost business you should have won.
- If you can’t get in front of the right people in your prospect organizations.
Next, ask yourself these questions:
- Can your staff quickly identify the three true convincing advantages offered by your credit union?
- Do you get the same three reasons consistently across the board?
- Better yet, can your prospects and members restate these same three advantages?
If you answer “no” to any of these questions, then it’s time to get to work. Now.
Bryan Gray, Revenue Path Group CEO, has the unique ability to apply the big thinking necessary to help leaders steer their organizations through times of velocity and uncertainty. Having previously led two businesses to the Inc. 500 list of fastest-growing companies, Bryan's group is well positioned to understand today's highly competitive arena and help companies activate their prospects to make better and faster decisions.
The Commonwealth of Kentucky is known for horses, fried chicken, and of course, basketball. Team members at Commonwealth Credit Union recently hosted a Rupp Arena Experience Event Night. This hospitality event created a VIP experience for all who attended.
To highlight Commonwealth CU’s partnership with the YMCA of Central Kentucky as their official Afterschool Program Sponsor, the children and parents who utilize the afterschool program were that night’s special guests. Families enjoyed an on-court meal, open court shoot around, a free-throw contest to win an All Sports gift card, and a tour of the University of Kentucky Men’s Basketball locker room.
Former UK Men’s Basketball player, Heshimu Evans from the 1998 NCAA championship team, was the event keynote speaker.
Fort Knox Federal Welcomes Jake Darabos as Chief Financial Officer
Fort Knox Federal Credit Union recently welcomed Jake Darabos, CPA, as its new Chief Financial Officer. Jake is an experienced finance professional with a demonstrated history of working in the financial services industry. As CFO, he is responsible for overseeing all aspects of financial and accounting performance for the credit union including budgeting, product profitability and asset liability management.
Prior to joining Fort Knox Federal, Jake served as Vice President of Finance/Chief Financial Officer for CASE Credit Union in Lansing, Michigan for nearly seven years. He also served as Board Treasurer and Finance Committee Chair of the Lansing Community College Foundation and on the Board of Directors for Ele’s Place - a counseling and grief center for children who have lost parents, siblings, or others close to them. Jake is looking forward to learning more about the many charitable organizations operating in North Central Kentucky and becoming more involved in his new community.
“I am so happy and excited to be living here in Kentucky and to be part of such a great organization. During my short-time at Fort Knox Federal, I’ve already experienced the incredible environment of innovation, fresh ideas and constant improvement,” says Jake Darabos, CFO of Fort Knox Federal. “Employees at every level are unbelievably welcoming, helpful, and truly friendly. I can tell that those traits get carried through to the service that we provide our members as well.”
Jake is skilled in Cash Flow, Budgeting, Internal Audit, Banking, and Account Reconciliation. In addition to being a Certified Public Accountant, he earned a Master of Business Administration from Northwood University - DeVos Graduate School and holds a Bachelor’s degree in Professional Accountancy from Saginaw Valley State University.
“Jake is a skilled finance professional who looks for innovative ways to strengthen the credit union and solve financial challenges for members,” says Ray Springsteen, Chief Executive Officer of Fort Knox Federal. “In fact, his previous finance department was recognized with the first-ever Excellence in Finance Award from the Credit Union National Association for demonstrating initiative, creativity, commitment and strategic thinking.”
Fort Knox Federal Credit Union recently celebrated an important milestone in its strong history of growth. The not-for-profit financial cooperative exceeded 100,000 members.
The credit union, which is the largest Kentucky-based credit union, was founded in 1950 by 10 charter members and was originally named Fort Knox Civilian Employees Federal Credit Union. Over the years, the credit union expanded to serve both military and civilian personnel and the name was changed to Fort Knox Federal Credit Union in 1960.
“We’ve come a long way from where we started,” says Marvin Hawk, Chair of Fort Knox Federal’s Board of Directors. “I’ve had the privilege of serving as a volunteer for over 40 years now and the growth has been tremendous, but our core values and mission to serve has never changed.”
The credit union’s mission statement says it all: Fort Knox Federal Credit Union exists to improve the financial lives of its member-owners. Both the Board of Directors and the credit union staff live this mission, along with the credit union philosophy of people helping people, each and every day.
“Everything we do is for the benefit of our members and community,” says Ray Springsteen, CEO of Fort Knox Federal Credit Union. “When we help even a single member improve their financial life, there’s a ripple effect. We’re strengthening their family and, as word spreads, our entire North Central Kentucky community.”
Fort Knox Federal Credit Union team members were recently recognized by the United Way of Central Kentucky for increasing their total donations by over 100% during 2017.
Team members went above and beyond this year to invest in the community. In addition to donating $20,000 financially, Fort Knox Federal staff also donated their time to volunteer on the United Way’s Board of Directors, Community Investment Team, and Marketing Committee.
“I’ve been active in the United Way myself for four years now and I’m incredibly proud of my team members for their involvement. Fort Knox Federal Credit Union wants the Central Kentucky community to succeed and by supporting the United Way, we’re helping ensure that happens,” says Ray Springsteen, CEO of Fort Knox Federal Credit Union and 2017 Community Investment Team Chair for United Way of Central Kentucky.
“United Way’s work is 100% locally-funded, which means we could not change the odds for families without partners like Fort Knox Federal Credit Union,” said Megan Stith, President & CEO of United Way of Central Kentucky. “To see their employees generously answer our community’s call to action is truly humbling. Their mission of ‘People Helping People’ comes to life through our collaboration, which has a lasting impact on our region.”
Kendrick Walker, Senior Creative Lead for Fort Knox Federal’s Marketing Department knows about the impact of the United Way in his community firsthand. “United Way invests in the community and impacts so many individuals and schools - the sky’s the limit,” said Walker. “My grandmother was put on the list to receive a Habitat for Humanity House and the United Way was part of the program at that time, so it directly impacted our family.”
More information about how to get involved with the United Way of Central Kentucky may be found online at www.unitedwayck.org.
Checks have been signed, sealed and delivered to a variety of charities/non-profits in our community. In total, L&N employees donated $32,936.50 to the Giving Fund that will benefit our employees preferred charities/non-profits. We are grateful to everyone who participated and made these donations possible!
L&N Employees are committed to drinking more water to contribute to a healthier personal lifestyle. L&N’s Water Wellness Challenge encouraged our team to simply consume more water! The results are in and our employees have confirmed that this challenge was easy to adopt, has had a positive impact on how they feel, and has made them more aware of the importance of drinking water.
Perry Blake, the Human Resources & Project Manager at Members Choice Credit Union, will be part of the 2018 Elevate Kentucky Program.
Elevate Kentucky offers young professionals in-depth personal and professional development while fostering a better understanding of challenges facing our Commonwealth. Elevate participants return to their companies with increased skills, knowledge, perspective, and a new statewide professional network.
Blake, who was formerly MCCU’s IT Manager, recently oversaw the opening of the Members Choice branch on the campus of Our Lady of Bellefonte Hospital, was named the Kentucky Credit Union League’s “Young Professional of the Year” in 2016.
Members Choice and ACTC will be offering an exciting new opportunity for students starting in 2018- an internship for those looking to enter the business world after graduation. Developed by both institutions over the past year, MCCU/ACTC Mentorship program will be offered each semester to interested and qualified students. “I am thrilled that 3 of my ACTC business students have the opportunity to complete an internship with Members Choice Credit Union this semester”, said Molly Webb, a Professor and Unit Leader at ACTC. “The students are excited to have the chance to apply what they have learned in the classroom to the business environment and it will also be a valuable experience for the students to network with individuals in the financial business sector.”
While focusing specifically on the many jobs offered in area financial institutions, the program seeks to give participants a broad range of skills and experiences that will translate to any working environment. Soft skills such as workplace communication, professional writing, interview/resume workshops, and habits of effective employees will be covered, and students will have opportunities to pursue independent projects tailored to their professional interests. Cheryl Deborde, President of MCCU, is excited to see the program launching this year. “It’s a wonderful opportunity for the students and Members Choice. We get a chance to strengthen our area workforce and continue our mission of being heavily involved with our community. They get a chance to learn from the staff at MCCU- who we consider to be some of the best in the Tri-State Area.”
Members Choice, who has partnered with hundreds of area businesses during its 85-year history, sees the partnership as a natural extension on its existing services. “One of our mentees was a former AK Steel worker who went back to school after he was laid off in 2015”, says Marketing and Business Development Manager Tiffany Black. “In a broad sense, his story is what we hope to accomplish with all our members: meeting them wherever they are in life and helping them reach their goals”.
On March 14th at 10:30 am, Park Community Credit Union is scheduled to present the Refuge for Women with a Chrysler minivan. The presentation will take place at Park Community’s Hamburg branch located at 2217 War Admiral Way in Lexington, KY.
Refuge for Women is a non-profit that provides a safe place for women who have escaped human trafficking or sexual exploitation. They provide counseling, training, and job placement assistance. Their program is conducted in 3 phases: the first is to stabilize and provide safety to rebuild trust to help with healing, the second is to equip the women with tools, training, and job placement assistance, and the third is an optional program which provides reduced living expenses and additional life skills classes. The van will help relieve some of the organization’s transportation challenges and help further their cause.
Park Community Credit Union has made it a mission to help the communities we serve. The concept to provide vehicles was a suggestion from Park Community’s Executive Vice President, Dave Shadburne. He stated, “This is just one more way that we can help the community, in addition to helping another worthy organization.” Park Community will be co-branding future vehicles with the Park Community logo and the phrase, “Community Passion in Motion.” The phrase captures the credit union’s desire to help the community and to be a driving force for positive change. It also ties back to the industry-wide credit union motto of “People Helping People.”
Not only has Park Community donated over $288,000 for the benefit of multiple charities over the last four years, Park Community offers three co-branded debit cards which benefit Kosair Charities, the Kentucky Humane Society, and the Lexington Humane Society.
The headquarters for Refuge for Women is located on Waller Avenue, in Lexington, KY.
In a win for the credit union industry, the U.S. Court of Appeals for the D.C. Circuit on Friday found the Federal Communications Commission's (FCC) definition of "autodialer" to be arbitrary and capricious, calling the Commission's interpretation of the term "utterly unreasonable." NAFCU has repeatedly told the FCC that its definition has led to financial institutions ceasing important communications with members about their accounts over fear of inadvertently violating the rule.
"It cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a [Telephone Consumer Protection Act]-violator-in-waiting, if not a violator-in-fact," the ruling stated.
In another win, the court also rejected the FCC's interpretation of when a caller violates the Telephone Consumer Protection Act (TCPA) by calling a reassigned number. "We set aside the Commission's interpretation on the ground that the one-call safe harbor is arbitrary and capricious," the court said.
This lawsuit, ACA International v. FCC, stems from a declaratory ruling and order the FCC issued in July 2015 that provides limited robocall exemptions under the TCPA for financial institutions making free auto-dialed calls to consumers.
Upon the court's decision, FCC Chairman Ajit Pai said he was pleased with the ruling. "Instead of sweeping into a regulatory dragnet the hundreds of millions of American consumers who place calls or send text messages from smartphones, the FCC should be targeting bad actors who bombard Americans with unlawful robocalls," he said. "We will continue to pursue consumer-friendly policies on this issue, from reducing robocalls to reassigned numbers to call authentication to blocking illegal robocalls.
NAFCU entered into the suit in September 2015 and oral arguments were heard in the case in October 2016.
A federal appeals court voided the Department of Labor’s fiduciary rule Thursday, a rule CUNA believes would have created additional compliance burdens for credit unions. The Fifth Circuit Court of Appeals ruled 2-1 that the rule was an arbitrary exercise of administrative power.
The rule would expand who is considered a “fiduciary” of an employee benefit plan. The DOL announced an 18-month delay in implementation of the rule in November.
While the final rule has some CUNA-requested improvements, CUNA is still concerned CUNA expressed several concerns about compliance challenges with the rule, and supports additional research efforts into whether the rule may limit choices for moderate and low-income borrowers.
Is Your Credit Union Prepared for the Remote Deposit Capture Indemnity Provision of the Reg CC Final Rule?
The 2017 Regulation CC final rule becomes effective on July 1 this year.
The final rule creates a new Remote Deposit Capture Indemnity in Section 229.34(f) to address the allocation of liability when a depositary institution, such as a credit union accepts deposit of a check through "remote deposit capture." In other words, when the depositor/ member sends the credit union electronic information about a check, such as a photographic image, which the credit union uses to create an electronic check or substitute check for collection. The proposed indemnity would be provided by a credit union that accepted a check via remote deposit capture to a financial institution that accepted the original check for deposit, in the event the financial institution that accepted the original check incurred a loss because the check had already been paid.
The final rule added an exception to the indemnity, and associated commentary, which would prevent a bank from making an indemnity claim if it accepted the original check containing a restrictive endorsement inconsistent with the means of deposit, such as "for mobile deposit only." The Federal Reserve Board believed that providing this exception could reduce accidental double deposits and could provide incentives for financial institutions that receive remote deposit capture deposits to take steps to minimize intentionally fraudulent deposits.
Something to consider: If your credit union accepts checks via remote deposit capture, you may want add language to your Remote Deposit Capture Agreement (if the language isn't already there) that requires your member to add a restrictive indorsement to the check such as "For Mobile Deposit Only," or similar endorsement.
Such an endorsement may help reduce risk to your credit union.
Earlier this week, the Federal Reserve Board issued a Proposed Rule requesting comment on amendments to simplify Regulation J (Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire) and to make it conform more closely with Regulation CC (Availability of Funds and Collection of Checks).
The proposed amendments are intended to align the rights and obligations of parties, including the Federal Reserve Banks, with the Board's 2017 amendments to Regulation CC, which reflected the evolution of the nation's check collection system from one that is largely paper-based to one that is virtually all electronic. The proposed amendments would clarify and simplify provisions of Regulation J, remove obsolete provisions, and improve consistency between Regulation J and Regulation CC. The proposed amendments would also clarify that electronically-created items (check-like items created in electronic form that never existed in paper form) are not "items" that the Reserve Banks are authorized to handle under Regulation J.
The Board has also proposed amending Regulation J to clarify that financial messaging standards for Fedwire funds transfers, such as the international common format standard ISO 20022, do not confer or connote legal status or responsibilities with respect to Fedwire funds transfers.
Subpart A of Regulation J governs the collection of checks and other items by the Reserve Banks. This subpart includes the warranties and indemnities that are given to the Reserve Banks by parties that send items to the Reserve Banks for collection and return, as well as the warranties and indemnities for which the Reserve Banks are responsible in connection with the items they handle. Subpart A also describes the methods by which the Reserve Banks may recover for losses associated with their collection of items. Subpart A authorizes the Reserve Banks to issue operating circulars governing the details of the collection of checks and other items and provides that the operating circulars have binding effect on all parties interested in an item handled by a Reserve Bank. The Reserve Banks' Operating Circular No. 3, "Collection of Cash Items and Returned Checks" (OC 3), is the operating circular that is the most relevant to Reserve Banks' check collection activities. Subpart B of Regulation J provides rules to govern funds transfers through the Reserve Banks' Fedwire Funds Service. This service is also governed by the Reserve Banks' Operating Circular No. 6, "Funds Transfers through the Fedwire Funds Service" (OC 6).
As we all know, beginning May 11, 2018, credit unions will be required to obtain identifying information about the beneficial owners of their legal entity accounts.
We also know that beneficial owners are defined in the rule as:
- Ownership Criteria: Each individual, if any, who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25 percent or more of the equity interests of a legal entity customer: and
- Control Criteria: A single individual with significant responsibility to control, manage, or direct a legal entity customer, including:
- An executive officer or senior manager (e.g. a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer); or
- Any other individual who regularly performs similar functions.
There are some legal entities and some accounts that are so unlikely to foster money laundering that FinCEN has provided exceptions to the rule. In the final weeks before the compliance date, let's review the exceptions and exemptions of the new requirements.
Quasi-Exception: The following are instances when a credit union will only obtain the information required by the control criteria as described above:
- When there is no individual or entity that owns at least 25% of the legal entity opening the account at the credit union;
- When the legal entity is established as a nonprofit corporation or similar entity and has filed its organizational documents with the appropriate State authority as necessary; and
- When the legal entity is a pooled investment vehicle that is operated or advised by a financial institution not already excluded by one the several exceptions in the rule as described below.
Exceptions: The following are NOT considered “legal entities” for purposes of the new CDD rule (keep in mind the term “bank” refers to banks, credit unions & trust companies, while “financial institution” is defined as broadly as you can imagine):
- A financial institution regulated by a Federal functional regulator or a bank regulated by a State bank regulator;
- A department or agency of the United States, of any State, or of any political subdivision of any State;
- Any entity established under the laws of the United States, of any State, or of any political subdivision of any State, or under an interstate compact between two or more States, that exercises governmental authority on behalf of the United States or any such State or political subdivision;
- Any entity, other than a bank, whose common stock or analogous equity interests are listed on the New York Stock Exchange or the American Stock Exchange or whose common stock or analogous equity interests have been designated as a NASDAQ National Market Security listed on the NASDAQ Stock Market (except stock or interests listed under the separate “NASDAQ Capital Markets Companies” heading), provided that, for purposes of this exception, a person that is a financial institution, other than a bank, is an exempt person only to the extent of its domestic operations;
- Any subsidiary, other than a bank, of any entity described in exception 4 above (a “listed entity”) that is organized under the laws of the United States or of any State and at least 51 percent of whose common stock or analogous equity interest is owned by the listed entity, provided that, for purposes of this exception, a person that is a financial institution, other than a bank, is an exempt person only to the extent of its domestic operations;
- An issuer of a class of securities registered under the Securities Exchange Act or that is required to file reports under that Act;
- An investment company, as defined by the Investment Company Act, that is registered with the Securities and Exchange Commission;
- An investment adviser, as defined by the Investment Advisers Act, that is registered with the Securities and Exchange Commission;
- An exchange or clearing agency, as defined by the Securities Exchange Act , that is registered under that Act;
- Any other entity registered with the Securities and Exchange Commission;
- A registered entity, commodity pool operator, commodity trading advisor, retail foreign exchange dealer, swap dealer, or major swap participant, that is registered with the Commodity Futures Trading Commission;
- A public accounting firm registered under the Sarbanes–Oxley Act;
- A bank holding company or savings and loan holding company;
- A pooled investment vehicle that is operated or advised by a financial institution excluded under one of these exceptions;
- An insurance company that is regulated by a State;
- A financial market utility designated by the Financial Stability Oversight Council under the Dodd-Frank Act;
- A foreign financial institution established in a jurisdiction where the regulator of such institution maintains beneficial ownership information regarding such institution;
- A non-U.S. governmental department, agency or political subdivision that engages only in governmental rather than commercial activities; and
- Any legal entity only to the extent that it opens a private banking account subject to the due diligence requirements specifically for private banking accounts.
Exemptions: A credit union may be exempt from the requirements to identify and verify the beneficial owner(s) of a legal entity member only to the extent the credit union opens an account that is:
(i) At the point-of-sale to provide credit products, including commercial private label credit cards, solely for the purchase of retail goods and/or services at these retailers, up to a limit of $50,000;
(ii) To finance the purchase of postage and for which payments are remitted directly by the credit union to the provider of the postage products;
(iii) To finance insurance premiums and for which payments are remitted directly by the credit union to the insurance provider or broker;
(iv) To finance the purchase or leasing of equipment and for which payments are remitted directly by the credit union to the vendor or lessor of this equipment.
Limitations on these Exemptions. These four exemptions do not apply to transaction accounts through which a legal entity member can make payments to, or receive payments from, third parties.
Additionally, if there is the possibility of a cash refund on the account activity identified in one of these four exemptions then beneficial ownership of the legal entity member must be identified and verified by the credit union as required by the new rule, either at the time of initial remittance, or at the time such refund occurs.
1. The New CDD rule going into effect May 11, 2018 triggers the need for a new lobby sign.
False. The new CDD rule does not include any new notice requirements. Many credit unions have been contacted by vendors notifying them that an updated U.S. Patriot’s Act notice is available for purchase. The only member notice that is required by the U.S. Patriot Act regulations is the Customer (Member) Identification Program (CIP) notice that you have been complying with for several years:
Excerpt from the FFIEC BSA Examination Manual:
Adequate Customer Notice
The CIP must include procedures for providing customers with adequate notice that the bank is requesting information to verify their identities. The notice must generally describe the bank’s identification requirements and be provided in a manner that is reasonably designed to allow a customer to view it or otherwise receive the notice before the account is opened. Examples include posting the notice in the lobby, on a Web site, or within loan application documents. Sample language is provided in the regulation:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT — To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
2. Credit unions must now collect identifying information about account beneficiaries.
False. Not surprisingly, there has been some confusion between the term “beneficial owner” and “beneficiaries”. I have listened to CDD related conversations where one person is referring to beneficiaries and the other person is referring to beneficial owners, unaware that they were discussing unrelated account relationships.
Beneficial owners own at least 25% equity interest in, and/or have significant responsibility to control, a legal entity that opens an account at the credit union.
Beneficiaries are designated by an account holder to receive the balance of the funds in the account after the account holder’s death.
The new rule does not require credit unions to obtain additional information about account beneficiaries.
3. The Girl Scouts of America, Inc is exempt from the new CDD beneficial ownership requirements.
False. There has been a lot of confusion surrounding FinCEN’s “scout troop” example in the final rule:
“FinCEN also notes that as a general matter, small local community organizations, such as Scout Troops and youth sports leagues, are unincorporated associations rather than legal entities and therefore not subject to the beneficial ownership requirement.” (Federal Register/ Vol.81, No. 91 / Wednesday, May 11, 2016 / page 29416)
If a scout troop opening an account at your credit union meets the definition of “legal entity”, then the beneficial ownership requirements will apply:
“Legal entity customer. For the purposes of this section: (1) Legal entity customer means a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an account.” (31 CFR 1010.230(e)(1))
Since the Girl Scouts of America, Inc is an incorporated organization, beneficial ownership information will be required.
4. The new CDD rule requires credit unions to obtain beneficial ownership information from a legal entity account every time a new account is opened.
True. Say what? Didn’t I recently post a blog that suggested otherwise? Not exactly. My previous blog post was about assessing your risk and reducing your compliance burden, rather than the literal text of the regulation. The new CDD rule does require beneficial ownership information be obtained each time a new account (ie: loan, checking, CD) is opened. During the rulemaking process, several groups expressed concern with this requirement and requested that the beneficial ownership information only be collected when the initial account is opened. This is how FinCEN responded:
“FinCEN has concluded that, while it is not requiring periodic updating of the beneficial ownership information of all legal entity customers at specified intervals, the opening of a new account is a relatively convenient and otherwise appropriate occasion to obtain current information regarding a customer’s beneficial owners. Accordingly, FinCEN has added to the final rule as § 1010.230(g) a definition for ‘‘new account’’.”
“New account. For the purposes of this section, new account means each account opened at a covered financial institution by a legal entity customer on or after the applicability date.” (31 CFR 1010.230(g))
When assessing your risk to determine how you will implement the new CDD requirements, keep in mind that it is FinCEN’s goal to obtain reasonably updated beneficial ownership information for every legal entity account in every financial institution across the country. Until we receive more guidance from FinCEN, at the very least whenever a new account is opened by a legal entity within a reasonably short time from when you obtained the beneficial ownership information, to reduce compliance burden you might consider asking the member if any changes have occurred and if the response is "no", document and date that response. If your member indicates that changes have occurred to the beneficial owners of the legal entity, a new Beneficial Owner Certification must be processed.
In the meantime, CUNA will continue to work with FinCEN to issue reasonable guidelines and clarification for this new rule. (And yes, I requested that a Beneficial Owner Certificate be good for a full year – so I am hoping for at least 6 months.)
5. Credit unions will be required to verify that the individual named on the Beneficial Owners Certification form are actually “beneficial owners”.
False. Although FinCEN stopped short of allowing the use of the model Beneficial Owner Certification Form to provide a safe harbor for financial institutions choosing to use the form, the agency did clarify in the rule:
“A covered financial institution may rely on the information supplied by the legal entity customer regarding the identity of its beneficial owner or owners, provided that it has no knowledge of facts that would reasonably call into question the reliability of such information.” (31 CFR 1010.230(b)(2))
Q: We are seeing a much broader range of service animals entering the credit union with members who are not obviously using them to perform specific tasks. Sometimes the animals are not very well behaved. What are our obligations under the ADA to ensure that our members with disabilities are protected from discrimination, while at the same time maintaining a safe environment for all of our members?
A: Credit unions are not the only businesses that are struggling with the growing number and variety of “service animals”. Many of us have seen the recent news reports about airlines tightening their policies due to mishaps by “emotional support” turkeys, snakes, and other unconventional animals. (And don’t even get me started on the hamster flushing incident). Additionally, many states have passed laws to crack down on people who try to pass off their pets as “service animals.”
While both the Air Carriers Access Act (ACAA) and the Fair Housing Act (FHA) call for modification of (no pets) policies for “emotional support animals”, the American with Disabilities Act (ADA) only addresses “service animals”, and states that the “provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks” of a service animal as defined by the ADA.
The ADA defines “service animal” as “any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. Other species of animals, whether wild or domestic, trained or untrained, are not service animals for the purposes of this definition.
The work or tasks performed by a service animal must be directly related to the individual's disability. Examples of work or tasks include, but are not limited to:
- assisting individuals who are blind or have low vision with navigation and other tasks,
- alerting individuals who are deaf or hard of hearing to the presence of people or sounds,
- providing non-violent protection or rescue work,
- pulling a wheelchair,
- assisting an individual during a seizure,
- alerting individuals to the presence of allergens,
- retrieving items such as medicine or the telephone,
- providing physical support and assistance with balance and stability to individuals with mobility disabilities, and
- helping persons with psychiatric and neurological disabilities by preventing or interrupting impulsive or destructive behaviors.
In 2010, the Department of Justice added provisions that included miniature horses as service animals, as well, and must meet the same criteria as service dogs.
Permitted Inquiries: Generally, a credit union may not make inquiries about a service animal when it is readily apparent that an animal is trained to do work or perform tasks for an individual with a disability (e.g., the dog is observed guiding an individual who is blind or has low vision, pulling a person's wheelchair, or providing assistance with stability or balance to an individual with an observable mobility disability).
A credit union must not ask about the nature or extent of a person's disability, but may make two inquiries to determine whether an animal qualifies as a service animal. If it is not readily apparent why the individual is accompanied by a dog, a credit union may ask:
- whether the animal is required because of a disability, and
- what work or task the animal has been trained to perform.
A credit union must not require documentation, such as proof that the animal has been certified, trained, or licensed as a service animal.
While a credit union must modify policies, practices, or procedures to permit the use of a service animal by an individual with a disability, there are some exceptions. A credit union may ask an individual with a disability to remove a service animal from the premises if:
(i) The animal is out of control and the animal's handler does not take effective action to control it; or
(ii) The animal is not housebroken.
If a credit union properly excludes a service animal, it must give the individual with a disability the opportunity to obtain goods, services, and accommodations without having the service animal on the premises.
Animal under handler's control: A service animal must be under the control of its handler. A service animal must have a harness, leash, or other tether, unless either the handler is unable because of a disability to use a harness, leash, or other tether, or the use of a harness, leash, or other tether would interfere with the service animal's safe, effective performance of work or tasks, in which case the service animal must be otherwise under the handler's control (e.g., voice control, signals, or other effective means).
Care or supervision: A credit union is not responsible for the care or supervision of a service animal.
Fees: A credit union must not ask or require an individual with a disability to pay a surcharge, even if people accompanied by pets are required to pay fees, or to comply with other requirements generally not applicable to people without pets. If a credit union normally charges individuals for the damage they cause, an individual with a disability may be charged for damage caused by his or her service animal.
For more information see CUNA’s eGuide: Americans with Disabilities
The members of the Federal Financial Institutions Examination Council (FFIEC) today announced an update on its Examination Modernization Project that was undertaken as a follow-up to the review of regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).
The objective of the project is to identify and assess ways to improve the effectiveness, efficiency, and quality of community financial institutions safety and soundness examination processes, particularly through increased leveraging of technology. The agencies expect these efforts to help reduce unnecessary regulatory burden on community financial institutions.
The FFIEC members have, in the past, taken a number of steps to enhance the efficiency of the safety and soundness examination process, including:
- Moving from a one-size-fits-all examination process to a risk-based approach that tailors examinations to the size, complexity, risk profile, and business model of each institution; and
- Leveraging technology to improve offsite surveillance systems and improve the efficiency of onsite and offsite reviews.
To further improve the examination process, the FFIEC members have compared current processes, including the staff involved, technology utilized, products generated, and the work that is completed on-site versus off-site. To gain additional perspectives, the FFIEC members sought feedback from selected supervised institutions and examiners. Based on these feedback sessions, the FFIEC members plan to focus initial efforts on the following four areas that have the potential for the most meaningful supervisory burden reduction:
- Highlight and reinforce regulator communication objectives before, during, and after examinations;
- Leverage technology and shift, as appropriate, examination work from onsite to offsite;
- Continue to tailor examinations based on risk; and
- Improve electronic file transfer systems to facilitate the secure exchange of information between institutions and supervisory offices or examiners.
Although, the members’ initial efforts will be focused on the above four themes, the Examination Modernization Project is expected to be a long-term endeavor and other areas of improvement may emerge. As a first step, and to address the first theme, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the State Liaison Committee (SLC) have each committed to issue reinforcing and clarifying guidance to its examination staff about the importance of being clear and transparent to community bankers during examination processes. While the National Credit Union Administration (NCUA) is not required to participate in the EGRPRA process, it does so voluntarily. The NCUA in 2016 launched a similar effort, its exam flexibility initiative, and the agency has incorporated parts of that initiative into its examination process.
Examiner guidance will cover the following community bank examination communication or transparency practices:
- Assist community financial institutions to prepare for the examination by providing prior notification and addressing spacing needs, staffing, and logistics.
- Tailor the examination request list and scope to the unique risk profile and business model of the institution.
- Facilitate the secure exchange of information between institution management and examiners.
- Inform institution management of areas under review and provide management the opportunity to communicate any additional information or clarification before the conclusion of the examination.
- Establish clear expectations regarding items the financial institutions are expected to address.
The FFIEC expects to take further actions on the other themes listed above and other areas of improvement that may emerge.
The FFIEC was established in March 1979 to prescribe uniform principles, standards, and report forms and to promote uniformity in the supervision of financial institutions. It also conducts schools for examiners employed by the five federal member agencies represented on the FFIEC and makes those schools available to employees of state agencies that supervise financial institutions. The Council consists of the following six voting members: a member of the FRB; the Chairman of the FDIC; the Director of the Consumer Financial Protection Bureau; the Comptroller of the Currency; the Chairman of the NCUA; and the Chairman of the SLC.
What Should You Do When A Distressed Member Threatens Suicide?
Loan denials, debt collections, and even job terminations can result in credit union staff finding themselves facing an individual in a suicidal state or threatening to take their own life. I have talked to credit union staff dealing with this issue and read discussion threads about it on the Compliance Community Discussion Board. What are the credit union’s options when such a situation arises and what resources are available?
To get answers to these questions, I presented the following scenario to internationally renowned suicidologist Dr. David Jobes, Director of the Suicide Prevention Laboratory at The Catholic University of America in Washington, DC:
If a collection officer talks to a member about a delinquent payment and the member asks “if I kill myself, will my wife still have to pay the debt?” – how should the collections officer respond?
Dr. Jobes recommends that the collection officer not respond to the debt question, but rather focuses directly on the suicidal threat. According to Dr. Jobes, "the collection officer should say that any threat of suicide is taken seriously and offer to call the local police to send someone to their home for a Wellness Check.” Dr. Jobes adds “while I understand that your initial response may be to forget about the debt - after all it’s only money and you’re facing a potentially life-threatening situation – it’s important to discourage your member’s use of any verbal threat of suicide as a means of dealing with their financial situation. In my field we call threats of suicide (to obtain non-fatal outcomes) "instrumental behavior"-- our goal is to not further reinforce such behavior, if possible."
Dr. Jobes also stated that “any verbalization about suicide should always be taken seriously. Non-mental health professionals can play a potentially life-saving role in suicide prevention by directly asking about any current suicidal risk. Lives cannot be saved when threats of suicide are ignored or dismissed as mere manipulation.”
So back to our scenario, what should a credit union do about the debt? The immediate response should be to support your member’s well-being. Offer to call the police or a mobile crisis center (if one is available in your area). Be aware that wellness checks can turn into very unpleasant situations, sometimes involving handcuffs and a ride to an emergency room. When talking to the police, request an officer with crisis intervention training (CIT). A CIT officer is specially trained to react appropriately, as well as advise, problem-solve and support your member through this challenging situation. Also, encourage your member to call a suicide prevention hotline. Give the member a sufficient amount of time to seek out the help they need before initiating further discussion about a repayment plan.
An important resource to offer anyone that verbalizes suicidal thoughts, as well as hopelessness or overwhelming depression, is the National Suicide Prevention Life Line (1-800-273-8255).
It’s also critical that the credit union immediately provide support to the employee who performed this crisis intervention. Encourage the credit union employee to talk to a suicide prevention specialist about the incident. The National Suicide Prevention LifeLine is not just for people struggling with suicidal thoughts, it also provides support to anyone worried about a friend, loved one, or even a credit union member. The Lifeline network is available 24/7 across the United States.
For more information: National Suicide Prevention LifeLine