Source: https://nafcucomplianceblog.typepad.com/nafcu_weblog/checking-accounts/
Timestamp: 2019-04-19 02:22:29+00:00

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Hello, Compliance Friends. We are counting down the days to San Diego. The NAFCU Compliance Team will be hosting our Regulatory Compliance School and Regulatory Compliance Seminar the week of October 9th.
On September 12, 2017, the CFPB issued its latest supervisory report sharing a plethora of observations from recent examinations and other supervisory activities. The report covers issues observed by the Bureau in the areas of automobile loan servicing, credit card account management, debt collection, deposits, and fair lending. Other topics, such as small-dollar lending, collection, mortgage origination, and mortgage servicing were also addressed. Today's blog will provide some of the highlights of the Bureau's findings.
Automobile Loan Servicing. In recent examinations, CFPB examiners reviewed how servicers are overseeing repossession agents and how repossessions are conducted. The Bureau's report alleges that some servicers are repossessing vehicles after the repossession was cancelled due to a formal extension agreement or the borrower has made a payment.
In these instances, the servicers wrongfully coded the account as remaining delinquent, customer service representatives did not timely cancel the repossession order after borrowers made sufficient payments or entered agreement with the servicer to avoid repossession, or repossession agents had not checked the documentation before repossessing and thus did not learn that repossession had been cancelled.
As a result of the examiner's findings, the servicers implemented a system that requires repossession agents to verify that the repossession order is still active immediately prior to repossessing the vehicle, for example, through a specially designed mobile application for that purpose.
Credit Card Account Management. The Bureau examiners noted that generally their supervised entities are complying with Federal consumer financial laws.
However, CFPB examiners observed that one or more credit card issuers violated Regulation Z by failing to provide the requisite tabular disclosures with the account opening materials provided to numerous cardholders. The entities in question acknowledged the violations with examiners and initiated a review to ensure that the errors were limited, the root causes were identified, and corrective actions were developed.
CFPB Supervision also reviewed the calls between customer service representatives and consumers. The review revealed customer service representatives routinely veering from or abandoning their scripts, which resulted in misrepresentation and higher fees for consumers. To mitigate the deceptive practice, entities established more effective controls over communications to consumers, ensured representatives informed consumers of free payment options prior to authorization of an expedited phone payment and reimbursed fees to consumers impacted by the deceptive representations about the costs and availability of pay-by-phone options.
Debt Collection. The CFPB examiners noted that some entities made false representations to consumers about the effect on their credit score of paying a debt in full rather than settling the debt for less than the full amount. As the CFPB explained in a 2013 bulletin, representations about the impact of paying a debt on a consumer's credit score may be deceptive. The bulletin states that "in light of numerous factors that influence an individual consumer's credit score, such payments may not improve the credit score of the consumer to whom the representation is being made. Consequently, debt owners or third-party debt collectors may well deceive consumers if they make representations that paying debts in collection will improve a consumer's credit score." As a result of these findings, the entities in violation amended training materials to reflect this Bureau's guidance.
Deposits. The CFPB continues to examine financial institutions for compliance with Regulation E as well as review for any unfair, deceptive, or abusive acts or practices (UDAAPs) in connection with deposit accounts.
The CFPB examiners noted that several institutions are engaged in unfair acts or practices by placing hard holds on customer accounts to stop all activity when the institutions observed suspicious activity. These holds resulted in the consumers' accounts being locked, resulting in payments not being honored, deposits being rejected, and the consumer lacking access to his or her funds for as long as two weeks. The examination also found that some institutions also failed to clearly, consistently, and promptly communicate the nature and status of these holds.
As a result, the CFPB directed the institutions to cease unnecessarily placing hard holds on consumer deposit accounts and to develop and implement policies and procedures to clearly, consistently, and promptly communicate with consumers with respect to hard holds place on their accounts.
The overdraft protection product would take effect on the same day as enrollment.
Supervision directed the depository institutions in violation to cease misrepresenting features of their overdraft protections products.
Fair Lending. In general, the CFPB examiners found deficiencies in oversight by board and senior management, monitoring and corrective action processes, compliance audits, and oversight of third-party service providers.
The Bureau's review also revealed data quality issues, which were related to a lack of complete and accurate loan servicing records, made certain fair lending analyses difficult or impossible to perform. The examiners attributed these data quality issues to significant weaknesses in compliance management system related policies, procedures, and service provider oversight.
These are just some of the highlights from the CFPB's report. The full report is available here.
On September 28th, the CFPB released HMDA implementation materials to support the recently issued 2017 HMDA rule. The Bureau has updated the 2018 Institutional Coverage Chart, the 2018 Transactional Coverage Chart and the Key Dates Timeline.
You can find the materials here on the CFPB's HMDA implementation webpage.
Greetings to all of you out there in regulatory compliance land. While NCUA’s Truth in Savings Rule and Regulation E address the disclosure of credit union overdraft and bounce protection programs, we sometimes receive questions regarding the substantive features of these products. For example, credit unions have asked whether federal regulations prohibit automatically enrolling members into bounce protection programs to cover checks presented for payment that may overdraw an account. This blog post covers some of these more frequently asked questions on overdrafts and bounce protection.
May Credit Unions Automatically Enroll Members in Overdraft or Bounce Protection Programs?
Regulation E prohibits credit unions from assessing a fee against a member’s account for paying an ATM or one-time debit card transaction as part of an overdraft service unless the member has affirmatively consented to participate in the overdraft program. See, 12 C.F.R. § 1005.17(b)(1)(i)-(iii). The member must be provided with “confirmation of the [member’s] consent in writing, or if the [member] agrees, electronically, which includes a statement informing the [member] of the right to revoke such consent.” 12 C.F.R. § 1005.17(b)(1)(iv). Therefore, while the rule does not specifically require that a member opt in to the overdraft program, it does prohibit the credit union from charging the member a fee for overdrawing an account.
Aside from the disclosure requirements in Section 707.11 of Truth in Savings, there does not appear to be any comparable opt-in requirement for bounce protection programs that may pay the full amount of a check even though it overdraws a member’s account. Article 4 of the Uniform Commercial Code, which sets forth model laws that have been adopted to some extent in each state, generally permits credit unions to pay checks even though they may cause an overdraft and leaves questions regarding bounce protection programs to state contract and common law principles. See, U.C.C. § 4-401. For example, specific bounce program practices may be subject to claims under state unfair or deceptive trade practices laws.
That being said, NCUA does recommend as a best practice that credit unions “obtain affirmative consent of [members] to receive overdraft protection. Alternatively, where overdraft protection is automatically provided, permit [members] to ‘opt out’ of the overdraft program and provide a clear consumer disclosure of this option.” Letter to Credit Unions 05-CU-03 (Feb. 2005). Even though this is couched in interagency guidance, the clear supervisory expectation here appears to be that credit unions either obtain affirmative consent or permit members to opt out of overdraft or bounce protection programs.
Is it Necessary to Send a Cure Notice Each Time a Member Overdraws an Account?
Promptly notify consumers of overdraft protection program usage each time used. Promptly notify consumers when overdraft protection has been accessed, for example, by sending a notice to consumers the day the overdraft protection program has been accessed. The notification should identify the date of the transaction, the type of transaction, the overdraft amount, the fee associated with the overdraft, the amount necessary to return the account to a positive balance, the amount of time consumers have to return their accounts to a positive balance, and the consequences of not returning the account to a positive balance within the given timeframe. Notify consumers if the institution terminates or suspends the consumer’s access to the service, for example, if the consumer is no longer in good standing.
(Emphasis added). Again, while this is provided as a “best practice,” the guidance appears to suggest that a program that lacks some or all of these recommended practices may be considered unsafe and unsound or possibly unfair or deceptive. Therefore, even though this does not appear to be an explicit requirement contained in a regulation, credit unions may still wish to provide cure notices to members both as a member service and to possibly avoid any compliance or litigation risk.
Is it Necessary to Provide an Adverse Action Notice when the Credit Union Denies an Overdraft?
While Regulation B defines “credit” and “consumer credit” broadly enough to include credit union bounce protection and overdraft programs within its scope, the rule also contains a number of exceptions from various provisions for incidental credit including the requirement to provide adverse action notices. See, 12 C.F.R. § 1002.3(c)(2)(vi). The term “incidental credit” is defined as an extension of credit that is not made pursuant to a credit card agreement, that is not subject to a finance charge, and that is not payable by agreement in more than four installments. See, 12 C.F.R. § 1002.3(c)(1). Since most overdraft charges are not considered finance charges, it may not be necessary to provide an adverse action notice under Regulation B. See, 12 C.F.R. § 1026.4(c)(3). That being said, if the credit union denies an overdraft as part of an overdraft line of credit program, there may be an obligation to provide an adverse action notice if one would otherwise be required since fees related to overdraft lines of credit are typically considered finance charges.
Looking for Additional Help with the Military Lending Act? Thursday, September 15, 2016, from 2:00-3:30 p.m. ET, Director of Regulatory Compliance Brandy Bruyere and Director of Education Devon Lyon will be providing a walk through the recent interpretive guidance issued by the U.S. Department of Defense on the Military Lending Act as well as highlighting lingering compliance questions. More information on the webcast can be found here.
2016 Interagency Fair Lending Hot Topics. Tuesday, October 4, 2016, from 2:00-3:30 p.m. ET, the Federal Reserve will be hosting an interagency webinar on fair lending issues and hot topics. During this session, representatives from six federal agencies, including NCUA, will discuss a variety of emerging fair lending issues and hot topics including redlining, auto lending, and CFPB updates. More information on the webinar can be found here.
NCUA Issues Letter to Credit Unions on Same Day ACH. On Tuesday, September 13, 2016, NCUA issued Letter to Credit Unions 16-CU-03 (Sept. 2016) as a reminder for the upcoming Phase 1 NACHA Same Day ACH deadlines. The letter addresses upcoming changes to the NACHA Operating Rules to implement Phase 1 of NACHA's Same Day ACH amendments. The letter contains a summary of NACHA's Same Day ACH rule as well as additional resources for credit unions and is available here.
Last month, the NCUA, and four other regulatory agencies, issued interagency guidance on member account deposit reconciliation practices. See Letter to Credit Unions 16-CU-04. The guidance states that some financial institutions are not appropriately reconciling “credit discrepancies.” These “credit discrepancies” arise when a consumer inaccurately records the amount of money being deposited on a deposit slip (or mobile app when using Remote Deposit Capture) and the financial institution fails to properly reconcile the discrepancy. For example, if a consumer deposited $110 into an account, but indicated on the deposit slip that only $100 was deposited, it is the regulators expectation that $10 is credited to the consumer’s account.
While not specifically stated, the guidance comes after regulators took action against Citizens Bank for improper deposit reconciliation practices. In the consent order, the CFPB and other bank regulators alleged that Citizens Bank engaged in an unfair deposit practices because it failed to credit consumers the full amount of their deposits when the deposit slip stated an amount that was less or greater than the actual amount of cash and checks deposited. The regulators also asserted that Citizens’ practices were deceptive because the bank’s account agreements stated that consumer deposits were subject to verification, thereby implying that Citizens Bank would take steps to ensure consumers were credited with the correct deposit amount. In practice, however, discrepancies were corrected only if the amount indicated was over or under a certain dollar threshold ($50.00 prior to September 2012, and $25.00 thereafter). Over a six-year period, the CFPB alleged that Citizens Bank under credited consumers accounts by approximately $12.3 million.
This guidance does not change existing law, but rather emphasizes that financial institutions should ensure deposit reconciliation policies and practices are compliant with existing law. The guidance highlights that failing to properly implement and carry out proper deposit reconciliation practices, financial institutions may be violating the Expedited Funds Availability Act, which is implemented by Regulation CC, Unfair and Deceptive Acts and Practices, which is enforced under the FTC, and Unfair, Deceptive, Abusive Acts or Practices, which is enforced by the CFPB.
With regard to Regulation CC, the guidance points out that financial institutions are required to make funds available in transaction accounts within prescribed time limits. For example, under Regulation CC certain check deposits must be made available for withdrawal the business day after the banking day on which they were received. Failure to reconcile “credit discrepancies” within these time limits may violate Regulation CC, as consumers are unable to access the correct amount of funds that they are entitled within the time period outlined by the regulation. The guidance acknowledges that under limited circumstances items cannot be reconciled. With the exception of an item being severely damaged, the guidance fails to provide examples of these limited circumstances.
Going forward, credit unions should ensure that deposit reconciliation policies and practices are designed to reconcile discrepancies within regulatory timeframes. Furthermore, disclosures made to members about the credit union’s deposit reconciliation policies and practices should be accurate. Credit unions may want to consider implementing effective compliance management systems that include appropriate policies, procedures, internal controls, training, and oversight and review processes to ensure “credit discrepancies” are identified and corrected within a timely manner.
Laywers love To Kill a Mockingbird. I need both hands to count the number of lawyers I know who have dogs or children named Atticus. Personally, I have always advocated for My Cousin Vinny as the better movie about trial work. So when a wave of questions about ute accounts youth accounts came in to the Regulatory Compliance team recently, I could not resist.
See, 12 C.F.R. Part 701, Appendix A, Article XV, Section 1. The standard bylaws direct an FCU to the state law in their jurisdiction regarding the rights of a minor because whether or not a minor has legal ability to enter into a binding agreement, i.e. the legal capacity to contract, is determined by law in each state. If an FCU were to enter into a contract, for example - an account agreement, with someone who did not have capacity to do so at the time the agreement was made, the agreement could become void, possibly even years later. For this reason, most credit unions require a parent or adult to also be on the account, to ensure that an enforceable agreement is in place. An FCU considering youth accounts or writing a policy regarding youth accounts should speak with local counsel who can advise it on the law regarding minority and capacity to contract in the credit union’s jurisdiction.
(Emphasis added.) Even if not needed for CIP reasons, many credit unions request the minor’s SSN and/or birth certificate to document the account and to ensure the minor is actually a minor.
If a state’s laws and the credit union’s policies permit the minor to open the account on his or her own behalf, then the minor is the customer. In this case, the FCU should perform CIP regarding the minor as it would on any other customer.
One final consideration with regard to youth accounts is the Children’s Online Privacy Protection Act (COPPA). COPPA imposes certain requirements on operators of websites or online services directed to children. Credit unions are subject to COPPA if they operate a website or online service directed to children, or have actual knowledge that they are collecting or maintaining personal information from a child online. COPPA could apply to a credit union’s internet-based services, such as online banking. A credit union could be unintentionally accessing a minor’s personal information through cookies or similar devices which may collect nonpublic personal information. Making COPPA determinations generally requires an analysis of the specific facts and circumstances surrounding a credit union’s online activities against the requirements of COPPA. Thus, a credit union may want to work with local counsel to see if COPPA applies. The FTC’s website has an excellent overview of COPPA.
Enterprise Risk Management (ERM) is becoming a more prominent management strategy in the credit union industry. This webcast focuses on the importance of reputation management and NCUA’s requirements and expectations. You’ll work through real examples of risk scenarios that could significantly impact your reputation, such as data breaches and social media attacks. Learn how to properly implement a reputation risk plan and how to defend your credit union.
In a move aimed at cracking down on payday lenders, the Department of Justice (DOJ) launched an investigation last year called “Operation Choke Point.” DOJ is probing whether banks allowed third-party payment processors working on behalf of payday lenders to illegally access billions of dollars from consumer checking accounts.
In essence, Operation Choke Point is an attempt to cut off some payday lenders’ “back door” entrance to traditional banking services. Like many merchants, payday lenders often use third-party payment processors to debit their customers’ checking accounts. The third-party payment processors, in turn, establish relationships with financial institutions. This allows payday lenders to indirectly access the Automated Clearing House (ACH) network to receive payments.
So what happens when a bank has an agreement with a third-party payment processor, but that third-party does business on behalf of a payday lender who is breaking the law? As it turns out, without proper due diligence, these agreements could be quite expensive for targeted financial institutions.
In its first Operation Choke Point action, DOJ filed a lawsuit against Four Oaks Bank (Four Oaks) of North Carolina. The various allegations included violations of Customer Identification Program requirements under the Bank Secrecy Act and allowing improper access to the ACH network. According to the complaint, Four Oaks worked with a third-party payment processor called TPPP-TX, which primarily represented payday lenders. Some of these payday lenders had rates of returned transactions that exceeded 30%, over 21 times higher than the national average of 1.38%. DOJ claimed that the Bank went so far as to design its internal policy for third-party payment providers to accommodate TPPP-TX despite these “extraordinarily high” return rates. Four Oaks was also accused of failing to properly identity foreign payday lenders accessing customer accounts via TPPP-TX.
Eye on the Olympics. Speaking of choking, I don’t know about the rest of you, but I’m a bit of a sucker for the Olympics. Maybe it’s the combination of patriotism and pageantry. Or maybe it’s that I experience a strange sense of joy watching people careen down a mountain headfirst on a tiny sled. Anyway, while figure skating is not normally my personal favorite, 19-year-old Jason Brown is an athlete to watch. Here is Jason’s impressive performance that helped earn him a trip to Sochi.
"One commonly overlooked area in interest-rate and liquidity risk analysis is the modeling of early withdrawals of certificates of deposit (CDs). While many credit unions will have nonmaturity share decay rate assumptions incorporated into their analysis, they rarely factor in the risk associated with early CD withdrawals because many believe that the early withdrawal penalties associated with their CDs will discourage members from cashing in their CDs prior to maturity. This line of thinking may have been reasonable and defensible prior to 2007 when interest rates—even on short-term CDs—were near 5 percent. However, it probably would not pass muster in today’s extremely low interest-rate environment." (emphasis added).
i. The term “checking account” may be used to describe share draft accounts.
ii. The term “money market account” may be used to describe money market share accounts.
iii. The term “savings account” may be used to describe regular share and share accounts.
iv. The terms “share certificate,” “certificate account,” or “certificate” may be used to describe share certificates and other dividend-bearing term share accounts.
v. However, under no circumstances may a credit union describe a share account as a deposit account, or vice versa. For example, the term “certificate of deposit” or “CD” may not be used to describe share certificates and other dividend-bearing term share accounts. Similarly, the terms “time account” (used in Regulation DD, 12 CFR 1030.2(u)) and “time deposit” (used in Federal Reserve Board's Regulation D, 12 CFR 204.2(c)) may not be used to describe term share accounts." (emphasis added).
1. General. Member savings placed in share accounts are equity investments, and the returns earned on these accounts are dividends. Federal credit unions may only offer dividend-bearing and non-dividend-bearing share accounts. State-chartered credit unions may offer both share and deposit accounts if permitted by state law. State law, including without limitation regulations and official interpretations, will determine if returns earned in accounts in state-chartered credit unions are dividends."
Hopefully that helps clear things up a bit for everyone!
Nationals Win! Yesterday was NAFCU's summer staff outing - the Washington Nationals versus the Pittsburgh Pirates. Everyone had a great time and I wanted to share my two favorite photos (featuring the former Compliance Guy) from yesterday which accurately sum up the game.
But, luckily, Bryce Harper came through with a 2-run walk-off home run in the bottom of the ninth - leading to this reaction!
Excellent use of the rally cap! Have a great weekend!
On Tuesday the CFPB issued a Study of Overdraft Programs which outlines their findings of studying the overdraft market.
For compliance officers and risk managers, I'd start with the Fact Sheet and then dive into Cordray's speech and then the Study to get an idea of where the CFPB is heading next on overdrafts.
"Our report today examined overdraft practices at some of the country’s larger financial institutions and found wide variations across them when it comes to overdraft opt-in rates and costs. At some institutions, more than 40 percent of new customers were opting in for overdraft coverage; at others, it was less than 10 percent. The gap may reflect differences in the substance of overdraft programs, or differences in customer base, or differences in marketing approaches. On this point, we are interested to dig in and learn more about the reasons why." (Emphasis added).
What is your credit union's opt-in rate? How are you marketing your overdraft programs?
"A second takeaway is that financial institutions have very different policies, procedures, and practices that can be highly complex and difficult for consumers to understand, yet greatly affect whether and how often they will incur overdraft fees...Some charge no overdraft fees on items under a certain amount (say, for example, a transaction of $5 or less); others do not charge if the total amount of the net overdraft at the end of the day is under a certain amount. At still other institutions, if you miss by as little as a penny, you may incur a hefty overdraft fee. Predicting or planning around these results can be highly complex." (Emphasis added).
Does your credit union have a de minimis exception for overdrafts?
One change suggested in the Pew Report was to add a "reasonable and proportional" limit on overdraft fees. In other words, if a member overdraws by $5 - you'd be limited to a $5 overdraft fee. Similar to the existing restrictions on penalty fees for credit cards under 12 CFR 1026.52(b)(2).
Require depository institutions to provide information about checking account terms, conditions, and fees in a uniform, concise, easy-to-read format that would be available online and in financial institutions' branches.
Require depository institutions to provide accountholders with clear, comprehensive terms and pricing information for all available overdraft options when a customer is considering opting in to a plan.
Require that overdraft penalty fees be reasonable and proportional to the institution's costs in providing the overdraft loan or to the size of the violation.
Require depository institutions to post deposits and withdrawals in a fully disclosed, objective and neutral manner, such as in chronological order, that does not maximize overdraft fees.
While these are recommendations at this point, there is a definite possibility the CFPB moves on amending checking account disclosures in the next year. At a minimum, be sure to pass this report along to others at your credit union - paying special attention to the suggested Model Disclosure Box on page 9 of the PDF (page 7 of the report). Would your forms provider be able to recreate that disclosure? How long would it take? At what cost?
While Pew's Report looks at 36 of the 50 largest banks, the recommended changes are meant for all depository institutions - including credit unions.
Featured Presentation - What Does Having a Culture of Compliance Mean to Your Credit Union?
We hear again and again about the importance of fostering a culture of compliance. What exactly does that mean? Why should you invest the time and effort into creating such a culture? Join experts David A. Reed and Rusty Vellek to learn how to know if you have achieved a culture of compliance at your credit union. Also explore how to gain buy-in from all departments to support the notion of a culture of compliance.
We hope to see you there! Be sure to sign-up by August 23 to Save $100!
Regulatory Burden: Update the Regulations, Please!
Regulatory Burden - Update the Regulations, Please! Today I want to look at another form of regulatory burden. And, I'm going to use three different regulators as examples (equal opportunity!) The general gist is that when credit unions look at the regulations - they should be accurate. When Congress changes the law, regulators have an obligation to update their regulations so that entities they regulate - including credit unions - can rely on those regulations. If the regulations aren't updated promptly, the result is a textbook case of unnecessary regulatory burden.
"Regulation E implements the EFTA and hopefully the CFPB will move very swiftly to amend Regulation E to ensure that everyone is aware of the change.
Note: The removal of the requirement will occur after President Obama signs the bill and enacts it into law. Thus, credit unions' litigation and compliance risk will reduce at that point. The CFPB moving quickly to amend Regulation E and clarify the remaining requirement will be the icing on the cake. Hopefully we don't have to wait too many birthdays."
Well, here we are on March 12, 2013 and a look to Regulation E - 12 CFR 1005.16 - clearly shows the CFPB hasn't updated Regulation E to implement the amendments to the Electronic Funds Transfer Act.
Where is the Burden? The burden lies in the fact that if a compliance officer was reviewing Regulation E they would come to the conclusion that federal law still requires the "on the machine" disclosure. Which is wrong. The Electronic Funds Transfer Act was amended by H.R. 4367 to remove the federal requirement and the CFPB just hasn't found the time to update Regulation E.
An isolated incident? Must be due to the unique situations related to a new regulatory agency who was given so many mandates by Dodd-Frank. Keep reading, it gets worse.
"So, the Dodd-Frank change to Regulation CC - the one that bumps the $100 next day availability amount to $200 - when does it become effective? July 21, 2011. Some of you are thinking that you can wait, however, until the Fed finalizes its current Regulation CC rulemaking to comply. Wrong. Surprise, surprise, but the Fed buried this detail into its Reg CC proposal.
"Regulation CC. A change in Regulation CC from $100 to $200 for next-day availability. The Federal Reserve has proposed changes to Reg CC that have not been finalized. This change to $200 becomes effective though the Federal Reserve has not changed the language of Reg CC.
"The letter is dated August 15. Which is interesting because the change to $200 became effective July 21, 2011.
Dodd-Frank was signed on July 21, 2010. The Reg CC proposal was released March 3, 2011. I'm still puzzled why the Fed did not propose two separate rules - with one proposal solely implementing the $200 change.
A brief amendment to that last statement - these headaches do get realized by credit unions. Now, we need the regulators to realize the impact of their actions (or inactions).
(B) The aggregate amount deposited on any one banking day to all accounts of the customer by check or checks not subject to next-day availability under paragraphs (c)(1) (i) through (vi) of this section."
And, if they followed that language - they would have a regulatory violation. Let me repeat that - if a credit union followed the language of Regulation CC - as published by the Federal Reserve in the Electronic Code of Federal Regulations - they would have a regulatory violation as the regulation is incorrect. If that isn't regulatory burden, I don't know what is!
Example 3 - National Credit Union Administration. By now, everyone is aware that the unlimited share insurance coverage for noninterest-bearing transaction accounts expired on December 31, 2012. We blogged on this issue on December 18, 2012 and then again on January 2, 2013. We also had discussions with NCUA about updating 12 CFR 745.14 of their regulations to prevent confusion by credit unions - which we discussed in our February 7, 2013 blog post.
So, here we are on March 12, 2013 and the language of NCUA's 12 CFR 745.14 still hasn't been removed. Granted, this example isn't as egregious due to the inclusion of this language "(a) Separate insurance coverage. Through December 31, 2012, a member's funds in a 'noninterest-bearing transaction account' (as defined in § 745.1(f) of this part)" - however, it still makes a credit union researching 12 CFR 745.14 follow-up with whether this has been unlimited share insurance has been extended or not. It hasn't and NCUA should make that information clear by removing 12 CFR 745.14 from their regulations.
Where is the Burden? There were so many back-and-forths on the unlimited share insurance issue - including Footnote 1 of NCUA's Letter to Credit Unions 12-CU-14 - that it is understandable that credit unions would be unsure whether or not the unlimited coverage was extended. NCUA could ease this burden by updating their regulations.
But, Regulating is Difficult. I'm sometimes told that I'm too harsh on regulators. That they have very difficult jobs. I get that. I'm not denying that fact (my wife works at a federal financial regulator and I know how hard she works). However, a basic job of a regulator is to make sure their regulations are clear and understandable. And, accurate. This last part is extremely important. Credit unions need to be able to rely on the regulations that are published by the regulators. If they have to second-guess whether the regulations are accurate, they cannot perform other tasks - such as serving their members.
One example where a federal regulator failed to promptly update their regulations after Congress explicitly amended the law to remove an unnecessary regulatory burden from financial institutions.
One example where a federal regulator failed to promptly update their regulations after Congress explicitly amended the law to provide further protections to consumers.
One example where a federal regulator failed to update their regulations after Congress failed to extend a provision that was explicitly designed to "sunset" after a specific period of time.
I've been in the Washington D.C. area almost nine years and if I've learned one thing it is that Congress does not like to be ignored.
Consider opting out of overdraft coverage on debit or ATM transactions.
If you thought the last round of periodic statement changes to disclose overdraft fees was bad, the potential formatting requirements on this one could really drive you nuts!
The full information on the upcoming listening sessions can be found here. Registration for the first two sessions (May 2 in Boston and May 9 in Alexandria, VA) are now open.
Yesterday, the CFPB announced it had filed an amicus brief (Wikipedia.org) in an ongoing case regarding the right of rescission under the Truth in Lending Act. The CFPB's press release can be found here and the actual brief is here.
"The CFPB is committed to filing amicus briefs in litigation involving the federal consumer financial protection laws that it oversees and in which the CFPB determines its views will assist the courts in correctly resolving the matters. Amicus briefs are an important way for the CFPB to ensure that the statutes it oversees are correctly and consistently interpreted by the courts, even in cases in which the CFPB is not itself a named party."
I hinted at this on Monday - but it does seem the only thing missing from the CFPB's regulatory toolbox is actual guidance or clarity to the entities it regulates. Wouldn't that be something, huh?
NAFCU Members: Our Regulatory Alert on the CFPB's Overdraft Inquiry (12-EA-07) is available. Please consider providing your feedback and comments to help NAFCU draft our comment letter to the CFPB. Comments are due to NAFCU by April 6th.

References: § 1005
 § 1005
 § 4
 § 1002
 § 1002
 § 1026

v. 
 § 745