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Compliance Update with Amy K by Amy Kleinschmit, Chief Compliance Officer HMDA – How much does it cost your CU? The Consumer Financial Protection Bureau (CFPB) has issued a request for information concerning its Home Mortgage Disclosure Act (HMDA) rules. This RFI can be found here. This assessment focuses on the CFPB’s 2015 HMDA final rule and subsequent amendments. The CFPB seeks data/feedback primarily on the following topics - (1) institutional coverage and transactional coverage; (2) data points; 3) benefits of the new data and disclosure requirements; and 4) operational and compliance costs. As explained in the RFI, “To assess the HMDA Rule, the Bureau plans to analyze a variety of metrics and data to the extent feasible. Feasibility will depend on the data and information available to the Bureau as well as any information and data submitted in response to this request for comment. The Bureau plans to investigate the operational and compliance costs of the rule.” Some of the inquiries that the CFPB is interested in data, numbers, feedback on include: The activities undertaken by financial institutions to comply with the HMDA Rule’s criteria, as well as the adoption of loan-volume coverage thresholds, adoption of new and revised data points, and revisions to transactional coverage, including mandatory reporting of open-end lines of credit and the adoption of a dwelling-secured standard. The HMDA Rule’s effect on the operational and compliance costs for financial institutions, including activities covered institutions conducted to collect and report new and revised data points. The CFPB wants to do an evaluation of the benefits and costs of the new and revised data points, and the benefits and costs of new data reported under the revised coverage thresholds. Therefore, the CFPB needs to hear what the costs were to implement the 2015 HMDA rule – how much did your credit union spend on implementation and ongoing compliance? Comments are due 60 days after this RFI is published in the Federal Register. ND Admin Rule – Proposed Changes The North Dakota State Credit Union Board has issued a notice for proposed changes to the North Dakota Administrative Rules Title 13 which will impact ND state chartered credit unions. A hearing will be held on Friday, December 17 on the proposed changes. Written or oral comments on the proposed rules must be received by December 31, 2021. The notice can be found here and the proposed changes can be found here. Among the proposed changes includes updates to ND Admin Rule 13-03-02-02 relating to requirements for advancement of money on security of real property. This includes incorporating changes to appraisal thresholds to reflect NCUA rule changes. A new notice requirements is proposed under 13-03-15. New ND Admin rule 13-03-15-07 would require, “A credit union that operates physical facilities in any area that is experiencing an epidemic or other emergency may adjust the credit union’s operations in any manner that is reasonable to protect the credit union’s members, employees, assets, or business. Under this section a credit union may temporarily close or relocate offices, employees, or operations; restrict access to offices or services; and change the manner in which the credit union provides services. A credit union shall notify the Department of Financial Institutions of any actions the credit union takes under the authority of this section if such action results in a closure greater than one business day. The credit union shall give the department notice promptly and in any case within three business days of the credit union’s decision to adjust the credit union’s operations. The notice must describe the credit union’s actions and the expected duration of the credit union’s adjusted operations. Unless extended by the commissioner, a credit union’s authority to change the credit union’s operations under this section may not exceed sixty days.” Significant changes were made to Chapter 13-03-22 – investment activities. Most the changes relate to derivatives found under 13-03-22-15 and charitable donation accounts under 13-03-22-16. Updates to Chapter 13-03-24 – fidelity bond and insurance coverage of credit unions are proposed to reflect changes NCUA had made to their rules and regulations on the topic. The proposed changes also relate to capitalization of interest regarding loan workouts found under 13-03-28-02 to reflect changes made by the NCUA. FinCEN – Environmental Crimes The Financial Crimes Enforcement Network (FinCEN) recently issued notice FIN-2021-NTC4 regarding an upward trend in environmental crimes and related illicit financial activity. This notice can be found here. BSA officers – be sure to review this notice as it includes very specific suspicious activity report (SAR) filing instructions and highlights the likelihood of illicit financial activity related to several types of environmental crimes. The Notice starts with fact – “Global environmental crimes are estimated by some international organizations to generate hundreds of billions in illicit proceeds annually and now rank as the third largest illicit activity in the world following the trafficking of drugs and counterfeit goods.” As explained by FinCEN, environmental crimes include - (i) wildlife trafficking, (ii) illegal logging, (iii) illegal fishing, (iv) illegal mining, and (v) waste and hazardous substances trafficking. Each of these crimes are further explained in by FinCEN. NCUA Final Rule – Shared Facilities At its recent board meeting, the National Credit Union Administration (NCUA) approved a final rule amending the chartering and field of membership rules for federal credit unions (FCUs), specifically as it relates to service facilities and multiple common bond FCUs. This final rule can be found here and is effective 30 days after published in the Federal Register. The chartering and field of membership manual (Manual) for multiple occupational/associational common bond FCUs requires that groups within a multiple common bond FOM must be within reasonable geographic proximity of the credit union. That is, the groups must be within the service area of one of the credit union’s service facilities. This final rule revised “service facility” requirements to provide that shared locations are service facilities for purposes of multiple common bond FCU additions of groups, regardless of whether the FCU has an ownership interest in the shared branching network providing the locations. Thus, the Manual provides, “A service facility for multiple common bond credit unions is defined as a place where shares are accepted for members’ accounts, loan applications are accepted, or loans are disbursed. This definition includes a credit union-owned branch, a mobile branch, an office operated on a regularly scheduled weekly basis, a credit union-owned ATM, or a credit union-owned electronic facility that meets, at a minimum, these requirements. A service facility also includes a shared branch or a shared branch network location, including a shared ATM or electronic facility that meets the above requirements, if the credit union participates in a shared branching network. This definition does not include the credit union’s Internet Web site.” The final rule also added similar shared branching language to multiple common bond FCUs serving underserved communities as it relates to service facility. However, ATMs continue to be excluded from the from the definition of service facility for additions of underserved areas. The Manual provides that a multiple common bond federal credit union may include in its field of membership, without regard to location, an “underserved area” as defined by the Federal Credit Union Act. Once an “underserved area” has been added to a FCU’s FOM, the credit union must establish within two years, and maintain, an office or service facility in the community. A service facility is defined as a place where shares are accepted for members’ accounts, loan applications are accepted and loans are disbursed. By definition, a service facility includes a credit union-owned branch, a shared branch, a mobile branch, an office operated on a regularly scheduled weekly basis, or a credit union-owned electronic facility that meets, at a minimum, the above requirements. A service facility also includes a shared branch or a shared branch network location, including an electronic facility that meets the above requirements, if a credit union participates in a shared branching network. This definition does not include an ATM or the credit union’s Internet Web site. Share Your Concerns with CFPB As Jay Kruse mentioned in his article on Wednesday, the CFPB recently issued a proposed rule that would require financial institutions to collect and report data on the credit applications of small businesses. The Bureau’s rulemaking is required to implement changes to the Equal Credit Opportunity Act (ECOA) made by Section 1071 of the Dodd-Frank Act. The intent of data collection is to facilitate enforcement of fair lending laws and to enable the identification of business and community development needs and opportunities. The proposed changes result in extensive and recurring costs to comply with these new rules. Please take a moment to share your voice with the CFPB. Any expanded requirements will only create new significant challenges for credit unions trying to provide financial services to those that need them most. The CFPB needs to hear from credit unions on this, and you can send a message through the Grassroots Action Center. As always, DakCU members may contact Amy Kleinschmit at akleinschmit@dakcu.org with any compliance related questions.
Compliance Update with Amy K
by Amy Kleinschmit, Chief Compliance Officer
HMDA – How much does it cost your CU?
The Consumer Financial Protection Bureau (CFPB) has issued a request for information concerning its Home Mortgage Disclosure Act (HMDA) rules. This RFI can be found here.
This assessment focuses on the CFPB’s 2015 HMDA final rule and subsequent amendments. The CFPB seeks data/feedback primarily on the following topics - (1) institutional coverage and transactional coverage; (2) data points; 3) benefits of the new data and disclosure requirements; and 4) operational and compliance costs.
As explained in the RFI, “To assess the HMDA Rule, the Bureau plans to analyze a variety of metrics and data to the extent feasible. Feasibility will depend on the data and information available to the Bureau as well as any information and data submitted in response to this request for comment. The Bureau plans to investigate the operational and compliance costs of the rule.”
Some of the inquiries that the CFPB is interested in data, numbers, feedback on include:
The activities undertaken by financial institutions to comply with the HMDA Rule’s criteria, as well as the adoption of loan-volume coverage thresholds, adoption of new and revised data points, and revisions to transactional coverage, including mandatory reporting of open-end lines of credit and the adoption of a dwelling-secured standard.
The HMDA Rule’s effect on the operational and compliance costs for financial institutions, including activities covered institutions conducted to collect and report new and revised data points.
The CFPB wants to do an evaluation of the benefits and costs of the new and revised data points, and the benefits and costs of new data reported under the revised coverage thresholds. Therefore, the CFPB needs to hear what the costs were to implement the 2015 HMDA rule – how much did your credit union spend on implementation and ongoing compliance?
Comments are due 60 days after this RFI is published in the Federal Register.
ND Admin Rule – Proposed Changes
The North Dakota State Credit Union Board has issued a notice for proposed changes to the North Dakota Administrative Rules Title 13 which will impact ND state chartered credit unions.
A hearing will be held on Friday, December 17 on the proposed changes.
Written or oral comments on the proposed rules must be received by December 31, 2021.
The notice can be found here and the proposed changes can be found here.
Among the proposed changes includes updates to ND Admin Rule 13-03-02-02 relating to requirements for advancement of money on security of real property. This includes incorporating changes to appraisal thresholds to reflect NCUA rule changes.
A new notice requirements is proposed under 13-03-15. New ND Admin rule 13-03-15-07 would require, “A credit union that operates physical facilities in any area that is experiencing an epidemic or other emergency may adjust the credit union’s operations in any manner that is reasonable to protect the credit union’s members, employees, assets, or business. Under this section a credit union may temporarily close or relocate offices, employees, or operations; restrict access to offices or services; and change the manner in which the credit union provides services. A credit union shall notify the Department of Financial Institutions of any actions the credit union takes under the authority of this section if such action results in a closure greater than one business day. The credit union shall give the department notice promptly and in any case within three business days of the credit union’s decision to adjust the credit union’s operations. The notice must describe the credit union’s actions and the expected duration of the credit union’s adjusted operations. Unless extended by the commissioner, a credit union’s authority to change the credit union’s operations under this section may not exceed sixty days.”
Significant changes were made to Chapter 13-03-22 – investment activities. Most the changes relate to derivatives found under 13-03-22-15 and charitable donation accounts under 13-03-22-16.
Updates to Chapter 13-03-24 – fidelity bond and insurance coverage of credit unions are proposed to reflect changes NCUA had made to their rules and regulations on the topic.
The proposed changes also relate to capitalization of interest regarding loan workouts found under 13-03-28-02 to reflect changes made by the NCUA.
FinCEN – Environmental Crimes
The Financial Crimes Enforcement Network (FinCEN) recently issued notice FIN-2021-NTC4 regarding an upward trend in environmental crimes and related illicit financial activity. This notice can be found here.
BSA officers – be sure to review this notice as it includes very specific suspicious activity report (SAR) filing instructions and highlights the likelihood of illicit financial activity related to several types of environmental crimes.
The Notice starts with fact – “Global environmental crimes are estimated by some international organizations to generate hundreds of billions in illicit proceeds annually and now rank as the third largest illicit activity in the world following the trafficking of drugs and counterfeit goods.” As explained by FinCEN, environmental crimes include - (i) wildlife trafficking, (ii) illegal logging, (iii) illegal fishing, (iv) illegal mining, and (v) waste and hazardous substances trafficking. Each of these crimes are further explained in by FinCEN.
NCUA Final Rule – Shared Facilities
At its recent board meeting, the National Credit Union Administration (NCUA) approved a final rule amending the chartering and field of membership rules for federal credit unions (FCUs), specifically as it relates to service facilities and multiple common bond FCUs.
This final rule can be found here and is effective 30 days after published in the Federal Register.
The chartering and field of membership manual (Manual) for multiple occupational/associational common bond FCUs requires that groups within a multiple common bond FOM must be within reasonable geographic proximity of the credit union. That is, the groups must be within the service area of one of the credit union’s service facilities.
This final rule revised “service facility” requirements to provide that shared locations are service facilities for purposes of multiple common bond FCU additions of groups, regardless of whether the FCU has an ownership interest in the shared branching network providing the locations.
Thus, the Manual provides, “A service facility for multiple common bond credit unions is defined as a place where shares are accepted for members’ accounts, loan applications are accepted, or loans are disbursed. This definition includes a credit union-owned branch, a mobile branch, an office operated on a regularly scheduled weekly basis, a credit union-owned ATM, or a credit union-owned electronic facility that meets, at a minimum, these requirements. A service facility also includes a shared branch or a shared branch network location, including a shared ATM or electronic facility that meets the above requirements, if the credit union participates in a shared branching network. This definition does not include the credit union’s Internet Web site.”
The final rule also added similar shared branching language to multiple common bond FCUs serving underserved communities as it relates to service facility. However, ATMs continue to be excluded from the from the definition of service facility for additions of underserved areas.
The Manual provides that a multiple common bond federal credit union may include in its field of membership, without regard to location, an “underserved area” as defined by the Federal Credit Union Act. Once an “underserved area” has been added to a FCU’s FOM, the credit union must establish within two years, and maintain, an office or service facility in the community. A service facility is defined as a place where shares are accepted for members’ accounts, loan applications are accepted and loans are disbursed. By definition, a service facility includes a credit union-owned branch, a shared branch, a mobile branch, an office operated on a regularly scheduled weekly basis, or a credit union-owned electronic facility that meets, at a minimum, the above requirements. A service facility also includes a shared branch or a shared branch network location, including an electronic facility that meets the above requirements, if a credit union participates in a shared branching network. This definition does not include an ATM or the credit union’s Internet Web site.
Share Your Concerns with CFPB
As Jay Kruse mentioned in his article on Wednesday, the CFPB recently issued a proposed rule that would require financial institutions to collect and report data on the credit applications of small businesses. The Bureau’s rulemaking is required to implement changes to the Equal Credit Opportunity Act (ECOA) made by Section 1071 of the Dodd-Frank Act. The intent of data collection is to facilitate enforcement of fair lending laws and to enable the identification of business and community development needs and opportunities.
The proposed changes result in extensive and recurring costs to comply with these new rules. Please take a moment to share your voice with the CFPB. Any expanded requirements will only create new significant challenges for credit unions trying to provide financial services to those that need them most. The CFPB needs to hear from credit unions on this, and you can send a message through the Grassroots Action Center.
As always, DakCU members may contact Amy Kleinschmit at akleinschmit@dakcu.org with any compliance related questions.