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Compliance Update with Amy K by Amy Kleinschmit, Chief Compliance Officer Risk Based Capital At their recent meeting, the National Credit Union Administration (NCUA) Board issued a proposed rule to provide a simplified measure of capital adequacy for federally insured, natural-person credit unions classified as complex (those with total assets greater than $500 million). This proposed rule can be found here and is open for a 60-day comment period. As a reminder RBC is scheduled to become effective January 1, 2022. As explained by the NCUA – “This proposed rule would primarily provide a simple measure of capital adequacy for credit unions classified as complex based on the principles of the community bank leverage ratio (CBLR) framework. The complex credit union leverage ratio (CCULR) would relieve complex credit unions that satisfy specified qualifying criteria from having to calculate the risk-based capital ratio. In exchange, the credit union would be required to maintain a higher net worth ratio than is otherwise required for the well-capitalized classification for risk-based capital purposes. This is a similar trade-off to the decision qualifying community banks make under the CBLR. After the initial phase in period, a qualifying complex credit union that has a net worth ratio of 10 percent or greater will be eligible to opt into the CCULR framework.” In general, the qualifying criteria that a complex (over $500 million) credit union would need to meet include: (1) Has a CCULR (net worth) of 10 percent or greater, subject to an initial transition period; (2) Has total off-balance sheet exposures of 25 percent or less of its total assets; (3) Has the sum of total trading assets and total trading liabilities of five percent or less of its total assets; and (4) Has the sum of total goodwill, including goodwill that meets the definition of excluded goodwill, and total other intangible assets, including intangible assets that meet the definition of excluded other intangible assets, of two percent or less of its total assets. Among the items the NCUA is seeking comment on includes these qualifying criteria. What are the advantages and disadvantages of each qualifying criterion? What is the burden associated with determining whether a complex credit union meets the proposed qualifying criteria? What other criteria, if any, should the Board consider in the proposed definition? The proposed rule would also make several amendments to update the NCUA’s October 29, 2015, risk-based capital final rule, including addressing asset securitizations issued by credit unions, clarifying the treatment of off-balance sheet exposures, deducting certain mortgage servicing assets from a complex credit union’s risk-based capital numerator, updating several derivative-related definitions, and clarifying the definition of a consumer loan. Money Smart for Older Adults The Consumer Financial Protection Bureau (CFPB) recently announced that it has released an enhanced version of the financial education curriculum – Money Smart for Older Adults. The enhanced version includes a new section to help people avoid “romance scams” and an updated resource guide. Money Smart for Older Adults is a free curriculum that includes an instructor guide with presentation content, speaker tips, hands-on activities, presentation slides, and a resource guide for participants. The resource guide can also serve as a stand-alone handout for distribution to libraries, senior centers, senior housing centers, and at senior information fairs and other events. All materials are provided free of charge and can be ordered in bulk for community-wide distribution. Find all the material and directions on how to order this material at the above link. Beware of Romance Scams Earlier this year the Federal Trade Commission (FTC) released data on scams in 2020, which can be found here. In 2020, reported losses to romance scams reached a record $304 million, up about 50 percent from 2019, as reported by the FTC. As discussed in the FTC article, increased use of online dating sites/apps and social media have contributed to this increase. “While many people report losing money on romance scams that start on dating apps, even more say they were targeted on social media. These social media users aren’t always looking for love, and report that the scam often starts with an unexpected friend request or message.” The common theme with all these scams – money. “What many of the largest reported dollar losses have in common is that people believe their new partner has actually sent them a large sum of money. Scammers claim to have sent money for a cooked-up reason, and then have a detailed story about why the money needs to be sent back to them or on to someone else. People think they’re helping someone they care about, but they may actually be laundering stolen funds. In fact, many reported that the money they received and forwarded on turned out to be stolen unemployment benefits.” Protect your members and their money with education. *Never send money or gifts to someone you haven’t met in person – even if they send you money first. *Talk to someone you trust about this new love interest. It can be easy to miss things that don’t add up. So pay attention if your friends or family are concerned. *Take it slowly. Ask questions and look for inconsistent answers. *Try a reverse-image search of the profile pictures. If they’re associated with another name or with details that don’t match up, it’s a scam. The link ftc.gov/romancescams has a lot of resources that your credit union can use to help educate members about these scams. From the lies romance scammers tell and how to avoid losing money, to how to detect a romance scammer. Online love interest has asked for money = scam! NACHA - Unemployment Benefits Return Opt-In Program NACHA has announced the creation of an Opt-In Program to better facilitate the return and recovery of potentially fraudulent unemployment benefits originally paid by ACH credits (i.e., Direct Deposit), including partial amounts. This announcement and the instructions for participating in this program can be found here. The program allows for a Participating RDFI to send funds back to a state unemployment agency via a “Program Return” for less than the amount of the original ACH credit (partial amount); or also for the full amount of the original entry. Program Returns are treated as an ODFI Request for Return under the Nacha Rules, in which the ODFI indemnifies the RDFI for the return of funds. Program Returns (CCD and R06), in accordance with Program Rules, may be sent for two years after the settlement date of the original ACH credit. Procedural Notice on PPP Guarantee Purchases and Charge-Offs The Small Business Administration has issued Procedural Notice 5000-812316, "PPP Guaranty Purchases, Charge-Offs, and Lender Servicing Responsibilities," on how lenders can apply to have SBA purchase and charge off Paycheck Protection Program loans for which the borrower has not applied for forgiveness or made payment on the loan. The notice became effective July 15, 2021 and expires July 1, 2022. Happy Birthday CFPB Ten years ago on July 21, the Consumer Financial Protection Bureau (CFPB) opened. The CFPB announced the occasion and provided some stats on what they have accomplished including fielding 3.1 million consumer complaints. The CFPB has also ordered that $1.7 billion be paid in civil penalties as a result of CFPB enforcement work. $692 million in consumer relief was ordered as a result of fair lending enforcement and supervisory actions, per the CFPB. 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
Risk Based Capital
At their recent meeting, the National Credit Union Administration (NCUA) Board issued a proposed rule to provide a simplified measure of capital adequacy for federally insured, natural-person credit unions classified as complex (those with total assets greater than $500 million). This proposed rule can be found here and is open for a 60-day comment period.
As a reminder RBC is scheduled to become effective January 1, 2022.
As explained by the NCUA – “This proposed rule would primarily provide a simple measure of capital adequacy for credit unions classified as complex based on the principles of the community bank leverage ratio (CBLR) framework. The complex credit union leverage ratio (CCULR) would relieve complex credit unions that satisfy specified qualifying criteria from having to calculate the risk-based capital ratio. In exchange, the credit union would be required to maintain a higher net worth ratio than is otherwise required for the well-capitalized classification for risk-based capital purposes. This is a similar trade-off to the decision qualifying community banks make under the CBLR. After the initial phase in period, a qualifying complex credit union that has a net worth ratio of 10 percent or greater will be eligible to opt into the CCULR framework.”
In general, the qualifying criteria that a complex (over $500 million) credit union would need to meet include:
(1) Has a CCULR (net worth) of 10 percent or greater, subject to an initial transition period;
(2) Has total off-balance sheet exposures of 25 percent or less of its total assets;
(3) Has the sum of total trading assets and total trading liabilities of five percent or less of its total assets; and
(4) Has the sum of total goodwill, including goodwill that meets the definition of excluded goodwill, and total other intangible assets, including intangible assets that meet the definition of excluded other intangible assets, of two percent or less of its total assets.
Among the items the NCUA is seeking comment on includes these qualifying criteria. What are the advantages and disadvantages of each qualifying criterion? What is the burden associated with determining whether a complex credit union meets the proposed qualifying criteria? What other criteria, if any, should the Board consider in the proposed definition?
The proposed rule would also make several amendments to update the NCUA’s October 29, 2015, risk-based capital final rule, including addressing asset securitizations issued by credit unions, clarifying the treatment of off-balance sheet exposures, deducting certain mortgage servicing assets from a complex credit union’s risk-based capital numerator, updating several derivative-related definitions, and clarifying the definition of a consumer loan.
Money Smart for Older Adults
The Consumer Financial Protection Bureau (CFPB) recently announced that it has released an enhanced version of the financial education curriculum – Money Smart for Older Adults. The enhanced version includes a new section to help people avoid “romance scams” and an updated resource guide.
Money Smart for Older Adults is a free curriculum that includes an instructor guide with presentation content, speaker tips, hands-on activities, presentation slides, and a resource guide for participants. The resource guide can also serve as a stand-alone handout for distribution to libraries, senior centers, senior housing centers, and at senior information fairs and other events. All materials are provided free of charge and can be ordered in bulk for community-wide distribution.
Find all the material and directions on how to order this material at the above link.
Beware of Romance Scams
Earlier this year the Federal Trade Commission (FTC) released data on scams in 2020, which can be found here. In 2020, reported losses to romance scams reached a record $304 million, up about 50 percent from 2019, as reported by the FTC. As discussed in the FTC article, increased use of online dating sites/apps and social media have contributed to this increase. “While many people report losing money on romance scams that start on dating apps, even more say they were targeted on social media. These social media users aren’t always looking for love, and report that the scam often starts with an unexpected friend request or message.”
The common theme with all these scams – money. “What many of the largest reported dollar losses have in common is that people believe their new partner has actually sent them a large sum of money. Scammers claim to have sent money for a cooked-up reason, and then have a detailed story about why the money needs to be sent back to them or on to someone else. People think they’re helping someone they care about, but they may actually be laundering stolen funds. In fact, many reported that the money they received and forwarded on turned out to be stolen unemployment benefits.”
Protect your members and their money with education.
*Never send money or gifts to someone you haven’t met in person – even if they send you money first.
*Talk to someone you trust about this new love interest. It can be easy to miss things that don’t add up. So pay attention if your friends or family are concerned.
*Take it slowly. Ask questions and look for inconsistent answers.
*Try a reverse-image search of the profile pictures. If they’re associated with another name or with details that don’t match up, it’s a scam.
The link ftc.gov/romancescams has a lot of resources that your credit union can use to help educate members about these scams. From the lies romance scammers tell and how to avoid losing money, to how to detect a romance scammer. Online love interest has asked for money = scam!
NACHA - Unemployment Benefits Return Opt-In Program
NACHA has announced the creation of an Opt-In Program to better facilitate the return and recovery of potentially fraudulent unemployment benefits originally paid by ACH credits (i.e., Direct Deposit), including partial amounts. This announcement and the instructions for participating in this program can be found here.
The program allows for a Participating RDFI to send funds back to a state unemployment agency via a “Program Return” for less than the amount of the original ACH credit (partial amount); or also for the full amount of the original entry. Program Returns are treated as an ODFI Request for Return under the Nacha Rules, in which the ODFI indemnifies the RDFI for the return of funds. Program Returns (CCD and R06), in accordance with Program Rules, may be sent for two years after the settlement date of the original ACH credit.
Procedural Notice on PPP Guarantee Purchases and Charge-Offs
The Small Business Administration has issued Procedural Notice 5000-812316, "PPP Guaranty Purchases, Charge-Offs, and Lender Servicing Responsibilities," on how lenders can apply to have SBA purchase and charge off Paycheck Protection Program loans for which the borrower has not applied for forgiveness or made payment on the loan. The notice became effective July 15, 2021 and expires July 1, 2022.
Happy Birthday CFPB
Ten years ago on July 21, the Consumer Financial Protection Bureau (CFPB) opened. The CFPB announced the occasion and provided some stats on what they have accomplished including fielding 3.1 million consumer complaints. The CFPB has also ordered that $1.7 billion be paid in civil penalties as a result of CFPB enforcement work. $692 million in consumer relief was ordered as a result of fair lending enforcement and supervisory actions, per the CFPB.
As always, DakCU members may contact Amy Kleinschmit at akleinschmit@dakcu.org with any compliance related questions.