Regulatory Compliance Update NAFCU’s Regulatory Compliance Update Webcast Wednesday, November 18, 2015 Presented By: Brandy Bruyere, NCCO, NAFCU Director of Regulatory Compliance Eliott C. Ponte, NCCO, NAFCU Regulatory Compliance Counsel Victoria Daka, NCCO, NAFCU Regulatory Compliance Counsel Elizabeth M. Young LaBerge, NAFCU Regulatory Compliance Counsel
Regulatory Compliance Update Agenda Other Regulators Update NCUA Update Recent Final Regulations • Proposed Rules • Other Issues and Guidance • NCUA Letters • CFPB Update Recent Final Regulations • Recently Proposed Rules • Ongoing Initiatives and Possible Future Rulemakings •
Other Federal Regulators Recent Final Regulations and Guidance DoD: Military Lending Act FCC: Telephone Consumer Protection Act NACHA: Same Day Automated Clearing House
Military Lending Act (MLA) Compliance Dates • o Rule went into effect on October 1, 2015. o Compliance required by October 3, 2016. o Credit card are exempt until October 3, 2017.* More expansive definition of “Consumer Credit.” • o Previously, the DoD definition of “consumer credit” was defined to cover three products: 1. closed-end payday loans for no more than $2,000 and with a term of 91 days or fewer; 2. closed-end auto title loans with a term of 181 days or fewer; and 3. closed-end tax refund anticipation loans. o Under the new definition , “consumer credit” is defined as credit offered or extended to a borrower for personal, family, or household purposes, and is subject to a finance charge, or payable by a written agreement in more than four installments. 32 C.F.R § 232.3(f)(1). o Certain types of credit are excluded Residential mortgages. Auto loans that are secured by the auto being purchased. Personal property that is secured by the personal property being purchased.
Military Lending Act (MLA) Identification of Covered Borrower • o Covered Borrower is defined as “a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit,” and is a member of the armed forces who is on active duty, or active guard and reserve duty. The rule also includes any of their dependents, as defined in 10 U.S.C. § 1072(2): spouse, unremaried widow, child, etc. o “A creditor is permitted to apply its own method to assess whether a consumer is a covered borrower.” o Safe Harbor Until October 3, 2016, credit unions can continue to use a covered borrower identification statement. After October 3, 2016, a credit union seeking a safe harbor must conduct the covered borrower check through the MLA Database, a consumer report from a nationwide consumer reporting agency, or both. One-time Determinations permitted with exceptions . See 32 • C.F.R 232.5(b)(3)
Military Lending Act (MLA) • Military Annual Percentage Rate (MAPR) o The MLA limits the amount of interest that a creditor may charge on “consumer credit,” establishing a maximum MAPR of 36 percent. o MAPR calculation is APR plus other charges. Includes: debt cancellation contracts, debt suspension agreements, ancillary products, etc. o Excluded from the MAPR: A fee that is bona fide and reasonable, and/or An application fee charged when making a “short- term, small amount loan,” also known as a PAL loan • However, the application fee may only be excluded once in a rolling 12-month period.
Military Lending Act (MLA) • Disclosures • A statement of the applicable MAPR, • Any disclosure required by Regulation Z, and • A clear description of the payment obligation of the covered borrower, including a payment schedule or account-opening disclosure. • Method of Delivery • Mandatory disclosures required to be delivered in both written and oral form. • Oral delivery may be provided either in person or by providing a toll-free telephone number. • For more information: • Final Regulation Summary 15-EF-11 • NAFCU Compliance Blogs o November 21, 2014 o July 24, 2015 o September 4, 2015 • NAFCU’s September 2015 Compliance Monitor
Polling Question Does your credit union or any of its vendors use an autodialer or robocaller? A. No. B. Yes. C. I don’t know.
Telephone Consumer Protection Act • Telephone Consumer Protection Act—1991 • Regulation – 47 C.F.R. § 64.1200 • Limits calls and requires different types of consent based on type of call and applies differently depending on a call’s purpose o Telemarketing vs other commercial purpose vs informational o Landline versus cellphone o Automated dialing systems and robocalls
TCPA—July 2015 Order • On July 10, 2015 the FCC issued an order clarifying nearly 20 requests for “clarification” • Expands the term “autodialer” • Addresses revocation of consent • One-time safe harbor for calls to wireless numbers ported to another consumer • Limited exemption for certain free to end user calls for purposes like fraud, data breaches
TCPA—Autodialers Autodialers include systems with the “ potential • ability ” to serve as an autodialer, even where those functions are not activated on the system . Unfortunately, the FCC declined to adopt a clear • standard, reasoning that the level of “human intervention” that is necessary for particular equipment to avoid functioning as an autodialer This is a problem as auto dialing capability varies • widely across products, so instead whether a particular system is an “autodialer” is a “case-by- case determination.”
TCPA— Consent, Transferred Numbers • The FCC rejected requests to allow callers to designate particular methods for consumers to revoke consent. o Instead, consumers can revoke orally or in writing by “any reasonable method,” including by phone or in person at a business’s location. o The FCC rejected arguments that oral revocation presents recordkeeping burdens, and instead “expect[s] that responsible callers…will maintain proper business records tracking consent.” • Wireless numbers reassigned to another consumer—one petitioner asked for a one year grace period • The Order allows callers to avoid liability only for the first call to a wireless number after reassignment o After the first call “without reaching the original subscriber,” the credit union is reasonably “considered to have constructive knowledge” that the number was reassigned
TCPA—Limited Exemption • Four kinds of calls/texts will be exempt if the message is free to the consumer: o relates to fraud or identity theft, o possible data breaches, o conveys information regarding preventing or remedying the harm of a data breach, or o relates to pending money transfers. • Calls must meet three other requirements: o Can only be made to the number provided by the member. o State the credit union’s name and contact information. o Strictly limited to the purpose of the call/text. • The credit union also cannot initiate more than 3 messages per event over a 3 day period, & must offer “an easy means to opt out” of the messages, honoring opt-outs immediately.
Same Day ACH NACHA finalized a change to its operating guidelines which will enable same-day • processing for ACH payments under $25,000. Receiving Financial Institutions must make funds from same-day ACH credits • available by 5:00 PM local time. NACHA recommends that the ACH Operator Implement two daily settlement • windows for same-day transactions: o A morning submission deadline at 10:30 AM ET, with settlement occurring at 1:00 PM ET. o An afternoon submission deadline at 3:00 PM ET, with settlement occurring at 5:00 PM ET. Each originating financial institution must pay the receiving financial institution a • Same Day Entry Fee of 5.2 cents for each same-day transaction.
Same Day ACH 3 Phase Implementation Phase 1 September 23, 2016 Receipt of credit entries as same-day entries. Phase 2 September 15, 2017 Receipt of debit entries as same-day entries. Phase 3 March 16, 2018 Requirement to provide funds availability at 5:00 PM local time
NCUA Update NCUA Recent Final Regulations RBC2 Flood Insurance Field of Membership Associational Common Bond Fixed Assets Definition of Small Entity
RBC2 • October 15, 2015- NCUA finalized its risk-based capital rule which, among other things, establishes a new method for computing NCUA’s risk-based requirement, including a risk- based capital (RBC) ratio measure for “complex” credit unions. • The rule sets forth ten categories of risk-weights for various types of assets based on the risk associated with particular investments. For example, cash is assigned a zero percent risk weight while riskier assets such as mortgage servicing and CUSO activities have substantially higher risk-weights. • Final rule defines ‘‘complex’’ credit union using a single asset size threshold of $100 million. • Effective Date: January 1, 2019.
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