Markets Wired

Credit Unions Should be Aware of Changes to CDFI Certification Rules

ALEXANDRIA, Va. (Sept. 16, 2019) – Federally insured, low-income credit unions that want to become certified Community Development Financial Institutions have until Oct. 5 to apply to use the National Credit Union Administration’s qualification process for streamlined CDFI certification.

This will be the final opportunity to take advantage of the streamlined certification process in 2019.

Credit unions need to be aware the U.S. Treasury Department has announced important changes to the Community Development Financial Institution and the Native American CDFI Assistance programs (opens new window). Beginning with the FY2020 application round, credit unions must be certified as CDFIs no later than the date the Notice of Funds is published in the Federal Register. That notice is expected to be published in early 2020.

The agency’s Office of Credit Union Resources and Expansion hosts a resource page with details about CDFI certification and the streamlined process. The agency’s application guide (opens new window) has the necessary instructions for the qualification process. The Community Development Financial Institutions Fund’s webpage (opens new window) offers information about the benefits of CDFI certification.

Developed by the NCUA and the CDFI Fund, the streamlined application process has helped 50 credit unions obtain certification as community development financial institutions.

ALEXANDRIA, Va. (Sept. 18, 2019) – The National Credit Union Administration is expecting an unusually large audience for its September 19 open Board meeting, and the agency is making special preparations.

People planning to attend the meeting, which begins at 10 a.m., should be aware of the following:

• There will be 50 seats available in the agency’s Filene Boardroom;
• Attendees will be admitted on a first-come, first-served basis;
• The agency has made an overflow room available for attendees, and those arriving after the boardroom is full will be escorted there;
• The agency’s headquarters will open at 8 a.m., and attendees will proceed through security as usual and obtain visitors’ badges;
• Visitors who leave the building after obtaining a badge will need to go back through the screening process when they return, and they will not be given preference for a boardroom seat; and
• Security staff will begin escorting attendees upstairs at approximately 9:30.

The open Board meeting will be available on a livestream from the agency’s website, NCUA.gov. The meeting agenda is available, and Board documents will be posted on the agenda page when the meeting begins.

Board Action Bulletin

ALEXANDRIA, Va. (Sept. 19, 2019) – The National Credit Union Administration Board held its eighth open meeting of 2019 at the agency’s headquarters today and approved three items:

• A final rule allowing federal credit unions to offer an additional payday alternative loan option to members.
• A final rule to clarify the agency’s regulation covering required credit union supervisory committee audits and providing credit unions with additional flexibility in the audit process.
• A final rule updating, clarifying, and simplifying federal credit union bylaws.

The Chief Financial Officer briefed the Board on the performance of the National Credit Union Share Insurance Fund.

Final Payday Alternative Loans Rule Provides Greater Flexibility

Federal credit unions will be able to offer more payday alternative loan options under a final rule (opens new window) approved, 2-1, by the NCUA Board.

“The PALs II rule is a free-market solution that responds to the need for small-dollar lending in the marketplace,” NCUA Chairman Rodney E. Hood said. “This can make a difference by helping borrowers build or repair credit records, allowing them to graduate to other mainstream financial products. We want to encourage responsible lending that allows consumers to address immediate needs while working towards fuller financial inclusion. Particularly when coupled with financial counseling, as many credit unions provide, such lending can be a powerful tool to help people get out of debt and climb the ladder toward financial security. This is an example of the fundamental credit union principle of people helping people.”

The final rule, known as PALs II, does not replace the existing payday alternatives loan option (opens new window). The final rule approved today:

• Allows a federal credit union to offer a PALs II loan for any amount up to $2,000;
• Requires PALs II loans to have a minimum term of one month with a maximum of 12 months;
• Allows a federal credit union to make a PALs II loan immediately upon the borrower’s establishing membership; and
• Restricts a federal credit union to offering only one type of PALs loan to a member at any given time.

All other requirements of the existing payday alternative loan program—a prohibition against rollovers, a limitation on the number of loans a single borrower can take in a given period, and full amortization—remain in effect.

The final rule will become effective 60 days after publication in the Federal Register.

Final Rule Simplifies, Clarifies Supervisory Committee Audits

The NCUA Board unanimously approved a final rule (opens new window) amending the supervisory committee audit regulation for federally insured credit unions.

The final rule updates outdated provisions of the regulation and provides added flexibility to federally insured credit unions with assets less than $500 million while continuing to ensure appropriate financial oversight.

The final rule:

• Replaces the outdated Supervisory Committee Guide Audit alternative to a financial statement audit and replaces it with a simplified appendix to the regulation;
• Eliminates two types of audits federally insured credit unions seldom use; and
• Eliminates the 120-day deadline for receiving a third-party audit report and gives credit unions the ability to negotiate a delivery date.

The final rule implements recommendations contained in the agency’s Regulatory Reform Task Force’s reform agenda.

The final rule will become effective 90 days after publication in the Federal Register.

Final Bylaws Rule Adopted

The Board unanimously approved a final rule (opens new window) that updates its regulation on federal credit union bylaws.

The final rule codifies in one place several existing NCUA legal opinions and clarifies several bylaw provisions. For example, it provides detailed guidance to help credit union officials, employees, and members better understand bylaw provisions, including a credit union’s ability to limit services to a disruptive or abusive member. The final rule also clarifies that the process to expel a member is statutory.

The final rule will become effective 90 days after publication in the Federal Register.

Strong Operating Trends Mark Share Insurance Fund Q2 Performance

The National Credit Union Share Insurance Fund (opens new window) reported a net income of $79.1 million and a net position of $16 billion for the second quarter of 2019.

Strong investment income earnings drove the net income. Second-quarter total income was $81.2 million. The equity ratio was 1.33 percent, calculated on an insured share base of $1.2 trillion. Operating expenses were $49.8 million in the second quarter, and the provision for insurance losses decreased by $47.7 million.

For the second quarter of 2019:

• The number of CAMEL codes 4 and 5 credit unions increased 1.0 percent from the end of the first quarter, to 204 from 202. Assets for these credit unions decreased 6.8 percent from the first quarter, to $11 billion from $11.8 billion.
• The number of CAMEL code 3 credit unions decreased to 3.6 percent from the end of the first quarter, to 872 from 905. Assets for these credit unions decreased 0.2 percent from the first quarter, to $50.4 billion from $50.5 billion.

There were no federally insured credit union failures in the second quarter of 2019 that caused a loss to the Share Insurance Fund. Total year-to-date losses associated with credit union failures is $40 million.

The second-quarter figures are preliminary and unaudited.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

ALEXANDRIA, Va. (Sept. 25, 2019) – National Credit Union Administration Chairman Rodney E. Hood has appointed H. Lenwood Brooks, V, to serve as his Chief of Staff.

Brooks, who joined the NCUA on May 28, has been serving as Acting Chief of Staff and Director of the Office of External Affairs and Communications.

“Since joining the team, Lenwood has played an integral role in agency policy and communications,” Hood said. “He also has been important to furthering my initiatives for the NCUA and the nation’s system of cooperative credit.”

Brooks came to the NCUA from the Securities Industry and Financial Markets Association, where he served as Vice President of Communications and led the trade association’s external affairs activities.

Previously, Brooks served on Capitol Hill as an advisor to Sen. Roger F. Wicker (R-Miss.), providing counsel during the Senator’s service on the Senate Banking Committee.

“I look forward to supporting Chairman Hood in advancing his initiatives to create a regulatory environment that grows the economy,” Brooks said.

Brooks holds an undergraduate degree from the University of Mississippi in managerial finance and insurance and risk management. He holds a master’s degree in economic and workforce development from the University of Southern Mississippi. Brooks also holds a certificate from the Securities Industry Institute, an executive education program at The Wharton School.

Brooks assumed his duties on September 24.

ALEXANDRIA, Va. (Sept. 25, 2019) – Credit unions interested in learning more about Small Business Administration loan programs can get valuable information from an October 16 webinar hosted by the National Credit Union Administration and the SBA.

Registration for the webinar, “The Big Picture of SBA Lending for Credit Unions—Part 1,” is now open (opens new window). The webinar is scheduled to begin at 2 p.m. Eastern and run approximately one hour. Participants will be able to log into the webinar and view it on their computers or mobile devices using the registration link. They should allow pop-ups from this website.

This will be the first of two webinars hosted by the agencies.

William Briggs, Senior Advisor in the SBA’s Office of Capital Access, and Dianna L. Seaborn, Director, SBA Office of Financial Assistance, will discuss:

• A brief history of the SBA;
• SBA benefits to the borrower and to the credit union;
• An overview of SBA programs; and
• How offering small business loans may align with your credit union’s mission.

The NCUA will provide live Twitter updates on @TheNCUA. Participants can submit questions over Twitter anytime during the presentation and in advance by emailing [email protected]. The email’s subject line should read, “SBA Lending for Credit Unions – Part 1.” Please email technical questions about accessing the webinar to [email protected]. This webinar will be closed captioned and archived online approximately three weeks following the live event.

In April, the NCUA and the U.S. Small Business Administration announced a three-year collaborative effort to bring small businesses and credit unions together and expand awareness about SBA programs.

NCUA’s Office of Credit Union Resources and Expansion supports low-income-designated credit unions and credit unions interested in a low-income designation; minority credit unions; credit unions seeking changes in their charters, bylaws, or fields of membership; and groups organizing to start new credit unions.

ALEXANDRIA, Va. (Sept. 30, 2019) – The National Credit Union Administration issued five prohibition notices and two prohibition orders in September. These seven individuals are prohibited from participating in the affairs of any federally insured financial institution.

• Richard Fortney, a former institution-affiliated party of Mid East Tennessee Community Credit Union in Decatur, Tennessee, agreed and consented to the issuance of a prohibition order and agreed to comply with all of its terms to settle and resolve the NCUA Board’s claims against him.
• Connie Marie Kent, a former employee of Topeka Post Office Credit Union (now 1^st Kansas Credit Union) in Topeka, Kansas, pleaded guilty to the charge of embezzlement.
• Jamelah Y. Martinez, a former employee of Suncoast Credit Union in Tampa, Florida, pleaded guilty to the charge of conspiracy to commit bank fraud.
• Jenifer M. Nelson, a former employee of Baker’s Federal Credit Union in Omaha, Nebraska, pleaded guilty to the charge of attempted theft.
• Teresa Ann Perkins, a former employee of Community United Federal Credit Union in Waycross, Georgia, pleaded guilty to the charge of theft, embezzlement or misapplication of funds.
• Jasmine Marie Santos, a former institution-affiliated party of People’s Alliance Federal Credit Union in Hauppauge, New York, agreed and consented to the issuance of a prohibition order and agreed to comply with all of its terms to settle and resolve the NCUA Board’s claims against her.
• Devin S. Williams, a former employee of Suncoast Credit Union in Tampa, Florida, pleaded guilty to the charge of conspiracy to commit bank fraud.

Prohibition and administrative orders are searchable by name, institution, city, state, and year at the NCUA’s Administrative Orders webpage. The webpage also provides links to the enforcement actions of federal banking agencies against other institutions or their affiliated parties.

You may view NCUA enforcement orders online or inspect them at the NCUA’s Office of General Counsel between 9 a.m. and 4 p.m. Eastern, Monday through Friday. You also may order copies by mail from the NCUA at 1775 Duke St., Alexandria, VA 22314-3428.

ALEXANDRIA, Va. (Oct. 1, 2019) – Financial losses due to cybercrime reached $2.7 billion in 2018 (opens new window), and during National Cybersecurity Awareness Month, the National Credit Union Administration is reminding credit union industry stakeholders to remain vigilant.

“In this day and age, cybersecurity is everyone’s business,” NCUA Chairman Rodney E. Hood said. “Hackers and thieves do not rest, and the NCUA is committed to leadership in detection and response to cyber threats. We expect credit unions to take appropriate measures to protect themselves and their members, and we provide numerous information resources to help them do that job. Earlier this year, I named a special advisor, who reports directly to me, to coordinate our efforts. I hope everyone in our industry will continue working to keep our financial system, and the millions of Americans who entrust their assets to us, safe.”

Cybersecurity remains a supervisory priority for the NCUA, and the agency puts special emphasis on:

• Advancing consistency, transparency and accountability within the cybersecurity examination program;
• Encouraging due diligence for supply chain and third-party service provider management at credit unions;
• Assisting institutions with resources to improve operational hygiene and resilience; and
• Ensuring NCUA’s systems and collected controlled unclassified information is secure.

The agency maintains a cybersecurity resources webpage to provide credit unions with important information, including regulations and guidance, about protecting themselves and their members from cyber threats.

During Cybersecurity Awareness Month, the NCUA will share tips on its Facebook page (opens new window) and on Twitter (opens new window) about online security, recognizing and preventing identity theft, and what consumers can do if they fall victim to a cybercrime. The NCUA provides consumers with information on staying safe in the Be Smart Online (opens new window) section of MyCreditUnion.gov (opens new window).

National Cyber Security Awareness Month is a collaborative effort by government, non-profit, and industry stakeholders to ensure Americans have the necessary information to help them stay more secure online. The NCUA has joined the U.S. Department of Homeland Security’s efforts with the National Cyber Security Alliance’s Stay Safe Online initiative (opens new window) to raise awareness and encourage vigilance.