CURRENT Newsletter | 21 May 2020
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NOTE: Your League is closed May 25 in observance of Memorial Day. We wish you a happy and safe holiday weekend!
- NCUA Board Approves PCA Flexibility, Joint Ownership Proposal
- FREE Webinar May 27: Compliance Hot Topics
- League to Host Regional, Virtual Meetings Next Week to Facilitate CU Discussion on Pandemic Response Issues
- CUNA Mutual Group’s Carlos Molina Discusses Pandemic-Related Risk Management Issues in League Webinar
- SBA Releases Reporting Process Notice for PPP Lenders
Compliance / Regulatory Affairs News
- NCUA, Regulators Share Responsible Small-Dollar Lending Principles
- FHFA Guidance Addresses Eligibility for Borrowers in Forbearance
- CFPB Extends Comment Period for Proposed Rules on Debt-Collection Practices
Economic / Financial Services News
Security / Fraud Prevention
- Recent Ransomware Attack Validates Growing Trend Targeting Vendors
- FinCEN Issues Advisory Alert on Medical Financial Scams Related to COVID-19
- Equifax Offers to Pay FIs $30.5 Million for Data Breach Claims
The NCUA Board issued a proposed rule and an interim final rule during its Thursday board meeting, conducted via live audio stream. The board also heard a quarterly update on the National Credit Union Share Insurance Fund.
NCUA Chairman Rodney Hood announced at the start of the meeting that NCUA would be “following the spirit” of the White House Executive Order issued this week calling on federal agencies to identify regulations that can be rescinded or temporarily waived to promote job creation and economic growth.
The board approved an interim final rule on prompt corrective action (PCA). The rule:
- Amends §702.201 to temporarily waive the earnings retention requirement for any credit union that is adequately capitalized, and
- Modifies §702.206(c) with respect to net worth restoration plans.
The rule will be effective immediately upon publication in the Federal Register, and the temporary modifications will be in place until Dec. 31.
CUNA and the Leagues requested PCA flexibility due to the pandemic in multiple communications with NCUA in recent weeks.
Comments on the PCA final rule can be submitted to NCUA within 30 days of its publication in the Federal Register.
The proposed rule on joint ownership accounts would provide an alternative method to satisfy the membership card or account signature card requirement (signature card requirement).
The signature card requirement could be satisfied by information contained in the account records of the insured credit union establishing co-ownership of the share account, such as evidence that the credit union has issued a mechanism for accessing the account to each co-owner or evidence of usage of the share account by each co-owner.
Comments on the proposal will be due within 30 days after its publication in the Federal Register.
Your League is hosting a Compliance Hot Topics webinar with attorney Jay Spruill, who leads our compliance hotline. Join us on May 27, at 11 a.m.
Topics will include:
- Holding annual member meetings, board meetings, and other meetings through remote participation: legal and compliance issues
- Emerging Issues under the Paycheck Protection Program for lenders, including loan forgiveness
- Legal and regulatory considerations for dealing with troubled borrowers and loans in default as a result of COVID-19
- Protecting the credit union and its members from new fraud scams as a result of COVID-19
- New regulatory guidance on compliance obligations in response to COVID-19
League to Host Regional, Virtual Meetings Next Week to Facilitate CU Discussion on Pandemic Response Issues
Your League is hosting a series of virtual meetings next week for each of our four geographic regions. All meetings are free to participants.
The schedule is as follows:
- Region II - May 26 (11 a.m.) - All CUs in Richmond, Petersburg and Southside
- Region III - May 28 (9 a.m.) - All CUs in Northern Virginia and Central Virginia (Charlottesville, Waynesboro, Harrisonburg, Shenandoah Valley)
- Region IV - May 28 (11 a.m.) - All CUs in Roanoke Valley, New River Valley, Lynchburg, Danville, Martinsville and southwestern Virginia)
- Region I - May 28 (2 p.m.) - All CUs in Greater Hampton Roads (Tidewater Chapter, including the Peninsula)
If you operate branch locations in multiple regions, feel free to join any of the discussions you might find beneficial.
- Communication tools/signage for both employees and members
- PPE (Masks and gloves) (Are you supplying to employees? Are they offering these to members, and are they paying for them?)
- Lobby traffic – how many members in the branch at once? Appointment only?
- How to identify members with masks
- How to control social distancing (how to deal with open branch concepts or pods)
- Sanitizing solutions, ventilation improvement – where are you purchasing supplies?
- Sneeze guards – who supplies them?
- Employee/member exposure – how they are handling issues?
- Privacy issues
CUNA Mutual Group’s Carlos Molina Discusses Pandemic-Related Risk Management Issues in League Webinar
Your League hosted 40-member credit union leaders on a free webinar this week featuring Carlos Molina, Senior Risk Management Consultant and team lead in Risk and Compliance Solutions for CUNA Mutual Group. Carlos discussed pandemic-related risk management issues for credit unions as we adjust to the “new normal.” Carlos covers everything from employee health issues, rethinking member service, opening branch lobbies and other physical locations, hazard assessments, telework strategies, litigation risks and more!
- Moody's Analytics expects auto and unsecured balances at credit unions to decline. However, mortgage balances are expected to grow.
- Credit union default rates on consumer loans will trail initial unemployment claims by six months to one year. This would mean loss rates will peak toward the end of this year or in the first half of next year.
- Auto loans are an area of concern. Gross loss rates on auto loans at credit unions will peak at around 3.5 percent, which will be above loss rates during the financial crisis.
- According to the webinar, loss rates on credit cards will be in unchartered territory and will come quickly, especially at the largest credit unions.
The Small Business Administration released guidance for Paycheck Protection Program lenders on the reporting process through which they will report their program loans and collect processing fees, effective May 21.
Within the notice is guidance on certain deadlines. According to the notice, lenders must report any PPP loans that have been fully disbursed or canceled to the SBA via Form 1502 by the later of May 29 or 10 calendar days after disbursement or cancellation of the loan. Lenders must also submit PPP loan information to SBA on a monthly basis, reporting on loans that are cancelled before disbursement or that have been cancelled or voluntarily terminated and repaid after disbursement.
Once the loan data on Form 1502 has been received, the SBA will confirm that no prior processing fee on the loan has been requested and no previous processing fee payment has been made on the loan. The SBA will also confirm that the disbursed amount reported on the Form 1502 matches the approved amount in the E-Tran system. The regulator will then calculate the processing fee owed based on the final fully disbursed loan amount and submitted by the lender and submit that fee to the lender using the ACH credit information provided by the lender. (S&P Global Market Intelligence, May 21)
Compliance / Regulatory Affairs News
NCUA, along with other federal financial institution regulatory agencies Wednesday issued principles for offering small-dollar loans in a responsible manner to meet financial institutions customers' short-term credit needs.
According to "Interagency Lending Principles for Offering Responsible Small-Dollar Loans," responsible small-dollar loan programs generally reflect the following characteristics:
- A high percentage of customers successfully repaying their small dollar loans in accordance with original loan terms, which is a key indicator of affordability, eligibility, and appropriate underwriting;
- Repayment terms, pricing, and safeguards that minimize adverse customer outcomes, including cycles of debt due to rollovers or reborrowing; and
- Repayment outcomes and program structures that enhance a borrower’s financial capabilities.
The Federal Housing Finance Agency (FHFA) announced Tuesday that Fannie Mae and Freddie Mac (the Enterprises) have issued temporary guidance regarding the eligibility of borrowers who are in forbearance, or have recently ended their forbearance, looking to refinance or buy a new home.
Borrowers are eligible to refinance or buy a new home if they are current on their mortgage (i.e. in forbearance but continued to make their mortgage payments or reinstated their mortgage). Borrowers are eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, or payment deferral option or loan modification.
FHFA is also extending the Enterprises previously announced ability to purchase single-family mortgages in forbearance. The Enterprises are now able to buy forborne loans, with note dates on or before June 30, 2020, as long as they are delivered to the Enterprises by August 31, 2020 and have only one mortgage payment has been missed. The previous policy was set to expire on May 31.
The Consumer Financial Protection Bureau is extending for an additional 60 days the comment period for its supplemental notice of proposed rulemaking on time-barred debt disclosures to provide interested parties more time to submit comments amid the pandemic.
The deadline was moved to Aug. 4 from June 5.
The proposed rule would prohibit collectors from using nonlitigation means, such as calls, for the collection of time-barred debt unless they disclose to consumers during initial contact, and on any required validation notice, that the debt is time-barred.
Economic / Financial Services News
More than 403,500 Virginians are unemployed following the economic devastation from the COVID-19 pandemic, though the number of initial jobless claims in the commonwealth continues to decrease.
About 44,000 Virginians filed initial claims for unemployment last week, down from roughly 52,000 initial claims the prior week, according to the Virginia Employment Commission (VEC).
The COVID-19 crisis has upended auto sales, and many don’t think they will ever be the same again. Dealers and automakers are changing business strategies and investing millions in new digital sales tools as consumers demand more online and personalized services.
“For digital, this whole disruptive period with corona is an inflection point from which there’s no turning back,” Mike Jackson, chairman and CEO of AutoNation, the country’s largest auto retailer, recently told investors.
What that means for consumers is being able to choose how much or how little of the process they want to conduct online. That includes scheduling a test drive or delivery of a vehicle to appraising a trade-in and getting prequalified for financing.
More importantly, it should result in less, if any, time waiting at dealerships and flexible options such as having the vehicle picked up or delivered – something Tesla Motors and other newer auto retailers such as Carvana have been doing for years. It’s a more flexible purchasing process that doesn’t have to be conducted during traditional business hours.
Security / Fraud Prevention
A major provider of automatic teller machines (ATMs) and payment technology, Diebold Nexdorf, recently suffered a ransomware attack that disrupted some corporate operations and services for over 100 of the company’s customers.
While Diebold has determined that the spread of the malware has been contained, the attack validates a growing trend of third-party vendors being aggressively targeted by cybercriminals deploying ransomware in 2019, according to Beazley Breach Solutions.
(CUNA Mutual Group Risk Alert)
The Financial Crimes Enforcement Network (FinCEN) this week issued Advisory FIN-2020-A002 to alert financial institutions to rising medical scams related to the COVID-19 pandemic. This advisory contains descriptions of COVID-19-related medical scams, case studies, red flags, and information on reporting suspicious activity.
BSA data, as well as information from other federal agencies, foreign government partners, and public sources indicate possible illicit activities related to the COVID-19 pandemic regarding:
- fraudulent cures, tests, vaccines, and services;
- non-delivery scams; and price gouging and hoarding of medical-related items, such as face masks and hand sanitizer.
FinCEN identified eight red flag indicators to help financial institutions identify COVID-19-related medical scams, and to assist financial institutions in detecting, preventing, and reporting suspicious transactions associated with the COVID-19 pandemic.
According to the plaintiffs’ May 15 motion, the parties didn’t discuss the details of attorneys’ fees and expenses prior to agreeing to the essential terms of the proposed settlement. But it does specify that Equifax will pay class counsel up to $2 million for fees and up to $250,000 for litigation costs and expenses, subject to court approval.
Twenty-one financial institutions would recover $5,000 each for service awards.
If certified, the class would be comprised of all financial institutions that issued debit or credit cards jeopardized by the breach.
Those class members that opt-in would agree to release Equifax from any claims that were or could have been asserted in the lawsuit, including, but not limited to, claims related to the data breach, fraudulent card activity, or “damage to the financial services ‘ecosystem’ as alleged in the complaint.”
Related consumer allegations were settled in January for roughly half a billion dollars, with the possibility of paying up to $2 billion more if all potential class members sign-up for credit monitoring.