The renewal period for credit unions and their MLOs registered under the SAFE Act began on Nov. 1 and will run through Dec. 31. Credit unions should check their NMLS records to determine which MLOs need to renew their registration (MLOs that registered for the first time within the past six months will not need to renew now) and ensure that those renewals are completed before the deadline.
Credit unions must renew their own registrations before they can submit the renewals for their MLOs. MLOs that do not renew by Dec. 31 will no longer be allowed to act as an MLO until their registration is renewed.
In addition to the MLO renewal, there are two audits that credit unions should ensure are completed or are near completion. Credit unions are required to complete an ACH audit and a SAFE Act audit annually.
The SAFE Act requires independent testing of a credit union’s program on an annual basis.
NACHA also requires an annual audit of a credit union’s ACH program.
Both audits must also be completed by Dec. 31.
Private Student Loans
NCUA has developed a Supervisory Letter to clarify the agency’s supervisory expectations about direct and indirect private student loan (PSL) products.
Private student loan (PSL) products are an important component of higher education finance. Rising education costs, flat household income, and the growing gap between financial aid and federal coverage for student costs have led to a growing demand for these products to meet consumers’ needs. With sound processes and controls in place, private student lending can provide a valuable service to members and generate income for credit unions.
NCUA has observed steady growth in the PSL market since the agency began collecting Call Report data on these loans in December 2011. PSLs are unlike other consumer-based loan products, and it is critical that credit unions have sound processes and controls in place to address their unique characteristics and risks.
Supervisory Letter — Private Student Loan
Private Student Loan AIRES Questionnaire
PayPal Transfers Will Not Count Toward Remittance Rule Cap
Do credit unions need to add inbound PayPal transactions to the tally as they determine whether or not they will meet the 100 transfer threshold for coverage under new remittance regulations? No, the Credit Union National Association compliance team noted in a recent CUNA's Compliance Myths blog post on CompBlog.
A credit union does not have to count international automated clearinghouse transactions when it is the receiving depository institution, the CUNA post clarified.
One example highlighted in the blog post is an inbound PayPal transaction that debits a member's account. "Remember that the remittance transfer provider must be "directly engaged with the sender to send a transfer of funds to a person in a foreign country," CUNA wrote. In this case, PayPal, not the credit union, is directly engaged with the sender as the originator of the ACH.
The Consumer Financial Protection Bureau has confirmed that this is a correct interpretation.
The CFPB's remittance rules, which became effective on Oct. 28, require financial institutions to provide consumers with prepayment and receipt disclosures that include the exchange rate, certain fees and taxes associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors.
Credit unions will not be considered remittance transfer providers under the rule if:
- They provided 100 or fewer remittance transfers in the previous calendar year; and
- If they provide 100 or fewer remittance transfers in the current calendar year.
When tallying the 100, credit unions must count all the various types of remittance transfers covered by the rule together. However, transactions that do not count toward this 100 transfer total include:
- Domestic wire/ACH transactions;
- Transfers where the credit union is the recipient institution of the wire/ACH;
- Debit card purchases from a merchant located in another country;
- International transfers sent by businesses;
- Prepaid cards purchased in the U.S. that are not delivered to a recipient abroad; and
- Online bill payments to recipients located in another country where the agreement states that payments will be made solely by check, draft or similar instrument.
Other Resources: CompBlog Post
CFPB Previews 2014 Regulatory Hot Spots
The Consumer Financial Protection Bureau unveiled its rulemaking agenda for the next six months and highlighted its intent to go forward on a proposed rule on prepaid card products, and more thorough examinations of debt collection practices, payday loans and deposit advance products, and overdraft programs.
These near-term regulatory priorities are outlined in the CFPB's Fall 2013 rulemaking agenda released this week.
The CFPB said it has been gathering significant information on these topics, and will "intensify work on these projects in 2014, for instance by testing consumer disclosures in connection with prepaid products and debt collection."
Streamlining and modernizing regulations that the CFPB inherited from other agencies will also be a focus in the coming months, the CFPB said. "Specifically, we expect to issue a proposal regarding the notices that consumers receive each year from their financial institutions to explain the companies' information sharing practices," the CFPB added. Several commenters suggested the CFPB work to reduce unwanted paperwork for consumers and unnecessary regulatory burdens, "at least where a financial institution limits the sharing of information with third-parties and has not changed policies."
Other Resources: CFPB Release
FinCEN Amends Funds Transfer, Transmittal of Funds Definitions
Technical amendments to the definitions of "funds transfer" and "transmittal of funds" under regulations implementing the Bank Secrecy Act (BSA) were approved by the Federal Reserve and the Financial Crimes Enforcement Network (FinCEN) this week.
The final rule adopts the amendments as proposed in November 2012, the Fed and FinCEN said. The changes maintain the current scope of funds transfers and transmittals of funds subject to BSA, are necessary in light of amendments to the Electronic Fund Transfer Act (EFTA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the agencies added.
Credit Union National Association Senior Director of Compliance Analysis Valerie Moss said that the BSA funds transfer regulations have always excluded from coverage funds transfers governed by the EFTA.
The Consumer Financial Protection Bureau's Regulation E remittance transfer regulation covers transactions that have traditionally been outside the scope of EFTA and Reg E, including consumer-initiated international wire transfers that were covered by BSA regulations.
"So, the BSA regulations had to be amended to maintain coverage of these types of transactions," she added.
Other Resources: FinCEN Release
NCUA Letter Details CUSO Rule, Compliance Tips
An outline of the National Credit Union Administration's final rule on credit union service organization (CUSO) supervision, and compliance tips for credit unions, are provided in a new agency letter to credit unions (13-CU-13).
The CUSO rule, which was approved at the November NCUA open board meeting, will require CUSOs and their subsidiaries to directly file their financial statements with the NCUA and to forward those reports to state supervisors. The rule is targeted to CUSOs that engage in high-risk or complex activities such as credit lending, information technology and custody, safekeeping and investment management.
The final rule will become effective on June 30. A registry for CUSOs to file their documents with the NCUA will be finalized in late 2015.
While the unique collaborative business model of CUSOs fosters cooperation and shared innovation for credit unions, allowing them to achieve economies of scale, retain expertise, and better serve their members, CUSOs can also pose potentially widespread financial and operational risks to credit unions and the National Credit Union Share Insurance Fund, the NCUA noted in the letter.
"Without these changes to the CUSO regulations, NCUA cannot fully determine the financial condition of CUSOs, the full range of services offered by each CUSO, an accurate number of CUSOs in operation, or the relationship between a specific CUSO and a specific credit union," the agency explained.
The letter also contains details on the agency's developing CUSO registry, CUSO accounting tips, and information on how the agency rule will address less than adequately capitalized federally insured, state-chartered credit unions.
NCUA Chairman Debbie Matz in the letter recommended that credit unions that have or plan to make a loan to or investment in a CUSO familiarize themselves with the requirements of the final regulations, and contact their regional office or state supervisory authority if there are further questions.
Other Resources: NCUA Release