CUNA Comment Letter
National Credit Union Administration Boards Regulatory Review for 2008
August 1, 2008
Mr. Robert M. Fenner
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
RE: National Credit Union Administration Boards Regulatory Review for 2008
Dear Mr. Fenner:
On behalf of the Credit Union National Association (CUNA), I appreciate the opportunity to file comments in response to the agencys Annual Regulatory Review. CUNA is the nations largest trade organization for credit unions, representing about 90 % of the approximately 8,300 state and federal credit unions in this country, which serve 90- million members.
Under the agencys policy, the National Credit Union Administration (NCUA) reevaluates one-third of its current rules each year and all rules are reviewed every three years. Also, under the Economic Growth and Regulatory Paperwork Reduction Act, NCUA and other regulators are required to seek comments from stakeholders and report to Congress on the agencys efforts to minimize or eliminate unwarranted, outdated, or excessive regulations.
For credit unions, which are one of the most highly regulated businesses in this country, these reviews are very important, and CUNA supports efforts by regulators and legislators to identify unnecessary and/or overly burdensome regulatory requirements that have been imposed on federally insured credit unions. Our comments on particular rules listed in the annual review notice are below. As we have in the past and in light of the fact that NCUA and the other regulators provide an annual report to Congress on regulatory burdens under EGRPRA, we are also providing comments on other key regulatory issues for credit unions that we urge NCUA to address.
Bank Secrecy Act
While most of the regulations for review this year are not noteworthy for credit unions, 12 CFR 748, Security Program, Report of Crime and Catastrophic Act and Bank Secrecy Act Compliance, is significant. This section of NCUAs rules also addresses Suspicious Activity Reports. (This rule supplements BSA regulation 12 CFR 103.)
There is no question that coping with BSA requirements remains one of the top regulatory issues for a number of credit unions and other financial institutions. As members of the NCUA Board are aware, last year CUNA formed a Bank Secrecy Act Task Force, led by Harvard Employees Credit Union President Eugene Foley. The Task Force and/or its representatives met with all three Board members as well as the Director of the Financial Crimes Enforcement Network, Jonathan Freis. The group also met with House Financial Services Committee Chairman Barney Franks staff regarding problematic issues under BSA.
We feel one of the most important things that NCUA and the other federal financial regulators could do regarding BSA is to encourage House and Senate hearings on the scope of the regulations, and the costs and problems institutions encounter in trying to meet BSA requirements and satisfy examiners. This will bring more congressional attention to these issues and encourage lawmakers to develop meangingful legislation to help streamline requirements.
For example, we strongly encourage NCUA to work with the other regulators to support meaningful changes to BSA and anti-money laundering requirements such as:
- Increasing the threshold for current transactions that are reported from $10,000 to $20,000. This is an adjustment that is long overdue, since the present threshold was fixed decades ago.
- Increasing other key thresholds, such as the $3,000 trigger for reporting wire transfers and the $5,000 threshold for filing a SAR should also be considered.
Recently, FinCEN proposed changes to the process for obtaining exemptions to filing currency transaction reports on certain members and customers. CUNA supported FinCENs efforts and made several recommendations for improvements. We believe it would have been useful for NCUA to comment on the proposed changes and recommend NCUA consider filing letters on future proposals from other regulators on issues of universal concern to credit unions, such as BSA. CUNA would be pleased to work with the agency to help identify areas of concern that could be addressed.
Also, we urge NCUA to consider providing additional guidance to credit unions on BSA compliance. For example, we believe more information from the regulators on risk assessment under BSA would be extremely useful.
Because the Board made a number of changes to its regulation on records preservation, 12 CFR 749, in 2007, we are uncertain as to why this rule is on the list for review now. In our comment letter on the proposed revisions, CUNA generally supported the rule changes but brought several issues to NCUAs attention that were addressed in the final rule. These were concerns about when certain records need to be updated and whether examiners would be expecting credit unions to adopt the practices addressed as guidance in the Appendix. We believe these changes were handled satisfactorily, and we do not have further concerns at this time.
In May, CUNA commented on the interagency questions and answers that NCUA and the other regulators proposed to explain flood insurance requirements. We supported the guidance generally but raised several issues, including that the answers should clarify that a loan application does not trigger a flood determination. We also recommended that when the agency finalizes the guidance that it be readily available on the agencys website. We encourage NCUA to work with the other regulators to finalize the questions and answers to assist institutions in their understanding of the flood insurance requirements.
Freedom of Information Act
The guidance available on NCUAs website regarding the Freedom of Information Act provides information for entities seeking to file a FOIA request with NCUA. However, some FOIA requests to NCUA seek information about individual credit unions, such as applications the credit unions have filed with NCUA. The agencys FOIA website should include more thorough guidance to credit unions on how they can protect certain information under the exemptions in FOIA, should data involving their operations or activities be the subject of a FOIA request.
Pending Field of Membership Proposal
In 2007, NCUA issued proposed changes to its field of membership policy to improve the implementation of its FOM authority for both the agency and credit unions. For NCUA, the proposal would have provided greater opportunities for additional scrutiny and reflection for larger community applications, thereby potentially providing a shield against further litigation. For credit unions, the proposal would have streamlined the application system for areas that meet the new presumption definitions, giving community credit unions more latitude to plan their growth to benefit their members, consistent with the language and purposes of the Federal Credit Union Act. While we recommended some changes to the proposal, we commended NCUA in our comment letter for issuing the proposal that would have provided additional flexibility for community federal credit unions. The proposal has now been pending for more than a year. We urge the agency to consider whether the proposal can advance or whether there are key aspects of the proposal that could be included in a final rule to assist both community credit unions and NCUA.
Pending Foreign Investments Proposal
As we stated in our comment letter filed in October on the agencys Advance Notice of Proposed Rulemaking on FCU and Corporate Credit Union Foreign Currency Investments, we support the ability of FCUs that can manage the risk to make investments in foreign denominated currency, consistent with the Federal Credit Union Act. In our comment letter, we requested that NCUA develop a pilot program before writing a regulation that would allow well-run credit unions to engage in this activity. It would also provide the agency with experience in regulating on this issue before implementing a regulation. We also believe that because federal credit unions may already accept foreign currency deposits, allowing FCUs to balance the exchange risk with foreign currency denominated investments could be an important safety and soundness tool.
Commentary to Regulations
The legal opinions from NCUAs Office of General Counsel respond to requests from credit unions and others for interpretations and clarifications on a range of issues credit unions must deal with in complying with regulatory requirements and other matters. NCUA posts the letters on the agencys website, which is useful. However, the guidance in the letters could be the basis for commentary to NCUA regulatory requirements. We encourage NCUA to consider whether commentary on issues such as lending, investments, corporate governance and other topics could assist credit unions, particularly if developed under a notice and comment process. As you know, commentaries issued by the Federal Reserve Board to Regulation Z, Truth-in-Lending, are processed as a regulation with comments from stakeholders considered when the final commentary is developed.
Thank you for the opportunity to file our comments on the agencys regulatory review. We would welcome the opportunity to respond to any questions you may have regarding our comments.
Mary Mitchell Dunn
CUNA SVP and
Deputy General Counsel