National Credit Union Administration (NCUA) Board Member Todd M. Harper on October 30 is requesting public comment on his proposal to create a dedicated consumer compliance exam program for large, complex credit unions.
The NCUA’s current compliance examinations covering consumer financial protection laws in credit unions with total assets of $10 billion or less differs from other financial institutions regulators. Other regulators complete regularly scheduled, risk-focused consumer compliance reviews and assign a separate consumer compliance rating outside of the CAMEL process for institutions under their jurisdiction.
Harper noted the NCUA’s approach to consumer financial protection reviews also runs counter to the congressionally mandated mission of the Federal Financial Institutions Examination Council, which works to develop uniform standards and processes across all financial institution regulators.
Harper would like to add three new full-time employees in the NCUA’s Office of Consumer Financial Protection in 2020, who would develop and later launch a dedicated consumer compliance examination program for large, complex credit unions.
Read the press.
Thursday, October 31, 2019
Tuesday, October 29, 2019
Early CECL Adopter CU Saw 4 -Fold Increase in Loan Loss Reserves
S&P Global Market Intelligence provided insights into the impact of the current expected credit loss (CECL) accounting standard on one credit union's balance sheet.
Georgia United Credit Union (Duluth, GA) adopted the CECL standard in the first quarter of 2019.
The $1.2 billion credit union reported a 324.5 percent increase in allowances for loan and lease losses between the first quarter of 2019 and the fourth quarter of 2018 to $24.7 million. Its allowances for loan and lease losses to loans ratio went from 0.59 percent as of December 2019 to 2.51 percent as of March 2019.
The credit union's CFO noted that $15 million of the reserve build was tied to troubled commercial loans.
The credit union reported a 10.7 percent decline in net worth to $142.2 million over the same time period. Its net worth ratio fell from 11.71 percent at the end of 2018 to 10.10.24 percent at the end of March 2019.
According to an industry consultant, credit unions, on average, are under-reserved by a factor of two and will need to increase their loan loss reserves under CECL.
Read the article.
Georgia United Credit Union (Duluth, GA) adopted the CECL standard in the first quarter of 2019.
The $1.2 billion credit union reported a 324.5 percent increase in allowances for loan and lease losses between the first quarter of 2019 and the fourth quarter of 2018 to $24.7 million. Its allowances for loan and lease losses to loans ratio went from 0.59 percent as of December 2019 to 2.51 percent as of March 2019.
The credit union's CFO noted that $15 million of the reserve build was tied to troubled commercial loans.
The credit union reported a 10.7 percent decline in net worth to $142.2 million over the same time period. Its net worth ratio fell from 11.71 percent at the end of 2018 to 10.10.24 percent at the end of March 2019.
According to an industry consultant, credit unions, on average, are under-reserved by a factor of two and will need to increase their loan loss reserves under CECL.
Read the article.
Monday, October 28, 2019
Study: Most State CU Regulations Are Very Difficult to Read
A paper appearing in the Journal of Accounting - Business & Management found that majority of state credit union regulations are very difficult to read.
The paper, Pawnshops Regulatory Environment: A Readability Analysis (April 2018), compared the readability of pawnshop regulations to credit union regulations in 42 states.
States excluded from the analysis are Arkansas, Delaware, Idaho, Iowa, New York, North Dakota, South Dakota, and Wyoming; because the state does not have credit union regulations or state level pawnshop regulations.
The paper contends that the readability of regulations could be a barrier to a small business' success, as the ability to navigate regulations are a function of human capital.
The paper used FRE score to calculate the readability of the state regulation, which looks at the average number of syllables per word and the average number of words per sentence.
The FRE score will range from 0 to 100 -- higher the score, the easier to read. The following table shows FRE score by reading level.
The paper found that most state credit union regulations were at a college graduate reading level. Twenty-five states had a reading level of college graduate. The mean FRE score was 28.78.
All state credit union regulations required a minimum reading level of college.
The state with the most readable credit union regulation was Maine, while California had the most difficult to read credit union regulation. The following table shows the reading level of each states' credit union regulation with FRE score in parenthesis. Click on the image to enlarge.
The findings from this study suggest that state credit union regulators should look at improving the readability of their regulations, especially for small credit unions with limited financial and human capital resources.
The paper, Pawnshops Regulatory Environment: A Readability Analysis (April 2018), compared the readability of pawnshop regulations to credit union regulations in 42 states.
States excluded from the analysis are Arkansas, Delaware, Idaho, Iowa, New York, North Dakota, South Dakota, and Wyoming; because the state does not have credit union regulations or state level pawnshop regulations.
The paper contends that the readability of regulations could be a barrier to a small business' success, as the ability to navigate regulations are a function of human capital.
The paper used FRE score to calculate the readability of the state regulation, which looks at the average number of syllables per word and the average number of words per sentence.
The FRE score will range from 0 to 100 -- higher the score, the easier to read. The following table shows FRE score by reading level.
The paper found that most state credit union regulations were at a college graduate reading level. Twenty-five states had a reading level of college graduate. The mean FRE score was 28.78.
All state credit union regulations required a minimum reading level of college.
The state with the most readable credit union regulation was Maine, while California had the most difficult to read credit union regulation. The following table shows the reading level of each states' credit union regulation with FRE score in parenthesis. Click on the image to enlarge.
The findings from this study suggest that state credit union regulators should look at improving the readability of their regulations, especially for small credit unions with limited financial and human capital resources.
Sunday, October 27, 2019
Class Action Lawsuit Alleges Philadelphia FCU Charged Multiple NSF Fees on Same Item
Philadelphia Federal Credit Union (Philadelphia, PA) is being sued in state court over improper overdraft (OD) fees.
The class action complaint alleged that Philadelphia credit union assessed multiple insufficient fund (NSF) fees on the same item.
The complaint stated that the imposition of multiple NSF fees on a single transaction by the credit union was a breach of contract and breach of the covenant of good faith and fair dealing, and violated Pennsylvania's Unfair Trade Practices and Consumer Protection Laws.
The lawsuit is seeking monetary damages, restitution, and declaratory relief.
Read the complaint.
The class action complaint alleged that Philadelphia credit union assessed multiple insufficient fund (NSF) fees on the same item.
The complaint stated that the imposition of multiple NSF fees on a single transaction by the credit union was a breach of contract and breach of the covenant of good faith and fair dealing, and violated Pennsylvania's Unfair Trade Practices and Consumer Protection Laws.
The lawsuit is seeking monetary damages, restitution, and declaratory relief.
Read the complaint.
Friday, October 25, 2019
NCUA Board Finalized Nonmember Shares Rule, Proposes FOM Rule Implementing Court Decision
The National Credit Union Administration Board finalized its rule expanding credit unions access to nonmember and public unit shares (deposits).
According to the final rule, a federal credit union may accept public unit and nonmember shares in an amount up to 50 percent of the credit union’s net amount of paid-in and unimpaired capital and surplus, less any public unit or nonmember shares, or $3 million, whichever is greater.
The original proposal had eliminated the current alternative limit of $3 million. The Board, however, thought the elimination of the current alternative limit of $3 million would adversely impact some small credit unions.
In addition, the Board is proposing changes to its community charter regulations to align it with the August 2019 opinion issued by the District of Columbia Circuit Court of Appeals.
A federal credit union would be allowed to designate a combined statistical area or an individual contiguous portion of such an area, as a well-defined local community, provided the chosen area has a population of 2.5 million or less.
The Board added a provision to address concerns raised by the Appeals Court about potential discrimination in the field-of-membership selection process in combined statistical areas and core-based statistical areas.
Read the press release.
According to the final rule, a federal credit union may accept public unit and nonmember shares in an amount up to 50 percent of the credit union’s net amount of paid-in and unimpaired capital and surplus, less any public unit or nonmember shares, or $3 million, whichever is greater.
The original proposal had eliminated the current alternative limit of $3 million. The Board, however, thought the elimination of the current alternative limit of $3 million would adversely impact some small credit unions.
In addition, the Board is proposing changes to its community charter regulations to align it with the August 2019 opinion issued by the District of Columbia Circuit Court of Appeals.
A federal credit union would be allowed to designate a combined statistical area or an individual contiguous portion of such an area, as a well-defined local community, provided the chosen area has a population of 2.5 million or less.
The Board added a provision to address concerns raised by the Appeals Court about potential discrimination in the field-of-membership selection process in combined statistical areas and core-based statistical areas.
Read the press release.
Thursday, October 24, 2019
Bank Stockholders Approve Acquisition by Teachers CU
New Bancorp, Inc. (New Buffalo, MI), the holding company of New Buffalo Savings Bank, announced that on October 22, 2019 its stockholders overwhelmingly approved the acquisition of the assets and assumption of the liabilities of New Bancorp and New Buffalo by Teachers Credit Union (South Bend, IN) at its stockholders’ meeting.
Subject to the receipt of the required regulatory approvals and the satisfaction of customary closing conditions, the parties hope to close the transaction in the first quarter of 2020.
Read the press release.
Subject to the receipt of the required regulatory approvals and the satisfaction of customary closing conditions, the parties hope to close the transaction in the first quarter of 2020.
Read the press release.
Few Options to Offset Costs for CUs Topping $10 Billion Asset Threshold
S&P Global Market Intelligence recently wrote that large credit unions have few options available for offsetting the regulatory burden of breaching the $10 billion asset threshold.
This article should be of interest for credit unions that are within several years of the $10 billion asset threshold. As of June 2019, there were three credit unions with at least $9 billion in assets and another 5 credit unions with between $8 billion and $9 billion in assets.
The article notes that credit unions, which topped the $10 billion threshold, have seen a drop in fee revenue due to the Durbin Amendment and an increase in compliance cost, as the credit unions become subject to oversight by the Consumer Financial Protection Bureau and increased regulation by the National Credit Union Administration.
Credit unions that have topped the $10 billion asset threshold have seen an up to 50 percent decline in debit card interchange revenues due to the Durbin Amendment.
The article also states that credit unions that top the $10 billion asset threshold may lack the ability to scale up rapidly to offset these new costs, as they tend to grow organically.
Read the article.
This article should be of interest for credit unions that are within several years of the $10 billion asset threshold. As of June 2019, there were three credit unions with at least $9 billion in assets and another 5 credit unions with between $8 billion and $9 billion in assets.
The article notes that credit unions, which topped the $10 billion threshold, have seen a drop in fee revenue due to the Durbin Amendment and an increase in compliance cost, as the credit unions become subject to oversight by the Consumer Financial Protection Bureau and increased regulation by the National Credit Union Administration.
Credit unions that have topped the $10 billion asset threshold have seen an up to 50 percent decline in debit card interchange revenues due to the Durbin Amendment.
The article also states that credit unions that top the $10 billion asset threshold may lack the ability to scale up rapidly to offset these new costs, as they tend to grow organically.
Read the article.
Wednesday, October 23, 2019
Washington Updates
House passed a bill backed by bank and credit union trade groups and a bipartisan group of House members called on the Office of Financial Research (OFR) study the potential impact of the current expected credit loss (CECL) accounting model.
The House on October 22 voted 249-173 to pass the Corporate Transparency Act (H.R. 2513). The bill is supported by both bank and credit union trade groups. The legislation, sponsored by Rep. Carolyn Maloney (D-N.Y.), would direct the Financial Crimes Enforcement Network to create a national database that banks could use to verify a business’s beneficial ownership information. The bill was amended before passage to include legislation championed by Rep. Emanuel Cleaver (D-Mo.) that would modernize the existing anti-money laundering/Bank Secrecy Act framework by, among other things, enhancing bank-law enforcement communications.
Also, a bipartisan group of 28 House members last week called on the Financial Stability Oversight Council to require that the OFR study potential financial stability effects of the CECL model for loan loss accounting, which goes into effect for large reporting companies in January.
Specifically, the lawmakers called on OFR to study CECL’s procyclical characteristics and their effects on access to credit and market volatility; the effects of CECL on the solvency and leverage of financial institutions; and the effects of procyclicality on institutions complying with CECL, including contagion risk during times of economic stress. Read the letter.
The House on October 22 voted 249-173 to pass the Corporate Transparency Act (H.R. 2513). The bill is supported by both bank and credit union trade groups. The legislation, sponsored by Rep. Carolyn Maloney (D-N.Y.), would direct the Financial Crimes Enforcement Network to create a national database that banks could use to verify a business’s beneficial ownership information. The bill was amended before passage to include legislation championed by Rep. Emanuel Cleaver (D-Mo.) that would modernize the existing anti-money laundering/Bank Secrecy Act framework by, among other things, enhancing bank-law enforcement communications.
Also, a bipartisan group of 28 House members last week called on the Financial Stability Oversight Council to require that the OFR study potential financial stability effects of the CECL model for loan loss accounting, which goes into effect for large reporting companies in January.
Specifically, the lawmakers called on OFR to study CECL’s procyclical characteristics and their effects on access to credit and market volatility; the effects of CECL on the solvency and leverage of financial institutions; and the effects of procyclicality on institutions complying with CECL, including contagion risk during times of economic stress. Read the letter.
CU Overdraft Fees Up 3.4 Percent from a Year Earlier
Moebs Services is reporting that the median overdraft fee at credit unions rose 3.4 percent over the past year ending on June 2019.
The median overdraft fee at credit unions was $30 as of June 2019, up from $29 a year earlier.
In comparison, the median overdraft fee at banks increased by 6.7 percent over the past year to $32.
Unsurprisingly, the study found that there was a year-over-year decline in the volume of overdrafts at both credit unions and banks. The volume of overdrafts were down 1.2 percent at credit unions versus 6.8 percent at banks.
Michael Moebs, Economist and CEO of Moebs Services, contends that history shows that overdraft revenues will either stagnate or decline with the increase in overdraft fees.
The median overdraft fee at credit unions was $30 as of June 2019, up from $29 a year earlier.
In comparison, the median overdraft fee at banks increased by 6.7 percent over the past year to $32.
Unsurprisingly, the study found that there was a year-over-year decline in the volume of overdrafts at both credit unions and banks. The volume of overdrafts were down 1.2 percent at credit unions versus 6.8 percent at banks.
Michael Moebs, Economist and CEO of Moebs Services, contends that history shows that overdraft revenues will either stagnate or decline with the increase in overdraft fees.
Tuesday, October 22, 2019
Think Again, Banks Beat CUs on Deposit Rates
The Credit Union Journal is reporting that analysis of industry data shows that credit unions do not pay the best rates on deposits.
According to an analysis by The Kafafian Group, the median cost of interest bearing liabilities at banks with between $1 billion and $10 billion in assets were 1.25 percent versus 95 basis points for comparable sized credit unions.
In addition, another analysis of deposit rates in 15 metropolitan areas found that banks are paying more than credit unions for deposits.
These findings contradict the assumption that credit unions offer better deposit rates than other financial institutions.
The article provides some explanations for this, including regulatory changes making core deposits more attractive at the largest of banks.
Read the article (subscription may be required).
According to an analysis by The Kafafian Group, the median cost of interest bearing liabilities at banks with between $1 billion and $10 billion in assets were 1.25 percent versus 95 basis points for comparable sized credit unions.
In addition, another analysis of deposit rates in 15 metropolitan areas found that banks are paying more than credit unions for deposits.
These findings contradict the assumption that credit unions offer better deposit rates than other financial institutions.
The article provides some explanations for this, including regulatory changes making core deposits more attractive at the largest of banks.
Read the article (subscription may be required).
Ent CU to Start Construction on 7-Story HQ Building
Ent Credit Union (Colorado Springs, CO) will break ground on its seven-story, 330,000 square-foot headquarters building on October 23.
The new headquarters building will house the credit union' call center, consumer and mortgage lending, information technology, finance and accounting, human resources, member services, and administrative and executive teams.
The cost of the project was not disclosed.
Read more.
The new headquarters building will house the credit union' call center, consumer and mortgage lending, information technology, finance and accounting, human resources, member services, and administrative and executive teams.
The cost of the project was not disclosed.
Read more.
Monday, October 21, 2019
The Financial Brand: CU Marketing Expenses Study
A study by The Financial Brand provides interesting metrics on credit union marketing expenditures.
The study examines promotional and educational expenses at 227 credit union with at least $250 million in assets between 2015 and 2018.
The report noted that the average marketing spending in 2018 as a percent of assets was 0.12 percent. However, 31.3 percent of credit unions spent at least 0.15 percent on marketing expenses as a percent of assets.
The study also looks at marketing expenses per member. The following graph shows marketing expenses per member by asset size for 2018.
Read more.
The study examines promotional and educational expenses at 227 credit union with at least $250 million in assets between 2015 and 2018.
The report noted that the average marketing spending in 2018 as a percent of assets was 0.12 percent. However, 31.3 percent of credit unions spent at least 0.15 percent on marketing expenses as a percent of assets.
The study also looks at marketing expenses per member. The following graph shows marketing expenses per member by asset size for 2018.
Read more.
Friday, October 18, 2019
Harris Poll: Most Americans Support Taxing Large Credit Unions
A majority of Americans across all political parties said they would support ending federal and state tax exemptions for large credit unions, according to a Harris Poll survey commissioned by the Florida Bankers Association.
Sixty-eight percent of those surveyed agreed that a tax exemption for these institutions was unfair, and 70 percent said they would support congressional action to require credit unions with more than $500 million in assets to pay income taxes.
Three-fourths of respondents also agreed that tax-exempt institutions should not be permitted to acquire local community banks.
The poll also showed opportunity for more consumer education about the credit union tax exemption, with just 18 percent of respondents correctly stating that credit unions are tax-exempt. Thirty-seven percent believe credit unions do pay taxes and 45 percent were unsure.
Harris Poll surveyed 2,040 U.S. adults ages 18 and older, of which 1,668 are registered voters. The survey was conducted from September 26 thru September 30.
Read more.
Sixty-eight percent of those surveyed agreed that a tax exemption for these institutions was unfair, and 70 percent said they would support congressional action to require credit unions with more than $500 million in assets to pay income taxes.
Three-fourths of respondents also agreed that tax-exempt institutions should not be permitted to acquire local community banks.
The poll also showed opportunity for more consumer education about the credit union tax exemption, with just 18 percent of respondents correctly stating that credit unions are tax-exempt. Thirty-seven percent believe credit unions do pay taxes and 45 percent were unsure.
Harris Poll surveyed 2,040 U.S. adults ages 18 and older, of which 1,668 are registered voters. The survey was conducted from September 26 thru September 30.
Read more.
Thursday, October 17, 2019
Tax Foundation Calls for Repeal of CU Tax Exemption
The credit union industry has strayed from its original tax-exempt purpose and its tax exemption can no longer be justified, according to a research note published on October 16 at the nonpartisan Tax Foundation.
“Ending the exemption would make the tax code more efficient and provide lawmakers with revenue that could be used to offset other improvements in the tax code,” Erica York, an economists at the Tax Foundation.
York noted that the credit union tax exemption was historically justified by three purposes: serving customers with a common bond and customers with moderate means, as well as providing services difficult to obtain at banks. She cited evidence showing the erosion of common bond, that credit unions are increasingly serving high-income customers and that their services now resemble those offered by banks.
“The tax exemption for credit unions is not justifiable under principles of sound tax policy, nor under the rubric that lawmakers have used in the past to evaluate the tax-exempt status of financial institutions,” she concluded.
Read the research note.
“Ending the exemption would make the tax code more efficient and provide lawmakers with revenue that could be used to offset other improvements in the tax code,” Erica York, an economists at the Tax Foundation.
York noted that the credit union tax exemption was historically justified by three purposes: serving customers with a common bond and customers with moderate means, as well as providing services difficult to obtain at banks. She cited evidence showing the erosion of common bond, that credit unions are increasingly serving high-income customers and that their services now resemble those offered by banks.
“The tax exemption for credit unions is not justifiable under principles of sound tax policy, nor under the rubric that lawmakers have used in the past to evaluate the tax-exempt status of financial institutions,” she concluded.
Read the research note.
CU CEOs Earned Almost 14 Times the Average Pay of CU Employees
In 2017, chief executive compensation at large state chartered credit unions was on average 13.81 times the average employee salary and benefits.
The median ratio of chief executive compensation to average employee salary and benefits was 10.29.
To calculate average credit union employee compensation, the analysis divided the Call Report line item Employee Compensation & Benefits by Full Time Equivalent Employees. Full Time Equivalent Employees = The Number of Full Time Employees + (0.5 times the Number of Part Time Employees).
A large state chartered credit union had at least $1 billion in assets, as of December 2017.
The CEO with the highest compensation to average employee compensation ratio was Mark Pfisterer of AmeriCU (Rome, NY) at 99.6 times the average employee compensation at AmeriCU.
The following table lists the 10 chief executives with the highest compensation to average employee compensation ratio.
However, this data should not be used to compare the compensation of bank CEOs to their employees. The information reported by publicly-traded banks uses median employee pay, while this analysis substitutes average employee compensation for median compensation, because median compensation is not available.
Median employee compensation would be lower than average employee compensation. In other words, if median compensation was used, the ratio of CEO compensation to median employee compensation would be higher.
The median ratio of chief executive compensation to average employee salary and benefits was 10.29.
To calculate average credit union employee compensation, the analysis divided the Call Report line item Employee Compensation & Benefits by Full Time Equivalent Employees. Full Time Equivalent Employees = The Number of Full Time Employees + (0.5 times the Number of Part Time Employees).
A large state chartered credit union had at least $1 billion in assets, as of December 2017.
The CEO with the highest compensation to average employee compensation ratio was Mark Pfisterer of AmeriCU (Rome, NY) at 99.6 times the average employee compensation at AmeriCU.
The following table lists the 10 chief executives with the highest compensation to average employee compensation ratio.
However, this data should not be used to compare the compensation of bank CEOs to their employees. The information reported by publicly-traded banks uses median employee pay, while this analysis substitutes average employee compensation for median compensation, because median compensation is not available.
Median employee compensation would be lower than average employee compensation. In other words, if median compensation was used, the ratio of CEO compensation to median employee compensation would be higher.
Wednesday, October 16, 2019
Desert Financial Buys Naming Rights to University Arena
Desert Financial Credit Union (Phoenix, AZ) bought the naming rights to an arena at Arizona State University.
Under the terms of the five-year agreement, Desert Financial Credit union will pay $1.5 million per year for the naming rights to the arena.
The arena is currently home to men’s and women’s basketball, wrestling, gymnastics and volleyball.
The arena will be renamed from the Wells Fargo Arena to the Desert Financial Arena.
Read more.
Under the terms of the five-year agreement, Desert Financial Credit union will pay $1.5 million per year for the naming rights to the arena.
The arena is currently home to men’s and women’s basketball, wrestling, gymnastics and volleyball.
The arena will be renamed from the Wells Fargo Arena to the Desert Financial Arena.
Read more.
Tuesday, October 15, 2019
Unsealed Complaint: CU Board Members Incurred Significant Expenses
An unsealed complaint states that multiple Board members at Municipal Credit Union (New York, NY), including Sylvia Ash, regularly incurred significant expenses each year paid by the credit union.
These expenses included conferences at foreign destinations, food and drink, and donations to charitable organizations of their choice.
The complaint states that Ash between 2012 and 2016 received annually tens of thousands of dollars in reimbursements and other benefits from the credit union.
Ash, who is charged with obstructing a Federal probe of Kam Wong the former CEO of Municipal CU, served on Municipal CU's Board from 2008 until she resigned on about August 15, 2016. From about May 2015 until her resignation, Ash was the Chair of the credit union's Board.
Kam Wong on December 2, 2018 pled guilty to embezzlement and impeding a criminal investigation into the embezzlement.
Pages 7 and 8 of the complaint outlined the benefits and gifts received by Ash.
For example, in 2015 Municipal Credit Union spent approximately $63,408 for the benefit of or at the direction of Ash. These expenses included airfare and hotels at multiple conferences for her and a guest in Cancun, Greek Isles, and San Juan. The credit union also paid for tickets to sporting events for Ash. in addition, Municipal Credit Union paid her phone and cable bills.
Even after she left the credit union Board, Ash continued to have her expenses paid by the credit union.
In October 2016, she attended a credit union conference in Las Vegas. The credit union paid her and a guest's expenses including 3 tickets to a Brittany Spear's concert.
In June 2017, Ash was a guest of another credit union Board member for a conference in Cuba of the Caribbean Confederation of Credit Unions. Her expenses were picked up by the credit union.
While Ash and her fellow board members were not paid, they were handsomely rewarded with significant in-kind benefits.
This is probably not an isolated instance. Credit union regulators need to examine the corporate governance practices of credit unions to ensure that credit union officials are not incurring excessive expenses.
Read the complaint.
These expenses included conferences at foreign destinations, food and drink, and donations to charitable organizations of their choice.
The complaint states that Ash between 2012 and 2016 received annually tens of thousands of dollars in reimbursements and other benefits from the credit union.
Ash, who is charged with obstructing a Federal probe of Kam Wong the former CEO of Municipal CU, served on Municipal CU's Board from 2008 until she resigned on about August 15, 2016. From about May 2015 until her resignation, Ash was the Chair of the credit union's Board.
Kam Wong on December 2, 2018 pled guilty to embezzlement and impeding a criminal investigation into the embezzlement.
Pages 7 and 8 of the complaint outlined the benefits and gifts received by Ash.
For example, in 2015 Municipal Credit Union spent approximately $63,408 for the benefit of or at the direction of Ash. These expenses included airfare and hotels at multiple conferences for her and a guest in Cancun, Greek Isles, and San Juan. The credit union also paid for tickets to sporting events for Ash. in addition, Municipal Credit Union paid her phone and cable bills.
Even after she left the credit union Board, Ash continued to have her expenses paid by the credit union.
In October 2016, she attended a credit union conference in Las Vegas. The credit union paid her and a guest's expenses including 3 tickets to a Brittany Spear's concert.
In June 2017, Ash was a guest of another credit union Board member for a conference in Cuba of the Caribbean Confederation of Credit Unions. Her expenses were picked up by the credit union.
While Ash and her fellow board members were not paid, they were handsomely rewarded with significant in-kind benefits.
This is probably not an isolated instance. Credit union regulators need to examine the corporate governance practices of credit unions to ensure that credit union officials are not incurring excessive expenses.
Read the complaint.
Monday, October 14, 2019
188 CUs Borrowed from Discount Window in Q3 2017
The Federal Reserve reported that 188 credit unions borrowed from the Discount Window 255 times during the third quarter of 2017.
The aggregate amount borrowed was almost $176.3 million during the third quarter -- up from slightly more than $152.7 million borrowed in the previous quarter.
The average amount borrowed by credit unions was $691.3 thousand. The median Discount Window borrowing was $10,000.
The maximum amount borrowed was $25 million by Chevron FCU (Oakland, CA).
The most frequent borrowers from the Discount Window were True North FCU (Juneau, AK), North Star Community CU (Maddox, ND), Aurora CU (Milwaukee, WI), and United Business and Industry FCU (Plainville, CT).
The vast majority of the credit unions borrowing from the Discount Window used the primary credit program, which is available for the healthiest institutions. One credit union used the secondary credit program. Four credit unions borrowed multiple times from the seasonal credit program, which assists small depository institutions in managing significant seasonal swings in their loans and deposits.
The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.
The aggregate amount borrowed was almost $176.3 million during the third quarter -- up from slightly more than $152.7 million borrowed in the previous quarter.
The average amount borrowed by credit unions was $691.3 thousand. The median Discount Window borrowing was $10,000.
The maximum amount borrowed was $25 million by Chevron FCU (Oakland, CA).
The most frequent borrowers from the Discount Window were True North FCU (Juneau, AK), North Star Community CU (Maddox, ND), Aurora CU (Milwaukee, WI), and United Business and Industry FCU (Plainville, CT).
The vast majority of the credit unions borrowing from the Discount Window used the primary credit program, which is available for the healthiest institutions. One credit union used the secondary credit program. Four credit unions borrowed multiple times from the seasonal credit program, which assists small depository institutions in managing significant seasonal swings in their loans and deposits.
The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.
Sunday, October 13, 2019
Digital FCU Agrees to Settle Overdraft Lawsuit
Digital Federal Credit Union (Marlborough, MA) will pay $1.8 million to settle lawsuit for improperly charging overdraft fees.
Digial FCU will also forgive $766,000 in overdraft fees charged, but not yet collected.
The settlement will benefit individuals who had a checking account with Digital FCU and were charged an overdraft fee on any transaction between June 15, 2012 and June 15, 2019 or members who were charged an overdraft fee on an ATM or debit card transaction between June 15, 2017 and Sept. 1, 2018.
In addition, the credit union agreed to change the way it assesses overdraft fees for a period of three years. The credit union will change from the available balance to ledger balance. It is estimated that this change will result in estimated savings of $467,000 from fewer overdrafts per year.
The final approval hearing is scheduled for December 19, 2019.
Read more.
Digial FCU will also forgive $766,000 in overdraft fees charged, but not yet collected.
The settlement will benefit individuals who had a checking account with Digital FCU and were charged an overdraft fee on any transaction between June 15, 2012 and June 15, 2019 or members who were charged an overdraft fee on an ATM or debit card transaction between June 15, 2017 and Sept. 1, 2018.
In addition, the credit union agreed to change the way it assesses overdraft fees for a period of three years. The credit union will change from the available balance to ledger balance. It is estimated that this change will result in estimated savings of $467,000 from fewer overdrafts per year.
The final approval hearing is scheduled for December 19, 2019.
Read more.
Saturday, October 12, 2019
Former Officials at Municipal CU Charged by Federal Law Enforcement
Two former officials at Municipal Credit Union (New York, NY) were charged by Federal authorities for obstruction of justice and financial fraud.
Sylvia Ash, presiding judge of the Kings County Supreme Court, Commercial Division, and former chair of the board of directors of Municipal Credit Union (MCU), was charged in Manhattan federal court with conspiracy to obstruct justice and obstruction of justice, arising from a scheme to seek to influence and impede an ongoing federal investigation into fraud and corruption at MCU associated with former CEO Kam Wong. Ash made false and misleading statements, as well as she deleted and concealed relevant text messages.
Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department Officer and former member of MCU’s supervisory committee, was charged separately with embezzlement, fraud, and controlled substance offenses arising from abuse of his position as a member of the supervisory committee.
Municipal Credit Union is currently under conservatorship with the National Credit Union Administration.
The defendants are presumed innocent unless and until proven guilty.
Read the press release.
Sylvia Ash, presiding judge of the Kings County Supreme Court, Commercial Division, and former chair of the board of directors of Municipal Credit Union (MCU), was charged in Manhattan federal court with conspiracy to obstruct justice and obstruction of justice, arising from a scheme to seek to influence and impede an ongoing federal investigation into fraud and corruption at MCU associated with former CEO Kam Wong. Ash made false and misleading statements, as well as she deleted and concealed relevant text messages.
Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department Officer and former member of MCU’s supervisory committee, was charged separately with embezzlement, fraud, and controlled substance offenses arising from abuse of his position as a member of the supervisory committee.
Municipal Credit Union is currently under conservatorship with the National Credit Union Administration.
The defendants are presumed innocent unless and until proven guilty.
Read the press release.
Friday, October 11, 2019
What Was the Value of Progressive CU's Open Charter?
The 2018 Annual Report of Pentagon Federal Credit Union (McLean, VA) has information on the value of the open field of membership charter of Progressive Credit Union (New York, NY) to Pentagon FCU.
An open field of membership charter allows anyone to join a credit union.
This open charter was transferred to Pentagon FCU after the emergency merger of Progressive CU into Pentagon FCU.
In Note 14 (Subsequent Events), Pentagon FCU reported an increase of intangible assets of approximately $108 million associated with the emergency merger.
The increase in the value of intangible assets was derived from the contractual right of Pentagon FCU to use Progressive CU's open field of membership charter.
An open field of membership charter allows anyone to join a credit union.
This open charter was transferred to Pentagon FCU after the emergency merger of Progressive CU into Pentagon FCU.
In Note 14 (Subsequent Events), Pentagon FCU reported an increase of intangible assets of approximately $108 million associated with the emergency merger.
The increase in the value of intangible assets was derived from the contractual right of Pentagon FCU to use Progressive CU's open field of membership charter.
Thursday, October 10, 2019
Illinois CU Fined for Failure to Take Timely Remedial Actions
The Illinois Department of Financial and Professional Regulation, Division of Financial Institutions assessed a civil money penalty against SmartChoice Credit Union (Spring Valley, IL) for its failure to take timely remedial action with respect to specific violations.
During a December 31, 2014 exam, a Document of Resolution (DOR) was issued noting that required Financial Crimes Enforcement Network (FinCEN) searches had not been completed.
A follow up contact was completed on April 30, 2015, the issue had not be resolved and another DOR was issued.
During another full exam at the end of 2015, the issue was unresolved.
A 2017 contact with the credit union further noted the issue had not been addressed. Also, the Examiner in Charge obtained evidence from a 2018 FinCEN report that the credit union had not downloaded the reports from FinCEN to complete a search.
The state regulator fined the credit union $1,000 -- the maximum amount permissible for credit unions with less than $10 million in assets.
Read the enforcement order.
During a December 31, 2014 exam, a Document of Resolution (DOR) was issued noting that required Financial Crimes Enforcement Network (FinCEN) searches had not been completed.
A follow up contact was completed on April 30, 2015, the issue had not be resolved and another DOR was issued.
During another full exam at the end of 2015, the issue was unresolved.
A 2017 contact with the credit union further noted the issue had not been addressed. Also, the Examiner in Charge obtained evidence from a 2018 FinCEN report that the credit union had not downloaded the reports from FinCEN to complete a search.
The state regulator fined the credit union $1,000 -- the maximum amount permissible for credit unions with less than $10 million in assets.
Read the enforcement order.
Wednesday, October 9, 2019
Iowa Lawmakers Discuss Taxing CUs at State Level
State lawmakers highlighted the challenges of taxing credit unions at the state level at a banker convention.
According to BankBeat, a panel of lawmakers at the recent Iowa Bankers Association Annual Convention pointed out that state chartered credit unions could switch to a federal charter, if taxed at the state level.
The Federal Credit Union Act exempts federal credit unions from all state and local taxes, except property taxes.
Lee Hein, chairman of the House Ways and Means Committee, stated: "Credit unions have options. They can move to a federal charter, so that makes taxing credit unions not such an obvious solution."
Gary Carlson, chairman of the House Commerce Committee, commented: "If they all go to a federal charter, we do not achieve our goal of leveling the competitive playing field."
While I think the threat of switching charters for Iowa credit unions are overblown because the state charter is more liberal than the federal charter, this perceived threat shows that Congress needs to solve this issue.
Read more.
According to BankBeat, a panel of lawmakers at the recent Iowa Bankers Association Annual Convention pointed out that state chartered credit unions could switch to a federal charter, if taxed at the state level.
The Federal Credit Union Act exempts federal credit unions from all state and local taxes, except property taxes.
Lee Hein, chairman of the House Ways and Means Committee, stated: "Credit unions have options. They can move to a federal charter, so that makes taxing credit unions not such an obvious solution."
Gary Carlson, chairman of the House Commerce Committee, commented: "If they all go to a federal charter, we do not achieve our goal of leveling the competitive playing field."
While I think the threat of switching charters for Iowa credit unions are overblown because the state charter is more liberal than the federal charter, this perceived threat shows that Congress needs to solve this issue.
Read more.
Tuesday, October 8, 2019
California Public Bank Bill Becomes Law
California Governor Gavin Newsom signed into law on October 2 a bill authorizing local governments to charter public banks.
The bill (AB 857) will take effect in January and permits the chartering of two public banks per year. The maximum number of public banks at any one time will be capped at 10.
According to the bill, a public bank will be organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation.
Any public bank would be required to obtain FDIC insurance to obtain a charter.
The bill authorizes public banks to accept deposits from local agencies; but prohibits public banks from competing with local financial institutions.
Proponents for the bill argue that public banks will be able to address local needs, such as the financing of affordable housing, small businesses, and infrastructure.
However, voters don't appear to be clamoring for public banks. Last year voters in Los Angeles rejected the option of creating a public bank.
Read the bill.
The bill (AB 857) will take effect in January and permits the chartering of two public banks per year. The maximum number of public banks at any one time will be capped at 10.
According to the bill, a public bank will be organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation.
Any public bank would be required to obtain FDIC insurance to obtain a charter.
The bill authorizes public banks to accept deposits from local agencies; but prohibits public banks from competing with local financial institutions.
Proponents for the bill argue that public banks will be able to address local needs, such as the financing of affordable housing, small businesses, and infrastructure.
However, voters don't appear to be clamoring for public banks. Last year voters in Los Angeles rejected the option of creating a public bank.
Read the bill.
Monday, October 7, 2019
Outstanding Consumer Credit Growth at CUs Accelerated in August
The Federal Reserve is reporting that outstanding consumer credit growth accelerated at credit unions in August.
Total consumer credit balances at credit unions increased by approximately $7.7 billion for August to $485.8 billion. In comparison, outstanding consumer credit at credit unions grew by $2 billion in July.
The growth in consumer credit at credit unions was fueled by an expansion in nonrevolving credit. Nonrevolving credit includes loans for motor vehicles, mobile homes, education, boats, trailers, and vacations.
Nonrevolving credit balances rose by almost $8 billion during August to $421.6 billion.
On the other hand, revolving credit edged lower by almost $200 million to $64.3 billion during August.
Read the G.19 Report.
Total consumer credit balances at credit unions increased by approximately $7.7 billion for August to $485.8 billion. In comparison, outstanding consumer credit at credit unions grew by $2 billion in July.
The growth in consumer credit at credit unions was fueled by an expansion in nonrevolving credit. Nonrevolving credit includes loans for motor vehicles, mobile homes, education, boats, trailers, and vacations.
Nonrevolving credit balances rose by almost $8 billion during August to $421.6 billion.
On the other hand, revolving credit edged lower by almost $200 million to $64.3 billion during August.
Read the G.19 Report.
ABA Challenges Appellate Court Decision in FOM Case
The American Bankers Association (ABA) on October 4 filed a petition for the full D.C. Circuit Court of Appeals to review its decision in the association’s challenge the National Credit Union Administration’s 2016 field of membership (FOM) rule. In August, a three-judge panel of the court upheld much of rule while remanding a portion related to redlining concerns. The request for a rehearing by the full “en banc” panel of judges is the next step in the legal process
ABA argued that the three-judge panel’s decision “stretches Chevron deference beyond its limits” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” The panel concluded that when a statute directs an agency to define a term through regulation, this act suggests that Congress did not intend the terms to be applied according to their plain meaning, whereas Supreme Court precedent holds that an agency’s authority “go[es] no further than the ambiguity will fairly allow.”
“Rehearing en banc is warranted to realign this Court’s Chevron jurisprudence with that of the Supreme Court,” ABA explained. Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue. ABA also said the decision was incompatible with judicial review under the Administrative Procedure Act and thus warranted review.
ABA argued that the three-judge panel’s decision “stretches Chevron deference beyond its limits” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” The panel concluded that when a statute directs an agency to define a term through regulation, this act suggests that Congress did not intend the terms to be applied according to their plain meaning, whereas Supreme Court precedent holds that an agency’s authority “go[es] no further than the ambiguity will fairly allow.”
“Rehearing en banc is warranted to realign this Court’s Chevron jurisprudence with that of the Supreme Court,” ABA explained. Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue. ABA also said the decision was incompatible with judicial review under the Administrative Procedure Act and thus warranted review.
Report: CUs Buying Banks Pays Off as Growth Strategy
S&P Global Market Intelligence is reporting that credit unions buying banks as part of a growth strategy appear to be paying off.
Membership and deposit (share) growth at credit unions that acquired banks has outpaced membership and deposit growth of the rest of the industry.
Since the fourth quarter of 2015, membership and deposit growth at credit unions that acquired a bank was 22.7 percent and 45.9 percent, respectively.
For credit unions that did not acquire a bank, membership and deposit growth over the same time period was 15.1 percent and 25.3 percent, respectively.
The study found that only one credit union saw a decline in membership in the quarter following the closing of the acquisition. However, 7 credit unions reported a decline in shares and deposits in the quarter after the acquisition was completed.
Read more.
Membership and deposit (share) growth at credit unions that acquired banks has outpaced membership and deposit growth of the rest of the industry.
Since the fourth quarter of 2015, membership and deposit growth at credit unions that acquired a bank was 22.7 percent and 45.9 percent, respectively.
For credit unions that did not acquire a bank, membership and deposit growth over the same time period was 15.1 percent and 25.3 percent, respectively.
The study found that only one credit union saw a decline in membership in the quarter following the closing of the acquisition. However, 7 credit unions reported a decline in shares and deposits in the quarter after the acquisition was completed.
Read more.
Sunday, October 6, 2019
GreenState CU Buys Naming Rights to Fieldhouse
GreenState Credit Union (North Liberty, IA) bought the naming rights to the fieldhouse attached to Xtream Arena (Coralville, IA), according to The Gazette.
The credit union, formerly University of Iowa Community Credit Union, will pay $1.4 million over 10 years for the naming rights.
The 53,000 square-foot fieldhouse will be called GreenState Family Fieldhouse.
Read more.
The credit union, formerly University of Iowa Community Credit Union, will pay $1.4 million over 10 years for the naming rights.
The 53,000 square-foot fieldhouse will be called GreenState Family Fieldhouse.
Read more.
Saturday, October 5, 2019
Landmark CU Pays $8 Million for Property for Future HQ
Landmark Credit Union (New Berlin, WI) paid $8 million for a property in Brookfield that will be the future home of its corporate headquarters, according to BizTimes.
The $4.3 billion credit union plans to build a a five-story, 158,000-square-foot headquarters building on the property.
The credit union may opt to build an additional 148,000-square-foot office building in the future.
Read more.
The $4.3 billion credit union plans to build a a five-story, 158,000-square-foot headquarters building on the property.
The credit union may opt to build an additional 148,000-square-foot office building in the future.
Read more.
Friday, October 4, 2019
NCUA Hood Says There Is No One-Size -Fits-All Solution to NYC Taxi Medallion Loans
In a September 3, 2019 letter to Representative Alexandria Ocasio-Cortez, National Credit Union Administration (NCUA) Chairman Rodney Hood responded to her and other members of the New York City (NYC) congressional delegation inquiries about taxi medallion loans by credit unions and efforts to modify loans for financially struggling taxi medallion owners.
Chairman Hood wrote that he shared her concerns for taxi drivers, but noted that there is no one-size-fits-all approach to resolving these challenges.
Chairman Hood wrote at the end of 2014, when medallion prices peaked, there were 8 federally insured credit unions that originated the vast majority of the loans secured by New York City taxi medallions. Those 8 credit unions held a combined $3.9 billion in assets. Today, six of those eight credit unions have either been liquidated or merged and are no longer in business. Only one of the six credit unions that are no longer in business was found to have engaged in indirect lending on a small portion of its taxi medallion portfolio.
Chairman Hood noted that in 2015 the average outstanding taxi medallion balance was less than $350,000.
The letter noted that that these credit unions had some deficiencies in their underwriting standards and ignored repeated warnings from the agency about the dangers of excessive concentration in taxi medallion loans.
Chairman Hood further wrote that NCUA is updating its examination scope requirements to ensure credit unions analyze a borrower's ability to repay the loan and to ensure the agency addresses, through informal and formal enforcement actions, any cases where the credit union is not properly undertaking this analysis. Those updated procedures will become effective with the release of the 2020 examination program.
The letter stated that bad actors should be held accountable and NCUA is aggressively pursuing institution-affiliated parties, who have violated the law, breached their fiduciary duties, and engaged in unsafe and unsound practices. However, the agency found no evidence that credit unions engaged in market manipulation.
Hood stated that NCUA, as liquidating agent for Melrose and LOMTO, is actively identifying distressed borrowers in an effort to rework their loans, where possible, including payment reductions, lower interest rates, and term adjustments. But Hood acknowledges that these efforts are complicated by the sharp decline in value of taxi medallions and, in some cases, the high level of cash-out refinancing activity that took place on individual loans.
The letter is below (click on images to enlarge).
Chairman Hood wrote that he shared her concerns for taxi drivers, but noted that there is no one-size-fits-all approach to resolving these challenges.
Chairman Hood wrote at the end of 2014, when medallion prices peaked, there were 8 federally insured credit unions that originated the vast majority of the loans secured by New York City taxi medallions. Those 8 credit unions held a combined $3.9 billion in assets. Today, six of those eight credit unions have either been liquidated or merged and are no longer in business. Only one of the six credit unions that are no longer in business was found to have engaged in indirect lending on a small portion of its taxi medallion portfolio.
Chairman Hood noted that in 2015 the average outstanding taxi medallion balance was less than $350,000.
The letter noted that that these credit unions had some deficiencies in their underwriting standards and ignored repeated warnings from the agency about the dangers of excessive concentration in taxi medallion loans.
Chairman Hood further wrote that NCUA is updating its examination scope requirements to ensure credit unions analyze a borrower's ability to repay the loan and to ensure the agency addresses, through informal and formal enforcement actions, any cases where the credit union is not properly undertaking this analysis. Those updated procedures will become effective with the release of the 2020 examination program.
The letter stated that bad actors should be held accountable and NCUA is aggressively pursuing institution-affiliated parties, who have violated the law, breached their fiduciary duties, and engaged in unsafe and unsound practices. However, the agency found no evidence that credit unions engaged in market manipulation.
Hood stated that NCUA, as liquidating agent for Melrose and LOMTO, is actively identifying distressed borrowers in an effort to rework their loans, where possible, including payment reductions, lower interest rates, and term adjustments. But Hood acknowledges that these efforts are complicated by the sharp decline in value of taxi medallions and, in some cases, the high level of cash-out refinancing activity that took place on individual loans.
The letter is below (click on images to enlarge).
Thursday, October 3, 2019
Fairwinds CU Completes Acquisition of Friends Bank
Fairwinds Credit Union (Orlando, FL) completed its acquisition of Friends Bank (New Smyrna Beach, FL) on October 1.
The merger will double the number of branches of Fairwinds CU in Volusia County.
Read the press release.
The merger will double the number of branches of Fairwinds CU in Volusia County.
Read the press release.
Secondary Capital Up 10.5 Percent During the 1st Half of 2019
Low-income credit unions added secondary capital during the first six months of 2019.
Sixty-eight credit unions have $292.1 million in subordinated debt that counted as net worth at the end of June 2019.
This is up from $264.8 million at the end of 2018.
The following table shows the 10 credit unions holding the most secondary capital.
Six credit unions reported that more than half of their net worth was from secondary capital. At Hope FCU (Jackson, MS), 75.3 percent of its net worth was in the form of subordinated debt.
The other credit unions reporting that at least half of their new worth was from subordinated debt were:
Sixty-eight credit unions have $292.1 million in subordinated debt that counted as net worth at the end of June 2019.
This is up from $264.8 million at the end of 2018.
The following table shows the 10 credit unions holding the most secondary capital.
Six credit unions reported that more than half of their net worth was from secondary capital. At Hope FCU (Jackson, MS), 75.3 percent of its net worth was in the form of subordinated debt.
The other credit unions reporting that at least half of their new worth was from subordinated debt were:
- LCO FCU (WI), 69.4 percent;
- Hill District FCU (PA), 62.8 percent;
- Self-Help FCU (CA), 58.9 percent;
- Syracuse Cooperative FCU (NY), 57.8 percent; and
- Toledo Urban FCU (OH), 50.1 percent.
Wednesday, October 2, 2019
GAO Reports on Information Sharing Between Regulators and FinCEN
The Government Accountability Office (GAO) recently released a report on the Bank Secrecy Act (BSA).
The report examined, among other objectives, how the Financial Crimes Enforcement Network (FinCEN) and supervisory and law enforcement agencies (1) collaborate and (2) provide metrics and feedback on the usefulness of BSA reporting.
However, GAO found that FinCEN did not consistently communicate available metrics and when FinCEN did so, it did it on an ad-hoc basis.
Below is information specific to credit unions from the report.
According to the report, each federal credit union must receive a BSA examination each examination cycle — although the frequency and scope of these examinations may vary based on the credit union’s size and other risk factors. National Credit Union Administration (NCUA) officials noted that certain small credit unions with limited separation of duties may be examined more frequently.
According to the report, NCUA made 50 referrals for potential BSA violations to FinCEN between fiscal year 2015 and 2018 (see Table 3).
Appendix II has statistics on the number of BSA examinations and violations.
The most common BSA violations cited by the federal banking regulators were violations of requirements to report suspicious activities, 314(a) information-sharing requirements, rules for filing of reports, BSA training, and a system of internal controls.
NCUA accounted for the majority of 314(a) information-sharing violations, which include a financial institution failing to expeditiously search its records after receiving an information request from FinCEN based on credible evidence concerning money laundering.
Between fiscal year 2015 and the first half of fiscal year 2018, NCUA did 14,575 BSA examinations. During that time period, NCUA found 8,477 BSA violations, which resulted in 4,588 informal enforcement actions. NCUA counts each BSA violation in a Document of Resolution as an informal action.
However, NCUA did not issue any formal enforcement action against a credit union during that time period.
The report examined, among other objectives, how the Financial Crimes Enforcement Network (FinCEN) and supervisory and law enforcement agencies (1) collaborate and (2) provide metrics and feedback on the usefulness of BSA reporting.
However, GAO found that FinCEN did not consistently communicate available metrics and when FinCEN did so, it did it on an ad-hoc basis.
Below is information specific to credit unions from the report.
According to the report, each federal credit union must receive a BSA examination each examination cycle — although the frequency and scope of these examinations may vary based on the credit union’s size and other risk factors. National Credit Union Administration (NCUA) officials noted that certain small credit unions with limited separation of duties may be examined more frequently.
According to the report, NCUA made 50 referrals for potential BSA violations to FinCEN between fiscal year 2015 and 2018 (see Table 3).
Appendix II has statistics on the number of BSA examinations and violations.
The most common BSA violations cited by the federal banking regulators were violations of requirements to report suspicious activities, 314(a) information-sharing requirements, rules for filing of reports, BSA training, and a system of internal controls.
NCUA accounted for the majority of 314(a) information-sharing violations, which include a financial institution failing to expeditiously search its records after receiving an information request from FinCEN based on credible evidence concerning money laundering.
Between fiscal year 2015 and the first half of fiscal year 2018, NCUA did 14,575 BSA examinations. During that time period, NCUA found 8,477 BSA violations, which resulted in 4,588 informal enforcement actions. NCUA counts each BSA violation in a Document of Resolution as an informal action.
However, NCUA did not issue any formal enforcement action against a credit union during that time period.
Tuesday, October 1, 2019
Only 1 in 5 CUs Offer Free Checking
Moebs Services is reporting that credit unions have dramatically reduced their offerings of free checking.
Free checking has declined by 59.2 percent so far this year at credit unions.
According to Moebs Services, only 20 percent of credit unions offered free checking in 2019. At the end of 2018, 49 percent of all credit unions offered free checking.
In comparison, 19.4 percent of banks provided free checking.
Michael Moebs, Economist & CEO of Moebs Services, blamed the Durbin Amendment for the decline in free checking as it reduced interchange fee revenues.
Most free checking accounts are unprofitable, according to Moebs.
Free checking has declined by 59.2 percent so far this year at credit unions.
According to Moebs Services, only 20 percent of credit unions offered free checking in 2019. At the end of 2018, 49 percent of all credit unions offered free checking.
In comparison, 19.4 percent of banks provided free checking.
Michael Moebs, Economist & CEO of Moebs Services, blamed the Durbin Amendment for the decline in free checking as it reduced interchange fee revenues.
Most free checking accounts are unprofitable, according to Moebs.
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