Thursday, April 30, 2020

Tinker FCU to Acquire Prime Bank

Tinker Federal Credit Union (Oklahoma City, OK) announced on April 30 it has entered into an agreement to acquire substantially all of the asset and operations of Prime Bank (Edmond, OK).

Prime Bank has almost $286 million in assets at the end of 2019.

Tinker FCU has approximately $4.4 billion in assets.

The acquisition was unanimously approved by the boards of both institutions and is awaiting approval and is expected to close later this year.

The price tag of deal was not disclosed.

This is the first acquisition of an Oklahoma bank by an Oklahoma headquartered credit union.

Read the news story.

Bank and CU Groups Call on SBA to Fix E-Tran Problems

Nine trade associations representing banks and credit unions in April 28 letter to the Small Business Administration (SBA) Administrator Jovita Carranza called on the SBA to resolve the E-Tran system access problems that have plagued round two of the Paycheck Protection Program (PPP).

The trade groups wrote: "Quite simply, it is taking too long to submit loans and get these funds where they need to go."

‌In addition to urging SBA to prioritize E-Tran access improvements, the groups called on the agency to communicate transparently with the industry and the public about the problems. "If the pace and performance of the E-Tran system cannot be improved, then we ask that you share that information with the public to help manage expectations for all of the small businesses still counting on PPP for a lifeline," they said, adding that they "have found the lack of transparency and timely guidance on the PPP process impedes the funding of loans to small businesses in need."

The trade groups signing the letter were American Bankers Association, Bank Policy Institute, Community Development Bankers Association, Consumer Bankers Association, Credit Union National Association, Financial Services Forum, Mid-Size Bank Coalition of America, National Association of Federally-Insured Credit Unions, and National Bankers Association.

Read the letter.

Wednesday, April 29, 2020

OMWI Report: Men Outnumber Women in Leadership Positions at Large CUs

Recently, the National Credit Union Administration Office of Minority and Women Inclusion (OMWI) released its 2019 Annual Report.

The report provides information on diversity practices at credit unions.

While a slight majority of credit union managers and chief executive officers are women, female managers and CEOs outnumber men only in credit unions with less than $100 million in assets. Men primarily run credit unions with $100 million or more in assets.

NCUA reported that in 2019, 118 federally insured credit unions (76 federal and 42 state-chartered) submitted Credit Union Diversity Self-Assessments. This was up from 81 credit unions in 2018.

According to the Self-Assessment survey, 55.6 percent of responding credit unions reported a leadership and organizational commitment to diversity, while 48.2 percent reported taking steps to implement employment practices to demonstrate that commitment. But only 29.0 percent of the reporting credit unions were monitoring and assessing their diversity policy and practices.

The Self-Assessment survey found that few credit unions had developed solid business practices with regard to supplier diversity (7.7 percent) and transparency of diversity and inclusion practices (17.2 percent).

NCUA stated that 44 credit unions that did the self-assessment in both 2018 and 2019 reported a year over year improvement in their diversity practices.

However, these self-assessment results should not be generalized to the entire industry, as the results are probably skewed by sample selection bias.

Read the report.

Tuesday, April 28, 2020

Harper: CUs Entered Pandemic Recession in Strong Position, But Will Be Challenged

In a speech to the Mountain West Credit Union Association’s Annual Meeting on Thursday, April 23, National Credit Union Administration Board Member Todd Harper stated that federally insured credit unions entered the pandemic-induced recession in a strong position.

At the end of 2019, the system had a net worth ratio of 11.37 percent and a delinquency rate of just 71 basis points.

However, he cautioned that credit unions will face a challenging environment.

He noted that the COVID-19 pandemic will likely lead to sizable losses in the commercial real estate portfolio at credit unions. While the industry has an overall exposure to commercial real estate of 4.8 percent of the industry's assets, those credit unions that have concentrated in commercial real estate lending will be carefully monitored by the agency.

He further stated that residential real estate comprises 31 percent of the industry's balance sheet. Credit unions should expect elevated losses from higher rates of unemployment.

Credit unions hold $380 billion in auto loans. Harper told the audience that the agency expects auto loan delinquency rates to be high to very high, but he pointed out that credit union borrowers have better than average creditworthiness.

Harper noted that credit unions with large exposure in used auto loans could be challenged as used car prices plummet. He said: "These credit unions could face unexpectedly higher losses if the borrower defaults and the actual market price of the vehicle is lower than the value of the loan."

He also commented that these credit unions could face earnings pressure as both new and used car sales fall.

Harper stated that unsecured loans accounted for 7.5 percent of the industry's assets. Unsecured loans include credit cards, private student loans, and other unsecured products. Harper warned that if people don't return to work within the next 3 months, delinquencies on unsecured loans will start to hit credit unions.

Harper also encouraged credit unions to join the Central Liquidity Facility (CLF). He stated that even if your credit union does not borrow from the CLF, your joining the CLF will ensure that the CLF has the resources to meet the liquidity needs to other credit unions that are facing liquidity issues.

Read the speech

Monday, April 27, 2020

Bill Would Exclude Business Loans from MBL Cap for 3 Years

Representative Brad Sherman (D-CA) on April 17 introduced a bill (H.R. 6550) that will provide an exception from the aggregate member business loan (MBL) cap for loans made to aid in the recovery from the COVID-19 emergency.

The bill will exclude any member business loan from the aggregate MBL cap that is originated during a three-year period beginning on March 13, 2020.

The only caveat in the bill is that the extension of credit does not seriously threaten the safety and soundness of an insured credit union.

In aggregate, MBLs are capped at 12.25 percent of assets under current law.

However, roughly half of all credit unions are not subject to the MBL cap; because they have either a low income designation or have a history of making business loans or were chartered for the purpose of making business loans.

If this bill becomes law, I will be interested in seeing whether this program sunsets in three years.

As Milton Friedman said, "Nothing is so permanent as a temporary government program."

Read the bill's text.

Sunday, April 26, 2020

Two FCUs to Switch to NY State Charters, Then Merge with Sunmark

Two federal credit unions have filed applications with the New York Department of Financial Services to convert to state charters. Upon converting to New York state-chartered credit unions, both credit unions will subsequently merge with Sunmark Credit Union (Latham, NY).

Hudson River Financial Federal Credit Union (Mohegan Lake, NY) on April 21 applied to convert to a New York state-chartered credit union under the name of Hudson River Financial Credit Union.

Columbia-Greene Federal Credit Union (Hudson, NY) also on April 21 applied to switch to a New York state-chartered credit union under the name of Columbia-Greene Credit Union.

Hudson River Financial FCU has $64.3 million in assets and Columbia-Greene FCU had $31.2 million in assets at the end of 2019.

The mergers would create an almost $840 million institution.

Read the Weekly Banking Bulletin.

Saturday, April 25, 2020

First Commerce CU Completed Acquisition of Georgia Community Bank

First Commerce Credit Union (Tallahassee, FL) completed its acquisition of The Citizens Bank (Nashville, GA) on April 1, 2020.

Georgia Department of Banking and Finance approved the bank's application to dissolve the bank on March 12, 2020.

On March 13, 2020, the Federal Deposit Insurance Corporation approved the merger.

Friday, April 24, 2020

State Bankers Associations: Reject CUs Call for Expended Business Lending Authority

In a letter to congressional leaders on April 22, 51 state bankers associations flagged “opportunistic and unnecessary” attempts by the credit union industry to seek charter enhancements — such as expansion of the member business lending cap — during the coronavirus pandemic.

The state bankers associations noted that government guaranteed loans, including SBA Paycheck Protection Program loans, are already exempt from the business lending cap, and that an expansion is unnecessary. The group added that at this time more than 99 percent of credit unions are not affected by the member business lending cap.

“We are proud of the joint work banks and credit unions have done together during this crisis, and both industries appreciate the important role we all play to keep liquidity flowing to communities,” the groups said. “However, efforts to increase credit union powers in the name of a crisis, including increases to the member business loan limit, are disappointing and distract from important policy priorities that are actually needed to support our small businesses.”

The aggregate member business loan cap for credit unions is 12.25 percent of assets. Credit unions that have a low-income designation or have had a history of making business loans or chartered for the purpose of making business loans are not subject to the cap.

Read the letter.

Thursday, April 23, 2020

City of Tempe and Desert Financial CU Launch $1 Million Small Business Program

The City of Tempe (AZ) and Desert Financial Credit Union (Phoenix, AZ) on April 21 launched the $1 million Tempe Small Business Emergency Loan Program.

Tempe small businesses that employ between 5 and 50 people as of March 19, 2020 may be eligible for microloans of between $5,000 and $20,000.

Applicants must have a minimum credit score of 640. The small business needs to have operated within the city of Tempe for at least 2 years. The applicant cannot be delinquent on any state, federal, or local taxes.

The loans have a fixed interest rate at 4 percent with a repayment terms of up to 48 months. A small business owner must provide a personal guarantee and if the loan is awarded, the small business must establish a business account with Desert Financial Credit Union.

The first payment is deferred for 90 days.

The emergency loan program could serve as many as 200 Tempe small businesses.

The program will end either within 3 months or until the total guaranteed amount is lent.

Read more.

Wednesday, April 22, 2020

NCUA Amends Capital and Business Lending Regulations

The National Credit Union Administration (NCUA) Board unanimously approved on April 22, 2020, by notation vote, an interim final rule that amends the agency’s capital adequacy and member business loans and commercial lending regulations following the creation of the Small Business Administration’s Paycheck Protection Program (PPP).

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created the PPP to help certain businesses affected by the COVID-19 pandemic. The CARES Act requires that PPP loans receive a zero-percent risk weighting under the NCUA’s risk-based capital requirements. To reflect this statutory requirement, the interim final rule amends the NCUA’s capital adequacy regulation so that covered PPP loans receive a zero-percent risk weight in the agency’s risk-based net worth requirements.

Additionally, if a loan is pledged as collateral for a non-recourse loan provided through the Federal Reserve System’s PPP Lending Facility, the covered loan can be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio. This ensures that credit unions can neutralize the regulatory capital effects of PPP loans pledged to the facility.

The interim final rule also makes a conforming change to the definition of a commercial loan in the NCUA’s member business loans and commercial lending rule. Under the rule, PPP loans are excluded from the definition of a commercial loan because the unique nature of these loans mitigates the need for enhanced commercial underwriting.

Read the interim final rule.

Coronavirus Hits Navy FCU's Q1 Net Income

Navy Federal Credit Union (Vienna, VA) reported a decline in net income for the first 3 months of 2020 compared to the same time period a year ago, as the coronavirus affected its performance.

Net income fell from almost $423.6 million for the first quarter of 2019 to $245.7 million for the fist quarter of 2020 -- an almost 42 percent decline in net income from a year earlier.

The increase in provisions for loan and lease losses contributed to the decline in net income. Provisions for loan and lease losses increased by $112 million between the first quarter of 2019 and the first quarter of 2020. At the end of the first quarter of 2020, provisions for loan and lease losses were $504.5 million.

Delinquent loans increased from almost $710.9 million as of March 2019 to $958 million one year later -- a year-over-year increase of approximately 35 percent. However, loans two month or more past due were down $21.5 million from the end of 2019.

Allowance for loan and lease losses were $1.74 billion for the quarter ending March 31, 2020. As of March 31, 2019, allowance for loan and lease losses were $1.54 billion. At the end of 2019, allowance for loan and lease losses were $1.632 million.

Assets at Navy FCU surged over the last year. Assets grew by almost 22 percent to $125.7 billion at the end of the first quarter of 2020.

Loans were up by slightly less than $11.2 billion over the last year to $86.2 billion as of March 31, 2020.

The information for the first quarter of 2020 was obtained from Navy Federal Credit Union's website. Data for the first quarter of 2019 came from the credit union's Call Report at the National Credit Union Administration.

Tuesday, April 21, 2020

$60 Billion in PPP Funds Set Aside for Banks and CUs with $50 Billion or Less in Assets

The Senate this afternoon unanimously passed legislation to provide more than $320 billion in new funding for the Small Business Administration’s Paycheck Protection Program (PPP). The House must now approve the bill, which it is expected to do in a floor vote later this week.

‌Of the more than $320 billion appropriated for PPP loans, a minimum of $30 billion will be set aside for community development financial institutions, banks and credit unions with less than $10 billion in assets. Another $30 billion at least will go to banks and credit unions with assets between $10 billion and $50 billion.

Institutions in these categories may originate PPP loans above these levels.

NCUA Board Members Offer Legislative Recommendations

In their opening statements at the April 16 National Credit Union Administration (NCUA) Board meeting, Board Members J. Mark McWatters and Todd Harper offered suggestions for legislation that he stated would benefit credit unions during the COVID-19 pandemic and beyond.

Both Harper and McWatters recommended that Congress allow all federal credit unions, not just multiple common-bond credit unions, to serve underserved areas in their field of membership, provide an additional $10 million in appropriations for the Community Development Revolving Loan Fund, and grantg NCUA with the authority to supervise third-party vendors.

With regard to member business loans, McWatters called on Congress to raise or eliminate the member business loan cap of 12.25 percent of assets, while Harper stated that Congress should temporarily allow all member business loans made on or before the start of the COVID-19 public health emergency through December 31, 2020, be exempt from the member business lending cap.

Both recommended restructuring the Central Liquidity Facility (CLF). Harper called on Congress to make permanent or extend the temporary changes to the CLF that are scheduled to expire on December 31, 2020. McWatters advocated for the creation of a permanent, separate and robust, standby liquidity facility for the NCUA to employ as needed or the permanent restructuring of the Central Liquidity Facility (CLF) to create the same.

Additionally, McWatters called on Congress to enact capital reforms to assist credit unions that may experience a downtick in their capital during the economic downturn. McWatters was not specific on the nature of these capital reforms.

Read the statement.

Monday, April 20, 2020

Banks and CUs Are Working to Ensure Americans Receive Economic Impact Payments

In an April 16 letter to Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA), four financial trade groups emphasized that the industry’s “highest priority is to ensure that economic impact payments (EIPs) reach Americans’ wallets quickly.”

In response to concerns lawmakers raised about the garnishment of these payments, the groups noted that more clarity is needed to ensure that EIPs are considered as benefits subject to the federal exemption from garnishment. Without this legal clarity, “depository institutions have no discretion and are obligated to comply with applicable state laws and court-ordered garnishments,” the groups noted.

The groups underscored the importance of maximizing electronic payments. This will enhance the ability of banks and credit unions to identify and protect these payments.

The letter was signed by American Bankers Association, Bank Policy Institute, Consumer Bankers Association, and Credit Union National Association.

Read the letter.

Sunday, April 19, 2020

132 CUs Borrowed from Fed's Discount Window in Q1 2018

During the first quarter of 2018, 132 credit unions borrowed from the Federal Reserve's Discount Window.

Credit unions accessed the Federal Reserve's Discount Window 183 times during the first quarter of 2018 and borrowed an aggregate $243.7 million.

The average amount borrowed was $1,331,754 during the first quarter of 2018. However, the median amount borrowed was $10,000.

The maximum amount borrowed during the quarter was $42 million by United Nations Federal Credit Union (Long Island City, NY).

While most credit unions only visited the Discount Window once during the quarter, two credit unions were active borrowers from the Federal Reserve. Aurora Credit Union (Milwaukee, WI) visited the Discount Window 19 times during the quarter, followed by True North Federal Credit Union (Juneau, AK), which borrowed 17 times from the Discount Window.

The vast majority of the credit unions borrowing from the Discount Window used the primary credit program, which is available for the healthiest institutions. Two credit unions borrowed from the secondary credit program.

The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.

Friday, April 17, 2020

NCUA Board Adopts Temporary Reg Relief Measures

The National Credit Union Administration Board on April 16 approved a temporary final rule providing federally insured credit unions with regulatory relief during the COVID-19 crisis.

The Board temporarily raised the maximum aggregate amount of a loan participation that a federally insured credit union (FICU) can purchase from a single originating lender to the greater of $5 million or 200 percent of a FICU's net worth. NCUA's current rule limits the maximum aggregate amount of a loan participation that can be bought from a single originating lender to the greater of $5 million to 100 percent of net worth.

The Board also suspended limitations on eligible obligations that a federal credit union (FCU) may purchase and hold. Specifically, a FCU with a CAMEL composite rating of 1, 2, or 3 may purchase eligible obligations of FICUs or liquidating credit unions irrespective of whether the obligation belongs to the purchasing FCU's members. The rule previously limited purchases of eligible obligations to a FCU with a CAMEL ration of 1 or 2.

In addition, the Board is tolling the required timeframe for the occupancy or disposition of properties not being used FCU business or that have been abandoned.

These temporary modifications are effective upon publication in the Federal Register and will be in place until December 31, 2020, unless extended by the NCUA Board.

Read the temporary final rule.

Wednesday, April 15, 2020

NCUA Risk Alert Addresses Cybersecurity Best Practices for Remote Work

The National Credit Union Administration (NCUA) issued a Risk Alert on cybersecurity best practices for credit unions leveraging employees working remotely or with their own personal networks and devices.

The Risk Alert discusses how credit unions can prepare employees to prevent security events. NCUA expects credit union management to proactively communicate with employees that remote work is being done securely. For example, policies and procedures should ensure that family members or others do not use devices designated for work, should keep devices physically secure, should establish strong, unique passwords for all log-ins and devices on their home network, etcetera.

In addition, credit unions need to develop policies and procedures for responding to security incidents. This would include immediate actions employees should take when they suspect a cyberattack and how the credit union would respond to a security incident.

The Risk Alert provides links to various cybersecurity resources.

Read the Risk Alert.

Tuesday, April 14, 2020

NCUA Issues CLF Interim Final Rule

The National Credit Union Administration (NCUA) Board issued on April 13 an interim final rule that will enhance the ability of the Central Liquidity Facility (CLF) to serve as liquidity backstop to the nation’s credit union system.

The rule makes it easier for credit unions to join the facility as a regular member or through a corporate credit union as part of an agent relationship, and access emergency liquidity should the need arise.

Specifically, the interim final rule:
  • Eliminates the six-month waiting period for a new member to receive a loan;
  • Makes temporary amendments to the waiting period for a credit union to terminate its membership;
  • Eases collateral requirements on some assets; and
  • Allows, temporarily, for an agent member to borrow for its own liquidity needs.
The interim final rule becomes effective upon publication in the Federal Register, and it will expire on December 31, 2020.

The NCUA Board urges all natural person and corporate credit unions to join the CLF, if they have not done so.

Read the interim final rule.

Monday, April 13, 2020

Vystar and City of Jacksonville to Provide Support to Small Businesses Impacted by Coronavirus

The City of Jacksonville (Florida) and Vystar Credit Union (Jacksonville, FL) have entered into a public-private partnership program to support local small businesses affected by the coronavirus.

Vystar Credit Union has set aside $50 million for small business loans.

Under the credit union's COVID-19 Small Business Relief Loan Program, small businesses located in Duval County can apply for loans up to $100,000 at a 5.99 percent interest rate. The loan will be interest only during the first year. If the loan application is approved, the first 3,000 loan recipients will get a $1,000 grant from the city.

VyStar will waive the $250 loan underwriting fee for loans under $5,000. The city will pay the fee for loans above $5,000.

The city will cover 100 percent of the loan interest payments in the first year. In years two through six, the city will provide grants to cover interest costs, if businesses retain at least 50 percent of their pre-coronavirus workforce.

If the grant recipient retains 100 percent of its pre-coronavirus workforce, the small business will receive principal forgiveness during years 2 through 6 of 10 percent annually.

The city is allocating $9 million from the city’s general fund for the first year of the COVID-19 Small Business Relief & Employee Retention Grant Program. The maximum funding for the program will be $26 million over six years.

The credit union will administer the program for the city.

The Ordinance creating the program was passed unanimously by the City Council on April 6.

Read more.

Saturday, April 11, 2020

Lawsuit Accuses BECU of Charging Excessive Overdraft Fees

A putative class action lawsuit was filed against Boeing Employees Credit Union (BECU) on August 1, 2019.

The complaint alleged the Washington credit union was engaged in a practice of charging excessive fees on debit and ACH transactions. Specifically, BECU (a) assessed Overdraft Fees (OD Fees) on transactions that do not actually overdraw checking accounts; and (b) charged two or more Non-Sufficient Funds Fees (NSF Fees) on a single transaction.

Plaintiffs claimed these practices were in breach of BECU’s contracts with its members and were unfair and deceptive practices in violation of the Washington Consumer Protection Act.

Read the complaint.

Friday, April 10, 2020

Commentary: CUs Should Temporarily Suspend Cross-Collateralization During Economic Downturn

Many credit unions have cross-collateralization clauses in their membership agreements and account opening documents.

This means a credit union member's debt and savings are connected. So if a credit union member defaults on a loan at a credit union, a credit union can seize funds in the member's checking or savings account to cover the loss.

WILX News 10 recently reported that a credit union member had funds taken from his account by the credit union and applied to his past due loan. Once News 10 contacted the credit union, the credit union stated it made a mistake and refunded the money to the account.

As the United States addresses the coronavirus, a large portion of our economy has been shut down.

In the last 3 weeks, almost 17 million people have filed claims for unemployment benefits. The unemployment rate for April is expected to exceed the peak reached during the financial crisis at 10 percent.

Loan defaults are only going to increase.

While the practice of cross-collateralization benefits credit unions, it harms financially struggling credit union members, especially those of modest means.

Given the economic dislocation due to the coronavirus, credit unions should temporarily suspend the practice of cross-collateralization, if they have not already done so.

If credit unions do not voluntarily suspend this practice, credit union regulators and the Consumer Financial Protection Bureau should require credit unions to temporarily suspend the implementation of these clauses.

Thursday, April 9, 2020

Survey: Small Businesses Not Equipped to Handle Long-Term Disruption in Revenues

The latest Small Business Credit Survey by the Federal Reserve Banks found that most small businesses were not equipped to handle a long-term loss of revenues.

The survey, which was based on responses collected in the third and fourth quarter of 2019, prior to the outbreak of the coronavirus in the U.S., serves as a benchmark for how these firms entered the crisis period and highlights the challenges many were already facing.

In the last twelve months, 66 percent of small businesses faced financial challenges with paying operating expenses being the most frequent cited financial challenge at 43 percent.

Seventeen percent of small businesses said that they would have to close or sell if they experienced a two-month loss in revenue, according to the survey.

Over the last five-years, the primary source of funding for small employers was personal savings, family, or friends at 56 percent. This was followed by banks at 44 percent. Credit unions as a source of funding was 6 percent.

In addition, the share of firms that applied for financing remained flat at 43 percent between 2018 and 2019. Large banks received the most credit applications from small businesses (40%) during the survey period, followed by small banks (36%), online lenders (33%), finance companies (18%), credit unions (9%) and CDFIs (3%).

The survey found that banks were the most common source of credit for small businesses that had not applied for credit. Credit unions were a source of credit for 8 percent of small businesses that had not applied for credit in the prior 12 months.

The survey found that nonapplicant small businesses were more satisfied with credit unions and small banks compared to other lenders.

Read more.

A second report by the Federal Reserve Bank of New York uses the results from the survey to look at whether small businesses can weather the economic impact of COVID-19.

At the time of the survey, 23 percent of the small businesses were at-risk and 6 percent were distressed. while 70 percent were either healthy or stable.

Only 1 and 5 healthy small businesses have cash reserves to meet a two-month loss of revenue.

Read the brief.

Wednesday, April 8, 2020

Trades Urge Treasury to Maximize the Use of Direct Deposit for Stimulus Payments

In an April 3 letter, 8 financial industry organizations urged the Treasury Department to maximize the use of electronic disbursement methods when issuing the stimulus payments to individuals.

The trade groups strongly argued against the use of paper checks, highlighting potential issues with speed of delivery and high potential for loss or fraud.

The financial industry trade groups signing the letter were American Bankers Association, Bank Policy Institute, The Clearing House, Consumer Bankers Association, Credit Union National Association, Independent Community Bankers of America, NACHA, and National Association of Federally Insured Credit Unions.

Read the letter.

Tuesday, April 7, 2020

Consumer Credit Up at CUs during February 2020

The Federal Reserve reported that outstanding consumer credit at credit unions rose during February 2020, according to it G.19 report released on April 7.

Outstanding consumer credit at credit unions increased by $2.4 billion during February 2020 to $484.9 billion.

Revolving credit at credit unions contracted by almost $700 million during February to $65.2 billion. This is the second consecutive monthly decline in revolving credit balances at credit unions.

Nonrevolving credit expanded by approximately $3.1 billion to $419.7 billion during February.

Read the G.19 Report.

Regulators Encourage Mortgage Servicers to Work with Homeowners Affected by COVID-19

Financial regulators on April 3 issued a joint policy statement granting flexibility to mortgage servicers to work with borrowers struggling as a result of the coronavirus pandemic. Under the CARES Act, servicers are required to grant payment forbearances to impacted borrowers for up to 180 days, and possibly longer.

The agencies confirmed that these forbearance offers are exempt from certain loss mitigation procedural requirements and servicers do not need to obtain a complete application before offering CARES Act forbearance to a borrower. The agencies also said that they would not penalize servicers for failing to provide the required notice of acknowledgement to borrowers who submit incomplete applications within the five-day timeframe described in the servicing rules, provided that the notice is given before the end of the forbearance period. The agencies also said that they would not penalize servicers for failing to provide other loss mitigation notices and outreach efforts, so long as servicers demonstrate good-faith efforts to comply “within a reasonable timeframe.”

Finally, the agencies said they would not take action against servicers for delays in sending annual escrow statements, provided the servicers demonstrate good-faith efforts to comply “within a reasonable timeframe.” In addition to the statement, the CFPB offered further clarification in a set of frequently asked questions regarding compliance with the servicing rules during the COVID-19 emergency

Read more.

Monday, April 6, 2020

89 Percent of CUs Profitable During 2019

The National Credit Union Administration reported that 89 percent of federally-insured credit unions reported positive net income during 2019.

All credit unions with at least $1 billion in assets were profitable during 2019.

The following table shows the number and percent of credit unions that were profitable for 2019 by asset size group. There is an inverse relationship between asset size and the percent of credit unions by asset size group reporting positive net income.

The median return on average assets reached 60 basis points during 2019, up 4 basis points from a year earlier.

However, it is likely that the economic disruptions arising from COVID-19 will adversely impact the industry's profitability for this year.

Saturday, April 4, 2020

Apple FCU to Pay $2.7 Million to Settle Overdraft Class Action

Apple Federal Credit Union (Fairfax, VA) settled a class action lawsuit regarding its overdraft practices.

The credit union agreed to pay $2.7 million.

In addition, Apple FCU issued revised disclosures for consumer checking Account holders further clarifying Apple FCU’s policy with respect to the authorization/settlement procedures relating to debit transactions, including non-recurring debit card transactions, that policy’s potential impact on overdraft transactions and the manner and method by which Apple FCU assesses Overdraft Fees.

As part of the settlement agreement, Apple FCU maintained that there was nothing wrong with the transaction processing practices it used and that it complied, at all times, with applicable laws and regulations and the terms of the account agreements with its customers.

The judge approved the final settlement on December 6, 2019.

Read the settlement agreement.

Read the order approving the settlement.

Friday, April 3, 2020

After Converting to a State Charter in 2018, Cobalt CU to Switch to Federal Charter

Cobalt Credit Union (Council Bluffs, IA) is seeking to switch from an Iowa state chartered credit union to a federal credit union charter.

The credit union will hold a vote on the proposed charter change on May 1.

In 2018, the credit union had converted from a federal credit union to a state chartered credit union.

The credit union stated several factors have influenced its decision to pursue a federal charter:

The credit union pointed out that federal credit unions do not pay state income taxes, but Iowa state chartered credit unions do. The credit union noted that the Iowa legislature has considered bills in recent years that would impose a higher taxes on Iowa state chartered credit unions.

As a federal credit union, Cobalt would be able to offer small dollar loans thru the Payday Alternative Loan program. Iowa law limits the fees that the credit union can charge on these small dollar loans, as a result the credit union loses money when it makes such loans.

Cobalt further stated that by becoming a federal charter it can offer its membership more competitive rates and fees. The credit union noted that it costs the credit union $708,440 more annually to be an Iowa state chartered credit union compared to a federal credit union.

The credit union estimated that the proposed cost of converting from a state charter to a federal charter would be $48,760. When the credit union converted to a state charter in 2018, the cost was $38,678.03.

The credit union pledged that at the time of the conversion to a federal charter and for a period of five year thereafter, it will not convert to a mutual savings bank or savings association or a stock institution.

Thursday, April 2, 2020

Number of Outstanding Enforcement Orders Fell in 2019

The National Credit Union Administration is reporting that outstanding enforcement orders against federally-insured credit unions fell in 2019.

Outstanding enforcement orders were 278 at the end of 2018. In comparison, outstanding enforcement orders at the end of 2019 were 227.

An enforcement order includes Preliminary Warning Letters (PWLs), Letters of Understanding and Agreement (LUAs), Cease and Desist Orders (CDOs), and Conservatorships.

The following table shows the number of outstanding enforcement orders by type for state chartered credit unions and federal credit unions from 2014 through 2019.

Wednesday, April 1, 2020

Trade Groups Urge FCC to Facilitate COVID-19 Related Calls

As financial institutions seek to contact customers with COVID-19-related information, seven financial trade groups filed a petition requesting that the Federal Communications Commission issue an expedited declaratory ruling or waiver confirming that financial institutions’ COVID-19-related calls are exempt from the requirements of Telephone Consumer Protection Act (TCPA).

The TCPA requires banks and other callers to obtain the customer’s prior express consent prior to placing an autodialed call, but exempts calls placed for “emergency purposes.”

These phone calls and text messages may include outreach to customers and members (hereinafter referred to collectively, as consumers) to offer payment deferrals, fee waivers, extension of repayment terms, or other delays in payment, modification, or forbearance on mortgage payments or other loans; to advise consumers of branch closings, service limitations, reduced hours, or the availability of remote banking or other remote access options; to warn consumers of potential fraud on the consumer’s account; or otherwise to make consumers aware of programs, relief, and resources offered by the institution in response to the pandemic.

The trade groups urged the FCC to confirm that COVID-19-related calls placed by financial institutions fall within the emergency purposes exception. “If financial institutions cannot freely communicate with consumers, it will thwart the directives issued by the [CFPB] and the federal banking agencies encouraging financial institutions to ‘work constructively’ with consumers impacted by COVID-19,” the groups wrote. “Constructive engagement with consumers is best achieved by proactive communication via automated phone call or text message by the institution.”

The seven trade groups were American Bankers Association, American Financial Services Association, Consumer Bankers Association, Credit Union National Association, Independent Community Bankers of America, Mortgage Bankers Association, and National Association of Federally-Insured Credit Unions.

Read the petition.

The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.