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.
Showing posts with label State Regulator. Show all posts
Showing posts with label State Regulator. Show all posts
Tuesday, April 7, 2020
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.
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, March 25, 2020
Coronavirus and Liquidity Planning
The Texas Credit Union Department in its March Newsletter is encouraging credit unions to review their liquidity outlook, asset liability management practices and Liquidity Contingency Funding Plan to ensure that they have adequate liquidity to meet member loan demand and share withdrawal requests.
The regulator wrote that "[a] number of your members will likely need lending assistance or will be making savings withdrawals to get thru these challenging times."
As part of the credit union's Contingent Funding Plan, each credit union should address:
The regulator wrote that "[a] number of your members will likely need lending assistance or will be making savings withdrawals to get thru these challenging times."
As part of the credit union's Contingent Funding Plan, each credit union should address:
- its policies to manage a range of stress environments, identification of some possible stress events, and identification of likely liquidity responses to such events;
- its lines of responsibility within the credit union to respond to liquidity events;
- its management processes that include clear implementation and escalation procedures for liquidity events;
- its outside sources of liquidity for contingency needs; and
- the frequency the credit union will test and update the plan.
Monday, March 23, 2020
Agencies Provide Guidance on Loans Modified Due to COVID-19
Loan modifications for borrowers affected by the coronavirus pandemic will not generally be required to be treated as troubled debt restructurings (TDRs), federal financial institution agencies and state banking regulators said on March 22.
The agencies said they had confirmed with FASB staff that “short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.” This includes short-term modifications like payment deferrals, fee waivers and repayment term extensions.
Meanwhile, the agencies said that examiners will “exercise judgment” in reviewing loan modifications and “not automatically adversely risk rate credits that are affected by COVID-19,” including those that are designated as TDRs.
The guidance also addresses past-due reporting, nonaccrual status, charge-offs, and the eligibility of modified loans as discount window collateral.
Read the interagency statement.
The agencies said they had confirmed with FASB staff that “short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs.” This includes short-term modifications like payment deferrals, fee waivers and repayment term extensions.
Meanwhile, the agencies said that examiners will “exercise judgment” in reviewing loan modifications and “not automatically adversely risk rate credits that are affected by COVID-19,” including those that are designated as TDRs.
The guidance also addresses past-due reporting, nonaccrual status, charge-offs, and the eligibility of modified loans as discount window collateral.
Read the interagency statement.
Wednesday, March 18, 2020
WI CU Regulator Removes MBL Cap for Community First CU
The Wisconsin Office of Credit Unions approved an application of Community First Credit Union (Neenah, WI) to remove the aggregate member business loan (MBL) cap, according to the Office's Credit Union Activities Report.
The credit union applied for the removal of the cap on December 9, 2019.
On January 14, 2019, the member business loan cap for Community First CU was increased to 25 percent of assets.
As of December 2019, the credit union's member business loan to asset ratio was almost 16 percent.
The credit union applied for the removal of the cap on December 9, 2019.
On January 14, 2019, the member business loan cap for Community First CU was increased to 25 percent of assets.
As of December 2019, the credit union's member business loan to asset ratio was almost 16 percent.
Sunday, March 8, 2020
Settlement Agreement Ends Dispute on Bank Selling to CU
On March 6, First American Bank and the Iowa Division of Banking entered into a settlement agreement allowing the bank to sell its Iowa assets and branches to a credit union.
Both parties decided it was in the best interest of all, especially First American Bank's customers, to settle this dispute. Both parties recognized that litigation could take months, if not years, to resolve the issue to the detriment of First American Bank's customers.
As background, GreenState Credit Union (North Liberty, IA) completed its acquisition of First American Bank (Fort Dodge, IA) on February 28.
However, the Iowa Division of Banking on March 2 blocked the sale of First American Bank’s remaining Iowa-based assets and branches to GreenState Credit Union. The banking regulator also directed the bank and the credit union to maintain separate records until the matter is resolved.
But First American Bank asserted that it did not need the prior approval of the Superintendent before the transaction closed and disputed the Superintendent's decision to deny the bank's application and effectively block the sale.
As part of the settlement, a state chartered bank must obtain the approval of the Superintendent before voluntarily ceasing the business of banking.
The superintendent understands that First American Bank was confused about whether it needed the approval of the Superintendent before closing the deal with GreenState CU. Part of the confusion arose from First American Bank in 2019 selling its Florida branches and assets to MID-FLORIDA Credit Union without the prior approval of the Iowa Division of Banking. But the Division of Banking did not object to the sale, because the bank still had significant assets and deposits and was still actively engaged in the business of banking.
Due to the unique circumstances of this transaction, the Superintendent agreed to approve First American Bank's application. But the approval of this application should not be construed as setting precedent where an Iowa state-chartered bank can sell substantially all its assets and liabilities to a credit union.
First American Bank agreed to pay $110,700 to cover cost incurred by the Division of Banking associated with the application.
First American Bank does not necessarily agree with the Superintendent's position on the legal issues addressed in the settlement agreement. The settlement agreement should not be interpreted as an admission of wrongdoing by the bank. Both parties have agreed to disagree regarding their respective positions.
Both parties decided it was in the best interest of all, especially First American Bank's customers, to settle this dispute. Both parties recognized that litigation could take months, if not years, to resolve the issue to the detriment of First American Bank's customers.
As background, GreenState Credit Union (North Liberty, IA) completed its acquisition of First American Bank (Fort Dodge, IA) on February 28.
However, the Iowa Division of Banking on March 2 blocked the sale of First American Bank’s remaining Iowa-based assets and branches to GreenState Credit Union. The banking regulator also directed the bank and the credit union to maintain separate records until the matter is resolved.
But First American Bank asserted that it did not need the prior approval of the Superintendent before the transaction closed and disputed the Superintendent's decision to deny the bank's application and effectively block the sale.
As part of the settlement, a state chartered bank must obtain the approval of the Superintendent before voluntarily ceasing the business of banking.
The superintendent understands that First American Bank was confused about whether it needed the approval of the Superintendent before closing the deal with GreenState CU. Part of the confusion arose from First American Bank in 2019 selling its Florida branches and assets to MID-FLORIDA Credit Union without the prior approval of the Iowa Division of Banking. But the Division of Banking did not object to the sale, because the bank still had significant assets and deposits and was still actively engaged in the business of banking.
Due to the unique circumstances of this transaction, the Superintendent agreed to approve First American Bank's application. But the approval of this application should not be construed as setting precedent where an Iowa state-chartered bank can sell substantially all its assets and liabilities to a credit union.
First American Bank agreed to pay $110,700 to cover cost incurred by the Division of Banking associated with the application.
First American Bank does not necessarily agree with the Superintendent's position on the legal issues addressed in the settlement agreement. The settlement agreement should not be interpreted as an admission of wrongdoing by the bank. Both parties have agreed to disagree regarding their respective positions.
Tuesday, February 25, 2020
Washington CU Regulator Expects CUs to Measure Consumer Complaints
The Washington Division of Credit Unions is expecting that credit union board of directors and senior management should receive periodic reports regarding consumer complaints.
The state regulator stated that these periodic reports should include the following:
The state regulator stated that these periodic reports should include the following:
- The volume and types of complaints received;
- The channels in which complaints are received (e.g. social media, email, in person);
- The reimbursements paid for potential violations of consumer protection laws; and
- Any identified trends.
Sunday, February 16, 2020
Washington CU Regulator Releases 2020 Examination Focus
The Washington Division of Credit Unions released its examination focus for 2020.
The state credit union regulator dropped the following areas from its 2019 examination focus -- Internal Controls & Fraud Prevention and Interest Rate Risk.
The state regulator added Business Continuity/Disaster Recovery Testing to its 2020 focus.
Other areas that the state credit union regulatory will target include Cybersecurity, Compliance with Consumer Protection Laws, and Liquidity.
Under Compliance with Consumer Protection Laws, the state regulator will examine consumer complaint processing, Bank Secrecy Act, Regulation E (Electronic Funds Transfer Act), Regulation CC, and Equal Credit Opportunity Act.
Read the Bulletin.
The state credit union regulator dropped the following areas from its 2019 examination focus -- Internal Controls & Fraud Prevention and Interest Rate Risk.
The state regulator added Business Continuity/Disaster Recovery Testing to its 2020 focus.
Other areas that the state credit union regulatory will target include Cybersecurity, Compliance with Consumer Protection Laws, and Liquidity.
Under Compliance with Consumer Protection Laws, the state regulator will examine consumer complaint processing, Bank Secrecy Act, Regulation E (Electronic Funds Transfer Act), Regulation CC, and Equal Credit Opportunity Act.
Read the Bulletin.
Wednesday, January 29, 2020
Indiana Regulator Approves Bank's Acquisition of CU
Credit Union Times is reporting that Indiana's Department of Financial Institutions on January 24 approved the application of Adams County Farm Bureau Cooperative (Monroe, IN) to merge with First Bank of Berne (Berne, IN).
The transaction first required the privately-insured credit union to convert from a state-chartered credit union into a state-chartered mutual savings bank.
Immediately after that application was approved, the Indiana regulator approved the application First Bank of Berne for the converted credit union to merge into the bank.
This is the first Indiana credit union to be acquired by a bank.
The transaction first required the privately-insured credit union to convert from a state-chartered credit union into a state-chartered mutual savings bank.
Immediately after that application was approved, the Indiana regulator approved the application First Bank of Berne for the converted credit union to merge into the bank.
This is the first Indiana credit union to be acquired by a bank.
Friday, January 17, 2020
Colorado State Regulator Blocks the Sale of Bank to CU
The Colorado State Banking Board on January 16 denied the sale of a Colorado community bank to one of the state’s largest credit unions. The board found that the deal—in which Boulder, Colorado-based Elevations Credit Union would purchase the assets of Cache Bank and Trust, headquartered in Greeley—did not meet the requirements of state law.
According to the American Banker, only one of the seven board members voted in favor of the acquisition.
In a letter to the state regulator earlier this week, the Colorado Bankers Association cited a state statute regarding the sale of assets between state-chartered banks, which essentially establishes “that a bank may only sell the bulk of its assets to another bank.”
Read the American Banker story (subscription required).
According to the American Banker, only one of the seven board members voted in favor of the acquisition.
In a letter to the state regulator earlier this week, the Colorado Bankers Association cited a state statute regarding the sale of assets between state-chartered banks, which essentially establishes “that a bank may only sell the bulk of its assets to another bank.”
Read the American Banker story (subscription required).
Tuesday, December 31, 2019
Florida CU Regulator Approves Florida CU's Acquisition of Georgia Bank
The Florida Office of Financial Regulation on December 23 approved the application of First Commerce Credit Union (Tallahassee, FL) to purchase certain assets and assume certain liabilities of The Citizens Bank (Nashville, GA).
First Commerce will purchase approximately $193 million in assets and assume approximately $186 million in liabilities.
Both the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation approved First Commerce's request to expand its field of membership in relation to the proposed transaction.
The expanded field of membership includes people who live in the following GA counties of Atkinson, Berrien, Clinch, Colquitt, Cook, Lanier, and Tift (subject to an aggregate maximum of 5,500 new members per calendar year based on this expansion). AND all then-current customers of The Citizens Bank, as of the date of the successful purchase by the credit union.
At closing all customers of The Citizens Bank will temporarily become members of First Commerce. However with six months after the transaction being consummated, all depositors and borrowers of The Citizens Bank will have: (1) opted-in to become a member of the credit union; (2) not opted-in but will maintain a non-member deposit account with the credit union; or (3) not opted-in and their account relationship has been closed, paid off, or moved to another institution.
The purchase and assumption agreement still requires the authorization of the National Credit Union Administration and the Federal Deposit Insurance Corporation.
First Commerce will purchase approximately $193 million in assets and assume approximately $186 million in liabilities.
Both the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation approved First Commerce's request to expand its field of membership in relation to the proposed transaction.
The expanded field of membership includes people who live in the following GA counties of Atkinson, Berrien, Clinch, Colquitt, Cook, Lanier, and Tift (subject to an aggregate maximum of 5,500 new members per calendar year based on this expansion). AND all then-current customers of The Citizens Bank, as of the date of the successful purchase by the credit union.
At closing all customers of The Citizens Bank will temporarily become members of First Commerce. However with six months after the transaction being consummated, all depositors and borrowers of The Citizens Bank will have: (1) opted-in to become a member of the credit union; (2) not opted-in but will maintain a non-member deposit account with the credit union; or (3) not opted-in and their account relationship has been closed, paid off, or moved to another institution.
The purchase and assumption agreement still requires the authorization of the National Credit Union Administration and the Federal Deposit Insurance Corporation.
Thursday, December 26, 2019
OIG Examines Joint Examination Process with State CU Regulators
The National Credit Union Administration (NCUA) Office of Inspector General (OIG) conducted an audit to assess the NCUA’s joint examination process with state supervisory authorities (SSAs).
The report found NCUA provides shared oversight of federally insured state-chartered credit unions (FISCUs) and that the NCUA effectively monitors FISCUs using off-site monitoring tools. However, the OIG determined there are aspects of the joint examination process with the SSAs that need improvement.
The OIG found that NCUA’s regional offices did not have updated operating agreements with each individual SSA that defined roles and responsibilities for joint on-site examinations of FISCUs. The OIG determined that NCUA had 18 signed operating agreements on file and 11 unsigned operating agreements on file. There were no operating agreement on file with 16 SSAs. Five state do not have FISCUs. The OIC concludes that because NCUA did not having updated and useable operating agreements with each SSA, there could be confusion regarding roles and responsibilities during joint on-site examinations. The OIG concluded that having an executed operating agreement in place would help bring consistency to the working relationship and across the joint examination process.
The OIG also determined supervisory examiners did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews. OIG believed that it is a prudent and sound practice to consistently document supervisory examiner decisions regarding examiner recommendations. Doing so would ensure that examiners’ supervisory concerns would be consistently communicated and addressed.
The OIG recommended that NCUA management create a formal process to capture supervisory examiner decisions regarding recommended follow-up actions taken or not taken from work classification code 26 reviews to ensure concerns identified by examiners are properly documented. NCUA management agreed with the recommendation and indicated they will implement a formal process that addresses the recommendation by December 31, 2020.
Read more.
The report found NCUA provides shared oversight of federally insured state-chartered credit unions (FISCUs) and that the NCUA effectively monitors FISCUs using off-site monitoring tools. However, the OIG determined there are aspects of the joint examination process with the SSAs that need improvement.
The OIG found that NCUA’s regional offices did not have updated operating agreements with each individual SSA that defined roles and responsibilities for joint on-site examinations of FISCUs. The OIG determined that NCUA had 18 signed operating agreements on file and 11 unsigned operating agreements on file. There were no operating agreement on file with 16 SSAs. Five state do not have FISCUs. The OIC concludes that because NCUA did not having updated and useable operating agreements with each SSA, there could be confusion regarding roles and responsibilities during joint on-site examinations. The OIG concluded that having an executed operating agreement in place would help bring consistency to the working relationship and across the joint examination process.
The OIG also determined supervisory examiners did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews. OIG believed that it is a prudent and sound practice to consistently document supervisory examiner decisions regarding examiner recommendations. Doing so would ensure that examiners’ supervisory concerns would be consistently communicated and addressed.
The OIG recommended that NCUA management create a formal process to capture supervisory examiner decisions regarding recommended follow-up actions taken or not taken from work classification code 26 reviews to ensure concerns identified by examiners are properly documented. NCUA management agreed with the recommendation and indicated they will implement a formal process that addresses the recommendation by December 31, 2020.
Read more.
Monday, December 23, 2019
Wisconsin CU Regulator Removes MBL Cap for Two CUs
The Wisconsin Office of Credit Unions removed the member business loan (MBL) cap for two credit unions -- Summit Credit Union (Madison, WI) and Landmark Credit Union (New Berlin, WI).
The aggregate MBL cap for Wisconsin credit unions is 12.25 percent of assets.
According to a spokesperson for the Wisconsin Department of Financial Institutions, Summit CU was granted an exception to the aggregate MBL cap on August 19, 2016 for 18 percent of assets. The cap was removed on November 1, 2019.
Landmark CU was granted an exception to the aggregate MBL cap on April 8, 2015 for 15 percent of assets; it was subsequently raise to 18 percent of assets on March 31, 217 and removed on November 18, 2019.
The aggregate MBL cap for Wisconsin credit unions is 12.25 percent of assets.
According to a spokesperson for the Wisconsin Department of Financial Institutions, Summit CU was granted an exception to the aggregate MBL cap on August 19, 2016 for 18 percent of assets. The cap was removed on November 1, 2019.
Landmark CU was granted an exception to the aggregate MBL cap on April 8, 2015 for 15 percent of assets; it was subsequently raise to 18 percent of assets on March 31, 217 and removed on November 18, 2019.
Monday, December 2, 2019
Texas CU Regulator Says Complaints Up 4 Percent for Fiscal Year 2019
The Texas Credit Union Department announced that the number of complaints against credit unions increased for fiscal year 2019.
For fiscal year 2019, the state regulator stated there were 363 complaints -- up from 349 complaints for fiscal year 2018.
The top five complaint areas were:
For fiscal year 2019, the state regulator stated there were 363 complaints -- up from 349 complaints for fiscal year 2018.
The top five complaint areas were:
- Credit Report Issues (24.5 percent);
- Account/Loan Balances (10.7 percent);
- Customer Service (10.5 percent);
- Fraud/Unauthorized (9.1 percent); and
- Fee Related (7.2 percent).
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.
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.
Tuesday, September 10, 2019
Michigan Charters LGBTQ CU
Multiple news outlets are reporting that Michigan Department of Insurance and Financial Services has approved a charter for a credit union serving the LGBTQ community.
The credit union, Superbia, expects to begin operations in early 2020.
The credit union will offer traditional banking products and services, but will also tailor products and services to the specific needs of the LGBTQ community.
The credit union, Superbia, expects to begin operations in early 2020.
The credit union will offer traditional banking products and services, but will also tailor products and services to the specific needs of the LGBTQ community.
Friday, August 30, 2019
New Haven County CU Enters into Consent Order, Former CEO Pleads Guilty to Bank Fraud
New Haven County Credit Union (North Haven, CT) has entered into a consent order on August 5, 2019 with the Connecticut Department of Banking regarding unsafe and unsound banking practices.
The consent order addressed numerous deficiencies at the $20 million credit union that need to be addressed.
The consent order paints a picture of weak board oversight of the credit union. The consent order mandated the active participation of the credit union board of directors in credit union affairs. This included at least a monthly meeting of the board and a minimum attendance requirement for board members of at least 75 percent of the meetings.
In addition, the consent order required that the credit union will retain qualified board members, as well as management and staff.
The credit union is required to put into place internal controls and ensure financial records are complete and accurate.
The credit union is expected to file timely and accurate Call Reports, including ensuring that delinquent loans are properly reported and Allowance for Loan and Lease Losses are adequately funded.
The consent order requires the credit union to develop a strategic plan covering at lease three years. The credit union board is also expected to develop written budget consistent with safe and sound banking practices.
The credit union will ensure that employees and Board members are provided with Bank Secrecy Act training and that there is a comprehensive review of the credit union's BSA program.
The consent order requires the credit union to establish a comprehensive Information Security Program.
In a related story, the former credit union Chief Executive Officer (CEO), James Farrell, pleaded guilty to bank fraud. Farrell was the CEO of the New Haven County Credit Union from approximately 1992 to June 2015 and was then retained by the credit union's board of directors to provide assistance to the new CEO until March 2016.
Between July 2011 and March 2016, Farrell defrauded the credit union by transferring funds from NHCCU’s general ledger account to the account held by The Rib House, a restaurant located in East Haven, Connecticut. Farrell provided financial and bookkeeping services to The Rib House from 2010 to 2016.
Read the order.
Read the Justice Department press release.
The consent order addressed numerous deficiencies at the $20 million credit union that need to be addressed.
The consent order paints a picture of weak board oversight of the credit union. The consent order mandated the active participation of the credit union board of directors in credit union affairs. This included at least a monthly meeting of the board and a minimum attendance requirement for board members of at least 75 percent of the meetings.
In addition, the consent order required that the credit union will retain qualified board members, as well as management and staff.
The credit union is required to put into place internal controls and ensure financial records are complete and accurate.
The credit union is expected to file timely and accurate Call Reports, including ensuring that delinquent loans are properly reported and Allowance for Loan and Lease Losses are adequately funded.
The consent order requires the credit union to develop a strategic plan covering at lease three years. The credit union board is also expected to develop written budget consistent with safe and sound banking practices.
The credit union will ensure that employees and Board members are provided with Bank Secrecy Act training and that there is a comprehensive review of the credit union's BSA program.
The consent order requires the credit union to establish a comprehensive Information Security Program.
In a related story, the former credit union Chief Executive Officer (CEO), James Farrell, pleaded guilty to bank fraud. Farrell was the CEO of the New Haven County Credit Union from approximately 1992 to June 2015 and was then retained by the credit union's board of directors to provide assistance to the new CEO until March 2016.
Between July 2011 and March 2016, Farrell defrauded the credit union by transferring funds from NHCCU’s general ledger account to the account held by The Rib House, a restaurant located in East Haven, Connecticut. Farrell provided financial and bookkeeping services to The Rib House from 2010 to 2016.
Read the order.
Read the Justice Department press release.
Tuesday, August 27, 2019
NCUA Board Dismisses Secondary Capital Plan Appeal by LICU
The National Credit Union Administration (NCUA) Board dismissed an appeal of a low-income state chartered credit union's secondary capital plan on procedural grounds.
The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.
The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.
The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.
On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.
Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.
On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.
The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.
Read more.
The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.
The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.
The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.
On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.
Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.
On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.
The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.
Read more.
Friday, August 9, 2019
Ohio Becomes the Latest State to Allow CUs to Compensate Directors
Legislation (House Bill 489) permits Ohio credit unions to compensate their directors.
The bill was signed into law in March 2019.
The legislation states "A credit union may provide any of the following to its directors and supervisory audit committee members: (1) Reasonable compensation for their service as directors or supervisory audit committee members."
Robert Rutkowski, Deputy Superintendent of the Ohio Division of Financial Institutions, wrote in the Credit Union Newsletter setting the Division's expectations for credit unions deciding to pay their directors.
Credit unions should take asset size and financial conditions into consideration when setting director pay.
Credit unions should also set new standards for director competence and performance as part of the compensation arrangement.
Read the newsletter.
The bill was signed into law in March 2019.
The legislation states "A credit union may provide any of the following to its directors and supervisory audit committee members: (1) Reasonable compensation for their service as directors or supervisory audit committee members."
Robert Rutkowski, Deputy Superintendent of the Ohio Division of Financial Institutions, wrote in the Credit Union Newsletter setting the Division's expectations for credit unions deciding to pay their directors.
Credit unions should take asset size and financial conditions into consideration when setting director pay.
Credit unions should also set new standards for director competence and performance as part of the compensation arrangement.
Read the newsletter.
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