ALEXANDRIA, Va.–The deadlines to comment on several proposals that are part of NCUA’s Deregulation Project are approaching, with comment deadlines for other proposals somewhat further out.
Here’s a look at what’s been proposed and when comments are due:
April 13
Organization and Operation of Federal Credit Unions
NPRM Summary: The NCUA Board proposes to rescind its Interpretative Ruling and Policy Statement 06-1 (IRPS 06-1). Rescinding IRPS 06-1 would ease the compliance burden on Federal credit unions (FCUs) by limiting the number of sources that FCUs must check to ensure compliance with applicable chartering and field of membership (FOM) requirements.
Simplified Summary: “The NCUA Board proposes to rescind its Interpretative Ruling and Policy Statement 06-1 (IRPS 06-1) to limit the number of sources an FCUs must check to ensure compliance with applicable chartering and field of membership (FOM) requirements,” the agency said. “IRPS 06-1 shares similar information about FOM policies and procedures as the Chartering Manual. By rescinding IRPS 06-1, NCUA is eliminating duplicative information that may be confusing or increase compliance burden.”
April 13
Mergers of Insured Credit Unions into Other Credit Unions; Voluntary Termination or Conversion of Insured Status
NPRM Summary: The NCUA Board proposes to amend its regulations governing the voluntary termination of federal share insurance to streamline member communication requirements. “This action is necessary to reduce regulatory burden by eliminating overly prescriptive formatting rules for the mandatory disclosure statement that credit unions must provide to members,” NCUA stated. “The intended effect is to simplify compliance and provide credit unions with greater flexibility in designing effective communications, while still ensuring that members receive clear and prominent notice of a proposed termination of federal insurance.”
Simplified Summary: “The NCUA Board proposes to amend its regulations to streamline member communication requirements with regards to proposed mergers or voluntary termination of federal share insurance,” according to the agency. “Currently, credit unions must notify members about an upcoming vote on a proposed merger or a credit union’s intentions to terminate its federal share insurance. This proposal would retain the requirement to notify members about the loss of federal insurance coverage for deposits but would remove overly prescriptive formatting requirements for how that notification is conducted. The proposal would also eliminate the requirement for NCUA to post member comments regarding proposed mergers.”
For the full proposal, go here.
April 13
Conversion of Insured Credit Unions to Mutual Savings Banks
NPRM Summary: NCUA said the board is proposing to amend its regulations governing the conversion of insured credit unions into banks. The NCUA Board proposes to eliminate certain prescriptive procedural, disclosure, and communication requirements. This action reduces unnecessary regulatory burdens and provides credit union boards of directors with greater flexibility to exercise their business judgment. The intended effect of these changes is to simplify compliance for credit unions, reduce administrative costs, and modernize the conversion process, while ensuring members receive clear and effective disclosures, the agency said.
Simplified Summary: “The Board proposes to amend its regulations related to conversion of insured credit unions into mutual savings banks. This proposal would eliminate certain prescriptive procedural, disclosure, and communication requirements,” NCUA said. “At present, the regulations governing the conversion process are outdated and overly burdensome. Additionally, the regulations currently include items that are guidance, which may be confusing. NCUA is proposing to simplify compliance and clarify guidance by removing these provisions and relocating guidance to elsewhere on NCUA.gov.”
For more info, go here.
April 27
Post-Election Training for New Board Members
NPRM Summary: NCUA said the board is soliciting public comment on a proposal to eliminate the regulatory requirement that each director of a federal credit union (FCU) attain a working familiarity with finance and accounting within six months after election or appointment. The Board said it believes the regulation is unnecessarily prescriptive.
Simplified Summary: “Currently, this regulation requires FCU directors to attain a working familiarity with finance and accounting within six months after election or appointment,” the agency stated. “The Board is proposing to eliminate this requirement. Certainly, the Board continues to believe that directors must have a working familiarity with basic finance and accounting practices. Nonetheless, specifically requiring that new FCU directors receive specific training in a certain period of time may be unduly burdensome and inadvertently undermine the ability of a credit union’s members to elect their board.”
For the full proposal, go here.
April 27
Definitions Related to Statutory Lien
NPRM Summary: The NCUA Board is publishing this proposed rule to remove a provision under section 12 CFR 701.39 of NCUA regulations regarding federal credit unions’ (FCUs) statutory lien authority. The Board believes it is redundant to continue to include a definition of the term “except as otherwise provided by law or except as otherwise provided by federal law” when it is axiomatic that a law that supersedes this regulation would be controlling.
The provision does not provide any assistance to FCUs in determining whether such statutory or case law exists, therefore it has no material value, NCUA said.
Simplified Summary: “12 CFR 701.39, related to statutory liens, states that an FCU has the power to impress and enforce a lien against a member’s shares and dividends to satisfy any outstanding obligations owed to the credit union,” NCUA stated. “12 CFR 701.39(a)(1) defines the phrase ‘except as otherwise provided by law or except as otherwise provided by federal law.’ The NCUA Board proposes to remove the definition of this phrase because the language is unnecessary and obvious. The definition does not add anything to the plain meaning of these words.”
For the full proposal, go here.
April 27
Refund of Interest (Loans)
NPRM Summary: The NCUA Board is issuing for public comment a proposal to rescind its regulation § 701.24, which addresses the refund of interest to members. This regulation is redundant, as it restates the authority already granted to a federal credit union’s (FCU’s) board of directors by the Federal Credit Union Act (FCU Act) section 113(9), according to the agency.
Simplified Summary: “The NCUA Board is proposing to eliminate 12 CFR 701.24 because it is duplicative of the Federal Credit Union Act (FCU Act, see 12 U.S.C. 1761b(9)),” NCUA said. “The FCU Act authorizes FCU’s board of directors to refund interest to members at the close of business on the last day of any dividend period. This refund is in proportion to the interest paid by the member in that dividend period. This proposal would reduce regulatory burden by limiting the number of sources that FCUs must check to ensure compliance with laws and regulations.”
For the full proposal, go here.
April 27
Eligible Obligations
NPRM Summary: The NCUA Board (Board) solicits public comment on a proposal to streamline its regulations governing the purchase, sale, and pledge of eligible obligations. The Board proposes to remove the prescriptive lists of items that must be addressed in the written policies adopted by a federal credit union (FCU). Although FCUs would still be required to maintain written policies, removing the mandated items will enable a more efficient and principles-based approach, NCUA said.
The Board also proposes to remove detailed requirements regarding conflicts of interest and compensation. These regulatory provisions are unnecessary since FCUs are already governed by broader conflict of interest provisions in their bylaws and by the fiduciary duties of their officials.
Simplified Summary: “The Federal Credit Union Act authorizes federal credit unions to purchase, sell, and pledge eligible obligations to provide great flexibility in meeting member demand and improving liquidity,” NCUA said. “NCUA implements this authority through provisions in 12 CFR 701.23, which includes the requirement that a credit union must have policies governing its purchase, sale, and pledge of eligible obligations and a list of items that those policies must address. The proposed revisions would retain the requirement that a credit union must have policies that address eligible obligations, but it would remove the prescriptive lists of items that must be addressed in written policies.”
For the full proposal, go here.
April 27
Loan Compensation Commission
NPRM Summary: The NCUA Board (Board) is issuing for public comment a proposal to amend the NCUA’s regulation that limits federally insured credit union (FICU) official and employee compensation in connection with loans to members and lines of credit to members. These regulations have generated confusion and are unduly restrictive, NCUA said. To provide clearer and more flexible standards, the proposed rule would expressly permit incentives and bonuses to employees, including senior management, to incorporate lending metrics as part of compensation based on a credit union’s overall financial performance.
Simplified Summary: “The NCUA Board seeks to amend 12 CFR 701.21(c)(8) which establishes a blanket prohibition on the direct or indirect receipt of any commission, fee, or other compensation by a FICU official, employee, or their immediate family members, in connection with any loan made by their FICU,” the agency said. “While the regulation carves out certain exceptions to this prohibition, FICUs have expressed confusion and uncertainty about what is permitted and the definition of ‘overall financial performance.’ They also have asserted that the regulation is subject to varying interpretations and levels of enforcement across the NCUA’s regions.
“While NCUA has determined limitations on compensation tied to lending are still necessary, the proposed rule would change the regulation to provide clearer and more flexible standards by adding a definition for “overall financial performance”. Additionally, the proposed rule would expressly permit incentive and bonuses to employees, including senior management, to incorporate lending metrics as part of compensation based on a credit union’s overall financial performance,” the agency continued.
For the full proposal, go here.
May 11
Records Preservation Program and Appendices: Record Retention Guidelines; Catastrophic Act Preparedness Guidelines
NPRM Summary: On April 24, 2024, the NCUA Board published an advance notice of proposed rulemaking (ANPR) to solicit comments on ways the agency can improve and update its vital records preservation program regulation and accompanying guidelines, the agency stated. It added that based on public comments received in response to the ANPR and upon further consideration of the issues involved, the board is publishing this proposed rule to simplify and streamline part 749. The board is proposing to update part 749 by clarifying the purpose of the regulation, updating the definitions, and removing the appendices.
Simplified Summary: “The purpose of the proposed rule is to reduce the regulatory burden of vital records preservation. The proposed changes would ensure that only essential records are kept, and only for as long as they are necessary to restore important member services,” NCUA said. “The Board is proposing to update 12 CFR 749 by clarifying the purpose of the regulation, updating the definitions, and removing unnecessary references to recommendations and guidance.”
For the full proposal, go here.
May 26
Third Party Servicing of Indirect Vehicle Loans
NPRM Summary: The NCUA Board is seeking comment on a proposed rule that would remove the NCUA’s unnecessarily prescriptive regulation regarding third-party servicing of indirect vehicle loans. This action would reduce regulatory burden and provide credit unions with greater operational flexibility, consistent with a principles-based supervisory approach. The intent is to reduce administrative costs and compliance complexity, enabling credit unions to serve their members more efficiently, according to the agency.
Simplified Summary: “Third-party servicing of indirect vehicle loans, limits a federally insured credit union’s ability to purchase indirect auto loans serviced by a third party,” NCUA said. “Today, a credit union can only invest up to 50% of its net worth in indirect auto loans serviced by a third party. After 30 months of experience with a particular servicer, a credit union can invest up to 100% of its net worth in indirect auto loans serviced by that third party. The proposed rule would remove these overly prescriptive limitations.”
For the full proposal, go here.
June 6
Chartering and Field of Membership
NPRM Summary: The NCUA Board proposes to amend the associational common bond provisions of its chartering and field of membership (FOM) rules. The proposed FOM amendment would clarify that requiring the purchase of a product or service as a condition of membership no longer automatically bars eligibility as a recognized association. The board does not believe such an automatic bar is required under the Federal Credit Union (FCU) Act, and a client-customer relationship as a condition of membership may still be incidental in a manner that permits an evaluation of the group’s activities and overall circumstances.
Simplified Summary: “NCUA’s Chartering and Field of Membership Manual outlines the requirements for forming and expanding a federal credit union (FCU). Under current rules, the Chartering Manual establishes eligibility requirements for an associational common bond and identifies certain groups that are not eligible,” NCUA said. “Specifically, the current rule states that associations primarily based on a client-customer relationship do not qualify for associational common bond status. In such a case, if membership in an association requires purchasing a product or service (such as insurance), the group is interpreted as falling under this automatic bar to eligibility, regardless of other factors.
“The proposed rule would enhance consumer access to financial services by eliminating language in the Chartering Manual that automatically disqualifies one type of associational group and instead permits further evaluation of circumstances as whole,” NCUA added.
For the full proposal, go here.
