Compliance Blog

Welcome to 2018!

I hope everyone had a wonderful and safe holiday season. As we recover from our holiday hangovers, its time to start thinking about all the things we want to accomplish this year. Whether it's a personal goal like finally taking that vacation you've been planning for the past five years, or a professional one like sharpening your skills by attending Regulatory Compliance Seminar, we all have our priorities for the year. NCUA is no different.

In the last letter to credit unions of 2017, NCUA outlined its examination priorities for 2018. While many of their priorities remain the same as last year, they added a few that are discussed below. As a starting point, here are the ones that haven't changed: internal controls and fraud prevention, interest rate and liquidity risk, commercial lending and the Military Lending Act. The new priorities are addressed below.

Cybersecurity Assessment. While this was an NCUA priority in 2017, NCUA announced that it will be implementing its Automated Cybersecurity Examination Tool (ACET) in 2018. This tool will allow examiners to assess a credit union's cyber preparedness and will be used in examinations for credit unions with more than $1 billion in assets. As the ACET is based off the FFIEC's Cybersecurity Assessment Tool (CAT), NCUA encourages credit unions to continue to use the CAT to self-assess their cybersecurity risks. NAFCU's Cybersecurity Compliance webpage provides a number of useful resources for credit unions, including our editable, self-tallying CAT Workbook (member login required) that was updated last month.

Bank Secrecy Act Compliance. BSA compliance was also a priority in 2017; however, NCUA has changed the focus of its examinations from money service businesses to the new customer due diligence regulations. These new requirements become mandatory May 11, 2018, so examiners will be assessing compliance beginning in the second half of 2018. NCUA recommends credit unions review its BSA webpage for additional information and resources. To assist credit unions with these new rules, NAFCU has blogged on the new rule, triggering events for account review and the technical amendments and has published an article on the new rule (member login required). FinCEN has also published a few FAQs on the new rule. We expect additional FinCEN guidance in the coming months.

Automobile Lending. Examiners will look more closely at those credit unions with higher risk auto lending programs. Higher risk programs are those with maturities over seven years, high loan-to-value ratios, near-prime or subprime loans or indirect lending programs. NCUA recommends credit unions review its supervisory letter on concentration risk for more information. For indirect lending programs, credit unions may also want to review NCUA's report on What to Look out for When Managing an Indirect Lending Program and Letter to Credit Unions 10-CU-05.

HMDA. As part of its 2018 priorities, NCUA announced that it will look for "good faith efforts to comply" with the new HMDA rules. While credit unions subject to HMDA are still required to collect and report data following the new rules, NCUA indicated that examiners will simply review LARs and help credit unions determine their compliance weaknesses in both data collection and reporting. As long as credit unions are making good faith efforts to comply with all the new requirements, examiners will credit those efforts. NCUA also announced that it will not cite violations nor require data resubmissions unless the errors are material. More information on NCUA's 2018 HMDA examinations can be found in last week's blog. Credit unions may find it helpful to review the CFPB's HMDA implementation and Resources for HMDA Filers webpages and NAFCU's HMDA Compliance webpage which includes a number of charts, articles and blogs on the new rules.

Overdrafts. Examiners will review credit unions' compliance with Regulation E's overdraft rules. Section 1005.17 provides a number of requirements for overdraft programs, including requiring members to opt-in before certain fees can be assessed. Model Form A-9 provides a sample opt-in form. While the 2018 priorities refer only to Regulation E, credit unions may also want to review the overdraft rules contained in the Truth in Savings rule. Section 707.4 requires overdraft fees to be disclosed in a credit union's account opening disclosures and section 707.11 requires overdraft fees be disclosed on periodic statements and provides rules for advertising an overdraft program. Credit unions may also find it helpful to review Letter to Credit Unions 05-CU-03 which includes NCUA's Interagency Guidance on Overdraft Protection Programs and NAFCU's blogs on overdraft programs.

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New HMDA Tools Available. Last week, the CFPB announced that its check digit tool and its rate spread calculator are now available. The check digit tool provides the last two digits of the ULI and verifies the check digit is calculated correctly. More information on the check digit can be found in this prior NAFCU blog. The rate spread calculator provides the rate spread for a loan with a final action date of January 1, 2018 or later.