Compliance Update with Amy K

​CFPB hosting elder fraud prevention webinar series; NCUA hosting webinar on Fintech and ACCESS; an OFAC video series; and final rule on member expulsion. 

by Amy Kleinschmit, Chief Compliance Officer

Elder Fraud Prevention Resource
The Consumer Financial Protection Bureau (CFPB) is hosting an elder justice webinar series this fall - Register now! The first webinar is later today - Get to Know Your Federal Financial Regulators. Speakers for today’s webinar will their agencies’ roles as Financial Institution Regulatory and Enforcement Agencies (FIREAs) and as partners in elder financial exploitation prevention and response. They will also share free resources for older consumers, account holders, and financial caregivers and how state and local elder justice organizations, networks, financial institutions, and law enforcement can work with them.

Next week, the webinar will be on September 14 and is titled - Just in Time Housing. Learn about four new resources to help older adults and their caregivers navigate some of the important decisions that can affect later-life financial security. The guides focus on: Leaving your home to children or heirs; Making housing decisions after losing a spouse or partner; Making housing decisions when your health changes; and Using home equity to meet financial needs.

In October, the CFPB’s webinar will discuss Reporting and Investigating Elder Financial Abuse. Attendees will learn what happens after elder financial exploitation has been reported. Elder justice professionals will discuss their organizations’ roles in reporting and investigating elder financial exploitation, as well as share resources for the field.
 
NCUA Webinar – September 28
NCUA is hosting a free webinar - “Fintech and ACCESS: Future Possibilities for Enhancing Financial Inclusion Through the Use of Technology.” Charles Vice, the NCUA’s Director of Financial Technology and Access, will discuss opportunities and challenges in adopting technology to promote greater inclusion. A question-and-answer session will follow the presentation. Register for this webinar here.
 
OFAC Video Series
The Office of Foreign Asset Control (OFAC) recently released an “Introduction to OFAC Series” which can be found here. The first two episodes are now available with the first episode introducing viewers to OFAC and its place within the U.S. government, as well as its history, mission, and relationship with the public. Episode 2 discusses blocking and non-blocking sanctions.
 
Final Rule – FCU Bylaws (Member Expulsion)
In case you missed it, the NCUA approved its final rule amending Part 701, Appendix A – Federal Credit Union Bylaws to implement the Credit Union Governance Modernization Act of 2022, specifically provisions to expel members for cause. This rule applies to Federal Credit Unions (FCUs) and is now in effect (as of August 25, 2023).

Resources - In order to assist federal credit unions with rule changes, CU PolicyPro has made changes to model policy 2232 – Membership Expulsion and/or Service Limitation and created a new corresponding procedure, 2232.10 – FCU Member Expulsion Procedure. Credit unions can also reference the Membership Expulsion and/or Service Limitation topic within the Accounts channel of InfoSight, which has been updated to include the recent changes.

Prior to the Credit Union Governance Modernization Act of 2022, FCUs could only expel members by a two-thirds vote of the membership present at a special meeting called for that purpose, and only after the individual is provided an opportunity to be heard; or for non-participation in the affairs of the credit union, as specified in a policy adopted and enforced by the board. Under this final rule an FCU member may be expelled for cause by a vote of two-thirds of a quorum of an FCU’s board of directors provided the FCU has adopted the related standard Bylaw amendment.

In discussion of the final rule, the NCUA states it “believes the expulsion of members is an extreme remedy that may have the effect of denying individuals access to financial services. In addition, as financial cooperatives, a credit union’s expulsion of a member-owner is a particularly significant action resulting in financial exclusion. Therefore, consistent with certain statements in the legislative history, use of the authority under the Governance Modernization Act should be rare and used only for egregious member behavior.”

To briefly highlight some provisions of the final rule:

Amendments are made to Article XIV. Expulsion and Withdrawal of Appendix A to Part 701—Federal Credit Union Bylaws, where the final rule sets forth the policy for expulsion. As noted above, the final rule adds a third avenue to expel a member, specifically adding – “The third way to expel a member is by a two-thirds vote of a quorum of the directors of the credit union. A credit union can only expel a member for cause and through a vote of the directors of the credit union if it follows the policy for expulsion in section 2.”

The final rule details the steps the credit union must take should it wish to proceed under this new process – including providing a written copy of the Bylaw Article or the optional standard disclosure notice to each member of the credit union.

Advance notice - If a member will be subject to expulsion, the member shall be notified in writing in advance, along with the reason for such expulsion. The final rule instructs what must be included in said notice, which must include that any complaints related to the member’s potential expulsion should be submitted to NCUA’s Consumer Assistance Center if the complaint cannot be resolved directly with the credit union.

The final rule provides that a member shall have 60 calendar days from the date of receipt of a notification to request a hearing from the board of directors of the credit union. If a member does not request a hearing or provide a written submission, the member shall be expelled after the end of the 60-day period after receipt of the notice. If a member requests a hearing, the board of directors must provide the member with a hearing. At the hearing, the board of directors may not raise any rationale for expulsion that is not explicitly included in the notice to the member. After the hearing, the board of directors of the credit union must hold a vote within 30 calendar days on expelling the member.

Final notice - If a member is expelled, either through the expiration of the 60-day period or a vote to expel the member after a hearing, written notice of the expulsion must be provided to the member. The final rule also details what must be in this notice. A member expelled under this authority must be given an opportunity to request reinstatement of membership.

The final rule also adds definitions and commentary to clarify the scope of this new procedure. The final rule defines, “cause” and “dangerous or abusive behavior.”

Expulsion or withdrawal does not relieve a member of any liability to the credit union. The credit union will pay all of the member’s shares upon the member’s expulsion or withdrawal less any amounts due to the credit union.
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An expulsion of a member pursuant to this final rule shall be done individually, on a case-by-case basis, and neither the NCUA Board nor any credit union may expel a class of members.

As always, DakCU members may contact Amy Kleinschmit with any compliance related questions.