Compliance Update with Amy K

​NCUA proposed rule on succession planning; free webinar on IT Security for small credit unions; learn more about call report changes; and “Junk Fees” targeted by CFPB. 

by Amy Kleinschmit, Chief Compliance Officer 

Proposed Rule – Succession Planning.
The National Credit Union Administration (NCUA) considered a proposed rule at its recent board meeting regarding succession planning, which can be found here. Comments are due 60 days after the proposed rule is published in the federal register.

The discussion of the proposed rule reviewed the importance of succession planning. The first factor examined was the decline in the number of credit unions mainly resulting from the long-running trend of consolidation across all depository institutions. As noted in the proposed rule, “One of the reasons for the consolidation is the lack of succession planning. An NCUA analysis found that poor management succession planning was either a primary or secondary reason for almost a third (32 percent) of credit union consolidations.”

Another factor discussed in the proposed rule is the retirement of ‘baby boomers.’ As noted, “Each day, commencing in 2011 (when the oldest members of the generation turned 65) and continuing until 2030, approximately 10,000 Baby Boomers will turn age 65.”

This proposal applies to federal credit unions (FCU) of all sizes. State chartered credit unions are encouraged to also undertake succession planning. This proposed rule is intended to strengthen current succession planning efforts being taken by credit unions and to require others that have not yet done so to commence their succession planning process.

This new requirement is proposed to be added to section 12 CFR 701.4 which relates to the general authorities and dues of FCU directors.

The board of directors would be required to have a working familiarity with the FCU’s succession plan established. However, the proposed rule does not mandate the contents of training to meet this requirement allowing the FCU flexibility in how it will meet this requirement.

The proposed rule would require that a FCU’s board of directors establish a process to ensure proper succession planning to include officers of the board, management officials, executive committee members, supervisory committee members, and (where provided for in the bylaws) the members of the credit committee. The board of directors or an appropriate committee of the board must: (i) Approve a written succession plan that covers the individuals described above; and (ii) Review, and update as deemed necessary, the succession plan and policy in accordance with a schedule established by the board of directors, but no less than annually. The succession plan must, at a minimum, identify key positions covered by the plan, necessary general competencies and skills for those positions, and strategies to identify alternatives to fill vacancies.

The proposed regulatory amendments provide FCUs with broad discretion in how to implement the new requirements. For example, while the proposed rule would require succession plans to include certain mandatory elements, the rule neither specifies how the topics should be addressed nor does it otherwise prescribe the contents of the succession plans.

All feedback is welcome, but some specific questions were posed by the NCUA in the proposed rule. Those questions include -  

1. What do you believe will be the quantified burden imposed by the rule, be it in hours, dollars, or effort?
2. It is anticipated that most FCUs already possess the information needed to comply with the proposed rule, and thus that most FCU will not have to create any new documentation as a result of the rule. Do you agree with this view? Why or why not?
3. As noted, the board anticipates that the examination program will establish an FCU’s compliance with the proposed rule by confirming the existence of a succession plan and training. Do you have any other suggested methods of establishing compliance?
4. This preamble provides that smaller credit unions with less than $10 million in assets will be the primary beneficiaries of the proposed rule. What benefits do you think smaller credit unions will receive from the board’s adoption of this proposed rule?
5. What benefits do you anticipate larger FCUs will receive from adoption of the proposed rule? For purposes of this question, “larger FCUs” may include FCUs with more than $10 million in assets or FCUs in another higher asset category.
6. What benefits do you anticipate members will receive from the adoption of the proposed rule?

IT security – Small Credit Union Tools from TraceSecurity
Be sure to register for this free webinar on February 3 to learn more about cybersecurity tools available for small credit unions. IT security has been top of mind for organizations across all industries. There are new breaches discovered every day, so it’s more important than ever to ensure your organization is secure. Small to medium businesses are not safe from cyberattacks.

Hear about IT solutions geared specifically for the small credit union, including network assessment; risk assessment; and IT audit. These services were designed to meet the regulatory requirements of smaller organizations while also remaining within budget constraints.

TraceSecurity has provided over 30,000 examiner approved reports, helping credit unions of all sizes maintain compliance year after year. As a CUNA Strategic Services provider since 2006, TraceSecurity helps credit unions with a range of cybersecurity services, including risk assessments, penetration testing and IT audits. With a combination of software and services, TraceSecurity can help credit unions manage their information security program and supplement it with third-party validation. 

Call Report Changes Webinar
The National Credit Union Administration (NCUA) will be hosting a free webinar on February 10 to provide important information to credit unions about Call Report Form 5300 changes. Registration can be found here.
Staff from the NCUA’s Office of Examination and Insurance will cover Call Report changes for natural person credit unions effective with the March 2022 reporting cycle, including new schedules for risk-based capital and the Complex Credit Union Leverage Ratio (CCULR), which became effective in January.

“Junk Fees” Targeted by CFPB
The Consumer Financial Protection Bureau (CFPB) recently announced an “initiative to save Americans billions in junk fees” charged by banks and financial companies.

The Request for Information (RFI) can be found here and comments must be received by March 31, 2022.
In the RFI, the CFPB notes it is, “concerned about fees that far exceed the marginal cost of the service they purport to cover, implying that companies are not just shifting costs to consumers, but rather, taking advantage of a captive relationship with the consumer to drive excess profits.”

Fees that the CFPB mentions in its RFI include - penalty fees such as late fees, overdraft fees, non-sufficient funds (NSF) fees, convenience fees for processing payments, minimum balance fees, return item fees, stop payment fees, check image fees, fees for paper statements, fees to replace a card, fees for out-of-network ATMs, foreign transaction fees, ACH transfer fees, wire transfer fees, account closure fees, inactivity fees, fees to investigate fraudulent activity, ancillary fees in the mortgage closing process, and more.

This request for information seeks knowledge from the public on how “junk fees” (CFPB’s term) have impacted peoples’ lives. The CFPB goes on to describe these “junk fees” as “exploitative, back-end, hidden, or excessive fees.”

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

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