Posts tagged ‘Kyle Hauptman’

The Most Informative Blog of the Year

So much for a quiet end to the year. With Congress still rushing to get a COVID relief bill done, NCUA rushing to get some important regulations done, the Russians looking to get some important hacking done and the CDC trying to execute the vaccine roll-out, the past few days have been among the most impactful for the credit union industry this year. Here are the highlights of what you need to know before breaking for your holiday vacation.

NCUA Finalizes Subordinated Debt Regulation

NCUA finalized regulations which will allow complex credit unions to utilize subordinated debt to help meet their risk-based capital requirements when they kick in in 2022. Additionally, for the first time, eligible credit unions can offer subordinated debt to natural persons. Those are just two of the highlights from an extremely important regulation, which creates an updated framework for credit unions that wish to use what used to be called secondary capital. 

One of the big debates going on within the industry has been the extent to which credit unions should be allowed to use secondary capital. On the one hand, former NCUA Board Chairwoman Debbie Matz encouraged eligible credit unions to get their low-income designations in part so that they could utilize secondary capital. In recent years, the pendulum has swung back the other way, with NCUA issuing strict guidance for the approval of secondary capital plans. Individuals who feel that NCUA is too tough on this issue will find little comfort in the final regulations. NCUA now considers subordinated debt to be a security, meaning that credit unions will have to comply with detailed and complicated legal disclosures and oversight provisions. I’ll have more on this in the future, but it’s not too early to start thinking about who in your credit union is going to be designated the in-house security law expert. 

In a typical board meeting, the finalized subordinated debt rule would be more than enough work, but NCUA also took the opportunity to propose several new and important regulations. These include permitting multiple SEG credit unions that participate in shared branching networks to utilize shared branches to satisfy branch location requirements when expanding into new areas. The key is that credit unions will no longer have to own a portion of a shared branching network in order to take advantage of this increased flexibility. The board also extended temporary regulations promulgated in response to COVID-19, which provide regulatory relief to credit unions. Over the strong objections of Board Member Harper, the Board proposed a rule that would give credit unions greater flexibility when it comes to overdraft protections. Specifically, credit unions can now give consumers more than 45 days to either cure the overdraft or enter into a traditional loan. In objecting to the proposal, Board Member Harper argued that the proposal will hurt consumers who he feels need more protection against overdraft programs, not less. 

The NCUA still wasn’t done. It has proposed regulations permitting federal credit unions to purchase servicing rights from other federally insured credit unions. This is an aggressive move by NCUA, which has in the past been hesitant to propose such a change on safety and soundness grounds. 

Show MeThe Money

The NCUA also got some important budget issues out of the way. First and foremost, the normal operating level of the share insurance fund will remain at 1.38% for the time being, and with new Board Member Kyle Hauptman now officially onboard, the NCUA approved next year’s budget. As part of the process, the NCUA made regulatory changes to the overhead transfer rate (OTR)  and the operating fee schedule. The OTR is the formula used to determine how much money NCUA needs to fund its share insurance examination expenses. In recent years it has come under scrutiny since it allows NCUA to assess not only federal credit unions, but state chartered ones as well. The budget was passed over the objection of Board Member Harper, who continues to advocate for greater scrutiny of credit union compliance with consumer protection laws.

EEOC Issues Vaccine Guidance

Many credit unions are considering whether or not they should mandate that their employees get the COVID-19 vaccine. On Wednesday, the EEOC issued this important updated guidance explaining the legal issues that employers should consider if they decide to mandate that their workforce get vaccinated.

From Russia With Love

In a plotline worthy of a John le Carre novel, the size, scope and damage of the recent mass cyberattack, widely believed to be the work of Russia’s intelligence services, continues to grow. It’s hard to believe it won’t end up impacting a large swath of the private sector, and it is certainly something that your IT team should be paying attention to. Here is a blog on the issue published by Microsoft’s President Brad Smith, who has emerged as an authoritative voice on the breach in the absence of a coordinated federal response. 

Believe it or not, there’s much more I could say, but tomorrow is another day. Stay tuned.

December 21, 2020 at 10:01 am Leave a comment

Credit Unions Don’t Adequately Protect Consumers? That’s News To Me

At yesterday’s budget briefing, NCUA Board Member Todd Harper continued his push for NCUA to adopt an examination framework which includes a consumer protection component. According to Board Member Harper, who has championed this issue since 2019, “we know that the NCUA falls short when it comes to the agency’s oversight of consumer financial protection laws. Consumers, regardless of their financial provider of choice, deserve to have the same level of financial protection, yet we do not adequately assess consumer compliance management systems or even basic compliance with consumer financial protection laws in most credit unions.” Harper’s solution is for the NCUA to join other financial regulators to assign a separate consumer compliance rating to the examinations of credit unions with $1 billion or more in assets. 

These are big charges for a board member to make. The problem is that there continues to be a lack of evidence that credit unions fall short when it comes to consumer compliance. Credit unions have many faults, but a lack of commitment to consumer compliance is not one of them. In fact, I would suggest that if anything, there are some credit unions which do not appropriately balance the need for good faith compliance against the need to invest in other areas of credit union concern. Remember, for those credit unions with over one billion dollars in assets who would be subject to the increased scrutiny, the explosion of class action consumer litigation we’ve seen over the last decade provides more than enough incentive to comply with consumer protection laws. 

The policy debate playing out between Board Member Harper and Chairman Hood will ultimately be decided by Kyle Hauptman, whose nomination to the board was just approved by the Senate. As he considers the issue, the question he should ask himself is this – is there evidence that the credit union industry is systemically failing to adequately protect the consumer rights of its members, or are the board member’s concerns a solution in search of a problem that does not exist?

December 3, 2020 at 9:34 am 2 comments

Seven Things You Need To Know To Start Your CU Day

Today’s blog is tailor-made for those of you with ADHD.  There’s lot of information I want to get to you on a broad range of topics.

Governor Signs Mortgage Forbearance Bill – Governor Cuomo has signed into law legislation I have been telling you about regulating mortgage forbearances for homeowners impacted by COVID-19.  Here’s where it gets a little confusing.  You should read S.8243C in conjunction with PART C of A.10530 which amends S.8243C.  This is what New York State calls a Chapter Amendment.    I would certainly take a close look at these new requirements which are effective immediately.

Governor Declares Juneteenth A State Holiday—Governor Cuomo issued an EO recognizing Juneteenth as a holiday for state employees tomorrow.  June 19th marks the day in 1865 when Federal troops informed African American slaves in Texas that slavery had ended more than a year earlier following the end of the Civil War.

Meet The New Boss—On Monday the Trump Administration announced that it intends to nominate Kyle Hauptman, of Maine, to be a Member of the National Credit Union Administration Board.  He will replace current holdover board member J. Mark McWatters whose previous term expired August 2019.  If confirmed, Hauptman would serve through at least August 2025. Hauptman is currently an economic policy advisor to Senator Tom Cotton (R-Arkansas).

Don’t Forget The Money—Board Member McWatters used a gracious goodbye statement to the industry, to remind credit unions that they still have some money coming their way from the conserved credit unions as outlined on NCUAs website available here.

DFS Issues Guidance On Credit Reporting And Credit Reporting Agencies—As the sugar rush from the PPP loans and the stimulus checks begin to wear off, you can expect more and more issues to arise about your members credit.  Yesterday the New York State Department of Financial Services issued a guidance on credit reporting which is based on a set of principles the department negotiated with the CRAs.  It also will have some impact on what banks and credit unions report when acting as furnishers of credit information.

This Is One Wacky Economy; Retail Sales Surge—Any expert who tells you they know what to expect from the economy should bring you as much comfort as the weatherman confidently predicting what the weather will be like seven days from now.  Yesterday, retail sales bounced back with a vengeance.  Does this mean that a V-shaped recovery is once again possible? Or simply that people are anxious to get out of the house, anxious to spend some of that free money from the Federal Government knowing that the hard times are right around the corner?  The answers to these questions will of course have a profound impact on the financial health of credit unions large and small in the coming months.  Right now unfortunately, the economy is analogous to a 5,000 piece jigsaw puzzle with all the pieces spread across the table.

New York Primaries Worth Watching—With the state seemingly turning bluer by the day, and national pundits seeking to figure out how much staying power AOC has, here is a great piece of analysis from long time Albany hand Bruce N. Gyory handicapping the upcoming primaries in New York’s 16th Congressional District where longtime Congressman Eliot Engel is facing the proverbial spirited challenge from political unknown Jamaal Bowman and in the 15th Congressional District where the winner is all but assured of replacing retiring Congressman Jose E. Serrano.

 

June 18, 2020 at 10:04 am Leave a comment


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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