Chapter 1 – Fundamental Credit Union Issues
Section 1
Organization, Bylaws and Field of Membership
Organization of a Federal Credit Union ......................................................................................................... 4
Credit Union Membership ......................................................................................................................... 4
Federal Credit Union Powers ..................................................................................................................... 5
Board of Directors ..................................................................................................................................... 5
Supervisory Committee ............................................................................................................................. 6
Employees.................................................................................................................................................. 7
Federal Credit Union Bylaws ......................................................................................................................... 7
Name and Purpose, Membership Qualifications and Shares ..................................................................... 8
Par Value ............................................................................................................................................... 8
Meetings of Members ................................................................................................................................ 9
Elections .................................................................................................................................................. 10
Duties of the Board of Directors .............................................................................................................. 11
Board Officers, Management Officials and Executive Committee .......................................................... 12
Credit Committee ..................................................................................................................................... 13
Additional Bylaw Provisions ................................................................................................................... 13
Confidentiality .................................................................................................................................... 13
Removal of Directors and Committee Members ................................................................................. 14
Records ............................................................................................................................................... 14
Indemnification ................................................................................................................................... 14
Charter and Bylaw Amendments ........................................................................................................ 14
Field of Membership .................................................................................................................................... 14
Occupational Common Bond ................................................................................................................... 15
Associational Common Bond .................................................................................................................. 16
Multiple Common Bond .......................................................................................................................... 17
Common Bond Advertising Requirements .............................................................................................. 19
Community Credit Unions ....................................................................................................................... 19
Low-income Credit Unions...................................................................................................................... 20
Other Persons Eligible for Membership ................................................................................................... 21
Once a Member, Always a Member ........................................................................................................ 22
Resources and Research Tips ....................................................................................................................... 22
Chapter 1 – Fundamental Credit Union Issues
Section 2
The Legislative and Regulatory Process
Legislative Process......................................................................................................................... 24
I am Just a Bill ........................................................................................................................... 24
Committees ................................................................................................................................ 24
Floor Consideration ................................................................................................................... 25
Food for Thought ....................................................................................................................... 25
Regulatory Process......................................................................................................................... 26
Proposed Rules .......................................................................................................................... 26
Final Rules ................................................................................................................................. 27
Advanced Notice of Proposed Rulemaking ............................................................................... 27
Interim Final Rule...................................................................................................................... 28
Anatomy of a Regulation ............................................................................................................... 28
Code of Federal Regulations ..................................................................................................... 28
The Rule Itself ........................................................................................................................... 29
Staff Commentary...................................................................................................................... 30
Preambles .................................................................................................................................. 30
Legal Opinion Letters ................................................................................................................ 30
Other Guidance .......................................................................................................................... 31
Putting it All Together ............................................................................................................... 32
Resources and Research Tips......................................................................................................... 32
Chapter 1 – Fundamental Credit Union Issues
Section 3
The Federal Credit Union Act and the National Credit Union Administration
Overview of the Federal Credit Union Act .................................................................................... 34
History of the Federal Credit Union Act ........................................................................................ 34
Major Provisions and Amendments .......................................................................................... 34
Title I - General Provisions ................................................................................................... 34
Title II - Share Insurance ....................................................................................................... 35
Title III - Central Liquidity Facility ...................................................................................... 36
Overview of the NCUA ................................................................................................................. 37
Administrative Bodies ................................................................................................................... 37
NCUA Board ................................................................................................................................. 37
NCUA Board Authorities .......................................................................................................... 38
NCUA Organization ...................................................................................................................... 38
Regional Offices ........................................................................................................................ 39
Office of Public and Congressional Affairs............................................................................... 39
Office of the General Counsel ................................................................................................... 40
Office of Consumer Protection & Access ................................................................................. 40
Office of Examination and Insurance ........................................................................................ 40
Office of Inspector General ....................................................................................................... 40
Office of Small Credit Union Initiatives ................................................................................... 41
Office of the Chief Economist ................................................................................................... 41
Resources and Research Tips......................................................................................................... 41
Chapter 1 – Fundamental Credit Union Issues
Section 4
The Consumer Financial Protection Bureau
Overview ........................................................................................................................................ 44
Basics of the CFPB ........................................................................................................................ 44
Objectives of the CFPB ................................................................................................................. 45
Structure of the CFPB .................................................................................................................... 45
Consumer Education and Engagement ...................................................................................... 46
Research, Markets and Regulations ........................................................................................... 47
Supervision, Enforcement and Fair Lending ............................................................................. 48
Operations, Chief Operating Officer ......................................................................................... 49
External Affairs ......................................................................................................................... 50
Legal, General Counsel ............................................................................................................. 50
The CFPB’s Regulatory Authority ................................................................................................ 50
Enumerated Consumer Laws ..................................................................................................... 51
Inherited Regulations................................................................................................................. 52
Truth in Savings .................................................................................................................... 53
Credit Unions and the CFPB’s Regulations .............................................................................. 54
Tracking the CFPB’s Actions .................................................................................................... 54
Unfair, Deceptive or Abusive Acts or Practices (UDAAP) ........................................................... 54
Unfair Acts or Practices ............................................................................................................. 55
Deceptive Acts or Practices ....................................................................................................... 55
Abusive Acts or Practices .......................................................................................................... 56
Examples of CFPB’s Actions .................................................................................................... 56
Consumer Complaints.................................................................................................................... 57
CFPB’s Authority over Nonbanks ................................................................................................. 58
Dodd-Frank Mandates ................................................................................................................... 59
CFPB’s Regulatory Agenda ........................................................................................................... 60
Resources and Research Tips......................................................................................................... 60
Chapter 1 – Fundamental Credit Union Issues
Section 5
NCUA Supervision and Examination
Overview ........................................................................................................................................ 64
Examination Authority................................................................................................................... 65
Special NCUA Examination Programs .......................................................................................... 65
Credit Unions Above $10 Billion .............................................................................................. 66
Federal Credit Unions Below $10 Million ................................................................................ 66
Areas of Risk Evaluation ............................................................................................................... 66
Credit Risk ................................................................................................................................. 66
Liquidity Risk ............................................................................................................................ 66
Interest Rate Risk....................................................................................................................... 67
Transaction Risk ........................................................................................................................ 67
Compliance Risk........................................................................................................................ 67
Strategic Risk............................................................................................................................. 67
Reputation Risk ......................................................................................................................... 67
CAMEL Rating System ................................................................................................................. 68
Capital Adequacy ...................................................................................................................... 68
Asset Quality ............................................................................................................................. 68
Management .............................................................................................................................. 69
Earnings ..................................................................................................................................... 69
Liquidity and Asset-Liability Management ............................................................................... 69
Composite Rating ...................................................................................................................... 69
The Examination ............................................................................................................................ 70
Joint Conference/Exit Meeting .................................................................................................. 70
Administrative Tools ................................................................................................................. 71
Supervisory Focus.......................................................................................................................... 72
Chapter 1 – Fundamental Credit Union Issues
Section 6
Special Credit Union Issues
Overview ........................................................................................................................................ 77
Statutory Lien................................................................................................................................. 77
Impressing the Lien ................................................................................................................... 77
Notice .................................................................................................................................... 77
Member ................................................................................................................................. 78
Enforcing the Lien ..................................................................................................................... 78
“Except as Otherwise Provided by Law” .................................................................................. 78
Freezing Accounts ..................................................................................................................... 78
Expulsion and Limitation of Service ............................................................................................. 79
Expulsion ................................................................................................................................... 79
Member Meeting ................................................................................................................... 79
Nonparticipation Policy......................................................................................................... 79
Limitation of Services ............................................................................................................... 80
Board of Directors and Compensation ........................................................................................... 80
Reasonable Costs ....................................................................................................................... 81
Health Care ................................................................................................................................ 81
Indemnification.......................................................................................................................... 81
Service to Nonmembers ................................................................................................................. 82
Loans ......................................................................................................................................... 82
Joint Owners and Nonmember Deposits ................................................................................... 83
Check Cashing and Funds Transfers ......................................................................................... 83
Incidental Powers ...................................................................................................................... 84
When Required...................................................................................................................... 84
Marketing Power ................................................................................................................... 84
Credit Union Powers ...................................................................................................................... 84
Express Powers .......................................................................................................................... 85
Incidental Powers ...................................................................................................................... 86
Preapproved Categories......................................................................................................... 86
Service to Businesses and Organizations ....................................................................................... 89
Field of Membership ................................................................................................................. 89
Documentation........................................................................................................................... 89
Member Agreements and Disclosures ....................................................................................... 90
Dividends on Business Accounts .............................................................................................. 90
Share Insurance.......................................................................................................................... 90
Preemption ..................................................................................................................................... 90
Lending ...................................................................................................................................... 91
Opening, Maintaining and Closing of Accounts ....................................................................... 92
Resources and Research Tips......................................................................................................... 92
Chapter 2 – Member Accounts
Section 1
Regulation D
Overview .......................................................................................................................................... 98
Reserve Requirements ..................................................................................................................... 98
Transaction Accounts....................................................................................................................... 98
Savings Accounts ............................................................................................................................. 99
Linked Accounts ........................................................................................................................ 101
Seven Days Notice..................................................................................................................... 101
Footnote 4 .................................................................................................................................. 102
Time Deposits ................................................................................................................................ 103
Early Withdrawal Penalties ....................................................................................................... 103
Exceptions to Early Withdrawal Penalties ................................................................................ 103
Resources and Research Tips......................................................................................................... 104
Chapter 2 – Member Accounts
Section 2
Regulation E
Overview ...................................................................................................................................... 107
Which Accounts are Covered ...................................................................................................... 107
Which Transactions are Covered ................................................................................................. 107
Account Opening Disclosures...................................................................................................... 108
Periodic Statement Requirement .................................................................................................. 108
Error Resolution Notice ............................................................................................................... 109
Change-in-Terms Notices ............................................................................................................ 109
Disclosures at Automated Teller Machines (ATMs) ................................................................... 109
Unauthorized Transfers and Member Liability ............................................................................ 110
Special Situations ......................................................................................................................... 110
Member Notification of Unauthorized Transactions ................................................................... 111
Timely Notice of Loss or Theft Given .................................................................................... 112
Timely Notice of Loss or Theft Not Given ............................................................................. 112
Timely Notice Not Given After Periodic Statement Delivered ............................................... 113
Error Resolution Process.............................................................................................................. 114
Time Limits for Error Review ................................................................................................. 115
Investigation Pending Receipt of Information ......................................................................... 116
Notification of Investigations .................................................................................................. 116
Prohibition on Requiring Electronic Payment of Loans .............................................................. 117
Overdraft Rules for ATM and One-Time Debit Card Transactions ............................................ 117
Opt-In Process ......................................................................................................................... 118
Duration of Opt-in and Right to Revoke ................................................................................. 119
Remittance Transfers ................................................................................................................... 120
What is a Remittance Transfer?............................................................................................... 120
Definitions ........................................................................................................................... 120
Safe Harbor ......................................................................................................................... 123
Disclosure Requirements ......................................................................................................... 124
Pre-Payment Disclosures..................................................................................................... 124
Receipts ............................................................................................................................... 125
Combined Disclosures......................................................................................................... 125
Format, Delivery and Timing .............................................................................................. 126
Error Resolution .................................................................................................................. 127
Cancellation......................................................................................................................... 128
Resources and Research Tips....................................................................................................... 128
Chapter 2 – Member Accounts
Section 3
Share Insurance
Overview ...................................................................................................................................... 132
SMSIA ......................................................................................................................................... 132
Single Ownership Accounts ......................................................................................................... 133
Joint Ownership Accounts ........................................................................................................... 133
Example of Multiple Joint Accounts ....................................................................................... 133
Qualifications for Joint Account Coverage ............................................................................. 135
Revocable Trust Accounts ........................................................................................................... 135
General Coverage for Revocable Trusts .................................................................................. 136
Joint Revocable Trust Accounts .............................................................................................. 137
Special Rule for Complex Revocable Trusts ........................................................................... 138
Examples of the Special Rule.............................................................................................. 138
Irrevocable Trust Accounts .......................................................................................................... 140
Retirement Accounts .................................................................................................................... 141
Business Accounts ....................................................................................................................... 141
Executor or Administrator Accounts ........................................................................................... 142
Funds Held by a Guardian or Custodian ...................................................................................... 142
Special Share Insurance Issues .................................................................................................... 142
IOLTAs and Other Similar Escrow Accounts ......................................................................... 142
Credit Union Mergers .............................................................................................................. 143
Credit Union Failure ................................................................................................................ 144
Death of a Member .................................................................................................................. 145
Share Insurance Disclosures ........................................................................................................ 145
NCUA’s Official Sign ............................................................................................................. 146
Official Advertising Statement ................................................................................................ 147
Disclosures to Members .............................................................................................. 148
Summary of Bucket Theme ............................................................................................ 148
Resources and Research Tips.......................................................................................... 149
Chapter 2 – Member Accounts
Section 4
Regulation CC
Overview ...................................................................................................................................... 152
Definitions.................................................................................................................................... 152
Availability of Funds and Disclosure Requirements ................................................................... 153
When Funds Are Considered Deposited ................................................................................. 153
Timing ..................................................................................................................................... 154
Availability of Funds ............................................................................................................... 154
Next-Day Availability ......................................................................................................... 154
Availability Schedule .......................................................................................................... 155
Exceptions ........................................................................................................................... 156
Funds Availability Disclosures................................................................................................ 158
General Disclosure Requirements ....................................................................................... 158
Specific Availability Policy Disclosure .............................................................................. 158
Additional Disclosure Requirements .................................................................................. 159
Relation to State Law .............................................................................................................. 159
Collection of Checks .................................................................................................................... 160
Substitute Checks ......................................................................................................................... 160
General Provisions................................................................................................................... 160
Warranties and Indemnity ....................................................................................................... 161
Expedited Recredit .................................................................................................................. 161
Consumer Awareness .............................................................................................................. 163
Resources and Research Tips....................................................................................................... 163
Chapter 2 – Member Accounts
Section 5
Truth in Savings
Overview ...................................................................................................................................... 167
Scope and Definitions .................................................................................................................. 167
Definition of “Account” and “Member”.................................................................................. 168
Use of Synonyms ..................................................................................................................... 168
Relation to Regulation E.......................................................................................................... 170
Rounding and Accuracy Rules for Rates and Yields............................................................... 170
Account Disclosure Requirements ............................................................................................... 171
Content of Account Disclosures .............................................................................................. 171
Delivery of Disclosures ........................................................................................................... 172
Subsequent Disclosures ............................................................................................................... 173
Change in Terms ...................................................................................................................... 173
Maturity Notices for Term Share Accounts............................................................................. 174
Periodic Statement Disclosures.................................................................................................... 174
Content of Periodic Statements ............................................................................................... 175
Advertising................................................................................................................................... 175
Scope ....................................................................................................................................... 176
Misleading or Inaccurate Advertising ..................................................................................... 176
Advertising “Free” or “No Cost” Accounts ........................................................................ 177
Advertising Rate Information .................................................................................................. 178
Trigger Terms and Additional Disclosures.............................................................................. 179
Advertising Bonuses ................................................................................................................ 180
Advertising the Payment of Overdrafts ................................................................................... 180
Exemption for Certain Advertisements ................................................................................... 180
Media Exemptions............................................................................................................... 181
Indoor Signs ........................................................................................................................ 181
Overdraft Protection Programs .................................................................................................... 182
Periodic Statement Disclosures ............................................................................................... 182
Disclosure of Total Fees ...................................................................................................... 182
Advertising Disclosures for Overdraft Services ...................................................................... 183
Disclosure of Account Balances .............................................................................................. 183
Payment of Dividends .................................................................................................................. 184
Record Retention ......................................................................................................................... 185
Resources and Research Tips....................................................................................................... 186
Chapter 2 – Member Accounts
Section 6
E-SIGN Act
Overview ...................................................................................................................................... 188
A Law Without Regulations ........................................................................................................ 188
Legality of Electronic Records .................................................................................................... 188
Electronic Record Retention ........................................................................................................ 188
Electronic Disclosures ................................................................................................................. 189
Opt-in Requirement; Not Opt-out ................................................................................................ 189
Electronic Consent or Electronic Confirmation Required ........................................................... 189
Reasonably Demonstrate Ability to Access Electronic Information ........................................... 190
Hardware and Software Requirement Disclosure ........................................................................ 190
Breadth and Scope of E-SIGN Consent ....................................................................................... 191
Potential Consequences of Improper E-SIGN Consent ............................................................... 191
Handling Invalid Email Addresses .............................................................................................. 192
Resources and Research Tips....................................................................................................... 192
Chapter 3 – Lending
Section 1
NCUA Lending Requirements
Overview ...................................................................................................................................... 199
Membership Nexus ...................................................................................................................... 199
Maturity Limits ............................................................................................................................ 199
Fifteen Years............................................................................................................................ 199
Twenty Years........................................................................................................................... 200
Up to Forty Years .................................................................................................................... 200
Lines of Credit ......................................................................................................................... 201
Other Issues Related to Maturity ............................................................................................. 201
Payday Alternative Loans ................................................................................................... 201
Balloon Loans ..................................................................................................................... 202
The Usury Ceiling ........................................................................................................................ 202
Other Matters Related to the Usury Ceiling ............................................................................ 202
Preemption ................................................................................................................................... 205
Various Federal Credit Union Lending Issues ............................................................................. 206
Written Policies and Procedures .............................................................................................. 206
10 Percent Limitation .............................................................................................................. 207
General Prepayment Penalty Ban ............................................................................................ 207
Compensation and Lending ..................................................................................................... 208
Loans and Lines of Credit to Officials .................................................................................... 208
Non-Preferential Treatment ..................................................................................................... 209
Third-Party Servicing of Indirect Vehicle Loans .................................................................... 210
NCUA’s Loan Participation Rule ................................................................................................ 210
Written Loan Participation Policy ........................................................................................... 211
Requirements for Loan Participation Purchases ...................................................................... 211
Minimum Requirements for a Loan Participation Agreement ................................................ 212
NCUA’s Commercial Lending and Member Business Loans Regulation ................................... 213
What is a Commercial Loan? .................................................................................................. 213
What is a Member Business Loan? ......................................................................................... 214
Aggregate MBL and Commercial Loan Limits ....................................................................... 215
Board Involvement and Experience......................................................................................... 216
Commercial Loan Policies....................................................................................................... 217
Small Credit Union Exemption ............................................................................................... 218
Collateral and Security Requirements ..................................................................................... 219
Construction and Development Lending ................................................................................. 220
Prohibited Activities ................................................................................................................ 220
Other Member Business Loan Issues ...................................................................................... 221
Maturity ............................................................................................................................... 221
Small Business Administration Programs ........................................................................... 221
About this Section ........................................................................................................................ 222
Resources and Research Tips....................................................................................................... 222
Chapter 3 – Lending
Section 2
Regulation Z – Introduction
Overview ...................................................................................................................................... 226
Consumer Financial Protection Bureau ................................................................................... 226
Regulation Z’s Coverage ............................................................................................................. 227
Finance Charges ....................................................................................................................... 228
APR versus APOR ................................................................................................................... 228
Open-End versus Closed-End .................................................................................................. 229
Multi-Featured Lending Plans ................................................................................................. 229
Definition of Dwelling ............................................................................................................. 230
Chapter 3 – Lending
Section 3
Regulation Z – Open-End Credit
Overview ...................................................................................................................................... 232
Home-Equity Line of Credit Disclosures..................................................................................... 232
Application Disclosures ........................................................................................................... 232
Account Opening Disclosures ................................................................................................. 232
Periodic Statements for HELOCs ............................................................................................ 233
Special Rules for HELOCs ...................................................................................................... 233
Not Home-Secured Open-End Credit Disclosures ....................................................................... 234
Application Disclosures for Credit Cards ................................................................................ 235
Account Opening Disclosures ................................................................................................. 235
Periodic Statements ................................................................................................................. 235
Change-in-Terms Notices ........................................................................................................ 236
APR Increases ..................................................................................................................... 237
Right to Reject..................................................................................................................... 237
Delinquency ........................................................................................................................ 237
Advertising Open-End Credit ...................................................................................................... 237
Misleading Terms .................................................................................................................... 238
Flexibility for TV and Radio Ads ............................................................................................ 238
Not Home-Secured Open-End Credit ...................................................................................... 238
Promotional Rates Advertisements ..................................................................................... 239
HELOC Advertising Rules ...................................................................................................... 240
Chapter 3 – Lending
Section 4
Regulation Z – Special Credit Card Rules
Special Rules Applying to Credit Card Accounts ........................................................................ 244
Ability to Repay....................................................................................................................... 244
Members Under 21 .................................................................................................................. 244
Allocation of Payments ........................................................................................................... 245
Limitation of Fees During the First Year ................................................................................ 245
Limitation on Amount of Penalty Fees ........................................................................................ 246
Reasonable and Proportional Fees ........................................................................................... 246
Limitations on Increasing APR or Fees ....................................................................................... 246
Advanced Notice Exception .................................................................................................... 247
Prohibition on Changes During First Year .............................................................................. 247
Variable Rate Exception...................................................................................................... 248
Temporary Rate Exception.................................................................................................. 248
Other Exceptions ................................................................................................................. 248
Reevaluation of APR Increases.................................................................................................... 249
Reevaluation of Credit Card Accounts After a Merger ........................................................... 249
Submitting Credit Card Agreements to the CFPB ....................................................................... 250
Exceptions to Submission Requirements................................................................................. 251
De Minimis Exception ........................................................................................................ 251
Private Label Credit Card Exception................................................................................... 252
Product Testing Exception .................................................................................................. 252
Posting Card Agreements on the Internet .................................................................................... 252
Chapter 3 – Lending
Section 5
Regulation Z – Closed-End Credit
Closed-End Credit........................................................................................................................ 256
Refinances and Loan Modifications ........................................................................................ 256
Private Education Loans .............................................................................................................. 257
Closed-End Advertising Rules ..................................................................................................... 258
Special Rules for Dwelling-Secured Ads ................................................................................ 259
Chapter 3 – Lending
Section 6
Regulation Z – TILA/RESPA Integrated Disclosures Rule
Background and Overview .......................................................................................................... 263
Scope of the Rule ......................................................................................................................... 264
Covered Transactions .............................................................................................................. 264
Transactions Not Covered by TRID ........................................................................................ 264
The Loan Estimate Disclosure ..................................................................................................... 265
General Requirements ............................................................................................................. 265
Timing and Delivery................................................................................................................ 266
General Requirements ......................................................................................................... 266
The Trigger – Receipt of Application ................................................................................. 266
Restrictions on Activities .................................................................................................... 268
Information Required on the Loan Estimate ........................................................................... 268
Good Faith Requirement ......................................................................................................... 270
Tolerances................................................................................................................................ 271
No Tolerance Limitation (Variations Permitted) ................................................................ 271
10 Percent Cumulative Tolerance ....................................................................................... 272
Zero Tolerance .................................................................................................................... 272
Limitation on the Imposition of Fees....................................................................................... 274
When a Fee is “Imposed” ........................................................................................................ 274
Intent to Proceed ...................................................................................................................... 274
Written Estimates of Costs Provided Before the Loan Estimate ............................................. 275
The Closing Disclosure ................................................................................................................ 275
General Requirements ............................................................................................................. 275
Timing and Delivery................................................................................................................ 276
General Requirements ......................................................................................................... 276
More Than One Consumer .................................................................................................. 277
Definitions ........................................................................................................................... 277
Consumer's Waiver of Waiting Period ................................................................................ 278
Information Required on the Closing Disclosure .................................................................... 278
Good Faith Requirement ......................................................................................................... 280
Use of Average Charges .......................................................................................................... 280
General Rule ........................................................................................................................ 280
Exception............................................................................................................................. 280
Special Rules for Timeshare Plans............................................................................................... 283
Revised and Corrected Disclosures.............................................................................................. 283
Revised Loan Estimates........................................................................................................... 283
Loan Estimates and the Good Faith Standard ..................................................................... 284
General Rule on Revised Loan Estimates ........................................................................... 284
Timing Requirements for Revised Loan Estimates ............................................................. 287
Record Retention ................................................................................................................. 287
Corrected Closing Disclosures ................................................................................................ 288
Changes Before Consummation that Require a New Waiting Period ................................. 288
Changes Before Consummation that Do Not Require a New Waiting Period .................... 290
Corrected Disclosures for Post Consummation Events ....................................................... 290
Corrected Disclosures for Clerical Errors and Refunds to Cure Tolerance Violations ....... 291
Post-Consummation Notices ........................................................................................................ 291
Escrow Closing Notice ............................................................................................................ 291
Scope and Applicability of the Rule.................................................................................... 292
Content Requirements ......................................................................................................... 292
Format Requirements .......................................................................................................... 293
Timing and Delivery Requirements .................................................................................... 294
Mortgage Servicing Transfer Notice—Partial Payment Policy ............................................... 294
Content Requirements ......................................................................................................... 295
Loan Originator Identification Requirement................................................................................ 295
Record Retention ......................................................................................................................... 296
Chapter 3 – Lending
Attachment
Regulation Z
Resources and Research Tips....................................................................................................... 298
Chapter 3 – Lending
Section 7
Special Mortgage Rules – Ability to Repay and Qualified Mortgage
Overview ...................................................................................................................................... 302
Types of Loans Covered .............................................................................................................. 302
Ability-to-Repay .......................................................................................................................... 303
Eight Underwriting Factors ..................................................................................................... 303
Calculating Monthly Repayments on the Covered Transaction .............................................. 304
Simultaneous Loans................................................................................................................. 306
Verifying Mortgage-Related Obligations ................................................................................ 306
Calculating Current Debt Obligations, Alimony and Child Support ....................................... 306
Exemption for Refinancing from Non-Standard to Standard Loans ....................................... 307
Qualified Mortgages .................................................................................................................... 308
Overview ................................................................................................................................. 308
Safe Harbor and Presumption of Compliance ......................................................................... 308
What is a “Higher-Priced Covered Transaction”?............................................................... 308
Safe Harbor Treatment ........................................................................................................ 309
Presumption of Compliance ................................................................................................ 309
Qualified Mortgage – General Definition (First Category) ..................................................... 309
Qualified Mortgage – Temporary QM Definition (Second Category) .................................... 310
Temporary ........................................................................................................................... 311
Qualified Mortgage – Small Creditor Categories .................................................................... 311
What is a “Small Creditor”? ................................................................................................ 311
Qualified Mortgage – Small Creditor QM (Third Category) .................................................. 312
Qualified Mortgage – Balloon-Payment QM (Fourth Category) ............................................ 313
Calculating Points and Fees ..................................................................................................... 314
What Must Be Included in Points and Fees? ....................................................................... 314
Post-Consummation Points and Fees Cure ......................................................................... 315
Calculating Debt-to-Income Ratio........................................................................................... 316
Resources and Research Tips....................................................................................................... 316
Chapter 3 – Lending
Section 8
Special Mortgage Rules – Mortgage Servicing
Overview ...................................................................................................................................... 319
Periodic Statements...................................................................................................................... 319
Timing of Periodic Statements ................................................................................................ 319
Format and Content of Periodic Statements............................................................................ 319
Using Coupon Books Instead of Periodic Statements............................................................. 320
Exemptions ............................................................................................................................. 321
ARM Notices ............................................................................................................................... 321
Initial Rate Adjustment Notices .............................................................................................. 321
Ongoing Interest Rate Adjustment Notices............................................................................. 322
Content Required in ARM Disclosures................................................................................... 322
Error Resolution ........................................................................................................................... 323
What is an “Error”? ................................................................................................................. 323
What is Required to Resolve an Error? ................................................................................... 324
Exceptions ............................................................................................................................... 324
Information Requests ................................................................................................................... 324
Distinguishing Between Information Requests and Error Notices ......................................... 325
Prompt Crediting.......................................................................................................................... 325
Handling Periodic Payments ................................................................................................... 326
Handling Partial Payments ...................................................................................................... 326
Handling Non-Conforming Payments..................................................................................... 326
Prohibition Against Pyramiding Late Fees ............................................................................. 326
Payoff Statements ........................................................................................................................ 327
Written Requests for Payoff Statements ................................................................................. 327
Force-Placed Insurance ................................................................................................................ 327
What Loans Are Covered By the Force-Placed Insurance Rule? ........................................... 327
What is Required to Charge Force-Placed Insurance to the Borrower?.................................. 328
Required Content and Format for Force-Placed Insurance Notices ........................................ 328
Obtaining and Renewing Force-Placed Insurance .................................................................. 329
Special Rules for Members with Escrow Accounts ................................................................ 329
General Servicing Policies, Procedures and Requirements ......................................................... 330
Which Loans are Subject to the General Servicing Policies, Procedures and Requirements? 330
What are the Requirements? ................................................................................................... 330
Record Retention..................................................................................................................... 331
Servicing File Creation ........................................................................................................... 331
Early Intervention with Delinquent Consumers........................................................................... 332
Which Loans are Covered By the Early Intervention Rule? ................................................... 332
Establishing Live Contact ....................................................................................................... 333
Loss Mitigation Information ................................................................................................... 333
Written Notice ......................................................................................................................... 334
Continuity of Contact with Delinquent Consumers ..................................................................... 335
Which Loans are Covered? ..................................................................................................... 335
What are the Requirements? ................................................................................................... 335
Loss Mitigation ............................................................................................................................ 336
Which Loans are Subject to the Loss Mitigation Rule? .......................................................... 336
What are the Requirements? ................................................................................................... 336
Application .............................................................................................................................. 337
Review Requirements ............................................................................................................. 337
Timing ..................................................................................................................................... 338
Appeals ................................................................................................................................... 338
Dual Tracking ......................................................................................................................... 338
Servicing Transfers ................................................................................................................. 339
Small Servicer .............................................................................................................................. 340
Who is a Small Servicer? ........................................................................................................ 340
What Loans Should Be Considered?....................................................................................... 340
Can a Credit Union Lose the Exemption?............................................................................... 340
Which Provisions Offer Exemptions for Small Servicers? ..................................................... 341
Resources and Research Tips....................................................................................................... 341
Chapter 3 – Lending
Section 9
Special Mortgage Rules – Loan Originator Rule
Scope and Applicability of the Loan Originator Rules ................................................................ 344
Loan Originator Compensation.................................................................................................... 345
What is Compensation? ........................................................................................................... 346
Term of a Transaction .............................................................................................................. 346
Permissible Methods of Compensation.................................................................................... 347
Prohibition Against Dual Compensation ................................................................................. 347
Loan Originator Qualifications and Training............................................................................... 347
Qualifications and Screening Standards................................................................................... 348
Other Notable Information on Determinations ........................................................................ 350
Training Requirement .............................................................................................................. 350
Disclosures ................................................................................................................................... 351
Recordkeeping Requirements ...................................................................................................... 352
Loan Originator Policies and Procedures..................................................................................... 352
Prohibition on Mandatory Arbitration or Waivers of Certain Consumer Rights ......................... 353
Prohibition on Financing Single Premium Credit Insurance ....................................................... 353
What is Credit Insurance? ........................................................................................................ 353
Financing.................................................................................................................................. 354
No Violation for Premiums or Fees Calculated and Paid in Full on a Monthly Basis ............. 354
Resources and Research Tips....................................................................................................... 354
Chapter 3 – Lending
Section 10
Special Mortgage Rules – Regulation B Appraisal Disclosures and Delivery
Overview ...................................................................................................................................... 358
Scope ............................................................................................................................................ 358
Notice Requirements .................................................................................................................... 359
Requirements (Written Notice)................................................................................................ 359
Timing and Delivery................................................................................................................ 359
Content (Template) .................................................................................................................. 359
Alteration of Disclosure ...................................................................................................... 360
Provision of Appraisals and Valuations ....................................................................................... 360
Timing ..................................................................................................................................... 360
Waiver ..................................................................................................................................... 360
Electronic Form ....................................................................................................................... 361
Valuations ................................................................................................................................ 361
Additional Requirements ......................................................................................................... 362
Prohibition on Charging for Providing the Copy of the Appraisal .......................................... 362
Withdrawn, Denied or Incomplete Applications ..................................................................... 362
Resources and Research Tips....................................................................................................... 362
Chapter 3 – Lending
Section 11
Special Mortgage Rules – Special Protections for High-Cost Mortgages
Overview ...................................................................................................................................... 364
HOEPA Coverage Tests .............................................................................................................. 364
Protections for High-Cost Mortgages .......................................................................................... 365
Specific Disclosure Requirements ........................................................................................... 366
Restrictions on Transaction Terms and Prohibited Practices .................................................. 366
Ability-to-Repay Requirements ............................................................................................... 367
Pre-Loan Counseling ............................................................................................................... 367
Resources and Research Tips....................................................................................................... 368
Chapter 3 – Lending
Section 12
Special Mortgage Rules – Higher-Priced Mortgages
Higher-Priced Mortgage Loans, Defined ..................................................................................... 370
Escrowing for HPMLs: The TILA Escrow Rule ......................................................................... 370
General Exemptions ................................................................................................................ 371
Small Creditor Exemption ....................................................................................................... 371
Appraisals for HPMLs: The TILA HPML Appraisal Rule .......................................................... 373
Scope ....................................................................................................................................... 373
Appraisal Requirements .......................................................................................................... 374
Definition of “Business Day” .................................................................................................. 374
Timing and Delivery................................................................................................................ 375
Initial Disclosure ................................................................................................................. 375
Appraisal Copies ................................................................................................................. 375
More Than One Applicant................................................................................................... 375
Content of Initial Disclosure.................................................................................................... 375
Exemptions .............................................................................................................................. 376
Resources and Research Tips....................................................................................................... 377
Chapter 3 – Lending
Section 13
Special Mortgage Rules – Homeownership
Counseling and Disclosure Requirements
Overview ...................................................................................................................................... 380
Homeownership Counseling Disclosure for Federally-Related Mortgage Loans ....................... 380
Timing ...................................................................................................................................... 381
General Disclosure Requirements ............................................................................................ 381
Generating Lists of Homeownership Counseling Organizations ............................................. 381
Content of the List ................................................................................................................... 382
Pre-Loan Counseling for High-Cost Mortgage Loans ................................................................. 382
Timing of Counseling .............................................................................................................. 383
Written Certification ................................................................................................................ 383
Counseling Fees ....................................................................................................................... 384
Pre-Loan Counseling for Negative-Amortization Loans ............................................................. 384
Resources and Research Tips....................................................................................................... 385
Chapter 3 – Lending
Section 14
Lending to Servicemembers: The Military Lending Act
and Servicemembers Civil Relief Act
Military Lending Act .....................................................................................................................388
Scope of the Rule – Definitions of Key Terms..........................................................................388
Consumer Credit ................................................................................................................... 388
Covered Borrower ................................................................................................................. 389
Calculating the Military Annual Percentage Rate (MAPR) ......................................................390
Bona Fide Fees ...................................................................................................................... 392
MAPR Computation.............................................................................................................. 393
Rectifying an MAPR that Exceeds 36 Percent ...................................................................... 393
Disclosures to Covered Borrowers ............................................................................................394
Delivery of Mandatory Disclosures ...................................................................................... 395
Identifying Covered Borrowers ............................................................................................. 396
Other Miscellaneous Provisions.....................................................................................................397
Applying the Rule ..........................................................................................................................397
Overcoming Compliance Challenges.............................................................................................398
The Servicemembers Civil Relief Act ...........................................................................................399
Six Percent Cap on Interest Rate ...............................................................................................399
SCRA Protections Impacting Automobile Lending and Leasing ..............................................400
Foreclosure and Eviction Protection ..........................................................................................401
Resources and Research Tips.........................................................................................................401
Chapter 3 – Lending
Section 15
Regulation B
Overview ...................................................................................................................................... 404
What is an Application and When is an Application Complete................................................... 404
Inquiries versus Applications ....................................................................................................... 404
Timeframe for Responding to Applications................................................................................. 405
Possibilities for Responding to Incomplete Applications ............................................................ 406
Adverse Action Notices ............................................................................................................... 406
Content of Adverse Action Notices ......................................................................................... 407
Timeframe for Sending Adverse Action Notice ...................................................................... 408
Relationship with Other Regulations ....................................................................................... 408
Discrimination on a Prohibited Basis........................................................................................... 409
Intent to Apply Jointly ............................................................................................................. 409
Treating Non-Married Joint Applicants the Same as Married Joint Applicants ...................... 410
Driver’s License in Loan Files ................................................................................................ 410
Collection of Information for Monitoring Purposes .................................................................... 411
Record Retention ......................................................................................................................... 412
Resources and Research Tips....................................................................................................... 412
Chapter 3 – Lending
Section 16
Fair Lending
Overview ...................................................................................................................................... 416
Fair Lending Laws ....................................................................................................................... 416
Fair Lending Examinations ...................................................................................................... 416
General Lending Discrimination .............................................................................................. 417
Types of Lending Discrimination ............................................................................................ 418
Overt Evidence of Disparate Treatment ............................................................................... 418
Comparative Evidence of Disparate Treatment ................................................................... 419
Evidence of Disparate Impact .............................................................................................. 419
NCUA’s Non-Discrimination in Real Estate Regulation............................................................. 419
Nondiscrimination in Lending ................................................................................................. 420
Nondiscrimination in Real Estate Advertising......................................................................... 420
Potential Unfair Lending Practices .............................................................................................. 421
Notice to Cosigner ................................................................................................................... 421
Pyramiding of Late Fees – Consumer Credit ........................................................................... 422
Fair Debt Collection Practices Act............................................................................................... 423
Who is a Debt Collector under FDCPA? ................................................................................. 423
Debt Collection Communications with a Consumer ................................................................ 424
Resources and Research Tips....................................................................................................... 424
Chapter 3 – Lending
Section 17
The Real Estate Settlement Procedures Act
Overview ...................................................................................................................................... 429
Coverage ...................................................................................................................................... 429
Special Information Booklet ........................................................................................................ 432
Good Faith Estimate (GFE) of Settlement Costs ......................................................................... 432
General Requirements ............................................................................................................. 432
The Trigger – Receipt of Application ...................................................................................... 432
Relationship to Regulation Z HELOC Application Disclosures ......................................... 433
Information Required on the GFE ........................................................................................... 434
Tolerances on Settlement Costs .......................................................................................... 434
Tolerance Categories ........................................................................................................... 434
Binding GFE ............................................................................................................................ 436
Changed Circumstances ...................................................................................................... 436
Borrower-Requested Changes ............................................................................................. 437
Expiration of Original GFE ................................................................................................. 437
Interest Rate-Dependent Charges and Terms ...................................................................... 438
Uniform Settlement Statement (HUD-1 or HUD-1A) ................................................................. 438
Information Required on the Settlement Statement................................................................. 439
Average Charge Permitted .................................................................................................. 439
Tolerance Violations and Errors ......................................................................................... 440
Timing and Delivery................................................................................................................ 440
One-Day Advance Inspection of the Settlement Statement ................................................ 440
Retention.................................................................................................................................. 440
Prohibition of Fees for Preparing Federal Disclosures ................................................................ 441
Prohibition Against Kickbacks and Unearned Fees ..................................................................... 441
Affiliated Business Arrangements ........................................................................................... 441
Escrow Accounts ......................................................................................................................... 442
Escrow Account Analysis ........................................................................................................ 442
Shortages, Surpluses and Deficiency Requirements ........................................................... 443
Initial Escrow Account Statement ....................................................................................... 444
Annual Escrow Account Statement..................................................................................... 444
Short-Year Statements......................................................................................................... 445
Timely Payments ..................................................................................................................... 445
Recordkeeping ......................................................................................................................... 445
Service Transfers ......................................................................................................................... 445
Servicing Disclosure Statement ............................................................................................... 445
Notice of Servicing Transfer ................................................................................................... 445
Payments Made During Service Transfers .............................................................................. 446
Resources and Research Tips....................................................................................................... 447
Chapter 3 – Lending
Section 18
The Fair Credit Reporting Act
About this Section ........................................................................................................................ 450
Overview ...................................................................................................................................... 450
Key Terms.................................................................................................................................... 451
Obtaining Consumer Reports ....................................................................................................... 452
Overview ................................................................................................................................. 452
Permissible Purposes of Consumer Reports ............................................................................ 452
Obtaining and Sharing Information From Credit Reports ........................................................... 453
Protection of Medical Information .......................................................................................... 454
Affiliate Marketing Opt Out .................................................................................................... 455
Disclosures to Consumers and Miscellaneous Requirements ...................................................... 455
Prescreened Consumer Reports and Opt Out Notice ............................................................... 455
Truncation of Credit and Debit Card Account Numbers ......................................................... 456
Disclosure of Credit Scores by Certain Mortgage Lenders ..................................................... 457
Adverse Action Disclosures .................................................................................................... 457
Information Obtained From a Consumer Reporting Agency .............................................. 458
Information Obtained From an Affiliate ............................................................................. 459
Information Obtained From a Source Other Than a Consumer Reporting Agency ............ 459
Risk-Based Pricing Notifications ................................................................................................. 459
Duties of Users of Consumer Reports and Furnishers of Consumer Report Information ........... 461
Duties of Users of Credit Reports Regarding Address Discrepancies ..................................... 461
Reasonable Policies and Procedures Concerning the Accuracy and Integrity of Furnished
Information .............................................................................................................................. 461
Duties Upon Notice of Dispute From a Consumer Reporting Agency ................................... 462
Duties Upon Notice of Dispute From a Consumer (Direct Disputes) ..................................... 462
Prevention of Re-Pollution of Consumer Reports ................................................................... 465
Negative Information Notice ................................................................................................... 465
Consumer Alerts and Identity Theft Protections.......................................................................... 466
Fraud and Active Duty Alerts .................................................................................................. 466
Information Available to Victims ............................................................................................ 467
Resources and Research Tips....................................................................................................... 468
Chapter 4 – BSA, Privacy and Security
Section 1
The Bank Secrecy Act and OFAC
Overview ...................................................................................................................................... 472
The Bank Secrecy Act ................................................................................................................. 472
Important Concepts.................................................................................................................. 472
An Overview of the Bank Secrecy Act System .................................................................. 472
NCUA Regulations ............................................................................................................. 473
Treasury Regulations and FinCEN ..................................................................................... 474
The Patriot Act .................................................................................................................... 474
The FFIEC BSA/Anti-Money Laundering Examination Manual ....................................... 475
BSA Compliance Program and Risk Assessment ............................................................... 475
General Requirements ............................................................................................................. 477
Customer Identification Program (CIP) .............................................................................. 477
Currency Transaction Reports ............................................................................................. 479
CTR Exemptions ................................................................................................................. 479
Suspicious Activity Reports (SARs) ................................................................................... 480
BSA E-Filing ....................................................................................................................... 484
Monetary Instruments ......................................................................................................... 484
Funds Transfers Recordkeeping .......................................................................................... 486
314(a) and 314(b) Information Sharing............................................................................... 487
Recordkeeping..................................................................................................................... 488
Enforcement ........................................................................................................................ 489
Other Issues ......................................................................................................................... 489
Resources and Research Tips....................................................................................................... 490
OFAC ........................................................................................................................................... 490
Overview ................................................................................................................................. 490
SDN List .................................................................................................................................. 491
Resources and Research Tips....................................................................................................... 492
Chapter 4 – BSA, Privacy and Security
Section 2
Privacy of Member Information
Overview - Privacy ...................................................................................................................... 495
CFPB’s Privacy Rule ................................................................................................................... 495
General Principles .................................................................................................................... 495
Key Terms ............................................................................................................................ 495
Initial Privacy Notice................................................................................................................ 498
Delivery of the Initial Notice ................................................................................................ 498
Timing of the Initial Notice .................................................................................................. 499
Annual Privacy Notice ............................................................................................................. 499
Delivery of the Annual Notice .............................................................................................. 499
Providing Notices on Joint Accounts ....................................................................................... 501
Model Privacy Form................................................................................................................. 501
Exceptions to the Limitation on Disclosure ............................................................................. 501
Processing and Servicing Transactions Exceptions .............................................................. 501
Other General Exceptions ..................................................................................................... 502
Exception for Agreements with Service Providers and Joint Marketers .............................. 502
Prohibition Against the Disclosure of Account Numbers .................................................... 503
Disclosure and the Opt Out Requirement ................................................................................. 503
Content of the Opt Out Notice .............................................................................................. 504
Providing a Reasonable Opportunity to Opt Out .................................................................. 504
Providing an Opt Out Notice for Joint Accounts .................................................................. 505
Complying with a Consumer’s Decision to Opt Out ............................................................ 505
Revising Credit Union Privacy Notices ................................................................................... 505
Resources and Research Tips....................................................................................................... 506
Affiliate Marketing ...................................................................................................................... 506
Key Provisions ......................................................................................................................... 506
Key Terms ............................................................................................................................ 507
Sharing Databases and the Use of Service Providers ............................................................... 508
Exceptions to the Restriction on Using Eligibility Information ............................................... 508
Affiliate Marketing Opt Out Notice ......................................................................................... 509
Delivery of the Opt Out Notice ............................................................................................ 510
Reasonable Opportunity to Opt Out ..................................................................................... 510
Providing an Opt Out Notice for Joint Accounts .................................................................. 510
Combining Notices ................................................................................................................... 511
Constructive Sharing ................................................................................................................ 511
Resources and Research Tips....................................................................................................... 512
Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act........ 512
Background and Summary ....................................................................................................... 512
Transactional or Relationship Message Exception................................................................... 513
Mixed Message Content ....................................................................................................... 513
Resources and Research Tips....................................................................................................... 514
Right to Financial Privacy Act ..................................................................................................... 514
Background and Summary ....................................................................................................... 514
Definition ................................................................................................................................. 514
Requirements ............................................................................................................................ 515
Exceptions to Notice and Certification Requirements .......................................................... 516
Delayed Notice Requirements .............................................................................................. 517
Civil Liability ....................................................................................................................... 517
Cost Reimbursement ............................................................................................................. 518
Resources and Research Tips....................................................................................................... 518
Attachment – Affiliate Marketing ................................................................................................ 519
Chapter 4 – BSA, Privacy and Security
Section 3
NCUA’s Security Regulation
NCUA’s Security Regulation ...................................................................................................... 522
Written Security Program ........................................................................................................ 522
Filing of Reports ...................................................................................................................... 523
Catastrophic Act Reports and Business Continuity Planning.................................................. 523
The FFIEC’s Business Continuity Planning Booklet .......................................................... 524
Safeguarding Member Information ......................................................................................... 524
Risk Assessment and Steps to Manage and Control Risks .................................................. 525
Reviewing and Adjusting the Information Security Program ............................................. 526
Annual Report to the Board of Directors ............................................................................ 526
Oversight of Third-Parties ................................................................................................... 526
Interplay with Credit Union’s Privacy Policy ..................................................................... 527
The FFIEC’s Management Booklet .................................................................................... 527
Response Programs for Unauthorized Access to Member Information .................................. 528
Components of a Response Program................................................................................... 528
Member Notification ........................................................................................................... 528
Contents of Member Notification........................................................................................ 529
Cybersecurity Guidance ............................................................................................................... 530
FFIEC IT Examination Handbook........................................................................................... 530
The Audit Booklet ............................................................................................................... 530
The Information Security Booklet ....................................................................................... 531
The Operations Booklet ...................................................................................................... 531
FFIEC Cybersecurity Assessment Tool................................................................................... 531
Resources and Research Tips....................................................................................................... 532
Chapter 4 – BSA, Privacy and Security
Section 4
Vendor Management
Overview ...................................................................................................................................... 536
What Relationships Require Management and Why ................................................................... 536
Common Types of Vendor Relationships................................................................................ 536
Common Themes ..................................................................................................................... 537
Potential Risks ......................................................................................................................... 537
NCUA’s Expectations .................................................................................................................. 538
Risk Assessment and Planning Considerations ....................................................................... 538
Due Diligence for Third Party Relationships .......................................................................... 539
Risk Measurement, Monitoring and Control ........................................................................... 539
CFPB’s Expectations ................................................................................................................... 540
General Expectations ............................................................................................................... 540
UDAAP Risks ......................................................................................................................... 540
Contract Management .................................................................................................................. 541
Third Party Monitoring and Review ............................................................................................ 542
Take Aways and Best Practices ................................................................................................... 543
Resources and Research Tips....................................................................................................... 544
Appendix A – Miscellaneous Regulations
Section 1
Uniform Commercial Code
Articles 3 and 4
Overview ...................................................................................................................................... 550
What is a Check and When is it Payable? .................................................................................... 550
Negotiable Instruments Overview ............................................................................................... 551
Payable to Bearer and Payable to Order ...................................................................................... 551
Checks Payable to Multiple Parties ............................................................................................. 552
Restrictive Indorsements .............................................................................................................. 552
Impact of Alteration on a Negotiable Instrument ........................................................................ 553
Definition of Signature ................................................................................................................ 553
Contradictory Terms .................................................................................................................... 554
Charging a Member’s Account .................................................................................................... 554
Stop Payments.............................................................................................................................. 555
Special Account Issues ................................................................................................................ 555
Resources and Research Tips....................................................................................................... 556
Appendix A – Miscellaneous Regulations
Section 2
Regulation C
Home Mortgage Disclosure Act
Overview ...................................................................................................................................... 560
Applicability ................................................................................................................................ 561
Compilation of Loan Data ........................................................................................................... 562
Excluded Data .............................................................................................................................. 563
Reporting Format ......................................................................................................................... 564
Reporting and Mergers ............................................................................................................ 565
Disclosure .................................................................................................................................... 565
Resources and Research Tips....................................................................................................... 567
Appendix A – Miscellaneous Regulations
Section 3
Loans in Flood Hazard Areas and the Homeowners Protection Act
Overview – Loans in Flood Areas ............................................................................................... 571
General Requirements .................................................................................................................. 572
Standard Flood Hazard Determination Form ............................................................................... 574
Notice to Borrower ...................................................................................................................... 574
Borrower Relief ....................................................................................................................... 575
Letter of Determination Review (LODR) ........................................................................... 576
Letter of Map Amendment (LOMA)................................................................................... 576
Letter of Map Revisions Based on Fill (LOMR-F) ............................................................. 576
Forced Placement of Insurance .................................................................................................... 576
Escrow Requirement .................................................................................................................... 577
Notice of Servicer’s Identity ........................................................................................................ 579
Civil Money Penalties .................................................................................................................. 579
Resources and Research Tips....................................................................................................... 579
Overview – Homeowners Protection Act .................................................................................... 580
Coverage ...................................................................................................................................... 580
Cancellation ................................................................................................................................. 581
Termination .................................................................................................................................. 581
Final Termination .................................................................................................................... 581
Return of Unearned Premiums ................................................................................................ 581
High Risk Loans .......................................................................................................................... 582
Disclosure Requirements ............................................................................................................. 582
Initial Disclosure...................................................................................................................... 582
Fixed-Rate Mortgages ......................................................................................................... 582
Adjustable Rate Mortgages ................................................................................................. 583
High Risk Loans .................................................................................................................. 583
Annual Disclosure ................................................................................................................... 583
Notification Upon Cancellation/Termination .......................................................................... 583
Notification of Grounds ........................................................................................................... 583
Lender-Paid Mortgage Insurance ................................................................................................. 584
Civil Liability ............................................................................................................................... 584
Resources and Research Tips....................................................................................................... 585
Appendix A –Miscellaneous Regulations
Section 4
Appraisals
Overview ...................................................................................................................................... 588
NCUA’s Appraisal Regulation .................................................................................................... 588
Transactions Requiring an Appraisal by a State Certified or Licensed Appraiser .................. 588
Transactions Requiring a State Certified Appraiser ................................................................ 589
Property Valuations ................................................................................................................. 589
Minimum Appraisal Standards ................................................................................................ 589
Appraiser Independence .......................................................................................................... 590
Discrimination ......................................................................................................................... 590
Copies of Appraisals .................................................................................................................... 591
Interagency Appraisal and Evaluation Guidelines ....................................................................... 592
Regulation Z’s Rule on Valuation Independence ........................................................................ 593
Secondary Market Concerns ........................................................................................................ 594
Resources and Research Tips....................................................................................................... 594
Appendix A – Miscellaneous Regulations
Section 5
Identity Theft Red Flags
Overview ...................................................................................................................................... 596
Red Flags ..................................................................................................................................... 596
Periodically Determine If the Credit Union Has Covered Accounts........................................ 596
Establish an Identity Theft Protection Program ....................................................................... 597
Elements of the Program .......................................................................................................... 597
Administer the Program ........................................................................................................... 597
Consider the Guidelines of Appendix J .................................................................................... 598
Duties of Card Issuers Regarding Changes of Address ............................................................... 599
Notice of Address Discrepancy.................................................................................................... 600
Reporting a Member’s Address ................................................................................................ 601
Resources and Research Tips....................................................................................................... 601
Appendix A – Miscellaneous Regulations
Section 6
IRS Reporting Requirements
Taxpayer Identification Numbers ................................................................................................ 604
Obtaining TINs from Members ............................................................................................... 604
Form W-8BEN ........................................................................................................................ 605
Backup Withholding .................................................................................................................... 605
CP2100/CP2100A Notice ........................................................................................................ 606
First ‘B’ Notice ........................................................................................................................ 606
Second ‘B’ Notice ................................................................................................................... 606
1099 Reporting Requirements ..................................................................................................... 607
1099-INT ................................................................................................................................. 607
1042-S...................................................................................................................................... 607
1099-MISC .............................................................................................................................. 608
Spouse or Guest Travel and the 1099-MISC....................................................................... 608
1099-C ..................................................................................................................................... 609
Mortgage Forgiveness Debt Relief Act of 2007 ................................................................. 609
1099-A ..................................................................................................................................... 609
1099-R ..................................................................................................................................... 609
Mortgage Interest ......................................................................................................................... 610
Education Loan Interest ............................................................................................................... 610
Statements to Recipients .............................................................................................................. 610
Electronic Statements................................................................................................................... 611
IRS Levies on Members Accounts............................................................................................... 612
Resources and Research Tips....................................................................................................... 612
Appendix A – Miscellaneous Regulations
Section 7
Record Retention
Overview ...................................................................................................................................... 614
Why Does a Credit Union Keep Records?................................................................................... 614
Corporate Recordkeeping ........................................................................................................ 614
Regulators ................................................................................................................................ 614
Legal Issues ............................................................................................................................. 615
Historical Perspective .............................................................................................................. 615
Not Knowing What to Keep or Throw Out ............................................................................. 615
Sources of Recordkeeping Requirements .................................................................................... 616
NCUA ...................................................................................................................................... 616
Vital Records Preservation Program ................................................................................... 616
NCUA Record Retention Guidelines .................................................................................. 616
Catastrophic Act Preparedness Guidelines.......................................................................... 618
Other Regulations and Laws.................................................................................................... 618
Federal Regulations ............................................................................................................. 619
Legal Concerns (Litigation, Assertion of Rights).................................................................... 620
Resources and Research Tips....................................................................................................... 621
Research Tools ........................................................................................................................ 621
Recordkeeping Suggestions ..................................................................................................... 621
Appendix A – Miscellaneous Regulations
Section 8
Telephone Consumer Protection Act
Overview ...................................................................................................................................... 624
Use of Automated Telephone Equipment .................................................................................... 624
Scope of the 2015 TCPA Order ............................................................................................... 625
Definition of “Autodialer” ................................................................................................... 625
Establishing Consent Under the TCPA ................................................................................ 626
Revoking Consent ................................................................................................................ 627
Reassigned Wireless Numbers ............................................................................................. 627
Limited Exception for Certain Calls .................................................................................... 628
Requirements Regarding Company-Specific Do-Not-Call Lists ................................................. 629
Do-Not-Call Requests from Consumers .................................................................................. 629
Other Restrictions on Telemarketing Calls .................................................................................. 630
Restrictions on Telephone Solicitations ................................................................................... 630
Hang-Ups and Abandoned Calls .............................................................................................. 631
Restrictions on Junk Faxes........................................................................................................... 631
Resources and Research Tips....................................................................................................... 631
Appendix B – Amended Regulation C
Section 1
Home Mortgage Disclosure Act
Overview ...................................................................................................................................... 636
Applicability ................................................................................................................................ 636
Transactional Coverage Test ................................................................................................... 636
Excluded Transactions ........................................................................................................ 637
Unsecured Home Improvement Loans ................................................................................ 638
Institutional Coverage Test – Loan Volume Threshold........................................................... 638
Phase 1: January 1, 2017 ..................................................................................................... 639
Phase 2: January 1, 2018 ..................................................................................................... 639
Reportable Data ........................................................................................................................... 639
Recording and Reporting ............................................................................................................. 645
Annual Reporting .................................................................................................................... 645
Quarterly Reporting ................................................................................................................. 646
Reporting After a Merger or Acquisition ................................................................................ 646
Disclosure of HMDA Data .......................................................................................................... 648
Resources and Research Tips....................................................................................................... 648
Appendix C – Prepaid Rule
Section 1
Prepaid Rule
Overview ...................................................................................................................................... 652
Who is Covered by the Rule? ...................................................................................................... 652
Definition of “Prepaid Account”.................................................................................................. 653
Accounts Marketed As Prepaid................................................................................................ 654
Exclusions ................................................................................................................................ 654
Disclosures ................................................................................................................................... 655
Short Form Disclosure ............................................................................................................. 655
Long Form Disclosure ............................................................................................................. 657
Periodic Statements & Periodic Statement Alternative ........................................................... 658
Other Disclosure Requirements ............................................................................................... 658
Error Resolution Procedures ........................................................................................................ 659
Member’s Liability Limitations ................................................................................................... 659
Overdraft Services ....................................................................................................................... 660
Definition of “Hybrid Prepaid Account” ................................................................................. 660
Exceptions ............................................................................................................................ 661
Covered Separate Credit Features ............................................................................................ 662
Finance Charges ................................................................................................................... 662
Additional Requirements ..................................................................................................... 662
Prepaid Account Agreements....................................................................................................... 663
Final Rule Effective Date............................................................................................................. 664
Resources and Research Tips....................................................................................................... 665