Compliance Blog

It Ain’t You, Babe

Written by Jennifer Aguilar, Senior Regulatory Compliance Counsel, NAFCU

Every once in a while a credit union compliance officer will dig up a rule or guidance that appears to answer a question they are researching. But, upon further inspection, it’s not always clear whether that rule or guidance applies to credit unions. More research ensues and the compliance officer comes up empty. This is when they reach out to us with the all-important question: Which financial institutions are covered by this rule?

Well, as Bob Dylan might say: It ain’t you, babe. More often than not, we simply confirm that there was nothing more to find. While there may be a rule or guidance that gives instruction to other institutions, credit unions are not obligated to follow suit. Today’s post provides three FAQs where this is the case.

I am trying to locate NCUA’s requirements for when a federal credit union closes a branch.  It appears there are no requirements. Is this correct?

Yes, that is correct. NCUA does not have any guidance or regulations governing branch closures. The FDIC has guidance on this topic, which requires notice to consumers and the appropriate federal agency and policies for branch closures. However, this guidance does not apply to credit unions and NCUA has not issued any similar guidance.

In the absence of NCUA guidance, federal credit unions may want to review any state law to determine whether it has any requirements for closing a branch, such as notice or other requirements. If there are no state laws, a credit union may want to consider providing notice to its members anyway. From a member service perspective, it can be helpful to notify members that a branch will be closing. Some credit unions post the notice in all their branches, their website or in a member newsletter; the notice usually indicates which branch will be closing and the date it will close. This may help mitigate any potential issues or complaints later on from members who use that branch. In the absence of any state law requirements, it will ultimately be up to the credit union to determine how to handle closing a branch and whether or how to inform members.

The SAFE Act in our state requires loan originators to meet annual education requirements. Does this apply to loan originators employed by our credit union?

Loan originators employed by a credit union and registered with the NMLS under the federal SAFE Act are commonly exempt from state SAFE Act requirements. Under section 1007.103 of the federal SAFE Act, each person acting as a mortgage loan originator who is employed by a “covered financial institution” must be registered with the NMLS. All federally insured credit unions are covered financial institutions.

Section 1008.103 provides a similar requirement for state SAFE Acts: all loan originators register with the NMLS and obtain a state license. However, section 1008.103(e)(5) explains that states may provide an exemption for loan originators employed by a “covered financial institution” and registered with the NMLS under the federal SAFE Act. This exemption is often included in state SAFE Acts. However, the credit union will want to review the applicable state SAFE Act to determine whether it actually contains this exemption. If so, it is possible that the education requirements will not apply to loan originators employed by a credit union. Local counsel may be able to assist in reviewing the applicable state laws and to provide an opinion on whether your loan originators must meet the annual education requirements.

I’m trying to find the requirements for lending to insiders. Is our credit union required to follow Regulation O?

Regulation O does not apply to credit unions. Regulation O applies only to “extensions of credit made by a member bank to an executive officer, director, or principal shareholder of the member bank…” A “member bank” is any banking institution that is a member of the Federal Reserve System. As credit unions are not members of the Federal Reserve System, the requirements of Regulation O do not apply to them.

In the enclosure to a letter to federal credit unions, NCUA identified section 107(5)(A)(iv) and (v) of the FCU Act and its implementing regulations at section 701.21(d)(5) as the appropriate requirements for lending to officials and members of their immediate family. This NAFCU blog further discusses these requirements. Section 701.21(d)(5) applies to all federally insured credit unions. 

About the Author

Jennifer Aguilar, NCCO, NCBSO, APRP, Senior Regulatory Compliance Counsel, NAFCU

Jennifer Aguilar, NCCO, Regulatory Compliance CounselJennifer Aguilar, NCCO, NCBSO, APRP joined NAFCU as regulatory compliance counsel in February 2017 and was named Senior Regulatory Compliance Counsel in March 2019. In this role, Aguilar helps credit unions with a variety of compliance issues.

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