Record Retention in the Real World
Written by JiJi Bahhur, Regulatory Compliance Counsel
As many of you know, the NAFCU Compliance Team has been in and out of the office all week at NAFCU's Regulatory Compliance School at National Harbor, Maryland. Today, I'm presenting on record retention.
If I had to sum up record retention in one brief sentence, it would be as follows: It's not that easy.
When coming up with a retention schedule, credit unions must be aware of all sources out there that affect the requirements. My presentation focuses on NCUA's Vital Records Preservation Program (12 C.F.R. Part 749), its Appendix A Retention Guidelines, other regulations, and law, and also legal concerns.
To demonstrate why it's not that easy, I thought it would be fitting to share a real-world example:
Question: What is the retention requirement for credit card statements?
The initial starting point is Regulation Z which covers credit card accounts. Section 1026.25 of Regulation Z indicates that credit unions must retain evidence of compliance for two years. Here is the regulation:
§ 1026.25 Record retention.
(a) General rule. A creditor shall retain evidence of compliance with this part (other than advertising requirements under §1026.16 and 1026.24) for 2 years after the date disclosures are required to be made or action is required to be taken. The administrative agencies responsible for enforcing the regulation may require creditors under their jurisdictions to retain records for a longer period if necessary to carry out their enforcement responsibilities under section 108 of the Act.
But note that NCUA's retention guidelines (Appendix A of Part 749) mention that the following records must be kept permanently:
"(h) Copies of the periodic statements of members, or the individual share and loan ledger. (A complete record of the account should be kept permanently.)(Emphasis added).
The word exists in that statement so if you were to keep credit card statements only for 2 years, it would be fine as long as you are keeping individual ledgers permanently so that you can reconstruct the member's loan history if need be.
Also, take a look at the Official Staff Commentary from Regulation Z. The section relating to record retention uses open-end periodic statements as an example and states that you don't technically have to retain each one, so long as you are saving other records that have the necessary information on it to reconstruct the history.
25(a) General rule
2. Methods of retaining evidence. Adequate evidence of compliance does not necessarily mean actual paper copies of disclosure statements or other business records. The evidence may be retained on microfilm, microfiche, or by any other method that reproduces records accurately (including computer programs). The creditor need retain only enough information to reconstruct the required disclosures or other records. Thus, for example, the creditor need not retain each open-end periodic statement, so long as the specific information on each statement can be retrieved. (Emphasis added)
And so there it is folks. We had to visit Regulation Z, Appendix A of NCUA's Vital Records Preservation Program, and the Official Interpretations to Regulation Z to get our answer to what seemed to be such a simple question.