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PALs, involuntary liquidations on NCUA's agenda
The NCUA Board next week will consider a final rule on involuntary liquidations and will also issue a notice of proposed rulemaking related to payday alternative loans (PALs). PALs was included on the NCUA's spring rulemaking agenda released last week, and NAFCU suggested additional ways to revise involuntary liquidation procedures.
The NCUA Board's meeting is slated for 10 a.m. Eastern Thursday. The board will also receive a quarterly report on the National Credit Union Share Insurance Fund (NCUSIF); the agenda is available here.
The agency issued a proposal seeking to update and clarify its involuntary liquidation procedures for those federally-insured credit unions that enter involuntary liquidation during its January board meeting. More specifically, the proposal would amend the current rule's payout priority provision relating to severance claims. The change would clarify the application of the NCUA's regulation on golden parachute payments to severance claims submitted by employees of liquidated credit unions.
Commenting on the proposal in April, NAFCU agreed with many of the changes but also suggested that executive-level severance claims should also be a permitted claim in liquidation: "NAFCU is concerned that restrictions on the provability of separately negotiated executive severance agreements will impair credit unions' ability to recruit, motivate, and retain talented managers and executives," wrote NAFCU Regulatory Affairs Counsel Andrew Morris.
The NCUA last week released its spring rulemaking agenda, which included a new option for its PALs program. This would not be a replacement for the current program, but an alternative. Specifically, this proposal (PALs II) would differ from the current PALs rule by modifying the minimum and maximum amount of the loans, eliminating the minimum membership requirement and increasing the maximum maturity for these loans.
NAFCU efforts led to many credit union concerns being addressed in the CFPB's final payday lending rule, including an exemption of all loans issued by credit unions in conformance with NCUA parameters for PALs. The association hosted a small-dollar lending working group in September with credit union representatives and industry experts to discuss the implications of the CFPB's rule.
Then-CFPB Director Richard Cordray called NAFCU President and CEO Dan Berger after the bureau issued the rule in October to note the impact NAFCU's advocacy had on the bureau's rulemaking to lessen its potential negative effects on the credit union industry.