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Archive - 2002 Comment Letters

Current Comment Letters

Archive: 1999-2013


NCUA

NCUA’s Proposed Rule on Benefits for Employees of Federal Credit Unions
(December 26, 2002)
CUNA appreciates the Board's efforts in this revised proposal to provide more flexibility to federal credit unions to make investment decisions to fund benefit plans for their employees and officers. However, CUNA is concerned that the "directly related" standard authorizing a federal credit union to purchase an investment that would otherwise be impermissible to fund an employee benefit plan is too limiting. Instead, CUNA recommends the agency utilize its long-standing test to allow investment to fund employee benefit plans if the credit union is "acting pursuant to its authority to provide retirement benefits to employees." Further, the proposal authorizes federal credit unions to make investments otherwise permissible to fund a defined benefit plan not covered by ERISA fiduciary requirements if the investments meet certain criteria. CUNA believes that such an approach would needlessly prohibit variable funding arrangements. Therefore, CUNA urges NCUA to allow such arrangements for all federal credit unions or alternatively, allow credit unions to participate in such arrangements on a pilot project basis. Another approach would be to authorize federal credit unions that qualify for the agency's Reg-Flex program to offer such plans.

NCUA’s Proposed Rule on Requirements for Insurance – Foreign Branching
(December 26, 2002)
CUNA comments on NCUA’s proposed rule to facilitate the process for federally-insured credit unions to branch overseas. The rule is designed to regulate credit union international operations in a manner similar to that of the Federal Reserve Board under Regulation K, while addressing issues that are unique to the operation of credit unions.

NCUA’s Proposed Rule on Advertising and Notice of Insured Status
(November 25, 2002)
CUNA supports the proposed rule with regard to the provisions on the use of trade names, but the rule should incorporate additional flexibility with regard to the displaying of the official sign or advertising statement on the credit union's website.

NCUA's Draft Accounting Manual for Federal Credit Unions With Less than $10 Million in Assets
(September 30, 2002)
CUNA appreciates NCUA's efforts to streamline and simplify its guidance on regulatory accounting practices (RAP) for smaller credit unions as well as the agency's work to update the Manual. CUNA makes 2 specific recommendations on the draft Manual. First, with regard to the elimination of the familiar chart of general ledger accounts organization, CUNA suggests that NCUA to provide a list of the chart of accounts numbers in an appendix to the Manual so that FCUs can continue to look up those numbers and refer to them in a user-friendly way. Second, CUNA urges NCUA to make the section on allowance for loan and lease losses (ALLL), which will be incorporated into the final Manual, as straightforward and detailed as possible (including examples) so that credit unions understand how to comply with the ALLL process.

Section 326 of the USA PATRIOT Act
(September 6, 2002)
While credit unions realized at the time of its passage that the USA PATRIOT Act would result in additional regulatory burdens for them, nonetheless CUNA is generally supportive of this initiative to help fight the war on terrorism. Further, as stated in the summary, CUNA commends the regulators for their efforts to refrain from imposing broad, new requirements on credit unions and other financial institutions at account opening.

Proposed Changes Regarding the Regulation of Corporate Credit Unions
(August 29, 2002)
CUNA strongly supports the comment letter filed by the Association of Corporate Credit Unions (ACCU). In particular, CUNA addresses and reinforces ACCU's position on the following key issues: future-dated ACH transactions; the definition of paid-in capital; earnings retention requirements; and the definition of "trade association."

NCUA’s Proposal on Prompt Corrective Action
(August 5, 2002)
CUNA strongly supports NCUA's proposed changes to PCA. In particular, CUNA endorses the "safe harbor " approach to net worth restoration plans (NWRP). The letter notes that the agency has made a number of solid recommendations that will enhance implementation of the regulation. However, CUNA urges NCUA to continue its creative thinking, consistent with the Federal Credit Union Act, to enlarge the safe harbor concept, consider secondary capital for NWRPs and make other changes in the PCA rule that will make the proposed revisions even more meaningful.

NCUA Strategic Plan for 2003-2008
(July 12, 2002)
While noting that NCUA's proposed Strategic Plan for 2003-2008 is an important and useful resource for credit unions, CUNA suggests some changes, including the following: remove provisions that go beyond safety and soundness issues; provide more guidance on risk-focused examinations; integrate crisis management planning efforts that were put into force following the Sept. 11 attacks; incorporate specific goals and objectives for expanding the "Reg Flex" program for federal credit unions; and be more expansive in addressing issues relating to safety and soundness affecting federally insured, state-chartered credit unions.

NCUA’s Request for Comments on the Valuation of Credit Union Non-Maturity Shares
(April 24, 2002)
In general, CUNA believes that the specific methods used to justify a credit union's non-maturity share assumptions should be left to each credit union and should be judged on a case-by-case basis. Imposition of a standard calculation methodology is undesirable since, as explained in the n/e/r/a research report, each has unique weaknesses. While standardization may help NCUA conduct examinations more efficiently, the goal should be accurate risk measurement. CUNA agrees that the characteristics of a non-maturity account (not its labeling) are important determinates of value and are currently evaluating the documentation appropriate to use "safe harbor" assumptions.

CUNA Supports Repeal of CAP
(February 20, 2002)
CUNA strongly supports the elimination of NCUA's policy that imposed needless requirements on existing community federal credit unions to document for agency review their plan to serve the entire community. Such requirements are not based on provisions in the Federal Credit Union Act; and Congress declined to add such Community Reinvestment Act-type requirements for credit unions when it adopted the Credit Union Membership Access Act in 1998. The necessity for these requirements has not been supported by agency data demonstrating community credit unions are failing to reach out to their fields of membership. Rather, data show that credit unions do not need a regulation to force them to serve their members. CUNA has called upon state and federal credit unions to document their service to their entire fields of membership, including those with the greatest financial needs, through Project Differentiation. While CUNA opposes the CAP requirements, CUNA wholeheartedly endorses service to all individuals, including those of limited means. As we have in the past, CUNA wants to work with the NCUA Board to pursue regulatory incentives that will allow federal credit unions to continue their proud history of service to all, regardless of background, ethnicity, gender or other factors unrelated to credit union membership.

CUNA Supports Proposed Revision of NCUA's Rule on Retirement Benefits for Employees of FCUs
(February 20, 2002)
CUNA applauds the Board's initiative to update the agency's rule to reflect the evolution in the employee benefits marketplace. The proposal would provide FCUs with an expanded range of allowable benefit packages they may offer and options to fund those packages through appropriate and secure funding vehicles. CUNA urges the agency to clarify that the proposal's section on investments covers corporate credit unions as well.

ANPR on NCUA's Rules on Investment and Deposit Activities
(January 24, 2002)
CUNA strongly supports NCUA's efforts with this Advanced Notice of Proposed Rulemaking to review the area of investments and consider changes that will facilitate investment activities for federal credit unions. NCUA suggested eliminating the Q&A format and simply highlighting what is permissible and what is not in order to make the regulation more readable and understandable. CUNA also recommended changes in the rule's standards in the following areas: broker requirements, safekeeper requirements, expanded investment authorities, discretionary control, investment credit, borrowing repurchase agreements, purchase of equity-linked options, secondary capital, and additional investment authority. CUNA will be looking for further opportunities to expand the investment opportunities for federal credit unions.

NCUA's Proposed Guidance on Allowance for Loan and Lease Losses (ALLL) Methodologies and Documentation.
(January 24, 2002)
While CUNA appreciates NCUA's efforts to ensure credit unions utilize ALLL methodologies that are not inconsistent with the other federal financial institutions, comments we have received indicate that some of the provisions of the proposed guidance would needlessly burden credit unions. The proposed guidance would add responsibilities on credit union boards of directors at a time when attracting qualified volunteers seems to be increasingly difficult for many credit unions. Further, the documentation requirements for credit unions would expand under this proposed guidance. Because there does not appear to be deficiencies in the current ALLL methodology and reporting, we question whether such an extensive policy change is warranted at this time.

FEDERAL RESERVE BOARD

Proposed Changes to Discount Window Lending Programs
(August 22, 2002)
CUNA supports replacement of the adjustment credit program with the primary credit program, replacement of the extended credit program with the secondary credit program, and retention of the seasonal credit program. The primary and secondary credit lending programs would have fair market value interest rates and would have less onerous application requirements.

CUNA supports joint white paper by Federal Reserve and Securities Exchange Commission that explores ways to reduce vulnerability in the settlement of government securities
(August 12, 2002)
CUNA supports the white paper and notes additional vulnerabilities that should be addressed such as: geographical vulnerability due to the location of the settlement facilities; structural vulnerability from limited competition; and operational vulnerability due to the high cost of new competitors entering the business. CUNA also recommends future steps for the agencies to take: reviewing the comments, disseminating them for public comment; and creating a broad-based task force.

Financial Literacy and Privacy
(June 21, 2002)
In connection with the upcoming meeting of the Federal Reserve Board's Consumer Advisory Council, CUNA President and CEO Dan Mica offers input on credit efforts with regard to financial literacy and on the effectiveness of the federal agencies' privacy rules that were issued last year.

Proposed Revisions to Regulation C (Home Mortgage Disclosure Act)
(April 12, 2002)
Credit unions strongly support efforts to eliminate predatory lending but oppose these recent proposed changes to Regulation C, the Home Mortgage Disclosure Act, which are intended to address predatory lending practices but apply to all lenders, including credit unions, which have not been involved in these abusive practices.

Proposed Revisions to the Regulation Z Commentary
(February 5, 2002)
CUNA generally supports these changes to the Regulation Z official staff commentary. One possible exception would be that if certain holidays fall on weekends and are observed on alternative days, CUNA would only support including these days as "business days," and included as part of the rescission period for certain home-secured loans, if the financial institution is open or available for business on these alternative days.

NACHA

CUNA Supports Proposal to Reduce Return Returns for Telephone ACH Entries
(December 20, 2002)
In general, CUNA supports this proposal which would require originating financial institutions (ODFIs) to make a warranty that they will cease initiating Telephone-Initiated (TEL entries) for any merchant whose return rate for unauthorized TEL entries has exceeded 2.5 percent, until the reason for the high return rate is resolved. However, CUNA supports a longer period of 30 days, before an ODFI is required to report and cease originating for a merchant with a high return rate.

Proposed Rule on Electronic Bounced Check Fees
(December 6, 2002)
CUNA does not support NACHA's proposal to modify the authorization requirements for service fees associated with Re-presented Checks (RCK) entries. The change in the authorization requirements would allow a merchant to obtain a consumer's authorization with a posting of notice instead of a signature or verbal assent. If NACHA does proceed with the proposal, CUNA makes several recommendations, including: a new standard entry class code; inclusion of the check number on the ACH and statement; inclusion of the merchant's phone number on the ACH; and collection of the underlying obligation first.

ACH Audit Requirements
(August 15, 2002)
CUNA supports:

  • Requiring financial institutions to verify that accurate records of ACH entries are retained and can be retrieved and reproduced as necessary;
  • Requiring financial institutions to ensure compliance with general funds availability rules for all ACH credit entries;
  • Requiring receiving depository financial institutions (RDFIs) to add certain required information from ACH entries to consumer's monthly periodic statements, such as check serial numbers and terminal locations;
  • Requiring RDFIs to verify that copies of written statements under penalty of perjury are provided to originating depository financial institutions (ODFIs) when requested and that such written statements are obtained for all appropriate return reason codes;
  • Requiring financial institutions to review their procedures for compliance with Regulation E, as long as NACHA limits the scope of this requirement to ACH transactions; and
  • Verifying that stop payment orders are being properly conducted.

CUNA Supports Free Copies of ACH Consumer Authorization & Check Numbers on Certain ACH entries
(June 25, 2002)
CUNA has the following comments on the changes proposed by NACHA:

  • CUNA supports an explicit amendment to the rules that would prohibit originating depository financial institutions (ODFIs) from charging a fee for providing a copy of a consumer's authorization to an receiving depository financial institutions (RDFI) that requests the authorization.
  • CUNA supports amendments to the rules that give ODFIs a 10-day deadline within which they must provide a copy of such an authorization.
  • CUNA believes that including a check serial number on an ACH item that has been created from a destroyed share draft a "XCK entry" should be mandatory and that this information should be included on a consumer's periodic statement.
  • CUNA supports the elimination of the RET Standard Entry Class Code.
  • Finally, CUNA supports technical provisions within the proposal that would clarify that certain ACH entries and Return Reason Code R29 are for one-time specific debit entries and not multiple ACH entries.

CUNA supports NACHA Rules to Promote Operational Efficiency
(May 15, 2002)
CUNA supports the adoption of amendments to the automated clearing house (ACH) rules that would clarify and introduce standard warranties for certain ACH applications. CUNA also supports separating and delineating return reason codes, so that a return reason code does not have two deadlines associated with it. Finally, CUNA does not oppose the elimination of the requirement that merchants manually enter the consumer's name on certain ACH items. CUNA also asks NACHA to consider additional measures to enhance efficiency within the ACH network.

NACHA's Proposal to Change ACH Enforcement Procedures
(January 31, 2002)
CUNA·generally supports NACHA's proposal to stiffen fines and streamline the enforcement process. CUNA recommends adoption of a fine structure that does not disproportionately penalize smaller institutions; procedures that would promote the early detection and punishment of fraud; immediate prosecution of egregious violations; and enabling NACHA and Regional Payments Associations to report alleged violations.

TREASURY

Disclosure of OFAC Penalties
(July 19, 2002)
CUNA does not support the proposal regarding the public disclosure of OFAC penalties. The ever-increasing complexity of the OFAC sanctions programs raises the risk that entities may mistakenly violate the requirements. Publicly disclosing such violations would aggravate this problem by ruining the reputation of those entities that would be affected.

CUNA Supports Treasury's ACH Rules Allowing for Electronic Records, Signatures & Authorizations
(June 10, 2002)
CUNA supports Treasury's interim final rule that makes the ACH rules for federal agencies more consistent with other laws, regulations and rules. In particular, CUNA supports the interim rule that allows for the electronic usage of records, signatures, affidavits and authorizations consistent with the E-SIGN Act and Regulation E. Treasury's rule also includes provisions limiting the number of times that a single ACH item may be represented and requiring that a receiving financial institution include the city and state of the point-of- purchase terminal on its member's monthly statement. These provisions make Treasury's ACH rules consistent with NACHA's ACH rules. They also help consumers by reducing insufficient funds charges to their accounts and by providing consumers with information to help them identify the transactions that appear on their statements.

Comments on the GLBA Information Sharing Study
(May 1, 2002)
CUNA responds to the study on information sharing that is being conducted by the federal financial institution regulators, including NCUA. The letter reinforces credit unions' concerns about protecting their members' privacy and offers the following comments:

  • Congress should enact legislation to preempt state privacy laws that would be more restrictive than those included in the GLBA.
  • The current privacy requirements outlined in the GLBA and the rules that were later issued are sufficient and adequately balance the privacy rights of consumers with the need for financial institutions to provide services in an efficient and cost-effective manner.
  • Future efforts with regard to privacy should be focused on industry guidelines and standards that address fraud and information security.

Proposed Rule regarding Special Information Sharing
(April 3, 2002)
CUNA generally supports these proposed and interim final rules, which are intended to utilize the resources of the Financial Crimes Enforcement Network (FinCEN) to create a communication network to accomplish the goal of improving information sharing in order to detect money laundering and terrorist activities, while ensuring that consumer privacy is not compromised. However, CUNA has some concerns with the rules, including the following: the definition of the term "transaction", provision of time needed by institutions to conduct an adequate and thorough search, record retention regarding closed accounts and past transactions, the definition of "financial institution", and certifications to FinCEN. CUNA believes that addressing these concerns should help alleviate burden and uncertainty for financial institutions without jeopardizing the aim of improved information sharing between financial institutions and government law enforcement agencies, as well as among financial institutions themselves.

SEC

CUNA supports joint white paper by Federal Reserve and Securities Exchange Commission that explores ways to reduce vulnerability in the settlement of government securities
(August 12, 2002)
CUNA supports the white paper and notes additional vulnerabilities that should be addressed such as: geographical vulnerability due to the location of the settlement facilities; structural vulnerability from limited competition; and operational vulnerability due to the high cost of new competitors entering the business. CUNA also recommends future steps for the agencies to take: reviewing the comments, disseminating them for public comment; and creating a broad-based task force.

SEC Exemption for Credit Union Sweep Accounts
(July 17, 2002)
CUNA supports Evangelical Christian Credit Union's request to offer sweep account services without the need to register as a broker-dealer and supports allowing all credit unions to offer sweep account services without registering as a broker-dealer, including privately insured credit unions.

FEDERAL HOUSING FINANCE BOARD

Multiple Federal Home Loan Bank Memberships
(March 4, 2002)
Credit unions generally support allowing financial institutions to join more than one Federal Home Loan Bank at the same time. This should enhance competition and provide greater flexibility. However, there should be some modest limitations to ensure that larger financial institutions do not exert undue influence on the Federal Home Loan Bank system.

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB)

Proposed Changes to Streamline FASB
(April 17, 2002)
CUNA does not believe the proposal by FASB's parent organization, the Financial Accounting Foundation, to streamline FASB's structure and standards-setting process would help to ensure the interests of credit unions and their members are represented as the accounting standards-setting process evolves. Increasingly, credit unions are concerned that FASB seeks to develop homogenous financial institution standards that do not reveal the unique nature of credit unions. CUNA believes the focus of the Foundation should be on ensuring that FASB has all relevant information before adopting new policies, including how any new guidelines and standards will affect commerce, such as credit union operations (particularly smaller entities). CUNA recommends that FASB should follow the standards of the Administrative Procedure Act, which federal agencies are required to follow in setting new rules, to ensure that FASB has received input from all affected parties and takes such input into full account when developing new standards.

INTERNAL REVENUE SERVICE (IRS)

Proposed Regulatory Changes on Reporting of Deposit Interest Paid to Nonresident Aliens
(November 14, 2002)
CUNA continues to oppose the IRS' efforts to expand reporting requirements for interest paid to nonresident aliens for the following reasons: (1) credit unions as financial institutions already shoulder a significant compliance burden as the result of current IRS reporting requirements; (2) the current proposal would increase compliance costs for credit unions; (3) additional IRS reporting requirements should be imposed only when the agency has clearly demonstrated that it is essential to implement statutory tax code requirements; and (4) the IRS has not shown that this rule is necessary to implement such statutory requirements.

Incorrect Taxpayer ID Numbers and Backup Withholding
( October 1, 2002)
CUNA appreciates the IRS' efforts to clarify the method of determining whether a payor has received two notices that a payee's taxpayer identification number (TIN) is incorrect. When a credit union receives two or more notices of incorrect TIN with respect to the same member's account for the same year, the credit union is treated as receiving one notice, regardless of the calendar year in which the notices are received. While most credit unions typically do not receive multiple notices of incorrect taxpayer ID numbers relating to the same members' account for the same tax year, we support the IRS' proposed changes because they will reduce the overall regulatory burden associated with backup withholding for payors and payees.

CUNA's Testimony at IRS Hearing on Option Plans for Employees of Tax-Exempt Organizations
(August 29, 2002)
At an IRS hearing on the agency's proposal regarding deferred compensation plans, CUNA Senior Vice President and Associate General Counsel Mary Mitchell Dunn told the panel that CUNA is concerned the provision to reposition option plans of tax-exempt entities, including credit unions, under a separate section of the tax code would "effectively eliminate the use of option plans." Dunn noted that the proposed change would place tax-exempt option plans under a section that is "silent on options." Dunn urged the agency to reconsider that provision of the proposal.

Option Plans for Employees of Tax-Exempt Organizations
(August 6, 2002)
CUNA opposes the IRS' proposal regarding deferred compensation plans under Section 457 of the Internal Revenue Code. CUNA expresses concern that this guidance would effectively eliminate the use of option plans by credit unions and other not-for-profit entities. Many credit unions have found these types of option programs to be a good tool for retaining talented executives. Taxable entities would not be hindered by these proposed regulations in designing their deferred compensation plans as tax-exempt entities would be. CUNA urges the IRS to reconsider the proposal in order to afford fairness to credit unions and other tax-exempt employers.

OFFICE OF MANAGEMENT AND BUDGET (OMB)

OMB Draft Report to Congress on the Costs and Benefits of Federal Regulations
(May 30, 2002)
CUNA applauds the efforts of the OMB to improve the federal regulatory process, particularly the agency’s proactive approach to achieving more accurate cost/benefit analysis of regulatory requirements. CUNA encourages OMB to work with the General Accounting Office and independent agencies, such as NCUA, to develop an ongoing process that will ensure that costs as well as benefits are accurately assessed and that there is accountability to the public for every new regulation adopted. Further, CUNA urges OMB to work with agencies to develop a review mechanism that will require agencies to consider the cumulative burden under which institutions and other regulated entities already operate before adding more regulatory requirements.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)

Real Estate Settlement Procedures Act (RESPA)
(October 28, 2002)
These proposed RESPA rules will permit lenders to offer borrowers Guaranteed Mortgage Packages, which will contain a guaranteed, lump sum price for all loan originator and government-required settlement costs associated with obtaining a mortgage, along with a guaranteed interest rate. These rules will also make significant changes to the Good Faith Estimate form. We realize that this proposal is intended to address the concerns expressed by consumers with regard to the current complexity of the mortgage process. These concerns are not unfounded, and we also share HUD's desire to address this problem. However, we believe that this proposal will be unduly burdensome for lenders with very few corresponding benefits for consumers.

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)

Draft Chapters for AICPA Combined Audit and Accounting Guide
(July 2, 2002)
While reiterating our support for the retention of a separate CU Guide, CUNA makes several recommendations for the following draft Chapters of the proposed AICPA Combined Audit and Accounting Guide: Chapter 2 Industry Overview - Credit Unions and Chapter 17 Equity and Disclosure Regarding Capital Matters.

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