Our focus this month, as it is for everyone, is how the coronavirus (COVID-19) is affecting credit unions. The financial impact COVID-19 will have on the lives of Americans has yet to be determined. However, credit unions are already stepping forward to help soften the blow for their members. And they’re looking to us for help balancing compliance with service. Our outsourced compliance services team here at CU Service Network has compiled a list of frequently asked compliance questions, below.
Normally reserved for our compliance clients, we are making this information available to all credit unions in hopes it helps you navigate this complex and confusing environment.
Question: Our credit union is allowing members to skip a payment on closed-end loans. What are some issues to consider?
One common way assistance is being offered is via “skip-a-payment” promotions on outstanding loans. This is a program already offered by many credit unions; a borrower can pay a small fee and “skip” making their monthly closed-end loan payment. While this is an excellent way to alleviate some financial pressure on a member, certain disclosures need to be made. A member should understand that the skipped payment will extend the term of the loan and interest will continue to accrue until the next payment is made. The credit union should also consider the impact skipping a payment might have on a member’s GAP or credit insurance. A process should also be put into place to ensure loans with skipped payments are not reported to credit bureaus as delinquent.
Question: Our credit union is planning to temporarily increase our members’ credit card limits. What should we know before we do this?
A credit union is well within its rights to increase credit card limits. However, the credit union should understand the level of risk involved in taking this action without reviewing each cardholder’s current credit report. Additionally, cardholders under the age of 21 must be excluded from the automatic limit increase. Regulation Z requires proof of the ability to repay be obtained prior to raising the credit limit for a borrower under 21 years old.
Should your credit union decide to move forward with temporarily increasing credit card limits, members should be given information about how they may opt-out of the increase. When the credit union decides to end the temporary increase, 45 days’ notice should be given to members that their limit will be reduced and processes should be in place to prevent members being charged over limit fees or negative information being reported to credit bureaus.
Question: What about our annual meeting?
A federal credit union has flexibility to postpone its annual meeting and this may be necessary for credit unions with annual meetings scheduled over the next few months. The credit union should provide notice of the cancellation and rescheduled meeting as required in the FCU Bylaws. A federal credit union can amend the date of its annual meeting by using the fill-in-the-blank provision in its bylaws with the two-thirds vote of its board, without seeking the NCUA’s approval. State credit unions should also consult their bylaws and refer to state law in order to take the appropriate steps to reschedule the annual meeting.
Question: Are Regulation D limits still in place?
The Federal Reserve recently reduced the reserve requirement ratios to zero percent, but they did not change the transfer limitations imposed by Regulation D. Pre-authorized withdrawals from non-transaction accounts are still limited to six (6) per month, at least for now. Several trade associations have petitioned the Federal Reserve Board to ease withdrawal restrictions on savings accounts. Your compliance team will continue to monitor this and pass along any information we receive.
Question: We want to offer small loans with no payment due for 90 days. What concerns should we keep in mind?
Promotions offering loans with no payment due for 90 days are relatively common. Normal loan documents and disclosures can be used, but the borrower should be informed if interest will accrue during the first 90 days. Additionally, the credit union should put a process in place to ensure the loans are not reported to credit bureaus as delinquent during the deferred payment period.
Question: What issues with Bank Secrecy Act could arise because of the pandemic?
Your credit union should continue filing CTRs and SARs in a timely manner and your compliance program should continue as normal. Unfortunately, there are scams which often arise from national emergencies. Credit Union staff should be aware of scams involving fake charities, fraudulent investments, and sales of products making false claims about treating or curing the virus.
Question: Members are asking about withdrawing large amounts of cash. Can we limit daily cash withdrawals?
Yes, you can limit the amount of cash a member can withdraw on one day, and you probably should. If you choose to impose daily cash limits, we recommend posting a notice in the lobby and at the drive-thru.
You can also discourage this action as it’s not safe for members to carry large amounts of cash. Remind your members that their funds are fully insured up to $250,000 by the National Credit Union Share Insurance Fund. However, if your member insists on making a significant cash withdrawal, we recommend having him/her sign a hold harmless agreement, absolving the credit union of any liability.
Question: Can we waive fees to help our members?
Absolutely. We’ve heard from credit unions who are waiving loan fees, such as late payment fees, over-the-limit fees, overdraft protection program fees, skip-a-payment fees, etc. Some credit unions are waiving wire transfer fees and expedited shipping fees for cashier’s checks and credit/debit cards. You can also waive share certificate early withdrawal fees, as long as the certificate has been open for at least six days.
Question: Will assisting our members result in issues with our next exam?
No. NCUA has taken the stance of encouraging credit unions to work with members affected by the Covid-19 pandemic. Short-term modifications made in response to borrowers who were current prior to the pandemic will not be considered troubled debt restructuring (TDR). NCUA examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected, including those considered TDRs. In circumstances where modifications are considered TDRs, NCUA assures credit unions that its examiners will not criticize prudent efforts to modify terms on existing loans for affected customers.
Links to additional resources:
- NCUA Letter to Credit Unions concerning Covid-19
- FFIEC Statement on Pandemics
- CFPB Page on protecting finances during a pandemic
- Interagency Statement on Loan Modifications and Working with Members Affected by Coronavirus
How we can help:
The CU Service Network compliance team assists credit unions across the country with outsourced compliance needs, from testing and marketing reviews to full outsourcing. As you can imagine, we have been quite busy assisting our credit unions over the past few weeks with items such as sample notices and disclosures for COVID-19 related products and services. Our now fully-remote team is focused on staying up-to-date with this environment and standing ready to review advertising and other member communications for compliance.
Not a compliance client? Contact us at firstname.lastname@example.org to learn more. We hope you found this Q&A helpful during this confusing time.
CU Service Network and its employees are not engaged in rendering legal advice. If legal advice is required, consult an attorney. Information may have changed since this document was prepared. This information is intended as a summary and is not intended to be all inclusive.
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NACUSO: Coronavirus Compliance Q & A