2019 Fair Lending and Consumer Compliance Regulatory Update

Summary

Highlights

• Matthew Biliouris introduces the webinar focusing on fair lending laws and regulations. 📢
• The roles of the NCUA’s Office of Consumer Financial Protection are outlined, emphasizing compliance support. 🏢
• Detailed insights into HMDA compliance issues and potential systemic errors are discussed. 🏠
• New updates on Payday Alternative Loans (PALs II) and their benefits over traditional payday loans are presented. 💡
• Challenges and solutions regarding elder financial abuse and reporting obligations are explored. 👴

Key Takeaways

• Understanding the roles of the NCUA office in consumer protection is crucial for compliance. 🤓
• PALs II loans offer an alternative to high-cost payday loans, with increased flexibility and higher loan caps. 💵
• Elder financial abuse is witnessing a rise; protective measures under S 2155 offer some immunity for reporting. 🛡️
• Accurate HMDA reporting is crucial for uncovering discriminatory lending patterns. 📊
• Credit unions should report cases of elder abuse to local authorities to strengthen prevention and response mechanisms. 🚨

Overview

Chapters

• 00:00 - 02:30: Introduction Matthew Biliouris introduces a webinar focused on fair lending and consumer compliance laws. He mentions his role as the director of NCUA's Office of Consumer Financial Protection (OCFP), which has two main divisions. The first division handles consumer compliance policy and outreach, working on consumer protection policies and overseeing the fair lending program, including HMDA compliance supervision.
• 03:00 - 22:00: HMDA Compliance and Errors The chapter titled 'HMDA Compliance and Errors' focuses on the responsibilities of the division of consumer affairs in enhancing financial literacy and managing consumer interactions. They oversee the consumer website, mycreditunion.gov, and the consumer assistance center which caters to inquiries and complaints. The chapter aims to equip credit unions with the necessary information and resources to adhere to consumer compliance laws and regulations. Key personnel, including deputy director Martha Powell, are part of this presentation.
• 22:00 - 28:00: Regulation B Adverse Action Notices The chapter introduces the main topic of Regulation B Adverse Action Notices with the participation of staff from the division of consumer compliance policy and outreach, including director Morgan Rogers, and program officers Joe Goldberg, Matt Nixon, and Al Brantley. It begins with logistical instructions for the webinar attendees, emphasizing the importance of proper audio setup and visual settings to ensure a smooth viewing experience. Participants are advised to adjust their computer volume, allow pop-ups, and set their screen resolution to 1024 by 768 for optimal engagement during the session.
• 28:00 - 38:00: PALs II Loan Program The chapter titled 'PALs II Loan Program' provides guidelines for a webcast presentation, emphasizing the availability of slides and the 'ask a question' feature. Participants can submit questions throughout the webcast, with a dedicated Q&A session at the end to address them. Acknowledgement is given to those who submitted questions beforehand. Additionally, it is noted that the archived version of the webinar will be accessible approximately three weeks after the live event, and efforts will be made to respond to unanswered questions.
• 38:00 - 49:00: Elder Financial Abuse This chapter discusses the legal disclaimer and objectives of a webcast presented by the NCUA, focusing on enhancing understanding of the statutes and regulations administered by the organization. It clarifies that the views expressed are those of NCUA staff and are not binding on the board members. The chapter sets the agenda for the session, beginning with a presentation by CCPO program officer Matt Nixon, who will share his observations.
• 49:00 - 54:00: Resources and Contact Information The chapter titled 'Resources and Contact Information' covers topics related to HMDA reviews conducted in 2018 and 2019, and regulation B's adverse action notice requirements. It also provides updates on recent changes to the PALs rule and discusses elder financial abuse. The presentation is introduced by a field staff member and mainly led by Matthew Nixon.
• 54:00 - 75:00: Q&A Session Matthew Nixon from NCUA's Office of Consumer Financial Protection discusses limited scope HMDA reviews conducted by NCUA examiners in 2018 and 2019. These reviews aim to evaluate federal credit unions' compliance with HMDA reporting requirements. While some errors in HMDA reporting are seen as technical deficiencies or violations of regulation C, there could be wider implications.

2019 Fair Lending and Consumer Compliance Regulatory Update Transcription

• 00:00 - 00:30 Matthew Biliouris: Good afternoon and welcome to this NCUA webinar around fair lending and other consumer compliance laws and regulations. My name is Matt Biliouris. I'm the director of NCUA's office of consumer financial protection. Just for some background, OCFP is comprised of two divisions, the division of consumer compliance policy and outreach works on consumer financial protection policy issues and also oversees the agency's fair lending program, which includes supervision for compliance with HMDA or the Home Mortgage Disclosure Act.
• 00:30 - 01:00 The division of consumer affairs is responsible for our agency's consumer financial literacy efforts, our consumer website, mycreditunion.gov and our consumer assistance center, which handles consumer inquiries and complaints. Our goal today is to provide you with information and resources you can use to help your credit union comply with applicable consumer compliance laws and regulations. I'm pleased to have many of my staff joining me today. So for some introductions we have deputy director, Martha Powell, division of consumer affairs
• 01:00 - 01:30 director, Morgan Rogers, division of consumer compliance policy and outreach Joe Goldberg. Also joining us this afternoon, our CCPO program officers, Matt Nixon and Al Brantley. Before we get into the substance of today's webinar, let's cover some general logistics. First, please make sure the volume on your computer is turned up so that you can hear the webcast audio. If you have trouble viewing a slide, click on the enlarge slide button on the bottom of the console. Also, please allow popups from the website and a screen resolution of 1024 by 768 or
• 01:30 - 02:00 higher will let you see the slides. You can submit a question at any time during the webcast in the ‘ask a question’ box. We have time set aside at the end of today's presentation to address questions as time permits. And I do want to thank all of those of you who have sent in questions in advance of the webinar. The webinar will be archived in approximately three weeks after the live event and we will make every effort to address the questions that we are not able to get to during that
• 02:00 - 02:30 portion of the webcast. And then as this slide indicates, let me just cover the legal language really quick. I just want to point out, we're presenting this webinar to enhance your understanding of the statutes and regulations administrated by the NCUA. It expresses the views and opinions of NCUA staff and it's not binding on any NCUA board member. Any representation to the contrary is expressly disclaimed. And with that said, let me start looking at the agenda. First up this afternoon we'll hear from CCPO program officer Matt Nixon on observations
• 02:30 - 03:00 by our field staff during their HMDA reviews conducted in 2018 and 2019 as well as regulation B's adverse action notice requirements. Later in the presentation, we'll provide an update on recent changes to our PALs rule and also discuss elder financial abuse. We're ready to get started, so I'll now turn it over to Matt Nixon. Matt, the floor is yours. Matthew Nixon: Thank you Matt. Good afternoon.
• 03:00 - 03:30 I'm Matthew Nixon and I work in NCUA's Office of Consumer Financial Protection. In 2018 and 2019, NCUA examiners completed limited scope Home Mortgage Disclosure Act or HMDA reviews to assess federal credit union compliance with HMDA reporting requirements. While we sometimes consider HMDA reporting errors to be technical deficiencies or technical violations of regulation C, there may be broader implications.
• 03:30 - 04:00 The NCUA uses HMDA data to assist in identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. Systemic HMDA errors may make the data unreliable to the point that it cannot be effectively used for its intended purpose. Additionally, HMDA reporting violations that are systemic in nature are usually attributable to weaknesses in one or more areas of the institution's compliance management system.
• 04:00 - 04:30 Today I'll discuss some of the issues NCUA examiners identified while performing HMDA reviews, the impact those issues may have on fair lending oversight and some of the underlying compliance management system weaknesses that contributed to the violations noted. While institutions report HMDA data on an annual basis, Section 1003.4(f) of Regulation
• 04:30 - 05:00 C requires financial institutions to record data on a loan application register within 30 calendar days after the end of the calendar quarter in which final action is taken. A financial institution may maintain the records required by Section 1003.4(f) in electronic or any other format provided the institution can make the information available to its
• 05:00 - 05:30 regulatory agency in a timely manner upon request. Failure to record data on an ongoing basis as required may impact HMDA LAR accuracy, especially if it prevents an institution from performing sufficient quality control reviews before the HMDA LAR is filed. Failing to comply with Section 1003.4(f)'s recording requirements likely demonstrates
• 05:30 - 06:00 weaknesses with HMDA policies and procedures, training, and audit functions. Also, the CMS deficiencies shown on these slides are not intended to represent all possible CMS deficiencies for the particular issue being described. They are included to remind you that weaknesses in an institution's compliance management system can lead to violations of laws or regulations such as the ones described in this presentation.
• 06:00 - 06:30 Many credit unions use the services of third parties for their mortgage lending programs. Services include, but are not limited to, underwriting, origination, HMDA collection, and HMDA reporting. In most of these third party arrangements, the third parties are not agents of the credit unions and that makes a difference because actions of an agent equate to actions of the
• 06:30 - 07:00 institution. Only one party reports each originated covered loan as an origination. If more than one party was involved in the origination of a covered loan, the party that made the credit decision reports the loan as an origination. For HMDA purposes, it is not relevant whether the loan closed in the institution's name. As an example, let's assume a third party that provides mortgage services for credit
• 07:00 - 07:30 union A receives an application and forwards the application to credit union A. Credit union A reviews the application and approves the loan prior to closing. The third party continues to process the loan and it closes in credit union A's name. Since credit union A made the credit decision prior to closing, credit union A reports the
• 07:30 - 08:00 transaction as an origination on its HMDA LAR. The third party does not report the transaction. Let's consider another example. A third party reviews an application and makes a credit decision to approve a loan using the underwriting criteria provided by credit union B. Credit union B does not review the application prior to closing. The third party reports the origination, even though the loan closes in credit union B's
• 08:00 - 08:30 name. A credit union's lending patterns cannot be evaluated if a third party collects HMDA data for more than one credit union, defers to their credit union clients on lending decisions, but erroneously reports originations as belonging to the third party. A preapproval request is an application under the HMDA rule if the request is (1) for a
• 08:30 - 09:00 home purchase loan; (2) not secured by a multifamily dwelling; (3) not for an open end line of credit or for a reverse mortgage; and (4) reviewed under a preapproval program as defined in the HMDA rule. Prequalification requests are not considered applications under the HMDA rule. A preapproval program for purposes of the HMDA rule is a program in which the financial
• 09:00 - 09:30 institution conducts a comprehensive analysis of the applicant's credit worthiness including income verification, resources and other matters typically reviewed as part of the financial institution's normal credit evaluation program; and then issues a written commitment that is (a) for a home purchase loan, (b) is valid for a designated period of time and up to a specified amount, and (c) is subject only to specifically permitted conditions which
• 09:30 - 10:00 are unrelated to the applicant's financial condition or creditworthiness, conditions such as requiring the identification of a suitable property. Generally, a prequalification request is a request other than a preapproval request by a prospective loan applicant for a preliminary determination of whether the prospective loan applicant would likely qualify for credit under the financial institution standards,
• 10:00 - 10:30 or for a determination of the amount of credit for which the prospective applicant would likely qualify. Transactions included on a HMDA LAR erroneously because they do not meet HMDA's definition of an application often contain missing data elements. Unreliable data often leads to unreliable conclusions.
• 10:30 - 11:00 In order to meet HMDA institutional coverage requirements, depository institutions must have a home or branch office located in a metropolitan statistical area (or MSA). Depository institutions that do not have a home or branch office located in an MSA are not required to collect and report HMDA data regardless of their mortgage loan volume. However, once the depository institution meets HMDA's institutional coverage requirements,
• 11:00 - 11:30 they report applications secured by properties located both within and outside MSAs. NCUA examiners identified one or more credit unions that met HMDA institutional coverage requirements, but were not reporting applications secured by properties located outside of MSAs. Missing data such as this may not look like data reported for application secured by properties
• 11:30 - 12:00 located in MSAs. Demographics may be different. The institution might have applied different underwriting and pricing requirements. Applications not reported as required can materially impact the accuracy of any fair lending analysis that uses the institution's HMDA data. It may reflect a fundamental weakness at the board and management level to comply with
• 12:00 - 12:30 HMDA. NCUA examiners noted that one or more credit unions failed to include all covered denied applications on their HMDA LARs. This typically occurred when credit unions used manual processes to collect and report denials, and the credit union's oversight of HMDA failed to identify that files were not reported as required. Fair lending decisioning analyses compare approvals and denials of similarly situated
• 12:30 - 13:00 applicants. Missing files can affect the accuracy of the analysis. A financial institution reports an application as withdrawn when the application is expressly withdrawn by the applicant before the financial institution makes a credit decision denying the application, before the financial institution makes a credit decision approving the application,
• 13:00 - 13:30 or before the file is closed for incompleteness. A financial institution does not report an application as withdrawn when the financial institution approves the application, but the applicant fails to respond to the financial institution's approval within the specified time. In this example, the financial institution reports the application as approved but not accepted.
• 13:30 - 14:00 Additionally, NCUA examiners have observed credit unions verbally communicating to applicants that applications will not likely be approved based on the information available and applicants then withdraw their applications. We discourage this type of interaction as it has Regulation B implications and likely triggers the requirement to provide an adverse action notice. For HMDA purposes, in this example, the financial institution denied credit and then the applicant
• 14:00 - 14:30 elected to withdraw the application. The transaction should be reported as a denial on the financial institution's HMDA LAR. A fair lending decisioning analysis compares approvals and denials of similarly situated applicants to determine if applicants were treated differently on a prohibited basis. Actions taken other than approved and originated, approved but not accepted, and denied are
• 14:30 - 15:00 generally excluded from a decisioning analysis. Accuracy of the analysis is affected when a material number of approved but not accepted or denied applications are excluded because they were erroneously reported as withdrawn. A financial institution reports an application as approved but not accepted if the financial
• 15:00 - 15:30 institution made a credit decision approving the application subject solely to outstanding conditions that are customary commitment or closing conditions, but the applicant either does not accept the terms of the loan or fails to respond to the financial institution's approval within the specified time. A financial institution does not report an application as approved but not accepted if
• 15:30 - 16:00 it runs preliminary information through an automated underwriting system like Desktop Underwriter but does not underwrite the loan further. (for example, the financial institution does not verify income, confirm debts, or order an appraisal). In instances where underwriting is incomplete and the applicant withdrawals the application, the financial institution reports the application as withdrawn.
• 16:00 - 16:30 In instances where underwriting is incomplete and the financial institution closes the file after the applicant fails to respond to a written notice of incompleteness, the financial institution may report the application as closed for incompleteness. In this circumstance, the financial institution may also report the application as denied if it provided a notification of adverse action on the basis of incompleteness.
• 16:30 - 17:00 As described on the previous slide, misreporting approvals and denials affect the accuracy of fair lending decisioning analyses. HMDA now allows an applicant to self-report belonging to up to five racial or ethnic categories. Some racial and ethnic categories have sub categories that are more detailed than the general category.
• 17:00 - 17:30 For example, an applicant can report that they are Hispanic or Latino and also report they are Mexican. NCUA examiners identified instances where race, ethnicity, or sex information does not match the information reported on the application. For example, an applicant reported on the application being black or African American, but the credit union recorded on the HMDA LAR white.
• 17:30 - 18:00 NCUA examiners also identified instances where applicants reported belonging to more than one racial or ethnic category, but the credit union recorded only the first entry. And, NCUA examiners identified instances where applicants reported primary and sub-category information, for example, Asian and Chinese but the credit union only recorded the primary
• 18:00 - 18:30 category. Institutions with automated HMDA collection and reporting tools should have virtually no errors in race, ethnicity, and sex fields. Data should be mapped from the loan origination system to the HMDA tool. A large number of errors may indicate mapping problems. Evaluating prohibited basis differences is central to fair lending analysis. Institutions must correctly report race, ethnicity, and sex information.
• 18:30 - 19:00 Fair lending analyses often use predictive models such as regression to evaluate an institution's underwriting and pricing decisions. Materially incorrect and missing values in fields used to predict lending and pricing decisions affect model accuracy. Systemic inaccuracies and omissions in key data fields maybe indicative of a board and
• 19:00 - 19:30 management team that has not devoted sufficient resources to its fair lending compliance management system. HMDA training is likely inadequate, and, monitoring and corrective action is deficient. Generally, institutions are required to report property addresses when known. “NA” can be used if the property did not have a property address at closing and when
• 19:30 - 20:00 the property address was not provided to the institution before the application was denied, withdrawn or closed for incompleteness. Generally, institutions are required to report rates spread for originations and applications that were approved but not accepted. Institutions may report N/A for rates spread on applications that did not result in an origination other than approved but not accepted; for applications approved but not accepted,
• 20:00 - 20:30 if no disclosures under Regulation Z are required; and for covered loans that are assumptions, reverse mortgages, purchased loans, or are not subject to Regulation Z. Missing rate spreads affect the accuracy of pricing analyses. Missing property addresses affect red lining analyses.
• 20:30 - 21:00 For each reportable transaction, HMDA requires financial institutions to report the Nationwide Mortgage Licensing System and Registry ID assigned to the loan originator. In instances where the mortgage loan originator is not required to obtain and has not been assigned an NMLSR identifier, the institution reports N/A for the transaction. Institutions also report N/A or voluntarily report the loan originators NMLSR ID for purchased
• 21:00 - 21:30 covered loans. Institutions do not report the NMLSR ID assigned to the institution. While we often evaluate fair lending at the institution level, it is also important to review trends below the institution level. For example, indirect auto lending analyses may review transactions by auto dealer.
• 21:30 - 22:00 Similarly, mortgage loan analyses may review transactions at the loan originator level. HMDA data cannot be used to evaluate trends associated with an institution's loan originators if the institution erroneously reports the NMLSR ID assigned to the institution. In this portion of the webinar, I'll discuss some of the issues NCUA examiners identified
• 22:00 - 22:30 under Regulation B’s adverse action notice requirements. Similar to the HMDA reviews discussed previously, this year NCUA examiners completed targeted reviews to evaluate compliance with Regulation B adverse action notice requirements. The reviews were conducted in federal credit unions.
• 22:30 - 23:00 As with the HMDA issues discussed previously, Regulation B violations are usually attributable to weaknesses in one or more areas of the institution's compliance management system. When denying credit or taking adverse action on an existing credit account, credit unions must disclose the principle reason or reasons for the action taken. The statement of reasons must be specific.
• 23:00 - 23:30 The reasons must relate to and accurately describe the factors actually considered or scored by a creditor. Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant failed to achieve a qualifying score on the creditor’s credit scoring system are insufficient. When a credit union denies a credit request because the applicant failed to achieve a qualifying credit score, the reasons disclosed to the applicant must relate to the factor
• 23:30 - 24:00 scored in the system. Similarly, when credit is denied because an applicant does not meet certain internal standards or policy requirements, the reasons disclosed must describe the specific conditions which were not met. Some credit decision methods maintain features that call for automatic denial because of one or more negative factors in the applicant's record (such as the applicant's previously
• 24:00 - 24:30 bad credit history with that creditor or the applicant's declaration of bankruptcy). When a creditor denies the credit request because of an automatic denial factor, the creditor must disclose that specific factor. Credit unions that routinely violate technical requirements of Regulation B such as this likely need to improve their compliance training and audit programs.
• 24:30 - 25:00 Adverse action notices must include the name and address of the federal agency that administers compliance with respect to the creditor. Those names and addresses are listed in Appendix A to Regulation B. Federal credit unions with total assets of $10 billion or less list the name and address of NCUA's Office of Consumer
• 25:00 - 25:30 Protection. The name of this office has since changed to the Office of Consumer Financial Protection, but Regulation B has not been revised to reflect the change. We do not take exception to federal credit unions listing “Office of Consumer Protection” or “Office of Consumer Financial Protection”. Regardless of the name used, the address must match the address listed in Appendix A to
• 25:30 - 26:00 Regulation B, 1775 Duke Street, Alexandria, Virginia 22314. Banks, savings associations, and credit unions with total assets of over $10 billion and their affiliates list the Consumer Financial Protection Bureau. All creditors not specifically identified, including state chartered credit unions, list the Federal Trade Commission.
• 26:00 - 26:30 We recommend credit unions confirm compliance by reviewing adverse action notices issued from all loan products and platforms. We often see lending platforms that are purchased with a default federal regulator listed, one other than the NCUA. If a credit union does not update the default settings, all notices issued from this particular platform may violate Regulation B requirements.
• 26:30 - 27:00 As discussed on the previous slide, adverse action notices must include the name and address of the federal agency that administers compliance with respect to the creditor. This information provides contact information to consumers should they have questions or concerns about a creditor's actions. Regulation B describes this requirement as it pertains to a singular regulator, not regulators,
• 27:00 - 27:30 "the name and address of the federal agency that administers compliance with respect to the creditor." A consumer should not have to determine which regulator to contact from a provided list. The appropriate regulator should be clearly identified.
• 27:30 - 28:00 Once a creditor has obtained all the information it normally considers in making a credit decision, the application is considered complete. The creditor has 30 days from this date to provide notice of adverse action. When an application is incomplete regarding information that the applicant can provide and the creditor lacks sufficient data for a credit decision, the creditor may either deny the application giving as the reason for denial that the application is incomplete,
• 28:00 - 28:30 or, alternatively, provide a Regulation B compliant notice of incompleteness. This concludes my portion of today's webinar. I will now turn it over to Consumer Compliance Policy and Outreach Director Joe Goldberg, to discuss payday alternative loans. Joseph Goldberg: Thank you, Matt. Good afternoon and good morning to those in the West. As Matt said, I'm going to talk about what are called PALs II loans.
• 28:30 - 29:00 As many of you are aware, the NCUA board recently created a new small dollar loan product federal credit unions can offer to members as an alternative to high cost payday loans. The new payday alternative loan program known as PALs II, provides a second PALs product by which federal credit unions can give members in need a path forward to more mainstream
• 29:00 - 29:30 credit products. Before discussing PALs II, it will be helpful to review the background on the PALs I program. In 2010 the board amended the NCUA regulation to create what are now known as PALs I loans. These small dollar, short term products were intended as a way to help keep existing credit union members confronted with unexpected expenses or loss of income from getting high cost or
• 29:30 - 30:00 predatory loans. This slide includes a citation in the regulation for the PALs I rule, which is section 701.21 (c)(7)(iii). The regulation permits federal credit unions to make a PALs I loan with a maximum interest rate of 28%. The loan must be for at least $200 and not more than $1,000. It is a closed end loan that must be fully amortized over a maximum term of six months.
• 30:00 - 30:30 A credit union can extend no more than three PALs I loans to the same borrower in any rolling six month period. A credit union can make only a single PALs loan at a time and no loan can be rolled over. A PALs I borrower must have been a member of the credit union for a minimum of 30 days. As the slide indicates, the only fee allowed is an application fee that does not exceed
• 30:30 - 31:00 $20. Finally, the credit union must have written underwriting guidelines. The board also included in the rule guidance and best practices for a PALs I program. First and foremost, the credit union should determine how its program will benefit a member's financial well-being. Features to consider include appropriate underwriting standards such as requiring proof of employment
• 31:00 - 31:30 or income. This could be recent pay stubs or other proof of recurring income. Another suggested feature is reporting PALs I loan payments to credit bureaus to help establish or re-establish credit. As indicated in the credit union profile, 82% of federal credit unions that made PALs I loans reported PAL statements to credit bureaus and 75% reported having payroll deductions.
• 31:30 - 32:00 Credit unions might provide financial education, attach a savings component to the loan or encourage or incentivize members to establish repayment by payroll deduction. Also indicated in the CU profile, 45% of federal credit unions reported requiring financial education and 17% reported requiring a savings component.
• 32:00 - 32:30 Despite the reported success of PALs I programs, after a number of years, it became clear that the market penetration of PALs had leveled off at a relatively low number. Credit unions and other stakeholders informed the board that some of the PALs I terms were too restrictive. Some advised the loan term was too short where the $1,000 cap was too low. Others pointed out that since many borrowers had an immediate need for a short term loan,
• 32:30 - 33:00 a 30 day membership requirement was an impediment. Starting in mid-2018, the board went through a rulemaking process which resulted in the creation of PALs II loans. The board approved PALs II on September 19th, 2019. It placed the PALs rule in a separate part of the NCUA regulation. It is contained in section 701.21 (c)(7)(iiii).
• 33:00 - 33:30 By doing that, PALs I loans retained their safe harbor exemption in the Consumer Financial Protection Bureau's rule on Payday, Vehicle Title and Certain High Cost Installment Loans Rule or as it's commonly known, the Payday Lending Rule. The effective date of the PALs II rule is December 2nd, 2019, which is 13 days from today. The chart in slide 28 shows which PALs II terms are the same as those for PALs I and
• 33:30 - 34:00 which are not. PALs II loans share most of the same terms and restrictions of PALs I loans, but the differences are significant and I'll discuss them now. First, the PALs II loan amount cap is $2,000 and there is no minimum. The board felt the higher cap reflects the reality that things such as emergency medical bills or car repairs, reasons that members might seek a PALs loan, can exceed $1,000,
• 34:00 - 34:30 while they could also use a PALs II loan to pay off an existing high cost or predatory loan. The board also saw no reason to require a member with a smaller need to borrow more than necessary. Second, there is no minimum length of membership required to obtain a PALs II loan. As previously mentioned, this is a recognition that a person with an immediate need cannot
• 34:30 - 35:00 wait 30 days to be eligible and it will be better to obtain a safer loan product from a credit union. Please note that the board made it clear that a credit union can oppose its own minimum membership requirement and is not required to extend PALs II loans to everybody who could become a member. Credit unions should consider risk and exercise sound principles as it does with any credit
• 35:00 - 35:30 product. Third difference: the loan term must be not less than one month and not more than 12. The board extended the maximum term to give credit unions the flexibility to provide longer terms of smaller payments to better fit the needs of each member. Fourth difference: the rule prevents the assessment of a fee or charge on the borrower's account pursuant to the federal credit unions overdraft service in connection with a PALs II loan.
• 35:30 - 36:00 This includes a fee for non-sufficient funds. However, the restriction does not prohibit imposing a late fee. As with PALs I loans, rollovers are prohibited. Credit unions can make no more than three PALs of either type to a borrower during a rolling six month period. To be clear, that is a total of three PALs loans, not three PALs I and three PALs II loans. Also, credit unions can make only one PALs loan of either type at a time to a member.
• 36:00 - 36:30 The other PALs I requirements and restrictions apply to PALs II as well. All of the PALs I guidance and best practices I discussed earlier apply to PALs II loans. The board especially noted the need for a credit union to make prudent underwriting decisions when considering whether to extend a PALs II loan.
• 36:30 - 37:00 It stated that a federal credit union must consider the borrower's entire financial position, including debt burden, and make an informed judgment consistent with responsible lending principles regarding whether to extend the PALs loan to a borrower. As mentioned earlier, PALs I loans retain a full exemption from the CFPB Payday Lending Rule.
• 37:00 - 37:30 That rule is not yet in effect as a judge has issued a stay in a pending lawsuit challenging the rule. In addition, the CFPB issued proposed amendments to its Payday Lending Rule, which are still under consideration. Federal credit unions should be able to tailor their PALs II loans so they receive an exemption based on the terms of the loan or on the number of loans extended and the total dollar amount of loans made per year.
• 37:30 - 38:00 That exemption would apply under the current CFPB rule and under the proposed amendment. Finally, as slide 31 indicates, credit unions will report both types of PALs loans together on their call reports. Call report instructions are being amended to inform your credit union of the change. Your credit union will be required to indicate on its Profile whether it is making PALs I
• 38:00 - 38:30 loans, PALs II loans or both. We anticipate these changes to take effect with the March, 2020 call reports cycle. And just for your information, the agency is working on guidance on PALs II loans, which should be forthcoming soon since the effective date is, as I mentioned, December 13th - excuse me, December 2nd. And with that, I'll turn the mic over to Morgan Rogers, Director of the Division of Consumer
• 38:30 - 39:00 Affairs who will talk to you about elder financial abuse. Morgan Rogers: Thank you Joe. Good afternoon. My name is Morgan Rogers and I'm the director of the division of consumer affairs in NCUA's office of consumer financial protection. During my time today, I'm going to discuss elder financial abuse. This slide lists the areas I will cover. It includes an update on the economic growth, regulatory relief and consumer protection act, signed into law by president Trump in May of 2018 commonly referred to as S 2155.
• 39:00 - 39:30 Before I begin, I would like to take a moment to acknowledge the work credit unions do to promote financial literacy to their members and the communities they serve, especially when it involves elder financial exploitation. Under the federal credit union act, promoting financial literacy is a core credit union mission. It is also important to note that the NCUA works to support these efforts, increase awareness of these efforts and increase access to credit union services.
• 39:30 - 40:00 The NCUA also encourages credit unions to continue with this important work, particularly as it relates to serving older Americans. This slide contains the S 2155 definition of exploitation of senior citizens. In short, it's the illegal or improper use of an older person's funds, property or assets. The law defines a senior citizen as an individual who is 65 years of age or older.
• 40:00 - 40:30 In October of 2019, the FDIC hosted a public webinar called building collaborations between financial institutions and law enforcement to prevent and address elder financial abuse. In addition to the FDIC the CFPB, the San Mateo County, California district attorney's office, and the US Department of Justice participated in the webinar. During the webinar, the CFPB presented a number of statistics based on the elderly financial
• 40:30 - 41:00 exploitation, suspicious activity reports filed with FinCEN or EFE SARS. I'm going to share a few of the charts they shared during the webinar. Perpetrators who target older Americans include among others, family members, caregivers, scam artists, financial advisors, home repair contractors and fiduciaries such as agents under power of attorney or guardians of property. On this slide, the CFPB took a random sample of 1051 EFE SARS and analyzed the suspect
• 41:00 - 41:30 category. As you can see, someone not known by the elderly person was the highest suspect category. Most suspects who were unknown to the targeted older adults were located internationally. But over one third of the suspicious activity reports involved a family member, fiduciary or other known person. In other words, someone generally trusted by the senior citizen. So while scams by strangers that target older Americans are not surprising, people close
• 41:30 - 42:00 to the senior citizens are also exploiting them. Financial regulatory and law enforcement agencies agree that only a fraction of elderly financial exploitation incidents are reported to authorities, law enforcement, or adult protective services. However, as seen on the current slide, the number of EFE SARS filed by financial institutions quadrupled from 2013 to 2017.
• 42:00 - 42:30 FinCEN introduced electronic SAR filing including a designated category for EFE in 2013. The presenters during the interagency webinar are noted that SARS are helpful but encouraged financial institutions to also report elder financial exploitation to local law enforcement and elderly service agencies as applicable. This is the final slide I'll share from the CFPB is part of the inner agency webinar. It shows the total amount of monetary losses and fraud attempts reported to an EFE SARS
• 42:30 - 43:00 by year. You can see as of 2017, losses or attempts total almost $1.8 billion. One third of the individuals who lost money were aged 80 and over and adults ages 70 to 79 had the highest average monetary loss. Remember, only a fraction of elder financial exploitation is reported. Actual annual losses to older adults can be assumed to be exponentially higher.
• 43:00 - 43:30 As we've seen in the proceeding charts, elder financial exploitation is increasing and as the population ages, it is expected to continue to increase. Seniors are targeted because they often have fixed income such as social security or a pension. They also have accumulated assets through savings and equity in their homes. They're more vulnerable to abuse due to isolation, declines in their health or cognitive impairment
• 43:30 - 44:00 and other factors. When these seniors are robbed of their resources, it can have tangible effects on their quality of life and their physical and emotional wellbeing. Financial institutions, including credit unions, play a vital role in preventing and responding to elder financial exploitation. The CFPB and law enforcement are pleased financial institutions are filing more EFE SARS because SARS provide essential information and references to supporting documentation.
• 44:00 - 44:30 However, fewer than one third of the EFE SARS indicated the filer reported the suspicious activity to a local, state or federal authority. During the inner agency webinar, they noted the lack of reporting to law enforcement authorities results in missed opportunities to strengthen prevention and response. Older adults may be reluctant to say anything about what is happening to them out of embarrassment and shame, fear of reprisal, dependency on the perpetrator of the offense or fear of
• 44:30 - 45:00 further straining a family relationship. Now that we've discussed the trends relating to elder financial abuse, let's discuss the economic growth, regulatory relief and consumer protection act and what it means for reporting financial abuse of older adults. As mentioned previously, S 2155 was enacted in May of 2018. Section 303 is codified as 12 USC 34 23.
• 45:00 - 45:30 It extends immunity from liability to certain credit union employees who disclose the suspected financial exploitation of a senior citizen age 65 or over to a regulatory or a law enforcement agency. The immunity from liability covers credit union employees serving in a supervisory, legal or compliance capacity who in good faith and with reasonable care disclose the suspected
• 45:30 - 46:00 financial exploitation of a senior citizen to a regulatory or law enforcement agency. In order to receive that immunity or safe haven, the credit union must meet certain requirements. The employee's credit union must provide the credit union employee with specific training to identify suspected exploitation. The credit union can use the services of a third party to train its staff. A credit union employee who receives training to identify elder financial exploitation from
• 46:00 - 46:30 the credit union shall not be liable in any civil or administrative proceeding for disclosing the suspected financial exploitation of a senior citizen to a regulatory or a law enforcement agency if at the time of the disclosure, the individual served as a supervisor or in a compliance or legal function for the credit union, like being the BSA officer or as a registered representative like an investment officer or insurance provider affiliated or
• 46:30 - 47:00 associated with the credit union, and the aforementioned individual made the disclosure in good faith and with reasonable care. A credit union shall not be liable with respect to disclosures made by such employees as long as the individual was employed by the credit union or in the case of a registered representative, insurance producer or investment advisor representative affiliated or associated with the credit union
• 47:00 - 47:30 at the time of the disclosure and before the time of the disclosure, the credit union provided training to identify suspected exploitation of a senior citizen to any employee who serves as a supervisor or an compliance or legal function, including as a bank secrecy act officer may come into contact with the senior citizen as a regular part of the professional duties of the individual or may review or approve the financial documents, records or
• 47:30 - 48:00 transactions of a senior citizen in connection with providing financial services to a senior citizen. Please note that training should include supervisory and non-supervisory employees of the credit union or a third party. The credit union also needs to maintain adequate records of the training which we'll discuss in just a moment.
• 48:00 - 48:30 It is important to note that the act does not require an individual serving in a supervisory, legal, or compliance capacity or a credit union to report suspected exploitation of a senior citizen, nor does the act obligate credit unions to provide training to their employees on this matter. The act also does not limit the liability of an individual or a credit union in a civil action for any act, omission or fraud.
• 48:30 - 49:00 That is not a disclosure described in section 303. Additionally, section 303 does not preempt or limit any provision of state law except only to the extent that it provides a greater level of protection against liability to an individual or to a credit union that is provided under state law - than is provided under state law. The training that a credit union must provide to receive immunity under section 303 of the
• 49:00 - 49:30 act must be maintained by the credit union, all content delivered to the currently employed staff and be made available to the financial institutions regulator. Instruct attendees on identifying and reporting suspected exploitation of a senior citizen internally and as appropriate to government officials or law enforcement authorities. Include the common signs that indicate the financial exploitation of a senior citizen. Discuss the need to protect the privacy and respect the integrity of each individual customer
• 49:30 - 50:00 of the credit union and be appropriate to the job responsibilities of the individual attending the training. If you would like to learn more about elder financial abuse or exploitation, there are several resources listed on this slide that can help you. Thank you for your time. Now I turn the presentation back to Joe who will show you two other important consumer compliance resources. Joseph Goldberg: Thank you, Morgan. We thought it might be helpful to show you these two resources and actually how to find
• 50:00 - 50:30 them on our website. They're on ncua.gov which is obviously the agency website. The consumer compliance regulatory resources page, or CCRR, contains many resources on all consumer financial protection compliance areas, including fair lending. It provides links to our recent consumer financial protection updates, has a handy listing of new items and contains sections on the different topic areas.
• 50:30 - 51:00 The new Federal Consumer Financial Protection Guide replaces the old consumer compliance self-assessment guide. It contains full versions of the examination procedures approved by the federal financial institutions examination council or the FFEC including full checklists. It is available now for you to use as a reference, although some additions will be made in the
• 51:00 - 51:30 near future. Although the slides themselves contain direct links to both documents, I'm going to quickly show you how to find them on our website. For both, you will start on the website homepage which you access at www.ncua.gov. First I'll show you how to find the consumer compliance regulatory resources section of the website. To get to the CCRR pages, click on the Regulation and Supervision tab, which is highlighted
• 51:30 - 52:00 in the slide and is the item at which the red arrow is pointing. It's in the bar at the top of the page. That will take you to our general Regulation and Supervision page shown here. The red arrows and yellow highlights point to the two places you can click to get to the Regulatory and Compliance Resources page.
• 52:00 - 52:30 When you get to the Regulatory and Compliance Resources page, which is the page is highlighted in yellow and has the red arrow on the right and it's also in purple in the list on the left, you click there and either when you click on will take you to the CCRR landing page. Although this is obviously far too small to read. This is the main Consumer Compliance Regulatory Resources page.
• 52:30 - 53:00 It's very easy to navigate. On the left is a list of topics, general topics, usually by product or a similar type of item, which then will take you to the links for all the individual items on that topic. Okay. Now I'm going to show you how to get to the new Federal Consumer Financial Protection Guide.
• 53:00 - 53:30 Again, you'll start on the ncua.gov homepage and click on that same Regulation and Supervision tab in the top bar. This time when you get to the Regulation and Supervision page, you'll select Manuals and Guides from the list on the left side, which is highlighted and the red arrow points to it. And as with the CCRR pages, there is also an option to use the link from the group of items with pictures.
• 53:30 - 54:00 Slide 53 shows how scrolling down on that Regulation and Supervision page will get you to that alternate item. If you clicked there, you will land on the main Manuals and Guides page. Again, this is far too small to read but on the next slide, we've enlarged it to show you where the link to the Federal Consumer Financial Protection Guide is as shown in
• 54:00 - 54:30 this blowup. When you click there, you will then land on the landing page at the Federal Consumer Financial Protection Guide. You'll enter the guide by choosing a subject area from the list on the left. This guide is easily searchable and because it is in web format easily updatable. There are some sections still awaiting FFEC updates and approval. We'll add them as they are approved by the FFEC.
• 54:30 - 55:00 Although there will be a more formal rollout of this guide, we're interested in any feedback or comments you may have when you access it. Please send them to our compliance mailbox at the email address on the contact slide for this webinar that you'll have at the very end. And with that, we're now going to answer some of the questions we received during the webinar and possibly some questions, some FAQ that may be of interest.
• 55:00 - 55:30 Matthew Biliouris: And just again to submit a question or to ask a question, hit the button on the console. And we had some submitted in advance so I'm going to turn it over to Martha and Al to see what they've got queued up for us. Martha Powell: Thanks Matt. The first question we have goes back to the HMDA presentation, Matt Nixon here. The questioner is asking if a preapproval letter contains multiple conditions that are not related to credit worthiness, should it be considered as a prequalification letter.
• 55:30 - 56:00 Credit unions are issuing preapproval letters for hot real estate markets so the applicants can provide them with offers and they say that prequel letters are not enough. Matthew Nixon: Yeah. A credit union issues a firm commitment to extend credit subject only to conditions which are unrelated to credit worthiness and it would be considered a preapproval request.
• 56:00 - 56:30 So EFA credit union performs a comprehensive analysis of credit worthiness the same way that they would, or a written application and issues the firm commitment to extend credit then that's a preapproval and that is generally going to be HMDA reportable.
• 56:30 - 57:00 The conditions unrelated to credit worthiness would be things such as the requirement for a termite inspection. So I believe as the way the question is asked, if a preapproval letter contains multiple conditions that are not related to credit worthiness, then it would be a preapproval
• 57:00 - 57:30 assuming that the credit union has issued a firm commitment to extend credit. Martha Powell: Thank you, Matt. I have an additional follow-up question regarding the adverse action form. Just to confirm, if we are a state chartered credit union on the adverse action form, should we list the federal trade commission under the equal credit opportunity act notice and not NCUA?
• 57:30 - 58:00 Matthew Nixon: If your state chartered, we would advise you first to consult with your state regulator and follow the guidance that they provide. That said, appendix A to regulation B indicates that institutions list NCUA when they are
• 58:00 - 58:30 federal credit unions and it does say federal credit unions and they have assets of 10 billion or less. And then the catchall category would be listing the federal trade commission. And so if you follow all the appendix down, it's NCUA's opinion that state chartered credit unions do not fall in any of the categories that are specific to a regulator.
• 58:30 - 59:00 And so therefore they would be within that catchall category and they would list the federal trade commission. Martha Powell: Thank you Matt. Now over the course of the year we have a variety of questions that come into our office and we thought while we're waiting for more of you to submit some of your questions, we might ask and answer a few of these.
• 59:00 - 59:30 This first one is for Al Brantley here regarding fair lending. May credit unions consumer loan policy set different borrowing limits based on home ownership status? Alfred Brantley: Good question. The answer is no; home ownership is not a legitimate measure of credit worthiness. Many homeowners have poor credit while many renters have pristine credit, so homeownership status doesn't measure a borrower's capacity to repay the loan.
• 59:30 - 60:00 Moreover, loan policy allowing homeowners to borrow more than a non-homeowner has fair lending or discriminatory implications, if a protected basis under the Equal Credit Opportunity Act or the Fair Housing Act is affected. Martha Powell: Okay, Al I have another one for you here. This is another fair lending related question. We added $300 monthly housing expense when calculating the debt to income ratio for loan
• 60:00 - 60:30 applicants without a mortgage or rent payment. Although we apply this provision consistently, does it raise any fair lending concerns? Alfred Brantley: NCUA opined in legal opinion 04-0936 that a lender may consider the circumstances surrounding an individual applicant's lack of housing expense and may determine the facts in a particular case warrant an adjustment.
• 60:30 - 61:00 However, a blanket policy of adding an amount to every applicant's debts to compensate for the absence of a stated housing expense is improper and could result in illegal discrimination under the federal fair housing rules. Excuse me, fair lending rules. Specifically, we think this practice could result in a disparate impact on younger applicants. A policy that is facially neutral as to age or another prohibited basis such as race,
• 61:00 - 61:30 color, national origin, sex or religion may constitute illegal discrimination if it results in a disproportionately adversely impact on a protected class of applicants, despite the absence of intent to discriminate. Martha Powell: Thanks Al. Let's ask another one. We offer a credit builder loan product that requires the borrower to keep 10% of the loan
• 61:30 - 62:00 proceeds of deposit while the loan is outstanding. Is this contingency permissible under federal regs? Alfred Brantley: Regulation Z, which implements the Truth in Lending Act expressly addresses this situation. Under section 1026.18(r), the credit union must properly inform the borrower if a deposit must be maintained as a condition of receiving the loan. The disclosure must include a statement that the APR does not reflect the effect of the
• 62:00 - 62:30 required deposit. Appendix H to Regulation Z provides a model clause that may be used in making that disclosure. Martha Powell: Thank you. I have a question for either Matt Biliouris or Joe to answer here. Can our current PAL policy and procedures simply be modified for increased maximum amount in term or must PALs II be a separate set of policies and procedures? Matthew Biliouris: So this is Matt.
• 62:30 - 63:00 I would say that's really going to depend on the unique features of the loan that's granted. So, because there are unique features of PALs II loans, the increased amount, the additional term, there really should be a policy that's unique to that, that the credit union can point back to, to demonstrate the underwriting for that loan and the how that loan was granted. That being said, there is some overlap with some of the features, particularly in some of the terms. So you could augment your policy to incorporate some of the features, but when you're granting
• 63:00 - 63:30 loans that are unique under PALs II, for example, the membership was granted 15 days or they became a member 15 days and were granted the loan, that really makes that a PALs II loan And there should be some procedural guidelines to govern that. Alfred Brantley: We do have another question that's come in on HMDA reporting.
• 63:30 - 64:00 A person asked: When determining the number of HELOCs originated in a calendar year, is an increase in an existing HELOC considered a new HELOC originated for that year? The answer to that is: Individual drawls on an open-end line of credit, including those secured by a dwelling, are not separate extensions of credit. Under the HMDA regulation, an extension of credit generally requires the creation of
• 64:00 - 64:30 a new debt obligation. If a transaction modifies, renews, extends or amends the terms of an existing debt obligation, but the existing debt obligation is not satisfied and replaced, the transaction is not a new loan. Regulation C, which implements HMDA, provides two narrow exceptions for transactions that are substantially similar to new debt obligations.
• 64:30 - 65:00 Therefore, we caution you to be aware of these provisions. In particular, assumptions are extensions of credit for HMDA reporting purposes. So, if the credit union enters into a written agreement accepting a new borrower in place of the existing borrower as the obligor on an existing debt obligation, the transaction is covered as a new loan. Martha Powell: Thank you Al. I have a question for Matt Nixon that has come in.
• 65:00 - 65:30 Are there any fair lending concerns or considerations related to offering discounted interest rates to veterans? Matthew Nixon: I don't know that I can answer that question without probably some additional information. Yeah, I mean, I think probably, we provided the contact information within the slides
• 65:30 - 66:00 and if the person that asked the question could just contact us directly, we could, maybe flesh that out. Martha Powell: Okay. Matt, thank you. We do have excellent resources on our website for you. I have a question that's come in for elder abuse limitations. Morgan, if you could answer.
• 66:00 - 66:30 If the employees are trained and elder abuse is noted within the credit union staff and the elder member does not see it as abuse, are you saying that the credit union is not held liable? The member could have a relative that's using social security for their own gain and not the elder members gain. And the credit union is not liable for retrieving the funds if the family finds us abusive relative doing the actions. Morgan Rogers: Right. So this is not the purpose of S 2155.
• 66:30 - 67:00 The purpose of S 2155 is to cover liability of credit union employees who have identified abuse and are reporting the abuse. So leading up to that is something wholly different. So S 2155 is what is your coverage once you've identified it? Martha Powell: Okay thank you. Al do we have another question that's come in?
• 67:00 - 67:30 Alfred Brantley: We can shift. This has to do with the loan estimate. So let me - we have a question about providing an applicant with a loan estimate in connection with a mortgage transaction. So this would be under the TRID rule. The question is: What establishes the application date with respect to income for issuance of the loan estimate? If income for more than one consumer is required to make a certain loan, we consider the loan application incomplete until all sources of income are reviewed.
• 67:30 - 68:00 In response to that question, when applying for a mortgage loan under the TILA-RESPA Integrated Disclosure or TRID rule, six pieces of information constitutes a valid loan application: name, income, social security number to obtain a credit report, property address, estimated value of the property, and mortgage loan amount sought. This is addressed in 12 CFR 1026.2(a)(3).
• 68:00 - 68:30 Once these six pieces of information are obtained or submitted, the credit union then must provide the applicant with a loan estimate within three business days. So if income information is required from more than one applicant for a particular loan, this prong of the application is not satisfied until the information is received from all of the applicants. But please keep in mind that an applicant cannot be required to provide documentation verifying income information prior to receiving a loan estimate.
• 68:30 - 69:00 Martha Powell: Thank you Al. I have a question that's come in for Matt. Is elder abuse going to be included in the NCUA supervisory priorities [inaudible]. Matthew Nixon: So I don't know the answer to that question. I don't think it will be. As Morgan indicated in her presentation, we have a lot of resources available to assist credit unions on this on mycrane.gov. We often will highlight and re-emphasize certain slides depending on the time of the year to focus attention on that critical important feature.
• 69:00 - 69:30 And again, this presentation was designed to make credit unions aware that employees have some relief in reporting suspected elder abuse. But I don't think we have any plans right now to review for that during our examination cycle, but that decision is made above my pay grade. Martha Powell: Thank you Matt. I have another question that's come in here. Is it a violation of federal regulations to link a debit card to a savings account?
• 69:30 - 70:00 Alfred Brantley: A very good question. It is not a violation of the Federal Reserve Board's Regulation D to link a debit card to a savings account. However, savings accounts are generally not considered appropriate for debit cards, as Regulation D limits the number of remote withdrawals that can be made from a savings account during a statement cycle. The limit is six per month. Withdrawals are transfers made by telephone or through online banking.
• 70:00 - 70:30 So to ensure that no more than the permitted number of withdrawals or transfers are made over a given cycle, the credit union must follow the provisions outlined in Regulation D. Martha Powell: Okay. Thank you Al. I have another question that's come in regarding sales. Can you clarify the prohibition of overdraft on PALs II? Matthew Biliouris: Sure. And I'm glad this is the second question we've seen in here on this.
• 70:30 - 71:00 I'm glad this is coming up. As Joe mentioned, we're working on guidance to coincide with the effective date of the PALs II rule. So the information we talk about in here will help inform some of that guidance. So the restriction on overdraft fees for PALs II relates to a PALs II payment. That payment itself cannot trigger an overdraft fee. A previous question talked about overdraft fees or not overdraft fees, but overdraft
• 71:00 - 71:30 payments programs tied to a checking account. It doesn't restrict that but the payment for the PALs II loan cannot trigger an overdraft fee. Martha Powell: Thank you Matt. Morgan, I have a question for you that's come in. If you suspect elder abuse but the member has an attorney in fact and it appears the attorney in fact is abusing the member financially, would that be SAR worthy? Morgan Rogers: Under S 2155 yes, it would be. That is something you would definitely want to report.
• 71:30 - 72:00 Martha Powell: Okay thank you. I have another question related to PALs and overdrafts. Would a credit union overdraft protection plan be considered a PAL loan? Joe or Matt, do you want to answer this? Matthew Biliouris: So at the top of my head I would be inclined to say no. What makes a PAL loan unique is it is structured a certain way to allow an interest rate that
• 72:00 - 72:30 exceeds the [general] interest rate approved by the NCUA board. So that's kind of the governing factor for that. So I would say no to that question. Martha Powell: Thank you. We have one more question that's come in regarding service members civil relief act.
• 72:30 - 73:00 And then I think we're about ready to wrap up the webinar. When we must reduce a member's loan rates to 6% to comply with the service members civil relief act, at what point in time do we need to? We have a member who enlisted in the Navy nearly a year ago, but we learned of this action only recently. Alfred Brantley: A very good question. If talking about an active duty service member – from the date the member reported for active duty, the credit union must ensure that the total of fees and interest on any
• 73:00 - 73:30 loan obligation incurred prior to military service does not exceed 6% APR. A service member also has up to 180 days after being released from military service to show proof of service for the interest rate limitation. Therefore, you may have to retroactively reduce fee and interest charges. Please note that SCRA benefits also extend to members of the National Guard and Reservists
• 73:30 - 74:00 when on active duty. A common mistake by credit unions is to assume that SCRA protections don't kick in until the National Guard member or Reservist reports for duty. Again, this is the compliance date for regular active duty military personnel. Protections for National Guard members and Reservists start when they receive orders to report for military service. More information on this can be found in 50 USC 3917.
• 74:00 - 74:30 Matthew Biliouris: Thank you Al. I don't see any other questions in the queue so I'll give you some portion of your afternoon back. I do want to highlight again, we're working on guidance for the new PALs II rule in addition to the questions that were posed today. If there are other questions you want us to try to clarify in that guidance, please send that information to OCFPCCPO@ncua.gov. That's OCFPCCPOmail@ncua.gov and I believe we have a resource slide here we can add to
• 74:30 - 75:00 it. This will be part of the slide deck also that's available for download. So with that being said, I appreciate your time this afternoon and I look forward to talking to you in the near future. Thank you.