National Credit Union Administration (NCUA)
Importance of Contingency Funding Plans
The NCUA Board released Letter to Credit Unions 23-CU-06 which provides information related to the Addendum to the 2010 Interagency Statement on Funding and Liquidity Risk Management: Importance of Contingency Funding Plans. The events of the first half of 2023 have further underscored the importance of liquidity risk management and contingency funding planning.
Credit Unions should assess the stability of their funding and maintain a broad range of funding sources that can be accessed in adverse circumstances. In addition, credit unions should be aware of the operational steps required to obtain funding from contingency funding sources, including potential counterparties, contact details, and availability of collateral. As part of operational readiness, credit unions should regularly test any contingency borrowing lines to ensure the institution’s staff are well versed in how to access them and that they function as envisioned.
The addendum discusses two sources of contingency funding that are available to credit unions:
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Consumer Financial Protection Bureau (CFPB)
CFPB Supervisory Highlights: Summer 2023
The CFPB released the Summer 2023 edition of their Supervisory Highlights. The latest edition of the Supervisory Highlights report covers findings from CFPB supervisory examinations completed from July 2022 to March 2023. The highlight included observations on:
Auto Origination;
Auto Servicing;
Consumer Reporting;
Debt Collection;
Deposits;
Fair Lending;
Information Technology;
Mortgage Origination;
Mortgage Servicing;
The CFPB paid particular attention to issues with:
Higher car prices lead to more delinquencies in auto lending. Examiners also found multiple instances of unfair or abusive acts or practices by servicers, including:
Charging fraudulent interest on inflated loan balances: Servicers charged interest on loans based on fraudulent representations by dealers that the vehicle had options and enhancements that it did not actually have. When servicers identified discrepancies, they did not reduce the amount that consumers owed on the loan agreements and continued to charge interest tied to financing of the nonexistent options.
Cancelling automatic payments without sufficient notice, leading to unavoidable late fees: Servicers did not properly notify consumers that the final payment of an auto loan often had to be made manually to close out the loan, and were surprised when they were hit with late fees even though they had automatically paid their balance for years.
Engaging in illegal collection practices after repossession: Servicers engaged in the practice of blanket cross-collateralization by accelerating and requiring payments from all consumers on unrelated debts, such as credit cards, before consumers could reclaim their repossessed vehicles.
Debt Collection attempts on medical debt. Examiners found debt collectors continued collection attempts for work-related medical debt after receiving sufficient information to render the debt uncollectible under state worker’s compensation law. The debt collectors violated the Fair Debt Collection Practices Act by collecting an amount not permitted by law or agreement, by falsely representing the character, amount, or legal status of a debt, by engaging in conduct which had the natural consequence of harassing, oppressing, or abusing the consumer, and by using false, deceptive, or misleading representations in connection with the collection of a debt.
Issues with payday lender collection practices. The CFPB examinations also found unfair and abusive acts employed by payday lenders in their collection practices. Lenders would put language in loan agreements that prohibited consumers from revoking their consent for the lender to call, text, or e-mail the consumers about collection on the outstanding balance.
Lenders also made false collection threats that would often purport their authority to garnish wages of borrowers, when no such authority exists. In some cases, the lender would make an unauthorized wage deduction by sending demand notices to consumers’ employers that incorrectly conveyed that the employer was required to remit to the lenders from the consumer’s wages the full amount of the consumer’s loan balance. In fact, the consumer had agreed to permit the lenders only to seek a wage deduction in the amount of the individual scheduled payment due.
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Federal Reserve Board (FRB)
Federal Reserve Issues FOMC Statement
The Federal Reserve released the latest FOMC statement after the committee decided to raise the target range for the federal funds rate another 25 basis points to 5 ¼ to 5 ½ percent.
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Internal Revenue Service (IRS)
IRS Commissioner Signals New Phase in Employee Retention
Credit Work
IRS Commissioner Danny Werfel stated that the agency has made substantial progress in the ongoing effort related to Employee Retention Credit (ERC) claims and has entered a new phase of increasing scrutiny on dubious submissions while renewing consumer warnings against aggressive marketing.
The Employee Retention Credit, also sometimes called the Employee Retention Tax Credit or ERTC, is a tax credit enacted to help businesses during the pandemic that was subsequently amended three times by Congress. Many businesses legitimately apply for the credit, but aggressive marketing has overshadowed the program. The period of eligibility for the credit for affected businesses is very limited, covering only between March 13, 2020, and Dec. 31, 2021.
Under the current law, businesses can typically continue to file claims for the credit until April 15, 2025. That raises future concerns, Werfel said.
Properly claiming the ERC
There are very specific eligibility requirements for claiming the ERC. These are technical areas that require review. Employers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021. However, to be eligible, employers must have:
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