National Credit Union Administration (NCUA)
NCUA Board Approves Updates to MDI Preservation Program and Share Insurance Fund Report Shows an Increase in the Assets of CAMEL 3 Credit
Unions
The National Credit Union Administration Board held its second open meeting of 2024 and adopted revisions to an interpretive ruling and policy statement (IRPS) 13-1, governing the Minority Depository Institution Preservation Program for credit unions. In addition, the Board was briefed on the performance of the National Credit Union Share Insurance Fund for the fourth quarter of 2023.
Home Mortgage Disclosure Act Data Requirements
The NCUA released Regulatory Alert 24-RA-01 to remind credit unions of the HMDA data filing requirements.
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Consumer Financial Protection Bureau (CFPB)
CFPB Data Spotlight Report: Credit Card Data: Small Issuers Offer Lower Rates
The CFPB released a Data Spotlight Report which reviewed the newly updated Terms of Credit Card Plans survey. The survey data revealed that larger banks tended to offer worse terms and conditions as well as having higher interest rates. The 25 largest credit card issuers charged customers interest rates of 8 to 10 points higher that small and medium sized banks and credit unions. Some of the key findings of the survey included:
Large issuers offered worse rates across credit scores: Whether a person has poor, good, or great credit, large issuers offer higher interest rates. For example, the median interest rate for people with good credit – a credit score between 620 and 719 – was 28.20% for large issuers and 18.15% for small issuers.
Fifteen issuers reported credit cards with interest rates above 30%: Nine of the largest credit card issuers in the country reported at least one product with a maximum purchase annual percentage rate (APR) over 30%. Many of these high-cost products were private label or co-branded cards offered through retail partnerships.
Large issuers were more likely to charge annual fees: Among large issuers’ credit cards, 27% carried an annual fee, compared to just 9.5% of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.
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Federal Financial Institutions Examination Council (FFIEC)
Statement on Examination Principles Related to Valuation Discrimination and Bias in Residential Lending
The FFIEC issued a statement to communicate principles for the examination of supervised financial institutions’ residential property appraisal and evaluation processes to:
Institutions rely on real estate valuations when assessing the level of collateral support in residential credit decisions. Deficiencies in real estate valuations, including those due to valuation discrimination or bias, can lead to increased safety and soundness risks, as well as consumer harm and have an adverse impact on borrowers and their communities. Examples of such harm are consumers being denied access to credit for which they may be otherwise qualified, offered credit at less favorable terms, or steered to a narrower class of loan products.
For an institution, the failure of internal controls to identify, monitor, and control valuation discrimination or bias could negatively affect credit decisions, potentially exposing an institution to legal and compliance risks or affecting an institution’s financial condition and operations. Furthermore, material findings and concerns related to noncompliance with laws and regulations generally negatively affect the supervisory assessment of an institution’s management in a safety and soundness examination.
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Internal Revenue Service (IRS)
IRS Shares 7 Warning Signs Employee Retention Credit Claims May Be
Incorrect; Urges Businesses to Revisit Eligibility, Resolve Issues Now Before March 22
The IRS released an alert to businesses about seven suspicious warning signs that could signal future IRS problems involving ERC claims. The indicators, built on feedback from the tax professional community and IRS compliance personnel, center on misinformation some unscrupulous ERC promoters used. Many of these groups urged taxpayers to ignore advice from trusted tax professionals and claim the pandemic-era credit even though they may not qualify. In the alert, the seven suspicious signs an ERC claim could be incorrect include:
Government orders that don’t qualify
Too many employees and wrong calculations
Business citing supply chain issues
Business claiming ERC for too much of a tax period
Business didn’t pay wages of didn’t exist during eligibility period
Promoter says there’s nothing to lose
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Financial Crimes Enforcement Network (FinCEN)
FinCEN Proposes Rule to Combat Illicit Finance and National Security Threats in Investment Advisor Sector
Credit unions that offer investment services for their members through partnerships with CUSOs or other investment advisors should be aware of a recent proposed rule from FinCEN. The proposed rule would add investment advisors to the definition of a financial institution and thereby extend the BSA reporting requirements to a sector that may not have been providing the reports.
The proposed rule would require certain investment advisers to apply Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) requirements pursuant to the Bank Secrecy Act (BSA), including implementing risk-based AML/CFT programs, reporting suspicious activity to FinCEN, and fulfilling recordkeeping requirements. The Treasury also published its risk assessment of this sector, which identifies illicit finance threats and vulnerabilities in the sector, including how the uneven application of AML/CFT requirements across the sector allows both legitimate and illicit investors to “shop around” for an adviser who does not need to inquire into their source of
wealth.
FinCEN Sees Increase in BSA Reporting Involving the Use of CVC for Online Child Sexual Exploitation and Human
Trafficking
FinCEN released a Financial Trend Analysis (FTA) which highlighted an increase in in BSA reporting associated with the use of convertible virtual currency (CVC) and online child sexual exploitation (OCSE) and human trafficking. The FTA is based on BSA reporting filed between January 2020 and December 2021.
FinCEN’s analysis highlights the value of BSA reporting filed by regulated financial institutions. Key findings in the FTA include:
The total number of OCSE- and human trafficking-related BSA reports involving CVC increased from 336 in 2020 to 1,975 in 2021.
BSA filers specifically reported child sexual abuse material (CSAM) or human trafficking and CSAM in 95 percent of the OCSE- and human trafficking-related BSA reports involving CVC.
BSA reports overwhelmingly identified bitcoin as the primary CVC used for purported OCSE- and human trafficking-related activity, however, this does not necessarily mean that other types of CVC are not used for such crimes.
FinCEN identified four typologies (i.e. the use of darknet marketplaces that distribute CSAM, peer-to-peer exchanges, CVC mixers, and CVC kiosks) that describe common trends within BSA reports related to OCSE and human trafficking.
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