1. What is the difference between a preamble to a rule and the staff commentary?

Question 1

What is the difference between a preamble to a rule and the staff commentary?

Answer 1

Preamble contains background information, summaries, explanations of the agency’s determinations and, in final rules, summaries of comments received by the agency.

Question 2

What is a self-effectuating law?

Answer 2

Some laws, usually referred to as “Acts”, are self-effectuating, meaning regulations are not needed to interpret the act or “bring it into effect.” Other laws direct an agency (or several agencies) to issue implementing regulations to interpret and carry out an act’s requirements.

Question 3

Besides the rules and regulations, what other kinds of guidance are available? What are the purposes for these other kinds of guidance

Answer 3

NCUA issues guidance that may or may not go through the formal rulemaking process. The agency issues Interpretive Rulings and Policy Statements (IRPS) that are NCUA’s official interpretation of the Federal Credit Union Act (FCU Act) as it relates to a particular issue.

Question 4

Title II - Share Insurance The National Credit Union Share Insurance Fund (NCUSIF) is

Answer 4

By law, federally insured credit unions maintain one percent of the credit union’s shares in the NCUSIF.

Question 5

What are the different offices (e.g., Office of Consumer Financial Protection, Office of Credit Union Resources and Expansion, etc.) within NCUA? What do they do or when would a credit union need to contact one of these offices

Answer 5

The Office of Credit Union Resources and Expansion, or CURE, offers assistance to any credit union in the following areas: chartering; charter conversions; bylaw amendments; field of membership expansion requests; and low income designations. CURE also provides online training, grants and loans through the Community Development Revolving Loan Fund and a program for minority institutions.

Question 6

Does the CFPB have examination authority over all credit unions? What determines whether the CFPB has supervisory and examination authority over a credit union?

Answer 6

a. For credit unions, the CFPB has the authority to examine and supervise institutions with more than $10 billion in assets. NCUA will continue to examine all credit unions for safety and soundness.

Question 7

Are credit unions subject to the CFPB’s Regulation DD? If not, is there a similar regulation that credit unions may be subject to?

Answer 7

The Truth in Savings Act has a special requirement that NCUA implement the regulations for credit unions. All credit unions need to comply with the agency’s version of Truth in Savings rather than CFPB’s Regulation DD

Question 8

How does NCUA’s examination program differ from an audit?

Answer 8

Audits are generally assessments of the credit union that look to the past, whereas examinations have an eye on the credit union’s future

Question 9

What are the seven types of risk that NCUA examines for?

Answer 9

Liquidity risk is the risk that the credit union cannot meet its obligations when they come due without incurring significant costs and/or unacceptable losses. Liquidity risk includes the inability to manage funding sources and can arise from the credit union’s failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.

Question 10

What are the various administrative tools available to NCUA, when may they be utilized, and what is the severity of each?

Answer 10

Document of Resolution (DOR) - agreement between NCUA and the credit union. It formally documents plans for the credit union to take in order to reduce areas of unacceptable risk.

Question 12

In what format can credit unions file quarterly call reports and profile data with NCUA?

Answer 12

Since 2014, NCUA has required all federally insured credit unions to file quarterly call reports and profile data electronically using NCUA’s information management system or other electronic means specified by the agency. Manual filing of this information is no longer an option for federally insured credit unions.

Question 13

What are the main responsibilities of the Supervisory Committee?

Answer 13

The supervisory committee acts as the watchdog of the federal credit union and conducts annual audits and verification of accounts. The committee should review the performance of the federal credit union, its officials and employees and make recommendations to the board for improvements that can be made. The supervisory committee may employ certified public accountants and/or other independent qualified persons to assist in its audit, account verification and clerical duties. In addition, if the full board of directors is removed simultaneously, the supervisory committee fills in until a special meeting is called to elect board members who will serve until the next annual meeting. The supervisory committee may suspend any director, board officer or member of the credit committee until the next meeting of the members. The vote must be unanimous. The supervisory committee must then call a special meeting of the members to act on the suspension. The special meeting must be held 7-14 days after the suspension.

Question 14

Are credit unions required to fully adopt the standard bylaws each time NCUA provides updates? Can credit unions keep their own version?

Answer 14

When NCUA issues a new version of the model bylaws, federal credit unions are encouraged, but not required, to adopt the new version in its entirety as the new version often provides greater clarity and flexibility. Federal credit unions may choose to adopt the new version in its entirety, adopt some of the new provisions or adopt none of them. As a result, each federal credit union may have its own unique version of the bylaws.

Question 15

What is the annual meeting process, including the notice requirements? How many members must be present to have a quorum?

Answer 15

Written notice to membership 30-75 days prior

Question 16

What are the eligibility requirements to run for the board?

Answer 16

1. The individual must be a member before distribution of ballots;
2. The individual cannot have been convicted of a crime of dishonesty or breach of trust; and
3. The individual must meet any minimum age requirement provided in the bylaws

Question 17

Study the various duties of the board officers. Who elects them? Who presides overboard meetings?

Answer 17

After the annual meeting, the board meets to elect the board officers that will serve for the next year. The elected officers will serve until the next annual meeting and subsequent election of board officers. Board officers include a chair, one or more vice chairs, a financial officer and a secretary.

The chair presides over board meetings and performs other duties customarily assigned to the chair.

Question 18

What is the special meeting process, including who may call a special meeting and notice and quorum requirements?

Answer 18

Special meetings may be called by the chair and must be called when a majority of the directors make a written request for a special meeting. Special meetings may be conducted using audio or video teleconference methods. A quorum is required in order to conduct business at meetings. A majority of board members, including any vacant positions, constitutes a quorum. Minutes of all meetings must be recorded and retained. Minutes must be signed by the chair and secretary.

Question 19

How do NCUA’s lending regulations interact with state law?

Answer 19

NCUA preempts state laws that regulate the rates, terms of repayment and other conditions of federal credit union loans and lines of credit including:
NCUA does not preempt state laws in the areas of lending that do not affect the terms and conditions of the loan itself. For example: insurance laws; laws related to transfer of property; security interests in property; conditions of default and collection costs and attorneys’ fees are historically governed by state law. Normally, state laws in these areas would not be preempted. Also keep in mind that other federal regulations, such as Regulation Z, may govern specific areas of lending.

Question 20

What is the difference between a nonparticipation policy and a limitation of services policy? What are the requirements of each? Which one can be used against a member who has caused the credit union a loss?

Answer 20

Actions such as causing a loss to the credit union or verbally abusing staff members cannot be considered nonparticipation. To expel members for these and similar other actions, federal credit unions must make use of the special meeting and vote.

A limitation of services policy establishes certain behaviors exhibited by members that will lead to a limitation of certain services. The policy must be established by the board, in writing and communicated to the membership.

Question 21

How does a credit union impress its statutory lien?

Answer 21

› Notice may be given to a member by way of the account opening documentation;
› For loans, by giving notice of the lien through the loan documentation that is signed or otherwise acknowledged by the member; or
› Through a bylaw amendment or policy, of which the member is given notice.

Question 22

How does a credit union enforce its statutory lien? How is this different for credit cards?

Answer 22

A federal credit union enforces the lien by debiting funds in the account and applying the funds to any “outstanding financial obligation due and payable to the credit union.”
Freezing Accounts Federal credit unions do not have the authority to freeze funds a member’s account when the member becomes delinquent on a financial obligation.

Question 23

What are the two fundamental rights for credit union members?

Answer 23

The right to vote at elections and the right to hold par value in a share account.

Question 24

Where is the best place to look for the credit union’s field of membership?

Answer 24

Section 5 of its charter.

Question 25

When is an account considered a revocable trust?

Answer 25

Formal trust
Informal trust – ex. accounts payable upon field of membership death (beneficiaries)

Question 26

How is insurance coverage determined for a revocable trust? A joint revocable trust?

Answer 26

Insured for up to the total number of beneficiaries named multiplied by $250,000

Question 27

If a member has an IRA and a Roth IRA at your credit union, is the member’s insurance coverage a combined $250,000, or $250,000 for each account ($500,000 total)?

Answer 27

Combined amount up to $250,000

Question 28

How is share insurance coverage determined in the event of a merger? How long is the grace period?

Answer 28

Share insurance is separate for 6 months if a member has funds in both credit unions.

Question 29

What are the various maturity limitations found in NCUA’s lending regulations?

Answer 29

20 years – mobile home residence secured by first lien, second mortgage loan, home improvement loan
40 years – residential real estate

Question 30

Do NCUA’s lending regulations address loan incentive programs? If so, what are the limitations of such programs?

Answer 30

3. Payment, by a federal credit union, of an incentive or bonus to an employee, other than a senior management employee, in connection with a loan (or loans) made by the credit union, as long as the federal credit union’s board of directors establishes written policies and internal controls in connection with the incentive/bonus program and monitors compliance with those policies and controls at least annually.40
4. Receipt of compensation from a person outside a federal credit union by a volunteer official or non-senior-management employee of the credit union, or an immediate family member of a volunteer official or employee of the credit union, for a service or activity performed outside the credit union, as long as no referral has been made by the credit union or the official, employee or family member

Question 31

What are the “concentration limits” in NCUA’s lending rules?

Answer 31

10%. Can’t exceed 10% of the credit unions capital and surplus.

Question 32

How do the NCUA lending regulations limit loans and loan-related compensation to a credit union’s board of directors and other officials? When is board approval required for loans made to credit union officials?

Answer 32

Any member of the board of directors or a volunteer committee taking a total of more than $20,000 for all loans (balances and lines of credit). Board of directors must review and approve/deny.