NCUA Regulations and Supervisory Authority Flashcards
The Central Liquidity Facility was established to address the economic conditions of the 1970s and to lend money to credit unions under certain circumstance. What are the three circumstances listed in this book?
Short-term adjustment credit to help meet temporary requirements for funds; seasonal credit to help meet seasonal needs for funds; and protracted adjustment credit to help meet needs in unusual or emergency circumstances of longer-term nature
Federal Credit Unions are subject to what kinds of federal, state, or local taxes under the Federal Credit Union Act?
FCUs are exempt from federal and state income taxes and franchise taxes but are subject to the same real property taxes and personal property taxes that are imposed on other businesses.
Because state-chartered credit unions are not “federal instrumentalities” what tax are they subject to that federally chartered credit unions are not?
Unrelated business income taxes (UBIT)
NCUA Rules and Regulations
NCUA directives that govern a particular topic and have a substantial impact on credit union operations
Interpretive Rulings and Policy Statements
provide NCUA interpretations on what a law means on a particular subject generally requiring credit unions to comply and follow the guidance provided in them
Letters to Credit Unions
issued by the NCUA board to provide clarifying information about credit union compliance, issue warnings, or announce changes in accounting rules, operating fee assessments or examination procedures and generally sent to all federally insured credit unions
Regulatory Alerts
Advise federally insured credit unions about regulatory changes affecting their compliance requirements
Legal Opinion Letters
written responses to inquiries made to NCUA representing their legal staffs interpretation of the law and regulations that are posted on the NCUA website but not sent directly to credit unions
The Federal Credit Union Act gives the NCUA authority to issue regulations and other guidance to direct the operations of federal credit unions and federally insured state-chartered credit unions. What is the difference between a “final regulation” and an “interim final regulation”?
A final regulation is issued after an official “notice and comment period” of 30 days to 120 days giving credit unions at least 30 days before compliance is mandatory. An “interim final regulation” is issued because of a pressing agency concern such as a safety or soundness problem or the enactment of as new law.
If a state-chartered credit union has federal share insurance, NCUA has the right to examine the credit union, but in most cases the NCUA relies on the state regulator to actually do the examination
True
What is the difference between a “call report” and a “financial performance report”?
Call reports - the Financial and Statistical Report - NCUA requires all federally insured credit union to submit a summary of their financial and statistical data quarterly
Financial Performance Report - a report drawn from the call report data providing credit unions a five-year review of the data and showing how the credit union’s peers are performing
Letters of Understanding and Agreement
agreements between the credit union and the regulator that require the credit union to take specific corrective action
Cease and Desist Orders
prohibits a credit union from engaging in an activity described in the order and/or requires the correction of a condition resulting from a violation
Removal and Prohibition Orders
an order to remove a credit union board member or employee after a notice and hearing and an order to ban credit union officials and employees as well as affiliated parties from serving or being employed by any federally insured financial institution
Civil Money Penalties
a three-tier penalty program against federally insured credit unions or institution-affiliated party ranging from $5,000 to $1 million a day
Conservatorship
the NCUA Board takes immediate control of a federally insured credit union with no notice or hearing required
Order for Special Reserves
the NCUA Board requires a federal or federally insured state-chartered credit union to maintain special reserves to protect the interests of the members
Termination of Insurance
applies only to FISCUs and could mean the involuntary liquidation of the credit union
Involuntary Liquidation
the authority to close an insolvent federal credit union eliminating that credit union as a legal entity
When NCUA is faced with liquidating a credit union or merging it with another healthy credit union, what is the agency’s preference?
NCUA will usually pursue a merger or purchase and assumption when a federal credit union cannot feasibly continue operating
The primary purpose of the Expedited Funds Availability Act (EFAA) and Regulation CC is to require depositary financial institutions to speed up (expedite) the availability of funds to depositors from their deposited checks. True or False
True
The major requirements of the Expedited Funds Availability Act and Regulation CC for your credit union are:
disclosing funds availability policies
adhering to funds availability hold periods
indorsing checks in designated areas in black ink
expediting the return of unpaid checks to the depositary financial institution
When Bill deposits a $1000 share draft into his checking account at a nonproprietary ATM at the convenience store, generally under Regulation CC the funds must be made available on the fifth business day. True or False
True
When one of the exception holds is placed on a deposit, the credit union’s hold notice must contain the current account balance with the held amount deducted. True or False
Must the notice ID the deposit date, amount held & reason for the hold?
True
Yes
One test for the “repeated overdrafts exceptions” is having a negative balance on six or more banking days in the last six months. True or False
True
Wen a credit union invokes (uses) an exception hold on a deposit, the member must be notified of this hold. True or False
True
When a credit union invokes the reasonable cause exception hold on a deposit, the notice to the member need only state the time period of the hold, and no additional information is necessary (like the specific reason for the hold). True or False
False
An “on-us” check must be given next-day availability unless it is deposited at a non-proprietary ATM at a nearby convenience store. True or False
True
Generally a credit union can place holds on local checks deposited into new accounts for a period of time up to the credit union’s discretion (i.e., generally Regulation CC would not apply to all local checks deposited for 30 days). True or False
True
Like the UCC’s Articles 3 & 4 the Expedited Funds Availability Act and Regulation CC help resolve to two major problems that occur with checks; nonpayment and wrongdoing. True or False
False
Financial institutions are required by law to take checks for deposit that are drawn on other financial institutions. True or False
False
Credit unions are required to provide their “funds availability policy” (i.e., your Reg CC “disclosures”) prior to opening an account, and those disclosures must be
1) given in a clear and conspicuous manner
2) in writing
3) in a form the member can keep
4) must describe the credit union’s specific policy on the availability of all deposited funds.
(these 4 requirements apply to Reg E, TISA and Privacy disclosures as well, whether provided in a paper or electronic format!)
Regulation CC requires credit unions to post their funds availability policy or provide a notice regarding their policy at proprietary ATMs they own or operate. This notice may be printed on the receipt the member receives after the deposit. True or False
False
Explain why the EFAA & Reg CC changed the indorsement standards for all depositary and collecting financial institutions.
To identify the depositary institution that took the check for deposit.
Explain why the EFAA & Reg CC changed the check return requirements for all payor-drawee financial institutions.
If you’re going to limit the time the depositary institution has to hold the funds then the payor institution must get the check back pronto
Ty deposits $120 in cash into his share draft account at your credit union’s night depository Monday evening, and on Tuesday deposits another $100 in cash with a teller, he can withdraw $220 in cash on Thursday. True or False
True
The only notice your credit union must give to a member under Check 21 is when a deposited check is returned to your credit union as a substitute check. Thereafter you provide the substitute check and Check 21 notice to the member. True or False
True
No other Check 21 notices are required other than this notice.
When a new account is opened by mail, the initial funds availability disclosures must be mailed to the member within on (1) day after the account is opened. True or False
True
All owners of joint accounts must be given the disclosures. True or False
False
Under Check 21 a substitute check can be generated (created) by a financial institution in any size. True or False
False
The primary purpose of the Electronic Fund Transfer Act and Regulation E is to
a) protect consumers against unauthorized and erroneous electronic fund transfers (EFTs)
b) encourage consumers to use and rely on electronic payment systems. EFTs and access devices.
Telephone transfers are considered electronic funds transfers (EFTs) under Regulation E. True or False
True
Reg E requires that the initial disclosures be given to a member…
…when she/he contracts for an EFT service
The Regulation E initial disclosures must include the location of the credit union’s ATMs. True or False
False
A receipt for a transaction completed at an electronic terminal must disclose the account balance after the transaction. True or False
The receipt must disclose the date, terminal location and a number that IDs the member True or False
False
True
If a surcharge will be imposed on nonmembers for using an ATM operated by your credit union, the only notice requirement is to post that a fee on the transactions receipt. True or False
False
Notice must be given before the deposit, on a screen sign or envelope
There is no requirement under Regulation E for a financial institution to send a periodic statement to a consumer if no electronic fund transfer (EFT) has been debited or credited to the consumers account. True or False
False
A consumer has 60 days from the receipt of the periodic statement to notify an institution of an EFT error.
True
If not resolved within 10 days you must provisionally credit the member’s account.
True
A financial institution can require consumers to notify it of EFT errors in writing. True or False
False
A financial institution can require consumers to confirm all notices of EFT errors in writing. True or False
True
An access device is an “accepted device” when 1) the member requests and receives a debit card, or 2) the member calls the credit union to validate an unsolicited debit card, or 3) the member receives a replacement debit card for a broken original card. True or False
True
The primary purpose of the Regulation E initial disclosures is to summarize the member’s liability for unauthorized electronic fund transfers. True or False
True
The Regulation E initial disclosures must also explain the types of electronic services offered, the member’s right to stop preauthorized payments, and the credit union’s business days. True or False
True
If a consumer has a debit6 card, and writes their PIN on the debit card, and the card is subsequently stolen and unauthorized EFTs are made to the account, the consumer’s negligence affects their liability for unauthorized EFTs. True or False
False
If a consumer notifies the financial institution within 2 business days after learning of the loss or theft of their debit card, their liability for unauthorized EFTs is …
…$50
If the consumer notifies the financial institution after 2 business days of learned of the loss or theft of their debit card, their liability for unauthorized EFTs is
$500
If a consumer notifies their financial institution of unauthorized EFT debits made to the account (that occurred without an access device) that appear on their statement within 60 days of the transmittal of the statement, their liability for the unauthorized EFTs that occur after that 60 days period is
unlimited
Under Regulation E a non-beneficial change in terms (such as increased or new fees) requires 21 days advanced notice to your members. True or False
True
Regulation CC and TISA require 30 days advanced notice for non beneficial changes in terms to members. True or False
True
Before Regulation E disclosures can be provided to members electronically, a credit union must receive affirmative consent from a member to receive electronic disclosures, inform the member of her rights regarding electronic disclosures, and provide details to the member on the hardware & software requirements for receiving electronic disclosures. True or False
True (ESign)
Under Federal law (EFTA and Regulation E) before your credit union can charge a fee for paying overdrafts on ATM and one time debit card transactions, it must first obtain the members consent (opt in to the overdraft fee. True or False
True
As of July 1 2010 your credit union is required to pro vide members with a notice and have them opt in before your credit union can pay overdrafts on ATM and one time debit card transactions. True or False
True
Truth in Savings Act and regulations addresses all account lifecycles except closing. True or False
True
Under the TISA credit unions’ initial disclosures must disclose the minimum balances to earn dividends on accounts. the APYs and dividend rates, the use of DBM or ADBM of dividend calculation, compounding & crediting policies and fees. True or False
True
Under the Truth in Savings Act credit unions must verbally (orally) disclose account rates upon request. True or False
False
The daily balance method (DBM) of dividend calculation invoices dividing the sum of the daily balances in the period by the number of days in the period. True or False
False
Under the TISA dividends are essentially earnings to members. True or False
True
When a member inquires about account rates by phone, and the credit union discloses the rate, TISA requires that the rate be stated as the APY. True or False
True
The APYE (annual percentage yield earned) must be included in the initial TISA account opening disclosures. True or False
False
The TISA initial disclosures must be given to all owners on joint accounts. True or False
False
If the TISA disclosures are available to members electronically (via the credit union’s web site), the credit union must first obtain the member’s affirmative consent to receive the disclosures electronically. True or False
True
The member must also be able to access the electronic TISA disclosures prior to opening the account. True or False
True
The TISA “clear and conspicuous” standard for disclosures does not apply to TIS electronic disclosures. True or False
False
In account disclosures, a 3.154% annual percentage yield (APY) must be disclosed as 3.15%. True or False
True
When opening a dividend-bearing term share account (certificate account) or other interest bearing account (for state chartered credit unions), the annual percentage yield (APY) and dividend rate (or interest rate) disclosed must be the rate that was offered on the date the account is opened. True or False
True
For ODP, TISA requires the transactions offered, fees and time to repay to be disclosed in marketing pieces. True or False
True
The TISA does not require overdraft disclosures (concerning your ODP) on your credit union’s ATM receipts. True or False
True
Members must be given the TISA disclosures by phone or mail, the credit union has ten (10) days to get around to sending the member those disclosures. True or False
True
The TIS Act absolutely mandates that credit unions send periodic statements to all members with accounts. True or False
False
The change in terms notice required under the Truth in Savings rule does not apply to variable-rate accounts. True or False
True
The Truth in Savings Act requires credit unions to disclose rates in all account advertisements. True or False
False
Could the following checking accounts be advertises as “free” under TISA rules? Our classic checking account has no minimum balance, no per check charge, and no monthly service charge. However, you do have a $20.00 NSF fee and a $10.00 stop-payment fee. “Under a special “senior” program, the $250.00 minimum balance requirement on your no interest checking account is waived for members 65 years of age or older.” Yes or No
Yes
When an advertisement mentions an APY, it must also disclose the period for which the APY is offered. True or False
True
While minimum balance(s) balance computation method (DBM/ADBM) and the date dividends will be computed must be disclosed, the method used to decide the minimum balance requirements is not part of the initial disclosures. True or False
True
The TISA requires credit unions to pay dividends on members inactive (aka dormant) accounts. True or False
True
A credit union is required to disclose periodic and year to date overdraft fees and returned item fees in its periodic statement (along with dividends & interest earned), whether it promotes the payment of overdrafts in advertising or not. True or False
True
Transaction accounts are the key subject of concern to credit unions under the Reg D reserve requirements. True or False
True
A share or savings account may have up to, but no more than, 6 automatic or telephonic transfers per month. True or False
True
Online (home banking) transfers from savings to checking count toward the limit of 6 transfers for savings and Money Market accounts. True or False
True
If the early withdrawal penalty on a time deposit (certificate account), exceeds the dividends earned on the deposit, the balance of the penalty must be paid from the principal in the account. True or False
True
Limiting the number of transactions on a deposit account is the feature that makes a deposit account a non-reservable liability. True or False
True
