NCUA has released its supervisory priorities for the year, so you might want to grab some coffee before reading it because the letter is lengthy.

This article summarizes what the letter covers. Like all good compliance professionals, please read NCUA’s letter and take advantage of the resource links it provides.

Here are NCUA’s supervisory concerns and areas of focus for 2020.

BSA/AML compliance

As with every examination, NCUA conducts a Bank Secrecy Act/Anti-money laundering (BSA/AML) review to ensure credit unions meet those obligations.

Customer due diligence (and the beneficial ownership requirements that became effective in 2018) is still an area of focus for 2020. Plus, NCUA will continue to focus on the proper filing of suspicious activity reports (SARs) and currency transaction reports (CTRs) with “proper” (informative and timely) filing.

As you know, SARS and CTRs provide law enforcement, intelligence, and counter-terrorism officials with helpful information to identify and thwart criminal and terrorist activities.

Electronic Fund Transfer Act (Regulation E)

Examiners will want to review your EFT policies and procedures, as well as initial account disclosures, to ensure they cover the requirements under the regulation.

Examiners also will analyze your member error-resolution procedures for when a consumer asserts an error.

Fair Credit Reporting Act

Examiners will review your credit reporting policies and procedures, and will check the accuracy of any reports made to credit bureaus, including the date used as the first delinquency.

Gramm-Leach-Bliley Act (privacy)

How does your credit union protect members’ nonpublic personal information? Do your efforts meet the requirements under the rule?

Small-dollar lending/payday alternative loans

Does your credit union offer a short-term, small-dollar loan outside of NCUA Payday Alternative Loans (PALs)?

If so, examiners will confirm the product meets the requirements under the regulation. If your credit union offers PAL 1 or PAL 2 loans, examiners will determine whether the loans meet the requirements, including interest-rate caps, set forth under the rule.

Truth in Lending (Regulation Z)

What are your credit union’s practices related to annual percentage rates (APR) and late charges?

Examiners will review how your credit union applies loan payments to principal, interest, fees, and other charges.

Is your process consistent with the written disclosures and agreement? How does your credit union assess late fees? Does it meet the rule’s requirements?

Other areas of focus will be the disclosure of finance charges and APR.

MLA and SCRA

These have been a priority since 2017, so if your credit union has not had a recent Military Lending Act or Servicemembers Civil Relief Act review, this will be an area of focus. 

Credit and concentration risk

There will be increased focus on credit unions’ loan underwriting standards and procedures. Has your credit union properly analyzed borrowers’ ability to meet debt service requirements without excessive reliance on the value of the collateral? 

New this year are enhanced examination procedures and additional quality control requirements for credit unions with high concentrations of loans in participations, commercial lending, indirect lending, and residential real-estate lending.

CECL

Yes, the Financial Accounting Standards Board (FASB) delayed implementation of the Current Expected Credit Losses standard until 2023, but examiners will still review your credit union’s plans for its implementation.

If you haven’t developed a plan yet, start now.

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