A panel of legal experts addressed National Credit Union Administration (NCUA) exam priorities, overdraft litigation, and employee safety during a breakout session at the 2021 CUNA Governmental Affairs Conference on Tuesday.

David Reed, an attorney with the law firm Reed and Jolly, says that with the change of administration at NCUA, credit unions can anticipate a more focused approach on consumer protection from the agency.

Reed references NCUA Letter to Credit Unions 21-CU-02, which includes such priorities as:

• Allowance for loan and lease loss. 
• Bank Secrecy Act (BSA) and anti-money laundering (AML). 
• Coronavirus Aid, Relief, and Economic Security (CARES) Act. 
• Consumer financial protection. 
• Credit risk management. 
• Cybersecurity. 
• London Inter-Bank Offered Rate (LIBOR) transition planning. 
• Liquidity risk. 
• Serving hemp-related businesses.

Reed says the No. 1 external risk for credit unions is how priorities have changed within the pandemic environment and how the changes affect credit union risk to the Share Insurance Fund. 

According to the NCUA Examiner’s Guide, regulators want to see:

• An understanding of risks. 
• Accurate and timely financial data. 
• Sound internal controls and effective audits. 
• An active supervisory committee. 
• Efficient operation and operating expense controls. 
• Written policies that reflect actual practices. 
• Realistic budgets and strategic plans. 
• Communication and transparency. 

Cristina Miller, an attorney with the law firm Styskal, Wiese & Melchione, says overdraft litigation is about money rather than justice. “The plaintiffs in these cases are getting pennies on the dollar compared to what the attorneys get in fees and statutory penalties,” she says. 

Miller says overdraft litigation starts with larger banks. Then, as plaintiff lawyers obtain wins, litigation trickles down to small financial institutions, including credit unions. 

Favorite targets of overdraft litigators include: 

• Actual vs. available balance. 
• “Approved positive, purportedly settled negative” situations. 
• Repeat nonsufficient funds (NSF) fees. 
• Out-of-network ATM balance inquiry fees. 
• International transaction fees. 

Miller says a credit union’s "best friend" is an arbitration provision in its disclosures. “If you’ve had one in place for a few years, you probably need to look at it again,” she says. “The needle keeps moving, and it’s going to change depending on where your jurisdiction is.” 

Addressing employment litigation related to the coronavirus (COVID-19) pandemic, Christopher Pippett, an attorney with the law firm Fox Rothschild, says credit unions must consistently manage employees. 

Credit unions should consider employee litigation questions related to COVID-19: 

• Can employees work effectively from home?
• How is that function supervised?
• What if employees do not feel safe in the workplace?
• How are employees who choose to come to work protected?
• What if employees have specific health issues?
• What if employees won’t come back to work?

“Keep the safety of your employees paramount, while keeping in mind that your business still has to operate,” Pippett says.

He says credit unions should work with their human resource departments to develop consistent protocols. 

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