CUs need additional time for CECL compliance from FASB, Congress

June 25, 2020

CUNA commented on several pandemic lending-related bills in a letter to the House Financial Services subcommittee on investor protection, entrepreneurship and capital markets Thursday. The subcommittee discussed several pieces of legislation during the hearing.

The CARES Act Section 4014 Technical Corrections Act contains a provision to delay the effective date of the Financial Accounting Standards Board’s (FASB) current expected credit loss (CECL) standard, but it does not apply to credit unions.

“We appreciate FASB’s decision in October 2019 to move the effective date for CECL compliance to January 2023 for credit unions and other financial institutions. At the time the FASB proposed moving the date, we supported 2023 as an appropriate timeframe for credit unions,” the letter reads. “However, in light of the current crisis, we urge FASB and Congress to provide additional time for CECL compliance. While some credit unions are in the final stages of preparation, the vast majority are in the very early stages of gathering necessary data and beginning to make the numerous changes required under CECL.

The Business Borrowers Protection Act (H.R. 6790) would prevent lenders from requiring borrowers to repay on an accelerated basis any government loan related to the COVID-19 pandemic. CUNA notes the bill is an admirable effort but would be unnecessary is a simplified loan forgiveness policy.

“We ask Congress to ensure Treasury and the Small Business Administration (SBA) simplify the forgiveness application process for loans under $350,000. This threshold would capture the vast majority of loans and is the amount at which the CARES Act makes the lowest cutoff in determining lender processing fees,” the letter reads. “Additionally, the agencies should consider making forgiveness of these loans automatic or simply require a good faith certification that the funds were spent on forgivable expenses.”

 “A one-year delay will help ensure our nation’s credit unions—the median of which is well under $50 million in assets—are prepared to comply. Therefore, we urge the Committee to delay the effective date of CECL as it applies to credit unions until at least January 2024,” it adds.

The third bill would temporarily halt the Federal financial regulators from carrying out rulemakings unrelated to the COVID-19 emergency until the end of such emergency. While CUNA appreciates the intent of the legislation, it would also halt updates to “important and timely” rulemakings, including the Consumer Financial Protection Bureau’s payday lending rule and pending NCUA rulemakings.

“A more constructive approach would be to suspend all pending rulemakings - and not propose additional rulemakings – except those intended to reduce regulatory burden or to facilitate service to members during this crisis,” the letter reads. “We encourage Congress to consider this approach prospectively.”