1. 2017 Consumer Protection Examination Program
Donald Thomas, Division of Supervision Analyst
Region III (Atlanta, Georgia)
2017 Consumer Protection Examination Program
League of Southeastern Credit Unions & Affiliates Meeting
July 19, 2017

2. Agenda Introduction Purpose Pre-Examination Review Areas
Field Of Membership
Consumer Complaints
Examination Review Areas
Military Lending Act
Servicemembers Civil Relief Act
Equal Credit Opportunity Act
Questions and Answers
My name is Donald Thomas and I am a Supervision Analyst in Region III.
I am here today to briefly discuss some of the 2017 Consumer Protection related examination initiatives.
I will discuss 5 areas of review for Federal Credit Union examinations during Two of the areas will be reviewed offsite and before commencement of the onsite examination. The last three areas of will be reviewed during the examination. Please note that this information is only for examinations of Federal Credit Unions.
The two areas in Pre-planning are: Field of Membership and Consumer Complaint Review. The areas in examinations are: Military Lending Act (MLA) , Servicemembers Civil Relief Act (SCRA), and Equal Credit Opportunity Act (ECOA).
These reviews are being performed for a variety of reasons, including: 1) MLA is a new regulation and its relationship to SCRA; 2) to focus on areas NCUA management deems to have additional risk, which is why MLA and SCRA are listed as Supervisory Priorities for 2017; and 3) in response to the Navy Federal consent order. (Navy Federal – CFPB fined them for improper debt collection practices)
2017 Consumer Protection Examination Program

3. Pre-Examination Review
Field Of Membership
Consumer Complaints
The two areas that will be reviewed offsite and before commencement of the onsite examination of all federal credit unions include: Field Of Membership and Consumer Complaints.
Based on what the examiner learns from the reviews, the examiner may decide to extend the review while onsite at the credit union.
2017 Consumer Protection Examination Program

4. Field Of Membership (FOM) Review
During the pre-examination review, examiners will:
Identify groups added to a FCU’s multiple common bond FOM since the preceding examination; and
Use information to identify heightened areas of risk.
Purpose of FOM review:
Identify groups added to a multiple common bond federal credit union’s FOM since the preceding examination.
Identify potential heightened areas of risk based on the business model of added groups. Groups added may be occupational, meaning groups based on employment, or associational, which refers to groups based on an affinity.
2017 Consumer Protection Examination Program

5. FOM Review (Continued)
Potential on-site review steps:
Assess the credit union’s internal controls for adding groups;
Review process credit union staff uses to validate membership for added groups; and
Evaluate credit union procedures.
If the examiner decides to include risks associated with Field of Membership in the on-site portion of the examination, the examiner may consider doing some or all of the following:
Assessing the credit union’s internal controls for adding groups;
Reviewing how credit union staff validates credit union membership for groups added; and
Evaluating the credit union’s procedures and whether they address specific potential safety and soundness risk such as BSA compliance, indirect lending, member business lending, or cash internal controls.
2017 Consumer Protection Examination Program

6. FOM Reference Materials
NCUA Webinar on Field of Membership Rule – Effective February 6, 2017
Q&As from FOM Webinar
Supervisory Letter –SL 15-02, Associational Common Bond Updates
NCUA Letter to Federal Credit Unions 15-FCU-03
Additional references and informational guidance on Field of Membership can be found in Supervisory Letter which is named “Associational Common Bond Updates.” It’s attached to NCUA Letter to Federal Credit Unions 15-FCU-03 and it provides a detailed discussion about how field staff should address chartering related concerns during the examination process.
2017 Consumer Protection Examination Program

7. NCUA Consumer Assistance Center (CAC) Background
NCUA’s CAC is responsible for addressing consumer complaints involving FCUs with total assets up to $10 billion, and, in certain instances, FISCUs.
The majority of the complaints received by CAC involve federal consumer financial protection laws and regulations that NCUA enforces.
Complaints involving BSA, safety and soundness or whistleblower issues are sent to the applicable regional office for handling.
As with the review of Field of Membership, the review of Consumer Complaints will be performed during the Pre-Examination Phase of all Federal Credit Unions.
Summarize bullets
2017 Consumer Protection Examination Program

8. NCUA CAC Background (Continued)
Complaints involving matters outside NCUA’s authority are forwarded to the appropriate state supervisory authority (SSA) or federal regulator for disposition.
For federal consumer financial protection law matters, the consumer complaint handling process involves two phases:
Attempted resolution by the credit union (as appropriate); and
Investigation by CAC (when necessary)
See NCUA Letter to Credit Unions (15-CU-04) for further information about the consumer complaint handling process.
For federal consumer financial protection law matters, the consumer complaint handling process involves two phases:
Attempted resolution by the credit union; and
Investigation by the Consumer Assistance Center, when necessary.
NCUA Letter to Credit Unions 15-CU-04 provides additional information about the consumer complaint handling process.
2017 Consumer Protection Examination Program

9. CAC Actions and Determinations
Common Violations Identified by CAC:
Regulation E (EFTA)
Regulation Z (TILA)
Regulation V (FCRA)
NCUA’s TISA Regulation
Regulation P (Privacy)
Regulation X (RESPA)
Regulation CC (EFAA)
Garnishments
Regulation B (ECOA)
This slide lists the main types of laws and regulations with violations identified by the Consumer Assistance Center.
The main types laws and regulations with violations identified by the Consumer Assistance Center are listed on this slide. We’ll discuss a quarterly report available to you that provides information on the top complaints shortly.
2017 Consumer Protection Examination Program

10. Pre-Examination Review of Consumer Complaints
Purpose of Review
During the pre-examination process, examiners will review complaints involving FCUs for the following reasons:
Identify the number and subject matter
Identify potential areas of risk
Decide whether to extend the review while onsite at the credit union.
The purpose of the pre-exam consumer complaint review will be for the examiner to identify the number and subject matter of consumer complaints involving the credit union since the preceding examination. This information may be useful in identifying potential areas of risk and may result in necessary adjustments to the examination scope.
Complaints may involve the credit union’s compliance with a specific law and regulation and/or its overall compliance management system. NCUA’s Consumer Assistance Center investigates consumer complaints involving federal consumer financial protection laws and regulations. Therefore, examiners will not reinvestigate these consumer complaints.
Additionally, examiners are not allowed to discuss individual complaints filed with the Consumer Assistance Center with the credit union and will never contact a consumer regarding these complaints.
2017 Consumer Protection Examination Program

11. Examination Review Areas
Military Lending Act (MLA)
Servicemembers Civil Relief Act (SCRA)
Equal Credit Opportunity Act (ECOA)
Compliance Management Systems
NCUA examiners will conduct consumer protection compliance reviews for the Military Lending Act (MLA) regulation, the Servicemembers Civil Relief Act (SCRA), and the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B.
These three laws govern credit extensions to defined groups of consumers. MLA and SCRA affect credit to active duty servicemembers and their dependents, while ECOA and Regulation B relate to credit to protected classes. Through these reviews, NCUA will ensure credit unions are complying with these laws and regulations.
Examiners will focus on credit union policies and procedures, and compliance management systems that support a credit union’s ability to manage risk and meet the regulatory requirements.
2017 Consumer Protection Examination Program

12. Compliance Management Systems
The purpose of compliance management systems (CMS) is to appropriately manage consumer protection risk at a credit union. CMS generally includes:
Board and management oversight (including third parties)
Policies and procedures
Training
Monitoring/Internal Review/Audit
Complaint resolution
Let’s briefly discuss Compliance Management Systems (CMS) before we get into the three examination review areas.
Compliance management systems are similar to other credit union management information and reporting systems and various controls. As with those other systems, the purpose of CMS is to appropriately manage risk at a credit union, specifically risk associated with federal consumer protection regulations. Compliance management systems are generally composed of areas such as board and management oversight (including third parties), policies and procedures, training, monitoring, internal review/audit, and complaint resolution. Credit union compliance management systems will differ in size, complexity and formality depending on the credit union.
Examiners reviewing CMS will review credit union board meeting minutes and management committee minutes to determine the credit union’s oversight of policies and practices that relate to consumer protection laws and regulations and associated risks. Credit unions with good CMS will have appropriate and updated policies and procedures that include the credit union’s product and service offerings. Training records should reflect adequate employee training based on the various employee duties. Credit unions should have monitoring, internal review, and audit mechanisms to ensure the credit union is complying with the various consumer protection regulations and take corrective actions when violations and deficiencies are self-identified. Credit union should have effective processes in place for resolving consumer complaints. All of these items are part of a compliance management system and as examiners look at them, they will consider whether they are commensurate with the size, complexity, and risk profile of the credit union that is being examined.
2017 Consumer Protection Examination Program

13. MLA Background Purpose and background
Report to Congress on the Impact of Predatory Lending Practices on Members of the Armed Forces and Their Dependents – August 2006
Congress passed the Talent-Nelson Amendment, now called the Military Lending Act – October 2006
First regulation – August 31, 2007
Members of the armed forces:
• Army
• Navy
• Marine Corps
• Air Force
• Coast Guard
Serving on active duty for 30 days or more or Active Guard and Reserve duty
2017 Consumer Protection Examination Program

14. Effective Dates Amendment Effective Dates
Rule amended to ensure protections – July and October 2016
Compliance with new provisions – October 3, 2016
2017 Consumer Protection Examination Program

15. MLA Examiner Review Purpose of Review
Credit union made reasonable and good faith efforts to comply with the MLA regulation.
Credit union incorporated MLA into its overall compliance management system
2017 Consumer Protection Examination Program

16. NCUA MLA Webinar (for industry) – June 29, 2016
MLA Training
NCUA MLA Webinar (for industry) – June 29, 2016
FFIEC MLA Webinar (for industry) – December 2016
This slide includes links to the MLA industry webinar hosted by NCUA in June of last year and the MLA industry webinar hosted by the FFIEC hosted in December 2016.
2017 Consumer Protection Examination Program

17. MLA – Reference Materials
Letter to Credit Unions 16-CU-07, NCUA MLA Examination Approach - October 2016
Regulatory Alert 15-RA-04, Announcing Amendments to MLA Regulation – October 2015
Regulatory Alert 16-RA-04, Complying with Changes to MLA – March 2016
Regulatory Alert 16-RA-06, MLA – DoD’s Interpretive Guidance – September 2016
This slide includes additional references and informational guidance related to MLA.
2017 Consumer Protection Examination Program

18. SCRA Background Signed into law on December 19, 2003
Amended and replaced Soldiers’ and Sailors’ Civil Relief Act of 1940
Protects:
Members of Army, Navy, Air Force, Marine Corps, and Coast Guard, including members of the National Guard serving in the U.S. armed forces, as they enter military service.
Commissioned officers of the Public Health Service and National Oceanic and Atmospheric Administration
The Foreclosure Relief and Extension for Servicemembers Act of 2015 amended certain sections of SCRA
2017 Consumer Protection Examination Program

19. SCRA Examiner Review
Purpose of Review • Credit union incorporated SCRA into its overall compliance management system. • Credit union has adequate policies and procedures to comply with SCRA.
2017 Consumer Protection Examination Program

20. SCRA – Reference Materials
NCUA Letter to Credit Unions 12-CU-2009
NCUA Letter to Credit Unions 16-CU-07, NCUA MLA Examination Approach - October 2016
Regulatory Alert 16-RA-07, DOD's Interpretive Guidance on Military Lending Act
Regulatory Alert 16-RA-04, Complying with Changes to MLA – March 2016
50 U.S.C : US code relating to Servicemembers Civil Relief
2017 Consumer Protection Examination Program

21. MLA vs. SCRA
MLA applies to transactions entered into during active duty.
Servicemembers Civil Relief Act (SCRA) applies to transactions entered into before active duty.
Some exceptions, but not relevant to MLA
2017 Consumer Protection Examination Program

22. ECOA Examiner Review Purpose of Review
Evaluate CU’s compliance with the following requirements of ECOA / Regulation B:
Anti-discrimination;
Notification of action taken; and
Monitoring information.
2017 Consumer Protection Examination Program

23. ECOA Training NCUA Fair Lending Webinar – February 2015
NCUA Fair Lending Webinar – October 2015
Interagency Fair Lending Webinar – October 2016
2017 Consumer Protection Examination Program

24. ECOA – Reference Materials
NCUA Fair Lending Webinar – February 2015
NCUA Fair Lending Webinar – October 2015
NCUA Fair Lending Guide
Regulatory Alert 13-RA-07, Real Estate Appraisals and Other Written Valuations – July 2013
This slide includes links to ECOA industry webinars hosted by NCUA in 2015, and additional references and informational guidance related to ECOA.
2017 Consumer Protection Examination Program

25. Questions 2017 Consumer Protection Examination Program
Before I conclude, are there any more questions?
2017 Consumer Protection Examination Program

26. Contact Information
Feel free to contact our offices with questions or comments.
Primary Staff: Donald Thomas, CC SME/CUCE
DOS Analyst
Office Phone:
Field of Membership: Consumer Access:
Consumer Complaints: Consumer Affairs
MLA/SCRA/ECOA: Consumer Compliance Policy & Outreach
This concludes the presentation. Thank you for your time today. These are the contact addresses for if you have questions after today.
2017 Consumer Protection Examination Program