Defense Credit Union Council’s

Defense Credit Union Council’s
Welcome to the Defense Credit Union Council’s Defense Issues 2017 February 26, 2017

DCUC Defense Issues 2017: Military Lending Act
Hosted by the Defense Credit Union Council Copyright © 2017 by Credit Union National Association. All rights reserved. These materials may not be reproduced in whole or in part, in any form whatsoever, without the express written permission of Credit Union National Association.

Disclaimer Information provided in this presentation, including all materials, should not be construed as legal services, legal advice, or in any way establishing an attorney-client relationship. Credit unions should contact their own legal counsel for advice. Information may have changed since this presentation was prepared. This information is intended to only be a summary and is not all inclusive.

This Morning’s Agenda…
Fee restriction on open-end loans during a billing cycle in which there is no balance Prohibition against using a remotely created check for repayment Bona fide and reasonable credit card fees Credit union holder-in-due-course claims and defenses in indirect auto lending transactions Hybrid purchase/cash-out transactions Definition of an ancillary product Statutory lien rights Definition of a motor vehicle Methods to satisfy the credit union’s oral disclosure requirement for a clear description of the required payment Frequently asked questions CUNA’s ongoing advocacy efforts Discussion

Open-End Credit Fee Restriction
The MLA provides that a creditor may not impose any fee or charge during a billing cycle with a zero balance Exception: participation fee that doesn’t exceed $100 Interpretive rule (question #5) provides another exception: A charge that is not considered a finance charge under Regulation Z may be imposed Late fee, over-the-limit fee, etc.

Prohibition Against Remotely Created Check
The MLA makes it unlawful for a creditor to use a check or other method of access to a deposit, savings or other financial account maintained by a covered borrower Interpretive rule (question #16) clarifies that this does not prohibit a covered borrower from repaying the covered transaction by check or other electronic transfer The restriction only applies to remotely created checks

Bona Fide and Reasonable Credit Card Fees
The MLA permits a creditor to exclude from the MAPR reasonable and bona fide credit card fees In order to be bona fide and reasonable, the charge must be less than or equal to the similar average charge of at least 5 creditors, each with at least $3 billion in outstanding credit card balances at any time during the immediately preceding 3-year period According to the DOD, such information is widely available – but is it?

Holder in Due Course Rule
Preserves a consumer’s right to assert the same legal claims against the buyer of a credit contract (credit union) they would have had against the seller of the credit contract (auto dealership) Consider this when purchasing indirect paper from a dealer who has not originated a covered transaction in accordance with the requirements of the MLA

Hybrid Purchase / Cash-Out Transactions
A hybrid purchase/cash-out transaction no longer qualifies for the purchase money exemption under the MLA Interpretive rule (question #2) Any credit transaction that provides purchase money secured financing along with additional cash-out financing is not eligible for the exception under §232.3 CFPB’s updated MLA examination procedures A transaction where a creditor simultaneously extends an additional cash advance beyond the purchase price of the securing personal property or motor vehicle does not fall under these exceptions

Definition of Ancillary Product
The fee for credit-related ancillary products must be included in the creditor’s calculation of the MAPR What constitutes a credit-related ancillary product? It remains unclear Not a defined term within the MLA DOD’s interpretive rule did not address this question

Statutory Lien Right Creditor may only take a security interest in funds deposited after the extension of credit deposited in an account established in connection with the credit transaction Interpretive rule (question #18) claims that nothing in the MLA impedes a creditor from exercising a statutory lien right, provided that the creditor complies with the MLA regulation See bullet point #1…

Definition of a Motor Vehicle
Purchase money exemption to the MLA for a motor vehicle Interpretive rule (question #19) provides a definition for the term motor vehicle: Any self-propelled vehicle primarily used for personal, family or household purposes for on-road transportation. The term does not include motor homes, recreational vehicles, golf carts or motor scooters

Oral Disclosure Requirement
MLA requires the creditor to provide a clear description of the required payment Interpretive rule (question #12) provides additional guidance: Creditor may provide an oral recitation of the required payment Alternatively, creditor may provide a general description of how the payment obligation is calculated Example for open-end credit Your required monthly payment will be calculated based on 3% of the outstanding balance at the end of the billing cycle; however, at no time will your required monthly payment be less than $50

Frequently Asked Questions
A 5-page Q&A document from DCUC’s MLA webinar held on January 31st is included with your materials

CUNA’s Ongoing Advocacy Efforts
CUNA wrote to the DOD in December 2016 asking for further guidance on the remaining implementation issues No response received The joint trades held a meeting with the DOD on February 1st DOD indicated it was open to providing additional guidance; however, did not commit to anything specific CUNA again wrote to the DOD in February 2017 reiterating the need for additional guidance. This letter also asks that guidance specific to credit card accounts be issued at least 4 months before the effective date of 10/3/2017. Alternatively, CUNA asked that the effective date be delayed to provide creditors at least four months from the date any guidance is issued to implement the necessary changes

Questions?

Thanks for your participation!
Michael R. Christians Senior Federal Compliance Counsel Credit Union National Association Michael Christians Read Michael’s posts on CUNA’s CompBlog

Michael R. Christians, CUCE
Credit Union National Association, Inc. (CUNA) In his role at CUNA, Michael assists credit unions across the country with ensuring their compliance programs conform to Federal rules. In addition, he helps credit unions strategically plan for upcoming compliance changes, provides counsel relative to current laws and regulations, and offers training and education services to credit union professionals. As a recognized speaker on the national circuit, Michael regularly presents at CUNA’s compliance schools and other regulatory compliance educational events. Michael has more than 19 years of experience in the financial services industry in a variety of legal and compliance related positions. He obtained his Juris Doctorate with honors from Drake University Law School in Des Moines, Iowa. Michael was admitted to the Iowa State Bar in April 2014 where he is licensed to practice law. Michael has earned CUNA’s Credit Union Compliance Expert (CUCE) designation.

What We’ll Discuss Why we developed this Blended Retirement System (BRS) Guide Who needs this guide How credit unions can use these tools A look at the PowerPoint presentation and script

What Is In The Guide Why it’s critical to save for retirement
What is the Blended Retirement System (BRS)? Who may opt-in to BRS How the blended system encourages retirement saving Choosing between the blended and legacy systems

The Retirement Marathon
Goal: Living a financially secure retirement Winning strategies Participating in tax-deferred savings plans Starting early Making regular contributions Avoiding hurdles

Power of Compounding Compounding’s snowball effect
Earnings added to account value to create larger balance Future earnings figured on larger balance Keys to success: early start and regular cash infusions

Blended Retirement System
Replaces legacy pension-only system Combines tax-deferred savings with a smaller pension Adds automatic and matching DoD contributions

How Matching Works Here’s how DoD contributions to the Thrift Savings Plan (TSP) work:

Career Continuation Pay
Bonus paid between years 8 and 12 Timing and amount determined by branch Secretary Must agree to three years additional service May be contributed, in part or whole, to retirement savings account

Nuts and Bolts of the BRS
The military member is always vested in their own contributions They are immediately vested in DoD matching contributions Each account value is portable: Military members can take it with them when they separate from the military

Where Your Contributions Go
Each BRS participant has TSP account Chooses among investments TSP offers Five individual funds Four lifecycle funds Allocates contributions on percentage basis among selected funds

Individual Funds Three stock funds for growth
Common large-cap stock (C) Small- and mid-cap stock (S) International stock (I) One fixed-income fund (F) for income One government fund (G) for income and asset preservation

Lifecycle Funds Each fund includes all five individual funds in different proportions Shifts allocation gradually from emphasis on growth to emphasis on income At maturity becomes an income fund You select the fund with the date closest to your 62nd birthday

BRS or Legacy CAREER TIMELINE RETIREMENT SYSTEM
Joined service before 1/1/2006 Joined service between 1/1/2006 and 12/31/2017 Join service after 1/1/2018 Grandfathered to legacy system, eligible to contribute to TSP Opt-in to BRS 1/1/2018 to 12/31/2018 or remain in legacy system Automatically enrolled in BRS

Benefits of Opting In Continued eligibility for pension after 20 years
Automatic and matching DoD contributions to TSP account Immediate vesting in all contributions and earnings Career continuation pay between 8th and 12th year

Factors to Consider Willingness of individual to contribute regularly and at high enough rate Appetite for investment risk Likelihood of serving 20 years

Wrapping Up Military retirement on cusp of a new era
Each military member will be in a position to make an important choice Acting thoughtfully can give each member the confidence they have done what’s right for them and their family

The End

DoD Banking and Credit Union Programs
Mr. Bill Hawbecker Director, DoD Banking and Credit Union Programs February 2017 Integrity - Service - Innovation

Integrity - Service - Innovation
This presentation is being made by a Defense Finance and Accounting Service (DFAS) employee. It does not constitute legal interpretation, guidance, or advice of DFAS or the Department of Defense (DoD). Any opinions or views stated by the presenter are the presenter’s own and may not represent the views of DFAS or DoD. 9/17/2018 Integrity - Service - Innovation

DoD Issuances Update DoD FMR Volume 12, Chapter 33 Financial Institutions on DoD Installations DoDI Personal Commercial Solicitations on DoD Installations DoDI Procedures and Support for Non-Federal Entities Authorized to Operate on DoD Installations FMR: Last update– administrative in Aug 2015; next administrative update o/a August 2017 : Sponsorships are allowed; however, a company cannot advertise or distribute literature that promotes competitive financial services/products offered by the on-base FI Cannot be used to gain access to collect information for solicitation through raffles, drawings, or surveys without individual written consent to be solicited beyond the event : Letter Signed by Secretary of Defense Dec 2014 Reemphasizes authorities and flexibilities Implements additional measures to help with consistency Provides clarity for adjudicating requests Letter States “Within the bounds of law and regulation…” 9/17/2018 Integrity - Service - Innovation

Operating Agreements (FMR V12, CH33 330310)
Operating agreement defines the relationship between the FI and installation and must be in place prior to commencing operations Should be reviewed yearly Must be JOINTLY reviewed at least once every 5 years A copy of the agreement shall be maintained by the installation commander AND the banking office or on-base credit union Should include the hours of operation, agreement to comply with DoD policies and procedures, security requirements for cash shipments, and an agreement to reimburse the government for logistical support (as applicable) Any change in services and fees must be agreed to AND added/amended in the operating agreement 9/17/2018 Integrity - Service - Innovation

Credit Union Change of Control
Merger, Acquisition, or Other Action Vol 12, CH A, “Voluntary Credit Union Terminations” If change effects violation of the terms and conditions of the existing operating agreement, after appropriate coordination, operating agreement is terminated If change does not effect violation of the terms and conditions of the existing operating agreement, appropriate Secretary of the Military Department (or designee) initiates a novation action to the operating agreement identifying the change in control 9/17/2018 Integrity - Service - Innovation

Treasury General Accounts
Accepting Deposits for Credit to US Treasury Is it Required? Process to Establish 9/17/2018 Integrity - Service - Innovation

Financial Education: Key Points From Policy
Financial Education (FMR V12, CH A) On-base financial institutions shall be invited to take part in seminars to educate personnel on personal financial management and financial services Financial institutions shall be encouraged to provide financial education and counseling services as an integral part of their financial service offerings Officials of on-base financial institutions shall submit advance briefing texts for approval by the installation commander to ensure that the program is not used to promote services of a specific financial institution 9/17/2018 Integrity - Service - Innovation

Overseas Military Banking Program
Current Contract Performance Began April 2013 Runs Through March 2018, Potentially March 2023 5-year base contract Five, 1-year options Market Research Meet with industry Overview of program Those Interested in Meeting Should Contact Director, DoD Banking and Credit Union Programs May Issue Request for Information 9/17/2018 Integrity - Service - Innovation

Overseas Military Banking Program
9/17/2018 Integrity - Service - Innovation

Closing Thoughts… Reality Relationships Perceptions Biases Framing 9/17/2018 Integrity - Service - Innovation

THANK YOU for your continued support of Service members, civilians, and their families and for support of the official mission!

Defense Credit Union Council Defense Issues 2017
CPT Christopher J. Anderson Department of the Army Banking Officer United States Army Financial Management Command (USAFMCOM) 26 February 2017 Unclassified

Agenda Banking Program Overview Strategic Partners
Army Banking Updates Army Banking Initiatives Current Issues POC Information Questions Unclassified

Army Banking Program USAFMCOM Responsibilities
Advises ASA(FM&C) and USAFMCOM Commanding General on banking policy Works closely with federal agencies and trade associations Liaison for Training with Industry (TWI) financial institution and student Trains, facilitates, and resolves banking issues CONUS On-Post Financial Institutions (FIs) 80 installations with 60 credit unions and 15 banks One bank and one credit union per installation Overseas Military Banking Program (OMBP) 65 (33 Army) branches, 288 (142 Army) ATMs in 10 foreign locations DFAS lead, in coordination with the military services, for overseeing contract and operations Supports/Assists Deployed TFMSC/FMSUs on Banking Issues Develops & conducts banking training Assists with opening LDAs Foreign banks/ATMs on U.S. bases Unclassified

Government and Private Industry Partners
Defense Credit Union Council (DCUC) Association of Military Banks of America (AMBA) Armed Forces Financial Network (AFFN) Armed Forces Bank (AFB) U.S. Department of the Treasury Federal Reserve Bank of Boston Federal Reserve Bank of Cleveland Federal Reserve Bank of Kansas City Citi Bank JP Morgan Chase – MetaBank Defense Finance and Accounting Service (DFAS) Army and Air Force Exchange Service (AAFES) Military Postal Service Agency (MPSA) Financial Management Support Centers (FMSCs) Financial Management Support Units (FMSUs) Unclassified

Army Banking Updates USAFMCOM (Indianapolis, IN)
2-star Command Commanding General: MG David C. Coburn Command Sergeant Major: CSM Christopher J. Cosby Now a Direct Reporting Unit (DRU) to the ASA(FM&C) USAFMCOM CG received formal delegation of authority from ASA(FM&C) to approve all Army Banking & E-Commerce actions Internal Command Counsel; coordinates all legal requirements E-Commerce Directorate Growth Expanded from 4 to 11 personnel Assumed E-Commerce Sustainment Team (ECST) mission from Treasury Unclassified

Army Banking Initiatives
Installation FI Site Visits Opportunity to meet garrison leadership, CLOs, and credit union employees in order to assist with outstanding issues Conducted quarterly; based on emerging requirements Installation Status Report (ISR) Incorporated 10x inspectable areas for banking program in 2016 100% response rate for all FIs on Army installations Training with Industry (TWI) Received approval for NCO participation in banking program Effective training year Unclassified

Current Issues Advertising and Sponsorship
FI rights (on vs. off-post) Competitive products and promotional materials On-post credit unions should participate at newcomer briefings and should not be solicited for sponsorship dollars Operating Agreement (OA) Compliance with DoDFMR Must update every 5 years This office recommends annual review (at a minimum), or when one of the following changes occurs: New Garrison Commander New credit union management Addition/removal of ATMs or branches Changes to fee structure Changes to Treasury General Account (TGA) Changes to lease agreement Unclassified

POC Information CPT Christopher Anderson (U.S. Army Banking Officer)
- DSN: - CPT Charles Krueger (U.S. Army Europe Banking Officer) - DSN: - CPT Ishak Owusu (U.S. Army Pacific Banking Officer) - DSN: - 1LT Valerie Rucinski (U.S. Army Theater Banking Officer) - DSN: - Unclassified

Questions? Unclassified

Backup Slide Installation Status Report (ISR)
Installation-level inspection (conducted annually) CLOs are aware & trained 10 inspectable areas 1. Qualified CLO 2. Appointment orders 3. Mandatory training 4. Contact information 5. Regulatory/policy guidance 6. Document repository 7. Current Operating Agreement (OA) 8. Valid OA 9. One bank/one credit union 10. Financial education Obtain inspection worksheets from your CLO Unclassified

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