Here are the answers to the most frequently asked compliance questions in Q2 2021

In its continuing efforts to assist credit unions, the New York Credit Union Association’s compliance department is available to provide answers to a range of important questions from member credit unions.

Bridget Castle, the Association’s senior compliance specialist, has compiled a list of frequently asked questions by credit unions during the second quarter of 2021, as well as the corresponding answers.

Q: Does Regulation E require the member to opt in before an overdraft fee can be assessed for paying an ACH item presented against their account?

A: Regulation E requires the members opt in in order to assess an overdraft fee on one-time debit and ATM transactions. Without a prior opt-in, the credit union should not charge their NSF fee on those items. Regulation E contains model form A-9 that can be used for this purpose. Below is the relevant citation from regulation.

(b) Opt-in requirement—(1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer’s account shall not assess a fee or charge on a consumer’s account for paying an ATM or one-time debit card transaction pursuant to the institution’s overdraft service, unless the institution:

(i) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution’s overdraft service;

(ii) Provides a reasonable opportunity for the consumer to affirmatively consent, or opt in, to the service for ATM and one-time debit card transactions;

(iii) Obtains the consumer’s affirmative consent, or opt-in, to the institution’s payment of ATM or one-time debit card transactions; and

(iv) Provides the consumer with confirmation of the consumer’s consent in writing, or if the consumer agrees, electronically, which includes a statement informing the consumer of the right to revoke such consent.

The above provision does not apply to transactions that are not one-time debit or ATM transactions, as those are covered under general courtesy pay.

Q: Can a power of attorney open an account at the credit union on behalf of the principal? Would we collect CIP information for the principal or agent?

A: Under NYS General Obligations Law § 5-1502D, the agent can open an account in the name of the principal so long as they are eligible for membership at the credit union and “banking transactions” is selected on the power of attorney form.

To open in the name of the principal or on behalf of the principal a deposit account of any type with any banker or in any banking institution selected by the agent, to make deposits to and withdrawals from any such deposit account; to hire such safe deposit box or vault space and to make such other contracts for the procuring of other services made available by any such banker or banking institution as the agent shall think to be desirable

The Bank Secrecy Act requires the credit union to collect identifying information for your customer. BSA regulation provides the following definition for customer:

(c) Customer. For the purposes of §1020.220:

(1) Customer means:

(i) A person that opens a new account; and

(ii) An individual who opens a new account for:

(A) An individual who lacks legal capacity, such as a minor; or

(B) An entity that is not a legal person, such as a civic club.

Q: Can a credit union loan officer disburse funds for a loan that they approved?

A: The Federal Credit Union Act states that “no individual shall have authority to disburse funds of the Federal credit union with respect to any loan or line of credit for which the application has been approved by him in his capacity as a loan officer.” This means the person approving the loan may not play a role in the disbursement of funds.

The NCUA has stated in a previous opinion letter that the intent behind this provision it “to segregate loan approval and disbursement duties of the loan officer to decrease the incidence of fraud, embezzlement, and errors”.

Q: Are federal credit unions subject to NYS Cybersecurity rule?

A: Based on the below definition of covered entity from the rule, this would apply to state chartered credit unions. This rule would also apply to a FCU’s mortgage or insurance CUSO.

(c ) Covered Entity means any Person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law.

Q: Are there any exemptions to the member business loan aggregate limit?

A: Yes, regulation offers the below exemptions to this limit.

(d) Statutory exemptions. A federally insured credit union that has a low-income designation, or participates in the Community Development Financial Institutions program, or was chartered for the purpose of making member business loans, or which as of the date of enactment of the Credit Union Membership Access Act of 1998 had a history of primarily making commercial loans, is exempt from compliance with the aggregate member business loan limits in this section.

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