From the Archives: November 2012

Regulatory Roundup 

Regulation Z: Independent Ability to Repay Credit Cards

The Consumer Financial Protection Bureau proposes to amend Regulation Z, which implements the Truth in Lending Act, and the official interpretation of the regulation. Regulation Z currently requires that credit card issuers consider the consumer’s independent ability to pay, regardless of the consumer’s age; in contrast, TILA expressly requires consideration of an independent ability to pay only for applicants who are under the age of 21. The CFPB requests comment on proposed amendments that would remove the independent ability-to-pay requirement for consumers who are 21 and older, and permit issuers to consider income to which such consumers have a reasonable expectation of access. Comments must be received on or before Jan. 7, 2013. A copy of this proposed rule can be found here.

Foreign Account Tax Compliance Act

The U.S. Internal Revenue Service and the U.S. Treasury have pushed back the compliance date for key aspects of the Foreign Account Tax Compliance Act until 2014 and, in some cases, as far as 2017. The rules were scheduled to apply to payments made on and after Jan. 1, 2013.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions and other entities. The IRS's proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries. The FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.

The compliance date for portions of FATCA that would require U.S. credit unions and other financial institutions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs will be pushed back until Jan. 1, 2017, the agencies added. Withholding on other types of payments is still expected to commence Jan. 1, 2014. Portions of the rule that impact Form 1042-S filings will still become effective on Jan. 1, 2013.

The IRS/Treasury release can be found here.

Regulation D (Reserve Requirements)

Implementation of the second phase of the Federal Reserve Board's program to simplify reserve requirement administration will be delayed until June 27, 2013. The FRB had amended its Regulation D in April 2012. The amendments simplify reserves administration by:

The contractual clearing balance and direct compensation changes are already in effect. Implementation of the remaining amendments was scheduled to take place on Jan. 24.

The FRB also amended the annual indexing of the reserve requirement exemption amount and of the low reserve tranche for 2013. These amounts are used in the calculation of reserve requirements of depository institutions. For net transaction accounts in 2013, the first $12.4 million, up from $11.5 million in 2012, will be exempt from reserve requirements. A 3% reserve ratio will be assessed on net transaction accounts more than $12.4 million up to and including $79.5 million, up from $71.0 million in 2012. A 10% reserve ratio will be assessed on net transaction accounts in excess of $79.5 million.

The rule delay release can be found here.

The amended reserve requirement release can be found here.

12-CU-12: Changes Planned for Upcoming Call Reports

The purpose of this letter is to describe additions and revisions scheduled for the next three Call Report cycles (December 2012, March 2013 and June 2013). New sections for data on loans held for sale and unfunded commitments for business-loan categories were also added for the March 2013 Call Report period. Changes to sections addressing purchased credit impaired loans, investments, Equal Employment Opportunity Commission filing requirements, remittance transfers and grants have also been added. The NCUA also released revised delinquent loan schedules that will take effect beginning with the June 2013 call report cycle. Specifically, the NCUA said the changes clarify reporting requirements by changing delinquency categories from "months" to "days" in order to align the NCUA's reporting standards with those of other federal regulators, and eliminate confusion arising from differences in the number of days per month. A copy of this letter can be found here.

12-RA-04: CFPB’s New Remittance Transfers Rule

The purpose of this Alert is to explain what is covered by CFPB’s final remittance transfers rule, what disclosures are required, and what credit unions need to do to ensure compliance that takes effect on Feb. 7, 2013. A copy of this alert can be found here.

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