Special Guest Author: Barb Cooper, VP Professional Services
The Truth-in-Savings regulatory changes, found in the update to the NCUA Regulation 707, seemed relatively easy to understand for this first round. NCUA patterned their changes from the Federal Reserve in most respects, but not all.
A tip from AuditLink’s Jim Vilker: Credit unions are required to follow those regulations as published by the NCUA and I would caution those who believe they must try and blend the Federal Reserves Regulation with the NCUA’s. It almost never works. Keep your compliance eye on our regulatory body only. Blending these two will only lead to analysis for the sake of analysis.
Breaking It Down
There were two well-defined sections to the upcoming changes. The first describes available balance requirements at points where a member may inquire on their accounts or where available balances are displayed, such as ATM terminals and online banking.
c) Disclosure of account balances. If a credit union discloses balance information to a member through an automated system, the balance may not include additional amounts that the credit union may provide to cover an item when there are insufficient or unavailable funds in the member’s account, whether under a service provided in its discretion, a service subject to part 226 of this title (Regulation Z), or a service to transfer funds from another member account. The credit union may, at its option, disclose additional account balances that include such additional amounts, if the credit union prominently states that any such balance includes such additional amounts and, if applicable, that additional amounts are not available for all transactions.
The second section describes changes to the format of member periodic statements related to the fees charged for overdraft and NSF fees ONLY.
(a) Disclosure of total fees on periodic statements.
(1) General. A credit union must separately disclose on each periodic statement, as applicable:
(i) The total dollar amount for all fees or charges imposed on the account for paying checks or other items when there are insufficient or unavailable funds and the account becomes overdrawn; and
(ii) The total dollar amount for all fees or charges imposed on the account for returning items unpaid.
(2) Totals required. The disclosures required by paragraph (a)(1) of this section must be provided for the statement period and for the calendar year-to-date.
(3) Format requirements. The aggregate fee disclosures required by paragraph (a) of this section must be disclosed in close proximity to fees identified under § 707.6(a)(3), using a format substantially similar to Sample Form B–10 in appendix B.
Let’s take this on one section at a time and try to clear the fog a bit.
Clearing the Fog: Account Balance Disclosures
CU*Answers has already sent an announcement concerning the amendments to Regulation DD on 12/11/09. You can be assured that It’s Me 247 and CU*TALK supported by our CU*Network Partners are already in compliance. Balances displayed on these systems are based on available balances only.
Now, let’s talk about ATM switches. The provisions of Regulation DD require that balances provided to cardholders through automated systems (including ATMs) exclude any additional funds available through overdraft protection programs. Or, if the balances provided do include amounts through overdraft protection programs, they must be disclosed as such. Because there is no assurance that all ATM terminals provide this disclosure, you want to understand what balances are submitted to your ATM vendor and how they are using those balances. This will require a conversation with your vendor and an understanding of how your interface works (online versus batch, PBF formats, etc.)
When you have completed your checklists of how balances are displayed at ATM machines (whether through an online platform or through a batch processing positive balance file or PBF), the next step is to make sure your statement disclosures are set up.
Clearing the Fog: Fee Disclosures On Periodic Statements
CU*BASE has supported the NSF and Non-Return Fee disclosure on periodic statements since 2006. Until now, they were only required based on the way credit unions marketed their Overdraft Privilege offerings. Beginning January 1, 2010, it will be required for all credit unions who offer overdraft programs.
There are two steps to print the fee disclosure on your member statements:
1. Choose Which Activity is Tracked
Modify your NSF Configuration (MNCNFA #9, then #1) to indicate which origin codes will be counted in the fee totals.
2. Change Statement Print Configuration
Contact a Client Service Representative and request the statement print flag be turned on (we need your request in writing). Self Processors can activate this flag using the Member Statement Config. feature via OPER #10, then #5.
So will there be a box around the fees? The regulation does not say we must; it simply states the disclosure should be “substantially similar” to the one proposed. The regulation does not even speak to the intent of the box or gridlines. Is the intent to draw attention to the data? Is the intent to make it clear from a member’s reading perspective?
Our first inclination is to forget the box altogether and trust we have all invested in displaying the data according to the intent of the regulation. However, this is not the final say, as you will see in the separate “Boxes, boxes…” sidebar in this issue of the Advisor.
Remember there are multiple ways a member can view a statement, including a printed format as well as e-Statements. In some cases credit unions may be printing their own statements or using third party statement providers who are not familiar with the upcoming changes. There is also the additional complexity of the new statement flat file format versus the “old” print format that is still used by many third-party print vendors.
Changing print formats might seem simple but it is definitely not. Any change we make to the way a statement appears must be made individually to each and every one of the output formats and delivery channels and viewing applications. So we are reviewing our options and will declare our direction in separate communications during the month of January.
The Truth-in-Savings regulatory changes, found in the update to the NCUA Regulation 707, seemed relatively easy to understand for this first round. NCUA patterned their changes from the Federal Reserve in most respects, but not all.
A tip from AuditLink’s Jim Vilker: Credit unions are required to follow those regulations as published by the NCUA and I would caution those who believe they must try and blend the Federal Reserves Regulation with the NCUA’s. It almost never works. Keep your compliance eye on our regulatory body only. Blending these two will only lead to analysis for the sake of analysis.
Boxes, boxes…who has the boxes?
Based on inquiries from several credit unions after a recent CUNA press release, we are currently analyzing the process of modifying all of the different statement formats that would be affected by a change such as putting border lines around the existing fee disclosure table. Remember that as with any change to statements, some credit unions may incur custom programming fees to a third-party vendor in order to also incorporate a similar change.
- Current e-Statements through CoWWW (until the transition to CU*SPY through eDOC is complete), which are presented via multiple formats:
- XML format
- PDF format
- HTML/text format
- Printed statements via the existing print file format (still used by many third-party print vendors as well as self processors who still print their own statements)
- Printed statements via the new flat file format (used by Sage Direct)
- New e-Statements through eDOC (which will also include multiple formats similar to current e-Statements through CoWWW)
- CU*CD (archived e-Statements on CD-ROM)
As you can see, it is impractical to make a blanket statement that “statements” will be changed—each of these delivery channels and formats must be evaluated separately and a decision made as to which formats will change and which will not. We are contacting all of the involved vendors now, including CoWWW, eDOC, and Sage Direct, to determine options.
The end result might even be a call for an early end to support for the old print file format, forcing all credit unions and their print vendors to move to the flat file processing with all the resulting coordination, timelines, and change fees.
Stay tuned for more updates after the first of the year!
Barb Cooper
VP Professional Services
CU*Answers