Credit unions offer numerous advantages over banks and other financial institutions. Their services, fees, and rates are all top notch. And a good deal of that can be attributed to relatively strict rules and regulations regarding consumer safety.

However, they can get bogged down in those rules and regulations. The regulatory burden is heavy, and credit union compliance professionals have their hands full keeping up with changes to laws, practices, and guidelines.

Fortunately, the NCUA sends out a letter to credit unions every January. Each year, they detail their supervisory priorities for the coming year as well as any notable statutory and regulatory updates.

These are the statutory and regulatory updates for credit unions in 2020.


Regulatory Changes for 2020

The following are the major laws and regulations applicable to credit unions. Credit union exams were updated to reflect these changes. (These may also give you something new to worry about in your next audit!)

1.    Commercial Real Estate Appraisal Rule

Starting in October of last year, the NCUA Board amended Part 722, which increased the threshold for commercial real estate transactions from $250,000 to $1 million. Commercial real estate transactions under $1 million don’t need certified appraisers. Rather, credit unions can now conduct their own written estimate or use an appraisal by a state-licensed appraiser.

2.    Private Flood Insurance Rule

Along with other banking agencies, the NCUA Board finalized the private flood insurance rule. As of February 2019, credit unions must accept certain flood insurance policies that are not issued by the National Flood Insurance Program. Credit unions can review the extent of this change to Part 760 here.

3.    Public Unit and Nonmember Shares Rule

Per the NCUA’s letter to credit union, “the NCUA Board approved a final rule amending Section 701.32 regarding public unit and nonmember shares.” Starting in January 2020, credit unions may accept public unit and nonmember shares up to a certain amount. That amount is 50% of the credit union’s paid-in and unimpaired capital and surplus, less any public unit or nonmember shares, or $3 million, whichever is greater.

Credit unions must develop and share plans for the use of those funds if they exceed 70% of paid-in and unimpaired capital and surplus.

4.    Serving Hemp Businesses

As of 2018, hemp is no longer a federally controlled substance. Thus, providing services and funding to hemp businesses is now legal. It may still be prudent to measure risk vs reward in this field in the near future though.

The NCUA intends to issue further guidance about cannabusiness soon. In the meantime, you may review our blog about it here, the NCUA’s Regulatory Alert here, or the USDA’s website here.

5.    Supervisory Committee Audits Rule

The NCUA Board recently approved a final rule amending part 715 about supervisory committee audits. The rule is intended to increase the flexibility of financial statement audits. It went into effect January 6, 2020.

If your credit union signed a single or multi-year engagement letter for January 6, 2020, it should still follow the previous Supervisory Committee Guide (possibly with a letter or addendum to meet the updated regulation). However, if your credit union signed after that date, it will follow the new guide.

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FREE: Audit Checklist for Credit Unions

4 key principles and 13 questions to jumpstart your audit planning. From leading credit unions.

Additional Resources

At Redboard, we’re tend to focus on credit union audit and exam processes and management. Nevertheless, we keep like to know when any major changes emerge in the regulatory landscape.

Fortunately, the NCUA has many resources for credit union compliance teams.

And so do we! Check out our free audit checklist here. Or, if you’d like to discover your biggest areas of risk, see our scorecard here to determine your readiness for your next exam.

Feel free to contact us to see how you can lower risk while saving time and money on your credit union’s audits and exams.

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