Samantha: Hello, this is Samantha Shares.
This episode covers N C U Aâs Advanced Notice of Proposed Rulemaking on
Records Preservation Program and Appendices â Record Retention Guidelines;
Catastrophic Act Preparedness Guidelines
The following is an audio version of that A N P R and the press release.
This podcast is educational and is not legal advice.
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And now the A N P R.
Records Preservation Program and Appendices â Record Retention Guidelines;
Catastrophic Act Preparedness Guidelines
SUMMARY: The National Credit Union Administration Board is issuing this
advance notice of proposed rulemaking (A N P R) to solicit comments on ways
the agency can improve and update its records preservation program regulations
and accompanying guidelines in Part 7 4 9 of the AGENCY regulations (Part 7 4 9).
The Board is particularly interested in obtaining stakeholder input on the
content of Part 7 4 9, which has not been updated in 15 years and may be outdated
or at odds with current best practices.
The Board is also interested in feedback on the structure of Part
7 4 9 which may be confusing as it currently contains a combination of
regulatory requirements and guidance.
SUPPLEMENTARY INFORMATION:
I.
Background
II.
Current Standards and Request for Comment
III.
Legal Authority
I.
Background
In 2023, the AGENCY received feedback that Part 7 4 9 and its
appendices are burdensome and unclear.
Based on this feedback and other factors described below, the AGENCY has identified
the need to review Part 7 4 9 to see if any changes or improvements are necessary.
The Board recognizes the AGENCYâs regulations in this area, which were
last updated many years ago, may be outdated or unclear for some credit
unions, which ultimately may have adverse effects on their members.
Thus, the Board is seeking advance comment on whether there is a need
to update Part 7 4 9, and if so, what should be updated and how, to ensure
that credit unions continue to properly preserve records vital to their business
operations, the AGENCYâs supervisory needs, and the needs of their members.
II.
Current Standards and Request for Comment
Part 7 4 9 requires all federally insured credit unions (credit unions) to
maintain a records preservation program to identify, store, and reconstruct
vital records in the event that a credit unionâs records are destroyed.
Part 7 4 9 requires a vital records preservation program to be in writing
and contain certain procedures for maintaining duplicate vital records
at an offsite vital records center.
The regulation defines the term âvital recordsâ as: (a) a list of
share, deposit, and loan balances for
each memberâs account as of the close of the most recent business day that shows
each balance individually identified by a name or number; lists multiple loans
of one account separately; and contains information sufficient to enable the
credit union to locate each member, such as address and telephone number; (b)
a financial report, which lists all of the credit unionâs asset and liability
accounts and bank reconcilements, current as of the most recent month-end; (c)
a list of the credit unionâs accounts at financial institutions, insurance
policies, and investments along with related contact information, current
as of the most recent month-end; and (d) emergency contact information for
employees, officials, regulatory offices, and vendors used to support vital records.
At the same time, Appendix A â which is included in Part 7 4 9 as suggested
guidelines for record retention â advises that the following additional sets of
records should be retained permanently: 1.
Official records of the credit union: (a) Charter, bylaws, and amendments;
(b) Certificates or licenses to operate under programs of various government
agencies, such as a certificate to act as issuing agent for the sale of U.S.
savings bonds.
2.
Key operational records:
(a) Minutes of meetings of the membership, board of directors, credit committee,
and supervisory committee; (b) One copy of each financial report, AGENCY
Form 5300 or 5310, or their equivalent, and the Credit Union Profile report,
AGENCY Form 4501, or its equivalent as submitted to the AGENCY at the end
of each quarter; (c) One copy of each supervisory committee comprehensive
annual audit report and attachments; (d) Supervisory committee records of
account verification; (e) Applications for membership and joint share account
agreements; (f) Journal and cash record; (g) General ledger; (h) Copies of the
periodic statements of members, or
the individual share and loan ledger; (i) Bank reconcilements; and
(j) Listing of records destroyed.
Credit unions have expressed confusion regarding the interaction between
Part 7 4 9âs requirements and Appendix A, and between Part 7 4 9 and other
parts of the AGENCYâs regulations that have record retention requirements
not referenced in Part 7 4 9.
Under Part 7 4 9, certain supervisory committee documents are not vital records
and are subject to periodic destruction; yet under Â§ 7 1 5 point 8 the supervisory
committee must retain the records of each verification of membersâ passbooks
and accounts until the completion of the next member account verification.
The Board seeks comment on all aspects of Part 7 4 9 and the Appendices, including
how they can be modernized, streamlined, and clarified, and other provisions
in the AGENCYâs regulations that contain record retention requirements.
The Board also encourages credit unions and other stakeholders that
have developed well-functioning records preservation programs to comment on
what works for them and share their best practices in response to this notice.
In addition, the Board specifically requests feedback
addressing the following areas:
A.
PART 7 4 9 DEFINITIONS
Questions:
1) Does the definition of vital records in t CwelveFR 7 4 9 point 1 contain
all, and only those, records you would consider to be vital for credit unions?
2) Are there additional types of documents not listed as a âvital
recordâ that you think should be as they are critical for business
operations and to properly serve members?
3) Are there other industry standards or methodologies outside of Part 7
4 9 that the agency should consider for preserving vital records, for
defining what vital records are, and for determining minimum retention periods?
4) The primary focus of the records retention guidance in
Appendix B relates specifically to catastrophic act preparedness.
Are there any terms, definitions, or standards that the Board should
consider updating in Appendix B?
5) Are there any other changes to Appendix B that you would recommend?
B.
RECORDS RETENTION PRACTICES
Understanding current credit union retention practices would be helpful in
determining whether Part 7 4 9 is properly serving its purpose which is for a credit
union to identify, store, and reconstruct vital records in the event that the
credit unionâs records are destroyed.
Questions:
6) How long, and in what format, does your credit union store its vital records?
7) Does your credit union maintain and store any vital records in a
physical format due to a regulatory requirement or supervisory expectation?
8) What impediments, including estimated costs, does your credit union
encounter with storing vital records?
9) What records do you deem vital for business operations that a
credit union should be required to keep permanently for the purpose
of restoring vital member services?
10) Other than for records that must be kept permanently, are there specific
timeframes you would recommend that other vital records be retained?
11) What are the pros and cons of storing vital records physically,
electronically, or in other formats, such as cloud computing storage?
12) Does your credit union rely on third-party vendors to accurately
maintain vital records, and if so, what are some of the challenges
that these arrangements present?
13) How would you suggest the agency create a more effective framework for
credit unions to preserve vital records?
14) What are some challenges for smaller credit unions, defined as
credit unions with total assets of $100 million or less, in maintaining
vital records, and what has worked?
15) What additional support, training, or technical assistance could the AGENCY
provide, if any, to assist credit unions with both understanding and implementing
records retention requirements?
C.
ADDITIONAL GUIDANCE
The issuance of guidance in this area has been a long-standing agency
practice to assist credit unions with their record preservation obligations.
As noted in an earlier rulemaking on Part 7 4 9, âthere is a need for
guidance in the area of record retention based on the frequency of requests
for assistance from credit unions.â Additionally, clearer guidance in
this area would also allow AGENCY to better execute its supervisory duties.
As part of meeting this need, the agency has taken steps over the
years to clearly state the difference between regulations and guidance.
In a prior rulemaking on Part 7 4 9, the Board attempted to clarify this
issue by stating, âThe Board has weighed the fact that guidance is available
from other sources and the potential for confusion regarding enforceability
of a regulation versus guidance.
The Board believes the benefit to credit unions in having the guidance in the
appendix to the regulatory requirement will enhance access to the guidance
and will facilitate compliance.â10 In the Part 7 4 9 rulemaking, the Board
further noted that âincluding specific words like ârecommendedâ and âguidanceâ
means, as a legal matter, that the guidance is just thatâguidanceâand
is not enforceable as a regulation.
These words clarify and minimize, to the extent linguistically possible, the
potential for misinterpretation.â The AGENCY recently codified this position in
an interagency rulemaking clarifying the distinction between a rule and guidance
whereby the former creates binding legal obligations, and the latter does not.
Questions:
16) What provisions of Appendix A or Appendix B do not align
with the requirements of Part 7 4 9, or are otherwise outdated or
unclear examples of the types of records that should be retained?
For records you consider outdated, please explain why.
17) In terms of the content of any future guidance, what guidance would be helpful
to better reflect the types of records that must be retained under Part 7 4 9?
18) What guidance would be helpful for catastrophic act
or other disaster preparedness?
19) Is there confusion among stakeholders regarding the enforceability of regulation
versus guidance concerning Part 7 4 9?
If so, what should be revised?
D.
OTHER AGENCY REGULATIONS
Questions:
20) Are there other provisions in the AGENCYâs regulations that contain
record retention requirements that should be incorporated into Part 7 4 9?
III.
Legal Authority
The Board issues this A N P R pursuant to its authority under the Federal Credit
Union Act (FCUA) to prescribe rules and regulations as it deems appropriate for
administering the FCUA, including its recordkeeping requirements for federal
credit unions.13 Maintaining vital records is central to a credit unionâs
ability to properly service its members and to the AGENCYâs ability to fulfill
its supervisory and enforcement duties.
Section 209 of the FCUA is a plenary grant of
regulatory authority to the Board to examine and require information and
reports from credit unions as well as issue rules and regulations necessary
or appropriate to carry out its roles as regulator and share insurer.
Section 206 of the FCUA requires the agency to impose corrective measures
whenever, in the opinion of the Board, any credit union is engaged in
or has engaged in unsafe or unsound practices in conducting its business.
Accordingly, the FCUA grants the Board broad rulemaking authority to ensure that
credit unions, their member owners, and the National Credit Union Share Insurance
Fund remain safe, sound and protected.
This concludes the A N P R.
If your Credit union could use assistance with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and we Thank you for listening.