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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers Records Preservation
Program and Appendices Record
Retention Guidelines; Catastrophic
Act Preparedness Guidelines.
The following is an audio
version of that document.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
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examination, reach out to learn how they
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With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the document.
Summary.
On April 24, 2024, the N C U A Board,
referred to as the Board, published an
advance notice of proposed rulemaking,
or A N P R, to solicit comments on
ways the agency can improve and update
its vital records preservation program
regulation and accompanying guidelines.
Based on public comments received in
response to the A N P R and upon further
consideration of the issues involved,
the Board is publishing this proposed
rule to simplify and streamline part 749.
The Board is proposing to update part
749 by clarifying the purpose of the
regulation, updating the definitions,
and removing the appendices.
Supplementary Information.
Section one.
Introduction.
Part A.
Background.
The N C U A's first vital records
preservation program rule was promulgated
in 1972 with the purpose of ensuring off
site storage for duplicate vital records
which will be used for reconstruction
purposes in the event of a catastrophe.
The purpose of the rule is to ensure
that federally insured credit unions,
referred to as F I C U s or credit unions,
can continue providing vital member
services if their records are destroyed
as a result of a catastrophic event.
This purpose was reiterated when the
agency revised the rule between 1980
and 1981 because, when catastrophic
acts occur, such as the Johnstown
flood, Hurricane Agnes, or the Mount St.
Helens volcano, credit union
records can be destroyed.
When members may most need
funds, the credit union can
be completely without records.
A records preservation program is
the only way to assure that back up
records are available when needed.
Part 749 was further amended in 2007
to build in lessons learned from
Hurricane Katrina and Hurricane Rita.
At that time, the Board concluded
that N C U A's review of events in
the hurricanes' aftermath demonstrates
the need for advance planning
and preparation in successfully
responding to a catastrophic act.
Specifically, challenges such as providing
members with access to funds and account
information, loss of, or lack of,
access to facilities, and locating and
communicating with staff were some of
the immediate issues credit unions faced.
The preamble to the proposed rule
recounted the many ways in which the N C
U A, credit unions, trade organizations,
and service providers assisted impacted
credit unions by helping to restore share
and loan data where necessary, making
staff available, operating a call center,
and assisting with equipment needs.
Drawing on those experiences, the Board
determined that the F I C U s that had
identified critical functions for the
retrieval of vital records were better
able to address unforeseen difficulties
and restore vital member services.
Part 749 continues to
serve an important purpose.
However, it has not been
updated since 2007, and Appendix
A, which was promulgated in
2001, has never been updated.
Appendix A was added to part 749
to provide guidance, which the
Board determined was needed in
light of the frequency of requests
for assistance from credit unions.
The 2001 proposed rule received 11
comment letters, all of which expressed
general support for the proposal.
Five of these comment letters
expressed approval specifically
for the addition of Appendix A.
While some commenters suggested
various changes, in finalizing
Appendix A the Board noted that the
record retention guidelines are merely
recommendations and credit unions
may adopt other retention periods
for these or other types of records.
In 2007, N C U A issued Appendix B,
Catastrophic Act Preparedness Guidelines,
to facilitate the recovery of essential
operations after a catastrophic act with
the expectation that these guidelines
would result in continued member
confidence in the credit union system.
When Appendix B was initially proposed,
most commenters opposed it on the grounds
that sufficient guidance already existed
and that including it in the regulation
would cause examiners and credit union
staff to misconstrue the guidance as
being enforceable like a regulation.
In August 2017, the Board published
and sought comment on the N C U A
Regulatory Reform Task Force's, referred
to as the Task Force, first report on
implementing the agency's regulatory
reform agenda, referred to as the Agenda.
The Agenda identified those regulations
the Board intended to amend or
repeal because they were outdated,
ineffective, or excessively burdensome.
The Board published the Task Force's
second and final report in December 2018.
The final report contained the Task
Force's updated recommendations
and a refined blueprint for
implementing the Agenda.
With regard to part 749, the Task Force
suggested the Board review this regulation
to identify if any changes or improvements
are needed and recommended using an A N P
R due to the complexity of the endeavor.
Over the next few years, the N C
U A received feedback that part
749 is unnecessarily burdensome
and unclear to credit unions.
In 2024, the Board issued
an A N P R on part 749, as
detailed in Section two below.
Part B.
Summary of Proposed Rule.
The Board is proposing to update part
749 by clarifying the purpose of the
regulation, updating the definitions,
and removing unnecessary references
to recommendations and guidance.
The main proposed change is to remove
both Appendix A and Appendix B entirely.
Appendix A was added to part 749
as suggested guidelines based
on the frequency of requests for
assistance from credit unions.
However, many commenters to the A N P R
stated that, in practice, Appendix A is
followed as if it were a requirement;
thus, Appendix A has become an obstacle
to sound record retention practices
and has resulted in credit unions
retaining unused and obsolete records.
In further reviewing Appendix A, the
Board has determined that several Appendix
A sections, specifically, sections A,
B, and D, duplicate language in the
regulatory text of part 749 and are more
appropriately addressed in the regulation.
Section C of Appendix A, titled What
Procedures Should a Credit Union Follow
When Destroying Records, is overly
prescriptive on the procedures a credit
union should use to destroy records.
The Board proposes to eliminate
this language on the basis that
processes for records destruction
are better left to the judgment of
a credit union's board of directors.
Section E of Appendix A in particular
appears to be a significant source
of confusion as F I C U s attempt
to balance the recommendation to
maintain documents permanently with
the need to reduce the burden of
maintaining old documents indefinitely.
Section E of Appendix A lists a number
of documents for permanent retention
that, while important to the founding
of a credit union or to its operations,
are not necessarily critical to the
restoration of vital member services in
the aftermath of a catastrophic event.
Thus, while it is important for a F
I C U to retain the documents listed
in Appendix A section E one, charter,
bylaws, amendments, and certificates or
licenses to operate under programs of
various government agencies, part 749
may not be the best place for the N C
U A to communicate this information.
Furthermore, it should be reasonable for
the Board and for a F I C U's membership
to expect that a F I C U's leadership
would retain these key foundational
documents of its own volition.
For the key operational records listed
in Appendix A section E two, credit
unions should determine how long to
retain these documents based on their
operations and any requirements of
other laws or regulations, with the
assistance of counsel if necessary.
Removing this provision from part
749 does not mean the Board considers
key operational documents to be
unimportant, but rather a reflection
of the fact that part 749 is focused
on vital records that a credit union
needs to restore vital member services.
Part 749 does not preclude a credit union
from classifying additional records to
be vital as it determines necessary.
The Board is proposing to remove Appendix
B because, upon reconsideration, it
no longer believes that the benefit
of having the guidance in proximity
to the regulation outweighs the
potential for misinterpretation.
As guidance, Appendix B is for
informational purposes only and is not a
regulatory requirement for credit unions.
Section two.
Overview of the A N P R and
Comments Received in Response.
The purpose of the 2024 A N P R
was to solicit comments on ways the
agency can improve and update its
vital records preservation program
regulation and accompanying guidelines.
The A N P R asked a series of questions
focused on the definitions in part 749,
current credit union records retention
practices, the use of guidance in part
749, and any interplay between part
749 and other N C U A regulations.
The agency received 25 comments
in response to the A N P R.
Commenters were 17 credit unions,
5 state and regional credit union
leagues, 1 national credit union trade
association, 1 trade association for
state credit union supervisors, and
1 individual member of the public who
did not disclose a group affiliation.
The A N P R questions were grouped into
four categories: part 749 definitions,
records retention practices, additional
guidance, and other N C U A regulations.
The questions and responses
are summarized below.
Part 749 Definitions.
Question one.
Does the definition of vital
records in 12 C F R 749.1
contain all, and only those,
records you would consider to
be vital for credit unions?
Ten commenters stated that the definition
of vital records in 12 C F R 749.1
is generally reasonable and appropriate.
However, five of these commenters noted
that it is only reasonable to retain
these documents in the short term, that
is, retain only the most recent and
current versions of these documents.
If the expectation is that
credit unions should retain them
permanently, it is unreasonable.
An additional three commenters
noted confusion with the definition
of vital records due to the
lack of clarity surrounding the
retention period for such records.
By way of example, commenters
noted that the types of records
identified in section 749.1
were different than the types of
records listed in Appendix A, and that
the N C U A recommended the records
in Appendix A be held permanently.
Commenters suggested that the N C U A
should clarify what it means by the terms
vital and permanent because documents that
may be vital for restoring member services
in the event that a credit union's
records are destroyed would rarely, if
ever, need to be maintained permanently.
One commenter noted that while it
believes only the most recent versions
of vital records are necessary to restore
service and must be retained under
the current language of section 749.1,
an explicit statement would
help alleviate confusion between
that provision and Appendix A.
Question two.
Are there additional types of documents
not listed as a vital record that
you think should be as they are
critical for business operations
and to properly serve members?
Six commenters stated that no additional
documents needed to be added to the list
of vital records, with one stating that
a comprehensive list would be unwieldy.
One commenter stated that the
list excludes key foundational
and key operational documents
such as board of directors meeting
minutes or board approved policies.
One commenter suggested that loan and
mortgage documents should be included,
and three commenters suggested that
contracts and agreements with vendors
should be included but that any
retention periods should reflect the
limited useful life of these documents.
One commenter suggested including a
list of current critical vendors and
a list of all parties that have access
to or store the personally identifiable
information of the credit union's members.
One commenter stated that while all
the records listed in section 749.1
are vital, the language of the provision
needs to be updated to reflect modern
storage and retention practices.
For example, lists of member accounts
and loan balances are outdated because
that information is now more often
stored digitally with regular backups
to the cloud, and other vital records
are maintained by third party data
processors with agreements that guarantee
record preservation and reproduction.
Question three.
Are there other industry standards
or methodologies outside of part 749
that the agency should consider for
preserving vital records, for defining
what vital records are, and for
determining minimum retention periods?
One commenter stated that the N C
U A and credit unions are the best
judges of what records are vital
and the advice in Appendix A section
D to consult counsel is sound.
Two commenters stated that the N C
U A should look at the statutes of
limitations for financial crimes as a
straightforward and helpful model for
determining minimum retention periods.
Two commenters suggested looking at
Internal Revenue Service and legal
lookback periods as guides, and
two other commenters offered the
Association of Records Managers and
Administrators standards, the National
Archives and Records Administration
standards, and the Records Information
Management system as sources for
records retention standards that are
widely available and well understood.
Question four.
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?
Five commenters stated that
Appendix B is sufficient.
One commenter added that the Disaster
Recovery Institute is an excellent
resource should the N C U A want
to consider the issue further.
Another commenter added that while
Appendix B is fine and should remain
as guidance, the recommendation that
credit unions review their plans
annually is unnecessary and not
feasible for many credit unions.
The commenter suggested no less
than once every three years as
a more workable recommendation.
Three commenters did not
see the need for Appendix B.
Two stated that it appears to
be repetitive of other guidance.
Another commenter stated that
Appendix B lacks detail and does not
address record retention or retention
periods or define the terms it uses.
Question five.
Are there any other changes to
Appendix B that you would recommend?
One commenter suggested adding a
recommendation that credit unions
conduct regular testing of their
plans as appropriate for their size.
Five commenters had no suggested changes.
Of these five, two stated that Appendix B
is redundant considering the availability
of other guidance, such as that of
the Federal Financial Institutions
Examination Council, referred to as F
F I E C, and thus should be removed.
Records Retention Practices.
Question six.
How long, and in what format, does your
credit union store its vital records?
Thirteen commenters
responded to this question.
Most store the bulk of their
records electronically, but some
still use a physical format,
particularly for older documents.
One commenter is in the
process of converting their
records to digital format.
The physical formats used include paper,
microfilm, floppy disk, and microfiche.
One commenter stated that the older
vital records listed in Appendix A are
kept permanently in their original form.
One commenter stated that, per its
records retention schedule, most
corporate and employee vital records
are retained permanently, although some
have a 15 or 20 year retention period.
This commenter generally keeps
member vital records related to
operations and lending for 5 to 10
years unless a different timeframe is
required based on the life of a loan.
Financial records are typically retained
for 10 years, but reconciliations
are retained permanently.
Account records, insurance
policies, and investment records
are retained indefinitely
until closed, sold, or matured.
Question seven.
Does your credit union maintain
and store any vital records in a
physical format due to a regulatory
requirement or supervisory expectation?
Nine commenters responded
to this question.
One stated that all documents
are maintained electronically.
Three stated that they maintain
some vital records physically
but did not provide a reason why.
One commenter stated that some
documents are kept in physical format
at the information owner's request.
Two stated that they maintain records
in physical format because the cost
to digitize them is prohibitive.
One stated that they maintain vehicle
titles in paper format because their state
has not switched to electronic titles.
This commenter also maintains
contracts and some human resources
documents in paper format.
Question eight.
What impediments, including estimated
costs, does your credit union
encounter with storing vital records?
Fourteen commenters
responded to this question.
Four commenters stated explicitly that
the recommendation in Appendix A to
keep certain key operational documents
permanently is a big source of frustration
because it results in the retention of
records that have no real use or benefit
to the credit union or its members.
One of these four commenters stated
that if by vital records the agency
means records needed to restore current
business within a month or two, then
the costs to the credit union are no
more than the cost of doing business.
But if vital implies that the
records must be maintained
permanently, then the commenter
would incur significant expenses.
Another commenter stated that permanent
records have a rapidly declining useful
life where the security liabilities and
storage costs outweigh the benefits.
These costs include maintaining
equipment to reconstruct old
documents and legal and reputational
costs in the event of a breach.
Another noted that the cost of storage
space and storage security is an ongoing
challenge, and the long timelines for
retention mean costly format management
and conversion, including retaining
and maintaining obsolete technology.
Two commenters noted the high cost of
converting documents to digital format
and the increased risk of data theft,
through digital or paper formats,
when keeping documents permanently.
Another noted they have an entire
secure room filled with boxes
of old documents, which is a
waste of space and employee time.
Four commenters noted the dollar
costs of renting storage space,
purchasing equipment, or converting
to newer storage methods.
Question nine.
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?
Fifteen commenters responded to this
question and universally expressed
the opinion that no document is
needed to be kept permanently to
restore vital member services.
One commenter stated that
it was chartered in 1948.
This commenter noted that it saves
some documents and photos from that
period for archival and historical
purposes but none of those would
provide data that would be helpful in
restoring vital member services today.
A common theme in the comments was
the need for N C U A to reevaluate the
definitions of vital and permanent.
Three commenters noted that 10
to 15 years is long enough for
maintaining accounting records.
The types of documents that commenters
suggested are permanent include board
meeting minutes, not the packets or
information that accompany the board
meetings, supervisory committee minutes,
charters, bylaws, and founding documents.
One commenter stated that the
documents listed in sections 749.1(a)
through (d) are vital but
should not be kept permanently.
The documents listed in Appendix A,
sections E one a and b and sections E two
a through c are important to reference
business decisions and financial results
and should be kept permanently, but
the records in Appendix A sections
E two d through j become outdated
and should not be kept permanently.
The minimum retention periods should
consider the business purpose of
the record, protect consumer data,
and align with retention periods
established in other regulations.
Another commenter stated that it makes
sense to permanently retain official
records of the credit union as stated in
Appendix A, such as its charter, bylaws,
amendments, and certificates or licenses.
In addition, the N C U A should address
any retention requirements for legal
documents associated with mergers.
However, other documents that N C U A
recommends to be retained permanently
are not appropriate to retain because
permanent retention is challenging
with no clear benefits, especially
for those credit unions that have
experienced mergers over the years.
The commenter also noted that this over
retention practice is legally risky.
Question ten.
Other than for records that must be
kept permanently, are there specific
timeframes you would recommend that
other vital records be retained?
Thirteen commenters
responded to this question.
Six commenters stated that they would not
recommend specific timeframes, with some
stating that the N C U A should defer to
credit unions on retention periods and
others suggesting that the statute of
limitations for financial crimes is a good
guide, beyond which credit unions may be
exposed to unnecessary litigation risk.
One commenter stated that it had
a list of timelines for various
documents based on legal advice.
For example, adverse action
notices are kept for 24 months
and checks are kept for 7 years.
Two other commenters suggested retaining
documents for 7 years after account or
loan closure or transaction completion.
Two commenters provided lists of
suggested retention periods including,
for example, 10 years for meeting
minutes, 2 to 3 years for member
statements, 5 years for audits and payment
systems, and 5 years after the date of
document submission to the requesting
authority in the case of subpoenas.
Question eleven.
What are the pros and cons of
storing vital records physically,
electronically, or in other formats,
such as cloud computing storage?
Fourteen commenters responded to
this question and generally provided
a range of overlapping pros and
cons for any method of storage.
Many suggested that, while there
are pros and cons to any method,
the credit union should be able
to choose the storage method.
The important considerations should
be ease of access, reducing the
number of records, minimizing costs,
and increasing member security.
Question twelve.
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?
Of the eight commenters who responded
to this question, only two stated that
they do not rely on third party vendors.
One commenter stated that it
uses third party vendors but
did not note any challenges.
The other commenters noted the following
challenges: data access if a vendor
goes out of business; timely retrieval
when the data is not under one's
immediate control and space; additional
vendor costs; lack of providers who
offer this service; planning for
future, potentially increased costs;
and greater security considerations.
One commenter stated that it is currently
paying 25,000 dollars per year for
third party vendor storage, and the
biggest challenges are ensuring the
vendor maintains appropriate information
security standards, disaster recovery
plans, and security of their sites.
Thus, drafting contracts with
strong security provisions, along
with ongoing monitoring and due
diligence, is very important.
Question thirteen.
How would you suggest the agency create
a more effective framework for credit
unions to preserve vital records?
Fourteen commenters
responded to this question.
One stated that the current
framework is effective.
Five commenters suggested
removing the permanent retention
recommendation in Appendix A.
One commenter recommended focusing
on clarifying the distinction between
vital and operational records.
One commenter stated that journal and
cash record and banking reconcilements are
confusing terms and should be clarified.
Another commenter stated that a credit
union should not need to maintain a
destruction log for a vital record
whose retention period has expired.
This commenter also noted that typically
consumers do not request account records
from their financial institution beyond
a certain point after account closure,
especially now that consumers have more
direct access to their records through
online and mobile banking platforms.
Two commenters stated that the N
C U A should articulate an actual
definition of vital records instead
of providing a bulleted list.
A third commenter suggested defining
records by category, for example,
accounting, administration, cards,
loans, checks, disclosures, rather
than listing individual documents.
Two commenters suggested clearly
differentiating between a regulation
versus a best practice or recommendation,
and another commenter suggested
consolidating all records preservation
requirements into one regulation.
Question fourteen.
What are some challenges for smaller
credit unions, defined as credit
unions with total assets of 100
million dollars or less, in maintaining
vital records, and what has worked?
Six commenters responded to this question.
Most noted that smaller credit
unions have less resources and
limited space and data capabilities.
One said it is getting difficult for
smaller credit unions to permanently
keep copies of member statements
as recommended in Appendix A.
The commenter noted that the credit
union system is celebrating 90 years of
the Federal Credit Union Act, and some
credit unions may have 90 years worth
of account records with no benefit to
permanent retention of these documents.
One commenter stated that credit unions
follow guidance as requirements and
another stated that it is important for
the N C U A to provide clear direction
on its recovery expectations, such as
delineating what a credit union must
be able to retrieve or reproduce and
over what duration, and what retention
periods apply for vital records that
do not have to be kept permanently.
Question fifteen.
What additional support, training, or
technical assistance could the N C U A
provide, if any, to assist credit unions
with both understanding and implementing
records retention requirements?
Fifteen commenters
responded to this question.
One stated that no additional
training is needed.
Six commenters suggested providing
pre recorded webinars and trainings.
Two stated that webinars with
a question and answer component
are particularly helpful.
One commenter asked that the N C U A do
annual or pre recorded trainings to help
with interpreting what is a regulation
and what is a recommendation, and
training on why the N C U A recommends
retaining so many documents permanently.
One commenter suggested the N C U A
create a detailed, standard retention
schedule for use by all credit unions and
informed by well known records management
organizations, such as Information
Governance Professionals or the
Institute of Certified Records Managers.
This commenter also suggested the
N C U A perform a comprehensive
review of all documents with a view
to reducing the permanent retention
recommendation in Appendix A.
Another commenter stated that the N C
U A should acknowledge the costs and
challenges of moving from physical to
electronic formats, provide guidance
on managing and mitigating them, and
provide training and webinars on the
difference between records necessary
for operational recovery and those
preserved for historical significance.
One commenter stated the N C U A
needs to explain the purpose of the
records retention program because,
while it is helpful that the
regulation lets credit unions form
their own systems, the definitions
of vital and permanent are too vague.
The commenter asserted that it is
unclear whether the purpose of part
749 is so credit unions can recreate
enough information to carry on member
services or so they can preserve
the history of the credit union.
This commenter suggested the N C U A go
through the list of permanent records
listed in Appendix A and contemplate
the why behind suggesting that credit
unions keep certain records permanently.
Additional Guidance.
Question sixteen.
What provisions of Appendix A or Appendix
B do not align with the requirements
of part 749, or are otherwise outdated
or unclear examples of the types
of records that should be retained?
For records you consider
outdated, please explain why.
Thirteen commenters responded to
this question with eight reiterating
the main point referenced throughout
many comment letters that the N C
U A remove the recommendation in
Appendix A that credit unions retain
certain documents permanently.
Two commenters noted that while
Appendix A is only guidance, as written
it appears more as a requirement,
which credit unions follow in the
event examiners seek compliance.
One commenter stated that the
Appendix A guidance on destruction
of records is outdated because
it does not consider automated
processes for document destruction,
which are more prevalent today.
One commenter noted that referring
to the appendices in section 749.0
while simultaneously saying the appendices
are only guidance adds to the confusion.
Question seventeen.
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 749?
Eleven commenters responded to this
question and, again, most focused
on the need to revise Appendix A's
recommendation that some records be
retained permanently and to ensure that
each record has a purpose and value
with a reasonable retention period.
Question eighteen.
What guidance would be helpful
for catastrophic act or
other disaster preparedness?
Nine commenters responded to this
question with four stating that Appendix
B is sufficient and two stating that
it is unnecessarily duplicative of
business continuity plan guidance.
Two commenters stated the N C U A
should mimic the F F I E C guidance
on Business Continuity Management.
One commenter stated that Appendix B
should include expectations or standards
that third party vendors need to maintain
so that credit unions are better able to
negotiate contracts with third parties.
Question nineteen.
Is there confusion among stakeholders
regarding the enforceability of regulation
versus guidance concerning part 749?
If so, what should be revised?
Thirteen commenters
responded to this question.
One commenter stated that the N C U A
should be consistent in its approach
to regulations versus guidance.
This commenter noted that the
regulation on derivatives contains
a record retention provision that
cites Appendix A as a requirement.
One commenter stated there is no
confusion while 11 stated there
is confusion primarily because
examiners do not differentiate between
guidance and enforceable regulation.
Other N C U A Regulations.
Question twenty.
Are there other provisions in the
N C U A's regulations that contain
record retention requirements that
should be incorporated into part 749?
Nine commenters responded
to this question.
Three stated that there are no
other provisions that need to
be incorporated into part 749.
Six commenters stated that the N C
U A should be mindful of retention
periods and requirements in other
regulations and statutes and ensure
that part 749 does not conflict.
Section three.
Section by Section Analysis
of the Proposed Rule.
The Board has considered the comments
received in response to the A N P R and
proposes to amend part 749 as follows:
Heading of Part 749.
The Board proposes to add the term vital
so that the heading of the part will
read: Vital Records Preservation Program.
This makes clear that the scope of
this part is limited to vital records.
Section 749.0
Purpose and Scope.
This section lays out the purpose
of part 749, which is for F I C U s
to maintain a written vital records
preservation program to identify, store,
and reconstruct vital records in the
event that such records are destroyed.
The proposed rule does not substantively
change the purpose statement.
The proposed changes streamline
the section and add the term vital
to further clarify the scope of
part 749, which is vital records.
Another proposed addition to this
section is to make clear that part 749
does not supersede records preservation
requirements that may apply to a credit
union pursuant to other law or regulation.
Finally, all references to the
appendices are also being removed
because the Board is proposing to
remove both appendices A and B.
Section 749.1
Definitions.
The current rule defines vital
member services and vital
records only through examples.
The proposed rule provides definitions
for these terms followed by the same
examples that are in the current rule.
Commenters generally did not take issue
with the examples but did suggest that the
agency draft definitions for these terms.
One commenter suggested additional
documents be added, such as
loan and mortgage documents.
The Board has determined not to add
to the list of examples at this time
and is, instead, incorporating a
clarifying statement in section 749.1
that credit unions may classify
additional records as vital and
maintain older versions of any vital
records as they determine necessary.
One commenter stated that lists of member
accounts and their loan balances is an
outdated example of a vital record because
information is now more often stored
digitally and records are also maintained
by third party service providers.
The Board is retaining this example
because current loan balances can
reasonably be considered vital to
members seeking access to their accounts.
While the information contained in the
record is considered vital, the proposed
rule continues to provide credit unions
with the flexibility to store such
records in any format, including but
not limited to digital storage methods.
The definition of vital
records center in section 749.3
is moved to section 749.1
as it is more appropriately located with
the other definitions used in this part.
Section 749.2
Vital Records Preservation Program.
This section sets forth a credit
union's obligation to establish a
vital records preservation program.
The first change is to make clear
that a records preservation log
may be in electronic format.
This information is
being added for clarity.
This is not a substantive change.
Electronic storage of vital records
is already permitted, and the rule
does not mandate any particular
format for records storage.
The second proposed change to this
section is to reference the legal
implications of records destruction
and to permit destruction of
older versions of records unless
required by other law or regulation.
The Board proposes to continue
its longstanding practice of not
prescribing specific retention periods
for individual documents that would
then apply to all credit unions.
There are too many variables that can
inform decisions about retention periods,
including the application of various state
and federal laws, industry best practices,
statutes of limitations, and a credit
union's unique operations and membership.
Thus, credit unions should continue to
make these judgments based on the many
factors that inform such decisions.
Some commenters to the A N P R shared
their lists of document retention
periods, further informing the Board's
decision to provide flexibility
and discretion for credit unions to
craft their own retention periods.
Section 749.3
Vital Records Center.
This provision continues to require
that a credit union maintain, or
contract with a third party to maintain,
any equipment or software necessary
for the credit union to access its
records from a vital records center.
As noted above, the Board is proposing
to move the definition of vital
records center to section 749.1
with other definitions used in this part.
The other proposed change to this
section is to state clearly the N C U
A's expectation that, if a credit union
contracts with a third party service
provider to maintain its vital records,
the credit union must maintain effective
oversight of the third party service
provider to ensure the credit union
meets its obligations under part 749.
With this addition, the heading
of this section is being amended
to include an explicit reference
to third party service providers.
Thus, the heading for this section
now reads, Vital records center
and third party service providers.
Section 749.4
Format for Vital Records Preservation.
The Board is not proposing
any changes to this section.
Section 749.5
Format for Records Required
by Other N C U A Regulations.
The Board is not proposing
any changes to this section.
Appendix A to Part 749
Record Retention Guidelines.
The Board is proposing
to eliminate Appendix A.
Many of the provisions in the
Appendix restate the requirements of
part 749, and section E of Appendix
A unnecessarily expands the scope
of part 749 by going beyond vital
records to discuss the retention of
foundational and operational records.
While these documents are important
and credit unions should be thoughtful
in their approach to managing them,
they are beyond the scope of part 749.
Furthermore, section E's reference to
retaining these records permanently
has, as reflected in many comments
to the A N P R, created much
confusion and unnecessary burden.
While eliminating Appendix A, the
Board proposes to retain some helpful
concepts from Appendix A and move them
into the regulatory text of part 749.
The reference in Appendix A section
D to keeping records until the credit
union's annual supervisory committee
audit and the N C U A's examination
have been completed, is now covered by
proposed language in section 749.2(c)
that older versions of vital
records may be destroyed unless
required by other law or regulation.
Appendix A's reference only to part 715
is unnecessarily limited and may create
the erroneous impression that there are no
other laws or regulations that may require
credit unions to maintain more than just
the latest version of a vital record.
The proposed amendment to section 749.2(c)
should clarify the Board's meaning
that, unless required by other law
or regulation, older versions of
vital records may be destroyed once
their current versions are stored.
Section A of Appendix A, titled
What Format Should the Credit
Union Use for Retaining Records, is
already covered in section 749.4,
which permits credit unions
to determine the format for
preserving their vital records.
The reference to maintaining the necessary
equipment or software to permit an
examiner to review and reproduce stored
records upon request is a requirement
and is already covered in section 749.5.
Appendix A section B, titled Who
is Responsible for Establishing
a System for Record Disposal, is
already covered in section 749.2,
which states that a credit union's
board of directors is responsible for
setting up a vital records preservation
program that includes a schedule for
storage and destruction of records.
Finally, section C of Appendix A,
titled What Procedures Should a Credit
Union Follow When Destroying Records,
recommends that credit unions prepare
an index of any records destroyed
and retain the index permanently.
It further recommends that destruction
of records should ordinarily be
carried out by at least two persons
whose signatures, attesting to the
fact that records were destroyed,
should be affixed to the listing.
The Board proposes to eliminate
this language on the basis that
processes for records destruction
are better left to the judgment of
a credit union's board of directors.
Furthermore, advances in technology
specifically designed to manage records
retention schedules provide credit
unions with more options for managing
the internal controls necessary for
a sound records retention program.
Appendix B to Part 749 Catastrophic
Act Preparedness Guidelines.
The Board is proposing to
eliminate Appendix B, Catastrophic
Act Preparedness Guidelines.
This is consistent with the agency's new
approach of streamlining its regulations
by removing nonbinding guidance documents.
References to Part 749 in
Other N C U A Regulations.
With the elimination of the record
retention guidelines, the Board is
proposing to eliminate the reference
to those guidelines in the reporting
requirements for derivatives activities.
Specifically, 12 C F R 703.105(d)
requires federal credit unions to
retain any reports required under
N C U A's derivatives regulation in
accordance with Appendix A of part 749.
This is a technical amendment but should
also further the Board's goal of better
differentiating between regulations
and guidance and removing references to
requirements in the context of guidance.
As an alternative to the proposed
rule, the agency considered
rescinding part 749 altogether.
Under the Federal Credit Union Act,
referred to as the F C U A or the
Act, the agency is authorized to
require information and reports
from insured credit unions.
The F C U A also requires
federal credit unions to keep
all their books and records.
These statutory provisions do
not require the agency to issue
regulations for them to go into effect.
They are self executing.
The F C U A does, however, grant the
agency the discretion to prescribe
such rules and regulations as it
may deem necessary or appropriate to
carry out the provisions of the Act.
And, N C U A has promulgated the record
retention regulations that are the subject
of the current rulemaking since 1972, for
the specific purpose of ensuring that F I
C U s can continue providing vital member
services if their records are destroyed
as a result of a catastrophic event.
Rather than rescind the regulation
entirely, which may be detrimental to
F I C U s that have relied on the rule
for many years or for new credit unions
that may need some direction in this
area, the Board believes that the more
prudent approach is to streamline the
regulation and remove the appendices.
This approach is consistent with
the recent comments received
in response to the A N P R.
Section four.
Request for Comments
on This Proposed Rule.
The Board is requesting comment on
the entire proposed rule, including
the following specific areas:
Number one.
Are the proposed definitions of
vital member services and vital
records helpful and sufficient?
If not, please provide
alternative suggestions.
Number two.
The proposed section 749.2(a)(3)
requires that a credit union's procedures
for its vital records preservation
program contain a records preservation
log, which may be in electronic or other
format at the credit union's discretion.
The regulation currently requires a
records preservation log to specify each
vital record stored and its name, storage
location, storage date, and name of the
person sending the record for storage.
The Board believes it is important for
a credit union and for the agency to
know where these records are stored.
However, the Board is interested in
feedback on whether the provision
is unnecessarily prescriptive in
mandating other requirements, such as
storage date and name of the person
sending the record for storage.
Number three.
Does the proposed repeal of Appendices
A and B clarify the scope of part 749
and reduce the burden and compliance
costs for preserving vital records?
Number four.
The Board is interested in obtaining
feedback from commenters on whether to
include a reference in section 749.2
for F I C U s to consult legal counsel
when setting minimum retention periods.
This suggestion is currently made in
Appendix A, Record Retention Guidelines.
However, with the removal of the record
retention guidelines, would it be helpful
to remind credit unions in the text of
the regulation that they can, at their
discretion, consult with legal counsel
when setting minimum retention periods?
Or do commenters believe that such
a reference is unnecessary and
would be construed as a requirement
to consult with counsel when
setting minimum retention periods?
Number five.
As stated above, the Board
considered rescinding part 749 as an
alternative to the current proposal.
Commenters are invited to provide
feedback on this alternative.
Section five.
Legal Authority.
The Board issues this proposed rule
pursuant to its authority under the F C
U A to prescribe rules and regulations
as it deems appropriate for administering
the F C U A, including its recordkeeping
requirements for federal credit unions.
Maintaining vital records is central
to a credit union's ability to
properly service its members and
to N C U A's ability to fulfill its
supervisory and enforcement duties.
Sections 120 and 209 of the F C U A are
plenary grants 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 106 of the F C U A requires
the Board to supervise federal credit
unions and requires federal credit
unions to make their books and records
accessible and available for examination
to any person designated by the Board.
Section 204 of the F C U A requires
the Board to appoint examiners
who shall have the power to
thoroughly examine the affairs of
F I C U s and report to the Board.
Section 206 of the F C U A 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 F C U A 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.
The Board's requirements codified in
part 749 help to identify or prevent such
unsafe and unsound practices to aid the
Board in its duties under the F C U A.
Part 749 also incorporates 15 U S C
7001(d), the Electronic Signatures in
National and Global Commerce Act, which
states that if a statute, regulation,
or other rule of law requires a record
be retained, that requirement is met
by retaining an electronic record of
the information in the record that
accurately reflects the information in
the record and remains accessible to
all persons who are entitled to access
by statute, regulation, or rule of law,
for the period required by such statute,
regulation, or rule of law, in a form
that is capable of being accurately
reproduced for later reference, whether
by transmission, printing, or otherwise.
This concludes the document.
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.