Time is almost up for state-chartered credit unions to comply with the Federal Trade Commission's (FTC) identity theft "red flags" rule. The FTC effective date is May 1.

 

Last October, state-chartered credit unions got a bit of a compliance reprieve when the FTC postponed its effective date because of concern that some entities under its jurisdiction—such as automobile dealers and utility companies--were unaware that the rule applied to them as well as to financial institutions.

 

The National Credit Union Administration (NCUA) and the federal banking agencies required compliance on November 1, 2008.

 

This month, the FTC launched a website to help entities covered by the red flags rule develop and implement identity theft prevention programs. The website features an online publication called "Fighting Fraud with the Red Flags Rule: A How-To Guide for Business" and can be accessed at www.ftc.gov/redflagsrule. The website also offers articles and guidance on specific elements of the rule.

 

The red flags rule was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003.

 

Under the rule, financial institutions and creditors with covered accounts must have identity theft prevention programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft.

 

 

National Credit Union Administration (NCUA) Chairman Michael Fryzel recently released a summary of the agency's analysis of the distressed securities held by U.S. Central Federal Credit Union (US Central) and Western Corporate Federal Credit Union (WesCorp).

 

In what was the NCUA's third weekly update on corporate credit unions, the chairman noted that the "incomplete or insufficient nature" of available information on the agency's action addressing corporate credit union stabilization has "led some to question the necessity of the NCUA's actions and level of expected credit losses being projected."

 

The Credit Union National Association (CUNA) has repeatedly requested more information regarding NCUA's corporate stabilization actions and filed a formal Freedom of Information Act (FOIA) in March.  The agency has 20 days from the March 30 request date to respond, but extensions to that deadline are possible.

 

Fryzel said the portfolio outlines and the NCUA's associated summary analysis provides a "concise synopsis of the respective portfolios and enables informed parties to appreciate the scope and severity of the stress on these investments."

 

"Though virtually all of the securities purchased by these two corporate credit unions were AAA- or AA-rated at the time of purchase, the summary clearly demonstrates how the nature of the securities and the deterioration of the economy have resulted in significant expected credit losses.  In the near future NCUA will also be releasing a summary of the PIMCO report," Fryzel said.

 

The chairman added that the agency also will be addressing the "many questions" surrounding how member credit unions will account for any impairment or write-down of paid-in-capital and membership capital accounts at corporate credit unions.  The NCUA, Fryzel promised, will be issuing guidance soon on this subject.

 

Use the resource link below to access the NCUA weekly summary and for CUNA's comprehensive resource on corporate credit union issues. http://www.cuna.org/cgi-php/offlink.php?nnlink_id=28204

 

 

This is the fourth and last article in a series of e-Weekly articles on the Fair Labor Stands Act (FLSA), and it will focus on the “Duties Tests” to qualify for exempt status.  To qualify for an exempt status, an employee must fall under one of these categories: Executive, Administrative, Learned Professional, Creative, Computer Employees, and Outside Sales. In this article, we are only going to focus on the first two exemptions named above since this is where the majority of an exempt status would apply in a credit union. (Remember, “exempt” means an exemption from the protections of the FLSA, which controls minimum wage, overtime, meal breaks, recordkeeping and the like; and it also must meet a salary test.)

 

Executive Exemption involves management of the credit union itself or management of a recognized department. The Executive must customarily and regularly direct the work of two or more employees and have authority to hire, promote, discipline, terminate, or provide particular weight to the entire employment status. And the Executive must customarily and frequently be engaged in management activities that may include: planning workflow, planning and controlling budgets, controlling compliance measures, disciplining employees, appraising productivity and efficiency, providing for the safety and security of employees and property, etc. These tasks are performed regularly and are not isolated or one-time assignments.

 

Administrative Exemption involves performance of duties that directly relate to the management or general business operations of the credit union such as marketing, human resources, auditing, accounting, public relations, finance, compliance, etc.  These duties must include the exercise of discretion and independent judgment with respect to matters of significance. In determining discretion and independent judgment, things to consider could include: Does the employee have the authority to formulate, affect, or interpret policies? Does the employee carry out major assignments in conducting the operations of the credit union? Does the employee have the authority to commit the employer in matters that have significant financial impact? Does the employee have the authority to waive or deviate from established policies without prior approval?

 

The exercise of discretion implies that the employee has the authority to make an independent choice free from immediate direction or supervision.  An independent judgment must be more than the use of skill in applying established policies and procedures. Exempt status is not a prize or honor to be awarded but rather a set of criteria based on the responsibilities of the job (not the job title).  Given the cost of misclassification, employers are wise to err on the conservative side and provide an exempt status only after careful analysis of the position.

 

If you have any specific questions, contact Beverly Purtell, vice president of human resource management, at bpurtell@cucenter.org.