Call Report Crackdown
The NCUA will impose penalties against federally insured credit unions that fail to meet filing deadlines for their 5300 Call Reports, according to a letter from NCUA Chairman Debbie Matz.
“Such late filing impacts NCUA’s ability to conduct effective off-site supervision and delays the release of quarterly industry data to the general public,” Matz wrote in a letter to credit unions on Jan. 15. “It is also a drain on NCUA resources, as field examiners are required to follow up with tardy FICUs.”
The agency said more than 1,000 federally insured credit unions of all sizes filed call reports late for the third quarter of 2013. Credit unions that missed the Jan. 24 deadline will be issued warnings but the agency will assess fines of up to $1 million per day if the April 25 deadline is missed.
The amounts of the civil money penalties are defined under the Federal Credit Union Act in three tiers, according to the letter.
Up to a maximum of $2,000 per day “may be assessed for each day a required report is minimally late or contains uncorrected false/misleading information if the late or false/misleading filing is unintentional and the credit union has reasonable procedures in place to avoid such errors.
” The fine goes up to a maximum of $20,000 per day if a required report is late or contains false/misleading information and is not covered by the unintentional safe harbor outlined in the first category. Up to a maximum of $1 million (or 1% of total assets, whichever is less) per day may be assessed if a credit union “knowingly or with reckless disregard for accuracy submits a false or misleading report and fails to correct it.”
NAFCU and CUNA both objected, calling the penalties extreme and unnecessary.
“NAFCU … urges the NCUA to continue to look at other avenues, such as changes to the instructions to the call report, in lieu of penalties. Credit unions continue to face significant regulatory burden,” said Michael Coleman, director of regulatory affairs.
Mary Dunn, CUNA senior vice president and deputy general counsel, said, “We do not agree these penalties are necessary. Education and awareness of reporting requirements should be the keys to addressing problems not punitive charges borne ultimately by the members,”
Jim Norris, CEO at the $94 million Montgomery County Employees Federal Credit Union in Germantown, Md., told Credit Union Times that he was angry when he first read about the penalties.
“Then I’m thinking a little bit and I’m like, ‘this doesn’t even affect me or our credit union because we’re always on time.' I can’t even imagine a time when we’re going to be late,” Norris said.
“As I got more information I saw the number of credit unions that were actually late on their 5300s and I was very surprised at that,” he added.
Norris said he does not understand why credit unions are having trouble meeting the deadlines.
“I can see that if it’s a smaller credit union and they’re volunteer run, in that case, maybe there’s some issues. But for larger credit unions that have professional staff, I really don’t see an instance where it’s okay to be late,” he said.
Jim Blaine, president/CEO of the $26.8 billion State Employees’ Credit Union in Raleigh, N.C., said the NCUA picked the worst solution to a simple problem.
“It would appear that NCUA went out of its way to choose the worst possible solution to a seemingly simple problem,” Blaine said. “Not sure what killing an ant with a sledgehammer proves."
Paul Gentile, president/CEO of the Massachusetts Credit Union League, New Hampshire Credit Union League and Credit Union Association of Rhode Island, told Credit Union Times the NCUA should not threaten to enforce penalties.
“NCUA’s online call report filing system is still new. With any new technology-driven system, there are always bugs and issues. Rather than threaten fees, NCUA should be focused on working with credit unions to ensure the system is working properly and that credit unions are prepared,” Gentile said.