BUFFALO, N.Y. — Two Niagara Falls-area credit unions have been cited by regulators for operating "in an unauthorized and unsafe and unsound manner" for lack of controls in their lending, compliance, and accounting operations according to a story in The Buffalo News.
The New York State Banking Department issued cease-and-desist orders on Niagara Frontier Federal Employees Credit Union ($2.5 million, 559 members) and Niagara Falls Penn Central Employees Credit Union ($5.34million, 1,141 members). After examinations conducted in September the regulators found immediate action necessary due to the failure of the CUs to operate "in a safe, prudent and lawful
manner." They found that "prompt enforcement action is necessary" to correct "numerous supervisory concerns."
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The Penn Central order requires it to enforce existing policies and procedures on loan approval authority, maximum loan amounts, as well as how much it will loan someone relative to an asset's value or the member's debt level. Loans to insiders are also barred unless approved by the board. Loan disclosures under the Truth in Lending Act must also be "clearly and conspicuously" noted on loan agreements and a documentation checklist and quality review be held after closing to ensure all forms are complete. The credit union must make "timely" contacts with delinquent borrowers and properly write-off "seriously delinquent" loans.
It must also improve its financial reporting to regulators to prevent the kind of "significant errors" found in past call reports, and train both a board committee and executives on managing the balance sheet. It must develop a plan and schedule for operational audits. And it must conduct an independent test of its compliance with the federal Bank Secrecy Act and anti-money laundering rules.
Niagara Frontier FCU must revise its Bank Secrecy Act and Office of Foreign Assets Control procedures to ensure better compliance, independent testing once a year, staff training, and designation of who is responsible for compliance. The state also mandated the first independent test of both within 90 days. The board must hire an accountant to reconcile all accounts and develop a monthly process to ensure all accounts have supporting documents. It must provide written disclosure of loan prepayment penalty fees to all applicants or remove the penalties from its loan policy. And it has to correct problems in two specific auto loans identified by name.
It must independently review its policy for setting its loan loss reserve within 90 days, implement a formal policy on dormant accounts within 60 days, and test its disaster recovery plan within 120 days. And it has to update its bylaws to include all recent amendments.
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