Fees Paid by Federal Credit Unions, 53708-53713 [2020-16981]

Download as PDF 53708 Federal Register / Vol. 85, No. 169 / Monday, August 31, 2020 / Proposed Rules documents, including public comments, in the docket. FOR FURTHER INFORMATION CONTACT: Mr. John Cymbalsky, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–2J, 1000 Independence Avenue SW, Washington, DC 20585–0121. Telephone: (202) 287– 1692. Email: ApplianceStandardsQuestions@ ee.doe.gov. Ms. Elizabeth Kohl, U.S. Department of Energy, Office of the General Counsel, GC–33, 1000 Independence Avenue SW, Washington, DC 20585–0121. Telephone: (202) 586–7796. Email: Elizabeth.Kohl@hq.doe.gov. For further information on how to submit a comment, review other public comments and the docket, or participate in the webinar, contact the Appliance and Equipment Standards Program staff at (202) 287–1445 or by email: ApplianceStandardsQuestions@ ee.doe.gov. On August 13, 2020, DOE published in the Federal Register a NOPR and request for comment regarding proposals to amend the test procedures for showerheads, specifically proposals to amend the definition of a showerhead consistent with the most recent standard developed by the American Society of Mechanical Engineers in 2018. 85 FR 49284 (August 2020 NOPR). The August 2020 NOPR also announced a webinar but did not announce a webinar date. This notice announces that DOE will hold a webinar to discuss the proposed amendments to the showerheads test procedures on Thursday, September 3, 2020. Additionally, on August 18, 2020, DOE received a request from PMI to extend the comment period for the NOPR by 30 days (http:// www.regulations.gov/docket?D=EERE2020-BT-TP-0002-0011). DOE announces that it is extending the comment period until September 30, 2020. SUPPLEMENTARY INFORMATION: Public Participation khammond on DSKJM1Z7X2PROD with PROPOSALS See section IV, ‘‘Public Participation,’’ of the August 2020 NOPR for additional information on submitting written comments. Id. at 85 FR 49295. A. Participation in the Public Meeting (Webinar) The time and date of the webinar are listed in the DATES section at the beginning of this document. Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE’s VerDate Sep<11>2014 16:36 Aug 28, 2020 Jkt 250001 website: https://www1.eere.energy.gov/ buildings/appliance_standards/ standards.aspx?productid=2&action= viewlive. If you plan to attend the webinar, please notify the Appliance and Equipment Standards Program staff at (202) 287–1445 or by email: Appliance_Standards_Public_ Meetings@ee.doe.gov. Please note that foreign nationals participating in the public meeting are subject to advance security screening procedures which require advance notice prior to attendance at the public meeting. If a foreign national wishes to participate in the public meeting, please inform DOE of this fact as soon as possible by contacting Ms. Regina Washington at (202) 586–1214 or by email: Regina.Washington@ee.doe.gov so that the necessary procedures can be completed. B. Procedure for Submitting Prepared General Statements for Distribution Any person who has plans to present a prepared general statement may request that copies of his or her statement be made available at the public meeting. Such persons may submit requests, along with an advance electronic copy of their statement in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, by email to: Appliance_ Standards_Public_Meetings@ee.doe.gov. The request and advance copy of statements must be received at least one week before the public meeting via email. Please include a telephone number to enable DOE staff to make a follow-up contact, if needed. A transcript of the public meeting will be included in the docket, which can be viewed as described in the Docket section at the beginning of this document. In addition, any person may buy a copy of the transcript from the transcribing reporter. Signing Authority This document of the Department of Energy was signed on August 25, 2020, by Alexander N. Fitzsimmons, Deputy Assistant Secretary for Energy Efficiency, Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 administrative process in no way alters the legal effect of this document upon publication in the Federal Register. Signed in Washington, DC, on August 25, 2020. Treena V. Garrett, Federal Register Liaison Officer, U.S. Department of Energy. [FR Doc. 2020–19015 Filed 8–28–20; 8:45 am] BILLING CODE 6450–01–P NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 701 RIN 3133–AF24 Fees Paid by Federal Credit Unions National Credit Union Administration (NCUA). ACTION: Proposed rule. AGENCY: The NCUA Board (Board) proposes to amend its regulation governing assessment of an annual operating fee to federal credit unions (FCUs). First, for purposes of calculating the annual operating fee, the proposed rule would amend the current rule to exclude from total assets any loan an FCU reports under the Small Business Administration’s Paycheck Protection Program (PPP) or similar future programs approved for exclusion by the NCUA Board. Second, the proposed rule would delete from the current regulation references to the Credit Union System Investment Program and the Credit Union Homeowners Affordability Relief Program, both of which no longer exist. Third, the proposed rule would amend the period used for the calculation of an FCU’s total assets. Currently, total assets are calculated using the FCU’s December 31st Call Report of the preceding year. Under the proposed rule, total assets would be calculated as the average total assets reported on the FCU’s previous four Call Reports available at the time the NCUA Board approves the agency’s budget for the upcoming year, adjusted for any excludable programs as determined by the Board. Finally, the proposed rule also would make some minor technical changes. The Board has separately published a document and requested public comment about the methodologies it uses for computing the Overhead Transfer Rate and setting the annual operating fee schedule for fees charged to FCUs. Members of the public are encouraged to comment about these methodologies by responding to the appropriate Federal Register document. SUMMARY: E:\FR\FM\31AUP1.SGM 31AUP1 Federal Register / Vol. 85, No. 169 / Monday, August 31, 2020 / Proposed Rules The notice relating to National Credit Union Administration Overhead Transfer Rate Methodology and Operating Fee Schedule Methodology is published elsewhere in this issue of the Federal Register. DATES: Comments must be received on or before October 30, 2020. ADDRESSES: You may submit written comments, identified by RIN 3133– AF24, by any of the following methods (Please send comments by one method only): • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Fax: (703) 518–6319. Include ‘‘[Your Name]—Comments on Proposed Rule: Fees Paid by Federal Credit Unions’’ in the transmittal. • Mail: Address to Gerard S. Poliquin, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314– 3428. Public Inspection: You may view all public comments on the Federal eRulemaking Portal at http:// www.regulations.gov as submitted, except for those we cannot post for technical reasons. The NCUA will not edit or remove any identifying or contact information from the public comments submitted. Due to social distancing measures in effect, the usual opportunity to inspect paper copies of comments in the NCUA’s law library is not currently available. After social distancing measures are relaxed, visitors may make an appointment to review paper copies by calling (703) 518–6540 or emailing OGCMail@ncua.gov. FOR FURTHER INFORMATION CONTACT: James Holm, Supervisory Budget Analyst, Office of the Chief Financial Officer, at (703) 518–6570; Kevin Tuininga, Associate General Counsel, or John H. Brolin, Senior Staff Attorney, Office of General Counsel, at (703) 518– 6540; or by mail at 1775 Duke Street, Alexandria, VA 22314. SUPPLEMENTARY INFORMATION: I. Background II. Legal Authority III. Summary of the Proposed Rule IV. Regulatory Procedures khammond on DSKJM1Z7X2PROD with PROPOSALS I. Background A. The NCUA Annual Budget and Fees Paid by FCUs The NCUA charters, regulates, and insures deposits in FCUs and insures deposits in state-chartered credit unions that have their shares insured through the National Credit Union Share Insurance Fund (Share Insurance Fund). To cover expenses related to the NCUA’s tasks, the Board adopts an VerDate Sep<11>2014 16:36 Aug 28, 2020 Jkt 250001 annual budget in the fall of each year. The Federal Credit Union Act (FCU Act) provides two primary sources to fund the budget: (1) Requisitions from the Share Insurance Fund; 1 and (2) operating fees charged against FCUs.2 The Board uses an allocation formula, the Overhead Transfer Rate (OTR), to determine the amount of the budget that it will requisition from the Share Insurance Fund.3 Remaining amounts needed to fund the annual budget are charged to FCUs in the form of operating fees, based on each FCU’s total assets.4 The FCU Act requires each FCU to, ‘‘in accordance with rules prescribed by the Board [. . .] pay to the [NCUA] an annual operating fee which may be composed of one or more charges identified as to the function or functions for which assessed.’’ 5 The fee must ‘‘be determined according to a schedule, or schedules, or other method determined by the Board to be appropriate, which gives due consideration to the expenses of the [NCUA] in carrying out its responsibilities under the [FCU Act] and to the ability of [FCUs] to pay the fee.’’ 6 The statute requires the Board to, among other things, ‘‘determine the periods for which the fee shall be assessed and the date or dates for the payment of the fee or increments thereof.’’ 7 Section 701.6 of the NCUA’s regulations governs operating fee processes.8 The regulation establishes the following: (i) The basis for charging operating fees (i.e., total assets of the FCU, with certain exclusions, as of December 31st of the preceding year); (ii) the notice the NCUA must provide to FCUs regarding the fees; (iii) coverage provisions providing certain exceptions for new FCU charters, conversions, mergers, and liquidations; and (iv) the assessment of administrative fees and interest for late payment, among other principles and processes.9 Certain aspects of and adjustments to the operating fee process, such as the 1 See, e.g., 12 U.S.C. 1783(a) (making the Share Insurance Fund available ‘‘for such administrative and other expenses incurred in carrying out the purpose of [Subchapter II of the FCU Act] as [the Board] may determine to be proper.’’). 2 12 U.S.C. 1755(a) (‘‘In accordance with rules prescribed by the Board, each Federal credit union shall pay to the Administration an annual operating fee which may be composed of one or more charges identified as to the function or functions for which assessed.’’). 3 See, e.g., Request for Comment Regarding Revised Overhead Transfer Rate Methodology, 82 FR 29935 (June 30, 2017). 4 12 CFR 701.6(a). 5 12 U.S.C. 1755(a). 6 12 U.S.C. 1755(b). 7 Id. 8 12 CFR 701.6. 9 Id. PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 53709 multipliers used to determine fees applicable to designated asset tiers, are not included in the NCUA’s regulations. Instead, the Board generally adopts an operating fee schedule at an open meeting each year and publishes the schedule in the agency’s annual budget and on its website.10 Section 701.6(a) sets out the basis on which the NCUA assesses the operating fee. Paragraph (a) provides that FCUs must pay the NCUA an annual operating fee based on the credit union’s total assets.11 The NCUA calculates an FCU’s operating fee by multiplying the dollar amount of its total assets by a percentage set by the Board based on asset tiers after considering the expenses of the NCUA and the ability of FCUs to pay the fee. The term ‘‘total assets’’ for purposes of the operating fee presently includes all assets, with certain exclusions, reported on an FCU’s Call Report as of December 31st of the previous fiscal year. Operating fee payments are due from FCUs in April each year, and the NCUA prepares invoices using reported assets from the prior year’s December Call Report.12 In order to provide clarity to FCUs about their operating fee charges for the upcoming year, the Board typically approves the budget and sets the associated operating fee rates in November of the year before the operating fee is billed. Because the budget and operating fee rates are approved before December Call Report data is available, the Chief Financial Officer uses projected FCU asset growth to set the operating fee rates. Therefore, if actual total assets reported in December Call Reports are below the projected asset growth used for setting the operating fee rates, the NCUA will collect less in operating fee revenue than it requires to fund the budget. Conversely, if total assets reported in December Call Reports are greater than projected growth, the NCUA may collect more than is required. 10 In November 2015, the Board delegated authority to the Chief Financial Officer to administer the Board-approved methodology and to set the operating fees as calculated per the approved methodology each annual budget cycle beginning with 2016. See Board Action Memorandum on 2016 Operating Fee (Nov. 19, 2015), https:// www.ncua.gov/About/Documents/ Agenda%20Items/AG20151119Item6a.pdf. Since that time, the operating fee schedule has been published in the NCUA’s annual budget. See 2020– 2021 Budget Justification (December 12, 2019), https://www.ncua.gov/files/agenda-items/ AG20191212Item1b.pdf. 11 12 CFR 701.6(a). 12 Id. E:\FR\FM\31AUP1.SGM 31AUP1 53710 Federal Register / Vol. 85, No. 169 / Monday, August 31, 2020 / Proposed Rules B. The CARES Act and the SBA’s Paycheck Protection Program On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, into law.13 The law is designed to provide aid to the U.S. economy in the midst of the COVID–19 pandemic. The CARES Act authorized the Small Business Administration (SBA) to create a loan guarantee program, the Paycheck Protection Program (PPP), to help certain businesses affected by the COVID–19 pandemic meet payroll needs (including employee salaries, sick leave, other paid leave, and health insurance expenses), as well as mortgage, rent, and utilities expenses. Provided credit union lenders comply with the applicable lender obligations set forth in the SBA’s interim final rule, the SBA will fully guarantee loans issued under the PPP, backed by the full faith and credit of the United States. Most federally insured credit unions are eligible to make PPP loans to members.14 Under the CARES Act, PPP loans must receive a zero percent risk weighting for purposes of the NCUA’s risk-based capital requirements.15 Following enactment of the CARES Act, the Board issued an interim final rule to make several amendments to the NCUA’s regulations relating to PPP loans.16 Of most relevance to this proposed rule, an April 27, 2020, interim final rule provided that if a covered PPP loan made by a federally insured credit union is pledged as collateral for a non-recourse loan that is provided as part of the Board of Governors of the Federal Reserve System’s (FRB) PPP Liquidity Facility,17 the covered loan can be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio. The exclusion of PPP loans pledged to the FRB’s Liquidity Facility was comparable to an interim final rule issued by the other banking 13 Public Law 116–136 (Mar. 27, 2020). unions that are currently permitted to make loans under the SBA’s 7(a) program are automatically approved to make PPP loans. Federally insured credit unions that are not current SBA 7(a) lenders can receive approval by submitting an application to the SBA, unless they are currently designated as being in troubled condition or are subject to a formal enforcement action that addresses unsafe and unsound lending practices. Non-depository financing providers, such as credit union service organizations, may qualify as a PPP lender subject to the requirements listed in the interim final rule. 15 Public Law 116–135 § 1102(a)(2). 16 85 FR 23212 (Apr. 27, 2020). 17 The program was named as both the PPP Lending Facility and the PPP Liquidity Facility when the Board approved the interim final rule. It is now named the PPP Liquidity Facility in FRB documentation on the program. khammond on DSKJM1Z7X2PROD with PROPOSALS 14 Credit VerDate Sep<11>2014 16:36 Aug 28, 2020 Jkt 250001 agencies with respect to their capital regulations,18 which is consistent with the statutory requirement for the Board to prescribe a system of prompt corrective action that is, among other things, comparable to the section of the Federal Deposit Insurance Act that established prompt corrective action requirements for banks. That change applied only to the calculation of the net worth ratio and not to other requirements or calculations in the NCUA’s regulations that depend on a credit union’s total assets. At present, an FCU must report the value of all of its PPP loans in its Call Reports, whether the FCU originated the loans, purchased them in the secondary market, or has pledged them to the FRB Liquidity Facility.19 The value of PPP loans reported in Call Reports could therefore increase the total asset amounts the NCUA uses to compute the annual operating fees due. The Board is concerned that without a change to the NCUA’s current operating fee regulation,20 an FCU’s PPP loans may subject the FCU to a higher operating fee, and this may impose a burden for participation in this program, or a disincentive to participate now that the program has been extended. As the PPP serves an important public purpose, the Board believes PPP loans warrant exclusion from total assets when determining operating fees to avoid these harms. Under § 1755 of the FCU Act, the Board considers, among other things, FCUs’ ability to pay assessments. The Board finds that an increase in an FCU’s assets based on PPP loans—regardless of whether they are pledged to the PPP Liquidity Facility—poses no undue risk to the credit union’s capital strength. Additionally, given the short-term and low-fee nature of PPP loans, FCUs that report increased total assets as a result of them are unlikely to have a corresponding increase in their ability to pay a higher assessment. Furthermore, excluding PPP loans from operating fee assessments makes the program more affordable to the participants and avoids imposing a burden based on participation in a program designed to provide an important public benefit. These benefits closely align with the mission of credit unions to support their member communities through trusted and affordable financial services. 18 85 FR 20387 (Apr. 13, 2020). SBA Procedural Notice, Guidance on Whole Loan Sales of Paycheck Protection Program Loans (May 1, 2020), available at https:// www.sba.gov/sites/default/files/2020-05/500020024.pdf. 20 12 CFR 701.6(a). 19 See PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 Accordingly, based on this statutory analysis and application, this proposed rule has a broader scope of exclusion than the Board’s April 27, 2020, interim final rule on PPP loans. In addition, due to the possibility of additional economic stimulus through similar programs, the Board is proposing to incorporate a general statement in the regulation that contemplates the Board’s exclusion of loans made under programs similar to the PPP from total assets when calculating operating fees. This change would provide the Board with flexibility to consider excluding assets related to future programs that may develop on short notice, particularly in cases where including such assets may create a disincentive for FCUs to participate. In a separate Federal Register document, the Board is requesting comment on the methodologies it uses to set the rate schedule for operating fees and how it determines the OTR. Members of the public are encouraged to comment about these methodologies by responding to the appropriate Federal Register notice. The notice relating to National Credit Union Administration Overhead Transfer Rate Methodology and Operating Fee Schedule Methodology is published elsewhere in this issue of the Federal Register. II. Legal Authority The Board is issuing this proposed rule pursuant to its authority under the FCU Act.21 The FCU Act grants the Board a broad mandate to issue regulations governing both FCUs and, more generally, all federally insured credit unions. For example, section 120 of the FCU Act is a general grant of regulatory authority and authorizes the Board to prescribe rules and regulations for the administration of the FCU Act.22 Section 105 of the FCU Act requires FCUs to pay an annual operating fee to the NCUA.23 In particular, section 105(b) provides: The fee assessed under this section shall be determined according to a schedule, or schedules, or other method determined by the Board to be appropriate, which gives due consideration to the expenses of the Administration in carrying out its responsibilities under this chapter and to the ability of Federal credit unions to pay the fee. The Board shall, among other things, determine the periods for which the fee shall be assessed and the 21 12 U.S.C. 1751 et seq. U.S.C. 1766(a). 23 12 U.S.C. 1755(a). 22 12 E:\FR\FM\31AUP1.SGM 31AUP1 Federal Register / Vol. 85, No. 169 / Monday, August 31, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS date or dates for the payment of the fee or increments thereof.24 Accordingly, the FCU Act provides the Board with broad discretion to decide how the amount of the operating fee is determined. III. Summary of the Proposed Rule The proposed rule would amend § 701.6(a) by excluding PPP loans from the FCU’s total assets for purposes of calculating its operating fee. In particular, the proposal would amend current § 701.6(a) to provide, among other things, that the operating fee shall be based on the total assets of each FCU, less loans made under the Small Business Administration’s Paycheck Protection Program.25 Under this proposed rule, participating FCUs would continue to report their assets in the quarterly Call Report. For purposes of determining the operating fee, the NCUA will exclude reported PPP loans in the calculation of total assets. The NCUA believes this change will ensure that FCUs interested in making PPP loans do not bear greater financial burdens for doing so. The Board proposes to exclude PPP loans from the calculation of total assets even if the PPP loans are not pledged to the FRB PPP Liquidity Facility because PPP loans pose no undue risk to the FCU’s capital strength and, due to their unique structure, do not increase an FCU’s ability to pay a higher operating fee. Excluding all reported PPP loans when determining total assets also ensures FCUs that do not pledge their PPP loans to the FRB are treated consistently with those FCUs that do. Absent such consistent treatment, FCUs that do not pledge their PPP loans to the FRB would bear a larger relative cost burden of the operating fee compared to those FCUs that do pledge their PPP loans. Excluding PPP loans from the calculation of total assets is similar to the amendment the Board made to the calculation of total assets in a 2009 final rule to encourage FCU participation in the Credit Union System Investment Program (CU SIP) or the Credit Union Homeowners Affordability Relief Program (CU HARP).26 Investments in these programs were excluded from the computation of total assets because the instruments were guaranteed by the Share Insurance Fund, posed no credit risk to the participating credit unions, and the exclusion was intended to encourage a greater participation rate in programs with a clear public benefit. The CU SIP ended in 2010. Similarly, 24 12 U.S.C. 1755(b). U.S.C. 636(a)(36). 26 74 FR 29934 (June 24, 2009). 25 15 VerDate Sep<11>2014 16:36 Aug 28, 2020 Jkt 250001 CU HARP investments were issued by the U.S. Central Federal Credit Union and all of those investments matured prior to that credit union’s liquidation in 2012. Because these programs no longer exist and have no remaining investments, the Board proposes to amend current § 701.6(a) to delete references to them. However, given the potential for additional programs similar to the PPP to arise in the near future or as a result of future economic crises, the Board proposes adding regulatory language that would contemplate exclusion of assets under similar programs without requiring references to the specific program in the regulation. The Board anticipates making exclusions of similar future programs by issuing an order, which may be published in a letter to FCUs or a similar notice. The Board invites comment on this approach. In addition, the Board is proposing to amend current § 701.6(a) to use the average of FCUs’ four most-recently reported quarterly assets to calculate operating fees and to make conforming amendments to the regulatory text to ensure this same approach is applied to merged and recently converted FCUs. The Board is proposing to use an average of total assets because it believes that doing so will reduce the effect of seasonal fluctuation in the total assets of FCUs, and will provide more certainty to FCUs about their operating fee charges for the forthcoming year. The change to a four-quarter average of reported assets also reduces the risk that the Board will collect less in operating fee revenue than it requires if actual assets reported in FCUs’ December Call Reports are below the asset growth assumption used to set the operating fee rates in the budget. In particular, the proposal would amend current § 701.6(a) to provide, among other things, that the operating fee shall be based on the average of total assets of each FCU based on data reported in the preceding four Call Reports (as reported on NCUA Form 5300 for natural person FCUs and Form 5310 for corporate FCUs), or as otherwise determined pursuant to paragraph (b) of § 701.6. Specifically, when determining the operating fee rate and the invoice amounts due, the NCUA Board will use the average of FCUs’ four most-recent Call Reports available at the time the Board approves the budget for the forthcoming year. The Board anticipates that this change will have no impact on current billing practices for newly chartered FCUs, since these credit unions do not receive an operating fee invoice until the second year after they are chartered. The PO 00000 Frm 00022 Fmt 4702 Sfmt 4702 53711 Board will continue its current practice of treating merged FCUs and conversions of non-FCUs into FCUs as a single entity for purposes of calculating the average total assets that are the basis for determining the amount of operating fees due. For purposes of calculating the average total assets of an FCU that converts from or merges with a federally insured state-chartered credit union (FISCU), the Board proposes to compute comparable quarterly total assets using the Call Report data in the agency’s possession. For conversions to an FCU charter from entities not insured by the NCUA, the Board proposes to average assets based only on Call Reports filed by the time the Board finalizes its budget because the NCUA cannot validate the accuracy or consistency of other data sources that may be similar to NCUA Call Reports. In circumstances where a conversion to an FCU charter from an entity not insured by the NCUA occurs in the fourth quarter of the year before the operating fee is due, no Call Report data will be available at the time the Board finalizes its budget, and the converted entity will therefore pay no operating fee in the year following conversion. While this approach would produce a different result based only on insured status prior to conversion for entities that are otherwise of the same FCU status after the conversion, the Board believes its lack of access to verified Call Report data for non-NCUA insured entities supports the distinction. In addition, the Board expects this will be a rare occurrence, with relatively small impact, as the maximum amount of forgone revenue is one quarter of reported assets for which a converted entity could be exempt from paying an operating fee. While this discrepancy could be avoided if the Board continued its current practice of estimating December Call Report data as the sole point of reference for determining total assets for the operating fee, the Board believes the four-quarter average is more equitable on the whole because it can account for seasonal share account fluctuations that some FCUs experience based on the characteristics and transaction patterns engaged in by their fields of membership. As discussed above, the proposed four-quarter average approach also would eliminate the risk that the Board could over- or under-collect operating fees based on differences between its estimation of and actual December Call Report data.27 The Board 27 While the proposed regulatory language introducing section 701.6(b)(2)(i)(B) could be read E:\FR\FM\31AUP1.SGM Continued 31AUP1 khammond on DSKJM1Z7X2PROD with PROPOSALS 53712 Federal Register / Vol. 85, No. 169 / Monday, August 31, 2020 / Proposed Rules requests comment on this proposed approach. With respect to mergers where an entity not insured by the NCUA merges into a continuing FCU, the same issue exists with respect to the Board’s access to data comparable to the Call Report for periods prior to the merger date. Here again, the proposal would combine assets looking back four quarters for mergers involving two FCUs or where a FISCU merges into a continuing FCU. On the other hand, for mergers into FCUs of entities that are not insured by the NCUA, the proposed regulation would not require combination of assets prior to the merger date, since the NCUA does not collect asset data for entities it does not insure. Instead the continuing FCU would pay a fee based only on assets reported on its own Call Reports. Depending on the specific timing of when the merger occurred, this could result in multiple quarters where the assets acquired from the nonNCUA insured entity are not included in the calculated average assets used to bill the continuing FCU. For the same reasons expressed above with respect to conversions, the Board believes the benefits of the four-quarter average outweigh the different treatment for mergers with FISCUs compared to mergers with entities not insured by the NCUA. The Board also invites public comment on this aspect of the proposal. With respect to purchase and assumption transactions, the regulation presently designates that they will be treated as mergers in circumstances where an FCU purchases all or essentially all of the assets of another credit union. In this proposed rule, the Board retains that language, but requests comment on alternative approaches the Board may wish to consider. The Board acknowledges that, in some circumstances, determining whether a purchase and assumption included all or essentially all assets could be a difficult determination. The Board also proposes some technical changes to existing rule language. First, the proposal clarifies that the NCUA will not issue refunds of operating fees to FCUs that convert to any other type of charter, not just a state-charter. This ensures the same treatment for a conversion to a mutual savings bank or any other charter type. The Board also proposes to remove the language ‘‘in the year in which the conversion takes place’’ from this to require an entity not insured by the NCUA that converts to a FCU charter in the fourth quarter to pay a fee in the year following conversion, the lack of available Call Report data prior to the date the Board adopts the budget would preclude a fee in that scenario. VerDate Sep<11>2014 16:36 Aug 28, 2020 Jkt 250001 provision, as a refund is never provided to any converting FCU, regardless of timing. The Board proposes the same changes to the rule text on refunds in the context of mergers. In addition, the Board proposes to expand the situations expressly covered in the regulation to include conversions and mergers involving entities not insured by the NCUA. Such transactions could involve privately insured statechartered credit unions or banking institutions. To support this expansion, the proposed regulatory language introduces the phrase ‘‘entity not insured by the NCUA.’’ In the language specifying that certain purchase and assumption transactions will be treated as mergers, the Board proposes to change the term ‘‘credit union’’ to ‘‘depository institution’’ to clarify that a purchase and assumption involving a bank, for example, would be treated in the same manner. Finally, the proposal would divide paragraph (b) of the regulation into additional subparagraphs to improve readability. The Board invites comments on these technical changes as well. IV. Regulatory Procedures A. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities. A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include federally insured credit unions with assets less than $100 million) and publishes its certification and a short, explanatory statement in the Federal Register together with the rule. The proposed rule would make a technical change to the period for measuring total assets for calculating the Operating Fee. However, the Board does not believe the impact will disproportionally impact small credit unions such that a regulatory flexibility analysis is required. First, small credit unions are still required to report assets on a quarterly basis, and the regulation only increases the number of quarters the NCUA will consider in adjusting the operating fee. Nor does the exclusion of PPP loans from assets increase reporting requirements, as the NCUA already has the information necessary to make that exclusion. Finally, although exclusion of PPP loans will decrease fee amounts PO 00000 Frm 00023 Fmt 4702 Sfmt 4702 for some small credit unions, the Board does not believe the change will amount to a significant impact on a substantial number of small entities. Accordingly, the NCUA certifies that the proposed rule will not have a significant economic impact on a substantial number of small credit unions. B. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency creates a new or amends existing information collection requirements.28 For the purpose of the PRA, an information collection requirement may take the form of a reporting, recordkeeping, or a thirdparty disclosure requirement. The proposed rule does not contain information collection requirements that require approval by OMB under the PRA.29 C. Executive Order 13132 Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, the NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the Executive Order. This proposed rulemaking would not have a substantial direct effect on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. The NCUA has determined that this proposed rule does not constitute a policy that has federalism implications for purposes of the Executive Order. D. Assessment of Federal Regulations and Policies on Families The NCUA has determined that this proposed rule will not affect family well-being within the meaning of Section 654 of the Treasury and General Government Appropriations Act, 1999.30 List of Subjects in 12 CFR Part 701 Credit unions, Low income, Nonmember deposits, Secondary capital, Shares. By the National Credit Union Administration Board on July 30, 2020. Gerard Poliquin, Secretary of the Board. For the reasons discussed above, the Board proposes to amend 12 CFR part 701 as follows: 28 44 U.S.C. 3507(d); 5 CFR part 1320. U.S.C. Chap. 35. 30 Public Law 105–277, 112 Stat. 2681 (1998). 29 44 E:\FR\FM\31AUP1.SGM 31AUP1 Federal Register / Vol. 85, No. 169 / Monday, August 31, 2020 / Proposed Rules PART 701—Organization and Operations of Federal Credit Unions 1. The authority citation for part 701 continues to read as follows: ■ Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601– 3610. Section 701.35 is also authorized by 42 U.S.C. 4311–4312. 2. In § 701.6 revise paragraphs (a) and (b) to read as follows: ■ khammond on DSKJM1Z7X2PROD with PROPOSALS § 701.6 Fees paid by Federal credit unions. (a) Basis for assessment. Each calendar year, or as otherwise directed by the NCUA Board, each federal credit union shall pay an operating fee to the NCUA for the current fiscal year (January 1 to December 31) in accordance with a schedule fixed by the Board from time to time. (1) General. The operating fee shall be based on the average of total assets of each federal credit union based on data reported in NCUA Forms 5300 and 5310 from the four quarters immediately preceding the time the Board approves the agency’s budget or as otherwise determined pursuant to paragraph (b) of this section. (2) Exclusions from total assets. For purposes of calculating the operating fee, total assets shall not include any loans on the books of a natural person federal credit union made under the Small Business Administration’s Paycheck Protection Program, 15 U.S.C. 636(a)(36), or any similar program approved for exclusion by the NCUA Board. (b) Coverage. The operating fee shall be paid by each federal credit union engaged in operations as of January 1 of each calendar year in accordance with paragraph (a), except as otherwise provided by this paragraph. (1) New charters. A newly chartered federal credit union will not pay an operating fee until the year following the first full calendar year after the date chartered. (2) Conversions. (i) In the first calendar year following conversion: (A) A federally insured state-chartered credit union that converts to a federal credit union charter must pay an operating fee based on the average assets reported in the year of conversion on NCUA Forms 5300 or 5310 from the four quarters immediately preceding the time the Board approves the agency’s budget in the year of conversion. (B) An entity not insured by the NCUA that converts to a federal credit VerDate Sep<11>2014 16:36 Aug 28, 2020 Jkt 250001 union charter must pay an operating fee based on the assets, or average thereof, reported on NCUA Forms 5300 or 5310 for any one or more quarters immediately preceding the time the Board approves the agency’s budget in the year of conversion. (ii) A federal credit union converting to a different charter will not receive a refund of any operating fees paid to the NCUA. (3) Mergers. (i) In the first calendar year following merger: (A) A continuing federal credit union that has merged with one or more federally insured credit unions must pay an operating fee based on the average combined total assets of the federal credit union and any merged federally insured credit unions as reported on NCUA Forms 5300 or 5310 in the four quarters immediately preceding the time the Board approves the agency’s budget in the merger year. (B) For purposes of this paragraph, a purchase and assumption transaction where the continuing federal credit union purchases all or essentially all of the assets of another depository institution shall be deemed a merger. (ii) A federal credit union that merges with a federal or state-chartered credit union, or an entity not insured by the NCUA, will not receive a refund of any operating fee paid to the NCUA. (4) Liquidations. A Federal credit union placed in liquidation will not pay any operating fee after the date of liquidation. * * * * * 53713 Federal Aviation Administration upward from 700 feet above the surface. Lastly, this action proposes an administrative correction to all of the airspace’s legal descriptions. This action would ensure the safety and management of instrument flight rule (IFR) operations at the airport. DATES: Comments must be received on or before October 15, 2020. ADDRESSES: Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12–140, Washington, DC 20590; telephone: 1– 800–647–5527, or (202) 366–9826. You must identify FAA Docket No. FAA– 2020–0768; Airspace Docket No. 18– AWP–25, at the beginning of your comments. You may also submit comments through the internet at https://www.regulations.gov. FAA Order 7400.11D, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at https://www.faa.gov/air_ traffic/publications/. For further information, you can contact the Airspace Policy Group, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267–8783. The Order is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of FAA Order 7400.11D at NARA, email fedreg.legal@nara.gov or go to https:// www.archives.gov/federal-register/cfr/ ibr-locations.html. FOR FURTHER INFORMATION CONTACT: Matthew Van Der Wal, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198; telephone (206) 231–3695. SUPPLEMENTARY INFORMATION: 14 CFR Part 71 Authority for This Rulemaking [FR Doc. 2020–16981 Filed 8–28–20; 8:45 am] BILLING CODE 7535–01–P DEPARTMENT OF TRANSPORTATION [Docket No. FAA–2020–0768; Airspace Docket No. 18–AWP–25] RIN 2120–AA66 Proposed Amendment of Class D and E Airspace; Truckee, CA Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: This action proposes to modify Class E airspace, designated as an extension to Class D or Class E surface airspace, at Truckee-Tahoe Airport. This action also proposes to modify Class E airspace extending SUMMARY: PO 00000 Frm 00024 Fmt 4702 Sfmt 4702 The FAA’s authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency’s authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it would amend the Class D and Class E airspace E:\FR\FM\31AUP1.SGM 31AUP1

Agencies

[Federal Register Volume 85, Number 169 (Monday, August 31, 2020)]
[Proposed Rules]
[Pages 53708-53713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16981]


=======================================================================
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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AF24


Fees Paid by Federal Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: The NCUA Board (Board) proposes to amend its regulation 
governing assessment of an annual operating fee to federal credit 
unions (FCUs). First, for purposes of calculating the annual operating 
fee, the proposed rule would amend the current rule to exclude from 
total assets any loan an FCU reports under the Small Business 
Administration's Paycheck Protection Program (PPP) or similar future 
programs approved for exclusion by the NCUA Board. Second, the proposed 
rule would delete from the current regulation references to the Credit 
Union System Investment Program and the Credit Union Homeowners 
Affordability Relief Program, both of which no longer exist. Third, the 
proposed rule would amend the period used for the calculation of an 
FCU's total assets. Currently, total assets are calculated using the 
FCU's December 31st Call Report of the preceding year. Under the 
proposed rule, total assets would be calculated as the average total 
assets reported on the FCU's previous four Call Reports available at 
the time the NCUA Board approves the agency's budget for the upcoming 
year, adjusted for any excludable programs as determined by the Board. 
Finally, the proposed rule also would make some minor technical 
changes.
    The Board has separately published a document and requested public 
comment about the methodologies it uses for computing the Overhead 
Transfer Rate and setting the annual operating fee schedule for fees 
charged to FCUs. Members of the public are encouraged to comment about 
these methodologies by responding to the appropriate Federal Register 
document.

[[Page 53709]]

The notice relating to National Credit Union Administration Overhead 
Transfer Rate Methodology and Operating Fee Schedule Methodology is 
published elsewhere in this issue of the Federal Register.

DATES: Comments must be received on or before October 30, 2020.

ADDRESSES: You may submit written comments, identified by RIN 3133-
AF24, by any of the following methods (Please send comments by one 
method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Fax: (703) 518-6319. Include ``[Your Name]--Comments on 
Proposed Rule: Fees Paid by Federal Credit Unions'' in the transmittal.
     Mail: Address to Gerard S. Poliquin, Secretary of the 
Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
    Public Inspection: You may view all public comments on the Federal 
eRulemaking Portal at http://www.regulations.gov as submitted, except 
for those we cannot post for technical reasons. The NCUA will not edit 
or remove any identifying or contact information from the public 
comments submitted. Due to social distancing measures in effect, the 
usual opportunity to inspect paper copies of comments in the NCUA's law 
library is not currently available. After social distancing measures 
are relaxed, visitors may make an appointment to review paper copies by 
calling (703) 518-6540 or emailing [email protected].

FOR FURTHER INFORMATION CONTACT: James Holm, Supervisory Budget 
Analyst, Office of the Chief Financial Officer, at (703) 518-6570; 
Kevin Tuininga, Associate General Counsel, or John H. Brolin, Senior 
Staff Attorney, Office of General Counsel, at (703) 518-6540; or by 
mail at 1775 Duke Street, Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION: 
I. Background
II. Legal Authority
III. Summary of the Proposed Rule
IV. Regulatory Procedures

I. Background

A. The NCUA Annual Budget and Fees Paid by FCUs

    The NCUA charters, regulates, and insures deposits in FCUs and 
insures deposits in state-chartered credit unions that have their 
shares insured through the National Credit Union Share Insurance Fund 
(Share Insurance Fund). To cover expenses related to the NCUA's tasks, 
the Board adopts an annual budget in the fall of each year. The Federal 
Credit Union Act (FCU Act) provides two primary sources to fund the 
budget: (1) Requisitions from the Share Insurance Fund; \1\ and (2) 
operating fees charged against FCUs.\2\ The Board uses an allocation 
formula, the Overhead Transfer Rate (OTR), to determine the amount of 
the budget that it will requisition from the Share Insurance Fund.\3\ 
Remaining amounts needed to fund the annual budget are charged to FCUs 
in the form of operating fees, based on each FCU's total assets.\4\
---------------------------------------------------------------------------

    \1\ See, e.g., 12 U.S.C. 1783(a) (making the Share Insurance 
Fund available ``for such administrative and other expenses incurred 
in carrying out the purpose of [Subchapter II of the FCU Act] as 
[the Board] may determine to be proper.'').
    \2\ 12 U.S.C. 1755(a) (``In accordance with rules prescribed by 
the Board, each Federal credit union shall pay to the Administration 
an annual operating fee which may be composed of one or more charges 
identified as to the function or functions for which assessed.'').
    \3\ See, e.g., Request for Comment Regarding Revised Overhead 
Transfer Rate Methodology, 82 FR 29935 (June 30, 2017).
    \4\ 12 CFR 701.6(a).
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    The FCU Act requires each FCU to, ``in accordance with rules 
prescribed by the Board [. . .] pay to the [NCUA] an annual operating 
fee which may be composed of one or more charges identified as to the 
function or functions for which assessed.'' \5\ The fee must ``be 
determined according to a schedule, or schedules, or other method 
determined by the Board to be appropriate, which gives due 
consideration to the expenses of the [NCUA] in carrying out its 
responsibilities under the [FCU Act] and to the ability of [FCUs] to 
pay the fee.'' \6\ The statute requires the Board to, among other 
things, ``determine the periods for which the fee shall be assessed and 
the date or dates for the payment of the fee or increments thereof.'' 
\7\
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    \5\ 12 U.S.C. 1755(a).
    \6\ 12 U.S.C. 1755(b).
    \7\ Id.
---------------------------------------------------------------------------

    Section 701.6 of the NCUA's regulations governs operating fee 
processes.\8\ The regulation establishes the following: (i) The basis 
for charging operating fees (i.e., total assets of the FCU, with 
certain exclusions, as of December 31st of the preceding year); (ii) 
the notice the NCUA must provide to FCUs regarding the fees; (iii) 
coverage provisions providing certain exceptions for new FCU charters, 
conversions, mergers, and liquidations; and (iv) the assessment of 
administrative fees and interest for late payment, among other 
principles and processes.\9\ Certain aspects of and adjustments to the 
operating fee process, such as the multipliers used to determine fees 
applicable to designated asset tiers, are not included in the NCUA's 
regulations. Instead, the Board generally adopts an operating fee 
schedule at an open meeting each year and publishes the schedule in the 
agency's annual budget and on its website.\10\
---------------------------------------------------------------------------

    \8\ 12 CFR 701.6.
    \9\ Id.
    \10\ In November 2015, the Board delegated authority to the 
Chief Financial Officer to administer the Board-approved methodology 
and to set the operating fees as calculated per the approved 
methodology each annual budget cycle beginning with 2016. See Board 
Action Memorandum on 2016 Operating Fee (Nov. 19, 2015), https://www.ncua.gov/About/Documents/Agenda%20Items/AG20151119Item6a.pdf. 
Since that time, the operating fee schedule has been published in 
the NCUA's annual budget. See 2020-2021 Budget Justification 
(December 12, 2019), https://www.ncua.gov/files/agenda-items/AG20191212Item1b.pdf.
---------------------------------------------------------------------------

    Section 701.6(a) sets out the basis on which the NCUA assesses the 
operating fee. Paragraph (a) provides that FCUs must pay the NCUA an 
annual operating fee based on the credit union's total assets.\11\ The 
NCUA calculates an FCU's operating fee by multiplying the dollar amount 
of its total assets by a percentage set by the Board based on asset 
tiers after considering the expenses of the NCUA and the ability of 
FCUs to pay the fee. The term ``total assets'' for purposes of the 
operating fee presently includes all assets, with certain exclusions, 
reported on an FCU's Call Report as of December 31st of the previous 
fiscal year.
---------------------------------------------------------------------------

    \11\ 12 CFR 701.6(a).
---------------------------------------------------------------------------

    Operating fee payments are due from FCUs in April each year, and 
the NCUA prepares invoices using reported assets from the prior year's 
December Call Report.\12\ In order to provide clarity to FCUs about 
their operating fee charges for the upcoming year, the Board typically 
approves the budget and sets the associated operating fee rates in 
November of the year before the operating fee is billed. Because the 
budget and operating fee rates are approved before December Call Report 
data is available, the Chief Financial Officer uses projected FCU asset 
growth to set the operating fee rates. Therefore, if actual total 
assets reported in December Call Reports are below the projected asset 
growth used for setting the operating fee rates, the NCUA will collect 
less in operating fee revenue than it requires to fund the budget. 
Conversely, if total assets reported in December Call Reports are 
greater than projected growth, the NCUA may collect more than is 
required.
---------------------------------------------------------------------------

    \12\ Id.

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[[Page 53710]]

B. The CARES Act and the SBA's Paycheck Protection Program

    On March 27, 2020, President Trump signed the Coronavirus Aid, 
Relief, and Economic Security Act, or CARES Act, into law.\13\ The law 
is designed to provide aid to the U.S. economy in the midst of the 
COVID-19 pandemic. The CARES Act authorized the Small Business 
Administration (SBA) to create a loan guarantee program, the Paycheck 
Protection Program (PPP), to help certain businesses affected by the 
COVID-19 pandemic meet payroll needs (including employee salaries, sick 
leave, other paid leave, and health insurance expenses), as well as 
mortgage, rent, and utilities expenses. Provided credit union lenders 
comply with the applicable lender obligations set forth in the SBA's 
interim final rule, the SBA will fully guarantee loans issued under the 
PPP, backed by the full faith and credit of the United States. Most 
federally insured credit unions are eligible to make PPP loans to 
members.\14\ Under the CARES Act, PPP loans must receive a zero percent 
risk weighting for purposes of the NCUA's risk-based capital 
requirements.\15\
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    \13\ Public Law 116-136 (Mar. 27, 2020).
    \14\ Credit unions that are currently permitted to make loans 
under the SBA's 7(a) program are automatically approved to make PPP 
loans. Federally insured credit unions that are not current SBA 7(a) 
lenders can receive approval by submitting an application to the 
SBA, unless they are currently designated as being in troubled 
condition or are subject to a formal enforcement action that 
addresses unsafe and unsound lending practices. Non-depository 
financing providers, such as credit union service organizations, may 
qualify as a PPP lender subject to the requirements listed in the 
interim final rule.
    \15\ Public Law 116-135 Sec.  1102(a)(2).
---------------------------------------------------------------------------

    Following enactment of the CARES Act, the Board issued an interim 
final rule to make several amendments to the NCUA's regulations 
relating to PPP loans.\16\ Of most relevance to this proposed rule, an 
April 27, 2020, interim final rule provided that if a covered PPP loan 
made by a federally insured credit union is pledged as collateral for a 
non-recourse loan that is provided as part of the Board of Governors of 
the Federal Reserve System's (FRB) PPP Liquidity Facility,\17\ the 
covered loan can be excluded from a credit union's calculation of total 
assets for the purposes of calculating its net worth ratio. The 
exclusion of PPP loans pledged to the FRB's Liquidity Facility was 
comparable to an interim final rule issued by the other banking 
agencies with respect to their capital regulations,\18\ which is 
consistent with the statutory requirement for the Board to prescribe a 
system of prompt corrective action that is, among other things, 
comparable to the section of the Federal Deposit Insurance Act that 
established prompt corrective action requirements for banks.
---------------------------------------------------------------------------

    \16\ 85 FR 23212 (Apr. 27, 2020).
    \17\ The program was named as both the PPP Lending Facility and 
the PPP Liquidity Facility when the Board approved the interim final 
rule. It is now named the PPP Liquidity Facility in FRB 
documentation on the program.
    \18\ 85 FR 20387 (Apr. 13, 2020).
---------------------------------------------------------------------------

    That change applied only to the calculation of the net worth ratio 
and not to other requirements or calculations in the NCUA's regulations 
that depend on a credit union's total assets. At present, an FCU must 
report the value of all of its PPP loans in its Call Reports, whether 
the FCU originated the loans, purchased them in the secondary market, 
or has pledged them to the FRB Liquidity Facility.\19\ The value of PPP 
loans reported in Call Reports could therefore increase the total asset 
amounts the NCUA uses to compute the annual operating fees due. The 
Board is concerned that without a change to the NCUA's current 
operating fee regulation,\20\ an FCU's PPP loans may subject the FCU to 
a higher operating fee, and this may impose a burden for participation 
in this program, or a disincentive to participate now that the program 
has been extended. As the PPP serves an important public purpose, the 
Board believes PPP loans warrant exclusion from total assets when 
determining operating fees to avoid these harms.
---------------------------------------------------------------------------

    \19\ See SBA Procedural Notice, Guidance on Whole Loan Sales of 
Paycheck Protection Program Loans (May 1, 2020), available at 
https://www.sba.gov/sites/default/files/2020-05/5000-20024.pdf.
    \20\ 12 CFR 701.6(a).
---------------------------------------------------------------------------

    Under Sec.  1755 of the FCU Act, the Board considers, among other 
things, FCUs' ability to pay assessments. The Board finds that an 
increase in an FCU's assets based on PPP loans--regardless of whether 
they are pledged to the PPP Liquidity Facility--poses no undue risk to 
the credit union's capital strength. Additionally, given the short-term 
and low-fee nature of PPP loans, FCUs that report increased total 
assets as a result of them are unlikely to have a corresponding 
increase in their ability to pay a higher assessment. Furthermore, 
excluding PPP loans from operating fee assessments makes the program 
more affordable to the participants and avoids imposing a burden based 
on participation in a program designed to provide an important public 
benefit. These benefits closely align with the mission of credit unions 
to support their member communities through trusted and affordable 
financial services. Accordingly, based on this statutory analysis and 
application, this proposed rule has a broader scope of exclusion than 
the Board's April 27, 2020, interim final rule on PPP loans.
    In addition, due to the possibility of additional economic stimulus 
through similar programs, the Board is proposing to incorporate a 
general statement in the regulation that contemplates the Board's 
exclusion of loans made under programs similar to the PPP from total 
assets when calculating operating fees. This change would provide the 
Board with flexibility to consider excluding assets related to future 
programs that may develop on short notice, particularly in cases where 
including such assets may create a disincentive for FCUs to 
participate. In a separate Federal Register document, the Board is 
requesting comment on the methodologies it uses to set the rate 
schedule for operating fees and how it determines the OTR. Members of 
the public are encouraged to comment about these methodologies by 
responding to the appropriate Federal Register notice. The notice 
relating to National Credit Union Administration Overhead Transfer Rate 
Methodology and Operating Fee Schedule Methodology is published 
elsewhere in this issue of the Federal Register.

II. Legal Authority

    The Board is issuing this proposed rule pursuant to its authority 
under the FCU Act.\21\ The FCU Act grants the Board a broad mandate to 
issue regulations governing both FCUs and, more generally, all 
federally insured credit unions. For example, section 120 of the FCU 
Act is a general grant of regulatory authority and authorizes the Board 
to prescribe rules and regulations for the administration of the FCU 
Act.\22\ Section 105 of the FCU Act requires FCUs to pay an annual 
operating fee to the NCUA.\23\ In particular, section 105(b) provides:
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 1751 et seq.
    \22\ 12 U.S.C. 1766(a).
    \23\ 12 U.S.C. 1755(a).
---------------------------------------------------------------------------

    The fee assessed under this section shall be determined according 
to a schedule, or schedules, or other method determined by the Board to 
be appropriate, which gives due consideration to the expenses of the 
Administration in carrying out its responsibilities under this chapter 
and to the ability of Federal credit unions to pay the fee. The Board 
shall, among other things, determine the periods for which the fee 
shall be assessed and the

[[Page 53711]]

date or dates for the payment of the fee or increments thereof.\24\
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 1755(b).
---------------------------------------------------------------------------

    Accordingly, the FCU Act provides the Board with broad discretion 
to decide how the amount of the operating fee is determined.

III. Summary of the Proposed Rule

    The proposed rule would amend Sec.  701.6(a) by excluding PPP loans 
from the FCU's total assets for purposes of calculating its operating 
fee. In particular, the proposal would amend current Sec.  701.6(a) to 
provide, among other things, that the operating fee shall be based on 
the total assets of each FCU, less loans made under the Small Business 
Administration's Paycheck Protection Program.\25\ Under this proposed 
rule, participating FCUs would continue to report their assets in the 
quarterly Call Report. For purposes of determining the operating fee, 
the NCUA will exclude reported PPP loans in the calculation of total 
assets. The NCUA believes this change will ensure that FCUs interested 
in making PPP loans do not bear greater financial burdens for doing so. 
The Board proposes to exclude PPP loans from the calculation of total 
assets even if the PPP loans are not pledged to the FRB PPP Liquidity 
Facility because PPP loans pose no undue risk to the FCU's capital 
strength and, due to their unique structure, do not increase an FCU's 
ability to pay a higher operating fee. Excluding all reported PPP loans 
when determining total assets also ensures FCUs that do not pledge 
their PPP loans to the FRB are treated consistently with those FCUs 
that do. Absent such consistent treatment, FCUs that do not pledge 
their PPP loans to the FRB would bear a larger relative cost burden of 
the operating fee compared to those FCUs that do pledge their PPP 
loans.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 636(a)(36).
---------------------------------------------------------------------------

    Excluding PPP loans from the calculation of total assets is similar 
to the amendment the Board made to the calculation of total assets in a 
2009 final rule to encourage FCU participation in the Credit Union 
System Investment Program (CU SIP) or the Credit Union Homeowners 
Affordability Relief Program (CU HARP).\26\ Investments in these 
programs were excluded from the computation of total assets because the 
instruments were guaranteed by the Share Insurance Fund, posed no 
credit risk to the participating credit unions, and the exclusion was 
intended to encourage a greater participation rate in programs with a 
clear public benefit. The CU SIP ended in 2010. Similarly, CU HARP 
investments were issued by the U.S. Central Federal Credit Union and 
all of those investments matured prior to that credit union's 
liquidation in 2012. Because these programs no longer exist and have no 
remaining investments, the Board proposes to amend current Sec.  
701.6(a) to delete references to them. However, given the potential for 
additional programs similar to the PPP to arise in the near future or 
as a result of future economic crises, the Board proposes adding 
regulatory language that would contemplate exclusion of assets under 
similar programs without requiring references to the specific program 
in the regulation. The Board anticipates making exclusions of similar 
future programs by issuing an order, which may be published in a letter 
to FCUs or a similar notice. The Board invites comment on this 
approach.
---------------------------------------------------------------------------

    \26\ 74 FR 29934 (June 24, 2009).
---------------------------------------------------------------------------

    In addition, the Board is proposing to amend current Sec.  701.6(a) 
to use the average of FCUs' four most-recently reported quarterly 
assets to calculate operating fees and to make conforming amendments to 
the regulatory text to ensure this same approach is applied to merged 
and recently converted FCUs. The Board is proposing to use an average 
of total assets because it believes that doing so will reduce the 
effect of seasonal fluctuation in the total assets of FCUs, and will 
provide more certainty to FCUs about their operating fee charges for 
the forthcoming year. The change to a four-quarter average of reported 
assets also reduces the risk that the Board will collect less in 
operating fee revenue than it requires if actual assets reported in 
FCUs' December Call Reports are below the asset growth assumption used 
to set the operating fee rates in the budget.
    In particular, the proposal would amend current Sec.  701.6(a) to 
provide, among other things, that the operating fee shall be based on 
the average of total assets of each FCU based on data reported in the 
preceding four Call Reports (as reported on NCUA Form 5300 for natural 
person FCUs and Form 5310 for corporate FCUs), or as otherwise 
determined pursuant to paragraph (b) of Sec.  701.6. Specifically, when 
determining the operating fee rate and the invoice amounts due, the 
NCUA Board will use the average of FCUs' four most-recent Call Reports 
available at the time the Board approves the budget for the forthcoming 
year.
    The Board anticipates that this change will have no impact on 
current billing practices for newly chartered FCUs, since these credit 
unions do not receive an operating fee invoice until the second year 
after they are chartered. The Board will continue its current practice 
of treating merged FCUs and conversions of non-FCUs into FCUs as a 
single entity for purposes of calculating the average total assets that 
are the basis for determining the amount of operating fees due. For 
purposes of calculating the average total assets of an FCU that 
converts from or merges with a federally insured state-chartered credit 
union (FISCU), the Board proposes to compute comparable quarterly total 
assets using the Call Report data in the agency's possession. For 
conversions to an FCU charter from entities not insured by the NCUA, 
the Board proposes to average assets based only on Call Reports filed 
by the time the Board finalizes its budget because the NCUA cannot 
validate the accuracy or consistency of other data sources that may be 
similar to NCUA Call Reports.
    In circumstances where a conversion to an FCU charter from an 
entity not insured by the NCUA occurs in the fourth quarter of the year 
before the operating fee is due, no Call Report data will be available 
at the time the Board finalizes its budget, and the converted entity 
will therefore pay no operating fee in the year following conversion. 
While this approach would produce a different result based only on 
insured status prior to conversion for entities that are otherwise of 
the same FCU status after the conversion, the Board believes its lack 
of access to verified Call Report data for non-NCUA insured entities 
supports the distinction. In addition, the Board expects this will be a 
rare occurrence, with relatively small impact, as the maximum amount of 
forgone revenue is one quarter of reported assets for which a converted 
entity could be exempt from paying an operating fee.
    While this discrepancy could be avoided if the Board continued its 
current practice of estimating December Call Report data as the sole 
point of reference for determining total assets for the operating fee, 
the Board believes the four-quarter average is more equitable on the 
whole because it can account for seasonal share account fluctuations 
that some FCUs experience based on the characteristics and transaction 
patterns engaged in by their fields of membership. As discussed above, 
the proposed four-quarter average approach also would eliminate the 
risk that the Board could over- or under-collect operating fees based 
on differences between its estimation of and actual December Call 
Report data.\27\ The Board

[[Page 53712]]

requests comment on this proposed approach.
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    \27\ While the proposed regulatory language introducing section 
701.6(b)(2)(i)(B) could be read to require an entity not insured by 
the NCUA that converts to a FCU charter in the fourth quarter to pay 
a fee in the year following conversion, the lack of available Call 
Report data prior to the date the Board adopts the budget would 
preclude a fee in that scenario.
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    With respect to mergers where an entity not insured by the NCUA 
merges into a continuing FCU, the same issue exists with respect to the 
Board's access to data comparable to the Call Report for periods prior 
to the merger date. Here again, the proposal would combine assets 
looking back four quarters for mergers involving two FCUs or where a 
FISCU merges into a continuing FCU. On the other hand, for mergers into 
FCUs of entities that are not insured by the NCUA, the proposed 
regulation would not require combination of assets prior to the merger 
date, since the NCUA does not collect asset data for entities it does 
not insure. Instead the continuing FCU would pay a fee based only on 
assets reported on its own Call Reports. Depending on the specific 
timing of when the merger occurred, this could result in multiple 
quarters where the assets acquired from the non-NCUA insured entity are 
not included in the calculated average assets used to bill the 
continuing FCU. For the same reasons expressed above with respect to 
conversions, the Board believes the benefits of the four-quarter 
average outweigh the different treatment for mergers with FISCUs 
compared to mergers with entities not insured by the NCUA. The Board 
also invites public comment on this aspect of the proposal.
    With respect to purchase and assumption transactions, the 
regulation presently designates that they will be treated as mergers in 
circumstances where an FCU purchases all or essentially all of the 
assets of another credit union. In this proposed rule, the Board 
retains that language, but requests comment on alternative approaches 
the Board may wish to consider. The Board acknowledges that, in some 
circumstances, determining whether a purchase and assumption included 
all or essentially all assets could be a difficult determination.
    The Board also proposes some technical changes to existing rule 
language. First, the proposal clarifies that the NCUA will not issue 
refunds of operating fees to FCUs that convert to any other type of 
charter, not just a state-charter. This ensures the same treatment for 
a conversion to a mutual savings bank or any other charter type. The 
Board also proposes to remove the language ``in the year in which the 
conversion takes place'' from this provision, as a refund is never 
provided to any converting FCU, regardless of timing. The Board 
proposes the same changes to the rule text on refunds in the context of 
mergers.
    In addition, the Board proposes to expand the situations expressly 
covered in the regulation to include conversions and mergers involving 
entities not insured by the NCUA. Such transactions could involve 
privately insured state-chartered credit unions or banking 
institutions. To support this expansion, the proposed regulatory 
language introduces the phrase ``entity not insured by the NCUA.'' In 
the language specifying that certain purchase and assumption 
transactions will be treated as mergers, the Board proposes to change 
the term ``credit union'' to ``depository institution'' to clarify that 
a purchase and assumption involving a bank, for example, would be 
treated in the same manner. Finally, the proposal would divide 
paragraph (b) of the regulation into additional subparagraphs to 
improve readability. The Board invites comments on these technical 
changes as well.

IV. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a notice of proposed rulemaking, an agency prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities. A regulatory flexibility analysis is not required, however, 
if the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include federally insured credit unions with 
assets less than $100 million) and publishes its certification and a 
short, explanatory statement in the Federal Register together with the 
rule. The proposed rule would make a technical change to the period for 
measuring total assets for calculating the Operating Fee. However, the 
Board does not believe the impact will disproportionally impact small 
credit unions such that a regulatory flexibility analysis is required. 
First, small credit unions are still required to report assets on a 
quarterly basis, and the regulation only increases the number of 
quarters the NCUA will consider in adjusting the operating fee. Nor 
does the exclusion of PPP loans from assets increase reporting 
requirements, as the NCUA already has the information necessary to make 
that exclusion. Finally, although exclusion of PPP loans will decrease 
fee amounts for some small credit unions, the Board does not believe 
the change will amount to a significant impact on a substantial number 
of small entities. Accordingly, the NCUA certifies that the proposed 
rule will not have a significant economic impact on a substantial 
number of small credit unions.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates a new or amends existing information collection 
requirements.\28\ For the purpose of the PRA, an information collection 
requirement may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement. The proposed rule does not contain 
information collection requirements that require approval by OMB under 
the PRA.\29\
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    \28\ 44 U.S.C. 3507(d); 5 CFR part 1320.
    \29\ 44 U.S.C. Chap. 35.
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C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, the NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the Executive Order. This proposed rulemaking 
would not have a substantial direct effect on the states, on the 
connection between the national government and the states, or on the 
distribution of power and responsibilities among the various levels of 
government. The NCUA has determined that this proposed rule does not 
constitute a policy that has federalism implications for purposes of 
the Executive Order.

D. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this proposed rule will not affect 
family well-being within the meaning of Section 654 of the Treasury and 
General Government Appropriations Act, 1999.\30\
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    \30\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects in 12 CFR Part 701

    Credit unions, Low income, Nonmember deposits, Secondary capital, 
Shares.

    By the National Credit Union Administration Board on July 30, 
2020.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the Board proposes to amend 12 CFR 
part 701 as follows:

[[Page 53713]]

PART 701--Organization and Operations of Federal Credit Unions

0
1. The authority citation for part 701 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. 
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.

0
2. In Sec.  701.6 revise paragraphs (a) and (b) to read as follows:


Sec.  701.6  Fees paid by Federal credit unions.

    (a) Basis for assessment. Each calendar year, or as otherwise 
directed by the NCUA Board, each federal credit union shall pay an 
operating fee to the NCUA for the current fiscal year (January 1 to 
December 31) in accordance with a schedule fixed by the Board from time 
to time.
    (1) General. The operating fee shall be based on the average of 
total assets of each federal credit union based on data reported in 
NCUA Forms 5300 and 5310 from the four quarters immediately preceding 
the time the Board approves the agency's budget or as otherwise 
determined pursuant to paragraph (b) of this section.
    (2) Exclusions from total assets. For purposes of calculating the 
operating fee, total assets shall not include any loans on the books of 
a natural person federal credit union made under the Small Business 
Administration's Paycheck Protection Program, 15 U.S.C. 636(a)(36), or 
any similar program approved for exclusion by the NCUA Board.
    (b) Coverage. The operating fee shall be paid by each federal 
credit union engaged in operations as of January 1 of each calendar 
year in accordance with paragraph (a), except as otherwise provided by 
this paragraph.
    (1) New charters. A newly chartered federal credit union will not 
pay an operating fee until the year following the first full calendar 
year after the date chartered.
    (2) Conversions.
    (i) In the first calendar year following conversion:
    (A) A federally insured state-chartered credit union that converts 
to a federal credit union charter must pay an operating fee based on 
the average assets reported in the year of conversion on NCUA Forms 
5300 or 5310 from the four quarters immediately preceding the time the 
Board approves the agency's budget in the year of conversion.
    (B) An entity not insured by the NCUA that converts to a federal 
credit union charter must pay an operating fee based on the assets, or 
average thereof, reported on NCUA Forms 5300 or 5310 for any one or 
more quarters immediately preceding the time the Board approves the 
agency's budget in the year of conversion.
    (ii) A federal credit union converting to a different charter will 
not receive a refund of any operating fees paid to the NCUA.
    (3) Mergers.
    (i) In the first calendar year following merger:
    (A) A continuing federal credit union that has merged with one or 
more federally insured credit unions must pay an operating fee based on 
the average combined total assets of the federal credit union and any 
merged federally insured credit unions as reported on NCUA Forms 5300 
or 5310 in the four quarters immediately preceding the time the Board 
approves the agency's budget in the merger year.
    (B) For purposes of this paragraph, a purchase and assumption 
transaction where the continuing federal credit union purchases all or 
essentially all of the assets of another depository institution shall 
be deemed a merger.
    (ii) A federal credit union that merges with a federal or state-
chartered credit union, or an entity not insured by the NCUA, will not 
receive a refund of any operating fee paid to the NCUA.
    (4) Liquidations. A Federal credit union placed in liquidation will 
not pay any operating fee after the date of liquidation.
* * * * *
[FR Doc. 2020-16981 Filed 8-28-20; 8:45 am]
BILLING CODE 7535-01-P