Dear Board of Directors:
What is Changing?
On April 2, 2012, CFPB released informal guidance softening FRB’s position.
The Compensation Rules permit employers to contribute to Qualified Plans out of a profit pool derived from loan originations.
Credit unions may now make contributions to Qualified Plans for loan originators out of a pool of profits derived from loans originated by employees.
- If your credit union has a discretionary non-qualified pension plan tied to profit targets, you should amend the plan to exclude income from closed-end mortgage loan originations, pending additional guidance from CFPB.
1 12 C.F.R. § 1026.36. Originally adopted by the Federal Reserve Board in September 2010 (75 Fed. Reg. 58,509 (Sept. 24, 2010)). Covered institutions were required to comply with the provisions on April 6, 2011. Pursuant to Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, rulemaking authority for Regulation Z transferred to the Consumer Financial Protection Bureau. In December 2011, CFPB issued interim final rules recodifying provisions of Regulation Z (76 Fed. Reg. 79,768 (Dec. 22, 2011)).
2 Employees and officials of a federal credit union are generally prohibited from receiving commissions, fees, or other compensation, directly or indirectly, in connection with any specific loan. 12 C.F.R. § 701.21(c)(8)(i).
3 A federal credit union may not charge a prepayment penalty. 12 C.F.R. § 701.21(c)(6).
4 As defined in the Internal Revenue Code. 26 U.S.C. § 401.
5 You can reach NCUA’s Office of Consumer Protection at 703-518-1140 or OCPMail@ncua.gov.