Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans (rule, 85 FR 23212, April 27, 2020)
Summary
An interim final rule from the National Credit Union Administration (NCUA) Board, published in the Federal Register on April 27, 2020 (Vol. 85, No. 81). It makes a conforming amendment to the NCUA’s capital adequacy regulation after the CARES Act. The CARES Act authorized the Small Business Administration to create the Paycheck Protection Program (PPP) and requires that PPP loans receive a zero percent risk weighting under the NCUA’s risk-based capital requirements. A covered loan pledged as collateral for a non-recourse loan from a Federal Reserve facility can be excluded from a credit union’s total assets when it calculates its net worth ratio. The rule also amends the definition of commercial loan in the NCUA’s member business loans rule. It is effective on April 27, 2020, and the NCUA requested public comment.
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Cite this document
“Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans (rule, 85 FR 23212, April 27, 2020).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/regulatory-capital-rule-paycheck-protection-program-lending-facility-a-9993a26ec2/
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23212 Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations
§ 1778.11 Maximum grants. ANTHC together with each individual Planning report for a recipient
(a) Grants up to $1,000,000 may be recipient community beneficiary shall community.
made to alleviate a significant decline in execute a grant agreement on a project * * * * *
quantity or quality of water available to by project basis. Expenditures for ■ 27. Amend § 1784.20 by revising
a rural area that occurred within two projects will be based on specific scope paragraph (a) to read as follows:
years of filing an application with the and be requested on a project by project
Agency, or to attempt to avoid a basis. § 1784.20 Applications Accepted from DEC
significant decline that is expected to or ANTHC.
* * * * *
occur during the twelve month period (a) In cases where applications are
(d) The median household income of
following the filing of an application. accepted from DEC or ANTHC, one
the recipient community cannot exceed
* * * * * master application may be submitted
110 percent of the statewide
covering recipient communities to be
nonmetropolitan household income
PART 1784—RURAL ALASKAN funded, however, each individual
(SNMHI), according to US Census
VILLAGE GRANTS project will be broken out and (for
American Community Survey. Alaska
construction grants) each will require its
census communities considered to be
■ 20. The authority citation for part own PER, or PER-like document and
high cost isolated areas or ‘‘off the road
1784 continues to read as follows: Environmental Report.
systems’’ (i.e., communities that cannot
Authority: 7 U.S.C. 1926d. be accessed by roads) may utilize up to * * * * *
150 percent of SNMHI. Chad Rupe,
Subpart A—General Provisions.
■ 24. Amend § 1784.10 by revising Administrator, Rural Utilities Service.
■ 21. Revise § 1784.1 to read as follows: paragraph (a) introductory text to read [FR Doc. 2020–08034 Filed 4–24–20; 8:45 am]
as follows: BILLING CODE 3410–15–P
§ 1784.1 Purpose.
This part sets forth the policies and § 1784.10 Eligible grant purposes.
procedures that will apply when the * * * * * NATIONAL CREDIT UNION
Rural Utilities Service (RUS) makes (a) To pay reasonable costs associated ADMINISTRATION
grants under the Rural Alaska Village with providing potable water or waste
Grant (RAVG) program (7 U.S.C. 1926d) disposal services to residents of 12 CFR Parts 702 and 723
to native villages in Alaska. The grants recipient communities. Reasonable costs RIN 3133–AF16
will be provided directly to a native include construction, planning, pre-
village or jointly with either The State development costs (including Regulatory Capital Rule: Paycheck
of Alaska, Department of Environmental engineering, design, and rights-of-way Protection Program Lending Facility
Conservation (DEC) or The Alaska establishment), and technical assistance and Paycheck Protection Program
Native Tribal Health Consortium as further defined in paragraphs (a)(1) Loans
(ANTHC) for the benefit of native through (3) of this section:
villages in Alaska. AGENCY: National Credit Union
* * * * *
■ 22. Amend § 1784.2 by removing the
Administration (NCUA).
definition of ‘‘Rural or Native Villages Subpart C—Application Processing ACTION: Interim final rule.
in Alaska’’ and adding, in alphabetical SUMMARY: The NCUA Board (Board) is
order, the definition of ‘‘Native Villages ■ 25. Amend § 1784.16 by revising
issuing this interim final rule to make a
in Alaska’’ to read as follows: paragraph (a) to read as follows:
conforming amendment to its capital
§ 1784.2 Definitions. § 1784.16 General. adequacy regulation following the
* * * * * enactment of the Coronavirus Aid,
(a) DEC and ANTHC utilize the
Native Villages in Alaska means a Relief, and Economic Security Act
National Indian Health Service,
Native village in Alaska which meets (CARES Act). The CARES Act
Sanitation Deficiency System (SDS)
the definition of a village as defined in authorizes the Small Business
database as a comprehensive source of
section 3 of the Alaska Native Claims Administration to create a loan
rural sanitation needs in Alaska. The
Settlement Act (43 U.S.C. 1602). guarantee program, the Paycheck
database provides an inventory of the
Protection Program (PPP), to help
* * * * * sanitation deficiencies including water,
certain businesses affected by the
sewer, and solid waste facilities for
Subpart B—Grant Requirements COVID–19 pandemic. The CARES Act
existing homes. The sanitation
requires that PPP loans receive a zero
deficiencies data are updated annually
■ 23. Amend § 1784.8 by revising percent risk weighting under the
by DEC and ANTHC in consultation
paragraphs (a)(1) through (3), (b), and NCUA’s risk-based capital requirements.
with the respective recipient
(d) to read as follows: To reflect the statutory requirement, the
communities. The SDS system is
interim final rule amends the NCUA’s
§ 1784.8 Eligibility. utilized in the RAVG program to help
capital adequacy regulation to provide
prioritize applications under the Village
(a) * * * that covered PPP loans receive a zero
Safe Water Program.
(1) Native village in Alaska; or percent risk weight. The interim final
(2) DEC on behalf of one or more * * * * * rule also provides that if the covered
recipient communities in Alaska; or ■ 26. Amend § 1784.17 by revising loan is pledged as collateral for a non-
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(3) ANTHC on behalf of one or more paragraph (a) to read as follows: recourse loan that is provided as part of
recipient communities in Alaska. the Board of Governors of the Federal
(b) Grants made to DEC or ANTHC § 1784.17 Application for Planning grants. Reserve System’s (FRB) PPP Lending
may be obligated through a master letter (a) Entities identified in § 1784.8 may Facility, the covered loan can be
of conditions for more than one submit a completed Standard Form 424 excluded from a credit union’s
recipient community; however, DEC or to apply for funding to establish a calculation of total assets for the
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Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations 23213
purposes of calculating its net worth I. Background and Legal Authority credit unions meeting the definition of
ratio. The interim final rule also makes ‘‘complex’’ was first applied on the
a. The NCUA’s Risk-Based Capital
a conforming amendment to the Requirements basis of data in the Call Report reflecting
definition of commercial loan in the activity in the first quarter of 2001.7
NCUA’s member business loans and The Credit Union Membership Access
Act (CUMAA) requires the NCUA to b. The NCUA’s MBL and Commercial
commercial lending rule. The Board has
formulate a risk-based net worth Lending Rule
found good cause to issue the interim
final rule without advance notice-and- (RBNW) requirement to apply to
complex credit unions.1 Part 702 of the Among other things, CUMAA limited
comment procedures and with an the aggregate amount of MBLs that a
NCUA’s regulations implement the risk-
effective date upon publication. credit union may make to the lesser of
based net worth requirement.2 Under
DATES: This rule is effective on April 27, current § 702.103 of the NCUA’s 1.75 times the net worth of the credit
2020. Comments, as discussed below, regulations, a credit union is defined as union or 1.75 times the minimum net
must be received on or before May 27, ‘‘complex’’ if ‘‘[i]ts quarter-end total worth required under the Federal Credit
2020. assets exceed fifty million dollars Union Act (FCU Act) for a credit union
($50,000,000); and . . . [i]ts [RBNW] to be well capitalized.8 The statutory
ADDRESSES: You may submit written requirement . . . exceeds six percent MBL limit is incorporated in part 723 of
comments, identified by RIN 3133– (6%).’’ 3 Current § 702.104 of the NCUA’s regulations.9 Part 723 also
AF16, by any of the following methods NCUA’s regulations defines eight risk defines MBLs and commercial loans,
(Please send comments by one method portfolios of complex credit union establishes minimum safety and
only): assets, liabilities, or contingent soundness standards, and implements
• Federal eRulemaking Portal: http:// liabilities.4 The eight risk portfolios are various other requirements regarding
www.regulations.gov. Follow the long-term real estate loans, member MBLs and commercial loans. The Board
instructions for submitting comments. business loans (MBL) outstanding, has not significantly amended part 723
investments, low-risk assets, average- since 2016.10
• Fax: (703) 518–6319. Include risk assets, loans sold with recourse,
‘‘[Your Name]—Comments on Interim unused MBL commitments, and c. The Coronavirus Aid, Relief, and
Final Rule: Regulatory Capital Rule: allowance. Current § 702.106 sets forth Economic Security (CARES Act)
Paycheck Protection Program Lending the specific risk-weightings that are
Facility and Paycheck Protection On March 27, 2020, President Trump
applied to the assets, liabilities, or signed the CARES Act into law.11 The
Program Loans’’ in the transmittal. contingent liabilities of each risk law is designed to provide aid to the
• Mail: Address to Gerard Poliquin, portfolio.5 A credit union’s RBNW
U.S. economy in the midst of the
Secretary of the Board, National Credit requirement is the sum of the eight risk
COVID–19 pandemic. The CARES Act
Union Administration, 1775 Duke portfolios times the applicable risk-
authorizes the Small Business
Street, Alexandria, Virginia 22314– weighting.6 The RBNW requirement for
Administration (SBA) to create a loan
3428. guarantee program, the Paycheck
1 12 U.S.C. 1790d(d). Only complex credit unions
• Hand Delivery/Courier: Same as are subject to the NCUA’s risk-based net worth Protection Program (PPP), to help
mail address. requirement. See 12 U.S.C. 1790d(d)(1) and 12 CFR certain affected businesses meet payroll
702.103. The FCU Act grants the Board a broad needs and utilities (including employee
Public Inspection: You may view all mandate to issue regulations governing both FCUs
public comments on the Federal and, more generally, all FICUs. For example,
salaries, sick leave, other paid leave,
eRulemaking Portal at http:// section 120 of the FCU Act is a general grant of and health insurance expenses) as a
regulatory authority and authorizes the Board to result of the COVID–19 pandemic.
www.regulations.gov as submitted, prescribe rules and regulations for the Provided credit union lenders comply
except for those we cannot post for administration of the Act. 12 U.S.C. 1766(a).
with the applicable lender obligations
technical reasons. The NCUA will not 2 12 CFR pt. 702. On January 1, 2022, the NCUA’s
capital requirements will be substantially amended set forth in the SBA’s interim final rule,
edit or remove any identifying or
when the NCUA’s risk-based capital rules become the SBA will fully guarantee loans
contact information from the public effective. See, 84 FR 68781 (Dec. 17, 2019). This issued under the PPP. Most federally
comments submitted. Due to social interim final rule only amends the NCUA’s current
risk-based net worth rules and does not amend the
insured credit unions are eligible to
distancing measures in effect through at make PPP loans to members.12 Under
NCUA’s risk-based capital rules (‘‘2015 Final
least April 30, 2020, the usual Rule’’), which will be addressed when they become the CARES Act, PPP loans must receive
opportunity to inspect paper copies of effective. Generally, the NCUA uses the term ‘‘risk- a zero percent risk weighting under the
comments in the NCUA’s law library is based net worth requirement’’ to reference the
not currently available. After social statutory requirement for the Board to design a
7 65 FR 44950 (July 20, 2000).
capital standard that accounts for variations in the
distancing measures are relaxed, visitors risk profile of complex credit unions and the 8 12 U.S.C. 1757a; Public Law 105–219, 112 Stat.
may make an appointment to review current risk-based framework in part 702. In 913 (1998).
paper copies by calling (703) 518–6540 contrast, the NCUA generally uses the term ‘‘risk- 9 12 CFR part 723.
based capital’’ to refer to the specific standards 10 81 FR 13530 (Mar. 14, 2016).
or emailing OGCMail@ncua.gov. established in the 2015 Final Rule. The term ‘‘risk- 11 Public Law 116–136 (Mar. 27, 2020).
FOR FURTHER INFORMATION CONTACT: based capital requirement,’’ however, is used in the 12 Credit unions that are currently permitted to
CARES Act and refers to both the risk-based net
Amanda Parkhill, Supervisory CUE make loans under the SBA’s 7(a) program are
worth and the risk-based capital requirements. The
automatically approved to make PPP loans.
(Policy); or Rachel Ackmann, Senior Board notes that the term ‘‘risk-based capital’’ is
Federally insured credit unions that are not current
Staff Attorney, Office of General also used by the other banking agencies and the
SBA 7(a) lenders, can receive approval by
international banking community when referring to
Counsel, 1775 Duke Street, Alexandria, submitting an application to the SBA, unless they
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the types of risk-based requirements that are
VA 22314–3428. Amanda Parkhill can are currently designated as being in troubled
addressed in the 2015 Final Rule.
condition or are subject to a formal enforcement
also be reached at (703) 518–6385, and 3 12 CFR 702.103. For the definition of total
action that addresses unsafe and unsound lending
Rachel Ackmann can be reached at (703) assets, see 12 CFR 702.2(k). practices. Non-depository financing providers, such
4 12 CFR 702.104.
548–2601. 5 12 CFR 702.106.
as credit union service organizations, may qualify
as a PPP lender subject to the requirements listed
SUPPLEMENTARY INFORMATION: 6 Id. in the interim final rule.
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23214 Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations
NCUA’s risk-based capital to the Federal Reserve Banks) on its purposes, but not for personal
requirements.13 balance sheet. expenditure purposes.19 The current
As a result, credit unions that definition also provides various
II. The Interim Final Rule participate in the PPPL Facility could exclusions. The interim final rule
a. Risk Weighting of PPP Loans potentially be subject to increased amends the commercial loan definition
regulatory capital requirements (due to to add PPP loans issued under the
To reflect the statutory requirement
the increase in total assets from CARES Act as an exclusion from the
that PPP loans receive a zero percent
originating and holding PPP loans). To definition of commercial loan in § 723.2.
risk weight, the interim final rule
facilitate use of the PPPL Facility, the While other federally guaranteed loans
amends the NCUA’s risk-based net
interim final rule allows credit unions may still be considered commercial
worth rules. Specifically, the interim loans under the regulation, the unique
to neutralize the regulatory capital
final rule explicitly provides that PPP nature of PPP loans mitigates the need
effects of PPP loans pledged to the
loans are low-risk assets. Low-risk assets for enhanced commercial underwriting
Facility.17 Additionally, the Board
are currently defined as cash on hand of these loans. The SBA’s interim final
believes that the regulatory capital
(e.g., coin and currency, including vault, rule specifically limits each lender’s
requirements for certain PPP loans,
ATM and teller cash), the National underwriting obligation under the PPP
those PPP loans pledged to a Federal
Credit Union Share Insurance Fund to the items noted in the rule.20
Reserve Bank as part of the PPPL
(NCUSIF) deposit, and debt instruments Additionally, lenders will be held
Facility, do not reflect the substantial
unconditionally guaranteed by the harmless for any borrower’s failure to
protections from risk provided to credit
NCUA.14 Under § 702.106(d), low-risk comply with PPP criteria and, in
unions by the PPPL Facility. Because of
assets receive a zero percent risk addition to the 100 percent guarantee,
the non-recourse nature of the FRB’s
weight.15 Under the interim final rule, PPP loans may qualify for loan
extension of credit to the credit union,
low-risk assets are defined as cash on forgiveness.
the credit union is not exposed to credit
hand (e.g., coin and currency, including
or market risk from the pledged PPP III. Clarification Regarding Eligible
vault, ATM and teller cash), the NCUSIF
covered loans. Therefore, the Board Recipients of PPP Loans
deposit, debt instruments
believes that it is appropriate to exclude
unconditionally guaranteed by the In general, the SBA has restrictions on
pledged PPP loans from regulatory
NCUA; and loans issued under the who can receive SBA business loans.21
capital. Specifically, the interim final
SBA’s Paycheck Protection Program (15 The SBA, however, recognizes that,
rule excludes PPP loans pledged as
U.S.C. 636(a)(36)). Therefore, the unlike other SBA loan programs, PPP
collateral to the PPPL Facility from the
interim final rule provides that PPP Loans are uniform for all borrowers, and
definition of total assets in § 702.2 for
loans receive a zero percent risk weight the standard underwriting process does
purposes of calculating a credit union’s
under the NCUA’s risk-based capital not apply because no creditworthiness
net worth ratio.18
rules as required by the CARES Act. assessment is required for PPP Loans.
c. Definition of Commercial Loan The SBA also recognizes that many
b. Definition of Total Assets for the
Purposes of Calculating the Net Worth The interim final rule also clarifies directors and equity holders of lenders
Ratio that PPP loans would not constitute making PPP Loans are owners of
commercial loans under part 723 of the unrelated businesses. Therefore, the
To provide liquidity to small business NCUA’s regulations. Generally SBA has determined that certain of its
lenders and the broader credit markets, commercial loans are defined as any prohibitions regarding eligible
to help stabilize the financial system, loan, line of credit, or letter of credit borrowers for SBA loans are not
and to provide economic relief to small (including any unfunded commitments), applicable.22 In general, it appears that
businesses nationwide, the FRB and any interest a credit union obtains a credit union director may obtain a PPP
authorized each of the Federal Reserve in such loans made by another lender, Loan from the credit union on whose
Banks to participate in the Paycheck to individuals, sole proprietorships, board the director serves, provided that
Protection Program Lending Facility partnerships, corporations, or other the related business follows the same
(PPPL Facility), pursuant to section business enterprises for commercial, process as any similarly situated
13(3) of the Federal Reserve Act.16 industrial, agricultural, or professional member or account holder of the credit
Under the PPPL Facility, each of the union and the director is not an officer
Federal Reserve Banks will extend non- 17 The Office of the Comptroller of the Currency, or key employee of the credit union.23
recourse loans to eligible financial the FRB, and the Federal Deposit Insurance This change to the SBA’s regulations,
institutions to fund PPP loans. Under Corporation (together, the other banking agencies) however, does not affect the FCU Act,
the PPPL Facility, only PPP loans that adopted a similar interim final rule to allow
banking organizations to neutralize the regulatory
the NCUA’s rules on insider lending, or
are guaranteed by the SBA with respect capital effects of participating in the PPPL Facility. any relevant provision of a credit
to both principal and interest and that See, 85 FR 20387 (Apr. 13, 2020). union’s bylaws.
are originated by an eligible institution 18 The Board has broad authority to define the
Under the FCU Act, a loan, or
may be pledged as collateral to the term ‘‘total assets.’’ While 12 U.S.C. 1790d defines aggregate of loans, to a director or
‘‘net worth’’—the numerator for determining the net
Federal Reserve Banks. Participation in worth ratio—it does not define the term ‘‘total member of the supervisory or credit
the PPPL Facility will affect a credit assets,’’ which comprises the denominator of the committee of the credit union making
union’s balance sheet because, as a equation. However, the Board has elected to define the loan which exceeds $20,000 (plus
function of participating in the PPPL the term in part 702. In addition to the Board’s
broad authority to define the term ‘‘total assets,’’ the
Facility, the credit union must originate Board finds that given the unique and
19 12 CFR 723.2.
and hold PPP covered loans (that is, unprecedented nature of the COVID–19 pandemic,
20 See, https://www.sba.gov/document/policy-
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assets that are eligible collateral pledged encouraging use of the PPP Facility by excluding guidance--ppp-interim-final-rule.
21 See e.g., 13 CFR 120.110 and 120.140.
pledged PPP loans from total assets would further
22 85 FR 21747 (Apr. 20, 2020).
13 Supra note 11, at § 1102(a)(2).
the purpose of section 1790d. Pledged covered PPP
loans present less risk and would potentially 23 Officers and key employees of the credit union
14 12 CFR 702.104(d).
facilitate resolving the problems of credit unions at may obtain a PPP Loan from a different lender, but
15 12 CFR 702.106(d).
the least possible long-term cost to the NCUSIF not from the credit union with which they are
16 12 U.S.C. 343(3). compared to non-pledged covered PPP loans. associated.
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Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations 23215
any applicable pledged shares) must be are impracticable and that moving provides that the rule may not take
approved by the board of directors.24 expeditiously in the form of an interim effect until at least 60 days following its
Similarly, loans to other members for final rule is in the best interests of the publication.
which directors or members of the public and the credit unions that serve The Congressional Review Act defines
supervisory or credit committee act as that public. a ‘‘major rule’’ as any rule that the
guarantor or endorser must be approved The Board also believes that notice- Administrator of the Office of
by the board of directors when such and-comment procedures are Information and Regulatory Affairs of
loans, standing alone or when added to unnecessary for this interim final rule as the OMB finds has resulted in or is
any outstanding loan or loans of the it principally implements a statutory likely to result in (A) an annual effect
guarantor or endorser, exceeds requirement and the Board has no on the economy of $100,000,000 or
$20,000.25 The NCUA’s regulations discretion in providing the zero risk more; (B) a major increase in costs or
implement these restrictions under part weight for PPP loans. Furthermore, the prices for consumers, individual
701, which explains how balances are Board believes notice-and-comment industries, Federal, State, or local
calculated for purposes of these procedures are impractical because government agencies or geographic
provisions and sets forth loan approval credit unions have already begun to regions, or (C) significant adverse effects
requirements.26 The SBA’s interim final offer PPP loans to members affected by on competition, employment,
rules and the CARES Act do not provide COVID–19.29 Credit unions need clarity investment, productivity, innovation, or
any authority to set these statutory and certainty on the applicable on the ability of United States-based
restrictions aside, and the FCU Act treatment of PPP loans both in regards enterprises to compete with foreign-
contains no authority for the Board to to the risk weighting and whether the based enterprises in domestic and
provide an exception.27 Therefore, as loans qualify as commercial loans under export markets.32
discussed above, current NCUA the NCUA’s MBL and commercial For the same reasons set forth above,
provisions governing loans to insiders lending rule. For these reasons, the the Board is adopting the interim final
are applicable to PPP Loans. Board finds that there is good cause rule without the delayed effective date
consistent with the public interest to generally prescribed under the
IV. Regulatory Procedures issue the interim final rule without Congressional Review Act. The delayed
A. Administrative Procedure Act advance notice and the opportunity to effective date required by the
comment.30 Congressional Review Act does not
The Board is issuing this interim final
The APA also requires a 30-day apply to any rule for which an agency
rule without prior notice and the
delayed effective date, except for (1) for good cause finds (and incorporates
opportunity for public comment and the
substantive rules which grant or the finding and a brief statement of
delayed effective date ordinarily
recognize an exemption or relieve a reasons therefor in the rule issued) that
prescribed by the Administrative
restriction; (2) interpretative rules and notice and public procedure thereon are
Procedure Act (APA). Pursuant to the
statements of policy; or (3) as otherwise impracticable, unnecessary, or contrary
APA, general notice and the opportunity
provided by the agency for good to the public interest.33 As discussed
for public comment are not required
cause.31 For the reasons stated above, above, the Board has concluded there is
with respect to a rulemaking when an
the Board finds good cause to issue the good cause to issue the interim final
‘‘agency for good cause finds (and
rule with an immediate effective date. rule without notice-and-comment
incorporates the finding and a brief
This rule would also be excepted from procedures.
statement of reasons therefor in the As required by the Congressional
the delayed effective date requirement
rules issued) that notice and public Review Act, the Board will submit the
because it relieves a restriction that
procedure thereon are impracticable, interim final rule and other appropriate
would otherwise apply.
unnecessary, or contrary to the public While the Board believes that there is reports to Congress and the Government
interest.’’ 28 The Board believes that the good cause to issue the rule without Accountability Office for review.
public interest is best served by advance notice and comment and with
implementing the interim final rule C. Paperwork Reduction Act
an immediate effective date, the Board
immediately upon publication in the is interested in the views of the public The Paperwork Reduction Act of 1995
Federal Register. The Board notes that and requests comment. (PRA) applies to rulemakings in which
the COVID–19 crisis is unprecedented. an agency by rule creates a new
It is rapidly changing and difficult to B. Congressional Review Act paperwork burden on regulated entities
anticipate how the disruptions caused For purposes of the Congressional or modifies an existing burden (44
by the crisis will manifest themselves Review Act, the OMB makes a U.S.C. 3507(d)). For purposes of the
within the financial system and how determination as to whether a final rule PRA, a paperwork burden may take the
individual credit unions may be constitutes a ‘‘major’’ rule. If a rule is form of a reporting, recordkeeping, or a
impacted. Because of the widespread deemed a ‘‘major rule’’ by the Office of third-party disclosure requirement,
impact of a pandemic and the speed Management and Budget (OMB), the referred to as an information collection.
with which business and economic Congressional Review Act generally The NCUA may not conduct or sponsor,
disruptions have transmitted throughout and the respondent is not required to
the United States, the Board believes it 29 Financial institutions could begin offering PPP respond to, an information collection
has good cause to determine that loans April 3, 2020. See, https://www.sba.com/ unless it displays a valid OMB control
ordinary notice and public procedure funding-a-business/government-small-business-
loans/ppp/.
number.
30 . 5 U.S.C. 553(b)(B); 553(d)(3). For the same To capture activity related to the PPP,
24 12 U.S.C. 1757(5)(A)(iv).
reasons, the Board is not providing the usual 60-day beginning with the June reporting cycle
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25 12 U.S.C. 1757(5)(A)(v).
comment period before finalizing this rule. See by credit unions, the NCUA will add
26 12 CFR 701.21(d).
NCUA Interpretive Ruling and Policy Statement four accounts to the quarterly Call
27 Cf. 12 U.S.C. 375b(9)(D)(ii) (authority for FRB (IRPS) 87–2, as amended by IRPS 03–2 and IRPS
to grant an exception to a similar restriction for 15–1. 80 FR 57512 (Sept. 24, 2015), available at Report (NCUA 5300) to identify the
member banks for extensions of credit that pose https://www.ncua.gov/files/publications/irps/
‘‘minimal risk’’). IRPS1987-2.pdf. 32 5 U.S.C. 804(2).
28 5 U.S.C. 553(b)(3)(B). 31 5 U.S.C. 553(d). 33 5 U.S.C. 808.
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23216 Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations
number and amount of PPP loans, the providing a regulatory impact analysis. Federal Reserve Board on April 7, 2020,
amount of PPP loans pledged as For purposes of the RFA, the Board from the calculation of total assets for
collateral to secure Federal Reserve considers credit unions with assets less the purpose of calculating its net worth
System’s PPP Lending Facility, and the than $100 million to be small entities.36 ratio. For the purpose of this provision,
amount of FRB PPP Lending Facility As discussed previously, consistent a credit union’s liability under the
loans. The changes to the Call Report with the APA,37 the Board has Facility must be reduced by the
will assist NCUA in off-site monitoring determined for good cause that general principal amount of the loans pledged
and supervision of credit unions while notice and opportunity for public as collateral for funds advanced under
minimizing the burden during on-site comment is unnecessary, and therefore the Facility.
examinations. the Board is not issuing a notice of * * * * *
These changes will not alter the proposed rulemaking. Rules that are ■ 3. In § 702.104, revise paragraph (d) to
current estimate of four hours per exempt from notice and comment read as follows:
response necessary to review the procedures are also exempt from the
instructions and complete the form. The RFA requirements, including § 702.104 Risk portfolios defined.
amount of data elements added are conducting a regulatory flexibility * * * * *
minimal and will not impact the total analysis, when among other things the (d) Low-risk assets. Cash on hand
burden. The Office of Management agency for good cause finds that notice (e.g., coin and currency, including vault,
Budget (OMB) has approved this change and public procedure are impracticable, ATM and teller cash), the NCUSIF
under a ‘‘non-substantive change’’ unnecessary, or contrary to the public deposit, debt instruments
request to the information collection interest. Accordingly, the Board has unconditionally guaranteed by the
requirements approved under OMB concluded that the RFA’s requirements National Credit Union Administration;
control number 3133–0004. relating to initial and final regulatory and covered loans issued under the
flexibility analysis do not apply. Small Business Administration’s
D. Executive Order 13132 Nevertheless, the Board seeks Paycheck Protection Program, 15 U.S.C.
Executive Order 13132 encourages comment on whether, and the extent to 636(a)(36).
independent regulatory agencies to which, the interim final rule would
consider the impact of their actions on * * * * *
affect a significant number of small
state and local interests. The NCUA, an entities. PART 723—MEMBER BUSINESS
independent regulatory agency as LOANS; COMMERCIAL LENDING
defined in 44 U.S.C. 3502(5), voluntarily List of Subjects
complies with the executive order to 12 CFR Part 702 ■ 4. The authority for part 723
adhere to fundamental federalism Capital, Credit unions, Reporting and continues to read as follows:
principles. recordkeeping requirements. Authority: 12 U.S.C. 1756, 1757, 1757a,
This interim final rule does not have 1766, 1785, 1789.
substantial direct effects on the states, 12 CFR Part 723
on the relationship between the national ■ 5. In § 723.2, revise the definition of
Credit, Credit unions, Member ‘‘commercial loan’’ to read as follows:
government and the states, or on the business loans, Commercial lending,
distribution of power and Reporting and recordkeeping § 723.2 Definitions.
responsibilities among the various requirements.
levels of government. The NCUA has * * * * *
By the NCUA Board on April 22, 2020. Commercial loan means any loan, line
therefore determined that this rule does
Gerard Poliquin, of credit, or letter of credit (including
not constitute a policy that has
Secretary of the Board. any unfunded commitments), and any
federalism implications for purposes of
interest a credit union obtains in such
the executive order. For the reasons discussed above, the
loans made by another lender, to
NCUA Board amends parts 702 and 723
E. Assessment of Federal Regulations individuals, sole proprietorships,
of chapter VII of title 12 of the Code of
and Policies on Families partnerships, corporations, or other
Federal Regulations as follows:
The NCUA has determined that this business enterprises for commercial,
rule will not affect family well-being PART 702—CAPITAL ADEQUACY industrial, agricultural, or professional
within the meaning of § 654 of the purposes, but not for personal
Treasury and General Government ■ 1. The authority for part 702 expenditure purposes. Excluded from
Appropriations Act, 1999, Public Law continues to read as follows: this definition are loans made by a
105–277, 112 Stat. 2681 (1998). Authority: 12 U.S.C. 1766(a), 1790d. corporate credit union; loans made by a
federally insured credit union to
F. Regulatory Flexibility Act (RFA) ■ 2. In § 702.2, add paragraph (k)(3) to another federally insured credit union;
read as follows: loans made by a federally insured credit
The Regulatory Flexibility Act (RFA)
generally requires that when an agency § 702.2 Definitions. union to a credit union service
issues a proposed rule or a final rule organization; loans secured by a 1- to 4-
* * * * *
pursuant to the APA 34 or another law, (k) * * * family residential property (whether or
the agency must prepare a regulatory (3) Notwithstanding paragraph (k)(1) not it is the borrower’s primary
flexibility analysis that meets the of this section, a credit union may residence); loans fully secured by shares
requirements of the RFA and publish exclude loans pledged as collateral for in the credit union making the
such analysis in the Federal Register.35 a non-recourse loan that is provided as extension of credit or deposits in other
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Specifically, the RFA normally requires part of the Paycheck Protection Program financial institutions; loans secured by
agencies to describe the impact of a Lending Facility, announced by the a vehicle manufactured for household
rulemaking on small entities by use; and loans that would otherwise
36 NCUA Interpretive Ruling and Policy meet the definition of commercial loan
34 5 U.S.C. 553(b). Statement 15–1. 80 FR 57512 (Sept. 24, 2015). and which, when the aggregate
35 5 U.S.C. 603, 604. 37 5 U.S.C. 553(b)(3)(B). outstanding balances plus unfunded
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Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Rules and Regulations 23217
commitments less any portion secured I. Discussion § 1005.10(e) of Regulation E, but did add
by shares in the credit union to a commentary to clarify the compulsory
A. Background
borrower or an associated borrower, are use prohibition’s application to
equal to less than $50,000. The Section 913 of the Electronic Fund government benefits (comment 10(e)(2)–
definition of commercial loan also Transfer Act (EFTA) provides, among 2), which is in line with pre-existing
excludes covered loans issued under the other things, that no person may require commentary regarding payroll
Small Business Administration’s a consumer to establish an account for (comment 10(e)(2)–1).
Paycheck Protection Program, 15 U.S.C. receipt of electronic fund transfers with Federal, State, and local governments
636(a)(36). a particular financial institution as a are considering a variety of approaches
condition of employment or receipt of a to providing consumers relief from the
* * * * *
government benefit.1 This provision, economic impacts of the COVID–19
[FR Doc. 2020–08920 Filed 4–24–20; 8:45 am]
often referred to as the compulsory use pandemic. These approaches may
BILLING CODE 7535–01–P
prohibition, is implemented in include government distribution of
§ 1005.10(e)(2) of Regulation E. funds directly to consumers, in some
In the mid-1990s, the Board of cases outside of existing government
Governors of the Federal Reserve benefit programs. In some cases, the
BUREAU OF CONSUMER FINANCIAL System (Board) extended consumer
PROTECTION relevant governmental agencies may not
protections under Regulation E to have access to consumers’ account
accounts established by government information, such as account and
12 CFR Part 1005 agencies for distributing benefits to routing numbers, and therefore may
consumers electronically (government have difficulty disbursing funds via
Treatment of Pandemic Relief
benefit accounts).2 Government benefits direct deposit in a timely manner; in
Payments Under Regulation E and
covered under the rule include other cases, consumers may not have a
Application of the Compulsory Use
Federally-administered government pre-existing account that is capable of
Prohibition
benefit programs and non-needs tested receiving funds via direct deposit.
State and local government benefit
AGENCY: Bureau of Consumer Financial
programs (they do not include accounts B. Use of Electronic Fund Transfers in
Protection. Government Benefit Disbursement
for distributing needs-tested benefits in
ACTION: Interpretive rule. programs established under State or The Bureau notes that Regulation E
local law or administered by a State or provides significant flexibility to
SUMMARY: The Bureau of Consumer local agency).3 Provisions specific to government agencies that wish to
Financial Protection (Bureau) is issuing government benefit accounts were disburse government benefits via
this interpretive rule to provide codified in § 1005.15 of Regulation E. electronic fund transfers. As stated
guidance to government agencies On October 5, 2016, the Bureau issued above, EFTA and Regulation E prohibit
distributing aid to consumers in a final rule titled ‘‘Prepaid Accounts requiring consumers to establish
response to the COVID–19 pandemic. Under the Electronic Fund Transfer Act accounts for receipt of electronic fund
The Bureau concludes in this (Regulation E) and the Truth In Lending transfers with a particular financial
interpretive rule that certain pandemic- Act (Regulation Z)’’ (2016 Final Rule).4 institution as a condition of receipt of a
relief payments are not ‘‘government The Bureau subsequently amended the government benefit.6 The compulsory
benefits’’ for purposes of Regulation E 2016 Final Rule twice, in 2017 and use prohibition does not require the
and the Electronic Fund Transfer Act 2018.5 The 2016 Final Rule, as agency to also offer payment through
(EFTA) and are therefore not subject to subsequently amended, is referred to any other method the consumer may
the compulsory use prohibition in herein as the Prepaid Accounts Rule. prefer; it simply requires that
EFTA, if certain conditions are met. The Prepaid Accounts Rule, among government agencies provide the
Specifically, government benefits do not other things, extended Regulation E consumer a choice. Specifically,
include payments from Federal, State, coverage to prepaid accounts and comment 10(e)(2)–2 to Regulation E
or local governments if those payments: adopted provisions specific to such states that a government agency may
Are made to provide assistance to accounts. The definition of ‘‘prepaid require direct deposit of benefits by
consumers in response to the COVID–19 account’’ in the Prepaid Accounts Rule electronic means if recipients are
pandemic or its economic impacts; are includes government benefit accounts allowed to choose the institution that
not part of an already-established (as defined in § 1005.15(a)(2)), which will receive the direct deposit.7
government benefit program; are made were already covered by Regulation E as In the preamble to the 2016 Final
on a one-time or otherwise limited described above. The Prepaid Accounts Rule, the Bureau recognized that in
basis; and are distributed without a Rule generally maintained the existing some cases, circumstances may require
general requirement that consumers provisions specific to government that financial institutions or other
apply to the agency to receive funds. benefit accounts, while adding certain persons disburse funds to consumers
new requirements such as pre- within a certain period. Consumers may
DATES: This interpretive rule is effective acquisition disclosures. The Prepaid
on April 27, 2020. be presented with options of how to
Accounts Rule did not change the receive payment but fail to exercise a
FOR FURTHER INFORMATION CONTACT: compulsory use prohibition in choice. In such cases, the Bureau noted
Kristine M. Andreassen, Senior Counsel,
1 15 U.S.C. 1693k(2).
Office of Regulations, at 202–435–7700 2 59 FR 10678 (Mar. 7, 1994) and 62 FR 43467
6 See EFTA section 913(a)(2) (15 U.S.C. 1693k(2))
or https:// and § 1005.10(e)(2).
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(Aug. 14, 1997). 7 Government agencies are permitted to provide
reginquiries.consumerfinance.gov/. If 3 See § 1005.15(a)(2).
paper checks as an option for payment, but are not
you require this document in an 4 81 FR 83934 (Nov. 22, 2016).
required to do so by EFTA or Regulation E.
alternative electronic format, please 5 See 82 FR 18975 (Apr. 25, 2017) and 83 FR 6364 Similarly, government agencies may, but are not
contact CFPB_Accessibility@cfpb.gov. (Feb. 13, 2018). These amendments, among other required to, offer direct deposit into an account of
things, extended the effective date of the Prepaid the consumer’s choosing as an alternative method
SUPPLEMENTARY INFORMATION: Accounts Rule to April 1, 2019. of payment.
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