My Take on NCUA's Record Retention Regulation Proposal

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Hey everyone.

This is mark Treichel with another
episode of, with flying colors.

And today I.

Have a little bit of a different way.

I'm going to be doing this podcast.

And you'll hear about that shortly,
but the NCAA board on April 18th.

Approved a UN.

Advanced notice of proposed
rulemaking on records, retention.

The board action bulletin.

Chairman Harper was stated
as saying is important that

federally insured credit union.

Maintain a robust records
preservation program.

Program whereby vital records
can readily be reconstructed.

Chairman Todd Harper said.

Maintaining all vital records is
central to a credit union's ability

to properly serve its members.

And to the NCUA is ability to
fulfill its supervisory enforcement

and liquidation functions.

Now the board meeting was unique.

In one way in that chairman,
Todd Harper was not at the NCA

building when he did the podcast.

He was on video as a
reminder, they skipped March.

So he wasn't there.

, in April and maybe they're
tiptoeing into doing these remote.

Like they've got most of the
people working remote, but in

any event, That caught my eye.

When I watched the YouTube video.

Because vice chairman, Kyle Houtman
was sitting right next to Tanya Otsuka.

The newest of the three board members.

And it was fitting because this
was a proposed rulemaking that

vice chairman, Kyle Helpmann was
taking a lot of credit for pushing.

He made some great points about the
fact that credit unions don't really

particularly small credit unions.

Don't really understand what
it is they're supposed to keep.

What it is, they're not required to keep.

There was a lot of
reference to the fact that.

Are the attachments guidance.

Or are they not Bidens?

There was a lot of reference to questions
that were being asked as part of the

advanced notice for proposed rule making.

So if you.

R one who likes to comment, take a look
at the questions and get your comments in.

However, they didn't highlight any of
those questions, which I probably will

highlight a few of them here today.

So again this was pushed by Kyle Houtman.

He actually did something very clever.

And he had sent out to some credit
unions, smaller credit unions and

said, show me your storage space,
where you keep your records.

And he talked a lot about,
When he was in the the.

When he worked at.

Stockbrokers how the sec required.

That they keep records seven years and
that there's different rules for the IRS

and that there's different rules for NCUA.

But that people in credit unions, err, on
the side of keeping everything so NC so

that they can't get in trouble with NCUA,
particularly smaller credit unions because

they don't have the time to hire attorneys
to tell them what the rule actually means.

So a lot of good content here.

And he makes a good point
that this is a good proposal.

Should it be come final ever?

For small credit unions and that
their burden is so high at the end.

I'll say why.

That's great.

I agree with it.

But what the other things,
the NCAA board is doing.

Is actually hurting small credit
unions, but I'll save that for the end.

All right.

And as far as particular
questions that they.

Are asking.

They have questions such as.

Does the definition of
vital records in the rule?

Contain all.

And only those records you would consider
to be vital for the credit unions.

. Next question.

Are there additional types of
documents not listed as vital

records that you think should be.

As they are critical for business
operations and to properly serve members.

Next question.

Are there other industry standards
or methodologies outside of the rule

that the agency should consider?

Preserving vital records.

For defining what vital records are and
for determining minimum retention periods.

Next question, the primary focus
of the records, retention guidance

in appendix B relates specifically
to catastrophic act preparedness.

Are there any terms, definitions,
or standards that the board should

consider updating in appendix B?

The next question.

Are there any other changes to
appendix B that you would recommend.

Next question.

How long, and in what format
does your credit union store?

It's vital records.

Next question.

Does your credit union maintain and
store any vital records in a physical

format due to a regulatory requirement
or a supervisory expectation?

Next question, what impact.

Pediments including estimated costs.

Does your credit union encounter
with storing vital records?

Next question.

What records do you deem vital for
business operations that a credit

union should be required to keep
permanently for the purpose of

restoring vital member services.

Next question other than for records,
that must be kept permanently.

Are there specific timeframes
that you would recommend?

That other vital records be retained.

Next questions.

What are the pros and cons of
storing vital records physically

electronically or in other formats,
such as cloud computing storage.

Next question.

Does your credit union rely
on third party vendors to

accurately maintain vital records?

And if so, what are some of the challenges
that these arrangements present?

Next question.

How would you suggest the agency create
a more effective framework for credit

unions to preserve vital records?

Next questions.

What are some challenges for
smaller credit unions defined as

credit unions with less than a
hundred million dollars or less?

In maintaining vital
records and what has worked.

Next and last question.

What additional support training or tech.

Nicola assistance.

Could the NCUA provide if Annie
to assist credit unions with both

understanding and implementing.

Retention requirements.

If any of those questions are
something that you have a strong

opinion on, I highly encourage you.

To comment to the AMPR.

I do believe the NCUA board is
going to take these comments into

consideration and truly would like.

To make this regulation better.

Now there's reference to the appendixes
relating to disaster recovery.

Type situation.

There was reference in the board meeting.

To the federal building.

In Oklahoma that blew up
that did have a credit union.

Headquarters in it.

And I can relate to that.

Reference because when that.

happened, I was a supervisory
examiner in Dallas.

I had peers and friends that were
supervisory examiners in Oklahoma.

They were actually doing exams
down the road from the federal

building when it blew up.

And I was supplementing their exam
teams with some of my examiners.

So when that happened there's a
lot of chaos in the United States.

From the trauma of it, but I have
friends and colleagues who had to

work with the credit union to get
the operations back up and running.

So it's a very important
reg from that perspective.

And kudos to Kyle Hartland
for bringing this up.

He also.

I wanted to touch on this.

If I haven't already, he also.

had credit union sent pictures
of their storage space.

I think I touched on that, but.

I've got a blog where I took a
picture of what was provided and it

it shows exactly why it's an issue.

You've got boxes and boxes.

They're paying for storage.

They don't know what they need.

And NCUA improving the regulation,
I think would go great towards

helping these smaller credit unions.

All right.

And so the new thing I'm doing here
is Discovered some new software.

So I was able to take One's entire
speech at the board meeting and

narrow it down to that and improve
the sound quality a little bit.

And so what's coming up next.

Are the words of vice
chairman, Kyle Hartman.

The advocate for this proposed rule.

And I will have some comments at the end.

To close out this podcast.

That concludes my remarks.

And I now recognize Vice Chairman Hoffman.

Thank you, Mr.


Thank you, Kelly and Matt, for
the presentation and Ghira for

being available for questions.

I want to also thank
Kelly for taking the time.

I would like to look into the impact
of NCOA regulations on records

preservation as they're currently written.

And I definitely want to thank the
leaders of small credit unions, which

I think are the reason we're here.

We had a meeting a few months back,
these small credit unions, they

brought up a few actionable items.

And I believe that meeting and then
our subsequent ones and discussions

with Kelly are why we're here today.

My point is a broader one, that we
actually do listen and there is a point to

talk to us and it can actually have value.

So, I think there are only maybe three
or four credit union leaders on that

call we had, but they're going to wind
up helping thousands of other people.

So, I want to thank those folks.

They did a real job and I want to
thank our staff for that, that meeting,

bringing something to our attention.

Actually, it's going to bring, uh,
real results to a lot of people.

To wit, the crush of regulatory
burden weighs more heavily

on small credit unions.

We cannot talk about financial inclusion
or talk about helping small credit unions

unless we're doing the sort of things
we're doing here today, providing clarity

that frees up scarce resources to focus
on their actual credit union members.

If you go to the extreme, regulatory
burden is often cited as a reason

why otherwise healthy credit unions.

Uh, merge out of existence.

But you know what's worse
than a regulatory burden?

Finding out you're doing things that your
regulator didn't even need you to do.

We found out credit unions were storing
boxes of records from decades ago because

they thought that we at NCUA wanted them.

Now we're aware that other agencies,
et cetera, may require records, but

they said we thought you wanted that.

Some were paying for storage facilities.

And unfortunately, it made sense to do
all of this hoarder like record retention.

Because as long as you get in trouble
for not having a document, and you never

get in any trouble for having extra
documents, the behavior is fairly obvious.

Credit unions and banks talk about
this with suspicious activity

reports, why they file so many.

They never get in trouble.

for filing too many.

They only get in trouble
for not filing one.

Their behavior obviously flows from that.

Uh, yesterday, and I wish you thought
of it earlier, we had the idea to email

two people and ask about their specific,
uh, credit unions records practices.

Um, we got a couple photos at 5.

30 p.


last night.

Slide, please.

Franz, you got a slide?

Yeah, alright.

This is what we got back last night at 5.


Uh, you can see on the right how
deep, this is just one credit

union, which by the way is not
particularly large, I can say it's

under 100 million in assets, okay?

They're paying for this, um, you can
see the yellowed old papers, and so,

if someone says, you know, these days
we have cloud storage, just scan it.

Well, anyone that thinks the answer is
just scan it hasn't had to go through

all those, and even if, You will scan.

Wouldn't it be a pain to find out you
scanned a hundred boxes of documents

and you only had to scan five?

You have to often do it one at a time
for old crinkled documents because

you have to get the whole document.

Otherwise, why are you retaining it?

You can even see if any of
you are old enough to remember

the old dot matrix printers.

You literally can't feed them in
a stack into a modern scanner.

They have those perforated edges
on the side with the holes in it

and you have to pull them off.

I just looked it up.

That's called continuous feed paper.

Um, and so it's not very easy to do.

Um, nobody can argue the
need for keeping records.

It's important.

It's important for NCWay.

It's important for the credit union.

If I was a new credit union CEO, I'd
want them to have good practices.

It's very helpful for new management.

But we, after 15 years, it's time to
re evaluate the unforeseen effects of

Part 749, as it's currently written.

Uh, even if they are maintaining,
um, documents digitally,

do they have to do that?

That costs money too.

Uh, this agency pays for
cloud storage as well.

We get it.

Uh, and I will say that those boxes,
uh, to credit this small guy, It's

piles of old boxes that probably the
people who put the ones in the back

aren't, don't work there anymore.

And I'll say, I had a storage unit.

This is more organized than the one I had.

And, uh, I want to thank a couple people
at NCUA that cleaned out our supply

closets in the hallway on this floor.

I can tell you they were
a lot messier than that.

So even if you have the wherewithal to
digitize, do we actually need to digitize

papers from 1985 because you think NCUA?

If the unintended consequences of a
regulation run counter to what was

intended, a responsible regulator
will re evaluate and adjust.

Many of you know that NCWA annually
reviews one third of its regs

for updates over three years.

That means all of them are addressed.

On many occasions, the NCA has taken
that opportunity to clarify, re

evaluate the impact of the regulations.

Today's action is an example of that.

And although I do want to take credit
for bringing this to the board's

attention, I'll take credit for
that, I want to clarify that I don't

think that the reg was written wrong.

I don't think it was written incorrectly.

I think back then I may well have
written the exact same thing, um,

it's just the result of it and the
incentives that it winds up giving

to any regulated institution.

And one more thing, uh, we talk a lot
about how important it is for small

credit unions to have, uh, well, any
credit union, but particularly small

credit unions to have succession planning.

Well, one way we can help with that as
an agency is make the job more appealing.

Records retention is the example of the
straw that can break the camel's back.

It's one of the many important but
tedious requirements that can make

running a small credit union less
attractive than it could otherwise be.

Thus right sizing the regulatory
burden is one way that NCUA can

make it easier for credit unions to
survive once a long time CEO retires.

The job shouldn't have
to be a labor of love.

NCUA can't control what records
a credit union is required for

their state or other agencies.

But we can reduce unnecessary burden
by ensuring our rules are clear and

do not require more than is needed.

And so the next step here is we're
going to look for ideas from the public

on what should we actually write,
what will actually help that, right?

That's what a credit
union is going to want.

So we can find ideas that reduce
the cost, make it less so people are

digging through old heavy documents.

You probably don't need anything
that uses the dot matrix printer.

But we need to actually publish something.

The good news is, we can probably get
some easy ideas from other agencies.

Just, second slide, Franz, please.

From my Wall Street days, I remember
everything was seven years, okay?

This is from the SEC.

This is kind of what we're looking at.

Seven years records, and then
they say what exactly that means.

Seven years, okay?

I remember anything we wrote,
even in our Bloomberg chats.

With seven years, right?

And you knew that, right?

This is just an example.

Uh, it happens across government.

Um, if you filed your taxes on Monday,
the IRS, just so you know, is, you are

supposed to only have three years worth
of records to back up that 2023 return.

If they audit your 2023
return, they can ask you for

information related to your 2021.

The IRS itself is published.

We're not going to ask
you about 2015, 2021.

Uh, uh, records, okay?

It's, it's the exact same reason.

It's the same reason that in
criminal justice, there's a statute

of limitations for most things.

Because over time, memories fade.

Uh, uh, things get lost.

People die.

Um, and in terms of which year they
can audit, just so you guys know,

uh, Chairman Harper, you're off the
hook from 2017 and earlier to C& L.

Uh, they can only even audit
the last seven years, uh, from

when you filed it, at least.


Um, yeah, right.

So thanks again for
the staff working this.

I just have one question, which
is, uh, what I alluded to.

I think credit unions, you know, the
people who sent that photo in are gonna be

like, oh man, I'm glad they're doing this.

What happens next?

They can't, after this meeting, go
and throw out the old stuff just yet.

What is the next?

I can take that question, Vice Chairman.

So, what happens next is really
a question for the board.

Today's action is an advance notice of
proposed rulemaking to solicit feedback

from commenters and stakeholders,
and we expect to get robust feedback

which can then inform any future
action that the board decides to take.

And that could be, well, be a
notice of proposed rulemaking,

but that would be a future action.

Somebody wants to send us
a link, an idea, you know.

Can they do that today?

They can.


They can provide feedback all the time,
just as you received feedback prior to.

So, uh, to have an easy idea
that would also serve NCOA's

purposes, we do need records kept.

Um, khautman, ncoa.

gov, um.

But a lot of these things, the notice
comment period, it has an official

start date, it has an official end
date, and the comments are public.

Uh, anyone can email or
call anybody anytime.

But, so if someone today is
hearing about this, they can

send something in today to whom?

They could send comments in to the NCUA
on our website, but specifically in

response to this ANPR, this Uh, document
once the board approves it, it will be

published in the federal register and
we provide specific instructions for

how the public can comment and it's a
transparent process available to all.

But if it is top of mind for anybody
out there who watches this or hears

about it, there's nothing stopping
anybody every time, uh, for, you know,

Calling or emailing say, here's an idea.

Here's what my state regulator does.

You know, something like that.

Uh, if it's top of mind,
that's the time to take action.

I'm pleased that I believe
all three board members are.

Uh, supporting this item and that
I believe all three board members

know how important it is to not make
the life of a small credit union

CEO any harder than it has to be.

And I think the board is all in agreement
that we know that sometimes regulations

can make that less attractive, that
when a little credit union goes away

and that field of membership loses
their own credit union, sometimes

that's because government has made
the job harder than it needs to be.

That concludes my remarks.

Back to Chairman Harper.


A lot of good information.

A word for word from Kyle Houtman.

I may do a little bit more
of this in the future.

Let me know if, if you
like this style and, , okay.

So, he made some great points about
how this will help small credit

unions, however, , it's a little bit
of a deck chair on a tech Titanic

type statement because of what the.

Democratic led board is doing right now,
tied to fees, tied to overdrafts, tied to.

, two.

, fees for overdrafts, NSF fees, et cetera.

The fact that NCUA, , is talking
about a concentration risk, , being

a risk tied to fee income.

All of those efforts are
going to increase mergers.

All of those efforts are going
to lead to less credit unions and

ironically create more of a monopoly
type issue situation, in one of his

speeches, chairman Harper talked about.

The fact that two of the three biggest
bay banks don't are don't charge share

overdrafts or checking account overdrafts.

Well guess what, those guys are going to
survive, regardless of whatever happens.

So as.

The government takes an approach that
fees are in and of themselves evil.

It's going to create more mergers
and banks, more murders and credit

unions lead to consolidation
and lead to the point where.

The big banks.

And the big credit unions
are all that's left.

And is that really what's in the
best interest of credit union members

and the United States of America?

I think not.

So again, kudos to Kyle Hartman.

I think perhaps if he had another
Republican vote, He would change

the direction of what's going
on in the fee income arena,

because that is a very partisan.

Topic and I will leave
it at that great job.

Kyle Hartman.

On this particular action and
I hope it leads to a board.

Proposed rule, which will be followed
by a final rule down the road.

So it's going to take a while.

Probably at least another,
it's going to take a while.

Probably at least another
12 months to 18 months.

To get any final traction on this,
but this was a fabulous first step.

All right, this is mark.

Treichel signing off with flying colors.

I hope you'll listen again soon.

My Take on NCUA's Record Retention Regulation Proposal
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