NCUA wants to give CUs greater compensation flexibility

NCUA headquarters

Responding to what it sees as a need to update “outdated and burdensome” regulations, the NCUA on Thursday issued an Advanced Notice of Proposed Rulemaking requesting information on how to update regulations related to how senior executives are compensated. Remember, this is an Advanced Notice of Proposed Rulemaking, meaning it is just the informational stage during which NCUA will gather information which it will use to come out with proposed amendments. It is the latest in a series of proposed amendments the agency has made to update its regulations and provide greater clarity.

The NCUA’s focus is 12 CFR 701.21(c)(8)(iii) which authorizes federal credit unions to pay an incentive or bonus to an employee “based on the credit union’s overall financial performance.” I have not dug in and done independent research yet on this provision. According to NCUA, the language has caused confusion for credit unions to provide appropriate incentives to their executives.

This regulation applies not only to executives but employees as well. For those of you who provide mortgage loans and are looking for greater flexibility regarding sales incentives, keep in mind that whatever you propose also has to comply with the CFPB’s wonderfully nuanced and complicated loan originator compensation rule. The Association will be coming out with a survey on this ANPR and I am curious how much interest it generates.

 

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