Penalty Assessments for Late Call Report Submissions

By Styskal, Wiese & Melchione

July 21, 2014

Increased attention has recently been paid to timely submissions of the quarterly Call Report by the NCUA. In January 2014, the NCUA issued NCUA Letter to Credit Unions 14‑CU‑03, in which it emphasized that late filings had become a serious problem and reminded credit unions that late filings, beginning in 2014, would subject the late filers to civil money penalties. According to the NCUA, the purpose of imposing penalties is to deter late filings.

As reported in the trade press, the NCUA has begun to follow up on its letter, stating that 104 credit unions were late on the first quarter Call Report. The NCUA has followed up with letters to late filers requesting consent to a civil money penalty. The NCUA is attempting to reach full compliance on timely submissions and is taking this very seriously.

The civil money penalty for late filing can be quite high, even when calculations take into account the asset size of institutions. Penalties can fall within three different tiers described in 12 U.S.C. 1782(a):

• $2,000 for each day late if your credit union has a policy to prevent late or erroneous filings, or for minor delays resulting from inadvertent errors.
• $20,000 for each day if none of those mitigating circumstances are present—this is the default!
• A whopping $1 million or 1 percent of total assets per day (whichever is less) for knowing or reckless publication of false or misleading information.

Within the available ranges, it is not clear how the NCUA goes about calculating penalties—only that it takes into account past behavior and asset size in its formula. Keep in mind also that the FDIC’s rules in this area differ greatly, with penalty amounts in 12 C.F.R. § 308.132 for first time offenders and other categories appearing much lower.

If your institution files late, then it is likely to receive a demand for a civil money penalty, though the NCUA has offered first quarter filers the chance to halve penalties in exchange for waiving a hearing. If your institution files late, or has filed late, it is important to carefully consider whether there may be extenuating circumstances of which the NCUA is unaware. While there is no clear delineation of what the NCUA believes to be an extenuating circumstance, credit unions which encountered NCUA system issues while filing, have a Call Report policy in place, acted in good faith, or have a good track record for filing on time may have arguments that a penalty should not be assessed. Though these may not eliminate the possibility of a penalty, they can nonetheless be significant mitigating factors.

Keeping in mind the hefty potential penalties, prevention is the best medicine—the difference between $2,000 for each day for a tier I penalty and $20,000 for each day for a tier II could be the implementation of a Call Report policy. Credit unions should implement a written policy designed to prevent any inadvertent errors in filing a Call Report or late filings. The policy need not be a “Board approved” policy, though your Board and management team should be aware of the procedure and involved internal controls.

Policies and procedures designed to prevent late filings should include:

• Clear designation of the person responsible for completing the submission, as well as for certifying the report in CUOnline;
• The e-mail address to be registered with CUOnline, and controls to ensure it is checked for updates and instructions;
• Checking for updates of and download of new instructions for the Call Report and CUOnline for each filing;
• Ensuring all historical warnings and errors are addressed before submission;
• Checking whether an email was received, with the Financial Performance Report, the day before the due date, and double check that there is no need to resubmit;
• A requirement to take a screenshot of the submission status, once the Call Report is submitted, which should read “processing” under the current instructions.

Keep in mind that your policies and procedures may need to change in this area if (or when) the CUOnline system changes. Keeping up to date on this policy can make an $18,000 a day difference!

If your credit union is in need of a policy or has any questions regarding NCUA Call Report penalties or filings, please contact SW&M for assistance.