CARES Act Incorporates Credit Union Provisions

On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides support for millions of Americans and enables credit unions to provide a critical role in economic recovery. CUNA and League advocacy helped ensure credit unions were included in several provisions that, through drafting oversight, had only included banks.

"This is great news from our lawmakers and regulators who understand that credit unions are first financial responders for more than 115 million Americans," said Cornerstone Credit Union League President/CEO Caroline Willard. "We're grateful for their swift response to situations on the ground and the corrective actions they made to the drafted bill so that credit unions can continue to serve the best interests of their members and communities."

Here are additional provisions that affect credit unions according to the Credit Union National Association:

Section 1102: Paycheck Protection Program

Credit unions can offer small business loans for operational costs: Credit unions will be eligible to participate in the paycheck protection program, which would allow for 100% federally guaranteed loans to small businesses that maintain their payroll, rent, benefits, insurance premiums and other emergency expenses. This is a large lending program through which credit unions can help millions of Americans.

Section 1102: Temporary Relief from TDR Disclosures

Flexibility to modify loans impaired by COVID-19: Temporary relief from TDR disclosures allows credit unions to modify troubled and other loans in relation to COVID-19 difficulties without being required to comply with FASB Troubled Debt Restructurings by Creditor Accounting Standards.  

Section 2301: Employee Retention Payroll Tax Credit or Employer Subject to Closure or 50% Reduction in Gross Receipts

The bill provides a refundable payroll tax credit, capped at $10,000 per employee, for 50% of wages paid by employers to employees from March 13 through Dec. 31, 2020. Employers qualify if they are either (1) subject to a full or partial shut-down order due to the COVID-19 crisis or (2) seeing gross receipts decline by more than 50% when compared to the same quarter in the prior year. In the event the qualifying event is a decline in gross receipts, the employer remains eligible for the credit during 2020 until it reaches 80% of gross revenues in a quarter compared to the prior year.  

Section 4008: Debt Guarantee Authority

Unlimited federal insurance protection through NCUSIF and FDIC for transaction accounts held at credit unions and banks: By reestablishing the Transaction Account Guarantee Program, the government will guarantee certain noninterest-bearing transaction accounts. This will help credit unions support business and other large accounts.  

Section 4014. Optional Temporary Relief from Current Expected Credit Losses 

Temporary relief for credit unions currently required to comply with CECL: Affected credit unions have the option to temporarily delay measuring credit losses on financial instruments under the new Current Expected Credit Losses methodology.  

Section 4016: Temporary Credit Union Provisions; Expanding Liquidity Temporarily enhances access to the Central Liquidity Facility (CLF) 

Increased resources available for liquidity needs: Expanding liquidity temporarily enhances credit union (including corporates) access to the Central Liquidity Facility (CLF). The amendment makes it easier for credit unions to access, which will be essential if there is a higher demand for cash.

Section 4021: Credit Protection During COVID-19

The law amends the Fair Credit Reporting Act to shield borrowers from the reporting of negative information related to pandemic-related loan accommodations. 

Section 4022: Foreclosure Moratorium and Consumer Right to Request Forbearance 

The bill includes provisions related to forbearances of federally backed mortgage loans, as well as a foreclosure moratorium on those loans during the COVID-19 pandemic. These provisions seem to codify policies already announced by FHFA. 

National Credit Union Administration Chairman Rodney Hood also released a statement that reads in part, "the act provides vital economic support and regulatory relief and will ensure that credit unions play a critical role in the economic recovery following the coronavirus outbreak."