Original Notice.

Preproposal statement of inquiry was filed as WSR 01-03-146.

Title of Rule: Increasing assessments and fees paid by credit unions and affiliated parties examined by the Division of Credit Unions.

Purpose: To provide additional revenue to the division.

Statutory Authority for Adoption: RCW 31.12.516, 43.320.040.

Statute Being Implemented: RCW 31.12.516, 31.12.555.

Summary: The proposed rule increases by 2.87% the rate of assessments and fees charged by the Division of Credit Unions, effective in June 2001; provides for an automatic annual rate increase in assessments and fees charged by the division, on July 1, 2001, and every July 1 thereafter, up to the then current fiscal growth factor; allows for the waiver of fees and assessments, if certain conditions are met; and clarifies assessments and fees charged to out-of-state and foreign credit unions.

Reasons Supporting Proposal: The division needs significant additional revenues to pay for the operation of the division and to maintain a reserve.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Parker Cann, 210 11th Street S.W., Room 300, Olympia, WA 98504, (360) 902-8778.

Name of Proponent: Division of Credit Unions, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: Explanation: The proposed rule increases by 2.87% the rate of assessments and fees charged by the Division of Credit Unions, effective in June 2001; provides for an automatic annual rate increase in assessments and fees charged by the division, on July 1, 2001, and every July 1 thereafter, up to the then current fiscal growth factor; allows for the waiver of assessments and fees, if certain conditions are met; and clarifies assessments and fees charged to out-of-state and foreign credit unions.

     Purpose: To increase revenue to cover the operation of the division and to maintain a reserve for the division.

     Anticipated Effects: To provide additional revenues to the division and to increase assessments and fees paid by credit unions.

Proposal Changes the Following Existing Rules: The proposed rule amends WAC 208-418-040 and adds a new section to increase by 2.87% the rate of assessments and fees charged by the Division of Credit Unions, effective in June 2001; adds a new WAC section to provide for an automatic annual rate increase in assessments and fees charged by the division, on July 1, 2001, and every July 1 thereafter, up to the then current fiscal growth factor; adds a new WAC section to provide definitions; add a new WAC section to allow for the waiver of assessments and fees, if certain conditions are met; amends WAC 208-418-040 and 208-418-070 to clarify assessments and fees charged to out-of-state and foreign credit unions; amends WAC 208-418-050 to clarify that the division can pass through the costs of special counsel; repeals WAC 208-418-060 ("One-time special assessment for fiscal 1997"); and amends WAC 208-418-020 to make clarifying and conforming changes.

A small business economic impact statement has been prepared under chapter 19.85 RCW.

     By: Parker Cann, Director of Credit Unions.

     Date: March 21, 2001.

     Introduction: The division has prepared this SBEIS in compliance with chapter 19.85 of the RCW, the Regulatory Fairness Act (RFA). The preproposal statement of inquiry (form CR-101) in connection with the proposed rule was filed at WSR 01-03-146.

     Background For Proposed Rule: State credit unions pay assessments and fees to the Division of Credit Unions to pay for the operation of the division and to establish a reserve for the division. RCW 31.12.516. For the most part, the division is funded by quarterly assessments based on asset size. WAC 208-418-040. The division also charges miscellaneous fees for, among other things, the processing of community field of membership applications. WAC 208-418-070.

     The division needs significant additional revenues to pay the cost of its operation and to maintain its reserve. Under state law, the division cannot increase its assessment and fee rates in any one fiscal year by more than the "fiscal growth factor" for the year. The fiscal growth factor for the current fiscal year is 2.87%. In order to generate significant additional revenues, the proposed rule provides for an immediate increase of 2.87% in the rate of assessments and fees, and provides for an annual increase every July 1 up to the amount of the fiscal growth factor for that fiscal year. The rule also provides that assessments and fees may be waived if certain conditions are met.

     Other technical changes are made by the rule concerning assessments and fees paid by out-of-state and foreign credit unions operating a branch in Washington.

     Description Of Proposed Rule: The proposed rule:

•	Increases assessment and fee rates by 2.87%, effective in June 2001.
•	Provides for the increase of assessment and fees rates on July 1, 2001, and every July 1 thereafter, up to the amount of the then current fiscal growth factor.
•	Provides for a waiver of assessments and fees, if certain conditions are met.
•	Clarifies assessment of out-of-state and foreign credit unions.

     REQUIRED ELEMENTS OF SBEIS: The elements of the SBEIS required by the RFA are set forth below.

     ELEMENT 1. A brief description of the reporting, record-keeping, and other compliance requirements of the proposed rule and the kinds of professional services that a small business is likely to need in order to comply with the requirements.

     RESPONSE: The only substantive change in the proposed rule is the increase in fee and assessment rates paid by credit unions. See "Description of Proposed Rule" above for a brief description of the requirements of the proposed rule. The proposed rule does not change the reporting, record-keeping or compliance requirements of the current rule, or the kinds of professional services that a small business is likely to need to comply with the proposed rule.

     ELEMENT 2. An analysis of the costs of compliance for identified industries, including costs of equipment, supplies, labor and increased administrative costs.

     RESPONSE: The proposed rule increases assessment and fees rates and provides for an automatic annual increase in such rates. The proposed rule should not increase any of the compliance costs associated with the payment of such assessments or fees, including costs for equipment, supplies, labor, or other administrative costs.

     ELEMENT 3. Whether compliance with the proposed rule will cause business to lose sales or revenue.

     RESPONSE: The annual increases will be fairly small. The reason is that the annual rate increases are limited to the amount of the fiscal growth factor (FGF), and the FGF is currently running less than 3%. Consequently, it is very doubtful that the increase in cost will prevent or delay credit unions from bringing new products or services to market or cause them to lose market share.

     ELEMENT 4. A comparison of the compliance costs for the small business segment and large business segment of the affected industry(ies), and whether the impact on the small business segment is disproportionate.

     RESPONSE: Under the proposed rule, all assessment and fee rates are increased by the fiscal growth factor, so all credit unions, regardless of size, will face the same percentage increase in their assessments or fees. Any existing disproportionality in assessment or fee rates will be maintained, but no additional disproportionality will be introduced.

     ELEMENT 5. Steps taken by the agency under RCW 19.85.030(3) to reduce the costs of the proposed rule on small businesses, or reasonable justification for not doing so, addressing the specified mitigation steps.

     RESPONSE: We have reviewed the six steps under RCW 19.85.030 (3)(a) through (f). Our analysis is as follows:

     (a) Reducing, modifying, or eliminating substantive regulatory requirements: We believe that the proposed rule is necessary to ensure that the division has sufficient funds to operate and is, in the final analysis, necessary to ensure the safety and soundness of credit unions, regardless of size. Consequently, we believe that the rule's requirements should not be reduced for small credit unions.

     (b) Simplifying, reducing, or eliminating record-keeping and reporting requirements: The proposed rule does not increase record-keeping or reporting requirements.

     (c) Reducing the frequency of inspections: The proposed rule does not provide for inspections.

     (d) Delaying compliance timetables: The proposed rule does not change the timing of payment of assessments and fees.

     (e) Reducing or modifying fine schedules for noncompliance: The proposed rule does not impose new fine schedules.

     (f) Any other mitigation techniques: We are not aware of other mitigation techniques. However, we welcome comments from small credit unions on how to make the proposed rule less onerous for them.

     Consequently, as discussed above, we do not believe that it is legal or feasible to reduce the costs of the proposed rule on small businesses.

     ELEMENT 6. A description of how the agency will involve small business in the development of the proposed rule.

     RESPONSE: All credit unions, including smaller credit unions, will be provided with a copy of the proposed rule and an opportunity to provide comment on the proposal. Credit unions are encouraged to contact the division to comment on the rule. Small credit unions in particular are welcome to provide comments on how the rule could be made less onerous for them.

     ELEMENT 7. A list of the industry(ies) affected by the proposed rule.

     RESPONSE: The industry affected by the proposed rule is state credit unions, standard industrial classification 6062.

A copy of the statement may be obtained by writing to Tina Philippsen, Division of Credit Unions, 210 11th Street S.W., Room 300, Olympia, WA 98504, phone (360) 902-8718, fax (360) 704-6918.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. The Department of Financial Institutions is not a listed agency in section 201.

Hearing Location: General Administration Building, Auditorium, 1st Floor, 210 11th Street S.W., Olympia, WA 98504, on May 1, 2001, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Tina Philippsen, (360) 902-8718, by close of business April 13, 2001, TDD (360) 664-8126.

Submit Written Comments to: Parker Cann, Assistant Director, Division of Credit Unions, 210 11th Street S.W., Room 300, Olympia, WA 98504, fax (360) 704-6947, by close of business April 30, 2001.

Date of Intended Adoption: May 1, 2001.

March 20, 2001

John L. Bley

Director

OTS-4715.2

NEW SECTION
WAC 208-418-010   Definitions.   Unless the context clearly requires otherwise, as used in this chapter:

     (1) "Credit union" includes a Washington credit union, an out-of-state credit union and a foreign credit union.

     (2) "Foreign credit union" means a credit union organized and operating under the laws of another country or other foreign jurisdiction, that is operating a branch in Washington in accordance with RCW 31.12.471.

     (3) "Hourly fee" means a fee of $57.42 per hour per examiner or other staff person of the division.

     (4) "Out-of-state credit union" means a credit union organized and operating under the laws of another state or U.S. territory or possession, that is operating a branch in Washington in accordance with RCW 31.12.471.

     (5)(a) "Total assets" of a Washington credit union includes all assets of the credit union as reported on the credit union's most recent form 5300 or similar financial report.

     (b) "Total assets" of an out-of-state or foreign credit union is derived from the following fraction:

Total assets x in-state branch shares and deposits

Total shares and deposits

"Total assets" and "shares and deposits" include respectively all assets and shares and deposits as reported on the credit union's most recent form 5300 or similar financial report.

     (6) "Washington credit union" means a credit union organized and operating under chapter 31.12 RCW.

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     (1) Quarterly asset assessments charged to credit unions;

     (2) Charges to a credit union for costs incurred by the division for certain types of attorney general assistance in regard to the credit union; and

     (3) Certain other fees charged by the director.

     ((Fees must be paid no later than thirty days after their due date.)) The director may waive all or any portion of any fee payable by a credit union or other party ((based on the ability of the credit union or party to pay the fee)).

[Statutory Authority: 1996 c 274. 96-12-058, § 208-418-020, filed 5/31/96, effective 7/1/96. 96-06-011, recodified as § 208-418-020, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. 95-06-066, § 419-18-020, filed 2/28/95, effective 3/31/95. Statutory Authority: RCW 31.12.320. 83-20-027 (Order 83-4), § 419-18-020, filed 9/26/83; 82-13-016 (Order 82-5), § 419-18-020, filed 6/7/82.]

(2)	Credit Union's Total Assets	Quarterly Asset Assessment
over $500M		$((18,357)) 18,883 + ((.000015)) 0.00001543 x total assets over $500M
over $100M up to $500M		$((5,104)) 5,250 + ((.000033134)) 0.00003408 x total assets over $100M
over $((20)) 25M up to $100M		((.000051035)) 0.00005250 x total assets
over $10M up to $((20)) 25M		$((1,125)) 1,157
over $2M up to $10M		$((750)) 771
over $((200)) 500K up to $2M		$((500)) 514
up to $((200)) 500K		$0
((Corporate Centrals		.0000252 x total assets))
M = Million K = Thousand

     (3) Quarterly asset assessments are charged for the calendar quarter that begins on the due date of the assessment. No rebates will be made to credit unions that cease to be state-chartered during the quarter. A credit union converting to state charter will pay a prorated quarterly asset assessment for the quarter during which the conversion is completed.

     (4) ((For the purpose of this chapter, "total assets" includes all assets held by a Washington chartered credit union whether held within this state or a branch in another state, and assets of foreign credit unions held through branches within the state of Washington, as reported on the credit union's form 5300 or similar financial report. However, the director may waive any assessment on assets held by Washington chartered credit unions through branches in other states based upon reciprocal agreements with the other state's regulatory authority. As used in this chapter, "foreign credit union" means a credit union chartered under the laws of another state or a foreign country.)) From time to time, the director may determine that asset assessments on an out-of-state credit union or foreign credit union are inappropriate relative to the level of examination and supervision of that credit union by the division. In that event, the director may charge the credit union hourly fees for examination and supervision of the credit union, including, but not limited to, off-site monitoring, in lieu of asset assessments. Such fees are due upon receipt of billing from the division.

[Statutory Authority: 1996 c 274. 96-12-058, § 208-418-040, filed 5/31/96, effective 7/1/96. 96-06-011, recodified as § 208-418-040, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. 95-06-066, § 419-18-040, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-040, filed 3/1/91, effective 4/1/91. Statutory Authority: RCW 31.12.545(1). 85-07-008 (Order 85-2), § 419-18-040, filed 3/8/85. Statutory Authority: RCW 31.12.320. 83-20-027 (Order 83-4), § 419-18-040, filed 9/26/83; 82-13-016 (Order 82-5), § 419-18-040, filed 6/7/82.]

     (2) The division will notify a credit union before the division incurs expense for legal assistance which may be charged to the credit union under this section.

[Statutory Authority: 1996 c 274. 96-12-058, § 208-418-050, filed 5/31/96, effective 7/1/96. 96-06-011, recodified as § 208-418-050, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. 95-06-066, § 419-18-050, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-050, filed 3/1/91, effective 4/1/91. Statutory Authority: RCW 31.12.320. 83-20-027 (Order 83-4), § 419-18-050, filed 9/26/83.]

     (a) An hourly fee will be charged to a party other than a credit union or a subsidiary of one or more credit unions for each electronic data processing examination of the party by the division of credit unions.

     (b) An hourly fee will be charged to a credit union for the processing of the credit union's application to add a community group to its field of membership.

     (c) An hourly fee will be charged to a credit union for a fraud investigation of the credit union and/or its related parties by the division.

     (d) An hourly fee will be charged to ((a)) an out-of-state or foreign credit union for ((an on-site)) examination and supervision by the division under WAC 208-418-040(4).

     (e) An hourly fee will be charged to ((a)) an out-of-state or foreign credit union for the processing of the credit union's application to ((do business)) operate a branch in this state.

     (f) An hourly fee will be charged to other divisions or agencies for examinations, investigations, or similar undertakings performed on their behalf by the division.

     (2) ((As used in this section, "hourly fee" means a fee of $55.82 per hour per examiner or other staff person of the division.

     (3))) In addition, the director will charge a credit union for the actual cost incurred by the division for an examination or investigation of the credit union and/or its related parties performed under personal services contract by third parties.

     (((4))) (3) Charges under this section are due upon receipt of billing from the division.

[Statutory Authority: 1996 c 274. 96-12-058, § 208-418-070, filed 5/31/96, effective 7/1/96. 96-06-011, recodified as § 208-418-070, filed 2/23/96, effective 6/1/96. Statutory Authority: RCW 31.12.535 and 31.12.545. 95-06-066, § 419-18-070, filed 2/28/95, effective 3/31/95; 91-06-062, § 419-18-070, filed 3/1/91, effective 4/1/91. Statutory Authority: RCW 31.12.545(1). 85-07-008 (Order 85-2), § 419-18-070, filed 3/8/85. Statutory Authority: RCW 31.12.320. 83-20-027 (Order 83-4), § 419-18-070, filed 9/26/83.]

     (2) The director may round off a rate increase under subsection (1) of this section. However, no rate increase may exceed the applicable fiscal growth factor.

     (3) By June 1 of each year, the director will make available a chart of the new rates that will take effect on the immediately following July 1.

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     (1) The credit union examination fund established in RCW 43.320.120 (or its successor) exceeds the projected acceptable minimum fund balance level approved by the office of financial management; and

     (2) That such course of action would be fiscally prudent.

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     The following section of the Washington Administrative Code is repealed:

WAC 208-418-060

One-time special assessment for fiscal 1997.

© Washington State Code Reviser's Office