Fair Hiring in Banking

<RULE> NATIONAL CREDIT UNION ADMINISTRATION <CFR>12 CFR Parts 701, 741, 746, 748, and 752</CFR> <DEPDOC>[NCUA-2023-0023]</DEPDOC> <RIN>RIN 3133-AF55</RIN> <SUBJECT>Fair Hiring in Banking</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> National Credit Union Administration (NCUA). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The NCUA Board (Board) is issuing this final rule to incorporate Interpretive Ruling and Policy Statement (IRPS) 19-1 and the Fair Hiring in Banking Act (FHBA) into its regulations. The Federal Credit Union Act (FCU Act) generally prohibits, except with the Board's prior written consent, any person who has been convicted of or has a program entry for certain criminal offenses involving dishonesty or breach of trust from participating in the affairs of an insured credit union. The final rule will expand career opportunities for individuals to work and volunteer at insured credit unions. The Board also rescinds IRPS 19-1. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> The final rule is effective October 30, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Rachel Ackmann, Senior Staff Attorney, Office of General Counsel, and Pamela Yu, Special Counsel to the General Counsel, Office of General Counsel, at the above address or by calling (703) 518-6540. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> <HD SOURCE="HD2">Section 205(d) of the Federal Credit Union Act (Section 205(d))</HD> Prior to December 23, 2022, section 205(d)(1) of the Federal Credit Union Act (FCU Act) provided that, except with the prior written consent of the Board (the NCUA refers to applications for such consent as “consent applications”), a person who has been convicted of any criminal offense involving dishonesty or breach of trust, or has agreed to enter into a pretrial diversion or similar program in connection with the prosecution for such offense (collectively, covered offenses), may not: • Become, or continue as, an institution-affiliated party (IAP) with respect to any insured credit union; or • Otherwise participate, directly or indirectly, in the conduct of the affairs of any insured credit union. <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>  12 U.S.C. 1785(d)(1). </FTNT> Section 205(d)(1)(B) further provides that an insured credit union may not allow any person described above to participate in the conduct of the affairs of the credit union without Board consent. Section 205(d)(2) restricts the Board from approving a consent application related to a person convicted of certain crimes enumerated in Title 18 of the United States Code (U.S.C.) for 10 years, absent a motion by the Board and approval by the sentencing court. Finally, section 205(d)(3) states that “whoever knowingly violates” section (d)(1)(A) or (d)(1)(B) commits a felony, punishable by up to 5 years in prison or a fine of up to $1,000,000 a day, or both. Section 205(d) prohibitions have existed in some form since 1970, and since then federally insured credit unions have been required to make a diligent inquiry as to whether prospective employees or IAPs  <SU>2</SU> <FTREF/> are subject to a section 205(d) prohibition. <SU>3</SU> <FTREF/> <FTNT> <SU>2</SU>  The NCUA has made its administrative orders against IAPs available in a searchable database on the agency's website. <E T="03">See https://ncua.gov/news/enforcement-actions/administrative-orders</E> . </FTNT> <FTNT> <SU>3</SU>  73 FR 48399, 48401 (Aug. 19, 2008). </FTNT> In 2008, the Board adopted IRPS 08-1 to provide direction and guidance to federally insured credit unions and those persons who may be affected by section 205(d). <SU>4</SU> <FTREF/> The Board specifically sought comments as to whether the format of the guidance as an IRPS was appropriate or whether a regulation would be more suitable. <SU>5</SU> <FTREF/> The Board received some comments supporting guidance in the form of an IRPS and others supporting a regulation, but ultimately chose to issue the guidance through an IRPS. <SU>6</SU> <FTREF/> <FTNT> <SU>4</SU>   <E T="03">Id.</E> </FTNT> <FTNT> <SU>5</SU>  The Board had not previously adopted any policies or regulations on section 205(d), as the statute at that time imposed no guidance or limitations on the information that the Board may consider, and the Board received a limited number of applications under section 205(d). However, due to an increasing number of applications requesting the Board's consent under section 205(d), the Board believed it was appropriate to issue guidance on the topic. </FTNT> <FTNT> <SU>6</SU>  Two commenters believed that a regulation was the more appropriate format for the guidance. One of the commenters who favored a regulation thought a regulation provided greater protection to a credit union that might be challenged by a prospective employee. Another commenter believed a regulation was preferable because it would help reinforce a credit union's right to appeal an adverse decision and subject future changes to public notice and comment. The Board concluded that the source of the requirement stems from Federal statute, namely section 205(d). Therefore, the Board believed that the need to comply with Federal law, as augmented by guidance in the form of an IRPS, was sufficient to protect a credit union. The Board believed that credit union officials should be able to adequately understand and apply the guidance styled as an IRPS and that the right to request a hearing contained in the IRPS provided a credit union a sufficient right to appeal a denial of consent by the Board. Additionally, the Board noted that it would not amend its IRPS without providing the public notice and an opportunity to comment. For all these reasons, the Board believed it appropriate to issue the final guidance in the form of an IRPS. </FTNT> IRPS 08-1 outlined the actions prohibited under the FCU Act and the procedures for applying the Board's consent on a case-by-case basis. Recognizing that certain offenses are so minor and dated that they would not presently pose a substantial risk to the insured credit union, IRPS 08-1 excluded certain <E T="03">de minimis</E> offenses that met specified requirements and juvenile offenses from the need to request consent from the Board. In effect, the IRPS gave automatic consent for these offenses without requiring a consent application or any notice. In 2019, the Board rescinded IRPS 08-1 and issued IRPS 19-1, a revised and updated IRPS to reduce regulatory burden (also known as the Second Chance IRPS). <SU>7</SU> <FTREF/> IRPS 19-1 amended IRPS 08-1 to expand the definition of <E T="03">de minimis</E> offenses to reduce the scope and number of offenses that would require submission of a consent application to the Board. Specifically, the IRPS did not require a consent application for convictions involving insufficient funds checks of moderate aggregate value, small-dollar simple theft, false identification, simple drug possession, and isolated minor offenses committed by covered persons as young adults. The Board recognized that many Americans faced hiring barriers due to a criminal record, a great number of whom are not violent or career criminals, but rather people who made poor choices early in life who have since paid their debt to society. The Board found that offering second chances for career opportunities to those who are truly penitent was consistent with our nation's shared values of forgiveness and redemption. <FTNT> <SU>7</SU>  84 FR 65907 (Dec. 2, 2019). </FTNT> On December 23, 2022, Congress passed the National Defense Authorization Act for Fiscal Year 2023 (NDAA), which amended section 205(d). <SU>8</SU> <FTREF/> The NDAA included the FHBA—which became immediately effective on December 23, 2022. The FHBA amends section 205(d) to expand employment opportunities for those with a previous minor or older criminal offense, among other provisions. Generally, the amendments codify a number of elements already contained in the NCUA's current policy regarding section 205(d) but also extend greater relief than what is currently available to certain individuals with prior convictions seeking employment with an insured credit union, particularly individuals with older convictions, expunged convictions, or prior convictions for a misdemeanor, any drug-related possession offense, or certain designated “lesser offenses.” The FHBA also clarifies several definitions and the procedures for processing a consent application. <SU>9</SU> <FTREF/> The specific provisions of the FHBA are discussed in detail later in this preamble. <FTNT> <SU>8</SU>  Public Law 117-263 (Dec. 23, 2022). </FTNT> <FTNT> <SU>9</SU>  Under the FHBA, a “consent application” means “an application filed with [the] Board by an individual (or by an insured credit union on behalf of an individual) seeking the written consent of the Board under [12 U.S.C. 1785(d)(1)(A).” 12 U.S.C. 1785(d)(6)(A). </FTNT> <HD SOURCE="HD2">Section 19 of the Federal Deposit Insurance Act</HD> Section 19 of the Federal Deposit Insurance Act (section 19) contains a prohibition provision similar to section 205(d) of the FCU Act. <SU>10</SU> <FTREF/> Before 2020, the Federal Deposit Insurance Corporation (FDIC) provided the public with guidance relating to section 19 and the FDIC's application thereof through a Statement of Policy similar to the NCUA's IRPS 19-1. <SU>11</SU> <FTREF/> Similar to the NCUA's IRPS, the FDIC's Statement of Policy, among other things, instituted a set of criteria to provide for blanket approval of certain low-risk crimes and for persons convicted of such <E T="03">de minimis</E> crimes to forgo filing a section 19 consent application. <FTNT> <SU>10</SU>  12 U.S.C. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 129k characters. 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