Not legal advice. If someone has to sign their name to a credit decision, that someone is not the author of this blog. 😊.

This isn’t the first time we’ve talked about Executive Order 14406 and some of the resulting guidance. When we walked through FinCEN’s non work authorized populations advisory a few weeks ago, we told you the advisory was the opening act. The pieces with real operational teeth, i.e., the ones that could reshape how you underwrite, not just how you file SARs, were still backstage. Back then, we flagged one in particular: credit risk guidance from each federal regulator, NCUA included, due within 60 days of Executive Order 14406.

Right on schedule, it’s here. On July 13, 2026, the NCUA, FDIC, and OCC jointly issued the Interagency Guidance on Lending to Individuals Not Legally Authorized to Work in the United States. And for New York credit unions, it arrives with a complication the guidance itself never mentions because it’s a federal document that doesn’t account for New York’s Executive Law. Let’s fix that.

What the Guidance Actually Says

The guidance is short, and it’s careful to frame itself as a reminder of “existing obligations” rather than a new rule. But read past the throat clearing and it’s asking for something specific: treat a borrower’s work authorization as a credit risk variable. It organizes the ask around five underwriting considerations.

• Source of repayment. Consider whether income tied to unauthorized employment is a reliable repayment source, and stress test repayment capacity against scenarios including the borrower’s loss of work authorization or removal from the United States. In other words, the guidance treats loss of work authorization or removal as a repayment scenario to be modeled, not a remote contingency.
• Collateral Considerations. Security interests may be harder to enforce, and unaffixed collateral like autos, RVs, and boats is harder to locate and repossess, if a borrower is removed.
• Documentation and verification. Consider paystubs, W-2s, tax returns, employer verifications, and “evidence of continuing work authorization.”
• Portfolio and concentration risk. The sleeper. Lenders concentrated in geographies, employers, or industries exposed to immigration enforcement may see correlated deterioration across a whole segment at once and the guidance invites classifying such loans or segments as weak for allowance purposes regardless of delinquency.
• Consumer compliance risk. It points to the CFPB’s June 8, 2026 Statement on Ability To Repay and Immigration Status and reminds everyone that the Equal Credit Opportunity Act and Regulation B, by their own terms, permits a creditor to take immigration status into account “to ascertain the creditor’s rights and remedies regarding repayment.”

Federally, then, consideration of immigration status and continuing work authorization isn’t just permitted: Regulation B allows it, and the CFPB’s June 8 statement signals that, in the ability-to-repay context, ignoring information bearing on repayment capacity can be its own compliance risk.

The New York Red Light

Ready for the New York complicator?

New York amended its Human Rights Law (Executive Law §§ 296 and 296-a) in December 2022 to add citizenship and immigration status to the list of protected characteristics, which now makes it unlawful to discriminate in granting, withholding, extending, renewing credit, or in fixing its rates, terms, or conditions, on the basis of citizenship or immigration status, right alongside race, national origin, and the rest. And it makes it unlawful even to use an application, record, or inquiry that expresses, “directly or indirectly,” any limitation or discrimination as to citizenship or immigration status.

Now line up the dates, because they’re almost too on the nose. On April 22, 2026, the CFPB published its Regulation B rewrite eliminating disparate impact liability under ECOA. On that same day the New York Department of Financial Services issued an industry letter on § 296-a reminding regulated entities that, under New York law, “covered credit decisions that result in a disparate impact may constitute an unlawful discriminatory practice.” One regulator closed the disparate impact door; the other, hours away, propped New York’s open and pointed at it.

And DFS wasn’t bluffing. The letter cites three of its own banking consent orders as reminders that it actually brings fair lending cases, and it notes that DFS is authorized both to enforce New York’s fair lending law and to penalize violations of federal fair lending law.

Where That Leaves New York Credit Unions

Put the two documents side-by-side and the tension is obvious. Federal guidance invites you to require evidence of continuing work authorization and to treat immigration status as a risk factor. New York law makes immigration status a protected class, restricts inquiries that single it out, and, unlike the CFPB and NCUA (for now) still recognizes disparate impact.

That last point is where the concentration risk reference becomes a trap. Suppose you respond to the federal guidance by tightening underwriting on borrowers in construction, agriculture, hospitality, domestic service, or staffing, or in a particular immigrant heavy geography. Facially, you’re managing concentration risk exactly as the agencies suggested. Under New York’s still live disparate impact standard, you may have just built a facially neutral policy that lands disproportionately on a protected class, the textbook setup for a § 296-a claim, and one the federal safe harbor won’t rescue you from in a state action.

Even before you get to preemption, there’s another unresolved issue. Regulation B expressly allows creditors to consider immigration status when doing so is necessary to ascertain their rights and remedies regarding repayment. We have not found a comparable exception in New York’s Executive Law § 296-a or the DFS guidance. Whether New York courts would recognize the same repayment related distinction remains an open question and is one that should be evaluated with counsel before changing underwriting practices.

And for federal charters, don’t assume preemption solves the problem. Fair lending is different from many other banking laws. NCUA’s lending preemption expressly leaves room for state credit discrimination laws, and ECOA preserves state laws that provide greater protection to applicants. Because New York’s Executive Law § 296-a is more protective, it continues to apply to both federal- and state-chartered credit unions. As a result, federal guidance permitting consideration of immigration status does not automatically displace New York’s fair lending restrictions. The practical difference between charters is largely who examines and enforces compliance, not whether the underlying New York statute applies.

Practical Next Steps

• Underwrite to documented repayment capacity, not solely immigration status. A decision grounded in verifiable, stable income is defensible anywhere; one that turns on status is exposed under § 296-a, and in New York, even the inquiry is restricted.
• Apply any work-authorization inquiry consistently across applicants, rather than selectively based on national origin, accent, or perceived ethnicity.
• Self-test before you tighten. Any new underwriting criterion tied to the named industries, geographies, or work authorization should get a disparate impact review before it goes live.
• Document the individualized decision. The credit file should show a documented, member specific, income based judgment, not a reflex toward either approval or denial.
• Don’t overcorrect. Declining or exiting members simply to avoid the question creates its own fair-lending and reputational exposure.
• Coordinate your BSA and lending policies. Our last article on SAR/EDD and this one on underwriting address the same members. Make sure the left hand and the right hand agree on how you treat ITIN and immigrant serving relationships.
• Watch the rulemakings. The CDD and CIP proposals EO 14406 set in motion are still coming, and they’re where account opening obligations will actually harden. The Association will flag them as they drop.

The Bottom Line

The federal guidance and New York law don’t just differ in emphasis; on immigration status they point in opposite directions, and they did it on the same day. When a federal permission and a state prohibition collide, the conservative path is the one that satisfies the stricter regime: income based, uniformly applied, individually documented underwriting that would survive a disparate impact review. Do that, and you’re likely compliant in both directions. Reach for the federal green light without checking your rearview mirrors, and New York is the car you don’t see coming.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.

The usual housekeeping: this post is plain-English commentary, not legal advice, and definitely not a substitute for reading the proposal yourself. Your examiner has not read this blog. Probably.

The alphabet soup that decides your examination fate is getting a rewrite. On May 19, the FFIEC proposed a top-to-bottom revision of the Uniform Financial Institutions Rating System, the framework you know as CAMELS. The headline, if you only have time for one sentence: ratings are supposed to follow material financial risk, and stop following everything else.

The one-paragraph version

CAMELS keeps its six letters—Capital, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk—and its 1-to-5 scale. What changes is what examiners are told to weigh. The proposal pulls the spotlight off process, paperwork, and the “M,” and points it at whether something actually threatens your financial condition. For most credit unions, that’s a welcome shift.

Why the “M” is on a diet

Today, the Management component gets “special consideration” in your composite rating, and the agencies’ own data show it has quietly become the single most influential letter in the soup. The proposal strikes that special weight and says a Management rating of 3 or worse generally requires material financial risk, not just a thin succession plan or a binder that’s missing a policy update.

It also retires three evaluation factors outright: management depth and succession, responsiveness to auditor and supervisory recommendations, and “willingness to serve the community.” If you run a lean shop with a very capable spreadsheet, this one’s for you.

Good news from the compliance trenches

Here’s the change you’ll want to frame: specialty-review findings such as BSA/AML, consumer compliance, and IT, would only flow into your composite or Management rating to the extent they reflect material financial risk or significant noncompliance. In plain terms, a technical compliance ding on an otherwise financially sound credit union shouldn’t cascade into a ratings downgrade. It flows nicely with the direction FinCEN is taking on AML program expectations, too.

The fine print that still reads like a bank

Not everything got the cooperative memo. The Capital Adequacy section still talks about raising capital from shareholders, a sponsor, parent, or holding company, and the capital markets: a menu credit unions don’t generally order from. We build capital the old-fashioned way: retained earnings, one basis point at a time. NYCUA will be flagging this so the final framework doesn’t quietly treat “can’t issue stock” as “capital weakness.”

If you’re state-chartered, read this twice

The framework applies to all federally insured credit unions, including New York FISCUs. But NCUA only controls the federal side of your exam; DFS runs its own program. Until the state conforms, a NY FISCU could get a recalibrated NCUA rating sitting next to a state exam that still weighs things the old way. We’ll urge NCUA to coordinate with DFS so you’re not graded on two different curves.

The word nobody defined

The entire reform hinges on “material financial risk” and the proposal never defines it. That leaves a lot of room for interpretation at exactly the moment the agencies are trying to reduce it. We’re not asking for a rigid formula, but credit unions deserve some calibrated guidance so credit unions aren’t equally measured against the same invisible yardstick.

What this means for your next exam

• Nothing changes today. This is a proposal, not a final rule, and each agency still has to bake it into its own exam program if finalized.
• Document your financial story. As ratings tilt toward financial condition, the narrative that connects your risk profile to your numbers gets more valuable.
• Watch the “M” and the specialty reviews. If finalized, process-only findings should carry less rating weight; worth tracking how your examiners actually apply it.

We want to hear from you: take the survey

NYCUA is considering a comment letter, and our member’s operational experience is the most persuasive thing we can put in it. We’ve built a short member survey (8–10 minutes) to capture how the current framework has hit your exams and where the proposal helps or misses. Watch for the survey link in this week’s edition of the New York Minute or reach out and we’ll send it your way; please complete it by July 31 so we can reflect your input before the August 17 deadline.

You can also email your thoughts and feedback to me.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.

Not legal advice. Not tax advice. If you need someone to sign their name to something, call your attorney or tax advisor. This blog is here to help translate regulatory Latin into English, not to get between you and the people you pay to keep you out of trouble.

When Congress passed the One, Big, Beautiful Bill Act (OBBBA) last July, it included a new 1% excise tax on certain remittance transfers sent from the United States to foreign destinations. The tax technically took effect January 1, 2026. On April 13, 2026, the IRS and Treasury published proposed regulations to fill in the blanks on how it actually works.

Here is the headline for credit unions: you are mostly spectators to this one. And that is not a bad place to be.

Quick Refresher: What Is the Tax, and Who Pays It?

Section 4475 imposes a 1% excise tax on the amount of a taxable remittance transfer. The sender pays it. The remittance transfer provider collects and remits it quarterly.

A remittance transfer is the electronic transfer of funds from a consumer in the U.S. to a designated recipient in a foreign country, using a remittance transfer provider in the normal course of business. Same definition as Regulation E, which should sound familiar.

What makes a remittance transfer taxable? Two things have to line up:

• The transfer goes to a foreign location (domestic transfers do not trigger this tax), and
• The sender funds it with cash, a money order, a cashier’s check, or a traveler’s check.

That’s it. Miss either prong and there is no tax. Which brings us to the good news.

The Statutory Carve-Out That Matters for You

Section 4475(d)(1) exempts from the tax any remittance transfer for which the funds are withdrawn from an account held in or by, among other things, a credit union that is subject to BSA requirements. Translation: if your member’s money comes out of a share account at your credit union, the tax does not apply.

Section 4475(d)(2) separately exempts transfers funded with a U.S.-issued debit card or credit card. So in practice, the tax hits cash, money orders, cashier’s checks, and traveler’s checks: instruments that tend to show up at money services businesses (MSBs).

The IRS and Treasury said the quiet part out loud in the preamble: they expect banks and credit unions will “not be materially affected” by the tax because credit union -facilitated remittances are primarily funded by non-cash instruments.

The Question We’ve Heard and How Our Answer Changes With This Proposal: Is There a Waiting Period?

Here is the scenario. A member walks into the branch, deposits $500 in cash into their share account, and ten minutes later initiates a remittance transfer from that same account. Is that transfer exempt under §4475(d)(1), or does it look enough like tax avoidance to raise a flag?

The conservative advice we have been giving has been to let the cash sit in the account for a few days before using it to fund a remittance, just to avoid any appearance of gaming the system. The proposed regulations do not require that, and here is why.

The preamble and footnotes state that settlement of an instrument against an account “does not constitute a ‘withdrawal’ from an account at a financial institution for purposes of section 4475(d)(1)… Thus, the source of any funds used to purchase such instruments is immaterial.” That language is aimed at money orders and cashier’s checks, not cash deposits specifically, but the reasoning travels: once funds are in an account, they are account funds. No holding period. No look-through. Nothing in the proposed reg imposes or implies a waiting period.

So the short answer is: there is no statutory or regulatory waiting period, and the proposed reg supports treating funds as exempt account funds once they hit the account.

But (and it is a useful but) the proposed regulations include an anti-avoidance rule at §49.4475-1(d)(4) that lets Treasury disregard or recharacterize transactions whose “principal purpose“ is avoiding the tax. The two examples Treasury gives involve a consumer handing over cash in exchange for a general-use prepaid card and immediately using the card to fund a remittance or handing the card to a relative who does. In other words, they are targeting instruments used as pass-throughs.

A genuine cash deposit into a real, ongoing share account, processed through the credit union’s normal BSA and CIP procedures, is a different animal.

Practical takeaway: If the proposed regulations is finalized as is, you can stop telling members to wait three days. What you should keep doing is making sure cash deposits go through your normal front line procedures (CIP verification, CTR thresholds, SAR monitoring, the usual). Where the member is actually your member, and the account is actually their account, the exemption applies.

A Few Compliance Housekeeping Notes

Even though your credit union is not the one collecting and remitting the tax, a few operational points deserve attention:

• Cashier’s checks and money orders issued by your credit union. If a member takes a cashier’s check drawn on your credit union and hands it to Western Union, that transfer is taxable to the sender. The settlement of the check between you and the MSB is not treated as a withdrawal from the member’s account for §4475(d)(1) purposes. The tax attaches because the MSB received a cashier’s check regardless of where the funds backing it came from. This mostly matters for member education. You are not the collector, but your members may be surprised to learn that “I used a cashier’s check from my credit union” does not save them the 1%.
• Check cashing at MSBs. If a member cashes a payroll or personal check at an MSB and immediately uses the proceeds to fund a remittance, the proposed regs treat that as a cash-funded remittance and therefore taxable. Again, not your compliance burden, but useful to know when members ask.
• International wires from member accounts. The exemption applies regardless of whether the wire goes through your credit union directly or through a correspondent. As long as the funds come out of the member’s account at a BSA-covered financial institution, §4475(d)(1) applies.
• The Reg E safe harbor does not travel. Regulation E’s 500-transfer-or-fewer safe harbor for low-volume providers does NOT apply for purposes of this tax. Treasury was explicit on this point. If your credit union does fewer than 500 remittance transfers a year, you are still a “remittance transfer provider” for §4475 purposes. In practice, it does not matter much because the transfers you facilitate are from member accounts, which are exempt anyway but it is a useful footnote for anyone on your team who was counting on the safe harbor.
• Form 720 and semimonthly deposits. For the handful of transfers where your credit union might actually be collecting the tax (cash-funded remittances from non-members, for example, if your CU offers that service), you would be filing Form 720 quarterly and making semimonthly deposits. Notice 2025-55 provides failure-to-deposit relief for the first three calendar quarters of 2026, so there is a soft-landing period built in.

Comment Period and What to Push For

Written comments on the proposed regulations are due June 12, 2026. If there is one thing worth asking Treasury to address more explicitly, it is the cash-deposit-then-remit fact pattern. The proposed reg supports the conclusion that it is exempt, but the support is by analogy rather than by direct example.

The New York Credit Union Association is reviewing the proposal so you can send comments and feedback to be considered for a comment letter.

The Bottom Line

The new 1% remittance excise tax is a rare regulatory development that genuinely benefits credit unions without requiring you to do much of anything. The statute carves you out. The proposed regulations confirm the carve-out. The anti-avoidance rule targets synthetic workarounds, not genuine member relationships.

Your job is less about compliance and more about communication. Let your members and your communities know that sending money home from a share account is cheaper than sending it from the storefront down the block. That is not new. The tax just made it a little more true.

And, one more time, because we like our licensed colleagues: this blog is not legal or tax advice. Consult your attorney and your tax advisor on the specifics of your operation.

And, one more one more time: this is just a proposal. Things can change.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.

Fraud is having a moment. Unfortunately, it’s not the good kind.

The numbers are jarring: $132 billion in payment fraud losses in 2023, $12.5 billion in consumer scam losses in 2024, and a record-breaking $16.6 billion in cyber-related crime losses that same year. And it’s getting worse. Deloitte projects that AI-enabled fraud could reach $40 billion in the United States by 2027. Fraudsters aren’t just opportunists anymore. They’re organized, AI-powered, and, frankly, extremely motivated. Deepfakes that can clone your loan officer’s voice. Synthetic identities that spend months building credit before vanishing. Romance scam bots managing dozens of victims simultaneously without a human ever touching the keyboard. If it sounds like a streaming crime series, that’s because it basically is, except the victims are your members and the losses are very real.

Credit unions have been fighting this battle largely on their own, absorbing resources, staff time, and emotional energy trying to protect members from criminals who don’t respect regulatory, or frankly, any boundaries.

The good news? Washington is starting to pay attention.

The Executive Order

Earlier this month, President Trump signed an Executive Order directing a comprehensive review of the tools available to combat transnational criminal organizations behind cybercrime and fraud. The order calls for an action plan to identify and dismantle criminal networks, prioritizes prosecution of cyber-enabled fraud, and directs the Attorney General to explore returning seized funds to victims.

Is this a magic wand? No. But it signals that fraud is now a whole-of-government priority  which is exactly what the industry has been calling for. As many credit unions can attest, law enforcement’s resource limitations often mean they can’t engage unless losses are large enough; a threshold that feels pretty cold comfort when your member just wired their savings to a romance scammer.

The TRAPS Act

New York Credit Union Association members made the TRAPS Act—the Taskforce for Recognizing and Averting Payment Scams Act—a top priority at America’s Credit Unions’ Governmental Affairs Conference last week, and it’s easy to see why.

The bipartisan bill would establish a Treasury-led federal task force drawing from the NCUA, CFPB, FCC, FTC, DOJ, credit unions, banks, digital payment networks, consumer groups, and the tech sector. The task force would examine fraud trends, coordinate prevention, and issue annual reports for three years.

In other words: someone would actually be in charge of a national strategy. Imagine that.

The New York Credit Union Association and America’s Credit Unions have been clear that this kind of collaborative, whole-of-government approach is exactly what’s needed and that credit unions also need broader safe harbor protections for information sharing and greater regulatory clarity on liability, particularly around electronic transfers.

What This Means for New York Credit Unions

The pressure on credit unions is real. Fraud losses are outpacing loan losses at some institutions. Staff are spending considerable time on education and monitoring. And members are increasingly targeted by AI-enhanced schemes that exploit trust and urgency in equal measure.

The Executive Order and the TRAPS Act won’t solve the problem overnight, but they represent meaningful momentum toward a coordinated national strategy the industry has been seeking. In the meantime, credit unions should continue investing in staff training, member education, and fraud transaction monitoring because no amount of federal coordination fully compensates for a member who has decided to trust a scammer.

The fight against fraud is a team sport. New York credit unions have been showing up to practice for years. Nice to see the rest of the team finally suiting up.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.