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September 30, 2014

NCUA chair to request second risk-based capital comment period

ALEXANDRIA, Va. (9/30/14)--National Credit Union Administration Chair Debbie Matz announced Monday that she will request that a revised risk-based capital proposal be issued with a new comment period due to "significant structural changes" being considered. Credit Union National Association President/CEO Jim Nussle commended the NCUA's decision.

"CUNA, the leagues and credit unions fervently advocated for a second comment period given the significance of the proposal and the feedback that it received from both the credit union movement and policymakers," Nussle said. "This is terrific news; we look forward to continuing to work with the agency to craft a rule that meets the needs of the credit union system."

CUNA requested an additional comment period in its original comment letter filed with the agency May 28, and has advocated for it during the three NCUA Listening Sessions over the summer and in meetings with NCUA board members and staff.

Board member J. Mark McWatters called the previously proposed risk-based capital proposal "deeply flawed" and said it merits substantial revision.

"As I stated last week, I will not consider the rules for adoption unless they are re-proposed with a robust comment period of not less than 60 to 90 days," he said. "I articulated this position out of respect for Congress and those members of the credit union community who have enthusiastically voiced their opposition to the proposed rules."

NCUA staff are reviewing and revising the current proposal, and reviewing stakeholder comments, before bringing the revised version to the board. The agency could not confirm when the board might see the revision, but Matz anticipates the board could issue an amended proposal before the end of the year.

According to the agency, the amended proposal will include a longer implementation period and revised risk weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions, among other changes.

Stakeholders will be invited to comment on an alternative approach for addressing interest rate risk using the supervisory process. NCUA board member Rick Metsger said he believes interest rate risk must be addressed in the risk-based capital rule, but separately from credit risk.

"Weighting credit risk and interest rate risk with a single numerical value created conflicts that ultimately made it difficult to accurately weigh the risk of either," he said. ""I am pleased we appear to be moving in the direction of separating interest rate risk and credit risk and that structural change alone is sufficient for me to believe an additional comment period would be appropriate."

Matz said the changes will pose less of a regulatory burden than the original proposed rule, but some changes will affect the rule's structure.

"Based on discussions with NCUA's general counsel, I now believe it is prudent under the APA to ask for additional comments," she said. ReadMore

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CU leagues of 5 states call for merchant breach accountability

WASHINGTON (9/30/14)--The presidents of credit union leagues from Alabama, Florida, Massachusetts, New Hampshire and Rhode Island have echoed concerns of the Credit Union National Association in calling for retailers to take responsibility for the costs of data breaches.

Speaking to The New Hampshire Union Leader , Paul Gentile, president/CEO of the Massachusetts, New Hampshire and Rhode Island Credit Union Leagues, called for retailers to take responsibility for the costs borne by financial institutions when such breaches occur.

"They should lose money. They lost their customer data. They're losing money [in sales] because of bad business, not protecting their systems," Gentile told the publication. "Credit unions are impacted for nothing that they did. Their systems are not breached."

The same article in The New Hampshire Union Leader estimated that the Target breach alone caused New Hampshire credit unions to reissue 25,493 debit cards and 2,911 credit cards, at a cost of $5.10 per card, a total of $144,862. That number does not take into account the cost of fraudulent charges.

Patrick La Pine, president/CEO of the League of Southeastern Credit Unions, cited a CUNA survey in his editorial that ran in the Sept. 28 edition of The Miami Herald . CUNA's survey indicated the target data breach cost Florida credit unions more than $1.5 million.

"If the Home Depot breach is larger, you can see that credit unions will have considerable expense on a breach that they did not cause," he wrote. "The merchant does not incur any of these costs and, ultimately, the costs are passed along to consumers."

La Pine, who was also featured in The Gainesville Sun last week, cited a lack of data security standards for merchants as a primary reason for so many breaches.

"Financial institutions, including credit unions, are subject to high data protection standards by law while merchants are not subject to federal data protection standards; there is no merchant financial accountability," he wrote.

CUNA's survey results from all states led to an estimate that the total cost to credit unions is an estimated $30.6 million, including reissuing 4.6 million credit and debit cards, as a result of the Target breach.

Use the resource link below for News Now coverage of CUNA's response to the data breaches. ReadMore

CULAC backs former CU VP Aguilar's House campaign

WASHINGTON (9/30/14)--With 35 days remaining before the general election, the Credit Union Legislative Action Council (CULAC) has made its second independent expenditure of election season. CULAC has spent $150,000 on direct mail and digital advertising to support Pete Aguilar, a Democratic candidate running to represent California's 31st Congressional District.

Aguilar is the former vice president of Arrowhead CU of San Bernardino, Calif., $820 million in assets, and the current mayor of Redlands, Calif. He won his June primary election by 209 votes, after CULAC funded a $200,000 independent expenditure on direct mailers, digital advertisements and a website for the primary.

"We believe Pete's background working at a credit union gives him an understanding of the unique role credit unions play in their communities, and will give him unique insight into the challenges faced by the working families of California's Inland Empire," said Trey Hawkins, vice president of political affairs at the Credit Union National Association. "Now we're here to get him through November's election."

This is the second independent expenditure from CULAC for the general election. Sen. Mitch McConnell (R-Ky.), the Senate minority leader, is benefiting from $300,000 in television and radio advertising for his race to continue representing Kentucky in the Senate.

CULAC also spent $156,000 on similar advertising earlier this spring for McConnell.

"As we get into the final weeks leading up to the election, we'll be announcing up to a dozen races around the country where credit unions will be contacting their members, CULAC will be spending money on advertisements and we'll be engaging at the ballot box on behalf of credit union champions in both key House and Senate races," Hawkins said. ReadMore

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CFPB seeks $47.5M, charges Flagstar Bank with mortgage servicing violations

WASHINGTON (9/30/14)--Violations of the Consumer Financial Protection Bureau's (CFPB) new mortgage servicing rules resulted in the bureau ordering Flagstar Bank to pay $37.5 million, according to the CFPB. The Michigan-based mortgage servicer is alleged to have illegally blocked borrowers' attempts to save their homes, and as a result will pay $27.5 million to victims and a $10 million fine, which will go to the CFPB's civil penalty fund. 

The CFPB said in a statement that Flagstar failed borrowers "at every step in the foreclosure relief process."

Flagstar administers foreclosure relief programs provided by the owner of the loan, which are meant to mitigate losses for both the borrower and the owners of the loans by providing alternatives to foreclosure.

CFPB examinations and an investigation found that from 2011 to the present, Flagstar failed to devote sufficient resources to administering loss mitigation programs for distressed homeowners. For example, in 2011, Flagstar had 13,000 active loss mitigation applications but only assigned 25 full-time employees and a third-party vendor in India to review them.

Specifically, the Bureau found that Flagstar:
  • Took excessive time to review loss mitigation applications, often causing application documents to expire. To move its backlog, Flagstar would close applications due to expired documents;

  • Failed to approve or deny borrower applications within the 30 days required by CFPB mortgage servicing rules;

  • Failed to send, or delayed sending, missing document letters to borrowers. Flagstar is responsible for reviewing borrowers' initial loss mitigation applications to determine what documents are missing. It must then tell borrowers what documents are missing, usually by sending a "missing document" letter;

  • Routinely miscalculated borrower income, leading to Flagstar wrongfully denying loan modifications;

  • Denied applications for unspecified reasons, despite the fact that Flagstar's internal systems contained the true reason for the denial; and

  • "Needlessly prolonged" trial periods for loan modifications, causing some borrowers' loan amount under the modified note to increase and, in some cases, jeopardized borrowers' permanent loan modification.
In addition to the fines, the bureau has ordered Flagstar to end all loss mitigation mortgage servicing violations and stop acquiring default servicing rights from third parties.

Use the resource link below to access the CFPB's consent order.


Three webinars remain on OSCUI's schedule this year

ALEXANDRIA, Va. (9/30/14)--Webinars on product pricing, building loan portfolios and improving internal controls will be held over the next few months by the National Credit Union Administration, the agency reminded Monday.

The dates and topics of the webinars are:
  • Oct. 15: "Product Pricing: Getting it Right." How loan size matters to profitability, how to set rates based on internal metrics and how some decisions made "in the name of the member" may be unprofitable;

  • Nov. 19: "Building a Loan Portfolio: Four Keys to Lending." Loan products, pricing, underwriting and collections; and

  • Dec. 17: "Internal Controls." How to build effective internal controls with a small staff, how to minimize employee dishonesty and how to avoid common internal controls mistakes.
The webinars will be hosted by staff from the NCUA's Office of Small Credit Union Initiatives.  Participants may submit questions in advance at The subject line of the email should be the title of the webinar.

All webinars are free and will begin at 2 p.m. (ET). Each one will be archived and closed-captioned online approximately three weeks following the live event.

Use the resource links below for more information. ReadMore

Inside Washington (09/30/2014)

  • WASHINGTON (9/30/14)--The Government Accountability Office (GAO) has released a report regarding Bureau of Engraving and Printing (BEP) efforts to make currency more accessible. This includes adding large, high-contrast numerals to notes, distributing free audible currency reader devices and developing tactile features for touch identification. BEP has also developed a smartphone app that identifies notes. The GAO report states the inclusion of a tactile feature will require a redesign of currency, that the BEP is behind its internal schedule in developing a raised tactile feature and that BEP and Federal Reserve staff have concerns about potential cost impacts. BEP officials stated that they have not yet determined how these concerns might be addressed. The GAO recommends BEP evaluate its currency reader program while it develops a tactile feature in the next redesign of currency...

  • WASHINGTON (9/30/14)--Due to a payroll processing issue, federal salary payments submitted to FedACH Services on Sept. 25 with a payment date of Sept. 26, under routing and transit number 101036009, were issued with reversed checking/savings account transaction codes. Transactions intended for checking accounts were issued with a transaction code of "32" (savings account credit); while transactions intended for savings accounts were issued with a transaction code of "22" (demand credit-checking). Other than the incorrect transaction code being assigned to these payments, amounts and other payment related information is valid. The U.S. Department of the Treasury is requesting, to the extent possible, that financial institutions identify and post these transactions to the appropriate checking or savings account ...

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