WASHINGTON (3/26/15 UPDATED 10:10 a.m. ET)--The Consumer Financial Protection Bureau released a plan overnight aimed at eliminating payday lending "debt traps" and CUNA is evaluating it to determine if it accomplishes its goal without hindering credit unions' efforts to provide credit to their members. The new consumer protections would apply to payday loans, vehicle title loans, deposit advance products and certain high-cost installment and open-end loans.
"One of the goals of the founders of the American credit union movement was to create a system of cooperative finance that provided consumers with access to credit, including short-term, small dollar loans, on fair terms and rates. Therefore, CUNA supports the ability of credit unions to provide beneficial short-term, small loans as alternatives to predatory payday lending, which has no place in the financial marketplace.
"The extent to which credit unions will be able to continue to productively, efficiently and responsibly serve their members' short-term, small-dollar credit needs will be a key measure we use in evaluating these proposals. If the rule results in consumers having reduced access to credit from credit unions or if the access to credit is made more expensive by regulatory burdens imposed on credit unions which would be more appropriately targeted toward the abusers of consumers, it will have failed to adequately protect consumers.
"We are evaluating the proposals the bureau released overnight, and we look forward to discussing them with our members, the CFPB and other policymakers."
The proposal would cover both short-term credit products (which must be paid in full within 45 days), and long-term loans where the lender collects payments through access to the borrower's bank accounts. One of the proposal's main focuses is requiring a lender to determine a borrower's ability to repay a loan before granting it.
For long-term loans, the CFPB is considering protections already used by the National Credit Union Administration for its payday alternative loan program. Those loans are capped at 28% interest and an application fee of no more than $20.
The other approach the bureau is examining for long-term loans would cap a loan payment amount at no more than 5% of their gross monthly income, and no more than two such loans can be made to a borrower within a 12-month period.
For short-term loans, lenders would have to verify a borrower's income, financial obligations and borrowing history to determine the consumer's ability to repay. There would be a 60-day "cooling off period" between loans, loans cannot be made within that period unless there is documentation the borrower's circumstances have improved enough to repay without re-borrowing.
Lenders also would not be allowed to keep consumers in debt on short-term loans for more than 90 days in a 12-month period. Rollover loans would be capped at two, followed by a mandatory 60-day cooling off period.
For the second and third consecutive short-term loans, the bureau is considering two options. One would require the principal decrease with each loan, so that it is repaid after the third loan, or require the lender provide a no-cost "off-ramp" after the third loan, to allow the consumer to pay the loan off over time without further fees.
WASHINGTON (3/26/15, UPDATED 11:11 a.m. ET)--Nine regulatory relief bills supported by CUNA were approved by the House Financial Services Committee this morning after a two-day markup of a series of bills.
"These bills are a step in the right direction toward removing barriers and allowing credit unions to efficiently serve their members," said CUNA President/CEO Jim Nussle.
"I look forward to seeing these pieces of legislation that reduce regulatory burden come the House floor for a vote. When credit unions boards and managers--not government bureaucrats--are making decisions about how to provide services, it's the 102 million member-owners of the credit union who benefit."
The bills that passed the committee today include:
- H.R. 299, the Capital Access for Small Community Financial Institutions Act, introduced by Reps. Steve Stivers (R-Ohio) and Joyce Beatty (D-Ohio), corrects a drafting oversight in the Federal Home Loan Bank Act that has resulted in a small number of privately insured credit unions being ineligible to join a Federal Home Loan Bank. This bill passed by a vote of 56-1.
- H.R. 1195, the Bureau of Consumer Financial Protection Advisory Board Act, introduced by Reps. Pittenger (R-N.C.) and Denny Heck (D-Wash.), would require the Consumer Financial Protection Bureau by law to eastablish the Credit Union Advisory Council, as well as the Small Business Advisory Board and the Community Bank Advisory Council. These advisory councils had previously been voluntarily established by the CFPB. The separate Consumer Advisory Board is already codified in statute. This bill passed by a vote of 53-5.
- H.R. 1265, the Bureau Advisory Commission Transparency Act, introduced by Rep. Sean Duffy (R-Wis.), would, in effect, open bureau advisory committee meetings to the public. This bill passed by a vote of 56-2.
- H.R. 1259, the Helping Expand Lending Practices in Rural Community Act, introduced by Reps. Andy Barr (R-Ken.) and Ruben Hinojosa (D-Texas), directs the CFPB to establish an application process determining whether an area should be designated as a rural area if the CFPB has not designated it as one. This bill passed by a vote of 56-2.
- H.R. 1480, the SAFE Confidentiality and Privilege Enhancement Act, introduced by Reps. Robert Dold (R-Ill.) and Ed Perlmutter (D-Colo.), would require that confidentiality protections provided by federal and state laws apply when state and federal regulatory officials with mortgage or financial services industry oversight authority access any information provided to the Nationwide Mortgage Licensing System and Registry. This bill passed by a vote of 58-0.
- H.R. 1408, the Mortgage Servicing Asset Capital Requirements Act, introduced by Reps. Perlmutter and Luetkemeyer, requires federal banking agencies to conduct a study of the appropriate capital requirements for mortgage servicing assets for nonsystemic banking institutions. This bill passed by a vote of 49-9.
- H.R. 1529, the Community Institution Mortgage Relief Act, introduced by Reps. Sherman and Luetkemeyer, would exempt mortgage loans made by financial institutions under $10 billion in assets and held in portfolio for three years from RESPA's escrow requirements and would also exempt mortgage servicers that service fewer than 20,000 mortgages annually from a number of requirements of RESPA. This bill passed by a vote of 48-10.
- H.R. 685, Mortgage Choice Act, introduced by Reps. Bill Huizenga R-Mich.) and Gregory Meeks (D-N.Y.), would make an important modification to the Truth-in-Lending Act's definition of "points and fees." This bill passed by a vote of 43-12.
The next step in the House for these bills would be a vote on the House floor.
For more detail on each bill, use the resource link to the
WASHINGTON (3/26/15)--With 22 working days left until the comment deadline for the risk-based capital proposal--often referred to as RBC2, CUNA is providing
in its effort to encourage credit unions to weigh in. Again.
The deadline is April 27.
The National Credit Union Administration abandoned its original RBC plan, issued in January 2014, after it received 2,056 comments from credit unions, lawmakers and others that listed concerns regarding how the plan would impact credit unions and consumers.
The agency issued its second RBC proposal this January, and CUNA has said it is a substantially improved regime--but still a solution in search of a problem.
"With reductions in many of the risk weights found in the original plan, and a reduction to 10% for the well-capitalized requirement, the second proposal is an improvement," says Bill Hampel, CUNA chief policy officer.
However, he emphasizes there are still significant problems with the proposal, particularly as it relates to an additional "capital adequacy" requirement, and the future treatment of interest-rate risk so it is imperative that credit unions stay engaged in this rulemaking process to have as much impact on proposal improvements as possible.
As part of its
, CUNA has developed a "comment letter guide" with information regarding the need for and value of commenting on the plan and how to comment.
"There remain a number of areas that should still be improved, and they are described in the guide," Hampel says.
"We are asking credit unions to individually tell their stories to NCUA, so the agency understands that their rule will have real impact on real credit unions and their very real members," CUNA's chief policy officer adds.
WASHINGTON (3/26/15)--A data security bill passed the House Energy subcommittee on commerce, manufacturing and trade Wednesday, and it included a CUNA-supported technical correction amendment.
The amendment exempts both federal- and state-chartered financial institutions from the bill because those institutions already are subject to strict security standards under the Gramm-Leach-Bliley Act.
The Data Security and Breach Notification Act of 2015 would
certain entities that collect and maintain personal information of individuals to secure such information. The breached entity must also provide notice to such individuals within 30 days of determining the scope of the breach.
A violation of the act would be classified as an unfair or deceptive act or practice under the Federal Trade Commission Act, and would be enforced by the FTC or state attorneys general.
for stricter standards than the current bill calls for, particularly in the area of merchant data security standards. Along with other financial trade organizations, CUNA
those principles in letters to Congress last month.
ALEXANDRIA, Va. (3/26/15)--More than 40 consumers around the country have received a scam phone text message purporting to use a National Credit Union Administration phone number, the agency announced Wednesday.
Consumers who receive a text from 703-518-6301 asking for personal information should contact the agency's Consumer Assistance Center hotline at 800-755-1030.
states that it will never request personal or financial information from consumers.
According to the NCUA, the perpetrators are able to mimic a telephone number to generate text messages. The messages may warn of a debit card reaching its limit or use some other trick to persuade individuals to provide personal information or go to a malicious website.
Consumers should not click on links in the message, provide information to any websites referenced in the message nor attempt to conduct any financial transactions through those websites.
This attempted fraud scam is classified as "
" by the Federal Communications Commission.
WASHINGTON (3/26/15)--Car-title loans, where borrowers hand over the title to their vehicles as collateral to secure a cash advance, cause many of the same problems seen with payday loans, The Pew Charitable Trusts has found in a new report.
One of the biggest drawbacks of the product, which more than 2 million Americans use every year, is that the loans can lead to unmanageable balloon payments that can push borrowers deeper into debt.
"We found that auto-title loans share the same harmful characteristics as payday loans," said Nick Bourke, Pew small-dollar loans project director. "They require balloon payments that borrowers can't afford, and most consumers end up having to re-borrow the loans repeatedly."
What's more, a car-title loan can carry even higher costs than payday loans, as a borrower faces the additional risk of losing their car, which for some is their only form of transportation, Bourke added.
The report did note, however, that some credit unions serve members who have damaged credit by offering low-rate installment loans that can be secured with car titles.
"Depository institutions are better positioned to offer lower-cost title loans than are stores that sell only a small variety of financial products to a limited population," the report said.
Still, Pew hopes the findings will encourage the Consumer Financial Protection Bureau to enact regulations that either prohibit high-interest, small-dollar loans or at least make them more transparent, affordable and safe through key reforms.
Key findings from the report include:
- Title-loan customers spend roughly $3 billion annually, or $1,200 each, in fees on loans, which average $1,000;
- Annual interest rates for title loans average roughly 300% APR;
- The average lump-sum title-loan payment gobbles up 50% of an average borrower's gross monthly income. The average payday loan consumes 36%;
- Between 6% and 11% of title-loan customers have their car repossessed every year, and one-third of all title-loan borrowers have no other working vehicle to rely on; and
- Half of consumers report using title loans to pay for regular bills, and more than nine in 10 loans are used for personal reasons.
MADISON, Wis. (3/26/15)--Filing tax returns can be challenging and a little scary. Credit unions, with the Volunteer Income Tax Assistance (VITA) program, step up to help consumers file their taxes properly and receive the tax credits they've earned.
VITA programs offer free tax-preparation assistance to economically eligible populations as well as elderly, disabled or non-English speaking taxpayers. Certified preparers also help identify eligibility for earned income tax credits (EITC) and navigate new
under the Affordable Care Act (
During its five-day VITA program, Firstmark CU helped 163 families prepare and file their 2014 income taxes for an estimated $400,000 in refunds, the San Antonio, Texas, credit union reported.
"We saw a high turnout each day which validates the need for this kind of assistance," said President/CEO Leon Ewing.
By the first part of March, Montana credit unions and Montana Credit Unions for Community Development partners had electronically filed more than 2,120 tax returns at VITA sites. More than a third were filed at credit union-sponsored sites, and the certified volunteers helped Montanans claim more $987,000 in federal refunds, including $313,586 in EITC (
In addition to its 12 branch locations, Bethpage (N.Y.) FCU will take its VITA program to local libraries and community centers. Last year the credit union secured more than $700,000 in earned income tax credits for eligible families, according to Rob Suarez, assistant vice president of community development. Bethpage also completed 2,489 VITA tax returns and helped taxpayers claim refunds of more than $2.8 million, a 23% increase from 2013.
CORE FCU, East Syracuse, N.Y., tapped seven students from East Syracuse-Minoa High School to serve as certified tax preparers. The students work under the supervision of credit union employees and IRS-certified volunteers.
"They pick up tremendous math and financial accounting skills," CORE FCU President/CEO Bill Sweeney told
(March 14). "They also get an opportunity to be community leaders and not only learn from the program, but also give back to the community."
WASHINGTON (3/26/15)--CUNA continues to monitor the advancement of nine regulatory relief bills being considered by the U.S. House Financial Services Committee, which is expected to vote on a relief package today.
Eleven regulatory relief bills in total were marked up by the committee Wednesday.
, a number of the bills passed the committee in the previous Congress, including several that passed without any opposing votes.
"Witness after witness has come before our committee over the last several years to speak about the weight, the volume, the complexity, the cost and uncertainty of Washington regulations," said Rep. Jeb Hensarling (R-Texas), chair of the committee. "One community banker who appeared before our committee last week called this 'an avalanche of new rules.' It is not an exaggeration to say that America's community financial institutions are withering on the vine."
Members of the committee seemed especially concerned with regulatory burdens that are causing financial institutions to limit products offered, and how such burdens are not only affecting financial institutions, but the consumers who rely on them.
Rep. Randy Neugebauer (R-Texas) said a common theme in recent regulatory relief hearings is that small financial institutions appear ready to stop offering products such as mortgages.
"When they leave the mortgage market in those smaller communities, there's no place for the people who live in those communities to get a mortgage loan," he said, speaking in support of the Mortgage Servicing Asset Capital Requirements Act of 2015 (H.R. 1480).
Rep. Blaine Luetkemeyer (R-Mo.) said he was especially concerned with regulations that see community institutions as existing on the same level as the largest banks. He cited the Community Institution Mortgage Relief Act (H.R. 1529) as an example of tangible regulatory relief.
The bill would provide safe harbor from escrow requirements for loans held in portfolio for some smaller financial institutions, and exempt institutions that service less than 20,000 mortgages per year.
"Community banks and credit unions that service less than 20,000 mortgages per year should not be subject to the same regulations as an institution that has a $2 trillion servicing portfolio," he said.
All bills will considered during the markup be subject to a recorded vote, which is expected to begin at 9 a.m. (ET).
JACKSONVILLE, Fla. (3/26/15)--Gail Lewis, director of consumer lending/credit manager at 121 Financial CU, Jacksonville, Fla., learned very early in her long career in financial services the importance of leadership in the workplace.
During a work-study program in high school, she landed a job reconciling business accounts at a bank. Her boss was the one who first imbued this idea in her.
"I had a great supervisor who set many of the standards I hold today--mostly, that a leader's role is to grow and develop people," she told
Credit Union Magazine
Since joining 121 Financial in 1983, Lewis has reinforced her belief in the importance of leadership many times over, including through the development of staff within her department.
As the lead on consumer and indirect lending, Lewis encourages and challenges her staff to grow within their roles at the credit union.
"Many people are satisfied in their positions, but they can't just be content," Lewis told
Credit Union Magazine
. "They're always learning--whether it's serving new members with different situations, understanding the regulatory environment, or handling changing times or a shifting economy."
Lewis also leads by example, especially in her community.
On her own time, the longtime credit union employee conducts financial education workshops, teaches financial counseling through the Credit Union Education Program and also serves on the education committee for the Northeast Florida Chapter of Credit Unions.
"Credit unions are about the community," she told
Credit Union Magazine
. "We say that and we back it up. I love that credit unions stand for helping and caring about people."
one of three nominees
for this year's "CU Hero of the Year"
, presented by
Credit Union Magazine
. The award recognizes those in the credit union movement who relentlessly promote the credit union philosophy, dedicate themselves to credit union principles, and make a difference in their communities.