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November 26, 2014

NPR report highlights merchant failures on data breaches

CU System
WASHINGTON (11/26/14)--Merchant data security breaches--their effects on consumers and the reactions of retailers--were highlighted on a recent segment of NPR's "All Things Considered."
 
Reporter Aarti Shahani followed a security expert who was able to point out how easily a hacker could infiltrate a retailer's point-of-sale network. EMC's Davi Ottenheimer noted a card reader--similar to ones he had at home--connected to a tablet left unattended in a high-end retail store. At another large retailer, no one noticed that he was paying more attention to a computer plugged into the network than to the merchandise.
 
"A lot of times, a lazy approach to security is just to make information difficult to get," Symantec security expert Orla Cox told NPR. "Just because you're not talking about it isn't actually making you any more protected."
 
The incentives are small for retailers to take on more responsibility. They want to keep information technology budgets down, and they don't have to pay, even if they are at fault. Financial institutions pick up the bill, Shahani said.
 
The Credit Union National Association, NPR noted, "is asking lawmakers to intervene, so that retailers are held to stricter security and disclosure rules."
 
CUNA worked with NPR, providing statistics on the costs of the data breaches--costs that credit unions and banks pick up. The text version of the segment links readers to CUNA's Stop the Data Breaches fact sheet.
 
Chris Leggett, president/CEO of $989 million-asset LGE Community CU, Marietta, Ga., told NPR that the issuers are bearing the brunt of the expenses. "It sure would be nice if the merchants would be willing to share in the cost of cleaning it up due to their lax security," he said. ReadMore

Media outlets widely share CUNA-CFA holiday spending outlook

CU System
WASHINGTON (11/26/14)--The holiday shopping survey conducted by the Credit Union National Association, in collaboration with the Consumer Federation of America (CFA), was picked up broadly in the national media Tuesday after a Monday press conference where the results were announced.

Stephen Brobeck, right, of the Consumer Federation of America and Mike Schenk of the Credit Union National Association deliver the 2014 outlook for holiday spending. (Cronkite News Photo)
CBS Money Watch featured the comments of Mike Schenk, CUNA vice president of economics and statistics, and Stephen Brobeck, CFA executive director, along with the survey results, which found that 87% of shoppers plan to spend either the same or less than they did last year this holiday season.

The 15th annual holiday spending survey also found that only 10% plan to spend more--compared with 13% last year--and that, overall, holiday spending will climb 3% to 3.5% (News Now Nov. 25).

Spending will rise modestly, but the survey found many consumers have "significant concerns about their personal finances," said Schenk in CBS Money Watch (Nov. 24).

Survey results also were picked up in the Detroit Free Press, Cronkite News, American Banker and by local news affiliates. CNBC, ABC Radio and Voice of America attended the press conference Monday, and several interviewed both Schenk and Brobeck individually.

Because of concerns over finances and weak income gains, "we expect the increase in holiday spending this season to be modest," Schenk told Cronkite News (Nov. 24).  

Added Brobeck: "During the great recession, some consumers were thrashing around financially, but quite a large number were sinking. The rising economic tide has not raised all boats equally."

In a piece from NBC affiliate KGNS-TV 8, Brobeck was quoted during the press conference as saying: "Somewhat shockingly, nearly half of Americans say that they don't have extra funds to cover a $1,000  unexpected expense. These Americans in particular need to limit spending despite expectations that are encouraged by massive and relentless holiday marketing."

The survey found that nearly twice as many of those with low incomes (37%) than those with high incomes (19%) said they would spend less money this year.

Overall, 33% said they would spend less this year, compared with 32% in last year's survey who said they would spend less than in the previous year. In 2008, 55% said they would spend less. ReadMore

Skimming remains biggest threat, says ATMIA global survey

CU System
LONDON and SIOUX FALLS, S.D. (11/26/14)--Increased attacks from a wider range of skimming devices, including increasingly smaller devices, continue to plague the ATM industry, according to the ATM Industry Association Global Fraud Survey.
 
Roughly 43% of respondents cited digital skimming as the predominant technique for skimming, up from 38% in 2013. Criminals have opted to develop smaller, more sophisticated electronic skimming devices.

For physical attacks, more than 50% of respondents reported the most common criminal devices were hammers and crow bars to pry open the ATM, followed closely by gas and explosive attacks.
 
Also, ATM fraud is increasing around the world, but at a slower rate than last year, according to the survey.
 
About 45% of respondents said criminal attacks are increasing, with 12.61% saying attacks were up sharply and 32.77% saying they rose moderately. The 45% figure is down from the 2013 survey where 52.1% said criminal attacks on ATMs were increasing. The rate of increase is back down to the 2012 level of 45%. About 17% said attacks are decreasing, similar to last year's figure.

About 11% respondents said the cost of fraud to ATM businesses had increased sharply. Another 59% said the cost had increased moderately. In 2013, about 16% said the cost of fraud had increased sharply and 44% said the cost was increasing moderately.
 
At the same time this year, about 25% said they were investing much more on ATM security technology than they were six months ago. Roughly 36% said they were investing a little more than six months ago. In 2013, those figures were 14.6% and 38% respectively.
 
Through-the wall ATMs (48%) were the locations most targeted by criminals, followed by those inside stores (43%) and inside a financial institution vestibule or inside a mall (both with 16%).
 
The number of respondents who see ATM security solutions as "very effective" has risen to 52.7% in 2014 from 39% in 2013. ReadMore

3Q GDP beats expectations, up 3.9%

Market
WASHINGTON (11/26/14)--Real gross domestic product (GDP) climbed by 3.9% in the third quarter--a 0.4% increase from the quarter's initial reading, according to the Bureau of Economic Analysis' second estimate.

GDP jumped by 4.6% in the second quarter (Economy.com Nov. 25).

"Despite the slowing in growth in the third quarter, the performance of the economy has shifted to above-trend gains, near 3%," said Scott Hoyt, Moody's analyst (Economy.com). "The economy has expanded more than 3% in four of the past five quarters."

Consumer spending added 1.5% to growth, net exports contributed 0.8%--well below the initial estimate of 1.3%--fixed investments added 0.9% and the federal government contributed 0.7%. Inventories slowed GDP, however, as it fell by 0.1%.

Personal consumption trends showed that inflation slowed in the third quarter, as it rose only 1.3% after a 2.3% gain in 2Q. Excluding food and energy, inflation climbed 1.4% after a 2% gain in the prior quarter.

Real disposable income rose 2.3%; the savings rate increased by 5%; and corporate profits only climbed by 2.1% after jumping 8.4% in the second quarter.

Gross domestic income, an alternative metric used to gauge the pace of the economy's growth, climbed 4.5% after a 4% increase in the second quarter.

"The nation's economic prospects are improving," Hoyt said. "However, the divergence between the U.S. economy and that of much of the rest of the world is striking. The euro zone is flirting with recession, Japan is struggling to break free from the pull of deflation, and China and much of the rest of the emerging world are at best holding their own." ReadMore

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FHFA directive loosens policy on sales of existing REOs

Washington
WASHINGTON (11/26/14)--A change to Fannie Mae and Freddie Mac's existing real estate owned (REO) properties policy will allow the enterprises to sell existing REO properties to any qualified purchasers at fair-market value. The Federal Housing Finance Agency (FHFA) directed Fannie and Freddie to make the change Tuesday.

The change is limited to Fannie Mae and Freddie Mac REO inventory of single-family homes as of Nov. 25, which is roughly 121,000 properties.

Previously, Fannie and Freddie required homeowners who have been through foreclosure and want to buy their home back to pay the entire amount owed on the mortgage. This applied to anyone buying the home for the benefit of the previous homeowner as well.  

The new rule applies to existing REO properties and allows homeowners who are able to repurchase their home, or a third-party able to purchase on their behalf, to do so under the fair-market value policy that already applies to other purchasers of REO properties. 

According to a release by the FHFA, certain property exclusions may apply and will be handled by the Fannie and Freddie on a case-by-case basis. ReadMore

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CFPB ombudsman reports top complaint areas of 2014

Washington
WASHINGTON (11/26/14)--A review of the Consumer Financial Protection Bureau (CFPB) from the agency's ombudsman has been released, highlighting several issues from 2014.

CFPB Ombudsman Wendy Kamenshine said the report aims to highlight ways the ombudsman has resolved process issues with the bureau throughout 2014.

The report includes inquiries by consumers, financial entities, trade associations and through internal engagement with bureau staff.
Click to view larger imageThe number of inquiries to the Consumer Financial Protection Bureau ombudsman in FY2014 compared with FY2013, sorted by category. (CFPB Graphic)

The ombudsman received 1,133 inquiries in fiscal year 2014, down from 1,422 in fiscal year 2013. According to the report, nearly all of the decline is attributed to fewer consumer contacts--871 this year compared with 1,219 the year before. The number of individual inquiries from other groups increased by roughly 9% over the year before.

The bureau as a whole received roughly 240,600 consumer complaints this year, up from 144,000 the year prior.

Inquiries to the ombudsman about the CFPB included questions (41%), complaints (36%), topics of concern (14%), courtesy copies to the ombudsman (6%), and feedback on CFPB and non-CFPB topics (2%).

The ombudsman's office also reviews systemic issues that may be affecting consumers or financial institutions around the country. One of the issues reviewed in FY2014 was what information the CFPB shares with consumers about public actions and what channels are used to connect with the bureau regarding industry developments, and how that information is shared within the CFPB.

The bureau generally releases information about public actions via press release, website, a telephone contact center and, in some cases, letters to consumers.

The ombudsman recommended the bureau standardize all informational documents provided to the contact center so information can easily be found as the staff interacts with the public. It also recommended the bureau make public actions easier to find on the CFPB's homepage.

Other issues reviewed in the report include: setting expectations and the need for transparency, how the bureau shares information and a look into the CFPB caller contact center. ReadMore

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DoD extends comment deadline on lending act proposal

Washington
WASHINGTON (11/26/14)--The U.S. Department of Defense (DoD) announced a 30-day extension of the comment period for its proposed changes to the Military Lending Act. Comments will now be accepted until Dec. 26.

According to the posting in Tuesday's Federal Register, the DOD is "extending the comment period after receiving requests from several organizations. These organizations expressed that they would not have sufficient time to adequately cover their concerns."

The proposal would overhaul the Military Lending Act and could affect credit unions that serve military members and families. Most notably, it would place a 36% cap on the annual percentage rate of interest charged for credit products covered by the regulation, which includes credit cards and payday loans.

Current National Credit Union Administration regulations allow federal credit unions to offer payday alternative loans with an interest rate of up to 28% and an application fee of up to $20.

NCUA Chair Debbie Matz previously expressed concern that the rule could prevent credit unions from making payday loans permitted by NCUA rules. The NCUA finalized a payday lending alternative rule in 2010, and considered existing DOD regulations when constructing it.

"The Defense Department's new proposed rule would broaden the definition of  'consumer credit' under Military Lending Act regulations in a way that would prevent federal credit unions from making payday alternative loans permitted by our rule," Matz said.

The Credit Union National Association and the Defense Credit Union Council are working with state associations and credit unions to develop a comment letter. CUNA is still accepting comments on the proposal. ReadMore

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National Herring awards distributed for model member service efforts

CU System
MADISON, Wis. (11/26/14)--There is a name for credit unions that materially improve members' lives, and that name is a Louise Herring Philosophy-in-Action Member Service Award winner, conferred by the Credit Union National Association.
 
The Herring Award honors credit unions for practical applications of the credit union philosophy within the credit union that benefit its members. These may include:
  • Member programs for groups that are often economically challenged;
     
  • Internal programs or services that help to differentiate the credit union from other financial services providers;
     
  • Programs that do an extraordinary job of encouraging thrift and provide a source of unbiased money management and consumer information, which would be difficult or impossible to obtain elsewhere; and
     
  • Evidence of an exceptional degree of service to members.
As an Ohio delegate to the 1934 national credit union conference, Herring was an original signer of CUNA's constitution. She believed credit unions should work to better people's lives because credit unions were more than just financial institutions.
 
The awards, which are given in several asset sizes, were selected among the winning entries at a league level.
 
Listed by asset size, the credit unions recognized include:
 
Less than $50 million in assets:
  • First place: City Co FCU, Pittsburgh, with $21 million in assets;
  • Second place: Trenton NJ Police FCU, Hamilton, N.J., with $24 million in assets; and
  • Honorable mention: Cove FCU, Edgewood, Ky., with $46 million in assets.
$50 million to $250 million in assets:
  • First place: Carolina Postal CU, Charlotte, N.C., with $86 million in assets;
  • Second place: Jersey Shore FCU, Northfield, N.J., with $125 million in assets; and
  • Honorable mention: Henrico FCU, Richmond, Va., with $203 million in assets.
$250 million to $1 billion in assets:
  • First place: Michigan First CU, Lathrup Village, Mich., with $695 million in assets;
  • Second place: Freedom First FCU, Roanoke, Va., with $331 million in assets; and
  • Honorable mention: FAA CU, Oklahoma City, with $563 million in assets.
More than $1 billion in assets:
  • First place: Hanscom FCU, Hanscom AFB, Mass., with $1.08 billion in assets;
  • Second place: Pen Air FCU, Pensacola, Fla., with $1.24 billion in assets; and
  • Honorable mention: TruMark Financial CU, Trevose, Pa., with $1.5 billion in assets.
ReadMore

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CUNA offices closed Thanksgiving, Friday; no News Now

CU System
WASHINGTON and MADISON, Wis. (11/26/14)--The Washington, D.C., and Madison, Wis., offices of the Credit Union National Association will be closed Thursday and Friday, in observance of the Thanksgiving holiday. There will be no regular issues of News Now those days.

The staff of News Now wishes its readers a happy Thanksgiving and will be back on Monday morning. ReadMore

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