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Congress should listen, act on reg. relief concerns, lawmakers say at forum

WASHINGTON (9/18/14)--The three lawmakers present at Wednesday's The Hill forum agree on at least one thing: that credit unions are an integral part of the country's financial services landscape. Reps. Denny Heck (D-Wash.), Brad Sherman (D-Calif.) and Rob Woodall (R-Ga.) spoke at the forum, which was sponsored by the Credit Union National Association.

The three legislators admitted that banking industry representatives are often pushing them and others to reconsider credit unions' tax status.

"I think the economic revenue that would come with taxing these institutions would be far less than the economic benefit we see now," Sherman said. "And that's not even taking into account the fact that a credit union that charges a little less interest, or pays a little more interest on deposits, is generating personal income tax. If you can make 2% on that account, Uncle Sam is getting a piece of that."
Click to view larger image From left, Reps. Brad Sherman (D-Calif.), Rob Woodall (R-Ga.) and Denny Heck (D-Wash.) speak to The Hill' s Kevin Cirilli about the role of credit unions in today's financial landscape. (CUNA Photo)

He added that while some opponents of credit unions advertise an additional $2 billion to $3 billion in revenue, the Joint Committee on Taxation has estimated the number to be almost 40% less than that.

Heck said he has a standard response to banking officials that keep pushing him to re-examine credit unions' tax status, paraphrasing a famous quote from economist Walter Heller on supply-side economics.

"To keep coming to us and asking for that, waiting for it to happen, is a little bit akin for leaving the landing lights on for Amelia Earhart," he said. "Credit unions are not taxed the same as banks as a matter of policy."

Woodall said he has an answer prepared as well, should the question be put to him.

"If they believe the credit union structure is so advantageous that it must be changed in order for you to maintain your competitive edge, maybe just join the credit union movement," Woodall said. "I think it's a red herring to suggest that the playing field we have today is somehow uneven."

When the topic shifted to ideas for regulatory relief, Heck admitted that "there's an appetite in the United States House of Representatives for regulatory relief," but the process has been difficult.

"As credit unions have become a bigger and more integral part of the fabric of the community, their concerns about the regulatory environment have grown over time, and I think it behooves Congress to listen to that and act on it," he said.

The second part of the forum, moderated by CUNA interim President/CEO Bill Hampel, featured Steve Pociask, president of the American Consumer Institute, and Michael Mandel, chief economic strategist of the Progressive Policy Institute.

Both were asked about the consequences of overregulation on credit unions, and how this overregulation can affect recovery from the economic crisis as a whole.

Pociask pointed to the 12.25% member business lending cap for credit unions as a regulation that could be slowing recovery. He emphasized the importance of credit unions for picking up their small business lending by 38% since the onset of the recession, while banks have reduced their small business lending by 17% over that same time period.

"As banks were dropping their lending to small businesses, credit unions were stepping up and increasing that lending," he said. "Why is that important? Because if you look at how the cycle works, 65%-70% of jobs created in the upturn are jobs from small businesses. So it's very important to get capital to them. There's definitely demand for it, but the banks aren't meeting it."

With regard to the National Credit Union Administration's risk-based capital proposal, Mandel said it was a "classic case of regulatory oversight."

"It's tightening up regulations just when we need more lending. We saw this after 2000, with the change in accounting rules, which was an overreaction that imposed a lot of costs, but it didn't stop the next financial crisis," he said, adding, "This is the same type of thing, imposing extra costs without doing what needs to be done."

Mandel didn't mince words when he said that the post-crisis reaction of targeting institutions like credit unions "is going to turn out in retrospect to be a disaster. Because it misses the point about what caused this disaster."

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Today's NCUA meeting is 1st for new board member McWatters

ALEXANDRIA, Va. (9/18/14)--Today's National Credit Union Administration board meeting only has a few items on the agenda, but it is the first meeting with new board member J. Mark McWatters, who replaced Michael Fryzel in August.

McWatters said Tuesday to a group of credit union advocates from the League of Southeastern Credit Unions, the Idaho Credit Union League and the Georgia Credit Union Affiliates that he favored a new risk-based capital rule be written by the agency. (See News Now story: Fall sweep: CU message hits Hill hard before sesson ends.)

Today's agenda will include a request to expand the community charter for First Service FCU, based in Groveport, Ohio, with $136 million in assets, and a quarterly report on the Corporate Stabilization Fund.

It will also include discussion of a final rule containing technical amendments to three parts of the NCUA's rules and regulations.

These technical amendments will likely involve:
  • A section of the Dodd-Frank Act that stripped the NCUA of rule-writing authority for unfair or deceptive acts and practices;
  • Changes to central office and regional structures; and
  • Using the term "payday alternative loans" to describe payday and small amount, small dollar loans.
The meeting will take place at the NCUA's Alexandria headquarters, starting at 10 a.m. (ET).

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Senate Banking leaders request FHLB membership comment extension

WASHINGTON (9/18/14)--The top Democrat and Republican of the Senate Banking Committee are asking the Federal Housing Finance Agency (FHFA) to apply the brakes on a recent proposal that would change Federal Home Loan Bank (FHLB) membership rules.
Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) Tuesday asked FHFA Director Mel Watt to extend the comment period for the proposed rule by 60 days.
On Sept. 2, the FHFA issued a notice of proposed rulemaking that would, in part, require all credit unions to hold 10% of assets in residential mortgage loans on a constant basis to become and remain members of the FHLB system. Currently, the rule requires the 10% to be held only at the time membership is approved.
In a letter to the agency, the senators wrote, "Given the important role the Federal Home Loan Banks play in providing liquidity to small financial institutions and supporting community development efforts ... any change to membership criteria should only be undertaken after thorough consideration."
The Credit Union National Association backs a longer comment period. In a Sept. 8 letter to Watt, CUNA interim President/CEO Bill Hampel warned the proposal "could create significant barriers to credit union membership in FHLBs."  The letter went on to cite the critical role FHLBs play as a source for credit union liquidity.

"The FHFA has not explained why this proposal should be processed on an accelerated basis and thus, we are not aware of the need to expedite it now, particularly since the Advance Note of Proposed Rulemaking was initially issued almost four years ago," the letter reads.

CUNA is deeply concerned that credit unions are not given membership parity with community banks that are not required to maintain the 10% threshold on an ongoing basis in order to retain their FHLB membership.

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Comments on CFPB's consumer complaint data narrative due Sept. 22

WASHINGTON (9/18/14)--Comments are due by Sept. 22 on the Consumer Financial Protection Bureau's consumer complaint narrative proposal, the Credit Union National Association reminds credit unions.

The bureau's original deadline was Aug. 22, but it extended the comment period by a month in response to a number of requests.

Currently, the CFPB discloses on its public database certain complaint data it receives regarding consumer financial products and services.

The proposal would expand the disclosure to include unstructured consumer complaint narrative data. Only those narratives for which opt-in consent has been obtained, as well as application of a personal information scrubbing standard and methodology, would be subject to disclosure.

The proposed policy would supplement the CFPB's existing policy statements establishing and expanding the consumer complaint database.

CUNA has worked with the CFPB to address credit union concerns regarding the complaint database, warning that sensitive or confidential business or consumer information could be inadvertently disclosed when consumer complaints are filed in the database and has urged the bureau to minimize privacy risks and other unintended consequences. CUNA will be filing further comments with the bureau.

Use the resource link below for the full proposal.

Inside Washington (09/18/2014)

  •  WASHINGTON (9/18/14)-- Julian Castro , who was sworn in to lead the U.S. Department of Housing and Urban Development (HUD) in July, told a housing summit here that mortgage lending standards have become too tight and added that it must change ( American Banker Sept. 18). It is time for policymakers to expand the housing market and remove the "stigma" associated with promoting homeownership , he told the Bipartisan Policy Center. The article noted that HUD's Federal Housing Agency will move ahead with a proposed housing counseling program that can help FHA borrowers save thousands of dollars over the life of their loan. Castro also said he supports a Senate housing reform bill, introduced by top Senate Banking Committee members, Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho), which would wind down Fannie Mae and Freddie Mac while developing a new government backstop for the private securitization market ...

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