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CUNA seeks answers from NCUA on IOLTA bill questions

WASHINGTON (1/29/15)--The passage of the Credit Union Share Insurance Fund Parity Act has raised a number of questions from credit unions about its potential applications, questions summarized by the Credit Union National Association in a letter to the National Credit Union Administration Wednesday.

The bill was signed into law in December, which was followed by NCUA Chair Debbie Matz announcing interest on lawyer trust accounts (IOLTAs) were now covered by the National Credit Union Share Insurance Fund (NCUSIF). Matz has also indicated that the agency is working to update Part 745 of the NCUA's regulations, which pertain to insurance.

While the law allows IOLTAs to be covered by the NCUSIF, it also provides coverage for "other similar escrow accounts," according to the bill's text. Credit unions have inquired as to whether this includes accounts such as prepaid funeral accounts and realtor escrow accounts.

"We do not think there is any question that the new provisions of the law cover these types of accounts, and we hope that Part 745 will enumerate types of accounts covered," reads the letter, signed by Lance Noggle, CUNA senior director of advocacy and counsel. "These accounts have very similar structures to IOLTAs and should receive similar insurance coverage."

Credit unions have also asked if the NCUA will use its authority to resolve questions about pass-through insurance of prepaid card programs. CUNA urged the agency to allow member businesses to offer payroll cards to employees, regardless of whether individual employees are members of the credit unions.

The Federal Deposit Insurance Corp. has determined that such accounts receive the same insurance coverage as other deposit accounts, and CUNA has urged the NCUA to follow suit.

CUNA also asked the NCUA to address questions on:
  • Expectations from the agency regarding the types of records that need to be maintained to keep track of beneficial owners of IOLTAs and similar accounts, and who is expected to maintain the records. CUNA encourages the NCUA to explain that credit unions should only have to make clear to the entity establishing the of account that the accountholder will need to maintain good records so the actual owners of the account can be ascertained if needed;

  • Bank Secrecy Act (BSA) compliance requirements on IOLTAs and similar accounts, since those accounts can hold nonmember funds. CUNA believes guidance on whether the agency will expect credit unions to modify customer identification program requirements would help credit unions; and

  • Whether IOLTAs and similar accounts are exempt from NCUA regulations that limit public unit and nonmember shares to 20% of the credit union's total shares or $3 million, whichever is greater. CUNA suggests those accounts become exempt.

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New privacy notice bill introduced with CUNA support

WASHINGTON (1/29/15)--A bill that would change annual privacy notice requirements for certain financial institutions was introduced Wednesday by Reps. Blaine Luetkemeyer (R-Mo.) and Brad Sherman (D-Calif.). The bill is titled the Eliminate Privacy Notice Confusion Act (H.R. 601).

The bill would amend the Gramm-Leach-Bliley Act to exempt from its annual privacy notice requirement any financial institution that:
  • Provides nonpublic personal information only in accordance with specified requirements; and

  • Has not changed its policies and practices with regard to disclosing nonpublic personal information from those disclosed in the most recent disclosure sent to consumers.
The Credit Union National Association wrote to Luetkemeyer and Sherman Wednesday to express its support of the bill.

"The Eliminate Privacy Notice Confusion Act will make privacy notices sent to consumers by financial institutions more meaningful by eliminating the requirement that the notices be sent annually, and requiring them only to be sent when the privacy policy of the financial institution has changed," reads the letter, signed by CUNA President/CEO Jim Nussle. "In addition to enhancing the value of these privacy notifications for consumers, your legislation also reduces regulatory burden for credit unions and other financial institutions."

CUNA estimates that since 2001, credit unions have sent more than 1 billion annual privacy notices to members.

A voter survey has indicated that less than 25% of consumers reads the privacy notifications they receive. The same survey showed that more than 75% would be more likely to read such a notice if it was only sent when a financial institution changed its policy.

According to CUNA, "this suggests that the public policy goal of privacy notification would be better achieved if the notices had more meaning to consumers." CUNA believes the proposed bill achieves that goal.

The bill previously passed the House by voice vote in the 112th and 113th Congress. During the 113th Congress the bill had 76 co-sponsors in the Senate.

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CUNA, trades outline principles to Congress for combating 'patent trolls'

WASHINGTON (1/29/15)--The U.S. Congress must act to combat abusive patent demand letters. Deceptive demand letters and litigation from entities asserting low quality patents are major challenges facing the financial services industry, leading the Credit Union National Association and other trade organizations to express their concerns to members of Congress.

The letter , sent Wednesday, outlines concerns about such lawsuits and urges Congress to take action against the "patent trolls" that bring them. 

"We have serious concerns about the current patent litigation environment as well as the quality of patents granted by the Patent and Trademark Office," the letter reads. "In addition, patent trolls continue to assert low-quality patents through vaguely worded demand letters with the full knowledge that their targets, our members, are more likely to pay unnecessary licensing agreements then engage in lengthy, costly litigation."

The letter highlights a set of principles adopted by the financial services industry that it feels are needed to address the issue.

The principles fall into three categories, and are as follows:
  • Efficiency of the litigation process: Improvements need to be made to make the cost and burdens of patent litigation equitable and more efficient;

  • Enhanced transparency: Abuse of the patent system through the use of vaguely worded demand letters must be ended by requiring such letters to provide more details about the patent and who claims to assert it; and

  • Patent quality: Improvements are needed in the post-grant review of patents such as making the Covered Business Method (patents that claim a method or operation used in practice, administration or management of a financial product or service) permanent and more useable for smaller entities.
According to the organizations, those principles will "go a long way in protecting the financial services sector and the millions of customers our members interact with on a daily basis from the harm wrought by patent trolls."

In addition to CUNA, the letter was signed by the American Bankers Association. American Insurance Association, The Clearing House, Financial Services Roundtable, Independent Community Bankers of America, Mortgage Bankers Association, NACHA--The Electronic Payments Association, National Association of Federal Credit Unions and National Association of Mutual Insurance Companies.

A patent troll bill was drafted last May by Rep. Lee Terry (R-Neb.) in the House, which eventually passed the House subcommittee on commerce, manufacturing and trade. A separate bill was considered by the Senate Judiciary Committee before eventually being removed from the voting agenda.

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FDIC letter addresses 'Choke Point' issues

WASHINGTON (1/29/15)--In a move that American Banker said was being hailed as the beginning of the end for Operation Choke Point, the Federal Deposit Insurance Corp. (FDIC) issued a Financial Institution Letter Wednesday meant to encourage institutions under its supervision "to serve their communities" and to assess risk of individual customer relationships rather than take a wholesale approach of declining to provide banking services to entire categories of customers.

In a release, the agency notes that it has reinforced its policies on managing customer relationships to FDIC examiners and other supervisory staff.

The Credit Union National Association is seeking similar guidance from the National Credit Union Administration for credit unions and for NCUA examiners.

The FDIC letter also says that a financial institution should assess its own ability to manage any customer risk. In a release, the agency notes that financial institutions that "properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customers operating in compliance with applicable laws."

"The FDIC is aware that some institutions may be hesitant to provide certain types of banking services due to concerns that they will be unable to comply with the associated requirements of the Bank Secrecy Act," the FDIC says. The agency also states that FDIC examiners must provide notice in writing for any case in which an institution is directed to exit a customer relationship.

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AEA FCU, in conservatorship, sees improved 2014 performance

YUMA, Ariz. (1/29/15)--AEA FCU, under the conservatorship of the National Credit Union Administration, reported improved financial performance for the year ending Dec. 31, 2014, according to the NCUA.

AEA, a $238 million-asset federal credit union based in Yuma, Ariz., saw a net income last year of $3.8 million, and a net worth ratio improvement of 51 basis points from 2013, bringing it to 5.23%.

According to the NCUA, loans grew by $9.5 million compared with 2013, with the majority of the increase in auto lending.

"An important factor in AEA's positive performance was its determination and dedication to maintain a strategic focus throughout 2014," said Elizabeth Whitehead, NCUA's Region V director. "By focusing on three main objectives--financial sustainability, community banking and a focus on people--AEA's management team and staff were able to make significant and impressive progress toward sustained growth and profitability."

NCUA placed AEA into conservatorship in December 2010 to address its declining financial condition stemming from problems with its member business loan portfolio. The credit union serves approximately 40,000 members.

AEA FCU was established in 1942 and serves individuals who live, work or worship in Yuma or La Paz counties.

The NCUA announced Tuesday that another credit union in conservatorship, the $1.4 billion-asset Texans CU in Richardson, Texas, also saw growth in 2014.

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Inside Washington (1/29/15)

  • WASHINGTON (1/29/15)--The IRS is continuing its pilot program that allows consumers to use an Identity Protection PIN (IP PIN) when filing tax returns. Taxpayers who filed returns last year from Georgia, Florida and Washington, D.C., are eligible for an IP PIN. The PIN is a six-digit number that must be used on a tax return, in addition to a Social Security number, to verify a taxpayer's identity. Once a taxpayer opts into the program, they will need to use the IP Pin for future filings. The ITS will mail a new IP PIN to taxpayers before each filing season ...

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