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News Now: November 21, 2014

Matz: Revised RBC rule to be unveiled Jan. 15, with 90-day comment period

Washington
ALEXANDRIA, Va. (11/24/14 )--Jan. 15 is the likely date that the National Credit Union Administration will take up a new risk-based capital proposal for discussion. NCUA Chair Debbie Matz late Friday announced that she will ask the agency board to consider a revised RBC plan at that time--and said a 90-day public comment period would likely follow.

Credit Union National Association President/CEO Jim Nussle responded immediately to the announcement: "We appreciate that the NCUA intends to support a 90-day comment period, which is consistent with how we thought this process would work. CUNA looks forward to seeing the details of the revised rule when it is proposed. We plan to be an active participant in what we hope will be an open process that will fully examine the effect the revised proposal will have on credit unions."

Responding to an inquiry by CUNA after the chairman's announcement, NCUA Vice Chair Rick Metsger said he supports Matz's position. He stated that with the arrival of the holiday season, he and his senior policy advisor want to make sure all have an time to evaluate the "voluminous material" associated with a new plan.

He said that putting the RBC discussion on the January meeting agenda, rather than December as some were anticipating, "allows all three board members two months to evaluate the final proposal and make suggested changes before it is presented."

The third NCUA board member, J. Mark McWatters,  was sworn into his post at NCUA in late August.  He also has voiced support for a 90-day comment period. He told CUNA that he will carefully review and analyze the revised proposed risk-based capital rule once he receives it.​

Earlier this month he outlined his areas of focus for revised RBC plan.

"We asked the chairman to allow us to present this in January and she totally understood, agreed, and moved forward," Metsger told CUNA.  Matz had indicated in a Nov. 19 letter to Sens. Debbie Stabenow (D-Mich.) and Thad Cochran (R-Miss.) that a revised risk-based capital plan could be issued by the NCUA "before the end of 2014."  Her letter to the senators responded to the lawmakers' concerns that a new plan keep in mind any potential effects on agricultural lending.

In making the timing announcement Friday, Matz said, "During the six months since the comment period closed on the original proposed rule, we've taken the time to carefully review and methodically evaluate the many thoughtful comments received from stakeholders.

"We've also considered the input received during three Listening Sessions across the U.S. this summer. We're getting closer to issuing the revised proposed rule, which I now anticipate will be presented in January 2015--one year since the original proposed rule.

"To provide the public ample time to review this important safety and soundness rulemaking, I intend to support a 90-day comment period," she added.

CUNA has strongly advocated for a reasonable comment period of at least 60 days, given the amount of structural changes that had been mentioned by NCUA, including longer implementation period and revised risk weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions.

More than 2,000 comments were received from credit unions, members of the U.S. Congress and other stakeholders during the proposal's original comment period.

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Huffington joins GAC roster, Senate will be in session

Washington
WASHINGTON (11/24/14)--Entrepreneur Arianna Huffington will speak at the Credit Union National Association's 2015 Governmental Affairs Conference (GAC), scheduled for March 8-12 in Washington, D.C.

The Senate will also be in session during the GAC, according to the 2015 schedule released by incoming Senate Majority Leader Sen. Mitch McConnell last week.

"Efforts to reach out to Congress during the GAC will be strong, despite the release last week by the House majority leader of a schedule showing the House out of session during the conference," said CUNA President/CEO Jim Nussle. "The Senate will be in session during those dates, and key House and Senate staff members will certainly be on the Hill. Our meetings with these professionals have traditionally been very valuable."

Huffington is the co-founder and current editor-in-chief of The Huffington Post. She has written more than a dozen books, and her latest debuted at No. 1 on The New York Times bestseller list. She also heads a public interest group dedicated to alternative-fuel cars, is a board member for the Center for Public Integrity and ran as an independent candidate for governor of California in 2003.

Huffington was named to the TIME 100 in 2011, Vanity Fair's 2011 Powers That Be list; Fast Company's list of the 100 Most Creative People in Business; Financial Times' 50 Faces That Shaped the Decade, Newsweek's Top 10 Thought Leaders of the Decade, and Forbes' Most Influential Women in the Media (2012) and The World's 100 Most Powerful Women (2012 and 2013).

Last week it was announced that Stanley McChrystal, retired U.S. Army general and former commander of U.S. and international forces in Afghanistan, would also speak at the conference.

"There is plenty going on at the GAC, and I hope to see a large portion of the credit union community join us to take part in the full range of activities and advocacy on behalf of credit unions," Nussle said.

More than 4,000 credit union stakeholders are expected to attend the conference, which will be held at the Walter E. Washington Convention Center. Registration for the GAC is currently open.

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Keep consumers in mind for real-time payments system: Cordray

Washington
NEW YORK (11/24/14)--The Consumer Financial Protection Bureau (CFPB) has several concerns about electronic payments networks, particularly its effects on consumers, said bureau Director Richard Cordray last week to attendees at the annual Clearing House Conference in New York City.

During his remarks Cordray outlined several concerns the bureau has with the process.

"We have concerns that electronic payment systems can be misused to victimize consumers unless banks and the system administrators work to police and enforce safeguards," he said.

Cordray shared several examples received by the CFPB about how abuses of the payments system have led to mistreated consumers who were left vulnerable to loss and theft or were exposed to otherwise "hidden and exclusionary effects."

The stories included everything from a consumer being victimized by a payday lender to another consumer repeatedly suffering automatic withdrawals by a gym after a "free" membership expired.

Cordray said that financial institutions and administrators must be "vigorous and proactive" in policing these types of activities, and credited good practices seen at credit unions and banks over the last year for developing screening mechanisms for detecting such abuse.

"But more needs to be done. We must shine a light on the murkier corners of electronic payment systems and related practices, and we must be vigilant about preserving consumer protections no matter how these approaches may evolve in the future," he said.

Transparency in the payments system is another concern of the CFPB. Consumers need to know when money deposited into accounts is available, as well as when funds are debited from accounts.

"For some consumers, these uncertainties are of little consequence because they are able to maintain a healthy cushion of funds in their checking accounts," Cordray said. "But many other consumers struggle to keep up with their expenses and have no such cushion. Not knowing when a payment will be credited or a debit posted can cause them significant harm."

Cordray added that the CFPB is "carefully studying" whether regulatory changes are needed to address some of these concerns.

He wrapped up his remarks with a request when it comes to faster payments: "Make it an urgent priority," while keeping the interests of consumers top of mind.

Cordray said this fast payments system should include: faster access to deposited funds; real-time account status information and protection from "hair-trigger assessments of fees;" robust consumer protections when it comes to unauthorized transactions; and accessibility of the system to all consumers.

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Mass. league to hold open forum with McWatters

CU System
MARLBOROUGH, Mass. (11/24/14)--The Massachusetts Credit Union League will host an open forum discussion with new National Credit Union Administration board member J. Mark McWatters Dec. 12 in Newton, Mass.
 
Issues expected to be addressed include regulatory relief, transparency, accountability, supporting low-income credit union members, the NCUA budget, risk-based capital and interest-rate risk ( Daily CU Scan Nov. 21).
 
"There are a number of critical matters being considered by the NCUA and board member McWatters has already demonstrated a clear understanding of how important they are," said league President Paul Gentile, who will facilitate the session.
 
Both state- and federally chartered credit unions are invited to attend to clarify current issues, to gain insight into emerging topics, to receive an update on the local economic environment and developments in federal legislation and regulation, and to affect the regulatory advocacy process.

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Colo. authorizes first-ever marijuana-focused CU

CU System
DENVER (11/24/14)--The Colorado Division of Financial Services (CDFS) approved an unconditional state charter for The Fourth Corner CU this week, setting the stage for the establishment of the first-ever credit union that will serve the marijuana industry ( Denver Post Nov. 20).

With the charter in hand--the first issued by the CDFS in nearly a decade--the only hurdles left in Fourth Corner's way are to obtain insurance from the National Credit Union Administration, and to receive a master account from the Federal Reserve System.

While the NCUA review could take up to two years, according to Mark Mason, one of the marijuana credit union's key organizers, the credit union may begin operations starting Jan. 1, as Colorado law permits credit unions to open their doors while an application for share-deposit insurance is pending. 

The credit union would serve all marijuana-related businesses, such as growers and transportation companies that support the industry, and also those legal enterprises that sell it at retail shops.

The Mountain West Credit Union Association (MWCUA) has been monitoring the development of the state's first marijuana-industry credit union, and plans to stay apprised as the process with the NCUA and federal regulators unfolds.

"Ever since Amendment 64, legalizing the recreational use of marijuana in Colorado, was passed and went into effect, we have been monitoring the challenge of providing financial services to businesses in this industry," said MWCUA President/CEO Scott Earl in a statement to News Now . "While this first-of-its-kind charter would serve legal marijuana businesses in Colorado, it will be some time before we know if the credit union has approval from the NCUA for deposit insurance."

Mason said federal regulators will likely pay special attention to the credit union's business plan, the insurance and a fidelity bond, and its safety and soundness.

"We are building a whole new structure to deal with an industry that still violates federal law," Douglas Friednash, who incorporated the credit union soon after the charter was approved, told the Denver Post . Federal law enforcement and bank regulators can still punish the industry, and until that gets resolved, it will continue to have a cloud over it, he said.

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Fed's Dudley faces criticism from Senate Banking on big banks

Washington
WASHINGTON (11/24/14)--Two separate reviews of how it examines large banks have been launched by the Federal Reserve, the board of governors announced last week prior to Federal Reserve Bank of New York President William Dudley's appearance at a U.S. Senate subcommittee hearing.

The Fed's inspector general will examine two aspects of how the system examines large banks, while the board will conduct its own review of how it supervises the largest, most systematically important financial institutions.

Dudley came under fire from members of the Senate financial institutions and consumer protection subcommittee Friday. Sen. Elizabeth Warren (D-Mass.) said during the hearing that until action is taken, the entire financial system remains at risk.

"The Federal Reserve will continue to improve its supervision and regulation of financial Institutions," Dudley said in his testimony before the subcommittee. "We understand the risks of doing our job poorly and of becoming too close to the firms we supervise."

Federal Reserve General Counsel Scott Alvarez and Division of Banking Regulation and Supervision Director Michael Gibson requested a look into:
  • Whether there are adequate methods for decision makers at the relevant Reserve Banks and at the board to obtain all necessary information to make supervisory assessments and determinations; and

  • Whether channels exist for decision makers to be aware of divergent views among an examination team regarding material issues.
Alvarez and Gibson wrote a letter to Mark Bialek, inspector general for the Fed's Board of Governors, to make the request.

"Decision makers must have access to complete information and to the informed views of members of the examination team in order to reach appropriate decisions and supervisory conclusions regarding the examination of large banking organizations," the letter reads.

The board's own review will examine:
  • Whether the decision makers at the board receive the information needed to ensure consistent and sound supervisory decisions regarding the supervision of the largest, most complex banking organizations; and

  • Whether adequate methods are in place for those decision makers to be aware of material matters that required reconciliation of divergent views related to supervision of those firms.
Dudley told the Senate subcommittee the review is expected to take several months.

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1 year post breach, Target asks for lawsuit dismissal

CU System
MINNEAPOLIS (11/24/14)--The attorney for retail giant Target Corp. told a U.S. District judge Friday to dismiss the lawsuit brought against it by financial institutions for the losses they incurred after Target's data security breach last December.
 
The breach compromised 40 million debit and credit card numbers and the personal information of as many as 70 million customers.
 
In filing the motion to dismiss, Douglas Meal told U.S. District Judge Paul Magnuson that Target had no legal obligation to protect the financial institutions--which include $286 million-asset CSE FCU, Lake Charles, La.--because there was no "special relationship" between the parties.
 
Magnuson didn't rule.
 
The lawsuit is playing out as representatives from financial organizations, including the Credit Union National Association, are pressing Congress to take action to hold retailers more accountable for data security breaches and to bring them under the same privacy standards as financial institutions with regard to financial data, Ars Technica reported (Nov. 22).
 
A survey by CUNA found that as a result of the Target breach, credit unions experienced 4.6 million compromised cards, leading to about $30.6 million in related costs.
 
Karl Cambronne, who is representing the financial institutions, told Magnuson that the Minnesota Plastic Card Security Act requires Target to guard against a possible breach. The law prohibits the retailer from retaining some personal data after a sale, Cambronne said ( Bloomberg Nov. 21).
 
"We reject the notion that this case is all about the obvious, that is, the bad guys hacked into the system," Cambronne said. "Twice the Visa and MasterCard system had warned Target this malware is out there and you are not protected from it."
 
Target contends the plastic card law does not apply because the data theft happened at the point of sale.

2 CUs earn Cornerstone league's Juntos Avanzamos designation

CU System
FARMERS BRANCH, Texas (11/24/14)--Two credit unions have earned the Cornerstone Credit Union League's Juntos Avanzamos or "Together We Advance" designation.
 
Click to view larger image Tinker FCU Branch Manager Laura Rodriguez looks on as the Juntos Avanzamos flag is raised in front of the TFCU Capitol Hill branch in Oklahoma City. (Tinker FCU Photo)
Tinker FCU, Oklahoma City, with $3.2 billion in assets, and People's Trust FCU, Houston, with $478 million in assets, have been recognized for their commitment to serving the Hispanic population in their respective communities.
 
The honor is earned through an application and review process during which a credit union must demonstrate the capacity, commitment and compassion to serve the Hispanic market's financial needs.
 
"The Juntos Avanzamos designation is the culmination of several years of work," said Tinker FCU President/CEO Michael Kloiber. "In the summer of 2008, we created a diverse multi-department task force to develop ways to better serve our Hispanic community. That task force was instrumental in the planning that resulted in building the Capitol Hill branch."
 
To celebrate the award and its commitment to the Hispanic community, Tinker FCU hosted a flag-raising ceremony at its Capitol Hill branch Nov. 20. The flag, provided by the league, sends a message to the surrounding community that TFCU is prepared to serve the unique needs of the Hispanic population in Oklahoma.
 
Click to view larger image Cornerstone Credit Union League CEO Dick Ensweiler, left, with People's Trust FCU Board Chair Mike Read and President/CEO Angela McCathran. (Cornerstone Credit Union League Photo)
In Oklahoma, 9.3% of the population is Hispanic. According to the Cornerstone Credit Union League, the Hispanic population in Oklahoma is the largest minority group, with 385,000 people of Hispanic origin residing in the state. In the last decade, Oklahoma's Hispanic population has nearly doubled.
 
In her address at the Nov. 14 flag-raising ceremony, People's Trust CU President/CEO Angela McCathran said, "By receiving this designation, it symbolizes our commitment to the well-being of the Hispanic market in Houston, and I commend our staff on a job well done in preparing for this endeavor. We take great pride in our work within the community and have high aspirations for serving the needs of the Hispanic consumers in our community."

Research has shown that the city of Houston will continue to grow into a more diverse community, with Hispanics comprising more than 50% of the city's population by 2040.

"Earning Juntos Avanzamos is just another example of People's Trust's steadfast commitment to the community, its members and the financial success and growth of individuals in the Houston market," league CEO Dick Ensweiler said at the ceremony ( Leaguer Nov. 21).

AACUL honors Dykstra with Eagle Award; Lyons re-elected chair

CU System
WASHINGTON, D.C. (11/24/14)--Diana Dykstra, president/CEO of the California and Nevada Credit Union Leagues, received the American Association of Credit Union Leagues' (AACUL) highest honor--the Eagle Award--at the organization's annual meeting last week.
 
AACUL members also elected their board during the annual meeting.
 
Mike Mercer, president/CEO of the Georgia Credit Union Affiliates and member of the Eagle selection committee, presented the award to Dykstra, who has led the leagues for four years.
 
The Eagle Award, which has been presented only 20 times, is bestowed on a league president who:
  • Has an outstanding record of achievement at the league level;
  • Is willing to speak out and take a stand on critical, controversial issues;
  • Demonstrates leadership beyond the league level;
  • Is innovative in creating or implementing new ideas; and
  • Maintains an unremitting dedication to credit union and personal principles, and an unflagging focus on important issues.
Mercer lauded Dykstra's leadership for her focus on constant improvement, on pushing forward to improve what is good to be even better; not being afraid to "rock the boat" by taking controversial stands; her commitment to member engagement; and her constant search for collaboration opportunities that are in the best interest of the entire movement. 
 
He specifically cited:
  • California and Nevada's more than 500,000 congressional contacts during the movement's Don't Tax My Credit Union campaign;
     
  • The creation of PowerComment and subsequent partnership with the Credit Union National Association to take the program nationwide; and
     
  • Her leadership to create Plexity, a partnership among her leagues, the New Jersey Credit Union League and the Maryland and D.C. Credit Union Association with a mission to consolidate back office operations of the four organizations to reduce costs, while maintaining the identify and uniqueness of each of the states.
"While Diana has been a league president for just four years, she has already had a significant impact in California and Nevada along with CUNA and all 42 leagues," said AACUL Executive Director Susan Newton.
 
AACUL Chairman Wendell Lyon said, "I cannot think of a better person to receive this high honor from our association."

Dykstra was elected to AACUL's executive board, replacing Carolinas Credit Union League President/CEO John Radebaugh who stepped down after six years on the board.
 
Lyons, who is president/CEO of the Kentucky Credit Union League, was re-elected as chairman. Other members of the board are:
  • First vice chairman: Tracie Kenyon, president/CEO, Montana Credit Union Network;
  • Second vice chairman: Mark Cummins, president/CEO, Minnesota Credit Union Network; and
  • Treasurer: Scott Simpson, president/CEO, Utah Credit Union Association.
Ex officio members are Newton and immediate past chairman Bill Mellin, president/CEO, Credit Union Association of New York.

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Matz to senators: Revised RBC rule will consider ag lending needs

Washington
ALEXANDRIA, Va. (11/24/14)--National Credit Union Administration Chair Debbie Matz assured senators from agricultural states that she shares their concerns that a revised risk-based capital (RBC) plan should not disrupt credit unions' agricultural lending. She assured that the agency will keep in mind any impact a new rule might have on the ability of credit unions to serve farmers and ranchers.​

Matz's statement came in a Nov. 19 letter to Sens. Debbie Stabenow (D-Mich.) and Thad Cochran (R-Miss.).  It was in response to a letter the two sent Nov. 12 questioning the proposal's impact on the ability of credit unions to support agricultural lending.

"The NCUA board will remain mindful in its deliberations of the trade-offs between the costs and benefits of the regulation, so credit remains available for family farmers, ranchers, consumers, homebuyers and small business owners in rural communities across the nation," Matz wrote.

She added that the new proposal will include revised risk weights for member business loans, including loans to family farms and ranches. Mortgages, investments, credit union service organizations and corporate credit union risk weights also will be modified from the original proposal.

"Additionally, stakeholders will be invited to comment on an alternative approach for addressing interest-rate risk using the supervisory process," Matz wrote.

The Credit Union National Association advocated for interest-rate risk to be addressed in the regulatory, examination and supervision process in its comment letter filed with the NCUA in May.

The NCUA has since said it will consider a separate interest-rate risk proposal, which has led to concerns from CUNA , which is wary of another regulation.

Matz said in the letter that the new RBC proposal could be discussed at the December open board meeting, but on Friday announced she had decided to request that the board tackle the RBC plan at its January meeting instead. (See related story: Revised RBC rule likely to be unveiled Jan. 15, 90-day comment period to follow.)

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