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News Now: April 24, 2014

Major changes needed if NCUA stress-testing rule advances: CUNA

WASHINGTON (4/24/14)--While the Credit Union National Association opposed the capital planning and stress-testing proposal issued by the National Credit Union Administration in December, it urged the agency to include significant changes if the board votes to adopt the rule in final form.

The rule is on the agency's open board meeting agenda today. The final rule would directly impact credit unions with assets of $10 billion or more.
CUNA will also be reviewing carefully the agency's field-of-membership proposal regarding associational group additions, which is also on the agenda.
Regarding the stress-testing proposal, CUNA cited among its concerns the hefty $4 million total price tag all federally insured credit unions would shoulder for the agency's implementation of the rule in just the first year.
CUNA is also concerned that the proposal called for the results of the stress tests to be made public and that NCUA's approach would duplicate what large credit unions are already doing in terms of stress testing.
These concerns are in addition to the fact that there is no statutory requirement for such testing, CUNA has noted.

Another top consideration emphasized by CUNA is the timing of the adoption of the stress-testing rule. CUNA argues it should not be approved prior to the issuance of a risk-based capital (RBC) rule because stress-test results could impact RBC requirements.
The NCUA proposed a controversial RBC plan at its January open board meeting, and credit unions have until May 28 to comment. CUNA has urged a 90-day extension to that comment deadline.

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CUNA ready to raise QM issue in latest high-level housing finance reform meetings

NEW YORK (4/24/14)--Credit Union National Association Housing Finance Reform Task Force member Bill O'Brien Tuesday attended the latest Obama administration meeting with stakeholders on housing finance reform. 
O'Brien, president/CEO of $886 million-asset Suffolk FCU, Medford, N.Y., participated in a roundtable discussion in New York headed by Department of Housing and Urban Development Secretary Shaun Donovan. The meeting followed by one day an exclusive meeting between White House and CUNA officials to discuss credit union priorities regarding housing finance reform policy issues.
Also on Wednesday, in Washington, D.C., CUNA attended the final White House group meeting of housing finance reform stakeholders. Deputy General Counsel Mary Dunn and Assistant General Counsel for Special Projects Robin Cook stressed what small lenders need in terms of setting up the Federal Mortgage Insurance Corp. while winding down Fannie Mae and Freddie Mac, as proposed by draft Senate legislation.
At the New York meeting, O'Brien was prepared to bring up CUNA's and credit unions' concerns about a point made recently by Donovan: That the qualified mortgage model, as defined under the Consumer Financial Protections Bureau's Ability-to-Repay rule, would become the standard mortgage for the secondary market.
CUNA argues that if the QM rule became the secondary market standard, credit-worthy individuals who fall outside the criteria could be denied a mortgage.
CUNA has previously raised this issue with the White House and with the Senate Banking Committee, which is scheduled to consider its housing finance reform bill on April 29.
Donovan most recently made the point about the QM standard during a Tuesday webinar hosted by the Bipartisan Policy Council. During that session, Donovan said the administration is pleased with the direction of the Johnson-Crapo reform draft for four reasons:
  • The government guarantee is made explicit rather than implicit;
  • The bill would attracts private capital back into play;
  • It proposes to use market-based incentives to ensure broad access to mortgage market; and
  • It addresses affordability across housing market.

CFPB reported to be considering changes to QM loan fees

WASHINGTON (4/24/14)--The Consumer Financial Protection Bureau is expected to ease its rules setting fees for Qualified Mortgage loans, as defined under the bureau's Ability-to-Repay rules, American Banker reported Wednesday.
The article quoted Leonard Chanin, a partner at Morrison & Forester who is the former head of regulation at the CFPB.
The existing CFPB rule on QM fees paid to affiliates are restricted to 3% of the loan amount, and that must include points. Chanin told American Banker that he has heard from unofficial sources that the agency is working to clarify the ATR rule.
He said addressing fees passed through an affiliate would be an area that would be relatively easy to fix or clarify. The article said that Richard Andreano, an attorney at Ballard Spahr, agreed with Chanin's assessment, adding that he expects the CFPB to address the issue when it releases technical changes this spring.
The Credit Union National Association has noted the QM rule's 3% limitation on points and fees for a qualified mortgage loan may be problematic for some credit unions, and has also said the rule's total debt-to-total-monthly-income ratio of 43% should be expanded.
As CUNA Deputy General Counsel Mary Dunn told Bloomberg Business News Americas back in December, there are many creditworthy borrowers with debt-to-income ratios that exceed the limits proposed in the QM regulations. "You can still demonstrate an ability to repay a loan, but have a debt-to-income ratio that is higher than 43%," Dunn said.

CommunityAmerica helps members build savings safety net

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LENEXA, Kan. (4/24/14)--As a way to help its members develop ever-important emergency savings, $1.8 billion-asset CommunityAmerica CU is offering an interest rate nearly 34 times higher than the national average on one of its savings accounts.
The High Interest Savings Account at Lenexa, Kan.-based CommunityAmerica CU pays nearly 4% interest on the first $1,500 deposited ( Kansas City Business Journal April 22).
The high rate serves the organization's not-for-profit cooperative structure and focus on financial literacy, said Rob Persaud, CommunityAmerica senior vice president of marketing.
The higher interest rate serves as a great differentiator for the credit union, Persaud said. "You just don't see anything like this high-interest savings account anywhere," Persaud told the Kansas City Business Journal . "But the nice thing about this is many of the people who join to be a part of this end up with free checking, where many of them came from banks that didn't offer free checking. It's a huge complaint consumers have that a basic account like checking isn't offered free, but we offer that here."
The program has helped the credit union gain new members, Persaud said. The credit union sees the high savings rate as a marketing expense that benefits its membership financially, Persaud said. That's a great fit for CommunityAmerica CU's not-for-profit structure, because management is not accountable to shareholders, but rather directly to its membership.
Therefore, the credit union focuses on building relationships with members. "That's where we feel we can also bring value, whether it's your mortgage, your auto loan, your home equity loan or a credit card," Persaud told the Journal .

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Data breaches could have been avoided: Verizon report

WASHINGTON (4/24/14)--A new Verizon data security report reveals that many point-of-sale (POS) breaches could be prevented by taking basic security enhancement steps. Those steps include limiting remote access to networks, using POS devices only for their intended purpose, updating antivirus software and providing two-factor identification on the perimeter of networks.

The report, released Wednesday, was compiled from data on 1,367 confirmed data breaches and 63,437 security incidents that occurred in 95 separate countries. Fifty organizations provided information for the report.

Click to view larger image Source: Verizon
The year 2013 may be tagged as the "year of the retailer breach," but a more comprehensive assessment of the information security risk environment shows it was a year of transition from geopolitical attacks to large-scale attacks on payment card systems, Verizon said.

Through its data analysis, Verizon found that nine patterns described 92% of the confirmed data breaches cited in the report. "We find it simply astounding that nine out of 10 of all breaches observed by 50 global organizations over a full year can be described by nine distinct patterns," report author Wade Baker wrote.

The nine patterns are:
  • Denial of service attacks;
  • Crimeware;
  • Cyber-espionage;
  • Web application attacks;
  • Insider misuse;
  • Miscellaneous errors;
  • Physical theft and loss;
  • Payment card skimmers; and
  • POS intrusions.
The Verizon analysis found that:
  • Web app attacks accounted for 35% of breaches; and
  • POS intrusions accounted for 14% of breaches.
Web app attacks will continue to compromise networks if organizations do not regularly test their network and software security, and update their computer systems, Verizon said.

"Most organizations cannot keep up with cybercrime--and the bad guys are winning," Baker wrote. "But by applying big data analytics to security risk management, we can begin to bend the curve and combat cybercrime more effectively and strategically," he added.

Overall, Baker said, "organizations need to realize no one is immune from a data breach. Compounding this issue is the fact that it is taking longer to identify compromises within an organization--often weeks or months, while penetrating an organization can take minutes or hours."
For the full Verizon report, use the resource link.

CU CEO part of Minn. elder fin. abuse press conference

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MINNEAPOLIS (4/24/14)--Minnesota's Department of Commerce recently released first-of-its-kind guidance on privacy laws regarding elder financial abuse, and a credit union CEO was on stage for Tuesday's news conference on the subject. 
"It was an honor to be chosen and to be a part of it," Terri Maloney, president/CEO of Catholic United Financial CU, St. Paul, with $18 million in assets, told News Now .
Maloney joined Minnesota Commerce Commissioner Mike Rothman; Hubert "Skip" Humphrey, assistant director, Office of Financial Protection for Older Americans, Consumer Financial Protection Bureau; Will Phillips, state director, AARP; Matt Bostrom, Ramsey County sheriff; and Peggy Hiestand-Harri, whose elderly mother was a victim of fraud.
"We know that senior citizens, and the Baby Boomers who have a great amount of wealth, have a big target on their backs," Rothman told the audience at the Lyngblomsten Care Center ( Pioneer Press April 23).
During the press conference, Rothman shared the Commerce Department's guidance that allows financial institutions to disclose nonpublic personal information--for the purpose of reporting suspected financial abuse of older adults--to local, state or federal agencies. This is an exception to privacy guidelines in the Gramm-Leach-Bliley Act.
Maloney was quoted in Wednesday's Star Tribune about the importance financial institutions play in protecting seniors from scams and fraud. "If we spot something that looks fishy, we can work with law enforcement to make sure that our members, and their money, are safe," she said. "We have the authority and the ability to act."
She told News Now that she sees how her employees watch over certain members and make sure they know the credit union is taking care of them.
Victims are not aware of the approaches that a con artist will take, Maloney said. Suspicious activities that tellers look out for include frequent large cash withdrawals, attempts to wire large sums of money, trepidation about discussing financial matters or a sudden change in who manages the member's account.

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Mass. latest to examine Experian data breach

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BOSTON (4/24/14)--Yet another state has launched a probe into a data breach involving the credit-reporting company Experian Plc, an incident that led to the exposure of about 200 million Social Security numbers.

Massachusetts Attorney General Martha Coakley announced this week that her office has opened an investigation into U.S. Info Search, the data broker whose data-sharing agreement with a company Experian purchased in 2012 was compromised, leading to the fraudulent acts ( Boston Business Journal April 22).

Illinois and Connecticut, who also have spearheaded a multistate investigation into the Target data breach where more than 40 million payment card numbers and 70 million other pieces of information were stolen, as well as Iowa and North Carolina are reportedly looking into the breach.

Credit unions have paid more than $30 million in costs related to the Target breach, according to the Credit Union National Association. Leaders continue to push lawmakers in Washington D.C. to address the disparity in data-security requirements between financial institutions and the under-regulated merchants.

While the details of who may have been at fault for the Experian data breach are still uncertain, authorities have charged the individual who distributed the sensitive information.

Last month a Vietnamese man pled guilty to federal charges in New Hampshire of operating a website that allegedly illegally offered clients access to personal information such as Social Security numbers.

Hieu Ngo, the man charged with orchestrating the operation, allegedly sold access to the information, which was to be used to commit identity theft or financial fraud, according to Boston Business Journal.

Allegedly, Ngo was able to access the information because of a "reciprocal data-sharing agreement" between Court Ventures--a U.S.-based company with which he had an account--and U.S. Info Search, both of which are now under investigation by the Massachusetts Attorney General.

That data agreement somehow allowed Ngo access to a database full of hundreds of millions of pieces of personal information.

More than 3 million queries by at least 1,300 people allegedly were made to the database using Ngo's account during an 18-month period of time.

Experian has been pulled into this case because in March 2012 it bought Court Ventures, which allowed Ngo and his account to access the personal information for at least 10 months after the purchase.

The leading credit score reporting company says its credit card databases were not infiltrated, however.

"While this is an unfortunate and isolated issue, Experian has devoted its full attention to the matter and continues to fully cooperate with investigators to uncover the facts," Michael Troncale, spokesperson for Experian, said in a statement emailed to (April 22).

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CU Magazine wants your vote for CU Hero

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MADISON, Wis. (4/24/14)--Voting for Credit Union Magazine 's 2014 Credit Union Hero of the Year is open until May 1.
The annual award honors individuals who exemplify the "people helping people" philosophy and who have gone above and beyond to expand credit union services in their communities. Candidates are nominated by Credit Union Magazine readers.
This year's nominees are:
  • William Armstrong, co-founder and board member, Northeast Community CU, Elizabethton, Tenn., is a "pillar of wisdom and knowledge" for the $99 million-asset credit union, according to CEO Kathy Campbell.
  • Dan Morrisey, CEO/treasurer of $2 million-asset Queen of Peace Arlington (Va.) FCU, spends his retirement keeping track of the onslaught of regulations that his small credit union faces.
  • William "Bill" Rissel, president/CEO, Fort Knox FCU, Radcliff, Ky. Rissel, who is retiring this year, has seen success beyond the doors of the $1.2 billion-asset credit union.
  • Joni Senkpeil, director of small credit union development, Illinois Credit Union League, started the Small Asset Size Credit Union Advisory Group. Senkpeil has developed a network of resources for small credit unions.
The winner will be honored at the Credit Union National Association's America's Credit Union Conference, set for June 29 to July 3 in San Francisco.
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