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News Now: August 1, 2014

New bill would push CFPB supervision trigger to $50B

WASHINGTON (8/1/14)--Sens. Pat Toomey (R-Pa.) and Joe Donnelly (D-Ind.) have introduced a bill that would raise the credit union threshold for supervision by the Consumer Financial Protection Bureau (CFPB) to $50 billion in assets, up from the current $10 billion. If passed, the bill would exempt all but one credit union from direct CFPB supervision.

"Our thanks to Sens. Toomey and Donnelly for introducing this legislation, which would ease the regulatory burden facing credit unions affected by direct CFPB supervision," said John Magill, executive vice president of government relations for the Credit Union National Association.

"While this bill is a welcome development, CUNA continues to urge the CFPB to use its broad exemption authority for credit unions more extensively, as we strongly believe there is more CFPB can and should do on its own to exempt credit unions from unnecessary regulations," Magill added.

Former congressman and House Banking Committee Chair Barney Frank, a Democrat from Massachsetts,  testified at a House Financial Services Committee hearing last week that the examination threshold should be raised.

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CFPB says debit, ATM overdraft services still raise concerns

WASHINGTON (8/1/14)--The Consumer Financial Protection Bureau said Thursday that it has studied the effect of a 2010 "opt-in" requirement that depository institutions obtain a consumer's consent before charging fees for allowing overdrafts on most ATM and debit card transactions and found it lacking.
The bureau noted it is weighing what additional consumer protections may be necessary for overdraft and related services.
A new CFPB report indicated that the majority of debit card overdraft fees are incurred on transactions of $24 or less and that the majority of overdrafts are repaid within three days. "Put in lending terms, if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate," the CFPB said in a release.
The  study was based on data from a set of large banks supervised by the CFPB. It found also that  among the banks studied, overdraft and Not-Sufficient-Funds (NSF) fees represent more than half of the fee income on consumer checking accounts. The study found that about 8% of accounts incur the majority of overdraft fees.
The CFPB acknowledged that some credit unions and banks do not charge an overdraft fee if the consumer overdraws an account by a small amount; some also cap the number of overdraft and NSF fees they will charge on an account on a single day.

In a related story this week, a Moebs Services study released Tuesday includes information that describes how credit unions remain the most reasonable financial institutions in forgiving members for overdrafts ( News Now July 30).
Use the resource link to read the complete CFPB release and to access the study.

Proposed rule eliminates 5% fixed-asset cap

ALEXANDRIA, Va. (8/1/14)--Credit unions would be able to manage their fixed assets without waivers or permissions from the National Credit Union Administration under a proposed rule issued by the agency board Thursday.

The rule, which applies to credit unions with more than $1 million in assets, would allow credit unions to exceed the 5% limit without prior NCUA approval, provided it is done by establishing and following a fixed-asset management policy. It would also simplify the partial occupancy requirement for premises acquired for future expansion.

Board member Rick Metsger said that the NCUA's review of fixed assets demonstrated that many factors, including net worth, delinquency ratios and CAMELS rating were not significantly different for credit unions with fixed assets above 5% against those that are below 5%.

"[Our analysis] also demonstrated that investments in fixed assets were not a major contributor to losses for the Nation Credit Union Share Insurance Fund," he said. "Quite the contrary, investment in fixed assets correlates to positive asset growth, share growth and membership growth."

In March 2013, the NCUA issued proposed amendments to the rule to further clarify the rule, but without any changes to the regulatory requirements. During that proposal's comment period the Credit Union National Association was among those suggesting elimination of the fixed-asset cap.

CUNA advocated for the removal of the cap, and suggested the agency replace it with requirements that credit unions have written policies that set parameters for ownership of fixed assets. CUNA also noted that the policies and their implementation should be subject to examiners review. Each of those items are contained in the NCUA's proposed rule.

Metsger said that reforming the fixed-asset cap has been a priority since he took office in 2013, and NCUA Chair Debbie Matz credited him for initiating the effort to change the rule. Metsger called the proposal a "positive regulatory relief measure" that would help both credit unions and agency staff.

Matz said the proposal will move the agency away from micromanaging credit unions' business decisions that have no impact on safety and soundness.

"Rather than spending hours writing a waiver application, credit unions could better devote their time to developing a fixed-assets management program under this proposed rule," she said.

The proposal would apply to more than 3,500 credit unions, Matz said.

The comment period for the proposed rule is open for 60 days after it is published in the Federal Register .

Use the resource link below for more information.

$1.1M trimmed from NCUA budget; less than past mid-year cuts

ALEXANDRIA, Va. (8/1/14)--Approximately $1.1 million has been trimmed from the National Credit Union Administration's budget this year, according to the agency's mid-year operating budget report Thursday. The reduction in costs for the year ending Dec. 31 will bring the revised NCUA budget to $266,920,296.

The majority of unused budgetary funds, $1.525 million, is a result of vacant staff positions. Pay and benefits account for 73% of the NCUA's total operating budget.

"For the fifth straight year our mid-year budget review has yielded more than $1 million in savings, which will be returned to credit unions," said NCUA Chair Debbie Matz.

She also noted that while this year's reduction is less than it has been in years past, the difference is due to the agency entering this year with 15 vacancies, as opposed to the close to 40 in years past.

Another $90,000 in savings comes from a reduction in the monthly transit subsidy reimbursement, which was lowered to $130 from $245 by Congress after the initial budget was passed.

Other changes in the mid-year budget include:
  • Reduction of $289,000 in travel costs due to updated program and training requirements, expenses from the 2014 National Training Conference coming in under budget and realignment of existing travel dollars among two regions;

  • Increase of $63,000 for an unplanned, unbudgeted real estate brokerage fee due to an early five-year lease negotiation for one of the retail tenants in the agency's Alexandria space. By renegotiating the lease before it was required in 2015, the NCUA has ensured uninterrupted rental income for this tenant through 2019;

  • Increase of $143,000 to support a new license agreement for the agency's Incident Management system, software warranty extension, e-mail software;

  • Increase of $238,000 for prioritized projects recommended by the Information Technology Prioritization Council and to meet growing demand for specialized audio and video expertise for webinars, video conferences and special events; and

  • Increase of $270,000 for compliance with new high-level security requirements mandates by the federal government.
The NCUA also announced that a portion of its retail space in Alexandria will be re-purposed into a dedicated training facility for the agency's exam program. This will result in capital costs of an estimated $200,000 for building renovations and information technology infrastructure updates. According to the NCUA, these costs will be funded from existing NCUA resources.

Use the resource links below for more information.

SunCorp, Alloya to merge

CU System
WESTMINSTER, Colo. and WARRENVILLE, Ill. (8/1/14)--System United Corporate FCU (SunCorp), Westminster, Colo., has announced its intent to merge with Alloya Corporate FCU (Alloya), Warrenville, Ill.
SunCorp President/CEO Tom Graham said the announcement comes after "an extensive process of strategic planning and due diligence by the SunCorp board, aimed at finding the best means to deliver excellent cooperative financial services to SunCorp members. The board and management clearly saw Alloya as the best partner to help our members grow and succeed in today's competitive marketplace."
The merger still must be approved by the National Credit Union Administration (NCUA). Graham said he expects a member vote on the merger in February, shortly after expected regulatory approval. Prior to voting and the approval process, SunCorp plans to host multiple town hall meetings throughout the Rocky Mountain region.
"This merger with SunCorp clearly enhances the value that all of our members will receive," said Todd Adams Alloya president/CEO. "Combining both organizations strengthens Alloya and helps us to assure a continued, long-term cooperative value to all credit union members from coast to coast. Retaining many key staff of SunCorp also enhances our leadership and service delivery strengths, including member contact staff in all four U.S. continental time zones."
As part of the merger agreement, Alloya has committed to retaining SunCorp's office in Denver. It will also retain member-facing staff to further grow relationships with SunCorp's members in Colorado, Utah, Wyoming, Nebraska and California. Both boards have agreed to governance provisions for merger that include two board seats, and committee representation from former SunCorp board members.
The next step after the completion of due diligence would be the execution of a definitive merger agreement by both corporates and submission of an application for merger to the NCUA.

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NCUA: No corporate assessment (but no refunds either)

ALEXANDRIA, Va. (8/1/14)--Credit unions will not face an assessment this year for the Corporate Credit Union Stabilization Fund, the National Credit Union Administration confirmed at its board meeting Thursday. Future assessments are unlikely as well.

Larry Fazio, NCUA director of examination and insurance, said the improvements to the fund are due to the performance of the NCUA Guaranteed Notes (NGN) program and recent corporate credit union litigation settlements totaling more than $1.75 billion.

Net projected remaining assessments in the Stabilization Fund range from -$2 billion to -$0.6 billion. NCUA Chair Debbie Matz said the double negative projected assessment range is "positive news" for credit unions.

But Fazio emphasized that the negative assessment range does not mean there are funds available to provide refunds to credit unions now, as the improving values of legacy assets are used to secure the NGN. The NCUA also owes $2.6 billion borrowed from the U.S. Treasury. The agency did indicate that some rebate to federally insured credit unions in 2021 might be possible, but only after all obligations, including those to Treasury, have been met.

The board also provided a quarterly update on the status of the National Credit Union Share Insurance Fund (NCUSIF). The fund has an equity rate of 1.29% as of June 30, and reserves are approximately $176.1 million, $8.1 million of which are for specific credit unions.

According to the NCUA, there are 295 CAMEL 4 and 5 credit unions, representing 1.46% of insured shares, or approximately $13.2 billion. The number of CAMEL 4 and 5 credit unions is on the decline. There are 1,466 CAMEL 3 credit unions, representing 10.46% of insured shares, or $94.5 billion. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent only 11.92% of total insured shares.

There have been eight credit union failures so far this year. In 2013 there were 17 total failures.

The NCUA board also approved a community charter expansion for Call FCU, based in Richmond, Va. with $360 million in assets. The credit union was chartered in 1962 to serve the employees of Philip Morris Tobacco Company, also based in Richmond, and converted to a community charter in July 2010, serving approximately 100 select groups and two underserved areas.

The expansion of the charter means approximately 1.3 million people are now in Call FCU's field of membership.

Use the resource links below for more information.

Study: 35% of American borrowers in collections

CU System
WASHINGTON (7/31/14)--Thirty-five percent of adults have a debt in collections reported in their credit files, an Urban Institute study shows. But while the 35% figure is definitely cause for concern, it may be more a reflection of aftereffects from the recent recession than a long-term measure of household financial health, a Credit Union National Association economist advised.
"The depth and duration of the Great Recession left many out of work and/or underemployed--and that contributed to a huge surge in defaults--reflected in ongoing collections," Mike Schenk, CUNA's interim Chief Economist told News Now. "More recently, however, unemployment has declined from a cyclical high of 10% to 6.1% today and households collectively reflect substantial improvements in their financial position.  The stock market is trading near all-time highs and home prices have rebounded lifting the value of household financial assets."
The study, conducted with Encore Capital Group's Consumer Credit Research Institute, found 77 million Americans owed an average of $5,200 in September 2013.
Nevada, hit hard by the housing crisis, tops the list of states: 47% of people with a credit file have reported debt in collections. The state also has the highest average collections debt, $7,198.
Twelve other states (11 in the South) and the District of Columbia top 40%: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas and West Virginia. On the low end, the Midwest's Minnesota, North Dakota, and South Dakota have about 20% of residents with reported debt in collections.
Debt in collections involves a nonmortgage bill--such as a credit card balance, child support obligation, medical or utility bill, parking ticket, or membership fee--that has been reported so far past due that the account has been closed and placed in collections, often with a third-party debt collection agency. This debt can remain in a person's credit file for seven years. Some consumers become aware of collections debt only when they review their credit report.
While it's true that most households carry debt--according to the Federal Reserve 75% of families carry some form of debt--Schenk said it's also is true that debt loads have been declining: Total debt outstanding peaked at roughly 125% of disposable income at the start of the recession, but declined to 98% of take-home-pay at the end of the first quarter 2014--a level not seen since 2002.
"With improving asset values and lower debt loads household net worth has increased dramatically and now is at the highest level ever--even after adjusting for inflation," Schenk told News Now. "These improvements have translated to substantial declines in loan delinquencies and loan defaults--with both banks and credit unions now reporting levels in these measures that are near pre-recession norms."

#CUNAChat takes CU awareness to Twitter

CU System

WASHINGTON (8/1/14)--As credit unions approach the 100 million membership milestone, the Credit Union National Association  took the credit union awareness conversation to the Twittersphere Thursday afternoon.
CUNA hosted credit unions, volunteers and member-advocates as participants in its latest #CUNAchat on Twitter.

CUNA posted 10 questions for participants, focusing primarily on the meaning of credit unions and how they serve their communities. Chat participants responded with a barrage of tweets that provided a litany of reasons for consumers to join the credit union movement.

"This chat shows the power of the movement, coming together to raise awareness to consumers about credit union structure, community involvement and benefits of membership," said Amaia Kirtland, CUNA social and digital media manager.

"Reaching 100 million members is a significant milestone for all of us who love credit unions. Twitter chats help connect individuals to each other to learn new things and to develop new interests.  The cooperative nature of credit unions amplifies the reach of our message, that we are the preferred financial institution for 100 million credit union members and other American's should use a credit union for their financial services needs as well."
The 10 questions posed by CUNA:

  • What is a credit union?
  • Who is eligible to join a credit union?
  • What makes a credit union a different kind of a financial institution?
  • How is the credit union's structure/different from a bank's?
  • What are the benefits of being a credit union member?
  • How do credit unions impact their communities?
  • How do members control their credit unions?
  • Why are you a credit union member?
  • Why should consumers join a credit union?
  • How do you find a credit union that's right for you?

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Non-traditional entrants topic of World Conference panel

CU System
GOLD COAST, Australia (7/31/14)-- As non-traditional market entrants rapidly become many consumers' preferred financial service providers, credit unions must learn how to engage and adapt to stay in the race, panelists advised at the World Credit Union Conference in Gold Coast, Australia Wednesday. The conference is sponsored by the World Council of Credit Unions.
Click to view larger image Non-traditional market entrant spokespersons joined together for a lively panel discussion at the World Credit Union Conference Tuesday. Participants included, from left, Effie Zahos and Alan Shields, Australia; Alex Moven, United States; and Amy ter Haar, Canada. 
Dubbed "Catching the Disruption Wave: 'Three Big Ideas' for Serving a Radically Changing Marketplace," the panel brought together three primary market disruptors from Australia, Canada and the United States to give an outside perspective on credit unions' future.
Panelists included Alan Shields, RFi Intelligence co-founder and managing director, from Australia; Alex Sion, president of Moven president, from the United States, and Amy ter Haar, Flow Inc. CEO, from Canada. Effie Zahos, Money magazine editor, Australia, moderated the panel.
Topics focused on the keynoters' "big ideas" regarding the future of financial services as payments, finance and commerce emerge for a multi-dimensional consumer marketplace. All sides admitted that credit unions have a chance to capture and capitalize on the advantages of the disruption wave, with a need to differentiate their products and value propositions.
Click to view larger image "We are in a world where the app should be a credit union's product, not plastic, branches or telephone services," said Moven's Alex Sion.
"This is an existential moment for credit unions ... to redefine your basic product and core value proposition," said Sion, who asked the audience to reconsider his app-centric business as a potential partner, rather than a disruptor. "Credit unions must ask themselves what ... family and community mean in this digital era. The future of the model is to maintain the community aspect, but disrupt the physical distribution model."
To some panelists, the best practice model could be achieved through shared platforms among different credit unions, and potentially nontraditional market entrants.
"We need to get connected if we want to [financially] include everyone, everywhere. It's not us versus the banks. It's lateral and peer-to-peer," ter Haar said, noting credit unions' mission to provide nondiscriminatory financial access to all. "We are stronger together."

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