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Washington Archive

Washington

NEW: Risk-based capital will be discussed at Jan. 23 NCUA

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ALEXANDRIA, Va. (1/16/14, UPDATED 3:20 p.m. ET)--A proposed rule on risk-based capital is on the just-released agenda for next week's National Credit Union Administration's open board meeting.
 
The current 7% leverage capital standard was set by statute in 1998. While only the U.S. Congress can change the statute, NCUA Chairman Debbie Matz said in July that the recent financial crisis and changes in the ways the industry operates means the agency must make changes to how it implements the law by adopting a more flexible and forward-looking approach.
 
The Credit Union National Association has supported net worth standard changes that better reflect risk than the present approach does, but which will not simply add net worth requirements to the current system. CUNA has also been urging the agency to adopt a more productive approach to rulemaking that focuses on problem areas rather than issuing rules with blanket applicability, regardless of the credit unions level of risk. CUNA's Examination and Supervision Subcommittee has met with NCUA officials on the capital ratio issue.
 
Earlier this week, CUNA's News Now reported that NCUA board member Rick Metsger said fewer than 200 credit unions would be required to make adjustments under the risk-based capital proposal that will be discussed next Thursday.
 
Also on the Jan. 23 open meeting agenda:
 
* NCUA's Strategic Plan for 2014 through 2017, and Annual Plan for 2014 and 2015;
* The Federal Credit Union Loan Interest Rate Ceiling; and,
* Final Rule, Parts 703, 715 and 741, Financial Derivative Transactions to Mitigate Interest Rate Risk.

NCUA unveils 2013 reg review results, including MBL recommendations

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ALEXANDRIA, Va. (1/16/14)--Amendments to member business lending (MBL) regulations could be proposed by a National Credit Union Administration committee early this year, the National Credit Union Administration's Office of General Counsel said in its review of agency regulations.

The OGC recommended that MBL regulations "should be revisited and updated to reflect the current business climate and to address certain other pressing issues facing credit unions." The Credit Union National Association has been urging the agency to provide more flexibility to credit unions under its MBL rule.

The OGC said the agency could consider:
  • Whether 'soft costs' should be included in calculating the market value of a construction and development project;
  • Clarifying the meaning of 'associated borrower';
  • Changing collateral valuation;
  • Determining appropriate financial analysis practices as part of the underwriting process;
  • Exempting well-capitalized credit unions with sufficient CAMEL ratings from the MBL rule's personal guarantee requirement;
  • Replacing the two-year direct experience requirement with a more flexible, user friendly method of ensuring a credit union is utilizing qualified individuals in its business lending program; and
  • Updating the rule to clarify the legal relationship between NCUA and state supervisors.
Appraisals and the Central Liquidity Facility are also addressed in the document. The general counsel recommended that the agency eliminate any redundant requirements on credit unions to provide copies of appraisals upon request. Technical changes to CLF language were also suggested.

Other items on the list include:
  • 711 Management Official Interlocks;
  • 712 Credit Union Service Organizations;
  • 713 Fidelity Bond and Insurance Coverage for Federal Credit Unions;
  • 714 Leasing;
  • 715 Supervisory Committee Audits and Verifications;
  • 716 Privacy of Consumer Financial Information;
  • 717 Fair Credit Reporting;
  • 721 Incidental Powers;
  • 724 Trustees and Custodians of Certain Tax-Advantaged Savings Plans;
  • 740 Accuracy of Advertising and Notice of Insured Status;
  • 741 Requirements for Insurance;
  • 745 Share Insurance and Appendix; and 
  • 747 Administrative Actions, Adjudicative Hearings, Rules of Practice and Procedure, and Investigations.
The NCUA reviews all of its rules every three years, scheduling a look at about one-third of its rules each year on a rotating basis. The 2014 list of regulations up for review has not been released.

The agency says its goal is to ensure that all regulations are clearly articulated and easily understood, a goal that the Credit Union National Association endorses.

The CUNA Councils last year reviewed the listed rules and filed comments with the agency. CUNA continues to advocate for a reduction in regulatory burden and other changes that would increase regulatory relief for credit unions.

Omnibus spending bill approved in House

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WASHINGTON (1/16/14)--A $1 trillion, nearly 1,600-page omnibus spending bill was approved by the U.S. House on Wednesday by a 359 to 67 vote.

The Senate will reportedly vote on the bill by Friday, allowing President Barack Obama to sign the bill by the Saturday deadline. If approved, the bill would fund the government until October.

The bill would increase funding for the Community Development Revolving Loan Fund at an annualized rate of $1,144,746 and the Community Development Financial Institutions Fund at $210 million. The maximum loan limitation of the National Credit Union Administration's Central Liquidity Facility would also be maintained at its current statutory ceiling of 12 times its paid-in capital.

The Credit Union National Association in a Jan. 7 letter urged lawmakers to restore funding to these two vital programs at levels proscribed in a 2012 law. (See Jan. 15 News Now story: CUNA-requested CDRLF, CDFI Fund funding levels restored under House bill.)

Nominees sought for CFPB CU council

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WASHINGTON (1/16/14)--The Consumer Financial Protection Bureau is accepting nominations for Credit Union Advisory Council (CUAC), Consumer Advisory Board (CAB) and Community Bank Advisory Council (CBAC) seats that will come open this fall.

There will be eight CUAC seats, seven CAB seats and eight CBAC seats open.

The CAB is comprised of 25 members with expertise in consumer protection, financial services, community development, fair lending, civil rights, and consumer financial products or services. Bill Bynum, CEO of Hope Enterprise Corp. and Hope Community CU, Jackson, Miss., is CAB vice president. Laura Castro de Cortes, vice president of alternative financial services for Centris FCU, Omaha, Neb., is also a CAB member.

The 15 current members of the CUAC are:
  • Bernard Balsis, IEG FCU, Hawaii;
  • Rose Bartolomucci, Towpath CU, Ohio;
  • Gary Bell, Cooperative FCU, California;
  • John Buckley, Gerber FCU, Michigan;
  • Carla Decker, District Government Employees FCU, Washington, D.C.;
  • Ron Ehrenreich, Syracuse Cooperative FCU, New York;
  • Kevin Foster-Keddie, Washington State Employees CU, Washington;
  • Mitchell Klein, Police and Firemen FCU, Pennsylvania;
  • Lily Lo, Northeast Community FCU, California;
  • Maria Martinez, Border FCU, Texas;
  • Marcus Schaefer, Truliant FCU, North Carolina;
  • Camille Shillenn, Unified People's CU, Wyoming;
  • Helen Godfrey Smith, Shreveport FCU, Louisiana;
  • Gregg Stockdale, 1st Valley CU, California; and
  • David Wright, Services Center FCU, South Dakota.

CUNA calls for targeted, cheaper ways to address ODFI exceptions

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WASHINGTON (1/16/14)--NACHA--The Electronic Payments Association should examine more targeted, less costly ways to help reduce exceptions by Originating Depository Financial Institutions (ODFIs), the Credit Union National Association said in a comment letter.

The comment letter follows the release of a proposed Automated Clearing House (ACH) rule that would reduce exceptions by establishing a system of economic incentives for ODFIs. An ODFI would pay fees based on exceptions to partially offset the Receiving Depository Financial Institution's (RDFI) costs for exception processing and customer service.

The proposal would require ODFIs to pay the following fees to RDFIs:
  • $.10 to $.40 per return based on incorrect account data;
  • $.25 to $.75 per change, when an RDFI corrects information and sends a Notification of Change; and
  • $1.50 to $2.50 per return related to an issue with the receiver's authorization.
CUNA Assistant General Counsel Dennis Tsang noted that credit unions generally originate higher quality transactions and are not likely to be significantly impacted by the proposal. Also, they would receive fees to offset costs incurred for exception processing and customer service.

However, Tsang said, some credit unions oppose the concept of fees paid by ODFIs based on returns, because ODFIs may not be able to fully control the transactions originated by the Originators. Credit unions feel this approach is not targeted to reduce risk, he said.

The CUNA letter asked NACHA to minimize costs on credit unions that may be affected and minimize unintended consequences. NACHA should conduct a robust, comprehensive study that includes financial institutions of all types and sizes to measure better the costs incurred by all RDFIs for handing exceptions before it moves forward with finalizing the proposal, the CUNA letter added.

The CUNA letter also urged NACHA to:
  • Fully assess and minimize the potential unintended consequences from the proposed changes, including with consumer access to payments;
  • Account for effects from the concurrent proposed rule on ACH network risk and enforcement topics that would reduce return rate thresholds;
  • Provide additional risk management tools and resources to assist ODFIs; and
  • Form a representative panel to oversee the fee-setting process, with a dedicated slot for a credit union representative.
NACHA should also delay the compliance date by at least three months after the proposed March 20, 2015 effective date, CUNA said.

For the full comment letter, use the resource link.

Late call report filers will be fined by NCUA--starting soon

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ALEXANDRIA, Va. (1/16/14)--Procrastinators beware: The National Credit Union Administration will begin to impose civil money penalties against federally insured credit unions (FICUs) that do not meet their quarterly call report filing deadlines.

In a Letter to Credit Unions (14-CU-03) released last night, the NCUA called tardy filing is "a serious problem" and financial penalties will be assessed starting in the second quarter of this year.

The agency first informed credit unions of its plan to charge such fees in a letter to credit unions in October.

The agency reported that  more than 1,000 FICUs of all asset sizes filed their call reports after the 2013 third quarter deadline had passed, with a large percentage of these late filers being chronically late. "Such late filing impacts NCUA's ability to conduct effective off-site supervision and delays the release of quarterly industry data to the general public," and is a drain on NCUA resources.

The agency said it plans to charge:
  • Up to a maximum of $2,000 per day for each day a required report is "minimally" late or contains uncorrected false/misleading information if the late or false/misleading filing is unintentional and the credit union has reasonable procedures in place to avoid such errors;
  • Up to a maximum of $20,000 per day for each day a required report is late or contains false/misleading information if the late or false/misleading filing is not covered by the "unintentional" safe harbor outlined above;
  • Up to a maximum of $1 million, or 1% of total assets, whichever is less, per day if a federally insured credit union knowingly or with reckless disregard for accuracy submits a false or misleading report and fails to correct it.
To determine the size of the fine, the NCUA said it will consider:
  • The size of financial resources and good faith of the credit union;
  • The gravity of the violation;
  • The history of previous violations; and
  • Other matters as justice may require regarding the circumstances of late or false/misleading submissions, such as natural disasters and incapacitation of key employees.
Proceeds from the fines will go to the U.S. Treasury, the NCUA said.

Those that file late in the 2014 first quarter will receive warning letters with an estimate of what the assessed penalty would have been.

The Call Report filing deadlines for 2014 are:
  • Jan. 24 for 2013 fourth quarter filings;
  • April 25 for 2014 first quarter filings;
  • July 25 for 2014 second quarter filings; and
  • Oct. 24 for 2014 third quarter filings.
For the full NCUA letter, use the resource link.

Rep. Pittenger cites CUs in intro of Reg D study bill

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WASHINGTON (1/16/14)--Rep. Robert Pittenger (R-N.C.) took to the House floor this week calling for his colleagues' support of a bill to study reforms to Regulation D, and citing credit union concerns that members blow through the rule's six-transfer limit "in a matter of moments as they work online."

"Hats off to Rep. Pittenger for speaking up for credit union concerns on this important issue. It's time to study this requirement to determine how it really affects consumers and financial institutions, and to understand how or if modifying it would affect monetary policy," Credit Union National Association President/CEO Bill Cheney said in response.

Pittenger spoke on behalf of the H.R. 3240, which would require the Government Accountability Office to study Regulation D and recommend ways to modernize it. The rule affects transfers made via phone, online and ATMs.

CUNA supports the bill and improvements to Reg D and has testified before the U.S. Congress in support of such changes as increasing the number of automatic transfers allowed from a member's savings to share accounts.

Pittenger called Reg D "truly obsolete" in this age of online and mobile banking, and said it harkens back to a time when most banking transactions "ended with giving a free lollipop."

Carper, Blunt bills would address data security concerns

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WASHINGTON (1/16/14)--The Data Security Act of 2014 (S. 1927), introduced by Sens. Tom Carper (D-Del.) and Roy Blunt (R-Mo.) Wednesday, is the latest in a series of data security bills released in the wake of the recent Target data breach.

The Carper/Blunt bill would require credit unions and other financial institutions, retailers, and federal agencies to protect sensitive information, notify consumers if a breach occurs, and conduct their own investigations in that  event.  If a breach impacted more than 5,000 consumers, the federal authorities, law enforcement officials, and various consumer reporting agencies would have to be notified.  Overall, the bill aims to replace various state-based data protection laws with one single, federal standard.

"New technologies pose new opportunities--as well as new security challenges," Blunt said. "As the recent incidents involving Target and Neiman Marcus remind us, major data breaches that compromise consumers' identities and financial security are becoming more routine. These recent breaches, and others before them, underscore the need for Congress to act to protect Americans against fraud and identity theft," Carper added.

The Credit Union National Association supports the Carper/Blunt legislation, which is similar to bills the legislators have introduced over the last five years.

On the House side, another cybersecurity bill, the National Cybersecurity and Critical Infrastructure Protection Act (H.R. 3696), was amended by the House Homeland Security subcommittee on cybersecurity, infrastructure protection, and security technologies on Wednesday. The bill will move on to the full committee for consideration. (For more on H.R. 3696, see Dec. 14 News Now: CUNA: Bill would back CU cybersecurity efforts.)

Sen. Patrick Leahy (D-Vt.) has also introduced the Personal Data Privacy and Security Act, which would establish consumer data security standards for companies, and require them to notify consumers when a data breach has occurred.

House Financial Services Committee leaders have said their panel will conduct their own data security hearings, and Senate Banking Committee Chairman Tim Johnson (D-S.D.) is also reportedly considering similar action.

CUNA President/CEO Bill Cheney this week called on Target and other merchants responsible for breaches in the security of the personal financial information of their customers to step up and do the right thing. Target has admitted responsibility for the breach that compromised the data of as many as 70 million customers, but Cheney said more is needed. "Their admission should mean that the retailer, not credit unions and other financial institutions, should pay for the costs associated with making consumers whole, including reissuing payment cards," Cheney emphasized.

NCUA's Metsger added to NeighborWorks board

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ALEXANDRIA, Va. (1/16/14)--National Credit Union Administration Board Member Richard Metsger will represent the agency on the NeighborWorks America board of directors.

Metsger was appointed by NCUA Chairman Debbie Matz, who is vice chair of the NeighborWorks board of directors.

Metsger said he looks forward to working with NeighborWorks board members "in their efforts to create affordable housing opportunities for low-income Americans and their families in safe, sustainable neighborhoods."

Federal Reserve Board Governor Sarah Bloom Raskin is the current NeighborWorks America board chairman, and Comptroller of the Currency Thomas Curry, Federal Housing Administration Commissioner Carol Galante, and Federal Deposit Insurance Corp. Board Member Jeremiah Norton also serve on the NeighborWorks board.

NeighborWorks America works to provide access to homeownership and to safe and affordable rental housing. In the past five years, NeighborWorks' affiliated organizations have generated more than $19.5 billion in reinvestment in their communities, according to a release, which also stated that NeighborWorks America is the nation's leading trainer of community development and affordable housing professionals.