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Extensive Updates Provided in First Reg Advo Report of 2014

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WASHINGTON (1/7/14)--In the first Regulatory Advocacy Report of 2014, Credit Union National Association staff provide a heavy dose of the latest in compliance and regulatory news, updating credit unions on what they may have missed over the holidays.

Items addressed in the Report include:
  • CUNA's work to determine the impact of the Target breach on credit unions;
  • CUNA's call for the National Credit Union Administration to issue guidance, not a new rule, on capital planning and stress tests for the largest credit unions;
  • An NCUA regulatory alert on new Ability-To-Repay and Qualified Mortgage rules;
  • CUNA and financial institutions' upcoming oral arguments in an ongoing interchange case;
  • The Consumer Financial Protection Bureau's request for information regarding the mortgage closing process;
  • The CFPB's release of the 2014 Home Mortgage Disclosure Act threshold;
  • U.S. Treasury Bank Secrecy Act Advisory Group nominations; and
  • CUNA's comments to the Federal Reserve Banks on payment system improvements.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link. News Now coverage of the regulatory issues listed above can also be found through the links.

Senate Banking Leader is Considering Target Breach Hearing

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WASHINGTON (1/7/14)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) said Monday that he is considering conducting a hearing to study the recent data breach at Target, according to a Politico Pro "whiteboard"--or quick news burst--last night.

The Credit Union National Association has reached out both to Senate Banking and House Financial Services Committee leaders to encourage them to "fully examine the chronic issue of merchant data breaches, their impact on consumers and financial institutions."
Three Senate Banking panel member--Bob Menendez (D-N. J.), Chuck Schumer (D-N.Y.), and Mark Warner (D-Va.) --have also called on Johnson to hold such a hearing (News Now Jan. 3).
The Target data security failure--which included stolen encrypted PIN data--impacted millions of credit and debit card customers during the holiday gift-buying season.

"The cost of a merchant data breach--whether it is at a large national merchant or a local merchant--can be significant for credit unions of all sizes," CUNA President/CEO Bill Cheney wrote in the CUNA letter to key lawmakers.
"Failure to hold merchants fully accountable for data breaches when they occur ultimately harms consumers, undermines their confidence in our payments system, and adds to their growing frustrations that government is not protecting their interests," Cheney added in the letter, which was sent to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), ranking committee minority member Maxine Waters (D-Calif.), Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking committee minority member Mike Crapo (R-Idaho).

Use the resource link to read CUNA's letter to lawmakers.

Plenty on the Plate As Congress Returns to Session

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WASHINGTON (1/7/14)--Legislation to fund the government through the end of the fiscal year, an agricultural policy bill and a water conservation and development bill are some of the priorities on the agenda as the U.S. Congress begins its 2014 work this week.

The spending resolution will need to be approved by Jan. 15 to avoid another government shutdown. Democratic and Republican representatives have met on this issue over the winter recess.

The progress of the funding, farm and water bills will provide a good barometer of how much Congress is going to be able to get done this year, Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said. "If Congress is able to complete these bills sooner rather than later, it may show there is a window open for additional measures to move this spring. However, if these bills remain bogged down, it will likely mean we're in for more of the same gridlock in this session," he added.

Bills expected to be considered this week include the Unemployment Insurance Extension Act (S.1845), legislation that would delay flood insurance rate increases for homeowners residing in flood zones in revised maps (S. 1846), the Reducing Excessive Deadline Obligations Act of 2013 (H.R. 2279), the Exchange Information Disclosure Act (H.R. 3362) and the Health Exchange Security and Transparency Act of 2014.

Hearings scheduled this week include:
  • A Wednesday Senate Banking financial institutions subcommittee hearing on "Examining the [Governmental Accountability Office (GAO)] Report on Government Support for Bank Holding Companies."; and
  • A Thursday House Financial Services monetary policy and trade subcommittee hearing on the international impact of the Federal Reserve's quantitative easing program.

CUs Receive QM, non-QM Guidance from NCUA

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ALEXANDRIA, Va. (1/7/14)--National Credit Union Administration field staff "will take into account a credit union's good-faith efforts to comply" with new qualified mortgage regulations as they conduct their early-stage examinations, the agency said in a supervisory letter to credit unions (14-CU-01) released Monday.

"As CUNA has been advocating for some time, NCUA has now put into writing that it will take into account, during examinations, credit unions' good faith efforts to comply with the new mortgage rules," Credit Union National Association Deputy General Counsel Mary Dunn said.

"Coupled with the guidance issued last week CUNA also sought--in which NCUA made it clear that it would not expect credit unions to make only 'qualified mortgage' loans--credit unions can structure mortgage loans to meet members' needs and do not have to fear they will be written up for noncompliance with the new mortgage rules as they are working to meet their compliance responsibilities," she added.

The agency letter said NCUA field staff will place particular emphasis on the safety and soundness implications of mortgage lending. Whether a credit union originates Qualified or non-Qualified Mortgages, "examiners will be evaluating credit risk, liquidity risk, and concentration risk," the agency added.

NCUA Chairman Debbie Matz in the letter emphasized that non-QM lending "can be an effective member service if conducted safely and soundly." The agency, she said, "will not subject a mortgage to safety-and-soundness criticism solely because of the loan's status as a QM or non-QM.

However, "credit unions choosing to make non-QMs will need to take into account the potential new market and legal risks," Matz added.

The new QM rule becomes effective on Jan. 10, and will apply to all federally insured credit unions.

For the full letter, use the resource link.

Yellen Confirmed for Fed Post

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WASHINGTON (1/7/14)--The U.S. Senate has confirmed Janet Yellen to succeed Ben Bernanke as chairman of the Federal Reserve Board. Bernanke's term, his second as head of the central bank, ends Jan. 31.
Yellen, who has served as Fed vice chairman since Oct. 4, 2010, becomes the first woman to head the Fed board. Last Dec. 20, the Senate voted 59-34 to move Yellen's name forward for today's historic vote. Her term as chairman will end Jan. 30, 2018.
"Congratulations to Chairman Yellin," said Credit Union National Association President/CEO Bill Cheney in response to the final vote.  He added, "We stand ready to work with her on all facets of reducing the regulatory burden for smaller financial institutions, particularly credit unions."
In testimony to support her nomination before the Senate Banking Committee in November, Yellen said, "In writing new rules, however, the Fed should continue to limit the regulatory burden for community banks and smaller institutions, taking into account their distinct role and contributions."
She also said, "We have made progress in promoting a strong and stable financial system, but here, too, important work lies ahead. I am committed to using the Fed's supervisory and regulatory role to reduce the threat of another financial crisis. I believe that capital and liquidity rules and strong supervision are important tools for addressing the problem of financial institutions that are regarded as 'too big to fail.'"
During that nomination hearing, committee chairman Sen. Tim Johnson (D-S.D.) called Yellen "a model candidate for chair of the Fed."  He said she "understands the challenges facing our economy and the balance the Fed must strike as we navigate the path back to full employment," and has also demonstrated "that she understands the importance of completing ongoing Wall Street reform rulemaking and of the Fed's regulatory role in supervising the riskiest banks."

Matz in HuffPost: CU Short-Term Loans Can Be a Lifeline

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ALEXANDRIA, Va. (1/7/14)--"With the right products and rules of the road, credit unions and other financial institutions can help millions of cash-strapped Americans break free of their reliance on expensive loans...and replace a cycle of debt and dependency with one that meets borrowers' short-term needs while promoting greater financial security in the long run," National Credit Union Administration Chairman Debbie Matz wrote in a Huffington Post editorial.

Matz in her column noted that while payday loans are sometimes touted as a lifeline for consumers dealing with unexpected expenses, the truth is that nearly 70% of first-time payday loan borrowers use the funds to pay for recurring expenses such as rent, utilities or food.

More than 12 million Americans take out payday loans each year, spending more than $7 billion on principal, interest, and fees, Matz wrote. The average payday borrower pays more than $500 in finance charges and spends five months in debt for the average $375 loan, she added.

"When you consider that most of these loans are taken out to cover monthly expenses--yet only one in seven borrowers can afford to repay that average payday loan from their monthly budgets--it's easy to see how loans that are billed as 'lifelines' more often function as anchors, sinking borrowers into debt from which they cannot escape," she wrote.

However, Matz said, "there is a workable solution to providing short-term credit in a way that protects consumers and is viable for financial institutions." The regulator noted that under NCUA guidelines, federally chartered credit unions are allowed to charge no more than 10 percentage points above the established usury ceiling--currently, the statutory maximum is 28%.

Most credit unions that offer alternatives to conventional payday loans also limit fees, encourage members to open savings accounts and provide financial counseling. For more on payday loans in this issue of News Now, see "Some Big Banks Allegedly Ignore Nov. Payday Loan Guidance."

For the full Huffington Post column, use the resource link.

New FHFA Head Watt Begins Five-Year Term

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WASHINGTON (1/7/14)--Mel Watt on Monday began a five-year term as Federal Housing Finance Agency director.

Click to view larger image New Federal Housing Finance Agency director Mel Watt is sworn in on Monday in Washington. (FHFA Photo)
The veteran North Carolina congressman was sworn in yesterday in Washington by former Charlotte mayor and current U.S. Secretary of Transportation Anthony Foxx. Credit Union National Association Deputy General Counsel Mary Dunn extended the association's good wishes for a successful tenure at FHFA, which oversees Fannie Mae, Freddie Mac and the Federal Home Loan Banks. CUNA has requested a meeting with the new director.

During remarks that followed his swearing in, Watt shared with dignitaries, including Members of Congress he served with in the U.S. House of Representatives, Treasury Secretary Jack Lew, agency staff and others, life experiences that helped prepare him for his current position, including his family's home ownership and early opposition to predatory lending and other mortgage-related practices that harm consumers.

CUNA President/CEO Bill Cheney in a late December letter to Watt encouraged the new regulator to ensure balanced oversight of Fannie Mae and Freddie Mac that fully considers the impact actions will have on credit unions. The CUNA CEO said credit unions are looking forward to working with Watt, and also urged him to do all he can to ensure that:
  • Fannie and Freddie are accountable for the policies they implement;
  • The process for developing policies is transparent;
  • Policies adopted and implemented will support small sellers and services; and
CUNA is looking forward to discussions with the FHFA on key policy issues that are significant for credit unions.

CUNA Provides Clarification on Target Breach Notifications

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WASHINGTON (1/7/14)--Credit unions continue to ask what steps should be taken to alert members about the importance of monitoring their accounts as a result of the Target data breach.
"This is a business decision for the credit union to decide whether--and if so, how--to communicate with members," said Kathy Thompson, Credit Union National Association senior vice president for compliance Monday.  "Contrary to what we've reported earlier, there is no regulatory requirements about notifying members when a breach occurs in a merchant's information systems.  Section 748/Appendix B of NCUA's regulations on member notification only is triggered when there has been unauthorized access to member information directly from the credit union's system or its third-party service provider." (See resource link for past News Now story.
CUNA provided clarifying information about the requirements on a new CompBlog post on Jan. 6, explaining that it is up to the credit union to determine how it will communicate with its members. 
"Certainly all members need to be reminded of the importance of thoroughly reviewing their statements regularly," Thompson wrote.  CUNA has heard from credit unions that they are posting information on their websites, including information in their newsletters, or adding information to their call center response lines about what the credit union is doing to stay on top of the situation and what members need to do to monitor their accounts.  Some credit unions have already decided to re-issue cards on vulnerable accounts, while others continue to closely monitor account activity for suspicious transactions.
Thompson reminds credit unions that "your insurance company and VISA and MasterCard need to know about incidents of unauthorized access to specific members' accounts so they can continue to investigate the Target breach." 
Last week CUNA announced it's asking credit unions to complete a survey (see resource link) on costs they are incurring due to the Target data breach. 
"We know that this is early in the process of monitoring, potentially freezing, and perhaps re-opening accounts.  But we are asking credit unions to keep track of these costs and respond to our survey in coming weeks," Thompson said. 
She notes that for several years CUNA has been pushing for congressional action on legislation to require merchants to reimburse financial institutions for costs incurred when breaches occur in retailers' systems.  "Actual cost data will obviously be very useful in helping us to represent credit unions," Thompson noted. 

New aSmarterChoice Blog Is Now Live

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WASHINGTON (1/7/14)--A new blog has been added to the list of resources available at, the Credit Union National Association's consumer website.

The blog will be updated daily with new insightful and informative posts to increase awareness of credit unions, the credit union difference, and credit union financial education efforts. Credit unions will also have a chance to highlight their own community efforts by submitting stories to the blog.

Amaia Kirtland, CUNA social and digital media manager, encouraged credit unions to check the blog frequently and share their favorite blog posts on social media sites like Facebook and Twitter., CUNA's consumer website, was launched in 2011 by CUNA and state credit union associations to provide information on credit unions to potential members and to press professionals. More site improvements are on the way in the upcoming weeks as part of a multi-phase modernization effort which includes the responsive design and other updates.

The modernization effort will include enhanced tools for mobile phone and tablet users.

For more on the new, use the resource link.