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CUNA Brings CU Issues To Newest NCUA Board Member

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ALEXANDRIA, Va. (10/21/13)--Potential risk-based net worth requirements, containing corporate stabilization fund assessments and general agency budget issues were on the agenda when the Credit Union National Association met with new National Credit Union Administration board member Richard Metsger on Friday.

CUNA President/CEO Bill Cheney said the discussions were candid and productive. "We are confident that board member Metsger will ensure that credit unions' concerns will be fully considered, as well as reasonable agency safety and soundness needs when the board makes policy decisions," he added.

CUNA staff at the meeting included Cheney, General Counsel Eric Richard, Deputy General Counsel Mary Dunn, and Executive Vice President for Strategic Communications Paul Gentile. Also in the meeting was NCUA Deputy Director of Examinations and Insurance Dave Shetler, who is acting as Metsger's advisor on a temporary basis until a candidate is selected to fill the position permanently.

Other meeting topics included:
  • Minimizing oversight of credit union service organizations;
  • Emergency liquidity resources;
  • Examination and appeals process issues;
  • The agency's proposal on derivatives; and
  • NCUA's proposal on charitable donation accounts.
CUNA is pursuing all of these issues and others with the agency to point out concerns and seek improvements to benefit credit unions without undermining safety and soundness. CUNA will continue to advance recommendations to the agency on all of these issues, CUNA's Dunn said after the Friday meeting.

NCUA Names New Office Of Examination And Insurance Supervision Director

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ALEXANDRIA, Va. (10/21/13)--D. Scott Neat, a 26-year National Credit Union Administration veteran, will serve as the agency's director of supervision in the office of examination and insurance starting on Nov. 3.

The Division of Supervision oversees NCUA's examination and supervision program. Neat will replace Matthew Biliouris, who the NCUA named deputy director of the office of consumer protection in July.

Neat joined the NCUA as an examiner in 1987, and has served as supervision analyst, problem case officer and supervisory examiner in his time with NCUA. He holds an accounting degree from the University of Kentucky.

NEW: CUNA Brief: Fed Interchange Rule Bad, Court Ruling Worse

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WASHINGTON (10/21/13, UPDATED 3:44 p.m. ET)--The Federal Reserve Board has made errors in implementing the Dodd-Frank-imposed debit interchange fee cap, the Credit Union National Association said today in a legal brief, but a July 31 U.S. appeals court ruling  overturning the rule would make things "significantly worse."
 
The ruling "compounds the (Fed's) legal error through a construction that would require deep cuts--amounting to many billions of dollars each year--into issuers' remaining interchange-fee revenues," CUNA, with its financial services coalition partners, warned in an amicus brief.
 
Already the Fed cap is too low and the court has further misinterpreted the law to set the fee cap equal to only a portion of the cost incurred by the debit card issuer with regard to the transaction, CUNA said.
 
"(T)he statute states clearly that the full 'cost' incurred by an issuer 'with respect to' an electronic debit transaction may be recovered through an interchange fee," CUNA noted.
 
Judge Richard Leon of the U.S. District Court for the District of Columbia issued the July decision to strike down the Fed's price caps on debit interchange fees. He ruled at that time that the Fed did not follow narrow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment.
 
At the urging of both sides party to the lawsuit--the merchants' group plaintiffs and defendant Fed--as well as CUNA and its partners, Leon issued a stay in September to keep the Fed rules in place during the court proceedings.
 
The CUNA brief today made two additional points against the court's ruling. CUNA said the court ignored that the statute provides that the interchange fee "shall be reasonable and proportional to that transaction cost." 
 
"In choosing that language, Congress invoked the established constitutional principle that price regulation may not deprive one of the right to earn a reasonable return.  The district court's construction, which would call for deeply below-cost price caps, would flagrantly violate that principle," the CUNA brief stated.
 
The court and Fed also depart from congressional intent in their interpretations of the network non-exclusivity clause. CUNA wrote the while the Fed final rule departs from intent by requiring issuers to negotiate contracts with unaffiliated networks so as to "enable multiple networks on a debit card," the court's interpretation departs further. 
 
The court's interpretation that issuers must enable additional networks on their debit cards would force issuers to spend billions of dollars developing complex technology that did not, and does not yet, exist. CUNA argued that is "implausible" to believe it was the intent of Congress, especially where those expenditures are not recoverable under the district court's construction of the statute.
 
CUNA made a final point that the district court's ruling would cause grave harm to all debit system participants through reduced services, diminished investment in innovation by issuers, increased fees to consumers, and disruptive technological changes--all with no tangible offsetting economic benefit.
 
The CUNA brief was filed today in support of the Fed's brief due today on its appeal (more in tomorrow's News Now). Merchants have until Nov. 20 to respond and then the Fed has a Dec. 4 deadline to reply to that.
 
CUNA's partners in filing the brief are the American Bankers Association, Consumer Bankers Association, Electronic Payments Coalition, Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Association of Federal Credit Unions, and National Bankers Association. The case is known as NACS, et al. v. Board of Governors of the Federal Reserve System.

Monthly Payments Webinars Previewed In Cheney Report

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WASHINGTON (10/21/13)--In the latest edition of The Cheney Report, Credit Union National Association President/CEO Bill Cheney previews a new series of monthly upcoming webinars that will help credit unions tackle the challenges brought on by the changing nature of payments systems and technologies.
 
The first webinar, which is scheduled for Oct. 21 at 2 p.m. (CT), is part of a series on the future of payments. The CUNA Technology Council will present the webinar, during which PSCU Executive Vice President Fredda McDonald will discuss:
  • Closed Loop versus using the current rails;
  • Credit versus Debit in the mobile payments space;
  • Cloud payments versus the mobile wallet;
  • What role loyalty plays for credit unions, and how they can leverage it; and
  • How payment system changes can offset the loss of interchange income.
 
Use the resource link to register for the webinar.
 
Cheney also discusses the results of a CUNA survey on upcoming Consumer Financial Protection Bureau mortgage rules. (For more, see today's story: CUs Wary Of New Mortgage Rules, CUNA Survey Shows.)
 
This week's edition of The Cheney Report also:
  • Thanks to credit unions that helped their members make it through the federal government shutdown;
  • Provides a preview of how tax reform discussions could progress as Congress returns to normal business;
  • Gives credit unions an example of why they must continue to advocate for their tax status; and
  • Details the items on the National Credit Union Administration's October open board meeting agenda.
 
Use the resource link to read the latest in The Cheney Report.

Fed To File Interchange Brief Today; CUNA To File Also

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WASHINGTON (10/21/13)--Today the Federal Reserve Board's brief is due in support of its rule implementing the debit card interchange cap required by the Dodd-Frank Act. The brief must be submitted to the .S. Court of Appeals for the District of Columbia Circuit.
 
In July, Judge Richard Leon of the district court ruled to strike down the Fed's price caps on debit interchange fees. He said that the Fed did not follow narrow congressional intent when it implemented the cap. The Fed has appealed that decision.
 
The Credit Union National Association and its financial services partners will file an amicus brief today.
 
At the urging of both sides party to the lawsuit--the merchants' group plaintiffs and defendant Fed--as well as CUNA and its partners, Leon issued a stay in September to keep the Fed rules in place during the court proceedings.
 
CUNA's partners in filing the brief are the American Bankers Association, Consumer Bankers Association, Electronic Payments Coalition, Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Association of Federal Credit Unions, and National Bankers Association. The case is known as NACS, et al. v. Board of Governors of the Federal Reserve System.

Survey Shows New Mortgage Regs Could Force CUs To Reduce Programs

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WASHINGTON (10/21/13)--Some credit unions may be forced to discontinue, delay, or reduce their mortgage loan product offerings due to Consumer Financial Protection Bureau mortgage regulation changes that are set to take effect in January, a Credit Union National Association survey has revealed.

Around 60% of credit unions that responded to the survey said they were considering scaling back their mortgage practices. And, while many have been diligently working throughout 2013 toward meeting the compliance deadline, they may not be fully prepared to comply when the regulations take effect.

"These survey results are troubling for consumers," CUNA President/CEO Bill Cheney said. "CUNA has urged the CFPB to allow more time for compliance, since seven rules will hit within a two-week period, which poses a monumental compliance challenge. This is a particularly daunting task for smaller credit unions, given their small staffing resources," he added.

Half of the credit unions that responded said they have not decided whether or not they would offer non-qualified mortgage (QM) loans, write only QM loans, or reduce the number of non-QM loans that they make for their members. "This indicates that some credit worthy borrowers who would otherwise have qualified for a mortgage may not receive loans from their credit union," Cheney said.

The survey showed the pending regulations will also impact third party vendors: Ten percent said they would not be able to develop programming until after January 2014, and 41% of credit unions indicated their vendor has not yet promised a delivery date.
 
The lack of programming updates could mean that credit unions may miss their Internal Revenue Service deadlines and/or CFPB compliance dates. Overall, the survey showed that 86% of responding credit unions are using third party vendors to assist in implementing the rules, while 69% of this 86% are using multiple vendors.
 
"CUNA will continue to do all we can to help minimize the impact of these rules," Cheney added. "We are aware that the CFPB has talked with prudential regulators such as [the National Credit Union Administration] and that examiners should allow several months after the effective date before instructions that are seeking to comply are cited for violations. We are also concerned about protecting credit unions from litigation, and we will continue to pursue that issue as well."