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CUNA Unveils Major Speaker for GAC 2014

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WASHINGTON (12/17/13)--The Credit Union National Association is making a major announcement about a speaker of international renown slated for the 2014 Governmental Affairs Conference.

Tony Blair, one of the most respected and admired world leaders in the last 50 years, will offer GAC attendees an unparalleled analysis of the world's most difficult and complex issues. Blair, former Prime Minister of Great Britain and Northern Ireland, will bring his worldly perspective to the credit union system's top annual event at a key time not only for the U.S. economy, but for the future of the U.S. credit union system.

"Bringing Tony Blair to the GAC is an incredible opportunity," said Bill Cheney, CUNA President/CEO. "Admired as a great world leader, Mr. Blair brings an unprecedented level of experience and influence to the GAC stage. At a time when credit unions must "Unite for Good" to play an even more important role in consumers' lives, we will all benefit from hearing from someone who has made a great impact on the world stage, while tirelessly working for good in his own country," Cheney added. Unite for Good refers to CUNA's shared strategic vision, unveiled at the 2013 GAC, in which Americans choose credit unions as their best financial partner.

Since leaving Downing Street, Blair has served as the Quartet Representative to the Middle East. He represents the United States of America, United Nations, Russia and the European Union, working with the Palestinians to prepare for statehood as part of the international community's effort to secure peace. Blair also leads up a number of initiatives to bridge cultural and religious divides, engender international awareness of climate change, and foster public well-being--including the Tony Blair Faith Foundation, the Tony Blair Africa Governance Initiative, the Breaking the Climate Deadlock Initiative, and the Tony Blair Sports Foundation.

The 2014 GAC, set for Feb. 23 through 27 in Washington, D.C., is the credit union movement's premiere political event. The GAC gathers more than 4,000 credit union decision-makers in the nation's capital to hear from influential leaders and guide the credit union movement in building and maintaining America's trust.

To register for the 2014 GAC, use the resource link.

NEW: Patent Trolls' 'Growing Threat' Described to Lawmakers by CUNA

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WASHINGTON (12/17/13, 10:44 a.m. ET)--Demand letters from "patent trolls" represent a great and growing threat to credit unions and other end-users of technology, John Dwyer,  president/CEO of New England FCU, Williston, Vt., told the Senate Judiciary Committee this morning.
 
Dwyer testified on behalf of the Credit Union National Association and his own credit union at a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." Dwyer was the only financial services representative to speak at the hearing.
 
In his testimony, the credit union CEO said his credit union is now in the middle of expensive discovery in a patent infringement case related to 23 ATM machines it provides for members. "The case has been a costly and distracting headache," he said.
 
The case began, he explained, with an "ill-researched, vague demand letter" that referred to his credit union as a bank, did not specify which of his credit union's ATM machines allegedly infringed a patent, and contained absolutely no information as to why the entity believed the credit union infringed. The letter only provided a simple list of patent numbers, he said. Attempts to clarify claims made in the letter were met with similar form letters from the patent trolls, and Dwyer said "the troll has recently turned up the heat in its rhetoric."
 
He described another patent troll letter offering a financial institutuion 'a special one-time limited time offer for smaller Banks such as yours to receive a fully paid up sub-license' for $2,000 per ATM, and eventually upped this demand to $5,000 per ATM. "Frankly, this language sounds a bit more like a late-night infomercial than a serious attempt at dispute resolution," Dwyer said.
 
If left unchecked, Dwyer said, the problem of demand letters will deter institutions like his from
using new technologies at all, including ATMs, online and mobile banking, remote check capture, and check processing.
 
To help prevent future instances of patent trolling, Dwyer, in written testimony, said CUNA supports:
  • Giving the Federal Trade Commission enforcement and rulemaking authority over patent trolls that operate in unfair or deceptive ways;
  • Developing minimum disclosure standards that would help ensure that only demand letters trulyasserting a potentially valid claim of infringement are sent; and
  • Requiring an entity that sends more than 10 demand letters in a single calendar year to enter all letters into a registry that would be publicly available and maintained by a federal agency.

Consider CU Burden in New Payments Regs: CUNA Urges Fed

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WASHINGTON (12/17/13)--Federal Reserve Banks must ensure that credit unions and small financial institutions are able to access and utilize the latest developments in payments, without undue regulatory restrictions, as it develops a new payments framework, the Credit Union National Association said in a comment letter.

The Fed Banks are working to address potential gaps and opportunities in the payments system, including payment speed, closed payment communities, and international, mobile, and traditional payment channels. The Fed is also exploring where it fits in the payment system going forward.

"As the payment system continues to evolve, it is critical that credit unions and their providers have access and utilize the latest developments in payments," including mobile payments, payments systems that could potentially enable ubiquitous near-real-time payments, and a potential new centralized directory to be used for payments, CUNA Payments Policy Subcommittee Chair Jane Watkins wrote. Watkins is also the president/CEO of Virginia CU, Richmond, Va.

While credit unions support appropriate and flexible rules, Watkins said they are concerned with regulatory and other changes that may result in compliance burdens that will reduce the ability of credit unions to provide current payment products. Watkins also noted that increasing costs and reductions in payments-related revenue, including with debit interchange or overdraft, could have a negative impact on the ability of credit unions to offer important services to many consumers, as well as to expand current and develop new products and services.

The CUNA letter suggested the Fed Banks should continue to work with, and coordinate with, the Consumer Financial Protection Bureau, Federal Reserve Board, NACHA--The Electronic Payments Association, other regulators, and policymakers to target problem areas without creating new regulatory restrictions.

Watkins said CUNA appreciates the Fed Banks' plan to examine the costs and benefits of implementation, as well as ongoing costs, of offering "ubiquitous near-real-time payments." These payments could offer benefits to end users, different stakeholders, and the payment system, she said.
 
The CUNA letter also suggested the Fed banks:
  • Join in efforts to address cybersecurity issues;
  • Remain important providers and partners that help meet the payments needs of their members;
  • Continue to act as major service providers to the interbank market for financial institution payment services, given the role of the Fed Banks in the payment system and economy; and
  • Collaborate and work with regulators, financial institutions, and others on potential improvements to international payments.
For the full comment letter, use the resource link.

Online Lender Sued by CFPB for Illegal Servicing

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WASHINGTON (12/17/13)--California firm CashCall has been sued by the Consumer Financial Protection Bureau in that agency's first action against an online loan provider.

The CFPB filed suit against CashCall in the U.S. District Court for the District of Massachusetts. In the complaint, the CFPB alleged that CashCall, subsidiary WS Funding LLC, and an affiliated Nevada collection agency, Delbert Services Corporation, "engaged in unfair, deceptive, and abusive practices, including illegally debiting consumer checking accounts for loans that were void."

CashCall collected money "it had no right to take from consumers," CFPB Director Richard Cordray alleged. "Online lending is rapidly growing and deserves ample regulatory attention. The Consumer Financial Protection Bureau will take action against online lenders and servicers that engage in unfair, deceptive, or abusive practices," he added.

The CFPB said that CashCall and its partners entered into business with South Dakota online lender Western Sky Financial, which was situated on an Indian reservation and owned by a Cheyenne River Sioux Tribe member. The firm claimed that state laws did not apply to its business. "This relationship with a tribe does not exempt Western Sky from having to comply with state laws when it makes loans over the Internet to consumers in various states," the CFPB said.

According to the bureau, Western Sky provided borrowers with loans in amounts from $850 to $10,000, with upfront fees, lengthy repayment terms, and annual interest rates as high as 343%. Some consumers agreed to allow payments to be debited directly from their bank accounts. These loans were acquired by WS Funding and serviced by CashCall.

These loans, the CFPB charged, violated either licensing requirements or interest-rate caps--or both--in Arizona, Arkansas, Colorado, Indiana, Massachusetts, New Hampshire, New York, and North Carolina. "Under statutes in at least these eight states, any obligation to pay such loans was rendered void or otherwise nullified in whole or in part by law. Therefore, the defendants are collecting money that consumers do not owe," the CFPB said.

The CFPB suit seeks refunds for consumers, damages and civil penalties. The suit also requests that the defendants adhere to all federal consumer financial protection laws, including prohibitions on unfair, deceptive, and abusive acts and practices.

For more on the CFPB suit, use the resource link.

Patent Trolls Plague Some CUs, CUNA To Tell Lawmakers Today

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WASHINGTON (12/17/13)--Today the Senate Judiciary Committee takes a look at patent law reform and the Credit Union National Association will be there to detail the chaos that patent trolls are creating for credit unions across the country.

John Dwyer, president/CEO of New England FCU, Williston, Vt., testifies today at a Senate Judiciary Committee hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." It's scheduled to begin at 10 a.m. (ET).

Dwyer will testify on behalf of CUNA and his own credit union, and will be the only financial services representative speaking.

Other hearing witnesses include:
  • Printing Industries of America President/CEO Michael Makin;
  • Adobe Systems, Inc., Vice President and Associate General Counsel Dana Rao;
  • Coalition for 21st Century Patent Reform Senior Vice President Philip Johnson;
  • Alnylam Pharmaceuticals Vice President, Intellectual Property Steve Bossone, Ph.D.;
  • AMD Senior Vice President Harry Wolin; and
  • American Intellectual Property Law Association Executive Director Q. Todd Dickinson.
For more on the hearing, use the resource link.

Mortgage Mix is Best QM Approach, CUNA's Dunn Tells Bloomberg BNA

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WASHINGTON (12/17/13)--A mixture of qualified mortgages (QM) and nonqualified mortgages may be the best approach for financial institutions to ensure loans are still available to creditworthy borrowers that are protected by fair lending laws such as the Equal credit Opportunity Act, Credit Union National Association Deputy General Counsel Mary Dunn told Bloomberg Business News Americas.

The Bloomberg story reported on QM guidance released by the National Credit Union Administration and other federal financial regulators late last week.

In that guidance the regulators said residential mortgage loans will not be subject to safety-and-soundness criticism solely because of their QM or non-QM status. The guidance addresses Ability-to-Repay and QM standards set to go into effect on Jan. 10. (See Dec. 16 News Now story: NCUA, Regulators Release QM Guidance.)

Dunn told Bloomberg that 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 percent," Dunn said.

"We think that a number of credit unions are looking at how they can make loans that wouldn't qualify as QMs," she added.

She said there is "real concern" among credit unions that if they just make QM loans, "there could be an overall disparate impact on some borrowers."

CUNA 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 said the total debt to total monthly income ratio of 43% should be expanded.

CUNA and credit unions have also called on the Consumer Financial Protection Bureau to delay the effective dates of QM regulations and other upcoming mortgage rules, and protect credit unions and other mortgage originators from litigation. CUNA has also sought a one-year mortgage regulation implementation delay.

FHFA Seeks Comments on Loan Limit Drawback

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WASHINGTON (12/17/13)--The Federal Housing Finance Agency is seeking public comment on a plan that could gradually reduce maximum loan limits by over 4% for loans eligible to be purchased by Fannie Mae or Freddie Mac, the agency said yesterday.

Under the plan, the current statutory maximum loan limit for one-unit properties would decline from $417,000 to $400,000. The FHFA said the loan purchase limit would be reduced by the same percentage in other parts of the country, including high cost areas in the contiguous states where current limits are set at $625,500. Those loan purchase limits would be set at $600,000, according to the FHFA.

The Credit Union National Association is studying the proposal carefully and the agency has said that the proposed plan does not represent final action. However, CUNA is concerned about the potential reduction in the loan amount, particularly for high-cost areas. CUNA is also concerned that this proposal is moving forward before the new FHFA director, Mel Watt, has been sworn in.

CUNA will be reviewing the proposal with its Housing Finance Reform Task Force and CUNA Lending Council among other groups and will issue a CUNA Comment Call to summarize the proposal and encourage credit union mortgage lenders to comment shortly.

The proposal has not been published in the Federal Register yet; the agency is seeking comments through March 20.

Credit unions can comment on those issues and others such as:
  • Whether six months' advance notice is adequate for any changes that are made;
  • Whether it is preferable for FHFA to announce a multi-year schedule of decreases; and
  • To what date any future loan purchase limit reductions should be tied.
The FHFA said any changes will not apply to loans originated before Oct. 1, 2014.

In a comment letter filed with the agency in October, CUNA and a coalition of financial services and housing market representatives said reducing the size of mortgages that Fannie Mae and Freddie Mac can purchase "would have a very disruptive impact on the availability of affordable housing credit." See Oct. 10 News Now item: CUNA: Reducing Mortgage Limits Would Disrupt Housing Recovery.)