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CUNA: CUs Do Not Need a New Stress Test Rule

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ALEXANDRIA, Va. (12/31/13)--New National Credit Union Administration regulations are not needed to ensure that credit unions will conduct robust stress tests and comprehensive capital planning, "since it is in their own best interests, and those of their members, to do so," the Credit Union National Association said in a comment letter to the agency.

Instead of finalizing a new rule, the NCUA should issue similar guidance and administer the guidance through the examination process, CUNA Deputy General Counsel Mary Dunn wrote.

The comment letter follows the October release of an NCUA proposal what would require federally insured credit unions with assets exceeding $10 billion to develop and maintain capital plans, and undergo annual stress tests.

The stress test requirements, drafted by the agency's Office of National Examinations and Supervision, would require impacted credit unions to conduct specific capital analyses to evaluate how changes in variables, parameters and inputs used by credit unions in their capital plans could affect their capital. Credit unions would also need to test how interest rate shocks of at least plus or minus 300 basis points would impact their net economic value.

"We do not believe that NCUA has sufficiently substantiated the need for a new regulation, given the financial performance of credit unions in general and the largest credit unions that would be covered by the rule in particular," Dunn wrote. Dunn in the letter also noted that the Dodd-Frank Act did not include NCUA in the list of agencies required to implement capital plan or stress testing regimes.

The issuance of guidance, as opposed to a new regulation, would remove credit union sanction concerns, would be less costly for credit unions and the agency to implement, and would provide additional flexibility for credit unions to develop their own models and plans, the CUNA letter said.

CUNA strongly agrees with the NCUA that capital planning, including stress testing under a range of economic scenarios, includes a highly significant set of tools that can benefit credit unions and the agency.  However, CUNA states that the agency's objectives to protect the National Credit Union Share Insurance Fund can be achieved, and more cost effectively, through guidance that addresses issues raised in the proposal, and the examination process, rather than under a new rulemaking. With guidance, the agency can work with credit unions as opposed to issuing sanctions. 

Additional CUNA recommendations include:
  • NCUA should not conduct stress tests, but should review stress test results that covered credit unions conduct; NCUA could use a third party to review the results;
  • Alternatively, NCUA should coordinate with the Federal Reserve Board to have the Fed conduct the reviews of the credit unions' tests;
  • NCUA should not subject covered credit unions to sanctions for failure to meet capital planning or stress test benchmarks;
  • NCUA should not establish a formal process for rejecting a credit union's capital plan; and
  • NCUA should not publicly disclose stress test results.
For the full CUNA comment letter, use the resource link.

New Prepaid Card Bill Would Add Consumer Protections

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WASHINGTON (12/31/13)--Legislation that would restrict hidden fees charged on prepaid cards and increase protections offered to consumers of those cards was introduced earlier this month by Sen. Robert Menendez (D-N.J.).

The Prepaid Card Consumer Protection Act Of 2013 (S. 1867) has been referred to the Senate Banking Committee. The Senate is scheduled to begin its first work period of 2014 on Jan. 6.

Sens. Richard Blumenthal (D-Conn.) and Jeff Merkley (D-Ore.) are original co-sponsors of the legislation.

Menendez noted that prepaid card consumers can pay as much as $1,300 per year, with the average consumer paying about $340 per year in fees. These numbers were part of a Pew Charitable Trusts study.

In a release, the senator said his bill would:
  • Require prepaid card providers to disclose all fees prior to prepaid card purchase;
  • Ban the charging of overdraft fees, balance inquiry fees, customer service fees, inactivity fees, account closure fees and others on prepaid cards;
  • Ensure that consumers will get their money back if a prepaid card is lost or stolen;
  • Ensure that consumers will get their money back if the card company goes bankrupt;
  • Direct the Consumer Financial Protection Bureau to issue regulations within 12 months of enactment; and
  • Direct the CFPB to release a study within 12 months detailing the benefits prepaid cards offer consumers when compared with bank accounts or other financial options.
The CFPB plans to release a proposed rule on prepaid card products in the near future, and is also aiming to test consumer disclosures in connection with prepaid products. (See Dec. 5 News Now item: CFPB Previews 2014 Regulatory Hot Spots.)

CFPB Sets 2014 HMDA Threshold, Variable Rate Ceiling, More

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WASHINGTON (12/31/13)--The ceiling on allowable charges under the Fair Credit Reporting Act (FCRA) will remain unchanged in 2014, and Regulation Z and Home Mortgage Disclosure Act (HMDA) thresholds will increase, the Consumer Financial Protection Bureau announced.

The FCRA ceiling, which impacts allowable charges a consumer reporting agency may charge a consumer for making a disclosure, will remain unchanged at $11.50 for 2014.

Section 612(f)(1)(A) of FCRA provides that a consumer reporting agency may charge a consumer a "reasonable amount" for making a report disclosure to the consumer and sets that amount at $8. However, Section 612(f)(2) of the FCRA states that the CFPB shall increase the $8 maximum amount on Jan. 1 of each year, based proportionally on changes in the Consumer Price Index for All Urban Consumers, with fractional changes rounded to the nearest 50 cents.

The Regulation Z threshold for 2014 is contained in a final CFPB rule amending its official commentary to that regulation. The amendment reflects a change in the asset size threshold for certain creditors to qualify for an exemption to the requirement to establish an escrow account for a higher-priced mortgage loan. Effective Jan. 1, the threshold amount, which also affects eligibility for small creditor status under Regulation Z's Ability to Repay requirements, will be increased to $2.028 billion.

As for the HMDA threshold: A final rule will increase that exemption threshold for credit unions, banks and savings associations to $43 million from $42 million, effective Jan. 1. Under HMDA, financial institutions with total assets of more than $43 million that have home or branch offices in defined metropolitan statistical areas must collect certain mortgage loan data and report it to federal regulators.

The CFPB fee notices were published in the Federal Register.

Wells Fargo, Fannie Mae Settle $541M in Mortgage Claims

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WASHINGTON (12/31/13)--Wells Fargo has agreed to pay $591 million to Fannie Mae to resolve "substantially all" repurchase liabilities related to mortgage loans sold on to Fannie Mae that were originated before Jan. 1, 2009, the government-sponsored enterprise (GSE) said.

"The $591 million agreement was adjusted for credits related to certain prior repurchases, resulting in a one-time cash payment to Fannie Mae of approximately $541 million," Fannie Mae added in a release. As of Sept. 30, 2013, Wells Fargo had set aside funds for the full cost of the agreement, the GSE added.

Fannie Mae President/CEO Timothy Mayopoulos said the agreement with Wells Fargo "represents a fitting conclusion to [Fannie Mae's] year of hard work to put legacy issues in the rear view mirror and begin 2014 focused on improving the future of housing finance." The GSE in 2013 also reached agreements to resolve mortgage issues with Bank of America, CitiMortgage, SunTrust, J.P. Morgan Chase, Flagstar, PNC and HSBC Bank USA, N.A. These agreements have brought in nearly $14 billion in funds, altogether.

The National Credit Union Administration has also taken action against Wall Street firms to regain credit union system losses brought by residential mortgage-backed securities of alleged questionable quality.

The NCUA will receive $1.4 billion under the terms of a $13 billion multi-agency settlement with JP Morgan Securities. In addition to JP Morgan, the NCUA has also filed lawsuits against RBS Securities, Wachovia Capital Markets and Wells Fargo, Barclay's Capital Inc., Goldman Sachs, and UBS Securities. The agency has also settled claims of more than $170 million with Citigroup, Deutsche Bank Securities and HSBC.