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CUNA makes ATM disclosure advice available

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WASHINGTON (1/3/12)--The Credit Union National Association (CUNA) has alerted credit unions, as well as the Consumer Financial Protection Bureau, of increasing instances of lawsuits being brought against credit unions and other financial institutions when ATM notices have been removed, damaged or destroyed. CUNA's Center for Professional Development (CPD)  also has re-released a spring audio conference on ATM fee disclosures to assist credit unions with issues.

The audio conference features commentary from CUNA Mutual Group Senior Risk Management Specialist Ken Otsuka and PolicyWorks LLC Vice President of Compliance Andrea Stritzke.

The Electronic Fund Transfer Act requires credit unions and other financial institutions to display at each ATM location that fees will or may be charged.  More detailed ATM fee information must also be provided before the transaction is completed, either  by  projecting it onto the ATM's screen or providing the ATM user with a small printed disclosure. 

Credit unions and others have found that the outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then using this as evidence of apparent non-compliance and as grounds for lawsuits.

The audio conference addresses:

  • Noncompliance issues giving rise to lawsuits;
  • Best practices credit unions should implement to avoid this type of lawsuit;
  • The requirements of Regulation E; and
  • Answers to implementation questions, such as "What must be included in the disclosure?" and "Where do we put the sign?"
CUNA has also advised credit unions on how to mitigate the risk of ATM fee lawsuits.

In a release sent to credit union league presidents, CUNA said credit unions should develop and maintain written procedures for inspecting all of their ATMs on a regular basis to ensure the ATM fee signs are intact. ATMs should be inspected at least weekly or when the ATM is serviced--whichever provides for more frequent inspections. Credit unions could photograph the ATM each time it is inspected and log the inspections, CUNA added.

Any missing signage should be replaced immediately, and credit unions can ensure that this can be done in a quick fashion by maintaining a supply of signs and stickers to replace any that have been defaced or removed from ATMs, CUNA said.

The ATM screen and paper disclosures should also be tested, CUNA added.

For more on the CPD audio conference and CUNA's efforts to help credit unions avoid these types of suits use the resource links.

NCUA will rescind its big CU data request

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WASHINGTON (1/3/12)--The National Credit Union Administration (NCUA) said it would rescind its request that the Office of Management and Budget (OMB) allow the NCUA to collect monthly financial data and monthly executive and board compensation data from credit unions with at least $1 billion in assets.

The request was published in the Federal Register on Dec. 28 and reported by CUNA's News Now on Dec. 29.  (See NCUA may gather monthly data on large CU financials)

The NCUA told CUNA that, after seeing CUNA's News Now story, the agency decided to rescind its request after further discussion that focused in part on the fact that the Dodd-Frank Wall Street Reform and Consumer Protection Act only requires executive compensation data for credit unions with $1 billion or more in assets to be collected annually.

The NCUA added that it is the agency's belief that the rescission is more in conformance with President Barack Obama's Executive Order to reduce regulatory reporting burdens where reasonable and appropriate.

The NCUA's withdrawal of its Federal Register request will be posted on OMB's website, and subsequently will be published in the Federal Register, likely within a week or two.

The Federal Register notice is expected to note that the request was withdrawn to reduce regulatory reporting burdens on credit unions subject to the information collection and that the agency has existing authority through supervisory action to require any high-risk credit unions to report the information on a monthly basis if deemed necessary and appropriate.

CUs urged to comment on loan participation investment rules CUNA

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WASHINGTON (1/3/12)--The National Credit Union Administration's (NCUA) proposed revisions to loan participation investment rules, which were released at the December monthly open board meeting, are now out for public comment, and the Credit Union National Association (CUNA) is encouraging credit unions to weigh in on the proposal.

The NCUA proposal would impact all federally insured state credit unions (FISCUs) that purchase participations in loans originated by other credit unions. Specifically, under the proposal, loan originators would need to retain 10% of the original loan, and loan participations involving a single originator would be limited to 25% of the FISCU's net worth. The NCUA proposal also sets a 15% of net worth limit on loans to one borrower.

While a waiver is permitted from the limit on participations involving the same borrower, the state chartered credit unions would have to apply to the NCUA Regional Director for approval.

Just over 1,400 federally insured credit unions held over $12.4 billion in outstanding loan participations this year, and loan participation balances have grown by 28% since 2007, the NCUA noted. NCUA Chairman Debbie Matz said "large volumes of participated loans tied to a single originator, borrower, or industry--or serviced by a single entity--have the potential to impact multiple credit unions if problems occur."

CUNA in the comment call said that some are concerned that the NCUA is expanding its regulatory reach to encompass state-chartered credit unions, and said the NCUA loan participation proposal could have a negative impact on dual-chartered credit unions. "If the proposal is adopted, state regulators will have no leeway to develop their own regulatory approach to loan participations, even though NCUA has not provided sufficient justification for the expansion," CUNA said.

In the comment call, CUNA asks if there is a need for these new loan participation rules, and whether or not the NCUA has provided sufficient justification for this proposal. CUNA also asks credit unions if the proposal should be applied to state chartered credit unions. Credit unions can also comment on the proposed loan participation limits, and the NCUA's waiver process, among other items.

Interested parties, including credit union officials and leagues, may file a comment letter with the NCUA for up to sixty days from when it is published in the Federal Register. The proposal has not yet been published; the CUNA  Comment Call (see resource link below) will include the comment deadline as soon as it is available.

Comments may be filed with NCUA at regcoments@ncua.gov.

For the full CUNA comment call, use the resource link.

Inside Washington (12/30/2011)

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  • ALEXANDRIA, Va (1/3/12)--The National Credit Union Administration (NCUA)  has scheduled a closed board meeting for Friday, Jan. 6, at 10 a.m. (ET) to consider a supervisory matter.The agenda for the meeting: Consideration of Supervisory Activities. Closed pursuant to some or all of the following: exemptions (5), (7), (8), (9)(i)(B), and 9(ii) ...

     
  • WASHINGTON (1/3/12)--Freddie Mac and Fannie Mae will begin to increase their loan guarantee fees on April 1 under direction by the Federal Housing Finance Agency, which is charged with implementing a congressionally mandated increase. A bill passed in December by the U.S. Congress requires at least a 10 basis point increase in the average guarantee fee in 2012. The payroll tax cut extension bill targeted a 10-year increase in Fannie and Freddie guarantee fees to cover most costs of the legislation that extended the payroll tax reduction and unemployment benefits for two months. The bill also mandates that adjustments be made to the guarantee fees so all lenders pay the same fee (American Banker Dec. 30). …

Inside Washington (12/29/2011)

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  • WASHINGTON (12/30/11)--In an attempt to keep sales of foreclosed properties flowing as much as possible, the Federal Housing Administration (FHA) has suspended a 2003 rule that prohibits investors from using FHA mortgages to "flip"--or purchase and quickly resell--single-family houses at inflated prices. This will be the third time the rule has been suspended.  The Department of Housing and Urban Development (HUD)  issued the antiflipping rule protect FHA borrowers but suspended it in early 2010 and then for all of 2011 because it determined the rule was holding up sales of foreclosed  properties …
  • WASHINGTON (12/30/11)--Serious delinquencies on loans insured by the Federal Housing Administration (FHA) rose to 9.3% in November, a growth of one percentage point over the 8.3% rate in July, said FHA's Single-Family Outlook. Roughly 689,350 of loans were 90 days or more late, compared with 589,000 overdue loans in July (American Banker Dec. 29). To date, the delinquencies have been attributed to legacy loans originated during 2006-2008--before the housing boom went bust. However, now FHA says the rates are affected by massive fiscal 2009 and fiscal 2010 books of business and a slowdown in FHA lending. That means for the next two years higher delinquency rates will be reported. Loans made in 2009 and 2010 are reportedly performing well when compared with those from 2007 and 2008. …

Jan. 19 is 2012s first Financial Capability open meeting

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WASHINGTON (12/30/11)--The President's Advisory Council on Financial Capability has scheduled its first open meeting of 2012 for Jan. 19 at 10 a.m. (ET).

The council agenda is expected to include the following topics:

  • A report from the council's subcommittees on financial access, research and evaluation, partnerships, and youth) on their progress on various projects;
  • A review of membership and composition of the subcommittees; and
  • Reports from outside experts about practices and innovations regarding financial capability in the workplace.
The council is composed of two ex officio federal officials and 11 non-governmental members appointed by the president  and with relevant backgrounds such as financial services, consumer protection, financial access and education. Current members include Roland "Arty" Arteaga, president/CEO of the Defense Credit Union Council.

New PZC software can enhance CU advocacy efforts

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WASHINGTON (12/30/11)--The Credit Union National Association's (CUNA) Project Zip Code (PZC) has played a pivotal role in recent credit union advocacy efforts, and a new version of CUNA's PZC software can give credit unions a great advantage as they work to advocate for their credit unions and their members in discussions with legislators and candidates for office.

PZC is a secure program that matches credit union members by legislative district and county based upon their zip code. The program has identified over 78 million credit union members.

The latest version of Project Zip Code software, just unveiled this month, matches credit union membership data to the current 112th  U.S. congressional districts and state legislative districts. New legislative districts being created due to the 2010 census are also covered. The 113th congressional and state districts are also being updated.

"Credit unions are always growing, districts are changing, and members are moving across the county--or the country--even though they keep their credit union membership," said Credit Union National Association (CUNA) Senior Vice President of Political Affairs Richard Gose, and those changes are reflected in the latest version of CUNA's Project Zip Code program.

"Every time credit union advocates meet with their elected officials the Project Zip Code numbers have an important role to play," CUNA Grassroots Manager Kristen Prather said.

"Because of Project Zip Code we are able to go into a congressional office and tell the elected officials how many credit union members they represent with very clear numbers. The more credit unions that participate in Project Zip Code, the more accurate our membership counts to members of Congress will be."

As the Project Zip Code program has grown, the number of members per legislative district has grown and leaves an even greater impression on legislators, she added.

Project Zip Code also protects the privacy of credit union members, as only membership totals per legislative district and county, and not information on individual members, is transmitted from credit unions to the Project Zip Code database.

The benefits of Project Zip Code are not only political, however, as CUNA adds that credit unions can use the program to better track their membership and to plan future ATM and branching expansion.

CUNA identifies busy regulatory arena for 2012

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WASHINGTON (12/30/11)--As the credit union world heads into 2012, the Credit Union National Association's (CUNA) Regulatory Advocacy department has created a chart that lists a variety of agencies' pending proposals that would affect credit unions.

As busy as 2011 has been, indications are that 2012 will be just as full of regulatory actions.  CUNA and the state leagues remain committed to improving the regulatory environment for credit unions, and that will continue to be the top regulatory advocacy priority into 2012.

So what happened in 2011? (Click on chart image to access chart.)
Click to download the chart Click to download the chart
 At the National Credit Union Administration (NCUA) alone there were 18 new regulatory initiatives, which was five more than the year prior.

With some of the more restrictive of those, such as ones on credit union service organizations (CUSOs), interest rate risk management (IRR), and loan participations, CUNA notes that the agency seems poised to replace the principle that credit unions should manage their own risks with a new principle: Protect the National Credit Union Share Insurance Fund no matter what--even if that means eliminating risks.

However, CUNA will continue its ongoing efforts to work with NCUA Chairman Debbie Matz and senior NCUA staff to detail credit union concerns with the CUSO and IRR proposals as well as with other agency staff on a request for comments on using derivatives to mitigate interest rate risk.

CUNA is also identifying concerns with proposals issued in December on loan participations, the flagging Reg-Flex program, and on emergency sources of liquidity.

At the new Consumer Financial Protection Bureau (CFPB) there are a number of significant projects underway that could affect credit unions either directly or indirectly.

CUNA Senior Vice President and Deputy General Counsel Mary Dunn explains in her final Regulatory Advocacy Monthly Report of the year (see resource link) that credit unions will not necessarily see a number of onerous new rules from the CFPB that impose numerous new requirements on credit unions. However,  she says, the agency does have some significant projects underway and proposals out for comment that CUNA is watching closely and raising concerns and questions with the CFPB.

One of CFPB's key pending projects is its request for comment on how to streamline the regulations that were transferred to its authority from other agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Other CFPB projects and proposals include (see chart for detail):

  • Remittance transfers (initiated by the Fed);
  • Ability to repay (mortgages, initiated by the Fed);
  • Regulation CC, Expedited Funds (shared authority with the Fed);
  • Private student lending regulation;
  • Credit card complaints for large issuers (more than $ 10 billion in assets);
  • Deposit/share account insurance disclosures for non-federally insured financial institutions;
  • Know Before You Owe (certain disclosures for TILA and RESPA simplified; disclosures for credit cards; and disclosures for student loans); and
  • Rules that were transferred to the agency, such as the Home Mortgage Disclosure Act, RESPA, Equal Credit Opportunity, Truth-in-Lending and others.
For other agencies and initiatives actively being monitored by CUNA, please refer to the chart above and resource link below.

NCUA launches two new sites for transparency

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ALEXANDRIA, Va. (12/29/11)--Just one day after making public the just-released clean audit report of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), the National Credit Union Administration (NCUA) announced its unveiling of two new webs pages: One on the NCUA Guaranteed Notes (NGN) program, the other on corporate  credit union system resolution costs.
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Featured information on the new NGN Program and Corporate System Resolution sites includes:

  • Background of the NGN Program;
  • Characteristics of each NGN transaction;
  • Profiles of the legacy assets;
  • Ongoing performance of the NGNs and legacy assets;
  • Recent guidance from the NCUA Board on projected 2012 Stabilization Fund assessments;
  • Current loss projection ranges on the legacy assets; and
  • A glossary of frequently used terms.
 

The NCUA said it considers the two new Web resources to be "works in progress," meaning that they will continue to be built and bolstered with new or additional information. Updates will occur regularly, the agency claims, and the sites are intended to add clarity to the complex subjects of the NGN program, as well as transparency for the resolution costs associated with the resolution of the corporate credit union system's problems.

"NCUA is committed to ensuring full transparency throughout the Corporate System Resolution," said NCUA Chairman Debbie Matz in a release. "These useful new website tools will assist stakeholders in understanding how NCUA's ongoing initiatives are mitigating losses from the legacy assets, spreading out loss ranges over time, and reducing assessments paid by credit unions."

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Not long ago--at the Dec. 15 NCUA open board meeting, in fact--the agency approved the NGN Program's 2012 budget in the amount of $7,710,000. The budget will provide funding for the NGN Program's administrative costs such as security valuation, accounting, and reporting costs.

The guaranteed notes program was created in 2010, and was comprised of $50 billion of legacy assets gathered from the accounts of corporate credit unions under NCUA conservatorship. The NGNs are sold on the open market and are permissible investments for credit unions. They have a zero risk weight from the Securities and Exchange Commission.

The websites are available at www.NCUA.gov by clicking on the "Corporate System Resolution Costs" and "NGN Program Information" links under "Credit Union Resources and Information."

NCUA may gather monthly data on large CU financials

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WASHINGTON (12/29/11)--The National Credit Union Administration (NCUA) recently posted notice in the Federal Register that it will begin to gather information on large credit union financial statement, as well as their compensation and perks packages to board members.

The agency, in its Federal Register document, said that the request to monitor such trends among credit unions of $1 billion of more in assets is an extension of current authority. It added that the closer monitoring is necessary because problems at such large institutions would obviously mean a bigger hit to the National Credit Union Share Insurance Fund if trouble were to arise undetected.

The NCUA proposed that the large credit unions be tasked with reporting financials and board packages on a monthly basis so the agency can effectively monitor trends between onsite visits.

Comments will be accepted until Jan. 26.

See resource link for NCUA's Federal Register posting.

CUNA wants FHFA to improve mortgage servicing fee proposal

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WASHINGTON (12/29/11)--The Federal Housing Finance Authority (FHFA) has issued a discussion paper intended to find an alternative mortgage servicing compensation plan that would improve service for borrowers, reduce financial risk to servicers, and provide flexibility for guarantors to better manage non-performing loans while promoting liquidity in the mortgage securities market. However, the Credit Union National Association (CUNA), in a comment letter, warns that the plans put forth by the FHFA are too vague and could have the effect of consolidating the servicing industry into a few large players resulting in diminishing service levels to borrowers.

In its discussion paper, the FHFA outlined two alternative servicing compensation proposals for public consideration and comment.  They are:

  • A "reserve account" approach that would establish a reserve account within the current servicing compensation structure, in which case the minimum servicing fee would be reduced from today's 25 basis point (BP) minimum to a minimum of between 12.5 and 20 bps, with an additional reserve amount of between 3 and 5 bps set aside in a reserve account. This would be used to offset unexpectedly high servicing costs associated with servicing non-performing loans; or
  • A "fee for service," which would create a new compensation structure, under which the guarantor would pay a set dollar fee per loan for servicing, effectively tying the compensation to the number of loans being serviced rather than the size of the loans. This would be funded by a master servicing strip collected by the guarantor from interest payments paid by the borrowers.
CUNA told the FHFA that any change in the mortgage servicing compensation structure is unnecessary and inappropriate at this time, given all of the changes occurring relating to servicing standards and the unknown future of Fannie Mae and Freddie Mac, and voiced its concern that the proposed changes could have the ill effects on servicing such as consolidation of the servicing industry and declining service to borrowers.

"CUNA and its members urge FHFA to release further details on each proposal laid out in the Discussion Paper, and to refrain from making any changes to the servicing compensation structure until the future of the (government-sponsored housing enterprises) are determined and national servicing standards are developed," CUNA wrote.

"While we understand FHFA's objectives, it is impossible to understand at this point what the effects of either proposal will be on credit unions and on the industry as a whole," the letter added.

Use the resource link to read the comment letter in detail.

Fed should coordinate Reg J changes with CFPB CUNA says

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WASHINGTON (12/29/11)--The Credit Union National Association (CUNA) in a comment letter told the Federal Reserve that it generally agrees with proposed technical amendments to Regulation J, but CUNA also called on the Fed to work with the Consumer Financial Protection Bureau before the Reg J proposal is completed to address some outstanding remittance transfer issues.

Regulation J implements portions of the Federal Reserve Act and  the Expedited Funds Availability Act, as well as the Check Clearing for the 21st Century Act and other laws.

The Fed's proposed Reg J changes would clarify that subpart B would continue to apply to a Fedwire funds transfer even if the funds transfer also meets the definition of a "remittance transfer" under Section 919 of the Electronic Funds Transfer Act (EFTA), and Section 919 would prevail if there is an inconsistency between Reg J and Section 919. Changes to Section 919 are expected to be finalized by the CFPB in the near future.

The Fed proposal also incorporates proposed changes to Regulation D, which governs reserve requirements of depository institutions. The Reg D plan, addressed in a separate CUNA comment letter, would simplify the administration of reserve requirements by discontinuing as-of adjustments related to deposit revisions, replacing all other as-of adjustments with direct compensation, and establishing a penalty-free band around reserve balance requirements in place of carryover and routine penalty waivers.  (See related Dec. 20 story: CUNA asks for more time for Reg D changes.)

The Reg J proposal harmonizes that regulation with the Reg D changes by removing any references to a Reserve Bank's use of as-of adjustments in connection with a Fedwire funds transfer from Reg J.

The Fed has also proposed amending subpart A of Reg J to clarify that when an institution sends a check or other item for collection to a Reserve Bank, the institution's Administrative Reserve Bank is deemed to have accepted deposit of the item even if the item was sent directly to another Reserve Bank. CUNA said this clarification is "useful," as Reserve Banks currently permit institutions to send checks and other items directly to a Reserve Bank that is not the Administrative Reserve Bank.

For the full CUNA comment letter, use the resource link.

CFPB wants comment Should EFTA rules change

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WASHINGTON (12/29/11)--Should Regulation E, which implements the Electronic Funds Transfer Act (EFTA), be revised, and, if so, in what ways?  That is the latest topic for which the Consumer Financial Protection Board (CFPB) is seeking comment.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, oversight and enforcement of EFTA was transferred to the CFPB, as was authority over a number of other rules that were formerly under the purview of the other federal financial regulators.

The CFBP issued an EFTA interim final rule, substantially similar to existing rules, and seeks comment until Feb. 27, 2012. The interim rule becomes effective Dec. 30.

Other rules that are newly under CFPB oversight include:

  • Truth in Savings (regulation DD);
  • Fair Credit Reporting (Regulation V);
  • Privacy of Consumer Financial Information (Regulation P);
  • Equal Credit Opportunity (Regulation B); and
  • Interstate Land Sales Registration Program (Regulations J, K, and L).
Use the resource link to access the CFPB's request for Reg E comment.

Inside Washington (12/28/2011)

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  • WASHINGTON (12/29/11)--Proceedings in the Securities and Exchange Commission's (SEC) lawsuit case against Citigroup, charging that Citigroup defrauded stakeholders in a $1 billion fund invested in mortgage-related securities, came to a temporary halt when a federal appeals court granted an emergency ruling this week (The New York Times Dec. 27). The decision will allow the court to consider an appeal of a lower court's decision to throw out a $285 million fraud settlement between the SEC and Citigroup. The fund in question was sold by Citigroup in 2007, just as the housing market and mortgage securities were showing signs of distress, the article noted. According to the SEC suit, Citigroup sold the securities but did not inform investors the portfolio was being loaded with mortgage investments that Citigroup thought would fail and was betting against. The article further notes that a motions panel of the appeals court will consider a further stay of the proceedings beginning Jan. 17. …

NEW New corporate resolution NGN sites available at NCUA

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ALEXANDRIA, Va. (12/28/11 UPDATE 1:24 ET p.m.)--Just one day after making public the just-released clean audit report of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), the National Credit Union Administration (NCUA) announced its unveiling of two new webs pages: One on the NCUA Guaranteed Notes (NGN) program, the other on corporate  credit union system resolution costs.
Click to view larger image Click for larger view


Featured information on the new NGN Program and Corporate System Resolution sites includes:

  • Background of the NGN Program;
  • Characteristics of each NGN transaction;
  • Profiles of the legacy assets;
  • Ongoing performance of the NGNs and legacy assets;
  • Recent guidance from the NCUA Board on projected 2012 Stabilization Fund assessments;
  • Current loss projection ranges on the legacy assets; and
  • A glossary of frequently used terms.
 

The NCUA said they consider the two new web resources to be "works in progress," meaning that they will continue to be built and bolstered with new or additional information. Updates will occur regularly, the agency claims, and the sites are intended to add clarity to the complex subjects of the NGN program, as well as transparency for the resolution costs associated with the resolution of the corporate credit union system's problems.

"NCUA is committed to ensuring full transparency throughout the Corporate System Resolution," said NCUA Chairman Debbie Matz in a release. "These useful new website tools will assist stakeholders in understanding how NCUA's ongoing initiatives are mitigating losses from the legacy assets, spreading out loss ranges over time, and reducing assessments paid by credit unions."

Click to view larger image Click for larger view
Not long ago--at the Dec. 15 NCUA open board meeting, in fact--the agency approved the NGN Program's 2012 budget in the amount of $7,710,000. The budget will provide funding for the NGN Program's administrative costs such as security valuation, accounting, and reporting costs.

The guaranteed notes program was created in 2010, and was comprised of $50 billion of legacy assets gathered from the accounts of corporate credit unions under NCUA conservatorship. The NGNs are sold on the open market and are permissible investments for credit unions. They have a zero risk weight from the Securities and Exchange Commission.

The websites are available at www.NCUA.gov by clicking on the "Corporate System Resolution Costs" and "NGN Program Information" links under "Credit Union Resources and Information."

Clean audit given to NCUAs stabilization fund for 2010

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ALEXANDRIA, Va. (12/28/11)--The National Credit Union Administration's  (NCUA) Temporary Corporate Credit Union Stabilization Fund (TCCUSF) received a "clean"--or unqualified--audit of its 2010 financial statements, the agency announced Tuesday.

The Credit Union National Association has  been concerned that sufficient information has not been provided to credit unions regarding the agency's handling of the legacy assets of the conserved corporate credit unions and had also expressed concerns about the tardiness of the year-end 2010 TCCUSF financial statements.

The purpose of the audit opinion, of course, is to express an opinion on whether the financial statements of the stabilization fund are fairly presented. The audit was executed by KPMG LLP, the independent firm that also issued a clean audit on the financial statement of the National Credit Union Share Insurance Fund in May.

The firm also reviewed the internal control structure of the stabilization fund, as well as evaluated compliance with laws and regulations, as part of its audit.

Although the audit references a number of reasons for delay, the report does fault the timeliness of the agency's reporting.

The KPMG finding acknowledges that the NCUA faced "unprecedented developments related to finalizing the 2010 financial statements" and makes recommendations to ensure that the agency produces timely reporting in the future.

The finding states:

"During 2010, the National Credit Union Administration undertook a new initiative, the Corporate System Resolution Program…as a result of the failing corporate credit unions (CCUs)due to the financial system crisis. The broad-reaching inter-related implications of this unprecedented initiative, which included actions to accumulate and value assets of liquidated CCUs and their corresponding temporary bridge entities, presented significant financial reporting challenges.

"Simultaneously, the agency was transitioning to new accounting standards for another fund as well as implementing a new accounting system. This unprecedented initiative and its reporting challenges hindered NCUA's ability to fully plan and execute timely all the related accounting requirements for the TCCUSF and contributed to delays in the publication of the financial statements by OMB [Office of Management and Budget] established deadlines."

Last year, the 2009 audit--also "clean"--was released in July. KPMG issued a clean audit for the NCUSIF for that year at the same time.

The stabilization fund was created by the U.S. Congress in 2009 to provide flexibility to the NCUA as it worked to manage the impact of the costs to consumer credit unions associated with the troubled mortgage-backed securities purchased by the five failed corporate credit unions.

Use the resource link to access the audit.

FinCEN offers help to ID report account-takeovers

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VIENNA, Va. (12/28?11)--The Financial Crimes Enforcement Network (FinCEN) is issuing an advisory to assist credit unions and other financial institutions in identifying account-takeover activity and reporting the activity by filing Suspicious Activity Reports (SARs).

FinCEN, in its alert, notes that cybercriminals are increasingly using sophisticated methods to obtain access to accounts, including the use of malware--the computer-ese for malicious software--SQL injection attacks (SQLIA), spyware, Trojans, and worms. These attacks aim to exploit a member's or customer's account and, often, to gain seemingly legitimate access to another customer's account.

FinCEN says that through ongoing monitoring, financial institutions may be able to identify inconsistencies with normal account activity, which could indicate illicit intrusions into an account. Such irregularities might include, but are not limited to, unusual ATM activity, clustered Automated Clearing House transactions in different geographic areas, sudden wire transfers, or changes to customer and account profiles.

Account-takeover activity is different than other forms of computer intrusion because it is the accountholder, rather than the financial institution maintaining the account, that is the primary target of the fraud.

FinCEN says that a financial institution is required under the Banker Secrecy Act to file a SAR if it: Knows, suspects, or has reason to suspect" that a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity or an attempt to disguise funds derived from illegal activity, is designed to evade requirements under the BSA, or lacks a business or apparent lawful purpose, the financial institution may be required to file a SAR.

When completing SARs on suspected account takeover activity, financial institutions should use the term "account takeover fraud" in the narrative section of the SAR and provide a detailed description of the activity.

Use the resource link below to read more of the FinCEN advisory and to see more examples of possible account-takeover red flags.

Compliance CUs must build better online account security

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WASHINGTON (12/28/11)--January 2012 is the timeframe mentioned by the National Credit Union Administration (NCUA) for federally insured credit unions to adapt "appropriate strategies" to institute "key precautions" to address the growing problem of online transaction fraud at institutions that offer electronic services.

Back in 2005, the NCUA and the federal banking agencies issued "Authentication in an Internet Banking Environment."  It was an effort intended to move institutions away from single-factor authentication--such as user name and password only-- to the use of multi-factor authentication, like username with password and PIN, or password and challenge question, layered security and other controls.

Then just this past July the agencies issued a supplement to this guidance to address growing incidences of online transaction fraud and ID theft, and to highlight some key precautions institutions should take if they offer electronic services.  (Use resource link to see NCUA Letter to Credit Unions 11-CU-09: Online Member Authentication Guidance).

A recent Credit Union National Association (CUNA) webinar highlighted that Jan. 1, 2012 is not a compliance "deadline." Rather, credit unions that offer online banking will need to be able to provide a progress report by that date.  They will need to demonstrate that they have:

  • Reviewed and updated the credit union's risk assessment;
  • Talked to their vendor(s); and
  • Put together a timeline or compliance in 2012. 
 With that in mind, CUNA's compliance team recommends that a credit union should:

  • Review and update risk assessments as new information becomes available, prior to implementing new electronic financial services, or at least every twelve months. Consider any: changes in the internal and external threat environment; changes in the member base adopting electronic banking; changes in the member functionality offered through electronic banking; and any actual incidents of security breaches, identity theft, or fraud experienced by the credit union or financial services industry.
  • Implement more robust controls for "high risk" transactions, which include the use of automated payment mechanisms (e.g., ACH, wire transfer) or offering online services for commercial accounts. The agencies recommend both layered security and multifactor authentication for business accounts because of the higher dollar amounts involved and the frequency of transactions.
  • Implement layered security programs at the transaction process level based on the credit union's service operations and threat environment to facilitate fraud detection and respond to suspicious activity. Layered security means that if a vulnerable control is installed at a different point, it can be compensated for by the strength of other control layers. The layered security approach can significantly strengthen the overall security of an institution's Internet-based services, and has been shown to reduce money transfer fraud. The agency guidance provides several examples of controls that may be included in a layered security program.
  • Re-evaluate current authentication techniques to determine if they are still effective in today's online environment.   Apparently, use of simple "cookies" for device identification and/or typical challenge questions (e.g., mother's maiden name, city where you were born, high school, etc.) just won't cut it anymore. More sophisticated authentication techniques are now available from many vendors, as described in the guidance.
  • Educate membership so all are aware of the steps the credit union is taking to protect them and the institution from cyber-crime, and let them know what they can do to protect themselves.  Advise them of their Regulation E error resolution rights, and that the credit union may ask them to provide electronic banking credentials, implement suggested risk control mechanisms, and contact authorities when they become aware of suspicious activity.

Inside Washington (12/27/2011)

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  • WASHINGTON (12/28/11)--President Barack Obama was expected to announce plans Tuesday to nominate economist Jeremy Stein, a Harvard University finance professor, and Jerome Powell, a former private-equity executive,  to fill the two open spots on the Federal Reserve's  seven-member board of governors. (The Wall Street Journal Dec. 27)  The move essentially packages a nominee who is a Democrat with one who is a Republican in what is described as an attempt to overcome daunting hurdles in the path of Senate confirmation …
  • Washington (12/28/11)--$2.2 billion-asset Bank of Hampton Roads in Norfolk, Va., will pay $33,600 in fines and $619 million-asset State Bank and Trust Co. of Defiance, Ohio, will pay $9,340 in fines for violations of the National Flood Insurance Act, reported the Dec. 27 issue of American Banker.  The penalty orders did not describe the banks'  violations, but the article noted the act's requirement that loans secured by properties in these areas at a high risk for flooding have the proper coverage.  The Virginia bank was named in violation in its capacity as successor of Gateway Bank and Trust in Elizabeth City, N.C.,  which Hampton Roads acquired in 2009 …
  • WASHINGTON (12/28/11)--Late last week, four federal banking agencies approved an extension on the comment period for a proposal that  requires regulators to implement certain prohibitions on banking entity and nonbank financial company to restrict their ability to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund.  The proposal, commonly referred to as the Volcker Rule, is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The new comment deadline is Feb. 13, 2012, pushed back from Jan. 13, 2012. The proposal was issued by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission …

Inside Washington (12/22/2011)

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  • WASHINGTON (12/27/11)--North Carolina U.S. Reps. Brad Miller (D) and Walter Jones (R) called on the U.S. Justice Department to investigate violations of the Servicemembers Civil Relief Act (SCRA) that resulted in the foreclosure of active duty servicemembers' homes while some served in Iraq and Afghanistan. In a letter to Attorney General Eric Holder, Miller and Jones cited the Office of the Comptroller of the Currency's (OCC) requirement to review some 5,000 improper foreclosures on military personnel by 10 mortgage servicers or banks that may be in violation of the SCRA. "The SCRA is not some obscure legal technicality that might just have escaped the attention of mortgage servicers," Miller said. "Those servicers are all affiliates of the biggest banks, but they're huge and specialized. Servicing mortgages is all they do, and they really don't have that many laws to keep up with. They have got to have known what the law required, and consciously decided that they could just ignore it, the same way they apparently decided it was okay to file false affidavits in legal proceedings," he added …
  • WASHINGTON (12/27/11)--The Federal Housing Finance Agency may introduce a program to help underwater homeowners who have filed for Chapter 13 bankruptcy protection. Pending the approval of the bankruptcy judge, borrowers would make principal-only payments for five years on Fannie Mae or Freddie Mac mortgages (American Banker Dec. 22). Borrowers' payments would be lower because interest would not be included under the plan, which was devised by bankrupty lawyers. The repayment plan also includes credit card and other unsecured debt, so borrowers have a better chance of remaining in their homes …
  • WASHINGTON (12/27/11)--The Federal Housing Finance Agency (FHFA) will extend implementation dates for a key component of the Uniform Mortgage Data Program (UMDP). Specifically, Fannie Mae and Freddie Mac will delay the voluntary implementation of the Uniform Loan Delivery Dataset (ULDD) until April 23 and will require loan delivery in the new format on July 23 instead of in March. The new timeline for the ULDD does not affect Uniform Collateral Data Portal effective dates. Fannie and Freddie's UMDP initiative was designed to improve the consistency and quality of data for appraisals and other loan information …

CUNA asks OMB to back regulatory moratorium

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WASHINGTON (12/27/11)--An overwhelming, yet growing, regulatory burden on smaller institutions presents very serious concerns for credit unions – and can be addressed by a presidential executive order calling for a moratorium on new rules, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a recent letter to the Office of Management and Budget (OMB).

The letter, which was sent to OMB Administrator Cass Sunstein, urged the administrator to call on President Barack Obama to issue another executive order to independent regulatory agencies calling for a moratorium on new rules that would impose "regulatory burdens that are not required by statute or necessitated by serious, material, quantifiable and well-documented safety and soundness concerns."

Obama in an executive order issued earlier this year called on the National Credit Union Administration and other regulators to improve the regulatory environment for entities under their jurisdiction, and to report back to OMB how they were taking action. This was a positive step, Cheney said, but credit unions and other financial institutions "are in great need of meaningful regulatory relief – the kind of relief that they have not seen as of yet."

Cheney said CUNA was not suggesting that regulators ignore "significant safety and soundness issues or statutory directives," but said a regulatory moratorium could help regulators fully examine the impact of their current rules, and assess the results of any regulatory cutbacks they have made following this year's executive order.

The CUNA leader also urged the OMB chief to consider establishing an Office of Regulatory Burden Monitoring, which would focus on measuring and scrutinizing the extent of the regulatory burdens that entities, such as credit unions, must bear. "Such an office could also give regulated entities additional recourse in terms of having their regulatory burdens reviewed," Cheney wrote.

For the full CUNA letter, use the resource link.

Mortgage rates at record lows as 2011 ends

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WASHINGTON (12/27/11)--Thirty-year fixed mortgages reached a new low in the week ended Dec. 22, averaging 3.91%, Freddie Mac reported last week.

The previous record low of 3.94% was set the week ended Dec. 15.

Fifteen-year fixed-rate mortgages remained steady, continuing at last week's record low average of 3.21%.

Freddie Mac Chief Economist Frank Nothaft noted that the historically low 30-year fixed mortgage rates, which have been "at or below 4% for the last eight weeks and now are almost 0.9 percentage points below where they were at the beginning of the year,"  are helping homebuyers save $1,200 more per year on a $200,000 loan.

Adjustable-rate mortgages also reached all-time lows last week, as five-year, Treasury-indexed, hybrid adjustable-rate mortgages (ARM) averaged 2.85% and one-year Treasury-indexed ARMs averaged 2.77%.

"This greater affordability helped push existing home sales higher for the second consecutive month in November to an annualized pace of 4.42 million, the most since January," and new construction and homebuilder confidence have also been on the uptick, Nothaft added.

CUNA urges CFPB to help stop ATM lawsuits

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WASHINGTON (12/22/11)--The Credit Union National Association (CUNA) has urged the Consumer Financial Protection Bureau (CFPB) to suspend a duplicative automated teller machine (ATM) notice requirement in an effort to help stop lawsuits being brought against credit unions and other financial institutions when the notices have been removed, damaged or destroyed.
 
The Electronic Fund Transfer Act requires credit unions and other financial institutions to disclose that ATM fees will or may be charged on the outside surface of the ATM.  More detailed ATM fee information must also be provided before the transaction is completed by either projecting it on the ATM's screen or providing the ATM user with a small printed disclosure.
 
Credit unions and others have found that the outside notices on ATMs are, in some cases, being intentionally removed or destroyed , without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users are then using this evidence of apparent non-compliance as grounds for lawsuits.
 
"Consumers do not benefit from the redundant notices, yet credit unions are being sued because the notices have been removed," CUNA President/CEO Bill Cheney said in a letter to Acting CFPB Director Raj Date.
 
"If the litigants were concerned about compliance, they should first bring the issue to the institution's attention to correct it or to the attention of the regulator. That is not happening and ATM "chasers" are going straight to court," Cheney added. Cheney urged Date to perform a quick review of this regulatory situation and "suspend the duplicative ATM notice requirement."
 
If a quick suspension of the rule is not possible, the CFPB, "at the very least," should announce it will work with CUNA, credit unions, consumer groups, and others "to seek legislation immediately that will put an end to these suits."
 
CUNA has also advised credit unions on how to mitigate the risk of ATM fee lawsuits.
 
In a release sent to credit union league presidents, CUNA said credit unions should develop and maintain written procedures for inspecting all of their ATMs on a regular basis to ensure the ATM fee signs are intact.  ATMs should be inspected at least weekly or when the ATM is serviced--whichever provides for more frequent inspections. Credit unions could photograph the ATM each time it is inspected and log the inspections, CUNA added.
 
Any missing signage should be replaced immediately, and credit unions can ensure that this can be done in a quick fashion by maintaining a supply of signs and stickers to replace any that have been defaced or removed from ATMs, CUNA said.
 
The ATM screen and paper disclosures should also be tested, CUNA added.

CFPB takes on Reg DD four other new rules

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WASHINGTON (12/22/11)--The Consumer Financial Protection Bureau (CFPB) is accepting comments on the rules it has inherited from other agencies under the Dodd-Frank Act and has been publishing them in the Federal Register, including Truth in Savings (regulation DD) and Fair Credit Reporting (Regulation V).

The other rules that are newly under CFPB oversight are:

  • Privacy of Consumer Financial Information (Regulation P);
  • Equal Credit Opportunity (Regulation B); and
  • Interstate Land Sales Registration Program (Regulations J, K, and L).
The CFPB in the Federal Register said it is republishing the regulations "with technical and conforming changes to reflect the transfer of authority and certain other changes made by the Dodd-Frank Act." However, the legal intent of the regulations is not being changed at this time, the CFPB said.

The Credit Union National Association (CUNA) will be using this opportunity to determine what changes could be suggested to help alleviate credit unions' regulatory burdens while still upholding statutory requirements. CUNA plans to review each one of the inherited rules in detail, many of them with one or more of CUNA's Governmental Affairs Committee's Subcommittees, credit union leagues, CUNA's Councils, and other groups. 

The CFPB is accepting comment on these rules until Feb. 21 and an interim final rules will become effective on Dec. 30, 2012.

Under the Dodd-Frank Act, rule-writing authority for more than 12 consumer protection laws was transferred from the National Credit Union Administration, the Federal Reserve, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the Office of Comptroller of the Currency and the Office of Thrift Supervision.

The CFPB this month announced it would accept public input on how to best streamline rules that it will soon inherit from seven federal agencies "to make it easier for banks, credit unions and others to follow the rules" and ensure that regulations work better for consumers and the firms that serve them.

CUNA is also asking for credit union comment on this issue.

For the CFPB releases on these rules, and CUNA's comment call, use the resource links.

Retirement from GECU by CUNA Chairman May announced

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WASHINGTON (12/22/11)--Harriet May--whose retirement as president/CEO of El Paso, Texas-based GECU was announced by the credit union on Wednesday--will continue as Credit Union National Association (CUNA) chairman through the end of her current term.

Click to view larger imageCUNA Chairman Harriet May, seen here speaking at the 2011 Governmental Affairs Conference, has retired as CEO of GECU. (CUNA photo)
May's term as CUNA chairman will end once CUNA's annual general meeting, and the 2012 Governmental Affairs Conference (GAC), conclude on March 22. She will continue to work with the CUNA board as immediate past chairman of the association following the GAC, as has been the practice with other immediate-past chairmen.

CUNA President/CEO Bill Cheney praised May's service as a credit union leader following the retirement announcement.

"For four decades, Harriet May has served the credit union movement with complete commitment to its values and utter dedication to service to the members of credit unions. She has been a champion of the principles that are the bedrock of the credit union industry and--through her service with the Texas Credit Union League and CUNA--a tireless advocate for more flexibility for credit unions to better serve their members," Cheney  said.

Greg Watters, chairman of the GECU board, said the credit union's members and the surrounding community have benefitted from May's "leadership, vision and experience."

Crystal Long has been named GECU's new president/CEO; she previously served as executive vice president and chief operations officer.

May will serve as senior advisor to GECU until her retirement becomes effective March 31. The credit union, in a press release, said she will be named president emerita at GECU's annual meeting scheduled in the first quarter of 2012 in honor of her 38-year distinguished career with the credit union, and legacy to the movement.

Three congressmen back CU tax status in letter to House leaders

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WASHINGTON (12/21/11)--Three congressmen offered their support for credit union tax-exempt status in a letter sent to U.S. House of Representatives Speaker John Boehner (R-Ohio), U.S. House Majority Leader Eric Cantor (R-Va.) and U.S. Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, on Dec. 15.

During a meeting with credit union leaders at the Missouri Hike the Hill in Washington, D.C. in October, U.S. Rep. Todd Akin (R-Mo.) announced his willingness to write a letter in support of the credit union structure and tax status, according to the Missouri Credit Union Association (MCUA) (The Missouri Difference Dec. 20).  

"Credit unions continue to serve the initial goals intended by Congress when their tax-exempt status was granted," the letter states. "Regardless of size, credit unions remain cooperatives. They are operated by utilizing democratically controlled volunteer boards of directors who subsequently return their earnings to members of the credit union."

The letter is signed by Akin and U.S. Reps Daniel Lungren (R-Calif.) and Ron Paul (R-Texas).

"We thank Congressman Akin for his understanding of how credit unions serve their communities and the need to preserve credit unions' tax status," said MCUA President/CEO Mike Beall. "We appreciate his efforts and continued support."

Credit Union National Association (CUNA) Executive Vice President John Magill said CUNA welcomed members of the U.S. Congress reaffirming their support for credit unions and the tax status.

"The credit union tax status enjoys broad bipartisan support in Congress because the structure of credit unions remains the same as it was when credit unions were created," Magill said. "We are grateful that these members took the initiative to remind their colleagues of the important role credit unions play in the lives of their members."

Inside Washington (12/20/2011)

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  • WASHINGTON (12/21/11)--The Federal Reserve on Tuesday issued a package of rules viewed as the core of the Dodd-Frank Act. The rules were expected to be released this summer, but were delayed due to their complexity. The proposal includes measures addressing issues such as capital, liquidity, credit exposure, stress testing, risk management and early remediation requirements. The proposal generally applies to all U.S. bank holding companies with assets of $50 billion or more and any nonbank financial firms that may be designated by the Financial Stability Oversight Council as systemically important companies. The board will issue a proposal regarding foreign banking organizations shortly …

NCUA reschedules July open board meeting

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ALEXANDRIA, Va. (12/21/11)--The National Credit Union Administration (NCUA) Tuesday announced it has rescheduled its July open board meeting, moving it to Tuesday, July 24.

The meeting was set to take place on Thursday, July 19. The meeting still is scheduled to start at the customary 10 a.m. (ET) time.

The dates for the NCUA's other 2012 board meetings are:

  • Jan. 26;
  • Feb. 16;
  • March 15;
  • April 12;
  • May 24;
  • June 21;
  • Sept. 20;
  • Oct. 18;
  • Nov. 15; and
  • Dec. 13.
The agency does not usually schedule a board meeting for the dog days of August, although this past year the agency scheduled a special open meeting for that month to discuss the corporate credit union stabilization fund assessment.

The 2012 board meeting schedule may be subject to further changes, as is the case any year.

CUNA seeks comment on CFPB reg streamlining plans

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WASHINGTON (12/21/11)--The Credit Union National Association (CUNA) has asked credit unions to identify their highest priorities for updating, modifying, or eliminating specific provisions of regulations that are outdated, unduly burdensome, or unnecessary in a comment call on the Consumer Financial Protection Bureau's (CFPB) plans for regulatory streamlining.

The CFPB this month announced it would accept public input on how to best streamline over one dozen rules that it will soon inherit from seven federal agencies "to make it easier for banks, credit unions and others to follow the rules" and ensure that regulations work better for consumers and the firms that serve them.

Under the Dodd-Frank Act, rulewriting authority for more than 12 consumer protection laws was transferred from the National Credit Union Administration, the Federal Reserve, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the Office of Comptroller of the Currency and the Office of Thrift Supervision.

The CFPB plans to consider simplifying some regulations, standardizing some common terms across regulations, updating outdated or unneeded regulations, and removing unnecessary restrictions on consumer choice or business innovation.

That agency is accepting comment on which currently required disclosures could be considered for modification or removal. The CFPB also specifically has requested comment on regulations covering annual privacy notices, ATM fee disclosures, the coverage and scope of Home Mortgage Disclosure and Truth in Lending regulations, ability-to-pay standards, credit card debt electronic disclosures, and the Interstate Land Sales Full Disclosure Act.

The CFPB has set a March 5 deadline for public comments on the proposal, but CUNA plans to work with credit union leagues, the American Association of Credit Union Leagues' Regulatory Advocacy Advisory Committee, key CUNA subcommittees, credit union councils, and other credit union officials to develop a response well before this comment deadline. CUNA also is using its Operation Comment platform to encourage credit unions to provide their own comment to the CFPB.

For the full comment call, use the resource link.

Private insurance could augment NFIP study says

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WASHINGTON (12/21/11)--Premiums charged to policyholders under the National Flood Insurance Program (NFIP) are, in some areas, "too high," and allowing more private insurers to enter the market could increase coverage for many homeowners and lower their flood insurance costs, a recent study by the University of Pennsylvania's Wharton School said.

The Wharton study focused on Galveston and Travis Counties, two Texas counties that are frequently impacted by floods, and calculated "actuarially fair" flood insurance premiums for more than 300,000 residences in these counties.

These calculated rates were compared to actual rates charged by the NFIP, with some of the calculated rates coming in higher than the NFIP rates and some featuring lower totals than the NFIP rates. NFIP premiums were double the calculated rates in a moderate flood risk area of Travis County, and were 16 times the calculated rate in portions of Travis County, which has a lower risk of flooding.

"This presents opportunities for private insurers to provide coverage in some of those areas, to complement the NFIP," study co-author Erwann Michel-Kerjan said.

"There are several practical barriers that would need to be addressed for private insurers to sell such coverage, but if done, this could significantly increase the number of residents with proper coverage, thus reducing the need for government disaster relief," he added.

The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

The NFIP is administered by the Federal Emergency Management Agency, and was established after private insurance entities refused to offer flood insurance. It is typically reauthorized every few years.

The insurance program will be extended until May 31 once President Barack Obama signs a $1 trillion omnibus federal government funding bill into law. That bill was approved by both branches of the U.S. Congress late last week.

The NFIP was set to expire on Dec. 16. That program has been funded by short-term resolutions for months, as both Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have called for the program to be reformed.

The Credit Union National Association supports the short term NFIP extension, but has said a longer term extension should be considered.

FinCEN delays use of new SAR CTR reporting forms

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WASHINGTON (12/21/11)—The Financial Crimes Enforcement Network (FinCEN) has pushed back the deadline for credit unions and others to use its new Currency Transaction Report (CTR) and Suspicious Activity Report (SAR) forms until March 31, 2013.

FinCEN had proposed that the new SAR and CTR forms be used as of June 30, 2012.

FinCEN in a release said the deadline delay is a response "to industry concern about having sufficient time to transition to the new reports, including any necessary changes to their internal processes and/or IT systems."

The Credit Union National Association supported additional time for a transition period and supports this extension.

The SAR and CTR changes, which were approved earlier this year, are technical in nature, and do not include any new regulatory requirements or changes related to current report requirements, FinCEN said. The changes were made to ease the transition from the current paper SAR form submission model to a newer electronic filing model.

FinCEN had proposed that the new SAR and CTR forms be used as of June 30, 2012, and the agency is also considering requiring e-filing of SARs, CTRs and Designations of Exempt Persons (DEPs) reports on that same date.

FinCEN has said the switch to all-electronic filing would improve efficiency, reduce costs for the financial industry, and enhance the ability of investigators, analysts, and examiners to gain better and more timely access to important financial information.

Increased Bank Secrecy Act (BSA) E-Filing would also help FinCEN provide information relevant to money laundering and terrorist financing investigations to law enforcement in the quickest manner possible, shortening the lag time between when BSA reports are filed and when they can be accessed by authorities to two days. (See related Sept. 15 story: FinCEN proposes to make BSA e-filing mandatory)

CUNA asks for more time for Reg D changes

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WASHINGTON (12/20/11)--The Credit Union National Association (CUNA) has asked the Federal Reserve to give credit unions and other financial institutions a minimum of nine months to prepare for pending changes to its Regulation D, which governs reserve requirements of depository institutions.

The Fed's Reg D proposal is intended to simplify the administration of reserve requirements. The proposal would create a common two-week maintenance period for all depository institutions, create a penalty-free band around reserve balance requirements in place of carryover and routine penalty waivers, discontinue as-of adjustments related to deposit revisions, replace all other as-of adjustments with direct compensation, and eliminate the contractual clearing balance program. 

In a comment letter that was sent to the Fed on Monday, CUNA noted that credit unions are working to implement many of the new regulations imposed as a result of the Dodd-Frank Act and other regulatory initiatives, and said "requiring depository institutions to put into operation any of the proposed changes in the first quarter of 2012 may prove unduly burdensome," particularly for smaller credit unions.

Overall, CUNA said it generally supports the proposed Reg D amendments, but also questioned the value of a related requirement of Reg D that limit transfers from savings to transaction accounts. CUNA also urged the Fed to reconsider its six transfer limitation on transfers and/or withdrawals from savings deposit accounts, and suggested the Fed either raise this limit or abolish it entirely.

"Due to technological advances, consumers can now make payments and transfers online, via telephone, at point-of-sale terminals, and via Automated Clearing House (ACH) transactions," and these advances have enabled financial institutions "to deliver financial services to consumers conveniently and at lower costs." The six transfer limitation "unreasonably restricts consumers from being able to easily access their own funds for their own use," CUNA said.

CUNA also encouraged further efforts to reduce regulatory burdens on credit unions, including those under Reg D.

For the full comment letter, use the resource link.

Little left for CUs as Congress looks to leave D.C.

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WASHINGTON (12/20/11)--Neither hearings nor other items of interest to credit unions are on the congressional agenda this week, but members of the U.S. House remain in Washington as they continue to work on a potential bipartisan payroll tax cut bill.

The Senate approved a two month extension of the payroll tax cut and federal benefits for the unemployed, but that legislation was rejected by the House on Monday. Most senators have left Washington for a holiday recess, however, and It is not clear if the U.S. Senate will return to session before the end of the holidays to address the legislation.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said the House may ask the Senate to hold a conference on this legislation, moving the responsibility for hammering out a bicameral agreement to a small group of leaders. Addressing these issues retroactively early next year also appears to be an option, he added.

Language that would have extended the National Flood Insurance Plan until 2016 was not included in the Senate's payroll tax legislation. However, the NFIP is expected to be extended until May of 2012 once a $1 trillion omnibus federal government funding bill, which was approved by Congress late last week, is signed into law.

That bill also addresses the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF), the NCUA's Community Development Revolving Loan Fund (CDRLF), the U.S. Treasury Department's Community Development Financial Institution (CDFI) Fund, and the Cooperative Development Program (CDP). (See related Dec. 19 story: NFIP, CLF, other CU issues addressed by spending bill)

Inside Washington (12/19/2011)

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  •  WASHINGTON (12/20/11)--President Barack Obama on Friday nominated Dick Berner for director of the Treasury Department's new office of financial research. Berner is currently counselor in the Treasury's office of research and quantitative studies. He was a member of the economic advisory panel of the Federal Reserve Bank of New York, a panel of economic advisers of the Congressional Budget Office, the executive committee of the board of directors of the National Bureau of Economic Research, and the advisory committee of the Bureau of Economic Analysis …
  • WASHINGTON (12/20/11)--The expected adoption of global rules laid out in Basel, Switzerland, would be a defeat for large U.S. banks that contended the guidelines were too strict. The Basel rules require large financial institutions to hold extra capital. Financial institutions argue that the requirements will prompt them to reduce lending and hurt the economy (The Wall Street Journal Dec. 19). The requirements are designed to end the "too big to fail" model that was critical in causing the financial crisis of 2008. The Basel committee has designated eight systemically important U.S. banks that are required to hold extra capital, but they have not indicated how much capital each bank would be required to carry …

Fed adjusts small institution CRA thresholds

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WASHINGTON (12/20/11)--The Federal Reserve has adjusted the asset-size thresholds it uses to define small bank, small savings association, intermediate small bank, and intermediate small savings associations under Community Reinvestment Act (CRA) regulations.

Under the new Fed standards:

  • Small banks or small savings associations will mean institutions that have held less than $1.16 billion in assets over the past two years;
  • Intermediate small banks or intermediate small savings associations will mean institutions that have held at least $290 million in assets over the past two years but less than $1.16 billion in assets in either of the last two years.
These standards will become effective on Jan. 1, according to the Fed.

The Fed bases these adjustments on changes to the average of the Consumer Price Index (CPI) for urban wage earners. That index increased by 3.43% between November 2010 and November 2011.

MBL cap lift is an answer to biz lending crunch CUNA

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WASHINGTON (12/20/11)--An American University Investigative Reporting Workshop analysis of recent Federal Deposit Insurance Corp. (FDIC) data has found that loans to small businesses are at a 10-year low, and even successful small businesses are having issues accessing credit.  However, but Credit Union National Association (CUNA) President/CEO Bill Cheney reminds that allowing credit unions to make more loans to their small business members would ease this credit crunch and help the economy.

The FDIC statistics showed that banks reported 1.5 million outstanding loans of $1 million or less to small businesses as of Sept. 30, and the amount of these types of loans has fallen consistently since 2008.

The American University analysis found that the volume of loans made to small businesses has fallen 14.7% from the peak amount, while overall commercial and industrial lending by banks has increased for the past five quarters. The reduction in credit "has had an even bigger impact" on small businesses, and, the report notes, "the sheer length of the country's economic woes has left small businesses with fewer reserves and hardly ready to jump back up, were conditions to start looking up."

"As we have been saying for some time: Small business owners are not finding the support they need from banks, and this latest analysis gives additional weight to our view," Cheney said.

"Small business-owning credit union members want to create jobs. To do that, they need a financial partner who will stand with them and help their business succeed with credit when they need it and support for their payrolls and other aspects of their operations," Cheney said. "Credit unions have been that partner for many of their members, but it will become increasingly difficult in the future for credit unions to continue that role, unless Congress gives credit unions more authority to make member business loans (MBLs)," he added.

CUNA estimates that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Credit unions have been picking up some of the small loan slack, as a recent Biz2Credit Small Business Lending Index report showed that credit unions granted 57% of the small lending requests brought by their members in November. Big banks approved 10% of their small business loan requests, by comparision. (See related Dec. 19 story: Biz lending up, CUs outshine big, small banks)

Inside Washington (12/16/2011)

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  • WASHINGTON (12/19/11)--The Financial Crimes Enforcement Network (FinCEN) will launch a new Money Service Business (MSB) Registration website the week of Jan. 23, to improve the availability of MSB registration information. The site will replace the current MSB Registration List. As part of the Department of Treasury's initiative to go paperless, FinCEN will no longer send acknowledgement letters to MSBs. As part of the conversion to the new site and other FinCEN Bank Secrecy Act information technology modernization efforts, MSBs will not be able to confirm their registration status between Dec. 16  and Jan. 23. During the data transition period, MSBs will not receive acknowledgement letters and cannot request confirmation of their registration status through either FinCEN's Regulatory Helpline or the Internal Revenue Service's Enterprise Computing Center-Detroit Hotline. The latest version of the MSB Registration List will be available for general reference during this period …
  • WASHINGTON (12/19/11)--The Securities and Exchange Commission (SEC) is expected to appeal a U.S. District judge's rejection of a proposed $285 million settlement between the SEC and Citigroup Inc., according to The Wall Street Journal (Dec. 16). U.S. District Court Judge Jed S. Rakoff rebuked the SEC for charging Citigroup with negligence instead of fraud as part of a $285 million proposed settlement that said Citigroup misled investors about an investment tied to the deteriorating housing market in 2007 (News Now Nov. 29).  The SEC could appeal the Nov. 28 ruling to the Second Circuit Court of Appeals. The SEC's five-person commission is expected to vote on a recommendation about an appeal from the agency's enforcement staff soon …

CFPB provides outlet for financial crime informants

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WASHINGTON (12/19/11)--Individuals with information on potential violations of federal consumer financial laws will now have "a direct line of communication" to the Consumer Financial Protection Bureau (CFPB), CFPB Assistant Director of Enforcement and nominee for CFPB Director Richard Cordray said last week.

"Their tips will help inform [CFPB] strategy, investigations, and enforcement" and will help fulfill that agency's "commitment to consumers," Cordray said. Credit Union National Associatio (CUNA)  Deputy General Counsel Mary Dunn said CUNA "wants to make sure that the whistleblower process focuses on legitimate concerns involving illegal practices rather than facilitating frivolous inquiries or misguided 'tips.'"

Potential whistleblowers may contact the CFPB by emailing whistleblower@cfpb.gov or calling a toll free hotline at 855-695-7974. The CFPB said it also plans to add an online whistleblower application to its homepage soon.

Individuals that reach out to the CFPB may request confidentiality or ask to remain anonymous, but the CFPB said providing personal contact information may help the CFPB investigate and remediate the reported issues.

The CFPB will accept financial crime tips from current or former employees, contractors, vendors, and competitor companies, the release said. The agency said that portions of the Dodd-Frank Wall Street Reform Act would protect whistleblowers from any retaliation by potential violators they are reporting. Whistleblowers that believe they have been retaliated against may file complaints with the Secretary of Labor, the CFPB said.

The whistleblower program will be separate from the CFPB's consumer complaint activities, the agency added.

NCUA bans former FCU employee for abetting fraud

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ALEXANDRIA, Va. (12/19/11)--The National Credit Union Administration (NCUA) last week blocked former N&W Poca Division FCU employee Pamela Mullins from participating in the affairs of any federally insured financial institution.

Mullins has been sentenced to serve a 30-month prison sentence and three years of supervised probation following her conviction on charges of aiding and abetting bank fraud. Mullins also is required to pay $2,406,804 in restitution.

The Bluefield, W. Va.-based credit union was put into liquidation by the NCUA in 2008 after the NCUA determined it was insolvent and had no prospects of restoring viable operations. The credit union held $6 million in assets and had 1,194 members when it closed.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link to access all NCUA prohibition orders.

NFIP CLF other CU issues addressed by spending bill

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WASHINGTON (12/19/11)--The National Flood Insurance Program (NFIP) has been extended until May 31 after the U.S. Congress approved a $1 trillion omnibus federal government funding bill late last week, and several other credit union priorities will also be impacted by this bill.

The NFIP was set to expire on Dec. 16. That program has been funded by short-term resolutions for months, as both Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have called for the program to be reformed.

Legislation that would extend the NFIP until September of 2016 also remains active in Congress.

The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA backs the short term extension, but added it is "important that Congress consider a long term extension of this program to provide stability and predictability."

Other credit union priorities that are addressed by the omnibus bill include the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF), the NCUA's Community Development Revolving Loan Fund (CDRLF), the U.S. Treasury Department's Community Development Financial Institution (CDFI) Fund, and the Cooperative Development Program (CDP).

The CLF's current lending authority, which stands at up to 12 times of its paid-in capital, will remain at this level in 2012 under the terms of the omnibus bill. Funding for the CDRLF, which provides loans and technical assistance to federal and state credit unions that are designated as a low-income credit union, as defined by NCUA regulations, would drop slightly to $1.25 million. Funding for the CDFI Fund would also be reduced.

Funding for the CDP has not been determined, but the 2012 budget for the U.S. Agency for International Development will be cut by 13% under the omnibus bill. However, the omnibus bill directs $10 million in funds to cooperatives and credit unions that take part in overseas development assistance programs.

The omnibus appropriations bill also includes language directing the Federal Trade Commission (FTC) to study the impact and effectiveness of the small issuer exemption to the debit interchange regulation. Specifically, the FTC will report to Congress on the steps it has taken to ensure compliance by payment card networks, and will look for any proof that the payment card networks have favored larger institutions over credit unions that are exempt from the terms of the interchange cap.

CUNA's Donovan said this language "could be valuable in ensuring that the payment card networks continue to operate a two tier system and may help make the small issuer exemption more meaningful," and that CUNA will work with the FTC as this report is developed.

Proposed federal spending bill steady on CU programs

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WASHINGTON (12/16/11)--An omnibus appropriations bill that has been agreed to by House and Senate conferees, and could be voted on by the U.S. Congress this week, would allow the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF) to continue to operate under its statutory cap and would impact some other issues of great interest to credit unions.

The CLF is authorized by the Federal Credit Union Act to lend up to 12 times its paid-in capital, and this lending limit would be continued in 2012 provided the administrative expenses of the CLF in the 2012 fiscal year do not exceed $1.25 million.

The appropriations bill also addresses the NCUA's Community Development Revolving Loan Fund (CDRLF), the U.S. Treasury Department's Community Development Financial Institution (CDFI) Fund, and the Cooperative Development Program (CDP).

Funding for the CDRLF, which provides loans and technical assistance to federal and state credit unions that are designated as a low-income credit union, as defined by NCUA regulations, would be dropped slightly under the omnibus bill. The 2012 funding would fall to $1.25 million. The Obama administration had asked for $2 million in CDRLF funding for fiscal 2012.

Funding for the CDFI Fund would also be reduced slightly under the omnibus agreement, dropping to $221 million from the Obama administration's requested total of $227.3 million.

Funding for the Office of Cooperative Development has not been determined, but the 2012 budget for the U.S. Agency for International Development (USAID) will be cut by 13% under the omnibus bill. However, the omnibus bill would direct $10 million in funds to cooperatives and credit unions that take part in overseas development assistance programs.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said the legislation could be considered today.

NCUA cites improvement back to quarterly insurance reports

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ALEXANDRIA, Va. (12/16/11)--Noting that the credit union system appears to be returning to a more steady state, the National Credit Union Administration (NCUA) on Thursday said it would scale back its monthly reporting on the status of the National Credit Union Share Insurance Fund (NCUSIF) and  the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to a quarterly basis.

Until October 2008, the NCUA chief financial officer (CFO) traditionally made a public accounting of NCUSIF before the NCUA board on a quarterly basis. At that time, then-Chairman Michael Fryzel asked NCUA CFO Mary Ann Woodson to prepare a monthly until the end of the year, but that practice continued to the most recent meeting. Fryzel also requested at that time that the report include an additional slide, one which would provide clearer information regarding insurance loss expense.

In this month's insurance fund report, Woodson said credit unions with CAMEL Code ratings of 1 or 2 held 82.7% of total credit union assets for the second straight month, and asset distributions in CAMEL Code 3, 4 and 5 credit unions again held steady in November. Approximately 17.3% of all cu assets were in CAMEL code 3, 4 or 5 credit unions, Woodson said. There are currently 399 CAMEL 4 and 5 credit unions and 1,735 CAMEL 3 credit unions, the NCUA reported.

The NCUSIF ended November with a 1.32% equity ratio and a reserve balance of $871.6 million, and the TCCUSF held $5.9 billion in liabilities as of Nov. 31, the report said.

The agency did not write-off any insurance loss expense and reported net income of $7.3 million for the month. For more on the NCUA's December board meeting, use the resource link.

NCUA proposes RegFlex loan participation changes

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ALEXANDRIA, Va. (12/16/11)--Changes to credit union liquidity access, loan participation investment rules, and the National Credit Union Administration's Regulatory Flexibility (RegFlex) Program were all addressed at the agency's final board meeting of 2011. The agency also okayed Virginia-based Henrico FCU's application to expand its community charter.

The board also approved for a 60-day public notice and comment period an Advance Notice of Proposed Rulemaking (ANPR) regarding whether the NCUA should issue a regulation to require FICUs to have access to backup federal liquidity sources.

The agency's ANPR outlines a number of options that credit unions could take to ensure they maintain needed liquidity in times of financial stress. Under the ANPR, credit unions could ensure liquidity by:

  • Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or through a corporate credit union;
  • Obtaining and maintaining "demonstrated access" to the Federal Reserve Discount Window; or
  • Maintaining a certain percentage of their assets in highly liquid U.S. Treasury securities.
The Credit Union National Association's Corporate Credit Union Task Force will be reviewing the ANPR.

Another NCUA proposal released on Thursday would revise the NCUA's existing loan participation investment rules for all federally insured state credit unions (FISCUs) that purchase participations in loans originated by other credit unions. Under the proposal, loan originators would need to retain 10% of the original loan.

The proposal would also limit loan participations involving a single originator to 25% of the FISCU's net worth and set a 15% of net worth limit on loans to one borrower.

The 25% net worth requirement would not be subject to waiver, but credit unions should ask their regional directors to allow them to exceed the 15% net worth limit.

Credit unions with loan participation investments that exceed these limits would be grandfathered in to the new rule, and could exceed these limits until its loan participations have been paid off or sold.

NCUA Chairman Debbie Matz said that loan participations "are a valuable tool for credit unions to diversify loan portfolios, improve earnings, and manage their balance sheets," but also noted that "large volumes of participated loans tied to a single originator, borrower, or industry – or serviced by a single entity – have the potential to impact multiple credit unions if problems occur."

Just over 1,400 federally insured credit unions held over $12.4 billion in outstanding loan participations this year, and loan participation balances have grown by 28% since 2007, the NCUA noted.

CUNA Deputy General Counsel Mary Dunn said loan participations "are useful tools for credit unions in a variety of ways, including allowing credit unions to originate more loans that their members need."

"While material problem areas should be addressed--but only in a very targeted way--regulatory efforts should also be pursued to enhance the ability of well-managed credit unions to be involved in loan participations," she added.

Dunn also commented on the NCUA's regulatory flexibility proposal, saying that "credit unions are overburdened with too many regulations and regulatory flexibility is needed now more than ever."

The NCUA on Thursday proposed eliminating the RegFlex program and, instead, "enabling all federal credit unions to engage in activities permitted by the existing RegFlex rule without the need to apply for a RegFlex designation."

Specifically, the NCUA said, all credit unions would be permitted to donate funds to the charities of their choosing, to accept non-member deposits, subject to predetermined limits, from local governmental entities or other credit unions, and purchase private-label commercial mortgage-related securities, subject to certain net worth constraints and safety and soundness rules. Other rights would also be granted to the 1,770 credit unions that are not covered under the RegFlex designation.

A final rule that makes clarifying changes and other amendments to the NCUA's corporate credit union rule, Part 704, was also approved. The final rule includes a CUNA recommendation that the NCUA not incorporate proposed credit ratings provisions until the agency can finalize a separate proposal on credit ratings.

CUNA's Examination and Supervision Subcommittee, along with other key CUNA groups, will be reviewing the proposals in detail, and regulatory comment calls on these proposals and a Final Rule Analysis on the corporate credit union rule changes will be posted early next week.

All three of the proposals will have 60-day public comment periods.

The NCUA also approved Virginia-based Henrico FCU's application to expand its community charter, allowing the $120-million-in-assets, 21,000-member credit union to serve residents in the greater Richmond, Va. area. Matz said the credit union's community focus and its low $5 minimum balance requirement for membership convinced her to support the charter expansion.

For more on the NCUA's December board meeting, use the resource link.

Performance budget strategic plan approved at NCUA meeting

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ALEXANDRIA, Va. (12/16/11)—The National Credit Union Administration's (NCUA) near-future plans, and the budget for that agency's oversight of its NCUA Guaranteed Notes program, were approved during Thursday's open board meeting.

The NCUA in its 2012 Annual Performance Budget identified its top priorities for the coming year as: monitoring and controlling risk in natural-person credit unions, continuing to stabilize the corporate credit union system, and ensuring that the transition from bridge corporates does not cause disruption to member services.

The agency also identified ensuring a safe, sound, and healthy credit union system, promoting credit union access to all eligible persons, and improving regulatory transparency as other key goals for 2012.

The Credit Union National Association (CUNA) said it would press the agency to stick to these goals, with a particular emphasis on the need to improve the regulatory environment faced by credit unions.

Many of these goals are also reflected in the NCUA's 2011-2014 strategic plan, which was released during the board meeting. For instance, ensuring a safe, sound, and healthy credit union system, promoting credit union access to all eligible persons, are also key priorities under the strategic plan.

The NCUA approved a budget of $7.7 million to cover administrative costs, including security valuation, accounting, and reporting costs, related to its NGN program.

Management and oversight of the NGN program is being handled by the NGN Securities Management and Oversight Committee, which was approved by NCUA board members in August. The committee's duties include monitoring the performance of the NGNs and their underlying collateral, ensuring the programs compliance with legal and accounting requirements, and maintaining the NGN Programs transparency to credit unions and other key stakeholders.

For more on the NCUA meeting, use the resource link.

Inside Washington (12/15/2011)

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  • WASHINGTON (12/16/11)--Neil Barofsky, former special inspector general for the Troubled Asset Relief Program (TARP), criticized the Obama administration and Treasury Department for their response to the housing crisis. Barofsky, during a panel discussion on the foreclosure crisis the non-profit news organization ProPublica, said the administration's Home Affordable Modification Program (HAMP) was a failure because the White House feared being accused of helping "undeserving homeowners" (American Banker Dec. 15). The Obama administration backed away from its goal of helping three million to four million homeowners after CNBC editor Rick Santelli accused the government of promoting bad behavior with the HAMP program. Barofsky said the $28 billion left in TARP should be used to modify home loans …
  • WASHINGTON (12/16/11)--The U.S. Department of the Treasury's Community Development Financial Institution's (CDFI) Fund has certified Cascade Forest Products CU, Kent, Wash., as a CDFI. Incorporated in 1953, Cascade Forest Products CU provides access to capital for the low-income community of Clark County, Wash. Its services include financial counseling, youth accounts, workout loans, debt consolidation loans, and payday lending alternatives. Its targeted market is the low-income in Clark County, Wash. …

Progressive Policy Institute backs MBLs to help economy

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WASHINGTON (12/16/11)--While descrying the "deep freeze" in credit for small businesses as one of the most damaging consequences of the U.S. financial meltdown to the country's economy, the Progressive Policy Institute (PPI) offers a "simple solution" for providing smaller firms with greater access to credit: allowing credit unions to offer more small business loans.

In its latest policy memo, entitled "The Credit Gap: Easing the Squeeze on the Smallest Businesses"  and written by Brian Martin, an independent policy analyst, PPI notes that as the financial system all but shut down in 2007-2008, "millions of small business owners across America found themselves unable to get the credit they desperately needed to run their businesses, let alone expand." The result, the analysis says, was that thousands of firms that may have otherwise flourished were pushed into bankruptcy or closure, with thousands of Americans losing their jobs.

The policy memo notes that while the crisis of credit availability is starting to ease for some small businesses, the smallest--those with fewer than 50 workers--are "still at risk of being left behind."

"These smaller businesses account for nearly one in three private-sector jobs in America, yet they are much less likely to be able to get the credit they need to stay in business or grow," Martin writes.

The PPI memo goes on to call increased member business lending (MBL) authority the "easiest and most obvious" public policy option for expanding credit to those smaller businesses.  Credit unions, he adds, are "some of the lenders who are already the most likely to be working with smaller businesses" as their members.

Recalling the history of the current MBL cap of 12.25% of assets, set in 1998 as part of legislation enacted in response to a Supreme Court ruling that would have tightened credit union membership rules, the report says that cap "was not considered a major provision of the legislation at the time and is now an arbitrary limit on the ability of credit unions to help smaller businesses make the leap toward growth."

The PPI report says that increasing the MBL cap to 27.5% of assets, as proposed by legislation in both the U.S. House and Senate and strongly backed by the Credit Union National Association, could substantially benefit smaller business owners and in turn the economy at large.

"It would enable credit unions to extend more credit to their existing members who are small business owners interested in expansion or who are just starting out a new venture, while the current low cap may block these opportunities for growth."

The PPI statement joins an increasing chorus of support for an MBL increase, including from other think-tanks, like the Heartland Institute in Chicago, bi-partisan backing on Capitol Hill, and support from small business groups.

CUNA keeps MBL pressure on as Congress prepares for years end

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WASHINGTON (12/15/11)—The Credit Union National Association (CUNA) has continued to aggressively advocate for increased credit union member business lending (MBL) authority as 2011 nears its end, with CUNA President/CEO Bill Cheney saying Congress should consider using all "available and sensible remedies," including an MBL cap increase, to increase accessibility of funding to small businesses.

Cheney promoted an MBL cap lift in a letter that was sent to Senate securities subcommittee chairman Jack Reed (D-R.I.) and ranking member Michael Crapo (R-Idaho) ahead of a Wednesday hearing on investor risk in capital raising. Cheney said "credit unions support efforts to help small businesses, and want to be part of the solution as well."

Cheney added that raising the MBL cap, if compared with other remedies to address small business credit shortage, would "come considerably ahead" of other suggested solutions, including more lenient registration rules for banks with the Securities and Exchange Commission and rules regarding "crowdfunding," a method of raising funds through pools of investors.

"Credit unions would be significantly troubled if any of the bills related to shareholder thresholds or crowdfunding moved through the legislative process in the absence of similar movement of S. 509," pending legislation raise the cap on credit union business lending to 27.5 percent (from the current cap of 12.5 percent), Cheney wrote. He added: "This is a key issue for credit unions."

CUNA has estimated that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Two MBL cap lift bills, Sen. Mark Udall's S. 509 and Rep. Ed Royce's (R-Calif.) H.R. 1418, remain active in Congress. S. 509 has 21 cosponsors, and H.R. 1418 has 108 cosponsors.

CUNA has encouraged credit union advocates nationwide to discuss MBLs and other credit union issues with their legislators as they return to their home districts for the holidays. Congress is scheduled to end the 2011 legislative year on Dec. 16, but work could continue into next week.

CUNA WOCCU inform foreign CU reps on advocacy efforts

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WASHINGTON (12/15/11)—The Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) teamed up this week to advise credit union representatives from nine countries on best practices for making sure the credit union point of view is heard by their legislators and government officials.

Through the two-day workshop at Credit Union House on Capitol Hill,  CUNA and WOCCU addressed more than 30 credit union representatives from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Paraguay, Peru and Puerto Rico.

Click to view larger image CUNA President/CEO Bill Cheney, right, discusses credit union advocacy with Mexico's Caja Popular de Ahorros Yanga CEO Margarito Saavedra, left, WOCCU President/CEO Brian Branch, left center, and and Fernando Rivera, project director for FEDECACES, El Salvador's credit union trade group, at the joint WOCCU/CUNA advocacy training workshop. (WOCCU PHOTO) 

"Each country has a different political system, but the basic principles of advocacy are universal," noted CUNA President/CEO Bill Cheney, adding that the workshop gave examples of how they are applied in the United States and sparked discussions on how they may be applicable in Latin America.

WOCCU President/CEO Brian Branch said, "Today more than ever, we all need to strengthen our advocacy programs to address the increasing complexity of regulations and the increasing compliance burden. CUNA has been recognized many times over the years as one of the most effective advocacy organizations in the U.S. We are privileged that CUNA is sharing its expertise with other countries."



During the session, CUNA Senior Vice President of Legislative Affairs Ryan Donovan said, overall, that lobbying efforts should be unified, clear and credible, and accompanied by an understanding of both allies and opponents to credit union efforts. And CUNA Senior Vice President of Political Affairs Richard Gose highlighted the added impact that grassroots work can have on credit union advocacy, saying an educated credit union member base is important to communicating directly with legislators and holding them accountable for the decisions they make.

CFPB seeks comment on mortgage form design

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WASHINGTON (12/15/11)--The Consumer Financial Protection Bureau (CFPB) this week continued its work on mortgage closing forms, releasing two different transaction/closing-cost disclosures for public comment.

One form is similar to the existing Real Estate Settlement Procedures Act (RESPA) HUD-1 Settlement statement that homebuyers receive when they close a mortgage loan, the CFPB said. The second form is based on a CFPB prototype for mortgage disclosures that are provided when homebuyers first apply for a mortgage loan. Both of the forms present the same information; it is only the format that is different.

The CFPB is asking for any improvements that could be made to either form, and has asked the public to comment on whether the forms present the needed information in a consumer-friendly format, whether consumers that use the sample forms are able to easily identify key loan terms and closing costs, and whether all needed information is provided in the sample form.

The CFPB is working on a mortgage disclosure form project to combine the federal Truth in Lending disclosures and RESPA HUD-1 Settlement statement into a single document. The CFPB has said the goal of the revisions is "to provide information in a clear and simple way that consumers will find easier to use and understand and that industry will find less burdensome."

A final version of the mortgage disclosures will be released to the public between now and February, the CFPB said.

The combined closing form is meant to accompany the CFPB's combined Truth in Lending Act/Real Estate Settlement Procedures Act (RESPA) document. The CFPB is also planning to develop new mortgage regulations once the mortgage disclosure form revision project is completed.

The CFPB said the mortgage reform efforts seek to reduce the paperwork burden faced during the mortgage process by 50%.

CUNA continues to be actively involved in roundtable discussions and other forums with CFPB personnel and others as the mortgage revision process moves forward. For the CFPB release, use the resource link.

NCUA looks at loan participations liquidity today

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ALEXANDRIA, Va. (12/15/11)--Loan participation issues and credit unions' access to liquidity will lead the agenda when the National Credit Union Administration (NCUA) holds its December monthly board meeting today.

NCUA Chairman Debbie Matz earlier this year said the agency would develop a new loan participation protection rule covering both originators and buyers to require originators to retain some of the original loan risk on their balance sheets, and require buyers to do more due diligence.

Regulatory Flexibility, the final version of a proposed NCUA corporate credit union proposal, the NCUA's strategic plan for the years 2011 through 2014, the 2012 Annual Performance Budget, the 2012 Budget for NCUA Guaranteed Note Securities Management and Oversight, and National Security Delegations of Authority are also on the agenda.

The NCUA will also respond to Virginia-based Henrico FCU's request to expand its community charter during the meeting, and the monthly insurance fund report will also be presented during the open portion of the board meeting.

For the full NCUA agenda, use the resource link.

Inside Washington (12/14/2011)

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  • WASHINGTON (12/15/11)--Lawmakers questioned Julie Williams, the Office of the Comptroller of the Currency's (OCC) deputy comptroller and chief counsel, about the relationship between the 14 largest mortgage servicers and the consultants that were hired to review their practices (American Banker Dec. 14). The consultants were supposed to be independent but lawmakers noted they were chosen by the servicers, casting doubt on the fairness of the OCC's process to homeowners. In April, federal bank regulators ordered the 14 largest servicers to complete a foreclosure review process, including identifying and assisting homeowners that were harmed by improper foreclosures and other illicit practices …
  • WASHINGTON (12/15/11)--House Republicans and Senate Democrats have proposed legislation that would raise the guarantee fees that banks pay Fannie Mae and Freddie Mac to cover the risk of defaulting mortgages. The fee increases could help bring private investors back into the mortgage market, according to industry observers (American Banker Dec. 14). Private investors cannot compete with the government's low prices for mortgage-default guarantees, the Banker said. But if guarantee fees were raised significantly, private investors may be enticed to buy loans from lenders. Large banks have long paid volume discounts to Fannie and Freddie, a sore point with community banks and smaller lenders that pay higher fees, according to the Banker
  • WASHINGTON (12/15/11)--New Jersey credit union advocates met with three of the state's U.S. House delegation during New Jersey at Credit Union House on Tuesday in Washington D.C. Participants heard from U.S. Reps. Frank LoBiondo (R), Scott Garrett (R) and Bill Pascrell (D). They also received political, legislative, and regulatory briefings from Credit Union National Association staff and insights from CUNA President/CEO Bill Cheney. "This was a special opportunity to showcase credit unions and talk about our latest political initiatives, namely the need to get the member business lending cap increased," New Jersey Credit Union League President/CEO Paul Gentile said. Gentile, left, speaks with Cheney …

Treasure State Kansas Corporate CUs merge

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ALEXANDRIA, Va. (12/15/11)--The National Credit Union Administration (NCUA) Wednesday approved a merger between Treasure State Corporate CU, of Helena, Mont., and Kansas Corporate CU, of Wichita, Kan. Kansas Corporate remains as the continuing corporate credit union.

The agency assured that both corporate credit unions are financially sound but sought the merger as a way to benefit from greater efficiencies and increased service volumes that the merger could bring without significant additional expense.  The merger is expected to be effective as of Jan. 1, 2012.

Treasure State is a $230 million state-chartered corporate serving 57 credit unions and provides a wide range of correspondent services. Kansas Corporate is a $315 million state-chartered corporate providing its 148 member credit unions access to correspondent services, investment solutions, liquidity solutions, and technology services.

Survey CU satisfaction breaks all records

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WASHINGTON (12/14/11)--Credit unions have set an all-time American Customer Satisfaction Index (ACSI) record, with 87% of credit union members surveyed saying they are "more satisfied than ever before" with their credit unions.

The 87% score was the highest score reached in any of the ASCI's 47 industries that it surveys, and credit unions have consistently received high praise for their member service in this survey.

Credit Union National Association President/CEO Bill Cheney congratulated credit union boards, management and employees for the record-breaking survey results. "Given the enormous outpouring of consumer interest in credit unions over the past several weeks--and the apparent growing dissatisfaction among consumers with megabanks--it can be of little doubt that, the more consumers learn about credit unions, the more they see how credit unions can help them fulfill their financial needs and goals," he added.

The ASCI survey found that bank customer satisfaction stands at 75%, and that total decreased by 1.3% over the past year.

ACSI founder Claes Fornell noted that grassroots efforts like Bank Transfer Day, and recent consumer revolts over higher bank fees, are creating issues for banks. "While it is too early to quantify just how much business the big banks have lost to smaller competitors, the new ACSI data suggest credit unions and smaller banks now have become an even more attractive alternative for consumers," Fornell added.

Approval for the biggest banks was even lower, with 73% of Wells Fargo and Citigroup customers saying they were satisfied with the service at those institutions. A total of 70% of JPMorgan Chase customers said they were satisfied with that bank's service, and a mere 68% of Bank of America customers approved of that financial firm's customer service.

Hoenig takes next step toward FDIC

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WASHINGTON (12/14/11)--Thomas Hoenig took the next step toward becoming vice chairman of the board of directors of the Federal Deposit Insurance Corp. (FDIC) when his nomination was unanimously approved by the Senate Banking Committee on Tuesday.

Hoenig, who previously served as president of the Federal Reserve Bank of Kansas City, was nominated to join the FDIC by President Barack Obama in October. Hoenig's nomination will now move on to the full Senate.

Another Obama nominee, Carla León-Decker, is still awaiting a vote on her nomination to join the National Credit Union Administration. The nomination of the CEO of the $47 million District Government Employees FCU, Washington, D.C., could receive further consideration after the new year, Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said.

IG says FHFA lagged in oversight supervision

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WASHINGTON (12/14/11)--The Federal Housing Finance Agency (FHFA) "was not proactive in oversight and enforcement" of government-sponsored entities (GSEs) Fannie Mae and Freddie Mac, and did not adequately process consumer complaints that may have "contained important information about alleged foreclosure processing abuses and fraud," FHFA inspector General Steve Linick said in his semi-annual report to Congress.

The FHFA failed to develop and maintain a system for receiving or processing consumer complaints. Linick said the agency also failed to:

  • Consistently follow up on complaints referred to the GSEs;
  • Prioritize complaints or assess the timeliness of responses to complaints;
  • Refer complaints to law enforcement for evaluation or possible investigation; and
  • Perform substantive analyses to identify overall trends in complaints.
"These deficiencies occurred because FHFA did not establish adequate internal controls and did not assign sufficient priority and resources to complaint processing," Linick said, adding that the FHFA did not feel it needed to address consumer complaints.

The FHFA was also slow to react to foreclosure related issues, Linick said, noting that the FHFA did not schedule comprehensive examination of foreclosure issues until reports of foreclosure abuses surfaced in mid-2010. "FHFA had not previously considered risks associated with foreclosure processing to be significant," the report said.

Linick also said the FHFA gave "undue deference" to the GSEs by relying on their opinions on mortgage repurchase claim issues, executive compensation, and various GSE transactions, "without independently testing and validating them."

He said the FHFA's Office of the Inspector General is currently assessing whether FHFA has an effective supervisory control structure and sufficient examination coverage to adequately and timely identify and mitigate mortgage servicing risks, and assessing the FHFA's oversight of Enterprise controls over real estate owned (REO) operations, including management and sales activities and contractor performance. 

Amid the criticism, the Inspector General's report did commend the FHFA for its progress in eliminating golden parachute compensation awards to terminated Fannie Mae and Freddie Mac executives, taking steps to mitigate its shortage of qualified examiners, increasing its underwriting standards and raised guarantee fees, and reducing its vulnerability to fraud, waste, and abuse.

MBL waivers 2011 highlights in iNCUA Reporti

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ALEXANDRIA, Va. (12/14/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz in the latest edition of The NCUA Report said the past year has been productive for credit unions, with the corporates stabilizing, consumer credit unions recovering financially, and, overall, the credit union industry "turning a corner."

Credit unions can look forward to a future of increasing members and strengthening bottom lines, Matz added. The NCUA chairman also highlighted the agency's regulatory modernization initiative, adding that the agency will eliminate or streamline regulations that are "ineffective or overly burdensome" and modernize outdated or inefficient regulations.

Regulation was also a focus of NCUA Board Member Gigi Hyland's contribution to this month's NCUA Report, as Hyland noted that federally insured credit unions may apply for blanket waivers from member business loan (MBL) personal guarantee requirements. Hyland said the agency "strongly believes that obtaining a personal guarantee is a prudent practice and solidifies the personal commitment of the principal to the business enterprise." However, she said, credit unions may waive this personal guarantee requirement in instances where the credit union is not taking on undue risk.

NCUA regional director waivers may also be granted for a variety of limits, including appraisal requirements, aggregate construction and development loan limits, and loan-to-value ratio requirements for business loans, Hyland said.

Credit unions that wish to obtain a waiver should submit a request, and their business lending policy, supporting documents that show the credit unions' past MBL account management, to their regional NCUA director. Documentation addressing the credit union's history of loan losses and delinquencies, portfolio diversification, underwriting standards and practices, and other information should be provided as well.

Hyland said any information that would "demonstrate that [the credit union] can safely engage in the activity with a waiver in place" should also be included. She said a lack of sufficient documentation is the most common reason that waivers are denied, and added that "waivers are not likely to be approved if the documentation package as a whole does not demonstrate a well-constructed plan for the activity proposed."

The report also featured coverage of the NCUA's Office of Consumer Protection's work with the Consumer Financial Protection Bureau, recent NCUA actions, and other issues. For more of the December NCUA Report, use the resource link.

CUNA Exiting CUs should recognize liability to TCCUSF

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WASHINGTON (12/13/11)--The Credit Union National Association (CUNA) is recommending to the National Credit Union Administration (NCUA) that a credit union leaving the system should be required to provide its share of future temporary corporate credit union stabilization fund assessments to recognize liabilities incurred as a federally insured credit union.

CUNA's analysis reviewed the issues surrounding how requirements to obtain such assessments would work and determined that the NCUA has the legal authority under the federal credit union act to adopt such requirements.

Some credit unions have raised concerns about the basic issue that remaining credit unions should not be left to cover the assessments that a credit union exiting the system would avoid.

The NCUA is on record as having advised the National Association of State Credit Union Supervisors--NASCUS--and others that a converting credit union cannot be assessed for all future assessments in a single payment prior to conversion.

However, CUNA's approach to the issue would not require a single payment. Instead, CUNA's recommendations would require a credit union leaving the system to set up an escrow account as part of its conversion, one that is comprised of funds representing a general estimate of that credit union's future assessments.

The account would be managed by the NCUA and future payments would be made out of the account as they are assessed on all federally insured credit unions.

CUNA has noted that this structure for future payments is intended to avoid triggering an accounting event that would make all federally insured credit unions recognize all remaining assessments immediately as an expense. CUNA also has identified several other accounting issues associated with the plan and is pursuing those with credit union certified public accountants.

CUNA has initiated early meetings with federal financial regulators on this TCCUSF issue, including NCUA, as well as the Federal Deposit Insurance Corp. (FDIC). The FDIC coordinates with the NCUA regarding a conversion to a federally insured bank or thrift.

CUNA will follow up with the FDIC as discussions with the NCUA proceed. CUNA also is pursuing meetings with other policymakers including the Office of the Comptroller of the Currency.

CUNA members can use the resource links below for more information.

Inside Washington (12/13/2011)

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  • WASHINGTON (12/14/11)--The Federal Deposit Insurance Corp.'s (FDIC)  new Office of Corporate Risk Management is less concerned with the risk assessment of the financial system and more focused on providing information on unseen risks to the agency internally and from the financial system, according to Stephen A. Quick, FDIC's first chief risk officer. Regulators are behind the banking industry in risk management expertise, Quick said (American Banker Dec. 13). The new office will likely improve that culture, Quick added. FDIC essentially functions as an insurance company, and should manage risk with the same diligence practiced by private-sector insurance companies, said Robert Litan, a senior fellow at the Brookings Institution and research chief at the Kauffman Foundation. The FDIC is unique from other financial regulators because its Deposit Insurance Fund is exposed to financial risk in the event of bank failures, Quick said. The agency also owns a large portfolio of assets that were taken over from failed institutions …
  • WASHINGTON (12/14/11)--Morris Morgan has been named the Office of the Comptroller of the Currency's (OCC) large bank deputy comptroller. Morgan, who currently serves as examiner-in-charge at PNC, will lead the examination and data analytics teams for a portfolio of large banks and thrifts. Morgan joined OCC's large bank supervision division in March 1999 and was assigned to the Bank of America examination team, where he served in general supervision duties before progressing to team leader roles covering capital markets, asset management, and then commercial credit. He has been with the OCC since 1985, examining banks in the Southwest District …

NCUA opinion addresses pre-approved CUSO activity

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ALEXANDRIA, Va. (12/13/11)--A federal credit union may invest in a credit union service organization (CUSO) established solely to act as a corporate trustee on deeds of trust for real estate loans made by another CUSO of the credit union.  It also is permissible for a CUSO to form a subsidiary to function as the corporate trustee for its own real estate loans.

So said a Nov. 17 legal opinion letter from National Credit Union Administration (NCUA) Associate General Counsel Hattie Ulan to Samuel T. Wyrick, III., general counsel of Wyrick, Robbins, Yates & Ponton, LLP, of Raleigh, N.C.

The NCUA letter notes that deeds of trust are three-party documents, used in some states instead of mortgages, and which pledge real property to secure a loan: Typically, the borrower-trustor conveys legal title to real property to an impartial trustee to hold for the benefit of the lender-beneficiary in order to secure the loan obligation.

Ulan goes on to point out that the NCUA CUSO rule provides illustrations of permissible CUSO activities (12 C.F.R. §712.5) and trust and trust-related services, such as  acting as trustee, are allowed.

To read the complete opinion, use the resouce link below.

CUNA Exiting CUs should pay stabilization assessments

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WASHINGTON (12/13/11)--The Credit Union National Association (CUNA) is recommending to the National Credit Union Administration (NCUA) that a credit union leaving the system by converting to private insurance or a bank charter should be required to provide its share of future temporary corporate credit union stabilization fund assessments to recognize liabilities incurred as a federally insured credit union.

CUNA's analysis reviewed the issues surrounding how requirements to obtain such assessments would work and determined that the NCUA has the legal authority under the federal credit union act to adopt such requirements.

Some credit unions have raised concerns about the basic issue that remaining credit unions should not be left to cover the assessments that a credit union exiting the system would avoid.

The NCUA is on record as having advised the National Association of State Credit Union Supervisors--NASCUS--and others that a converting credit union cannot be assessed for all future assessments in a single payment prior to conversion, but that issue is different from key ones raised by CUNA and the alternatives CUNA has presented.

CUNA's recommendations would require a credit union leaving the system to set up an escrow account as part of its conversion, one that is comprised of funds representing a general estimate of that credit union's future assessments.

The account would be managed by the NCUA and future payments would be made out of the account as they are assessed on all federally insured credit unions.

CUNA has noted that this structure for future payments is intended to avoid triggering an accounting event that would make all federally insured credit unions recognize all remaining assessments immediately as an expense. CUNA also has identified several other accounting issues associated with the plan and is pursuing those with credit union certified public accountants.

CUNA has initiated early meetings with federal financial regulators on this TCCUSF issue, including NCUA, as well as the Federal Deposit Insurance Corp. (FDIC). The FDIC coordinates with the NCUA regarding a conversion to a federally insured bank or thrift.

CUNA will follow up with the FDIC as discussions with the NCUA proceed. CUNA also is pursuing meetings with other policymakers including the Office of the Comptroller of the Currency.

Spending deal leads as Congress ends 2011 session

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WASHINGTON (12/13/11)--Legislation that would continue to fund the government beyond Dec. 16 will top the agenda as many in the U.S. Congress expect to leave Washington once the first session of the 112th Congress ends later this week.

Continued government funding could take the form of an omnibus appropriations bill, a continuing resolution, or a combination of the two, and any of these options would need House and Senate votes to move forward.

Credit unions will be particularly interested in H.R. 3630, the Middle Class Tax Cut and Job Creation Act, which would extend payroll tax cuts and jobless benefits. Portions of this bill would extend the National Flood Insurance Program (NFIP) until Sept. 2016.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA supports this language, but noted that it may not pass the House or Senate. Separate legislation that would extend the NFIP until May 31 was approved by a voice vote in the Senate last week, and Donovan added the House may consider this legislation at some point this week.

Several hearings will also be held this week. The Senate Banking Committee has scheduled an oversight hearing on the Federal Housing Finance Agency for today, and will also vote on the nominations of Maurice Jones to be deputy secretary and Carol Galante to be an assistant secretary of Housing and Urban Development; and Thomas Hoenig to be a vice chairman and member of the Board of Directors of the Federal Deposit Insurance Corporation. Today will also feature a Senate Banking housing subcommittee hearing on foreclosures and their impact on homeowners.

The Senate Banking subcommittee on securities, insurance, and investment will address investor risks in capital raising on Wednesday. House subcommittees will also be busy on Wednesday, as the House Financial Services capital markets subcommittee marks up a discussion draft of the Private Mortgage Market Investment Act and H.R. 2483, the Whistleblower Improvement Act, and the House Energy communications and technology subcommittee discusses online domain name changes.

The week will end for a trio of House Financial Services subcommittees on Thursday, as the capital markets subcommittee holds a hearing on H.R. 3606, the Reopening American Capital Markets to Emerging Growth Companies Act. The House insurance, housing and community opportunity subcommittee will discuss ways to promote economic independence for homeless children and youth in another Thursday hearing, and the House oversight and investigations subcommittee will also hold a hearing on the collapse of financial firm MF Global on Thursday.

Same-day ACH processing Start as pilot CUNA says

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WASHINGTON (12/12/11)--The Credit Union National Association (CUNA) has encouraged the Electronic Payments Association (NACHA) to conduct a pilot program to study the effects of its proposed network-wide premium same-day automated clearing house (ACH) expedited processing and settlement (EPS) service before taking further action.

CUNA in a comment letter added that credit unions and others should be given the option of opting in to the new EPS service, and said that not all receiving financial institutions should be required to receive and post same-day ACH payments because of significant implementation and risk management concerns, especially for smaller credit unions and other financial institutions.

NACHA has proposed amending its operating rules to enable EPS ACH entries to be processed and settled on the same day they are originated, while preserving existing ACH processing and settlement features for non-EPS entries. Under the proposal, credit unions and all other Receiving Depository Financial Institutions (RDFIs) would be required to both receive and settle EPS transactions.

The proposal sets specific timelines for payment file transmissions and fund availability, and also proposes new per-entry EPS dollar limits of $25,000 or $100,000.

NACHA has said the proposal would aid financial institutions by easing the flow of funds, increasing customer use of direct deposit, reducing counter-party settlement risks on received ACH credits, and mitigating risks.

CUNA in the comment letter said credit unions would incur increased costs, including implementation costs, under the NACHA proposal.

The EPS proposal would provide network-wide expedited settlement for all types of payments that currently use the ACH network, and provide a platform for other applications, such as mobile and person-to-person (P2P) payments. Credit unions and other financial institutions could offer EPS as a premium service to their customers.

If the current proposal is finalized, NACHA should "provide an adequate timeframe for implementation to minimize costs and impact to credit unions and others" that are working to comply with various regulatory changes, CUNA said.

For the full comment letter, use the resource link.

Inside Washington (12/12/2011)

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  • WASHINGTON (12/13/11)--Collecting and using available data to predict the next financial crisis is similar to forecasting the weather, Treasury Secretary Tim Geithner said in describing the challenge facing the Office of Financial Research (OFR), created by the Dodd-Frank Act (American Banker Dec. 12). "Policy makers are always looking for the financial system equivalent of the MRI; over-the-horizon radar, the kind we put on aircraft carriers; or, to borrow [an] analogy, a National Weather Service," Geithner said at a conference hosted by the Financial Stability Oversight Council dedicated to helping to set up the OFR. "That goal will always elude us. But we will keep pursuing it, and we can do a lot better than we have done to date." Regulators face three primary challenges in fulfilling the office's mission: defining systemic risk, assessing risk as the industry evolves and creating a new, flexible risk model …
  • WASHINGTON (12/13/11)--The Internal Revenue Service on Monday issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating vehicle for business, charitable, medical or moving purposes. Beginning Jan. 1, the standard mileage rates for the use of a car, truck or van will be 55.5 cents per mile for business miles driven; 23 cents per mile driven for medical or moving purposes; and 14 cents per mile driven in service of charitable organizations. The rate for business miles driven is unchanged from the rates that became effective July 1. The medical and moving rates have been reduced by 0.5 cents per mile …

Cheney CU momentum giving banks food for thought

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WASHINGTON (12/12/11)--Coverage of banks' business practices, consumers' mounting distrust of banks, and the movement to credit unions may be giving bankers food for thought. Banks are beginning to focus on what they need to do to repair their reputations and shore up customer loyalty, according to an American Banker article Friday. However, some of their focus may be misplaced.

The article noted that 300 bank executives and others at two conferences were struggling with ways to mend their reputations and relationships with increasingly disgruntled customers. On the agenda were sessions such as how to communicate with customers and increase loyalty to their branches and market effectively.

One panel member indicated that banks' negative reputation is a barrier to growth and may be a path to losing customers.  And a BMO Harris Bank executive noted that bankers in general are troubled by the lack of profitability in the consumer banking sector and that banks must work to prove that they "deserve to make an appropriate return" for the services they provide their customers.

Some suggested that customers would be lured back, or tempted to stay put at their bank, if banks offered technological advances such as new iPad applications or other technical additions.

Credit Union National Association (CUNA) President/CEO Bill Cheney said the coverage of consumers moving over to credit unions "clearly has given banks food for thought."

Cheney said that banks' choice to emphasize new tricks and technology over simple customer service improvements can serve as another reminder of why credit unions are the best choice for consumer financial services--"but that choice is only earned by absolute focus on consumer needs, which is what credit unions do," Cheney added.

Former FCU employee convicted of ID theft

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ALEXANDRIA, Va. (12/12/11)--The National Credit Union Administration (NCUA) on Friday blocked former University of South Alabama FCU employee Jennifer Stringer from working for a federally insured financial institution after she was convicted of identity theft.

Stringer was sentenced to 10 years in prison, but that sentence was suspended, pending good behavior. She also has been sentenced to probation and will pay $43,234.44 in restitution.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link to access all NCUA prohibition orders.

For the full NCUA release, use the resource link.

CFA hails CUs critical work on consumers behalf

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WASHINGTON (12/12/11)--The Consumer Federation of America (CFA) last week hailed credit unions for their "critical and irreplaceable" role in ensuring consumers have access to high quality and low-cost financial services. It also expressed support for maintaining credit unions' not-for-profit cooperative structure and preserving credit unions' tax-exempt status.

"In contrast to the policies and practices of for-profit financial institutions, as consumer cooperatives, credit unions provide low-cost and consumer-friendly financial products and services," the CFA said in its Statement of Support for Credit Unions. "CFA stalwartly supports credit unions and recognizes the critical and irreplaceable place credit unions have in Americans' lives and the key role they play in ensuring that consumers receive high-quality and low-cost financial services."

The CFA also expressly backed establishing an appropriate regulatory and lending environment that will enable credit unions to continue to thrive, and said allowing credit unions to continue to have access to a secondary market for loans and capital and to continue to offer small business loans to their members is vital.

The CFA's board unanimously adopted the Statement of Support for Credit Unions at a late November meeting in Washington.  CFA Executive Director Stephen Brobeck noted that the CFA action came as more consumers are looking for alternatives to for-profit financial institutions.

"At a time when consumers are increasingly critical of for-profit financial institutions, it is important for not-for-profit, member-owned credit unions to survive and prosper and for all consumers to have access to credit union membership," Brobeck said.

"The CFA's statement is well-timed given the heightened consumer interest in credit unions that has surrounded Bank Transfer Day, and it helps to underscore credit unions' benefits to consumers," noted Credit Union National Association (CUNA) President/CEO Bill Cheney. "We hope it will motivate even more consumers to turn to credit unions and discover the great value they provide on financial services."

Cheney added that the statement "reflects CFA's longstanding and deep-seated support for credit unions" and the value that credit unions provide to the nation's consumers.

CFA developed the statement in consultation with the  credit union representatives on its board: CUNA's Cheney; Wright-Patt CU CEO Douglas Fecher, SchoolsFirst FCU CEO Rudy Hanley, Navy FCU CEO Cutler Dawson, National Association of Federal Credit Unions CEO Fred Becker, and CUNA Mutual Group's Larry Blanchard. The CFA is an association of nearly 300 consumer  groups and cooperative organizations founded in 1968 to advance consumer interest through research, advocacy and education.  CUNA is a charter member.

A news release highlighting the statement of support for credit unions was distributed by CFA to about 600 consumer media outlets on Friday.

Inside Washington (12/08/2011)

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  • WASHINGTON (12/9/11)--The Federal Deposit Insurance Corp. (FDIC) Wednesday approved a $3.28 billion budget for 2012, which is 15.4% lower than this year's budget. The drop is attributed primarily to a steadily declining workload since the height of the economic crisis. The agency plans to eliminate more than 500 non-permanent employees who work in resolution operations. Spending on work related to failed banks is expected to decline about 32% from this year's budget to $1.5 billion. However, other budget areas will grow because of the FDIC's new duties under the Dodd-Frank Wall Street Reform Act, such as its oversight role with systemically important institutions. "It appears that the peak of the recent banking failures may have passed, and the FDIC is now positioned to begin reducing budget and staffing levels while continuing to fulfill our mission and maintain readiness to handle remaining bank failure and supervisory challenges," said FDIC Acting Chairman Martin Gruenberg in the FDIC's announcement. "While this budget reflects our priority to reduce costs where prudent, it also allocates the resources needed to implement new authorities under (Dodd-Frank), primarily the FDIC's ability to facilitate the orderly resolution of a large, complex financial institution."  The board approved a staff of 8,704 employees, a reduction of 565 positions from this year's staff. More than one-third of the FDIC's 2012 staffing will be temporary employees who will assist with bank closings; perform follow-up work related to the management and sale of failed bank assets; and support supervision of a continued high number of problem banks. There were 157 bank failures in 2010 and 90 so far this year …

Loan participations RegFlex liquidity on NCUA agenda

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ALEXANDRIA, Va. (12/9/11)--Loan participations, Regulatory Flexibility (RegFlex), and an advance notice of proposed rulemaking on liquidity access are among the items on the National Credit Union Administration's (NCUA) Dec. 15 agenda.

The loan participation issue has been addressed by the agency in recent months, with NCUA Chairman Debbie Matz this fall saying the agency would develop a new loan participation protection rule covering both originators and buyers to require originators to retain some of the original loan risk on their balance sheets, and require buyers to do more due diligence.

CUNA recently commented on another December agenda item, requesting that the NCUA reinstate the RegFlex program.

The final version of a proposed NCUA corporate credit union proposal will also be addressed during the meeting. The NCUA earlier this year released a series of technical amendments and clarifying changes to its corporate credit union rule, Part 704. The proposed changes amend NCUA regulations to exclude Central Liquidity Facility (CLF) stock subscriptions from the definition of net assets. The proposal also clarifies that violations of the weighted average life of a corporate's assets are not subject to capital category reclassification. The proposal would require the preparation of investment action plans for such violations. These changes were made to "relieve regulatory burden where warranted" and ease access to liquidity, the NCUA has said.

The NCUA's strategic plan for the years 2011 through 2014, the 2012 Annual Performance Budget, the 2012 Budget for NCUA Guaranteed Note Securities Management and Oversight, and National Security Delegations of Authority are also on the agenda.

The NCUA will also respond to Virginia-based Henrico FCU's request to expand its community charter during the meeting.

The closed board meeting, which typically immediately follows the open board meeting, has been rescheduled to Dec. 14.

For more on the NCUA board meeting, use the resource link.

CFPB director appointment blocked in Senate

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WASHINGTON (12/9/11)--The U.S. Senate on Thursday elected not to hold a full vote on the Obama administration's nominee to lead the Consumer Financial Protection Bureau (CFPB), Richard Cordray, defeating a cloture motion by a 45-to-53 vote. A total of 60 yes votes would have brought Cordray's confirmation vote to the Senate floor.

President Barack Obama said "there is no reason" for Cordray not to be nominated, and added the White House would "continue pushing on this issue." The White House in a release said his administration would explore all options and take nothing "off the table" with respect to ensuring that the CFPB is able to fulfill its mission of protecting consumers. Obama did not rule out a recess appointment.

The nomination of a CFPB director has been controversial, with legislators for or against the appointment lining up mostly by party lines. Some Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the CFPB. One such change is replacing the director's position with a five-member panel of leadership as a way, supporters say, of making the CFPB's actions more transparent.

Wheres My Debit Discount site launched by EPC

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WASHINGTON (12/9/11)--An Electronic Payments Coalition (EPC) research project has found that "there is no evidence that American consumers are benefitting from the Durbin amendment, despite overwhelming evidence that the retail industry is experiencing significant savings," and the EPC is presenting the results of its own consumer study on a new website: wheresmydebitdiscount.com.



The Federal Reserve's final debit interchange rule, which became effective in October, caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents. The regulation also allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards.

Industry data cited on the EPC website said that retailers have saved $825 million since the interchange cap came into effect, and Bloomberg Government has estimated that retailers will bring in an additional $8 billion in revenues per year as a result of the interchange changes.

The EPC researched standard merchant pricing before and after the Oct. 1 implementation of this interchange fee cap by making 84 separate shopping trips to 21 retail locations of four major national retail brands in six U.S. cities. The EPC said this field research found that customers paid, on average, 1.7% more for the same products after the debit interchange cap was implemented.

While the U.S. Congress justified the interchange fee cap "in part because of proclamations by retailers that consumers would benefit in the form of lower prices," the EPC said its field research has shown that 76% of surveyed retailers have not passed any of the savings created by the debit fee cap on to their shoppers.

The Credit Union National Association (CUNA) and others warned that retailers would not pass on any savings to their customers as the interchange cap legislation made its way through Congress. CUNA is an EPC member.

Lawmakers Card reforms hurt stay-at-home spouses

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WASHINGTON (12/9/11)--Rep. Carolyn Maloney (D-N.Y.) and several other U.S. House members have asked the Consumer Financial Protection Bureau (CFPB) to conduct an extensive review of the impact that ability-to-pay rules that were imposed by the Credit Card Accountability Responsibility and Disclosure (CARD) Act and became effective on Oct. 1 are having on the ability of some consumers to obtain credit.

The ability-to-pay rules, which are now part of Regulation Z, require a card issuer to consider a consumer's independent ability to make required payments on a credit card account, regardless of the consumers age, before opening a new card account or increasing the credit limit on an existing account. Outside of community property states, a card issuer may not rely solely on household income provided by an applicant on a credit card application, but will need to obtain additional information about the applicants independent income. Information concerning the applicant's income or salary, however, may be relied on in order to determine whether the applicant has the ability to make the required payments.

In a letter to de facto CFPB leader Raj Date, the legislators said the CFPB should amend Regulation Z if it finds that these rules are causing any negative effects. House Financial Services Committee Chairman Spencer Bachus (R-Ala.), Rep. Barney Frank (D-Mass.) and Rep. Louise Slaughter (D-N.Y.) were among the letter's 25 co-signors.

The letter notes one unintended consequence of these rules: limiting the ability of stay-at-home spouses to secure new lines of credit. In one case, an issuer said the average line of credit assigned to women was well below the average assigned to men. "In addition, approval rates have declined significantly for women in certain age groups, especially for those 62 and over, who may be particularly likely to rely on the income of other household members," the letter adds.

Maloney said Congress needs to make sure "that women are not subject to credit denials because of a misreading of the law. Nonworking spouses must continue to have access to credit using household income, and the CFPB has the tools to tell if that is happening."

Overall, the CFPB "can look across the credit card issuing industry" to determine any potential negative impacts of the rule, and can collect first-hand stories of financial issues through its consumer complaint collection processes, the letter said. The legislators recommended the CFPB begin this process before the end of the year.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA applauds the lawmakers for requesting the study. "Like these lawmakers, CUNA is also concerned about unintended consequences of this or any other major rulemaking," she added.

For the full letter, use the resource link.

Senate votes May extension for flood insurance

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WASHINGTON (12/9/11)--Legislation that would extend the National Flood Insurance Program (NFIP) until May 31 has been approved in the U.S. Senate by a voice vote, and is now awaits a House vote.

The legislation was introduced by Sen. David Vitter (R-La.). A House vote on the legislation has not been scheduled yet. The NFIP has been funded by short-term resolutions for some time, and unless the House approves the extension and it is then signed into law by President Barack Obama, the program currently set to expire on Dec. 16.

The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA supports and appreciates the Senate action backing even a short-term extension, and encourages the House to pass the bill quickly.

"However, we also think it is important that Congress consider a long term extension of this program to provide stability and predictability," he added.

Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have said the NFIP is in need of reform. The NFIP has been on the Government Accountability Office's (GAO) high-risk list since 2006, when the program had to borrow from the U.S. Treasury to cover losses from the 2005 hurricanes, and its outstanding debt and operational and management challenges have kept it there.

NEW Senate Blocks Cordray CFPB Nomination

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WASHINGTON (UPDATED: 11:30 A.M. ET)—The U.S. Senate this morning elected not to hold a full vote on the Obama administration's nominee to lead the Consumer Financial Protection Bureau (CFPB), Richard Cordray, defeating a cloture motion by a 45-to-53 vote. A total of 60 yes votes would have brought Cordray's confirmation vote to the Senate floor.

President Barack Obama today said the White House would "continue pushing on this issue."

The nomination of a CFPB director has been controversial, with legislators for or against the appointment lining up mostly by party lines. Some Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the CFPB. One such change is replacing the director's position with a five-member panel of leadership as a way, supporters say, of making the CFPB's actions more transparent.

Deputy U.S. Treasury Secretary Neil Wolin has countered, however, that the transparency concerns are unfounded, for instance saying in this week's Treasury Notes Blog post that the CFPB does not lack accountability nor transparency. Treasury is parent agency to the consumer bureau.

Inside Washington (12/07/2011)

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  • WASHINGTON (12/8/11)--Federal Reserve Board Chairman Ben Bernanke publicly disputed media reports that portray the Federal Reserve helping big banks at the expense of the American public during the 2008 financial crisis (American Banker Dec. 7). In letters to the congressional banking committees, Bernanke disclosed a four-page memo distributed to Fed employees refuting a number of facts in recent articles by Bloomberg News and other media outlets. "There have been a series of recent articles--one just last week--concerning the Federal Reserve's emergency lending activities during the financial crisis," Bernanke wrote in the letter. "The articles have largely repeated the same information in different formats and have contained a variety of egregious errors and mistakes." Although the memo did not name Bloomberg specifically, it offered details of a Nov. 27 Bloomberg Markets Magazine article that claimed big banks had received $13 billion of income after the Fed had committed $7.7 trillion in guarantees and lending before March 2009. The central bank never provided a lending program that was not disclosed to the public or Congress, according to the memo. Bloomberg stands by its reporting in the article, a company spokesman said …
  • WASHINGTON (12/8/11)--House members showed support Tuesday for measures to bar lawmakers from profiting on inside knowledge, but they differed on what approach that ban should take (American Banker Dec. 7). The agreement comes in the wake of a Nov. 13 60 Minutes report about congressional representatives from both political parties making trades after receiving non-public information (News Now Nov. 21). The Stop Trading on Congressional Knowledge Act, the bill with the most support, would expressly bar members from making trades based on nonpublic knowledge regarding legislative activity, strengthen disclosure rules for certain trades, prohibit congressional staffers from disclosing nonpublic information about legislation that could be used by traders, and require lobbying registration for firms that gather political intelligence for investors. Other bills would require lawmakers to place their investments in a blind trust …
  • WASHINGTON (12/8/11)--The Office of the Inspector General at the Federal Deposit Insurance Corp. confirmed that the office is involved in an investigation into the premature and seemingly unauthorized release of a plan to implement the so-called Volcker Rule, which, under the Dodd-Frank Wall Street Reform Act, would restrict proprietary trading in which banks could engage (American Banker Dec. 7). During a Senate Banking Committee hearing, Sen. Richard Shelby (R-Ala.) said it has been a struggle for regulators to effectively implement a number of Dodd-Frank rules, most notably the Volcker Rule.  He said those efforts specifically have been marked by "misconduct, ambiguity, and interagency discord" …
  • WASHINGTON (12/8/11)--The Federal Housing Finance Agency has appointed Manoj K. Singh as principal examiner for risk in charge of Fannie Mae and Freddie Mac. Singh most recently worked as a special adviser with The Collingwood Group, a Washington-based consulting firm (American Banker Dec. 7). From 2006 to July he worked at Freddie Mac, where he last served as senior vice president of pricing and securitization on the single-family side of the business. He was previously senior vice president of market risk management …
  • WASHINGTON (12/8/11)--The Office of the Inspector General at the Federal Deposit Insurance Corp. confirmed that the office is involved in an investigation into the premature and seemingly unauthorized release of a plan to implement the so-called Volcker Rule, which, under the Dodd-Frank Wall Street Reform Act, would restrict proprietary trading in which banks could engage (American Banker Dec. 7). During a Senate Banking Committee hearing, Sen. Richard Shelby (R-Ala.) said it has been a struggle for regulators to effectively implement a number of Dodd-Frank rules, most notably the Volcker Rule.  He said those efforts specifically have been marked by "misconduct, ambiguity, and interagency discord" …

HUD reports 5.4 million mortgage mods made

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WASHINGTON (12/8/11)--More than 5.4 million mortgage modification arrangements were started between April 2009 and the end of October 2011, the U.S. Department of Housing and Urban Development (HUD) reported in its November Housing Scorecard.

HUD said the loan adjustments included more than 1.7 million trial modifications under the Home Affordable Modification Program (HAMP) and more than 1.1 million Federal Housing Agency loss-mitigation and early-delinquency interventions. HUD said more than 880,000 permanent mortgage modifications have been made through HAMP, reducing the average payments made by those homeowners by 37%.

More than 2.5 million proprietary modifications were made under the HOPE Now program, HUD added. HOPE Now is an alliance of major mortgage servicers, mortgage counselors, government officials and non-profit groups intended to develop strengthened efforts to help struggling homeowners keep their homes.

Nearly one in four homes that took part in HAMP are located in California, and the greater Los Angeles area accounted for 7% of all mortgage modifications, nationwide.

More than 20% of mortgages held in Florida were more than 60-days past due, the report added.

For the full HUD release and report, use the resource links.

Cordrays CFPB confirmation vote expected today

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WASHINGTON (12/8/11)--A U.S. Senate vote on the nomination of Richard Cordray to become director of the Consumer Financial Protection Bureau (CFPB) is expected to take place today.

The nomination of a CFPB director has proven controversial, with legislators for or against the appointment lining up mostly by party lines. For instance, a group of 44 Senate Republicans earlier this year signed a letter saying they would block any CFPB nominee if certain structural changes were not made to the CFPB.

These lawmakers back replacing the director's position with a five-member panel of leadership, among other changes. Some supporters argue this would make the agency actions more transparent. A bill that would impose the changes passed the House by a 241-173 vote in late July, but has not been brought up in the Senate Banking Committee.

Deputy U.S. Treasury Secretary Neil Wolin has countered that the CFPB concerns are unfounded, for instance saying in a Wednesday Treasury Notes Blog post that the CFPB does not lack accountability nor transparency. Treasury is parent agency to the consumer bureau.

CFPB unveils sample credit card disclosures

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WASHINGTON (12/8/11)--The Consumer Financial Protection Bureau (CFPB) has begun another stage of its Know Before You Owe project, announcing on Wednesday that its sample credit card disclosures.

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A two-page disclosure that "contains the key terms consumers need, clearly laid out and without fine print" has been released to the public, and the CFPB said its initiative will simplify contracts to help consumers better understand their credit cards while allowing card issuers to retain their freedom to design credit card products.

The sample form divides credit card information into three sections: Costs, Changes and Additional Information.

The Costs section lays out interest rates and related charges tied to purchases, balance transfers, and cash advances, and provides information on returned payment fees, replacement card fees, rush card fees, and foreign currency transaction fees. Payment deadlines and possible late payment issues are also explained on the form.

The form also addresses changes that could be applied to the credit card account, including penalty interest rates and other interest rate changes, credit limit changes, fees, and other terms.

Cardholder and card issuer rights are explained in the Additional Information section. Consumer privacy rights and other terms of the credit card agreement are also addressed.

The CFPB has launched a testing program with one credit card issuer, and has also released the sample form for public comment. The CFPB said it ultimately would not set the terms of card products, and credit card issuers will "have total control of terms within the limits of existing law."

The new credit card project was announced at a Wednesday meeting in Cleveland, Ohio. The Ohio Credit Union League and 10 representatives from five Ohio-based credit unions attended the announcement, and gave their opinions on the new disclosure during a roundtable discussion with the CFPB. The credit union representatives also covered financial education and general credit union issues during the meeting.

The Credit Union National Association will be reviewing the sample form with its Consumer Protection Subcommittee and Lending Council and providing feedback to the CFPB later this month.

In a separate blog post, the CFPB advised credit card shoppers on how to proceed as they decide which credit card they should use.

Credit card shoppers should first determine how they are going to use their new card, and whether or not they will pay the card off every month or maintain a balance on their credit card. Card customers should also know which terms to compare when evaluating credit card offers. The CFPB suggested that they focus on annual percentage rates (APR), APR for balance transfers, penalty APRs, and fees attached to the credit card account.

The CFPB said that credit unions or other financial institutions with which the consumer already has an account may offer the best credit card terms, but added that consumers should not hesitate to compare mailed or online offers with offers from their current financial institutions. Credit card shoppers can also ask their current financial institutions to match the terms of any credit card offer, the CFPB said.

For more on the CFPB's credit card work, use the resource links.

CUNA gives planning insight in advocacy article

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WASHINGTON (12/7/11)--The 2012 House calendar, and its newly added feature of at least one "constituent work week" per month, is creating issues for associations that bring out-of-town advocates to Washington, CEO Update noted in a Dec. 2 article. However, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan told the publication that CUNA avoids these issues by scheduling fly-ins when House members are extremely likely to be in their D.C. offices.

House Majority Leader Eric Cantor released that chamber's 2012 calendar on Oct. 27, a date that is well past when most associations have scheduled meetings and booked hotels for the year.

CEO Update said that groups that have now learned that the House will be out during a week they have scheduled members to come for Capitol Hill visits must decide whether to keep their scheduled meetings to pursue meeting with lawmakers in U.S. Senate, which will be in session, reschedule the meeting to when lawmakers in both houses of Congress will be in Washington,  or cancel them altogether.

Donovan said CUNA has generally avoided a scheduling problem by planning fly-ins for "more predictable" weeks, like those that are directly after a holiday break—such as days following the July 4 break, or in September between Labor Day and the Jewish holidays of Rosh Hashanah and Yom Kippur.

CUNA has traditionally avoided traveling conflicts by scheduling its premier Governmental Affairs Conference on the week following Presidents Day. However, this year, due to outside circumstances, CUNA's GAC will be held March 18-22 at the Washington Convention Center. Luckily, the House calendar has cooperated and the House will be in session and the traditional Capitol Hills visits, which are an integral part of the GAC, are in good shape to proceed in force.

CUNA's GAC is the credit union movement's premier political event and its largest national conference, each year providing more than 4,000 credit union executives and board members an opportunity to hear influential leaders from the U.S. Congress, the administration and federal regulatory agencies.

American Idol star Taylor Hicks will perform at the 2012 GAC opening concert, and former Secretary of State Condoleezza Rice, journalistic duo Bob Woodward and Carl Bernstein, and political pundit Charlie Cook have signed on as keynote speakers for the 2012 GAC.

Additional speakers and session topics will be announced in the weeks to come. For more information and to register use the resource link below or go to gac.cuna.org.

NCUA IG reports material loss reviews have been focus

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ALEXANDRIA, Va. (5/25/11)--The National Credit Union Administration's (NCUA) Office of the Inspector General in its semi-annual report to the agency and the U.S. Congress said it has remained active in both audit and investigative matters, focusing on both material loss reviews and security-related issues.

The report covers the time between April 1 and Sept. 30. It summarizes the material loss reviews of Members United Corporate FCU, Beehive CU, Certified FCU, Constitution Corporate FCU, Southwest Corporate FCU, and the OIG also detailed the NCUA's own progress in improving its examination and supervision procedures for overseeing credit unions.

The OIG in 2010 recommended the agency take corrective actions related to its documentation, monitoring, exam procedures, quality control reviews and regulatory guidance, and, in this most recent report to Congress, the OIG said the NCUA "has made significant progress and is in various stages of implementing corrective action" on these and other recommendations.

The report also reviews the OIG's own internal security work, which included reviewing building security measures at the NCUA's Central Office and Region II facility and investigating allegations of misconduct and fraud by some NCUA employees.

The overall financial status of the credit union industry was also addressed in the report, with the OIG noting 0.3% total growth in assets, and an increase in the net worth to assets ratio of 0.08%, during the six-month period ended September 30. The OIG also noted that while total share accounts increased during this time period, the amount of loans taken out at credit unions fell slightly.

NCUA comments on key credit union issues, including the debit interchange fee cap and increasing the credit union member business lending cap, are addressed, as are other NCUA developments, including the naming of NCUA Chairman Debbie Matz to lead the Federal Financial Institutions Examination Council, the setting of the 2011 Temporary Corporate Credit Union Stabilization Fund Assessment, the creation of the NCUA Guaranteed Note oversight plan, and the finalization of the NCUA's Voluntary Prepayment of Stabilization Fund Assessments Plan.

CUNA's Examination and Supervision Subcommittee will be reviewing the report and following up on any issues of concern.

For the full NCUA OIG report, use the resource link.

NCUA promotes small CU office in new training video

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ALEXANDRIA, Va. (12/7/11)--The National Credit Union Administration's (NCUA) Office of Small Credit Union Initiatives (OSCUI) announced a free training video Tuesday, An Introduction to OSCUI, to give credit unions information on how services of  that division of the agency can help small credit unions " grow and thrive."

OSCUI Director Bill Myers said the free training video is one of a series of planned future training and informational videos "to underscore NCUA's commitment to the success of small, low-income and newly chartered credit unions."

The OSCUI administers the NCUAs Community Development Revolving Loan Program and aids small credit union development and member service. The NCUA said the 33-minute video provides a general outline of the OSCUI and gives tips on how to access its services.

The video addresses four small credit union programs. They are:

  • Direct assistance through one-on-one consulting;
  • Classroom-based and online training courses;
  • Financial assistance through grants and loans; and  
  • Partnerships with government, non-profit and private organizations.
NCUA Chairman Debbie Matz said in a release that the agency is "committed to making sure small credit unions are fully informed of all the resources available to help them succeed," Matz added.

Work to minimize Dodd-Frank impact continues Fed testifies

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WASHINGTON (12/7/11)--The Federal Reserve Board has made special efforts to identify and minimize the regulatory burden faced by credit unions and other small financial institutions, and assesses the potential impact that rules could have on small businesses, small governmental jurisdictions, and small organizations, as it implements rules under the Dodd-Frank Wall Street Reform Act, Fed Governor Daniel Tarullo testified on Tuesday.

Tarullo said the Fed has established a subcommittee of regulatory and supervisory oversight committee members "for the express purpose of reviewing all regulatory matters" from the perspective of credit unions and other small, community-based financial institutions. The reviews undertaken by this group "are intended to find ways to reduce the burden on community depository organizations arising from our regulatory policies without reducing the effectiveness of those policies in improving the safety and soundness of depository organizations of all sizes," he said.

The Fed's Community Depository Institutions Advisory Council (CDIAC) is also helping to address the needs of small financial institutions, Tarullo noted. The CDIAC has 12 separate district bank-based councils, and chairmen from each of these 12 councils serves on the Feds larger CDIAC, which meets twice a year in Washington, D.C. That group provides the Fed with input on the economy, lending conditions, and other issues. A number of credit union representatives serve on these councils.

Overall, the Fed governor testified, the Fed has issued 29 final rules, public notices, and reports, and has begun work on another 13 related rules. The Fed is expected to issue approximately 60 sets of rules and formal guidelines as part of its implementation efforts, and the Fed is "working diligently to complete the remaining rules," he added.

The Fed is trying to make its rulemaking process "as fair and transparent as possible, with ample opportunity for the public to comment," and is specifically seeking public comment on the costs and benefits of proposed rulemaking approaches, and what, if any, alternative approaches could be used.

Tarullo testified at a Senate Banking Committee hearing on the "Continued Oversight on the Implementation of the Wall Street Reform Act."  Deputy Treasury Secretary Neal Wolin, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler, Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg, and acting Comptroller of the Currency John Walsh also testified during the hearing.

While the Credit Union National Association (CUNA) commends the objectives of the efforts referenced by Tarullo referenced, CUNA underscores that credit unions are overwhelmed by regulations with which they must comply, but which address problems credit unions generally weren't involved in.

Many of the regulations affecting credit unions that the Fed used to oversee have now been transferred to the Consumer Financial Protection Bureau, which has approached its responsibilities so far by reaching out to credit unions and other stakeholders before developing regulations. CUNA said it encourages the Fed to utilize this approach to a greater extent when fine tuning rules that will remain under its jurisdiction, such as Regulation D, which covers monetary control reserve requirements for transaction accounts, and provisions of Regulation E, Electronic Fund Transfer Act, which covers debit card interchange regulations.

CUNA will be following up with the Fed to pursue regulatory changes under that agency's authority that will benefit credit unions.

For more on the hearing, use the resource link.

SCE FCU Sonepco FCU merger approved by NCUA

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ALEXANDRIA, Va. (12/7/11)—The National Credit Union Administration said it has approved the merger of Sonepco FCU of Las Vegas into El Monte, Calif.-based SCE FCU.

The merger will give the 42,000-member, $497 million-in-asset SCE FCU entry into the Nevada market. The boards of both credit unions approved the merger earlier this year.

Sonepco FCU held $56 million in assets, and was organized in 1955 to serve employees of Nevada Energy and their families and other members of the local community. SCE was organized in 1952 and serves multiple employee groups, though it has historically served employees of Southern California Edison power company.

The boards of the merging credit unions approved the merger this summer and Sonepco CEO Sue Longson in a statement made at that time called the merger a natural progression since both credit unions have a history of serving employees at energy companies.

Inside Washington (12/06/2011)

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  • WASHINGTON (12/7/11)--While large banks are providing detail-filled resolution plans, regulators appear to have accepted condensed versions since the "living wills" requirement was finalized three months ago. As part of the Dodd-Frank Act, the Federal Deposit Insurance Corp. (FDIC) and Federal Reserve Board finalized rules in September that require large banks to provide resolution plans for how they would unwind in the event of failure (American Banker Dec. 6).  An initial plan and regular updates are required of firms with more than $50 billion in assets and nonbanks deemed systemically risky. But while a living will for the largest banks could run to thousands of pages, participants in recent discussions said the regulators have indicated an interest in "quality over quantity," according to the Banker. Regulators appear willing to work to build a dialogue with banks to develop proper plans if an institution can show regulators how to find information as needed, John Bovenzi, a partner in Oliver Wyman's financial services practice and former FDIC chief operating officer …
  • WASHINGTON (12/7/11)--The Federal Deposit Insurance Corp. (FDIC) is claiming the same rights as other banks in collecting losses from directors and officers of failed banks. In one instance, Sterling Bank in Spokane, Wash., pursued the $6 million it loaned to Bank of Clark County and another $1.14 million for regulatory fees from the loss (American Banker Dec. 6). Sterling filed a lawsuit against the bank's directors and officers in Superior Court for the State of Washington in May 2009. The FDIC has since intervened in the case, claiming it is owed $19 million from Bank of Clark County's directors and officers. The case has been moved to the U.S. District Court for the Eastern District of Washington. Both the FDIC and Sterling claim that Bank of Clark County's directors and officers breached their fiduciary responsibility and were negligent …
  • WASHINGTON (12/7/11)--The Commodity Futures Trading Commission (CFTC) issued final rules Monday making it more difficult to segregate customer funds from a derivatives firm's trading activities. The final rule was issued in the midst of ongoing efforts to resolve customer claims in the MF Global Inc. failure (American Banker Dec. 6). MF Global, already decimated by bad debts on European sovereign debt, declared bankruptcy Oct. 31 after an estimated $1 billion in funds from its customer accounts was reported missing. The CFTC had previously proposed restrictions on how firms can use segregated funds. But commission officials have called for stiffer regulations while investigating whether MF Global improperly raided customer accounts to fund its operations. The Commodity Exchange Act allows customer funds to be used for a list of certain investments. The CFTC previously had provided exemptions from that list, including the ability to invest money from customer accounts in highly rated sovereign debt instruments. Those exemptions are limited under the new rule …
  • WASHINGTON (12/7/11)--The U.S. Treasury Department announced the release of seven years of data provided by Community Development Financial Institutions (CDFIs) through a data collection system known as the Community Investment Impact System (CIIS).  The report, for fiscal years 2004 through 2010, contains Institution Level Report (ILR) data on 534 CDFIs that have reported to CIIS. In general, the report covers CDFI information on overall assets, loans, investments, sources and cost of capital, financing of day-to-day activities, staffing and impact in their communities. A previous data release in 2007 consisted of ILR data on 223 CDFIs in fiscal year 2003, 236 in fiscal year 2004, and 173 in fiscal year 2005. CDFI Fund Director Donna Gambrell said, "This comprehensive data release will be a valuable tool for researchers, academics, and the CDFI industry, and I believe it presents evidence of the tangible and lasting impact of CDFI investments in low-income communities. The CDFIs that submitted CIIS data for this report originated $10.9 billion in loans and investments from 2004 to 2010" …

Senate to vote on CFPB head nomination this week

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WASHINGTON (12/6/11)--The White House has said the Senate will vote this week on Richard Cordray's nomination to become head of the Consumer Financial Protection Bureau (CFPB), and the Obama administration added it is aggressively seeking Republican support for his nomination ahead of the hearing.

It is widely reported that the vote would take place on Thursday, Dec. 8.

Cordray's nomination to be CFPB director was approved by the Senate Banking Committee in October, but has stalled since then. Over 40 senators have said they will not vote to confirm any CFPB nominee unless changes to the CFPB are enacted. Those changes include increasing CFPB leadership to a five-member commission and reforming some operational rules.

The CFPB is currently operating under the leadership of Raj Date, associate director of research, markets & regulations, while it waits for a full director.

Fed Reserve announces district chair deputy positions

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WASHINGTON (12/6/11)--The Federal Reserve Board has named the 2012 district chairpersons and deputy chairpersons for its 12 Federal Reserve Banks.

The 12 banks are located in Boston; New York;  Philadelphia; Cleveland;  Richmond, Va.; Atlanta; Chicago; St. Louis; Minneapolis; Kansas City, Mo.; Dallas; and San Francisco. Each bank has a nine-member board of directors. The Federal Reserve appoints three of these directors and designates chairs and deputy-chairs each year.

Kirk Sykes, president of Urban Strategy America Fund L.P., will chair the Boston Fed Bank, with Yale University Sterling Professor of Economics William Nordhaus serving as deputy chair.

William Penn Foundation President Jeremy Nowak will lead the Philadelphia Fed Bank, and The Swarthmore Group Chairman James Nevels will serve as deputy chair.

Energizer Holdings CEO Ward Klein will lead the St. Louis Fed Bank, and Peabody Energy Executive Vice President Sharon Fiehler will serve as deputy chair.

The Minneapolis Fed Bank will be chaired by Mary Brainerd, CEO of HealthPartners, and Pentair Inc. CEO Randall Hogan will serve as deputy chair.

Former USG Corp. Chairman William Foote will again chair the Chicago Fed Bank, with ManpowerGroup CEO Jeffrey Joerres coming in to serve as deputy chair.

Paul DeBruce will also repeat as chair the Kansas City Fed Bank, with Barbara Mowry, CEO of GoreCreek Advisors, serving as deputy chair.

The current chairs and deputy chairs of the New York, Cleveland, Richmond, Atlanta, Dallas, and San Francisco Fed Banks will remain in their positions for 2012, the Fed said.

For the full release, use the resource link.

House Senate have much to do before adjournment

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WASHINGTON (12/6/11)--Appropriations bills and tax extender legislation are among the items standing between Congress and the holiday recess, but credit unions will also want to watch for hearings on Dodd-Frank Act implementation and private mortgage regulations, among others.

The Senate Banking Committee on Tuesday will discuss the "Continued Oversight on the Implementation of the Wall Street Reform Act," with Deputy Treasury Secretary Neal Wolin, Federal Reserve Governor Daniel Tarullo, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler, Federal Deposit Insurance Corp. (FDIC)  Chairman Martin Gruenberg, and acting Comptroller of the Currency John Walsh scheduled to testify.

The House Ways and Means Committee and Senate Finance Committee have also set a hearing for today, entitled "Tax Reform and the Tax Treatment of Financial Products." Joint Committee on Taxation chief of staff Thomas Barthold, academics, and industry representatives will testify during that hearing.

The House Financial Services capital markets subcommittee will hold a hearing entitled the "Private Mortgage Market Investment Act, Part 2," on Wednesday.

That committee's financial institutions subcommittee will conduct a Wednesday hearing on enhanced supervision of large, complex financial institutions, with former FDIC Chairperson Sheila Bair among those set to testify.

The full House Financial Services Committee was set to discuss legislation related to examination of depository institutions this week, but that hearing has been postponed until next year. In lieu of that hearing, the committee is expected to hold a hearing Tuesday on H.R. 1148, the Stop Trading on Congressional Knowledge Act.

Hearings on cybersecurity and internet domain names have also been scheduled.

A House vote on H.R. 10, the Regulations from the Executive in Need of Scrutiny (REINS) Act, and a Senate vote on the nomination of Richard Cordray to serve as Consumer Financial Protection Bureau leader may also take place this week. (See related story: Senate to vote on CFPB head nomination this week)

Congress has targeted an adjournment date of Dec. 16, but that date is subject to change. For more on this week's hearings, use the resource link.

CU loans continue increase in October CUNA

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WASHINGTON (12/6/11)--Credit union loans outstanding increased for the seventh straight month, growing by 0.3% in October, the Credit Union National Association (CUNA) reported in its analysis of October's monthly sample of credit unions.

This loan increase was led by growth in adjustable-rate mortgages, which increased by 1.3%. Used auto loans increased by 0.6%, unsecured personal loans went up by 0.5%, and credit card loans increased by 0.4%, the CUNA report added. However, new auto loans, fixed-rate mortgages, and home equity loans all decreased, falling by 0.1%, 0.2%, and 0.3%, respectively.

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Credit union loans totaled $581.5 billion in October, compared with $584 billion in the previous month, according to the monthly estimate. (See chart)

Overall, credit unions' capital-to-asset ratio remained at 10% during the month. The total dollar amount of capital was $100 billion. CUNA Chief Economist Bill Hampel said the capital ratio results were "good news, considering that credit unions were accounting for the corporate stabilization expenses in October."

Credit union savings balances fell by 0.1% in October, but money market accounts grew by 0.8% and regular shares increased by 0.4%, CUNA reported. Individual retirement accounts and one-year certificates each decreased by 0.2%, and share drafts went down by 2.8%, the report added. Credit union savings balances increased by 1.3% in September.

The credit union system held $836.4 billion in savings in October 2011, an improvement when compared to the $803.1 billion total recorded this time last year. (See chart)

Credit unions' 60-plus day delinquency rate remained at 1.6%, and the loan-to-savings ratio also held steady at 70%.
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On membership, CUNA estimated credit unions added 441,000 new members in September and October -- roughly equal to 75% of total credit union member growth in all of 2010 and a further indication that consumers made significant movement to credit unions in the weeks prior to Bank Transfer Day. Specifically, credit union membership increased 227,000 in September and 214,000 in October.

CUNA also believes about 400,000 new checking accounts were likely opened by credit union members in October.  The combination of new members In October and new checking accounts from existing members puts the total close to the 650,000 estimated in an earlier CUNA pre-Bank Transfer Day survey, which was intended to provide a rapid response and which CUNA now believes likely drew estimates of both members and new accounts based on credit unions' interpretation of the survey question.

Inside Washington (12/05/2011)

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  • WASHINGTON (12/6/11)--The Treasury Department is pressuring small- and mid-sized financial institutions to unwind its remaining investments in the Troubled Asset Relief Program (TARP). The agency sent a letter to 380 banks advising that it had hired the investment advisory firm, Houlihan Lokey Capital Inc., to pursue the recovery of the remaining $17 billion in TARP investments (American Banker Dec. 5). The government has largely unwound TARP investments to big banks. Even though banks have another two years before the dividend rate on TARP funds increases dramatically, the letter sent a message that banks must begin thinking about how they will divest themselves of the funds, said V. Gerard Comizio, a partner at Paul, Hastings, Janofsky & Walker LLP. Large financial institutions tend to have great access to capital than smaller banks. The healthiest small banks may be able to buy back shares, while still-troubled institutions may opt for alternatives such as converting preferred shares to common stock, the Banker said …
  • WASHINGTON (12/6/11)--CUNA Strategic Services provider Agility Recovery Solutions and the U.S. Small Business Administration will host a webinar focusing on best practices to help those in leadership positions navigate the road to recovery after disasters at 2 p.m. Dec. 20.  "Management Obligations during Disaster Recovery" will be presented by Bob Boyd, Agility president/CEO. Boyd will share real-world disaster recovery scenarios and engage participants in a discussion on practical strategies to develop the wisdom and skill needed to become a more resilient leader. A question-and-answer session will follow …

Small Oregon CU is liquidated 14th of 2011

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ALEXANDRIA, Va. (12/5/11)—The National Credit Union Administration (NCUA) announced Friday that it liquidated a small Eugene, Ore. federal credit union that had been placed into conservatorship in June.

Certain assets and member shares of that credit union, O.U.R. FCU, were immediately purchased and assumed by Northwest Community CU of Springfield, Ore., according to the NCUA announcement.

O.U.R. FCU, with $4.3 million, had been placed under conservatorship to allow it to continue full operations for its 2,184 members while operating under NCUA control and addressing previous service and operational weaknesses.

The assumed accounts of the new Northwest Community CU continue to be federally insured and the new Northwest Community members will experience no interruption in services. Northwest Community Credit Union serves more than 71,000 members in 15 Oregon counties and has approximately $675 million in total assets.

NCUA made the decision to liquidate and discontinue the operations of O.U.R. Federal Credit Union after determining the credit union was insolvent and has no prospect for restoring viable operations on its own. At the time of liquidation and subsequent purchase by Northwest Community Credit Union, the former credit union served 1,379 members and had deposits of approximately $4.25 million.

O.U.R. FCU, chartered in 1969, fourteenth federally insured credit union liquidation in 2011.

Cheney Rep. Biggert talk financial lit at CFA

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WASHINGTON--Rep. Judy Biggert (R-Ill.) has made financial literacy one of her top priorities, and it is one credit unions share, Credit Union National Association (CUNA) President/CEO Bill Cheney emphasized Friday to consumer advocates and co-op leaders attending the Consumer Federation of America's (CFA) annual "Consumer in the Financial Services Revolution" conference in Washington, D.C.

Cheney, a member of the CFA board, was asked to introduce Biggert, whom he noted "is widely respected on Capitol Hill for her leadership on the issue of financial literacy."

Biggert is a member of the House Financial Services Committee and chairs its subcommittee in insurance, housing and community opportunity. She also co-chairs the House Financial and Economic Literacy Caucus. Cheney pointed out
Click to view larger image Rep. Judy Biggert (R-Ill.) and CUNA President/CEO Bill Cheney prepare to address the Consumer Federation of America's annual consumer finance meeting in Washington on the importance of consumer financial education. (CUNA photo)
Biggert was first elected to the House in 1998 with support from CUNA, the Illinois Credit Union System and the state's credit unions.

Biggert understands credit union's structure as not-for-profit, member-owned cooperatives "is an essential structural and philosophical difference that sets credit unions apart from the for-profit banking sector," Cheney told the CFA group. "Not every member of Congress 'gets it,' but Congresswoman Biggert most certainly is one who does."

In her comments, Biggert emphasized that the need for financial education is greater than ever, and the need remains whether economic times are good or bad.

She noted, for example, 60% of pre-teens don't know the difference between cash, a credit card and checks, 50% of high schoolers get failing marks on financial literacy tests, and only 25% of those between 13 and 21 say their parents teach them how to manage money.

Raising awareness about the issue among federal lawmakers is one reason she organizes Capitol Hill financial literacy fairs, where she noted credit unions and CUNA have taken part. The congresswoman noted she also has held seminars with Congressional FCU on financially empowering women.

Another of her financial-issue priorities, she added, is flood insurance reform legislation, which she noted has passed the House but still awaits action in the Senate.

CUNA served on the CFA's financial services conference advisory committee and is a charter member of CFA.

Inside Washington (12/02/2011)

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  • WASHINGTON (12/5/11)--Housing and Urban Development Secretary Shaun Donovan on Thursday offered alternatives for increasing the Federal Housing Administration's reserves before the House Committee on Financial Services (American Banker Dec. 2). Donovan said he expects to release a proposal in the coming months. Donovan's testimony came in the wake of a report that showed the Federal Housing Administrations (FHA) capital reserve ratio to about one-eighth of the 2% minimum standard required by law. Members of Congress expressed concern that the agency may require a bailout by taxpayers. Borrowers with low credit scores are now required to make a 10% down payment to qualify for an FHA mortgage, while borrowers with higher scores must make a 3.5% down payment, Donovan said. The bulk of the FHA losses are from loans originated before 2009, Donovan added. More recent loans are turning a profit, he said …
  • WASHINGTON (12/5/11)--Treasury Secretary Tim Geithner on Thursday said efforts by members of Congress to weaken the Dodd-Frank Act--including blocking key oversight positions, proposing legislation to repeal the law, or using cost-benefit analysis as a roadblock--will not succeed (American Banker Dec. 2).  Dodd-Frank's reforms are "sensible and essential," Geithner said, speaking before a conference hosted by the Financial Oversight Stability Council. The Obama administration and Congress took on the process of financial reform soon after the financial crisis, rather than waiting until the damage had been repaired to maximize the prospects of enduring changes. Efforts to undermine those reforms could limit future available credit to businesses and expose consumers to further abuse, he said …
  • WASHINGTON (12/5/11)--Senate Majority Leader Harry Reid (D-Nev.) will schedule a vote next week on Richard Cordray's nomination as director of the Consumer Financial Protection Bureau (CFPB), a spokesman for Reid said Thursday. Speaking to reporters in Washington, Reid said he would set votes next week to limit debate on four or five nominations (Bloomberg Dec. 2). Cordray is among those to be up for a vote, according to Adam Jentleson, a spokesman for Reid. Cordray, a former Ohio attorney general, is the CFPB's enforcement director. His nomination has drawn opposition from Republicans, who have promised to block any nominee for unless the CFPB's funding and leadership structures are changed. In a May letter, 44 lawmakers called for a board of directors to run the agency. The letter also demanded that the new agency be funded by congressional appropriations. Under the current structure, the CFPB's budget is set from the Federal Reserve. The Republican hold enough votes to block the Cordray nomination …
  • WASHINGTON (12/5/11)--Rep. Barney Frank (D-Mass) said Thursday the deadlock in Congress over the confirmation of a director for Consumer Financial Protection Bureau (CFPB) may not be broken until after the 2012 election. The bureau's full authority's is contingent on the Senate confirmation of a director, a provision which Frank said he regrets as one of the authors of the Dodd-Frank Act (American Banker Dec. 2). The provision was pushed by Senate leaders. The CFPB still has the power to enforce all existing consumer financial laws transferred from other regulators, Frank said. The confirmation of a director for the CFPB in the best interest of banks and credit unions, most of which are subject to the bureau's rules and oversight while their nonbank counterparts are not until a director is confirmed, Frank said …

CUNA leagues continue to press NCUA on TDRs

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WASHINGTON (12/5/11)--The Credit Union National Association (CUNA), credit union officials, and league staff discussed the range of regulatory problems and concerns that credit unions face when they provide troubled debt restructurings (TDR) to their members in a conference call with the National Credit Union Administration (NCUA) late last week.

TDR loans, which have very specific accounting and reporting requirements, occur when a credit union or other lender grants a concession to the borrower and modifies the terms of the loan based on the borrowers financial situation. The financial statement notes and call report data associated with TDRs are also unique.

The credit union representatives and CUNA staff, including Deputy General Counsel Mary Dunn, were joined on the call by NCUA Director of Examinations and Insurance Larry Fazio, General Counsel Mike McKenna, Senior Strategic Communications and External Relations Advisor Buddy Gill, Director of Supervision Matt Biliouris, and Chief Accountant Karen Kelby.

CUNA and others during the call noted that the NCUA's call report requirements are not consistent with U.S. Generally Accepted Accounting Principles, and asked the NCUA for clarifications on the distinctions between a TDR and a loan modification that is not a TDR and the circumstances under which a TDR is required to be reported as delinquent.

The credit union representatives during the call also noted that the NCUA's call report requirements force credit unions to track TDRs manually, and asked how call report requirements can be reconciled with GAAP.

The NCUA representatives said they are planning to release for public comment a proposed Interpretative Ruling and Policy Statement (IRPS) that will provide new guidance on reporting and other issues associated with TDRs. However, Dunn said, "there has been a real concern that the guidance would not address all issues sufficiently and leave some questions unanswered."

The NCUA asked CUNA and the other credit union representatives to provide further detail on what the guidance should address and how key issues should be handled, and CUNA plans to work with its accounting subcommittee to develop recommendations in time for the NCUA's upcoming Dec. 15 open board meeting.

Michigan CU League president/CEO Dave Adams, Northwest CU Association CEO John Annaloro, Missouri CU Association president/CEO Mike Beall, League of Southeastern CUs president/CEO Patrick La Pine, Ohio CU League president/CEO Paul Mercer, Rhode Island/Massachusetts/New Hampshire CU Leagues senior vice president and general counsel Mary Ann Clancy, California/Nevada CU Leagues president/CEO Diana Dykstra, Suncoast Schools FCU executive vice president/CFO Linda Darling, Mid Minnesota FCU CFO Pam Finch, Summit CU CFO Keith Peterson, and Patelco CU senior vice president/CFO Scott Waite took part in the call. CUNA Assistant General Counsel Luke Martone and Counsel for Special Projects Kristina Del Vecchio were also on the call.

New NFIP Q-and-A backed by CUNA

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WASHINGTON (12/5/11)--The Credit Union National Association (CUNA) has backed a proposed interagency National Flood Insurance Program question-and-answer documents that aims to provide clearer guidance about the forced placement of flood insurance, to clarify additional areas, and avoid potential misunderstandings.

The guidance was issued by the National Credit Union Administration (NCUA) and other federal financial regulators, and will serve as an update of guidance on flood insurance requirements for credit unions and other financial institutions, agency personnel, and the public, that was issued in 2009.

In a comment letter, CUNA notes that credit unions and other financial institutions are currently required to force place flood insurance when a borrower has inadequate or lapsed flood insurance during the term of the loan that must have flood insurance.  If a credit union determines the borrower has inadequate or lapsed flood insurance, the credit union must notify the borrower that adequate coverage is required.  If the borrower does not provide evidence of adequate flood insurance coverage within the 45-day notice period, the credit union must arrange for the insurance on the borrower's behalf and may charge the borrower for the cost of the insurance, CUNA said.

Under the guidance, NFIP insurance must be provided if:

  • the lender determines that the property securing the loan is located in an Special Flood Hazard Area;
  • flood insurance is available for the property securing the loan;
  • the lender determines that flood insurance coverage is not adequate or does not exist; and
  • after required notice, the borrower fails to purchase the appropriate coverage within 45 days.
One portion of the new guidance, known as Q&A 62, states that a lender that provides flood insurance during the 45-day notice period may charge a borrower for any part of the 45-day notice period.

Proposed Q&A 60 would require a lender or its servicer to send a force placement notice to a borrower when flood insurance on the collateral has expired or is less than the amount required for the property, and recommends that the lender also advise the borrower when flood insurance is about to expire to maintain continuous coverage, CUNA said. CUNA does not oppose this recommendation, but said lenders should not be required to provide a separate notice that is not required by the statute.

For the full comment letter, use the resource link.

Reg Accountability Act passes House

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WASHINGTON (12/5/11)--The Regulatory Accountability Act of 2011 (H.R. 3010) passed the House on a 263-to-159 vote count Friday and will now move on to the Senate for consideration.

The bill would:

  • Revise the Administrative Procedure Act to require that agencies consider the costs and benefits of new rules and regulatory actions;
  • Set new data-quality standards for agency fact finding in the rulemaking process; and
  • Require federal regulators to conduct public hearings for most rules estimated to have an aggregate impact on industry of over $1 billion.


The bill was introduced by Rep. Lamar Smith (R-Texas).

Amendments that would have shielded regulations tied to workplace safety, food safety, consumer product safety, air quality, water quality, nuclear power, and the Department of Homeland Security were among those that were defeated before the final vote.

President Barack Obama has reportedly said he would veto the bill if it passes.

The Credit Union National Association (CUNA) has backed the legislation, saying that it "would give credit unions and others new tools and procedures that would help protect against arbitrary regulatory burdens" and "would significantly enhance the interaction between industry and federal administrative agencies."

Portions of the bill that add cost benefit analysis and information reporting requirements "would be far more effective than the closest existing parts of the Administrative Procedure Act, the Regulatory Flexibility Act and the Paperwork Reduction Act," CUNA added.

For the full CUNA letter on H.R. 3010, use the resource link.

Inside Washington (12/01/2011)

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  • WASHINGTON (12/2/11)--The House Financial Services Committee on Wednesday passed three bills Wednesday related to the derivatives provisions of the Dodd-Frank Act. The first bill, the Swap Execution Facility Clarification Act, would prohibit the Commodity Futures Trading Commission and the Securities Exchange Commission from requiring facilities to maintain a minimum number of participants to receive or respond to quote requests; require facilities to display or delay quotes; limit the means of interstate commerce that market participants can use to execute swap transactions; and require one trading system. The second bill, the Business Risk Mitigation and Price Stabilization Act, exempts end users from margin requirements on swaps that do not go through a clearinghouse. The third bill, H.R. 2779, ensures entities under a common corporate ownership are able to manage risks without unnecessary costs ...
  • WASHINGTON (12/2/11)--Michael S. Gibson was appointed director of the Federal Reserve Board's division of banking supervision and regulation, effective Jan. 1. Gibson, a deputy director in the board's division of research and statistics with an expertise in risk management and financial markets, succeeds Patrick M. Parkinson. Parkinson is retiring after more than 30 years of service with the board. The division develops regulatory policy and oversees the supervision of state member banks; bank, financial, and savings and loan holding companies and their subsidiaries; and U.S. branches and agencies of foreign banking organizations. The director of the division represents the Federal Reserve on the Basel Committee on Banking Supervision and works closely with officials from other U.S. and international government agencies on bank oversight issues. Gibson is an economist who began his career at the Federal Reserve in 1992 in the banking section of the division of international finance. He moved to the trading risk analysis section in the division of research and statistics in 1999 and was selected chief of that section in 2000. Earlier this year, Gibson was promoted to deputy director, with responsibility for the division's financial functions …

Merchants low data security standards harm consumers CUNA

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WASHINGTON (12/2/11)--Data security is a critical issue and the U.S. Congress should consider legislative changes to protect consumers, such as requiring merchants to meet the same high standards for data protection to which credit unions and other financial institutions are subject, the Credit Union National Association (CUNA) said in a letter sent to a key lawmaker Thursday.

Additionally, Congress should permit financial institutions to disclose the source of data breaches affecting their members or customers, and merchants should be required to reimburse consumers and financial institutions for costs associated with data breaches, CUNA President/CEO Bill Cheney wrote in a letter to the chairman of the House Small Business subcommittee on health and technology, Rep. Renee Ellmers (R-N.C.). The subcommittee conducted a hearing yesterday entitled hearing "Cyber Security: Protecting Your Small Business."

Cheney wrote that until merchants are held to high standards for data security as financial institutions, such as credit unions, are, the consumer will "remain vulnerable to a system that does not protect their information."

Without federal requirements forcing merchant to notify their customers of a data breach, the burden of notification to the consumer lies with the financial institution that issued the payment card.

"However, financial institutions cannot specify which merchant was responsible for the breach and also bears the costs of issuing new payment cards, and making any loss to the consumer's account whole. The merchant bears no financial responsibility in the case of a data breach," Cheney underscored in his letter to Ellmers.

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

NCUA 3Q numbers show member asset net worth increases

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ALEXANDRIA, Va. (12/2/11)--The results of call reports from 7,179 federally insured credit unions showed increases in member totals, net worth and total assets, as "credit union financials continued to move in the right direction," National Credit Union Administration (NCUA) Chairman Debbie Matz said as the agency released its quarterly update on the credit union system on Thursday.

Credit unions added more than 450,000 members during the third quarter, increasing the nationwide membership total to 91.4 million members, and Matz noted that membership during the first 9 months increased by nearly 1 million.

Credit union total assets also continued to expand, standing at $951.1 billion when the third quarter of 2011 ended on Sept. 30, an increase of almost $8.7 billion for the quarter, the NCUA added.

Although net income growth slowed during the quarter, totaling $1 billion, credit union earnings during the first 9 months of 2011, which total $4.61 billion, exceed the net income total that was reported in 2010.

The net worth ratio totaled 10.15% during the third quarter, and credit union share deposits increased by $7 billion during that time period, totaling $819.2 billion at the end of the quarter.

The NCUA added that checking, savings, and money market shares also rose. However, share certificates and non-member deposits fell.

Lending during the quarter totaled $567.1 billion, a $3.1 billion increase over the second-quarter total, with used vehicle loans, credit cards and other unsecured loans, and first mortgages rising. However, the NCUA noted, loans for new automobiles and other types of real estate fell during the quarter.

The NCUA said demand for non-federally guaranteed student loans increased by 20.5% during the quarter, and investments, cash on deposit, and cash equivalents increased 1.78%, totaling $347.2 billion at the end of the quarter.

For the full NCUA report, use the resource link.

CFPB Treasury form HAMP abuse task force

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WASHINGTON (12/2/11)--The Consumer Financial Protection Bureau (CFPB), the U.S. Treasury Department, and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) on Thursday announced they have established a joint task force to combat scams that target homeowners seeking to apply for the Home Affordable Modification Program (HAMP).

The joint agency task force will investigate companies that charge struggling homeowners a fee in exchange for false promises of lowering the homeowner's mortgage debt or payments through HAMP, among other schemes. The task force said it would end these scams, and provide education programs to vulnerable homeowners.

SIGTARP Deputy Special Inspector General Christy Romero said these types of scams "prey upon the most vulnerable homeowners as they desperately hold out hope of saving their homes.  SIGTARP, the CFPB, and Treasury want to make sure that homeowners know a scam when they see one and know where to turn for help."

CFPB Chief of Enforcement and agency director nominee Richrd Cordray added: "Mortgage scams harm not only homeowners but legitimate businesses and the market as a whole."

The agencies also warned consumers of these types of scams in a consumer fraud alert. The alert reminds homeowners that are struggling to pay their mortgage and are looking for relief that third parties are not able to guarantee or pre-approve HAMP mortgage modification applications. Mortgageholders should also beware of individuals or companies that offer money-back guarantees, or companies that advise them to stop making their payments or to not contact their mortgage servicers, the release adds.

The administration last year claimed that the HAMP program was on course to modify as many as 4 million mortgages by 2012.

For the full release, use the resource link.

CUNA For real job creation pass CU biz lending bill

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WASHINGTON (12/2/11)--Credit unions will be "very concerned" if legislation that would increase the credit union member business lending cap does not move forward, especially if two other bills -- ostensibly meant to spur job creation – do, the Credit Union National Association (CUNA) said in a Thursday letter to Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Richard Shelby (R-Ala.).

The letter was submitted for the record of a Thursday committee hearing on two Senate legislative vehicles: S. 556 and S. 1791.

S. 556, which is sponsored by Sen. Kay Bailey Hutchison (R-Tex.) and has nine cosponsors, would increase the shareholder threshold for registration with the Securities and Exchange Commission from 500 shareholders to 2,000 shareholders.  S. 1791, which is sponsored by Sen. Scott Brown (R-Mass.) and has two cosponsors, would provide registration exemptions for certain crowdfunded securities.

Cheney in the CUNA letter said while these two bills – which have been termed job-creation vehicles – may ultimately be part of the solution to the nation's current job market issues, "credit unions should be encouraged and permitted to help as well."

Cheney added that S. 556 and S. 1791 "would appear to reduce regulatory scrutiny and investor protections," while creating jobs. However, under MBL cap lift legislation, job creation could be accomplished through qualified, well-managed and effectively regulated credit unions, he said.

CUNA has estimated that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Two MBL cap lift bills, Sen. Mark Udall's S. 509 and Rep. Ed Royce's (R-Calif.) H.R. 1418, remain active in Congress. S. 509 has 21 cosponsors, and H.R. 1418 has 104 cosponsors.

Regulatory Accountability Act could see House vote today

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WASHINGTON (12/2/11)--The Regulatory Accountability Act of 2011 (H.R. 3010), which would revise the Administrative Procedure Act to require agencies to consider the costs and benefits of new rules and other regulatory actions, and would require federal regulators to conduct public hearings for most rules estimated to have an aggregate impact on industry of over $1 billion, is expected to come up for a full U.S. House vote today.

The bill, which was introduced by Rep. Lamar Smith (R-Tex.) and has 36 co-sponsors, would also set new data quality standards for agency fact finding in the rulemaking process.

The Credit Union National Association (CUNA) has backed the legislation, saying that it "would give credit unions and others new tools and procedures that would help protect against arbitrary regulatory burdens" and "would significantly enhance the interaction between industry and federal administrative agencies."

Portions of the bill that add cost benefit analysis and information reporting requirements "would be far more effective than the closest existing parts of the Administrative Procedure Act, the Regulatory Flexibility Act and the Paperwork Reduction Act," CUNA added.

The bill would need to be approved by the Senate if it passes the House. President Barack Obama has said he would veto the bill, The Hill reported.

For the full CUNA letter on H.R. 3010, use the resource link.