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CUNA urges regulatory hearing on risk-based capital plan

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WASHINGTON (2/18/14)--Public hearings on the National Credit Union Administration's risk-based capital proposal have been called for by the Credit Union National Association, as the association urged the regulator to address credit unions' "deep-seated concerns" in an interactive setting.  

In a letter  to NCUA board members, CUNA President/CEO Bill Cheney wrote that hearings would produce an official record of discussions between credit unions and NCUA leadership that, in addition to comment letters, the NCUA board could rely upon to determine the best path for proceeding on the rule.

The CUNA leader noted to the federal regulators that CUNA is "dissecting the agency's stated legal basis for the proposal," and reviewing a January 2012 Government Accountability Office report on the NCUA's use of Prompt Corrective Action.  

In addition, Cheney wrote that CUNA is thoroughly assessing the impact and costs of the proposed risk-based capital rule to the credit union system. CUNA is comparing the NCUA plan to key provisions of Basel III, the global, regulatory standard that will be implemented for banks through March 31, 2018, on capital adequacy, stress testing and market liquidity risks.

"We are objectively considering the extent to which a number of key changes to the proposal would result in an improved outcome for credit unions and minimize any detrimental impact that the proposal would otherwise impose," Cheney said in the letter sent Feb. 14.

CUNA continues to urge credit unions to find out as much as possible about the proposal and to send a comment to NCUA  within the 90-day comment period provided. (The due date for comments will be set once the proposal is printed in the Federal Register,  which has not occurred as of this writing. Watch CUNA's News Now for updates.)   

CUNA estimates that the risk-based capital proposal carries with it a multi-billion dollar price tag for credit unions--perhaps prompting as much as $7.3 billion in more capital to retain current margins.

What is most concerning about the impact, Cheney points out, is that it would occur despite the fact the current system showed its strength by withstanding the worst financial crisis in 80 years.

CUs may want to give marijuana businesses a pass

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WASHINGTON (2/18/14)--New federal guidelines allow credit unions and others to provide financial services to marijuana dispensaries. However, this newfound leniency does not come without compliance burdens, the Credit Union National Association says in a new CompBlog post.

Colorado and Washington recently approved the legal sale of the drug from state-regulated dispensaries. The U.S. Treasury, Financial Crimes Enforcement Network and U.S. Deputy Attorney General James Cole have all commented on the issues in recent weeks, telling financial institutions that they may accept accounts from legal dispensaries.

However, CUNA said, "until Congress changes the federal law so that marijuana-related businesses are no longer illegal at the federal level, credit unions may be taking a great risk providing financial services to these businesses."

The compliance burdens could also be stifling for those that decide to take on dispensary accounts.

Financial institutions that work with these businesses should be aware of three new types of suspicious activity reports ("Marijuana Limited" SAR, "Marijuana Priority" SAR and "Marijuana Termination" SAR), as well as seven specific customer due diligence requirements, such as verifying with the state whether the business is duly licensed and registered.

Further, credit unions that work with dispensaries may need to determine whether or not marijuana from a given dispensary is:
  • Being used by a minor;
  • Being used by an individual who will get behind the wheel of a car; or
  • Being transferred across state lines.
"Not only does this compliance burden appear insurmountable, but also overreaching," CUNA said.

For more on the potential compliance and legal risks credit unions could face, use the resource link.

CU advocates to flood D.C. as Camp readies tax reform report

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WASHINGTON (2/18/14)--House Ways and Means Committee Chairman Dave Camp (R-Mich.) plans to release his much-anticipated and much-delayed plan to overhaul the tax code soon, according to news media reports that are circulating.
 
"The timing of  4,300 credit union advocates hitting Washington, D.C., for our Governmental Affairs Conference starting Feb. 23 could not be any better," said Credit Union National Association Executive Vice President John Magill.
 
CUNA, the state credit union associations, credit unions and credit union members have vehemently been advocating on behalf of the credit union tax status in anticipation of the tax code reform draft.
 
"Credit unions and their members will be well served by having thousands of their advocates available for Capitol Hill visits during GAC to drive home their 'Don't Tax My Credit Union' message just as been the tax report is being wrapped up," Magill noted. "Credit unions have worked hard to make sure that lawmakers on all levels truly understand that a new tax on credit unions would be a tax on the 99 million Americans that are their members."

GAO report notes CUs charge lower fees

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WASHINGTON (2/18/14)--Credit unions generally charge lower rates and fees for their card services than do other financial institutions that offer such products to college students, a new U.S. Government Accountability Office study has found.

The study--"College Debit Cards: Actions Needed to Address ATM Access, Student Choice, and Transparency"--reviewed information on fees for similar checking accounts from large national banks and credit unions. The credit union information was drawn from the Credit Union National Association's 2013-2014 Fees Report. CUNA was also interviewed by GAO for the report.

The GAO study found at least 852 schools, representing 11% of U.S. colleges and universities, had agreements to provide debit or prepaid card services to their students as of July 2013. Most of these agreements offered students the ability to receive federal student aid and other payments on a card, the GAO said.

The GAO found that "fees charged by college card providers generally were comparable with those for similar products provided by banks, although some college card fees were slightly higher than those of credit unions."

And, according to the report on college card providers, some college providers went significantly outside the bounds of regular fees: two large providers charged a fee for card purchases using a personal identification number rather than a signature. Mainstream debit cards typically do not charge this fee, the GAO said.

One card provider, Higher One, settled Federal Deposit Insurance Corp. allegations that unfair and deceptive practices by the firm resulted in consumers paying higher fees. That settlement was reached in 2012.

Concerns noted in the GAO report include a lack of clear standards for what constitutes "convenient access" to surcharge-free ATMs or bank branches for students receiving federal student aid payments.

Increased transparency for college card agreements could help ensure that the terms are fair and reasonable for students, and the agreements are free from conflicts of interest, the report added. "Schools may have incentives to influence student choice because some receive payments from card providers based on the number of card accounts or transactions, leading some consumer advocates to question whether schools always act in their students' best interests," the report said.

CUNA regulatory staff said the GAO study could lead to future policy changes by financial regulators.

For the full GAO report, use the resource link.