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CUNA Nominates CUs To BSA Advisory Group

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WASHINGTON (2/21/13)--The Credit Union National Association has nominated a trio of credit unions to serve on the Financial Crimes Enforcement Network's (FinCEN) Bank Secrecy Act Advisory Group (BSAAG).

"As not-for-profit financial cooperatives, credit unions will be in an excellent position to make a substantial contribution to the activities of the BSAAG, and will provide diversity among the financial institutions that are members of the BSAAG," CUNA Deputy General Counsel Mary Dunn said.

The CUNA-nominated credit unions are:

  • United Nations FCU, Long Island City, N.Y., which boasts more than 100,000 members living in more than 205 countries and territories and $3.7 billion in assets;
  • First Commerce CU, Tallahassee, Fl., which holds $350 million in assets and has more than 37,000 members; and
  • CP FCU, Jackson, Mich., which holds $360 million in assets and has 46,000 members.
Dunn noted these credit unions have been very active in BSA and payments issues and have provided substantial assistance to CUNA and others regarding BSA, payments, and regulatory issues that affect credit unions.

Assistant General Counsel for Regulatory Research Dennis Tsang is CUNA's BSAAG representative.

The BSAAG is comprised of representatives from federal regulatory and law enforcement agencies, financial institutions, and trade associations. The group makes BSA policy recommendations to the U.S. Treasury Secretary.

CUNA has been a member of BSAAG since 2003, and is scheduled to fill the Credit Union Industry Trade Group position on the advisory group through February 2015. CUNA also participates on the parent group and its working subgroups, including the Banking, Law Enforcement, Prepaid Access, and Suspicious Activity Report (SAR) Review subcommittees.

For more on the nominees, use the resource link.

NEW: Strong NCUSIF, TCCUSF Performance Decrease Premium Chances

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ALEXANDRIA, VA. (2/21/13, UPDATED 12:35 p.m. ET)--The strong performance in 2012 of the National Credit Union Share Insurance Fund and the Temporary Corporate Credit Union Stabilization Fund, reported by the National Credit Union Administration today, decrease chances for a premium assessment this year.

The number of federal credit unions with CAMEL codes 3, 4 and 5 dropped significantly during 2012, according to the NCUA. The declining number of lower-rated credit unions, of course, reduces the exposure of the NCUSIF to potential losses.

The agency reported the NCUSIF ended 2012 with a 1.30% equity ratio, after transferring $88 million in "excess equity" to the Temporary Corporate Stabilization Fund. The NCUA said it calculated the ratio on an insured share base of $839.4 billion, compared to $795.3 billion at the end of 2011, indicating growth of 5.5%.

Also today, the NCUA reported good 2012 results for the TCCUSF. Based on "preliminary and unaudited" information, for 2012 the total net position of the fund improved nearly $1.8 billion.

The agency staff noted that when the stabilization fund has outstanding borrowings from the U.S. Treasury, the Federal Credit Union Act requires the NCUA to make a distribution from the NCUSIF if the share insurance fund has an equity ratio above the normal operating level of 1.30% at year's end.

"Had the stabilization fund not existed, the $88 million would have been paid as a dividend to credit unions on their NCUSIF deposits. Instead, it will serve to lower future assessments," Credit Union National Association Chief Economist Bill Hampel points out.  

Of the improved CAMEL ratings, NCUA Chairman Debbie Matz said, "Protecting the Share Insurance Fund is a top priority for NCUA, and the 2012 year-end results show that NCUA's prudent management and effective regulatory policies are working well."

At today's meeting the NCUA's chief financial officer also related that:

The total number of CAMEL code 3, 4 and 5 credit unions dropped 9.8%, to 1,940 at year-end 2012 from 2,150 in 2011;

Assets of CAMEL code 3 credit unions decreased to $119.3 billion at the end of the fourth quarter of 2012, a 16.3% drop from $142.5 billion on Dec. 31, 2011; and

For lowest ranked CAMEL code 4 and 5 credit unions, assets fell 35.4%, to $19 billion at the end of 2012, down from $29.4 billion for 2011.

As a result of the improving condition of stressed credit unions, the percent of total insured shares in CAMEL 4 and 5 credit unions declined from 3.3% to 2.0% during 2012. At the same time, shares in CAMEL 3 credit unions have fallen from 15.9% to 12.6% of insured shares. Therefore, shares in CAMEL 3, 4 and 5 credit unions are down from 19.2% of insured shares as of December 2011, to 14.6% as of December 2012.   

Overall, the amount of assets in CAMEL Code 3, 4 and 5 credit unions have decreased 32.7% since reaching a high in September 2010.

There was no NCUSIF premium assessed in 2012 and the agency has projected a premium range between zero and 5 basis points for 2013.

NEW: NCUA Passes Expanded Rural District FOM, Amends Investment Rule to Allow TIPs

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ALEXANDRIA, Va. (2/21/13, UPDATED 10:12 a.m. ET)--The National Credit Union Administration has approved a final rule that expands the definition of "rural district" for field of membership purposes. The new rule sets the definition at the greater of "no more than 250,000 persons or 3%" of the population of the state in which the majority of the district's persons are located.

NCUA Chairman Debbie Matz said, ""This is really a move in the right direction and is responsive to be the needs of credit union members." She added that she looks forward to having the rule in effect to help credit unions serve more people in rural areas.

The rule will go into effect 30 days after it is published in the Federal Register.

The rural district changes are similar to those advocated by the Credit Union National Association in meetings and a comment letter on the NCUA proposal. CUNA Board Member Roger Heacock presented data to NCUA to support making the changes.

CUNA Deputy General Counsel Mary Dunn urged the NCUA to allow as much authority as legally permissible to federal credit unions to facilitate their presence in these areas of the country that are often are in serious need of financial institution services. Dunn suggested that the NCUA, in the long-term, should allow credit unions that serve rural areas to determine for themselves the size of their fields of membership, governed by the credit union's resources to serve the area sufficiently and its ability to manage safety and soundness concerns.

The agency also approved a final rule that will allow federal credit unions to purchase Treasury Inflation Protected Securities (TIPS) as a permissible investment. The agency believes that TIPS will provide an additional investment portfolio risk management tool. Allowing such investments will help credit unions protect against inflation and manage interest-rate risk, Dunn has noted.

The quarterly insurance fund report was also presented by NCUA staff at today's open meeting.

A final rule addressing NCUA employee policy issues is the lone item on the closed meeting agenda. That closed meeting is scheduled to begin at 11:15 a.m.

CFPB Consumer Group Meeting Spotlights Payday Lenders

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WASHINGTON (2/21/13)--Consumer Advisory Board (CAB) members on Wednesday called on the Consumer Financial Protection Bureau to create and implement tighter regulations for payday lenders and short-term small-dollar credit products.

In remarks delivered before the first CAB meeting of 2013, CFPB Director Richard Cordray identified short-term loans as one of four "classes of problems" that his agency will focus on going forward.

The Credit Union National Association has also urged the bureau to focus more attention in 2013 on regulating entities in the financial marketplace that engage in abusive practices, such as payday lenders, that have been unregulated or under-regulated to date.

To address existing short-term loan issues, CAB members suggested the CFPB could:
  • Require longer repayment periods for payday loans;
  • Limit the number of times a borrower may roll over a payday loan; and
  • Force lenders to verify that a borrower can repay a given loan before it is taken out.
Debt traps such as short-term loans "can cause consumers to veer off the pathway to opportunity," Cordray noted. "There is an obvious demand for short-term credit products, which can be helpful for consumers who use them responsibly and which are structured to facilitate repayment. We want to make sure that consumers can get the credit they need without jeopardizing or undermining their finances. Debt traps should not be part of their financial futures," he added.

Credit unions and CUNA are committed to providing safe and affordable alternatives to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders.

CUNA supports the ability of credit unions to provide beneficial short-term, small-dollar loans as alternatives to predatory payday lending, which have "no place in the financial marketplace." CUNA has also urged the bureau to focus more attention in 2013 on regulating entities in the financial marketplace that engage in abusive practices, such as payday lenders, that have been unregulated or under-regulated to date.

Wednesday's CAB session was the first day of a two-day board meeting.

During today's meeting, the board is scheduled to discuss:
  • CAB governance;
  • Remittance policies;
  • Overdraft fee issues;
  • Mobile payments; and
  • Credit reporting and debt collection.
Two credit union representatives are among the 25 CAB members. Bill Bynum, CEO of Hope Enterprise Corp. and Hope Community CU, Jackson, Miss., serves as vice chair of the CAB. Laura Castro de Cortes, vice president of alternative financial services for Centris FCU, Omaha, Neb., is a CAB member.

The board advises CFPB leadership on consumer financial issues and emerging market trends.

For Cordray's remarks and more on this week's CAB meetings, use the resource links.

Risk Alert Features NCUA DDoS Guidance

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ALEXANDRIA, Va. (2/21/13)--The National Credit Union Administration has stepped into Washington's cybersecurity discussion, identifying appropriate policies and procedures to guard against distributed denial-of-service (DDoS) attacks in a new credit union risk alert (13-Risk-01).

"The increasing frequency of cyber-terror attacks on depository institutions heightens the need for credit unions to maintain strong information security protocols," the notice said.

DDoS attacks are attempts to disrupt or suspend online service by saturating the target's network with external communication requests to overload its server. The NCUA letter noted that such attacks are sophisticated, requiring the vigilance of credit unions offering Internet-based financial services. "As the goal of DDoS attacks is causing service outages rather than stealing funds or data, typical network security controls--such as firewalls and intrusion detection and prevention systems--may offer inadequate protection," the risk alert said.

To mitigate the issues presented by DDoS attacks, the NCUA suggested that credit unions:
  • Perform risk assessments to identify risks associated with DDoS attacks;
  • Ensure incident response programs include a DDoS attack scenario during testing and address activities before, during, and after an attack; and
  • Perform ongoing third-party due diligence, in particular on Internet and web-hosting service providers, to identify risks and implement appropriate traffic management policies and controls.
The agency also noted that DDoS attacks may also be paired with attempts to steal member funds or data. The letter suggested that credit unions voluntarily file Suspicious Activity Reports if DDoS attacks impact Internet service delivery, enable fraud, or compromise member information.

For the full NCUA risk alert, use the resource link.

CARD Act Changes Threaten To Divert Resources From Member Service: CUNA

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WASHINGTON (2/21/13)--When it revisits some provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Consumer Financial Protection Bureau must recognize that certain CARD Act requirements "have the potential to divert credit unions' resources and attention away from their primary mission, which is to meet their members' financial needs," the Credit Union National Association said in a comment letter.

In the letter, CUNA Senior Assistant General Counsel for Regulatory Advocacy Luke Martone noted CUNA's longstanding support of the CARD Act's objective, which is to eliminate predatory credit card practices. "However, credit unions remain concerned that regulatory requirements not become any more cumbersome for credit cards than they are now," he wrote.

The letter noted that CARD Act implementation has changed many of the substantive terms and conditions of credit card agreements, and has resulted in numerous direct changes to card issuers' practices.

The credit card application review process has become lengthier, and the forms themselves have become more complex, the letter adds. Credit limits have also been lowered for some borrowers as an indirect result of the Act.

Many creditors have also increased their underwriting as a result of the CARD Act, the letter noted.

Overall, the increased cost of compliance associated with these and other CARD Act changes has made it more expensive for credit unions and other issuers to operate card programs. "While the Act was implemented to better manage and enforce industry practices related to certain high-risk borrowers, higher credit costs for all borrowers and credit card issuers has resulted," the letter said.

If and when the CFPB turns its attention to its rules implemented under the CARD Act, CUNA encourages the agency to provide meaningful regulatory relief from various provisions of the Act.

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

Federal, State Regulators Streamline LICU Process For State-Chartereds

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ALEXANDRIA, Va. (2/21/13)--Federal and state regulators announced a joint plan Wednesday to streamline the process for state-chartered credit unions to determine if they are eligible for designation as low-income credit unions. (LICU).

Under a cooperative effort by the National Credit Union Administration and the National Association of State Credit Union Supervisors (NASCUS), state regulators can now provide limited geographic and income data to NCUA's AIRES system when they upload their examinations. AIRES stands for Automated Integrated Regulatory Examination Software.

The NCUA said it will use that data to determine if there are state-chartered credit unions eligible for the low-income designation and provide a list to state regulators on a quarterly basis of those credit unions. State regulators have the sole authority to make the LICU designation for state-chartered credit unions.

To qualify as a LICU, a majority of a credit union's membership must meet a low-income thresholds based on 2010 U.S. Census data. LICU designation has some regulatory benefits for credit unions.

For qualifying state-chartered credit unions, under certain circumstances and when state law permits, benefits can include: 
  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans;
  • Ability to obtain supplemental capital;
  • Exemption from the 12.25 percent statutory cap on member business loans; and
  • Ability to accept non-member deposits from any source.
"Consistency and cooperation are fundamental to effective regulation, and so is creating opportunities," NCUA Chairman Debbie Matz said in a release. "This is a great example of how state and federal regulators can work together to help state-chartered credit unions that qualify obtain a low-income designation. NCUA will provide state regulators with lists of credit unions that could qualify, and the states take it from there."

"Streamlining the process for federally insured, state-chartered credit unions that might seek the low-income credit union designation is a tangible benefit to the state system," NASCUS President/CEO Mary Martha Fortney added.

'Rural' Definition, TIPS On NCUA Agenda Today

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ALEXANDRIA, Va. (2/21/13)--The National Credit Union Administration meets this morning to address final rules addressing Treasury Inflation Protected Securities (TIPS) and the definition of a "rural district" for field of membership purposes.

In September, the NCUA proposed to extend the "rural district" definition to include geographic areas with 200,000 or fewer inhabitants or less than 3% of a given state's population. The Credit Union National Association has urged the agency to take the definition further and allow as much authority as legally permissible to federal credit unions to facilitate their presence in these areas of the country that are often are in serious need of financial institution services.

Also on today's agenda, the NCUA will decide whether to allow federal credit unions to purchase TIPS as a permissible investment. Currently, they are not a permissible investment because TIPS re-price their value based on changes in the consumer price index, which is currently a prohibited index for variable rate instruments. However, the agency believes that TIPS will provide an additional investment portfolio risk management tool.

CUNA supports the plan, saying it will allow credit unions to protect against inflation and manage interest-rate risk.

The meeting is expected to be brief as only these permissive rules and a quarterly report on the National Credit Union Share Fund are on the agenda.