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House Passes Privacy Notice Bill: CUNA Urges Senate To Act

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WASHINGTON (3/13/13)--The U.S. House on Tuesday approved by voice vote the Eliminate Privacy Notice Confusion Act (H.R. 749), and the bill will now move on for Senate consideration.

Credit Union National Association President/CEO Bill Cheney said the bill "will make privacy notifications more meaningful by removing a costly and duplicative paperwork requirement that has been no real help to consumers.

"More people are apt to pay attention to privacy notices that are made when their financial institution's policies change rather than when these notices are issued annually as a matter of routine, so House passage is a benefit to consumers and credit unions alike," he added.

H.R. 749 would eliminate repetitive privacy notices by eliminating a requirement that the notices be sent annually. Under the terms of the bill, privacy notices would only to be sent when the privacy policy of a financial institution has changed. A similar bill passed the House in late 2012, but the Senate did not vote on the bill before the last session of Congress ended.

CUNA has backed the bill since it was introduced in the last session of Congress, and urged House members to vote yes on H.R. 749 in a letter sent Tuesday morning. Thousands of credit union representatives also sought support for the legislation when they met with their Washington representatives during the recently completed CUNA 2013 Governmental Affairs Conference.

The CUNA CEO thanked Reps. Blaine Luetkemeyer (R-Mo.) and Brad Sherman (D-Calif.) for their leadership on the privacy notice issue, and urged the Senate to take note of Tuesday's strong House vote "and act promptly in similar fashion to enact this important piece of legislation."

CUNA Senior Vice President for Legislative Affairs Ryan Donovan said a Senate companion bill could be released as soon as this week. Donovan said CUNA looks forward to working with the Senate to pass H.R. 749, or a similar companion bill.

Cordray Says CFPB Should Protect CUs During Nomination Hearing

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WASHINGTON (3/13/13)--Credit unions and community banks did not engage in practices that caused the financial crisis, and the Consumer Financial Protection Bureau's regulatory actions "should take account of that fact and protect and preserve their traditional model of lending which is a very responsible model and good for many communities across this country," CFPB Director Richard Cordray said on Tuesday.

Cordray made the remarks during a Senate Banking Committee confirmation hearing. Committee Chairman Tim Johnson (D-S.D.) started Cordray's questioning by noting that credit unions and community banks continue to raise concerns about regulatory burden, and asking how the CFPB plans to address these issues while protecting consumers.

The CFPB has met with credit unions and other small financial institutions in South Dakota and elsewhere, and the CFPB's work has been influenced by these meetings, Cordray responded. The meetings affected the agency's qualified mortgage rule, escrow rule and servicing rule, he noted. The CFPB has created separate credit union and community bank advisory councils to speak regularly and specifically with small financial institutions about the issues they face, Cordray added. The regulation of non-banks and the shadow banking system are areas of emphasis for the agency, he said.

The agency's structure and funding were also touched on during the hearing. Cordray said he is open to working with the Senate to further develop transparency and accountability of the agency. He added that the agency is always accountable to Congress, and said he himself has found the congressional oversight process to be "vigorous and meaningful."

House and Senate Republicans have supported replacing the CFPB director's position with a five-member panel of leadership. Legislation that would create such a panel (S. 205) has been introduced in the Senate. The Credit Union National Association backs such a multi-member panel of directors if it includes seats statutorily designated for credit union system representatives, including a state or federal credit union regulator, and possibly a state consumer agency representative.

Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency.

The committee also heard from Mary Jo White, who is President Barack Obama's nominee to lead the Securities and Exchange Commission. A vote on both nominees will be held at a later date.

Cordray's nomination is expected to pass through the committee, but his prospects before the full Senate are uncertain, CUNA Senior Vice President for Legislative Affairs Ryan Donovan said. The banking committee approved Cordray's nomination in late 2011, but he did not receive a full vote in the Senate. President Barack Obama appointed Cordray to the director position during a brief congressional recess in 2012, and some have questioned the constitutionality of this appointment.

House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) in a March 8 letter to Federal Reserve Chairman Ben Bernanke said the nature of Cordray's appointment could impact the agency's funding. The letter questioned the circumstances under which the Fed could lawfully fund the CFPB's operations, and asked Bernanke to comment on that issue.

CUs Are Not Mentioned In New Tax Proposals

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WASHINGTON (3/13/13)--As expected, the credit union tax status is not mentioned nor targeted in a U.S. House Republican budget released on Tuesday. Other items of interest to credit unions, however, including Fannie Mae and Freddie Mac and financial regulations, are addressed.

The Credit Union National Association's work to educate lawmakers and the public about the public policy value of the credit union tax status is a top priority.

The Republican budget plan would:

  • Wind down Fannie Mae and Freddie Mac and decrease the government's role in the mortgage sector;
  • Require the use of fair-value scoring for federal housing-credit programs;
  • Revisit elements of financial regulations, and the Dodd-Frank Wall Street Reform Act; and
  • Require that the costs of legislation related to housing be calculated on a fair-value basis and authorize the use of fair-value costs estimates for other credit programs.
The plan also instructs eight congressional committees to each produce their own legislation that would reduce the federal deficit by at least $1 billion over ten years.

Overall, the Republican plan would reduce spending by $4.6 trillion by 2023 through healthcare changes, welfare reforms, closing loopholes, consolidating some tax forms and making other changes.

A Senate Democrat budget is expected to be released on Wednesday. While that full plan was not revealed as of late Tuesday, several outlets reported basic details of the plan. The Democratic budget plan would create $975 billion in new revenues by reducing tax expenditures, cut domestic spending by $493 billion, reduce defense spending by $240 billion, and add $100 billion in new infrastructure spending. These results would be achieved over a ten-year span.

Both budgets are being released to the backdrop of budget and tax discussions. A long-term budget has not been passed by Congress since 2009, and the government has been funded on short-term bills since that time.

CUNA Executive Vice President of Government Affairs John Magill this week said "absolutely everything in the tax code could fall under the microscope of those policy makers charged with developing tax reform. No legislator CUNA has spoken with has suggested that the credit union tax status is currently on the table as a tax reform or spending issue. However, we know that an educated Congress, and an educated public, are the credit union movement's best tools to work to keep it that way."

Magill has also encouraged credit unions to continue their conversations with lawmakers and to engage their members as well by using a Tax Status Advocacy Toolkit provided by CUNA and the leagues.

CFPB Sets March Field Hearing For Consumer Complaint Database

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WASHINGTON (3/13/2013)--The Consumer Financial Protection Bureau's (CFPB) Office of Consumer Response will host a field hearing on its consumer complaint database on Thursday, March 28 at 11 a.m. (CT), in Des Moines, Iowa.

CFPB Director Richard Cordray will open the hearing with remarks and the event also will feature testimony from consumer groups, industry representatives, and members of the public.

The CFPB database compiles consumer complaints related to credit cards, deposit accounts, mortgage loans, student loans and consumer loans. The bureau plans to add consumer complaints on other types of financial products over time.

While credit unions will not likely be the subject of a sizable number of consumer complaints, the Credit Union National Association has expressed concern that the public data release could have unintended consequences.

CUNA has warned that sensitive or confidential business or consumer information could be inadvertently disclosed when consumer complaints are filed in the database. "The bureau should take steps to minimize privacy risks and other unintended consequences," CUNA has said in a series of comment letters.

The CFPB said more information on the hearing will follow its Tuesday announcement. The event is open to the public and any interested party can sign up at with their full name and organizational affiliation, if it applies.

'Understanding Student Loans' In NCUA Monthly Report

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ALEXANDRIA, Va. (3/13/13)--The March edition of "The NCUA Report" is now available and among this month's newsletter features is an article called, "Understanding the Risks of Private Student Lending."

The article says that, for the most part, credit unions have been in this market for a relatively short time-most have offered private student loans for less than five years. 

The article notes:

  • The Consumer Financial Protection Bureau reports that student loan debt just surpassed $1 trillion in 2012 and is now the largest form of consumer debt in the U.S., eclipsing credit cards;
  • Private student loans comprise 15% of total outstanding student loan debt. The remaining 85% is federally guaranteed loans; and
  • Total delinquencies (loans past due more than 60 days) in the private student loan market nationwide is 5.4% (according to CFPB), and total delinquency for credit unions in their portfolios is a much lower 1.46%.
As credit unions become more involved in providing these loans to their members, they must be aware that it is an attractive loan product but with rising delinquency rates. They also must consider all risks associated with private student loans before entering the market, the NCUA says.

The agency names some of the risks as:

  • An increasing reliance on parents as co-borrowers for private student loans, which has almost doubled since 2005. According to CFPB, 55% of private student loans had cosigners in 2005;
  • That number jumped to 91% in 2011;
  • The compounding of interest because of a deferral period can be quite large when the repayment period begins. A typical private student loan can have a deferral period up to five years while the borrower is in school. This results in the borrower owing much more than just the original principal; and
  • Unlike federal guaranteed student loans that have fixed rates, private student loans usually have adjustable rates. Although the current interest rate environment is at an all-time low, there is no guarantee that rates will remain that low three to four years out.
The NCUA states it expects credit unions to establish reasonable concentration limits for a private student loan portfolio to protect against risk.

Use the resource link to read more.