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Evaluations, Outreach Are Keys To CFPB Financial Ed Efforts

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WASHINGTON (3/27/13)--Evaluating the effectiveness of current financial education efforts and reaching out to the public to hear about how current financial education approaches can be improved are two key components of the Consumer Financial Protection Bureau's financial literacy work, bureau officials wrote in a Tuesday blog post.

The CFPB noted it has conducted listening sessions and released public information requests to collect comments on financial education needs. As a result of its outreach endeavors, the CFPB said it has "heard loud and clear that a comprehensive approach to financial education is needed and in order to be effective, it has to be salient, well-timed, integrated, and comprehensive."

New financial education strategies that incorporate behavioral psychology research and developing projects that address the specific issues and challenges that consumers confront on a daily basis are also near-term CFPB projects, according to the post.

The benefits of financial coaching are also being examined by the CFPB, and the bureau said it is working with the Corporation for Enterprise Development to uncover which "combinations of knowledge, skills, behaviors, and attitudes help consumers succeed in achieving their own financial goals."

Financial education is a core credit union principle, and financial literacy improvement efforts will especially be on display during April's Financial Literacy Month. The Credit Union National Association is observing Financial Literacy Month by holding National Credit Union Youth Week April 21-27. During the week, credit unions nationwide teach the benefits of saving and goal setting, and invite youth to open savings accounts at their credit union and make deposits throughout the year.

CUNA also conducts the National Youth Saving Challenge throughout April. The challenge rewards 10 savers with $100 cash prizes. Last April, 241 credit unions joined the Saving Challenge and engaged 125,867 youth, who deposited a collective $21.3 million in their credit union savings accounts, including 7,300 new member accounts.

"It makes good business sense for credit unions to help members make the most of their financial resources. We believe that educated consumers choose credit unions as their best financial partner," said Susan Tiffany, CUNA director of consumer periodicals. "We also believe it's the right thing to do." (See March 25 News Now story: Financial Literacy Month an Opportunity For CUs to Shine)

NEW: CUNA To Testify At April 10 CU Burden House Hearing

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WASHINGTON (UPDATED: 3/27/13, 11:50 a.m. ET)--The Credit Union National Association is scheduled to testify at an April 10 House Financial Services financial institutions and consumer credit subcommittee hearing on the regulatory burdens facing credit unions.

The credit union hearing, which is part of a 2013 series to study, in part, the impact of the Dodd-Frank Act, will take place one week before an April 16 hearing on bank regulatory issues.

John Magill, CUNA Executive Vice President of Government Affairs, on Wednesday said a hearing focused on credit union issues is highly significant. "We're breaking new ground here. Years ago, we would have been a side dish," he said. Even at a member business lending hearing in the last Congress, credit unions shared the day with banks. "Not so this time," he noted.

CUNA is working to select a witness for the credit union regulatory burden hearing. Additionally, CUNA has communicated routinely with financial services committee staff, providing specific and detailed suggestions for ways to ease the regulatory burden on credit unions. "We expect to elaborate on these ideas when we testify," Magill said.

The hearings are expected to be a precursor to a legislative package on regulatory relief with elements addressing the concerns of credit unions and community banks.

Compliance: CUNA Clarifies Credit Rating Question

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WASHINGTON (3/27/13)--Are credit unions still allowed to rely on credit ratings as they determine the acceptability of a given investment? Yes, Credit Union National Association Senior Vice President for Compliance Kathy Thompson said in a new CUNA CompBlog question and answer post.

In the post, Thompson clarified that credit unions are permitted to use credit ratings as one of many ways to determine the "investment grade" of a security.

As of June 11, the National Credit Union Administration will substitute "investment grade" wherever a specific credit rating appears in Section 703 of its regulations.

"This means that the credit union is required to analyze and be comfortable in concluding that the risk of default by the issuer is low and timely repayment of principal and interest is expected. The regulations suggest a list of eight factors a credit union may consider in its analysis. Although NCUA can't rely on a credit rating, there is nothing that prohibits a credit union from using credit ratings in its analysis," Thompson wrote.

The NCUA's Section 703 regulation on investments only applies to federal credit unions, Thompson noted. However, she added, if a federally insured state chartered credit union holds an investment not permissible for a federal credit union, it may be subject to special reserving on that investment.

"In Section 741.3, the NCUA points out that if a federally insured state chartered credit union relies upon a ratings-based investment permissible under state law, that credit union should go through the same 'investment grade' analysis that a federal credit union is now required to do," Thompson explained.

For more CUNA CompBlog compliance gems, use the resource link.

Mandatory CDFI Recertification Deadline Extended

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WASHINGTON (3/27/13)--Community Development Financial Institutions (CDFIs) now have until noon EDT on April 8 to submit their mandatory recertification applications.

This is a one-week extension of the original April 1 deadline and it was granted because of accessibility issues over the past several days that prevented the public from visiting the CDFI Fund's website or the myCDFIFund database.

The recertification requirement involves CDFIs originally or most recently certified before Feb. 1, 2010.

The Treasury's CDFI Fund helps locally based financial institutions--including credit unions--offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community.

Earlier this year the CDFI Fund said it expects to provide up to $165 million to eligible financial institutions in 2013.

For guidance on the mandatory recertification effort, use the resource link below.

CFPB To Expand Debt Collection Supervision: Report To Congress

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WASHINGTON (3/27/13)--Debt collection will remain a major Consumer Financial Protection Bureau (CFPB) focus in 2013 and the agency will keep expanding the reach of its supervisory authority in this area, according to the CFPB's second annual report to the U.S. Congress on enforcement of the Fair Debt Collection Practices Act (FDCPA).

The report, released Tuesday, noted that although the CFPB expects to expand its complaint system to include debt collection in the first half of this year, since it has not yet done so the data discussed in the report is based on complaints submitted to the Federal Trade Commission through its Consumer Sentinel database in 2012.

The report states that the FTC continues to receive more complaints about the debt collection industry than any other specific industry.

The report notes that first-party creditors are not generally subject to the FDCPA. However, the FDCPA applies to credit unions and others that regularly collect debts for other unrelated institutions, including under reciprocal service agreements. A credit union that uses a name other than its own in its collection efforts would also be covered.

The CFPB noted these other highlights of the report:
  • For the first time in five years, the most common category of FDCPA complaint received by the FTC was "demanding an amount other than is permitted by law or contract." This category includes complaints claiming a debt collector was attempting to collect a debt the consumer did not owe, including a debt discharged in bankruptcy, or a larger debt than what the consumer owed;
  • Among the practices targeted by the FTC was "phantom debt collection," meaning attempts by debt collectors "to collect on debts--often related to payday loans--that either did not exist or were not owed" to them; and
  • Another target was misleading practices in connection with attempts to collect time-barred debts.
Credit unions are not addressed in the report but CUNA will be monitoring developments in this area closely and meeting with the CFPB.

FHFA Proposes Force-placed Insurance Payment Changes

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WASHINGTON (3/27/13)--The Federal Housing Finance Agency (FHFA) on Tuesday proposed rule changes that would prevent mortgage sellers and servicers from collecting certain fees and payments from insurers that offer force-placed home insurance.

Force-placed insurance is a form of hazard coverage financial institutions buy to protect the properties of buyers who have let their homeowners' insurance lapse. Under standard mortgage terms, borrowers are contractually obligated to maintain hazard insurance. In the event that homeowners fail to maintain such coverage, mortgage servicers are entitled to buy force-placed coverage on their behalf and bill the homeowners.

Credit Union National Association Deputy General Counsel Mary Dunn said CUNA will weigh in on the FHFA proposal, "and will seek to minimize any negative impact on credit unions."

Some consumer advocates and insurance regulators have criticized financial institutions for reinsuring or collecting commissions on the force-placed insurance policies they buy, saying the policies amount to kickbacks and inflate the price of coverage. Consumer abuse in the force-placed insurance market has also attracted the attention of the Consumer Financial Protection Bureau, CUNA General Counsel Eric Richard noted.

The FHFA noted these and other concerns in its policy notice, saying comments it has received from various government agencies have focused on excessive rates and costs that are sometimes passed onto borrowers, as well as commissions and other compensation paid to servicers by insurance carriers.

Public comment on this issue will be accepted for 60 days after the notice is published in the Federal Register, the FHFA said. Comments on how transparency and consumer and investor protections could be improved will also be accepted.

For the notice, use the resource link.

Earlier this year, the FHFA delayed implementation of a plan to cut some force-placed insurance costs. Under that plan, Fannie Mae would require banks and other mortgage servicers to replace existing force-placed policies on loans it guarantees with insurance provided by a consortium of carriers offering 30% to 40% discounts. Instead of moving forward with the plan, the FHFA announced it would develop a working group to study force-placed insurance issues and evaluate how force-placed insurance impacts Fannie Mae.

Rep. Maxine Waters (D-Calif.), the ranking Democratic member of the House Financial Services Committee, criticized the FHFA's decision to delay the force-placed insurance changes, saying the plan could have created savings for taxpayers and borrowers alike.

ICANN Launches Domain Name Trademark Clearinghouse

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WASHINGTON (3/27/13)--A new trademark clearinghouse database is now being offered in a bid to help businesses register their trademarks before a raft of new domain names are approved, and that database was launched by the Internet Corporation for Assigned Names and Numbers (ICANN) on Tuesday.

According to ICANN, the clearinghouse will serve as a global repository for trademark data. The data held in the clearinghouse will help support future trademark claims and protect trademark rights.

ICANN last year accepted applications from individuals and groups interested in buying the rights to new "top level domain names." Domain names are the words to the right of the dot in an Internet address (URL). The domain name applications can encompass communities of businesses or services, such as ".creditunion" or ".news," and can also be used to market specific brands or products.

The Credit Union National Association has submitted an application for the ".creditunion" domain name. The ".creditunion" top level domain, if obtained, would be available to credit unions to supplement or replace their existing Web names at a roughly estimated cost of $100-$200 annually per credit union, according to CUNA. CUNA President/ CEO Bill Cheney has said the move to reserve a credit union-specific top-level domain "ensures this important identifier will stay in credit union hands and will allow the credit union movement to collectively take full advantage of the next stage of the Internet's development and growth."

ICANN last week approved 27 new domain name suffixes in non-English languages, including Arabic and Chinese.

Nearly 2000 domain name applications have been submitted, and ICANN is reviewing the domain names, approving them, classifying them as being eligible for extended evaluation, or classifying them as ineligible for further review.

ICANN is releasing these evaluations at an initial rate of 30 per week, and plans to increase that rate to 100 evaluations per week, with the ultimate goal of releasing all evaluations by August.