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NEW: CUNA to Hill: CUs, members pay steep data breach price

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WASHINGTON (3/5/14, UPDATED 11:11 a.m. ET)--The Credit Union National Association today made sure that every lawmaker on Capitol Hill got this message: America's credit unions spend millions of dollars--without skipping a beat--to protect consumers from merchant data breaches by re-issuing cards, monitoring accounts and reimbursing customers for fraud.

CUNA called on merchants to start working with financial institutions now to implement the best solutions to secure the system and protect consumers from fraud and identity theft--even though these solutions may be costly.

That message to Congress came in the form of a CUNA rebuttal to a recent blog post by the National Association of Convenience Stores (NACS) in The Hill newspaper.

In CUNA's Hill blog post today--which CUNA circulated to every federal lawmaker's office-- Executive Vice President of Government Affairs John Magill refutes mistaken claims NACS made about who covers costs of a merchant's data breach: it is credit unions and other financial institutions.

"Merchants are not required to reimburse financial institutions for the cost of card re-issuance after a data breach. Nothing in the Visa and MasterCard network rules provide for merchants to cover the costs of card re-issuance.

"This cost can be quite substantial, particularly for smaller financial institutions such as credit unions: the recent Target breach has cost credit unions about $5.68 per card affected, and that doesn't even include actual fraud losses," Magill states.

Magill goes onto to rebut the merchants' claim of "forced reimbursements" from merchants to card issuers to cover the cost of fraud losses after a breach--calling the whole notion "flawed."

"The Durbin amendment only applies to debit transactions, not credit, and the rate adjustment does not cover the cost of card re-issuance."

Even when merchants are made to take responsibility--like in a recent settlement reached between TJ Maxx, Visa and  MasterCard after a recent data breach at the retailer-- the credit unions involved received only pennies on the dollar to cover fraud costs. (Magill also notes that if network rules really did provide for "forced reimbursements," then there would be no need for this type of settlement in the first place.)

Calling on merchants to work with credit unins and other financial institutions for solutions, Magill concludes, "While we have all had our disagreements about issues in the past, now is the time to put our customers first and collaborate to ensure the best outcome for Americans." 

CLF, CDRLF, CDFI Fund spending stable in Obama 2015 budget

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WASHINGTON (3/5/14)--President Obama Tuesday unveiled his budget blueprint for FY 2015, which included proposed funding levels for certain credit union programs--along with about $3.9 trillion in other spending priorities.
 
The maximum loan limitation of the National Credit Union Administration's Central Liquidity Facility (CLF) would continue at its current fiscal 2014 level under the Obama administration's proposed budget for fiscal 2015. The CLF is authorized by the Federal Credit Union Act to lend up to 12 times its paid-in capital: The borrowing authority of the CLF currently stands at $2.9 billion.
 
The NCUA Community Development Revolving Loan Fund's (CDRLF) appropriation drops slightly to $1,071,267 in the proposed 2015 budget, down from $1,200,000 in last year's spending plan. The CDRLF provides loans and technical assistance to federal- and state-chartered credit unions that are designated as low-income credit unions as defined by NCUA regulations.
 
Also in Obama's spending plan, the proposed funding for the U.S. Treasury Department's Community Development Financial Institutions Fund, at $224,900,000, is down slightly from $226,000,000 last year.
 
Next week, the Office of Management and Budget will release its tax expenditure list along with details of these and other programs.

FASB seeks comment on financial statement notes proposal

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FAIRFIELD, Conn. (3/5/14)--The Financial Accounting Standards Board (FASB) is seeking comment on a proposed chapter of FASB's conceptual framework that is intended to improve its evaluation of existing and future disclosure requirements in notes to financial statements.
 
The proposal falls under the larger framework of FASB's project to improve the overall effectiveness of financial statements. FASB's ongoing disclosure project is a bid to create disclosures that clearly communicate vital information to users of financial statements released by public firms, not-for-profit organizations, and private companies, such as credit unions.
 
The proposed framework released Tuesday addresses FASB's process for identifying relevant information and the limits on information that should be included in notes to financial statements.
 
The Credit Union National Association is reviewing the proposed framework and will be posting a Regulatory Call to Action in the coming days. The proposal can be found on the FASB website. Use the resource link.

March 13 is McWatters nomination hearing

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WASHINGTON (3/5/14)--The Senate Banking Committee has rescheduled its hearing on National Credit Union Administration nominee Mark McWatters, and others, for March 13.
 
The hearing was postponed from March 4 due to a storm that hit the nation's capital with six inches of snow.
 
In addition to President Obama's pick for the NCUA, the committee will hear testimony from these other nominees: Stanley Fischer, as a member and vice chairman of the Federal Reserve Board; Jerome Powell, as Federal Reserve Board governor; Lael Brainard, as a Fed governor; and Gustavo Aguilar, to be an assistant secretary for the U.S. Department of Housing and Urban Development.
 
The hearing is scheduled to begin at 10 a.m. (ET).  All hearings are webcast live from the Senate Banking Committee's website. See resource link.

'Economic Update' video: NCUA ponders what 2014 will bring

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ALEXANDRIA, Va. (3/5/14)--In the National Credit Union Administration's newest "Economic Update" video the agency's chief economist, John Worth, reviews recent economic developments and what they may mean for credit unions.
 
Worth notes that the economy seemed to be gaining strength at the end of last year, but more recent data have been "somewhat disappointing," especially in the labor market.  He adds that some of the decline could be attributed to unusually bad winter weather.
 
Still, he says in the video, most economists expect 2014 to be a "pretty good" year for growth and employment.
 


The video is the latest in a series of NCUA YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The videos can also be viewed on the NCUA's YouTube page by using the resource link below.

House passes Flood Insurance Affordability Act

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WASHINGTON (3/5/14)--The Homeowner Flood Insurance Affordability Act (H.R. 3370) passed the House last night by a 306-91 vote.

The bill, in part,  would delay planned increases in National Flood Insurance Program premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably.

In January, the Senate passed similar legislation, the Homeowner Flood Insurance Affordability Act (S. 1926), with the same kind of bipartisan support the House bill saw Tuesday.

The House and Senate bills must now be reconciled before they can be sent to the president and signed into law.

NCUA letters detail derivatives rule, exam expectations

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ALEXANDRIA, Va. (3/5/14)--The National Credit Union Administration has released a pair of letters to inform credit unions that are interested in using derivatives to reduce interest rate risk.

Letter to Credit Unions (14-CU-04) outlines the derivatives rule approved by the NCUA at its January meeting and explains the application process for credit unions that plan to use derivatives to reduce interest rate risk.

The rule went into effect Monday and allows well-run federal credit unions with assets of at least $250 million to use simple derivatives to hedge against interest rate risks.

An NCUA field director may permit selected federal credit unions with assets of less than $250 million to apply to engage in derivatives as well.

Credit unions must have CAMEL ratings of 1, 2, or 3, and a management rating of 1 or 2, to be eligible for the derivatives authority.

The final derivatives rule included key changes sought by the Credit Union National Association, such as removing a fee for supervision of the use of these products. CUNA in general has supported derivatives investments for credit unions. CUNA in general has supported the use of derivatives to help credit unions manage their interest rate risks.

The NCUA also detailed its supervisory expectations in Supervisory Letter No. 14-02, released as an attachment to the Letter to Credit Unions.

Use the resource link to access the NCUA letters.

World Council seeks limit to CU burden in IASB rule

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LONDON (3/5/14)--The World Council of Credit Unions (World Council) in a comment letter filed this week backed amendments proposed by the International Accounting Standards Board (IASB) that would give credit unions increased ability to follow International Financial Reporting Standards for small- and medium-sized entities (IFRS for SMEs).

The World Council, however, recommended that the IASB go further and exclude credit unions and other non-publicly traded financial institutions from the definition of "publicly accountable" in order to make the IFRS for SMEs standard more consistent with U.S. Generally Accepted Accounting Principles (U.S. GAAP).
 
IASB sets International Financial Reporting Standards (IFRS), which apply to credit unions in a growing number of jurisdictions including Australia, Brazil, and Canada. IASB and the U.S. Financial Accounting Standards Board are in the process of converging IFRS with U.S. GAAP, thereby bringing U.S. credit unions under accounting rules that are the same as IFRS in most respects.
 
The exclusion of credit unions from the definition of "publicly accountable," recommended by the World Council, would align the IASB rule more closely with U.S. accounting rules. In December, FASB exempted U.S. credit unions from the definition of "public business entity," thereby allowing them to follow less burdensome private company accounting standards.
 
In its comment letter to IASB, the World Council wrote, "We agree that some credit unions--especially smaller institutions and those in developing countries--should be able to state their financials officially in conformity with IFRS for SMEs in order to help limit excessive compliance burdens on small credit unions, as well as to reduce the use of less stringent pro forma accounting systems at financial institutions in developing countries."
 
The World Council's letter also supported the IASB proposed expansion of the IFRS for SMEs "undue cost or effort" exemptions as another way to reduce compliance burdens on small credit unions.
 
To read the complete comment letter, use the resource link below.