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Compliance CFPB will affect CUs

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WASHINGTON (3/9/11)—While all but the three largest credit unions do not fall under the enforcement authority of the new Consumer Financial Protection Bureau (CFPB) established by the Dodd-Frank Act, credit unions will be affected as the CFPB works to increase consumer protections in the financial world. The bureau, officially to begin its operations on July 21, is currently under the auspices of the U.S. Treasury Department, which is getting the bureau off the ground until the Senate confirms a director. As Kathy Thompson, Credit Union National Association (CUNA) senior vice president for compliance says in a March article in CUNA’s Credit Union Magazine, Treasury envisions the CFPB “will look out for people as they borrow money or use other financial services.” The CFPB will also monitor the financial marketplace to ensure markets “work as transparently as they can for consumers.” “This is a sweeping mandate for the CFPB and raises questions about how this new agency will affect credit unions,” Thompson writes, and she pens “10 points credit unions should know about the CFPB.” Some of the ten points identified by Thompson include:
* Funding: It has been an issue from the start. CUNA adamantly opposed any plan that would make credit unions partly responsible for the funding. The solution was to make the CFPB part of the Fed, which covers expenses primarily from the income its large portfolio of federal government securities generates. What the Fed doesn’t spend, it returns to the Treasury. So taxpayers will pay for the CFPB operations but not through the normal appropriations process —but this could be revisited by Congress. * Staffing: Most of the new agency’s staff will transfer from existing federal agencies, most notably from the Federal Reserve Board’s Consumer Affairs Division—the group that already writes most of the rules implementing federal consumer protection laws. As the financial crisis unfolded, the Fed and other agencies became more active in rewriting consumer regulations, and credit unions must expect more, not fewer, consumer regulations in the next few years. * Examinations. The CFPB has “exclusive authority” for examinations of banks and credit unions with more than $10 billion in assets for compliance with the laws it oversees. Three credit unions currently have more than $10 billion in assets, and the bureau must coordinate its exam schedule with the National Credit Union Administration (NCUA) or state regulators. This does not mean, however, that other credit unions can expect the bureau to be hands-off. For instance, CFPB will have access to all examination reports, regardless of credit unions’ size or charter. This is another reason to expect consistent—and undoubtedly more detailed—consumer protection exams by NCUA and state regulators. * Enforcement. The new bureau also will have “exclusive” enforcement of the consumer laws under its jurisdiction for the three credit unions with more than $10 billion in assets as well as for privately insured credit unions. For federally insured credit unions with less than $10 billion in assets, NCUA will maintain enforcement authority, but NCUA can refer a problem to the bureau, which can initiate the enforcement action. And if the bureau spots a compliance problem, it can ask NCUA to investigate.
This is just a quick glimpse of some of Thompson’s observations and CUNA members can access the entire article using the resource link below.

CUNA urges senators for MBL bill support

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WASHINGTON (3/9/11)—The Credit Union National Association (CUNA) wrote key senators Tuesday to thank them for their support of “commonsense economic recovery and job creation” through their sponsorship of legislation that would increase the credit union member business lending cap to 27.5% of total assets, up from the current 12.25% limit. The letter was first sent to Sen. Mark Udall (D-Colo.), who drafted MBL legislation introduced in the Senate Tuesday, and to his primary co-sponsors, Sens. Olympia Snowe (R-Maine) and Charles Schumer (D-N.Y.). It was also sent to all Senate offices later in the day, to outline the benefits to the economy represented by the bill. (See related story: MBL bill introduced in Senate.) The letter recaps the 100-year history of credit unions serving the credit needs of their small business-owning members, and how it was just since 1998 that an “arbitrary statutory cap” was imposed. “In an effort to promote economic recovery and job creation, we strongly urge Congress to increase the credit union member business lending cap,” the CUNA letter said, adding, “While not the largest portion of credit union lending, small business lending is the fastest growing segment of credit union lending by a significant margin.” CUNA said it’s most recent research conservatively estimates that the MBL cap is lifted by Congress to 27.5% , credit unions could lend an additional $13 billion to small businesses in the first year after implementation, helping them to create nearly 140,000 new jobs. “To be clear,” the letter from CUNA President/CEO Bill Cheney said, “credit unions do not need taxpayer money to lend more to small businesses: they need the authority from Congress to do so.” The letter also noted bankers’ objection to increased business lending for credit unions. “Let’s face it: the banker’s objection is rooted in their fear of competition, which given the circumstances is relatively hollow,” Cheney wrote. “Credit unions currently hold 5% of the small business loans issued by depository institutions. We believe that many of the additional business loans granted by credit unions once the cap is increased would not be loans otherwise made by banks,” He added. Cheney said for the most part the loans supplied by credit unions would generally be “too small for a bank to consider” and would go to “borrowers unwilling to deal with a bank.” “However, even if all of the new credit union loans would have been made by banks, and if credit union business lending doubled (both quite unlikely), that would still leave banks with 90% of the business lending market,” Cheney said. More importantly and more troubling, Cheney added, is that the bankers’ rhetorical arguments miss the point of this legislation entirely. “This legislation is not about credit unions; it is about helping small businesses access credit.”

Udall introduces MBL bill in Senate

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WASHINGTON (3/9/11)—A bill introduced Tuesday in the Senate to increase the member business lending (MBL) cap for credit unions could bring 140,000 new jobs and $13 billion of new small business lending into the economy, according to updated figures from the Credit Union National Association (CUNA). The economic benefits, CUNA underscores, come at no cost to taxpayers.
Click to view larger image Sen. Mark Udall (D-Colo.) addresses the audience of the CUNA 2011 GAC last week, at which more than 4,000 credit union representatives participated. Udall noted his intention to reintroduce MBL legislation at the GAC. (CUNA Photo)
CUNA President/CEO Bill Cheney thanked Sen. Mark Udall (D-Colo.) for his introduction yesterday of legislation ((S.509) that would establish a maximum MBL limit of 27.5% of a credit union's total assets. Cheney said, “Economic conditions may be improving, but the nation is still in need of more jobs, and small businesses are still in search of affordable and accessible options for capital. Credit unions can help on both fronts.” Udall sponsored an MBL-increase bill last year, but when Congress adjourned without having taken action on it, it became procedurally necessary to reintroduce the bill in the new 112th Congress. Cheney noted, “Unlike last year’s legislation that handed community banks $30 billion to make new loans, Sen. Udall’s bill will spur more small business lending by credit unions without burdening U.S. taxpayers or creating a new federal program.” “Raising the statutory cap is a no-cost way to free credit unions to do more of what they are doing now: making safe and responsible loans to help their members start or grow their small businesses. After focusing last year on the banks, it is time for Congress to pass Sen. Udall’s common-sense small business lending bill and recognize that credit unions want to be, ought to be, and deserve to be part of the solution,” the CUNA leader said. Under provisions of the new Udall bill, substantially similar to the 2010 legislation, growth of a given credit union's MBL portfolio may be no more than 30% annually. Credit unions that wish to lift their MBL cap above the current level of 12.25% of total assets must be well capitalized, must be lending at a ratio near the current cap for the previous four quarters, must have a minimum of five years of underwriting and servicing MBLs, and must demonstrate sufficient experience in managing these types of loans, under the Udall plan. The National Credit Union Administration (NCUA) also would be granted the authority to "set rules creating intermediate (MBL) limits and to require approval before any credit union can move to the next higher limit." The bill calls on the NCUA to "be vigilant and carefully oversee implementation" of the MBL program by reporting on MBL "activity and loan performance." The language of the Udall bill closely reflects language drafted by the U.S. Treasury Department last year and endorsed by the Obama administration. Prior to the bill’s introduction, CUNA sent a letter of support to Udall and his co-sponsors, Sens. Olympia Snowe (R-Maine) and Charles Schumer (D-N.Y.), which also urged their Senate colleagues to pass the MBL cap increase. (See related story: CUNA urges senators for MBL bill support; thanks leaders) Original co-sponsors of the bill also include Sens. Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Al Franken (D-Minn.), Kirsten Gillibrand (D-N.Y.), Patrick Leahy (D-Vt.), Joseph Lieberman (I-Conn.), Bill Nelson (D-Fla.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), and Ron Wyden (D-Ore.). Last week Udall made known his intentions to reintroduce the MBL increase at CUNA’s Governmental Affairs Conference, at which more than 4,000 credit union representatives were present. Many of those representatives made personal visits to Capitol Hill to advocate to lawmakers on behalf of increased MBL authority to increase jobs and provide more capital for small business, as well as other key credit union issues. Also at the GAC, Rep. Ed Royce (R-Calif.), a House champion of MBL legislation, said he intends soon to re-introduce a bill to increase the cap in that chamber.

Inside Washington (03/08/2011)

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* WASHINGTON (3/9/11)--The 27-page term sheet forwarded by federal regulators to the five largest mortgage servicers last week is an indication of major changes in the future relationship among servicers, investors and borrowers. The term sheet’s operating directions for servicers includes new requirements for mortgage documentation, guidance on working with borrowers and active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems. The term sheet is an introduction to negotiations for the punishment process by state and federal agencies of servicers who were negligent in their foreclosure process. The details of the requirements had not been made public until now. View the entire document here … * WASHINGTON (3/9/11)--During the Credit Union National
Click for video Click the image to launch the video
Association’s (CUNA) Governmental Affair’s Conference in Washington, Michigan credit union representatives took time to educate their state lawmakers. One group visited Reps. Dale Kildee (D-Mich.), Justin Amash (R-Mich.) and Tim Walberg (R-Mich.), focusing on three main topics of concern for credit unions: maintaining the tax-exempt status, fixing interchange and increasing credit union member business lending authority. On Wednesday, the Michigan delegation hosted the traditional breakfast with home state legislators. Congressmen Dave Camp, Bill Huizenga and Gary Peters (Michigan Credit Union League 2011 Legislator of the Year) joined the group to discuss maintaining credit unions’ tax status, fixing interchange, raising the cap on member business lending and supplemental capital. Michigan’s credit unions spent the rest of the day visiting lawmakers on Capitol Hill to lobby for their support on issues. See the video above recapping Wednesday’s activities …