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Washington

'Patent trolls' in the crosshairs at state, federal levels

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WASHINGTON (3/28/14)--"Patent trolls," those who manipulate the patent system for their own gain, continue to be in the legislative crosshairs on both the state and federal levels, as the Credit Union National Association and state credit union leagues work to protect credit unions from their menacing practices.
 
On Thursday, Sen. Patrick Leahy (D-Vt.), chairman of Senate Judiciary Committee, confirmed at a Senate Executive Business Meeting that patent reform remains on his very near-term agenda. CUNA expects the committee to vote on the Patent Transparency and Improvements Act of 2013 (S. 1720) before Congress breaks for a Spring District Work session on April 11.
 
Without actually inventing anything or adding to innovation, patent trolls buy up patents in order to extract fees--or legal settlements--from other companies that may use that technology. Small companies like credit unions find themselves between a rock and a hard place: paying what amounts to extorted fees may be cheaper than fighting the trolls.
 
Leahy noted in his Thursday statement that members of his committee have been working on the issue for "the better part of the year," including a December hearing in which John Dwyer, president/CEO of New England FCU, Williston, Vt., testified on CUNA's behalf.
 
Dwyer described how his credit union became the target of a patent troll demand letter and is in the middle of expensive discovery in a patent infringement case related to 23 ATMs it provides for members.

Most recently on the state level, the Wisconsin State Assembly approved a patent troll bill this week. Like bills in six other states, Wisconsin's SB 498 now awaits the governor's signature to become law.
 
There have been similar bills in an additional 14 states, only two of which have died in committee.
 
CUNA and many state credit union leagues continue to heavily advocate for patent reforms on Capitol Hill and in state legislative offices.

Senator calls for 'clarification' on where data breach risk falls

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WASHINGTON (3/27/14)--Sen. Claire McCaskill (D-Mo.) said at a hearing on the Target data breach Wednesday that there just might be a lot of public confusion about where "losses fall and where costs are absorbed" in such breaches.
 
McCaskill, a member of the Senate Commerce, Science & Transportation Committee that conducted the hearing, noted that companies collecting consumers' personal information are not held financially responsible for the costs that occur when the data is not secure.
 
"I don't think people understand ... a lot of the costs associated with this breach--in fact the majority--fall on credit unions and local banks instead of Target," McCaskill highlighted.
 
She noted, "Interchange fees were $19 billion before the Durbin amendment and now they are less than $10 billion." The Durbin Amendment refers to the last-minute addition to the Dodd-Frank Act that capped the fees debit card issuers area allowed to charge merchants for the merchants' customer's use of debit cards.
 
She continued, "So retailers got almost $10 billion extra as a result of those prices going down. I'm not saying that's good or bad, but I'm trying to say it's important the risk be borne by those who must engage in the activity to protect.
 
"I think most people thought you guys were covering the cost of this," she said to the retailer. "I think a clarification of where the risk falls is important for us, because it will be better to align those risks with the right incentives in the free market," she stated.
 
In conjunction with its hearing, the committee released a report alleging that Target missed several opportunities to stop last year's data breach that compromised about 40 million debit and credit card numbers and the personal information of 70 million customers (News Now March 27).
 
The Credit Union National Association has asked Congress to address data security relative to merchants, who are not held to the same standards of security as credit union and other financial institutions.
 
In particular, CUNA suggests all payment system participants are held to comparable levels of federal data security requirements; those responsible for the data breach should be responsible for the costs of helping consumers; and those responsible should ensure consumers know where their information was breached.

Waters enters bill into housing finance reform debate

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WASHINGTON (3/28/14)--Entering the policy discussions involving changes to the country's existing housing finance system, Rep. Maxine Waters (D-Calif.) this week introduced legislation that would create a cooperative group of mortgage lenders to back home loans.
 
The discussion draft, known as the "Housing Opportunities Move the Economy (HOME) Forward Act of 2014," would establish a new lender-owned Mortgage Securities Cooperative (MSC). That entity would be the only issuer of government-guaranteed securities. It would be governed on a one-member, one-vote basis, and capitalized by lenders based on mortgage volume, the House Financial Services Committee said in a summary of the proposal.
 
The co-op would replace government-sponsored enterprises Fannie Mae and Freddie Mac, which would be wound down over a five-year timeline.
 
The bill would also:
  • Maintain the affordable 30-year fixed-rate mortgage;
  • Establish a new regulator known as the National Mortgage Finance Administration, which would oversee the MSC;
  • Ensure equal access for small lenders;
  • Provide transparency and standardization across the mortgage market through uniform pooling and servicing agreements and new databases to facilitate access to mortgage data; and,
  • Ensure access to affordable rental housing.
Housing finance reform bills have also been introduced by the Senate Banking Committee and Waters' House Financial Services Committee colleague Rep. Jeb Hensarling (R-Texas). CUNA this week met with White House officials to discuss credit union concerns ahead of a vote on the Senate bill, and CUNA Chief Economist Bill Hampel last year discussed credit union priorities for a future housing finance market at a conference convened by Waters.
 
CUNA has repeatedly underscored that credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.
 
Other CUNA suggestions for a future mortgage market include:
  • There must be a neutral third party in the secondary market, with its sole role as a conduit to the secondary market;
  • The secondary market must be open to lenders of all sizes on an equitable basis;
  • The new housing finance system should emphasize consumer education and counseling as a means to ensure that borrowers receive appropriate mortgage loans;
  • The new system must include consumer access to products that provide for predictable, affordable mortgage payments to qualified borrowers; and
  • The new housing finance system should apply a reasonable conforming loan limit that adequately takes into consideration local real estate costs in higher cost areas.

World Council comments on risk-based AML/CFT compliance

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BRUSSELS (3/28/14)--The World Council of Credit Unions (World Council) this week
World Council of Credit Unions Vice President and Chief Counsel Michael Edwards at the headquarters of the European Banking Federation in Brussels. (World Council of Credit Unions photo)
recommended ways the Financial Action Task Force (FATF) could limit regulatory burdens on credit unions as part of revisions to its guidance for financial institutions on the risk-based compliance approach (RBA) to anti-money laundering and countering the financing of terrorism (AML/CFT). 

The FATF's changes to the RBA, once finalized, are likely to be incorporated into the U.S. Bank Secrecy Act (BSA) rules within the next year, the World Council predicts.

As FATF works to update its current RBA for banking institutions guidance paper, issued in 2007, the World Council recommends that increasing the detail of that guidance would help increase the clarity regarding when and how it is appropriate to apply risk-based policies for AML/CFT.

World Council made its recommendations during the FATF private sector participation group meeting in Brussels Tuesday and Wednesday. Other topics discussed included AML/CFT issues related to money services businesses (MSBs) and virtual currencies such as bitcoin. World Council Vice President and Chief Counsel Michael Edwards represented credit unions at the FATF meeting.

The FATF's work to update the RBA guidance is intended to make that compliance tool consistent with its also-updated International Standards on Combatting Money Laundering and the Financing of Terrorism & Proliferation document--commonly called the "40 Recommendations."

World Council related that it has become increasingly difficult for credit unions in jurisdictions such as Great Britain and the U.S. to maintain access to correspondent banking services since the FATF's 2012 revisions to the "40 Recommendations" increased the responsibility placed on banks and credit unions for ensuring proper customer due diligence on their customer's customers.  

For example, a bank or corporate credit union providing correspondent services to a credit union now can be held liable for shortcomings in the credit union's customer due diligence/member identification program.

Similarly, a credit union doing business with an MSB can be held liable for problems with the MSB's AML/CFT compliance.

Many larger banks have decided to "de-risk" their operations in the face of these new requirements by curtailing their business relationships with credit unions, smaller banks, trusts, MSBs, and other businesses that handle funds on behalf of consumers or businesses.

NEW: Johnson, Crapo announce housing finance reform markup

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WASHINGTON (3/28/14, UPDATED 11:54 a.m. ET)--On April 29 at 10 a.m. (ET) the Senate Banking Committee will markup its housing finance reform legislation, according to an announcement by the committee chairman, Sen. Tim Johnson (D-S.D.), and its ranking Republican member, Sen. Mike Crapo (R-Idaho).
 
It was just earlier this month that the senators unveiled their housing finance reform proposal--hailing its bipartisan backing. 
 
The new bill used the Corker-Warner bill (S.1217) as its framework and it is intended to:
  • Protect taxpayers from bearing the cost of housing downturns;
  • Promote stable, liquid, and efficient mortgage markets for single-family and multifamily housing;
  • Ensure that affordable, 30-year, fixed-rate, prepayable mortgages continue to be available, and that affordability remains an important consideration;
  • Provide equal access for lenders of all sizes to the secondary market;
  • Facilitate broad availability of mortgage credit for eligible borrowers in all areas and for single family and multifamily housing types.
The Johnson-Crapo draft bill is a lengthy, 425 pages of reforms.
 
When the bill was released, the Credit Union National Association confirmed that it contained an important modification from an earlier draft bill. A cap for membership in a mutual securitization company was drastically increased, as recommended by CUNA in testimony last November and in meetings with legislative staff on Capitol Hill.

Read News Now Monday for more.

Compliance: It bears repeating--ATMs vulnerable as of April 8

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WASHINGTON (3/28/14)--ATMs could become vulnerable on April 8 when Microsoft stops providing regular security patches, technical assistance and support for its Windows XP operating system, the Credit Union National Association again reminds.
 
"Credit unions have probably tired of the reminder notices and news headlines at this point, but it
ATM owners will need to upgrade their machines to Windows 7 to ensure continued technical support for their terminals, and to remain compliant with Payment Card Industry Data Security Standards, CUNA reminds.
 bears repeating just the same: ATM owners will need to upgrade their machines to Windows 7 to ensure continued technical support for their terminals, and to remain compliant with Payment Card Industry Data Security Standards," CUNA Senior Director of Compliance Analysis Valerie Moss said in a recent Comp Blog post.
 
Failure to upgrade could expose ATMs and other devices to increased security risks. And, it won't take hackers very long to exploit these vulnerabilities. However, Moss stressed, Microsoft's decision to stop Windows XP support does not mean that personal computers, ATMs and other devices will cease to operate on April 8 without an upgrade.
 
The Federal Financial Institution Examination Council (FFIEC) has outlined risk-management processes to address the risk from continued use of XP. Those processes are:
  • Performing risk assessments;
  • Selecting appropriate mitigations;
  • Conducting appropriate planning; and
  • Monitoring risk mitigation implementation.
Moss advised that credit unions be ready to respond to member inquiries about the ATM upgrade issue.
 
"CUNA has been in contact with strategic partners that have been educating credit union ATM owners on upcoming changes for the past year. So, your vendors should be able to address any questions you have regarding the XP sunset and/or the security of your ATMs," she said.
 
Use the resource link for more on this ATM security issue.

Hill report alleges Target weaknesses leading to data breach

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WASHINGTON (3/27/14)--U.S. retailer Target missed several opportunities to stop last year's data breach that compromised about 40 million debit and credit card numbers and the personal information of 70 million customers, a new Senate Commerce Committee report has revealed.
 
The report was released at a Wednesday committee hearing on the data breach.
 
The breach impacted credit unions, costing them an estimated $30.6 million. Future fraud could increase these costs, according to the Credit Union National Association. Credit unions are among the plaintiffs in more than 90 lawsuits that have been filed against Target.
 
The Senate analysis highlighted certain issues that contributed to the breach, including:
  • Target's decision to give network access to a third-party vendor that failed to follow broadly accepted information security practices. "The vendor's weak security allowed the attackers to gain a foothold in Target's network," the report said;
  • Target's failure to respond to multiple automated warnings from anti-intrusion software which detected malware installations and reported on escape routes hackers planned to use to remove data from Target's network; and
  • Target's failure to properly isolate sensitive data from other less sensitive data on its network.
Committee Chairman John D. Rockefeller IV (D-W.Va.) in a Wednesday release said, "(I)f Target--or any other company--is going to collect detailed information about its customers, they need to do everything possible to protect it from identity thieves...Target must be a clarion call to businesses, both large and small, that it's time to invest in some changes."
 
CUNA has asked Congress to address data security relative to merchants, who are not held to the same standards of security as credit union and other financial institutions.
 
In particular, CUNA suggests all payment system participants are held to comparable levels of federal data security requirements; those responsible for the data breach should be responsible for the costs of helping consumers; and those responsible should ensure consumers know where their information was breached.
 
For the full committee report on the Target breach, use the resource link.
 
 

CUNA: CUs' dissatisfaction with exams ticks up

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WASHINGTON (3/27/14)--Based on results of the Credit Union National Association's ongoing
Click to view larger image Source: CUNA
 survey of credit unions' satisfaction with the federal and state examination processes, as of February 2014 more credit union CEOs were satisfied with their exams (58%) than dissatisfied (27%), although this finding has slipped slightly from 2012's results of 61% and 25%
 
The CUNA survey also found that:
  • Exams tended to take longer in 2013 (9.1 days) than in 2012 (7.9 days);
  • There was a slight decline between 2013 and 2012 in the number of credit unions reporting being under one or more Documents of Resolution (DOR), from 43% to 41%;
  • Exams conducted by state examiners are substantially less likely to include DORs than exams in which the National Credit Union Administration is involved; and
  • Examinations conducted solely by state examiners tend to be rated slightly better than NCUA-only exams, but joint exams were rated much lower than either state- or NCUA-only exams.
Agency exam teams received positive ratings on a number of items. They included: giving credit union management the opportunity to comment on or respond to examination findings before they were shared with others; being knowledgeable about the credit union being examined; being knowledgeable about key safety and soundness issues and regulatory requirements; and taking time to discuss preliminary exam findings prior to the exit meeting.
 
Four of five survey respondents agreed that heavier regulatory and examination requirements are putting increasing pressure on credit union resources. Many credit unions also complained of the sometimes excessive use of DORs and of instances in which examiners applied "best practices" as a regulatory standard and/or applied "guidance" as if it were enforceable regulation.
 
CUNA continues to encourage credit unions to participate in the survey--even if they have done so for prior exams--weighing in on the strengths and weaknesses of state and federal regulatory examinations. The information gleaned from the survey responses helps CUNA and the state credit union leagues hone their exam issue advocacy efforts with regulators.

CUNA's Examination and Supervision Subcommittee will be reviewing the survey results, and CUNA Regulatory Advocacy staff will be pursuing concerns with NCUA.
 
For a summary of the credit union examination survey results, use the resource link.

Fin. Services Dems seek review of financial regulators' workplace policies

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WASHINGTON (3/27/14)--In the wake of allegations of workplace discrimination at the Consumer Financial Protection Bureau (CFPB), a group of House Financial Services Committee Democrats has asked the inspector generals of the National Credit Union Administration and all the federal financial regulatory agencies to examine the workplace practices of those agencies.
 
In addition to the NCUA, the requests were sent to the IGs of the Federal Deposit Insurance Corp., the U.S. Treasury Department, the Federal Housing Finance Agency, the Securities and Exchange Commission and the Federal Reserve.
 
The letters ask the IGs to investigate "any employee complaints, formal or informal, related to personal practices, workplace policies and the findings from any employee satisfaction surveys."
 
If the IG identifies any individual or group within an agency that has shown discriminatory practices or "patterns of unfair or unequal treatment," that IG is asked to recommend appropriate action to address the negative workplace situation, such as "remedial training" or firing the individuals involved in the discriminatory patterns.
 
Led by Reps. Maxine Waters, of California, and Carolyn Maloney, of New York, the group of eight lawmakers noted that the Dodd-Frank Act established Offices of Minority and Women Inclusion (OMWI) at most of the federal financial agencies. Those offices are charged with matters relating to diversity in management, employment and business activities.
 
The lawmakers' letters noted, however, that a Government Accountability Office report last year concluded that management-level representation of minorities and women among federal financial agencies and the Federal Reserve Banks had not changed substantially from 2007 through 2011.
 
On April 2, the House Financial Services subcommittee on oversight and investigations is calling several CFPB officials to testify regarding recent allegations that CFPB's white employees were more likely to get a higher performance rating than minority employees.
 
"While public attention is currently and justifiably focused on the CFPB, the most recent OMWI reports suggest the disparities impeding internal upward mobility for minorities may be endemic throughout all the agencies regulating the financial services industry," the letters stated.

FHFA announces $9.3B PLS settlement with BoA Corp.

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WASHINGTON (3/27/14)--The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, announced Wednesday that it has reached a settlement in cases involving Bank of America, Countrywide Financial, Merrill Lynch and certain named individuals totaling approximately $5.83 billion.
 
According to the agency release, the agreement provides for an aggregate payment of around $9.33 billion by Bank of America that includes the litigation resolution as well as a purchase of securities by the bank from Fannie and Freddie.
 
Bank of America Corp. owns Countrywide and Merrill Lynch. The cases alleged violations of federal and state securities laws in connection with private-label, residential mortgage-backed securities (PLS) purchased by Fannie Mae and Freddie Mac between 2005 and 2007. Allegations of common law fraud were made in the Countrywide and Merrill Lynch cases.
 
Of the 18 PLS suits filed in 2011, FHFA says it now has claims remaining in seven suits against various institutions and remains committed to satisfactory resolution of these pending actions.

N.Y. Fed papers take on too-big-to-fail, other big bank issues

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WASHINGTON (3/27/14)--A series of papers by Federal Reserve economists has found the largest U.S. banks enjoy a boost--what Reuters labeled a "too-big-to-fail" advantage in financial markets--which brings lower funding and reduced operating costs.
 
Reuters went on to say that while the study did not pinpoint the reason big banks can borrow more cheaply, "Wall Street critics say it is because investors believe the U.S. government would again rescue them in a panic" (March 26).

The New York Fed research papers, released Tuesday in a special edition of that body's Economic Policy Review , address bank size, complexity and resolution issues.
 
According to the Fed papers, bank size has both benefits and costs: "The upside is the potential for economies of scale and lower operating costs; the downside is the 'too-big-to-fail' problem and associated funding advantages and moral hazard."
 
The papers also state that banks have become less bank-centric and more organizationally complex.
 
The 11 papers are titled:
  • Do Big Banks Have Lower Operating Costs?;
  • Evidence from the Bond Market on Banks' "Too-Big-to-Fail" Subsidy;
  • Do "Too-Big-to-Fail" Banks Take On More Risk?;
  • Components of U.S. Financial Sector Growth, 1950-2013;
  • The Evolution of Bank Complexity;
  • Measures of Complexity of Global Banks;
  • Matching Collateral Supply and Financing Demands in Dealer Banks;
  • Bank Resolution Concepts, Trade-Offs, and Changes in Practices;
  • The Failure Resolution of Lehman Brothers;
  • Why Bail-in? And How!; and
  • Why Are Large Bank Failures So Messy and What to Do about It?
For more on the Fed papers, use the resource link.
 

NCUA kicks off Fin. Lit. events in five days

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ALEXANDRIA, Va. (3/27/14)--Make sure you're ready: Financial Literacy Month arrives in just five days.

The National Credit Union Administration sent out a reminder Wednesday encouraging credit unions to use the month to continue to help their members become smarter consumers. For instance, credit unions can partner with national and local organizations such as schools, non-profits and other consumer-focused groups to offer workshops and distribute outreach materials. (Watch for April News Now stories with a Financial Literacy logo for credit union highlights.)

"While consumer education is a year-round effort, Financial Literacy Month is a good reminder about the importance of learning how to manage money and build financial security," NCUA Chair Debbie Matz said in a release. 

She highlighted several activities NCUA has planned for the month, including:
  • April 1: A new video documenting the history of America's credit unions and the NCUA, which will be available on the agency's YouTube channel;
  • April 3: A free webinar for credit unions, "Financial Literacy: Putting Your Mission into Action," at 2 p.m. (ET) (see resource link for registration information);
  • April 10: Participation in the annual Financial Literacy Day event on Capitol Hill. Hosted by the Jump$tart Coalition, Junior Achievement USA and the Council for Economic Education, the event is intended to inform lawmakers, congressional staffers and the public about federally insured credit unions and the role of NCUA; and,
  • April 23: A Twitter chat focused on financial literacy from 11 a.m. until noon (ET).
The Twitter chat will be lead by Kenneth Worthey, Financial Literacy and Outreach Analyst with NCUA's Office of Consumer Protection.

The NCUA encourages both credit unions and consumers to follow the conversation and contribute using the #NCUAChat hashtag. Participants can submit questions ahead of time to socialmedia@ncua.gov .

This is the agency's second Twitter chat, having hosted a similar event for America Saves and Military Saves Weeks.

Also in April, the agency will feature updated pages on MyCreditUnion.gov and the agency's financial literacy site, Pocket Cents, with new information about saving, borrowing and managing credit.

CFPB: 80% of payday loans renewed or followed by more loans

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WASHINGTON (3/26/14)--More than 80% of short-term loans taken out at payday lenders are rolled over or followed within two-weeks by another loan, according to a new Consumer Financial Protection Bureau report.
 
The report got a public unveiling Tuesday at a payday lending field hearing in Nashville, Tenn.
Click to view larger image The CFPB slide pictured above shows the number of loan sequences per new borrower. According to the bureau, defaulters are more likely than repayers and renewers to have just a single loan sequence. Defaulting on a loan can preclude a consumer from borrowing again, the bureau noted.
CFPB Director Richard Cordray said the bureau study "again confirms that payday loans are leading many consumers into longer-term, expensive debt burdens."
 
While the CFPB believes that some payday loans should continue to be available, it is expected that the bureau will issue new restrictions on their practices.

"Too many borrowers get caught up in the debt traps these products can become. The stress of having to re-borrow the same dollars after already paying substantial fees is a heavy yoke that impairs a consumer's financial freedom," Cordray added in his written remarks.

The bureau said same-day renewals were less frequent in states with mandated cooling-off periods, but also noted that 14-day renewal rates in states with cooling-off periods were nearly identical to states without those limitations.
 
The CFPB analysis found that:
  • 15% of new loans are followed by a loan sequence at least 10 loans long;
  • Half of all loans are in a sequence at least 10 loans long;
  • Increases in loan amounts are more likely to occur early in a loan sequence;
  • Few borrowers amortize, or have reductions in principal amounts, between the first and last loan of a loan sequence;
  • Loan size is more likely to go up in longer loan sequences, and principal increases are associated with higher default rates;
  • Monthly borrowers are disproportionately likely to stay in debt for 11 months or longer; and,
  • The majority of monthly borrowers are government benefits recipients.
The field hearing also featured testimony by consumer groups. Industry representatives and the general public also were provided an opportunity to speak at the session.

The CFPB announced in November 2013 that it would accept complaints on payday lenders and later that month announced its first enforcement action against a payday lender.
 
The Credit Union National Association highlights credit unions as a consumer-friendly alternative to the high-cost payday loan industry. Around 20% of credit union members use payday lenders.

A May 15 webinar (see resource link) from CUNA will examine why payday lending has increased in recent years and illustrate how to develop effective credit union loan alternatives to payday loans.

For the full CFPB study, use the first resource link.

CUNA participates in today's White House GSE reform meeting

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WASHINGTON (3/26/14)--As the attention of the Senate Banking Committee is dominated by preparations for a vote on its housing finance reform bill, White House staff continues to conduct meetings with stakeholders, like the Credit Union National Association, on policy concerns.
 
In a meeting at the White House today, CUNA Chief Economist Bill Hampel and General Counsel Eric Richard will represent credit union concerns. CUNA urges the U.S. Congress as it considers comprehensive housing finance reform to ensure that credit unions and other community financial institutions continue to have access to the secondary mortgage market.
 
In his January State of the Union address, President Obama called on Congress to pass a housing finance reform bill that would "protect taxpayers" and keep "the dream of homeownership alive for future generations."
 
A fact sheet released at that time outlined four White House principles for reform:
  • Utilize the private sector as the center of the housing finance system;
  • End Fannie Mae and Freddie Mac as they currently exist;
  • Ensure widespread access to safe and simple mortgage products such as the 30-year fixed rate mortgage; and,
  • Support affordability for creditworthy first-time homebuyers and access for affordable rental housing.
As the Senate Banking Committee prepares for its markup within the next few weeks of the Senate's plan for a new housing finance system, CUNA is drafting a comprehensive list of suggested changes and improvements for the panel ( News Now March 25).
 
In essence, the bipartisan draft winds down and eliminates Fannie Mae and Freddie Mac and establishes a "modernized, streamlined and accountable" Federal Mortgage Insurance Corporation (FMIC). The draft bill also creates a reinsurance fund, to be known as the Mortgage Insurance Fund, to protect taxpayers.
 
The bill is 425 pages long. (See resource links.)

Mobile banking use jumps to one-in-three, Fed report says

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WASHINGTON (3/26/14)--The number of consumers that used mobile phones to access credit union and bank accounts in 2013 rose to 33%, a sharp, five-percentage-point increase over 2012's total, the Federal Reserve Board said in a report released Tuesday.

Additionally, the Fed report found that smartphone users really tipped the balance in mobile phone banking.  In 2013, 51% of smartphone users had used mobile banking applications.

Consumers most frequently used their phones to review account balances, monitor recent transactions and transfer money between accounts, the Fed said. In addition, 38% of mobile banking users deposited a paper check with their phone's camera in 2013.

The underbanked were frequent users of mobile financial services: 39% of underbanked consumers with mobile phones used mobile banking last year.

"Mobile phones may also allow for the extension of financial services to an additional 10% of the population that is unbanked…as 69% of this group has a mobile phone, 64% of which are smartphones," the Fed said in a release.

The ubiquitous mobile phones aren't just changing the face of banking services. Consumers are also more frequently using their phones to make purchases, compare product prices and read product reviews, according to the Fed report. Those numbers show:
  • 17% of smartphone owners had used their phone to make a purchase at a retail store;
  • 44% of smartphone users used their phone to compare prices while shopping; and
  • 42% of smartphone users browsed product reviews in-store with their phone.
However, not all are embracing this technology. The Fed report noted that "well over half of mobile phone owners who do not currently use mobile banking say they have no interest in using this technology." Many are also skeptical regarding the safety and benefits of mobile in-store payments.

Data for the report was collected from 2,600 respondents. For the full Fed report, use the resource link.

Joint-agency appraisal management proposal ready for comment

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ALEXANDRIA, Va. (3/25/14)--The National Credit Union Administration and other federal financial regulators on Monday approved a joint proposal to impose minimum requirements for appraisal management companies (AMC). The NCUA discussed the proposal at its open board meeting last week.

The proposal soon will be published in the Federal Register and will be open for public comment for 60 days. Federal regulators have asked for comments on all aspects of the proposal.

The six federal financial regulatory agencies that comprise the Federal Financial Institutions Examination Council, including the NCUA, are proposing the rule to implement Dodd-Frank Act requirements meant to better ensure the quality of appraisals and assure compliance with the Truth-in-Lending Act.

NCUA staff last week said the AMC proposal should not have a measurable impact on credit unions ( News Now March 21).  It would set minimum requirements for registration and supervision of AMCs--the intermediaries for appraisers and lenders that provide appraisal services.

These requirements would apply to states that elect to establish an agency with authority to register and supervise appraisal management companies.

Under the joint-agency plan, an appraisal management company that is a subsidiary of a financial institution and regulated by a federal financial services regulatory agency would not be required to register with a state, but would otherwise be required to meet the same minimum requirements as other appraisal management companies.

The Credit Union National Association will be evaluating the impact of the proposal and will provide a summary in its Regulatory Comment Call.

DeMarco will leave FHFA next month

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WASHINGTON (3/25/14)--Edward J. DeMarco, who served as acting director of the Federal Housing Finance Agency from 2009 until January 2014, will leave the agency in April.
 
FHFA Director Mel Watt said DeMarco "has been an invaluable asset to FHFA," and thanked him for his help as Watt transitioned into his new role as agency head. Watt took over as head of the FHFA earlier this year.

In his resignation letter to Watt, DeMarco wrote, "I appreciate your invitation to assist you with the recent leadership transition and I have been pleased to do so. I am also grateful for the thoughtfulness you have shown me during this transition period. With the transition now well along, I believe the time has come for me to seek other opportunities."

DeMarco made no announcements about his future plans.
 

RBC webinar detailing CU concerns available online

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WASHINGTON (3/25/14)--The Credit Union National Association's (CUNA) free web session on the controversial risk-based capital proposal is now available online.
 
In the hour-long session, two credit union CEOs warned a capacity audience of 500 last week that the National Credit Union Administration's proposed rule on risk-based capital will change how credit unions manage their operations and may require some to ration services to their members.
 
Maurice Smith, CEO of Local Government FCU, Raleigh, N.C., noted three potential tactics credit unions would have to resort to in preserving a capital "cushion" from being eroded by the proposal:
  • Rebalance assets,
  • Ration services to members--which he called "repugnant" to the credit union philosophy, or
  • Ask members to pay more through lower returns on savings, higher rates on loans and higher fees.
Smith is a CUNA Executive Committee member.
 
Ron Burniske of Chartway FCU, Virginia Beach, Va., strategically analyzed the risk-weighting provisions within the NCUA proposal.
 
He pointed out during the webinar that they do not "significantly reflect the reasons credit unions failed" during the Great Recession of 2008-11.
 
Senior CUNA staff also addressed the webinar participants.
 
Chief Economist Bill Hampel explained that the proposal would create strong incentives for credit unions to throttle back on mortgage and member business loans, as well as retention of long-term assets.
 
Deputy General Counsel Mary Dunn scrutinized the NCUA's authority to regulate. She noted that the Federal Credit Union Act requires NCUA to develop a system of prompt corrective action that is "comparable" to bank PCA--but that also takes into account the unique nature of credit unions. The proposal, Dunn emphasized, does not do that sufficiently.
 
General Counsel Eric Richard outlined CUNA's comprehensive strategy aimed at major improvements in the proposal--including thorough analysis, member activation (especially through comment letters) and with the U.S. Congress. And he said a challenge in court of a final rule, if warranted, is not off the table.
 
All urged credit union stakeholders to review the proposal, determine its impact on their operations, and file a comment letter by May 28 with the NCUA, copying their members of Congress.

In Congress: McWatters nomination could see vote before next break

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WASHINGTON (3/25/14)--The Senate Banking Committee is expected to move forward with a vote on National Credit Union Administration nominee Mark McWatters within the next couple of weeks--and probably on short notice. But that is not all that is brewing on Capitol Hill during this work session just before a spring recess.
 
For this week, the committee schedule includes today's House Financial Services Committee hearing titled "Why Debt Matters" and a House Small Business Committee markup of the views and estimates of the fiscal 2015 budget request of the Small Business Administration, also today.
 
On Wednesday, the congressional calendar includes:
  • A Senate Banking subcommittee on financial institutions and consumer protection hearing titled "Are Alternative Financial Products Serving Consumers?";
  • A Senate Homeland Security and Governmental Affairs Committee hearing on "Strengthening Public-Private Partnerships to Reduce Cyber Risks to Our Nation's Critical Infrastructure.";
  • A Joint Economic Committee hearing titled "Unwinding Quantitative Easing: How the Fed Should Promote Stable Prices, Economic Growth, and Job Creation."; and,
  • A House Judiciary regulatory reform, commercial and antitrust law subcommittee hearing on potential reforms to Chapter 11.
 
The Senate Judiciary Committee was scheduled to consider the Patent Transparency and Improvements Act (S. 1720), but discussion of that bill may be delayed by one week or more.
 
CUNA also expects the House Financial Services Committee to soon announce an April 8 hearing on financial services regulation.
 
Representatives from the NCUA, Consumer Financial Protection Bureau and other agencies are expected to testify at this hearing. CUNA staff have been briefing committee members regarding current concerns with these regulators, including concerns regarding the NCUA's risk-based capital proposal.
 
The House and Senate are scheduled to remain in session until the Easter holiday district work period, which is set to begin on April 11.

Ways & Means tax hearings to start in April re: 'extenders'

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WASHINGTON (3/25/14)--House Ways and Means Chairman Dave Camp (R-Mich.) notified colleagues Monday that the committee will move forward with hearings on his tax reform draft in April--first taking on the amorphous area of tax "extenders."
 
On Feb. 26, Camp released a much-anticipated tax reform plan. The specific credit union tax status was left untouched in the plan, an outcome for which the Credit Union National Association strongly advocated.  CUNA, the state credit union associations and credit unions together amassed 1.3 million contacts with lawmakers urging them "don't tax my credit union."
 
The "extenders" referred to by Camp on Monday are dozens of temporary tax provisions that are renewed--often at the last minute Camp notes--over and over again. In sum, they can represent many billions of dollars annually.
 
Camp suggested that certain tax extenders should be "considered, and treated, as permanent parts of the baseline off of which tax reform is enacted."
 
"One important goal of tax reform is to provide certainty to American taxpayers. I think we can all agree that a short extension of tax policies is no way to legislate and is even worse for the families and businesses who utilize those tax benefits," he wrote to his tax-policywriting colleagues.
 
Camp maintained that the extenders confuse debate regarding what is the real tax revenue baseline.
 
Starting in April, Camp pledged, the committee will go policy-by-policy and through hearings and markup session determine what extenders should become permanent to the tax code. Specific dates and topics will be forthcoming.
 
CUNA will continue to monitor the tax reform process as it unfolds.
 
"While credit unions were untouched in the original tax draft, CUNA will continue to advocate for and educate about the credit union tax status as long as the tax reform process is alive," CUNA Executive Vice President of Government Affairs John Magill vowed. 

Housing finance reform markup on the horizon

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WASHINGTON (3/25/14)--The Senate version of housing finance reform legislation could be marked up in the coming weeks, and the Credit Union National Association is preparing a comprehensive list of suggested changes and improvements for the Senate Banking Committee. That list will be forwarded to committee members later this week.
 
For now, CUNA's main concerns regarding the proposal include changes made to the Federal Mortgage Insurance Corp. and the establishment of the securitization platform. CUNA also has concerns regarding the governance of the securitization platform and the small lender mutual, as well as the 10% first loss coverage requirement.
 
"We were pleased to see that the legislative proposal incorporates our suggestion to increase the cap on the size of institutions which could be members of the small lender mutual from $15 billion to $500 billion in assets," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.
 
CUNA has had several meetings and conversations with Senate staff, the White House, credit union mortgage lenders and other financial services trade groups regarding the bill. While CUNA expects the Senate Banking Committee markup to happen before the Easter break, the timeline for consideration by the full Senate is uncertain.
 
The 425-page draft bill, released earlier this month, addresses how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac.

CUNA continues to review the proposal to ensure the legislation will help maintain a functioning secondary mortgage market that provides credit unions equitable access and the ability to continue to offer mortgage products with predictable payments, like the 30-year fixed-rate mortgage.
 
"We also want to ensure that the transition to the new system is smooth," Donovan said.
 
For more on the proposal, use the resource links.
 
 
 
 

 

NCUA to CUNA: MBLs on regulatory radar

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WASHINGTON (3/25/14)--The National Credit Union Administration assured the Credit Union National Association that member business lending (MBL) is prominently on its radar for this year. Calling a recent CUNA letter on the issue "timely," NCUA Chairman Debbie Matz said the agency intends to carefully review several MBL issues that have come to its attention.
 
The NCUA has a rolling review of its regulations, each year assessing one-third of its catalogue of rules; the MBL statute is on the 2014 review calendar.
 
"In preparation, NCUA has been carefully studying the current rule and member business lending data to determine whether policy and rule improvements as permitted by statute are warranted," Matz wrote to CUNA President/CEO Bill Cheney.
 
She went on to say that if the NCUA board finds consensus that improvements are "indeed warranted by the facts," the agency may make changes at either the rule or supervisory policy level, or both.
 
Cheney wrote to Matz and board members Michael Fryzel and Richard Metsger earlier this month recounting a number of regulatory actions the NCUA "can and should take" to aid credit unions approaching the MBL cap of 12.25% of assets.
 
Among changes CUNA advocates:
  • Updating Federal Credit Union Act definitions that provide exemptions from the MBL cap for credit unions that have a history of primarily making MBLs to their members;
  • Expanding provisions addressing MBL loans made for the financing of one to four family dwellings; and,
  • Removing limitations that are not required by the statute.
CUNA also supports legislation that would increase the MBL cap to 27.5% of assets.

CUNA: Victory for CUs in court interchange ruling

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WASHINGTON (3/24/14)--Calling it "truly a victory for credit unions and a rebuke to the merchants," the Credit Union National Association welcomed a federal appeals court ruling Friday that upheld the Federal Reserve's debit interchange regulation.
 
A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously reversed an earlier decision of U.S. District Judge Richard Leon, issued in July, that the Fed interchange rules violated the plain text of the Durbin Amendment to the Dodd-Frank Act. 
 
By superseding Leon's opinion, this newest ruling removes the chaos and confusion caused when Leon vacated the Fed rule and then issued a stay so the rule remained in place until the appeals process was completed.
 
In this case known as NACS, et al. v. Board of Governors of the Federal Reserve System, a merchants' coalition challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high. CUNA and its partner members of The Clearing House coalition maintain that the cap, in fact, is too restrictive.

"The district court granted summary judgment to the merchants, concluding that the rules violate the statute's plain language. We disagree," the three circuit court judges penned in their opinion.
 
"Applying traditional tools of statutory interpretation, we hold that the (Federal Reserve) Board's rules generally rest on reasonable constructions of the statute, though we remand one minor issue--the Board's treatment of so-called transactions-monitoring costs--to the Board for further explanation," they continued.

CUNA General Counsel Eric Richard explained of the judges' opinion, "This decision constitutes an almost total rejection of the merchants' arguments.

"We hope this will be a first step toward restoring some grounding in reality to the debate over interchange fees, not only in the courts, but also in Congress and at the regulatory agencies."
 
On Friday, the National Retail Federation said it is disappointed in the decision, and said it is weighing an appeal to the U.S. Supreme Court. 
 
At this point, the merchants have a few options.  First, they could do nothing, almost certainly ending the case.  Or they could ask the D.C. Circuit to review the case "en banc," which would ask all members of that court to decide whether they want to re-hear the case.  Or they could appeal to the Supreme Court. 
 
CUNA will continue to monitor the case, and should a Supreme Court review move forward, will alert credit unions.

GSE limits must be part of total reform package, CUNA urges

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WASHINGTON (3/24/14)--Housing finance reforms must be considered in a comprehensive way, not broken out as piecemeal changes, the Credit Union National Association warns in a comment letter to the Federal Housing Finance Authority.
 
Last year that agency proposed a plan that could  gradually reduce maximum loan limits by more than 4% for loans eligible to be purchased by Fannie Mae or Freddie Mac. 
 
"As you know, Congress is currently actively looking at a number of ways to reform the housing finance system," CUNA President/CEO Bill Cheney wrote to FHFA Director Mel Watt, a former member of Congress. "Any legislation to reform the housing finance system will establish a system that may last for decades, and Congress should have the opportunity to address loan limits as part of a comprehensive package...We recommend that FHFA not take any action on loan limits as conservator of the (government-sponsored enterprises) until Congress first acts."
 
The GSEs are of crucial importance to credit unions that sell and service mortgage loans. In 2012, credit unions originated $123 billion of first mortgages, or about 6.5% of the total mortgage origination market. Although credit unions traditionally are portfolio lenders, the number of credit union loans sold has almost doubled from 2009 to present, to an average of 52%.
 
Cheney wrote that CUNA believes the new housing finance system should apply a reasonable conforming loan limit that adequately takes into consideration local real estate costs in higher cost areas.
 
Under the plan, the current statutory maximum loan limit for one-unit properties would decline from $417,000 to $400,000. The FHFA said the loan purchase limit would be reduced by the same percentage in other parts of the country, including high-cost areas in the contiguous states where current limits are set at $625,500. Those loan purchase limits would be set at $600,000, according to the FHFA.

The CUNA leader went on to say that it is "an open question" as to whether FHFA even has the legal authority to lower loan limits without a statutory change.
 
"In section 1124 of the Housing and Economic Recovery Act of 2008 (HERA), Congress modified the charter acts for the GSEs to set forth a requirement that loan limits be adjusted annually to reflect housing prices. However, in setting $417,000 as the baseline for single-family residences, Congress required that loan limits not be adjusted downward."

Comments were due March 20.

Use the resource link to access CUNA Comment Letters.

Golden Plains CU of Kan. assumes liquidated CU's shares

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ALEXANDRIA, Va. (3/24/14)--The Kansas Department of Credit Unions announced a decision Friday that Parsons Pittsburg CU of Parsons, Kan., placed into conservatorship on Jan. 24, has no prospect for restoring viable operations on its own and should be liquidated.

Upon announcing Parson's  insolvency and liquidation, the Kansas regulator also named the National Credit Union Administration as liquidating agent. Golden Plains CU of Garden City, Kan., immediately assumed Parsons Pittsburg's 1,466 members, $13.4 million in assets, and its shares and loans. Service to former Parsons Pittsburg's members will continue uninterrupted.

Golden Plains is a federally insured, state-chartered credit union with $418.5 million in assets and 59,413 members, according to its most recent Call Report.

Chartered in 1951, Parsons Pittsburg served persons residing or employed within a 45-mile radius of Labette, Bourbon, Cherokee or Crawford counties in Kansas. The credit union also operated a branch in Pittsburg, Kan.

Parsons Pittsburg CU is the third federally insured credit union liquidation of 2014.
 

SBA moves to 'invigorate' flagship guaranteed lending programs

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WASHINGTON (3/24/14)--The U.S. Small Business Administration has made changes to its flagship business lending programs, effective April 21, intended to increase eligibility for loans under the 504 Loan Program and the 7(a) Loan Program.

By increasing eligibility the SBA hopes to reinvigorate the guarantee programs. The agency describes the changes as:

Eliminating the personal resource test: A borrower will no longer be required to obtain a maximum level of personal finance resources for a 7(a) or 504 loan. This will streamline the loan process by eliminating complicated regulations used to determine the amount of collateral required.

Revising the rule on affiliation: Revising this rule will open access to SBA loans to businesses that, under current rules, would not qualify as a small business under SBA's size standards by virtue of their association with other companies. It also would streamline 504 loan applications and reduce paperwork requirements for 504 and 7(a) loan applications.  

Eliminating the nine-month rule for the 504 loan program: Eliminating the nine-month rule removes a restriction that limits a business to include in its 504 project only expenses incurred nine months prior to submitting the loan application. The new rule would allow inclusion of expenses incurred at any time (e.g., projects put on hold for more than nine months due to a natural disaster).

Increasing accountability of the Certified Development Companies' (CDC) board of directors while eliminating requirements for membership: Refocusing CDC corporate governance requirements will reinforce the importance of board accountability for CDC oversight for the 504 loan program and set in place measures to strengthen oversight in order to maintain program integrity.

The Credit Union National Association has urged the SBA to provide such flexibility and supports the changes as a step in the right direction to make it easier for credit unions and other participating entities to navigate the SBA loan process.

CUNA also recently contacted the SBA to urge continuation of an SBA 7(a) guaranteed loan program fee waiver into 2015, and promoted increasing the member business lending cap, in a letter to SBA Acting Administrator Marianne Markowitz.

Use the resource links to read more about the SBA final rule.

President signs Flood Insurance delays into law

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WASHINGTON (3/24/14)--President Barack Obama has signed The Homeowner Flood Insurance Affordability Act into law.
 
The new law delays the implementation of certain provisions of the Biggert-Waters Flood Insurance Reform Act of 2012.
 
Biggert-Waters extended the National Flood Insurance Program's (NFIP) authority through Sept. 30, 2017, and mandated major flood insurance reforms, including phasing out subsidies for many properties and raising the cap on annual premium increases.
 
This new law delays increases in NFIP premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably. It reinstates lower rates for grandfathered properties, which were repealed by Biggert-Waters, and extends the effective date of pending flood insurance escrow rules to Jan. 1, 2016, from July 6, 2014. 

The law also clarifies that escrow requirements would apply to loans closed on or after the new effective date, and that certain loans would not be subject to the escrow requirements, such as second liens if proper coverage is in place in connection with the first lien, HELOCs, commercial loans secured by a residence, and more.

The National Credit Union Administration and federal banking regulators were in middle of writing rules to implement certain sections of Biggert-Waters when the bill, upon which the new law is based, passed the House and Senate.  The regulators now need to amend the proposed regs to address the escrow changes.

Spots may go quickly for NCUA new 'listening sessions'

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ALEXANDRIA, Va. (3/21/14)--Available spots may go quickly for the National Credit Union Administration's new series of "Listening Sessions."  The agency announced Thursday that online registration is open.
 
Participation in the free sessions will be limited by the size of each meeting room and may hover around 150 per meeting.  They are scheduled for:
  • June 26 in Los Angeles, from 1 to 4 p.m. (PT);
  • July 10 in Chicago, from 1 to 4 p.m. (CT); and,
  • July 17 in Alexandria, Va., from 1 to 4 p.m. (ET).
The Listening Sessions will be open to any topics related to the NCUA and, importantly, will take place before NCUA's proposed risk-based capital rule is finalized.

NCUA Chairman Debbie Matz said she initiated the face-to-face field meetings in 2012 to talk with credit union officials about how the agency can further improve regulations, the exam process and "other agency initiatives."

"The last Listening Sessions in 2012 generated many ideas that we later incorporated into NCUA's rules. I anticipate the 2014 sessions will produce similar results," Matz said.

NCUA board member Rick Metsger and senior agency staff will also participate in the meeting.
 
See resource link for registration information.

10 days to Fin. Lit. month: NCUA to host webinar

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ALEXANDRIA, Va. (3/21/14)--In April, people's thoughts turn to...becoming increasingly competent in handling their financial matters. Or at least they ought to.

April is Financial Literacy month in the United States--declared so by Congress. Credit unions provide financial counseling to more than 1.5 million consumers each year, according to a National Credit Union Foundation (NCUF) 2013 report, but even those busy bees ramp up their efforts to mark this month. (Watch News Now for more on that later.)

On Thursday, the National Credit Union Administration announced it is offering credit union a chance to learn even more about promoting financial literacy through an April 3 webinar.

The webinar--free by the way--will be hosted by Kenneth Worthey, financial literacy and outreach analyst in NCUA's Office of Consumer Protection. It will feature Katie Bryan, communications director of the Consumer Federation of America, and Gigi Hyland, executive director of NCUF, as well as:
  • Gail Laster, director, NCUA's Office of Consumer Protection; and,
  • Louisa Quittman, director, Office of Financial Education, U.S. Department of Treasury.
The 2 p.m. (ET) online session, titled "Financial Literacy: Putting Your Mission into Action," promises to provide valuable information on topics including:
  • The link between financial literacy and the credit union mission;
  • NCUA financial literacy resources;
  • Tips on building a successful financial literacy program based on credit union size and specialized member demographics;
  • Information about improving financial literacy efforts through the creation of key local and national financial literacy partnerships; and
  • The U.S.  Treasury Department's recent financial literacy pilot research program.
Registration for this free webinar is now open. Use the resource link to sign up.

Matz: AMC proposal shows 'regulatory blind spot'

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ALEXANDRIA, Va. (3/21/14)--National Credit Union Administration Chairman Debbie Matz Thursday used the agency's proposal of a joint-agency plan to impose minimum requirements for appraisal management companies (AMC) as an occasion to draw attention to what she called an NCUA "regulatory blind spot."

The six federal financial regulatory agencies that comprise the Federal Financial Institutions Examination Council, including the NCUA, are proposing the rule to implement Dodd-Frank Act requirements meant to better ensure the quality of appraisals and assure compliance with the Truth-in-Lending Act.

In response to a question from NCUA board member Michael Fryzel during the open meeting, agency staff said the AMC proposal should not have a measurable impact on credit unions. 

However, Matz highlighted the problem she believes the agency faces:

"We face a regulatory blind spot," Matz said. "NCUA can approve this interagency rule, which would strengthen regulation of appraisal management companies and should help prevent conflicts of interest, but we are unable to enforce it.

"NCUA remains the only financial services regulator lacking the necessary authority to examine vendors for safety and soundness and compliance with laws and regulations. NCUA will continue to call on Congress to provide this authority."

Historically, the Credit Union National Association has not supported additional oversight authority over third-party vendors for the agency. CUNA has raised concerns about agency's expertise in the area and the implications for the agency's budget, which has been increased for the last seven years.

The proposed rule would set minimum requirements for registration and supervision of AMCs--the intermediaries for appraisers and lenders that provide appraisal services. These requirements would apply to states that elect to establish an agency with authority to register and supervise appraisal management companies.

Under the joint-agency plan, an appraisal management company that is a subsidiary of a financial institution and regulated by a federal financial services regulatory agency would not be required to register with a state, but would otherwise be required to meet the same minimum requirements as other appraisal management companies.

After all six FFIEC agencies approve the proposal, it will be published in the Federal Register. A 60-day comment period will start upon publication.

CUNA will be evaluating the impact of the proposal and will provide a summary in its Regulatory Comment Call.

NCUA stabilization fund report confirms no 2014 CU assessment

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ALEXANDRIA, Va. (3/21/14)--At a brief open board meeting Thursday, National Credit Union Administration Chief Financial Officer Mary Ann Woodson reported on the financial condition of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) as of Dec. 31, 2013.

As announced by the NCUA board last November, there is no planned stabilization fund assessment for credit unions for 2014.

The net position of the TCCUSF improved from a $3.5 billion deficit at the end of 2012 to a $142 million deficit at the end of last year, according to the agency's audited information.

NCUA Chairman Debbie Matz asked Woodson why the "Receivable from Asset Management Estates, Net" line item had grown from $1.139 billion at the end of 2012 to $2.304 billion as of Dec. 31, 2013.

The agency CFO noted that the favorable report was the result of the enhanced performance of the NCUA Guaranteed Notes (NGN) Program, improved performance of legacy assets from the corporate credit unions that NCUA conserved, and the legal settlements NCUA received during 2013 from major banking firms that sold mortgage-backed securities to those corporate credit unions.

In a release after the meeting, Matz called effective management of the stabilization fund to minimize federally insured credit union assessments "a top NCUA priority."

"I'm hopeful we can forgo charging assessments not only in 2014, but in future years as well," she stated.

The Credit Union National Association has urged the NCUA--and will continue to press the agency--to forgo any further TCCUSF assessments.

The only other item on the Thursday meeting agenda was a joint federal financial regulators' proposal on minimum requirements for appraisal management companies. (See related story: Matz: AMC proposal shows 'regulatory blind spot.')

Use the resource link for more NCUA information.

NEW: Appeals court overturns merchant challenge to Fed interchange rule

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WASHINGTON (3/21/14, UPDATED 10:44 a.m. ET)--U.S. Court of Appeals for the District of Columbia Circuit Judges David Tatel, Harry Edwards, and Stephen Williams ruled today to overturn a lower court that supported merchants' arguments in the ongoing debit interchange fee cap case known as NACS, et al. v. Board of Governors of the Federal Reserve System.
 
In this case, a merchants' coalition has challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high. The Credit Union National Association and its partner members of The Clearing House coalition maintain that the cap, in fact, is too restrictive.

"The district court granted summary judgment to the merchants, concluding that the rules violate the statute's plain language. We disagree," the circuit  court judges penned in their opinion that was just released. "Applying traditional tools of statutory interpretation, we hold that the (Federal Reserve) Board's rules generally rest on reasonable constructions of the statute, though we remand one minor issue—the Board's treatment of so-called transactions-monitoring costs—to the Board for further explanation."

Credit Union National Association General Counsel Eric Richard  explained of the judges opinion, "This decision constitutes an almost total rejection of the merchants' arguments. 

"We hope this will be a first step toward restoring some grounding in reality to the debate over interchange fees, not only in the courts , but also in Congress and at the regulatory agencies."
 
Watch News Now for more on this breaking news.

CFPB says consumers 'hounded' by debt collectors

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WASHINGTON (3/21/14)--Some debt collectors are using aggressive communications tactics and even threats of illegal actions to "hound" consumers--even over debts the targets say they do not owe, according to a Consumer Financial Protection Bureau annual report to Congress.

The report is built from more than 30,000 consumer complaints the bureau has received about the debt collection market since July 2013.

"Consumers should never be hounded about debts they do not owe," said CFPB Director Richard Cordray. "We will not tolerate companies harassing consumers or threatening illegal actions in the debt collection market. We will continue to work hard to ensure that consumers are treated with dignity and fairness."

It is estimated that about 4,500 debt collection firms comprise the multi-billion dollar industry.  Original creditors--like financial institutions--may collect their own debts or hire third-party debt collectors. Original creditors and other debt owners also may sell their debts to debt buyers. Debt buyers may sell the debt, collect the debt themselves, or hire third-party debt collectors to do so.
 
The bureau's larger-participant rule for debt collection became effective on Jan. 2, 2013. Under this rule, the CFPB has supervisory authority over any firm with more than $10 million in annual receipts from consumer debt collection activities, which extends to about 175 debt collection companies.
 
Use the resource link to access the CFPB report.

CFPB seeks design help for prepaid card disclosures

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WASHINGTON (3/20/14)--The Consumer Financial Protection Bureau was in Los Angeles this week to conduct consumer-interview testing of potential disclosures it may propose for use on the packaging of prepaid cards. The consumer testing effort was launched last month in Baltimore.
 
Click for slide showForm 1 (click to view Form 2)
The agency intends to conduct more tests around the country by the end of April before it settles on a disclosure plan. Last year, the CFPB identified prepaid card regulation as a 2014 priority.
 
The CFPB is developing a model disclosure form to standardize the disclosures so consumers can make side-by-side comparisons of the many products offered.  Currently, each prepaid card company's retail package discloses different information in different styles and using different formats to do so--making product comparisons challenging at best.
 
It is consumer-testing two model forms.
 
In a blog posting this week, the CFPB says it's developing the standardized disclosure form to include in an upcoming proposed rule. "We want our model form to clearly present a prepaid card's most important fees so you can easily identify the best prepaid card for your needs."

NEW: Spots may go quickly for NCUA new 'listening sessions'

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ALEXANDRIA, Va. (3/20/14, UPDATED 2:30 p.m. ET)--Available spots may go quickly for the National Credit Union Administration's new series of "Listening Sessions."  The agency just announced that online registration is open.
 
Participation in the free sessions will be limited by the size of each meeting room and may hover around 150 per meeting. They are scheduled for:
  • June 26 in Los Angeles, from 1 to 4 p.m. (PT);
  • July 10 in Chicago, from 1to 4 p.m. (CT); and,
  • July 17 in Alexandria, Va., from 1 to 4 p.m. (ET).
The Listening Sessions will be open to any topics related to the NCUA and, importantly, will take place before NCUA's proposed risk-based capital (RBC) rule is finalized.

The Credit Union National Associatoin had urged the NCUA to hold a town hall-style meeting on the RBC proposal.

NCUA Chairman Debbie Matz said she initiated the face-to-face field meetings in 2012 to talk with credit union officials about how the agency can further improve regulations, the exam process and "other agency initiatives."

"The last Listening Sessions in 2012 generated many ideas that we later incorporated into NCUA's rules. I anticipate the 2014 sessions will produce similar results," Matz said.

NCUA board member Rick Metsger and senior agency staff will also participate in the meeting.
 
See resource link for registration information.

CUNA releases new RBC video resource for credit unions

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WASHINGTON (3/20/14)--Continuing to add resources for credit unions to its Risk-Based Capital (RBC) Action Center webpage, the Credit Union National Association Wednesday posted a new video that can help credit unions in three ways.
 
The new video is designed to explain the National Credit Union Administration's RBC proposal, address what credit unions can do to apply it to their situations, and define steps credit unions can take to get involved in the effort to improve the proposal.
 
Also on Wednesday, CUNA offered a free, one-hour webinar titled "NCUA's Risk-based Capital Rule: Can It Be Fixed?" Topics explored during the webinar included: key aspects of the proposal, the proposal's financial impact on credit union operations, and the top legal issues create by the proposal.  (See related story: CU CEOs outline real-life risks of RBC plan during CUNA webinar.) A recoding of the webinar will be available by Friday morning.
 
CUNA's RBC Action Center is a complete catalog of reference materials for credit unions and also provides credit unions with a tool to take action immediately by sending comment letters to the NCUA by the May 28 deadline.
 
CUNA strongly supports risk-based capital for credit unions, but warns that the NCUA's current proposal is not the approach to take. CUNA analysis shows that, as written, the NCUA plan could force credit unions to hold as much as $7.3 billion in additional capital.
 
CUNA President/CEO Bill Cheney has explained that equals a multi-billion-dollar price tag of additional capital for a system that withstood, under the current system, the worst financial crisis in 80 years.

WSJ columnist watches biggest banks 'freak' over tiny tax

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WASHINGTON (3/20/14)--Al Lewis, who writes columns for The Wall Street Journal Sunday and MarketWatch, is watching big banks' reaction to Rep. Dave Camp's (R-Mich.) draft proposal for tax code reforms and does not seem amused.

He calls attention to the fact that "America's too-big-to-fail banks are freaking out over one Republican lawmaker proposing a tiny tax" increase for those biggest banks. They are "freaking out," Lewis points out, despite their long and inglorious recent past of accepting "unfathomable billions" in taxpayer-funded bailouts, and more.

The increase Lewis refers to is a proposed 0.035% quarterly tax on bank assets, which would apply only to bank assets in excess of $500 billion.  (Editor's note: Total assets for all federally insured credit unions in the U.S. reached $1 trillion just in June 2012, according to National Credit Union Administration call report data.)

So what have big banks gotten from the government since the Fall and fallout of 2008, in addition to "unfathomable billions" worth of bailouts? Lewis calculates:

"The Federal Reserve also responded by buying trillions of dollars in illiquid mortgage-backed securities and government bonds from these institutions. This has ratcheted up the Fed's balance sheet from $869 billion in August 2007 to more than $4.1 trillion today ...

"Additionally, the Fed lowered interest rates to zero, and it has held them there for more than five years, giving these banks unprecedented access to free capital.

"Yes, zero interest rates would severely punish a whole generation of retirees and savers who didn't want to risk it all in Wall Street's casino. But the idea was that these banks would find ways to stimulate the economy. They would be so grateful to a helpful nation for saving them that they'd make loans to small-business owners who would in turn create jobs."

But that just didn't happen, Lewis notes. Bankers instead, he writes, "raised every fee they possibly could on their customers, they improperly foreclosed on millions of Americans' homes, they continually dodged prosecution for their alleged criminal activity, they fought Congress on just about every sensible idea lawmakers had for reforming a broken and corrupt banking system, and then they gave themselves bonuses."

Risk-based capital webinar is today: Slots open

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WASHINGTON (3/19/14)--Hundreds have signed up, but a few slots are still open for those who wish to take part in today's webinar from the Credit Union National Association on the National Credit Union Administration's risk-based capital (RBC) proposal.

The RBC proposal would restructure NCUA's current prompt corrective action regulation to include calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks. The risk weights would be substantially different, and the proposal would impose higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer term investments and some other assets.

The proposal would apply to credit unions with assets of more than $50 million.
 
CUNA has warned that the RBC plan, as proposed, could affect the core operations of most, if not all, credit unions with assets over $50 million, and is working with the agency to reinforce the need to reduce credit unions' regulatory burdens, not increase them.
 
If the RBC proposal is not withdrawn, changes must be made, CUNA has emphasized. NCUA Chairman Debbie Matz, in a letter sent to CUNA last week, said key changes to the proposal are "not out of the question" prior to the rule becoming final.
 
CUNA has urged credit unions to weigh in on the proposal to let regulators know their concerns.
 
CUNA's free, hourlong webinar today, titled "NCUA's Risk-based Capital Rule: Can It Be Fixed?" is scheduled to begin at 3 p.m. (CT). Topics to be explored during the webinar include:
  • Key aspects of the proposal;
  • The proposal's financial impact on credit union operations; and
  • The top legal issues create by the proposal.
CUNA President/CEO Bill Cheney will be joined at the webinar by CUNA Chief Economist Bill Hampel and Deputy General Counsel Mary Dunn.

Participants also will have the chance to hear directly from credit union CEOs about their perspectives on the proposed rule. A short question-and-answer session will wrap up the session. 

A recording of the webinar will be available on the CUNA website 24 hours after the live event.
 
In addition to the webinar, CUNA is offering a catalog of reference tools to help credit unions determine if and how they will be affected by the NCUA proposal, and to take action by sending comment letters to the agency. Also, CUNA has produced an "Inside Exchange" video segment on the steps for writing an effective comment letter on this issue.
 
To register for the webinar and access more CUNA risk-based capital content, use the resource link.

NACHA restarts discussions of same-day ACH settlement

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WASHINGTON (3/19/14)--NACHA--The Electronic Payments Association is planning a phased approach to reforms that would create a ubiquitous, same-day automated clearinghouse (ACH) settlement system.
 
The planned change would move the payment system from the current single, next-day settlement system to multiple, same-day settlement options that would be available for virtually any ACH network transaction, NACHA said in a Tuesday release.
 
NACHA plans to study the costs and transaction volume such a system could create. "The information gathered on implementation capabilities, costs and volume will then inform rulemaking that could occur as early as fall 2014," NACHA said.
 
NACHA said it is planning to introduce multiple, new settlement windows, and greater certainty around faster funds availability.

In the first phase of implementation, users will be able to provide same-day ACH credits for payroll, person-to-person payments and expedited bill pay.

In the second phase, NACHA plans to introduce same-day ACH debits and allow same-day payment of utility, mortgage, loan and credit card bills.

In a third phase, NACHA said it would focus on improving the level of service across the ACH network and on reducing counter-party risk by adding a second same-day settlement and by accelerating funds availability.
 
The phased-in approach to these changes will allow NACHA to introduce new capabilities more quickly, and then continue to build over time, creating value for all participants at each step along the way, NACHA President/CEO Janet O. Estep said.
 
"The Credit Union National Association and its payments subcommittee continue to meet and work with NACHA on payments and same-day ACH issues. We expect additional updates in upcoming months," said Dennis Tsang, CUNA assistant general counsel for regulatory research.
 
For the full NACHA release, use the resource link.

CUNA at Treasury talks of IT improvements for FIs

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WASHINGTON (3/19/14)--The Credit Union National Association attended a recent U.S. Treasury Department discussion on how information technology (IT) is transforming financial institutions.
 
Treasury Assistant Secretary for Financial Institutions Cyrus Amir-Mokri in introductory remarks said the agency is interested in the role of IT changes on the broader financial system, business models, communications to consumers, compliance and the regulatory framework.
 
During the event, different perspectives regarding investment banking, asset management, commercial banking and academia were presented.
 
Several points that credit unions may be interested in include:
  • Technology is changing the financial services landscape rapidly, including non-traditional providers;
  • Vendor and overall risk management are very important for financial institutions; and
  • Additional coordination among financial institutions and various regulators would be helpful to address evolving IT data standards, compliance and risk management issues.
Members of the Financial Services Sector Coordinating Council and other stakeholders also attended the discussion, and CUNA and these groups will continue to coordinate on these issues.

Corp. loss update reaffirms good news for CUs: CUNA

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WASHINGTON (3/19/14)--Tuesday's announcement that the upper end of projected corporate stabilization assessments declined by $2.2 billion between July and December 2013 "reaffirms the good news credit unions received last fall," Credit Union National Association Chief Economist Bill Hampel said.

"The current projected range for total future remaining assessments is now between negative $2 billion and negative $600 million. At the end of the second quarter of 2013, the total range was negative $200 million to $1.6 billion," the National Credit Union Administration reported.

The agency said the Temporary Corporate Credit Union Stabilization Fund assessment decrease was largely due to the JPMorgan Chase settlement reached in November 2013.

"The more than $1.75 billion in recoveries from NCUA's litigation has certainly brought relief to credit unions, but it's also good to see the general trends continuing," NCUA Chairman Debbie Matz said in a release. "An improving economy and NCUA's continuing efforts to effectively manage losses from the corporate failures at this time make us hopeful that we will not need to make future credit union assessments," she added.

CUNA's Hampel said the midpoint of the range of total projected corporate resolution costs is now $9.1 billion, down from $15 billion as of mid-2010. "That's almost $6 billion of costs that credit unions will not have to pay," he noted.

Credit unions can expect some combination of assessment rebates or repayment of depleted corporate capital, Hampel said, noting that these refunds are extremely likely, but not guaranteed.

"They'll depend on the future performance of the remaining legacy assets. That's the good news. The not-so-good news is that those payments are several years in the future," Hampel advised.

Class action suit alleges debt collection misconduct by Chase

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WASHINGTON (3/19/14)--A new class action suit has challenged default judgments that JPMorgan Chase was awarded in cases against several credit card debtors, alleging that the financial firm used robo-signed affidavits to support its motions for default in these cases.

The suit was brought by a South Florida woman, Ruth Moya, and more than 100 individuals have joined the class action suit. The suit relates to more than $5 million in funds and is filed in the U.S. District Court for the Southern District of Florida.

JPMorgan Chase & Co., Chase Bank USA, N.A., Chase Bankcard, LLC and Chase Bankcard Services, Inc. or their subsidiaries or affiliates, are named as defendants in the suit.

Chase has frequently committed debt collection abuses against thousands of their credit card customers who have purportedly defaulted on their accounts, the 51-page complaint alleges. "To collect on these accounts, Defendants have flooded state courts, including Florida courts and state courts across the United States, with collection proceedings against their credit card customers seeking to collect on alleged credit cardholder debt," the complaint adds.

"Chase has been successful in obtaining default judgments due to this large-scale pattern and practice of fraud and abuse of the legal process. Rather than follow basic procedures to ensure fairness to its cardholders and properly meet the burdens prescribed by law, Chase engaged in a scheme to obtain default judgments, writs of execution, and wage-garnishment orders through lawsuits (and other proceedings) designed to render rapid default judgments without scrutiny," the complaint states.

The class action suit seeks to force Chase to:
  • Stop engaging in unlawful, unfair and fraudulent practices;
  • Provide the plaintiff and other litigants with notice of Chase's misconduct and the borrower's option and procedure to reopen their cases so they may seek to expunge the default judgments;
  • File notice in the state court actions notifying the courts of Chase's use of fraudulent affidavits in support of obtaining the default judgments;
  • Reimburse all funds unlawfully taken from plaintiffs; and
  • Pay damages to the plaintiffs.
The plaintiffs have also sought relief under the federal Racketeer Influenced Corrupt Organizations Act.

The state of California last year took its own action against JPMorgan Chase, alleging that the bank "engaged in fraudulent and unlawful debt-collection practices against tens of thousands of Californians" (News Now May 13, 2013).

CUNA urges continuation of SBA 7(a) waiver

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WASHINGTON (3/18/14)--The Credit Union National Association spoke out in support of continuing a Small Business Administration (SBA) 7(a) guaranteed loan program fee waiver into 2015, and promoted increasing the member business lending cap, in a letter to SBA Acting Administrator Marianne Markowitz.

The SBA currently waives upfront and annual fees of 7(a) small business loans of $150,000 or less, and President Barack Obama's recently released 2015 budget would continue this waiver. Without that extension, the waiver will expire in September.

"We appreciate the president's and SBA's recognition that the 7(a) fee waiver is an effective way to increase borrower participation in this important SBA loan program," CUNA President/CEO Bill Cheney wrote.

Cheney also again encouraged the SBA to review its 504 and 7(a) Loan Programs from a regulatory relief perspective.

"Credit unions have been working tirelessly to comply with a seemingly never-ending onslaught of regulatory requirements from a variety of federal regulatory agencies, and CUNA strongly supports efforts of federal agencies to eliminate unnecessary, outdated regulatory restrictions on credit unions," he said.

The CUNA CEO also strongly urged the SBA to follow the lead of the Obama administration and support congressional efforts to increase the credit union member business lending (MBL) cap. Increasing the MBL cap to 27.5% of assets, up from the current 12.25% limit,  would allow credit unions to lend an additional $13 billion to small businesses and help them create over 146,000 new jobs in the first year after enactment, CUNA reminded.

Rep. Ed Royce (R-Calif.) is a main sponsor of a House MBL increase bill, and he has also introduced related legislation to would exempt loans for one- to four-unit non-occupied dwellings from the MBL cap. The bill is called the "Credit Union Residential Loan Parity Act."  (See March 13  News Now ).

Housing reform draft includes CUNA-sought cap increase

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WASHINGTON (3/18/14)--With the release of the Johnson-Crapo housing finance reform bill over the weekend, the Credit Union National Association has confirmed an important modification from an earlier draft bill.  The cap for membership in an mutual securitization company was drastically increased , as recommended by CUNA in testimony last November and in meetings with legislative staff on Capitol Hill.

The Johnson-Crapo draft bill is lengthy--425 pages of reforms. It, of course, details the bipartisan agreement announced last week by Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) on how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac. The discussion has both languished and been on the front burner for five years, and now some traction has been found.

CUNA supports housing finance reform but has insisted throughout discussions that credit unions must continue to have unfettered access to the secondary market under any revised system.

CUNA backed an idea found in an earlier bill, S. 1217, which proposed a mutual securitization company to provide credit unions and other smaller lenders access to securitizing their mortgages, access currently provided by Fannie Mae and Freddie Mac. However, CUNA had criticized a $15 billion-in-assets cap for participation in the mutual to be far too low.

As CUNA Chief Economist Bill Hampel emphasized during one of the hearings in which CUNA was asked to testify on reforms, "We believe that this cap is far too low, and would suggest that lenders of almost any size should be able to use the mutual, so long as they do not themselves issue covered securities."

"Restricting the mutual to serving just smaller lenders would preclude achieving necessary scale economies," he said, and added, "Indeed, it would be desirable for the mutual to be among the largest if not the largest issuer of covered securities. "

The Johnson-Crapo bill raises the proposed ceiling to $500 billion in assets--a half-trillion dollars--large enough to serve as a robust vehicle to the secondary market for credit unions.

Overall, CUNA has applauded Senate Banking Committee leadership for creating a bipartisan housing finance reform bill--one that builds on the work of Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), and "takes significant steps to ensure that credit unions will continue to have access to a functioning, well-regulated, well-capitalized secondary mortgage market."

CUNA Senior Vice President of Legislative Affairs Ryan Donovan has noted, "While we have only just begun to review the legislative language, based on the information we have received so far, we believe many of the suggestions that we made in our testimony have been incorporated, and we are hopeful this will be a bill that credit unions can strongly support."

Republican senators oppose FATCA in letter to foreign-based citizens

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WASHINGTON (3/18/14)--The Foreign Account Tax Compliance Act (FATCA) "treats Americans living overseas unfairly," Sen. Rob Portman (R-Ohio) wrote in a letter sent on behalf of the National Republican Senatorial Committee last week.

The letter was sent to Republicans Overseas Action Inc., a group that bills itself as a 501(C)(4) organization that has been formed "for the purpose of educating the public worldwide on why FATCA violates U.S. citizens' and foreign passport-holding U.S. residents' constitutional protections."

The practical effect of FATCA is to "make it impossible for Americans living abroad to open a bank account since foreign banks have no desire to become the eyes of the American government," Portman said. He added he is glad the Republican National Committee has added FATCA opposition to its issues platform for upcoming elections.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities. Some provisions would apply to U.S. credit unions that make international payments. U.S. credit unions would also be required to identify and withhold on so-called "pass-through payments" to FFIs involving transfers of U.S.-sourced investment or interest income to an FFI that has not yet been subject to taxation.

Opposition to FATCA continues to grow in the U.S., and Rep. Bill Posey (R-Fla.) last year introduced H.R. 2299, which would repeal the Internal Revenue Service's recent expansion of U.S. credit union and bank reporting rules with respect to interest on deposits paid to nonresident aliens.

CUNA and the World Council of Credit Unions have supported the Posey repeal bill, saying in a joint letter to Posey that the legislation "would be instrumental in eliminating an unnecessary and unduly burdensome rule for credit unions." (See resource link.)

CFPB sets March 25 for payday loan field hearing

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WASHINGTON (3/18/14)--Payday loans will be the topic when the Consumer Financial Protection Bureau holds a field hearing in Nashville, Tenn., March 25.

The hearing is set to begin at 11 a.m. (CT) in the Nashville Public Library Auditorium and will feature remarks from CFPB Director Richard Cordray and testimony from consumer groups. Industry representatives and the general public will also have the opportunity to speak at the session.

The CFPB announced in November 2013 that it would accept complaints on payday lenders and later that month announce its first enforcement action against a payday lender.
 
The Credit Union National Association highlights credit unions as a consumer-friendly alternative to the high-cost payday loan industry. Around 20% of credit union members use payday lenders. A May 15 webinar from CUNA will examine why payday lending has increased in recent years and illustrate how to develop effective credit union loan alternatives to payday loans.

Credit unions often offer members alternatives to payday loans--short-term lines of credit with annualized interest rates generally capped at the usury ceiling, which has been currently determined by federal rules to be at 18%.  National Credit Union Administration regulations can allow credit unions to charge an annualized interest rate 10 points above the ceiling--at 28%. Most credit unions that offer payday loan alternatives also limit fees, offer counseling and encourage members to open savings accounts.

To register to attend the hearing, and sign up for the CUNA webinar, use the resource links.

Clean audit for 2013 posted for NCUA Stabilization Fund

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ALEXANDRIA, Va. (3/18/14)--The Temporary Corporate Credit Union Stabilization Fund has received a clean audit opinion for the fifth consecutive year of its five-year existence, the National Credit Union Administration announced Monday.

The fund's condition is on the agenda for this Thursday's NCUA open board meeting, and at that time the NCUA's Chief Financial Officer will provide a detailed report. However, in its Monday release the NCUA highlighted that in 2013 the Stabilization Fund's financial condition "remained stable, maintaining sufficient available liquidity to meet its obligations while its deficit net position continued to decline."

KPMG LLP, the independent firm that audits the stabilization fund's financial statements, issued an unmodified audit opinion with no reportable findings. The agency released that opinion as well as the stabilization fund's 2013 audited financial statements (see resource link).

"Congress created the Stabilization Fund in 2009, and an independent auditor has given NCUA a clean financial statement audit opinion every year since then," NCUA Chairman Debbie Matz said in the release. "KPMG's latest report, following the board's announcement last November that we do not expect an assessment in 2014, demonstrates the agency's planning and management are prudent and that we are maintaining transparency as we work to complete the resolution of the corporate credit union crisis."

Fed releases 2013 financial reports

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WASHINGTON (3/17/14)--The Federal Reserve System Friday released the 2013 combined annual financial statements for the Federal Reserve Banks, as well as statements for the 12 individual Federal Reserve Banks, the consolidated variable interest entities that were created to respond to strains in financial markets, and the Fed Board of Governors.
 
The financial statements are audited annually by an independent auditing firm.
 
The Fed said in a release that:
  • The Federal Reserve Banks' 2013 earnings, inclusive of other comprehensive income, were $81.4 billion.
  • The Reserve Banks provided for remittances to the U.S. Treasury of $79.6 billion.
  • Interest income on securities acquired through open market operations--U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities (MBS)--totaled $90.4 billion, an increase of $9.9 billion over the previous year.
Use the resource link to read more.

NEW: NCUA says Stabilization Fund earned clean audit for 2013

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ALEXANDRIA, Va. (3/17/14, UPDATED 1:22 p.m. ET)--The Temporary Corporate Credit Union Stabilization Fund has received a clean audit opinion for the fifth consecutive year of its five-year existence, the National Credit Union Administration announced today.

The fund's condition is on the agenda for this Thursday's NCUA open board meeting and at that time the NCUA's Chief Financial Officer will provide a detailed report. However, in its release today the NCUA highlighted that in 2013 the Stabilization Fund's financial condition "remained stable, maintaining sufficient available liquidity to meet its obligations while its deficit net position continued to decline."

KPMG LLP, the independent firm that audits the stabilization fund's financial statements, issued an unmodified audit opinion with no reportable findings. The agency released that opinion as well as the stabilization fund's 2013 audited financial statements  (see resource link).

"Congress created the Stabilization Fund in 2009, and an independent auditor has given NCUA a clean financial statement audit opinion every year since then," NCUA Chairman Debbie Matz said in the release. "KPMG's latest report, following the board's announcement last November that we do not expect an assessment in 2014, demonstrates the agency's planning and management are prudent and that we are maintaining transparency as we work to complete the resolution of the corporate credit union crisis."

 

Reg alert updates CU ATR/QM responsibilities, protections

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ALEXANDRIA, Va. (3/17/14)--The National Credit Union Administration has reminded credit unions of the compliance responsibilities created by new Ability-to-Repay/Qualified Mortgage (ATR/QM) rules, and the protections offered to certain credit unions, in a new regulatory alert (14-RA-09).

The Consumer Financial Protection Bureau's ATR/QM rules became effective on Jan. 10, and apply to all federally insured credit unions. The rules require credit unions to assess a member's ability to repay for virtually all closed-end residential mortgage loans secured by a member's dwelling. Loans with terms that do not exactly match certain CFPB QM requirements, such as 40-year loans, or loans with points and fees exceeding the thresholds established by the rule, will not be purchased by government-sponsored enterprises.

The NCUA alert includes details on:
  • Which loans are covered by the rule;
  • Basic ability-to-repay requirements;
  • Eight factors credit unions must consider when making an ATR determination;
  • How QMs provide a safe harbor;
  • The different types of QMs;
  • Caps on QM points and fees;
  • How QMs protect against liability;
  • What makes a QM loan higher priced;
  • When prepayment penalties are allowed for QM loans; and,
  • What other guidance has been made available.
The agency said this latest regulatory alert supersedes and replaces  14-RA-01, released in January. The new release clarifies the points and fees limit for each loan amount threshold and types of charges included in ATR/QM calculations, the agency said. 14-RA-09 also references updated guidance for implementing the requirements of the rule, the NCUA added.

The letter also includes an updated ATR/QM small entity compliance guide, a general comparison chart of ATR and QM requirements, and a small creditor QM flowchart.

For the full letter, use the resource link.

CFPB restructure bill moves through committee

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WASHINGTON (3/17/14)--Legislation that would grant credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau has moved on to the full U.S. House after it was approved by the financial services committee late last week.

Rep. Andy Barr's (R-Ky.) H.R. 2672 would direct the CFPB to establish an application process determining whether a county should be designated as a rural area if the CFPB has not designated it as one.

The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas.

"From our point of view, any time credit unions can gain an additional opportunity to provide input and inspire the process, we should do so," Credit Union National Association President/CEO Bill Cheney said last week.

Barr's bill was one of two pieces of credit union-related regulatory relief legislation that were sent to the U.S. House floor Thursday. (See related story: FHLB membership bill, others, could bring some CU relief: CUNA.)

Risk-based capital webinar is Wednesday, CUNA reminds

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WASHINGTON (3/17/14)--There is still time to register for this week's webinar on the National Credit Union Administration's risk-based capital proposal, the Credit Union National Association reminds.

The hour-long, free webinar, entitled "NCUA's Risk-based Capital Rule: Can it be fixed?" is scheduled to begin at 3 p.m. (CT).

The webinar will explore the key aspects of the proposal, highlight its financial impact on credit union operations, and outline the top legal issue.

CUNA President/CEO Bill Cheney will be joined at the webinar by CUNA Chief Economist Bill Hampel and Deputy General Counsel Mary Dunn. Participants also will have the chance to hear directly from credit union CEOs about their perspectives on the proposed rule. A short question-and-answer session is planned to end the information session.

"We'll also bring everyone up to date on our latest efforts aimed at the proposal--and recommend actions credit unions can take on their own to voice their concerns, in their own words," Cheney says.

Registration is limited to 500. A recording of the webinar will be available on the CUNA website 24 hours after the live event.

The risk-based capital proposal would restructure NCUA's current prompt corrective action regulation to include calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks. The risk weights would be substantially different, and the proposal would impose higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer term investments and some other assets.

The proposal would apply to credit unions with assets of more than $50 million.

In addition to the webinar, CUNA is offering a complete catalog of reference tools to help credit unions determine if and how they will be impacted by the NCUA proposal,  and take action by sending comment letters to the agency.

To register for the webinar and access more CUNA risk-based capitol content, use the resource link.

Patent troll bill will get March 27 Senate Judiciary attention

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WASHINGTON (3/17/14)--Legislation that would curb patent troll abuses will be discussed during a March 27 Senate Judiciary Committee executive business meeting, the committee chairman, Sen. Pat Leahy (D-Vt.), announced last week.

Leahy last year introduced the Patent Transparency and Improvements Act of 2013 (S. 1720), which would aid credit unions and other businesses that have been targeted by patent trolls.
 
"Members of the Senate Judiciary Committee have been working on meaningful, targeted legislation to combat patent abuses in our system.  As chairman of the Committee, I am committed to ensuring we move forward with meaningful legislation this spring," Leahy wrote in a statement released last week.
 
Other Senate bills that would address patent troll issues include the Patent Litigation Integrity Act of 2013 (S. 1612) and the Patent Quality Improvement Act of 2013 (S. 866), offered by Sen. Charles Schumer (D-N.Y.).

Credit union priorities for patent law reform include:
  • More transparency in demand letters;
  • Clarification of Federal Trade Commission enforcement authority over unfair and deceptive demand letters;
  • A demand letter registry; and,
  • Stronger end user protections.
Use the resource link to read a Credit Union Natoinal Association joint trade association letter to lawmakers in support of patent legislation.

FHLB membership parity bill, others, could bring some CU relief: CUNA

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WASHINGTON (3/17/14)--Voting 55-0, the House Financial Services Committee passed a bill Friday to broaden credit unions' ability to apply for Federal Home Loan Bank membership.
 
The bill is strongly supported by the Credit Union National Association to put the country's privately insured credit unions on the same footing as their federally insured counterparts where it comes to membership in the Federal Home Loan Bank system.
 
The bill was one of three passed over two days, all strongly supported by CUNA, the state credit union leagues and credit unions across the country, that--when they become law--will potentially provide significant relief for  credit unions from their regulatory burden.
 
Together with National Flood Insurance Program reforms passed Thursday by the Senate and a bill to make changes to the  operating structure of the Consumer Financial Protection Bureau also approved Friday morning by House Financial Services--CUNA says the bills will help credit unions by cutting costs, increasing their voice in the regulatory process, and giving credit unions more flexibility to fund mortgage lending. (See related story: CFPB restructure bill moves through committee.)
 
In a markup session Thursday for the FHLB bill, House Financial Services Committee Chairman Jeb Hensarling said approval of the bill (H.R. 3584) would correct a "drafting oversight" that occurred years ago.
 
The new bill, introduced by Rep. Steve Stivers' (R-Ohio), amends the Federal Home Loan Bank Act to authorize privately insured credit unions to become members of an FHLB.
 
CUNA urged committee leaders in a letter Wednesday to vote in favor of the Stivers' bill.
 
CUNA noted that the bill would create no additional risk of loss to any FHLB or to taxpayers. In the Thursday committee markup session Stivers underscored that there is only $11 billion total in privately insured credit union assets. And Rep. Joyce Beatty (D-Ohio), a bill co-sponsor, noted that the bill only affects credit unions in nine states, and they represent less than 2% of all credit unions in the U.S.
 
The bill states that a privately insured credit union will be considered to have met the eligibility criteria for Federal Home Loan Bank membership if, six months after its application date, the state supervisor has failed to act upon the application.
 
If H.R. 3584 is approved by the full House, it would then move to the Senate for consideration.

Appraisal proposal, stabilization fund report on NCUA agenda

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ALEXANDRIA, Va. (3/17/14)--For the second consecutive month, the National Credit Union Administration should have a swift-moving open board meeting: A proposed interagency rule addressing minimum requirements for appraisal management companies and a quarterly report on the agency's corporate stabilization fund are the only items on Thursday's agenda.

The interagency proposal is required by the Dodd-Frank Act and relates to financial institutions' use of appraisal management companies.

Dodd-Frank amended the Financial Institutions Reform, Recovery, and Enforcement Act to require regulators to provide new minimum requirements for the registration, reporting and supervision of appraisal management companies. Implementing regulations for new, automated valuation model quality control standards must also be developed.

According to the Consumer Financial Protection Bureau, the implementing regulations must:
  • Ensure a high level of confidence in the estimates produced by valuation models;
  • Protect against data manipulation;
  • Seek to avoid conflicts of interest; and
  • Require random sample testing and reviews.
Agencies may also address other factors in their regulations.

Share insurance appeals are on the agenda for the March closed board meeting, which is scheduled to begin at 10:45 a.m. (ET).

For the full NCUA March agenda, use the resource link.

FDIC sues over banks' alleged Libor suppressions

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WASHINGTON (3/17/14)--The Federal Deposit Insurance Corp. has taken action against 16 of the world's biggest banks, alleging they manipulated the London interbank offered rate (LIBOR), several outlets reported last week.

Bank of America, Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase and Bear Stearns Capital Markets are among the institutions reportedly named in the suit, which was filed in the Southern District of New York. The British Banking Association is also named in the suit. The suit references actions taken between 2007 and 2011.

The FDIC is seeking an unspecified amount of damages, according to several reports.

LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.

British bank Barclays PLC in 2012 admitted that some of its employees between 2005 and 2009 conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The firm has been fined by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission, and the United Kingdom's Financial Services Authority.

More than 40 suits alleging LIBOR manipulation have been filed, including a 2013 suit by the National Credit Union Administration. The agency filed suit in federal district court in Kansas against 13 international banks, alleging violations of federal and state anti-trust laws through LIBOR manipulation. The NCUA said this alleged manipulation resulted in a loss of income from investments and other assets held by five failed corporate credit unions: U.S. Central, WesCorp, Members United, Southwest and Constitution.

The NCUA claims the defendants in today's action individually and collectively gave false interest rate information through the LIBOR rate-setting process "to benefit their investments that were tied to LIBOR, to reduce their borrowing costs, to deceive the marketplace as to the true state of their creditworthiness, and to deprive investors of the interest rate payments to which they were entitled."

The false information created the impression the defendant banks were borrowing money at a lower interest rate than they were actually paying, the NCUA said.

Loan parity step will help CUs support affordable housing: CUNA

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WASHINGTON (3/17/14)--Enactment of the Credit Union Residential Loan Parity Act (H.R. 4226) would enable credit unions to better meet the needs of their members and also would contribute to the availability of affordable rental housing, Credit Union National Association President/CEO Bill Cheney wrote in a letter of support for the newly introduced bill.

The bill, introduced late last week by Reps. Ed Royce (R-Calif.) and Jared Huffman (D-Calif.), would amend the Federal Credit Union Act to exclude from the 12.25%-of-assets member business lending cap any credit union residential loans made for the purchase of a one- to four-unit, non-owner-occupied residential dwelling.

The amendment would address an existing disparity in the treatment of those loans made by banks as compared to those made by credit unions.

"Enactment of this legislation would not only correct this disparity but it would also enable credit unions to provide additional credit to borrowers seeking to purchase residential units, including low-income rental units," Cheney wrote. He noted that CUNA looks forward to working with the bill's sponsor  to see its enactment.

NEW: FHLB membership parity bill, others, could bring some CU relief: CUNA

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WASHINGTON (3/14/14, UPDATED 9:59 a.m. ET)--Voting 55-0, the House Financial Services Committee passed a bill to broaden credit unions' ability to apply for Federal Home Loan Bank membership.
 
The bill is strongly supported by the Credit Union National Association to put the country's privately insured credit unions on the same footing as their federally insured counterparts where it come to membership in the Federal Home Loan Bank system.
 
The bill was one of three passed over two days, all strongly supported by CUNA, the state credit union leagues and credit unions across the country, that--when they become law--will potentially provide significant relief for  credit unions from their regulatory burden.
 
Together with National Flood Insurance Program reforms passed Thursday by the Senate and a bill to make changes to the  operating structure of the Consumer Financial Protection Bureau also approved this morning by House Financial Services--CUNA says the bills will help credit unions by cutting costs, increasing their voice in the regulatory process, and giving credit unions more flexibility to fund mortgage lending.
 
In a markup session Thursday for the FHLB bill, House Financial Services Committee Chairman Jeb Hensarling said approval of the bill (H.R. 3584) would correct a "drafting oversight" that occurred years ago.
 
The new bill, introduced by Rep. Steve Stivers' (R-Ohio), amends the Federal Home Loan Bank Act to authorize privately insured credit unions to become members of an FHLB.
 
CUNA urged committee leaders in a letter Wednesday to vote in favor of the Stivers' bill.
 
CUNA noted that the bill would create no additional risk of loss to any FHLB or to taxpayers. In the Thursday committee markup session Stivers underscored that there is only $11 billion total in privately insured credit union assets. And Rep. Joyce Beatty (D-Ohio), a bill co-sponsor, noted that the bill only affects credit unions in nine states and they represent less than 2% of all credit unions in the U.S.
 
The bill states that a privately insured credit union will be considered to have met the eligibility criteria for federal home loan bank membership if, six months after its application date, the state supervisor has failed to act upon the application.
 
If H.R. 3584 is approved by the full House, it would then move to the Senate for consideration.

CU Residential Loan Parity Act is H.R. 4226

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WASHINGTON (3/13/14)--Rep. Ed Royce (R-Calif.), as expected, introduced a credit union relief bill Thursday that would exempt loans for one- to four-unit non-occupied dwellings from the member business lending cap.
 
The "Credit Union Residential Loan Parity Act"--now also known as H.R. 4226-- is co-sponsored by Rep. Jared Huffman (D-Calif.).
 
Royce unveiled his intention to introduce the MBL-related bill when he addressed the 4,400 credit union advocates attending the Credit Union National Association's Governmental Affairs Conference late last month.
 
Royce has explained that his bill fixes a disparity between how credit unions and banks can account for certain loans.
 
"When a bank makes a loan to finance the purchase of a small apartment building it is called a residential real estate loan. When a credit union makes the same loan it is called a business loan," and thereby falls under the low 12.25%-of-assets MBL cap, Royce has noted.
 
He's estimated that enactment of his bill would allow credit unions to lend an estimated additional $11 billion to small businesses, and would free up "much needed private sector financing for commercial businesses and rental housing without costing taxpayers a dime."
 
The bill also authorizes the National Credit Union Administration to apply strict underwriting and servicing requirements for the loans.

'Thankful Thursday' continues CUs' social media support of tax status

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WASHINGTON (3/14/14)--Credit unions and their members continue to contact federal
Click to view larger image Click for larger view
lawmakers about preserving the credit union tax status--and this time it was to thank House Ways and Means Committee members for not touching credit unions in the committee's draft tax code reforms.

More than one-quarter of a million Twitter users were potentially exposed to the credit union message yesterday through the Credit Union National Association's latest social media blitz, "Thank You Thursday."  It was the latest innovation launched under CUNA's successful "DontTaxMyCreditUnion" campaign, which started in 2013.

CUNA created the "DontTaxMyCreditUnion" effort in anticipation of this year's release of a tax reform draft.  More than one million contacts to the U.S. Congress were generated under that program, first on July 23, then on Sept. 10--and then on the eve of Rep. Dave Camp's release of his tax reform discussion draft last month.

Maintaining the exemption in the Camp proposal was proclaimed a "big win" for credit unions by the press. Nevertheless, CUNA continues to urge credit union advocates to educate lawmakers and consumers alike about the good public policy reasons behind the credit union tax status. Even though the credit union federal tax exemption remained untouched, bank trades are pressing House Ways and Means Committee Chairman Camp to reconsider taxing credit unions.
 
To quickly send a Twitter message, credit union advocates can got to www.DontTaxMyCreditUnion.org and click on the "Tweet Your Legislators" icon at the top. A tweet to a member of the House Ways and Means Committee will automatically populate, or an advocate can create a personal message to legislators on Facebook or Twitter using the hashtag #DontTaxMyCU.

McWatters talks risk-based capital, reg burden at nomination

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WASHINGTON (3/14/14)--National Credit Union Administration board member nominee J. Mark McWatters said at his confirmation hearing Thursday that a risk-based capital approach
Click to view larger image NCUA nominee J. Mark McWatters (far right) greets Sen. Mike Crapo of Idaho, who is the ranking Republican member of the Senate Banking Committee, before that panel begins its confirmation hearing for McWatters and four other Obama nominees. Sen. Bob Corker (R-Tenn.) is in the background. (CUNA Photo)
"makes sense" for credit unions, but warned the "devil is in the details" of any proposal.
 
He told Senate Banking Committee members that examining the overall issue in general and the NCUA's proposal specifically would be high on his list of priorities if he is confirmed to join the NCUA board.
 
That proposal, issued in January, was one of many regulatory issues the potential NCUA board member brought up in response to a question from the committee's chairman, Sen. Tim Johnson (D-S.D.). Overregulation of small credit unions is another challenge, he said, adding that the NCUA has made some progress in this area, but more needs to be done.
 
The principle challenge for credit unions and the credit union system, McWatters stated, is to look to the future and anticipate the next systemic shock. This applies to both credit unions and banks, he noted, and said that while regulators look for future problems, they must also exercise judgment. "If you are always crying wolf, you'll be considered a flake," he said.
 
The greatest opportunity for credit unions, the NCUA nominee asserted, is to continue doing what they are doing now. Credit unions' membership and loan base are growing, and many low-income credit unions have the chance to expand their mandate to those who are underbanked and unbanked. Underbanked and unbanked Americans need financial services at a reasonable rate, McWatters added.
 
In his opening remarks, he briefly previewed his overall approach to regulation in his opening statement, saying his focus as a regulator "will remain straightforward: Don't neglect the fundamentals of capital, liquidity, and transparency, and always remember that the greatest threat to a financial system may reside where you least expect it--hidden within plain view."
 
McWatters also pledged to "work diligently to ensure the continued integrity and safety and
Click to view larger image McWatters testifies that his approach to regulating credit unions will be "straightforward." (CUNA Photo)
 soundness of our nation's credit union system in an ever-evolving marketplace...I will aim to balance competing viewpoints while maintaining the safety and soundness of the credit union system, safeguarding the Share Insurance Fund, enforcing consumer protection rules, and protecting taxpayers and credit union members from losses," he said.
 
Johnson said McWatters will hit the ground running with an eagerness to learn more about credit unions. He called for all nominees at Thursday's hearing to be confirmed quickly. Sen. Elizabeth Warren (D-Mass.) also commented on her work alongside McWatters on the TARP Congressional Oversight Panel. She commended McWatters as "smart, thoughtful and principled."
 
McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences." This approach has worked for him in past positions, he said. In addition to his work on the TARP panel, McWatters has served as counsel for Rep. Jeb Hensarling (R-Texas) and as dean for graduate programs at Southern Methodist University's School of Law.
 
If confirmed, McWatters would replace board member Michael Fryzel, whose term ended Aug. 2. Fryzel will continue to serve until McWatters is confirmed.
 
The committee also reviewed the qualifications for 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.

127 LICUs total more than $500K NCUA grants

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WASHINGTON (3/14/14)--The National Credit Union Administration has awarded $517,890 in grants to 127 low-income credit unions in the first 2014 round of its Community Development Revolving Loan Fund program.

The credit unions that receive these grants will be able to offer "more services to members, more resources to their communities and more education for young people interested in financial services careers," NCUA Chairman Debbie Matz said in an agency release.

This round of the grant program will provide:
  • Thirty-three credit unions with funds to help the development of new products and services for their members;
  • Forty credit unions with funds to help apply for Community Development Financial Institution certification; and
  • Fifty-four credit unions with funds to offer internships to local students.
The funds will be administered by the NCUA's Office of Small Credit Union Initiatives.

Grant applications representing a total of $2.3 million in funds were submitted by 320 credit unions.

The agency has received more than $12.8 million in grant funding from the U.S. Congress since 2001. Congress provided the NCUA with $1,144,746 in funding for this year's round.

For the NCUA release and a full list of 2014 first-round CDRLF grant recipients, use the resource links.

NCUA reminds CUs of March liquidity compliance deadline

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ALEXANDRIA, Va. (3/14/13)--The National Credit Union Administration has sent a reminder to credit unions that its new liquidity and contingency planning regulation will become effective March 31 (Letter to Credit Unions 14-CU-05).
 
The NCUA letter includes a supervisory letter and examination questionnaire for examiners to use when reviewing liquidity risk management at credit unions. These resources will give credit unions further insight into how the NCUA will examine for compliance, the agency said.
 
Under the final rule:
  • Credit unions with less than $50 million in assets would need to maintain a basic written emergency liquidity policy, but would not be required to take further action;
  • Credit unions with assets of $50 million or more would be required to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations; and
  • Credit unions with assets of $250 million or more would be required to have access to a backup federal liquidity source for emergency situations.
The final rule does not include the Federal Home Loan Banks (FHLB) as an acceptable source of emergency liquidity, although eligible credit unions required to meet the federal source provisions would be free to borrow from a FHLB for nonemergency purposes. Without the FHLB, credit unions have two options to ensure a federal liquidity source for emergency situations: Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or access to the Federal Reserve's discount window.
 
The Credit Union National Association strongly supports the use of the home loan banks for liquidity.
 
CUNA has developed an eGuide section on the emergency liquidity rule, and the issue was also covered in the January 2014 edition of Credit Union Magazine and March 10 issue of News Now.
 
For the NCUA letter and CUNA resources, use the resource links.

Senate passes Flood Insurance fixes

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WASHINGTON (3/14/14)--The Homeowner Flood Insurance Affordability Act (H.R. 3370) can now move on to President Barack Obama's desk to be signed into law after the Senate approved the bill on Thursday.
 
The Senate approved the bill on a 72-22 vote. The bill passed the House earlier this month by a 306-91 vote.
 
The bill, in part, would delay planned increases in National Flood Insurance Program (NFIP) premiums until the Federal Emergency Management Agency puts in place a plan to ensure they are implemented affordably.
 
A range of other NFIP fixes has been discussed in recent months. The National Credit Union Administration joined the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to ask whether federal financial regulatory agencies should adopt additional regulations on the acceptance of flood insurance policies issued by private insurers.
 
The joint agency proposal would:
  • Require regulated lending institutions to escrow payments and fees for flood insurance for any new or outstanding loans secured by residential improved real estate or a mobile home, not including business, agricultural and commercial loans, unless the institutions qualify for a statutory exception;
  • Result in new and revised sample notice forms and clauses concerning the availability of private flood insurance coverage and the escrow requirement;
  • Clarify that regulated lending institutions have the authority to charge a borrower for the cost of force-placed flood insurance coverage after a homeowner's private insurance lapses or becomes insufficient; and
  • Outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.

Senate confirms Bloom Raskin for Treasury deputy secretary

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WASHINGTON (3/13/14)--The U.S. Senate confirmed Sarah Bloom Raskin to become deputy secretary to the U.S. Treasury Department, making her the second in command there and the highest-ranking woman ever in a Treasury post.

Bloom Raskin's nomination was confirmed by voice vote. Her exit from her current position on the Federal Reserve Board of Governors will make for three vacancies in the central bank's seven-member board. 

Bloom Raskin has served at the Fed since 2010.

Today, the Senate Banking Committee is expected to consider the nomination of J. Mark McWatters to become a member of the National Credit Union Administration board, as well as 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.
 

NEW: McWatters pledges 'straightforward' regulatory approach

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WASHINGTON (3/13/14, UPDATED: 10:45 a.m. ET)--If confirmed, National Credit Union Administration board nominee J. Mark McWatters said he will "work diligently to ensure the continued integrity and safety and soundness of our nation's credit union system in an ever-evolving marketplace."
 
McWatters made his remarks at this morning's Senate Banking Committee nomination hearing that started at 10 a.m. (ET).
 
Committee Chairman Tim Johnson (D-S.D.) said McWatters will hit the ground running with an eagerness to learn more about credit unions. He called for all nominees at today's hearing to be confirmed quickly.
 
The NCUA nominee briefly previewed his approach to regulation in his opening statement, saying his focus as a regulator "will remain straightforward: Don't neglect the fundamentals of capital, liquidity, and transparency, and always remember that the greatest threat to a financial system may reside where you least expect it--hidden within plain view."
 
McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences." This approach has worked for him in past positions, he said. McWatters has served on the TARP Congressional Oversight Panel, as counsel for Rep. Jeb Hensarling (R-Texas), and as dean for graduate programs at Southern Methodist University's School of Law.
 
If confirmed, McWatters would replace board member Michael Fryzel, whose term ended Aug. 2. Fryzel will continue to serve until McWatters is confirmed.
 
The committee is also reviewing the qualifications for 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 ongoing. Watch @ NewsNowLiveWire and News Now for further coverage.

Introduction of Royce MBL-related bill expected today

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WASHINGTON (3/13/14)--As he pledged to 4,400 credit union advocates at the Credit Union National Association's 2014 Governmental Affairs Conference less than two weeks ago, Rep. Ed Royce (R-Calif.) is ready to introduce a bill to exempt loans for one- to four-unit non-occupied dwellings from the credit union member business lending cap.
 
CUNA expects the bill to be introduced today. Its primary co-sponsor is Rep. Jared Huffman (D-Calif.).
 
In a letter to his House colleagues Wednesday describing the bill and seeking support, Royce wrote: "When a bank makes a loan to finance the purchase of a small apartment building it is called a residential real estate loan.  When a credit union makes the same loan it is call a business loan" and thereby falls under the low 12.25%-of-assets MBL cap.
 
Royce told House lawmakers that his common-sense credit union reform bill, called the "Credit Union Residential Loan Parity Act," would fix that disparity.
 
He added that, if enacted, the bill would allow credit unions to lend an estimated additional $11 billion to small businesses, freeing up "much needed private sector financing for commercial businesses and rental housing without costing taxpayers a dime."
 
The bill also authorizes the National Credit Union Administration to apply strict underwriting and servicing requirements for the loans.
 
Welcoming Royce's bill, CUNA Executive Vice President of Government Affairs John Magill said, "Credit unions can do so much more to help small business grow and add jobs to the economy--and this bill will go a long way toward doing that, by making available an additional $11 billion while maintaining stringent underwriting and serving requirements.
 
"Credit unions are grateful for the efforts of Reps. Royce and Huffman to move forward on this bill, which makes sense for small business and the credit union members who own them."
 
CUNA and the state credit union leagues also support legislation to increase the MBL limit to 27.5% of assets. CUNA estimates that credit unions could lend an additional $13 billion to small businesses and help them create over 146,000 new jobs in the first year after enactment of the increase, again at no cost to taxpayers.
 

Consideration of CFPB rural redefinition is welcome, says CUNA

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WASHINGTON (3/13/14)--The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas, and the Credit Union National Association this week welcomed consideration of a bill that would alter the Consumer Financial Protection Bureau's approach to this definition.

In a letter sent to House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Rep. Maxine Waters (D-Calif.), the committee's ranking Democrat, CUNA thanked the committee for its planned consideration of H.R. 2672 today. That bill would direct the CFPB to establish an application process determining whether a county should be designated as a rural area if the CFPB has not designated it as one.

The CFPB currently uses the U.S. Department of Agriculture Economic Research Services' urban influence codes to define a "rural" area. While the bureau is scheduled to reexamine the definition of "rural" over the next two years, CUNA welcomed Rep. Andy Barr's (R-Ky.) bill "because it would allow a person who lives in or does business in a state, to apply to the CFPB to have designated the county in which the business is located as a rural area for purposes of a federal consumer financial law."

The CUNA letter cited two examples of how rural area definitions impact credit union business practices:
  • Escrow requirements under the Truth in Lending Act require certain lenders to create an escrow account for at least five years for higher-priced mortgage loans. If those loans are made by small lenders that operate predominately in rural or underserved counties, they are exempt from this requirement; and
  • Ability to Repay and Qualified Mortgage (QM) Standards which generally exclude mortgage loans with balloon payments from the QM standard, but allow small lenders that operate predominately in rural areas to originate balloon payment QMs.
It is expected that an amendment may be offered during today's markup session that would allow part of a county to be given a "rural" designation even if the whole county did not qualify. 

The amendment is targeted to opponents of the Barr bill who think it does not go far enough to help people in rural areas get access to financial services.

For CUNA letters to Congress, use the resource link.

CUNA launches nationwide search for new president/CEO

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WASHINGTON (3/13/14)--A national search for a new president/CEO of the Credit Union National Association will be launched immediately, the association's chairman said, to find a successor to Bill Cheney, who is returning to California in June to be president/CEO of SchoolsFirst FCU in Santa Ana.

CUNA Chairman Dennis Pierce said the search would consider candidates from both inside and outside of the credit union movement.

"We will be looking for leadership that can bring to bear the talents of the exceptional team that we have on board at CUNA now, and leverage the strengths of the three-tiered system of CUNA, the state credit union leagues, and credit unions to achieve our goals and strengthen the movement," Pierce said.

Pierce thanked Cheney for his service, and praised his accomplishments as president/CEO since 2010. Among them, the CUNA chairman said, were:
  • Successfully protecting the credit union tax exemption, ensuring that the recent tax reform draft from the House Ways and Means Committee made no changes to the tax status of credit unions. Pierce pointed to the award-winning "Don't Tax My Credit Union Campaign," which Cheney launched, as a key reason for the "big win" for credit unions in the tax reform proposal. The campaign generated 1.3 million contacts with Congress from credit union supporters in less than nine months' time--a record for such efforts--urging lawmakers "don't tax my credit union."
  • Establishing the first-ever shared, strategic vision for the credit union movement: "Americans choose credit unions as their best financial partner." The initiative is aimed at guiding, uniting and helping credit unions achieve a shared agenda of removing barriers, creating awareness and fostering service excellence, with the ultimate goals of increasing credit union membership and delivering to members more value.
  • Developing an approach to communicate credit union concerns and interests to Congress with a "535-seat strategy," designed to reach every single member of Congress on behalf of credit unions.
"In addition, Bill and his team this year planned and executed the most successful CUNA Governmental Affairs Conference ever, which drew more than 4,400 credit union supporters to rally and then deliver the credit union message to Capitol Hill," Pierce said. The CUNA chairman also noted the association's continued financial health during Cheney's tenure, as well as its strengthened communications program as hallmarks of his leadership.

Cheney expressed his thanks to the movement for its support during his nearly four years of leading the national trade association.

"I take on this new role at SchoolsFirst knowing that, with the backing of the CUNA board, the state leagues, and CUNA staff, we have accomplished much. However, the work will continue without interruption.

"Protection of our tax exemption, pursuit of regulatory relief, enhancing the charter and working toward achievement of a shared strategic vision--among other key issues--must proceed, with guidance from our board, partnership with the leagues and efforts of our talented, professional staff," Cheney said.

Pierce noted that Cheney will take a consulting role in the leadership search for the association during his remaining tenure at CUNA.

Current SchoolsFirst FCU president/CEO, Rudy Hanley, announced earlier this year that he would retire from the credit union after 31 years of service. Although he was originally scheduled to retire in March, Hanley has said he will stay on at the $9.7 billion-asset credit union until Cheney comes aboard.

More CU access to FHLBs a boon to members, communities: CUNA to Congress

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WASHINGTON (3/13/14)--Allowing privately insured credit unions to apply for Federal Home Loan Bank system membership "will provide a valuable source of liquidity and enhance their lending operations to the benefit of the members and the communities in which they reside," the Credit Union National Association stressed in a letter sent Wednesday to key lawmakers.

The CUNA letter was submitted prior to a scheduled markup today of Rep. Steve Stivers' (R-Ohio) bill, H.R. 3584. The bill is expected to be considered by the House Financial Services Committee, and the letters were sent to the committee chairman, Rep. Jeb Hensarling (R-Texas), and its ranking Democrat, Rep. Maxine Waters (D-Calif.).

The bill would create no additional risk of loss to any FHLB or to taxpayers, CUNA President/CEO Bill Cheney assured in his letter.

Although the National Credit Union Administration historically has raised concerns with private share insurance, CUNA's letter suggested tweaks to the Stivers bill that should address the agency's concern.

CUNA suggested modifying the underlying bill to clarify that the "NCUA has no legal authority, no regulatory power and no supervisory jurisdiction over either privately insured credit unions or commercial insurance companies."

Privately insured credit unions would not be the first type of non-federally insured institution to be eligible for FHLB System membership, Cheney reminded. "Under current law, insurance companies, which are not federally insured, may join the FHLB System. And, in fact, insurance companies borrow more from the FHLB System than all credit unions," Cheney said.

In a separate letter, CUNA also joined with the state credit union leagues of states most affected by the bill to show support.

CUNA cosigned a letter with the California & Nevada Credit Union Leagues, the Cornerstone Credit Union League, the Idaho Credit Union League, the Illinois Credit Union League, the Indiana Credit Union League, the League of Southeastern Credit Unions & Affiliates and the Maryland & D.C. Credit Union Association.

Stivers' bill addresses one of the more than 30 regulatory relief proposals CUNA submitted to the committee at a hearing last year. A vote on the bill could be held as soon as Friday morning. Federally insured credit unions already have the ability to apply for FHLB system membership.

For both letters, use the resource links.

What CUNA will look for in new GSE bill

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WASHINGTON (3/13/14)--The Credit Union National Association has identified key areas it will scrutinize in an anticipated housing finance reform bill announced yesterday and expected to be unveiled this week or early next week.

An agreement to move ahead with the bill, which has bipartisan support in the Senate and a strongly positive reaction from stakeholders, was announced Tuesday by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and the committee's top Republican member, Sen. Mike Crapo (Idaho).

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said CUNA is keen to analyze such areas as:
  • Whether there are provisions in place to assure a smooth transition from the current system based on government sponsorship to a private-market approach;
  • Whether there is an appropriate government guarantee, paid for by borrowers, that would assure the continued availability of essential 30-year, fixed-rate mortgage; and,
  • Whether the secondary market must be open to all lenders on an equitable basis.
CUNA also will be scrutinizing whether the proposed underwriting standards and private capital requirements are not so strict as to exclude qualified borrowers from access to mortgage credit.
 
The bill is expected to wind down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and replace them with a new mortgage guarantor, the Federal Mortgage Insurance Corporation (FMIC).
 
The winding down of Fannie and Freddie, and the Federal Housing Finance Agency, would be accomplished within five years of the bill's potential passage. GSE assets would be sold off, and their charters would be revoked once the FMIC is established.

"As CUNA stated when the senators announced their accord yesterday, we look forward to reviewing the legislative text when it is made available and we are hopeful this will be a bill that credit unions can strongly support," Donovan said Wednesday.
 
He added that with the broad early support surrounding this recent announcement about GSE reform parties can be hopeful that good public policy will be the result. 
 
"Credit unions and banks--primarily smaller banks--are on the same page on this. When that happens--even on a complicated issue like this--good public policy tends to be produced," he said.

New CFPB consumer survey on debt collection industry announced

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WASHINGTON (3/13/14)--The Consumer Financial Protection Bureau has announced plans to conduct a mail survey of consumers to learn about their experiences interacting with the debt collection industry.
 
The CFPB has named debt collection as a major focus since 2012.
 
The new survey will ask consumers about:
  • Their experiences with debt collectors;
  • Whether they recognized the debt that was being collected; and,
  • The nature of their interactions with the debt collectors.
It will also ask about preferences for how consumers prefer to be contacted by debt collectors, consumer opinions about potential regulatory interventions in debt collection markets, and about their knowledge of their legal rights regarding debt collections.
 
Use the resource link to read a CFPB Notice and Request for Comment that was recently published in the Federal Register.  Written comments must be received by May 6.

CFPB fills key senior positions

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WASHINGTON (3/13/14)--Three senior posts have been filled at the Consumer Financial Protection Bureau, including one in the Office of Financial Empowerment, which has worked with credit unions and other financial institutions to gather information on available financial coaching services for economically vulnerable consumers, including veterans in transition, people with disabilities, and those who are transitioning back into the workforce.
 
The CFPB announced Wednesday that:
  • Daniel Dodd-Ramirez is now CFPB assistant director of Financial Empowerment in the bureau's Consumer Education and Engagement Division. Dodd-Ramirez has previously served as the executive director of Step Up Savannah Inc. in Savannah, Ga., from 2005 to 2014, and as education project director and community organizer for People Acting for Community Together in Miami. From 1998 to 2000, he was the human resources director for Families First, a social services agency in southern Vermont.
  • Christopher D. Carroll is CFPB assistant director and chief economist for the Office of Research in the bureau's Research, Markets, and Regulations Division. Carroll is a professor of economics at Johns Hopkins University, from which he has taken a leave of absence to serve at CFPB. He also is a member of the board of directors of the National Bureau of Economic Research, and the co-chair of the NBER Research Group on Consumption. Carroll has served as a senior economist for the Council of Economic Advisors on two separate occasions, and as an economist for the Board of Governors of the Federal Reserve System.
  • Jeffrey Langer has joined the CFPB as the assistant director of Installment and Liquidity Lending Markets in the bureau's Research, Markets, and Regulations Division.  Langer most recently served as senior counsel at Macy's, Inc. in Mason, Ohio.  He also has served as a partner in several law firms, including Jones Day and Dreher Langer & Tomkies. He is a founding fellow and treasurer of the American College of Consumer Financial Services Lawyers and is a former chair of the Consumer Financial Services Committee of the American Bar Association Business Law Section.

Bipartisan housing finance reform bill expected soon

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WASHINGTON (3/12/14)--Housing finance reform got a shot in the arm yesterday. After five years of debate and delay among policymakers, Senate Banking Committee Chairman Tim Johnson (D-S.D.) and the committee's top Republican member, Sen. Mike Crapo (Idaho), announced Tuesday that they have agreed upon a bipartisan plan to overhaul the housing finance market, as well as to wind down government-owned Fannie Mae and Freddie Mac.

The Credit Union National Association has and will continue to advocate for credit unions as housing reform moves forward.

CUNA has repeatedly said that credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said that, based on early information, the Johnson-Crapo initiative seems to include many of the housing finance reform suggestions CUNA made during testimony last year.
 
"We look forward to reviewing the legislative text when it is made available and are hopeful this will be a bill that credit unions can strongly support," Donovan stated.
 
A draft bill could be unveiled in the next few days, with a committee vote to follow in the next weeks. Information released by Johnson and Crapo indicated the legislation will reflect significant provisions of S. 1217, a bill introduced by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) last June.
 
Like that legislation, the new bill would wind down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and replace them with a new mortgage guarantor, the Federal Mortgage Insurance Corporation (FMIC).
 
The winding down of Fannie and Freddie, and the Federal Housing Finance Agency, would be accomplished within five years of the bill's potential passage. GSE assets would be sold off, and their charters would be revoked once the FMIC is established.

Under the terms of the bill, private entities would purchase mortgages from lenders. Those mortgages would then be reissued as securities and sold on to investors. Investors would need to maintain a 10% interest of equity for every dollar of risk.

New loans would not be required to go through the FMIC. Only those that wanted the government guarantee would be processed by the agency.
 
"This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country," Johnson said in a statement. "I look forward to moving this effort through committee once members have had a chance to review our forthcoming legislation." 
 
CUNA's Donovan said, "We appreciate that the committee engaged CUNA frequently through the development of this legislations, and we look forward to its consideration in the Banking Committee very soon."

CompBlog Wrap-Up reminds CUs of tax fraud potential

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WASHINGTON (3/12/14)--With the April 15 tax return due date approaching, credit unions must stay on their toes to protect themselves and their members from fraud schemes, the Credit Union National Association warned in this month's edition of the CompBlog Wrap-Up.
 
"As always, but particularly during tax season, credit unions must protect their members' personal information, and stay on top of suspicious activity," Kathy Thompson, CUNA senior vice president for compliance and legislative analysis, wrote.

One type of fraud credit unions have alerted CUNA to is non-member tax refund checks going into member accounts. Not only must credit unions note and potentially report such suspicious activity for Bank Secrecy Act purposes, they must also be on the lookout for members using personal accounts for business purposes, such as a tax return filing business, she added.

Thompson noted the U.S. Internal Revenue Service has reported a steady increase in instances of tax refund fraud between 2011 and 2013. From 2011 through November 2013, the agency has stopped 14.6 million suspicious returns involving more than $50 billion in fraudulent refunds, she wrote.
 
This month's CompBlog Wrap-Up also features:
  • Top concerns outlined by credit unions at last month's Governmental Affairs Conference;
  • Recent Foreign Account Tax Compliance Act amendments and clarifications;
  • Final Affordable Care Act employer regulations; and
  • News on student lending issues.
The Wrap-Up also updates credit unions on the latest regulatory changes and offers a question-and-answer section.

For the full CompBlog Wrap-Up, use the resource link.

CUNA online update details post-GAC political landscape

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WASHINGTON (3/12/14)--Top credit union priorities coming out of last month's Credit Union National Association Governmental Affairs Conference are detailed in the March edition of CUNA's "Legislative Update Webcast."
 
The advocacy efforts of 4,400 credit union supporters during the GAC "certainly made an impact that will last for a long time," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said in this month's webinar. "As we turn the page from the GAC, several of our priorities are on the front burner of Congress," Donovan noted.
 
In the webinar, Donovan provides updates and analysis of key credit union issues, including:
  • Tax reform;
  • Merchant data breaches;
  • Housing finance reforms;
  • Patent reforms; and
  • Capital reform.
On the credit union tax status, Donovan emphasized that the recently released draft "is just the first chapter in tax reform," and groups that did not do as well as credit unions did in the first draft will be seeking to improve their own position in future drafts. Credit unions must defend their hard-earned gains in the future, he emphasized.

Donovan said CUNA does not expect the U.S. House to consider Rep.Dave Camp's (R-Mich.) tax plan this year, and it is not clear if the Senate will introduce its own tax reform document this year.

However, he added, Rep. Paul Ryan (R-Wis.), who could take on House Ways and Means Committee chairmanship, has said he would use Camp's proposal as a starting point for his own work on taxes.

Each month, CUNA's legislative update webinar breaks down vital information on top congressional concerns into an easy to access and understand format.

For the full 15-minute webinar, use the resource link.

Pat Keefe is CUNA's new top communications officer

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WASHINGTON (3/12/14)--Pat Keefe has been promoted to senior vice president of communications by the Credit Union National Association.
 
Keefe, who has nearly 30 years of experience with communications at the national level, has been with CUNA since 2000, most recently serving as vice president of communications.
 
CUNA President/CEO Bill Cheney noted that Keefe was named to the position after CUNA conducted a broad search to fill the chief communications officer position, considering nearly 90 applicants from across the nation. That list was winnowed down to about a half-dozen finalists, who themselves held impressive credentials and experience, Cheney said.
 
"Pat was promoted to this position based on his long service to credit unions, his experience here at CUNA and his interaction with our executive team," said Cheney. "As senior vice president of communications, his role will be to ensure that CUNA continues to enhance its strong reputation as the leader of the credit union movement with all of our audiences, especially our member credit unions, the financial services industry, the Washington community and the public at large."

Prior to working at CUNA, Keefe was a communications executive with the National Association of Federal Credit Unions in Arlington, Va., for 16 years. He is a former newspaper reporter and editor.
 
During his credit union career, he has been engaged in communications strategies and tactics affecting nearly every key issue for credit unions, including: Protecting the tax-exempt status of credit unions, bankruptcy reform, debit interchange and--most recently--dealing with data security breaches.
 
In the late 1990s, Keefe played a substantial role in planning and executing the Credit Union Campaign for Consumer Choice, which passed legislation to overturn a Supreme Court decision limiting credit union membership.
 
"I'm greatly honored to represent the credit union movement and will use my experience and background to help protect and advance the movement's interests," Keefe said Tuesday.

FINRA warns of Bitcoin-related risks

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WASHINGTON (3/12/14)--While many have reported on the great promise that Bitcoin and other virtual currencies hold for consumers and businesses alike, buying and using digital currency such as Bitcoin carries certain risks, the Financial Industry Regulatory Authority Inc. (FINRA) warned Tuesday.
 
FINRA bills itself as the largest independent securities regulator in the U.S., with a central task of protecting investors by maintaining the fairness of U.S. capital markets.
 
"Speculative trading in Bitcoins carries significant risk. There is also the risk of fraud related to companies claiming to offer Bitcoin payment platforms and other Bitcoin-related products and services," FINRA wrote in an investor alert.

The alert reminds that:
  • Digital currency such as Bitcoin is not legal tender, and businesses and individuals are not legally required to accept it as payment. If no one accepts Bitcoins, Bitcoins will become worthless, FINRA writes;
  • Platforms that buy and sell Bitcoins, and digital wallets, can be hacked, costing consumers;
  • Bitcoin transactions can be subject to fraud and theft;
  • The account insurance and other safeguards provided by credit unions and banks are not provided to users of digital wallets;
  • Bitcoin payments are irreversible, and refunds are only made if a seller decides to provide them;
  • Bitcoin has been used in illegal activity, and thus, Bitcoin exchanges could be shut down by law enforcement agencies; and
  • Bitcoin prices can fluctuate wildly.
Many criminals also view Bitcoin "as a chance to steal your money through old-fashioned fraud," FINRA added. Warning signs of fraud include business claims that are not backed by financial reality, FINRA said.

For the full FINRA alert, use the resource link.

NEW: Royce set to introduce MBL-related bill

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WASHINGTON (3/12/14, UPDATED 5:38 p.m. ET)--As he pledged to 4,400 credit union advocates at the Credit Union National Association's 2014 Governmental Affairs Conference less than two weeks ago, Rep. Ed Royce (R-Calif.) is ready to introduce a bill to exempt loans for one- to four-unit non-occupied dwellings from the credit union member business lending cap.
 
CUNA expects the bill to be introduced tomorrow.
 
In a letter to his House colleagues describing the bill and seeking support, Royce wrote: "When a bank makes a loan to finance the purchase of a small apartment building it is called a residential real estate loan.  When a credit union makes the same loan it is call a business loan" and thereby falls under the low 12.25%-of-assets MBL cap.
 
Royce tells House lawmakers that his common-sense credit union reform bill, called the "Credit Union Residential Loan Parity Act," would fix that disparity.
 
He added that, if enacted, the bill would allow credit unions to lend an estimated additional $11 billion to small businesses, freeing up "much needed private sector financing for commercial businesses and rental housing without costing taxpayers a dime."
 
The bill also authorizes the National Credit Union Administration to apply strict underwriting and servicing requirements for the loans.

NEW: CUNA launches national search for new president/CEO

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WASHINGTON (3/12/14, UPDATED 2:32 p.m. ET)--A national search for a new president/CEO of the Credit Union National Association will be launched immediately, the association's chairman said, to find a successor to Bill Cheney, who is returning to California in June to be president and CEO of SchoolsFirst FCU in Santa Ana.

CUNA Chairman Dennis Pierce said the search would consider candidates from both inside and outside of the credit union movement.

"We will be looking for leadership that can bring to bear the talents of the exceptional team that we have on board at CUNA now, and leverage the strengths of the three-tiered system of CUNA, the state credit union leagues, and credit unions to achieve our goals and strengthen the movement," Pierce said.

Pierce thanked Cheney for his service, and praised his accomplishments as president/CEO since 2010. Among them, the CUNA chairman said, were:
  • Successfully protecting the credit union tax exemption, ensuring that the recent tax reform draft from the House Ways and Means Committee made no changes to the tax status of credit unions. Pierce pointed to the award-winning "Don't Tax My Credit Union Campaign," which Cheney launched, as a key reason for the "big win" for credit unions in the tax reform proposal. The campaign generated 1.3 million contacts with Congress from credit union supporters in less than nine months' time--a record for such efforts--urging lawmakers "don't tax my credit union."
  • Establishing the first-ever shared, strategic vision for the credit union movement: "Americans choose credit unions as their best financial partner." The initiative is aimed at guiding, uniting and helping credit unions achieve a shared agenda of removing barriers, creating awareness and fostering service excellence, with the ultimate goals of increasing credit union membership and delivering to members more value.
  • Developing an approach to communicate credit union concerns and interests to Congress with a "535-seat strategy," designed to reach every single member of Congress on behalf of credit unions.
"In addition, Bill and his team this year planned and executed the most successful CUNA Governmental Affairs Conference ever, which drew more than 4,400 credit union supporters to rally and then deliver the credit union message to Capitol Hill," Pierce said. The CUNA chairman also noted the association's continued financial health during Cheney's tenure, as well as its strengthened communications program as hallmarks of his leadership.

Cheney expressed his thanks to the movement for its support over his nearly four years of leading the national trade association.

"I take on this new role at SchoolsFirst knowing that, with the backing of the CUNA board, the state leagues, and CUNA staff, we have accomplished much. However, the work will continue without interruption.

"Protection of our tax exemption, pursuit of regulatory relief, enhancing the charter and working toward achievement of a shared strategic vision--among other key issues--must proceed, with guidance from our board, partnership with the leagues and efforts of our talented, professional staff," Cheney said.

Pierce noted that Cheney will take a consulting role in the leadership search for the association during his remaining tenure at CUNA.

Current SchoolsFirst FCU president/CEO, Rudy Hanley, announced early this year that he would retire from the credit union after 31 years of service.  Although he was originally scheduled to retire in March, Hanley has said he will stay on at the $9.7 billion-asset credit union until Cheney comes aboard.

NEW: Pat Keefe named SVP for CUNA communications

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WASHINGTON (3/11/14 UPDATED 1:40 P.M. ET)--The Credit Union National Association announced today that Pat Keefe has been promoted to senior vice president of communications.
 
Keefe, who has nearly 30 years of experience with communications at the national level, has been with CUNA since 2000, most recently serving as vice president of communications.
 
"Pat was promoted to this position based on his long service to credit unions, his experience here at CUNA and his interaction with our executive team," said CUNA President/CEO Bill Cheney. "As senior vice president of communications, his role will be to ensure that CUNA continues to enhance its strong reputation as the leader of the credit union movement by all of our audiences, especially our member credit unions, the financial services industry, the Washington community and the public at large."
 
Cheney noted that Keefe was named to the position after CUNA conducted a broad search to fill the chief communications officer position, considering nearly 90 applicants from across the nation. That list was winnowed down to about a half-dozen finalists, who themselves held impressive credentials and experience, Cheney said.

Prior to working at CUNA, Keefe was a communications executive with the National Association of Federal Credit Unions in Arlington, Va., for 16 years. He is a former newspaper reporter and editor.
 
During his credit union career, he has been engaged in communications strategies and tactics affecting nearly every key issue for credit unions, including: Protecting the tax-exempt status of credit unions, bankruptcy reform, debit interchange and--most recently--dealing with data security breaches.
 
In the late 1990s, Keefe played a substantial role in planning and executing the Credit Union Campaign for Consumer Choice, which passed legislation to overturn a Supreme Court decision limiting credit union membership.
 
"I'm greatly honored to represent the credit union movement and will use my experience and background to help protect and advance the movement's interests," Keefe said.

CUNA part of cross-industry collaboration to improve data security

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WASHINGTON (3/11/14)--The Credit Union National Association and credit unions are part of a new, cross-industry effort to improve payment security systems. Formed by MasterCard and Visa, the group will focus on enhancing payment system security to keep pace with the expectations of consumers, retailers and financial institutions, MasterCard said in an announcement.
 
"One of the critical roles we play is to protect consumers and businesses against criminals and fraudsters...Only through industry collaboration and cooperation will we address the real and immediate issue of security and maintain consumer confidence and trust," said Chris McWilton, MasterCard president of North American markets.
 
The group initially will focus on Europay, MasterCard and Visa (EMV) standards and also will discuss tokenization, point-to-point encryption and other security systems.
 
Along with CUNA and credit unions, MasterCard and VISA, the groups will be comprised of representatives of  large and small banks, acquirers, retailers, point-of-sale device manufacturers and other trade groups.
 
The group's conversations "will serve as a useful forum to share ideas, break down barriers and spur the adoption of next generation security solutions for the benefit of all," Visa President Ryan McInerney in the announcement. "No one industry or technology can solve the issue of payment system fraud on its own," he added.
 
CUNA welcomes the discussion, pursuit and deployment of new payment system technology, but is skeptical that a solution to merchant data breaches can be achieved without first requiring all participants to follow similar data security standards. Merchants must also be held accountable for the damages that breaches to their systems cause financial institutions and consumers.
 
CUNA has repeatedly encouraged members of the U.S. Congress to address inconsistent rules that require credit unions and other financial institutions to follow high security standards while exempting merchants. CUNA President/CEO Bill Cheney has also called on the House Financial Services Committee to hold hearings on the last year's Target data security breach, and to call on credit union witnesses for such hearings.

NCUA to CUNA: Changes could come for final RBC rule

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ALEXANDRIA, Va. (3/11/14)--National Credit Union Administration Chairman Debbie Matz has assured the Credit Union National Association that key changes to the agency's risk-based capital (RBC) proposal are not out of the question prior to the rule becoming final.
 
She also indicated that the capital proposal is the "last significant safety and soundness" rulemaking she intends to initiate at the agency. Her term ends April 10, 2015.
 
Regarding the RBC plan, proposed at the agency's January open board meeting, Matz wrote, "Just as NCUA incorporated significant changes to our final rules on troubled debt restructurings, loan participations and derivatives...I assure you NCUA will do so, as appropriate, on this critically important rule." Her remarks were in response to a joint letter from CUNA President/CEO Bill Cheney and National Association of Federal Credit Union President Dan Berger that urged a longer RBC comment period than the 90 days allowed (News Now March 3).
 
CUNA's primary objective with the RBC proposal is to achieve a vastly improved regulatory outcome: If the NCUA board will not withdraw the proposal, then CUNA argues broad changes must be included in the final.
 
CUNA has warned that the RBC plan, as proposed, could affect the core operations of most, if not all, credit unions with assets over $50 million, despite NCUA analysis that says fewer than 200 credit unions will be impacted.
 
CUNA's top regulatory advocacy goal overall is to reduce credit unions' regulatory burdens. The trade group is aggressively following up with the agency to reinforce the need to reduce credit unions' regulatory burdens, not increase them.
 
Also in her March 5 letter, Matz declined to expand the RBC comment period beyond the given 90 days, which ends May 28.
 
She wrote that credit unions effectively will have 120 days to comment to the agency, in part, because the proposal's publication was delayed in the Federal Register. The comment period begins from the date of publication.
 
CUNA urges credit unions to weigh in on the proposal and let regulators know their concerns. Also, CUNA has produced an "Inside Exchange" video segment on the steps for writing an effective comment letter on this issue. (See resource link.)
 

In Congress: McWatters, flood insurance, FHLB membership for privately insured CUs

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WASHINGTON (3/11/14)--This week in Congress, there are a number of matters of interest for credit unions.  As reported earlier, the Senate Banking Committee's rescheduled hearing for the nomination of  J. Mark McWatters to become a National Credit Union Administration board member is on the plate for Thursday.  So are a potential markup of legislation that would allow some credit unions to join the Federal Home Loan Bank system, and a full Senate vote on a National Flood Insurance Program bill.

Rep. Steve Stiver's (R-Ohio) bill (H.R. 3584) would permit privately insured credit unions to join the Federal Home Loan Bank system. The bill may be considered when the House Financial Services Committee holds markup sessions Thursday and Friday. Stivers' bill addresses one of the more than 30 regulatory relief proposals the Credit Union National Association submitted to the committee at a hearing last year.

H.R. 2672, which would address the Consumer Financial Protection Bureau's rural designation, and the committee's budget views and estimates, may also be considered by the Financial Services panel.

The Senate this week is expected to approve legislation providing for a four-year delay in the implementation of some provisions of the 2012 Biggert-Waters National Flood Insurance Program Act, such as an increase in premiums.

CUNA will also track committee hearings this week, including:
  • Today's Senate Banking Committee consumer protection subcommittee hearing titled "Finding the Right Capital Regulations for Insurers;"
  • A Wednesday House Budget Committee hearing on President Barack Obama's fiscal 2015 revenue and economic policy proposals; and
  • A Wednesday Senate Banking Committee economic policy subcommittee hearing titled "The State of U.S. Retirement Security: Can the Middle Class Afford to Retire?"
When the House and the Senate recess at the end of this week, they will be out of session until the week of March 24.

NEW: Johnson, Crapo announce agreement on housing finance reform

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WASHINGTON (3/12/14, updated 10:44 a.m. ET)--Housing finance reform just got a huge shot in the arm after being mired in inaction for so long. Senate Banking Committee Chairman Tim Johnson (D-S.D.) and the committee's top Republican member, Sen. Mike Crapo (Idaho), announced this morning that they have agreed upon a bipartisan plan on how to overhaul the housing finance market, as well as on what to do with government-owned Fannie Mae and Freddie Mac.

A draft bill could be unveiled in the next few days, with a committee vote to follow in the next weeks.
 
"This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country," Johnson said in a statement. "I look forward to moving this effort through committee once members have had a chance to review our forthcoming legislation." 

The Credit Union National Association has and will continue to advocate for credit unions as housing reform moves forward.

CUNA has repeatedly said that credit unions appreciate the need to reform the current housing finance system, but any reforms must not hinder the ability of credit unions to meet their members' housing finance needs in a member-friendly cooperative way.

CUNA has also said that the transition from the current system to any new housing finance system must be reasonable and orderly, and a transition deadline needs to be flexible.

CUNA attends 1st meeting of Treasury's youth fin. ed. council

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WASHINGTON (3/11/14)--The President's Advisory Council on Financial Capability for Young Americans held its first  meeting Monday and the Credit Union National Association joined U.S. Treasury Secretary Jack Lew, Education Secretary Arne Duncan, Senior Advisor to the President Valerie Jarrett, and private, public and nonprofit leaders and innovators for that inaugural session.

The council was established by President Barack Obama last year. Consumer Financial Protection Bureau Director Richard Cordray also is a member of the council, which has been charged with increasing the financial acuity of young Americans.

"Mastering the basics of financial decision-making at an early age will equip young people for the first major financial decision many Americans are likely to face: Whether to pursue post-secondary education and, if so, how to pay for it," Lew noted in his opening remarks.

"The primary purpose of the advisory council meeting was to provide a forum for council members to meet in person and share what they believe to be the most pressing issues facing the nation's youth," CUNA Senior Assistant General Counsel Luke Martone said following the meeting.

The council will follow up on the formal recommendations of the President's Advisory Council on Financial Capability, which included promoting financial education in the community and researching and evaluating those efforts.

CFPB reports $1M recovered on servicemembers' behalf

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WASHINGTON (3/10/14)--The Consumer Financial Protection Bureau reports that it has recovered more than $1 million  and heard from 14,100 servicemembers, veterans and their family members--both things associated with complaints regarding financial services or products since 2011.
 
"Behind those case numbers are servicemembers with questions about mortgages, military spouses seeking to invoke consumer legal protections on behalf of their deployed spouse, veterans desperately fighting scams that threaten to steal their retirement income, and many more members of the military community with compelling, sometimes heartbreaking, real-life stories," the bureau said in its announcement of the release of its annual "snapshot by the Office of Servicemember Affairs"(see resource link).
 
The report notes that newer categories of complaints added just last year "have climbed steadily and now factor prominently into our complaint totals." They include such things as debt collection and payday loans.
 
"In fact, since we began taking debt collection complaints in July 2013, debt collection has quickly become the highest volume complaint category for military consumers over the last seven months," the bureau notes in its report introductions.
 
The report carries a breakdown of complaints by product, as well as the top issues within each product for military consumers.
 
Use the link to access the report.

NCUA has avenues to MBL relief, CUNA reminds board

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WASHINGTON (3/10/14)--Only the U.S. Congress can increase the 12.25%-of-assets credit union member business lending (MBL) cap, but there are a number of regulatory actions the National Credit Union Administration can and should take to aid credit unions approaching the cap, the Credit Union National Association said. CUNA detailed these Friday in letter to the agency leadership.
 
CUNA President/CEO Bill Cheney wrote, "On a number of occasions, CUNA has urged the agency to revisit its member business loan rule and since March 2012, we have repeatedly advocated that the agency update its regulatory provisions implementing the exemption for credit unions that have a history of primarily making member business loans.
 
"Since 2008, we have been advocating for other changes to the MBL rule, such as removing limitations that are not required by the statute."
 
Other steps suggested in letters sent to NCUA Chairman Debbie Matz and board members Michael Fryzel and Richard Metsger include:
  • Updating Federal Credit Union Act definitions that provide exemptions from the MBL cap for credit unions that have a history of primarily making MBLs to their members;
  • Expanding provisions addressing MBL loans made for the financing of one to four family dwellings; and
  • Removing limitations that are not required by the statute.
The NCUA can take important steps to relieve regulatory burdens associated with MBLs without sacrificing safety and soundness, the top CUNA executive wrote.

CUNA urged the agency to proceed with these recommendations and to aid efforts to encourage the U.S. Congress to increase the cap.

March 31 is compliance deadline for NCUA emergency liquidity rule

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WASHINGTON (3/10/14)--Compliance preparations for the National Credit Union Administration's new emergency liquidity rule must be complete by March 31, the Credit Union National Association reminds credit unions.

The liquidity rule sets up three-tiered emergency liquidity requirements for credit unions with less than $50 million in assets, between $50 million and $250 million in assets, and more than $250 million in assets.

The final rule contains asset-cap increases that were advocated by CUNA and will impact approximately 374 credit unions.

Federally insured credit unions (FICUs) with less than $50 million in assets must maintain a basic written emergency liquidity policy but will not be required to take further action. All FICUs with assets of $50 million or more are required to develop contingency funding plans describing how their credit union will address liquidity shortfalls in emergency situations. FICUs with assets of $250 million or more would be required to have access to a backup federal liquidity source for emergency situations.

The NCUA has said the rule is part of a global regulatory effort to promote sound liquidity-risk management. The rule will strengthen individual credit unions and, as a result, the entire system, the agency added.

The final rule does not include the Federal Home Loan Banks (FHLB) as an acceptable source of emergency liquidity, although eligible credit unions required to meet the federal source provisions would be free to borrow from a FHLB for nonemergency purposes. Without the FHLB, credit unions have two options to ensure a federal liquidity source for emergency situations: Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or access to the Federal Reserve's discount window.

CUNA strongly supports the use of the home loan banks for liquidity.

CFPB small business panel meets on HMDA issues

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Click to view larger image From left:  Garth Griese, president/CEO, Service One CU, Bowling Green, Ky.; Laura Phillips, director of mortgage services, Alabama Teachers CU, Gadsden, Ala.; Jim Ryan, president/CEO, JM Associates FCU, Jacksonville, Fla.; Bob Aresti, president/CEO, 360 FCU, Windsor Locks, Conn.; Jane Hammil, president/CEO, Wichita (Kan.) FCU; and Dallas Bergl, president/CEO, INOVA FCU, Elkhart, Ind., and CUNA board member. (CUNA photo)

 WASHINGTON (3/10/14)--Six credit union executives were among the 21 Small Business Regulatory Enforcement Fairness Act (SBREFA) panel members who convened last week to discuss proposals the Consumer Financial Protection Bureau has made under its Home Mortgage Disclosure Act (HMDA) rulemaking authority.

Credit Union National Association staff were also in attendance.
The 1975 Home Mortgage Disclosure Act (HMDA) requires credit unions and all lending institutions to report public loan data. While implementation authority rested originally with the Federal Reserve Board, that power was transferred to the CFPB in July of 2011.

Among the matters discussed at the SBREFA meeting Thursday were additional data points that are currently being considered for HMDA reporting. They include:

  • Loan term;
  • ARM introductory period;
  • Nonamortizing features (balloon, interest-only, negative amortization);
  • Property value;
  • Security type (real or personal property);
  • Manufactured property interest (own, cooperative, leasehold);
  • Total units;
  • Multifamily affordable housing;
  • Age;
  • Automated underwriting system results;
  • Loan originator ID;
  • Application channel (retail or wholesale);
  • Credit score;
  • Denial reasons;
  • Total points and fees;
  • Total origination charges;
  • Discount points;
  • Risk-adjusted interest rate;
  • Interest rate;
  • Prepayment penalty term;
  • Debt-to-income ratio;
  • Combined loan-to-value ratio;
  • Qualified mortgage status flag;
  • Reverse mortgage flag; and,
  • A home equity line of redit (HELOC) flag.

Archived NCUA webinar on RBC, QM now available

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ALEXANDRIA, Va. (3/10/14)--A Feb. 12 town hall-style webinar hosted by National Credit Union Administration Chairman Debbie Matz and featuring Consumer Financial Protection Bureau Director Richard Cordray is now available online.
 
The webinar focused on some of credit unions' hottest topics, such as the NCUA's proposed risk-based capital rule, the CFPB's qualified mortgage rules, and data collection and ensuring data security.
 
Also discussed during the 90-minute session: Temporary Corporate Credit Union Stabilization Fund assessments and potential regulation of payday lending. More than 1,900 people registered for the live webinar.
 
Use the resource link for audio recording and written transcript of the virtual town hall. The archived webinar will be available until Feb. 15, 2015.
 

Cheney defines how risk-based capital should look

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WASHINGTON (3/10/14)--The Credit Union National Association supports risk-based capital but has strong concerns that there's a multi-billion-dollar price tag of additional capital for credit unions attached to a proposed risk-based capital (RBC) rule. That is the wrong approach for a credit union system that withstood, under current rules, the worst financial crisis in 80 years, CUNA President/CEO Bill Cheney says in the most recent The Cheney Report.

Cheney urges credit unions to comment on the National Credit Union Administration's risk-based plan, unveiled in January, and points to CUNA's increasing arsenal of resources for credit unions at www.cuna.org/riskbasedcapital/. The tools, including a March 19 webinar (see related story), are intended to help credit unions understand the impact of the proposal on their operations--today and into the future--and gear up to respond.

"CUNA absolutely supports risk-based capital for credit unions--that's our long-held position. But NCUA's proposal is not the right approach for our members, and the credit union system at large," Cheney writes, reiterating a point the group has made repeatedly.

For risk-based capital to be implemented correctly, CUNA asserts, it must be part of overall capital and prompt corrective action reform---changes that will require congressional action.

The reforms must include:

  • Lower leverage ratios for well- and adequately capitalized credit unions; and,
  • Authority for supplemental capital for federally insured credit unions that want to use it to meet capital ratio requirements.

Cheney says that the NCUA should be pursuing these legislative plans no less vigorously than it is pushing for its major RBC rule.

Furthermore, Cheney informs, CUNA strongly believes that updated risk-based capital requirements should be in relation to the adequately capitalized, statutorily defined as maintaining a 6% net worth ratio, and not to the well-capitalized level.

"Also, no rule should afford any greater authority for the agency to impose additional capital requirements on a case-by-case basis--and risk weightings must be properly calibrated," the CUNA leader writes.

See the resource links for information on the webinar and on the CUNA RBC resources for member credit unions.

CUNA, CUs will explore RBC rule 'fixes' in new webinar

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WASHINGTON (3/10/14)--Can the National Credit Union Administration's risk-based capital proposal be fixed? Credit Union National Association experts and credit union CEOs will attempt to answer that and other credit union questions during a just-announced March 19 webinar.

The hourlong CUNA webinar, scheduled to begin at 3 p.m. (CT), will be introduced by CUNA President/CEO Bill Cheney. CUNA Chief Economist Bill Hampel and Deputy General Counsel Mary Dunn will detail the risk-based capital proposal and credit union concerns. Participants will also have the chance to hear directly from credit union CEOs about their perspectives on the proposed rule. A short question-and-answer session is planned to end the information session.

The risk-based capital proposal would restructure NCUA's current prompt corrective action regulation to include calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks. The risk weights would be substantially different, and the proposal would impose higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer term investments and some other assets.

The proposal would apply to credit unions with assets of more than $50 million.

A final version of the rule is not likely to go into effect until 2016 or later. However, CUNA is encouraging credit unions to consider the proposal and its impact on their operations right now and submit their comments to the agency, CUNA and state leagues. Credit unions will also have a chance to take their thoughts on the issue directly to the NCUA during a trio of public town hall meetings this summer.

CUNA has posted a comprehensive, but concise, summary of the rule to help inform credit unions on the rule, and has also produced a Risk-Based Capital Action Center tool to help credit unions file comment letters with the agency. CUNA has also requested that the agency extend the comment deadline for this proposal by at least 90 days.

For more on the webinar and CUNA's other risk-based capital resources, use the links.

Survey says majority of business owners unconcerned about card security

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NEW YORK (3/7/14)--As the Credit Union National Association works for merchant accountability for breaches to their data systems,  the results of a new study show a startlingly high 67% of business owners polled are not concerned about credit card security at their businesses.
 
Newtek Business Services, with a portfolio of more than 100,000 business accounts, announced the findings of its latest Small Business Authority Market Sentiment Survey, a monthly snapshot of the concerns of independent business owners.
 
"Based on a poll of over 1,400 respondents, one of the key findings from the February survey is that even after the recent hackings at major companies such as Target and Neiman Marcus, 67% of business owners are not concerned about credit card security at their business," Newtek said in a release. Newtek is a CUNA Strategic Services alliance provider.

What's more, Newtek reported, 63% of business owners are unaware of Europay-MasterCard-Visa (EMV) chip card technology. EMV is a global standard for credit and debit payment cards based on chip card technology.

The Credit Union National Association supports the adoption of EMV technology--which goes beyond magnetic stripes and contain an embedded chip for stronger security. However, CUNA strongly emphasizes that no one technology can address the burgeoning problem of merchant data breaches.

As the credit union trade association has underscored in a series of letters to federal lawmakers, inconsistent data security standards need to be addressed before a solution to merchant data breaches can be achieved.

"(A) prime reason that merchant data breaches are a chronic issue is because data security standards are inconsistent among the participants in the payments system," CUNA has pointed out, adding, "Simply put: credit unions and other financial institutions are subject to high data protection standards under the Gramm-Leach-Bliley Act; merchants are not. When merchant data breaches occur, financial institutions--not merchants--bear the costs of replacing credit and debit cards and fraud costs."

In another EMV development, CO-OP Financial Services welcomed a recent agreement for debit EMV security standards between Visa Inc. and First Data STAR Network, a major electronic funds transfer system. (News Now March 6)
 
The credit union-owned ATM network operator said Feb. 26 that a number of its clients are in the STAR Network, and that it is also seeking to implement similar protective technologies like the one Visa and First Data hope to spread through their agreement.

CUNA, bank trades throw support behind new 'patent troll' bill

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WASHINGTON (3/7/14)--With the weight of their combined 14,000 financial institution memberships behind them, the Credit Union National Association, Independent Community Bankers of America and the American Bankers Association sent a joint letter of support for a new bill to fight patent system abuses.
 
The bill (S. 2049) was introduced by Sen. Claire McCaskill (D-Mo.) late last month and is titled the "Transparency in Assertion of Patents Act." It would curb unfair and deceptive practices during assertions of patents against legitimate businesses, including credit unions and banks.
 
The legislation takes an important step toward addressing the "exponentially growing threat of Patent Assertion Entities (PAEs), commonly referred to as 'patent trolls,'" the joint letter states.

If enacted, it would help to address the burden credit unions and banks face when trying to decipher vague and misleading demand letters. And, the letter asserts, it would do so by taking specific aim at the problem, without affecting the rights of legitimate patent holders to send demand letters or otherwise assert their patent rights.
 
S. 2049 would clarify the Federal Trade Commission's (FTC) authority to require basic information, such as the owner of the patent and specific technology involved, to be included in letters sent by PAEs.
 
"This will help the victims of trolls to quickly and inexpensively understand the infringement claim and how best to respond to it," the letter said.
 
The CUNA joint letter also noted that legitimate patent holders would benefit from McCaskill's bill because it would empower the FTC to specify what constitutes a deceptive demand letter.
 
"This would provide patent holders with certainty of how to assert a patent without any risk that it could be labeled unfair or deceptive. Civil penalties would be imposed on those that continue to send out 'bad faith' demand letters, with exceptions provided for communications between parties on existing licensing agreements."
 
Once introduced, S. 2049 was referred to the Senate Commerce, Science, and Transportation Committee.
 
The chairman of that committee, Sen. John Rockefeller (D-W. Va.), is a co-sponsor of the bill. The CUNA joint letter was sent to the chairman and the ranking member of the committee, Sen. John Thune (R-S.D.).
 
CUNA and the banking trades told the committee leaders that they look forward to working with members of the committee to find a "bipartisan solution that directly addresses the growing abuse of our patent system and the specious demand letters that are having a negative impact on our industry, our customers, and the American economy."

NCUA participates in Capitol Hill Consumer Protection Week event

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WASHINGTON (3/7/14)--
Click to view larger image Ken Worthey, the NCUA's financial literacy and outreach analyst, talks to congressional staffers Thursday during a Capitol Hill event to mark National Consumer Protection Week. (NCUA photo)
The National Credit Union Administration Thursday joined in on a Capitol Hill celebration of National Consumer Protection Week by educating congressional staffers about credit unions and the role of their federal regulator.

March 2-8 is National Consumer Protection Week. It is intended to encourage Americans to be better informed in their consumer decisions. In his proclamation of the week, President Obama wrote, "This week, we remember that our nation's economy is only as strong as its people, and we recommit to fostering a sense of basic fairness in our marketplace." He called on government officials and private industry leaders to help educate Americans on their rights as consumers.

Ken Worthey, the NCUA's financial literacy and outreach analyst, participated in the day's Capitol Hill event.

The NCUA has used the declaration of the week to highlight the many resources it provides consumers--especially on its two consumer-oriented websites, MyCreditUnion.gov and Pocket Cents. These sites include tips to help consumers avoid financial scams and protect their financial well-being.

On its own site, the NCPW this week reminded users that a checking account at a credit union or other financial institution can serve as a less costly alternative to using check cashers or prepaid cards. The site also featured information on top consumer complaints, and highlighted state efforts to get vital money-saving information to consumers.

Use the resource link to visit the Credit Union National Association's consumer website, aSmarterChoice.org.

Is big data right for the underbanked?

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WASHINGTON and BOSTON (3/7/14)--A National Consumer Law Center (NCLC) study released Thursday warns that while big data promises it can make better products available to the unbanked and underbanked through predictive systems, the information based on those algorithms can be riddled with inaccuracies.
 
Big data brokers claim to be able to help some of the approximately 64 million consumers in the U.S. who have no credit history or lack sufficient credit history to generate a credit score--a state that in the modern world can cut off access to traditional banking services--by providing informed predictions of their histories.
 
The NCLC said it got 15 of its employees to request information about themselves from some of the largest data brokers in the country. The report's executive summary said that errors in the information ranged "from the mundane--a wrong e-mail address or incorrect phone number--to seriously flawed."
 
It went on to say that seven of 15 reports of a data broker that touts an ability to estimate income and education based on its advanced models contained errors in estimated income, nearly doubling the salary of one participant and cutting that of another in half, and 11 of the 15 reports incorrectly stated the volunteer's education level.
 
"Big data makes big promises. It promises to make better predictive algorithms that in turn can make better products available to the unbanked and underbanked. But can big data live up to this big promise?" the NCLC summary asks.
 
It suggests that when analyzing this use of big data, consumers and policy makers should be concerned with these questions:
  • Are the decisions based upon accurate data?
  • Can the algorithms, when fed with good data, actually predict the creditworthiness of low-income consumers?
  • Does the use of big data in reports used for credit, employment, insurance, and other purposes comply with consumer protection laws?
  • Is there the potential for a discriminatory impact on racial, geographic, or other minority groups?
  • Does the use of big data actually improve the choices for consumers?

February NCUA board meeting available as online video

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ALEXANDRIA, Va. (3/7/14)--A video recording of the National Credit Union Administration's February open board meeting is now available on the agency's website.
 
There was a short agenda for the Feb. 21 meeting, just two items: a proposed rule on voluntary liquidations of federal credit unions, and the quarterly report on the National Credit Union Share Insurance Fund.
 
The NCUA posts its meeting video in an effort to provide transparency and to give those unable to attend board meetings the opportunity to witness the agency's actions. The videos comply with Section 508 of the Rehabilitation Act for the hearing and visually impaired.
 
Use the resource link to view this and other archived videos of past board meetings. Each video remains on the site for one year.
 
 

NCUA launches cybersecurity resources page

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ALEXANDRIA, Va. (3/6/14)--The National Credit Union Administration has launched a new resource for credit unions--a webpage that provides links to cybersecurity and data security resources.
 
The site includes links to regulations, guidance and best practices, as well as information-sharing forums on cyber threats, among other resources.
 
The launch coincided with NCUA Board Chairman Matz's remarks last week at the Credit Union National Associations' Governmental Affairs Conference here.
 
The data breach at Target is the story of a double standard "that is neither healthy nor fair," she said at the Feb. 24 general session at the GAC. "While financial institutions are required by law to protect sensitive personal information, data protection standards for retailers are too often simply not adequate."  ( News Now Feb. 25)
 
The NCUA also is working on better understanding the evolving cyberthreat environment with other financial regulators, law enforcement and intelligence communities, as part of a new working group.
 
Use the resource link to explore the new NCUA resource.

CU/merchant parity in data rules a must: CUNA to lawmakers

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WASHINGTON (3/6/13)--Inconsistent data security standards need to be addressed before a solution to merchant data breaches can be achieved, the Credit Union National Association said in a Wednesday letter to the U.S. Congress.
 
The letter was sent for the record of a House Financial Services subcommittee on financial institutions and consumer credit entitled "Data Security: Examining Efforts to Protect Americans' Financial Information." Subcommittee members Rep. David Scott (D-Ga.) and Spencer Bachus (R-Ala.) during the hearing queried government witnesses on the need for merchants to be under uniform data security and consumer notification standards.
 
CUNA, the National Credit Union Administration and others have recently called for data security standard parity between merchants and financial institutions.
 
"Simply put: credit unions and other financial institutions are subject to high data protection standards under the Gramm-Leach-Bliley Act; merchants are not. When merchant data breaches occur, financial institutions--not merchants--bear the costs of replacing credit and debit cards and fraud costs," CUNA President/CEO Bill Cheney wrote.
 
The Target data breach cost credit unions an estimated $30.6 million, and future fraud could increase these costs, CUNA said. Merchant data breaches are a top credit union concern. "It is an issue of such great concern because these breaches cost credit unions and their members significantly, and they divert resources from other credit union activity, including lending," Cheney wrote.
 
"Until and unless merchants are held accountable for the damages that breaches to their systems cause financial institutions and consumers, we have little confidence that they will be incentivized to properly secure their systems," the letter added.
 
To address credit union data security concerns, CUNA suggested that Congress:
  • Hold all payment system participants to comparable levels of federal data security requirements;
     
  • Hold those responsible for the data breach responsible for the costs of helping consumers; and
     
  • Ensure consumers know where their information was breached.
"Credit unions also support legislation that requires merchants to provide notice to those consumers affected by a data breach, and permits credit unions to disclose where a breach occurs when notifying members that their account has been compromised...Consumers need transparency and knowledge to understand where their data has been put at risk," the letter said.
 
CUNA also encouraged the committee to hold additional data breach hearings.
 
For the full letter, use the resource link.

CU retirement products shine in Forbes

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WASHINGTON (3/6/14)--Credit unions once again shone by a comparison of their service to consumers, this time in a Forbes magazine article that discussed the virtues and challenges of the Obama administration's new MyRA retirement account and how it compares with traditional Roth IRAs.
 
Credit Union National Association Chief Economist Bill Hampel was extensively quoted in the broad article, describing the lower-cost retirement account services available at credit unions.
 
The Forbes article listed key selling points of the MyRA, especially for Millennials and others just starting to save: There's no annual account maintenance fee; an account can be opened with as little as $25; additional contributions can be as small as $5 every payday; and, if an employer agrees, savings can be deducted automatically from a saver's paycheck, as they are with 401(k) contributions.
 
One big drawback however, Forbes says, is that the MyRA will not be available until much later this year. As everyone knows, the article says, this very minute is the best time to start retirement savings.
 
That brings the choice back to Roth IRAs, which are not terribly different from the proposed MyRA. However, Forbes warns, the fees and minimums can be significantly higher and, to make it all that much more difficult, it is hard to compare offerings.
 
That's where credit unions come in, says CUNA's Hampel.
 
"(M)ost credit unions will allow you to open a Roth IRA with that same $25 minimum MyRA will have," Hampel points out, adding, "The MyRA is, in essence, a formalized version of what most credit unions already offer."
 
"Moreover," he says, "if you schedule an automatic transfer from your checking account, or if your HR department allows you to set up an automatic transfer from your paycheck before it hits your checking account, you can have amounts as small as $25 or even $5 per pay period regularly transferred into that credit union Roth--again, much like the MyRA."
 
While it's true that the yield on Roth IRAs can be low, Hampel argues that beginner savers shouldn't get hung up on the small number in the "rate of return" category. "There is a time to be concerned about rates, but it's not when you have a really small balance,'' he says.

NCUA: State data shows where strongest growth occurred

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Quarterly U.S. Map Review News Now Quarterly Map Review

Hundreds file late call reports despite threatened fines

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ALEXANDRIA, Va. (3/6/13)--The number of federally insured credit unions filing late call reports declined by two-thirds in the fourth quarter of 2013 from the year prior.  That is the good news.
 
However, a number of credit unions--561--filed late or made corrections beyond the Jan. 24 deadline, the National Credit Union Administration reported Wednesday, which NCUA Board Chairman Debbie Matz said is unacceptable.
 
Credit unions that filed their fourth-quarter 2013 call reports late will receive a warning letter from NCUA, the agency said but subsequent late filers will be subject to civil money penalties.
 
The Credit Union National Association has raised concerns about the potential overuse of fines and calls on the agency to work with credit unions, particularly when exigent circumstances arise. At the same time, CUNA urges all credit unions to file their 5300 Call Reports on a timely basis.
 
Potential penalties for late filers include:
  • Up to a maximum of $2,000 per day for each day a required report is "minimally" late or contains uncorrected false/misleading information if the late or false/misleading filing is unintentional and the credit union has reasonable procedures in place to avoid such errors;
  • Up to a maximum of $20,000 per day for each day a required report is late or contains false/misleading information if the late or false/misleading filing is not covered by the "unintentional" safe harbor outlined above;
  • Up to a maximum of $1 million, or 1% of total assets, whichever is less, per day if a federally insured credit union knowingly or with reckless disregard for accuracy submits a false or misleading report and fails to correct it.
To determine the size of the fine, the NCUA said it will consider:
  • The size of financial resources and good faith of the credit union;
  • The gravity of the violation;
  • The history of previous violations; and,
  • Other matters as justice may require regarding the circumstances of late or false/misleading submissions, such as natural disasters and incapacitation of key employees.
Proceeds from the fines will go to the U.S. Treasury, the NCUA said.
 
Late-filed call reports impact NCUA's ability to conduct effective off-site supervision and are a drain on agency resources, the NCUA said. The late filings also delay the release of quarterly industry data to the general public.

CUNA to Hill: CUs, members pay steep price for merchant data breaches

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WASHINGTON (3/6/14)--The Credit Union National Association made sure that every lawmaker on Capitol Hill got this message Wednesday: 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 Wednesday--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 among 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.)

Magill calls on merchants to start working together with financial institutions to implement the best solutions to secure the system and protect consumers from fraud and identity theft, "even though these solutions may be costly."

"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," he concludes.

Yellen pledges her best to promote strong financial system

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WASHINGTON (3/6/14)--At a ceremonial swearing in that took place Wednesday, new Federal Reserve Board Chairman Janet Yellin reiterated her promise to do her very best to work with her Fed colleagues and help restore the health of the economy and promote a strong and stable financial system.

"I am repeating this promise, in this distinguished company and to all others listening because that is what this ceremony is about," she said to the gathering in the Federal Reserve Building on 20th Street and Constitution Avenue NW. "The oath I have affirmed, identical to the one taken by everyone serving the Federal Reserve, is a public promise to carry out my duties guided by no interest other than the public's interest," she said in her written remarks.

Yellen said she will continue the work of repairing damage done by the financial crisis to the economy. "Too many Americans still can't find a job or are forced to work part-time. The goals set by Congress for the Federal Reserve are clear: maximum employment and stable prices.

"It is equally clear that the economy continues to operate considerably short of these objectives. I promise to do all that I can, working with my fellow policymakers, to achieve the very important goals Congress has assigned to the Federal Reserve," she said.  

Those in attendance included members of the U.S. Congress, U.S. Treasury Secretary Jack Lew, and others from the Obama administration including fellow financial regulators.

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.

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.

'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.

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.

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." 

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.
 

CFPB should carefully target rule to rein in debt collectors

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WASHINGTON (3/4/14)--The Credit Union National Association agrees that unscrupulous business practices, including those performed by certain third-party debt collection agencies, should not be tolerated. However, CUNA urges regulators to address those issues using a targeted approach that hones in on the third-parties that engage in abusive and/or illegal collection efforts.

CUNA, addressing a 162-question Consumer Financial Protection Bureau debt collection advance notice of proposed rulemaking, told the CFPB that consumers and creditors both would best be served by a regulatory approach that focuses on problem cases rather than on the creation of broad new rules that affect good and bad actors similarly. 

The CUNA comment letter underscored that credit unions that are collecting their own debts should be treated differently than third-parties that are in the business of debt collections.
 
"As member-owned, not-for-profit financial cooperatives, credit unions are distinct from most other types of financial service providers. Repeatedly, CFPB Director (Richard) Cordray has commended credit unions for their practices and urged them to 'keep doing what you are doing,'"  the CUNA letter reminded. "We urge the agency to reflect that view in all rulemakings, including any new rules that are developed regarding debt collection practices."

To read CUNA's complete comment letter and its answers to all the CFPB inquiries, use the resource link.

This week in Congress: McWatters' hearing postponed, patent 'trolls'on Thurs. schedule

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WASHINGTON (3/4/14)--The congressional calendar this week has a number of items of interest to credit unions, although timing could possibly be subject to change due to Washington digging out from another winter storm.

For instance, today's scheduled nomination hearing for J. Mark McWatters to become a National Credit Union Administration board member has been postponed. A new date has not been set.

Nominations at today's Senate Banking Committee's hearing were to include McWatters; 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.

On Thursday, the Senate Commerce Committee will meet to markup S. 2049, the Transparency in Assertion of Patents Act, which is supported by the Credit Union National Association.

The bill would grant the Federal Trade Commission greater authority to require patent "trolls"--who present deceptive patent demand letters and pursue frivolous patent litigation--to include more information about the patents they dispute in demand letters. CUNA will submit a letter of support to the committee.

Also on today's congressional committee agenda:
  • The House Financial Services subcommittee on oversight and investigations will conduct a hearing on "The Growth of Financial Regulation and its Impact on International Competitiveness" ( News Now March 3); and
  • The House Science, Space, and Technology subcommittee on research and its subcommittee on technology will hold a joint hearing on whether technology can  protect Americans from international cybercriminals.
Among scheduled Wednesday hearings are:
  • The House Financial Services Committee subcommittee on financial institutions and consumer credit on "Data Security: Examining Efforts to Protect Americans' Financial Information,"  ( News Now March 3), which will feature law enforcement and technical experts. CUNA will submit a letter for the record of this hearing; and
  • The Senate Finance Committee will hold a full committee hearing on "The President's FY2015 Budget."
On Thursday:
  • The House Ways and Means Committee will hold a full committee hearing on "The President's FY2015 Budget Proposal."

2013 financials show continued positive trends at CUs

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ALEXANDRIA, Va. (3/4/14)--National Credit Union Administration 2013 call report data, released Monday, shows continued positive trends in loan, membership and net worth growth for federally insured credit unions.
 
Credit Union National Association President/CEO Bill Cheney said the year-end financials illustrate that "credit unions are experiencing a renaissance of sorts in lending, particularly in the new and used auto loans."
 
"Although credit unions never stopped lending and working with their members, they have clearly left the recession in the dust and are looking forward," Cheney noted. (See related story: Autos boost CU lending, CUNA estimates say.)
 
However, NCUA Chairman Debbie Matz used the release of 2013 call report data to warn credit unions not to take on "excessive" interest rate risk. She highlighted that growth in 5- to 10-year investments was nearly 60% and called it "cause for concern."
 
"It's easy to get trapped chasing near-term profits by increasingly concentrating investments in long terms. That can imperil a credit union because it increases interest rate risk...For many credit unions it may be prudent, at this time, to accept lower return on assets to avoid exacerbating interest rate risks," the head federal credit union regulator advised.
 
Investments grew to $299 billion, up from $280 billion at the beginning of 2013, then declined to $285 billion by the end of the year. The NCUA said most of that decline was in short-term investments; the most dramatic growth occurred in 5- to 10-year maturities, which increased by $14 billion, or the 60% noted above.
 
However, the 2013 financial reports showed strong positives, such as:
  • Strong loan growth, led by auto loans, with total loans at up close to 2.2% to $645.2 billion in the fourth quarter. Loans grew nearly 8% compared to the end of 2012, and lending continued to rise in nearly every category;
  • Membership grew by slightly more than 343,000 in the fourth quarter of 2013 and by more than 2.4 million for the year; and,
  • Net-worth ratio climbed as credit unions remained well-capitalized. Aggregate net-worth ratio was 10.78%, the NCUA reported, up 13 basis points from the end of the third quarter, its highest level since the first quarter of 2009. The vast majority of federally insured credit unions remain well-capitalized, with 97% reporting a net worth at or above the statutorily required 7%.
Delinquency and net charge-off ratios held pretty steady and even dipped slightly in the third quarter. The delinquency ratio fell to 1.01% in the fourth quarter from 1.02% in the previous quarter and from 1.16% at the end of 2012. The net charge-off ratio remained the same during the fourth quarter at an annualized 57 basis points. The percentage of loan charge-offs due to bankruptcy also held steady at 20.5%, is below the 2012 level of 21.5%.

See the resource link for more data.

CUs' advocacy marathon sets them up for gridlock 'breakthrough'

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WASHINGTON (3/4/14)--The one thing certain about the ongoing gridlock in the legislative hall of the U.S. Congress is that the voter disapproval it engenders is unsustainable. That is why advocacy groups like credit unions must be poised for an inevitable breakthrough, write Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan and Vice President of Political Affairs Trey Hawkins in a March 1 Credit Union Magazine article.

"Waiting to engage with Congress until it's ready to vote on a matter is an almost certain way to come out on the losing end," the CUNA legislative and political experts write.

This is why credit unions must stay engaged in the process the entire time--an advocacy marathon, so to speak.
 
CUNA has spent the last year making this point as often as possible: Advocacy is a marathon; it's not a sprint.
 
Donovan and Hawkins make it clear that CUNA and others have very low expectations in terms of bills addressing threats or opportunities credit unions face actually becoming law in the short-term.
 
"But make no mistake: The work Congress does on matters such as tax reform and housing finance reform this year will significantly influence the outcome of these issues in the next Congress," they warn.
 
Already some credit unions are running in the advocacy marathon, the writers say, but they underscore that all credit union advocates must join the race by contacting legislators, educating members about the cooperative difference, involving members in advocacy efforts--in short, uniting for the good of both credit unions and members.
 
 
Look at 2013, they advise, when roughly two-thirds of the 1.3 million communications sparked by CUNA and the state credit union association's "Dont Tax My Credit Union" advocacy blitaz were delivered by members of roughly 300 credit unions.
 
"Imagine our potential if 600 credit unions--or 900 or 1,000 or more--had engaged their members similarly!"
 
Why should credit unions engage members directly?
 
Consider the results of a groundbreaking research project CUNA conducted recently with two credit unions: CommunityAmerica CU, Lenexa, Kan., and University FCU, Austin, Texas.  Researchers sent email communications to 70,000 members of these credit unions about the "Don't Tax My Credit Union" campaign and then surveyed 4,100 of those members about their attitudes toward advocacy and the credit unions in general.
 
The results:
  • Open rates on the emails were as high as 40%, with "click rates" as high as 6% and "action rates" as high as 5%.
  • Less than 0.1% of respondents opted out of these email communications, and neither credit union received any complaints.
More stunning and important: 86% of members who were contacted agree with the statement, 'In the future, I am likely to do a greater share of my personal banking with a credit union.'
 
"In other words," the article emphasizes, "the very process of educating members on the ownership structure of their credit union--and especially the value it delivers via more affordable loans, higher interest on deposits, and lower and fewer fees--increases those members' loyalty to the institution and willingness to engage it for more financial products and services."

Bloomberg spotlights CUs' 'big, big' tax win

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WASHINGTON (3/4/14)--Credit unions and the preservation of their tax status were highlighted Monday within the first 23 words of a 1,000-word Bloomberg article on Rep. Dave Camp's (R-Mich.) unveiling of his draft tax code reforms last week. And Credit Union National Association executive John Magill was quoted underscoring the importance of the "big, big win" for CUNA, the state credit union associations, credit unions and credit union members.
 
"We're very, very pleased with this very big, big win," said Magill, CUNA executive vice president for government relations. "The tax exemption is our very heart and soul."
 
And on the other side of the equation, the article noted that, "Lobbyists and companies that lost breaks or face new taxes are trying furiously to build political opposition," citing, for instance, the banks.
 
"In addition to fighting the credit union tax break, banks are attacking Camp's plan to add a 3.5-basis point quarterly tax on the assets exceeding $500 billion of the biggest U.S. financial institutions...," reporter Richard Rubin noted.
 
Regarding the credit union win, CUNA left nothing to chance.  The trade group took the lead in 2013 with an early strategy to educate and engage lawmakers and credit unions members.

The group's innovative and award-winning social media campaign, "DontTaxMyCreditUnion," generated 1.3 million contacts with lawmakers from credit union supporters since mid-May, when the campaign was launched. Through social media, the campaign helped to expose 5.3 million to the credit union message that a new tax on credit unions would be a tax on credit union members. Through lower fees on services, lower rates on loans and higher deposit rates, credit unions benefit their members to the tune of $6 billion each year. And, when there is a credit union in the market place, bank customers benefit too--by almost  $2 billion a year.

During CUNA's "Don't Tax" advocacy, it was not just credit unions and their members that took to social media to back their credit union.  Lawmakers also joined in with some tweeting their support for the credit union tax status.

CUNA, NAFCU join to seek 90-day extension of RBC comment deadline

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WASHINGTON (3/3/14)--The 90 days given for public comment on the National Credit Union Administration's (NCUA) controversial risk-based capital plan is not enough and should be at least doubled, the Credit Union National Association and the National Association of Federal Credit Unions told the regulator in letter sent Friday.

The current comment deadline is May 28. A 90-day extension would give credit unions until Aug. 26 to submit their comments on the proposal.

"The risk-based capital is the most significant proposed rulemaking that credit unions will face this year and likely for years to come," the joint letter declared. "Such an extension of the comment period will allow credit unions much needed additional time to review the provisions in the proposal in detail and analyze thoroughly the impact of such provisions on their current operations and plans for the future."

The extension would also allow the agency to include the comments, data and recommendations received at this summer's scheduled NCUA listening sessions to be considered and included in the administrative record.

CUNA has produced a video segment with tips on how to write effective comment letters on the proposal, and has also launched the Risk-Based Capital Action Center, which will allow CUNA members to directly write NCUA in a quick and efficient way and submit their comments electronically with the click of a mouse.

The proposal would restructure NCUA's current prompt corrective action regulation to include calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks. The risk weights would be substantially different, and the proposal would impose higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer term investments and some other assets.

The proposal would apply to credit unions with assets of more than $50 million.

CUNA estimates that the rule, if made final and implemented, would lead to credit unions needing to hold as much as $7.3 billion in additional capital.

For the CUNA comment tool and more on the proposed rule, use the resource link.

McWatters nominations, data security scrutiny, reg burden impact

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WASHINGTON (3/3/14)--The Senate Banking Committee Tuesday will be scrutinizing the nomination of Mark McWatters to become a member of the National Credit Union Administration (NCUA) board.

There are only two steps left, after the nomination hearing, on McWatters' path to replacing NCUA board member Michael Fryzel.  Fryzel's  term ended Aug. 2, but the one-time chairman has continued to serve until his replacement could be installed.

After tomorrow's hearing, the banking panel will decide whether or not to move McWatters' name forward for a confirmation vote; an affirmative vote is widely expected. If the committee then votes to confirm the nomination,  a vote is then taken by the full Senate.
If all goes smoothly, McWatters could take a seat on the NCUA board within weeks.

McWatters is not a stranger to the halls of the U.S. Congress. He served in 2009 as counsel for Rep. Jeb Hensarling (R-Texas), who has been the chairman of the House Financial Services Committee since January 2013. McWatters is currently dean for graduate programs at Southern Methodist University's School of Law in Dallas.

He was a member of the TARP Congressional Oversight Panel in Washington, D.C., from December 2009 to April 2011. TARP--or the Troubled Asset Relief Program--refers to the $700 billion fund established in 2008 to help stabilize the economy after the downturn caused by a burst housing market bubble.

Among other notable events for credit unions in Congress this week: House Financial Services subcommittees will be looking at data security and the impact that the growth of financial regulations has on competition:
  • On Tuesday at 10 a.m. (ET), the subcommittee on oversight and investigation will examine the growing impact of regulations on financial institutions in the U.S.. It will also study the extent to which differences between domestic and foreign regulatory regimes make it  difficult for U.S. financial institutions to compete with foreign-based firms and decrease the attractiveness of U.S. financial markets. Witnesses to be announced.
  • The subcommittee on financial institutions and consumer  credit  on Wednesday will conduct that panel's first investigation into the Target data breach and the overall existing threat to financial privacy and date security. The subcommittee will discuss existing security measures and what types of technologies are on the horizon that will help reduce the risk of future data breaches. The hearing starts at 10 a.m. (ET). Witnesses to be announced.

Watch News Now for legislative calendars updates for the week.

'Unite for Good' celebrates one-year anniversary with enhanced website

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WASHINGTON (3/3/14)--"Unite for Good," the vision for credit unions to be Americans' best financial partners, is one year old now. Credit Union National Association President/CEO Bill Cheney, who unveiled the vision at the association's 2013 Governmental Affairs Conference, says this year's GAC this past week--with a record number of attendees--made it evident that the credit union movement has embraced the "Unite for Good" initiative.
 
To mark the success, CUNA has enhanced the "Unite for Good" website (see resource link). Stories and photos are featured more prominently and will allow users to connect, share and comment directly from and to the site.
 
The site now has a "cooperate blog," which offers ideas and resources to help credit unions engage with "Unite for Good," and to back the movement's work to remove barriers, foster service excellence and create awareness.
 
The CUNA leader invites and encourages credit unions to visit the enhanced site and share their "Unite for Good" stories.

NCUA bans four from future CU work

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ALEXANDRIA, Va. (3/3/14)--The National Credit Union Administration has banned four former credit union employees from participating in the affairs of any federally insured financial institution.

The NCUA said the orders involve the following individuals:
  • Jeannette Abbott, a former Malheur FCU, Ontario, Ore., employee who pleaded guilty to the charge of theft, embezzlement or misapplication by a credit union officer. Abbott was sentenced to four months in prison, three years of supervised release and ordered to pay restitution in the amount of $93,749.40;
  • Carol Ann Ferraro, a former Chaffey FCU, Upland, Calif., employee who pleaded guilty to embezzlement by a credit union employee. Ferraro was sentenced to 30 months in prison, five years of supervised release and ordered to pay restitution in the amount of $1,052,790.56;
  • Justine Martin, a former Leominster CU, Leominster, Mass., employee who admitted to facts sufficient for a finding of guilt to the charge of larceny over $250. Martin was sentenced to five years of supervised probation and ordered to pay restitution in the amount of $17,990; and
  • Nancy Ann Secoda, a former Vons Employees FCU, El Monte, Calif., employee who pleaded no contest to charges of grand theft and willfully obtaining personal information. Secoda was sentenced to five years in prison and ordered to pay restitution in the amount of $712,253.58.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

NCUA website users can now access a new tool for searching agency administrative actions. Through the new tool, they can search prohibition and administrative orders by name, institution, city, state and year, the agency said.

Use the resource link to access all NCUA enforcement orders.