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CU director's concern for members re: RBC plan sparks his 1st comment letter

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WASHINGTON (4/14/14)--Until the risk-based capital plan was issued, Lou Gill, secretary and director of Chartway FCU, was happy to let his credit union's CEO take the lead on comment letters that addressed regulatory proposals. But this time it's different. Very different.

As a volunteer elected credit union official representing over 180,000 members, I have a responsibility to comment on this RBC proposed regulation because, if approved as written, it will change the future credit unions--and not for the good Gill agrees with CUNA and most credit unions that the industry needs a "smart and thoughtful" risk-based capital plan.

However, he also agrees this proposed regulation "is simply not it." The Virginia Beach, Va. credit union official says his review of the NCUA's 196-page plan showed the proposal would impede Chartway's ability to be competitive in the marketplace in providing sound and safe member financial services.

"Member/consumer lending, mortgage lending and the use of our collaborative CUSO (credit union Service organization) will all be impacted. Our credit union may be forced to reduce dividends on member shares and CDs. Traditional ALM/ALCO (Asset Liability Management/Asset Liability Committee) strategies will be replaced with the new proposed regulatory balance sheet requirements, adversely affecting all of our products."

Please, Gill urges all credit union representatives, work with your CEO, use CUNA's website (see resource link below) to provide NCUA your concerns and suggestions, share your comment letter with your federal lawmakers--before the May 28 deadline elapses.

NCUA reports positive CLF growth trends

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ALEXANDRIA, Va. (4/14/14)--The National Credit Union Administration's Central Liquidity Facility (CLF) performed well during the first quarter of this year, the agency announced Friday.
 
The CLF's stock dividend rate increased to 0.25%, its assets reached $180 million, up from $115 million at the end of the first quarter of 2013, and its retained earnings hit $27.8 million, up from $27.4 million at the same time last year.
 
CLF membership grew to 218 credit unions, up from 129 at the end of the first quarter of 2013.
 
The CLF, created by Congress in 1998, serves as a lender of last resort for credit unions to meet short- or long-term liquidity needs, much as the Federal Reserve System does for banks. Credit unions are also allowed access to the Fed discount window.
 
The NCUA also reported that the maximum legal borrowing authority of the CLF grew to $3.8 billion, up from $2.4 billion at the end of the first quarter of 2013.
 
The NCUA called the 0.25% stock dividend rate for the CLF is a "significant change" from the 0.10% rate paid quarterly since the fourth quarter of 2012.  The agency added that CLF management expects moderate growth in both membership and portfolio earnings during 2014, with a strong likelihood the 0.25% rate will continue.
 
"The CLF's steady growth in membership and assets has enabled it to expand its earnings base and borrowing capacity, increase retained earnings and pay the higher dividend rate," the NCUA noted in a release.

As of March 31, credit unions with assets of $250 million or more are required to have access to either the CLF or the Fed's discount window for an emergency source of liquidity.

Idaho gov. signs patent troll bill, CUs keeps pressure on

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BOISE, Idaho (4/14/14)--With lobbying support from the Idaho Credit Union League, Idaho Gov. Butch Otter last week signed legislation to protect credit unions from so-called patent trolls ( The Idaho Statesman April 11).

Patent law reforms to address "trolls" is a significant issue for credit unions and is seeing a lot of attention from lawmakers on both the federal and state levels.

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 such as credit unions find themselves between a rock and a hard place: paying what amounts to extorted fees may be cheaper than fighting the trolls in court.

The Idaho law defines bad-faith patent litigation threats as any of the following:
  • A letter threatening patent infringement litigation but lacks the patent number or name and address of the sender;
  • The letter demands payment for a license fee or a response in an unreasonably short period of time;
  • The person offers to license the patent for an amount that is not reasonably based on the value of the license to the patent; and
  • When a reasonable person would recognize that a person's claim of patent infringement had no merit.
Other states that have enacted legislation include Alabama, Idaho, Oregon, South Dakota and Utah.

States with pending legislation include: Connecticut, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Missouri, Nebraska, New Hampshire,  New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Virginia and Wisconsin.

On the federal level, Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) has 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.

The Credit Union National Association supports support the demand-letter language within S. 1720, which would aid credit unions and other businesses that have been targeted with financial threats through demand letters by bad actors who have been come to be referred to as "patent trolls."

Last week, Attorney General Bill Sorrell, at the request of U.S. Rep. Peter Welch (D-Vt.), testified before a subcommittee of the U.S. House of Representatives' Committee on Energy and Commerce to urge Congress to take steps to address the patent troll issue, the Association of Vermont Credit Unions reported. In addition to better understanding the problem, the goal of the hearing was to explore ways to prevent abusive patent demand letters, while preserving the right of legitimate businesses to use demand letters to negotiate licenses to their inventions ( Newslines Express April 11).

CUNA, NAFCU, ICBA letter unites on housing finance reform issues

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WASHINGTON (4/14/14)--As part of a coalition of small financial institutions--both credit unions and banks--the Credit Union National Association has urged improvements to proposed housing finance reform legislation that would address the unique needs of those institutions in the housing market.
 
The creation of the coalition enables CUNA, along with the National Association of Federal Credit Unions and the Independent Community Bankers of America, to present a united front on key changes needed in proposed housing finance reform legislation. The changes address:
  • The bill's regulatory burden on credit unions and community banks;
  • Issues to ensure that the housing finance market remains accessible to credit unions and other smaller institutions; and,
  •   Give credit unions, and community banks, representation in governance of the new federal entities envisioned under the proposal.
The letter is addressed to Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho) and thanks the senators for introducing their Housing Finance Reform and Taxpayer Protection Act discussion draft. 
 
The coalition letter notes that the current secondary market structure works well for credit unions and community banks and allows them to meet their borrowers' needs. It warns that restructuring the system is "unchartered and untested" territory and therefore raises numerous questions regarding fees and functionality when applied to the real-world marketplace.
 
"We understand some of the specific details of the proposal are still to be established and we hope those changes will satisfy our ongoing concerns and address the uncertainty faced by our member institutions," the letter notes.
 
"Any housing reform proposal must ensure equal and competitive access for community banks and credit unions, while avoiding further concentration of the primary and secondary mortgage markets to the largest of lenders and Wall Street firms," the three groups wrote.
 
They added, "We look forward to providing ongoing input on the concerns raised by community banks and credit unions as we continue to review and digest the evolving measures."
 
The letter was signed by CUNA President/CEO Bill Cheney, ICBA President/CEO Camden Fine and NAFCU President/CEO B. Dan Berger.