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April Legislative Update Webcast covers capital, housing, patent reform status

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WASHINGTON (4/18/14)--In the April edition of the Credit Union National Association's "Legislative Update Webcast," CUNA Senior Vice President of Legislative Affairs Ryan Donovan gives a quick update on five essential credit union issues: Capital reforms, housing finance reforms, merchant data breaches, patent reforms and regulatory burdens.

This list of issues, when combined with others such as interchange and overdraft protections, represents a number of topics that could come up "on any given day" for credit unions on Capitol Hill. There are plenty of things CUNA hopes Congress will take care of, and other things they hope Congress won't touch, Donovan emphasized.

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

The May edition of the legislative update webinar will be released in early May in advance of that month's Hike the Hill meetings.

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

Technical difficulty disrupts News Now distribution

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WASHINGTON and MADISON, Wis. (4/18/14)--(Editor's note: Due to technical problems with our website operations Thursday--now resolved--emails of the daily News Now headlines were not distributed as per usual at 5 a.m. (ET). The news on the CUNA homepage was not updated. News Now regrets the inconvenience to readers. Now that the technical problems have been resolved, News Now is back on schedule.)

New video provides NCUA answers to CUs' RBC questions

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ALEXANDRIA, Va. (4/18/14)--A two-part, 20-minute video has been released by the National Credit Union Administration, one that is intended to help federally insured credit unions with questions about the agency's proposed risk-based capital rule.

The new NCUA resource for credit unions is free and available on its YouTube channel (see resource link).

"NCUA's risk-based capital proposal is complex, but its overall purpose is simple," NCUA Chairman Debbie Matz said in a release. The video, she said, clears up "misinformation," explains why the agency believes the rule is necessary, and how it would affect credit unions. It also, she added, helps credit unions understand how and why the NCUA's proposal differs from the Federal Deposit Insurance Corp.'s rule and Basel III.

Comments on the RBC plan are due to the agency by May 28.  The Credit Union National Association and the National Association of Federal Credit Unions continue to urge a 90-day extension to the comment deadline.  (See related story: CUNA, NAFCU jointly repeat urging for RBC comment extension.)

CUNA has extensive resources for credit unions regarding the RBC plan.  Use the resource link.

Carolina CUs, armed with membership numbers, call on lawmakers

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WASHINGTON (4/18/14)--"Preparation is key to effective visits with legislators," Carolinas Credit Union League Director of Government Relations Billy Boylston said this week, highlighting how the Credit Union National Association's Project Zip Code (PZC) helped advocates from Palmetto Citizens FCU, Columbia, S.C., prepare for their visits to the nearby South Carolina State House.

The $602 million-asset credit union provided a summary document that includes membership data by legislative district taken from PZC documentation. "Palmetto Citizens has done a great job preparing and presenting information, and it shows in legislators' responses," Boylston added (In the Loop April 17).

Credit unions can also use PZC to better track their membership and to plan future ATM and branching expansion. Project Zip Code protects the privacy of credit union members, as only membership totals per legislative district and county, and not information on individual members, are transmitted from credit unions to the PZC database.

The number of credit union members matched to their respective legislative districts and counties by CUNA's PZC software has reached another milestone: 82.7 million members. Around 700,000 of these matches have been made in the month-plus since the 2014 CUNA Governmental Affairs Conference.

The PZC version 14.0 software was introduced during this year's GAC.

The software, and the data gleaned from it, can give credit union supporters a great advantage as they work to advocate for credit unions and their members. The data will be vital as this fall's election season comes into full swing.

PZC data allows CUNA, the leagues and credit unions to show elected officials how many credit union members are among their constituents with very clear numbers. "The more credit unions that participate in Project Zip Code, the more accurate these membership counts will be," said Kristen Prather, CUNA grassroots manager and day-to-day PZC manager.

For more Project Zip Code information, use the resource link.

NCUA a-Twitter with fin. lit. chat

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WASHINGTON (4/18/14)--Interested in sharing best practices for helping members increase their financial literacy? The National Credit Union Administration has set an April 23 Twitter chat on the issue.

The NCUA Financial Literacy Twitter chat is scheduled to take place between 11 a.m. and noon ET. The event will be hosted by Kenneth Worthey, financial literacy and outreach analyst with NCUA's Office of Consumer Protection.

Followers can take part in the conversation by watching the agency's @TheNCUA Twitter feed and the #NCUAChat hashtag. Participants can also submit questions before the chat to

The Twitter chat is part of the NCUA's National Financial Capability Month activities. This month, the NCUA has also used its consumer-oriented Twitter feed @MyCUgov to share personal finance tips with the public, and hosted a financial literacy webinar to share best practices.

The NCUA Twitter talk will take place during National Credit Union Youth Week, April 20-26. Sunny beaches and rolling waves are a part of this year's theme, which encourages young potential credit union members to "Catch the $ave Wave." During the week, credit unions will engage and encourage younger members to set up savings accounts, learn how to manage money and be more financially literate.

Credit unions nationwide may join in the celebration through April, or even just during National Credit Union Youth Week.

Stress testing for large CUs, common bond proposal on next NCUA agenda

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ALEXANDRIA, Va. (4/18/24)--A final stress testing rule for large credit unions will lead the agenda when the National Credit Union Administration holds its April open meeting next Thursday.

Under a proposed version of the stress test regulation released last year, federally insured credit unions with assets exceeding $10 billion would be required to develop and maintain capital plans, and undergo annual stress tests.

The stress test requirements, drafted by the agency's Office of National Examinations and Supervision, would require impacted credit unions to conduct specific capital analyses to evaluate how changes in variables, parameters and inputs used by credit unions in their capital plans could affect their capital. Credit unions would also need to test how interest rate shocks of at least plus or minus 300 basis points would affect their net economic value.

"While we acknowledged the utility of stress testing, we did not feel a new rule was necessary or that NCUA had substantiated the need for it," Credit Union National Association Deputy General Counsel Mary Dunn said.

CUNA offered recommendations that would help improve the proposal, including:

  • Stress test results should not be disclosed publicly;
  • Sanctions should not apply if planning or test benchmarks are not met; and
  • Rejection of a credit unions' capital plan should only occur under a formal process.

Other items on the agenda include:

  • A new proposal that would address requirements for multi-group credit unions to add associational groups;
  • A board briefing on a proposed interagency policy statement addressing joint diversity standards for regulated entities;
  • A board briefing on a proposed interagency rule on loans in areas having special flood hazards;
  • The quarterly National Credit Union Share Insurance Fund report;
  • A final rule on the electronic filing of financial reports; and
  • A final rule on liquidity and contingency funding plans.

The Thursday open meeting is scheduled to begin at 10 a.m. (ET).

Two federal credit union act requests are on the closed board meeting agenda.

For the full NCUA agenda, use the resource link.

CUNA, NAFCU jointly repeat urging for RBC comment extension

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WASHINGTON (4/18/14)--Joining forces, the Credit Union National Association and National Association of Federal Credit Unions Thursday urged a 90-day extension for the comment period for the National Credit Union Administration's risk-based capital plan (RBC), set to elapse on May 28.
Both organizations previously asked for just such an extension back in February, and it was denied by the agency. 
"We simply do not believe that the comment period provides sufficient time for a number of credit unions to analyze the proposal's impact on their individual operations and prepare their responses,"  CUNA President/CEO Bill Cheney and NAFCU President/CEO Dan Berger wrote to the NCUA board members.
"Given the health of the credit union system, we do not see the need to rush this rule and believe more time for comments will also benefit the agency through the production of well-reasoned letters," the credit unions leaders argued.
The joint letter called the RBC plan the "most significant proposed rulemaking that credit unions will face this year and likely for years to come." It noted that credit unions already are struggling, in some cases, to meet an onslaught of new regulatory requirements this year, and need additional time to provide the NCUA with substantive comments on the RBC plan that reflect their particular situations.
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.
As described in the Federal Register, the NCUA proposal would revise the risk-weights for many of the NCUA's current asset classifications, require higher minimum levels of capital for federally insured natural-person credit unions with concentrations of assets in real estate loans, member business loans (MBLs) or higher levels of delinquent loans; and set forth the process for the NCUA to require an individual federally insured natural-person credit union to hold higher levels of risk-based capital to address unique supervisory concerns raised by NCUA.
It would apply to credit unions with $50 million or more in assets.

World Council suggests revisions to international RBA guidance

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WASHINGTON (4/17/14)--A comment letter from the World Council of Credit Unions filed Monday with the Financial Action Task Force (FATF) suggests revisions to the international guidance on the risk-based approach (RBA) to anti-money laundering and countering the financing of terrorism (AML/CFT) compliance. The changes would help to promote financial inclusion and to limit regulatory burdens on credit unions and other less complex financial institutions
The World Council comment letter was filed in response to new FATF proposal for the risk-based approach of the banking sector on AML/CFT.

The FATF is currently updating its RBA guidance to better align the guidance with its also-updated International Standards on Combatting Money Laundering and the Financing of Terrorism & Proliferation document--commonly called the "40 Recommendations."  The comment letter follows a recent FATF's private sector consultative meeting on the RBA guidance project held in March at the headquarters of the European Banking Federation in Brussels.
The FATF's changes to the RBA standards, once finalized, are likely to be incorporated into the U.S. Bank Secrecy Act (BSA) rules within the next year, the World Council has predicted.
In the letter, World Council Vice President and Chief Counsel Michael Edwards said the association supports most aspects of the proposal in relation to credit unions, but suggested several revisions to the draft guidance, including:

In both the comment letter and at the recent meeting at the headquarters of the European Banking Federation in Brussels, Edwards said the FATF could limit regulatory burdens on credit unions.

To do so, as part of revisions to its RBA guidance for financial institutions, FATF should increase the detail in its RBA for banking institutions guidance paper thereby increasing clarity regarding when and how it is appropriate to apply risk-based policies for AML/CFT, Edwards said.

  • Limiting AML/CFT compliance requirements for business activities that have lower money laundering/terrorist financing risks;
  • Limited compliance burdens on less complex financial institutions;
  • Allowing flexibility in AML/CFT requirements, such as customer due diligence/know your member rules, in order to promote financial inclusion of unbanked persons; and
  • The concern that some banks may be "de-risking" their customer relationships by ceasing to provide correspondent banking services to credit unions and other types of businesses which handle funds on behalf of members/customers.

Function should be focus of any CUSO regs, says NASCUS chair

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LAKE BUENA VISTA, Fla. (4/17/14)--Regulators' interest in credit union service organizations (CUSOs) should focus specifically on the impact these organizations' services deliver to credit unions rather than their overall safety and soundness, John Kolhoff, chairman of the National Association of State Credit Union Supervisors (NASCUS), told attendees of the National Association of Credit Union Service Organizations' annual conference.

Kolhoff  said it can be difficult to determine a CUSO's direct impact on a credit union's bottom line due to secondary subsidiaries and other interconnected players; and there's no efficient pipeline to share this information with other involved parties.

And that, he said, is the CUSO trap for regulators. He addressed the conference Monday.

"We don't need to regulate CUSOs, we just need to understand how they work," said Kolhoff, who also heads the Michigan Department of Insurance and Financial Services' Office of Credit Unions. "The tools are there to go after [CUSOs] if there's an exorbitant amount of risk we need to mitigate."

NASCUS has expressed this viewpoint to National Credit Union Administration, which lacks direct regulatory authority over CUSOs but is implementing requirements for the organizations through directives to credit unions. NCUA Chairman Debbie Matz recently reaffirmed the agency's intent to obtain direct authority over CUSOs.

"We need examination oversight, not enforcement or regulatory oversight," Kolhoff said.

CUSOs allow credit unions to innovate, reduce costs, increase income, become more efficient and share risks, said Kolhoff, who classifies them along with third-party vendors who perform similar functions.

"What I need to know is how your services directly relate to the safety and soundness of the credit union," Kolhoff said. "That's all I should be looking at."

To address risk, Kolhoff believes regulators should focus on credit unions' due diligence to ensure they're aware of the risks of their relationships with particular CUSOs and that they've taken steps to mitigate those risks.

"Instead of making those decisions, we are reviewing those decisions," he said.

Kolhoff added that credit unions would benefit from a shared information pool about CUSOs. He proposed developing a CUSO registry that credit unions could access, similar to the Nationwide Mortgage Licensing System and Registry.

Click to view larger image John Kolhoff, chairman of the  National Association of State Credit Union Supervisors and a state regulator, says regulators need "examination oversight, not enforcement or regulatory oversight" of CUSOs. (CUNA photo)

NCUA: CUs can help consumers avoid predatory payday loans

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ALEXANDRIA, Va. (4/17/14)--The basics of credit union payday alternative loans (PALs) and advice for credit unions looking to start up their own programs were addressed during a Wednesday National Credit Union Administration webinar.
NCUA representatives included Tom Penna Jr., Office of Small Credit Union Initiatives economic development specialist; Lucinda Johnson, Office of Examination and Insurance program officer; and Kerri Donald, NCUA Region III examiner. Also participating in the webinar were Katia Marini-Nunez, CEO of $7.5 million-asset St. Francis FCU, Greenville, S.C.; Jennifer Lovett, CEO of  $7.3 million-asset Mississippi DHS FCU, Jackson, Miss.; and Vickie Hastings, CEO of  $34.9 million-asset Greenwood (S.C.) Municipal FCU. 
The presenters stressed that NCUA PALs can serve as a viable option to predatory payday loans for many credit union members, as well as non-members. The loans, they said, give credit unions a chance to transition borrowers to more traditional products offered by credit unions.

The NCUA's short-term, small-amount loan program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. Currently, this amounts to an interest rate ceiling of 28%. 
Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling and encourage members to open savings accounts. 
Nearly two-thirds of webinar participants said they did not offer PALs or other short-term small-amount loans. Twenty-seven percent of attendees said they offer the loans. 
Direct deposit payments can be a useful tool to help credit unions limit the risk presented by these loans, but is not a requirement for PALs. Payroll deduction can also be used for PAL payments but cannot be a condition of extending credit. However, credit unions may offer lower rates or other incentives for members who choose to pay off their PALs using payroll deductions. 
The webinar also covered other types of small-dollar loans provided by credit unions, which do not have the same requirements as PALs and are limited to an APR of 18% or less. Credit unions must ensure these other loan programs are in accordance with all applicable laws and regulations. Standard safety and soundness guidelines must also be applied, the presenters said. 
When they examine a credit union's small-dollar and payday-alternative loan programs, NCUA staff said they will look to ensure adequate policies and procedures and sufficient documentation of loan files. NCUA examiners will also check for verified application fees as well as established and well-monitored lending limits.

Click to view larger image An NCUA analysis presented during the webinar showed that the 28% APR charged by many credit unions is well below the 661.80% APR reportedly charged in some payday loan situations. Monthly payments, fees and total payments on a $250 loan were also lower. (Source: NCUA)