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Washington Archive

Washington

CU Online changes detailed in May 15 webinar

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ALEXANDRIA, Va. (5/1/12)--The National Credit Union Administration (NCUA) is offering a free webinar scheduled for May 15 that will outline changes the agency intends to make to its Credit Union Online system will answer questions from credit unions about the innovations.

The CU Online system is a web-based data collection system that allows credit unions to file 5300 call reports and to post profile information.  The NCUA launched CU Online Sept. 1, 2009, and the changes coming in late May are the first major upgrade to the system.

The changes, according to the NCUA, will include an enhanced user interface, the ability to convert call report and profile information into .pdf files, and other basic interface changes that will help users make their call report calculations and avoid leaving information out of their profiles.

"We worked to incorporate the many valuable suggestions we received from credit unions to improve data integrity, enhance security, and make CU Online more user-friendly," said NCUA Examination and Insurance Director Larry Fazio.

The agency also is planning to cease sending paper Call Report notices to credit unions that use the CU Online service, a change that will reduce waste and save the NCUA an estimated $20,000 in paper and postage costs per year.

The webinar is scheduled to begin at 2 p.m. (ET) and will last 90 minutes. Advanced registration is required and the agency plans to archive the webinar on its homepage.

To register for the webinar and read the full NCUA release, use the resource link.

IRS changes to FATCA burden CUs CUNA

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WASHINGTON (5/1/12)--U.S. credit unions should not be subject to any of the Internal Revenue Service's (IRS) recently proposed changes to Foreign Account Tax Compliance Act (FATCA) regulations, as the compliance burdens and overhead costs credit unions would face as a result of these proposed changes would far exceed any benefit to the IRS, the Credit Union National Association (CUNA) said in a Monday comment letter.

The planned FATCA changes are designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.

Under the proposed regulations, credit unions and other domestic financial institutions as "withholding agents" would be required to identify members or customers that are FFIs and determine their compliance with FATCA and whether or not they have entered into a reporting agreement with the IRS. Credit unions would also be required to identify members that are foreign entities that are not financial institutions, and be able to verify whether such entities have any substantial U.S. owners.

U.S. credit unions would also be required to identify and withhold on so-called "pass-thru payments" to FFIs involving a transfer of funds to a customer of the FFI that should be subject to withholding, but is not having withholding tax taken out of their account.

Credit unions are concerned that the proposal would impose new compliance requirements on them at a time when credit unions are already subject to a range of additional regulatory responsibilities from a variety of other agencies, the letter said.

To cope with the FATCA changes, credit unions would need to establish procedures and practices, including staff training, for ongoing identification of covered entities and transactions, and take additional steps to ensure they met their reporting and withholding compliance responsibilities when facing transactions that come under IRS regulations.

CUNA said Congress did not appear to have credit unions in mind when it developed the FATCA provisions, and urged the IRS to "weigh the minimal benefits related to reporting and withholding that might be obtained from applying these requirements to U.S. credit unions."

The IRS should exempt domestic financial institutions from the requirements, CUNA said. At a minimum, CUNA added, the IRS could exempt remittance transfers from the reporting requirements of the final rule.

For the full comment letter, use the resource link.

Inside Washington (04/30/2012)

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  • WASHINGTON (5/1/12)--The Federal Housing Finance Agency (FHFA) is no longer expected to announce a decision on whether to allow principal reductions on Fannie Mae and Freddie Mac loans by the end of the month as expected, an agency spokeswoman said Friday. A decision will not be made until the FHFA concludes its principal forgiveness analysis and discussions with the Department of the Treasury, the spokeswoman said. The agency did not specify a new target date for its decision. Some observers have cited write-downs as the most effective way to resolve bad credits and to avoid mass foreclosures, but FHFA Acting Director Edward DeMarco earlier this year indicated that forbearance plans and short sales already serve as forms of principal reduction without saddling taxpayers with further losses, and has also spoken in favor of principal forbearance. (American Banker April 30). Credit Union National Association Deputy General Counsel Mary Mitchell Dunn has said the FHFA's decision to delay the principal reduction decision is "not surprising," considering DeMarco was somewhat critical of principal reduction in recent comments. DeMarco earlier this year said a principal reduction program, if offered, would likely impact a fraction of the estimated 11 million underwater borrowers in the country today. The larger group of underwater borrowers who have remained faithful to paying their mortgage obligations are a greater risk to housing markets and taxpayers, he added. Encouraging their continued success could have a greater positive impact on the recovery of housing markets, he said…
  • WASHINGTON (5/1/12)--The Consumer Financial Protection Bureau's decision to scale back proposed limits on credit card fees is being complimented by industry observers, despite some initial criticism from the media and consumer advocacy groups (American Banker April 30). The CFPB inherited a rule from the Federal Reserve Board that proposed limits on credit card fees prior to the opening of an account. A federal judge said the provision wasn't authorized by the law. The agency decided to strip the provision in its own proposal on the issue, rather than prolonging the issue in court.  Jo Ann Barefoot, a co-chairman of Treliant Risk Advisors, said the decision shows the CFPB is willing to focus on areas where it will have the biggest impact. The agency has a busy regulatory agenda in upcoming months, including the release of the qualified mortgage rule, which requires lenders to verify a borrower's ability to repay a loan unless it meets certain requirements. Isaac Boltansky, a policy analyst with Compass Point Research & Trading, said the CFPB showed restraint in scaling back the proposed limit on credit card fess to avoid fighting battles on multiple fronts …
  • WASHINGTON (5/1/12)--Stuart Ishimaru has been selected to head the  Consumer Financial Protection Bureau's (CFPB) newly established Office of Minority and Women Inclusion (OMWI), which will work to promote diversity at the CFPB and at the financial institutions it regulates.  Ishimaru's experience includes leading the U.S. Equal Employment Opportunity Commission, and serving in senior positions in the Civil Rights Division at the Department of Justice, and the Commission on Civil Rights. His work was often geared toward creating policies to foster diversity in the workplace and creating opportunities for women and minorities in contracting jobs.  The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB to establish the OMWI …

CFPB receives 1800 advisory board nominations

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WASHINGTON (5/1/12)--More than 1,800 people contacted the Consumer Financial Protection Bureau (CFPB) regarding nominations for membership to the bureau's Consumer Advisory Board (CAB), according to a communication sent to nominees and those who nominated them.

The CFPB said it will review each nomination and then select a group of "knowledgeable, experienced and committed individuals; representing a diversity of perspectives and backgrounds, to serve the consumer interest."

The CFPB is developing the consumer advisory panel to help keep abreast of emerging trends and practices in the financial services and products industry.

Credit union officials and their representatives are among those nominated. The Credit Union National Association (CUNA) has met with several CFPB officials to work to ensure credit union candidates are given full consideration for the board.

CUNA submitted a list of 28 nominees from credit unions across the country. CUNA President/CEO Bill Cheney indicated at the time that the work of the advisory board will be enhanced if members are from credit unions or credit union leagues.

CUNA also has encouraged the bureau to proceed with assembling its planned Credit Union Advisory Council. CUNA urged that nominees that are not accepted for the consumer board be considered for the CFPB's credit union advisory board.

The CFPB communication to CAB nominees said a further public status update will not be made until the final board is selected. However, nominees selected as semi-finalists will participate in a phone interview and be required to complete a financial disclosure.

Postal reform OKd before District Work Break

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WASHINGTON (5/1/12)--Before members of the U.S. House and Senate returned to their home districts for this week's district work break, the Senate passed the 21st Century Postal Service Act of 2012 (S. 1789) by a 62 to 37 vote.

The bill would reduce postal service days from six to five and, of greater interest to credit unions since it could affect operational costs to some degree, give the U.S. Postal Service (USPS) more flexibility in how it increases its rates.

The bill would also require the postal service to consider how certain office location changes would impact small and rural communities, and to alter postal employee compensation and benefit structure in some cases.

These and other moves are bids to cut costs and increase revenues. USPS earlier this year moved forward with a one-cent increase in first-class mail rates, bringing that rate to 45 cents.

New NCUA video preps CUs for improving economy

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ALEXANDRIA, VA. (4/30/12)--The improving economy's impact on credit unions, and how credit unions can access the latest economic data online, are both addressed in the latest YouTube briefing by National Credit Union Administration (NCUA) Chief Economist John Worth.

"Continued improvement in key economic indicators is good news for credit unions. Falling unemployment and stronger consumer spending will likely help credit unions' bottom lines in 2012," Worth said in an NCUA release. "Credit unions also could expect to see increased deposits, fewer delinquencies and charge-offs, and increased loan demand," he added.



The video also shows how credit unions can access information on key economic indicators like unemployment rates and housing price trends.

The agency earlier this year announced it would release an ongoing series of 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.

Healthcare payment costs should be limited CUNA to NACHA

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WASHINGTON (4/30/12)--The Electronic Payments Association (NACHA) should minimize costs on financial institutions that process healthcare reimbursement payments through the automated clearing house (ACH) network, the Credit Union National Association (CUNA) suggested in a comment letter.

NACHA has considered changing some of its information processing protocols for healthcare payments, and has provided three different approaches for how this change could be accomplished. According to CUNA, all three possibilities would result in higher costs for credit unions and other Receiving Depository Financial Institutions (RDFIs). CUNA said that rather than adopting one of the three suggested changes, NACHA should continue to permit RDFIs to provide healthcare payments information on CCD+ entries to assist their healthcare receivers based on the capabilities and preferences of both the RDFI and its receiver.

The CUNA comment letter also said RDFIs should not be required to automatically deliver reassociation data to healthcare receivers for each payment that is processed, as most payments are processed correctly. Not all healthcare receivers would want to receive the reassociation data automatically for every payment that is processed, CUNA added.

For the full comment letter, use the resource link.

CDFI CUs remain true to mission study says

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WASHINGTON (4/27/12)--Community Development Financial Institutions (CDFIs) have remained true to their mission, and "have succeeded in lending to and investing in individuals and communities not served by conventional financial institutions, while maintaining loan performance standards generally equivalent to those of the conventional financial sector," the CDFI Fund said in a report.

The "CDFI Industry Analysis: Summary Report" was developed by the University of New Hampshire Carsey Institute's Center on Social Innovation and Finance, and examines the performance of 612 CDFIs between 2005 and 2010. The report examined 197 credit unions as part of the study. The study focused on capitalization, liquidity, portfolio health and risk-management issues faced by CDFIs.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit.

The CDFI fund report found that CDFI credit unions, and other institutions, have been "willing to take risks and serve customers with financial products that traditional capital markets are unlikely to provide."

However, the report noted, these risks, when coupled with the recent recession, created issues in some cases. While the majority of CDFI credit unions examined in the report had excellent loan quality, some CDFI credit unions experienced greater amounts of delinquent loans, higher operating expense ratios, declining earnings, and higher delinquency rates between 2005 and 2010.

Some of the risks and costs could be mitigated through certain operating procedure changes, according to the report.

For the full report, use the resource link.

In-district MBL advocacy key this week CUNA

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WASHINGTON (4/30/12)—Increased media coverage and still-growing support from Washington advocacy groups have kept member business lending (MBL) legislation in the spotlight in recent weeks, and continued credit union support of legislation that would increase the MBL cap will remain pivotal as members of Congress return home to their districts this week.

Pending Senate and House bills would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%, under certain conditions, and the Credit Union National Association (CUNA) has estimated that this increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers.

Senate leadership remains committed to a floor vote on the MBL legislation, but a voting date has still not been determined.

"We have more confidence in the level of support in Congress today than we did two months ago, and we continue to build support every day," Ryan Donovan, CUNA's senior vice president of legislative affairs, said. To help build upon this strong base of support, Donovan said, credit union representatives can arrange to meet with federal lawmakers in their home offices, town hall meetings, and other venues this week. Credit unions should contact lawmakers on their Facebook pages and through Twitter to urge them to vote in favor of MBL legislation.

The House and Senate members are scheduled to remain in their home districts until May 6.

While bankers have stepped up their vocal opposition to increasing the MBL cap in anticipation of the Senate vote, several political- and consumer-oriented Washington groups have also joined the fray, touting the boost that an MBL cap increase could give to small businesses.

A group that identifies itself as a coalition of conservative, libertarian and free-market organizations have voiced their support for the MBL cap increase, calling MBL legislation "a sound, free-market, deregulatory action that will create jobs, help small business, and assist veterans."

The Consumer Federation of America (CFA) also urged legislators to support the MBL bills, which, in the CFA's words, would "expand access to affordable credit for small businesses and help strengthen local marketplaces that serve consumers well." And American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask has supported an MBL increase in a blog post and an editorial in political news publication The Hill. (See related News Now story: ACI op-ed: MBL cap inhibits competition, hurts small business)

The MBL fight, and the benefits that a cap increase could provide to the broader economy, have received press coverage in other localities, with The Wichita Eagle, the Colorado Springs Business Journal, Oklahoma's NewsOK, Minnesota's Finance & Commerce, the Baltimore Business Journal, the Sacramento Business Journal and Missouri's Springfield Business Journal running original reporting and editorials. (See related April 27 News Now story: Credit unions press MBL case with media)

For more News Now MBL coverage, use the resource links.

ACI op-ed MBL cap inhibits competition hurts small business

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WASHINGTON (4/30/12)--American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask, in an editorial published in The Hill last week, said the only "unlevel playing field" in the fight between credit unions and banks regarding increased member business lending (MBL) is that credit unions are subject to an MBL cap that prevents them from lending to small businesses.

He said the banks' cry of an "unlevel" playing field is just "weak and disingenuous lobby-speak." Pociask also noted that compared with banks, credit union lending produces a third of the delinquency rate and bad debt. Current law limits the amount credit unions can loan to business-owning members to 12.25% of the credit union's total assets. "This is unfortunate since, compared with banks, credit union lending produces a third of the delinquency rate and bad debt," Pociask said.

Keeping the MBL cap in place also "maintains an economic barrier to entry that protects near-monopoly status for banks that collectively control 95% of small business lending," Pociask said. "In other words, the arbitrary cap on credit union lending is a regulation that inhibits competition and protects competitors (the banks)," he added.

Legislation that would increase the MBL cap to 27.5% of assets has been introduced in the House and Senate, and Senate leadership remains committed to a vote on their version of MBL legislation. Rep. Ed Royce (R-Calif.), who is an original cosponsor of House MBL legislation, has said he would push for a vote on his bill once Senate action is complete. "Public policy needs to encourage competition, remove market entry barriers, encourage investment— and do all of this without government funding," Pociask said, adding that the MBL cap increase would mean "more loans at lower market risk."

Pociask also wrote in favor of the MBL cap bills in a blog post last week. (See related April 26 News Now story: MBL increase brings choice, credit access: ACI blog) CUNA is encouraging credit union supporters to ask their elected representatives to support MBL cap increase legislation during this current weeklong congressional district work period. (See related News Now story: In-district MBL advocacy key this week: CUNA) For the full editorial, use the resource link.

Inside Washington (04/27/2012)

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  • WASHINGTON (4/30/12)--The Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program (TLGP), a financial system stabilization program created around the same times as the Troubled Asset Relief Program (TARP),  will expire at the end of this year after receiving much less attention than TARP. Participants paid fees to take part in the program, saving it from the criticism that plagued TARP (American Banker April 27). The TLGP also included full temporary coverage of noninterest bearing checking deposits in transaction accounts. The FDIC reported this week it had started transferring unused reserves into the agency's Deposit Insurance Fund. The program--including both the debt and deposit guarantees--stands to finish up essentially with more than $8 billion in net profit—barring the failure of any banks participating in the program. Earlier this month, FDIC officials said that, $2.7 billion in funds originally set aside for potential TLGP defaults had been moved into the DIF at the end of 2011, increasing the balance for the agency's traditional deposit-coverage fund …
  • WASHINGTON (4/30/12)--The Obama administration, which had originally proposed funding a mortgage refinancing program with a tax on big banks, appears to be distancing itself from that approach. The bank tax was met with criticism as soon as it was announced during President Barack Obama's Sate of the Union address in January (American Banker April 27). That administration has yet to introduce a refinancing plan. Housing and Urban Development Secretary Shaun Donovan said Thursday that the administration is working on a bill with members of Congress, and he is hopeful that legislation will be introduced in the next few weeks. Donavan said talks with members of Congress include looking for alternate ways of funding the program. The refinancing program would allow homeowners whose mortgages are not backed by the federal government--and who have not qualified for other government refinance initiatives--to take advantage of low interest rates by locking into a government-backed loan. But the plan has been criticized by House Republicans, who have dismissed it as election-year politics …
  • WASHINGTON (4/30/12)--Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) led a group of 22 senators in calling on regulators meet the July 21 deadline for writing a rule that would ban banks from participating in proprietary trading.  In a letter to Federal Reserve Chairman Ben Bernanke and other regulators, the senators reminded the agency heads of the major role high-risk trading had in the makings of the financial crisis, and the need for the Volcker Rule protection. "The American people suffered greatly because of the financial crisis," the senators wrote. "The Volcker Rule is a critical protection to help ensure that such a crisis does not happen again.  The economy needs these protections, our constituents deserve these protections, and the law demands these protections.  Please implement a clear, strong, and effective Volcker Rule without delay." The letter lists out specific issues with the proposed Volcker Rule, but asks that it not be delayed or scrapped. It urges the regulators to adopt the best elements from the proposed rule; eliminate loopholes; draw clear lines based on objective data and observable markets; strengthen CEO and board-level accountability and public disclosure; and provide coordinated and consistent enforcement, including data sharing by regulators …

Overdraft comments now due to CUNA May 25

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WASHINGTON (4/27/12)--The Credit Union National Association (CUNA) has pushed its own overdraft comment deadline back to May 25 after the Consumer Financial Protection Bureau (CFPB) announced it would collect overdraft comments from credit unions and other interested parties until June 29. 

The CFPB launched its comment initiative on Feb. 28 and first intended it to end April 30. CUNA and others earlier this year requested the agency delay the comment deadline by at least 30 days.

CUNA Deputy General Counsel Mary Mitchell Dunn said the delay is a good development and will allow credit unions, leagues and CUNA, along with other interested parties, ample time to develop comments.

The CFPB is seeking information on how financial institutions' overdraft policies and practices affect consumers. The overdraft comments from consumers, the financial services industry, and other interested parties will be used to determine whether new overdraft fee disclosures and rules are needed and to assist with policymaking on overdraft practices. It will also be used to prioritize the CFPB's regulatory and financial education work, the agency said.

Concerned that the CFPB's questions were open ended, CUNA developed its own survey for credit unions to complete, the results of which will be used by CUNA to develop its overdraft comment letter.

In the survey, CUNA asks for basic information on the credit union's asset size, and what types of overdraft programs are offered to members. More specific questions addressing how members are made aware of available overdraft protection programs and how members are alerted to the possibility that a transaction may trigger an overdraft fee are also among the survey questions.

The CUNA survey does not collect any identifying information, and credit union participation will be strictly confidential.

For the CUNA survey, use the resource link.

CU-backed swap bill moves on to Senate

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WASHINGTON (4/27/12)--The Small Business Credit Availability Act (H.R. 3336), which would preserve the rights of credit unions and other small financial institutions to use swaps to hedge interest rate risk, will move on to the Senate after it passed a U.S. House vote this week.

The bill passed by a 312 to 111 vote, with 8 members of the House abstaining.

The Credit Union National Association (CUNA) supports the legislation, which would grant credit unions and other small financial institutions with under $1 billion in cumulative current uncollateralized credit risk exposure and potential future credit risk exposure an exception from portions of the Dodd-Frank Act that barred certain institutions from engaging in swap transactions.

"The House considered this legislation to reinforce that small financial institutions, including the credit unions eligible to engage in this activity, receive the exemption that Congress intended to provide under the Dodd-Frank Act," said Ryan Donovan, CUNA's senior vice president of legislative affairs.

The National Credit Union Administration (NCUA) currently allows a limited number of federal credit unions to engage in derivatives through an investment pilot program, and is considering expanding credit union derivative investment authority. CUNA has commended the agency for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third-parties. (See related April 5 News Now story: Allow CU derivative investments as risk management tool: CUNA to NCUA)

Registration for July 31 NCUA session opens

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ALEXANDRIA, Va. (4/27/12)—Registration for the July 31, Denver, Colo.-based National Credit Union Administration's credit union "listening session" has opened, the agency said Thursday.

The session is scheduled to be held between 1 and 4 p.m. ET. Registration will be limited to the first 150 reservations.

NCUA Chairman Debbie Matz said agency representatives are looking forward to hearing from credit union officials and volunteers in all six listening sessions, and added the agency welcomes open dialogue to improve its exam processes, regulations, and credit unions' safety and soundness.

The NCUA listening sessions will begin on May 2 in Boston, Mass., and are also scheduled for:

  • May 9 in Alexandria, Va.
  • June 5 in St. Louis, Mo.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
The agency also recently rescheduled a June 12 session in Orlando, Fla., moving it back a day to June 13.

For more on the sessions, use the resource link.

CDFIs have succeeded but also face difficulties report says

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WASHINGTON (4/27/12)--Community Development Financial Institutions (CDFIs) "have succeeded in lending to and investing in individuals and communities not served by conventional financial institutions, while maintaining loan performance standards generally equivalent to those of the conventional financial sector," but have also experienced some difficulties while doing so, the CDFI Fund said in a recent report.

The "CDFI Industry Analysis: Summary Report" was developed by the University of New Hampshire Carsey Institute's Center on Social Innovation and Finance, and examines the performance of 612 CDFIs between 2005 and 2010. The report examined 197 credit unions as part of the study. The study focused on capitalization, liquidity, portfolio health and risk-management issues faced by CDFIs, and how those institutions were impacted by the recent recession.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit.

The report found that CDFI credit unions "have been experiencing greater risk in their loan portfolios than traditional credit unions," with more than double the rate of delinquent loans as a percentage of total assets as the overall credit union industry. However, most of the CDFI credit unions examined had excellent portfolio quality, the report said.

CDFI Fund credit unions also recorded higher operating expense ratios, declining earnings, and rising delinquency rates, and had higher delinquency rates than the credit union industry as a whole, according to the report. Net income, returns on assets, and net interest margins also declined.

While the costs of working with underserved communities can be "somewhat higher," CDFI credit unions and other CDFIs "have learned to effectively manage the 'risk' that discourages conventional financial institutions from serving low- and moderate-income individuals and communities," the report said. Some of the risks and costs could be mitigated through certain operating procedure changes, according to the report.

Those changes include:

  • Creating networks, building infrastructure and improving the scale of operations;
  • Promoting the availability of longer-term capital;
  • Promoting streamlined access to industry data;
  • Promoting greater innovation and strengthening knowledge of best industry practices; and
  • Enhancing staff education and training efforts.
For the full CDFI Fund report, use the resource link.

Inside Washington (04/26/2012)

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  • WASHINGTON (4/27/12)--Changes made last October to the Home Affordable Refinance Program (HAMP), a mortgage refinance program designed to help troubled homeowners, have benefited big banks at the expense of homeowners and U.S. taxpayers, according to mortgage experts testifying at a Senate hearing on Wednesday.  Laurie Goodman, a senior managing director at Amherst Securities Group, said in written testimony at a Senate housing subcommittee hearing that borrowers are making big profits because they lack competition. HAMP is intended to make it easier for homeowners with Fannie Mae and Freddie Mac mortgages to refinance at lower interest rates. The program is designed for homeowners with good payment records who have seen the value of their homes drop. The revisions expanded access to the program. For example, borrowers who owe 25% more than their homes are worth could qualify for HAMP 2.0, as the new program is known. But critics say that the program now provides an advantage to the homeowners' existing servicers because they will not be required to purchase delinquent loans from Fannie and Freddie, while any potential competing servicers would be required to do so. Borrowers face obstacles and greater costs in obtaining a mortgage from any lender other than their current servicer, said Christopher Mayer, a professor at Columbia Business School …
  • WASHINGTON (4/27/12)--The Federal Housing Finance Agency (FHFA) announced the appointment of Denise Dunckel as senior associate director for the Office of Congressional Affairs and Communications where she will manage all internal and external communications for the agency. Dunckel previously served as senior business leader of Global Corporate Relations for Visa, Inc., where she managed the company's corporate, public policy and litigation communications strategies. Before joining Visa, Dunckel held senior public affairs positions at the U.S. Department of Education and the U.S. Department of Housing and Urban Development. She also served as senior press advance representative in the Office of Presidential Advance at the White House. She will join FHFA May 14 …
  • WASHINGTON (4/27/12)--Rep. Barney Frank (D-Mass.), former chairman of the House Financial Services Committee and co-author of namesake legislation the Dodd-Frank Wall Street Reform and Consumer Protection Act, issued a press release Thursday to announce the U.S. District Court for the District of Columbia has agreed to permit filing of an amicus brief submitted by House Democrats concerning the ability of the Commodities Futures Trading Commission to issue rules to limit speculation in commodities markets.  Frank noted that the amicus brief states "that the clear intent of Congress in enacting the (2010 law) was to require the (CFTC) to establish rules setting position limits on trading commodities futures and swaps."  Frank noted the Democratic brief, signed by 17 lawmakers, is a response to a lawsuit brought by the industry that  argues that the CFTC lacks authority to promulgate rules setting position limits before first conducting cost-benefit analyses on a case-by-case basis. Frank described the amicus brief signatories as "every member of the House who voted in conference for the financial reform bill and still serves in Congress …
  • WASHINGTON (4/27/12)--The Federal Reserve Board, along with the Federal Reserve Banks of Minneapolis and San Francisco, have scheduled a conference in Washington D.C. May 1 intended to explore ways to encourage economic growth in Native American communities.  "Growing Economies in Indian Country: A National Summit" is related to a series of forums organized by the Fed in partnership with the Interagency Working Group for Indian Affairs' Committee on Economic Development, a group of federal agency representatives who work with tribal governments. The Fed said its summit will provide a venue for tribal leaders, policymakers, financial industry professionals, and community development service providers to discuss:  challenges to economic development in Indian country; opportunities to strengthen Tribal enterprise development; opportunities to expand Native American entrepreneurship and access to small business capital; and opportunities to strengthen governance and legal structures. For more information, visit the conference website. Live online video will be available at 9:15 a.m. (ET) on May 1 …

CUNA highlights iBankeri survey showing readers back MBLs

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WASHINGTON (4/27/12)--The Credit Union National Association (CUNA) queried the American Banker Thursday asking: Based on your publication's own online survey results, why not write about all the banks that apparently have no quarrel with credit unions' member business lending (MBL) bill?

John Magill, CUNA executive vice president, government affairs, posed the question in a letter to the editor that ran in the online edition Thursday in response to the publication's April 23rd story, "Third Credit Union Dissents on Business Lending Bill."

If three dissenters is a story, asked Magill, then what about all the banks that have no objection to raising the credit union small business lending cap?  He noted that the American Banker's own online survey this week suggests such bankers are out there, apparently in droves.

"Your survey posed the question, 'Should credit unions be permitted to expand credit union small-business lending?' Sixty percent of your readers said yes, the competition is healthy, another 10% said yes, as long as credit unions have sufficient capital, and only 31% said no," Magill wrote.

Magill noted that it can be presumed the majority of American Banker readers are directly involved in or favorably disposed toward the banking industry.

"Who knew 70% support our efforts to increase small business lending and job growth? I think American Banker should write about some of these bank executives.

"Based on your survey, it shouldn't be at all hard to find them."

Magill said that in a credit union universe of some 7,500 institutions, one will never find an issue that sparks total agreement. But, he said, CUNA has tracked at least 60,000 contacts to the U.S. Congress since late March from credit unions, small businesses and others in support of S. 2231, the Credit Union Small Business Jobs Act. That bill would increase the MBL cap to 27.5% of assets, up from 12.25%, under certain conditions.

"Clearly,  our legislation has broad industry and small-business support, and the dissenters are in the distinct minority," Magill pointed out to the Banker.

Use the resource link to access the opinion letter and to read News Now coverage of the American Banker survey.

Inside Washington (04/25/2012)

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  • WASHINGTON (4/26/12)--The Small Business Lending Fund (SBLF) helped several healthy banks exit the Troubled Asset Relief Program (TARP), but the most troubled banks have remained in TARP, according to a report released Wednesday. Of the 351 banks remaining in TARP as of March 31, 46% were behind on their dividend payments, and about one-third had missed five or more dividends payments to Treasury, according to report released by the TARP special inspector general. The report provides the first analysis of the 137 banks that used SBLF to refinance out of Tarp's Capital Purchase Program. In an interview with American Banker (April 25) on Tuesday,  Christy Romero, the special inspector general for TARP called for the Treasury Department and the banking regulators to implement an exit plan for the mostly small community banks left in the government program. The SBLF program was implemented in 2010 as part of the Small Business Jobs Act. It provided $30 billion to banks with less than $10 billion of assets, including banks that wished repay TARP funds. In exchange, the institutions are required to increase their small business lending or pay higher dividends …
  • WASHINGTON (4/26/12)--The Consumer Financial Protection Bureau (CFPB) Tuesday launched a public inquiry into how consumers and financial services companies are affected by arbitration and arbitration clauses. "Arbitration clauses are found in many contracts for consumer financial products," said CFPB Director Richard Cordray. "We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers' issues. This inquiry will help the Bureau assess whether rules are needed to protect consumers." Through the Dodd-Frank Act, Congress requires the CFPB to study the use of pre-dispute arbitration clauses in consumer financial markets and gives the bureau the power to issue regulations for the protection of consumers consistent with the study. For purposes of conducting the study, the CFPB is asking the public about the prevalence of arbitration clauses in consumer financial products and services; what claims consumers bring in arbitration against financial services companies; if claims are brought by financial services companies against consumers in arbitration; how consumers and companies are affected by actual arbitrations; and how consumers and companies are affected by arbitration clauses outside of actual arbitrations …
  • WASHINGTON (4/26/12)--Democratic members of the House Financial Services Committee today issued dissenting views to the budget reconciliation legislative recommendations which passed the committee last week on a straight party line vote. Republican members of the committee claim that the legislation will cut the deficit by roughly $35 billion during a 10-year period.  One section of the budget reconciliation language would repeal a key title of the Dodd-Frank Act.  Committee Democrats wrote that "the Republicans have used the reconciliation vehicle as a means of achieving what they have been unable to do through the regular legislative process, namely repeal the section of the Financial Reform bill … that provides for a way to deal with large financial institutions that have become too indebted to exist."  The Republican language would eliminate Orderly Liquidation Authority (OLA), the provision in the Financial Reform law which makes it possible to wind down failing firms while minimizing damage to the greater economy.  Democrats argue that that Dodd-Frank's liquidation authority will not increase the deficit over the long term …
  • WASHINGTON (4/26/12)--Citizens Financial Corp. has agreed to pay $137.5 million settle a class action lawsuit over its of manipulating the posting order of debits to customer accounts. By reordering the charges from high to low, Citizens and other banks peers maximized additional overdraft fees on debit-card customers (American Banker April 25). More than a dozen banks involved in the case have previously settled. Cases involved PNC Financial Services , Toronto-Dominion Bank , Capital One Financial and Comerica are still in litigation. Plaintiffs' attorneys, Robert Gilbert, said the $137 million settlement is a "a very significant percentage" of the alleged harm done to Citizens' customers. Previous settlements in the case have ranged from roughly 10% to 63% of alleged damages …

CUNA other trades jointly back cyber-security reforms

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WASHINGTON (4/26/12)--The financial services industry is committed to ensuring national cyber-security standards remain strong, and the Credit Union National Association (CUNA) has joined with the Electronic Funds Transfer Association (EFTA) and other groups to urge members of the U.S. Congress to support legislation that is designed to further protect national security in cyberspace.

The letter, which was sent to Speaker of the House John Boehner (R-Ohio), Minority Leader Nancy Pelosi (D-Calif.,) and all other members of the House of Representatives, noted that the financial services industry has been a leader in defending against cyber attacks, and continuously adopts new technologies and techniques to protect against existing and emerging cyber threats. However, the ever-growing scope, organization and sophistication of those engaging in cyber attacks requires the  government and the private sector to work even harder and more effectively cooperate and share cyber threat information, the letter adds.

A group of cyber-security bills that aim to address cyber attacks and other online security issues are scheduled to be brought to the U.S. House floor this week.

The Cyber Intelligence Sharing and Protection Act (H.R. 3523) is among those bills. H.R. 3523 would task the Office of the Director of National Intelligence with developing cyberthreat information sharing guidelines between public- and private-sector organizations. The bill would also provide privacy protections for consumers by limiting the inclusion of consumer data in shared threat information.

The other bills are:

  • The Advancing America's Networking and Information Technology Research and Development Act (H.R. 3834), which would provide funding for government research and development of next generation security controls;
  • The Cybersecurity Enhancement Act of 2011 (H.R. 2096), which would increase public awareness of online security issues and establish programs to increase the federal cyber work force; and
  • The Federal Information Security Amendments Act (H.R. 4257), which would update the federal framework for protecting their information technology systems.
The Financial Services Roundtable, NACHA – The Electronic Payments Association, the Financial Services Information Sharing and Analysis Center, The Clearing House, the American Financial Services Association, the National Association of Federal Credit Unions, the Consumer Bankers Association, The Independent Community Bankers of America, and the American Bankers Association joined CUNA and the EFTA in signing the letter.

For the full letter, use the resource link.

Mortgage rule relief needed CU rep tells CFPB

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WASHINGTON (4/26/12)--The Consumer Financial Protection Bureau (CFPB) should consider meaningful exemptions for credit unions and other small financial institutions as it develops new mortgage servicing rules, American Southwest CU CEO Brian Barkdull said at a CFPB Small Business Regulatory Enforcement Fairness Act (SBREFA) panel discussion held this week in Washington.

The CFPB earlier this month began working on a series of new mortgage rules that aim to increase transparency and accountability in the market. The SBREFA panels, which are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, are intended to bring credit unions and other small financial service providers into discussions on any proposed rules that may have a significant economic impact on a substantial number of small providers.

The Credit Union National Association suggested that Barkdull take part in the panel. Tiffany Michel, vice president of lending at Omaha Police FCU, Omaha, Neb., and Victor Petroni, senior vice president of lending at First New England FCU, East Hartford, Conn., also joined representatives from the CFPB, the U.S. Small Business Administration (SBA), and the Office of Management and Budget at the panel discussion. Representatives from Services Center FCU, Yankton, S.D., Rocky Mountain Law Enforcement FCU, Denver, Colo., and community banks also took part in the discussion.

During the panel discussions, Barkdull noted that regulatory changes in mortgage servicing do affect and increase his credit union's costs in other areas, such as business loans.

He also said that he includes regulations alsongside other financial institutions when he thinks of the "competition" his credit union faces, because his Tuscon, Arizona credit union must address both concerns.

Panel participants also reviewed the CFPB mortgage servicer proposals under consideration, discussed the direct and indirect impact on businesses and consumers, responded to CFPB staff questions, and provided detailed examples from their experiences.

The panelists urged the agency to minimize duplicative regulations, consider the costs on small financial institutions, consider meaningful exemptions or multi-tiered approaches, and focus on targeting specific problem areas instead of developing overly broad rules.

The CFPB also plans to conduct additional outreach on the mortgage servicing project to gather feedback from consumer groups, industry, and other agencies.

Some of the rules under consideration would require mortgage servicers to provide regular mortgage statements covering the mortgage loan's principal, interest, fees, and escrow, the amount of and due date of the next payment, and, in some cases, information on financial and foreclosure avoidance counseling. Servicers would also be required to warn mortgage holders before interest rate changes are made to their adjustable-rate mortgages, to post mortgage payments promptly after they have been received, to increase mortgageholder ease of access to their own account information, and to quickly correct account errors.

Some of the rules would also address force-placed insurance, which can be purchased by mortgage servicers when mortgage borrowers do not maintain hazard insurance on their properties. Force-placed insurance can often be far more expensive than privately purchased insurance. Under one of the proposals, alternatives to force-placed insurance could be offered to consumers, and warnings and disclosures would need to be provided before force-placed insurance is purchased.

An advanced notice of proposed rulemaking on the mortgage servicing rules is scheduled to be released this summer, and the rules are scheduled to be finalized in January of 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long of a transition period is necessary yet.

The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.

CUNA will be following up with the CFPB on the mortgage servicer rules and other rulemaking efforts, and we will continue to work with the Leagues and credit unions on any further developments.

MBL increase brings choice credit access ACI blog

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WASHINGTON (4/26/12)--Increasing the credit union member business lending cap "means more competition, greater choice, and increased access to capital," American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask said in a recent blog post.

Separate pieces of House and Senate MBL legislation would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%. Within the first year of enactment, the increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA estimates show.

The Senate version of MBL legislation, the Small Business Lending Enhancement Act of 2012 (S.2231), is on the Senate schedule, but a voting date has not been determined.

Passing MBL legislation "will mean new investment," and "there is plenty of pent up demand for capital as a result of very restrictive lending by banks," Pociask said. "During the last recession, bank loans fell by the double digits, while credit union lending increased toward its cap. In 2011, banks denied 60% of small business bank loan applications. So the legislation would increase small business access to capital and increase market investment," he added.

Pociask said the only reason banks oppose the legislation is because it increases market competition. "Because credit unions are pretty good in managing risks and providing affordable loans, banks do not want the market competition – they want market protection. The reality is that heightened market competition would benefit the economy." The increased competition that an MBL cap increase would bring would be good for the economy in general, Pociask said.

"The [American Bankers Association] doesn't like the bill, and that is precisely why the bill is a step in the right direction. It is as simple as that. It's time to let the market work," he added.

The nonprofit ACI says its focus is "to support concepts which spur competition, encourage innovation, create jobs and benefit consumers overall, while maintaining reasonable and necessary consumer safeguards."

For the full blog post, use the resource link.

Senate bill would extend NFIP through Dec. 31

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WASHINGTON (4/26/12)--Some good news--temporary though it may be--for credit unions and other mortgage lenders who have been watching the National Flood Insurance Program escape demise through a series of temporary extensions: a new short-term reprieve has been introduced in the U.S. Senate.

The NFIP is currently set to expire on May 31; somewhat ironically that is the day before the nominal start of the Atlantic hurricane season. Credit unions, as well as other lenders, cannot write certain mortgages without NFIP coverage, and in the past the program has lapsed for brief periods--three times in 2010.

Sen. David Vitter, a Republican from Louisiana, introduced S. 2344 Tuesday night to extend the NFIP through the end of this year. The bill was placed directly on the Senate's legislative calendar, thereby circumventing the banking committee, which has been working on controversial on NFIP reform issues for years.

The Credit Union National Association (CUNA) strongly supports the NFIP program and backs short-term extensions, but also advocates for longer-term approval.

The reforms proposed in the Senate, and which appear to be holding up any long-term reauthorization, are problematic for credit unions, CUNA has noted.  In fact, CUNA has warned lawmakers, they could have the unintended effect of driving some small mortgage lenders, including credit unions, out of the mortgage business.

Particularly at issue is a section of the Senate Banking Committee's NFIP reform discussion draft, which would require all mortgage lenders to escrow for NFIP premiums.

Current law only requires lenders that escrow for taxes and insurance to also escrow for NFIP premiums. CUNA has alerted key Senate lawmakers that there is a significant cost involved with establishing escrow accounts, particularly for credit unions, community banks, and community-based lenders that have small lending volumes.

Texans CU improves under NCUA oversight

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ALEXANDRIA, Va. (4/25/12)—The financial condition of Texans CU, which was taken under conservatorship by the National Credit Union Administration (NCUA) last April, has improved, with that credit union posting $5.87 million in income in the first quarter of 2012, the NCUA reported.

The credit union held $1.48 billion in total assets as of March 31, an increase from the $1.42 billion it held at the end of 2011. The credit union's net worth also improved by 35 basis points during the first quarter of 2012.

NCUA Region IV Director Keith Morton said the agency wants to "continue efforts to transition Texans to a financially strong credit union."

For the past year, we reduced expenses, streamlined operations, retooled infrastructure, and began the process of returning Texans to the core credit union business model," and the NCUA is "very encouraged by the credit union's positive financial results," Morton said. The credit union is planning to introduce new financial products and a new website and online banking and bill payment platform this year, the NCUA added.

The Richardson, Texas-based credit union serves residents of Collin, Dallas, Rockwall, Travis, and Williamson, as well as parts of Denton County.

NCUA reminds of dos-and-donts of compensating loan originators

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ALEXANDRIA, Va. (4/25/12)--Credit unions that make closed-end residential mortgage loans will have "new flexibility" regarding how they compensate some of their loan originators, the National Credit Union Administration (NCUA) said in a letter (12-RA-03) sent to credit unions this week.

Under the terms of the Dodd-Frank Act, loan originators may not be paid funds that originate from any mortgage transaction. The rule is intended to prevent loan originators from increasing their own compensation by raising the consumers' loan costs, such as by increasing the interest rate or points.

However, the CFPB earlier this month said, in its interpretation, that the compensation rules would permit financial institutions to use funds collected from loan originations to pay for employee qualified profit sharing, 401(k), and employee stock ownership plans. This determination is not final, the CFPB said, adding that a rule addressing this issue is expected to be released by the bureau before January 21, 2013.

As a result of the CFPB guidance, Matz said, credit unions may now make contributions to qualified plans for loan originators out of a pool of profits derived from loans originated by employees.

The NCUA Chairman did, however, warn credit unions with discretionary non-qualified pension plans that are tied to profit targets to amend those plans to exclude income from closed-end mortgage loan originations. "If your credit union has a pension plan that establishes the employer's contribution amount based on a loan originator's income, that plan is particularly at risk," Matz said.

For the full NCUA letter, use the resource link.

Pa. primary candidate has CU backing

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WASHINGTON (4/25/12)—The Credit Union Legislative Action Council (CULAC), the Pennsylvania Credit Union Association (PCUA), and local credit unions are among those that helped former State Rep. Scott Perry (R) in his Republican U.S. House primary efforts, which concluded last night.

Perry defeated fellow nomination hopefuls York County Commissioner Chris Reilly, Kevin Downs, Eric Martin, Sean Summers, Mark Swomley and Ted Waga in Tuesday's primary.

He will face Democratic challenger Harry Perkinson in November's general election. The candidates will vye for Pennsylvania's fourth district U.S. House seat, which is being vacated by current congressman Todd Platts (R).

Perry served two terms representing Pennsylvania's 92nd district, which includes parts of Cumberland County and York County. He is also a military veteran and currently serves as a Colonel in the Pennsylvania Army National Guard.

The former state legislator is supportive of credit union member business lending increase legislation and other credit union priorities, and has used his credit union to obtain funding for his own small business. The PCUA and credit unions have supported Perry with canvassing efforts, and CULAC financially supported the candidate.

Credit Union National Association (CUNA) Vice President of Political Affairs Trey Hawkins said CULAC "will continue to be in the game on behalf of credit union-friendly candidates, and will aggressively support credit union friends in this year's elections."

The presidency, congressional seats, and state and local positions are all at stake in 2012.

CUNA backs swaps exemption bill

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WASHINGTON (4/25/12)--The Credit Union National Association (CUNA) on Tuesday said it supports the Small Business Credit Availability Act (H.R. 3336), which would preserve the rights of credit unions and other small financial institutions to use swaps to hedge interest rate risk.

Under the terms of the legislation, credit unions and other small financial institutions with under $1 billion in cumulative current uncollateralized credit risk exposure and potential future credit risk exposure would be granted an exception from portions of the Dodd-Frank Act that barred certain institutions from engaging in swap transactions.

CUNA President/CEO Bill Cheney in the letter thanked H.R. 3336 sponsor Vicky Hartzler (R-Mo.) for introducing the legislation, and said CUNA looks forward to working with her as the bill moves through Congress.

Relatively few credit unions use derivatives to hedge interest rate risk, but the National Credit Union Administration (NCUA) is considering allowing more credit unions to use derivatives to hedge those risks.

The NCUA currently allows a limited number of federal credit unions to engage in derivatives through an investment pilot program, and the agency could permit more credit unions to independently use derivatives to hedge IRR. The agency in an advanced notice of proposed rulemaking has suggested that credit unions that demonstrate a relevant, material IRR exposure, have demonstrated the ability to manage derivatives, and have the net worth and financial health needed to manage derivatives could be allowed to invest in interest rate swaps and interest rate caps.

CUNA earlier this month commended the NCUA for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third-parties. CUNA also supports granting independent derivative investment authority for certain credit unions with adequate derivatives experience. (See related April 5 News Now story: Allow CU derivative investments as risk management tool: CUNA to NCUA)

CU short-term loans the safe affordable choice CUNA

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WASHINGTON (4/25/12)--Credit unions and the Credit Union National Association (CUNA) are committed to providing a safe and affordable alternative to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders, CUNA said in a comment letter to the Consumer Financial Protection Bureau (CFPB).

The comment letter followed a recent CFPB hearing on payday lending. That hearing featured testimony from Daryl McMinn, vice president of operations of Listerhill CU of Sheffield, Ala., and various payday lending experts, regulators, and financial industry representatives.

In the comment letter, CUNA Assistant General Counsel Luke Martone said CUNA supports the ability of credit unions to provide beneficial short-term, small amount loans as alternatives to predatory payday lending, which have "no place in the financial marketplace."

Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%. However, under the National Credit Union Administration's (NCUA's) short-term, small amount loan program, federal credit unions may offer certain short-term loans at an APR as high as 28%, provided certain terms are met.

To offer the NCUA-approved higher loan rate, the loan principle must be between $200 and $1,000, and the term of the loan must be between one and six months. Fees tied to the loan may not exceed $20, and lenders may not roll over the short-term loans.

For the full comment letter, use the resource link.

CUNA Will CFPB card limits plan impact CUs

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WASHINGTON (4/25/12)--Credit unions are asked to weigh in on a Consumer Financial Protection Bureau (CFPB) plan to revise Regulation Z regarding credit card fee limitations, and whether the proposal will have any direct impact on their operations.

In a Comment Call to credit unions, the Credit Union National Association noted that the CFPB proposal would amend the provision of Reg Z that limits the total amount of fees that can be charged on a credit card account "prior to account opening and during the first year after account opening." 

Under the proposed rule, this limitation would apply only "during the first year after account opening."

It is CUNA's opinion, the Comment Call said, that overall the proposal is positive and will benefit some credit card issuers, but that it will not have a major impact on credit union issuers directly, based on the fees they typically charge on members' credit card accounts.

The CFPB is accepting public comments on its proposal until June 11. CUNA's comment deadline is May 28.

iAmerican Bankeri survey shows strong reader MBL support

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WASHINGTON (4/25/12)--In a poll of its readers, American Banker  found that 70% of respondents backed the idea of increased member business lending (MBL) authority for credit unions.

The poll results, which first ran in the April 23 issue and were updated Tuesday, showed 60% of respondents flat-out supported more credit union MBLs, choosing the answer option that stated:  Yes--competition is as healthy for lending as it is for other markets.

Another 10% indicated they could support increased MBL authority if credit unions are required to hold plenty of capital to cover losses.

The remaining 31% opposed increased small business lending for credit unions.

American Banker is owned by SourceMedia and is geared toward senior-level financial services executives. SourceMedia's Banking Group is comprised of American Banker  (website, daily newspaper, eNewsletters, and iPad app), Bank Technology News (website and monthly print publication), and American Banker Magazine, formerly USBanker.

Credit Union National Association Executive Vice President John Magill noted that the survey results come in the middle of an all-out assault by banking trade groups trying to block CUNA-backed legislation that would increase the MBL cap to 27.5% of assets, up from 12.25%.

"CUNA, credit unions, small businesses, and consumer and business groups support an increase in the MBL cap and are urging lawmakers to allow credit unions to do more to help the economy through more lending," Magill said Thursday. "Who knew 70% of bankers feel the same way?"

Senate leadership has put Sen. Mark Udall's (D-Colo.) MBL cap increase bill on the voting calendar for this year, and just yesterday that body's third-ranking member, Sen. Charles Schumer (D-N.Y.), reiterated the Senate's commitment to a floor vote.

"While much was made earlier this week of whether the MBL vote will come earlier in this session of Congress or later, the truth is--respect to the procedural status of the MBL bill--nothing has changed," Magill said.

He added, "Scheduling of a vote is always a function of a crowded Senate schedule. What is more important than the timing of the vote is winning the vote."

CFPB extends deadline for overdraft information

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WASHINGTON (4/25/12)--Interested parties now have until June 29 to provide information to the Consumer Financial Protection Bureau (CFPB) about overdraft protection plans and how they affect consumers.

The CFPB launched its comment initiative on Feb. 28 and first intended it to end April 30.

The Credit Union National Association (CUNA) in an April 16 comment letter told the bureau that overdraft protection is an extremely important topic for credit unions, which offer a variety of programs. CUNA asked the CFPB to extend a comment period.

The CFPB has said it is particularly focused on gathering information on the practice of re-ordering purchases and payments to maximize overdraft fee charges, on whether consumers can anticipate and avoid overdraft fees, and on how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.

The longer comment timeframe, CUNA wrote, would help ensure the agency has the information it needs.

Inside Washington (04/24/2012)

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  • WASHINGTON (4/25/12)--Federal Deposit Insurance Corp. (FDIC) staff offered another positive assessment about the Deposit Insurance Fund (DIF) at the FDIC board meeting on Monday. Losses to the DIF from failures are estimated to be $12 billion over the five-year period from 2012 through 2016. That is a $7 billion drop from projections for 2011 through 2015 (American Banker April 25). The DIF's balance has increased for eight consecutive quarters, primarily as a result of increased assessment income and fewer bank failures. The DIF held $11.8 billion in reserves, or 0.17% of the nation's insured deposits at the end of 2011. That balance was $2.6 billion higher than a previously unaudited amount reported in the Quarterly Banking Profile. The board featured two new members at the meeting--former Federal Reserve Bank of Kansas City chief Thomas Hoenig and former Treasury Department official Jeremiah Norton ...
  • WASHINGTON (4/25/12)--The Federal Deposit Insurance Corporation (FDIC) and U.S. Small Business Administration (SBA) Tuesday announced new resources to support small businesses.  FDIC Director for Depositor and Consumer Protection Mark Pearce and SBA's Deputy Associate Administrator for Entrepreneurial Development Michael Chodos released Money Smart for Small Business, a training curriculum for new and aspiring business owners. Developed in partnership between both agencies, this curriculum is the latest offering in the FDIC's 10 year old award-winning Money Smart program. Money Smart for Small Business provides an introduction to day-to-day business organization and planning and is written for entrepreneurs with limited or no prior formal business training.  It is designed to offer practical information that can be applied immediately, while also preparing participants for more advanced training. The curriculum is designed to be delivered to new and aspiring business owners by financial institutions and small-business development centers ...

Mortgage SARs up in 2011 crimes could be declining

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WASHINGTON (4/24/12)--The total number of mortgage loan fraud suspicious activity reports (MLF SARs) increased by 31% between 2011 and 2010, mainly due to mortgage repurchase demands, the Financial Crimes Enforcement Network (FinCEN) reported.

The agency released its MLF SARs report on Monday, and FinCEN Director James Freis Jr. also discussed these latest mortgage fraud numbers and other FinCEN issues at the Mortgage Bankers Assocation's National Fraud Issues Conference on Monday.

Financial institutions submitted 92,028 MLF SARs in 2011 and 70,472 in 2010, FinCEN said. MLF SARs accounted for 12% of all SARs filed in 2011, the FinCEN report said, representing an increase from the 10% share of total shares they represented in 2010.

However, the report added, the total number of MLF SARs filed in the fourth quarter of 2011 was lower than the 2010 fourth quarter total. While it is too soon to call this a trend, Freis in the report said initial numbers for the first quarter of 2012 appear to show a continued decline in MLF SAR filings.

Around 84% of the MLF SARs reported involved amounts below $500,000, according to the FinCEN report. Some of the types of suspicious activity reported included: Overstated income on loan applications, loan workout or debt elimination attempts, questionable refinance or loan modification attempts by borrowers or others targeting distressed homeowners, and Social Security number discrepancies submitted in the original loan application and the workout request.

Income misrepresenations and invalid documents are, in some cases, being spotted and rejected before they can cause any damage, and FinCEN said the 2011 annual roundup indicates that due diligence by mortgage lenders has improved significantly since the height of the housing bubble. Financial institutions are "spotting activity that appears to be fraud before it happens and in the process, helping to prevent it," Freis said in the release.

California, Hawaii, Florida, Nevada, and the District of Columbia had the highest amounts of SAR filings, per capita.

Fries said that FinCEN's recently enacted rule that requires non-bank residential mortgage lenders and originators to establish anti-money laundering programs and file SARs "will augment FinCEN's initiatives in the mortgage fraud area." FinCEN is also considering adding "a range of consumer and commercial finance businesses" to the list of businesses that are required to file SAR reports, and will also consider regulations for settlement related businesses, Freis added in his remarks.

For the full FinCEN report and Freis's remarks, use the resource links.

Cybersecurity postal bill on tap this week in Congress

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WASHINGTON (4/24/12)--Credit unions remain on the lookout for a potential vote on a Senate bill that would increase member business lending authority, and while that vote could come at any time, it is unlikely to occur before the next Senate recess begins on April 30 because of a busy legislative schedule.

However, there is still plenty to watch in Washington this week.

Debate on the 21st Century Postal Service Act of 2012 (S. 1789), which would reduce postal service days from six to five and give the postal service greater flexibility in how it increases its rates, is expected to begin again today and could conclude this week.

A group of cyber-security bills are also expected to come up for discussion in the U.S. House. Those bills are:

  • The DATA Act (H.R. 2146);
  • The Advancing America's Networking and Information Technology Research and Development Act (H.R. 3834);
  • The Cybersecurity Enhancement Act of 2011 (H.R. 2096); and
  • The Federal Information Security Amendments Act (H.R. 4257).
The Cyber Intelligence Sharing and Protection Act (H.R. 3523) is also expected to be discussed in the House this week. That bill would task the Office of the Director of National Intelligence with developing cyberthreat information sharing guidelines between public- and private-sector organizations. The Credit Union National Association supports this legislation. (See related NewsWatch story: What is Congress doing about Cyber-Security)

The Small Business Credit Availability Act (H.R. 3336), which would preserve the rights of credit unions and other small financial institutions to use swaps to hedge interest rate risk, is on the House schedule for Wednesday, and CUNA also supports this bill.

The committee calendar is also busy this week. The House Homeland Security subcommittee on oversight today will hold a hearing entitled: "America is Under Cyber Attack: Why Urgent Action is Needed." Oversight of the U.S. Securities and Exchange Commission will be covered during a Wednesday House Financial Services capital markets subcommittee hearing.

Wednesday will also feature home refinancing discussions during a Senate Banking housing, transportation and community development subcommittee hearing, and the Senate Homeland Security and Governmental Affairs' oversight and government management subcommittee has scheduled a Thursday hearing on financial literacy. 

Thursday will also feature a House Ways and Means select revenue measures subcommittee hearing on tax extenders.

ATM bill sponsors urge support

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WASHINGTON (4/23/12)--Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) are asking their House colleagues to sign on in support of their bill, introduced last week, that would ease current ATM fee disclosure regulations to cut bogus lawsuits against ATM operators.

Current law requires all ATM operators to display both a physical placard on the machine and to provide an electronic disclosure of a fee that an ATM user may incur.

The lawmakers' joint letter explains, "Recently, some have found it advantageous to remove the physical placard and sue (or threaten to sue) financial institutions and merchants for noncompliance of the requirement.

"This is despite the fact that the electronic disclosure goes above and beyond the physical disclosure in that it not only informs the user there is a fee, but what that fee is, and then requires the user to affirmatively accept the fee."

Under H.R. 4367, supported by the Credit Union National Association (CUNA), ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee. The physical ATM fee disclosure notice requirement would be eliminated.

"Our bill eliminates an outdated and unnecessary regulatory burden on all financial institutions while continuing to ensure consumer protections for all ATM users through mandated on-screen fee disclosures," Luetkemeyer and Blaine wrote, urging support.

CUNA last week sent a etter of support to Luetkemeyer and Scott, calling the bill common sense legislation that will reduce regulatory burden without harming ATM users.

The bill currently has the following six co-sponsors: Reps. Francisci Canseco (R-Texas, Michael Grimm (R-N.y.), Ted Poe (R-Texas), David Schweikert (R-Ariz.), Scott, and Lynn Westmoreland (R-Ga.)

Senate leader reiterates support for MBL vote

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WASHINGTON (4/24/12)--Senate leadership remains committed to a floor vote on credit union legislation to increase the member business lending (MBL) cap, a pledge reiterated Monday by Sen. Charles Schumer (D-N.Y.), the third-ranking Democrat in the Senate.

"If the banks want to go to sleep on this legislation, that's fine with us," said Credit Union National Association (CUNA) President/CEO Bill Cheney Monday in response to a report started by the New York Bankers Association that claimed Schumer had said the MBL bill has been pulled from the Senate voting calendar.

Sen. Schumer's office yesterday reiterated that the legislation is still on the Senate's agenda, with a voting date yet to be determined, and nothing procedurally has changed. Banks have been waging war against the MBL bill as CUNA, credit unions, small businesses, and consumer and businesses groups have ramped up their advocacy efforts in advance of a vote that Senate Majority Leader Harry Reid (D-Nev.) also has said is coming.

"The fact is, Senate leadership remains committed to a floor vote on this bill, a promise Sen. Schumer reiterated again today," Cheney said. "Senators recognize our bill would create hundreds of thousands of jobs and inject billions of dollars into the economy--at no cost to taxpayers.

"Credit unions will continue to advocate for this bill with no letup. The bill remains on the Senate calendar, and we know that small business will continue to join us in the push for approval. After all, small business continues to need help finding credit--and more jobs are certainly needed in this economy."

Schumer has said that lifting the "job-killing" lending cap "would be a win" for small businesses.

S. 2231, like its counterpart introduced in the House (H.R. 1418), would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%. 

Within the first year of enactment, the increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA estimates show.

CUNA does not anticipate the MBL vote will come up for a vote this week.  The House and Senate both begin a one-week Spring District Work Break on April 30, but then return for a three-week work session in Washington, D.C.

Inside Washington (04/23/2012)

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  • WASHINGTON (4/24/12)--The Federal Housing Finance Agency (FHFA) will provide a final answer this month on whether Fannie Mae and Freddie Mac would offer principal reductions as part of a Treasury Department proposal that would use funds from the Troubled Asset Relief Program, FHFA Edward DeMarco, the acting director of the FHFA said. DeMarco indicated that forbearance plans and short sales already serve as forms of principal reduction without saddling taxpayers with further losses. "This is not about some huge difference-making program that will rescue the housing market," Demarco said. "It is a debate about which tools, at the margin, better balance two goals: maximizing assistance to several hundred thousand homeowners while minimizing further cost to all other homeowners and taxpayers" …
  • WASHINGTON (4/24/12)--In recent public remarks, Federal Reserve Chairman Ben Bernanke has emphasized the central bank's focus on maintaining financial stability. In a recent American Banker article (April 23), Margaret Tahyar, a partner at Davis Polk & Wardwell, described financial stability as an "unofficial third goal," along with price stability and unemployment, of the Fed. The emphasis on financial stability appears to have created when Dodd-Frank gave the Fed the task of regulating all systemically important banks and nonbanks. Dodd-Frank law required the Fed to write new rules on, including living wills, capital and liquidity requirements. Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc., said financial stability will be part of Bernanke's legacy …
  • WASHINGTON (4/24/12)--Effective May 7, the U.S. Treasury Department's Community Development Financial Institutions Fund (CDFI Fund) will be in a new location: 1801 L Street, N.W., 6th Floor, Washington, D.C., 20220. Treasury said the fund will do its best to maintain normal operations during the transition period from May 4 to May 7, but warned some patience might be required of those communicating during this period. Parties sending correspondence to the new address should anticipate slight internal delivery delays and should account for this in timing the delivery of correspondence. Also, the CDFI Fund's new office space is in a secure federal building that requires visitors to be escorted to the office by CDFI Fund staff. Visitors should anticipate short security screening delays as part of the process. Items not affected by the relocation include the submission of electronic applications through Grants.Gov or the myCDFIFund portal; the submission of other electronic reports (e.g. the Allocation Tracking System, the Community Investment Impact System, or through the myCDFIFund portal); or the submission of CDE Certification Applications, which should continue to be submitted to the Bureau of Public Debt. …

GAO identifies some FDIC insurance fund issues

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WASHINGTON (4/23/12)--Some of the Federal Deposit Insurance Corporation's (FDIC) processes for deriving and reporting estimates of losses to its deposit insurance fund are deficient, but, overall, that agency's controls over financial reporting are effective, the Government Accountability Office (GAO) said in its audit of the FDIC's 2011 financial statements.

The GAO audit specifically found issues in the FDIC's loss estimate reporting of resolution transactions involving shared loss agreements.

Under shared loss agreements, the FDIC absorbs a portion of the loss on a specified pool of assets. This approach maximizes asset recoveries, minimizes FDIC losses, and reduces immediate cash needs, the agency said. This approach is used in selected purchase and assumption transactions.

The audit said these deficiencies resulted in undetected errors in draft 2011 insurance fund financial statements. These errors were flagged and ultimately corrected by the FDIC. "While these deficiencies, individually and collectively, do not constitute a material weakness in internal control over financial reporting, they nevertheless increase the risk of additional undetected errors or irregularities in the DIF's financial statements," the GAO said.

The GAO also reported other less significant matters involving FDIC's internal control over financial reporting. The GAO did not make any recommendations in the report, but did say it would produce a separate report on the issues identified in the audit, and provide recommendations on how the FDIC could strengthen its own internal controls.

For the GAO report, use the resource link.

CUNA releases 12-question CU overdraft survey

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WASHINGTON (4/23/12)—The Credit Union National Association (CUNA) is asking credit unions to share information regarding their overdraft protection programs, and overdraft transfer and marketing practices, through a short, 12-question CUNA survey.

CUNA developed the survey in response to an action by the Consumer Financial Protection Bureau (CFPB) earlier this year when it distributed questionnaires to financial institutions to help evaluate how those institutions' overdraft policies affect consumers.

In the CUNA survey, CUNA asks for basic information on the credit union's asset size, and what types of overdraft programs are offered to members.

More specific questions addressing how members are made aware of available overdraft protection programs and how members are alerted to the possibility that a transaction may trigger an overdraft fee are also among the survey questions.

The CUNA survey does not collect any identifying information, and credit union participation will be strictly anonymous. Responses must be received by CUNA by April 27.

The CFPB's overdraft project is particularly focused on addressing the practice of re-ordering purchases and payments to maximize overdraft fee charges, on whether consumers can anticipate and avoid overdraft fees, and on how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.

The CFPB has said it plans to use overdraft comments from consumers, the financial services industry, and other interested parties to craft new overdraft fee disclosures and rules, assist with policymaking on overdraft practices, and to prioritize the bureau's regulatory and education work.

For the CUNA survey, use the resource link.

NCUA highlights green progress for Earth Day

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ALEXANDRIA, Va. (4/23/12)--With many participating in Earth Day observations this past Sunday, the National Credit Union Administration (NCUA) took the opportunity to highlight the positive steps it has taken through the "greeNCUA" initiative, which aims to help the agency decrease its overall environmental footprint.

NCUA Chairman Debbie Matz said her agency understands its environmental responsibility, and takes that responsibility seriously each and every day.

"The greeNCUA initiative encompasses thousands of small, individual decisions throughout the year in order to make it a big, ongoing success," she added, and Matz encouraged "all credit unions to make the same commitment by creating a culture that promotes and rewards individual decisions that add up to environmental successes."

The NCUA noted it has helped reduce unneeded paper use by distributing email communications through its NCUA Express and NCUA CU Express systems, purchasing only recycled paper, and setting all office printers to print double-sided documents. The agency over the past year has also adopted energy efficient lighting in its Alexandria, Va. central office, and has installed motion detectors in that office to keep the lights off in unoccupied rooms.

Old electronics, used cell phones, and paper have also been recycled, and the agency also requires contractors to use low volatile organic compound paint in any refurbishing projects that are done in the building.

"Going green is a total commitment NCUA has made," Matz said.

For the full NCUA release, use the resource link.

Alabama Central CU employee prohibited by NCUA

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ALEXANDRIA, Va. (4/23/12)—Michael John Young, a former employee of Alabama Central CU, Birmingham, Ala., has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following his conviction on one count of bank fraud.

Young was sentenced to 17 months in prison, five years of supervised probation, and ordered to pay$140,000 in restitution, according to an NCUA prohibition order released Friday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Inside Washington (04/20/2012)

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  • WASHINGTON (4/23/12)--Comptroller of the Currency Thomas Curry on Thursday noted that eligible borrowers affected by government settlement with the country's five largest mortgage servicers can sign up for the Office of Comptroller of Currency's foreclosure-review process. "I want people to know this process is free to eligible borrowers who ask for a file review, and that they give up absolutely none of their rights in asking for the independent review of their case," Curry said in a speech at a conference on reviving home ownership. "All eligible borrowers who request a review can be assured that their file will be reviewed professionally and evaluated fairly to determine whether errors resulted in financial injury." The deadline for requesting a review is July 31. Later this month an additional round of outreach and advertising will begin to help increase awareness of the program, Curry said …
  • WASHINGTON (4/23/12)--While small-business lending has made a recovery since the recession, gaps remain in the market, Karen Mills, head of the Small Business Administration (SBA) said in American Banker (April 20). That gap is in small loans and the underserved markets, including women-owned and minority-owned businesses, Mills said. Banks and other lenders made $30.5 billion of SBA-backed loans to small businesses in fiscal year 2011, a 35% increase from 2011. The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' members business lending (MBL) cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said …
  • WASHINGTON (4/23/12)--The House Financial Services Committee last week voted to terminate the Office of Financial Research (OFR) and sharply questioned an OFR official during a hearing. During the hearing, Republicans criticized the OFR open-ended budget authority and its failure to provide more specifics about how it will evaluate its own performance. Michele Shannon, OFR chief operating officer, said office is aware of concerns about data privacy, and will seek to minimize duplicative data-collection with other federal agencies. Shannon said the OFR exists to fill the gaps of other agencies. Rep. James Renacci (R-Ohio) questioned whether OFR is providing specific information about its expenditures. He cited a request for $29 million to cover expenses for one quarter of the current fiscal year …
  • WASHINGTON (4/23/12)--Banks will be expected to fully comply with the so-called Volcker Rule by July 21, 2014, or two years after the rule technically takes effect, regulators announced Thursday. The rule bars banks from proprietary trading and limits their investments in private-equity and hedge funds …
  • WASHINGTON (4/23/12)--The Consumer Financial Protection Bureau (CFPB) last week provided guidance about compliance with the fair lending requirements of the Equal Credit Opportunity Act. After the bulletin's release, during a panel discussion at a National Community Reinvestment Coalition conference in Washington, Patrice Ficklin, the agency's assistant director for fair lending, said fair lending touches every aspect of what the agency does (American Banker April 20). Ficklin said the office, which was created by the Dodd-Frank Act, interacts with different offices and programs across CFPB, including bank and nonbank supervision, rulemaking and community engagement. CFPB has authority to enforce the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act. Prudential regulators enforce the other two fair lending laws--the Fair Housing Act and the Community Reinvestment Act …
  • WASHINGTON (4/23/12)--The Federal Deposit Insurance Corp. (FDIC) Advisory Committee on Economic Inclusion (ComE-IN) will meet Thursday to discuss the results of its Model Safe Accounts Pilot program; opportunities for banks offering mobile financial services to meet the needs of unbanked and underbanked consumers; and differences in consumer protections for debit, credit and prepaid cards. The committee will also welcome four new members: Robert Annibale, global director of Citi Community Development and Microfinance; José Cisneros, treasurer of the City and County of San Francisco; Andrea Levere, president/CEO of the Corporation for Enterprise Development (CFED); and John C. Weicher, senior fellow and director, Center for Housing and Financial Markets, Hudson Institute. The FDIC's Model Safe Accounts pilot, with nine financial institutions participating, was launched in January 2011 for one year to determine the feasibility of banks offering safe, low-cost transaction and savings accounts. The results of the pilot will be presented to the committee and the final report will be released at the ComE-IN meeting …

MBL appraisal addressed in NCUA legal opinion

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ALEXANDRIA, Va. (4/20/12)--In response to an inquiry from an Oregon-based credit union LLC, the National Credit Union Administration has issued a legal opinion letter stating it is unnecessary for a credit union to obtain an appraisal when it sells a participation interest in a member business loan (MBL)  under the Interagency Appraisal and Evaluation Guidelines.

The LLC said it works with credit unions that offer to sell participations in commercial real estate secured MBLs to other credit unions from the originating credit union's MBL portfolio.  The loans have been held by the originating credit union for several years, are in current repayment status, and have a loan-to-value ratio of less than 80%, with no deterioration in the subject property.  Also, according to the LLC's description, the terms, conditions and pricing of the loan at origination remain the same at the time of the participation sale.

"The (g)uidelines do not require that an appraisal be obtained under the facts you have presented, " wrote Hattie M. Ulan, NCUA associate general counsel.  She added, however, that a purchasing credit union should continue to perform its risk assessment and due diligence consistent with agency guidance on real estate lending and loan participation programs.

Use the resource link to read the complete letter.

Inside Washington (04/19/2012)

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  • ALEXANDRIA, Va. (4/20/12)--The National Credit Union Administration (NCUA) changed the Orlando, Fla. meeting of its "Listening Sessions" by one day: It is now scheduled for June 13 instead of June 12. The time and location remain the same: 1:00–4:00 p.m. at the Rosen Centre Hotel. The Florida event is the fourth of the agency's series of six sessions intended to provide opportunities for credit union officials and volunteers to suggest how the NCUA can improve the examination process, regulations, and any other initiatives to protect credit union safety and soundness… 
  • WASHINGTON (4/20/12)—In a mostly party-line vote, the House Financial Services Committee this week approved a legislative package that would bring funding for the Consumer Financial Protection Bureau under the Congressional appropriations process and end government-funded bank bailouts, among other things. The legislative package would also eliminate the Home Affordable Modification Program and extend the National Flood Insurance Program for an additional five years, and reform elements of that program. A recent House budget resolution asked the committee to identify cuts and legislative changes that would save around $30 billion in taxpayer funds over a 10 year period. These changes would cut the national deficit by more than $35 billion, according to a committee release. The proposals are not expected to pass the Senate…
  • WASHINGTON (4/20/12)--U.S. Treasury Secretary Tim Geithner restated his support for writing down some of the mortgages held by government-sponsored entities Fannie Mae and Freddie Mac this week, saying that mortgage principal forgiveness would help a "significant" number of families. (American Banker April 19) Geithner said the mortgage reductions would almost certainly improve taxpayer returns in Fannie and Freddie. Mortgage modifications for those that can afford their homes, refinancing assistance, and renting out now-vacant foreclosed on properties would also aid the housing market recovery, he added…
  • WASHINGTON (4/20/12)--As the U.S. Congress considers the Financial Institutions Examination Fairness Act, which in part would create a new appeals process with an outside ombudsman for all federal financial institution regulators, the American Banker ran an interview with the ombudsman of the Office of the Comptroller of the Currency, Larry Hattix, to address such areas of banks' regulatory concerns as: What is the role of the ombudsman? How does the OCC assure banks that its ombudsman is independent? How does the OCC view the plan to reform the examination appeals process? Hattix responded that it is the ombudsman's role to operate independently from the agency's bank supervision division and to report directly to the Comptroller, and reminded that the ombudsman's authority over the agency includes ability to overrule supervisory office decisions. His office conducts outreach meetings with banks and savings association to inform on the appeals process, and also maintains a Web site to provide additional resources about its dispute resolution process. Regarding the proposed statutory reforms, Hattix said his office has concern that creating an outside appeals bureaucracy could gum up the works and delay the exam process and corrective actions. In response to another question, Hattix noted that the most common appeals the OCC ombudsman receives generally involve composite or component ratings of a bank's financial condition and law violations, but he added that within those broad categories, specifics vary greatly… .

IRS changes add to CU compliance burden CUNA

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WASHINGTON (4/20/12)--Changes to the Internal Revenue Service's (IRS) 1042-S reporting requirements will create a new compliance burden for credit unions, Credit Union National Association (CUNA) Deputy General Counsel Mary Mitchell Dunn has warned.

The IRS this month approved new tax reporting requirements that will impact credit unions, banks, savings institutions, securities brokerages, and insurance companies that pay interest on deposits. Under the IRS rule, credit unions and other financial institutions will be required to report on their forms 1042-S interest of $10 or more earned annually on deposit accounts held by nonresident aliens who are residents of any foreign country. The current nonresident reporting requirement only applies to Canadian expatriates.

The IRS rule change is an attempt to combat tax evasion.

Dunn said some credit unions may not have the data processing abilities needed to identify affected accounts and prepare the required IRS forms.

Overall, Dunn said, the costs that the rule change would create for financial institutions and consumers would far outweigh any benefit to the IRS, and CUNA last year said the IRS has not proven that the new regulation is needed.

Business coalition joins MBL push

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WASHINGTON (4/20/12)--A group that identifies itself as a coalition of conservative, libertarian and free-market organizations voiced support Thursday for increased member business lending for credit unions and encouraged lawmakers to vote in favor of legislation that would achieve that end.  The group called Sen.  Mark Udall's (D-Colo.) Small Business Lending Enhancement Act of 2012 (S. 2231) "a sound, free-market, deregulatory action that will create jobs, help small business, and assist veterans."

S. 2231 would increase the MBL cap to 27.5% of assets from 12.25% of assets. The Credit Union National Association (CUNA) has estimated that lifting the MBL cap in this manner would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers. The legislation is expected to come up for a Senate vote soon.

The coalition said they support S. 2231 or "any similar measure lifting the arbitrary cap on member business lending by credit unions."

"As the economy is struggling to kick-start, this bill would give businesses much-needed capital to expand by simply raising the arbitrarily low lending cap," said the group's letter, that was widely distributed to lawmakers' offices on Capitol Hill.

The big winners, the letter said, will be small business owning job creators; but the group also noted that military veterans and their families would also be helped by the measure, as two of the largest credit unions in the credit union system work primarily with servicemen, servicewomen and their families.

The bill "would allow many well-capitalized smaller credit unions to expand business lending," and would not harm the banking industry, the coalition noted.,

"Most of the new credit loans will almost certainly go to businesses that wouldn't get any loans at all today, and credit unions would specialize in serving the types of businesses of their member populations," the letter said.

The letter was cosigned by Heartland Institute Vice President Eli Lehrer, Competitive Enterprise Institute Senior Fellow for Finance and Access to Capital John Berlau, Americans for Tax Reform President Grover Norquist, Less Government President Seton Motley, Citizen Outreach President Chuck Muth, Institute for Liberty President Andrew Langer, American Commitment President Phil Kerpen, Freedom Research Foundation President Jack Wheeler, Freedom Action President Myron Ebell, 60 Plus Association Chairman Jim Martin, and Council for Citizens Against Government Waste President Thomas Schatz.

The Consumer Federation of America (CFA) this week also spoke out in support of an MBL cap increase. CFA Executive Director Stephen Brobeck in a letter sent Wednesday to members of the Senate said MBL cap increase legislation "would be particularly beneficial at this time," and would "benefit consumers both by promoting competition and innovation in local marketplaces and by strengthening credit unions."

The CFA said MBL legislation would "expand access to affordable credit for small businesses and help strengthen local marketplaces that serve consumers well." (See related April 19 News Now story: CFA asks senators to support MBL cap increase.)

A vote is expected soon in the Senate, with a House vote to follow.

For the full letter, use the resource link.

CU remittance concerns aired at D.C. symposium

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WASHINGTON (4/20/12)--Credit union concerns regarding the Consumer Financial Protection Bureau's (CFPB) remittance transfer regulations were laid out at a symposium held this week in Washington, as the Credit Union National Association (CUNA) underscored that credit unions continue to have many compliance concerns regarding the remittance transfers final rule, especially with "open network" transfers.

CUNA also raised its continuing opposition to the rule with senior CFPB staff in a meeting at CUNA April 18.

The day-long symposium was hosted by Appleseed Network, a public interest group that advocated for strong consumer protections on remittance transfers. Staff from CUNA, the World Council of Credit Unions and the National Federation of Community Development Credit Unions were among those in attendance. Representatives from other financial associations, payment companies, law firms, non-profits, and consumer groups also took part in the symposium.

A new remittance rule that was adopted by the CFPB earlier this year would require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes. The rule will become effective on Feb. 7, 2013, and will impact U.S.-based credit unions that provide consumers with international electronic funds transfer services.

During the symposium, CUNA Regulatory Counsel Dennis Tsang said CUNA continues to support regulatory flexibility that would allow credit unions to continue to offer remittances and complement the many financial services and financial literacy programs that credit unions provide to consumers and communities.

Tsang added that the final remittance rule would impose unsustainably high compliance costs and legal liabilities on credit unions that provide transfers through "open networks," such as international wire transfers and international automated clearing house transfers through unrelated correspondent institutions. CUNA has called for "meaningful relief" from the remittance rules, and continues to discuss this and other remittance issues with CFPB staff. (See related April 10 News Now story: Some CUs could be forced out of remittances: CUNA)

The meeting also featured discussions on the final rule's requirements with CFPB staff, compliance and new disclosure changes, and future developments on remittance transfers and research.

NCUA responds to CUNA Agency can improve exam process

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WASHINGTON (4/20/12)--National Credit Union Administration (NCUA) Chairman Debbie Matz identified regulatory relief measures her agency is pursuing, in a letter this week to Credit Union National Association (CUNA) President/CEO Bill Cheney. Matz's letter was in response to a follow-up letter Cheney sent to the chairman after she appeared at the CUNA Governmental Affairs Conference in March.

The CUNA Executive Committee met with Matz during the GAC. "I believe those present would agree that the meeting produced useful discussions," Cheney said Monday, "although we all realize that there are many issues yet to be resolved regarding regulatory burdens, examination concerns and others."

Matz's letter indicates the NCUA will be pursuing a number of actions that CUNA urged on behalf of credit unions. They  include:

  • The agency is moving ahead with its proposal on troubled debt restructurings. Matz's letter acknowledged that CUNA's Examination and Supervision Subcommittee, and Accounting Subcommittee, along with leagues, played an important role in urging the development of the proposal.  A TDR final rule may be considered by the NCUA as early as May or June.
  • The NCUA is undertaking a review of its examination process.
  • While NCUA declined to issue a moratorium on issuing new regulations, the agency said it will "make every effort to draft rules that are as minimally burdensome as possible."
  • The agency will be reviewing its field of membership regulation.
 

Regarding the NCUA's review of its examination process, CUNA's Examination and Supervision Subcommittee hopes to meet regularly with NCUA's Director of Examination and Insurance Larry Fazio to develop and pursue recommendations for improvements. Also, CUNA will be closely monitoring developments in the areas addressed by the NCUA chairman's letter.

"I believe the letter from the NCUA board chairman overall reflects an increased awareness on the part of the agency to the merits of the issues and concerns that CUNA, leagues, and credit unions have raised,"  Cheney said.  He added that CUNA welcomes the steps the chairman has laid out.

In its meeting and communications with the NCUA, CUNA has urged the agency to direct examiners to take a number of actions that would result in a more effective and productive exam for credit unions as well as for the agency. Such steps include providing the authority that an examiner directive is based on and ensuring examiners refrain from aggressive tactics in their dealings with credit unions, which CUNA will continue to pursue.

CFPB clarifies state reciprocity in MLO licensing

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WASHINGTON (4/20/12)--Consistent with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), a state may grant a transitional mortgage loan originator (MLO) license to an individual who holds a valid loan originator license from another state, according to a clarification issued by the Consumer Financial Protection Bureau (CFPB) Thursday.

However, the CFPB also clarified that its regulations do not allow states to provide transitional licensing for registered but unlicensed loan originators who leave a credit union or bank to act as loan originators for a non-depository institution while pursuing a state license. 

The CFPB inherited authority to enforce and implement the SAFE Act from the U.S. Department of Housing and Urban Development under the Dodd-Frank Wall Street Reform Act.  CFPB Director Richard Cordray said the Bureau is committed to working with states and the industry to make interstate transitions as smooth as possible for loan originators.

New small CU deputy director is appointed

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ALEXANDRIA, Va. (4/19/12)--Credit union veteran Martha Ninichuk will take on the role of deputy director of the National Credit Union Administration's (NCUA) Office of Small Credit Union Initiative (OSCUI) on Sunday, the agency has announced.

Ninichuk most recently served as the Michigan Credit Union League's director of cooperative initiatives, and has also worked with the Maryland and D.C. Credit Union Association.

Her work has focused on helping credit unions provide innovative financial products and services to underserved and low-income populations, addressing governance issues, and developing financial products, the NCUA noted.

She also led Warren, Michigan-based St. Cletus CU.

NCUA Chairman Debbie Matz said Ninichuk's "mix of small credit union management and broad credit union field work is ideal for this hands-on position" and added that her "wide range of experiences, from running a small credit union in Michigan, to consulting for two state leagues, to international credit union development projects, will also bring fresh perspectives to OSCUI's work."

For the NCUA release, use the resource link.

CFPB to target credit discrimination

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WASHINGTON (4/19/12)--The Consumer Financial Protection Bureau (CFPB) will "combat unlawful, discriminatory practices--including those that have an illegal disparate impact on protected borrowers," and examine mortgage lending, student lending, auto lending, and credit card practices for evidence of lending discrimination, the agency said on Wednesday.

The CFPB in its bulletin 2012-04 said it would continue to adhere to the fair lending principles outlined in Regulation B, which implements the Equal Credit Opportunity Act (ECOA). ECOA bans creditors from discriminating against credit applicants based on their race, color, religion, national origin, sex, marital status, and other select factors.

In the bulletin, the CFPB said it would employ the legal doctrine of "disparate impact" as it exercises its supervision and enforcement authority to enforce compliance with the ECOA and Reg B.

According to the CFPB, lending policies that seem evenhanded but have a disproportionate, negative effect on a group that is protected under ECOA are said to have a "disparate impact," and "are unlawful unless they meet a legitimate business need that can't be met by an alternative that has a less disparate impact."

"Discrimination that disparately impacts borrowers in violation of the law hurts consumers and can threaten the economic stability of our communities," and "that is why the law has long recognized this form of unlawful credit discrimination," the CFPB said.

For the CFPB release, use the resource link.

Inside Washington (04/18/2012)

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  • WASHINGTON (4/19/12)--Republican lawmakers were more even-handed Tuesday in their remarks about how the Securities and Exchange Commission (SEC) is making improvements to its economic analysis of proposed new Dodd-Frank Act regulations. Republican lawmakers have criticized regulators for not accounting for the true cost of regulations associated with Dodd-Frank-related rules. At a hearing on Tuesday, Rep. Patrick McHenry (R-N.C.) said he was hopeful the SEC's cost-benefit analysis of the regulations would lead to an improved decision-making process. The SEC's March 16 memo followed a July 2011 appeals court ruling that cited the agency for not properly conducting a cost-benefit analysis before finalizing a rule required by Dodd-Frank. A January 2012 report by the SEC's inspector general also criticized the agency's method of analysis …
  • WASHINGTON (4/19/12)--In his first speech as comptroller of the currency, Thomas Curry stressed the Office of Comptroller of Currency's (OCC) role as its relates to community banks and small-business lending.  Small business and community banking are primarily locally focused, said Curry, speaking before a small business summit in Washington. "While the major share of small-business lending is done by large and midsize banks and thrifts, it's important to remember that small business is an intensely local undertaking, as is community banking," he said. "From our position as a nationwide regulator, the OCC brings significant resources and expertise to the table. But our local presence in communities throughout the country provides an equally important perspective." Local banks and thrifts are in the best position to make credit decisions about the small businesses in their communities, Curry said. "We won't try to substitute our judgment for that of the bank, nor will we discourage banks and thrifts from making creditworthy loans to small businesses," he added. "In fact, we and the other federal banking agencies have consistently encouraged the institutions we supervise to make loans to creditworthy borrowers, especially in difficult times " …

CFA asks senators to support MBL cap increase

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WASHINGTON (4/19/12)--The Consumer Federation of America (CFA) has joined the list of organizations that support a member business lending (MBL) authority increase for credit unions, telling senators that the Small Business Lending Enhancement Act of 2012 (S. 2231) would "expand access to affordable credit for small businesses and help strengthen local marketplaces that serve consumers well."

S. 2231, which is expected to come up for a Senate vote soon, would increase the MBL cap from 12.25% of assets to 27.5%. The Credit Union National Association (CUNA) has estimated that lifting the MBL cap from 12.25% to 27.5% of assets would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

CFA Executive Director Stephen Brobeck in a letter to members of the Senate said MBL cap increase legislation "would be particularly beneficial at this time," and would "benefit consumers both by promoting competition and innovation in local marketplaces and by strengthening credit unions."

Moreover, to the extent new jobs were created, some consumers would gain additional income, the letter said.

"Credit unions are especially deserving of this opportunity" and "have a strong record of serving consumer and communities, especially moderate-income areas that have been particularly hard-hit by the recession." Credit unions also "have had much past success in providing low-cost, sustainable credit to consumers and small businesses," and would "be able to invest in loans that likely will increase credit union earnings, capital contributions, and overall safety and soundness, directly benefitting all credit union members," if greater MBL authority is given to them, the letter added.

The National Cooperative Business Association (NCBA) earlier this month asked members of the cooperative community to communicate the crucial funding needs of small businesses, and the importance of supporting MBL cap increase legislation, to members of the U.S. Congress.  A number of other groups have also stepped up to back credit unions and an MBL cap increase. (See related April 4 News Now story: NCBA urges members to call for MBL bill support)

Those organizations include the National Council of Textile Organizations, the American Small Business Chamber of Commerce, the National Farmers Union, the National Association of Realtors, the Realtors Land Institute, the Small Business Majority, the Society of Industrial and Office Realtors, the CCIM Institute, Americans for Tax Reform, the American Consumer Institute, the Hardwood Federation, the Institute of Real Estate Management, NCB Capital Impact MultiFunding, the National Association of Home Builders, the National Association of Professional Insurance Agents, AMT--The Association for Manufacturing Technology, the U.S. Women's Chamber of Commerce, and the Heartland Institute.

NCUA report notes CU burden in diversity standards

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ALEXANDRIA, Va. (4/19/12)--The administrative burden on credit unions will be taken into account as new diversity standards are developed, since "credit unions face some challenges in developing diversity policies and programs," the National Credit Union Administration's (NCUA) Office of Minority and Women Inclusion (OMWI) said in its yearly report to Congress.

Section 342 of the Dodd-Frank Wall Street Reform Act requires the NCUA and other federal regulators to create standards to assess the work force diversity policies and practices of their regulated institutions, and OMWI, which began its work last year, is in charge of developing the NCUA's diversity policy. The NCUA and other regulators are still developing these policies and rules on how they will develop these standards.

The Credit Union National Association (CUNA) in a letter sent to the NCUA late last month urged the agency to implement diversity standards "in a manner that would minimize the information gathering and reporting burden on credit unions." (See related March 28 News Now story: Avoid CU burdens in diversity policy: CUNA to NCUA)

OMWI in its annual report noted that credit unions have suggested applying the diversity standards only to "large credit unions with sufficient resources."  The agency said that some credit unions may face challenges in developing their own diversity policies and programs, as their limited number of employees, geographic location, and field of membership may limit their opportunities to truly diversify their own staff.

The office added credit unions have offered various suggestions to NCUA on how to implement the diversity policy assessment standards, such as developing diversity best practices and model diversity standards that credit unions could use as guides, and allowing credit unions to perform self-assessments of their own diversity practices.

The NCUA also said credit unions have requested NCUA use Equal Employment Opportunity Commission data to gauge credit union diversity compliance, in some cases.

OMWI also noted that its own efforts to work with a more diverse group of outside contractors have had positive results, with the NCUA's changes to procurement practices resulted in the amount of contracting dollars that were awarded to women- and minority-owned businesses doubling between 2010 and 2011.

For the full NCUA report, use the resource link. See particularly Part III on "Regulated Entities."

CFPB can cut CU reg burden on TILARESPA form says CUNA

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WASHINGTON (4/18/12)—As the Consumer Financial Protection Bureau (CFPB) moves to the final stages of its project to integrate Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures into a single form, the Credit Union National Association (CUNA) has provided a number of specific recommendations the bureau could take to reduce the regulatory burdens faced by credit unions.

In a letter to CFPB Director Richard Cordray, CUNA Senior Assistant General Counsel Jared Ihrig said CUNA supports the CFPB's work to consolidate the mortgage disclosures currently required by TILA and RESPA, and added that credit unions will welcome the elimination of the duplication which has been inefficient for consumers and industry for the past many years.

However, CUNA said, the CFPB's stated goals of speeding up the lending process to benefit the consumer and improving the accuracy and clarity of disclosures for consumers are admirable objectives, but added that it will be difficult to achieve both goals through the same regulatory change.

The mortgage form changes will require significant systems, software and operational changes within credit union mortgage lending departments, and the costs of most of these changes will likely be passed on to consumers, CUNA said. "These costs will significantly increase the cost to lenders of originating mortgage loans, and ultimately, the consumer will face these increased costs in either rate or fee adjustments, which will have the end result of further tightening the availability of mortgage credit for consumers," the letter adds.

CUNA in the letter requested that the CFPB give credit unions and other financial institutions at least one year to comply with the TILA/RESPA changes, once they are finalized. The agency should also attempt to minimize implementation costs for credit unions and exempt credit unions from portions of the regulation, where possible.

The letter also urged the CFPB to remove parts of the proposed changes that would require lenders to maintain "standardized, machine-readable" electronic versions of the proposed loan estimate and settlement disclosure forms that are provided to consumers, and recommended that the CFPB not expand its definition of "finance charge" to include currently excludable real estate and other charges.

The CFPB continues to work toward final versions of the combined TILA/RESPA forms, and the agency is required to publish a proposed rule and proposed disclosure forms by July. The regulations are scheduled to be finalized by Jan. 21, 2013.

For the full CUNA comment letter, use the resource link.

Hawaii First FCU joins CDFI leaders program

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WASHINGTON (4/18/12)--Hawaii First FCU, Kamuela, Hawaii, is among the 16 native community development financial institutions (CDFIs) taking part in the CDFI Fund's Leadership Journey, a capacity building initiative designed for Native American organizations.

The program, which the CDFI Fund has named The Leadership Journey: Native CDFI Growth & Excellence, is a two-year training program that aims to help participating organizations develop their staff and organization.

Representatives of the 16 organizations met earlier this year in Albuquerque, New Mexico, to discuss a myriad of business issues, including staff and human resource management, finance, sustainability practices, and succession plans. Three other similar meetings are scheduled for this group, and the first of those meetings is scheduled to be held in New Orleans, La., between May 7 and 11 of this year.

Other participants include the Community Development Financial Institution of the Tohono O'odham Nation, the Citizen Potawatomi Community Development Corporation, the Council for Native Hawaiian Advancement, the Four Bands Community Fund, the Hopi Credit Association, the Indian Land Capital Company and the Karuk Community Loan Fund, Inc. The Lakota Fund, Mazaska Owecaso Otipi Financial, Inc., Native Community Finance, the Navajo Partnership for Housing, Inc., Niijii Capital Partners, Inc., the Northern Shores Loan Fund, Inc., the Northwest Native Development Fund, and Salt River Financial Services Institution are also taking part, according to the CDFI fund.

For the full CDFI Fund release, use the resource link.

LuetkemeyerScott bill would address ATM disclosure problems

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WASHINGTON (4/18/12)--Legislation that would ease current ATM fee disclosure regulations "will protect credit unions and other ATM operators from frivolous lawsuits while at the same time maintaining important consumer protections," Credit Union National Association (CUNA) President/CEO Bill Cheney said.

The bill, H.R. 4367, was introduced by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.) on Tuesday.

Regulation E currently requires credit unions and other financial institutions that provide ATM services to display a notice on the ATM that a fee will be charged. More detailed ATM fee information must also be provided before the transaction is completed, either by showing it on the ATM's screen or providing the ATM user with a small printed disclosure before the consumer is committed to paying the fee.

Under the legislation, ATMs would only be required to display the ATM disclosures on a screen, and give ATM users the choice of opting in to such a fee. The physical ATM fee disclosure notice requirement would be eliminated.

Cheney thanked the congressmen for offering the legislation, calling the bill common sense legislation that will reduce regulatory burden without harming ATM users. He said CUNA looks forward to working with them as the bill makes its way through Congress.

ATM disclosure requirements have caused issues for credit unions and other financial institutions. CUNA has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb. CUNA recently estimated that the total number of these lawsuits could be in the hundreds.

CUNA this week communicated with the Consumer Financial Protection Bureau on the ATM issue, telling that agency that it has "more than sufficient authority" under the Dodd-Frank Wall Street Reform Act and the Electronic Fund Transfer Act to amend Regulation E and eliminate the requirement for on-machine ATM fee disclosure notices. (See related April 17 News Now story: CUNA details how CFPB could address ATM issue)

Lawsuits brought against credit unions and banks alleging violations of the ATM-fee disclosure regulations are on the increase again, this time on the West Coast with the latest filed against a credit union in Washington state. (See related News Now story: ATM fee-notice lawsuits spread to West Coast)

Inside Washington (04/17/2012)

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  • WASHINGTON (4/18/12)--In early March, the Federal Reserve released 513 of about 7,000 pages of transcripts of the Federal Open Market Committee (FOMC) meetings from 2007 through 2010, according to a March 7 letter from FOMC Secretary William English (The Wall Street Journal April 17). Typically, the Fed releases full transcripts of its policy-making meetings five years after the sessions. But when news organizations requested transcripts of the meetings that centered on the 2008 financial crisis, the Fed released redacted documents that did not reveal any substantive content. The transcripts reflect who attended the meetings, some comments during the meeting, but no discussion of economics or policy. The minutes said Federal Reserve Chairman Ben Bernanke called the meetings to order, introduced staff presentations, honored departing colleagues and adjourned the sessions for lunch …
  • WASHINGTON (4/18/12)--An American Banker article (April 17) described how bank regulators are taking a look at old compliance standards, including the Bank Secrecy Act--a compliance area that also causes angst among credit unions as well as banks. BSA and anti-money laundering (AML) violations decreased to seven in 2011 after reaching double-digits in 2006, according to BankersOnline.com, a website developed by bank consultants. Violations are expected to increase as regulators concentrate on risk management and compliance, observers said in the Banker article. Earlier this month, the Office of Comptroller of Currency cited Citibank for failing to maintain adequate internal controls and effective independent testing in its AML compliance programs …
  • WASHINGTON (4/18/12)--A coalition of 32 lender, realtor, consumer and civil rights groups on Friday urged the Consumer Financial Protection Bureau (CFPB) to include a broadly defined "qualified mortgage"--or QM--designation as part of its Dodd-Frank Act-mandated ability-to-repay final rule. In a letter to CFPB Director Richard Cordray, the trade groups said: "[A]n unnecessarily narrow definition of QM that covers only a modest proportion of loan products and underwriting standards, and serves only a small proportion of borrowers, would undermine prospects for a housing recovery and threaten the redevelopment of a sound mortgage market." The trade groups noted that Congress intended that all creditworthy borrowers--especially low- and moderate-income borrowers and families of color--should be extended the protections of a QM. "Creating a broad QM, which includes sound underwriting requirements, excludes risky loan features, and gives lenders and investors reasonable protection against undue litigation risk, will help ensure revival of the home lending market," the letter said. The Credit Union National Association (CUNA) supports a proposed safe-harbor rule. This proposal will make compliance less resource intensive for credit unions. CUNA will monitor the progress of the rule and work with the CFPB to ease the compliance burden for credit unions …
  • WASHINGTON (4/18/12)--Thomas M. Hoenig and Jeremiah O. Norton were sworn in Monday as members of the board of directors of the Federal Deposit Insurance Corp (FDIC). Prior to joining the FDIC's board, Hoenig was the president of the Federal Reserve Bank of Kansas City and a member of the Federal Reserve System's Federal Open Market Committee from 1991 to 2011. Norton joins the board after serving as an executive director at J.P. Morgan Securities in New York. He was in government for a number of years before that, most recently as the deputy assistant secretary for financial institutions policy at the U.S. Treasury Department. Norton also was a legislative assistant and professional staff member for Rep. Edward R. Royce (R-Calif.) …
  • WASHINGTON (4/18/12)--The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to enhance and align their strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease, in order to help more homeowners avoid foreclosures.  According to an announcement, the effort will be executed in stages with the first taking place in June. A new, aligned timeline will include the requirement that mortgage servicers review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer. Also with the alignment, FHFA said, servicers will be required to do the following: review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer and a complete borrower response package; provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days; and, make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer and complete borrower response package. The regulator also noted that by yearend, Fannie Mae and Freddie Mac will announce additional enhancements addressing borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance …

Let Congress set privacy rules CUNA tells CFPB

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WASHINGTON (4/18/12)--The Credit Union National Association (CUNA) has urged the Consumer Financial Protection Bureau (CFPB), which sought comments on a proposal that is intended to protect privileged information provided to the agency, to postpone its rulemaking pending action in the Senate on legislation to accomplish similar goals.

A recent CFPB proposal seeks to clarify that protections such as the attorney-client privilege would not be waived when information is provided to the CFPB and when such information is transferred from the CFPB to other federal or state agencies.

However, there is a concern, CUNA said, because the CFPB does not have statutory authority to ensure that will be the case.

Legislation that would provide these types of protections passed the House earlier this year, and similar legislation could soon be considered in the Senate.

CUNA Deputy General Counsel Mary Mitchell Dunn in a comment letter said it is concerned that the CFPB's intent to address privacy issues on its own could encourage the Senate not to act, "thus foregoing an important opportunity to provide a stronger statutory basis for the protection of privilege than the CFPB's rule would afford, given the current uncertain legal foundation."

The letter also noted that the CFPB may not have the statutory authority to alter rules that generally govern when privileged information is and is not protected. "This doubt will persist even in the face of regulatory amendments that purport to have the force of law, even though that is the agency's objective by seeking public comments," the letter added.

If new privacy protections are, eventually, implemented, CUNA encouraged the CFPB to set parameters on the kinds of materials that the agency will request from financial institutions that it supervises and to first seek information that is not privileged.

For the full comment letter, use the resource link.

SBA seeks non-profit lenders for 2nd round of program

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WASHINGTON (4/18/12)—The U.S. Small Business Administration (SBA) has opened its second round of a program intended to provide long-term loans to eligible non-profit intermediary lenders to finance loans to small businesses.

Eligible intermediaries must have at least one year of lending experience; they include state and federal credit unions, certified nonprofit Community Development Financial Institutions, private, nonprofit community development corporations, consortiums of private, nonprofit organizations or community development corporations, or agencies or nonprofit entities established by Native American tribal governments.

Under the Intermediary Lending Pilot (ILP)Program, SBA makes loans of up to $1 million to participating lenders. The lenders then use the funds to make smaller loans to newly established or growing small businesses.

SBA said in a release it anticipates that an ILP Program participant will re-lend the funds approximately 2.5 times over the 20-year term.

The program funded 20 ILP intermediaries in 2011; none of them were credit unions, however. The agency hopes to identify another 20 participants this year in the second round.

Use the resource link for more program information.

CUNA details how CFPB could address ATM issue

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WASHINGTON (4/17/12)--The Consumer Financial Protection Bureau has "more than sufficient authority" under the Dodd-Frank Wall Street Reform Act and the Electronic Fund Transfer Act to amend Regulation E and eliminate the requirement for on-machine ATM fee disclosure notices, Bill Cheney, president/CEO of the Credit Union National Association (CUNA), said in a recent letter to the agency.

Regulation E currently requires credit unions and other financial institutions that provide ATM services to display a notice on the ATM that a fee will be charged. More detailed ATM fee information must also be provided before the transaction is completed, either by showing it on the ATM's screen or providing the ATM user with a small printed disclosure before the consumer is committed to paying the fee.

CUNA has noted that credit unions and others have found that the outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb. CUNA in the letter estimated that the total number of these lawsuits could be in the hundreds.

CUNA in its letter to CFPB Director Richard Cordray said "Congress has provided the agency with general and specific authority to relieve the burdens of Regulation E for certain service providers, consistent with sufficient consumer protection.

"We believe Congress intended for the agency to use this authority to ensure those institutions that are not abusing consumers may be relieved from certain burdens under the rule—and we believe this congressional intent applies to the regulation of remittances as well as to ATM fee notices," the letter added.

"Moreover, sound public policy supports removal of the on-machine ATM fee notice requirements given that these notices are replicated on-screen and are of questionable utility to ATM users," Cheney wrote.

The letter follows a recent meeting between Cordray and CUNA's Executive Committee and senior staff in which the CFPB director asked for CUNA's analysis of how the CFPB could address the ATM issue. CUNA has also discussed this issue on several occasions with the CFPB director and has written about it in comment letters and other communications to the agency.

CUNA is also pursuing a legislative remedy to this ATM problem, working with other financial advocacy organizations to forestall litigation related to ATM fee disclosure notices.

CFPB overdraft plan needs more comment time says CUNA

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WASHINGTON (4/17/12)--Overdraft protection is an extremely important topic for credit unions, which offer a variety of related programs, and the Credit Union National Association (CUNA) has asked the Consumer Financial Protection Bureau (CFPB) to extend a comment period for its overdraft fee initiative, which is scheduled to end on April 30.

In a communication to Dan Sokolov, CFPB deputy associate director for research, markets and regulations, CUNA requested an additional 30 to 45 days to develop comments on the issue. "We want to make sure the agency has the information it needs," CUNA Deputy General Counsel Mary Mitchell Dunn told Sokolov.

The CFPB earlier this year announced a new overdraft fee initiative, under which the bureau distributed questionnaires to large banks in an effort to evaluate how those institutions' overdraft policies affect consumers.

The CFPB has said it is particularly focused on the practice of re-ordering purchases and payments to maximize overdraft fee charges, on whether consumers can anticipate and avoid overdraft fees, and on how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.

The CFPB has said it plans to use overdraft comments from consumers, the financial services industry, and other interested parties to craft new overdraft fee disclosures and rules, assist with policymaking on overdraft practices, and to prioritize the bureau's regulatory and education work. (See related Feb. 23 News Now story: CUs represented in CFPB overdraft discussion.)

The CFPB is also considering requiring a so-called "penalty- fee box" – which would add information on the amount overdrawn  and total overdraft fees charged each month to a consumers monthly checking account statement.  The bureau also is developing a consumer overdraft fee education project.

Robert Allen, president/CEO of Long Island, N.Y.'s Teachers FCU, and CUNA Regulatory Counsel Jared Ihrig were among those that met with the CFPB earlier this year to discuss the overdraft fee project and other issues with CFPB staff.

Allen told the CFPB that credit unions support meaningful overdraft fee disclosures, but added that the CFPB needs to consider the costs that credit unions and other institutions would bear as it addresses overdraft fee issues. He noted that credit unions routinely charge lower overdraft fees than those charged by banks, and said his credit union refunds many account fees and makes financial counseling available to members.

Fed seeks summary judgment in interchange case

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WASHINGTON (4/17/12)--The Federal Reserve in a brief filed Friday asked the U.S. District Court for the District of Columbia to declare summary judgment in its favor in a case brought against the regulator by a coalition of retailer organizations seeking to invalidate the Fed's debit card interchange rule.

NACS, National Retail Federation, Food Marketing Institute, Miller Oil Co. Inc., Boscov's Department Store LLC, and the National Restaurant Association filed their own motion early last month, seeking a summary judgment ruling declaring the interchange rule and a network non-exclusivity regulation invalid.

The Fed's initial interchange proposal originally would have set a per-transaction debit interchange fee cap of between 7 and 12 cents per transaction. However, after receiving more than 11,500 comments, the Fed decided to add many costs related to debit card use, such as network connectivity, hardware, software, and labor costs, in the calculation of the final debit card interchange cap, and settled on a final debit interchange rule that caps fees for issuers with assets of $10 billion or more at 21 cents.

The merchants' motion claimed the Fed's interchange rule exceeds the authority granted to it by Congress, arguing that the final rule is "arbitrary, capricious" and "an abuse of process." (See related March 6 News Now story: Retailers file for summary judgment on interchange rule)

In its April 13 legal brief, the Fed argued that its final interchange fee regulation "complies in all respects" with the authority granted to the Fed by the U.S. Congress "to promulgate regulations regarding interchange transaction fees in debit card transactions and network exclusivity and routing."

The Fed also argued that Congress granted the Fed the authority to "consider other costs specific to a particular electronic debit transaction" as it developed the interchange fee regulation.

"Congress provided only limited guidance on how the Board should fulfill its statutory mission, and thereby expansively delegated to the Board authority to fill statutory gaps in establishing the statutory standard," the Fed said.

The merchants' claims that fixed authorization, clearance, or settlement (ACS) costs, transaction monitoring costs, fraud losses, and network processing fees should not have been included in the final interchange fee calculation were also challenged by the Fed brief. Nothing in the interchange statute prohibits the Fed "from taking network processing fees paid by issuers as part of the ACS costs considered as part of the interchange fee standard," the Fed's brief said.

The merchant representatives are scheduled to reply to the Fed's request for summary judgment on May 11. The Fed is then scheduled to reply to that merchants' brief on June 1.

The Credit Union National Association (CUNA) this year joined the Financial Services Roundtable, the Clearing House Association, the National Association of Federal Credit Unions, the Midsize Bank Coalition of America, the Independent Community Bankers of America, the Consumer Bankers Association, the National Bankers Association and the American Bankers Association to file a friend of the court brief asking the court to dismiss the merchant's case.

The friend of the court brief maintains that the final interchange fee is too low, as it does not allow debit card issuers to cover their costs and receive a reasonable rate of return on their investments. The joint brief also described how small and large financial institutions are harmed by the Fed's tight fee ceiling, and underscores that consumers have not seen any pricing benefits for products and services promised by the merchants when they were fighting for a government-set cap on what card issuers may charge for their services. (See related March 16 News Now story: CUNA, coalition seek dismissal of merchant interchange suit)

CU CEO decries flood of regulations at field hearing

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CLEVELAND, Ohio (4/17/12)--Although credit unions did not cause the financial crisis, "they have been subjected to a flood of regulations that create an unnecessary burden without any measure of the effectiveness of these changes," Stan Barnes, president/CEO of Canton, Ohio-based CSE FCU said during a Monday House subcommittee on financial institutions and consumer credit field hearing in Cleveland, Ohio.

Barnes in his statement noted that Ohio credit unions have been subjected to more than 160 new rules and regulations from 27 different federal agencies since 2008, and added that there are at least 27 rulemaking proposals pending at various agencies, including the National Credit Union Administration (NCUA), the Federal Reserve, and the Consumer Financial Protection Bureau.

He said credit unions have told the NCUA that the agency's examiners "are practicing regulatory micromanagement and overreach," and "are dictating the business of operating a credit union."

Steps to stem this tide have been suggested by the Credit Union National Association (CUNA) and credit unions, and Barnes repeated this call in his testimony, suggesting that the NCUA impose a moratorium on new regulations for at least the next six months and reinstate the Regulatory Flexibility Program, "which provides well-managed and well-capitalized credit unions an exemption from regulations that are not statutorily required."

The credit union CEO also told members of the committee that the Financial Institution Examination Fairness and Reform Act (H.R. 3461), which is sponsored by the subcommittee chair, Rep. Shelly Moore Capito (R-W. Va.), and its ranking subcommittee member, Rwp.  Carolyn Maloney (D-N.Y.), "would be a positive step in balancing the relationship between the regulated and the regulator."

The hearing also featured testimony from Bill Blake, senior vice president and associate general counsel for KeyBank; Courtney Haning, chairman, president and CEO of Peoples National Bank; Steven Fireman, president and general counsel of the Economic and Community Development Institute; and Martin Cole, president and CEO of Andover Bank.

For more testimony from the hearing, use the resource link.

Inside Washington (04/16/2012)

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  • WASHINGTON (4/17/12)--The working relationship of the Federal Deposit Insurance Corp. board marked a time of change as Thomas Hoenig and Jeremiah Norton officially took their seats on the board Monday (American Banker April 16). Martin Gruenberg took over as acting chairman for the departed Sheila Bair, who resigned in 2011. Thomas Curry left for the Office of Comptroller of Currency. Bair, Gruenberg and Curry were largely united in their votes as board members. Gerard Comizio, a partner at Paul Hastings and a former official at the Office of Thrift Supervision expects the new board will have more view points and will have to work harder to gain consensus …
  • · WASHINGTON (4/17/12)--The Treasury Department's investments made during the financial crisis are expected to return $179 billion to U.S. taxpayers, according to a report issued by the department Friday. Among the Treasury's investments were the Troubled Asset Relief program, which will earn a gain on its investment in banks but is expected to result in a net loss largely due to funds spent to rescue Chrysler and General Motors and to help troubled homeowners. Treasury also bailed out Fannie Mae and Freddie Mac, an investment which is projected to result in a net cost to taxpayers of $28 billion through fiscal year 2022. Treasury also estimated that it will earn a total of $26 billion from its money market fund guarantee program and its mortgage-backed securities purchase program. "Collectively, these programs--carried out by both a Republican and a Democratic administration--were effective in preventing the collapse of the financial system, in restarting economic growth, and in restoring access to credit and capital," the report said. "They were well-designed and carefully managed. Because of this, we were able to limit the broader economic and financial damage" …

NCUA bans former FCU employee for theft

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ALEXANDRIA, Va. (4/17/12)--The National Credit Union Administration (NCUA) Monday issued an order prohibiting Nicole M. Vincent, a former employee of Bangor (Maine) FCU, from participating in the affairs of any federally insured financial institution.

The NCUA reported that Vincent was convicted of theft by unauthorized taking or transfer and was sentenced to 15 days in prison.

It is a felony offense to violate a prohibition order; such a breach is punishable by imprisonment and a fine of up to $1 million.

Use the resource link to view NCUA enforcement orders.

Sherman boosts CU capital bill in iRoll Calli

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WASHINGTON (4/17/12)--A bill to broaden credit unions' ability to build capital would simply fix a flaw in current law that unfairly punishes healthy credit unions for growing to meet the needs of their members and their communities, writes Rep. Brad Sherman (D-Calif.) in an op-ed in the Monday issue of Roll Call.

Sherman and Rep. Pete King (R-N.Y.) introduced the Capital Access for Small Businesses and Jobs Act (H.R. 3993) in February to allow credit unions additional sources of capital.  Currently capital can only be built from retained earnings.

"This bipartisan legislation simply gets the government out of the way, allowing credit unions to expand consumer access to their affordable financial services while improving the overall safety and soundness of the credit union system.

"The bill makes a simple fix to current law to boost economic growth without spending a dime of taxpayer dollars or adding to the deficit," the Sherman op-ed says.

Sherman says the result of the current law's inflexibility on capital for credit unions results in credit unions of all sizes being forced to turn away deposits and scale back on lending to limit their growth.

"(The current) capital-based standards were never intended to discourage manageable asset growth by well-managed, financially healthy credit unions, yet that is exactly what is happening in every part of the country.

"As consumers and small-business owners will tell you, this is a real problem that harms everyone looking for reasonably priced financial services," Sherman writes.

Sherman notes that H.R. 3993 ensures adequate safeguards. It gives the National Credit Union Administration the flexibility to adjust capital requirements in response to changes in economic conditions. That flexibility, Sherman adds, is something the U.S. Congress has already provided to every other financial regulator.

"Credit union access to supplemental capital does not cost the taxpayer a dime and would not disturb the cooperative and mutual structure fundamental to the credit union model, and it has no bearing on the federal tax status of credit unions. By definition, our bill excludes any form of supplemental capital that would alter the cooperative nature of the credit union.

"Best of all, unlike other financial institutions, no credit union ever accepted a taxpayer bailout or Troubled Asset Relief Program money, and today we are eager to put more of their capital to work to help sustain the recovery," Sherman writes.

Roll Call is a widely read publication covering Capitol Hill.

CUNA asks Fitch to revise MBL statements

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WASHINGTON (4/17/12)--The Credit Union National Association (CUNA) asked Fitch Rating Services to revise or reconsider a statement critical of credit union business lending that the ratings agency issued late last week, pointing out information about credit union lending that the statement's authors "may not have been aware" of in preparing their message.

"I would hope that you might consider revising or extending your remarks after reviewing this additional information," CUNA Chief Economist Bill Hampel said in an email to the statement's authors.

In preparing his comments, Hampel underscored that credit union member business lending (MBL) is a safe and sound activity and that pending legislation to increase the MBL cap includes provisions that allow only safe and measured growth.

He noted that to ensure that pending legislation does not increase risk to credit unions by lifting the MBL cap to 27.5%, both the House (H.R. 1418) and Senate (S. 2231) bills explicitly contain the following three provisions a credit union must meet to go beyond the current 12.25% cap. The credit union:

  • Must have at least five years of experience making business loans;
  • Must have been above 80% of the cap for at least four consecutive quarters; and
  • Would be allowed to increase business lending by no more than 30% in any one year, under a tiered approach.  
Hampel also reminded that credit unions are not novices to member business lending, with some credit unions having been engaged for decades.

To assuage any doubt regarding whether a shortage of small business credit has existed throughout the recession and its aftermath, Hampel cited the monthly survey results generated by the National Federation of Independent Business, which show a reading of negative 11 for availability of credit.

Hampel reiterated a CUNA point that the NFIP has also made: any time there is an increase in the supply of a product, small business loans in this case, users of that product will find more of it available, on better terms, and more of it will be consumed.

"In other words, small businesses would benefit from this bill," Hampel noted.

Hampel also warned to be wary of banking groups' "analysis" of the number of credit unions that are impaired by the current low lending cap.

In assessing the need for a higher MBL cap to further help small businesses, CUNA classifies as:

  • "At the cap" all credit unions with MBL to asset ratios of 10% to 15%.  For example, for a $100 million credit union with MBLs equal to 11% of assets, just four or five average-sized loans would put them over the cap.  Credit unions in this group essentially have to eschew any new business, keeping their limited remaining cap authority available for existing member borrowers.  There are about 140 such credit unions;
  • "Approaching the cap" those credit unions with between 7.5% and 10% of assets in MBLs.  On average, these credit unions will reach the cap in about two-and-a-half years at recent growth rates.  There are about 170 such credit unions; and,
  • "Feeling initial constraints of the cap" those credit unions with MBL to asset ratios of between 5% and 7.5%.  At their recent fairly rapid growth rates, these credit unions too would be capped in about two-an- a-half years.  There are about 210 such credit unions.
In total, these roughly 500 credit unions account for about 75% of credit union business loans subject to the cap and they have to progressively retard their business lending the closer they get to the cap.

To the Fitch writer's stated concern that smaller credit unions with limited resources might find it difficult to successfully compete in a larger business loan environment, Hampel reminded that MBL legislation would not require--nor would allow-- all credit unions, of all sizes, to ramp up business lending facilities. 

"Any significant increase in business lending at credit unions would come only from those credit unions that already have extensive experience in business lending," Hampel said, and pointed out that National Credit Union Administration rules already require a credit union to use the services of an experienced individual (at least two-years) before even setting up a business lending program. 

The CUNA communication, which was also distributed to the legislative directors of every U.S. House and Senate office, also noted that credit union member business loan net charge-off rates have been significantly lower than bank rates year-in and year-out for over a decade.  In fact, CUNA said that since 1997, credit union member business loan net charge-off rates have averaged 0.23%, a figure that is one-fourth the 0.91% bank average over the same period.

MBLs and more on tap as Congress returns

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WASHINGTON (4/16/12)—Although increasing member business lending (MBL) authority for credit unions remains the top priority for the Credit Union National Association (CUNA) and credit unions as members of the U.S. Congress return to Washington this week, CUNA Senior Vice President of Legislative Affairs Ryan Donovan said there are a number of other issues of interest to credit unions brewing.

A vote on  Senate MBL legislation, to increase the lending cap to 27.5% of assets, up from 12.25%, is expected soon, but likely will not happen this week. House MBL sponsor Rep. Ed Royce (R-Calif.) has said that a vote in that chamber would follow a Senate vote.

The House and Senate will remain in session until April 30.  Agendas for this stretch of the congressional calendar are still being developed, but a House Financial Services Committee vote is scheduled this week to address a deficit package that incorporates some changes to the Consumer Financial Protection Bureau (CFPB) and the National Flood Insurance Program (NFIP), among other issues.

Under the House package, funding for the CFPB would be subject to the congressional appropriations process. The NFIP provisions would extend the flood insurance program for five years. Similar NFIP legislation is active in the Senate. The flood insurance program is set to expire on May 31. It has been extended through a long series of short-term extensions since 2008.

Other portions of this package would end the Dodd-Frank Act's so-called "Too Big to Fail" bailout fund and eliminate the Home Affordable Modification Program (HAMP). According to a committee release, the total spending cut package would reduce the national deficit by an estimated $35 billion.

Other pieces of  pending legislation of interest to credit unions include:

  • A bill to permit the National Credit Union Administration to allow credit unions to accept additional forms of capital, provided it does not alter the cooperative ownership structure of credit unions (H.R. 3993); and
  • A bill to ensure that credit unions and other entities or individuals that provide information to the CFPB would not waive their right to privacy protections (S. 2099).
There also are bills to enhance the fairness of financial institution examinations pending in both the House and Senate. Housing finance reform and cybersecurity standard improvements are also current topics of interest in Congress.

Donovan said the 21st Century Postal Service Act of 2012 (S. 1789) is also of interest, as the bill would reduce postal service days from six to five and give the postal service greater flexibility in how it increases its rates.

As noted, the House and Senate will remain in session until late April.

After that, the Senate will take an in-district work period between April 30 and May 6, and then will remain in D.C. until the long Memorial Day weekend. The Senate is then scheduled to be out of session between May 28 and June 3. A nearly monthlong Senate session will begin on June 4 and last until July 1.

The Senate will not be in session the week of July 4, but will return to Washington on July 9. A four-week Washington-based work session will follow.

The House has a similar schedule, but House members will return to their districts in the week before Memorial Day, May 21 through May 25. Unlike the Senate, the House is scheduled to be in session on May 30 and 31. The House has also scheduled a week-long district work period from June 11 until June 15.

Both chambers of Congress are scheduled to begin their summer recesses on Aug. 6.

CFPB accepting comment on Reg Z change

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WASHINGTON (4/16/12)--The Consumer Financial Protection Bureau (CFPB) is considering revising Regulation Z so that a current 25%-of-available-credit limit would apply only to fees that are charged at account opening.

The Fed last year adopted language that would apply the 25% of credit-limit restriction to fees that are charged before an account is opened, such as application fees. That rule was scheduled to go into effect last October, but was blocked by a successful challenge. The CFPB became rule writer of the Reg Z provision under a transfer of responsibilities required by the Dodd-Frank Wall Street Reform Act.  

First Premier Bank and Premier Bankcard LLC last year filed a lawsuit against the CFPB arguing that the regulator was exceeding its authority by seeking to regulate fees that are paid before account opening, and U.S. District Court for South Dakota Chief Judge Karen Schreier granted a motion for preliminary injunction.

The CFPB is considering amending Reg Z to Prompted by this recent litigation, the CFPB said it has proposed amending Reg Z to apply the 25% only to by only applying the 25% limitation to the first year following account opening. The potential amendment will remain open for public comment until June 11.

For a full CFPB release, use the resource link.

FIs could be responsible for third-party actions CFPB

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WASHINGTON (4/16/12)--The Consumer Financial Protection Bureau (CFPB) last week reminded its supervised financial institutions that they could be held responsible for the actions of third-party service providers they contract with, and said it would "take a close look at service providers' interactions with consumers."

The CFPB said it expects the financial institutions that it supervises to maintain effective processes for coping with some of the risks that working with third party vendors can pose. The agency suggested that financial institutions:

  • Conduct adequate due diligence;
  • Review vendor policies, procedures, internal controls, and training materials to ensure they meet high standards;
  • Inform third party vendors of their expectations regarding compliance, and  of the consequences of noncompliance;
  • Establish internal controls and monitoring methods to determine vendor compliance; and
  • Quickly address any consumer issues that may arise due to vendor actions.
For the full CFPB release, use the resource link.

Inside Washington (04/13/2012)

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  • WASHINGTON (4/16/12)--The U.S. Treasury Department's Hardest Hit Fund, which distributes money to state housing agencies to assist troubled borrowers, has been hampered by delays and disagreements with mortgage companies that must participate for the program to succeed, according to a report released last week by the Special Inspector General for the financial bailouts (American Banker April 13). The fund is part of the Troubled Asset Relief Program--known as TARP, a $700 billion bailout package released during the 2008 financial crisis. It was created to shore up Treasury's earlier effort to prevent foreclosures and provide assistance to underwater and unemployed borrowers in some of the country's weakest housing markets. The Treasury Department should have done more to facilitate participation by larger servicers and the government-sponsored enterprises, said Christy Romero, the special inspector general. As of Dec. 31, the fund had spent $217.4 million, or 3%, of the $7.6 billion that it was allocated …
  • WASHINGTON (4/16/12)--Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, said last week that  regulators are unlikely to meet the summer deadline for completion of a rule barring banks from proprietary trading and limiting their investments in private-equity and hedge funds (American Banker April 13).  Plosser said the complexities involving the rule may prevent regulators from meeting the July deadline. Both Federal Reserve Board Chairman Ben Bernanke and Fed Gov. Daniel Tarullo have also indicated that regulators would be late in delivering a final version of the so-called Volcker Rule to Congress. The Fed has received close to 17,500 comments on the rule, which is opposed by many banks and some foreign governments. Much of the criticism is focused on the exceptions allowed by the rule …

FHFA forgiveness plan could spill to private lenders CUNA

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WASHINGTON (4/13/12)--If the Federal Home Finance Administration (FHFA) proposes a mortgage principal forgiveness program, it should take into account any potential spillover effects such a program could have on private sector mortgage modifications, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a letter to Edward DeMarco, acting FHFA director.

The letter follows remarks that De Marco made earlier this week before the Washington, D.C.-based think tank The Brookings Institution. In his speech, De Marco addressed a potential FHFA principal forgiveness program. Such a program would be limited to borrowers with GSE-backed mortgages, and the program would likely impact a fraction of the estimated 11 million underwater borrowers in the country today, De Marco said.

The acting FHFA head outlined his objections to allowing the GSEs to pursue a broad principal forgiveness program for troubled homeowners. "This is not about some huge difference-making program that will rescue the housing market," DeMarco said, adding that the debate over this type of relief is "about which tools, at the margin, better balance two goals: maximizing assistance to several hundred thousand homeowners while minimizing further cost to all other homeowners and taxpayers."

The anticipated benefit of principal forgiveness is that by reducing foreclosures relative to other modification types, losses would be lowered and housing prices would stabilize faster, producing broad market benefits, DeMarco said. However a larger group of underwater borrowers who have remained faithful to paying their mortgage obligations are a greater risk to housing markets and taxpayers, he added. Encouraging their continued success could have a greater positive impact on the recovery of housing markets, he said.

Cheney said CUNA agrees it is important for the FHFA to conduct a thorough up-front analysis of the possible effects of implementing any principal forgiveness program aimed at GSE-backed mortgages. However, he warned, such a program, if implemented, could lead to some of the underwater borrowers without GSE-backed mortgages to seek similar principal forgiveness packages from their lenders or servicers.

"CUNA shares FHFA's concerns regarding the possibility that such a program would incentivize borrowers to strategically default in order to obtain principal forgiveness," Cheney said, adding that an FHFA program may have a domino effect leading to strategic defaults outside of the body of mortgages backed by the GSEs.

In the letter, Cheney said credit unions have traditionally originated high quality mortgage loans with stringent underwriting standards, have had lower default rates than most banks during the recent economic crisis, and have been at the forefront of efforts to provide reasonable mortgage modifications to their members who are in distress. Many credit unions have also sold mortgages to government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, but holding mortgages in portfolio is still a more common practice among credit unions than in other parts of the financial services sector, he added.

Even though an FHFA-sponsored principal forgiveness program would not directly affect credit unions' balance sheets, if such a program spills over into the private sector, CUNA is concerned that it could have a significant negative impact on credit unions with regard to the loans held in their portfolios, Cheney said.

CUs iNational Journali help launch Tampa hospital project

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ST. PETERSBURG, Fla. (4/13/12)--All Children's Hospital in St. Petersburg, Fla., will soon boast a freshly renovated playground for its patients and their families through funds raised with the help of credit unions. Groundbreaking took place Wednesday on the "leave behind" project, which will retrofit an existing playground with special play equipment for ill and injured children and  will honor the 2012 Republican National Convention taking place in nearby Tampa.

Click for slide showCredit union representatives helped kick off a renovation project to benefit All Children's Hospital in St. Petersburg, Fla. at a groundbreaking event this week. CUNA, state credit union leagues, credit unions nationwide and the National Journal are working together on the "leave-behind" project to honor the Republican National Convention to be held in Tampa in August. Shown here breaking ground (L to R): Brendan Garrison; Beth Reinhard of National Journal; Patrick La Pine, president/CEO, League of Southeastern Credit Unions; Cynthia Scott-Butler; Rep. C.W. Bill Young (R-Fla.); Riley Christian; Mike Mercer, CUNA chair and president /CEO, Georgia Credit Union League & Affiliates; Dr. Jonathan Ellen, Interim president/CEO of All Children's; St. Petersburg Mayor Bill Foster; and Caden Riley. (CUNA Photo)
Credit Union National Association (CUNA) Chair Mike Mercer, League of Southeastern Credit Unions President/CEO Patrick La Pine, the National Journal Group's Political Correspondent and event emcee Beth Reinhard, All Children's Hospital's Physician-in-Chief and Interim President Dr. Jonathan Ellen, St. Petersburg Mayor Bill Foster and Rep. Bill Young (R-Fla.) broke ground for the playground project.

Foster said he is "grateful to everyone who is helping to make this playground a lasting legacy for the families of St. Pete."  Young said "seeing all these groups come together to provide a safe place where children can rehabilitate while at the same time play and have fun is a way in which they can give back to our area and demonstrate what the spirit of the upcoming convention is all about."

La Pine noted that Florida credit unions have a long history of supporting All Children's Hospital, with $1.5 million in donations and supporting the development of a 28-bed Pediatric Intensive Care Unit, a state-of-the art dialysis wing, and a new autism center. The playground project gives the league and others a chance "to demonstrate that credit unions are local and give more to their communities than just financial services," he said.

On behalf of the hospital, Ellen thanked the group for making the vision of a therapeutic playground a reality for All Children's patients and their families.

The Republican National Convention is scheduled to begin on Aug. 27 and end on Aug.  30 in Tampa.

A similar project to build a rooftop playground was kicked off last week at Levine Children's Hospital in Charlotte, N.C. Charlotte is the location of the 2012 Democratic National Convention. (See related April 6 News Now story: "CUs help kick off hospital project for conventions.")

Since 2000, credit unions have honored the host cities for each national convention with a "leave behind" project that benefits local communities.

The two 2012 projects will cost a combined $600,000, and credit unions nationwide, the Carolinas Credit Union Foundation, the Southeastern Credit Union Foundation, CO-OP Financial Services, and CUNA Mutual Group are raising funds for the projects.

Credit unions really see this as an opportunity to leave something positive behind that will continue to benefit the Charlotte and Tampa communities long after the balloons have dropped and the convention ended," CUNA President/CEO Bill Cheney said.

NCUA opens registration for Orlando listening session

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ALEXANDRIA, Va. (4/3/12)--Registration for the Orlando, Fla. edition of the National Credit Union Administration's credit union "listening sessions" has opened, the agency said Thursday.

"Stakeholders can now register for any of our first four Listening Sessions, and we expect to open registration for our final two sessions next week," NCUA Chairman Debbie Matz said. "Credit union officials and volunteers are welcome to take this opportunity to tell us how we can improve our exam process, regulations, and any other initiatives to protect credit union safety and soundness," she added.

The NCUA listening sessions will begin on May 2 in Boston, Mass., and are also scheduled for:

  • May 9 in Alexandria, Va.
  • June 5 in St. Louis, Mo.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
For more on the sessions, use the resource link.

NCUA Director of Examinations and Insurance Larry Fazio in the latest NCUA Report said he is interested in hearing opinions on how examiners and credit unions can better "understand and recognize the challenges and demands of their corresponding roles, and the associated points of view," and looks forward to discussing how agency examiners and credit unions can build "a constructive working relationship and trust." (See April 12 News Now story: NCUA suggests CU, agency steps to improve exams)

CUNA talks MBLs in iMarketplace American Bankeri

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WASHINGTON (4/13/12)--Credit unions continue to advocate for increasing the member business lending cap in a number of media outlets, and two notable media appearances were Credit Union National Association (CUNA) comments on American Public Media's Marketplace radio and in the pages of the American Banker.

Marketplace is broadcast across the nation on National Public Radio affiliates. In the Marketplace story, CUNA Executive Vice President John Magill emphasized the benefits of an MBL cap increase, noting that raising the MBL cap "would put $13 billion into the coffers of small businesses that aren't otherwise getting loans--and at no cost to taxpayers."

Sen. Mark Udall's (D-Colo.) MBL cap lift legislation, S. 2231, would increase the MBL cap from 12.25% of assets to 27.5% of assets. Senate Majority Leader Harry Reid (D-NV) has pledged to bring the bill to the floor for a vote following the Senate's return to Washington.

The American Banker story quoted comments CUNA CEO Bill Cheney made in a video message to credit unions on CUNA's home page. The current battle over the MBL bill "isn't about banks and credit unions," but about "small businesses that desperately need access to capital," Cheney said.

In the same story, Ryan Donovan, CUNA senior vice president of legislative affairs, stressed that credit unions' grassroots push in the Senate is going strong and will continue right up until the floor vote. "Our interest right now is making sure that when it happens, that we have the votes. And we're going to get there," Donovan said.

CUNA has also made efforts to refute banker claims ahead of the vote, warning lawmakers to not be fooled by the misinformation being circulated by bankers in a fact sheet sent to all members of Congress. (See May 12 News Now story: CUNA takes on banks for MBL claims)

In a letter to the editor published in The Daily News of Newburyport, Tom Stites, a citizen of Newburyport, Mass., urged Massachusetts Sens. John Kerry (D) and Scott Brown (R), who have voiced support for the state's small businesses, to follow through and vote for the Senate MBL bill.

"Massachusetts' small businesses are a driving force of employment and economic improvement," Stites wrote. "In a recent national survey, 90% of small businesses identified availability of credit as a problem, and 61% of them said it's harder to get loans today than it was a few years ago.

"One of the advantages of credit unions is that they are legally set up as financial service cooperatives, owned by their depositors and governed by elected, volunteer boards of directors," he added. "This is why they don't waste money on elaborate lobbies, have hidden costs or back bad loans."

To read the letter and listen to the radio spot, use the links.

Inside Washington (04/12/2012)

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  • WASHINGTON (4/13/12)--Thomas Hoenig and Jeremiah Norton will begin their terms on the five-member Federal Deposit Insurance Corp. (FDIC) board Monday. Hoenig, who is the former head of Federal Reserve Bank of Kansas City, and Norton, who worked within the Treasury Department and at JPMorgan Chase & Co., will be sworn in for their terms in a private ceremony (American Banker April 12). Hoenig and Norton were nominated by President Barack Obama, but were recommended by Republican lawmakers under rules limiting the number of FDIC board members from the president's party to three. The board will be at its full capacity for the first time since July 2011, but its composition is not complete. Last month, when the Senate confirmed Hoenig and Norton for their terms, it also extended the term for Martin Gruenberg as chairman. However, lawmakers delayed voting on President Obama's nominations for Gruenberg to become the permanent chairman, and for Hoenig to become vice chairman …

S.D. CUs discuss reg burden with CFPBs Cordray Sen. Banking chair

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SIOUX FALLS, S.D.  (4/12/12) --
Click to view larger image CFPB Director Richard Cordray; Leandra English, CFPB senior advisor for external affairs, meet with South Dakota credit unions community banks.
South Dakota credit unions emphasized the importance of helping consumers without adding unnecessarily to their regulatory burden during a meeting in Sioux Falls yesterday with Consumer Financial Protection Bureau  (CFPB) Director Richard Cordray and Sen. Tim Johnson (D-S.D.), the chairman of the Senate Banking Committee.

Robbie Thompson, president of the CUAD, told News Now that Sen. Johnson made clear at the session that he understood that credit unions and community banks did not cause the financial crisis, and said that was why he authored the provision in the Dodd-Frank financial reform law directing the CFPB to consider the impact of its rules on smaller financial institutions, including credit unions and community banks in rural areas.

The Credit Union National Association, the leagues and credit unions supported this key provision.

Click to view larger image Jeff Schmidt, middle, chief operating officer, Voyage FCU, Sioux Falls, S.D., at roundtable of South Dakota credit unions, community banks. (Photos provided by Credit Union Association of the Dakotas)
"This was a great opportunity to hear directly from the CFPB director and receive some assurances that their mission aligns with ours," said Thompson.

"Our credit unions are concerned about the impact of the CFPB on our overall regulatory burden, and any time we have a chance to express this point face to face with the director, it is a welcome opportunity.  We thank Mr. Cordray for his participation and applaud Sen. Johnson in his efforts to ensure that credit unions were included in this meeting with the CFPB."

The roundtable session also included a panel discussion with three financial institution representatives from a larger bank, a community bank, and credit union.

Speaking for credit unions on the panel was Jeff Schmidt, chief operating officer of Voyage FCU in Sioux Falls and chairman of CUAD's governmental affairs committee.  The panel focused on the burdens of regulations and how difficult it can be to manage the load, especially when an institution is smaller in size.

CUs iNational Journali to revitalize playground at Tampa childrens hospital

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ST. PETERSBURG, Fla. (4/13/12)--All Children's Hospital in St. Petersburg, Fla., will soon boast a freshly renovated playground for its patients and their families through funds raised with the help of credit unions. Groundbreaking took place yesterday on the "leave behind" project, which will retrofit an existing playground with special play equipment for ill and injured children suffering from a variety of illnesses and accidents, will honor the 2012 Republican National Convention taking place in nearby Tampa.

Credit Union National Association (CUNA) Board Chair Mike Mercer, League of Southeastern Credit Unions President/CEO Patrick La Pine, the National Journal Group's Political Correspondent and event emcee Beth Reinhard, All Children's Hospital's Physician-in-Chief and Interim President Dr. Jonathan Ellen, St. Petersburg Mayor Bill Foster and Rep. Bill Young (R-Fla.) broke ground for the playground project.

Mayor Foster said he is "grateful to everyone who is helping to make this playground a lasting legacy for the families of St. Pete," and  Congressman Young said "seeing all these groups come together to provide a safe place where children can rehabilitate while at the same time play and have fun is a way in which they can give back to our area and demonstrate what the spirit of the upcoming convention is all about."

La Pine noted that Florida credit unions have a long history of supporting All Children's Hospital, with $1.5 million in donations and supporting the development of a 28-bed Pediatric Intensive Care Unit, a state-of-the art dialysis wing and a new autism center. The playground project gives the league and others a chance "to demonstrate that credit unions are local and give more to their communities than just financial services."

Dr. Ellen thanked the group for making the vision of a therapeutic playground "a reality for All Children's patients and their families."

The Republican National Convention is scheduled to begin on August 27 and end on August 30.

A similar project that would build a rooftop playground was kicked off last week at Levine Children's Hospital in Charlotte, N.C. Charlotte is the location of the 2012 Democratic National Convention. (See related April 6 News Now story, CUs help kick off hospital project for conventions)

Since 2000, credit unions have honored the host cities for each national convention with a "leave behind" project that benefits local communities.

The two projects will cost a combined $600,000, and credit unions nationwide, the Carolinas Credit Union Foundation, the Southeastern Credit Union Foundation, CO-OP Financial Services, and CUNA Mutual Group are raising funds for the projects. National Journal is also sponsoring the renovations.

Credit unions really see this as an opportunity to leave something positive behind that will continue to benefit the Charlotte and Tampa communities long after the balloons have dropped and the convention ended," CUNA President/CEO Bill Cheney said.

NCUA suggests CU agency steps to improve exams

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ALEXANDRIA, Va. (4/12/12)--In this month's National Credit Union Administration (NCUA) Report, Director of Examinations and Insurance Larry Fazio said NCUA examiners and credit union management "can both take a lot of specific steps to contribute to a conducive exam environment."

Fazio said these steps include:
  • discussing expectations;
  • setting ground rules and the exam approach upfront;
  • agreeing to a regular update schedule during the examination so there are no surprises for the examiners or members of a credit union's management team;
  • coordinating how examiners and credit union staff will interact, and how these interactions will impact the credit union; and
  • reviewing the specific risks that were identified during the examination, and discussing how those risks will be resolved.
"Each of these steps largely revolves around effective communication," he said. Fazio noted that the agency will soon kick off a series of "listening sessions" with credit unions across the country.

The NCUA listening sessions will begin on May 2 in Boston, Mass., and are also scheduled for:
  • May 9 in Alexandria, Va.;
  • June 5 in St. Louis, Mo.;
  • June 12 in Orlando, Fla.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
Fazio said during these meetings he is interested in hearing opinions on how examiners and credit unions can better "understand and recognize the challenges and demands of their corresponding roles, and the associated points of view."

He added that he wants to listen to suggestions on best practices NCUA examiners can use to achieve results-oriented examinations conducted with professionalism and empathy, and thoughts on how to build "a constructive working relationship and trust" between examiners and credit unions. He said he is also looking forward to discussing how credit union management should interact with examiners, and how the appeals process for examiner decisions could be improved.

For the full NCUA Report, use the resource link.

CUNA takes on banks for MBL claims

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Click to view larger image Click to download pdf
WASHINGTON (4/12/12)--The Credit Union National Association (CUNA) is warning lawmakers to not be fooled by the misinformation being circulated by bankers in an attempt to derail potential Senate action that could increase the credit union member business lending (MBL) cap."

Sen. Mark Udall's (D-Colo.) legislation, S. 2231, would increase the MBL cap from 12.25% of assets to 27.5% of assets, injecting $13 billion in new funds into the economy and creating 140,000 new jobs, at no cost to taxpayers, CUNA has said. A vote on the Senate bill is expected once members of Congress return to Washington on April 16, and Rep. Ed Royce (R-Calif.), a key sponsor of House MBL legislation, has promised a vote on his bill after any Senate action.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said "bankers have been pelting legislators with twisted facts ahead of the vote."

To challenge this misinformation campaign, CUNA has distributed a fact sheet that corrects banker assertions to all members of Congress.

The fact sheet notes that:

  • Credit unions have been lending to small businesses for more than 100 years;
  • More than 500 credit unions are or will be bumping against the MBL cap in under three years, and the low current cap of 12.25% of assets means that two-thirds of credit unions, most of which hold under $50 million in assets, cannot justify the cost of investing in new business lending programs;
  • The average credit union business loan is $219,000; and
  • MBL cap increase legislation is not, in fact, "controversial," but has been introduced in each of the last four Congresses.
MBL cap increase legislation "is only controversial because the banks don't like it… everyone else thinks it's a no-brainer," the fact sheet adds.

Kids fin lit site launched by NCUA

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ALEXANDRIA, Va. (4/12/12)--Pocket Cents, a new website that introduces young people to the benefits of credit unions and the importance of setting financial goals, was unveiled by the National Credit Union Administration (NCUA) on Wednesday.

During the unveiling,  NCUA Chairman Debbie Matz noted the agency is committed to developing financial literacy materials for people of all ages.

The  new site specifically  includes information and tools to teach school-aged youth about the history of credit unions, how to locate a credit union nearby, and how to start their own credit union at their school. The site also addresses positive financial habits, offers important lessons about the value of a dollar, and, for fun, contains a map section that allows users explore the currencies of different nations.

The Pocket Cents website launch is part of the  NCUA's celebration of April as  national financial literacy month. The agency also is using Twitter and other social media outlets to help increase financial literacy, addressing issues such as taxes, money management for youth, savings, investing, retirement, and homeownership. (See related April 3 News Now story: CFPB, NCUA promote financial literacy month.)

The Credit Union National Association (CUNA) is also marking Financial Literacy Month by continuing its annual sponsorship of the  National Youth Saving Challenge, and credit unions across the country are also encouraging their members to budget, save, manage credit, and pay down debt. (See related March 30 News Now story: April is National

Financial Literacy Month.)

For more on the NCUA's new site, use the resource link.

Inside Washington (04/11/2012)

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  • WASHINGTON (4/12/12)--Mortgage servicers say that upcoming proposed rules from the Consumer Financial Protection Bureau (CFPB) will require come at a high compliance expense that could trickle down to borrowers. The proposed rules, scheduled to be made by the CFPB this summer, would require servicers to provide more disclosures and increased assistance for struggling homeowners (American Banker April 11). Servicers would provide monthly mortgage statements and advance notice of interest rate increases for adjustable rate mortgages, and place new limits on force-placed insurance. Servicers would be required to post mortgage payments promptly, and to increase mortgage holder ease of access to their own account information, and to quickly correct account errors. Compliance with the new changes comes down to technology, observers said. Robert Cook, a partner with HudsonCook LLP, said servicing systems will require reprogramming to meet the new requirements. The faster servicers are required to make the change the more expensive it will be, he said. CFPB Director Richard Cordray said Tuesday the agency understands that a one-size-fits-all approach may not be appropriate for smaller institutions such as credit unions and community banks …
  • WASHINGTON (4/12/12)--Edward DeMarco, the acting director of the Federal Housing Finance Agency outlined his objections to allowing Fannie Mae and Freddie Mac to pursue a broad principal forgiveness program for troubled homeowners. "This is not about some huge difference-making program that will rescue the housing market," DeMarco said. "It is a debate about which tools, at the margin, better balance two goals: maximizing assistance to several hundred thousand homeowners while minimizing further cost to all other homeowners and taxpayers." The anticipated benefit of principal forgiveness is that by reducing foreclosures relative to other modification types, losses would be lowered and housing prices would stabilize faster, producing broad market benefits, DeMarco said. However a larger group of underwater borrowers who have remained faithful to paying their mortgage obligations are a greater risk to housing markets and to taxpayers, he added. Encouraging their continued success could have a greater positive impact on the recovery of housing markets, he said …

CFPB begins mortgage rule discussions

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WASHINGTON (4/11/12)--The Consumer Financial Protection Bureau (CFPB) this week said it is considering a series of new mortgage rules that aim to increase transparency and accountability in the market.

"The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds," CFPB Director Richard Cordray said. "For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It's time to put the 'service' back in mortgage servicing," he added.

The CFPB said it would release an advanced notice of proposed rulemaking this summer, and release the rules for public comment before finalizing them in January of 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long of a transition period is necessary yet.

According to the CFPB, some of the rules under consideration would require:

  • Mortgage servicers to provide regular mortgage statements covering the mortgage loan's principal, interest, fees, and escrow, the amount of and due date of the next payment, and, in some cases, information on financial and foreclosure avoidance counseling;
  • Servicers to warn mortgage holders before interest rate changes are made to their adjustable-rate mortgages; and
  • Increased contact with mortgage holders before foreclosure proceedings can be initiated.
Lenders could also be required to provide greater information on help that is available to homeowners facing foreclosure.

Some of the rules would also address force-placed insurance, which can be purchased by mortgage servicers when mortgage borrowers do not maintain hazard insurance on their properties. Force-placed insurance can often be far more expensive than privately purchased insurance. Under one of the proposals, alternatives to force-placed insurance could be offered to consumers, and warnings and disclosures would need to be provided before force-placed insurance is purchased.

Other proposed rules could require servicers to post mortgage payments promptly after they have been received, to increase mortgageholder ease of access to their own account information, and to quickly correct account errors.

The agency said it may also work with other regulators to collaboratively address mortgage servicing issues. The CFPB said it would meet with a Small Business Review Panel to discuss the proposal and "will also be conducting other outreach to gather feedback from consumer groups, industry, and other agencies."

The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.

For more on the CFPB's potential mortgage servicing rules, use the resource link.

NCUAs Myers outlines CU benefits in iMarketWatchi

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WASHINGTON (4/11/12)--Bill Myers, director of the National Credit Union Administration's (NCUA) Office of Small Credit Union Initiatives, discussed credit unions' benefits to consumers, and more complex issues facing small credit unions in a recent MarketWatch interview.

In a question-and-answer format, Myers said "the cool thing about most credit unions" is their service to small communities, including churches and employees of certain businesses that need tailored financial service offerings. "Depending on what little niche you fit into, there's a credit union for you," he said.

The NCUA official highlighted the fact that credit unions serve individual communities, and as such, "did not get caught up in some of the complex financial practices of the recent bank bust."

Most credit unions don't have the complex financial products a bank has to offer; that is a strength in terms of safety, even if they don't earn as much income as a result, he said.

When asked if lower income levels were a concern, Myers responded, "Well, first, credit unions are member-owned, and don't have to produce profits or please anxious shareholders. But second, and more to the point, not having complex products does hurt the funding, and also causes some customers to drift away. 

"It's especially hard on small credit unions, which are closing or merging at a significant pace: in 1979 there were 22,000, and now there are 7,100 credit unions in the U.S."

However, Myers also noted during the interview that many credit unions are finding their membership increasing as new members that do not trust big banks move to the safety of credit unions.

Call report site enhancements coming NCUA says

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ALEXANDRIA, Va. (4/11/12)--An enhanced version of the National Credit Union Administration's (NCUA) Credit Union Online system will be unveiled in May, the NCUA said in the April edition of its NCUA Report.

The Credit Union Online system allows credit unions to file 5300 call reports and to post profile information on their credit union, submit data to the agency, and receive key bits of information from the NCUA.

The changes, according to the NCUA, will include an enhanced user interface, the ability to convert call report and profile information into .pdf files, and other basic interface changes that will help users make their call report calculations and avoid leaving information out of their profiles.

The agency said it would provide more information on these and other changes to the system in an upcoming webinar. The webinar has not been scheduled at this time.

For the full NCUA report, use the resource link.

Hyland Fin Lit month good for aiding members employees

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ALEXANDRIA, Va. (4/11/12)--As credit unions celebrate April's Financial Literacy Month, credit union leadership should ask what they can do to empower their employees and members financially, National Credit Union Administration (NCUA) Board Member Gigi Hyland said in this month's NCUA Report.

Hyland said "the terminology of financial literacy is shifting to a more holistic and robust view of financial empowerment," a view that goes beyond simple financial literacy. "Financial empowerment is the process of increasing capacity of members to make financial choices and to transform those choices into desired financial goals.

In her column, Hyland noted that credit unions, "because of their philosophy and structure, are uniquely poised to serve as financial empowerment agents."

"How can you meet your members where they are in life to help them achieve their financial dreams? How can you offer an array of products and services that accomplish the dual goals of making good business sense and financially empowering your members," Hyland asked.

The NCUA this month is using Twitter and other social media outlets to help increase financial literacy, and will focus its outreach on issues such as taxes, money management for youth, savings, investing, retirement, and homeownership. (See related April 3 News Now story: CFPB, NCUA promote financial literacy month.)

The Credit Union National Association (CUNA) is also celebrating Financial Literacy Month by again sponsoring its annual National Youth Saving Challenge, and credit unions across the country are also encouraging their members to budget, save, manage credit, and pay down debt. (See related March 30 News Now story: April is National Financial Literacy Month.)

For more of this month's NCUA Report, use the resource link.

Inside Washington (04/10/2012)

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  • WASHINGTON (4/11/12)--Two years after the federal government eliminated its Federal Family Education Loan Program in 2010--ending subsidies for student loans originated by private lenders--the student lending market faces more changes. Starting on July 21, lenders must report their practices, including the underwriting standards they use and the pricing and terms of their loans, to the Consumer Finance Protection Bureau (American Banker April 10). Sen. Richard Durbin (D-Ill.) is pushing a measure that would allow private student loans to be discharged in bankruptcy. President Barack Obama in January announced a plan to expand the Federal Perkins Loans Program to $8 billion from $1 billion, which could cut the market share of financial institutions by expanding the availability of lower-cost federal loans to students. Concerns have surfaced about rising default rates on student loans. Americans now owe more than $1 trillion in student debt …
  • WASHINGTON (4/11/12)--In the aftermath of the financial crisis, financial stability policy is considered to stand on equal footing with monetary policy as critical responsibilities of the central bank, Federal Reserve Board Chairman Ben Bernanke said Monday. But predicting the next crisis remains a greater challenge when compared with the Fed's ability to impact economic policy, Bernanke said at the 2012 Federal Reserve Bank of Atlanta Financial Markets Conference in Stone Mountain, Ga. "We have spent decades building and refining the infrastructure for conducting monetary policy," Bernanke said. "And although we have done much in a short time to improve our understanding of systemic risk and to incorporate a macroprudential perspective into supervision, our framework for conducting financial stability policy is not yet at the same level." Since the crisis, the Fed has instituted reforms related to securitizations and structured finance vehicles, money market funds and repurchase agreements to minimize market vulnerabilities, Bernanke said …
  • WASHINGTON (4/11/12)--Financial institutions will be dramatically affected by any reforms to the U.S. Postal Service, which has endured a sharp drop in revenue as a result of the recession and rapid technological change, said the American Bankers Association. More than half of all statements and bills sent through the mail come from financial institutions, including credit unions, according to the U.S. Postal Service (American Banker April 10). Three bills related to U.S. Postal reform are making their way through Congress. One bill would make it easier to raise postage rates above the rate of inflation. Another measure calls for a five-day delivery schedule and closures of postal facilities. Also on the table is a bill that would allow the U.S. Postal Service to provide non-postal services such as check cashing …

CDCU reps nominated for CFPB advisory panel

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WASHINGTON (4/10/12)--Three community development credit union (CDCU) representatives, heeding the encouragement of the National Federation of CDCUs, have nominated themselves for membership on the Consumer Financial Protection Bureau's (CFPB) new Consumer Advisory Board.

The federation noted Monday that by the March 30 nominating deadline, the following three individuals were among the nominees for the advisory panel:
  • Bernard Balsis, president, EG FCU, Hilo, Hawaii;
  • Gary Bell, CEO, Cooperative Center FCU, Berkeley, Calif.; and
  • Laura McKinley, interim president/CEO, Georgia Coastal FCU, Brunswick, Ga.
The CFPB's consumer advisory board is expected to be comprised of 20 members with varied backgrounds and the panel is scheduled to meet at least twice a year here to discuss, advise and consult with the bureau of emerging consumer financial issues.

Rafael Morales, public affairs and west coast program officer at the federation, said the above-named nominees are ones that notified the federation of their action, and others in the industry could also have been nominated.

Morales said credit unions, both within the CDCU movement as well as the "broader credit union world," are well-suited for membership to the advisory board.

"We don't know yet how many will be selected, but credit unions were created to maximize service to their members ahead of profits, and this consumer-oriented approach makes them ideal candidates to help guide this new agency," Morales added

N.J. CUs promote MBL benefits via ad

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HIGHTSTOWN, N.J. (4/10/12)--The New Jersey Credit Union League (NJCUL) is publicizing the promise of credit union member business lending legislation through an in-state radio ad and a postcard campaign ahead of a possible vote on a Senate MBL bill later this month.

The NJCUL radio and internet advertisements encourage Sens. Frank Lautenberg (D) and Robert Menendez (D) to vote in favor of Sen. Mark Udall's Credit Union Small Business Jobs Act (S. 2231). The bill, which would increase the MBL cap from 12.25% of assets to 27.5% of assets, is expected to come up for a vote in the Senate after Congress returns from their spring district work period next week. A vote on similar U.S. House MBL legislation has been promised by sponsor Ed. Royce (R-Calif.)

Both bills would inject $13 billion in new funds into the economy and create 140,000 new jobs, according to Credit Union National Association (CUNA) estimates.

The ads also direct listeners to www.bankingyoucantrust.com, a NJCUL website that features information on the MBL legislation and information to help citizens contact their Senators. NJCUL has also sent more than 800 postcards to the two Senators as part of the MBL campaign, and created a website, is also asking credit union employees, volunteers and members to send their own cards in.

"Our ads help communicate the necessity of support from Senators Lautenberg and Menendez and seek to inform New Jersey consumers of the true economic benefits of the Senate lifting the MBL cap. We hope that this is just the push the Senators need to vote yes when the bill comes before the Senate," NJCUL President/CEO Paul Gentile said.

CUNA and state credit union leagues in Arizona, Virginia, Wisconsin, Mississippi, Iowa, Alabama, Nebraska, South Dakota, South Carolina, and Idaho have also released their own radio ads to let small business-owning listeners that have had trouble accessing loans know that "credit unions are ready to lend a hand," and will have more money to lend to them, once Congress moves to increase the credit union member business lending cap. The ads are part of heavy in-district activity, and CUNA has urged credit unions to use every opportunity during the current April District Work Break to speak up on behalf on an MBL cap lift. (See related April 9 News Now story: CUNA/league radio ads tout MBL aid for small biz)

Senate bill would require pre-loan student counseling

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WASHINGTON (4/10/12)--Legislation that would require schools to counsel students before they take out private student loans, and would help students research their own federal student loan eligibility, has been introduced in the U.S. Senate.

The bill, the Know Before You Owe Act of 2012 (S. 2280), is sponsored by Sens. Richard Durbin (D-Ill.) and Tom Harkin (D-Iowa).

Under the legislation, higher education institutions would also require the prospective borrower's school to confirm the student's enrollment status, cost of attendance and estimated federal financial aid assistance before the private student loan is approved, according to a release on Durbin's website. The bill, the release said, would make lenders provide students with quarterly updates on the status of their loans, including details on accrued interest and capitalized interest. Lenders would also be required to inform the Consumer Financial Protection Bureau on their student lending activities.

Information on federal financial aid availability and eligibility, and how taking out a private loan could impact their eligibility for federal loans, would also need to be disclosed ahead of time, the release said.

Another piece of student loan legislation, the Fairness for Struggling Students Act (S. 1102), was introduced by Durbin last year and was discussed at a Senate Appropriations subcommittee on financial services and general government hearing last month.

That bill would treat privately issued student loans the same as other privately issued debt in bankruptcy proceeding by restoring a pre-2005 provision in the bankruptcy code allowing for discharge of privately-issued student loans – like other forms of private debt, including credit cards--in bankruptcy.

The Consumer Financial Protection Bureau (CFPB) is also working to address student loan issues, working with the U.S. Department of Education and launching the "Know Before You Owe" project to help borrowers, including student borrowers, understand debt implications.

The agency has also asked credit unions and other financial institutions, students, the higher education community, and others in the student loan industry to provide information on the role of schools in the private student loan marketplace, student loan underwriting criteria, repayment terms and behavior, loan servicing and loan modification, and financial education and default avoidance.

The full results of this study on the private student loan market will be released this summer. (See related March 28 News Now story: Hearing on student loans set for today)

For prior News Now coverage and the Durbin release, use the resource links.

CUNA seeks comment on FinCEN due diligence plan

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WASHINGTON (4/10/12)--The Credit Union National Association (CUNA) is seeking credit union comment on how the Financial Crimes Enforcement Network's (FinCEN) proposed changes to consumer due diligence (CDD) rules would impact credit union operations and compliance procedures.

FinCEN recently released an Advanced Notice of Proposed Rulemaking (ANPR) proposing to codify, clarify, consolidate, and strengthen current CDD rules.

The proposed CDD rule would apply to financial institutions, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities. A key part of the FinCEN ANPR addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account that is held at an institution to assess the likelihood of suspicious activity.

Credit unions and other institutions would also need to establish and maintain policies for monitoring the accounts they hold under the proposal.

Establishing a uniform CDD regulation would strengthen the ability of financial institutions to identify and report illicit financial transactions, help federal authorities as they investigate potential crimes, and promote greater global financial transparency and aid efforts to combat transnational illicit finance, FinCEN added.

The new regulations, if created, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion, FinCEN said.

In the comment call, CUNA asks credit unions what compliance cost changes, if any, they would need to make if the CDD rule changes are approved. CUNA also asks whether the CDD rules, if approved, should be extended to also cover other institutions covered by FinCEN regulations, including prepaid card providers, money services businesses, non-bank mortgage lenders or originators, and certain other entities. FinCEN has also asked which entities should be exempted from the CDD changes, and how the changes, if adopted, could impact members and customers.

CUNA is accepting credit union comment on the ANPR until April 20. FinCEN will accept public comment until May 4.

For the full CUNA comment call, use the resource link.

Some CUs could be forced out of remittances CUNA

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WASHINGTON (4/10/12)--Credit unions need meaningful relief from the Consumer Financial Protection Bureau's recently adopted final regulation on remittances, Credit Union National Assocation (CUNA) Deputy General Counsel Mary Mitchell Dunn wrote in a comment letter filed yesterday with the agency.

The letter was filed in response to the agency's proposed rule designed to provide some limited relief regarding the regulation of remittances.

A new remittance rule was adopted by the CFPB earlier this year and would require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes. The rule will become effective on Feb. 7, 2013.

The remittances regulation will likely affect most U.S. credit unions that provide consumers with international electronic funds transfer services because it broadly defines the term "remittances" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S., other than most transfers involving credit, debit, and prepaid cards.

Credit unions want to make sure their members are well informed about transactions at the credit unions, including remittances, the letter said. However, many credit unions rely on independent third parties to complete the transfers and do not have control over their activities, making it difficult to provide the disclosure information the CFPB requires, the letter pointed out.

The CFPB has proposed a safe harbor that would exempt credit unions that provide 25 or fewer international consumer-initiated electronic funds transfers per year from all aspects of the rule. However, credit unions performing more than 25 of these transactions a year would be subject to the rule if they provide remittance transfers in the ordinary course of business" under a facts and circumstances test.

The  proposed safe harbor threshold of 25 transfers annually is much too low to provide meaningful relief to credit unions, CUNA stated.

Instead, CUNA urged the agency to provide much broader relief for credit unions under the agency's authority to grant exemptions, which it is authorized to do under the Dodd-Frank Act and the Electronic Fund Transfer Act, which includes the remittance provisions.

Alternatively, CUNA recommended that the agency limit its reach to remittance providers that receive at least 30% of their net income income from remittance transfers. If the agency determines a numerical benchmark is the only approach it can support, then CUNA advocated raising the limit from 25 to 1,000.

The proposed rule also applies to any consumer-initiated electronic transfer using open networks, such as international wire and international automated clearing house (ACH) transactions. International transactions using open networks typically involve three or more financial institutions and, once initiated, the transfer is usually beyond the sending-credit union's control, CUNA has noted.

The open-network transfer rules could create high compliance costs for small credit unions, and force these credit unions with relatively small volume international payments programs to stop offering such programs since they will no longer be economically sustainable.

Overall, CUNA in the comment letter said the CFPB's final remittance rule did not address credit union concerns, and added that some credit unions will be forced to stop offering remittances if they are required to comply with the disclosure requirements as stated in the final rule.

"Credit unions provide these transfers to their members as one of many services they offer and are not in business solely to offer remittance transfers. They are not seeking to charge exorbitant fees or to prevent consumers from having reliable information about their transactions," Dunn said.

CUNA also suggested the agency use its statutory discretion to extend the compliance date by an additional year, but also said the extended compliance date may not be needed if the CFPB made certain changes to the rule, as advocated for by CUNA in its comment letter.

Those changes would include compliance relief for "open network" remittance transfers, preauthorized transfers, and other disclosure changes.

Inside Washington (04/09/2012)

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  • WASHINGTON (4/10/12)--Thomas J. Curry was sworn in Monday to become the 30th Comptroller of the Currency, regulator of more than 2,000 national banks and federal savings and loans, as well as certain federal branches of foreign banks operating in the U.S.  The comptroller also becomes a director on the board of the Federal Deposit Insurance Corp. (FDIC). Curry, prior to being confirmed as comptroller on March 29, served as an FDIC director since 2004, and as chairman of the NeighborWorks America board of directors. NeighborWorks is a coalition of affordable-housing organizations. Among other positions held, Curry served as chairman of the Conference of State Bank Supervisors from 2000 to 2001, and served two terms on the State Liaison Committee of the Federal Financial Institutions Examination Council …
  • WASHINGTON (4/10/12)--A report released last week by the Federal Reserve inspector general (IG) said the Fed was not involved in the 1970s Watergate burglary or arms sales to Saddam Hussein, as alleged by Rep. Ron Paul (R-Texas), who is also a Republican presidential candidate. During a February 2010 hearing with Fed Chairman Ben Bernanke before the House Financial Services Committee, Paul alleged that money used during Watergate scandal "came through the" Fed," and that investigators looking into the scandal "were always stonewalled" by the central bank, the IG said. Paul also alleged that the Fed "facilitated a $5.5 billion loan to Saddam Hussein, who then bought weapons from our military industrial complex …" Following Paul's comments, Rep. Barney Frank (D-Mass.), then the chairman of the committee, asked the Fed to look into the claims. "We did not find any evidence of undue political interference with Federal Reserve officials related to the 1972 Watergate burglary or Iraq weapons purchases during the 1980s," the report said ...

Fed amends Regs D J

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WASHINGTON (4/9/12)--The Federal Reserve has amended its Regulation D, which governs reserve requirements of depository institutions, in a bid to simplify those requirements and reduce costs.

According to the Fed, the amendments simplify reserves administration by:

  • Creating a common two-week maintenance period for all depository institutions;
  • Creating a penalty-free band around reserve balance requirements in place of carryover and routine penalty waivers;
  • Discontinuing as-of adjustments related to deposit revisions;
  • Replacing all other as-of adjustments with direct compensation; and
  • Eliminating the contractual clearing balance program.


The Fed said the amendments will be implemented in two waves.  The contractual clearing balance and direct compensation changes will take effect on July 12. The remaining amendments will take effect on Jan. 24, 2013.

The Fed added that it would notify financial institutions by Nov. 14 if it decides to delay the Jan.24 effective date further.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA supports the changes and the Fed's decision to use staggered effective dates.

The Fed has also amended Regulation J (Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire) to eliminate references to "as-of adjustments."  These changes will take effect on July 12.

For the full Fed release, use the resource link.

NCUA OIG recommends asset management changes

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ALEXANDRIA, Va. (4/9/12)--A National Credit Union Administration (NCUA) Office of the Inspector General (OIG) review of the agency's Asset Management Assistance Center (AMAC) found "deficiencies over the valuation process of real estate owned (REO) by AMAC."

The NCUA's AMAC conducts credit union liquidations and performs management and recovery of assets, and can, at times, assist NCUA regional offices with the review of large complex loan portfolios and actual or potential bond claims, the NCUA OIG said.

Many of the properties cited in the report were owned by now-defunct credit unions Norlarco CU and Huron River Area CU.

Norlarco, of Fort Collins, Colo., was placed into conservatorship by state regulators in May 2007, and the credit union was eventually purchased by nearby Public Service CU, Denver, Colo. Huron River Area CU, Ann Arbor, Mich., was taken under NCUA control in early 2007, and was liquidated later that year.

Credit risk and strategic risk were major factors in the failures of both of these credit unions, and the NCUA OIG in an earlier report on both failures said the management of each credit union failed to adequately manage and monitor the credit risk within their loan programs.

Both failures led to 850 properties that were owned by the credit unions being taken over by the NCUA, and 409 of those properties have been sold so far, the OIG report said. These NCUA-owned properties have sold for around 42.8% of their market value, on average, according to the report.

The NCUA OIG report specifically noted that AMAC did not perform valuations on the properties in accordance with industry standards and did not always maintain proper support for the valuations that were completed.

In the report, the OIG recommended that NCUA AMAC improve its review and documentation process for appraisals over $250,000, perform and document their analysis when determining whether to maintain properties versus selling them in a bulk sale, and improve its account reconciliation processes. Other recommendations were also made, and the AMAC agreed to follow the majority of the recommendations. The AMAC also noted that it has already acted to address some of the deficiencies identified in the OIG report.

For the full OIG report, use the resource link.

CUNAleague radio ads tout MBL aid for small biz

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WASHINGTON (4/9/12)--The Credit Union National Association (CUNA) and state credit union leagues are today letting small business-owning listeners that have had trouble accessing loans know that "credit unions are ready to lend a hand," and will have more money to lend to them, once Congress moves to increase the credit union member business lending cap.

CUNA and the Mountain West Credit Union Association, the Virginia Credit Union League, the Credit Union Association of the Dakotas, the Nebraska Credit Union League, the Wisconsin Credit Union League, the South Carolina Credit Union League, the Iowa Credit Union League, the League of Southeastern Credit Unions, the Mississippi Credit Union Association, and the Idaho Credit Union League are sponsoring radio ads in key states.



The ads seek to increase public support in key markets for legislation that would increase the MBL cap from 12.25% of assets to 27.5% of assets.

Listeners are encouraged to call their senators and ask them to support Senate MBL cap increase legislation. A senate bill that would increase the MBL cap, injecting $13 billion in new funds into the economy and creating 140,000 new jobs, is expected to come up for a vote in the Senate once Congress returns from their spring district work period.

Many of the ads use testimony from local business owners that have been denied by banks, but helped by credit unions.

The ads are scheduled to run in Arizona, Virginia, Wisconsin, Iowa, Alabama, Nebraska, South Dakota, South Carolina, and Idaho radio markets, and are part of an array of in-district activity.

CUNA has urged credit unions to use the current April District Work Break as an opportunity to meet with lawmakers in their home offices, attend town-hall type meetings, and use every opportunity to get across the credit union message that increasing the member business lending cap is good for small businesses and therefore good for the economy.

CUNA nominates 28 for CFPB consumer advisers

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WASHINGTON (4/9/12)--The Consumer Financial Protection Bureau (CFPB) is developing a Consumer Advisory Board to help keep the agency abreast of emerging trends and practices in the financial services and products industry, and the Credit Union National Association (CUNA) last week submitted a list of 28 nominees from credit unions across the country.

"All of these individuals have indicated a willingness to serve and to provide the agency with the benefit of their experience, knowledge and expertise on issues relating to consumer protection, financial institution operations, financial regulations and public policy concerns," CUNA President/CEO Bill Cheney said.

Cheney added that the advisory board "has the potential to be extremely important to the agency in its oversight of consumer protection," and added that CUNA strongly supports "balanced membership on the board who will appreciate the need for protections for consumers in the financial marketplace while understanding the need to avoid burdening entities such as credit unions that already work hard to ensure their members are well served."

The work of the agency "will be enhanced if several members of the board are from credit unions or credit union leagues," Cheney added. The CUNA CEO suggested that nominees that are not accepted for the consumer board be considered for the CFPB's planned Credit Union Advisory Council.

Those interested in more information on the CUNA nominees may contact CUNA Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.coop.

Inside Washington (04/06/2012)

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  • WASHINGTON (4/9/12)--The Office of the Comptroller of the Currency (OCC) Thursday issued a cease-and-desist order against Citibank for allegedly violating the Bank Secrecy Act (BSA). The order requires the Citibank to take corrective actions to improve its BSA compliance program. The OCC found that the bank's BSA compliance program had deficiencies with internal controls, customer due diligence, the independent BSA and anti-money laundering audit function, monitoring of its remote deposit capture and international cash letter instrument processing in connection with foreign correspondent banking, and suspicious activity reporting related to that monitoring. The findings resulted in violations by the bank of statutory and regulatory requirements to maintain an adequate BSA compliance program, file suspicious activity reports, and conduct appropriate due diligence on foreign correspondent accounts, said the OCC. It added that Citibank has begun corrective action, committing to taking all necessary and appropriate steps to remedy the deficiencies identified by the OCC and to enhance the bank's BSA compliance program …

April open NCUA meeting cancelled

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ALEXANDRIA, Va. (4/6/12)--April's open board meeting has been cancelled, the National Credit Union Administration (NCUA) said on Thursday.

That meeting was scheduled to be held on April 12. The closed board meeting that was scheduled for that date will still be held, the NCUA said, and supervisory matters are on the agenda.

This is the second open board meeting the agency has cancelled this year. The NCUA previously cancelled its Feb. 16 open board meeting, with NCUA Chairman Debbie Matz saying board members concluded there were no essential Board action items to publicly consider at that time.

Matz said the agency is "carefully evaluating which NCUA rules need to be streamlined, eliminated or clarified in 2012," and may cancel additional meetings this year, if needed.

Any additional meeting cancellations will be made the month of the meeting.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said the April cancellation is consistent with Matz's recent statement that the agency plans to slow the pace of new regulations. "Any time a regulator avoids issuing new rules, it is a positive development, and we view the cancellation of the April meeting—the second NCUA board meeting cancelled this year—in that light," Dunn said.

CUs help kick off hospital project for conventions

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CHARLOTTE, N.C. (4/6/12)--When the 2012 Democratic National Convention ends, credit unions will leave behind a rejuvenated children's playground on the rooftop of Charlotte, N.C.'s Levine Children's Hospital.

The Credit Union National Association (CUNA), state credit union leagues, credit unions nationwide and the National Journal are working with the Democratic National Convention Committee (DNCC) to complete the project in time for the September convention.

Click for slide showThere was a significant contingent of Carolina credit union representatives at the kickoff event for the rejuvenation of the rooftop playground at Carolinas HealthCare System's Levine Children's Hospital in Charlotte. Shown here from left are: John Radebaugh, president/ CEO of the North Carolina Credit Union League, Raleigh, N.C.; Judy Tharp, president/CEO of Piedmont Advantage CU, Winston-Salem, N.C. ; Maurice Smith, chair, Local Government FCU, Raleigh, N.C.; John Carlson, president/CEO of Sharonview FCU, Fort Mill, S.C.; John Slack, former Carolina Credit Union Foundation (CCUF) CEO; Jennifer Parker, senior vice president, Founders Federal Credit Union, Lancaster, S.C.; Steve Fowler, president/ CEO, South Carolina Credit Union League, Columbia, S.C.; Beverly Gagne, president/CEO, SAFE FCU, Sumter, S.C.; and, John McGrail, CEO, CCUF, Kernersville, N.C. (CUNA Photo)
Credit union volunteers are expected to lend hands-on support to help convert the existing rooftop space on the hospital's 12th floor to a dynamic play area with new features such as a touch-activated light and color "bubble wall," a deck and pavilion, outdoor play equipment and environmental improvements.

The project was launched with a ceremonial "water sprinkling" of freshly planted seeds that will become flowers on the finished playground.

"We're excited to put the credit union philosophy of people helping people into action by helping with this worthy project, and in the process join with the Democratic National Convention to shine a light on the amazing work that Levine Children's does for the communities it serves," John Radebaugh, North Carolina Credit Union League president/CEO, said.

A similar playground renovation project is planned for All Children's Hospital in St. Petersburg, Fla. That project, which will retrofit an existing playground with special play equipment for ill and injured children suffering from a variety of illnesses and accidents, will honor the 2012 Republican National Convention, which will take place in nearby Tampa.

"Credit unions really see this as an opportunity to leave something positive behind that will continue to benefit the Charlotte and Tampa communities long after the balloons have dropped and the convention ended," CUNA President/CEO Bill Cheney said.

Since 2000, credit unions have honored the host cities for each national convention with a "leave behind" project that benefits local communities.

The two projects will cost a combined $600,000, and credit unions nationwide, the Carolinas Credit Union Foundation, the Southeastern Credit Union Foundation, CO-OP Financial Services, and CUNA Mutual Group have begun fundraising efforts.

Bankers friends form SuperPAC

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WASHINGTON (4/6/12)--A group of 10 state banking association leaders have joined together to form a new pro-banker SuperPAC, dubbed "Friends of Traditional Banking."

The SuperPAC's mission, as stated on its homepage, friendsoftraditionalbanking.com, is to support members of Congress that support bank interests, and "to replace those members of Congress who do not."

While political action committees are limited in the amount of money they can spend on a given contest, SuperPACs do not have such limitations. They are only prevented from having direct contact with the candidate they are supporting.

The Washington Post reported that the SuperPAC intends to focus on two electoral contests per cycle.

"Congress isn't afraid of bankers… They don't think we'll do anything to kick them out of office. We are trying to change that perception," Oklahoma Bankers Association President/CEO Roger Beverage told American Banker (April 5).

Credit Union National Association (CUNA) Vice President of Political Affairs Trey Hawkins said the development of this pro-bank SuperPAC highlights the importance of credit union grassroots advocacy, and political action by CUNA's Credit Union Legislative Action Council (CULAC), in this critical election year.

"Many credit union friends in Congress are stepping up on behalf of credit unions in the face of increased banker opposition, and CULAC and credit unions must be there to stand with those who stand with credit unions, especially if our friends are going to find their re-election campaigns targeted by a banker Super PAC," he added.

CULAC has engaged in independent expenditures on behalf of credit union friendly candidates for nearly a decade, and currently collects contributions from more than 29,000 individuals, with the average contributor donating around $65 per calendar year, Hawkins said.

The many, small-dollar individual contributions are indicative of the depth of credit unions' grassroots support, which has always been the movement's greatest political asset, Hawkins added. "We have one great advantage that banks cannot compete with, and that is our 94 million members, 65% of whom say that a candidate's stance on credit union issues matters."

CULAC raised an estimated $1.8 million in funds from credit union supporters in 2011, and those funds were distributed evenly among Republican and Democratic candidates.

CULAC, as of Jan. 1, had nearly $800,000 in funds to spend on 2012 elections.

NCUA names two to new posts

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ALEXANDRIA, Va. (4/6/12)--Ronnie Levine will soon serve as the National Credit Union Administration's (NCUA) chief information officer (CIO), and Tim Segerson will take on the role of deputy director of the NCUA's Office of Examination and Insurance (OEI), the agency announced on Thursday.

Levine most recently served as CIO at the Bureau of Land Management, and has also worked for the Department of Transportation and the Joint Chiefs of Staff. She will replace now retired former NCUA CIO Doug Verner on April 23.

Segerson has worked at the NCUA since 1992, when he first joined as an examiner. He has served as a supervisory examiner, director of supervision, problem case officer, and director of risk management during his time with the agency. He will take on the role of former OEI Deputy Director John Kutchey, who was recently promoted to the OEI deputy executive director position.

NCUA Chairman Debbie Matz said both Levine and Segerson will play key roles in shaping the agency's future. "Their professional backgrounds, personable management styles, and forward looking perspectives are well suited for NCUA. Ronnie will ensure that NCUA stays at the cutting edge of information technology management providing critical support to our examiners, and Tim will facilitate our ongoing efforts to reach out and better communicate with credit unions," she added.

Inside Washington (04/05/2012)

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  • WASHINGTON (4/6/12)--President Barack Obama Wednesday signed into law a bipartisan bill that prevents members of Congress from trading stocks based on nonpublic information they gleaned on Capitol Hill. The STOCK Act amends the Ethics in Government Act of 1978 to require a governmentwide shift to electronic reporting and online availability of public financial disclosure information.  The measure requires that members of Congress and government employees report certain investment transactions within 45 days after a trade mandates that the information in public financial disclosure reports be made available on agency websites through searchable, sortable databases. The bill also includes ethics requirements, including pension forfeiture for corrupt members; mortgage disclosure term requirements; bans on special access to initial public offerings; requirements to report on political intelligence in financial markets; job seeking disclosure requirements; and bans on bonuses for Fannie Mae and Freddie Mac executives …
  • WASHINGTON (4/6/12)--The Federal Housing Administration (FHA) raised credit standards this month to eliminate borrowers who appear to be at risk of default and those who may be disguising bad debt (American Banker April 5). The FHA, which is experiencing financial difficulties, said the move was necessary to protect itself from default by borrowers who have taken on too much debt. Some lenders have said the new requirements will help stop abuses of disputed credit accounts. Because disputed accounts are not factored into a borrower's credit score, some prospective homebuyers' scores are artificially inflated, allowing them to qualify for mortgages while they have unresolved debts. Others lenders say the new requirements further reduce the availability of potential homebuyers at a time when the market is under pressure to grow …

Allow CU derivative investments as risk management tool CUNA to NCUA

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WASHINGTON (4/5/12)--State and federal credit unions should be permitted to manage their interest rate risk (IRR) through investments in derivatives, the Credit Union National Association (CUNA) said in a comment letter sent to the National Credit Union Administration (NCUA).

The NCUA is considering allowing more credit unions to hedge IRR by using limited types of derivatives, and has released an advanced notice of proposed rulemaking on this subject. The agency has suggested that credit unions that demonstrate a relevant, material IRR exposure, have demonstrated the ability to manage derivatives, and have the net worth and financial health needed to manage derivatives could be allowed to invest in interest rate swaps and interest rate caps.

The agency currently allows only a select number of federal credit unions to engage in derivatives through an investment pilot program, but could permit more credit unions to independently use derivatives to hedge IRR.

CUNA commended the NCUA for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third-parties. CUNA also supports granting independent derivative investment authority for certain credit unions with adequate derivatives experience.

The list of derivatives that are approved for credit union investment should include basic interest rate swaps, such as interest rate swaps that are payfixed or receive-floating instruments. These types of derivatives, CUNA said, would offset the credit union's balance sheet since floating rates would be paid on shares and payments with fixed rates would be received from mortgages and loans. CUNA also suggested that interest rate caps could be used by credit unions to hedge IRR. "Certain other types of derivatives to hedge IRR may be appropriate for well managed credit unions as long as they comply with any counterparty requirements, as applicable, as addressed in a regulation," CUNA added.

Any derivatives regulation that is eventually developed by the NCUA should "provide a sufficient number of eligible derivatives counterparties to provide credit unions with greater access to products and more competitive pricing," CUNA said.

For the full CUNA comment letter, use the resource link.

CUNANCUA interest rate risk webinar on April 17

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WASHINGTON (4/5/12)--Credit Union National Association (CUNA) and National Credit Union Administration (NCUA) staff, and a credit union CFO, will team up to offer an April 17 webinar on the NCUA's new interest rate risk (IRR) regulation.

The webinar will feature insight from:

  • NCUA Division of Capital Markets Director J. Owen Cole Jr.;
  • NCUA Division of Capital Markets Deputy Director Mark Vaughn;
  • NCUA Office of Examination & Insurance Senior Capital Markets Specialist Jeremy Taylor;
  • David D'Annunzio Sr., CFO of Charleston, S.C.'s Heritage Trust FCU; and
  • CUNA Senior Economist Mike Schenk.
The NCUA has amended its federal share insurance regulations to include a requirement that federally insured credit unions have both a written IRR policy and an effective interest rate risk management program. Credit unions with less than $10 million in assets are exempted from the new regulation, and a credit union between $10 and $50 million in assets is only subject to the requirements if its first mortgage loans plus investments with maturities over five years equal or exceed 100% of its net worth. The rule will become effective on Sept. 30.

During the webinar, NCUA staff will explain why the agency adopted the rule, which credit unions will be subject to the rule, what is required of those credit unions, and how the rule guidance can help affected credit unions.

Schenk will address recent IRR trends and will bring to light possible future IRR scenarios that credit unions should plan for.

D'Annunzio will discuss the rule and provide practical advice to help prepare and implement the rule from a CFO perspective.

"With the exemptions provided by NCUA to address regulatory burdens on smaller credit unions, about 3,200 credit unions will be subject to this new regulation," noted Kathy Thompson, CUNA Senior Vice President for Compliance. "But the important figure is '800.' That's the number of credit unions that NCUA feels have to build IRR programs and policies to meet agency expectations."

The hour-long webinar is scheduled to begin at 2:00 p.m. CT.

To register for the webinar, use the resource link.

Cheney makes video radio venues for business lending advocacy

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WASHINGTON (4/5/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney emphasized the benefits to small businesses of increased credit union member business lending (MBL) on two fronts Wednesday: in a new CUNA video encouraging all credit unions to seek lawmakers' support for legislation to increase the MBL cap, and during a guest appearance on Bloomberg Radio's Taking Stock with Pimm Fox.



Inside Washington (04/04/2012)

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  • WASHINGTON (4/5/12)--The Federal Housing Administration (FHA) has eased underwriting guidelines for borrowers with ongoing credit disputes. Under new requirements, loans held by borrowers with disputed credit accounts or billings of less than $1,000 will be processed by FHA's TOTAL automated underwriting system (American Banker April 4). The new requirement applies to debts that are at least two years old.  The change is designed to speed up the processing of loans for some borrowers. Borrowers with credit disputes of $1,000 or more must pay them off or start a repayment plan to be considered for a FHA single-family loan, the agency said. Some lenders have said the more rigid requirements could prevent borrowers from qualifying for FHA mortgages. Borrowers have the option of explaining in writing why a collection occurred and why it has not been paid, the FHA said in a letter to lenders on Friday …
  • WASHINGTON (4/5/12)--The Financial Stability Oversight Council, an interagency group headed by Treasury Secretary Tim Geithner, approved a rule outlining how it will designate nonbank financial firms that pose a threat to the system (American Banker April 4). The rule defines a three-step process in identifying nonbank firms, including insurance companies, hedge funds and private-equity firms, as systemically important financial institutions. In the first stage, nonbank firms must have at least $50 billion in assets to be potentially considered systemically risky. A firm must also meet at least one of the following thresholds: $20 billion in total debt outstanding, a minimum leverage ratio of 15 to 1, or $30 billion in gross notional credit default swap outstanding to trigger a closer look by regulators. After the initial evaluation, each company's individual risk profile and characteristics will be considered. Firms that move on to the final stage would receive a notice from the council for additional information such as internal risk management procedures, resolvability, or potential acquisitions that could pose risk to the financial stability of the U.S. The council would then vote on the company's designation, which would require a two-thirds majority and approval from the chairman of the council …

Six banned by NCUA from credit union work

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ALEXANDRIA, Va. (4/4/12)—Six former credit union employees—three from New York, one from Hawaii, one from Kansas, one from North Carolina—have been banned from  participating in the affairs of any federally insured financial institution by the National Credit Union Administration (NCUA).

The NCUA issued prohibition orders to the following individuals:

  • Cynthia Vaughan, a former employee of Rockland Employees FCU, Spring Valley, N.Y., who was convicted of bank fraud.  The NCUA said Vaughan was sentenced to 18 months in prison; three years supervised probation, and ordered to pay restitution in the amount of $150,000;
  • Daniel Mahiai, a former employee of Molokai Community FCU, Kaunakakai, Hawaii, was convicted of embezzlement. Mahiai was sentenced to 27 months in prison; five years supervised probation, and ordered to pay restitution in the amount of $168,280.39, according to the NCUA;
  • Jason J. LaPierre, a former employee of Hudson Community CU, Corinth, N.Y., was convicted of grand larceny and, according to the agency release, was sentenced to a minimum of three to nine years in prison;
  • Joyce Ann Outlaw, a former employee of Shuford CU, Granite Falls, N.C., was convicted of embezzlement. The NCUA said Outlaw was sentenced to 36 months of supervised probation and ordered to pay restitution in the amount of $5,000;
  • Melinda K. Riddle, a former employee of Leavenworth Teachers & Community CU, Leavenworth, Kan., was convicted of theft. Riddle was sentenced to two years supervised probation and ordered to pay restitution in the amount of $66,192.22, the NCUA said; and
  • Nathaniel Ham, a former employee of NY Team FCU, Hicksville, N.Y., was convicted of conspiracy to launder money and engage in monetary transactions involving criminally derived funds.  The NCUA said Ham was sentenced to 32 months in prison; three years supervised probation, and ordered to pay restitution in the amount of $1,136,034.
 

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link to see NCUA enforcement orders online.

iComp Blogi roundup Latest on NCUA CFPB changes

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WASHINGTON (4/4/12)--In the March edition of the Credit Union National Association's CompBlog Monthly Wrap Up, CUNA presents a new list of compliance questions that credit union CEOs should ask members of their staff.

Among the items addressed in this month's list are:

  • Forms and notices that credit unions will need changes if they do mortgage lending, provide risk-based price notices, offer credit cards, and file currency transaction reports or suspicious activity reports;
  • Concerns about how employees and volunteer credit union board members handle confidential information; and
  • The compliance burden of new remittance transfers rules--and a possible exemption.
The March update also highlights some notable upcoming events, including an upcoming Senate vote on legislation that would increase the credit union member business lending cap. The CompBlog update urges all credit unions – even those not involved in MBLs – to make their voices heard in Congress about the need to allow credit unions to better serve businesses.

The CompBlog update also notes some Letters to Credit Unions that are expected to be issued in the near future, as well as a recent NCUA Letter to Credit Unions (No. 12-CU-03) that reminds credit unions that the Temporary Corporate Credit Union Share Guarantee expires on Dec. 31, 2012.

As a result, effective Jan. 1, 2013, National Credit Union Share Insurance Fund coverage on deposits in corporate credit unions will once again be limited to the standard maximum amount of $250,000.

The monthly wrap-up also features effective dates, various new requirements, important compliance articles, and upcoming CUNA training programs.

For more of CUNA CompBlog's monthly wrap up, and other compliance gems, use the resource links.

Inside Washington (04/03/2012)

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  • WASHINGTON (4/4/12)--The Federal Reserve Board has revised the proposed requirements that will determine when a nonbank financial company falls under Federal Reserve supervision as "systematically important." The Dodd-Frank Act specified the Financial Stability Oversight Council can designate a company as "systematically important" if 85% of the company's assets or revenues are related to financial activities. The Federal Reserve issued a draft of the related rule on financial activities in February 2011 but has since revised that rule based on comment letters. The updated proposal issued this week specifies certain activities that are considered "financial," including lending; providing investment or financial advisory services; or exchanging or transfering of money and securities (American Banker April 2). Comments on the proposal are due by May 25 …
  • WASHINGTON (4/4/12)--Thomas Curry will officially become the comptroller of the currency on Sunday. Curry was nominated in June 2011 to lead the Office of the Comptroller of the Currency. Action by the Senate was delayed by political wrangling over nominees for financial regulatory posts, with the appointment confirmed in late March. The previous comptroller, John Dugan, completed his term in August 2010, with the position filled during the interim by Acting Comptroller John Walsh (American Banker April 2). A member of the Federal Deposit Insurance Corp. (FDIC) board since January 2004, Curry previously served as Massachusetts commissioner of banks from 1990 to 1991 and from 1995 to 2003 and is chairman of the board of NeighborWorks America, a non-profit that aids community-based neighborhood revitalization. The Senate also confirmed the nominations of Martin Gruenberg, Thomas Hoenig and Jeremiah Norton to serve on the FDIC board …
  • WASHINGTON (4/4/12)--Democrats on the Senate are pressing the Federal Housing Finance Agency (FHFA) to make further efforts to allow refinancing by homeowners with Fannie Mae and Freddie Mac mortgages (American Banker April 3). In a letter to FHFA Acting Director Edward DeMarco, the 12 Democrats on the committee said the recently announced expansion of the Home Affordable Refinance Program, known as HARP 2.0, falls short in assisting troubled homeowners. The two-page letter makes three specific suggestions: reducing or eliminating loan-level price adjustments for HARP refinances where Fannie and Freddie already carry credit risk; streamlining the refinance process for homeowners with more than 20% equity in their homes; and reducing the risk that Fannie and Freddie will put back mortgages to the loan originator, thereby removing disincentives to refinancing …
  • WASHINGTON (4/4/12)--The Consumer Financial Protection Bureau (CFPB) recently said that, in its interpretation, financial institutions may contribute to qualified profit sharing, 401(k), and stock ownership plans ("qualified plans") for employees and loan originators, if employer contributions to such plans are derived from profits generated by mortgage loan originations. The agency in CFPB Bulletin 2012-02 noted it had received a number of questions regarding the payment of compensation to loan originators under Regulation Z. That rule prohibits payments to loan originators, including mortgage brokers and loan officers, based upon the terms or conditions of the loan such as the interest rate. The CFPB said the compensation rules do not expressly address whether the loan origination provisions apply to contributions made to so-called "qualified plans." The CFPB said it would soon issue a proposed rule on loan origination provisions, and would also address how the compensation rules apply to profit-sharing arrangements/plans "that are not in the nature of qualified plans." ...

NCBA urges members to call for MBL bill support

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WASHINGTON (4/4/12)--The National Cooperative Business Association (NCBA) has asked members of the cooperative community to communicate the crucial funding needs of small businesses, and the importance of supporting credit union member business lending (MBL) cap legislation, to members of the U.S. Congress.

"By allowing credit unions to make more business loans, we'll be putting more Americans to work and improving our economy," NCBA Interim President/CEO Liz Bailey said in a release. The NCBA release cited Credit Union National Association (CUNA) estimates that show that lifting the MBL cap from 12.25% to 27.5% of assets would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

The NCBA release noted that 90% of small business owners that responded to a recent survey said they were having issues accessing credit, with 61% adding that it is harder to get loans today than it was a few years ago. The release asks NCBA members to reach out in support of S. 2231, the MBL cap increase legislation, and adds that one of the easiest ways to help small businesses gain access to the credit they need and start hiring is to lift the credit union member business lending cap.

The National Council of Textile Organizations, the American Small Business Chamber of Commerce, the National Farmers Union, the National Association of Realtors, the Realtors Land Institute, the Small Business Majority, the Society of Industrial and Office Realtors, the CCIM Institute, Americans for Tax Reform, the American Consumer Institute, the Hardwood Federation, the Institute of Real Estate Management, NCB Capital Impact MultiFunding, the National Association of Home Builders, the National Association of Professional Insurance Agents, AMT--The Association for Manufacturing Technology, the U.S. Women's Chamber of Commerce, and the Heartland Institute have also supported increasing the MBL cap in recent weeks.

For the full NCBA release, use the resource link.

CUNA President/CEO Bill Cheney also touted the benefits of an MBL cap increase in a Tuesday Daily Caller editorial. (See related story: CUNA in Daily Caller: MBLs are all about small business)

CUNA in iDaily Calleri MBLs are all about small business

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WASHINGTON (4/4/12)--Lawmakers should cast aside bankers' objections to increasing the credit union member business lending (MBL) cap and recognize that supporting MBL legislation is all about helping small businesses, Credit Union National Association (CUNA) President/CEO Bill Cheney wrote in a Daily Caller blog post Tuesday.

Increased lending to small businesses "shouldn't be about banks versus credit unions," Cheney said.

Legislation that would increase the MBL cap for credit unions from 12.25% of assets to 27.5% of assets is active in both the U.S. House and the Senate, and a vote on S. 509, the Senate bill, is expected to take place once Congress returns from its spring recess. Cheney said "the reality is that credit unions have money to lend, their track record is considerably better than the banks, and freeing up credit unions to do more will enhance competition and marketplace choice."

Banks have kicked their opposition into high gear in advance of this vote, with American Banker Association-backed radio ads playing frequently in Washington, D.C.-area radio markets. The ads, Cheney said, feature bankers grumbling about credit unions but show no concern about what banks would do for small business. "It's not like they haven't had a chance to do something," he said.

Cheney noted that banks currently control 95% of the small business lending market, but said many would think that number was actually 0.95% "the way they have been carrying on in opposition to a bipartisan bill that would let credit unions do more small business lending." Bankers have also continued to complain about the credit union nonprofit tax status during this debate, but those complaints "strike an incredibly false note given the enormity of the taxpayer bailouts that went to their industry," Cheney said.

Credit unions hear all the time from small business owners who have received no help from banks on the credit front, Cheney said, citing a Small Business Majority surveys that in February found 60% of small businesses say it's still too difficult to get a loan. Cheney also noted a January National Federation of Independent Business (NFIB) report that showed a 9% increase in the amount of small businesses that wished to borrow from financial institutions, but no corresponding change in the number of small businesses obtaining credit. NFIB concluded that "the more competition that exists, the more likely small-business owner customers will receive sympathetic consideration for their loan requests, favorable rates (and terms and conditions), and better service, other factors equal."

More competition is sure to ensue if Congress passes S. 2231, the Credit Union Small Business Jobs Act, and Cheney said credit unions are currently working to convince their legislators to lift the cap and let them help their local businesses. Approval of MBL legislation would free up credit unions to make $13 billion in new loans to small businesses in just the first year, giving these businesses the wherewithal to create an estimated 140,000 new jobs, all by simply raising a cap — no expense to the U.S. taxpayer involved, Cheney said.

The Daily Caller is an online news and opinion site co-founded by 20 year print and broadcast journalist Tucker Carlson. For the full post, use the resource link.

Pro-MBL editorials also appeared in the Wisconsin Corporate Report and the Huffington Post on Tuesday. (See related story: HuffPo, Wis. op eds: MBL bill to help small biz grow).

CU-small biz MBL grassroots key in next weeks CUNA

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WASHINGTON (4/3/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney is calling on credit unions to continue--and to redouble--their member business lending (MBL) advocacy efforts during the current April Congressional District Work Period.

Cheney emphasized the importance of credit union and small business meetings with federal lawmakers in their home offices, town hall meetings, and other venues available only when the U.S. House and Senate members are working in-district. The CUNA leader said in addition to face-to-face meetings, credit unions should contact lawmakers on their Facebook pages and through Twitter to urge them to vote in favor of MBL legislation.

Senate Majority Leader Harry Reid (D-Nev.) pledged recently to bring a Senate MBL bill to a vote in the Senate.  While precise timing of that vote is unclear at this point, CUNA President/CEO Bill Cheney noted that it is likely to occur soon after the current two-week District Work Period--making it imperative, he said, for credit unions--and small businesses--to ramp up their grass roots efforts in support of an MBL cap increase.

The Senate MBL bill, now numbered as S. 2231, like H.R. 1418 in the House, would increase the MBL cap to 27.5% of assets, up from 12.25%. Credit unions must meet certain criteria to pursue the higher cap.

A strong credit union-small business effort is particularly critical before the Senate vote, Cheney noted, in light of the intensity of opposition the MBL measure is facing from the banking industry. "They are willing to derail their own pending legislation in Congress--which would help banks--just to try to block a credit union bill, which would help consumers and the economy."

A state and local advocacy push at this time will back up a recent federal-level effort by credit unions to deliver their message to representatives from each of the 535 House and Senate offices as part of the advocacy effort launched in conjunction with the CUNA Governmental Affairs Conference, which attracted more than 4,100 credit union representatives to Washington last week.

During district visits, as credit unions meet with federal lawmakers in their home offices, town hall meetings, and other venues available only when the House and Senate members are working in-district, credit union advocates should urge their senators to vote for MBL bill S. 2231, and ask House members to be ready to approve the House version of the MBL bill (H.R. 1418), Cheney said.

Lawmakers will return to Washington, D.C. the week of April 16.

CUNA continues to maintain its MBL Action Alert with talking points and other tools to help credit unions contact federal lawmakers. See the resource links below.

CFPB NCUA promote financial literacy month

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WASHINGTON (4/3/12)--The National Credit Union Administration (NCUA) and the Consumer Financial Protection Bureau (CFPB) are among the federal agencies observing April's Financial Literacy Month, and both the NCUA and CFPB announced part of their plans for the month on Monday.

The NCUA plans to emphasize social media during the month by using Twitter to release daily postings on many weekly themes, including:

  • Tax tips;
  • Money management for youth;
  • Savings, investing, and retirement; and
  • Homeownership.
NCUA Chairman Debbie Matz said the Twitter campaign continues her agency's commitment "to reaching new audiences and online communities," and the NCUA in a release encouraged credit unions "to reach out to younger members in order to grow and thrive in the future." By redistributing the NCUA's twitter posts, "credit unions can reach out to and educate this important demographic about how to better manage money," Matz added.

The CFPB is active on Twitter and Facebook, but is also taking a more traditional approach this month, scheduling public appearances to promote financial literacy. CFPB Director Richard Cordray will address the CFPB's work on behalf of consumers at the New York Public Library's Financial Empowerment Day on April 21.

Gail Hillebrand, CFPB associate director of Consumer Education and Engagement, will speak earlier in the month, participating in an April 17 Financial Literacy Day event on Capitol Hill. Hillebrand will also take part in the Financial Literacy and Education Summit on April 23. That event will be co-hosted by the Chicago Federal Reserve Bank and Visa Inc.

CFPB Office of Financial Education Assistant Director Camille Busette is also set to appear at an April 19 Texas Panhandle Community Asset Building Forum.

To start the month, the agency also highlighted its new interactive website, Ask CFPB, which features clear definitions of financial terms and products, such as credit reports and reverse mortgages, and also explains many of the terms and features of financial products. The agency in a release also noted the work it has done to gather and address consumer complaints about financial products.

The Credit Union National Association (CUNA) is again sponsoring its annual National Youth Saving Challenge this month, and credit unions across the country are also encouraging their members to budget, save, manage credit, and pay down debt. (See related March 30 News Now story: April is National Financial Literacy Month.)

For more on the NCUA, CFPB and CUNA efforts, use the resource links.

NCUA opens June 5 listening session registration

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ALEXANDRIA, Va. (4/3/12)--The National Credit Union Administration (NCUA) has opened registration for the third date in its series of "listening sessions," a June 5 meeting in St. Louis, Mo.

The session is scheduled to be held between 1 and 4 p.m. ET. Registration will be limited to the first 150 reservations.

NCUA Chairman Debbie Matz noted that the agency is taking its listening tour "to all regions of our nation" in a bid to hear directly from credit union officials and volunteers about how the agency can improve examination processes and reduce or streamline regulations.

The NCUA listening sessions will begin on May 2 in Boston, Mass., and are also scheduled for:

  • May 9 in Alexandria, Va.
  • June 12 in Orlando, Fla.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
For more on the sessions, use the resource link.

Inside Washington (04/02/2012)

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  • WASHINGTON (4/3/12)--Thirty-two Delaware credit union advocates met with the offices of Sens. Tom Carper (D) and Chris Coons (D), and U.S. Rep. John Carney (D) during the Credit Union National Association's Governmental Affairs Conference in Washington D.C. last month. Member business lending (MBL), supplemental capital, and credit union regulatory burden were the top issues credit unions addressed. Among the credit unions that made Hill visits: American Spirit FCU, Newark; Delaware Alliance FCU, New Castle; Delaware First FCU, Wilmington; Del-One FCU, Dover; Delaware State Police FCU, Georgetown; DEXSTA FCU, Wilmington; Dover FCU; Eagle One FCU, Philadelphia; and Sussex County FCU, Seaford. Four small business owners joined the group to tell how their credit unions provided them with loans when banks would not. Eustace Kamanja, owner of Queen Bee Beauty Supply, and his daughter joined American Spirit FCU in visiting with Coons. Coons, who studied for a year in Kenya, spoke to Kamanja in his native language. Dover FCU brought three small business owners: Alisa Adams, owner of Art Fitness, Delaware's first boutique fitness studio; Pam Satterfield, owner of Brookdale Transport, a trucking/hauling business; and Connie Richard, owner of Hartly Family Learning Center. In the photo is Coons, left, and Sharon Schaeffer, CEO of Delaware First FCU (Photo provided by the Delaware Credit Union League)  …
  • WASHINGTON (4/3/12)--The government's focus on fair lending, most notably  represented by the largest mortgage settlement in history and the Consumer Financial Protection Bureau's new authority, has the banking industry nervous (American Banker April 2). Fair lending sessions were packed at a recent Consumer Banking Assocation conference. Organizers provided extra time for additional questions from attendees. Referrals from regulators have accounted for more than 25 open investigations and eight lawsuits and the Justice Department's fair lending unit shows no signs of slowing, Eric Halperin, the Justice Department's special counsel for fair lending, told attendees during one session. Halperin said fair lending is a priority throughout the federal government. Jo Ann Barefoot, a co-chairman at Treliant Risk Advisors, described the "fairness revolution"--driven by Occupy Wall Street, Elizabeth Warren, politicians and the media--that has turned compliance into headline news …

CUs CUNA back 2012 CU Cherry Blossom Run

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WASHINGTON (4/2/12)--Volunteers from the Credit Union National Association (CUNA) were among the many groups that helped make the 2012 Credit Union Cherry Blossom 10-Mile Run happen this past weekend, and all were greeted by fair weather on Sunday, as around 15,000 runners were routed through downtown Washington, D.C.

Click for slide show CUNA Board Chairman and Georgia Credit Union Affiliates President/CEO Mike Mercer (left) and CUNA President/CEO Bill Cheney hit the National Mall in Washington, D.C. Sunday in the pre-dawn hours to prepare for the 2012 running of the Credit Union Cherry Blossom 10-K Run. The annual event raises money for Children's Miracle Network Hospitals. Credit Union Miracle Day Inc., has raised more than $5.5 million for this cause in the 11 years it has sponsored the race. The group is slated to sponsor the race through 2016. (CUNA Mutual Photo)
CUNA volunteers supported the race for the 11th-straight time by working in the race bag check tent.

CUNA employees also took part in the run/walk event, and CUNA also co-sponsored the "Capitol Hill Competition," a race-within-a-race for runners from congressional offices.

This competition set a record this year, with nearly 1,000 runners participating. More than 180 members of the U.S. Congress, and Washington, D.C. Mayor Vincent Gray, served as honorary chairs of the run.

The 10-mile run and 5k run/walk event raises funds for Children's Miracle Network Hospitals, and the title sponsor, Credit Union Miracle Day Inc., has raised more than $5.5 million, including this year's donations of $515,000, for this cause in the 11 years it has sponsored the race. The group is slated to sponsor the race through 2016.

CUNA President/CEO Bill Cheney and other credit union representatives were among those that attended a Friday event to kick off the run. The event, held at Children's National Medical Center in Washington‚ DC‚ featured a craft day for children at the hospital.

"The Cherry Blossom Run has become a rite of spring for credit unions and their supporters, and is becoming one for the Capitol Hill community as well," Cheney said.

"The outpouring of support by credit unions for the race and children's hospitals across the nation--combined with the highest-ever participation from Capitol Hill--ensures that the impact of event will resound throughout credit unions and Washington," he added.

In addition to 93 credit union sponsors from across the country, more than 56 credit union business partners supported the run as well. It is estimated that over 7‚000 of the 15,000 D.C. runners were credit union members.

Also, a pair of Credit Union FREEDOM Ten Mile Runs were held at sites outside of Washington: the U.S. Army Garrison in Wiesbaden, Germany, and Camp Arifjan in Kuwait.