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CU Featured On ABC Affiliate With 'Don't Tax My CU'

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WASHINGTON (5/30/13)--What can one credit union do to support the Credit Union National Association's national "Don't Tax My Credit Union" grassroots campaign?  Mountain CU of Asheville, N.C. got its local ABC affiliate, Channel 13 News, to do a "Reality Check" segment that highlights the credit union difference and how it could be destroyed if credit unions were to lose their current tax status.

"Why don't credit unions pay taxes?" Reality Check host Frank Fraboni is asked to explain.

"Right now they are exempt from state and federal income taxes," Fraboni clarifies, and that's because "they are not-for-profit financial institutions. They were started to serve lower income and modest working class families that ordinary banks wouldn't serve. Now they worry the member-owned institutions could be in jeopardy."

Without the cost of taxes, the piece says, "credit unions can pass the savings on to members." It goes on to note that budget deficits and tax reform discussions have state and federal officials possibly considering credit unions for "additional funding," with possibly devastating effects.

Mountain's CEO, Patty Idol, explains on camera that without the current tax status, the incentive to remain as not-for-profit financial institutions diminishes.  She said big credit unions might convert to for-profit bank charters and small credit union might have to consider liquidation.

"We'd be back to where everything is driven by profits instead of serving our members," Idol says.

"That wouldn't be good for me," says one long-time member. "(Credit unions) are just easier to deal with," says another.

Fraboni said, "For many the credit union is a source of financial support unavailable at traditional banks."

When a third member declares on screen that he is "not happy" about the prospect of taxing credit unions, but "there's nothing you can do about it," Reality Check host Fraboni says credit unions believe there is something you can do about it: Contact your lawmakers and let them know how you feel.

Fraboni wraps up by telling viewers they can get more information on the Don't Tax My Credit Union campaign on the station's website.  News Now readers can use the link below.

CUNA Urges FASB To Drop Credit Impairment Plan

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WASHINGTON (5/29/13)--A Financial Accounting Standards Board (FASB) proposal that would change the methodology for recognizing credit impairment would be detrimental to the credit union system and could have serious, unintended consequences for borrowers and the economy, the Credit Union National Association warned Wednesday, urging the accounting board to abandon the plan.

The FASB proposal is "the most critical regulatory concern credit unions have faced in quite some time, including rules or proposals that have been issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act," CUNA President/CEO Bill Cheney underscored in a letter to the board.

The FASB has proposed an accounting standards update regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions. The proposed model would utilize a single "expected loss" measurement for the recognition of credit losses. It would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an "incurred loss" approach.

Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.

CUNA seriously questions whether the proposal will achieve the FASB's stated objectives and also questions how the proposal will be reconciled with the proposed approach from the International Accounting Standards Board, Cheney wrote.

"Some have concluded that the current methodology for recognizing credit losses did not identify such losses at the largest financial institutions soon enough leading up to and during the financial crisis. However, there is no evidence that the current system is not working well for smaller institutions, including credit unions," the CUNA leader said.

"After reviewing the proposal in detail with our members, accountants, and others, CUNA strongly opposes the proposal and urges the FASB not to proceed with the accounting standards update as issued for comments.

If dropping the proposal is not feasible, CUNA urges the FASB to work with the credit union system to develop credit loss reporting standards for credit unions, separate from those for publicly traded companies, that will reflect the unique business model of credit unions while ensuring credit loss issues are reported appropriately. 

In addition, CUNA is will urge National Credit Union Administration  Chair Debbie Matz and board member Fryzel to officially oppose the FASB proposal in the form of a comment letter from NCUA to the accounting standard setter.

CFPB Issues Exemptions To Ability-to-Repay Rule

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WASHINGTON (5/30/13)--The Consumer Financial Protection Bureau (CFPB) Wednesday finalized changes to rules issued in January that require lenders to determine a borrower's ability to repay before writing a mortgage loan. The changes are designed to make it easier for some credit unions and other small creditors to make mortgage credit available to their communities by exempting them from some provisions of the rule.

The CFPB noted that the amendments are intended to facilitate access to credit by creating the specific exemptions and modifications to its Ability-to-Repay rule for small creditors, community development lenders, and housing stabilization programs.

Credit Union National Association President/CEO Bill Cheney, who was contacted by CFPB Director Richard Cordray personally before the amendments were announced, welcomed the changes, noting, "We are hopeful these adjustments will enable more credit unions to continue to meet their members' borrowing needs in a way that minimizes risk and default."

The CFPB also separately approved an effective date delay, sought by CUNA and others, for a provision in a rule implementing a Dodd-Frank Act amendment prohibiting creditors from financing certain credit insurance premiums in connection with certain mortgage loans.

The rule is slated to take effect on Jan. 10, 2014, along with the Ability-to-Repay rule and other regulations implementing other Dodd-Frank Act mortgage provisions. However, the CFPB plans to seek comment on the appropriate effective date of the credit insurance premiums rule when it issues proposed credit insurance clarifications for public comment, which is expected next week.

Cheney said of the CFPB's action, "The CFPB's six-month delay of the provision on financing credit insurance premiums is key in that it will give credit unions more time to sort out what has proved to be a confusion element of the Dodd-Frank law.

"We appreciate that Director Cordray and the CFPB staff were responsive to the concerns we expressed to them about this provision and the importance of delaying its June 1 implementation."

He also noted, however, that CUNA is reviewing the rule changes in detail. CUNA will assess the impact of the revisions when it has had an opportunity to view the changes in total. CUNA's Regulatory Advocacy will be posting a Final Rule Analysis in the next few days.

The newly approved changes to the Ability-to-Repay rule are also effective on Jan. 10, 2014.  They include:

  • Several adjustments to facilitate lending by small creditors, including credit unions and community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgages annually, as defined in the rule. First, the rule generally extends Qualified Mortgage status to certain loans that these creditors hold in their own portfolios even if the consumers' debt-to-income ratio exceeds 43%. Second, the final rule provides a transition period during which small lenders can make balloon loans under certain conditions and those loans will meet the definition of Qualified Mortgages. The CFPB expects to continue to study issues concerning access to credit and balloon lending by small creditors. Third, the final rule allows small creditors to charge a higher annual percentage rate for certain first-lien Qualified Mortgages while maintaining a safe harbor for the Ability-to-Repay requirements.
  • An exemption from the final rule for certain nonprofit and community-based lenders that work to help low- and moderate-income consumers obtain affordable housing. Among other conditions, the exemptions generally apply to designated categories of community development lenders and to nonprofits that make no more than 200 loans per year and lend only to low- and moderate-income consumers. Similarly, mortgage loans made by or through a housing finance agency or through certain homeownership stabilization and foreclosure prevention programs are exempted from the Ability-to-Repay rules.
  • Establishing how to calculate loan origination compensation: The Dodd-Frank Act mandates that Qualified Mortgages have limited points and fees, and that compensation paid to loan originators, such as loan officers and brokers, is included in points and fees.  This cap ensures that lenders offering Qualified Mortgages do not charge excessive points and fees. The CFPB's amendments provide certain exceptions to this Dodd-Frank requirement that loan originator compensation be included in the total permissible points and fees for both Qualified Mortgages and high-cost loans. Under the revised rule, the compensation paid by a mortgage broker to a loan originator employee or paid by a lender to a loan originator employee does not count towards the points and fees threshold. This amendment does not change the January 2013 final rule under which compensation paid by a creditor to a mortgage broker must be included in points and fees, in addition to any origination charges paid by a consumer to a creditor.

CFPB Offers Guidance On SAFE Act Testing

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WASHINGTON (5/30/13)--States may use the Uniform State Test, developed by the Nationwide Mortgage Licensing System and Registry, as part of a qualified written test under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), according to guidance issued Wednesday by the Consumer Financial Protection Bureau.

The bureau said it was issuing the guidance in response to questions about a section of the SAFE Act that requires state-licensed mortgage loan originators to pass a "qualified written test."  The act states the written test must be developed by the NMLSR.

A Uniform State Test qualifies under the SAFE Act if it includes questions covering all required areas.  Those area include:
  • Ethics;
  • Federal law and regulation pertaining to mortgage origination;
  • State law and regulation pertaining to mortgage origination; and,
  • Federal and state law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.
"Presenting test questions through a UST rather than a separate state test component would not preclude the test from being a qualified test under the SAFE Act, so long as all the requirements for a qualified test are satisfied," the CFPB wrote.

Contact CFPB_SAFEAct_Inquiries@cfpb.gov with any additional questions.

NEW: CU First Quarter Results Show Good Loan, Membership Growth

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ALEXANDRIA, Va. (5/30/13, UPDATED 2:13 p.m. ET)--The National Credit Union Administration just released figures that claim the fastest first-quarter loan growth for federally insured credit unions in five years, as well as membership growth of more than 800,000 new members.

The agency also reports a decline in delinquencies and charge-offs in the first quarter of 2013, and says the first quarter data reflect "continuing overall improvement in the credit union industry's performance."

"As the economic recovery continues, American families are re-gaining their financial footing and so are federally insured credit unions," NCUA Chair Debbie Matz said. "It's encouraging to see delinquencies and charge-offs falling as loan portfolios and membership continue to grow." During the first quarter, the credit unions closed on $600 billion in total loans and, with the membership growth, reached 94.6 million members.

The delinquency ratio of federally insured credit unions declined, dropping 14 basis points (bp) to 1.02%. Net charge-off ratios also dropped significantly by 12 bp points, to 0.61%. The agency notes that the declines reflect significant improvement from the highs of 1.84% for delinquencies and 1.21% for charge-offs reached in 2009.

Read tomorrow's News Now for more on the  first-quarter results.

CU Grassroots Tax Status Advocacy Effort Builds

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WASHINGTON (5/29/13)--Credit unions and their members already are heeding the call from the Credit Union National Association and the state credit union leagues to deliver this message to federal lawmakers: Don't Tax My Credit Union. And CUNA continues to add resources to its Tax Status Toolkit to support advocacy efforts by credit unions and their members.

CUNA and the leagues have launched the large-scale, nationwide grassroots-mobilization campaign just at a time when the U.S. House and Senate have made broad-based tax reform a major priority. 

Social media contacts are among the key components of this grassroots campaign, making results difficult to precisely calculate; however, CUNA's Richard Gose says early indications show the campaign is off to a strong start.  Gose is CUNA senior vice president of political affairs.

He reports that credit union advocates already have initiated 20,000 contacts on the credit union tax status with federal lawmakers via e-mail directly through a special CUNA website alone. Also, there have been 23,000 visitors to that site, DontTaxMyCreditUnion.org, since it was launched just two weeks ago.

"We also have really been impressed with credit unions' willingness to engage their members through social media and other means.  A number of credit unions already have used their own websites to encourage members to get more information about the credit union tax status by going to donttaxmycreditunion.org," Gose notes.

As mentioned, CUNA continues to update its Tax Status Advocacy Toolkit. Recent additions include:

  • An activation plan for credit unions, with step-by-step instructions on how a credit union can engage;
  • Banner ads that leagues or credit unions can post on their websites that point to the campaign site;
  • Don't Tax My Credit Union gear, such as t-shirts that proclaim "I am 1 of the 96 Million: Don't Tax My Credit Union!"; and
  • New statement stuffers, posters, and drive-up envelopes that will help credit unions get the word out about the campaign to their members.
CUNA members can use the resource link to access the toolkit.

CUNA: Derivatives Plan Concerns Include Fee Structure

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WASHINGTON (5/29/13)--While it considers it a positive that the National Credit Union Administration is seeking comment on a proposal to allow eligible credit unions to use simple derivatives to hedge against interest rate risks, the Credit Union National Association says concerns with the proposal are surfacing.

In its May 28 issues of the CUNA Regulatory Advocacy Report, CUNA says the hottest issue surrounding the proposal right now is whether only those who want to participate in the program should bear the costs of applications and the supervision and examination costs associated with it.

"One of the concerns about the possible fees is that such a requirement could set a precedent for a new fee structure from NCUA for other new authority or services that a credit union is permitted to do if NCUA concludes the activity introduces more risk to the National Credit Union Share Insurance Fund," the CUNA  publication notes.

CUNA also notes that restrictions, such as a limit on notational value at 100% of net worth for a Level I credit union and 250% for a Level II credit union, as well as interest rate and maturity caps, have also raised concerns.

CUNA's Examination and Supervision Subcommittee already has had a first meeting with the NCUA to discuss issues associated with the derivatives proposal.  Comments will be due to the agency in early July.

Use the resource links to read the entire issue of the CUNA Regulatory Advocacy Report (members only), and to access more information on the NCUA derivatives plan.

NEW: CFPB Issues Exemptions To Ability-to-Repay Rule

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WASHINGTON (5/29/13, UPDATED 2:42 p.m. ET)--The Consumer Financial Protection Bureau (CFPB) Wednesday finalized changes to rules issued in January that require lenders to determine a borrower's ability to repay before writing a mortgage loan. The changes are designed to make it easier for some credit unions and other small creditors to make mortgage credit available to their communities by exempting them from some provisions of the rule.

The CFPB noted that the amendments are intended to facilitate access to credit by creating the specific exemptions and modifications to its Ability-to-Repay rule for small creditors, community development lenders, and housing stabilization programs.

Credit Union National Association President/CEO Bill Cheney, who was contacted by CFPB Director Richard Cordray personally before the amendments were announced, welcomed the changes, noting, "We are hopeful these adjustments will enable more credit unions to continue to meet their members' borrowing needs in a way that minimizes risk and default."

The CFPB also separately approved an effective date delay, sought by the Credit Union National Association and others, for a provision in a rule implementing a Dodd-Frank Act amendment prohibiting creditors from financing certain credit insurance premiums in connection with certain mortgage loans.

The rule is slated to take effect on Jan. 10, 2014, along with the Ability-to-Repay rule and other regulations implementing other Dodd-Frank Act mortgage provisions. However, the CFPB plans to seek comment on the appropriate effective date of the credit insurance premiums rule when it issues proposed credit insurance clarifications for public comment, which is expected next week.

Cheney said of the CFPB's action, "The CFPB's six-month delay of the provision on financing credit insurance premiums is key in that it will give credit unions more time to sort out what has proved to be a confusing element of the Dodd-Frank law.

"We appreciate that Director Cordray and the CFPB staff were responsive to the concerns we expressed to them about this provision and the importance of delaying its June 1 implementation."

He also noted, however, that CUNA is reviewing the rule changes in detail. CUNA will assess the impact of the revisions when it has had an opportunity to view the changes in total. CUNA will be posting a Final Rule Analysis in the next few days.  

The newly approved changes to the Ability-to-Repay rule are also effective on Jan. 10, 2014.  They include:

  • Several adjustments to facilitate lending by small creditors, including credit unions and community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgages annually, as defined in the rule. First, the rule generally extends Qualified Mortgage status to certain loans that these creditors hold in their own portfolios even if the consumers' debt-to-income ratio exceeds 43%. Second, the final rule provides a transition period during which small lenders can make balloon loans under certain conditions and those loans will meet the definition of Qualified Mortgages. The CFPB expects to continue to study issues concerning access to credit and balloon lending by small creditors. Third, the final rule allows small creditors to charge a higher annual percentage rate for certain first-lien Qualified Mortgages while maintaining a safe harbor for the Ability-to-Repay requirements.
  • An exemption from the final rule for certain nonprofit and community-based lenders that work to help low- and moderate-income consumers obtain affordable housing. Among other conditions, the exemptions generally apply to designated categories of community development lenders and to nonprofits that make no more than 200 loans per year and lend only to low- and moderate-income consumers. Similarly, mortgage loans made by or through a housing finance agency or through certain homeownership stabilization and foreclosure prevention programs are exempted from the Ability-to-Repay rules.
  • Establishing how to calculate loan origination compensation: The Dodd-Frank Act mandates that Qualified Mortgages have limited points and fees, and that compensation paid to loan originators, such as loan officers and brokers, is included in points and fees.  This cap ensures that lenders offering Qualified Mortgages do not charge excessive points and fees. The CFPB's amendments provides certain exceptions to this Dodd-Frank requirement that loan originator compensation be included in the total permissible points and fees for both Qualified Mortgages and high-cost loans. Under the revised rule, the compensation paid by a mortgage broker to a loan originator employee or paid by a lender to a loan originator employee does not count towards the points and fees threshold. This amendment does not change the January 2013 final rule under which compensation paid by a creditor to a mortgage broker must be included in points and fees, in addition to any origination charges paid by a consumer to a creditor.

FASB Credit Impairment Allowance Comments Due Friday

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WASHINGTON (5/29/13)--Credit unions and other interested parties have until this Friday to comment on a Financial Accounting Standards Board (FASB) proposal that could substantially increase the credit impairment allowance for credit unions.

Under an accounting standards update regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions, FASB proposed a model that would utilize a single "expected loss" measurement for the recognition of credit losses. That model would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an "incurred loss" approach.

Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.

CUNA is developing a comprehensive letter to FASB strongly opposing the proposal and issued a Comment Call to credit unions in January.

Use the resource link to access the Comment Call, which includes a detailed summary of the FASB plan.

Treasury Names Virtual Currency Firm As Money-launderer: A First

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WASHINGTON (5/29/13)--The U.S. Treasury Department announced Tuesday that it was entering new territory, for the first time naming a Web-based money transfer system as a financial institution of "primary money laundering concern" under the USA PATRIOT Act.

The subject of the Treasury's action is Liberty Reserve S.A., which a Treasury release said is "specifically designed and frequently used to facilitate money laundering in cyber space."

According to Treasury's charges, "Liberty Reserve is widely used by criminals worldwide to store, transfer, and launder the proceeds of a variety of illicit activities.  Liberty Reserve's virtual currency has become a preferred method of payment on websites dedicated to the promotion and facilitation of illicit Web-based activity, including identity fraud, credit card theft, online scams, and dissemination of computer malware.  It has sought to avoid regulatory scrutiny while tailoring its services to illicit actors."

Treasury said its action Tuesday was taken in coordination with the unsealing of an indictment by the U.S. Attorney's Office for the Southern District of New York, which charged Liberty Reserve and seven of its principals in Manhattan federal court for their alleged roles in running a $6 billion money laundering scheme and operating an unlicensed money transmitting business.

Treasury's Financial Crimes Enforcement Network has issued a notice of proposed rulemaking that, if adopted as a final rule, would prohibit covered U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for foreign banks that are being used to process transactions involving Liberty Reserve. 

The proposal also would require covered financial institutions to apply special due diligence to their correspondent accounts maintained on behalf of foreign banks to guard against any transactions involving Liberty Reserve.  The intention of the new rule would be to cut off Liberty Reserve from the U.S. financial system.

NCUA Approves OPIC Obligations For FCUs

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WASHINGTON (5/29/13)--The National Credit Union Administration this month issued a legal opinion letter that states that federal credit unions are authorized to invest in obligations that are fully guaranteed by the Overseas Private Investment Corp. (OPIC). The opinion could have positive consequences for both credit unions and for overseas cooperatives, according to the World Council of Credit Unions, which sought the agency opinion.

NCUA General Counsel Michael McKenna wrote in the May 14 opinion, "Federal credit unions are authorized to invest in, among other things, 'obligations, participations, securities, or other instruments of, or fully guaranteed as to principal and interest by any ...agency of the United States ...OPIC is an agency of the United States."

The OPIC-guaranteed investments, debentures called Certificates of Participation (COPs),  carry a full faith and credit U.S. government guarantee, similar to U.S. Treasury notes but generally with a higher yield. OPIC uses the funds from the notes to make loans in connection with projects overseas, and the investments from credit unions would be used for credit union or other cooperative development projects.

The credit union COPs investments would help foreign cooperative development on another level, by also enabling the use of government funds for such projects, according to WOCCU.  To use its government funds to support, for example, cooperative development in African countries, OPIC must bring also private U.S. money, such as that invested by U.S. credit unions, into the project.

NEW: CUNA Urges FASB To Drop Credit Impairment Plan

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WASHINGTON (5/29/13, UPDATED 3:29 p.m. ET)--A Financial Accounting Standards Board (FASB) proposal that would change the methodology for recognizing credit impairment would be detrimental to the credit union system and could have serious, unintended consequences for borrowers and the economy, the Credit Union National Association warned Wednesday and urged the accounting board to abandon the plan.

The FASB proposal is "the most critical regulatory concern credit unions have faced in quite some time, including rules or proposals that have been issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act," CUNA President/CEO Bill Cheney underscored in a letter to the board.

The FASB has proposed an accounting standards update regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions. The proposed model would utilize a single "expected loss" measurement for the recognition of credit losses. It would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an "incurred loss" approach.

Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.

CUNA seriously questions whether the proposal will achieve the FASB's stated objectives and also questions how the proposal will be reconciled with the proposed approach from the International Accounting Standards Board, Cheney wrote.

"Some have concluded that the current methodology for recognizing credit losses did not identify such losses at the largest financial institutions soon enough leading up to and during the financial crisis. However, there is no evidence that the current system is not working well for smaller institutions, including credit unions," the CUNA leader said.

"After reviewing the proposal in detail with our members, accountants, and others, CUNA strongly opposes the proposal and urges the FASB not to proceed with the accounting standards update as issued for comments.

If dropping the proposal is not feasible, CUNA urges the FASB to work with the credit union system to develop credit loss reporting standards for credit unions, separate from those for publicly traded companies, that will reflect the unique business model of credit unions while ensuring credit loss issues are reported appropriately.

CUNA Supports Credit Insurance Reg Delay

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WASHINGTON (5/28/13)--In a Friday comment letter, the Credit Union National Association said it supports the Consumer Financial Protection Bureau's decision to give financial institutions more time to comply with pending credit insurance premium financing prohibitions. However, CUNA also urged the agency to implement certain consumer protections without delay.

The CFPB has proposed delaying the June 1 effective date of the prohibition on creditors financing credit insurance premiums in connection with certain consumer credit transactions secured by a dwelling, and CUNA backed this delay.

The agency has proposed this delay to further revise the regulation, which CUNA Associate General Counsel Jared Ihrig noted "has produced a great deal of confusion among credit union mortgage lenders."

CUNA, however, supports retaining the existing effective date of June 1, 2013, with respect to actual single-premium insurance amounts which are added at loan origination. "We believe this important consumer protection should be made effective as soon as possible," Ihrig wrote.

CUNA also urged the CFPB to delay the effective date of this provision for insurance premium amounts other than actual single premiums until at least Jan. 10, 2014, when the remainder of the mortgage loan originator final rule is slated to take effect.

For the full comment letter, use the resource link.

June 5 'Pressing Issues' Audio Conference Is Free To CUNA Members

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WASHINGTON (5/28/13)--The Credit Union National Association is now offering its second "Pressing Regulatory and Compliance Issues Audio Conference" of the year--free to affiliated credit unions--on June 5.

Next Wednesday's program will feature legislative developments, such as:

  • Tax reform and the threat to the credit union tax status; and,
  • CUNA's efforts in the U.S. Congress to provide regulatory relief to credit unions.
On the regulatory side, the program will discuss issues, such as:

  • The Consumer Financial Protection Bureau's (CFPB's)  mortgage lending regulations; the status of regulations that become effective June 1; prohibition on financing credit life/disability, debt cancellation products' prohibition on arbitration clauses; escrow accounts for higher-priced mortgages; as well as the status of regulations to be effective January 2014;
  • A Financial Accounting Standards Board proposal on credit losses; and
  • National Credit Union Administration issues, such as prompt corrective action, the new proposal on derivatives authority  and a quick overview of NCUA actions expected in the second half of 2013.
The final two "pressing issues" session are slated for Sept. 5 and Dec. 5. Topics for those audio conferences will be announced as the programs are finalized.

Use the resource link for registration and more information.

Cheney Report: Low Fees, Free Checking Show CU Difference

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WASHINGTON (5/27/13)--Fostering service excellence is a key tenet of the Credit Union National Association's Unite for Good campaign, and CUNA's new 2013-2014 Credit Union Fees Report shows that many credit unions are providing this excellence to their members by offering reasonable fees and free checking.

Offering reasonable fees and free checking "are values differentiators between credit unions and banks," CUNA President/CEO Bill Cheney said in this week's edition of The Cheney Report.

According to the CUNA fee report:

  • 80% of credit unions with checking services still offer free checking, compared to 39% of banks;
  • The median overdraft protection fee at credit unions is $25, compared to median fees of $30 at banks and $35 at larger banks; and
  • The average nonmember credit union ATM fee, for those that charge them, is $2.10. Banks on average charge non-customer fees of $2.50 per transaction.

These types of pricing differences, which are rooted in credit unions' structure and philosophy, "really resonate, especially with younger consumers," and present great marketing and media opportunities, Cheney stressed. "More will see us as such knowing we're not the ones pummeling them with fees," Cheney said.

This week's Cheney Report also includes:

  • Tax advocacy tips, and the latest on tax reform efforts;
  • Details on Foreign Account Tax Compliance Act costs for credit unions; and
  • CUNA's new Consumer Financial Protection Bureau remittance rule survey.

Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs. The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

Congressional Recess Gives CUs Tax-status Advocacy Opportunity

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WASHINGTON (5/28/13)--Credit union supporters can keep up their advocacy efforts by acting locally and speaking up for the credit union tax status and other credit union priorities as members of the U.S. Congress return to their home districts for the Memorial Day district work period, the Credit Union National Association said.

"We need to make sure the importance of maintaining the credit union tax status, and other issues, are at the forefront of legislators' minds as they return to their home districts. Any face time with legislators is time well spent," CUNA Senior Vice President of Political Affairs Richard Gose said.

Tax status advocacy is the clear top priority, as the U.S. House and Senate have made broad-based tax reform a major priority. CUNA has joined with affiliated state credit union leagues to launch a large-scale, nationwide grassroots-mobilization campaign urging credit union members across the country to deliver a united message to the U.S. Congress: "Don't tax my credit union!"

Credit unions are vying with 400 other groups that are also working to preserve their own tax preference, and CUNA has provided several tips to help credit union tax status outreach efforts. CUNA has suggested that credit unions:

  • Encourage members to visit www.DontTaxMyCreditUnion.org where they can watch our educational video and take action to email their member of Congress;
  • Encourage members to download the CUNA Advocacy App for iPhone and Android smartphones; and
  • Work with CUNA and their state leagues to set up Vine campaigns in their credit union branches and offices (see CUNA tax advocacy toolkit for more information on Vine).
"The conversation with them needs to begin now, and our action will need to be sustained at least through the end of the year, perhaps longer. The tax status will not be secure until the process is complete," Cheney said.

CUNA has suggested that credit union supporters can ask members of Congress that already support the tax status to speak with leadership and members of the key tax-writing committees. Credit union comments should focus on the need to maintain the federal tax status, not the fact that credit unions pay state and other taxes. And the message should remain consistent, whether the legislator is a member of the House or Senate: Tell them "Don't tax my credit union."

More information to help credit unions with these efforts is included in a special CUNA tax advocacy toolkit.

To learn more about CUNA's and the leagues' "Don't Tax My Credit Union" campaign, use the resource link.

NCUA Lifts Arrowhead Central CU Conservatorship

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ALEXANDRIA, Va. (5/27/13)--Last week's announcement that control of the once-conserved Arrowhead Central CU has been returned to its members "is a positive step for the credit union, and a positive sign of the continued improvements in the economy and the credit union system," Credit Union National Association President/CEO Bill Cheney said.

The National Credit Union Administration made the announcement on Friday. Arrowhead is the first credit union since 2007 to emerge from conservatorship, the NCUA noted.

The NCUA took the 116,000 member, $755 million-in-assets credit union into conservatorship in June 2010. At that time, Arrowhead's net worth ratio had fallen to 3%. Then-CEO Larry Sharp and three other senior-level employees were replaced by the agency due to the credit union's declining financial condition.

"From day one, we were dedicated to restoring sound operations and safeguarding members' hard-earned money," NCUA Chairman Debbie Matz said.

The agency said NCUA staff, a new leadership team, and a 10-member advisory board worked together to strengthen Arrowhead's loan underwriting standards, control costs and restore net worth.

The credit union last week reported a net worth ratio of 10.5%, quarterly net income of $5.6 million, and membership of more than 116,000, the NCUA said.

For more, use the resource link.

CUNA Contacts Fed For More Interchange Survey Info

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WASHINGTON (5/24/13)--While a new Federal Reserve survey claims the interchange fee cap exemption is working for small issuers, details about credit unions' experience in this area are not fully reflected and the Credit Union National Association is talking with the agency to find out more about the survey results, CUNA President/CEO Bill Cheney said Thursday.

CUNA continues to closely monitor the impact of the interchange cap and whether market forces appear to drive down the fees that the exemption for smaller institutions is intended to protect.

"These results are welcome in the short term for credit unions across the country, but we continue to have grave concerns about debit interchange income for credit unions over the longer term, and question whether these results will stand over time," Cheney said.

The information was gathered from survey responses from the payment card networks and 102 small depository institutions. CUNA has reached out to the Fed to clarify how many of these respondents were credit unions, since the number is not apparent from the information released.  The Fed had asked 1,000 small financial institutions to take part in the survey.

The Fed's final rule implementing the interchange law capped large issuer debit interchange fees at 21 cents. An additional five basis points per transaction may be charged to cover fraud losses, and an extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.

Information on network exclusivity provisions and compliance costs is also included in the Fed report.

For the full Fed release, use the resource link.

Electrical Workers #527 FCU Declared Insolvent

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ALEXANDRIA, Va. (5/24/13)--Electrical Workers #527 FCU of Texas City, Texas, with 527 members and assets of $622,857, was declared insolvent Thursday by the National Credit Union Administration, which liquidated the credit union upon determining it had no prospect of restoring viable operations.

The credit union was chartered in 1963 and served a number of select groups centered primarily on electrical workers in the Texas City area.

It is the seventh federally insured credit union liquidation in 2013.

Member deposits are federally insured by the National Credit Union Share Insurance Fund up to $250,000 and within a week the NCUA's Asset Management and Assistance Center will issue checks to individuals holding verified share accounts.

Economic Growth Continues, NCUA Economist Reports

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ALEXANDRIA, Va. (5/23/13)--The improving economy, and how it could impact interest rate risks faced by credit unions, are addressed by National Credit Union Administration Chief Economist John Worth in a new YouTube video.



The video is the latest in a 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.

House Approves Federal Student Loan Rate Flexibility

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WASHINGTON (5/24/13)--Legislation that would tie student loan interest rates to 10-year U.S. Treasury notes, and allow those student loan rates to reset each year, was passed by the U.S. House on Thursday.

The Smarter Solutions for Students Act (H.R. 1911) passed the House by a 221 to 198 vote.

According to a U.S. House release, H.R. 1911 would:

  • Calculate subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury note plus 2.5%;
  • Calculate graduate and parent PLUS loans using a formula based on the 10-year Treasury note plus 4.5%;
  • Cap Stafford Loan interest rates at 8.5% and cap PLUS loans at 10.5%.
The bill will now move on to the Senate. The federal student loan rate is currently capped at 3.4%, and this limit will double to 6.8% on July 1 if Congress does not take action.

Other student loan fixes introduced in the House and Senate include:

  • The Student Loan Affordability Act (S. 953), which would cap federal student loan rates at 3.4% for another two years;
  • The Bank on Students Loan Fairness Act (S. 897), which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%; and
  • The Student Loan Fairness Act (H.R. 1330), which would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate.
Sen. Kirsten Gillibrand (D-N.Y.) this week also announced the Federal Student Loan Refinancing Act, which would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%.

The Credit Union National Association's first annual High School Student Borrowing Survey, released last month, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.

In a recent meeting with Consumer Financial Protection Bureau officials, CUNA said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for an April 23 News Now story: CFPB Seeks CU Help For Student Loan Issues.)

NEW: NCUA Lifts Arrowhead Central CU Conservatorship

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ALEXANDRIA, Va. (UPDATED: 5/24/13, 12 p.m. ET)--Control of the once-conserved Arrowhead Central CU has been returned to its members, the National Credit Union Administration reported today.

Arrowhead is the first credit union since 2007 to emerge from conservatorship, the NCUA noted.

"This is a very positive step for Arrowhead Central and its members, and a positive sign of the continued improvements in the economy and the credit union system," Credit Union National Association President/CEO Bill Cheney said.

The NCUA took the 116,000 member, $755 million-in-assets credit union into conservatorship in June 2010. At that time, Arrowhead's net worth ratio had fallen to 3%.

"From day one, we were dedicated to restoring sound operations and safeguarding members' hard-earned money," NCUA Chairman Debbie Matz added.

The agency said NCUA staff, a new leadership team, and a 10-member advisory board worked together to strengthen Arrowhead's loan underwriting standards, control costs and restore net worth.

The credit union this week reported a net worth ratio of 10.5%, quarterly net income of $5.6 million, and membership of more than 116,000, the NCUA said.

For more, use the resource link.

Bipartisan CU MBL Bill Spreads Freedom, CEI Writes

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WASHINGTON (5/23/13)--Credit union member business lending (MBL) legislation should be cheered not just because of its bipartisanship, but because it "spreads freedom" and "lifts regulatory barriers to an untapped source of capital for startups: America's credit unions," Competitive Enterprise Institute Senior Fellow for Finance and Access to Capital John Berlau wrote in a recent openmarket.org blog post.

Berlau in his post noted that credit unions have stepped up to fill the funding void felt by many small businesses and startups. "But because of government barriers to credit union business lending, thousands of entrepreneurial ventures may be unnecessarily deprived of the seed capital credit unions could provide to them," he wrote.

U.S. House (H.R. 688) and Senate (S. 968) bills would help rectify this situation by increasing the credit union MBL cap from 12.25% of assets to 27.5%. The Credit Union National Association has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

"The modest hike in the lending cap would pay big dividends for entrepreneurs and the economy," Berlau wrote.

S. 968, which was introduced by Sen. Mark Udall (D-Colo.) earlier this month, currently has 14 co-sponsors. H.R. 688, introduced by Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.), has 94 co-sponsors.

For the full CEI piece, use the resource link.

CUNA Nationwide Webinar Rallies CUs For Grassroots Tax Battle

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WASHINGTON (5/23/13)--Credit union efforts will have to be bigger, louder, and stronger than ever to preserve the credit union tax exemption as tax reform discussions gain momentum in the U.S. Congress. In a nationwide webinar Wednesday, the Credit Union National Association urged credit unions to engage their 96 million members and help them join the fight to support the credit union tax status.

"We're talking about delivering one message, millions of times, starting today...and the message is simple; the message to Washington is 'don't tax my credit union," CUNA President/CEO Bill Cheney said.

He noted that CUNA research has found that two out of three credit union members--potentially 63 million members--are willing to email the U.S. Congress when asked by their credit unions. "We just have to ask them to do so," CUNA Senior Vice President of Political Affairs Richard Gose said.

Credit unions are vying with 400 other groups that are also working to preserve their own tax preference, CUNA staff noted. To ensure that they are heard above the din, CUNA, the leagues, and credit union supporters and members will need to be persistent.

"Our action will need to be sustained at least through the end of the year, perhaps longer. The tax status will not be secure until the process is complete," Cheney said.

CUNA has joined with affiliated state credit union leagues to launch a large-scale, nationwide grassroots-mobilization campaign urging credit union members across the country to deliver a united message to the U.S. Congress: "Don't tax my credit union!"

The campaign is being launched at a time when the U.S. House and Senate have made broad-based tax reform a major priority. The initiative will urge lawmakers as part of any final tax reform plan to preserve the federal tax exemption credit unions receive as not-for-profit, member-owned cooperatives.

"There is no light switch to turn on 96 million activists," Cheney emphasized during the webinar. "The conversation with them needs to begin now," he told the more than 2,000 credit union webinar participants.

To help in member engagement efforts, CUNA suggests credit unions:
  • Encourage members to visit www.DontTaxMyCreditUnion.org where they can watch our educational video and take action to email their member of Congress; 
  • Encourage members to download the CUNA Advocacy App for iPhone and Android smartphones; and,
  • Work with CUNA and their state leagues to set up Vine campaigns in their credit union branches and offices (see CUNA tax advocacy toolkit for more inforamtion on Vine).
More information to help credit unions with these efforts is included in a special CUNA tax advocacy toolkit.

To learn more about CUNA's and the leagues' "Don't Tax My Credit Union" campaign, use the resource link.

New Subcommittee Assignments For Two House Financial Services Members

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WASHINGTON (5/23/13)--House Financial Services Committee Chairman Jeb Hensarling (R-Texas) Wednesday announced new subcommittee assignments for two members of the committee, Reps. Dennis Ross (R-Fla.) and Keith Rothfus (R-Pa.).

Ross was appointed to fill the vacancy on the housing and insurance subcommittee created by the departure of Rep. Jim Renacci (R-Ohio) in February to take a seat on the House Ways and Means Committee.  Ross will continue as a member of the subcommittee on capital markets and government-sponsored enterprises.

Rothfus, who became a member of House Financial Services in April, will serve on the subcommittee on financial institutions and consumer credit, as well as the subcommittee on oversight and investigations.

CUNA Seeks CU Remittance Comments In New Survey

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WASHINGTON (5/23/13)--Credit unions can detail how recent changes to the Consumer Financial Protection Bureau's final international remittance transfer rule could impact their business practices as they relate to such services they provide to their through a new Credit Union National Association survey.

The survey specifically asks whether the CFPB's recent revisions to remittance rules are sufficient to enable credit unions to continue offering these transfer services to their members. The survey begins with the rule's definition, provides examples regarding remittance transfers and presents questions that reflect the recent CFPB regulatory changes.

Under the final rule, remittance transfer providers are required to provide prepayment and receipt disclosures to the consumer sender that include the exchange rate, certain fees and taxes associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors.

Remittance rule changes announced by the agency earlier this month include:

  • Delaying the effective date of the entire rule until Oct. 28;
  • Making optional, in certain circumstances, the requirement to disclose fees imposed by a designated recipient's institution;
  • Making optional the requirement to disclose taxes collected by a person other than the remittance transfer provider; and
  • Revising resolution provisions that apply when a remittance transfer is not delivered to a designated recipient due to sender error.
CUNA advocated for these and a number of other beneficial changes. The CFPB did not revisit the 100 transfers per year exemption threshold.

"Credit union responses will be very helpful as we continue to advocate to important policymakers in an effort to minimize the effects of the Dodd-Frank Act on international remittances. We hope to share the aggregate results with the CFPB, key members of the U.S. Congress, and the National Credit Union Administration board," CUNA Deputy General Counsel Mary Dunn said.

CUNA has asked that credit unions complete the survey by June 10.

For the survey, use the resource link.

NASCUS, CFPB Sign Memorandum Of Understanding

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WASHINGTON (5/22/13)--The National Association of State Credit Union Supervisors and the Consumer Financial Protection Bureau "will continue to endeavor to promote consistent examination procedures and effective enforcement of state and federal consumer laws and to minimize regulatory burden on state credit unions" under the terms of a new memorandum of understanding (MOU).

Click to view larger imageCFPB Deputy Director Steve Antonakes, left; Mary Martha Fortney, NASCUS president/CEO; and John Ryan, Conference of State Bank Supervisors president/CEO, pose after signing a memorandum of understanding. (Photo by Randy Jonoski provided by NASCUS)
NASCUS said the MOU, signed Tuesday by representatives from both groups, "provides that state regulators and the CFPB will consult each other regarding the standards, procedures, and practices used by state regulators and the CFPB to conduct compliance examinations of credit unions."

The MOU will help NASCUS and the CFPB avoid wasting time and resources, NASCUS said in a release.

"As we are committed to reducing regulatory burden and increasing examination efficiencies while protecting America's state credit union members, NASCUS is pleased to sign this MOU," Mary Martha Fortney, NASCUS president/CEO, said.

For the full NASCUS release, use the resource link.

Mica Calls For Tax Defense Action In CUinsight Column

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WASHINGTON (5/22/13)--"The current potential threat of the taxation on credit unions is the highest it has ever been in my 20 years that I have been involved in the movement," longtime member of Congress and former Credit Union National Association CEO Dan Mica wrote in a CUinsight.com piece.

While some in the U.S. Congress have promised that the credit union tax exemption will remain unchanged when current tax reform discussions are complete, credit unions must not rest on their laurels, Mica said. Sitting back, feeling secure and doing nothing in this crucial time "is the surest way to guarantee taxation of credit unions," he noted. "Make no mistake about it; there will be tax increases in the future. The government is gasping for revenue."

In his 15 years as head of CUNA and his 20 years in the credit union movement, Mica was instrumental in ensuring that credit unions won many key battles, including:

  • The Credit Union Membership Access Act (H.R. 1151), which granted credit unions power to serve multiple groups; and
  • A 2005 credit union tax status fight that ended when then-House Ways and Means Committee Chairman Bill Thomas (R-Calif.) said he had no plans for legislation that would add federal income tax to credit unions, regardless of their size or the diversity of their service offerings.
To prevent credit unions from being taxed this time around, CUNA and its affiliated state credit union leagues have launched a large-scale, nationwide grassroots-mobilization campaign urging America's 96 million credit union members to deliver a united message to the U.S. Congress: Don't tax my credit union!

"Every single day the bankers are pressing for taxation of credit unions. Every single day until the issue has been resolved in our favor all those who believe in the credit union movement should be shouting, "Do not tax my credit union!" Mica wrote.

"On the other hand, if you want to destroy the credit union movement. Do nothing," he said.

A legislative briefing on the tax situation facing credit unions and valuable information on the tools CUNA and state leagues are providing to help credit unions join the tax status fight will both be covered in today's National Webinar on the Credit Union Tax Status.

For the full CUinsight.com column and more on the free CUNA webinar, use the resource links.

CUNA Urges Qualified Mortgage Changes In Letter To Congress

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WASHINGTON (5/22/13)--Qualified mortgage rules must be changed to ensure credit unions will be able to meet their members' borrowing needs in a way that minimizes risk and default, Credit Union National Association President/CEO Bill Cheney wrote in a letter submitted to the U.S. Congress on Tuesday.

The letter was submitted to House Financial Services financial institutions and consumer credit subcommittee chair Shelley Moore Capito (R-W.Va.) ahead of a hearing entitled: "Qualified Mortgages: Examining the Impact of the Ability to Repay Rule." Consumer Financial Protection Bureau Assistant Director for Mortgage Markets Peter Carroll and Assistant Director for Regulations Kelly Cochran testified at the hearing.

To help improve the regulation for credit unions, Cheney in his letter suggested expanding the ceiling on the debt to income ratio beyond the current 43% limit: "Credit unions often write mortgage loans for members that have a 45% debt-to-income ratio...Even so, our mortgage losses remain very low," he said.

Members of the subcommittee echoed some other concerns raised in CUNA's letter. There was broad consensus on both sides of the aisle that community based financial institutions should not be harmed by the "ability to repay" rule as currently written. Specifically, members raised concerns about the 3% cap on points and fees and asked questions about the debt-to-income ratio established in the rule. The cap could potentially harm those that participate in relationship banking, they said.

"As the loan amount decreases, certain fees cannot decrease alongside of it--some fees are fixed and are not dependent upon the size of the loan," Cheney wrote in the letter. "Therefore, the smaller the loan amount, the easier it is for fees to constitute a higher percentage of the total loan. This is especially true as the fees are currently defined as including loan originator compensation, and affiliate and non-affiliate fees."

Members of the subcommittee also discussed how this rule would interface with existing regulations. In his letter, Cheney also raised this point: "Examiners may be critical of credit unions and assess their CAMEL ratings accordingly if credit unions do not make mortgages that meet the qualified mortgage standards. We believe credit unions should retain the flexibility they currently have to either hold a loan in portfolio or sell it on the second mortgage market based on the needs of the credit union to manage its assets and obligations," the CUNA leader added.

For the full letter, use the resource link.

NCUA Activates Disaster Relief For Oklahoma

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WASHINGTON (5/22/13)--In the wake of this week's tornadoes, the National Credit Union Administration has activated its disaster relief policy to aid impacted credit unions and their members.

Under the NCUA disaster relief policy, the agency will, where necessary:

  • Encourage credit unions to make loans with special terms and reduced documentation to affected members;
  • Reschedule routine examinations of affected credit unions if necessary; and
  • Guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund.
The NCUA also encouraged credit unions to exercise prudent efforts to alter terms on existing loans for affected members, including:

  • Extending the terms of loan repayments;
  • Restructuring a borrower's debt obligations; and
  • Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
Institutions in need of assistance in dealing with members affected by this disaster should contact NCUA's Region IV office in Austin, Texas, at 512-342-5600.

Members needing emergency assistance related to the tornados and severe weather should call NCUA's toll-free consumer assistance hotline at 800-755-1030 and press the appropriate option. Operators will answer calls Monday through Friday between 8 a.m. and 5 p.m. EDT, the agency said.

Federal credit unions may also provide emergency financial services for non-members and aid other credit unions by providing services.

For the full NCUA release, use the resource link.

Cordray Confirmation Vote Reportedly Delayed Until After Recess

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WASHINGTON (5/22/13)--A Senate confirmation vote for Consumer Financial Protection Bureau Director Richard Cordray will not be held until after the upcoming U.S. Congress recess, several outlets reported on Tuesday.

Sen. Harry Reid (D-Nev.) told reporters of the delay on Tuesday afternoon. Members of Congress are scheduled to leave Washington at the end of this week for the Memorial Day district work period. They are set to return on June 3.

The Senate Banking Committee in March approved Cordray's nomination by a 12 to 10 vote, moving the nomination on to the full Senate.

Cordray's nomination passed the committee in 2011, but ultimately failed to get a vote in the Senate. President Barack Obama appointed Cordray to the CFPB director position during a brief congressional recess in 2012, and Cordray's term as director would end this year if he is not confirmed.

Many Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency makeup.

More Than $1M In Grants Available From NCUA

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WASHINGTON (5/22/13)--Low-income credit unions can now apply for a total of $1.18 million in grants to help support their financial literacy, product development, collaboration, staff and board member training, office relocation and computer modernization efforts, the National Credit Union Administration said on Tuesday.

Eligible credit unions may apply for as much as $24,000 in funding. Grant applications can be filed between June 17 and July 12, and grantees will be announced at the end of August, the agency said. Eligible credit unions may file a single application for all funding initiatives, the NCUA added.

NCUA Chairman Debbie Matz encouraged eligible credit unions to apply. "These grants provide critical assistance to low-income designated credit unions so they can better meet the evolving financial needs of their members," she added.

The grant money was appropriated by Congress through the Community Development Revolving Loan Fund. NCUA's Office of Small Credit Union Initiatives administers that fund.

The NCUA has scheduled a "Multi-Initiative Grant Webinar" for today at 2 p.m. ET.

For the full NCUA release, and to register for the webinar, use the resource link.

CUNA Urges Further Fixed-Asset Improvements to NCUA

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WASHINGTON (5/21/13)--The Credit Union National Association has spoken in support of National Credit Union Administration proposed fixed-asset rule changes, but is urging that more improvements be made to the rule, in a comment letter filed Monday.

The CUNA comment letter responds to a March NCUA proposal that makes plain language revisions to the agency's fixed asset rule, and adds new definitions and rewordings.

The changes would impact NCUA's current fixed-assets rule, Section 701.36, which allows federal credit unions to purchase, hold and dispose of property necessary or incidental to their operations. These fixed assets include office buildings, branch facilities, furniture, computer hardware and software, and ATMs.

The NCUA's amendments to section 701.36 would "clarify the regulation by improving its organization, structure and ease of use," CUNA Deputy General Counsel Mary Dunn wrote.

While these are positive improvements, Dunn also urged the NCUA "to take this opportunity to adopt substantive changes" that will make the rule more effective and meaningful for credit unions, while remaining faithful to the letter and intent of the Federal Credit Union Act.

"The rule in its current and proposed forms gives NCUA staff too much authority over the business decisions of federal credit unions...Involving itself into the decision-making process of credit unions is outside the duties for which the NCUA was created. CUNA is confident that credit unions themselves are in the best position to make business decisions and, conversely, are at a competitive disadvantage when NCUA dictates their business decisions to them," Dunn added.

CUNA's recommendations for improving the fixed-assets rule include:

  • Eliminating the current regulatory limit imposed on the ownership of fixed assets, which is 5% of a federal credit union's shares, since it is not required under the Federal Credit Union Act;
  • Improving the rule's definition of "partially occupy" to clear up some credit union confusion;
  • If the cap is retained, using the blanket waiver concept to give credit unions additional flexibility under the fixed-assets rule;
  • Adding an appeal process to denied fixed-asset rule waiver requests; and
  • Issuing an annual report detailing fixed-asset rule waiver-request statistics from each region.
For more of CUNA's comments on the fixed-asset rule, use the resource link.

CFPB Vote, Hearing Set Ahead Of Memorial Day Break

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WASHINGTON (5/21/13)--A Consumer Financial Protection Bureau confirmation vote and hearings on tax reform, qualified mortgages, the Dodd-Frank Act and other economic issues are expected in the U.S. Congress this week.

The Senate vote on Richard Cordray's nomination for the position of CFPB director could happen Thursday, Ryan Donovan, CUNA's senior vice president of legislative affairs, said. Cordray's nomination did not receive a Senate vote in 2011, and President Barack Obama appointed Cordray to the CFPB director position during a brief congressional recess in 2012.

Many Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency makeup.

Cordray's term as director would end this year if he is not confirmed.

Hearings on tap today include:

  • A House Financial Services financial institutions and consumer credit subcommittee hearing entitled: "Qualified Mortgages: Examining the Impact of the Ability to Repay Rule";
  • A House Financial Services monetary policy and trade subcommittee hearing focusing on the Securities and Exchange Commission rules for public companies to disclose their use of minerals that originated in the Democratic Republic of Congo; and
  • The Senate Banking, Housing and Urban Affairs Committee hearing on the Financial Stability Oversight Council's (FSOC) annual report to Congress.
The yearly FSOC report will be discussed before the House Financial Services Committee on Wednesday. Other Wednesday hearings include:

  • A Joint Economic Committee hearing on Federal Reserve Chairman Ben Bernanke's views of the current economic outlook;
  • A House Financial Services oversight and investigations subcommittee hearing entitled: "Who Is Too Big to Fail: Are Large Financial Institutions Immune from Federal Prosecution?"; and
  • A Senate Budget Committee hearing entitled "Supporting Broad-Based Economic Growth and Fiscal Responsibility through Tax Reform."
The House Financial Services capital markets and government sponsored enterprises subcommittee on Thursday will discuss a range of regulatory relief measures for investors and job creators.

Members of Congress are scheduled to leave Washington at the end of the week for the Memorial Day district work period. They are set to return on June 3.

Qualified Mortgage Updates Featured In Reg Advocacy Report

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WASHINGTON (5/21/13)--Plenty of news is swirling around recently approved and still-developing qualified mortgage changes, and this qualified mortgage (QM) news is featured in this week's edition of the Credit Union National Association's Regulatory Advocacy Report.

While Consumer Financial Protection Bureau Director Richard Cordray recently encouraged credit unions to continue to write non-QM loans, as long as they are supported by strong underwriting, participants at a recent symposium said there is little investor appetite for non-QM loans in the secondary market.

The remarks were made by a representative of the Securities Industry Financial Market Association. CUNA also participated in the symposium, which focused on the future of housing finance and was sponsored by accounting firm PricewaterhouseCoopers.

Low secondary market interest in QM mortgages could mean that credit unions that write non-QM loans may face an increasing need to hold them in portfolio, rather than selling them into the secondary market, CUNA Deputy General Counsel Mary Dunn wrote.

"CUNA continues to strongly advocate for flexibility for credit unions to issue mortgages to well-qualified members, without regard to the QM rules, and is carrying this message to the National Credit Union Administration, the CFPB, the Federal Housing Finance Agency, and other regulators," she added.

Other topics addressed in this week's Regulatory Advocacy Report include:

  • The results of the May NCUA open board meeting;
  • FHFA notices on lender placed insurance, terms and conditions;
  • JPMorgan Chase & Co. issues regarding collections practices;
  • A Securities and Exchange Commission credit ratings roundtable; and
  • CFPB escrow rule clarifications.
Employees or volunteers of CUNA- and state credit union league-member credit unions can sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Still Time To Register For CUNA's CU Tax Status Webinar

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WASHINGTON (5/21/13)--There is still time for credit unions to register for Wednesday's Credit Union National Association National Webinar on the Credit Union Tax Status.

The tax advocacy webinar will feature:

  • A legislative briefing on the tax situation facing credit unions; and
  • Valuable information on the tools CUNA and state leagues are providing to help credit unions join the tax status fight.
The U.S. House and Senate have made broad-based tax reform a major priority. In the face of these reform efforts, CUNA and affiliated state credit union leagues have launched a large-scale, nationwide grassroots-mobilization campaign urging America's 96 million credit union members to deliver a united message to the U.S. Congress: "Don't tax my credit union!"

The initiative will urge lawmakers as part of any final tax reform plan to preserve the federal tax exemption credit unions receive as not-for-profit, member-owned cooperatives.

There is no cost to attend the CUNA webinar.

To sign up, use the resource link.

New Senate Student Loan Fix Introduced

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WASHINGTON (5/21/13)--Sen. Kirsten Gillibrand (D-N.Y.) is the latest member of the U.S. Congress to take on student loan issues, announcing a new bill, the Federal Student Loan Refinancing Act, over the weekend.

Gillibrand's bill would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%. The senator in a release said her bill would reduce interest rates for nine of 10 student loans nationwide.

"The nation's $1.1 trillion in student loan debt is contributing to sluggish economic growth, negatively impacting young borrowers' purchasing power, home and car ownership, and even small business growth and entrepreneurship.

Keeping interest rates low would help reduce the debt burden on students and strengthen their purchasing power to boost economic growth," Gillibrand said.

The senator said she would also support another recent piece of student loan legislation: the Student Loan Affordability Act. That bill, introduced last week by Senate Majority Leader Harry Reid (D-Nev.) and Sens. Tom Harkin (D-Iowa), Patty Murray (D-Wash.) and Jack Reed (D-R.I.), would cap federal student loan rates at 3.4% for another two years.

The federal student loan rate is scheduled to double from 3.4% to 6.8% on July 1 if Congress does not take action.

Other student lending solutions have been introduced in the House and Senate. Sen. Elizabeth Warren (D-Mass.) introduced a bill, the Bank on Students Loan Fairness Act, which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%.

Rep. Karen Bass (D-Calif.) in March introduced her own bill that would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate.

The Credit Union National Association's first annual High School Student Borrowing Survey, released last month, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.

In a recent meeting with Consumer Financial Protection Bureau officials, CUNA said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for an April 23 News Now story: CFPB Seeks CU Help For Student Loan Issues.)

Senate CU MBL Bill Gets CFA Backing

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WASHINGTON (5/20/13)--The Small Business Lending Enhancement Act (S. 968) would "expand access to affordable credit for small businesses and help strengthen local marketplaces that serve consumers well," the Consumer Federation of America (CFA) said in a letter to Sen. Mark Udall (D-Colo.).

S. 968, which was introduced by Udall on Thursday, would increase the credit union member business lending (MBL) cap from 12.25% of assets to 27.5%. The Credit Union National Association has estimated that lifting the MBL cap 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 the letter said increasing the MBL cap "would be particularly beneficial at this time," and would aid small businesses that "play an essential role in enhancing competition and innovation in local markets."

The CFA letter cited U.S. Department of the Treasury statistics that show 25% of credit union small business loans made in 2001 went to households with less than $30,000 in annual income. Another 20% of those loans went to families with incomes of $30,000 to $50,000, according to the Treasury statistics.

"If given greater small business lending opportunities, they will 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," Brobeck said.

Udall's bill currently has 14 co-sponsors. Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.) released similar legislation early this year. That bill, H.R. 688, has 94 co-sponsors.

CUs' European Network, EU Policymakers Talk Basel, FACTA, Inclusion

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BRUSSELS, Belgium (5/20/13)--Representatives from the European Network of Credit Unions (ENCU) and World Council of Credit Unions (WOCCU) met with European Union (EU) policymakers in Brussels on May 14-15 to advocate for several issues affecting European credit unions.

European Network of Credit Unions representatives who met with policymakers in Brussels included, from left: Anne Schneider, Policy Action; Breege-Anne Murphy, Irish League of Credit Unions (ILCU); Michael Edwards, World Council of Credit Unions; Ed Farrell, ILCU; Brian McCrory, ILCU; Pawel Grzesik, National Association of Cooperative Savings and Credit Unions (Poland); and Matt Bland, Association of British Credit Unions Ltd.  (Photo provided by the World Council of Credit Unions)

Click to view larger image
The issues include: Reasonable interpretation of Basel Committee liquidity rules; the U.S. Foreign Account Tax Compliance Act (FATCA) and related European rules; and the provision of basic current accounts to the unbanked in order to promote financial inclusion.

Regarding the Basel liquidity rules, the ENCU group met with the European Commission to urge that credit unions' deposits at banks be treated similarly to other depository institutions under the Basel "Liquidity Coverage Ratio."

Although credit unions are not subject to the ratio, Irish commercial banks have told Irish credit unions they are being classified as "non-bank financial institutions"--a category that applies to non-depository institutions--for purposes of draft European liquidity guidance. That means banks are cutting the yields they will pay on credit union demand and term deposits, said WOCCU.

This treatment under the EU's Basel liquidity rules may cost the Irish credit union movement as much as $74.4 million a year in lost income unless EU regulators clarify and grant credit unions more favorable treatment, the group said. ENCU representatives will talk to the European Banking Authority on the issue this week in London.

"We believe that there has been some level of confusion regarding classification of credit unions for Basel liquidity purposes in Ireland and possibly other member states," said Michael Edwards, WOCCU vice president and chief counsel. "We will continue to engage European authorities on this issue to seek an outcome that is satisfactory for credit unions."

ENCU members also met with European Commission representatives about the impact of FATCA on EU credit unions as it relates to European data protection regulations and the likely upcoming tax information-sharing amendments to EU directives that will create what some have called a "European FATCA."

Though the European Commission envisions the European FATCA will focus on tax information sharing within the EU, it also expects the Paris-based Organization for Economic Cooperation and Development to establish a global version of FATCA, which would apply to credit unions in all, or most, jurisdictions worldwide.

ENCU members also asked commission members to consider credit union-friendly rules on basic current accounts for the unbanked. The measures would allow credit unions to continue outreach to underserved individuals without creating undue regulatory burdens. Representatives also discussed with policymakers the EU's upcoming directive on deposit-guarantee schemes and forthcoming revisions to the EU's anti-money laundering directive.

ENCU is a network of national credit union associations in Europe and WOCCU representatives who educate and engage with EU policymakers and other stakeholders on legislation that affects credit unions. ENCU was formally established in 2010 and is based in Brussels.

CUNA Tax Advocacy Webinar Is Wednesday

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WASHINGTON (5/20/13)--More details of the joint Credit Union National Association/state credit union league "Don't Tax My Credit Union" campaign will be revealed during a free Wednesday webinar.

CUNA President/CEO Bill Cheney will host the webinar, which is scheduled for Wednesday at 3 p.m. ET.

The National Webinar on the Credit Union Tax Status will feature:

  • A legislative briefing on the tax situation facing credit unions; and
  • Valuable information on the tools CUNA and state leagues are providing to help credit unions join the tax status fight.
CUNA and affiliated state credit union leagues last week launched a large-scale, nationwide grassroots-mobilization campaign urging America's 96 million credit union members to deliver a united message to the U.S. Congress: "Don't tax my credit union!"

The campaign is being launched at a time when the U.S. House and Senate have made broad-based tax reform a major priority. The initiative will urge lawmakers as part of any final tax reform plan to preserve the federal tax exemption credit unions receive as not-for-profit, member-owned cooperatives.

"It's rare that credit unions call upon their 96 million members to take action, but our members will be the best spokespeople we have, especially on an issue as vital to our future as this," Cheney said.

To register for the webinar, and learn more about CUNA's and the leagues' "Don't Tax My Credit Union" campaign, use the resource links.

Cheney Report: CU Tax Efforts Help Other Initiatives

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WASHINGTON (5/20/13)--Ongoing efforts by the Credit Union National Association and state credit union leagues to protect the credit union tax exemption can also help raise the profile of other credit union priorities in the U.S. Congress, CUNA President/CEO Bill Cheney said in this week's edition of The Cheney Report.

CUNA and state leagues last week launched a large-scale grassroots effort which seeks to mobilize America's 96 million credit union members and deliver to Congress a direct, united message: "Don't tax my credit union!"

This Wednesday, May 22, at 3 p.m. ET, CUNA is conducting a free webinar on the new campaign. Cheney urged credit union executives to attend. To sign up for the webinar, click here.

The "Don't Tax My Credit Union" campaign is extremely important, Cheney said. At the same time, it "will not detract from our efforts this year to advance proactive charter enhancement legislation for credit unions, such as supplemental capital and an increase in the member business lending cap.

"We can and will move our proactive agenda forward while undertaking this grassroots tax advocacy campaign. In fact, the grassroots effort on taxation will strengthen us on charter enhancement.

"A large, sustained, high-impact grassroots turnout will create a halo effect on credit union issues that illustrates the depth of consumer support for credit unions. Members of Congress are sure to take notice," the CUNA CEO added.

Asking credit unions to contact their members on an advocacy issue is not something CUNA does often, or takes lightly, Cheney wrote. "But we must act now, and our 96 million members will be our best spokespeople, especially on an issue as vital to the movement's future as our tax status."

CUNA has offered a host of resources to aid credit unions in their outreach efforts, including a tax advocacy kit, a new website, www.DontTaxMyCreditUnion.org, and new resources to engage consumers through social media, using the Twitter hash tag #DontTaxMyCU and the Twitter handle @CUNAadvocacy.

This week's Cheney Report also includes:
  • The results of last week's National Credit Union Administration board meeting, and the nomination of potential new board member Rick Metsger;
  • Details from CUNA's latest Credit Union Environmental Scan (E-Scan); and
  • A thank you to retiring National Credit Union Foundation Executive Director Wendell "Bucky" Sebastian.
Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs. The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

Escrow Tweaks, Exemption Areas Finalized By CFPB

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WASHINGTON (5/20/13)--The Consumer Financial Protection Bureau last week unveiled two tweaks to its pending escrow regulations: a final rule clarifying and making amendments to its previously issued 2013 escrows final rule, and a final list determining both rural and underserved county status regarding the escrows rule.

The CFPB's escrow rule, issued in January, generally extends the required duration of a mortgage loan escrow account to five years, up from one year. Lenders that work in rural or underserved areas will be exempt from the escrow changes, provided they meet certain other criteria.

The final escrow rule clarifications released last week establish a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until expanded consumer protections take effect in January 2014. The rule also clarifies how to determine whether  a county is considered "rural" or "underserved" for purposes of applying an exemption.

The final list of CFPB-approved rural and underserved areas covers counties in 46 states and Puerto Rico. The CFPB defines rural counties by using the U.S. Department of Agriculture Economic Research Service's urban influence codes. Underserved counties are defined by reference to data collected under the Home Mortgage Disclosure Act.

Some counties' status may change from year to year, according to the CFPB.

For both CFPB releases, use the resource links.

Technical Changes, Reg Briefing Also On NCUA Agenda

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ALEXANDRIA, Va. (5/17/13)--While a new derivatives investment proposal was the big ticket item on Thursday's National Credit Union Administration agenda, two other items were also discussed: A final rule making technical adjustments to credit union regulations, and a board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans.

The technical amendments to NCUA regulations reflect changes to agency organizational structure, remove duplicative language, make minor changes updating cross citations, and make minor changes that are statutorily required by the Dodd-Frank Act. The rule will take effect when it is published in the Federal Register.

The briefing item was a forthcoming interagency proposal that would amend the Truth in Lending, Regulation Z, interagency appraisals rule adopted in January. For certain mortgages, the appraisals rule requires creditors to obtain an appraisal that meets certain specified standards, provide applicants with a notification regarding the use of the appraisals and give applicants a copy of the written appraisals used.

Ahead of the January 2014 effective date of the appraisals rule, the federal financial regulatory agencies are jointly proposing exemptions from the rules for existing manufactured homes, certain refinancings and transactions of $25,000 or less.

CUNA will prepare a comment call on the interagency proposal once it is released.

For more on the NCUA board meeting, see today's News Now story, CUNA Will Closely Review NCUA Derivatives Proposal, and use the resource link.

First Kingdom Community FCU Placed Under NCUA Conservatorship

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ALEXANDRIA, Va. (5/17/13)--First Kingdom Community FCU, Selma, Ala., has been taken under conservatorship, the National Credit Union Administration (NCUA) announced Thursday.

The NCUA said it will work to resolve safety and soundness issues at the 76-member, $88,400 asset credit union.

First Kingdom was chartered in 2007 and serves those who live, work, worship, or attend school in Dallas County, Ala.; businesses and other legal entities located in the county; spouses of persons who died while within First Kingdom's field of membership; employees of the credit union; volunteers in the community; members' immediate family or household; and organizations of such persons.

Members will not be able to conduct business at the credit union for the time being, but the NCUA said it is working on a solution to this issue.

For the full NCUA release, use the resource link.

CUNA: NCUA Nominee's CU Experience A Positive

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WASHINGTON (5/17/13)--National Credit Union Administration board nominee Rick Metsger's direct experience with credit unions, which came through his having served on an Oregon credit union's board, will serve him well if he is ultimately confirmed, Credit Union National Association President/CEO Bill Cheney said.

Metsger, a former Democratic state senator from Oregon, was officially nominated by the White House on Wednesday. If confirmed, he would fill the vacant seat on the three-member NCUA board. His nomination is subject to U.S. Senate confirmation.

Metsger's knowledge of the political process and banking issues is also a plus, Cheney added. "We look forward to working with the Senate as it considers the nomination and the process moves forward," he said.

NCUA Chairman Debbie Matz said Metsger, if confirmed, "will bring valuable perspectives" to the agency.

The nominee served as Oregon state senator from 1999 to 2011, and was Oregon Senate president pro-tempore from 2009 to 2011. He led an Oregon Senate committee that heard all financial institution legislation during his time in state government.

Metsger also served as a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy, and Portland Teachers CU.

Senate MBL Bill Means More CU Help For Small Biz, Cheney Says

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WASHINGTON (5/17/13)--Sen. Mark Udall's (D-Colo.) Small Business Lending Enhancement Act (S. 968), introduced on Thursday, "would allow credit unions with experience in business lending to continue to lend to their small business members, without increasing the size of government," Credit Union National Association President/CEO Bill Cheney said.

Udall's bill would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level. Credit unions would need to be in good standing, and have a history of making business loans, to qualify for the cap increase. They would also need approval from the National Credit Union Administration.

The legislation tells credit unions that stood with their business-owning members during the recent Great Recession to "keep lending; keep serving the bakeries, the gas stations, the florists, and the carpenters; keep helping the restaurant owners, plumbers, realtors, independent grocers and shopkeepers," Cheney noted in a Thursday letter thanking Udall.

"The bill will not endanger the small banks in your community; the bill will not alter the nature or focus of credit unions; the bill is not inconsistent with the credit union mission or the purpose of their tax status. This legislation recognizes that credit unions are working in their communities to help small businesses, and it is important to enact even though the bank lobbyists oppose it," Cheney added.

CUNA estimates the MBL cap change would help credit unions lend an additional $13 billion to small businesses in just the first year after enactment. This money, which would be made available at no expense to taxpayers, would in turn help small businesses create around 140,000 new jobs.

"Credit unions have an important role to play, lending to startups and Main Street businesses alike. My bill helps to unleash their potential to ensure that job creators in Colorado and across the country have the capital they need to start a business or to grow," Udall said in a release.

Udall's bill currently has 14 co-sponsors: Sens. Mark Begich (D-Alaska), Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Kirsten Gillibrand (D-N.Y.), Martin Heinrich (D-N.M.), Angus King (I-Maine), Pat Leahy (D-Pa.), Bill Nelson (D-Fla.), Rand Paul (R-Ky.), Jack Reed (D-R.I.), Bernie Sanders (I-Vt.), Charles Schumer (D-N.Y.) and Sheldon Whitehouse (D-R.I.).

Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.) released similar legislation early this year. That bill, H.R. 688, has 94 co-sponsors.

"Credit unions have capital to lend, a history of prudent and safe small business lending, and a mission to help provide access to credit to their members--including their small business-owning members. They just need Congress to act," Cheney said.

For CUNA's letter to Udall and more on the bill, use the resource links.

CUNA Will Closely Review NCUA Derivatives Proposal

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ALEXANDRIA, Va. (5/17/13)--A proposed rule that would allow eligible credit unions to engage in interest rate swaps and to purchase interest rate caps was released for public comment by the National Credit Union Administration on Thursday.

Click to view larger imageCUNA Deputy General Counsel Mary Dunn, left, and Executive Vice President of Strategic Communications and Engagement Paul Gentile speak with NCUA Chairman Debbie Matz, right, following Thursday's NCUA open board meeting. The NCUA said there are still questions about how the proposed derivatives rule would work, and the agency has asked credit unions for their thoughts on all aspects of the proposal. (CUNA Photo)
Approved credit unions would be permitted to use these simple derivatives to hedge against interest rate risks.

"Our initial take is that NCUA took a positive step to issue the proposal for comments to assess credit unions' views--a development we have been urging for months--although the devil is always in the details," Credit Union National Association Deputy General Counsel Mary Dunn said. "We will be reviewing it very carefully."

NCUA Chairman Debbie Matz and board member Michael Fryzel both stressed that the proposal is not cast in stone, and said they will welcome comments on all aspects of the proposal. The agency also released a question and answer document to help credit unions better understand the proposal. (Use the resource link.)

"Working with credit unions to manage interest-rate risk exposure is a top priority for NCUA," Matz said in a Thursday release. "The negative impact on balance sheets when rates rise, especially if they rise rapidly, will significantly reduce the earnings and net worth of exposed credit unions. NCUA urges credit unions to prepare for this event. After careful evaluation, the NCUA Board is proposing to allow eligible credit unions, which hold nearly 80 percent of industry assets, to purchase simple types of derivatives with certain safeguards to hedge interest-rate risk."

Under the terms of the NCUA proposal, only credit unions that have assets of more than $250 million, are well-managed, and have the appropriate expertise will be eligible to apply for an agency derivatives investment program. The NCUA estimated that 75 to 150 credit unions would apply for derivatives authority within the first two years of the program. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.

The proposal would apply to federal credit unions and federally insured state-chartered credit unions that are permitted under state law to engage in derivatives and that meet NCUA's criteria.

Credit unions seeking derivatives authority would be required to submit an application for one of two levels of authority:

  • Level I, which includes lower permissible transaction limits and involves a more streamlined application process with less restrictive requirements on experience, personnel and systems; and
  • Level II, which would allow higher transaction limits, but would require an onsite evaluation, higher regulatory requirements, a higher application fee, and necessary personnel and systems to be in place.
The NCUA has developed separate eligibility requirements for each of these two levels. Level I application fees would start at $25,000, and Level II application fees would range from $75,000 to $125,000, depending on the complexity of the application.

These application fees would help the agency cover the costs of the program. NCUA staff estimate that the program would require six to 12 new examiners and would cost $6 million to $11 million to initiate. "Charging these types of application and participation fees is unprecedented, and we will be scrutinizing the proposal, the fee issues and the agency's cost estimates very carefully as we analyze the proposal," Dunn added.

The NCUA will accept comment for 60 days after the proposal is published in the Federal Register. A final rule could be released in the summer or fall, with an effective date of the end of the year or early next year, Dunn said.

For more on the proposal and the NCUA board meeting, use the resource link.

NEW: NCUA Releases CU Derivatives Program Proposal

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ALEXANDRIA, Va. (UPDATED: 5/16/13, 11 a.m. ET)--Well-run federal credit unions would be permitted to use simple derivatives to hedge against interest rate risks under a just-proposed National Credit Union Administration program.

Under the terms of the NCUA proposal, only credit unions that have assets of more than $250 million, are well-managed, and have the appropriate expertise will be eligible to apply for an agency derivatives investment program. Swaps and caps will be the only approved derivatives investments, the NCUA said. There will be an application process, and fees will be charged to cover costs related to application processing and supervision.

The NCUA estimated that 75 to 150 credit unions would apply for derivatives authority within the first two years of the program. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.

The agency is seeking comments for 60 days on the proposal.

The Credit Union National Association is reviewing the proposal in detail and will work with its Examination and Supervision Subcommittee to develop its comments CUNA urges any credit unions interested in engaging in these investments to share their reaction to the proposal and to flag problem areas as well as favorable provisions they identify.

While CUNA commend the agency's decision to move forward on this issue, CUNA plans to urge that the final rule not be so restrictive that it discourages well run credit unions that meet the proposal's criteria from applying for derivatives authority.

A board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans, and a final rule making technical adjustments to credit union regulations are also on today's open meeting agenda.

For more on the NCUA May board meeting, see Friday's News Now.

NEW: Udall Reintroduces Bill To Increase CUs' MBL Cap

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WASHINGTON (UPDATED: 5/16/13, 12:30 p.m. ET)--Sen. Mark Udall (D-Colo.) today reintroduced legislation that would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level.

Credit Union National Association President/CEO Bill Cheney thanked Udall for introducing the bill. "Your legislation is a commonsense economic-recovery and job-creation measure that would permit credit unions with experience in business lending to continue to lend to their small business members, without increasing the size of government," Cheney told Sen. Udall.

"When other lenders fled the market, credit unions stood with those in need," Cheney said. "Your legislation says to the credit unions that stood with their business-owning members, keep lending."

CUNA estimates the MBL cap change would help credit unions lend an additional $13 billion to small businesses in just the first year after enactment. This money, which would be made available at no expense to taxpayers, would in turn help small businesses create around 140,000 new jobs.

Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.) released similar legislation early this year. That bill, H.R. 688, has 94 co-sponsors.

White House Nominates Former Oregon State Senator To NCUA Board

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WASHINGTON (5/16/13)--Former Oregon State Sen. Rick Metsger (D) has been tapped by the White House to fill the vacant seat on the three-member National Credit Union Administration board.

Nominated Wednesday by President Barack Obama, Metsger, if confirmed by the U.S. Senate, will fill the seat vacated late last year after the term of board member Gigi Hyland expired.

Highlights from Metsger's resume include:

  • Oregon state senator from 1999 to 2011;
  • Oregon Senate president pro-tempore from 2009 to 2011;
  • Chaired Oregon Senate committee that heard all financial institution legislation;
  • Oregon state Debt Policy Advisory Commission member from 2001 to 2011;
  • Board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy; and
  • Former board of director at Portland Teachers CU from 1993 to 2001.
"Sen. Metsger has a strong background of public service and certainly understands the complexity of the financial services landscape including the importance of safety and soundness in the credit union system," said Northwest Credit Union Association President/CEO Troy Stang.

"With so many consumers interested in becoming part of the cooperative credit union system, it's important the industry's regulatory and insurance system is led by the most qualified individuals. Sen. Metsger should complement the skills and talent on the NCUA board well with a solid focus on the future."

Tax Talk Kicks Off CUNA Inside Exchange Video Series

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WASHINGTON (5/16/13)--The Credit Union National Association is launching a new regular video feature today called "Inside Exchange." CUNA has launched the new communications tool to give members insight into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

In the inaugural video, CUNA President/CEO Bill Cheney and Executive Vice President of Strategic Communications and Engagement Paul Gentile dive into efforts to preserve the credit union tax exemption, including more about CUNA's new "Don't Tax My Credit Union" campaign.



Cheney in the video notes that Congress now has an interest in comprehensive tax reform--a key change that can put the credit union tax exemption into play.

"What's changed is that Congress is talking about starting with a blank sheet of paper," Cheney said. "It's not like last year when they were talking about closing loop holes--a blank sheet of paper means everyone has lost their tax exemption, and not just credit unions. They haven't done that yet--but the conversation has started now."

This first video gives a good flavor of what is to come as CUNA hits all the hottest credit union topics in these periodic videos. 

"This is just one more direct line to our member credit unions--to share what we know about the things they want and need to know about most," Gentile says.

'Don't Tax My CU' Campaign Mobilizes 96 Million Members

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WASHINGTON (5/16/13)--The Credit Union National Association and its affiliated state credit union leagues have launched a large-scale, nationwide grassroots-mobilization campaign urging America's 96 million credit union members to deliver a united message to the U.S. Congress: "Don't tax my credit union!"

The campaign is being launched at a time when the U.S. House and Senate have made broad-based tax reform a major priority. The initiative will urge lawmakers as part of any final tax reform plan to preserve the federal tax exemption credit unions receive as not-for-profit, member-owned cooperatives.

"Policy is being formulated on Capitol Hill now, so we must act now. We can't wait," said CUNA President and CEO Bill Cheney. "It's rare that credit unions call upon their 96 million members to take action, but our members will be the best spokespeople we have, especially on an issue as vital to our future as this."

The CUNA campaign will emphasize that any tax on credit unions is really a tax on its members since credit unions are cooperatively-owned by the people they serve. If credit unions were taxed, their benefits to members and communities will be lost, and a consumer-friendly option in the financial marketplace will vanish.

The nationwide action alert urges nearly 7,000 state and federally chartered credit unions to support this campaign by engaging their consumer-members on this issue and directing them to a range of new resources.

"We have to take action on a large scale," said Cheney. "This is about more than just the banking sector wanting to see us taxed. We're vying with some 400 other organizations and industries that see their own tax status threatened. There will be a great deal of noise on Capitol Hill. We've got to be sure our voice is clearly heard."

One example of these reform efforts came yesterday, when the Senate Finance Committee released a paper examining tax considerations related to economic and community development. The committee paper discusses potential mortgage interest deduction changes, and other tax expenditures. Credit unions are not mentioned in the paper.

The "Don't Tax My Credit Union" campaign will utilize direct communication from credit unions to their members and supporters as well as web-based and social media channels in order to convey a powerful and sustained message to Congress. Elements include:

  • A new web site, DontTaxMyCreditUnion.org, where people can learn about the issue, send an email message directly to their members of Congress;
  • Engagement of influential third-party coalition members that recognize credit unions' tax status is good public policy that benefits consumers and society as a whole;
  • A national webinar for credit union executives, to be held Wednesday, May 22 at 3:00 p.m. ET, where CUNA will fully outline the issues, strategy, and required actions. To sign up for the webinar, click here;
  • A reformatted version of CUNA's tax advocacy tool kit.
"Our research shows that informed members are ready to stand with us in this battle," Cheney said. "We have a great opportunity to unite for the good of our members. If Congress taxes credit unions, they'll take away the best financial option from America's consumers. We won't allow that to happen."

For more on the "Don't Tax My Credit Union" campaign, use the resource links.

Reid: Senate To Vote On Cordray Nomination Next Week

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WASHINGTON (5/16/13)--A Senate confirmation vote for Consumer Financial Protection Bureau Director Richard Cordray will be on the schedule next week, Sen. Harry Reid (D-Nev.) told reporters Wednesday.

According to Talking Points Memo, Reid is adamant that the job of CFPB director will be filled. Cordray will receive a vote, the senator said.

The Senate Banking Committee in March approved Cordray's nomination by a 12 to 10 vote, moving the nomination on to the full Senate.

Cordray's nomination passed the committee in 2011, but ultimately failed to get a vote in the Senate. President Barack Obama appointed Cordray to the CFPB director position during a brief congressional recess in 2012, and Cordray's term as director would end this year if he is not confirmed.

Many Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency makeup.

House and Senate Republicans have supported replacing the CFPB director's position with a five-member panel of leadership. Legislation that would create such a panel (S. 205) has been introduced in the Senate. The Credit Union National Association backs a multi-member panel of directors if it includes seats statutorily designated for credit union system representatives, including a state or federal credit union regulator, and possibly a state consumer agency representative.

Spanish Site, New Mortgage Videos Unveiled By CFPB

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WASHINGTON (5/16/13)--The Consumer Financial Protection Bureau on Wednesday added new tools to its consumer outreach arsenal, unveiling a Spanish-only version of its website, consumerfinance.gov/es, and a series of videos that break down new mortgage regulations.

Language barriers can make financial struggles more difficult and can make individuals more prone to financial abuse, the agency noted in a release. "Recognizing these challenges, we wanted to provide our Spanish-speaking audience with access to clear, unbiased information about financial products and services," the CFPB said.

The Spanish-language site provides plain-language answers to frequently asked questions. The CFPB said it hopes to include more resources and tools in languages other than English to reach as many consumers "as effectively as possible."

The new CFPB videos provide a general overview of the CFPB's new mortgage rules.

An hour-long video takes on all of the new mortgage regulations.

Shorter, more focused presentations on individual regulations are also provided. Those videos cover:

  • Ability-to-Repay and Qualified Mortgage regulations;
  • The 2013 Home Ownership and Equity Protection Act;
  • Equal Credit Opportunity Act valuations and Truth in Lending Act (TILA) higher-priced mortgage loans appraisal rules;
  • Loan originator compensation regulations;
  • Mortgage servicing regulations; and
  • TILA escrow regulations.
"Although the videos and guides give an overview of the rules, they are not a substitute for the underlying rules," the CFPB stressed.

For more on both CFPB outreach efforts, use the resource links.

CFPB Encourages CUs To Write Non-QM Mortgages

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WASHINGTON (5/16/13)--Credit unions should continue to feel free to write non-qualified mortgage loans, as long as those loans are supported by strong underwriting, Consumer Financial Protection Bureau Director Richard Cordray said this week.

Cordray made his remarks before a National Association of Realtors gathering. In his remarks, Cordray said "lenders that have long upheld strong underwriting standards have little to fear" from the CFPB's ability to repay regulations.

The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules in January. The rule amended Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). It also establishes certain protections from liability under this requirement for "qualified mortgages."

"These qualified mortgages cover the vast majority of loans made in today's market, but they are by no means all of the mortgage market. This point is quite important, and it should not be misunderstood," Cordray said this week.

Credit unions and other community financial institutions "have seen the strong performance of their loans over time," he added. "Nothing about the traditional lending model has changed, and they should continue to offer such mortgages to borrowers whom they evaluate as posing reasonable credit risk--whether or not they meet the criteria to be classified as qualified mortgages. We all benefit by recognizing and sustaining responsible lending wherever we find it in the mortgage market," Cordray said.

For the CFPB Director's full remarks, use the resource link.

Derivatives On NCUA Agenda Today

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ALEXANDRIA, Va. (5/6/13)--A proposal to allow federal credit unions to invest in simple derivatives, technical amendments to agency regulations, and a board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans are on the agenda of this morning's National Credit Union Administration open board meeting.

While details of the proposal will be released after 10 a.m. ET, it is anticipated that the board will consider authority for well-run credit unions with the necessary expertise to use simple derivatives to hedge against interest rate risk (IRR). NCUA Board Chairman Debbie Matz has said managing IRR is a key concern for the agency.

The Credit Union National Association strongly supports permitting credit unions to manage IRR through investments in simple derivatives and urged the agency to proceed with consideration of this authority.

Supervisory activities and an appeal under Section 701.14 and Part 747, Subpart J of NCUA regulations are on the closed agenda. The closed board meeting is scheduled to begin after the open meeting has ended.

Watch @NewsNowLiveWire for up-to-the-minute tweets on the NCUA meeting, and News Now for breaking coverage on meeting developments.

For the full NCUA agenda, use the resource link.

NEW: Former Oregon State Senator Nominated To NCUA Seat

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WASHINGTON (5/15/13 FILED 7:11 p.m. ET)--Former Oregon State Sen. Rick Metsger (D) has been tapped by the White House to fill the vacant seat on the three-member National Credit Union Administration board.

Nominated today by President Barack Obama, if confirmed by the U.S. Senate, Metsger will fill the seat vacated late last year after the term of board member Gigi Hyland expired.

Highlights from Metsger's resume include:
  • Oregon state senator from 1999 to 2011;
  • Oregon senate president pro-tempore from 2009 to 2011;
  • Chaired Oregon senate committee that heard all financial institution legislation;
  • Oregon state Debt Policy Advisory Commission member from 2001 to 2011;
  • Board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy; and,  
  • Former board of director on Portland Teachers CU from 1993 to 2001.
"Sen. Metsger has a strong background of public service and certainly understands the complexity of the financial services landscape including the importance of safety and soundness in the credit union system," said Northwest Credit Union Association President/CEO Troy Stang.

"With so many consumers interested in becoming part of the cooperative credit union system, it's important the industry's regulatory and insurance system is lead by the most qualified individuals. Sen. Metsger should complement the skills and talent on the NCUA board well with a solid focus on the future."

NCUA: 2012 A 'Transformative Year' for CUs

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ALEXANDRIA, Va. (5/15/13)--The credit union system in 2012 "transitioned from uncertainty caused by a severe recession and benefited from a recovering economy," making last year "a transformative year" for credit unions, the National Credit Union Administration said in its 2012 Annual Report.

This "transformative year" bore significant results: Credit union system assets exceeded the $1 trillion threshold for the first time, membership rapidly grew to 94 million, and the aggregate industry net worth ratio increased to 10.44%, the NCUA said.

Credit Union National Association Deputy General Counsel Mary Dunn said, "This report demonstrates clearly the health of the credit union system and supports CUNA's view that new, universally applied safety and soundness regulations are not needed."

Net credit union income totaled $8.5 billion at the end of 2012, and the return on average assets ratio for credit unions totaled 86 basis points. Loan charge-offs declined to 0.73%, the NCUA wrote.

Credit unions with more than $250 million in assets saw the strongest growth. While smaller credit unions tended to have higher net worth, they lagged behind in other areas, the NCUA reported. Credit unions with assets of less than $10 million "sustained sluggish loan growth compared to credit unions with assets above $250 million" and "struggled to generate earnings and lost membership overall," the agency added. The NCUA's Office of Small Credit Union Initiatives is working to help small credit unions survive hardship, the NCUA noted.

The report also detailed how the agency worked to:

  • Ensure a safe and sound credit union system;
  • Modernize regulations;
  • Continue corporate credit union system resolution efforts;
  • Engage, assist and coordinate with stakeholders; and
  • Position the NCUA for the future.
Interest rate risk, liquidity risk, cyberattacks and an aging membership base outside of its prime borrowing years are among the most pressing risks to credit unions going forward, the agency said.

The report serves as the agency's official report to the president and Congress, and covers NCUA and credit union operations. The report also tabulates 10 years of financial trends for credit unions and the National Credit Union Share Insurance Fund.

For the full NCUA report, use the resource link.

CUNA's Examination and Supervision Subcommittee will be reviewing the report and following up on issues of concern.

NEW: CUNA and Leagues Mobilizing 96 Million Members to Preserve CU Tax Status

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WASHINGTON (UPDATED: 5/15/13, 10:15 A.M. ET)--The Credit Union National Association and its affiliated state credit union leagues have launched a large-scale, nationwide grassroots-mobilization campaign urging America's 96 million credit union members to deliver a united message to the U.S. Congress: "Don't tax my credit union!"

The campaign is being launched at a time when the U.S. House and Senate have made broad-based tax reform a major priority. The initiative will urge lawmakers as part of any final tax reform plan to preserve the federal tax exemption credit unions receive as not-for-profit, member-owned cooperatives.

"Policy is being formulated on Capitol Hill now, so we must act now. We can't wait," said CUNA President and CEO Bill Cheney. "It's rare that credit unions call upon their 96 million members to take action, but our members will be the best spokespeople we have, especially on an issue as vital to our future as this."

The campaign will emphasize that any tax on credit unions is really a tax on its members since credit unions are cooperatively-owned by the people they serve. If credit unions were taxed, their benefits to members and communities will be lost, and a consumer-friendly option in the financial marketplace will vanish.

The nationwide action alert urges nearly 7,000 state and federally chartered credit unions to support this campaign by engaging their consumer-members on this issue and directing them to a range of new resources.

"We have to take action on a large scale," said Cheney. "This is about more than just the banking sector wanting to see us taxed. We're vying with some 400 other organizations and industries that see their own tax status threatened. There will be a great deal of noise on Capitol Hill. We've got to be sure our voice is clearly heard."

The "Don't Tax My Credit Union" campaign will utilize direct communication from credit unions to their members and supporters as well as web-based and social media channels in order to convey a powerful and sustained message to Congress. Elements include:

  • A new web site, DontTaxMyCreditUnion.org, where people can learn about the issue, send an email message directly to their members of Congress;
  • Engagement of influential third-party coalition members that recognize credit unions' tax status is good public policy that benefits consumers and society as a whole;
  • A national webinar for credit union executives, to be held Wednesday, May 22 at 3:00 p.m. ET, where CUNA will fully outline the issues, strategy, and required actions. To sign up for the webinar, click here;
  • A reformatted version of CUNA's tax advocacy tool kit.
"Our research shows that informed members are ready to stand with us in this battle," Cheney said. "We have a great opportunity to unite for the good of our members. If Congress taxes credit unions, they'll take away the best financial option from America's consumers. We won't allow that to happen."

For more on the "Don't Tax My Credit Union" campaign, use the resource links.

In Fox Biz Piece, Cheney Reminds 'There's a CU For Everyone'

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WASHINGTON (5/15/13)--"There's a credit union for everyone...You just have to find it," Credit Union National Association President/CEO Bill Cheney said in a new Foxbusiness.com story.

In the story, entitled "Five Types of Credit Unions Worth Joining," Cheney recommended that consumers use CUNA's aSmarterChoice.org to help them find a credit union that fits their needs. The story also ran on Bankrate.com.

American families that chose a credit union over a bank saved around $130 in 2012, according to CUNA estimates. Better loan rates and lower and fewer fees help create these types of benefits for credit union members, Cheney said.

The Foxbusiness.com story said consumers seeking a credit union to join can look into:

  • University-tied credit unions that offer membership to current students, graduates, faculty and area residents. Many of these credit unions feature convenient on-campus branches, and help young members establish their credit;
  • Community development financial institutions that aim to serve low- and moderate-income people and can offer affordable mortgages, tax preparation services, or enhanced savings accounts;
  • Going green with credit unions that offer paperless statements, loan discounts for high-fuel-economy cars, and green workshops;
  • Examining religiously affiliated institutions they could join; and
  • Considering military credit unions, if they are eligible to join.
For the full Foxbusiness.com story and more on aSmarterChoice.org, use the resource links.

CU Mag Compliance Column Takes On Credit Reporting Queries

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WASHINGTON (5/15/13)--The Fair Credit Reporting Act's (FCRA) treatment of credit report information-sharing rights and adverse action notices are two topics taken on in the May edition of Credit Union Magazine's Compliance Q&A Column.

First, credit reports: As explained by Credit Union National Association Senior Director of Compliance Analysis Valerie Moss in the column, section 1681e of FCRA permits a credit union to disclose the contents of a member's credit report to that member if a loan denial or other adverse action is based in whole or in part on information in the report.

Credit unions should check their credit reporting bureau contracts to see if it is permissible to provide their members with actual copies of their credit reports, Moss recommended.

The FCRA does not require adverse action notices to be released in written form. When a financial institution takes adverse action with respect to a consumer based--in whole or in part--on any information contained in a credit report, the financial institution shall provide an oral, written, or electronic notice of the adverse action to the consumer, Moss explained.

On the other hand, she noted, Regulation B [the Equal Credit Opportunity Act] requires adverse action notices to be in writing for consumer credit. "The term 'in writing' includes electronic delivery of the notice if provided in compliance with the federal ESIGN statute. But, you may give the notifications for business credit verbally or in writing," Moss wrote.

For other engaging Credit Union Magazine articles, use the resource link.

CFPB, Dodd-Frank On House Fin. Svcs. Hearing Schedule

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WASHINGTON (5/15/13)--How Consumer Financial Protection Bureau mortgage regulations could impact consumer credit access and the housing market will be one of many key items discussed in House Financial Services Committee hearings planned for next week.

The CFPB hearing, which will focus on the CFPB's Ability to Repay/Qualified Mortgage rule, will be held before the financial institutions and consumer credit subcommittee on Tuesday, May 21.

New standards to define a "qualified mortgage" under the agency's "ability to repay" regulations were issued by the CFPB in January. The rule amended Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). The regulations also establish certain protections from liability under this requirement for "qualified mortgages."

Other hearings scheduled for next week include:
  • A May 21 monetary policy and trade subcommittee hearing on the unintended consequences of the conflict minerals provision of the Dodd-Frank Act. That provision requires the Securities and Exchange Commission to promulgate rules for public companies to disclose their use of minerals that originated in the Democratic Republic of Congo;
  • A May 22 full Financial Services Committee hearing that will feature testimony from U.S. Treasury Secretary Jacob Lew. Lew will present the annual Financial Stability Oversight Council report during that hearing;
  • A May 22 oversight and investigations subcommittee hearing on how the U.S. Department of Justice determines whether a financial institution is "Too Big to Jail"; and
  • A May 23 capital markets and government-sponsored enterprises subcommittee hearing on the Burdensome Data Collection Relief Act (H.R. 1135), the Small Business Capital Access and Jobs Preservation Act (H.R. 1105), the Audit Integrity and Job Protection Act (H.R. 1564) and a proposal to amend portions of the Dodd-Frank Act that address the fiduciary duties of broker-dealers.
The committee stressed that this is a tentative schedule, and said witnesses will be announced later.

For the full schedule, use the resource link.

NEW: Senate Will Vote On Cordray Nomination Next Week, Reid Says

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WASHINGTON (UPDATED: 5/15/13, 3 p.m. ET)--A Senate confirmation vote for Consumer Financial Protection Bureau Director Richard Cordray will be on the schedule next week, Sen. Harry Reid (D-Nev.) reportedly said today.

According to Talking Points Memo, Reid is adamant that the job of CFPB director will be filled. Cordray will receive a vote, the senator said.

The Senate Banking Committee in March approved the nomination by a 12 to 10 vote.

Cordray's nomination passed the committee in 2011, but ultimately failed to get a vote in the Senate. President Barack Obama appointed Cordray to the CFPB director position during a brief congressional recess in 2012, and Cordray's term as director would end this year if he is not confirmed.

Many Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency makeup.

House and Senate Republicans have supported replacing the CFPB director's position with a five-member panel of leadership. Legislation that would create such a panel (S. 205) has been introduced in the Senate.

The Credit Union National Association backs a multi-member panel of directors if it includes seats statutorily designated for credit union system representatives, including a state or federal credit union regulator, and possibly a state consumer agency representative.

CUNA's Gentile Notes CU Structure Benefits In LSCU Podcast

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WASHINGTON (5/14/13)--"The banks may have more money...but what they don't have is the cooperative nature of credit unions," Credit Union National Association Executive Vice President of Strategic Communications and Engagement Paul Gentile said in a new League of Southeastern Credit Unions and Affiliates (LSCU) podcast.

Cooperative effort is at the heart of CUNA's Unite for Good rallying cry for credit unions, which calls upon credit unions to work toward a movement-wide strategic vision in which "Americans Choose Credit Unions as Their Best Financial Partner," Gentile told LSCU Vice President of Communications Mike Bridges in the podcast

Collaborating to remove barriers, raise awareness and foster service excellence are the three major goals of the Unite for Good effort. CUNA has suggested several steps credit unions can take to achieve each of these goals. Unite for Good has a full arsenal of resources to help credit unions spread their positive message, he said.

However, he said, the No. 1 key for credit unions right now is to go to their membership and tell them the value of the credit union tax status. "With the tax fight that's brewing, we want members to understand the value of the credit union structure," Gentile said.

Whether in financial services or other industries, being the smaller guy and not being the "king of the mountain" has its advantages, he noted.

Larger institutions, no matter the industry, can find it harder to be creative and are not as flexible as their smaller counterparts, he emphasized. "Credit unions...want to get mainstream, but we should also embrace the flexibility we have with our marketplace. You can't be everything to everybody, but if you can find a niche in your area ...that's powerful," Gentile said.

Looking at local niche areas can help credit unions "drum up lending until some of the more mainstream markets come back," Gentile said. Private student loans and loans that are intended to help homeowners better their energy efficiency through structural improvements are two examples of niche products that can help credit unions expand their lending portfolios.

Another way credit unions can make their presence felt is by reaching out to their membership. Credit unions can grow from within if they speak to their 96 million members and tell their own story within their own membership, Gentile said.

For the full podcast interview, use the resource link.

This Week: Housing, Small Biz Issues Hit Hearing Spotlight

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WASHINGTON (5/14/13)--A host of hearings on housing issues, Too Big To Fail banks, small businesses and general tax issues highlight what should be another busy week for U.S. House and Senate financial services committees.

Today the Senate Banking securities insurance and investment subcommittee will discuss returning private capital to mortgage markets. A mix of industry experts and academics is scheduled to testify.

Wednesday hearings include:

  • A House Financial Services oversight and investigations subcommittee hearing entitled "Who Is Too Big to Fail: Does Title II of the Dodd-Frank Act Enshrine Taxpayer-Funded Bailouts?";
  • A House Ways and Means select revenue measures subcommittee hearing on the discussion draft of "Small Business and Pass-through Entity Tax Reform";
  • A House Small Business Committee hearing entitled "Patent Reform Implementation and New Challenges for Small Businesses"; and
  • A Senate Banking securities, insurance and investment subcommittee hearing on the impact of cross-border bank resolution on taxes and the economy.
Federal Deposit Insurance Corp. Office of Complex Financial Institutions Director Jim Wigand, Federal Reserve Division of Banking Supervision and Regulation Director Michael Gibson and U.S. Department of the Treasury Office of International Banking and Securities Markets Director William Murden are scheduled to testify during that hearing.

The House Financial Services Committee on Thursday will hold an oversight hearing on the Securities and Exchange Commission. That body's subcommittee on housing and insurance will also hold a hearing entitled "Sustainable Housing Finance: The Government's Role in Multifamily and Heath Care Facilities Mortgage Insurance and Reserve Mortgages" on that same date.

N.C., S.C. Leagues, CUs Kick Off 2013 Hill Hike Advocacy

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WASHINGTON (5/14/13)--Credit union leaders from North Carolina and South Carolina this week will kick off Spring advocacy efforts on Capitol Hill. These visits come at a vital time for credit unions, as tax reform and regulatory relief are on the minds of many in Congress.

"These groups continue to show the credit union commitment to advocacy. North Carolina and South Carolina credit unions have been some of the most frequent visitors in the 15 years of the Hike the Hill program," Credit Union National Association Senior Vice President of Political Affairs Richard Gose said.

Both groups said communicating credit unions' positive impact on their communities and membership will be their highest priority. The hikers will also target congressional support for legislation to increase the member business lending cap,  enhanced supplemental capital access, and other credit union priorities during their visits.

North Carolina Credit Union League staff will be accompanied by representatives from Raleigh's Coastal FCU and Local Government FCU; Waynesville's Mountain CU; Winston Salem's Allegacy FCU and Winston-Salem FCU; Charlotte Metro FCU; and Salisbury's Lion's Share FCU.

The South Carolina Credit Union League  group will include representatives from Hartsville's SPC CU, Charleston's Heritage Trust FCU; Palmetto Cooperative Services; Greenville's SC Telco FCU and Greenville FCU; and Sumter's SAFE FCU.

Both groups will also meet with National Credit Union Administration Deputy Director of Examination and Insurance Tim Segerson and attend the NCUA's Thursday open board meeting.

Credit union representatives from Oregon, Washington and Missouri have planned late May hikes. Michigan, Texas, Wisconsin and Arkansas credit union groups are scheduled to visit Washington in June.

CUNA Treasury Comments, CFPB News Lead Reg Advocacy Report

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WASHINGTON (5/14/13)--Credit Union National Association comments on Bank Secrecy Act burdens are one of many topics tackled in this week's edition of the Regulatory Advocacy Report.

CUNA has called for reduced credit union regulatory burdens during recent U.S. Treasury Bank Secrecy Act Advisory Group (BSAAG) meetings. CUNA has also suggested that BSAAG promote more efficient Bank Secrecy Act rules.

The BSAAG is comprised of representatives from federal regulatory and law enforcement agencies, financial institutions, and trade associations. The group makes BSA policy recommendations to the U.S. Treasury Secretary.

CUNA has been a member of BSAAG since 2003, and is scheduled to fill the Credit Union Industry Trade Group position on the advisory group through February 2015. CUNA also participates on the parent group and its working subgroups, including the Banking, Law Enforcement, Prepaid Access, and Suspicious Activity Report Review subcommittees.

Recent Consumer Financial Protection Bureau developments detailed in this week's Regulatory Advocacy Report include:

  • The recent proposal of a credit insurance premium effective date delay;
  • Details on a CFPB private student loan report and how the CFPB may address the student loan issue going forward;
  • Proposed clarifications of the ability-to-repay/qualified mortgage and mortgage servicing rules; and
  • The elimination of a restrictive independent ability-to-pay assessment requirement.
Recent Federal Housing Finance Agency actions, and the impact that high profits from government-sponsored enterprises Fannie Mae and Freddie Mac could have on housing reform talks, are also discussed in this week's report. Handy CUNA regulatory advocacy resource charts are also provided.

Employees or volunteers of CUNA and state credit union league member credit unions can sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Taxreform.gov Gives CUs New Tax Advocacy Opportunity

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WASHINGTON (5/13/13)--Credit unions now have another avenue to advocate for the credit union tax status: They can post comments to a new U.S. Congress hosted website, taxreform.gov.

The site, which was developed by Senate Finance Committee Chairman Max Baucus (D-Mont.), House Ways and Means Committee Chairman Dave Camp (R-Mich.), and their staff, is intended to give citizens a voice as tax reform discussions continue in Congress. The site also explains the reasons behind current tax reform efforts, and updates readers on the progress of the tax debate.

A tax comment Twitter feed, @simplertaxes, has also been developed.

"No need to travel to Washington. Through the use of social media, we want all Americans to participate directly," the legislators said on the site.

The taxreform.gov site received more than 1,000 comments in its first 12 hours of operation.

The Credit Union National Association has alerted credit unions that the next several weeks will be key as a tax reform package is developed. Executive Vice President of Government Affairs John Magill has noted that credit unions must remain vigilant and be prepared to do what is needed to protect their tax status.

"This is a critical time for credit unions to be educating their members and encouraging them to contact lawmakers to express their support for the value they receive from the credit union tax exemption," he added. Credit unions must use every chance possible to tell lawmakers loudly, early and often that a tax on credit unions is nothing more than a tax on 96 million Americans who are credit union members, Magill said.

CUNA provides a Tax Advocacy Toolkit to its member credit unions to help with their efforts to educate their own members on credit union tax issues.

CUNA members can use the resource link to access the toolkit.

IRS Reminds CUs Of May 15 Form 990 Deadline

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WASHINGTON (5/13/13)--State-chartered credit unions and other tax-exempt organizations must file their 990 forms by May 15 or risk losing their tax-exempt status, the Internal Revenue Service reminded on Friday.

State-chartered credit unions are required to file Form 990 with the IRS annually, although a few states still permit group 990 filings. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes.

"Organizations will see their federal tax exemptions automatically revoked if they have not filed reports for three consecutive years," the IRS wrote.

Small tax-exempt organizations with annual receipts of $50,000 or less can file an electronic notice Form 990-N (e-Postcard). Tax-exempts with annual receipts above $50,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Filing extensions are available.

Use the resource link below for more information.

Comments Due May 25 On CFPB Credit Insurance Rule Delay

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WASHINGTON (5/13/13)--Parties interested in commenting on a proposed delay of the June 1 effective date relating to a prohibition on financing certain credit insurance charges must have their opinions to the Consumer Financial Protection Bureau by May 25.

Last week, the CFPB announced it would seek comment on a proposed delay of the June date. A Friday Federal Register document set the comment date.

The Credit Union National Association has issued a Comment Call seeking credit union views on the delay by May 17.

The CFPB's mortgage loan originator compensation rule contains a provision, as required by the Dodd-Frank Act, which bans the financing of any premiums or fees for payment protection products in connection with certain consumer credit transactions secured by a dwelling. The rule does allow the products to be calculated and paid for in full on a monthly basis.

To ease compliance and help avoid unneeded costs, the Credit Union National Association had urged the CFPB to delay the effective date of any provisions of the final rule that would impact products other than actual single-premium credit insurance, as well as any future rule that will address these issues, until Jan. 10, 2014.  Most of the rest of the mortgage loan originator compensation rule is set to take effect at that time.

JP Morgan Card Practices Draw California AG Action

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LOS ANGELES, Calif. (5/13/13)--California's Attorney General is cracking down on some of JPMorgan Chase & Co.'s questionable credit card practices.

In an enforcement action filed against the bank in Los Angeles Superior Court late last week, California Attorney General Kamala D. Harris alleged that JPMorgan Chase "engaged in fraudulent and unlawful debt-collection practices against tens of thousands of Californians."

Those practices included:

  • Illegally robo-signing litigation filings;
  • Failing to properly notify customers of debt collection lawsuits the bank had filed against them; and
  • Filing legal documents against customers without properly redacting sensitive personal information from the filings, exposing customers to potential identity theft.
"In addition, when asking courts to enter default judgments against consumers, Chase consistently swore under penalty of perjury that the consumers were not on active military duty. In fact, Chase never checked. This deprived servicemembers of important legal protections to which they are entitled while on active duty," the attorney general alleged in a release.

"At nearly every stage of the collection process, Defendants cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits," the complaint added.

These practices impacted approximately 100,000 California credit customers over a three-year period, the attorney general said.

"This enforcement action seeks to hold Chase accountable for systematically using illegal tactics to flood California's courts with specious lawsuits against consumers. My office will demand a permanent halt to these practices and redress for borrowers who have been harmed," Harris added.

For the full release, use the resource link.

Cheney Report Comments On CU DDoS Vigilance

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WASHINGTON (5/13/13)--While last week's threatened Distributed Denial of Service (DDoS) cyberattacks did not pan out as anticipated, Credit Union National Association President/CEO Bill Cheney in this week's edition of The Cheney Report said CUNA strongly believes that "maintaining the trust of members in the security of their credit unions is worth the effort of advising credit unions of risks to them and their members."

DDoS attacks are attempts to disrupt or suspend online service by saturating a target's network with external communication requests to overload its server. One dozen credit unions were among the 133 financial institutions and government agencies on a hackers' hit list. The hacker group, OpUSA, indicated that a cyber campaign would be launched "on or about May 7." CUNA warned credit unions of the potential for attacks in late April.

Some websites overseas were temporarily defaced by the hackers, but the 133 U.S. credit unions and banks on the OpUSA target list were unaffected. (Use resource link for May 9 News Now coverage: Websites Defaced, But No Action So Far Vs. U.S. CUs.)

"There were little, if any, widespread attacks on credit unions. We had acknowledged from the beginning that there certainly was the possibility that no threat would, in fact, materialize...And, if our cautions to credit unions played any role in diminishing a threat, so much the better," Cheney wrote in this week's report.

This week's Cheney Report also includes:

  • A tax reform update;
  • News on Fannie Mae and Freddie Mac profits;
  • Details on the CFPB's decision to delay the effective date of its credit insurance rule; and
  • A preview of this week's NCUA board meeting.
Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs. The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

Fed Official Criticizes Bank Risk Taking

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WASHINGTON (5/10/13)--Federal Reserve Bank of St. Louis President Jim Bullard knocked "too big to fail" banks pretty hard in a recent interview in American Banker, criticizing a "Las Vegas" attitude toward using short-term funds to take big risks and then sticking it to the taxpayer if losses pile up.

Bullard suggested a novel way to control some bank bad behavior: Taxing their short-term borrowings (American Banker May 8).

"You could change the tax code to get more reliance on equity finance and less reliance on debt," the Banker quoted him as saying.  He added, this change would prevent large firms from taking risks with short-term funds, only to come looking for government bailouts when those risks don't pan out.

Overall, he said, the U.S. does not need large banks: They are given unfair subsidies, are difficult to manage, and are not vital to economic growth.

Large, multinational businesses have their own means of accessing the capital they need, and rarely go to banks for back up, he said. Smaller, more nimble institutions could perform many of the same tasks that large banks take on, with far less risk to taxpayers, Bullard added.

Federal Reserve Governor Daniel Tarullo also addressed too-big-to-fail firms in remarks made last week. While much work has been done to address big banks, regulators "would do the American public a fundamental disservice were we to declare victory without tackling the structural weaknesses of short-term wholesale funding markets, both in general and as they affect the too-big-to-fail problem," he said.

"Relatively little has been done to change the structure of wholesale funding markets so as to make them less susceptible to damaging runs," Tarullo said. One way to address these short-term wholesale issues is requiring banks to hold additional capital, ending the need for short-term borrowing.

Too-big-to-fail banks, and how to limit their outsized impact on the economy, continues to be a frequent topic of discussion in Washington, as various regulatory and legislative fixes are discussed.

For Tarullo's full remarks, use the resource link.

Derivatives Proposal Tops NCUA May Agenda

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ALEXANDRIA, Va. (5/10/13)--A long-awaited National Credit Union Administration derivatives proposal will headline the three items on the agenda when the agency holds its May open board meeting at 10 a.m. ET on May 16.

NCUA Chairman Debbie Matz in February hinted that the agency is considering allowing well-run credit unions with the necessary expertise to use simple derivatives to hedge against interest rate risk (IRR). She said managing interest rate risk is a key concern for the agency.

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 NCUA indicated last year.

The Credit Union National Association has encouraged the NCUA to permit state and federal credit unions to manage IRR through investments in simple derivatives. CUNA has also told the agency it supports allowing well-managed credit unions to invest in derivatives through third-parties, and granting independent derivative investment authority for certain credit unions with adequate derivatives experience.

The agency currently allows only a select number of federal credit unions to engage in derivatives through an investment pilot program.

Other items on the open board meeting agenda are:

  • A board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans; and
  • A final rule making technical adjustments to credit union regulations.
The agency is also proposing technical amendments to multiple parts of its rules and regulations. The Credit Union National Association will review these amendments to ascertain their substance.

Consideration of supervisory activities and an appeal under Section 701.14 and Part 747, Subpart J of NCUA regulations are on the closed agenda. The closed board meeting is scheduled to begin after the open meeting has ended.

For the full NCUA agenda, use the resource link.

Fannie Mae To Pay $59 Billion Toward Gov't Outlay

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WASHINGTON (5/10/13)--Fannie Mae will soon pay a whopping $59.4 billion in dividends to the U.S. Treasury as it continues to settle debts incurred following a 2008 government conservatorship.

Fannie Mae reported total pre-tax income of $8.1 billion for the first quarter of 2013, the largest quarterly pre-tax income in company history. The record income was due to strong credit results and increased revenue, Fannie Mae said. The government sponsored enterprise (GSE) also released a $50.6 billion valuation allowance on deferred tax assets.

Fellow GSE Freddie Mac also reported near-record profits during the first quarter: that company brought in $4.6 billion in funds.

Fannie and Freddie are currently making quarterly dividend payments to the federal government to repay funds that were used to bail out the two firms. Fannie Mae's portion of those payments will total $95 billion once the $59.4 billion payment is made, the GSE said. The payment will be made by June 30, according to the company. Freddie Mac said it paid $7 billion to the Treasury in the first quarter.

The GSEs have been held under government conservatorship since 2008, and they continue to repay more than $150 billion in taxpayer funds that were used to prop them up.

Some have speculated that the Fannie and Freddie profits, and the resulting repayments, could slow the tempo of GSE reform efforts.

A range of housing policy changes have been discussed by the U.S. House, the Senate, and the Obama administration in recent months, including full market privatization, limiting government market intervention, and several stops in-between.

"Lawmakers in Washington agree on the need to draw private capital back into the mortgage market but no consensus on how to do so has formed," Federal Housing Finance Agency Acting Director Ed DeMarco said in remarks delivered Thursday to the Federal Reserve Bank of Chicago's 49th Annual Conference on Bank Structure and Competition.

Ensuring that credit union interests are represented in any reform of the housing finance system is one of the Credit Union National Association's top 2013 legislative objectives. CUNA has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

Use the resource link to read more.

CFPB Proposes Options to Ease Student Debt Repayment

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WASHINGTON (5/10/13)--Consumer Financial Protection Bureau Director Richard Cordray this week outlined a trio of potential policy and market-based solutions that he said would "help struggling borrowers with unmanageable private student loan debt."

The student debt solutions were unveiled during a Wednesday field hearing in Miami, Fla. The potential actions, which were developed through suggestions from outside commenters, include:

  • Allowing student loan borrowers that have dutifully repaid their loan to refinance their remaining debt at lower interest rates;
  • Lowering monthly repayments to match a negotiated debt-to-income ratio; and
  • Cleaning the slate and creating a payment plan for borrowers that need a way to repair their credit and get out of default.
A comprehensive CFPB student debt report released during the hearing found that Americans hold approximately $1.1 trillion in outstanding student loan debt, and one-in-five U.S. households have at least one resident that has taken out a student loan. The average outstanding balance for student loan borrowers is $26,682, and one-in-eight student loan borrowers owes more than $50,000. Thirty percent of student loan borrowers are delinquent, and a total of 6.7 million are more than 90 days behind on their student loan payments, according to the bureau.

Student loan debt is impacting housing, small business ownership, retirement savings and rural communities, the CFPB report noted.

"Everyone who cares about the future of this country should be focused closely on the many problems posed by a growing student loan debt burden borne by some of our best young people," Cordray said.

Also this week, Sen. Elizabeth Warren (D-Mass.) introduced legislation that aims to address student loan issues. Her bill, the Bank on Students Loan Fairness Act, would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently .75%.

In a recent meeting with CFPB officials, the Credit Union National Association said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for April 23 News Now story: CFPB Seeks CU Help For Student Loan Issues.)

Three CUs Among 2013 NACA Fund Applicants

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WASHINGTON (5/10/13)--Three credit unions are among the 65 firms that have requested funding through the 2013 round of the Community Development Financial Institutions (CDFI) Fund's Native American Assistance CDFI Program (NACA) awards.

The credit unions have requested a combined $1.33 million in funds. Altogether, the 65 NACA applicants have requested $26.9 million in total funds. The amount requested is more than double the amount made available this year, and is an increase from the $23 million requested during 2012, the CDFI Fund said in a release. Funding applicants hail from 21 states and the District of Columbia.

"Native CDFIs are active partners in the economic growth of their communities, and the NACA Program continues to serve as vital support for these essential organizations as they work in the some of the most distressed areas in the country," CDFI Fund Director Donna Gambrell said.

NACA applications are being reviewed, and awards are expected to be announced this fall, the CDFI Fund said.

The NACA Program is designed to encourage the creation and strengthening of certified CDFIs that primarily serve Native American, Alaskan Native and Native Hawaiian communities. NACA funds may be used to finance capital or may be provided to financial institutions in the form of technical assistance grants.

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

CDFI Fund Grant Requests Jump $15 Million

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WASHINGTON (5/9/13)--Three times as many funds were requested this year through the U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) as were available to grant.

For Fiscal Year 2013, CDFI program applicants requested a total of $410.8 million, which was a $15 million jump over last year's requests of nearly $395.7 million. Financial assistance (FA) applicants requested $402.2 million and technical assistance (TA) applicants requested nearly $8.6 million, according to a Treasury release.

The CDFI Fund received 401 applications for this funding round. The  309 applications for FA came from 43 states plus the District of Columbia and Puerto Rico; and the 92 TA applicants came from 30 states plus the District of Columbia and Puerto Rico.

The deadline for CDFI Program applications was February 28. The awards are expected to be announced in the fall.

For more, use the resource link for the CDFI Fund's release.

CFPB Proposes CUNA-sought Credit Rule Delay

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WASHINGTON (5/9/13)--The Consumer Financial Protection Bureau has favorably responded to the Credit Union National Association's recent request that the agency delay a June 1 effective date relating to the prohibition on financing certain credit insurance charges. The provision is contained within the bureau's mortgage loan originator compensation rule.

The CFPB told CUNA it will seek comment for 15 days on a proposed delay.

CUNA had expressed concern that certain language within the new rule needed clarification, and that a June 1 effective date of this prohibition could upend practices at some credit unions. However, CUNA does not support the financing of actual single premium insurance charges.

The CFPB's mortgage loan originator compensation rule contains a provision, as required by the Dodd-Frank Act, which bans the financing of any premiums or fees for payment protection products in connection with certain consumer credit transactions secured by a dwelling. The rule does allow the products to be calculated and paid for in full on a monthly basis.

To ease compliance and help avoid unneeded costs, CUNA had urged the CFPB to delay the effective date of any provisions of the final rule that would impact products other than actual single-premium credit insurance, as well as any future rule that will address these issues, until Jan. 10, 2014.  Most of the rest of the mortgage loan originator compensation rule is set to take effect at that time.

CU SAR Vigilance Helps Fraud, Drug Cases

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WASHINGTON (5/9/13)--One credit union's vigilance, and frequent filing of Suspicious Activity Reports (SARs), helped uncover an alleged $2 million mortgage loan fraud scheme and resulted in a win for law enforcement, the Financial Crimes Enforcement Network (FinCEN) reported in its SAR Activity Review--Tips, Trends & Issues.

According to FinCEN, the credit union reported a local accountant that allegedly helped clients and complicit realtors obtain mortgage loans by creating fraudulent tax letters stating the borrowers had self-employment income and owned their own businesses. The accountant and employees of his tax preparation business also prepared fraudulent tax returns to back up these claims.

The accountant and his accomplices used these falsified documents to secure loans for homebuyers. The accountant pleaded guilty to bank fraud charges and was sentenced to two years in prison.

In a separate case, credit union SARs contributed to the dismantling of a multi-state drug trafficking and money laundering ring.

Overall, the number of SARs from credit unions that listed the National Credit Union Administration as their primary federal regulator declined by 3% between 2012 and 2011, FinCEN said in another document, its SAR Activity Review--By the Numbers.

That number had increased every year since 2003, according to FinCEN.

Overall, the total number of SARs filed by credit unions and other financial institutions increased by 8% in 2012, with mortgage fraud and check fraud continuing to rank as the most common criminal offenses.

However, there were 29% fewer mortgage fraud SARs filed in 2012 than there were in 2011, FinCEN added. Commercial loan fraud SARs also declined by 19% during that same time period.

Check, commercial loan, consumer loan, credit and debit card, mortgage and wire transfer fraud accounted for 23% of all suspicious activities reported by depository institutions in 2012, FinCEN said.

For both FinCEN releases, use the resource links.

Possible Tax Reform-Debt Ceiling Link Heightens Need For CU Vigilance

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WASHINGTON (5/9/13)--Reports that a key lawmaker cleared a path yesterday for tax code reform debate--by publicly backing the idea of linking an overhaul of the tax code to an increase in the debt limit--truly highlights the need for credit unions to be vigilant in defense of their tax status right now, said CUNA Executive Vice President of Government Affairs John Magill.

"Credit unions must be educating their members--now--about the public policy value of the credit union federal tax exemption. Our research shows that informed members are ready to stand with us in this battle," Magill said.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) have said they are ready to push ahead with efforts to revise the tax code. It was Camp who backed tying tax talks with debt-ceiling talks, which would create a package harder to derail during the legislative process (Bloomberg Government May 8).

On May 6, the Joint Committee on Taxation released a report detailing the findings of 11 House Ways and Means Committee tax reform working groups. (News Now May 6).

CUNA noted at that time that the next several weeks will be key in terms of what actually goes into a tax reform bill in the House and that it is possible that the House could consider comprehensive tax reform legislation before the end of July.

"This is a critical time for credit unions to be educating their members and encouraging them to contact lawmakers to express their support for the value they receive from the credit union tax exemption," Magill underscored.

"And on the political front, credit unions must use every chance possible to tell lawmakers loudly, early and often that a tax on credit unions is nothing more than a tax on 96 million Americans who are credit union members."

CUNA provides a Tax Advocacy Toolkit to its member credit unions to help with their efforts to educate their own members on credit union tax issues.

CUNA members can use the resource link to access the toolkit.

NCUA Announces 22 Student Grant Winners

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ALEXANDRIA, Va. (5/9/13)--Twenty-two low-income credit unions in 16 states will receive a combined $80,000 in grants under the National Credit Union Administration's Student Internship Grant Initiative.

The agency grant program provides individual grants of up to $4,000 to help eligible credit unions hire student interns during the summer months. Hired students will help their respective credit unions implement marketing plans, ensure compliance and assist with day-to-day operations, among other tasks.

NCUA Board Chairman Debbie Matz said the grants will give credit unions "a chance to add some helping hands and to connect with young people, who could be future members or industry leaders."

The agency received more than 40 applications requesting upwards of $150,000 in funds on May 1, the first day applications were accepted.

Program funding is provided through the Community Development Revolving Loan Fund, and the grant program is administered by the NCUA's Office of Small Credit Union Initiatives.

Only low-income designated, financially viable credit unions are permitted to take part in the grant program. The grants can only be used for student internship costs, the NCUA said.

Details of other NCUA grant programs will be discussed during a May 22 webinar. (See related story: Grant Initiatives To Be May 22 NCUA Webinar Topic.)

For details on the 22 credit unions that received funding, use the resource link.

Foreign Account Tax Act Repeal Would Give Reg Relief

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WASHINGTON (5/9/13)--The Foreign Account Tax Compliance Act (FATCA), if left in place, "will impose billions of dollars of compliance costs on U.S. credit unions and banks annually," Credit Union National Association President/CEO Bill Cheney wrote in a Wednesday letter to Sen. Rand Paul (R-Ky.). The CUNA letter follows Paul's Tuesday introduction of a bill (S. 887) that would repeal FATCA.

The CUNA letter said Congress did not appear to have U.S. credit unions nor banks in mind when it developed the FATCA provisions in 2010. "Yet U.S. financial institutions will be required to bear a large proportion of FATCA's compliance burdens," Cheney said.

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

Portions of FATCA that impact Form 1042-S filings are already in effect. Other provisions will be phased in between January 2014 and January 2017.

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.

The CUNA letter also addressed the European Union's consideration of a "European FATCA" that would regulate U.S. credit unions and banks in the same manner that the U.S.'s FATCA purports to regulate credit unions and banks in the European Union. "Unless Congress repeals FATCA, we think that it is only a matter of time before the extraterritorial diktats of a European FATCA and other FATCA-inspired foreign laws become additional compliance burdens on U.S. financial institutions," Cheney said.

"FATCA and FATCA-related intergovernmental agreements with foreign nations undermine the constitutional privacy rights of U.S. credit union members and bank customers," the CUNA letter added.

For the full letter, use the resource link.

CUNA: FHLB Bill Creates More Mortgage Options

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WASHINGTON (5/9/13)--A bill introduced Tuesday to allow privately insured credit unions to become members of the Federal Home Loan Bank System (FHLBs) would provide a new source of mortgage funding for those financial institutions and their members, the Credit Union National Association wrote Wednesday in a letter of support for the bill.

CUNA thanked Rep. Steve Stivers (R-Ohio) for taking leadership on the issue and introducing H.R. 1862. "Passage of this legislation would advance home ownership options for members of privately insured credit unions," CUNA President/CEO Bill Cheney wrote.

The FHLBs were created by Congress in 1932 to provide liquidity support to the nation's mortgage lenders. Credit unions and other financial institutions can access the FHLB liquidity system by becoming FHLB members. However, current law prohibits privately insured credit unions from joining.

Also on the FHLB front, CUNA earlier this year called on the National Credit Union Administration to approve the FHLBs as a permissible source of emergency liquidity for credit unions. The FHLB presidents also have urged the agency to adopt that policy.

"Such action would encourage and facilitate a stable source of funding to assist credit unions of all sizes in meeting their business, community, and member needs," the presidents wrote in a letter to NCUA Chairman Debbie Matz and board member Michael Fryzel. (Use the resource link for Feb. 4 News Now story: FHLBs ask to be named a CU emergency liquidity provider.)

Ensuring greater regulatory relief for credit unions continues to be a top CUNA priority, and CUNA continues to work closely with House Financial Services Committee members and staff as they develop legislative solutions to address small financial institution regulatory burden.

Removing legislative and regulatory barriers is also one of the key objectives outlined in CUNA's Unite for Good initiative. Unite for Good calls on credit unions to rally in support of a common vision where "Americans choose credit unions as their best financial partner."

For the full CUNA letter and a list of Unite for Good action steps, use the resource links.

Grant Initiatives To Be May 22 NCUA Webinar Topic

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ALEXANDRIA, Va. (5/9/13)--Details on several National Credit Union Administration low-income credit union grant programs will be delivered during an upcoming May 22 agency webinar.

The free webinar, entitled "Multi-Initiative Grants for Low Income Credit Unions," is scheduled to begin at 2 p.m. ET. The NCUA's Office of Small Credit Union Initiatives will host the webinar. The event is intended to help credit unions:

  • Understand the application process and the qualifications necessary for grant funding;
  • Determine which grant initiatives best meet their needs;
  • Learn how these grant initiatives can assist with certain operating expenses; and
  • Understand how to use these funds to expand member services and grow.
The NCUA said webinar participants may submit questions in advance by sending an e-mail to WebinarQuestions@ncua.gov.  The subject line of the e-mail should read, "Multi-Initiative Grants for Low Income Credit Unions."

To register for the NCUA webinar, use the resource link.

Sen. Finance Chair Backs CU Tax Status In MCUN Remarks

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WASHINGTON (5/8/13)--"Credit unions' tax exempt status is not going away, not on my watch," Senate Finance Committee Chairman Max Baucus (D-Mont.) said in a recent message to Montana credit unions.

"Over the years, folks in D.C. have tried to cut your tax exempt status, and I've gone to the mat to fight back," he added.

"I was thrilled to hear Sen. Baucus clearly reiterate his support for our unique tax treatment. He understands the value that credit unions provide to their members far exceeds the amount of tax that might be generated," Montana Credit Union Network President/CEO Tracie Kenyon said.

As chair of the Senate's powerful tax-policy committee and leader of the Joint Committee on Taxation, Baucus is one of the most influential legislators currently working on a tax code revamp.

Credit Union National Association President/CEO Bill Cheney also expressed gratitude to Baucus for his statements and his ongoing support of credit unions.   However, due to "general uncertainty on Capitol Hill," Cheney urged credit unions not to take anything for granted.

"Credit unions must be vigilant to protect their tax status. One of the best ways to do that is to ensure that our members and supporters, nationwide, understand the value that credit unions bring to their memberships and consumers at large and how the tax exemption plays a critical role for not-for-profit credit unions," he said. Cheney encouraged credit unions to use CUNA's Tax Advocacy Toolkit for information and tools to help their advocacy and educational efforts.

As part of the tax code revamp efforts, the joint committee received a 550-plus page report on tax policy reform on Monday. (Use the resource link for the May 7 News Now story: Ways and Means Releases Working Group Tax Reform Report.)

The report, which was developed by 11 separate working groups, mentions the credit union tax exemption, as expected. However, the report does not indicate that the working groups received any comments urging the repeal of the credit union tax exemption.

The House Ways and Means Committee is expected to meet privately on Wednesday to discuss the tax reform report, and discussions are scheduled to continue next week. Later this summer, the committee is expected to consider legislation to completely overhaul the corporate and individual tax codes, with full House consideration prior to the August recess.

Baucus's Senate Finance Committee has been meeting privately each week to discuss a series of options papers developed by committee staff, and a tax policy report similar to the one provided to the Joint Committee on Taxation could be released later this spring.

CUNA has met with many members of the House and Senate committees to advocate the retention of the credit union tax status.

Baucus, who said he is proud to be among the one-in-three of Montanans that are credit union members, made his pro-credit union remarks in a brief video that played at the MCUN's 76th annual meeting and convention held April 17-19 in Great Falls.

Montana's credit unions are critical to job growth and "provide a rock solid foundation for our business and our families to prosper," Baucus added.

NEW: CFPB Proposes CUNA-sought Credit Rule Delay

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WASHINGTON (5/8/13, UPDATED 11:11 a.m.)--The Consumer Financial Protection Bureau has favorably responded to the Credit Union National Association's recent request that the agency delay a June 1 effective date relating to the prohibition on financing certain credit insurance charges. The provision is contained within the bureau's mortgage loan originator compensation rule.

The CFPB told CUNA it will seek comment for 15 days on a proposed delay.

CUNA had expressed concern that certain language within the new rule needed clarification, and that a June 1 effective date of this prohibition could upend practices at some credit unions. However, CUNA does not support the financing of actual single premium insurance charges.

The CFPB's mortgage loan originator compensation rule contains a provision, as required by the Dodd-Frank Act, which bans the financing of any premiums or fees for payment protection products in connection with certain consumer credit transactions secured by a dwelling. The rule does allow the products to be calculated and paid for in full on a monthly basis.

To ease compliance and help avoid unneeded costs, CUNA had urged the CFPB to delay the effective date of any provisions of the final rule that would impact products other than actual single-premium credit insurance, as well as any future rule that will address these issues, until Jan. 10, 2014.  Most of the rest of the mortgage loan originator compensation rule is set to take effect at that time.

CFPB Cracks Down On Two Debt Relief Companies

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WASHINGTON (5/8/13)--Under a complaint filed Tuesday by the Consumer Financial Protection Bureau, two debt-relief providers, Mission Settlement Agency and Premier Consultant Group LLC, would be made to halt their current practices, repay impacted customers and give up allegedly ill-gotten gains.

"These wolves in sheep's clothing take money from consumers who are already struggling to pay their bills, falsely promising them help while really making their problems worse," CFPB Director Richard Cordray said.

The compliant, which was filed by the CFPB in the U.S. District Court for the Southern District of New York, alleges that the two firms and related entities and individuals:

  • Unlawfully collected fees in advance of providing debt relief services; and
  • Failed to provide effective debt relief services.
Cordray also said Mission "impersonated a government agency" and encouraged employees "to sign up consumers by any means, including lies about the cost and timing of fees."

The defendants allegedly charged more than $1.3 million in combined fees to more than 1000 consumers in multiple states.

The CFPB worked with the U.S. Department of Justice to investigate both firms. "Consumers deserve better, and we are proud of this joint effort to crack down on unscrupulous behavior," Cordray added.

For more on the charges, use the resource link.

Dodd Frank, JOBS Act Amendments Moved On To House

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WASHINGTON (5/8/13)--The House Financial Services Committee took another step toward reforming aspects of the Dodd-Frank Wall Street Reform Act, amending the Jumpstart Our Business Startups (JOBS) Act and addressing some derivatives issues, marking up nine measures and moving them along to the U.S. House in a lengthy Tuesday session.

Committee Chair Rep. Jeb Hensarling (R-Texas) acknowledged that the changes "in some respects are modest," but said they were not insignificant in that they reduce "the sheer weight, volume, complexity, and uncertainty of federal rules and regulations,"

Hensarling said in a release that two of the bills amend the JOBS Act, six would amend Title VII of the Dodd-Frank Act, and one would enhance the economic analysis performed by the Securities and Exchange Commission in carrying out its regulatory responsibilities. The Dodd-Frank Act changes would address unintended consequences of the derivatives provisions of those regulations.

The nine committee-approved bills are:

  • A bill to amend a provision of the Securities Act of 1933 directing the Securities and Exchange Commission to add a particular class of securities to those exempted under such Act to provide a deadline for such action (H.R. 701);
  • The Holding Company Registration Threshold Equalization Act of 2013 (H.R. 801);
  • The Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013 (H.R. 742);
  • The Financial Competitive Act of 2013 (H.R. 1341);
  • The Business Risk Mitigation and Price Stabilization Act of 2013 (H.R. 634);
  • The Inter-Affiliate Swap Clarification Act (H.R. 677);
  • The Swaps Regulatory Improvement Act (H.R. 992);
  • The Swap Jurisdiction Certainty Act (H.R. 1256); and
  • The SEC Regulatory Accountability Act (H.R. 1062).
The next stop for the bills is the House floor.

FTC Declines To Extend COPPA Changes' Effective Date

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WASHINGTON (5/8/13)--The Federal Trade Commission (FTC) has rejected requests by the U.S. Chamber of Commerce and others to delay changes to the Children's Online Privacy Protection Act (COPPA) and announced Tuesday the effective date is July 1, as originally scheduled.

The FTC said of its decision that the enhanced privacy protections now included in COPPA must be made available to children without delay, "especially in the face of rapid evolution in the ways children interact with the Internet."

The COPPA rules address the collection, use, and/or disclosure of personal information for children under 13 years old by websites and other online services, including credit unions that have websites and/or mobile banking applications. The recent changes aim to strengthen children's privacy protections and give parents greater control over the personal information that websites and online services may collect from their young children.

Also related to COPPA, the FTC late last month released a series of frequently asked questions (FAQs) that addresses the basics of the COPPA rule, as well as more specific concerns.

For more on the FTC FAQ, use the resource link.

New White Paper Assesses DDoS Risk To CUs

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WASHINGTON (5/7/13)--Over the past eight months, a buzz has grown around news of Islamic hacktivist groups targeting U.S. banks with powerful distributed denial of service (DDoS) attacks. Against this backdrop, writes Chief Technology Officer Kevin Prince of CompuShare in a just-released white paper, credit unions and community banks have to ask themselves: How concerned should we be?

Compushare, a technology management provider for the financial services industry, is CUNA Strategic Services' newest alliance provider. Its new white paper, "DDoS Attacks: How Real Are The Risks For Community Financial Institutions," is available to Credit Union National Association members via the trade group's website (see resource link).

A DDoS attack involves using an army of hijacked computers to overwhelm a site with so many requests for attention that it's unable to respond to legitimate requests and thus becomes unavailable. It has become a popular method to make a political or ideological point in which the target is some kind of symbol.

Prince notes that since September, U.S. financial institutions have been under coordinated and timed DDoS attacks: "In total, 50 U.S. financial institutions have been targeted in over 200 separate DDoS attacks with varying effects."

Prince writes that credit unions should understand that, to date, there have been no attacks towards smaller financial institutions: "The attackers are targeting top tier financial institutions." While there is currently nothing to suggest that smaller financial institutions will become a target anytime soon, this could change at any time, warns Prince.

He explains in the white paper that there is little a financial institution can do on its firewall, routers, or intrusion detection and prevention system to stop a DDoS attack.

"To be handled effectively it must be addressed 'upstream' at the ISP or by the third-party hosting provider of your Internet-based services such as online banking (perhaps hosted by your core processor).

"While every community financial institution should have controls like antivirus and patch management in place, you should be reaching out to your Internet Service Providers and Internet banking providers to determine their degree of readiness and response plan in case the DDoS threat should hit close to home," writes Prince.

Overall, the white paper details how a DDoS attack is launched and executed, discusses how to assess risk, and also talks about protecting systems and data.

Ways and Means Releases Working Group Tax Reform Report

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WASHINGTON (5/7/13)--A 550-plus page report on tax policy reform created by 11 House Ways and Means working groups and delivered to the Joint Committee on Taxation Monday mentions the credit union tax exemption, as expected.

The report states, "Credit unions are exempt from federal income taxation. The exemption is based on their status as not-for-profit mutual or cooperative organizations (without capital stock) operated for the benefit of their members, who generally must share a common bond."

The report also notes that the definition of common bond has been expanded so more people can access credit unions.

It continues: "While significant differences between the rules under which credit unions and banks operate have existed in the past, most of those differences have disappeared over time."

This final sentence on credit unions in the report comes directly from a study from last years of the Clinton administration.

Upon release of the working groups' report, Credit Union National Association President/CEO Bill Cheney emphasized that preserving the credit union tax exemption is CUNA's highest priority.

"However," he added, "the most effective way that we can do that is to ensure that our members and supporters, nationwide, understand the value that credit unions bring to their memberships and consumers at large and how the tax exemption plays a critical role for not-for-profit credit unions.

"We cannot take anything for granted--we urge credit unions to take action and tell the story to their members. Visit our Tax Advocacy Toolkit for information and the tools to make that happen." (See resource link for members-only toolkit.)

Ways and Means Committee Chair Dave Camp (R-Mich.) and ranking member Sander Levin (D-Mich.) called the report an "important and comprehensive overview of the tax code, an overview of some of the most commonly referenced previous tax reform proposals and summarizes the views of more than 1,300 submissions offered to the Ways and Means Committee by key stakeholders."

They pledged that the committee will "dig into its details over the coming weeks."

The Ways and Means working groups accepted public comment until April 15, and prior to that deadline CUNA participated in a committee briefing on the credit union tax status, talking to four members of the powerful tax-policy committee and about 15 staffers, and also submitted a comment letter.

Among the points emphasized by CUNA about the tax exemption:

  • The economic benefits provide gains to tax-paying credit union members and other consumers that far outweigh any funds that would be brought in by imposing a federal income tax on credit unions;
  • While the Joint Committee on Taxation estimated the credit union "tax expenditure" meant $0.5 billion in unclaimed government revenues in 2012, CUNA estimates that credit unions gave $8 billion back to their members and other consumers in the form of low fees, low rates and other benefits;
  • A tax on credit unions is a tax on 96 million Americans who are their members.

Further, CUNA pointed out,  credit unions provide full and fair service to all members and  more than half of members that rely on credit unions for their primary financial services are middle class Americans, bringing in annual incomes of $25,000 to $75,000.

CUNA Urges Care In CFPB 'Rural,' 'Underserved' Definitions

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WASHINGTON (5/7/13)--In advance of the Consumer Financial Protection Bureau's June 1 effective date for its escrow rule adopted in January, the Credit Union National Association has urged the bureau to get its definition of "rural" and "underserved" areas right because it affects so many other rules that have an impact on credit unions.

The CFPB has proposed amending the escrow rule to clarify how to determine whether a county is "rural" or "underserved."

In a new comment letter, CUNA notes that four CFPB mortgage rules approved in January include provisions for special treatment under various Regulaton Z requirements for credit transactions made by creditors operating predominantly  in "rural" or "underserved" areas.These provisions are:

  • An exemption from the escrow rule's escrow requirement for higher-priced mortgage loans (HPML);
  • An allowance to originate balloon-payment qualified mortgages under the 2013 ability-to-repay final rule;
  • An exemption from the balloon-payment prohibition on high-cost mortgages under the 2013 HOEPA final rule; and
  • An exemption from the requirement to obtain a second appraisal for certain HPMLs under the 2013 interagency appraisals final rule.
While CUNA supports some aspects of the CFPB proposal, there are also aspects that prompt concerns.

"For example, the proposal would amend the Escrow Rule's commentary regarding the term 'adjacent' in the context of determining whether an area is 'rural,' wrote Luke Martone, CUNA assistant general counsel.  "However, since the proposal does not include any relevant data on the impact of this proposed change, we ask that the CFPB refrain from finalizing this aspect of the rule without first making such data available and allowing for informed input from the public."

The new comment letter is highlighted in CUNA's newest Regulatory Advocacy Report, published Monday. CUNA members can use the resource link below to access that publication.

Congress Back For Three-Week Session

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WASHINGTON (5/7/13)--Both chambers of the U.S. Congress are back in session  until a week-long Memorial Day district work period, which begins May 27.

Among hearings of some interest to credit unions this week are these sessions slated for Tuesday:

  • The House Financial Services Committee has scheduled a full committee markup of pending legislation from the subcommittee on capital markets, including: H.R.701, to amend a provision of the Securities Act of 1933 directing the Securities and Exchange Commission to add a particular class of securities to those exempted under such act to provide a deadline for such action; H.R.801, the "Holding Company Registration Threshold Equalization Act of 2013"; H.R.1341, the "Financial Competitive Act of 2013"; H.R.634, the "Business Risk Mitigation and Price Stabilization Act of 2013"; and  H.R.1062, the "SEC Regulatory Accountability Act"; and,
  • A Senate Commerce, Science and Transportation subcommittee hearing on "Credit Reports: What Accuracy and Errors Mean for Consumers."
And on Wednesday:

  • The House Small Business Committee will hold a full committee hearing on "Retrospective Review: Have Existing Regulatory Burdens on Small Businesses Been Reduced?"
  • The Senate Judiciary Committee's Crime and Terrorism Subcommittee will hold a hearing on "Cyber Threats: Law Enforcement and Private Sector Responses."

FHFA Limiting Fannie, Freddie Loan Purchases To 'Qualified Mortgages'

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WASHINGTON (5/7/13)--As of Jan. 10, 2014, Fannie Mae and Freddie Mac must limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definition, and loans that are exempt from the "ability to repay" requirements under the Dodd-Frank Act.

Under the directive issued Monday by their regulator, The Federal Housing Finance Agency (FHFA),  Fannie and Freddie will no longer purchase any loan subject to the Consumer Financial Protection Bureau's "ability to repay" rule if the loan:
  • Is not fully amortizing;
  • Has a term of longer than 30 years; or
  • Includes points and fees in excess of three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.
Effectively, this means Fannie Mae and Freddie Mac will not purchase interest-only loans, loans with 40-year terms, or those with points and fees exceeding the thresholds established by the rule, the FHFA said in a release.

Fannie Mae and Freddie Mac will be able to continue purchasing loans that otherwise meet the underwriting requirements in their selling guides, including loans where the borrower's debt-to-income ratio is greater than 43%. 

Use the resource link to read the FHFA announcement.

House Committee Tax Policy Report Out Today

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WASHINGTON (5/6/13)--The Joint Committee on Taxation (JCT) is expected to deliver its working groups' report on tax policy reform today to the House Ways and Means Committee, which writes tax policy.

The report will broach a broad spectrum of tax issues, including those impacting credit unions. However, the Credit Union National Association does not expect the report to contain any policy recommendations.

"The fact of the matter is that this is a kitchen sink report. It's not the job of the staff of JCT to make decisions about what is included or not included in legislation to address tax policy," explains Ryan Donovan,  CUNA's senior vice president of legislation affairs.

"This is a critical time for credit unions to be educating their members on the value of the credit union tax status and encouraging them to contact lawmakers to express their support," Donovan added. CUNA research has revealed that the more credit union members understand the value of the tax exemption, the more likely they are to take action to protect it.

"For instance, when members understand that for every $1 of the credit union federal income tax exemption, $10 goes back to consumers in better rates and lower fees, they are motivated to advocate for the exemption," Donovan said.

He also noted that the next several weeks will be key in terms of what actually goes into a tax reform bill in the House. "It's possible that the House could consider comprehensive tax reform legislation before the end of July."

"Ever since the Speaker of the House announced at CUNA's Governmental Affairs Conference in February that the first action of the House this year would be the tax reform bill, the expectation has been that they would try to complete House consideration before August recess," said Donovan.

CUNA provides a Tax Advocacy Toolkit to its member credit unions to help with their efforts to educate their own members on credit union tax issues. CUNA members can use the resource link to access the toolkit.

Cheney Report: CUs Must Be Heard As Tax Talk Intensifies

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WASHINGTON (5/6/13)--The Credit Union National Association is vigorously defending the credit union tax exemption as the U.S. Congress continues to consider broad tax code changes. However, "the days of playing defense are coming to an end--and the time for actively advocating for a continued tax exemption is here," CUNA President/CEO Bill Cheney wrote in this week's edition of The Cheney Report.

A comprehensive tax reform report is expected to be released today, and the report could include some commentary about the credit union tax exemption. "Our tax preference won't be alone--any and all others will be mentioned, most likely, in one way, shape or form. So, from that point of view, we will have plenty of company," Cheney wrote. (See related story: House committee tax policy report out today)

Credit unions will need to rise above the resulting din and stand up for their tax status. "We can't be drowned out by all of the noise that will likely erupt early next week and continue throughout the process of tax reform," the CUNA CEO said. As many as 400 other affected parties will also be speaking up to defend their own priorities, and in times like this, "the squeaky wheel gets the grease," he emphasized.

Credit unions "are going to have to become the 'squeaky wheels'" and makes as much noise as possible, Cheney wrote.

One way credit unions can become "squeaky wheels" as quickly as possible is using CUNA's Tax Status Advocacy Toolkit to help their member outreach efforts, he noted. The importance of incorporating 96 million members into credit union advocacy efforts was also covered in a CUinsight.com column by CUNA Executive Vice President of Strategic Communications Paul Gentile. (Use the resource link for May 2 News Now story: CUNA In CU Insight: 96 Million Voices Can Back CUs In Tax Battle.)

This week's Cheney Report also includes:

  • Cyber security news;
  • Comments on remittance regulations;
  • News on credit union Financial Literacy Month activities; and
  • An update on credit union auto lending activities.
Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs. The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

Lynrocten FCU Closed By NCUA

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ALEXANDRIA, Va. (5/6/13)--The National Credit Union Administration (NCUA) Friday liquidated Lynrocten FCU. The Lynchburg, Va., credit union had 1,068 members and about $13.8 million in assets, according to the agency.

The federal regulator made the decision to liquidate Lynrocten and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

Lynrocten FCU is the sixth federally insured credit union liquidation in 2013. The credit union was chartered in 1936 and served the employees of Rock-Tenn Co. and their immediate family members.

Member deposits are federally insured by the National Credit Union Share Insurance Fund up to $250,000. NCUA's Asset Management and Assistance Center will issue correspondence to individuals holding verified share accounts in the credit union within one week.

Credit Access Compliance Date Is Nov 4

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WASHINGTON (5/6/13)--The Consumer Financial Protection Bureau's new credit access rule went into effect Friday and credit unions and others have until Nov. 4 to comply.

The regulatory changes, which were released early last week and published in the Federal Register on May 3, will allow credit card applicants who are 21 years of age or older to list joint-account income as an asset on credit applications. The regulation applies to all applicants regardless of marital status, but the bureau expects that it will ease access to credit particularly for stay-at-home spouses or partners who have access to a working spouse or partner's income.

Before this CFPB change, Regulation Z's ability-to-repay rule did not specifically address joint accounts or even checking accounts. It merely advised card issuers to take into account assets such as savings accounts when it determines whether it will allow an applicant to open a new card account or increase the credit limit on an existing account. The regulation, as originally written, created unintended issues for many couples and families.

For the regulatory changes, as published in the Federal Register, use the resource link.

NCUA Supports CU Capital Bill

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WASHINGTON (5/3/13)--The National Credit Union Administration backs a bill that would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts toward capital ratio.

Under current law, the more deposits a credit union accepts, the more its capital ratio declines. When capital ratios decline, credit unions could face prompt statute regulated corrective action by their regulator.

NCUA Chair Debbie Matz pledged in a May 2 letter to Rep. Peter King (R-N.Y.), the bill's chief sponsor along with Rep. Brad Sherman (D-Calif.), that if the U.S. Congress enacts King's Capital Access for Small Business and Jobs Act (H.R. 719), her agency will "promptly propose the necessary rule changes required for implementation."

Matz wrote, "As we witnessed during the recent economic crisis, maintaining sufficient capital is critical at time of economic stress...Your legislation would provide credit unions with an additional tool to promote sufficient capital--even under adverse economic conditions--and ensure that healthy credit unions would no longer be forced to turn away deposits in order to protect their net worth."

The Credit Union National Association strongly advocates for giving credit unions access to supplemental capital. In a recent letter, CUNA urged federal lawmakers to consider the capital concerns of credit unions as Congress discusses Basel III exemptions for small banks.

"To be clear: we would have very significant concerns if Congress were to exempt the small banks from the Basel III capital requirements and not at the same time address reforms to credit union capital requirements," CUNA President/CEO Bill Cheney urged in the letter to all members of the U.S. House.

Basel III standards would require U.S. banks to hold common equity of 4.5% by 2015. In addition, banks would be required to hold a 2.5% conservation buffer, which would be gradually introduced by 2019, and increase Tier 1 levels from 4% to 6% by 2015.

Recent House legislation (H.R. 1693) would exempt community banks from the application of Basel III capital standards.

NEW: Ways And Means Working Group Tax Reform Report Delivered

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WASHINGTON (5/6/13, UPDATED, 2:07 p.m. ET)--The credit union tax status is one of many issues discussed in the just-released report on tax policy reform created by 11 House Ways and Mean working groups and delivered to the Joint Committee on Taxation.

The 550-plus page report does not contain any policy recommendations, but lists the pluses and minuses of around 400 different tax expenditures.

"Our tax preference is not alone, we have plenty of company," Credit Union National Association President/CEO Bill Cheney said Monday. "But credit unions need to be alert to the fact that our tax status is being discussed."

Cheney added, "It is vital that credit unions move to educate more of their members on the value of the credit union tax status, as their advocacy efforts could play a key role in deciding what goes into a final tax reform bill."

The U.S. House could consider comprehensive tax reform legislation before the end of July.

CUNA provides a Tax Status Advocacy Toolkit to its member credit unions to help with their efforts to educate their own members on credit union tax issues. CUNA members can use the resource link to access the toolkit.

CU Magazine Article Warns Of Combined Security Threats

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WASHINGTON (5/3/13)--Criminals are using a mixture of malware, phishing, and sophisticated social engineering strategies to steal data from their victims, and these combined attacks are creating new concerns for credit unions, the Credit Union National Association's BITS Liaison Task Force wrote in the just-released May issue of  Credit Union Magazine.

Safeguarding information, accounts, systems, and processes is increasingly challenging to manage in the face of these "blended threats." The attacks "are effective because many audit processes lag behind in detecting gaps that stretch across various departments," the task force piece said.

To better address these threats, CUNA's BITS Liaison Task Force recommended that credit unions:

  • Improve their data visibility across multiple sources to enable greater identity capabilities;
  • Perform a risk assessment to collectively identify current capabilities and security gaps; and
  • Design solid security measures to mitigate exposure risks.
"Organizations might have many approaches in how to bring these various disciplines together to work as a cohesive unit. Some might consolidate risk groups under a single management structure and others might introduce independent audit or risk management groups to look across different areas," the CUNA task force noted.

For the full Credit Union Magazine article, and more engaging stories, use the resource link.

HOEPA, ECOA, TILA Guidance Released By CFPB

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WASHINGTON (5/3/13)--The Consumer Financial Protection Bureau on Thursday released plain-English compliance guides detailing recent changes to three rules: the Home Ownership and Equity Protection Act, the Equal Credit Opportunity Act, and sections of the Truth in Lending Act that impact higher-priced mortgage loan appraisals.

The new documents are part of a series of guides and other informational materials the CFPB plans to provide over the next few months on its new mortgage regulations.

The bureau has said the goal of the guidance series is to provide a comprehensive rule summary in a plain language and frequently-asked question format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.

The guides give an overview of the rules, but are not substitutes for the underlying rules, the CFPB emphasized. The Credit Union National Association is reviewing the guidance and will be following up with the CFPB on any issues of concern.

Use the resource link below to access the guides.

Similar plain-English guides on ability-to-repay and qualified mortgage rules, and escrow regulations, were released last month.

CUNA to CFPB: Avoid One-size-fits-all Payday Regs

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WASHINGTON (5/3/13)--While oversight of largely unregulated, predatory payday lenders and their products is overdue, the Consumer Financial Protection Bureau must take steps to avoid crafting one-size-fits-all regulations that would harm credit unions as it addresses payday loan issues, the Credit Union National Association said in a Thursday letter to CFPB Director Richard Cordray.
In the letter, CUNA President/CEO Bill Cheney commended the CFPB's efforts to ensure payday lenders will be subject to appropriate standards and accountability. However, he said, these efforts must focus on unregulated abusers. Cheney also urged the CFPB to "refrain from adopting new rules that apply to all lenders and that tend to eliminate a diversity of approaches that may be adopted by those with no record of abuse or inadequate existing regulation."
The CUNA commentary follows last week's release of a CFPB study that found many payday loan borrowers face a harmful combination of loose lending standards, high costs, and risky loan structures.
Cheney emphasized that credit unions and CUNA are committed to providing safe and affordable alternatives to predatory payday lenders. "These products address a real need for small-dollar, short-term credit by consumers, while discouraging over-dependence on such credit and helping members to move toward financial stability," he added.
Loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program. That program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. For now, this amounts to an interest rate ceiling of 28%. Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling, and encourage members to open savings accounts.
CUNA plans to meet with the bureau on payday loan issues soon.
The letter also addressed another topic of concern to credit unions: The CFPB's final International Remittance Transfer Rule that was issued this week. (Use the resource link for May 1 News Now story: Final CFPB Remittance Rule Is Effective Oct 28.) "While we remain concerned that the exemption level is far too low, the final rule includes several improvements that CUNA urged the agency to adopt and we want to acknowledge your effort to address those issues," Cheney said. CUNA is surveying member credit unions on how the changes could impact their current remittance practices, and will share the results of the survey with the CFPB, he added.
For the full CUNA letter, use the resource link.

Comment On QM/Repay Regs Due By June 1

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WASHINGTON (5/3/13)--Credit unions and others that wish to comment on recently proposed ability to repay/qualified mortgage (QM) and mortgage servicing rule clarifications will have to do so by June 1.

The clarifications, which were published in the Federal Reserve this week, are meant to address questions that have been posed in the months since the rules were first issued. The clarifications address:
  • Small servicer exemptions;
  • Debt-to-income ratios;
  • Contract variances and the temporary QM provision;
  • Purchase, guarantee or insurability status and the temporary QM; and
  • Field preemption under Regulation X.
The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules, and mortgage servicing rules, in January.

For the proposed CFPB clarifications, as published in the Federal Register, use the resource link.

CFPB Sets Consumer, Student Lending Sessions

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WASHINGTON (5/3/13)--Remittances, payday loans, consumer engagement tools and financial services in new American communities will be on the agenda when the Consumer Financial Protection Bureau's Consumer Advisory Board (CAB) holds its second meeting of 2013 on May 15 in Los Angeles.
The CFPB has also scheduled a May 8 student lending field hearing for May 8 in Miami, Fla.
The two-day Los Angeles CAB meeting will feature a public listening session on May 15, with remarks by CFPB Director Richard Cordray. A preview of the CFPB en espanol website, and a feedback session on the site, are also set for May 15. Policy discussions and CAB committee reports are scheduled for the May 16 portion of the CAB meeting.
Two credit union representatives are among the 25 CAB members. Bill Bynum, CEO of Hope Enterprise Corp. and Hope Community CU, Jackson, Miss., serves as vice chair of the CAB. Laura Castro de Cortes, vice president of alternative financial services for Centris FCU, Omaha, Neb., is a CAB member.
The board advises CFPB leadership on consumer financial issues and emerging market trends.
Cordray is also scheduled to speak at the May 8 student lending hearing. The CFPB has not announced witnesses for that hearing, but testimony from the consumer groups, industry representatives, and members of the public is expected, the bureau said.
For more on the CAB meeting and field hearing, use the resource links.

House Financial Services Releases May Hearing List

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WASHINGTON (5/2/13)--The May hearing schedule for the House Financial Services Committee, released Wednesday, kicks off with a May 7 mark up session by the full committee on a series of bills related to Title VII of the Dodd-Frank Act and the Jumpstart Our Business Startups Act--or JOBS Act.

The legislation, the subject of subcommittee hearings last month, is intended, in part, to address unintended consequences of the derivatives provisions of the Dodd-Frank Act and to Require the Securities and Exchange Commission to conduct cost-benefit analyses of regulations. The mark up starts at 10 a.m. (ET).

The rest of the committee's hearing schedule, which is tentative at this point and may require changes, includes:

  • A May 8, 2 p.m. (ET) hearing by the subcommittee on monetary policy and trade on the reauthorization of the Defense Production Act, which has been in effect since 1950 with periodic reauthorizations;
  • A May 15, 2 p.m. (ET) hearing by the subcommittee on capital markets and government-sponsored enterprises on the structure and costs of the GSEs;
  • A May 16, 10 a.m. (ET) oversight hearing by the full committee with SEC Chair Mary Jo White; and
  • A May 16, 2 p.m. (ET) hearing by the subcommittee on housing and insurance on multi-family housing finance.
Witnesses for each hearing will be announced at later dates. These hearings will take place in Room 2128 of the Rayburn House Office Building.

 
 

Lawson Appointed To FFIEC State Liaison Committee

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WASHINGTON (5/2/13)--Michigan Department of Insurance and Financial Services Banking Office Director Karen Lawson has been appointed to a two-year term on the Federal Financial Institutions Examination Council's (FFIEC) five-member State Liaison Committee (SLC).

Lawson replaces Charles Vice, Commissioner of the Kentucky Department of Financial Institutions, on the panel.

The SLC is a five-member panel of state financial regulatory agencies that works to encourage the application of uniform examination principles and standards by state and federal agencies and allows state regulators to participate in the development of those principles and standards.

The SLC consists of five representatives of state financial institution regulatory agencies, and members are designated from the Conference of State Bank Supervisors, the American Council of State Savings Supervisors, the National Association of State Credit Union Supervisors, and the FFIEC for two-year terms.

The FFIEC is comprised of the leaders of the National Credit Union Administration, the Federal Reserve Board, the office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp.

For the full release, use the resource link.

FHFA Nominee Knows CU Issues

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WASHINGTON (5/2/13)--Rep. Mel Watt (D-N.C.), President Barack Obama's nominee to serve as the next Federal Housing Finance Agency director, "has a strong understanding of financial services issues and has been willing to listen to credit unions and consider our issues throughout the years," Credit Union National Association President/CEO Bill Cheney said Wednesday.

North Carolina Credit Union League President/CEO John Radebaugh congratulated Watt on his nomination, which was announced by Obama on Wednesday. "Through the years, credit union advocates in North Carolina have appreciated the opportunity to work with him on a variety of issues of importance to the movement. He's very qualified for the position and we wish him well through the confirmation process," Radebaugh said.

Watt has served in the U.S. Congress since 1992, and is a veteran member of the House Financial Services Committee. If confirmed by the Senate, he would replace FHFA Acting Director Edward DeMarco, who has led that agency since Sept. 1, 2009.

Many in Congress have called for Obama to remove DeMarco and nominate a replacement. Obama in 2011 nominated former North Carolina bank commissioner Joseph Smith to serve as full-time director, but that nomination was not confirmed.

Demarco last year caused consternation for many in Congress when he objected to allowing Fannie Mae and Freddie Mac to pursue a broad principal forgiveness program for troubled homeowners. House Democrats in a February 2013 letter to Obama said the FHFA has been directed by Congress to maximize assistance for homeowners and minimize foreclosures. The agency has also been granted explicit authority to modify mortgage loans through loan principal reductions, the legislators wrote.

"Ensuring that FHFA implements congressional directives to support the most liquid, efficient, competitive, and resilient housing finance markets is a matter of national urgency," they added. They urged Obama "to nominate an FHFA director who is ready to fulfill this mission and address the many challenges still facing the nation's housing finance markets." Forty-five Democrats co-signed the letter.

A range of housing policy changes has been discussed by the U.S. House, the Senate, and the Obama administration in recent months, including full market privatization, limiting government market intervention, and several stops in between. (Use the resource links for News Now coverage of mortgage market reform efforts.)

Ensuring that credit union interests are represented in any reform of the housing finance system is one of CUNA's top 2013 legislative objectives. CUNA has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

NCUA Newsletter Educates New LICUs On Secondary Capital

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ALEXANDRIA, Va. (5/2/13)--As the number of low-income designated credit unions (LICUs) increases, the National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI) is working to inform these new LICUs of the benefits of their new status, including their new-found access to secondary capital.

The LICU designation brings benefits that include the ability to accept supplemental capital and an exemption from the member business lending cap under certain circumstances. LICU-designated credit unions are also eligible for Community Development Revolving Loan Fund grants and low-interest loans and may accept deposits from non-members.

OSCUI said it would provide details on secondary capital benefits in the next three installments of the monthly FOCUS e-Newsletter. This month, the agency outlined general secondary capital information, including:
  • Borrowing limitations for federal credit unions;
  • NCUA ''Secondary Capital Plan'' approval;
  • Secondary capital account contract agreements; and
  • Capitalization requirements.
Future secondary capital columns will address proper accounting treatment and prompt corrective action considerations, OSCUI said.

The NCUA in August notified 1,003 credit unions of their eligibility for the LICU designation. Those credit unions were offered a streamlined LICU application process, and many accepted the NCUA designation.

The agency and the National Association of State Credit Union Supervisors have also announced joint efforts to streamline the process for state-chartered credit unions to determine if they are eligible for a LICU designation. (Use the resource link to read April 22 News Now story: NCUA Letters Address LICU, Corporate Credit Risk Issues)

There are currently 1,927 LICUs, according to the NCUA.

For this month's FOCUS, use the resource link.

CUNA In CU Insight: 96 Million Voices Can Back CUs In Tax Battle

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WASHINGTON (5/2/13)--Ninety-six million members' voices could potentially be heard in support of credit unions as Capitol Hill tax reform discussions continue in the coming weeks, Credit Union National Association Executive Vice President of Strategic Communications Paul Gentile wrote in a Wednesday CUinsight.com editorial. The more credit unions educate their members on tax issues, Gentile noted, the more likely members are to communicate their support for credit unions.

"If all members knew that for every $1 of their tax exemption, $10 goes back to consumers in better rates and lower fees, it would be a lot easier to get members to advocate for the exemption and as importantly, to reinforce why they do business at a credit union," Gentile wrote.

However, some members don't understand which taxes credit unions do and do not pay, and most may not be aware of the credit union tax exemption, he warned. "CUNA's own research shows that the more credit union members understand the value of the tax exemption, the more likely they are to proactively take action to protect it."

The Senate Finance Committee and House Ways & Means Committee are both studying comprehensive tax reform.

"No one, other than the bankers, is targeting the credit union tax exemption," Gentile said. However, all tax preferences are on the table, and "the status of the credit union tax exemption can't really be defined one way or the other.

"That alone is cause for vigilance," Gentile wrote.

So, how can credit unions reach out and educate their members? Overall, Gentile said, credit unions must get more comfortable with messaging their members about their structure. He pointed out that CUNA's Tax Advocacy Toolkit, which includes sample newsletter articles, advertisements, op-eds, and other messaging resources, gives credit unions a great start. Social media such as Twitter and Facebook provides another avenue for credit unions to tell their story to members.

"CUNA is aggressively monitoring the tax reform discussion on the Hill and is actively engaged with lawmakers on the issue, but credit union members are our most powerful advocate. If credit unions can drive home the message of credit union value, we will not only be able to advocate for the exemption but for other proactive legislative issues down the line," Gentile said.

Gentile noted that CUNA launched a new vision for the credit union system in February: "Americans Choose Credit Unions as Their Best Financial Partner."

"We feel strongly that if the system unites together and Unites for Good, we can make that vision a reality. By educating your members on the value of the credit union structure, you can play a key role in moving that vision forward," he concluded.

For the full op-ed and more on CUNA's Tax Toolkit and strategic vision for the credit union system, use the resource links.

Final CFPB Remittance Rule Is Effective Oct 28

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WASHINGTON (5/1/13)--Oct. 28 will be the effective date for the Consumer Financial Protection Bureau's final remittance regulations, the bureau announced Tuesday.

The Credit Union National Association had urged a substantial delay in the original Feb. 7 effective date of the final rule, and the CFPB's action yesterday, in effect, granted an eight-month delay.

Under the final rule, remittance transfer providers are required to provide prepayment and receipt disclosures to the consumer sender that include the exchange rate, certain fees and taxes associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors.

CUNA's International Remittances Working Group has met with CFPB Director Richard Cordray and his senior staff and CUNA senior staff have had numerous meetings and telephone conversations with CFPB officials to advocate for credit unions on remittance issues.

"In our several meetings with Director Cordray and his senior staff, we urged flexibility for credit unions using open networks, such as ACH, to send their members' transfers," said Mary Dunn, CUNA deputy general counsel, upon reviewing the rule. "The final provides that by eliminating the requirement that fees charged by recipient institutions should be disclosed unless the institution is acting as the provider's agent."

CUNA also urged no liability when the consumer provides wrong information and the final rule provides for that as it applies to an incorrect account number or recipient institution number. However, the rule does require an investigation must be conducted.

CUNA advocated for a number of other beneficial changes that have been added to the rule. The final rule provides additional flexibility for credit unions and other remittance transfer providers by:

  • Making optional, in certain circumstances, the requirement to disclose fees imposed by a designated recipient's institution;
  • Making optional the requirement to disclose taxes collected by a person other than the remittance transfer provider; and
  • Revising resolution provisions that apply when a remittance transfer is not delivered to a designated recipient due to sender error.
Unfortunately, CUNA noted, the agency did not revisit the 100 transfers-per-year exemption threshold. "We continue to urge the CFPB to revisit these rules and to make additional changes to facilitate remittance transfers for credit unions," Dunn said.

Remittance rule revisions addressing fees and foreign tax disclosures and how financial institutions will cope with account or routing number errors were also released on Tuesday.

OCC, FDIC Order Restitution For Overdraft Violations

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WASHINGTON (5/1/13)--RBS Citizens, N.A. has been ordered to pay $2.5 million in total restitution to 265,000 customers under an overdraft settlement announced Tuesday by the Office of the Comptroller of the Currency.

The OCC has also assessed a $5 million civil money penalty against the bank for alleged violations of section 5 of the Federal Trade Commission (FTC) Act. According to the OCC, RBS employees made inaccurate or misleading statements about:
  • Overdraft protection programs;
  • The rebate qualification requirements of the bank's checking rewards program; and
  • The bank's ability to process stop payments requested by customers.
The alleged violations took place between September 2007 and September 2011.

Customers that were wrongfully charged as a result of these practices will be reimbursed, with interest. The OCC has also ordered RBS Citizens to take actions to ensure this issue does not recur. Those actions include:
  • Correcting violations;
  • Enhancing compliance risk management programs, policies and procedures; and
  • Ensuring compliance with the FTC Act and other consumer protection laws.
RBS Citizens' state bank affiliate, Citizens Bank of Pennsylvania, has also been ordered to pay $1.4 million in restitution to more than 75,000 consumers for similar violations. The Federal Deposit Insurance Corp. order also imposed $5 million in civil penalties.

For more on the settlements, use the resource link.

The Credit Union National Association has frequently noted that reasonable overdraft protection plans help assure consumers will have access to funds when they need them. Because of their cooperative structure, credit unions do not have financial incentives to charge members the high fees that banks frequently do in order to maximize profits for shareholders, CUNA said.

Reps. Carolyn Maloney (D-N.Y.) and Maxine Waters (D-Calif.) in mid-March introduced legislation that would cap overdraft fees, impose a limit on the number of overdrafts that a member could use per year, and require financial institutions to post credits and debits in a particular order. CUNA said the bill "seems to address a problem that doesn't exist in the credit union system," and has encouraged legislators and regulators to note the credit union difference as they move to regulate overdraft protection programs.

Overall, credit unions charge less for the service than banks. A recent Moebs Services survey shows that the average charge for an overdrawn account of $40 was $30 at banks, but $27 at credit unions. Overdraft revenue at banks, credit unions and thrift institutions totaled $32 billion last year, up $400 million or 1.3% from 2011, said the study. (Use the resource link to read April 2 News Now story: One-fourth Of Consumers With Checking Accounts Have Overdrafts.)

CUNA Monitors Tax Policy Report, CU Issues When Congress Returns

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WASHINGTON (5/1/13)--Many members of the U.S. Congress have returned to their home districts, but the Credit Union National Association is tracking a number of key credit union issues ahead of their scheduled return next week.

A three-week legislative session will be held ahead of the planned Memorial Day break.

Of the many issues CUNA will be monitoring on behalf of credit unions, the Joint Committee on Taxation's tax reform report, expected out on Monday, takes top billing.

The Joint Committee early next week is expected to deliver the report to the House Ways and Means Committee. The report will likely broach a broad spectrum of tax issues, including those impacting credit unions. However, CUNA does not expect the report to contain any policy recommendations.

Early last month, CUNA and other stakeholders met with the House Ways and Means Committee's  financial services tax reform working group members to brief them on the public policy reasons backing the credit union federal tax exemption.

House and Senate floor schedules, as well as committee and subcommittee agendas, are unknown at this point. CUNA will keep an eye on the progress of:

  • Regulatory relief measures, including the "Community Lending Enhancement and Regulatory Relief Act (CLEAR Relief Act) (H.R. 1750)," which would aid credit unions and other community-based financial institutions by providing regulatory relief in the mortgage area and eliminating a requirement that privacy notices be sent on an annual basis;
  • Too Big To Fail action, including the Terminating Bailouts for Taxpayer Fairness Act (S. 798), which would require banks with more than $500 billion in assets to maintain a capital ratio of at least 15%; and
  • House (H.R. 1553) and Senate (S. 727) bills that would enhance safety and soundness by increasing the consistency and fairness of the regulatory examination system.
Several cybersecurity bills and financial literacy efforts are also being monitored by CUNA.

NEW: Obama Nominates Watt To Lead FHFA

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WASHINGTON (UPDATED: 5/1/13, 3:15 P.M. ET)--Rep. Mel Watt (D-N.C.) has been nominated to serve as the next Federal Housing Finance Agency Director by President Barack Obama.

Obama made the announcement in remarks at the White House this afternoon.

The congressman "has a strong understanding of financial services issues and has been willing to listen to credit unions and consider our issues throughout the years," Credit Union National Association President/CEO Bill Cheney said Wednesday.

Watt has served in the U.S. Congress since 1992, and is a veteran member of the House Financial Services Committee. If confirmed by the Senate, he would replace FHFA Acting Director Edward DeMarco, who has led that agency since Sept. 1, 2009.

Many in Congress have called for Obama to remove DeMarco and nominate a replacement. Obama in 2011 nominated former N.C. bank commissioner Joseph Smith to serve as full-time director, but that nomination was not confirmed.

NCUA Prohibition Orders Include Three Big-Time Thieves

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ALEXANDRIA, Va. (5/1/13)--Sharon Broadway, the former manager and sole employee who allegedly stole more than $2 million from her now defunct credit union, United Catholic CU, Monroe, Mich., is one of five individuals recently banned from future credit union work by the National Credit Union Administration.

Broadway earlier this year was sentenced to at least 45 months in prison and ordered to pay nearly $2.6 million in restitution by Monroe County's 38th Circuit Court. The 62 year-old allegedly began embezzling funds from her credit union in 1985, using what has been called a complex money-laundering scheme involving multiple aliases and forged checks to hide the thefts.

The alleged theft was discovered during a routine examination by the Michigan Office of Financial and Insurance Regulation.

Two former employees of Enterprise (Kan.) CU will also be prohibited from future credit union work after both plead guilty to embezzlement charges. The employees, Deborah Bomia and Pamela Emig, worked together to operate a check-kiting scheme, the Associated Press reported. Both women allegedly kited checks between credit union accounts in their names to create fictitious balances. Bomia was sentenced to two years of probation and ordered to pay $85,233.75 in restitution. Emig was sentenced to three years in prison, two years supervised release and ordered to pay $819,405.15 in restitution.

Others issued NCUA prohibition orders include:

  • Ashley Ayotte, a former employee of SeaComm FCU, Massena, N.Y., pleaded guilty to the charge of grand larceny. Ayotte was sentenced to five years of probation and ordered to pay $23,500 in restitution; and
  • Georgia Schwartz, a former employee of Glen Ullin CU, Glen Ullin, N.D., was adjudged guilty of embezzlement and misapplication from a credit union. Schwartz was sentenced to time served, three years supervised release and ordered to pay $130,119.19 in restitution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.
For more on the orders, use the resource link.