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NCUA reports 1,850 RBC comments, still room in 'listening sessions'

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ALEXANDRIA, Va. (5/30/14)--The National Credit Union Administration logged in 1,850 comment letters on its risk-based capital proposal as of Thursday morning, and reported spaces still open for each of its three "listening sessions" across the country.
 
The comment deadline was 11:59 p.m. (ET) May 28. However, NCUA Chair Debbie Matz has assured that the federal regulator would consider comments received any time prior to finalization of the rule.
 
Each of the NCUA's post-comment period listening sessions is open to 150 attendees. The NCUA said the June 26 session in Los Angeles has 98 registrants, 126 have registered for the July 10 session in Chicago, and 120 have registered for the final listening session in Alexandria, Va.
 
The Credit Union National Association encourages credit unions to stay engaged in the RBC regulatory process as the NCUA works to create a final rule. CUNA filed its own comment letter prior to the deadline, calling the current proposal "seriously flawed" and suggesting a series of improvements.
 
Use the resource link to read News Now on the CUNA comment and to access the letter.

Treasury publishes changes to mutilated currency rule

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WASHINGTON (5/30/14)--What to do with tattered currency? The U.S. Treasury Department's Bureau of Engraving has published an interim final rule amending its regulations on exchange of mutilated paper currency.
 
The interim rule will allow the bureau's Mutilated Currency Division examiners to cease processing damaged-currency submissions that appear to be part of any illegal scheme, and instead alert law enforcement officials about their suspicions.  It also serves as notice to the public about what to do with legitimate redemption requests.
 
The interim rule uses several categories of amendments, which:
  • Notify the public about the characteristics mutilated paper currency must have in order to be submitted for possible redemption;
  • Inform the public of the present practices in the Bureau of Engraving and Printing's Mutilated Currency Division, and deter fraud in mutilated currency submissions;
  • Clarify packaging and shipping requirements for mutilated currency submissions and update the delivery methods and the appropriate address for shipping purposes; and
  • Notify the public that their information may be provided to law enforcement officials pertaining to any mutilated currency submission.
The Bureau of Engraving and Printing reports it has encountered some schemes where currency is intentionally mutilated in an apparent attempt to defraud the government. The intentionally mutilated currency is often intermingled with other bills in an effort to thwart detection.
 
The rule is effective immediately, and comments will be accepted through July 28.
 
Use the resource link below for the full interim rule.

NEW: CUNA: NCUA should respond to Hill RBC concerns with meaningful changes to proposal

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WASHINGTON (5/30/14, UPDATED 12:40 p.m. ET)--The National Credit Union Administration responded this morning to 324 federal lawmakers who voiced concern about the agency's proposed risk-based capital plan. The bipartisan collection of House members joined Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.) earlier this month to express their concern over the NCUA proposed rule and urged the federal agency to ensure the proposal does not adversely affect small businesses and credit union members.
 
Credit Union National Association President/CEO Bill Cheney immediately issued a statement expressing CUNA's appreciation of the NCUA's acknowledgement of the very significant interest on the part of Congress regarding the proposed rule on risk-based capital.  He also thanked Matz for reiterating the agency's willingness make changes to the proposal.
 
However, Cheney emphasized that the concerns expressed in the letter from Capitol Hill, signed by three quarters of House members, must be acknowledged by the board as it finalizes the rule. 
 
"Congress is concerned that NCUA is proposing risk-weights that are, in some cases, more stringent than the standards imposed on small banks; they don't want a rule that has a significant adverse impact on otherwise very healthy credit unions; and they want credit unions to have more than enough time to comply with the rule. It is critical that NCUA respond to these concerns not only with today's letter, but with meaningful changes to the final rule," the CUNA leader said. 
 
He added, "We strongly encourage the board to also give very careful consideration to the views of the members of Congress who worked on H.R. 1151 in 1998.  Former Banking Committee Chairman Alphonse D'Amato, former Senator Richard Bryan and former Speaker Newt Gingrich, all have expressed concern that the proposed rule would exceed the authority conveyed to NCUA in 1998.  The congressional intent is clear in the minds of these lawmakers, and the final rule should be consistent with that intent."
 
Finally, Cheney stated, the NCUA should reconsider its portrayal of the impact the proposed rule would have on credit unions. 
 
"The agency knows very well that credit unions operate with capital cushions at the behest of their examiners and to avoid inadvertently dropping below required capital levels.  While the rule would not require them to maintain these capital buffers, commonsense and sound business practice do. 
 
"Nothing in the proposed rule alters the reality that most credit unions will not want to live on the edge of prompt corrective action, especially in light of this new complicated rule.  There is absolutely no doubt that impact this proposal, if finalized, will be more significant than the estimates generated by NCUA," Cheney warned.
 
Congress is concerned, Cheney reminded, that the NCUA is proposing risk-weights that are, in some cases, more stringent than the standards imposed on small banks.
 
"They don't want a rule that has a significant adverse impact on otherwise very healthy credit unions; and they want credit unions to have more than enough time to comply with the rule.  It is critical that NCUA respond to these concerns not only with the today's letter, but with meaningful changes to the final rule. "

FLEC seeks fin. ed. for young consumers

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WASHINGTON (5/30/14)--Knowledge of personal finance isn't an automatic part of employment, especially for young people new to the workforce who often don't have an understanding of payroll deductions and tax withholding. With that in mind, the members of the Financial Literacy and Education Commission (FLEC) are taking extra steps to bring financial education to employees just starting their careers.

Speaking at a FLEC field hearing Thursday, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray addressed the importance of financial education in the workplace, especially for young people. Stressing that the economic system in the United States can only endure if education starts "at the bottom up," he said that the CFPB has been working with the Office of Personnel Management to create a financial education program for the federal government, and he encouraged FLEC members to do that same.

"Ultimately, we want to enable our young people to pursue decisions that will allow them to achieve their future financial goals," he said. "To that end, at the Consumer Bureau we are working on a project that specifically examines the issue of consumer financial well-being. We are evaluating just what financial well-being is exactly, what skills and behaviors help people achieve it, and how we can measure it."

Cordray recalled meeting with a representative from Southwire, an Atlanta-based company that partnered with the Federal Reserve Bank of Atlanta for a mentoring program designed bring financial professionals and educators in contact with employees, to give them a better sense of the big picture when it comes to personal finance.

Citing inspiration from Southwire and a number of other innovative approaches presented at the February FLEC meeting, the commission has founded an effort called the State Engagement Project.

"This project is designed to gather input from state policymakers on resources and information that will be helpful for states to consider when determining the best way to incorporate youth financial education into their programs," Cordray said. "We think this is an excellent opportunity for federal agencies to partner with state policymakers to expand access to K-12 financial education and help develop ways to offer hands-on financial learning."

Cordray stressed that the goals of the project cannot be achieved at the federal level, but with the participation of state and local institutions as well.

FLEC is comprised of the heads of the CFPB, the National Credit Union Administration, and 17 other federal agencies.

Int'l and U.S. accounting boards issue joint revenue standard

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WASHINGTON (5/30/14)--The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) announced a converged standard on the recognition of revenue from customer contracts.

The IASB, which is responsible for International Financial Reporting Standards (IFRS), and the FASB, responsible for Generally Accepted Accounting Principles (GAAP) in the United States, jointly issued the new standard Wednesday, believing it will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally.
 
Revenue is a metric for users of financial statements and is used to assess a company's financial performance and prospects. Previous international and American standards had different requirements, leading to different accounting for transactions that were considered economically similar.
 
The new, converged requirements for the recognition of revenue in both IFRS and U.S. GAAP provide enhancements to the quality and consistency of how revenue is reported while improving comparability in the financial statements of companies reporting both standards.
 
The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration, or payment, to which the company expects to be entitled in exchange for those goods or services.
 
The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.
 
The boards together consulted extensively with interested parties throughout the life cycle of the revenue project, receiving more than 1,500 comment letters further refining their proposals in response to that feedback.
 
The IASB and FASB have established a joint resource group in order to aid transition to the new standard.

CUNA remittances survey closes Monday

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WASHINGTON (5/30/14)--The Credit Union National Association has extended its comment deadline on the international remittance rule proposed by the Consumer Financial Protection Bureau (CFPB) Monday, from today's original deadline.
 
The CFPB's new rule would extend a temporary provision, which is set to expire July 21, 2015, by an additional five years. The provision permits federally insured credit unions and other depository institutions to estimate certain remittance pricing disclosures.
 
CUNA continues to advocate for improvements to the CFPB remittance rule for credit unions, including an exemption well over the 100 transfers per year that the current rule provides for. CUNA also has concerns that some credit unions have stopped or reduced remittance transfers, or are planning to do so, and that credit unions continue to experience compliance challenges. (See News Now May 14: Remittance rule comment deadline extended by 10 days.)
 
Use the resource link below to access CUNA's comment call.

CUNA: Risk-based capital plan has 'serious flaws,' should not proceed

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WASHINGTON (5/29/14)--The National Credit Union Administration should not proceed with its proposed rule on risk-based capital (RBC), the Credit Union National Association wrote in its comment letter submitted Wednesday. The trade association "ardently opposes" the proposal, its inherent flaws and the damaging impact it would generate, and recommended that the proposal be withdrawn given the board has not provided an adequate justification for the major changes it is proposing. 
 
"Credit unions have been subjected to a number of new rules in the wake of the financial crisis, but none of them is as potentially harmful as this proposal," the CUNA comment letter, signed by CUNA President/CEO Bill Cheney, states.

"Indeed, the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher."

CUNA  emphasizes a willingness and desire to  work with the NCUA on both a comprehensive strategy and on a narrower new rule approach.
 
CUNA's 47-page letter lists several key defects in the NCUA's proposal, including:
  • The "well-capitalized" RBC requirements violate the Federal Credit Union Act and are not well-tailored to produce appropriate levels of credit union capital;
  • The proposal substitutes a punitive capital rule for effective examination and supervision;
  • The proposal would needlessly interfere with credit union operational capabilities to meet the credit needs of their communities, particularly in the areas of business and mortgage lending, and other financial necessities;
  • Contrary to a stated goal of the proposal, it does not significantly reduce losses to the National Credit Union Share Insurance Fund (NCUSIF), nor does it effectively identify potential credit union failures (without overcapitalization of other credit unions); 
  • The proposal does not reflect credit unions' historical financial performance including during times of severe financial market distress; and 
  • The overall negative impact of the proposal would be far greater than the agency has anticipated and would result in a much smaller credit union system over the long term.
CUNA instead advocates for the current system to be retained alongside "positive and meaningful reform" related to capital and prompt corrective action. This reform would involve congressional and regulatory action, and encourage the following:
  • The NCUA working with the credit union system in urging Congress to allow credit access to supplemental capital.
  • The NCUA, along with credit unions, working to amend the law and give the agency the power to establish net worth levels that define prompt corrective action capital classifications, similar to those granted to banking regulators.
  • Establishment of a Basel-style system with appropriate risk weightings taking into consideration credit unions' operational history and organizational structure, with different RBC ratio levels to be either adequately or well capitalized).
Among the other recommendations CUNA makes in its letter:
  • The NCUA should continue providing a risk mitigation credit as under the current rule;
  • The agency should permit supplemental capital for RBC purposes;
  • Additional comments on a new proposal should be sought; and
  • The NCUA should give credit unions much more time to comply.
Use the resource link to read the complete letter. 

NEW: CUNA RBC letter details plan's flaws, urges withdrawal

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WASHINGTON (5/29/14, UPDATED 8:04 a.m. ET)--In a 47-page comment letter to the National Credit Union Administration, the Credit Union National Association Wednesday underscored the inherent flaws and damaging impact the agency's risk-based capital plan would generate, and recommended that the proposal be withdrawn. CUNA said the regulator has not provided an adequate justification for the major changes it is proposing.

The CUNA comment letter, signed by CUNA President/CEO Bill Cheney, emphasizes CUNA's willingness and desire to  work with the NCUA on both a comprehensive strategy and on a narrower new rule approach.
 
"Credit unions have been subjected to a number of new rules in the wake of the financial crisis, but none of them is as potentially harmful as this proposal," the CUNA comment letter, signed by CUNA President/CEO Bill Cheney, states.
 
"Indeed, the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher," the CUNA letter states.
 
Use the resource links to access the full News Now story and to access the CUNA comment letter.

Ala. firm fined for 'inadequate' RESPA disclosures

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WASHINGTON (5/29/14)--The largest real estate firm in Alabama has been ordered to pay $500,000 for an inadequate disclosure practice that left some consumers unaware of their right to choose a service provider during the home-buying process, according to the Consumer Financial Protection Bureau.
 
The CFPB, in a release Wednesday announcing its action against RealtySouth's, charged the firm's disclosures violated the Real Estate Settlement and Practices Act (RESPA). RESPA protects consumers during the home-buying process by prohibiting such things as kickbacks for referrals of real estate settlement services. 
 
The bureau said RealtySouth's preprinted form purchase contracts, given to homebuyers preparing to make an offer on a home, either "explicitly directed or suggested" that title and closing services be conducted by TitleSouth, an affiliated company owned by the same holding company that owns RealtySouth.

"While RESPA allows real estate companies to refer their customers to affiliated businesses, the law requires them to provide consumers an 'Affiliated Business Arrangement' disclosure that clearly states their right to shop around for a better price and that they are not required to use the affiliated company," the CFPB noted.

The disclosure RealtySouth gave consumers did not comply with the law; it did not properly highlight consumers' rights, and the required language was buried in a section of text that also made marketing claims about the company's prices. 

The case was referred to the CFPB by the Department of Housing and Urban Development. RealtySouth changed its disclosure forms immediately after being contacted by the CFPB, the release said.

Comment period for GLBA privacy amendment extended to July 14

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WASHINGTON (5/29/14)--The Consumer Financial Protection Bureau has extended the comment period to July 14  for the amendment to the annual privacy notice requirement set forth in subpart A of Regulation P of the Gramm-Leach-Bliley Act (GLBA). The CFPB published the proposal in the May 13 edition of the Federal Register.
 
The proposed amendment would allow financial institutions that do not engage in certain types of information sharing activities to stop mailing an annual disclosure if they meet the following conditions:
  • The financial institution does not share the customer's nonpublic personal information with nonaffiliated third parties in a manner that triggers GLBA opt-out rights;
  • The financial institution does not include on its annual privacy notice an opt-out notice under section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (FCRA);
  • The financial institution's annual privacy notice is not the only notice provided to satisfy the requirements of section 624 of the FCRA;
  • The information included in the privacy notice has not changed since the customer received the previous notice; and
  • The financial institution uses the model form provided in the GLBA's implementing Regulation P.
The deadline originally was June 12. Use the resource link below for the full proposal.

States seek feds' banking guidance for cannabis businesses

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WASHINGTON (5/29/14)--Colorado Gov. John Hickenlooper and Washington Gov. Jay Inslee have asked the federal financial institution regulators for guidance on marijuana business banking. The governors wrote a letter this week to the National Credit Union Administration, Federal Reserve, Office of the Controller of the Currency and the Federal Deposit Insurance Corp.

The letter follows one sent in October 2013 by the two governors with a similar request for guidance.

"Banks and credit unions in Colorado and Washington are waiting for the Federal Banking Agencies to furnish the instructions given to bank and credit union examiners before deciding whether and how to provide banking services to state-licensed recreational marijuana businesses," the letter reads. "In the meantime, product sales have begun in Colorado and will soon being in Washington, exposing all involved to the significant risks of criminal activity associated with accepting, storing and transporting large quantities of cash that can be ameliorated by access to the banking system."

According to May 27 report in The Denver Post, financial institutions in both states are more worried about penalties from financial regulators than from prosecutors, fearing the effects and penalties that regulators could impose.

The U.S. Department of the Treasury's Financial Crimes Enforcement Network issued guidance in February that advised anyone providing financial services to marijuana-related business to assess the risk with due diligence that includes:
  • Verifying with the appropriate state authorities whether the business is duly licensed and registered;
     
  • Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;
     
  • Requesting from state licensing and enforcement authorities available information about the business and related parties;
     
  • Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical vs. recreational customers);
     
  • Ongoing monitoring of publicly available sources for adverse information about the business and related parties;
     
  • Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and
     
  • Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.
News Now reported earlier this month that Spokane Valley, Wash.-based Numerica CU, with $1.3 billion in assets, would be the first financial institution in the country to accept marijuana-based business. Businesses that grow or process cannabis can manage finances there, but retailers cannot. (See News Now May 9: "Wash. CU sets standards for serving marijuana businesses.")

Use the resource link for more information.

FHLBanks: NCUA proposed risk-weights place CUs at disadvantage

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WASHINGTON (5/29/14)--The 12 Federal Home Loan Bank presidents warn that the National Credit Union Administration's plan to revise its prompt corrective action rule for risk-based capital could have negative consequences both for credit unions and for homebuyers in their communities.
 
In a May 28 comment letter to the NCUA, the home loan bank presidents note that the proposed risk weights for mortgages in the RBC plan increase as the percentage of mortgages to total assets held by a credit union increases. 
 
"Consequently, credit unions that serve the needs of their members by issuing mortgages would be negatively impacted if they retain these mortgages on their balance sheets," the FHLB letter cautions.
 
It further warns, "This would put credit unions at a competitive disadvantage to other financial institutions that hold such mortgages under less restrictive regulatory standards and would also prevent credit unions from holding mortgage collateral that can be used to access liquidity through the FHLBanks and support mortgage lending within their communities.
 
"Therefore, we request that the limits imposed with respect to mortgages be revised to be more in line with other bank regulatory standards."
 
The FHLB presidents also asked the NCUA to bring its proposal more in line with banks' and thrifts' capital rules in the risk weights assigned FHLBank capital stock.
 
In contrast to the risk-based capital rules for banks and thrifts, the NCUA's proposed framework would assign risk weights to all investments, regardless of credit quality, based on the weighted average life (WAL) of the investment.
 
Under current and proposed Basel rules for risk-based capital, claims on government-sponsored entities, including the home loan banks, are assigned a 20% risk value.
 
Under the NCUA's WAL approach, the FHLBank letter says, the same stock could be subject to risk weightings of 20% or 75%, depending on the class of capital stock. Furthermore, investments in FHLBank consolidated obligations could be subject to risk weightings that range from 20% to 200%, depending on their WALs.
 
"This treatment by the NCUA will require credit unions to hold more risk-based capital against their holdings of FHLBank Capital Stock and FHLBank Consolidated Obligations than other depository institutions are required to hold," the letter notes. 
 
It warns that, in addition to placing credit unions at a disadvantage compared to other depository institutions, this requirement could restrict credit unions' extension of needed credit to the communities that they serve.

FTC report calls for data broker transparency

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WASHINGTON (5/29/14)--The Federal Trade Commission (FTC) has found that data brokers operate with a "fundamental lack of transparency."  The agency recommends that Congress look into legislation that would increase transparency when it comes to the practice and give consumers more control over personal data that is collected and shared among data brokers.
 
Data brokers obtain and share vast amounts of consumer information, typically without consumer knowledge. They then sell this information for marketing campaigns, fraud prevention and more. 
 
"The extent of consumer profiling today means that data brokers often know as much -- or even more -- about us than our family and friends, including our online and in-store purchases, our political and religious affiliations, our income and socioeconomic status, and more," said FTC Chair Edith Ramirez, releasing the FTC's findings and recommendations Tuesday. "It's time to bring transparency and accountability to bear on this industry on behalf of consumers, many of whom are unaware that data brokers even exist."
 
The report studied nine data brokers (Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future ) and found that just one of them studied holds information on more than 1.4 billion consumer transactions and 700 billion data elements, and another adds more than three billion new data points to its database each month.
 
Other findings in the report include:
  • Data brokers collect consumer data from online and offline sources, ranging from consumer purchase data, social media activity, warranty registrations, magazine subscriptions, religious and political affiliations and other details of consumers' everyday lives.

  •  Consumer data often passes through multiple layers as data brokers sharing data with each other. Seven of the nine data brokers in the study had shared information with another data broker in the study.

  • Data brokers combine and analyze data about consumers to make inferences, including potentially sensitive inferences such as those related to ethnicity, income, religion, political leanings, age and health conditions.

  • Many of the purposes for which data brokers collect and use data pose risks to consumers, such as unanticipated uses of the data. For example, a category like "Biker Enthusiasts" could be used to offer discounts on motorcycles to a consumer, but could also be used by an insurance provider as a sign of risky behavior.

  • Some data brokers unnecessarily store data about consumers indefinitely, which may create security risks.

  • To the extent data brokers currently offer consumers choices about their data, the choices are largely invisible and incomplete.
The FTC encouraged Congress to consider enacting legislation that would enable consumers to learn of the existence and activities of data brokers and provide consumers with reasonable access to information about them held by these entities.
 
Such legislation should include, according to the FTC, requirements that data brokers create a centralized mechanism, allow consumers to have access to their data, allow consumers to opt out and protect sensitive information.
 
Use the resource link for more information.

MBLs at risk with proposed RBC change, Udall, Scott write

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WASHINGTON (5/28/14)--Sens. Mark Udall (D-Colo.) and Tim Scott (R-S.C.) have joined the growing number of legislators in Washington, D.C., expressing concerns about the National Credit Union Administration's risk-based capital (RBC) proposal.
 
A longtime credit union supporter, Udall noted in his Tuesday letter to the NCUA, "It is important for NCUA to carefully consider the appropriateness of risk weights that deviate significantly from analogous regulations administered by other federal financial regulators."
 
"I have sponsored legislation to permit well-capitalized credit unions with a history of business lending to lend more to small businesses," Udall wrote. "I am concerned that the consequence of a final rule constructed without close attention to input from the credit unions could be a reduction in these institutions' ability and willingness to lend to their small business members."
 
Last year, Udall sponsored the Credit Union Small Business Lending Enhancement Act, which would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level.
 
He noted it is critical that regulators focus on parts of the financial system that could "undermine safety and soundness of financial institutions without unnecessarily constraining their ability to lend responsibly."
 
The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets. (See related story: Final countdown: Hours left to submit RBC proposal comments.)
 
Scott chimed in Tuesday with a letter to the NCUA as well. Scott was previously a board member for Summerville, S.C.-based Heritage Trust FCU, with $475 million in assets. In his letter he also expressed concerns with the proposed risk weightings for member business loans.
 
"I have very significant concerns that a regulatory action could draw $7 billion of capital out of the economy at this time," Scott wrote. "Because of credit unions' limited avenues for raising capital, it is likely that this proposal would force them to charge higher lending and financial services fees, reduce dividend payments to members and deter new depositors."
 
Approximately 1,000 credit unions would be affected, based on a conservative estimate, requiring them to raise between $3 billion and $4 billion in new capital and collectively, credit unions' buffers or margins above being well-capitalized would decline by $7.6 billion.

Sen. Bill Nelson (D-Fla.), Heidi Heitkamp (D-N.D.) and Al Franken (D-Minn.) also have submitted comment letters.

CUNA survey finds parents unsure of college costs

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WASHINGTON (5/28/14)--A survey conducted by the Credit Union National Association found that more than half of parents of college-age students do not know how long it will take to pay off student loans or the average interest rate of that debt. The online Financing Children's College Education Survey polled 717 parents of 17- or 18-year-olds who plan to or are seriously considering attending a college or university.
 
According to the survey, 59% of parents of prospective U.S. college students are not able to guess the average rate of their future loans, 53% do not know how long it will take to pay off future loans and 25% do not know their children's expected debt at graduation. 
 
The survey also found that 86% of parents believe that their children are at least somewhat likely to receive a high-paying job upon graduating, suggesting that parents are willing to pay the cost of college tuition even while not knowing how their associated borrowing will affect their future debt and financial health.
 
"Today's findings suggest that the parents of graduating high school seniors could face significant levels of increased debt," said Pat Keefe, CUNA's senior vice president/chief communications officer. "Parents should speak with financial professionals to plan for their financial future, including their credit unions."
 
He added, "Managing debt is an important part of realizing one's financial goals and these debts can get on the parents' balance sheet right when they need to start planning in earnest for retirement. Credit unions stand ready to help in the planning."
   
Keefe also said the survey's findings are of particular concern because 68% of parents say that their children will need federal loans, and 40% indicated they will need private loans to support their tuition.
 
Other findings include:
  • Twenty-two percent of respondents anticipate taking out two or more student loans, while 11% anticipate a single loan.
     
  • Forty-eight percent reported that they didn't know how many loans their children would need to graduate.
     
  • Of the respondents who do have an idea of how much money they will owe when they graduate, 6% expect to have debt under $10,000; 22% say they will owe $10,000-$24,999; 22% expect debt of $25,000-$49,999; 13% expect debt of $50,000-$74,999; 6% expect to have debt between $75,000-$99,999; and 6% expect to have more than $100,000 in debt at graduation.
The Washington Post's WonkBlog cited the CUNA survey Friday in a post examining the perception of college debt.
 

Hensarling sets June deadline for NCUA 'reputation risk' remarks

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WASHINGTON (5/28/14)--Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, requested that the National Credit Union Administration, along with other regulators, provide "reputation risk" comments by June 12.
 
Hensarling asked that National Credit Union Administration Chair Debbie Matz, Federal Reserve Chair Janet Yellen, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Comptroller of the Currency Thomas Curry respond with the following information:
  • Whether or not the agency considers "reputation risk" in its supervisory duties, and if so, an explanation of why it is an appropriate element of the agency's supervisory program.
     
  • If the agency does consider "reputation risk," what data is used to determine its effects on an institution's safety and soundness. Also, an explanation of why this data is not already accounted for under traditional capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market (CAMELS) ratings.
     
  • If the agency does use "reputation risk," whether or not a poor rating under this analysis is sufficient to recommend a change in an institution's business practices despite a strong rating under traditional CAMELS analysis.
Hensarling is concerned that the idea of "reputation risk" relies on subjective judgment, as opposed to the Uniform Financial Institutions Rating System, which uses as factors in the CAMELS rating.
 
He cites use of the "reputation risk" metric in recent guidance issued by NCUA, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Federal Reserve.
 
"Under the CAMELS supervisory framework, 'reputation risk' is not a standalone indicator that, on its own, can warrant a recommendation by your agency that a depository institution cease providing a particular product of service," the letter reads.
 
Hensarling said he is concerned that the use of a "reputation risk" indicator is too "vague, subjective and unquantifiable" to lead to a regulatory outcome, such as a depository institution that could be compelled to sever a customer relationship that is otherwise in accordance with laws and regulations, but has been the subject of unflattering press coverage or disapproval of its business model from a branch of government.
 
"The introduction of subjective criteria like 'reputation risk' into prudential bank supervision can all too easily become a pretext for advancement of political objectives, which can potentially subvert both safety and soundness and the rule of law," he wrote.

Veterans' magazine rates NCUA highly as workplace

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ALEXANDRIA, Va. (5/28/14)--The National Credit Union Administration has been rated as a "Best of the Best" when it comes to career opportunities for veterans by U.S. Veterans Magazine. In 2014, 47% of NCUA's new hires have been veterans, and they make up 16% of the agency's overall workforce.
 
"As part of our efforts to make NCUA an employer of choice, we want to be certain veterans know about the kinds of job opportunities available at the agency. We also want access to this group of talented workers with a commitment to public service," said NCUA Board Chair Debbie Matz.
 
The NCUA joined forces with the Department of Veterans Affairs in September 2013 to create more opportunities for veterans through the Feds for Vets program. The agency also focuses on veterans and the Pathways Internship Program, which aims to reach entry-level candidates, including disabled veterans, and provides flexibility to veterans who are recent graduates.
 
According to DiversityComm Inc., the parent company of U.S. Veterans Magazine, scores are awarded based on policies supporting equal access, advancement and inclusion of all individuals, as well as other activities demonstrating a commitment to diversity and equal opportunity.

San Antonio Mayor Castro nominated for HUD position

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WASHINGTON (5/28/14)--President Barack Obama has nominated San Antonio Mayor Julian Castro to be the new Housing and Urban Development (HUD) secretary. Castro, 39, is one of the youngest mayors of a major city in the United States.
 
Castro is the grandson of Mexican immigrants and, in 2001, he was San Antonio's youngest elected councilman at age 26.
 
Elected as mayor of San Antonio in 2009, Castro has followed the footsteps of longtime friend Henry Cisneros, who himself was the youngest elected councilman in San Antonio in 1975, became mayor of the city, and served as HUD secretary under former President Bill Clinton from 1993 to 1997.
 
If confirmed, Castro will replace Shaun Donovan, who has been nominated to be the new director of the White House Office of Management and Budget.

Final countdown: Hours left to submit RBC proposal comments

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WASHINGTON (5/28/14)--The comment deadline has arrived. Stakeholders' views on the National Credit Union Administration's risk-based capital plan are due to the agency by 11:59 p.m. (ET) today.
 
The NCUA already has more than 1,100 letters in hand.
 
The hundreds of comments by credit unions are joined in the NCUA's files by many other voices, including a joint letter representing the views of more than 320 members of the House and individual letters of concern from five senators. (See related story: MBLs at risk with proposed RBC change, Udall, Scott write.)
 
The agency also has heard from agricultural and community groups, who warn of the negative impact the proposal could have on consumers if credit union funds are diverted away from serving members. Reflecting concerns of many credit unions, the groups warned that unreasonably high capital requirement to reach a "well-capitalized" designation (10% of assets), and what some say are faulty asset risk weights, could result in too much capital and dramatically limit credit union growth in the long term.
 
Credit Union National Association President/CEO Bill Cheney underscored that the comments received by the NCUA show a deep level of thought--and of concern--surrounding this proposal. 
 
"An incalculable number of work-hours have been dedicated, within the credit union community and beyond, to detailing changes that are needed to the NCUA plan, if the agency is determined to move forward with a proposal," Cheney said.

"The number of comment letters alone reflects that this is the most significant proposed rulemaking that credit unions will face likely for years to come," he added.
 
The CUNA leader also urged credit unions to remain involved in this regulatory discussion going forward.
 
"All three NCUA board members have said they anticipate changes to the plan before it is finalized--and credit unions have to remain engaged in affecting those changes," he said, reminding that the agency is conducting three Listening Sessions on the proposal now that the comment period is drawing to a close.
 
Use the resource links for more on the RBC plan and for NCUA's Listening Session schedule.

NEW: CUNA: Risk-based capital plan has 'serious flaws,' should not proceed

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WASHINGTON (5/28/14, UPDATED 7:33 p.m. ET)--The National Credit Union Administration should not proceed with its proposed rule on risk-based capital (RBC), the Credit Union National Association wrote in its comment letter submitted today. CUNA believes that the proposal has serious flaws and could damage credit unions, and has recommended that the proposal be withdrawn on the grounds that the NCUA has not established economic or legal grounds as a basis for their proposed changes.
 
"Credit unions have been subjected to a number of new rules in the wake of the financial crisis, but none of them is as potentially harmful as this proposal," the CUNA comment letter, signed by CUNA President/CEO Bill Cheney, states. "Indeed, the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher."
 
CUNA's 47-page letter lists several key defects in the NCUA's proposal, including:
  • The "well-capitalized" RBC requirements violate the Federal Credit Union Act, and are not well-tailored to produce appropriate levels of credit union capital;
  • The proposal would needlessly interfere with credit union operational capabilities to meet the credit needs of their communities, particularly in the areas of business and mortgage lending, and other financial necessities; and,
  • Contrary to a stated goal of the proposal, it does not significantly reduce losses to the National Credit Union Share Insurance Fund (NCUSIF), nor does it effectively identify potential credit union failures (without overcapitalization of other credit unions).
CUNA instead advocates for the current system to be retained alongside "positive and meaningful reform" related to capital and prompt corrective action. This reform would involve congressional and regulatory action, and encourage the following:
  • The NCUA working with the credit union system in urging Congress to allow credit access to supplemental capital.
  • The NCUA, along with credit unions, working to amend the law and give the agency the power to establish net worth levels that define prompt corrective action capital classifications, similar to those granted to banking regulators.
  • Establishment of a Basel-style system with appropriate risk weightings taking into consideration credit unions' operational history and organizational structure, with different RBC ratio levels to be either adequately or well capitalized).
Among the other recommendations CUNA makes in its letter:
  • The NCUA should continue providing a risk mitigation credit as under the current rule;
  • The agency should permit supplemental capital for RBC purposes;
  • Additional comments on a new proposal should be sought; and
  • The NCUA should give credit unions much more time to comply.
"CUNA has historically supported risk-based capital but cannot support this proposal," Cheney states in the CUNA letter. "We urge NCUA to address the numerous fundamental issues we are raising by incorporating our recommendations and reissuing a new proposal for comments from the credit union system and other stakeholders."
 
Use the resource link for CUNA's comprehensive letter.

San Antonio Mayor Castro nominated for HUD position

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WASHINGTON (5/28/14)--President Barack Obama has nominated San Antonio Mayor Julian Castro to be the new Housing and Urban Development (HUD) secretary. Castro, 39, is one of the youngest mayors of a major city in the United States.
 
Castro is the grandson of Mexican immigrants and, in 2001, he was San Antonio's youngest elected councilman at age 26.
 
Elected as mayor of San Antonio in 2009, Castro has followed the footsteps of longtime friend Henry Cisneros, who himself was the youngest elected councilman in San Antonio in 1975, became mayor of the city, and served as HUD secretary under former President Bill Clinton from 1993 to 1997.
 
If confirmed, Castro will replace Shaun Donovan, who has been nominated to be the new director of the White House Office of Management and Budget.

Final countdown: Hours left to submit RBC proposal comments

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WASHINGTON (5/28/14)--The comment deadline has arrived. Stakeholders' views on the National Credit Union Administration's risk-based capital plan are due to the agency by 11:59 p.m. (ET) today.
 
The NCUA already has more than 1,100 letters in hand.
 
The hundreds of comments by credit unions are joined in the NCUA's files by many other voices, including a joint letter representing the views of more than 320 members of the House and individual letters of concern from five senators. (See related story: MBLs at risk with proposed RBC change, Udall, Scott write.)
 
The agency also has heard from agricultural and community groups, who warn of the negative impact the proposal could have on consumers if credit union funds are diverted away from serving members. Reflecting concerns of many credit unions, the groups warned that unreasonably high capital requirement to reach a "well-capitalized" designation (10% of assets), and what some say are faulty asset risk weights, could result in too much capital and dramatically limit credit union growth in the long term.
 
Credit Union National Association President/CEO Bill Cheney underscored that the comments received by the NCUA show a deep level of thought--and of concern--surrounding this proposal. 
 
"An incalculable number of work-hours have been dedicated, within the credit union community and beyond, to detailing changes that are needed to the NCUA plan, if the agency is determined to move forward with a proposal," Cheney said.

"The number of comment letters alone reflects that this is the most significant proposed rulemaking that credit unions will face likely for years to come," he added.
 
The CUNA leader also urged credit unions to remain involved in this regulatory discussion going forward.
 
"All three NCUA board members have said they anticipate changes to the plan before it is finalized--and credit unions have to remain engaged in affecting those changes," he said, reminding that the agency is conducting three Listening Sessions on the proposal now that the comment period is drawing to a close.
 
Use the resource links for more on the RBC plan and for NCUA's Listening Session schedule.

CUNA survey finds parents unsure of college costs

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WASHINGTON (5/28/14)--A survey conducted by the Credit Union National Association found that more than half of parents of college-age students do not know how long it will take to pay off student loans or the average interest rate of that debt. The online Financing Children's College Education Survey polled 717 parents of 17- or 18-year-olds who plan to or are seriously considering attending a college or university.
 
According to the survey, 59% of parents of prospective U.S. college students are not able to guess the average rate of their future loans, 53% do not know how long it will take to pay off future loans and 25% do not know their children's expected debt at graduation. 
 
The survey also found that 86% of parents believe that their children are at least somewhat likely to receive a high-paying job upon graduating, suggesting that parents are willing to pay the cost of college tuition even while not knowing how their associated borrowing will affect their future debt and financial health.
 
"Today's findings suggest that the parents of graduating high school seniors could face significant levels of increased debt," said Pat Keefe, CUNA's senior vice president/chief communications officer. "Parents should speak with financial professionals to plan for their financial future, including their credit unions."
 
He added, "Managing debt is an important part of realizing one's financial goals and these debts can get on the parents' balance sheet right when they need to start planning in earnest for retirement. Credit unions stand ready to help in the planning."
   
Keefe also said the survey's findings are of particular concern because 68% of parents say that their children will need federal loans, and 40% indicated they will need private loans to support their tuition.
 
Other findings include:
  • Twenty-two percent of respondents anticipate taking out two or more student loans, while 11% anticipate a single loan.
     
  • Forty-eight percent reported that they didn't know how many loans their children would need to graduate.
     
  • Of the respondents who do have an idea of how much money they will owe when they graduate, 6% expect to have debt under $10,000; 22% say they will owe $10,000-$24,999; 22% expect debt of $25,000-$49,999; 13% expect debt of $50,000-$74,999; 6% expect to have debt between $75,000-$99,999; and 6% expect to have more than $100,000 in debt at graduation.
The Washington Post's WonkBlog cited the CUNA survey Friday in a post examining the perception of college debt.
 

MBLs at risk with proposed RBC change, Udall, Scott write

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WASHINGTON (5/28/14)--Sens. Mark Udall (D-Colo.) and Tim Scott (R-S.C.) have joined the growing number of legislators in Washington, D.C., expressing concerns about the National Credit Union Administration's risk-based capital (RBC) proposal.
 
A longtime credit union supporter, Udall noted in his Tuesday letter to the NCUA, "It is important for NCUA to carefully consider the appropriateness of risk weights that deviate significantly from analogous regulations administered by other federal financial regulators."
 
"I have sponsored legislation to permit well-capitalized credit unions with a history of business lending to lend more to small businesses," Udall wrote. "I am concerned that the consequence of a final rule constructed without close attention to input from the credit unions could be a reduction in these institutions' ability and willingness to lend to their small business members."
 
Last year, Udall sponsored the Credit Union Small Business Lending Enhancement Act, which would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level.
 
He noted it is critical that regulators focus on parts of the financial system that could "undermine safety and soundness of financial institutions without unnecessarily constraining their ability to lend responsibly."
 
The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets. (See related story: Final countdown: Hours left to submit RBC proposal comments.)
 
Scott chimed in Tuesday with a letter to the NCUA as well. Scott was previously a board member for Summerville, S.C.-based Heritage Trust FCU, with $475 million in assets. In his letter he also expressed concerns with the proposed risk weightings for member business loans.
 
"I have very significant concerns that a regulatory action could draw $7 billion of capital out of the economy at this time," Scott wrote. "Because of credit unions' limited avenues for raising capital, it is likely that this proposal would force them to charge higher lending and financial services fees, reduce dividend payments to members and deter new depositors."
 
Approximately 1,000 credit unions would be affected, based on a conservative estimate, requiring them to raise between $3 billion and $4 billion in new capital and collectively, credit unions' buffers or margins above being well-capitalized would decline by $7.6 billion.

Sen. Bill Nelson (D-Fla.), Heidi Heitkamp (D-N.D.) and Al Franken (D-Minn.) also have submitted comment letters.

Hensarling sets June deadline for NCUA 'reputation risk' remarks

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WASHINGTON (5/28/14)--Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, requested that the National Credit Union Administration, along with other regulators, provide "reputation risk" comments by June 12.
 
Hensarling asked that National Credit Union Administration Chair Debbie Matz, Federal Reserve Chair Janet Yellen, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Comptroller of the Currency Thomas Curry respond with the following information:
  • Whether or not the agency considers "reputation risk" in its supervisory duties, and if so, an explanation of why it is an appropriate element of the agency's supervisory program.
     
  • If the agency does consider "reputation risk," what data is used to determine its effects on an institution's safety and soundness. Also, an explanation of why this data is not already accounted for under traditional capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market (CAMELS) ratings.
     
  • If the agency does use "reputation risk," whether or not a poor rating under this analysis is sufficient to recommend a change in an institution's business practices despite a strong rating under traditional CAMELS analysis.
Hensarling is concerned that the idea of "reputation risk" relies on subjective judgment, as opposed to the Uniform Financial Institutions Rating System, which uses as factors in the CAMELS rating.
 
He cites use of the "reputation risk" metric in recent guidance issued by NCUA, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Federal Reserve.
 
"Under the CAMELS supervisory framework, 'reputation risk' is not a standalone indicator that, on its own, can warrant a recommendation by your agency that a depository institution cease providing a particular product of service," the letter reads.
 
Hensarling said he is concerned that the use of a "reputation risk" indicator is too "vague, subjective and unquantifiable" to lead to a regulatory outcome, such as a depository institution that could be compelled to sever a customer relationship that is otherwise in accordance with laws and regulations, but has been the subject of unflattering press coverage or disapproval of its business model from a branch of government.
 
"The introduction of subjective criteria like 'reputation risk' into prudential bank supervision can all too easily become a pretext for advancement of political objectives, which can potentially subvert both safety and soundness and the rule of law," he wrote.

Veterans' magazine rates NCUA highly as workplace

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ALEXANDRIA, Va. (5/28/14)--The National Credit Union Administration has been rated as a "Best of the Best" when it comes to career opportunities for veterans by U.S. Veterans Magazine . In 2014, 47% of NCUA's new hires have been veterans, and they make up 16% of the agency's overall workforce.
 
"As part of our efforts to make NCUA an employer of choice, we want to be certain veterans know about the kinds of job opportunities available at the agency. We also want access to this group of talented workers with a commitment to public service," said NCUA Board Chair Debbie Matz.
 
The NCUA joined forces with the Department of Veterans Affairs in September 2013 to create more opportunities for veterans through the Feds for Vets program. The agency also focuses on veterans and the Pathways Internship Program, which aims to reach entry-level candidates, including disabled veterans, and provides flexibility to veterans who are recent graduates.
 
According to DiversityComm Inc., the parent company of U.S. Veterans Magazine, scores are awarded based on policies supporting equal access, advancement and inclusion of all individuals, as well as other activities demonstrating a commitment to diversity and equal opportunity.

Former Speaker Gingrich: RBC proposal 'extraordinarily troubling'

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WASHINGTON (5/27/14)--Former Speaker of the House Newt Gingrich, who worked on amending the Federal Credit Union Act in 1998, submitted a letter Friday to the National Credit Union Administration regarding its risk-based capital (RBC) proposal, calling the proposal "extraordinarily troubling."
 
Gingrich, a Republican who represented the 6th District of Georgia, is one of the latest U.S. legislators to bring their concerns to the attention of the regulator. (See related story: RBC proposal may impede CU goals: Sen. Nelson.)
 
The NCUA's proposal would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
"This is not what Congress contemplated NCUA should do to establish a Prompt Corrective Action regime," Gingrich wrote, adding, "We never intended, nor even comprehended the possibility of higher risk-based capital requirements for well-capitalized credit unions than those that apply to adequately capitalized credit unions."
 
Under the proposed rule, an adequately capitalized credit union would need to maintain a net worth ratio of 6% and an RBC ratio of 8% of equity to risk assets, while a well-capitalized credit union would need 7% and a higher RBC ratio of 10.5%, meaning the RBC ratio for well-capitalized credit unions exceeds that for adequately capitalized credit unions. This violates the Federal Credit Union Act, the Credit Union National Association says. 
 
The act directs the NCUA to set any risk-based component for the well-capitalized threshold no higher than the component for the adequately capitalized level. 
 
He continued, "If Congress wanted a different result, we would have indicated that. In fact, in other banking statutes, we did exactly that.  At the time of the 1998 statutory change, banks were already subject to risk-based capital ratio standards for both the adequate and well-capitalized classifications.
 
"However, both then and now, banks have a lower statutory leverage ratio and access to supplemental forms of capital," Gingrich wrote. Quoting from the Federal Credit Union Act, he added, "The proposal thus creates a system that does not seem 'to take into account that credit unions are not-for-profit cooperatives' that 'do not issue capital stock,' 'must rely on retained earnings to build net worth' and 'have boards of directors that consist primarily of volunteers."
 
Lastly, "banks and credit unions are not the same, and we did not want NCUA to treat them exactly the same," he wrote, urging the regulator to design a system that takes into consideration the unique nature of credit unions and applies the risk-based standards as Congress intended--at the adequately capitalized level.

Sen. Nelson: RBC plan may impede CU goals

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WASHINGTON (5/27/14)--In a Friday letter to National Credit Union Administration Chair Debbie Matz, Sen. Bill Nelson (D-Fla.) relayed his concerns about the regulatory agency's risk-based capital (RBC) proposal and its effect on credit unions' ability to serve their communities.
 
"Credit unions have long played a critical role in serving communities without access to other affordable financial services, promoting thrift among their members and providing a low-cost source of credit," he wrote, adding he was concerned that the proposed RBC rule "may impede these important goals."
 
Nelson joins Sen. Al Franken (D-Minn.) and Senate Banking Committee member Heidi Heitkamp (D-N.D.) in submitting comments. This is addition to King-Meeks letter signed by 324 members of Congress and a May 7 comment letter from former Senate Banking Committee Chair Alfonse D'Amato (R-N.Y.).
 
D'Amato's counterpart during the 1998 amendment of the Federal Credit Union Act, former House Speaker Newt Gingrich (R-Ga.) submitted a letter Friday as well. (See related story: Former House Speaker Gingrich: RBC proposal 'extraordinarily troubling.')
 
The NCUA's proposal would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
The proposal should reflect the nature of credit unions, the purpose they serve and the types of activities they engage in, Nelson wrote. "Accordingly, I urge the NCUA Board to seriously consider the concerns of credit unions before finalizing the rule to ensure it does not apply a broad brush where a fine-tooth comb is more appropriate," he noted.
 
Nelson ended his letter with a note of support for efforts to strengthen the integrity of the U.S. financial system and urged that such policies "are reasonably targeted and serve the public interest."

RBC proposal inspires innovative approaches for commenting

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WASHINGTON (5/27/14)--As the window to comment on the National Credit Union Administration's risk-based capital (RBC) proposal comes to a close, a different tactic is being used by some commenters: Videos citing the concerns of credit unions.
 
More than 1,100 comment letters already have been received by the board, including a video from the Credit Union Association of the Dakotas (CUAD).
 
In the video comment letter, CUAD President/CEO Robbie Thompson talks to credit union executives from rural North and South Dakota about their numerous concerns about the impact of the RBC proposal.
 
On Friday, the league announced that it is "very concerned about the negative impact" the proposal would have on credit unions in their states.
 
"Nearly half of the credit unions in the Dakotas over $50 million in assets are exempt from the MBL cap because they have historically been agricultural lenders, and many others are low income designated credit unions," its lettere reads. "As such, the proposed rule has a disproportionately deleterious impact on them."
 
The NCUA's proposal would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.

The Northwest Credit Union Association also submitted a video comment letter. Ken Olson, president/CEO of $119 million-asset Old West CU, based in John Day, Ore., expressed his concerns with the proposal in the video. 
 
"The endgame would mean we'd have to stop our MBL lending, and that's what we do," he said. "We've been business lending and lending for agricultural purposes for the last 60 years, and our members depend on us to find sources for funding."
 
Jim Phelps, vice president of advocacy for Cornerstone Credit Union League, which represents Arkansas, Oklahoma and Texas, also released a video urging credit unions to submit comments before the May 28 deadline.
 
"Whether you agree or don't agree with the proposal, there's no denying it has the potential to affect the entire credit union system, regardless of asset size," he said.
 
Dave Gunderson, chair of the California and Nevada Credit Union Leagues' Regulatory Advocacy Committee, wrote, "In my view, this is one of the most important proposals the NCUA has issued over the past couple of decades. It has the potential to severely harm the credit union industry."
 
In his letter to committee members, Gunderson, who is also the CEO of $710 million-asset CU of Southern California, Whittier, noted, "If we don't comment, we are essentially communicating to the NCUA that the proposed rule is fine, and its passage is of no concern to us. I recognize we all have time and resource challenges--however, I believe responding to the RBC proposal should be a top priority."
 
Credit Union National Association President/CEO Bill Cheney said in his weekly report Friday that comment letter submissions have increased tenfold over the past month, but urged all credit unions and other stakeholders who haven't yet submitted a letter to do so.
 
Use the resource links for the videos.

eBay breach leads to more data security legislation

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WASHINGTON (5/27/14)--Sen. Robert Menendez (D-N.J.) and Rep. Albio Sires (D-N.J.) have introduced new data security legislation in the wake of eBay's announcement Wednesday that users' personal information may have been compromised. The Menendez-Sires Commercial Privacy Bill of Rights aims to increase consumer protections and, in the event of a data breach, hold corporations accountable. 
 
The proposed bill would do the following:

Since the Target data security breach last holiday season, breaches at Michaels, Neiman Marcus have also followed, with eBay being the most recent high-profile example. (See related story: Compromised non-payment card data on the rise: Trustwave.)
 
In a response to a letter from Menendez following the Target breach, Federal Trade Commission (FTC) Chair Edith Ramirez urged Congress to enact data security legislation that gives the FTC civil penalty authority and recommended that Congress establish a general federal breach notification requirement.
 
"When we shop, every consumer assumes that companies will protect their data by any means necessary. Yet in the last year, we have read far too many stories about hackers getting past corporations' security systems," Menendez said.
 
The legislation would only apply to entities covered by the FTC that collect, use, transfer, or store certain information concerning more than 5,000 people during a 12-month period. While the bill will be enforced by the attorney general, state attorneys general and the FTC, private suits based on the law would be prohibited.

The Credit Union National Association has asked Congress to address data security relative to merchants, who are not held to the same standards of security as credit union and other financial institutions.

  • Place limits on both the type of information an entity may collect and for how long it may retain that information.
     
  • Require the FTC to issue regulations requiring companies to get consumers' opt-in consent for the transfer of their covered information to third parties for behavioral advertising or marketing; access and correct any personally identifiable information the entity has stored; and compel those entities to inform their customers of and allow them to exercise their rights.
     
  • Require entities to contractually protect consumer information when transferring it to a third party.
     
  • Create a uniform data security notification standard to replace the current notification system and ensure timely notice of a data breach to consumers.
     
  • Provide additional protections for children through inclusion of the Do Not Track Kids Act.
     
  • Require an independent non-governmental organization to help companies implement the bill and tasking the Department of Commerce with organizing outside entities towards the creation of safe harbor provisions.

Merger guidance offered in new NCUA brochure

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WASHINGTON (5/27/14)--The National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI) released a new brochure to be used as a resource for credit unions considering a merger. Titled "Truth in Mergers: A Guide for Merging Credit Unions," it provides a framework for credit union managers to begin discussions about the future of their institution. 
 
"Every strategic plan should include contingencies, including when a merger is worth considering," said OSCUI Director William Myers. "The critical first step is recognizing the early signs that a credit union's long-term viability may be at risk. A credit union still in sound financial condition has more options when it comes to merger partners and is in a better position to negotiate a contract than a credit union in a deteriorated financial condition."
 
Between 2003 and 2012 there were 2,462 mergers--an average of one every 1.5 days--according to the NCUA. NCUA also found that many credit unions wait until they are in a precarious financial position before exploring a merger as an option.
 
Many of these credit unions exhibit the following negative characteristics:
  • Declining membership: 47% of merging credit unions had negative member growth for three consecutive years prior to failure.
     
  • Prompt Corrective Action (PCA): 26% of merging credit unions were in PCA sometime during the three to four years prior to failure. Existing OSCUI research shows that only 33 % of small credit unions recover from PCA within four years.
     
  • Negative earnings: 54% of merging credit unions had negative return on average assets for three consecutive years prior to failure.
     
  • Declining net worth: 53% of merging credit unions had declining net worth ratios for three consecutive years prior to failure.
     
  • Weak CAMEL ratings: 47%of merging credit unions had a composite CAMEL rating of 4, or three consecutive years with a composite rating of 3, prior to failure. None were rated a CAMEL 5.
The brochure draws lessons from a review of more than 430 mergers that took place over an 18-month period. It is designed to help credit unions that might be considering a merger recognize when it might be in its best interest.
 
Once a credit union is in financial trouble, a merger becomes more difficult because there will be fewer potential partners, giving the troubled credit union less leverage in any negotiations. If a merger deadline is imposed by the NCUA, options can become increasingly limited.
 
The brochure identifies scenarios that can be harbingers that a credit union's viability is at risk. If a credit union recognizes any of these scenarios, it may want to explore merger options, the NCUA advises. Characteristics include:
  • The credit union's membership is shrinking because it cannot provide desired services, or services on competitive terms, and the credit union's financial condition will not permit improvement.
     
  • The credit union is not serving a unique niche via services, convenience or price, among others.
     
  • The credit union's financial condition is deteriorating, as evidenced by: a CAMEL 4 or lower, or long-term CAMEL 3, consistently negative earnings, consistently declining net worth, PCA, administrative action or repeat Document of Resolution items.
     
  • The credit union does not have a realistic plan to address any of the problems listed above.
     
  • Key credit union officials or employees are nearing the end of their careers and no viable options for replacement exist.
It also contains information on how to find a partner, negotiate a merger contract that serves members as well as employees and finalize the transaction.
 
Use the resource link for more information.

CDCU federation to host CDFI webinar Thursday

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WASHINGTON (5/27/14)--The National Federation for Community Development Credit Unions will host a webinar about Community Development Financial Institution (CDFI) grants from the National Credit Union Administration Thursday.
 
Based on the success of the technical assistance grants for CDFI certification awarded earlier this year, the NCUA has announced additional grants for up to 60 credit unions.
 
The webinar is from 3 to 4 p.m. (ET) and designed to answer questions about this round of funding from the NCUA, as well as the benefits of CDFI certification and an overview of the application process.
 
The federation's Pablo DeFilippi, vice president of membership and business development, and Terry Ratigan, senior consultant, will be joined by:
  • Debra Hickman, director of organizational development, CALCOE FCU, Yakima, Wash., with $23 million in assets. She is responsible for compliance, vendor management, project management, training and strategic planning.
     
  • Ikenna Nwankpa, financial analyst and grant administrator, NCUA's Office of Small Credit Union Initiatives. He supports credit unions that primarily serve low-income communities throughout the United States, including assistance on applications for funding through NCUA's Community Development Revolving Loan Fund.
Topics covered will include what the NCUA looks for in a successful application, as well as how CDFI credit unions can serve as a viable business model for community development. There will also be a Q-and-A with all four speakers after the presentation.
 
Use the resource links for more information.

Pro athletes' CU gets preliminary nod from NCUA

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ALEXANDRIA, Va. (5/27/14)--The National Credit Union Administration has given preliminary approval for a field of membership (FOM) for a proposed credit union to serve amateur and professional athletes.
 
Players Choice FCU would have a multiple common bond including a number of organizations focused on professional and amateur sports. Entities that have been approved for the proposed credit union's membership include both associations and businesses.
 
Stacy Fielder August, a lead sponsor of the proposed credit union, said the idea to charter came from her experience as the spouse of a professional athlete. August was married to retired baseball player Cecil Fielder and is the mother of current Texas Rangers player Prince Fielder.
 
"Many professional athletes do not manage their newfound wealth with an eye toward their financial needs after their sports careers are over," she said.  "As a result, far too many former professional athletes face major financial hardships within a few years of leaving their teams."
 
Cecil Fielder retired after 13 years of playing professional baseball with estimated career earnings of approximately $47 million. In 2004, The Detroit News reported that the money was gone and the family faced foreclosures, lawsuits and liens.
 
Prince Fielder signed a nine-year, $214 million contract in 2012, the fourth largest contract in Major League Baseball history, and August said she hopes her son can avoid his father's pitfalls. In 2012, she told MLive.com that she chose to found a credit union after many years of trying to found a bank, mainly because of a credit union's not-for-profit nature.
 
"A credit union is an ownership cooperative so it just made more sense--people helping people," she said. "They really enforce education."
 
It is anticipated that Players Choice FCU will be based in the Houston area.  The plan for the new credit union is to offer electronic services allowing it to serve members throughout the country, according to organizers. The group hopes to complete the charter application by year-end. 
 
As a result of the FOM approval by the NCUA, discussions will begin as various sports organizations will explore adding their staffs and team members to the proposed credit union's membership base.
 
August said she hopes the new credit union will be able to attract both active and retired professional athletes.

Life Line CU closes, Virginia CU assumes shares

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ALEXANDRIA, Va. (5/27/14)--The Virginia State Corporation Commission closed Life Line CU, a $7.4 million-asset credit union in Richmond, Va., and appointed the National Credit Union Administration Board as receiver to act as liquidating agent.
 
North Chesterfield, Va.-based Virginia CU, with $2.5 billion in assets, assumed all member shares.
 
The commission decided to close Life Line and discontinue its operations after determining the credit union was insolvent and had no reasonable prospect for restoring viable operations.
 
At the time of liquidation and subsequent assumption by Virginia CU, Life Line was a federally insured, state-chartered credit union that served 2,076 members and had assets of $7.9 million, according to its most recent call report.
 
Chartered in 1969, Life Line served employees of the Bon-Secours Richmond Health System and Central Virginia Health Network.
 
Life Line CU members will now become members of Virginia CU and should experience no interruption in deposit services. Members' accounts remain insured by the National Credit Union Share Insurance Fund up to $250,000.
 
NCUA's Asset Management and Assistance Center will take charge of Life Line's assets and loans and will correspond with individuals who have loans with the credit union.
 
Life Line CU is the fifth federally insured credit union liquidation in 2014.

Three CUNA-backed relief bills pass committee

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WASHINGTON (5/23/14)--Three credit union relief bills were passed by the House Financial Services Committee Thursday, part of a markup session continued from May 7.

The bills are:
  • H.R. 2673, the Portfolio Lending and Mortgage Access Act, introduced by Rep. Andy Barr (R-Ky.), would treat mortgage loans held in portfolio as qualified mortgages. It passed 36-23.
  • H.R. 4466, the Financial Regulatory Clarity Act of 2014, introduced by Reps. Shelley Moore Capito (R-W.Va.) and Gregory Meeks (D-N.Y.), would require financial regulators to determine whether new regulations are duplicative or inconsistent with existing federal regulations. It passed 34-25.
  • H.R. 4521, the Community Institution Mortgage Relief Act, introduced by Rep. Blaine Luetkemeyer (R-Mo.), would exempt credit unions and other lenders under $10 billion from certain Real Estate Settlement Procedures Act (RESPA) escrow requirements and exempt mortgage servicers servicing fewer than 20,000 loans from certain RESPA servicing requirements. It passed 43-16.
The Credit Union National Association sent letters of support for all three bills.
 
"These bills are small but important steps towards addressing the crisis of creeping complexity with respect to regulatory burden," said Ryan Donovan, CUNA's senior vice president of legislative affairs, told Housing Wire Thursday. "Credit unions appreciate the work of the sponsors and we look forward to seeing these bills come up for a vote on the House floor as soon as possible."
 
 

CUs sound off in RBC comment letters

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WASHINGTON (5/23/14)--With only three business days left in the comment period for the National Credit Union Administration's risk-based capital (RBC) proposal, almost 900 comment letters already have been sent. In addition to the King-Meeks letter signed by 324 members of Congress, Sen. Al Franken (D-Minn.) submitted a letter last week, and former Senate Banking Committee Chair Al D'Amato has commented as well.

Sen. Heidi Heitkamp (D-N.D.), a member of the Senate Banking Committee, submitted a comment letter of her own Thursday, urging the NCUA board to commit to transparency during the process and incorporate feedback from industry participants.

"Credit unions have served farmers and ranchers for many years, by making safe and affordable agricultural loans," she wrote. "Several North Dakota agricultural groups are concerned the proposal risk-based capital rule will negatively affect agricultural lending in my state."

A letter signed by members of five different North Dakota-based agricultural organization also cautioned against the effects of changes to current RBC rules.

"It is because of this history of safe and sound loans that Congress created an exemption for rural based credit unions so that they would not be subject to the 12.25% cap on business lending," the letter reads. "If the RBC rule were to be finalized as proposed, this exemption would become moot and many credit unions may have to discontinue or decrease agricultural lending."

State credit union leagues, credit unions and other stakeholders have also contributed to the nearly 900 comment letters received by the NCUA, including the following:
  •  Joshua Roberts, controller and compliance officer, Enterprise CU, Brookfield, Wis., with $28 million in assets.: "Every credit union's balance sheet varies dramatically, and while some loans may have a higher inherent risk than others, certain considerations should be made, such as a credit union's low-income designation, opportunities to provide loans to lower rated paper, and assisting with credit building lending. Being held to this standard could result in these credit unions potentially not providing these lending products which are vital to the communities they serve."
  •  Mary Zillman, Brokaw CU, Weston, Wis., with $46 million in assets: "I am mystified as to why this rule needs to be imposed. We've offered many of these products for years, and have just weathered one of the most troubling times of our days. What is really driving this proposal?"
  •  Jacki Lerdal, vice president/manager, Power Co-op Employees CU, Humboldt, Iowa, with $28 million in assets: "Credit unions must know the standard they're managing to in terms of capital.  Allowing subjective authority to examiners in the field to arbitrarily establish capital guidelines higher than proposed guidelines eliminates that standard.  Including such a provision creates uncertainty and difficulty for our staff and board and prevents us from effectively managing the financial institution on behalf of our members."
  •  Martin R. Carter, CEO, Parkside CU, Livonia, Mich., with $76 million in assets: "While the FDIC fund became technically insolvent during each of the last two financial crises, the NCUSIF has performed very well under current PCA rules. I believe this NCUA proposal is misguided from the outset because it builds additional layers on top of already existing statutory standards that in many areas are more stringent than the Basel system for small banks. Credit unions are already highly regulated and restricted. The current leverage requirement of a 7% net worth ratio in order to be considered "well capitalized" is 40% higher than the comparable requirement on community banks ..."
To read more of Carter's comments, as well as a sampling of other comments received by the NCUA, use the resource link.

Stabilization fund, new regulatory review discussed at NCUA meeting

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ALEXANDRIA, Va. (5/23/14)--The National Credit Union Administration held its monthly board meeting Thursday, during which it issued a notice of request to review its regulations, provided information on the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and approved an addition of underserved counties to the field of membership of a credit union in the Southwest.

The NCUA board issued a notice and request for comment to review its regulations to identify outdated, unnecessary or burdensome regulatory requirements imposed on federally insured credit unions. The agency proposes to publish 10 categories of regulations for public comment over the next two years. The NCUA will accept public comment for 90 days following publication of the notice in the Federal Register , which is expected shortly.

The notice specifically requests comments on the first two categories, "Applications and Reporting" and "Powers and Activities." The NCUA is interested in comments regarding the need and purpose of the regulations, need for statutory change, overarching approaches and flexibility of the regulatory standards, and effect on competition.

In addition, the agency is seeking comments on reporting, recordkeeping and disclosures, consistency and redundancy, clarity, and scope of rules. The agency is also seeking comments on the burden on small credit unions.

The Credit Union National Association continues to urge the NCUA to reduce regulatory burdens for credit unions. It will be publishing a regulatory call to action to solicit feedback from credit unions.

In addition, the NCUA board was briefed on the financial condition of the TCCUSF as of March 31. Since the last report, agency staff noted that the stabilization fund net position has improved by $102 million, largely due to an improvement in the financial performance of the legacy assets associated with the NCUA Guaranteed Notes program.

As previously noted by the NCUA, the agency does not intend to charge a stabilization fund assessment to federally insured credit unions in 2014. CUNA has urged the NCUA to forego any further stabilization fund assessments on credit unions.

Finally, the NCUA board approved an addition to $205 million-asset AERO FCU's field of membership of two underserved areas. The Glendale, Ariz.-based credit union will expand to 413 census tracts in Maricopa County, Ariz., and 81 census tracts in Bernalillo County, N.M.--an area which includes seven Native American reservations with virtually no financial services. The population of the total area covered by the addition is approximately two million.

'Risky' nonbank practices subject of new CFPB report

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WASHINGTON (5/23/14)--A new report, issued Thursday by the Consumer Financial Protection Bureau, highlights what the bureau labeled as illegal actions that were uncovered by the bureau's new supervision of the payday, debt collection and consumer reporting markets.
 
"For the first time at the federal level, nonbank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers," said CFPB Director Richard Cordray, unveiling the report.
 
"The CFPB's oversight of banks and nonbanks alike is exposing risky practices and getting results for consumers. We are pleased that our supervision program has been able to return more than $70 million to consumers in recent months," Cordray added. The CFPB gained supervisory authority over the nonbank entities under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
 
The new report generally covers supervisory activities between November 2013 and February 2014. In the three nonbank markets highlighted, examiners found that many companies had "systemic flaws" in their compliance management systems, such as consistently failing to have a system in place to track and resolve consumer complaints.
 
In the payday lending area, the CFPB report found:
  • Lenders deceiving consumers to collect debt;
  • Lenders illegally harassing borrowers and visiting consumers at work; and
  • Lenders hiring third-party collectors that illegally deceive and harass consumers.
In the debt collection market, the CFPB reported:
  • Debt collectors intentionally and illegally misleading consumers about litigation;
  • Debt collectors making excessive, illegal calls to consumers; and
  • Debt collectors failing to investigate consumer credit report disputes.
The bureau said it also discovered problems at consumer reporting agencies--including companies that are popularly called credit bureaus or credit reporting companies. The CFPB said its examiners found certain agencies did not handle consumer credit report dispute documents correctly and that some agencies were encouraging consumers to file disputes online or by telephone, but then refused to accept such disputes from some consumers.
 
Where CFPB examiners find problems, the bureau said in a release, they alert the company to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions.
 
Use the resource link for more detail on the CFPB report findings.

House subcommittee studies patent abuses

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WASHINGTON (5/23/14)--The Federal Trade Commission (FTC), one of eight witnesses called to testify Thursday before a House Energy and Commerce subcommittee, raised issues on patent demand letters, patent assertion entities (PAEs) and other consumer protection issues.

Lois Greisman, associate director of the FTC's Division of Marketing Practices, presented testimony that patent demand letters raise broad issues about patents in the United States.

The Credit Union National Association has urged lawmakers to act to curb the patent system abuses, saying reforms are desperately needed. CUNA and the state credit union leagues have been active on every level urging lawmakers and the Obama administration address patent reform.

During Thursday's testimony before the commerce, manufacturing and trade subcommittee, Greisman said, "The commission shares this subcommittee's goal of stopping deceptive patent demand letters while respecting the rights of patent holders to assert legitimate claims, and recognizes that achieving this goal is not easy."

The testimony also included comments on a draft bill that would prohibit deceptive patent demand letters, which would grant the FTC civil penalty authority in this area. The testimony also noted that the FTC is pleased that the proposed legislation would supplement, rather than replace, their existing authority under Section Five of the FTC Act.

When it comes to PAEs, otherwise known as patent "trolls," the testimony cited a study from the Executive Office of the President that found that suits brought by PAEs have increased to 62% of all infringement suits from 29% two years ago, and that this may have "a negative impact on innovation and economic growth."

The FTC is currently conducting a study to shed further light on practices of PAEs beyond litigation, to include an assessment of how PAE activity affects competition and innovation.

Use the resource link for more information.

NCUA begins to assess penalties for late filers

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ALEXANDRIA, Va. (5/23/14)--The National Credit Union Administration has begun the process of assessing civil money penalties to 104 credit unions that filed 2014 first-quarter call reports late. The number of late filers is down 80% from the previous quarter.

"The goal is full compliance," NCUA Chair Debbie Matz said. "More credit unions filed their Call Reports in a timely fashion, but 104 late filers is still far too many. It was particularly troubling that most of the credit unions that filed late for the first quarter had not done so the previous quarter, so they came in late even after NCUA brought this issue to their attention and announced plans for assessing penalties."
 
Of the 104 credit unions that filed call reports late for the first quarter of 2014, 85 had been on time the previous quarter, and 93 of them were credit unions with assets of less than $50 million. For the last quarter of 2013, 561 credit unions failed to file on time. Credit unions that filed late in that quarter received a warning letter from the agency.
 
Credit unions that filed first-quarter call reports late will receive letters from the agency describing the penalties the agency is planning to assess. NCUA is reviewing each late filing to determine the assessments and whether or not there are any mitigating factors.
 
Matz sent a Letter to Credit Unions (14-CU-03) in January, advising that the agency would, beginning with the first-quarter 2014 call reports, impose civil money penalties on credit unions that file late as a deterrent against late filing.
 
Penalties would be assessed per day according to ranges set out in the Federal Credit Union Act and based on a credit union's asset size and the violation. NCUA will also consider mitigating factors such as a credit union's filing history and other circumstances, such as a natural disaster, that prevented timely filing.
 
Use the resource link for more information.

CUNA lays out concerns with RBC proposal

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WASHINGTON (5/22/14)--With just four business days remaining for stakeholders to comment on the National Credit Union Administration's risk-based capital (RBC) proposal, the Credit Union National Association shares several key points to assist credit unions, credit union leagues and other stakeholders in finalizing their own comments. CUNA will be circulating its detailed letter to association leaders prior to the comment deadline.
 
CUNA believes the financial health of the credit union system now and during the financial crisis demonstrates that the NCUA proposal is not justified.
 
CUNA also believes that while the current RBC rules are serving credit unions adequately, they understand that the NCUA is determined to move forward with a proposal.  In light of that, CUNA will urge a number of key changes for any new proposal. 
 
CUNA is opposing the proposal's 10.5% requirement for a well-capitalized credit union, stating that this number is unnecessary and will result in too much capital and dramatically limit credit union growth in the long term. This will affect credit unions' ability to serve their members and communities.
 
CUNA also believes that the economic impact of the proposal will be more detrimental than the NCUA has indicated.
 
Approximately 1,000 credit unions would be affected, based on a conservative estimate, requiring them to raise between $3 billion and $4 billion in new capital and collectively, credit unions' buffers or margins above being well capitalized would decline by $7.6 billion. 
 
CUNA believes that there is no reason for credit unions to feel comfortable with the reduction in their buffers.
 
While CUNA does not support the proposal, given strong support for RBC at the agency, CUNA does not believe it is in its members' best interests to simply demand the proposal be withdrawn and will be recommending a comprehensive set of recommendations to dramatically improve the proposal, help identify the relatively few credit unions that may need to hold more capital without unduly burdening all other credit unions and condemning them to stagnation by overcapitalization.   

CU-backed candidates perform well in Ky., Ga., Idaho

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WASHINGTON (5/22/14)--Senate and congressional candidates in Kentucky, Georgia and Idaho who garnered support from their state leagues, as well as the Credit Union National Association and the Credit Union Legislative Action Council (CULAC) performed well in Tuesday's primaries.

Sen. Mitch McConnell (R-Ky.), the Senate minority leader, defeated Tea Party challenger Matt Bevin to face Democrat Allison Lundergan Grimes in what is predicted to be one of the tightest races in the country come November. McConnell was backed by the Kentucky Credit Union League and will be throughout the campaign. He was also supported with $156,000 in television ads from CULAC ( News Now May 21).

In Idaho, incumbent Rep. Mike Simpson (R) defeated challenger Bryan Smith and is expected to win in November due to the heavily Republican nature of the first district.

"Mike is a longtime friend of credit unions in Idaho, he has consistently supported upholding credit unions' tax status," said Will Hall, government affairs officer for the Idaho Credit Union League. "Most recently, he signed the King-Meeks letter to the National Credit Union Administration regarding its risk-based capital (RBC) proposal."

Hall was referring to a bipartisan letter with the signatures of more than 320 House lawmakers, joining Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.), to urge federal regulators to be judicious as they work to finalize a RBC rule.  (See News Now May 13: Concerned about RBC proposal, 75% of U.S. Reps. sign letter to NCUA.)

In the Georgia Senate race, Rep. Jack Kingston (R), finished with 26% of the vote, a second-place finish to David Perdue, former CEO of Dollar General, who took 31%. The two will face off in July in an attempt to fill the seat left open by retiring Sen. Saxby Chambliss (R).

Incumbent Rep. Hank Johnson (D) defeated his opponent in the primary with 50% of the vote, moving one step closer to being elected to a fifth term as representative to Georgia's 4th District. Johnson is a longtime credit union supporter who co-sponsored a bill to raise the cap on credit union member business loans (MBL) to 27.5% of assets, up from 12.25%.

Several candidates in Georgia finished high in the polls, but did not get the requisite 50% of the vote, so they will face off against another candidate in a July 22 runoff election.

State Sen. Buddy Carter (R) finished first in the 1st District race, winning 36% of the vote. He will face surgeon Bob Johnson July 22.

Mike Collins (R), owner of a trucking company and board member of Norcross, Ga.-based Associated CU, with $1.3 billion in assets, will also be in a runoff July 22 in the 10th District. If elected in November, Collins would be the first credit union board member elected to Congress from Georgia.

"He has met with credit union leadership throughout the district, visited branches located in the district as well as received financial support through CULAC as well as personal donations," said Cindy Connelly, the Georgia Credit Union Affiliates senior vice president of government influence. "In Georgia we are pleased to be able to work with Mike and his campaign to try to get a legislator who has spent years learning about the issues that impact credit unions and their members. For that reason Georgia credit unions have and will continue to support Mike's campaign."

In the 11th District, former Rep. Bob Barr (R) finished second place in the primary, with his 26% of the vote enough to put him into the July 22 runoff against State Sen. Barry Loudermilk.

"Rep. Barr was a solid CU supporter during his prior service in the House and earned the league's and CULAC's early support," said Trey Hawkins, CUNA's vice president of political affairs.

In Arkansas, credit union-supported candidate state Rep. Ann Clemmer (R), lost to banker French Hill for the nomination to replace retiring Rep. Tom Griffin (R).

'Rural' definition has many implications for CUs, CUNA tells senators

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WASHINGTON (5/22/14)--The designation of an area as "rural" by the Consumer Financial Protection Bureau has many implications for credit unions, the Credit Union National Association told key senators in a May 21 letter. The letter declared CUNA's support for a bill that would increase the number of counties that could receive such designation.
 
The HELP Rural Communities Act (S. 1916), introduced by Sen. Mitch McConnell (R-Ky.), would direct the CFPB to establish an application process by which a county could request to be designated as a rural area if the CFPB has not already assigned it that status.
 
Credit unions operating in "rural" areas may be exempt for some regulatory burdens, such as an escrow requirements under the Truth in Lending Act that requires certain lenders to create an escrow account for at least five years for higher-priced mortgage loans. They may also be exempt from standards under the Ability-to-Repay and Qualified Mortgage (QM) rules that disqualify mortgage loans with balloon payments from meeting the QM standard.
 
Being exempt from such requirements, CUNA noted in its letter, can beneficially affect the types of products a credit union can offer their members in what can be underserved areas.
 
The letter was sent to Senate Banking Committee Chairman Tim Johnson (D-S.D.) and its ranking member, Mike Crapo (R-Idaho) and signed by CUNA President/CEO Bill Cheney. Cheney closed the letter by saying CUNA and credit unions look forward to working with the legislators to see the bill's enactment.
 
 

Leahy removes patent 'troll' bill from vote calendar

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WASHINGTON (5/22/14)--Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.), a primary sponsor of a Senate patent reform bill, announced Wednesday that he is taking his bill off the voting agenda of his committee. The legislation would, in part, fight the patent law abuses of "trolls" that send questionable patent assertion letters to extract settlements from credit unions and other businesses.
 
 In early April, Leahy sent out a notice to postpone a scheduled markup of the bill known as the Patent Transparency and Improvements Act (S. 1720), but made it clear that he wanted to move forward with a vote this spring. However, on Wednesday he said, "Because there is not sufficient support behind any comprehensive deal, I am taking the patent bill off the Senate Judiciary Committee agenda."
 
He added, "If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the committee."
 
Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said in response to the announcement, "CUNA will continue to work with our partners in the Main Street Coalition and with others who share the view that patent troll abuses should be stopped, and we appreciate Chairman Leahy's willingness to take this issue up as soon as a path forward materializes."
 
Leahy has had CUNA's support for the demand-letter language within S. 1720, which would aid credit unions and other businesses that have been targeted with financial threats through the demand letters of the bad actors--the so-called patent "trolls."

CUNA: Why CUs below $50 million threshold need to comment on RBC proposal

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WASHINGTON (5/21/14)--Credit Union National Association Deputy General Counsel Mary Dunn urges credit unions--even those under a $50 million-in-assets threshold--to read the National Credit Union Administration's risk-based capital (RBC) proposal, determine the extent to which they could be impacted in the future, and get their comments in to the federal regulator.
 
The period to comment on RBC plan ends May 28--five business days from today--and 950 comment letters have already been sent, according to the NCUA.
 
"We're urging credit unions, even if they have less than $50 million in assets, to read the proposal and determine the extent to which they could be impacted into the future. Even if they're not affected by the change right now, they certainly could be," Dunn said. "Credit unions grow, and if this proposal is adopted, it will affect these credit unions' ability to plan their product offerings and investment strategies."
 
The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing existing risk-based net worth requirements with new risk-weighted asset and capital requirements for federally insured "natural person" credit unions with more than $50 million in assets.
 
CUNA believes that the rule's requirement that a well-capitalized credit union would need 7% and a RBC ratio of 10.5% that is higher than the proposed requirement for an adequately capitalized credit unions, is in violation of the Federal Credit Union Act. The act does not authorize the NCUA to set a RBC ratio for well-capitalized credit unions that would exceed the RBC component for adequately capitalized credit unions.
 
"It's important that every credit union understand this proposal, how they might be affected by it and file a comment letter based on their consideration of the proposal," she said.
 
Use the resource link below for more information.

New Experian white paper analyzes data breach laws

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COSTA MESA, Calif. (5/21/14)--A new white paper developed by Experian Data Breach Resolution analyzes the current legislative and regulatory landscape surrounding data breaches.
 
Released Tuesday, "Policymakers Review Focus on Data Breach Laws" notes that efforts to prepare a data-breach-response plan must include a review of state and federal laws to understand the framework for notifications and other requirements.
 
"You don't want to learn the current patchwork of federal and state data-breach laws while in the midst of a breach," said Michael Bruemmer, vice president, Experian Data Breach Resolution, when unveiling the free white paper. Having the right group of experts identified in advance of a problem will significantly improve a company's ability to respond in a way that meets regulatory requirements and keeps the focus on assisting the affected population, Bruemmer said.
 
In its release Experian noted that the absence of a federal data security and breach standard, while there are 47 separate state notification laws, fosters a lot of uncertainty. However, the state statutes along with  a regulatory threshold established by the attorneys general and the Federal Trade Commission through enforcement orders, "comprise the law of the land, and both the attorneys general and the FTC are taking action to ensure compliance."
 
In examining the current landscape, key topics addressed in the paper include:
  • Continued FTC action: Since 2001, the FTC has brought more than 50 cases that accused businesses of failing to protect consumers' personal information. In the settlements, the FTC has required entities to implement a comprehensive information security program and undergo evaluation every two years by a certified third party.
     
  • Federal focus on new data breach laws: New legislation continues to be introduced in the U.S. Congress to address the absence of a national data breach standard.
     
  • Global policy trend considerations in data breach notification within the European Union, as well as in Australia and countries in Latin America--including Mexico, Costa Rica and Colombia.
To download the full complimentary white paper, use the resource link.


 

Accountability, transparency of CFPB subject of House hearing today

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WASHINGTON (5/21/14)--The House Financial Services subcommittee on financial institutions and consumer credit will examine bills and discussion drafts today that are designed to promote greater transparency and accountability at the Consumer Financial Protection Bureau.
 
The Credit Union National Association has submitted a letter for the record of the hearing thanking the subcommittee for holding the session and stating CUNA's support for several of the bills under consideration.
 
"Credit unions have significant interest in the activities of the bureau because even though credit unions with less than $10 billion in assets are exempt from the bureau's examination authority, they are not exempt from the bureau's rulemaking authority, " wrote CUNA President/CEO Bill Cheney.
 
He added, "It has been nearly four years since the enactment of the Dodd-Frank Act and the creation of the bureau. It is appropriate for Congress to give serious consideration to legislation designed to improve the accountability and transparency of the bureau."
 
The subcommittee hearing is titled "Legislative Proposals to Improve Transparency and Accountability
at the CFPB" and will include the following witnesses: Andrew Pincus, partner at Mayer Brown LLP; Hester Peirce, a senior research fellow at George Mason University's Mercatus Center; and Rob Chapman, president of the American Land Title Association.
 
Seven house resolutions, as well as four discussion drafts are on the agenda, including:
  • H.R. 3389, the CFPB Slush Fund Elimination Act, which would eliminate the bureau's Civil Penalty Fund and require the CFPB to remit fines it collects to the U.S. Treasury;
  • H.R. 3770, the CFPB-IG Act, which would create a separate, independent inspector general for the CFPB; the CFPB currently shares an inspector general with the Federal Reserve System;
  • H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act, which would create a small business advisory board at the CFPB;
  • H.R. 4604, the CFPB Data Collection Security Act, which would require the CFPB to create an opt-out list for consumers who do not want the CFPB to collect personally identifiable information about them and to delete or destroy information about a particular consumer within a specified period of time following collection; and
  • A discussion draft of the "Bureau Guidance Transparency Act," which would require that the CFPB, in issuing any guidance, provide a public notice and comment period before issuing the guidance in final form, and must make public any studies, data, and other analysis it relied on in preparing and issuing its guidance.
The hearing is scheduled to begin at 2 p.m. (ET) today in room 2128 of the Rayburn House Office Building.
 
Also on the subject of CFPB transparency, in an announcement Tuesday the CFPB said that starting June 18 it is changing the format of its Consumer Advisory Board and Council meetings to become fully open to the public, a change advocated by CUNA. The change was made to "provide more transparency and to be responsive to the requests we've received," said the bureau announcement.
 
The next opportunity to attend or view a Consumer Advisory Board meeting will be June 18 in Reno, Nev.
 
Use the resource links below for more information.

Senate should maintain CDFIF funding level: CUNA

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WASHINGTON (5/21/14)--In a letter to the Senate Appropriations subcommittee on financial services, the Credit Union National Association encouraged the committee to maintain the current level of funding to the Community Development Financial Institutions Fund (CDFIF).
 
The CDFIF makes capital grants, equity investments and awards for technical assistance to community development financial institutions (CDFIs), such as community development credit unions.
 
"CDFI-funded credit unions offer alternatives to predatory payday lenders and check-cashing services. They also promote economic revitalization and community development in distressed communities," the letter reads.
 
Funded institutions supply low-income, distressed communities with traditional banking services such as savings accounts and personal loans.
 
The Consolidated Appropriations Act for fiscal year 2014 funded the CDFIF at $226 million. This year's draft, for the fiscal year ending Sept. 30, 2015, does not yet have a CDFIF amount in the language. The bill was passed by the house May 1, and will next go to the Senate for consideration.

Int'l CU regulators discuss emerging risks, effective supervision

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LONDON--The International Credit Union Regulators' Network (ICURN) met here last week to share best practices on effective credit union supervision at the international regulators' annual conference.
 
ICURN is an independent international network of credit union regulators that promotes the guidance given by the leaders of the Group of 20 (G-20) nations for greater international coordination among financial services regulators. More than 50 supervisors of financial cooperatives from jurisdictions around the world participated in the conference, which was hosted by the Bank of England's Prudential Regulatory Authority (PRA) at its headquarters in the City of London.
 
The international policy topics reflected similar emerging supervisory concerns in the United States, including interest rate risk, cybersecurity, credit union capital standards, how best to ensure effective credit union corporate governance, and internal and external auditing standards.
 
ICURN Chairman Martin Stewart, the PRA's head of U.K. Banks and Mutuals, said that even though credit unions and other financial cooperatives vary significantly from jurisdiction to jurisdiction in terms of the level of development and applicable rulebooks, the challenges supervisors face are very similar.
 
Speakers at the ICURN conference included Andrew Bailey, deputy governor of the Bank of England and board member of the European Banking Authority; and Karl Cordewener, deputy secretary general of the Basel Committee on Banking Supervision.
 
The World Council of Credit Unions is the ICURN Secretariat.
 
Use the resource link to learn more about ICURN.

Early promise shown by CU-backed candidates in Tuesday's primaries

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WASHINGTON (5/21/14)--Credit union-backed candidates saw mostly positive early results in Tuesday's primary elections in Georgia, Kentucky, Arkansas, Pennsylvania and Idaho.

"These are candidates who have strong connections and have demonstrated their commitment to credit unions, and we know the importance of supporting them," said Trey Hawkins, the Credit Union National Association vice president of political affairs. "As primary season heats up, we'll continue to back candidates who are strong credit union supporters."

In the Senate primaries, credit union-backed candidate Sen. Mitch McConnell (R-Ky.) handily defeated challenger Matt Bevin, identified as "favorite of the Tea Party" in media accounts.  McConnell, the current Senate minority leader, was supported by $156,000 worth of television ads via the Credit Union Legislative Action Council (CULAC).

In Georgia, credit union-backed Republican Rep. Jack Kingston, who faced a tough fight Tuesday, now moves on to a runoff. When the Associated Press called the race just after 11:30 p.m. (ET),  Kingston claimed 26% of the vote to win a spot against businessman David Perdue, with 30%, to faceoff in a July runoff for the Georgia Senate GOP nomination to fill the vacant Senate seat left by Sen. Saxby Chambliss (R).

Also in Georgia, CUNA, CULAC and the Georgia Credit Union Affiliates supported candidates in the first, fourth, 10th and 11th congressional districts. CUNA, the state credit union associations and credit unions also backed candidates in Arkansas, Pennsylvania and Idaho, where final results were not available before News Now's publishing deadline.
 
Watch News Now Thursday for more primary results.

CFPB director describes ripple effect of student loan debt

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BOULDER, Colo. (5/21/14)--Consumer Financial Protection Bureau Director Richard Cordray spoke at the 2014 Boulder Summer Conference on Consumer Financial Decision Making Monday, addressing the many ways in which student loan debt can have a ripple effect on other areas of the economy.
 
He recalled numerous instances of the CFPB hearing from consumers that student debt prevented them from buying a house, opening a small business or starting a family. Referring to the $1.2 trillion in student loan debt in America, Cordray said "we are now standing at a precipice" when it comes to the current economy.
 
"This is not debt that can be quickly erased--it can take many years to pay it back, which means that it may prevent borrowers from achieving other financial milestones for at least that long," he said. "A recent Pew study found that about 40% of younger households--those headed by someone under the age of 40--have student loan debt, and we can see no reason why this percentage will not continue to grow."
 
According to the CFPB, more than seven million Americans are in default of a student loan. Those who are in default at a young age can see their credit score affected negatively, which can have an effect on everything from employment background checks to the home-buying process.
 
A recent Pew research survey said that more than one-third of people age 18 to 31 are living with their parents, which is 18% higher than it was at the start of the recession. This leads to fewer households being created, which Cordray said is a key driver of economic growth.
 
Student loan debt also has consequences that can follow individuals later in life as well, Cordray said. He quoted a study that said student loan debt can cost more than $200,000 in net assets, including nearly $135,000 in net retirement savings over the course of a career.
 
"If the consequences of student loan debt weigh down individuals and markets, it is inevitable that they hold back communities as well. Recent research has shown that for every $10,000 in additional student debt, young graduates are 6% less likely to pursue a career in public service, especially careers as teachers," he said. "Rural areas in particular struggle to attract and retain doctors, nurses, and other young professionals. In many of these places, ownership of a car is a prerequisite for employment and rental housing may be scarce."
 
Cordray said the CFPB plans to combat these trends by:
  • Using supervisory authority over financial institutions to send examination teams into firms to assess compliance with the law;
  • Working with regulators to incentivize student loan servicers to provide more loan modification and refinancing options; and
  • Created the "Financial Aid Shopping Sheet," which gives college-bound students hard numbers in a common-sense format in partnership with the Department of Education. This has been adopted by more than 2,000 schools.
Use the resource link below for more information.

This week in Congress: three CUNA-backed relief bills set for markup

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WASHINGTON (5/20/14)--Congress will be considering a number of bills this week that would have an impact on credit unions and their members.
 
The House is scheduled to resume markup on three bills of interest to credit unions Thursday. The issues covered by these bills were raised by the Credit Union National Association in testimony before the Committee last year, and CUNA has sent letters of support for these bills:
  • H.R. 4466, introduced by Reps. Shelley Moore Capito (R-W.V.) and Gregory Meeks (D-N.Y.), would require financial regulators to determine whether new regulations are duplicative or inconsistent with existing Federal regulations;
  • H.R. 4521, introduced by Rep. Blaine Luetkemeyer (R-Mo.), would exempt credit unions and other lenders under $10 billion from certain Real Estate Settlement Procedures Act (RESPA) escrow requirements and exempt mortgage servicers servicing fewer than 20,000 loans from certain RESPA servicing requirements; and,
  • H.R. 2673, introduced by Rep. Andy Barr (R-Ky.), would treat mortgage loans held in portfolio as qualified mortgages.
In addition, House committees will hold hearings on the following bills today:
  • The House Financial Services Committee will hold a full committee hearing on "Examining the Dangers of the Financial Stability Oversight Council Designation Process and its Impact on the U.S. Financial System;" and
  • The House Financial Services subcommittee on housing and insurance will hold a hearing on "Legislative Proposals to Reform Domestic Insurance Policy;" the Insurance Consumer Protection and Solvency Act of 2013 (H.R. 605); the Policyholder Protection Act of 2014 (H.R. 4557); the Risk Retention Modernization Act of 2014; the Insurance Data Protection Act of 2014; and the Insurance Capital Standards Clarification Act of 2014 (H.R.4510).
Hearings on Wednesday include:
  • The House Financial Services subcommittee on oversight and investigations will hold a hearing on "Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, Part Two;"
  • The House Homeland Security subcommittees on counterterrorism and intelligence and on cybersecurity, infrastructure protection and security technologies will hold a joint hearing on "Assessing Persistent and Emerging Cyber Threats to the U.S. Homeland;"
  • The House Financial Services subcommittee on financial institutions and consumer credit  will hold a hearing on "Legislative Proposals to Improve Transparency and Accountability at the CFPB;" and,
  • The Senate Appropriations subcommittee on financial services and general government will hold a hearing on the proposed budget estimates and justification for FY2015 for the Small Business Administration and the Community Development Financial Institutions Fund.
In addition to the House Financial Services markup, hearings on Thursday also include :
  • The House Energy and Commerce subcommittee on commerce, manufacturing and trade  will hold a hearing on legislation to enhance federal and state enforcement of fraudulent patent demand letters; and
  • The Senate Judiciary Committee will hold a full committee markup of the Patent Transparency and Improvements Act of 2013 (S. 1720).

NCUA offers tips for senior financial safety

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ALEXANDRIA, Va. (5/20/14)--With May designated as Older Americans Month, the National Credit Union Administration has released information in its monthly newsletter designed to help seniors and their caregivers avoid "financial injuries."
 
The NCUA's Pocket Cents program has a section specifically tailored to seniors that includes information on retirement, managing debt, share insurance coverage, online financial security, reverse mortgages, home equity and more. There is also information aimed at preventing elder financial abuse, which includes breakdowns of specific scams that the FBI and other agencies are aware of.
 
The fact that seniors often have a nest egg, own their own homes and generally have good credit makes them a top-priority target for con artists. Solicitors pushing bogus charities, faulty home repairs, fraudulent health care or medical devices, phony investments and even phantom cemetery plots and funeral services are all schemes that cost seniors an estimated $3 billion per year.
 
NCUA Chair Debbie Matz, in the May "The NCUA Report," wrote an article aimed at helping seniors avoid fraud, which gives the following tips:
  • Never give out personal or financial information unless you personally initiated the exchange. Particularly sensitive information includes Social Security numbers, account numbers and dates of birth.
  • Never make a commitment on the spot. Take time to discuss any transactions with family members, friends or caregivers.
  • Do not be pressured into signing a document you do not understand.
  • For caregivers: look out for erratic financial transactions in seniors' accounts. This can include large account withdrawals, frequent ATM use and share certificate penalties.
NCUA also recommends that credit unions look into inviting government agencies or nonprofits that can offer free assistance to seniors on retirement, Social Security, health care and other issues. These services can include counseling for low-income seniors at or near retirement age, or an information fair at individual credit union branches.
 
Use the resource links below for more information.

CUNA urges Senate consideration for two CU relief bills

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WASHINGTON (5/20/14)--The Credit Union National Association has written to the Senate Banking Committee, urging its leadership to have the panel consider H.R. 3468 and H.R. 3584, two regulatory relief bills that will have a positive impact on credit unions.
 
The bills were passed by the House May 6 via a voice vote, were moved to the Senate desk and have been referred to the committee for consideration. CUNA's letter seeks the committee's approval of the two bills, thereby moving them a step closer to becoming law.
 
H.R. 3468, the Credit Union Share Insurance Fund Parity Act, would extend National Credit Union Share Insurance Fund coverage for trust accounts, including Interest on Lawyer Trust Accounts, even if the account includes funds owned by a credit union nonmember.
 
"This legislation is necessary because the National Credit Union Administration has interpreted that it does not have authority under the Federal Credit Union Act to extend such coverage," the letter reads. "This legislation would provide coverage on par with the coverage that the FDIC extends to similar accounts held by banks."
 
H.R. 3584, the Capital Access for Small Community Financial Institutions Act, would correct a drafting error in the Federal Home Loan Bank (FHLB) Act, one that prohibits state-chartered, privately insured credit unions from joining the FHLB system. The passage of the bill would make 132 small, privately insured credit unions eligible for FHLB membership, providing them additional opportunities to provide mortgage credit to their members.
 
The legislation presents no risk to the FHLB system or the taxpayer because all advances from the
FHLB system must be fully collateralized and subject to their strict uniformly applied standards," the letter reads. "In addition, the bill specifically states that the FHLB will have a superior lien position over any asset that it may hold as collateral, irrespective of how the credit union's deposits are insured."
 
H.R. 3584 was passed by a unanimous vote in the House, 395-0, and has a companion piece of legislation, S. 1806, in the Senate that was introduced in December by Sen. Sherrod Brown (D-Ohio).

Malware probe results in dozens of arrest

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WASHINGTON (5/20/14)--The U.S. Federal Bureau of Investigation, working with law enforcement officials in about a dozen other countries, have arrested scores of individuals they say are involved with the creation and selling of Blackshades Remote Access Tool (RAT), a malicious computer software that allows its users to gain secret access to a victim's computer.

Blackshades RAT users can access computer files, steal passwords and even activate a computer's webcam to spy on the victim, according to the lawmakers' charges ( Bloomberg May 19).

Bloomberg reported that the government Monday unsealed charges against Alex Yucel, allegedly the owner and operator of the Blackshades website and co-creator of the malware, and four others.  Yucel was reported to be charged with five crimes, which included aggravated identity theft, conspiracy, and access device fraud.  Arrested in Maldova in November, he awaits extradition.

White paper examines impacts of CDFI certification

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WASHINGTON (5/20/14)--The National Federation of Community Development Credit Unions and the Credit Union National Association together have created a white paper to assess the impact of Community Development Financial Institution (CDFI) certification on the performance of credit unions.

The federation has been certified by the U.S. Treasury Department's CDFI Fund since 1996 as the only national intermediary exclusively devoted to CDFI credit unions. Since then, it has served as the leading advocate and provider of technical assistance and consulting services to help credit unions obtain, retain and capitalize on CDFI certification.

The purpose of the Treasury's CDFI program is to use federal resources to invest in CDFIs, including credit unions and banks, and to build their capacity to serve low-income people and communities that lack access to affordable financial products and services.

The paper, prepared by the federation and CUNA's Community Credit Union Committee,  compares CDFI certified credit unions with peer groups of low-income designated and mainstream credit unions and identifies important similarities and differences, using data from the CDFI Fund and NCUA 5300 Call Reports for fiscal years 2009 and 2013. The data was used to analyze the institutional performance and community development profile of 173 credit unions that were CDFI certified as of Dec. 31, 2013.

Several of the paper's key findings include:
  • CDFI credit unions thrive in tough markets. By their nature, CDFI credit unions focus most loans and services in most economically disadvantaged communities, yet the financial growth and performance of CDFI credit unions meets or exceeds that of their mainstream peers. CDFI credit unions offer a greater number and variety of community development products and services than their peers, including credit-builder loans, anti-predatory loans, check-cashing services, bilingual services, financial counseling and more.
  • CDFI credit unions maximize leverage of external resources. From 2009 through 2013, 61 credit unions received $102.7 million in CDFI Financial Assistance grants. During that time, these credit unions increased total assets by $2.4 billion -- a leverage rate of $23.70 for each equity grant dollar added by the CDFI Fund -- and increased total loans by more than $1.5 billion. In addition, 99% of the dollars awarded to credit unions as permanent capital grants from the CDFI Fund are still at work in credit unions.
  • CDFI credit unions are leaders in technology and member services. CDFI credit unions today significantly outpace their peers in the use of high technology for member services. The high-transactional needs of low-income communities pushed CDFI credit unions to lead the way with innovative services such as online and mobile banking, bill payment services, online loan applications and 24/7 access to account information.
  • CDFI credit unions represent a viable business model for community development finance. CDFIs blend financial products with capacity-building services to help members better manage their personal finances; as a result, CDFI credit unions put a higher percentage of their assets to work as loans.
  • CDFI certification is within reach for thousands of credit unions. Nearly half of all credit unions are concentrated in economically distressed census tracts that qualify as CDFI Investment Areas, but that alone does not make them CDFIs. Credit unions that make a strategic decision and take action to address the needs of these underserved communities can become eligible for CDFI certification.
The paper concludes by saying that while a CDFI certification alone will not make a credit union successful, it can be used a building block and to achieve growth and impact underserved markets.

The paper also notes the regulatory benefits enjoyed by CDFI credit unions, such as their exemption from the 12.25% of assets cap on member business loans and from the Consumer Financial Protection Bureau's Ability-to-Repay and Qualified Mortgage requirements for mortgage lenders that took effect in January 2014. It notes that such exemption reflect regulators' recognitions that CDFI credit unions are mission-driven institutions working to provide products and services that meet low-income communities' needs.

Use the resource link below for more information.

Comptroller Curry outlines regulators' work for cybersecurity

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BOSTON (5/19/14)--U.S. Comptroller of the Currency Thomas J. Curry spoke to the New England Council Friday about the importance of cybersecurity in finance, particularly when it comes to financial institutions using third-party technology.
 
"Not so many years ago, hacking was largely the domain of bright amateurs who were mainly interested in exploring data networks or demonstrating their hacking skills to their peers. Today, though, it's the province of an array of terrorists, organized criminals and so-called 'hacktivists' intent on doing real harm," he said.
 
Curry noted the increasing frequency of multiple types of cyberattacks in recent years that range from distributed denial of dervice attacks to ATM cash-out schemes to the card data security breach at Target last holiday season.
 
Growing reliance on new commerce mechanisms, such as Internet bill payment, mobile banking and shopping through smartphone applications, can create new vulnerabilities. The consolidation of many of these platforms into a single vendor, increased reliance on foreign vendors and third-party access to financial and consumer data all bring their own set of risks that must be mitigated, Curry said.
 
"Each new relationship and every new connection provides potential access points to all of the connected networks, any one of which can provide access to the system," he said. "These interconnected networks are potentially vulnerable to attacks that may affect multiple organizations at one time."
 
The Office of the Comptroller of the Currency issued updated guidance last October that focuses on the risk-management process throughout the lifecycle of a third-party relationship, as well as urges management to directly oversee those activities.
 
"What concerns me most is that risk management practices haven't always kept pace with the risks institutions take on," he said.
 
The Federal Financial Institutions Examination Council, of which the National Credit Union Administration is a member,  has created a working group on cybersecurity issues, working with intelligence, law enforcement and homeland security to share information and help financial institutions of all sizes shore up their defenses.
 
"This isn't a problem that any one agency or institution can solve on its own," he said. "To deal effectively with cyberthreats, institutions both large and small need to communicate, not only with each other but also with relevant government agencies."
 
The NCUA in March launched a new resource for credit unions--a webpage that provides links to cybersecurity and data security resources.
 
Use the resource links for more information.

McWatters vote for NCUA seat: An update

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WASHINGTON (5/19/14)--The confirmation of J. Mark McWatters to the National Credit Union Administration board is still awaiting a final vote, and while it is widely expected that he will be confirmed, it may not be until later next month.
 
McWatters, who is currently an assistant dean at South Methodist University's School of Law, was nominated last December to replace board member Michael Fryzel, whose term ran from 2008 to Aug. 2 of last year but who is still serving on the board until his successor is seated.
 
"Senate confirmation of J. Mark McWatters for the seat held by Fryzel may be delayed a bit--but the wait is in no way related to McWatters," said Credit Union National Association President/CEO Bill Cheney in his weekly Cheney Report. "His nomination is grouped with three nominees for the Federal Reserve Board, and political maneuvering among senators over those confirmations is holding up the process."

McWatters will join NCUA Chair Debbie Matz and board member Rick Metsger on the three-person board that governs the NCUA once confirmed. Each member serves a six-year, staggered term.

Health One CU of Mich. is conserved

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ALEXANDRIA, Va. (5/19/14)--The Michigan Department of Insurance and Financial Services recently detected unsafe and unsound practices at Detroit-based Health One CU and placed the state-chartered, federally insured credit union into conservatorship and named the National Credit Union Administration as agent to handle the credit union's day-to-day operations.

The state and federal regulators will work together to resolve issues affecting the credit union's safety and soundness while continuing normal credit union services to members.

Health One has 3,882 members and assets of $18.2 million, according to the credit union's March 31  Call Report. It was chartered in 1957 and serves those living in Macomb, Oakland, Washtenaw and Wayne counties in Michigan, as well as other select groups. The credit union also operates a branch in Cleveland, Ohio.

The NCUA has provided Health One members with an online frequently asked questions document that addresses conservatorship issues. Use the resource link to access the FAQs.

Rep. Terry drafts a House patent 'troll' bill

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WASHINGTON (5/19/14)--While a U.S. Senate bill to fight patent law abuses is debated in the Senate Judiciary Committee, the House now has its own legislation intended to crack down on "trolls" waving frivolous patent assertion letters around.

Rep. Lee Terry (R-Neb.) last week released draft legislation to address illegitimate patent demand letters where so-called "patent trolls" use low-quality patents in an effort to extract settlements from credit unions and other businesses. Terry, chairman of the Commerce, Manufacturing, and Trade Subcommittee of the House Energy and Commerce Committee, plans to hold a hearing on the bill on Thursday. 

Many trolls are aware that the cost of hiring a patent attorney is a deterrent to credit unions and others, and price their proposed licenses in such a way that they are sure to be lower than the cost of counsel to evaluate the demand.

"Patent trolls cost American companies tens of billions of dollars each year, and are threatening job creation and innovation," Terry said when announcing his new bill.

Terry said his draft legislation would increase transparency and accountability to help expose and prevent fraudulent infringement claims. It would do so by requiring patent demand letters to include certain basic information to help companies determine whether a letter is legitimate.

The bill also would increase the Federal Trade Commission's authority to levy fines on fraudulent patent demand practices and provide state Attorney General enforcement of the federal standard.

Terry's bill is a follow-up to broad patent litigation reform approved by the House last December, which did not address the issue of abusive patent assertion letters.

The Senate Judiciary bill, introduced by its chairman, Sen. Patrick Leahy (D-Vt.), is called the Patent Transparency and Improvements Act (S. 1720). Other Senate bills that would address patent troll issues include the Patent Litigation Integrity Act of 2013 (S. 1612), the Patent Quality Improvement Act of 2013 (S. 866) offered by Sen. Charles Schumer (D-N.Y.), and the Transparency in Assertion of Patents Act (S. 2049)  introduced by Sen. Claire McCaskill (D-Mo.) .

The Credit Union National Association has urged lawmakers to act to curb the patent system abuses. "Reforms are desperately needed. This growing problem will not be solved until Congress passes bipartisan legislation that makes clear patent trolls can no longer get away with abusing the system," CUNA has said in letters of support for such legislation.

CUNA and the state credit union associations have been active on every level urging lawmakers and the Obama administration that patent reform is needed.

Nominations for NCUA small-CU consulting close May 31

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ALEXANDRIA, Va. (5/19/14)--Nominations for credit unions to receive free consulting services from the National Credit Union Administration's Office of Small Credit Union Initiatives are due May 31.

"NCUA's free consulting program regularly delivers practical plans and technical advice that participating credit unions find highly valuable," NCUA Board Chairman Debbie Matz said. "Because NCUA is committed to helping small, new, minority and low-income credit unions to remain viable, I encourage all qualified credit unions to submit a nomination."

NCUA's consulting services, provided by experienced economic development specialists, offer assistance to credit unions in the areas of budgeting, marketing, policy development, strategic planning and operational or regulatory areas. Selected credit unions receive assistance for a six-month period.

To qualify a credit union must fall into one of the following categories: total assets of less than $50 million, a new charter (fewer than 10 years), designation as a Minority Depository Institution or designation as a low-income credit union.

Credit unions may nominate themselves or be nominated by their NCUA examiner. Credit unions not chosen in one round may apply again in subsequent rounds.

Qualified credit unions may submit a nomination through NCUA's website.

Use the resource links below for more information.

Matz: 18-month RBC timeframe not 'etched in stone' as comment period draws to close

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WASHINGTON (5/19/14)--"The 18-month timeframe in the proposed risk-based capital rule is not etched in stone," National Credit Union Administration Chair Debbie Matz told a credit union audience Friday.  She added, "If the comment letters raise sensible reasons to delay the effective date further, we will certainly consider doing so."

Matz was addressing the annual meeting of the Hawaii Credit Union Association.

With just seven business days to go before the NCUA wraps up the comment period on its risk-based capital (RBC) proposal on May 28, the letters of more than 550 credit unions and supporters had been posted to the agency website--detailing their concerns and questions regarding the plan--as of Friday evening.

That number includes an almost unprecedented letter signed by more than 320 members of the U.S. House urging the NCUA to consider impact on of its RBC plan on credit unions. The lawmakers ask the agency to provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions and to give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.

"Seven days is plenty of time to push the number of credit union comments even higher," said Mary Dunn, Credit Union National Association deputy general counsel said Friday. "A high number of comments clearly signals to the regulator that credit unions have concerns about the proposal. CUNA encourages more credit unions to meet the comment deadline."
All three NCUA board members have indicated in letters to CUNA that the plan will be revised before adopted as a final. 

"Those assurances and Chairman Matz's newest comment show why it is imperative," Dunn said, "that credit unions weigh in in numbers on this proposal."

The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.

CUNA supports risk-based capital for credit unions but has called this proposal "the most detrimental, wide-reaching regulatory change affecting credit unions in years" and "a regulation in search of a problem."


If adopted, the amount of capital that credit unions would need to hold in order meet minimum requirements to be well capitalized would rise by $7.6 billion according to CUNA's projections.  Credit unions would also face burdensome risk weightings that would serve as a disincentive for holding member business and mortgage loans, and long-term investments, CUNA has noted. 


CUNA President/CEO Bill Cheney addressed the matter in the Cheney Report last week, noting that the number of comments on the proposal has tripled in the last three weeks.

"CUNA supports risk-based capital, but not along the path NCUA's proposal takes. We are finalizing our comment letter now, which will offer alternatives for the agency to consider in developing a better route forward," he said.

Once the comment period closes, the NCUA will host three listening sessions: June 26 in Los Angeles, July 10 in Chicago and July 17 in Alexandria, Va.

Use resource links for CUNA's RBC Action Center and more on the NCUA listening sessions.

Court keeps NCUA N.Y. RMBS suit alive

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NEW YORK (5/16/14)--The District Court of New York has denied a motion to dismiss a lawsuit involving the National Credit Union Administration and Wachovia Capital Markets, LLC, now known as Wells Fargo Securities, LLC.
 
This is the latest in a series of lawsuits brought by the NCUA to various banking institutions on behalf of several corporate credit unions that purchased large amounts of residential mortgage-backed securities in the years between 2005 and 2007 and have since been liquidated. NCUA's complaints generally assert that the offering documents used to sell residential MBS contained material misstatements and/or omissions.
 
"This is the latest in a series of wins NCUA has had recently when it comes to these type of cases," said Robin Cook, assistant general counsel for special projects for Credit Union National Association. "We commend NCUA for their continued hard work on this issue."
 
In this case, the NCUA is serving as the liquidating agent for Southwest Corporate FCU and Members United Corporate FCU. Southwest Corporate FCU purchased two RMBS certificates from what was then called Wachovia Capital Markets, in June and December of 2006, for a total of $25,738,350. Both certificates were rated AAA at the time of purchase but were downgraded to junk status by mid-2009, and by June 2013 approximately 25% of the loans for each certificate were delinquent.
 
The NCUA has claimed that American Mortgage Network, Inc. (AmNet), which originated 100% of the loans in the first certificate, known as AMN1, had a high percentage of "originate-to-distribute" loans, which it said encourages shoddy underwriting practices because the securitization of mortgage loans breaks down the direct relationship between the borrower and the lender.
 
Wachovia claimed that a forensic analysis of AMN1 "found materially higher LTV (loan-to-value) ratios and lower owner-occupancy rates" than those listed in the offering documents by the NCUA.
 
The court found that the NCUA has plausibly pled its claims related to the underwriting conduct for loans contained in the first certificate, noting that while there is "no single set of allegations that every plaintiff must include to state a plausible claim," NCUA presented enough factual content to allow the court to draw a reasonable inference.
 
In 2006, the year AMN1 was sold, AmNet had a 90.3% originate-to-distribute rate, and within one year of securitization, more than 5% of the mortgages in that certificate were delinquent or in default, and has only worsened in later years, rising to 25% by June 2013.
 
"These allegations, when viewed in their totality, create a plausible inference that AmNet systematically failed to comply with its reported underwriting guidelines," reads the decision.
 
Wachovia also attempted to have the court dismiss any figures involving loan-to-value (LTV) ratio, arguing that LTV ratios are based upon appraisals that are a matter of opinion, meaning that the NCUA failed to show "that the estimates were both objectively false and disbelieved by the speaker when made."

However, the court ruled that some of the LTV ratios were calculated on purchase price for the property, not appraisals, and are "therefore clearly representations of fact." Also, that an appraisal can be a statement of fact in that it "represents an appraiser's true belief as to the value of the property."

Housing finance reform passes committee 13-9

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WASHINGTON (5/16/14)--Despite the announcement of six Senate Democrats late last week that they would not support a housing finance reform overhaul drafted by Senate Banking Committee Chair Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho), the committee approved that bill (S. 1217) by a 13-9 vote Thursday.

Credit Union National Association President/CEO Bill Cheney, following the vote, said, "It's critical that government-sponsored enterprise reform ensures equal and competitive access for credit unions and other small lenders to the housing finance market--and avoids further concentration of the primary and secondary mortgage markets to Wall Street and the largest of lenders.

"This legislation takes significant steps toward accomplishing both. Our thanks to Chairman Tim Johnson and ranking member Mike Crapo for their leadership."

The bill is intended to redesign the nation's housing finance reform system to address problems that caused and resulted from the country's recent mortgage market and economic meltdown.

CUNA worked closely with the committee and its staff to secure changes to the original draft that addressed:
  • The bill's regulatory burden on credit unions and community banks;
  • Issues to ensure that the housing finance market remains accessible to credit unions and other smaller institutions; and,
  • Giving credit unions, and community banks, representation in governance of the new federal entities envisioned under the proposal.
CUNA also advocated for an adopted increase of an assets cap--up to $500 billion from $15 billion--for participation in a mutual securitization company to provide credit unions and smaller lenders access to securitizing their mortgages.

Sam Whitfield, CUNA vice president of legislative affairs, also reiterated CUNA's thanks to the sponsors of the bill for listening to credit unions' concerns, and pledged CUNA's continued work with lawmakers as they make reforms happen.

"The Johnson-Crapo bill is a bipartisan effort with the majority of the committee members behind it, as shown by this vote. This monumental reform legislation takes into consideration the important role small lenders, like credit unions, have in the marketplace.  The prospect of full Senate consideration is unknown at this time, but it is widely agreed that S. 1217 will be a good starting place for future legislation," Whitfield added.

The committee summary of the bill describes it as being designed "to protect taxpayers from bearing the cost of a housing downturn; promote stable, liquid and efficient mortgage markets for single-family and multifamily housing; ensure that affordable, 30-year, fixed-rate mortgages continue to be available, and that affordability remains a key consideration; provide equal access for lenders of all sizes to the secondary market; and facilitate broad availability of mortgage credit for all eligible borrowers in all areas and for single-family and multifamily housing types."

Underserved FOM request, 10-year reg review on short NCUA agenda

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ALEXANDRIA, Va. (5/16/14)--The National Credit Union Administration will host its monthly meeting Thursday, starting at 10 a.m. (ET) at its Alexandria headquarters. The meeting will take place in the seventh-floor boardroom.
 
The following matters will be considered:
  • Notice and request for comment, economic growth and Regulatory Paperwork Reduction Act review:  This includes a decennial review of its regulations, using notice and comment procedures, in order to identify those that impose unnecessary regulatory burden on insured depository institutions;
  • A request from AERO FCU, Glendale, Ariz., with $205 million in assets, request to add two underserved areas; and
  • Corporate Stabilization Fund quarterly review.
Use the resource link for more information.

April open meeting posted on NCUA site

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ALEXANDRIA, Va. (5/16/14)--The video of the April open meeting of the National Credit Union Administration board is now available online.

The meeting's agenda included four items:
  • The National Credit Union Share Insurance Fund quarterly performance review;
  • A community charter expansion request from CME FCU, Columbus, Ohio, with $224 million in assets;
  • A proposed rule on associational common bond requirements for federal credit unions; and
  • A final rule on credit union capital planning and stress testing for federally insured credit unions with more than $10 billion in assets.
Archived videos of past board meetings may be viewed online, and each video remains on the site for one year.

The board actions page of the NCUA's website has more information, including board agendas, which are posted one week in advance of each open meeting, and copies of board action bulletins, which summarize the meetings, board memorandums and other documents.

Use the resource links for more information.

NEW: Senate Banking approves Johnson-Crapo housing finance reform bill

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WASHINGTON (5/15/14 UPDATED 11:07 a.m. ET)-- The Senate Banking Committee voted this morning to approve its Housing Finance Reform and Taxpayer Protection Act of 2014 (S. 1217). The vote was 13-9.
 
Sen. Mike Crapo (R-Idaho), the committee's ranking member, has called housing reform "the most significant piece of unfinished business from the 2008 financial crisis."
 
Credit Union National Association President/CEO Bill Cheney, following the vote, said, "It's critical that government-sponsored enterprise reform ensures equal and competitive access for credit unions and other small lenders to the housing finance market--and avoids further concentration of the primary and secondary mortgage markets to Wall Street and the largest of lenders.
 
"This legislation takes significant steps toward accomplishing both. Our thanks to Chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo for their leadership."
 
The bill is intended to redesign the nation's housing finance reform system to address problems that caused and resulted from the country's recent mortgage market and economic meltdown.
 
The bill's summary says it is "designed to protect taxpayers from bearing the cost of a housing downturn; promote stable, liquid and efficient mortgage markets for single-family and multifamily housing; ensure that affordable, 30-year, fixed-rate mortgages continue to be available, and that affordability remains a key consideration; provide equal access for lenders of all sizes to the secondary market; and facilitate broad availability of mortgage credit for all eligible borrowers in all areas and for single-family and multifamily housing types."
 
Sam Whitfield, CUNA vice president of legislative affairs, also reiterated CUNA's thanks to the sponsors of the bill for listening to credit unions' concerns, and pledged CUNA's continued work with lawmakers as they make reforms happen.
 
"The Johnson-Crapo bill is a bipartisan effort with the majority of the committee members behind it, as shown by this vote. This monumental reform legislation takes into consideration the important role small lenders, like credit unions, have in the marketplace.  The prospect of full Senate consideration is unknown at this time, but it is widely agreed that S. 1217 will be a good starting place for future legislation," Whitfield added.
 
CUNA has advocated for several changes to the bill that were made, including the raising of an assets cap to $500 billion from $15 billion for participation in a mutual securitization company to provide credit unions and smaller lenders access to securitizing their mortgages.
 
For more information on the draft bill, use the resource link. Also, watch News Now Friday for more on the bill's details.

Housing reform markup on for today

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WASHINGTON (5/15/14)--Despite rumors and reports that its plans could be again derailed, the Senate Banking Committee is still scheduled to begin markup of the Housing Finance Reform and Taxpayer Protection Act of 2014 today.
 
As currently constructed, the bill would call for a wind down of government-sponsored enterprises Fannie Mae and Freddie Mac, and their functions to be replaced by a set of private entities to be overseen by the newly created Federal Mortgage Insurance Corp. (FMIC).
 
According to the committee's summary of the bill it is "designed to protect taxpayers from bearing the cost of a housing downturn; promote stable, liquid and efficient mortgage markets for single-family and multifamily housing; ensure that affordable, 30-year, fixed-rate mortgages continue to be available, and that affordability remains a key consideration; provide equal access for lenders of all sizes to the secondary market; and facilitate broad availability of mortgage credit for all eligible borrowers in all areas and for single-family and multifamily housing types."
 
The markup is likely to be finished today, with the bill widely expected likely to pass the 22-person committee.
 
According to a report by Bloomberg last week, six Democrats--Sens. Elizabeth Warren (Mass.), Charles Schumer (N.Y.), Sherrod Brown (Ohio), Jeff Merkley (Ore.), Robert Menendez (N.J.) and Jack Reed (R.I.) --agreed that they would not support the proposal without significant revisions.
 
Without votes from those six, even if the bill passes committee, it is not expected to make it to the floor for a vote by the Senate as a whole.
 
"Housing reform is critically important, whether it comes in the short term or the long term," said Ryan Donovan, Credit Union National Association's senior vice president of legislative affairs. "We are grateful to the sponsors of this bill for listening to credit unions' concerns and will continue to work with lawmakers as they make reforms happen."
 
CUNA supports housing reform, and previously advocated successfully for a change in the bill that proposed a mutual securitization company to provide credit unions and smaller lenders access to securitizing their mortgages. 
 
The assets cap for participation in the mutual was eventually raised to $500 billion from the original $15 billion, after testimony from CUNA Chief Economist Bill Hampel, among others.

CUNA seeks comments on mortgage rule amendments

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WASHINGTON (5/15/14)--The Credit Union National Association is seeking comments from credit unions on a Consumer Financial Protection Bureau proposal that would amend certain mortgage rules issued in 2013.

One proposed rule would provide an alternative definition of "small servicer" for nonprofit entities that service, for a fee loans, on behalf of other nonprofit chapters of the same organization.

Another proposal from the CFPB would amend the Regulation Z ability-to-repay requirements to provide that some interest-free, contingent subordinate liens originated by nonprofit creditors will not be counted toward the 200 mortgage loan credit extension limit.

The proposed rule would provide a limited, post-consummation cure mechanism for loans that are originated with the good faith expectation of qualified mortgage (QM) status but that actually exceed the points and fees limit for QMs.

The CFPB is seeking comments on how to provide a limited, post-consummation cure or correction provision for loans that are originated with a good faith expectation of QM status, but that actually exceed the 43% debt-to-income ratio limit that applies to certain QMs.

The CFPB is also seeking feedback and data from smaller creditors regarding implementation of certain provisions of the 2013 mortgage rules that are tailored to account for small creditor operations and how their origination activities have changed in light of the new rules.

Comments are due to CUNA by May 30, with a CFPB deadline of June 5.

For the CUNA comment call, use the resource link.

Sen. Franken spotlights CUs' RBC plan concerns

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WASHINGTON (5/15/14)--Sen. Al Franken (D-Minn.) sent a letter Wednesday to National Credit Union Administration Chair Debbie Matz urging her to consider the input of Minnesota's credit unions as the agency considers its risk-based capital (RBC) proposal.
 
Franken added his voice to a growing chorus of lawmakers who are urging the federal regulatory agency to heed credit union concerns that the RBC plan, as written, could adversely affect small businesses and credit union members. A bipartisan collection of more than 320 House lawmakers joined Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.) this week to urge the NCUA to be judicious as it works to finalize a RBC rule. (See News Now May 14: Concerned about RBC proposal, 75% of U.S. Reps. sign letter to NCUA.)
 
In his separate letter Franken wrote, "Minnesota credit unions have contacted me with a number of concerns regarding the proposed rule. Capital rules must be tailored to the circumstances of credit unions and their customers."
 
The NCUA's proposal would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
Under the proposed rule, an adequately capitalized credit union would need to maintain a net worth ratio of 6% and an RBC ratio of 8% of equity to risk assets, while a well-capitalized credit union would need 7% and a higher RBC ratio of 10.5%, meaning the RBC ratio for well-capitalized credit unions exceeds that for adequately capitalized credit unions. This violates the Federal Credit Union Act, the Credit Union National Association says. 
 
The act directs the NCUA to set any risk-based component for the well-capitalized threshold no higher than the component for the adequately capitalized level. 
 
CUNA opposes the NCUA's current proposal and is developing a comment letter with its Examination and Supervision Subcommittee. The trade association is also encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter by the May 28 deadline.

Domestic, foreign co-op programs need full funding: CUNA, World Council

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WASHINGTON (5/15/14)--In joint letters to U.S. House and Senate lawmakers, the Credit Union National Association and the World Council of Credit Unions advocated for re-authorization of the U.S. Agency for International Development's (USAID) Cooperative Development Program (CDP), and also for increased USAID development assistance to Ukraine.

CUNA and the World Council represent 99 million credit union members in the U.S. and 200 million members worldwide, respectively.
 
In letters to House and Senate state, foreign operations subcommittee leadership, the credit union trade associations requested reauthorization of the CDP program for FY2015 at its FY2014 funding level of $10 million. The CDP is a competitive grants program that responds to the needs of local credit unions and other cooperatives by utilizing the expertise and resources of long-established U.S. cooperative organizations, their members and volunteers.
 
"The CDP allows U.S. credit unions and other cooperatives to continue in a leadership role in reducing hunger and lifting people out of poverty. The resources that you make available to our cooperative development organizations generate positive impacts and results for millions of people in the developing world," wrote CUNA President/CEO Bill Cheney and World Council President/CEO Brian Branch.
 
In urging that Congress increase USAID development assistance to Ukraine, the joint letter said such an increase would "promote democracy as well as economic and social stability in that country."
 
Credit unions in Ukraine were restarted in the early 1990s after the dissolution of the Soviet Union with the support of World Council, the letter noted, and added that the 620 credit unions in Ukraine perform an important private-sector financial and development role for their approximately 1 million natural person members as well as for Ukrainian small and medium enterprises.

Fryzel assures RBC plan will see changes

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WASHINGTON (5/15/14)--National Credit Union Administration board member Michael Fryzel, responding to a letter from the Credit Union National Association, said that he is confident that significant changes will be made to the agency's current risk-based capital proposal for credit unions before it is finalized, reflecting a message that the agency chair and other board member have also stated.

However, Fryzel parted ways with his fellow regulators in his letter to CUNA when he said that if the question of extending the comment deadline on the proposal--as CUNA has recommended--came before the board for a vote, he would vote for an extension.  That opinion, however, puts him in a two-to-one minority as the others on the three-person board have told CUNA that they believe the current May 28 deadline is sufficient for comment gathering.

Fryzel was responding to a joint request by CUNA and the National Association of Federal Credit Unions for the comment extensions.

He wrote, "I am confident that, when the NCUA finalizes the risk-based capital rule, it will include significant changes from what has been proposed, and will incorporate the suggestions of your trade associations and credit unions across the country.
 
"I am a firm believer in taking the time to get a rule right. During the corporate crisis, quick decisions were necessary. We did not have the luxury of time. Fortunately, we are not in a crisis mode and should take this opportunity to proceed with all appropriate care and precision. The NCUA board can afford to take the time to get it right. "
 
The NCUA proposal would make changes to Prompt Corrective Action (PCA) rules, that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
CUNA supports risk-based capital, but strongly opposes the proposal the NCUA has issued for comment. Working with its Examination and Supervision Subcommittee, CUNA is developing its comment letter, and is encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter.

LICUs eligible for $1.2M in second round CDRLF grants

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ALEXANDRIA, Va. (5/15/14)--The National Credit Union Administration will invest an additional $1.2 million in low-income credit unions through its second round of 2014 Community Development Revolving Loan Fund grants.
 
The agency will accept applications from June 2 through 5 p.m. (ET) June 30. Each applicant may apply in any of four grant categories, but a credit union may only receive funding in one category.

The grants are used by credit unions to improve their service by adding new products, modernizing technology, and expanding staff training. As well as to expand their community outreach efforts.

The grant categories are:
  • Community Development Financial Institution (CDFI) Certification. The NCUA said it anticipates awarding 60 credit unions $2,500 each to cover the cost of applying for CDFI certification. This certification makes a credit union eligible for funding to help service low-income members and communities that lack adequate access to affordable financial services products. 
  • New Product and Service Development. This is for credit unions that want to offer members new electronic services, which include first-time websites, home banking, mobile banking, bill pay, remote deposit capture, online loan and member applications, electronic or digital signatures, and debit, credit or prepaid cards. There is a maximum award of $7,500 for each successful applicant. 
  • Collaboration. The NCUA will award four collaboration grants of up to $50,000 each for a total of $200,000. The grants may be used to establish collaborative relationships for cost-saving projects such as  back-office operations, vendor due diligence, and secondary capital investment pools. A minimum of three credit unions must apply for a single collaboration grant, with the lead credit union having its low-income designation. Collaborations may include leagues, credit union service organization or vendors. 
  • Training. Grants of up to $3,000 each will be available to pay for training in compliance, collections and lending, and governance. The total allocation for training grants is $198,000.
In announcing the new round of grants, NCUA Chairman Debbie Matz said, "Because NCUA's grants to low-income credit unions can improve service and support local economies, I encourage all qualified credit unions to apply."
 
Funding for NCUA's grant initiatives is provided by the Community Development Revolving Loan Fund, a fund created by the U.S. Congress to support credit unions that serve low-income communities. NCUA's Office of Small Credit Union Initiatives administers the fund.

Use the resource link for more information or to apply online.

FHFA launches social media accounts

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WASHINGTON (5/15/14)--The Federal Housing Finance Agency has launched an official Twitter account: Its handle is @FHFA.
 
The feed aims to increase the availability and accessibility of FHFA news, and will be used to tweet links to speeches, testimony, news releases, research papers, monthly and quarterly reports and other select announcements.
 
FHFA will also post select news on its newly created FHFA YouTube channel. The channel features recent radio and TV spots from FHFA's national education campaign on the Home Affordable Refinance Program.
 
Also, the FHFA will use LinkedIn to post job advertisements on an occasional basis.
 
Use the resource links for more information.

CFPB designs 'easier' electronic format for Reg Z

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WASHINGTON (5/14/14)--The Consumer Financial Protection Bureau has launched an electronic version of Regulation Z, the flagship federal regulation protecting consumers in matters involving credit products.
 
Regulation Z implements the Truth in Lending Act (TILA) and has undergone several recent changes, including new rights and disclosures for mortgages.
 
The new format for Regulation Z uses CFPB's eRegulations tool, which was launched last year as a way to combine important information that is hard to navigate or spread over multiple pages throughout a regulation.
 
"By adding Regulation Z, one of the most complex and heavily consulted consumer financial regulations, we can help mortgage stakeholders better understand and comply with the recent amendments implementing the Ability to Repay rules, the new federal mortgage integrated disclosures, and other changes," reads the CFPB blog.

"Stakeholders who deal with credit cards, auto loans, student loans, and other consumer credit will also benefit, because Regulation Z covers virtually all forms of consumer credit."
 
The new eRegulations format allows consumers to view the current version of Regulation Z, previous versions beginning Dec. 30, 2011, as well as two amendments that will become effective on July 18, 2015, and Aug. 1, 2015.

CUNA: Lawmakers' RBC letter effort had 'outstanding' CU, league support

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WASHINGTON (5/14/14)--Credit Union National Association President/CEO Bill Cheney said Tuesday that the hundreds of House members' signatures collected on a letter of concern over the National Credit Union Administration's proposed risk-based capital (RBC) regulation--and the short timeframe in which they were collected--could never have been accomplished without the outstanding efforts of credit unions and their state leagues.

As reported Tuesday in News Now, a bipartisan collection of more than 320 House lawmakers joined Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.) to urge the NCUA to ensure its RBC proposal does not adversely affect small businesses and credit union members.

"Reps. King and Meeks did an outstanding job of reaching out to their colleagues regarding the letter, but a number of members contacted them directly about the letter because of the concerns they heard from the credit unions in their district and their state league," Cheney said of the process behind credit union support of Meeks' and King's letter-writing effort.

"CUNA, our member credit unions and their state leagues and associations thank the members of the House for speaking out on this key issue for credit unions--and we pledge to work with lawmakers to see that their concerns are addressed," Cheney said Tuesday when announcing the lawmakers' success.

At issue is the NCUA proposal that would impose on credit unions with greater than $50 million in assets new standards that would restructure the agency's current "prompt corrective action" regulation to involve calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks--although the risk weights would be substantially different for credit unions.

The NCUA proposal would change risk-based capital ratios and require higher minimum levels for credit unions with concentrations of assets in real estate loans, member business loans, or high levels of delinquent loans.

The letter encourages the NCUA to:
  • Take into account the cost and burden of implementing new risk-based capital requirements beyond the current leverage ratio;
  • Provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions; and
  • Give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.
For more on the RBC proposal and on the lawmakers' letter, use the resource links.

"It is almost unprecedented for a letter to generate this much bipartisan support in such a short period of time," said Ryan Donovan, CUNA's senior vice president of legislative affairs said of the massive two-week effort.

"At time when it is difficult to get Congress to agree on much of anything, more than 320 members speaking in one voice sends a message to NCUA that should be loud and clear."

Comments on the RBC plan are due to the agency by May 28. The agency has received about 350 comment letters to date.

Settlement between FDIC, Sallie Mae announced for UDAP, SCRA

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WASHINGTON (5/14/14)--The Federal Deposit Insurance Corp. announced a settlement with subsidiaries of SLM Corp. and Navient Corp. for alleged unfair and deceptive practices as well as violations of the Servicemembers Civil Relief Act (SCRA) related to student loans.

The settlement involved Sallie Mae Bank, Salt Lake City, and Navient Solutions Inc. (formerly known as Sallie Mae, Inc.), Olney, Md., subsidiaries of SLM Corp. and Navient Corp., respectively, according to an FDIC release.

The FDIC said that the parties (referred to as Sallie Mae in the FDIC order) violated federal law prohibiting unfair and deceptive practices by:
  • Inadequately disclosing its payment allocation methodologies to borrowers;
     
  • Allocating payments across multiple loans in a way that maximizes late fees; and
     
  • Inadequately disclosing how to avoid late fees in billing statements.
The FDIC also said it determined that Sallie Mae violated the SCRA by unfairly conditioning receipt of benefits upon requirements not in the act, improperly advising servicemembers they must be deployed to receive SCRA benefits, and failing to provide SCRA relief after having been put on notice of borrowers' active duty status.

Sallie Mae and Navient have been ordered to pay $6.6 million in penalties, $30 million in restitution to harmed borrowers, and fund a $60 million settlement fund with the U.S. Department of Justice. This is a result of an examination of Sallie Mae conducted by the FDIC.

A separate action has been taken by the Department of Justice with regard to violation of the SCRA.

In addition to the restitution payments and civil monetary penalty, the FDIC has ordered Sallie Mae to take affirmative steps to see that late fee and avoidance payment allocation are clear and conspicuous, that servicemembers receive proper treatment under the SCRA and that all residual violations are remedied in accordance with applicable laws.

Holly Petraeus, Consumer Financial Protection Bureau assistant director, Office of Servicemember Affairs, commended the actions by Justice and the FDIC. "The men and women serving this country should receive quality customer service and the legal protections afforded to them. Instead, Sallie Mae gave servicemembers the runaround and denied them the interest-rate reduction required by law," she said, adding, "This behavior is unacceptable. And it's particularly troubling from a company that benefits so generously from federal contracts."

She noted a 2012 CFPB report that found that servicemembers faced serious hurdles in accessing their student loan benefits, including the provisions of the SCRA which caps the interest rate on pre-existing student loans and other consumer credit products at 6% while the servicemember is on active duty. (See resource link.)

FHFA aligns with CUNA view, won't reduce Fannie, Freddie loan limits

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The Federal Housing Finance Agency (FHFA) will not reduce loan limits and will continue allowing Fannie Mae and Freddie Mac to purchase loans when the borrower has a debt-to-income (DTI) ratio of higher than 43% but also has other compensating strengths,  Director Mel Watt said in a speech Tuesday.

The FHFA also released a strategic plan today for the future of the government-sponsored enterprises (GSEs)--one in which the agency will not involve itself in policy decisions on housing reform.

"The announcement about loan and DTI limits is welcome news for borrowers and credit unions alike. CUNA has repeatedly urged that loan limits not be reduced and we are gratified that this position has been accepted," noted Eric Richard, Credit Union National Association general counsel, who added, "The health of the housing finance market requires that the current system be kept viable as long as possible until Congress acts on reforms and we are pleased that the agency is taking steps to help ensure that outcome."

CUNA has also urged that the FHFA make it clear that creditors will be able to continue selling to the GSEs mortgage loans involving a borrower's DTI that is higher than 43%, the threshold for a "qualified mortgage" under the Consumer Financial Protection Bureau's "Ability to Repay" rule, when the borrower has the capacity to repay the loan.
 
CUNA President/CEO Bill Cheney and senior CUNA staff met with Watt and members of his team in April.
 
"Our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie Mae and Freddie Mac," Watt said in prepared remarks at the Brookings Institution.

"This means, first and foremost, that we must ensure that Fannie Mae and Freddie Mac operate in a safe and sound manner.  It means that we'll work to preserve and conserve Fannie Mae and Freddie Mac's assets," he said, adding, "It means that we'll work to ensure a liquid and efficient national housing finance market."

Because it is not part of the agency's statutory mandate, the FHFA will not take on housing finance reform legislation. "My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA," Watt said.

"I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary.  However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA."

He also announced:
  • The agency will be working to stabilize communities hardest hit by foreclosures with a Neighborhood Stabilization Initiative with Fannie Mae, Freddie Mac and the National Community Stabilization Trust; and
     
  • Eligibility parameters for the Home Affordable Refinance Program will not be extended, but the agency is retargeting its outreach efforts.

Remittance rule comment deadline extended by 10 days

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WASHINGTON (5/14/14)--The Consumer Financial Protection Bureau has extended the comment period for the modifications to its international remittance transfers rule. The comment period will now close June 6.

The new rule would extend a temporary provision, which is set to expire July 21, 2015, by an additional five years. The provision permits federally insured credit unions and other depository institutions to estimate certain remittance pricing disclosures.
 
The Credit Union National Association encourages credit unions to comment as the trade association works for improvements to the proposal, including an exemption level well over the 100 transfers per year that the CFPB currently provides.
 
Also, the proposal would make several clarifications and technical corrections, including to:
  • Consider whether U.S. military installations abroad should be considered being located in a U.S. state or a foreign country for purposes of the remittance rule;
  • Clarify that transfers from accounts primarily used for personal, family or household purposes would be subject to the remittance rule, but transfers from non-consumer accounts would not be subject to the rule;
  • Clarify that faxes are considered writings and would not be subject to additional requirements for electronic disclosures; and, separately, in certain circumstances, a remittance transfer provider may conduct the transaction orally and entirely by telephone after receiving a remittance inquiry from a consumer in writing (e.g., if a sender physically abroad a U.S. branch of a sender's institution attempts to initiate a transfer by first sending a mailed letter, and further communication by letter may be impractical.); and
  • Clarify that a provider's failure to deliver a transfer by the disclosed date of availability is not an error if such failure was caused by a delay related to a necessary investigation or other action to address Bank Secrecy Act, Office of Foreign Assets Control, or similar requirements; and, separately, to clarify remedies for certain errors.
CUNA continues to advocate to the CFPB to improve the international remittance transfer rule for credit unions, and is interested in how these proposed changes would affect the processing of international funds transfers at credit unions, corporate credit unions and other payment providers.
 
Use the resource link to access CUNA's Comment Call. CUNA's comment deadline has been extended to May 30.

NEW: Fryzel also assures of RBC plan changes

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WASHINGTON (5/14/14, UPDATED 9:40 a.m. ET)--National Credit Union Administration board member Michael Fryzel, responding to a letter from the Credit Union National Association, said that he is confident that significant changes will be made to the agency's current risk-based capital proposal for credit unions before it is finalized, reflecting a message that the agency chair and other board member have also stated.

However, Fryzel parted ways with his fellow regulators in his letter to CUNA when he said that if the question of extending the comment deadline on the proposal--as CUNA has recommended--came before the board for a vote, he would vote for an extension.  That opinion, however, puts him in a two-to-one minority as the others on the three-person board have told CUNA that they believe the current May 28 deadline is sufficient for comment gathering.

Fryzel was responding to a joint request by CUNA and the National Association of Federal Credit Unions for the comment extensions.

He wrote, " I am confident that, when the NCUA finalizes the risk-based capital rule, it will include significant changes from what has been proposed, and will incorporate the suggestions of your trade associations and credit unions across the country.
 
"I am a firm believer in taking the time to get a rule right. During the corporate crisis, quick decisions were necessary. We did not have the luxury of time. Fortunately, we are not in a crisis mode and should take this opportunity to proceed with all appropriate care and precision. The NCUA board can afford to take the time to get it right. "
 
The NCUA proposal would make changes to Prompt Corrective Action (PCA) rules, that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
CUNA supports risk-based capital, but strongly opposes the proposal the NCUA has issued for comment. Working with its Examination and Supervision Subcommittee, CUNA is developing its comment letter, and is encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter.

Workshops set for CDFI Fund applications in 3 locations

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WASHINGTON (5/14/14)--The U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) will host a series of application workshops to prepare the CDFI industry for the fiscal year 2014 round of the CDFI Bond Guarantee Program.
 
The workshops will include an in-depth discussion of the financial structure of the program, including: roles of the qualified issuer, program administrator and servicer; Capital Distribution Plan requirements; eligible CDFI and secondary loan requirements; costs of the CDFI Bond Guarantee Program and review processes for the qualified issuer and guarantee applications.
 
The fund announced earlier this week that it has opened the 2014 application period for the bond guarantee program  (News Now May 13). It will make up to $750 million in bond guarantee authority available to eligible CDFIs this year.
 
The CDFI Fund specifically encourages the participation of certified CDFIs, community development trade groups and associations, and others interested in community economic development finance who may be interested in submitting either a Qualified Issuer or Guarantee Application this fiscal year.
 
Workshops will be held June 2-3 in Detroit; June 10-11 in Washington, D.C.; and June 17-18 in San Francisco.

Use the resource link for more information.

NEW: FHFA adopts CUNA view, won't reduce Fannie, Freddie loan limits

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WASHINGTON (5/13/14 UPDATED 12:45 P.M. ET)--The Federal Housing Finance Agency (FHFA) will not reduce loan limits and will continue allowing Fannie Mae and Freddie Mac to purchase loans when the borrower has a debt-to-income (DTI) ratio of higher than 43% but also has other compensating strengths,  Director Mel Watt said in a speech today. The FHFA also released a strategic plan today for the future of the government-sponsored enterprises (GSEs)--one in which the agency will not involve itself in policy decisions on housing reform.

"The announcement about loan and DTI limits is welcome news for borrowers and credit unions alike. CUNA has repeatedly urged that loan limits not be reduced and we are gratified that this position has been accepted," noted Eric Richard, Credit Union National Association general counsel, who added, "The health of the housing finance market requires that the current system be kept viable as long as possible until Congress acts on reforms and we are pleased that the agency is taking steps to help ensure that outcome."

CUNA has also urged that the FHFA make it clear that creditors will be able to continue selling to the GSEs mortgage loans involving a borrower's DTI that is higher than 43%, the threshold for a "qualified mortgage" under the Consumer Financial Protection Bureau's "Ability to Repay" rule, when the borrower has the capacity to repay the loan.
 
CUNA President/CEO Bill Cheney and senior CUNA staff met with Watt and members of his team in April.
 
"Our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie Mae and Freddie Mac," Watt said in prepared remarks at the Brookings Institution.

"This means, first and foremost, that we must ensure that Fannie Mae and Freddie Mac operate in a safe and sound manner.  It means that we'll work to preserve and conserve Fannie Mae and Freddie Mac's assets," he said, adding, "It means that we'll work to ensure a liquid and efficient national housing finance market."

Because it is not part of the agency's statutory mandate, the FHFA will not take on housing finance reform legislation. "My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA," Watt said.

"I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary.  However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA."

He also announced:
  • The agency will be working to stabilize communities hardest hit by foreclosures with a Neighborhood Stabilization Initiative with Fannie Mae, Freddie Mac and the National Community Stabilization Trust; and
     
  • Eligibility parameters for the Home Affordable Refinance Program will not be extended, but the agency is retargeting its outreach efforts.

CUs turned a corner in 2013: NCUA annual report

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ALEXANDRIA, Va. (5/13/14)--America's credit unions turned a corner in 2013, as federally insured credit unions experienced one of the best years on record, National Credit Union Administration Chairman Debbie Matz wrote in the 2013 annual report.

Highlights of 2013 touched on in the report include:
  • Credit union membership of 96.3 million;
  • Total assets of $1.06 trillion; and
  • An aggregate net worth ratio of 10.78%, the highest level reported since the first quarter of 2009.
In 2013, "a strengthening economy led to increased loan demand and fewer delinquencies," Matz added. Loans expanded by 8% from 2012's total, with loans growing in all categories.

Credit unions' combined delinquency ratio totaled 1.01%, a 15 basis-point (bp) decline from 2012's total, the NCUA reported. Charge-offs also declined to 0.57%, a 16 bp reduction from 2012's total.

The report also detailed its four strategic goals of:
  • Ensuring a safe, sound and healthy credit union system;
     
  • Promoting credit union access to all eligible persons;
     
  • Further developing a regulatory environment that is transparent and effective, with clearly articulated and easily understood regulations; and
     
  • Cultivating an environment that fosters a diverse, well-trained and motivated staff.
 
Of its 11 targets for ensuring a safe and healthy credit union system, NCUA missed only one--maintaining an aggregate net long-term asset ratio of less than 35%.
 
Under promoting credit union access, NCUA met seven of its eight targets, which included addressing consumer complaints within 45 business days, amassing a greater social media audience on Twitter, Facebook and YouTube and increasing exposure to its financial literacy website.
 
It met all five of its targets for its regulatory environment goal. It completed 26 fair lending examinations in 2013--above its target of 18 annually. The number of webinars more than tripled to 17. The publishing of information on the NCUA Guarantee Notes Program and the annual review of one-third of credit union regulations also were achieved.
 
For its work environment, NCUA met four of 10 targets--falling short in staff diversity and enhancing communications within the agency vertically and horizontally.
 
The NCUA expended just over 97% of its $248.8 million operating budget after returning $2.6 million of excess cash in the mid-session budget review, thereby reducing operating fees, according to a statement by NCUA Chief Financial Officer Mary Ann Woodson.

Increasing complexity, greater concentration of assets, rising interest rates, increasing liquidity needs and emerging cybersecurity threats were some of the threats facing credit unions in 2013, the NCUA added.

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 NCUSIF.

For the full NCUA report, use the resource link.

Housing reform markup expected to resume Thursday

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WASHINGTON (5/13/14)--While the U.S. House is out of session this week, the Senate side of the U.S. Congress will remain busy, with that body's banking committee set to resume consideration of housing finance market reform legislation at 10 a.m. (ET) Thursday.

The committee continues its work on the 425-page Housing Finance Reform and Taxpayer Protection Act of 2014 (S. 1217), which would overhaul the housing finance market and address the issues created by the current government ownership of Fannie Mae and Freddie Mac.

Committee Chairman Tim Johnson (D-S.D.) delayed a scheduled April 29 markup of the bill to gain support. However, Democratic Sens. Charles Schumer (N.Y.), Sherrod Brown (Ohio), Jeff Merkley (Ore.), Robert Menendez (N.J.), Elizabeth Warren (Mass.) and Jack Reed (R.I.) last week reportedly said the proposed structure of a new mortgage reinsurance body was unworkable. They also said the proposed bill did not do enough to address affordable housing issues, Bloomberg reported.

The Credit Union National Association is working to analyze new legislative language added to the proposal.

Legislation of interest to credit unions will also likely be front and center next week, when the House Financial Services Committee may resume a markup it delayed last week. Bills which CUNA supports include:
  • The Portfolio Lending and Mortgage Access Act (H.R. 2673);
  • The Financial Regulatory Clarity Act (H.R. 4466); and
  • The Community Institution Mortgage Relief Act (H.R. 4521).
CUNA will continue to monitor the progress of these bills as they make their way through that committee.

FSOC clarifies transparency policy

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WASHINGTON (5/13/14)--The Financial Services Oversight Committee (FSOC) released an updated transparency policy last week, after critics in Congress and across the financial world accused the group of keeping its decision-making processes under wraps.

The new policy opens up all FSOC meetings to the public through a live stream online, except in certain circumstances listed below. Minutes will be released for each meeting after it has concluded, but are subject to redaction at the discretion of the chair.
 
The new policy also states that meetings will be open to the public whenever possible, but notes "the central mission of the FSOC is to monitor systemic and emerging threats. This will require discussion of supervisory and other market-sensitive data, including information about individual firms, transactions, and markets that may only be obtained if maintained on a confidential basis. Protection of this information will be necessary in order to prevent destabilizing market speculation that could occur if that information were to be disclosed."
 
Determination of whether or not a meeting is closed will be made by the chair, or through an affirmative vote of the majority of committee members.

Examples of a meeting that would be closed include instanced where an open meeting could:
  • Result in the disclosure of trade secrets and commercial or financial information obtained from a person and privileged or confidential;
  • Result in the disclosure of information of a personal nature that would constitute an unwarranted invasion of personal privacy or be inconsistent with Federal privacy laws, or of information that relates solely to internal personnel rules or practices;
  • Result in the disclosure of investigatory records compiled for law enforcement or supervisory purposes; and
  • Necessarily and significantly compromise the mission or purposes of the FSOC, as determined by the chairman with the concurrence of a majority of the voting member agencies or by a majority of the voting member agencies.

Cordray: Accountability improves consumer experience

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WASHINGTON (5/13/14)--Consumer Finance Protection Bureau Director Richard Cordray spoke to the Federal Reserve Bank of Chicago Friday, saying the CFPB seeks accountability from financial institutions when it comes to the costs and risks of their products in order to create a better marketplace for consumers.
 
The CFPB's authority extends to all consumer finance markets, and they have regulatory oversight over all financial institutions with assets over $10 billion and their affiliates, institutions which comprise nearly three-quarters of U.S. banking market.
 
"We have been charged by Congress to assure that the markets for all of these consumer financial products are fair, transparent, and competitive. We expect a marketplace where companies are honest and clear so that consumers know the key terms and conditions of financial products up front, including pricing," Cordray said. "When consumers have the ability to compare between two financial products with knowledge of the true costs, actual benefits, and real risks, they will generally be better able to make decisions they can live with over time. And informed decision-making allows American consumers to drive the market toward products and services that meet genuine consumer preferences."
 
This primarily includes using supervisory and enforcement authority to push for compliance with the law in all instances. So far, these efforts have resulted in more than $3.5 billion in relief to consumers.
 
"In each of these instances, the monetary relief provided to past and current consumers was supplemented by prospective injunctive-style relief," Cordray said. "This relief is aimed at protecting future consumers, who should never have to suffer the same treatment because the company is being compelled to change its practices."
 
The CFPB has been publishing periodic documents, called "Supervisory Highlights," which describe problems and actions taken to remediate them, without identifying the specific institutions. In addition, the organization has solicited feedback from consumers themselves, and has received more than 350,000 complaints, which Cordray said have given it the ability to work with companies to address a specific complaint.
 
"The Consumer Bureau has organized itself around a central precept of paying close attention to what consumers themselves tell us," he said. "Ultimately, for every sound business it is the customers who provide the essential information about what to fix, when to fix it, and how to fix it."

Moore Capito has CU support in W.Va. primary

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WASHINGTON (5/13/14)--Today's primary elections in West Virginia feature two candidates supported by the Credit Union National Association and the West Virginia Credit Union League (WVCUL).
 
Current Rep. Shelley Moore Capito (R-W.Va.) is running for the state's Senate seat, which is up for grabs in November due to the retirement of current Sen. Jay Rockefeller (D).
 
Capito has represented West Virginia's 2nd District since 2000, and serves as chair on the U.S. House Financial Services subcommittee on financial institutions and consumer credit. She is a well-known proponent of credit unions, and was one of several members of Congress who addressed the Credit Union National Association's Governmental Affairs Conference in February.
 
Her comments were captured by The Washington Post on March 3. "Credit unions need a great deal of regulatory flexibility to meet the needs of their members," she told the audience. "One-size-fits-all Washington regulations simply don't work."
 
WVCUL President Ken Watts praised Capito for her work on many important credit union issues.
 
"In her position as chairman of the Financial Services subcommittee on financial institutions and consumer credit, Rep. Capito has brought to the forefront any number of key credit union issues, such as regulatory relief and examination fairness," Watts told News Now.
 
"She has been keenly interested in hearing the credit union perspective on these matters and remains in close contact to ensure she has the most current information available to her," he added. "The league has maintained a close working relationship with her during her time in the House and look forward to a similar relationship in the Senate."
 
Two other Republicans will face off against Capito in today's primary. The Democrats also have three candidates in their own primary.
 
Capito's campaign for Senate leaves her 2nd District seat open, and CUNA has backed candidate Charlotte Lane, who is running against seven other candidates today for the nomination. Lane is a former commissioner of the U.S. International Trade Commission.
 
"We've met with Charlotte Lane and found her to be very interested in the important work credit unions do in their respective communities by providing affordable credit to members," Watts said. "She also expressed her support for maintaining the credit union tax exemption."
 

CDFI Fund opens application period for bond guarantee program

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WASHINGTON (5/13/14)--The U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund) opened the fiscal year 2014 application period for the CDFI Bond Guarantee Program.
 
The Notice of Guarantee Authority makes up to $750 million in bond guarantee authority available to eligible Community Development Financial Institutions (CDFIs) in fiscal year 2014.
 
Through the CDFI Bond Guarantee Program, certified CDFIs can issue federally guaranteed bonds and use bond proceeds to extend capital within the CDFI industry for community development financing and long-term community investments.
 
The Secretary of the Treasury may guarantee bond issues having a minimum size of $100 million each, up to an aggregate total of $750 million.  Multiple CDFIs may pool together in a single $100 million bond issuance provided that each eligible CDFI participates at a minimum of $10 million.
 
Authorized uses of the loans financed through bond proceeds include supporting commercial facilities that promote revitalization, community stability and job creation or retention; housing that is principally affordable to low-income people; businesses that provide jobs for low-income people or are owned by low-income people; and community or economic development in low-income and underserved rural areas.
 
Qualified Issuer Applications must be submitted through myCDFIFund by 11:59 p.m. (ET) June 23. Guarantee Applications must be submitted through myCDFIFund by 11:59 p.m. (ET) June 30.
 
Use the resource link for more information.
 

NEW: Concerned about RBC proposal, 75% of U.S. Reps. sign letter to NCUA

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WASHINGTON (5/13/14 UPDATED 9:30 A.M. ET)--A bipartisan collection of more than 320 U.S. House members have joined Reps. Peter King (R-N.Y.) and Gregory Meeks  (D-N.Y.) to express their concern over the National Credit Union Administration's proposed risk-based capital regulation.
 
In particular, the lawmakers urge the federal agency to ensure the proposal does not adversely affect small businesses and credit union members.
 
"An overwhelming majority of the House--three in every four members--have come together in a bipartisan effort by Representatives King and Meeks to express concern over NCUA's proposed rule," said CUNA President/CEO Bill Cheney. "CUNA supports risk-based capital--but not the way that NCUA has proposed it. The fact that so many members of Congress have added their voices of concern bolsters credit unions' views that this proposal must be changed significantly.
 
"CUNA and the state leagues and associations thank the members of the House for speaking out on this key issue for credit unions--and we pledge to work with lawmakers to see that their concerns are addressed," Cheney said.
 
At issue is a proposal by the NCUA to impose on credit unions with greater than $50 million in assets new standards that would restructure the agency's current "prompt corrective action" regulation to involve calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks--although the risk weights would be substantially different for credit unions.
 
The NCUA proposal would change risk-based capital ratios and require higher minimum levels for credit unions with concentrations of assets in real estate loans, member business loans, or high levels of delinquent loans.
 
The letter encourages the NCUA to:
  • Take into account the cost and burden of implementing new risk-based capital requirements beyond the current leverage ratio;
     
  • Provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions; and
     
  • Give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.
"During the financial crisis, natural person credit unions served as an important source of liquidity in local communities and the overwhelming majority of them successfully weathered the downturn. These cooperatives did not engage in the risky lending practices that led up to the crisis and nearly all maintained their well-capitalized status," the letter notes.
 
"It is almost unprecedented for a letter to generate this much bipartisan support in such a short period of time," said Ryan Donovan, CUNA's senior vice president of legislative affairs. "At time when it is difficult to get Congress to agree on much of anything, more than 320 members speaking in one voice sends a message to NCUA that should be loud and clear."
 
The congressional co-signers include several traditional credit union supporters and members of the House Financial Services Committee, as well as a healthy number of members who have never publicly supported credit unions. The partisan breakdown on the letter, 173 Republicans and 151 Democrats, very closely aligns the partisan breakdown in the House of Representatives.
 
"Credit unions should be really pleased to see such balanced support for the letter. One might expect members who have co-sponsored supplemental capital or member business lending legislation to support the letter," Donovan said, adding, "But the letter is also supported by almost everyone on the House Financial Services Committee--the committee that provides oversight to the NCUA--and there are several dozen members on the letter who have not previously co-sponsored credit union legislation, and who did not write banking regulators during the BASEL III process.
 
"It really speaks to members of the House of Representatives understanding the concerns credit unions have regarding the proposed rule," he noted.
 
Comments on the RBC plan are due to the agency by May 28.

OFAC, FinCEN topics of NCUA May 21 webinar

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WASHINGTON (5/13/14)--The National Credit Union Administration will host a free webinar May 21 at 2 p.m. (ET) to educate institutions on how to better comply with federal anti-money laundering requirements.
 
The webinar will cover Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) programs, enforcement authorities and their relationships with other financial services regulators.
 
Participants may receive a certificate of attendance, if they individually participate in the polls offered during the webcast and take a short quiz at the end of the webcast.
 
Online registration for the May 21 webinar is now open. Use the resource link.

Six Democratic senators back off housing finance bill support

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WASHINGTON (5/12/14)--Six Senate Democrats have said they will not support recently proposed revisions to the secondary mortgage market if further changes are not made to the bill.
 
Legislation proposed by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) is scheduled to be marked up this week. The 425-page bill, known as the Housing Finance Reform and Taxpayer Protection Act of 2014 (S. 1217), would overhaul the housing finance market and address the issues created by the current government ownership of Fannie Mae and Freddie Mac.
 
In a private meeting last week, Charles Schumer (N.Y.), Sherrod Brown (Ohio), Jeff Merkley (Ore.), Robert Menendez (N.J.), Elizabeth Warren (Mass.) and Jack Reed (R.I.) reportedly said the proposed structure of a new mortgage reinsurance body was unworkable. They also said the proposed bill did not do enough to address affordable housing issues, Bloomberg reported.
 
Johnson last week delayed a scheduled markup of the bill to gain greater support, and he told Politico that the bipartisan bill could pass his committee by a 13-9 vote.
 
The Credit Union National Association supports the bill and has advocated for credit union priorities on several fronts, including meetings with White House officials, Federal Housing Finance Agency Director Mel Watt and members of Congress. In these meetings, CUNA has encouraged policymakers to be mindful of the existing regulatory burdens of credit unions and other mortgage servicers, and to avoid layering additional regulatory authority on top of existing regulatory regimes that address mortgage servicing.

IRS taking VITA grant applications until June 2

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WASHINGTON (5/12/14)--The Internal Revenue Service will be accepting applications for the Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grant programs through June 2.
 
The TCE program offers free tax help for all taxpayers specializing in questions about pensions, particularly those who are 60 years of age and older. The VITA program offers free tax help to people who generally make $52,000 or less, those with disabilities, the elderly and taxpayers with limited English skills.
 
The VITA grant program was established in 2007, allowing the program to extend services to underserved populations in hard-to-reach urban and non-urban areas. Some organizations can apply to receive annual funding for up to three years.
 
Credit unions across the nation participate in the VITA program, most notably helping community members by helping them identify which tax credits they may be eligible to receive ( News Now Jan. 21).
 
Applications must be submitted through Grants.gov by June 2. Previous grant recipients have the option to apply for up to three years of annual funding, which reduces the amount of paperwork that must be completed annually, and helps recipients with budget planning.
 
Interested applicants can find TCE and VITA application packages on Grants.gov. Electronic versions of the grant application package instructions, Publication 1101 for TCE and Publication 4671 for VITA, can be found on the IRS.gov website.

NCUA RBC listening sessions are filling up fast

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WASHINGTON (5/12/14)--Interested in attending one of the National Credit Union Administration's three listening sessions on its risk-based capital proposal? You'd better hurry up, as spaces are filling up fast, the Credit Union National Association reminds.
 
Each listening session with Chairman Debbie Matz is open to 150 attendees. The June 26 session in Los Angeles already has 76 registrants, 101 have registered for the July 10 session in Chicago and 87 have registered for the final listening session in Alexandria, Va.
 
"The NCUA is hosting the sessions as a result of pressure from CUNA and others to provide a forum for credit unions to speak directly with the agency regarding the proposed rule," CUNA Deputy General Counsel Mary Dunn said.
 
CUNA will be attending each of the sessions and will be working with the leagues to ensure credit unions' concerns are heard by the agency, she added.
 
The NCUA proposal would make changes to Prompt Corrective Action rules that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
CUNA supports risk-based capital. However, the association strongly opposes the proposal the NCUA has issued for comment. Working with CUNA's Examination and Supervision Subcommittee, CUNA is developing its comment letter, which it says will reflect major concerns and present a range of recommendations to make the proposal workable.
 
CUNA is encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter.
 
To sign up for the NCUA sessions and access CUNA's RBC Action Center, use the resource links.

Letter calls for 'meaningful patent reform now'

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WASHINGTON (5/12/14)--A letter to the Senate Judiciary Committee is calling for "meaningful patent reform now" on the federal level, and states continue to raise their voices against abusive patent "trolls."
 
The Credit Union National Association, as well as other members of the Main Street Patent Coalition, addressed today's letter to Sen. Patrick Leahy (D-Vt.), chairman of the committee, and its ranking member, Sen. Charles Grassley (R-Iowa).
 
Leahy has introduced the Patent Transparency and Improvements Act of 2013 (S. 1720) but postponed last week's committee vote on the bill.
 
The need for patent reform is not in question, the CUNA letter emphasized, and now is the time to fix the problem.
 
"Main street businesses provide jobs and services in our communities; patent trolls leach away billions of dollars and provide nothing in return," the letter noted. "The patent system must be modernized to stop this abuse."
 
Eliminating trolls' preferred weapons such as frivolous demand--or patent assertion--letters, would not injure legitimate companies, or devalue or degrade their patents, it said. "We believe that it is wholly possible to keep the U.S. patent system's original intent intact while at the same time shielding businesses from abuses made possible by a lack of smart, modern day policies within that system."
 
In the letter, the coalition noted its support of legislation that makes it easier to:
  • Eliminate trolls' ability to hide behind shell corporations;
     
  • Make it easier to punish trolls that send fraudulent and abusive shakedown demand letters;
     
  • Protect end users by providing a consistent application of the customer stay when the manufacturer is best positioned to fight the troll, and ensure that the stay provision adequately covers and shields main street businesses;
     
  • Make trolls pay when they sue companies frivolously and stop runaway litigation cost; and
     
  • Disarm trolls by improving patent quality and providing a way to fight bad patents.
Meanwhile, the Vermont state Senate Friday unanimously approved a resolution relating to bad faith patent assertion--a resolution that had been introduced just one day prior. It specifically "supports congressional efforts to eliminate patent abuse in the form of bad faith patent assertion and the need for strong federal legislation, including fee shifting, more stringent pleading standards, and limitations on the initial discovery process."
 
The Main Street Patent Coalition is a national coalition of business organizations that represents businesses in every community that are being harmed by the predatory practices of patent trolls.

New SBA administrator: Make extra effort for underserved groups

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WASHINGTON (5/12/14)--Maria Contreras-Sweet just wrapped up her first month on the job as administrator of the Small Business Administration (SBA) and has already set up a goal for the remainder of her term: getting capital to the small businesses that need it.
 
At an address to the National Association of Guaranteed Government Lenders last week, she said a major part of achieving that goal was to throw more support behind minority-owned businesses.
 
According to the Department of Commerce, minority-owned businesses with gross receipts of $500,000 or less were three times more likely to be turned down for a business loan than their non-minority-owned counterparts. Loan denial rates for larger firms are twice as high for minority-owned businesses.
 
"We know that SBA lending to African-Americans, Asian-Americans, Native Americans, Hispanic Americans--and women-owned businesses--can lift up entire communities," she said. "I'm determined to do more to get loans into those underserved communities hit hardest by the recession."
 
A study conducted by the Urban Institute found that women and minorities are three to five times more likely to be approved for an SBA-backed loan than a traditional loan because of the guarantee the government provides. Four of every five loan applications received from Hispanic and African-American business owners are for $150,000 or less.
 
Contreras-Sweet also said the SBA plans to roll out SBA One, which she described as "TurboTax for business lending," that will provide one set of forms, services and data management to thousands of SBA lending partners.
 
"We'll create a single portal that's a one-stop shop for eligibility, underwriting, closing, loan modification, servicing, and purchase. It will automate the upload of documents. It will automate the generation of forms. It will automate credit scoring. And it will automate electronic signatures," she said. "SBA One will streamline and simplify our lending process."
 
The Credit Union National Association supports a goal of increasing small business access to capital through the reduction of statutory and regulatory impediments, such as enabling full credit union participation in the SBA's Section 504 programs.
 
CUNA has urged Congress to increase the member business lending (MBL) cap to 27.5% of assets from 12.25%. CUNA 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.

FEC to accept bitcoin for PAC donations

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WASHINGTON (5/12/14)--The Federal Election Commission (FEC) has unanimously approved the use of the digital currency bitcoin for political donations.
 
In a May 8 statement, Chairman Lee Goodman noted that "bitcoin contributions will be regulated and reported by recipient political committees as in-kind contributions."
 
Members of the commission have imposed several conditions on these contributions, most notably that they cannot be anonymous, and campaign treasurers must scrutinize the donations for "evidence of illegality" ( USA Today May 9).
 
Additionally, Goodman said the commission lacks statutory authority to impose limitations. Although the requesting party, Make Your Laws PAC, said it would voluntarily limit acceptance of bitcoins to no more than $100 from any single contributor, as a general rule, the FEC lacks the authority to impose such a limitation on bitcoin contributions.
 
An article in Politico (May 9) also stated that the ruling "does not prevent political committees from testing the boundaries of federal law on crypto-currencies."
 
Attorney Dan Backer, who has created a bitcoin political action committee, told Politico that his organization plans to press Congress and the FEC with further questions on bitcoin and other digital currencies.
 

NCUA opens new consulting program nomination round

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ALEXANDRIA, Va. (5/12/14)--Nominations for the latest 2014 round of the National Credit Union Administration's small credit union consulting program will be accepted until May 31.
 
Through the consulting program, the NCUA's Office of Small Credit Union Initiatives (OSCUI) offers budgeting, marketing, policy development and strategic planning assistance. The experienced economic development specialists that offer this assistance also help credit unions tackle other examination issues.
 
The new nomination round was announced in OSCUI's Focus e-Newsletter .
 
Credit unions with less than $50 million in total assets, charters that have been approved within the past 10 years or low-income designations may be approved for the consulting program.
 
Nominations may be submitted by NCUA examiners or other agency staff, state credit union regulators or by credit unions themselves. Selected credit unions will receive assistance during the six-month period between July and December.
 
For more information and a nomination form, use the resource link.

NCUA at the ready for disaster season

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WASHINGTON (5/9/14)--Severe weather, including tornadoes and flooding in the South and Midwest, is being monitored by the National Credit Union Administration, which is prepared to assist affected credit unions.
 
During natural disasters, NCUA works with state regulators and state league organizations to ensure all federally insured credit unions are aware of the agency's available assistance. Agency examiners remain in close contact with credit unions affected by a disaster to offer advice and provide material and technical assistance, as needed.
 
NCUA reminds that low-income credit unions may apply for emergency assistance through the Urgent Needs Initiative for grants up to $7,500 to cover expenses related to natural disasters or other unexpected adverse events. The grants provide funds to these credit unions to repair damages or replace equipment in order to restore services to members.
 
For more information about Urgent Needs Grants, use the resource link.

CFPB webinar focuses on veterans' issues

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WASHINGTON (5/8/14)--The Consumer Financial Protection Bureau will host an online forum on veteran consumer issues today at 2 p.m. (ET).
 
The event will focus on common consumer issues for veterans and military retirees. Highlights will include a review of tools that can help veterans capitalize on key benefits and information that can help them avoid consumer scams.
 
The event is open to veterans, as well as those who work with veterans or military retirees. Use the resource link.

G-fees weigh heavy in Fannie, Freddie income

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WASHINGTON (5/9/14)--Single-family guaranty fee income brought in by Fannie Mae totaled $2.9 billion in the first quarter of 2014, and the government-sponsored enterprise said it expects those fees to become the primary source of the company's revenues in the near future.
 
Net income was $5.3 billion and comprehensive income was $5.7 billion during that quarter, Fannie Mae added. This is the ninth consecutive quarter of profits for Fannie Mae.
 
Overall, Fannie Mae said it expects to remain profitable for the foreseeable future. 
 
Fellow government-sponsored enterprise Freddie Mac also reported strong financials in the first quarter of 2014: That firm reported quarterly income of $4 billion, and was profitable for the tenth straight quarter. However, Freddie Mac cautioned that the current level of earnings would not be sustainable over the long term.
 
Fannie Mae last year announced plans to increase guaranty fees, but new Federal Housing Finance Agency Director Mel Watt said he planned to delay these planned increases. 
 
Under former acting Director Ed DeMarco, the FHFA had planned to increase base guarantee fees for all mortgages by 10 basis points, update the up-front guarantee fee grid to better align pricing with the credit risk characteristics of the borrower, and eliminate the up-front 25 basis point adverse market fee, except in the four states whose foreclosure carrying costs are more than two standard deviations greater than the national average. These planned increases would have resulted in an average guaranty fee increase of approximately 11 basis points for the third quarter of 2013.
 
Watt said he will thoroughly evaluate the proposed fee changes, and would give the public a minimum of 120 days' notice before he made any changes to the guaranty fee structure.
 
The Credit Union National Association has urged FHFA not to go forward with these fee increases.

FFIEC advises FIs prepare for cybersecurity assessments

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WASHINGTON (5/9/14)--The Federal Financial Institutions Examination Council (FFIEC) highlighted efforts to enhance financial institutions' cybersecurity during a webinar Wednesday for approximately 5,000 chief executive officers and senior managers from community financial institutions.
 
The webinar aimed to raise awareness of cyber threats, discussed the role of executive leadership in managing these risks and shared actions being taken by the FFIEC.
 
FFIEC announced it will conduct vulnerability and risk-mitigation assessments, as well as regulatory self-assessment of supervisory policies and processes later this year. These will help the FFIEC member agencies make informed decisions about the state of cybersecurity across community institutions, address gaps and prioritize necessary actions to strengthen supervisory programs.
 
FFIEC members want to provide additional support to community banks, which may not have access to the resources available to larger institutions. They hope to help these institutions identify and mitigate cybersecurity risks by:
  • Setting the tone from the top and building a security culture;
     
  • Identifying, measuring, mitigating, and monitoring risks;
     
  • Developing risk management processes commensurate with the risks and complexity of the institutions;
     
  • Aligning cybersecurity strategy with business strategy and accounting for how risks will be managed both now and in the future;
     
  • Creating a governance process to ensure ongoing awareness and accountability; and
     
  • Ensuring timely reports to senior management that include meaningful information addressing the institution's vulnerability to cyber risks.
To download the presentation from the webinar, use the resource link.

Proposed rule aligns ARM, FHA interest rate adjustments

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WASHINGTON (5/9/14)--The Housing and Urban Development Department has proposed two revisions to the Federal Housing Administration's (FHA) regulations governing its single-family adjustable-rate mortgage (ARM) program.
 
The revisions would align FHA interest rate adjustment and notification regulations with the requirements for notifying mortgagors of ARM adjustments, as required by the regulations implementing the Truth in Lending Act (TILA), as recently revised by the Consumer Financial Protection Bureau.
 
The first proposed amendment of this rule would require that an interest rate adjustment resulting in a corresponding change to the mortgagor's monthly payment for an ARM be based on the most recent index value available 45 days before the date of the rate adjustment, a change from current regulations that provide for a 30-day look-back period.
 
The date that the newly adjusted interest rate goes into effect is often referred to as the "interest change date." The number of days prior to the interest change date on which the index value is selected is called the "look-back period."
 
An overwhelming majority of ARMs originated in the conventional mortgage market currently have a 45-day look-back period and were required to comply with the 2013 TILA Servicing Rule notification requirements on Jan. 10, well before the effective date of this proposed rule. There should be little, if any, burden to apply the same 2013 TILA Servicing Rule requirements on FHA-insured ARMs. Therefore, the anticipated costs of this proposed rule are very minimal.
 
Additionally, since a majority of ARMs already have look-back periods of 45 days, the revised 45-day look-back period proposed by FHA is consistent with current industry norms.
 
The second proposed amendment would require that the mortgagee of an FHA-insured ARM comply with the disclosure and notification requirements of the 2013 TILA Servicing Rule, including at least a 60-day but no more than 120-day advance notice of an adjustment to a mortgagor's monthly payment.
 
FHA's current regulations provide for notification at least 25 days in advance of an adjustment to a mortgagor's monthly payment.
 
Since this proposed change also conforms to the 2013 TILA Servicing rule, HUD does not anticipate that the revised disclosure requirements will impose significant costs on FHA-approved mortgagees, since they were required to make these notification adjustments by Jan. 10.

Fed seeks comment on financial institution combo rule

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WASHINGTON (5/9/14)--Proposed Federal Reserve rules that would prohibit insured depository institutions and other financial firms from combining with another company in certain cases are now open for public comment.
 
The Fed proposal would specifically prohibit firms from combining if the ratio of the resulting financial company's liabilities exceeds 10% of the aggregate consolidated liabilities of all financial companies, the Fed said. The Fed would also measure and disclose the aggregate liabilities of financial companies annually and would calculate aggregate liabilities as a two-year average, under the proposal.
 
Bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and nonbank financial companies designated by the Financial Stability Oversight Council for Fed supervision would also be subject to the rule.
 
For the purposes of the Fed rule, liabilities are defined as the difference between an institution's risk-weighted assets, as adjusted to reflect exposures deducted from regulatory capital, and its total regulatory capital. Firms not subject to consolidated risk-based capital rules would measure liabilities using generally accepted accounting standards, the Fed said.
 
Comments on the proposal will be accepted until July 8. For more, use the resource link.

Senators call for quick passage of privacy notification tweaks

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WASHINGTON (5/9/14)--Sens. Sherrod Brown (D-Ohio) and Jerry Moran (R-Kan.) this week called on colleagues to follow up on the release of a new Consumer Financial Protection Bureau privacy notification proposal by supporting their own bill, The Privacy Notice Modernization Act.
 
The privacy notice bill would eliminate a requirement that privacy notices be sent on an annual basis. It would instead allow the notices to be sent only when the privacy policy of a financial institution has changed.
 
It would also require credit unions and other financial institutions to make their privacy policy always accessible in some form in order to qualify for the bill's exemption from sending annual privacy notices.
 
The Credit Union National Association supports the bill. The privacy notification legislation was introduced last year.
 
"Consumers don't need to be flooded with duplicative and confusing information, we need to make disclosures easier to understand," Brown said in a release. "The CFPB deserves credit for moving forward with its proposal. But our commonsense bill would further reduce burdensome and unnecessary paperwork--that burden consumers and community banks and credit unions alike--and ensure that provide disclosures are timely, clear, and concise."
 
Moran urged his Senate colleagues to support swift passage of the bill so credit unions and banks can better serve the public and make privacy notices readily available without filling mailboxes with duplicative information.
 
In a letter of support for the bill, CUNA and seven other groups said the "common sense measure would reduce the significant costs institutions incur providing unnecessary disclosures and more importantly give (consumers) a break from redundant notices."
 
The Senate bill currently has 63 bipartisan co-sponsors.

Yellen expresses optimism to Joint Economic Committee

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WASHINGTON (5/8/14)--Federal Reserve Chair Janet Yellen addressed Congress's Joint Economic Committee Wednesday, expressing reserved optimism about the country's current economic situation.
 
She admitted that 2014 has seen a pause in gross domestic product (GDP) growth in the first quarter, but said that transitory factors, including an unusually harsh winter, were the likely cause.
 
"With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter," she said.
 
Several factors, most notably improving unemployment numbers, were a primary cause for her positive outlook.
 
"The unemployment rate was 6.3% in April, about 1.25 percentage points below where it was a year ago. Moreover, gains in payroll employment averaged nearly 200,000 jobs per month over the past year," she said. "During the economic recovery so far, payroll employment has increased by about 8 1/2 million jobs since its low point, and the unemployment rate has declined about 3.75 percentage points since its peak."
 
This optimism was tempered by disappointment in the housing market, in recovery since 2011, which she said has "remained disappointing" this year.
 
"[T]he recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery," she said.
 
One of the reasons she highlighted for the flattening of growth was less household formation, which began to flatten in 2007 after two decades of growth, according to Thomson Reuters DataStream.
 
Yellen said for housing growth to continue, household formation numbers needed to be on the rise again. With an increasing number of young people graduating from college with student debt, it means they would be less likely to qualify for mortgages and more likely to live with their parents, meaning fewer new households.
 
Overall, Yellen said she believed that 2014 would see faster growth than 2013, and expressed optimism that unemployment numbers would fall and inflation will move closer to 2%, a stated goal of the Federal Reserve.
 
"A faster rate of economic growth this year should be supported by reduced restraint from changes in fiscal policy, gains in household net worth from increases in home prices and equity values, a firming in foreign economic growth and further improvements in household and business confidence as the economy continues to strengthen," she said.

CUNA names Hampel as interim president/CEO

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WASHINGTON (5/8/14)--The Credit Union National Association announced Wednesday that its Chief Economist, Bill Hampel, will serve as interim president/CEO, effective June 11. That is the same day that Bill Cheney, current CUNA president/CEO, returns to California to become president/CEO of Santa Ana-based SchoolsFirst FCU, the largest credit union in that state.
 
Hampel, a senior member of CUNA's credit union advocacy team in Washington, is one of the longest-tenured executives at CUNA, having joined the association as an economist in 1978, promoted to vice president in 1985 and to senior vice president and chief economist in 1992.
 
An expert on the economy and credit union issues, he is regularly interviewed by major national television, radio and print media. Hampel also presents the results of the annual holiday spending survey, which is conducted by CUNA and the Consumer Federation of America.
 
He has also testified numerous times before Congress and is a registered lobbyist, advocating on behalf of credit unions on a wide variety of issues.
 
"Bill has deep and broad knowledge and understanding of CUNA's top advocacy issues and operations of the organization. He has demonstrated an ability to bring that background to bear in making decisions in the best interests of our members," said CUNA Chairman Dennis Pierce, president/CEO of CommunityAmerica CU, Lenexa, Kan. "During this interim period between CEOs, I expect CUNA and its members will have a steady hand at the helm."
 
Cheney noted Hampel's nearly four decades of experience in credit union policy issues and with Congress, regulators, state associations, credit unions and the press. "I've worked with Bill on a host of issues affecting the credit union system at large and policy issues specifically," Cheney said, adding, "Bill understands intuitively what credit unions need and want; I fully endorse his selection to oversee CUNA's efforts during the interim period."
 
Prior to joining CUNA, Hampel was an assistant professor of economics at the University of Montana-Missoula. Before that he was an instructor of economics at Iowa State University at Ames.
 
During a one-year sabbatical in 1989, Hampel served as a staff member at Navy FCU, Vienna, Va., where he studied credit union operations and carried out a variety of consulting projects.
 
He was on the board of directors for Madison, Wis.-based Great Wisconsin CU (formerly CUNA CU) from 1991 to 2003, serving as board chair from 1999 to 2001. He served on the board of the National Cooperative Bank, which supports America's cooperatives and their members, especially in low-income communities, by providing innovative financial and related services.
 
Hampel is a member of the American Economic Association and the National Association for Business Economists. He holds a doctorate in economics from Iowa State University.
 
CUNA's search for a permanent CEO will continue throughout the summer; the CUNA Board hopes to make a hire by this fall.
 
Meanwhile, CUNA Vice President of Economics and Statistics Mike Schenk has been named acting chief economist for the association.

Seniors' mortgage challenges examined by CFPB

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WASHINGTON (5/8/14)--The Consumer Financial Protection Bureau released a report Wednesday spotlighting the mortgage debt challenges faced by a growing number of older Americans. These challenges include more mortgage debt, less affordable housing and a greater risk of foreclosure.
 
"A home can be a place of security for older Americans in their retirement years--a roof over their heads as well as a valuable asset," said CFPB Director Richard Cordray. "But as more seniors carry significant mortgages into retirement, they put themselves at risk of losing their nest eggs and their homes."
 
Approximately 80% of the 41 million Americans age 65 and older own their home, the highest homeownership rate among all age groups. But while their rate of homeownership has remained constant over the last decade, the percent of older homeowners holding mortgages has increased.
 
The report's highlights include:
  • More senior homeowners with mortgages: For homeowners age 65 and older, the percentage carrying mortgage debt increased to 30% from 22% from 2001 to 2011. Among those aged 75 and older, the rate more than doubled during that same time period, to 21.2% from 8.4%.
     
  • Median mortgage debt for seniors increased by 82%: From 2001 to 2011, the median amount older homeowners owed on mortgages increased 82% from about $43,300 to $79,000. In addition to carrying increased mortgage debt, many older Americans have also accrued less home equity than their age group did a decade ago.
     
  • Less affordable housing: More than half of the 4.4 million retired homeowners with mortgage debt spend 30% or more of their household income in housing related costs. Housing affordability is threatened when housing costs exceed 30% or more of a homeowner's income.
     
  • Senior delinquency and foreclosure rates increased after financial crisis: From 2007 to 2011, the percentage of homeowners age 65 to 74 who were seriously delinquent in paying their mortgage, meaning more than 90 days late or in foreclosure, increased to 4.96% from 0.85%. For those over 75, it increased to 5.87% from 1.01%. Older consumers have greater difficulty recovering from foreclosure than their younger counterparts due to their increased incidences of health problems, cognitive impairment and difficulties returning to the work force.
The CFPB also issued an advisory highlighting three issues that older Americans should consider while managing mortgage debt in retirement: determining their mortgage pay-off date, the risks of getting home equity loans or refinancing and what less income during retirement will mean while still paying a mortgage.

CFPB data security changes introduced in House

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WASHINGTON (5/8/14)--A five-part bill that aims to address security flaws in the Consumer Financial Protection Bureau's data collection processes has been introduced in the U.S. House.

The CFPB Data Collection Security Act, which was released by Rep. Lynn Westmoreland (R-Ga.), would:
  • Create a consumer opt-out list for CFPB data collection;
     
  • Limit the length of time that data can be held by the CFPB to 60 days after an investigation has been completed;
     
  • Require the bureau to provide one free year of credit monitoring to consumers whose data is used for investigative purposes;
     
  • Require the bureau to be run by a Senate-confirmed director; and
     
  • Create a "confidential" security clearance for certain CFPB employees.
"The CFPB Data Collection Security Act is a simple bill to address a huge problem in protecting your information from not only internal abuse, but from hackers as well. It improves the ability to know what they have and the right to have it removed from their system," Westmoreland said in a release.
 
Under the Dodd-Frank Act, the CFPB is permitted to gather information on organizations, their business conduct, markets, and activities of covered persons and service providers. This information is filed to the CFPB by financial institutions and other service providers. The CFPB has stressed that any personal information collected is stripped from the agency records. CFPB Director Richard Cordray has said the data is used to examine overall trends, not individual transactions.
 
The CFPB's data collection practices could increase the risk of identity theft and fraud for consumers, the Credit Union National Association warned in a letter to the bureau earlier this year. CUNA also said it is particularly concerned by the resulting obligations that these data collection efforts may create for credit unions.

FSOC annual report notes 'significant risks' remain

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ALEXANDRIA, Va. (5/8/14)--The Financial Stability Oversight Council (FSOC) released its annual report for 2013, citing seven themes throughout the 195-page document.
 
The council noted that the U.S. financial system has seen positive developments and continues to grow stronger. However, "significant risks to the financial stability of the U.S. remain," the council said.
 
Practices by nonbank financial firms, such as mortgage-servicing companies, is one area that is coming under scrutiny ( The Wall Street Journal May 7).
 
The themes of the council's fourth annual report are:
  • A vulnerability to runs in wholesale funding markets and destabilizing fire sales;
  • A housing finance system that relies heavily on government and agency guarantees;
  • Operational risks such as technological failures, natural disasters and cyberattacks from internal or external sources;
  • Reliance on reference interest rates
  • Resilience to interest rate risk;
  • Long-term fiscal imbalances; and
  • The sensitivity to possible adverse development in foreign economies.
"It is important for us to be continually reconsidering and evaluating risks to the credit union system," said National Credit Union Administration Board Chairman Debbie Matz, who is a voting member. "Participation in FSOC and the annual report are valuable components of that process."
 
She urged credit unions to read the report, "Because financial stability and the health of a growing economy are critical to the success of the industry."
 
Matz pointed out the following items:
  • The council recommends that agencies continue to promote forward-looking capital and liquidity planning. She noted that "NCUA recently finalized a stress testing and capital planning requirement for credit unions with more than $10 billion in assets, and we are receiving public comment on a modernized risk-based capital rule."
     
  • The council also identifies the risk of increased interest rate volatility. "Over the last several years, many credit unions increased their exposure to fixed rate real estate and more recently have dramatically lengthened the tenor of their investments. These changes have exacerbated exposure to interest rate movements," she said. "The council recommends that supervisors continue to monitor and assess the growing risks resulting from the continued search-for-yield behaviors, as well as the risks from potential severe interest rate shocks. I can assure you this is a high priority area for NCUA."
     
  • The council identified operational risks such as cybersecurity issues. "Credit unions are not immune to this threat, and this will be an area of continued emphasis and guidance," Matz said.
Among the council members are representatives from the Treasury Department, Federal Reserve System, Comptroller of the Currency, Consumer Financial Protection Bureau, Securities and Exchange Commission; Federal Deposit Insurance Corp., Commodity Futures Trading Commission and the Federal Housing Finance Agency.

Boston Fed cutting 160 employees in treasury services

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BOSTON (5/8/14)--The Federal Reserve Bank of Boston will cut 160 staff members who are part of its treasury services unit, reports the Boston Business Journal . The reduction will remove the entire department over the next several years.
 
According to the May 6 report, the move is part of consolidation efforts and will save taxpayers about $117 million over the next 10 years.
 
The Boston Globe reports that the reductions will take place over a three- to four-year period and represent the largest layoff in more than a decade. In the early 2000s, the bank cut the number of offices that handled paper checks down to one from 54.
 
Currently the services offered by the Federal Reserve banks are spread across 10 regional banks. After the restructuring, those services will be provided by four regional banks in Kansas City, St. Louis, Cleveland and New York.
 
Services such as cash management, invoice processing and stored value debit cards used on military bases will be phased out in Boston, reports the Globe . A study completed by the Treasury searching for ways to save money resulted in the decision to reduce the workforce.
 
Approximately 1,100 people work at the Boston location. Employees were told of the cuts May 2.

'Ability to repay' rule passes committee, other votes pushed back

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WASHINGTON (5/8/14)--Legislation that addresses some credit union concerns regarding points and fee definitions in the Consumer Financial Protection Bureau's amended final "Ability to Repay" rule was passed, and votes on other financial services bills were delayed, during a Wednesday House Financial Services Committee markup.
 
Lead sponsor Bill Huizenga (R-Mich.) said his Mortgage Choice Act of 2013 (H.R. 3211) aims to "help low- and middle-income borrowers as well as prospective first-time homeowners realize a portion of the American Dream: owning their own home."
 
The bill, Huizenga said, is "narrowly focused to promote access to affordable mortgage credit without overturning the important consumer protections and sound underwriting required under Dodd-Frank's 'ability to repay' provisions."
 
Huizenga said he hopes his bipartisan bill will receive a vote "in a timely manner."
 
Votes were postponed on three other bills that the Credit Union National Association supports:
  • The Portfolio Lending and Mortgage Access Act (H.R. 2673), which would treat mortgages held in portfolio at credit unions and other mortgage lenders as qualified mortgages for purposes of the Consumer Financial Protection Bureau mortgage lending rules;
     
  • The Financial Regulatory Clarity Act (H.R. 4466), which would fight duplicative federal rules; and
     
  • The Community Institution Mortgage Relief Act (H.R. 4521), which would exempt credit unions under $10 billion in assets from a Dodd-Frank Act requirement that mortgage lenders must hold an escrow account for five years for higher-priced, first-lien mortgages secured by borrower's principal dwelling.
CUNA has stated its support for these bills which would help chip away at the regulatory burden that confronts credit unions on a daily basis.
 
A vote on these and other bills is expected to be held after the upcoming House District Work Period.

New radio ad touts consumer benefits of CU membership

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WASHINGTON (5/8/14)--In light of increasing attacks on the credit union tax status, the Credit Union National Association developed a new radio advertisement designed to show the credit union difference when it comes to member benefits.
 
The new 30-second ad, which is intended to be used as a resource, reminds current and potential credit union members that "credit union services are based on members' needs, not profit margins."
 
"Highlighting the ways credit unions serve their members is a key part of our advocacy efforts," said Richard Gose, CUNA senior vice president of political affairs. "And a critical part of those efforts is incorporating that message into our ads."
 
As not-for-profit, member-owned financial institutions, credit union earnings are returned to members through services such as surcharge-free ATMs, better rates and lower fees. With banks, those earnings go to outside bond and stockholders through dividends.
 
While credit unions pay state, payroll and sales taxes, they are exempt from federal income taxes. This was established in 1937, and upheld in 1951 and 1998, through the Credit Union Membership Access Act.
 
"Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because credit unions are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means," reads the act.
 
The tax status of credit unions has come under attack s in several states, including New Hampshire, Maine, Connecticut, Vermont, South Dakota and Nebraska.
 
On April 15, the New Hampshire Bankers Association announced a resolution in which they urged Congress to repeal the federal tax exemption for credit unions, accusing credit unions of failing to work for underserved populations. The New Hampshire Credit Union League has repeatedly refuted those claims.
 
CUNA's award-winning grassroots advocacy campaign #DontTaxMyCU encourages credit unions to contact state and federal lawmakers with the unified message of "Don't Tax My Credit Union." In February, more than 5.3 million users of Twitter and Facebook were exposed to the hashtag #DontTaxMyCU. CUNA and state leagues spearheaded two similar events in July and September 2013.

NEW: Bill Hampel named interim president/CEO of CUNA, effective June 11

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WASHINGTON (5/7/14 UPDATED 2:15 ET)--Current Credit Union National Association Chief Economist Bill Hampel will be interim president/CEO of CUNA, effective June 11, the same day that Bill Cheney, the current president/CEO, returns to California to become president/CEO of Santa Ana-based SchoolsFirst FCU, the largest credit union in that state.
 
Hampel, a senior member of CUNA's credit union advocacy team in Washington, is one of the longest-tenured executives of CUNA, having joined the association as an economist in 1978, promoted to vice president in 1985 and to senior vice president and chief economist in 1992.
 
An expert on the economy and credit union issues, he is regularly interviewed by major national television, radio and print media. He has also testified numerous times before Congress and is a registered lobbyist, advocating on behalf of credit unions on a wide variety of issues.
 
"Bill has deep and broad knowledge and understanding of CUNA's top advocacy issues and operations of the organization. He has demonstrated an ability to bring that background to bear in making decisions in the best interests of our members," said CUNA Chairman Dennis Pierce, president/CEO of CommunityAmerica CU, Lenexa, Kan. "During this interim period between CEOs, I expect CUNA and its members will have a steady hand at the helm."
 
Cheney noted Hampel's nearly four decades of experience in credit union policy issues and with Congress, regulators, state associations, credit unions and the press. "I've worked with Bill on a host of issues affecting the credit union system at large and policy issues specifically," Cheney said, adding, "Bill understands intuitively what credit unions need and want; I fully endorse his selection to oversee CUNA's efforts during the interim period."
 
Prior to joining CUNA, Hampel was an assistant professor of economics at the University of Montana-Missoula. Before that he was an instructor of economics at Iowa State University at Ames.
 
Hampel served as a staff member at Navy FCU, Vienna, Va., during a one-year sabbatical in 1989, where he studied credit union operations and carried out a variety of consulting projects.
 
He was on the board of directors for Madison, Wis.-based Great Wisconsin CU (formerly CUNA CU) from 1991 to 2003, serving as board chair from 1999 to 2001. He served on the board of the National Cooperative Bank, which supports America's cooperatives and their members, especially in low-income communities, by providing innovative financial and related services.
 
Hampel is a member of the American Economic Association and the National Association for Business Economists. He holds a doctorate in economics from Iowa State University.
 
CUNA's search for a permanent CEO will continue throughout the summer; the CUNA Board hopes to make a hire by this fall.
 
Meanwhile, CUNA Vice President of Economics and Statistics Mike Schenk has been named acting chief economist for the association.

CFPB floats plan to promote effective privacy disclosures

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WASHINGTON (5/7/14)--The Consumer Financial Protection Bureau (CFPB) Tuesday proposed a rule aimed at promoting more effective privacy disclosures from financial institutions to their members or customers. The rule would allow companies that limit their consumer data-sharing and meet other requirements to post their annual privacy notices online rather than delivering them individually in paper form.
 
"Consumers need clear information about how their personal information is being used by financial institutions," said CFPB Director Richard Cordray. "This proposal would make it easier for consumers to find and access privacy policies, while also making it cheaper for industry to provide disclosures."
 
Under the Gramm-Leach-Bliley Act (GLBA), financial institutions are required to send annual notices to consumers, describing the conditions by which and how the financial institution shares members' personal information.
 
The CFPB proposal would allow institutions to post privacy notices online if they satisfy certain conditions, such as using a model disclosure form developed by federal regulatory agencies in 2009. (See resource link.) The rule would apply both to financial institutions and those nonbanks that are within the CFPB's jurisdiction under the GLBA.
 
Under the proposal, if an institution qualified for and wants to rely on the online disclosure method, it would have to inform consumers annually about the availability of the disclosures. Those alerts, however, could be included as part of other routine mailings. Currently institutions must send consumers a separate annual communication about privacy disclosures.

If an institution chooses not to meet the requirements for the online disclosure method, it would be required to continue to deliver annual privacy notices to its customers.
 
Benefits of the proposed rule include constant access to privacy policies for consumers, limited data sharing with third parties, and a potential savings of $17 million across the industry if institutions were to choose the online disclosure method.
 
In addition, the model disclosure form designed by federal regulators would allow consumers to easily comparison shop before deciding which financial institution to use. It would allow customers to better educate themselves about different types of privacy policies.
 
The CFPB will accept comments on the proposed rule for 30 days after its publication in the Federal Register.
 
Use the second resource link to see a copy of the proposed rule.

Markup of CU relief bills starts today

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WASHINGTON (5/7/14)--The House Financial Services Committee is slated to start a multi-day markup session on 15 bills today, including four measures that would provide regulatory relief for credit unions.
 
The Credit Union National Association has stated its strong support for the bills that would help chip away at the regulatory burden that confronts credit unions on a daily basis. (See related story: CU relief bills sail through House vote.)

The bills are:
  • The Financial Regulatory Clarity Act (H.R. 4466), which would fight duplicative federal rules;
  • The Portfolio Lending and Mortgage Access Act (H.R. 2673), which would treat mortgages held in portfolio at credit unions and other mortgage lenders as qualified mortgages for purposes of the Consumer Financial Protection Bureau mortgage lending rules;
  • The Mortgage Choice Act (H.R. 3211), which addresses some credit union concerns regarding point and fee definitions in the CFPB's amended final "Ability to Repay" rule; and
  • The Community Institution Mortgage Relief Act (H.R. 4521), which would exempt credit unions under $10 billion in assets from a Dodd-Frank Act requirement that mortgage lenders must hold an escrow account for five years for higher-priced, first-lien mortgages secured by borrower's principal dwelling (News Now May 6).

Former Senate Banking chairman asks NCUA to modify RBC plan

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WASHINGTON (5/7/14)--Former senator Alfonse D'Amato clarified congressional intent for the National Credit Union Administration in a May 7 comment letter, telling the agency that if the U.S. Congress wanted the regulator to set a different two-risk-based net worth standard for well versus adequately capitalized credit unions, it would have said so.
 
D'Amato notes in his letter that the NCUA's proposed risk-based capital plan, issued for comment in January, would apply a risk-based capital standard to determine whether a credit union is well capitalized.
 
"Doing so would be inconsistent with the intent my colleagues and I had when we crafted the credit union version of Prompt Corrective Action (PCA) in 1998 and exceed the authority we conveyed to the NCUA under the Federal Credit Union Act," D'Amato stated. The New York Republican is a former member and chairman of the Senate Banking Committee.
 
D'Amato went on to clarify that while credit union PCA was modeled after the bank regime, there are "some very important differences." For instance, the standards for a credit union to be adequately or well capitalized are higher than those set for banks.
 
"Because of this higher pure net worth requirement for credit unions, we called for a different risk-based component in credit union PCA.
 
"Rather than the dual risk-based capital system in place for banks, with a given risk-based capital ratio threshold to be adequately capitalized and a higher risk-based capital ratio to be well-capitalized, we instructed the NCUA to construct only a risk-based net worth floor, to take account of situations where the 6% requirement to be adequately capitalized was not sufficient."
 
D'Amato urged the NCUA as it works to finalize its RBC rule to apply the risk-based standards to capital adequacy.

CU-supported candidates do well in N.C. primaries

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WASHINGTON (5/7/14)--A trio of credit union-supported candidates fared well in Tuesday's Republican primary elections in North Carolina.
 
U.S. House incumbent Walter Jones and House candidate David Rouzer won their respective party primaries in the 3rd and 7th Congressional District elections. The 6th District candidate, Phil Berger, Jr., appeared headed to a July 15 primary runoff with Mark Walker as of late Tuesday evening.
 
The candidates needed more than 40% of the total primary vote in their district in order to secure the party nomination without a runoff; with 58% of precincts reporting, Berger was leading a nine-candidate field with 36.7% of the reported vote.
 
The Credit Union National Association and the Carolinas Credit Union League (CCUL) took active roles in these elections. CCUL Senior Vice President of Association Services Dan Schline noted that the 3rd, 6th and 7th districts are all heavily Republican, so these primary winners are likely to move on to Washington following their November contests.
 
"We're proud to support candidates who are actively working on behalf of credit unions and understand what they have to offer their constituents," said Trey Hawkins, CUNA's vice president of political affairs (News Now May 6).
 
Jones was the first North Carolina sponsor of the Promoting Lending to America's Small Business Act of 2009, which aimed to raise the credit union member business lending cap. He has also strongly supported Jacksonville's Marine FCU. Berger Jr. has strong connections to credit unions in his district, and Rouzer supported that state's credit unions during his time in the N.C. House.
 
CULAC, CUNA's PAC, starts 2014 on solid footing, with more than $922,000 in cash available. All three of the North Carolina candidates received the maximum CULAC campaign contribution of $5,000. According to opensecrets.org, CULAC remains one of the top 20 PACs in terms of contributions to candidates, and one of the most bi-partisan. During 2013-14, donations were split 50-50 between Democratic and Republican candidates.

Merchants fail to file petition for interchange re-hearing

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WASHINGTON (5/7/14)--An important deadline has passed for the debit card interchange fee cap court case between merchants' groups and the Federal Reserve System. The merchants failed to meet a May 5 deadline to request a re-hearing of the case.

That means the Supreme Court is now the lone option for merchants that wish to challenge the ruling.
 
The merchant interchange claims were made in the case known as NACS, et al. v. Board of Governors of the Federal Reserve System, in which merchants challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high.
 
In an early hearing in the case, U.S. District Judge Richard Leon last July vacated the Fed interchange rule and issued a stay so the rule remained in place until the appeals process was completed.
 
The Credit Union National Association and its partner members of The Clearing House coalition maintained that the cap, in fact, is too restrictive.
 
The ruling, reached in March by the U.S. Court of Appeals for the District of Columbia Circuit, unanimously rejected claims that the Fed interchange rules violated the plain text of the Durbin Amendment to the Dodd-Frank Act. This ruling will become official May 12.
 
Any petitions merchants file with the Supreme Court must be filed by June 19. If such a position is filed, the Fed's response and any amicus briefs from supporters must be sent to the court within 30 days after the case is placed on the docket.

CU relief bills sail through House vote

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WASHINGTON (5/7/14)--Three credit union regulatory relief bills were adopted by the U.S. House by voice vote last night. The bills, two of which are stand-alone credit union measures, are all important steps in the Credit Union National Association's larger relief agenda and attack credit union regulatory burden from a number of fronts.
 
CUNA Executive Vice President of Government Affairs John Magill last night said the significance of the legislative development cannot be overstated. 
 
"It is important for credit unions to note that two of these bills are credit union stand-alone bills. They passed the House on their own merits, not as part of a big roundup of many stakeholders' legislative agendas. Credit unions, the state credit union associations and CUNA have taken their regulatory burden story to Capitol Hill, and federal lawmakers are listening to us," Magill noted.
 
He added, "CUNA and credit unions thank House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and House leadership for guiding these bills through House passage at a time when so few bills are seeing congressional action.
 
"We also thank the chairman and other key lawmakers for working so closely with CUNA and credit unions to make this happen."
 
Under suspension of the rules, these CUNA-backed bills were passed:
  • H.R. 3584, the Capital Access for Small Community Financial Institutions Act, introduced by Reps. Steve Stivers (R-Ohio) and Joyce Beatty (D-Ohio). This bill corrects a drafting error in the Federal Home Loan Bank (FHLB) Act thereby allowing state-chartered, privately insured credit unions to join the FHLB system. The change would give 132 privately insured credit unions across the country additional opportunities to provide mortgage credit to their members, CUNA has noted.
  • The Community Institution Mortgage Relief Act (H.R.  3468). Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.) introduced this bill to provide National Credit Union Share Insurance Fund (NCUSIF) coverage for trust accounts,  such as Interest on Lawyer Trust Accounts (IOLTAS) and other similar accounts. CUNA backed this bill as necessary because the National Credit Union Administration has interpreted that the Federal Credit Union Act does not permit it to extend such coverage.  H.R. 3468 would provide parity in the insurance treatment of trust accounts offered by credit unions with the treatment of similar accounts offered by banks.
  • H.R. 2672, which grants credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau. The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas, and CUNA maintains that any time credit unions can gain an additional opportunity to provide input into the process, they should do so.
When bills are considered under suspension of House rules, it dictates that no amendments can be added during the consideration process and the bills must have enough lawmakers support to pass by a two-thirds vote. Prior to Tuesday night's vote, CUNA contacted each member of the House, urging them to pass the three credit union relief bills.

Next the Senate must consider these bills.  If adopted in that chamber, the bills move on to President Barack Obama's desk to be signed into law.
 
CUNA is also a strong proponent of credit union regulatory relief measures that are scheduled for votes by the House Financial Services Committee today. Use the resource link to read more on those bills.

Johnson: Housing finance reform votes to resume next week

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WASHINGTON (5/7/14)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) said Tuesday that his housing finance reform bill could pass by a 13-9 vote, or better, when the panel resumes its markup on the legislation next week (Politico May 6).
 
It was already widely anticipated that the Johnson-Crapo reform bill would pass the committee with the support of 12 of the panel's members, including Johnson, the committee's ranking member, Rep. Mike Crapo (R-Idaho), and 10 others who backed similar legislation last year as co-sponsors.

Politico reported that Johnson, during a brief interview, declined to identify 13th senator he believes will support the legislation.

When a committee vote on the bill was postponed at the end of April, Johnson said, the delay would aid discussions that would "build a larger coalition supporting the bill."

"While we have the votes to report the bill out today, members of the committee have asked for a brief delay to try to work out additional issues prior to a final vote," he explained.

The legislation is a 425-page plan, known as the Housing Finance Reform and Taxpayer Protection Act of 2014 (S. 1217), which would overhaul the housing finance market and address the issues created by the current government ownership of Fannie Mae and Freddie Mac.

CUs launch support for Calif. congressional candidate

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WASHINGTON (5/7/14)--Credit unions have launched an independent effort to support the candidacy of Redlands, Calif., Mayor Pete Aguilar (D) for the state's 31st Congressional District.
 
Click to view larger image Pete Aguilar (D) is running, with credit union support, to represent California's 31st Congressional District. He is shown here in April at a Justice for Immigration Coalition forum in Rancho Cucamonga, Calif. (CUNA photo)
The Credit Union Legislative Action Council (CULAC) Tuesday filed with the Federal Election Commission to launch an independent expenditure (IE) in support of Aguilar's candidacy. An IE is a paid communication directed to the general public advocating for the election or defeat of a candidate for federal office that must be conducted independently from, and not coordinated in any way with, the candidate being supported.
 
CULAC is the federal political action committee of the Credit Union National Association.
 
Aguilar is a former employee of Arrowhead CU, San Bernardino, Calif., with $773 million in assets, during which time he was an active participant and advocate for credit unions. Additionally, Aguilar was active in local underserved communities through credit union community outreach.
 
"Pete Aguilar worked at an Inland Empire credit union, and thus understands and appreciates the critical role credit unions play in the financial lives of the 170,000 credit union members in the 31st District," said Trey Hawkins, CUNA vice president of political affairs. "We're proud to support Pete's candidacy because we know his credit union background will prove a valuable asset in Congress as he fights for those working families."
 
CULAC is spending $197,189.03 on direct mail and digital advertising, both in English and Spanish. CULAC had previously contributed $10,000 to Aguilar's campaign, and he has strong support from the California Credit Union League and local credit unions.
 
California's 31st District is an open seat created by the announced retirement of incumbent Rep. Gary Miller (R) who will be stepping down at the end of his term. Under state rules, the top two vote-getters in a nonpartisan primary June 3 move to the general election regardless of party.

This week in Congress: CUNA-backed CU relief takes center stage

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WASHINGTON (5/6/14)--The U.S. House returns today and, as reported by News Now, it will consider several bills under suspension of the rules, including the CFPB Rural Designation Petition and Correction Act(H.R. 2672), the Credit Union Share Fund Insurance Parity Act (H.R. 3468), and the Capital Access for Small Community Financial Institutions Act of 2013 (H.R. 3584).
 
Use the resource link to read more about these Credit Union National Association-backed bills that will bring regulatory relief to credit unions, if passed.
 
CUNA sent a letter to all members of the House Monday urging passage of the legislation. Regulatory relief for credit unions is a top CUNA legislative and regulatory priority.
 
CUNA also has stated its strong support for additional credit union relief bills to be considered Wednesday at the committee level. The House Financial Services Committee is scheduled to vote on a series of bills, including:
  • The Financial Regulatory Clarity Act (H.R. 4466), which would fight duplicative federal rules;
  • The Portfolio Lending and Mortgage Access Act (H.R. 2673), which would treat mortgages held in portfolio at credit unions and other mortgage lenders as qualified mortgages for purposes of the Consumer Financial Protection Bureau mortgage lending rules;
  • The Mortgage Choice Act (H.R. 3211), which addresses some credit union concerns regarding point and fee definitions in the CFPB's amended final "Ability to Repay" rule; and,
  • The Community Institution Mortgage Relief Act (H.R. 4521), which would exempt credit unions under $10 billion in assets from a Dodd-Frank Act requirement that mortgage lenders must hold an escrow account for five years for higher priced, first-lien mortgages secured by borrower's principal dwelling.
The markup could extend over days.
 
Also important to credit unions, the Senate Judiciary Committee has rescheduled its markup on the Patent Transparency and Improvements Act of 2013 (S. 1720), which was postponed last week. CUNA and credit unions are strong proponents of this bill intended to help credit unions and other businesses fight predatory practices of patent "trolls" who manipulate the patent system for their own gain.
 
CUNA also is closely monitoring the Housing Finance Reform and Taxpayer Protection and when the Senate Banking Committee reschedules its delayed vote on the bill.
 
Also on CUNA's radar this week:
  • On Wednesday, the Senate Appropriations Committee Homeland Security Subcommittee will hold a hearing on "Investing in Cybersecurity: Understanding Risks and Building Capabilities for the Future" and,
  • The Senate Banking, Housing and Urban Affairs Committee Economic Policy Subcommittee will conduct a hearing on "Drivers of Job Creation."
  • On Thursday, the House Homeland Security subcommittee on counterterrorism and intelligence will hold a hearing on "Assessing Persistent and Emerging Cyber Threats to the U.S. Homeland" and
  • The House Financial Services Committee will hold a full committee hearing on the state of the international financial system.
Use the first resource link to access CUNA's most recent letters of support for this week's regulatory relief bills.

CU-backed candidates face challengers in today's N.C. primaries

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WASHINGTON (5/6/14)--The Credit Union National Association and the Carolinas Credit Union League (CCUL) are taking an active role in today's Republican primary elections in North Carolina, throwing support behind candidates in the 3rd, 6th and 7th Congressional Districts.

Dan Schline, senior vice president of association services for CCUL, said that these seats are all in heavily Republican districts, so the winner of the primary is likely to win the seat in November's election.
                                                            
Incumbent Walter Jones, a Republican who co-sponsored the Promoting Lending to America's Small Business Act of 2009, is one such candidate facing a challenger in Tuesday's primary. Jones became was the first North Carolina sponsor of the bill, which aimed to raise the credit union member business lending cap. He represents the state's 3rd District, which includes the areas around the Outer Banks and the Pamlico Sound.

"Walter has been a huge supporter of credit unions in the district while in office, especially with Marine FCU in Jacksonville," Schline said.

The 6th and 7th Districts feature open seats, and the Credit Union Legislative Action Council (CULAC) and the state league have thrown their support behind a candidate in each race.

In the 6th District, which includes portions of Greensboro and Durham, Phil Berger Jr. will face eight challengers for a chance at his party's nomination to the seat currently held by Republican Howard Coble. Coble announced last November that he would retire at the end of his current term.

"Phil has a lot of connections to credit unions in the sixth district, and he has expressed a real appreciation for the services they offer," Schline said.

Politico called Tuesday's primary "the real battle in 2014," when it comes to the heavily Republican 6th District, as whoever wins the Republican primary is favored to take the vacant seat.

In the 7th District, which includes Wilmington and the southern suburbs of Raleigh, former state senator David Rouzer is being supported by CULAC and the league. He faces challenges from two others for the seat held by Republican Rep. Mike McIntyre, who has announced he will not seek re-election.

"David Rouzer was very supportive of credit unions during his time in the state legislature," Schline said.

In a straw poll conducted April 26 at the district convention, Rouzer took 59.8% of the votes.

"We're proud to support candidates who are actively working on behalf of credit unions and understand what they have to offer," said Trey Hawkins, CUNA's vice president of political affairs.

In each primary, the winning candidate must receive at least 40% of the vote. If that number is not reached, a runoff election between the top two candidates will take place July 15.

CULAC has donated the maximum legal amount, $5,000, to each of the three candidates' campaigns. According opensecrets.org, CULAC is one of the top 20 PACs in terms of contributions to candidates, and during 2013-14, donations were split 50-50 among Democratic and Republican candidates.
 
Use the resource links to access the Politico article, the OpenSecrets website, and the straw poll results.

Anti-money laundering compliance is topic of new NCUA webinars

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ALEXANDRIA, Va. (4/6/14)--Looking for tips on how your credit union could better comply with federal anti-money laundering (AML) regulations? The National Credit Union Administration will provide an overview of AML issues and how they can be addressed in a pair of upcoming webinars.
 
Both webinars will deal with AML requirements enforced by the Office of Foreign Assets Control (OFAC)  and the Financial Crimes Enforcement Network (FinCEN).
 
The first webinar, "How to Be in Compliance with OFAC and FinCEN," will be held on May 21 at 2 p.m. (ET).
 
NCUA Office of Small Credit Union Initiatives Training Manager Diane Rector is scheduled to host the webinar, which will also feature commentary from:
  • Adam Maddox, sanctions compliance officer, OFAC;
  • Andrea Sharrin, office of compliance and enforcement director, FinCEN; and
  • Stephanie Brooker, enforcement division associate director, FinCEN.
The webinar will provide an overview of OFAC's and FinCEN's programs, their enforcement authorities and their relationships with other financial services regulators, the NCUA said.
 
The second webinar will take place on June 25 and will cover:
  • Reporting requirements;
  • Emerging money laundering threats; and
  • Tips on how to create an effective AML compliance program.
NCUA Office of Examination and Insurance staff will take part in both webinars.

Participants may submit questions in advance at WebinarQuestions@ncua.gov. The subject line of the email should read, "OFAC and FinCen Compliance Webinar."

To register for the May 21 webinar, use the resource link.

Spanish-language NCUA share insurance estimator is available

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ALEXANDRIA, Va. (2/6/14)--Spanish speakers who wish to keep track of their share insurance coverage, or who have general questions about share insurance, can get answers from a new Spanish-language version of the National Credit Union Administration's Share Insurance Estimator.
 
The NCUA said it developed the origianl estimator to make it easier for consumers to calculate share insurance coverage and receive immediate answers to questions about share insurance. Users can choose from personal, business and government accounts, and enter the amounts held in those accounts and other related information to determine how much of their total credit union funds are insured by NCUA.

The Share Insurance Estimator was formerly known as the E-Calculator. The tool will also tell members what they can do if their account is not 100% protected.

The Spanish version of the estimator is available at espanol.MyCreditUnion.gov, or at the resource link.

NEW: CU relief bills sail through House vote

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WASHINGTON (5/6/14, UPDATED 5:45 p.m. ET)--Three credit union regulatory relief bills were adopted by the U.S. House this evening. The bills, two of which are stand-alone credit union measures, are all important steps in the Credit Union National Association's larger relief agenda and attack credit union regulatory burden from a number of fronts.
 
CUNA Executive Vice President of Government Affairs John Magill tonight said the significance of the legislative development cannot be overstated. 
 
"It is important for credit unions to note that two of these bills are credit union stand-alone bills. They passed the House on their own merits, not as part of a big roundup of many stakeholders' legislative agendas. Credit unions, the state credit union associations and CUNA have taken their regulatory burden story to Capitol Hill and federal lawmakers are listening to us," Magill noted.
 
He added, "CUNA and credit unions thank House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and House leadership for guiding these bills through House passage at a time when so few bills are seeing congressional action.
 
"We also thank the chairman and other key lawmakers for working so closely with CUNA and credit unions to make this happen."
 
Under suspension of the rules, these CUNA-backed bills were passed:
  • H.R. 3584 , the Capital Access for Small Community Financial Institutions Act, introduced by Reps. Steve Stivers (R-Ohio) and Joyce Beatty (D-Ohio). This bill corrects a drafting error in the Federal Home Loan Bank (FHLB) Act thereby allowing state-chartered, privately insured credit unions to join the FHLB system. The change would give 132 privately insured credit unions across the country additional opportunities to provide mortgage credit to their members, CUNA has noted.
  • The Community Institution Mortgage Relief Act (H.R.  3468). Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.) introduced this bill to provide National Credit Union Share Insurance Fund (NCUSIF) coverage for trust accounts,  such as Interest on Lawyer Trust Accounts (IOLTAS) and other similar accounts. CUNA backed this bill as necessary because the National Credit Union Administration has interpreted that the Federal Credit Union Act does not permit it to extend such coverage.  H.R. 3468 would provide parity in the insurance treatment of trust accounts offered by credit unions with the treatment of similar accounts offered by banks.
  • H.R. 2672, which grants credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau. The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas and CUNA maintains that any time credit unions can gain an additional opportunity to provide input into the process, they should do so.
When bills are considered under suspension of House rules, it dictates that no amendments can be added during the consideration process and the bills must have enough lawmakers support to pass by a two-thirds vote. 

Prior to this evening's vote, CUNA contacted each member of the House, urging them to pass the three credit union relief bills.Next the Senate must consider these bills.  If adopted in that chamber, the bills move on to the president's desk to be signed into law.
 
CUNA is also a strong proponent of credit union regulatory relief measures that are scheduled for votes by the House Financial Services Committee, starting tomorrow.

Use the resource link to read more on those bills.

NCUA releases Part II of RBC Q-and-A video

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ALEXANDRIA, Va. (5/5/14)--More credit union questions about the National Credit Union Administration's risk-based capital plan are answered by NCUA staff in a new, second YouTube video.

The video is intended to serve as a resource for federally insured credit unions to understand how the proposed changes to NCUA's Prompt Corrective Action rule may affect their risk-based capital (RBC) ratios, the agency said.

Questions addressed in the video include:
  • Why did NCUA propose the rule, and why now;
  • How many credit unions will be impacted; and
  • What are the differences between well-capitalized, adequately capitalized and undercapitalized credit unions under the rule.
CUNA continues to urge credit unions to weigh in on the RBC plan. The NCUA will accept comment on the proposal until May 28.

Working with CUNA's Examination and Supervision Subcommittee, CUNA is developing its own comment letter, which it says will reflect major concerns and present a range of recommendations to make the proposal workable.

The NCUA proposal would make changes to Prompt Corrective Action rules, that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.

Use the resource links for the NCUA video and CUNA's RBC Action Center. CUNA's Action Center features a calculator to help credit unions assess how the proposal will affect their operations, a video explaining the NCUA's plan, and much more.

Freddie Mac plans to purchase, secure multifamily loans

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WASHINGTON (5/5/14)--The multifamily housing unit of Freddie Mac plans to begin purchasing and securitizing Manufactured Housing Community (MHC) loans in a bid to increase available funding for affordable housing in rural areas, Freddie Mac reported last week.

Freddie Mac said stabilized, high-quality, professionally managed communities owned by experienced operators will be eligible for the program. Loans will be made to community owners. Community land, infrastructure, amenities and community-owned rentals will serve as collateral for securing MHC loans, Freddie Mac added.

"Manufactured housing communities are an affordable housing option for many low‐income individuals, especially in rural communities where affordable apartments are less prevalent," said David Brickman, executive vice president for Freddie Mac Multifamily Business. The financing, he added, will help to increase debt capital to rural areas and help provide housing options for underserved populations. "Nearly half of nation's manufactured homes are located in rural, non-metropolitan areas," Brickman said.

For more information, use the resource link.

GAO report notes CFPB audit deficiencies

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WASHINGTON (5/5/14)--Internal control issues increase the risk that the Consumer Financial Protection Bureau may not detect and correct errors in its own financial statements, the U.S. Government Accountability Office reported last week.

The GAO analysis of the CFPB's fiscal 2012 and 2013 statements and other documents found that the bureau did not effectively design or implement:
  • Internal control over its year-end accrual process to ensure accounts payable amounts recorded were complete and accurate; and
  • Controls to ensure accurate and complete recording of its property and equipment transactions.
To address these issues, the GAO recommended that the bureau:
  • Strengthen the design and implementation of control procedures to require the review of tracking schedules, invoices, obligating documents and other underlying supporting documents;
  • Design and implement control procedures to ensure that property and equipment costs, including costs associated with internal-use software, are properly capitalized or expensed as appropriate;
  • Develop detailed guidance and provide training for contracting officer representative (CORs) to further assist them in identifying and estimating accruals, including examples of expenses that should and should not be accrued at the end of an accounting period and how to calculate amounts to be accrued; and
  • Strengthen the design and implementation of control procedures regarding the review of the accounts payable estimates to include variance analysis of calculations and comprehensive review of obligating documents, invoices, and the CORs' accrual calculations.
The GAO said the CFPB has agreed with these recommendations, and has implemented or is in the process of implementing the recommendations.

For the full GAO report, use the resource link.

CUNA clarifies questions on post-death benefit payment collections

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WASHINGTON (5/5/14)--Receiving depository financial institutions (RDFIs) are liable for all benefit payments received after the death of a recipient, unless they meet certain requirements, the Credit Union National Association clarified in a CompBlog post.

According to U.S. Treasury regulations, an RDFI will not be liable if it:
  • Certifies that it did not have actual or constructive knowledge of the recipient's death or incapacity at the time of the deposit of any post-death benefit payments;
  • Returns all post-death benefit payments it receives after it learns of the death; and
  • Responds to the Notice of Reclamation completely and adequately, so that it is received by the Government Disbursing Office within 60 days from the date of the notice.
Credit unions should first determine the balance of a given account when it receives a notice of reclamation from the government. If there are insufficient funds, a partial payment should be remitted to the Government Disbursing Office that issued the reclamation, CUNA wrote.

The Treasury says financial institutions may not attempt to reclaim funds if all or part of post-death benefit payments have been withdrawn from an account. "If the RDFI does so, it acts under its own authority in terms of its contract with its depositor or under state law," according to the agency.

For the full CompBlog post, use the resource link.

CUNA urges action on series on CU relief bills

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WASHINGTON (5/5/14)--This morning, the Credit Union National Association is contacting each member of the House of Representatives, urging them to pass three credit union relief bills that are expected to come up for a vote in that chamber this week .

Those bills are the Capital Access for Small Community Financial Institutions Act (H.R. 3584), H.R. 2672, which would grant credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau, and The Community Institution Mortgage Relief Act (H.R.  3468) (News Now May 2).

Also this morning, CUNA is sending a series of letters to key lawmakers on Capitol Hill, thanking them for their leadership in developing other measures that will provide regulatory relief for credit unions--a top priority for CUNA--and for considering CUNA's views on behalf of credit unions while developing their bills.

"CUNA, the state credit union leagues, and credit unions have worked tirelessly to inform lawmakers of the crisis of creeping complexity credit unions face with respect to regulatory burden.  There are now a series of bills in the House that will, if passed, attack the problem from many directions," Ryan Donovan, CUNA senior vice president of legislative affairs, said Friday and added, "These are significant developments."

In its appreciation letters, CUNA stated its strong support for the following bill that are expected to be considered by the House Financial Services Committee this week:
  •  The Financial Regulatory Clarity Act (H.R. 4461), introduced by introduced by Reps. Shelley Moore Capito and Gregory Meeks, the chair and ranking member of the House Financial Services subcommittee on financial institutions and consumer credit. The bill would require financial regulators to determine whether new regulations are duplicative or inconsistent with existing federal regulations. Unnecessary regulatory burden could be avoided if regulators took these steps, so we strongly support this commonsense piece of legislation, CUNA wrote.
  • H.R. 2673, the Portfolio Lending and Mortgage Access Act introduced by Rep. Andy Barr (R-Ky.), which would treat mortgages held in portfolio at credit unions and other mortgage lenders as qualified mortgages for purposes of the Consumer Financial Protection Bureau mortgage lending rules. CUNA noted that it is appropriate to treat loans held on balance sheets as QMs because the lender retains all of the risk involved with the mortgages and is subject to significant safety and soundness supervision from its prudential  regulator. The statutory change, if made, will help credit unions, many of which are primarily portfolio lenders, continue to provide mortgage credit to their members, CUNA wrote.
  • H.R. 4521, introduced by Rep. Luetkemeyer (R-Mo.), would exempt credit unions under $10 billion in assets from a Dodd-Frank Act requirement that mortgage lenders must hold an escrow account for five years for higher priced, first-lien mortgages secured by borrower's principal dwelling. The requirement has forced some credit unions to shy away from higher priced mortgages because of the expertise that is required to establish and maintain the escrow accounts. CUNA noted that Dodd-Frank conveyed authority to the CFPB to exempt credit unions and other classes of entities from its rules to keep the regulatory burden on community financial institutions measured. However, the bureau has failed to exercise that authority to its fullest possibilities, making bills like Luetkemeyer's necessary, CUNA wrote.  H.R. 4521 also improves the exemption threshold for small servicers of mortgage loans from Section 6 of the Real Estate Settlement Procedures Act.

In its separate letter to all House members, CUNA urged passage of:
  • H.R. 3584 , the Capital Access for Small Community Financial Institutions Act, introduced by Reps. Steve Stivers (R-Ohio) and Joyce Beatty (D-Ohio), a bill to correct a drafting error in the Federal Home Loan Bank (FHLB) Act thereby allowing-state chartered, privately insured credit unions to join the FHLB system. The change would give 132 privately insured credit unions across the country additional opportunities to provide mortgage credit to their members, CUNA has noted.
  • The Community Institution Mortgage Relief Act (H.R.  3468). Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.) have introduced this bill to provide National Credit Union Share Insurance Fund (NCUSIF) coverage for trust accounts,  such as Interest on Lawyer Trust Accounts (IOLTAS) and other similar accounts. CUNA backs this bill as necessary because the National Credit Union Administration has interpreted that the Federal Credit Union Act does not permit it to extend such coverage.  H.R. 3468 would provide parity in the insurance treatment of trust accounts offered by credit unions with the treatment of similar accounts offered by banks.
  • H.R. 2672, which would grant credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau. The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas and CUNA maintains that any time credit unions can gain an additional opportunity to provide input into the process, they should do so.
When the letters are posted to the CUNA website, they will be available through the resource link below.

Liquidation must stay a last CU resort: CUNA to NCUA

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WASHINGTON (5/5/14)--In its proposed updates to voluntary liquidation rules, the National Credit Union Administration should reinforce that liquidation of a credit union is a drastic step and should be only be undertaken when no other options are viable, the Credit Union National Association said in a comment letter filed with the agency last week.

The proposed liquidation rule updates, released at the February NCUA open board meeting, would permit liquidating federal credit unions to publish required creditor notices in electronic media or newspapers of general circulation.

It would also increase the asset size threshold for requiring multiple creditor notices, by exempting federal credit unions with less than $1 million in assets from the publication requirement, and exempting federal credit unions with less than $50 million in assets from the multiple publication requirement.

Other portions of the update impact how credit union members will be refunded their member shares in the event of a liquidation. NCUA Chairman Debbie Matz in February said the changes are intended to modernize the rule and factor in credit union growth since 1993, which was when the rule was last updated.

"We recognize that a small number of credit unions may choose to liquidate, but we urge NCUA to add language to the rule requiring agency staff to work with a credit union considering such an option to find ways to either continue operation or merge with another credit union, in order to ensure members will continue to have access to a credit union if at all possible," CUNA Deputy General Counsel Mary Dunn wrote.

While it generally supports the agency's efforts to update the rule and generally agrees with it, CUNA has recommended some changes.

"Consistent with longstanding CUNA policy, we believe that credit union liquidation should only occur as a last resort," Dunn added.

For more on the changes, use the resource link.

House to consider CU relief bills next week

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WASHINGTON (5/2/14)--Regulatory relief -- a top priority for the Credit Union National Association--would be realized for credit unions under a number of measures that will be considered next week on the House floor.

Among the items on the House schedule for consideration are:
  • H.R. 3468, which would  extend share insurance coverage to all of the underlying owners of funds held by lawyers in trust accounts and realtors in escrow accounts. This bill, supported by CUNA, would provide parity for credit unions with banks with respect to federal insurance coverage of lawyer trust accounts (IOLTAs: Interest on Lawyer Trust Accounts) and other similar accounts;
  • H.R. 3584, which would  broaden credit unions' ability to apply for Federal Home Loan Bank membership.  CUNA strongly supports this bill that would put the country's privately insured credit unions on the same footing as their federally insured counterparts where it comes to membership in the FHLB system; and,
  • H.R. 2672, which would grant credit unions and other lenders greater input into rural-area designations made by the Consumer Financial Protection Bureau. The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas and CUNA maintains that any time credit unions can gain an additional opportunity to provide input into the process, they should do so.

NCUA stands firm on May 28 RBC comment deadline

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ALEXANDRIA, Va. (5/2/14)--The comment deadline for the National Credit Union Administration's risk-based capital (RBC) plan remains at May 28, said agency board member Rick Metsger in a letter to the Credit Union National Association.  The response aligns Metsger with NCUA Chair Debbie Matz who also said no to a joint request by CUNA and the National Association of Federal Credit Unions to extend the comment period.
 
A key reason the deadline must remain May 28, according to Metsger, is that the regulator wants adequate time for staff to summarize written RBC comments to better inform the Listening Sessions Matz and Metsger--and perhaps NCUA nominee J. Mark McWatters by then--will be conducting across the country this summer. 
 
Also, basic human nature--lulling many to wait until the last minute to submit a report or comments--argues against an extension, Metsger asserted.
 
"Extension of the comment period is more likely to delay the receipt of comments (and thus delay their consideration) than it is to generate additional comments. It would seem more productive for interested parties to utilize the significant time still left in the comment period to focus their energy on actually analyzing the proposal and providing input, rather than eroding that time on other issues," he wrote.
 
Metsger noted in his April 30 letter that he will carefully consider any comment on the proposal prior to a final vote, regardless of when it is received. CUNA General Counsel Eric Richard pointed out, however, that the other members of the NCUA board have not made any similar commitment. "The comment deadline remains May 28--that is hard and fast.  A credit union must meet that deadline to become a part of the official record on this historic proposal," he said.
 
Metsger reminded in his letter that the agency has created resources, available at www.ncua.gov , to help credit unions understand the proposed rule.
 
Reflecting another point made by Matz when she sent her response to the joint trade group request for an extension, Metsger said, "While I cannot predict what the board will do, it is common for final rules to be modified to reflect comments received.  History suggests the more complex and significant a rule is, the greater the likelihood modifications will be made."

On Thursday, Richard reiterated CUNA's urging to credit unions to weigh in on the RBC plan.

The NCUA proposal would make changes to Prompt Corrective Action (PCA) rules, that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
CUNA supports risk-based capital. However, the association strongly opposes the proposal the NCUA has issued for comment. Working with CUNA's Examination and Supervision Subcommittee, CUNA is developing its comment letter, which it says will reflect major concerns and present a range of recommendations to make the proposal workable.

In the meantime, CUNA is encouraging all credit union with assets above $40 million to consider how the proposal will affect their operations and to file a comment letter.

Use the resource link for CUNA's RBC Action Center.

Mass. bank commish reappointed to FFIEC slot

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WASHINGTON (5/2/14)--David Cotney, Massachusetts Commissioner of Banks, has been reappointed to the Federal Financial Institutions Examination Council's (FFIEC) State Liaison Committee (SLC).

Cotney was also selected to serve as SLC chairman for one year but can be elected for additional terms as leader. His SLC term is scheduled to end on April 30, 2016.

The SLC encourages 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 group 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.

CUNA: Fed remote capture changes could create loss risks

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WASHINGTON (5/2/14)--Proposed changes to remote deposit capture (RDC) standards could increase risks for all financial institutions that offer that product, and alternative approaches to addressing the issue must be considered, the Credit Union National Association said in a letter to the Federal Reserve.

RDC transactions allow credit union members and bank customers to transmit scanned share drafts or checks to their financial institutions from remote locations.

The Fed is considering changes that would allow a depository institution that accepts an original check to recover directly from the financial institution that permitted the check to be deposited through RDC when there has been duplicate presentment.

The Fed has also proposed new indemnity rules relating to RDC to cover institutions that receive deposit of an original paper check returned unpaid, because it was previously deposited (and paid) using RDC.

CUNA supports the intent behind the proposal--to improve the check-clearing process and to account for a shift toward fully electronic checks, Assistant General Counsel Dennis Tsang wrote. However, he added, the board should also minimize the impact the proposed changes could have on smaller institutions.

Credit unions, the CUNA letter noted, have concerns that the Fed's proposed changes would increase risks for institutions offering RDC. Also, financial institutions offering RDC generally have taken steps already to reduce the risk of duplicate presentments and the likelihood that other institutions will deposit the paper check again after they have honored it.

The CUNA letter also called on the Fed to:
  • Consider whether the proposed indemnity could be applied only to paper checks that have not been restrictively endorsed;
  • Further assess and research the likely operational impacts that a pair of proposed alternative RDC approaches could create;
  • Limit changes to Reg CC that would maintain an expedited check-return process;
  • Address and limit any increased risks that applying Check-21-like warranties to electronic images and electronic information could create for financial institutions;
  • Clarify the indemnities and warranties in Reg CC that should apply to electronically created items; and
  • Provide appropriate flexibility for financial institutions to vary certain terms by agreement, and also address risk management regarding the unique attributes and risks associated with electronically created items.
In addition, CUNA called for a delayed effective date of at least one year to provide adequate time for credit unions and others to implement any changes.
 
CUNA also encouraged the Fed and Consumer Financial Protection Bureau to work closely with credit unions on check and other payments issues, and to solicit comments on the impact to credit unions during the rulemaking processes.

For the full comment letter, use the resource link.

Fair lending focus on high-risk areas, CFPB says

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WASHINGTON (5/2/14)--High-risk areas have become the focus as the Consumer Financial Protection Bureau refines its fair lending examination and supervisory work, the agency said this week.

"For many consumers, access to responsible credit remains a challenge. Without fair and equal access to credit, some people may never reach their financial goals. Worse, some consumers may face discrimination in the process," CFPB Assistant Director for the Office of Fair Lending and Equal Opportunity Patrice Ficklin wrote.

He added, "We've created, refined, and implemented a process to focus our supervisory work on areas that present higher risk to consumers when it comes to fair lending."

Ficklin said the CFPB's supervisory work on behalf of consumers takes agency staff into institutions to analyze data and review policies and practices to determine compliance with the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act.

The CFPB blog post highlighted recent agency actions against ECOA and HMDA violators, including:
  • Actions taken against two mortgage lenders that had significant mortgage loan application data errors;
  • Actions against a credit card company that unlawfully discriminated against car applicants;
  • Actions against a mortgage lender that charged African-American and Hispanic borrowers higher rates than it charged white borrowers with similar creditworthiness; and
  • Actions against an indirect auto lender that overcharged minority borrowers.
For more on CFPB enforcement, use the resource link.

Grants available to CUs in storm-hit areas: NCUA

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ALEXANDRIA, Va. (5/2/14)--Grants are available to help credit unions impacted by recent storms repair their facilities and restore their operations, the National Credit Union Administration reminded on Thursday.

The four days of storms, which hit much of the Southeast, Mid-Atlantic and Northeast, and parts of the Midwest, threw off an estimated 79 tornadoes and created floods of historical proportions from Florida to La Guardia.

Low-income designated credit unions may apply for up to $7,500 in grant funding to pay for repairs and fix or replace damaged equipment through the agency's Urgent Needs Initiative. The fund is supported by the Community Development Revolving Loan Fund and is administered by the NCUA's Office of Small Credit Union Initiatives. It provides grants to help restore operations and fix facilities damaged by natural disasters and other unexpected events, but the agency accepts applications for the initiative year-round.

For the full NCUA release, use the resource link.

Credit unions are one group that can play a critical role in helping communities recover after disaster strikes. Agility Recovery this week gave tips on how preemptive steps taken by credit unions and other organizations can help.

Use the resource link to access the News Now article: Expert shares disaster preparedness advice with CUs.

CUNA joins with 400 firms, amplifies patent reform support

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WASHINGTON (5/1/14)--"Patents are bedrock to the American innovation economy, but when they are used by patent trolls to extort American businesses, congressional action is unquestionably necessary," the Credit Union National Association, with about 400 co-signers, said in a Wednesday letter to the U.S. Congress.
 
The letter comes as the Senate Judiciary Committee prepares for a vote on its Patent Transparency and Improvements Act (S. 1720).  The  committee had scheduled a markup on the bill for today, starting around 10 a.m. (ET), but that session has been delayed.

That bill would aid credit unions and other businesses that have been targeted by patent "trolls" who manipulate the patent system for their own gain.
 
The coalition letter notes that senators are working on additional legislative language that would:
  • Require patent demand letters to include basic information about the alleged infringement and the method by which a demand was calculated;
  •  Require patent owners to reveal their ownership when demanding licenses and attempting to enforce a patent; and
  • Protect customers and end-users from lawsuits based on alleged infringements by manufacturers and service providers, and make it easier for courts to get rid of frivolous claims of willful infringement.
"Today, abusive patent litigation is killing small companies, chilling employment and growth of all companies, and stifling the economies of a wide range of industries nationwide. Instead of investing in new jobs and services, businesses must fight frivolous claims and overly broad lawsuits made by patent trolls against a range of technologies and commonplace ideas," the letter added.
 
The letter was signed by CUNA and a large group of diverse firms, including Apple Inc., Facebook, Ford Motor Co., Google, Hasbro, Hilton Worldwide, J.C. Penney Co., Kickstarter Inc., Newspaper Association of America, Polaroid, Wal-Mart Stores Inc. and White Castle.
 
"To date, we have borne the economic costs and burdens of a patent system increasingly held hostage by trolls that do not seek to build up the American economy, but rather tear it down, one demand letter and exorbitant licensing fee at a time," the coalition wrote.
 
The bill, the co-signers said, "would help restore balance to the system in a manner that will help to bolster innovation and the entrepreneurial spirit."

The letter is expected to be posted on the CUNA site this morning. Use the resource link.

Five banned from FCU work in newest NCUA prohibition orders

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ALEXANDRIA, Va. (5/1/14)--Former Pampa (Texas) Teachers FCU loan officer Erin Trevathan is one of five individuals prohibited from future financial institution work under National Credit Union Administration prohibition orders released Wednesday.

Trevathan, who pleaded guilty to fraud charges, was the only loan officer at the $11 million-asset credit union between mid-2008 and 2010, and used funds she allegedly stole for personal use, The Associated Press reported in 2013.  The Pampa News said that year that Trevathan allegedly funded false loans with funds from other credit union member accounts and made false entries into financial statements and credit union records to cover her tracks.

She has been ordered to pay $442,973.91 in restitution. Trevathan will also serve three years of prison and five years of supervised release.

Also subject to NCUA prohibition orders are:
  • Jayme Cather, aka Jayme Suiter, a former employee of Pittsburgh Central FCU, Sewickley, Pa., with $42 million in assets. Cather entered into an accelerated rehabilitative disposition program in connection with charges of unlawful use of a computer, theft and receiving stolen property. Cather was also required to complete 200 hours of community service and ordered to pay $16,508.02 in restitution;
     
  • Aaron Kyle Harris, a former employee of Mainstreet CU, Lenexa, Kan., with $338 million in assets, who pleaded no contest to charges of unlawful acts concerning computers and theft. Harris was sentenced to eight months in prison, one year of supervised release and 18 months of probation;
     
  • Susanne Jenness, a former employee of $4.8 million-asset United Neighbors FCU, Watertown, N.Y., who pleaded guilty to a charge of grand larceny. Jenness was sentenced to a five-year probation and ordered to pay $22,215.70 in restitution; and
     
  • Kelly Osborne, a former employee of Charlotte Fire Department CU, Charlotte, N.C., with $48 million in assets. Osborne pleaded guilty to embezzlement charges and was sentenced to six months in prison, three years of supervised release and ordered to pay $97,953.05 in restitution.
The NCUA reminds that violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link to access all NCUA enforcement orders.
 

Tech can help fin. lit. efforts, panelist says

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WASHINGTON (5/1/14)--"Technology holds the promise of expanding access to personal finance education by providing flexibility in how, where and when learning occurs," but will never serve as a replacement for the power of in-person motivating instruction between students and financial experts, WorldofMoney.org CEO Sabrina Lamb said in prepared testimony Wednesday.

Lamb was one of five witnesses at a House Financial Services subcommittee on financial institutions and consumer credit hearing titled "Examining How Technology Can Promote Consumer Financial Literacy."

WorldofMoney.org is a nonprofit firm that provides financial education sessions taught by industry experts to youth ages 7 to 18.

Lamb noted that technology, and social media in particular, can be a powerful tool that "can create a financial education cultural revolution." However, it "should be used as an instructional supplemental activity that is supported by compassionate financial coaching" or other means of education, she added.

U.S. Government Accountability Office Director of Financial Markets and Community Investment Alicia Puente Cackley also testified during the hearing. Puente Cackley in part presented a GAO report that examined the financial literacy efforts of several federal agencies, including the Consumer Financial Protection Bureau.

The GAO report noted that federal agencies have shown improvement in four areas: Coordination, partnerships, delineating their roles, and evaluation tools. However, that report said, significant work remains to be done in one major area--determining the most effective and efficient allocation of federal resources.

BancVue CEO Gabriel Krajicek, Visa Senior Vice President and Global Head of Financial Inclusion Stephen Kehoe and Intuit Consumer Ecosystem Group Senior Vice President Barry Saik also testified on Wednesday.

The Credit Union National Association and National Credit Union Foundation submitted a letter for the hearing record.  It noted the positive work of credit unions and highlighted that credit unions invest millions of dollars in consumer financial education and counseling programs, helping provide financial counseling to more than 1.6 million consumers a year. (See April 30 News Now ).

For more on Wednesday's hearing, use the resource link to access written testimony.

With CFPB tweak, lenders could refund some fees, points for QM rating

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WASHINGTON (5/1/14)--Minor mortgage rule adjustments proposed by the Consumer Financial Protection Bureau would allow credit unions and other institutions to refund excess points and fees that are charged on mortgages in certain cases.
 
The proposed changes would set limited circumstances where lenders that exceed a points and fees cap can refund the excess amount to consumers and still have the loan be considered a Qualified Mortgage, the CFPB said.
 
CFPB Director Richard Cordray said the proposal would maintain strong consumer protections set by the agency while making tweaks to ensure consumers have access to credit. "This includes helping nonprofits that provide working families with important pathways to affordable homeownership," he added.
 
The CFPB in a release said the proposal also:
  • Offers an alternative definition of a small servicer that would allow certain nonprofits to continue to consolidate their servicing activities while maintaining their exemption from some servicing rules; and
  • Allow certain nonprofits to continue to extend certain interest-free, forgivable loans, also known as "soft seconds," without regard to the 200-mortgage loan limit.
While the CFPB's points and fees proposed "cure" provision would affect credit unions, the remaining two portions of the proposal noted above will not, as they are not 501(c)(3) organizations.  However, the Credit Union National Association will be urging the bureau to consider expanding the scope of these two provisions to other nonprofit creditors, such as credit unions.
 
The CFPB is also seeking:
  • Comment on a possible limited, post-closing cure or correction provision for loans that are originated with the good faith expectation of QM status, but that actually exceed the 43% debt-to-income ratio limit that applies to certain QMs; and
  • Feedback and data from smaller creditors such as credit unions regarding implementation of certain provisions of the 2013 mortgage rules that are tailored to account for small creditor operations and how their mortgage origination activities have changed in light of the new rules.
Specifically, the CFPB is seeking comment on amending the credit extension limits under the "small creditor" provisions of the Ability-to-Repay/Qualified Mortgage rule.  CUNA will be weighing in on this aspect of the proposal to urge the Bureau to expand the number of first lien mortgages allowed to be originated by small creditors and recommending other changes, as well.
 
"We appreciate that the bureau is reviewing and proposing these amendments to the mortgage rules, taking into consideration the operational concerns and needs of small creditors, such as credit unions; however, we will be urging the agency to do more to exempt credit unions from these and other rules," CUNA Associate General Counsel Jared Ihrig said Wednesday.
 
CUNA will work with credit union leagues, its Consumer Protection Subcommittee and other groups to analyze the proposed changes and prepare comments for the CFPB, he added.
 
For the full CFPB release, use the resource link.