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Washington

CUNA: Bank Tax Rhetoric Tired, But Threat's Real

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WASHINGTON (6/25/13)--Banks have ramped up their attacks on the credit union tax status, taking their credit union-bashing arguments to President Barack Obama and administration officials as members of the U.S. Congress are preparing to develop comprehensive tax refrom legislation.

The banks urged Obama to examine the credit union tax status in letters sent last week.

This latest attack serves as clear message calling for continued vigilance and strong credit union advocacy in favor of the credit union tax status, Credit Union National Association Executive Vice President of Government Affairs John Magill noted Monday. He added that the bank attacks will only add fire to the current fight by credit unions and their members to preserve the credit union tax status and the public-policy benefits it provides for all Americans.

CUNA on Monday also reiterated that the reasons for supporting and maintaining the credit union tax status are as valid today as when they were first established by the U.S. Congress in 1934.

"Credit unions are exempt from the federal income tax because they are not-for-profit and member-owned, member controlled. Unlike banks that maximize profits for a small group of investors, credit unions exist to serve their members, including working families, small businesses, and the local community.

"Because they return benefits to members, they are able to offer higher returns on savings, lower rate on loans, and most importantly, low or no fees--and these benefits, combined, result in more than $8 billion in direct financial benefits each year to the 96 million Americans who belong to credit unions," Senior Vice President of Legislative Affairs Ryan Donovan said. Donovan said the banks have come up with nothing new in their tired rhetoric against credit unions.

And, he noted, credit union membership totals nationwide are increasing as millions of new members are seeing the positive benefits of credit unions.

Magill noted that the bank lobby usually amplifies their attacks on the credit union tax status when they want to divert attention from some problem of their own.

To oppose these and other tax status attacks, a large-scale, nationwide grassroots-mobilization campaign led by CUNA and the leagues continues to encourage 96 million credit union members nationwide to present a unified message to members of congress: Don't Tax My Credit Union!

Credit union advocates have delivered the message to members of Congress more than 135,000 times since mid-May, with the help of CUNA/league communication tools. The innovative campaign also uses newer media vehicles such as Facebook, a Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and social media micro-video site Vine. Around 300,000 individuals have used Facebook and Twitter to spread the message through social media.

CUNA has also developed a reformatted version of its tax advocacy toolkit to help credit unions and their members spread this message.

Actively participating in credit union grassroots activities and the political process is one tenet of CUNA's Unite for Good. Through Unite for Good, CUNA has called on credit unions to rally together to help create a nation in which "Americans choose credit unions as their best financial partner."

For more CUNA/league advocacy resources, and more on Unite for Good, use the resource links.

FinCEN Restructures Information Channels

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WASHINGTON (6/25/13)--As information nerds know, "silos" can be bad because they inhibit related communication--even within an organization--and the Financial Crimes Enforcement Network (FinCEN) Monday announced it is tearing silos down to enhance communications.

Jennifer Shasky Calvery, who became FinCEN director last September, announced a reorganization with the underlying conceptual change being that employees will be organized by job function rather than by the stakeholder that they serve.

"In the new structure, information developed by an analyst in the Intelligence Division could more easily be provided to law enforcement, regulators, foreign partners, and industry to enable each of them to better carry out their individual responsibilities," Shasky explained. "This maximizes FinCEN's ability to further its anti-money laundering and counterterrorist financing efforts in a nimble and efficient way."

Shasky noted that under the former organizational structure, FinCEN was organized by stakeholder. The Analysis and Liaison Division served law enforcement. The Regulatory Policy and Programs Division served industry and regulators. The International Programs Division served foreign partners.

"Each division was vertically integrated to carry out all functions for its stakeholders and had its own analysts, policy specialists, liaisons, and enforcement specialists," she said.

Use the link to read the entire FinCEN release.

Supreme Court's May Not Be Last Word On Arbitration

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WASHINGTON (6/25/13)--The Supreme Court last week ruled in favor of giving financial services companies the right to include mandatory arbitration clauses in contracts with customers. The high court is set to discuss another case this Fall with potential ramifications for the Consumer Financial Protection Bureau and credit unions: A case addressing the constitutionality of President Barack Obama's recess appointments.

In the Arbitration case, a merchant that accepted American Express cards argued that the company was violating antitrust laws by charging rates up to 30% higher than fees for competing credit cards. However, the merchant lacked the funds to take on the case on its own, and a mandatory arbitration clause in the merchant's contract prevented it from joining with others in a class action suit.

The Supreme Court ruled 5-3 that under the Federal Arbitration Act, the merchant cannot challenge a class action waiver simply because the cost of pursuing individual legal action would be more expensive than the potential payout.

However, in this week's edition of the Credit Union National Association's Regulatory Advocacy Report, CUNA notes that the Supreme Court ruling may not be the final determination on this topic: The Dodd-Frank Act requires the CFPB to study the use of arbitration clauses in consumer financial services contracts. The bureau plans to survey 1,000 credit card holders on credit card agreements.

"Some in the financial services industry wonder if CFPB could prohibit mandatory arbitration agreements if the study shows that it would be in the public interest," CUNA Deputy General Counsel Mary Dunn wrote.

Another case that could impact the CFPB is set to be on the docket this fall. The court is scheduled to hear a case challenging President Barack Obama's recess appointment of three National Labor Relations Board members. A federal appeals court in January ruled that these appointments were unconstitutional.

Obama made the appointments on Jan. 4, the same time he appointed CFPB Director Richard Cordray.

The U.S. Constitution generally requires that senior officers of the government must be confirmed by the U.S. Senate, but when the Senate is in recess, the president can act alone by making a recess appointment.

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

  • National Credit Union Administration board meeting results;
  • A  Financial Stability Oversight Council update;
  • Recent U.S. Small Business Administration actions;
  • CFPB remarks on mortgage rule implementation; and
  • CUNA's regulatory advocacy resource chart.
Employees or volunteers of CUNA and state credit union league member credit unions can sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Student Loans, NCUA Nominee On Hill Hearing Agenda

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WASHINGTON (6/25/13)--With the July 1 deadline for federal student loan action rapidly approaching, student lending issues remain a high priority in the U.S. Congress. The Senate Banking Committee today has scheduled a full committee hearing entitled "Private Student Loans: Regulatory Perspectives."

The federal student loan rate is currently capped at 3.4%, and this limit will double to 6.8% on July 1 if Congress does not take action. Legislators are reportedly working to craft a solution. Other potential student loan fixes have also been introduced, but none have been passed.

Potential student loan fixes include:

  • The Smarter Solutions for Students Act (H.R. 1911), which would tie student loan interest rates to 10-year U.S. Treasury notes, and allow those student loan rates to reset each year. This bill passed the House in late May;
  • The Bank on Students Loan Fairness Act (S. 897), which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%;
  • The Student Loan Fairness Act (H.R. 1330), which would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate; and
  • The Federal Student Loan Refinancing Act (S. 1066), which would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%.
Two other student lending bills failed in the Senate.

The Consumer Financial Protection Bureau last week emphasized that any federal student loan rate increase that occurs on July 1 will apply only to new loans. Federal direct loan rates will remain at 0% while a given student is still in school, the CFPB added.

Other hearings credit unions will want to watch out for this week include:

  • A Tuesday Senate Appropriations financial services and general government subcommittee hearing on the fiscal 2014 budget for the Commodity Futures Trading Commission and the Securities and Exchange Commission;
  • A Wednesday Joint Economic Committee hearing on reducing red tape through smarter regulations;
  • A Wednesday House Financial Services housing and insurance subcommittee hearing on how the U.S. Department of Housing and Urban Development's Moving-to-Work Program benefits public and assisted housing residents; and
  • A House Financial Services Committee hearing entitled "Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts."
The Senate Banking Committee will hold a hearing on the nominations of Richard Metsger to be a member of the National Credit Union Administration board, Melvin Watt to be director of the Federal Housing Finance Agency, and others on Thursday. (See News Now story: NCUA Nomination Could Move Quickly.)

NCUA Nomination Could Move Quickly

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WASHINGTON (6/25/13)--Former Oregon State Sen. Rick Metsger's (D) nomination to become a member of the National Credit Union Administration board could progress quickly after his nomination hearing by the Senate Banking Committee this week.

Metsger's nomination will be discussed before the committee on Thursday, June 27, at 10 a.m. (ET).

Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said there is an interest in the Senate to hold confirmation votes on non-controversial nominations such as Metsger's in July. "There is a plausible path to have it happen in July," he added.

Metsger, who would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year, served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation. He was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

Other nominees on the committee's June 27 include Rep.  Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a member and chairman of the Council of Economic Advisers; Kara M. Stein of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar of Virginia, to be a member of the Securities and Exchange Commission.

CUNA Backs Rep. Huzienga's CFPB Bill

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WASHINGTON (6/25/13)--The "Ability to Repay" rule fixes contained in Rep. Bill Huzienga's (R-Mich.) Consumer Mortgage Choice Act (H.R. 1077) would address many credit union concerns, the Credit Union National Association wrote in a Monday letter to the legislator.

The Consumer Financial Protection Bureau in May finalized changes to the "Ability to Repay" rule, which will require lenders to determine a borrower's ability to repay before writing a mortgage loan. The rule is slated to take effect on Jan. 10, 2014.

CUNA remains concerned about the definition of points and fees in the amended CFPB rule, CUNA President/CEO Bill Cheney wrote. "Specifically, we are concerned that the inclusion of affiliated title charges remains as part of the points and fees definition," he said.

Huzienga's legislation addresses CUNA's concerns by excluding from the definition "all title charges, regardless of whether they are charged by an affiliated company, provided they are bona fide and reasonable."

Cheney said "defining points and fees in this way will maintain a competitive marketplace, prevent over-pricing or limiting choice in low-moderate income areas and allow consumers to enjoy the existing benefit of working through one entity for their new mortgage or refinance."

Huzienga's bill also addresses loan level price adjustment exclusions contained in the bill. These exclusions, if not eliminated, would impair the availability of credit for some credit union members, the CUNA letter warned.

For the full letter, use the resource link.

CFPB Issues Clarifications, 'Narrow' Changes To Mortgage Rules

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WASHINGTON (6/25/13)--The Consumer Financial Protection Bureau (CFPB) promised future clarifications, if needed, when it issued its January 2013 mortgage rules and on Monday the agency delivered just that.  The CFPB said its proposed clarifications and "narrow revisions" are intended to "ease implementation and pave the way for more effective consumer protections in the marketplace."

Among other things, the proposal amends and provides clarification on six major topics. These include: 

  • Facilitating the ability of servicers to offer short-term forbearance plans;
  • Addressing the process for correcting errors or mistakes that may occur when servicers perform initial completeness evaluations of loss mitigation applications, but later discover the application was incomplete;
  • Clarifying the definition of a loan originator;
  • Facilitating lending by small creditors, including those in rural or underserved areas;
  • Clarifying application of the prohibition on creditors financing credit insurance premiums; and
  • Adjusting effective dates of several provisions of the loan originator rule.
The CFPB also finalized rules that strengthened consumer protections for high-cost mortgages, and instituted a requirement that escrow accounts be established for a minimum of five years for certain higher-priced mortgage loans.

Interested parties have only until July 22 to comment on the proposed clarifications.  Use the resource link to read the CFPB's lengthy proposal.