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Inside Washington (06/05/2012)

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  • WASHINGTON (6/6/12)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund Tuesday posted comments it has received on its CDFI Program Application. The CDFI Fund this year asked for comment on how the application could be improved, how matching fund documentation could be collected, and other issues…
  • WASHINGTON (6/6/12)--The U.S. Treasury's Go Direct program announced it has changed the Web address for its Online Enrollment System homepage. Go Direct maintains separate sites for financial institution representatives and corporation and institutional representatives, and the current home pages for each of these sites will be deactivated on June 8. The new Web addresses can be found here and here… .

Small CU issues are NCUA listening session focus

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SAINT LOUIS, Mo. (6/6/12)--The many challenges faced by smaller credit unions took center stage at the National Credit Union Administration's (NCUA) Tuesday listening session.

Regulatory burden is an issue for credit unions of all sizes, and NCUA Director of Examinations and Insurance Larry Fazio noted that regulatory burdens can be exponentially more difficult for small credit unions to deal with, since they must comply with essentially all the same regulations as larger credit unions.

Local credit union attendees at the St. Louis session aired their concerns over the increasing trend of small credit union mergers. Bill Myers, director of the NCUA's Office of Small Credit Union Initiatives, said there are three reasons that small credit unions fail: fraud; lack of succession planning; and shrinkage.

NCUA staff said that eligible credit unions across the country will soon be notified of their Low Income Credit Union (LICU) designation status, and those credit unions, once they are contacted through an NCUA letter, will need only to accept or decline that LICU status. Credit unions were previously required to file applications and other relevant information with the NCUA before their LICU status could be denied or granted.

Overdraft fees, interchange, member business lending and related waivers, the NCUA's pending loan participation proposal, and the agency's recent decision to eliminate its regulatory flexibility rule and extend similar management and investment rights to all credit unions were also discussed during the meeting.

Credit union examination issues were also discussed during the session, and exam issues have been a consistent theme throughout the listening sessions.

The agency's work with other federal regulators, risk management, and National Credit Union Share Insurance Fund premium assessments were among the topics addressed at earlier listening sessions.

Additional sessions are planned for:

  • June 13 in Orlando, Fla.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
The sessions are scheduled to be held between 1 p.m. and 4 p.m. Registration is limited to the first 150 reservations, but the agency is still accepting registrants for all three of the remaining meetings.

The Credit Union National Association and league officials are planning to attend all sessions to hear what credit unions raise as well as the NCUA's responses, and will follow up with its Examination and Supervision Subcommittee and the NCUA on key issues brought up during the sessions.

For more on the sessions, use the resource link.

Compliance What does RegFlex end mean

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WASHINGTON (6/6/12)--What the National Credit Union Administration's (NCUA) decision to eliminate the regulatory flexibility (RegFlex) program means for federal credit unions is one of the many issues tackled in the June edition of the Credit Union National Association's (CUNA) CompBlog Monthly Wrap-Up.

The NCUA last month voted to eliminate the RegFlex program, extending the enhanced management and investment rights offered under the program to the 1,770 credit unions that were not covered under the RegFlex designation. While the good news is this move eliminated a regulation, CUNA staff noted that NCUA examiners may not be tolerant of financially troubled credit unions that make charitable donations.

The CompBlog Wrap-Up also cautions credit unions that, although they may be exempt from the NCUA's new interest rate risk (IRR) management rule, they should still be prepared to answer IRR questions from examiners. Credit unions that are writing IRR policies for the first time will find some ideas on how best to get started.

Other issues addressed in this month's Wrap-Up include:

  • The Consumer Financial Protection Board's continuing work on mortgage forms and regulations;
  • Recently introduced legislation that would address ATM disclosures, credit relief for servicemembers, and consumer privacy disclosures; and
  • Regulation E changes that could impact prepaid cards.
Information on an upcoming CUNA audio conference on compliance issues and new training programs is also provided in the Wrap-Up.

For more of CUNA CompBlog's Monthly Wrap-Up, and other compliance gems, use the resource links.

Put it on the map NCUAs CU data by state

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ALEXANDRIA, Va. (6/6/12)--Arizona is leading the way in average return-on-assets (ROA) for the nation's credit unions, the National Credit Union Administration (NCUA) revealed in a new quarterly state-by-state review of the financial performance of credit unions.

The new state-by-state breakdown of key financial indicators is a new format for the agency. Released Tuesday, the review features chart- and map-based presentations of the average ROA, annualized loan growth and delinquent loan percentages of credit unions in each state. Information on each state's share of credit unions with positive return on average assets is also included.

NCUA Chairman Debbie Matz said the quarterly U.S. map review "is part of an ongoing effort by NCUA to provide timely, easy-to-use analysis of credit union data to the public."

The map highlights the diversity of credit union performance across the nation, reflecting local economic conditions, specific state strengths, and current challenges, and can help credit unions make better decisions and give the public a greater understanding of how credit unions are performing, she added.

The latest data are drawn from 2012 first quarter call reports.

Arizona's 123 basis point (bp)quarterly average ROA is closely followed by Virginia's total of 121 bp. Iowa, North Dakota and Alaska are not far behind, with ROA averages of 112, 109 and 106, respectively. ROA increased for credit unions in 40 U.S. states and territories between the first quarters of 2011 and 2012, the NCUA added. New Jersey, North Carolina, Nevada, West Virginia and Rhode Island all average ROA below 50 bp during the first quarter, the NCUA reported.

New Hampshire's average credit union loan delinquency rate of 0.49% was the lowest in the nation, while Montana, at 3.23%, had the highest average rate during the quarter. Delinquency rates in 41 states fell when compared to last year's numbers, according to the report.

Overall, the NCUA said most state-level credit union metrics are experiencing a recovery, but "credit union performance varies widely across the country." Mid-American states are experiencing the strongest recovery, "while states in the West and Mid-Atlantic tend to lag behind the rest of the country in performance," the NCUA said. Loan growth for North Dakota's credit unions averaged 12.16%, the highest of any state, while loan volume at Nevada's credit unions declined by 11.05% during the quarter.

The agency said in a release that the state-level financial indicators are compiled as state aggregate averages--"essentially asset-weighted averages for the state." Credit unions are assigned to each state by the location of their home office or headquarters, the NCUA added, and the agency release stressed that state averages would not necessarily reflect the performance of individual credit unions in each state.

CFPB schools work to address student debt

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WASHINGTON (6/6/12)--Six colleges and four state university systems this week agreed to work with the government to provide key financial information, up front, to incoming students, and Vice President Joe Biden, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and Secretary of Education Arne Duncan on Tuesday urged all colleges and universities to provide the same information to their students.

Cordray in a prepared statement delivered during a Tuesday press conference said his agency has received thousands of comments from students that are "in over their heads" after taking out private student loans to cover their college costs.

The CFPB director said the process of figuring out how to pay for college can be "complex and confusing," and many factors make it difficult for students "to clearly see and compare college costs, evaluate financial aid options, and figure out how much debt they can afford."

Vassar College, Miami Dade College, Arizona State University, Syracuse University, North Carolina Agricultural & Technical State University, and the University of North Carolina joined the state university systems of Maryland, Massachusetts, New York and Texas that have agreed to provide incoming student information on:

  • The cost of one year of college at their institution;
  • Financial aid options to repay this cost;
  • How grants and scholarships could help minimize educational costs;
  • The estimated monthly payments students will need to cover after they graduate; and
  • Returning student enrollment rates, graduation rates, and loan repayment rates.
The schools and systems will provide this information beginning in 2013.

The Credit Union National Association estimates that around 300 credit unions currently offer student loans to their members, and those credit unions often provide loans with terms and interest rates that are fair to their members. Credit unions also provide financial education and seminars relating to student lending generally, and encourage students to attend. The CUStudentLoans.org website also provides extensive financial education regarding student lending, through both written information and webinars. The site is powered by Fynanz, a CUNA Strategic Services provider.

The CFPB is working with the U.S. Department of Education on a "Know Before You Owe" project to help borrowers, including student borrowers, understand debt implications, and is studying the private student lending market. A report on that market is expected to be released this summer.

The CFPB and Department of Education are also developing a financial aid shopping sheet for prospective students, and comments on that sheet will be accepted until June 20.

For more on the CFPB's student lending initiatives, use the resource link.