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Civil money penalties targeted to 84 late filers

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WASHINGTON (7/1/14)--The National Credit Union Administration reports that it has identified possible financial penalties against 84 credit unions under its "zero tolerance" policy for credit unions that filed late first-quarter call reports.

The NCUA has only notified late filers of the penalty that may be assessed, but since the process is not complete, no credit union has been 'fined' at this point, the agency emphacizes. 

The Northwest Credit Union Association noted in its June 24 Anthem newsletter that one of the credit unions being notified is in Oregon and four are in Washington. If the five Northwest credit unions sign consent orders, their penalties will range from $243 to $1,900. The league also notes that the steepest penalty of the possible 84 could exceed $10,000 according to the NCUA, should the credit union choose not sign the consent order.

The NCUA told News Now that it soon will be releasing national data related to the civil money penalties.

In May, the NCUA anticipated it would begin the process of assessing civil money penalties from 104 credit unions that filed 2014 first-quarter call reports late (News Now May 23).

The regulator makes exceptions to its "zero tolerance" policy for credit unions able to document certain filing hardships, including a breakdown in the credit union's core operating system, a natural disaster taking place in the credit union's community, or the incapacitation of a key employee who would be responsible for filing the report.

If a credit union encountered a problem and contacted the agency help desk to report an issue with filing the report, the NCUA generally took this into account and waived the penalties, an agency spokesman told the NWCUA.

Any fines collected by the NCUA will be remitted to the U.S. Treasury Department and do not supplement the agency budget.

The NWCUA says it is asking the NCUA to better to address issues with online filing.

"We're asking the NCUA to remind credit unions a couple of days before the reports are due that the filing deadline is approaching," said John Trull, director of the regulatory advocacy. "Furthermore, we are advocating for technical improvements to the system that would notify credit unions immediately upon hitting the submit button if there is an issue, or to confirm the report was received."

If credit unions provide evidence of previous on-time filing, Trull noted, they may be able to appeal the fine with the NCUA's Office of Examination and Insurance. If the cost of the fine would materially harm the financial health of the credit union, Trull said, that would be another circumstance for the regulator to consider.

Since January, an NCUA spokesman noted, credit unions were notified many times of the policy, and warning letters were sent to credit unions that filed their December 2013 reports late. The regulator also posted articles in the NCUA Report.

Overall, the zero tolerance policy is close to having its intended effect, with 98.4% of credit unions filing on time--the highest percentage since online filing began, according to the NCUA.

Cleveland Fed names CU rep among new CDIAC members

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CLEVELAND (7/1/14)--Steve Behler, president/CEO of $599 million-asset Kemba CU, West Chester, Ohio,  is among four individuals newly appointed by the Federal Reserve Bank of Cleveland to its Community Depository Institutions Advisory Council. The 10-person council consists of representatives from credit unions, commercial banks and thrift institutions from the fourth Federal Reserve District.
The council provides information and to the Cleveland Reserve Bank from the perspective of community depository institutions.
The four new members are:
  • Behler;
  • Diane Hoops, president/CEO, Corn City State Bank, Deshler, Ohio;
  • Ronald J. Seiffert, president/CEO, Delaware County Bank and Trust Co., Lewis Center, Ohio; and
  • Paul S. Siebenmorgen, president/CEO, Farmers and Merchants State Bank, Archbold, Ohio.
Council members meet with senior Fed leaders at least twice every year to provide anecdotal information to shape consideration of monetary policy direction and economic research activities.
The new board members assumed their positions June 1.

First Unity FCU gets community charter from NCUA

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ALEXANDRIA, Va. (7/1/14)--The second new credit union of 2014 has been approved by the National Credit Union Administration: First Unity FCU in McComb, Miss. The new credit union will serve individuals who live, work, worship, attend school and participate in associations located in Mississippi's Pike, Walthall and Amite counties.

The three counties have a total population of 68,978, according to the 2010 census.
The new institution will also serve individuals participating in programs to alleviate poverty or distress in the three counties; incorporated or unincorporated organizations located in or maintaining a facility in any of the counties; employees of the credit union and members of their immediate households; and spouses of persons who died while within the field of membership and organizations of such persons.
"Residents and workers in three underserved rural counties in southwestern Mississippi will certainly benefit from the affordable financial services First Unity will be able to provide," said NCUA Chair Debbie Matz. "I commend all the people who worked so hard on First Unity's federal charter application. This is an important investment in the people and the communities they will serve."
According to the NCUA, the new credit union will offer regular shares, share certificates, direct deposit, club accounts, notice accounts, share-secured loans, auto loans, non-member deposits, unsecured loans, other collateral loans, money orders, cashier's checks, travelers checks and savings bonds during the first year of operation.
First Unity FCU will be a community credit union and qualifies for a low-income designation, allowing it to accept secondary capital and non-member deposits, obtain grants and loans from NCUA's Community Development Revolving Loan Fund and qualify for certain exemptions from statutory limits on member business lending.
According to the NCUA, First Unity plans to apply for certification in the U.S. Department of the Treasury's Community Development Financial Institution program, giving it access to ongoing grant funding opportunities.
First Unity is the first new federal charter in Mississippi since 1995 and plans to open its doors in August.

The NCUA announced in April that it granted the first new federal charter of the year--a community charter to CommunityWorks FCU to serve people who live, work, worship or attend school in Greenville County, North Carolina, as well as businesses and other legal entities in the county.

The credit union's field of membership is nearly 475,000 people. The credit union plans to offer affordable financial services to individuals who currently are limited to high-cost alternatives.

Six prohibited from FCU work under NCUA orders

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ALEXANDRIA, Va. (7/1/14)--Six individuals have been prohibited from participating in the affairs of any federally insured financial institution, according to orders issued by the National Credit Union Administration Monday.
These individuals are:
  • Charlene Arva, a former employee of Canandaigua (N.Y.) FCU, with $22.3 million in assets, pleaded guilty to the charge of grand larceny. Arva was sentenced to a prison term of no less than 30 months and no more than 90 months;
  • Crystal Ferreira, a former employee of Columbus CU, Providence, R.I., with $67 million in assets, pleaded guilty to the charge of embezzlement. Ferreira was sentenced to three years supervised release and ordered to pay restitution in the amount of $437,250;
  • Robert Foster, a former employee of United Neighbors FCU, Watertown, N.Y., with $4.8 million in assets, pleaded guilty to the charge of falsifying business records. Foster was fined $795;
  • Felisa Kazimierczak, a former employee of Greylock FCU, Pittsfield, Mass., with $1.1 billion in assets, pleaded guilty to the charges of kidnapping, misleading a police officer, filing a false crime report, making false entries and larceny. Kazimierczak was sentenced to four years in prison;
  • Renee Thomas, a former employee of Community CU, Tacoma, Wash. with $12 million in assets, pleaded guilty to the charges of misapplication of credit union funds and wire fraud. Thomas was sentenced to 18 months in prison, three years supervised release and ordered to pay restitution in the amount of $126,469; and
  • Karen York, a former employee of VA Hospital FCU, Little Rock, Ark., with $8.4 million in assets, pleaded guilty to the charge of embezzlement. York was sentenced to one month in prison, two years supervised release and ordered to pay restitution in the amount of $51,920.77.
News Now readers will recall Kazimierczak's name from articles in 2013. She initially claimed that an unidentified individual left a note on her car threatening to harm her daughter unless Kazimierczak delivered a substantial amount of cash to a nearby location. But police said the story was fabricated and that Kazimierczak embezzled the money by taking cash allocated for area ATMs and delivering it to a false drop off site after coercing a co-worker into standing watch while she was gone. Pittsfield police allegedly found a bag of cash in Kazimierczak's car totaling the amount missing from the vault, less $58,000, and learned she allegedly had moved money between ATMs shortly after an impending audit was announced by Greylock managers.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.
Use the resource link below for a list of NCUA enforcement orders.

GAO: Virtual currencies raise consumer, investor protection issues

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WASHINGTON (7/1/14)--Virtual currencies, while heralded by some as part of an innovative new financial system, bring with them a host of challenges and risks to financial institutions, consumers and law enforcement. The U.S. Government Accountability Office (GAO) has released a report on virtual currencies, outlining several of these issues, and urging the Consumer Financial Protection Bureau to take an active role in facing consumer issues that might arise with its use.
Virtual currencies are digital representations of value that are not government-issued, and systems operate over the Internet and use computer protocols and encryption to conduct and verify transactions. Some can be used to buy real goods and services and exchanged for dollars or other currencies.
But these currencies have also been associated with illicit activity and security breaches, which raises possible regulatory, law enforcement, and consumer protection issues.
Several of the main issues outlined in the June 26 GAO report are:
  • Virtual currency systems may provide anonymity over traditional payment systems and can lack a central intermediary to maintain transaction information. This can lead to difficulties in detecting money laundering and other crimes;
  • Many virtual currency systems can be accessed globally to make payments and transfer funds across borders. Consequently, law enforcement agencies investigating crimes that involving these currencies have to rely upon cooperation from international partners who may operate under different regulatory and legal principles; and
  • The emergence of virtual currencies has raised a number of consumer and investor protection issues, including: reported loss of consumer funds maintained by bitcoin (one type of virtual currency) exchanges, volatility in bitcoin prices, and the development of virtual-currency-based investment products. For example, in February a Tokyo-based bitcoin exchange filed for bankruptcy after reporting it had lost more than $460 million.
The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) released guidance in March 2013 requiring virtual currency exchanges to register with FinCEN. Federal agencies also have begun to collaborate on virtual currency issues through informal discussions and interagency working groups.
These working groups have focused on law enforcement aspects of virtual currencies, but not on emerging consumer protection issues. The GAO report states that the CFPB has "generally not participated" in these groups.
"Therefore, interagency efforts related to virtual currencies may not be consistent with key practices that can benefit interagency collaboration, such as including all relevant participants to ensure they contribute to the outcomes of the effort. As a result, future interagency efforts may not be in a position to address consumer risks associated with virtual currencies in the most timely and effective manner," the report reads.
The GAO recommended that the CFPB "take steps to identify and participate in pertinent interagency working groups addressing virtual currencies, in coordination with other participating agencies."
According to the report, the CFPB has agreed with this recommendation.
Use the resource link below for the full report.

NCUA's chief economist: IRR of a few should concern all

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ALEXANDRIA, Va. (7/1/14)--National Credit Union Chief Economist John Worth discussed several economic factors in his monthly video address, including interest rate risk, employment statistics and automobile sales. Interest-rate risk (IRR) was identified as a potential emerging threat by the Financial Stability Oversight Council in its annual report in May.

Worth cautions that IRR should "be a concern for all credit unions that might, through potential Share Insurance Fund premiums, have to pay for the difficulties brought on by the decisions of a minority of institutions."

"In March 2005, there were 277 credit unions at which net long-term assets exceeded their combined net worth and core deposits," he said. "These 277 credit unions represented 9% of industry assets. In March 2014, that had risen to 350 credit unions, representing 27% of assets."

Worth also called the housing market indicators "mixed," since home sales are currently at 6.3% below where they were at this time last year. However, new homebuilding activities are up 4.2%.

"Some of the weakness reflects a poor start to the year due to weather, higher mortgage rates have played a role. Still, housing prices continues to rise, and nationwide we're up 6.4% according to the [Federal Housing Finance Agency's] purchase-only price index."

Unemployment numbers are more promising, with the 6.3% unemployment rate for April and May representing a 1.2% improvement over the numbers from the second quarter of 2013. The labor market has gained approximately 210,000 jobs per month in 2014 to date, an improvement from the 194,000 monthly average gains during 2013.

Auto sales, an important channel for credit union lending, have spiked, Worth said. In May, auto sales reached 16.8 million at an annual rate up more than 8% from a year earlier.

"Motor vehicle sales have jumped," Worth said, "and consumer income for the first four months of the year is up. Consumer balance sheets continued to improve in the first quarter."

Use the resource link below for the video of Worth's address.