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Cleveland Fed: CDFIs successful in boosting low-income area lending

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CLEVELAND (7/14/14)--The Community Development Financial Institution (CDFI) Fund is successfully increasing lending in low-income areas, according to a study by the Federal Reserve Bank of Cleveland.

Assessing returns on government projects spending can be difficult, the report states, because of "double bottom lines" found in many programs. These projects are not solely concerned with profits, but also with a socially oriented goal, such as strengthening the economy of a community or improving economic opportunities for a disadvantaged group.

Established by the Riegle Community Development and Regulatory Improvement Act of 1994, the CDFI Fund awards grants to CDFIs operating in low-income areas. Awards are intended to strengthen the institutions and increase the amount of lending to borrowers in those areas. In 2013, the fund awarded more than $172 million to CDFIs.

Credit unions make up 177 of the 811 CDFIs active at the end of 2013, according to a CDFI Fund annual report released earlier this month. According to U.S Treasury Department data, credit unions that receive awards lend more than their similarly sized counterparts over the three years following the award.

"Additionally, CDFIs' net worth ratio is positively correlated with receiving an award. This means that CDFI Fund awards go toward recapitalizing credit unions as well," the report reads. "This will allow credit unions to continue to make loans in the future because credit unions require a 7% capital-to-asset ratio to be able to expand their loan portfolio. On average, credit unions have capital ratios near 10% to 11%, but CDFIs hover around 8% or 9%."

The report goes on to say that the CDFI program seems to work because the awards are direct enough to increase lending in the areas that need it the most. The guidelines that define CDFIs prevent money from being allocated to areas that aren't in need.

"CDFI Fund is increasing lending in low-income areas, thus achieving one of the goals Congress set for it. This is, however, only one part of the double bottom line," the report reads. "But since the technical assistance and financial assistance programs are small, it is difficult to tease out their effects on aggregate employment, incomes, or other indicators of the economic viability of the community, which would reflect the other half of the double bottom line."

Use the resource link below for the full report.

Bill to fight patent 'trolls' passes House subcommittee

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WASHINGTON (7/14/14)--The House subcommittee on commerce, manufacturing and trade voted 13-6 Thursday to advance a bill designed to combat abusive patent demand letters. The Targeting Rogue and Opaque Letters (TROL) Act of 2014 would crack down on unfair or deceptive practices in connection with the assertion of a U.S. patent.

The bill would prevent the following:
  • The sending of communications where the sender falsely represents that they have the right to enforce the patent, a civil action has been filed against the recipient for a violation, a civil action has been filed against other recipients, legal action will be taken, the sender is the exclusive licensee of the patent or an investigation into infringement of the patent has occurred;

  • A sender seeking compensation for an unenforceable patent claim, activities undertaken by the recipient after the patent has expired or authorized activity regarding the patent by the recipient; and

  • The sender failing to provide the identity of the person asserting the right to the patent, the patent that is alleged to have been infringed upon, an identification of the alleged patent infringement or contact information for a person making the infringement claims.
Violations of the bill would be enforced by the Federal Trade Commission (FTC), under its powers to enforce rules against unfair or deceptive acts or practices.

The Credit Union National Association has been a longtime advocate of meaningful patent reform and submitted a joint letter with other trade associations representing more than 14,000 financial institutions Thursday in support of some of the provisions the TROL Act.

"Financial institutions of every size have been targeted by Patent Assertion Entities, often referred to as patent trolls, who in most cases assert patents of dubious quality through vaguely worded demand letters or intentionally vague complaints," the letter reads. "Indeed, patent trolls' recent focus on credit unions and community banks threatens to pose additional, unwarranted costs on lenders and the communities they serve."

The letter also praised the bill for clarifying the FTC's authority to fight these deceptive practices while not infringing upon the rights of legitimate patent holders to assert their rights.

The bill will now be sent to the full House Energy and Commerce Committee.

Proposed bill would exclude vets' loans from MBL cap

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WASHINGTON (7/14/14)--Rep. Jeff Miller (R-Fla.) introduced a bill to amend the Federal Credit Union Act to exempt veterans' business loans from counting against a credit union's member business lending (MBL) cap.

The bill, presently known only as H.R. 5061, would officially exclude extensions of credit made to veterans from the definition of a member business loan.

"The idea to exempt veterans from counting against a credit union's MBL cap makes a lot of sense," Miller has said to the League of Southeastern Credit Unions and Affiliates, which represents credit unions in Florida and Alabama. "This bill would make the decision to offer veterans access the capital much easier because it will no longer count against their business lending cap. It will provide opportunities for many more veterans."

The Credit Union National Association supports the bill, which was introduced Thursday.

Currently the MBL cap is set at 12.25% of a credit union's assets. CUNA supports legislation to increase the MBL cap to 27.5% of assets as a means to allow credit unions to better serve members by providing businesses with a much needed increase in access to capital.

CUNA makes NCUA L.A. Listening Session audio available

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WASHINGTON (7/14/14)--The Credit Union National Association has made available a full audio recording of the National Credit Union Administration's June 26 Listening Session held in Los Angeles, as well as key audio clips of that session.  The audios have been posted to CUNA's website.
 
The primary focus of the session was the NCUA's risk-based capital plan, with a lively back-and-forth dialogue between participants and NCUA representatives ( News Now June 27).
 
About midway through the session NCUA Chair Debbie Matz made it clear that "everything is on the table" regarding possible changes to the RBC plan proposed in January.  While she said the agency is not required to put a revised version of the proposal out for a separate comment period--beyond the one that concluded May 28--she also said very clearly that there is "no rush" to the finish line on this rule.
 
A second Listening Session occurred in Chicago July 10, and a third is scheduled for Thursday in Alexandria, Va. CUNA will post audios for those sessions also.

Use the resoure link to access the audio.