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CU CEO to tell of 'crisis of creeping complexity ' during House reg relief hearing

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WASHINGTON (7/15/14)--The Credit Union National Association will testify on various regulatory relief matters today at a House Financial Services Committee hearing titled "Examining Regulatory Relief Proposals for Community Financial Institutions." The hearing will feature discussion of nine bills and testimony from six individuals.

Doug Fecher, president/CEO of $2.8 billion-asset Wright-Patt CU, Beavercreek, Ohio, will testify on behalf of CUNA.

"Credit unions face a crisis of creeping complexity with respect to regulatory burden.  It is not just one new law or revised regulation that challenges credit unions, but the cumulative effect of all regulatory changes," he said. "The frequency with which new and revised regulations have been promulgated in recent years and the complexity of these requirements is staggering."

CUNA has estimated credit unions have been subjected to more than 180 regulatory changes since 2008.

"When a regulation is changed, there are certain upfront costs that must be incurred no matter the size of the institution: staff time and credit union resources must be applied in determining what is necessary in order to comply with the change; forms and disclosures must be changed; data processing systems must be reprogrammed; and staff must be retrained," Fecher said.

CUNA will testify on the following bills at the hearing:
  • The Regulation D Study Act (H.R. 3240), which directs the Government Accountability Office to study the impact of the Federal Reserve Board's monetary reserve requirements, implemented through Regulation D, on depository institutions, consumers and monetary policy;

  • The American Savings Promotion Act (H.R. 3374), which seeks to offer parity to financial institutions wishing to offer raffle-based prize-linked savings accounts to consumers;

  • The Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014 (H.R. 4042), which directs the federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing assets for non-systemic banking institutions;

  • The SAFE Act Confidentiality and Privilege Enhancement Act (H.R. 4626), which would allow state and federal regulatory officials with mortgage or financial services industry oversight authority access to any information provided to the Nationwide Mortgage Licensing System and Registry without the loss of confidentiality protections provided by federal and state laws; and

  • The End Operation Choke Point Act of 2014 (H.R. 4986), which would amend the appropriate federal banking statutes, including the Federal Credit Union Act, to bar regulators from prohibiting, restricting or discouraging insured depository institutions from serving entities that are licensed or authorized to provide products and services, is a registered money transmitting business or has a reasoned legal opinion that demonstrates the legality of the entity's business.
CUNA has also been asked to provide comment on the discussion draft of the Access to Affordable Mortgages Act of 2014, which would amend the Truth in Lending Act to exempt certain higher-risk mortgages from property appraisal requirements.

Fecher will emphasize the importance of reducing the strain of regulatory burden on smaller financial institutions.

"If Congress wants credit unions and other small community based financial institutions to survive, the avalanche of regulatory change must end," he said.

The other bills that will be discussed at the hearing do not directly impact credit unions; CUNA does not have a position on them presently.

Fecher will also testify on the National Credit Union Administration's risk-based capital proposal, the Credit Union Residential Loan Parity Act (H.R. 4226), the Consumer Financial Protection Bureau's examination thresholds and exemption authority, and the impact of effective dates for new regulations.

Additional delivery methods needed for privacy notices, CUNA writes CFPB

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WASHINGTON (7/15/14)--The Credit Union National Association has submitted a comment letter to the Consumer Financial Protection Bureau regarding its proposed amendment to the Annual Privacy Notice Requirement (Regulation P), saying the change would significantly reduce the costs to credit unions of providing the annual notices.

The proposal would allow financial institutions that do not engage in certain types of information sharing to stop mailing an annual disclosure as long as certain alternative delivery requirements are met ( News Now May 29).

"At the same time, the proposal would have a minimal impact on consumers who would have access to privacy disclosures through the proposed alternative delivery method," reads CUNA's letter. "As a result, the proposal would add efficiency to financial institutions' process of providing annual privacy notices to consumers without decreasing consumers' access to such disclosures."

The alternative delivery method includes notifying consumers of the availability of the annual privacy notice, then providing consumers with the notice through a website or a toll-free phone number consumers can call to request the mailing of a hard copy of the notice.

CUNA has requested several changes to the alternative delivery method to make it more cost-effective for small financial institutions. Most notably, CUNA questions the need for a dedicated toll-free number.

"If a financial institution has a toll-free number in place, then it should be able to use the existing number to meet the alternative delivery requirement," the letter reads. "We also suggest that the agency look at alternatives to the toll-free number for small institutions that do not already have a toll-free number. Many small credit unions operate in geographically restricted areas. These credit unions often do not have toll-free numbers due to the expense involved in procuring one, and because the credit union's members are contained in such a small area."

While CUNA supports the intent of the proposal, the comment letter suggests several changes, most notably that the CFPB allow for all privacy notices to be delivered via the alternate delivery methods for all financial institutions that use the Regulation P model form.

According to a recent CUNA survey of credit union members regarding the receipt of privacy notices, of the 79% of people who recall receiving an annual privacy notice, 10% disposed of the notice without opening it, 15% opened it without reading, 53% skimmed it quickly and only 22% reported reading the notice in its entirety.

CUNA, World Council letter precedes passage of FATCA amendment

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WASHINGTON (7/15/14)--An amendment that transfers $1 million to the Internal Revenue Service Inspector General's office for an economic study of the newly implemented Foreign Account Tax Compliance Act (FATCA) passed the House of Representatives by a voice vote Monday evening, hours after the Credit Union National Association and the World Council of Credit Unions submitted a letter to U.S. Rep. Bill Posey (R-Fla.).

Posey's amendment to the Financial Services and General Government Appropriations Act of 2015 (H.R. 5016) would transfer the funding from the IRS enforcement division.

"We believe this study is necessary given the complexity of implementing FATCA, the complex rulemaking that has taken place, and the myriad unintended consequences of the law on U.S. financial institutions and U.S. citizens living abroad," says the letter signed by CUNA interim President/CEO Bill Hampel and World Council President/CEO Brian Branch.

FATCA created a tax information reporting and withholding system for certain payments made to financial institutions. The 2010 FATCA statute passed by Congress requires foreign financial institutions to register with the IRS and detect taxable activity by U.S. citizens in foreign countries.

The IRS FATCA regulation also requires U.S.-based financial institutions to conduct due diligence and tax withholding on international funds transfers. This requirement is not present in the FATCA statute passed by Congress.

CUNA believes that these requirements are making it difficult for U.S. citizens living overseas, including credit union members, to maintain access to financial services in America.

CUNA eyes today's runoff elections in N.C., Ala.

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WASHINGTON (7/15/14)--Two credit union-friendly candidates will attempt to move closer to the November election in runoff elections today. Phil Berger Jr. in North Carolina and Paul DeMarco in Alabama will each face a fellow Republican in today's elections.

Berger, who is running for North Carolina's 6th District seat, is currently the district attorney of North Carolina's Rockingham County, a position he has held for the past seven years. Along with opponent Mark Walker, he emerged as one of the top two vote-getters among a field of eight candidates in the May primary.

Berger has received support from the Credit Union Legislative Action Council (CULAC) during his campaign, as well as from the Carolinas Credit Union League, due to his support of credit unions in and around the district.

"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," said Dan Schline, league senior vice president of association services.

North Carolina's 6th District includes parts of Greensboro and Durham. It leans Republican, so the winner of today's runoff is likely to succeed in November, according to a report by Politico leading up to the primary.

In the Republican runoff in Alabama's 6th District, state Rep. Paul DeMarco (R-Homewood) will face off against Gary Palmer, chief development officer for the Alabama Policy Institute think tank. DeMarco, who has introduced credit union-friendly legislation during his nine-year tenure in the Alabama House of Representatives, has been endorsed by the League of Southeastern Credit Unions (LCSU).

LCSU and CULAC have reached out to approximately 26,000 households with credit union members with several rounds of mailers designed to increase turnout for the runoff.

Alabama's 6th District seat has been held by Rep. Spencer Bachus (R) since 1993. Bachus announced his retirement in September.

This week in Congress: Yellen commentary, Operation Choke Point

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WASHINGTON (7/15/14)--Federal Reserve Chair Janet Yellen will address both houses of the U.S. Congress this week. Today she will address the Senate Banking Committee in an open session to deliver the semiannual Monetary Policy Report to Congress.

The session will feature remarks by Yellen, who will then answer questions from the full committee. The report is scheduled to run from 10 a.m. to noon (ET) and will be streamed live on the committee's website.

Yellen will make her appearance before the House in Wednesday during a hearing titled "Monetary Policy and the State of the Economy." She will be the sole witness for the hearing, which is scheduled to begin at 10 a.m. (ET).

There will be two separate hearings this week about Operation Choke Point, the Department of Justice (DOJ) program that is meant to allow the DOJ's Financial Fraud Task Force to investigate financial institutions and payment processing companies looking for fraud.  Critics have claimed it separates consumers from access to financial services and has caused financial institutions to terminate relationships with lawfully operating businesses.

Today's hearing will be conducted by the House Financial Services oversight and investigations subcommittee and will feature the following witnesses: Stuart Delery, assistant attorney general with DOJ; Scott Alvarez, general counsel of the Federal Reserve Board; Richard Osterman, acting general counsel for the Federal Deposit Insurance Corp.; and Daniel Stipiano, deputy chief counsel of the Office of the Comptroller of the Currency.

The hearing will begin at 10 a.m. (ET) in Room 2128 of the Rayburn House Office Building.

On Thursday, the House Judiciary subcommittee on regulatory reform, commercial and antitrust law will host a hearing on Operation Choke Point, titled "Guilty Until Proven Innocent? A Study of the Propriety and Legal Authority for the Justice Department's Operation Choke Point."

The list of witnesses has not been published by the subcommittee. The hearing will be Thursday at 9:30 a.m.  (ET) in Room 2141 of the Rayburn House Office Building.

The Senate is also expected to consider legislation that would re-authorize the Terrorism Risk Insurance Act, which is set to expire after this year. The House is working on a similar bill. The Senate version would extend the act for seven years, while the House version would extend it by five years.

The Credit Union National Association will also testify on regulatory relief efforts regulatory relief matters today to the House Financial Services Committee. (See related story: CU CEO to tell of 'crisis of creeping complexity' during House hearing.)