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180 reg changes since '08 impose high costs for CUs, CUNA testifies

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WASHINGTON (7/16/14)--The Credit Union National Association made its case on the costly effect of regulatory burden on credit unions before the House Financial Services subcommittee on financial institutions and consumer credit Tuesday. Doug Fecher, president/CEO of $2.8 billion-asset Wright-Patt CU, Beavercreek, Ohio, testified before the subcommittee on behalf of CUNA.

Click to view larger image Rep. Shelley Moore Capito (R-W. Va.), chair of the House Financial Services subcommittee on financial institutions and consumer credit, greets CUNA witness Doug Fecher before he testifies on the burden credit unions bear because of increasing regulatory complexity. (CUNA Photo)
The hearing was a look at nine different bills aimed at regulatory relief. Having last testified before the House Committee on Oversight and Government Reform on financial regulation and its effect on access to credit two years ago, Fecher underscored the message he delivered then.

"Credit unions face a crisis of creeping complexity with respect to regulatory burden. It's 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."

Since 2008, CUNA estimates that more than 180 regulatory changes from at least 15 different federal agencies have affected credit unions.  He said the costs to credit unions in terms of time and money diverts resources from member services.

CUNA commented on five bills and three legislative drafts that would have direct relief on credit unions' regulatory burdens. 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, was strongly supported by  CUNA.

Regulation D limits the number of automatic withdrawals from a member's savings account to six transactions per month. This can cause consumers to overdraft if their checking account falls below $0 and the six transactions already have been made for the month.

CUNA supports an increase in the cap, or for it to be eliminated altogether. Responding to a question from Rep. Robert Pittenger (R-N.C.) about why the bill is needed, Fecher explained the difficulty that comes with telling a credit union member they received a nonsufficient fund fee because they exceeded their six transfers.

Click to view larger image Doug Fecher, president/CEO of $2.8 billion-asset Wright-Patt CU, Beavercreek, Ohio, testifies that credit unions have faced an estimated 180 regulatory changes since 2008 from at least 15 different federal agencies. (CUNA Photo)
"Their initial thought is to blame the credit union, but we have to explain that this is actually a federal regulation that we have to enforce, and frankly, that makes them madder," he said. "We advocate for the bill, and hope for the study. We also hope the outcome of the study is that the number of transactions can almost be tripled without impacting the use of that regulation in terms of monetary policy."

Fecher also commented on the National Credit Union Administration's proposed risk-based capital requirement, laying out for subcommittee members CUNA's significant concerns regarding the proposed rule. CUNA urges the NCUA to withdraw the proposal, due to the belief that it would "seriously constrict credit union growth and financial performance." If not withdrawn, CUNA urges significant changes to the plan as currently proposed.

Also during the hearing, Rep. Denny Heck (D-Wash.) expressed his support for the CUNA-backed  American Savings Promotion Act (H.R.3374), which would allow financial institutions around the country to offer raffle-based, prize-linked savings accounts. Heck said he was "enthusiastic" about the bill, and asked Fecher about benefits of the act, based on his experience.

"The perceived value of the opportunity to win something more meaningful will cause many Americans to establish a savings program that they might not otherwise have done. We've seen that in the institutions that have done this," Fecher said. "As a matter of public policy that's why I support it. We want Americans to save more money, especially ones of more modest means."

The Community Bank Mortgage Servicing Asset Capital Requirements Study Act of 2014 (H.R. 4042) was another bill discussed. The bill would direct federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing for nonsystemic banking institutions.

"We request the subcommittee amend H.R. 4042 to include NCUA among the agencies conducting the joint study and to delay the implementation of the NCUA's proposed rule until an appropriate period of time after the study has been completed," Fecher said. "In any case, credit union capital requirements on mortgage servicing rights should be no higher than those imposed on small banks."

CUNA also provided testimony on three discussion drafts, most notably the Access to Affordable Mortgages Act of 2014, which amends the Truth in Lending Act to exempt higher-risk mortgages from property appraisal requirements.

Fecher concluded his testimony on behalf of CUNA by asking the subcommittee to work with regulators to ensure that effective dates for new rules provide credit unions and other financial institutions with sufficient compliance time.

CUNA's Donovan part of today's Pew debate on USPS fin. services plan

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WASHINGTON (7/16/14)--Should the U.S. Postal Service (USPS) offer financial services to low-income communities? During today's Pew Charitable Trusts conference--"Financial Services and the Post Office"--Ryan Donovan, the Credit Union National Association's senior vice president for legislative affairs, will be on a panel that will explore the implications of such a proposal.

The idea of the USPS providing non-bank financial services came up in January as the subject of a white paper published by the Office of the Inspector General of the Postal Service. The paper claimed that "the Postal Service is well positioned to provide non-bank financial services to those whose needs are not being met by the traditional financial sector."

Donovan joins panelists Dong Hong, regulatory counsel for the Consumer Bankers Association; Adam Levitin, professor at the Georgetown University Law Center and a member of the Consumer Financial Protection Bureau's Consumer Advisory Board; and Jana Barresi, director of federal government relations for Wal-Mart.

CUNA expressed strong reservations about the proposal when it was unveiled in January. CUNA General Counsel Eric Richard said some credit unions would be happy to explore possible creative partnerships with USPS or anyone else who can help bring financial services to more people at less cost ( News Now Jan. 29).

"To the extent that the goal here is more profit for USPS, there could be some problems," he said. "The field of financial services is already extremely crowded and competitive, and credit unions already provide a cooperative, not-for-profit alternative that benefits consumers, including many who would otherwise be unbanked. This is not an area in which there is a lot of low-hanging fruit that others have not picked."

Sen. Elizabeth Warren (D-Mass.), Rep. Darrell Issa (R-Calif.) and Tom Davis, former congressman and past chair of the House Oversight and Government Reform Committee, will speak during the conference, as well as David Williams, inspector general of the USPS, and Ruth Goldway, chair of the USPS Regulatory Commission.

In addition to the panel on providing financial services to the underserved, there will be panels on economics, operations and efficiency and a presentation of the findings from two Pew national surveys on consumer attitudes toward postal banking and the proximity of post offices to the underbanked.

The panel will be streamed live. Use the resource link below for the complete agenda for the conference.

Today marks an NCUA late-filer deadline

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ALEXANDRIA, Va. (7/16/14)--Credit unions that were late filing their first quarter call reports and have received letters from the National Credit Union Administration describing penalties the agency is planning to assess have until close of business today to submit an agreement of consent with the regulator.

Credit unions that do not file their 5300 reports on a timely basis and  evade the consent agreement could possibly find they are subject to other agency sanctions .

According to the NCUA, 104 credit unions filed late in the first quarter, down 80% from the previous quarter but unacceptable still to the NCUA with a stated goal of 100% compliance.

The NCUA announced civil money penalties for late filers in January, with several exceptions made for credit unions able to document filing hardships, such as a natural disaster or an unforeseen incapacitation of a key employee ( News Now Jan. 16). However, for the most part penalties will  be assessed per day according to ranges set out in the Federal Credit Union Act and based on a credit union's asset size.

The NCUA explains its zero-tolerance policy by noting late filings impact its ability to conduct effective off-site supervision and delay the release of quarterly industry data to the general public.

The NCUA is expected to have final information on late filers posted on its website within the next few days. Second quarter call report filings are due July 25.

Cybercrime a top target for new head of Justice crime div.

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WASHINGTON (7/16/14)--International organized crime groups are increasingly turning to the lucrative business of cybercrime, the new head of the U.S. Justice Department's criminal division told The Wall Street Journal in a recent interview.
Justice's Leslie Caldwell noted that there are hundreds of millions of dollars to gain illegally from the exploding field of cybercrime, while being a lower-risk proposition. Comparing cybercrime to major international narcotics trafficking organizations, Caldwell said with cybercrime chances for success are high, chances of capture are lower and, if caught and proven guilty, sentences are not as long.
The interview ran July 14, the day before Caldwell was slated to discuss the threat of so-called "botnets" before a U.S. Senate subcommittee hearing. Botnets are described as networks of hijacked computers used to steal information, attack other systems or churn out spam.
The article noted that the Justice Department "struck a blow against a major botnet this spring," shutting down a malicious-software infected network that it said had been used to steal at least $100 million. But even that success appears fleeting in the fast-paced world of cybercrime. The article cites research by security firm Sophos Ltd., which says hackers are distributing a variant of that network, known as Gameover Zeus, in what appears to be an effort, Sophos says, of resurrecting the old botnet.

Cybercrime, says Caldwell, is a law-enforcment game-changer--forcing new tactics by prosecutors, too, such as how to use data from cellular phone towers and gain access to encrypted email for instance.

Caldwell testified before the Senate Justice subcommittee on crime and terrorism Tuesday in a hearing titled, "Crime and Terrorism Taking Down Botnets: Public and Private Efforts to Disrupt and Dismantle Cybercriminal Networks." See the resource link for the complete witness list.

CFPB files suit vs. debt collection 'lawsuit mill'

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WASHINGTON 7/16/14)--Frederick J. Hanna and Associates, along with its three principal partners, has been accused of operating a debt lawsuit mill using illegal tactics, resulting in a lawsuit against it filed by the Consumer Financial Protection Bureau Tuesday.

The CFPB alleges the Georgia-based firm used illegal tactics to intimidate consumers into paying debts they may not have owed, and that the firm churns out hundreds of thousands of lawsuits that frequently rely on deceptive court filings and faulty or unsubstantiated evidence.

"The Hanna firm relies on deception and faulty evidence to drag consumers to court and collect millions," said CFPB Director Richard Cordray. "We believe they are taking advantage of consumers' lack of legal expertise to intimidate them into paying debts they may not even owe. Today we are taking action to put a stop to these illegal debt collection practices."

Between 2009 and 2013, the firm filed more than 350,000 debt collection lawsuits in Georgia. The CFPB alleges the defendants collected millions of dollars each year through these lawsuits, often from consumers who may not actually have owed the debts.

Violations alleged in the CFPB's complaint include:
  • Filing collection suits signed by attorneys when the lawsuits are the result of automated processes and the work of non-attorney staff, without any meaningful involvement of attorneys. The resulting lawsuits misrepresent to consumers that they are "from attorneys." This process allows the firm to generate and file hundreds of thousands of lawsuits. One attorney at the firm, for example, signed more than 130,000 debt collection lawsuits over a two-year period; and
  • Using sworn statements from clients attesting to details about consumer debts to support its lawsuits. The firm files these statements with the court even though in some cases the signers could not possibly know the details they are attesting to. In a substantial number of cases, when challenged, the firm dismissed lawsuits. Since 2009, the firm has dismissed more than 40,000 suits in Georgia alone.
The Hanna firm focuses exclusively on debt collection litigation, and its three principal partners, Hanna, Joseph Cooling, and Robert Winter, play an active role in the company's business strategies and practices.

The CFPB is seeking compensation for victims, a civil fine, and an injunction against the company and its partners.

Use the resource link below for the full complaint.

Ga. check casher gets dinged for repeated BSA violations: FinCEN

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WASHINGTON (7/16/14)--The Financial Crimes Enforcement Network (FinCEN) Tuesday said that a money services business (MSB) in Georgia committed "significant and willful violations" of the Bank Secrecy Act's (BSA) program and reporting requirements, prompting a $45,000 civil money penalty against it.
In a release, FinCEN said Mian Inc., doing business as Tower Package Store, "significantly" committed numerous violations even after being put on notice by its examiner of deficiencies in meeting its reporting obligations.
Under the BSA, MSBs are required to implement an effective written anti-money laundering (AML) program, which FinCEN alleges Mian failed to do. Among Mian's infractions cited by FinCEN:
  • From December 2010 through November 2011, Mian failed to file Currency Transaction Reports (CTRs) on approximately 40% of transactions that required filing. During this time, the CTRs that Mian actually filed were late and inaccurate.
  • Mian's failure to comply with its CTR obligations persisted even after it was notified by IRS Small Business/Self Employed Division of its CTR deficiencies. From December 2011 through November 2013, Mian failed to file timely CTRs on 91% of transactions that required filing.
FinCEN said that Mian "has further failed to meet its deadlines to renew its registration as an MSB" and that Mian has admitted that it violated the BSA's program, reporting and registration requirements, and has consented to FinCEN's assessment of a civil money penalty of $45,000.

Use the resource link to read more about the FinCEN enforcement action.