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Washington Archive

Washington

CUNA, Fed, Merchant Briefs Call For Extended Stay Of Interchange Decision

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WASHINGTON (8/29/13)--The Federal Reserve and the Credit Union National Association with its coalition partners filed separate briefs with the U.S. District Court for the District of Columbia Wednesday, but each called upon Judge Richard Leon to maintain current interchange regulations as a case on the validity of those regulations moves forward.

In their briefs, both parties argued, in part, that the court does not have the authority to require the regulator to issue an interim rule while the Fed appeals the decision to vacate its debit card interchange cap rule, which has been in effect since October 2011.

Even the merchants coalition--the plaintiff in the case--which also filed a brief yesterday, called on the court to maintain current interchange regulations pending the results of a Fed appeal of the court's overturning its rule.

Leon late last month struck down the Fed's rules on debit interchange fees and routing procedures under the Durbin Amendment. He ruled at that time that the Fed did not follow narrow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment. Leon earlier this month asked for information on the feasibility of issuing an interim final interchange rule, and asked the Fed for an interim final rule implementation timeline.

The Fed said a stay "will preserve the status quo in the debit card industry while the Board's appeal proceeds, will prevent irreparable injury to plaintiffs in the form of a likely steep increase in interchange fees should the market return to its largely unregulated state prior to the Rule, and will avoid mooting the Board's appeal."

The Fed also argued against developing and releasing an interim final interchange regulation while the court case moves forward. Doing so, according to the Fed:
  • Would be inconsistent with the Fed's view that the original interchange regulation complies with the Electronic Fund Transfer Act;
  • Would likely moot the Fed's appeal of Leon's decision, "irreparably harming the Board's right to seek appellate review on these issues"; and
  • Would result in uncertainty and disruption in the debit card industry.
In their brief, CUNA and coalition partners argue:
  • There is no legal basis for the court to order an independent agency to draft an interim rule.  Under Supreme Court and D.C. Circuit precedent, only the Fed can determine whether and when to issue any such rule;
  • In any event, the court should not require an interim rule. A rush to issue a new, temporary rule will harm all affected interests, including consumers, and threaten the effective functioning, stability, and security of the electronic debit-card payments system; and
  • An order requiring the Fed to issue an interim rule will almost certainly result in more litigation, further muddying the regulatory landscape in an area where parties need certainty. 
For these reasons, the financial institution coalition has asked the court to keep the current Fed regulation in place pending the Fed's appeal. The American Bankers Association, Consumer Bankers Association, Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Association of Federal Credit Unions and National Bankers Association joined CUNA in filing the brief.

Even the merchant's coalition, the plaintiff in the case that also filed a brief yesterday, called on the court to maintain current interchange regulations pending the results of a Fed appeal. Maintaining the stay would "prevent substantial harm" that they believe could occur to the merchants if the protections of the Durbin Amendment's interchange regulation are left entirely unimplemented during the appeal process.

The merchants did, however, support forcing the Fed to issue an interim final rule. The merchant group is comprised of NACS, National Retail Federation, Food Marketing Institute, Miller Oil Co. Inc., Boscov's Department Store LLC, and the National Restaurant Association.

NEW: NCUA Second Quarter Stats Show Fastest Four Quarters Of Loan Growth Since '09

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ALEXANDRIA, Va. (8/29/13, UPDATED 11:16 a.m. ET)--Loan growth, net worth, and membership are the biggest stories told in the National Credit Union Administration's second-quarter data, according to the agency.  The data show federally insured credit unions saw brisk loan growth, their highest net worth ratio since 2008 and record membership levels.

NCUA Chairman Debbie Matz, releasing the second-quarter report this morning, said, "The increases in lending, net worth and membership are especially positive signs.

"The brisk loan growth shows that federally insured credit unions are meeting the needs of more borrowers and putting their assets to productive use. The net worth ratio rose to 10.5%, its highest level since 2008. Credit union membership continues to reach a new milestone each quarter."

Loans were up 2.3% in the second quarter, and 5.5% in the last four quarters, which the NCUA said is the strongest four-quarter growth since the start of 2009.

"Although the industry is performing well overall, smaller credit unions continue to face challenges with making loans, generating earnings and attracting members," Matz added. "NCUA is committed to providing assistance and support to ensure the viability of small credit unions so they can continue to serve local communities."

Regarding lending by federally insured credit unions, the NCUA highlighted the following:
  • First mortgage real estate loans rose to $253.8 billion, up 2.1% for the quarter and 5.6% year-over-year;
  • New auto loans expanded to $66.4 billion, up 2.8% for the quarter and 10.7% for the last four quarters;
  • Used auto loans rose to $121.3 billion, up 3.7% for the quarter and 9.3% for the year ending June 3; and
  • Net member business loan balances grew to $43.5 billion, up 2.3% for the quarter and 8.3% for the prior 12 months.
Use the resource link to read more of the NCUA's report.

NCUA Provides $870K In CDRLF Grants To CUs

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ALEXANDRIA, Va. (8/29/13)--A combined $871,597 in grants will be disbursed to help 126 small credit unions improve their service, train their staff, and expand their community outreach efforts, the National Credit Union Administration (NCUA) said on Wednesday.

The grants are provided to these credit unions through the agency's Community Development Revolving Loan Fund (CDRLF). The agency received 231 grant applications in 2012, with credit unions requesting more than $2.7 million, combined, in funding.

NCUA Office of Small Credit Union Initiatives (OSCUI) Director William Myers said the grants reinforce success at the community level. "We're supporting the kind of innovation that has a direct and positive result on people's lives," Myers said. "We're especially proud of their efforts in collaboration and extending digital services," he added.

Credit unions that will receive grants have been contacted by the agency. They can also check their CyberGrants login for their application status, the NCUA said.

For the full NCUA release, use the resource link.
 

Federal Regulators Release Risk-Retention Proposal

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WASHINGTON (8/29/13)--Another round of proposed credit risk-retention regulations, including a new definition of "qualified residential mortgage" (QRM) with modifications that the Credit Union National Association had urged, was released by the Federal Reserve, Federal Deposit Insurance Corp. and four other federal regulators Wednesday.

However, CUNA has a number of concerns about the new 505-page proposal, which will be addressed in future comment letters to the agencies. Comments are due Oct. 30.

The proposed QRM definition would be identical to the definition adopted by the Consumer Financial Protection Bureau for a "qualified mortgage" (QM). While CUNA noted this is a marked improvement from the original proposal, CUNA continues to seek additional latitude for credit unions under the CFPB's QM standards. CUNA will press for such flexibility under the QRM proposal.

The agencies are also seeking comments on an alternative definition of QRM that would include underwriting standards.

Under the Dodd-Frank Act, credit unions are not directly covered by the QRM proposal. However, CUNA has been weighing in with the various regulators on the QRM issues because there is a concern that the secondary market will conform to QRM standards and that examiners will expect federally insured institutions to meet QRM requirements.   

Any closed end loan secured by a dwelling would be under the proposal.

CUNA will post a Comment Call  on the QRM provisions later this week.

The U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Office of the Comptroller of the Currency, and the Securities and Exchange Commission joined the Fed and FDIC in releasing the proposed rule.

For more, use the resource link.