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NEW: Interchange: Next Steps Covered In CUNA 'Inside Exchange' Video

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WASHINGTON (UPDATED: 8/8/13, 2:30 P.M. ET)--Interchange, and the next steps for credit unions to expect as the result of a federal court ruling, is the subject of the latest episode of "Inside Exchange."

In this episode, Credit Union National Association General Counsel Eric Richard discusses with Paul Gentile, CUNA Executive Vice President of Communications, the court ruling striking down the Federal Reserve's rules on debit interchange, what that ruling means for credit unions--and what CUNA is doing about it.

CUNA has warned that the district court ruling will have "a potentially devastating impact on the ability of small debit card issuers, particularly credit unions, to continue offering this vital payments service to their members and customers."

CUNA currently is meeting with a broad coalition of finance industry representatives to chart a response strategy and approach to the court's decision, and is contacting Fed staff to detail the negative impact of the ruling on credit unions and other small card issuers as that agency considers an appeal.

CUNA: Advocacy Strength Is Key To Repel Bank Attacks

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WASHINGTON (8/8/13)--In an apparent direct response to credit unions' successful grassroots social media blitz spreading the message "Don't Tax My Credit Union," a major banking trade association has launched a similar looking but rampantly anti-credit union campaign.

"The bank attacks and misinformation campaigns are only going to multiply and escalate as the nation's policymakers continue their tax reform discussions and as credit unions continue to have success getting our message out," says Credit Union National Association Vice President of Political Affairs Trey Hawkins.

"It is imperative that all credit unions and their supporters keep up a vibrant advocacy effort to preserve the credit union tax status and therefore preserve credit unions as a smarter financial services option for consumers," he notes
Hawkins adds, "The best way to respond to these bank attacks is to just keep doing what we've been doing all along:  keep telling Congress: Don't Tax My Credit Union!"

CUNA, the state credit union leagues, credit unions and their members made big waves on Twitter in July when they propelled their advocacy message onto a new plane with DONTTAXTUESDAY, as part of the ongoing Don't Tax My CU campaign.

CUNA urged credit unions and their members to tweet "Please #DontTaxMyCU @ (Twitter handle of your senator here) #DontTaxTuesday" on July 23, or to post the same message on Facebook. CUNA estimates that more than 875,000--including many lawmakers--viewed tweets that were posted in support of credit unions and their tax exemption.

It is the American Bankers Association (ABA) that is promoting its message to increase taxes on credit unions via a website, social media campaign, and videos. The ABA urges banks to have their employees send the messages to federal lawmakers.

CUNA President/CEO Bill Cheney is strongly encouraging credit unions and their supporters to use the current five-week congressional district work period to meet with their lawmakers at home to spark more public messages of support, on tax and other key credit union issues. He recommends:
Take advantage of any available public event to engage your Representatives and Senators.  Many will hold town hall meetings, others will not, but be on the lookout for these opportunities and prepared to take advantage. 
Arrange in-district meetings with league and credit union representatives;   Oftentimes members of Congress have more time available for these "Hike at Home" meetings than in Washington during session, in a more relaxed atmosphere.
Keep encouraging credit unions to drive their membership to and to take action there.  
Keep tweeting.

FASB Plan Would Name CUs As Non-public Entities

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FAIRFIELD, Conn. (8/8/13)--In a major step that could be positive for credit unions, the Financial Accounting Standards Board Wednesday issued a request for public comment on a proposal that would allow nonpublic business entities to use accounting and reporting alternatives under U.S. Generally Accepted Accounting Principles (GAAP).

Such entities, that could include credit unions, could be subject to more flexible accounting requirements, although FASB acknowledged that whether alternatives allowed under GAAP would be permitted "may ultimately be determined by regulators."
Comments are due to FASB September 20, and CUNA will be posting a CUNA Comment Call on its Regulatory Advocacy website this week.
The proposal includes a revised definition of "public entity." When finalized, this definition will be used by FASB to identify the different needs of users of private company financial statements as opposed to the users of public company financial statements, according to the "Proposed Accounting Standards Update."
The framework should also help identify opportunities for reducing the complexity and costs associated with preparing financial statements in accordance with GAAP for nonpublic entities. The proposal, in and of itself, would not affect existing requirements.
The Credit Union National Association has long advocated to FASB that credit unions, based on their structure as not-for-profit, member-owned financial cooperatives, should not be subjected to a number of onerous and costly reporting requirements that should be applied to only publicly traded companies.
Patelco CU EVP-CFO Scott Waite, who has served on several FASB advisory councils for 10 years, was also able to help draw focus on the need for accounting treatment distinctions for credit unions.   
"This is an important development," CUNA's Deputy General Counsel Mary Dunn stated.
In CUNA's June 21 comment letter to FASB, Dunn noted: "Unlike most other financial institutions, credit unions do not issue stock or pay dividends to outside stockholders. By law, they must use their earnings to build capital and as member-financial institutions, credit unions do not issue stock or pay dividends to outside stockholders."
She added, "By law, credit unions must use their earnings to build capital and as member-owned cooperative institutions, work hard to provide favorable rates on loans and savings, and to minimize fees."

ATMIA Expresses Concern On Overturn Of Fed Interchange Rule

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SIOUX FALLS, S.D. and NEW YORK, N.Y. (8/8/13)--The ATM Industry Association (ATMIA) has joined the ranks of those concerned about the impact of a recent court decision that overturns the Federal Reserve Board's rules on debit fee caps and transaction routing choices.
ATMIA warns that uncertainty introduced by the federal court ruling could derail progress that has been made toward migration to a Europay-MasterCard-VISA (EMV) strategy to reduce fraud losses and to meet the liability-shift deadlines put in place by the major card networks.
The July 31 U.S. District Court for the District of Columbia decision, said David Tente, executive director USA for ATMIA Wednesday, "could completely stall progress toward development of the debit solutions necessary for the vast US EMV migration.
"With one liability shift passed and others looming in the near future, we're already seeing that the court's action has created a heightened level of confusion in the industry."
Tente said the ATM industry suddenly finds itself dealing with a court decision that "has just thrown away the rules upon which we have based all of our work for the past year.  Work that was necessary because the EMV spec being dictated by the global networks does not fit well with the U.S. payment system as a whole.  And meanwhile, the industry still faces the same unrealistic liability shifts."
The Credit Union National Association has warned that the district court ruling will have "a potentially devastating impact on the ability of small debit card issuers, particularly credit unions, to continue offering this vital payments service to their members and customers."

CUNA currently is meeting with a broad coalition of finance industry representatives to chart a response strategy and approach to the court's decision. CUNA also is contacting Federal Reserve staff to detail the negative impact of the ruling on credit unions and other small card issuers as that agency considers an appeal.

"While the Fed will independently make its decision whether or not to appeal, CUNA will make sure that Fed attorneys are aware of the potential negative impact of this decision on credit unions," CUNA General Counsel Eric Richard has said.

NCUA: Progress Seen In First Year Of LICU Initiative

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ALEXANDRIA, Va. (8/8/13)--The National Credit Union Administration on Wednesday released numbers to mark the one-year anniversary of its low-income credit union (LICU) initiative, with NCUA Chairman Debbie Matz noting that "the number of designated credit unions has grown significantly, creating the potential for greater community investment and access to financial services in underserved communities."

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"Since last August, 821 federally insured credit unions, with 11 million members and $101.8 billion in assets, have accepted the low-income designation. There are now 1,961, two-thirds of which are federal credit unions, with the low-income designation. The most recent data show these credit unions have 17.8 million members and assets of $157.6 billion. By streamlining the designation process, we have been helping more credit unions help more people," Matz said.

To qualify as a LICU, a majority of a federal credit union's membership must meet low-income thresholds based on 2010 Census data. In addition to the exemption from the 12.25% statutory cap on member business lending for credit unions, other advantages derived from the LICU designation include:
  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans;
  • Ability to accept deposits from non-members; and
  • Authorization to obtain supplemental capital.
For the full NCUA LICU release, use the resource link.

Mortgage Reg Recommendations Featured In CompBlog

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WASHINGTON (8/8/13)--Existing and upcoming mortgage changes, and how credit unions can comply with and prepare for them, feature heavily in the latest edition of the Credit Union National Association's CompBlog Wrap-Up.

One mortgage question credit unions are asking is whether the "prompt crediting of payments" requirement in the Consumer Financial Protection Bureau's mortgage servicing rule applies to home equity lines of credit (HELOCs).

The answer is no, according to CUNA compliance staff. The provision requiring "prompt crediting of payments" under Reg. Z Section 1026.36(c)(1) applies to closed-end mortgage loans secured by the borrower's principal dwelling. It does not apply to HELOCs.

CUNA compliance staff also answer another key question in the wrap-up: Are mortgage servicers required to establish a process for receiving notices of error and information requests through our website?

In this case, the answer is also no. According to the CFPB's new rule, a mortgage servicer is allowed, but not required, to establish a process for receiving error resolution and information request notices through email, website form, or other online intake methods. Any such online intake process will be in addition to, and not in lieu of, any process for receiving error resolution and information request notices by mail.

This month's Wrap-Up also links to a five-part CompBlog series on error resolution and information notice requirements in the new mortgage servicing regulation. The series addresses:
  • Preparing policies and procedures for error resolution and information requests required by the new mortgage servicing rule;
  • What is a "notice of error" or "information request" as defined by the new mortgage servicing rule;
  • Acknowledging the receipt of the error resolution and information request notice;
  • How to respond to an information request; and
  • How to respond to a notice of error.
The Wrap-Up also features details on the CFPB's finalized ability-to-repay and mortgage servicing rules, and update on legislative activities, and other compliance resources.

And, as it does every month, the CompBlog Wrap-Up lists the upcoming effective dates of new regulations, important compliance articles and reports to read, as well as CUNA training programs.

For more of the CUNA CompBlog Wrap-Up, and other compliance gems, use the resource link.

CUNA Comments On CFPB Dispute Resolution Survey

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WASHINGTON (8/8/13)--The Consumer Financial Protection Bureau should be mindful of the compliance challenges faced by credit unions as it conducts a telephone survey on consumer awareness and perceptions of dispute resolution provisions in credit card agreements, Credit Union National Association Senior Assistant General Counsel Luke Martone wrote in a recent comment letter to the bureau.

The CFPB has requested Office of Management and Budget approval to conduct a telephone survey of 1,000 consumers regarding dispute resolution provisions in credit card agreements. This survey is in conjunction with the CFPB's study of pre-dispute arbitration agreements, as required by section 1028(a) of the Dodd-Frank Act.

"It is CUNA's understanding that, while most credit unions do not utilize pre-dispute arbitration agreements, a small number of credit unions may incorporate similar provisions into their consumer contracts," Martone wrote.

CUNA does not object to this CFPB survey. However, the CUNA letter urged the agency to ensure it utilizes a sample size that is adequate to yield a sufficient number of informed respondents.

For the full CUNA comment letter, use the resource link.

Sallie Mae Prepping For FDIC SCRA Penalties

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WASHINGTON (8/8/13)--Sallie Mae this week revealed it is preparing for Federal Deposit Insurance Corp. penalties after the regulator found alleged violations of the Servicemembers Civil Relief Act (SCRA) and other laws.

Under the provisions of SCRA, servicemembers can receive an interest-rate reduction on loans taken out before active-duty service and, in some cases, receive deferrals, principal reductions, and loan forgiveness.

Civil money penalties and restitution obligations may be imposed due to the compliance violations, Sallie Mae said this week. Among the charges are violations of Section 5 of the Federal Trade Commission Act, the Equal Credit Opportunity Act and its implementing regulation, Regulation B. Sallie Mae said it could not estimate how much the regulator fines would total, or when the issues cited by the regulator would be resolved.

The FDIC warned Sallie Mae of potential action in July. That regulator and the Utah Department of Financial Institutions issued a cease and desist order against Sallie Mae in August 2008 after they found compliance weaknesses. The cease and desist order instructed Sallie Mae to assemble a compliance committee. That committee would then develop procedures for monitoring and auditing collection activities, customer service activities, and any activities conducted by telemarketing call centers.

Sallie Mae was also ordered to train third party affiliates on state and federal consumer protection laws in the 2008 cease and desist letter.