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Loan growth, Net Worth, Membership Are 2Q Story

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ALEXANDRIA, Va. (8/30/13)--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 (FICU) saw brisk loan growth, their highest net worth ratio since 2008 and record membership levels.

NCUA Chair 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 FICUs, 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.
Membership was another big story told by the second quarter numbers. Reaching a record high and growing by 560,670, credit union membership reaches 95.2 million, according to the NCUA's tabulations.

The NCUA also reported a second quarter earnings increase, a positive jump it attributed in large to increases in fee income and declines in loan-loss provisions. FICUs in the second quarter had a net income of more than $2.2 billion. The industry's return on average assets ratio stood at an annualized 85 basis points (bp) points at the end of the second quarter, which the agency said showed progress "inching closer to pre-crisis norms."

The delinquency ratio of FICUs for the second quarter of 2013 was 1.04%; the industry's net charge-off ratio declined to a reported annualized 58 bps:  Since the second quarter of 2012, the net charge-off ratio has declined by 17 bps.

Use the resource link to read more of the NCUA's report.

NEW: CUNA Seeks CU Comment On Revised QRM Rule

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WASHINGTON (8/30/13, UPDATED 4:12 p.m. ET)--The Credit Union National Association is encouraging interested credit unions to comment on a joint revised proposal on credit risk retention  issued this week by federal banking agencies. One aspect of the proposal is key for credit unions--a proposed definition of the term "qualified residential mortgage (QRM)" for purposes of creating an exemption from the risk retention requirements under the Dodd-Frank Act.
 
While few credit unions likely would be covered as securitizers of asset-backed securities, the proposal is important to credit unions because the secondary market will likely conform to qualified mortgage (QM) and QRM standards, CUNA noted in its request for comment.
 
CUNA is also concerned that examiners may insist credit unions confine their mortgage loans to QMs and QRMs.
 
Under the proposed rule, the definition of QRM would be revised to be the same as the Consumer Financial Protection Bureau's definition of a QM. This is a development that CUNA had urged.
 
Contrary to the original proposal, there would be no loan-to-value, down payment, credit history, mortgage servicing, or appraisal requirements for a mortgage loan to qualify as a QRM. However, home equity lines of credit, reverse mortgages, mortgages secured by timeshares and temporary or "bridge" loans of 12 months or less would not qualify for QRM status.
 
The proposed rule also differs from the original proposal as QRMs would now include any closed-end loan secured by a dwelling, not just principal dwellings secured by first liens that are securitized.  Subordinate liens would also be eligible for QRM status, as long as they meet the CFPB's definition of QM and are securitized.
 
Importantly, CUNA noted that as part of the re-proposed rule, the agencies are seeking comment on a much more stringent alternative to the proposed QRM definition, termed "QM-Plus" that does address underwriting criteria, such as a 30% down payment.
 
Comments are due to the agencies on the proposed rule by Oct. 30. CUNA, working with its Consumer Protection Subcommittee,
the Housing Finance Reform Task Force on related policy issues, the CUNA Lending Council, the state credit union leagues and credit unions, will be filing a strong comment letter with the agencies to argue against the alternative QM-Plus definition for QRMs.
 
Use the resource link for the CUNA Comment Call on the proposed plan.

Denver Post Op-Ed: CUs Deserve To Keep Their Non-profit Tax Status

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DENVER (8/30/13)--Credit unions deserve to keep their non-profit tax status because consumers "unequivocally benefit" from their presence in the financial services marketplace, said a Colorado credit union CEO in a Wednesday op-ed in The Denver Post.

"The banking industry pretends that banks and credit unions are essentially the same, since they provide similar services, like checking and savings accounts, car and small-business loans, and mortgages," wrote C. Alan Peppers, president/CEO of Westerra CU in Denver.

"But the two are very different," he added. "Banks, like other corporations, are owned by shareholders and managed to produce a profit. Credit unions, on the other hand, are member-owned cooperatives. They have a long history of providing financial services primarily to middle- and working-class families.

"Credit unions are run democratically, serving the needs of their members exclusively," Peppers wrote. "They don't set out to generate profits. Instead, they return their earnings to their members in the form of better rates on deposits, lower rates on loans, and reduced fees."

As an example, Colorado credit unions offer four-year used-car loans at an average 3.2% interest rate, compared with an average of 5.25% charged by Colorado banks, Peppers said. With a $15,000 car loan, that equates to nearly $2,000 in savings at a credit union during the life of the loan, he explained.

"Coloradans unequivocally benefit from the presence of non-profit credit unions in the financial services marketplace. Forcing them to pay new taxes would rob consumers of millions of dollars in benefits--and consequently hamstring our state's economy," Peppers concluded.

Credit unions and their members nationwide are engaged in a "Don't Tax My Credit Union" campaign urging Congress not to eliminate credit unions' tax exemption for corporate income. For more information, use the link.

NEW: NCUA Files RMBS Suit Vs. Morgan Stanley

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ALEXANDRIA, Va. (8/30/13, UPDATED 12:04 p.m. ET)--The National Credit Union Administration announced today it has filed a new residential mortgage-backed securities (RMBS) case--this one against Morgan Stanley and alleging such things as "systemic disregard of underwriting standards."

"Firms like Morgan Stanley sold securities that turned out to be faulty, triggering a crisis in the credit union industry that has been extremely expensive to contain and repair, and credit unions are still paying the tab," said NCUA Chair Debbie Matz announcing the suit. "All the credit unions we supervise and insure are sharing this burden. The people who are accountable, those who precipitated this crisis, should be required to shoulder that burden, as well."
 
This newest case is in the U.S.  District Court for the District of Kansas. The defendants are Morgan Stanley & Co., Inc., Morgan Stanley ABS Capital I Inc., Morgan Stanley Capital I Inc., and Saxon Asset Securities Co.

It alleges violations of federal and state securities laws in the sale of more than $566 million in mortgage-backed securities to the U.S. Central and WesCorp corporate credit unions, accoding to the NCUA.
 
Although filed Aug. 16, the NCUA announcement of a lawsuit filing comes just three days after the regulator received some good news from the U.S. 10th Circuit Court of Appeals.
 
That court overturned a lower court ruling that claimed the NCUA's RMBS case against RBS Securities was time-barred and should be dismissed.  By overturning that ruling, the appeals court enabled the regulator to proceed with its lawsuits against 12 firms, including RBS Securities, which claim losses stemming from residential mortgage-backed securities sold to corporate credit unions.
 
At the time of that decision, NCUA Chair Debbie Matz said the agency would "continue to pursue our claims against firms that sold faulty mortgage-backed securities to corporate credit unions. As liquidating agent for the corporate credit unions, NCUA has a duty to maximize recoveries from responsible parties in order to limit losses to federally insured credit unions."
 
As noted, the NCUA has filed the RMBS lawsuit as the liquidating agent for the corporate credit unions. Its lawsuits claim that the brokers' offering documents for the RMBS had material misrepresentations about the underlying loans that backed the securities.
 
NCUA has filed lawsuits against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual, and Bear Stearns alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.
 
Also, the NCUA has settled similar suits with Bank of America, Citigroup, Deutsche Bank Securities, and HSBC, bringing in more than $335 million in funds that were lost due to the corporate credit union investments. The NCUA has said that funds recovered through these cases will be used to help reduce the amount of future corporate stabilization assessments on credit unions.

FDIC-insured Institutions Earned $42.2 Billion In 2013 2Q

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ARLINGTON, Va. (8/30/13)--Commercial bank and savings institution second quarter income jumped 22.6%--up to $42.2 billion, reported the Federal Deposit Insurance Corp. (FDIC) of its insured institutions. That represented a $7.8 billion increase from the $34.4 billion in profits that the industry reported a year earlier.
 
The FDIC said this is the 16th consecutive quarter that earnings have registered a year-over-year increase.
 
However, FDIC Chairman Martin Gruenberg said industry revenue growth remains weak, reflecting narrow margins and modest loan growth. "And," he added, "the current interest rate environment creates an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention."
 
"Nonetheless, overall these results show a continuation of the recovery in the banking industry," he said.

It's Almost September: Is Your CU Prepared?

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WASHINGTON (8/30/13)--As News Now has been reminding over the last month, September is National Preparedness Month. The Federal Emergency Management Agency (FEMA) is inviting all interested parties to join a collaborative "National Preparedness Community" to fulfill a "shared responsibility to prepare."

FEMA is also offering a downloadable 2013 National Preparedness Month Toolkit.

Those who join FEMA's virtual preparedness community (see resource link) also:
  • Get access to preparedness resources;
  • Can promote their national preparedness event on the calendar;
  • Can connect and build relationships with emergency management personnel; and
  • Can share and compare preparedness plans.
Credit unions should also be aware of three webinars to help them prepare that are being offered in September by Agility Recovery, the disaster preparedness business continuity service provider for CUNA Strategic Services (News Now Aug. 12). Agility Recovery is partnering with the U.S. Small Business Administration to offer the preparedness sessions.  
 
Each of the free webinars all begin at 2 p.m (ET) and topics include:
  • Protecting Your Organization By Preparing Your Employees, Sept. 11;
  • The NEW 10 Steps to Preparedness: Lessons From the Past, Sept. 18;  and
  • Crisis Communications For Any Organization, Sept. 25.
Agility Recovery also has prepared a free "Crisis Communications Planning Checklist for Credit Unions," available to download from its website. Use the third resource link to download a two-page checklist, which provides recommendations for developing a communications plan, as well as what to do during the crisis and after the crisis. 

Agility has said the checklist can help credit unions assess their current strategy "and put into place some simple steps that will enhance your capability to communicate before, during and after the next disaster."

FHFA Reports 'Sharp' July Mortgage Rate Jump

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WASHINGTON (8/30/13)--The Federal Housing Finance Agency (FHFA) reported Thursday that mortgage interest rates rose sharply in July over the previous month's rates.
 
Continuing an upward trend, the contract rate on the composite of all mortgage loans was 4%, up from 3.55% in June.
 
Interest rates are typically locked in 30-45 days before a loan is closed. Consequently, FHFA July data reflect market rates from mid-to-late June. The effective interest rate was 4.12%, up 45 basis points (bp) from 3.67% in June. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.
 
FHFA's interest rate survey shows the average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 4.27% in July, an increase of 51 bps. The average loan amount for all loans was $278,200 in July down $4,200 from $282,400 in June.
 
FHFA will release August index values Sept. 26.
 
Use the resource link to find the complete contract rate series.

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.

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.

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.
 

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.

NEW: CUNA, Partners File Interchange Case Brief

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WASHINGTON (UPDATED: 8/28/13, 3:20 P.M. ET)--The Credit Union National Association and a broad coalition of financial industry representatives just filed a supplemental briefing in the ongoing debit interchange fee court case.

The brief addresses three major points, including arguments against requiring or allowing the Federal Reserve Board to draft an new version of the Dodd-Frank-imposed fee cap regulations to be implemented on an interim basis, either as the Fed's appeal proceeds or after.

Merchant plaintiffs filed a brief in the case earlier today, and the Fed has also filed its brief. Watch News Now for more on the Fed brief.

In the 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.

The briefs were requested by U.S. District Court for the District of Columbia Judge Richard Leon. 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. The interchange regulation, however, is still intact due to a stay on the judge's order.

The Fed has appealed this decision.

In their brief, the merchants asked the court to keep the current Fed rule in place during the appeal, believing this is "critical to 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.

Merchants did, however, support forcing the Fed to issue an interim final rule.

Appeals Court Backs NCUA In Case v. RBS Securities, Others

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ALEXANDRIA, Va. (8/28/13)--The U.S. 10th Circuit Court of Appeals issued a ruling Tuesday that will allow the National Credit Union Administration to move forward with its lawsuit against 12 firms, including RBS Securities, which claims losses stemming from residential mortgage-backed securities (RMBS) sold to corporate credit unions.

The agency asked the court on July 31 to expedite its review of an earlier Kansas federal court's ruling that dismissed the claims against Barclays Capital on the grounds they were time-barred and the NCUA hadn't filed the case in time.
 
NCUA Chair Debbie Matz Tuesday evening issued this statement: "We're pleased with the court's decision.  We will continue to pursue our claims against firms that sold faulty mortgage-backed securities to corporate credit unions. As liquidating agent for the corporate credit unions, NCUA has a duty to maximize recoveries from responsible parties in order to limit losses to federally insured credit unions."

As noted, the NCUA filed the lawsuit as the liquidating agent for the corporates. Its lawsuits claim that the brokers' offering documents for the RMBS had material misrepresentations about the underlying loans that backed the securities.
 
NCUA has filed lawsuits against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual, and Bear Stearns  alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.
 
In related actions, the agency has reached $335 million in settlements with Bank of America, Citigroup, Deutsche Bank Securities and HSBC.

CUNA: 13 Days Left For In-District Tax Talks with Lawmakers

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WASHINGTON (8/28/13)--There are 13 days left for credit union advocates to  reach out to federal lawmakers while in their home offices and garner support for the Don't Tax My Credit Union message, Credit Union National Association Senior Vice President of Political Affairs Richard Gose emphasized this week.

The current congressional District Work Break ends Sept. 9 and when Congress returns to session then, tax code reform will be one of the hot topics of discussion.

"We need to make sure the importance of maintaining the credit union tax status is at the forefront of legislators' minds as they return to Washington early next month. Any face time spent with legislators in the coming days is time well spent," Gose added.

CUNA President/CEO Bill Cheney said it is easy to question whether or not tax reform will ultimately get done in this Congress, but stressed that drafts of tax reform legislation that are being written right now could frame the debate on tax reform for the foreseeable future. "We want credit union interests to be protected no matter what," Cheney said.

Recent credit union contacts have reaped results, with Rep. John Conyers (D-Mich.) this week becoming the latest legislator to publicly back the credit union tax status. (See News Now item: Rep. Conyers Joins The Growing Ranks On CUs' Tax Status.)

Credit union advocacy efforts through the Don't Tax My Credit Union campaign have remained strong, with more than 730,000 contacts coming through CUNA's donttaxmycreditunion.org website.

"We've been very pleased at the passion with which folks have engaged through social media and other means," Gose added.

Overall, the Don't Tax campaign is solidifying support for credit unions and increasing grassroots activity as people are looking for other ways to help the credit union cause. CULAC had its most successful January-to-June fundraising period ever, tallying $1.06 million in donations during that time. That is 18% more raised to support credit union candidates than was raised in the same period of the last cycle, CUNA Vice President of Political Affairs Trey Hawkins noted.

And, while banks are trying to reverse this momentum with social media attacks of their own, credit union supporters have responded in kind. Many have used the bank social media accounts and hashtag to point out the $200 billion in bailout funds that banks were given by the government, or to remind them of the value that credit unions provide to their members each day.

"Walking the halls of Congress in the last couple of weeks, we have found the bank attacks have not had a lot of legs. But they have energized credit unions. There's nothing like an erroneous bank attack to get credit unions fired up," CUNA Executive Vice President of Government Affairs John Magill said.

CUNA Participates In Cybersecurity Meeting At Commerce

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WASHINGTON (8/28/13)--The Financial Services Sector Coordinating Council for Critical Infrastructure (FSSCC) participated in a meeting at the U.S. Department of Commerce Tuesday to discuss the National Institute of Standards and Technology (NIST) critical infrastructure cybersecurity framework to implement parts of the president's Executive Order on cybersecurity. The Credit Union National Association is part of the FSSCC.
 
At the meeting, NIST Director Patrick Gallagher and other senior staff discussed upcoming cybersecurity developments.  CUNA and other representatives discussed the need for additional regulatory coordination with the federal financial regulators, including the National Credit Union Administration, and other agencies to ensure that the NIST framework is consistent with existing rules and regulations.   
 
On July 1, NIST released a discussion draft outline on a "Framework to Reduce Cyber Risks to Critical Infrastructure" (see resource link). 
 
"We are encouraged the draft framework is being developed through a private-public partnership and is designed to be an 'adaptable, flexible, and scalable tool for voluntary use' to 'complement rather than to conflict with current regulatory authorities,'" said Dennis Tsang, CUNA regulatory counsel, who attended the meeting.
 
NIST plans to issue a proposed cyber framework this October for notice and comment, and to finalize the framework by February 2014.     
 
CUNA submitted a comment letter NIST in April, emphasizing that credit unions and financial institutions are already subject to robust data security requirements and standards, and should not be subject to additional regulations.  However, CUNA stressed that additional coordination on cybersecurity would be helpful.  Use the second resource link to read the CUNA comment letter.
 
 

E-Filing Comment Deadline Approaches

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ALEXANDRIA, Va. (8/28/13)--Credit unions have until Sept. 3 to comment on a National Credit Union Administration proposal to require all federally insured credit unions (FICUs) to file financial, statistical, and other reports and credit union profiles with the agency only electronically.

The current rule allows FICUs to file these reports electronically or by manually sending the information to the NCUA. Credit unions are only required to file financial information online only if they have the capacity to do so, but under the proposal all FICUs would have to maintain a computer with internet access and an e-mail address.

When the agency proposed the change at its July 25 open board meeting, staff noted that a 30-day public comment timeframe, rather than the more-typical 60-days, would be sufficient for what the agency considers a "simple change.'

The Credit Union National Association issued a Comment Call seeking credit unions' views on the proposal and will be submitting a letter of comment with the agency later this week.

Use the resource links to access that and other CUNA Comment Calls, as well as the Federal Register document regarding the e-filing proposal.

CFPB, Labor Dept. Unite To Address Disabled Worker Financial Issues

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WASHINGTON (8/28/13)--The Consumer Financial Protection Bureau and Department of Labor (DoL) have announced a new partnership--one intended to help consumers with disabilities get the information they need to understand money management, savings, credit, and how to evaluate financial choices.  Equally important, the effort will help them know where to get assistance if they are treated unfairly.

The CFPB said in a release that all consumers need the information noted above, but added that individuals with disabilities "often face barriers and challenges in moving toward economic security and self-sufficiency." If entering the workforce, these new workers may never have had a savings or checking account, or may have no credit record, the release said.  It added that for those going back to work after an injury or illness, credit scores may have suffered because of the impact the event had on their income.

Through the partnership, the CFPB and DoL's Office of Disability Employment Policy will develop and distribute educational materials, resources, and technical assistance to the clients' and professional staff of American's Job Center, operated by DoL.

NEW: Fed Agencies Release QRM, Risk Retention Proposal

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WASHINGTON (UPDATED: 8/28/13, 11:40 A.M. ET)--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 today.

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.

Fed, Merchant Briefs Due Today In Interchange Case

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WASHINGTON (8/28/13)--Briefs on whether the Federal Reserve Board should issue a potential interim interchange rule are expected to be submitted by the Fed, plaintiffs representing merchants, and other interested parties today. The Credit Union National Association will join a coalition of financial trade groups in filing a brief.

Earlier this week, the Fed filed a consent motion for a stay of U.S. District Court for the District of Columbia Judge Richard Leon's July 31 interchange decision, pending appeal.

This motion was filed with the consent of merchant representatives, who are the plaintiffs in this case. The Fed and merchant representatives have both said they support a longer stay of Leon's order, pending a resolution of the Fed's appeal, CUNA General Counsel Eric Richard said last week.

The consent motion, which was filed late Monday, follows last Wednesday's hearing in that court, at which Fed General Counsel Scott Alvarez said the board plans to appeal Leon's decision. Alvarez last week said the Fed wishes to bring this case to finality quickly, and would work expeditiously to address interchange case issues once the appeal is filed. The Fed is also planning to file a motion to expedite this appeal, which could bring the case to its conclusion within nine months to one year.

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.

The judge has instructed the Fed to rewrite and/or revise the regulations, which require a cap on fees card issuers may charge merchants for their debit transaction services.

Service Expansions Behind July CU Mergers

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ALEXANDRIA, Va. (8/28/13)--There were 23 credit union mergers approved by the National Credit Union Administration in July, with 16 of these mergers being made in a bid to expand credit union services to new membership.

Billion-dollar credit unions such as Westerra CU, Denver, Colo., TTCU The Credit Union in Tulsa, Okla., and Western FCU, Manhattan Beach, Calif., were among those that were approved to expand their service areas by merging with smaller neighbors. Other mergers approved by the NCUA included:
  • Lima Ohio Postal Employees FCU, which merged into nearby Topmark FCU due to a lack of growth;
  • Harper & Row Keystone Employees FCU, Throop, Pa., which merged into Scranton, Pa.'s Penn East FCU due to a declining field of membership;
  • Angelus Can Employees FCU, Los Angeles, which lost its sponsorship and merged into Vons CU, El Monte, Calif.; and
  • Delta Wye FCU, Dorchester, Mass., which was merged into River Works CU, Lynn, Mass., due to poor financial conditions.
Middlsex Healthcare FCU, Middletown, Conn., and Savage Arms Employees CU, Westfield, Mass., were both approved to merge into other credit unions after they failed to obtain officials. Seasons FCU, Middletown Mass., will take on Middlesex members and assets, and Pioneer Valley FCU, Springfield, Mass., will take on the members and assets of Savage Arms Employees, according to the agency.

The July Insurance Report of Activity also noted one approved common bond expansion, 614 approved and 20 deferred multiple common bond expansions, and six approved and two deferred community expansions.

For the full NCUA report, use the resource link.

NEW: Appeals Court Backs NCUA In Case v. RBS Securities, Others

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ALEXANDRIA, Va. (8/27/13, UPDATED 7:10 p.m. ET)--The U.S. 10th Circuit Court of Appeals issued a ruling Tuesday that will allow the National Credit Union Administration to move forward with its lawsuit against 12 firms, including RBS Securities, which claims losses stemming from residential mortgage-backed securities (RMBS) sold to corporate credit unions.

The agency asked the court on July 31 to expedite its review of an earlier Kansas federal court's ruling that dismissed the claims against Barclays Capital on the grounds they were time-barred and the NCUA hadn't filed the case in time.
 
NCUA Chair Debbie Matz Tuesday evening issued this statement: "We're pleased with the court's decision.  We will continue to pursue our claims against firms that sold faulty mortgage-backed securities to corporate credit unions. As liquidating agent for the corporate credit unions, NCUA has a duty to maximize recoveries from responsible parties in order to limit losses to federally insured credit unions."

As noted, the NCUA filed the lawsuit as the liquidating agent for the corporates. Its lawsuits claim that the brokers' offering documents for the RMBS had material misrepresentations about the underlying loans that backed the securities.
 
NCUA has filed lawsuits against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual, and Bear Stearns  alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.
 
In related actions, the agency has reached $335 million in settlements with Bank of America, Citigroup, Deutsche Bank Securities and HSBC.

NCUA Holds Welcome Reception For Metsger

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ALEXANDRIA, Va. (8/27/13)--National Credit Union Administration Chair Debbie Matz Monday morning welcomed Richard Metsger to the NCUA board in a special reception at the agency headquarters here.

Matz presented Metsger with his official name plaque as the newest member of the board. He will attend his first open meeting as an agency leader on Sept. 12.

Matz told Metsger, "It is a great honor to join this board. We welcome you and welcome having our full three-person board again."

Metsger responded, "We all share a common goal of having a strong credit union system. Why we are here is to ensure those 95 million Americans that are members can continue their trust of credit unions.

"At the end of the day, what is really important under Chairman Matz's leadership, is we will speak with one voice."
 
Metsger, who will serve as the 20th NCUA board member, was sworn in Friday by NCUA General Counsel Michael McKenna. He fills the seat vacated late last year after the term of board member Gigi Hyland expired.

Immediately following the swearing-in, Metsger attended a reception in his honor organized by the Northwest Credit Union Association at Credit Union House.

Use the resource link below to access the Metsger biography featured on the NCUA website.

CUNA Seeks Comment On 'Most Troublesome' Bylaws

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WASHINGTON (8/27/13)--Modernizing Federal Credit Union Act bylaws to ensure they better reflect the current operating environment for credit unions is a Credit Union National Association priority, and CUNA in this week's Regulatory Advocacy Report urged all federal credit unions and leagues to identify any current bylaws that are problematic, and forward details to CUNA regulatory staff.

The Federal Credit Union Act requires the National Credit Union Administration board to address and federal credit unions to maintain bylaws. As with other business entities, the bylaws address a broad range of matters concerning a credit union's organization and governance, the relationship of the credit union to its members, and the procedures and rules a credit union follows.

CUNA is currently reviewing NCUA's federal credit union bylaws. The present version contains requirements that are, at best, dated, CUNA noted in this week's RAR. The NCUA bylaws were last updated in 2007, CUNA Deputy General Counsel Mary Dunn said in the report.

"This is a very important effort and we want to work closely with credit unions and leagues to address bylaw concerns, including those that are cumbersome or that make it more difficult for credit unions to serve their members," Dunn noted. Changes that are forwarded to CUNA will be included in a list of recommendations for the NCUA, Dunn added.

Credit unions may also send any nonstandard bylaws that have been approved by NCUA as well as any nonstandard bylaws that have been rejected by NCUA. The rejected nonstandard bylaws will also help CUNA consider additional revisions that should be made to the standard bylaws, she wrote.

Other items addressed in this week's CUNA Regulatory Advocacy Report include:
  • The Federal Reserve interchange litigation;
  • The swearing-in of NCUA Board Member Richard Metsger; and
  • A Consumer Financial Protection Bureau report on supervisory issues, including those uncovered during mortgage examinations.
Employees or volunteers of CUNA- and state credit union league-member credit unions are invited to sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Fannie Mae Readies Desktop Underwriter Update

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WASHINGTON (8/27/13)--An updated version of Fannie Mae's Desktop Underwriter will be released on Nov. 16.

Changes in the upcoming program revision, Desktop Underwriter version 9.1, include:
  • The addition of information on Fannie Mae policy changes made to comply with ability to repay provisions of the Dodd-Frank Wall Street Reform Act;
  • The removal of an interest-only feature, 40-year loan terms, and expanded approval recommendations;
  • Updated qualifying rate requirements and area median income limits; and
  • Alterations to minimum credit score requirements.
A series of webinars on the changes began on Aug. 26.

Desktop Underwriter is an automated mortgage loan underwriting program that helps lenders begin the mortgage writing and approval process. The program can give mortgage loan officers an idea of whether a potential borrower would or would not qualify for a given mortgage loan early in the mortgage approval process.

However, Fannie Mae in a release emphasized that the program does not evaluate a loan's compliance with federal and state laws and regulations or whether it meets certain legal standards. The program also does not consider a loan's potential status as a qualified mortgage. Lenders bear sole responsibility for that determination and for compliance with applicable requirements, Fannie Mae wrote.

Fannie Mae is a CUNA Strategic Services provider.

For more on the webinars and the updated program, use the resource link.

NEW: Fed Seeks Extended Stay In Interchange Case

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WASHINGTON (8/27/13, UPDATED 11:25 A.M. ET)--The Federal Reserve Board has filed a consent motion for a stay of U.S. District Court for the District of Columbia Judge Richard Leon's July 31 interchange decision, pending appeal.

This motion was filed with the consent of merchant representatives, who are the plaintiffs in this case. The Fed and merchant representatives have both said they support a longer stay of Leon's order, pending a resolution of the Fed's appeal, Credit Union National Association General Counsel Eric Richard said last week.

The consent motion, which was filed late Monday, follows last Wednesday's hearing in that court, at which Fed General Counsel Scott Alvarez said the board plans to appeal Leon's decision. Alvarez last week said the Fed wishes to bring this case to finality quickly, and would work expeditiously to address interchange case issues once the appeal is filed. The Fed is also planning to file a motion to expedite this appeal, which could bring the case to its conclusion within nine months to one year.

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.

The judge has instructed the Fed to rewrite and/or revise the regulations, which require a cap on fees card issuers may charge merchants for their debit transaction services. Briefs on whether the Fed should issue an potential interim interchange rule must be submitted by the Fed, plaintiffs representing merchants, and other interested parties by Aug. 28.

CUNA will join a coalition of financial trade groups in filing a brief.

CUs' 'Unique Nature' Requires Distinct Accounting Treatment, CUNA Tells FASB

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WASHINGTON (8/27/13)--The Credit Union National Association said it supports two proposed Financial Accounting Standards Board's (FASB) accounting changes, and reminded the agency that, in both cases, it must understand the unique nature of credit unions, which are member-owned, not-for-profit financial cooperatives, as it continues its work.

FASB should be particularly mindful of areas where "the associated costs outweigh the benefits to the reporting entity and the users of their financial statements," CUNA Senior Assistant General Counsel Luke Martone wrote in a pair of comment letters.

"Financial statement users of a credit union are so very different from those of a bank, including both public and private," he emphasized.

The primary users of credit unions' financial statements are the National Credit Union Administration--the prudential regulator of federally chartered credit unions and insurer of most state and all federally chartered credit unions--and state credit union regulators, Martone noted.

The comment letters were in reference to two separate proposals from FASB's Private Company Council.  Following a review of public comments, the council will consider changes to the proposals before submitting them to FASB for a final decision on endorsement.

One proposal, accounting for Goodwill Subsequent to a Business Combination (PCC Issue No. 13-01B), would permit amortization of goodwill (the residual asset recognized in a business combination after recognizing all other identifiable assets acquired and liabilities assumed) and a simplified goodwill impairment model. The proposal is intended to address private-company stakeholder concerns raised about the relevance and complexity of U.S. Generally Accepted Accounting Principles.

Another proposal, Accounting for Identifiable Intangible Assets in a Business Combination (PCC Issue No. 13-01A), would modify the requirement for private companies to separately recognize fewer intangible assets acquired in a business combination.

For more on both comment letters, use the resource links.

Matz Talks Capital Reforms In NCUA Report

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ALEXANDRIA, Va. (8/27/13)--The 15-year-old, one-size-fits-all credit union capital regime "is outdated and insufficient," and is "simply not enough to protect the credit union industry during a serious crisis," National Credit Union Administration Chairman Debbie Matz reiterated in the August edition of The NCUA Report.

The NCUA editorial mirrors remarks Matz made in July, when she said credit unions "need a flexible, forward-looking standard that makes sense for today and tomorrow."

The current 7% leverage capital standard was set in 1998, and recent financial crisis and industry changes mean a newer approach is needed, she said.

So, what's the right amount of capital then, credit unions may ask? The answer, Matz said, is complicated. "The answer will vary from credit union to credit union. But just because it's complicated doesn't mean we should shrink away from finding a solution. On the contrary, it underscores just how important it is to build a new risk-based capital framework for credit unions," Matz wrote.

A developing NCUA plan could result in higher capital levels for credit unions with high concentrations of risky assets. The current 7% leverage capital standard, which is required by the Federal Credit Union Act, would remain the floor. However, Matz said, credit unions with assets of $50 million and above could be subject to improved risk-based capital requirements to better correlate required capital levels to risk.

As it moves toward a final rule, the NCUA will give credit unions and other stakeholders plenty of time to comment on the proposed changes. "It's important for us to get it right. With your help, we will. And with your help, the entire credit union industry will be stronger," Matz added.

The Credit Union National Association has supported net worth standard changes that reflect risk better than the present approach but that will not simply add net worth requirements to the current system. CUNA has also been urging the agency to adopt a more productive approach to rulemaking that focuses on problem areas rather than issuing rules with blanket applicability, regardless of the credit unions level of risk. CUNA's Examination and Supervision Subcommittee, which has met with NCUA officials on the capital ratio issue, will be talking again today via telephone conference call on risk based net worth.

For the full NCUA Report, use the resource link.

Everbank Accepts OCC Order To Repay

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WASHINGTON (8/26/13)--Everbank Financial has agreed to pay more than $40 million to homeowners and housing assistance groups under the terms of a settlement with the Office of the Comptroller of the Currency (OCC).

The OCC said EverBank was subject to a cease and desist order for unsafe and unsound practices in mortgage servicing and foreclosure processing. According to the OCC, the Jacksonville, Fla., financial firm will pay:
  • Approximately $37 million in cash payments to more than 32,000 eligible mortgage borrowers whose homes were in foreclosure during 2009 and 2010; and
  • $6.3 million to housing assistance groups.
Aggrieved customers are scheduled to receive between $1,050 and $125,000, plus equity in some cases. Borrowers will be contacted by a third party, and will not need to take further action to receive payment.

The housing assistance funds are scheduled to go to U.S. Department of Housing and Urban Development certified groups. Certain tax-exempt organizations that provide affordable housing, foreclosure prevention and/or educational assistance to low- and moderate-income individuals and families will also be eligible for funds, the OCC added.

For the full OCC release, use the resource link.

Cheney Report Calls On CUs To Respond To Bank Attacks

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WASHINGTON (8/26/13)--More and more members of Congress are coming out in support of the credit union tax status, and Credit Union National Association President/CEO Bill Cheney in this week's Cheney Report said banks are responding the only way they know how: By attacking credit unions with outrageous arguments and vitriol.

One bank tactic is breaking apart credit unions by size or growth or some other category that has nothing to do with structure. "Don't they get it? Whether a credit union has $1 million in assets or $10 billion, a credit union is a credit union because of its structure," Cheney wrote.

And, while the banks continue their outrageous attacks via opinion pieces, ads and social media posts, Cheney said credit union members continue to recognize the benefit and necessity of the not-for-profit, member-owned cooperative structure.

"While these tired banker arguments are an annoyance, we must remain active in telling our story to members, consumers and lawmakers," Cheney said. Credit union advocacy efforts through the Don't Tax My Credit Union campaign have remained strong, with more than 715,000 contacts coming through CUNA's donttaxmycreditunion.org website.

Credit unions must continue to engage their members as the banker rhetoric heats up, Cheney said. "Now is the time for us to collectively be at our best in educating credit union members on why the exemption is so important and urging them to tell that story to Congress," he added.

The latest developments in the Federal Reserve's ongoing interchange case are also outlined in this week's Cheney Report.

Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership. To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

NEW: Matz Welcomes Metsger At NCUA Reception

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ALEXANDRIA, Va. (8/26/13, UPDATED 10:24 a.m. ET)--National Credit Union Administration Chair Debbie Matz this morning welcomed Richard Metsger to the NCUA board in a special reception at the agency headquarters here.

Matz told Metsger, "It is a great honor to join this board. We welcome you and welcome having our full three-person board again."

Metsger responded, "We all share a common goal of having a strong credit union system. Why we are here is to ensure those 95 million Americans that are members can continue their trust of credit unions.

"At the end of the day, what is really important under Chairman Matz's leadership, we will speak with one voice."
 
Matz presented Metsger with his official name plaque as the newest member of the board. He will attend his first open meeting as an agency leader on Sept. 12.

Metsger, who will serve as the 20th NCUA board member, was sworn in Friday by NCUA General Counsel Michael McKenna. He fills the seat vacated late last year after the term of board member Gigi Hyland expired.

Immediately following the swearing-in, Metsger attended a reception in his honor organized by the Northwest Credit Union Association  at Credit Union House.

See News Now LiveWire for photos.

Metsger Sworn In As NCUA Board Member

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WASHINGTON (8/26/13)--New National Credit Union Administration Board Member Richard Metsger outlined his vision for the credit union system in a Friday private swearing-in ceremony on Capitol Hill.
Click for slide showRichard Metsger, left, was sworn in as the National Credit Union Administration's newest board member this morning by NCUA General Counsel Michael Mckenna. Looking on is Velma Hall, Metsger's mother. Credit Union National Association President/CEO Bill Cheney attended the ceremony. (Photo provided by NCUA)

"As I said during my confirmation hearing, my vision is for NCUA to be recognized as an agency that manages its own fiscal house well, proposes regulatory action that is effectively targeted to achieve the desired outcome without placing unnecessary burdens on the credit unions themselves and, above all, maintains the confidence and trust the American public places in their local credit union," Metsger said.

Metsger, who will serve as the 20th NCUA board member, was sworn in by NCUA General Counsel Michael McKenna. He fills the seat vacated late last year after the term of board member Gigi Hyland expired.

Credit Union National Association President/CEO Bill Cheney attended the swearing in. "CUNA looks forward to working with Mr. Metsger as he starts his tenure on the board, knowing that he can rely on his experience as a credit union board member in dealing with the challenges that credit unions face today," Cheney said after the ceremony.

Immediately following the swearing-in, Metsger attended a reception in his honor organized by the Northwest Credit Union Association (NWCUA) at Credit Union House.

A number of credit union leaders from throughout the system, including CUNA, the American Association of Credit Union Leagues, and state leagues, were in attendance. NWCUA President/CEO Troy Stang; Spokane Media FCU CEO and NWCUA Board Chair Debie Keesee; Rivermark CU, Beaverton, Ore., President/CEO Scott Burgess; and Seattle, Wash.-based BECU President/CEO Benson Porter were among those attending the swearing in and reception.

"We certainly are honored to have witnessed Mr. Metsger--a fellow Northwest citizen--take the oath of office, and we look forward to his leadership at the agency," said Stang.

A former Oregon state senator, Metsger was named as an NCUA Board candidate by President Obama in June. His nomination moved quickly through the confirmation process, receiving Senate approval just before the August recess.

He will attend his first NCUA board meeting as an agency leader on Sept. 12.

CFPB Report IDs Mortgage Servicer Missteps

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WASHINGTON (8/23/13)--Sloppy account transfers, poor payment processing and loss mitigation errors are some of the mortgage servicing mistakes identified by the Consumer Financial Protection Bureau's review of banks and nonbank mortgage servicing examinations undertaken between November. 2012 and June 2013.

The report covers supervising banks with total assets of more than $10 billion and nonbank servicers. There is  no specific mention of credit unions within the report, other than the fact that CFPB supervises banks and credit unions with more than $10 billion in assets.

The CFPB report highlighted "both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law," CFPB Director Richard Cordray said. Fixing both of these issues is a priority for the agency, he said.

The bureau responded to mortgage servicing concerns it found by alerting the company in question, outlining remedial measures, and, when appropriate, investigating the issue and determining if enforcement actions were warranted.

The report found that many nonbanks "lack robust systems" for ensuring they are following federal laws. Other issues identified in the CFPB report include:
  • Failure to adequately disclose mortgage loan transfers;
  • A lack of document handling protocols;
  • Failure to notify borrowers of a change in billing address;
  • Deceptive communications to borrowers about the status of loan modification applications;
  • Excessive delays in handling private mortgage insurance payment cancellations;
  • Late property tax payments;
  • Conflicting instructions for loss mitigation processes and inconsistent loss mitigation underwriting;
  • Lengthy application review periods;
  • Incomplete loan files; and
  • Poor procedures for requesting missing or incomplete information from consumers.
The CFPB said it responded to these issues by reviewing loss mitigation decisions and related fees or charges to borrowers to determine whether any reimbursement was appropriate, conducting periodic testing to monitor areas of concern, and requiring reports on the status of ongoing corrective actions.

For the full CFPB release, use the resource link.

CompBlog Covers CFPB 'Small Servicer' Basics

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WASHINGTON (8/23/13)--How does the Consumer Financial Protection Bureau define "small servicer" for the purpose of the new mortgage lending rules? Credit Union National Association Federal Compliance Counsel Colleen Kelly answers this and other questions in an ongoing CompBlog series examining the bureau's treatment of small servicers.

To qualify as a small servicer, Kelly notes that a mortgage servicer must:
  • Service, together with any affiliates, 5,000 or fewer mortgage loans; and
  • Service only mortgage loans for which the mortgage servicer (or an affiliate) is the creditor or assignee.
Housing finance agencies would also qualify as small servicers for the purposes of CFPB mortgage regulations, she adds. Housing finance agencies are any public body, agency, or instrumentality created by a specific act of a state legislature or local municipality empowered to finance activities designed to provide housing and related facilities, through land acquisition, construction or rehabilitation.

CFPB definitions of creditor, assignee and affiliate are also clarified in the blog post.

Closed-end consumer credit transactions secured by a dwelling--except for charitably serviced mortgage loans, reverse mortgages and mortgage loans secured by time share plans--will count toward the 5,000 loan cap, Kelly adds in another blog post. Loans obtained by merger or acquisition and coupon book loans may also be considered when making a cap determination.

Kelly also outlines which mortgage servicers will not qualify as "small servicers" under CFPB regulations.

According to the bureau, if a mortgage servicer and its affiliate service fewer than 5,000 mortgages each, but more than 5,000 mortgages combined, they would not be considered "small servicers."

A mortgage servicer that services 3,100 mortgage loans--3,000 mortgage loans it owns or originated and 100 mortgage loans it neither owns nor originated, but for which it owns the mortgage servicing rights--would also not count as a small servicer.

Use the resource link for more CUNA CompBlog posts.

CFTC Approves CUNA-supported CU Swap Exemption Rule

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WASHINGTON (8/23/13)--A final rule that will provide credit unions and other cooperative businesses with a clearing exemption for certain swaps was published by the Commodity Futures Trading Commission (CFTC) on Thursday.
 
The Credit Union National Association supported the exemption proposal, which was opposed by the banks.

CUNA Deputy General Counsel Mary Dunn said the exemption ''will help minimize the additional costs and fees associated with mandatory clearing and provide flexibility for credit unions to use non-cleared swaps," However, she added, the exemption will not have a significant impact on the overall swap market because of the small number of entities eligible for the exemption.
 
The CFTC rule will permit credit unions and other co-ops with $10 billion or more in assets to avoid swap clearing requirements when loans are originated for members. This exemption also will be extended to swap transactions that are used to hedge against risks associated with member loans.

The CFTC published the final rule, "Clearing Exemption for Certain Swaps Entered Into by Cooperatives," Thursday in the Federal Register. The rule will become effective on Sept. 23.
 
The exemption would apply to cooperatives whose members are non-financial entities, financial entities to which the small financial institution exemption applies, and cooperatives. Credit unions and other financial institutions with under $10 billion in assets are already exempt under a separate CFTC final rule.
 
"As not-for-profit cooperatives, all well-managed credit unions, consistent with safety and soundness, should be able to elect not to clear swaps that are for the purpose of hedging interest rate risks," Dunn added.
 
For more on the CFTC final rule, use the resource link.

Sen. Enzi, Two Congressmen State Support Of CUs' Tax Exempt Status

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WASHINGTON (8/23/13)--A U.S. senator and two congressmen have added their support of credit unions' tax-exempt status to the growing list of congressional supporters, a further indication that credit unions' "Don't Tax My Credit Union" campaign is having an impact. They are U.S. Sen. Mike Enzi (R-Wyo.), and U.S. Reps. Steve Daines (R-Mont.) and Phil Roe (R-Tenn.).
 
A meeting with U.S. Sen. Mike Enzi (R-Wyo.) resulted in his stating his support for credit unions' tax exempt status. From left are: Chris Kemm of Mountain West Credit Union Association; Steve Higginson of Reliant FCU, Casper; Sen. Enzi; Brian Rohrbacher, Atlantic City FCU, Lander; Bill Willingham, WyHy FCU, Cheyenne; andVicki Nelson, River-Rail Community FCU, Casper. (Photo provided by Mountain West Credit Union Association)
Sen. Enzi affirmed his support of credit unions' status during a meeting with the Mountain West Credit Union Association and five Wyoming credit union leaders in Casper, Wyo.
 
"Today's meeting with Sen. Enzi was very positive," said Scott Earl, president/CEO of MWCUA. "He showed a great deal of support for credit unions' current cooperative structure and the value that credit unions bring to the community."
 
This was the first time Enzi had met with credit unions in Casper. MWCUA also is scheduling a meeting with him in Gillette.
 
Montana's Rep. Daines expressed his support of credit unions' status in a letter to the Montana Credit Union Network president/CEO Tracie Kenyon.
 
"Like you, I appreciate the important role that credit unions play for thousands of Montanans every day," he wrote in the Aug. 13 letter. "The service they provide to their members is particularly important to rural financing. I support the current tax exemption because credit unions are unique depository institutions that seek to meet the needs of their members rather than maximize profits."
 
He noted that although he does not serve on the House Committee on Ways and Means, which is overseeing the tax code reform, "I will work to encourage the committee to maintain this provision as it develops comprehensive tax reform legislation to make the tax code simpler and fairer."
 
"We are overjoyed by Congressman Daines' explicit support of credit unions' tax exempt status," Kenyon told News Now. "Although his tenure in Congress is short, he has quickly grasped the unique and important role that not-for-profit credit unions serve and articulated it in his written message."
 
Tennessee's Roe expressed his support in an e-mailed message Monday to Olan Jones, president/CEO of Eastman CU in Kingsport, Tenn. 
 
"In East Tennessee, credit unions play an important role by offering low-cost financial services to their primary shareholders: homeowners, families and small businesses," Roe said. "I support maintaining this tax exemption in order to keep credit availability high and the cost of borrowing low for American families and entrepreneurs.
 
"I will be sure to keep your thoughts in mind should this issue come up for a vote before the entire House of Representatives," Roe said.
 
The Tennessee Credit Union League coordinated a meeting recently with Roe and credit unions at United Southeast FCU in Bristol, Tenn. Comments by credit union members related to the Don't Tax My Credit Union campaign had a positive impact on Roe's position on credit unions' tax exemption.

"We organize our efforts so the credit unions are out front meeting with the members of Congress," league President/CEO Fred Robinson said. "We let them tell the story (about the impact on members), and their stories rang very true with Congressman Roe," he told News Now.
 
"We're meeting across the state right now and have met with half of the delegates. Many of them have supported [credit unions' tax exemption] verbally. Roe is the first to put it in writing, and we are very excited about that. The credit unions get all the credit," Robinson said.
 
The new supporters join a host of members of Congress who have recently stated their support of credit unions tax exemption, including Sens. Carl Levin (D-Mich.) and Tammy Baldwin (D-Wis.), and Reps. Rush Holt (D-N.J.); Keith Rothfus  and Joe Pitts, both Republicans from Pennsylvania; Sander Levin (D-Mich.); and seven other Michigan legislators.  In Texas, 38 House and Senator members said they support credit unions, with 32 mentioning specifically they support credit unions' tax exempt status.

NEW: Metsger Sworn In As NCUA Board Member

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WASHINGTON (8/23/13, UPDATED: 11:15 A.M. ET)--New National Credit Union Administration Board Member Richard Metsger outlined his vision for the credit union system in a private swearing-in ceremony on Capitol Hill this morning.

Click to view larger image Richard Metsger, left, was sworn in as the National Credit Union Administration's newest board member this morning by NCUA General Counsel Michael Mckenna. Looking on is Velma Hall, Metsger's mother. Credit Union National Association President/CEO Bill Cheney attended the ceremony. (Photo provided by NCUA)
"As I said during my confirmation hearing, my vision is for NCUA to be recognized as an agency that manages its own fiscal house well, proposes regulatory action that is effectively targeted to achieve the desired outcome without placing unnecessary burdens on the credit unions themselves and, above all, maintains the confidence and trust the American public places in their local credit union," Metsger said.

Metsger, who will serve as the 20th NCUA board member, was sworn in by NCUA General Counsel Michael McKenna.

"I will do everything within my power to fulfill the trust placed in me by the president and the Congress to ensure both the integrity and the continued safety and soundness of our nation's credit union system in a rapidly changing marketplace. For me, the most important task is the continued protection of the Share Insurance Fund, which protects credit union member deposits up to $250,000, from losses," Metsger added.

Immediately following the swearing-in, Metsger was scheduled to attend a reception in his honor at Credit Union House organized by the Northwest Credit Union Association. A number of credit union leaders from throughout the system, including the Credit Union National Association and state leagues, will be in attendance.

NCUA Sets Two September MBL Webinars

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ALEXANDRIA, Va. (8/22/13)--Member business lending (MBL) underwriting, strategy and policy will be addressed in a pair of upcoming National Credit Union Administration webinars.

The first webinar, which will address MBL strategy and policy, is scheduled for 2 p.m. ET on Tuesday, Sept. 17. MBL underwriting will be the topic of the next webinar, which is set for 2 p.m. ET on Wednesday, Sept. 25.

"Prudent member business lending is an important investment in communities, and it strengthens a credit union's balance sheet," NCUA Board Chairman Debbie Matz said. "Credit unions are frequently the only lenders willing to make small loans to expand a car repair shop, start a daycare center or open a corner bodega. Member business lending also diversifies credit union portfolios and improves their ability to withstand economic cycles," she added.

NCUA Office of Small Credit Union Initiatives and Region IV Division of Special Actions staff will present the webinars. A credit union business development specialist will also provide step-by-step guidance on setting up a successful, safe and sound MBL program.

Webinar participants may submit questions in advance by sending an e-mail to WebinarQuestions@ncua.gov. The subject line of the e-mail should read, "Member Business Lending Webinar."

To register for the NCUA webinars, use the resource link.

Illegal Fees, Consumer Deception Alleged In CFPB Suit

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WASHINGTON (8/22/13)--The Consumer Financial Protection Bureau (CFPB) has sued Nevada debt-relief firm Morgan Drexen Inc. for allegedly deceiving consumers and charging illegal upfront fees.

Morgan Drexen President/CEO Walter Ledda was also named in the suit.

The company "took advantage of people who were struggling," CFPB Director Richard Cordray said in a bureau release. "The company charged consumers illegal fees and deceived them about the services provided. We will hold them accountable for these actions," he added.

In the suit, the CFPB alleged Morgan Drexen violated the Telemarketing Sales Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act by claiming that consumers:
  • Would not pay up front for debt-relief services provided by the firm. In reality, the CFPB said, consumers  who worked with the firm paid hundreds, if not thousands, of dollars in upfront fees; and
  • Would be "debt free in months." The CFPB found that only a tiny fraction of consumers who worked with the company ever became debt free.
Consumers who engage with the company are presented with one contract for debt-settlement services and a separate contract for bankruptcy services. A CFPB investigation of the company's practices, however, has shown that Morgan Drexen charges consumers for bankruptcy services while doing little or nothing to address bankruptcy issues, the agency said.

The bureau in a release claimed the bankruptcy service contract "is a ruse designed to disguise the illegal upfront fees the company is charging consumers for debt-relief services as bankruptcy-related fees."

More than 22,000 customers have enrolled in Morgan Drexen's bankruptcy services program since October 2010, reaping millions of dollars in upfront fees for that firm.

The CFPB suit asks Morgan Drexen to stop the illegal activities, and seeks penalties for both the company and the CEO, Ledda.

For the full CFPB release, use the resource link.

What CUs Need To Know About Wednesday's Interchange Developments

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WASHINGTON (8/22/13)--Federal Reserve Board General Counsel Scott Alvarez on Wednesday said the Fed plans to appeal a recent district court decision that invalidated the agency's debit interchange fee rule. The U.S. District Court judge currently handling the case said that he would allow the status quo to be maintained for now.

Following the afternoon hearing, Credit Union National Association President/CEO Bill Cheney said CUNA is relieved to learn that the Fed is defending its rule.

"Although the Fed's rule is far from perfect for credit unions, the district court's decision compounds Durbin's already negative consequences and is the wrong result for consumers.  We appreciate that the Fed is prepared to take this issue to the next level, and CUNA will do everything it can to ensure the D.C. Circuit Court of Appeals is aware of credit union concerns as the case moves forward," he added.

The Fed will also file a motion to expedite this appeal. An expedited appeal could bring the case to its conclusion within nine months to one year, litigators at the hearing said. Alvarez said the Fed wishes to bring this case to finality quickly, and would work expeditiously to address interchange case issues once the appeal is filed.

Leon said he is not inclined to let the interchange issue linger.

Here are some other key points for credit unions highlighted by CUNA regulatory staff:
  • Alvarez said the Fed would also request a stay of Leon's July 31 interchange decision. The Fed and merchant representatives both said they support a longer stay of Leon's order, pending a resolution of the Fed's appeal. "The Fed raised the possibility of the merchants having to live for a while in a world with no rule at all. The possibility of returning to a pre-Durbin world, even temporarily, might allow financial institutions to charge whatever they want for interchange fees," CUNA General Counsel Eric Richard said;
  • CUNA agrees with the Fed's position that an interim rule is unnecessary here, because it would force all involved parties to adopt a new rule on a short-term basis when the original rule could ultimately be upheld by the D.C. Circuit Court. CUNA always wants to limit unnecessary compliance obligations on credit unions, and will strongly advocate for this position before the court; and
  • Counsel for a group of financial institutions, including CUNA, told the judge Wednesday that the group is considering instituting new litigation on constitutional grounds should the Fed put in place an interim rule that does not allow financial institutions to recoup their investment.
Additional hearings in the case remain on the schedule: Briefs on a potential Fed interim interchange rule must be submitted by Aug. 28.

CUNA continues to closely follow the progress of this debit interchange case, and is exploring a variety of options to ensure credit unions' interests are protected going forward.

FinCEN Mortgage SARS Down 25% In 2012

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WASHINGTON (8/21/13)--The total number of mortgage fraud suspicious activity reports (SARs) filed declined by 25% between 2011 and 2012, the Financial Crimes Enforcement Network (FinCEN) reported Tuesday.

FinCEN received 69,277 mortgage loan fraud (MLF) SAR filings in 2012, and 92,561 in 2011.

Click to view larger image FinCEN Chart
The 25% decline in 2012  stands out when compared with the high rate of 2011 filings. The 2011 filings were mainly due to mortgage repurchase demands on banks, FinCEN said.

While the number of MLF SARs received by FinCEN dropped in 2012, the agency noted that SAR filings increased steadily each year between 2001 and 2011. Overall, 46% of all the mortgage fraud reports FinCEN received in the last decade were filed in 2010, 2011 and 2012. The bulk of MLF SARs, regardless of filing date, reference suspicious activity that financial institution filers believe began in 2006 and 2007, FinCEN said.

Suspicious activity is often recognized and reported years after a given loan is originated, FinCEN emphasized. Loan defaults, repurchase demands and other factors can often help uncover instances of fraud, FinCEN said. The repurchase demands seen in 2011 prompted review of mortgage loan origination and refinancing documents, where filers discovered fraud, which was then reported on SARs, FinCEn added.

Around 84% of the MLF SARs reported involved amounts below $500,000, said the FinCEN report. Foreclosure rescue scams accounted for 4,427 of the MFL SARs filed in 2012 while appraisal fraud accounted for 13% that year. Foreclosure fraud (3%), loan modification fraud (6%), and reverse mortgage fraud (less than 1%) were also reported. Most of MLF SARs (87%) filed fell into the "other" category, in which the filer described the alleged fraudulent activity but did not attempt to fit it into a pre-set category.

California led the country in per capita MLF subjects and total MLF volume. Nevada, Florida, Arizona and Washington, D.C., rounded out the top five states for mortgage fraud filings.

For the full FinCEN report, use the resource link.

Fed Interchange Rule Case Resumes Today

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WASHINGTON (8/21/13)--The next developments in an ongoing court challenge to the Federal Reserve's debit interchange fee cap will take place today when Fed attorneys, merchant representatives and Judge Richard Leon meet in the U.S. District Court for the District of Columbia. Credit Union National Association staff will monitor the hearing.

Leon in a scheduling hearing last week requested that Fed officials discuss the feasibility of releasing an interim final interchange regulation, and develop a timeline for implementation of such a rule. The judge urged the Fed to move expeditiously, and expects them to have discussed these issues by today. He also last week asked whether the court should order issuers to "disgorge revenue" obtained due to the Fed regulation. (See Aug. 14 News Now story: Judge Fierce On Fed Interchange Rule.)

Last week's hearing followed Leon's July 31 decision to strike down the Fed's price caps on debit interchange fees. 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. He also said in that ruling that the Fed would have some time to redraft its rules--but did not specify how much time.

The Fed today could appeal this ruling, or ask the judge for more time to consider an appeal or other actions.

For now, briefs on a potential Fed interim interchange rule must be submitted by Aug. 28, and briefs on the issue of potential damages must be submitted by Sept. 16. However, these deadlines could be changed today.

CUNA is doing all it can to protect credit union interests in this case, and CUNA is already devising legal strategies should the judge move forward on his theory of "damages."

Watch News Now this afternoon for live, updated coverage of today's hearing.

CUNA Seeks Comment On NCUA Minority CU Preservation Program

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WASHINGTON (8/21/13)--Could the National Credit Union Administration's plan to create a Minority Depository Institution (MDI) Preservation Program have unintended consequences for credit unions? Could program requirements be modified to make the program more successful? Credit unions can answer these and other questions regarding the program in a new Credit Union National Association comment call.

The comment call follows the agency's July 25 release of an Interpretive Ruling and Policy Statement (IRPS 13-1) that lays out the design of a potential MDI Preservation Program, and its eligibility criteria, initiatives and benefits.

Under the program, credit unions with high percentages (50% and above) of minority members and management would be eligible to receive minority credit union status from the agency.

This status would grant them access to NCUA Office of Small Credit Union Initiatives resources, including grant program eligibility.

The goal of the program, which is mandated by the Dodd-Frank Act, is to promote and preserve minority ownership in the credit union industry. The program should not create any new burdens or requirements for credit unions.

Comments are due to CUNA by Sept. 20.

The NCUA is also accepting comments on the MDI Preservation Program. Credit unions and other interested parties have until Sept. 30 to make their views known to the agency.

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

NEW: Fed to Appeal Interchange Ruling, Request Stay Extension

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WASHINGTON (8/21/13, UPDATED 2:35 P.M. ET)--Fed General Counsel Scott Alvarez today said the Federal Reserve Board plans to appeal a recent district court decision that turned the agency's debit interchange fee rule on its head and instructed the Fed to rewrite and/or revise regulations that require a cap on fees card issuers may charge merchants for their debit transaction services.

Alvarez said the Fed would also request a stay of U.S. District Court for the District of Columbia Judge Richard Leon's July 31 interchange decision.

Leon on that date struck down the Fed's rules on debit interchange fees and routing procedures under the Durbin Amendment. At a scheduling hearing held last week, Leon asked whether the court should order issuers to "disgorge revenue" obtained due to the Fed regulation.

Alvarez today said the Fed wishes to bring this case to finality quickly, and would work expeditiously to address interchange case issues once the appeal is filed.

Leon said he is not inclined to let the interchange issue linger.

Today's hearing is ongoing.

NCUA Newsletter Covers Secondary Capital Accounting Issues

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ALEXANDRIA, Va. (8/20/13)--In the second part of its three-piece series on secondary capital benefits for small credit unions, the National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI) outlined rules and regulations governing secondary capital accounting treatments and the net worth valuation of such accounts.

Once the remaining maturity of the account is less than five years, a low income-designated credit union must reflect its net worth value in the financial statement according to the following schedule, the National Credit Union Administration said. (NCUA Graphic)
In the latest installment of OSCUI's monthly FOCUS eNewsletter, the agency notes that once the remaining maturity of a secondary capital account is less than five years, a low-income credit union (LICU) must reflect the net worth of that account in the financial statement in line with a set valuation schedule.

The article provides a standard net worth determination schedule and range for credit unions holding secondary capital (see photo), and discusses interest rates on secondary capital loans, and how those rates can impact net worth. What happens in the final year of the term of a secondary capital loan, and what credit unions should do with the funds during the final year of the term, is also addressed in the OSCUI article.

The first article in the series outlined general secondary capital information. The third article will address prompt corrective action considerations, OSCUI said.

For the full article and more from this month's FOCUS eNewsletter, use the resource link.

The NCUA last August notified 1,003 credit unions of their eligibility for LICU status, and many accepted the NCUA designation.

Access to secondary capital is one benefit of this status.

Sen. Levin, Rep. Holt State CU Tax Status Support

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WASHINGTON (8/20/13)--The list of credit union tax status backers in the U.S. Congress continues to increase as that body remains in summer recess: Sen. Carl Levin (D-Mich.) and Rep. Rush Holt (D-N.J.) are the latest legislators to voice their support.

Levin, Michigan's senior senator, said he continues to "support the work of service-oriented, not-for-profit, member-owned credit unions and their tax exempt status." The senator's comments, which were released by the Michigan Credit Union League, come as members of Congress continue to work on a comprehensive rewrite of the U.S. tax code. Tax policy leaders have planned a "blank slate" approach to reform legislation, which would remove all tax expenditures from the code and would add back in those that make the grade (Michigan Monitor, Aug. 19).

Levin said he wants to see loopholes that big corporations use to pay less taxes closed and to add more revenue, but he said he doesn't think raising taxes on credit unions is the way to achieve that goal. "Tax reform efforts should not undermine our economy, or remove useful exemptions such as the tax exemption for credit unions," he said.

Rep. Holt's recent comments were similarly supportive. Responding to a New Jersey Credit Union League survey of that state's congressional delegation, Holt's office said the legislator supports the continuation of the federal tax exemption for the nation's credit unions (The Daily Exchange, Aug. 19). "He always has and will continue to support the credit union tax exemption because credit unions provide needed and valued services in our local communities," his staff added.

The legislators join Sen. Tammy Baldwin (D-Wis.), who last week told a standing-room-only crowd of credit union supporters in Madison, Wis., that she fully backs credit unions' continued tax status as corporate tax-exempt institutions. (See News Now story: Sen. Baldwin Joins Growing List Supporting CU Tax-exempt Status.)

Other key lawmakers who have spoken in favor of credit unions include Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee overseeing the tax reform measures.

Legislators who have stated they support keeping the credit union tax exemption include House Financial Services Committee member Keith Rothfus (R-Pa.); House Ways and Means Democrat Rep. Sander Levin and seven other Michigan legislators; and Joe Pitts (R-Pa.).  In Texas, 38 House and Senate members said they support credit unions, with 32 members specifically mentioning their support for credit unions' tax-exempt status.

Credit unions have urged Congress to preserve their tax status by launching a website, www.DontTaxMyCreditUnion.org, and a nationwide campaign reminding the 96 million credit union member-owners about the financial benefits they would lose if credit unions' tax status were eliminated through congressional tax reform efforts.

Interchange Case, Fed Regulations In Reg Advocacy Report

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WASHINGTON (8/20/13)--Credit Union National Association preparations for the next round of the ongoing debit interchange fee case are detailed in the latest edition of the Credit Union National Association's Regulatory Advocacy Report.

The upcoming hearing follows a recent ruling in which U.S. District Court for the District of Columbia Judge Richard Leon struck down the Fed's rules on debit interchange fees and routing procedures under the Durbin Amendment, but stayed the order for the moment.

The next phase of the interchange case will take place this Wednesday, when Leon is scheduled to hear the Federal Reserve Board's thoughts on issuing an interim final rule, and an interim final rule implementation timeline. (See Aug. 15 News Now story: Judge Fierce On Fed Interchange Rule.)

At a scheduling hearing held last week, Leon asked whether the court should order issuers to "disgorge revenue" obtained due to the Fed regulation. In this week's Regulatory Advocacy Report, CUNA Deputy General Counsel Mary Dunn said CUNA is doing all it can to protect credit union interests in this case, and CUNA is already devising legal strategies should the judge move forward on his theory of "damages."

Other items addressed in this week's CUNA Regulatory Advocacy Report include:
  • The scheduled swearing in Friday of National Credit Union Administration Board Member Richard Metsger;
  • The Consumer Financial Protection Bureau's release of updated exam procedures and small-entity compliance guidance for mortgage rules;
  • The Federal Reserve's finalization of a large financial companies assessments rule; and
  • The Federal Housing Finance Agency's eminent domain policy.
Employees or volunteers of CUNA- and state credit union league-member credit unions can sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Matz, Regulators Talk Dodd-Frank Implementation With Obama

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ALEXANDRIA, Va. (8/20/13)--Strengthening the financial system was the central topic of a Monday meeting between President Barack Obama, National Credit Union Administration Chairman Debbie Matz, and other federal regulators.

Matz following the meeting reiterated that "NCUA remains committed to working in coordination with other regulators to build a stronger financial services industry."

The meeting was called, in part, to discuss the implementation of the Dodd-Frank Wall Street Reform Act, according to a White House release. White House Deputy Press Secretary Josh Earnest told Bloomberg News that Obama called the meeting to encourage the regulators to act urgently in getting Dodd-Frank regulations in place.

Matz was joined at the meeting by leaders from the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Federal Housing Finance Agency, Federal Reserve, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation and Securities and Exchange Commission.

Sen. Baldwin Joins Growing List Supporting CU Tax-exempt Status

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MADISON, Wis.  (8/19/13)--
Click to view larger image U.S. Sen. Tammy Baldwin (D-Wis.) announced Wednesday her support for credit unions' tax-exempt status during a visit with the Madison, Wis., offices of the Credit Union National Association, CUNA Mutual Group, the World Council of Credit Unions and the Filene Research Institute. (Photo provided by CUNA Mutual Group)
U.S. Sen. Tammy Baldwin (D-Wis.) joined a growing list of lawmakers speaking out for credit unions when she told a standing-room-only crowd of credit union supporters in Madison, Wis., Wednesday that she fully backs credit unions' continued tax status as corporate tax-exempt institutions.

"Credit unions provide essential services to their members and communities that would otherwise go unmet," she said. "I have long supported and will continue to advocate that as not-for-profit financial cooperatives, credit unions deserve their tax-exempt status. As we move forward with comprehensive tax reform, I will continue to monitor the situation to ensure that access to credit union loans will not be put out of reach for Wisconsin families and small businesses."

Her remarks were made during a visit with employees of CUNA Mutual Group, the Credit Union National Association, the World Council of Credit Unions, members of the Wisconsin Credit Union League, and the Filene Research Institute.

Baldwin expressed pride in having the opportunity to represent the headquarters of CUNA, CUNA Mutual Group and the World Council. She noted that cooperative businesses are consumer-centric business models that add significant value for families and communities.

"Sen. Baldwin understands clearly that credit unions are not-for-profit cooperatives that continue to earn their tax status by providing benefits to consumers and communities in a direct and tangible manner," explained Tom Liebe, league vice president of government affairs. "Baldwin continues to be a strong and consistent supporter of cooperatives of all kinds and we are indeed fortunate to have her thoughtful and informed voice in the U.S. Senate."

Since the start of the recession in 2007, Wisconsin credit unions' members have saved more than $1 billion.  Nationwide, between 2005 and 2011, credit unions have saved their members between $4.3 billion and $8 billion each year. Moreover, their presence in the marketplace moderates the pricing of banks, which provides about $10 billion in benefits to all consumers every year.

Other key lawmakers who have spoken in favor of credit unions include Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee overseeing the tax reform measures.

Legislators who have stated they support keeping the credit union tax exemption include House Financial Services Committee member Keith Rothfus (R-Pa.);  House Ways and Means Democrat Rep. Sander Levin and seven other Michigan legislators; and Joe Pitts (R-Pa.).  In Texas, 38 House and Senate members said they support credit unions, with 32 members  specifically mentioning their support for credit unions' tax-exempt status.

Credit unions have urged Congress to preserve their tax status by launching a website, www.DontTaxMyCreditUnion.org, and a nationwide campaign reminding the 96 million credit union member-owners about the financial benefits they would lose if credit unions' tax status were eliminated through congressional tax reform efforts.

NEW: Sen. Levin, Rep. Holt State CU Tax Status Support

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WASHINGTON (UPDATED: 8/19/13, 1:30 P.M. ET)--The list of credit union tax status backers in the U.S. Congress continues to increase as that body remains in summer recess: Sen. Carl Levin (D-Mich.) and Rep. Rush Holt (D-N.J.) are the latest legislators to voice their support.

Levin, Michigan's senior senator, said he continues to "support the work of service-oriented, not-for-profit, member-owned credit unions and their tax exempt status." The senator's comments, which were released by the Michigan Credit Union League, come as members of Congress continue to work on a comprehensive rewrite of the U.S. tax code. Tax policy leaders have planned a "blank slate" approach to reform legislation, which would remove all tax expenditures from the code and would add back in those that make the grade (Michigan Monitor, Aug. 19).

Levin said he wants to see loopholes that big corporations use to pay less taxes closed and to add more revenue, but he said he doesn't think raising taxes on credit unions is the way to achieve that goal. "Tax reform efforts should not undermine our economy, or remove useful exemptions such as the tax exemption for credit unions," he said.

Rep. Holt's recent comments were similarly supportive. Responding to a New Jersey Credit Union League survey of that state's congressional delegation, Holt's office said the legislator supports the continuation of the federal tax exemption for the nation's credit unions (The Daily Exchange, Aug. 19). "He always has and will continue to support the credit union tax exemption because credit unions provide needed and valued services in our local communities," his staff added.

The legislators join Sen. Tammy Baldwin (D-Wis.), who last week told a standing-room-only crowd of credit union supporters in Madison, Wis., that she fully backs credit unions' continued tax status as corporate tax-exempt institutions. (See News Now story: Sen. Baldwin Joins Growing List Supporting CU Tax-exempt Status.)

Cheney Report Covers CU Hiring, Volunteer Prospects

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WASHINGTON (8/19/13)--Many credit union CEOs are planning to expand their work forces and pay existing employees more in the near future. This expansion shows that "credit unions are taking advantage of an improving economy..., rewarding their workers for helping them and their members get through the tougher days of the recession, and positioning themselves to help their credit unions grow and deliver more services to members," Credit Union National Association President/CEO Bill Cheney said in this week's edition of The Cheney Report.

The CUNA CEO detailed the results of CUNA's 2013-14 Staff Salary Report, which shows:
  • One in four credit unions will add full-time employees to their payrolls this year, with the proportion of new workers being brought in increasing with asset size; and
  • Four in every five credit unions plan to provide pay increases to their workers.
And, as credit unions move forward in this improving economy, Cheney said CUNA will find new ways to get credit union volunteers more involved. In the report, he cited recent comments from CUNA Chairman Pat Wesenberg. "We all know the incredible contributions that volunteers have made to the success of the movement--and how critical they are for our future," Wesenberg said. "With the many challenges before credit unions today--particularly in reducing the regulatory burden, addressing the issues of small credit unions and preserving our tax exemption--this added voice to our board deliberations is most welcome," she added.

Other topics touched on in this week's Cheney Report include:
  • The latest developments in the Federal Reserve's ongoing interchange case;
  • News about future National Credit Union Administration Board Member Richard Metsger; and
  • A "Don't Tax My Credit Union" campaign update.
Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership. To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

Fed To Charge Holding Cos., Nonbanks For Supervision, Reg Costs

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WASHINGTON (8/19/13)--Large holding companies and certain nonbank financial entities will soon be assessed fees to cover the cost of supervision and regulation, the Federal Reserve reported on Friday.

The assessments will be charged to bank holding companies and savings and loan holding companies with $50 billion or more in assets, and board-supervised nonbank financial companies, the Fed said. 

Collected fees will be transferred to the U.S. Treasury. The Fed's final rule is required by the Dodd-Frank Wall Street Reform Act.

According to the Fed, the rule:
  • Addresses how the Fed determines which companies will be charged;
  • Estimates applicable regulatory and supervisory expenses;
  • Determines each company's assessment fee; and
  • Bills for and collects the assessment fees.
The final rule is scheduled to become effective Oct. 25, and institutions that will be subject to the fee assessment will be contacted around that time. Payments for the 2012 assessment period will be due no later than Dec. 15, the Fed said. The regulator estimates around $440 million will be collected from 70 companies during this assessment period.

Going forward, affected institutions will be notified of their assessment amounts no later than June 30 of the year following the assessment period. Payments will be due by Sept. 15 of each year.

For the full Fed release, use the resource link.

CUNA's Dunn Provides Compliance Tips In WSJ Interview

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WASHINGTON (8/19/13)--Valuable tips for credit unions prepping to comply with a bevy of new regulations from the Consumer Financial Protection Bureau and others are provided in a recent Wall Street Journal Risk & Compliance Journal interview with Credit Union National Association Deputy General Counsel Mary Dunn.

Changes to ability-to-repay/qualified mortgage, high-cost mortgage, appraisals for higher-priced mortgage loan and escrow regulations are among those on the way.

Credit unions readying themselves for these and other upcoming mortgage regulation changes "need to be considering what they need to be doing differently, how what they are doing now needs to be changed, whether what they are doing now needs to be stopped, what new steps, what new costs do they have to incur," Dunn said. "In training for personnel, they have to make sure their personnel are following all the rules, and that is going to be a big deal," she added.

Credit unions are one of the most highly regulated groups in the U.S., and to help credit unions prepare, CUNA has made a range of resources available, Dunn noted. Those resources include webinars, seminars and other services. CUNA also continues to urge the CFPB to be mindful of the burden faced by credit unions as it tweaks these rules and introduces new regulations.

The Risk & Compliance Journal article also covers credit union regulatory basics. Overall, Dunn said, "there are far too many rules on the way credit unions operate."

The high cost of compliance results in credit unions diverting resources away from their main goal of serving their members, Dunn stressed.

For more on CUNA and credit unions in the media, see CUs Hit Paydirt With Media Coverage in today's News Now.

For the full interview, use the resource link.

CFPB: Who Pays For Remittance Transfer Mistake?

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WASHINGTON (8/16/13)--The Consumer Financial Protection Bureau wants to make it perfectly clear that under its new remittance rule a remittance provider will not have to pay if an error occurs in a transaction due to incorrect or insufficient information provided by remittance requester.

The bureau has issued a "clarificatory amendment and technical correction" spelling out that its rule allows remittance providers to deduct fees and taxes related to the unsuccessful remittance transfer attempt from the total amount of funds that were provided by the sender for the transfer.
 
The fees and taxes would be taken from any money refunded to or re-sent by the remittance requester.
 
The bureau in recent days also released an updated version of its small business guide for the remittance rule, and produced a video with even more information on the rule.
 
Under the final rule, remittance transfer providers are required to provide prepayment and receipt disclosures to the consumer sender that include the exchange rate, certain fees and taxes associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors. The rule has a scheduled effective date of Oct. 28.

Tax Reform 'Road Show' Continues In San Francisco

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WASHINGTON (8/16/13)--House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) plan to continue their "tax-reform" tour early next week in San Francisco and the Silicon Valley.

The pair have set an Aug. 19 visit with mobile payment provider Square Inc. and an Aug. 20 trip to computer component manufacturer Intel.

The focus of the California trip will be how a simpler and fairer tax code can help spur innovation and boost America's economy, the legislators said in a joint release.

This will be the third stop on their tax tour, which was organized to give the congressmen an opportunity to talk with a range of Americans and businesses--from large multinational corporations to small, family-run businesses, and to individual taxpayers.

The two lawmakers visited multinational corporation 3M Company and Baldinger Bakery in an early July trip to Minneapolis. They met with owners and employees of third-generation, family-owned Mrs. G's TV & Appliances and The Hub Centers for Meeting and Collaboration in a late-July visit to Philadelphia, Pa.

The tax policy leaders have planned a "blank slate" approach to reform legislation, which would remove all tax expenditures from the code and would add back in those that make the grade. In the midst of this tax reform effort, credit unions and their members are using Credit Union National Association and state credit union leagues' resources, social media sites including Facebook, and micro-video site Vine, to tell their legislators, "Don't Tax My Credit Union!"

This pro-credit union message is also being shared through Twitter feeds, CUNA's Twitter handle @CUNAadvocacy and the hashtag, #DontTaxMyCU.

The Don't Tax My Credit Union social media presence has placed pro-credit union tax status messages before more than 1.5 million social media users each day, hitting lawmakers with about 10,000 contacts per day. Nearly 715,000 contacts have been made since CUNA launched "Don't Tax My Credit Union."

Use the resource link for more about the "Don't Tax My Credit Union"campaign.

NEW: Wisconsin Sen. Baldwin Voices Support For CU Tax Status

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MADISON, Wis.  (8/16/13, UPDATED 8:30 a.m. CT)--U.S. Sen. Tammy Baldwin (D-Wis.) told a standing-room-only crowd of credit union supporters in Madison, Wis., Wednesday that she fully backs credit unions' continued  tax status as corporate tax-exempt institutions.
Click to view larger image U.S. Sen. Tammy Baldwin (D-Wis.) announced Wednesday her support for credit unions' tax-exempt status during a visit with the Madison, Wis., offices of the Credit Union National Association, CUNA Mutual Group, the World Council of Credit Unions and the Filene Research Institute. (Photo provided by CUNA Mutual Group)
 
Credit unions provide essential services to their members and communities that would otherwise go unmet," she said. "I have long supported and will continue to advocate that as not-for-profit financial cooperatives, credit unions deserve their tax-exempt status. As we move forward with comprehensive tax reform, I will continue to monitor the situation to ensure that access to credit union loans will not be put out of reach for Wisconsin families and small businesses."
 
Her remarks were made during a visit with employees of CUNA Mutual Group, the Credit Union National Association, the World Council of Credit Unions, members of the Wisconsin Credit Union League, and the Filene Research Institute.
 
Baldwin expressed pride in having the opportunity to represent the headquarters of CUNA, CUNA Mutual Group and the World Council. She noted that cooperative businesses are consumer-centric business models that add significant value for families and communities.
 
"Sen. Baldwin understands clearly that credit unions are not-for-profit cooperatives that continue to earn their tax status by providing benefits to consumers and communities in a direct and tangible manner," explained Tom Liebe, league vice president of government affairs. "Baldwin continues to be a strong and consistent supporter of cooperatives of all kinds and we are indeed fortunate to have her thoughtful and informed voice in the U.S. Senate."

Credit unions have urged Congress to preserve their tax status by launching a website, www.DontTaxMyCreditUnion.org, and a nationwide campaign reminding the 96 million credit union member-owners about the financial benefits they would lose if credit unions' tax status were eliminated through congressional tax reform efforts.

Since the start of the recession in 2007, Wisconsin credit unions' members have saved more than $1 billion.  Nationwide, between 2005 and 2011, credit unions have saved their members between $4.3 billion and $8 billion each year. Moreover, their presence in the marketplace moderates the pricing of banks, which provides about $10 billion in benefits to all consumers every year.

New Mortgage Exam Procedures Set Out By CFPB

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WASHINGTON (8/16/13)--Updated examination procedures for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) compliance were unveiled by the Consumer Financial Protection Bureau on Thursday.

"We are committed to transparency around our examination process...So we have worked hard to provide industry with advance notice of what we will be expecting. That, in turn, will improve compliance and benefit consumers," CFPB Director Richard Cordray said.

The latest updates address exams for Ability-to-Repay/Qualified Mortgage, high-cost mortgage, and appraisals for higher-priced mortgage loans regulations. New amendments related to the escrows rule and credit card regulation changes are also covered in the exam procedure update.

The exam procedures, according to the CFPB, will help financial institutions and mortgage companies understand how they will be examined for CFPB rules that:
  • Require lenders to evaluate a borrower's ability to pay back a loan;
  • Ban or limit certain points, fees, and risky features;
  • Require servicers to provide monthly statements and disclosures;
  • Restrict dual-tracking;
  • Require access to servicing personnel and a fair review process; and
  • Require creditors use a licensed or certified appraiser.
The CFPB has now released exam procedures for mortgage origination rules issued through May 29 and mortgage servicing rules issued through July 10. More releases are planned.

For more on the exam procedures, use the resource link.

CUNA 'Inside Exchange' Lays Out Case For Ending Corporate Fund Assessments

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WASHINGTON (8/16/13)--The clear case for swiftly ending corporate credit union stabilization fund assessments is one of many topics touched on in the Credit Union National Association's latest Inside Exchange video.
 
The overall status of the corporate stabilization fund, liquidity and the outlook for assessments are also discussed by CUNA Executive Vice President of Communications Paul Gentile and CUNA Chief Economist Bill Hampel.



The National Credit Union Administration, at its July open board meeting, declared a corporate credit union stabilization assessment of eight basis points of credit unions' insured shares as of June 30. That payment is due Oct. 16.
 
CUNA has noted that with the improvement of the performance of the NCUA's legacy assets, stabilization fund assessments should no longer be necessary after the 2013 payment. The range for any additional assessment for 2014, if any, will be set by the NCUA board in November.

Metsger Swearing In Set For Aug. 23

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ALEXANDRIA, Va. (8/15/13)--Richard Metsger will be sworn in as the third member of the National Credit Union Administration's three-person board on Aug. 23.

The swearing in will take place at a private ceremony on Capitol Hill. Metsger will fill the seat vacated late last by then-board member Gigi Hyland. His term is scheduled to run until Aug. 2, 2017.

Credit Union National Association President/CEO Bill Cheney said CUNA looks forward to working with Metsger as he starts his tenure on the board. "We know that Mr. Metsger will be able to rely on his experience as a credit union board member in dealing with the challenges that credit unions face today," Cheney added.

NCUA Deputy Director of the Office of National Examinations and Supervision David Shetler will serve as Metsger's interim senior policy adviser until a permanent candidate is selected, the agency said.

Metsger is a former Oregon state senator. He was named as a candidate for the open NCUA board position by President Barack Obama in June and was confirmed by the Senate for the post just before the U.S. Congress broke for its August recess.

Metsger will attend his first NCUA board meeting as a board member on Sept. 12.

Board Member Michael Fryzel's term officially expired earlier this month, and he continues to serve the NCUA.

Judge Fierce On Fed Interchange Rule

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WASHINGTON (8/15/13)--Judge Richard Leon on Wednesday set a tight schedule for the Federal Reserve Board to revise its debit interchange cap rule, asking Fed attorneys to return to his court room within one week with the board's thoughts on issuing an interim final rule.

The judge also asked for an interim final rule implementation timeline.

The Fed attorney said the agency has not yet decided whether it will appeal Leon's recent ruling, and noted there are a range of options for responding to the debit interchange issue. The judge seemed to scold the Fed's counsel for being unprepared to articulate the Fed's substantive positions on whether there should be an interim rule and how long such a rule would take to put in place.

Fed board members can come back from wherever they are on vacation or schedule a conference call, Leon suggested. The Fed needs to move expeditiously, he stressed.

Leon has extended the current stay on the interchange rule for an additional week. The next hearing is officially scheduled for Aug. 21 at 2 p.m. (ET). Briefs on a potential Fed interim interchange rule must be submitted by Aug. 28, and briefs on the issue of potential damages must be submitted by Sept. 16.

Leon on Wednesday also asked whether the court should order issuers to "disgorge revenue" obtained due to the Fed regulation.

Attorney Seth Waxman, speaking on behalf of a coalition of financial institution groups, including the Credit Union National Association, said such "damages" were not requested by the plaintiffs in the case, the financial institutions that would pay the damages are not party to the case and as such have not had the ability to defend themselves, and it is unclear the legal basis for the judge's theory of why damages could even be required. The coalition filed an amicus brief earlier in the case.
 
CUNA President/CEO Bill Cheney said, "CUNA is alarmed at the possibility any financial institution could be required to pay 'damages' for following the rules established by a federal agency." The CUNA CEO pledged to pursue every legal avenue available to prevent this from occurring. Leon has agreed to accept briefing on this topic before Sept. 16, and CUNA will ensure credit union interests are put before this judge, Cheney said.

Credit unions under $10 billion are exempt from the fee cap rule and would have a strong argument that any such order must not apply to them, CUNA General Counsel Eric Richard emphasized.

"CUNA will continue to follow the progress of debit interchange. It is a serious issue for credit unions and we are exploring a variety of options to ensure credit unions' interests are protected in any changes to the debit interchange regulation," Cheney added.

The U.S. District Court for the District of Columbia hearing follows Leon's July 31 decision to strike down the Fed's price caps on debit interchange fees. 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. He also said in that ruling that the Fed would have some time to redraft its rules--but did not specify how much time.

Small-entity Compliance Guide Available For CFPB QM/ATR Rule

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WASHINGTON (8/15/13)--The Consumer Financial Protection Bureau Wednesday updated its small entity compliance guide for the Ability-to-Repay and Qualified Mortgage (ATR/QM) rule to incorporate clarifications and amendments to the ATR/QM rule issued on May 29 and July 10.

Changes made in the May 29 amendments include:
  • The creation of a transitional period when small lenders can make balloon mortgage loans under certain conditions. These balloon mortgage loans would still qualify as QM loans; and
  • Extending QM status to held loans that are made by credit unions and community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgages annually, even if the borrower's debt-to-income ratio exceeds the rule's 43% QM threshold.
The July 10 amendments addressed servicing provisions, implementation dates for adjustable-rate mortgage servicing, exclusions from requirements on higher-priced mortgage loans, some small servicer exemptions, and other issues.

The QM rule is scheduled to go into effect January 2014.

Cheney Conveys Interchange Message At DCUC Meeting

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WASHINGTON (8/15/13)--Credit Union National Association President/CEO Bill Cheney, in a 45-minute speech covering top credit unions issues, told attendees at the 50th annual conference of the Defense Credit Union Council that the only thing that equaled the shock of a recent court decision to vacate the Federal Reserve's debit interchange fee cap was the emphatic nature of the judge's decision that the rule--which has been in effect since October 2011--is, in essence, null and void.

Cheney was speaking in advance of the Wednesday U.S. District Court for the District of Columbia scheduling briefing for future proceedings in the interchange case. (See related story: Judge Fierce On Fed Interchange Rule.)

Cheney noted that the judge's decision to stay his own order to vacate the rule seems to reflect a realization by the court of the chaos that could ensure if no rule is in place.

But, Cheney underscored, the judge made it clear that the Fed has "months, not years" to determine new rules.

"The decision does not immediately impact interchange regulations," Cheney reminded, "but all debit card issuers, regardless of size, will be affected by the decision and the Durbin regulation with regard to routing and exclusivity provisions." Card issuers with less than $10 billion in assets remain exempt from a debit interchange cap.

As the situation continues to unfold, CUNA is working with a broad coalition of finance industry representatives to chart response strategy. CUNA also is in contact with Federal Reserve staff to detail the negative impact of the ruling on credit unions and other small card issuers as that agency considers its own course in response the court's July 31 decision.

NEW: Inside Exchange Video Lays Out Case For Corporate Charge Cancellation

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WASHINGTON (UPDATED: 8/15/13, 2:30 P.M. ET)--The clear case for swiftly ending corporate credit union stabilization fund assessments is one of many topics touched on in the Credit Union National Association's latest Inside Exchange video.
 
The overall status of the corporate stabilization fund, liquidity and the outlook for assessments are also discussed by CUNA Executive Vice President of Communications Paul Gentile and CUNA Chief Economist Bill Hampel.



The National Credit Union Administration, at its July open board meeting, declared a corporate credit union stabilization assessment of eight basis points of credit unions' insured shares as of June 30. That payment is due Oct. 16.
 
CUNA has noted that with the improvement of the performance of the NCUA's legacy assets, stabilization fund assessments should no longer be necessary after the 2013 payment. The range for any additional assessment for 2014, if any, will be set by the NCUA board in November.

Senate Committee Launches Virtual Currency Scrutiny

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WASHINGTON (8/15/13)--Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.) have contacted the U.S. Department of Homeland Security seeking information on "any policies, procedures, guidance or advisories" the agency has issued related to virtual currencies. Carper is chairman of the Senate Committee on Homeland Security and Governmental Affairs and Coburn is its ranking Republican member.

The senators' letter notes virtual currencies--or, digitally based money--are receiving increased positive attention and use. However, the currency's "near-anonymous and decentralized nature has also attracted criminals who value few things more than being allowed to operate in the shadows."

"Given that virtual currencies appear to be an important emerging area...the (committee) has initiated an inquiry" into the currencies, such as Bitcoin, that are used in online transactions, the joint letter said.  The New York Times and other media outlets reported that the inquiry letter was sent to major federal financial regulatory and law enforcement agencies.

The letter also asks that its recipient share "any ongoing coordination of your agency with any other" federal, state or local government, as well as "any plan or strategies" regarding ongoing initiatives  regarding virtual currencies.

The letter is dated Aug. 12, the same day New York state's financial regulator announced it is launching a similar inquiry with a eye toward possible future regulation.

Fryzel Commends Defense CUs' Good Work

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ALEXANDRIA, Va. (8/14/13)--"Keep thinking big, keep thinking long term, and keep your eye on a better future," National Credit Union Administration Board Member Michael Fryzel told the 477 attendees of the Defense Credit Union Council's 50th Annual Conference on Tuesday.

The NCUA official commended the assembled credit union representatives for continuing to offer "honest and reliable low-cost financial services with a global reach" to reduce the burden borne by servicemembers.

"The men and women of the armed forces join your credit unions because they understand value. They understand that, as is their own purpose, you are not seeking profit, but rather working for a higher goal. They understand you are looking to serve them just the way they are looking to serve their country," he said.

"You must keep up this good work for military members and their families," he added.

He also praised DCUC for its 50 years of service, and, encouraging the audience and the industry to "keep thinking long term," wished DCUC "50 more years of success."

"As you know, the path will not always be smooth, and it may not always be straight, but you and the industry as a whole must hold close to your vision," Fryzel added.

The conference also featured remarks from Credit Union National Association President/CEO Bill Cheney, Lieutenant General Kevin Byrnes (R) and keynote speaker Ernest Gregory, former Principal Deputy Assistant Secretary of the Army. Mary Martha Fortney, president/CEO of the National Association of State Credit Union Supervisors, and Congressional Medal of Honor recipient Peter Lemon are also scheduled to speak.

The DCUC conference is scheduled to run through Thursday.

Ways & Means Chair, New Fin. Services Member Support CUs

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WASHINGTON (8/14/13)--As credit unions continue their tax status advocacy efforts, Rep. Dave Camp (R-Mich.), who is currently working on tax reform measures as chairman of the House Ways & Means Committee, noted the "very important role" credit unions play in communities across Michigan and the rest of the country.

"I will continue to look for ways to reduce regulatory burden and to help credit unions in their mission of serving consumers and small businesses with affordable financial services," Camp added in a statement delivered to the Michigan Credit Union League & Affiliates.

"The significance of this statement is that the chairman has made a very clear and strong statement of support for credit unions and the need to help them with their mission of serving consumers and small businesses," MCUL & Affiliates' CEO David Adams said.

Camp and Senate Finance Committee Chairman Max Baucus (D-Mont.) have talked tax reform in town hall-style field meetings across the country, and tax reform is likely to be on the agenda when Congress returns in September.

Another key legislator, House Financial Services Committee member Keith Rothfus (R-Pa.), has joined the list of credit union tax-status backers in Congress, telling Pennsylvania credit union representatives he would continue his support to keep "credit unions out of the tax column."

Others that have spoken out in support of credit unions include ranking House Ways and Means Democrat Rep. Sander Levin and seven other Michigan legislators, as well as Rep. Joe Pitts (R-Pa.). The Cornerstone Credit Union League has also reported positive results to Texas credit unions: 38 House and Senate members state their support of credit unions, with 32 of those members specifically stating their support for the credit union tax status.

Credit union leagues are advocating for the credit union tax status in the press, through social media, and in person during this August recess. (See News Now story: CUs' 'Don't Tax' Message Resonates.)

Budgeting Basics Addressed In NCUA Webinar

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ALEXANDRIA, Va. (8/14/13)--Budgeting is a key-risk mitigation tool and serves as a manifestation of a credit union's chosen direction, National Credit Union Administration Economic Development Specialist Vanessa Lowe and Katia Marini-Nunez, director of St. Francis FCU, Greenville, S.C., said during a Tuesday webinar.

One way credit unions can mitigate risk is by using their budget as a monitoring tool, the speakers said. Credit unions can also use their budget as a strategic planning tool, and to monitor the relative success of different financial products.

When developing a budget, credit unions must understand their historic results and have a plan for the future. During the budget planning process, they should focus on the largest income and expense lines first. The presenters said credit unions should consider what their expenses and income have been, what is changing, and how expenses can be reduced and income can be increased.

Estimating future line items on a budget is key, and can be difficult, the presenters noted. As a budget is determined, credit union officials should have a formula for making good estimates. NCUA 5300 call report data can also be helpful for budgeting purposes, Lowe said.

Detailed descriptions are not needed for every item on the budget, they emphasized. Focus on the most important items, and try and provide the most clear information as possible detailing why you included those items in your budget, Lowe suggested to participating credit unions.

Allowance calculation is another critical task, and Lowe noted that some credit unions have moved into prompt corrective action territory during their examinations because they were not updating their allowance calculator, and were thus underreporting their allowance factor.

The webinar presenters also provided examples of loan planning and allowance calculation models. An advanced budget template was also worked through during the webinar.

The majority of credit unions that took part in the webinar said they hold between $10 million and $50 million in assets.

Other scheduled NCUA Office of Small Credit Union Initiatives webinars include:
  • A two-part webinar on small business lending for small credit unions scheduled for Sept. 17 and Sept. 25;
  • An Oct. 22 webinar on risk based lending;
  • A Nov. 14 webinar on dealing with employee dishonesty; and
  • A Dec. 17 succession planning session.
For more on Tuesday's webinar, use the resource link.

NEW: Metsger Swearing In Set For Aug. 23

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ALEXANDRIA, Va. (UPDATED: 8/14/13, 2:10 P.M. ET)--Richard Metsger will be sworn in as the third member of the National Credit Union Administration's three-person board on Aug. 23.

The swearing in will take place at a private ceremony on Capitol Hill. Metsger will fill the seat vacated late last by then-board member Gigi Hyland. His term is scheduled to run until Aug. 2, 2017.

Credit Union National Association President/CEO Bill Cheney said CUNA looks forward to working with Metsger as he starts his tenure on the board. "We know that Mr. Metsger will be able to rely on his experience as a credit union board member in dealing with the challenges that credit unions face today," Cheney added.

NCUA Deputy Director of the Office of National Examinations and Supervision David Shetler will serve as Metsger's interim senior policy advisor until a permanent candidate is selected, the agency said.

Metsger is a former Oregon state senator. He was named as a candidate for the open NCUA board position by President Obama in June and was confirmed by the Senate for the post just before the U.S. Congress broke for its August recess.

Metsger will attend his first NCUA board meeting as a board member on Sept. 12.

NEW: Judge to Fed: Have An Interim Rule Decision By Next Week

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WASHINGTON (8/14/13, UPDATED: 12:25 P.M. ET)--Judge Richard Leon this morning set a swift schedule for the Federal Reserve Board to revise its debit interchange cap rule, asking Fed attorneys to return to his court room within one week with the board's thoughts on issuing an interim final rule.

He also asked for an interim final rule implementation timeline. The Fed needs to move expeditiously, Leon stressed.

The Fed attorney said there are a range of options for responding to the debit interchange issue.

Leon today extended the current stay on the interchange rule for an additional week. He also set a schedule for discussing damages and other issues related to the case. That hearing will be held in 30 days.

"CUNA will continue to follow the progress of debit interchange. It is a serious issue for credit unions and we are exploring a variety of options to ensure credit unions' interests are protected in any changes to the debit interchange regulation," said CUNA President/CEO Bill Cheney.

Today's U.S. District Court for the District of Columbia hearing follows Leon's July 31 decision to strike down the Fed's price caps on debit interchange fees. 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.

He also said in that ruling that the Fed would have some time to redraft its rules--but did not specify how much time.

What's Next On Interchange?

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WASHINGTON (8/13/13)--The next development in the battle surrounding the Federal Reserve's debit interchange rule will take place on Wednesday in the U.S. District Court for the District of Columbia, and the Credit Union National Association will monitor the court action during the hearing that day.
 
The hearing follows District Court Judge Richard Leon's decision that orders the Fed to go back to the drawing board on its rule that implements the so-called Durbin amendment of the Dodd-Frank Act that capped debit card interchange fees and set network non-exclusivity regulations. Leon said the Fed's rule disregarded Congress's intent when deciding how much financial institutions can charge merchants for debit card transactions and that the Fed's cap is too high.
 
Leon vacated the Fed rule, but issued a temporary stay on his own order to keep the current rule temporarily in effect. The judge did not define how long the stay would be in effect, and that is a key issue expected to be a focus of the Wednesday convening.

Although there is no way to predict what Judge Leon might do Wednesday, or what the parties to the case might argue in front of him, there are a number of possibilities, including:
  • Leon can declare the hearing to be simply a scheduling session, charting out deadlines for future briefing and/or dates for future hearings in the case;
  • Only the Fed can appeal the district court's decision. If it decides to appeal, the agency could make that decision public at the hearing, and could also ask for a stay of the ruling throughout the appeals process;
  • The Fed could ask for more time to decide whether to appeal, arguing that there has been inadequate time to make that determination at this time; or
  • The Fed could announce that it is in the process of developing a new rule and could ask the court to continue the stay long enough to approve the new rule and make it public.
CUNA has met with a broad coalition of financial industry representatives to develop a response strategy and approach to the interchange decision. CUNA has also detailed to Fed staff the negative impact the district court ruling would have on credit unions and other small card issuers.
 
CUNA warns that the court's decision will challenge credit unions to continue their debit card programs without incurring drastic cuts in revenue, or imposing additional fees on their members. Credit unions with under $10 billion in assets will still be shielded from the interchange rule. CUNA notes, however, that all issuers, regardless of size, will be affected by the decision and the Durbin regulation with regard to routing and exclusivity provisions.
 
The current Fed interchange standard limits debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.
 
CUNA has developed a new password-protected web page for CUNA and credit union league members. The page provides resources about the litigation and highlights CUNA's efforts, including providing a range of materials that explain the decision and the next steps for credit unions. To access the page, use the link.

CUNA Survey Identifies Top CU Concerns With CFPB Remittance Rule

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WASHINGTON (8/13/13)--While the Consumer Financial Protection Bureau's tweaks to its remittance rule provided some significant, helpful changes, credit unions remain concerned about the overall rule, a Credit Union National Association survey has revealed.

The survey results are detailed in CUNA's Regulatory Advocacy Report this week.

More than 90% of survey respondents believe the latest changes, which included making certain disclosures optional for financial institutions, were "very helpful" or "somewhat helpful."

However, more than 40% said they would need more time to comply with the regulation, in spite of the CFPB's decision to delay the rule's effective date until Oct. 28.

The survey also showed that:
  • About 35% of respondent credit unions will have to increase service fees;
  • Eight percent plan to reduce international wire or automated clearinghouse services;
  • Nearly one-in-four (23%) will discontinue international wire or ACH completely; and
  • About 6% of respondents will discontinue all types of international remittances.
Other issues highlighted by the survey results include working with correspondent institutions and vendors to implement the disclosures in time, as well as training staff.

"Some small credit unions plan to continue to offer remittances if they remain under the safe harbor exemption level, which is 100 or fewer transfers per year, because they do not have the resources to comply with the rule. In addition, many credit unions continue to be concerned with their liability and risk on transfers to foreign institutions, despite the changes to the rule in this area," CUNA Deputy General Counsel Mary Dunn wrote.

CUNA is following up with those credit unions that have continuing concerns and will be pursuing these issues aggressively with the CFPB, and working for greater regulatory relief, in upcoming meetings with the bureau.

The CFPB last week also released an updated small business guide for those impacted by the remittance rule.

The bureau also produced a video with even more information on the rule for remittance providers.

For the full CUNA Regulatory Advocacy Report, and more on the CFPB remittance resources, use the links.

Two CU Reps Among Fed 2014 Advisory Council Members

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WASHINGTON (8/13/13)--Michael J. Castellana, president/CEO of SEFCU, Albany, N.Y., and Glenn D. Barks, president/CEO of First Community CU, Chesterfield, Mo., are among the 12 members announced by the Federal Reserve Board Monday for its 2014 Community Depository Institutions Advisory Council (CDIAC).

The council advises the Fed board on the economy, lending conditions, and other issues, and members are selected from representatives of commercial banks, thrift institutions and credit unions serving on local advisory councils at the 12 Federal Reserve Banks.

One member of each of the Reserve Bank councils serves on CDIAC, which meets twice a year with the Federal Reserve Board in Washington.

The Fed said Drake Mills, who is president/CEO of Community Trust Bank, Ruston, La., will serve as president in 2014. John B. Dicus, chairman and president/CEO of Capital Federal Savings Bank, Topeka, Kan., will serve as vice president.

Use the resource link to see all 2014 members' names.

FAQ+ Puts NCUA Answers At Your Fingertips

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ALEXANDRIA, Va. (8/13/13)--FAQ+, a new credit union-specific search engine unveiled by the National Credit Union Administration on Monday, will help users answer common questions and find new information on training opportunities, grant programs and other topics.

The FAQ+ search engine was developed by the NCUA's Office of Small Credit Union Initiatives (OSCUI). OSCUI Director William Myers said NCUA is "constantly striving to improve communications and access to information, and this is another tool to help us accomplish that objective."

The search engine, which is placed on the right side of the NCUA's OSCUI website (see resource link), connects users with web links, documents, videos, agency forms and other NCUA site content.

Questions that are not answered in an FAQ+ search can be forwarded on to agency staff. The search engine and the related database will also be updated and expanded by the agency on an ongoing basis.

Cap Back In Place On Federal Student Loans

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WASHINGTON (8/12/13)--President Barack Obama signed a bill Friday afternoon that will lower the federal student loan rate to 3.86% for direct loans for undergraduate students, after it shot up to 6.8% in July.
 
The bill, known as the Bipartisan Student Loan Certainty Act, passed the U.S. House a little more than a week ago and was approved by the Senate a week before that.
 
The legislation ties federal student loan interest rates to the 10-year U.S. Treasury note. Individual rates will be locked in for the life of the loan. Students and their families will be protected from sharply increasing interest rates.

The administration estimates that the new rate cap law will save a typical undergraduate student $1,500 over the life of his or her loans.

"This legislation allows borrowers to benefit from the low interest rates currently available in the marketplace, guarantees that borrowers are able to lock in these rates over the life of their loans, and protects future borrowers by capping how high rates can rise," said a White House Blog entry.
 
The bill does not affect private student loan rates.

Cheney Report Addresses Tax Status, Reg Burden, Interchange

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WASHINGTON (8/12/13)--The latest edition of The Cheney Report provides updates on three issues of critical importance to credit unions: Tax status discussions, interchange, and regulatory relief.

While members of Congress have now completed the first week of their five-week Summer District Work Break, credit unions must keep up the pressure and keep communicating their message, Cheney said in this week's Report.

And, if credit unions need another reason to stay engaged in the Don't Tax My Credit Union campaign, the CUNA CEO provides them with new motivation: bankers. The banks have unveiled the website "It's Time to Pay," which attempts to build a social media presence--presumably among bank employees--toward manufacturing some congressional momentum in taxing credit unions, he added.

Credit unions are already responding, and will not let banks out-message them," Cheney wrote.

As for interchange, CUNA and credit union leagues are working together to help credit unions understand what a recent decision to strike down the federal reserve's interchange rules means for them and their operations.

A hearing on this decision is set for Aug. 14. CUNA will attend the hearing and inform credit unions of pertinent developments, the CUNA CEO noted.
CUNA is also advocating for credit union interests as the National Credit Union Administration conducts its annual "regulatory review." The agency is taking a second look at one-third of its regulations each year, and this reexamination is the "perfect time to take action to lessen the regulatory load," Cheney said.

Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership. To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

NEW: Two CU Leaders Named To Fed 2014 Advisory Council

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WASHINGTON (8/13/13, UPDATED 11:54 p.m. ET))--Michael J. Castellana, president/CEO of SEFCU, Albany, N.Y., and Glenn D. Barks, president/CEO of First Community CU, Chesterfield, Mo., are among the 12 members announced by the Federal Reserve Board Monday for its 2014 Community Depository Institutions Advisory Council (CDIAC).

The council advises the Fed board on the economy, lending conditions, and other issues and members are selected from representatives of commercial banks, thrift institutions, and credit unions serving on local advisory councils at the 12 Federal Reserve Banks.

One member of each of the Reserve Bank councils serves on CDIAC, which meets twice a year with the Federal Reserve Board in Washington.

The Fed said Drake Mills, who is president/CEO of Community Trust Bank, Ruston, La., will serve as president in 2014.  John B. Dicus, chairman, president, and chief executive officer of Capital Federal Savings Bank, Topeka, Kan., will serve as vice president.

Use the resource link to see all 2014 members' names.

'Don't Tax My CU' Message Spreads To Spanish Language Site

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WASHINGTON (8/12/13)--The Don't Tax My Credit Union campaign continues to gather interest from all corners, showing up last week on HolaCiudad! (Hello City!), a Spanish-language site that features local and national news and other community resources. 

HolaCiudad!, which is associated with national television network Telemundo, featured CUNA's Don't Tax My Credit Union video and an accompanying story. The story details the threat that the credit union tax status faces due to ongoing tax reform talks in the U.S. Congress, and emphasizes the member-owned nature of credit unions, where profits are returned to those members through lower rates, dividends and other means. This cooperative business model makes credit unions vastly different than banks, the story explains.

CUNA's Don't Tax My Credit Union campaign reminds that any tax on credit unions is really a tax on members since credit unions are cooperatively-owned by the people they serve. If credit unions were taxed, their benefits to members and communities will be lost, and a consumer-friendly option in the financial marketplace will vanish, CUNA states.

Credit unions and their members are using CUNA and the state credit union leagues' resources, social media sites including Facebook, and micro-video site Vine, to tell their legislators, "Don't Tax My Credit Union!" This pro-credit union message is also being shared through Twitter feeds, CUNA's Twitter handle @CUNAadvocacy and the hashtag, #DontTaxMyCU.

The Don't Tax My Credit Union social media presence has placed pro-credit union tax status messages before more than 1.5 million social media users each day, hitting lawmakers with about 10,000 contacts per day. Nearly 660,000 contacts have been made since CUNA launched "Don't Tax My Credit Union" just three months ago.

These outreach efforts have created impressive results: Members of Congress have taken to Twitter and other means to make their support known.
"I know I have been beating this drum a lot lately, but it's because it is so vital to our future. We must continue to engage credit union members, our supporters in small business and in our communities to tell our story for us," CUNA President/CEO Bill Cheney said.

For more Don't Tax My Credit Union resources, use the link.

NEW: Federal Student Loan Rate Bill Expected To Be Signed Today

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WASHINGTON (8/9/13, UPDATED 11:50 a.m. ET)--It is expected that President Obama will sign a bill this afternoon that will lower the federal student loan rate to 3.86%, for direct loans for undergraduate students, after it shot up to 6.8% in July.
 
The bill, known as the Bipartisan Student Loan Certainty Act, passed the U.S. House a little more than a week ago and was approved by the Senate a week before that.
 
The legislation ties federal student loan interest rates to the 10-year Treasury note. Individual rates will be locked in for the life of the loan. Students and their families will be protected from sharply increasing interest rates.
 
The bill does not affect private student loan rates.

NCUA Letter Answers Corporate Assessment Questions

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ALEXANDRIA, Va. (8/9/13)--In its Letter to Federally Insured Credit Unions (13-CU-06) released Thursday, the National Credit Union Administration reminds all credit unions to expect an invoice in September for their assessment for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF). The payment is due Oct. 16.
 
The NCUA, at its July open board meeting, declared an assessment for the TCCUSF of eight basis points (bp) of credit unions' insured shares as of June 30, 2013. The assessment is at the very low end of the NCUA's estimated range of 8-11 bp announced last November and is a significant improvement over last year's assessment of 9.5 bp.
 
The Credit Union National Association has noted that with the improvement of the performance of the NCUA's legacy assets, stabilization fund assessments should no longer be necessary after the 2013 payment. The range for any additional assessment for 2014, if any, will be set by the NCUA board in November.
 
The NCUA letter also provides answers to key questions about the assessment. The topics addressed include:
  • Why must all credit unions pay assessments?
  • Why is the assessment set at 8 basis points?
  • How should my credit union account for the assessment?
  • What is the impact of the 2013 assessment on credit unions' earnings and net worth?
  • Will examiners take the effect of the assessment into account when evaluating credit union earnings and net worth?
  • What are the net remaining projected costs of the corporate resolution program?
 Use the resource link to read the complete letter.

Interchange: Next Steps Examined In CUNA 'Inside Exchange'

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WASHINGTON (8/9/13)--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 the Credit Union National Association's "Inside Exchange."

In this episode, CUNA General Counsel Eric Richard discusses with Paul Gentile, CUNA executive vice president of strategic communications and engagement, 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.

Fannie Mae Reports $10.1B 2Q Profit, Amid GSE Debate

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WASHINGTON (8/9/13)--Fannie Mae's second quarter financial results filed with the Securities and Exchange Commission show net income of $10.1 billion, marking the sixth consecutive quarterly profit for the conserved government-sponsored enterprise (GSE).

Fannie Mae said it will pay $10.2 billion in dividends to the U.S. Treasury as it continues to settle debts incurred following the 2008 government conservatorship. The GSE will have paid $105 billion in dividends to the Treasury when this latest payment is made in September. That is against a cumulative draw from Treasury of $116.1 billion.

Fannie Mae's results are attributed to continued stable revenues, boosted by a significant increase in home prices in the quarter, Fannie Mae said. The company expects to remain profitable for the foreseeable future.

Fannie Mae in its quarterly financial statement said it has "devoted significant resources toward helping to build a new housing finance system for the future," including pursuing the strategic goals identified by its conservator, the Federal Housing Finance Agency.

A range of housing finance policy changes are being considered by the U.S. House, the Senate, and the Obama administration, and the winding down of Fannie Mae and fellow GSE Freddie Mac is a consistent theme in all three plans.

As these plans are discussed, the Credit Union National Association continues to emphasize that consumers are increasingly choosing credit unions as their mortgage lenders and that it is critical credit unions have fair and readily available access to a functioning, well-regulated secondary market that accommodates their members' demand for long-term, fixed-rate mortgages.

CUNA has also identified maintaining widespread access to safe, responsible financing like the 30-year fixed rate mortgage as a priority.

CUNA: FTC Should Limit Telemarketing Rule's Impact On Payments System

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WASHINGTON (8/9/13)--The Credit Union National Association appreciates the Federal Trade Commission's (FTC) ongoing efforts to limit the activities of unscrupulous telemarketers that defraud consumers, but in a recent comment letter CUNA outlined concerns regarding how proposed amendments to the FTC's Telemarketing Sales Rule could impact the broader payments system.

The FTC's proposed changes, among other things, would prohibit sellers and telemarketers when they are engaged in "telemarketing" activities on the phone, from accepting or requesting four types of "novel payment methods":
  • Remotely created checks (RCCs);
  • Remotely created payment orders;
  • Cash-to-cash money transfers; and
  • Cash reload mechanisms.
A complete ban on these four payment methods in telemarketing activities would likely shift some of these payments to other payment systems, and financial institutions and other entities will have to make appropriate risk management changes, CUNA Regulatory Counsel Dennis Tsang wrote.

"We are not aware that credit unions use these types of payment methods in telemarketing or engage in telemarketing practices that harm consumers," he added.

Noting that the proposed rule could impact check-related rules, including the regulation of RCCs, CUNA encouraged the FTC to provide information to payment processors and others to comply with the rule, while permitting legitimate payments to continue.

The CUNA letter also urged the FTC to coordinate closely with federal financial regulators to ensure legitimate payments, including emerging payment applications and financial institution collections activities, are not negatively impacted.

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

Cleveland Fed's Pianalto To Leave Early 2014

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CLEVELAND, Ohio (8/9/13)--The president/CEO of the Federal Reserve Bank of Cleveland, Sandra Pianalto, announced Thursday that she will retire early next year after heading the bank since 2003.  She joined the Clevelend Fed in 1983 as an economist in the Research Department.

"It has been an honor to serve as president of the Federal Reserve Bank of Cleveland and to participate on the Federal Open Market Committee during this extraordinary period in our country's economic history," Pianalto said announcing her 2014 departure.

She said she presently has no immediate plans "beyond continuing my involvement in civic and non-profit activities."  She added: "I will not consider any opportunities until my successor is in place.  I look forward to staying actively engaged in leading the Bank and serving on the Federal Open Market Committee until the selection process is complete."

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.

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.

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.

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 www.DontTaxMyCreditUnion.org and to take action there.  
Keep tweeting.

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.

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."

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.

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.

Obama Outlines Housing Reform Goals In Speech

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WASHINGTON (8/7/13)--President Barack Obama on Tuesday again entered the debate on the future of housing finance, outlining his principles for market reforms in a speech delivered in Phoenix, Ariz.

"We have to build a housing system that's durable and fair and rewards responsibility for generations to come," Obama said in his remarks.

Obama in a release said credit unions and other small institutions "must be given the same opportunity to compete in any future system to ensure that consumers have the broadest number of options."

Credit Union National Association President/CEO Bill Cheney said "much of what the president discussed is consistent with CUNA's principles for housing finance reform.We're gratified to see that he is also recommending credit unions and other small institutions have the same opportunity to compete in any future system."

Ensuring widespread access to safe, responsible financing like the 30-year fixed rate mortgage is another pillar Obama proposed. Maintaining consumer access to products that provide predictable, affordable mortgage payments to qualified borrowers, such as the 30-year fixed rate mortgage, is one of the principles CUNA has said must be a part of any mortgage market reform effort. The continued availability of the 30-year fixed rate mortgage has been a consistent theme in CUNA's testimony to the U.S. Congress on housing issues.

Other housing reform priorities detailed in an Obama administration release include:
  • Putting private capital at the center of the housing finance system;
  • Winding down Fannie Mae and Freddie Mac;
  • Ensuring prospective homeowners receive a single, simple three-page mortgage disclosure form;
  • Increasing incentives for lenders to deliver high quality loans and products; and
  • Supporting affordability and access for renters and homeownership for first-time buyers, in part by continuing the historic affordability role of Federal Housing Administration (FHA).
Additional market fixes promoted by the Obama administration include streamlining refinancing for borrowers with government-insured mortgages, waiving closing costs for homeowners that borrowers who refinance into shorter term loans, and expanding mortgage refinancing eligibility to borrowers without government-backed mortgages by creating special programs through the FHA or Fannie Mae and Freddie Mac.

The administration estimated these changes could result in $3,000 or more in yearly savings for eligible families.

Obama said the government would also need to establish bright-line rules for when mortgage guarantees would be rescinded. The U.S. Department of Housing and Urban Development is working to update its rules along these lines, and will work with the Federal Housing Finance Agency and other federal agencies to institute a common framework for government guarantees across the market, he said.

The president also called on regulators to implement mortgage related rules in a way that encourages the clarity and certainty that leads to broad access to credit and a safe and sound system.

For more on the Obama administration's mortgage plans, use the resource link.

NCBA Urges Tax Policy Writers To Support CUs

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WASHINGTON (8/7/13)--The National Cooperative Business Association (NCBA) has sent letters to every member on the House Ways and Means and Senate Finance committees to "to strongly encourage" the federal tax policy makers to "advocate for the retention of the credit union tax exemption during your deliberations on tax reform."
 
NCBA President/CEO Michael Beall wrote, "As not-for-profit, member-owned financial cooperatives, credit unions return almost all of their earnings to their member-owners. Whether this is in the form of better rates on savings and loans, lower fees, or generally better services, this is a real-world example of how credit unions use the tax exemption to make a difference in the financial lives of their members.
 
"In addition, the credit union presence in the financial marketplace demonstrably benefits non-members as well, by providing marketplace competition and enhanced consumer choice.
 
"Studies have shown that credit unions provide over $10 billion annually in benefits to members and non-members, an amount that far exceeds the Joint Committee on Taxation estimate of $500 million that a tax on credit unions would generate."
 
Credit Union National Association President/CEO Bill Cheney said credit unions deeply appreciate cooperatives' voice in supporting the credit union tax exemption.
 
CUNA has noted that August, with its five-week congressional district work period, is just the time for credit union advocates to meet with their lawmakers at home to spark more public messages of support, on tax and other key credit union issues.

July 26 was the deadline for senators to submit their tax reform proposals to that chamber's Finance Committee leaders.  But, says CUNA Vice President of Legislative Affairs Ryan Donovan, "While that deadline has passed, you can bet legislators will be talking to each other over the summer."

After CUNA and the state credit union leagues ran a successful social media campaign, known as "DontTaxTuesday," more than 875,397--including lawmakers--viewed tweets that were posted in support of credit unions and their tax exemption.

Archived July NCUA Town Hall Is Out

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ALEXANDRIA, Va. (8/7/13)--Did you miss out on the National Credit Union Administration's July 18 town hall webinar? If so, you are in luck: The NCUA on Tuesday released an archived version of the event.

Topics addressed by NCUA Chairman Debbie Matz and agency staff during the webinar included:
  • NCUA's development of a new risk-based capital framework;
  • Member business lending and small business guaranteed loan programs;
  • NCUA's regional realignment;
  • The 2013 Temporary Corporate Credit Union Stabilization Fund assessment; and
  • The proposed Minority Credit Union Preservation Program.
The archived webinar will be available until Oct. 17.

CUNA Takes CU Cybersecurity Concerns To Treasury

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WASHINGTON (8/6/13)--The Credit Union National Association brought credit union cybersecurity concerns directly to the U.S. Treasury during a recent Financial Services Sector Coordinating Council for Critical Infrastructure meeting in Washington.

At the meeting, U.S. Treasury Assistant Secretary for Financial Institutions Cyrus Amir-Mokri and other senior government and financial services officials discussed efforts to facilitate the coordination on cybersecurity developments.

As detailed in this week's edition of the CUNA Regulatory Advocacy Report, CUNA has repeatedly emphasized that credit unions are already subject to robust data security requirements and standards, and should not be subject to additional regulations.

Additional coordination on cybersecurity would be helpful, CUNA has said.

CUNA continues to be engaged on cybersecurity issues, by working with the credit union system, FSSCC, regulators, BITS, and other entities. CUNA is also monitoring developments with the National Institute of Standards and Technology (NIST) framework.

On July 1, NIST released a discussion draft outline on a "Framework to Reduce Cyber Risks to Critical Infrastructure." CUNA is encouraged that the draft framework is "being developed through a private-public partnership" and is designed to be an "adaptable, flexible, and scalable tool for voluntary use" to "complement rather than to conflict with current regulatory authorities," Deputy General Counsel Mary Dunn wrote.

NIST plans to issue a proposed cyber framework this October for notice and comment, and to finalize the framework by February 2014.

Incentives to support adoption of this voluntary framework are being considered by the White House. Potential incentives include expedited government technical assistance, reduced tort liability, limited indemnity, lower burdens of proof, or the creation of a federal legal privilege that preempts State disclosure requirements in some cases, and public recognition for cybersecurity program participants.

Other items addressed in this week's Regulatory Advocacy Report include:

  • A CUNA letter that encouraged Congress to prohibit Federal Housing Administration insurance on mortgages seized through eminent domain;
  • A regulatory alert on appraisal regulations; and
  • News on federal student loan legislation.

For the full Regulatory Advocacy Report, use the resource link.

N.Y. Issues C-and-Ds To 35 Online Payday Lenders

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NEW YORK CITY (8/7/13)--Thirty-five payday lenders have been warned by the New York Department of Financial Services to "companies cease and desist offering illegal payday loans to New York consumers."

The DFS said that its extensive, ongoing investigation uncovered that those companies were offering payday loans to consumers over the Internet in violation of New York law, including some loans with annual interest rates as high as 1,095%.

Payday lending, via the Internet or otherwise, is illegal in New York under both civil and criminal usury statutes. New York state law prohibits unlicensed nonbank lenders from making loans of $25,000 or less with interest rates greater than 16%.

"We're going to use every tool in our tool belt to eradicate these illegal payday loans that trap families in destructive cycles of debt," Superintendent Benjamin Lawsky said in a press release. Lawsky said the lenders have two weeks to confirm that they have stopped offering the loans in the state.

Lawsky also sent letters to 117 banks, as well as NACHA, which administers the automated clearing house, asking them to cut off for illegal payday lenders' access to New York customer accounts. The DFS release notes that illegal payday loans made over the Internet are made possible in New York by credits and debits that must pass through the ACH network. Gov. Andrew M. Cuomo is requesting that those banks and NACHA work with DFS to create a new set of model safeguards and procedures to cut off ACH access to payday lenders.

Some credit unions offer members payday loan alternatives.  Under federal rules, credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program.

That program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. Currently, this amounts to an interest rate ceiling of 28%.

Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling and encourage members to open savings accounts.
 
Use the resource link to read the names of the 35 companies that were the subjects of the C-and-D orders.

Appeals Court Gives Plaintiffs Standing In ATM Suit

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WASHINGTON (8/7/13)--The U.S. Court of Appeals for the Eight Circuit earlier this month overturned a 2012 decision which ruled that plaintiff Jarek Charvat lacked constitutional standing to file suit against First National Bank of Waterloo for violating the Electronic Fund Transfer Act as it applies to fee disclosure notices on ATMs.

The 2012 decision was made in the U.S. District Court for the District of Nebraska.

The Eighth Circuit court said the district court "erred in finding plaintiff did not have standing because he did not have an injury in fact; assuming without deciding that plaintiff waived the claim that the $2.00 fee he was charged constituted an injury in fact, plaintiff still had standing to pursue his claim against the defendants based on the informational injury he allegedly sustained because of the failure to post the notice."

Once Charvat alleged a violation of EFTA notice provisions in connection with his ATM transactions, he had standing to claim damages, the Eight Circuit statement read. "Further, the injury was fairly traceable to defendants' conduct," the statement added.

Charvat's lawsuit was one of many alleging that individual credit unions and other financial institutions violated EFTA by failing to provide fee disclosures at their ATMs. In some cases, plaintiffs vandalized or removed disclosure stickers from ATMs and then photographed the ATM. These photos were used as evidence of noncompliance in their court cases against individual institutions.

Last year, Regulation E was revised to require that ATM fee disclosures only need to be presented on an ATM's screen. The law eliminated a duplicative provision that required a physical notice also be posted on the ATM machine. The Consumer Financial Protection Bureau in March implemented a rule to eliminate redundant ATM disclosures.

NEW: NCUA: Progress Seen In First Year Of LICU Initiative

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ALEXANDRIA, Va. (UPDATED: 8/7/13, 10:15 A.M. ET)--The National Credit Union Administration today 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."

"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.

CUNA Derivatives Comments Reach WSJ Audience

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WASHINGTON (8/6/13)--Credit Union National Association concerns regarding potential credit union derivatives changes received a broad audience this week, as Deputy General Counsel Mary Dunn outlined CUNA's objections to the National Credit Union Administration's proposal in The Wall Street Journal.

The NCUA derivatives proposal, released at the May open board meeting, would allow well-run federal credit unions to use simple derivatives for the sole purpose of hedging against interest rate risks. The NCUA plan would allow only well-managed credit unions with $250 million or more in assets, and which have appropriate expertise, to apply for an agency derivatives investment program. Simple swaps and caps will be the only approved investments, and fees will be charged to cover costs related to application processing and supervision of the program.

"If derivatives reduce [interest rate risk], then NCUA should be encouraging credit unions to make appropriate use of permissible derivative options instead of erecting barriers to their use, such as fees to apply the authority or for supervision," Dunn told the Journal.

CUNA in a comment letter filed last month said the proposed derivatives rule compliance costs are excessive and would place derivatives authority out of reach for many, if not most, credit unions seeking derivatives authority.

Credit unions are also concerned by portions of the rule addressing:
  • The possibility of waivers to gain additional derivatives authority;
  • The $250 million net worth requirement to qualify for derivatives authority; and
  • Expertise requirements.
CUNA and credit unions do not think the NCUA's derivatives proposal framework enables reasonable participation subject to appropriately calibrated requirements.

If the regulation is adopted as proposed, the NCUA "will virtually assure minimal use of derivatives, thus undermining the very purpose of the agency's own rule," Dunn said.

Comments Due Sept. 30 For NCUA Minority CU Program

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 WASHINGTON (8/6/13)--As the National Credit Union Administration moves forward to create a Minority Depository Institution (MDI) Preservation Program, credit unions and other interested parties have until Sept. 30 to make their views known.
 
At its July 25 open board meeting, the NCUA issued an  Interpretive Ruling and Policy Statement (IRPS 13-1) to prescribes an MDI program and its eligibility criteria, initiatives and benefits. (News Now July 26)
 
The program is reflective of ones established in 1989 under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) for the Federal Deposit Insurance Corp. and the now-defunct Office of Thrift Supervision, in response to the failure of the Federal Savings and Loan Insurance Corporation.

FDIC and OTS developed various initiatives, such as training, technical assistance, and educational programs, aimed at preserving federally insured banks and savings institutions that meet FIRREA's definition of a minority depository institution.
 
Under the 2010 Dodd-Frank Act, FIRREA was applied to the NCUA, the Office of the Comptroller of the Currency and the Federal Reserve Board. Dodd-Frank also requires these agencies, along with FDIC, to each submit an annual report to the U.S. Congress describing actions taken to carry out FIRREA.

Use the resource link to read the NCUA IRPS published in the Federal Register, which set the Sept. 30 comment deadline.

NEW: NCBA Urges House, Senate Tax Policy Writers to Support CU Status

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WASHINGTON (8/6/13, UPDATED 4: 33 p.m. ET)--The National Cooperative Business Association (NCBA) has sent letters to every member on the House Ways and Means and Senate Finance committees to "strongly encourage" the federal tax policy makers to "advocate for the retention of the credit union tax exemption during your deliberations on tax reform."

NCBA President/CEO Michael Beall wrote, "As not-for-profit, member-owned financial cooperatives, credit unions return almost all of their earnings to their member-owners. Whether this is in the form of better rates on savings and loans, lower fees, or generally better services, this is a real-world example of how credit unions use the tax exemption to make a difference in the financial lives of their members.
 
"In addition, the credit union presence in the financial marketplace demonstrably benefits non-members as well, by providing marketplace competition and enhanced consumer choice.
 
"Studies have shown that credit unions provide over $10 billion annually in benefits to members and non-members, an amount that far exceeds the Joint Committee on Taxation estimate of $500 million that a tax on credit unions would generate."

Credit Union National Association President/CEO Bill Cheney said credit unions deeply appreciate cooperatives' voice in supporting the credit union tax exemption.

CUNA, Coalition Ready Response, Strategy on Interchange Ruling

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WASHINGTON (8/6/13)--The Credit Union National Association will meet with a broad coalition of finance industry representatives this week to chart a response strategy and approach to last week's U.S. District Court decision striking down the Federal Reserve's price caps on debit interchange fees.

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 make its decision independently, 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 said.

U.S. District Court for the District of Columbia Judge Richard Leon last week ruled the Fed did not follow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment. The court vacated the Fed's rule, finding that the agency disregarded Congress's intent when deciding how much financial institutions can charge merchants for debit card transactions.

The judge left the rule in place for the time being, pending the Fed's issuance of new rules; however, there will be additional briefings to determine the length of time the existing rule can stay in place. A hearing has been set for Aug. 14.

Richard said the court's decision will challenge credit unions to continue their debit card programs without incurring drastic cuts in revenue, or imposing additional fees on their members. Credit unions with under $10 billion in assets will still be shielded from the interchange rule, he emphasized.

The court decision will not immediately impact interchange regulations. Those rules will stay in place for the time being. However,  CUNA notes, all issuers, regardless of size, will be affected by the decision and the Durbin regulation with regard to routing and exclusivity provisions.

The Fed interchange standard limits debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.

Corporate Assessment, MBL, CUSO Rule Changes Urged In CUNA Letter To NCUA

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WASHINGTON (8/6/13)--There are a number of immediate actions the National Credit Union Administration could take that would greatly improve the credit union regulatory framework, the Credit Union National Association told the agency Monday.

The NCUA should consider:
  • Ending assessments for the Temporary Corporate Credit Union Stabilization Fund (TCCUSF);
  • Revamping its member business lending (MBL) rule; and
  • Cancelling or revamping a proposed credit union service organization (CUSO) rule that has been delayed for nearly two years.
CUNA Deputy General Counsel Mary Dunn made the recommendations in a CUNA comment letter as NCUA reviews one-third of it body of regulations, as it does each year.

The agency should alter its MBL rule to give credit unions more latitude and authority to conduct those loans, Dunn recommended in the CUNA letter.

Dunn suggested that "all of the regulatory requirements for MBLs that are not specifically required by the Federal Credit union Act" be eliminated for well-managed, well-capitalized credit unions that operate successful MBL programs, including:
  • The requirement for the personal guarantee of the borrower(s);
  • Loan-to-value ratios;
  • Construction and development loan limits;
  • Appraisal requirements.
"At the very least, we urge the agency to develop and implement in all regions a waiver process that will be timely and allow credit unions to obtain much needed flexibility in operating their member business loan programs," Dunn wrote. She also urged the agency to revisit exemptions for federal credit unions under the "history of primarily making" language in the FCU Act.

The CUNA letter also called on the agency to minimize CUSO regulatory requirements and revamp CUSO requirements contained in its proposed derivatives rule. "A new broad rule regarding CUSOs should not be driven by problems a few credit unions have encountered with their CUSOs, particularly when the vast majority of CUSOs are operated in a safe and sound manner, providing much needed services to credit unions and their members," Dunn said.

TCCUSF assessments "are a major burden to credit unions," she added. The CUNA letter reiterated recent CUNA comments that this year's assessment of 8 basis points should cover the remaining losses on the legacy assets. "With the improvement in the performance of legacy assets, assessments are no longer necessary," the letter added.

Overall, the CUNA letter noted, compliance costs resulting from regulatory burdens continue to be one of the major concerns and operational hurdles for credit unions. The annual regulatory review is an opportunity for the agency to minimize the regulatory burden for credit unions and decrease their costs, Dunn said.

For more CUNA comment on other items on the NCUA's full 2013 review list, use the link.

Cheney Report Describes Fall Reg Relief Prospects

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WASHINGTON (8/5/13)--Regulatory relief is increasingly of interest in Congress, as financial institutions--especially credit unions--have made it very clear that is their top priority. Some have said this fall could represent the best chance for enacting relief legislation since 2006, Credit Union National Association President/CEO Bill Cheney noted in this week's edition of The Cheney Report.
 
However, moving regulatory relief measures through the Congress is "still a tricky proposition," he said. The debt ceiling, housing finance reform and other issues will also be on the docket, and some have said efforts to undo the Dodd-Frank Act or other controversial approaches "could make the whole effort collapse."
 
CUNA will first look to ensure that any regulatory relief measure that benefits community banks contains equal aid for credit unions. "For example: Any legislation that provides significant capital relief for community banks (such as easing Basel requirements) must also address capital concerns of credit unions (such as through supplemental capital)," Cheney wrote.
 
Ultimately, Cheney said CUNA expects Congress to consider one large regulatory relief legislative package that includes a number of relief proposals for credit unions and community banks. Such a bill could come from House or Senate financial services committees.

This week's Cheney Report also includes:
  • Details on recent interchange fee cap litigation;
  • CUNA concerns regarding the National Credit Union Administration's derivatives proposal; and
  • An update on how legislators are responding to the Don't Tax My Credit Union! campaign.
Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership. To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

Sept. 3 Is NCUA Comment Deadline on E-filing Plan

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WASHINGTON (8/5/13)--The 30-day comment period set by the National Credit Union Administration for its plan to require all federally insured credit unions (FICUs) to file financial, statistical and other reports electronically will end Sept. 3, according to an Aug. 2 Federal Register  document.
 
When the agency proposed the change at its July 25 open board meeting, staff noted that a 30-day public comment timeframe, rather than the more-typical 60-days, would be sufficient NCUA for what the agency considers a "simple" change.
 
If the rule is adopted, the reports and credit union profiles would have to be filed using the agency's information system or other means specified by NCUA. Manual filing would no longer be an option, so every FICU would have to maintain a computer with internet access and an e-mail address.
 
The Credit Union National Association has issued a Comment Call seeking credit unions' views on the proposal by Aug. 15.  Use  the resource link to access that and other CUNA Comment Calls, as well as the Federal Register  document.

Judge Dismisses Challenge To Dodd-Frank Constitutionality

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WASHINGTON (8/5/13)--A district court judge last week dismissed a case that challenged the constitutionality of the Consumer Financial Protection Bureau and the Financial Stability Oversight Council and sought to overturn the appointment of CFPB Director Richard Corday.

U.S. District Court for the District of Columbia Judge Ellen Segal Huvelle said the defendants did not suffer an injury that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." Further, she wrote, and injury that did occur could not be traced directly to the defendants.

"A decision along these lines was predicted by many observers and does not come as any surprise.  But this is one more indication that the CFPB will be with us for the foreseeable future," Credit Union National Association General Counsel Eric Richard said.
 
The suit was filed by State National Bank of Big Spring (Texas), the 60 Plus Association, and Competitive Enterprise Institute last year in federal court in Washington, D.C. Alabama, Georgia, Kansas, Michigan, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Texas, and West Virginia also joined the plaintiffs suit.
 
National Credit Union Administration Chair Debbie Matz and Cordray were among nine federal officials named as suit co-defendants because the officials are members of the FSOC. The case did not seek to challenge NCUA separately.
 
The bank argued that it was injured because it has incurred compliance costs in connection with the CFPB's mortgage servicing rule, because it has exited the market for issuing new mortgages due to the qualified mortgage rule and general uncertainty around the mortgage marketplace, and because it has exited the market for remittance transfers due to the CFPB's remittance rule. 

The bank noted that its compliance costs included staff time and spending approximately $10,000 to join a bank "Compliance Alliance" to keep up with CFPB actions and developments in the regulatory landscape.

NCUA Leaders Talk CUs, Confirmation

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ALEXANDRIA, Va. (8/5/13)--National Credit Union Administration Chairman Debbie Matz and board member Michael Fryzel on Friday welcomed their incoming colleague Richard Metsger, and addressed other key credit union issues, in remarks delivered at two separate conferences last week.

Metsger was confirmed to be the third member of the NCUA board by the full U.S. Senate on Thursday. All that remains to be done before Metsger takes his place on the board is for him to be sworn in.

Matz said Metsger's "personal commitment to public service, his breadth of policymaking experience and his unique perspective on financial services issues are welcome additions to the NCUA board."

Fryzel congratulated Metsger on his confirmation, adding that he looks forward to the former Oregon state senator joining the NCUA as it works to maintain a safe and sound credit union system.

The continuing resolution of the corporate credit union system will be one topic for Metsger to tackle once he is sworn in to the full NCUA board.

Fryzel on Friday told attendees of the American Association of Credit Union Leagues' 2013 summer meeting in Boston that the agency may not charge a Temporary Corporate Credit Union Stabilization Fund assessment in 2014. The Credit Union National Association has encouraged the agency to take this approach, and has said that future TCCUSF assessments may not be necessary at all.

Fryzel also addressed the credit union system in general in his remarks. Topics he touched on include:
  • Natural person credit unions, the overall economy and the challenges that lie ahead;
  • Pending and proposed rules, NCUA staff changes and the NCUA regional realignment;
  • Pending federal legislation that could affect credit unions; and
  • The future of credit unions.
In other remarks made before the African-American Credit Union Coalition's annual conference in Detroit, Matz said minority credit unions are essential to fostering economic diversity and opportunity in communities across America, particularly low-income and underserved communities.

Minority credit unions "are often the only insured institutions serving low-income and underserved areas," she noted. "Your being there--making loans to small businesses so they can provide jobs and offering loans so your members can buy a car or a home or send a child to college--has helped hard-working families in those communities pave a path towards financial security," she told the assembled credit union representatives.

The NCUA chairman also reiterated the agency's commitment to supporting greater diversity in its own workforce and in credit unions nationwide.

CUNA, DCUC: DoD Rules Must Recognize CU Difference

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WASHINGTON (8/5/13)--The U.S. Department of Defense must recognize the unique nature of credit unions, including the 85 years of direct support provided by on-base credit unions, as it develops enhancements to some of the consumer credit protections offered to servicemembers and their families, the Credit Union National Association and the Defense Credit Union Council said in a joint comment letter.

Credit unions' support of servicemembers and their families is "a support built on trust and confidence; a support that has never waned...either in peace or war; in good economic times or not," CUNA Deputy General Counsel Mary Dunn and DCUC President/CEO Roland Arteaga emphasized in the letter.

Dunn and Arteaga in the letter noted that both CUNA and DCUC, and their member credit unions, have supported existing DoD consumer credit rules since they were issued in 2007. The current rule "has been an effective tool in protecting military consumers and curbing predatory lending," they said, and should not be altered. Doing so "will likely create unintended consequences and could jeopardize the extension of consumer credit to our troops and their families," they wrote.

Overall, CUNA and DCUC said any regulatory changes that are made should only address those lenders that seek to take unfair advantage of military members and their families.

"We strongly support the imposition of firm enforcement actions on predatory and abusive entities, but urge DoD to ensure regulated financial institutions, including credit unions, are not negatively impacted by future changes," the letter added.

The DoD is considering consumer protection changes as it prepares its report to the Committees on Armed Services of the Senate and House. CUNA and DCUC said they would work with the DoD as it prepares this report, which is due by Jan. 2.

For the full comment letter, use the resource link.

CUNA: REINS Act Is Nod To 'Creeping Complexity' Of Regulation

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WASHINGTON (8/5/13)--In a 232-183 vote that mostly broke down along party lines, the U.S. House just before breaking for its August recess Friday passed a bill that would require both chambers of the Congress to approve any federal rule that would bring with it a cost of $100 million or more.
 
Although a companion bill to the House's "Regulations from the Executive in Need of Scrutiny (REINS) Act" has been introduced in the Senate, Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan noted Friday that the very partisan nature of the bill puts its future squarely into question.
 
Still, Donovan added, the discussions generated by the bills are important.
 
"This bill is symbolic recognition that Congress understands that many industries face what the credit union industry faces--a crisis of creeping complexity with respect to regulatory burden," he underscored.
 
"As the vote suggests, the legislation is quite partisan and because of that it is unclear that the legislation will be considered by the Senate.  
 
"Nevertheless, CUNA and credit unions will continue to work with Congress to produce bipartisan legislation that provides meaningful regulatory relief for credit unions," he noted.
 
As Donovan noted in a July 31 article in American Banker (News Now Aug. 1), many see regulatory relief for smaller financial institutions as one of the few items that can gain bipartisan approval in a log-jammed Congress this year.

He warned, however, that, to go forward, any relief measure that addresses both credit unions and small banks must contain benefits that are balanced for both parties.

Budget Prep Is Topic Of Aug. 13 NCUA Webinar

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ALEXANDRIA, Va. (8/5/13)--Budget preparation issues will be the topic of an Aug. 13 National Credit Union Administration webinar.

NCUA Office of Small Credit Union Initiatives Economic Development Specialist Vanessa Lowe will discuss the rationale for designing and implementing a budget that captures the strategic mission of a credit union, and give tips on documentation gathering during the webinar. Participants will also have the opportunity to hear from a credit union that has used budget preparation techniques successfully in its strategic and business planning, the NCUA said.

The free webinar is scheduled to begin at 2 p.m. ET. Webinar participants may submit questions in advance by sending an e-mail to WebinarQuestions@ncua.gov. The subject line of the e-mail should read, "Budget Preparation Webinar."

To register for the NCUA webinar, use the resource link.

CUNA: Ask Lawmakers To Tweet Tax, CU Support In August

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WASHINGTON (8/2/13)--Touting his 40-year credit union membership, Rep. Alan Lowenthal (D-Calif.), like other lawmakers
Click to view larger image Click for larger view
recently--took to Twitter to tweet his support for credit unions, vowing to fight to retain their tax status.

August, with its five-week congressional district work period, is just the time for credit union advocates to meet with their lawmakers at home to spark more public messages of support, on tax and other key credit union issues, says Credit Union National Association Vice President of Legislative Affairs Ryan Donovan.

July 26 was the deadline for senators to submit their tax reform proposals to that chamber's Finance Committee leaders. "While that deadline has passed, you can bet legislators will be talking to each other over the summer," Donovan says.

After CUNA and the state credit union leagues ran a successful social media campaign, known as "DontTaxTuesday," more than 875,397 tweeted their support for credit unions and their tax exemption. Some legislators have made portions of their tax reform recommendations public.

Sen. Mark Begich (D-Alaska), for instance, said this week retaining the credit union tax exemption would "ensure continued access to affordable credit for consumers, homebuyers and small businesses alike, all of which contribute substantially to economic growth."

Others, including ranking House Ways and Means Committee Democrat Rep. Sander Levin (D-Mich.), Rep. Gary Peters (D-Mich.), House Intelligence Committee Chairman Mike Rogers (R-Mich.), and Rep. Dan Kildee (D-Mich.) have also spoken out in support of the credit union tax exemption. Still more legislators took to Twitter on July 23, like Reps. Lowenthal, Lloyd Doggett (D-Texas) and David Scott (D-Ga.).

Credit Unions will also need to continue advocating for other priorities, such as:
  • Separate House (H.R. 688) and Senate (S. 968) member business lending bills;
  • The Capital Access for Small Business and Jobs Act (H.R. 719), which would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings; and
  • Regulatory relief measures, including H.R. 2572, which would provide regulatory relief for credit unions and community banks.
"I don't want anyone for a second to think we have stopped these advocacy efforts. To the contrary, we will keep on advocating, with vigor," CUNA Executive Vice President of Government Affairs John Magill added.

Metsger Clears Senate To Become NCUA Board Member

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WASHINGTON (8/2/13)--The nomination of Richard Metsger to be the third member of the National Credit Union Administration board has been approved by the full U.S. Senate. All that remains to be done before Metsger takes his place on the board is for him to be sworn in.
 
Credit Union National Association Bill Cheney welcomed the news and thanked the Senate for confirming Metsger.
 
"We look forward to working with Mr. Metsger as he starts his tenure on the board, knowing that he can rely on his experience as a credit union board member in dealing with the challenges that credit unions face today," Cheney said.
 
Once sworn in, Metsger will join NCUA Chair Debbie Matz and board member Michael Fryzel, himself a former chair, to fill out the three-member board. Metsger will fill the seat vacated late last year after the term of board member Gigi Hyland expired.
 
The new NCUA board member's nomination was widely supported and moved fairly quickly through the confirmation process--at least compared to some controversial posts like newly confirmed Consumer Financial Protection Bureau Director's Richard Cordray's.
 
Metsger, a former Oregon state senator, was named as a candidate by President Obama in June and a hearing on his nomination was conducted June 27.

The next scheduled NCUA open board meeting is Sept. 12, as it is a longstanding NCUA practice to forego an August meeting. Barring unforeseen circumstances, Metsger should be ready to take his seat at the table by that time.

Student Loan Fix Heads To President's Desk

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WASHINGTON (8/2/13)--Legislation that would return the federal student loan rate to 3.4%, after it shot up to 6.8% in July, now needs only President Barack Obama's signature to become law.
The bill, known as the Bipartisan Student Loan Certainty Act, passed the U.S. House on a 392-31 vote this week. The Senate approved the bill last week.
The federal student loan rate, which was capped at 3.4%, increased to 6.8% on July 1 when members of Congress could not agree on legislation to address the issue.
The legislation approved this week would tie student loan interest rates to the 10-year Treasury note. Individual rates would be locked in for the life of the loan. Students and their families would also be protected for sharply increasing interest rates: Undergraduate loans could not exceed an interest rate of 8.25%.
The bill would save undergraduates $25 billion in student loan payments, and result in $3,300 less interest being charged per undergraduate student loan, according to congressional estimates.
Caps of 9.5% for graduate student loans and 10.5% for PLUS loans would also be set.
On the private student loan front, the National Credit Union Administration has told the Credit Union National Association that the agency will be releasing examiners' guidance on private student loans in the near future. The guidance will then be shared with credit unions.

NCUA Alerts CUs On ECOA Valuations Rule

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WASHINGTON (8/2/13)--Details of the Consumer Financial Protection Bureau's new rule on real estate appraisals and other written valuations under the Equal Credit Opportunity Act, and how the rule could impact credit unions, are addressed in a new National Credit Union Administration Regulatory Alert (13-RA-07).

The appraisal rule, issued under Regulation B, implements changes to the Equal Credit Opportunity Act (ECOA) that were made under the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is intended to ensure that consumers can receive information prior to a loan closing about how the property's value was determined.

In the alert, the NCUA reminds credit unions that receive applications for first-lien loans to be secured by a dwelling on or after Jan. 18, 2014, that they must:
  • Notify applicants in writing within three days of receiving the application that they have the right to receive copies of all appraisals and written valuations; and
  • Provide a free copy of these appraisals and written valuations developed in connection with the loan application, promptly after they are completed, or three days before the loan closes, (whichever is earlier) regardless of whether the credit is extended, denied, incomplete, or withdrawn.
The NCUA regulatory alert also addresses what types of loans are covered under the rule, what constitutes an appraisal or other written valuation, when and how credit unions should deliver valuation copies to applicants, and how the ECOA valuation rule relates to a Higher-Priced Mortgage Loans (HPMLs) appraisal rule that was issued by the NCUA and five other federal financial institution regulators on Jan. 18.

Basic appraisal regulation requirements and compliance tips are also addressed.

The NCUA alert also links to the full text of the final rule, and CFPB compliance resources.

For the full alert, use the resource link.

JEC Looks At 1986 Tax Lessons Learned

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WASHINGTON (8/1/13)--Academic and tax policy experts testified Wednesday before the Joint Economic Committee as that bicameral panel conducted a hearing generally on comprehensive tax reform and more specifically on lessons learned by the Tax Reform Act (TRA) of 1986.
 
Witnesses encouraged policymakers to move forward on comprehensive tax reform, and at the very least, comprehensive corporate tax reform. In fact, the majority of the testimony and discussion centered on corporate tax reform agenda items including tax rates, repatriation, capital gains, and tax expenditures.
 
Laura D'Andrea Tyson, a professor at the University of California Haas School of Business, and former chair of the Council of Economic Advisers, for instance, testified that the numerous credits, deductions and exclusions in the current system results in high compliance costs for businesses and "undermines the efficiency of business decisions."

NEW: Senate Confirms Metsger For NCUA Board

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WASHINGTON (8/1/13, UPDATED 8:48 p.m. ET)--The nomination of Richard Metsger to be the third member of the National Credit Union Administration board has been approved by the full U.S. Senate. All that remains to be done before Metsger takes his place on the board isfor himto be sworn in.
 
Credit Union National Association Bill Cheney welcomed the news and thanked the Senate for confirming Metsger.
 
"We look forward to working with Mr. Metsger as he starts his tenure on the board, knowing that he can rely on his experience as a credit union board member in dealing with the challenges that credit unions face today," Cheney said.
 
Once sworn in, Metsger will join NCUA Chair Debbie Matz and board member Michael Fryzel, himself a former chair, to fill out the three-member board. Metsger will fill the seat vacated late last year after the term of board member Gigi Hyland expired.
 
The new NCUA board member's nomination was widely supported and moved fairly quickly through the confirmation process--at least compared to some controversial posts like newly confirmed Consumer Financial Protection Bureau Director's Richard Cordray's.
 
Metsger, a former Oregon state senator, was named as a candidate by President Obama in June and a hearing on his nomination was conducted June 27.
 

Balance Needed In Reg Relief: CUNA Tells Banker

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WASHINGTON (8/1/13)--A July 31 article in American Banker says many see regulatory relief for smaller financial institutions as one of the few items that can gain bipartisan approval in a clogged U.S. Congress this year.

However, Credit Union National Association Vice President of Legislative Affairs Ryan Donovan warned that, to go forward, any relief measures that address both credit unions and small banks must contain benefits that are balanced for both parties. Privacy notifications, escrow requirements, and the Consumer Financial Protection Bureau's mortgage underwriting regulations are among the items tackled in some bills that have been introduced.

Supporting increased member business lending authority for credit unions remains a CUNA priority, Donovan told the Banker, but it is not the only item on CUNA's regulatory relief agenda. In fact, the article notes, "credit union advocates also indicate they may be willing to support a regulatory relief package even if it lacks" MBL provisions.

Rep. Gary Miller (R-Calif.) has drafted a relief package for credit unions that does not include increased MBL "We would of course support legislation that included (an MBL cap increase), but when we look at balance in terms of regulatory relief we've got to look at: What's in it, how does it benefit us, how do the banks benefit and is that benefit balanced?" said Donovan.

"We're not going to measure it based on: Is the MBL provision in there or not? We know what the score is on that. We're trying to get balanced regulatory relief provisions.

"Where we get into some troubled waters is when we start talking about Basel relief or capital relief for community banks, in the absence of talking about the capital concerns that face credit unions," Donovan told the Banker.

"That's where we would take a more critical view of legislation, if it provided significant capital relief for community banks but didn't address the capital concerns for credit unions," he said.

CUNA Urges Congressional Support For Eminent Domain Language

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WASHINGTON (8/1/13)--Legislation is needed to prohibit the Federal Housing Administration (FHA) from insuring residential mortgages seized through eminent domain because of market developments in that arena threaten to freeze the return of private capital to housing markets, the Credit Union National Association said in a joint letter sent Wednesday to encourage members of the U.S. Congress to support such legislation.

The insurance prohibition has been offered as an amendment to the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act for Fiscal Year 2014 (H.R. 2610).

The amendment has become necessary because communities across the country are considering a plan developed by a vulture fund that would play on eminent domain powers, CUNA wrote. Vulture fund is a term used to refer to a private equity or hedge fund that invests in debt considered to be very weak.

The plan would use a municipality's eminent domain power to acquire performing-but-underwater mortgages held in private-label, mortgage-backed securities and then insure the new loans through the taxpayer-backed FHA, the CUNA letter explained. It noted that Richmond, Calif. is reportedly prepared to become the first city in the nation to start seizing loans in this unprecedented manner.

Such actions could freeze the return of private capital to housing markets.

This proposed use of eminent domain also raises very serious legal and constitutional issues, and would have lasting negative effects on existing and future homeowners and Main Street investors, the letter added.

"While we support a broad range of programs to assist struggling homeowners and the communities in which they reside, we are firm in our belief that using the power of eminent domain in this manner would harm our nation's housing markets and the very communities it is intended to help," the co-signors said.

The letter was signed by the American Bankers Association, American Council of Life Insurers, American Land Title Association, American Securitization Forum, Association of Mortgage Investors, Financial Services Roundtable, Housing Policy Council, Independent Community Bankers of America, Investment Company Institute, Mortgage Bankers Association, National Association of Federal Credit Unions, National Association of Home Builders, National Association of Realtors and the Securities Industry and Financial Markets Association.

Ways and Means' Levin, More Back CU Tax Status

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WASHINGTON (8/1/13)--The ranking Democrat on the powerful congressional panel in charge of tax policy oversight, the House Ways and Means Committee, issued a public statement saying he is "committed" to a tax code that "ensures important policies, like the credit union tax exemption, continue to serve the best interest of the American taxpayer."
 
Rep. Sander Levin, from Michigan, said, "I have long supported credit unions and the critical role they play in our communities.
 
"Throughout the financial crisis, credit unions increased lending because of their cooperative membership structure--providing a needed lifeline to individuals and small businesses that other lenders and financial institutions could not. 
 
"I am committed to a thoughtful reform of our nation's tax code that ensures important policies, like the credit union tax exemption, continue to serve the best interest of the American taxpayer."
 
Rep. Gary Peters (D), also of Michigan, also weighed in today to support the credit union tax exemption.
 
"I completely support the tax exempt status of credit unions," said Peters. "Credit unions are member-owned. It's about helping our middle class families who are part of credit unions all across the state. The savings that are realized are passed directly to millions of members in Michigan.

Credit unions help people access financial services in a cost-effective way every day.  Because of this, I will continue to support credit unions and their tax status."
 
Michigan Credit Union League & Affiliates CEO David Adams thanked Levin and Peters for adding their voices to the important public support of the credit union tax status and for their continued support of credit unions and the federal tax exemption.

Regarding Levin, Adams added, "As the immediate past chairman of the House Ways and Means Committee and now as ranking Democrat on the committee, Mr. Levin's strong position will carry significant weight with his colleagues, both Democrats and Republicans.  Rep. Levin knows that credit unions make a difference in the lives of millions of middle-class Americans and small businesses."
 
"As the immediate past chairman of the House Ways and Means Committee and now as ranking Democrat on the committee, Mr. Levin's strong position will carry significant weight with his colleagues, both Democrats and Republicans."

Levin's and Peters'endorsements of credit unions and their tax status join a growing body of lawmakers' recent public support--four of which come from Adams' state of Michigan.
 
In addition to Levin and Peters, House Intelligence Committee Chairman Mike Rogers (R-Mich.), a senior House Republican, today publicly endorsed the continued tax-exempt status of credit unions in any tax reform plan and added that credit unions play a critical role in the nation's economy.
 
Sen. Mark Begich (D-Alaska) and Rep. Dan Kildee (D-Mich.) have also spoken out in support of the credit union tax exemption.
 
In May, a 550-plus page report on tax policy reform created by 11 Ways and Means working groups was delivered to the Joint Committee on Taxation. And July 26 was the deadline for senators to submit their tax reform proposals to that chamber's Finance Committee leaders.

CUNA: Court Interchange Ruling Could Devastate Small Issuers

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WASHINGTON (8/1/13)--The Credit Union National Association Wednesday said that a U.S. District Court decision striking down the Federal Reserve's price caps on debit interchange fees 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."

U.S. District Court for the District of Columbia Judge Richard Leon said in his ruling that the Fed did not follow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment.
 
CUNA General Counsel Eric Richard said, "The decision, no doubt, will challenge credit unions to continue their debit card programs without incurring drastic cuts in revenue, or imposing additional fees on their members--the last thing that credit unions want to do."

The court vacated the Fed's rule, finding that the agency disregarded Congress's intent when deciding how much financial institutions can charge merchants for debit card transactions.  The judge left the rule in place for the time being, pending the Fed's issuance of new rules; however, there will be additional briefings to determine the length of time the existing rule can stay in place. 

The Fed alone also has a right of appeal. An appeal, if made, would likely have the effect of keeping the existing rules in place pending the outcome.

"In either event, there is not an immediate impact on the current debit interchange rules," Richard said, and added, " It should also be noted that the Durbin Amendment's requirements do not apply to institutions with assets under $10 billion.  This is a statutory exemption that will not change as a result of this litigation."

CUNA and a broad coalition of trade groups filed an amicus brief in the case in April 2012 refuting the merchants' suit charges that the Fed cap is too high. The brief countered that it is, instead, too low and does not allow debit card issuers to cover their costs and a reasonable rate of return on their investments.

The joint brief described how small and large financial institutions are harmed by the Fed's tight fee ceiling. It underscored that consumers have not seen any pricing benefits for products and services promised by the merchants when they were fighting for a government-set cap on what card issuers may charge for their services.

The Fed was charged with setting the debit fee limit under provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Fed's final rule, which became effective in October 2011, caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents.

NCUA Ends LUA With Lynn Municipal Employees CU

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ALEXANDRIA, Va. (8/1/13)--A Letter of Understanding and Agreement (LUA) has been lifted from Lynn Municipal Employees CU. The Lynn, Mass. credit union is no longer bound by its October 2012 agreement with the National Credit Union Administration and the Massachusetts Division of Banks.
 
When the LUA was imposed, Lynn Municipal Employees CU had agreed to "take steps to correct unsafe and unsound practices," including the following issues:
  • Failure to comply with the requirements of previous enforcement actions;
  • Operating without adequate supervision and direction by the credit union's board of directors over senior management;
  • Failure to maintain accurate books and records;
  • Failure to establish appropriate internal controls; and
  • Engaging in unsafe and unsound underwriting standards and practices.
The NCUA confirmed to News Now all issues were successfully addressed by the credit union.

The credit union had remained open and serving its members while corrective actions were undertaken.


Six Blocked By NCUA From Future FI Work

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ALEXANDRIA, Va. (8/1/13)--Embezzlement and grand theft, larceny, and making false statements were among the charges that sparked the National Credit Union Administration to issue prohibition orders prohibiting the six individuals from participating in the affairs of any federally insured financial institution.

The NCUA said the orders involve the following individuals:
  • Marivic Arano, a former employee of Sierra Point CU, San Francisco, Calif., entered a plea of no contest to felony charges of embezzlement and grand theft. Arano was sentenced to five years in prison and ordered to pay a fine of $1,040 and restitution in the amount of $202,205.97;
  • David Beard, a former board member of Health Alliance FCU, Somerville, Mass., admitted to facts sufficient for a finding of guilt of the charge of larceny. Beard was ordered to pay restitution in the amount of $7,709.38;
  • Shawn Lee Nelson, a former employee of Members Choice CU, Houston, Texas, consented to the issuance of a prohibition order to avoid the time, cost and expense of administrative litigation;
  • Michael Saad, a former appraiser used by DHCU Community CU, Moline, Ill., was sentenced on the charge of false statements to a federally insured credit union. Saad was sentenced to six months in prison, six months of home confinement, two years of supervised release and ordered to pay restitution in the amount of $131,575.06;
  • Nkajlo Vangh, a former board member of Hmong American FCU, St. Paul, Minn., consented to the issuance of a prohibition order to avoid the time, cost and expense of administrative litigation; and
  • True Yang Vangh, also a former employee of Hmong American FCU, consented to the issuance of a prohibition order to avoid the time, cost and expense of administrative litigation.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link to access all NCUA enforcement orders.

Growth Planning Is Best Reason For Secondary Capital

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ALEXANDRIA, Va. (8/1/13)--Secondary capital basics, and practical tips on how eligible low-income designated credit unions (LICUs) can best use their secondary capital authority, were among the topics discussed in a Wednesday National Credit Union Administration webinar.

The LICU designation brings benefits that include the ability to offer and accept secondary capital accounts.

The secondary capital must take the form of subordinated debt--a borrowing transaction that must be repaid over time, if the funds are not used to cover operating losses, according to the NCUA. Eligible LICUs are subject to borrowing limitations and capitalization requirements, and their secondary capital plans must be approved by the NCUA.

Using secondary capital to create breathing room for credit unions experiencing temporary financial issues is the most common use, and obtaining secondary capital in anticipation of profitable growth is the best use, the NCUA said.

However, the agency warned, credit unions should not use secondary capital to stave off prompt corrective action orders or to hide ongoing business model problems in a credit union. The agency said this is the worst use of secondary capital.

The costs of secondary capital can be high, the NCUA said, with net worth and liquidity issues being frequent landmines. Anticipated growth also may not occur as quickly as the credit union had hoped, the NCUA added. The NCUA during the webinar also emphasized that secondary capital is not a substitute for deposits because it bears a higher interest rate reflecting its longer term and higher risk. The NCUA slides also noted that secondary capital cannot be used like a grant. It is a loan which must be paid back, the agency said.

Secondary capital can be accepted from other credit unions, investors, the National Community Investment Fund, the National Federation of Community Development Credit Unions, the U.S. Treasury's Community Development Financial Institutions Fund, investment conduits and other sponsors.

Secondary capital accounting tips were also addressed during the webinar, including details on how secondary capital should be treated during a merger. Basic scenarios for credit unions that have taken on secondary capital were also discussed.

Nearly one-fourth of credit unions that took part in the webinar said they were considering using secondary capital within the next five years. Nearly 25% of credit unions that attended the webinar had net worth ratios above 10%, and 38% had new worth ratios between 7% and 10%. Around half of the webinar participants were low-income-designated credit unions.