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8 CU advisory members, senior leaders named by CFPB

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WASHINGTON (8/29/14)--The Consumer Financial Protection Bureau (CFPB) has announced new members of the Credit Union Advisory Council (CUAC), as well as new senior leaders and other advisory board members. The CUAC advises the CFPB on regulating consumer financial products or services, specifically to share the unique perspectives of credit unions.

The bureau supervises credit unions and other depository institutions with more than $10 billion in assets. It does not have authority over those credit unions with less than $10 billion in assets, other than limited authority conveyed by a section of the Dodd-Frank Act.

The members of the CUAC are:
  • Robert Falk, president/CEO, Purdue FCU, West Lafayette, Ind., with $823 million in assets;
  • Jason Lee, executive vice president/chief financial officer, Orion FCU, Memphis, Tenn., with $545 million in assets;
  • Robin Loftus, chief operating officer, Heartland CU, Springfield, Ill., with $243 million in assets;
  • James McDaniel, president/CEO, Heritage Trust FCU, Charleston, S.C., with $487 million in assets;
  • Robin Romano, CEO, MariSol FCU, Phoenix, with $33 million in assets;
  • Ronald Scott, president/CEO, Appalachian Community FCU, Gray, Tenn., with $171 million in assets;
  • David Seely, president/CEO, Kirtland FCU, Albuquerque, N.M., with $674 million in assets; and
  • John Winne, president/CEO, Boston Firefighters CU, Dorchester, Mass., with $193 million in assets.
New members to the council will serve two-year terms.

The bureau also named the following new senior leaders:
  • Patricia McClung, assistant director for mortgage markets. McClung worked at the Federal Housing Administration as a senior housing policy adviser and, since January, has been acting director of program development in single-family housing, with responsibility for the home mortgage insurance, valuation and program support divisions;

  • Janneke Ratcliffe, assistant director for financial education. Ratcliffe has served as executive director at the Center for Community Capital at the University of North Carolina at Chapel Hill since 2005; and

  • Will Wade-Gery, assistant director for card and payments markets. Wade-Gery has been serving in the same position as the acting assistant director since January. Prior to being named acting assistant director, he was senior counselor on the card and payments markets team.

Next major financial shock will come from cyberattack, says IOSCO head

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WASHINGTON (8/29/14)--Cybercrime is a "sleeper issue" with the potential for huge impact on markets, says Greg Medcraft, chairman of the board of the International Organisation of Securities Commissions (IOSCO), according to a report this Monday in the Financial Times .

Medcraft predicted that the next major financial shock will come from cyberspace, following attacks on large players in the financial marketplace.

According to the Financial Times , Medcraft believes there needs to be consistency around the world when it comes to identifying and mitigating cyberthreats. This would include a global "toolbox" that would identify risk-management standards for detecting and responding to cyberattacks.

JPMorganChase, and at least four other banks, were struck by coordinated attacks by hackers earlier this month, according to a report from The New York Times . The article states that hackers siphoned "gigabytes of data, including checking and savings account information, in what security experts described as a sophisticated cyberattack."

A report from Bloomberg cites unnamed sources that say Russian hackers likely perpetrated the attacks, and that authorities are investigating whether recent attacks on major European banks using a similar vulnerability could be linked. The Bloomberg report cites experts who contend the attacks, which "plowed through layers of elaborate security to steal the data," appear "far beyond the capability of ordinary criminal hackers."

Businesses have been the target of attacks as well. Last week the U.S. Secret Service issued a bulletin about malware known as "Backoff" that has been associated with several point-of-sale data breaches. The bulletin estimated that more than 1,000 businesses are affected with the malware, which accesses a businesses' administrator account remotely to exfiltrate consumer payment data.

According to the Secret Service, Backoff was not recognized by antivirus software until this month, but bas been detected as far back as October 2013. This means that even computers with the latest antivirus updates and security patches did not recognize Backoff as malicious.

A recent Ponemon Institute study of data breaches showed that that average financial cost to victims of a data breach averages $157 per consumer, when the breach is a result of malicious criminal intent. For companies that are hit with such attacks, the average cost is $3.5 million ( News Now Aug. 21).

And as Charles Lybrand, an information security analyst with TraceSecurity, points out, for any target of a cyberattack financial losses are just the beginning of the damage. There are reputational losses, a possible loss of business, and other costs, such as reimbursement and legal fees. TraceSecurity is a CUNA Strategic Services alliance provider.

U.S. financial regulators, as well as the Congress, are grappling with policy issues involving cybersecurity.  There is apparent agreement that the cost and effort required to prevent an attack is lower, and seems more manageable, than the cost and effort to react to one. Beyond that, there is much debate.

However, financial regulators are working to give resources and guidance to financial institutions. For instance, in March the National Credit Union Administration launched a new resource for credit unions--a webpage that provides links to cybersecurity and data security resources. (Use the resource link.)

The Credit Union National Association is pressing federal lawmakers to address data security relative to merchants, who are not held to the same standards of security as credit union and other financial institutions. CUNA is a strong proponent that all payments system participants must be held to comparable levels of federal data security requirements; those responsible for the data breach should be responsible for the costs of helping consumers; and those responsible should ensure consumers know where their information was breached.

Use the resource links below for more information.

Inside Washington (08/29/2014)

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  • WASHINGTON (8/29/14)--The Consumer Financial Protection Bureau unveiled a new publication, "Financial Wellness at Work ." The report provides case studies designed to educate employers about practices that can improve employees' financial health and increase worker productivity. "We've been researching how innovative companies are leveraging technology, peer-to-peer relationships, and other promising practices to find low-cost, high-impact ways to promote financial wellness at work," the CFPB said in a release . "Our report is a resource for employers, non-profits, and others interested in promoting financial wellness programs in the workplace" ...

Wal-Mart to issue EMV MasterCards within next few weeks

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BENTONVILLE, Ark. (8/29/14)--Wal-Mart announced holders of its branded MasterCard will be receiving new cards with EMV (Europay-Visa-MasterCard) chips embedded within the next few weeks.

The announcement comes two weeks after the Payments Security Task Force (PST), an organization made up of more than a dozen companies and organizations, announced that 575 million EMV cards will be issued by the end of 2015 ( News Now Aug. 14).

EMV, which stands for the companies that developed the technology, is a new global standard that would replace the magnetic strip on cards with an embedded chip. Instead of swiping, customers insert the cards into compatible point-of-sale terminals.

The chip-embedded cards are considered more secure against fraud since authentication provided by the use of a PIN and cryptographic algorithms are more difficult to duplicate.

The Credit Union National Association is a member of the PST, and Eric Richard, CUNA general counsel/executive vice president for regulatory affairs, said that EMV cards are picking up momentum within the financial industry.

Richard also said that there is still a question about whether the merchant community will be prepared to make the full-time change, as well as a need for all stakeholders to continue working on security strategies to combat data breaches.

In October 2015, organizations deploying EMV cards will be protected from financial liability from card-present counterfeit fraud losses.

Guy Chiarello, president of First Data, a global payment processing firm, said his company is encouraging institutions to launch EMV plans as soon as possible before the October 2015 deadline.

"Issuing EMV now will benefit consumers by making the most secure payment card available sooner, while reducing fraud losses and enhancing payments system security for all," he said.

The EMV Migration Forum has estimated that approximately 100 million EMV cards, approximately 9% of the card base, will be issued by the end of 2014. Javelin Strategy and Research estimates that 52% of point-of-sale terminals will be EMV-enabled by the end of 2015.

Wal-Mart currently has EMV terminals in more than 4,600 stores already, including all Sam's Club locations. According to a statement, terminals in the remaining U.S. stores will be activated by the end of this year.

N.J. money services biz fined for repeated BSA violations

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WASHINGTON (8/29/14)--A New Jersey-based money services business has been fined for "willful and repeated violations" of the Bank Secrecy Act (BSA), the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) announced Thursday. BPI Inc. has admitted its conduct violated the BSA and has consented to a civil money penalty of $125,000.

BPI was cited in 2005 and 2006 for what FinCEN called "serious concerns with its anti-money laundering program" found by examiners. Federal and state examiners issued warnings and corrective actions at that time.

In 2011, an examination found the same deficiencies were still present. In addition to deficiencies with its internal controls, independent testing and training, examiners also found that, prior to the 2011 examination, BPI had never filed a single suspicious activity report.

In addition, it was found that BPI employees allowed customers to conduct transactions without verifying and retaining required identification information and allowed customers to conduct money transfers by using expired identification documents.

"There is absolutely no excuse for a financial institution to ignore such warnings and render the U.S. financial system vulnerable to money laundering and terrorist financing," said FinCEN Director Jennifer Shasky Calvery, noting that BPI had "plenty of notice of its problems" from examiners and an independent auditor.

According to FinCEN, BPI ceased operations as a money services business in March 2014.

Use the resource information to access FinCEN's civil penalty assessment.

FTC warns of government impostor scams

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WASHINGTON (8/29/14)--Even if a phone's caller ID says "Federal Trade Commission" (FTC) or "Internal Revenue Service" and shows a Washington, D.C., area code, it could still be scammers, the FTC warned in a recent announcement. According to the FTC, scammers know how to display fake information on caller ID systems.

The FTC's warning states that scammers have been calling consumers, saying the caller is from the government and the consumer owes taxes or some other debt. The scammer tells them to put money on a prepaid debit card and then to tell the phony government representative the card number. Others scammers say there is a large sweepstakes prize from the FTC or some other agency, and that the money will be awarded after the consumer pays for shipping, taxes or some other expense.

The FTC's Consumer Information website has released information on how to spot potential scammers claiming to be from the government.

The website says all consumers should be aware of the following:
  • Federal government agencies and employees don't ask people to send money for prizes or unpaid loans. The FTC doesn't supervise sweepstakes, and when the IRS contacts people about unpaid taxes, they usually do it by postal mail, not by phone;

  • Federal government agencies and employees also don't ask people to wire money or use a prepaid debit card to pay for anything. Once a prepaid card is sent or a money transfer is made, the funds are gone; and

  • Do not rely on caller ID. Scammers know how to rig it to show the wrong information. Scammers might have personal information about individuals before they call, so it should not be taken as a sign the caller is legitimate.
Use the resource link below to access the FTC's government impostor scams homepage.

Gallego wins Ariz. primary with help from CUs

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WASHINGTON (8/28/14)--Ruben Gallego, Marine veteran and credit union-supported candidate in Arizona's 7th Congressional District, emerged victorious in Tuesday's Democratic primary.

The district is classified by Roll Call as a safe for Democrats, meaning Gallego will likely be its new congressman, replacing the retiring Rep. Ed Pastor (D).

Gallego, who resigned his position as a state representative to run for the U.S. Congress, received 48.14% of the vote, while his closest competitor, Mary Rose Wilcox, took 36.4% of the vote. Starting out, Wilcox was considered the better-known of the two candidates.

Neither of the other two candidates in the Democratic primary took more than 8% of the vote.

The Mountain West Credit Union Association (MWCUA) endorsed Gallego, with MWCUA Vice President of Political Affairs Austin De Bey telling News Now Monday that Gallego was a "strong advocate and supporter of credit unions" while a state representative, and saying Gallego would continue to be so while serving in Congress.

Five credit unions participated in a partisan communication campaign that included nine mailers that went to almost 20,000 households with credit union members.

"The communication campaign made credit unions a significant player in an election in which only 24,097 voters turned out, and which Gallego won by only 2,838 votes," said Trey Hawkins, vice president for political affairs for the Credit Union National Association.

Libertarian Joe Cobb will face Gallego in November. There was no Republican in the 7th District primary Tuesday, but 876 write-in votes were cast.

Ed. Dept. adopts new SCRA procedures for FFEL lenders

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WASHINGTON (8/28/14)--There are new procedures for Federal Family Education Loan (FFEL) lenders to determine if borrowers are eligible for benefits under the Servicemembers Civil Relief Act (SCRA), the U.S. Department of Education announced this week.

According to FFEL data, 17 credit unions are in the top 100 financial institutions holding FFEL loans. Those 17 credit unions had outstanding FFEL program balances of $1.562 billion as of Sept. 30, 2013.

Under the new procedures set by the Department of Education, FFEL lenders are now authorized and encouraged to use the Defense Manpower Data Center (DMDC) database to identify borrowers who are eligible for the interest-rate limitation provided military servicemembers under the SCRA and to grant that benefit. This identification can be made without a specific request from the borrower.

According to the Department of Education, it has been determined that the DMDC database provides "sufficient supporting documentation" of an individual's eligibility for the SCRA interest rate limitation.

Once a borrower's status and service dates have been confirmed using the DMDC, the loan servicer may use the information, but must retain that information in the borrower's file.  When the loan servicer applies the SCRA's interest rate limitation to a borrower's account, it must notify the borrower that the interest rate on the loan has been changed.

FFEL lenders that use the DMDC information to confirm a borrower status and maintain the supporting information will not be subject to any program liabilities if any information provided by the DMDC is found to be incorrect. The loan servicer does not need to confirm the information provided by the DMDC.

In a letter to FFEL lenders sent Wednesday, the Department of Education reminded them of two limitations on the application of the SCRA interest rate:
  • The SCRA applies only to loans taken out by a servicemember before the servicemember entered active-duty military service. It does not apply to loans taken out after the borrower's active-duty military service began; and

  • A consolidation loan made after the borrower has started active-duty military service is not eligible for benefits under the SCRA even if the underlying loans were taken out prior to the start of active-duty service.

Cyberattack simulations webinars available for FIs

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WASHINGTON (8/28/14)--Two identical, two-day cyberattack simulation exercises will be hosted by the Financial Services Information Sharing and Analysis Center (FS-ISAC) in September.

The annual free Cyberattack Against Payment Processes (CAPP) exercises are held in conjunction with the Payments Risk Council. This is the third year of the program.

Over a two-day period, a simulated attack will take place on payment processes to help organizations assess readiness in the event of such an attack. These events help the industry identify ways to prevent, detect and respond to cyberattacks against payment processes.

According to FS-ISAC, the exercises are meant to:
  • Evaluate current risk mitigation procedures related to cyberattacks and identify potential critical gaps in planning;
     
  • Engage in a live test of an incident response team's ability to respond to major incidents;
     
  • Raise awareness and educate staff regarding procedures to respond to complex threats;
     
  • Benchmark your business practices based on the responses of other firms;
     
  • Develop appropriate risk mitigation recommendations in response to the types of attacks used in this exercise; and
     
  • Receive an after-action report highlighting lessons learned from the exercise and category benchmark results.
Participants can choose from one of the two free sessions, one on Sept. 9 and 10, with a registration deadline of Sept. 5, and the other on Sept. 16 and 17, with a registration deadline of Sept. 12. The exercise is scheduled to take approximately an hour each day.

The simulations were announced by Federal Reserve Financial Services, which is the portal to national financial services for depository institution customers of the Federal Reserve System.

Use the resource link below for more information.

Inside Washington (08/28/2014)

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  • ARLINGTON, Va. (8/28/14)--In its latest issue, the FDIC Consumer News features tips on preparing financially for stressful life events, including disability or death. The summer edition of the Federal Deposit of Insurance Corp. (FDIC) publication also offers basic strategies for helping family members or others who are facing a personal hardship. It also reports on enhancements to the FDIC webpages that explain deposit insurance, offers tips for rebounding from a bad credit history, and outlines basics to know about new credit and debit cards that contain a computer chip for added security ...

CUNA congratulates McWatters on taking his NCUA board seat

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WASHINGTON (8/27/14)--With J. Mark McWatters having been sworn in as the newest member of the National Credit Union Administration board Tuesday, the Credit Union National Association immediately welcomed him and outlined a number of credit union system developments it hopes to work on with him.

Click to view larger image From left, Rep. Jeb Hensarling (R-Texas), outoging NCUA board member Michael Fryzel and incoming board member J. Mark McWatters. McWatters was sworn in by Fryzel at Hensarling's Dallas office Tuesday. (NCUA Photo)
Outgoing board member Michael Fryzel performed the swearing-in ceremony held in at Rep. Jeb Hensarling's (R-Texas) Dallas office. McWatters joins NCUA Chair Debbie Matz and Vice Chair Rick Metsger to form the three-person board.

In a letter sent to McWatters Tuesday directly after the new board member's swearing in, CUNA interim President/CEO Bill Hampel noted that credit unions are facing a "bourgeoning array of regulations."

"We look forward to working with you in the development of a regulatory process that is transparent and accountable and a regulatory environment that will enable credit unions to continue meeting the needs of their members, while ensuring safety and soundness," Hampel wrote.

"We are also hopeful that you will deploy your expertise and background to scrutinize agency decisions particularly regarding the need for new rules, issues relating to examination fairness, and continual NCUA budget increases."

Hampel also expressed his wish that CUNA could meet with McWatters soon to discuss the agency's risk-based capital proposal and other issues.

McWatters previously served as the assistant dean for Graduate Programs and as a professor of practice at the Southern Methodist University Dedman School of Law in Dallas and as an adjunct professor at the university's Cox School of Business. He also served on the governing board of the Texas Department of Housing and Community Affairs and the advisory committee of the Texas Emerging Technology Fund.

Prior to that, McWatters was a member of the Troubled Asset Relief Program Congressional Oversight Panel and as counsel to Rep. Jeb Hensarling (R-Texas). He also practiced law as a partner with three large cross-border law firms and as counsel to an international hedge and private equity firm where he specialized in taxation, corporate finance, and mergers and acquisitions.

Immediately after graduating from law school, McWatters served as a judicial clerk to Judge Walter Ely in the Ninth Circuit of the U.S. Court of Appeals in Los Angeles.

McWatters is licensed to practice law in Texas and New York and is a certified public accountant in Texas. He earned a J.D. from the University of Texas at Austin School of Law and LL.M. degrees from Columbia University School of Law and New York University School of Law.

FHA to ban prepayment 'penalties' beginning next year

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WASHINGTON (8/27/14)--Starting with mortgages insured by the Federal Housing Administration on Jan. 21, 2015, and beyond, borrowers who prepay their FHA mortgages will not have to make interest payments beyond the date their loan is paid in full. 

The FHA approved a rule Tuesday called "Handling Prepayment: Eliminating Post-Payment Interest Charges" (see resource link), and it bans interest charges typically imposed on a borrower who pays off a mortgage ahead of term, sometimes by selling the home or refinancing into another loan with a lower interest rate.

FHA also announced a second new rule intended to ensure borrowers have early access to information when making decisions about their FHA mortgages. It requires that borrowers get at least 60 days--but no more than 120 days--notice before any change is made to their monthly payment for adjustable-rate mortgages(ARMs) that are FHA-insured. It applies to FHA-insured ARMs originated on or after Jan. 10, 2015.

The rule also requires lenders to base an adjustment to the interest rate on the most recent index value available 45 days before the change is set to take place. FHA extended this so-called "look back" period from 30 days.

FHA said in a release that together, the new rules are responsive to the regulations implementing the Truth in Lending Act (Regulation Z) as revised last year by the Consumer Financial Protection Bureau.

21 CUs part of $195M in CDFI awards for low-income communities

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WASHINGTON (8/27/14)--Twenty-one credit unions received $27,906,027 in grants Tuesday from the U.S. Treasury Department's Community Development Financial Institutions (CDFI) program.

The credit unions represent part of 185 total organizations that received approximately $195.4 million from the CDFI Fund for the fiscal year 2014. The funds are meant to enable CDFIs around the country to increase lending and investments in low-income and economically distressed communities.

The credit unions were awarded $24,906,037 in financial assistance and technical assistance grants. Financial assistance awards are up to $2 million and are meant to allow CDFIs to sustain and expand lending capital, loan loss reserves, capital reserves, financial services and development services.

Technical assistance awards are available up to $125,000 for capacity development for organizational sustainability and success, such as purchasing equipment, hiring consulting or contracting services, paying salaries and benefits, or training staff or board members.

In addition to receiving $2 million in financial assistance awards, Hope FCU, Jackson, Miss., with $187 million in assets, received an additional $3 million from the Healthy Food Financing Initiative Financial Assistance awards. This is a supplemental funding opportunity under the CDFI Program for eligible CDFIs that expressed an interest in expanding their healthy food-focused financing activities.

According to CDFI, awardees use the funds to enhance capacity to make investments in a range of retail and non-retail healthy food projects serving low-income communities. Investments include food production, grocery stores, mobile food retailers, farmers markets, cooperatives, corner stores and bodegas.

In fiscal year 2013, 35 credit unions received $26,886,683 in awards.

In the same year, past CDFI Program awardees reported originating 24,285 loans or investments totaling more than $1.9 billion. Those awardees also reported financing 17,732 affordable housing units and 6,558 businesses, and provided more than 293,000 individuals with financial literacy training and other training.

Use the resource link below for the full list of awardees.

New NCUA board member McWatters outlines action priorities

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ALEXANDRIA, Va. (8/28/14)--J. Mark McWatters, one day after being sworn in as the newest National Credit Union Administration board member, has announced his top priorities for his term at the agency. In a statement, he named regulatory relief, transparency, accountability, supporting low-income credit union members and promoting greater industry diversity as among items high on his list.
J. Mark McWatters, the newest NCUA board member, is shown here at his Senate confirmation hearing. (CUNA Photo)

"In discharging my duties, I will always welcome advice and counsel from the broader credit union industry, as well as from the management and members of individual credit unions," McWatters said.

"I assure you that I will thoughtfully and respectfully consider your perspectives as I independently analyze the issues presented. While we may differ from time to time in our analysis and conclusions regarding the structure and scope of specific regulatory and administrative actions, I assure you that your voice will be heard and considered."

McWatters said his initial focus as a member of the NCUA board would be in five areas:
  • Providing regulatory relief for credit unions;

  • Incorporating a robust, objective, transparent and fully accountable cost-benefit analysis into NCUA's rulemaking and vetting process;

  • Recognizing the critical role and expanding the scope and financial viability of low-income credit unions within the financial services industry;

  • Enhancing the availability of affordable and readily understandable financial services to credit union members who are economically challenged; and

  • Promoting the role of women and persons of color within the credit union industry.
"Paying close attention to these and other critical issues affecting the credit union industry and providing a fresh, transparent and fully accountable approach toward NCUA's internal and external operations reflects my commitment to ensuring the safety and soundness of the credit union industry and protecting the Share Insurance Fund from losses while allowing credit unions to best serve their members and conduct their affairs through their exercise of prudent, fair-minded and autonomous business judgment," McWatters said.

Credit Union National Association interim President/CEO Bill Hampel said Tuesday that the association looks forward to meeting with McWatters once he is settled to discuss the agency's risk-based capital proposal, examination concerns, the need for regulatory relief and the agency's budget. Regulatory relief for credit unions is among CUNA's top priorities.

The NCUA has a full-time, three-member board appointed by the president and confirmed by the Senate. No more than two board members can be from the same political party, and each member serves a staggered six-year term.  The NCUA chair is Debbie Matz, and the vice chair is Richard Metsger.

Castro seeks improved quality assurance for FHA programs

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WASHINGTON (8/27/14)--U.S. Housing and Urban Development (HUD) Secretary Julian Castro addressed ways to balance serving homebuyers while managing risk for the Federal Housing Administration (FHA). Castro, who officially took office at the end of July, spoke during a National Association of Realtors webinar Tuesday.

Castro provided insight into the FHA's Homeowners Armed With Knowledge (HAWK) program. HAWK is a pilot program meant to help borrowers make better choices when it comes to housing finance.

The four-year voluntary program offers mortgage insurance premium reductions to first-time homebuyers with an FHA loan, in return for completing three phases of housing counseling.

At the invitation of HUD and FHA, Credit Union National Association regulatory advocacy staff has attended advance briefings on the HAWK program, as well as other housing finance reform measures, in recent months.

To receive the maximum benefit, a borrower must complete three phases of counseling--pre-purchase, pre-closing and post-closing--and have two years of timely mortgage payments. In exchange, the borrower can see a premium reduction, both up front and on annual premiums.

"At the end of the day, a borrower with an average size loan, say $180,000, will see $10,000 in savings over the life of the loan," Castro said. "By incentivizing responsible decision making we're trying to build a stronger foundation for middle class home ownership and at the same time reduce the exposure to risk by the FHA, while creating a more stable housing market."

The HAWK program falls under the FHA's renewed interest in housing counseling, which is part of the agency's overall ramping up of quality assurance measures. Castro mentioned a few other measures, designed to create more certainty and clarity for FHA lending partners.

These include:
  • Development of the single-family handbook, which Castro called a "definitive guide for doing business with FHA." The agency posted three sections of the handbook, "Applications Through Endorsement," "Doing Business with FHA" and "Quality Control, Oversight and Compliance" to solicit feedback and input. Final publication of the first section is expected within a few weeks;

  • Improved loan quality assessment. Castro said the goal is to create more descriptive and transparent ways to identify and classify loan defects;

  • Sampling in a way that more accurately reflects overall underwriting quality; and

  • Introducing a supplemental performance metric based on credit score groups rather than geography.

NACHA passes 2 rules to increase ACH Network quality

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HERNDON, Va. (8/27/14)--The voting membership of NACHA, the Electronic Payments Association has approved ballots for two upcoming rules for the Automated Clearing House (ACH) Network.

According to NACHA, the two rules are designed to improve ACH Network quality by reducing the incidence of ACH transactions that result in exceptions and returns.

The ACH Network Risk and Enforcement Rule aims to improve NACHA's ability to identify and enforce the rules against "outlier" originators that may be responsible for the highest, most disproportionate levels of exceptions and returns. Such returns impose costs on Receiving Depository Financial Institutions (RDFI) and can impact consumers.

The rule:
  • Establishes an inquiry process that allows NACHA to research the facts behind an originator's ACH activity;
     
  • Lowers the existing return threshold for unauthorized transactions and expands NACHA's authority to enforce rules related to unauthorized transactions; and
     
  • Defines permissible practices for use of the ACH Network to collect transactions returned for insufficient funds and other reasons.
The amendments related to NACHA's enforcement authority will become effective Jan. 1, 2015, and the amendments related to return rate levels and reinitiated transactions will become effective Sept. 18, 2015.

The ACH Network Quality Rule defines the methodology for establishing an unauthorized entry fee to be paid by an Originating Depository Financial Institution (ODFI) to a RDFI for the return of an unauthorized transaction. It goes into effect Oct. 3, 2016.

The fee is meant to provide an incentive for ODFIs to implement processes and tools to reduce the number of unauthorized transactions, as well as provide partial cost recovery to RDFIs for handling unauthorized transactions costs.

The Credit Union National Association has submitted comments to NACHA, urging it to minimize costs on credit unions that may be affected and minimize unintended consequences, due to the fact that credit unions generally originate higher quality transactions.

Use the resource link below to access the updates on rules, as well as CUNA's comment letters.

Ruben Gallego heads into Ariz. primary with CU support

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WASHINGTON (8/26/14)--Credit union-supported Ruben Gallego will attempt to move closer to a congressional seat in Arizona's 7th Congressional District primary today. The district, which consists of Phoenix and suburbs such as Glendale, is currently represented by Rep. Ed Pastor (D), who announced he will not seek re-election.

Gallego is a former Arizona state representative, who also served in the Marines with a deployment to Iraq in 2003.

He is endorsed by the Mountain West Credit Union Association (MWCUA), and has been the recipient of the maximum $5,000 donation from the Credit Union Legislative Action Council (CULAC). MWCUA joined with five Arizona credit unions, along with CULAC, to send out direct mailers to almost 20,000 households with credit union members.

"Ruben was a strong advocate and supporter of credit union issues while serving in the Arizona House of Representatives," said Austin De Bey, vice president of legislative affairs for MWCUA. "He recognizes the important role credit unions play in the financial marketplace, and we believe he will continue his support of issues that will help credit unions serve their members as a member of Congress."

Trey Hawkins, vice president of political affairs, Credit Union National Association, said the mailers could be a "significant factor" in the election, which has historically been one with low voter turnout.

Gallego is part of a six-person field in today's Democratic primary, and the district leans heavily Democratic. His closest challenger is expected to be ex-Maricopa County Supervisor Mary Rose Wilcox.

Late 2Q Call Reports: 75 CUs could face civil money penalties

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ALEXANDRIA, Va. (8/26/14)--The number of late call report filers in the second quarter dropped to 75 credit unions from 104 in the first quarter, but National Credit Union Administration Chair Debbie Matz said the goal still is full compliance.

Click to view larger image A breakdown of the second-quarter call report late filers, per National Credit Union Administration data. (CUNA Graphic)
The agency announced Monday that the late filers of second-quarter 5300 Call Reports now face potential civil money penalties. That number will likely decrease as the agency reviews each individual case and can waive civil money penalties if mitigating factors exist.

Four credit unions that filed late in the second quarter also filed late in the first quarter, and 63 of the late-filing credit unions have assets of less than $50 million. Fifty-five of the late filers are federally chartered credit unions. The NCUA said it will make public the names of late filers at a later date.

 After the agency reviewed the cases of the 104 credit unions that missed the first quarter call report filing deadline, 62 credit unions were ultimately fined, agreeing to civil money penalties totaling $57,750.

The NCUA reviews the cases to determine whether any of the late filers have mitigating circumstances that warrant a waiver of penalties. Those factors can include a credit union's filing history and other circumstances, such as a natural disaster, that prevented timely filing.

According to the agency, late filers should be notified in September of the penalties they face. Penalties are determined by three factors: size of the credit union, lateness in filing the call report and history of violations. All penalties will be sent to the U.S. Treasury, as required by the Federal Credit Union Act.

Starting in the first quarter of 2014, the NCUA announced the civil money penalties for late filers, which according to the agency, are meant "solely to deter late filing."

The NCUA has posted a video to its YouTube channel explaining the call report submission process.

Use the resource link below to access the video, as well as Matz's January letter to credit unions regarding the civil money penalties.

CUNA: NCUA's securitization rule should allow CUs to securitize own loans

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WASHINGTON (8/26/14)--The Credit Union National Association submitted a comment letter to the National Credit Union Administration Monday regarding two proposed rules, one on assets securitization and the other on safe harbors. While CUNA generally supports both proposals, the trade group recommends several changes and clarifications for the asset-securitization proposal, which would allow credit unions to securitize their own loans.

The NCUA's proposal would also allow credit unions to create special purpose vehicles to hold the assets collateralizing the securities, which CUNA also supports.

"Such authority would allow credit unions to create issuing entities, which are necessary to insure investors that the underlying assets are not reachable by creditors should the credit union become insolvent," the letter reads.

However, the proposal as currently constructed limits the authority of a credit union to securitize loans it has originated. CUNA believes this limits the benefits of the proposed rule, and advocates the restriction be removed.

"The ability to purchase loans for securitization will give credit unions without enough originations of a particular loan type increased opportunities to package their own loans," the letter reads. "In addition, credit unions may hold loans that they have purchased for other reasons prior to contemplating sponsoring a securitization. Credit unions should be able to include these loans in a securitization transaction for risk management."

The letter goes on to say that even if the agency does not allow other loans to be purchased for securitization, it should permit a credit union to purchase loans that it re-underwrites to be part of a securitization pool.

CUNA notes that the current proposal does not provide for those circumstances, and at a minimum, it should be clarified to state that such an action is permissible.

In addition, the rule does not address the role of credit union service organizations (CUSOs) in asset securitization. CUNA believes that loans originated by a credit union's CUSO should be included with loans the credit union securitizes through a special purpose vehicle that is not the CUSO.

"[The proposed rule] stated that securitization is not a pre-approved CUSO activity but we think it should be, both in originated loans that could be securitized by a credit union or allowing CUSOs to act as sponsors," the letter reads. "NCUA should also address whether multiple credit unions could utilize a CUSO to securitize loans and whether credit unions can participate with banks to facilitate securitizations."

CUNA's comment letter also addresses the NCUA's proposal safe harbor rule, which would provide a meaningful safe harbor irrespective of the legal characterization of the transfer. CUNA supports the NCUA's safe harbor rule as proposed.

Use the resource link below to access the proposed rule and CUNA's letter.

Goldman Sachs settles with FHFA for $3.15B in PLS suit

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WASHINGTON (8/26/14)--A $3.15 billion settlement was reached between the Federal Housing Finance Agency (FHFA) and Goldman Sachs in a lawsuit involving private-label mortgage-backed securities (PLS). The PLS were purchased by Fannie Mae and Freddie Mac between 2005 and 2007, and the FHFA alleged Goldman Sachs violated federal and state securities laws.

Under the terms of the settlement, Goldman Sachs will pay approximately $2.15 billion to Freddie Mac and approximately $1 billion to Fannie Mae.

According to an FHFA, the settlement effectively makes Fannie Mae and Freddie Mac whole on their investments in the securities at issue. As part of the settlement, FHFA, Fannie Mae and Freddie Mac will release certain claims against Goldman Sachs & Co. related to the securities involved.

The settlement also resolves claims that involved a Goldman Sachs security in FHFA v. Ally Financial Inc., et al.  FHFA previously settled claims against Ally Financial Inc. 

This is the 16th settlement reached in the 18 PLS lawsuits filed by the FHFA in 2011. Three cases remain outstanding.

Use the resource link below to access the full settlement.

Debt relief scammers subject of FTC, CFPB complaints

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WASHINGTON (8/26/14)--Two federal agencies took action against debt relief companies that they claim used deceptive tactics to collect fees for debt settlement services. The Consumer Financial Protection Bureau (CFPB) announced an enforcement action against Global Client Solutions, while the Federal Trade Commission has asked a federal court to shut down a scam that claimed its debt relief programs were sanctioned and approved by the federal government.

Global Client Solutions, a debt-settlement payment processor, allegedly helped other companies collect tens of millions of dollars in illegal upfront fees from consumers, according to the CFPB complaint. The bureau has asked a federal district court to approve a consent order that would require the company and its two owners to halt all illegal activities and to pay over $6 million in relief to consumers, as well as a $1 million civil penalty.

According to the CFPB's complaint, since October 2010, Global Client Solutions processed tens of millions of dollars in illegal advance fees from tens of thousands of consumers. The company will be subject to monitoring by the CFPB and will be required to make reports to the CFPB to ensure their compliance.

According to the CFPB, the complaint is not a finding or ruling that the defendants have actually violated the law. The proposed court order has been filed with the Court for the Central District of California and will have the full force of law only when signed by the presiding judge.

Separately, the FTC asked a federal court last week to shut down a scam that targeted financially distressed Americans by pitching a phony debt relief and credit repair program on two websites, called the "Bill Payment Government Assistance Program." It claimed to offer up to $75,000 in debt relief and improved credit scored within 30 days to consumers.

According to the complaint, consumers were told that in exchange for an advance "service charge" of $900 to $1,100, the defendants would pay off the consumers' debts. Scammers would ask consumers for details of their outstanding debt, including account numbers, and then arrange bogus electronic payments that gave consumers the impression their debts were in fact being paid.

Once consumers paid the service charge via a money transfer service, the scammers would then reverse the payments made to consumers' bills, leaving consumers without the promised debt relief or improvements to their credit scores or limits.

The sites claimed the program was governed by the Recovery Accountability and Transparency Board, and the FTC alleges YouTube videos created by the scam's operators included an audio recording of Obama saying, "I approve this message."

Use the resource links below for more information.

NEW: J. Mark McWatters sworn in as NCUA board member

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DALLAS (8/26/14, UPDATED 11:30 a.m. ET)--J. Mark McWatters was sworn in today as a National Credit Union Administration board member, the agency just announced. Outgoing board member Michael Fryzel performed the swearing in at Rep. Jeb Hensarling's (R-Texas) Dallas office. McWatters will join NCUA chair Debbie Matz and vice chair Rick Metsger to form the three-person board.

"It is my distinct honor and privilege to join the NCUA Board," said McWatters. "I wish to thank President Obama for submitting my nomination to the Senate, Senate Minority Leader [Mitch] McConnell for recommending my nomination to the President and the Senate for confirming my nomination. As a board member, I look forward to addressing the regulatory and administrative law challenges facing the credit union system as it continues to expand and evolve as a critical and fundamental component of the financial services industry."

Credit Union National Association interim President/CEO Bill Hampel said he and CUNA look forward to working with McWatters and meeting with him as soon as he is settled.  Priorities for discussion will include NCUA's risk-based capital proposal, examination concerns, the need for regulatory relief and the agency's budget. CUNA sent a letter to McWatters today welcoming him to the credit union system.

"Congratulations to Mark McWatters on becoming the newest member of the NCUA board today. We look forward to working with him, along with the other board members, on the key regulatory issues facing credit unions today," Hampel said.

Previously, McWatters was the assistant dean for graduate programs at Southern Methodist University's School of Law. He also served as a member of the Troubled Asset Relief Program Congressional Oversight Panel, and prior to that he practiced for over twenty-five years as a domestic and cross-border tax, corporate finance and mergers and acquisitions attorney.

McWatters received his J.D. degree from the University of Texas School of Law, a Master of Laws degree from Columbia University School of Law and an Master of Laws degree in Taxation from New York University School of Law. 

Each board member serves a staggered six-year term, with McWatters scheduled to serve until August 2019.

John Magill to leave after 9 strong years at CUNA

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WASHINGTON (8/26/14)--Credit Union National Association interim President/CEO Bill Hampel praised John Magill, executive vice president for government affairs and special assistant to the president, who announced Monday he will leave his position at CUNA on Sept. 5.

Click to view larger image John Magill has been "a significant leader" at CUNA and will be "sorely missed," CUNA interim President/CEO Bill Hampel said Monday after Magill announced he would leave CUNA on Sept. 5.  Magill (left) is shown here discussing credit union matters with House Financial Service Committee Chair Jeb Hensarling (R-Texas). (CUNA Photo)
Hampel said of Magill, "He has been a significant leader in CUNA's advocacy team for almost nine years." Hampel added that Magill will be "sorely missed" and "we wish him well."

Magill, a 30-year veteran of Capitol Hill, joined CUNA in May 2006 as senior vice president of legislative affairs. He was promoted to the executive vice president post in July 2011.

During his years as an EVP, CUNA waged a battle to protect the credit union tax status as Washington policymakers considered tax code changes.

That effort was rewarded by the absence of credit union changes in a House Ways and Means Committee draft tax code reforms early this year. CUNA's pro-credit campaign included its groundbreaking "Don't Tax My Credit Union" social media blitz, which generated more than 1.3 million messages of support and garnered a Grassroots Innovation Award from the Public Affairs Council.

Also during Magill's tenure, CUNA has successfully advocated for a long series of credit union regulatory relief bills that have been introduced in the House and the Senate. Most recently, they include such legislation as the Senate's RELIEVE Act, to give credit unions parity to banks in a deposit insurance coverage issue; and, on the House side, such bills as one that orders a federal study the impact of the Federal Reserve Board's monetary reserve requirements, and a bill to ease some property appraisal requirements.

"It's been a fulfilling, rewarding experience and an important part of my life," Magill said of his time at CUNA. He noted that it is expected that a new CUNA president/CEO will be named in the next few weeks.

"So the timing is right for me to step into my next challenge in our nation's capital, where so many of us are fortunate to work and call home," he noted.

Magill said, however, credit unions folks should expect to him around from time to time as he continues to "help out on a few matters."

As executive vice president for government affairs and special assistant to the president, Magill provided strategic counsel on legislative and political issues while overseeing the day-to-day operations of those key advocacy areas. He also handled a number of administrative and other related matters inherent in the daily operations of the CUNA Washington office.

NCUA reports on impact of new 'small CU' definition

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ALEXANDRIA, Va. (8/25/14)--The National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI) has released a report on its impact since January 2013, when the agency's definition of "small credit union" changed. The new definition classified a small credit union as those with assets of less than $50 million, up from the previous level of $10 million in assets.

According to OSCUI Director Bill Myers, this change meant that two-thirds of federally insured credit unions now qualified as a small credit union.

"Remarkably, we grew each one of our program areas to meet the increased demand without an increase to our budget or staff. Serving a broader audience of credit unions with our existing resources meant being realistic about which credit unions we should focus on," Myers said in the latest OSCUI report. "We learned to say 'yes' only to credit unions that were most likely to survive. We allotted time for follow up to ensure that credit unions adopted the measures we helped them develop."

During the first year of the new definition, OSCUI:
  • Invested more than 11,000 hours in credit union consultations, the highest number ever;

  • Assisted 21 organizer groups with new charter requests;

  • Offered three grant rounds in one year for the first time, which increased the number of first-time grantees by 51%;

  • Nearly doubled its consulting capacity by introducing two enrollment periods per year;

  • Trained more than 20,000 credit union officials and volunteers; and

  • Reached more than 15,000 viewers with videos, attracted nearly 9,000 participants to monthly webinars and fielded more than 1,000 inquiries through the new online search tool FAQ+. This was done through its Partnerships and Outreach Program.
Use the resource link below to access OSCUI's monthly report.

Regulatory forecast, deadlines featured at CUNA conference

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BOSTON (8/25/14)--The Credit Union National Association provided a regulatory forecast for the next several months during its Economics and Investment Conference in Boston last week.

Jared Ihrig, CUNA's associate general counsel for regulatory affairs, offered a glimpse into regulations coming from the National Credit Union Administration, Consumer Financial Protection Bureau (CFPB), Federal Financial Institutions Examination Council (FFIEC) and more.

The three-day conference featured a number of speakers and an audience of economists, accountants and other credit union regulatory and compliance staff.

The main topics were:
  • Interest-rate risk: The NCUA called interest-rate risk "the most significant risk the credit union industry faces right now" in a January letter to credit unions. Regulations require at least an annual review or policy to be in place;

  • Cybersecurity: The FFIEC announced a pilot program which will be conducted as part of regular examinations by state and federal regulators. The program, which will feature approximately 250 credit unions, will assess preparedness to identify, manage and control cyberrisks;

  • Member business lending: The NCUA is expected to propose revisions to its member business lending regulations later this year. Despite the promise of bills that would increase the current cap of 12.25% of assets, no congressional action is expected this year on CUNA-supported legislation;

  • Liquidity risks: New liquidity policies applicable to all federally insured credit unions became effective March 31. Credit unions with less than $50 million in assets must maintain a basic written liquidity policy, credit unions with more than $50 million must also have a contingency funding plan featuring strategies for dealing with shortfalls and credit unions with more than $250 million in assets must establish access to at least one contingent federal liquidity source;

  • Fair lending: The CFPB has introduced new Home Mortgage Disclosure Act rules, which require more reporting than the already-increased standards required by Dodd-Frank. CUNA believed the increased requirements will cause hardships for some credit unions. Comments on this proposal are due Oct. 22; and

  • Truth in Lending Act/Real Estate Settlement Procedures Act: New TILA/RESPA integrated disclosure rules will go into effect Aug. 15, 2015, and will consolidate existing mortgage disclosures required under TILA/RESPA into two integrated forms. The CFPB will host a webinar to answer questions about the new rule Tuesday, and will hold several more throughout the implementation process.
Ihrig reminded those in attendance that it is important every credit union ask itself three key questions:
  • What are the laws and regulations your credit unions is subject to across all jurisdictions in which you operate?
     
  • What is the level of confidence that the credit union is complying with all pertinent laws and regulations?
     
  • Can the credit unions prove compliance to critical parties, such as board members, investors, regulators and members?
Use the resource links below to access the latest News Now coverage on the above topics.

Important exception extended under new CFPB remittance rule

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WASHINGTON (8/25/14)--A final rule issued by the Consumer Financial Protection Bureau (CFPB) Friday extends a temporary exception to its remittance transfer rule, one which allows credit unions and other depository institutions to estimate certain remittance pricing disclosures when specific pricing information is not available.
 
A remittance generally is a transfer of money by a worker to an individual in his or her home country.
 
The CFPB rule extends the temporary exception by five years, until July 21, 2020. The Credit Union National Association strongly supported this and other changes to the bureau's existing rules on remittance transfers.
 
The CFPB explained that an extension of the exception is currently needed because in an open network, under which insured providers like depository institutions operate,  the provider typically does not have control over, or a relationship with, all of the participants in the remittance transfer.
 
This lack of control can make it difficult to learn all of the potential fees and, in some cases, the exchange rate. During the proposal comment period CUNA and other entities warned that without an extension financial institutions would have been unable to send some transfers to certain parts of the world that they currently serve.
 
The CFPB makes note, however, that under the Dodd-Frank statute the regulator may not extend the exception beyond the 2020 date.  The bureau said it will be working with credit unions and other affected remittance providers for a "more sustainable solution to this problem."
 
The new remittance final rule also makes a number of technical and clarifying changes related to error resolution procedures and permissible methods of delivering disclosures. Further, the rule clarifies that U.S. military installations abroad are considered to be located in a state for purposes of the remittance rule. The changes in these areas generally reflect requests CUNA made in its comment letter.
 
Also, the CFPB released a revised version of its compliance guide to reflect the changes finalized in today's rule.
 
 
Use the resource links to access the text of the new rule and the new compliance information.
 

 
 

Former Texans CU CEO barred from future FI work

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ALEXANDRIA, Va. (8/25/14)--The National Credit Union Administration has issued a cease and desist order to David Addison, former CEO of Texans CU, Richardson, Texas.

The order, to which Addison consented without admitting fault, requires that he not become an employee of, hold any office in or serve as a board member of any federally insured credit union or credit union service organization.

Addison served as CEO of  $1.4 billion-asset Texans CU from 2003 to 2009. The NCUA filed a complaint in federal district county Dec. 20, 2012, alleging Addison was "grossly negligent" in how he ran Texans, which included pursuing a high-risk business and investment strategy. Texans CU is currently under conservatorship.

According to NCUA's complaint, Addison's "gamble with TCU's funds in these high-risk, largely unstable businesses and investments is what caused TCU's ultimate downfall."

"Mr. Addison's actions were very costly to the credit union, and financial institution regulators have a responsibility to hold accountable those parties--institutions or individuals--when they undermine safety and soundness," NCUA Chair Debbie Matz said when the lawsuit was announced.

Since the Texans CU was placed into a conservatorship, TCU has improved operating efficiencies and risk-management strategies, according to the NCUA, and it earned more than $21 million in 2012.

Use the resource link below to access to cease and desist order.

NEW: John Magill to leave CUNA Sept. 5

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WASHINGTON (8/25/14 12:05 p.m. ET)--Credit Union National Association interim President/CEO Bill Hampel announced this morning that John Magill, executive vice president for government affairs and special assistant to the president, will be leaving his position at CUNA on Sept. 5.
 
"John Magill has been a significant leader in CUNA's advocacy team for almost nine years, and we wish him well," Hampel said, adding," John will be sorely missed."
 
Magill, a 30-year veteran of Capitol Hill, joined CUNA in May 2006 as senior vice president of legislative affairs. He was promoted to the executive vice president post in September 2011.
 
"It's been a fulfilling, rewarding experience and an important part of my life," Magill said of his time at CUNA.  He noted that it is expected that a new CUNA president/CEO will be named in the next few weeks.
 
"So the timing is right for me to step into my next challenge in our nation's capital, where so many of us are fortunate to work and call home."
 
As executive vice president for government affairs and special assistant to the president, Magill provided strategic counsel on legislative and political issues while overseeing the day to day operations of those key advocacy areas. He also handled a number of administrative and other related matters inherent in the daily operations of the CUNA Washington office.

Supervisory authority, not permissible acts, changed under Fed UDAP action

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WASHINGTON (8/25/14)--New guidance issued by federal regulators has been issued to clarify that while credit practices rules for financial institutions have been repealed, the deceptive acts or practices in the former regulations are still not permissible.

The National Credit Union Administration, along with the Office of the Comptroller of the Currency (OCC), Federal Reserve and Federal Deposit Insurance Corp., have repealed rules as required by the Dodd-Frank Act.

However, the agencies continue to have supervisory and enforcement authority regarding unfair or deceptive acts or practices, which could include ones described in the repealed rules. The agencies may still find that statutory violations exist, even in the absence of a specific regulation governing the conduct, according to a joint press release from the agencies.

In addition, the OCCs existing guidance concerning unfair or deceptive acts or practices remains in effect.

If credit unions and other financial institutions engage in the unfair or deceptive practices described in these former credit practices rules, such conduct may violate the prohibition against unfair or deceptive practices in Section 5 of the Federal Trade Commission Act, as well as several sections of the Dodd-Frank Act.

Use the resource link below to access the full text of the guidance.

CUs part of CFPB's eClosings pilot program

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WASHINGTON (8/22/14)--Two credit unions have been selected as participants for the Consumer Financial Protection Bureau's (CFPB) mortgage eClosing pilot program.

BECU, Tukwila, Wash., with $12.6 billion in assets, and Mountain America CU, West Jordan, Utah, with $3.8 billion in assets, will participate in the three-month program, slated to begin later this year.

The program is designed to explore how the increased use of technology during the mortgage closing process could affect consumer understanding and engagement.

"We believe that eClosings have the potential to create a better process for everyone involved. This eClosing pilot project will provide valuable insight as we work to improve the closing experience for consumers," said CFPB Director Richard Cordray.

The pilot project is a follow-up to a report released in April by the CFPB that outlined areas of difficulty in the closing process, and offered a vision for how electronic closings could help mitigate some areas. The project will study ways eClosings can enable consumer understanding, make processes more efficient and incentivize consumer engagement.

In addition to the two credit unions, two banks, three mortgage companies and five technology vendors that provide eClosing services will participate.

According to the bureau, the eClosing pilot program is not part of a rulemaking process, but is designed to identify best practices in the marketplace.

Use the resource link below to access guidelines for the program.

CUNA urges FASB: leave CUs out of credit loss reporting proposal

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WASHINGTON (8/22/14)--The Credit Union National Association reiterated its "strongest opposition" to a Financial Accounting Standards Board (FASB) proposal involving credit losses in a letter sent to the board today. The letter, signed by CUNA interim President/CEO Bill Hampel, states that the proposed changes are likely to have a "significant detrimental" impact on a number of credit unions and their members.
 
FASB has proposed credit loss reporting changes that would utilize a single "expected loss" measurement for the recognition of credit losses, replacing the multiple existing impairment models in U.S. generally accepted accounting principles that primarily use an "incurred loss" approach.
 
The newest CUNA letter states that, during the height of the financial crisis, credit unions overfunded their provisions for loan and lease losses and maintained their allowance for loan and lead losses (ALLL) in surplus. This caused credit union earnings to be understated during the recession, and overstated more recently as credit unions work down the overfunded allowance amounts. 
 
Hampel expressed his concern that, to the extent the proposal requires higher levels of the ALLL, the distortions would be
Click to view larger image Click for larger view
exacerbated.
 
"This unwarranted increase to many credit unions' ALLLs would directly result in a further reduction in their retained earnings, which are already understated under current accounting standards," Hampel wrote. "A decrease in earnings can lead to a reduced capital ratio, which could trigger prompt corrective action (PCA) implications for numerous credit unions that currently do not have PCA concerns."
 
The letter goes on to say that the proposal, if adopted, could further be compounded by the National Credit Union Administration's risk-based capital proposal, which increase minimum risk-based capital ratios for federally insured credit unions with over $50 million in assets. The NCUA is currently revising the rule based on feedback, making its impact unclear.
 
CUNA stressed in the letter, its official comment letter sent in May and in meetings with FASB,  that most credit unions, as not-for-profit, member-owned cooperatives, may only build net worth through retained earnings under the Federal Credit Act. This makes it more difficult for them to build capital.
 
The letter comes on the heels of an Aug. 15  New York Times  article that indicates FASB could adopt the proposal soon.
 
When available, the letter will be posted on CUNA's comment letters page. Use the resource link to access the page.

Bank of America agrees to record $17B settlement in MBS case

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WASHINGTON (8/21/14)--Bank of America has reached a record $17 billion settlement with federal and state authorities, according to an Associated Press report citing officials it says are directly familiar with the matter. The settlement comes from Bank of America's role in selling mortgage-backed securities leading up to the financial crisis in 2008.

The Bank of America settlement was negotiated through a joint federal and state working group with the U.S. Justice Department and other federal and state authorities, according to the Associated Press .

The BofA deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure, the article notes. It follows agreements in the last year with Citigroup for $7 billion and with JPMorgan Chase & Co. for $13 billion.

The Associated Press also reports that the deal requires Bank of America to acknowledge making serious misrepresentations about the quality of the residential mortgage-backed securities it issued, along with securities issued by Countrywide Financial and Merrill Lynch, entities which were acquired by the bank in 2008.

According to the report, $10 billion will be paid in cash and another $7 billion in consumer relief will be provided. An official announcement is expected to come later today.

Bank of America settled with the National Credit Union Administration in April 2013 over allegations that the mortgage-backed securities sold by Bank of America led to the failure of several credit unions. The NCUA suit was settled for $165 million.

Data breaches cost consumers average of $157: W. Va. league webinar

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PARKERSBURG, W.V. (8/21/14)--Nearly 40% of data breaches come from inadvertent misuse of data by employees, according to a cybersecurity webinar held Wednesday.

The webinar, held by the West Virginia Credit Union League and TraceSecurity, was designed to help credit unions be more aware of cyberattack threats and implement best practices when it comes to data security.

"The NCUA regional director has publicly stated that credit union information technology security will be a top priority during current credit union examination cycle," said Rich Schaffer, league senior vice president. "From our perspective, we want to ensure credit unions have available options when complying with examiner requests. The cost and effort required to prevent an attack is lower, and seems more manageable, than it is to react to one."

A Ponemon Institute study of data breaches showed that that average financial cost to victims of a data breach averages $157 per consumer, when the breach is a result of malicious criminal intent. For companies that are hit with such attacks, the average cost is $3.5 million.

"Outside of financial losses, you've got reputational losses. If you're hacked ... that can lead to loss of business, and other costs, such as reimbursement and legal fees, are there too," said Charles Lybrand, an information security analyst with TraceSecurity.

Lybrand recommended companies undergo a vulnerability assessment, which consists of a scan of addresses within a system, such as a phone, computer or printer, and look for vulnerabilities. The vulnerabilities are then reported.

A penetration test follows, with the vulnerability data used to go after system weaknesses, including passwords, system defaults and secure folders, all of which can contain sensitive information.

According to Lybrand, hackers can gain access to data by using a public IP address of a credit union and attacking that IP address. Other attacks are what is known as "social engineering" attacks. These attacks can be carried out via phone or e-mail, with the hacker posing as an IT staff member, a human resources staff member or CEO asking for system information, passwords or personal information.

Social engineering attacks can also be carried out in person, with the hacker visiting a location and getting physical access to an institution's servers or other equipment.

"Someone can come in acting like a new employee, or even dress as pest inspector, and get in," Lybrand said. "I've run into chief information officers and IT professionals who say that will never work, but I've dressed up as a pest inspector, gone into an institution dressed in a uniform and said, 'I'm here to look at the mouse problem.' Next thing I know I'm back in a server room."

TraceSecurity is a CUNA Strategic Services alliance provider. The webinar, titled "Protecting Your Credit Union Against Cyberattacks," will be posted on TraceSecurity's website within the next few days.

Use the resource link below for more information. And use the second resource to access a recent related News Now story, "What NCUA examiners look for on cybersecurity efforts: NCUA Report."

CUNA supports NCUA appraisal rule, seeks technical changes

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WASHINGTON (8/21/14)--The Credit Union National Association generally supports the National Credit Union Administration's proposed changes to appraisal requirements, according to a comment letter filed Tuesday.

The rule, which was proposed at the agency's June board meeting, would expand the current exemption in existing appraisal regulations to allow credit unions to refinance or modify a real estate-related loan in a declining housing market without having to obtain an additional appraisal.

CUNA first recommended changes to the NCUA's appraisal requirements in its 2013 regulatory review comment letter. The trade group's latest comment letter also offers additional suggestions for a few technical changes to the proposal.

"We request that NCUA's final rule clarify that the 'written estimate of market value,' required for exempt transactions, be satisfied by an estimated market value based on an automated valuation model," the letter reads. "This change would be consistent with the 2010 Federal Financial Institutions Examination Council's interagency appraisal and evaluation guidelines."

The NCUA's proposed rule would also eliminate a now duplicative requirement that federal credit unions make available, to any requesting member, a copy of the appraisal used in connection with that member's application for a loan secured by a first lien on a dwelling.

CUNA supports this part of the proposed rule as well, stating it will reduce regulatory burden for credit unions, a top priority for the association.

Use the resource link to access the letter.

Auto finance co. fined $2.75M for 'distorting consumer credit records'

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WASHINGTON (8/21/14)--An auto finance company has been accused of providing inaccurate information to credit reporting agencies, which the Consumer Financial Protection Bureau (CFPB) believes has caused distorted credit records.

On Wednesday, the CFPB announced a $2.75 million fine against Texas-based First Investors Financial Service Group, which the bureau alleges passed along information that could have potentially harmed tens of thousands of consumers.

"Consumers are harmed when companies furnish inaccurate information to credit reporting agencies. Incorrect reports on file at credit reporting agencies--such as Experian, TransUnion and Equifax--distort the true picture of how consumers have performed on their loans," said CFPB Director Richard Cordray. "An error could make a big difference in whether someone receives a loan, qualifies for a low interest rate, or even gets offered a job. It has the potential to disqualify people for rental housing or raise their premiums for auto insurance."   

A CFPB investigation found that for three years First Investors used a flawed computer system that provided incorrect information to credit reporting agencies. When the company discovered this problem, in April 2011, it notified the vendor that provided the system, but it did not replace the system or take steps to correct the inaccurate information. In fact, First Investors continued to use the flawed program.

According to the CFPB, the company frequently understated how much consumers were paying toward their debt, overstated past due amounts, misreported delinquency dates and inflated the number of delinquent payments.

"In one case, it reported that a consumer was delinquent 11 times when in fact that consumer had only been delinquent twice," Cordray said, adding that many customers of First Investors were subprime borrowers to begin with, a population the company strategically targeted. "When First Investors knowingly sent the wrong information to the credit reporting agencies, it put consumers with credit profiles that were already impaired into an even more perilous position."

The CFPB has ordered First Investors to pay a $2.75 million fine, as well as identify and fix the affected consumer credit profiles, which includes giving free copies of credit reports to affected consumers. First Investors is also required to establish consumer safeguards.

Sen. Merkley talks to CUs about raising MBL cap, keeping CU tax status

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TIGARD, Ore. (8/21/14)--Sen. Jeff Merkley (D-Ore.) met with members of the Northwest Credit Union Association (NWCUA) last week, sharing several items on his legislative agenda that would benefit credit unions.

His agenda included pushing for an increase in member business lending cap and maintaining credit unions' tax status, according to the NWCUA's Anthem .

Merkley expressed his support Sen. Mark Udall's (D-Colo.) bill that would raise the member business lending cap to 27.5% of assets, up from the current 12.25% cap.
Click to view larger image Sen. Jeff Merkley (D-Ore.) meets with Oregon credit union leaders at the Northwest Credit Union Association's office in Tigard, Ore. (Northwest Credit Union Association Photo)

In terms of regulatory reform, Merkley said he realized that some of the proposals intended to appropriately regulate large banks that contributed to the 2008 financial collapse would "cast a shadow" on community credit unions.

"[It's a] continuing balancing act to authentically take on practices that may be unethical, without applying a regulatory burden where it doesn't belong," he said.

He also proclaimed himself a supporter of preserving the credit union tax status, and urged those in attendance, as well as the greater credit union community, to keep spreading the word about why the status is beneficial to the American consumer.

Merkley, a member of the Senate Appropriations and the Banking, Housing and Urban Affairs Committees, is one of 27 senators to write to the National Credit Union Administration expressing reservations about the agency's risk-based capital proposal.

Echoing the concerns of many credit unions in his state, Merkley said credit unions' current regulations in regard to holding capital served them well, but any changes might require credit unions to raise more capital, which they have a limited ability to do ( News Now June 26).

Merkley also said housing finance reform and cutting college costs would be priorities for him once the Senate is back in session.

Use the resource link for more information.

Video of July NCUA board meeting posted online

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ALEXANDRIA, Va. (8/21/14)--A video recording of the National Credit Union Administration's July 31 open board meeting has been posted to the agency's website.

The meeting agenda included:
  • A proposed rule to provide federal credit unions with regulatory relief and greater flexibility managing fixed assets by removing the waiver requirement for credit unions to exceed the 5% limit on fixed-asset investments;

  • Reprogramming of NCUA's 2014 operating budget with a net reduction in overall expenditures of $1.1 million;

  • A request to expand the community charter of Call FCU, with $360 million in assets, to serve the entire Richmond, Va., metropolitan statistical area;

  • A briefing on the performance of the corporate credit union legacy assets and the NCUA Guaranteed Notes program, which concluded that, at present, future Corporate Stabilization Fund assessments are unlikely; and

  • A briefing on the performance of the National Credit Union Share Insurance Fund, which showed positive second-quarter results.
The NCUA website also features video recordings of other past board meetings. Each video remains on the site for one year.

Use the resource link below to access the videos.

Rep. Ryan backs cut in mortgage-debt tax deduction

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WASHINGTON (8/21/14)--Rep. Paul Ryan (R-Wis.) Wednesday said he would back a plan to reduce the available mortgage-interest tax deduction to apply only up to $500,000 in mortgage debt, down from the current $1 million in debt. He made his comment during a wide-ranging interview with Mark Halperin and John Heilemann on Bloomberg Television's "Market Makers." 

Ryan said the tax break should be targeted to the country's middle class and not be something for higher-income earners.

Deductions for mortgage interest have been part of the tax code since its inception in 1913, and it is considered hugely popular with taxpayers. In fact, national opinion polls often indicate that between 75% and 90% of Americans support the tax provision.

The proposal to reduce the cap was introduced by House Ways and Means Committee Chair Dave Camp (R-Mich.), who in March announced plans to retire from the U.S. Congress at the end of his current term. Ryan is considered by many to be the next chairman of Ways and Means, the powerful tax-policy writing panel.

Ryan, during the interview, rejected an idea of similarly capping charitable deductions by the wealthy. He was quoted as saying that is "the one area" where there should not be a cap.

What NCUA examiners look for on cybersecurity efforts: NCUA Report

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ALEXANDRIA, Va. (8/20/14)--With National Credit Union Administration examiners trying to identify and assess cybersecurity risks, the agency has released a list of cybersecurity areas examiners look at. The information is featured in this month's The NCUA Report .

The assessment includes the following questions:
  • Does the credit union have a board-approved information security policy commensurate with its size and complexity that meets the NCUA requirements?

  • Has management recently performed and documented an information security risk assessment to identity threats, assess potential effects and are risk-remediation plans in place?

  • Is the network and critical components such as servers and computers running updated virus and malware protection software?

  • Does the credit union have a password policy that meets or exceeds industry standards? According to the NCUA, this means passwords with at least eight alphanumeric and special characters; and

  • Is there a vendor management program, information security awareness training program, incident response and crisis management plan, and do they comply with NCUA regulations?
The article also recommends credit union management consider the possibility of cybersecurity insurance, which should cover costs associated with business interruptions, legal fees, public relations initiatives and hiring of additional staff or vendors.

A recent Ponemon Institute study cited by the agency estimates the average cost of a data breach is $3.5 million, which includes costs for investigations, notifications to members and reissuing credit and debit cards.

The NCUA Report also featured monthly commentary from Chair Debbie Matz. Her column listed several aspects of the agency's risk-based capital proposal that would likely be changed in response to feedback received through comment letters and the three Listening Sessions held during the summer.

She acknowledged that all risk weights in the proposal should be reviewed, and that the agency is considering lowering risk weights for investments, mortgages, member business loans, credit union service organizations and corporate credit unions.

"Examiners would have to undergo a rigorous process to convince their supervisory examiner, regional director and ultimately the NCUA board, if they believe a credit union needs to hold more capital than required by regulation," she wrote.

She also said the rule's implementation period will go "well beyond" the originally proposed 18 months, and that it would be enough time to give the NCUA time to update the call report system, train examiners on the revised rule and allow affected credit unions time to adjust their balance sheets.

This month's NCUA Report also contains:
  • A summary of the agency's fixed-assets proposal;
  • An update on the Office of Small Credit Union Initiatives FAQ+ search engine;
  • A summary of the $1.1 million in mid-year operating budget reductions;
  • A report on economic growth and rising interest rates;
  • The basics of media relations for credit union management; and
  • Information about the NCUA's video series on preventing fraud.
Use the resource link below to access the full issue.

FSR: Unverified complaint narratives could work against consumers

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WASHINGTON (8/20/14)--The Consumer Financial Protection Bureau's (CFPB) plan to allow consumer narratives in its complaint portal could likely work against consumers, as well as financial institutions, by spreading inaccurate information, according to the Financial Services Roundtable (FSR).

The FSR, which represents large integrated financial services companies, launched a campaign featuring social media and multimedia advertisements highlighting problems with the bureau's proposal.

The CFPB has accepted consumer complaints since it opened in 2011 and, to date, has handled more than 400,000 complaints. It announced the proposal to expand its consumer complaint database to include the consumer's narrative account of their experience and the problem they would like to see resolved.

The bureau said this would give context to complaints, spotlight specific trends and help consumers make more informed decisions. Those against the proposal worry it would spotlight inaccurate information without giving a named financial institution the chance to respond.

"The CFPB's plan will feature only one side of the story, and such one-sided accounts will not advance the CFPB's mission of better informing and helping consumers," said FSR President/CEO Tim Pawlenty.

The FSR cites the CFPB's own Consumer Response Report from 2013 that found, among other things, that almost 70% of all complaints filed were closed with a simple comment or clarification to the consumer.

According to the FSR, there are many unanswered questions in the CFPB's proposal, including how the CFPB plans to protect the identities of contributing consumers from the Freedom of Information Act and other public record requests and how the bureau will verify that a consumer is posting under a correct identity with an accurate account of what transpired.

On Aug. 6, the CFPB blog posted an item about universities in the Big Ten Conference that did not disclose partner contracts with financial partners for products. The report named four credit unions as failing to disclose details of the school and the financial institution it partnered with, but had to remove two credit unions from the article after it was found there was no such agreement in place.

The Credit Union National Association's Deputy General Counsel Mary Dunn took to the blog's comments to express concern that the blog entry, particularly the headline, made the impression that nondisclosure of a partnership meant these institutions were hiding information from consumers, when in fact many such disclosures are public, in accordance with state law or practices.

CUNA maintains that the other two credit unions should not have been named because there is no legal or regulatory requirement for such disclosures.

"There is no current regulatory requirement to publicly disclose a financial institution's contract with a college or university. Even so, some credit unions voluntarily choose to disclose these agreements, including two credit unions that were listed in your blog," Dunn wrote.

CUNA is currently pursuing issues related to consumer narratives being added to the CFPB complaint database with its consumer protection subcommittee.

NCUA audio from Chicago Listening Session available online

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ALEXANDRIA, Va. (8/20/14)--The National Credit Union Administration has posted an audio recording of its July 10 Listening Session in Chicago to the agency's YouTube page.

The two-hour, 54-minute recording carries the entirety of the agency's second of three sessions held this summer.

More than 160 people attended the Chicago discussion, where the primary topic was the agency's proposed risk-based capital (RBC) rule. NCUA Chair Debbie Matz and board member Michael Fryzel, a Chicago native, were in attendance.

The NCUA also held Listening Sessions on June 26 in Los Angeles and on July 17 in Alexandria, Va.

Matz noted in this month's The NCUA Report that the agency received more than 2,500 comments on its RBC proposal, from comment letters and attendees at the Listening Sessions, which she called "an unprecedented volume of input."

The Credit Union National Association previously posted a recording of the Chicago session to its website ( News Now Aug. 8). The recording was provided by the Illinois Credit Union League.

CUNA also has made available a full audio recording of the NCUA's first Listening Session held in Los Angeles, as well as key audio clips of that session.

Use the resource links below to access the recordings.

Circuit court reinstates opinion allowing NCUA MBS cases to proceed

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WASHINGTON (8/20/14)--In a decision immediately called "good news for credit unions" by the National Credit Union Administration Tuesday, the U.S. Court of Appeals for the 10th Circuit reinstated its ruling that allowed the NCUA to sue several banks for alleged deceptive practices when selling mortgage-backed securities.
 
The NCUA has brought suit against certain banks while serving as the liquidating agent of several failed corporate credit unions, alleging that deceptive information was used to form, market and sell the mortgage-backed securities.
 
Banks have claimed in the case that the NCUA missed a three-year window to file suit. The Denver-based 10th Circuit Court of Appeals, however, sided with the federal credit union regulator, citing a past provision that extends the deadline for a government regulatory agency to sue on behalf of a failed financial institution.
 
But on June 16 the U.S. Supreme Court vacated and remanded for further consideration that 10th Circuit ruling.
 
The directive from the Supreme Court to the circuit court did not necessarily indicate a need for the 10th Circuit to change its opinion. Rather it instructed the lower court to look at its decision in light of a new Supreme Court ruling, established in an environmental case, which defined the difference between statutes of limitation and statutes of repose, and whether various forms of "pausing" the period of time set forth by statute apply to statutes of repose.
 
The Tuesday decision affects a total of six cases, allowing the NCUA to move forward.  There are a total of 13 related cases that are pending. One case is awaiting an appeal at the Ninth Circuit Court of Appeals on this same issue. Most of the others are in the discovery phase.

The bank defendants in the 10th Circuit case now will have to evaluate their next move, which could involve further appellate review, settlement, or discovery and further litigation and ultimately trial in the district court.
 
The NCUA has settled similar suits with J.P. Morgan, Bank of America, Citigroup, Deutsche Bank Securities and HSBC, resulting in more than $1.75 billion in settlements lost by the corporate credit union investments ( News Now June 17). According to the NCUA, the recovered funds are being set against any future corporate stabilization assessments on credit unions.

Guidance on mortgage servicing transfers includes do's, don'ts

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WASHINGTON (8/20/14)--New guidance issued by the Consumer Financial Protection Bureau (CFPB) illustrates things the bureau's examiners will look for loan servicing responsibilities are transferred. The CFPB's new mortgage servicing rules took effect Jan. 10 and are intended to protect borrowers from runarounds by loan servicers.

The guidance, issued by the bureau Tuesday, comes with several months of examinations under the new rules and highlights policies that are likely to get a financial institution flagged, as well as policies that meet the rule's requirements.

The new rule requires servicers to maintain accurate records, promptly credit payments, correct errors on request and maintain policies and procedures to facilitate handing over information when a servicer transfers a loan to a new company.

The CFPB currently has examination authority for financial institutions with more than $10 billion in assets. While that currently means only a few credit unions fall under the bureau's examination supervision, the new guidance is important for credit unions of all sizes, said Colleen Kelly, senior assistant general counsel for regulatory affairs for the Credit Union National Association.

"This guidance provides helpful compliance information for all credit unions that transfer mortgage servicing," she said.

The guidance lays out several specific scenarios in which CFPB examiners concluded that the servicers had engaged in unfair practices, including:
  • Failing to properly identify loans that were trial or permanent modifications with the prior servicer at time of transfer;

  • Failing to honor trial or permanent modification offers unless the servicer could independently confirm that the prior servicer properly offered a modification or that the offered modification met investor criteria; and

  • Borrowers subsequently receiving a new modification with inferior terms, and in one case, the servicer conducted a foreclosure sale.
According to the CFPB, the servicers in the scenarios above were directed "to adopt policies and procedures to prevent continued unfair practices in this area and to remediate harmed consumers."

CFPB examiners consider transferors flagging all loans with pending loss mitigation applications, as well as approved loss mitigation plans (including trial modification plans) as having met the new rule's requirements.

Transferees requiring the transferor servicer to supply a detailed list of loans with pending loss mitigation applications, as well as approved loss mitigation plans will also be considered at having met the new requirements.

Use the resource link below to access the full bulletin.

Webinars scheduled for TILA/RESPA integration

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WASHINGTON (8/19/14)--With less than a year remaining until the new Truth in Lending Act/Real Estate Settlement Procedures Act (TILA/RESPA) rule goes into effect, several organizations are holding educational workshops to provide information about the rule and its implementation. The rule, which has a mandatory compliance date of Aug. 1, 2015, consolidates existing mortgage disclosures required under TILA/RESPA into two integrated forms.

CUNA Mutual Group will host a free webinar at noon (ET) today, the first in a series, designed to help credit unions understand the new rule, its impacts and how to comply.

Compliance experts will explain how the new rule may require changes to the mortgage lending process, as well as require system changes to complete the new required disclosures for mortgages and closed-end home equity lending.

"Overall, TILA/RESPA will directly affect the people, processes and technology credit unions use to support their lending operations because the regulations require loan disclosures to change dynamically to reflect each borrower's unique loan features," said Jon Bundy, regulatory compliance manager for CUNA Mutual Group. "Specifically, the rule will impact credit unions' relationships with their system providers, and most importantly, their members and their own staff."

The Consumer Financial Protection Bureau (CFPB) will host a webinar, the bureau's second in a continuing series, Aug. 26. This event is meant to address specific questions related to rule interpretation and implementation challenges that have been raised to the bureau.

Questions have been submitted by creditors, mortgage brokers, settlement agents, software developers and other stakeholders. According to the CFPB, future sessions will continue to address specific questions and challenges.

The CFPB's previous webinar was June 17, and the bureau will continue to host similar sessions throughout the implementation process. A recording of the June 17 webinar is available on the bureau's TILA/RESPA Integrated Disclosure rule homepage (see resource link).

The Aug. 26 webinar is scheduled to begin at 2 p.m. (ET).

The Credit Union National Association continues to meet frequently with the CFPB concerning rule implementation resources and efforts, and also to reiterate ongoing concerns with TILA/RESPA implementation requirements and associated regulatory burdens for credit unions.

CUNA is also working on a collection of resources designed to guide credit union compliance with the new rules, which should be online in the coming weeks.

Use the resource links below for more information.

Ginnie Mae launches MBS pilot for FIs in 2 states

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WASHINGTON (9/19/14)--The Federal Housing Finance Agency (FHFA) has given approval to start a pilot program that would allow Federal Home Loan Bank (FHLB) member institutions to originate and sell government backed loans into Ginnie Mae mortgage-backed securities (MBS), according to a report in American Banker .

The program, first proposed in September 2013, will initially be available to eligible participating members of the FHLB Chicago in Illinois and Wisconsin, with a wider rollout expected to follow ( News Now Sept. 9).

The new product, called Mortgage Partnership Finance (MPF) Government MBS, aims to provide mortgage lenders, particularly smaller institutions that currently lack direct access to the secondary mortgage market, a new option when creating mortgage products for home-buying consumers.

According to Ginnie Mae, "lenders will be able to choose whether to retain or release servicing on the government loans they originate and they will have a reliable channel for selling their loans that removes hurdles low-volume originators face in today's competitive market."

With the new authority granted by the FHFA, the Chicago FHLB will now be able to purchase government-insured loans, hold these loans on-balance sheet and then pool them into securities guaranteed by Ginnie Mae which may then be sold to investors.

Ginnie Mae currently guarantees more than $1.4 trillion of mortgage-backed securities.

Alaska primary will name Nov. opponent for Sen. Begich

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WASHINGTON (8/19/14)--Today's Republican primary in Alaska will see three candidates vie for a spot in November's general election; Mead Treadwell, current lieutenant governor; Dan Sullivan, former state attorney general; and Joe Miller, a lawyer and former U.S. Magistrate judge.

The race is being watched closely by credit unions because the winner will run against incumbent Sen. Mark Begich (D). Begich was first elected in 2008 and is a longtime credit union supporter.

In July 2013 he wrote to the Senate Finance Committee supporting credit unions' tax status, saying it "should be retained in any tax reform effort, to ensure continued access to affordable credit for consumers, homebuyers and small businesses alike, all of which contribute substantially to economic growth."

Speaking at this year's Credit Union National Association Governmental Affairs Conference, Begich pledged his support for a bill that would raise the member business lending (MBL) cap from its current 12.25% of assets. He is also one of 32 senators to write to the National Credit Union Administration with concerns about its risk-based capital proposal.

Trey Hawkins, vice president of political affairs for CUNA, called Begich "one of the strongest credit union supporters in the Senate."

The Credit Union Legislative Action Council (CULAC), CUNA's federal PAC, has participated in more than 400 U.S. House and Senate races this year. CULAC has raised more than $3.5 million this election cycle, and its contributions are split almost evenly between the two major parties, with 50.01% going to Democrats, 49.85% going to Republicans and 0.14% going to independent candidates.

Along with the Begich race, a number of November races feature credit union-supported candidates in close races, including incumbents Sen. Mark Udall (D-Colo.) and Sen. Mitch McConnell (R-Ky.).

Udall has advocated for credit unions in many areas, including preserving their tax status, increasing the MBL cap, and weighing in with concerns regarding the federal risk-based capital proposal. McConnell was backed in his May primary by the Kentucky Credit Union League and will be throughout the campaign.

Another closely watched race will be in California's 31st District. The race features Democratic candidate Pete Aguilar, a former vice president of Arrowhead CU, based in San Bernardino, Calif. with $820 million in assets.

CULAC contributed a $197,189.03 independent expenditure for direct mail and digital advertising for Aguilar, both in English and Spanish, in addition to a $10,000 contribution to Aguilar's campaign.

'Patent troll' study OK'd by OMB

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WASHINGTON (8/18/14)--The White House's Office of Management and Budget approved Friday the Federal Trade Commission request to launch a two-part study on "patent trolls."
 
The FTC study will request information from patent assertion entities, manufacturers and others. It will focus both on reviewing general patent troll activity and comparing trolls' enforcement efforts to that of manufacturers and other nonpracticing entities in the wireless chipset industry ( Law360 Aug. 15).
 
The investigation will look at how patent assertion entities organize their corporate legal structure, what types of patents they hold, and how they acquire patents and generate revenue. It also will examine how the companies engage in licensing demands and litigation, what patent assertion costs the companies face and how much money they earn from their activities.
 
The Credit Union National Association has been a longtime advocate of meaningful patent reform. In July, the trade association submitted a joint letter supporting the Targeting Rogue and Opaque Letters Act that passed the House subcommittee on commerce, manufacturing and trade ( News Now July 14).
 
"Financial institutions of every size have been targeted by Patent Assertion Entities, often referred to as patent trolls, who in most cases assert patents of dubious quality through vaguely worded demand letters or intentionally vague complaints," the letter reads. "Indeed, patent trolls' recent focus on credit unions and community banks threatens to pose additional, unwarranted costs on lenders and the communities they serve."

Pa. CUs: RBC rule could stop growth for capital buffer

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PHILADELPHIA (8/18/14)--Credit unions could be facing a "huge overhaul" with the National Credit Union Administration's risk-based capital (RBC) proposal, according to a report in the Philadelphia Business Journal .

Brian Schmitt, chief financial officer, American Heritage FCU, Philadelphia, with $1.4 billion in assets, said he recommends three years to comply, not the proposed 18 months, and that his credit union's growth would be stalled.

"We need a longer period of time to react to a rule than banks," he told the Journal . "For us, the fact that our excess capital would dwindle from $35 million to $300,000 means we would have to stop our growth until we could build up our capital buffer sufficient to go ahead and continue to expand."

Schmitt went on to say that the rule would require American Heritage FCU to keep 10.5% of risk-based assets in capital in reserve at all times. "We're currently under rules where it's 7% so even though we didn't cause tremendous losses to the nation ... they are dramatically increasing the reserve," he added.

Michael Wishnow, senior vice president of communications and public relations, Pennsylvania Credit Union Association, said that the RBC proposal is stricter than similar proposals for banks, according to the Journal .

"If you look back through the recession, credit unions fared pretty well relative to the rest of the financial sector," he said. "We don't really need quite so stringent risk-based capital requirement, particularly those that weigh heavily on certain loan classifications. Building capital in the credit union environment is a much more difficult and slower process."

At a recent Listening Session held by the NCUA in Alexandria, Va., NCUA board member Rick Metsger said that under the current proposal, only two credit unions are considered undercapitalized.

"I don't think anybody here believes that out of all of the credit unions in the country, only two are struggling with capital," Metsger said. "Obviously the current rule isn't giving us a very good picture of what the capital requirement should be."

Pennsylvania Congressional lawmakers have been among the 27 senators and 332 representatives to question the proposal. Sen. Patrick Toomey (R) and Rep. Scott Perry (R) both wrote in with concerns about the proposed implementation period, risk weights and justification for the new rule.

The Credit Union National Association has advocated that the NCUA withdraw the proposal and instead pursue RBC standards as part of a multifaceted capital reform strategy. If the rule stays, CUNA has expressed concerns with the proposal's interest rate risk scheme, risk weights and implementation period.

NCUA Chair Debbie Matz has said the agency will consider the more than 2,000 comment letters on the proposal. She said the implementation period will be changed, and the risk weights will likely be adjusted as well.

RBC goal to match capital to risk: Matz to Bridenstine

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ALEXANDRIA, Va. (8/18/14)--In response to an Aug. 1 letter from Rep. Jim Bridenstine (R-Okla.), National Credit Union Administration Chair Debbie Matz noted the goal of the agency's risk-based capital (RBC) proposal.
 
"With the proposed rule, our goal is to ensure that those federally insured credit unions that have a higher appetite for risk hold enough capital to match that risk," Matz wrote in her Aug. 14 response. "In other words, the proposal seeks to scale the capital requirement based on an individual credit union's balance sheet risks."
 
Bridenstine's letter read, "NCUA examiners already have the ability to mitigate concentration risk through other regulatory actions, it appears that the inclusion of concentration risk as a part of the calculation of capital rules could be redundant and place credit unions at a competitive disadvantage relative to other insured depository institutions."
 
Matz also identified the five candidates for revised risk weights--in part due to input from comment letters and the three Listening Sessions.
 
"They include the risk weights for investments, mortgages, and member business loans, as well as credit union service organizations and corporates.
 
"The final rule will make appropriate changes in each of these areas to ensure that credit unions continue to make safe investments and provide sound loans to homeowners, member small businesses, family farms, and consumers, including those in Oklahoma," Matz wrote.

The Credit Union National Association has advocated that the NCUA withdraw the proposal and instead pursue RBC standards as part of a multifaceted capital reform strategy. CUNA has expressed concerns with the proposal's interest rate risk scheme, risk weights and implementation period should the rule prevail.

FHFA seeks comments on next strategic plan

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WASHINGTON (8/18/14)--The Federal Housing Finance Agency (FHFA) is requesting input for its strategic plan for the fiscal year 2015-2019. The plan outlines the agency's priorities as regulator for the Federal Home Loan Bank System, as well as regulator and conservator of government-sponsored enterprises Fannie Mae and Freddie Mac.

The plan sets forth three goals for the agency: to ensure safe and sound regulated entities, ensure liquidity stability and access in housing finance and to manage the ongoing conservatorships of Fannie Mae and Freddie Mac.

To ensure the liquidity, stability and access in housing finance, the FHFA's strategies include:
  •  
  • Work to ensure ongoing liquidity in the marketplace for new mortgages and mortgage refinancings and continue the critical tasks of foreclosure prevention and loss mitigation;

  • Monitor access to mortgage credit by assessing trends in the availability of mortgage credit to both single-family and multifamily borrowers;

  • Support multifamily housing needs with a focus on the affordable and underserved segments of the market. The agency expects the enterprises to maintain a multifamily liquidity presence in all geographic areas and through all market cycles with a focus on the affordable segment of the market;

  • Collaborate with other federal regulators to identify and address foreign and domestic risks, to coordinate supervision efforts consistent with each agency's respective examination and supervision responsibilities, to complete inter-agency rulemakings and to pursue efforts that streamline and increase efficiency of regulatory activities; and

  • Monitor housing markets and conduct independent studies and reports that analyze various factors impacting access to housing finance for qualified borrowers and financial institutions. The information resulting from this analysis will contribute to FHFA's ability to ensure liquidity, stability and access in the housing finance markets.

Comments must be received by Sept. 15.

Use the resource link to access the full report, and for more information on how to comment.

CFPB sets 2015 dollar amounts for Reg Z provisions

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WASHINGTON (8/18/14)--The Consumer Financial Protection Bureau (CFPB) has issued a final rule regarding Regulation Z, which implements the Truth in Lending Act (TILA). The final rule reviews the dollar amounts for several provisions in the regulation, as required annually, based on the annual percentage change reflected in the Consumer Price Index in effect June 1.

The amounts for 2015 are:

Effective Jan. 1, 2015, a covered transaction is not a qualified mortgage unless the transaction's total points and fees do not exceed:

  • Penalty fees safe harbor: $27 for a first late payment and $38 for each subsequent violation within the following six months;

  • Home Ownership and Equity Protection Act (HOEPA) loans: $20,391, effective Jan. 1, 2015;

  • Adjusted statutory fee trigger for HOPEA loans: $1,020, also effective Jan. 1, 2015;

The minimum interest charge disclosure thresholds will remain unchanged in 2015.

The final rule reviews the dollar amounts for provisions implementing amendments to TILA under the Credit Card Accountability Responsibility and Disclosure Act of 2009, the Home Ownership and Equity Protection Act of 1994 and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

  • 3% of the total loan amount for a loan greater than or equal to $101,953;
  • $3,059 for a loan amount greater than or equal to $61,172 but less than $101,953;
  • 5% of the total loan amount for a loan greater than or equal to $20,391 but less than $61,172;
  • $1,020 for a loan amount greater than or equal to $12,744 but less than $20,391; and
  • 8% of the total loan amount for a loan amount less than $12,744.

Futures trading group offers fraud-recovery tips

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WASHINGTON (8/18/14)--Fraud can target consumers and financial institutions alike, according to the U.S. Commodity Futures Trading Commission (CTFC), which recently issued tips for victims on mitigating damage and preventing a reoccurrence.

As the federal agency that regulates commodity futures, options and trading markets, the CTFC's mission includes addressing fraud and other manipulative practices.

The commission advised monitoring financial information by reviewing any asset or income disclosures reported that included the misinformation for loans and other mechanisms.

The CTFC reports that consumers who have been victims of fraud before can become targets, because fraudsters often share details about people they have successfully targeted or approached.

In addition, fraud victims are vulnerable to "recovery fraud," when fraudsters contact people who already lost money and claim to be law enforcement officers or lawyers, advising victims that they can help recover lost money.

Placing an initial fraud alert on credit reports will reduce the risk that an identity thief will open accounts using personal stolen personal information. Identity theft victims can place an initial 90-day fraud alert by contacting one of the three credit rating agencies Experian, Transunion or Equifax. That agency must, in turn, contact the other two agencies on the victim's behalf.

Use the resource link below for more information.

Big data's risks, rewards for consumers: FTC webinar

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WASHINGTON (8/18/14)--An exploration of "big data" and how it can affect financial institutions and consumers, particularly low-income and underserved consumers, will be the topic of a Federal Trade Commission (FTC) workshop Sept. 15 in Washington, D.C.

With smartphones, social networks, cloud computing and predictive analytic techniques enabling the collection, analysis, use and storage of data in a ways not possible a few years ago, there are benefits and drawbacks.

New insights into medicine, education, and transportation, improved product offerings and more effectively tailored advertisements can be offset by concerns about whether big data may be used to categorize consumers in ways that may affect them unfairly, or even unlawfully.

According to the FTC, financial institutions, as well as retailers and other service providers, use big data to offer discounts to certain customers, tailor advertising for financial products or assess credit risks of certain populations.

The workshop, which will consists of academics, business and industry representatives and consumer advocates will address the following issues:
  • How are organizations using big data to categorize consumers?

  • What benefits do consumers gain from these practices? Do these practices raise consumer protection concerns?

  • What benefits do organizations gain from these practices? What are the social and economic impacts, both positive and negative, from the use of big data to categorize consumers?

  • How do existing laws apply to such practices? Are there gaps in the legal framework?

  • Are companies appropriately assessing the impact of big data practices on low income and underserved populations? Should additional measures be considered?
The workshop is free and open to the public, but seating will be limited and attendance will be on a first-come, first-served basis starting at 8 a.m. (ET) Sept. 15. No pre-registration is required.

A live webcast of the workshop will also be available on the day of the event.

Use the resource link below for more information.

C-Plant FCU assumes IBEW Local 816 FCU shares after liquidation

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ALEXANDRIA, Va. (8/15/14)--C-Plant FCU, of Paducah, Ky. with $178 million in assets, has completed the purchase and assumption of IBEW Local 816 FCU, also of Paducah, the National Credit Union Administration announced Thursday.

IBEW Local 816, which had $6 million in assets, was liquidated by the NCUA July 10 after the agency determined the credit union was insolvent and had no prospect for restoring viable operations. Former IBEW 816 members are now members of C-Plant, and the credit union has purchased the majority of IBEW's loan portfolio.

Originally chartered in 1951, C-Plant is a federally insured, community-chartered credit union with 15,062 members. C-Plant serves people who live, work, worship or attend school in Ballard, Graves, Livingston or McCracken counties in Kentucky.

HMDA, fixed-assets proposal now loaded on PowerComment

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WASHINGTON (8/15/14)--The Credit Union National Association has released the first two comment calls with PowerComment, a new online regulatory advocacy resource.
 
This week, CUNA added proposals on the National Credit Union Administration's (NCUA) FCU ownership of fixed assets proposal and the Consumer Financial Protection Bureau's (CFPB) regulation of Home Mortgage Disclosure Act Regulation C.
 
CUNA also is soliciting comments on another five proposals currently listed on PowerComment. Credit unions have the ability to email regulators directly through PowerComment.
 
The site, which is exclusive to CUNA-affiliated credit unions, counts down the number of days left in the comment period, which regulator proposed the regulation, the regulation's publish date and the progress of any letters a credit union has started in the system.
 
PowerComment also includes a discussion board for each rule to give credit union staff the ability to talk about the rules with other credit unions.
 
Users can access PowerComment with their cuna.org username and password.
 
CUNA and California and Nevada Credit Union Leagues partnered to develop the tool, which helps users efficiently generate and submit letters to regulatory agencies, including the NCUA and CFPB.
 
In announcing the compliance tool at CUNA's Governmental Affairs Conference in February, CUNA General Counsel Eric Richard said, "We know credit unions feel like the onslaught of regulation in recent years is one of the greatest headwinds facing the future of our movement. And we know credit unions want to do what they can to help shape the regulations. PowerComment will help credit unions take action in the regulatory arena" (News Now Feb. 25).

Retailer required to refund $350K to scammed servicemembers

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WASHINGTON (8/15/14)--The Consumer Financial Protection Bureau (CFPB) has ordered an end to a company's tactics that are responsible for tricking thousands of servicemembers into paying fees and obtaining legal protections.

USA Discounters Ltd. will repay more than $350,000 in refunds and an additional $50,000 civil penalty for what CFPB Director Richard Cordray called a "scam that was designed to exploit unsuspecting servicemembers."

USA Discounters, based in Norfolk, Va., operates a chain of retail stores selling furniture, electronics, bedding and appliances. Most of the company's stores are located within a few miles of military bases, and USA Discounters uses standardized contracts tailored to members of the U.S. armed forces when dealing with active-duty servicemembers.

Active-duty servicemembers had to agree in a contract with USA Discounters to pay a $5 fee for a company called SCRA Specialists LLC to be represent their rights under the Servicemembers Civil Relief Act (SCRA).

The SCRA provides certain legal protections to active-duty servicemembers, including delaying debt collection lawsuits filed against a servicemember if the court finds that the servicemember's military duty requirements hinder his or her ability to defend himself or herself.

USA Discounters portrayed SCRA Specialists as an independent representative that would perform services characterized as a benefit to servicemembers. Instead, SCRA Specialists helped USA Discounters sue servicemembers and did not perform many of the services that were promised.

The retailer also misrepresented SCRA Specialists as an independent company working on servicemembers' behalf, when in fact SCRA Specialists' sole source of revenue was USA Discounters' customers. USA Discounters gave $4.50 of each $5 fee to SCRA Specialists. The fee was charged in more than 70,000 contracts and generated more than $350,000 since 2009.

According to a report from the investigative journalism website ProPublica, USA Discounters has filed 13,470 lawsuits against servicemembers since 2006.

The CFPB's enforcement action requires the retailer to end its marketing of such contracts to servicemembers and stop charging SCRA fees, in addition to the $350,000 in refunds and $50,000 penalty.

Use the resource links below for more information.

Call report focus of new CUNA survey

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WASHINGTON (8/15/14)--The Credit Union National Association has sent a survey to credit union officials asking for opinion on the National Credit Union Administration's 5300 Call Reports. The survey aims to gather information on credit unions' experiences with the call reports and completing and submitting the required data.

The survey was developed by CUNA interim Chief Economist Mike Schenk, and asks respondents to answer on a five-point scale how much they agree or disagree with 21 statements. The statements involve topics from the ease of submission to what changes could reduce regulatory burden. 

CUNA interim President/CEO Bill Hampel said in the e-mail to credit unions that the survey will "enable us to better identify the issues and challenges our nation's credit unions may be facing with respect to the Call Report requirements, and how CUNA can best help address credit unions' needs in this area."

The survey, which should take about five minutes to complete, will be analyzed by CUNA staff confidentially, with only the combined results being reported to CUNA.

Use the resource link to access the survey.

Matz to Ohio's Stivers: Risk weights will be refined

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ALEXANDRIA, Va. (8/15/14)--National Credit Union Administration Chair Debbie Matz responded to a letter from Rep. Steve Stivers (R-Ohio) Thursday regarding the agency's risk-based capital (RBC) proposal. Stivers, a member of the House Financial Services Committee, wrote to Matz Aug. 8 questioning the proposal's risk weights, effect on credit unions and the justification for the change.

The Credit Union National Association raised a number of concerns about the risk weights in its comment letter and in follow-up meetings with the NCUA.  Matz has previously pledged that the proposed risk weights would be adjusted in the final rule, and pledged in her letter to Stivers that the agency will "continue to remain mindful" of the trade-offs between the benefits and impacts of the regulation.

According to the NCUA, 2,200 credit unions would be subject to the new rule. Of those 2,200, Matz said half would see an improvement in their capital levels relative to their risks, and would not be required to raise additional capital in order to reduce risk.

"NCUA estimates that under the proposed rule the 201 credit unions downgraded as a result of the proposed rule would need to collectively hold an addition $633 million in capital (equivalent to 0.8% of their combined assets of $80 billion) to reach the well-capitalized level, but only if all 201 choose to maintain their balance sheets' current risk exposures," Matz wrote.

CUNA has raised concerns with NCUA that the impact of the proposal will be far more negative than the agency has indicated.

In providing justification for the new rule, Matz cited several factors, including new Basel capital accounting, the recommendations of the Government Accountability Office and the NCUA's Inspector General and the issuance of new RBC rules last year by the other federal regulators.

Use the resource link below for more information.

N.Y. fraud prosecution leads to $5.4M recovery for NCUA

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ALEXANDRIA, Va. (8/15/14)--A fraud prosecution by the U.S. Attorney's office of the Northern District of New York has resulted in the National Credit Union Administration receiving a restitution of almost $5.4 million.

The prosecution followed the 2011 liquidation of BCT FCU, Binghamton, N.Y., with $41.3 million in assets, which was purchased by $3.2 billion-asset Visions FCU, Endicott, N.Y.

The recovery followed the seizure of bank accounts and property of Laura Conarton and her son, Scott Lonzinski, both from Pennsylvania. The two provided false documents to BCT FCU to obtain approximately $14 million in loans, which BCT was required to write off.

"An alert NCUA examiner uncovered this fraud, and diligent work by the U.S. Attorney's office and NCUA's Asset Management and Assistance Center made this recovery possible," NCUA Chair Debbie Matz said. "None of BCT's former members suffered losses on their insured shares."

The two pleaded guilty in U.S. District Court in August 2012 to bank/financial institution fraud, and both are serving federal prison sentences.

U.S. Attorney Richard Hartunian said while much of the fraudulently obtained money cannot be recovered, his office seized a total of seven vehicles, three bank accounts, two real estate properties and cash.

The total recovery was $5,391,641, which will be returned to the National Credit Union Share Insurance Fund.

Five senators urge Commerce chief to improve patent system

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WASHINGTON (8/15/14)--Five senators have written to the U.S. Department of Commerce Patent and Trademark Office urging it to reduce abusive "patent troll" lawsuits. The letter, signed by Sens. Mark Warner (D-Va.), Jeff Merkley (D-Ore.), Mark Begich (D-Alaska), Martin Heinrich (D-N.M.) and Tom Udall (D-N.M.),  pushes for the office to improve the patent process by limiting low-quality, vague patents.
 
"While it is important that our legal system uphold the rights of intellectual property owners to enforce those rights in court, abusive litigation raises questions about whether too many illegitimate patents are being issued, whether vague patents are being stretched to cover ideas never envisioned by the patent holder and whether more can be done to protect our intellectual property regime from being misused," the senators wrote.
 
The lawmakers expressed appreciation for the Patent and Trademark office renewed focus on improving patent quality over the past year and encouraged the office to use its other tools to prevent low-quality patents.
 
The letter suggests the Patent and Trademark Office should:

The legislators say the overall goal is to address abusive legal actions, while "continuing to encourage innovation and technological advancement."
 
The Credit Union National Association has urged lawmakers to act to curb the patent system abuses, saying reforms are desperately needed. CUNA and the state credit union leagues have been active on every level urging lawmakers and the Obama administration address patent reform.
 
Use the resource link below to access the full letter.

  • Continually review and assess the operation examiner management system and performance metrics already in place to ensure they incentivize quality over quantity, and that examiner evaluation is not improperly incentivizing approval of low-quality patents;
     
  • Direct examiners how to ensure complete applications records so any ambiguity in the initial process is documented and resolved. Applications files should provide a clear history of clarified terms and original intent so an approved patent cannot later be twisted to cover future inventions;
     
  • Determine whether the functional claiming measures are addressing concerns that functional claiming provides a loophole from definite, precise claims and that not all functional claims are held to the relevant standards;
     
  • Expand the use of crowdsourcing and data analysis to identify types of patents and specific characteristics that are most likely to give rise to ambiguity and produce litigation risk. These areas should be specifically targeted for stronger measures; and
     
  • Ensure public access to information about patents and their histories, especially the publicly searchable information on the Patent and Trademark Office's website.

IRS warns of phony payment demands

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WASHINGTON (8/15/14)--Despite tax day being four months ago, taxpayers are still receiving fraudulent phone calls from individuals demanding money while claiming to represent the Internal Revenue Service (IRS).
 
The IRS reported that, based on the 90,000 complaints that the Treasury Inspector General for Tax Administration (TIGTA) has received, about 1,100 victims have lost $5 million to scammers.
 
"There are clear warning signs about these scams, which continue at high levels throughout the nation," IRS Commissioner John Koskinen said. "Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate payment. This is not how we operate. People should hang up immediately and contact TIGTA or the IRS."
 
Potential victims may receive calls that tell them they owe money that must be paid immediately to the IRS or that they are entitled to big refunds. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.
 
The IRS reminds consumers that it:
  • Never asks for credit card, debit card or prepaid card information over the telephone;
     
  • Never insists that taxpayers use a specific payment method to pay tax obligations; and
     
  • Never requests immediate payment over the telephone and will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior notification of IRS enforcement action involving IRS tax liens or levies.
Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

EMV task force update: 575M chip cards issued by 2015

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NEW YORK (8/14/14)--A group of electronic payment industry organizations have predicted more than 575 million chip-enabled credit and debit cards will be issued by the end of 2015.

The Payments Security Task Force (PST), made up of more than a dozen companies and organizations including the Credit Union National Association, announced this forecast Wednesday.

"The shift to EMV cards clearly has big momentum now within the financial community," said Eric Richard, CUNA general counsel/executive vice president for regulatory affairs. "There is still an issue about whether the merchant community will be prepared to facilitate the change on a full and timely basis.  And both sides will need to continue working on other security strategies to counteract the growing problem of data breaches."

Nine of the country's largest payment card issuers who participate in the task force developed the current forecast. The PST is focused on continuing the momentum of payment cards with Europay- MasterCard-Visa (EMV) technology.

EMV is a global standard that uses chips embedded within the card to authenticate purchases, similar to the current magnetic strip on payment cards. EMV cards are considered more secure against fraud with authentication provided by the use of a PIN and cryptographic algorithms.

In October 2015, parties that deploy EMV cards will be protected from financial liability from card-present counterfeit fraud losses.

The task force plans to update the issuer forecast regularly and expand it to include acquirer and merchant perspectives on EMV chip terminalization. Javelin Strategy and Research estimates that 52% of point-of-sale terminals will be EMV-enabled by the end of 2015.

Priorities include identifying a long-term roadmap to deliver a consistent level of security for payments in the digital and physical environments.

FHA commissioner Galante steps down

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WASHINGTON (8/14/14)--Carol Galante, the commissioner of the Federal Housing Administration (FHA), announced this week she is leaving the government agency to teach at her alma mater, the University of California at Berkeley.
 
Galante started at the agency as interim commissioner in July 2011 and was confirmed Dec. 30, 2012. She led the agency as it sought $1.7 billion from the U.S. Treasury to cover losses from defaulted mortgages. The FHA doesn't make mortgages; rather it insures mortgage loans made by financial institutions.
 
The FHA became a critical cog in the market during the economic downturn, backing more than $330 billion in mortgages in fiscal year 2009 before easing down to $240 billion last fiscal year ( The Wall Street Journal Aug. 11).
 
Biniam Gebre, general deputy assistant secretary in the Department of Housing and Urban Development, will become acting commissioner after Galante departs, The Wall Street Journal noted.
 
On Jan. 1, Galante will be the I. Donald Terner Distinguished Professor in Affordable Housing and Urban Policy, according to the university. She also will be an adjunct professor in the department of city and regional planning and serve as director of the Berkeley Program on Housing and Urban Policy.
 

FHFA seeks comment on single security for Fannie, Freddie

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WASHINGTON (8/14/14)--The Federal Housing Finance Agency (FHFA) is seeking input on a proposed single security structure that would be issued by Fannie Mae or Freddie Mac--a proposal that  merits further study from stakeholders, according to the Credit Union National Association.

The FHFA listed in its strategic plan for the year a goal of developing a single mortgage-backed security (MBS) as part of its efforts to build a common securitization platform.

"Maintaining a highly liquid secondary mortgage market is a fundamental requirement for the success of the single security. In order to achieve maximum market liquidity, the proposed single security would leverage the enterprises' existing security structures," reads the FHFA's official request for input, published Tuesday.

The agency's stated goal for the proposed single security structure is for legacy Fannie Mae MBS and legacy Freddie Mac participation certificates to be mutually interchangeable with the single security for purposes of fulfilling to-be-announced contracts, allowing for maximum market liquidity. If necessary, investors would be offered an option to exchange a legacy participation certificate for a comparable single security.

"CUNA supports measures that improve the efficiency and liquidity of the mortgage market," said Eric Richard, CUNA general counsel/executive vice president for regulatory affairs. "However, we need to continue studying the implications of this proposal for its impact on the prices credit unions receive for the sales of their mortgages to the government-sponsored enterprises, as well as the proposal's potential impact on the values of existing MBS investments."

The FHFA is requesting input on all aspects of the proposal, with a focus on:
  • The transition from the current system to a single security;
  • To-be-announced contract eligibility;
  • Legacy Fannie Mae and Freddie Mac securities;
  • Potential industry impact of the single security initiative; and
  • Risk of market disruption.
All comments received will be made public and posted to the FHFA website.

Use the resource link below to access the full request for input.

CU supporter Tom Emmer wins in Minn. Congressional primary

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MINNESOTA (8/14/14)--Credit union supporter Tom Emmer took another step closer to the U.S. House of Representatives with a victory in Minnesota's primary Tuesday. Emmer, a Republican running for the state's open 6th Congressional District seat, received 73.2% of the vote to his opponent Rhonda Sivarajah's 26.8%.

Emmer was endorsed by the Minnesota Credit Union Network (MnCUN) and received the maximum $5,000 contribution from the Credit Union Legislative Action Council.

"During his tenure in the state Legislature, Rep. Emmer consistently demonstrated his support for credit unions' continued ability to serve their members," said MnCUN Vice President of Governmental Affairs Mara Humphrey in a statement. "He has vowed to continue that support of credit unions in the 6th District and across the country if elected. Credit unions have a champion in Tom Emmer."

Emmer served in the Minnesota House from 2005 to 2011 and ran for governor in 2010, losing narrowly to current Gov. Tom Dayton. 

"Credit unions offer consumers and small businesses a great choice for local, Main Street-focused financial services," said Emmer. "I'm proud to have the support of the Minnesota Credit Union Network and--when serving in Washington, D.C.--will continue to work for a fair marketplace so that credit unions can continue to grow."

Emmer will face Democratic candidate Joe Perske and Independence Party candidate John Denney in November. The 6th District seat is open due to the retirement of current Rep. Michele Bachmann (R).

Internal CFPB report finds workplace challenges

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WASHINGTON (8/14/14)--A Consumer Financial Protection (CFPB) internal report outlines employee concerns ranging from a perceived lack of diversity and a lack of clarity around processes, according to Politico (Aug. 12).

The CFPB's Office of Minority and Women Inclusion prepared the report, which is based on 48 listening sessions conducted by the bureau between April and June.

The report "frequently mentioned frustrations with insufficiency in infrastructure, lack of transparency and communication, and perceived unfairness in application of practices and procedures which permeated throughout the various areas of concern they mentioned," according to Politico .

According to an Aug. 12 Reuters article, the report also found that staff believed their supervisors micro-managed projects, were unclear about priorities, lacked uniform standards for employee performance and had misunderstandings concerning the bureau's hiring, promotion and pay practices, which contributed to the impression those decisions were unfair.

The CFPB announced in May it would remove its performance system after lower scores and bonuses were given to older employees and minorities, an action that led to the series of listening sessions.

According to Reuters , the report said the bureau's rapid expansion and pressure to churn out rules "fostered a culture of aggressiveness and a pace that could not be sustained long-term."

The report recommends additional internal communications mechanisms, additional training and creation of a forum to assess workplace trends.

CFPB Director Richard Cordray said he "embraces the recommendations" made in the report, and would work to ensure they are implemented, according to Politico .

White paper calls for more small-biz loan data from CUs

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WASHINGTON (8/13/14)--A new white paper by the National Community Reinvestment Coalition (NCRC) calls for credit unions to be included in expanded small business lending data reporting. The paper is a series of recommendations to the Consumer Financial Protection Bureau, which is developing a regulation to implement Section 1071 of the Dodd-Frank Act.
 
Section 1071 of Dodd-Frank is meant to facilitate enforcement of fair lending laws, as well as enable the government and financial institutions to identify women-owned, minority-owned and small businesses. The white paper lists several recommendations meant to improve publicly available small business loan data.
 
According to the NCRC, most of the current publicly available data is submitted by large banks. The coalition recommends data disclosure be expanded to credit unions, as well as smaller banks and non-depository lenders. While credit unions are limited in their business lending to 12.25% of assets, the NCRC recognizes them as an "important source of small business loans."
 
The National Credit Union Administration's 2013 report states that member business loan balances grew to $45.9 billion in 2013, a 10.1% increase from the year before. 
 
The NCRC recommends the following data elements be required from lenders about small businesses:
  • Race and ethnicity. The NCRC believes disclosures of information such as Asian or Hispanic is not specific enough;
     
  • Revenue size of business. According to the NCRC, this would allow policymakers and the public to track loans to women- and minority-owned businesses. Currently, the Community Reinvestment Act (CRA) data serves as the largest currently available database, and it separates businesses into only two categories--above and below $1 million in revenue;
     
  • Whether a loan was approved or denied. CRA data contains only origination information, not applications or denials. This new data field is intended to provide information on demand for credit, and responsiveness of lenders to this demand; and
     
  • Loan type and purpose. This will track the multiple ways in which small businesses are able to address credit, creating another way to track credit demand and if lenders are responsibly meeting it.
In addition to the above required items, the NCRC also recommends several discretionary data elements, including pricing data, creditworthiness, number of employees and loan performance. According to the coalition, this additional data will help identify barriers to credit access.
 
The NCRC, a nonprofit association of more than 600 organizations with a mission to build and protect wealth in underserved communities, says better data on lending markets will improve access to credit, as well as hold lenders publicly accountable for meeting credit needs.
 
Use the resource link below to access the white paper.

N.Y. charges payday lenders for violating usury cap

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NEW YORK (8/13/14)--State prosecutors in New York have brought charges against 12 companies and their owner, alleging the businesses violate New York's law banning payday lending.
 
Prosecutors indicted Carey Vaughn Brown, Ronald Beaver and Joanna Temple and the 12 companies they own on 38 counts of criminal usury and one count of conspiracy.
 
New York defines a payday loan as "payday loan is a relatively small, high-cost loan, typically due in two weeks and made with a borrower's post-dated check or access to the borrower's bank account as collateral," according to the state's Department of Financial Services. It is illegal in New York to charge more than 25% interest per annum on any loan less than $2.5 million.
 
"Payday lending is a short-term fix that can result in a lifetime of debt and credit problems," said District Attorney Cyrus Vance in a statement. "The exploitative practices--including exorbitant interest rates and automatic payments from borrowers' bank accounts, as charged in the indictment--are sadly typical of this industry as a whole."
 
Brown is accused of using the Internet to creating multiple companies between 2001 and 2013. He is accused of establishing one such company, MyCashNow.com, Inc. as a website and offshore corporation to accept online applications for payday loans while avoiding compliance with laws in individual states.
 
Other companies created by Brown performed loan processing and underwriting, processed electronic transactions to extend the loans and move funds between companies, as well as provided support for the payday lending business, creating the impression of multiple independent companies.
 
The state alleges that the companies in fact functioned as a completely enclosed operation controlled by the defendants. 
 
Use the resource link below to read the complete announcement from the New York County District Attorney's office.

FinCEN: 105 FIs involved with marijuana-based businesses

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WASHINGTON (8/13/14)--There are currently 105 banks and credit unions serving legal, marijuana-based businesses, according to suspicious activity reports (SARs) received by the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN).
 
FinCEN Director Jennifer Shasky Calvery addressed the topic during the Atlantic Anti-Money Laundering Conference Tuesday in Washington, D.C.
 
"Since FinCEN's (marijuana-based business) guidance went into effect in February of this year, we have received more than 1,000 SARs that indicate banks are using our guidance and providing much needed transparency into their dealings with marijuana-related businesses," she said.
 
FinCEN released marijuana-based business guidance Feb. 14 to assist financial institutions in determining when and how to file a SAR based on eight law enforcement priorities identified by the U.S. Department of Justice.
 
"Our overarching goal in issuing this guidance was to promote financial transparency, ensuring law enforcement receives the reporting from financial institutions that it needs to police this activity and making it less likely that the financial operations move underground and become more difficult to track," she said.
 
Financial institutions dealing with marijuana businesses can use three different designations for marijuana-related business SARs:
  • "Marijuana Limited," for financial institutions providing services to a marijuana-related business that can be reasonably believed is not violating one of the eight priorities or state law. FinCEN has received 502 SARs marked as Marijuana Limited;
     
  • "Marijuana Priority," for financial institutions that believe, based on its customer due diligence, a marijuana-related business is violating one of the eight priorities or state law. To date, FinCEN has received 123 SARs indicating Marijuana Priority; and
     
  • "Marijuana Termination," used if a financial institution deems it necessary to terminate a relationship with a marijuana-related business in order to maintain an effective AML compliance program. Just over 475 SARs filed to date have indicated "Marijuana Termination."
The numbers are based on SARs received by FinCEN from Feb. 14 and Aug. 8. Calvery said the number of marijuana-related SARs FinCEN has received is the "intended effect" of the guidance.
 
"It is facilitating access to financial services, while ensuring that this activity is transparent and the funds are going into regulated financial institutions responsible for implementing appropriate AML safeguards," she said.
 
Use the resource link below to access Calvery's full remarks.

IRS posts 'Taxpayer Bill of Rights' in 6 languages

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WASHINGTON (8/13/14)--The recently adopted "Taxpayer Bill of Rights" from the Internal Revenue Service (IRS) is now available in six languages.
 
"Your Rights as a Taxpayer" is posted on the IRS website in in English, Spanish, Chinese, Korean, Russian and Vietnamese
 
"We believe that these rights are critically important for people to know and understand, and translating them into additional languages helps us reach even more taxpayers," said IRS Commissioner John Koskinen.
 
In June, the IRS adopted the "Taxpayer Bill of rights" to help taxpayers understand items embedded in the tax code.
 
The 10 provisions are:
  1. The right to be informed;
  2. The right to quality service;
  3. The right to pay no more than the correct amount of tax;
  4. The right to challenge the IRS's position and be heard;
  5. The right to appeal an IRS decision in an independent forum;
  6. The right to finality;
  7. The right to privacy;
  8. The right to confidentiality;
  9. The right to retain representation; and
  10. The right to a fair and just tax system.

CFPB slaps $19.3M penalty on Amerisave for mortgage tactics

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WASHINGTON (8/13/14)--The Consumer Financial Protection Bureau (CFPB) has ordered Atlanta-based online mortgage lender Amerisave Mortgage Corp. and its affiliate to pay $19.3 million for "deceptive bait-and-switch" lending practices.
 
Amerisave and Novo Appraisal Management Co. will pay $14.8 million to affected consumers and a $4.5 million penalty. The companies' owner, Patrick Markert, was fined an additional $1.5 million. Fines will go to the CFPB's Civil Penalty Fund.
 
"Amerisave lured consumers in with deceptive advertising, trapped them with costly upfront fees, and then illegally overcharged them for services from an undisclosed affiliate," said CFPB Director Richard Cordray. "By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave."
 
Amerisave drew in consumers nationwide with online ads that teased rates that did not match the consumers' credit scores or did not exist. "Through use of these inaccurate rates and terms, Amerisave lured consumers into pursuing a mortgage with the company," the CFPB said, which found this practice deceptive under the Consumer Financial Protection Act and the Mortgage Acts and Practices Rule.
 
The CFPB also alleged that Amerisave required consumers to schedule appraisals that cost between $375 and $500 before obtaining an official estimate of mortgage costs, in violation of the Truth in Lending Act and the Real Estate Settlement Procedures Act.
 
The company also referred customers to Novo without disclosing its affiliate relationship with the appraisal company.
 
The CFPB order also requires Amerisave, Novo and Markert to stop advertising unavailable mortgage rates and stop charging illegal fees.

NCUA fixed-asset proposal could apply to some state-chartered CUs

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ALEXANDRIA, Va. (8/13/14)--While the National Credit Union Administration's fixed-assets proposal is meant to apply to federal credit unions, it could also apply to state-chartered credit unions in certain states. A number of states have a statutory provision that allows state-chartered credit unions to exercise powers allowed for federal credit unions.
 
The NCUA's proposal would allow federal credit unions with assets of $1 million or more to exceed the limit on the purchase of fixed assets, currently 5% of shares and retained earnings, without receiving a waiver from the agency. This is provided the credit union maintains a fixed-assets management program.
 
Credit unions in Alabama, Arizona, Illinois, Iowa, Maine, Oklahoma, Rhode Island and Texas are permitted by their state credit union acts to exercise powers conferred on federal credit unions without seeking approval from the state's regulator.
 
In Illinois--one state with such a parity provision--members of the Illinois Credit Union League will discuss the possibilities with state regulators to see if state-chartered credit unions can benefit from the proposal.
 
"We look at statutory requirements on an annual basis, and I'm sure this will be one of the topics discussed," said Patrick Smith, league vice president of communications and regulatory affairs. "We're going to look very closely at the proposal and make sure that none of our state-chartered credit unions will be at a disadvantage just because they have a state charter."
 
State-chartered credit unions in states with a parity provision can also be affected by the NCUA's proposal on securitization of assets, if the state regulator determines a credit union has the resources and capacity to support securitization. The proposal would authorize federal credit unions to securitize loans it has originated, provided the transaction meets certain requirements.
 
The Credit Union National Association has issued a comment call for both proposals. Comments on asset securitization are due to the NCUA by Aug. 25. Comments on the fixed-assets proposal are due to CUNA by Oct. 1, and to the NCUA by Oct. 10.
 
Use the resource link below for information about the fixed-asset proposal.

BSA/AML compliance needs to be part of CU culture: FinCEN

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WASHINGTON (8/13/14)--Recent anti-money laundering (AML) enforcement actions have led the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) this week to issue an advisory identifying common compliance shortcomings.
 
The advisory is meant to highlight principles that can strengthen a financial institution's Bank Secrecy Act (BSA) compliance program.
 
The advisory lays out the following guidance for financial institutions:
  • Leadership, including board of directors, senior and executive management, owners and operators, should be engaged with the financial institution's BSA/AML compliance program. Leaders should receive training tailored to their roles and should remain informed of BSA/AML compliance practices within the institution;
     
  • Compliance, including submission of appropriate and accurate reports, should not be compromised by revenue interests. BSA/AML compliance should function independently within a financial institution, in order to be prepared to take action to address and mitigate risks from the business side of the institution;
     
  • BSA/AML compliance staff should have access to all relevant information. According to FinCEN, several recent enforcement actions noted that compliance staff was not given information, possibly due to the lack of an information-sharing mechanism. Fraud prevention and legal departments should be sharing information with compliance staff;
     
  • Adequate human and technological resources should always be accessible. An individual should be designated as the person responsible for coordinating and monitoring day-to-day compliance, and appropriate support staff should be assigned to a BSA/AML compliance program based on an organization's risk profile;
     
  • Compliance programs should be commensurate with an institution's risk level, and should always include a proper ongoing risk assessment, sound risk-based customer due diligence and appropriate detection and reporting of suspicious activity. This should also include independent program testing from an independent, qualified, unbiased and non-conflicting entity; and
     
  • Staff at all levels should understand the purpose of BSA reports. FinCEN considers the information provided among the most important information available for law enforcement and other security entities. Information provided can help initiate investigations, expand existing investigations, promote international information exchange and identify significant relationships, trends and patterns.
Use the resource link below to access to the full advisory from FinCEN.

179 CUs accepted in NCUA consulting program

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ALEXANDRIA, Va. (8/12/14)--Free consulting services will be provided to 179 credit unions in the second half of this year, courtesy of the National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI).

During the six-month semester, economic development specialists will offer assistance in budgeting, marketing, policy development, strategic planning, operations and regulatory areas.

"OSCUI's consulting program is a valuable part of our efforts to help credit unions succeed in a changing economic environment and provide needed services to their members," NCUA board Chair Debbie Matz said. "Consultants help credit unions think strategically, develop plans and position themselves for future success."

Credit unions eligible for the NCUA's consulting program include those with total assets of less than $50 million, have been chartered for less than 10 years, have a low-income designation or are minority depository institutions. Credit unions may nominate themselves or be nominated by an examiner from the NCUA or their state.

The smallest credit union in the current consulting program has assets of $87,000, and several exceed $100 million in assets. Minority depository institutions make up 21% of the credit unions in the current program.

The OSCUI is currently accepting consulting program nominations for the first half of 2015, which must be received by Nov. 30.

Use the resource links below to access the nomination forms and for more information about the consulting program.

RBC rule requires Okla. CUs to raise extra $105M: Sen. Inhofe

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ALEXANDRIA, Va. (8/12/14)--Sen. James Inhofe (R-Okla.) became the 27th senator to write to the National Credit Union Administration regarding the agency's risk-based capital proposal Monday, echoing concerns from credit unions across his state, as well as the members and businesses they serve.

Inhofe acknowledged in his letter than a strong capital base is essential to maintaining a healthy financial system, and he affirmed his dedication to protecting the National Credit Union Share Insurance Fund and taxpayers.

However, he also said he is concerned that the NCUA has not justified the need for the proposal. He cited warnings from credit unions in his state that have told him they would have to change the way they operate in order to raise capital. He said is it estimated that Oklahoma credit unions would need to raise approximately $105 million in capital just to ensure capital buffers remain intact.

"Nationally, over 4,000 credit unions offer mortgage products and enjoy loss rates well below the national average. The risk weights in the proposed rule could force credit unions to reduce the availability or affordability of loan products, restricting credit to their members," he wrote. 

Inhofe also requested that the NCUA provide justification for the need for a new risk-based capital requirement at this time.

In addition to 27 senators, 332 representatives (76% of the House) have written to the NCUA with concerns about the proposal. The agency has addressed several of these concerns, such as the proposed 18-month implementation period, which will be lengthened.

CFPB to take consumer complaints on Bitcoin, virtual currency

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WASHINGTON (8/12/14)--Volatile exchange rates and the threat of hacking and scams have led the Consumer Financial Protection Bureau (CFPB) to now accept complaints on virtual currency products and services.

The bureau also issued a consumer advisory warning about the risks of such virtual currencies Monday.

Designed to be an alternative to current payment systems, virtual currencies--which include Bitcoin, XRP and Dogecoin--are used to track, store and send payments over the Internet. While benefits can include faster and cheaper processing, the currencies are not backed by a government or central financial institutions.

Because of this, virtual currency accounts are not insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund, meaning if a virtual currency company fails, the government will not cover the loss.

CFPB Director Richard Cordray likened consumers engaging in the virtual currency market to "stepping into the Wild West."

Additional services in the virtual currency market include virtual currency exchanges, which help consumers buy or sell virtual currencies and online "digital wallet providers," which allow consumers to create accounts with them to store and manage their virtual currencies. Many virtual currency exchanges are also wallet providers, and vice versa.

Some virtual currency companies do not identify owners, provide phone numbers and addresses, or even specify the country in which they are located. Others disclaim responsibility for consumer losses if funds are lost or stolen.

According to the CFPB, if a consumer submits a complaint about a virtual currency or virtual currency service, the CFPB will send the complaint to the appropriate company and will work to get a response. If the complaint is about an issue outside the CFPB's jurisdiction, the bureau will forward the complaint to the appropriate federal or state regulator.

The CFPB says it plans to use all complaints to better understand the virtual currency market and its effect on consumers, as well as shape future law enforcement and regulatory policies going forward.

Use the resource link below to access the consumer advisory.

CU-supported candidate in Minn. Republican primary today

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WASHINGTON (8/12/14)--Today's primary elections in Minnesota features credit union-backed candidate, Tom Emmer, for the state's open 6th Congressional District.

Emmer, a Republican former state representative and gubernatorial candidate in 2010, is running to for the seat currently held by Rep. Michele Bachmann, who announced she will not seek re-election in November.

Emmer is known to have supported credit unions during his time in the state's legislature, garnering him the support of the Minnesota Credit Union Network (MnCUN), as well as the Credit Union Legislative Action Council (CULAC), which provided the maximum $5,000 donation.

"During his tenure in the State Legislature, Rep. Emmer consistently demonstrated his support for credit unions' continued ability to serve their members," said Mara Humphrey, MnCUN vice president of governmental affairs. "He has vowed to continue that support of credit unions in the 6th District and across the country if elected. Credit unions have a champion in Tom Emmer."

Emmer has pledged to "work for a fair marketplace so credit unions can continue to grow" if elected.

Minnesota's 6th Congressional District Republican primary will feature Emmer facing off against Rhonda Savarajah, a past candidate for lieutenant governor.

Credit union-supported Congressional candidate Mark Takai emerged victorious from Saturday's primary election in Hawaii. Takai, a Democratic candidate for the state's 1st Congressional District, was the top vote-getter in a seven-person race, defeating his closest challenger Donna Kim with 42.6% of the vote to Kim's 27.2%. No other candidate received more than 10%.

Takai is a current state representative, where he has served since 1994. He is also a member of the state's Army National Guard and deployed to Kuwait from February to September 2009.

According to a questionnaire filled out for the Hawaii Credit Union League (HCUL), Takai is a member of Hawaii State FCU, with $1.3 billion in assets, and he answered yes when asked if he believed credit unions serve the public good.

"Any tax benefit received by nonprofit organizations is passed on to its members, for credit unions that means lower to no fees and higher returns," Takai wrote. "Any decrease or removal of the tax exemptions of nonprofit organizations would be harmful to consumers."

The HCUL and CULAC have supported Takai in his election bid, with the maximum $5,000 donation from CULAC. Hawaii's 1st Congressional District is heavily Democratic, and Takai is expected to prevail in November's election.

He will face former Republican Rep. Charles Djou, who was elected in a special election in 2010 to become the district's first Republican congressman in more than 20 years. The two are competing for the seat currently held by Rep. Colleen Hanabusa (D), who is seeking a U.S. Senate seat in November.

NCUA: More than 2,100 CUs designated as low-income

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WASHINGTON (8/11/14)--More than 2,100 credit unions are designated low-income credit unions (LICUs), the National Credit Union Administration announced Friday, marking two years since the agency began advocating for more credit unions to become designated.

A total of 2,107 credit unions with a combined 23.6 million members and $218 billion in assets have the low-income designation as of August 2014. Before the 2012 campaign, there were 1,140 LICUs, and an additional 821 credit unions accepted the designation from August 2012 to August 2013.

Click to view larger image An NCUA graph showing the growing number of LICUs.
"NCUA introduced the low-income credit union initiative two years ago as part of my Regulatory Modernization Initiative," NCUA Chair Debbie Matz said. "This was a significant easing of a regulatory burden for those credit unions that were eligible for the designation. These credit unions have expanded access to affordable financial services to low- and moderate-income members, developed financial literacy programs and increased their own service capacity through staff training."

Matz went on to say that LICUs are often the only insured depository institutions that serve low-income and underserved areas, providing affordable financial services and investing in ways to grow communities, such as small business and member lending.

The initiative was announced Aug. 7, 2012, and 1,003 credit unions were notified of their eligibility, and that they were essentially pre-qualified for the designation.

To qualify for the designation, a majority of the credit union's members must meet low-income threshold data based on the 2010 census.

Benefits of the designation includes:
  • An exemption from the statutory 12.25% cap on member business lending, which expands access to capital for small businesses and helps credit unions diversify portfolios;

  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans;

  • Eligibility for nomination for free NCUA consulting;

  • Ability to accept deposits from nonmembers; and

  • Authorization to obtain supplemental capital.
More than 70% of LICUs are have assets of less than $50 million.

Use the resource link below for a fact sheet on the LICU designation.

Changes in FICO scoring could improve credit access

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SAN JOSE, Calif. (8/11/14)--The most-used credit score in the country will no longer include records of consumers failing to pay bills if the bills are paid or settled, according to a report by The Wall Street Journal .

The change is expected to lead to higher FICO scores for those consumers, which could lead to more lending at financial institutions such as credit unions. Fair Isaac Corp.'s FICO credit score is based on consumer credit files of three national credit bureaus--Experian, Equifax and TransUnion.

Fair Isaac announced last week it would stop including records of a consumer failing to pay a bill if the bill has been paid, or settled with a collection agency. The company also said it will give less weight to unpaid medical bills that are with a collection agency.

Lower FICO scores can lead to loan denials, or higher interest rates, and according to The Wall Street Journal , collections can affect credit scores as much as foreclosures and bankruptcies.

"Credit unions already work closely with members seeking credit, and this FICO change will give them another tool to help more members with their credit needs," said Mike Schenk, interim chief economist for the Credit Union National Association. "It will also help credit unions keep credit costs to members down."

Credit unions are already generally able to provide lower loan rates to members. According to CUNA's Economics and Statistics Department, financing a $25,000 new automobile for 60 months at a credit union will save a member an average of $146 per year in interest expense compared with a bank.

John Ulzheimer, a credit expert at consumer credit website Credit Sesame , told The New York Times last week that the FICO change likely wouldn't be the difference between a loan approval or denial, but it is enough to lead to a more advantageous rate. But consumers whose score is currently deflated due to medical debts can expect to see their score "go through the roof," Ulzheimer said.

The Wall Street Journal cited data from credit bureau Experian that says approximately 64.3 million consumers in America have medical debt collection on their credit report.

The Consumer Financial Protection Bureau released a study in May that said 99.4% of medical debt information is reported to national credit rating agencies (NCRAs) by collection agencies.

"The use of medical collections in credit scoring models has generated concerns stemming from the unique circumstances under which these debts arise and come to be reported to the NCRAs. Among their unique characteristics is that consumers may sometimes be unaware that the medical collections exist," the report reads. "If consumers are unaware of their medical collections or they view them as illegitimate because they are charges their insurance should have paid, then these debts may provide little information about their creditworthiness."

Use the resource link below to access the CFPB's report.

Truckeroo gives D.C. a taste of CU difference

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WASHINGTON (8/11/14)--To celebrate the milestone of 100 million credit union memberships, the Credit Union National Association sponsored the August Truckeroo in Washington, D.C., Friday.

CUNA volunteers, along with other credit union supporters, manned a table throughout the day, handing out "Credit unions are a smarter choice" T-shirts and slap koozies to keep beverages cold.

Located next to the Washington National stadium, the CUNA section offered jump-shot basketball or cornhole games for the many who stopped by.

Employees from local credit unions including Money One FCU, Largo, Md., with $107 million in assets; Prince George's Community FCU, Bowie, Md., with $142 million in assets; NRL FCU, Alexandria, Va., with $455 million in assets; and DGE FCU, Washington, D.C., with $51 million in assets, were also on hand to assist in spreading the good news about the 100 million membership milestone.

The monthly festival features more than 20 food trucks with offerings ranging from cheesesteaks to lobsters, as well as live music throughout the day. There were plenty of dessert options as well, including Italian ice, crepes and a variety of cheesecakes.

See the Storify below for tweets and pictures from the event.

Analysis of CFPB HMDA proposal in July CompBlog Wrap-Up

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WASHINGTON (8/11/14)--The Credit Union National Association's CompBlog took a look last month at the Consumer Financial Protection Bureau's (CFPB) new Home Mortgage Disclosure Act (HMDA) proposed rule. The CFPB issued a 573-page proposed rule intended to improve information reported about the residential mortgage market.

While the CFPB believes the proposal will provide information about the residential mortgage market, access to credit, as well as easing reporting requirement for some small financial institutions, CUNA believes that the requirements will be costly and cumbersome to credit unions ( News Now Aug. 7), particularly the mandatory reporting of home equity lines of credit (HELOCs).

The CompBlog July roundup also covered a number of significant regulatory issues that arose last month, including:
  • Federal regulators', including the National Credit Union Administration, guidance on HELOCs nearing their end-of-draw periods, which occurs when the principal amount of a HELOC must begin to be repaid;
     
  • The Financial Crimes Enforcement Network's (FinCEN) proposed customer due diligence requirements, latest suspicious activity report bulletin and other information on money-laundering concerns and Bank Secrecy Act violations;
     
  • The NCUA's proposed regulatory relief changes, proposal to amend fixed assets and guidance on how examiners will enforce FinCEN guidance for legal marijuana-based businesses; and
     
  • The CFPB's new interpretive rule on ability-to-repay, equal treatment for same-sex married couples and input in its new eRegulations tool.
The roundup also includes a recap of CUNA's latest compliance webinar, "New Credit Union Compliance Officers: Advice from the Front Line."

Use the resource links below for more information and to access July's CompBlog Wrap-Up.

FTC refunds $800K to consumers ensnared by mortgage relief scams

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WASHINGTON (8/11/14)--More than 1,300 customers who fell prey to mortgage relief scams will be receiving checks totaling approximately $800,000. The Federal Trade Commission (FTC) announced that refund checks will be sent, though an administrator, to 1,305 consumers affected by two related scams.

In one scheme, a company using the name Precision Law Center alledgedly made false promises to consumers that if they sued their lenders along with other homeowners in so-called "mass joinder" lawsuits, they could obtain favorable mortgage concessions or stop the foreclosure process.

In the other, using names such as FreeFedLoanMod.org, HouseHoldRelief.org and MyHomeSupport.org, defendants charged consumers for "forensic loan audits," and allegedly misrepresented that they could use the results to force lenders to give them better mortgage terms.

According to the FTC, consumers should carefully evaluate offers of help in lowering their mortgage payments or saving their homes from foreclosure. It is illegal for anyone to collect money upfront for loan modification or foreclosure relief services.

Use the resource link for more information on mortgage relief scams.

26% of Senate, 76% of House now have voiced RBC plan concerns

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WASHINGTON (8/8/14)--Two more U.S. senators have sent a letter of concern to the National Credit Union Administration regarding its risk-based capital proposal, bringing the total number of Senate lawmakers to weigh in to 26. That's 26% of the chamber's members. And on the House side, the number rose to 332.

Georgia Sens. Saxby Chambliss (R) and Johnny Isakson (R) sent a joint letter Thursday echoing many concerns raised by their colleagues about the limited ability of credit unions to raise capital quickly, as well as if such a proposal is permitted by the Federal Credit Union Act (FCUA).

"The FCUA established a floor for risk-based net worth to take into account situations where the 6% requirement to be adequately capitalized was not sufficient, but it does not allow for a dual risk-based system that your proposed rule would create," the letter reads.

The letter goes on to question whether or not the NCUA has adequately explained the need for the proposed rule, citing the National Credit Union Share Insurance Fund's "exceptional performance" during the financial crisis.

And on the House side, Rep. Mark Meadows (R-N.C.) and Steve Stivers (R-Ohio) sent letters Thursday to the NCUA outlining issues with the proposal. For Meadows, Thursday's letter was a follow-up to the letter he signed in May that was also signed by 323 other representatives. Meadows, along with Rep. Kenny Marchant (R-Texas), signed that letter and submitted an individual one. A total of 332 representatives--76% of the House--has signed a letter with concerns about the proposal.

The May letter asked the NCUA board to take into account implementation costs and burdens, as well as for the agency to provide justification and more clarity as to why proposed risk weights differed from those applied to other community financial institutions.

In his recent letter, Meadows, a member of the House Committee on Oversight and Government Reform, as well as its subcommittee on economic growth, job creation and regulatory affairs, thanked the NCUA for pledging changes to the rule's implementation period and risk weights. He also encouraged the agency to put the rule up for comment again, after it has been revised to incorporate submitted comments.

"While the changes the NCUA have expressed are substantial, I still encourage the NCUA to put the revised rule out for comment again so that stakeholders can weigh in before the final rule is finalized," he wrote.

The Credit Union National Association has also advocated for a second comment period once a revised rule is issued. At the NCUA's Listening Session July 17 in Alexandria, Va., Chair Debbie Matz said there likely would not be a second issuance of the rule. Though, she has emphasized that if the intent of the rule is changed or other reasons under the Administrative Procedure Act require a second round of comments, the agency would follow those statutory requirements. 

"Unless we are in violation of the Administrative Procedures Act, as determined by our general counsel, we don't intend to re-propose the rule," she said. "It's like every other rule we've done, we put it out for comment, we get excellent comments from stakeholders, we review every single one of them, we accept those we think have merit and then we finalize the rule. This rule will not be an exception to that."

Stivers, a member of the House Financial Services Committee, said he was concerned that the proposal places more of an emphasis on "the basic measure of an asset size of an individual credit unions than the holistic assessment of a credit union's portfolio of assets and liabilities," which is the description given in the FCUA.

"Over 4,000 credit unions offer mortgage products that equate to a little over 6.5% of the entire mortgage market and enjoy loss rates well below the national average," he wrote. "The proposed rule will cause credit unions to reduce the availability or affordability of loan products, restricting credit availability to their members."

He went on to say that the supervision of concentration risk might be mort appropriately conducted duing the examination process, which is a concern raised by many of his colleagues.

Other concerns raised by a number of legislators in their letters include the proposed implementation timeline, proposed risk weights and the effects the proposal would have on member lending, particularly in communities with a strong agricultural base.

CUNA gives overdraft, reg relief suggestions to CFPB

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WASHINGTON (8/8/14)--Minimizing the impact of current rules, pending proposals and contemplated requirements were key themes of a meeting Wednesday between the Credit Union National Association and the Consumer Financial Protection Bureau (CFPB).
 
Dan Smith, first assistant director of the CFPB's Office of Financial Institutions and Business Liaison, and CUNA's Deputy General Counsel Mary Dunn discussed regulatory relief for credit unions, which remains CUNA's highest regulatory advocacy priority. The association is pursuing that priority with the National Credit Union Administration and other agencies, in addition to the CFPB.
 
At the meeting, CUNA raised concerns regarding the possible regulation of overdraft plans by the CFPB, as well as a range of other regulatory concerns such as the pending Regulation C proposal to implement changes to the Home Mortgage Disclosure Act under the Dodd-Frank Act.
 
Dunn said this was done in in recognition of the significant role credit unions play in the financial marketplace for consumers and small businesses.
 
"CUNA will continue to press for favorable regulatory treatment for credit unions in light of the fact that credit unions did not engage in abusive practices that led to the financial crisis," she said. "More and more credit unions are merging and citing regulatory burdens as a factor. Credit unions need and deserve regulatory relief, and CUNA will continue seeking every opportunity to further that outcome on their behalf."
 
CUNA has advocated that credit unions should be exempt from overdraft regulations.
 
Credit unions are consistently reported as having lower overdraft fees than banks. A report from Informa Research Services in April found that the median fee for overdrafting a checking account at is $30.70, while credit unions were at $27.74. In addition, banks with assets greater than $50 billion carry median overdraft fees of $35, while the largest credit unions (with more than $5 billion in assets), charge an average of $25 ( News Now April 2).

Audio of NCUA's Chicago Listening Session available on cuna.org

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WASHINGTON (8/8/14)--An audio recording of the National Credit Union Administration's July 10 Listening Session in Chicago is now available on the Credit Union National Association's website.

The event was the second in a series of three Listening Sessions the agency hosted across the country.

More than 160 people attended the Chicago session, where the primary topic of discussion was the agency's proposed risk-based capital (RBC) rule. NCUA Chair Debbie Matz and board member Michael Fryzel, who hails from Chicago, were in attendance.

Fryzel told those in attendance that "everything is on the table" when it comes to changes to the proposal, and that the goal was "a rule that provides safety and soundness without unduly limiting credit union operations."

Matz said during the session that the proposed rule's 18-month implementation period is likely to be extended, and said while the rule will go forward, the agency would address issues that have been identified.

The session also addressed fines for late call report filers and interest rate risk. (See resource link for related News Now story: 62 CUs pay total $57,750 for late call reports.)

The Illinois Credit Union League provided the audio. CUNA has also posted the audio from the June 26 Listening Session in Los Angeles. The audio from the July 17 session in Alexandria, Va., will be added  soon.

Use the resource links below to access the sessions.

Free webinar examines disaster prep, recovery for CUs

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ALEXANDRIA, Va. (8/8/14)--A free webinar featuring business continuity planning and disaster recovery practices will be hosted by the National Credit Union Administration Aug. 20.

Several NCUA staff members will outline strategies to prepare for and recover from natural disasters. Officials from credit unions that made it through Hurricanes Sandy and Katrina will also share their experiences.

"Recent natural disasters have illustrated the importance of effective contingency planning to ensure that all credit unions are able to fulfill their missions and obligations to their members during natural disasters or other disruptions in their operations," the NCUA said in a release announcing the webinar.

Presenters will discuss how to communicate with members, regulators and vendors, as well as establishing backup and recovery sites in separate locations while planning for a natural disaster. They will also outline ways to restore information technology services and how to return to normal operations after such a disaster.

The speakers will be Dominic Carullo, economic development specialist, NCUA's Office of Small Credit Union Initiatives; Jerald Garner, national field supervisor, the Office of National Examinations and Supervision; and Jason Radde and Ben Cates, both emergency management specialists with the Office of Continuity and Security Management.

The event is scheduled to begin at 2 p.m. (ET) Aug. 20. It will be archived and closed-captioned on the NCUA's videos and webcasts page approximately three weeks following the event.

Watch News Now later this month for more information on disaster preparedness and recovery.

Use the resource links below for registration information and emergency preparedness tips.

Fixed-rate mortgages decline at banks post-QM rule

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WASHINGTON (8/7/14)--New Consumer Financial Protection Bureau (CFPB) mortgage rules are reducing the number of mortgages from all banks but the biggest, says the latest survey from the Federal Reserve. As reported in HousingWire Wednesday, the Fed's quarterly survey polled large domestic and foreign banks about the effect of the rules.

The CFPB's new qualified mortgage rule went into effect Jan. 10. The rule describes certain minimum requirements for creditors to make ability-to-repay determinations but does not dictate that one follows any particular underwriting model.

According to the report, almost 20% of the 36 large American banks said approval rate of prime residential mortgages was lower than it would have been. A "substantial share" of other respondents reported the rules were lowering approval rates.

The article also cites a similar report from credit rating agency Dominion Bond Rating Services that found federal regulations, along with a general shift to purchase activities from refinancing, have resulted in historically low mortgage originations and organic servicing growth.

The Credit Union National Association expressed concerns with the rule when it was in the proposal stage last year. In a survey conducted by CUNA in October, almost 60% of credit unions that responded said the new rule was making them consider scaling back mortgage practices.

In another CUNA survey conducted in April, 17% of respondents said the new rule had reduced or limited the number of first-mortgage loans the credit union is making. Of all respondents, only 1% said the rule had a "minimal positive impact," and 31% said it had no impact.

The remaining credit unions said the rule had a strong negative impact (7%), moderate negative impact (27%) or minimal negative impact (34%) on the ability of credit union members to get approved for a first mortgage.

Credit unions have seen a 45% drop in first fixed-rate mortgages issued in the first quarter this year after three straight years of growth. From January to March 2011, 89,037 first fixed-rate mortgages were granted, and that number rose to 134,016 during those months in 2012 and 154,185 in 2013. From January to March 2014, only 69,958 were issued.

CUNA also notes that this decrease could be due to a number of factors, including increasing real estate prices.

Balloon and adjustable-rate first mortgages saw an increase from 2013 to 2014 that was on par with previous year-to-year gains. In addition, fixed- and adjustable-rate second mortgages saw growth within normal ranges from year-to-year since 2011.

Success for CU-supported candidates in some Mich., Wash. primaries

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WASHINGTON (8/7/14)--Four credit union-supported candidates in Michigan and one in Washington emerged victorious in close races in Tuesday's primary elections.

The winners in Michigan's primary were:
  • 1st District: Incumbent Rep. Dan Benishek won 70% of the vote over his opponent, Alan Arcand. Benishek has supported efforts to maintain credit unions' tax status;
     
  • 4th District: State Sen. John Moolenaar defeated two challengers--Paul Mitchell and Peter Konetchy--with 52% of the vote. Moolenaar has supported numerous pro-credit union initiatives;
     
  • 8th District: Former state senator and representative Mike Bishop (R) defeated his opponent, Tom McMillin, with 60% of the vote. A past chair of the state's Senate Banking and Financial Institutions Committee and a key player in an update of the state's credit union charter, Bishop will face Democrat Eric Schertzing in November; and
     
  • 12th District: Debbie Dingell (D), wife of retiring Rep. John Dingell (D), easily won her primary with 78% of the vote against challenger Raymond Mullins. She will face Republican Terry Bowman in November.
In Washington, Dan Newhouse (R), former state agriculture director, will advance to November's election and face fellow Republican candidate Clint Didier. The two topped the 12-person primary field, with Didier receiving 30.44% of the vote and Newhouse receiving 26.64%.

Several candidates backed by credit unions were defeated Tuesday, including current Rep. Kerry Bentivolio (R) in Michigan's 11th Congressional District.

Rudy Hobbs, a Democratic candidate for Michigan's 14th District, appears to have lost his primary by a slim margin. Unofficial results had candidate Southfield Mayor Brenda Lawrence with a 2,493-vote lead over Hobbs. The Detroit News reported Hobbs conceded the election early Wednesday morning, but the report also indicates the Hobbs campaign can request a recount.

Tennessee will hold its primaries today, with credit unions supporting Sen. Lamar Alexander (R) in his bid to be elected to a third term. Alexander has been a longtime supporter of credit unions. In a 2010 subcommittee hearing, Alexander expressed concerns about potential burdens on credit unions that would come with the creation of the Consumer Financial Protection Bureau.

Hawaii will hold its primary Saturday, and the Hawaii Credit Union League has supported state Rep. Mark Takai (D) in the race. Takai is running for the state's 1st Congressional District seat, the seat left open by current Rep. Colleen Hanabusa's (D) decision to run for Senate.

Both Alexander and Takai have been supported with a maximum $5,000 contribution from the Credit Union Legislative Action Council.

CUNA seeks CU comment on 'costly' new HMDA rule

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WASHINGTON (8/7/14)--The Credit Union National Association is seeking comment on additional reporting requirements proposed by the Consumer Financial Protection Bureau (CFPB), which would increase the burden on credit unions making home equity lines of credit (HELOCs).

The rule change would implement amendments made to the Home Mortgage Disclosure Act (HMDA) by the Dodd-Frank Act, as well as additional revisions proposed by the CFPB. The comment period is now open for the Regulation C changes.

In a recent letter to the CFPB, CUNA urged the bureau to exempt credit unions, as well as other community financial institutions, from the new additional proposed requirements in the proposed rule.

CUNA is most concerned with the proposed mandatory reporting of HELOCs, saying that "such reporting is currently optional and not required by statute."
 
The proposal requires credit unions to report more information on mortgage loan applications and originations, mandated by the Dodd-Frank Act--information that includes age, credit score, property value, occupancy type and more. The CFPB has also proposed to require additional reporting, including the first draw amount at account opening for HELOCs and other open-end lines of credit secured by a dwelling.

Many credit unions treat HELOCs more like consumer loans than mortgage loans, and therefore are often managed on different operating systems and platforms than traditional mortgage loan origination systems. CUNA believes this will lead many credit unions to have "extreme difficulties" providing the required HELOC data.

"The current rule already provides an option of reporting HELOC information for those institutions that have the capacity to do so," the letter reads. "To mandate reporting of all HELOCs for credit unions would be unwarranted and costly. Most important, this would be yet another requirement that would divert credit unions from actual lending or providing other needed member services."

CUNA is seeking comments on the proposed rule and will be filing a formal, detailed comment letter on the proposal before the comment period closes.

Use the first resource link below to access the CUNA letter letter. The Comment Call will be available through the second link once it is posted to the CUNA website.

CUNA encourages CUs to describe latest exam via survey

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MADISON, Wis. (8/7/14)--The Credit Union National Association and state leagues are reminding credit unions to share their examination experiences through CUNA's online survey.
 
The survey gives credit unions the chance to provide feedback to CUNA and state leagues on their most recent examinations by the National Credit Union Administration or state regulators.
 
"We are particularly interested in hearing from credit unions that have been examined since the last time they completed the survey, or that have not completed this exam survey," said CUNA interim President/CEO Bill Hampel.
 
Paul Gentile, head of CUNA's Examination and Supervision Subcommittee, added, "Each credit union should want its exam story  to be heard through this survey so its individual experience is part of the whole narrative that CUNA is delivering to regulators." Gentile is president/CEO of the Massachusetts Credit Union League, New Hampshire Credit Union League and Credit Union Association of Rhode Island.
 
As of February, more credit union CEOs were satisfied with their exams (58%) than dissatisfied (27%), although this finding has slipped slightly from 2012's results of 61% and 25% ( News Now March 27).
 
The ongoing survey covers topics such as the length of an on-site exam, the satisfaction of the credit union with the exam and the results, and problems areas--if any--noted by the examiner. CUNA has provided an optional section where credit unions can identify and rate individual examiners.
 
"Advocating on credit unions' behalf to improve the examination process is one of the highest priorities of both CUNA and the leagues," Hampel said. "Addressing that priority requires that CUNA be very well informed on what has been going on in credit union examinations, both the good and the bad. That's why it is so vital that credit unions complete the survey."
  
Survey replies are confidential, and identifying information from individual credit union respondents will not be seen by individuals outside of CUNA's Market Research Department. Only summary results will be reported.

White paper examines employee perception of cyberattacks

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WASHINGTON (8/6/14)--Of nearly 500 data breaches analyzed from the first half of 2013, 89% could have been avoided with controls and security best practices, according to a report from Online Trust Alliance.

SilverSky, a CUNA Strategic Services alliance provider, has released a white paper about perception of cyberattacks on businesses and organizations.

SilverSky surveyed approximately 200 employees about their perception of cyberattacks, and 78% said their company had been victims of such attacks one to five times over the past year. The majority of these attacks (71%) are phishing scams, in which an e-mail is made to look like an official communication from a trustworthy entity and contains links to website that look real, but are infected with malware or will steal personal information.

The following percentage of surveyed employees said there is perceived inadequacy:
  • Socially engineered Trojans, 31%. Where a victim is tricked into doing the scammer's bidding, which includes accessing a fraudulent website and entering confidential information, phony breaking news or sale alerts or false lottery winnings. Phishing is an example;

  • Botnets, 25%. A botnet is a network of computers that have been infected by a bot, a type of malware that allows the attacker to take over an affected computer;

  • Unpatched exploits, 19%. Vulnerabilities in software that has not been secured through an update from the provider;

  • Distributed denial-of-service (DDoS) attacks, 12%. A situation when compromised computers, usually infected by a Trojan, attack a single system, often crashing it; and

  • Zero-day attacks, 12%.  An attack that exploits a previously unknown vulnerability in existing software.
When asked what is preventing companies from doing a better job monitoring, protecting and analyzing cyberattacks, 64% said the cost, 44% said time constraints and 42% said a lack of skill sets or in-house knowledge.

Use the resource link below to access the paper, titled "Navigating the Pitfalls of Attack Prevention: A Look at Employee Perception."

Study shows big banks mislead on overdraft programs

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CHICAGO (8/6/14)--Big-bank branches' explanations of overdraft programs can be inconsistent and unclear according to a report published by the Woodstock Institute, a nonprofit research and policy organization. The report cites 64 mystery shopping visits at 39 bank branches in Chicago; Durham, N.C.; New York City and Oakland, Calif.

Through the visits to branches, the study found:
  • Explanations of overdraft programs in the four cities were "highly inconsistent and often unclear and incorrect;"

  • Bank employees did not clearly or correctly explain how overdraft fees are triggered, making it "difficult or impossible" for consumers to understand the costs; and

  • Bank employees "frequently" did not explain the opt-in requirement for ATM and debit courtesy overdraft, leading some to believe it was an automatic feature.
The four organizations that participated--Woodstock, the California Reinvestment Coalition, the New Economy Project and Reinvestment Partners--made several recommendations to federal banking regulators and the Consumer Financial Protection Bureau (CFPB). These include limiting overdraft fees, prohibiting financial incentives to employees for sale of overdraft products and creating a uniform standard for verbally describing overdraft products and fees.

The organizations visited branches of the four largest banks by deposit size in their respective states, which included Bank of America, BB&T, Capital One, Citibank, JPMorganChase and Wells Fargo, among others.

A July CFPB report on overdraft data found that overdraft and non-sufficient funds fees make up the majority of checking account fees incurred by consumers, approximately 75% of total fees paid by opted-in consumers, averaging more than $250 per year.

Sen. Brown: RBC proposal raises CU parity concerns

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WASHINGTON (8/6/14)--The National Credit Union Administration's risk-based capital (RBC) proposal raises concerns about credit unions' ability to compete with community banks, said Sen. Sherrod Brown (D-Ohio). Brown, chair of the Senate Banking subcommittee on financial institutions and consumer credit, wrote to the agency to share concerns from Ohio's credit unions.

"Numerous entities have noted that the proposal applies risk weights to mortgages and member business loans that are substantially higher than those applicable to community banks under their risk-based capital rules," the letter reads. "While the NCUA has been urged to address credit union lending concentration, it seems appropriate to consider credit unions' concern about parity."

Brown said he supports heightened capital requirements to "lower both the frequency and the cost of financial institution failures," but he echoed concerns from Ohio credit unions, especially when it comes to raising capital from limited sources.

To date, more than 30 legislators have written to the NCUA with concerns about its RBC proposal, in addition to 324 representatives that signed a letter in May with similar concerns.

NCUA Chair Debbie Matz has said the proposal will undergo changes, notably to the proposed 18-month implementation period, as well as risk weights.

CFPB offers 2nd TILA-RESPA integrated disclosure webinar

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WASHINGTON (8/6/14)--With the new mortgage disclosure rule to take effect in less than a year, the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve will host a webinar Aug. 26 to address implementation and other questions.

The rule consolidates existing mortgage disclosures required under the Truth in Lending Act-Real Estate Settlement Act (TILA-RESPA) into two integrated forms.

The session is meant to address specific questions related to rule interpretation and implementation challenges that have been raised by creditors, mortgage brokers, settlement agents, software developers and other stakeholders.

According to the CFPB, it will host several similar webinars to answer questions and respond to feedback throughout the new rule's implementation process.

The webinar is scheduled to begin at 2 p.m. (ET) Aug. 26.

Use the resource links below for more information.

CU milestone: 100M memberships reached nationwide

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WASHINGTON (8/6/14)--Credit unions have reached and surpassed 100 million memberships nationwide--equating to one in every three Americans, the Credit Union National Association announced Tuesday.
 
Click to view larger image Click for larger view
The count is based on data collected from credit unions and compiled by CUNA in its June 2014 monthly credit union estimates. CUNA estimates that credit union memberships expanded by 2.9% in the past 12 months, from June 2013 to June 2014, and the 100 million mark was eclipsed in June.

This represents a continuation, and acceleration,  of trends previously reported: In 2013 memberships expanded by 2.5% and in 2012 memberships grew 2.1%. CUNA expects the membership growth to continue in the second half of 2014 and exceed the full-year growth of the previous year.
 
Credit unions added a total of 2.85 million additional memberships over the past year--the largest reported increase in more than a quarter century. And, in percentage terms, the 2.9% increase was the fastest since 2000, according to the CUNA analysis.
 
"Clearly, there is growing recognition for credit unions among consumers," said CUNA interim President/CEO Bill Hampel. "They increasingly understand that a credit union places their interests above all else, particularly in returning financial benefits to consumer members in the forms of lower rates on loans, higher returns on savings, and lower and fewer fees." He added that, in 2013, those financial benefits totaled more than $6 billion.
 
Hampel pointed out that, as cooperatives, credit unions are owned by their members and exist to provide financial services to those members. Banks, he noted, which are owned by shareholders, exist to return profits to those shareholders.
 
"It's the structure of credit unions--as not-for-profit, democratically led and cooperatively owned financial institutions--that allows credit unions to maintain this focus on returning financial benefits to members," CUNA leader Hampel said. "In fact, by doing so, credit unions have earned the satisfaction and trust of their existing members--and are attracting even more."
 
At least two key measurements of consumer attitudes have recently underscored the reputation that credit unions have built among their members. At year-end 2013, the American Customer Satisfaction Index found, for the fifth straight year, that credit unions lead banks in customer satisfaction--scoring 85 out of 100, compared to 78 for all banks. Credit unions have topped banks in each of the five years that they have appeared on the index.
 
In 2013, the Chicago Booth Kellogg School Financial Trust Index showed that consumers trust credit unions more than banks. The index, sponsored jointly by the Kellogg School of Management at Northwestern University and the University of Chicago Booth School of Business,  showed trust in credit unions is 62% while trust in big banks is 28%.
 
CUNA interim Chief Economist Mike Schenk said other factors within the financial services marketplace have played key roles in the credit union growth. He noted that a growing number of consumers continue to express dissatisfaction with big Wall Street banks due to economic downturn and consumer movements such as Bank Transfer Day in 2011, when consumers were urged through a grassroots movement--and primarily on social media--to leave big banks and move their money to a credit union or small bank because the organizations tend to offer better rates and incur fewer fees.
 
"In 2010, credit union membership barely grew, expanding by just about 0.65%, or about 600,000 memberships," Schenk said. "But, with the spotlight turned in 2011 to the increasing fees banks were charging--particularly for debit cards and other products--and the additional publicity for the lower and fewer fees at credit unions by contrast, membership growth that year more than doubled over the previous year, by 1.4 million--and the rate of growth has increased in each subsequent year."
 
Schenk noted that not everyone can join the same credit union, but there is a credit union for everyone. He noted that consumers wishing to find a credit union they are eligible to join should visit aSmarterChoice.org , a website that includes a comprehensive credit union finder with every credit union in the country, and helps consumers learn more about credit unions.
 
Additionally: Hundreds of credit union members have shared their credit union stories with their photo on americascreditunions.org and social media to show they are part of an organization that focuses on their best financial interests. Learn more about the 100 million credit union memberships nationwide milestone by visiting www.americascreditunions.org .

62 CUs pay total $57,750 for late call reports

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ALEXANDRIA, Va. (8/6/14)--Sixty-two credit unions were identified by the National Credit Union Administration as being subject to civil money penalties for the late filing of their first-quarter call reports, and all 62 have consented to those penalties, the NCUA announced Tuesday.
 
Those late filers will pay a total of $57,750 in penalties, with individual penalties ranging from $150 to $20,000, the NCUA said. Under federal law any funds from civil money penalties must be sent to the U.S. Treasury.
 
The NCUA broke down the 62 late filers this way:
  • Thirty-eight have assets of less than $10 million;
  • Eighteen have assets between $10 million and $50 million; and
  • Six have assets between $50 million and $250 million.
Use the resource link to see the a list of the credit unions that have agreed to pay the penalties.
 
Although NCUA Chair Debbie Matz has made it clear that the agency is shooting for zero tolerance of call report late filing, she has made it equally clear that the regulator makes exceptions for credit unions able to document certain filing hardships. They could include a breakdown in the credit union's core operating system, a natural disaster taking place in the credit union's community or the incapacitation of a key employee who would be responsible for filing the report.
 
After identifying 104 credit unions as late for the first quarter of 2014, the NCUA--consulting with regional offices and, when appropriate, state supervisory authorities--determined mitigating circumstances in 20 cases allowed credit unions to avoid a penalty. News Now reported the agency had identified possible financial penalties against 84 credit unions in its July 1 issue.

A number of credit unions subsequently provided the agency with information about extenuating circumstances that caused them to miss the deadline and NCUA determined 22 of those credit unions would not be penalized.

"Our intention is that credit unions fully comply with the deadline for filing call reports," Matz said Tuesday in announcing the fines. "We've seen an improvement from the days when more than 1,000 credit unions filed late, but we haven't yet reached the goal of timely filing by all credit unions every quarter."

Use the resource links to access a January NCUA Letter to Credit Unions about late-filing penalties and to view the agency's how-to video describing the call report-filing process.

CUNA presses NCUA for real relief, BSA clarifications

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ALEXANDRIA, Va. (8/5/14)--Concerned that the cumulative regulatory burden on credit unions is at an "all-time high," the Credit Union National Association is urging regulatory relief for credit unions in a new letter to the National Credit Union Administration. The NCUA is currently in the process of its annual review of one-third of its regulations, a cycle that results in all regulations being reviewed over each three-year period.

"Advocating for a more favorable regulatory environment for credit unions is our top regulatory advocacy priority," CUNA's Deputy General Counsel Mary Dunn said. "The letter sent to NCUA yesterday cites all current rules, including those imposed by other agencies under the Dodd-Frank Act, as contributing to the regulatory burden."

The letter also urges the NCUA to establish a credit union cybersecurity council or working group that would "help identify and address data security concerns in a manner that recognizes the unique nature and needs of credit unions, without imposing a new layer of regulatory compliance." 

"In light of the imperative need to reduce credit unions' regulatory obligations, we urge NCUA to add new or expand existing rules only if required to do so by law, or doing so is clearly warranted based on a compelling safety and soundness reason that can be satisfactorily addressed in no other manner," Dunn stated in the letter. 

Agencies should refrain from categorizing changes as 'regulatory relief' unless the revisions result in less time and money being spent by credit unions to fulfill requirements, CUNA says.

The letter also advocates for consistency among regulators when it comes to enforcing Bank Secrecy Act compliance.

"We continue to hear of instances in which different regulators and examiners interpret BSA requirements and guidance differently, which makes it difficult for credit unions to satisfy examiners and plan accordingly throughout their organizations," the letter reads. "Greater consistency would also be helpful with the interpretation of requirements regarding BSA reports."

CUNA recommended a credit union's BSA examination be based on the "types of activities the credit union actually engages in and focus on its risks."

CUNA also recommended that the NCUA should provide a report on its website on how it plans to address recommendations received during the regulatory review process, as well as a summary of comments that were received, but not acted on.

CUNA will be sending the NCUA more recommendations for regulatory reductions in the coming weeks, as well as input on the agency's Economic Growth and Regulatory Paperwork Reduction Act request for comments, which are due by Sept. 2.

Legislators from farm states voice RBC plan concerns

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WASHINGTON (8/5/14)--Three legislators have joined more than 30 of their colleagues by writing the National Credit Union Administration to express concerns with the agency's risk-based capital proposal. Sens. John Thune (R-S.D.) and John Hoeven (R-N.D.), along with Rep. Jim Bridenstine (R-Okla.) sent their letters late last week.

Hoeven and Thune, who serves on the Senate Finance subcommittee on international trade, customs and global competitiveness, wrote on behalf of the 81 federal and state chartered credit unions in their state, which serve more than 450,000 members with assets of more than $5.5 billion total.

"We share the concerns of many of our colleagues … that your proposed regulations regarding risk-based capital could have unintended consequences that could negatively impact the availability and affordability of financial products offered to consumers," the letter reads, adding that many of the credit unions in the Dakotas serve agriculture-based communities.

Bridenstine's letter urges consideration of the effects the proposal would have on credit unions with high levels of concentration in assets such as member business loans, mortgages and long term investments.

"NCUA examiners already have the ability to mitigate concentration risk through other regulatory actions, it appears that the inclusion of concentration risk as a part of the calculation of capital rules could be redundant and place credit unions at a competitive disadvantage relative to other insured depository institutions," the letter reads.

Both letters also ask the NCUA to reconsider the proposed 18-month implementation period, which NCUA Chair Debbie Matz said will be changed.

In addition to legislators writing individually, 324 representatives signed a letter in May outlining issues with the proposal.

Rick Metsger named NCUA vice chair

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ALEXANDRIA, Va. (8/5/14)--National Credit Union Administration board member Risk Metsger has been named vice chair of the agency. NCUA Chair Debbie Matz announced the designation Monday.

"Rick has built on his experience and knowledge as a legislative leader and a credit union board member to become a strong, objective, and thoughtful regulator," Matz said in making the designation. "Rick is faithfully committed to our shared goal of protecting the safety and soundness of America's credit unions and the 97 million members who count on NCUA to insure their funds. During his time on the board, Rick has stood firm on regulatory principles, asked insightful questions, and strived toward sound public policy in our board decisions."

Click to view larger image National Credit Union Administration board member Rick Metsger, right, offers suggestions at the agency's board meeting last week, while Chair Debbie Matz listens. Matz named Metsger NCUA vice chair Monday. Pictured in back row, from left: Mike McKenna, NCUA general counsel and Steve Bosack, chief of staff. (CUNA Photo)
Credit Union National Association Deputy General Counsel Mary Dunn said CUNA welcomes the announcement: "This comes as recognition of Rick Metsger's key role in the credit union system."

Dunn noted that the agency's recent proposal to give credit unions more regulatory flexibility by managing their own fixed assets was a stated goal of Metsger when he was appointed to the agency in 2013.

She added that CUNA looks forward to continuing working with the new vice chair on the agency's risk-based capital proposal and on the range of regulatory issues that face credit unions.

Metsger was nominated by President Barack Obama in May 2013 and participated in his first board meeting in September of that year. His term will expire Aug. 2, 2017. He was named the NCUA representative on the board of NeighborWorks America on Jan. 1.

Previously he served in the Oregon state senate from 1999 to 2011, including a term as Senate President Pro Tempore. He also served in the board of Portland Teachers FCU, now known as OnPoint FCU, based in Portland, Ore with $3.4 billion in assets.

Mich., Wash. primary candidates win CU support

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WASHINGTON (8/5/14)--Primary elections today in Michigan and Washington feature several pro-credit union candidates. The candidates below have received maximum $5,000 in financial support allowed for primaries from the Credit Union Legislative Action Council (CULAC). CULAC has been involved with more than 300 Senate and House races this election cycle. 

In Michigan's 14th District, Democrat Rudy Hobbs has garnered support in his bid to replace Rep. Gary Peters (D), who is running for Senate. Hobbs will face three other Democrats in the primary.

Hobbs, a current state representative, has been an ally of credit unions throughout his tenure. During his candidacy for Congress, he has reached out to Michigan Credit Union League (MCUL) officials and local credit unions to learn about issues they face, and how federal legislation can impact them.

"Throughout his tenure in the Michigan House, Rudy Hobbs has been a fighter for consumers and has promoted affordable financial services for neighborhoods and businesses alike," said David Adams, CEO of MCUL and its affiliates in a statement. "We have no doubt he will continue to be a champion for his constituents and embody the credit union philosophy of 'people helping people' in Congress."

In Michigan's 8th District, Republican Mike Bishop is running for the seat currently held by Rep. Mike Rogers (R), who will not seek re-election. Rogers himself is a longtime credit union advocate, having pushed to keep the credit union tax status.

Bishop is a former state senator and representative, serving as Senate Majority Leader, chair of the Senate Banking and Financial Institutions Committee and the House Commerce subcommittee on banking and finance.

Adams called Bishop a "good friend" of credit unions during his time in the state legislature.

In the 2nd District, State Sen. John Moolenaar (R) has pledged to continue his support of pro-credit union initiatives and legislation during his campaign to replace Rep. Dave Camp (R), who has served since 1991 and announced he will not seek re-election.

Rep. Dan Benishek (R) will run against another Republican candidate for the chance to be elected to a second term in the state's 1st District. Benishek, a credit union member, has supported efforts to maintain credit unions' tax status and reduce regulatory burden.

Other credit union-supported candidates in primaries today include Debbie Dingell (D), running for Michigan's 12th Congressional District, and Washington state Rep. Dan Newhouse (R), running against 11 other candidates in the state's 4th District primary.

NEW: 62 CUs to pay total $57,750 for late-filing penalties

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ALEXANDRIA, Va. (8/5/14, UPDATED 2:28 p.m. ET)--Sixty-two credit unions were identified by the National Credit Union Administration as being subject to civil money penalties for the late filing of their first-quarter Call Reports and all 62 have consented to those penalties, the National Credit Union Administration announced today.
 
Those late filers will pay a total of $57,750 in penalties, with individual penalties ranging, the NCUA said, from $150 to $20,000. The median fine was $243. Under federal law any funds from civil money penalties must be sent to the U.S. Treasury.
 
Read News Now Wednesday for more.

NEW: 100M memberships reached at CUs nationwide

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WASHINGTON (8/5/14, UPDATED 11 a.m. ET)--Credit unions have reached and surpassed 100 million memberships nationwide--equating to one in every three Americans, the Credit Union National Association announced today.
 
The 100 million memberships count is based on data collected from credit unions and compiled by CUNA in its June 2014 "Monthly Credit Union Estimates." CUNA estimates that credit union memberships expanded by 2.9% in the past 12 months, from June 2013 to June 2014, and the 100 million mark was eclipsed in June. This represents a continuation, and acceleration,  of trends previously reported: In 2013 memberships expanded by 2.5% and in 2012 memberships grew 2.1%. CUNA expects the membership growth to continue in the second half of 2014 and exceed the full-year growth of the previous year.
 
Credit unions added a total of 2.85 million additional memberships over the past year--the largest reported increase in more than a quarter century. And, in percentage terms, the 2.9% increase was the fastest since 2000, according to the CUNA analysis.
 
"Clearly, there is growing recognition for credit unions among consumers," said CUNA President/CEO Bill Hampel. "They increasingly understand that a credit union places their interests above all else, particularly in returning financial benefits to consumer members in the forms of lower rates on loans, higher returns on savings, and lower and fewer fees." He added that, in 2013, those financial benefits totaled more than $6 billion.
 
Hampel pointed out that, as cooperatives, credit unions are owned by their members and exist to provide financial services to those members. Banks, he noted, which are owned by shareholders, exist to return profits to those shareholders.
 
"It's the structure of credit unions--as not-for-profit, democratically led and cooperatively owned financial institutions--that allows credit unions to maintain this focus on returning financial benefits to members," CUNA leader Hampel said. "In fact, by doing so, credit unions have earned the satisfaction and trust of their existing members--and are attracting even more."
 
At least two key measurements of consumer attitudes have recently underscored the reputation that credit unions have built among their members. At year-end 2013, the American Customer Satisfaction Index found, for the fifth straight year, that credit unions lead banks in customer satisfaction--scoring 85 out of 100, compared to 78 for all banks. Credit unions have topped banks in each of the five  years they credit unions have appeared on the index.
 
In 2013, the Chicago Booth Kellogg School Financial Trust Index showed that consumers trust credit unions more than banks. The index, sponsored jointly by the Kellogg School of Management at Northwestern University and the University of Chicago Booth School of Business,  showed trust in credit unions is 62% while trust in big banks is 28%.
 
CUNA Chief Economist Mike Schenk said other factors within the financial services marketplace have played key roles in the credit union growth. He noted that a growing number of consumers continue to express dissatisfaction with big Wall Street banks due to economic downturn and consumer movements such as Bank Transfer Day in 2011, when consumers were urged through a grassroots movement--and primarily on social media--to leave big banks and move their money to a credit union or small bank because the organizations tend to offer better rates and incur fewer fees.
 
"In 2010, credit union membership barely grew, expanding by just about 0.65%, or about 600,000 memberships," Schenk said. "But, with the spotlight turned in 2011 to the increasing fees banks were charging--particularly for debit cards and other products--and the additional publicity for the lower and fewer fees at credit unions by contrast, membership growth that year more than doubled over the previous year, by 1.4 million--and the rate of growth has increased in each subsequent year."
 
Schenk noted that not everyone can join the same credit union, but there is a credit union for everyone. He noted that consumers wishing to find a credit union they are eligible to join should visit aSmarterChoice.org, a website that includes a comprehensive credit union finder with every credit union in the country, and helps consumers learn more about credit unions.
 
Additionally: Hundreds of credit union members have shared their credit union stories with their photo on americascreditunions.org and social media to show they are part of an organization that focuses on their best financial interests. Learn more about the 100 million credit union memberships nationwide milestone by visiting www.americascreditunions.org.

CUNA, partners urge Congress to act on cyber protections

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WASHINGTON (8/4/14)--More than a dozen financial services organizations have praised new cybersecurity legislation passed by the Senate Select Committee on Intelligence. The Credit Union National Association, along with other organizations dedicated to credit unions, banks, investments and financial markets, signed a letter supporting the bill.

The Cybersecurity Information Sharing Act (CISA) of 2014 (S. 2588) is intended to strengthen defenses against cyberattakcs by encouraging the business community and the government to share information about threats more quickly, while ensuring privacy.

The letter points out the need for Congress to act on the bill, citing cyber threats that are more "sophisticated and dangerous than ever," and pointing out the need for public/private cooperation to share information.

"As it stands today, our laws do not do enough to foster information sharing and establish clear lines of communication with the various government agencies responsible for Cybersecurity," the letter reads. "Simply put, there is a limit to our ability to protect our customers and there is a clear need for Congress to act."

The bill would strengthen the ability of private sector and federal government to share information, by narrowing liability protections and strengthening privacy protections.

"For the undersigned financial services trade associations, more effective information sharing provides some of the strongest protections of privacy, as it is information about our members' customers that we are seeking to protect from those who would seek to steal or destroy that information," the letter reads.

The letter, addressed to Sen. Harry Reid (D-Nev.), Senate Majority Leader and Sen. Mitch McConnell (R-Ky.), Senate Minority Leader, urges the legislators to move CISA to the Senate floor as soon as possible.

New fraud scheme involves hacking of executives' e-mail

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WASHINGTON (8/4/14)--An employee might not hesitate to respond if their superior asks for secure information, and that's the response fraudsters are hoping for, according to a report by the Information Security Media Group. The report cites numerous warnings issued by federal authorities and researchers in recent weeks.

According to the report, hackers infiltrate e-mail networks and take over an executive's account. The account is then used to send e-mails to lower-level employees instructing them to perform a task with a sense of urgency. This usually involves confidential information, and sometimes involves instructing the employee to schedule fraudulent funds transfers.

The Internet Crime Complaint Center (IC3), a partnership between the FBI and the National White Collar Crime Center, has issued a notice about this scam. The IC3 reports that the average dollar loss per successful fraudulent transfer is approximately $55,000, but there have been reports of losses exceeding $800,000.

The IC3 also reported that victims are generally from the U.S., England and Canada, and are focused on institutions that generally conduct high-dollar wire transfers, so the requested amount is not uncommon.

Use the resource link below for more information. Also, see related story: DDoS threat landscape continues to evolve .

Big banks' funding advantage less, 'too big to fail' persists says GAO

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WASHINGTON (8/4/14)--While the Dodd-Frank Act prohibits rescues of individual failing financial institution, there is a debate among market observers about whether some of the largest banks are still benefitting from belief in the notion of "too big to fail." This is according to a report from the Government Accountability Office (GAO) that examined whether these large banks are benefitting from the belief that the government will intervene to prevent failure.

The GAO reviewed the economic benefits that banks with more than $500 billion in consolidated assets may have received as a result of actual or perceived support from the government.

The report notes that, in response to recent regulatory reforms, two of three major rating agencies reduced or removed assumed government support from overall credit ratings of some large bank holding companies.

Analysis by the GAO suggests that large bank holding companies had lower funding costs than smaller ones during the financial crisis, but that there is mixed evidence of these advantages in recent years.

The GAO created its own series of 42 statistical models that take into account bond funding costs and credit risk levels to paint a picture of bond funding cost differences between bank holding companies with between $1 trillion and $10 billion.

"All 42 models found that larger bank holding companies had lower bond funding costs than smaller ones in 2008 and 2009, while more than half of the models found that larger bank holding companies had higher bond funding costs than smaller ones in 2011 through 2013," the report reads. "However, the models' comparisons of bond funding costs for bank holding companies of different sizes varied depending on the level of credit risk."

The report warns that the GAO estimates of differences in funding costs reflect a combination of factors, including investors' beliefs about the likelihood a bank will fail and if it will be rescued by the government. Because of this, the report cannot precisely identify the influence of each specific factor.

Use the resource link below to access the report.

BSA clarifications could strengthen member/customer due diligence

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WASHINGTON (8/4/14)--A rule has been proposed to clarify and strengthen member/customer due diligence obligations of financial institutions in an effort to prevent anonymous companies from conducting illegal activity in the American financial sector. Proposed by the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN), the rule would amend  Bank Secrecy Act regulations.

The proposal was preceded by a related advance notice of proposed rulemaking from 2012. It woudl create a new, standardized format for covered financial institutions to collect information on beneficial owners, defined as individuals who own, control and profit from the companies they service. Financial institutions would be required to identify and verify any individual who owns 25% or more of a legal entity, and an individual who controls the legal entity.

The amendments clarify that customer (member) due diligence consists of:
  • Identifying and verifying the identity of members;

  • Identifying and verifying the beneficial owners of legal entity members;

  • Understanding the nature and purpose of member relationships; and

  • Conducting ongoing monitoring to maintain and update member information and identify and report suspicious transactions. 
David Cohen, Undersecretary for Terrorism and Financial Intelligence said the proposed rule would provide a new tool to track down people behind companies that "secretly move and launder their illicit gains."

CUNA continues to urge FinCEN and other regulators to minimize BSA regulatory burdens on credit unions.

Use the resource link below to access to the complete proposed rule.

204 grants equaling more than $1M got to 174 LICUs

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ALEXANDRIA, Va. (8/4/14)--On Friday, the National Credit Union Administration announced it  awarded $1,051,850 through 204 grants given to 174 low-income credit unions (LICUs).

The funding was given under the second 2014 round of Community Development Revolving Loan Fund grants. The agency's Office of Small Credit Union Initiatives administers the fund, which the U.S. Congress established to provide grants and loans to credit unions serving low-income communities.

The grants can be used for such things as to expanding services to members, training staff and collaborating for greater operational efficiencies.

 
Click to view larger image Source: NCUA

Also, new product or service grants can fund activities like a credit union building its first website or expanding into mobile banking, online applications, card services or home banking. Staff and volunteer training grants support training on lending and collections, governance, compliance and financial counseling for front-line staff to provide to members.

Certification grants help credit unions to apply to the U.S. Department of the Treasury to become a Community Development Financial Institution. Treasury's CDFI Fund provides resources to financial institutions serving low-income households and communities that lack adequate access to affordable financial products and services.

Use the resource links to access the grantees for this round of CDRLF awards and to read about the NCUA's year-round Urgent Needs grant program for emergency assistance.

Proposed rule eliminates 5% fixed-asset cap

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ALEXANDRIA, Va. (8/1/14)--Credit unions would be able to manage their fixed assets without waivers or permissions from the National Credit Union Administration under a proposed rule issued by the agency board Thursday.

The rule, which applies to credit unions with more than $1 million in assets, would allow credit unions to exceed the 5% limit without prior NCUA approval, provided it is done by establishing and following a fixed-asset management policy. It would also simplify the partial occupancy requirement for premises acquired for future expansion.

Board member Rick Metsger said that the NCUA's review of fixed assets demonstrated that many factors, including net worth, delinquency ratios and CAMELS rating were not significantly different for credit unions with fixed assets above 5% against those that are below 5%.

"[Our analysis] also demonstrated that investments in fixed assets were not a major contributor to losses for the Nation Credit Union Share Insurance Fund," he said. "Quite the contrary, investment in fixed assets correlates to positive asset growth, share growth and membership growth."

In March 2013, the NCUA issued proposed amendments to the rule to further clarify the rule, but without any changes to the regulatory requirements. During that proposal's comment period the Credit Union National Association was among those suggesting elimination of the fixed-asset cap.

CUNA advocated for the removal of the cap, and suggested the agency replace it with requirements that credit unions have written policies that set parameters for ownership of fixed assets. CUNA also noted that the policies and their implementation should be subject to examiners review. Each of those items are contained in the NCUA's proposed rule.

Metsger said that reforming the fixed-asset cap has been a priority since he took office in 2013, and NCUA Chair Debbie Matz credited him for initiating the effort to change the rule. Metsger called the proposal a "positive regulatory relief measure" that would help both credit unions and agency staff.

Matz said the proposal will move the agency away from micromanaging credit unions' business decisions that have no impact on safety and soundness.

"Rather than spending hours writing a waiver application, credit unions could better devote their time to developing a fixed-assets management program under this proposed rule," she said.

The proposal would apply to more than 3,500 credit unions, Matz said.

The comment period for the proposed rule is open for 60 days after it is published in the Federal Register .

Use the resource link below for more information.

New bill would push CFPB supervision trigger to $50B

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WASHINGTON (8/1/14)--Sens. Pat Toomey (R-Pa.) and Joe Donnelly (D-Ind.) have introduced a bill that would raise the credit union threshold for supervision by the Consumer Financial Protection Bureau (CFPB) to $50 billion in assets, up from the current $10 billion. If passed, the bill would exempt all but one credit union from direct CFPB supervision.

"Our thanks to Sens. Toomey and Donnelly for introducing this legislation, which would ease the regulatory burden facing credit unions affected by direct CFPB supervision," said John Magill, executive vice president of government relations for the Credit Union National Association.

"While this bill is a welcome development, CUNA continues to urge the CFPB to use its broad exemption authority for credit unions more extensively, as we strongly believe there is more CFPB can and should do on its own to exempt credit unions from unnecessary regulations," Magill added.

Former congressman and House Banking Committee Chair Barney Frank, a Democrat from Massachsetts,  testified at a House Financial Services Committee hearing last week that the examination threshold should be raised.

CFPB toolkit helps low-income consumers with financial decisions

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WASHINGTON (8/1/14)--In a new partnership with national and local organizations across the country, the Consumer Financial Protection Bureau (CFPB) will help to train social services staff to provide financial education and tools to clients with low-to-moderate incomes.

As part of that partnership, the CFPB Wednesday unveiled a new online toolkit called "Your Money, Your Goals." 

The bureau bills it as a comprehensive guide to help consumers make empowered financial decisions, and it addresses topics like budgeting daily expenses, managing debt, and avoiding financial tricks and traps.

Credit unions are mentioned throughout the tool and are included in the section to select financial services products and providers. The resource is available online in English and Spanish and includes information, checklists, and worksheets consumers can use in their everyday lives.  

Use the resource link to read more.

Former Penn. CU employee prohibited from work at FIs

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ALEXANDRIA, Va. (8/1/14)--Melissa Rosing, a former employee of Southwest Communities FCU, based in Carnegie, Pa. with $15 million in assets, has been prohibited from participating in the affairs of any federally insured financial institution. The National Credit Union Administration issued the prohibition order in July.

Rosing pleaded guilty to charges of theft, theft by deception, forgery, receiving stolen property and bad checks. She was sentenced to five years of probation and ordered to pay restitution in the amount of $25,046.50.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million, according to the NCUA.

Top Financial Services Dem weighs in on RBC

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WASHINGTON (8/1/14)--The ranking Democrat of the House Financial Services Committee, Rep. Maxine Waters of California, met recently with National Credit Union Administration Chair Debbie Matz to discuss the agency's risk-based capital (RBC) plan. She followed up with a letter Thursday asking the NCUA to make every effort to ensure credit unions and banks are regulated equally in this area.

Waters noted her support of the NCUA's effort to revise credit union capital rules, as required under Dodd-Frank Act, so that "lessons learned from the (financial) crisis are not forgotten." However, Waters added that it is "also important that those rules retain the strengths of the current examination process without unintentionally forcing examiners or credit unions to merely check boxes, especially with regard to concentration and interest rate risks."

"Although the statute dictates that NCUA's regulations must address concentration and interest-rate risks, the current proposal does not allow for examiners to impose capital requirements on credit unions that are tailored to the individual risks of the credit union's portfolio"

Waters asks the NCUA leader to revisit the RBC proposal, particularly with an eye to dislodging unintended consequences that could adversely affect certain credit unions.

$1.1M trimmed from NCUA budget; less than past mid-year cuts

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ALEXANDRIA, Va. (8/1/14)--Approximately $1.1 million has been trimmed from the National Credit Union Administration's budget this year, according to the agency's mid-year operating budget report Thursday. The reduction in costs for the year ending Dec. 31 will bring the revised NCUA budget to $266,920,296.

The majority of unused budgetary funds, $1.525 million, is a result of vacant staff positions. Pay and benefits account for 73% of the NCUA's total operating budget.

"For the fifth straight year our mid-year budget review has yielded more than $1 million in savings, which will be returned to credit unions," said NCUA Chair Debbie Matz.

She also noted that while this year's reduction is less than it has been in years past, the difference is due to the agency entering this year with 15 vacancies, as opposed to the close to 40 in years past.

Another $90,000 in savings comes from a reduction in the monthly transit subsidy reimbursement, which was lowered to $130 from $245 by Congress after the initial budget was passed.

Other changes in the mid-year budget include:
  • Reduction of $289,000 in travel costs due to updated program and training requirements, expenses from the 2014 National Training Conference coming in under budget and realignment of existing travel dollars among two regions;

  • Increase of $63,000 for an unplanned, unbudgeted real estate brokerage fee due to an early five-year lease negotiation for one of the retail tenants in the agency's Alexandria space. By renegotiating the lease before it was required in 2015, the NCUA has ensured uninterrupted rental income for this tenant through 2019;

  • Increase of $143,000 to support a new license agreement for the agency's Incident Management system, software warranty extension, e-mail software;

  • Increase of $238,000 for prioritized projects recommended by the Information Technology Prioritization Council and to meet growing demand for specialized audio and video expertise for webinars, video conferences and special events; and

  • Increase of $270,000 for compliance with new high-level security requirements mandates by the federal government.
The NCUA also announced that a portion of its retail space in Alexandria will be re-purposed into a dedicated training facility for the agency's exam program. This will result in capital costs of an estimated $200,000 for building renovations and information technology infrastructure updates. According to the NCUA, these costs will be funded from existing NCUA resources.

Use the resource links below for more information.


NCUA: No corporate assessment (but no refunds either)

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ALEXANDRIA, Va. (8/1/14)--Credit unions will not face an assessment this year for the Corporate Credit Union Stabilization Fund, the National Credit Union Administration confirmed at its board meeting Thursday. Future assessments are unlikely as well.

Larry Fazio, NCUA director of examination and insurance, said the improvements to the fund are due to the performance of the NCUA Guaranteed Notes (NGN) program and recent corporate credit union litigation settlements totaling more than $1.75 billion.

Net projected remaining assessments in the Stabilization Fund range from -$2 billion to -$0.6 billion. NCUA Chair Debbie Matz said the double negative projected assessment range is "positive news" for credit unions.

But Fazio emphasized that the negative assessment range does not mean there are funds available to provide refunds to credit unions now, as the improving values of legacy assets are used to secure the NGN. The NCUA also owes $2.6 billion borrowed from the U.S. Treasury. The agency did indicate that some rebate to federally insured credit unions in 2021 might be possible, but only after all obligations, including those to Treasury, have been met.

The board also provided a quarterly update on the status of the National Credit Union Share Insurance Fund (NCUSIF). The fund has an equity rate of 1.29% as of June 30, and reserves are approximately $176.1 million, $8.1 million of which are for specific credit unions.

According to the NCUA, there are 295 CAMEL 4 and 5 credit unions, representing 1.46% of insured shares, or approximately $13.2 billion. The number of CAMEL 4 and 5 credit unions is on the decline. There are 1,466 CAMEL 3 credit unions, representing 10.46% of insured shares, or $94.5 billion. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent only 11.92% of total insured shares.

There have been eight credit union failures so far this year. In 2013 there were 17 total failures.

The NCUA board also approved a community charter expansion for Call FCU, based in Richmond, Va. with $360 million in assets. The credit union was chartered in 1962 to serve the employees of Philip Morris Tobacco Company, also based in Richmond, and converted to a community charter in July 2010, serving approximately 100 select groups and two underserved areas.

The expansion of the charter means approximately 1.3 million people are now in Call FCU's field of membership.

Use the resource links below for more information.

CFPB says debit, ATM overdraft services still raise concerns

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WASHINGTON (8/1/14)--The Consumer Financial Protection Bureau said Thursday that it has studied the effect of a 2010 "opt-in" requirement that depository institutions obtain a consumer's consent before charging fees for allowing overdrafts on most ATM and debit card transactions and found it lacking.
 
The bureau noted it is weighing what additional consumer protections may be necessary for overdraft and related services.
 
A new CFPB report indicated that the majority of debit card overdraft fees are incurred on transactions of $24 or less and that the majority of overdrafts are repaid within three days. "Put in lending terms, if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate," the CFPB said in a release.
 
The  study was based on data from a set of large banks supervised by the CFPB. It found also that  among the banks studied, overdraft and Not-Sufficient-Funds (NSF) fees represent more than half of the fee income on consumer checking accounts. The study found that about 8% of accounts incur the majority of overdraft fees.
 
The CFPB acknowledged that some credit unions and banks do not charge an overdraft fee if the consumer overdraws an account by a small amount; some also cap the number of overdraft and NSF fees they will charge on an account on a single day.

In a related story this week, a Moebs Services study released Tuesday includes information that describes how credit unions remain the most reasonable financial institutions in forgiving members for overdrafts ( News Now July 30).
 
Use the resource link to read the complete CFPB release and to access the study.