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New Supervisory Report On GSEs Launched

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WASHINGTON (9/20/13)--The Federal Housing Finance Agency has broadened its reporting arsenal for reporting on its charges: Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
 
The FHFA announced Thursday that it has a new FHFA Quarterly Performance Report of the Housing GSEs, which provides a summary of data available in Fannie Mae, Freddie Mac and the FHLBanks' individual public filings, including some combined trends.
 
The inaugural issue was released yesterday and it covers the second quarter of 2013. It takes a look at key market drivers such as house prices, average interest rates and swap rates.  It also includes a quarterly update on the conservatorships of Fannie Mae and Freddie Mac.
 
As its name implies, the new report will be produced quarterly. The FHFA Conservator's Report will continue on an annual basis.
 
Use the link to access the newest publication.

NEW: Existing Fed Interchange Fee Cap Rules Will Stay Through Appeals Process

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WASHINGTON (9/20/13, UPDATED 9:54 a.m. ET)--The existing Federal Reserve rules implementing the interchange fee cap and network exclusivity provisions required by the Durbin Amendment will stay in place throughout an appeals process as the Fed seeks to overturn a July court ruling that declared those rules illegal. 
 
So says Judge Richard Leon of the U.S. District Court for the District of Columbia who, of course, is also the judge that ruled the Fed did an inadequate job of implementing the Dodd-Frank interchange rule in 2011.  Leon criticized the Fed for going beyond congressional intent when writing the rule by including too many items considered to be costs for card issuers.
 
Credit Union National Association President/CEO Bill Cheney said of today's decision, "CUNA continues to believe that the Fed's existing rules are far from perfect for credit unions, but in striking down the rule this summer, Judge Leon injected extreme uncertainty into the payment card system, which needs to continue efficiently serving merchants and consumers pending the outcome of this appeal.
 
"CUNA is relieved that there is an order in place that will provide that certainty for now. For credit unions, keeping the existing rules in place pending the appeal limits potentially needless compliance obligations, given the Fed's existing rules could ultimately be upheld. CUNA will now move forward in strong advocacy for credit union interests as the appeal is heard before the D.C. Circuit."
 
CUNA, with its coalition partners, filed a brief with the court calling on Leon to maintain current interchange regulations as the case moves forward. To do otherwise, CUNA noted, would "harm all affected interests, including consumers, and threaten the effective functioning, stability, and security of the electronic debit-card payments system."
 
The defendant Federal Reserve and plaintiff merchants coalition also urged the court to keep the current rule during the Fed appeals process.
 
The Fed, at that time, said a stay "will preserve the status quo in the debit card industry while the board's appeal proceeds, will prevent irreparable injury to plaintiffs in the form of a likely steep increase in interchange fees should the market return to its largely unregulated state prior to the rule, and will avoid mooting the board's appeal."
 
Credit unions under $10 billion are exempt from the fee cap rule, but not the network exclusivity provisions. If Leon's ruling stands on appeal, those provisions would require two unaffiliated PIN and two unaffiliated signature networks not only for each card, but for each transaction. 
 
As to the fee cap, the current Fed rule limits debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards.
 
CUNA maintains all credit unions, including those under $10 billion in assets, are negatively affected by these price controls in the marketplace.

Fed, Merchants Get Expedited Court Action On Interchange Appeal

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WASHINGTON (9/20/13)--The U.S. Court of Appeals for the District of Columbia Circuit moved quickly to approve a request for expedited action on the Federal Reserve Board's appeal in the case known as NACS v. Board of Governors of the Federal Reserve System. The court's approval was issued yesterday--the same day the request was filed.
 
On Thursday, the merchant plaintiffs in the debit card interchange lawsuit and the defendant Fed filed jointly an emergency motion asking the appeals court for quick action in the case. Specifically, the parties asked the D.C. circuit to move on the Fed's appeal that attempts to overturn a lower court ruling that the regulator's implementation of the Dodd-Frank Act debit card interchange fee was faulty and should be scrapped.
 
In the emergency motion the merchants asserted that every day the existing final rule is left in place potentially causes merchants "irreparable injury" because the cap is too high.
 
The Fed argued that expedited treatment is necessary because to vacate the existing rule before a resolution of the appeal "would eliminate the existing regulatory limits on the amount of fees that merchants can be required to pay in connection with each debit card transaction subject to the rule and thus allow the unrestrained imposition of fees by card networks and issuers on the businesses that accept debit cards--precisely the practice that the statute sought to prevent."  The Fed further claimed that expedited treatment is necessary to provide "timely guidance and certainty about the rules and procedures governing the millions of debit card transactions being conducted every day--a matter of unusual public interest." 

The Fed said it could not adopt an interim regulation while the appeal is pending without mooting the appeal. A decision is expected soon from the district judge regarding whether he will leave the stay in place throughout the appeal, a request the Fed, merchants, and financial institutions all have told the judge is the right step.
 
The circuit court approved the following expedited calendar for the appeal:
  • Brief for Federal Reserve 10/21/13;
  • Joint brief for amici in support of Federal Reserve 10/21/13;
  • Joint brief for merchants 11/20/13;
  •  Brief(s) for amici in support of merchants 11/20/13; and
  • Reply brief for Federal Reserve 12/04/13.
Robin Cook, assistant general counsel for special projects for the Credit Union National Association, observed Thursday that based on this schedule, oral arguments likely will be held this spring, with a decision as soon as this summer.  CUNA will be joining a coalition of financial institution trade associations in filing an amicus brief before the D.C. Circuit, and stressed Thursday that the case continues to be a top advocacy priority.

Small Business Leaders Call On Congress To Increase Their Access To Capital

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WASHINGTON D.C. (9/20/13)--With the opportunity to create over 140,000 jobs, small business owners' primary concern is gaining access to additional capital to grow their businesses. During The Hill's Policy Briefing Panel on Small Business, Credit Union National Association Senior Vice President and Chief Economist, Bill Hampel, along with other industry leaders, discussed what small businesses need from the U.S. Congress to be successful.

The main message was simple: remove the barriers that prevent small
Click to view larger image The Hill's policy briefing entitled "Small Business Voices" was live streamed on the publication's website.  Shown here, Credit Union National Association Chief Economist Bill Hampel notes that credit unions and small banks have increased their small business lending by 50% since the beginning of the recession. (CUNA Photo)
 businesses from growing by allowing them more access to capital, and don't hurt small business by destroying consumer confidence with unnecessary drama over the looming federal debt ceiling.

Panelists Mike Roach and Anne Zimmerman, small business owners from Oregon and Ohio, both suggested that passing the Credit Union Small Business Jobs Creation Act, which would eliminate the artificial cap on how much credit unions can lend to small businesses, would be a good start to helping small businesses gain access to additional capital.

Zimmerman was rejected by big banks when she went to purchase the building she runs her business in and had to rely on credit unions and community banks to fund her acquisition. Her story reflects the same message that many small business owners shared during CUNA's National Small Business Hike the Hill Day in 2012.

"Credit unions and small banks have increased their small business lending by 50% since the beginning of the recession," said CUNA's Hampel. This type of growth, even during the recessionary period, demonstrates that credit unions have the capital and means to help small businesses succeed and could do even more if Congress were to lift the artificial cap on their lending capabilities.

The panel also expressed concern about the government's looming budget debates this fall. Business owners are just beginning to win consumers' trust back and a government shut down or failure to raise the debt ceiling would only hinder consumer spending and weaken consumer, ultimately hurting the growth of small businesses, they observed.

The long-term federal debt outlook is another major concern for small business owners. Hampel indicated that although the federal debt ratio is in a stable place right now, if Congress doesn't address the explosive growth of entitlement spending, primarily Social Security and Medicare over the coming few decades, the country would indeed face a fiscal crisis.  

The panel's conclusive suggestion for Congress to help small businesses was to work to eliminate the barriers that hold them back from growing. Rather than Congress being a negative force, find positive ways to help small business and thus the economy by passing legislation such as the Credit Union Small Business Jobs Creation Act, which would increase the credit union member lending business cap to 27.5% of assets, up from 12.25%.  The panel stressed that the legislation would not cost taxpayers any money but it would reap huge benefits for consumers and small businesses alike.

Rep. Larson Pledges His Continued Protection Of CU Tax Status

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WASHINGTON (9/20/13)--Credit unions by their very nature, says Rep. John Larson, are a key part of the communities they serve and that, in part, is why the Connecticut Democrat supports protecting the credit union tax status, Larson said in a public statement.
 
"As institutions owned by and for their members, credit unions stepped up in the aftermath of the financial crisis and throughout our economic recovery to help the communities they serve through challenging times.
 
"Credit unions are an important source of capital for our communities and that's why I have consistently supported protecting their tax-exempt status in the past and will continue to do so moving forward," Larson said in a statement sent to the Credit Union League of Connecticut.
 
Larson's support adds to the growing body of federal lawmakers who have publicly backed the credit union tax status as public policy debate centers on tax reform.  A growing list of lawmakers--from diverse regions, from both on sides of the aisle, and including members of key tax-writing congressional committees--have weighed in to back credit unions in the debate.
 
The Credit Union National Association, the state credit union leagues, and credit unions have since May been running a massive social media advocacy campaign under the banner, "Don't Tax My Credit Union." The campaign uses Twitter, Facebook, as well as CUNA's own DontTaxMyCreditUnion.org websites--in Spanish and English--to generate tweets, Facebook posts and e-mails to lawmakers.
 
Overall, more than three million Twitter users potentially have been exposed to the #DontTaxMyCU campaign. In one day alone, the Sept. 10 "Don't Tax Tuesday" push around 4,800 tweets were specifically aimed at the Twitter accounts of members of Congress. That total was double the result seen during the first #DontTaxTuesday campaign held in July.
 
Use the resource link for more on CUNA's "Don't Tax My Credit Union" campaign.

NCUA Issues Guidance On Loan Participation Rule

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WASHINGTON (9/20/13)--The effective date for the National Credit Union Administration's new loan participation regulation is almost at hand--Sept. 23--and the agency today issued supervisory guidance on the rule.
 
In Letter to Credit Unions 13-CU-07, the agency stated, "Loan participations strengthen the credit union industry by providing a useful way for credit unions to diversify their loan portfolios, improve earnings, distribute liquidity across the industry, and balance loan demand.  However, as with any loans generated by third parties that are not federally guaranteed, loan participations come with risks."
 
In addition to the intention of the rule, the letter describes its reach and its provisions.  It also noted that NCUA examiners this week received supervisory guidance on the revised rule--including the process by which credit unions may obtain waivers.
 
The new loan participation rule features many improvements suggested by the Credit Union National Association even though CUNA did not support any new loan participation rule at this time. For instance, the original effective date was July 25, but CUNA strongly urged the agency to give credit unions more time to adequately prepare for the rule's changes.
 
The final rule sets a limit on loans from one originator of 100% of a credit union's net worth. This is up from a proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower.

CUNA urged such changes and the CUNA board emphasized credit union concerns as it worked to make the rule more practicable.

CUNA Supports FASB Plan That Could Bring CU Financial Reporting Relief

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WASHINGTON (9/20/13)--A proposed definition from the Financial Accounting Standards Board (FASB) of "public business entity" (PBE)  should be adopted, the Credit Union National Association's Deputy General Counsel Mary Dunn said in a letter filed with FASB yesterday.
 
The letter strongly commends FASB's efforts to consider whether some differences in generally accepted accounting principles (GAAP) should be allowed for private companies, such as credit unions,  that don't meet the definition of a PBE. A PBE is an entity that is regulated by the Securities and Exchange Commission, has securities that are unrestricted, and is required to produce GAAP compliant financial statements; or meets other criteria generally in connection with the issuance of securities, which do not apply to credit unions.    
 
The CUNA letter notes that FASB is developing a guide for private companies that could result in accounting and reporting requirements for credit unions that are more reflective of their purpose, democratic control and structure than some current requirements are.   
 
"Credit unions are not driven by the motivation to reward stockholders, but to serve the needs of their members with attractive rates and services and should not be subject to the same requirements that apply to publicly traded companies,"  the letter notes. The proposed PBE definition "will be of critical importance in determining which institutions are covered by the guide and thus eligible for alternatives that still qualify as GAAP," Dunn wrote.  Other types of financial institutions and organizations that do not meet the PBE definition could also be eligible for any GAAP alternatives FASB develops that apply to them.
 
"Allowing accounting principles and requirements to vary on a reasonable basis, depending on the type of entity, will result in standards that are more precisely tailored to the needs of stakeholders of differing organizations and produce financial reporting that is more transparent and accurate," CUNA emphasized.  CUNA also urged FASB to coordinate with prudential regulators in the development of alternative GAAP standards "to ensure regulators will accept their use" when alternative principles are adopted by FASB.
 
CUNA will continue to weigh in with FASB on the development of alternative GAAP standards and how credit unions could be affected by the use of such alternatives. CUNA's letter was developed with the CUNA Accounting Subcommittee and CUNA CFO Council members.
 
Use the resource link to access this and all recent CUNA Comment Letters.

Next CFPB Field Hearing Studies Credit Cards

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WASHINGTON (9/20/13)--The Consumer Financial Protection Bureau (CFPB) has announced a Chicago field hearing on credit cards for Oct. 2.
 
The session will be kicked off by CFPB Director Richard Cordray's remarks and the field hearing will gather testimony from consumer groups, credit card industry representatives, and members of the public.
 
While open to the public, attendance requires a reservation via this email address: cfpb.events@cfpb.gov. The communication should include full name and organizational affiliation, if any.
 
Making credit cards disclosures more consumer friendly has been a key
Click to view larger image In December 2011, the Consumer Financial Protection Bureau released a sample credit card disclosure form intended to help consumers understand the terms of a card agreement.
interest of the CFPB for years.
 
Late in 2011, under its "Know Before You Owe" initiative, the CFPB released a sample credit card disclosure, a two-page document the agency said "contains the key terms consumers need, clearly laid out and without fine print." The CFPB said its initiative will simplify contracts to help consumers better understand their credit cards while allowing card issuers to retain their freedom to design credit card products.

Also, the CFPB maintains a database of credit card agreements from more than 300 card issuers. Consumers can use a CFPB web-based tool to search for an agreement in one of two ways: by the name of the issuer, or by the text within the agreement.

Two CUs Among Native CDFI Program Awardees

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WASHINGTON (9/20/13)--Lakota FCU of Kyle, S.D., and The Queens FCU, Honolulu, Hawaii, are among the 35 organizations awarded a total of $12.4 million under the Treasury Department's Native American CDFI Assistance Program (NACA Program), according to an announcement Thursday.
 
Lakota is to receive $150,000 and The Queens is to receive $659,000.
 
The funds are intended to help awardees increase lending and financial services in Native American, Alaska native, and native Hawaiian communities throughout the United States.
 
"The Native American CDFI Assistance Program is providing critically needed funds for distressed Native and tribal areas, many of which lack traditional banking services," said Don Graves, Treasury Deputy Assistant Secretary for Small Business, Community Development and Housing Policy. "This latest round of awards will expand the capacity of native financial institutions to develop innovative economic development solutions for the businesses and individuals in their communities."       
 
The awardees, all certified Native Community Development Financial Institutions (Native CDFIs) or organizations looking to become or create Native CDFIs, will receive a collective total of $12,451,015 in Financial Assistance and Technical Assistance awards.
 
Eighteen Native CDFIs will receive Financial Assistance awards, which are primarily used for financing capital. Seventeen organizations will receive Technical Assistance grants, which are usually used to acquire products or services, staff training, professional services, or other support.
 
Use the resource link to read more about the grants and technical assistance.

Chase USA, JPMorgan Chase Must Refund Millions For Illegal Card Practices

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WASHINGTON (9/20/13)--The Consumer Financial Protection Bureau (CFPB) Thursday announced it has ordered Chase Bank USA, N.A. and JPMorgan Chase Bank, N.A. to refund an estimated $309 million to more than 2.1 million customers for illegal credit card practices.

The Office of the Comptroller of the Currency (OCC) announced earlier in the day that it was executing an enforcement action against the banks for "unsafe or unsound practices in connection with the bank's non-home loan debt collection litigation practices and the bank's non-home loan compliance with the Servicemembers Civil Relief Act (SCRA)." The CFPB enforcement action is the result of work started by the OCC, which the CFPB joined last year.

The agencies found that Chase engaged in unfair billing practices for certain credit card "add-on products" by charging consumers for credit monitoring services that they did not receive.

"At the core of our mission is a duty to identify and root out unfair, deceptive, and abusive practices in financial markets that harm consumers," said CFPB Director Richard Cordray. "This order takes action against such practices and requires Chase to fully refund more than $300 million to consumers who were charged illegal fees."
 
According to the CFPB order, Chase enrolled consumers in credit card "add-on" products that promised to monitor customer credit and alert consumers to potentially fraudulent activity. In order for consumers to obtain credit monitoring services, consumers generally must provide written authorization. Chase, however, charged many consumers for these products without or before having the written authorization necessary to perform the monitoring services. Chase charged customers as soon as they enrolled in these products even if they were not actually receiving the services yet.
 
The agencies found that Chase engaged in these practices between October 2005, when Chase first offered the products, and June 2012, when Chase stopped billing consumers who were not receiving the promised benefits.
 
Use the resource link to read more on what the CFPB said occurred as a result of unfair billing tactics and to read the terms of the enforcement action.