Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive


Cheney: Interchange Rule Stay Will Keep Order

 Permanent link
WASHINGTON (9/24/13)--Credit Union National Association President/CEO Bill Cheney said a Friday court decision to allow existing debit interchange fee cap rules to stay in place during an appeals means there will be an order in place that will provide certainty, at least for now.

The existing Federal Reserve rules implementing the debit 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 said Judge Richard Leon of the U.S. District Court for the District of Columbia who 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.
Cheney said, "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. 
"While many believe that lowering these caps will help consumers, there is simply no evidence that's true.  Studies have shown merchants aren't passing on the money they are saving under the Fed's rule to consumers.  The Fed's rule is a multi-billion dollar windfall for merchants, plain and simple. 
"CUNA looks forward to telling this important story as it advocates for 97 million credit union members before the D.C. Circuit."
CUNA, with its coalition partners, had 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.
Also last week,the U.S. Court of Appeals for the District of Columbia Circuit approved a request from both parties of NACS v. Board of Governors of the Federal Reserve System for expedited action on the Fed's appeal.
Use the resource link to read the related story.

NEW: NCUA Sues 13 Alleging LIBOR Manipulation

 Permanent link
ALEXANDRIA, Va. (9/23/13, UPDATED, 6:44 p.m. ET)--The National Credit Union Administration today filed suit in federal district court in Kansas against 13 international banks, including J.P. Morgan Chase. The suit alleges violations of federal and state anti-trust laws transacted by manipulation of interest rates through the London Interbank Offered Rate (LIBOR) system.
The NCUA said in a release that manipulation of LIBOR, the benchmark for setting interest rates around the globe, resulted in a loss of income from investments and other assets held by five failed corporate credit unions: U.S. Central, WesCorp, Members United, Southwest and Constitution.  
"We have a responsibility to pursue recoveries through every available avenue against those who caused billions of dollars in losses to credit unions," NCUA Chairman Debbie Matz said, announcing the suit. "Some firms were manipulating international interest rates in a way that cost the five corporates to lose millions of dollars. Just as we are doing in our other suits, we are seeking to hold responsible parties accountable for their actions."
NCUA claims the defendants in today's action individually and collectively gave false interest-rate information through the LIBOR rate-setting process "to benefit their investments that were tied to LIBOR, to reduce their borrowing costs, to deceive the marketplace as to the true state of their creditworthiness, and to deprive investors of the interest rate payments to which they were entitled." The false information created the impression the defendant banks were borrowing money at a lower interest rate than they were actually paying, the NCUA said.
The agency said that although there have been more than 40 suits have been filed in relation to the LIBOR manipulation, the CUA is one of the first federal financial regulators to sue in this area.  
LIBOR is the average daily interest rate a group of leading financial institutions pay when they borrow from one another. The rate is set daily for 10 currencies around the world and affects interest rates on trillions of dollars of financial transactions of various kinds.
Recoveries from NCUA's legal actions will further reduce the total losses resulting from the failure of the corporate credit unions. Losses from those failures must be paid from the Temporary Corporate Credit Union Stabilization Fund. All federally insured credit unions repay expenditures from the stabilization fund through assessments, so any recoveries would help reduce future assessments on credit unions, the NCUA noted.
Corporate credit unions are wholesale credit unions that provide various services to retail credit unions, which in turn serve consumers, or "natural persons." Retail credit unions rely on corporate credit unions to provide them such services as check clearing, electronic payments, and investments.
Use the resource link to access the NCUA website.

NEW: CUs To Hold Virtual Rally On Oct 2

 Permanent link
WASHINGTON (9/23/13, UPDATED 1:30 p.m. ET)--A national virtual rally--where credit union members and advocates from across the country will light up social media in support of the "Don't Tax My Credit Union" campaign via Twitter and Facebook--has been announced by the Credit Union National Association for Oct. 2.

There will be an accompanying physical rally at Credit Union House in Washington, D.C. between 2 p.m. and 3 p.m. (ET), and that event will be live streamed at and on The Hill newspaper website.

CUNA is expecting tens of thousands of supporters to be in virtual attendance. "Rather than rallying supporters at the National Mall--like so many campaigns do--this movement will rally tens of thousands of credit union members nationwide online," said Bill Cheney, president/CEO of CUNA.  CUNA and the state credit union leagues launched the Don't Tax My Credit Union Advocacy campaign in May, across the backdrop of national political debate on revising the country's tax code.

Participants will be encouraged to use the various Take Action tools at to show their support via  tweets, pictures, vine videos, and emails to their members of Congress, all with the #DontTaxMyCU hashtag. The physical rally at Credit Union House will feature several speakers, including Steve Pociask of the American Consumer Institute.

The event will be moderated by Paul Berry, an award-winning journalist and radio and television personality in the Washington D.C. area--and long-time Govermental Affairs Conference MC--and also will feature remarks by Cheney, Paul Gentile, Bill Hampel, John Magill, and Ryan Donovan of CUNA. Other participates, speakers and interviews from all over the country will join in remotely using video conferencing.

The initiative urges lawmakers as part of any final tax reform plan to preserve the federal tax exemption credit unions receive as not-for-profit, member-owned cooperatives. To date, the campaign has generated over 900,000 messages to members of Congress--15,000 of which have come via social media.

NEW: NCUA Names New Region III Director

 Permanent link
ALEXANDRIA, Va. (9/23/13, UPDATED: 11:25 A.M. ET)--Myra Toeppe will replace Region III Director Herb Yolles when he retires at the end of this year, the National Credit Union Administration reported today.

Toeppe is the NCUA's current acting director of supervision in the Office of Examination and Insurance. She joined the NCUA in 2011 as associate regional director for Operations in Region III. She has also served at the Office of Thrift Supervision and the Federal Home Loan Bank of Atlanta during her 25-year government career.

NCUA Chairman Debbie Matz said Toeppe is "a highly experienced financial services regulator" who "has quickly established herself as a leader and a problem solver." Her skills and experience, combined with a dedication to excellence, will make her a terrific regional director, Matz added.

New NCUA board member Rick Metsger noted he and Toeppe "have both taken new positions at NCUA during a time of opportunity and challenge for the industry. "I'm confident that Myra will bring new ideas, a fresh set of eyes and a balanced approach to address the problems facing federally insured credit unions in Region III," he said.

The agency also thanked Yolles for his 35 years of service to the NCUA. He has worked with every NCUA board member since Congress created the NCUA Board in 1978, the agency noted.

"During more than three decades at NCUA and especially the last three-and-a-half years in Region III, Herb has truly seen it all and practically done it all. To ensure continued access to affordable financial services for millions of Americans, Herb has been tireless in his efforts to make the credit union industry safe and sound," Matz said.

CFPB Extends Consumer Complaint Hotline Pilot

 Permanent link
WASHINGTON (9/23/13)--The Consumer Financial Protection Bureau (CFPB) has expanded the reach of its pilot program intended to help consumers more easily have their financial product questions or complaints answered by the bureau's Office of Consumer Response. The CFPB has partnered with the City of Jackson, Miss., so Jackson consumers can now dial 311 to be connected with the bureau when they have financial issues.
The CFPB launched the hotline pilot in Newark, N.J., in February.  Consumers there can dial 4311 for quick access to the agency's consumer response team.
In Jackson, the 311 hotline is a non-emergency line connecting residents to city services.
"We understand the challenges that Jacksonians face on a daily basis when it comes to financial services such as loans, debt collection, and mortgages," said city Mayor Chokwe Lumumba. "We want to help our citizens become more aware of the financial options and services that are available to them, and what better way than to connect the City's 311 system with the CFPB."
"Our mission at the CFPB is to make it easier for consumers to navigate the complex consumer financial markets," said CFPB Director Richard Cordray, who added the agency is always looking for new ways to connect with consumers.
For consumers outside of the hotline areas,  the consumer response team can be reached by :
  • Visiting;
  • Calling the toll-free phone number at 855-411-CFPB (2372) or TTY/TDD phone number at 855-729-CFPB (2372);
  • Faxing the CFPB at 855-237-2392; or
  • Mailing a letter to P.O. Box 4503, Iowa City, Iowa 52244.

CUNA Urges CUs To Take CFPB Mortgage Compliance Survey

 Permanent link
WASHINGTON (9/23/13)--Credit unions need to take the time to complete a compliance survey on the 2014 Consumer Financial Protection Bureau's mortgage lending rules, urges Kathy Thompson, Credit Union National Association senior vice president for compliance and legislative analysis, to aid the trade group in assessing the full impact on credit unions of the new CFPB rules.
"We really need you to provide some input in this CUNA survey--and we've moved the response date from Sept. 23 to Sept. 27--this Friday--to give you time to weigh in," Thompson said in CUNA's CompBlog Friday.  Moreover, if a credit union only can fill in parts of the survey, Thompson suggests which questions are most important to CUNA.
"In words it uses regularly, the CFPB is a 'data-driven' agency, so please give us data that might help us to persuade the agency to postpone the 'compliance date' of the mortgage regs," Thompson urged. 
While the agency will be unlikely to move the January 2014 "effective dates" of the mass of new regulations, Thompson explained that the Federal Reserve Board, which formerly regulated the consumer protection laws now under the CFPB's jurisdiction, often authorized a later "compliance date" in recognition of the practical operational considerations to comply.

Thompson said the more information a credit union can provide on the survey, the better, but she asked respondents at least to answer the following questions:
  • Number 8: Are you relying on a vendor to help with compliance?
  • Number 9: If so, when do you expect your vendor to provide all of the necessary changes?
  • Number 10: After your vendor has made the necessary changes, how long will your credit union need to test and implement the changes?
  • Number 11: How long will your credit union need to train staff on the vendor's changes?
  • Number 15: What is your credit union's asset size?
CFPB Director Richard Cordray earlier this month said that the bureau "will be sensitive to...good faith efforts to come into substantial compliance" by January 2014.

At CUNA's Compliance School last week, the NCUA said that the agency will start looking at how compliance is coming along after the regulations go into effect, but won't start writing up credit unions up until "summertime."  Thompson says the better approach than a vague "good faith effort" is for the CFPB to declare a formal "compliance date" next fall.
Use the resource link below to access the CUNA survey and to read Thompson's CompBlog entry.

Cheney Report: 'Stress Test' Proposal Worth Close Scrutiny

 Permanent link
WASHINGTON (9/23/13)--The National Credit Union Administration put credit unions on notice last week that the agency plans to propose "stress testing" for large credit unions--those with more than $10 billion in assets. That announcement gives the credit union system "reason to pause," Credit Union National Association President/CEO Bill Cheney wrote in the latest The Cheney Report.
Cheney made it clear that CUNA doesn't take issue with the NCUA taking appropriate steps to protect the federal share insurance fund in the interests of all credit unions that it insures. And CUNA appreciates that the agency is still weighing whether to make the results of such tests public.
"But we are pondering whether this sort of approach is necessary for credit unions, with their relatively low-risk profile, even for very large credit unions.
"Further, the specter of the 'creeping crisis of complexity' comes into play, as it appears that the agency will propose a threshold of $10 billion for the program--meaning as credit unions grow over the next several years, more and more will be subject to the testing, and the associated regulatory burden," he warned.
Cheney assured that CUNA intends to give any stress test proposal "very careful scrutiny," to include such actions as collecting more information from the agency about its intentions, and data from credit unions about the likely impact, in the short and long terms.
Also in The Cheney Report:
  • Interchange rules remain in force; 'expedited' appeal accepted;
  • NCUA urged to weigh in on FASB 'business entity' accounting proposal;
  • Regulatory relief efforts active in Congress;
  • And more.
Use the resource link to read the latest in The Cheney Report.