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April 17, 2015

NEW: CUNA files RBC2 comment, urges CU system to be heard


WASHINGTON (4/17/15, UPDATED 11:07 a.m. ET)--CUNA submitted its comment letter this morning on the National Credit union Administration's revised risk-based capital plan (RBC2). While holding firm to the view that the rule is unnecessary and should be tabled, the letter offers a number of constructive suggestions to improve the rule since the agency appears determined to move forward.
"I've said it before. I will keep saying this. A risk-based capital rule is a solution in search of a problem. What's more, the current plan--though vastly improved from the original--is a solution that just won't work in search of a problem that just does not exist," CUNA President/CEO Jim Nussle declared this morning.
He added, "To the more than 1,200 of you that have already filed a comment letter, I thank you for participating in this important effort to improve the rule. For those who have not yet written, I encourage you to do so."
CUNA has created a body of resources to support credit unions' RBC letter writing and has produced the video below describing key points of its 15-page comment letter. 

Among the points made in the trade association's letter, Nussle emphasizes that the proposal, as well as other recent NCUA initiatives, goes way too far in treating credit unions like banks: It ignores the importance of the credit union difference as cooperative, not-for-profit, member-owned and directed institutions. 
"There is a real danger," he warns, "that if you are regulated and supervised as banks, you will be forced to act more like banks, which would be a great disservice to your members."
Among other top points in Nussle's letter:

"We listened to our members in developing this letter . We heard from CUNA's Governmental Affairs Committee and its Examination and Supervision Subcommittee, from members of CUNA's CFO Council, from many credit union CEOs and volunteers, and from leagues.
"Their input was vital in shaping our response and I urge the NCUA to consider our recommendations carefully," Nussle said.

  •  CUNA holds hold firm to our view that NCUA does not have the legal authority to impose a two-tiered RBC system.
  • The strong performance of credit unions and their federally backed share insurance fund during and after the financial crisis demonstrates there is no need for a major overhaul of NCUA capital requirements, and CUNA finds no evidence that had RBC2 been in place before the crisis that it would have reduced National Credit Union Share Insurance Fund losses in any noticeable way;
  • CUNA therefore requests that the rule be withdrawn, but in the event the NCUA moves forward, the association urges a number of changes and further improvements;
  • The new proposed capital adequacy provisions, beyond net worth and RBC ratio requirements, should be dropped;
  • A number of the risk weights should be reduced;
  • The identification of "complex" credit unions should be based on something more than simply asset size, and should include only credit unions of at least $500 million in assets;
  • The conditions under which goodwill could be included in the RBC ratio should be expanded;
  • The NCUA should minimize the burden on credit unions of expanding the Call Report for purposes of RBC2;
  • The agency should allow credit unions to use supplemental capital in meeting RBC requirements;
  • A separate interest rate risk rule is NOT necessary; and,
  • The implementation of RBC2 should be delayed until 2021, to coincide with expected refunds from the Corporate Stabilization Fund.

Deadline looms for CUs to join suit vs. Home Depot: CUNA reminds

WASHINGTON (4/17/15)--CUNA is reminding credit unions of an impending deadline for deciding whether to become a party to a class action suit against Home Depot.

Parties must be identified and evaluated within the next two to three weeks to make a May 15 deadline for inclusion as a class participant.  The suit will seek recovery and injunctive relief associated with a massive data breach at the giant retail outlet in September 2014.

CUNA announced Wednesday that it will join credit unions and other financial institutions nationwide as a plaintiff in that lawsuit. However, CUNA emphasizes its participation should not discourage any credit union or state credit union league from participating as well, as credit union participation remains vitally important. 

"CUNA is pursuing every possible avenue to get merchants to raise their data security standards to protect consumers and card-issuing credit unions. We decided participation in this legal action is another route we can take to support our efforts," according to Susan Parisi, CUNA chief counsel.

CUNA Chief Advocacy Officer Ryan Donovan added, "If the court grants injunctive relief to the plaintiffs, Home Depot will likely be forced to improve its data security standards.

"That would, at least, reduce the data breach risks to consumers and card issuers at one mega-retail store while CUNA continues to advocate on Capitol Hill for higher data protection standards for all merchants."

The Atlanta-based, big-box retailer admitted that 56 million credit and debit cards were compromised after cybercriminals infiltrated its payment systems, costing credit unions alone nearly $60 million, according to data compiled by CUNA.

"For the last year and a half CUNA has been diligently working on the matter, including connecting credit unions that want to pursue legal action with the appropriate representation," Parisi said.

CU relief priorities highlighted for Senate panel study

WASHINGTON (4/17/15)--In response to a Senate panel's effort to review the effects of federal regulations, CUNA submitted a letter to leadership of the U.S. Senate Committee on Homeland Security and Governmental Affairs Thursday.

Sens. Ron Johnson (R-Wis.), James Lankford (R-Okla.), Thomas Carper (D-Del.) and Heidi Heitkamp (D-N.D.) announced March 18 that the committee is seeking input from those directly impacted by federal regulations of all kinds.
CUNA President/CEO Jim Nussle pointed out in CUNA's letter that regulations facing credit unions are "ever increasing, never decreasing," and cited regulatory burden as a key driver to consolidation within the credit union system.
"Credit union volunteers and executives are particularly frustrated that they are required to comply with these new and complex regulations notwithstanding the fact that they did not cause or contribute to the financial crisis," Nussle wrote. "To the extent that post-financial crisis regulations result in credit unions offering fewer services to their members or services which are more expensive, we believe the regulations have failed consumers, and add insult to injury."
CUNA highlighted more than a dozen suggested regulatory reforms, including:
  • Improvements to the National Credit Union Administration and Consumer Financial Protection Bureau rulemaking processes, which would include a required cost-benefit analysis of all proposals;
  • Amendments to the CFPB's mortgage servicing rules, such as increasing the small servicer threshold to 10,000 loans per year, up from 5,000. CUNA also believes the bureau should limit new regulatory requirements with its prepaid accounts and remittance transfers proposals;
  • Exempting credit unions from the Department of Defense's Military Lending Act proposal, Financial Accounting Standards Board credit impairment proposal and Internal Revenue Service's Foreign Account Tax Compliance Act proposal;
  • Improvements to the NCUA's Central Liquidity Facility (CLF) to eliminate the requirement it be funded by stock subscriptions paid for by member credit unions, and allowing credit unions to obtain CLF loans for short-term and longer-term liquidity purposes; and
  • Suggesting the NCUA work with the Treasury's Financial Crimes Enforcement Network and other regulators to exempt credit unions from "seemingly endless changes" to Bank Secrecy Act and anti-money laundering requirements;
The letter also addressed issues with the NCUA's revised risk-based capital proposal (RBC2), as well as other ways the NCUA can work with other regulators to clarify each regulator's authority over the Federal Trade Commission Act and its implementing regulations.
"This list just scratches the surface of the regulatory burden facing credit unions, but it represents a good place to start in addressing these burdens," Nussle wrote.

CUNA details mortgage reg. relief options for SBC hearing

WASHINGTON (4/17/15)--CUNA sent a number of recommended statutory changes to the U.S. Senate Banking Committee, changes that would remove regulatory barriers for consumers obtaining mortgage credit. The committee hosted a hearing Thursday on the matter, and CUNA's letter was sent for the hearing's record.
"As member owned, not-for-profit financial cooperatives, credit unions seek to meet members' demand for sound financial products like mortgages, but often face significant regulatory barriers as they try to help members achieve homeownership or expand the stock of affordable rental homes," reads the letter, signed by CUNA President/CEO Jim Nussle. "We welcome the opportunity to comment on a few of those barriers and to offer suggestions for relief."
CUNA made the following recommendations to remove regulatory barriers to increase access to mortgage credit:
  • Deem all mortgages in portfolio Qualified Mortgages (QMs), meaning a mortgage with features that make it more affordable. Should all mortgaged held in portfolio and services by the underwriting financial institution be deemed QMs, financial institutions will have very strong incentives to originate quality loans;
  • The Senate should enact legislation that would exclude title insurance charges and escrowed homeowners' premiums from the points and fees calculation;
  • Urge Congress to discuss withdrawing the Federal Housing Finance Agency's proposal to revise its Federal Home Loan Bank (FHLB) membership rules with the agency. CUNA believes Congress, not the regulator, should define who can be members of the FHLB program, since there is not statutory obligation to impose new membership limits;
  • Allow privately insured credit unions membership to the FHLB program. Committee Ranking Member Sen. Sherrod Brown (D-Ohio) and Sen. Rob Portman (R-Ohio) introduced a bill last Congress that would correct this, and the House just passed a similar bill;
  • Improve the Consumer Financial Protection Bureau's (CFPB) Truth in Lending Act-Real Estate Settlement Procedures Act (TILA-RESPA) closing disclosure waiting period. CUNA believes a personal financial emergency waiver should be clarified and expanding, and the delivery requirement should be reduced to two business days, instead of the current three days; and
  • Encouraging Congress to provide and exclusion to the member business lending cap for loans made for purchase of one to four unit non-owner occupied residential dwellings, to put credit unions on the same level as banks.
"These are only a few of the relevant barriers credit unions face in providing members access to affordable mortgage credit, but they are substantial," Nussle wrote.

TROL Act takes positive step, but improvements needed: CUNA

WASHINGTON (4/17/15)--A bill to clarify Federal Trade Commission (FTC) authority to fight abusive patent assertion entities (PAEs) is a positive step forward but is in need of improvement, CUNA believes.

The Targeting Rogue and Opaque Letters (TROL) Act of 2015 was the subject of a Thursday hearing by the U.S. House Energy and Commerce subcommittee for commerce, manufacturing and trade, to which CUNA and other organizations submitted a letter for the record.
"The recent focus of patent trolls on credit unions and community banks threatens to pose additional, unwarranted costs on lenders and the communities they serve," the letter reads. "In our industry alone, there are hundreds of examples of a patent troll attempting to sell a product--the patent license--to a bank or credit union using tactics resembling fraud or extortion."
The TROL Act would clarify the FTC's authority to fight deceptive practices while not affecting legitimate patent-holders to assert their patent rights. The FTC, along with state attorneys general, could remove financial incentive to send intentionally vague demand letters in hope of quick settlements.
CUNA and the organizations made several suggestions in the letter to strengthen the legislation. This includes removal, or expansion, of the bill's definition of "bad faith" to help more small businesses fall under the bill's protection.
The bill should also allow states that have enacted laws to discourage bad faith demand letters to continue to use those laws to protect credit unions, banks and other small businesses, as well as consumers, the letter says.
In addition to CUNA, the letter was signed by the American Bankers Association, Clearing House Payments Co., Financial Services Roundtable, Independent Community Bankers of America and National Association of Federal Credit Unions.

Senate Banking to vote reg. relief measures May 14

WASHINGTON (4/17/15)--The U.S. Senate Banking Committee will hold a full committee markup on regulatory relief matters May 14, according to the committee's schedule that was released Thursday.

While it's unclear what will be discussed at the meeting, CUNA has testified before the committee in recent months with dozens of regulatory relief suggestions to aid credit unions in better serving their members.
Previous to a Feb. 12 hearing in which CUNA testified on the need for regulatory relief, the Senate Banking Committee conducted a hearing with federal financial regulators seeking input on potential regulatory relief solutions as well.
CUNA is also working to collect real-life examples of regulatory burden to submit to the Senate Banking Committee, as requested by the committee at the February hearing.
The markup is scheduled to begin at 10 a.m. (ET) May 14.

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