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September 16, 2014

CUNA: SBC testimony 'important step' toward reg. relief bills' passage

WASHINGTON (9/16/14)--The Credit Union National Association will testify before the Senate Banking Committee today in a hearing titled "Examining the State of Small Depository Institutions."

CUNA's testimony will be focused on the current regulatory burdens facing credit unions, bills it supports heading into the final months of this Congress and concerns with proposals from the National Credit Union Administration and the Federal Housing Finance Agency.

"We're hopeful this hearing is an important step toward preparing House-passed bills for Senate consideration during the post-election 'lame duck' session," said Ryan Donovan, CUNA's senior vice president of legislative affairs. "This is the time of year we hear a lot of discussions about potential packages of legislation that could be considered before Congress adjourns."

Dennis Pierce, CEO of CommunityAmerica CU, Lenexa, Kan., $1.9 billion in assets, and chair of the CUNA board, will testify on behalf of CUNA. He will speak about the effect that the more than 180 regulatory changes from at least 15 federal agencies since the start of the financial crisis have impacted credit unions, particularly small ones.

"It's not that any particular regulation presents an unmanageable situation for credit unions, but the accumulation of regulatory requirements and the frequency with which these requirements change that contributes to a degradation of member service because it diverts finite resources away from our purpose and mission," he said.

CUNA will recommend that the Senate take up the following bills:
  • Privacy Notice Modernization Act (S. 635), which would require financial institutions to send privacy policy notifications when the policy is changed, rather than on an annual basis, as is currently required;

  • Credit Union Share Insurance Fund Parity Act (S. 2698/2699), which would extend share insurance coverage on Interest on Lawyer Trusts Accounts and other similar trust accounts; and

  • Capital Access for Small Financial Institutions Act (S. 1806), which would allow state-chartered, privately insured credit unions to apply for membership in the Federal Home Loan Bank (FHLB) system.
Pierce will also speak to CUNA's concerns with the NCUA's risk-based capital proposal--concerns that have been echoed by many members of Congress ( News Now Sept. 9)--and concerns with new proposed rules governing membership in the FHLB program.

Use the resource link below to access Pierce's written testimony that has been submitted by the committee. ReadMore

Balance needed between 'safety/soundness,' credit availability, CUNA tells FHFA

WASHINGTON (9/16/14)--Safety and soundness should not be used as a justification to create additional regulatory burden, the Credit Union National Association told the Federal Housing Finance Agency (FHFA) in a letter sent Monday. The FHFA is currently collecting comments on its 2015-19 strategic plan.

The agency stated three goals when planning its 2015-19 strategy: ensuring safe and sound government-sponsored enterprises and Federal Home Loan Banks (FHLBs); ensure liquidity stability and access in housing finance; and to manage the ongoing conservatorships of Fannie Mae and Freddie Mac.

CUNA supports "the vast majority of the concepts enumerated in the agency's strategic plan," but offered several suggestions to improve the plan for credit unions.

Chief among CUNA's concerns is a recent proposal that would revise membership requirements for FHLBs.  The proposal would require all credit unions to hold 10% of assets in residential mortgage loans on a constant basis to become and remain members of the FHLB system. Currently, the rule requires the 10% to be held only at the time membership is approved.

"Based on a very preliminary assessment, the proposed regulation would make it much more difficult for credit unions to maintain access to the FHLB system," reads the letter, signed by Mary Dunn, CUNA's deputy general counsel. "If adopted, this regulation will create another compliance task for affected credit unions as they will be forced to maintain a close watch over their balance sheets to ensure they meet an arbitrary requirement on an ongoing basis."

CUNA's longstanding position on FHLBs, as well as Fannie Mae and Freddie Mac, is that any government regulations should ensure lenders of all types and sizes have access to liquidity on equitable terms. The letter notes that this is reflected in the FHFA's draft strategic plan.

But the plan also makes several references to changing mortgage servicing standards, a topic of concern for CUNA. While CUNA believes that home-retention initiatives and loss-mitigation programs are beneficial, it urges the FHFA to refrain from imposing additional mortgage servicing requirements on behalf of Fannie and Freddie.

CUNA expressed support for several of the agency's recent actions, such as the introduction of Freddie Mac's Structured Agency Credit Risk debt notes, and the development of a common securitization platform, which has been included in the draft strategic plan.

"We applaud the agency's creativity, and encourage the agency to pursue similar initiatives," the letter reads.

Use the resource link below to access the full letter. ReadMore

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House lawmakers seeking breach answers from Home Depot exec

WASHINGTON (9/16/14)--A bi-partisan coalition of House lawmakers is seeking some answers from Home Depot about its data security practices.

Home Depot confirmed Sept. 8 that a breach of its payment systems  occurred, one that could have affected customers in its 2,200 U.S. and Canadian locations. The company is still determining the full scope and scale of the breach.

Reps. Joe Barton (R-Texas), Jan Schakowsky (D-Ill.) and Bobby Rush (D-Ill.), members of the House Privacy Caucus, sent a letter Monday to  Depot Chief Executive Officer Frank Blake requesting more details about the breach than the company has made public so far. The legislators want that information, and answers to a series of questions, by Oct. 13 ( Bloomberg BNA Sept. 15).
The congressmen want the Home Depot executive to detail what lessons, if any, his company learned from earlier breaches--like the Target breach that compromised 40 million credit and debit card accounts as well as personal information for 70 million customers in late 2013.
What security measures, the trio asks in their letter, has Home Depot implemented in the wake of that breach and others--like one at Neiman Marcus Group Ltd. The lawmakers also wanted to know about Home Depot's procedures for screening vendors before giving them access the company's sensitive data.
The Credit Union National Association strongly advocates on behalf of legislation that would protect financial institutions and consumers from the harm such breaches cause by subjecting merchants to the same federal data protection standards to which credit unions and other financial institutions are already subject. ReadMore

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NCUA offers 'road map to success' for FCU organizers

WASHINGTON (9/15/14)--Groups looking to apply for a federal credit union charter have a new resource from the National Credit Union Administration.

The NCUA's Federal Credit Union Charter Application Guide offers step-by-step instructions to help potential credit union organizers get information on what the process entails, and what the NCUA expects in a charter application.

"This new guide is essentially a road map to success, explaining in detail how to complete the process," said NCUA Chair Debbie Matz. "It also helps organizers focus on key actions, from finding their niche in an increasingly complex and competitive marketplace and raising capital to preparing an effective application."

The guide breaks down the chartering process into five steps:
  • Part 1: Researching a federal charter, selecting a credit union name, establishing a field of membership, deciding what kind of charter to request and determining whether to seek a low-income designation;

  • Part 2: Identifying subscribers, securing funding for start-up costs, finding a location and surveying the potential membership;

  • Part 3: Finding support resources, identifying credit union officials and management, creating a business plan, deciding on what products and services to offer, management, recordkeeping, establishing policies and continuity planning;

  • Part 4: How the NCUA acts on charter applications; and

  • Part 5: Checklists, worksheets and sample forms.
It also includes answers to frequently asked questions about the amount of time required to obtain a charter, the amount of start-up capital necessary and the availability of consulting services from NCUA's Office of Small Credit Union Initiatives.

Use the resource link below to access the complete guide. ReadMore

New NCUA videos fight financial exploitation of seniors

ALEXANDRIA, Va. (9/16/14)--Aiming to combat the trend of millions of American seniors who become victims of financial abuse, the National Credit Union Administration has released two videos to help consumers recognize this kind of fraud. The videos were released Monday on the agency's YouTube Channel.

The first, titled "Scams Targeting Seniors," is a dramatization of how a consumer can become the victim of a typical scam. The video offers advice to credit union members who suspect they may have been targeted.

The second, titled "Reporting Elder Financial Abuse or Exploitation," explains to credit union managers and staff how to spot, prevent and report cases of financial elder abuse.

"An educated consumer is the first line of defense against fraud or exploitation," NCUA Chair Debbie Matz said. "Research suggests financial abuse is the most common form of elder abuse, and perpetrators can be scam artists, dishonest financial advisors or even caregivers. Our new videos are the latest effort to help credit unions and members understand how this can happen and how to steer clear of trouble."

The agency recently announced an alliance with AARP for a two-year plan of financial education initiatives ( News Now Sept. 12). It also sent a letter to credit unions in September 2013 urging them to review their policies and procedures and ensure staff were trained to recognize signs that financial abuse or exploitation may be occurring.

Use the resource links below to access the videos. ReadMore

This week: Economic hearings, House to consider reg. relief bills

WASHINGTON (9/16/14)--This week likely marks the final pre-election sessions for Congress, and while the top priority is to pass a bill to fund the government past the end of the year, a number of other bills are likely to be considered.

The House will consider several bills under suspension of the rules this week. The Credit Union National Association is closely following the Insurance Capital Standards Clarification Act, which includes CUNA-supported language relating to points and fees calculations in the Consumer Financial Protection Bureau's ability-to-repay rule.

The House is also expected to consider the American Savings Promotion Act (H.R. 3374), which would allow financial institutions to offer raffle-based, prize-linked savings accounts. CUNA testified in support of this bill in July ( News Now July 16).

CUNA will be among several financial services organizations testifying at a Senate Banking Committee hearing today, along with federal regulators including the National Credit Union Administration. See News Now 's coverage of the hearing in today's issue.

Other hearings for this week include:
  • Wednesday, 10 a.m. (ET): House Financial Services Committee, "Oversight of the Financial Stability Oversight Council (FSOC)." The hearing will discuss the FSOC's operations, policies, and procedures. Patrick Pinschmidt, FSOC deputy assistant secretary, and Nicole Clowers of the Government Accountability Office, will testify;

  • Wednesday, 2:30 p.m. (ET): Senate Banking subcommittee on economic policy, "Who is the Economy Working For? The Impact of Rising Inequality on the American Economy." The witnesses will be: Heather McGhee, Demos; Amir Sufi, University of Chicago; and Claudia Viek, California Association for Micro Enterprise Opportunity. Additional witnesses may be added; and

  • Thursday, 11 a.m. (ET): Senate Banking Committee, "Assessing and Enhancing Protections in Consumer Financial Services." The witnesses will be: Travis Plunkett, The Pew Charitable Trusts; Sheri Ekdom, Lutheran Social Services of South Dakota; Oliver I. Ireland, Morrison and Foerster; and Hilary Shelton, NAACP.

Other Resources

CFTC fines Morgan Stanley for alleged 'red flags' failures

WASHINGTON (9/16/14)-- The U.S. Commodity Futures Trading Commission (CFTC) announced Monday that it has imposed a fine against Morgan Stanley Smith Barney LLC (Morgan Stanley) for failure to "diligently supervise" the opening and handling of accounts under "know your customer" rules.
The CFTC said its order requires Morgan Stanley to pay a $280,000 civil monetary penalty and to disgorge commissions it earned from the subject accounts in order to address its "unlawful conduct."
Specifically, the CFTC order finds that Morgan Stanley "failed to diligently supervise its officers', employees', and agents' opening and handling of accounts held at Morgan Stanley in the name of a family of companies called SureInvestment."
SureInvestment is purported to operate a hedge fund based, in part, in the British Virgin Islands, which is deemed a "high-risk jurisdiction" under Morgan Stanley's compliance procedures. That designation, said the CFTC, should have subject the entity's accounts to special scrutiny and due diligence, assuring that employees were alert to any red flags by SureInvestment's account opening documents.
The CFTC order found that despite numerous red flags presented by SureInvestment's account opening documents, which the agency said included audits "filled with typos and other suspicious irregularities for an entity that turned out not to exist," Morgan Stanley opened the accounts. The order alleges that that these accounts were ultimately used by the owner of SureInvestment to continue an ongoing $35 million Ponzi scheme based in the United Kingdom. Earlier this year, that owner was sentenced to seven years imprisonment after pleading guilty to criminal charges brought by the U.K. Financial Conduct Authority, a CFTC release said. ReadMore

Other Resources

Inside Washington (09/16/2014)

  • WASHINGTON (9/16/14)--The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, has announced a settlement of $550 million with HSBC North America Holdings Inc., related companies and specifically named individuals. The settlement resolves claims alleging violations of federal, Virginia and District of Columbia securities laws in connection with private-label mortgage-backed securities purchased by Fannie Mae and Freddie Mac during 2005-2007.  Pursuant to the agreement, HSBC will pay $374 million to Freddie Mac and $176 million to Fannie Mae. Only two of the 18 lawsuits FHFA filed in 2011 have not been resolved ...

  • WASHINGTON (9/16/14)--An Internet-based operation that finds potential borrowers for mortgage refinancing lenders will pay a $500,000 civil penalty to settle Federal Trade Commission charges that it deceived consumers with ads that falsely claimed they could refinance their mortgages for free. The FTC charged that the Colorado-based Intermundo Media, LLC, using the name "Delta Prime Refinance," designed and distributed the deceptive refinancing ads as a part of its lead generation service. Delta Prime Refinance made deceptive and unsupported claims in its advertisements that overstated how much consumers could reduce their payments if they refinanced their mortgages, how low their annual percentage rate would be, and how easy it would be for them to qualify for refinancing, according to the complaint. In addition to paying the $500,000 civil penalty, Intermundo Media is prohibited from: misrepresenting the terms and conditions of any financial product or service, and any term or condition of a mortgage credit product and disclosing, selling, or transferring the consumer data obtained through the Delta Prime Refinance lead generation service ...

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The 1st vid shows how consumer can become victim and, advice to those who think they've been targeted.
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.@TheNCUA has released two videos designed to raise awareness of elder financial abuse.
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