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January 23, 2015

NEW: Registration closing soon for CUNA's Jan. 26 RBC2 webinar

WASHINGTON (1/23/15 UPDATED 12:15 p.m. ET)--Registration closes soon for the Credit Union National Association's Jan. 26 webinar on the National Credit Union Administration's revised risk-based capital proposal (RBC2).

CUNA President/CEO Jim Nussle, Chief Policy Officer Bill Hampel and Deputy General Counsel Mary Dunn will discuss how and to what extent the new proposal addressed the significant concerns of CUNA members raised with the first proposal.

The webinar will feature the CUNA economic team's analysis of the impact the proposal will have, as well as other areas of continuing concern.

CUNA staff will show credit unions what they need to assess their own outcome under the proposal and broader implications for the credit union community.

In addition to CUNA staff, NCUA Director of Examination and Insurance Larry Fazio will break down the proposal, including the NCUA's view of why they made some changes from the original proposal.

Nussle, Hampel, Dunn and Fazio will also answer questions from participants, as time allows.

The free, 60-minute webinar is scheduled for 1 to 2 p.m. (ET).

The RBC2 proposal was released at the NCUA's Jan. 15 board meeting, almost a year after the original proposal was introduced. While it contains improvements over the original, it is still a "solution in search of a problem," Nussle said.

The proposal will have a 90-day comment period, which will begin once it is published in the Federal Register, which is expected in the coming weeks.

31 CUs fined total of $12,820 for 3Q late-filing

ALEXANDRIA, Va. (1/23/15)--Thirty-one federally insured credit unions will be subject to civil money penalties for filing late third-quarter 2014 call reports, the National Credit Union Administration announced Thursday. Those 31 have consented to pay a total of $12,820, according to the NCUA.

Individual penalties range from $138 to $1,878, with a median penalty of $176. Those funds are sent to the U.S. Treasury by the NCUA, as mandated in the Federal Credit Union Act.

Assessment of penalties primarily depends on the credit union's asset size, its recent call report filing history and the length of the delay. According to the NCUA, one of the credit unions assessed penalties had been late in a previous quarter.

Of the 31 credit unions paying penalties in the third quarter, 19 had assets of less than $10 million; seven had assets between $10 million and $50 million; and five had assets between $50 million and $250 million. No credit unions with assets greater than $250 million filed late in the third quarter.

A total of 47 credit unions filed call reports late for the third quarter. After the NCUA consulted regional offices and state supervisory authorities to review each of those cases, 42 credit unions were advised they could reduce their penalties by signing a consent agreement.

The NCUA granted waivers for 11 of those credit unions and the remaining 31 credit unions consented.

Seventy-five credit unions filed late reports in the second quarter of 2014, with 44 eventually paying a total of $17,111 in penalties. In the first quarter, 104 credit unions missed the deadline, and 62 were eventually fined a total of $57,750.

The NCUA started the civil money penalties for late filers in the first quarter of 2014, which Chair Debbie Matz said are meant to deter late filers. The third quarter of 2013 saw more than 1,000 credit unions miss the deadline, and Matz said a large portion of those credit unions were chronic late filers.

House subcommittee to examine 'sound data breach legislation'

WASHINGTON (1/23/15)--The House subcommittee on commerce, manufacturing and trade will examine what potential data breach legislation should look like in a hearing scheduled for Tuesday.

Subcommittee Chair Rep. Michael Burgess (R-Texas) has said that working toward a federal data breach solution is a top priority for the 114th Congress.

"Data theft is a real and serious threat facing American families. With cybercrimes growing in size and scope by the day, we have a responsibility to improve cyber safeguards," Burgess said in a statement. "We need a plan in place that will help prevent data from being stolen in the first place, and will also alleviate consequences for consumers if hackers are successful. I am encouraged by the president's recent focus on this issue and call for a national standard, and I agree."

The stated goal of the hearing is to determine what elements should be included in federal legislation--legislation that the subcommittee said it hoped will result in uniform standards and better consumer protection.

"We hope that any legislation that is enacted requires merchants to follow the same type of data security standards that credit unions and other financial institutions must follow, enables consumers to be notified in a timely manner and ensures that credit unions are reimbursed for costs they incur as a result of merchant data breaches--all issues CUNA has been voicing to Congress," said Credit Union National Association President/CEO Jim Nussle in response to President Barack Obama's call for data breach notification legislation.

The hearing is scheduled to start at 10 a.m. (ET) Tuesday and will be streamed on the House Energy and Commerce Committee's website.

The full House Financial Services Committee will host a hearing, also at 10 a.m. (ET) Tuesday, titled "Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Agency."

The hearing is likely to feature agency Director Mel Watt speaking on the future of housing finance, particularly the future of government-sponsored enterprises Fannie Mae and Freddie Mac.

CU support helps drive Va. prize-linked savings bill

CU System
RICHMOND, Va. (1/23/14)--With the support of state credit unions, a prize-linked savings (PLS) bill passed the Virginia House of Delegates Wednesday by 97-0 vote.
In addition, a state Senate version of the bill is expected to pass as early as today, the Virginia Credit Union League reported.
"Our credit unions have done a wonderful job in Richmond lobbying for our legislation," said Rick Pillow, league president/CEO. "This week, 80 representatives from credit unions all across the commonwealth met with their respective delegates and senators, not only on our credit union bills, but on dozens of other bills that affect our operations."

Credit unions that participated in this week's Credit Union Days at the General Assembly include:
  • 1st Advantage FCU, Yorktown, with $606 million in assets;
  • ABNB FCU, Chesapeake, with $438 million in assets;
  • BayPort CU, Newport News, with $1.3 billion in assets;     
  • Beach Municipal FCU, Virginia Beach, with $110 million in assets;
  • Beacon CU, Lynchburg, with $120 million in assets;
  • Belvoir FCU, Woodbridge, with $313 million in assets;
  • Bronco FCU, Franklin, with $182 million in assets;
  • Commonwealth One FCU, Alexandria, with $323 million assets;
  • Fairfax (Va.) County FCU, with $293 million in assets;
  • Freedom First FCU, Roanoke, with $355 million in assets
  • Hampton Roads Educators' CU, Hampton, with $29 million in assets;
  • NARFE Premier FCU, Alexandria, with $151 million in assets;
  • NSWC FCU, Dahlgren, with $315 million in assets;
  • Member One FCU, Roanoke, with $665 million in assets;
  • Piedmont CU, Danville, with $53 million in assets;
  • PortAlliance FCU, Norfolk, with $89 million in assets; and
  • ValleyStar CU, Martinsville, with $273 million in assets.
Next week, credit unions from the Richmond, Charlottesville and Waynesboro areas travel to Richmond for their lobbying days.
The league is also tracking progress on a parity bill for state-chartered credit unions and banks, which would eliminate the need for state-chartered institutions to seek permission from the state Bureau of Financial Institutions to place or relocate ATMs. The league asked that the measure be introduced and state-chartered banks have since joined credit unions on the legislation.
"We view this bill as elimination of red tape for state-chartered credit unions, which could have found themselves at a competitive disadvantage in placing ATMs in prime locations," said Pillow.
Prize-linked savings programs are intended to boost the country's annual savings rate--around 4.1% (News Now Dec. 12). Through these products, credit union members and others can receive entries into a cash prize sweepstakes for depositing a certain amount of money into their savings accounts.  The programs have appealed to unbanked and under-banked consumers who were not previously inclined to save money.

In December, the U.S. Senate passed legislation that would allow credit unions and other financial institutions nationwide to offer PLS accounts.

President Barack Obama signed the American Savings Promotion Act into law Dec. 18.

Ten states allow prize-linked savings programs: Connecticut, Indiana, Maine, Maryland, Michigan, Nebraska, New York, North Carolina, Rhode Island and Washington.

3Q membership growth outpaces Pa. population rate

CU System
HARRISBURG, Pa. (1/23/15)--Pennsylvania credit unions reported stronger membership and loan growth in the third quarter as well as solid earnings, high asset quality and increased capital ratios, according to the Pennsylvania Credit Union Association (PCUA).
Membership in Pennsylvania credit unions increased by 1.1% in the third quarter, up from a 0.9% advance in the second quarter, and a 0.8% increase in the year-prior, based on National Credit Union Administration data, the PCUA reported (Life is a Highway Jan. 22). Total membership at all 463 Pennsylvania credit unions finished the period at 3.83 million. The 1.6% 12-month growth in membership is more than two times higher than the state's population growth rate.
Lower unemployment and pent-up demand boosted credit union loan portfolios in the third quarter. The 2.7% quarterly jump was higher than the 2.2% second-quarter increase. New vehicle lending again led the way reflected by a 7.2% quarterly increase--eclipsing both the 5.9% second-quarter and 2.4% year-prior growth rates.
Used-auto portfolios grew by 4% in the third quarter, followed closely by unsecured personal loans increased at 3.5%. Pennsylvania credit union member business loan portfolios and first-mortgage portfolios each increased at roughly a 3% pace in the quarter, while credit cards were up 2.1%.
Earnings were healthy with an annualized return on assets (ROA) totaling 0.56%, a marginal decline over the second quarter's 0.60% ROA, but well above the 0.44% level recorded in the third quarter of 2013.
Strong earnings and modest asset growth pushed the Pennsylvania credit union aggregate capital ratio to 11.4% at the end of the third quarter--up from 11.2% at the end of the previous quarter. The state's aggregate ratio now stands at its highest level since 2008.

1 suit vs. Home Depot becomes 2: Judge separates consumers, FIs

CU System
ATLANTA (1/23/15)--Similar to how the data breach case against Target is being handled in Minnesota, a federal judge in Atlanta peeled financial institutions and consumers apart in their class action lawsuits against Home Depot for its role in the massive data breach to hit its stores last year (The National Law Journal Jan. 22).

The two groups, which include at least nine credit unions on the financial institution side, have sued Home Depot for failing to properly protect consumer personal and payment information, leading to 56 million compromised credit and debit cards nationwide.

The incident cost credit unions alone nearly $60 million to cover the reissuing of compromised cards and other breach-related activity, according to numbers compiled by the Credit Union National Association in the aftermath of the incident.

Credit unions were on the hook for just over $30 million as a result of the Target breach.

Home Depot has retained two separate law firms to handle the parallel lawsuits.

"While many of the legal issues and much of the discovery are common to the claims of both, the cases present significant, distinct factual and legal issues," wrote Thomas Thrash, Northern District of Georgia chief judge (The National Law Journal). "Accordingly, to manage the litigation most efficiently, the court hereby creates separate tracks for the consumer and financial institution cases."

Home Depot spokesperson Stephen Holmes said in an email: "Throughout the investigation and mitigation of the breach, our primary focus has been on our customers. We'll continue to deal with any legal matters in due course and in the proper venue."

CUNA continues pressing lawmakers to pass legislation that would require merchants such as Target and Home Depot to meet the same strict personal payment data standards that are imposed upon financial institutions.

JPMorgan Chase, Wells Fargo to pay $35.7M for mortgage kickbacks

WASHINGTON (1/23/15)--Consent orders proposing $35.7 million in payments from Wells Fargo and JPMorgan Chase were filed Thursday in federal court by the Consumer Financial Protection Bureau (CFPB).

The bureau, along with the Maryland Attorney General, took action against the two firms for what it alleges is an illegal marketing services kickback scheme with the now-defunct Genuine Title.

The CFPB alleges Genuine Title gave the banks' loan officers cash, marketing materials and consumer information in exchange for business referrals. According to the bureau, these were offered in order to increase the amount of loan business generated.

"These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly," said CFPB Director Richard Cordray. "Our action today to address these practices should serve as a warning for all those in the mortgage market."

The proposed consent orders would require $24 million in civil penalties from Wells Fargo, $600,000 in civil penalties from JPMorgan Chase and $10.8 million in redress to consumers whose loans were involved in the scheme.

An investigation by the CFPB revealed more than 100 Wells Fargo loan officers in at least 18 branches, mostly in Maryland and Virginia, participated in the scheme.

The investigation also found that at least six JPMorgan Chase loan officers in three different branches in Maryland, Virginia and New York were involved in referring settlement business on almost 200 loans to Genuine Title.

Action also has been taken against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement. The bureau alleged that Cohen took "substantial cash payments" in exchange for referrals. Genuine Title allegedly made tens of thousands of dollars in payments to Oliphant Cohen "in an effort to disguise the kickback nature of the payment."

The two would be required to pay a $30,000 penalty under the consent order, and Cohen would be banned from participation in the mortgage industry for two years.

Savings more attractive to consumers in 2015, says America Saves

CU System
WASHINGTON (1/23/15)--Consumers are more committed--and capable--of putting money into savings this year, according to America Saves' Personal Savings Index (PSI).
Consumers' interest in savings stands at 70% compared with 65% a year ago, according to the group's triannual survey.
Savings effort came in at 61% this year compared with 58% last year, and savings effectiveness also edged higher at 59% compared with 56% a year prior.
"Last year at this time, we suggested that a post-holiday financial hangover helped explain the decline in savings interest, effort and effectiveness from September 2013 to January 2014," said Stephen Brobeck, executive director of Consumer Federation of America and founder of America Saves. "But the fact that the decline did not occur between September 2014 and January 2015 suggests that Americans are now feeling better about their financial condition."
Substantial increases in the savings interest, effort and effectiveness of low- and middle-income households account for almost all of the overall PSI increases.
"Our new data suggest that low- and middle-class Americans are feeling more optimistic about their financial situation now than a year ago," Brobeck noted. "Instead of being distracted by heavy holiday spending and debts, they are nearly as interested and active saving today as they were this past September."
After learning that the survey dealt with "personal saving for goals ranging from a rainy day fund to retirement," respondents were asked to rate their personal savings interest, effort and effectiveness on a 10-point scale.
This year's theme for America Saves and Military Saves weeks is "Set a Goal. Make a Plan. Save Automatically." The Credit Union National Association is among the organizations promoting good savings behavior and a chance for individuals to assess their own saving status during the annual campaign, set for Feb. 23-28.

Consumers fear inaccurate info lingers on credit reports, says FTC study

WASHINGTON (1/23/15)--Most consumers reporting unresolved errors in their credit scores believe that inaccurate information is still on their credit report, according to a study from the Federal Trade Commission (FTC).

The study, released Tuesday, is the sixth and final congressionally mandated study on national credit report accuracy from the FTC.

A full 23% of those with lingering problems told the FTC that they just do not have the time to continue the fight to get the errors cleared up.

An earlier study--one in 2012--found that 20% of consumers had an error on at least one of their three credit reports that was corrected by a credit reporting agency (CRA) after it was disputed. That study also found that approximately 20% of the consumers who identified errors in their credit reports saw a later improvement in their score that resulted in a lower credit-risk tier.

This week's study is a follow-up to the 2012 study, and it focuses on 212 consumers who had at least one unresolved dispute in the 2012 study. The 2015 report found that 37 of those consumers (31%) found the disputed information had been corrected.

The other 84 consumers continue to believe some of the disputed information on their reports is still inaccurate. Thirty-eight of those consumers (45%) said they plan to continue their dispute, 42 (50%) said they would abandon their dispute and the remaining four said they are undecided.

The 42 consumers who plan to abandon the process are involved in 93 total disputes. Of those, 40% said they were not interested in pursuing the matter, or the inaccurate information is not important. As mentioned, another 23% of those consumers indicated they do not have enough time to continue the dispute.

The 2015 study recommends that:
  • CRAs review and improve the dispute results notification process to ensure notices and explanation of investigation results are provided to consumers;

  • CRAs continue to explore efforts to educate consumers regarding their rights to review their credit reports and dispute inaccurate information; and

  • Consumers continue to examine their credit reports annually by using and follow the Federal Credit Reporting Act dispute process when inaccuracies are identified. Following the resolution of a dispute, consumers should continue to check their credit reports for potential rare instances of reinsertion.
According to the FTC, "due to the relatively small number of consumers who participated in the follow-up interview, the commission has determined not to recommend any specific legislative action regarding credit reporting accuracy at this time."

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