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September 30, 2014

NEW: CUNA urges Obama to take strong cybersecurity action

WASHINGTON (9/30/14, UPDATED 10:24 a.m. ET)--The Credit Union National Association is asking President Barack Obama to establish a Cybersecurity Council that would report to the president and would be charged with "developing a comprehensive and timely approach to the range of issues associated with cybersecurity attacks on businesses and consumers in this country."
CUNA's new leader, President/CEO Jim Nussle, writes, "We urge the administration to give this idea full consideration, coordinating with Congress, agencies that are already addressing aspects of cybersecurity including prudential regulators, and the private sector to establish it."
Nussle notes in his letter to Obama that most recent massive data breaches have taken place in systems operated by merchants, not financial institutions. 
"One important problem with current law is that, even when fault in a data breach lies with a merchant, credit unions and financial institutions are assigned many of the financial costs. 
"One job of the Cybersecurity Council should be to help align liability with responsibility for these breaches," Nussle writes, adding that such a system would give more incentives to all parties to "take cybersecurity seriously."
Nussle detailed another key credit union concern related to merchant data breaches: "When credit unions reissue compromised cards, under current rules they are not permitted to reveal the reason for the reissuance, leaving the impression among many credit union members that it was the credit union that allowed the data to be compromised." ReadMore

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NCUA chair to request second risk-based capital comment period

ALEXANDRIA, Va. (9/30/14)--National Credit Union Administration Chair Debbie Matz announced Monday that she will request that a revised risk-based capital proposal be issued with a new comment period due to "significant structural changes" being considered. Credit Union National Association President/CEO Jim Nussle commended the NCUA's decision.

"CUNA, the leagues and credit unions fervently advocated for a second comment period given the significance of the proposal and the feedback that it received from both the credit union movement and policymakers," Nussle said. "This is terrific news; we look forward to continuing to work with the agency to craft a rule that meets the needs of the credit union system."

CUNA requested an additional comment period in its original comment letter filed with the agency May 28, and has advocated for it during the three NCUA Listening Sessions over the summer and in meetings with NCUA board members and staff.

Board member J. Mark McWatters called the previously proposed risk-based capital proposal "deeply flawed" and said it merits substantial revision.

"As I stated last week, I will not consider the rules for adoption unless they are re-proposed with a robust comment period of not less than 60 to 90 days," he said. "I articulated this position out of respect for Congress and those members of the credit union community who have enthusiastically voiced their opposition to the proposed rules."

NCUA staff are reviewing and revising the current proposal, and reviewing stakeholder comments, before bringing the revised version to the board. The agency could not confirm when the board might see the revision, but Matz anticipates the board could issue an amended proposal before the end of the year.

According to the agency, the amended proposal will include a longer implementation period and revised risk weights for mortgages, investments, member business loans, credit union service organizations and corporate credit unions, among other changes.

Stakeholders will be invited to comment on an alternative approach for addressing interest rate risk using the supervisory process. NCUA board member Rick Metsger said he believes interest rate risk must be addressed in the risk-based capital rule, but separately from credit risk.

"Weighting credit risk and interest rate risk with a single numerical value created conflicts that ultimately made it difficult to accurately weigh the risk of either," he said. ""I am pleased we appear to be moving in the direction of separating interest rate risk and credit risk and that structural change alone is sufficient for me to believe an additional comment period would be appropriate."

Matz said the changes will pose less of a regulatory burden than the original proposed rule, but some changes will affect the rule's structure.

"Based on discussions with NCUA's general counsel, I now believe it is prudent under the APA to ask for additional comments," she said. ReadMore

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CU leagues of 5 states call for merchant breach accountability

WASHINGTON (9/30/14)--The presidents of credit union leagues from Alabama, Florida, Massachusetts, New Hampshire and Rhode Island have echoed concerns of the Credit Union National Association in calling for retailers to take responsibility for the costs of data breaches.

Speaking to The New Hampshire Union Leader , Paul Gentile, president/CEO of the Massachusetts, New Hampshire and Rhode Island Credit Union Leagues, called for retailers to take responsibility for the costs borne by financial institutions when such breaches occur.

"They should lose money. They lost their customer data. They're losing money [in sales] because of bad business, not protecting their systems," Gentile told the publication. "Credit unions are impacted for nothing that they did. Their systems are not breached."

The same article in The New Hampshire Union Leader estimated that the Target breach alone caused New Hampshire credit unions to reissue 25,493 debit cards and 2,911 credit cards, at a cost of $5.10 per card, a total of $144,862. That number does not take into account the cost of fraudulent charges.

Patrick La Pine, president/CEO of the League of Southeastern Credit Unions, cited a CUNA survey in his editorial that ran in the Sept. 28 edition of The Miami Herald . CUNA's survey indicated the target data breach cost Florida credit unions more than $1.5 million.

"If the Home Depot breach is larger, you can see that credit unions will have considerable expense on a breach that they did not cause," he wrote. "The merchant does not incur any of these costs and, ultimately, the costs are passed along to consumers."

La Pine, who was also featured in The Gainesville Sun last week, cited a lack of data security standards for merchants as a primary reason for so many breaches.

"Financial institutions, including credit unions, are subject to high data protection standards by law while merchants are not subject to federal data protection standards; there is no merchant financial accountability," he wrote.

CUNA's survey results from all states led to an estimate that the total cost to credit unions is an estimated $30.6 million, including reissuing 4.6 million credit and debit cards, as a result of the Target breach.

Use the resource link below for News Now coverage of CUNA's response to the data breaches. ReadMore

Bank ATM fees continue to climb

CU System
MADISON, Wis. (9/30/14)--While credit unions continue to charge small or no fees for ATM transactions, banks have pumped up their fees to record highs, according to a recent survey from .

Among the big banks polled, the average surcharge for non-customers who use their ATMs jumped 6.5% this year up to a record of $2.77.

Banks also charge their customers who get cash from ATMs outside of their networks an average of $1.58 per transaction, also a new high. That means consumers could have to fork over an average of $4.35 per transaction every time they use a bank ATM outside of their bank's system.

Meanwhile, of those credit unions who charge fees for using ATMs outside of the institution's network, the median fee charged sits much lower at about $1, according to the Credit Union National Association's 2013-14 fees report. 

Further, only about 6.5% of all credit unions charge transaction fees on ATMs they own. Credit unions charge a median fee of $1 for non-owned ATMs as well.

"Data from every market research firm tracking financial institution pricing reflects the same fact: Credit unions generally charge their members lower fees, lower rates on loans, and higher yields on deposits than those available at banking institutions," Mike Schenk, CUNA vice president of economics and statistics, told News Now .

"Any consumer shopping for financial products and services would do well to include credit unions in that process," Schenk added. "That's one of the many reasons an increasing number of consumers are recognizing credit unions as their best financial partner."

Many credit unions allow free transactions before assessing a fee for using an owned or non-owned ATM. The majority provide about five or six free transactions before assessing a fee, according to CUNA numbers. ReadMore

CULAC backs former CU VP Aguilar's House campaign

WASHINGTON (9/30/14)--With 35 days remaining before the general election, the Credit Union Legislative Action Council (CULAC) has made its second independent expenditure of election season. CULAC has spent $150,000 on direct mail and digital advertising to support Pete Aguilar, a Democratic candidate running to represent California's 31st Congressional District.

Aguilar is the former vice president of Arrowhead CU of San Bernardino, Calif., $820 million in assets, and the current mayor of Redlands, Calif. He won his June primary election by 209 votes, after CULAC funded a $200,000 independent expenditure on direct mailers, digital advertisements and a website for the primary.

"We believe Pete's background working at a credit union gives him an understanding of the unique role credit unions play in their communities, and will give him unique insight into the challenges faced by the working families of California's Inland Empire," said Trey Hawkins, vice president of political affairs at the Credit Union National Association. "Now we're here to get him through November's election."

This is the second independent expenditure from CULAC for the general election. Sen. Mitch McConnell (R-Ky.), the Senate minority leader, is benefiting from $300,000 in television and radio advertising for his race to continue representing Kentucky in the Senate.

CULAC also spent $156,000 on similar advertising earlier this spring for McConnell.

"As we get into the final weeks leading up to the election, we'll be announcing up to a dozen races around the country where credit unions will be contacting their members, CULAC will be spending money on advertisements and we'll be engaging at the ballot box on behalf of credit union champions in both key House and Senate races," Hawkins said. ReadMore

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CFPB seeks $47.5M, charges Flagstar Bank with mortgage servicing violations

WASHINGTON (9/30/14)--Violations of the Consumer Financial Protection Bureau's (CFPB) new mortgage servicing rules resulted in the bureau ordering Flagstar Bank to pay $37.5 million, according to the CFPB. The Michigan-based mortgage servicer is alleged to have illegally blocked borrowers' attempts to save their homes, and as a result will pay $27.5 million to victims and a $10 million fine, which will go to the CFPB's civil penalty fund. 

The CFPB said in a statement that Flagstar failed borrowers "at every step in the foreclosure relief process."

Flagstar administers foreclosure relief programs provided by the owner of the loan, which are meant to mitigate losses for both the borrower and the owners of the loans by providing alternatives to foreclosure.

CFPB examinations and an investigation found that from 2011 to the present, Flagstar failed to devote sufficient resources to administering loss mitigation programs for distressed homeowners. For example, in 2011, Flagstar had 13,000 active loss mitigation applications but only assigned 25 full-time employees and a third-party vendor in India to review them.

Specifically, the Bureau found that Flagstar:
  • Took excessive time to review loss mitigation applications, often causing application documents to expire. To move its backlog, Flagstar would close applications due to expired documents;

  • Failed to approve or deny borrower applications within the 30 days required by CFPB mortgage servicing rules;

  • Failed to send, or delayed sending, missing document letters to borrowers. Flagstar is responsible for reviewing borrowers' initial loss mitigation applications to determine what documents are missing. It must then tell borrowers what documents are missing, usually by sending a "missing document" letter;

  • Routinely miscalculated borrower income, leading to Flagstar wrongfully denying loan modifications;

  • Denied applications for unspecified reasons, despite the fact that Flagstar's internal systems contained the true reason for the denial; and

  • "Needlessly prolonged" trial periods for loan modifications, causing some borrowers' loan amount under the modified note to increase and, in some cases, jeopardized borrowers' permanent loan modification.
In addition to the fines, the bureau has ordered Flagstar to end all loss mitigation mortgage servicing violations and stop acquiring default servicing rights from third parties.

Use the resource link below to access the CFPB's consent order.


Missouri CUs embrace Bank on More SUV sweepstakes

CU System
ST. LOUIS (9/30/14)--At the halfway point of the Missouri Credit Union Association's (MCUA) "Bank on More SUV Sweepstakes," participation is running hot.

Photo caption: Joplin Metro CU brought in a Jeep Compass to display alongside the sweepstakes' backdrop to create excitement about the promotion. (Missouri Credit Union Association Photo)
More than 500 Missourians hoping to win an SUV have either uploaded photos of themselves to the association's Facebook page or shared them on Twitter and Instagram.

The social media activity, combined with ads and organic posts, can potentially reach about 100,000 people on a weekly basis, with at least 1,200 engagements, according to the MCUA.

"We had a great outpouring of community interest in our SUV Sweeps event," said Janell Roth, loan officer for Horizon CU, Macon, Mo., with $20 million assets.

To enter the sweepstakes, consumers must find the big orange square backdrop at a local credit union, have their photo taken in front of it, and upload it to a social media site with the hashtag #bankonmore.

The sweepstakes is a great way to drive nonmembers to credit union branches, according to the MCUA.

The prize is a 2014 Jeep Compass, and the promotion runs until Oct. 10.

Horizon employees last week served food and offered gas cards in front of the promotion's backdrop located at their credit union. At the end of the event, the credit union had received 120 entries and secured two new members.

The sweepstakes event hosted by TelComm CU, Springfield, with $126 million in assets, was so popular that more than two dozen people entered to win the SUV, according to Lori Johnson, TelComm vice president of marketing and business development.

For a full schedule of where the big orange back drop will be over the coming days, use the resource link below. ReadMore

N.Y. CUs report strong 2Q lending, membership numbers

CU System
ALBANY, N.Y. (9/30/14)--New York credit unions' aggregate membership and loans increased in the second quarter, the Credit Union Association of New York (CUANY) reported.
Membership expanded by 0.5% throughout the quarter to push the state's total number of credit union members up to 5.03 million. Loan totals increased by 2.6%, up from 0.9% in the first quarte ( The Point Sept. 30).
On a year-over-year basis, the second quarter saw membership and outstanding loans grow by 2.6% and 10.4%. The year-to-date membership growth, CUANY pointed out, is almost seven times greater than the state's population growth rate.
The smallest credit unions in the state, those with fewer than $20 million in assets, saw loan portfolios grow year-over-year in the second quarter by 8%. Overall, 62.2% of state credit unions said their assets increased.
Auto lending expanded by 4.9%, with new auto loans growing by 4.4%.
Outstanding member business loans increased by 4.3% to a year-to-date 13.7% expansion rate. The quarterly growth, CUANY noted, was higher than the national average of 3.1%.
Throughout the first half of the year, New York credit unions originated $7.2 in loans, with $2 of that coming from mortgages.
New York credit unions finished the second quarter with a cumulative net worth-to-asset ratio of 10.9%.
The CUANY quarterly report is developed with the Credit Union National Association of America. ReadMore

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