Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

March 5, 2015

NEW: CUNA files amicus brief in Florida interchange case

ATLANTA (3/5/15 Updated 3:50 p.m.)--CUNA today filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit, in a case raising many of the policy issues surrounding credit card interchange fees. The case, Dana's Railroad Supply v. Bondi , involves a First Amendment challenge to Florida's ban on merchants surcharging users of credit cards.

The retailers bringing the lawsuits argue that price determination is a form of free speech, and that in banning surcharges, merchants are unable to protest interchange fees, which they deem to be too high.

Interchange fees occur when a credit card transaction takes place, and are how credit unions are compensated for making cards available to merchants. As the CUNA brief notes, merchants receive a number of benefits from participating in the credit card system, including being able to keep staff levels low, allow for transactions at unattended locations like gas pumps or online, as well as protecting merchants from fraud and insufficient fund losses.

"Nothing about the Florida Statute prohibits merchants from doing anything at the point-of-sale (or anywhere else) in an attempt to persuade consumers to use cash instead of a credit card," CUNA Senior Director of Advocacy and Counsel for Special Projects Robin Cook argued in the brief. "The Florida Statute also does not preclude merchants from asking Congress or the Florida Legislature to cap the fees merchants pay for credit card acceptance. In fact, merchants have repeatedly done exactly that in recent years, and have now developed this colorful theory in an effort to accomplish part of what they could not achieve in Washington and Tallahassee."

CUNA argues that allowing merchants to add additional surcharges to credit card transactions would allow merchants to shift the cost of these payments to consumers, while still allowing merchants to receive the substantial value of participating in the credit card system.

"Credit cards provide the consumer a safe, efficient, convenient, seamless transaction that redounds to the benefit of merchants," CUNA argued. "Meanwhile, card issuers like credit unions assume all of the risk and guarantee the merchant will receive payment immediately. The interchange component of the merchant discount fee is how issuers are appropriately compensated for providing this service."

Credit unions, which are generally smaller financial institutions, face numerous costs by offering and processing credit cards.  Interchange fees help ensure that card programs are economic for credit unions. A surcharge on credit card transactions, CUNA argues, could lead to consumers using credit cards less frequently, instead opting for other forms of payments.

This could force credit unions to exit the credit card market, making it more difficult for them to compete with larger financial institutions to attract and retain members.

The brief also notes that consumer issues are at play with eliminating Florida's surcharge ban. Funds generated through credit card programs are used to subsidize other consumer-friendly products at credit unions, such as free checking accounts. These programs help bring more consumers into the financial system.

Surcharging could mean fewer consumers would have access to basic financial services, the brief argues. CUNA presents evidence showing this is exactly what happened after the Durbin Amendment.

Surcharging was prohibited under federal law until the statue expired in 1984. After that, Visa and MasterCard banned surcharging as part of their network agreements. A 2013 antitrust case caused the bans to be removed from those agreements, making the state bans more relevant.

Three other cases across the country are pending, in New York, California, and Texas, all involving similar arguments as the Florida case. The New York Credit Union Association has filed an amicus brief for the case in that state, which is under appeal. The Texas district court has ruled surcharges to be unconstitutional, and the California case is still pending.

CUNA-backed bill would allow CU input into 'rural' definition

WASHINGTON (3/5/15)--Reps. Andy Barr (R-Ky.) and Ruben Hinojosa (D-Texas) have reintroduced the Helping Expand Lending Practices in Rural Communities Act, a CUNA-supported bill that would grant credit unions and other lenders greater input into rural-area designations.

"Having an area designated as 'rural' can affect  the types of products credit unions can offer members in that area, and CUNA supports any opportunity for credit unions to provide input to the process," said CUNA Chief Advocacy Officer Ryan Donovan.

For instance, credit unions operating in "rural" areas may be exempt for some regulatory burdens, such as an escrow requirements under the Truth in Lending Act that requires certain lenders to create an escrow account for at least five years for higher-priced mortgage loans. They may also be exempt from standards under the Ability-to-Repay/Qualified Mortgage (QM) rules that disqualify mortgage loans with balloon payments from meeting the QM standard.

Being exempt from such requirements, CUNA maintains, can beneficially affect the types of products a credit union can offer their members in what can be underserved areas.

The "rural " designations are made by the Consumer Financial Protection Bureau (CFPB), and the bill would provide individuals in rural areas the right to petition for the area to be reclassified as "rural." It would also direct the bureau to establish an application process determining whether an area should be designated as rural.

Currently, the bureau uses the U.S. Department of Agriculture codes to define a rural area.

The bill also requires the CFPB to grant or deny the application within 90 days and to publish the decision in the Federal Register. The decision must include an explanation of factors the bureau used in making its decision.

Memberships, loans continue positive trend: CUNA's monthly survey

CU System
MADISON, Wis. (3/5/15)--Loans outstanding and credit union memberships both posted solid gains in January, according to the latest CUNA credit union monthly estimates.

Click to view larger image Click for larger view
Loan growth climbed 0.5% during the first month of the year, and memberships rose 0.4% during the month, bringing total credit union memberships in the United States up to 102.3 million.

"The recent monthly estimates reflected continued overall credit union strength and stability," said Perc Pineda, CUNA senior economist. "Memberships grew at an impressive 4.8% annualized rate in the month, and overall lending activity continued to increase in January, reflected by a 6% annualized increase in loan balances.

"It is not surprising that, over time, more and more consumers are choosing credit unions as their best financial partner. And looking at it from a broader perspective, the services provided by credit unions are clearly supporting the continued expansion of the U.S. economy."

In January, loan growth was driven by new-auto loans (2.1%), other mortgages (1.9%), home-equity loans (1%), used-auto loans (1%) and unsecured personal loans (0.7%). Fixed-rate mortgages and credit card loans fell 0.4% and 1.2% respectively.

On an annual basis, new-auto loans jumped 25.2%, and used-auto loans climbed 12%.

"These positive numbers reveal recent improvements in consumer financial conditions and, more importantly, show credit unions continue to deliver solid value by meeting members' demand for financial products with competitive rates and flexibility," Pineda said.

Click to view larger image Click for larger view
Savings balances increased by 0.8% in January, compared with a 0.2% increase the prior month. Share drafts led the way with a 4.6% monthly jump, followed by regular shares with a 1.3% climb and one-year certificates with a 0.04% increase.

Money market accounts declined 0.2%, and individual retirement accounts dropped 1%. 

Further, the aggregate capital-to-asset and loan-to-savings ratios held steady compared with the previous month, Pineda said.

According to fourth quarter data from the National Credit Union Administration, 2014 loan growth at federally insured credit unions jumped to the highest level since 2005. Memberships, assets, deposits and net worth also trended higher.

App puts CUNA's GAC in palms of attendees' hands

CU System
WASHINGTON (3/5/15)--It's hard to imagine--given this year's expected record-breaking turnout--that the entire CUNA Governmental Affairs Conference experience could fit in the palm of your hand.

Click to view larger imageThe main menu of GAC2015, the conference app for CUNA's Governmental Affairs Conference this year. (CUNA Photo)
But with this year's revamped conference mobile app for conference attendees, "GAC2015," it most certainly can.

The conference app, which can be downloaded from both the Apple app store and Google Play, is full of features to inform attendees as they navigate the packed days of the conference.

Those registered for the event--nearly 5,000 credit union leaders--can access the conference's full agenda with GAC2015; search for networking opportunities by scrolling through the full roster of conference attendees; and also check out a map of the exhibit hall.

The app also offers transportation information, bios for the speakers, surveys and a page to read the GAC Daily, the daily conference publication Credit Union Magazine puts together to cover the highlights of the event.

This year, there's also a large social component to the app.

Click to view larger imageThe conference app contains a number of features, including a bio page for all of the conference's speakers. (CUNA Photo)
On the activity feed, attendees can post photos or comments about what they have enjoyed during the conference. They can even "like" or comment on posts from other attendees, similar to a Facebook feed. The app also can be linked to Twitter or other social media accounts.

"Excited to attend GAC for the first time!!" Krista Raines, loan officer from VW Central CU, Parkersville, W.Va., posted on the feed Tuesday.

"Looking forward to telling our legislators the credit union story, and how we benefit our members and differ from big banks!" said Jacqueline Henderson, vice president of human resources at Rivermark Community CU, Beaverton, Ore.

The Leaderboard feature also tracks who has been most active on the app during the conference. With a number of people already posting on the activity feed, it appears it will be a hotly contested race.

Conference registrants were sent invitations to download the app earlier this week. The app was created by CUNA and is hosted by DoubleDutch.

Bill introduced to change CFPB leadership structure

WASHINGTON (3/5/15)--A bill that would broaden the leadership structure of the Consumer Financial Protection Bureau (CFPB) was introduced Wednesday by Rep. Randy Neugebauer (R-Texas).

The Financial Product Safety Commission Act (H.R. 1266) would change the CPFB leadership from a single director to a five-person board.

CUNA testified before the Senate Banking Committee last month in support of installing a five-person board to run the CFPB.

"We believe that a five-member commission, as Congress originally intended, will better balance consumer access to financial products with the need to ensure a fair marketplace," reads a joint letter signed by CUNA and other financial services trade organizations. "A commission would serve as a source of balance and stability for consumers and the financial services industry by encouraging internal debate and deliberation, ultimately leading to increased transparency."

Under H.R. 1266, the members would be appointed by the president and confirmed by the Senate. The commission would be split 3-2 along political parties, with members serving five-year staggered terms.

According to the bill's text, the commission members must "have strong competencies and experiences related to consumer financial products and services."

Wally Murray, president/CEO of Greater Nevada CU, Carson City, Nev., testified last month on behalf of CUNA during a Senate Banking Committee hearing.

"Expanding the bureau's executive leadership to a five-person board will ensure that more voices contribute to the bureau's rulemaking and it could help produce regulations that better balance the important mission of the bureau and the impact the regulations have on the way products and services are provided to consumers," Murray said.

Neugebauer is the current chair of the House Financial Services financial institutions and consumer credit subcommittee, and he will be addressing CUNA's 2015 Governmental Affairs Conference Monday. The bill, which has 20 co-sponsors, would also rename the CFPB the Financial Product Safety Commission. 

Along with CUNA, the joint support letter was signed by the American Bankers Association, American Financial Services Association, Consumer Bankers Association, Financial Services Roundtable, Independent Community Bankers of America, National Association of Federal Credit Unions and the U.S. Chamber of Commerce.

Luetkemeyer introduces 'good first step' toward reg. relief, Nussle says

WASHINGTON (3/5/15)--CUNA expressed its appreciation Wednesday for a bill introduced by Rep. Blaine Luetkemeyer (R-Mo.) that contains several regulatory relief provisions. The Community Lending and Regulatory Relief Act of 2015 (CLEARR Act) contains a number of items that were part of regulatory relief bills in the previous Congress.

"We believe your legislation is a good first step toward meaningful regulatory relief for credit unions and other community based financial institutions," Nussle wrote to the chief sponsor of the bill. "We look forward to working with you on ways to further regulatory relief for community based financial institutions."

Most importantly, the bill contains a much-sought-after provision that directs federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing assets for nonsystemic banking institutions.

Luetkemeyer introduced a bill last Congress calling for the study, and CUNA advocated for a manager's amendment that would have included the National Credit Union Administration in the study and postponed the agency's risk-based capital proposal. The amendment eventually was not offered.

Other items in the bill that CUNA appreciates include:
  • A provision that would treat mortgages held in portfolio at credit unions and other mortgage lenders as Qualified Mortgages;
  • Language that amends the exemption of small servicers of mortgage loans from the Real Estate Settlement Procedures Act, exempting credit unions and other community financial institutions that service 20,000 or fewer mortgage loans;
  • Language from a previous Luetkemeyer bill that would amend the Truth in Lending Act to exempt higher risk mortgages from property appraisal requirements; and
  • A provision eliminating the privacy notice requirement that the notices be sent annually, and requiring them only to be sent when the privacy policy of the financial institution has changed.

Webinar highlights CU benefits in SBA programs

ALEXANDRIA, Va. (3/5/15)--Member business lending at credit unions has increased steadily for the past 20 years, even through the financial crisis, according to the National Credit Union Administration. The NCUA and Small Business Administration (SBA) hosted a joint webinar Wednesday to explore some of the benefits credit unions and their members can receive through government programs.

Click to view larger image Click for larger view
According to a poll taken at the webinar, 28.1% of attendees have a member business loan program and use SBA programs; 29.7% offer business loans, but do not use SBA programs; and another 20.1% do not offer business loans but are "thinking about it."

Credit unions are limited in their member business lending to no more than 12.25% of their assets. However, the SBA guarantees a significant portion of loans through its programs, and that amount does not count against the cap.

Currently, the SBA guarantees up to 85% of loans up to $150,000, and up to 75% on all other loans up to $5 million. The agency guaranteed $19.2 billion in loans in 2014, a record amount, and requested an authorization level of $21 billion for this year.

According to SBA staff who presented at the webinar, a member business lending department at a credit union should consist of: risk-focused staff; a risk assessment, rating process and monitoring; and independent loan reviews.

The webinar comes on the heels of a memorandum of understanding between the NCUA and SBA, as well as CUNA's efforts to connect credit unions interested in a small business program with SBA resources. In addition, the NCUA has launched a vendor research portal, and a new webpage with small business lending resources.

The NCUA will post an archived version of the webinar within the next three weeks.

Maine league testifies in support of fin. ed. bill

CU System
WESTBROOK, Maine (3/5/15)--The Maine Credit Union League re-emphasized credit unions' leadership role in youth financial education statewide during Monday's testimony before the Maine Legislature's Joint Committee on Education and Cultural Affairs.
Elise Baldacci, league director of governmental affairs, spoke in support of L.D. 417, An Act Regarding Measures to Ensure Students Can Demonstrate Proficiency in Financial Literacy.
The legislation directs the commissioner of education to develop methods to measure students' proficiency in financial literacy to help ensure they can demonstrate proficiency prior to graduation.
"For nearly two decades, long before financial literacy was fashionable or considered important, the Maine Credit Union League and a number of Maine's credit unions have had an active and leadership role in helping to build awareness and understanding about money management and personal finance with thousands of Maine children," Baldacci told the committee. 

"Since 2004, Maine's credit unions have coordinated more than 100 Financial Fitness Fairs for high school students across the state and, to date, nearly 25,000 Maine high school students have participated in one of these fairs," she added.
Baldacci thanked bill sponsor Rep. Matt Pouliot (R-Augusta) and other legislators for "their continued leadership and efforts on raising awareness and pursuing action on the important issue of financial education among high school students."

News Now LiveWire
App puts #CUNAGAC in palms of attendees' hands #NewsNow
11 hours ago
App puts #cunagac in palms of #creditunion attendees' hands
12 hours ago
Breaking at #NewsNow: @CUNA files amicus brief in Florida interchange case.
12 hours ago
What is the @NCUFoundation ? Watch this Foundation video:
15 hours ago
Follow @cumagazine for even more #CUNAGAC live-action reports March 8-12 #creditunion #creditunions #UniteForGood
18 hours ago