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September 17, 2014

CUNA testifies at hearing to examine 'regulatory assault' on small FIs

WASHINGTON (9/17/14)--Members of the Senate Banking Committee expressed their concerns with over-regulation and its effects on small financial institutions such as credit unions during a hearing Tuesday.

The hearing, which featured testimony from the National Credit Union Administration and the Credit Union National Association, examined ways Congress could reduce the regulatory burden in order to insure better access to financial services.

Click to view larger image Dennis Pierce, CUNA board chair, greets Larry Fazio, director of the NCUA's Office of Examination and Insurance, before a Senate Banking Committee hearing Tuesday. Both men testified at the hearing on the impact of regulatory burden on credit unions. (CUNA Photo)
Dennis Pierce, chair of the CUNA board and CEO of CommunityAmerica CU, Lenexa, Kan., with $1.9 billion in assets, said that unless reducing the regulatory burden of credit unions becomes a top legislative priority, small credit unions will continue to face troubles.

"Congress and regulators ask a lot of small, not-for-profit, financial institutions when they tell them to comply with the same rules as JPMorgan, Bank of America and Citibank, because the cost of compliance is proportionately higher for smaller-sized credit unions than these behemoth institutions," he said.

"Failure to take even small steps in the direction of reducing credit unions' regulatory burden will result in the continued trend of consolidation in the credit union sector and fewer credit unions serving America's consumers and small businesses."

Sen. Mike Crapo (R-Idaho) echoed these points, noting that since 1990, more than half of all credit unions and more than 3,000 small banks have closed, consolidated or merged.

"Small financial institutions are disappearing from the American landscape at an alarming rate, due to an ever increasing regulatory burden," he said. "These small entities can only withstand the regulatory assault for so long before considering a merger or consolidation."

In his testimony, Larry Fazio, director of the NCUA's Office of Examination and Insurance, cited NCUA data that said from 1990 to 2013, credit union membership grew by 66.3%, while the number of credit unions fell 49.7%.

Sen. Jerry Moran (R-Kan.) said that while regulators were also responsible for reducing regulatory burdens, Congress was at fault as well for failing to get certain bills "across the finish line." He noted the Privacy Modernization Act, which has the expressed support of 99 senators but has yet to be passed by the Senate.

Sen. Tim Johnson (D-S.D.), chair of the committee, asked Fazio for an update on the agency's risk-based capital (RBC) proposal. Johnson's first question of the hearing was on the NCUA's RBC rule. He asked when the rule will be finalized and whether or not it will be reissued for comment.

NCUA's witness answered that it is a top priority for the NCUA, and they are working around the clock on the rule. He indicated that he doesn't have an exact date for the final rule or answer if it will be reissued for comment.

Fazio said the agency is continuing to work at the staff level to consult with industry stakeholders on several technical aspects of the proposed rule.

"Once we complete that process we'll need to work with the NCUA board to achieve consensus on the direction we want to take for the final rule. Once we do that, we'll be in a better position to speak on the timing and the issue of another comment period," he said. "I can say it's the agency's top regulatory priority, and staff is working around the clock on this issue."

Pierce was critical of the risk-based capital proposal, noting the numerous objections raised by members of Congress, CUNA and other stakeholders.

"A comprehensive risk-based capital proposal for credit unions would be great, but this isn't the one that does it. It leaves out key elements, and it doesn't properly evaluate the risk-based nature of capital," he said. "It also goes beyond what Congress has given NCUA the authority to do with RBC and it doesn't include access to supplemental capital, which would be great for credit unions."

Pierce also expressed CUNA's support for the following bills in his written testimony.
  • The Privacy Notice Modernization Act (H.R. 749/S. 635) would require credit unions to send out privacy policy notifications only when the policy has changed, rather than the currently required annual basis. Since 2001, credit unions have sent an average of 87 million notices per year. Pierce said the bill "is an example of legislation that both reduces regulatory burden and improves consumer protection;"

  • The Credit Union Share Insurance Fund Parity Act (H.R. 3468/S. 2698/S. 2699) would provide share insurance coverage to lawyer trust accounts and other similar trust accounts held at a federally insured credit union. CUNA believes this bill will provide much-needed parity for credit unions; and

  • The Capital Access for Small Community Financial Institutions Act (H.R. 3584/S. 1806), which would correct a drafting oversight in the Federal Home Loan Bank Act which has resulted in a small number of privately insured credit unions being ineligible to join a Federal Home Loan Bank. "If the legislation had used a broader term, such as 'state credit union' or 'state-chartered credit union,' terms that are clearly defined in the Federal Credit Union Act, this would not be an issue," Pierce said.
Use the resource links below to access the full testimony from CUNA and the NCUA. ReadMore

CUNA urges CUs to tally Home Depot breach impact

CU System
WASHINGTON (9/17/14)--The Credit Union National Association is again turning to its member credit unions to help assess the costs of retailer security breaches--this time regarding the massive compromise of card information at Home Depot.
CUNA is urging credit unions to record breach-related activity and costs as they receive and process breach notifications in the upcoming weeks. The new survey will collect data to inform lawmakers, regulators, media and others about the effects of the data breach on credit unions.
The Home Depot breach could top 60 million compromised cards--significantly higher than last year's Target breach that affected 40 million cardholders.
CUNA executed a similar survey on the 2013 Target breach and found that credit unions incurred $30.6 million in costs directly related to the breach--not including fraud costs. The average cost per affected card was $5.68, and 4.6 million cards were compromised, the survey found.
The results of that CUNA survey made headlines in national media outlets for weeks.
While Target's breach lasted about three weeks and included about 1,500 stores, the Home Depot breach has the potential to be the largest breach ever. The home improvement retailer has 1,977 stores in the United States and 180 in Canada, and the breach went unnoticed for five months. Home Depot confirmed the breach Sept. 8 but has not released any further information.
Among the information CUNA will collect on the Home Depot breach:
  • Number of debit and credit cards affected;
  • Costs incurred for card reissuance;
  • Costs related to additional staffing, member notification, account monitoring, etc.;
  • Changes in call volume;
  • Changes in staffing; and
  • Any specifically identifiable fraud-related losses.
CUNA 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

Authoritative guidance needed on TILA-RESPA rule: CUNA

WASHINGTON (9/17/14)--A joint letter signed by 16 financial trade organizations, including the Credit Union National Association, has been sent to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray.

The letter addresses concerns these organizations have with the bureau's Truth in Lending Act and Real Estate Settlement Procedures Act (TILA-RESPA) integrated mortgage disclosures rule.

The rule must be implemented on Aug. 1, 2015, which the letter calls "the height of home-buying season." Due to this, as well as the fact that many members of the organizations are currently focusing time and resources on implementation of the new rule, the letter urges the bureau to provide "written, authoritative guidance" which is believed necessary for effective implementation.

"Reliable, written guidance is essential for lenders, settlement service providers, insurers, investors and other secondary market entities, regulators and ultimately consumers themselves," the letter reads. "It would be even more useful if the answers given were also provided in writing by the bureau."

Additional issues raised in the letter include:
  • Encouraging the bureau to "deepen its engagement in industry forums as much as possible." This would allow individual companies to engage with CFPB experts and receive clear guidance;

  • The bureau should provide additional exemplar forms. Examples of a limited number of completed forms for a range of transactions have been offered, and have proven useful, but they need to be provided for more circumstances and for additional localities;

  • The bureau should continue to assist industry vendors to help them timely develop tools to comply with the integrated disclosure rule. Lenders and other settlement service providers rely heavily on vendors to build and maintain the systems necessary to comply with this important rule; and

  • Duplicative and contradictory state laws should be reviewed by the CFPB to reduce consumer frustration that could arise with disclosures of similar information in different formats. The letter asks the bureau to begin reviewing such state laws with an eye to exercising any necessary authority to ensure that the objectives of this effort are achieved.
Use the resource link below to access the CFPB's information page about the new TILA-RESPA integrated disclosures rule. ReadMore

Rep. Holding says 2nd RBC comment period needed

WASHINGTON (9/17/14)--Rep. George Holding (R-N.C.) encouraged the National Credit Union Administration to open a second comment period for its risk-based capital proposal in a letter sent Tuesday.

Holding, who currently serves on the House subcommittee for regulatory reform and antitrust law, said a second comment period should happen "regardless of whether it is required under the Administrative Procedures Act."

The Credit Union National Association has also urged the agency to provide a second comment period before the rule is finalized.

NCUA Chair Debbie Matz stated over the summer that the proposal would not be re-opened for a second comment period unless the agency's general counsel found that it was required to do so under the aforementioned act.

In addition to questioning the authority that gives the NCUA the ability to enact such a rule, Holding asked for an explanation as to why the proposed rule has a well-capitalized requirement in addition to Congress's adequately capitalized standard.

"Protecting the American taxpayer by ensuring credit unions remain solvent in the worst of economic conditions should always be the top priority of the NCUA," Holding wrote. "The National Credit Union Share Insurance Fund performed well during one of the worst economic recessions in our country's history, which many attribute to prompt corrective action standards that were put in place by Congress in 1998."

Holding says the rule, when it is finalized, "should not unduly burden credit unions nor adversely affect healthy credit unions' ability to meet the needs of their members."

A former U.S. attorney, Holding joined the more-than 330 representatives to weigh in on the risk-based capital proposal. Twenty-seven senators have also written to the NCUA with similar concerns.

Use the resource link below to access News Now coverage of legislator concerns with the NCUA's proposal. ReadMore

Today's Hill forum to examine fin. services landscape

WASHINGTON (9/17/14)--Those interested in a legislative and regulatory look at the financial services landscape can still register to view The Hill 's forum online today. The publication will host the forum, sponsored by the Credit Union National Administration, to feature discussion of the policy implications of "the new financial services landscape."

Reps. Denny Heck (D-Wash), Brad Sherman (D-Calif.) and Rob Woodall (R-Ga.) will speak to The Hill 's Kevin Cirilli about the financial services landscape from a lawmaking perspective. Rep. Ed Royce (R-Calif.) was previously scheduled to appear but has a prior legislative committment.

CUNA interim President/CEO Bill Hampel, Steve Pociask of the American Consumer Institute and Will Marshall of the Progressive Policy Institute will discuss the regulatory burden facing credit unions, and the credit union movement's future after reaching 100 million memberships.

The event is scheduled to begin at 1:45 p.m. (ET) today and will be streamed online.

Use the resource link below for registration information, and to view the live video stream once the event begins. ReadMore

Cincinnati CUs turn spotlight on their heavy reg. burden

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CINCINNATI, Ohio (9/17/14)--Credit unions feel the burden of heavy regulation as much as banks, according to a Sept. 15 Business Courier of Cincinnati Online article.
Business Courier reporter Steven Watkins met with a group of Greater Cincinnati credit union executives for lunch to talk about the issues that are affecting them, and the regulatory burden was near the top of the list.
The credit union group had just met U.S. Rep. Steve Chabot (R-Ohio) about the possibility of easing the regulatory burden.
The financial services industry has had to endure the burden of 180 new rules and regulations that Congress has put into effect since the financial crisis, Patrick Harris, director of legislative affairs for the Ohio Credit Union League, told Watkins.
One of the primary reasons small credit unions cite for merging into larger institutions is to escape the creeping costs of compliance, said Jay Sigler, president/CEO of Cinfed CU, Cincinnati, with $329 million in assets. Cinfed CU recently merged a smaller credit union into its operations for that reason. Sigler's credit union has had to hire additional personnel to handle compliance.
Security breaches were also a concern for Cincinnati-area credit unions. Cincinnati Central CU, with $94 million in assets, called every member with a credit card who was impacted by the Home Depot breach, said Chief Operating Officer Kathy Haas. It also replaced all the cards.

That kind of service comes at a high price, Haas said, adding that it's card issuers, not merchants, who are shouldering the costs of data breaches. ReadMore

Other Resources

Study: CUs lead in free checking

CU System
LAKE FOREST, Ill. (9/17/14)--Consumers have fewer choices in checking accounts, according to a study by Moebs $ervices, but the type offered by credit unions is the most in demand: free.
Only six years ago the number of checking accounts offered was 11 or more, according to the Moebs report. Consumer accounts have quickly evolved to three basic types: interest, free and basic. Banks are moving quickly to interest or basic checking, while credit unions offer mainly free checking. 
About 79.6% of credit unions offer free checking, compared with 47.9% of banks, according to the Moebs study, which took place between January and June 2014.
Financial institutions reduce the types of checking to simplify sales and marketing efforts, and also to lessen maintenance costs especially in compliance matters, the Moebs study said. About 97% of financial institutions lose money by offering checking. Banks are moving away from the transaction orientation of free checking and embracing a balance-and-fee approach tied to relationships.
For example, about 78.3% of national banks offer checking with interest but require an average monthly balance to avoid a fee.
For all financial institutions, the price reflected in the balance required to avoid a fee is almost $700 for basic checking. Related fees, if charged, are about $7 per month on average. Interest checking requires almost three times the required balances of basic checking and costs more than $9 per month if charged. ReadMore

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Take this survey, please

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WASHINGTON (9/17/14)-- News Now , the daily online news publication from the Credit Union National Association, is soliciting comments from its readers.
"We want to know what serves you best and what fine tuning might help us serve your news needs even better," said Lisa McCue, vice president of editorial communications, asking News Now subscribers--and all News Now readers--to participate in the readership survey.
Please submit the survey only once. If you completed the survey sent by email Monday, thank you for your participation.
Respondents may enter a drawing for a $50 Amazon gift card. The deadline for submitting responses is Friday. Use the link to access the survey. Please let us hear from you. ReadMore
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