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September 22, 2014

Nussle takes helm of CUNA today

WASHINGTON (9/22/14)--Jim Nussle today formally begins his tenure as president/CEO of the Credit Union National Association, the nation's largest advocacy group for credit unions.
Click to view larger image CUNA President/CEO Jim Nussle speaks to attendees at the Iowa Credit Union League convention last week. Nussle formally takes leadership of the national trade association today. (Iowa Credit Union League Photo)
Nussle, a former Iowa congressman and director of the Office of Management and Budget (OMB), is taking the reins just as the credit union movement is celebrating the achievement of reaching 100 million memberships.
"The individuals who make up the more than 100 million memberships at credit unions trust their credit unions to provide them, their families and their small businesses with the financial services they expect and need," Nussle said, adding that he will work to ensure the credit union message and policy priorities are heard on the Hill and nationwide.
Nussle, 54, served in the U.S. House from 1991 to 2007 as a Republican representative for Iowa's 1st and 2nd Congressional Districts. He also served as chair of the House Budget Committee, which oversees the federal budget process, including review of all bills and resolutions on the budget.
Under President George W. Bush, Nussle was the 36th OMB director, serving from 2007 to 2009. He also was a member of the president's National Economic Council, National Security Council, Homeland Security Council and National Domestic Policy Council.
Most recently, Nussle was president of Growth Energy, a trade association of renewable energy companies and industry partners focused on alternative energy sources, such as ethanol.
Nussle also has been a contributor and guest host for CNBC 's "Squawk Box" and "The Kudlow Report" and has appeared on MSNBC and CNN . ReadMore

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Home Depot 2nd-largest breach with 56M compromised cards

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MADISON, Wis. (9/22/14)--Home improvement retailer Home Depot confirmed last week that the recent five-month data breach compromised 56 million credit and debit cards--second only behind the Heartland Payment Systems breach in 2009. But what does this mean to the average consumer?
First, look at how the information was taken. Using custom malware designed to evade traditional security tools, hackers breached the company's cash register systems in its U.S. and Canadian stores in April.
Brian Krebs, the security expert who first reported the breach Sept. 2, told NPR that it's that moment between the swipe of the card at the point-of-sale terminal and the encryption of the payment data on its way to the financial institution (Sept. 19). The malware sits at the cash register, essentially a Windows computer, and waits to siphon off the card information to the hackers, who sell the stolen card information on black-market websites, Krebs said.
Last week, Maine reported that bank names, expiration dates, names and addresses for 100,000 compromised cards were listed for sale  ( News Now Sept. 19). In Wisconsin, the Milwaukee Journal Sentinel found that the breach affected all 26 of the state's Home Depot stores, resulting in more than 282,000 compromised cards (Sept. 18). The combined black market asking price for the Wisconsin data--$8.16 million.
In confirming the number of affected cards, the Atlanta-based home improvement retailer also noted the malware used in the breach had been eliminated from its U.S. and Canadian networks.
The Credit Union National Association is urging credit unions to record the costs they are incurring because of the data breach. It will soon be sending credit unions a survey, similar to the one done after last year's Target breach, to collect the following information:
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.
The Target breach survey 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.

During the Governmental Affairs Conference, credit union advocates were armed with state-specific numbers from the CUNA survey of how the Target breach affected them.

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 beholden. ReadMore

How CUs use FHLBs in their operations, Part 3

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MADISON, Wis. (9/22/14)--Federal Home Loan Banks (FHLB), a system of 12 regional cooperatively owned institutions, offer a number of products that can potentially help financial institutions grapple with liquidity, interest-rate risk and investments, among other operations.  

This is Part 3 in a series on the relationship between credit unions and the Federal Home Loan Bank system. For Part 1 and Part 2, please use the resource links.

Nationwide, credit unions, which make up roughly 10% of the overall system's membership, have been using the products offered by FHLBs in various ways.

For example, American Heritage FCU, Philadelphia, with $1.4 billion in assets, has begun accepting public money as a public depository, and the FHLB of Pittsburgh facilitates that process by issuing a letter of credit so the credit union can take in the funds.

"In that arena you need to put up collateral to cover the deposits you're taking in from the municipality," Brian Schmitt, chief financial officer for American Heritage FCU, told News Now .

"Because we're a credit union, we're restricted on just taking any public funds in, so we have to specifically find a third party to issue a letter of credit on our behalf, and that's what we've done," he said.

American Heritage also utilizes five- and seven-year loans, or advances, at the FHLB of Pittsburgh, which it matches with its mortgage portfolio to hedge long-term interest-rate risk on its mortgage loans.

"The [National Credit Union Administration] likes this, using the leveraging for long-term borrowings vs. long-term assets," said Bruce Foulke, president/CEO of American Heritage. "They really like the idea of that because it's better managing your asset liability."

Uniquely, American Heritage works through a credit union service organization (CUSO) that recently qualified for membership at the FHLB of Pittsburgh to facilitate mortgage lending.

The CUSO qualified when all of the members of the organization successfully applied to the FHLB, which Schmitt said traditionally can take between nine months to a year.

"If you're a small credit union, $50 million to $60 million, you might not have" the capability to apply, Schmitt said. "$150 million-plus, they probably have the things they need."

Membership at a FHLB might become more difficult, meanwhile, thanks to a recent proposal by the Federal Housing Finance Agency to require credit unions to hold 10% of residential mortgages on an ongoing basis, rather than just when they apply.

The Credit Union National Association is collecting data on the number of credit union FHLB members that might fall below the 10% threshold and have their FHLB membership put at risk.

"Based on an initial review of the proposal, it may be harder for credit unions to maintain eligibility for FHLB membership because of the 10% requirement," said Robin Cook, CUNA assistant general counsel for special projects ( News Now Sept. 3).

With $544 million in assets, Denali Alaskan FCU has qualified and remained a member of the FHLB of Seattle for years.

Among other services, the Anchorage-based credit union relies on the cooperative bank to safe-keep bonds and mitigate interest-rate risk.

Bob Teachworth, Denali Alaskan president/CEO and board member of the FHLB of Seattle, said that the FHLB offers generally better rates and terms than other sources on long-term borrowings.

"We're kind of a unique credit union because, right now, we're 105% loaned out, and about three or four months ago we sold $31 million in loans to Catalyst Corporation," Teachworth told News Now . "We're funding loan growth through advances from the Federal Home Loan Bank."

Credit unions also use FHLBs as a source of emergency liquidity.

Todd Pietzsch, spokesperson for BECU, Tukwila, Wash., with $12.6 billion in assets, told News Now that the FHLB of Seattle is a part of the credit union's contingency funding plan.

 Foulke agreed that the FHLBs can be a big help in that regard.

"It's nice having (FHLBs) as an emergency funding source if you need it," Foulke said. "Now we don't need it, and I guess most credit unions don't need it today, but when liquidity gets in a crunch, at least you have another avenue to do that."

"People have relationships with the centrals and that's fine," Foulke added. "But for people that want an alternative, we'd say it's a great alternative you should really seriously consider, because they're strong institutions and they have great rates." ReadMore

Comments on customer due diligence, fixed assets, Reg. C due in Oct.

WASHINGTON (9/22/14)--Comments on proposals from the National Credit Union Administration, Consumer Financial Protection Bureau (CFPB) and the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) are due during the month of October. The Credit Union National Association is also collecting comments on the proposals in question.

The proposals are:
  • FinCEN, customer due diligence. The proposal would amend Bank Secrecy Act regulations by strengthening customer due diligence obligations for financial institutions to identify and verify beneficial owners of legal entity customers. Comments are due to CUNA today and to FinCEN Oct. 3;

  • NCUA, fixed assets. The agency has proposed to remove the waiver requirement for federal credit unions to exceed the 5% aggregate limit on investment in fixed assets. The proposal would allow credit unions to exceed the 5% limit if it implements a fixed-assets management program. Comments are due to CUNA by Oct. 1 and to the NCUA by Oct. 10; and

  • CFPB, Home Mortgage Disclosure Act (HMDA) Regulation C. The proposal would revise tests for determining which institutions are covered under the HMDA. Covered entities, including credit unions that trigger Regulation C compliance, would be required to report HMDA data if they originate 25 covered loans other than open-end lines of credit and commercial lines of credit, in the previous calendar year. Comments are due to CUNA by Oct. 15 and to the CFPB by Oct. 29.
Use the resource links below to access CUNA's regulatory advocacy comment call homepage, as well as previous News Now coverage of the proposals in question. ReadMore

Co-op model foundation for NW CUs' success

CU System
MADISON, Wis. (9/22/14)--Credit unions in two Northwest states recently earned media coverage for their robust growth rates--success built as a result of the cooperative business model, according to Troy Stang, president/CEO of the Northwest Credit Union Association (NWCUA).
Also, on a national note, the Puget Sound Business Journal cited credit unions for achieving the 100 million memberships milestone. "Nationwide membership cracked the 100 million mark in June for the first time, rising 2.9% over the past year as credit unions added 1.7 million members, according to the Credit Union National Association," a Sept. 19 article in the publication read.
The Business Journal went on to note the role Washington credit unions are playing in the national surge. Membership in Washington credit unions grew by an average of nearly 4% annually between June 2009 and June 2014 and now stands at more than 3 million statewide.
Credit unions hold 23% of the state's assets compared with 77% for commercial banks, the Business Journal reported, citing statistics from the NWCUA.

Washington's credit unions owe much of their success to the longstanding popularity of the co-op model, according to Stang. "Collectively, in the Northwest, there are a lot of cooperative values," Stang told the Business Journal . "We think of credit unions first as cooperatives and second ... as financial services businesses."
The Sept. 11 issue of the Idaho Business Review reported that Idaho remains one of the fastest-growing states within the credit union system. It ranks second for median growth in members, loans and assets, according to recent state-level data from the National Credit Union Administration (NCUA).
Idaho credit unions led the nation in the median loan-to-share ratio, according to NCUA statistics covering data from the second quarter.
A 4.7% growth in median asset rate was second in the nation and more than triple the national average of 1.3% for the year ending June 30. Idaho had a 2% growth in members, also second in the nation, behind Alaska.
Idaho's median growth rate for loans was 8.6%, more than double the national average of 3.2%.
State credit unions' median return on average assets of 53 basis points was well above the national average of 30 basis points. Nationally, 74% of all federally insured credit unions had positive earnings in the past year. ReadMore

Calif. ride-sharing law protects CU collateral

CU System
SACRAMENTO, Calif. (9/22/14)--California Gov. Jerry Brown signed legislation Thursday that will require Transportation Network Companies (TNC) such as Uber and Lyft to buy at least baseline insurance on their vehicles. The new law will address concerns held by credit unions who have been on the line for reductions in collateral value when the cars those businesses use are involved in accidents ( In the News Sept. 18).

Assembly Bill 2293, authored by Assemblywoman Susan Bonilla (D-Concord), also requires those companies to provide disclosures that outline any potential gaps in personal insurance auto-lines coverage for drivers using their own vehicles.

"While AB 2293 is a consumer protection bill, it represents much more than that," Bonilla said ( In the News ). "This measure symbolizes business flexibility, consumer affordability, political compromise and, most importantly, what true public policy should be: a collective process for all stakeholders to contribute."

Credit unions through the California and Nevada Credit Union Leagues worked closely with Bonilla on pushing forward the legislation, which was heavily opposed by the TNC companies. 

The bill also received some help from credit unions through the Leagues' "Connect for the Cause" email-alert grassroots system.

The new legislation:
  • Creates a personal insurance firewall to ensure personal insurance auto policyholders will no longer subsidize the commercial activity of TNCs, beginning July 1, 2015;
  • Lowers the primary insurance coverage requirements in the timeframe formerly known as "App On To Match" to $50,000/$100,000/$30,000, with excess coverage of $200,000;
  • Ensures oversight by the California Public Utilities Commission of TNCs, such as Uber and Lyft; and
  • Expedites the approval process for new TNC insurance products.
"AB 2293 sets the standard for this innovative industry, ensuring consumer protection and public safety remains a top priority," Bonilla added. "This legislation also reinforces corporate responsibility, safeguarding taxpayers from subsidizing the cost of commercial activity." ReadMore

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Gartner: 75% of mobile apps will fail security tests through 2015

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STAMFORD, Conn. (9/22/14)--By 2015 more than 75% of mobile applications will fail basic security tests, placing a security risk not only on personal but business data, according to new data from Gartner Inc.
Employees download from app stores and use mobile applications that can access enterprise assets or perform business functions, and these applications have little or no security assurances, Gartner said. These applications are exposed to attacks and violations of organizational security policies.
"Enterprises that embrace mobile computing and bring your own device (BYOD) strategies are vulnerable to security breaches unless they adopt methods and technologies for mobile application security testing and risk assurance," said Dionisio Zumerle, Gartner principal research analyst. "Most enterprises are inexperienced in mobile application security. Even when application security testing is undertaken, it is often done casually by developers who are mostly concerned with the functionality of applications, not their security."
Mobile testing is a relatively new area of security, Gartner said. Gartner predicts that by 2017, the focus of endpoint breaches will shift to tablets and smartphones--already, there are three attacks on mobile devices for every attack on a desktop. But the security features that mobile devices offer today will not suffice to keep breaches to a minimum. 
Gartner predicts that by 2017, 75% of mobile security breaches will be the result of mobile application misconfigurations, rather than the outcome of deeply technical attacks on mobile devices. A classic example of misconfiguration is the misuse of personal cloud services through apps residing on smartphones and tablets. When used to convey enterprise data, these apps lead to data leaks of which the organization remains unaware. ReadMore

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