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News Now: March 6, 2015

CUNA files amicus brief in important Florida interchange case

ATLANTA (3/6/15)--CUNA today filed an amicus brief Thursday 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, allowing 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.

He added, "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.

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7 new reg. relief bills help welcome CUs to D.C. for CUNA GAC

WASHINGTON (3/6/15)--As CUNA looks forward to welcoming nearly 5,000 credit union advocates to Washington next week for its 2015 Governmental Affairs Conference, Ryan Donovan, the association's chief advocacy officer, sent out a special edition of CUNA's weekly "Legislative Update" to CUNA members Thursday.

The update highlights seven bills introduced in the last week that, if enacted, will help remove barriers for credit unions to more fully serve their members.

"Their introduction, we hope, will facilitate their consideration as part of the regulatory relief process in which the Senate Banking Committee and House Financial Services Committee are engaged.

"We expect additional legislation to be introduced after the House returns from recess next week," Donovan notes in his message to CUNA members. He also underscored the importance of the advocacy work that will be accomplished by the thousands of credit union leaders who will be visiting federal lawmakers to discuss key credit unions issues as part of the GAC's advocacy outreach.

"It's going to be a great conference and an important opportunity to deliver a strong message to Congress: preserve the credit union tax status, stop merchant data breaches and remove barriers so credit unions can more fully serve their members!" the CUNA advocacy chief pens.

Donovan also encourages GAC attendees to the review congressional briefing documents that CUNA has shared and also to download the CUNA Advocacy App from the Apple App Store or Google Play.

The seven bills affecting credit unions that were introduced in the U.S. House of Representatives this week are:
  • H.R. 1188 : Credit Union Small Business Jobs Creation Act (MBL);
  • H.R. 1195 : Related to CFPB Advisory Boards;
  • H.R. 1176 : The National Credit Union Administration Budget Transparency Act;
  • H.R. 1210 : Portfolio Lending and Mortgage Access Act;
  • H.R. 1266 : Related to the establishment of a five-member Consumer Financial Product Safety Commission in place of the single-director Consumer Financial Protection Bureau;
  • H.R. 1233 : Community Lending and Regulatory Relief  (CLEARR) Act; and
  • H.R. 1259 : Helping Expand Lending Practices (HELP) in Rural Communities Act.
The CUNA GAC runs Sunday through March 12, and the schedule is packed with exciting keynote speakers, high-level policymakers from both the legislative and regulatory arenas, information-packed breakout sessions on the credit union movements hottest topics, networking opportunities and much more.

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Nussle: Need for reg. relief must trump banks' tired tax attacks

WASHINGTON (3/5/15)--The Independent Community Bankers of America (ICBA) unveiled its list of 2015 policy priorities Tuesday and CUNA President/CEO Jim Nussle noted that it highlights how similar the advocacy priorities of credit unions and small banks are--but with one very unfortunate exception.
"It is with great disappointment--and frankly some disbelief--that I see the community bankers have yet again committed to their misinformation campaign about credit unions and our federal tax status," Nussle said Thursday.
While the ICBA names "relief from crushing regulatory burden" as its top concern for community banks in 2015, it later on the same page declares it "continues to oppose" some of credit unions' key regulatory relief priorities as long as credit unions continue to operate under their statutory tax status as not-for-profit financial cooperatives.
"How does this even make sense?" Nussle questioned. 
Credit unions were first made tax-exempt by a ruling by the U.S. Attorney General in 1917, less than 10 years after the first one appeared in this country and 17 years prior to the enactment of the Federal Credit Union Act. The tax status has been reaffirmed many times, including in 1935, 1936, 1937, 1951 and 1998.
"Credit unions behave differently from other institutions due to their not-for-profit structure," Nussle reminded. "It's not what we do, but how we do it, and who we do it for makes the difference. The cooperative structure allows credit unions to focus totally on member value and service, and, overall, prevents us from taking the types of risks big banks take in the name of profits."
Nussle noted there are so many advocacy areas where community banks and credit unions could unite, not only in the regulatory relief arena, but also for housing finance reform, cyber- and data security issues and making merchants conform to higher data protection standards, payments systems access and governance, and so much more.
"The final concern named on the ICBA's 2015 issues list is 'ending too-big-to-fail' advantages given to 'megabanks,'" Nussle noted. "Maybe ICBA should put more effort into fighting the real enemy of community banks and stop attacking member-owned, community-based credit unions."

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Interchange-fee cap bill halted in Colo.

CU System
DENVER (3/6/15)--Legislation in Colorado that would have prohibited collection of interchange fees on state and local taxes was halted during a committee hearing Wednesday.
House Bill 15-1154 first put forth the prohibition of collecting credit-card transaction fees on taxes paid by Colorado businesses. After opposition from credit unions, banks and card-processing companies, the legislation was downgraded to a study on limiting interchange fees.
Credit unions and other financial institutions would have faced increased burdens and expense to develop systems to distinguish eligible and ineligible amounts for fee collection.
Also, financial institutions pointed out that even the study was limited to the fees' effect on businesses and not how fees are used to cover card costs such as data breach and fraud protection. (See related story: CUNA files amicus brief in Florida interchange case.)
Scott Earl, president/CEO of the Mountain West Credit Union Association, testified in front of the House Finance Committee.
"It appears almost to be a direct attack to credit unions' statement and missions," said Scott Earl, president/CEO, Mountain West Credit Union Association, in his testimony ( Denver Business Journal March 5). "The study is shamelessly biased toward the merchants."
The study version was voted down by the House Finance Committee by a 9-2 vote.

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N.H. CUs briefed on IOLTAs

CU System
MANCHESTER, N.H. (3/6/15)--The Cooperative Credit Union Association partnered with the New Hampshire Bar Association this week to put on a compliance training session for handling Interest on Lawyer Trust Accounts (IOLTA) and other escrow accounts ( Daily CU Scan March 5).

Daniel Wise, New Hampshire Bar Association director of communications, left, and Darlene Schmidt-Brandt, New Hampshire Bar Foundation director and vice president at Bellwether Community CU, have pledged to help credit unions with compliance related to handling IOLTAs. (Cooperative Credit Union Association Photo)
The Credit Union Insurance Fund Parity Act, which became effective Dec. 19, created deposit insurance parity for credit unions by mandating that the National Credit Union Administration extend share insurance coverage to trust accounts, including IOLTAs.

Those in attendance learned about the history of IOLTAs in New Hampshire, what an IOLTA account is, compliance issues, account opening and maintenance procedures, and practical tips.

The New Hampshire Bar Foundation noted during the session that it was excited credit unions had joined the ranks of financial institutions that can serve attorneys, and that lawyers often maintain their IOLTA accounts and their personal accounts at the same financial institution, offering potential development opportunities for credit unions.

The bar foundation also committed to providing operational, compliance and marketing assistance to all credit unions that offer IOLTA accounts.

Darlene Schmidt-Brandt, bar foundation director, IOLTA advancement committee member and staff member at Bellwether Community CU, Manchester, N.H., has pledged to offer tailored or on-site assistance to any credit union designing an IOLTA program.

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CEO confidence up, but reg. concerns increase: Abound survey

CU System
AUSTIN, Texas (3/6/15)--Credit union CEO optimism for 2015 is tempered by concerns of increased regulatory burden, according to Abound Resources.
Sixty-one percent of credit union CEOs list regulatory burden as their top concern for 2015--far outpacing the interest-rate environment, which came in at 40%, the credit union consulting firm reported in its Insights survey.
Still, nearly 70% responded that they feel either somewhat or very optimistic--a significant increase from 37% in 2013 and 48% in 2014.
"That is not to say they are content," said Brad Smith, Abound Resources president/CEO. "Concerns about regulatory burdens have increased steadily, and they are still worried about the economy and interest rates."
Tied neck-and-neck for top financial and risk management priority are regulatory compliance requirements and fraud and information security concerns. The latter jumped to 40% from 25% in 2014.
The December 2014 survey captured 187 responses from credit unions ranging in asset size of up to $3 billion.

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CUNA Mutual reports 4th consecutive year of growth

CU System
MADISON, Wis.  (3/6/15)--An improved lending environment contributed to the fourth consecutive year of earnings growth for CUNA Mutual Group, the company reported Thursday.

Consolidated GAAP revenue, net income and capital levels increased over 2013.

GAAP total revenue increased by 3.6% in 2014, driven in part by the emphasis on the TruStage auto, home, life, accidental death and dismemberment and health insurance product lines.

"Serving credit unions and members is at the center of everything we do," said CUNA Mutual Group President/CEO Robert Trunzo. "Our growth is a reflection of their trust and of the dedication of all CUNA Mutual Group employees. We view growth as an opportunity to invest in new and innovative ways to help credit unions and their members build financial security."

The company recorded $206 million of net income (GAAP) in 2014, a 26.8% increase over 2013. Strong investment and operating results, particularly in business protection products, contributed to the results.

CUNA Mutual Group continued its strong advocacy for credit unions in 2014, contributing $35 million to support credit union leagues and industry outreach.

As part of its efforts to streamline its business lines, it closed the sale of its mortgage insurance company joint venture in 2014 and its crop insurance business in early 2015.

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