Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

News Now: September 18, 2014

Fall sweep: CU message hits Hill hard before session ends

CU System
WASHINGTON (9/18/14)--State leagues and credit unions are making the most of the last days before Congress goes into its mid-term election recess with Hike the Hill visits and meetings with their federal regulator.
 
Click to view larger image (CUNA Graphic)
This week alone, credit union professionals and volunteers from 14 states have trekked to the U.S. Capitol to state their case for regulatory relief, data security standards and preserving the credit union tax status, among other topics.
 
National Credit Union Administration (NCUA) board members Rick Metsger and J. Mark McWatters shared their views of the regulator's risk-based capital (RBC) proposal with delegates from the Georgia Credit Union Affiliates, the Idaho Credit Union League and the League of Southeastern Credit Unions Tuesday.
 
McWatters indicated that a new RBC rule should be written with a "de novo" approach. He also cited the number of comment letters from credit unions and the letters from Congress as a sign that a second comment period is needed, the league's eSignal reported (Sept. 17). Metsger said that the release of the next draft is far down the road because of the sheer volume of comment letters submitted to the NCUA.
 
Members of the House Financial Services Committee, including ranking member Rep. Maxine Waters (D-Calif.) and Rep. Ed Royce (R-Calif.), met with delegates from the California and Nevada Credit Union Leagues.
 
The Wisconsin Credit Union League thanked soon-to-be-retired Rep. Tom Petri (R) for his support of member business lending during a Tuesday reception at Credit Union House. Wisconsin credit unions also met with Sens. Tammy Baldwin (D) and Ron Johnson (R).
 
Earlier in September, credit union leagues from Ohio, Iowa and New Mexico made the trip, and upcoming visits are scheduled by Montana, Illinois and the Dakotas. The Ohio Credit Union League met with 17 of the state's 18 congressional delegates, including meetings with Republican Reps. Steve Stivers and Brad Wenstrup ( eLumination Sept. 17).

Over the course of the year, 32 states will have brought the credit union message to elected representatives and federal regulators through the program, sponsored by the Credit Union National Association and state leagues.
 
With congressional delegates heading back to their districts, there are still plenty of opportunities for credit unions to connect, however.
 
"With important issues on the federal and state level, such as our tax exemption, data breaches, payday lending and foreclosure concerns, talking to our elected officials in district is crucial to making sure our voice is heard in Washington and Lansing," said Dave Adams, president/CEO, Michigan Credit Union League ( Monitor Sept. 17).

Congress should listen, act on reg. relief concerns, lawmakers say at forum

Washington
WASHINGTON (9/18/14)--The three lawmakers present at Wednesday's The Hill forum agree on at least one thing: that credit unions are an integral part of the country's financial services landscape. Reps. Denny Heck (D-Wash.), Brad Sherman (D-Calif.) and Rob Woodall (R-Ga.) spoke at the forum, which was sponsored by the Credit Union National Association.

The three legislators admitted that banking industry representatives are often pushing them and others to reconsider credit unions' tax status.

"I think the economic revenue that would come with taxing these institutions would be far less than the economic benefit we see now," Sherman said. "And that's not even taking into account the fact that a credit union that charges a little less interest, or pays a little more interest on deposits, is generating personal income tax. If you can make 2% on that account, Uncle Sam is getting a piece of that."
Click to view larger image From left, Reps. Brad Sherman (D-Calif.), Rob Woodall (R-Ga.) and Denny Heck (D-Wash.) speak to The Hill' s Kevin Cirilli about the role of credit unions in today's financial landscape. (CUNA Photo)

He added that while some opponents of credit unions advertise an additional $2 billion to $3 billion in revenue, the Joint Committee on Taxation has estimated the number to be almost 40% less than that.

Heck said he has a standard response to banking officials that keep pushing him to re-examine credit unions' tax status, paraphrasing a famous quote from economist Walter Heller on supply-side economics.

"To keep coming to us and asking for that, waiting for it to happen, is a little bit akin for leaving the landing lights on for Amelia Earhart," he said. "Credit unions are not taxed the same as banks as a matter of policy."

Woodall said he has an answer prepared as well, should the question be put to him.

"If they believe the credit union structure is so advantageous that it must be changed in order for you to maintain your competitive edge, maybe just join the credit union movement," Woodall said. "I think it's a red herring to suggest that the playing field we have today is somehow uneven."

When the topic shifted to ideas for regulatory relief, Heck admitted that "there's an appetite in the United States House of Representatives for regulatory relief," but the process has been difficult.

"As credit unions have become a bigger and more integral part of the fabric of the community, their concerns about the regulatory environment have grown over time, and I think it behooves Congress to listen to that and act on it," he said.

The second part of the forum, moderated by CUNA interim President/CEO Bill Hampel, featured Steve Pociask, president of the American Consumer Institute, and Michael Mandel, chief economic strategist of the Progressive Policy Institute.

Both were asked about the consequences of overregulation on credit unions, and how this overregulation can affect recovery from the economic crisis as a whole.

Pociask pointed to the 12.25% member business lending cap for credit unions as a regulation that could be slowing recovery. He emphasized the importance of credit unions for picking up their small business lending by 38% since the onset of the recession, while banks have reduced their small business lending by 17% over that same time period.

"As banks were dropping their lending to small businesses, credit unions were stepping up and increasing that lending," he said. "Why is that important? Because if you look at how the cycle works, 65%-70% of jobs created in the upturn are jobs from small businesses. So it's very important to get capital to them. There's definitely demand for it, but the banks aren't meeting it."

With regard to the National Credit Union Administration's risk-based capital proposal, Mandel said it was a "classic case of regulatory oversight."

"It's tightening up regulations just when we need more lending. We saw this after 2000, with the change in accounting rules, which was an overreaction that imposed a lot of costs, but it didn't stop the next financial crisis," he said, adding, "This is the same type of thing, imposing extra costs without doing what needs to be done."

Mandel didn't mince words when he said that the post-crisis reaction of targeting institutions like credit unions "is going to turn out in retrospect to be a disaster. Because it misses the point about what caused this disaster."

Other Resources

Senate Banking leaders request FHLB membership comment extension

Washington
WASHINGTON (9/18/14)--The top Democrat and Republican of the Senate Banking Committee are asking the Federal Housing Finance Agency (FHFA) to apply the brakes on a recent proposal that would change Federal Home Loan Bank (FHLB) membership rules.
 
Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) Tuesday asked FHFA Director Mel Watt to extend the comment period for the proposed rule by 60 days.
 
On Sept. 2, the FHFA issued a notice of proposed rulemaking that would, in part, require all credit unions to hold 10% of assets in residential mortgage loans on a constant basis to become and remain members of the FHLB system. Currently, the rule requires the 10% to be held only at the time membership is approved.
 
In a letter to the agency, the senators wrote, "Given the important role the Federal Home Loan Banks play in providing liquidity to small financial institutions and supporting community development efforts ... any change to membership criteria should only be undertaken after thorough consideration."
 
The Credit Union National Association backs a longer comment period. In a Sept. 8 letter to Watt, CUNA interim President/CEO Bill Hampel warned the proposal "could create significant barriers to credit union membership in FHLBs."  The letter went on to cite the critical role FHLBs play as a source for credit union liquidity.

"The FHFA has not explained why this proposal should be processed on an accelerated basis and thus, we are not aware of the need to expedite it now, particularly since the Advance Note of Proposed Rulemaking was initially issued almost four years ago," the letter reads.

CUNA is deeply concerned that credit unions are not given membership parity with community banks that are not required to maintain the 10% threshold on an ongoing basis in order to retain their FHLB membership.

Other Resources

Today's NCUA meeting is 1st for new board member McWatters

Washington
ALEXANDRIA, Va. (9/18/14)--Today's National Credit Union Administration board meeting only has a few items on the agenda, but it is the first meeting with new board member J. Mark McWatters, who replaced Michael Fryzel in August.

McWatters said Tuesday to a group of credit union advocates from the League of Southeastern Credit Unions, the Idaho Credit Union League and the Georgia Credit Union Affiliates that he favored a new risk-based capital rule be written by the agency. (See News Now story: Fall sweep: CU message hits Hill hard before sesson ends.)

Today's agenda will include a request to expand the community charter for First Service FCU, based in Groveport, Ohio, with $136 million in assets, and a quarterly report on the Corporate Stabilization Fund.

It will also include discussion of a final rule containing technical amendments to three parts of the NCUA's rules and regulations.

These technical amendments will likely involve:
  • A section of the Dodd-Frank Act that stripped the NCUA of rule-writing authority for unfair or deceptive acts and practices;
  • Changes to central office and regional structures; and
  • Using the term "payday alternative loans" to describe payday and small amount, small dollar loans.
The meeting will take place at the NCUA's Alexandria headquarters, starting at 10 a.m. (ET).

Other Resources

Fed rate changes hinge on economic expansion, Hampel says

Market
WASHINGTON (9/18/14)--The Federal Open Market Committee (FOMC) announced Wednesday that interest rates likely will be held low for a "considerable time" after the asset-purchase program ends, which the Federal Reserve expects will happen next month.

While the committee didn't tip its hand on when exactly it will begin to increase rates, it did offer a bit of insight into what will go into making that decision.

"Chair (Janet) Yellen didn't tell us when rates would start to rise--no surprise--but she did suggest that the timing of the increase will depend on how rapidly the economy expands," said Bill Hampel, interim president/CEO of the Credit Union National Association. Hampel will resume his responsibilities as the trade association's chief economist Monday.

"If monthly job gains average more than 250,000 for the next several months, the increase could come as early as next spring," Hampel added. "If they fall back below 200,000, it could be the fall or later. In between, we're looking at next summer."  

For the past six months, monthly job gains, or nonfarm payrolls, have climbed by an average of 226,000. If that pace holds up, Hampel said, the Federal Reserve likely will begin pushing up rates at mid-year.

In its policy statement released at the conclusion of its two-day meeting Wednesday, the FOMC said the economy is expanding at a moderate pace, and inflation continues to stay below its longer-run goal.

Officials also elevated their estimate for the federal funds rate at the end of 2015 by 25 basis points. By the end of 2017, the Fed said, the rate will be at 3.75% ( Bloomberg.com Sept. 17).

Other Resources

EMV rollout gains steam at CUs

CU System
MADISON, Wis. (9/18/14)--As security breaches such as the one at Home Depot make both consumers and financial institutions more wary of existing fraud prevention technology, credit unions have begun issuing cards equipped with the Europay-MasterCard-Visa (EMV) technology standard to their members.
 
These cards, which are already common in Canada, Europe and Asia, rely on microchip technology that is more secure than the magnetic strip technology that today's cards employ.
 
Spokane Teachers CU, Liberty Lake, Wash., with $1.9 billion in assets, has begun offering the more secure chip cards to its credit card holders, the Northwest Credit Union Association (NWCUA) reported ( Anthem Sept. 16).
 
Merchants have to upgrade their systems to read the new cards, and adoption in the United States has been slow. However, credit card networks have set a deadline of Oct. 1, 2015, for merchants to adopt the technology. Merchants who miss the deadline will face increased liability for fraudulent purchases.
 
"Until merchants upgrade their terminals the new cards won't help protect from these data breaches," said Katie Clark, NWCUA regulatory and compliance analyst. "We'll most likely see the upgrade to the new cards accelerate as we approach next October, when the liability for fraudulent in-person purchases could shift to the merchants."
 
STCU's updated cards will include both the traditional magnetic strip and the new microchip, so they will work whether or not a merchant has upgraded.
 
Initially, STCU is issuing the more secure cards to members who often travel internationally, where the cards are standard. By the end of 2015, though, all STCU credit cards will be equipped with EMV technology.
 
Beginning Oct. 1, First South Financial CU, Bartlett, Tenn., with $476 million in assets, will roll out credit cards embedded with EMV technology to its membership as well.
 
First South Financial President/CEO Craig Esrael told the Memphis Daily News (Sept. 17) that the motivation behind the EMV technology rollout is to help members mitigate some of the risk of data getting hacked in incidents such as the Home Depot breach.

Esrael said the in light of the most recent data breach announcement, card holders will soon be able to use the chip technology as big issuers lay out their strategy for EMV implementation.
 
First South's cards will also include the mag stripe.

Other Resources

Comments on CFPB's consumer complaint data narrative due Sept. 22

Washington
WASHINGTON (9/18/14)--Comments are due by Sept. 22 on the Consumer Financial Protection Bureau's consumer complaint narrative proposal, the Credit Union National Association reminds credit unions.

The bureau's original deadline was Aug. 22, but it extended the comment period by a month in response to a number of requests.

Currently, the CFPB discloses on its public database certain complaint data it receives regarding consumer financial products and services.

The proposal would expand the disclosure to include unstructured consumer complaint narrative data. Only those narratives for which opt-in consent has been obtained, as well as application of a personal information scrubbing standard and methodology, would be subject to disclosure.

The proposed policy would supplement the CFPB's existing policy statements establishing and expanding the consumer complaint database.

CUNA has worked with the CFPB to address credit union concerns regarding the complaint database, warning that sensitive or confidential business or consumer information could be inadvertently disclosed when consumer complaints are filed in the database and has urged the bureau to minimize privacy risks and other unintended consequences. CUNA will be filing further comments with the bureau.

Use the resource link below for the full proposal.

Your opinion wanted: News Now survey

CU System
WASHINGTON (9/18/14)--A readership survey from News Now , the daily online news publication from the Credit Union National Association, is open for comments through Friday.
 
  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.

" News Now is hoping to hear from every reader so we can work to tailor our news coverage to our readers' needs and wants," says Lisa McCue, CUNA vice president of communications and News Now editor.

RSS print
News Now LiveWire
#creditunions unite to bring message to Congress, @TheNCUA during Hike the Hill visits. See #NewsNow http://t.co/RKl5LZegVw
4 minutes ago
.@TheNCUA open board meeting starts at 10 a.m. ET tomorrow. It is board member J. Mark McWatters' first. Watch @NewsNowLiveWire
15 hours ago
.@CFPB is proposing to oversee larger nonbank auto finance companies for the first time at the federal level.
16 hours ago
.@CUNA's Bill Hampel moderates a discussion on the future of credit unions in the post-100 million member world. http://t.co/kcXykiRQVn
18 hours ago
#Breaking: QE likely to end next month, @federalreserve says #NewsNow #Market http://t.co/u7Fb5l5fwM
19 hours ago