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News Now:April 18, 2014

CUNA, NAFCU jointly repeat urging for RBC comment extension

Washington
WASHINGTON (4/18/14)--Joining forces, the Credit Union National Association and National Association of Federal Credit Unions Thursday urged a 90-day extension for the comment period for the National Credit Union Administration's risk-based capital plan (RBC), set to elapse on May 28.
 
Both organizations previously asked for just such an extension back in February, and it was denied by the agency. 
 
"We simply do not believe that the comment period provides sufficient time for a number of credit unions to analyze the proposal's impact on their individual operations and prepare their responses,"  CUNA President/CEO Bill Cheney and NAFCU President/CEO Dan Berger wrote to the NCUA board members.
 
"Given the health of the credit union system, we do not see the need to rush this rule and believe more time for comments will also benefit the agency through the production of well-reasoned letters," the credit unions leaders argued.
 
The joint letter called the RBC plan the "most significant proposed rulemaking that credit unions will face this year and likely for years to come." It noted that credit unions already are struggling, in some cases, to meet an onslaught of new regulatory requirements this year, and need additional time to provide the NCUA with substantive comments on the RBC plan that reflect their particular situations.
 
CUNA strongly supports risk-based capital for credit unions, but warns that the NCUA's current proposal is not the approach to take. CUNA analysis shows that, as written, the NCUA plan could force credit unions to hold as much as $7.3 billion in additional capital.
 
As described in the Federal Register, the NCUA proposal would revise the risk-weights for many of the NCUA's current asset classifications, require higher minimum levels of capital for federally insured natural-person credit unions with concentrations of assets in real estate loans, member business loans (MBLs) or higher levels of delinquent loans; and set forth the process for the NCUA to require an individual federally insured natural-person credit union to hold higher levels of risk-based capital to address unique supervisory concerns raised by NCUA.
 
It would apply to credit unions with $50 million or more in assets.

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Stress testing for large CUs, common bond proposal on next NCUA agenda

Washington

ALEXANDRIA, Va. (4/18/24)--A final stress testing rule for large credit unions will lead the agenda when the National Credit Union Administration holds its April open meeting next Thursday.

Under a proposed version of the stress test regulation released last year, federally insured credit unions with assets exceeding $10 billion would be required to develop and maintain capital plans, and undergo annual stress tests.

The stress test requirements, drafted by the agency's Office of National Examinations and Supervision, would require impacted credit unions to conduct specific capital analyses to evaluate how changes in variables, parameters and inputs used by credit unions in their capital plans could affect their capital. Credit unions would also need to test how interest rate shocks of at least plus or minus 300 basis points would affect their net economic value.

"While we acknowledged the utility of stress testing, we did not feel a new rule was necessary or that NCUA had substantiated the need for it," Credit Union National Association Deputy General Counsel Mary Dunn said.

CUNA offered recommendations that would help improve the proposal, including:

  • Stress test results should not be disclosed publicly;
  • Sanctions should not apply if planning or test benchmarks are not met; and
  • Rejection of a credit unions' capital plan should only occur under a formal process.

Other items on the agenda include:

  • A new proposal that would address requirements for multi-group credit unions to add associational groups;
  • A board briefing on a proposed interagency policy statement addressing joint diversity standards for regulated entities;
  • A board briefing on a proposed interagency rule on loans in areas having special flood hazards;
  • The quarterly National Credit Union Share Insurance Fund report;
  • A final rule on the electronic filing of financial reports; and
  • A final rule on liquidity and contingency funding plans.

The Thursday open meeting is scheduled to begin at 10 a.m. (ET).

Two federal credit union act requests are on the closed board meeting agenda.

For the full NCUA agenda, use the resource link.

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Ky. latest state to enact data breach protection

CU System
WASHINGTON (4/18/14)--As the Credit Union National Association continues to work on data security issues at the federal level, states are making progress with laws to protect and inform consumers about data security.
 
Last week, Kentucky Gov. Steve Beshear signed H.B. 232 into law, making Kentucky the 47th state to enact data breach notification legislation. With Beshear's signature, there are only three states left--Alabama, New Mexico and South Dakota--that do not have laws requiring companies to inform consumers about data breaches.
 
Under Kentucky's new law, companies that conduct business in the state and maintain consumer data of state residents are required to disclose data breaches involving the unauthorized acquisition of residents' unencrypted computerized data. Companies are required to disclose the breach in the "most expedient time possible" and "without unreasonable delay." Additionally, companies are required to notify consumer reporting agencies and credit bureaus if the breach affects more than 1,000 individuals.
 
Iowa Gov. Terry Branstad recently signed S.F. 2259 into law, which amended the state's Personal Information Security Breach Protection statute (JD Supra April 17). It requires written notice be provided to the Iowa Attorney General's office regarding a breach of security affecting 500 or more Iowa residents no later than five business days after notice of the breach. It also expands the term "breach of security" to include unauthorized acquisition of personal information "maintained by a person in any medium, including on paper, that was transferred by the person to that medium from computerized form."
 
A dozen more states have pending legislation that would amend and enhance existing state laws regarding security breaches.
 
During its recent Government Relations Rally, the California Credit Union League focused on the Consumer Data Breach Protection Act (See Wednesday's News Now: Card, member protection headline Calif. league rally.) A.B. 1710 has similar notification and retailer liability provisions to Iowa and Kentucky's newly enacted laws, but it adds mandatory credit monitoring services for those affected and civil penalties of up to $500 per violation or $3,000 for a willful or reckless violation (National Law Review April 17).
 
The Credit Union National Association found that credit unions incurred $30.6 million in costs directly related to last year's Target data security breach--not including fraud costs--and is pressing federal lawmakers to address data security relative to merchants, who are not held to the same standards of security as credit union and other financial institutions.
 
One of the reasons why the pre-trial activities for the Target class action lawsuits have been consolidated in Minnesota is because of state statutes that prohibit merchants or businesses from retaining magnetic-strip information captured during a transaction, require reimbursement to financial institutions for reissuing cards, and communicate "in the most expedient time possible and without unreasonable delay" if a breach occurs.

New video provides NCUA answers to CUs' RBC questions

Washington
ALEXANDRIA, Va. (4/18/14)--A two-part, 20-minute video has been released by the National Credit Union Administration, one that is intended to help federally insured credit unions with questions about the agency's proposed risk-based capital rule.

The new NCUA resource for credit unions is free and available on its YouTube channel (see resource link).

"NCUA's risk-based capital proposal is complex, but its overall purpose is simple," NCUA Chairman Debbie Matz said in a release. The video, she said, clears up "misinformation," explains why the agency believes the rule is necessary, and how it would affect credit unions. It also, she added, helps credit unions understand how and why the NCUA's proposal differs from the Federal Deposit Insurance Corp.'s rule and Basel III.

Comments on the RBC plan are due to the agency by May 28.  The Credit Union National Association and the National Association of Federal Credit Unions continue to urge a 90-day extension to the comment deadline.  (See related story: CUNA, NAFCU jointly repeat urging for RBC comment extension.)

CUNA has extensive resources for credit unions regarding the RBC plan.  Use the resource link.

Mercer: Ohio CUs need to be tougher to sell a powerful idea

CU System

COLUMBUS, Ohio (4/18/14)--While Ohio credit unions are doing an "amazing" job in serving their memberships, they must market better to sell their "beautiful, powerful idea," Ohio Credit Union League President Paul Mercer told the annual Invest 48 audience last week.
 
Mercer noted that Ohio credit unions had gained less than 2% market share in the state in 19 years, to 7.6% in 2013 from 5.9% in 1994 (eLumination April 16). "That's not good enough," Mercer said. The cooperative credit union model is an ideal fit for consumers, communities and small businesses, he noted. "You are places where people do matter more than money, and when people understand that, we will win more market share," he added.
 
A briefing with State Rep. Lou Terhar (R-Cincinnati), co-sponsor of House Bill 221, which would give credit unions authority to serve as public depositories and access loan programs through the Ohio Treasurer's office, was attended by more than 80 credit union representatives. In subsequent meetings with legislators, credit union officials urged lawmakers to support the legislation. Many legislators said they supported credit unions and would vote for the bill. Others expressed reservations, which provides league staff an opportunity to follow up.
 
Ohio Department of Commerce Director Andre Porter outlined three major concerns for credit unions to navigate in today's economic environment. First, credit unions must continue to plan and manage the risk associated with their changing loan portfolios. Porter also encouraged credit unions to find more ways to participate in today's digital age. He also said that succession planning is critical to keeping the industry strong in the long term. As a regulator, Porter pledged that his department is "here to help with these challenges."
 
Changes to the OCUL's board structure and code of regulations were approved by affiliated credit unions at the league's annual meeting. Thirty-three percent of eligible credit unions voted, and 95% favored the changes, which take effect Jan. 1. The key changes included:

  • A decrease in the size of the league board to nine directors, with a seat dedicated to small ($0-$50 million in assets), medium ($50 million to $250 million), and large ($250 million or more) categories and the others elected at-large;
     
  • "Interlocking" seats reduced to maximize the number of credit union leaders engaged in league leadership;
     
  • Officers streamlined to three positions--chair, vice chair and secretary/treasurer;
     
  • Uniform director eligibility requirements and customized qualifications;
     
  • League board empowered to direct the governance and oversight of the organization and its affiliates;
     
  • Committee structure designed to foster effectiveness and expand engagement opportunities; and
     
  • Board Succession Planning Committee leveraged to proactively monitor representational interests and recruit high-quality candidates.

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Carolina CUs, armed with membership numbers, call on lawmakers

Washington
WASHINGTON (4/18/14)--"Preparation is key to effective visits with legislators," Carolinas Credit Union League Director of Government Relations Billy Boylston said this week, highlighting how the Credit Union National Association's Project Zip Code (PZC) helped advocates from Palmetto Citizens FCU, Columbia, S.C., prepare for their visits to the nearby South Carolina State House.

The $602 million-asset credit union provided a summary document that includes membership data by legislative district taken from PZC documentation. "Palmetto Citizens has done a great job preparing and presenting information, and it shows in legislators' responses," Boylston added (In the Loop April 17).

Credit unions can also use PZC to better track their membership and to plan future ATM and branching expansion. Project Zip Code protects the privacy of credit union members, as only membership totals per legislative district and county, and not information on individual members, are transmitted from credit unions to the PZC database.

The number of credit union members matched to their respective legislative districts and counties by CUNA's PZC software has reached another milestone: 82.7 million members. Around 700,000 of these matches have been made in the month-plus since the 2014 CUNA Governmental Affairs Conference.

The PZC version 14.0 software was introduced during this year's GAC.

The software, and the data gleaned from it, can give credit union supporters a great advantage as they work to advocate for credit unions and their members. The data will be vital as this fall's election season comes into full swing.

PZC data allows CUNA, the leagues and credit unions to show elected officials how many credit union members are among their constituents with very clear numbers. "The more credit unions that participate in Project Zip Code, the more accurate these membership counts will be," said Kristen Prather, CUNA grassroots manager and day-to-day PZC manager.

For more Project Zip Code information, use the resource link.

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NCUA a-Twitter with fin. lit. chat

Washington
WASHINGTON (4/18/14)--Interested in sharing best practices for helping members increase their financial literacy? The National Credit Union Administration has set an April 23 Twitter chat on the issue.

The NCUA Financial Literacy Twitter chat is scheduled to take place between 11 a.m. and noon ET. The event will be hosted by Kenneth Worthey, financial literacy and outreach analyst with NCUA's Office of Consumer Protection.

Followers can take part in the conversation by watching the agency's @TheNCUA Twitter feed and the #NCUAChat hashtag. Participants can also submit questions before the chat to socialmedia@ncua.gov.

The Twitter chat is part of the NCUA's National Financial Capability Month activities. This month, the NCUA has also used its consumer-oriented Twitter feed @MyCUgov to share personal finance tips with the public, and hosted a financial literacy webinar to share best practices.

The NCUA Twitter talk will take place during National Credit Union Youth Week, April 20-26. Sunny beaches and rolling waves are a part of this year's theme, which encourages young potential credit union members to "Catch the $ave Wave." During the week, credit unions will engage and encourage younger members to set up savings accounts, learn how to manage money and be more financially literate.

Credit unions nationwide may join in the celebration through April, or even just during National Credit Union Youth Week.

Low-income CU financially empowers N.Y. neighborhood

CU System
LONG ISLAND CITY, N.Y. (4/18/14)--The credit cycle, especially for the impoverished, can pull people and their finances down into what seems like an inescapable abyss.

One New York-based organization, with its very own credit union, has decided to replace that downward cycle with a system of its own, one that is helping some of the most economically disadvantage climb out of those deep holes (NY1.com April 17).

The cycle is orchestrated by Urban Upbound, a nonprofit based out of Long Island City, that aims to position residents of public housing neighborhoods to achieve economic mobility and self-sufficiency, and to break the cycle of poverty.

To accomplish this, the organization bundles together and offers residents five types of services, including financial counseling, employment services, youth development and college access, community revitalization, and finally financial services through Urban Upbound FCU, Long Island City, N.Y., with $780,000 in assets.

Together, the programs teach residents how to improve their financial health, help them secure employment and advise them on how to manage their income once they've landed that new job, among other services. 

"And it makes sense," says Lenese Vergara, director of the Urban Upbound Workforce Development Program. "We're seeing more and more employers are checking credit, screening our candidates because of their credit."

Often, residents with rougher credit scores start at the organization's Financial Empowerment Center, where they receive free one-on-one counseling on how to budget and reduce debt.

From there, the individuals are sent just around the corner to Upbound FCU, where they can apply for a credit consolidation loan; a program that already has demonstrated tangible results.

"(Members' scores can rise) 100 points higher in just one month, just from that one loan from the credit union," Robin Wilson, director of the Urban Upbound Financial Fitness Program, told NY1.com, adding that people aren't able to access that kind of product through a mainstream bank.

With improved credit, then, the individuals are rerouted back to the workforce development program, which has found hundreds of people new places of employment.

"Our average wage is about $11 an hour, so that's excellent for the people we are working with, with only a high school diploma," Vergara said.

The next step in the cycle directs the residents back to the credit union where they not only can obtain checking and savings services--often an unreachable goal for the impoverished in this community, as 30% of the residents are unbanked--but they also can learn how to manage their income through the free one-on-one consultation.

Thanks to the availability of the credit union, the residents can avoid check-cashing outfits, which often charge high fees for their services, while also learning healthy financial habits.

"In a six-block radius, there is no financial institution around," said Ash Exantus, Urban Upbound FCU CEO. "Most people are used to going to the check-cashing place. They don't go to the check-cashing place because they want to. They were going to check-cashing places because they had to.

"We want to see elevation, and as we see the city around us and the tide rising, all small ships have the capacity to rise together, and that's what we want to see," Exantus said.

Technical difficulty disrupts News Now distribution

Washington
WASHINGTON and MADISON, Wis. (4/18/14)--(Editor's note: Due to technical problems with our website operations Thursday--now resolved--emails of the daily News Now headlines were not distributed as per usual at 5 a.m. (ET). The news on the CUNA homepage was not updated. News Now regrets the inconvenience to readers. Now that the technical problems have been resolved, News Now is back on schedule.)

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