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News Now: September 16, 2014

CUNA: SBC testimony 'important step' toward reg. relief bills' passage

WASHINGTON (9/16/14)--The Credit Union National Association will testify before the Senate Banking Committee today in a hearing titled "Examining the State of Small Depository Institutions."

CUNA's testimony will be focused on the current regulatory burdens facing credit unions, bills it supports heading into the final months of this Congress and concerns with proposals from the National Credit Union Administration and the Federal Housing Finance Agency.

"We're hopeful this hearing is an important step toward preparing House-passed bills for Senate consideration during the post-election 'lame duck' session," said Ryan Donovan, CUNA's senior vice president of legislative affairs. "This is the time of year we hear a lot of discussions about potential packages of legislation that could be considered before Congress adjourns."

Dennis Pierce, CEO of CommunityAmerica CU, Lenexa, Kan., $1.9 billion in assets, and chair of the CUNA board, will testify on behalf of CUNA. He will speak about the effect that the more than 180 regulatory changes from at least 15 federal agencies since the start of the financial crisis have impacted credit unions, particularly small ones.

"It's not that any particular regulation presents an unmanageable situation for credit unions, but the accumulation of regulatory requirements and the frequency with which these requirements change that contributes to a degradation of member service because it diverts finite resources away from our purpose and mission," he said.

CUNA will recommend that the Senate take up the following bills:
  • Privacy Notice Modernization Act (S. 635), which would require financial institutions to send privacy policy notifications when the policy is changed, rather than on an annual basis, as is currently required;

  • Credit Union Share Insurance Fund Parity Act (S. 2698/2699), which would extend share insurance coverage on Interest on Lawyer Trusts Accounts and other similar trust accounts; and

  • Capital Access for Small Financial Institutions Act (S. 1806), which would allow state-chartered, privately insured credit unions to apply for membership in the Federal Home Loan Bank (FHLB) system.
Pierce will also speak to CUNA's concerns with the NCUA's risk-based capital proposal--concerns that have been echoed by many members of Congress (News Now Sept. 9)--and concerns with new proposed rules governing membership in the FHLB program.

Use the resource link below to access Pierce's written testimony that has been submitted by the committee.

Balance needed between 'safety/soundness,' credit availability, CUNA tells FHFA

WASHINGTON (9/16/14)--Safety and soundness should not be used as a justification to create additional regulatory burden, the Credit Union National Association told the Federal Housing Finance Agency (FHFA) in a letter sent Monday. The FHFA is currently collecting comments on its 2015-19 strategic plan.

The agency stated three goals when planning its 2015-19 strategy: ensuring safe and sound government-sponsored enterprises and Federal Home Loan Banks (FHLBs); ensure liquidity stability and access in housing finance; and to manage the ongoing conservatorships of Fannie Mae and Freddie Mac.

CUNA supports "the vast majority of the concepts enumerated in the agency's strategic plan," but offered several suggestions to improve the plan for credit unions.

Chief among CUNA's concerns is a recent proposal that would revise membership requirements for FHLBs.  The proposal would 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.

"Based on a very preliminary assessment, the proposed regulation would make it much more difficult for credit unions to maintain access to the FHLB system," reads the letter, signed by Mary Dunn, CUNA's deputy general counsel. "If adopted, this regulation will create another compliance task for affected credit unions as they will be forced to maintain a close watch over their balance sheets to ensure they meet an arbitrary requirement on an ongoing basis."

CUNA's longstanding position on FHLBs, as well as Fannie Mae and Freddie Mac, is that any government regulations should ensure lenders of all types and sizes have access to liquidity on equitable terms. The letter notes that this is reflected in the FHFA's draft strategic plan.

But the plan also makes several references to changing mortgage servicing standards, a topic of concern for CUNA. While CUNA believes that home-retention initiatives and loss-mitigation programs are beneficial, it urges the FHFA to refrain from imposing additional mortgage servicing requirements on behalf of Fannie and Freddie.

CUNA expressed support for several of the agency's recent actions, such as the introduction of Freddie Mac's Structured Agency Credit Risk debt notes, and the development of a common securitization platform, which has been included in the draft strategic plan.

"We applaud the agency's creativity, and encourage the agency to pursue similar initiatives," the letter reads.

Use the resource link below to access the full letter.

Other Resources

House lawmakers seeking breach answers from Home Depot exec

WASHINGTON (9/16/14)--A bi-partisan coalition of House lawmakers is seeking some answers from Home Depot about its data security practices.

Home Depot confirmed Sept. 8 that a breach of its payment systems  occurred, one that could have affected customers in its 2,200 U.S. and Canadian locations. The company is still determining the full scope and scale of the breach.

Reps. Joe Barton (R-Texas), Jan Schakowsky (D-Ill.) and Bobby Rush (D-Ill.), members of the House Privacy Caucus, sent a letter Monday to  Depot Chief Executive Officer Frank Blake requesting more details about the breach than the company has made public so far. The legislators want that information, and answers to a series of questions, by Oct. 13 ( Bloomberg BNA Sept. 15).
The congressmen want the Home Depot executive to detail what lessons, if any, his company learned from earlier breaches--like the Target breach that compromised 40 million credit and debit card accounts as well as personal information for 70 million customers in late 2013.
What security measures, the trio asks in their letter, has Home Depot implemented in the wake of that breach and others--like one at Neiman Marcus Group Ltd. The lawmakers also wanted to know about Home Depot's procedures for screening vendors before giving them access the company's sensitive data.
The Credit Union National Association 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.

Other Resources

PCUA, Pittsburgh FHLB pursue cooperative benefits, Part 2

CU System
HARRISBURG, Pa. (9/16/14)--The Pennsylvania Credit Union Association (PCUA) and the Federal Home Loan Bank of Pittsburgh, through recent collaborative efforts, have initiated a partnership onto which each organization hopes to build. 

( Editor's note: This is the second of a two-part series on the Federal Home Loan Bank system. Part One was called "Where FHLBs can fit in CU operations" and ran Sept. 15. See resource link ).
Given the cooperative, member-owned structure of both credit unions and the Federal Home Loan Banks--and thanks to a recent pickup in credit union membership at the FHLB of Pittsburgh--the relationship that's building between the Pennsylvania league and the FHLB of Pittsburgh seems to both to be a natural fit.
Christina Mihalik, PCUA vice president of government affairs, told News Now that when the association detected growth in credit union membership in the FHLBank, it reached out to strengthen the relationship there.
"If credit unions are partnering with a third party, we figured it would benefit us to reach out and establish that relationship," especially because we have like-minded, cooperative issues we can work on with the Federal Home Loan bank, Mihalik added.
That collaborative work has ranged from general advocacy on common issues such as regulation, consumers and housing, to efforts to address specific issues such as the National Credit Union Administration's risk-based capital proposal. Very notably, the FHLB system's leaders wrote a comment letter to the NCUA earlier this year outlining its concerns over the proposal and how it might affect its credit union members.
And on the operations side, of course, the cooperative banks help their members by offering funding for liquidity for short-term needs, lower-cost funding for mortgages and asset-liability management, and funds for housing and community development ( News Now Sept. 15).
"We are really a business partner to financial institutions, and they've come to realize that's exactly what we are. It's a symbiotic relationship; it's a partnership," John Foff, FHLB of Pittsburgh's business development manager, told News Now .
The first building block of the relationship, described by both organizations now as growing, may have occurred when FHLB of Pittsburgh's CEO Winthrop Watson spoke at the league's annual conference two years ago.
"The managing officers of the local credit unions appreciated his words, and I think that that's helped us in our relationship with credit union financial institutions," Foff said. 
More recently, the cooperative bank has reached out to credit unions in Pennsylvania by coordinating efforts such as setting up a booth at the PCUA's annual fall leadership conference.
Mike Wishnow, PCUA senior vice president of communications and public relations, says that the FHLB of Pittsburgh has been reaching out to credit unions regularly.
"The FHLB banks deserve a lot of credit because they're doing the outreach," Wishnow told News Now . They reach out by "sponsoring efforts, helping in advocacy, and keeping credit unions informed on what they're doing."
Whatever the spark, over the last few years the FHLB of Pittsburgh has witnessed credit union membership rise substantially. Just a few years ago, only four credit unions in the state utilized the cooperative bank.
That number has jumped to 37, and about a dozen credit unions are interested in becoming members as well, according to Foff. 
"As more and more (credit unions) use their services and are pleased with their services," the more the word is spread, Mihalik told News Now . "Word of mouth is everything. A credit union referral is the best way" to spread the word.

NCUA offers 'road map to success' for FCU organizers

WASHINGTON (9/15/14)--Groups looking to apply for a federal credit union charter have a new resource from the National Credit Union Administration.

The NCUA's Federal Credit Union Charter Application Guide offers step-by-step instructions to help potential credit union organizers get information on what the process entails, and what the NCUA expects in a charter application.

"This new guide is essentially a road map to success, explaining in detail how to complete the process," said NCUA Chair Debbie Matz. "It also helps organizers focus on key actions, from finding their niche in an increasingly complex and competitive marketplace and raising capital to preparing an effective application."

The guide breaks down the chartering process into five steps:
  • Part 1: Researching a federal charter, selecting a credit union name, establishing a field of membership, deciding what kind of charter to request and determining whether to seek a low-income designation;

  • Part 2: Identifying subscribers, securing funding for start-up costs, finding a location and surveying the potential membership;

  • Part 3: Finding support resources, identifying credit union officials and management, creating a business plan, deciding on what products and services to offer, management, recordkeeping, establishing policies and continuity planning;

  • Part 4: How the NCUA acts on charter applications; and

  • Part 5: Checklists, worksheets and sample forms.
It also includes answers to frequently asked questions about the amount of time required to obtain a charter, the amount of start-up capital necessary and the availability of consulting services from NCUA's Office of Small Credit Union Initiatives.

Use the resource link below to access the complete guide.

Fin. lit. ideas percolate during NerdWallet TweetChat

CU System
MADISON, Wis. (9/16/14)--In a rapid-fire discussion Monday on Twitter, credit union leaders from across the country imparted loads of advice on how to ramp up financial literacy for high school and college students.

The host of the "TweetChat," personal finance website , fired off a round of questions during the hourlong session, and a number of the most tuned-in financial literacy minds in the credit union movement were on hand to give their answers.

NerdWallet , using its Twitter handle @NW_Banking and the hashtag #CUFinLit, first asked, "How are credit unions currently working to improve the (financial literacy) of young adults in their communities?"

Among the responses, Tena Lozano, executive director of the Richard Myles Johnson Foundation, tweeted: "Many CUs offer Reality Fairs--a financial simulation where teens take the role of an adult."

Later, NerdWallet asked: "How do you engage with parents and incentivize them to help educate their children or finances?"

Answered representatives from Christian Financial CU: "Parents are key decision-makers for teens. We use every opportunity to get in front of parents, like parent orientation meetings."

To read more questions and answers, search Twitter for the hashtag #CUFinLit.

Other participants included:
  • Ken Worthey, financial literacy and outreach analyst, National Credit Union Administration's Office of Consumer Protection;
  • Gigi Hyland, executive director, National Credit Union Foundation;
  • Rebekah Monroe and Shannon Bartlett, marketing manager and marketing specialist, respectively, Christian Financial CU, Roseville, Mich., with $325 million in assets;
  • Samantha Salazar and David Rodriguez, financial education instructor and financial education manager, respectively, Generations FCU, San Antonio, with $519 million in assets;
  • Jess Bedsole, social media producer, Alliant CU, Chicago, with $8.2 billion in assets;
  • Wendy Loeber, loan officer, CU Community CU, Springfield, Mo., with $94 million in assets; and
  • Alysha Klein, Young and Free Florida spokester, Tropical Financial CU, Miramar, Fla., with $566 million in assets.

New NCUA videos fight financial exploitation of seniors

ALEXANDRIA, Va. (9/16/14)--Aiming to combat the trend of millions of American seniors who become victims of financial abuse, the National Credit Union Administration has released two videos to help consumers recognize this kind of fraud. The videos were released Monday on the agency's YouTube Channel.

The first, titled "Scams Targeting Seniors," is a dramatization of how a consumer can become the victim of a typical scam. The video offers advice to credit union members who suspect they may have been targeted.

The second, titled "Reporting Elder Financial Abuse or Exploitation," explains to credit union managers and staff how to spot, prevent and report cases of financial elder abuse.

"An educated consumer is the first line of defense against fraud or exploitation," NCUA Chair Debbie Matz said. "Research suggests financial abuse is the most common form of elder abuse, and perpetrators can be scam artists, dishonest financial advisors or even caregivers. Our new videos are the latest effort to help credit unions and members understand how this can happen and how to steer clear of trouble."

The agency recently announced an alliance with AARP for a two-year plan of financial education initiatives ( News Now Sept. 12). It also sent a letter to credit unions in September 2013 urging them to review their policies and procedures and ensure staff were trained to recognize signs that financial abuse or exploitation may be occurring.

Use the resource links below to access the videos.

Filene survey: Economy still challenging consumers

CU System
MADISON, Wis. (9/16/14)--Macro-economic data indicates the economy is on the mend, but a recent survey by the Filene Research Institute found that 36% of the "every day people" respondents still think the economy is in a recession or depression.
Filene noted that the Absolute Strategy Research survey will not tell credit unions what to do, but will help them understand Americans' changing feelings about saving and borrowing.
U.S. households stubbornly remain risk averse, despite the stock market delivering annualized 20% growth. Forty-two percent said they are not prepared to take any risks with their savings--higher than that recorded in June 2009, the survey found.
"Perhaps still stung by the losses in real estate and equity markets, most respondents want to accept little risk in their savings," the report noted. "Despite four years of strong investment returns, credit unions' arrays of risk-free savings in the form of share accounts, certificates, and IRAs align with this risk aversion."
Regarding income inequality, 61% responded that the difference in incomes between rich and poor has increased, and 63% said that the difference in income between rich and poor has become too large.
Of those who carry debt, 54% plan to reduce it in the coming year, and 30% don't plan to access additional credit. Forty-two percent of borrowers still think their level of debt is too high compared with their income level.

Member growth continues despite mill closure

CU System
EVERETT, Wash. (9/16/14)--For the last 75 years, even in the most difficult of times, Mill Town CU has been there for the community it serves.

Julie Benson, treasurer-manager of what was then called the Scott Employees CU, assists a member in 1974. Now called Mill Town CU, the Everett, Wash.-based financial institution celebrates its 75th anniversary this year. (Mill Town CU Photo)
That included when the Kimberly-Clark mill, which employed many of the Everett, Wash.-based credit union's members, closed in 2012, impacting the town far and wide. 

"The closing of the (mill) was hard on our membership, but we worked with anyone that needed help," Laura Leuze, president/CEO of the $47 million-asset credit union, told The Herald Business Journal this week (Sept. 15).

Mill Town granted extensions, reduced payments and shifted to interest-only payments to aid former mill employees until they gained solid financial footing, according to The Herald Business Journal.

It's that type of commitment and service by credit unions that has helped fuel membership increases across the country, as the credit union movement recently surpassed 100 million memberships nationwide.

In Everett, even after those who had lost their jobs moved away, they still came back to the credit union to do their banking. The credit union still serves more than 2,800 members.

"They would always run into people they had worked with and they would catch up," Cathy Vanderberg, board member for Mill Town CU, told the Business Journal. "About 50 people watched the demolition of the oldest mill building from the credit union building. It was very emotional."

Since opening in 1939, the credit union has helped residents with mortgages, college tuition and auto loans, among other services.

While the credit union's membership base was extended beyond mill workers in the early 2000s, the people who worked at the mill, the same people who founded the credit union, continue to serve as the bedrock of the membership base. 

"The credit union was started by people before we were even born," Leuze told The Herald Business Journal. "We have generations of memberships coming from just former mill employees. We have to be good at what we do and get to personally know everybody."

Festivities to celebrate Mill Town CU's 75th anniversary are scheduled for later this fall.
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