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News Now: July 31, 2014

Senators introduce more reg relief for CUs, small banks

WASHINGTON (7/31/14)--U.S. Sens. Angus King (I-Maine), Deb Fischer (R-Neb.), Mark Warner (D-Va.), and Jon Tester (D-Mont.) unveiled new legislation Wednesday intended to provide immediate regulatory relief for America's credit unions and community banks.
Calling these smaller financial institutions the "bedrock of small towns across America," King said they--and the services they provide--are being "hammered by a tidal wave of poorly-tailored regulations."
"We owe it to these institutions--and the millions of Americans who depend on them--to provide some measure of relief. America will be the better for it when we do," said the senator from Maine.
The bill, introduced yesterday and entitled the RELIEVE Act, would:
  • Provide credit unions parity with Federal Desposit Insurance Corp.-insured institutions when it comes to deposit insurance coverage on Interest on Lawyers Trust Accounts (IOLTAs) and other escrow accounts. An IOLTA bill known as the Credit Union Share Insurance Fund Parity Act (H.R. 3468), which would extend share insurance coverage to all of the underlying owners of funds held by lawyers in trust accounts and realtors in escrow accounts. was approved by voice vote by the House in November 2013;
  •  Improve the definition of "rural" so that more counties will be considered rural for the purposes of the rules of the Consumer Financial Protection Bureau; and increase the annual mortgage origination limit for rural creditors from 500 to 1,000 per year. The rural county designations determined by regulators can impact the types of products credit unions may offer their members in those areas.; and,
  • Require the Federal Reserve to revise the Small Bank Holding Company Policy Statement so that the policy applies to bank holding companies and savings and loans holding companies with pro forma assets of less than $1 billion, an increase from the current threshold of $500 million.
Noting that regulatory relief for credit unions is one of its top advocacy priorities, the Credit Union National Association commended the senators for their clear grasp of the need to ease the burden of rules that hamper credit unions' ability to serve their members.
CUNA Vice President of Legislative Affairs Sam Whitfield said CUNA looks forward to working with each of the senators, as well as other members of the Senate, to see this bill move forward to enactment.

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HELOC reporting burden unjustified, CUNA tells CFPB

WASHINGTON (7/31/14)--With an eye toward reducing regulatory burden on credit unions, the Credit Union National Association has sent a letter to the Consumer Financial Protection Bureau (CFPB) outlining several concerns with the bureau's proposed changes to Home Mortgage Disclosure Act (HDMA) rules. The letter is a preliminary statement from CUNA, a more detailed comment letter will be filed during the official comment period.

CUNA urged the bureau to exempt community financial institutions, including all credit unions covered under Regulation C (which implements the HMDA), from the proposed requirement for reporting Home Equity Lines of Credit (HELOCs), which is currently optional.

The letter questions the justification for the HELOC reporting requirement, noting the difficulties many credit unions will face in order to meet the requirements.

"Many credit unions treat HELOCs more like consumer loans than mortgage loans; credit union HELOCs are frequently managed on computer operating systems and platforms that are outside of the traditional mortgage loan origination systems and are separate from their first mortgage counterparts," the letter reads. "To mandate reporting of all HELOCs for credit unions would be unwarranted and costly. Most important, this would be yet another requirement that would divert credit unions from actual lending or providing other needed member services."

The letter explains that since the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB to implement new data requirements, CUNA would like to work with the bureau to implement the requirements in a way that will accomplish the objectives without adding more regulatory burden.

Dodd-Frank mandates an additional 17 data fields for HDMA reporting, but the CFPB's proposal would require 37 new data fields. CUNA Associate General Counsel Jared Ihrig called the addition of so many new data fields "unwieldy and unnecessarily burdensome." (News Now July 25).

The comment period for the proposed rule is open until Oct. 22.

Two bills with CU relief approved by House panel

WASHINGTON (7/31/14)--The House Financial Services Committee passed two more regulatory relief bills that were held over for a recorded vote from Tuesday's hearing. Both bills are supported by the Credit Union National Association, in testimony before the committee several weeks ago, and with a letter to the committee Monday.

The Community Bank Mortgage Servicing Asset Capital Requirements Study Act (H.R. 4042) passed 44-9. The bill would direct federal banking agencies to conduct a study of appropriate capital requirements for mortgage servicing assets for nonsystemic banking institutions. CUNA supported a manager's amendment that would have included the National Credit Union Administration in the study and postponed the agency's risk-based capital proposal, but it was not offered.

However, several members of the committee, including Rep. Blaine Luetkemeyer (R-Mo.), the bill's sponsor, Rep. Jeb Hensarling (R-Texas) and Rep. Denny Heck (D-Wash.) pledged to work together to add credit union parity measures into the bill before it reaches the House floor.

Legislators from both houses are still questioning the NCUA's risk-based capital proposal. Wyoming Sens. Michael Enzi (R), John Barrasso (R) and Sen. Lisa Murkowski (R-Alaska) wrote expressing misgivings about the proposal.

"Credit unions in Wyoming have expressed their apprehension about this rule and fear it will prompt them to change the way they operate in order to raise capital to maintain their current buffers," reads the letter from Enzi and Barrasso. "In fact, one estimate suggests that credit unions in our home state will face increased capital requirements of approximately $12 million to preserve their current capita; buffers and remain well-capitalized."

All three Senators expressed concerns about whether or not the proposal exceeds the authority granted through the Federal Credit Union Act, and noted that increased requirements could reduce availability or affordability of loan products, thereby restricting credit availability to members.

The three legislators became the 20th, 21st and 22nd Senators to write to the agency with concerns about the proposal. In addition, six Representatives have individually written letters, along with 324 members that signed a letter outlining several issues with the proposal. 

The Access to Affordable Mortgages Act (H.R. 5148) passed 31-23, and would amend the Truth in Lending Act to exempt certain higher-risk mortgages from property appraisal requirements. CUNA supports the bill since it would provide regulatory relief to mortgage lenders.

"The bill would allow credit unions that offer mortgage loans secured by covered properties to serve their middle to lower income members better," reads the letter CUNA sent in support of the bill.

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House passes SAFE enhancement, cyber protection acts

WASHINGTON (7/31/14)--The House passed the SAFE Confidentiality and Privilege Enhancement Act (H.R. 4626) and the National Cybersecurity and Critical Infrastructure Protection Act of 2014 (H.R. 3696) this week. The Credit Union National Association supports both bills.

H.R. 4626 would amend the SAFE Mortgage Licensing Act of 2008 to give state and federal regulatory officials with financial services authority access to any information provided to the Nationwide Mortgage Licensing System and Registry (NMLSR) without the loss of privilege or confidentiality protections provided by federal and state laws. This includes access to information provided to any system established by the Director of the Consumer Financial Protection Bureau.

Currently only those regulatory officials with mortgage oversight authority can access the NMLSR without loss of privilege or confidentiality.

H.R. 3696 would amend the Homeland Security Act of 2002 to require the Secretary of Homeland Security to, among other requirements, strengthen existing mechanisms such as the Financial Services Sector Coordinating Council and the Financial Services Information Sharing and Analysis Center that help the financial services sector identify threats, respond to cyber incidents and coordinate with government partners.  The legislation also seeks to improve the provisioning of security clearances for those involved in cybersecurity information sharing.                

Both bills will move onto the Senate for consideration.

Fed continues easing, stands pat on interest rates

WASHINGTON (7/30/14)--Citing "sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions," the Federal Open Market Committee (FOMC) announced Wednesday it will continue the pace of its quantitative easing program and stand pat on interest rates.
The announcement came at the conclusion of the FOMC's two-day policy meeting this week.

Beginning in August, the committee will add to its holdings of agency mortgage-backed securities at a pace of $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month.
"There is nothing especially surprising in the latest Fed minutes--we expected a decline in bond purchases and in line with the $10 billion reported," the Credit Union National Association's interim Chief Economist Mike Schenk told News Now . "We likewise expected the Fed to stand pat on short rates.  More importantly, we anticipated the fact that there would be no significant shift in language that might signal impending increases in the Fed Funds rate."
Previously, the Federal Reserve's monetary policy-making body has been shaving down the amount of bonds and securities it has been buying over the last few months--purchases that have injected much-needed cash into the lending industry and subsequently the economy--by $10 billion every month ( News Now June 18).
This week's data shows that the economy grew at a fast clip in the second quarter--a 4% annualized increase--and the conference board's recently released consumer confidence index surged to a recovery high of 90.9.  At the same time labor markets are healing somewhat faster than many expected as reflected in five consecutive months of 200,000-plus gains in non-farm employment. 
ADP data suggests another gain of that magnitude when the Bureau of Labor Statistics releases data later this week.  "If so, that will be a six-month run of strong gains--the likes of which haven't been seen in 17 years," Schenk told News Now .
Still, Fed Chair Janet Yellen has repeatedly stressed the need to look beyond headline results in the labor statistics--where significant challenges are more obvious, Schenk said. For example, the U-6 unemployment rate (which accounts for those who have dropped out of the labor force and those who are working part-time but want to be working full-time) is six points above the 6.1% headline rate, while the norm is closer to a 4.5 percentage point difference. The average duration of unemployment stands at roughly 35 months--about double the long-run average. 
"This means that the yield curve is likely to remain little changed in the coming months," Schenk explained.  "That will continue to help buoy credit union bottom-line results and should result in additional lending opportunities.
"We expect a surge in loan demand as the market interest rate inflection point nears because an increasing number of consumers will jump off the sidelines, adopting a 'get-while-the-gettings good attitude' in an attempt to time borrowings with the increase in rates.  It also, means, that credit unions that feel the need to make balance sheet adjustment to avoid any nasty consequences related to interest-rate-risk exposure still have the time to do so."

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World Council speakers advise on young adult membership strategies

CU System
GOLD COAST, Australia (7/31/14)--Credit unions' challenges worldwide are more
Click to view larger image World Council of Credit Unions President/CEO Brian Branch speaks to his group's World Credit Union Conference on the challenges of attracting young-adult credit union members. (World Council Photo)
similar than ever before, including young adult membership growth, which drives the demand for credit unions to provide competitive mobile and digital payment systems, according World Council of Credit Unions President/CEO Brian Branch who spoke Monday at his group's World Credit Union Conference here.
"Young adults today have many more financial services options available to them, and they are willing to pay more for convenience," Branch told the general session audience.
"Convenience will be king. Our challenge is how to serve this market profitably by looking at our channels and addressing whether the products and services we offer respond to their demands."
In most countries, the median age of credit union members is mid- to late-40s, which is 10 to 15 years older than their median national population age, according to Branch. This segment is past its prime borrowing years, whereas young adults are on the brink of significant milestones and costly life transitions related to their education, careers, families and other living expenses.
Branch indicated this generation will be the source of future financial services business soon.
"For online and mobile channels to be successful, they must be easy, take only a few minutes and fall within regulatory requirements," Branch said. "If young consumers have to go to a branch in order to complete the process in person, we lose them."
Branch finished his remarks by challenging the global movement to join World Council's membership growth campaign to add 50 million credit union members worldwide by 2020, for a total of 258 million. This could be possible with a widespread focus on attracting young adult membership through less restrictive regulation, increased mobile, online and payments technology and collaboration amongst credit unions, he said.
Also addressing the conference Monday session, keynoter Lee Wetherington, a
Click to view larger image Keynoter Lee Wetherington, of ProfitStars, shares a forecast of the industry's best research on upcoming developments in online, mobile, payments and branches at the World Council's World Credit Union Conference in Australia. (World Council Photo)
technology expert and adviser, said the any notion that change is happening so fast in the marketplace that it prevents credit unions from planning for it accordingly is wrong.
Wetherington shared a forecast and summary of the industry's best research on upcoming developments in online, mobile, payments and branches. He provided insights on the global credit union movement's unique opportunity going forward to use their members' data-which no other institution has access to-to understand and satisfy members' financial advising needs through mobile and online payments.
"The future is more about data than it is about payments," said Wetherington, ProfitStars director of strategic insights in the United States. "Using credit unions' data, we will be able to help our members decide whether, when and where it makes sense to buy the stuff they want in real time, with integrity. None of the other market disruptors are in a position to do that."

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Fixed-asset cap, mid-year budget on today's NCUA agenda

ALEXANDRIA, Va. (7/31/14)--Elimination of the 5% fixed-asset cap and a mid-year operating budget report highlight today's monthly National Credit Union Administration board meeting. Also on the agenda is a request for community charter expansion, a quarterly performance report on the National Credit Union Share Insurance Fund and a performance report for the NCUA's Guaranteed Notes.

The elimination of the fixed-asset cap represents a step away from micromanaging credit unions' individual business decisions, said NCUA Chair Debbie Matz last week. Fixed-asset issues have also been an area of focus for board member Rick Metsger since he joined the board in 2013.

The Credit Union National Association wrote to the board this week, praising the decision to re-examine the fixed-asset rules. The letter called the proposal a "useful step in simplifying and modernizing procedures for credit unions."

CUNA also requested the agency continue the trend of reducing its mid-year budget in each of the past several years. In addition, the letter calls on NCUA to work with other regulators to reduce credit unions' regulatory burdens.

The board will also hear a request for expansion of the community charter for Call FCU, a $360 million-asset institution based in Richmond, Va.

The meeting is scheduled to begin at 10 a.m. (ET), and videos of meetings are posted several weeks later. The board will not meet in August, the next meeting is scheduled for Sept. 18.

30 days added to CFPB complaint narrative comment period

WASHINGTON (7/31/14)--The Consumer Financial Protection Bureau received a number requests for a longer comment period on its recent proposal to allow consumers to include narratives along with complaints posted to the bureau's database and the CFPB has pushed the deadline out by one month.
Comments on the proposed policy originally were due Aug. 22: The new deadline is Sept. 22, which is 60 days from the date the proposal was published in the Federal Register .
When making the proposal public, CFPB Director Richard Cordray said allowing consumers to include narratives with their financial services complaints would provide important context that better explains the significance of the consumer's complaint--beyond the current high-level category buckets, such as "transaction issue" or "advertising and marketing." Cordray said.
Under the plan, a consumer's complaint narrative would only be published with the author's informed consent, and that consent could be withdrawn at any time. Companies would be able to publish their own responses that would appear next to the complaint narrative and the CFPB has said it would take "all reasonable steps" to remove personal information from both the complaint narrative and the company's response.
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