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Omnibus spending bill signed into law

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WASHINGTON (1/16/14)--The U.S. government is funded into October after President Barack Obama late last week signed a $1 trillion omnibus spending bill.

As well as providing overall funding for the government, the bill increases funding for the Community Development Revolving Loan Fund at an annualized rate of $1,144,746 and the Community Development Financial Institutions Fund at $210 million. The maximum loan limitation of the National Credit Union Administration's Central Liquidity Facility will also be maintained at its current statutory ceiling of 12 times its paid-in capital.

The Credit Union National Association in a Jan. 7 letter urged lawmakers to restore funding to these two vital programs at levels proscribed in a 2012 law. (See Jan. 15 News Now story: CUNA-requested CDRLF, CDFI Fund funding levels restored under House bill.)

Appeals court to closely examine lower court interchange ruling

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WASHINGTON (1/20/14)--U.S. Court of Appeals for the District of Columbia Circuit Judges David Tatel, Harry Edwards, and Stephen Williams asked questions at oral arguments Friday that raised questions about whether they will fall in line with a lower court ruling that sought to overturn the Federal Reserve's debit interchange fee cap regulations.

From left, CUNA General Counsel Eric Richard, Deputy General Counsel Mary Dunn and Assistant General Counsel for Special Projects Robin Cook discuss Friday's interchange arguments outside the U.S. Court of Appeals. (CUNA Photo)

The case is known as NACS, et al. v. Board of Governors of the Federal Reserve System.

"We are very encouraged by today's hearing, as it shows that the court will be taking a hard look at U.S. District Court Judge Richard Leon's decision striking down the Federal Reserve's interchange rules. We are optimistic that this will result in more costs being taken into account in the setting of interchange fees than Judge Leon's decision would allow," Credit Union National Association General Counsel Eric Richard said.

Leon last year put a stay on his decision, pending the outcome of the case.

They heard from the Federal Reserve, a coalition of financial services groups, including CUNA, and merchants.

The merchants have argued that the Fed overstepped its bounds, allowed too many costs to be considered, and set too high of a cap. The three judges seemed to dismiss out of hand the position that merchants took in district court earlier this year. "They seemed to recognize that additional costs can be properly considered under the statute," CUNA General Counsel Eric Richard said.

Merchants brought the case against the Fed in 2012, alleging that the Fed made errors in implementing a final rule that caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows certain other charges to cover fraud losses and fraud prevention.

CUNA and the coalition in the past have argued that the Fed cap is too low and does not allow debit card issuers to cover their costs and a reasonable rate of return on their investments. The coalition has underscored that consumers have not seen any pricing benefits for products and services promised by the merchants when they were fighting for a government-set cap on what card issuers may charge for their services.

Lawyers that spoke on behalf of financial services coalition articulately presented credit union concerns, Richard said. However, he added, nothing is certain until the court actually issues its opinion. "Even after that, depending on exactly what the court says, there may still be much work to be done," he added.

The appeals court will rule on the case before its term ends in August, and a decision could come as soon as this spring.

"The stakes are very high, particularly at a time when many are relying on interchange revenues to cover the costs associated with data breaches at big box retailers."

Cheney in HuffPo: Hold merchants accountable for data breaches

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WASHINGTON (1/21/14)--"The cost of a merchant data breach--whether it is at a large national merchant or a local merchant--can be significant for credit unions of all sizes," and merchants that are involved in data breaches "should by law be financially liable for the impact of the breach on affected consumers, as well as their financial institutions," Credit Union National Association President/CEO Bill Cheney wrote in a Huffington Post column published Friday.

Cheney in his column commented on the recent Target and Neiman Marcus data breaches, which are not the first breaches of their kind and "are not likely to be the last." Much attention has been paid to the Target breach because of its size and scope, but these occurrences happen more frequently than we would like to admit, and even at smaller vendors, he wrote.

Credit unions provide exceptional service to their members in responding to these events, but many members wonder why their credit unions must bear the cost of the merchants' negligence, and why Congress has not done more to make merchants responsible for breaches of their data systems, he said. CUNA is working to assess the costs the Target breach has created for credit unions, and is releasing preliminary results from a survey on the issue this week. (See News Now story: Initial results expected this week from Target breach survey.)

Credit unions are working with members that have been impacted by data security breaches, notifying those that have been impacted, helping them to monitor their accounts and urging them to review their account statements and reversing fraudulent transactions and reissuing cards at no cost. However, these actions will not be reimbursed by Target. Target and other merchants are rarely held responsible for reimbursing financial institutions for the cost that the data breach has incurred on them and, in the case of credit unions, their members, Cheney emphasized.

When all is said and done, credit unions and banks will have spent millions on what appears to be a major security failure caused by Target and other retailers' inability to protect consumer data. "It's time for Congress to act to stop the cycle," Cheney said.

For the full Huffington Post column, use the resource link.

Initial results expected this week from Target breach survey

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WASHINGTON (1/21/14)--Preliminary results from the Credit Union National Association's survey on the impact of the massive Target data breach on credit unions are expected to be released this week.

CUNA has asked credit unions to outline the costs and burdens created by the Target data breach, which resulted in the theft of 40 million debit and credit cards, and encrypted PIN data, and the names, mail and email addresses, and phone numbers of up to 70 million individuals.

Target has admitted responsibility in the breach. Neimann-Marcus has also had data security issues lately, and six other merchants have reportedly been affected by the same hackers that caused the Target breach. (See News Now story: Target-like attack hitting 6 more retailers.)

CUNA has been collecting data from credit unions to inform communications with lawmakers, regulators, the media and others. There is no deadline for credit unions to respond to the survey, and credit unions that have not yet responded are encouraged to do so.  CUNA will update the survey results in a few weeks.

Members of the U.S. Congress are looking into the data breach issue and considering holding hearings. Bills that would establish consumer data security standards for companies and require them to notify consumers when a data breach has occurred have also been released. (See Jan. 16 News Now story: Carper, Blunt bills would address data security concerns)

CUNA pushing back on late fines, says 'Cheney Report'

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WASHINGTON (1/21/14)--The National Credit Union Administration's plan to fine late call report filers, revealed this week, is a clear case of "regulatory overreach," Credit Union National Association President/CEO Bill Cheney said in this week's Cheney Report.

In a Letter to Credit Unions (14-CU-03) released last week, the NCUA said it plans to charge late filers a minimum of $2,000 per day and a maximum of $1 million per day for various late filing offenses. (See Jan. 16 News Now story: Late call report filers will be fined by NCUA--starting soon.)

Cheney notes that the agency justified the assessment of the civil money penalties by noting more than 1,000 federally insured credit unions of all asset sizes filed their call reports after the 2013 third quarter deadline had passed, with a large percentage of these late filers being chronically late.

"We understand the need for the agency to obtain information in a timely manner--but these penalties are just not necessary," Cheney says. "Education for credit unions, including being sure they are aware of their reporting requirements, should be the keys to addressing problems--not punitive charges," he added.

"We're pushing back with NCUA about the imposition of this program," Cheney says..

Separately, The Report also notes Southeastern FCU's work to develop a student advisory board. The Valdosta, Ga. credit union selected 16 high school seniors to serve on its third high school student advisory board. Students were chosen based on several areas of criteria and will receive a $500 college scholarship upon completing their nine-month term on the board. "Activating a student advisory board is an excellent way to get young members involved in molding new and more effective ways of educating their peers on financial issues," Cheney wrote.

Creating awareness is one of the key elements of CUNA's Unite for Good effort, CUNA's shared, strategic vision in which Americans choose credit unions as their best financial partner.

Other issues addressed in this week's Report include:
  • The start of a new round of "Don't Tax My Credit Union" advocacy;
  • CUNA regulatory relief outreach results; and
  • Items on the NCUA board agenda.
For the full Cheney Report, use the resource link.

Operating fee invoices will come out in March

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ALEXANDRIA, Va. (1/21/14)--The 2014 natural person federal credit union operating fee rate reduction of 18.4%, and 5.1% increase in the asset dividing point for the 2014 operating fee scale, are detailed in a new National Credit Union Administration letter to federal credit unions (14-FCU-01).

Invoices for these fees will be sent out by the agency in March. Federal credit unions with assets less than $1 million will not be assessed an operating fee for 2014.

The operating fees for federal credit unions were assessed based on assets as of December 31, 2013. Included with the letter is an NCUA chart intended to help a federal credit union calculate the exact dollar amount of its operating fee. The chart also includes the NCUA web link to the online calculator. The letter also provides insight into the calculation method.

The NCUA will combine the operating fee and National Credit Union Share Insurance Fund capitalization deposit of 1% of insured shares into a single payment. Payment is due to NCUA no later than April 15.

The agency adds that for federal credit unions signed up to pay via Pay.Gov, no further action is required; payment will occur by April 15.

All others must send payment according to the instructions included with the invoice.

Questions regarding details for the letter should be directed to the NCUA's Office of the Chief Financial Officer at

Obama names nominee to head SBA

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WASHINGTON (1/21/14)--President Obama nominated Maria Contreras-Sweet to head the U.S. Small Business Administration (SBA), noted an entry in The White House Blog posted Friday.

"America's small businesses are on the front lines when it comes to creating jobs and new opportunities. They are the cornerstones of our communities, and can help lead the way as we continue to grow the economy and add jobs in the coming year," the post says.

"They're part of the pact that America makes--the idea that if you work hard, if you take responsibility, then you can build something new," President Obama said in his announcement.

The Credit Union National Association supports a goal of increasing small business access to capital through the reduction of statutory and regulatory impediments, such as enabling full credit union participation in the SBA's Section 504 programs.

Contreras-Sweet is the founder of a Latino-owned community bank in Los Angeles and she is a former state cabinet secretary in California having served as secretary of the Business, Transportation and Housing Agency from 1999 to 2003.

Her reported private sector experience includes her founding of ProAmerica Bank, which primarily serves small- and mid-sized businesses, and as president and co-founder of Fortius Holdings, a private equity firm formed to provide capital to small California businesses.

The top post at the SBA has been empty since August, when Karen Mills left to accept a joint post at the Harvard Business School and Harvard's Kennedy School of Government.

CUNA: NCUA 2014 strategic plan improvements needed before its adoption

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WASHINGTON (1/20/14)--The National Credit Union Administration should incorporate a number of improvements before it adopts its 2014-2017 Strategic Plan, the Credit Union National Association said in its most recent comment letter to NCUA filed Friday.
The letter focused on the NCUA's proposed strategic plan, but used the opportunity to raise a host of concerns CUNA has about the agency's operations and dealings with credit unions and credit union issues. 
Cheif among these issues, CUNA urged the agency to address how it plans to provide regulatory relief to credit unions.  Citing the Office of Comptroller of the Currency's recently released strategic plan that claims to want to support bank competitiveness, CUNA's Deputy General Counsel Mary Dunn said the agency should include its overall plans for regulatory relief within its three-year strategy notice.
"Steps such as allowing more flexibility for well-managed credit unions and additional latitude to avoid non-statutory requirements such as under the member business loan rule are but two examples that should be addressed," Dunn wrote. 
CUNA provided a number of recommendations in a Nov. 13, 2013 letter (see resource link) to NCUA that should be encompassed under regulatory relief in the Strategic Plan, the CUNA letter noted.
Other points raised by CUNA included:
  • NCUA efforts to improve the examination process should be addressed;
  • The strategic plan should address cost containment and how the agency's budget correlates with the strategic plan;
  • The NCUA's overall communications plan should be improved; and,
  • The agency should better address the use of technology, data security and efforts to stay current on new developments, such as in the area of payments.
CUNA also criticized the agency's process for review of its strategic plan, which did not provide sufficient time for stakeholder input, since the agency is considering the plan at the Jan. 23 open board meeting. CUNA also said that directives from the Office of Management and Budget, which sets standards for the operation of federal agencies, have not been met.