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NCUA names new Region I associate regional director

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ALEXANDRIA, Va. (1/31/14)--Lynn Markgraf has been selected to serve as associate regional director for programs in the National Credit Union Administration's Region I office.

She is scheduled to begin her new job Feb. 23, and she succeeds Marcia Sarrazin, who retired.

Markgraf joined the agency in 1989 as a district examiner and currently serves as a Region V supervisory examiner.

The NCUA's Region I is comprised of federal credit unions in Connecticut, Maine, Massachusetts, Michigan, New Hampshire, New York, Rhode Island, Vermont and Wisconsin.

NCUA: CUs can teach Americans to save

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ALEXANDRIA, Va. (1/31/14)--The National Credit Union Administration (NCUA)  reminds credit unions that the annual America Saves Week and Military Saves Week is Feb. 24-March 1.  The agency encourages credit union to make good use of the opportunity to educate their members and members' families about the importance of saving.
NCUA Chairman Debbie Matz highlighted the importance of savings on household financial stability.
"We should be seriously concerned that nearly 44% of American households have almost no savings for emergencies," said Matz in a release Thursday. "The America Saves and Military Saves campaigns are excellent opportunities for credit unions to educate members and their families about balancing household budgets, building a cushion for when they run into financial problems and putting money aside for a new home, retirement needs or their children's educations."
During the week-long event, the NCUA encourages credit unions to partner with local savings campaigns and consumer organizations to offer motivational workshops and obtain posters, brochures and other resources.

America Saves Week and Military Saves Week are national campaigns that unite government, nonprofit and corporate groups to encourage individuals and families to save and build personal wealth. American Saves Week is coordinated by American Saves and the American Savings Educational Council. Military Saves is part of the Defense Department's Financial Readiness Campaign and has been a partner with the department since 2003. Managed by the Consumer Federation of America, both programs encourage saving, reducing debt and building wealth.
Interested parties can learn more about America Saves and Military Saves activities using the resource links below.

CUNA encourages CUs to weigh in on critical capital proposal

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WASHINGTON (1/31/14)--The Credit Union National Association is urging credit unions to weigh in on the National Credit Union Administration's proposed risk-based capital proposal. "This is a critical proposal and as many credit unions as possible should share their assessments and concerns," CUNA Deputy General Counsel Mary Dunn emphasized.

CUNA will be coordinating with the state credit union leagues to ensure credit unions are aware of the proposal and the significance of sharing their views. 

"The agency's recent derivatives proposal is a good example of a rule that NCUA was willing to change based on concerns and comments and if a final rule must be adopted, CUNA is urging NCUA to follow that model regarding the risk-based capital proposal," Dunn added.

CUNA has posted a useful summary of the 198-page proposal that includes a risk-based capital framework for credit unions with assets over $50 million. The current 7% net worth ratio, as required by the Federal Credit Union Act, would remain in place, but in order to continue as well-capitalized, a covered credit union would need to maintain a 7% net-worth ratio and a 10.5% risk-based capital ratio.

The proposal is modeled after Basel III for community banks but would require the risk-based capital ratio to be determined using risk weights that  are different from those applied to community banks. It would require higher minimum levels of risk-based capital for credit unions with concentrations of assets in real estate loans, member business loans, or high levels of delinquent loans. However, some other weights, such as current consumer loans, would have lower weights than under the community bank requirement.

The proposal was issued for a 90-day comment period at this month's NCUA open board meeting.

One major concern is that the rule would allow the NCUA to assume additional authority to impose even higher capital requirements on individual credit unions that could exceed even well-capitalized level requirements.

A number of the risk weightings, especially for member business loan and mortgage concentrations, as well as for credit union service organization--or CUSO--investments, do not appear to be properly calibrated for credit unions. Using higher risk weights on long-term assets to deal with interest-rate risk could be misleading if liability maturities are not considered, CUNA Chief Economist Bill Hampel has said.

CUNA is analyzing all aspects of the proposal, including the agency's legal authority for the proposal and how it compares with Basel III for community banks. CUNA will work with various subcommittees, including foremost the CUNA Examination and Supervision Subcommittee, and the CUNA councils to develop comments on the issue, and will meet with NCUA board members and staff, individuals within the credit union system, and outside consultants with Basel III expertise.

Among the items credit unions are urged to comment on as of now are:
  • Whether the NCUA should be able to impose higher capital requirements on credit unions on a case-by-case basis;
  • Proposed risk weightings for member business loans, mortgage loans, consumer loans and other products;
  • The NCUA's authority to impose even additional capital requirements on a case-by-case basis; and
  • The NCUA's proposed implementation time line.
For the full CUNA summary, use the resource link.

CUNA has also posted an Inside Exchange video highlighting the rule and initial concerns and is planning an interactive session on the proposal at this year's Governmental Affairs Conference.

Condition improves at conserved Ariz.-based FCU

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ALEXANDRIA, Va. (1/31/14)--The financial condition of AEA FCU, Yuma, Ariz., improved during the year just ended. The $234 million-asset credit union was placed into conservatorship in December 2010 to address its declining financial condition that regulators said stemmed from problems with its member business loan portfolio.

In a release Thursday, the National Credit Union Administration credited AEA's "strong commitment to member service" as the driver of its improved financial performance.

For the year ending Dec. 31, 2013, the credit union posted net income of $5.23 million, up from $3.15 million in 2012. Total assets at the end of the fourth quarter stood at $234 million, up $3 million from 2012, and the net worth ratio improved from 2012 by 70 basis points, ending the fourth quarter at 4.72%, the NCUA said.

The credit union has 41,000 members.

Data protection a shared responsibility: Cheney in PaymentsSource

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WASHINGTON (1/31/14)--Protecting consumers following a data breach is a "shared responsibility," and "everyone, merchants included, must do their part," Credit Union National Association President/CEO Bill Cheney said in a PaymentsSource editorial published Thursday.

"Electronic payments in the United States are part of a sophisticated system that handles millions of transactions worth billions of dollars every day. When a data breach occurs, the system protects the consumers. But for the system to continue functioning when these breaches occur, all the participants of the system have to meet their responsibilities, take care of American consumers and save the finger pointing for another day," Cheney added.

The CUNA CEO responded to a Douglas Kantor blog post on PaymentsSource. In his post, Kantor, who serves as counsel to the Merchants Payments Coalition, asserted that lax card security standards were to blame for the Target data breach.

Cheney noted that for the moment, "no one knows the precise cause of the breach at the intrusion occurred is still a mystery.

"What is known, however, is that the breach has left tens of millions of customers with their personal information exposed," Cheney said.

Credit unions immediately moved to protect their members, reissuing cards and increasing account monitoring, he said. "We didn't wait to assess how the breach occurred or whom we could blame; we acted swiftly to protect our members. While these efforts brought significant expenses to credit unions, they are also the reasons our members remain confident in their credit unions and payment system," Cheney said.

And, while Kantor and retailers tout chip-and-PIN cards and payment card industry (PCI) standards as solutions to data breach issues, Cheney said those tools would not have prevented the theft of consumer marketing data during the Target breach. "Chip and PIN, to be truly effective, requires that retailers encrypt all data along the point of sale chain, decrypting it only outside of the merchant environment," he wrote.

CUNA has repeatedly encouraged Congress to consider legislation that holds merchants to the same standards as financial institutions when they handle financial transactions, and that permits financial institutions to disclose the source of the data breach and seek reimbursement from the merchant for the cost of the breach. CUNA supports chip-and-PIN cards as one way of addressing data security issues, but adds that other steps also need to be taken.

For the full PaymentsSource editorial, use the resource link.

House, Senate add data security hearings to next week's agenda

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WASHINGTON (1/31/14)--A House Energy and Commerce subcommittee has announced a Feb. 5 hearing titled "Protecting Consumer Information: Can Data Breaches Be Prevented?" It will be the first data security hearing in the House this year.

The session, scheduled to start at 9:30 a.m. (ET) in room 2123 of the Rayburn House Office Building, will follow a Senate Banking Committee hearing on the same subject by just two days.

Sandwiched between those two sessions will be a Senate Judiciary Committee hearing on "Privacy in the Digital Age: Preventing Data Breaches and Combating Cybercrime." It's scheduled to start at 10:15 a.m. (ET).

A notice from the House Energy and Commerce subcommittee on commerce, manufacturing, and trade said witnesses at its hearing Wednesday will include U.S. Secret Service, U.S. Department of Homeland Security, Target and Neiman Marcus representatives. Target and Neiman Marcus, of course, are the retail giants whose recent data breaches have compromised the financial and personal information of tens of millions of Americans.

Senate Judiciary is naming Target Executive Vice President John Mulligan as its first witness, to be followed by top representatives from the Consumers Union, Federal Trade Commission, Washington, Secret Service, and the Department of Justice.

The Credit Union National Association is urging Congress to improve merchants' data security standards, to allow credit unions and other financial institutions to disclose to members or customers where a breach has occurred and to make merchants more financially responsible for data breaches that occur through their systems. (See related story: Consumer data protection a shared responsibility, Cheney writes in PaymentsSource.)

Risk-based capital plan is latest 'Inside Exchange' topic

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WASHINGTON (1/31/14)--The basics of the National Credit Union Administration's proposed risk-based capital framework for credit unions, and credit union concerns regarding the proposal, are addressed in the latest edition of the Credit Union National Association's "Inside Exchange."
In the video, CUNA Vice President of Communications Pat Keefe, Deputy General Counsel Mary Dunn and Chief Economist Bill Hampel discuss what CUNA is doing to review the proposal, draw on expertise regarding Basel III standards, develop detailed comments on the proposal to the NCUA and encourage the credit union system to weigh in on this very critical proposal. (See related story: CUNA encourages CUs to weigh in on critical capital proposal.)

The proposal would restructure NCUA's current prompt corrective action regulation to include calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks. The risk weights would be substantially different, and the proposal would impose higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer term investments and some other assets.
The proposal would apply to credit unions with assets of more than $50 million.
Although a final rule is not likely to go into effect until 2016 or later, credit unions need to consider the proposal and its impact on their operations right now and submit their comments to the NCUA, state credit union leagues and CUNA, Hampel emphasized.
CUNA has posted a comprehensive, but concise, summary of the rule to ensure credit unions are informed about the proposal and to encourage them to weigh in to CUNA, the leagues and the NCUA on this proposal.  The topic will be a major focus of this year's CUNA Governmental Affairs Conference. (See related story: Interactive GAC breakout session to explore risk-based capital proposal.)

CFPB highlights mortgage-servicing problems of 2013

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WASHINGTON (1/31/14)--The Consumer Financial Protection Bureau (CFPB) released a report detailing problems in the mortgage servicing market over the previous year. The report also notes that between July and October 2013 companies returned $2.6 million to consumers as a result of overall CFPB supervisory activities.

Mortgage services are responsible for collecting payments from borrowers and delivering that payment to the loan originator. They also handle customer service, loan modifications, and foreclosures.

As a result of the financial crisis and housing market collapse, many mortgage service providers were unable to provide the necessary services, the CFPB said. However, the bureau noted, the mortgage services market has been plagued with problems for years, even before the financial crisis of 2008.
"Taking action against mortgage servicing practices that harm consumers is a key priority for the CFPB," said CFPB Director Richard Cordray as he made the report public. "Especially under the detailed protections of our new rules, we expect servicers to clean up their act and provide responsible customer service."
The CFPB's recent report uncovered many instances of unfair practices such as borrowers being charged the wrong amount, waiving the consumer rights of borrowers, poor payment processing, and failing to provide correct information to the consumer reporting agencies.

Where these unfair practices were discovered, the CFPB alerted the company of their concerns and specified necessary remedial measures and, when appropriate, opened investigations for potential enforcement actions.

To address the problems the CFPB adopted new rules, which went into effect on Jan. 10. These rules require servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request. The rules also include new, stronger protections for struggling homeowners, including those facing foreclosure. 

With today's report, the CFPB is also announcing that it is changing the format of supervisory reports in order to simplify them. The bureau anticipates that these changes will reduce the amount of time between an examination and when a supervised institution receives the report.

Use the resource link to read additional highlights of the CFPB findings.

NFIP rate-hike delay sent to House

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WASHINGTON (1/31/14)--Legislation that would delay National Flood Insurance Program (NFIP) fee increases by four years was approved by the U.S. Senate on Thursday.
The bill, S. 1926, passed on a 67-32 vote. It will move on to the U.S. House for consideration.
The NFIP bill would also correct some issues in the 2012 Biggert-Waters Flood Insurance Reform Act, which extends the NFIP until Sept. 30, 2017. The Federal Emergency Management Administration will also need to conduct an NFIP affordability study.

Rep. Frank LoBiondo (R-N.J.) Thursday afternoon called on House Speaker John Boehner (R-Ohio) to immediately put flood insurance legislation on the House calendar for a vote.

Secretary Lew details MyRA in op-ed

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WASHINGTON (1/31/14)--In an opinion piece scheduled to be published today in McClatchy newspapers, U.S. Treasury Secretary Jacob Lew discusses MyRA--the new retirement account idea unveiled by President Obama in his State of the Union address Tuesday night.

Lew calls the instrument a "simple, safe and affordable starter savings account to help low- and moderate-income Americans begin building towards a more secure financial future."

Lew says there is a stark picture out there when it comes to retirement savings. "Only about half of all workers have access to an employer-based retirement plan, such as a 401(k). And left on their own, few workers save. It is estimated that fewer than one out of 10 eligible workers actually contribute to an IRA."

Starting sometime this year, Lew writes, MyRA-- or My Retirement Account--will allow Americans to start retirement savings with an initial deposit of as little as $25 and contribute as little as $5 each payday.

An employer may choose to participate in providing automatic payroll deductions for contributions, making them hassle-free. 

 Lew notes there are no fees associated with the MyRA and that the full contribution goes into the account and is invested in a U.S. Treasury security. 

"That means it will be backed by the full faith and credit of the United States, will earn the same interest rate that is available to federal employees for their retirement savings, and the balance will never go down," Lew says.

The account is belongs to the saver, not the employer, so the account is portable and be rolled into a Roth Individual Retirement Account. MyRA savers also can withdraw their contributions tax-free, at any time.

 The McClatchy Co. owns 30 daily newspapers in 29 U.S. markets.