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NEW: NCUA to CUs: Examiners Will Reward Good Faith QM Compliance Efforts

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ALEXANDRIA, Va. (1/6/14, UPDATED: 4:35 P.M. ET)--National Credit Union Administration field staff "will take into account a credit union's good-faith efforts to comply" with new qualified mortgage regulations as they conduct their early-stage examinations, the agency said in a just-released supervisory letter to credit unions (14-CU-01).

The Credit Union National Association has repeatedly urged the agency and the Consumer Financial Protection Bureau to provide flexibility to credit unions as they work to come into compliance with the new rules.

"NCUA field staff will be placing particular emphasis on the safety and soundness implications of mortgage lending under this new paradigm. Whether your credit union originates Qualified or non-Qualified Mortgages, examiners will be evaluating credit risk, liquidity risk, and concentration risk," the agency added.

NCUA Chairman Debbie Matz in the letter emphasized that non-QM lending "can be an effective member service if conducted safely and soundly." The agency, she said, "will not subject a mortgage to safety-and-soundness criticism solely because of the loan's status as a QM or non-QM.

However, "credit unions choosing to make non-QMs will need to take into account the potential new market and legal risks," Matz added.

CUNA also urged NCUA to clarify that non-QM loans that otherwise meet applicable regulatory requirements should not be discouraged by examiners.

The new QM rule becomes effective on Jan. 10, and will apply to all federally insured credit unions.

For the full letter, use the resource link.

CUNA Survey Seeks Data Breach Cost Details

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WASHINGTON (1/6/14)--What was the cost of the Target breach on your credit union? The Credit Union National Association is asking credit unions for cost information, and details on how the breach has impacted members, through a new online survey.

"We want to know--because the scope of this breach is so big (the second largest, in terms of total persons affected), the costs to credit unions (and ultimately to their members) are so immense for replacing cards and reimbursing members who have lost funds due to fraudulent transactions, and because Congress is taking notice of this whole affair--particularly the costs of it all," CUNA President/CEO Bill Cheney wrote in the latest edition of The Cheney Report, where the survey was first unveiled.

Questions in the 14-item survey include when credit unions were notified of the breach, how many of their cards were impacted by the breach, whether or not any of the affected cards were EMV cards, how much call volume has been affected by members asking about the Target breach, and whether credit unions have had to increase staffing as a result of the breach.

The survey will help CUNA better represent credit union interests to lawmakers, regulators and the media.

Senate Banking Committee members and CUNA have asked for congressional hearings on data security issues. (See News Now story: CUNA Calls on Congress For Target Breach Hearings.)

"When hearings take place, the information we gather through our survey will be vital for expressing the impact of this event on credit unions and their members--and urging Congress to consider our ongoing concerns of the responsibility of merchants to protect data, and be accountable for the consequences of data breaches when they occur," Cheney said.

This week's Cheney Report also includes details on what actions credit unions are expected to take in the event of a data breach.

Other issues addressed in the first Cheney Report of 2014 include:
  • Details on National Credit Union Administration guidance on upcoming qualified mortgage rules;
  • CUNA's Jan. 17 interchange testimony;
  • Credit union and CUNA concerns regarding the NCUA's stress test proposal; and
  • State Employees CU, Raleigh, N.C.'s, positive work to Unite for Good and help NC GreenPower improve North Carolina's environmental quality through renewable energy alternatives and community awareness.
Use the resource link to read the latest in The Cheney Report.

Target Breach Hearings Needed, CUNA Tells Congress

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WASHINGTON (1/6/14)--In the aftermath of the Target data breach, the Credit Union National Association has reached out to House Financial Services and Senate Banking Committee leaders, encouraging them to "fully examine the chronic issue of merchant data breaches, their impact on consumers and financial institutions."
 
The Target data breach compromised 40 million debit and credit cards and included stolen encrypted PIN data. "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," CUNA President/CEO Bill Cheney wrote.
 
"Failure to hold merchants fully accountable for data breaches when they occur ultimately harms consumers, undermines their confidence in our payments system, and adds to their growing frustrations that government is not protecting their interests," Cheney added in the letter, which was sent to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), ranking committee minority member Maxine Waters (D-Calif.), Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking committee minority member Mike Crapo (R-Idaho).
 
"In the weeks following this breach, the first priority for credit unions has been to ensure that their members are protected from fraudulent transactions now and in the future...The steps credit unions have been taking include notifying members who have been affected, helping them to monitor their accounts and urging them to review their account statements, reversing fraudulent transactions and reissuing their cards, when appropriate," Cheney wrote. CUNA is also surveying credit unions about the effects and costs of the recent Target data breach. (See News Now item: CUNA Survey Seeks Data Breach Cost Details.)
 
"By contrast, Target's response to the breach has been in line with some other companies' responses to breaches since merchants are rarely held responsible for reimbursing financial institutions for the cost that the data breach has caused the financial institution or consumers to incur," he added. Cheney suggested that merchants that accept debit and credit cards should be subject to the same high data security standards as credit unions. Further, credit unions should have the ability in all instances to tell their members the name of the merchant where their accounts were compromised, and merchants that have data breaches should by law be financially liable for the impact of the breach on affected consumers and financial institutions, Cheney added.
 
Senate Banking Committee members Mark Warner (D-Va.) and Robert Menendez (D-N.J.) have also called for a hearing on consumer data security. (See Jan. 3 News Now: Senators Push for Consumer Data Security Hearing.)

NCUA's Tawana James Retires

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ALEXANDRIA, Va. (1/6/14)--Office of Minority and Women Inclusion Director and longtime National Credit Union Administration employee Tawana James has retired, effective Jan. 3.

James has worked at the agency since 1980 and led the OMWI since it was officially opened in January 2011. She also helped to establish OMWI.

NCUA Chairman Debbie Matz said James "took on the formidable task of creating a new office with broad responsibilities and succeeded," and also "provided valuable support for credit unions serving diverse communities."

James has more than 30 years of service with NCUA and has served as director of the agency's Office of Small Credit Union Initiatives, regional director, deputy executive director, deputy director of the Office of Examination and Insurance, and Associate Regional Director of Operations. She holds a bachelor's degree in accounting from Towson State University and attended the Harvard Kennedy School of Government's Program for Senior Managers.

NCUA Associate General Counsel for Administrative Law Linda Dent will serve as acting OMWI director until a permanent replacement is selected.

Retail Group Appeals $5.7B N.Y. Interchange Settlement

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NEW YORK, N.Y. (1/6/14)--The National Retail Federation last week appealed a $5.7 billion class action interchange suit settlement, asking the 2nd U.S. Circuit Court of Appeals to overturn a ruling made by U.S. District Judge John Gleeson in the Eastern District of New York, Brooklyn.

The class action settlement, which would be the largest private antitrust damages recovery in U.S. history, was approved in December. The settlement follows a 2008 suit in which merchants alleged MasterCard and Visa set artificially high credit card interchange fees.

NRF Senior Vice President and General Counsel Mallory Duncan in a release said the settlement "is an abuse of the class action system and should never have been approved." She noted that most of the original plaintiffs in the case "repudiated the settlement as soon as they saw its terms."

Some merchants have indicated they will opt out of the approved settlement.

The settlement requires a reduced interchange rate fee of 10 basis points for an eight-month period, and also calls for Visa, MasterCard and the banks to create a fund to repay retailers for past fees charged. Retailers would also be permitted to assess "check out" fees or surcharges on credit card purchases, which has previously been prohibited by Visa and Mastercard rules, under the terms of the settlement.

In a separate ongoing interchange case, NACS, et al. v. Board of Governors of the Federal Reserve System, the Credit Union National Association and its partner members of The Clearing House coalition will be in court Jan. 17 to present 10 minutes of oral arguments. In this case, a merchants' coalition has challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high. CUNA and its partner maintain that the cap, in fact, is too restrictive.

CUNA and it financial services partners have argued that the Fed cap does not factor in enough of the costs that card issuers face for providing their services. (See Dec. 30 News Now story: CUNA, Coalition Partners Added to Jan. 17 Interchange Oral Arguments.)

Consumer Mortgage Closing Comments Sought By CFPB

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WASHINGTON (1/6/14)--Consumers can now forward their mortgage closing "pain points" to the Consumer Financial Protection Bureau, and suggest how their particular pain points might be addressed by market innovations and technology, through a link on the CFPB website, consumerfinance.gov.

The bureau said it wants to hear from consumers or the realtors, settlement closing agents, attorneys, financial counselors and others who work closely with consumers during the closing process.

Credit Union National Association Deputy General Counsel Mary Dunn said CUNA will be working with its consumer protection subcommittee and lending council to provide information to the CFPB that will demonstrate credit unions perform their role in the home mortgage loan closing process well.

The information provided will be used to research and test solutions that address some of the biggest pain points associated with closing on a mortgage, both for consumers and for professionals. Comments will also be used as the CFPB finds ways to improve the closing process.

Comments must be received by Feb. 7.

For more, use the resource link.

Cordray Writes CUs Ahead of Jan. 10 Mortgage Rule Deadline

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WASHINGTON (1/6/14)--Thanking credit unions for their hard work in preparing to implement new Ability-to-Repay/Qualified Mortgage (ATR/QM) rules, Consumer Financial Protection Bureau Director Richard Cordray in a letter to credit union leagues outlined how the rules would impact small issuers and provided key compliance resources.

Cordray's letter comes as new mortgage rules are set to take effect Jan. 10. "We recognize that the challenges posed by these changes is not small, but the implementation of these rules is another critical step in the ongoing recovery of the housing market," he said.

The CFPB letter also covers the basics of the ATR/QM rules.

For the full letter, use the resource link. The letter in its entirety is included in the Jan. 6 issue of CUNA's Regulatory Advocacy Report.

CUNA Will Attend Watt FHFA Swearing In

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WASHINGTON (1/6/14)--Credit Union National Association General Counsel Eric Richard and Deputy General Counsel Mary Dunn will be among those in attendance when Rep. Mel Watt (D-N.C.) is sworn in as Federal Housing Finance Agency director today.

Watt was confirmed by December vote in the U.S. Senate. The chamber voted a reported 57-49 to move Watt's nomination forward.

The 20-year U.S. House veteran was nominated by President Barack Obama in May.