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Regulators release guidance on junior lien loss allowances

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WASHINGTON (2/1/12)--The four federal financial regulatory agencies, including the National Credit Union Administration (NCUA), Tuesday issued supervisory guidance on allowance for loan and lease losses (ALLL) estimation practices associated with loans and lines of credit secured by junior liens on one- to four-family residential properties.

The guidance addresses the responsibilities of financial institution management and examiners and builds on existing supervisory guidance for home equity lending and the allowance for loan and lease losses.

The guidance is intended to reiterate policy and to remind regulated financial institutions to monitor all credit quality indicators relevant to credit portfolios, including junior liens--a point made by the NCUA in numerous recent communications. Examples of junior liens include second mortgages and home equity lines of credit taken out by mortgage borrowers.

With respect to the ALLL estimation process for an institution's junior lien portfolio, the guidance says management should:

  • Gather and consider sufficient information to adequately assess the probable loss incurred within junior lien portfolios, including information on the delinquency status of senior lien loans associated with the institution's junior liens, and whether the senior lien loan has been modified;
  • Ensure adequate segmentation of the junior lien portfolio into groups of loans based on risk characteristics to appropriately estimate allowances for high-risk segments of the portfolio; and
  • Support qualitative or environmental factor adjustments to historical loss rates by an analysis that relates the adjustments to the characteristics of and trends in the individual risk segments within the junior lien portfolio.


The guidance says management also should ensure that income recognition practices related to junior liens do not overstate income and should also ensure charge-offs are made in accordance with NCUA Letter to Credit Unions 03-CU-01, from January, 2003 entitled, "Loan Charge-off Guidance.

The guidance instructs examiners to evaluate an institution's junior lien loan loss allowance methodology and documentation and the appropriateness of the level of the ALLL for the junior lien portfolio, including whether management's estimation process has properly incorporated the practices described in the supervisory guidance.

The guidance was jointly issued by the NCUA, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.



Use the resource links to access that accounting bulletin, as well as the supervisory guidance on junior liens.

Cordray CFPB goals can balance soundness concerns

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WASHINGTON (2/1/12)--While the Consumer Financial Protection Bureau (CFPB) is not required to take safety and soundness into account when it takes regulatory actions, that agency is working with other financial regulators to ensure that its stated goal of protecting consumers strikes a balance with safety and soundness concerns, CFPB Director Richard Cordray said Tuesday.

Cordray made the statement in response to a question during a Tuesday Senate Banking Committee hearing. The CFPB director presented the bureau's first semi-annual report during the hearing, and his testimony was similar to that presented last week to a  House Oversight and Government Reform subcommittee.

Cordray stated that he plans to work towards reducing the regulatory burden for credit unions by creating a Credit Union Advisory Panel.  He said he realizes that credit unions, as well as community banks,  had "nothing to do" with bringing on the financial crisis, and that their consumer-oriented business model is the business model that the CFPB strives for.

The CFPB is also planning to convene Small Business Regulatory Enforcement Fairness Act (SBREFA) panels in the spring, Cordray said. SBREFA panels, which are charged with making recommendations to CFPB on how to reduce regulatory burden on small entities, would be comprised of one representative each from CFPB, the Office of Management and Budget, and the U.S. Small Business Administration's Office of Advocacy. The panels are required by the Dodd-Frank Wall Street Reform Act.

The first SBREFA panel would address the CFPB's pending mortgage disclosure forms, Cordray said. Ranking committee member Sen. Richard Shelby (R-Ala.) noted that the agency did not hold a SBREFA meeting before the recent release of its remittance transfer rule, but Cordray explained that the SBREFA meeting could not be held, as the agency had inherited that remittance rulemaking process from another agency.

Under the new CFPB rule, remittance transfer providers must disclose the exchange rate and all fees associated with a transfer so consumers know exactly how much money will be received on the other end. The rule will become effective early next year. (See Jan. 23 story, New disclosures to be required of  remittance providers)

Cordray said his agency is working to create an adequate threshold for remittance transfers that would exempt small institutions, and added that the CFPB would continue to work on this exemption threshold over the next few months.

The general progress of the CFPB was also addressed during the hearing, with Cordray saying the agency would not set prices, limit the size of banks, or ban any specific financial products.

However, the CFPB is working to ensure a level playing field for the various financial institutions that offer consumer finance products such as payday loans, prepaid debit cards, mortgages, and student loans, Cordray added.

Committee Chairman  Sen. Tim Johnson (D-S.D.) said that Congress' oversight of the agency had been adequate to this point, but added that he wants to ensure the CFPB strikes the appropriate balance between protecting consumers and ensuring small institutions aren't subject to overregulation.

For more of the hearing, use the resource link.

Inside Washington (01/31/2012)

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  • WASHINGTON (2/1/12)--The Consumer Protection Financial Bureau presented its first semi-annual report Monday to Congress. The report details the bureau's accomplishments in its first six months of existence. Among the CFPB's major tasks was building staff. The bureau now includes more than 750 employees across the country, including more than 230 who transferred from federal banking regulators and other agencies. The bureau also began examining the country's largest banks, started campaigns to encourage transparency in key credit markets, began taking and resolving mortgage and credit card complaints from consumers, and launched offices dedicated to older Americans, students and service members …
  • WASHINGTON (2/1/12)--The Internal Revenue Service (IRS) clarified tax treatment of frequent flier miles after U.S. Sen. Sherrod Brown (D-Ohio) on Monday sent a letter to Citigroup criticizing the bank for sending 1099 tax forms to customers who received at least $600 in frequent-flier miles as a reward for opening a checking or savings account (American Banker Jan. 31). In the letter, Brown cited a previous IRS ruling that frequent-flier miles are not taxable income. But later in the day, IRS spokeswoman Michelle Eldridge said that when frequent flier miles are provided as a premium for opening an account, they may be taxable …
  • WASHINGTON (2/1/12)—U.S. Rep. Scott Garrett (R-N.J.) faces an uphill battle, including opposition from the Federal Deposit Insurance Corp. (FDIC), in his efforts to pass legislation would establish a covered bond market in the U.S. Supporters of the measure say the covered bond market is a safer market than securitizations because it would offer investors certain protections if an issuing bank fails (American Banker Jan. 31). Covered bonds differ from securitizations in that the underlying assets remain on the balance sheet of the issuer. The FDIC is concerned that a covered bond market could eventually increase the cost of a collapse. Senate Banking Committee Chairman Tim Johnson (D-.S.D.) is believed to have the same concerns …

CUNA seeks comment on NCUA liquidity rule changes

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WASHINGTON (2/1/12)--The National Credit Union Administration (NCUA) is seeking public comment on potential emergency liquidity regulations for federally-insured credit unions, and the Credit Union National Association (CUNA) has asked credit unions to add their voices to a pending comment letter on this NCUA proposal.

The agency in the final board meeting of 2011 approved an advance notice of proposed rulemaking (ANPR) regarding how credit unions should maintain access to emergency liquidity. The agency's ANPR outlines a number of options that credit unions could take to ensure they maintain needed liquidity in times of financial stress.

Under the ANPR, credit unions could ensure liquidity by:

  • Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or through a corporate credit union;
  • Obtaining and maintaining "demonstrated access" to the Federal Reserve Discount Window; or
  • Maintaining a certain percentage of their assets in highly liquid U.S. Treasury securities.
The CUNA comment call asks whether the liquidity rule is needed, and how the NCUA could limit the regulatory burden that these new rules could create.

Credit unions can also give their opinions on whether the agency should consider allowing credit unions to use other sources of credit or liquidity beyond the CLF and Fed discount window, and if corporate credit unions should continue to provide CLF access, in their response to the comment call.

CUNA is also collecting credit union comment on this ANPR, and other NCUA proposals on Regulatory Flexibility and loan participations, through online surveys.

For the full comment call, and access to the online surveys, use the resource link.

2012 CUNA campaign schools kick off in N.C.

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HICKORY, N.C. (2/1/12)--The Credit Union National Association (CUNA) kicked off its 2012 schedule of campaign schools this week, with three separate classroom sessions being held in Hickory, Fayetteville and Rocky Mount, N.C. and more sessions scheduled to be held in Montana.

The three campaign schools, which are co-hosted by CUNA, the North Carolina Credit Union League, and the National Rural Electric Cooperative Association (NRECA) and its N.C.-based affiliate, are expected to attract as many as 50 attendees before the week is complete.

This is the second time a series of campaign school events has been held in the state. The first campaign schools,  held in 2010, bore significant fruit for the credit union movement when a campaign school attendee, current U.S. Rep. Renee Elmers (R), went on to defeat incumbent Bob Ethridge (D) to win that state's second district.

Topics covered during CUNA's campaign schools include campaign management, fundraising, message development, and get-out-the-vote planning. Past campaign schools have created many other success stories, as dozens of graduates have run for a broad swath of positions, from Justice of the Peace, to State Representative, to Mayor. Potential State House members, school board officials, and county commissioners are among those taking part in this week's class sessions.

CUNA's Vice President of Political Affairs Trey Hawkins said the main goal of the campaign schools "is to give first-time candidates an overview of how to put together an effective campaign. Ultimately, though, we think it sends a message to these candidates that credit unions are sophisticated when it comes to politics and elections. Hopefully they will remember that once they are in office."

Montana campaign schools will take place next week in Great Falls, Missoula, Bozeman and Billings. This is the sixth time that campaign schools have been held in that state. This round of campaign schools will be co-hosted by CUNA, the Montana Credit Union League, the NRECA and its Montana affiliate, the Montana Chamber of Commerce and the Montana Realtors Association.

The four Montana schools are expected to draw up to 150 potential candidates, and the last session of Montana campaign schools, which took place in 2010, were covered extensively by The Billings Gazette and the Bozeman Daily Chronicle.

CUNA testifies today for examination fairness

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WASHINGTON (2/1/12)--Today when West Virginia Credit Union League President/CEO Ken Watts testifies on behalf of the Credit Union National Association (CUNA) at a House subcommittee hearing, he will tell lawmakers that a proposed financial institutions examination reform bill would help strengthen the safety and soundness of the financial system by increasing the consistency and fairness of financial institution examinations.

David Marquis, executive director of the National Credit Union Administration, is also scheduled to testify.

The bill, the Financial Institution Examination Fairness and Reform Act (H.R. 3461), would allow financial institutions to appeal examination reports from federal financial regulators and would provide further clarity to those regulators about the exam process (News Now Jan. 19). It would also give credit unions and other financial institutions access to decision-making information gathered in their exams and codify exam policy guidance for financial regulators.

CUNA supports the legislation, calling it a firm step in the right direction toward ensuring that the federal regulators conduct fair exams which are consistent with the law and regulation and ensure safety and soundness.

Today's 2 p.m. (ET) hearing is being conducted by the House Financial Services subcommittee on financial institutions and will feature testimony from two witness panels, one comprised of federal regulators, the other of financial industry representatives. H.R. 3461 is co-sponsored by subcommittee chair Rep. Shelly Moore Capito (R-W.Va.) and ranking member Rep. Carolyn Maloney (D-N.Y.). The bill has 77 co-sponsors.

In addition to Marquis and Watts, scheduled witnesses include:

Panel 1
  • Kevin M. Bertsch, associate director,  Division of Banking Supervision and Regulation,  Federal Reserve System ;
  • Sandra L. Thompson, director of the division of risk management supervision, Federal Deposit Insurance Corp.;
  • Jennifer Kelly, senior deputy comptroller for mid-size/community bank supervision, Office of the Comptroller of the Currency
Panel 2
  • Albert C. Kelly, Jr., president/CEO, SpiritBank, on behalf of the American Bankers Association;
  • Noah Wilcox, president/CEO, Grand Rapids State Bank, on behalf of the Independent Community Bankers of America;
  • Jeanne Kucey, president/CEO, JetStream FCU, on behalf of the National Association of Federal Credit Unions; and
  • Eugene Ludwig, founder and CEO, Promontory Financial Group, LLC.

CFPB complaint database could cause privacy other issues

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WASHINGTON (1/31/12)--Releasing credit card consumer complaint data "could have misleading implications, unintended consequences, and privacy risks to consumers and others that submit or use the data," the Credit Union National Association (CUNA) has warned in a comment letter to the Consumer Financial Protection Bureau (CFPB).

The CFPB has proposed creating a searchable public database that would provide relevant data on credit card complaints while avoiding the release of private personal information. The credit card complaint database would only include information tied to financial institutions with more than $10 billion in assets. Consumers and issuers will be able to provide background narrative information along with their complaint, but the CFPB will only provide the card issuer, the consumer's zip code, the date of the complaint, and whether and how the issuer responded to the complaint in its database.

CUNA said it "supports the ability of consumers to have timely and clear information on responsible credit card use." However, in the letter, CUNA said it is concerned that other federal financial regulators would follow the CFPB's lead and potentially compile their own credit card complaint databases, creating yet another regulatory and reporting burden for financial institutions.

The agency should give credit card companies the opportunity to resolve any complaints before the consumer information is issued, and should also adjust the data it ultimately releases to account for differences among issuers and credit card products, such as the size of the issuer, the relative size of the credit card portfolio of and within the institution, and the different types and characteristics of credit card products, CUNA said. Any consumer complaint releases should also include a disclaimer to let readers know that the complaints are from individuals that have had particularly bad experiences with their credit companies, and that the information in the database should not be viewed as a representative sample of all credit customers.

The CFPB said it would separate data that will be publicly reported from the private information that consumers may include in their complaints, but CUNA warned that inadvertent disclosure of confidential or narrative consumer or business information could still potentially occur.

CUNA also suggested that the CFPB release this potentially sensitive credit card complaint data in periodic reports, rather than creating a searchable database.

CUNA said it welcomes the opportunity to talk with the CFPB further about how to meets its obligations to consumers without creating further regulatory or consumer privacy issues.

For the full comment letter, use the resource link.

NCUA economic updates Free on YouTube

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ALEXANDRIA, Va. (1/31/12)--Recent domestic and global economic issues, and how the health of the credit union system is tied to employment issues, the housing market, and interest rate changes, are all covered in the National Credit Union Administration's (NCUA) first YouTube briefing by its Office of the Chief Economist (OCE).



The video is the first in a planned series. The videos are meant to inform credit unions and the public about economic developments affecting the credit union industry and the overall economy, the NCUA said. NCUA Chairman Debbie Matz said the OCE videos would "assist credit union officials as they tackle the difficult policy issues of the day and make decisions that will have long term effects on their balance sheets."

The OCE "has a wealth of data and analyses on virtually every aspect of the economy and, through social media, credit union officials will have this valuable information at their fingertips," she added.

For the NCUA's YouTube page, use the resource link.

Inside Washington (01/30/2012)

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  • ALEXANDRIA, Va.  (1/31/12)--The National Credit Union Administration announced the launch last week of an "updated and enhanced" Spanish-language  version of  the agency's  free consumer resource tool, www.MyCreditUnion.gov. The Spanish-language version can be found at http://espanol.mycreditunion.gov, and carries resources and information on topics such as: how to guard against identity theft, and how best to save and plan financially to send a child to college. There are also links for consumers to explain how to get a free credit report each year and how to protect themselves from financial scams. The website, like its English-language counterpart, also explains how credit unions work, where to find a credit union, and even how to start a credit union. The websites provide important pointers for resolving credit union member complaints  …
  • WASHINGTON (1/31/12)--Industry observers have questioned the potential long-term effectiveness of President Barack Obama's latest plan to help struggling homeowners (American Banker Jan. 30.) Obama announced the plan during his State of the Union address on Tuesday. Though Obama provided few details, the plan would be funded by large banks. Some say the proposal could present administrative difficulties for participating banks. Pete Mills, a principal at Mortgage Banking Initiatives, predicted banks will raise rates to reduce the operational challenges caused by the demand to refinance. But some observers believe the plan will stimulate the housing sector. Originators would profit from refinancing fees and also unburden themselves of the representation and warranty claims tied to the original loans that are being refinanced, according Jaret Seiberg, a senior policy analyst for Guggenheim Partners' Washington Research Group …
  • WASHINGTON (1/31/12)--A new task force created to investigate mortgage fraud will include 55 attorneys, analysts, agents, and investigators, U.S. Attorney General Eric Holder said Friday (American Banker Jan. 30).  President Barack Obama announced the formation of the Residential Mortgage-Backed Securities Working Group during his State of the Union address on Tuesday. The team will join existing state and federal resources investigating similar misconduct. The mortgage fraud unit will "streamline" and "strengthen" current efforts to investigate fraud in residential mortgage-backed securities, Holder said during a news conference Friday in Washington. Holder said that the goal of the group will be to hold accountable any institutions that violated the law, compensate victims and help provide relief for homeowners struggling from the collapse of the housing market …
  • WASHINGTON (1/31/12)--The Consumer Financial Protection Bureau (CPFB) has asked students, parents and educators to comment on a proposed streamlined financial aid disclosure (American Banker Jan. 30). In October, the CFPB, along with the Department of Education, issued a sample disclosure for the financial aid shopping sheet that colleges would provide to prospective students about loan payments and financial aid. The CFPB said students are concerned about the amount of debt they will have at graduation and how much they will owe in monthly loan payments. Students also wanted to know the track record of financial-aid recipients being able to repay their loans at specific schools. The shopping sheet would break down annual costs; compare costs to those of an average student at the school and at a public college versus private college; and how much the student will owe each month after graduation …

Exam fairness highlights this week in Congress

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WASHINGTON (1/31/12)--Examination issues will lead the week, as the Credit Union National Association (CUNA) testifies during a Wednesday House subcommittee hearing on H.R. 3461, the Financial Institution Examination Fairness and Reform Act.

That hearing, which will focus on legislation that would allow financial institutions to appeal examination reports from federal financial regulators and would provide further clarity to those regulators, will feature testimony from two separate panels of regulators and financial industry representatives. West Virginia Credit Union League President/CEO Ken Watts will represent credit unions and CUNA during that hearing.

However, there is other business in Washington this week. Consumer Financial Protection Bureau (CFPB) Director Richard Cordray on Tuesday will testify before the Senate Banking Committee. CUNA on Wednesday will also follow a House Financial Services subcommittee hearing entitled "Implementation of the Manufactured Housing Act of 2000" and a House Small Business Committee hearing entitled "The Path to Job Creation:  The State of American Small Businesses."

Legislation that would ban insider trading by members of the U.S. Congress, the FAA Authorization bill, the Fiscal Responsibility and Retirement Security Act of 2011, the Pro-Growth Budget Reform Act, and the Baseline Reform Act are also scheduled to be discussed this week.

HAMP changes meant to expand aid reach

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WASHINGTON (1/31/12)--The U.S. Treasury Department announced last week that it will revise the Home Affordable Modification Program, or HAMP, in an attempt to reach more homeowners on the brink of foreclosure and help them stay in their homes and strengthen hard-hit communities.

The HAMP enhancements, according to a blog announcement by Assistant Treasury Secretary Tim Massad, include:

  • Extending the program for an additional year through Dec. 31, 2013, conforming to an extended deadline the Home Affordable Refinance Program (HARP); and
  • Expanding the program to reach a broader pool of distressed borrowers.
The Treasury announcement said the eligibility extension would ensure that borrowers struggling to make ends meet because of debt beyond their mortgage can participate. The program will offer a new evaluation opportunity, one with more flexible debt-to-income criteria, to expand modification assistance to borrowers with higher levels of secondary debt, such as a second lien or medical bills, who otherwise meet program requirements. 

Treasury also plans to expand eligibility to include properties that are currently occupied by a tenant, as well as vacant properties that a borrower intends to rent.

Also, to further encourage investors to consider or expand use of principal reduction modifications, which is when a borrower owes significantly more on a mortgage than the home is worth, the administration program will triple incentives to investors, paying from 18 to 63 cents on the dollar, depending on the degree of change in the loan-to-value ratio.  

HAMP will also offer principal reduction incentives for loans insured or owned by the government-sponsored housing enterprises, Freddie Mac and Fannie Mae.

To read more about the modifications, use the resource link below.

Bonamici touts MBLs in House-seat contest

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WASHINGTON (1/31/12)—Congressional candidate Suzanne Bonamici (D) has made lifting the credit union member business lending (MBL) cap a key part of her campaign, and Oregon's credit unions, the Northwest Credit Union Association (NWCUA) and the Credit Union National Association (CUNA) have, in turn, supported the long-time credit union backer ahead of today's special election contest.

Bonamici, a Beaverton, Ore.-based state senator and frequent credit union supporter, is facing Republican candidate Rob Cornilles, who sits on a regional Umpqua Bank board. The winner of today's special election will claim the U.S. House seat of former Rep. David Wu (D), who resigned last year. Oregon's first district extends from the greater Portland area into Yamhill, Washington, and Columbia counties, as well as the coastal county of Clatsop. It is a largely Democratic district.



In a YouTube clip, Bonamici said that improving access to capital for businesses would be her first priority if she is elected to Congress, and added she would "champion" legislation that lifts the MBL cap. She has also publicly backed increasing the MBL cap in debates and interviews with the press, telling Oregon Public Broadcasting that an MBL cap lift could improve access to small business funding without adding any new costs for the government.

NWCUA Director of Legislative Advocacy Jennifer Wagner said the association is "is honored to be supporting Suzanne Bonamici for Congress," and said her experience in the state legislature and long-term relationship with credit unions made her "a quick study on the federal issues of importance to Oregon credit unions."

Oregon credit unions have supported Bonamici with phone bank volunteer efforts and door-to-door neighborhood canvassing. Hundreds of volunteers knocked on doors and made phone calls to voters, and northwest credit unions have also financially backed her campaign.

Bonamici has been endorsed by the Oregonian, and is widely thought to be the favorite. Mail-in votes are accepted for this election, and The Daily Astorian said 30% of those ballots had been cast as of Friday.

Through its Credit Union Legislative Action Council—or CULAC, CUNA will continue to aggressively support credit union friends in next fall's election, when the presidency, congressional seats, and state and local positions will all be at stake.

2012 starts new round of NCUA rule review

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ALEXANDRIA, Va. (1/ 31/12)--Each year, the National Credit Union Administration (NCUA) reviews one-third of its regulations to identify any rule or provision that it deems 'outmoded, ineffective, insufficient, or excessively burdensome," and the agency just released its 2012 review list.

The agency is now accepting public comments on the substance and wording of each rule.

NCUA Chairman Debbie Matz, in announcing the list, said that, "in the spirit of President Obama's Executive Order" to reduce regulatory burden (13579), the NCUA is "committed to 'modify, streamline, expand, or repeal' rules that are not required by statute and would not jeopardize safety and soundness."

Regulations under review in 2012 include rules governing bylaws, fields of membership, fixed-asset ownership, mergers, and corporate credit unions, among others.

Interested parties may submit comments through Aug. 3  by emailing them to OGCMail@NCUA.gov with the subject line "Regulatory Review 2012," or by mailing them to the Office of General Counsel, NCUA, 1775 Duke Street, Alexandria, VA 22314-3428.

The NCUA noted that the 2012 round of reviews begins a new three-year rotation that will result in another complete review of all NCUA regulations by 2014.

The NCUA also publishes a regulatory agenda in the Federal Register each May and November, as required by executive order (12866).

Use the resource link below to access the 2012 rule list.

NEW NCUA posts 2012 rule review

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ALEXANDRIA, Va. (UPDATED 1/ 30/12 10:30 a.m. ET)--Each year, the National Credit Union Administration (NCUA) reviews one-third of its regulations to identify any rule or provision that it deems 'outmoded, ineffective, insufficient, or excessively burdensome," and the agency just released its 2012 review list.

The agency is now accepting public comments on the substance and wording of each rule.

NCUA Chairman Debbie Matz, in announcing the list, said that, "in the spirit of President Obama's Executive Order" to reduce regulatory burden (13579), the NCUA is "committed to 'modify, streamline, expand, or repeal' rules that are not required by statute and would not jeopardize safety and soundness."

Regulations under review in 2012 include rules governing bylaws, fields of membership, fixed-asset ownership, mergers, and corporate credit unions, among others.

Interested parties may submit comments through Aug. 3  by emailing them to OGCMail@NCUA.gov with the subject line "Regulatory Review 2012," or by mailing them to the Office of General Counsel, NCUA, 1775 Duke Street, Alexandria, VA 22314.

The NCUA noted that the 2012 round of reviews begins a new three-year rotation that will result in another complete review of all NCUA regulations by 2014.

The NCUA also publishes a regulatory agenda in the Federal Register each May and November, as required by executive order (12866).

Use the resource link below to access the 2012 rule list.

First 2012 liquidation is 49M-deposit N.Y. FCU

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ALEXANDRIA, Va. (1/30/12)—After determining Eastern New York FCU was insolvent and had no prospect for restoring viable operations on its own, the National Credit Union Administration (NCUA) liquidated the $49 million-deposit Napanoch, N.Y.  credit union Friday.

USAlliance FCU of Rye, N.Y. immediately assumed Eastern New York's members, assets, loans and debts, thereby assuring continued service to former Eastern New York members.

At the time of liquidation and subsequent purchase by USAlliance , the credit union served approximately 6,800 members.

Eastern New York was chartered in 1961 and served state and government industry employees located in nine counties of the state.

The liquidation is the first for a federally insured credit union in 2012.

CUNA participates in Treasurys diversity meeting

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WASHINGTON (1/30/12)--While it supports the goal of increasing workplace diversity, the Credit Union National Association (CUNA) said it is concerned with how standards for assessing the diversity policies and practices of credit unions may ultimately be implemented by the National Credit Union Administration (NCUA).

CUNA joined other finance industry representatives, and regulators, including the NCUA, at the U.S. Treasury's first meeting on these developing policies and standards late last week.

The NCUA and other federal regulators are required to create workforce diversity policies for their regulated institutions by section 342 of the Dodd-Frank Wall Street Reform Act. Regulators are still developing these policies, and rules on how they will assess compliance with these policies.

The NCUA's Office of Minority and Women Inclusion (OMWI), which began its work last year, will develop the agency's diversity policy, and CUNA during the meeting urged the NCUA to reach out to credit unions as the new standards are created. CUNA also encouraged the agency to minimize the compliance burden on credit unions.

Agency officials said they would arrange roundtable discussions with credit unions of all sizes in February and March, and the NCUA plans to work with CUNA as well.

CUs should alert members to EI tax credit NCUA

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WASHINGTON (1/30/12)--National Credit Union Administration (NCUA) Chairman Debbie Matz urged "the thousands of credit unions" with members that qualify for the Earned Income Tax Credit (EITC) to remind those members of the benefits that tax credit can provide.

The EITC, which is a federal income tax credit that is intended to aid low-income working families, allows those that qualify and claim the credit to "pay less federal tax, pay no tax, or even get a substantial tax refund," the NCUA said in a release. Matz noted that the EITC "goes directly to families who may use it for living expenses or to offset depleted savings."

Credit unions are gearing up to help low-to-moderate income and elderly taxpayers through the IRS's Volunteer Income Tax Assistance Program (VITA) and highlighting members' eligibility for the EITC, and NewsNow will report on these efforts this week.

The NCUA's Office of Small Credit Union Initiatives (OSCUI) awarded more than $100,000 in technical assistance grants to low-income designated credit unions that operate or participate in VITA programs last year. Credit unions that received these technical assistance grants helped more than 16,055 members prepare their tax returns, saving those members and their families $5.6 million in taxes, the NCUA said.

For the full NCUA release, use the resource link.

Cheney in iMainStreet.comi BT Day buzz still felt at CUs

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WASHINGTON (1/30/12)--The "buzz" that began with last November's Bank Transfer Day continues at credit unions, which are "still seeing strong membership levels and a lot of growth," Credit Union National Association (CUNA) President/CEO Bill Cheney told MainStreet.com.

Javelin Strategy and Research data, which was cited in the MainStreet.com story, showed that 5.6 million Americans had changed their financial institution over the last 90 days, with 610,000 of them, or 11%, moving from large to credit unions and smaller banks. The 11% that moved to smaller institutions cited Bank Transfer Day as their reason for the change.

Around 410,000 new members streamed into credit unions in September and October, followed by another 500,000 in November, according to CUNA's Monthly Credit Union Estimates. On Bank Transfer Day alone, Nov. 5, credit unions brought in 40,000 in new members, and added $80 million in new savings account funds and $90 million in new loans, CUNA also has estimated.

Cheney told MainStreet.com that membership growth is good for credit unions, and credit unions have handled this influx "by cross-training staff," and sharing resources and staff. "People have to work a little harder, but you do so with a big smile on your face," he added.

One new member interviewed for the story gave high marks to their new interest bearing checking account and ATM rebates, and the story found that many consumers "weren't dissuaded from changing financial institutions due to the extra legwork."

CUNA Chief Economist Bill Hampel has noted that the real story of Bank Transfer Day is not asset growth, but membership growth "and the new, mostly young members that credit unions have now gained." Bank Transfer Day's longest lasting legacies will unfold as those new members relate their positive credit union experiences to their friends and families, creating even more new members, he added.

MainStreet.com is one of several sites owned and maintained by financial reporting site TheStreet.com.

For the full story, use the resource link.

Inside Washington (01/27/2012)

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  • WASHINGTON (1/30/12)--Rep. Brad Miller (D-N.C.), who has addressed the Credit Union National Association's Governmental Affairs Conference and been a supporter of credit unions in the U.S. House of Representatives, announced Thursday that he will not seek re-election this fall. Republicans in North Carolina carved Miller's district during the redistricting process (American Banker Jan. 27). Under the new configuration he would have to run in a primary against fellow Democrat David Price, who is also an incumbent. Miller acknowledged that redistricting was a factor in his decision not to seek another term ...
  • WASHINGTON (1/30/12)--The formation of a joint task force to examine mortgage abuses, announced by President Barack Obama in his State of the Union address Tuesday, may help the mortgage servicing settlement negotiations move forward (American Banker Jan. 27). The task force could cause some some holdouts in the settlement to return to negotiations. One holdout is New York Attorney General Eric Schneiderman, who was named a co-chairman of the new task force. The announcement of the task force has been praised by liberal groups. Some state attorneys general and liberal groups have pushed for investigations of both origination and servicing practices to be part of the settlement, and were against any proposal that would exclude future investigations. Banks have pushed for releases from future investigations. The task force may present a means to continue the investigations, but not include them as part of any settlement …
  • WASHINGTON (1/30/12)--Contributions by finance, insurance, and real estate groups of at least $10,000 per election cycle to political groups jumped to 5,510 in 2010 from 1,091, a 405% increase, according to a study by the Sunlight Foundation. The finance, insurance and real estate sector donor sector's combined contributions have increased even more dramatically, growing by $162.8 million--a 700% increase--to $178.2 million in 2010. The sector's contribution is now 8.4% of the domestic economy, up from about 6% in 1990. Compensation within the industry has also grown. In 1990, industry employees took home $244 billion, according to the U.S. Commerce Department. Compensation in the industry is now almost double the average U.S. compensation …

Compliance CompBlog clears up credit reporting questions

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WASHINGTON (1/30/12)--Some credit unions remain confused about which Fair Credit Reporting Act (FCRA) powers have been transferred to the Consumer Financial Protection Bureau (CFPB), and the Credit Union National Association's (CUNA) CompBlog recently explained what has – and what hasn't – been shifted to the new agency.

The Dodd Frank Act transferred FCRA rulemaking authority to the CFPB as of July 21, 2011, and FCRA regulations were republished, with slight changes, as an interim final Regulation V rule five months later.  That interim final rule is now effective, and the CFPB will accept public comment until Feb. 21.

The CFPB regulation "substantially duplicates" most of the interagency FCRA regulations issued by the National Credit Union Administration (NCUA), the Federal Trade Commission (FTC), and federal banking agencies, as well as the stand-alone FTC regulations.

The CFPB does not currently have the authority to promulgate rules regarding FCRA provisions on: the disposal of consumer information, identity theft red flags, and rules on the duties of card issuers regarding changes of address.

CUNA has advised credit unions to continue to refer to NCUA and FTC regulations, and not the CFPB Regulation V, for these provisions.

However, aside from the above exceptions, "Reg V is pretty much a one-stop-shop for FCRA regulations," the Comp Blog post said.

Anyone using model forms issued agencies other than the CFPB  will need to update these forms and disclosures, CUNA said. However, credit unions and other institutions will be allowed to use "substantially similar" model forms and disclosures that were issued by other agencies until Jan. 1, 2013.

For this and other CompBlog posts, use the resource link.

GAO reports on GAO performance

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WASHINGTON (1/30/12)--The Government Accountability Office (GAO) turned its investigative skills inward for an annual assessment of how well it accomplished its role in 2011 of being the audit, evaluation, and investigative arm of the U.S. Congress.

In its report, "Summary of GAO's Performance and Accountability Report Fiscal Year 2011," GAO said it met or exceeded 13 of 15 annual performance targets.  For instance, the report noted, GAO identified $45.7 billion in financial benefits for the federal government, which represented a return of $81 for every dollar GAO spent.

Of 1,318 improvements in broad program and operational areas across the government recommended last year by GAO, 80% were implemented.

"We did not meet our testimony target but testified at 174 hearings before the Congress on topics across our body of work, a third of which were on areas considered at high risk for fraud, waste, abuse, and mismanagement," the report said.

For information on management challenges and more, use the resource link below to access the report.

Obstacles to small biz job creation A House committee hearing

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WASHINGTON (1/30/12)--The House Small Business Committee has scheduled a Feb. 1 hearing to study obstacles that block small business job creation and economic growth.

The hearing notice referred to a 2011 Gallup poll that cited excessive government regulation, lack of available capital, and low consumer confidence as the biggest hurdles small business must currently overcome to survive and grow. The committee notice said the Gallup poll reflected similar finding in polls executed by "numerous" trade associations, think tanks, and national media.

Among the scheduled witnesses is Peter Ferrara, senior fellow, Entitlement and Budget Policy, of The Heartland Institute. The Chicago-based think tank has voiced its support of an increase to the credit union member business lending (MBL) cap as a way to increase credit for struggling small business.

Other scheduled witnesses include:

  • Dr. Dennis J. Jacobe, Gallup, Washington, D.C.;
  • Martin Neil Baily, The Brookings Institution, Washington D.C.;and
  • Michael J. Fredrich, president, Manitowoc Custom Molding, Manitowoc, Wis., testifying on behalf of the Small Business and Entrepreneurship Council.

Small biz survey shows need for MBL increase

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WASHINGTON (1/27/12)—A survey, released yesterday and executed by the Small Business Majority, shows 90% of small business owner respondents want credit unions and community banks to be permitted to lend more to small businesses.

By more than a 2:1 ratio, respondents supported increasing credit unions' member business lending (MBL) cap to 27.5% of a credit union's assets, up from the current limit of 12.25%--a changed also advocated by the Credit Union National Association and proposed in bills pending in both the U.S. House and Senate.

During a 2011 hearing on MBL legislation in the House, banking industry witnesses quibbled about whether small businesses are experiencing a credit crunch, with bankers claiming no such crunch exists.

However, an overwhelming 90% of small business owners nationwide agreed in the survey that the availability of credit for small businesses is a problem, and 61% agreed it's harder to get a loan now than it was four years ago.

CUNA has testified to the U.S. Congress that an increase in the credit union member business lending cap to 27.5% of assets would infuse $13 billion in new credit for small businesses and add 140,000 new jobs within the first year of enactment, at no cost to the U.S. taxpayer.

The Small Business Majority, which describes itself online as an advocacy group founded and run by small business owners to focus on solving the biggest problems facing small businesses today, said that respondents to the survey were politically diverse: 50% identified as Republican, 32% as Democrat and 15% as independent.

The poll reflects an Internet survey of 500 small business owners across the country,

commissioned by the American Sustainable Business Council, Main Street Alliance and Small Business Majority and conducted by Lake Research, according to the research report.

To read more, use the resource link below.

Coming March 20 Bernanke 101

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WASHINGTON (1/27/12)—Many colleges would consider it a major score to have Federal Reserve Board Chairman Ben Bernanke show up as a commencement speaker, but Washington, D.C.-based George Washington University (GWU) is going one better. Bernanke will deliver a series of lectures to the university's business school undergrads starting March  20.

According to a Fed announcement Thursday, the series of four lectures, while delivered at GWU, is aimed at college students in general and will be available to the public online. (See resource link below.)

The lecture series is entitled "The Federal Reserve and its Role in Today's Economy."   The class will feature a variety of speakers who will discuss central banking.  Bernanke's lectures are scheduled for March 20, 22, 27 and 29 and will begin at 12:45 p.m. (EDT).  Transcripts also will be available.

Rate risk rule is overkill CUNA says

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WASHINGTON (1/27/12)--New National Credit Union Administration (NCUA) interest rate risk (IRR) regulations are "regulatory overkill" and only increase "the already hefty regulatory burden on credit unions," Credit Union National Association (CUNA) President/CEO Bill Cheney said following Thursday's NCUA open board meeting.

The NCUA's IRR proposal,  presented to the three agency board members for consideration Thursday, is tailored "to apply to credit unions at most risk for interest rate shocks," agency staff  said. (CUNA Photo)

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The NCUA on Thursday unanimously approved amending its federal share insurance regulations to include a requirement that federally insured credit unions have both a written interest rate risk (IRR) policy and an effective interest rate risk management program. Under the proposal, the NCUA could withhold National Credit Union Share Insurance (NCUSIF) coverage of member accounts for credit unions that do not comply with the proposal.

The agency's IRR policy standard will not be "one-size-fits-all," NCUA Chairman Debbie Matz said, noting that the NCUA is providing flexibility for credit union managers and board members to develop their own policies, she added.

The NCUA said the final rule, which will become effective in early September, will not apply to credit unions with less than $10 million in assets. Federally insured credit unions with assets between $10 million and $50 million must have a written policy if first mortgage loans plus total investments longer than five years is equal to or greater than 100% of net worth, and federally insured credit unions holding more than $50 million in assets will need to fully comply with the new rule, the NCUA added.

The agency has estimated that 55% of all credit unions will be unaffected by the rule. However, CUNA noted, the 45% of credit unions that are subject to the rule account for more than 90% of all credit union members, meaning that the rule affects the vast majority of credit union operations.

NCUA officials at the Thursday meeting clarified that the guidance accompanying the rule would not be used by examiners as a compliance checklist, and said the agency does not intend to remove a credit union's NCUSIF coverage over this rule. Insurance coverage issues would only be addressed in "extreme" cases, NCUA Director of Examinations and Insurance Larry Fazio said.

"The agency still has not provided sufficient evidence that it is necessary for the rule to link compliance with its requirements for NCUSIF coverage," Cheney added.

Credit unions have increased their IRR exposure by more than 50% since 1995, and hold nearly 31% of their assets in long-term, fixed-rate mortgages, the NCUA said. This, when combined with the inevitable rise in interest rates, could lead to credit unions facing "far higher exposures to interest rate risk than banks" in the near future, the agency added. The NCUA has long provided guidance on IRR risk, but wanted to provide a more concrete rule to cite in cases where credit unions were taking on too much rate risk, agency staff said.

The NCUA is exploring allowing credit unions to hedge simple interest rate risks by investing in derivatives, and has asked for public comment on this possibility through an Advanced Notice of Proposed Rulemaking (ANPR).

Matz said "derivatives can be a useful tool for highly experienced professionals to manage interest rate risks," but also warned that some derivatives can be extremely volatile – and choosing the right rates to hedge at the right time can be a very risky proposition.

The ANPR was released for a 60-day comment period.

For more on the IRR and derivatives releases, use the resource link.

CUNA Troubled-debt plan step forward for CUs

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WASHINGTON (1/27/12)--The National Credit Union Administration's (NCUA) Troubled Debt Restructuring (TDR) proposal, which was unveiled at Thursday's open board meeting, "can be a very important step forward" for credit unions that are struggling to work with homeowners that cannot pay their mortgage due to financial difficulties, Credit Union National Association (CUNA) President/CEO Bill Cheney said.

TDR loans, which have very specific accounting and reporting requirements, occur when a credit union or other lender grants a concession to a borrower and modifies the terms of a loan based on the borrower's financial situation. The financial statement notes and call report data associated with TDRs are also unique.

Current TDR requirements force credit unions to segregate TDRs and report TDR payments as delinquent until the member has made timely and consecutive payments for six months after the modification. Credit unions are also usually required to manually track such payments.

The NCUA said its TDR proposal would allow credit unions to modify TDR loans without having to immediately classify those loans as delinquent. Also, credit unions would no longer be forced to track each TDR loan's performance manually for six months.

The TDR proposal, according to the agency, would also set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications. The proposal, the NCUA said, effectively balances "appropriate loan workout programs with potential safety-and-soundness considerations."

NCUA Chairman Debbie Matz said the policy change would benefit both credit union members and credit unions that had, in some cases, been forced to foreclose on financially troubled members that sought lower mortgage payments.

CUNA's Cheney said CUNA appreciated that the NCUA listened to credit union concerns "that call report requirements actually discouraged credit unions from providing TDRs."

"This proposal has the potential to ensure consistent guidance from the agency to its examiners--and help credit unions help their members in this time of need," he added.

The agency will accept public comment on this proposal for 30 days after publication in the Federal Register. Matz said the NCUA has shortened the public comment period "to implement regulatory relief on TDRs as quickly as possible."

CUNA urges the agency to move forward to address TDRs and loan modifications swifty once the 30 day comment period closes.

For more on the proposal, use the resource link.

Former Kansas CU worker banned by NCUA

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ALEXANDRIA, Va. (1/27/12)--Harold Wilkerson II, a former employee of Quest CU, Topeka, Kan., has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following his conviction on 21 counts of bank fraud.

Wilkerson was sentenced to two years in prison, and ordered to pay a special monetary assessment of $4200, according to an NCUA prohibition order released Thursday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Inside Washington (01/26/2012)

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  • WASHINGTON (1/27/12)--Federal Reserve Board Chairman Ben Bernanke on Wednesday said that a government program will not solve the housing crisis. Bernanke's comments mirror a recent white paper released by the Fed that called on policymakers to develop possible solutions to the housing problem but did not advocate a single approach (American Banker Jan. 26). In his State of the Union address on Tuesday, President Barack Obama proposed a new plan to stimulate financings. Obama's plan, which would require congressional approval, would use fees paid by banks to help troubled borrowers refinance. Bernanke said the Fed does not have an official position on any plan that calls for servicers to write down a portion of borrowers' principal. He said principal write-downs have both potential benefits and drawbacks …
  • WASHINGTON (1/27/12)--The Treasury Department on Wednesday announced the fifth and final disposition of securities within its Small Business Administration (SBA) 7(a) Securities Purchase Program, which was launched as part of the Troubled Asset Relief Program (TARP). On Jan. 24, Treasury sold the eight remaining securities in the portfolio for roughly $63.2 million. In total, Treasury recovered $376 million through sales ($335 million) and principal and interest payments ($41 million) over the life of the SBA program, representing a gain of about $8 million to taxpayers on Treasury's original investment of $368 million …
  • WASHINGTON (1/27/12)--Timothy Geithner on Wednesday said he doesn't expect to return as Treasury Secretary if President Barack Obama is re-elected for a second term. In an interview with Bloomberg News, Geithner said he was "pretty confident" Obama would not ask him to stay on (American Banker Jan. 26.) Geithner had considered leaving in August after the congressional battle over the debt limit was settled, but Obama asked him to stay on (News Now Aug. 8) …

CUNA to testify on exam fairness bill

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WASHINGTON (1/26/12)--West Virginia Credit Union League President/CEO Ken Watts will represent credit unions, and the Credit Union National Association (CUNA), during a  Feb. 1 hearing on the Financial Institution Examination Fairness and Reform Act ( H.R. 3461).

The hearing, scheduled by the House Financial Services subcommittee on financial institutions to start at 2 p.m. (ET), will feature testimony from two separate panels of regulators and financial industry representatives.

H.R. 3461 is co-sponsored by subcommittee chair Rep. Shelly Moore Capito (R-W.Va.) and ranking member Rep. Carolyn Maloney (D-N.Y.). The bill has 77 co-sponsors.

The legislation would allow financial institutions to appeal examination reports from federal financial regulators and would provide further clarity to those regulators. It would also give credit unions and other financial institutions access to decision-making information gathered in their exams and codify exam policy guidance for financial regulators. Credit unions will also be particularly interested in:

  • Portions of the bill that would establish a new Office of Examination Ombudsman to investigate complaints about examinations and look at examination quality assurance;
  • Language that would require regulatory agencies to list any information that was used to support a certain regulatory action or request; and
  • Language that would allow financial institutions to appeal any material supervisory determination in an exam report to an independent administration law judge.
CUNA has said it supports the legislation, calling it "a firm step in the right direction toward ensuring that the federal regulators conduct fair exams which are consistent with the law and regulation and ensure safety and soundness."

CUs are not GSEs CUNA clarifies for Gingrich campaign

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WASHINGTON (1/26/12)--The Credit Union National Association (CUNA) this week reached out to remind potential Republican presidential nominee Newt Gingrich and his staff that credit unions are member-owned cooperatives--not government-sponsored enterprises (GSEs).

Gingrich in a Republican presidential candidate debate held earlier this week at the University of South Florida in Tampa, Fla. cited credit unions alongside telephone cooperatives and rural electric cooperatives as GSEs that "have done very good things." The candidate was answering a question on his past work with GSE Freddie Mac.

"We understand that the heat of a campaign--and the intense pressure of a nationally televised debate--can lead to a candidate using some rhetorical shorthand to make an overarching point. But, the fact remains, credit unions are not GSEs, in any sort of interpretation," CUNA Executive Vice President John Magill said.

CUNA urged the candidate and his campaign to clarify future credit union comments.

Magill said CUNA does not feel that Gingrich was attempting to impugn credit unions by making this remark. "He played a pivotal role in credit union efforts to enact, in 1998, the Credit Union Membership Access Act, which ensured credit unions could continue to grow through small groups of workers," Magill said.

Database will track financial scams targeting military

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WASHINGTON (1/26/12)--The Consumer Financial Protection Bureau (CFPB) is joining forces with the Department of Defense and state attorneys general to create the Repeat Offenders Against Military database (ROAM), a system that will track companies and individuals that attempt to defraud current and former servicemembers and military families.

ROAM, which the CFPB noted is the "first database of its kind," will serve as a "central mechanism for officials to run a quick search for actions taken by various federal, state and local law enforcers" against financial schemers that target the military.

The database, which will go online in February, will help state and federal agencies "investigate and stop frauds that cross state lines," the CFPB added. State attorneys general, United States attorneys, local law enforcement and other officials, and judge advocates will be able to contribute to and search the database, the agency said.

"As a former Ohio Attorney General, I know how frustrating it is to expose a scam and then see it take root in another state. The ROAM database will help law enforcement crack down on frauds that cross state lines," said CFPB Director Richard Cordray at a Wednesday press conference. "ROAM is a huge step forward in our mission to improve consumer protection for the military community."

Holly Petraeus, the CFPB's assistant director for the Office of Servicemember Affairs, added, "During my visits to military communities across the country, I continue to hear stories of servicemembers and veterans being defrauded by businesses that see our troops as easy targets for a quick profit.

"This database will help law enforcers stop some of the worst offenders – those that have made a practice of targeting our men and women in uniform and our veterans."

For a CFPB release on the database, use the resource link.

Round 3 of mortgage disclosure testing starts

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WASHINGTON (1/26/12)--The Consumer Financial Protection Bureau (CFPB) is nearing the end of its mortgage closing form revision project, and is now asking the public to compare two different versions of a sample mortgage closing document with a sample version of a post-application disclosure.

These latest sample closing forms are another phase of the CFPB's Know Before You Owe project, which began in May. The agency has tested various initial disclosure and closing forms during this process.

The CFPB said the two new sample mortgage closing forms "use a format for closing costs that's similar to the format on the initial disclosure to enable the two forms to work well together." Each of these forms include information on the principal, interest rate, and total monthly payment amounts, and also address various closing costs, taxes, fee changes, and other information.

The sample mortgage closing forms are meant to show whether the final loan terms and costs match the terms and costs quoted in the estimate provided after application, and would help determine whether the interest rate or monthly payments could change after closing, according to the CFPB.

The agency has taken previous public comment into account in these latest revisions, and noted that it decided to include line numbers in these new documents after commenters said those lines "may help industry software systems that deal with the current HUD-1 settlement statement."

This time, the agency has asked commenters to detail whether they can easily find key loan terms or identify changes to loan terms or costs, and if the mortgage closing forms provide all the information needed to help them "feel comfortable closing on the loan."

The sample mortgage forms are available online, and they are also being tested in the field in Philadelphia.

Another version of the revised mortgage closing forms will be released next month.

The CFPB is also planning to develop new mortgage regulations once this mortgage disclosure form revision project is completed. The agency has said the mortgage reform efforts may reduce the paperwork burden faced during the mortgage process by as much as 50%.

For more on the sample mortgage forms, use the resource link.

CUNA says CUs have an answer to presidents call

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WASHINGTON (1/26/12)--Following President  Barack Obama's Tuesday night State of the Union address, Credit Union National Association (CUNA) Executive Vice President-Government Affairs John Magill said credit unions have an answer to the president's call to help aspiring entrepreneurs get financing they need to grow.

Obama said in his televised speech that reached approximately 42 million households, "Most new jobs are created in start-ups and small businesses.  So let's pass an agenda that helps them succeed.  Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow."

CUNA's Magill responded, "Credit unions stand ready to help--at no cost to the American taxpayer.  All we need is a statutory fix or regulatory approach that will allow credit unions to provide more credit for small businesses."

He noted that administration-backed legislation pending in both the U.S. House and Senate that would increase member business lending (MBL) authority for credit unions to 27.5% of assets, up from the current 12.25% limit, has bi-partisan support.

CUNA has testified to Congress that an increase in credit union member business lending would have a number of beneficial effects on the recovering economy--including jobs creation.  For instance, CUNA has estimated the increased cap would infuse $13 billion in new credit for small businesses and add 140,000 new jobs within the first year of enactment.

CUNA also has noted that, separate from a legislative fix, the National Credit Union Administration (NCUA) has existing authority that could allow it to enable credit unions to do more to help small businesses.

Magill said CUNA, the state leagues and credit unions will continue to advocate for increased MBL authority as a way to better serve credit union members and to help the economy.

Inside Washington (01/25/2012)

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  • ALEXANDRIA, Va. (1/26/12)--The National Credit Union Administration (NCUA) will release a troubled debt restructuring proposal, potential changes to its federal share insurance regulations, and an Advanced Notice of Proposed Rulemaking on derivatives at today's January open board meeting. The usual report on the status of the NCUA's Temporary Corporate Credit Union Stabilization Fund and the National Credit Union Share Insurance Fund will not be delivered, however, because the agency has moved those reports to a quarterly basis. …
  • WASHINGTON (1/26/12)--The House Financial Services Committee has announced its schedule for the first two weeks of February. Witnesses for hearings will be announced at later dates. On Feb. 1: The subcommittee on insurance, housing and community opportunity is scheduled to review efforts by the U.S. Department of Housing and Urban Development to implement the Manufactured Housing Improvement Act of 2000, and the subcommittee on financial institutions and consumer credit has scheduled a hearing on H.R. 3461, the Financial Institutions Examination Fairness and Reform Act.  (The Credit Union National Association is slated to testify.  See related story in News Now's Washington section: CUNA to testify on exam fairness bill.)  On Feb. 2: The subcommittee on oversight and investigations will continue its investigation into the collapse of MF Global with a hearing to address how MF Global managed risk, how this risk was disclosed to investors and customers, and how credit rating agencies evaluated this risk. On Feb. 7: The subcommittee on insurance, housing and community opportunity will vote on the Homeless Children and Youth Act of 2011, as well as a bill concerning affordable housing and reform of the Federal Housing Administration.  On Feb. 8: The subcommittee on financial institutions and consumer credit has scheduled a hearing on the accountability and transparency at the Consumer Financial Protection Bureau (CFPB).  Bills that will be discussed at the hearing include the Bureau of Consumer Financial Protection Accountability and Transparency Act and H.R. 2081, which would remove the CFPB director from membership on the board of directors of the Federal Deposit Insurance Corp., and the subcommittee on capital markets and government-sponsored enterprises has slated a session to examine legislative proposals to limit the extraterritorial impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  …
  • WASHINGTON (1/26/12)--U.S. Treasury Department lending data released this month appear to back up criticism of the Small Business Lending Fund (SBLF). Some have charged that the $30 billion fund has been used by some small banks to buy their ways out of the Troubled Asset Relief Program (TARP) bailout program rather than to increase lending, as is the SBLF program's intent. Treasury figures show that banks that put SBLF money toward repaying TARP-preferred stock had a lower rate of increase for their small business lending than did non-TARP banks (American Banker Jan. 25). The median SBLF-affiliated bank that didn't participate in TARP increased small business loans, defined as $10 million or less to firms with $50 million or less in revenue, by 21.4% between the middle of 2010 and the third quarter of 2011. The median bank that had participated in both TARP and the SBLF increased small business loans in that time frame by 8.4%. All non-TARP banks increased small business loans by 20.9% to $12.7 billion, whereas TARP-affiliated banks increased small business loans during that period by  5.1% to $25.9 billion. The article noted that gauging the effectiveness of the SBLF program is difficult also because it is hard to assess what new lending would have occurred even without the program …
  • WASHINGTON (1/26/120--In a speech given to the U.S. Chamber of Commerce, Sen. Bob Corker (R-Tenn.) blasted the Dodd-Frank Act's so-called Volcker Rule for allowing banks to speculate on government securities while forbidding other types of proprietary trading. The senator accused U.S. Treasury Department and Federal Reserve officials of excluding government securities from the ban because, he said, they don't want the cost of government borrowing to rise. (American Banker Jan. 25)  Corker added that the exclusion shows Volcker Rule-writers know that distinguishing between proprietary trading and market making is "impossible." The ban on proprietary trading, proposed by and named after former Federal Reserve Board Chairman Paul Volcker, restricts banks' transactions with private-equity and hedge funds, but allows regulators to grant certain exemptions. Exemptions include transactions involving Treasury bonds and other bonds issued by Fannie Mae and Freddie Mac …
  • WASHINGTON (1/26/12)--John Walsh, acting comptroller of the currency, defended the derivatives market on Tuesday, saying that its role in the financial crisis has been overstated by critics. Speaking at the American Securitization Forum's annual conference, Walsh said that while new rules to address transparency and interconnectedness in derivatives markets were needed, the market's recent failure has more to do with risky loans related to derivatives (American Banker Jan. 25). He went on to say that even if derivatives were implicated in the 2008 market collapse they still provide significant benefits for lenders and their customers. While Walsh's agency is one of the federal regulatory bodies currently formulating a rule, required by the Dodd-Frank Act, which mandates minimum margin and capital levels for certain participants in the derivatives market, he warned against regulations that could make American banks less competitive. He said that while financial products like credit-default swaps should be scrutinized, others, like collateralized debt obligations, could do more harm to the financial system …

President unveils mortgage plan financial crimes unit

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WASHINGTON (1/25/12)—In his State of the Union Address Tuesday night, in which he outlined what he termed his plan to build an economy that will last, President Barack Obama unveiled two initiatives of particular interest to the financial institutions sector.

Obama noted that he is sending to the current U.S. Congress a plan to give "every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates."

"No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust," Obama said.

He also announced that his administration will establish a financial crimes unit of "highly trained investigators to crack down on large-scale fraud and protect people's investments."

"Some financial firms violate major anti-fraud laws because there's no real penalty for being a repeat offender. That's bad for consumers, and it's bad for the vast majority of bankers and financial service professionals who do the right thing," Obama said, calling on federal lawmakers to pass legislation that "makes the penalties for fraud count."

The President also singled out Consumer Financial Protection Bureau Director Richard Cordray, whom Obama installed to the post as a recess appointment when his nomination was languishing in Congress.

Obama said, "(I)f you're a mortgage lender or a payday lender or a credit card company, the days of signing people up for products they can't afford with confusing forms and deceptive practices are over. Today, American consumers finally have a watchdog in Richard Cordray with one job: To look out for them."

"Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a Government and a financial system that do the same. It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody," Obama said.

To see more of the President's prepared remarks, see the resource link.

Cordray unveils plans for CU advisory council

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WASHINGTON (1/25/12)--The Consumer Financial Protection Bureau (CFPB) will establish an advisory council for credit unions to help the agency gauge how its actions are impacting the credit union industry, CFPB Director Richard Cordray said during a Tuesday House Oversight and Government Reform subcommittee hearing.

Cordray, who was the sole witness at the hearing, noted that he created similar advisory councils for credit unions and community banks during his time as Treasurer of Ohio, and said those advisory groups improved his agency's work. He noted that credit union interests are "often aligned with those of consumers," and said that this type of business model, which emphasizes helping consumers, is the type of business model that the CFPB wants to encourage in the larger financial marketplace.

He added that the agency would bring the National Credit Union Administration and other financial agencies in to meet with the CFPB in the coming year to coordinate supervisory schedules, guidance, and regulations, and discuss areas where their jurisdiction can overlap or where duplication can be minimized.

Responding to a question from House Oversight and Government Reform subcommittee on TARP, financial services and bailouts of public and private programs chairman Patrick McHenry (R-N.C.), Cordray said the CFPB has been and would continue to be transparent as it undertakes regulatory issues, and said the agency has been clear on its agenda. The CFPB would consider outlining its upcoming regulatory agenda on its homepage or through other forms, Cordray added.

Cordray said his agency aims "to make consumer financial markets operate fairly in order to protect consumers, support honest businesses, and play a crucial role in helping to safeguard the overall economy" under his leadership. Leveling the playing field is important for credit unions and community banks, and for making the financial system itself work, Cordray added. Overall, Cordray said, the CFPB's intention is to "be mindful" of the differences between larger institutions and smaller institutions.

Credit Union National Association (CUNA) President/CEO Bill Cheney and CUNA Senior Vice President and Deputy General Counsel Mary Dunn are scheduled to meet with Cordray on Jan. 31.

For Cordray's prepared statement and for video of the hearing, use the resource links.

NCUA confirms 2012 operating fee to drop 0.9

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ALEXANDRIA, Va. (1/25/12)--The National Credit Union Administration (NCUA) Tuesday confirmed that the 2012 operating fee for natural person credit unions would be 0.9% lower than 2011's rate.

The agency in its Letter to Credit Unions No. 12-FCU-01 said the growth of federal credit union assets and the slight overhead transfer rate increase led to the operating fee reduction. The NCUA adjusts these amounts each year by the same percentage as the projected federal credit union asset growth in order to maintain the same relationship of the scale to the asset base.

The NCUA will charge fees of $0 for assets up to $500,000 and $100 for assets from $500,001 to $750,000. Operating fees will be charged on a sliding scale for credit unions with assets greater than $750,000. The NCUA is offering an operating fee calculator on its homepage.

Invoices for the 2012 operating fees will be sent to credit unions in March. The invoices will also include information on the amount, if any, that a credit union must pay to adjust its National Credit Union Share Insurance Fund (NCUSIF) capitalization deposit to 1% of insured shares, the agency added.

A single payment covering operating fees and capitalization deposit adjustments will be due to the agency by April 16.

For the full NCUA release, and the NCUA Operating Fee Calculator, use the resource links.

Inside Washington (01/24/2012)

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  • WASHINGTON (1/25/12)--The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have signed an agreement to coordinate efforts to protect consumers and avoid duplication of federal law enforcement and regulatory efforts. "Entering this agreement with the FTC is important to making sure markets for consumer financial products are getting efficient and effective federal government oversight," said Richard Cordray, CFPB director. "We are both motivated by the same thing: To do right by consumers. We look forward to this partnership." The two agencies signed a memorandum of understanding. The Dodd-Frank Act, which created the CFPB, requires the two agencies to work together to coordinate their enforcement activities and promote consistent regulatory treatment of consumer financial products and services …
  • WASHINGTON (1/25/12)--Iowa Attorney General Tom Miller, who is leading settlement talks with the country's top mortgage servicers, ended speculation that a settlement had been reached. Miller said a settlement will not be reached this week. Several news agencies had reported that a proposal on a final deal had been sent to the states for review, with President Barack Obama expected to announce a settlement during his State of the Union address Tuesday night. However, Miller said some issues have yet to be resolved, though he did not provide details. Last week, Housing and Urban Development Secretary Shaun Donovan said a deal was imminent. Any settlement would require the largest mortgage servicers to commit between $17 billion and $25 billion to help borrowers, according to reports …

Reg actions arent basis for WesCorp suit dismissal court says

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LOS ANGELES (1/24/12)--Actions the National Credit Union Administration (NCUA) took before the failure of Western Corporate FCU may not be used as affirmative defenses by the officers of that corporate, George Wu, U.S. district judge for the Central District of California, ruled late last week.

The NCUA's ongoing legal action against former WesCorp officers Robert Siravo, CEO; Thomas Swedberg, head of human resources; Timothy Sidley, chief risk officer; Robert Burrell, chief investment officer; and Todd Lane, chief financial officer, alleges breach of fiduciary duty and fraud related to investments that resulted in $6.8 billion in investment portfolio losses.

The WesCorp executives filed counterclaims and affirmative defenses against the agency, alleging that the NCUA was aware of WesCorp's investment strategies, and approved of and encouraged those investment strategies.

The former executives specifically said that the NCUA was critical of WesCorp's prior and so-called conservative management, suggested or required that WesCorp's board hire new management, and gave the corporate special permission to buy riskier investments.

The NCUA's Office of Corporate Credit Unions monitored the corporate daily, with on-site examiners, annual exams, and a full-time capital market specialist located at WesCorp's facilities, the defendants added.

The NCUA, citing legal precedent, in mid-January asked the court to strike this defense, saying that "the pre-failure conduct of regulatory agency cannot support a legally viable defense, regardless of the level of oversight exercised by the regulatory agency." (See related Jan. 12 story: Reg actions cannot be used as WesCorp defense, NCUA claims)

Wu agreed with parts of this NCUA argument, and said the WesCorp defendants have conceded that the NCUA cannot be held liable for its pre-conservatorship actions. However, Wu said, NCUA's regulatory actions may be used as evidence to show whether the officers met their duties to WesCorp if the case moves to trial.

He also did not dismiss the defendants' claim that the NCUA may have exceeded the statute of limitations when they filed charges.

The parties will next meet on Feb. 6. Wu has set several dates for the case to proceed, including a post-mediation status conference on March 1. If the case proceeds according to schedule, a pretrial conference could be heard as early as Sept. 20.

U.S. Central ACH users should prep for change NCUA

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ALEXANDRIA, Va. (1/24/12)--The National Credit Union Administration (NCUA) has informed credit unions that the automated clearinghouse (ACH) services provided by the 18 corporates that work with U.S. Central Bridge Corporate FCU will soon be transitioned from U.S. Central Bridge to other providers.

In a Letter to Credit Unions (No. 12-CU-02), the NCUA noted that it was recently announced that the bidding process for the U.S. Central Bridge's payment services did not result in the selection of acquirers for its auto-settlement and ACH services.

"Consistent with the orderly wind-down of other U.S. Central Bridge services (for example, investment custody and international wires), NCUA is now moving forward with the orderly wind-down of payment services. This means the 18 corporate credit unions that currently utilize U.S. Central Bridge ACH services, along with The Members Group, will transition those services to a new service provider in 2012," the letter said.

In the letter, the agency said the following credit unions will be affected by the change: Alloya Corporate FCU, Catalyst Corporate FCU, Central Corporate CU, Corporate America CU, Corporate Central CU, Corporate One FCU, First Carolina Corporate CU, First Corporate CU, Kansas Corporate CU, Kentucky Corporate FCU, Louisiana Corporate CU, Missouri Corporate CU, Southeast Corporate FCU, SunCorp CU, Treasure State Corporate CU, TriCorp FCU, Volunteer Corporate CU, Western Bridge Corporate FCU and The Members Group.

U.S. Central representatives will soon contact credit unions to inform them of any actions that credit unions may need to take to ensure that service to members will continue uninterrupted, the NCUA said.

Corporates that are U.S. Central Bridge members must provide the NCUA with a plan detailing how they will transition from U.S. Central to a new ACH service provider, and a timeline for that transition, by Feb. 24.

The NCUA said it is working with corporates to revise these transition plans, where needed, and said some corporates have started the transition process.

"Each affected corporate credit union's transition plan will differ based on the unique services and operations of individual corporate credit unions," the agency said. The NCUA added that it "will closely monitor the transition process at the corporate and natural person credit union level."

The NCUA this month said ACH operations by the bridge corporate, which are known as APEX, would cease by the end of this year. (See related Jan. 12 story: NCUA unveils plan to wind down U.S. Central ACH operations) International wire transfers and other services provided by U.S. Central Bridge are also being wound down, and the NCUA said credit unions that receive these services "will be notified of any actions that [they] will need to initiate to ensure a smooth transition."

For the full NCUA letter, use the resource link.

CUNA-WOCCU outline concerns re new remittance disclosures

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WASHINGTON (1/24/12)--The World Council of Credit Unions (WOCCU) and the Credit Union National Association (CUNA) have identified concerns regarding new protections adopted by the Consumer Financial Protection Bureau (CFPB) for consumers who transfer money internationally.

On Friday, the CFPB issued a 417-page rule, which, in part,  requires remittance transfer providers to disclose the exchange rate and all fees associated with a transfer so consumers know exactly how much money will be received on the other end.

The rule, effective one year from the date of publication in the Federal Register, also will require remittance transfer providers to investigate consumers' disputes and fix mistakes. The rule was coupled with an accompanying proposal on remittance safe harbor requirements.

"We are concerned that a number of credit unions that provide 'remittances' as defined by the rule will face challenges in complying with the new regulation," noted Brian Branch, president/CEO of the WOCCU.   

CUNA President/ CEO Bill Cheney added, "CUNA plans to ask the CFPB to provide as much regulatory relief as possible through the accompanying proposed 'safe harbor.'

"We also plan to meet with CFPB Director (Richard) Cordray next week to raise this and other issues, and we are raising concerns in our comment letter to the CFPB on the agency's streamlining of regulatory requirements." 

The remittances regulation would affect most U.S. credit unions that provide consumers with international electronic funds transfer services because it broadly defines the term "remittances" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S., other than most transfers involving credit, debit, and prepaid cards. 

The accompanying proposed rule would exempt credit unions that provide 25 or fewer international consumer-initiated electronic funds transfers per year from all aspects of the rule.  Credit unions performing more than 25 of these transactions a year would be subject to the rule  if they provide international funds transfer services "in the ordinary course of business" under a facts and circumstances test.

About 109 U.S. credit unions participate in WOCCU's IRNet, a remittance service operated by WOCCU Services Group. The service, which works primarily with Hispanic clients, transmits remittances to eight countries and has taken part in over $2.9 billion in total transactions since its inception.

Use the resource link below to read key points identified by WOCCU and CUNA that will affect credit unions.

Inside Washington (01/23/2012)

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  • ALEXANDRIA, Va. (1/26/12)--The National Credit Union Administration will release a troubled debt restructuring proposal, potential changes to its federal share insurance regulations, and an Advanced Notice of Proposed Rulemaking on derivatives at today's January open board meeting. The usual report on the status of the NCUA's Temporary Corporate Credit Union Stabilization Fund and the National Credit Union Share Insurance Fund will not be delivered, however, as the agency has moved those reports to a quarterly basis. …
  • WASHINGTON (1/24/12)--Interested parties have until Jan. 30 to comment on a Consumer Financial Protection Bureau (CFPB) proposed policy statement on the disclosure of credit card complaint data CFPB receives from consumers regarding banks and federally insured credit unions with more than $10 billion in assets. Complaints regarding credit unions with $10 billion or less in assets would continue to be forwarded by CFPB to the National Credit Union Administration (NCUA), and complaints forwarded to NCUA are not proposed to be disclosed publicly in the online database or any other form at this time.  If CFPB finalizes the proposed policy statement, the bureau would release data about consumer credit card complaints involving large issuers in an online, searchable database, that would include information such as: the type of complaint; the name of the card-issuing institution; the consumer's zip code; the date of the complaint; and whether and how the issuer responded to the consumer. The CFPB has indicated it ultimately plans to disclose data about complaints it receives regarding other types of large institution financial products in a similar manner in the future. The CFPB has  released a report on the thousands of credit card complaints it has received since July 2011 …
  • WASHINGTON (1/24/12)--This week in Washington will be slow, in spite of the return of the full U.S. Congress, but Consumer Financial Protection Bureau (CFPB) Director Richard Cordray's Tuesday appearance before a House Oversight subcommittee and President Barack Obama's Tuesday night State of the Union address will punctuate the week. Cordray will answer questions on how he will lead the CFPB during today's hearing by a House Oversight and Government Reform subcommittee on TARP, financial services and bailouts of public and private programs hearing. House members are also scheduled to consider bills under suspension of the rules.  The House will consider additional bills under suspension of the rules on Tuesday, and H.R. 1173, the Fiscal Responsibility and Retirement Security Act, is expected to be considered on Wednesday. Voting is expected to end for the week on Wednesday at 11 a.m. (ET) to accommodate the Democratic Caucus retreat. ...

New disclosures to be required of remittance providers

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WASHINGTON (1/23/12)-- The Consumer Financial Protection Bureau (CFPB) Friday adopted new protections for consumers who transfer money internationally. Under a new rule, remittance transfer providers must disclose the exchange rate and all fees associated with a transfer so consumers know exactly how much money will be received on the other end.

The CFPB rule, effective one year from the date of publication in the Federal Register, also will requires remittance transfer providers to investigate disputes and fix mistakes.

The CFPB announced it will publish a Notice of Proposed Rulemaking along with the final rule. The notice will seek comment on whether to make changes to the final rule, such as setting a threshold that would minimize the impact of the rule on community banks, credit unions, and other companies that do not normally process these transactions.

The bureau promised to act on an expedited basis to make any further changes prior to the effective date of the final rule.

The Credit Union National Association is reviewing the 417-page rule and will provide a summary of its provisions to its members. CUNA also will be seeking credit union comment on the new rule.

Compliance Update on 1099-K reporting requirements

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WASHINGTON (1/23/12)--Companies that process credit and debit card payments are required to submit the Internal Revenue Service's (IRS) new Form 1099-K this tax season, the Credit Union National Association (CUNA) reminds.

Although few, if any, credit unions do their own processing, CUNA has urged credit unions to confirm that their processors are aware of the new 1099-K requirement and that those processors are filing their required forms.

The Form 1099-K filings, which were added to the tax code by the Housing Assistance Tax Act of 2008, are intended to catch the often unreported revenue that some small businesses generate through online transactions. Credit card processors will send the forms to businesses that accept customer payments through their card networks. The 1099-K forms were issued earlier this year, and the 2011 tax year is the first tax year that card processors will be required to file the new forms.

The form 1099-K will be required for "reportable payment transactions," which are transactions in which a payment card, such as a credit card or gift card, is accepted as payment or any transaction that is settled through a third party payment network, such as  PayPal and Amazon.com.

Only merchants that execute at least 200 transactions in a year and bring in a minimum of $20,000, combined, from those transactions will receive the 1099-K forms. ATM withdrawals, cash advances against credit cards, checks that are issued in connection with a payment card, or transactions in which payment cards are accepted as payment by a merchant or other payee who is related to the issuer of the card will not count as "reportable payment transactions" for IRS purposes.

Use the resource link for more information.

30-year mortgages stay at record low

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WASHINGTON (1/23/12)--Thirty-year fixed mortgages again reached new lows during the week ended Jan. 19, averaging 3.88%, Freddie Mac reported.

This marked the seventh straight week that average 30-year mortgage rates held below 4%.

Fifteen-year fixed-rate mortgages increased slightly, averaging 3.17%. That rate stood at just above 3.16% during the previous week.

Overall, average mortgage rates changed little amid mixed economic data, Freddie MacChief Economist Frank Nothaft noted. Although retail sales increases lagged somewhat in December, he said consumer sentiment has shown signs of improvement, and homebuilder confidence  in January reached the highest level reported since June of 2007.

Five-year, Treasury-indexed, hybrid adjustable-rate mortgages (ARM) averaged 2.82% and one-year Treasury-indexed ARMs averaged 2.74% during the week. Five-year ARMs averaged 3.69% and 1-year ARMs averaged 3.25% this time last year.

For the full report, use the resource link.

WOCCU webinar will address Basel III and CUs

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WASHINGTON (1/23/12)--An upcoming World Council of Credit Unions (WOCCU) webinar will keep credit union insiders at "the forefront of global regulatory compliance issues," including the Basel III Capital Accord.

The two-hour webinar is scheduled to begin at 10:00 a.m. ET on Feb. 1, and will address coming regulatory changes and how they may directly or indirectly impact credit unions. A question and answer session has also been scheduled.

Discussion will be led by Glen Westley, the senior advisor for the World Bank's Consultative Group to Assist the Poor. Westley has also worked with the Inter-American Development Bank in projects related to credit unions and microfinance, and, along with WOCCU President/CEO Brian Branch, co-authored Safe Money: Building Effective Credit Unions in Latin America.

Registration for the webinar will cost:

  • $100 for WOCCU members in Australia, Canada, Great Britain, Ireland, Poland, and the United States.
  • $50 for WOCCU members in other countries; and
  • $200 for non-members.
Registration must be completed by Jan. 31. A second webinar for Spanish speakers has also been scheduled for 10:00 a.m. ET on Feb. 2.

To register for the webinar, use the resource link.

Basel III standards will require banks to hold common equity of 4.5% by 2015. In addition, banks must hold a 2.5% conservation buffer, which will be gradually introduced by 2019, and increase Tier 1 levels from 4% to 6% by 2015.

These international bank rules, which will require banks to hold more capital as a buffer against future financial shocks, do not apply to credit unions, but the debate and discussion that takes place as these new reforms are brought into practice by regulators could provide a new backdrop for and focus on a conversation about alternative capital for credit unions.

Mountain America CU fin lit efforts awarded at Treasury

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WASHINGTON (1/23/12)--Mountain America Credit Union, West Jordan, Utah, was named as one of the first winners of the Workplace Leader in Financial Education award at a ceremony at the U.S. Treasury last week.

The award, which was given to the credit union for its attention to financial literacy and highlights the importance of financial wellness in the workplace, was presented by members of the President's Advisory Council on Financial Capability. It is sponsored by the American Institute of Certified Public Accountants and the Society for Human Resource Management (SHRM). SHRM in a release said the awards "recognize employers for efforts they're making to help employees make sound financial decisions and improve their personal financial well-being."

More than 300 organizations applied for the award, and nine were selected.

Mountain America's financial education program has been in place for almost a year and works to educate employees for the benefit of credit union members and the employees themselves. Mountain America holds $2.8 billion in assets and has 359,424 members.

The award ceremony followed 2012's first meeting of the President's Advisory Council on Financial Capability. Alan Krueger, Chair of the President's Council of Economic Advisors, addressed European sovereign debt issues, the slow recovery from the recession, and the long-term unemployment rate during that meeting.

The council is composed of two ex officio federal officials and 11 non-governmental members appointed by President Barack Obama and with relevant backgrounds such as financial services, consumer protection, financial access and education. Current members include Roland "Arty" Arteaga, president/CEO of the Defense Credit Union Council.

Inside Washington (01/20/2012)

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  • WASHINGTON (1/23/12)--As officials near a settlement agreement with the nation's largest banks following last year's robo-signing crisis, Sen. Sherrod Brown (D-Ohio) urged administration officials and state attorneys general to hold banks financially accountable for illegal practices. The current settlement terms allow mortgage servicers to use mortgage capital to pay penalties, hurting investors, but not the banks that broke the law, Brown said. In a letter to Associate Attorney General Thomas Perrelli, Consumer Financial Protection Bureau Director Richard Cordray, U.S. Department of Housing and Urban Development Secretary Shaun Donovan, and Iowa Attorney General Tom Miller, Brown said that mortgage servicers should be required to provide meaningful assistance to Ohio homeowners who lost their homes illegally, but not at the expense of other Ohio residents. "Instead of taking full responsibility for illegal foreclosures, Wall Street banks are trying to use the assets of middle class Americans to pay the penalty," Brown said in the letter. "Penalties for Wall Street's illegal practices must ensure meaningful relief for the more than one in five homeowners who owe more on their mortgage than their house is worth …
  • WASHINGTON (1/23/12)--Four congressional Democrats have called on the non-partisan Government Accountability Office (GAO) to examine the foreclosure review process that the Office of the Comptroller of the Currency and Federal Reserve currently are carrying out for potential conflicts of interest between banks and third-party auditors. In a letter to the GAO, Sen. Robert Menendez (D-N.J.) along with Reps. Maxine Waters (D-Calif.), Brad Miller (D-N.C.) and Luis Gutierrez (D-Ill.), posed 14 questions related to the independence, transparency, accountability and consistency of the foreclosure process. Last month, Menendez presided over a hearing where he raised concerns about regulators allowing banks under review to pick their own third-party consultants to conduct the audits. "We need the GAO's independent assessment to ensure the process is fair to homeowners--especially since regulators are letting the big banks pick their own auditors," Menendez said …

IRR debt restructuring action slated for NCUA meeting

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WASHINGTON (1/20/12)--Potentially controversial changes to the National Credit Union Administration's (NCUA) federal share insurance regulations, and a troubled debt restructuring (TDR) proposal, will both be taken up when the NCUA holds its first open meeting of 2012 on Jan. 26.

The NCUA last year proposed amending its federal share insurance regulations to include a requirement that federally insured credit unions have both a written interest rate risk (IRR) policy and an effective interest rate risk management program. The NCUA said it could withhold National Credit Union Share Insurance (NCUSIF) coverage of member accounts for credit unions that did not comply with the proposal if it is adopted. The agency has estimated that about 25% of credit unions, or around 800, would need to develop written IRR policies if its proposal is made final.

The Credit Union National Association (CUNA) has said the NCUA has not demonstrated the need for a new interest rate risk rule, and added that tying compliance to federal share insurance coverage, with the possibly of losing coverage, would be a punitive and unnecessary step. CUNA also suggested that the NCUA develop a more targeted IRR program before it imposes a broader rate-risk proposal, and suggested that the risk management proposal could be issued as guidance rather than as a final rule.

A long awaited proposal that would provide new guidance on reporting and other issues associated with TDR loans is also on the January agenda. TDR loans, which have very specific accounting and reporting requirements, occur when a credit union or other lender grants a concession to the borrower and modifies the terms of the loan based on the borrowers financial situation. The financial statement notes and call report data associated with TDRs are also unique.

Some credit unions have complained that NCUA examiners have sometimes discouraged TDRs, but NCUA Chairman Debbie Matz last year said the agency supports credit union efforts to find creative solutions for members who need loan modifications to stay in their homes. Matz added that the NCUA is seeking solutions that would better assist credit unions which are working diligently to provide members with alternatives to foreclosure.

A third item, an Advanced Notice of Proposed Rulemaking on derivatives, is also on the NCUA open meeting agenda. However, the customary report on the status of the NCUA's Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and NCUSIF will not be delivered, as the agency has decided to present its insurance fund reports on a quarterly basis going forward.

For the full NCUA agenda, use the resource link.

MBLs touted as credit crunch answer

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WASHINGTON (1/20/12)--With President Barack Obama's 2012 State of the Union Address scheduled for early next week, a Washington, D.C.-based think tank, the Progressive Policy Institute (PPI), is recommending easing credit access to small businesses--and lifting the credit union member business lending (MBL) cap--as one of the central themes that should be addressed in the President's upcoming speech. And a nonprofit educational and research group, the American Consumer Institute (ACI), has also added its voice to the MBL fight ahead of the pending return of the full Congress.

PPI in a release said "starting up start-ups" by improving access to credit is "crucial" to "engineering an American economic comeback," and added that allowing credit unions to offer more small business loans is a "simple solution" that would help ease the "deep freeze" that small businesses seeking credit continue to feel.

A PPI memo released late last year, entitled "The Credit Gap: Easing the Squeeze on the Smallest Businesses," called increased member business lending (MBL) authority the "easiest and most obvious" public policy option for expanding credit to those smaller businesses.  Credit unions are "some of the lenders who are already the most likely to be working with smaller businesses" as their members, the memo added.

The report said that increasing the MBL cap to 27.5% of assets, as proposed by legislation in both the U.S. House and Senate and strongly backed by the Credit Union National Association (CUNA), could substantially benefit smaller business owners and in turn the economy at large. CUNA has estimated that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Legislation that would lift this cap remains active in both the U.S. House and Senate, the ACI's Alan Daley and Stephen Pociask noted in a Thursday post on The Hill's Congress Blog, and the changes proposed in these bills, H.R. 1418 and S. 509, should be welcomed by credit union members and business owners alike, they said. H.R. 1418 has 113 cosponsors, and S. 509 has 21 cosponsors.

The two bills "are not about taxes, entitlements or government subsidies," but rather are "about private sector jobs, small business expansion and benefits to credit union members through competition with banks." Either of these bills, if passed, would "encourage banks to ease up on credit, further opening up small business access to capital, which will encourage investment and creating jobs," the blog post said, adding that "providing increased access to private capital would provide a much needed spark to businesses that are very small, innovative and more diverse."

For the PPI release and the Congress Blog post, use the resource links.

CFPB seeks comment on fin ed credit card info collection

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WASHINGTON (1/20/12)--The Consumer Financial Protection Bureau (CFPB) is seeking comment on how its financial education efforts and credit card term reports can be improved to better inform the public.

That agency will soon collect information on credit card pricing and fees from about 150 credit card issuers, and that information will be used to compile a semiannual report on credit card terms.

The CFPB is asking whether this sort of information collection is "will have practical utility," and, if so, how the quality, usefulness, and clarity of the information that is collected can be improved. The CFPB has also asked industry insiders to comment on how potential burdens or costs that result from the information collection activities can be minimized.

In another proposed project, the agency would collect information "to identify financial education strategies that are effective in educating consumers to make better informed financial decisions." This information would be drawn from in-person interviews, telephone discussions, and/or online surveys, the CFPB said.

The requests for comment were both published in the Federal Register. For those releases, use the resource links.

Inside Washington (01/19/2012)

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  • WASHINGTON (1/20/12)--During a House hearing Wednesday, regulators conceded they are uncertain how the Volcker Rule will be implemented. The Volcker rule, named for former Federal Reserve Board Chairman Paul Volcker,  is an 11-page section in the Dodd-Frank Act that restricts the ability of banks to make proprietary trades and to invest in hedge funds or private equity funds. But the rule has many complex exceptions. Last year, regulators released a nearly 300-page draft proposal for implementing the Volcker Rule. The draft included roughly 1,300 questions for public comment. The number of questions were driven by regulators' desire to understand the complexity of the proposal and to provide a legal basis for making adjustments, Acting Comptroller of the Currency John Walsh said Wednesday. Republicans worry the rule will restrict liquidity in financial markets and hurt economic growth …
  • WASHINGTON (1/20/12)--The Securities and Exchange Commission (SEC) Wednesday charged the holding company for one of Florida's largest banks and its top executive with misleading investors about growing problems in one of its significant loan portfolios early in the financial crisis. The SEC alleges that BankAtlantic Bancorp and its CEO and chairman, Alan Levan, made misleading statements in public filings and earnings calls to hide the deteriorating state of a large portion of the bank's commercial residential real estate land acquisition and development portfolio in 2007. According to court documents, SEC alleged that BankAtlantic and Levan then committed accounting fraud by minimizing BankAtlantic's losses on their books by improperly recording loans they were trying to sell. BankAtlantic and Levan knew that a large portion of the loan portfolio--which consisted primarily of loans on large tracts of lands intended for development into single family housing and condominiums--was deteriorating in early 2007 because many of the loans had required extensions due to borrowers' inability to meet their loan obligations, according to the SEC's complaint filed in U.S. District Court for the Southern District of Florida …
  • WASHINGTON (1/20/12)--Rep. John Tierney (D-Mass.) and House Oversight and Government Reform Committee Ranking Member Elijah Cummings (D-Md.) called on Committee Chairman Darrell Issa (R-Calif.) to subpoena documents that Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco had committed to share with the committee in November. Tierney originally requested the documents during a Nov. 16 committee hearing in which DeMarco said his agency's refusal to push banks to keep families in their homes through loan modifications was based on its own thorough analytics. Tierney called into question the validity of such an analysis, which would be counter to recommendations by others in the field. FHFA has failed to produce a single document in response to the request during the past two months, Tierney said …

CU payday loan alternative detailed for CFPB

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CFPB Director Richard Cordray (center) meets with representatives from about 10 credit unions after a field hearing studying payday lending practices. The meeting spanned about an hour. Cordray said yesterday of credit unions that "people swear by and love the membership model" and that he thinks it's important that it is preserved. (LSCU's Photo)
BIRMINGHAM, Ala. (1/20/12)--Daryl McMinn, vice president of operations of Listerhill CU of Sheffield, Ala., described his credit union's alternative to harmful payday lending practices, speaking to federal regulators conducting a field hearing here Thursday on the subject.

The hearing, convened by the Consumer Financial Protection Bureau (CFPB), brought together payday lending experts, regulators, financial industry representatives, and others to study payday lending practices and consumers' need for reliable sources of short-term, small amount loans.

CFPB Director Richard Cordray, addressing the public hearing that attracted about 400 interested parties, reminded that his fledgling agency has newly minted authority--under the Dodd-Frank Wall Street Reform and Consumer Protection Act--to examine nonbank payday lenders of all types and sizes, as well as large banks that offer deposit advances.

"We already have begun examining the banks, and we will be paying close attention to deposit advance products at the banks that offer them. And this month, we have launched our examination program for nonbank financial firms as well," Cordray said.

He added that while there are things the agency "need(s) to learn more about" through a series of hearings on payday lending, "we know there are some payday lenders engaged in practices that present immediate risk to consumers and are clearly illegal."

"While we need to learn more about the prevalence of this conduct and what allows it to fester, where we find these practices we will take immediate steps to eliminate them."

Listerhill's McMinn described to the regulators his credit union's decision to help members avoid predatory payday lenders by developing a credit union alternative that coupled reasonable rates with free financial education.

"In 1952, our founders saw a need for better loans and other financial services that actually served the needs of working people, not something that takes unreasonable and unfair advantage of their situation.

"Decades later, we again saw a real need to find new ways to combat the same problem due to the explosive growth of payday loans," he said.

The Listerhill Better Choice loan program offers short-term loans with 18% APR. The loans are written for between $250 and $500 with a 30-day repayment and the credit union works with each borrower to provide flexible payment options.

"Under our program, a borrower with a $500 loan would repay $507.40. Compare this to a payday lender in Alabama that may charge 17.5% of the face value of the loan. That same borrower would have to pay back $587.50. We do not allow these loans to rollover, as this can trap people in an ever increasing cycle of debt," McMinn said.

"I want to make it clear that Listerhill Credit Union offers the Better Choice loan program solely as a way to help our members avoid the pitfalls of payday loans. This is not a money-maker for us. At best, we break even.

"However, it is an important way that we continue our mission of financial services to people who need more options. It is important that we, as a credit union, fulfill our mission of being not-for- profit, not-for-charity, but for service to our members. Keeping them from the harm that can result from utilizing payday loans is part of that mission."

The Credit Union National Association and its member credit unions are committed to providing safe and affordable alternative to predatory payday lenders.

Use the resource link below to read the CFPB's payday loan examination procedures unveiled at the hearing.

CUNA urges action on exam improvements bill

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WASHINGTON (1/19/12)--The Credit Union National Association (CUNA) told key lawmakers Wednesday that enactment of H.R. 3461, the Financial Institution Examination Fairness and Reform Act, would help strengthen the safety and soundness of the financial system by increasing the consistency and fairness of financial institution examinations.

In a letter to the chairman of the House Financial Institutions subcommittee on consumer credit, Rep. Shelly Moore Capito (R-W.Va.), and its and ranking member, Rep. Carolyn Maloney (D-N.Y.)., CUNA reiterated its strong support for the bill. H.R. 3461 was referred to Capito's subcommittee last week, and was introduced in the House last fall. It has 66 cosponsors.

The legislation, which would allow financial institutions to appeal examination reports from federal financial regulators and would provide further clarity to those regulators, represents "a firm step in the right direction toward ensuring that the federal regulators conduct fair exams which are consistent with the law and regulation and ensure safety and soundness," CUNA said. CUNA last fall said the introduction of this bill showed that Congress is taking the examination concerns of credit unions and others seriously.

The legislation would give credit unions and other financial institutions access to decision-making information gathered in their exams and codify exam policy guidance for financial regulators. Credit unions will also be particularly interested in:

  • Portions of the bill that would establish a new Office of Examination Ombudsman to investigate complaints about examinations and look at examination quality assurance;
  • Language that would require regulatory agencies to list any information that was used to support a certain regulatory action or request; and
  • Language that would allow financial institutions to appeal any material supervisory determination in an exam report to an independent administration law judge.
 

CUNA President/CEO Bill Cheney said the bill seeks to "address the concern that examiners are in some cases requiring credit unions and other financial institutions to take action that is not required by law or regulation and in other cases prohibiting these institutions from taking action that is otherwise permitted by law or regulation."

CUNA meets with Treasurys Amir-Mokri on CU priorities

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WASHINGTON (1/19/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney met Tuesday with the Treasury Department's Assistant Secretary for Financial Institutions, Cyrus Amir-Mokri,  in his Treasury office to discuss credit union policy priorities for 2012.

The assistant secretary assumed his new role in November.

Cheney highlighted key information about credit unions as well as the objectives CUNA is focusing on this year: the continuation of credit unions' tax exempt status, meaningful regulatory relief for credit unions, allowing credit unions to strengthen their ability to manage risks through the use of supplemental capital, and ensuring greater flexibility for credit unions to provide more member business loans.

Cheney, who was joined by CUNA staff at the meeting, commended the Treasury for its support of increased member business lending for credit unions and said that CUNA wants to work with Treasury as CUNA pursues its policy objectives. The recent Government Accountability Office report on the National Credit Union Administration was also discussed.

In a follow-up thank you note, he reiterated the central purpose of credit unions -- to serve their members' financial needs and thereby serve their communities -- and urged the Obama administration to support credit unions policy goals.

CUNA estimates that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Missouri boots kick off 2012 Hikes

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WASHINGTON (1/19/12)--The Missouri Credit Union Association (MCUA) and representatives from credit unions in that state kicked off the Credit Union National Association's (CUNA) 2012 Hike the Hill program, meeting with federal legislators and regulators in Washington to discuss a series of top credit union issues.

The Missouri group met first with Consumer Financial Protection Bureau (CFPB) Assistant Director for Community Banks and Credit Unions Elizabeth Vale on Tuesday afternoon. After a briefing on key issues by senior CUNA staff, the Missourians went on to meet with lawmakers and their staffers.
 
Click to view larger imageCUNA Senior Vice President of Legislative Affairs Ryan Donovan (back to camera) and CUNA Senior Vice President of Political Affairs Richard Gose, (center, facing camera) discuss the top credit union priorities that will be covered during this year's Capitol Hill visit at a briefing at Credit Union House in Washington. D.C.  Also pictured  are CUNA President/CEO Bill Cheney (center right) and Missouri  credit union represenatives. (CUNA photo)


The 2012 CUNA Hike the Hill briefings will focus primarily on the following topics:

  • Member business lending (MBL), and legislation in the U.S. House and Senate to increase the current MBL cap to 27.5% of assets, up from 12.25%;
  • Alternative sources of capital for credit unions;
  • The credit union tax status;
  • Concerns regarding the regulatory burden of credit unions;
  • Data security issues,
  • The new debit card interchange fee cap and the effectiveness of the statutory exemption for card issuers under $10 billion in assets;
  • Improvement of regulatory examination practices; and
  • Housing finance reform.
The Missouri group, which includes representatives from Chesterfield-based First Community CU, Kansas City-based CommunityAmerica CU, Wentzville-based 1st Financial FCU, Warrensburg-based Central Missouri Community CU, and Springfield-based BluCurrent, met with legislators and staffers in several congressional offices.

Legislators on their Hike the Hill schedule include Reps. Todd Akin (R), Emanuel Cleaver (D), Billy Long (R), Sam Graves (R), William Clay (D), Blaine Luetkemeyer (R), Vicky Hartzler (R), Russ Carnahan (D) and Jo Ann Emerson (R), as well as Sens. Claire McCaskill (D) and Roy Blunt (R).

The Northwest Credit Union Foundation, Texas Credit Union League, and credit union groups from Illinois, Minnesota, Wisconsin, Kentucky and Idaho have scheduled Hill Hikes throughout the summer and fall, and more hikes are expected to be scheduled.

Around 450 credit union representatives from more than 20 states discussed the credit union difference, and other key issues, during the 2011 edition of Hike the Hill, held last fall, and that credit union presence will also be felt on Capitol Hill this spring in hill visits tied to CUNA's 2012 Governmental Affairs Conference.

A strong schedule is developing for the credit union system's premier event, which is scheduled to take place between March 18 and 22 in Washington. Rep. Rob Woodall (R.-Ga.) is the latest to sign on as a speaker, joining Reps. Ed Royce (R-Calif.), Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.) and Carolyn McCarthy (D-N.Y.) and Sen. Mark Udall (D-Colo.) on the list of legislators that are scheduled to appear.

Former Secretary of State Condoleezza Rice, premier, non-partisan political analyst Charlie Cook, and journalistic duo Bob Woodward and Carl Bernstein are also on the list of GAC speakers. The conference will provide more than 4,000 credit union executives and board members an opportunity to hear several influential leaders from Congress, the Administration and the federal regulatory agencies.

To see additional speakers, session topics, or to register for the GAC, use the resource link.  Watch News Now for upcoming announcements of additional speakers and session topics.

Payday lending is subject of CFPB Alabama field hearing

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WASHINGTON (1/19/12)--Payday lending will be the central topic later today as the Consumer Financial Protection Bureau (CFPB) holds its first field hearing in Birmingham, Ala.

CFPB Director Richard Cordray will join Rep. Terri Sewell (D-Ala.) and U.S. Attorney Joyce White Vance in opening the hearing, which will also feature the testimony of consumer groups, civil rights groups, finance industry representatives, and the general public.

CFPB Deputy Director Raj Date, Assistant Director for the Office of Nonbank Supervision Peggy Twohig, Assistant Director for the Office of Fair Lending and Equal Opportunity Patrice Ficklin, and Associate Director for Consumer Education & Engagement Gail Hillebrand will provide expert testimony on payday loans, and a slate of separate panels will discuss consumer payday loan experiences and industry perspectives on payday loans. Daryl McMinn, COO of Sheffield, Ala.-based Listerhill CU will be among the finance industry representatives testifying.

The CFPB in its hearing announcement noted that Alabama has one of the highest concentrations of payday lenders, per capita, in the United States.

Cordray has said overseeing nonbank financial institutions is "a top priority" for his agency, and noted the good work of credit unions in a recent appearance on MSNBC. (See related story: On MSNBC, Cordray notes good CU practices)

For more on the hearing, use the resource link.

Inside Washington (01/18/2012)

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  • WASHINGTON (1/19/12)--Richard Cordray, the new head of the Consumer Financial Protection Bureau (CFPB), attended his first Federal Deposit Insurance Corp. board meeting Tuesday (American Banker Jan. 18). Under the Dodd-Frank Act, the CFPB director replaces the head of the now-defunct Office of Thrift Supervision on the board. Acting FDIC Chairman Martin Greenberg welcomed Cordray to the board. Following the board's official actions, Cordray read prepared remarks about what the bureau can bring to the FDIC's deliberations. "Like the FDIC, the CFPB was created in reaction to a crisis in the American financial system to correct market failures that harmed an overwhelming number of American consumers and businesses," he said. "Among other things, we both share the common goal of supporting confidence in our financial institutions" …
  • WASHINGTON (1/19/12)--Republican presidential candidate Mitt Romney spoke in favor of the $700 billion bailout in 2008, a decision that places him in good stead with Wall Street but largely out of favor with the Tea Party. But during the 2008 campaign during which Romney also ran for president, the increasingly risky behavior of U.S. consumers was not a major issue (American Banker Jan. 18). Romney did argue, however, that the lack of personal savings among U.S. consumers was a problem. He suggested consumers should pay no taxes on capital gains, interest and dividends, up to a certain level--an idea he has revived during the 2012 race. As the crisis spun out of control in September 2008, Romney was once again a private citizen. He came out strongly in favor of the Bush administration's $700 billion bailout. In the 2012 campaign he has not spoken strongly against bailouts as have many of his fellow Republican candidates …
  • WASHINGTON (1/19/12)--Outcry over the Stop Online Piracy Act (SOPA) could compel financial companies to put in place more strict copyright infringement standards for online payments. Wikipedia held a 24-hour "blackout" in protest of the House bill SOPA and its companion Senate bill, the Protect Intellectual Property Act. The bills have been criticized for placing the burden of enforcing intellectual property rights on payment companies (American Banker Jan. 18). SOPA requires payment network providers to suspend service within five days for companies suspected of copyright infringement. Five days is not enough time, said Linda Kirkpatrick, group head of franchise development and customer performance integrity at MasterCard …

On MSNBC Cordray notes good CU practices

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CFPB Director Richard Cordray (above) appears on MSNBC's "Morning Joe" show Wednesday to discuss his role as head of the new consumer watchdog agency.
WASHINGTON (1/19/12)--Credit unions were recognized on air yesterday for their positive business practices when new Consumer Financial Protection Bureau (CFPB) Director Richard Cordray appeared on MSNBC's "Morning Joe" program.

During the roughly nine-minute segment, Cordray responded to questions about his recess appointment and his priorities during the two-years that appointment affords him in the director's position.

In response to a comment regarding new regulations, Cordray said, "I think responsible businesses embrace rules of the road that are clear and straightforward and that apply to all."

He went on, to say, "That's what happened to our good community banks and credit unions.  They were held to certain standards--and they maintained certain standards in their communities" and were ultimately harmed by competition by nonbank players in the mortgage markets not held to the same standards.

When declining to make loans that did not meet their standards, Cordray said, credit unions and community  banks lost markets share to "people who were not being responsible in the marketplace."

"It broke the market and a lot of people got hurt," he said.

FHFA seeks to back CU in N.Y. mortgage tax appeal

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ALBANY, N.Y. (1/18/12)--The Federal Housing Finance Agency has filed an amicus brief intended to support Hudson Valley FCU's appeal of a lower court ruling that denied the Poughkeepsie, N.Y. credit union's challenge to the state's mortgage recording tax (MRT).

At issue is whether a federal credit union, including its members, must pay MRT to New York to record its mortgages with the state. Hudson Valley FCU has argued that the MRT is not considered a "privilege tax" under federal law and that the credit union federal tax exemption and applicable U.S. Supreme Court rulings should control.

The credit union filed the suit on May 15, 2009 against the New York State Department of Taxation and Finance, Commissioner Robert L. Megna, and the state of New York. This suit was dismissed by New York Supreme Court Justice Judith Gische in mid-2010, but the credit union appealed this ruling. The Credit Union Association of New York (CUANY) and the Credit Union National Association (CUNA) late last year supported Hudson Valley FCU's appeal in an amicus brief filed in the New York State Court of Appeals.

The FHFA, which oversees mortgage servicers Fannie Mae and Freddie Mac, said in its recent amicus brief that the credit union tax exemption, as provided under the Federal Credit Union Act ad approved by the U.S. Congress, shields federal credit unions "from state taxation of any type whatsoever, carving out only direct taxes on real property and tangible personal property from the otherwise all-encompassing exemption."  An amicus briefs can be filed by a party with no direct involvement in a given court case, but who wishes to provide additional information or opinions.

"Because a mortgage is neither real property nor tangible personal property, the federal statutory exemption of federal credit unions from 'all taxation' precludes the state from imposing the MRT on Hudson Valley," the FHFA wrote in its brief.

This exemption from "all taxation" applies "regardless of how the relevant tax or transaction is structured," and Supreme Court precedent "confirms that Hudson Valley FCU's statutory exemption from 'all taxation' covers excise taxes such as the MRT," the FHFA added.

Although most states charge only administrative fees for mortgage recordation, New York's MRT can be more than 2% of the mortgage's face value in places like New York City. Recording a mortgage is required in New York for lenders to be able to foreclose on a mortgaged property or have other rights related to the mortgaged real estate.

FDIC sets resolution plan rule for big banks

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WASHINGTON (1/18/12)--Depository institutions that hold $50 billion or more in total assets will be required to submit resolution plans to the Federal Deposit Insurance Corporation (FDIC) under a final rule that was approved on Tuesday.

The new resolution plan requirements would apply to 37 depository institutions. Those institutions held $4.14 trillion in insured deposits, accounting for almost 61% of all insured deposits, as of Sept. 30, 2011, the FDIC said.

The resolution plans must ensure that all customers of a given depository institution that has failed may receive prompt access to their insured funds. Customers must have access to their funds within one business day if the failure occurs on a Friday, and two business days if the failure takes place on a day other than a Friday, the FDIC said. The resolution plans "will supplement the FDIC's own resolution planning work with information that would help facilitate an orderly resolution in the event of failure," the agency added.

The rule will enhance FDIC efficiency, limit disruptions caused by insolvent banks, and potentially help reduce losses to the FDIC's insurance fund, the agency said. The rule "is intended to address the banking industry's continuing exposure to the risks of insolvency of large and complex insured depository institutions -- an exposure that proper resolution planning can mitigate," the FDIC said. The new rule would apply to 37 depository institutions. Those institutions held $4.14 trillion in insured deposits, accounting for almost 61% of all insured deposits, as of Sept. 30, 2011, the FDIC said.

The final rule will become effective on April 1.

For the full FDIC release, use the resource link.

CUNA calls on FAF to improve CU accounting standards

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WASHINGTON (1/18/12)--Financial accounting standards for credit unions and other private companies need to be improved, and challenges that many credit unions and others face due to the complexity of existing accounting standards should be addressed, the Credit Union National Association (CUNA) said in a letter to the Financial Accounting Foundation (FAF).

The FAF has proposed the creation of a new Private Company Standards Improvement Council (Council) that would work toward improving the accounting standard-setting process for credit unions and other private companies. This council, which would be comprised of a single chairperson and between 11 and 15 other members, "would have adequate tools and flexibility to make necessary changes to and properly tailor standards to the unique structure of private companies," according to the FAF's proposal.

However, CUNA said it is concerned that the proposed council "would simply make recommendations to the Financial Accounting Standards Board (FASB)" and "be unable to actually set standards."

Any modifications that the FAF or the proposed Council make to GAAP must "result in standards that are no more complex or burdensome than existing GAAP," and "should involve simplifying overly complex standards and/or decreasing the reporting burden for unnecessarily burdensome standards," CUNA said.

The most pressing accounting standard issues facing credit unions are the complexity of current standards and the lack of cost-benefit analyses in the standard-setting process, CUNA said, and the FAF should "take the steps necessary to mitigate the burden on smaller entities, particularly when there is no or only minimal resulting benefit."

While many of the complex reporting requirements of current U.S. generally accepted accounting principles (GAAP) are necessary to ensure adequate and accurate information for reporting and investing purposes, some of these reporting requirements are inappropriate for private entities including credit unions that primarily supply their financial information to their state or federal regulator for regulatory purposes, CUNA added.

For the full comment letter, use the resource link.

Inside Washington (01/17/2012)

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  • WASHINGTON (1/18/12)--The Supreme Court last week said credit card providers and other lenders may continue to use mandatory arbitration clauses, which help prevent consumer lawsuits by forcing them to challenge fees or other credit-related issues in an arbitration system rather than a court of law. (American Banker Jan. 13) Consumer advocates, the Banker said, have long criticized these clauses and the arbitration system they are tied to, saying that the arbitration system unfairly benefits businesses. The Supreme Court's 8 to 1 decision responded to a class action lawsuit filed by customers of CompuCredit Corp. and Columbus Bank and Trust. That lawsuit accused these firms of illegally marketing a subprime credit card. While the credit card was sold as a way for customers to rebuild their credit, fees tied to the cards added up to $257 per year. An appeals court had ruled that the Credit Repair Organizations Act, which prevents credit repair firms from using questionable business practices, gave customers the right to sue those firms in court. Justice Antonin Scalia, however, noted that CROA does not specifically address whether claims made under the Act may be arbitrated. Therefore, arbitration agreements remain enforceable under the Federal Arbitration Act…                      
  • WASHINGTON (1/18/12)—Small Business Administration (SBA) administrator Karen Mills will soon attend White House Cabinet meetings after President Barack Obama last week announced that the SBA would be elevated to a cabinet-level agency (American Banker Jan. 13). Obama's plan would combine the SBA and other trade- and commerce-related agencies, including the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation and the Trade and Development Agency. This change would save $3 billion and eliminate more than 1,000 jobs over next 10 years, Obama said. The move would also ease the regulatory burden on businesses and save money by eliminating duplicative functions such as human resources, Obama added…
  • WASHINGTON (1/18/12)--Consumer Financial Protection Bureau (CFPB) Director Richard Cordray, who represented that agency for the first time at Tuesday's Federal Deposit Insurance Corporation board of directors meeting, said the CFPB's work "complements that of the FDIC" and added that the two agencies "share the common goal of supporting confidence in our financial institutions." (American Banker Jan. 17) Cordray voted alongside his FDIC board colleagues, unanimously supporting a rule that would require banks with more than $10 billion in assets to conduct annual stress. The stress tests would "assess the potential impact" of hypothetical financial market related issues on that bank's financial condition. Cordray said these tests would help depositors and creditors. Cordray last week said he would bring "a consumer perspective" to the FDIC board. However, some have questioned whether Cordray should be taking part in the FDIC board, which can often focus on safety and soundness issues (American Banker Jan. 13), noting that some of the issues the FDIC focuses on in these meetings, including Basel rules and the Volcker rule, are not relevant to the CFPB's work. Former comptroller of the currency and FDIC board member John Dugan, however, said Cordray may be particularly interested in a pending rule that would require lenders to retain 5% of the loans that they securitize, as this rule could have an impact on consumers, and others have praised the consumer-oriented point of view that Cordray could bring to the board…
  • WASHINGTON (1/18/12)--Federal Reserve Board Governor Elizabeth Duke said last week that the Fed is ready to take actions that would help cut the regulatory burden of community banks. Soon, she said, the central bank will begin including with every proposal, final rule or regulatory guidance, a statement citing which banks would be affected by the action. (American Banker Jan. 17) When the Fed issues a supervisory letter, Duke said, an attempt will be made to accompany it with a statement saying how the new rule would apply to community banks. Furthermore, for rules that apply to all banks, but that application varies based on asset size, the Fed will, Duke said, point out throughout the rule or guidance how it applies to institutions of varying sizes. Duke said the new approach will help prevent banks from dedicating and wasting resources on requirements that don't apply to them…
  • WASHINGTON (1/18/12)--The U.S. House of Representatives returned to Washington Tuesday to launch the second session of the 112th Congress, but lawmakers in that chamber have a light agenda this week. The House first conducted a quorum call--a parliamentary procedure--and then considered a resolution to appoint a new Sergeant-at-Arms. Today, the House will consider a resolution to disapprove of the President's exercise of authority to increase the debt ceiling. Also today, the House Financial Services subcommittee on capital markets and government-sponsored enterprises and subcommittee on financial institutions and consumer credit will conduct a joint hearing on "Examining the Impact of the Volcker Rule on Markets, Businesses, Investors and Job Creation." Federal Reserve Board Governor Daniel Tarullo, Mary Schapiro, chairwoman, Securities and Exchange Commission, Gary Gensler, chairman, Commodity Futures Trading Commission, Martin J. Gruenberg, acting chairman, Federal Deposit Insurance Corporation, and John Walsh, acting Comptroller of the Currency are expected to testify. No votes are expected in the House on Thursday or Friday.  The Senate is not in session this week, but will reconvene next week. Also next week, the President will deliver his State of the Union Address before a joint session of Congress on Tuesday, Jan. 24. …

Rep. Woodall joins strong GAC lineup

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WASHINGTON (1/17/12)—With the March 18-22 dates of the Credit Union National Association's (CUNA) Governmental Affairs Conference (GAC) coming closer, key Washington, D.C. figures and others continue to help build a dynamic schedule.  Most recently, Rep. Rob Woodall (R.-Ga.) signed on to address the credit union crowd anticipated to attend the premier event.

on that would increase the MBL cap.  He urged members of the House to support an MBL increase as a jobs-creating effort.

Also on the GAC schedules: former Secretary of State Condoleezza Rice, premier, non-partisan political analyst Charlie Cook, and journalistic duo Bob Woodward and Carl Bernstein.

and others on the 2012 GAC speaker schedule.

The GAC, which takes place March 18-22 at the Washington Convention Center in Washington, D.C., provides more than 4,000 credit union executives and board members an opportunity to hear influential leaders from Congress, the Administration and the federal regulatory agencies, and discuss pressing credit union issues with their respective members of Congress and staff during Capitol Hill meetings.

To see additional speakers, session topics, or to register for the GAC, use the resource link.  Watch News Now for upcoming announcements of additional speakers and session topics

Obama proposes consolidation of some agencies

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WASHINGTON (1/17/12)—President Barack Obama Friday introduced a plan to combine several trade- and commerce-related agencies, a move he said would save $3 billion and eliminate more than 1,000 jobs over next 10 years.

The proposal would combine the functions and staff of six trade and commerce agencies and offices, including the U.S. Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation and the Trade and Development Agency. 

According to White House, the consolidation would ease the regulatory burden on businesses and save money by eliminating duplicative functions such as human resources. 

Under the plan, Obama must first seek broad consolidation authority from the U.S. Congress, which could vote on each proposed merger.

The National Credit Union Administration was not specifically mentioned as an affected agency.  The Credit Union National Association will continue to follow the developments.

Use the resource link to view a White House video of the president's remarks on consolidating departments.

CUNA backs broad info collection on mortgage servicing form

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WASHINGTON (1/17/12)—The Credit Union National Association (CUNA) supports the Consumer Financial Protection Bureau's (CFPB) information-gathering behind efforts to design, develop and implement required mortgage servicing model forms and disclosures, but CUNA urges the bureau to gather information from as broad a sample of mortgage–industry participants as possible.

In a Jan. 13 comment letter to the CFPB, CUNA backed the bureau's core objective to "help refine specific features of the content and design of the mortgage servicing model forms to maximize communication effectiveness while minimizing compliance burden."

CUNA suggested, however, that a broad data collection would work to ensure the accuracy and comprehensive nature of data obtained.

"In this connection, we ask that CFPB gather information from participants in all areas of the mortgage servicing market, including credit unions and other small mortgage lenders and servicers.

"CUNA also requests that this process place emphasis on the compliance burden associated with adopting new model forms, and that the CFPB ensure that any compliance burden for servicers is minimized – especially for small servicers," CUNA wrote.

If the recommended steps are effectively taken, the letter noted, CUNA believes that the CFPB information-gathering process could help to minimize any compliance burden associated with adopting new model servicing forms, particularly for small servicers.

Use the resource link to access CUNA comment letters.

Inside Washington (01/13/2012)

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  • WASHINGTON (1/17/12)--Richard Cordray, the Consumer Financial Protection Bureau's (CFPB) recently appointed director, said he hoped the agency would be embraced by the U.S. Chamber of Commerce because the CFPB will not only be protecting consumers, but also honest and responsible businesses against fraudulent and disreputable competitors (American Banker Jan. 13). The chamber is among the candidates that industry observers have deemed most likely to file a lawsuit challenging the bureau's legal authority following President Barack Obama's recess appointment of Cordray to the CFPB's leadership. At a press conference Thursday, Chamber President Tom Donahue expressed disappointment with the president's action, but said the chamber has no immediate plans to sue the CFPB. The financial crisis, credit crunch and recession have created a strong argument for "rules of the road" to protect against similar adversity in the future, Cordray said, adding that he and Donahue are in frequent contact …
  • WASHINGTON (1/17/12)--The Consumer Protection Financial Bureau (CFPB) will use risk assessments to determine where to focus its resources in supervising supervision nonbank financial providers, Peggy Twohig, the bureau's associate director for nonbank supervision, said last week. The CFPB expanded its bank supervision program to nonbanks on Thursday. Twohig said she hopes the bureau would begin notification and pre-exam scoping within a month, during an interview with the American Banker (Jan. 13). Because of the size of the nonbank sector, the bureau must use risk assessments to determine where to focus its resources, she said. Among the first priorities is determining how many companies will be under its supervision …

Financial regulators release interest rate risk FAQ

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WASHINGTON (1/13/12)--The Federal Financial Institutions Examination Council (FFIEC) has reiterated "the need for sound management of interest rate risk (IRR)" and highlighted sound IRR practices in a new Frequently Asked Questions (FAQ) document.

The FAQ answers a number of questions that were submitted following a January 2010 FFIEC advisory on IRR Management. The FAQ addresses appropriate measurement and reporting, robust and meaningful stress testing, assumption development reflecting the institution's experience, and comprehensive model validation, the FFIEC said.

The FAQ provides examples of risk management expectations for institutions of various risk profiles, and includes direction on how to adjust processes as profiles change, the FFIEC said. How financial institutions can determine which IRR vendor model is appropriate for their unique situation, what types of IRR measurement methodologies institutions are expected to use, and other more technical IRR issues are also addressed in the FAQ.

The National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the State Liaison Committee, along with the Financial Crimes Enforcement Network, collaborated on the revised FAQ.

The FFIEC is comprised of the leaders of the NCUA, the Fed, the OCC, the OTS, the FDIC, and the newest member, the Consumer Financial Protection Bureau. NCUA Chairman Debbie Matz succeeded FDIC Chairman Sheila Bair as head of the FFIEC last spring, and Matz is serving a two-year term.

For the full FAQ, use the resource link.

CUNA survey Do CUs want distinct domain name

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WASHINGTON (1/13/12)--The Internet Corporation for Assigned Names and Numbers (ICANN), the group that oversees top-level internet domain names, has begun the process of allowing organizations to apply for their own custom internet domain names, and the Credit Union National Association (CUNA) is working to assess credit union interest in obtaining the ".creditunion" domain name.

CUNA is seeking comment from credit union CEOs, members of its Marketing Council, members of its Technology Council, and others through an online, three-question survey.

One of the questions asks credit union respondents to identify the asset size of their institution.

The ".creditunion" top level domain,  if obtained, would be available to credit unions to supplement or replace their existing web names at a roughly estimated cost of $100-$200 annually per credit union, according to CUNA.

CUNA notes that a potential benefit to pursuing the domain name would be that it could  provide additional brand recognition by enhancing the uniqueness of the credit union identity.  CUNA notes that the banking sector intends to obtain the ".bank" top level domain. 

Reuters has reported that as many as 2,000 applications are expected to be filed with ICANN, with applicants paying $185,000 per application. Applications will be accepted for the next three months, Reuters said, and the opportunity to name a domain may not again arise for several years.

Possible benefits of the switch to the ".creditunion" domain name include:
  • Enhanced brand recognition and industry identity; and
  • Possible opportunities for enhanced website security.


New domain names will require DNS Security Extensions, which are currently optional for existing top level domain names.

The domain name switch could also help credit unions keep pace with changing internet search engine habits and structures. Domain names that include ".creditunion" would come up in the search results of anyone that searches online for credit unions, and Google, Bing and other search engines are already being revamped to better deliver these types of results.

However, CUNA notes on the negative side, the switch to a new domain name would create costs and take some time to complete. There is also a chance that many in the credit union system would not choose to adopt the new domain name structure.

For the CUNA survey, use the resource link.

Mortgage originator exam steps released by CFPB

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WASHINGTON (1/13/12)--The Consumer Financial Protection Bureau (CFPB) this week released its official Mortgage Origination Examination Procedures, which will serve as "a field guide for CFPB examiners looking at mortgage originators in both the bank and nonbank sectors of the industry," the agency said.

"The mortgage market cannot work well for consumers if the spotlight shines only on one part of it, while the rest is left in darkness," CFPB Director Richard Cordray said in comments accompanying the release. "Our supervision program will illuminate the entire marketplace by making nonbanks play by the same rules as the banks." The CFPB leader, who took on his position earlier this month after a recess appointment by President Barack Obama, has said overseeing nonbank financial institutions is "a top priority" for his agency.

The CFPB's exam procedures provide background information on the mortgage market and mortgage lender examinations and give detailed steps on how a given lender's overall business model, loan disclosures and terms, and advertising and marketing practices can be properly examined. Steps on examining underwriting, appraisal, originator compensation, and closing practices, as well as fair lending and privacy rule compliance, are also included in the CFPB procedures.

The CFPB examinations will aim to:
  • Assess the quality of a supervised entity's compliance management systems in its mortgage origination business;
  •  
  • Identify acts or practices that materially increase the risk of violations of federal consumer financial law, and associated harm to consumers, in connection with mortgage origination;
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  • Gather facts that help determine whether a supervised entity engages in acts or practices that are likely to violate federal consumer financial law in connection with mortgage origination; and
  •  
  • Determine, in accordance with CFPB internal consultation requirements, whether a violation of a federal consumer financial law has occurred and whether further supervisory or enforcement actions are appropriate.
The agency will coordinate with federal and state regulators "to maximize overall supervisory capability and minimize regulatory burden," the release said.

With Cordray now in place as a full-time director, the CFPB is taking on its full list of responsibilities under the Dodd-Frank Act, including the supervision of mortgage servicers and other nonbank financial entities such as payday lenders and student loan firms.

The bureau is also planning to move forward with its Consumer Advisory Board and to begin work on regulations that have been stalled, including the regulation of remittances and rules for service providers not currently regulated by the federal government. The agency is already involved in several ongoing projects, including mortgage disclosure and closing form revisions, and other rulemaking, consumer education, and guidance projects.

The Credit Union National Association (CUNA) will be meeting with Cordray later this month, and continues to discuss  issues with other agency staff. CUNA has emphasized to Cordray and other CFPB staff that the agency must "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions."

For the full CFPB release, use the resource link.

CFPBs Cordray set for Jan. 24 subcommittee hearing

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WASHINGTON (1/13/12)--Consumer Financial Protection Bureau (CFPB) Director Richard Cordray will be the lone witness at a Jan. 24 appearance before the House Oversight and Government Reform subcommittee on TARP, financial services and bailouts of public and private programs.

The hearing had not been officially added to the House Financial Services Committee calendar as of Thursday. However, a source told News Now that the hearing would likely take place in the afternoon.

It will be Cordray's first appearance before the Congress since he was appointed by President Barack Obama earlier this month. The hearing was prompted by subcommittee chairman Patrick McHenry (R-N.C.), who in a Jan. 4 letter invited Cordray to discuss how he would implement and enforce the CFPB's new authorities.

McHenry is one of many Republicans that have questioned the legality of President Barack Obama's recess appointment of Cordray. (See related Jan. 11 story: Bachus questions Justice on CFPB recess appointment)

Republicans have argued that Congress was not in recess when Cordray was appointed, and Rep. Spencer Bachus (R-Ala.) has also questioned whether a recess appointment can be made for a newly created position. Cordray's nomination to be CFPB director was controversial, with 44 GOP lawmakers vowing to block confirmation of any CFPB director unless certain changes were made to the structure of that agency.

CDFI fund approves new CU

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WASHINGTON (1/13/12)--Hackensack, N.J.-based 1st Bergen FCU is the latest credit union to be added to the list of Community Development Financial Institutions (CDFI) after the U.S. Treasury's CDFI Fund approved the credit union in December.

The credit union, which serves low income citizens of Bergen County, N.J., had 779 members and held $1.15 million in assets as of June 2011. The credit union was chartered in 2009 and offers one-on-one housing counseling, credit counseling, budget assistance, and debt resolution advice.

The credit union also provides basic financial education services to both current and potential members.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community. CDFI Fund distributions are merit-based, and a total of $25.7 million in funds were awarded to 25 credit unions under the fiscal year 2011 round of the CDFI Fund Program. Overall, the CDFI Fund awarded $142,302,667 to 155 institutions in 2011, representing the largest single round of monetary awards since the CDFI Fund program began in 1994. The fund has awarded more than $1 billion in total funds since its inception.

The CDFI Fund will make $123 million in funds available in 2012, and the deadline for applications for those funds passed on Jan. 11.

For the CDFI Fund's release, use the resource link.

Inside Washington (01/12/2012)

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  • WASHINGTON (1/13/12)--The Government Accountability Office (GAO), the investigative arm of the Congress, issued recommendations to the Treasury that it adopt a more consistent approach in reporting the financial impact of various programs associated with the Troubled Asset Relief Program, or TARP.  The Emergency Economic Stabilization Act of 2008 authorized Treasury to create the $700 billion TARP, which was designed to restore the liquidity and stability of the financial system. Treasury and the Congressional Budget Office have projected that overall TARP costs will be much lower than the amount initially authorized--perhaps as low as $70 billion.  However, the GAO report criticized the Treasury's transparency regarding costs of different TARP programs. "Although Treasury regularly reports on the cost of TARP programs and has enhanced such reporting over time, GAO's analysis of Treasury press releases about specific programs indicate that information about estimated lifetime costs and income are included only when programs are expected to result in lifetime income," said the report, titled "As Treasury Continues to Exit Programs, Opportunities to Enhance Communication on Costs Exist."  GAO said it recommended to Treasury that the department enhance its program-specific press releases to the public by consistently including lifetime cost estimates--positive or negative--when reporting on program activities and results, and that Treasury agreed with the recommendation. The report can be viewed online
  • WASHINGTON (1/13/12)--The Federal Housing Finance Agency (FHFA) should develop a more vigorous oversight process that includes an enforcement system that requires troubled Federal Home Loan Banks (FHLB) to correctly identify deficiencies within specific timeframes, according to a report released Wednesday by the agency's watchdog. The report from the FHFA's Office of Inspector General also recommended that the agency develop an automated management reporting system for bank examination findings and document interactions with banks. "FHFA has not established a written enforcement policy for troubled FHLBanks," the report said. "Although FHFA examination guidance states that FHFA will take formal enforcement actions for FHLBs that have supervisory concerns, officials said that the guidance does not constitute a specific agency policy. Instead, FHFA officials have broad discretion in determining the circumstances under which formal actions against troubled FHLBanks will be initiated." The report said the agency does not have an automated management information system that provides access to current information about the deficiencies identified in its examinations and the status of efforts to address them. Instead, FHFA uses manual reporting processes that limit management's capacity to identify trends in examination findings and the progress made by banks in correcting identified deficiencies …
  • WASHINGTON (1/13/12)--Twenty-eight California House Democrats Wednesday sent a letter to President Barack Obama requesting that he immediately appoint a permanent director to the Federal Housing Financial Authority (FHFA). The position at the agency, which oversees Fannie Mae and Freddie Mac, has been blocked by Senate Republicans for two and a half years. "For too long Republicans in the Senate have been playing games with the American people by blocking the Federal Housing Financial Authority from having a proper leader," said Rep. Zoe Lofgren (D-Calif.). "These are difficult times and we need to be doing everything we can to prevent foreclosures and keep families in their homes. I would urge President Obama to take immediate action and appoint a permanent director" …
  • WASHINGTON (1/13/12)--The Treasury Department issued a report this week providing data that indicates the Small Business Lending Fund (SBLF) has been a success, according to the agency--despite previous criticism of the initiative. The report said that 218 of the 281 participating community banks, or 78%, and 41 of the 51 participating community development loan funds (CDLFs), or 80%, have increased their small-business lending. And more than 60% of SBLF participants have now increased their small-business lending by 10% or more. In dollars, community bank participants increased their small business lending by $3.4 billion and CDLFs increased their small business lending by $86.8 million …

Direct deposit helps winterize money GoDirect says

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WASHINGTON (1/12/12)--Winter weather can hinder mail delivery, making it "difficult if not impossible" for those that receive federal benefits by check to receive their money on time, but switching to direct deposit can help avoid this type of seasonal hassle, the U.S. Treasury's Go Direct program said this week.

The Go Direct program has released news copy, fliers and posters for financial institutions and community organizations to inform citizens of the benefits of "winterizing" their finances by switching to direct deposit.

The Go Direct campaign, which started in 2004, also notes that direct deposit enhances safety and convenience.

The Treasury officially ended the use of paper checks for the payment of newly filed Social Security and other federal benefit payments on May 1, 2011, and all federal benefit payments will be made electronically beginning on March 1, 2013.

The Credit Union National Association is a Go Direct national partner and supports the check-safety and cost-savings goals for the program. For more information on Go Direct, use the resource link.

NCUA unveils plan to wind down U.S. Central ACH operations

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ALEXANDRIA, Va. (1/12/12)--The next steps in the National Credit Union Administration's (NCUA) winding down of failed corporate credit union U.S. Central FCU were revealed in an agency letter to bridge corporate members, with the NCUA saying that the agency plans to end automated clearing house (ACH) operations by the bridge corporate, which are known as APEX,  by the end of this year.

The agency in a letter to members of the bridge corporate said that ACH operations and pricing will remain at current levels through June 2012. Pricing will increase by 80% once June ends to encourage corporates to go elsewhere for their ACH services.

Member corporate credit unions must provide the NCUA with a plan detailing how they will transition from U.S. Central to a new ACH service provider, and a timeline for that transition, by Feb. 24, the agency said. Plans that are submitted to the NCUA must address how the transition will impact their credit union's operations and member services, and how member credit unions will be informed of and educated on any procedural changes. The NCUA stressed that it and the Federal Reserve Bank would be available to help any corporates that require assistance during the transition.

The NCUA late last year announced that various lines of payment services offered by U.S. Central would be wound down after a bidding process for many of U.S. Central's services did not result in the selection of any additional acquirers. The agency initiated an open competitive bidding process last October to solicit acquirers for lines of business, including APEX, international wires and automated settlement.

Services of Corporate Network eCom LLC that were purchased by CO-OP Financial Services, and announced Dec. 15, will not be wound down, the NCUA said.

Reg actions cannot be used as WesCorp defense NCUA claims

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LOS ANGELES (1/12/12)--The National Credit Union Administration (NCUA) told a federal court this week that, based on legal precedent, actions the agency took prior to placing Western Corporate FCU into conservatorship may not be used by that institution's management as a defense against the NCUA's negligence suit against former executives of the failed corporate.

The NCUA, in its role as WesCorp's conservator, has sued the former officers alleging breach of fiduciary duty and fraud related to investments that created $6.8 billion in investment portfolio losses, and, ultimately, the collapse of WesCorp. Former WesCorp executives in counterclaims filed last fall alleged that the NCUA was aware of WesCorp's investment strategies, and approved of and encouraged those investment strategies.

In a hearing this week, NCUA representatives challenged these counterclaims, telling the U.S. District Court for the Central District of California, Western Division in Los Angeles that  that "the pre-failure conduct of regulatory agency cannot support a legally viable defense, regardless of the level of oversight exercised by the regulatory agency."

The NCUA representatives cited as precedent rulings in several prior cases, some of which involved the Federal Deposit Insurance Corp.  "[C]ourts have uniformly held that claims or defenses based upon pre-receivership actions of regulators are legally insufficient," the NCUA said.

Overall, the NCUA has claimed that these former WesCorp officials did not use sufficient care when they made certain investments before the recession hit the corporate credit union system.

The former WesCorp executives have argued that the NCUA's Office of Corporate Credit Unions monitored the corporate daily, with on-site examiners, annual exams, and a full-time capital market specialist that was located at WesCorp's facilities.

The executives also claimed that the NCUA was critical of WesCorp's prior and so-called conservative management, suggested or required that WesCorp's board hire new management, and gave the corporate special permission to buy riskier investments. The agency also allegedly gave WesCorp authority to invest in securities rated as low as BBB, and approved of other risky investment practices. (See related Sept. 2 story: WesCorp officers offer arguments in NCUA case)

The NCUA's case against former WesCorp officials Robert Siravo, CEO; Thomas Swedberg, head of human resources; Timothy Sidley, chief risk officer; Robert Burrell, chief investment officer; and Todd Lane, chief financial officer; is set to continue. However, it is not known if a trial date will be set.

Order bans former FCU employee from related work

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ALEXANDRIA, Va. (1/12/12)--Rizwaan Mohammed Ansari, a former employee of Wheatland FCU, Lancaster, Pa., has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following his conviction on charges of theft.

Ansari was sentenced to five years of supervised probation and ordered to pay restitution in the amount of $11,640.99, according to an NCUA prohibition order released Wednesday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Inside Washington (01/11/2012)

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  • WASHINGTON (1/12/12)--A consumer advocate said it's too early to tell if new caps on debit-card swipe fees will result in savings for consumers. In July, the Federal Reserve capped fees at roughly 24 cents per transaction, as part of a Dodd-Frank Act amendment (American Banker Jan. 11). Fees had averaged about 44 cents per transaction before the law regulated debit card interchange fees. James L. Brown, a retired director of the Center for Consumer Affairs at the University of Wisconsin-Milwaukee, called the cap on interchange fees a price control on financial service providers. Brown appeared on a panel at the American Bar Association's winter meeting of consumer bank lawyers in Park City, Utah. Debit card issuers will recover the lost fees from other sources, because 70% to 80% of bank accounts are unprofitable, Brown said …
  • WASHINGTON (1/12/12)--Fannie Mae CEO Michael J. Williams Tuesday said he will step down. Williams was appointed president/CEO in 2009, after the company was placed in federal conservatorship. He will continue as CEO and as a director until Fannie Mae's board of directors names a successor. Williams joined Fannie Mae in 1991. He led the company's eCommerce and eBusiness divisions, including the development of the innovative Desktop Underwriter product. Williams led the company's financial restatement and accounting and control reforms, and was appointed chief operating officer in 2005 …
  • WASHINGTON (1/12/12)--Two Senate Republicans on Tuesday criticized the Federal Reserve Board for recent remarks that the government should take more steps to stabilize the distressed U.S. housing market. U.S. Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, Tuesday called on Federal Reserve Chairman Ben Bernanke to refrain from advising on fiscal policy and suggesting ways to think about how to use taxpayer resources, which Hatch called the responsibility of Congress. In a letter to Bernanke, Hatch criticized a  recent Federal Reserve white paper, which offered recommendations to Congress on how to use taxpayer resources to address issues in the ailing housing market, for treading "too far into fiscal policy advice and advocacy." Also on Tuesday, Sen. Bob Corker (R-Tenn.), speaking to the Greater Nashville Association of Realtors, attacked New York Fed President William Dudley for calling on the federal government to initiate new programs to aid the housing market. Dudley made his comments in a speech last week. "A program like this, one that reduces principal for a few million underwater borrowers, would come at a substantial cost to American taxpayers and responsible borrowers everywhere," Corker said …
  • WASHINGTON (1/12/12)--As the government nears a deal with five large mortgage servicers to resolve charges misconduct related to foreclosures, the Justice Department has begun reaching out to other banks to join the settlement, according to a person familiar with the matter (American Banker Jan. 11). The Justice Department contacted nine other banking companies, including PNC Financial Services Group, U.S. Bancorp, SunTrust Banks Inc., and HSBC Holdings Plc, about joining the settlement rather than facing potential government lawsuits in the future. State and federal officials are close to reaching a settlement with Bank of America Corp, JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. The servicers would pay as much as $25 billion into a fund for distressed homeowners. The banks also would put behind them potential government lawsuits about improper foreclosures and abuses in originating and servicing the loans …
  • WASHINGTON (1/12/12)--In a year-end assessment of the contributions of Community Development Financial Institutions (CDFIs), the director of that U.S. Treasury program cited "disheartening" poverty statistics to highlight what she called the "critical work" performed by CDFIs in low-income communities. CDFI Fund Director Donna J. Gambrell noted in a release that the U.S. Census Bureau reported in September that the nation's poverty rate increased from 14.3% in 2009 to 15.1% in 2010, and that from 2009 to 2010, the number of Americans living in poverty rose from 43.6 million to 46.2 million--the largest number ever recorded in the 52 years for which poverty estimates have been published. Gambrell also noted that some of the country's most vulnerable populations have been among the hardest hit. For example, families living in poverty rose from 8.8 million in 2009 to 9.2 million in 2010. Also, the poverty rate during the same period increased for Hispanics (from 25.3% to 26.6%), for African-Americans (from 25.8% to 27.4%), and across the board for children under age 18 (from 20.7% to 22%). " Indeed, by financing new businesses, creating new jobs, building affordable housing, and supporting community-based social service organizations, CDFIs are extending lifelines to communities that have struggled for generations and have had to bear even heavier burdens since the recent economic downturn began," Gambrell said. As of Dec. 31, 2011, the number of certified CDFIs, which includes credit unions, was approaching 1,000, the most in the history of the CDFI Fund …

Free NCUA webinar to feature Cordray in Feb

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ALEXANDRIA, Va. (1/12/12)--Newly installed Consumer Financial Protection Bureau (CFPB) Director Richard Cordray will address credit unions Feb. 8 during a free National Credit Union Administration (NCUA) webinar announced yesterday.

The 3 p.m. (ET) webinar will feature updates on current topics including the NCUA's Regulatory Modernization Initiative, corporate credit union resolution, as well as the CFPB.

During the live webinar, participants will be able to electronically submit questions about any topic relating to the credit union system or the CFPB.  An archived version of the webinar will be posted to the NCUA's website approximately two weeks after the event.

In announcing the webinar, NCUA Chairman Debbie Matz said, "At NCUA we share CFPB's commitment to protecting consumers, and we are honored that Director Cordray has accepted my invitation to participate in NCUA's first virtual town hall meeting of 2012."

She said, "Credit union officials have expressed an extraordinary interest in CFPB's regulatory priorities; they often ask me how CFPB will affect credit unions. This webinar will provide the first opportunity for credit unions to ask the CFPB leader directly."

Use the resource link to register.

NCUA clarifies new call report questions intent

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WASHINGTON (1/11/12)--The National Credit Union Administration (NCUA) has clarified that new questions addressing minority credit unions and workplace diversity, which were added to fourth quarter call report documents with no explanation from the agency as to why, are required by the Dodd-Frank Wall Street Reform Act.

The questions are:

  • Does your credit union have more than 50% of its current members and management officials who are Black American, Native American, Hispanic American, or Asian American? If yes, please identify the minority groups(s) that apply.
  • Does your credit union have more than 50% of its eligible potential members and management officials who are Black American, Native American, Hispanic American, or Asian American? If yes, please identify the minority group(s) that apply.
The NCUA notes in its clarification sent to credit unions that the conditions in each question must be true for a credit union to answer "yes" to the question: Are you a minority credit union (MCUA).

Credit unions that answer yes are also asked to identify the minority groups(s) that comprise its membership or management.

The NCUA's Office of Minority and Women Inclusion (OMWI), which is tasked with ensuring equal employment opportunity and workplace diversity at the NCUA and in the credit unions the agency regulates, is developing a program for preserving minority credit unions--as instructed under Dodd-Frank--and these questions will help the NCUA develop this program.

The NCUA has also added new questions on workplace diversity to the Credit Union Profile under "Regulatory Information," but the questions are only to be answered by credit unions with 100 or more employees or credit unions with 50 or more employees that serve as a depository of government funds, as issuing and paying agents of U.S. Savings Bonds or Notes, or have a Federal Government contract of at least $50,000.

The NCUA doesn't consider federal share insurance a government contract for purposes of this requirement, the Credit Union National Association (CUNA) has noted.

Credit unions have to provide the date on which they last filed the required EEO-1 Survey Report with the Equal Employment Opportunity Commission (EEOC) and must answer "yes" or "no" if they have a "diversity policy or program."

These questions are meant to assess the number of credit unions that have diversity policies and practices in place, and determine credit union compliance with EEOC reporting requirements, the agency has said. The NCUA has not established standards for diversity programs, but more guidance related to diversity programs could be released.

For more on the NCUA questions, see CUNA's CompBlog.

Reg I Z comment deadlines approaching CUNA

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WASHINGTON (1/11/12)--Credit unions that wish to comment on two Consumer Financial Protection Bureau (CFPB) interim final rules, one that addresses Truth in Lending (Regulation Z) and another on disclosures and other requirements for privately insured credit unions and non-federally insured depository institutions, should forward their comments to the Credit Union National Association (CUNA) by early next week.

Regulation Z implements the Truth in Lending Act. Regulation I requires privately insured credit unions and other financial institutions that lack federal deposit insurance to make certain insurance-related disclosures on their periodic statements and account records, and to provide the same disclosures at locations where deposits are normally received and in any advertising. These regulations are among the many rules that will now be overseen by the CFPB.

The CFPB's interim final rules do not impose any new substantive obligations on regulated entities. However, there are some technical changes.

CUNA has also noted that the CFPB interim rule would change Reg I by stating that deposits or shares that are moved to accounts that were established on or before Oct. 13, 2006 may not be accepted unless the institution holding the account has notified members or accountholders of its private insurance status, and received confirmation that accountholders are aware of the institution's insurance status by mail. The two mailings should have occurred first within 90 days after Oct. 13, 2006 and the second within 180 days after that date. CUNA will be discussing this provision with the CFPB.

CUNA is reviewing both of these rules to determine what recommendations could be made to the CFPB. CUNA is accepting comment on the Reg Z proposal until Jan. 15. The deadline for comment on the Reg I proposal is Jan. 16.

The CFPB will accept public comment on the Reg I changes until Feb. 14. The deadline for Reg Z comments is Feb 21.

For the CUNA comment calls, use the resource links.

Bachus questions Justice on CFPB recess appointment

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WASHINGTON (1/11/12)--House Financial Services Chairman Spencer Bachus (R-Ala.) has questioned whether the U.S. Congress was truly in recess when President Barack Obama claimed use of his executive powers to install Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB) last week as a "recess appointment."

A recess appointment is the appointment by the president of a nominee to a senior post. The U.S. Constitution generally requires that senior officers of the government must be confirmed by the U.S. Senate, but when the Senate is in recess, the president can act alone by making a recess appointment.

In his letter to the U.S. Department of Justice (DOJ), Bachus asked whether, in the DOJ's opinion, Congress was in recess last week. He noted that the Senate has been meeting in pro forma sessions once every third day since the winter break began late last month. He added that the Congress did not pass an adjournment resolution before the break began.

The challenge was anticipated, and a number of other Republicans have argued that Congress was not in recess when Cordray was appointed.

Bachus also questioned whether a recess appointment can be made for a newly created position, and asked the DOJ to provide background on any legal advice it may have given the administration before the appointment was made.

Sen. Charles Grassley (R-Iowa) has also asked for information on what role, if any, the DOJ or its Office of Legal Counsel played in developing, formulating, or advising the White House on its decision to appoint Cordray and other nominees during the winter congressional recess.

Grassley's letter was co-signed by fellow Senate Judiciary Committee members Orrin Hatch (R-Utah), Jon Kyl (R-Ariz.), Jeff Sessions (R-Ala.), Lindsey Graham (R-S.C.), John Cornyn (R-Texas), Mike Lee (R-Utah) and Tom Coburn (R-Okla.).

Cordray's nomination to be CFPB director has been controversial from the start, with 44 GOP lawmakers vowing to block confirmation of any CFPB director unless certain changes were made, for instance, to the leadership structure of that agency.

With Cordray in place as director, the CFPB has taken on its full list of regulatory responsibilities, including the establishment of a Consumer Advisory Board, remittance regulations, and supervision of nonbank financial entities such as mortgage servicers, payday lenders and student loan firms. Cordray last week said overseeing nonbank financial institutions, which "had no regular federal oversight in the run up to the financial crisis," is "a top priority" for his agency.

The agency is already involved in several ongoing projects, including mortgage disclosure and closing form revisions. The CFPB will also work on rulemaking, market guidance, consumer education and empowerment, enforcement, and supervision and examination of large banks and credit unions with more than $10 billion in assets.

Cordray and Credit Union National Association (CUNA) President/CEO Bill Cheney have spoken since Cordray took on his new role at the CFPB, and CUNA representatives will soon meet with him to "reinforce that credit unions are consumer-owned cooperatives and that credit unions need meaningful regulatory relief, not new regulations, in order to protect consumers," Cheney said.

CUNA has also encouraged Cordray to "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions" and has also encouraged the CFPB to establish an Office of Regulatory Burden Monitoring to help the agency "track, consider, and help mitigate the cumulative regulatory burden under which credit unions and others must operate."

For the full letters from Rep. Bachus and Sen. Grassley, use the resource links.

Inside Washington (01/10/2012)

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  • WASHINGTON (1/11/12)--Consumer advocates raised concerns that the Consumer Financial Protection Bureau (CFPB) has not done enough to roll back a pre-emption that allows lenders to make nontraditional loans such as adjustable rate mortgages, interest-only loans and balloon payment loans. The CFPB largely left the Alternative Mortgage Transaction Parity Act of 1982 unchanged in an interim rule issued last year. The CFPB rule still permits adjustable-rate mortgages with nontraditional terms to pre-empt state laws. Consumer advocates are concerned that the CFPB will allow lenders to create risky loans. Kathleen Keest, a senior policy counsel at the Center for Responsible Lending, who spoke during a panel the American Bar Association's winter meeting of consumer financial services attorneys, said the CFPB maintained the "status quo" with last year's interim rule …

CUNA seeks comment on HMDA changes

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WASHINGTON (1/10/12)--The Credit Union National Association (CUNA) is reviewing the Consumer Financial Protection Bureau's (CFPB) interim final rule on Regulation C to determine if any regulatory changes can be made without amending the statute, and plans to include any recommendations on how the CFPB could limit the regulatory burden on credit unions in an upcoming comment letter.

The deadline for comment on this issue is quickly approaching, and credit unions may provide their comments on this interim final rule now through a CUNA comment call.

The CFPB's interim final rule is substantially similar to the Federal Reserve's Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The interim final rule "does not impose any new substantive obligations on persons subject to existing Regulation C," the CFPB said.

Under HMDA, credit unions with total assets of more than $40 million that have home or branch offices in defined metropolitan statistical areas must collect their loan data and report it to federal regulators. This $40 million threshold was set in 2011, and the CFPB has not yet set a threshold for 2012. CUNA has suggested that HMDA requirements only be applied to the largest mortgage lenders that make the vast majority of mortgage loans.

The Dodd-Frank Act amended HMDA to require covered financial institutions to report the age of mortgagors and mortgage applicants, any points and fees payable at origination in connection with a mortgage, the difference between the annual percentage rate associated with a loan and a benchmark rate or rates for all loans, and the terms of a given mortgage loan, among other items. There are additional changes required by Dodd-Frank, and the CFPB said those changes will be covered in future rulemakings by the agency. The CFPB will also soon advise financial institutions on which financial institutions should report to which agencies. CUNA will continue to monitor for this information, and will advise credit unions after it is released.

CUNA is accepting comment on the CFPB's Reg C interim final rule until Jan. 14. The deadline for CFPB comments is Feb. 17.

For the CUNA comment call, use the resource link.

CU cyber security standards are adequate CUNA

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WASHINGTON (1/10/12)--The data security standards followed by credit unions and other financial institutions are strong, and the addition of new, potentially duplicative, data security standards could create issues for credit unions, the Credit Union National Association (CUNA) said following Monday's release of a Government Accountability Office report on cyber security guidance.

The report noted that credit unions and other regulated entities are subject to "specific risk-based cyber security requirements," with federal financial regulators addressing security programs, risk management, data security, incident response and anti-identity-theft through their own regulations. The GAO added that the Federal Financial Institutions Examination Council has released its own outlines of security requirements, and financial institutions and the payment card industry have produced their own voluntary cyber security standards and practices.

CUNA and others met with the GAO as it developed this report.


CUNA following the release of the report noted that several congressional committees have acted to improve payment card data security policy, and CUNA has worked to prevent Congress from increasing the regulatory burden on credit unions. Providing consumer notice of data breaches, and ensuring that merchants are held liable for the breaches they allow to happen, have also been emphasized as CUNA worked with legislators on these issues.

The GAO report, released on Monday, also addressed cyber security in the areas of:

  • Banking and finance;
  • Communications;
  • Energy;
  • Healthcare and public health;
  • Information technology;
  • Nuclear reactors, material, and waste; and
  • Water
The report provides additional information on how cyber security guidance is disseminated in these industries, how regulators examine for compliance with that guidance, and potential penalties that could be levied against entities that are not in compliance with cyber security standards.

The GAO report found that a wide variety of cyber security guidance from both national and international organizations has been made available to financial institutions and entities in other key industries, and this guidance provides tailored information for specific industries. However, the GAO added, more can be done to promote the use of this guidance.



For the full report, use the resource link.

Inside Washington (01/09/2012)

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  • WASHINGTON (1/10/12)--In separate speeches on Friday, Federal Reserve Board Gov. Elizabeth Duke and New York Fed President William Dudley, called for steps to assist the troubled housing market (American Banker Jan 9). "Given the severity of problems with supply and demand in the housing market, it is unlikely that any single policy solution will provide the full answer, but a number of different policies each have the potential to yield incremental improvement in housing and economic recovery," Duke said in a speech before the Virginia Bankers Association and state Chamber of Commerce. Speaking before the New Jersey Bankers Association, Dudley said easing housing policies would improve the economic overall economic conditions in the U.S.  "I do believe that forceful and effective housing policies have the potential to significantly influence the speed and strength of our economic recovery," he said. Dudley called for the extension of a bridge funding program for  qualified borrowers who have demonstrated an ability make payment but have become "unemployed involuntarily" to help prevent foreclosures …
  • WASHINGTON (1/10/12)--Federal Reserve Board Gov. Sarah Bloom Raskin offered community bankers assurances they would not face the same stiff requirements larger banks are subject to under the Dodd-Frank Act. Raskin, speaking before the Maryland Bankers Association, said the community banking model differs from that of larger banks. Community banks are local and have deep roots in their communities, Raskin said. "Their value proposition is that they are able and willing to take the time and effort to know and work with their customers in a way that may not be possible for a larger, more distant institution," she said. That value proposition is important in small-business lending, in which a local community bank may understand customers in a way that cannot be captured by more quantitative credit-scoring models that might be used by larger banks, she added …
  • WASHINGTON (1/10/12)--President Barack Obama's recess appointment of Richard Cordray to run the Consumer Financial Bureau (CFPB) creates a threat of litigation, a climate that will weaken the agency, Neil Barofsky, former special inspector of the Troubled Asset Relief Program, said Friday (American Banker Jan. 9). The legal uncertainty could have been avoided if the administration had nominated Elizabeth Warren, who assisted in shaping the CFPB, or another candidate during the 2010 recess, when the U.S. Senate did not stay in pro forma session, Barofsky said. Although Obama said Cordray's recess appointment was made for the benefit of consumers, Barofsky said the move showed no concern for distressed homeowners or other consumers …
  • WASHINGTON (1/10/12)--Two days after appointing Richard Cordray to head the Consumer Financial Protection Bureau (CFPB), President Barack Obama visited the agency's offices on Friday. "Every one of you here has a critical role to play in making sure that everybody plays by the same rules," Obama told CFPB employees. "To make sure that the big banks on Wall Street play by the same rules as community banks on Main Street. To make sure that the rules of the road are enforced, and that a few bad actors in the financial sector can't break the law, can't cheat working families, can't threaten our entire economy all over again." Obama also gave a "special shout out" to Elizabeth Warren, who led the agency's formation …

SBAAgility webinar to address disaster prep lessons learned in 2011

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WASHINGTON (1/9/12)--Agility Recovery Solutions and the U.S. Small Business Administration have again teamed up to provide disaster tips, and perspective on how recent natural disasters have impacted businesses, in an upcoming webinar entitled "2011 Year in Review—Disaster Recovery Lessons Learned."

The webinar is scheduled to take place on January 17 at 2:00 P.M. ET.

The webinar will be hosted by Agility Recovery Solutions President/CEO Bob Boyd, and will discuss the lessons that can be learned from businesses that were impacted by the tornadoes, hurricanes, floods, and weather events of 2011. New disaster preparedness trends and technology will also be addressed, and Boyd will offer practical strategies on how business owners can help keep their business open following a disaster.

The SBA and agility have also partnered to share business continuity strategies on a new website, www.preparemybusiness.org .

Agility is a Credit Union National Association strategic alliance provider. To register, use the resource link.

CFPB outlines info-sharing guidelines for large FIs

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WASHINGTON (1/9/12)—Large financial institutions that are supervised by the Consumer Financial Protection Bureau (CFPB) may not withhold documents that the CFPB has requested for oversight purposes, the agency said in recent guidance.

The CFPB noted this standard applies to insured financial institutions with more than $10 billion in assets.

The CFPB guidance said financial institutions will be in violation of the law if they do not provide the CFPB with requested information intended to help monitor compliance with federal financial law and to determine whether or not certain practices of a given financial institution could be harmful to consumers or the market in general.

"The supervisory process is based on the supervisor's full and unfettered access to information, and the supervisor is entitled — indeed, duty bound — to ensure that it thoroughly understands the institution in question and has access to all information that, in its independent judgment, may bear on its supervisory responsibilities," the CFPB added.

The CFPB said that any documents that are requested will be treated as "confidential and privileged," and will not be subject to disclosure under the Freedom of Information Act. However, this information may be shared with other regulators. The CFPB will also have the authority to determine which non-regulatory authorities it shares this information with, and may withhold information from law enforcement and state attorneys general in some cases.

For the full CFPB guidance, use the resource link.

Larger participant definition out soon CFPB says

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WASHINGTON (1/9/12)—An anticipated definition of non-depository-institution large participants in the financial services market, and an accompanying rule on how those institutions will be regulated, will be released soon, the Consumer Financial Protection Bureau (CFPB) said late last week.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise all sizes of nonbank payday lenders, private student lenders, and mortgage companies. For other nonbank markets for consumer financial products and services, the act generally provides authority to supervise non-depository institution larger participants in the financial services market, and requires the CFPB to define such larger participants.

The CFPB said it may supervise "larger participants" in the debt collection, consumer reporting, auto financing, and money services markets, once this definition is fully determined.

The Credit Union National Association (CUNA) has met with the CFPB on this issue, and in an August comment letter suggested that the agency base its definition of non-depository-institution larger participants on the local market share of those participants. CUNA has also warned that using something other than the local, state-wide or metropolitan-area-based market share to define what type of firm is considered a larger participant could result in the CFPB only regulating the largest nationally active non-depository financial service providers. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise all sizes of nonbank payday lenders, private student lenders, and mortgage companies, CUNA said.

The agency last week officially took supervision authority over nonbank financial institutions when President Barack Obama used his executive powers to appoint Richard Cordray as CFPB director. Cordray's nomination proved controversial in Congress, and Obama circumvented Congress and moved Cordray into his new position through a recess appointment.

In one of his first statements as CFPB Director, Cordray said overseeing nonbank financial institutions would be "a top priority" for his agency.

The CFPB in a release said the main goals of its nonbank supervision activities will be "prevent harm to consumers and promote the development of markets for consumer financial products and services that are fair, transparent, and competitive." The CFPB will assess nonbanks compliance with the Truth in Lending Act, the Equal Credit Opportunity Act, and other federal consumer financial laws. The agency will also consider a nonbank financial institution's business volume, the types of products or services that are offered and the extent of state oversight as it attempts to determine any risks that the nonbank could pose to consumers or the financial system.

For the full CFPB release, use the resource link.

Control of small Philly CU assumed by NCUA

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ALEXANDRIA, Va. (1/9/12)—On Friday, Philadelphia-based People for People Community Development CU became the first credit union in 2012 to be taken under conservatorship by the National Credit Union Administration (NCUA).

The state-chartered, federally insured credit union will remain under NCUA management as the agency works to "resolve issues affecting the institution's safety and soundness," the agency said. The Pennsylvania Department of Banking concurred with the conservatorship decision.

The NCUA said the credit union's 1,561 members will receive uninterrupted service during the conservatorship. The credit union, which serves a 14-mile section of North Philadelphia considered to be underserved by financial services, held $1.1 million in assets as of Sept. 30, the agency added.

Deposits at People for People remain insured with the NCUA's National Credit Union Share Insurance Fund (NCUSIF) insures, which covers individual accounts up to $250,000.

The decision to conserve a credit union enables the institution to continue regular operations with expert management in place, correcting previous service and operational weaknesses, the NCUA said in its release.

For the full NCUA release, use the resource link.

Key lawmakers sign on to speak at 2012 GAC

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WASHINGTON (1/6/12)--As 2012 begins, members of Congress are joining the speaker lineup for this year's Credit Union National Association (CUNA) Governmental Affairs Conference (GAC), with Reps. Ed Royce (R-Calif.), Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.) and Carolyn McCarthy (D-N.Y.) and Sen. Mark Udall (D-Colo.) signing on to speak.

The legislators will join former Secretary of State Condoleezza Rice, premier, non-partisan political analyst Charlie Cook, journalistic duo Bob Woodward and Carl Bernstein, and others on the 2012 GAC speaker schedule.

GAO report is opportunity for PCA reform NASCUS CEO says

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WASHINGTON (1/9/12)--The Government Accountability Office's (GAO) recent criticism of the National Credit Union Administration's (NCUA) oversight of the credit union system "offers state and federal regulators a valuable opportunity to evaluate current [Prompt Corrective Action (PCA)] standards," National Association of State Credit Union Supervisors (NASCUS) President/CEO Mary Martha Fortney said late last week.

The GAO examined the NCUA's response to 85 natural person credit union failures that took place between the start of 2008 and June 30, 2011, and faulted the NCUA's supervision of troubled credit unions, noting that the agency in some cases responded too late. The GAO noted PCA measures were not taken for 16 of the 85 failed credit unions, and said that PCAs, when used for the other failed credit unions, had limited opportunity to help the credit unions prior to their failure.

The GAO recommended the NCUA "consider additional triggers for PCA that would require early and forceful regulatory action and offer proposals to Congress on how to modify PCA, as appropriate." NCUA Chairman Debbie Matz responded to this recommendation, saying her agency would strengthen its existing enforcement program, develop new predictive PCA measures that identify emerging problems earlier.

NASCUS noted that the NCUA has been directed to work with state credit union regulators on PCA and other issues under the terms of the Credit Union Membership Access Act.

The Credit Union National Association supports improvements in PCA that will not encumber well managed credit unions, and will urge the NCUA to tailor any solutions that might be developed as a result of the GAO report to problem areas only and to avoid the temptation to issue new regulations that cover all credit unions, regardless of their risk profiles.

Fortney said the NCUA and state regulators can also use this opportunity "to act on capital reform and supplemental capital for credit unions in an effort to modernize the archaic capital system for credit unions." CUNA hopes to work with the NCUA to pursue authority from Congress for credit unions to use supplemental capital.  

For coverage of the GAO report, use the resource link.

Inside Washington (01/06/2012)

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  • WASHINGTON (1/9/12)--Consumer Financial Protection Bureau (CFPB) Director Richard Cordray Thursday named Raj Date the agency's first deputy director. Date has been leading the day-to-day operations of the consumer bureau since it launched in July. Date's background includes more than a decade in the financial services industry. He first joined the CFPB as head of the bureau's research, markets and regulations division. Shortly after the CFPB launched, Treasury Secretary Timothy Geithner named Date the special adviser on the CFPB. Cordray also named Kent Markus, who has been the agency's deputy assistant director of the office of enforcement, to assistant director of the office of enforcement.  Before joining the CFPB, Markus was the chief legal counsel to the Ohio governor. Earlier in his career, Markus served as first assistant attorney general of Ohio, as the deputy chief of staff at the Department of Justice, and counselor to the U.S. Attorney General …

GAC

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Frequent credit union supporter Rep. Barney Frank (D-Mass.) on Monday announced he would not seek reelection next November after serving nearly 30 years in the U.S. House. (CUNA Photo) 

NCUA newsletter highlights Assets for Independence program

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ALEXANDRIA, Va. (1/9/12)--In its first monthly newsletter of the new year, the National Credit Union Administration (NCUA) highlighted the Assets for Independence (AFI) program, which promotes an asset-based approach to help lift low-income families out of poverty.

In the article, the NCUA Office of Small Credit Union Initiatives (OSCUI) asks: Is your credit union seeking a way to introduce wealth-building strategies to members?  It notes the AFI program does so by encouraging members to save earned income in accounts called Individual Development Accounts (IDAs), which are match-savings accounts.

The AFI program is administered by the U.S. Department of Health and Human Services and each dollar deposited in an IDA accountholder is matched, from $1 to $8, in federal and nonfederal funds.

IDA accountholders may use the combined totals to achieve any of three objectives:

  • Acquiring a first home;
  • Capitalizing a small business; or
  • Enrolling in postsecondary education or training.
OSCUI notes that credit unions with low-income-designation or Community Development Financial Institution certification can offer IDAs as a means to attract new members who will be there for the long haul. After building a savings relationship, the member may later become a borrower--for a mortgage, small business, or education loan.

For more on this and other credit union topics, use the resource link below to access the January 2012 issue of "The NCUA Report."

CUNA seeks comment on CFPB SAFE RESPA plans

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WASHINGTON (1/5/11)--The Credit Union National Association (CUNA) is seeking credit union comment on two pending Consumer Financial Protection Bureau (CFPB) projects: an interim final rule that addresses Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) regulations, and a separate interim final rule that amends the Department of Housing and Urban Development's (HUD) Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA).
 
The CFPB's changes to both of these regulations are mainly technical, and do not impose any new rules, CUNA notes. However, CUNA is reviewing the RESPA interim final rule to determine if there are any regulatory changes that could be made without having to statutorily amend RESPA. CUNA will include any changes that could reduce the regulatory burden on credit unions in its comment letter.
 
These interim final rules became effective on Dec. 30, 2011. CUNA has asked credit unions to submit their comments on the RESPA changes by Jan. 20. Comments on the SAFE Act changes may be sent to CUNA until Jan. 31.
 
The CFPB will accept public comment on the SAFE Act interim final rule until Feb. 17, and has set a Feb. 21 deadline for comments on the RESPA changes. For the full CUNA comment calls, use the resource links.
 
The CFPB is also working on more substantive revisions to mortgage rules, creating a combined form that blends elements of RESPA and Truth in Lending Act (TILA) disclosures. CUNA continues to be actively involved in roundtable discussions and other forums with CFPB personnel and others as this mortgage revision process moves forward. For a CFPB release on the latest developments in this project, use the resource links.

New director names nonbank entities as CFPB focus

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WASHINGTON (1/6/11)--With newly appointed Consumer Financial Protection Bureau (CFPB) Director Richard Cordray in place, that agency can now take on its full list of responsibilities under the Dodd-Frank Act, including the supervision of nonbank financial entities such as mortgage servicers, payday lenders and student loan firms.
 
Cordray said in a statement Thursday that overseeing these nonbank financial institutions, which "had no regular federal oversight in the run up to the financial crisis" and "led a race to the bottom that pushed aside responsible businesses, including community banks and credit unions, and greatly harmed consumers," is "a top priority" for his agency.
 
Cordray became director of the bureau Wednesday when President Barack Obama executed a "recess appointment" that circumnavigated the need for Cordray to be confirmed by Congress.
 
The CFPB director said more information on how his agency would regulate these nonbank entities will be provided soon.
 
Now with Cordray in place at the CFPB, the bureau will also be able to move forward with its Consumer Advisory Board, which will consult with the agency on key issues, and with some regulations that have been stalled, including the regulation of remittances and rules for service providers not currently regulated by the federal government.
 
The agency is already involved in several ongoing projects, including mortgage disclosure and closing form revisions. The CFPB will also work on rulemaking, market guidance, consumer education and empowerment, enforcement, and supervision and examination of large banks and the three credit unions with more than $10 billion in assets.
 
The Credit Union National Association (CUNA) has met with Cordray at the CFPB in Washington, D.C., and the Ohio Credit Union League has developed a strong, professional relationship with him, CUNA noted earlier this week. CUNA President/CEO Bill Cheney said, "We will be meeting with Mr. Cordray again shortly to reinforce that credit unions are consumer-owned cooperatives and that credit unions need meaningful regulatory relief, not new regulations, in order to protect consumers."
 
CUNA has encouraged Cordray to "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions" and has also encouraged the CFPB to establish an Office of Regulatory Burden Monitoring to help the agency "track, consider, and help mitigate the cumulative regulatory burden under which credit unions and others must operate."

BSA SAR filings tick up in 2011

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WASHINGTON (1/6/11)—The total number of Bank Secrecy Act (BSA) filings and the number of Suspicious Activity Reports (SARS) filed both increased in fiscal 2011, the Financial Crimes Enforcement Network (FinCEN) said in its Annual Report.
 
The report covers the 2011 fiscal year, which ended on Oct. 1.
 
Just over 17 million BSA filings were sent to FinCEN in 2011,an increase from 2010's total of 16.1 million. Currency transaction reports accounted for the majority of the BSA filings that were produced in fiscal 2011, totaling 14.8 million.
 
FinCEN said about 1.4 million SARs were filed in fiscal year 2011, compared with 1.3 million filed in fiscal year 2010. FinCEN explained that the increase may be tied to the agency's work "to enhance financial institutions' understanding of and compliance with the reporting requirements."
 
FinCEN has also pushed the advantages of online e-filing of SAR reports in recent months, and the agency noted that 87% of the SAR reports that were filed in the last two months of fiscal 2011 were filed electronically. This is an increase when compared to the 83% of SAR reports that were electronically filed in that same time period in 2010.
 
FinCEN's work with financial institutions was also addressed in the report, and FinCEN particularly noted its meetings with credit union representatives.
 
Credit union officials in those meetings with FinCEN discussed the "unique circumstances" that can impact their BSA compliance, including the use of shared branching, the difficulty some credit unions face when they need to expell a credit union member that has engaged in risky activity, growth issues, and the increasing number of international transactions that are being made at some credit unions.
 
For the full report, use the resource link.

Inside Washington (01/05/2012)

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  • WASHINGTON (1/6/12)--During its Dec. 13 meeting, members of the Federal Reserve's monetary policy committee, the Federal Open Market Committee, expressed concern about the housing market's slow recovery, according to the meeting's minutes. Several Federal Reserve Board governors offered support for the Obama administration's plan to expand the Home Affordable Refinancing Program (HARP), which allows more distressed borrowers to refinance their Fannie Mae and Freddie Mac loans (American Banker Jan. 5). The first phase of the HARP restructuring began Dec. 1. Market reaction to the new HARP program has been slow so far, Fed staffers told committee members …
  • WASHINGTON (1/6/12)--John Delaney is taking a leave as executive chairman of CapitalSource Inc. to run for a seat in the U.S. House of Representatives. Delaney's leave is without pay and effective immediately, although he will remain chairman of the company (American Banker Jan. 5). Delaney is seeking the Democratic nomination for Maryland's 6th District, which was redrawn this year to include part of Montgomery County. The seat is held by U.S. Rep. Roscoe Bartlett, a 10-term Republican, who has said he plans to seek re-election. Delaney formed an exploratory committee late last year and said previously that job creation would be his primary focus …

Inside Washington (01/04/2012)

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  • WASHINGTON (1/5/12)--The Department of the Treasury on Tuesday issued a proposal to begin collecting assessments from large banks to fund the Office of Financial Research (OFR), starting July 20. The proposed rule, part of the Dodd-Frank Act, would apply to bank assets of $50 billion or more and nonbank financial companies supervised by the Federal Reserve Board. The OFR includes Financial Stability Oversight Council, which monitors risks and emerging threats to U.S. financial stability. Both the council and the OFR were created by the Dodd-Frank Act. The proposed rule outlines how the Treasury would determine which companies will be subject to an assessment fee; estimate the total assessments; determine the assessment fee for each company; and would bill and collect the fees …
  • WASHINGTON (1/5/12)--The Office of the Comptroller of the Currency on Wednesday released print and radio public service advertisements to increase awareness of the Independent Foreclosure Review, announced in November. The public service items include a feature story, distributed to 7,000 small newspapers nationwide, and two 30-second radio spots distributed to 6,500 small radio stations. The material will be distributed in English and Spanish. The ads inform homeowners who faced foreclosure in 2009 and 2010 that they may be eligible for a free independent review of their cases. More than four million letters were mailed to potentially eligible borrowers with request-for-review forms and instructions on how to complete and return them …
  • WASHINGTON (1/5/12)--For the fiscal year 2012 funding rounds for Community Development Financial Institutions (CDFIs), Congress has waived the matching funds requirement for Small and Emerging CDFI Assistance (SECA) Program applicants and Financial Assistance (FA) applicants for the Native American CDFI Assistance Program (NACA Program). This means that all SECA and NACA FA awards will be in the form of grants for this fiscal year. Core FA applicants must provide evidence of eligible matching funds, as described in the FY 2012 CDFI Program Notice of Funding Availability. Technical Assistance applicants are not required to submit matching funds documentation …
  • WASHINGTON (1/5/12)--The Internal Revenue Service (IRS) kicked off the 2012 tax-filing season Wednesday by announcing that taxpayers have until April 17 to file their tax returns. The IRS explained in a release: Because the normal tax-filing day, April 17, falls on a Sunday this year, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16, tax day is the seventeenth. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do, said the IRS.  Therefore, all taxpayers have an two extra days to file.  However, taxpayers requesting an extension will have until Oct. 15 to file their 2011 tax returns. The IRS said it expects to receive more than 144 million individual tax returns this year, with most of those filed by April 17. The tax agency encourages taxpayers to e-file as the best way to ensure accurate tax returns and to get faster refunds.  The IRS will begin accepting e-file and Free File (http://www.irs.gov/efile/index.html?portlet=106) returns Jan. 17 …

GAO says more info on corporate CU loss estimates needed

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WASHINGTON (1/5/12)--The Government Accountability Office (GAO) yesterday issued a report on the National Credit Union Administration's (NCUA) oversight of corporate and natural person credit unions that, among other things, calls on the agency to provide more information and transparency regarding its estimates of the losses for failed corporate credit unions.

The GAO study was required by the U.S. Congress in legislation enacted in January.  The report examined the NCUA's handling of five corporate credit unions that failed and the agency's efforts to stabilize the corporate credit union system.

The report also reviewed the agency's supervision of the 85 natural person credit unions that failed during the time period under review, which was from the beginning of 2008 to June 30, 2011. Those 85 represented less than 1% of total credit union assets.

The GAO report, which relied in part on NCUA examination reports and reports from NCUA's Office of Inspector General, cited poor management as the "primary reason" that the natural person credit unions failed.  GAO also faulted NCUA's supervision of troubled credit unions, noting that the agency in some cases responded too late.

It also said that while there were some favorable outcomes associated with NCUA's implementation of prompt corrective action (PCA), there were also inconsistencies in the "presence and timeliness of PCA and other enforcement actions."

The GAO noted PCA measures were not taken for 16 of the 85 failed credit unions, and said that PCAs, when used for the other failed credit unions, had limited opportunity to help the credit unions prior to their failure.

The GAO said it could not effectively estimate the adequacy of the NCUA's response to the corporate credit union failures, as the NCUA did not provide sufficient documentation to support its estimate of corporate failure losses. The Credit Union National Association (CUNA) raised similar concerns with the NCUA.

The GAO called on the NCUA to provide the necessary supporting documentation to enable the NCUA Office of the Inspector General to verify the total losses incurred as soon as practicable.  CUNA has for over a year urged the NCUA to provide credit unions with information on the valuation of the Legacy Assets beyond simply stating a range of possible losses.  Had such information been available, the GAO would likely not have raised this concern, according to CUNA.

In a statement yesterday, NCUA Chairman Debbie Matz said that before the end of 2011, the NCUA completed its audit of the 2010 Temporary Corporate Credit Unions Stabilization Fund, which was provided to GAO.  She also said the NCUA plans to update stabilization cost estimates in the future.

CUNA will be following up with GAO to determine if the agency believes it has been provided sufficient documentation from the NCUA regarding the corporate credit union loss estimates.

CUNA continues to urge the NCUA to be as transparent as possible in releasing and updating information about the corporate credit union losses, including clear and detailed explanations of the valuations of the Legacy Assets, and will be regularly monitoring NCUA's new websites on Corporate System Resolution Costs and the NCUA Guaranteed Note program, which, CUNA says, do not yet provide adequate information. (Use resource link below to see related News Now story: NCUA launches two new sites for transparency.)  

The GAO recommended the NCUA "consider additional triggers for PCA that would require early and forceful regulatory action and offer proposals to Congress on how to modify PCA, as appropriate." Matz responding to this recommendation said her agency would strengthen its existing enforcement program, develop new predictive PCA measures that identify emerging problems earlier.

CUNA noted that the GAO report does not recommend specific rulemakings to address specific problems such as those in the failed natural person credit unions but does urge the agency to improve its detection of problems and seek changes in PCA. CUNA said it supports improvements in PCA that will not encumber well managed credit unions and hopes to work with NCUA to pursue authority from Congress for credit unions to use supplemental capital.  

CUNA will urge the NCUA to tailor any solutions that might be developed as a result of this report to problem areas only and to avoid the temptation to issue new regulations that cover all credit unions, regardless of their risk profiles.

CUNA member credit unions can use the resource link below to access CUNA's summary of the GAO report.

NCUA names risks as 2012 supervisory priority

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ALEXANDRIA, Va. (1/5/12)--While pointing out in its first letter to credit unions of the year (12-CU-01) that credit union finances continue to improve, National Credit Union Administration (NCUA) also provided credit unions with a heads up on the risk issues it will be particularly tracking this year.

Credit risk, interest rate and liquidity risk, and concentration risk levels will be watched closely by the NCUA, agency chairman Debbie Matz said the letter.

The list of risks is drawn from trends the NCUA has identified in its analysis for the credit union system's numbers from Jan. 1, 2011 through Sept. 30 of that year. The NCUA's third quarter call report data, which was released last year, showed increases in member totals, net worth and total assets, with total credit union assets increasing to $951.1 billion. The net worth ratio equaled 10.15% during the third quarter, and credit union share deposits increased by $7 billion during that time period, totaling $819.2 billion at the end of the quarter.

The NCUA letter said that federally insured credit unions, overall, "appear to be turning the corner," with "many key financial indicators" trending in the right direction, and added that the NCUA will monitor emerging risks "to ensure that the positive financial trends continue in 2012."

One of the highlighted risks, credit risks, "persist in constraining the performance of many credit unions," with delinquencies and charge-offs tied to real estate loans, business loans, and participation loans remaining "historically high," the NCUA said. The agency recommended that credit unions evaluate their Allowance for Loan and Lease Loss1 (ALLL) accounts, and fully fund that account, to cope with these risks. Credit unions should also monitor their loan modification policies and procedures "to ensure that each borrower is a suitable candidate for modification or other alternatives to foreclosure," the NCUA added.

The NCUA has also recommended that credit unions with high exposure to interest rate risks should "proactively re-structure their balance sheets, sell off excessive concentrations of long-term loans, and re-price share products before rates begin to rise."

Interest rate risks can be exacerbated by holding growing portfolios of long-term, fixed-rate loans and the purchase of investments with longer maturities to obtain slightly higher yields, the NCUA added. New and outsourced loan programs, as well as third-party indirect loan programs, also can be risky, the NCUA said. The agency also warned that credit unions that hold high concentrations of long-term fixed-rate loans could "be subject to negative margins when interest rates rise and short-term funding costs exceed income from fixed-rate mortgages," and said an increase in long-term delinquencies may lead to a sharp increase in charge-offs "in the near future."

"While the NCUA board intends to propose regulatory relief from the requirement to manually track Troubled Debt Restructurings in 2012, credit unions will still need to monitor performance of modified loans on an ongoing basis to properly mitigate credit risks," the letter said.

For the full NCUA letter to credit unions, use the resource link.

President claims recess authority to appoint Cordray to CFPB

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WASHINGTON (1/5/12)--The White House Wednesday claimed use of its executive powers to install Richard Cordray as director of the Consumer Financial Protection Board (CFPB) after the U.S. Congress failed to take action on Cordray's nomination before the current work break.

Cordray's nomination to be CFPB director was approved by the Senate Banking Committee in October, but had stalled since then. Cordray is a former Ohio attorney general who currently serves as enforcement chief at the CFPB. The bureau as created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Opponents to the CFPB director nomination have argued that the CFPB will lack transparency if run by a single director and they have been pushing for a five-member board to head the new agency, among other changes.  In fact, earlier this year 44 GOP lawmakers vowed to block confirmation of a director unless those changes were made.

However, others have argued that the CFPB's work is being held hostage in a fight that amounts to nothing more than political wrangling.  As early as last summer, before President Obama's first choice for the directorship--Elizabeth Warren--left Washington to return to Harvard University and subsequently launch a U.S. Senate race--a letter signed by 89 House Democrats urged the president to name Warren director of the CFPB by recess appointment, if necessary.

The consumer agency has been run since August by Raj Date in the role of special adviser to U.S. Treasury Secretary Tim Geithner, the post Warren filled previously.

Date had been serving as CFPB associate director of research, markets and regulations,  and has testified in his position as special adviser that the CFPB's work is being held up by it's lack of a director. With a director, the bureau will be able to assume regulatory authority over financial entities, like payday lenders and check cashers, not currently subject to federal regulation.

Also, as the Credit Union National Association (CUNA) noted in a statement on Cordray's appointment, the fact that the bureau now has a director holds other ramifications for credit unions and other financial institutions.  For example, the CFPB now will be able to move forward with its Consumer Advisory Board, which will consult with the agency on key issues, and with some regulations that have been stalled, including the regulation of remittances and rules for service providers not currently regulated by the federal government.

CUNA has met with Cordray at the CFPB in Washington, D.C., and the Ohio Credit Union League has developed a strong, professional relationship with him, CUNA noted.  CUNA President/CEO Bill Cheney said, "We will be meeting with Mr. Cordray again shortly to reinforce that credit unions are consumer-owned cooperatives and that credit unions need meaningful regulatory relief, not new regulations, in order to protect consumers."

The recess appointment promises no lack of controversy.  While the White House has determined it has the authority to go ahead with the appointment, Senate Republicans are likely to argue that they have never formerly recessed.

The Constitution provides that the recess appointment is effective until the end of the next session of the Senate. Since the recess appointment was made in the second session of the 112th Congress, it would remain effective until the end of the next session, the first session of the 113th Congress.

NEW White House to use recess appointment for CFPB director

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WASHINGTON (1/4/12, UPDATE 10:16 a.m. ET)—The White House today said it would claim use of its executive powers to install Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB) after the U.S. Congress failed to take action on Cordray's nomination before the current work break.

Cordray's nomination to be CFPB director was approved by the Senate Banking Committee in October, but had stalled since then. Cordray is a former Ohio attorney general who currently serves as enforcement chief at the CFPB. The bureau was created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Opponents to the CFPB director nomination have argued that the CFPB will lack transparency if run by a single director and they have been pushing for a five-member board to head the new agency, among other changes. In fact, earlier this year 44 GOP lawmakers vowed to block confirmation of a director unless those changes were made.

However, others have argued that the CFPB's work is being held hostage in a fight that amounts to nothing more than political wrangling. As early as last summer, before President Obama's first choice for the directorship, Elizabeth Warren, left Washington to return to Harvard University and subsequently launch a U.S. Senate race--a letter signed by 89 House Democrats urged the president to name Warren director of the CFPB by recess appointment, if necessary.

The consumer agency has been run since August by Raj Date in the role of special adviser to U.S. Treasury Secretary Tim Geithner, the post Warren filled previously.

Date  had been serving as CFPB associate director of research, markets and regulations, and has testified in his position as special adviser that the CFPB's work is being held up by it's lack of a director. With a director, the bureau will be able to assume regulatory authority over financial entities, like payday lenders and check cashers, not currently subject to federal regulation.

The recess appointment promises no lack of controversy. While the White House has determined it has the authority to go ahead with the appointment, Senate Republicans are likely to argue that they have never formerly recessed.

In an interesting side story, after Warren, a Democrat,  left Washington she announced she would challenge Sen. Scott Brown (R-Mass.) for his Senate seat.  Brown was one of only three GOP senators who did not sign the pledge to block Warren's confirmation as CFPB director.

CUNA seeks comment on CFPB Reg M changes

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WASHINGTON (1/4/12)--The Credit Union National Association (CUNA) is reviewing the Consumer Financial Protection Bureau's recent Regulation M rule to determine if there are any regulatory changes that could be made to benefit credit unions, and CUNA is asking credit unions to provide their own comment on the regulation in a new comment call.

Regulation M implements the Consumer Leasing Act of 1976 (CLA). That rule requires credit unions and other lessors to provide consumers with uniform cost and other disclosures about consumer lease transactions. The statute and the regulation generally apply to consumer leases for the use of personal property in which the contractual obligation has a term of more than four months and the lessee's total contractual obligation under the lease exceeds a specified dollar threshold. The threshold is expected to stand at $51,800 until Dec. 31.

Authority over this regulation was transferred to the CFPB from the Federal Reserve last year. The CFPB's interim final rule makes few changes to the Fed's existing text, but has been edited somewhat. The CFPB has noted that the interim final "rule does not impose any new substantive obligations on persons subject to existing Regulation M."

The interim final rule became effective on Dec. 30, 2011.

CUNA has asked credit unions to submit their comments by Jan. 17. The CFPB will accept public comment until Feb. 17.

For the full CUNA comment call, use the resource link.

NCUA responds as judge questions securities suit

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ALEXANDRIA, Va. (1/4/12)--The National Credit Union Administration (NCUA) has sought to buoy its case against RBS Securities and others by submitting to a California court background information on troubled residential mortgage-backed securities that were purchased by Western Corporate FCU (WesCorp).

NCUA is seeking $629 million in damages from RBS, alleging that the firm violated federal and state securities laws when it sold securities to WesCorp. The agency claimed that RBS sellers and underwriters caused WesCorp to believe the risk of loss associated with the investments was minimal (News Now July 19). This suit is one of several through which the NCUA is seeking about $2 billion total for losses to the corporate credit union system.

George Wu, U.S. district judge for the Central District of California, in a Dec. 19 statement, questioned the NCUA's allegations that RBS Securities and related parties "made numerous material misrepresentations" when they sold securities to WesCorp. RBS Securities, Wachovia Mortgage Loan Trust, Nomura Asset Acceptance Corp., and Nomura Home Equity Loan have filed a motion to dismiss these NCUA charges.

Wu said that the NCUA complaint against RBS and others may not meet the standards set forth by previous Supreme Court securities rulings. Wu hinted that the NCUA case could be dismissed, and requested that the NCUA provide additional information on the securities purchased by WesCorp for his review.

The NCUA's information, in response to Wu's remarks,  addresses specific allegations related to reduced documentation underwriting guidelines, loan-to-value ratios, and loan originators, among other things. The agency in this document notes that this same information has resulted in the denial of a motion to dismiss another securities-related case it brought in a separate court.

Wu has not made a final decision on how the case will proceed, according to court documents. The judge on Dec. 7 ordered the NCUA and RBS to start negotiating a settlement. (See related Dec. 20 story: Judge directs NCUA, RBS to negotiate settlement on WesCorp)

CULAC in top shape as 2012 election cycle sparks

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WASHINGTON (1/4/12)--The 2012 presidential elections are moving ever closer after the first political contest of 2012, the Iowa Republican Caucus, took place last night. The Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) is preparing to aggressively support credit union friends in this fall's elections, when the presidency, congressional seats, and state and local positions are all at stake.

CULAC raised an estimated $1.8 million in funds from credit union supporters in 2011, and $1.35 million of those funds have been disbursed to pro-credit union candidates and committees. Slightly more than 50% of that total went to Republican candidates and committees, and close to 50% of the funding went to Democratic candidates and committees. CULAC, as of Jan. 1, has nearly $800,000 in funds to spend on 2012 elections, and CUNA Vice President of Political Affairs Trey Hawkins said fundraising is keeping pace with where CULAC stood at this point in the 2009-2010 election cycle.   "CULAC is right where we want to be financially," he added.

However, while the 2011 fundraising total is impressive, "we ultimately measure CULAC's success in terms of how many pro-credit union candidates are elected," Hawkins said.

CULAC supported 386 candidates for Congress in the 2010 general election, and more than 86% of those candidates won their respective races. "That's the real measure of success, although of course that wouldn't be possible without leagues and credit unions raising the funds," he said.

Following a special election in Oregon later this month, the first congressional primaries begin in March, with primaries affecting a combined 29 House seats in Alabama, Illinois and Mississippi. Ohio holds a U.S. Senate-only primary on March 6.

Inside Washington (01/03/2012)

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  • WASHINGTON (1/4/12)--The Office of the Comptroller of the Currency, the Federal Reserve Board and Federal Deposit Insurance Corp. are seeking comment on a proposal establishing new capital requirements using alternative standards of creditworthiness to determine how much capital banks must hold to offset risks in their investments in securitizations and debt. The proposal seeks to ease banks' reliance on credit ratings through three methods for assessing risk on trading books. The methods would use country risk classifications published by the Organization for Economic Cooperation and Development for sovereign positions; company-specific information related to leverage, cash flow, and the volatility of the company's monthly stock market returns for corporate debt positions; and a supervisory formula for securitization positions. The proposal amends an interagency notice of proposed rulemaking published Jan. 11, 2011 …