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NCUA reaching out to leagues credit unions post-Sandy

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ALEXANDRIA, Va. (11/01/12)--In the wake of Hurricane Sandy, the National Credit Union Administration (NCUA) is reaching out to credit unions affected by the storm and offering assistance where possible.

NCUA Chairman Debbie Matz has contacted league presidents in impacted states to see how the agency can provide greater assistance, agency staff told News Now.

Region I and II officials are also communicating with credit unions in affected areas, and offering assistance where needed. The regional representatives are also accounting for any credit union personnel dealing with the effects of the storm.

The agency has activated its disaster relief policy, and reminded credit union members that their accounts remain insured up to $250,000. The NCUA has also encouraged credit unions to make prudent loans with special terms and reduced documentation to affected members, and to alter the terms of loans in some cases when prudent to help members.

Exams also may be rescheduled as needed. (See related Oct. 31 News Now story: NCUA's disaster relief policy, hotline activated in wake of hurricane)

Overall, the storm may have caused as much as $20 billion in damage. New Jersey was hit hard by the storm, and many credit unions in that state are regaining their footing. Credit unions have the discretion to remain open or to close, as needed.  Many are encouraging their members to use online services or ATMs until branch offices have reopened. (See related story: N.J. CUs slowly re-opening after Hurricane Sandy.)

Inside Washington (10/31/2012)

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  • WASHINGTON (11/1/12)--The Federal Deposit Insurance Corp. (FDIC) will soon release a new bankruptcy rule as required by the Dodd-Frank Act. The agency's challenge is to ensure creditors receive at least as much in a resolution as they would otherwise in a Chapter 7 bankruptcy. The FDIC is likely to implement a rule that provides a process for creditors to contest whether they received what they would have under Chapter 7, according to Michael Krimminger, a former FDIC general counsel and now a partner at Cleary Gottlieb Steen & Hamilton LLP. Dodd-Frank provides the government with the authority to circumvent traditional reorganizations in some cases and subject large financial institutions that are failing to a special wind-down process designed to limit the effects of a failure on the financial system. However, many in the industry argue the new process should not drastically differ from the current system …
  • WASHINGTON (11/1/12)--Debt settlement companies settle only a small minority of the debts they take and often require clients to stop paying credit card bills before settlement negotiations begin, the Center for Responsible Lending (CRL) said in a letter (http://www.responsiblelending.org/other-consumer-loans/debt-settlement/research-analysis/debt-settlemernt-doj-letter.pdf) to the Justice Department last week. The companies offer to settle a consumer debt with creditors for significantly less than the principal, in exchange for fees, and often misrepresent their services to consumers, the letter said. Many debt collectors or credit card companies refuse to negotiate with the firms, and may even speed up their collection efforts once a customer signs up for debt settlement, CRL said. "Requiring clients to default on their obligations to third parties, without any assurance of the third parties' cooperation, is debt settlement's central flaw," Ellen Harnick, a senior policy counsel at CRL, wrote in the letter, which was also sent to the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency and Federal Trade Commission …

iHilli again names Cheney a Top Lobbyist

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WASHINGTON (11/01/12)--For the second straight year, Credit Union National Association (CUNA) President/CEO Bill Cheney has been named a top nonprofit lobbyist by D.C.-based political publication The Hill.

Click to view larger imageCUNA President/CEO Bill Cheney, left, introduces small business owners from across the country at this year's small business Hike the Hill event. Cheney's credit union advocacy efforts earned him the "top lobbyist" distinction for the second-straight year. (CUNA Photo)
Cheney earned the distinction for his quarter-century of experience with credit unions, and The Hill noted he is "among the advocates keeping tabs on [the Dodd-Frank Wall Street Reform Act] every step of the way."

The CUNA CEO said the recognition reflects the continued efforts of CUNA, the leagues and credit unions throughout the past year. Increasing the member business lending cap for credit unions, allowing credit unions greater access to supplemental capital, and fixing troublesome ATM fee dual disclosure regulations are among the issues Cheney, CUNA and credit unions have taken on in 2012.

Cheney was one of 67 named to The Hill's 2012 list of nonprofit lobbyists. The Hill also lists leaders in grassroots, corporate and "hired gun" categories.

The Hill noted that it uses the term "lobbyist" broadly "to encompass the people who are working day in and day out" to help shape federal policy.  Not all of those listed are registered lobbyists, The Hill added.

For the full story, use the resource link.

Exam guidance released for FI tech service providers

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WASHINGTON (11/01/12)--Revised guidance to aid the supervision of technology service providers was released by federal financial regulatory agencies on Wednesday, including the National Credit Union Administration (NCUA).

Part of the new guidance came in the form of a revised Supervision of Technology Service Providers (TSP) booklet, which is part of the Federal Financial Institutions Examination Council (FFIEC) Information Technology (IT) Examination Handbook.

The FFIEC is comprised of the leaders of the NCUA, the Federal Reserve Board, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision, the Federal Deposit Insurance Corp. (FDIC) and the Consumer Financial Protection Bureau.

The FFIEC in a release said the revised TSP guidance addresses the federal financial regulatory agencies' statutory authority to supervise third-party servicers that enter into contractual arrangements with regulated financial institutions. The revised guidance also outlines the agencies' risk based examination priority ranking program and includes an appendix describing the uniform rating system for information technology (URSIT), which the agencies use for financial institutions and their technology service providers, the FFIEC added.

In the TSP Booklet, the FFIEC notes that the directors and managers of financial institutions are ultimately responsible for ensuring outsourced activities are conducted in a safe and sound manner and in compliance with applicable laws and regulations. Outsourcing management is also addressed elsewhere in the IT handbook.

The Fed, FDIC and OCC also released separate guidance that describes how various interagency supervisory programs are implemented. The guidance, which is mainly intended for Fed, FDIC and OCC managers and field examiners, also provides reporting templates for financial examiners.

For the full FFIEC release, use the resource link.

IRS pushes back FATCA compliance date

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WASHINGTON (11/01/12)--The U.S. Internal Revenue Service (IRS) and the U.S. Treasury have pushed back the compliance date for key aspects of the Foreign Account Tax Compliance Act (FATCA) until 2014 and, in some cases, as far as 2017.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.

The IRS's proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries. The FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.

The rules were scheduled to apply to payments made on and after Jan. 1, 2013. However, the IRS and Treasury in a release noted that many commenters said they would have issues following that implementation timeline. The Credit Union National Association earlier this year also noted that the compliance burdens and overhead costs credit unions would face as a result of these proposed changes would far exceed any benefit to the IRS.

As a result of these comments, the IRS and Treasury announced they are:
  • delaying the compliance date for FATCA due diligence procedures until January 1, 2014; and
  • delaying the date by which withholding agents which are not participating FFIs must document payees that do not comply with FACTA until July 1, 2014.
The compliance date for portions of FATCA that would require U.S. credit unions and other financial institutions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs will be pushed back until Jan. 1, 2017, the agencies added. Withholding on other types of payments is still expected to commence Jan. 1, 2014.

The delayed compliance dates will apply to U.S. and foreign credit unions, as well as other financial institutions.

For the IRS/Treasury release on the FATCA changes, use the resource link.

NCUA fed agencies protest bill urge autonomy

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WASHINGTON (11/1/12) --The National Credit Union Administration (NCUA)  joined with other federal financial regulators last week to strongly object to pending legislation in the U.S. Senate that would authorize the president to require all independent agencies to take up to 13 additional steps before proposing any new rule.

The bill is the Independent Agency Regulatory Analysis Act of 2012 (S. 3468) and was introduced Aug. 1 by Sen. Robert Portman (R-Ohio).  It is co-sponsored by Sens. Marker Warner (D-Va.) and Susan Collins (R-Maine).

The joint letter warns that a provision allowing the president to require independent agencies to submit their rulemakings to the Office of Management and Budget for prior review would give "any (p)resident unprecedented authority to influence policy and rulemaking functions" of agencies and would "constitute a fundamental change in the role of independent agencies."

The letter was signed by NCUA Chairman Debbie Matz and the heads of the Federal Reserve Board, U.S. Securities and Exchange Commission, Comptroller of the Currency, Federal Deposit Insurance Corp., and Consumer Financial Protection Bureau.

The letter went on to say that the bill would hamstring agencies' regulatory authority in a number of ways:  "Beyond injecting an (a)dministration's  influence directly into our rulemaking, the bill would also interfere with our ability to promulgate rules critical to our mission in a timely manner and would result in unnecessary and unwarranted litigation in connection with our rules."

The letter was addressed and sent to Sen. Joseph Lieberman (I-Conn.) and bill co-sponsor Collins as chairman and ranking member, respectively, of the Senate Committee on Homeland Security and Governmental Affairs, which the letter said is considering a possible post-election markup of the bill.

"We urge you to consider the potential negative consequences of this bill before proceeding with it legislatively," the letter writers concluded.

Womens Southwest FCU in Texas is closed

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ALEXANDRIA, Va.  (11/1/12)--Women's Southwest Federal Credit Union (WSFCU) of Dallas, Texas became the tenth federal credit union liquidation of the year when the National Credit Union Administration (NCUA) shuttered its doors Wednesday.

Announcing the liquidation, the NCUA said that the $2 million -deposit credit union, which had 743 members, was insolvent and had no prospects for restoring viable operations.

The NCUA's Asset Management and Assistance Center will transfer certain share accounts to City CU of Dallas. City CU is a full-service, federally insured, state-chartered credit union with $259.6 million in assets and approximately 38,000 members.

For accounts not transferred to City CU, the center will issue checks within a week to those holding verified accounts from Women's Southwest.

The closed credit union originally was chartered as Feminist Southwest FCU in 1974.  At the time it was closed, Women's Southwest served numerous select groups centered primarily on women's advocacy, interest, and affiliation. The credit union also served an underserved area in Dallas and other affinity groups.

Members with questions about their insurance coverage may contact NCUA's Consumer Assistance Center toll free at 800-755-1030. The center answers calls Monday through Friday between 7 a.m. and 4 p.m. (CT).

Individuals may also visit the MyCreditUnion.gov website at any time for more information about their insurance coverage.

NCUAs disaster relief policy hotline activated in wake of hurricane

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ALEXANDRIA, Va. (10/31/12)--The National Credit Union Administration (NCUA) has activated the agency's disaster relief policy, including opening the agency's toll-free consumer assistance hotline to answer financial questions related to Hurricane Sandy, to ensure continuity of credit union services and to protect consumers in the hurricane's wake.

"Hurricane Sandy is a forceful storm that requires a forceful response," NCUA Board Chairman Debbie Matz said. "NCUA is already reaching out to storm-affected credit unions to determine their needs and opening the agency's toll-free hotline to answer consumer questions related to their financial services options after Hurricane Sandy. As always, consumers can rest easy knowing that their deposits at federally insured credit unions are safe."

Consumers are reminded that share deposits at federally insured credit unions remain protected. Administered by NCUA and backed by the full faith and credit of the U.S. government, the National Credit Union Share Insurance Fund (NCUSIF) insures share accounts up to $250,000.

Credit union members needing emergency assistance related to Hurricane Sandy should call NCUA's toll-free consumer assistance hotline at 800-755-1030 and press the appropriate option. Operators will answers calls Monday through Friday between 8 a.m. and 5 p.m. ET.

Under the agency's disaster relief policy in relation to communities affected by Hurricane Sandy, NCUA will, where necessary:

  • Encourage credit unions to make prudent loans with special terms and reduced documentation to affected members.
  • Reschedule routine examinations of affected credit unions, if necessary.
  • Guarantee lines of credit for credit unions through the NCUSIF.
  • Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility.
NCUA additionally recognizes that Hurricane Sandy may have affected the orderly conduct of lending relationships with both individual members and member businesses. As a result, NCUA encourages credit unions to exercise prudent efforts to alter terms on existing loans for affected members. Actions may include:

  • Extending the terms of loan repayments;
  • Restructuring a borrower's debt obligations; and
  • Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
As part of the response to Hurricane Sandy, NCUA examiners are surveying credit unions operating in affected areas. Some credit unions and their branches in locations affected by the storm may have curtailed hours or services.

During natural disasters, NCUA works with state regulators and state league organizations to ensure all federally insured credit unions know of NCUA's available assistance. The agency's examiners will therefore remain in close contact with credit unions affected by Hurricane Sandy to offer advice and to provide material and technical assistance, as needed.

Federal credit unions may also provide assistance to other credit unions, their members, and non-members in the affected areas, under certain conditions:

  • Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals in the areas affected, can be provided under the authority to engage in charitable activities. Federal credit unions providing services on this charitable basis may not impose charges for services that exceed their direct costs.
  • A federal credit union may provide services to other credit unions that it is authorized to perform for its own members or as part of its operations. This activity is part of a federal credit union's incidental powers, so it may impose charges for these services.
Institutions in need of assistance in dealing with members affected by this disaster should contact their primary supervisory official.

Inside Washington (10/30/2012)

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  • WASHINGTON (10/31/12)--Alex J. Turner has been named assistant director of the Federal Bureau of Investigation's (FBI) Security Division. The division is responsible for ensuring a safe and secure work environment for FBI employees and others with access to FBI facilities and for preventing the compromise of national security and FBI information. Turner most recently served as the deputy assistant director for the division. Turner began his career as a special agent with the FBI in 1985. He first reported to the Atlanta Division, where he investigated drug and property crime matters. He also served as an undercover agent in several FBI investigations …

Federal government CUNA Washington offices reopen today

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WASHINGTON (10/31/12)--The Washington, D.C. office of the Credit Union National Association reopened today after being closed Monday and Tuesday due to Hurricane Sandy's impact on the area.

The U.S. Office of Personnel Management announced yesterday the federal government would reopen offices today as well.

CUNA had closed after the D.C. area closed public and private schools and suspended the Metro rail and bus service on Sunday night. Its Madison, Wis., offices were unaffected by the hurricane and remained open.

NCUA reminds LICUs of Urgent Needs support

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ALEXANDRIA, Va. (10/31/12)--As Superstorm Sandy worked its way inland on Tuesday, the National Credit Union Administration (NCUA) reminded low-income credit unions (LICUs) of the Urgent Needs Initiative, which provides grants to help restore operations and fix facilities damaged by natural disasters and other unexpected events.

LICUs may obtain up to $7,500 in grant funding to pay for repairs and fix or replace damaged equipment. The agency accepts applications for the initiative year-round.

The Urgent Needs Initiative is backed by the Community Development Revolving Loan Fund (CDRLF), and is administered by the NCUA's Office of Small Credit Union Initiatives (OSCUI).

LICUs may apply for an Urgent Needs Grant at http://www.ncua.gov/Resources/CUs/Dev/Pages/Loans.aspx.

For the full NCUA release, use the resource link.

NEW NCUA reminds LICUs of Urgent Needs support

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ALEXANDRIA, Va. (UPDATED: 12:15 P.M. ET, 10/30/12)--As Superstorm Sandy worked its way inland on Tuesday, the National Credit Union Administration (NCUA) reminded low-income credit unions (LICUs) of the Urgent Needs Initiative, which provides grants to help restore operations and fix facilities damaged by natural disasters and other unexpected events.

LICUs may obtain up to $7,500 in grant funding to pay for repairs and fix or replace damaged equipment. The agency accepts applications for the initiative year-round.

The Urgent Needs Initiative is backed by the Community Development Revolving Loan Fund (CDRLF), and is administered by the NCUA's Office of Small Credit Union Initiatives (OSCUI).

LICUs may apply for an Urgent Needs Grant at http://www.ncua.gov/Resources/CUs/Dev/Pages/Loans.aspx.

For the full NCUA release, use the resource link.

NEW NCUA activates disaster relief policy and hotline in Sandys wake

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ALEXANDRIA, Va. (FILED 11 a.m. ET 10/30/12)--To protect consumers and ensure the continuity of credit union services after Hurricane Sandy, the National Credit Union Administration (NCUA) has activated the agency's disaster relief policy, including opening the agency's toll-free consumer assistance hotline to answer financial questions related to the emergency.

"Hurricane Sandy is a forceful storm that requires a forceful response," NCUA Board Chairman Debbie Matz said. "NCUA is already reaching out to storm-affected credit unions to determine their needs and opening the agency's toll-free hotline to answer consumer questions related to their financial services options after Hurricane Sandy. As always, consumers can rest easy knowing that their deposits at federally insured credit unions are safe."

Consumers are reminded that share deposits at federally insured credit unions remain protected. Administered by NCUA and backed by the full faith and credit of the U.S. government, the National Credit Union Share Insurance Fund (NCUSIF) insures share accounts up to $250,000.

Credit union members needing emergency assistance related to Hurricane Sandy should call NCUA's toll-free consumer assistance hotline at 800-755-1030 and press the appropriate option. Operators will answers calls Monday through Friday between 8 a.m. and 5 p.m. ET.

Under the agency's disaster relief policy in relation to communities affected by Hurricane Sandy, NCUA will, where necessary:

  • Encourage credit unions to make prudent loans with special terms and reduced documentation to affected members.
  • Reschedule routine examinations of affected credit unions, if necessary.
  • Guarantee lines of credit for credit unions through the NCUSIF.
  • Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility.
NCUA additionally recognizes that Hurricane Sandy may have affected the orderly conduct of lending relationships with both individual members and member businesses. As a result, NCUA encourages credit unions to exercise prudent efforts to alter terms on existing loans for affected members. Actions may include:

  • Extending the terms of loan repayments;
  • Restructuring a borrower's debt obligations; and
  • Easing credit terms for new loans to certain borrowers, consistent with prudent practices.
As part of the response to Hurricane Sandy, NCUA examiners are surveying credit unions operating in affected areas. Some credit unions and their branches in locations affected by the storm may have curtailed hours or services.

During natural disasters, NCUA works with state regulators and state league organizations to ensure all federally insured credit unions know of NCUA's available assistance. The agency's examiners will therefore remain in close contact with credit unions affected by Hurricane Sandy to offer advice and to provide material and technical assistance, as needed.

Federal credit unions may also provide assistance to other credit unions, their members, and non-members in the affected areas, under certain conditions:

  • Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals in the areas affected, can be provided under the authority to engage in charitable activities. Federal credit unions providing services on this charitable basis may not impose charges for services that exceed their direct costs.
  • A federal credit union may provide services to other credit unions that it is authorized to perform for its own members or as part of its operations. This activity is part of a federal credit union's incidental powers, so it may impose charges for these services.
Institutions in need of assistance in dealing with members affected by this disaster should contact their primary supervisory official.

U.S. Central Bridge officially closed

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ALEXANDRIA, Va. (10/30/12)--Completing three years of efforts to stabilize the corporate credit union sector, the National Credit Union Administration (NCUA) Monday closed U.S. Central Bridge Corporate FCU and used the closing to remind credit unions of the need to address their emergency liquidity needs.

"Closing U.S. Central Bridge is the last step in the effort to stabilize and reform a corporate credit union system that was close to collapsing three years ago," NCUA Board Chairman Debbie Matz said. "Decisive actions by both NCUA and credit unions brought the system back from the brink. It wasn't easy, and it required sacrifices, but there was no interruption of service to members while we overcame the worst economic crisis since the 1930s.

"We now have a stronger, safer system," Matz added. "We have set high standards for corporate credit union investments, capital and governance, and we've created a new operating environment for wholesale corporate credit unions to serve retail credit unions. The decisions NCUA and credit unions made have produced a solid foundation for the future."

Chartered in October 2010, the Lenexa, Kan.-based U.S. Central Bridge assumed operations of U.S. Central FCU to maintain continuity of services to corporate credit union members, prevent disruption to the credit union system, and protect consumers.

Founded in 1974, U.S. Central was once the largest corporate credit union. However, it was part of a group of five corporate credit unions devastated by losses incurred through the purchase of faulty mortgage-backed securities (MBS) in the years preceding the financial crisis that began in 2008. NCUA placed U.S. Central into conservatorship in March 2009, and the credit union was subsequently transitioned into U.S. Central Bridge.

To lower the Temporary Corporate Credit Union Stabilization Fund assessments that credit unions will need to pay to cover the losses in the corporate system, NCUA has to date initiated eight legal actions against seven Wall Street securities firms that packaged and sold faulty MBS products to the failed corporates, alleging misrepresentation of their risk. NCUA has separately settled with three other firms for more than $170 million.

With the closing of U.S. Central Bridge, NCUA is also planning emergency liquidity options for credit unions. Most retail credit unions had access to emergency liquidity from the Central Liquidity Facility (CLF) by belonging to a corporate credit union that was part of the CLF agent group headed by U.S. Central Bridge.

U.S. Central Bridge held stock in NCUA's CLF on behalf of all natural person credit unions that are members of a corporate but not a direct member of the CLF. As part of the closure, U.S. Central Bridge redeemed its CLF stock and the agent group is now no longer providing CLF coverage for member natural person credit unions. As a result, credit unions and their corporates no longer have the CLF as a source of backup liquidity, unless they join the CLF directly.

In July, NCUA's Board issued for 60-day comment a targeted proposed rule (new Section 741.12) to require credit unions to plan for emergency liquidity. The proposed rule incorporates a three-tiered approach, based on the size of the federally insured credit union:

  1. Credit unions under $10 million in assets would have to maintain a written liquidity policy approved by their board. The policy would provide a basic framework for managing liquidity and have a list of contingent liquidity sources for use in emergency situations.
  1. Credit unions with more than $10 million in assets would have to establish a formal contingency funding plan that clearly sets out strategies for addressing liquidity shortfalls in emergency situations.
  1. Credit unions with more than $100 million in assets would have to demonstrate access to at least one of the following three options for a backup federal liquidity source:
  • Becoming a direct member of the CLF;
  • Becoming an indirect CLF member through a CLF agent; or
  • Establishing direct borrowing access to the Federal Reserve's Discount Window.
"Credit unions have access to everyday liquidity needs through their balance sheet, and through correspondent relationships such as corporates or Federal Home Loan Banks," Matz noted. "But in the event of another systemic crisis, it is also critical for larger credit unions to have demonstrated access to a dependable source of government-backed emergency liquidity, such as NCUA's CLF or the Federal Reserve Discount Window. That's why the NCUA Board proposed the emergency liquidity rule."

NCUA staff is now reviewing the 45 comments received on the proposed "access to emergency liquidity" rule to develop a recommendation for further action

Credit union executives, managers, and directors can learn more about the CLF by watching a video on NCUA's YouTube channel or go to NCUA's website. Use the links.

Weather closes CUNAs Washington office today

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WASHINGTON (10/30/12)--The Washington, D.C., office of the Credit Union National Association (CUNA) is closed again today due to the worsening weather from Superstorm and former Hurricane Sandy. The CUNA office in Madison, Wis., is fully operational.

Earlier Monday it was announced that the area's Metrorail system and bus service would not resume service today because of worsening weather conditions.

"With all public schools in the D.C. area being closed and Metro rail and bus service being suspended, staying open would be a hardship for many, at best," said CUNA Executive Vice President John Magill Monday.  Many private schools in the area also that they would be closed today.

Federal government offices in Washington are also closed, as are many local county government offices.

Inside Washington (10/29/2012)

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  • WASHINGTON (10/30/12)--Banks are urging federal regulators to delay Basel III implementation. Regulators have received more than 700 letters regarding the Basel III accord, which would require financial institutions to hold more and higher-quality capital (American Banker Oct. 29). Smaller institutions seek exemption from some of its requirements. Larger institutions are looking for revisions such as an easing on risk-based capital requirements, a filter on how much capital banks must hold against certain instruments, a narrower definition of financial institutions, and removing duplicative requirements that force banks to comply with 11 different ratios. Banks also argue that the Jan. 1 deadline does not provide them with enough time to comply …
  • WASHINGTON (10/30/12)--Comptroller of the Currency Thomas Curry Monday issued a warning to banks that are releasing reserves too quickly in an to effort boost earnings. In a speech to the Risk Management Association in Dallas, Curry said his office is ready to take action again banks that release loan reserves. "With fresh memories of the financial crisis and a deep recession that led to hundreds of bank and thrift failures, that has to be a matter of concern to all of us," Curry said. In the current economic environment Curry said the OCC did not want to err on the side of allowing reserves to become too lean. "At the same time, it is important that we maintain the integrity of the balance sheet so that investors and others can reasonably assess a financial institution's condition," he added. "That's why traditional accounting practices have prescribed rigorous methodologies for determining the amount of the loan loss allowance" …

CUNA Washington is closed today

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WASHINGTON (10/29/12)--The Washington, D.C. office of the Credit Union National Association (CUNA) is closed today due to concerns about the storm conditions and damage that might be brought to the area by Hurricane Sandy.  The CUNA office in Madison, Wisc. is fully operational.

"With all public schools in the D.C. area being closed and Metro rail and bus service being suspended, staying open would be a hardship for many, at best," said CUNA Executive Vice President John Magill Sunday evening.  Many private schools in the area also announced Sunday that they would be closed today.

Federal government offices in Washington are also closed, as are many local county government offices.

New NCUA OCP director is named

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ALEXANDRIA, Va. (10/29/12)--Gail Laster will become the new director of the National Credit Union Administration's (NCUA) Office of Consumer Protection (OCP) on Nov. 19, the agency announced Friday.

Laster has served as House Financial Services Committee deputy chief counsel since 2007. She has also served as general counsel to the U.S. Department of Housing and Urban Development and as counsel to both the Senate Judiciary and Labor and Human Resources Committees. During her career, Laster helped legislators draft many consumer protection laws, including the Dodd-Frank Wall Street Reform Act and the Consumer Protection Act, the agency added.

NCUA Chairman Debbie Matz in a release said Laster's "extensive background in consumer protection, community development and financial services makes her an ideal choice" as the next OCP director. "She's an expert in policy, understands how to work with an array of constituencies, and brings the kind of consumer-focused approach that is central to our mission," Matz added.

Laster will replace current OCP Director Kent Buckham, who will retire at the end of the year. Matz hailed Buckham's  contributions during his 35 years with the agency, and his dedication to NCUA's mission.

For the NCUA release, use the resource link.

The OCP addresses consumer matters, as well as field-of-membership and chartering activities. It is split into two divisions, one addressing consumer protection and one addressing consumer access.

The Division of Consumer Access covers:
  • New federal credit union charters;
  • Charter conversions;
  • Field-of-membership expansions;
  • Bylaw amendments; and
  • Low-income designations.
The Division of Consumer Compliance and Outreach (CCO):

  • Addresses consumer compliance policies, program and rulemaking;
  • Acts as an interagency liaison on consumer protection and compliance issues;
  • Conducts fair lending examinations;
  • Manages its own consumer call center and financial literacy and outreach programs; and
  • Serves as the agency's ombudsman.

Inside Washington (10/26/2012)

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  • WASHINGTON (10/29/12)--Of the more than 700 banks that received Troubled Asset Relief Program (TARP) funds since the financial crisis, about 20 have failed, six within the past year, according to the Treasury Department. Regulators closed down two banks last week: $201 million-asset Excel Bank and $159 million-asset GulfSouth Private Bank (American Banker Oct. 26). The failures indicate that while TARP was a buffer that helped some banks weather the financial storm, it didn't keep them afloat indefinitely, according banking industry lawyers. The number of TARP failures would be higher, but community banks had to pass a viability test before receiving the funds. After the initial TARP funds were issued in 2008, smaller banks had to prove they could survive to qualify for additional capital. As the economy remained sluggish, capital has diminished at many TARP-funded banks. Of the 185 banks considered to be at high risk for failure at the end of the second quarter, 30 received TARP funds, according to Trepp, a firm that provides information on financial markets …

CUs can work amid D.C. gridlock CUNA says

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WASHINGTON (10/29/12)--While the partisan gridlock that has gripped much of Washington persists, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan last week said credit unions must find ways to maneuver through it and continue to promote credit union-friendly legislation.

Speaking at CUNA's Community Credit Union & Growth Conference in Denver, Donovan said the best way to break through is by putting credit union boots on the ground. (Credit Union Magazine Oct. 26)

Donovan said CUNA has held hundreds of meetings with congressional staff in recent weeks, and noted that this type of direct advocacy will continue when credit unions from across the country go to Washington for a late-November National Hike the Hill.

Increasing the 12.25%-of-assets credit union member business lending cap to 27.5% will be a main focus of those meetings.  Donovan said he still expects a vote on legislation that would increase the cap before 2012 has ended.

CUNA Deputy General Counsel Mary Dunn also spoke at the event. In her remarks, Dunn said reducing the regulatory burden faced by credit unions continues to be a top priority. Dunn noted that CUNA this year has filed 75 comment letters to the Consumer Financial Protection Bureau (CFPB), National Credit Union Administration (NCUA) and other agencies. CUNA has also made daily contact and held frequent face-to-face meetings with the CFPB, NCUA and other agencies, she said.

For more on the CUNA conference, use the resource link.

TDR call report changes detailed in NCUA letter

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ALEXANDRIA, Va. (10/29/12)--The National Credit Union Administration (NCUA) on Friday detailed several 5300 call report changes that will help implement requirements included in the NCUA's May 2012 Final Rule on troubled debt restructurings (TDR) and loan-workout guidance.

One such change, as detailed in the letter to credit unions (12-CU-12), will mean credit unions will no longer need to report modified-loan information on their 5300 call reports, starting with the Dec. 31, 2012, call report cycle. Instead, they will be required to report information on their TDR loans, the NCUA said.

The NCUA said this change will impact the delinquency, charge-off and recovery, and specialized-lending schedules.

The agency in the letter detailed pending changes to the March 2013 call report and profile. Among those changes are new data field categories for delinquencies related to:

  • Member business loans secured by real estate;
  • Member business loans not secured by real estate;
  • Nonmember business loans secured by real estate; and
  • Nonmember business loans not secured by real estate.
New sections for data on loans held for sale and unfunded commitments for business-loan categories were also added for the March 2013 call report period. Changes to sections addressing purchased credit impaired loans, investments, Equal Employment Opportunity Commission filing requirements, remittance transfers and grants have also been added, the NCUA said.

The NCUA also released revised delinquent loan schedules that will take effect beginning with the June 2013 call report cycle. Specifically, the NCUA said the changes clarify reporting requirements by changing delinquency categories from "months" to "days." These changes are meant to align the NCUA's reporting standards with those of other federal regulators, and to eliminate confusion arising from differences in the number of days per month.

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

The new NCUA TDR rules allow credit unions to modify TDR loans without having to immediately classify those loans as delinquent. The rules also set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications.

Fed delays second phase of Reg D changes

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WASHINGTON (10/29/12)--Implementation of the second phase of the Federal Reserve's program to simplify reserve requirement administration will be delayed until June 27, 2013, the agency said Friday.

The delay will allow for further development and testing of automated systems to ensure a smooth transition for affected institutions, the Fed said in a release.

The Fed in April amended its Regulation D, which governs reserve requirements of depository institutions, in a bid to simplify those requirements and reduce costs.

According to the Fed, the amendments simplify reserves administration by:

  • Creating a common two-week maintenance period for all depository institutions;
  • Creating a penalty-free band around reserve balance requirements in place of carryover and routine penalty waivers;
  • Discontinuing as-of adjustments related to deposit revisions;
  • Replacing all other as-of adjustments with direct compensation; and
  • Eliminating the contractual clearing balance program.
The contractual clearing balance and direct compensation changes are already in effect. Implementation of the remaining amendments was scheduled to take place on Jan. 24.

The Credit Union National Association supports the Fed Reg D changes.

The Fed last week also announced the annual indexing of the reserve requirement exemption amount and of the low reserve tranche for 2013. These amounts are used in the calculation of reserve requirements of depository institutions.

For net transaction accounts in 2013, the first $12.4 million, up from $11.5 million in 2012, will be exempt from reserve requirements. A 3% reserve ratio will be assessed on net transaction accounts over $12.4 million up to and including $79.5 million, up from $71.0 million in 2012. A 10% reserve ratio will be assessed on net transaction accounts in excess of $79.5 million.

For more on the Fed Reg D changes, use the resource links.

NCUA alerts CUs to prepare as Sandy approaches

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ALEXANDRIA, Va. (10/29/12)--National Credit Union Administration (NCUA) Chairman Debbie Matz on Friday reminded East Coast credit unions to "take safety precautions" as Hurricane Sandy approached mid-Atlantic and Northeast states.

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"We know that an ounce of prevention now will help to prevent problems later. NCUA stands ready to do what is needed to help credit unions affected by the storm," Matz said. She noted that the NCUA continues to protect deposits at federally insured credit unions up to $250,000.

The agency in a release said it is prepared to activate emergency response plans, if needed, and will take steps to assist credit unions in maintaining normal operations or, in the event of a disruption, to restore those services as quickly as possible.

The National Weather Service late Sunday predicted Sandy would bring hurricane-grade winds and life threatening flooding to areas of the mid-Atlantic and Northeast. Hurricane-force winds extended as far as 175 miles out from the center of the storm, which is expected to turn northwest and make landfall today.

See related News Now story, "Disaster plans ready for 'Frankenstorm' Sandy.

Mortgage rates remain low Freddie Mac reports

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WASHINGTON (10/26/12)--Average fixed mortgage rates increased slightly this week, but remained near recent record lows, Freddie Mac reported Thursday.

Thirty-year fixed-rate mortgages averaged 3.41% this week, 3.37% last week and 4.10% this time last year. Fifteen-year fixed-rate mortgages averaged 2.72% this week, 2.66% last week and 3.38% this time last year.

Five-year adjustable-rate mortgages (ARMs) averaged 2.75% this week, the same as last week's average. Those ARMs averaged 3.08% the same week last year.

The average one-year ARM was 2.59%, down slightly from the 2.60% average reported last week. One-year ARMs averaged 2.90% this week last year.

The mortgage rates reflect market conditions for the week ended Oct. 25.

Freddie Mac Vice President and Chief Economist Frank Nothaft said the low mortgage rates "should continue to support the housing market and mortgage refinance."

However, Credit Union National Association (CUNA) Chief Economist Bill Hampel last month said continued low mortgage rates can be a "something of a double-edged sword for credit unions." On one hand, he said, the resulting refinancing boom will generate significant income. "Also, the stronger the recovery in the housing market, the better the outlook for moderation in future National Credit Union Administration (NCUA) corporate stabilization assessments.

"On the other hand, higher-rate mortgages in credit union portfolios are being prepaid, and replacing those mortgages with new mortgages at these very low interest rates is perilous," he added.

Outside law firms help agency help CUs NCUA says

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WASHINGTON (10/26/12)--The National Credit Union Administration's (NCUA) use of law firms that operate on a "contingency basis" to sue banks and recover losses of failed corporate credit unions benefits credit unions by reducing costs of pursuing the recoveries, the agency said Thursday.

NCUA Public Affairs Specialist John Fairbanks told News Now that "credit unions benefit from NCUA's legal efforts," and the funds recovered as a result of those lawsuits "help reduce what credit unions--owned by their members--have to pay to cover the losses of the failed corporate credit unions."

The NCUA has taken legal action against several Wall Street firms alleging they violated federal and state securities laws when they sold securities to now-defunct corporate credit unions. The agency has filed suit against U.S.-based subsidiary of Swiss bank Credit Suisse, J.P. Morgan Securities, RBS Securities, Goldman Sachs, and Wachovia, and each of these suits are progressing through the court system. The agency has settled with Citigroup, Deutsche Bank Securities, and HSBC, avoiding the cost of litigation and bringing in more than $170 million in funds that were lost due to the corporate credit union investments.

Funds recovered through these legal actions will be used to help reduce the amount of future corporate stabilization assessments on credit unions, the NCUA has said.

Two firms, Kellogg Huber Hansen Todd Evans & Figel PLLC and Korein Tillery LLC, have pursued cases against the banks, on behalf of the NCUA. The agency is reportedly paying the firms on a contingency arrangement basis. This arrangement would provide the firms with one-fourth of any judgment they secure for the agency, and the total payment could be hundreds of millions of dollars, The Wall Street Journal (Oct . 24) reported.

The Journal reported that Rep. Darrell Issa (R-Calif.) in a recent letter to the NCUA's Office of the Inspector General asked whether these payment arrangements violate a 2007 executive order signed by then-President George W. Bush. The order, entitled "Protecting American Taxpayers from Payment of Contingency Fees," is meant to prevent federal agencies from using these sorts of payment arrangements with attorneys. "Contingency fee arrangements impose exorbitant or unnecessary costs on taxpayers who have a right to expect the government to operate transparently and efficiently," Issa told the Journal. The congressman added that the payment arrangement could harm credit union members by diverting funds that should go to paying off the corporate credit union stabilization costs.

Fairbanks told News Now the NCUA retained specialized outside counsel consistent with agency policies and with applicable law. "The OIG functions independently of the NCUA Board, so we cannot comment on its activities," he added.

Credit Union National Association General Counsel Eric Richard told the Journal the high cost is "the price of being in the game, unfortunately." Credit unions may be concerned by the price tag, but, in the end, the compensation is "probably a pretty good deal," Richard said. He explained that contingent fees as high as 40% are common, with the norm probably being in the 30-35% range. The contingency fees the NCUA is paying appear to be near or below 25%--still a large amount of money for the law firms involved, but these firms also took a large risk that they would get paid nothing if they failed to win or settle these cases, he noted.

CUNA holds hundreds of Hill meetings during recess

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WASHINGTON (10/26/12)--While many perceive pre-election recesses as a "down time" for the U.S. Congress, the Credit Union National Association (CUNA) has held daily meetings with Capitol Hill staffers since the current recess began earlier this month, making use of all opportunities to conduct critical credit union outreach.

CUNA's total number of meetings currently hovers near 200, and more meetings are planned for the week-and-a-half before the election is held on Nov. 6.

CUNA Executive Vice President John Magill said even with lawmakers are on the campaign trail, up to 95% of regular Washington-based congressional staffers have remained in their Capitol Hill offices. He noted that many are high-level committee staff, with expertise in their respective fields.

"Some of the best policy discussions can come at times like this, when there are fewer distractions from the usual mix of committee and subcommittee meetings, votes and the like," Magill said. "While there are fewer coats and ties worn, the staff members are still here… and it's a great chance for us to reach out and make our points," he told News Now.

CUNA staff have advocated for credit unions in discussions with staff representing high-ranking members of the U.S. House and Senate, including House and Senate leadership, committee leadership, and ranking committee and subcommittee members. Key credit union issues, such as increasing the statutory member business lending (MBL) cap, access to supplemental capital, ATM fee disclosure fixes, among others, are addressed in these meetings.

The staffers are working to prepare for a post-election session, where tax and spending issues are sure to be discussed, and extenders and other bills could be offered.

Magill also stressed that credit unions and the state credit union leagues must also do their part in their home districts to reach their respective legislators over the next week-and-a-half.

The New Jersey Credit Union League (NJCUL) will be one credit union group taking such actions when it meets with Rep. Scott Garrett (R-N.J.) next week. The meeting will focus on potential reforms to the secondary mortgage market, and NJCUL President/CEO Paul Gentile said the league will meet with Garrett "to ensure that credit unions and other smaller lenders continue to have access to a viable secondary mortgage market and are not put at a competitive disadvantage with large banks."

The league frequently meets with Garrett and other legislators to discuss credit union issues.

Inside Washington (10/25/2012)

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  • WASHINGTON (10/26/12)--The Federal Deposit Insurance Corp. (FDIC) still must address several outstanding issues before the financial system is prepared to withstand another crisis, according to a report released by the private firm Federal Financial Analytics. Among the matters still to be addressed are the structure of bridge entities, overseas financial crises, treatment of broker-dealers, futures commodity merchants, qualified financial contracts, bankruptcy equivalence testing, living wills, financial market infrastructure, legal-entity identifiers and data processing uncertainties. However, the report also said the FDIC has implanted the system in many respects, including establishing rules regarding creditor claims and compensation clawbacks. The report was commissioned by the Securities Industry and Financial Markets Association. Federal Financial Analytics issued two accompanying reports: one exploring the current regulatory landscape, and another on operational impediments to effective financial regulation
  • WASHINGTON (10/26/12)--The Federal Reserve Board on Thursday announced its annual indexing of the reserve requirement exemption amount and of the low reserve tranche for 2013. These amounts are used to calculate of reserve requirements of depository institutions. The board also announced the annual indexing of the nonexempt deposit cutoff level and the reduced reporting limit that will be used to determine deposit reporting panels effective 2013. All depository institutions must hold a percentage of certain types of deposits as reserves in the form of vault cash, as a deposit in a Federal Reserve Bank, or as a deposit in a pass-through account at a correspondent institution. Reserve requirements are assessed on the depository institution's net transaction accounts (mostly checking accounts).  Depository institutions also must regularly submit reports of their deposits and other reservable liabilities. For net transaction accounts in 2013, the first $12.4 million, up from $11.5 million in 2012, will be exempt from reserve requirements. A 3% reserve ratio will be assessed on net transaction accounts over $12.4 million up to and including $79.5 million, up from $71 million in 2012. The Fed will assess a 10% reserve ratio will be assessed on net transaction accounts in excess of $79.5 million …

Inside Washington (10/24/2012)

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  • WASHINGTON (10/25/12)--Community banks are reassessing their relationships with government contractors over concerns that the impending fiscal cliff could prompt spending cuts. If legislators fail to reach a compromise by year end, $1.2 trillion in deficit reduction moves will be initiated Jan. 2, hurting businesses that provide services to the government, say the banks. Banks are scrutinizing credit lines, increasing loan-loss allowances and reducing government-related lending (American Banker Oct. 24). The fiscal cliff could hurt small banks that extended credit to government contractors as overall loan demand has slowed. Contractors would feel the pressure if banks cut back on government lending. Legislative gridlock could reduce banks' appetite for lending, said Wes Teague, the chief operating officer of Z Systems, which provides logistics services to the public and private sectors …

Catalyst Corporate to assume FirstCorp next week

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ALEXANDRIA, Va. (10/25/12)--Catalyst Corporate FCU early next week will assume the members and assets of First Corporate CU, a Catalyst representative told News Now on Wednesday.

Members of Phoenix-based First Corporate CU in August approved the purchase and assumption of the majority of its assets by Catalyst Corporate FCU. The deal required approval from the National Credit Union Administration and the Arizona Department of Financial Institutions before it could move forward.

FirstCorp held $1.1 billion in assets and had 48 members as of May, and the corporate's assets and share accounts will be transferred as part of the deal. Legacy assets will not be acquired by Catalyst, but will remain in the FirstCorp charter until they mature or are sold at a later date. "This approach protects FirstCorp's membership capital, which will remain at FirstCorp, and will also immunize Catalyst's members against the risk of future losses on these assets," Catalyst President/CEO Kathy Garner said in August.

Catalyst Corporate FCU was formed one year ago when the corporate credit union consolidated Georgia Corporate FCU and Southwest Bridge Corporate FCU. Catalyst had more than 1,230 credit union members at the end of August 2012, and its capital grew to more than $150 million during its first year.

The Plano, Texas-headquartered corporate also maintains branch offices in Georgia and Hawaii, and is working to secure space in Southern California. The corporate also has staff in California, Oregon, Washington, Oklahoma, Florida, Utah and Idaho. They also provide coverage for the neighboring states of Nevada, New Mexico, Arkansas and Louisiana.

MBL cap increase would answer biz loan demand CUNA

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WASHINGTON (10/25/12)--While interest in U.S. Small Business Administration (SBA) lending programs continues to surge, the SBA in a recent release noted that "high-growth small businesses continue to face difficulties in accessing patient, long-term capital to grow and create jobs."

The SBA this week reported that its Small Business Investment Company (SBIC) debenture program, which was established in part to address these access issues, provided an all-time record $2.95 billion to small businesses in the 2012 fiscal year. This total represented a 14% increase over the fiscal 2011 total of $2.59 billion, and an 85% increase over 2010's total. The SBA this month also reported that its loan programs posted the second largest dollar volume ever in 2012, with the agency supporting $30.25 billion in small business loans.

Increasing the member business lending (MBL) cap for credit unions could be another way the government could help serve the pent-up demand for small business loans, Mike Schenk, Credit Union National Association (CUNA) vice president of economics and statistics, said following this week's SBA release.

"Credit unions are active participants in various SBA programs and the recent growth in credit union SBA lending makes it clear that SBA programs are a key component in helping small companies overcome their financing difficulties. However, it's also important to note that thousands of small businesses that face difficulties in accessing capital don't qualify for SBA programs and/or are unwilling, for a variety of reasons, to use SBA programs," Schenk added.

"Credit unions have grown all types of business loans at healthy rates since the start of the financial crisis. But an increasing number are beginning to bump against an arbitrary statutory cap on lending to small businesses--threatening small business access to this additional source of capital," he said.

Bills that would increase the credit union MBL cap to 27.5% of assets have been introduced both in the U.S. House (H.R. 1418) and Senate (S. 2231).  Members of both parties support the MBL cap increase bills: H.R. 1418 has 140 cosponsors and S. 2231 has 21 cosponsors.  Senate leadership has committed to a floor vote on the MBL legislation.

CUNA analysis shows the MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

CFPB to begin debt collector supervision

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WASHINGTON (10/25/12)--The Consumer Financial Protection Bureau (CFPB) is planning to start supervision of consumer debt collection agencies with more than $10 million in annual receipts on Jan. 2.

In a release, the CFPB said firms that may buy defaulted debt and collect the proceeds for themselves, firms that may collect defaulted debt owned by another company in return for a fee, and debt collection attorneys who collect through litigation will be subject to agency supervision. The agency noted that single companies may use all three methods to pursue debtors.

The CFPB's examination authority will cover around 175 debt collectors, representing more than 60% of the total debt collection market. The agency estimates that around 30 million Americans carry $1,500 of debt that would be subject to collection.

"By expanding the supervision program to oversee the nonbanks that are larger participants in the consumer debt collection market, the bureau will now have a window into every stage of the process--from the origination of credit to debt collection," the CFPB said.

This will be the first time debt collectors are supervised on the federal level, CFPB Director Richard Cordray noted. "Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly… we want all companies to realize that the better business choice is to follow the law--not break it," he added.

Once examination of these debt collection firms begins, the CFPB said staff examiners will assess potential consumer risks and consider whether debt collectors are complying with requirements of federal consumer financial law. A field guide to aid agency examiners was also released.

According to the agency, the examiners will determine whether:

  • Required disclosures are provided to consumers;
  • Debt collectors are using accurate data in their pursuit of debt;
  • Collection agencies offer adequate consumer complaint and dispute resolution processes to debtors; and
  • Debt collectors are treating debtors with due respect, and avoiding harassing or deceptive tactics.
The CFPB on Wednesday also published a question and answer document on debt collection practices, and held a field hearing on the issue in Seattle.

For more on the CFPB's debt collector plans, use the resource link.

Cheney Senate letter counters banks MBL statements

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WASHINGTON (10/25/12)--The greatest obstacles to credit unions providing access to more credit for small business are the banks who oppose credit union member business lending (MBL) legislation, not a lack of designations as low- income institutions, Credit Union National Association (CUNA) President/CEO Bill Cheney wrote in a Wednesday letter to members of the Senate and their staff.

The National Credit Union Administration (NCUA) in August reached out to 1,003 credit unions, indicating they are eligible for the low-income credit union (LICU) designation. The notified credit unions were offered a streamlined LICU application process, and many accepted the LICU designation. The LICU designation brings benefits that include the ability to accept supplemental capital and an exemption from the 12.25%-of-assets MBL cap under certain circumstances.

Banks are complaining to Congress that the NCUA's LICU actions were an attempt to outmaneuver the MBL cap. The Independent Community Bankers of America sent such a message this week.

Cheney in CUNA's letter noted that banks have claimed this recent NCUA action "has, in effect, magically relieved Congress of the need to enact legislation permitting the credit unions with the most business lending experience to continue to lend to their small business members," Cheney wrote. "Nothing could be further from the truth."

Just over three-fourths of the credit unions that were offered LICU designations by the agency do not offer business loan products, Cheney said.

There are 503 credit unions actively affected by the MBL cap, and 34 of these were offered relief under the LICU designation. "That leaves 469 of 503 credit unions that still need their cap raised," Cheney added.

The CUNA CEO urged senators to support S. 2231, which would increase the MBL cap to 27.5% of assets. MBL cap-increase legislation "is about giving the credit unions with the most business lending experience the opportunity to continue to lend to their members, and continue to help in the economic recovery. It is common sense legislation that raises the cap in a responsible manner and at no cost to taxpayers," Cheney said.

Increasing the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment, according to CUNA estimates.

CU CEO to chair N.Y. Feds consumer council

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NEW YORK (10/25/12)--Albany, N.Y.-based SEFCU President/CEO Michael Castellana has been named chairman of the Federal Reserve Bank of New York's Community Depository Institutions Advisory Council (CDIAC).

The New York Fed's president and first vice president meet with the council tweice a year to discuss regional economic and financial conditions and issues facing community depository institutions. The council provides insight to the New York Fed.

The CEO of the $2 billion assets, 200,000-member credit union also will represent the second district on the Federal Reserve Board's 2013 CDIAC.

Castellana was named to the 2013 edition of the CDIAC last week, alongside Glenn Barks, president/CEO of First Community CU, Chesterfield, Mo.

Castellana and Barks will join 10 other members on the CDIAC. The council provides input to the Fed on the economy, lending conditions and other issues. The Fed selects one member from each of its 12 Fed local advisory councils to serve on the CDIAC, and the council meets with the Fed in Washington, D.C., twice each year.

American National Bank and Trust Co. Executive Chairman Charles Majors will serve as CDIAC president in 2013, and Drake Mills, president/CEO of Community Trust Bank, will serve as vice president.

Brokaw Chatzky are first on packed GAC speaker list

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WASHINGTON (10/24/12)--NBC News anchor and best-selling author Tom Brokaw and award-winning personal finance journalist and author Jean Chatzky will headline the Credit Union National Association's (CUNA) 2013 Governmental Affairs Conference (GAC), Feb. 24-28 at the Washington Convention Center.

CUNA President/CEO Bill Cheney said CUNA is delighted to continue the tradition of bringing great speakers to the GAC stage. "Tom Brokaw will share his unique insight into more than 50 years of American life. Jean Chatzky is a perfect fit with the credit union movement: she is all about empowering Americans to make strong, life-long financial choices," he said.

Chatzky is an award-winning journalist, best-selling author and financial editor for NBC's Today Show. She is also a contributing editor for MORE magazine, a columnist for The New York Daily News and a daily blogger at her site, JeanChatzky.com. Chatzky has also authored numerous books including her latest, Money Rules: The Simple Path to Lifelong Security and the recent release Money 911: Your Most Pressing Money Questions Answered, Your Money Emergencies Solved, a New York Times best seller. Chatzky has also been a guest several times on CUNA's Home & Family Finance radio show.

The theme of the 2013 GAC, Powerful Cause, Positive Effect, reflects the credit union commitment to the 95 million working Americans who rely on credit unions every day, he added. CUNA's GAC is the credit union movement's premier political event and its largest national conference, each year providing more than 4,000 credit union executives and board members an opportunity to hear influential leaders from Congress, presidential administrations and federal regulatory agencies.

GAC attendees will also have the chance to meet directly with their members of Congress here in Washington.

Recognized as the key conference to attend for political impact, credit union networking and industry updates, the GAC also offers a wide array of educational breakout sessions, the industry's largest exhibitor showcase, guest/family programs to tour Washington's sights, and special entertainment including an opening concert and the closing Gala Reception and Dance.

Keynote and other speakers and session topics will be announced in the weeks to come. For more information, follow the @CUNAverse twitter hashtag #CUNAGAC.

To register, use the resource link.

Inside Washington (10/23/2012)

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  • WASHINGTON (10/24/12)--The Financial Action Task Force (FATF), during a planning session last week, announced a number of new steps to protect the international financial system from abuse. Among the new steps, the FATF said it would begin producing two public documents as part of its ongoing work to identify jurisdictions that may pose a risk to the international financial system: an FATF Public Statement on jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies, and an Improving Global AML/CFT Compliance document that would identify jurisdictions with strategic AML/CFT deficiencies for which they have developed an action plan with the FATF. The FATF is an inter-governmental body whose objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system …
  • VIENNA, Va. (10/24/12)--The Financial Crimes Enforcement Network (FinCEN) has issued guidance to financial institutions about filing Suspicious Activity Reports (SARs) on activities related to third-party payment processors. Non-bank, or third-party, payment processors are financial institution customers that provide payment processing services to merchants and other business entities, typically initiating transactions on behalf of merchant clients that do not have a direct relationship with the payment processor's financial institution. Law enforcement has reported to FinCEN that recent increases in certain criminal activity have demonstrated that payment processors present a risk to the payment system by making it vulnerable to money laundering, identity theft, fraud schemes and illicit transactions. FinCEN will hold an informational webinar on Thursday, October 25 to discuss third-party payment processors ...
  • WASHINGTON (10/24/12)--Although banks and retailers have reached a settlement over interchange fees, industry observers say the U.S. Department of Justice (DOJ) could still scuttle the deal on the grounds that it is bad for consumers. While such a determination by DOJ is not common, the department has the oversight to weigh in on matters with implications for the economy or the law, said Bert Foer, president of the American Antitrust Institute, a think tank that seeks to promote economic competition (American Banker Oct. 23). For example, DOJ objected when Google reached a settlement with authors and book publishers who alleged that Google's digitization of their works infringed on their copyrights under the terms of the settlement. DOJ questioned whether Google's agreement to pay the publishers and authors $125 million violated antitrust law. DOJ also argued that the case raised public policy questions beyond the parties involved in the settlement. The department also objected to a subsequent settlement in the case. In the second settlement, DOJ maintained that under the agreement Google would be the only competitor for the digital distribution of a variety of books …
  • WASHINGTON (10/24/12)--The Commodity Futures Trading Commission (CFTC) has released a proposed new rule to increase protections for customers and security regarding the holding of money, securities and other property deposited by customers with futures commission merchants and derivatives clearing organizations. The proposals are the result of the commission's work to coordinate and consult with the futures industry on improving customer protections, including two public roundtables hosted by the commission. The proposals also expand upon previous commission actions to enhance customer protections, including rolling back certain exemptions from investment standards for customer funds under Regulation 1.25 and the adoption of the legal segregation with operational commingling for cleared swap transactions …

CULAC remains most bipartisan PAC in top 20

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WASHINGTON (10/24/12)--The Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) remains the most bipartisan political action committee (PAC) in opensecrets.org's list of the top 20 PAC contributors for this election cycle.

Click to view larger image opensecrets.org list of 20 top PACs
"Partisan fights are a guarantee in an election season, and though much of Washington has grown more divided as Nov. 6 approaches, CUNA continues to work both sides of the aisle on behalf of credit unions, and remains one of the most bipartisan political advocacy groups in the country," CUNA Vice President of Political Affairs Trey Hawkins said.

Opensecrets.org reported that the $1,852,650 spent by CUNA as of Sept. 30 was nearly evenly divided between the two major parties: 49% of the funds went to Democrats, while 51% went to Republican candidates.

Hawkins said that CUNA and CULAC's campaign finance decisions, "like all of our political activities, aren't focused on helping candidates of one party of the other. First and foremost we look to help candidates that understand and support credit unions."

Some of the highly competitive races CUNA, CULAC and state credit union leagues are taking part in include:

  • Fifteen-year incumbent and credit union ally Rep. Brad Sherman's (D-Calif.) race against fellow incumbent Rep. Howard Berman (D-Calif.).  Sherman, who is facing Berman due to recent redistricting, has supported increasing the member business lending (MBL) cap, giving credit unions greater access to supplemental capital, and other key credit union issues;
  • New Hampshire Republican Frank Guinta's (R) contest against the candidate he defeated in 2010's midterms, Carol Shea-Porter (D). Guinta is the newest member of the House Financial Services Committee, and has been a strong advocate for small community financial institutions during his time in Congress;
  • Retired Illinois National Guard General Bill Enyart's (D) bid to take on the seat vacated by the retiring Rep. Jerry Costello (D-Ill.). Enyart, who is facing Jason Plummer (R), thanked credit unions for their support in a recent debate. He noted that credit unions, not the Wall Street banks that caused the financial crisis, are "where working people of America go to save their money, to get home and car loans."; and
  • California State Sen. Tony Strickland's (R) U.S. House race against Assemblywoman Julia Brownley (D). Strickland, who has taken on banks on behalf of credit unions in the California State House, is taking on Brownley for the open U.S. House seat vacated by the retiring Rep. Elton Gallegly (R).
Click to view larger image opensecrets.org's chart of independent expenditures and partisan communications made by CUNA
CUNA, CULAC and state leagues are also supporting Rep. Brian Bilbray's (R-Calif.) attempt to hold on to his House seat against challenger Scott Peters (D), and East Moline, Ill. Alderwoman Cheri Bustos' (D) challenge to incumbent Rep. Bobby Schilling (R-Ill.)

Altogether, CUNA and CULAC are planning to spend more than $1 million on independent expenditures and partisan communications during this election cycle. Independent expenditures are advertising vehicles aimed at voters, while partisan communications are targeted specifically at credit union members.

CUNA also worked hard to develop new up-and-coming credit union champions on both sides of the aisle in the 2010 midterm elections, sending more than one million pieces of direct mail to voters. CUNA, CULAC, state credit union leagues and individual credit unions spent a combined $3.9 million on various candidates, and $1.1 million of that total on direct communications with voters in 13 general and primary races, targeting 12 states during that election. CUNA finished that election cycle as the most bipartisan spender among the top 50 group that made independent expenditures during the election.

Credit unions had a strong 2010 midterm election, with around 90% of candidates that were backed by CULAC winning their respective contests.

CULAC's bipartisan support reflects the broad appeal of credit unions, which cull their members from citizens of all stripes, Hawkins noted. And the broad, bipartisan appeal of credit unions is reflected by the support for key pro-credit union bills that would increase the credit union MBL cap to 27.5% of assets.

MBL cap increase bills have been introduced in the House (H.R. 1418) and Senate (S. 2231).  Members of both parties support the MBL cap increase bills: H.R. 1418 has 140 cosponsors and S. 2231 has 21 cosponsors.

CUNA analysis shows the MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

Latest NCUA town hall webinar available online

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ALEXANDRIA, Va. (10/24/12)--If your credit union missed the original webcast of the National Credit Union Administration's (NCUA) Oct. 4 town hall session on such things as overall credit union performance and the agency's regulatory modernization initiative, it is now available online.

The NCUA reported that more than 1,000 participated in the live version of the webinar, but Chairman Debbie Matz said "those who were not able to join us will get value from being able to access the recording."

Other issues addressed include:

  • NCUA's low-income credit union eligibility initiative;
  • The corporate credit union resolution;
  • The new Office of National Examinations and Supervision; and
  • Recently finalized and proposed rules.
 Use the resource link to access the archived webinar.

Inside Washington (10/22/2012)

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  • WASHINGTON (10/23/12)--The Consumer Financial Protection Bureau (CFPB) on Monday announced it will now accept consumer complaints on credit reporting agencies. The complaints can address incorrect information, improper use of a credit report, issues obtaining credit scores or files, and issues related to credit monitoring or identify protection services, the CFPB said...
  • WASHINGTON (10/23/12)--Lenders feel increasingly stifled by mortgage regulations slated to take effect in 2013. Among them is the qualified mortgage (QM) rule, which calls for the the Consumer Financial Protection Bureau (CFPB) to define standards for ultra-safe loans, based on the borrower's ability to repay, as required by the Dodd-Frank Act. The CFPB is scheduled to finalize the rule by Jan. 21 (American Banker Oct. 22). Banks and consumer groups disagree on the type of protection the CFPB should afford to QM loans. Bankers would like to see a clear "safe harbor." The Credit Union National Association (CUNA) advocates a safe harbor approach. Based on how courts have treated safe harbors in the past, this approach would afford mortgage loan originators that follow the CFPB's QM requirements certain protections from litigation, according to CUNA. Consumer groups are pressing for QM loans to be subject to court challenge. Also at issue are Basel III standards, which define how much risk-based capital banks must hold against certain assets. Basel III standards are scheduled to take effect Jan. 1. Other issues facing lenders are the possibility of higher guarantee fees from Fannie Mae and Freddie Mac and an increase in premiums for Federal Housing Administration loans …  
  • WASHINGTON (10/23/12)--Banks that pursue new strategies to raise revenue in place of slow loan production will face increased oversight from regulators, according to panelists taking part in an American Bankers Association conference in San Diego (American Banker Oct. 22). Federal Reserve examiners are focusing on risks associated with banks' strategic plans, said Kevin Bertsch, the associate director in the Fed's division of banking supervision and regulation. Banks that step out of their areas of expertise in pursuit of diversification will be "red flagged," said Timothy Long, a managing director at Protiviti Consulting and a former senior deputy comptroller at the Office of the Comptroller of the Currency. John Dugan, a partner at Covington & Burling and a former comptroller of the currency, advised banks to be transparent with their strategies when dealing with regulators …

CUNA plans post-election MBL blitz

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WASHINGTON (10/23/12)—While the results of early November's elections are still to be decided, the Credit Union National Association (CUNA) is already planning a post-election advocacy blitz, bringing credit union advocates from across the country to Washington in late November.

The National Hike the Hill will take place on Nov. 27 and 28. Advocacy for credit union member business lending (MBL) cap increase bills in the U.S. Senate and House will be the main focus of these visits.

Senate leadership has committed to a floor vote on the MBL legislation.

Ahead of the hike, CUNA President/CEO Bill Cheney said the upcoming lame duck session "is our last and best chance to pass MBL bills in this Congress. We have been promised a vote, and we must win the vote," he said.

"If you are here with me and the CUNA team our chance to win becomes even greater. We cannot leave a single stone unturned in our effort to win the vote when it comes up," Cheney said. He encouraged leagues, credit union officials, and, specifically, credit union lending officers and small business owners to make the trip to Washington this year. Credit union small business-owning members are a vital part of MBL advocacy efforts, he added. "We have the chance to do something good for our country's small businesses, our economy at large--and for the future of credit unions--if we can turn out, push this bill over the top and win this vote."

Bills that would increase the credit union MBL cap to 27.5% of have been introduced in the House (H.R. 1418) and Senate (S. 2231).  Members of both parties support the MBL cap increase bills: H.R. 1418 has 140 cosponsors and S. 2231 has 21 cosponsors.

CUNA analysis shows the MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

Pre-election CU champs get strong support

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WASHINGTON (10/23/12)--With two key incumbent credit union supporters--Sen. Jon Tester (D-Mont.) and Rep. Larry Kissell (D-N.C.)--facing tough re-election contests, the Credit Union National Association has joined with state leagues to step up support of these candidates.

"CUNA, the leagues and credit unions back up candidates that support credit union priorities," CUNA Vice President of Political Affairs Trey Hawkins said.

Hawkins said Tester's reelection is among CUNA's highest priorities for the upcoming elections, and CUNA is teaming up with the Montana Credit Union Network (MCUN) to support the senator. Tester, a six-year veteran, is locked in a tight race with Republican opponent Denny Rehberg.

According to online political news site realclearpolitics.com, recent polls show the race with Rehberg is a virtual tie. A three-poll average shows Rehberg in the lead by 0.3% of the potential vote.

MCUN President/CEO Tracie Kenyon said Tester has "proven to be a great friend of credit unions." Tester approaches decision-making "not by choosing what's politically expedient for him, but what's right for his constituents--which aligns nicely with the credit union philosophy," she added.

Tester championed credit union concerns on debit interchange fee cap legislation in recent years, and the CUNA/MCUN mailers tout Tester's understanding of the credit union difference, and his positive work with credit unions and small business owners alike.

The mailers will be sent to credit union members in Montana.

A similar mailer will go out to credit union members in Kissell's district, which stretches across portions of south-central North Carolina--from outside of Charlotte into Lumberton. CUNA and the North Carolina Credit Union League (NCCUL) are producing the mailers.

Kissell was an original sponsor of H.R. 3993, which would modify the definition of credit union net worth to include supplemental forms of capital for credit unions. The one-term House member is also a cosponsor of H.R. 1418, which would increase the credit union member business loan cap to 27.5% of assets.

NCCUL Senior Vice President of Association Services Dan Schline said credit unions have rallied around Kissell, who is in a tough re-election campaign against Republican opponent Richard Hudson. "It's been easy for credit union leaders in North Carolina to get excited about helping Larry Kissell because he's been such a strong supporter, and credit unions recognize the importance and value in helping to re-elect our credit union friends," he added.

Pre-election advocacy events are also being held across the country, as state leagues and credit unions meet with local legislators and hold their own events. These events increase credit union involvement in the political process, and help inform lawmakers on credit union issues.

The Credit Union Association of the Dakotas (CUAD) is one group holding these events for legislators and credit unions, and a trio of recent events attracted attention from a combined 31 legislators and candidates. The events were held in Huron, Rapid City and Sioux Falls. "These legislative chapter meetings have been conducted the Dakotas for a number of years now, and they have been very successful in helping credit unions establish and build relationships with legislators," CUAD CEO Robbie Thompson said.

Altogether, CUNA and the CUNA Credit Union Legislative Action Council (CULAC) are planning to spend more than $1 million on independent expenditures and partisan communications during this election cycle. Select U.S. House races in New York and Iowa are also high on the agenda, and CULAC also supported House Financial Services Committee Chairman Spencer Bachus (R-Ala.) in his Republican primary contest this spring.

CUs fiscal cliff covered in new NCUA video

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ALEXANDRIA, Va. (10/23/12)--The approaching "fiscal cliff," and how it could impact the credit union system, is addressed in the National Credit Union Administration's (NCUA) latest YouTube economic briefing.

In the October edition, NCUA Chief Economist John Worth also discusses national labor market and consumer confidence trends. Recent increases in new car sales are also discussed.



The video is the latest in a series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The videos can also be viewed on the NCUA's YouTube page by using the resource link below.

Small CU definition comment deadline extended

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ALEXANDRIA, Va. (10/23/12)--The National Credit Union Administration (NCUA) on Monday extended the deadline for comments on a proposed "small" credit union definition change until Nov. 26.

The previous deadline was Oct. 26. The Credit Union National Association (CUNA) and CUNA's Small Credit Union Committee last week in a letter urged the agency to extend this deadline by at least 30 days.

CUNA Deputy General Counsel Mary Dunn said CUNA and credit unions appreciate the NCUA's move to grant an extension. "Given the heavy load that credit unions have right now in attempting to respond not only to NCUA, but to other regulators, such as the CFPB, about proposed, important regulations, the agency's action gives credit unions an opportunity to be more thorough in their commentary," she added.

The NCUA last month proposed to increase the asset test that defines a "small" credit union to $30 million in assets, up from the current $10 million. CUNA is currently seeking comments on this proposal.

CUNA's Comment Call on the proposal asks credit unions if the NCUA's proposed $30 million small credit union asset threshold should be increased. CUNA maintains that a credit union with up to $100 million in assets could reasonably be considered "small," and has encouraged the agency to raise the threshold to at least $50 million.

For the CUNA comment call, use the resource link.

Inside Washington (10/19/2012)

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  • WASHINGTON (10/22/12)--The Consumer Financial Protection Bureau (CFPB) says it is partnering with the Department of Defense to create better awareness of the rights and options for servicemember student loan borrowers. The partnership will include training judge advocate generals and education service officers, and work with personal financial counselors on military bases. CFPB staff, for example, will visit the Judge Advocate General's Legal Center and School in Charlottesville, Va., to train legal assistance attorneys from all military branches about student loan issues and about repayment options for servicemembers. The CFPB developed a guide for servicemembers with student loans. It also has frequently asked questions from military student loan borrowers at Ask CFPB. Servicemembers also can use the CFPB's online Web tool, the Student Debt Repayment Assistant, to navigate their options. The CFPB Thursday released a report outlining the servicing obstacles reported by servicemembers seeking to pay off student loan debt. "The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform" describes complaints about difficulties they have accessing the protections granted to them under federal rules--from not being able to get the information they need, to being met with roadblocks when they do try to pursue their benefits …

NMLS update coming today

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WASHINGTON (10/22/12)--Starting today, Nationwide Mortgage Licensing System and Registry (NMLS) users will need to add additional details when information on any disciplinary, enforcement, or related actions taken against a mortgage loan originator (MLO) is entered into the database.

Until now, the NMLS has only required users to disclose whether they have been subject to disciplinary or enforcement actions.

Going forward, MLOs that have been subject to disciplinary action will need to detail:

  • The type of action taken;
  • The name of the authority that took the action; and
  • The date of the action.
MLOs will also need to provide official documentation of any actions taken, such as court orders or letters from regulatory authorities, in .pdf format.

The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit union MLOs and their employing institutions to register with the NMLS, which became active in early 2011. The NMLS registry is intended to increase consumer protection and to help financial regulators coordinate and share mortgage originator information.

Registered MLOs are given a "unique identifier," which is the identification number associated with the MLO within the NMLS. The unique identifier remains the same, even when the MLO changes employment, moves, or changes his or her name, and the identifier tracks the MLO and facilitates public access to the employment history and any disciplinary or enforcement actions that have been initiated against the individual.

All NMLS accounts for financial institutions must be renewed on an annual basis.

Credit unions and other MLOs are required to ensure that their mortgage loan originators are properly registered and prohibit any employees who are not registered from performing any residential mortgage loan origination duties.

NCUA prohibits WesCorp exec from CU work

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ALEXANDRIA, Va. (10/22/12)--Robert Siravo, the former CEO of the failed Western Corporate FCU, has been prohibited from participating in the affairs of any federally insured credit union by the National Credit Union Administration (NCUA).

The NCUA in a release said the order bars Siravo from becoming an employee of, holding any office in, or otherwise participating in any manner in the conduct of the affairs of any federally insured credit union. He will also pay $600,000 to the liquidating agent of WesCorp under the settlement.

Siravo agreed to the order, without admitting liability or fault. The prohibition order was part of a larger settlement between the agency and the former CEO of the now-defunct corporate.

The NCUA in a lawsuit against Siravo and other former senior WesCorp officials alleged that they were negligent in monitoring mortgage-backed security investments that were made by the $34 billion corporate, and that there was a breach of fiduciary duty and fraud related to these investments, which resulted in $6.8 billion in portfolio losses. The WesCorp employees filed counterclaims and affirmative defenses against NCUA, alleging the agency was aware of WesCorp's investment strategies and approved of and encouraged the strategies.

Former WesCorp employee Thomas Swedberg, Chief Risk Officer Timothy Sidley and Chief Investment Officer Robert Burrell have also settled with the agency. However, former WesCorp Chief Financial Officer Todd Lane has not settled with the agency.

As part of the settlement, the NCUA dropped charges it filed regarding Siravo's work with WesCorp. The settlement also settles any claims against Siravo that NCUA may have had regarding the conservatorship and eventual liquidation of U.S. Central FCU, the agency said. Siravo was a U.S. Central board member prior to that corporate's failure.

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

For the full order, use the resource link.

Too good to be true Might be a Ponzi scheme NCUA warns

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ALEXANDRIA, Va. (10/22/12)--Do the rates, risks or returns of a given investment seem too good to be true? If so, it is likely a Ponzi scheme, the National Credit Union Administration (NCUA) warned consumers in this month's edition of The NCUA Report. The article was from the agency's Office of Consumer Protection.

Financier Charles Ponzi, who originated his scheme in the early 20th century, promised investors he would double their money within three months, and a Boston Post headline saying as much helped fuel his success. Ponzi's investors would make as much as $2,500 in returns--within one year—on a simple $100 investment. Ponzi eventually made $8.5 million in money for himself, and duped 40,000 investors, by paying off old investors with new investor deposits.

He was, of course, eventually found out, and stood as history's most infamous "financier" until recent times, when Bernie Madoff picked up where Ponzi left off. Madoff made billions using the same scheme, and pleaded guilty to 11 federal felonies in 2008 after losing $65 billion in investor money.

While these two examples are by far the most well-known Ponzi schemes committed, the NCUA warned that the same tactics are often used on a smaller scale.

The U.S. Securities and Exchange Commission (SEC) has warned potential investors to look out for:

  • High investment returns with little or no risk, especially "guaranteed" investment opportunities;
  • Investments that appear to generate regular, positive returns regardless of overall market conditions;
  • Investment products that are not registered with the SEC or state regulators;
  • Unlicensed investment brokers or firms;
  • Secretive and/or complex strategies;
  • Issues with paperwork; and
  • Difficulty receiving payments or cashing out investments.
"Perhaps the best guard against falling prey to a Ponzi scheme or other financial fraud is always consider that if an investment sounds too good to be true, it probably is," the NCUA said.

For more of the October edition of The NCUA Report, use the resource link.

NEW NCUA prohibits WesCorp exec from CU work

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ALEXANDRIA, Va. (UPDATED: 11:15 A.M. ET, 10/19/12)--Robert Siravo, the former CEO of the failed Western Corporate FCU, has been prohibited from participating in the affairs of any federally insured credit union by the National Credit Union Administration (NCUA).

The NCUA in a release said the order bars Siravo from becoming an employee of, holding any office in, or otherwise participating in any manner in the conduct of the affairs of any federally insured credit union. He will also pay $600,000 to the liquidating agent of WesCorp under the settlement.

Siravo agreed to the order, without admitting liability or fault. The prohibition order was part of a larger settlement between the agency and the former CEO of the now-defunct corporate.

The NCUA in a lawsuit against Siravo and other former senior WesCorp officials alleged that they were negligent in monitoring mortgage-backed security investments that were made by the $34 billion corporate, and that there was a breach of fiduciary duty and fraud related to these investments, which resulted in $6.8 billion in portfolio losses. The WesCorp employees filed counterclaims and affirmative defenses against NCUA, alleging the agency was aware of WesCorp's investment strategies and approved of and encouraged the strategies.

Former WesCorp employee Thomas Swedberg, Chief Risk Officer Timothy Sidley and Chief Investment Officer Robert Burrell have also settled with the agency. However, former WesCorp Chief Financial Officer Todd Lane has not settled with the agency.

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

For the full order, use the resource link.

Two CU reps added to Fed advisors on community FIs

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WASHINGTON (10/19/12)--Two credit union executives are among the 12 members of the Federal Reserve Board's 2013 Community Depository Institutions Advisory Council (CDIAC).

The credit union representatives are:

  • First Community CU, Chesterfield, Mo., President/CEO Glenn Barks; and
  • SEFCU, Albany, N.Y., President/CEO Michael Castellana.
American National Bank and Trust Company Executive Chairman Charles Majors will serve as CDIAC president in 2013, and Drake Mills, president/CEO of Community Trust Bank, will serve as vice president, the Fed announced.

The CDIAC provides input to the Fed on the economy, lending conditions, and other issues. The Fed selects one member from each of its 12 Fed local advisory councils to serve on the CDIAC, and the council meets with the Fed in Washington, D.C., twice each year.

For more on the CDIAC and a full list of its members, use the resource link.

LICU-designation response time extended

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ALEXANDRIA, Va. (10/19/12)--The National Credit Union Administration (NCUA) started Thursday by sending out a release proclaiming a good response to its initiative meant to cut red tape and expand the number of credit unions with low-income designation.

The NCUA said in a release that just two months after it informed 1,003 federal credit unions of their eligibility to become a low-income credit union (LICU), 676 have accepted. As a group, the newly designated LICUs serve more than 7.7 million members and manage more than $66 billion in combined assets.

With those acceptances, the total number of low-income designated credit unions has risen to 1,874, according to the agency.

That news was followed up by an NCUA board action approving an extension of the amount of time credit unions have to accept LICU designation.

Thursday's NCUA open board meeting was the first for the new regulatory duo of NCUA Chairman Debbie Matz, right, and board  member Michael Fryzel, left. (CUNA Photo)


At October's open board meeting, NCUA Chairman Debbie Matz and board member Michael Fryzel approved a proposal to extend credit union low-income designation response time to 90 days, up from 30 days. The proposal, which will be released for a 30-day public comment period, would also make minor technical amendments to NCUA's insurance regulation to reflect current agency practices. Specifically, the proposal would change NCUA insurance regulations to reflect new agency policy that allows the NCUA's Office of Consumer Protection, not regional directors, to designate federal credit unions as LICUs.

The NCUA in a release noted that the current 30-day approval deadline was creating an obstacle for some credit unions. Matz said credit unions should have sufficient time to properly assess whether to accept their offered LICU designations, and to complete their own internal approval processes.

The LICU proposal did not address state-chartered credit unions, but the Credit Union National Association following the meeting said it is working with the agency to clarify the state-chartered credit union LICU approval process. State-chartered credit unions may obtain LICU designations from their respective state regulators.

The NCUA board also approved an application for conversion to a community charter for BMI FCU, Columbus, Ohio. The 27,000 member, $378 million-in-asset credit union currently serves members of 440 employee groups in central Ohio. The new community charter will allow BMI FCU to serve those that live, work, worship, or attend school in the Columbus, Ohio metropolitan area, consisting of Delaware, Fairfield, Franklin, Licking, Madison, Morrow, Pickaway, and Union Counties.

Quarterly updates on the National Credit Union Share Insurance Fund (NCUSIF) and the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) were also presented during the meeting.

NCUA Chief Financial Officer Mary Ann Woodson reported that the NCUSIF's equity ratio was  1.32% as of Sept. 30, and that fund held $484.9 million in reserves. The TCCUSF reported $810 billion in total earned revenues for the quarter ended Sept. 30.

Woodson also noted that 15.1% of federally insured credit union assets were in CAMEL code 3, 4 or 5 credit unions, and reported that the total number of CAMEL code 3, 4 and 5 credit unions fell by 57 between the second and third quarters of this year. Around $140 billion in assets were held in CAMEL Code 3, 4 and 5 credit unions as of Sept. 30, and the agency noted that this is the lowest percentage of assets those credit unions have held since 2008.

"The steady decline in the number of troubled credit unions and the continued improvements in the performance of the NCUSIF are a direct result of a recovering economy, the prudent actions of credit unions, and careful supervision by NCUA and state regulators," Matz said.

For more on the NCUA board meeting, use the resource link.

New state-chartered CU receives NCUSIF coverage

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ALEXANDRIA, Va. (10/19/12)--Member accounts at Gateway CU, Montgomery, Ala., will be backed with up to $250,000 in National Credit Union Share Insurance Fund (NCUSIF) support when that credit union opens later this year, the National Credit Union Administration (NCUA) said Thursday.

Gateway CU is the first credit union chartered by the Alabama Credit Union Administration this year, and the first state-chartered credit union to receive NCUSIF backing in 2012. The NCUA's Office of Small Credit Union Initiatives will also assist the credit union as needed.

Financial services at Gateway CU, a state-chartered community credit union with a low-income credit union designation, will be made available to 437,000 residents in Montgomery, Elmore, Autauga, Lowndes, Dallas, Perry and Wilcox counties when it opens. The credit union is scheduled to open for business in December.

Gateway CU plans to regular shares, unsecured loans, short-term consumer loans, share secured loans, and auto loans, according to the NCUA. The credit union's LICU status will also allow it to accept non-member deposits, obtain grants and loans from the NCUA's Community Development Revolving Loan Fund and accept secondary capital accounts, the NCUA said. The credit union will also be exempt from the 12.25%-of-assets limit on credit union member business loans.

NCUA Chairman Debbie Matz said the agency is "pleased to be able to provide insurance for Gateway Credit Union and its members." Gateway members "will not only gain access to affordable financial services, but they can be confident their money will be safe," she added.

For the NCUA release, use the resource link.

Inside Washington (10/18/2012)

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WASHINGTON (10/19/12)--The Bipartisan Policy Center (BPC) Thursday launched an initiative to evaluate the Dodd-Frank Act and propose reforms that balance financial stability, economic growth and consumer protection. The initiative aims to assist Congress, the executive branch and regulators as they work to further develop and potentially modify financial supervision and regulation. The new initiative is led by co-chairs Dr. Martin Baily, former chairman of the Council of Economic Advisers under President Bill Clinton, and Dr. Phillip Swagel, former assistant secretary for economic policy at the U.S. Treasury Department. The initiative will consider five aspects of financial reform: systemic risk; failure resolution; capital markets and the Volcker rule; consumer financial protection; and regulatory architecture. As part of its work, the initiative will review the landscape of regulatory actions and inactions since the enactment of Dodd-Frank in 2010. The group will issue a series of white papers around each of the areas beginning in 2013 and release a comprehensive report in the fall of next year …

WASHINGTON (10/19/12)--U.S. Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) are urging the U.S. banking agencies to simplify and strengthen new bank capital standards. With the U.S. beginning to implement the Basel III international capital standards, Brown and Vitter, both serving on the Senate Banking Committee, in a letter urged the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. to abandon the overly complex approach of the Basel II accord, and to focus on higher and more loss-absorbing capital buffers. "Wall Street banks have become too large, while their capital requirements are too small," Brown said. "And both these institutions and their rules are so complex that no one--not their executives, nor their shareholders, nor their regulators--truly understands their financial health. It is essential that banks fund themselves with more pure equity, so that taxpayer dollars are not on the line, and capital rules should be simple enough that banks of all sizes can understand them" …

CUNA seeks small entity comment NCUA deadline extension

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WASHINGTON (10/19/12)--The Credit Union National Association (CUNA) has asked the National Credit Union Administration (NCUA) to extend its comment period by at least 30 days on a proposal to increase the asset test that defines a "small" credit union. The current deadline is set for Oct. 26.

The NCUA last month proposed to increase the asset test that defines a "small" credit union to $30 million in assets, up from the current $10 million, and CUNA is currently seeking comments on this proposal.

In a Thursday letter to the NCUA, CUNA Deputy General Counsel Mary Dunn noted that CUNA is analyzing the proposal, and is in the process of collecting feedback from credit unions, but urges the current comment deadline be extended.

In the letter, CUNA noted that the Consumer Financial Protection Bureau and other regulators have issued a number of proposals that have kept CUNA, state credit union leagues, and credit unions very busy in recent weeks. Comments may not be as complete as they otherwise would be if a reasonable amount of additional time is not provided, CUNA said.

While CUNA supports the goal of timely regulatory relief, "we believe it is critical that comments and information submitted to the board be as accurate and complete as possible," the letter added.

CUNA's effort to seek more time for comments is supported by CUNA's Small Credit Union Committee.

CUNA's Comment Call on the proposals asks credit unions if the NCUA's proposed $30 million small credit union asset threshold should be increased.

For the CUNA letter to the NCUA, and the comment call, use the resource link.

Regional director Treichel named NCUA exec director

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ALEXANDRIA, Va. (10/19/12)--National Credit Union Administration (NCUA) Region I Director Mark Treichel has been named the next executive director of the agency, replacing the retiring David Marquis.



Treichel has served as the NCUA's Region 1 director since 2003. He oversaw credit unions in Connecticut, Maine, Massachusetts, Michigan, Nevada, New Hampshire, New York, Rhode Island and Vermont in this role. Treichel joined the NCUA as an examiner in 1986.

NCUA Chairman Debbie Matz noted Treichel has "successfully handled some of the toughest tasks facing the agency in recent years," including serving as acting director of the Office of Corporate Credit Unions in 2009 during a time of turmoil and leading the group that worked with Barclays to create and sell the NCUA Guaranteed Notes.

Board member Michael Fryzel said Treichel "will provide a fresh direction to the organization."

Credit Union National Association Deputy General Counsel Mary Dunn said CUNA and state leagues have had the opportunity to work with Treichel in the past, and anticipate a professional and transparent relationship with him in his new role. "We hope to be meeting with him right after the new year," she added.

NEW NCUA names Mark Treichel to serve as exec director

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ALEXANDRIA, Va. (UPDATED: 12:45 P.M. ET, 0/18/12)—National Credit Union Administration (NCUA) Region 1 Director Mark Treichel has been named the next executive director of the agency, replacing the retiring David Marquis.



Treichel has served as the NCUA's Region 1 director since 2003. He oversaw credit unions in Connecticut, Maine, Massachusetts, Michigan, Nevada, New Hampshire, New York, Rhode Island and Vermont in this role. Treichel joined the NCUA as an examiner in 1986.

NCUA Chairman Debbie Matz noted Treichel has "successfully handled some of the toughest tasks facing the agency in recent years," including serving as acting director of the Office of Corporate Credit Unions in 2009 during a time of turmoil and leading the group that worked with Barclays to create and sell the NCUA Guaranteed Notes.

Board member Michael Fryzel said Treichel "will provide a fresh direction to the organization."

Treichel will take on his new role when Marquis retires at the end of this year.

NEW LICU-designation response time extended

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Alexandria, Va. (10/18/12 Updated 10:30 a.m. ET)--The National Credit Union Administration (NCUA) launched the day by sending out a release proclaiming a good response to its initiative meant to cut red tape and expand the number of credit unions with low-income designation.

The NCUA said in a release that just two months after it informed 1,003 federal credit unions of their eligibility to become a low-income credit union (LICU), 676 have accepted. As a group, the newly designated LICUs serve more than 7.7 million members and manage more than $66 billion in combined assets.

With those acceptances, the total number of low-income designated credit unions has risen to 1,874, according to the agency.

That news was followed up by an NCUA board action approving an extension of the amount of time credit unions have to accept LICU designation.

At an open board meeting this morning, the first conducted by the agency since the departure of board member Gigi Hyland on Oct. 5, Chairman Debbie Matz and board member Michael Fryzel approved a proposal to extend credit union low-income designation response time to 90 days, up from 30 days.

Watch News Now Friday for more on the NCUA meeting.

Lynn Municipal Employees CU signs LUA

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ALEXANDRIA, Va. (10/18/12)--Lynn Municipal Employees CU, Lynn, Mass., has agreed to "take steps to correct unsafe and unsound practices" under the terms of a letter of understanding and agreement (LUA) with the National Credit Union Administration (NCUA) and the Massachusetts Division of Banks.

In the letter, the credit union agrees to correct the following issues:

  • Failure to comply with the requirements of previous enforcement actions;
  • Operating without adequate supervision and direction by the credit union's board of directors over senior management;
  • Failure to maintain accurate books and records;
  • Failure to establish appropriate internal controls; and
  • Engaging in unsafe and unsound underwriting standards and practices.
The NCUA said it is working with the credit union to correct these issues. Violations of the LUA could result in civil financial penalties, cease and desist orders, removal and prohibition orders, or orders to liquidate, conserve or merge the credit union, the NCUA said.


The credit union will remain open and will serve its members while corrective actions are taken.

For the full NCUA release, use the resource link.

CUNA CUs take remittance concerns to CFPB today

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WASHINGTON (10/18/12)--The Credit Union National Association (CUNA) will again press for regulatory relief for credit unions in a meeting today with Consumer Financial Protection Bureau (CFPB) Director Richard Cordray on the agency's final rule on international remittance transfers.

CUNA's Deputy General Counsel Mary Dunn and several credit union officials will participate in the meeting at CFPB headquarters.

In recent communications, CUNA President/CEO Bill Cheney and CUNA staff have urged the CFPB to consider ways to lessen the impact of the final international remittance transfer rule on credit unions. Cheney and CUNA have repeatedly met with the CFPB to discuss these and other issues.

Under the CFPB's rule, remittance transfer providers would be required to provide prepayment and receipt disclosures to the consumer sender that include the exchange rate,  fees and taxes  associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors. The bureau's new remittance rule will take effect Feb. 7.

The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year. The agency has claimed at least 80% of credit unions that offer remittance services would be exempt under this safe harbor.

However, CUNA has emphasized that many credit unions make more than 100 remittance transfers per year, and has urged the CFPB to extend this safe harbor coverage. CUNA has also noted that the remittance transfer regulations could create foreign tax disclosure and liability issues for credit unions.

The CFPB in recent days has released guidance and held a webinar to prepare credit unions and others for the remittance regulations. CFPB staff also hinted at how the agency will examine for remittance rule compliance. (See Oct. 17 News Now story: CFPB remittance exam procedures in the works)

CFPB proposes credit-access fix

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WASHINGTON (10/18/12)--Responding to complaints from consumers and the U.S. Congress, the Consumer Financial Protection Bureau (CFPB) on Wednesday proposed a regulatory update that would allow spouses or partners who do not work outside of the home to use shared income on their credit card applications.

Regulation Z's ability-to-repay rule, as currently written, does not specifically address joint accounts or checking accounts. It merely advises card issuers to take into account assets such as savings accounts when it determines whether it will allow an applicant to open a new card account or increase the credit limit on an existing account.

Legislators last year contacted the CFPB, noting that the ability-to-repay rules were limiting the ability of stay-at-home spouses to secure new lines of credit. Hearings on the topic were also held, and the Credit Union National Association urged the CFPB to correct this issue.

The CFPB in a release said its proposal would allow credit card applicants who are 21 years of age or older to list joint-account income as an asset on credit applications. Although the proposal applies to all applicants regardless of marital status, the Bureau expects that it will ease access to credit particularly for stay-at-home spouses or partners who have access to a working spouse or partner's income, the release said.

"When stay-at-home spouses or partners have the ability to make payments on a credit card, they should be able to obtain a card in their own name," CFPB Director Richard Cordray said.

The proposal will remain open for public comment for 60 days after it is published in the Federal Register.

For the full CFPB release, use the resource link.

CUNA seeks significant MLO proposal changes

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WASHINGTON (10/18/12)--The Credit Union National Association (CUNA) in a Wednesday comment letter suggested several significant changes to the Consumer Financial Protection Bureau's (CFPB) plans to introduce additional standards for mortgage loan originator (MLO) compensation, and urged the agency to shield credit unions from the impact of the proposal, where possible.

Under the CFPB proposal, MLOs would need to be state-licensed or registered on the Nationwide Mortgage Licensing System & Registry (NMLSR) and include their NMLSR identification numbers on loan documents.

Credit unions and other organizations that originate loans would also need to:

  • Ensure that their MLOs are properly registered in accordance with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act);
  • Provide periodic training to unlicensed MLOs covering federal and state law requirements that apply to the individual MLO's origination activities;
  • Obtain state and national criminal background checks, credit reports, and information on any potential court proceedings for all unlicensed MLOs; and
  • Make a determination of the MLO's financial responsibility, character and general fitness that indicates that the MLO will operate honestly, fairly and efficiently.
MLO bonuses based on the terms of loan transactions would still be banned, but financial institutions could compensate MLOs in certain circumstances utilizing mortgage loan revenues in some instances, such as credit unions' contributions to MLOs' qualified 401(k) plans, employee stock plans and other types of "qualified" deferred compensation plans if certain requirements are met. The rule would also allow for compensation to MLOs in instances where the MLO has made five or fewer mortgage loan originations in the past year.

In the letter, CUNA Senior Vice President and Deputy General Counsel Mary Dunn said CUNA has long supported current regulations that prohibit prohibition on tying compensation for loan officers and other originators to the terms and conditions of a specific loan. However, CUNA has a number of major concerns with the CFPB's proposal and is seeking significant changes, she said.

CUNA's suggested changes include:

  • Substantially altering the loan originator qualification requirements that are not specifically required by the Dodd-Frank Wall Street Reform Act;
  • Eliminating the use of "proxy" factors to restrict compensation to loan originators;
  • Refraining from expanding recordkeeping requirements;
  • Revising the proposal's restrictions on upfront points and fees; and
  • Providing greater flexibility regarding the use of arbitration clauses.
If the CFPB's proposal is adopted without significant changes, credit unions will have to shoulder greater regulatory burdens and costs, Dunn wrote. "These costs would far outweigh any marginal benefits that credit union members might achieve as a result of this proposal," the letter added.

The letter also noted that credit unions already take steps to screen their MLOs, and said credit unions "justifiably resent being subjected to additional requirements that are suitable for mortgage brokers and the biggest banks."

There is no evidence or even complaints against credit unions that they engage in mortgage lending practices that are inconsistent with either the SAFE Act or prudent, pro-consumer lending policies generally, Dunn wrote. Credit unions, and their efforts to fully comply with regulations and treat consumers fairly and honestly should not be ignored or rewarded with additional regulations, she added.

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

NCUA meeting is first for two-member board

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ALEXANDRIA, Va. (10/18/12)--The National Credit Union Administration's (NCUA) October open board meeting, scheduled for today, will be the first held since NCUA board member Gigi Hyland's Oct. 5 resignation, and the first meeting in years to be held without a full three-member NCUA board.

Hyland's NCUA board term was scheduled to expire on Aug. 2, 2011, but complications in the nomination process prevented her replacement from being confirmed by the U.S. Congress and President Barack Obama. Hyland stayed on the board in the interim, but eventually left to pursue other opportunities.

NCUA Chairman Debbie Matz this month said the timeline for filling the NCUA board vacancy is up to the White House and Congress, and the position likely will not be filled in the near future.

The NCUA last held a two-member board meeting in 2005, after Dennis Dollar left his position with the agency. The agency has held two-member board meetings 10 times since late 1979, and has held board meetings led by a single board member on three occasions. The most recent single-member board meeting was held in 2005, according to the NCUA.

Mary Dunn, senior vice president and deputy general counsel of the Credit Union National Association (CUNA), said NCUA board operations are expected to move forward as usual, with two members. Chairman Matz and board member Michael Fryzel have voted on the same side of agency proposals. Additionally, the majority of proposals voted on by the NCUA board in recent months have been unanimously approved, she added.

Agency proposals would simply not move forward if the two board members could not agree on a vote.

A low income credit union designation proposal is on today's NCUA open board meeting agenda and the board will consider a request from BMI FCU of Dublin, Ohio, to convert to a community charter. That credit union holds $378 million in assets and has 27,400 members.

The quarterly insurance fund report will also be presented by NCUA staff. CUNA will provide a summary of the meeting shortly after it concludes, as usual.

A purchase and assumption request, personnel issues and supervisory activities are on the agenda for the NCUA's closed meeting.

For the full NCUA agenda, use the resource link.

Inside Washington (10/17/2012)

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WASHINGTON (10/18/12)--The Consumer Financial Protection Bureau's (CFPB) impending release of Dodd-Frank Act requirements that lenders follow "ability-to-repay" standards for mortgage borrowers could rankle both banks and consumer groups despite the agency's best intentions (American Banker Oct. 17). At issue is the definition of ultra-safe loans--known as "Qualified Mortgages" (QM)--that would automatically fit the ability-to-repay criteria. Banks and consumer groups disagree on the type of protection afforded to QM loans. Bankers are calling for a clear "safe harbor." The Credit Union National Association (CUNA) advocates a safe harbor approach. Based on how courts have treated safe harbors in the past, this approach would afford mortgage loan originators that follow the CFPB's qualified mortgage requirements certain protections from litigation, according to CUNA. Consumer groups would like some QM loans to be subject to court challenge. The CFPB is considering a compromise approach, where some QM loans would get a safe harbor and others would get a less airtight exemption, according to stakeholders familiar with the agency. That approach is unlikely to win broad support from either bankers or consumer groups, according to observers …

WASHINGTON (10/18/12)--Oklahoma issued the first compensation checks Monday to residents affected by its own settlement with five large mortgage servicers. Oklahoma was the only state to not participate in an agreement that attorneys general in 49 states struck with the five banks in February that will provide as much as $25 billion to distressed borrowers (American Banker Oct. 17). Oklahoma settled with Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial in February. The banks agreed to pay $18.6 million to settle claims of foreclosure abuse in the state. Oklahoma homeowners affected by the settlement could receive from $5,000 to $20,000 apiece under the settlement, according to the state. Borrowers whose states were part of the national settlement would receive at least $840 if all eligible homeowners request relief, although the final amount likely will be higher, according to the national mortgage settlement administrator …

Agencies should work to minimize CUs Reg B burdens CUNA

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WASHINGTON (10/17/12)--The Consumer Financial Protection Bureau (CFPB) should work with the National Credit Union Administration (NCUA) to assess how federal credit unions could be protected from the burdens of pending Regulation B changes, the Credit Union National Association (CUNA) said in a comment letter.

The CFPB this year proposed amendments to Reg B to implement new requirements under the Equal Credit Opportunity Act (ECOA)--as amended by the Dodd-Frank Wall Street Reform Act--that would require creditors to provide mortgage loan applicants with copies of appraisal and valuation documents. Related disclosures must also be provided.

Reg B currently allows homebuyers to request these forms, but does not force lenders to provide the forms to borrowers.

In the comment letter, CUNA Assistant General Counsel Luke Martone noted that the CFPB proposal would remove language that exempts federal credit unions from the appraisal delivery requirements of Reg B. This exemption, which has stood since 1993, was permitted because the NCUA had a similar rule in place, which required federal credit unions to provide applicants with a copy of the appraisal report upon request.

CUNA said it recognizes ECOA now requires creditors to provide all covered applicants with copies of the appraisal and valuation documents. However, CUNA suggested that the CFPB and NCUA could work together to minimize any unnecessary regulatory burdens Reg B may impose on federal credit unions.

"We believe it is important that the Bureau work closely with NCUA on this since it is an issue that will directly affect all federally chartered credit unions, which are under the direct regulation of the NCUA," CUNA said.

Martone said CUNA is also concerned that ECOA's definition of "valuation" could be expanded. The comment letter noted that the congressional directive regarding "valuation" is simply to require the numerical value of the estimate of the property and does not include other items, such as "written comments and other documents" that CFPB has proposed to include.

CUNA also suggested the CFPB in its final rule permit lenders to charge a reasonable fee to cover the copying, postage, and other costs incurred when a subsequent copy of valuation and appraisal documents is provided.

CUNA in the comment letter encouraged the CFPB to delay the effective date of the Reg B changes until at least mid-2014. A number of pending CFPB mortgage proposals are scheduled to be finalized in January 2013.

For the full comment letter, use the resource link.

CUs could boost student loan market says CFPB

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WASHINGTON (10/17/12)--Increased participation by credit unions and other small financial institutions could help alleviate issues in the student loan market, Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman Rohit Chopra said in a report issued Tuesday.

The CFPB student lending report, which was mandated by the U.S. Congress, addressed issues faced by private student loan borrowers. The report noted that many borrowers are surprised by some terms and conditions in their loans. Lenders also offer limited options to borrowers that wish to refinance or modify their student loans, the report said.

To produce the report, the CFPB analyzed 2,900 complaints and comments from private student loan borrowers. The CFPB noted that very few of these complaints came from borrowers that received student loans from credit unions or other small financial institutions.

Around 95% of the complaints received by the CFPB related to loan servicing.

The CFPB noted that student loan debt, which surpassed $1 trillion this year, has now exceeded credit card debt as the largest source of consumer debt in the U.S. More than $150 billion of this $1 trillion total is comprised of private student loans, and at least $8 billion of these private student loans are in default, the CFPB said.

According to the CFPB report, many borrowers have difficulty determining how much they owe once they graduate. Some borrowers said they have had trouble contacting their lenders when they have loan payment issues. Borrowers also reported issues related to lender record keeping, and uneven or late crediting of loan payments. They have also reported limited or no options for loan deferrals, forbearance, or interest-rate changes, the CFPB said.

"Student loan borrower stories of detours and dead-ends with their servicers bear an uncanny resemblance to problematic practices uncovered in the mortgage servicing business," Chopra said. "Consumers deserve clarity, not chaos and confusion."

In the report, the CFPB noted that credit unions and community banks want to reach out to younger members and customers, but are prevented from offering long-term financial products, such as mortgages, to these borrowers due to their student loan debt issues.

"One way that small financial institutions might assist younger (consumers) to get closer to homeownership is to offer products that allow them to refinance any student loans they might have with rates in excess of their perceived repayment risk," the CFPB report suggested. "Small financial institutions might even be able to assist (consumers) worried about falling behind on student loans by offering products that might allow them to be successful," the report added.

The Credit Union National Association (CUNA) estimates that around 300 credit unions currently offer student loans to their members. Credit unions also provide financial education and seminars relating to student lending generally, and encourage students to attend. The CUStudentLoans.org website also provides extensive financial education regarding student lending, through both written information and webinars. The site is powered by Fynanz, a CUNA Strategic Services provider.

CFPB remittance exam procedures in the works

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WASHINGTON (10/17/12)--Remittance regulation examination procedures will be finalized before the new rules become effective on Feb. 7, the Consumer Financial Protection Bureau (CFPB) said during a Tuesday webinar.

Dana Miller, of the CFPB's office of regulations and who hosted the webinar, also made it clear that the bureau does not have any plan to push back that Feb. 7 remittance rule compliance date.

The webinar outlined the agency's pending remittance rule, which will require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end.

Remittance transfer providers also will be required to investigate disputes and correct errors. The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year.

Remittance rule compliance examinations will be risk-focused, and the CFPB and other agencies will begin examinations for compliance once the rule becomes effective, Miller said.

The CFPB's examination authority will only apply to credit unions with more than $10 billion in assets.

Asset size, transaction volume, the amount of existing oversight, and other factors will be considered when the CFPB decides which institutions it will examine first, Miller said. The CFPB may also use its enforcement authority to address remittance program issues, she added.

The CFPB is also considering adding remittance providers to the list of businesses it may supervise under its "larger participant" definition. The agency already has the authority to supervise some "larger participants."

An archived version of the webinar will be posted soon, the CFPB said. Slides from the webinar are currently available of the CFPB's home page.

For more on the webinar, use the resource link.

NCUA announces grant rule change for small CUs

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ALEXANDRIA, Va. (10/17/12)--Grant reimbursement forms for 2012 will have new features and a new format, the National Credit Union Administration's (NCUA) Office of Small Credit Union Initiatives (OSCUI) said in a Tuesday release.

One of the OSCUI grant changes will allow credit unions to check the status of their reimbursement request online, OSCUI said in the October edition of its FOCUS e-newsletter. The grant reimbursement changes will also allow credit unions to submit their proofs of purchase and proofs of payment for each vendor through single or multiple uploads, OSCUI added. The grant reimbursement changes will make the grant process more efficient for credit unions and the agency, OSCUI added.

OSCUI said any grant reimbursement proofs of purchase should be come directly from the credit union that accepted the grant. "Receipts, invoices and payments made from entities other than the credit union or a credit union official will not be considered," OSCUI said.

According to OSCUI, acceptable proofs of purchase may include:

  • An invoice from vendor; and/or
  • A receipt from vendor specifying items purchased.
OSCUI said acceptable proofs of payment may include:

  • A canceled check made out to vendor identified on invoice (both front & back);
  • A credit card statement with payment amount and vendor listed;
  • The original check to the vendor with a monthly statement attached; and/or
  • A receipt listing items purchased and showing the method of payment.
The NCUA in August awarded $1.4 million in technical assistance grants to just over 100 small credit unions through its Community Development Revolving Loan Fund (CDRLF).

These grant disbursements may be used by credit unions to improve their service, train their staff, expand their community outreach efforts, provide ATMs in underserved areas, increase marketing efforts at in-school branches and increase awareness of the payday loan alternatives offered at their credit union. Financial literacy and education at in-school credit union branches, and internships and staff training efforts, may also be funded by the grant money.

OSCUI in the newsletter also announced an Oct. 22 webinar on the Assets for Independence (AFI) program, which promotes an asset-based approach to help lift low-income families out of poverty.

OSCUI said the webinar will include a question-and-answer session and details from a credit union that has taken part in an AFI project.

For the full OSCUI Focus e-newsletter, use the resource link.

Inside Washington (10/16/2012)

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  • WASHINGTON (10/17/12)--Comptroller of Currency Thomas Curry is the latest regulator to indicate federal agencies are working to ease Basel III capital and liquidity requirements for small banks. Federal Reserve Board Chairman Ben Bernanke also has defended the need to find a compromise that lessens the impact on community financial institutions. "We will be taking a fresh look at the possible scope for transition arrangements, including the potential for grandfathering, to evaluate what we could do to lighten the burden without compromising our two key principles of raising the quantity and quality of capital and setting minimum standards that generally require more capital for more risk," Curry said in a speech before the American Bankers Association in San Diego …

CUs banks encouraged to help drought-stricken borrowers

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WASHINGTON (10/17/12)--The National Credit Union Administration (NCUA), as part of the Federal Financial Institutions Examination Council (FFIEC), is "strongly encouraging" credit unions to work constructively with borrowers who have been affected by the severe drought conditions that have blazed across much of the Midwest and southern portions of the U.S.

The FFIEC is comprised of the NCUA, Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau.

"The effects of natural disasters on the agricultural sector are often transitory, and prudent loan modification efforts can help stabilize borrowers, benefit the long-term interests of financial institutions and their stakeholders, and contribute to the health of local economies," noted the FFIEC in a release Tuesday.

It was suggested that financial institutions could consider alternatives for borrowers who can demonstrate they are hurt by the drought, and such alternatives may include:

  • Expediting lending decisions when possible, consistent with safe-and-sound credit practices;
  • Extending or restructuring borrower debt obligations, consistent with prudent loan workout standards;
  • Easing credit terms or fees for loans, consistent with prudent loan workout standards; and
  • Considering loan programs offered by the U.S. Department of Agriculture's Farm Service Agency or the U.S. Small Business Administration.
"If drought conditions persist, some agricultural borrowers may need to carry over a portion of operating lines of credit that cannot be retired because of lower crop yields.  Financial institutions should perform a comprehensive review of an affected borrower's financial condition in an effort to implement prudent loan workout arrangements," the release noted.

The NCUA and other federal financial regulators, to support efforts to originate and prudently modify loans that help agricultural borrowers recover financially and be better positioned to honor obligations as conditions improve, will instruct examiners to consider the unusual circumstances financial institutions are facing in the affected areas.

"Financial institutions that implement prudent loan workout arrangements will not be subject to criticism for engaging in these efforts even if the restructured loans have weaknesses that result in adverse classification or credit risk grade," said the joint agency release.

However, lenders must evaluate modifications individually to determine whether any require  financial reporting as troubled debt restructurings (TDRs).

Use the resource link to read the complete FFIEC press release.

CULAC backs N.Y. Iowa candidates

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WASHINGTON (10/16/12)--The Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) this week is expanding its candidate advocacy activities ahead of this fall's elections, reporting independent expenditures for Iowa U.S. House candidate Christie Vilsack (D) and New York U.S. House candidate Chris Collins (R).

Altogether, CUNA and CULAC are planning to spend more than $1 million on independent expenditures and partisan communications during this election cycle. Independent expenditures are advertising vehicles aimed at voters, while partisan communications are targeted specifically at credit union members.

CULAC will spend $197,000 to produce radio, direct mail and online ads supporting Vilsack. Vilsack, wife of U.S. Secretary of Agriculture and former Iowa Governor Tom Vilsack, is facing Rep. Steve King (R) this fall.  She has made rural economic development in Iowa a centerpiece of her campaign, and sees a role for credit unions in that process, CUNA Vice President of Political Affairs Trey Hawkins said.

CULAC will spend $117,500 in funds to support Collins, with $65,000 of those funds coming in the form of a direct mail campaign and $51,000 used to develop and broadcast radio ads.

Collins, a small businessman and former Erie County Executive, is running against first-term incumbent Rep. Kathleen Hochul (D), who won a special election held last summer. He was endorsed by the Credit Union Association of New York this month. (See Oct. 5 News Now story:  Four N.Y. candidates get CU backing)

Hawkins said Collins earned the league's and CULAC's support "based on his strong vocal support of credit union issues such as member business lending (MBL), supplemental capital, and reducing regulatory burden on credit unions."

MBLs remain a key credit union issue going in to the upcoming elections, and CUNA expects the Senate to vote on legislation that would increase the MBL cap after the election.

Bills that would increase the MBL cap to 27.5% of assets, from 12.25%, have been introduced in the House and Senate. Members of both parties support the MBL cap increase bills, and H.R. 1418 has 142 co-sponsors. S. 2231 has 21 co-sponsors.

CUNA has estimated that an MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

CULAC last week also announced that it will use independent expenditures to support Rep. Tom Latham (R-Iowa) in his contest against fellow incumbent Rep. Leonard Boswell (D-Iowa), and former Rep. Dan Maffei (D-N.Y.) as he squares off against Republican House member Ann Marie Buerkle. (See Oct. 10 News Now story: Iowa, N.Y. candidates backed in CULAC-supported ads)

And CUNA is also planning to team up with the Montana Credit Union Network to support Sen. Jon Tester (D-Mont.). Hawkins noted that Sen. Tester's reelection is among CUNA's highest priorities for the upcoming elections.

CULAC and the league will develop mailers in support of these candidates.

Rep. William Lacy Clay (D-Mo.) was named a credit union champion and endorsed by the Missouri Credit Union Association (MCUA) this week. The MCUA in a release noted that Clay has more than 225,000 credit union members in his district. Clay is a longtime credit union supporter who has co-sponsored legislation that would increase the credit union member business lending cap and a bill that would increase credit union access to supplementary capital.

CULAC has backed Clay during this election cycle.

CUNA comment letter seeks high-risk rule relief

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WASHINGTON (10/16/12)--Recently proposed appraisal requirements for "higher-risk" mortgage loans should be modified to give credit unions and other financial institutions greater flexibility, the Credit Union National Association (CUNA) said in a recent comment letter.

The comment letter is in response to a proposal to amend Regulation Z (Truth in Lending) that would introduce new appraisal standards. The proposed regulations were released jointly by the Consumer Financial Protection Bureau (CFPB), National Credit Union Administration (NCUA), Federal Reserve Board, Federal Deposit Insurance Corp., Federal Housing Finance Agency, and the Office of the Comptroller of the Currency in August.

The appraisal changes would require mortgage creditors offering higher-risk mortgages to use licensed or certified appraisers who prepare written reports, based on physical inspections of a home's interior, when they determine the value of a given home. As amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, under the Truth in Lending Act, higher-risk mortgages would be defined as mortgage loans secured by a principal dwelling with annual percentage rates that exceed the average prime offer rate by 1.5% for first-lien loans, 2.5% for first-lien jumbo loans, and 3.5% for subordinate-lien loans.

Mortgage lenders would also be required to provide homebuyers with a free copy of the resulting home appraisal report.

In a comment letter, CUNA Assistant General Counsel Luke Martone said CUNA supports greater flexibility in the final rule for creditors to determine whether the use of a certified or licensed appraiser is appropriate, rather than having the rule prescribe when a certified vs. licensed (and vice-versa) appraiser is appropriate.

In the letter, CUNA also noted:

  • The proposed use of a transaction coverage rate (TCR) solely for determining whether a loan is a "higher risk mortgage loan" is "likely to lead to confusion among consumers and within the industry." CUNA said it would not support using a TCR for that purpose;
  • The proposed reequirement that a second, additional appraisal be obtained in cases where property is being resold at a higher price within a 180-day period would have unintended consequences, such as creditors choosing to stop offering higher-risk mortgage loans due to costs and burden association with an additional appraisal; and
  • Higher-risk mortgage loans made in rural areas should be exempt from the appraisal requirement, where finding two independent appraisers can be difficult.
CUNA in the comment letter encouraged the agencies to delay the effective date of the appraisal changes until all related rules--including other pending CFPB mortgage proposals--take effect. "In no case should the compliance date be less than 18 months from the date the final rule is published in the Federal Register," CUNA added.

For the full comment letter, use the resource link.

Inside Washington (10/15/2012)

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  • ALEXANDRIA, Va. (10/16/12)--While the increasing sophistication of credit unions can create issues for the National Credit Union Administration (NCUA) as a regulator, this sophistication also helps credit unions provide a higher level of service, NCUA Chairman Debbie Matz said on Monday. Speaking in an interview on The IBM Center for The Business of Government's Business of Government Hour, Matz said making sure the NCUA can keep up with credit unions is the agency's biggest challenge. Rising interest rates could pose the greatest risk to the credit union industry in the near future, and Matz said the NCUA has encouraged credit unions to monitor interest rate risk. Rising interest rates could pose challenges for credit unions that have large amounts of fixed rate assets on their books, she said. Matz also covered her own career background, credit union and insurance fund basics, and the corporate crisis and the NCUA's reaction to it …
  • WASHINGTON (10/16/12)--Arlen Specter, a 30-year veteran of the U.S. Senate, died on Sunday after a long battle with cancer. Specter, a career-long centrist, entered the Senate as a Republican in 1980 but left as a Democrat after joining that party in 2009. He was defeated by Rep. Joe Sestak (D-Pa.) in a May 2010 Democratic primary contest. Specter in 2010 supported legislation that would increase the 12.25% of assets cap on credit union member business lending, and was a key figure in 2005 data security deliberations. The congressman also served on the Senate Judiciary and Appropriations Committees and chaired the Judiciary Committee between 2005 and 2007. Pennsylvania Credit Union Association President/CEO Jim McCormack said Specter "was a tireless advocate for Pennsylvania. As a senator, he always welcomed input from credit unions and looked at all sides of an issue. Sen. Specter will always be remembered as a fighter who went to Washington to put the best interests of Pennsylvanians first," he added (Life is a Highway Oct. 15) …
  • WASHINGTON (10/16/12)--Monitoring shell companies and increasing financial institutions' due diligence related to those entities are two priorities for new Financial Crimes Enforcement Network (FinCEN) Director Jennifer Shasky Calvery (American Banker Oct. 15).  Calling shell companies "a perennial problem," Shasky Calvery told the Banker the agency has watched "organized crime and others just consistently use shell companies to launder money." She said financial institutions have said they are willing to work with the agency to address these issues. The new FinCEN director said her agency will take a balanced approach as it produces financial intelligence, supervises banks and nonbanks, enforces laws and develops regulations. "For us to be as successful as possible, it is abundantly clear that we are going to have to really focus on our own efficiency and then very carefully pick out what our priorities are going to be and where can we make the biggest difference in this space with the least amount of people," she added …
  • WASHINGTON (10/16/12)--Recent cyberattacks against large U.S. banks could be a sign of things to come, U.S. Secretary of Defense Leon Panetta said last week (American Banker Oct. 15). The attacks blocked and delayed access to consumer websites, and similar assaults against national infrastructure such as electrical power plants could be coupled with physical attacks. The recent attacks, which have been waged against roughly nine banks, are extremely sophisticated, cybersecurity experts said. "The collective result of these kinds of attacks could be a cyber Pearl Harbor, an attack that would cause physical destruction and the loss of life," Panetta said. Panetta has encouraged the U.S. Congress to vote on legislation that would protect electrical grids, transportation networks, and other infrastructure systems from these attacks. Financial Services Information Sharing and Analysis Center CEO William Nelson said his group has advised financial institutions to remain vigilant to prevent these types of attacks. JPMorgan Chase CEO Jamie Dimon noted that cybercrime is "a big deal," and will likely get worse. He said his firm favors strengthening cybersecurity measures ...

CFPB releases remittance compliance guide

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WASHINGTON (10/16/12)--The Consumer Financial Protection Bureau (CFPB) on Monday released new guidance that it says provides an easy-to-use summary of its pending remittance transfer rule and highlights any issues that businesses might find helpful to consider when implementing the rule.

The agency noted that the guidance is particularly tailored to help small businesses and those that work with them cope with the remittance changes.

The CFPB's new remittance rule, which is scheduled to take effect on Feb. 7, will require remittance transfer providers to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers also will be required to investigate disputes and correct errors. The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year.

Portions of the guidance are intended to help financial institutions determine if they are subject to the CFPB's remittance regulations. The guidance also provides model remittance disclosures and receipts.

Information on cancellation, refund, and error resolution rights, and liability issues, are also addressed in the guidance.

In the guidance, the agency recommends that financial institutions that offer remittance transfers consider practical implementation issues in addition to understanding their obligations under the rule. Remittance rule compliance plans may include identifying products, departments, and staff that will be impacted by the rule, and identifying training needs, the CFPB said.

The CFPB also noted that the remittance rule changes may impact marketing or advertising practices, the forms and processes used to communicate with customers, and systems and processes for sending transfers. Fully understanding the changes required may involve a review of existing business processes, as well as the hardware and software that a given financial institution, related agents, or other business partners employ, the CFPB added.

The agency this month published a safe harbor list of countries that qualify for an exception to the remittance rule. An overview of the rule will also be provided in a webinar scheduled to take place today.

For the guidance and more on the webinar, use the resource links.

The Credit Union National Association continues to urge the CFPB to consider ways to lessen the impact of the final international remittance transfer rule on credit unions, and has asked the agency to increase the safe harbor exemption beyond 100 transfers.

NCUA webinar on TDRs workouts and nonaccruals now online

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ALEXANDRIA, Va. (10/15/12)--A recent National Credit Union Administration (NCUA) webinar on loan workouts, nonaccruals, and the reporting of troubled debt restructurings (TDRs) is now available online.

The webinar focuses on the supervisory guidance NCUA recently issued to examination staff implementing a final rule on loan workouts and nonaccrual policy, as well as on the regulatory reporting of troubled debt restructured loans. NCUA experts and Crowe Horwath consultants participated in the discussion.

In May, the NCUA approved a final rule requiring federally insured credit unions to maintain written policies that address the management of loan workout arrangements and nonaccrual policies for loans, consistent with industry practice. The final rule includes compliance guidelines.

The NCUA reports that more than 1,600 people listened into the webinar, which is now available through the resource link below.

Inside Washington (10/12/2012)

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WASHINGTON (10/15/12)--The Congressional Budget Office estimates that the net cost to the federal government of the Troubled Asset Relief Program transactions, including the cost of grants for mortgage programs, will amount to about $24 billion. CBO reduced its estimate of the cost of the TARP's transactions by $8 billion since the agency's previous report in March, when it estimated a cost of $32 billion. The final bill stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home foreclosures; CBO estimates a cost of roughly $51 billion for providing those three types of assistance. …

WASHINGTON (10/15/12)--Although the Consumer Financial Protection Bureau (CFPB) has assured that confidential attorney-client information will be protected, American Banker reported Friday that bankers fear discussions of lending policies and procedures may be fair game during examinations, at least according to attendees of a mortgage conference in Las Vegas last week. Steve Jacobson, CEO of Fairway Independent Mortgage, expressed concern that the CFPB's emphasis on fair-lending enforcement could eventually lead to lenders' reliance on the advice of their attorneys (American Banker Oct. 12). There is a pervasive fear that privileged information will be discoverable at some point during the exam process, said John Konyk, an executive director of government affairs at Weiner Brodsky. The CFPB has said that the Dodd-Frank Act provides it with the authority to ensure confidential treatment of the information that is obtained through the supervisory process. But banks and their attorneys are skeptical, because the CFPB finalized its own rule in July, which in essence provides the bureau with a waiver that bankers say should only be granted by Congress …

Matz Hyland wont be deposed in WesCorp suit

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WASHINGTON (10/15/12)--U.S. Magistrate Judge Margaret Nagle granted a request by attorneys for National Credit Union Administration (NCUA) Chairman Debbie Matz and former NCUA board member Gigi Hyland for a court order that, in essence, protects the two from having to testify in the agency's case against WesCorp FCU officials.

The case revolves around WesCorp's losses related to mortgage-backed securities. WesCorp was hard hit by those losses and the NCUA's lawsuit alleges that senior WesCorp executives were negligent in monitoring the investments of the corporate and that there was a breach of fiduciary duty and fraud related to investments that resulted in $6.8 billion in portfolio losses.

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

In addition to the request to shield Matz and Hyland from being deposed, attorneys representing NCUA, Jeffrey D. Wexler and Michael H. Bierman, of McKenna Long & Aldridge LLP, had also requested that NCUA's Kent Buckham be excused from the procedure.  That request was denied by the court.  Buchkham was as director of the agency's Office of Corporate Credit Unions and so headed the agency's oversight at the time of the investments.  He is now director of the NCUA Office of Consumer Affairs.

Three of the five former WesCorp  officials sued by the NCUA have settled.  The case remains active against two: former CEO Bob Shiravo and former CFP Todd Lane.

Hyland, whose term on the NCUA board ended Aug. 2, 2011, left the agency on Oct. 5.

CUNAs Hampel Small biz lending is good more is better

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WASHINGTON (10/15/12)--The U.S. Treasury Department last week reported that banks receiving tax-payer-funded Small Business Lending Fund (SBLF) support increased their lending to small business in the second quarter of 2012 by $6.7 billion--or 27.4%--above the baseline average. Lending by SBLF participants increased by $1.5 billion between the first and second quarters of 2012, the Treasury added.

However, Credit Union National Association (CUNA) research shows that over the same period, small business lending by the almost 6,500 community banks that did not accept the SBLF funding was essentially flat.  In sharp contrast, credit unions, which are not eligible for SBLF funding, increased their small business lending by 13.5% during the two years ending in June 2012.

CUNA Chief Economist  Bill Hampel notes that credit unions could do even more to help small businesses--without  requiring government funding--if their member business lending (MBL) cap were raised.   In fact, he points out, that 13.5% MBL growth rate is actually down considerably from the 22.6% rate recorded in the preceding two years.

"This slowdown is most likely the result of more and more active business-lending credit unions getting close enough to the statutory 12.25% business lending cap to have to conserve additional business lending capacity," Hampel explains.  

Bills that would increase the credit union MBL cap to 27.5% of assets have been introduced both in the U.S. House (H.R. 1418) and Senate (S. 2231).  Members of both parties support the MBL cap increase bills: H.R. 1418 has 140 cosponsors and  S. 2231 has 21 cosponsors.  Senate leadership has committed to a floor vote on the MBL legislation.

CUNA analysis shows the MBL cap increase would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits would come at no cost to taxpayers.

Regarding the increased lending by banks using government  SBLF funds,  Hampel  says, "Anything Congress can do to increase lending to small businesses is, of course,  good for an economy mired in a weak recovery.  Therefore, it has no doubt helped small businesses that the roughly 320 banks that received over $4 billion in special funding increased their small business lending."

But, he adds, the  $13 billion of additional business lending by credit unions that an MBL cap increase would allow is more than twice the lending--in one year-- of the total amount of new loans generated by SBLF banks since mid-2010.

"Co-sponsors of the MBL legislation have called enactment of the bill a 'no-brainer' for Congress," Hampel says, adding, "It's kind of hard to argue with that."

CompBlog Oct. 16 is deadline for MLO compensation comment

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WASHINGTON (10/15/12)--Credit unions still have a little time to comment on a Consumer Financial Protection Bureau (CFPB) proposal on loan originator compensation, which, among other things, would require mortgage loan originators (MLO) to meet certain qualification standards in addition to those required by the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008. Oct. 16--tomorrow--is the comment deadline.

CompBlog, which serves up hot compliance information from the Credit Union National Association's (CUNA)compliance experts each day, recently outlined what MLOs will have to do to be "qualified" under amended Truth in Lensing Act rules and soon-to-be-amended Regulation Z.

The CFPB proposal would implement Dodd-Frank Act provisions, including requirements for MLOs to be state-licensed or registered on the Nationwide Mortgage Licensing System & Registry (NMLSR) and include their NMLSR identification numbers on loan documents.

CompBlog reminds that the proposed rule would require "loan originator organizations," which includes credit unions that offer real-estate secured loans, to:

  • Ensure that its MLOs are properly registered in accordance with the SAFE Act;
  • Obtain the following information for each unlicensed MLO (which would be the case for most CU MLOs):  a state and national criminal background check; a credit report from a nationwide consumer reporting agency; and information about any administrative, civil, or criminal findings by any court or government agency;
  • Make a determination of the MLO's financial responsibility, character and general fitness that indicates that the MLO will operate honestly, fairly and efficiently; and
  • Provide periodic training to unlicensed MLOs that covers federal and state law requirements that apply to the individual MLO's origination activities.
The proposed commentary to the CFPB rule recognizes that many loan originator organizations already provide training to their MLOs to comply with applicable laws and regulations and the rule would not require training that is duplicative of training that credit unions or others already are providing if it meets the new Reg Z standards.

CUNA will submit its comment to the CFPB Tuesday.  News Now will provide the details of that comment.

To see more detail on the CFPB proposal, provided in the CompBlog post, use the resource link and scroll to Oct. 11 posts.

CFPB consumer database is up expanding

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WASHINGTON (10/12/12)--The Consumer Financial Protection Bureau (CFPB) this week removed the "beta" tag from its consumer credit card complaint database and announced plans to expand the database in the near future.

The agency currently accepts consumer complaints related to credit cards, deposit accounts, mortgage loans, student loans and consumer loans. The CFPB has compiled credit card complaint information in a publicly available online database since June.

When a consumer sends a credit complaint, the CFPB compiles information on the issue that prompted the complaint, the zip code of the consumer that made the complaint, and the company against which the complaint was made. Information on how the complaint was resolved and whether it was resolved in a satisfactory fashion is also included.

The database includes consumer credit card complaint data dating back to Dec. 1, 2011.

Information on complaints regarding additional financial products and services will be added to the database in the future, and the agency said it is evaluating expansion suggestions from a wide range of interested stakeholders. A final decision on what types of new data and products will be added to the database could come in early 2013, the CFPB said.

The CFPB said it will continue to work on the functionality and design of the consumer complaint database, and will expand database data fields.

The CFPB this week reported 79,200 consumer complaints were lodged with the agency between July 21, 2011 and Sept. 30, 2012. Credit card complaints accounted for approximately 23,400 of complaints filed, while 36,300 were mortgage complaints, 12,900 were bank accounts and services complaints, and 2,900 were private student loan complaints.

A total of 45 of the 79,200 complaints involved credit unions.

Billing disputes were the most commonly reported credit card complaints, while most mortgageholders that filed complaints reported issues related to loan modifications, collections or foreclosures.

Accountholder complaints were mainly prompted by account opening, closing, or management issues. These complaints also cited marketing, fee, statement and joint account issues as common problems. Payment problems were the most commonly reported issues for student loan holders.

For more on the database, use the resource links.

CUNA CFPB CU advisors meet before first session

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WASHINGTON (10/12/12)—In an early Thursday meeting with Credit Union National Association (CUNA) staff, members of the Consumer Financial Protection Bureau's (CFPB) Credit Union Advisory Council (CUAC) said they planned to note the issues regulatory burdens can create for credit unions in their discussions with the agency.

The first meeting of the CUAC was held on Thursday. A number of the 15 council members said they also would emphasize that credit unions are already highly regulated during the meeting.

The CUAC was formed to ensure that the CFPB hears from smaller credit unions that are outside of its regulatory scope but will still be impacted, in some form, by CFPB regulations and/or actions. The CUAC will generally advise the CFPB on how its regulation of consumer financial products or services will impact credit unions with less than $10 billion in assets. The group may also take on other topics, as assigned by CFPB Director Richard Cordray.

The CFPB said the discussions with the advisory council will help inform its policy development, rulemaking, and engagement functions.

The CUAC will likely hold four meetings each year.

The 15 CUAC members are:

  • Bernard Balsis, IEG FCU, Hawaii;
  • Rose Bartolomucci, Towpath CU, Ohio;
  • Gary Bell, Cooperative FCU, California;
  • John Buckley, Gerber FCU, Michigan;
  • Carla Decker, District Government Employees FCU, Washington, D.C.;
  • Ron Ehrenreich, Syracuse Cooperative FCU, New York;
  • Kevin Foster-Keddie, Washington State Employees CU, Washington;
  • Mitchell Klein, Police and Firemen FCU, Pennsylvania;
  • Lily Lo, Northeast Community FCU, California;
  • Maria Martinez, Border FCU, Texas;
  • Marcus Schaefer, Truliant FCU, North Carolina;
  • Camille Shillenn, Unified People's CU, Wyoming;
  • Helen Godfrey Smith, Shreveport FCU, Louisiana;
  • Gregg Stockdale, 1st Valley CU, California; and
  • David Wright, Services Center FCU, South Dakota.
CUNA submitted a list of 28 nominees from credit unions across the country to take part in the CUAC and the CFPB's Consumer Advisory Board.

LICU designation deadline on NCUA agenda

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ALEXANDRIA, Va. (10/12/12)--A low income credit union designation proposal is the highest profile item on the National Credit Union Administration's (NCUA) otherwise sparse October open meeting agenda.

The agency this August notified 1,003 credit unions, indicating they are eligible for the low-income credit union (LICU) designation.

The contacted credit unions had not completed the required paperwork to become a LICU, and may not have known of their LICU eligibility. The notified credit unions were offered a streamlined LICU application process. American Banker this week reported that 615 credit unions have accepted the NCUA's LICU designation, bringing the total number of LICU-designated credit unions to around 1,800.

The NCUA originally gave credit unions until Sept. 10 to respond to the LICU notifications, but extended that deadline by thirty days last month.

The LICU designation brings benefits that include the ability to accept supplemental capital and an exemption from the member business lending cap under certain circumstances. LICU-designated credit unions are also eligible for Community Development Revolving Loan Fund grants and low-interest loans and may accept deposits from non-members.

The LICU agenda item for the Oct. 18 meeting is described as: ​Proposed Rule – Section 701.34 of NCUA's Rules and Regulations, Low-Income Designation, Acceptance Deadline.

The agency will also consider a request from BMI FCU of Dublin, Ohio, to convert to a community charter. That credit union holds $378 million in assets and has 27,400 members.

The quarterly insurance fund report will also be presented by NCUA staff.

A purchase and assumption request, personnel issues and supervisory activities are on the agenda for the NCUA's closed meeting.

These will be the first NCUA board meetings held since Gigi Hyland left the NCUA on Oct. 5.

For the full NCUA agenda, use the resource link.

Inside Washington (10/11/2012)

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WASHINGTON (10/12/12)--Regulators' authority, mandated by the Dodd-Frank Act, to foster financial stability will be difficult to enforce because the U.S. Congress has provided little guidance on how to carry it out, Federal Reserve Board Gov. Dan Tarullo said Wednesday. "Dodd-Frank creates a legal and institutional framework within which financial stability regulation is to be developed but, with a couple of notable exceptions, it does not delineate the steps that should actually be taken to promote financial stability," Tarullo said before the University of Pennsylvania's Law School. As an example, Tarullo cited creation of the Financial Stability Oversight Council (FSOC). While the FSOC has the authority to designate nonbank financial companies and financial market utilities as "systemically important," the standard to be applied by the FSOC is whether "material financial distress at the U.S. nonbank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the U.S. nonbank financial company, could pose a threat to the stability of the financial system of the U.S." However, no further guidance is provided in how the FSOC should apply this standard, Tarullo said …

WASHINGTON (10/12/12)--The Consumer Financial Protection Bureau (CFPB) has scheduled a Seattle, Wash. field hearing on debt collection. The hearing is scheduled to begin at 10 a.m. (PT) Oct. 24. CFPB Director Richard Cordray will join consumer groups, industry representatives, and the public at the hearing. Potential attendees can RSVP for the hearing now…

WASHINGTON (10/12/12)--Four Republicans on the House Financial Services Committee criticized the Commodity Futures Trading Commission (CFTC) for  prioritizing "ideological and political goals" over the agency's mission, after a federal court invalidated its "position limits" rule. The lawmakers also requested the CFTC to provide estimates of cost related to the rule and litigation costs, considering the agency's request for a nearly 50% budget increase in fiscal year 2013, according to a letter sent Wednesday to CFTC Chairman Gary Gensler (American Banker Oct. 11). The letter was signed by House Financial Services Committee Chairman Spencer Bachus (R-Ala.), Vice Chairman Jeb Hensarling (R-Texas) and two subcommittee chairs, Reps. Scott Garrett (R-N.J.) and Randy Neugebauer (R-Texas). In September, the U.S District Court for the District of Columbia invalidated the CFTC rule limiting speculation in certain derivatives markets …

Inside Washington (10/10/2012)

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• WASHINGTON (10/11/12)--Former Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair offered a compromise proposal for extending the Transaction Account Guarantee (TAG). Bair proposed extending TAG—which is due to expire at the end of the year--but gradually phasing it out over two years. Ending the program abruptly could cause a rapid exit of funds from the banking system, she said in a video interview with American Banker (Oct. 10). TAG was initiated by the FDIC as a voluntary program in 2008 during the financial crisis to address concerns that a large number of account holders might withdraw their uninsured account balances from financial institutions because of economic uncertainties …

Banks LICU anger is manufactured CUNA tells iBankeri

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WASHINGTON (10/11/12)--Bank furor over the National Credit Union Administration's (NCUA) recent actions to alert credit unions to their eligibility for low-income credit union (LICU) status is a "manufactured issue," Mary Dunn, senior vice president and deputy general counsel of the Credit Union National Association (CUNA), told American Banker this week.

The NCUA in August reached out to 1,003 credit unions, indicating they are eligible for the low-income credit union (LICU) designation. To qualify as a LICU, a majority of a federal credit union's membership must meet low-income thresholds based on 2010 Census data. Around 1,200 credit unions were already designated as LICUs at the time.

The contacted credit unions had not completed the required paperwork to become a LICU, and may not have known of their LICU eligibility. The notified credit unions were offered a streamlined LICU application process. A total of 615 credit unions accepted the NCUA's LICU designation, according to the Banker.

The LICU designation brings benefits that include the ability to accept supplemental capital and an exemption from the member business lending (MBL) cap under certain circumstances. LICU-designated credit unions are also eligible for Community Development Revolving Loan Fund grants and low-interest loans and may accept deposits from non-members.

Banks have complained that the NCUA's LICU actions were an attempt to outmaneuver the 12.25%-of-assets MBL cap.

"I think this is a tempest in a teapot," Dunn said.

The Banker reported that a small percentage of the 615 credit unions that accepted the NCUA's LICU designation offer are close to the MBL cap.

Fourteen of the 615 credit unions were halfway to the MBL cap limit, and six were within 20% of the MBL cap. Around 70% of the newly LICU designated credit unions do not offer business loans to their members, the Banker added.

CUs role v. ID theft noted by FinCEN

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WASHINGTON (10/11/12)--One credit union's role in breaking up an identity theft ring was noted in the Financial Crimes Enforcement Network's (FinCEN) latest Suspicious Activity Report (SAR) review.

The FinCEN report is entitled SAR Activity Review--Trends, Tips & Issues.

The credit union, FinCEN reported, received account applications in January of 2010. The accounts were opened, but potential issues arose once fictitious checks were deposited into the accounts.

When the credit union examined the accounts more fully, it found that the applications, which were seemingly for females living in a large metropolitan area, showed certain similarities: all were opened with real names, but falsified driver's licenses. The account applications also featured out-of-date address information, and were sent from the same IP address.

Another business account application was later sent to the credit union from that same IP address.

Further, when the credit union examined security footage, it found that the same individual seemed to be accessing all of these accounts.

The identity theft victims, state law enforcement and federal authorities were all notified by the credit union. A subsequent investigation found that SARs suspecting similar activities had been filed in other jurisdictions. The identity theft investigation also found other instances of criminal investigations in other cities.

Eventually, other alleged identity thieves were identified, and a multi-member identity theft ring was uncovered. The ring allegedly used stolen personal and financial information to open credit accounts in local jewelry stores. Members of the organization would then use the credit accounts to buy jewelry pieces, and those pieces were later pawned for cash, FinCEN said.

The five theft ring members were indicted by a grand jury, and the leader of the group was later sentenced to 20 years in prison, FinCEN reported.

The FinCEN review also provided guidance and instructions to help financial institutions complete SARs using the agency's Bank Secrecy Act (BSA) E-Filing System. The basics of how to write an effective SAR are also addressed in the review.

For the full FinCEN report, use the resource link.

CUNA urges CFPB to shield CUs from mortgage regs

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WASHINGTON (10/11/12)--The Credit Union National Association (CUNA) in a pair of comment letters pressed the Consumer Financial Protection Bureau (CFPB) to exempt credit unions from many provisions of proposed mortgage servicing rules, or to refrain from applying provisions to credit unions in the proposals that do not implement a specific statutory requirement.

The comment letters address proposed amendments to Regulation Z, which implements the Truth in Lending Act (TILA), and Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA). The regulations would coordinate with changes proposed in connection with the combined TILA and RESPA forms that will be provided for most closed-end mortgage loans.

The mortgage forms and proposed rules are scheduled to be finalized by January.

"CUNA strongly opposes application of many aspects of the Regulation Z and Regulation X proposals to credit unions," CUNA Senior Assistant General Counsel Jared Ihrig wrote in the letters. "Credit unions do not seek to mislead their members or take advantage of them in the mortgage servicing process, and credit unions already comply with a number of regulations designed to protect consumers from abuses in this area," he added.

The CUNA comment letters noted that many of the provisions in the proposals would impose significant, burdensome requirements on credit unions. Further, CUNA pointed out, many of the provisions that would be imposed on credit unions are not required by statute--and CUNA will not support them.

Ihrig also wrote that CUNA has also concluded that several provisions in the proposal are overly broad and will have a detrimental impact on credit unions. This was not the intent of the Dodd-Frank Wall Street Reform Act, he said. Rather, he said, it appeared that the burdensome regulatory requirements would only apply those that engage in unfair and deceptive acts and practices against consumers.

CUNA noted that the CFPB has repeatedly assured CUNA and credit unions that credit unions are not the focus of the agency's mortgage rulemaking efforts.

"(Credit unions) should not now be punished, needlessly, through additional regulations that should be reserved for those who intentionally took advantage of consumers in the mortgage servicing process," he wrote.

The comment letters urged the CFPB to use its exemption powers to confine the mortgage regulatory requirements to those entities that demonstrated a need for enhanced regulation by abusing consumers, not those that serve them well, such as credit unions.

For the full CUNA comment letters, use the resource links.

SBA FY 2012 loan totals a near record

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WASHINGTON (10/11/12)--The U.S. Small Business Administration (SBA) reports that its fiscal year (FY) 2012 loan volume reached a near record at $30.25 billion.

That total was surpassed only by FY 2011 totals, which got a strong boost by the loan incentives under the Small Business Jobs Act of 2010.

The SBA reported that during FY 2012, which ended Sept. 30, SBA approved $30.25 billion in loans--representing 53,848 loans--to small businesses in its two main loan programs, 7(a) and 504. That was down just slightly from the record-high volume of $30.5 billion in loans--or 61,689 loans--in FY 2011. Credit unions participate in both programs.

The SBA said the year's near-record loan pace was driven, in large part, by a record year for the Certified Development Company (504) loan program, which supported $15.09 billion in small business credits. That strong performance was boosted by the temporary 504 refinancing program, which was responsible for 26% of the 504 program loans made in FY 2012 and 34% of the dollar volume. The recently expired 504 refinancing program was part of the incentive package under the Jobs Act.

Use the resource link to read more about the FY 2012 SBA loan volumes.

NEW CUNA urges CFPB to shield CUs from mortgage regs

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WASHINGTON (UPDATED: 4:45 P.M. ET, 10/10/12)--The Credit Union National Association (CUNA) in a pair of comment letters pressed the Consumer Financial Protection Bureau (CFPB) to exempt credit unions from many provisions of proposed mortgage servicing rules, or to refrain from applying provisions to credit unions in the proposals that do not implement a specific statutory requirement.

The comment letters address proposed amendments to Regulation Z, which implements the Truth in Lending Act (TILA), and Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA). The regulations would coordinate with changes proposed in connection with the combined TILA and RESPA forms that will be provided for most closed-end mortgage loans.

The mortgage forms and proposed rules are scheduled to be finalized by January.

"CUNA strongly opposes application of many aspects of the Regulation Z and Regulation X proposals to credit unions," CUNA Senior Assistant General Counsel Jared Ihrig wrote in the letters. "Credit unions do not seek to mislead their members or take advantage of them in the mortgage servicing process, and credit unions already comply with a number of regulations designed to protect consumers from abuses in this area," he added.

The CUNA comment letters noted that many of the provisions in the proposals would impose significant, burdensome requirements on credit unions. Further, CUNA pointed out, many of the provisions that would be imposed on credit unions are not required by statute--and CUNA will not support them.

Ihrig also wrote that CUNA has also concluded that several provisions in the proposal are overly broad and will have a detrimental impact on credit unions. This was not the intent of the Dodd-Frank Wall Street Reform Act, he said. Rather, he said, it appeared that the burdensome regulatory requirements would only apply those that engage in unfair and deceptive acts and practices against consumers.

CUNA noted that the CFPB has repeatedly assured CUNA and credit unions that credit unions are not the focus of the agency's mortgage rulemaking efforts.

"(Credit unions) should not now be punished, needlessly, through additional regulations that should be reserved for those who intentionally took advantage of consumers in the mortgage servicing process," he wrote.

The comment letters urged the CFPB to use its exemption powers to confine the mortgage regulatory requirements to those entities that demonstrated a need for enhanced regulation by abusing consumers, not those that serve them well, such as credit unions.

Updates provided for FinCEN e-filing

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VIENNA, Va. (10/11/12)--The Financial Crimes Enforcement Network (FinCEN) Wednesday issued updates to the electronic filing requirements for its Currency Transaction Reports (CTR), Suspicious Activity Reports (SAR), and Form 110--Designation of Exempt Person (DOEP)--all reports required under the Bank Secrecy Act (BSA).

The updates include clarifications in the instructions for certain fields, corrections, and system enhancements. There were no changes to field lengths nor any field additions or deletions. The overall technical layout of the file has not changed.

FinCEN also unveiled enhancements to its BSA e-Filing System. 

Anyone needing technical assistance for BSA electronic filing is asked by FinCEN to contact the BSA E-Filing Help Desk at 1-866-346-9478 (option 1) or via email at BSAEFilingHelp@fincen.gov.

The Help Desk is available Monday through Friday from 8 a.m. to 6 p.m. (ET), except on federal holidays.

Use the resource link for update details.

FTC files suits against mortgage relief scams

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WASHINGTON (10/11/12)--The Federal Trade Commission (FTC) announced it has filed three separate lawsuits in federal court to put a stop to what it alleges to be "deceptive tactics of three operations that preyed on distressed homeowners by falsely claiming they could save their homes from foreclosure, and then charging them thousands of dollars up-front, while delivering little or no help and often driving them deeper into debt."

"With many homeowners still struggling to hold onto their homes, the FTC takes a hard line against con artists who are seeking their next victim," said Jon Leibowitz, FTC chairman.  On Oct. 9, Leibowitz appeared with U.S. Attorney General Eric Holder, Federal Bureau of Investigations Associate Deputy Director Kevin Perkins, and Department of  Housing and Urban Development Secretary Shaun Donovan to announce the FTC cases. It was noted that the cases are part of the Distressed Homeowner Initiative, a federal effort intended to halt predatory foreclosure rescue, mortgage modification, short sales, and bankruptcy schemes that target distressed homeowners. 

The FTC noted in a release that is has brought more than 40 cases against entities that the agency alleges have peddled  fraudulent mortgage relief schemes and caused "hundreds of millions of dollars in consumer injury."  These law enforcement actions have helped tens of thousands of consumers who were victims of these scams, and have prevented tens of thousands more from becoming victims.

In its newest actions, the FTC said the companies named in the lawsuits acted in violation of the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule. The MARS ruled was issued by the FTC late in 2010 to bring new protections and to ban mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

For more on the three lawsuits filed this week, use the resource link below.

Bank regulators issue final stress-test rules

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WASHINGTON (10/10/12)--Banks will soon be subject to new stress test requirements under final rules released by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) on Tuesday.

The stress tests, which will determine how well banks can withstand certain financially stressing scenarios, are required by the Dodd-Frank Wall Street Reform Act. The stress testing requirements will not impact credit unions.

Fed Governor Daniel Tarullo in a release said the stress testing is "a key tool to ensure that financial companies have enough capital to weather a severe economic downturn without posing a risk to their communities, other financial institutions, or to the general economy."

Banks with more than $10 billion in assets will need to conduct yearly stress tests. Testing for institutions holding between $10 billion and $50 billion in assets will be delayed until October 2013. However, financial institutions with more than $50 billion in assets will need to conduct the stress tests this year. The FDIC in a release said it may permit some covered institutions to delay testing.

Scenarios for the supervisory and company-run stress tests will be released no later than Nov. 15, and the results of these stress tests will be released to the public in March 2013.

The Fed, FDIC and OCC worked closely as the stress test rules were developed, and will work together on some of the remaining elements, such as finishing reporting templates, developing stress scenarios under this rule each year, and providing guidance to banks and savings associations on stress test methodologies, the OCC said in a release. Supervisory approaches will also be developed by the agencies, the OCC added.

For more on the stress tests, use the resource links.

CBS CUs 101 story drives viewers to CUNAs aSmarterChoice.org

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WASHINGTON (10/10/12)--CBS This Morning in an Oct. 8 segment made a strong case for credit union membership, highlighting the Credit Union National Association's (CUNA) consumer web site aSmarterChoice.org as one resource for potential members.

The CBS This Morning segment, entitled Credit Unions 101, highlighted five things viewers should know about credit unions.

Traffic at aSmarterChoice.org surged as a result of the story, with nearly 2,100 visitors viewing the site, and around 1,100 visitors using the site to search for local credit unions that day.

"By coming to aSmarterChoice.org, consumers can conduct a search for a credit union they are eligible to join from among all credit unions nationwide. The entire premise of this website is to make it easier for consumers to learn more about credit unions, and find one they can join, with minimal hassle," CUNA President/CEO Bill Cheney said.

During the CBS segment, Jack Otter, executive editor of CBSmoneywatch.com, said that overall credit unions are "worth it." He promoted credit unions as a safe, local alternative to large banks.

Otter noted that credit unions put their members first because members, not shareholders, are the owners. Cost is one of the main reasons consumers should choose credit unions over banks, Otter added.

He said rates are usually better at credit unions, with higher rates of return on certificates of deposit and savings accounts and lower interest rates on auto loans and mortgages. He also noted that member deposits at credit unions are insured up to $250,000. "People shouldn't worry about safety, that's a non-issue," Otter said.

Fields of membership at credit unions are expanding, Otter added, noting that potential members can join a credit union "at the slightest excuse." He also discussed the widespread availability of credit union network ATMs at credit unions and retail stores, and said that out-of-network ATM fees, when charged, are typically lower than those charged by banks. He cited CO-OP Network as an example of a large shared ATM network.

For the full CBS This Morning segment, use the resource link.

Iowa NY candidates backed in CULAC-supported ads

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WASHINGTON (10/10/12)--With less than one month to go before election day 2012, the Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) is backing state credit union league political advocacy efforts, for instance supporting key credit union-friendly candidates in U.S. House races in Iowa and New York with a series of new radio ads.

In Iowa, CULAC is supporting Rep. Tom Latham (R) in his contest against Rep. Leonard Boswell (D).

Both Latham and Boswell are current members of the U.S. House. They are facing off for the right to represent Iowa's re-drawn third congressional district, which includes areas around Des Moines, Council Bluffs and portions of southwest Iowa. Iowa congressional districts were redrawn in 2010 when the number of House members assigned to that state was reduced from five to four.

CULAC is spending $198,000 for radio ads supporting Latham. CUNA Vice President of Political Affairs Trey Hawkins said Latham "has evolved into a strong credit union friend." Latham has also been endorsed by the Iowa Credit Union League.

In New York, CULAC is supporting Dan Maffei (D). He is attempting to regain the congressional seat he lost in 2010 from the Republican lawmaker who defeated him, Rep. Ann Marie Buerkle. The candidates are contesting in New York's 25th district, which includes Syracuse, Rochester, and areas in-between.

Maffei is a credit union member and supporter. He served on the Financial Services Committee and sponsored a bill that shielded credit unions from elements of the Dodd-Frank Wall Street Reform Act in his previous two-year congressional stint. CULAC is spending $68,000 in radio ads to support Maffei. The candidate has also been endorsed by the Credit Union Association of New York. (See related Oct. 5 News Now story: Four N.Y. candidates get CU backing)

Polls have shown that both races are tight.

The radio ads in both districts are positive and candidate-focused, Hawkins said. CULAC will continue to aggressively support credit union friends in this year's elections, he added.

Inside Washington (10/09/2012)

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  • WASHINGTON (10/10/12)--The housing recovery is being stymied by the government's failure to ease the glut of vacant properties plaguing neighborhoods, Federal Reserve Board Gov. Elizabeth Duke said Friday. "In order to see the robust economic recovery we all want, we need to deal effectively with the large volume of vacant and distressed properties throughout the country," Duke said at conference in on distressed residential real estate. "Our housing crisis has many dimensions and will require a full spectrum of policy actions to restore health to the housing market, our economy, and most importantly, to neighborhoods and communities." The inventory of vacant homes for sale had fallen to 1.6 million units in the second quarter, below its peak of about two million units in 2010 and the first half of 2011, Duke said. However, many vacant homes are not on the market at all, she added. Vacant homes can be more than just an eye sore, Duke said. They can have negative impacts on surrounding communities. Homes vacant for a long time fall into disrepair and invite crime, Duke said. "In turn, blight and crime make these neighborhoods less attractive to potential buyers, renters, and businesses," she added ...
  • WASHINGTON (10/10/12)--Unless Republicans gain control of the Senate in the November elections, Sen. Richard Shelby's tenure as the ranking Republican on the Senate Banking Committee may be numbered. GOP conference rules prohibit a member from serving as a committee's ranking member or chairman for more than six years (American Banker Oct. 9). If Republicans win enough seats to control the Senate can, Shelby serve as chairman for two more years. But he is ending his sixth year as the panel's minority leader. If Republicans don't control of the Senate, Shelby would likely have to give up his ranking member spot. Sen. Mike Crapo (R-Idaho) is next in line to replace Shelby, according to the order seniority. Brian Gardner, a research analyst with Keefe, Bruyette & Woods, described Crapo as more low-key and less populist than Shelby. Crapo and current committee chairman Tim Johnson (D-S.D.) both are from states with a strong community banking presence, Gardner said …
  • WASHINGTON (10/10/12)--The Federal Housing Finance Agency (FHFA) Tuesday released an updated strategic plan for FHFA for fiscal years 2013-2017. The four strategic goals included in the new FHFA plan, called "Preparing a Foundation for a More Efficient and Effective Housing Finance System," are:  Safe and sound housing government-sponsored enterprises, or government-sponsored enterprises (Fannie Mae, Freddie Mac and Federal Home Loan Banks);  stability, liquidity, and access in housing finance; to preserve and conserve Fannie Mae and Freddie Mac assets; and; to prepare for the future of housing finance in the U.S. "The initiatives and strategies set forward in this plan will serve to improve current mortgage processes, inspire greater confidence among prospective market participants, and set the stage for recovery and an improved future system of housing finance," said Edward DeMarco, FHFA acting director. "Working with the Congress, the administration and FHFA's stakeholders, I am confident that FHFA will meet the challenge of building the foundation for a safer, more efficient, and effective system of housing finance" …

SARs on foreclosure rescue scams up again FinCEN

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WASHINGTON (10/10/12)--The number of foreclosure rescue scams reported to the Financial Crimes Enforcement Network (FinCEN) continued to increase in the second quarter of 2012, and a growing awareness of these scams may be influencing this upward filing trend, FinCEN said.

A total of 2,360 foreclosure rescue related suspicious activity reports (SARs) were filed in the first half of 2012. The total number of these SARs will far exceed 2011's total of 2,782 if this filing pace continues, FinCEN said.

The foreclosure scam SARs increase came as the total number of SARs indicating mortgage loan fraud (MLF) declined, FinCEN noted. In total, 17,476 total MLF SARs were filed in the second quarter of 2012, a 41% decrease from the 29,558 MLF SARs filed in the second quarter of 2011.

Underwater mortgages, lower turnover of existing homes and low new home construction numbers may be providing criminals greater chances to develop foreclosure relief scams, as opposed to schemes related to new loan origination, FinCEN suggested.

The agency said "a number of well-publicized Federal investigations, enforcement actions, reports, bulletins, and guidance" have likely increased public awareness and underscored the importance of preventing and reporting these scams.

FinCEN noted that foreclosure rescue scams often promise to aid troubled homeowners by delaying or stopping the foreclosure process. Home titles may be transferred, or payments may be made to the "foreclosure rescuer," in many cases. "Victims may lose thousands of dollars in fabricated fees, and risk losing their homes as well," FinCEN noted.

Nearly half of these foreclosure rescue scam attempts took place in California. Scam attempts were also frequently reported in Florida, Nevada and Arizona.

The median amount of funds reported in foreclosure scam MLF SARs was $345,000, compared to $265,500 for all second quarter MLF SARs, FinCEN noted.

For the full FinCEN report, use the resource link.

L.A. due diligence roundtable set by FinCEN

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WASHINGTON (10/9/12)--The Financial Crimes Enforcement Network (FinCEN) has scheduled another roundtable discussion on proposed customer due diligence (CDD) regulations, this time setting the meeting on Oct. 29 in Los Angeles.

The meeting will take place at the Los Angeles branch of the Federal Reserve Bank of San Francisco, and will be held between the hours of 9:30 a.m. and 3 p.m. PT. Advanced registration is required, and interested parties must register by Oct. 19. Any interested parties, including finance industry representatives, may attend, FinCEN said.

FinCEN held a similar roundtable on Oct. 5 in New York, N.Y. Discussion at the meeting will focus on FinCEN's Advanced Notice of Proposed Rulemaking, which would require financial institutions and others to establish and maintain member and customer account monitoring policies. The proposal would codify, clarify, consolidate and strengthen CDD rules, and would apply to financial institutions, securities brokers and dealers, mutual fund brokers and dealers, futures commission merchants, and some introducing commodities brokers.

Entities that are subject to the rules would need to follow standards for verifying the identity of each member/customer. They would also need to understand the "nature and purpose" of each account held at an institution to assess the likelihood of suspicious activity.

The FinCEN plan is part of a broader U.S. Treasury strategy to enhance financial transparency and better combat financial crime, money laundering, terrorist financing, and tax evasion. FinCEN is requesting information on how and when financial institutions collect "beneficial ownership" information from their customers and members, and how this information is verified. Costs and other burdens associated with these collections may also be discussed.

The Credit Union National Association (CUNA) has noted that while it supports the objectives of the FinCEN proposal, the burdens and costs credit unions could face as a result would far outweigh the purported benefits to FinCEN. CUNA has suggested that FinCEN abandon the due diligence proposal and, alternatively, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules.

For more on the FinCEN meeting, use the resource link.

Inside Washington (10/05/2012)

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  • WASHINGTON (10/9/12)--Banks that received government relief through the Troubled Asset Relief Program (TARP) may bear more risk with new Basel III standards, panelists said during a webinar sponsored by Mercer Capital Thursday. Banks that received TARP funds likely experienced a decrease in retained earnings and common equity, and will likely face pressure to sell or raise capital, said Andrew Gibbs, the head of Mercer Capital's depository institutions practice, during the seminar (American Banker Oct. 5). To raise capital within a limited timeframe, banks should file shelf registrations for stock offerings or update old registrations based on Basel III proposed requirements, Gibbs and other panelists advised. Mortgage-servicing rights also could be more expensive to carry and less profitable, said Chip MacDonald, a lawyer with Jones Day in Atlanta. Valuations on deferred-tax assets also are likely to decrease, he added …

CUs should assess CFPB mortgage compliance costs soon CUNA

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WASHINGTON (10/9/12)--While many credit unions may be avoiding undertaking a full review of the Consumer Financial Protection Bureau's (CFPB) extensive mortgage lending regulation proposal, thinking the regulations only apply to first mortgage loans, Credit Union National Association (CUNA) Senior Vice President for Compliance Kathy Thompson has warned that portions of the regulations do apply to subordinate liens.

Thompson specifically cited regulations addressing ability-to-repay, appraisals for higher-risk mortgages and high-cost mortgages, as well as the CFPB's developing Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) forms, as regulations that will likely impact credit unions that process subordinate liens. The CFPB's mortgage originator standards and mortgage servicing regulations will also apply to subordinate liens, she added.

In the September edition of CUNA's CompBlog Wrap-Up, Thompson said credit unions should think about the compliance costs these pending regulations could create and consider whether those potential costs should be built into their 2013 budgets. At least 20 new notices would be required under the proposed rules, and those notices will need to be developed and incorporated into policies and procedures, as appropriate, Thompson said. Information technology changes and additional staff training will also be necessary, she noted.

The CFPB has said the expected compliance date for many of these rules will be six to 12 months from when finalized regulations are issued. A six-month compliance period would be tough--but remember the CFPB is oriented to the consumer and has even said that a short compliance period might help to calm the mortgage market, Thomspon said. No matter the final compliance date, these regulations will likely create a busy 2013 for credit unions.

Thompson noted that CUNA is encouraging the CFPB to shield credit unions from these regulations as much as possible, and encouraged credit unions that have not done so to forward their own thoughts on to the agency in a comment letter. "If you have ever thought about sending in a comment letter--either directly to the CFPB or to CUNA--now is the time to help the CFPB understand the time necessary to comply with this barrage of mortgage lending rules," she said.

The September edition of CUNA's CompBlog Wrap-Up also informs credit unions on how a recent National Credit Union Administration letter could impact open-end lending programs, and how some risks related to those programs can be decreased.

The Wrap-Up also advises credit unions on how they can determine whether or not they will be impacted by the CFPB's new international remittance transfer regulation. Tips on how affected credit unions can ease potential compliance burdens are also discussed.

As usual, the September edition of the CompBlog Wrap-Up lists the upcoming effective dates of new regulations, important compliance articles and reports to read, as well as CUNA training programs.

For more of the CUNA CompBlog Wrap-Up and other compliance gems, use the resource links.

CUNA analyzing FHFA mortgage paper

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WASHINGTON (10/9/12)--The Credit Union National Association (CUNA) is analyzing the Federal Housing Finance Agency's (FHFA) secondary mortgage market infrastructure white paper, which was released last week, and plans to present its views on the paper to the agency soon.

The FHFA in a release said the white paper seeks to identify the core components of mortgage securitization that will be needed in the housing finance system going forward. The white paper also discusses model pooling and servicing agreements (PSAs). The FHFA is accepting public comment on the paper until Dec. 3.

"The release of this white paper is an important step laying the groundwork for the future structure of the housing finance system," FHFA Acting Director Edward DeMarco said in a release. "Given that the securitization infrastructure could serve as a utility that would outlast Fannie Mae and Freddie Mac as we know them, we look forward to public input from all market participants and interested parties."

Overall, the FHFA said aligning Fannie and Freddie with a single set of policies, guides, documents, processes and a new securitization platform "will provide a sound, efficient and flexible operating environment in the shorter term" and will also aid the progress of government-sponsored enterprise (GSE) reform efforts.

A new platform and PSA framework could make it easier for regulators to enforce Qualified Mortgage and Qualified Residential Mortgage guidelines, screen for qualified mortgage eligibility and identify any corresponding risk retention requirements, the FHFA noted.

The U.S. Treasury this summer announced that the winding down of mortgage investment portfolios held by Fannie and Freddie will be accelerated to an annual rate of 15%. The agency had previously set a 10% annual reduction rate, which would have reduced the amount of mortgage assets held by the GSEs to $250 billion by 2022. The increase to 15% will accelerate this process by four years, according to the Treasury.

The Obama administration is considering a range of options for mortgage market reform, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Administration officials have said that each proposal would shrink the government's role in the mortgage market.

CUNA has repeatedly emphasized that any changes to the U.S. housing finance system must ensure that credit unions and other small issuers maintain fair and affordable access to secondary mortgage markets. Credit unions are concerned that fully privatizing the securitization market by turning it over to a group of large banks, as has been suggested by some, could exclude credit unions from important parts of the market, CUNA has noted. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

For the FHFA white paper, use the resource link.

NCUA takes action against Credit Suisse

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ALEXANDRIA, Va. (10/5/12)--Credit Suisse Securities (USA) became the latest Wall Street firm to be sued by the National Credit Union Administration (NCUA), as the agency alleged federal and state securities law violations in a suit filed in Kansas Federal District Court.

The NCUA's complaint states that underwriters for the U.S.-based subsidiary of Swiss bank Credit Suisse made numerous material misrepresentations in the offering documents when that firm sold a combined $715 billion in securities to three failed corporates.

These misrepresentations caused U.S. Central FCU, Western Corporate FCU (WesCorp) and Southwest Corporate FCU (Southwest) to believe the risks of loss associated with these investments were minimal, when in fact the risks were substantial, the NCUA charged.

All three corporate credit unions failed as a result of these purchases, the NCUA claims.

NCUA Chairman Debbie Matz said Wall Street firms "ran a bait and switch operation, and the effects were felt not only in credit unions, but throughout the financial industry.

"NCUA and credit unions have successfully worked together to restore stability to the credit union system. Now we are holding responsible parties, like Credit Suisse, accountable for their actions," she said of the NCUA's action.

The NCUA had already filed suit against J.P. Morgan Securities, RBS Securities, Goldman Sachs, and Wachovia, and each of these suits are progressing through the court system. The agency has settled with Citigroup, Deutsche Bank Securities, and HSBC, avoiding the cost of litigation and bringing in more than $170 million in funds that were lost due to the corporate credit union investments.

For the full NCUA release, use the resource link.

Four N.Y. candidates get CU backing

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WASHINGTON (10/5/12)--State leagues, credit unions and the Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) are stepping up their support of credit union-friendly candidates ahead of this fall's elections, and the Credit Union Association of New York (CUANY) this week endorsed four congressional candidates as part of these efforts.

The candidates are:

  • Small businessman and former Erie County Executive Chris Collins (R);
  • N.Y. State Assemblyman Hakeem Jeffries (D);
  • Former U.S. Congressman Dan Maffei (D); and
  • N.Y. State Assemblywoman Grace Meng (D).
The endorsements were based on the results of meetings with the candidates, feedback from credit unions in the candidates' districts and, where applicable, the candidates' legislative records, CUANY said in a release.

CUANY President Bill Mellin said the association is "pleased to back these candidates, who have demonstrated support for credit unions and understand the value of offering New Yorkers a not-for-profit financial option." Mellin said CUANY looks forward "to working with these candidates during the remaining days of their campaigns and after they take office."

Collins is running against first-term incumbent Rep. Kathleen Hochul (D), who won a special election held last summer. Collins, a 36-year private sector worker, noted that he has created or saved more than 500 jobs as a small businessman. "Credit unions provide small business men and women with crucial financial support, allowing them to invest in their companies and create the jobs we need to grow this economy," he said.

Jeffries, who is expected to win the congressional seat vacated by the retiring Rep. Edolphus Towns (D), will face Republican opponent Alan Bellone this fall. As a state assemblyman, Jeffries sponsored credit union field of membership legislation and another key financial services bill. "In the state assembly, I fought to promote the growth of credit unions as an incredibly important banking option for working families in the communities that I represent," Jeffries said.

Maffei is attempting to regain the congressional seat he lost in 2010, facing off against the Republican lawmaker who defeated him, Rep. Ann Marie Buerkle. In his previous two-year congressional stint, Maffei served on the Financial Services Committee and sponsored a bill that shielded credit unions from elements of the Dodd-Frank Wall Street Reform Act. A credit union member himself, Maffei noted credit unions are important community financial institutions.

State Assemblywoman Meng serves on that body's Banks Committee, and has cosponsored and supported many pro-credit union bills in her four years in the assembly. Meng is facing N.Y. City Councilman Dan Halloran (R) in the contest to replace the seat vacated by Rep. Robert Turner (R).

U.S. House members, and one-third of sitting Senate members are facing November reelection campaigns, and CUNA Vice President of Political Affairs Trey Hawkins said CULAC "will continue to be in the game on behalf of credit union-friendly candidates, and will aggressively support credit union friends in this year's elections."

CUNAs Hampel talks mortgage refi in iU.S. Newsi

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WASHINGTON (10/5/12)--In a U.S. News and World Report article published this week, Credit Union National Association (CUNA) Chief Economist Bill Hampel said the growing number of home refinance applications is making it harder for lenders to process new home loan applications, in some cases.

The U.S. News story noted that continued low mortgage rates are resulting in high levels of mortgage refinancings, with refinancing applications accounting for 83% of all mortgage applications filed last week. Some are concerned that this refinancing increase could harm new home sales, slowing the seemingly growing housing recovery, U.S. News said.

"It does gum up the works," Hampel, who was the only economist interviewed for the story, noted.

The Federal Reserve (Fed) last month announced plans to purchase mortgage-backed securities at a rate of $40 billion per month in a bid to improve the housing market. The Fed also said it would likely if warranted extend its targeted fed funds rate at 0% to 0.25% until mid-2015. Long-term interest rates will stay lower, for longer, based on the Fed's actions.

"Part of the public policy is to allow more people to refinance, giving them more disposable income. One of the costs of that is that it makes it more difficult for new purchase applications to go through quickly. There's a certain amount of capacity and the busier those [mortgage loan officers] are, the more difficult it is for them to handle purchase applications quickly," Hampel added.

The U.S. News story suggested strict underwriting standards, political issues and tax issues may also be slowing the progress of some mortgage processing. However, Hampel said home sales could be helped by lenders prioritizing new home purchase mortgage application processing ahead of refinancing application processing. "Lenders don't mind letting refi applicants wait longer as a result of heavy volume," he said. "Everything might take a little longer for sales to be consummated, but it doesn't necessarily stop those sales. It's just a little sand in the wheels."

Home starts, new home permits, home prices and sales of existing homes have increased in recent months, and Freddie Mac Vice President and Chief Economist Frank Nothaft last week said low interest rates should support an already improving housing market.

Five-year adjustable-rate mortgages (ARMs) were the only mortgage products not to set records for the second week running, Freddie Mac reported in a survey of mortgage rates for the week ended October 4.

Thirty-year fixed-rate mortgages averaged 3.36% this week, 3.40% last week and 3.94% this time last year. Fifteen-year fixed-rate mortgages averaged 2.69% this week, 2.73% last week and 3.26% this time last year. Five-year ARMs averaged 2.72% this week, compared with 2.71% the previous week and 2.96% the same week last year.

This is the first time since October of 2009 that the average fifteen-year mortgage rate has fallen below the average five-year ARM rate.

The average one-year ARM was 2.57%, down slightly from the 2.60% average reported last week. One-year ARMs averaged 2.95% this week last year.

For the U.S. News and World Report story and Freddie Mac's mortgage survey, use the resource link.

Matz not expecting new NCUA board member soon

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ALEXANDRIA, Va. (10/5/12)--The timeline for filling the National Credit Union Administration (NCUA) board vacancy created by board member Gigi Hyland's pending departure is up to the White House and U.S. Congress, and the position likely will not be filled in the near future, NCUA Chairman Debbie Matz said Thursday.

Matz spoke during an NCUA Town Hall webinar.

Regulatory issues were also discussed during the webinar. NCUA Director of Examinations and Insurance Larry Fazio announced that the agency's call report forms are being revised to include information on how credit unions can appeal examiner directives or other pronouncements. The Credit Union National Association has encouraged the NCUA to make this call report change.

Agency staff said the NCUA's guide for its examiners is being updated, and a revised version of that guide will be made public once those revisions are complete. The agency's national supervision policy manual should also be released soon. However, portions of the manual that are not for public release must be redacted first, NCUA staff said.

The NCUA staffers stressed that the examiners guide is not meant to serve as a series of hard and fast rules, but, rather, should be viewed as a set of guidelines for examiners. However, the policy manual is a more strict set of standards that governs how examiners should proceed once their exams are complete, they said.

The NCUA's supervisory regions, which govern which examiners and supervisors oversee credit union activities, may be restructured, NCUA staff added. The agency is considering moving Nevada, which is currently in Region 1, into Region 5. California will continue to be managed out of Region 2, as the agency is lacking examiners with the experience needed to supervise large credit unions in other regions. Both Region 1 and Region 2 feature primarily east coast-based states.

Matz also discussed more general NCUA regulatory issues, saying that the agency is going to continue to review credit union regulations to ensure they stand the test of time and they are responsive to the risks the agency sees in credit union portfolios. The NCUA will also be responsive to credit union burdens as it moves forward, she said.

Credit union regulatory burdens have also been a topic of conversation in the agency's work with the Consumer Financial Protection Bureau (CFPB), Matz said. She noted that the agency has spoken up for credit unions when potential CFPB actions could create burdens.

The CFPB does not always have a great deal of flexibility, due to the congressionally mandated nature of some of its work and timelines. However, CFPB officials are sensitive to the needs of credit unions, and the NCUA and CFPB have a close working relationship. Matz said the NCUA works hard to convey how credit unions will be impacted by CFPB actions.

The NCUA webinar also revealed that:
  • A supervisory letter on member business lending blanket waivers is being developed;
  • The expected range of National Credit Union Share Insurance Fund assessments and corporate stabilization assessments for 2013 will be released at the agency's November open board meeting;
  • Agency staff continue to look at derivatives authority regulations, and could bring a proposal forward, at the NCUA board's request; and
  • NCUA staff consult with state regulators before they issue regulations that also impact state-chartered credit unions.
The webinar also covered state-to-federal credit union charter conversions, recently proposed emergency liquidity regulations, the overall performance of the credit union industry, the NCUA's low-income credit union eligibility and regulatory modernization initiatives, corporate credit union issues, and recently finalized and proposed rules.

Inside Washington (10/04/2012)

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  • WASHINGTON (10/5/12)--Mortgage lenders will soon face exams from the Consumer Financial Protection Bureau (CFPB) and, based on recent settlements that agency has reached with credit card companies, the exams will focus on the quality of data reported to regulators under the Home Mortgage Disclosure Act (HMDA). The bureau also is intent on determining if mortgage applicants have been discriminated against, even if the discrimination is inadvertent (American Banker Oct. 4). Although CFPB does not have authority over the Community Reinvestment Act (CRA), the agency may drive some nonbank mortgage lenders to meet CRA requirements that seek to prevent discriminatory credit practices in low-income neighborhoods, said Jo Ann Barefoot, a co-chairman at Treliant Risk Advisors. The exams will be focused on the most vulnerable customers, Barefoot told mortgage lenders at an Ellie Mae conference. Lenders who have received a large number of consumer complaints also will be scrutinized, the Banker said …

Senators suggest a U.S. interest rate standard

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WASHINGTON (10/4/12)--Noting the many issues that manipulation of the London interbank offered rate (LIBOR) and other interest rates could create for borrowers, Sens. Chuck Grassley (R-Iowa) and Mark Kirk (R-Ill.) said an American-based interest rate index should be considered.

LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.

British bank Barclays PLC earlier this year admitted that some of its employees between 2005 and 2009 conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The firm was fined by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission, and the United Kingdom's Financial Services Authority, and LIBOR manipulation investigations are ongoing in several countries, including the U.S.

"If U.S. investors and borrowers have suffered financial harm from our dependence on an index set in London, they have the right to expect the country's leaders to support better alternatives. Complacency in the wake of losses and lawsuits will diminish both investor and borrower confidence regarding debt securities issued in U.S. financial markets," the legislators said in a letter sent to U.S. Treasury Secretary Tim Geithner this week. For the full letter, use the resource link.

U.S. Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler this week told Reuters that LIBOR alternatives do exist, but financial market participants must decide whether or not to replace the standard. Whatever form a new standard may take, the standard would need to be based on observable transactions to prevent any further misconduct, Gensler added.

Project Zip Code hits milestone ahead of elections

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WASHINGTON (10/4/12)--The Credit Union National Association's (CUNA's) Project Zip Code, a secure program that matches credit union members by legislative district and county based upon their zip code, has achieved a milestone just ahead of the November federal election, identifying 80 million credit union members in congressional districts across the country.

"This is a great milestone as it means we have matched 84% of credit unions members to their current and new legislative districts," said Kristen Prather, Grassroots Manager and day-to-day Project Zip Code (PZC) manager.

The latest version of PZC software, which was unveiled late last year, matches credit union membership data to the current 112th U.S. congressional districts and state legislative districts. New legislative districts for the 113th Congress and state legislative districts are also matched by this latest version of the software.

The Project Zip Code software, and the data gleaned from it, can give credit union supporters a great advantage as they work to advocate for credit unions and their members. CUNA, the state leagues and credit unions are in the midst of a major push on credit union issues now--just before of the upcoming elections--meeting with legislative staff in Washington, D.C. and federal lawmakers as they campaign in their home districts.

Project Zip Code data allows CUNA, the leagues and credit unions to show elected officials how many credit union members are among their constituents with very clear numbers, Prather said. "The more credit unions that participate in Project Zip Code, the more accurate these membership counts will be," she added.

The data will also come in handy once the elections have concluded, as credit unions follow up with advocacy efforts with newly elected officials.

Credit unions can also use PZC to better track their membership and to plan future ATM and branching expansion. Project Zip Code protects the privacy of credit union members, as only membership totals per legislative district and county, and not information on individual members, are transmitted from credit unions to the PZC database.

For more Project Zip Code information, use the resource link.

Inside Washington (10/03/2012)

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  • ALEXANDRIA, Va. (10/4/12)--Credit union managers, staff and volunteers can still register for today's online town hall with National Credit Union Administration (NCUA) Board Chairman Debbie Matz. The webinar begins at 3 p.m. ET. Registration for the free webinar is available online. Participants also will use the link to log into the webinar after registration. Registrants should allow pop-ups from the website. During the webinar, participants can type in questions about any topic related to the credit union industry, and they may e-mail questions in advance at WebinarQuestions@ncua.gov. The subject line should read, "Matz Town Hall Webinar" …
  • WASHINGTON (10/4/12)--Among the agenda items on the Federal Deposit Insurance Corp.'s (FDIC) board of directors meeting scheduled for Tuesday are  stress-testing requirements mandated under the Dodd-Frank Act and adjustments to how the agency charges large-bank premiums. In January, the agency proposed rules requiring stress tests for banks with more than $10 billion in assets (American Banker Oct. 3). Dodd-Frank requires each regulator to establish stress-testing standards for institutions it supervises with assets of $10 billion or more. Companies with more than $50 billion in assets under the watch of the Federal Reserve Board must also undergo stress tests. A proposal for deposit insurance assessments at larger banks is expected to be finalized at the meeting. The board also is expected to hear an update from FDIC staff officials on the status of the Deposit Insurance Fund …
  • WASHINGTON (10/4/12)--Housing and Urban Development Secretary Shaun Donovan Tuesday defended the Obama administration's efforts to revive the sluggish housing market during the president's four-year term. "While a fuller evaluation will need to be done by economists and historians with greater analysis and the perspective of time--and despite the fact that our progress has not been made in a straight line--it's clear that housing is stronger than most expected at the time the president took office," Donovan said in speech at a Progressive Policy Institute and American Action Forum. A challenge facing the administration is to create rules without stifling competition and entrepreneurship--or impeding access to loans, Donovan said. "We need to remember that the goal of this debate is not to limit credit further, but rather to ensure that the kind of access we are encouraging doesn't cause another crisis," he added …
  • WASHINGTON (10/4/12)--Federal Housing Administration (FHA) endorsements of condominium loans increased 20% to 5000 units from July to August, the agency reported Tuesday. The government mortgage insurer endorsed $22.1 billion mortgages in August, an increase of 13% from July and 38% from a year ago (American Banker Oct. 3). Condo refinancings accounted for 40% of endorsements. In June, FHA endorsed 3,700 condo loans …

NCUA legal opinion weighs in on charter change

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ALEXANDRIA, Va. (10/4/12)--The National Credit Union Administration (NCUA) may approve a credit union's request to alter its charter and, subsequently, merge with another credit union with the same field of membership, NCUA General Counsel Michael McKenna said in a legal opinion letter released Wednesday.

The Federal Credit Union Act (FCUA), as amended by the Credit Union Membership Access Act (CUMAA), gives the agency the authority to approve such a charter conversion and subsequent merger, McKenna wrote.

CUMAA was approved in the late 1980s by the U.S. Congress, in part, to allow the chartering of multiple common-bond credit unions. The Supreme Court had previously ruled multiple common-bond charters were not permitted under the FCUA.

The American Bankers Association (ABA) challenged the NCUA's implementing regulations in court, but the ABA challenge, and subsequent appeals, were defeated.

These court decisions support NCUA's discretion under the FCUA to approve the voluntary merger of two healthy multiple common-bond credit unions, McKenna said in the NCUA legal opinion letter. "In addition, NCUA has discretion under the FCUA to approve a change to a credit union's charter to facilitate a voluntary merger with another healthy credit union," he added.

However, the applicant must satisfy the criteria for a charter change, as spelled out in FCUA and NCUA regulations, McKenna said.

For the full NCUA legal opinion letter, use the resource link.

NMLS upgrades coming this weekend

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WASHINGTON (10/4/12)--Changes to accommodate credit report enhancements, new disciplinary and regulatory action disclosures, and renewal enhancements will be made to the Nationwide Mortgage Licensing System & Registry (NMLS) this weekend.

In the update, the NMLS will add two new summary flags, a comparison tool, and new alerts. Tools that allow users to authorize criminal background checks and/or credit report checks will also be added. Space for mortgage loan originators (MLOs) to explain any disciplinary actions that have been taken against them will also be added, and minor database changes are also planned.

The changes will be made during a system maintenance period starting on Friday night. The NMLS system will not be available until Sunday, according to an NMLS release.

The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires credit union MLOs and their employing institutions to register with the NMLS, which became active in early 2011. The NMLS registry is intended to increase consumer protection and to help financial regulators coordinate and share mortgage originator information.

Registered MLOs are given a "unique identifier," which is the identification number associated with the MLO within the NMLS. The unique identifier remains the same, even when the MLO changes employment, moves, or changes his or her name, and the identifier tracks the MLO and facilitates public access to the employment history and any disciplinary or enforcement actions that have been initiated against the individual.

All NMLS accounts for financial institutions must be renewed on an annual basis.

Credit unions and other MLOs are required to ensure that their mortgage loan originators are properly registered and prohibit any employees who are not registered from performing any residential mortgage loan origination duties.

CUNAs Dunn named a CU Woman to Watch

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WASHINGTON (10/4/12)--Mary Dunn, senior vice president and deputy general counsel of the Credit Union National Association (CUNA), is featured in the Credit Union Times 2012 list of credit union "Women to Watch" honoring those, like Dunn, who are "tirelessly dedicated to providing support to credit unions."

scovered is that it is just as important to shine the spotlight on…those who choose to champion the credit union mission every day," as does Dunn.

CUNA General Counsel Eric Richard said of the honor, "Mary is a tireless and creative advocate for credit unions who could not be more deserving of this kind of recognition. We are so proud to have her as part of the CUNA team.  In these challenging regulatory times, her work is critically important."

CU Times named Dunn "The Student of Life," and noted that for CUNA she represents credit union interests before the National Credit Union Administration, the Federal Reserve Board, and other federal agencies, like the Consumer Financial Protection Bureau. She is the chief staff liaison to CUNA's Examination and Supervision Subcommittee and its Federal Credit Union Subcommittee. She is also a liaison to the CUNA Governmental Affairs Committee and Community Credit Union Committee.

Dunn was also recognized for her bi-monthly column for CUNA's Credit Union Magazine and for overseeing the weekly production of RegWatch and regulatory analyses on all proposed and final regulations affecting credit unions, as well as Operation Comment, CUNA's website to facilitate comments from the credit union community to regulators.

Merchants Fed FIs offer oral arguments on interchange

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WASHINGTON (10/3/12)--The Federal Reserve's debit interchange fee cap regulation is fundamentally flawed, and imposes a cap that does not fully allow debit card issuers to cover their costs and make a reasonable rate of return on their investments, the Credit Union National Association (CUNA) and financial industry coalition partners said in Tuesday oral arguments in Washington.

Attorneys representing merchants, the Federal Reserve and financial institutions all spoke out on the Fed's debit interchange fee cap regulations during oral arguments held Tuesday in the U.S. District Court for the District of Columbia.

The Tuesday arguments were part of an ongoing debit interchange case brought by the National Retail Federation, the Food Marketing Institute, the National Association of Convenience Stores and two retailers in late 2011. That suit alleges that the Fed adopted an unreasonably high interchange cap on debit card transaction fees when it implemented provisions of the Dodd-Frank Act.

CUNA and coalition partners added their voices to the case in an amicus brief filed this spring.

Seth Waxman of law firm WilmerHale represented CUNA and a coalition of trade associations representing thousands of small and large financial institutions on Tuesday.

During the hearing, merchant representatives argued that fixed costs that are not associated with a particular debit transaction should not have been included in the Fed's final debit interchange fee determination. The Fed attorney said the agency had a right to fill in areas of the law that Congress had left ambiguous. Waxman said that the Fed had handled the fee issue wrongly--but for the opposite of the reasons offered by the merchants: namely, by failing to take all appropriate costs into account.

The final version of the Fed's regulation caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards.

The Fed took some costs related to debit card use, such as network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring, into account when it decided to increase the proposed 12 cent debit interchange cap.

The merchant representatives on Tuesday claimed that the Fed sought to impose its own views, and overstepped its authority, when it decided to include these costs, which are not just incremental costs for particular transactions, but costs that are common for all transactions.

The Fed also ignored directions spelled out in the Dodd-Frank Act, which directed the agency to create the interchange fee standards, the merchants argued.

Fed representatives countered the merchant argument, saying that Congress directed the agency to look at fees that were reasonable and proportionate to debit card issuer costs, and to also include fixed costs. However, a number of costs fell between these two standards, and the Fed also had the authority to include these costs.

Overall, the final rule hurts consumers and financial institutions of all sizes, CUNA and coalition partners added in a statement released after the hearing. Further, merchants are merely seeking to increase their profits, rather than trying to help their consumers, through this legal action, the statement added.

The judge hearing the case, Richard J. Leon, said he could not give any indication of how or when he would rule.

CUNA to NACHA minimize P2P program changes

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WASHINGTON (10/3/12)--The Credit Union National Association (CUNA) in a comment letter urged the Electronic Payments Association (NACHA) to minimize programming and formatting changes as it works to standardize person-to-person payments (P2P) on the automated clearinghouse (ACH) network.

CUNA said it appreciates NACHA's P2P reform efforts, which are intended to facilitate risk management and payments innovation. NACHA's proposal would consolidate and standardize P2P payments under WEB standard entry code (SEC) for both P2P debits and credits for all ACH network participants.

The proposal would specifically define P2P entries as credit entries that are initiated by or on behalf of a holder of a consumer account to a consumer account. It would also allow credit versions of WEB SEC codes to be used for P2P credit transactions that are sent from a consumer's account, and establish standardized formatting for the P2P WEB credits.

Currently, only P2P debits use the WEB code, while credits may use other SEC codes and different formatting.

In the comment letter, CUNA Regulatory Counsel Dennis Tsang noted that a small but growing number of credit unions offer P2P services on the ACH network. Tsang encouraged NACHA to minimize the costs associated with the proposed P2P changes for financial institutions, particularly smaller credit unions. CUNA also said NACHA should not change funds availability standards for P2P transactions.

The CUNA comment letter also suggested that NACHA could provide educational and training materials to help receiving depository financial institutions and originating depository financial institutions better tailor their customer service and training, if NACHA's changes take effect.

NACHA could also provide greater resources and guidance to help reduce the number of fraudulent P2P transactions on the ACH network, and should also work with both financial regulators and financial institutions to minimize payments fraud, CUNA added. CUNA also said NACHA must take care to ensure its P2P rule changes are consistent with existing regulatory requirements and guidance, including federal regulations addressing data security and authentication.

The effective date for these changes should be pushed back until March 21, 2014, CUNA said. CUNA in the comment letter also supported a one-year transition period that would provide additional time for mandatory compliance.

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

CU CUNA efforts highlighted in iBankratei blog

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WASHINGTON (10/3/12)--Credit Union National Association (CUNA) senior staff were interviewed exclusively about credit union issues, advocacy, and legislative priorities, and what the post-election future could hold for credit unions a recent Bankrate.com Banking Blog post.

With the 2012 elections rapidly approaching, CUNA is focused on ensuring that credit unions and their members know where candidates stand on credit union issues, CUNA Vice President of Political Affairs Trey Hawkins said. Direct mail and other forms of grassroots advocacy are helping to inform voters, and CUNA is also working to help get the vote out for many candidates.

CUNA and credit unions' efforts are bipartisan, Hawkins adds.

"We look at individual races in an effort to determine which candidate is more supportive of credit unions, regardless of whether they call themselves Democrats or Republicans," he said in the post.

CUNA also continues to work on many key credit union issues ahead of this fall's election, including increasing the credit union member business lending cap and eliminating ATM dual disclosure regulations.

"We're trying to reduce regulatory burden for credit unions and ultimately bring the cost of compliance down for credit union members," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.

No matter the result of November's election, there will be changes in regulatory offices, CUNA Deputy General Counsel Mary Dunn said. She noted that many suspect U.S. Treasury Secretary Tim Geithner could be leaving after the election. Geithner has been a friend to credit unions, but credit union advocates should prepare for regulators with different views on credit unions, Dunn added.

For the full blog post, use the resource link.

NCUA prohibits three from CU work (10/02/2012)

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ALEXANDRIA, Va. (10/3/12)--The National Credit Union Administration (NCUA) has prohibited three individuals from participating in the affairs of any federally insured financial institution.

They are:

  • Former Windward Community FCU, Kailua, Hawaii, employee Billie Jean Collins, who was convicted of bank fraud. Collins was sentenced to four months in prison and five years of supervised release. Collins will also be required to pay $65,336 in restitution;
  • Former Florida A&M FCU, Tallahassee, Fla., employee Eugene Telfair, who was convicted of conspiracy to steal or misapplying funds from an organization that receives federal assistance and misapplying funds as a credit union employee. Telfair was sentenced to 30 months in prison and three years of supervised release. He will also be required to pay $134,255.15 in restitution; and
  • Former USX FCU, Sarver, Pa., employee Glenna Gouza, who was convicted of theft by unlawful taking. Gouza was sentenced to 36 months of probation and 100 hours of community service. She will also be required to pay $4,000 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full NCUA release, use the resource link.

Third new FCU for 2012 will launch

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ALEXANDRIA, Va. (10/3/12)--Come November, about 150,000 people who live, work, worship, volunteer, attend school, and transact business in the Kalamazoo, Mich., area will have a new federal credit union to serve their financial services needs.

The National Credit Union Administration (NCUA) announced Tuesday that its Office of Consumer Protection approved the third new federal credit union charter of the year, this one for Community Promise FCU.

Community Promise was given low-income designation. The low-income designation means the majority of potential members earn 80% or less than the median family income in the metropolitan area.

"The chartering of Community Promise means more people in southwest Michigan will have access to affordable financial services," said NCUA Chairman Debbie Matz in a release. "As a new charter in a market with few other insured financial institutions, this credit union will be well-positioned to make a significant difference in the local community. I applaud everyone who organized and supported this chartering effort."

David Adams, Michigan Credit Union League & Affiliates CEO said, "After seven years of due diligence and hard work, we are very pleased to have Community Promise FCU join the Michigan credit union community. As a community development credit union, Community Promise will fill an important role in the Kalamazoo area.

"At a time when other financial institutions have pulled back from the area, a credit union is preparing to open its doors to help and serve those who need it most. We applaud this effort and will be there to provide support and advocacy as Community Promise FCU moves forward."

Initially, the credit union plans to offer regular shares, club shares, share certificates, unsecured loans, share secured loans, auto loans, money orders, prepaid cash cards, and check cashing. Financial literacy and membership education initiatives, the NCUA noted, are top priorities for the credit union.

As a low-income credit union, Community Promise will be able to:

  • Accept non-member deposits,
  • Obtain grants and loans from the Community Development Revolving Loan Fund,
  • Accept secondary capital accounts, and
  • Qualify for exemptions from statutory limits on member business lending. 
NCUA's Office of Small Credit Union Initiatives will provide assistance to the new credit union.

The NCUA also noted that Guardian Finance and Advocacy Services, a non-profit organization providing financial and advocacy services through available community resources, is the fiscal sponsor for the credit union. The group retains and manages the various grant funds received by the credit union.

Earlier this year, in late August, the NCUA approved a charter for Lakota FCU, in South Dakota's Pine Ridge Reservation, to serve the 40,000 people that live, work, worship, volunteer, attend school and transact business there.  Lakota FCU is expected to start operations next month also.

About a week before the Lakota announcement, the NCUA announced approval of the first new charter of the year--for New Brunswick, N.J.'s Internet Archive FCU, scheduled to open this month.

Inside Washington (10/02/2012)

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  • ARLINGTON, Va. (10/3/12)--The National Association of State Credit Union Supervisors (NASCUS) is urging the National Credit Union Administration (NCUA) to reconsider its proposed "troubled condition" rule. "NCUA's own proposal concedes that disagreement between the state and NCUA on a CAMEL rating that would determine whether a state credit union is in 'troubled condition' is exceedingly rare and occurs in less than 4% of all cases. NCUA has not asserted that a ratings discrepancy caused a material delay in supervisory action contributing to an increased loss to the National Credit Union Share Insurance Fund," NASCUS wrote in a Sept. 28 comment letter. In the letter, NASCUS asserts that the cooperation between NCUA and the states has worked for two decades. NCUA's proposed rule would forsake the longstanding protocol that properly recognizes the state regulator's role as primary regulator for federally insured state-chartered credit unions (FISCUs) and would allow NCUA to unilaterally classify a FISCU to be in "troubled condition." NASCUS said it understands that as the federal insurer NCUA has certain authorities and obligations with respect to FISCUs.  The rule as proposed is troubling, however, to NASCUS and state regulators, weakens the credit union system and is unnecessary for effective administration of the share insurance fund, the group added …
  • WASHINGTON (10/3/12)--A new program unveiled by the Office of Comptroller of Currency (OCC) will allow examiners to formally dispute supervisory decisions. The program encourages examiners to resolve disagreements with their direct supervisors and also provides the opportunity to raise a concern directly to the comptroller's office (American Banker Oct. 2). Comptroller of the Currency Thomas Curry promised to create a more supportive examination environment when members of the Senate Banking Committee criticized the agency for ineffective anti-money-laundering supervision at HSBC's U.S. unit. Larry Hattix, the OCC's ombudsman, will investigate complaints forwarded by the comptroller's office. Agency employees can submit concerns by e-mail, but that process may be more formalized in the future, an agency spokesman said. The OCC has not publicized the change, but did confirm details with the American Banker
  • WASHINGTON (10/3/12)--U.S. regulators are making notable progress in their implementation of Basel III standards, while their European counterparts are slightly behind (American Banker Oct. 2). U.S. regulators achieved either "compliant" or "largely compliant" in 12 of the 13 key components of the latest review by the Basel Committee on Banking Supervision. A gap was found in the U.S. implementation of proposed regulatory treatment of securitizations. The review compares countries' efforts to implement the compliance requirements of the international accord, examines the completeness and consistency of domestic regulations and determines why gaps may exist between countries. The European Union was found to be "compliant" or "largely complaint" in 12 out of 14 areas …
  • WASHINGTON (10/3/12)--New York Attorney General Eric Schneiderman, the head of President Barack Obama's mortgage task force, Monday filed suit against JPMorgan Chase, alleging widespread fraud in the marketing and selling of mortgage-backed securities. The suit charges investors were deceived about the defective loans backing securities they bought (The New York Times Oct. 2). In January, Schneiderman was named co-chairman of a group formed by the Obama administration to investigate misconduct in bundling of mortgage loans into securities leading up to the financial crisis. The group includes officials from the U.S. Justice Department, the Securities and Exchange Commission, the Federal Bureau of Investigation and other federal and state officials …
  • WASHINGTON (10/3/12)--The Financial Accounting Standards Board (FASB) may repeal the debt value adjustment provision, under which banks can record an increase in income when the value of their own fixed-income securities decreases, and losses when the liabilities' worth rises. The board initially voted in June to repeal the directive provision, originated from a standard FASB adopted in 2007 that allows companies to appraise some of their obligations at current market value rather than original cost (American Banker Oct. 2). Under FASB Accounting Standard 159, companies must supply information in the notes of financial statements to help investors understand why the company measured assets and liabilities at market value and displayed the information on their balance sheets. However, statement users have told the board the standard makes financial results confusing and counter-intuitive, a FASB spokesperson told American Banker Monday …

Regulators OK unassisted CU merger in Colo.

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ALEXANDRIA, Va. (10/2/12)--The National Credit Union Administration (NCUA) and the Colorado Division of Financial Services Monday announced the unassisted merger of Trinity CU, of Trinidad, Colo., with Power CU, of Pueblo, Colo.

Back on July 27, the Colorado Division of Financial Services placed Trinity into conservatorship and appointed the NCUA as conservator. The merger announced Monday occurred without assistance from the National Credit Union Share Insurance Fund.

Power CU is a state-chartered, federally insured community credit union, which opened in 1938.

Before the merger, Power had $82.2 million in assets and nearly 11,400 members. Trinity CU had nearly 1,200 members and approximately $4.1 million in assets. Chartered in 1939, Trinity served the residents of Las Animas County, Colo.

As part of the merger agreement, Power will maintain a branch in Trinity's former home-base, Trinidad.

Amex subs to pay 85M for consumer law violations

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WASHINGTON (10/2/12)--A trio of American Express subsidiaries will pay $85 million in refunds to 250,000 customers and $27.5 million in fines, after the Consumer Financial Protection Bureau (CFPB) and other agencies found several alleged consumer financial law violations.

The three subsidiaries are American Express Centurion Bank, American Express Travel Related Services Company, Inc. and American Express Bank, FSB. In a release, the CFPB said the joint investigation, which was undertaken by the CFPB, the Federal Deposit Insurance Corporation (FDIC), the Utah Department of Financial Institutions, the Federal Reserve and the Office of the Comptroller of the Currency, found widespread violations between 2003 and spring 2012 at every stage of the consumer experience.

The alleged violations occurred as consumers shopped for cards, applied for cards, paid charges, and paid off debt. The issues were first found in a routine February 2011 FDIC examination.

The CFPB said the later joint investigation found that American Express Centurion Bank deceived consumers who signed up for the American Express "Blue Sky" credit card program, leading some to believe they would receive $300, and bonus points, for joining the program.

Consumers that met the program qualifications and signed up did not receive the $300, the CFPB said. American Express Centurion Bank also unlawfully discriminated against consumers on the basis of age, and both that bank and American Express Bank, FSB, charged excessive late fees to their customers.

All three of the American Express subsidiaries incorrectly told customers they would report old debts that were paid off to credit bureaus, thus increasing their credit scores, the CFPB said. "In fact, the debt was not reported to the credit bureaus and in any event it was so old that it may not have appeared in credit reports anyway," the CFPB release added.

American Express Centurion Bank and American Express Bank, FSB also allegedly charged unlawful late fees and failed to report consumer disputes to consumer reporting agencies. Customers that were impacted by these actions will be contacted by the institutions, and those institutions will also hire independent auditors to ensure that they are paying their rebates and fines, and complying with the regulators' orders to end these illegal business practices.

The Utah Department of Financial Institutions will take its own action against the institutions, the CFPB said.

For the full CFPB release, use the resource link.

Oral arguments today in retailers v. Fed interchange suit

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WASHINGTON (10/2/12)--Oral arguments in a debit interchange case brought by retailers will be heard today in the U.S. District Court for the District of Columbia.

The National Retail Federation, the Food Marketing Institute, the National Association of Convenience Stores and two retailers in late 2011 filed suit alleging that the Federal Reserve adopted an unreasonably high interchange cap on debit card transaction fees when it implemented provisions of the Dodd-Frank Act. The lawsuit alleges that the Fed's fee cap is "an unreasonable construction" of the debit interchange statute.

The final version of the Fed's regulation caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents, and allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards.

The Fed took some costs related to debit card use, such as network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring, into account when it decided to increase the proposed 12 cent debit interchange cap. The merchants in their complaint claimed the Fed "vastly expanded the categories of recoverable costs" when it developed the final rule.

The Credit Union National Association (CUNA) and a coalition of trade associations in March filed an amicus brief in the case, underscoring that consumers have not seen any pricing benefits for products and services merchants promised when they fought for a government-set cap on what card issuers may charge for their services. CKE Restaurants Inc. and other partner retailers have also filed their own amicus brief supporting the suit.

The Fed in April asked the court to declare a summary judgment in its favor, and counterfilings have been made by each side in the case.

CUNA General Counsel Eric Richard and Deputy General Counsel Mary Dunn will attend today's oral arguments.

Recess means more time to make a point CUNA

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WASHINGTON (10/2/12)--Although most members of the U.S. Congress are campaigning in their home districts ahead of November's elections, the pre-election recess provides an excellent opportunity to discuss credit union issues with their staff members here in Washington, Credit Union National Association (CUNA) Executive Vice President John Magill reminds credit unions.

Some staffers are, indeed, on the campaign trail, but most--likely 90%--remain in Washington to prepare for the upcoming post-election, lame-duck session of Congress and next year's legislative session.

"It's a good time to go to Capitol Hill to see staff, and we definitely do that," Magill notes. He says that staffers in a slower-paced Washington are able to give CUNA and other visitors greater time to discuss key credit union issues, such as member business lending (MBL) cap increase legislation, access to supplemental capital, ATM fee disclosure fixes and other credit union priorities.

"What may have been a five-minute meeting while Congress was in session and votes were being called can turn into a twenty-five minute conversation about MBLs during a recess period," Magill notes.

Magill also stressed that, notwithstanding advocacy taking place on Capitol Hill, credit unions and leagues must also pull out the stops back home in-district and in-state to reach their legislators before the November elections.

CUNA and credit unions have made use of the quieter times in the halls of Congress. For instance, the Wisconsin Credit Union League and credit union representatives from that state will begin their fall Washington advocacy efforts today when they meet with staffers from the offices of Sen. Ron Johnson (R), Vice Presidential candidate Rep. Paul Ryan (R), and Reps. Gwen Moore (D), Tom Petri (R), Ron Kind (D), Jim Sensenbrenner (R), Reid Ribble (R) and Tammy Baldwin (D). The group will also meet with Consumer Financial Protection Bureau Senior Advisor for Small Business Bart Shapiro and National Credit Union Administration Chairman Debbie Matz this week.

A group of Vermont credit union leaders last week met with Sen. Patrick Leahy (D) and Rep. Peter Welch (D), Sen. Bernie Sanders' (I) Senior Policy Advisor Warren Gunnels, and NCUA Board member Michael Fryzel during their visit. The group also discussed political, regulatory and legal issues with CUNA President/CEO Bill Cheney and CUNA staff, and received an economic briefing from CUNA Chief Economist Bill Hampel.

The Minnesota Credit Union Network also held their own Hike the Hill activities last week, and Iowa, North Dakota and South Dakota credit union representatives have scheduled Hikes for the lame-duck session of Congress.

Other hikes may be added in the future.

Troubled condition definition could harm CU charter CUNA warns

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ALEXANDRIA, Va. (10/2/12)--The Credit Union National Association (CUNA) has urged the National Credit Union Administration (NCUA) to withdraw a proposed rule that would allow the agency to determine when a state chartered credit union is in "troubled condition," saying the proposal is inconsistent with the Federal Credit Union Act (FCU Act) and could undermine the credit union dual chartering system.

The "troubled condition" proposal, which was released for public comment in July, would add the NCUA to the list of regulators that may determine whether a state-chartered federally insured credit union's (FICU) financial issues are enough to label the credit union as "troubled." The NCUA would also be permitted to assign a CAMEL Code 4 or 5 rating to those credit unions.

The agency has said that expanding the definition of "troubled condition," as proposed, would strengthen the oversight abilities of the NCUA and state regulators, and better protect the National Credit Union Share Insurance Fund from future losses.

Currently, the CAMEL rating assigned by a state supervisor alone determines if a state-chartered FICU is in "troubled condition."

"One of the FCU Act's benefits for credit unions is that it allows them a choice, to be chartered and operate under NCUA's purview or under that of the appropriate state regulator. NCUA's ability to trump a state regulator's determination regarding "troubled condition" would discriminate against state chartered credit unions, in derogation of the FCU Act, because it would further jeopardize their choice of financial regulator," CUNA Deputy General Counsel Mary Dunn added in the comment letter filed Friday.

CUNA in the letter added that the proposal, and the NCUA's added ability to overrule state regulatory determinations, would "seriously undermine the already burdened dual chartering system.

"The fact that credit unions can choose their charter type quite frankly improves the regulatory process and promotes balance as well as fairness by ensuring that neither the state nor federal government will have control of the credit union system," the comment letter said. Allowing the NCUA to overrule state regulators would undermine the need for an independent credit union regulatory system by continuing to move the focus of credit union regulation away from a state and federal system to one that is increasingly dominated by NCUA, the letter said.

The letter also noted the the proposal is not necessary to further safety and soundness purposes.

The NCUA is operating successfully without this proposed intrusion on state regulatory authority, and credit unions also remain strong in spite of continued general economic issues, CUNA said. "The reality of credit unions' financial performance under adverse conditions undermines the case for any additional safety and soundness rules at this time, including this one." If NCUA could demonstrate the necessity for this rule change based on safety and soundness reasons credit unions might have a different view of the proposal, but the agency has not provided that rationale, the letter added.

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

NCUA releases September iYouTubei economic update

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ALEXANDRIA, Va. (10/2/12)--The national economy and how it could impact the credit union system going forward is addressed in the National Credit Union Administration's (NCUA) latest YouTube economic briefings.

The NCUA update is split into three separate sections.

NCUA Chief Economist John Worth also discusses the changing institutional environment around emergency liquidity.



The three videos are the latest in a series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The videos can also be viewed on the NCUA's YouTube page by using the resource link below.

Inside Washington (10/01/2012)

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  • WASHINGTON (10/2/12)--The Financial Stability Oversight Council (FSOC) voted Friday to move forward with the third and final phase of a plan to publicly declare some nonbanks as systemically important financial institutions. The names of the firms that the FSOC is considering for the designation, which could include insurance companies, were not released (American Banker Oct. 1). The council will notify companies that are under evaluation; however, it does not intend to publicly announce their names before final designations are made, a Treasury spokesman said. Industry observers have speculated that American International Group and GE Capital, an arm of General Electric Co., are among the firms the council is evaluating, the Banker said ...
  • ARLINGTON, Va. (10/2/12)--The National Association of State Credit Union Supervisors (NASCUS) Monday filed comments on the National Credit Union Administration's (NCUA) proposed emergency liquidity-access rule.  NASCUS emphasized the importance of liquidity planning to risk management and the safe and sound operation of credit unions, and noted that state regulators had participated in the development of the Federal Financial Institution Examination Council (FFIEC) liquidity guidance issued in March 2010. In its comments, NASCUS questioned the need for additional rulemaking given the thorough nature of FFIEC's 2010 guidance, but also provided specific constructive recommendations for the rule as proposed. Among NASCUS' recommendations was a suggestion that NCUA raise the asset categories to more realistically reflect the distinctions between small-, mid-sized and larger credit unions. NASCUS also expressed concerns with the reliability of the Central Liquidity Facility as an emergency liquidity source, given its structure and the time it takes to process requests. With respect to the proposed rule's exclusion of the Federal Home Loan Bank (FHLB) as an acceptable source of emergency liquidity under the rule NASCUS urged NCUA to carefully consider the specificity of the proposed rule, for credit unions with more than over $100 million in assets. In response to NCUA's questions regarding applying BASEL III liquidity rules, NASCUS recommended NCUA work with state regulators, many of whom have expertise and experience with banking liquidity rules …