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Washington

CFPB Report Reinforces Need For Fin Lit Spending

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WASHINGTON (11/20/13)--Financial product marketing spending far outpaces funding for financial education efforts, a situation that the Consumer Financial Protection Bureau said "can make it difficult for consumers to find objective information."

The CFPB detailed this spending discrepancy in a report entitled "Navigating the Market." The study examined financial education spending by nonprofits, the federal government, financial institutions, state governments, municipal governments and school districts, and philanthropic giving groups, and spending on awareness advertising and direct marketing.

"When consumers receive the vast majority of their financial information from companies that are trying to promote an image or sell products, consumers have very little unbiased information," CFPB Director Richard Cordray said.

Financial services firms spend $17 billion annually to market financial products and services to consumers, while $670 million is spent annually to provide financial education to consumers, the CFPB said.

Nearly $2.5 billion in financial marketing funds are used to promote credit and loan products, and around $1.4 billion was spent to advertise checking accounts, savings, and other bank related services, the CFPB said. The majority of this advertising was done through television ads, but newspaper, radio, magazine, display and outdoor ads were also used, the CFPB said. Around $12 billion was spent on direct advertising, which aims to get consumers to make immediate purchases. Nearly half of this direct marketing total was spent on online advertising endeavors.

Financial institutions came in third in financial education spending, providing around $31 million for those efforts. Overall, nonprofit spending accounted for $472 million of the funds spent on educational efforts, while the federal government spent $130 million, the CFPB noted.

The study, Cordray noted, "further reinforces the dire need for more and better financial education in this country."

Credit unions continue to work to close the financial education knowledge gap, providing financial counseling to more than 1.5 million consumers each year, according to a National Credit Union Foundation report entitled "Credit Unions: Focused on Financial Capability across the Nation." In total, credit unions invested more than $140 million in financial literacy efforts in 2010.

Credit unions also provide financial education through on-campus credit union branches, which held more than $34 million in funds from 111,500 student members as of 2010. Nearly 5,000 student workers received on-the-job training experiences at those 1,400 in-school credit union branches.

NCUA Receives $1.4B In JP Morgan Settlement

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ALEXANDRIA, Va. (11/20/13)--The National Credit Union Administration has added another settlement to its victory pile related to lawsuits to regain costs associated with losses to the corporate credit unions brought by residential mortgage-backed securities of alleged questionable quality. The U.S. Department of Justice Tuesday announced that JP Morgan Securities would pay $13 billion in total.

The NCUA will receive $1.4 billion under the terms of the settlement.

"All this really comes down to holding responsible parties accountable...In agreeing to this settlement, the world's largest bank has taken a measure of responsibility for actions that caused severe damage to the credit union system," NCUA Chairman Debbie Matz said. The settlement, she added, "will greatly benefit credit unions" and "will enable NCUA to greatly reduce the assessments that all credit unions have to pay.

The settlement announcement comes just two days before the NCUA discusses the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment on natural person credit unions for 2014 at its open board meeting.

Credit Union National Association President/CEO Bill Cheney said Tuesday that the announcement gives even more weight to CUNA's recommendation that the TCCUSF projected assessment range for next year be set at 0% of insured shares. The NCUA is expected to discuss a projected assessment of 0% to 5% at its Thursday open board meeting.

"The NCUA has taken a strong leadership role in its work to regain costs it says were caused by securities firms that knowingly sold products of questionable value. It must now make sure that the regained funds benefit the credit unions who have carried the cost of those actions," he said.

The DOJ is also reportedly considering criminal charges against JP Morgan.

The NCUA lawsuits alleged JP Morgan oversold the quality of certain mortgage-backed securities (MBS's) it issued, underwrote and sold to U.S. Central FCU, Western Corporate FCU and other corporates from 2006 to 2007. The corporates collapsed in 2009, and NCUA, as their liquidating agent, sued a number of Wall Street banks who issued or underwrote the securities that contributed to the corporates' collapse.

The agency alleged systemic disregard of underwriting guidelines stated in the offering documents and says the alleged misrepresentations caused U.S. Central and WesCorp to believe the risk of loss on the investments was minimal, when in fact, the risk was substantial.

In addition to JP Morgan, the NCUA has also filed lawsuits against RBS Securities, Wachovia Capital Markets and Wells Fargo, Barclay's Capital Inc., Goldman Sachs, and UBS Securities. The agency has also settled claims of more than $170 million with Citigroup, Deutsche Bank Securities and HSBC.

Merchant Briefs Due Today In Interchange Case vs. Fed

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WASHINGTON (11/20/13)--Merchant briefs are due today in the ongoing debit interchange fee legal battle known as NACS, et al. v. Board of Governors of the Federal Reserve System.
 
The plaintiff merchants group has alleged that the Federal Reserve Board has made errors in implementing a Dodd-Frank-imposed debit interchange fee cap and Judge Richard Leon of the U.S. District Court for the District of Columbia issued a July decision to strike down the Fed's price caps on debit interchange fees.  
 
 Leon, however, stayed the vacated rule to avoid what the Credit Union National Association warned in an amicus brief would be chaos in the market.
 
The Fed filed its brief in support of its rule on Oct. 20.implementing the debit card interchange cap required by the Dodd-Frank Act. The brief must be submitted to the U.S. Court of Appeals for the District of Columbia Circuit.
 
The next round in the legal battle will be oral arguments for both sides at  9:30 a.m.  (ET) on Jan. 17. The arguments will be heard by a three-judge panel in the U.S. Court of Appeals for the District of Columbia Circuit.

Circuit Judges David Tatel, Harry Edwards, and Stephen Williams will hear the appeal.

CUNA Sends Comprehensive Reg Improvement List to NCUA

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WASHINGTON (11/20/13)--The Credit Union National Association is urging the National Credit Union Administration to do all it can to cut credit union regulatory burdens and build a regulatory environment and examination culture that enhances the ability of credit unions to serve their members.  
 
In a letter to the NCUA, CUNA detailed a list of regulatory areas that are of key concern to credit unions, and also noted the impact of the Consumer Financial Protection Bureau and other regulators on the daily operations of credit unions.
 
CUNA President/CEO Bill Cheney wrote to NCUA Chair Debbie Matz:
"We urge the agency, rather than continuing the parade of new rules that apply on a broad basis, to utilize its array of supervisory powers to focus on problem credit unions. We also urge NCUA to do all it can to allow well-managed credit unions the space and latitude they need to serve their members of today and to attract new members for tomorrow."
 
CUNA also advocated that the NCUA always consider the magnitude of regulatory requirements--from a variety of regulators--that credit unions must already meet in all areas of their operations before imposing any new requirements. CUNA added that the agency should work to eliminate rules that are outdated, unnecessary, or simply provide minimal benefits.
 
Among the letter's other top issues are two that directly affect credit union bottom lines, the NCUA budget, which is funded by the credit union system, and the assessment for the Corporate Stabilization Fund for 2014. Both topics are scheduled for action at the Nov. 22 NCUA open board meeting.
 
CUNA urged the agency to keep credit unions' costs as low as possible.
 
"CUNA, the leagues, and credit unions do not want the agency to be underfunded. At the same time, we strongly oppose large, steady increases in the face of the solid financial performance by the credit union system, which continues to rebound from the financial crisis," wrote CUNA's Cheney in the Nov. 18 letter.
 
"Credit unions are frustrated about the agency's budget due in large part because there seems to be little opportunity for oversight by Congress or the credit unions that pay the costs of NCUA's expenses or a connection between spending and the achievement of strategic goals.
 
CUNA also addressed the agency's plan to regulate credit union service organizations (CUSOs), which is also on the NCUA agenda this week. CUNA underscored that, under the Federal Credit Union Act, the NCUA has very limited authority where CUSOs are concerned.
 
Other issues addressed in detail in the letter include: 
  • Risk-based net worth: CUNA noted that the NCUA has ample supervisory tools to handle problem cases and urged the agency to advance supplementary capital;
  • Examination and exam appeals process: CUNA encourages the development of an Examinations Working Group;
  • Financial Accounting Standards Board (FASB) proposals and rules: CUNA reiterated that NCUA's support on FASB issues is critical;
  • NCUA's derivatives proposal: CUNA recommended the agency move forward to approve the plan that would let well-run federal credit unions to use simple derivatives for the sole purpose of hedging against interest rate risks; and
  • CUNA said the NCUA should allow for an expedited process, when warranted for waivers for member business lending and loan participation requirements.
The comprehensive CUNA letter also focused on the NCUA's important role in payments developments, its engagement on cybersecurity coordination, and the importance that regulatory strictures not act to discourage student lending.

CUNA further noted that the NCUA's pending proposal on stress testing for the largest credit unions would be costly and is not required by the Dodd-Frank Act.
 
CUNA commended the NCUA for a number of its recent actions that brought regulatory relief, and underscored the importance of the agency's October guidance to improve the federal examination process, and the NCUA's action this year to cut its operating budget by $2.6 million from its original projections, among other important decisions. CUNA added that the agency NCUA should use its own positive regulatory steps as a template for future regulatory relief for credit unions.

A copy of the letter was sent to each of the three NCUA board members: Chair Debbie Matz and board members Michael Fryzel and Richard Metsger.

CUNA's Donovan Talks Tax Reform Rumors In The Hill

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WASHINGTON (11/20/13)--Rumors continue to swirl as the Credit Union National Association and others await the release of congressional tax reform plans. The Hill this week noted that House Ways and Means Committee Chairman Rep. Dave Camp (R-Mich.) has closely guarded details of the plans, with CUNA Senior Vice President of Legislative Affairs Ryan Donovan saying "even if someone told us what's in it, I'm not sure we'd have a lot of confidence in that until we saw it on paper."

Donovan said he wishes he knew what Camp's committee was planning.

"But even if I thought I knew, I'm not sure how much confidence you should have in it, because we've seen nothing," he said in The Hill. Retailer groups and other business interests are also working to obtain details, but said they have not had success.

Lobbying groups across Washington are also waiting and watching, with many saying they have not seen a legislator so successfully shield his secrets. The respect for Camp within his own committee is one factor helping his efforts, the story said.

Avoiding leaks, Donovan said, is vital, since the stakes of tax reform are so high. Others said Congress would not want to be seen as picking winners and losers in the tax fight.

Camp, according to The Hill, has said the tax reform debate may continue into early next year.

As budget and tax talks continue, CUNA is urging credit unions and their members to use social media sites including Facebook, micro-video site Vine and other outlets to tell their legislators, "Don't Tax My Credit Union!"

Credit union and member tax advocacy efforts have remained strong. Almost 1.2 million separate congressional contacts have been made since mid-May to support credit unions in the tax talks.

For more on the Don't Tax my Credit Union efforts, use the resource link.

CU Suggestions In Final CFPB Mortgage Forms

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WASHINGTON (11/20/13)--The Consumer Financial Protection Bureau's (CFPB) "Know Before You Owe" mortgage disclosure forms, which will be released later today at a bureau field hearing, contain changes advocated by credit unions and the Credit Union National Association.
 
Bernie Winne, CEO at Boston Firefighters CU, will speak on behalf of credit unions, CUNA and the Massachusetts Credit Union League (MCUL) at a CFPB hearing today. CFPB Director Richard Cordray is also scheduled to meet with MCUL representatives after the session.

The field hearing, entitled "Know Before You Owe: Mortgages," will be held in Boston, Mass., and is scheduled to begin at 11 a.m. (ET).

Among the changes is the removal of language that would have required lenders to maintain "standardized, machine-readable" electronic versions of loan estimates and closing disclosures provided to consumers. The CFPB also removed a total cost of funds disclosure from both the Loan Estimate and Closing Disclosure. This disclosure, which would have required credit unions to reveal the approximate amount of the wholesale rate of funds in connection with a given mortgage loan, was "of questionable value to consumers," CUNA noted.

Credit unions and others also opposed CFPB regulations that would have counted Saturday in the three-day window lenders were given to provide Loan Estimate forms to new mortgage borrowers. The CFPB final rule does not count Saturdays as a "business day" for this purpose.
 
The final disclosure forms and related regulations do not adopt a more inclusive annual percentage rate (APR) and finance charge definition. However, the bureau said it would review both definitions as part of their five-year review of the regulations. Changes may be incorporated at that time, they said.
 
The final version of the forms and regulations will also:
  • Require the Closing Disclosure, which is designed to take the place of the existing HUD-1, to be provided to borrowers three days in advance of a mortgage loan closing; and
  • Require Spanish versions of the Closing Disclosure and Loan Estimate forms to be provided under certain circumstances for the benefit of Spanish-speaking consumers.

CU Seat Essential If CFPB Leadership Becomes a Panel

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WASHINGTON (11/20/13)--If the single Consumer Financial Protection Bureau director model is replaced with a panel, a seat specifically designated for a person with experience related to credit unions must be added, the Credit Union National Association emphasized in a letter sent to the House Financial Services Committee today.

The letter was sent for the record of a full committee markup on six CFPB bills.

The Responsible consumer Financial Protection Regulations Act (H.R. 2446) is one of the bills slated for markup. The bill, introduced by Rep. Spencer Bachus (R-Ala.), would replace CFPB Director Richard Cordray with a five-member commission.

CUNA also recommended that the proposed five-member board be expanded further. "The concern we raise is that there's no guarantee that the CFPB Board would include someone who had experience running a financial institution, specifically a credit union, and that without such experience, there would not be an appreciation for the totality of regulatory burdens facing credit unions," CUNA President/CEO Bill Cheney wrote.

Other bills set for markup and supported by CUNA include:
  • The Consumer Financial Protection Safety and Soundness Improvement Act (H.R. 3193), which would authorize the Financial Stability Oversight Council to stay or set aside any CFPB regulation that is found to be inconsistent with safe and sound operations of financial institutions. The bill would also require the CFPB to take into consideration the impact of its rules on insured depository institutions;
  • The Consumer Right to Financial Privacy Act (H.R. 2571), which would prohibit the CFPB from requesting, accessing, collecting, using, retaining or disclosing nonpublic personal information about a consumer unless proper disclosures are provided to the consumer;
  • H.R. 3183, which would require the CFPB to provide at a consumer's request one free annual report disclosing all of the information about the consumer held by the CFPB; and
  • The Bureau of Consumer Financial Protection Accountability and Transparency Act (H.R. 3519), which would subject CFPB funding to congressional appropriations.
The CFPB Pay Fairness Act of 2013 (H.R. 2385) is also on the hearing agenda.

Patent 'Troll' Bill Markup Is Today

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WASHINGTON (11/20/13)--In advance of a markup session today, the Credit Union National Association and a coalition of partners sent a letter of support to lawmakers for "The Innovation Act of 2013" (H.R. 3309), which intends to help clean up a scourge known as "patent trolls."
 
The so-called "trolls" use low-quality patents to try to extract settlements from credit unions and others and are an abuse of the patent system, CUNA has said.
 
Credit unions have been sued for the use of certain ATM technologies, check imaging applications and check cashing applications, and providing members with mobile transactions through their smartphones, among other examples of this form of abuse.
 
CUNA has strongly advocated for improvements to a program that allows financial institutions to pursue invalidity claims at the Patent and Trademark Office when confronted with a patent claim. The program provides financial institutions with powerful tools to defend themselves, but carries a hefty price tag--starting at $35,000 just for the filing fee. The Innovation Act contains a provision to allow that fee to be waived on a discretionary basis, with an idea of benefiting credit unions and community banks.
 
H.R. 3309, which was introduced by Rep. Bob Goodlatte (R-Va.) late last month, would remove some of the financial incentives sought by firms that assert low-quality patents in the hope of quick settlements.
 
The mark up is scheduled to by the House Judiciary Committee for 11:15 a.m. (ET).

Senate's First Tax Discussion Drafts Address International Tax

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WASHINGTON (11/20/13)--The head of the Senate Finance Committee, Sen. Max Baucus (D-Mont.), released three draft options today, all concerning international taxation. It is expected that two other discussion drafts will be released later this week, those regarding tax administration and the cost recovery method of accounting. 

As expected, the discussion drafts released Tuesday do not affect credit unions or other not-for-profit entities. The Credit Union National Association (CUNA) and other stakeholders are monitoring developments closely as lawmakers appear to be keeping a schedule of launching fully into tax reform discussions this Fall.

CUNA and credit union members across the country continue to keep pressure on Congress with the unified message, "Don't Tax My Credit Union."

As CUNA Senior Vice President of Legislative Affairs Ryan Donovan has noted, "Credit unions must make sure that lawmakers on all levels truly understand that a new tax on credit unions would be a tax on their 97 million members."

To date the "Don't Tax My Credit Union" campaign has garnered almost 1.2 million separate message s to Congress, rallying support through social media and state credit union leagues.