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NEW: House Approves CUNA-Supported Patent Improvement Bill

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WASHINGTON (12/5/13, UPDATED: 1:35 P.M. ET)--The U.S. House today approved The Innovation Act of 2013 (H.R. 3309) by a 325 to 91 vote. The bill, which will now move on to the Senate, included a Credit Union National Association-supported amendment.

H.R. 3309, which was introduced by Rep. Bob Goodlatte (R-Va.) in late October, would remove some of the financial incentives sought by firms that assert low-quality patents in the hope of quick settlements.

So-called "patent trolls" continue to use low-quality patents to try to extract settlements from credit unions and others. 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.

The amendment supported by CUNA would require patent trolls to identify the ultimate parent entity in claim letters filed as part of their patent litigation.

CUNA and coalition partners on Wednesday supported H.R. 3309 in a letter sent to all House members. The bill, they wrote, "takes a positive step" toward addressing the exponentially growing threat of "patent trolls" that assert patents of dubious quality against legitimate businesses, including banks and credit unions. (See Dec. 5 News Now story: CUNA to House Leaders: Patent Bill Goes in 'Right Direction'.)

Legislators, CUNA Witness Speak on Need for Reg Relief

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WASHINGTON (12/5/13)--"The crisis of creeping complexity with respect to regulatory burden is very real" for credit unions and other community-based financial institutions, Rose Bartolomucci, president/CEO of Towpath CU, a state-chartered, privately insured credit union in Akron, Ohio, said in Wednesday testimony before members of the House Financial Services subcommittee on financial institutions and consumer credit.

Click to view larger image Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan, right, and Rose Bartolomucci, president/CEO of Towpath CU, Akron, Ohio, speak with Rep. David Scott (D-Ga.) during Wednesday's hearing. Several subcommittee members on Wednesday said they saw the need for greater regulatory relief for small institutions, including Rep. Mel Watt (D-N.C.), who is himself a nominee to lead the Federal Housing Finance Agency. (CUNA Photo)
Bartolomucci testified on behalf of the Credit Union National Association and her credit union at a hearing entitled "Examining Regulatory Relief Proposals for Community Financial Institutions." The hearing focused on three bills: A bill to require the National Credit Union Administration and other federal financial regulators to assess and address regulatory duplication or inconsistency; legislation that would allow privately insured credit unions to join a Federal Home Loan Bank (FHLB); and a bill that would adjust the Consumer Financial Protection Bureau's rural designation to align with the definition used by the U.S. Department of Agriculture.

"Small credit unions are expected to comply as quickly and efficiently as large financial institutions with hoards of compliance officers. While the elimination of one duplicative rule or regulation may not seem like much, to a compliance officer in a credit union, it is. Without one more rule to comply with that employee can now spend time with a credit union member, helping to serve their financial needs," Bartolomucci said in written testimony.

Responding to committee questions later in the hearing, she noted that regulatory compliance issues have hampered her credit unions' attempts to serve its 21,000 members, Bartolomucci, who is also a former Ohio state credit union regulator, told legislators her credit union has 47 employees, with one full time compliance officer and a shared compliance officer that also works with two other credit unions. The cost of compliance can make it more difficult for her credit union to offer new products to members, she said. Compliance costs and regulatory burdens "will take the lives of some of our credit unions," she noted. Some credit unions cannot afford the cost of compliance, and thus seek out strategic mergers, she added.

Allowing privately insured credit unions to join FHLB would not put taxpayers at risk, Bartolomucci said. FHLB members have to fully collateralize their advances, and "how you are insured does not come into play," she added.

Legislators at the hearing agreed there is bipartisan desire to address regulatory issues faced by credit unions and other small financial institutions, with ranking subcommittee member Gregory Meeks (D-N.Y.) noting that small financial institutions are facing severe regulatory problems.

One subcommittee member, Rep. Ruben Hinojosa (D-Texas), said it is important to listen to credit unions and other small institutions, because their communities rely on them for access to credit. Smart regulatory relief is an area that is ripe for bipartisan collaboration, he added.

Another subcommittee member, Maxine Waters (D-Calif.), noted the strong support that credit unions enjoy from members of both parties.

Shelley Moore Capito (R-W. Va.), who chairs the subcommittee, noted that reducing regulation does not mean getting rid of all regulation. Moore Capito said she is trying to help create smarter, more forward thinking regulations.

Rep. Sean Duffy (R-Wisc.) said the Wednesday hearing was a good example of members of both parties working together early to get bipartisan bills moving in the right direction. He also said he hopes that credit unions and community banks will be able to focus less on regulators and more on making loans.

For CUNA's prepared hearing testimony, use the resource link.

CUNA Calls on Congress to Aid CFPB Mortgage Compliance Delay

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WASHINGTON (12/5/13)--The U.S. Congress must delay the private right of action associated with recently finalized Consumer Financial Protection Bureau mortgage rules, a move that would grant credit unions and their vendors a full year to come into compliance with pending mortgage regulations, the Credit Union National Association said in a Wednesday letter to U.S. House and Senate leaders.

Six CFPB mortgage product and service rules are set to go into effect in January 2014. The rules include the bureau's Ability-to-Repay and Qualified Mortgage standards.

CFPB Director Richard Cordray has said bureau examiners would provide some leeway to credit unions and other institutions that are making good faith efforts to comply with these regulations, but have not fully complied when the January deadline arrives. The CFPB director said he could not give an official cutoff date for when this leeway would end, but said the leeway would be granted for several months.

"Nevertheless," CUNA President/CEO Bill Cheney wrote, "the laws under which these rules have been promulgated carry a private right of action that only Congress can delay." The letter was sent to Senate Banking Committee Chairman Tim Johnson (D-S.D.), ranking committee Republican Sen. Mike Crapo (Idaho), House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and ranking committee Democrat Maxine Waters (D-Calif.).

"Without this delay, this means attorneys may be able to sue credit unions for any violations no matter how minor," Cheney added. Credit unions that are working with their vendors to comply with the new rules could be sued for noncompliance, and this litigation threat has many credit unions considering whether to suspend mortgage lending either entirely, or limit the offerings of certain mortgage loan products until they are certain that they are in compliance, he said.

"We hope Congress would agree that having small lenders exit mortgage lending, even temporarily, during the fragile housing recovery we are experiencing would be bad for borrowers, communities and the economy," Cheney wrote.

For the full CUNA letter, use the resource link.

NCUA to Offer $481K in CDFI Technical Assistance Grants

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ALEXANDRIA, Va. (12/5/13)--Starting on Feb. 3, credit unions will be able to apply for their share of $481,000 in technical assistance grants, the National Credit Union Administration announced Wednesday.

Low-income designated credit unions can apply for up to $16,500 in funds to help cover the costs of:
  • A new Community Development Financial Institution (CDFI) certification;
  • New products; and
  • Student internships.
Applications will be accepted until Feb. 14.

"These grants will help America's low-income credit unions remain viable and respond to the evolving needs of their members," NCUA Chairman Debbie Matz said. "The funding to assist low-income credit unions in qualifying for a CDFI certification is a welcome addition to NCUA's long-standing grant program. CDFI-certified financial institutions have access to additional capital, which can help them create jobs and promote financial stability in some of our nation's most underserved communities," she said.

The U.S. Treasury's CDFI Fund helps locally based financial institutions--including credit unions--offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community.

Credit unions made 73 requests for a total of around $77 million in funds for the 2013 fiscal year CDFI Fund program. More than $21 million in CDFI Fund awards and grants were released to 35 low-income credit unions. Overall, 191 organizations were awarded a total of more than $172 million when fiscal 2013 CDFI Fund awards were announced in late September.

CUNA to House Leaders: Patent Bill Goes in 'Right Direction'

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WASHINGTON (12/5/13)--The Innovation Act of 2013 (H.R. 3309) "takes a positive step" toward addressing the exponentially growing threat of Patent Assertion Entities, commonly referred to as "patent trolls," that assert patents of dubious quality against legitimate businesses, including banks and credit unions, the Credit Union National Association and coalition partners wrote in a Wednesday letter to members of the U.S. House.
The letter, which was cosigned by CUNA, the American Bankers Association and the Independent Community Bankers of America, was sent ahead of a scheduled Thursday vote on H.R. 3309.
That bill would remove some of the financial incentives sought by firms that assert low-quality patents in the hope of quick settlements. 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 said in the letter that it is encouraging that H.R. 3309's includes language that would grant the director of the Patent and Trademark Office (PTO) discretionary authority to waive the filing fee for the transitional proceeding for the review of Covered Business Method Patents program. "This provision would be beneficial for smaller financial institutions by helping deter patent trolls from sending abusive and extortive "demand" letters and ensuring that institutions of all sizes have access to the CBM program," the letter said.
However, some concerns with the bill still remain. The co-signors urged support for an amendment offered by Rep. Jared Polis (D-Colo.) that would require patent litigation claimants to provide additional disclosure information in any pre-suit notification.
The bill could also do more to ensure that credit unions and banks cannot be sued for patent infringement for simply purchasing new technology in good faith, off the shelf. Language in the bill requiring the PTO to conduct claims construction proceedings in a manner similar to the federal courts should also be removed, the letter added.

NCUA Breaks Down Third-Quarter Data by State

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ALEXANDRIA, Va. (12/5/13)--Idaho credit unions had the strongest third quarter by a number of measures, according to a report published Wednesday by the National Credit Union Administration that broke down thrid-quarter data by states.
Idaho's federally chartered credit unions topped the annual state-by-state growth charts in terms of outstanding loans, membership and assets. The state also posted one of the lowest delinquency rates, along with New Hampshire, for the period ending Sept. 30.
Credit unions in Idaho posted loan growth of 15.2% and membership growth of 8.9%. Finishing second in both categories were Rhode Island, with loan growth of 12.6%, and Virginia, with membership growth of 7.8%. Loan growth increased in all but three of 54 states and territories, while membership grew in all but nine.
The state-by-state breakdown also showed Utah and Washington leading at the end of the third quarter in terms of annualized rate of return, at 144 and 117 basis points respectively. Washington, D.C. and Connecticut posted the weakest rates of return, at 25 and 30 basis points. The annualized rate of average return on assets only grew in eight out of 54 states and territories monitored by the NCUA.
States that had the highest proportion of federally insured credit unions with positive net income were Maine, Alaska and New Mexico--all at 92%. Hawaii and Connecticut had the lowest number of credit unions with positive net incomes, at 55% and 58%. The proportion of credit unions with positive net income was up in 17 states and Washington, D.C. It was stagnant in Alaska, Wyoming, and Guam.
Leading the nation in asset growth alongside Idaho was Iowa, which also the saw the largest increase in share and deposit growth.
Delinquency rates were highest in New Jersey and Florida.
At the end of the third quarter, NCUA nationwide credit union annual growth statistics showed that:
  • 95.9 million Americans belonged to a credit union--an increase of 2.2%;
  • Loan growth increased by 6.8%;
  • The delinquency rate declined to 1% from 1.2 %;
  • The annualized average return on assets was down to 80 basis points from 86 basis points;
  • Asset growth declined to 4.3% from 6.5%;
  • Shares and deposit growth fell to 4.2% this year, from 6.2% last year; and,
  • The proportion of credit unions with positive net income fell to 72% from 73%.

Fed Files Reply in Interchange Case

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WASHINGTON (12/5/13)--The Federal Reserve Board met its Dec. 4 deadline for filing its reply to merchants' arguments against the agency's implementation of the Dodd-Frank-imposed debit interchange fee cap.
In November, the merchants argued that that the U.S. Court of Appeals for the District of Columbia Circuit should affirm an earlier court decision that struck down the Federal Reserve's debit card interchange fee cap and network non-exclusivity regulations.
The Fed response Wednesday makes arguments to counter those of the merchants' that say the Fed made errors in implementing the rule and therefore the rule should be scrapped and rewritten.
The Fed made a request that the court reverse the judgment of the district court and that the case be remanded with instructions to enter judgment in favor of the Fed and its rule.
Circuit Judges David Tatel, Harry Edwards, and Stephen Williams will hear oral arguments from the Fed and merchants at 9:30 a.m. (ET) on Jan. 17.
The ongoing debit interchange fee legal battle known as NACS, et al. v. Board of Governors of the Federal Reserve System.

CFPB Previews 2014 Regulatory Hot Spots

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WASHINGTON (12/5/13)--The Consumer Financial Protection Bureau unveiled its rulemaking agenda for the next six months and highlighted its intent to go forward on a proposed rule on prepaid card products, and more thorough examinations of debt collection practices, payday loans and deposit advance products, and overdraft programs.

These near-term regulatory priorities are outlined in the CFPB's Fall 2013 rulemaking agenda released this week.

The CFPB said it has been gathering significant information on these topics, and will "intensify work on these projects in 2014, for instance by testing consumer disclosures in connection with prepaid products and debt collection."

Streamlining and modernizing regulations that the CFPB inherited from other agencies will also be a focus in the coming months, the CFPB said. "Specifically, we expect to issue a proposal regarding the notices that consumers receive each year from their financial institutions to explain the companies' information sharing practices," the CFPB added. Several commenters suggested the CFPB work to reduce unwanted paperwork for consumers and unnecessary regulatory burdens, "at least where a financial institution limits the sharing of information with third-parties and has not changed policies."

For more on the CFPB agenda, use the resource link.
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