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Cheney Report Previews the Busy Year Ahead

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WASHINGTON (12/30/13)--A busy 2014 is shaping up for credit unions, and Credit Union National Association President/CEO Bill Cheney details the full plate that lies ahead in this week's edition of The Cheney Report.

CUNA priorities in 2014 will include protecting credit unions, obtaining regulatory relief and enhancing the credit union charter, Cheney wrote. Other top issues include:
  • Continuing the national conversation about the credit union tax status and the value credit unions bring to the financial marketplace, and how their tax status helps support good public policy, through grassroots outreach and education efforts;
  • Containing any new unnecessary or burdensome regulation from any agency, including the National Credit Union Administration and the Consumer Financial Protection Bureau;
  • Ensuring that credit unions are fully prepared for the new regulations set to take effect in 2014;
  • Stressing that on risk-based net worth, case-by-case judgment is better, and urging NCUA to focus on addressing problems at the individual institution level rather than under a broader rulemaking approach;
  • Urging NCUA to work with the credit union system to continue to support statutory capital reform;
  • Addressing ongoing concerns with examiner directives that seem arbitrary and highly subjective;
  • Advising against additional corporate assessments;
  • Ensuring credit union access to the secondary market is maintained;
  • Working to increase authority for member business lending;
  • Seeking forms of supplemental capital for credit unions; and
  • Helping the credit union movement to "Unite for Good."
"And all of this is just for starters. No doubt, as the year progresses, more issues will come our way, and more challenges will be presented to all of us," Cheney wrote.

For the full Cheney Report, use the resource link.

CUNA, Coalition Partners Added to Jan. 17 Interchange Oral Arguments

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WASHINGTON (12/30/13)--The Credit Union National Association and its partner members of The Clearing House coalition will be in court Jan. 17 to present 10 minutes of oral arguments in the ongoing debit interchange case known as NACS, et al. v. Board of Governors of the Federal Reserve System.

The court ruled Friday that CUNA and TCH members will be allowed to present their views, along with the Fed and the merchants group, during the already-scheduled oral arguments for the Fed's appeal to uphold its rule. The Fed is assigned 15 minutes for oral arguments and the merchants have 25 minutes.
 
In this case, a merchants' coalition has challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high. CUNA and its partner maintain that the cap, in fact, is too restrictive.
 
CUNA and it financial services partners have argued that the Fed cap does not factor in enough of the costs that card issuers face for providing their services.
 
"(T)he statute states clearly that the full 'cost' incurred by an issuer 'with respect to' an electronic debit transaction may be recovered through an interchange fee," CUNA noted in an earlier amicus brief.
 
The current Fed debit interchange fee cap  limits fees for issuers with assets of $10 billion or more to 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards.

The interchange regulations, overturned by a lower court, remain in effect as the court case moves forward on the Fed's appeal.

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

CUNA's partners in TCH coalition are the: American Bankers Association, Consumer Bankers Association, Electronic Payments Coalition, Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Association of Federal Credit Unions, and National Bankers Association.

CU Impact Must Be Considered in FHFA Oversight, CUNA Tells Watt

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WASHINGTON (12/30/13)--The Credit Union National Association has encouraged incoming Federal Housing Finance Agency Director Rep. Mel Watt (D-N.C.) to ensure balanced oversight of Fannie Mae and Freddie Mac that fully considers the impact actions will have on credit unions.

CUNA President/CEO Bill Cheney made these remarks in a letter sent to Watt last week.

In that letter, the CUNA CEO said credit unions are looking forward to working with Watt, and also urged him to do all he can to ensure that:
  • Fannie and Freddie are accountable for the policies they implement;
  • The process for developing policies is transparent;
  • Policies adopted and implemented will support small sellers and services; and
  • CUNA and other stakeholders will be included in discussions with the FHFA as policy concerns arise and solutions to address those concerns are developed.
Cheney said CUNA would like to have a solid, working relationship with the agency on a range of issues, including fair access. The CUNA letter also highlighted concerns regarding policies and other developments, including:
  • Uncertainty as to whether non-qualified mortgage loans will be purchased by the government-sponsored enterprises after January;
  • Uncertainty regarding the continuation of loan guarantees and whether guarantee fees will be further increased;
  • Requiring a seller/servicer to be accepted by the other GSE before allowing it to sell, own or service them;
  • Making it difficult for new seller/servicers to be approved or approved in a timely manner;
  • Requiring a credit union servicer to use a sub-servicer; and
  • The ongoing failure by the GSEs to reflect the low level of default and delinquency of credit union mortgages in the pricing that is offered to credit union sellers.
The CUNA letter also urged Watt to withdraw proposed loan purchase limit reductions.

Watt is scheduled to be sworn in as FHFA director on Jan. 6.

CUNA CompBlog Provides Target Breach Response Tips

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WASHINGTON (12/30/13)--Helping credit unions respond to the massive Target data breach with compliance requirements is the aim of the latest posting on the Credit Union National Association's CompBlog, the daily blog for compliance information and developments.

In a new CompBlog post, CUNA Senior Vice President for Compliance Kathy Thompson reminds that Section 748 of National Credit Union Administration regulations require federally insured credit unions to have a security program that contains a provision for responding to instances of unauthorized access to "sensitive" member information.

When sensitive information is accessed by unauthorized outsiders, credit unions must investigate to quickly determine the likelihood that the information has been or will be misused. Sensitive information includes a member's name, address, or telephone number, in conjunction with the member's Social Security number, driver's license number, account number, credit or debit card number, or a personal identification number or password that would permit access to the member's account, she notes.

"The Target breach is clearly an incident triggering compliance procedures," Thompson says.

NCUA guidance states that credit unions should have procedures in place to:
  • Assess the nature and scope of the incident, and identify what member information systems and types of member information have been accessed or misused;
  • Notify the appropriate regulator and inform it of the impact of the breach on the credit union's operations;
  • Notify appropriate law enforcement authorities;
  • File a timely Suspicious Activity Report in situations involving federal criminal violations requiring immediate attention. Credit unions should also report incidents of possible fraud to their insurers and Visa and MasterCard;
  • Contain and control the incident and prevent further unauthorized access to or use of member information;
  • Monitor, freeze or close affected accounts and preserve records and other evidence; and
  • Notify members, when warranted.
Many credit unions are asking whether there is required language that must be included in notifications sent to members. The answer is "no," Thompson says: There are no specific federal regulatory procedures on how and when the notification must be sent.

It is best to notify everyone who might possibly be affected as soon as possible and in a reasonably effective way.

"Yes, we know that individual members are far more likely to know if they actually bought something at Target using their debit or credit card since Black Friday, and should already be monitoring their accounts--but regulators will expect credit unions to be proactive and alert their members," she adds.

For the full blog post, use the resource link.

CUNA Seeks Comment on Proposed Fed Payment System Changes

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WASHINGTON (12/30/13)--Credit unions can now comment on how the Federal Reserve's proposed changes to its Payment System Risk Policy, and related changes to Regulation J, could impact their business practices in a new Credit Union National Association regulatory call to action.

The proposed Fed changes would move the posting of automated clearinghouse (ACH) debits processed by the Fed banks' FedACH service overnight to 8:30 a.m. (ET) from 11 a.m. (ET) to align with the posting of ACH credits. The proposal would also move the posting time for receiving most commercial check credits for deposits and debits for presentments to 8:30 a.m. (ET) and establish two other posting times of 1 p.m. (ET) and 5:30 p.m. (ET), and make other related changes.

CUNA is seeking details on how these proposed changes would impact credit union operations, payments processing and account management with the Fed banks.

CUNA will accept comment until Jan. 13. To comment, use the resource link.

New COPPA Parental Consent Provision Approved

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WASHINGTON (12/27/13)--The Federal Trade Commission (FTC) has decided that use of certain knowledge-based authentication (KBA) methods may count as a verifiable parental consent (VPC) method under the Children's Online Privacy Protection Act (COPPA) rule..
 
Credit unions that operate websites or online services that collect information about children under age 13 fall under COPPA rules and must provide a COPPA notice clearly and conspicuously on their homepage.
 
Under COPPA rules, online sites and services directed at children must obtain permission from a child's parent or guardian before collecting personal information from that child.
 
The rules specify a number of acceptable methods for gaining parental consent, but also allows interested parties to submit new verifiable parental consent methods to the FTC for approval. If approved, the method can be used by the applicant or any other party.
 
Imperium LLC, a fraud-prevention and identity-validation company, submitted an application for approval from the FTC for its ChildGuardOnline parental consent method. In a letter to Imperium, the FTC recently stated that the use of KBA will be included in the rule as a VCP method, provided it is appropriately implemented based on factors including:
  • The use of dynamic, multiple-choice questions, where there are a reasonable number of questions with an adequate number of possible answers such that the probability of correctly guessing the answers is low; and,
  • The use of questions of sufficient difficulty that a child age 12 or under in the parent's household could not reasonably ascertain the answers.

CUs Have Until Jan. 7 to Comment on ACH Proposal

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WASHINGTON (12/27/13)--The Credit Union National Association is encouraging credit unions to weigh in on a proposal issued last month by NACHA--The Electronic Payments Association, which aims to reduce risk and exceptions on Automated Clearing House (ACH) networks.
 
The NACHA plan could improve NACHA's ability to identify and enforce rules against "outlier" originators, those responsible for the highest levels of exceptions. An originator is any individual, corporation or other entity that initiates entries into the Automated Clearing House Network.

The NACHA proposal would:
  • Reduce the existing return rate threshold for unauthorized debits from 1% to 0.5%;
  • Establish a return rate threshold for account data quality returns (i.e., administrative returns) at 3% and an overall debit return rate threshold (for all return reason codes) at 15%;
  • Clarify the definition of a "reinitiated entry";
  • Apply risk management rules to third-party senders; and
  • Expand NACHA's enforcement authority.
CUNA has extended its deadline for comment to Jan. 7 from Dec. 16.  Comment is due to NACHA on Jan. 13.

FinCEN Seeks New BSA Advisory Group Members

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WASHINGTON (12/27/13)--The Financial Crimes Enforcement Network (FinCEN) is inviting the public to nominate financial institutions and trade groups for membership on the Bank Secrecy Act Advisory Group (BSAAG). The Credit Union National Association is a BSAAG member.
 
BSAAG membership is open to financial institutions and trade groups and new members will be selected for three-year membership terms.

Nominations must be received by Jan. 27.
 
BSAAG, which ultimately makes BSA policy recommendations to the U.S. Treasury Secretary, is chaired by the FinCEN director. It was created by the 1992 Annunzio-Wylie Anti-Money Laundering Act.
 
Applications may be mailed to Liaison Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183 or e-mailed to: BSAAG@fincen.gov. Use the resource link below for more information.
 
CUNA's current term ends in early 2015. Houston FCU was selected last year as a BSAAG member and traditionally there is one credit union on the BSAAG.     
 
 

CFPB Announces Two Actions to Restore Consumers

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WASHINGTON (12/27/13)--The Consumer Financial Protection Bureau has announced two new actions intended to restore consumers that the bureau claims have suffered illegal treatment at the hands of financial services providers.
 
Most recently, the CFPB announced an enforcement action with orders requiring three American Express subsidiaries to refund an estimated $85 million to approximately 250,000 customers for illegal card practices.
 
The regulator charges that its action is the result of a multi-part federal investigation which, it claims, found that at "every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws."
 
In the other action, the CFPB joined forces with the U.S. Department of Justice to file a joint complaint against National City Bank (NCB) for allegedly "charging higher prices on mortgage loans to African-American and Hispanic borrowers than similarly creditworthy white borrowers between the years 2002 and 2008."
 
The joint action marks the first lawsuit brought in federal court by the CFPB and the DOJ to enforce federal fair lending laws. On Dec. 6, 2012, the CFPB and the DOJ forged a formal agreement meant to bring strong coordination between the two agencies on fair lending enforcement, including the pursuit of joint investigations such as this one.
 
The agencies also filed a proposed order to settle the complaint that requires NCB, through its successor PNC Bank, to pay $35 million in restitution to harmed African-American and Hispanic borrowers.


 
 
 
 
 
 
 

NCUA Employees Still Rank NCUA High as Employer

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ALEXANDRIA, Va. (12/27/13)--The National Credit Union Administration maintained a high ranking in the 2013 "Best Place to Work" federal government employee survey, but dipped a little from its 2012 high as sixth-best employer of 22 mid-sized agencies.
 
NCUA Chairman Debbie Matz said that while the agency got high marks from employees in "critical areas" like strategic management, effective leadership and teamwork," it took its biggest ding on employee pay.
 
"Satisfaction with employee pay was clearly a major reason for our overall decline in the 2013 ranks. However, we have now adopted a much-needed pay increase for 2014," Matz said. "NCUA's employees are our greatest asset, and I remain committed to listening to employee feedback and making changes that will continue to improve the working environment for everyone."
 
The agency reported it ranked first with Hispanic and African-American employees among mid-sized federal agencies, and third among veterans. The agency also ranked high overall in teamwork and employee training and development.
 
Nearly 376,000 federal workers participated in the U.S. Office of Personnel Management's Federal Employee Viewpoint Survey used by the Partnership for Public Service to compile the Best Places to Work in the Federal Government rankings. This is the eighth edition of the Best Places to Work rankings; the first was produced in 2003.
 

CUNA: Tax Reform Efforts to Continue, With or Without Baucus

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WASHINGTON (12/26/13)--President Barack Obama's nomination of Max Baucus to serve as the next U.S. ambassador to China adds an element of uncertainty to the future of tax reform efforts. However, Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan reminds, "tax reform isn't about one person."

The veteran senator has held his seat since 1978 and was scheduled to retire after the 2014 elections. Montana Gov. Steve Bullock (D) would likely appoint his replacement if he is confirmed by the U.S. Senate. Current Lt. Gov. John Walsh is running for Baucus's seat.

Baucus is chairman of the tax-writing Senate Finance Committee and has been central to recent tax reform efforts. Lawmakers had planned to launch into tax reform and prepare for a vote this past fall, but missed that deadline.

"The circumstances which have made tax reform necessary continue to exist, and we expect Congress to continue to try to make progress on tax reform in 2014," Donovan said. "The likelihood they will complete the process may be smaller, but the likelihood they will continue to work on the process remains the same. Even if they are not able to complete a bill the work they do could have implications on credit unions," he added.

Donovan also emphasized that a high level of advocacy on behalf of credit unions must continue. "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," Donovan said.

CUNA continues to encourage credit unions and their members to use CUNA and state credit union league resources, social media sites including Facebook, and micro-video site Vine, to tell their legislators, "Don't Tax My Credit Union."

Watt to Re-examine Planned FHFA Guarantee Fee Hikes

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WASHINGTON (12/26/13)--Incoming Federal Housing Finance Agency Director Rep. Mel Watt (D-N.C.) will delay and re-examine planned guarantee fee hikes when he takes control of the agency next year, The Wall Street Journal reported  Dec. 20.

The FHFA early this month announced it would:
  • Increase base guarantee fees for all mortgages by 10 basis points;
  • Update the up-front guarantee fee grid to better align pricing with the credit risk characteristics of the borrower; and
  • Eliminate the up-front 25 basis point adverse market fee, except in the four states whose foreclosure carrying costs are more than two standard deviations greater than the national average.
The FHFA said these fee structure changes would result in average guarantee fee increases of approximately 11 basis points based on loan purchases of Fannie Mae and Freddie Mac in the third quarter of 2013.

Watt was confirmed by the Senate on Dec. 10 and is scheduled to be sworn in on Jan. 6.

Stress Test Comment Deadline Approaching, CUNA Says

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ALEXANDRIA, Va. (12/26/13)--The Dec. 31 deadline for comments on the National Credit Union Administration Board's proposed stress testing regulations is rapidly approaching, the Credit Union National Association says in this week's Regulatory Advocacy Report.

Under the NCUA proposal, federally insured credit unions with assets exceeding $10 billion would be required to develop and maintain capital plans, and undergo annual stress tests.

The stress test requirements, drafted by the agency's Office of National Examinations and Supervision, would require impacted credit unions to conduct specific capital analyses to evaluate how changes in variables, parameters and inputs used by credit unions in their capital plans could affect their capital. Credit unions would also need to test how interest rate shocks of at least plus or minus 300 basis points would impact their net economic value.

CUNA has encouraged all interested credit unions and leagues to comment. Among other issues, CUNA is focusing on:
  • Whether a rule is needed;
  • Whether NCUA should assess a credit union's stress testing instead of developing and utilizing its own;
  • Whether the results of stress testing should be made public; and
  • Whether elements of the proposal such as the nine-quarter horizon, the +/- 300 basis point shock, and the two-year assumption of the maturity of non-maturity shares are appropriate.
CUNA will share a draft of key concerns regarding the proposal with state credit union leagues, the CUNA Examination and Supervision Subcommittee, CUNA Council members, and others shortly.

Other issues addressed in the Regulatory Advocacy Report include:
  • CUNA's work to address issues created by the recent Target stores data breach;
  • Extension of the comment period until February 7, 2014 for a joint agency diversity proposal;
  • The Consumer Financial Protection Bureau's mortgage rule education campaign; and
  • CUNA's comments on the Federal Reserve Banks' payment system improvement paper.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link.

Cheney, CUNA Congratulate McWatters on Pending NCUA Nomination

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WASHINGTON (12/26/13)--Credit Union National Association President/CEO Bill Cheney last week congratulated Mark McWatters, who has been selected by President Obama to serve on the National Credit Union Administration Board, pending confirmation by the U.S. Senate.

"We are pleased that an individual of your caliber and extensive background has been chosen for the NCUA board. A number of important issues for credit unions are pending at the agency, and we look forward to working with you, once you are confirmed, as you address these matters with the other NCUA board members," Cheney wrote.

Obama announced his intent to nominate McWatters in mid-December. McWatters' nomination is subject to a nomination hearing by the U.S. Senate Banking Committee and a confirmation vote by the Senate.

If confirmed, McWatters would replace board member Michael Fryzel, whose term ended Aug. 2 this year, but he is allowed to continue serving until another Board member is confirmed. (See Dec. 20 News Now story: Obama to Nominate McWatters for NCUA Board.)

NCUA Video Covers 4Q Economic Trends

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ALEXANDRIA, Va. (12/26/13)--In a new YouTube video, National Credit Union Administration staff discuss positive economic signs from the fourth quarter of this year.

However, the agency notes, expected changes in the interest rate environment will present challenges to future credit union performance. The YouTube spot is hosted by NCUA Chief Economist John Worth.


ABA to Challenge Volcker Rule Trust-preferred Securities Provision

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WASHINGTON (12/26/13)--The American Bankers Association is reportedly planning to challenge trust-preferred securities provisions of the Volcker rule, Politico reported this week.

Exemptions are needed, the bankers told Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Martin Gruenberg and Comptroller of the Currency Thomas Curry. The banker group is planning a lawsuit if no action is taken on exemptions.

The bankers encouraged regulators to suspend portions of the Volcker rule that treat trust-preferred security debt interests as covered fund ownership interests.

CUNA Urges CUs to Review New CFPB Mortgage Resources

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WASHINGTON (12/23/13)--The Credit Union National Association has encouraged credit unions to review mortgage rule resources released by the Consumer Financial Protection Bureau last week to become familiar with the resources that are now available to consumers.
 
"To the extent credit union members review and utilize this information, it will be beneficial for credit union mortgage lending staff to be aware of the contents of these documents to better assist members and manage the mortgage lending process effectively," CUNA Associate General Counsel Jared Ihrig said.
 
The CFPB said the documents were released to ensure that "potential homebuyers have the information they need to make responsible decisions and that current borrowers know about their new protections." The materials released include:
  • A quick reference guide to help housing counselors understand new federal protections so that borrowers can pursue all possible options before beginning the foreclosure process;
  • Tips on new rights under the new rules for homebuyers and homeowners at every stage of the mortgage process, and recommendations for troubled borrowers facing foreclosure;
  • A list of frequently asked mortgage-related questions;
  • A tool to help consumers find local housing counseling agencies to answer their questions or address their concerns; and
  • Factsheets with an overview of all of the new consumer protections in the CFPB's mortgage rules.
CUNA has been in discussions with the CFPB throughout the development of the rules, and expects 2014 to hold even more changes in the mortgage lending regulatory arena, Ihrig added.

Ally Financial Ordered to Repay $80M

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WASHINGTON (12/23/13)--Allegations of discriminatory auto loan markup policies have resulted in an $80 million settlement between Ally Financial, the U.S. Dept. of Justice and the Consumer Financial Protection Bureau.

Under the terms of the settlement, Ally will pay $80 million in damages to consumers harmed by an alleged discriminatory markup policy that was used between April 2011 and Dec. 2013. The policy impacted more than 235,000 African-American, Hispanic, and Asian and Pacific Islander borrowers, the CFPB claimed.

According to the CFPB/DOJ order, Ally allowed auto dealers to mark up a consumer's interest rate above Ally's established buy rate. The financial firm then compensated dealers with funds obtained through the markups. "Ally did not monitor whether discrimination on a prohibited basis occurred through the charging of markups," the order said.

The CFPB/DOJ complaint said an analysis of Ally's lending practices found:
  • African-American borrowers were charged 29 basis points more than similarly-situated non-Hispanic whites, resulting in them paying more than $300 more in interest over the lifetime of their loan contracts;
  • Hispanic borrowers were charged 20 basis points more than similarly-situated non-Hispanic whites, resulting in them paying more than $200 more in interest over the lifetime of their loan contracts; and
  • Asian/Pacific Islander borrowers were charged 20 basis points more than similarly-situated non-Hispanic whites, resulting in them paying more than $200 more in interest over the lifetime of their loan contracts.
The order called on Ally to cease this markup practice, establish a compliance committee, and regularly report to the CFPB and DOJ on its compliance with non-discriminatory lending laws.

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

NCUA Sets Jan.15 LICU Webinar

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ALEXANDRIA, Va. (12/23/13)--Tips for credit unions looking to improve their service to low-income members and the underserved will be provided during a Jan. 15 National Credit Union Administration webinar.

The free webinar, entitled "Profiling Products and Services for Underserved Members," is scheduled to begin at 2 p.m. (ET).

Vanessa Lowe from the NCUA's Office of Small Credit Union Initiatives will host the webinar. Joining her will be Elliot FCU, Jeannette, Pa., CEO James Benson, Marisol FCU, Phoenix, CEO Robin Romano, and St. Louis Community CU Vice President of Community Development Paul Woodruff.

These credit union leaders will discuss how they have developed innovative products for the underserved, including:
  • Second-chance loans and second-chance checking accounts;
  • Citizenship loans;
  • An alternative to payday loans funded with U.S. Treasury Community Development Financial Institutions Fund proceeds; and
  • Value-added partnerships with municipalities and community service organizations.
The webinar also will provide an overview of the NCUA Community Development Revolving Loan Fund 2014 grants round.

Webinar participants may submit questions in advance by sending an email to WebinarQuestions@ncua.gov. The subject line of the email should read, "Underserved Products and Services Webinar."

To register for the NCUA webinar, use the resource link.

Congress, Gov't Set Holiday Schedule

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WASHINGTON (12/23/13)--Like many in the rest of the country, members of the U.S. Congress and federal government employees get some much-needed time off during the holiday season.

The U.S. House has been out of session since Dec. 13, and the Senate finished its 2013 work late last week. Both bodies are scheduled to return to work on Jan. 6.

Federal agencies follow the U.S. Office of Personnel Management schedule over the holiday period, which means they are closed Dec. 25 and Jan. 1. Those agencies include:
  • The National Credit Union Administration;
  • The Federal Reserve;
  • The Consumer Financial Protection Bureau;
  • The Federal Housing Finance Agency;
  • The U.S. Small Business Administration;
  • The Federal Trade Commission;
  • The U.S. Treasury;
  • The Office of the Comptroller of the Currency; and
  • The U.S. Dept. of Housing and Urban Development.
Credit unions can check their state regulator's website for those holiday schedules.

FHFA Receives $1.9B in Deutsche Bank Settlement

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WASHINGTON (12/23/13)--Deutsche Bank AG, related companies and specifically named individuals will pay $1.925 billion to the Federal Housing Finance Agency under a settlement announced Friday.

The settlement will resolve allegations that Deutsche Bank AG and others violated federal and state securities laws when they sold private-label mortgage-backed securities (MBS) to Fannie Mae and Freddie Mac between 2005 and 2007.

Freddie Mac will receive $1.63 billion of the settlement and Fannie Mae will receive $300 million. The settlement will release Deutsche Bank from certain claims tied to the securities sales, but will not impact claims related to alleged LIBOR manipulation nor claims made in two other suits: FHFA v. SC Americas, Inc., et. al., and FHFA v. Countrywide Financial Corp., et. al.

This is the sixth MBS settlement FHFA has reached. The National Credit Union Administration is not involved in this settlement.

For more on the settlement, use the resource link.

CU Holiday Efforts Covered in Cheney Report

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WASHINGTON (12/23/13)--One credit union's efforts to heighten the holiday season for overseas servicemembers and Unite for Good are highlighted in this week's edition of The Cheney Report.

Staff members at Arrowhead CU, San Bernardino, Calif., recruited members, families, friends and first graders at nearby East Heritage Elementary School to help make hundreds of holiday cards to send to on-duty Air Force service men and women stationed abroad. More than 300 cards were specially made and sent to the Air Force for those deployed in Afghanistan, sharing the credit union and holiday spirit of people helping people, Cheney noted.

CUNA is collecting these stories to showcase how credit unions are joining forces to Unite for Good, and similar stories will be featured each week in The Cheney Report. Cheney continues to encourage credit unions to visit UniteforGood.org and share how they are helping reach CUNA's shared, strategic vision in which Americans choose credit unions as their best financial partner.

This week's Cheney Report also includes:
  • Details on expected National Credit Union Administration board nominee J. Mark McWatters;
  • CUNA's recent testimony on patent issues;
  • Budget Committee Chairman Paul Ryan's (R-Wis.) comments on the future of tax reform efforts; and
  • An "Inside Exchange" video featuring tips on how to deal with the media.
The results of last week's National Credit Union Administration open board meeting.

Use the resource link to read the latest in The Cheney Report.

CDFI Fund Providing New Resources, Looking for New Hires

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WASHINGTON (12/20/13)--Community development-focused credit unions will soon have a new resource when the U.S. Treasury's Community Development Financial Institutions Fund (CDFI Fund) provides a series of technical assistance webinars early next year.

The webinars, which will be provided as part of the fund's capacity building initiative's "Strengthening Small and Emerging CDFIs" series, will run from January until June.

Opportunity Finance Network will host the webinars, which the fund said will provide small and emerging CDFIs with best practices and tools to evaluate their business practices and pursue strategies to strengthen their organizations.

Scheduled webinars include:
  • The four stages of CDFI growth on Jan. 8 at 1 p.m. (ET);
  • Capitalization: raising debt and equity for CDFIs on Jan. 21 at 1 p.m. (ET); and
  • Leading organizational change on Feb. 5 at 1 p.m. (ET).
Other topics and times will be announced soon, and posted on the "Strengthening Small and Emerging CDFIs" webpage.

Advanced registration is required, and the webinars will be archived, the CDFI Fund said.

The CDFI Fund is also working on strengthening its own internal resources by hiring new reviewers and alternates to examine applications for the 2014 rounds of the CDFI Program and the Native American CDFI Assistance Program.

The CDFI Fund said candidates should have expertise in:
  • Community and economic development finance sectors such as affordable housing, small business, microfinance, and commercial real estate financing;
  • Financing of community-based organizations; and
  • Development service activities.
Applicants with previous experience will also be accepted.

The reviewers will work remotely and will evaluate applications early in the process.

The 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.

CFPB, States Seek $2B in Homeowner Relief from Ocwen

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WASHINGTON (12/20/13)--Ocwen Financial Corporation and subsidiary Ocwen Loan Servicing, the largest nonbank mortgage loan servicer in the nation, have been ordered to provide $2 billion in principal reductions to underwater borrowers and $125 million in refunds to homeowners that were allegedly wrongly foreclosed upon under a Consumer Financial Protection Bureau court order.

The consent order is cosigned by the CFPB and authorities in 49 states and the District of Columbia. In the order, the authorities allege Ocwen "engaged in significant and systemic misconduct that occurred at every stage of the mortgage servicing process" and violated consumer financial protections, putting thousands of homeowners in jeopardy of losing their homes.

"Deceptions and shortcuts in mortgage servicing will not be tolerated," CFPB Director Richard Cordray said.

Alleged instances of misconduct cited by a CFPB release include:
  • Failing to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements;
  • Charging borrowers unauthorized fees for default-related services;
  • Imposing force-placed insurance on consumers when Ocwen knew or should have known that they already had adequate home-insurance coverage;
  • Providing false or misleading information in response to consumer complaints;
  • Deceiving consumers about foreclosure alternatives;
  • Improperly denying loan modifications;
  • Providing false or misleading information to consumers about the status of foreclosure proceedings; and
  • Robo-signing foreclosure documents.
To remedy these identified issues, the CFPB and other authorities have requested that Ocwen:
  • Stop robo-signing official documents;
  • Adhere to significant new homeowner protections;
  • Properly process pending requests;
  • Honor previous loan modification agreements;
  • Ensure continuity of contact for consumers;
  • Restrict servicing fees; and
  • Notify consumers of loss mitigation options and restrict dual tracking.
For more, use the resource link.

Feb. 7 Is New Diversity Policy Comment Deadline

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WASHINGTON (12/20/13)--Feb. 7 is the new deadline for credit unions and others to make their voices heard and comment on a proposed joint agency policy statement for assessing diversity policies and practices of financial institutions.

The National Credit Union Administration, Federal Reserve, Consumer Financial Protection Bureau, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Securities and Exchange Commission developed the standards.

The proposed standards would encourage regulated entities to include diversity and inclusion considerations in both employment and contracting as an important part of their strategic plan. The standards, required by the Dodd-Frank Act, would also encourage those entities that collect workforce data to use that data to evaluate and assess workforce diversity and inclusion efforts.

Regulated entities would also need to demonstrate supplier diversity policies that provide "for a fair opportunity for minority-owned and women-owned businesses to compete in procurements of business goods and services."

An institution's commitment to these standards will also need to be demonstrated in a transparent fashion, the standards said. The proposed standards are tailored to account for an institution's:
  • Asset size;
  • Number of employees;
  • Governance structure;
  • Income;
  • Number of members or customers;
  • Contract volume;
  • Location; and
  • Community characteristics.
  • Financial professionals, consumer advocates, and community representatives were consulted as the standards were developed.
The agencies have specifically asked for comments on how the standards might better take into account individual entities' circumstances, especially for small regulated entities. Originally the comment period was slated to end in December.

NCUA-approved LICUs Top 2,000

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ALEXANDRIA, Va. (12/20/13)--The number of credit unions nationwide carrying low-income designations has risen to more than 2,000, the National Credit Union Administration reported Thursday.

The 2,002 NCUA-approved low-income credit unions (LICUs) hold a combined $176 billion in assets and have nearly 20 million members. They individually hold as many as $1 billion in assets.

This LICU growth "could provide additional opportunities for investment in local economies," NCUA Chairman Debbie Matz said Thursday. "These credit unions can promote greater financial security for their members by providing loans to support a small business, purchase a house or send family members to college," she added.

To qualify as a LICU, a majority of a federal credit union's membership must meet low-income thresholds based on 2010 Census data. In addition to the exemption from the 12.25% statutory cap on member business lending for credit unions, other advantages derived from the LICU designation include:
  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans;
  • Ability to accept deposits from non-members; and
  • Authorization to obtain supplemental capital.
The NCUA has scheduled a LICU webinar for Jan. 15. For more, use the resource link.

177 CUs Eligible For CDFI Funding

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WASHINGTON (12/20/13)--A total of 177 credit unions are now eligible to take part in the U.S. Treasury's 2014 Community Development Financial Institution (CDFI) program.

The Treasury on Thursday released a comprehensive list of CDFI-certified institutions. The list of 808 certified institutions includes credit unions, banks, thrifts, loan funds, venture capital funds and depository institution holding companies.

With this certification, these institutions are able to take part in Treasury programs that help them 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. Up to $191 million in funds is being made available for the 2014 round of the program.

CDFI-certified credit unions may also apply for their share of $481,000 in technical assistance grants from the National Credit Union Administration. The agency this month announced 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.
The NCUA will accept applications until Feb. 14.

NCUA Tweaks December 2014 Meeting Date

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ALEXANDRIA, Va. (12/19/13)--Credit unions, mark your calendars. The National Credit Union Administration December 2014 open board meeting, originally scheduled for Dec. 18, has been re-scheduled to Dec. 11, 2014.

The agency made the announcement Wednesday. The board meeting schedule can be subject to change at any time.

Use the resource link to access next year's updated meeting schedule.

The Credit Union National Association's daily online news service for credit unions, News Now, provides live updates during all open NCUA meetings through Twitter via NewsNowLiveWire. CUNA's News Now also provides full meeting coverage.

CUNA Backs Schumer, Hatch Patent Reforms in Senate

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WASHINGTON (12/19/13)-The Credit Union National Association is keeping focus on patent law reforms, even as the U.S. Congress is wrapping up its 2013 session. The latest example of CUNA advocacy came in the form of letters of support to Sens. Charles Schumer (D-N.Y.) and Orrin Hatch (R-Utah), who have introduced bills in their chamber for CUNA-supported changes in the patent system.

One letter supports Schumer's Patent Quality Improvement Act of 2013 (S. 866) which would make the Section 18 program created by the America Invents Act permanent.

The Section 18 program protects credit unions and other businesses from outside claims that some specific customer service, payment and marketing practices have already been claimed under existing business method patents. These patent challenges, which are often brought by non-practicing entities, can become expensive for credit unions and others if they are heard in court.

"By making the program permanent, you ensure that that full spectrum of low-quality business method patents will be subject to review if asserted under the threat of litigation." The bill shines a light on patent quality and patent litigation abuse, "and is critical to clear the landscape of poor quality patents that are most often used by assertion entities in meritless litigation," the letter said.

In a separate letter, the cosigners expressed support for Hatch's Patent Litigation Integrity Act of 2013 (S. 1612.) That bill would enable fee shifting in unsuccessful patent infringement lawsuits, a change that would help to discourage PAEs from filing frivolous lawsuits.

The bill, the letter said, aims to ensure that fee shifting will be effective by empowering the court, on a motion from the defendant, to order the party alleging infringement to post bond to cover the other party's expenses. This change "will hold PAEs financially accountable and ultimately deter them from filing frivolous lawsuits that unnecessarily harm financial services providers and the consumers they serve," the letter added.

The letters are cosigned by the American Bankers Association, American Insurance Association, The Clearing House, Financial Services Roundtable, Independent Community Bankers of America, NACHA--The Electronic Payments Association, National Association of Federal Credit Unions and the National Association of Mutual Insurance Companies.

CUNA witness John Dwyer, who is president/CEO of New England FCU, Williston, Vt., described the growing threat' of patent trolls to Senate Judiciary Committee members this week. (See Dec. 18 News Now story: CUNA Describes 'Growing Threat' of Patent Trolls to Lawmakers.) CUNA and others have also written to Senate Committee on Commerce, Science and Transportation members, urging them to protect businesses of all sizes from the "smash and grab tactics" employed by patent trolls. (See Dec. 12 News Now story: CUNA Urges Hill Action on 'Main Street' Patent Reform.)

Obama to Nominate McWatters for NCUA Board

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WASHINGTON (12/19/13)--Mark McWatters will be President Barack Obama's pick to fill a National Credit Union Administration board seat when it is vacated by board member Michael Fryzel, whose term ended Aug. 2 this year.

The president announced his intent to nominate McWatters Wednesday. To achieve the NCUA slot, McWatters will go through a process that includes a nomination hearing by the Senate Banking Committee and a confirmation vote by the full U.S. Senate.

McWatters was a member of the TARP Congressional Oversight Panel in Washington, D.C. from December 2009 to April 2011. TARP--or the Troubled Asset Relief Program--refers to the $700 billion fund established in 2008 to help stabilize the economy after the downturn caused by a burst housing market bubble. The supervision panel was charged with overseeing the investment of TARP funds in an array of systemically significant and other institutions including megabanks like Citigroup, Bank of America, Wells Fargo, Goldman Sachs, AIG, GM, GMAC, Chrysler as well as approximately 700 additional financial institutions.

All three NCUA board members welcomed McWatters' consideration in a Wednesday statement.

McWatters served in 2009 as counsel for Rep. Jeb Hensarling (R-Texas), who has been the chairman of the House Financial Services Committee since January 2013. McWatters is currently dean for graduate programs at Southern Methodist University's School of Law in Dallas, Texas.

The NCUA has a three-member board and no more than two members can be from the same political party. The political party occupying the White House generally dominates the board's makeup, although existing NCUA board members are often left in place even after a transition in the Oval Office.

McWatters would fill Fryzel's Republican slot on the board. Fryzel was confirmed for NCUA board member in July 2008 and served as chairman until August 2009. The other members of the regulatory panel are NCUA Chairman Debbie Matz and board member Richard Metsger, confirmed this year.

Examiners Won't Expect Immediate 'Perfection' in Mortgage Rule Compliance, says CUNA

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WASHINGTON (12/19/13)--The National Credit Union Administration will not be expecting "compliance perfection" with new mortgage rules as soon as they go into effect, according to the Credit Union National Association's CompBlog.
 
CUNA asked the NCUA during its webinar Wednesday afternoon whether credit unions will have reasonable time after a Jan. 10 effective date to come into full compliance with the Consumer Financial Protection Bureau's new mortgage rules. 
 
Gail Laster, director of the NCUA's Office of Consumer Protection, responded that CFPB Director Richard Cordray and others understand the compliance challenges sparked by the new rules. "We are not expecting compliance perfection" right away, she said.
 
Examiners will be looking for good-faith compliance efforts first, and then "substantial compliance" in due time, Laster told CUNA.
 
In today's webinar--the second part of a series on the new mortgage rules--NCUA staff provided a high-level overview of the upcoming CFPB mortgage rules. Specific topics covered this afternoon included: ability-to-repay and Qualified Mortgages, high-cost mortgage and home ownership counseling, loan originator compensation and ECOA appraisals and valuations.
 
An archived version of this free webinar, as well as written Qs-and-As, will be available on the agency website in the next couple of weeks.

Senate Budget Deal Could Speed 2014 Tax Reform Talks

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WASHINGTON (12/19/13)--While the budget deal approved by the Senate on Wednesday does not directly impact credit unions, it could help speed issues like tax reform along when Congress returns in early January, Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said.

House Budget Committee Chairman Paul Ryan (R-Wisc.) on a recent episode of NBC's "Meet the Press" encouraged viewers to pay attention to the House Ways and Means Committee in the first quarter of next year. "The House will continue to pursue tax reform in 2014. And Sen. Max Baucus (D-Mont.) of the Finance Committee shows no signs of slowing down in the release of his tax reform proposals," Donovan noted.

Tax policy writers on Capitol Hill had intended to launch into tax reform and prepare for a vote during this past Fall, but tax reform fell by the wayside as other issues came to the fore.

"Congress is still miles from an agreement on comprehensive tax reform, but we know that important decisions on issues like the credit union tax status and others are being made in these early stages of tax reform, so even if Congress doesn't complete tax reform next year, our efforts now will help put us in a good position when Congress is closer to completing the process," Donovan said. CUNA continues to encourage credit unions and their members to use CUNA and state credit union league resources, social media sites including Facebook, and micro-video site Vine, to tell their legislators, "Don't Tax My Credit Union!"

Another 2013 priority, housing finance reform, has missed a deadline and will also have to wait until 2014, Donovan noted.

The Senate Banking Committee has been very active on this issue this year, holding more than one dozen hearings on the matter. However, committee Chairman Tim Johnson (D-S.D.) said their progress was pushed back somewhat by the government shutdown.

CUNA has been involved in the Committee's discussion, providing advice and testifying at hearings in July and November. "Our read of the Committee is that there is an intense interest in getting housing reform done properly, as opposed to getting it done quickly, because consequences of enacting a bad bill are severe. We now expect a new bill to be released early in the new year, and it is possible that a banking committee mark-up could occur shortly thereafter," Donovan said.

SAFE Act Changes Passed by Senate

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WASHINGTON (12/19/13)--The SAFE Act Confidentiality and Privilege Enhancement Act (S. 947) was passed by the U.S. Senate this week, and will now move on to the House for consideration.

Under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), employees of financial institutions, or their subsidiaries that act as residential loan originators, are required to register with the Nationwide Mortgage Licensing System and Registry.

The bill would amend the SAFE Act to grant all state and federal financial regulatory officials access to NMLS and Registry information without jeopardizing privilege or confidentiality provided under federal and state law.

Currently, only state and federal regulators with mortgage oversight authority are allowed access to the NMLS and Registry data.

Reassessing, Retooling CU Biz Model in NCUA 2014-2017 Plan

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ALEXANDRIA, Va. (12/19/13)--Reassessing and retooling the credit union business model to stay ahead of the curve is one of many priorities laid out in the National Credit Union Administration's draft 2014-2017 strategic plan.

The agency said the plan outlines how it will address "a growing system where credit unions are offering new services, engaging in greater portfolio diversity, and presenting new risk challenges."

Coming challenges cited in the plan include:
  • More and different products;
  • Diversified holdings;
  • Growing real estate concentration;
  • Rapid changes in technology;
  • Escalating threats to cyber-security; and
  • Increasing member business loan portfolios.
"Each of these are risks that require continual monitoring and mitigation strategies," the NCUA said.

To deal with these risks, the NCUA plans to continue to modernize its regulatory approach to create a framework "that encourages innovation while protecting safety and soundness." Ensuring the progress of the credit union system "while continuously protecting the consumer's rights and benefits, effectively overseeing the credit union system, and insuring nearly 96 million members' deposits in federally insured credit unions" will be another agency focus, the NCUA said.

Legislative goals detailed in the draft plan include:
  • Providing the NCUA with vendor authority through statutory changes that achieve parity with the other federal financial regulatory agencies to regulate, examine, and take enforcement actions against vendors and Credit Union Service Organizations;
  • Restoring the NCUA's access to back-up liquidity by re-establishing NCUA's emergency borrowing authority of $30 billion which sunset on December 31, 2010, and revising Title III of the Federal Credit Union Act to modernize the Central Liquidity Facility; and
  • Improving the NCUA's ability to manage the National Credit Union Share Insurance Fund by providing more flexibility in setting the normal operating level and building retained earnings for the NCUSIF in a manner consistent with the size and complexity of the credit union industry and financial stability goals.
For the full draft plan, use the resource link.

NEW: Examiners Won't Expect Immediate 'Perfection' in Mortgage Rule Compliance, says CUNA

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WASHINGTON (12/18/13, UPDATED 5:04 p.m. ET)--The National Credit Union Administration will not be expecting "compliance perfection" with new mortgage rules as soon as they go into effect, according to the Credit Union National Association's CompBlog.
 
CUNA asked the NCUA during its webinar this afternoon whether credit unions will have reasonable time after a Jan. 10 effective date to come into full compliance with the Consumer Financial Protection Bureau's new mortgage rules. 
 
Gail Laster, director of the NCUA's Office of Consumer Protection, responded that CFPB Director Richard Cordray and others understand the compliance challenges sparked by the new rules. "We are not expecting compliance perfection" right away, she said.
 
Examiners will be looking for good-faith compliance efforts first, and then "substantial compliance" in due time, Laster told CUNA.
 
In today's webinar--the second part of a series on the new mortgage rules--NCUA staff provided a high-level overview of the upcoming CFPB mortgage rules. Specific topics covered this afternoon included: ability-to-repay and Qualified Mortgages, high-cost mortgage and home ownership counseling, loan originator compensation and ECOA appraisals and valuations.
 
An archived version of this free webinar, as well as written Qs-and-As, will be available on the agency website in the next couple of weeks.

NEW: Obama to Nominate McWatters for NCUA Board

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WASHINGTON (12/18/13, UPDATED 9:25 A.M. ET)--Mark McWatters will be President Barack Obama's pick to fill a National Credit Union Administration board seat when it is vacated by board member Michael Fryzel, whose term ended Aug. 2 this year.

The president announced his intent to nominate McWatters today. To achieve the NCUA slot, McWatters will go through a process that includes a nomination hearing by the Senate Banking Committee and a confirmation vote by the full U.S. Senate.

McWatters was a member of the TARP Congressional Oversight Panel in Washington, D.C. from December 2009 to April 2011. TARP--or the Troubled Asset Relief Program--refers to the $700 billion fund established in 2008 to help stabilize the economy after the downturn caused by a burst housing market bubble. The supervision panel was charged with overseeing the investment of TARP funds in an array of systemically significant and other institutions including megabanks like Citigroup, Bank of America, Wells Fargo, Goldman Sachs, AIG, GM, GMAC, Chrysler as well as approximately 700 additional financial institutions.

McWatters served in 2009 as counsel for Rep. Jeb Hensarling (R-Texas), who has been the chairman of the House Financial Services Committee since January 2013. McWatters is currently dean for graduate programs at Southern Methodist University's School of Law in Dallas, Texas.

The NCUA has a three-member board and no more than two members can be from the same political party. The political party occupying the White House generally dominates the board's makeup, although existing NCUA board members are often left in place even after a transition in the Oval Office.

McWatters would fill Fryzel's Republican slot on the board. Fryzel was confirmed for NCUA board member in July 2008 and served as chairman until August 2009. The other members of the regulatory panel are NCUA Chairman Debbie Matz and board member Richard Metsger, confirmed this year.

Today's NCUA Webinar on Mortgage Rules Still Open for Registration

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ALEXANDRIA, Va. (12/18/13)--Credit unions can still register for today's National Credit Union Administration free webinar on Dodd-Frank Act mortgage lending rules.  In fact, they can sign up right up to the 2 p.m. (ET) starting time.
 
Staff from the agency's Office of Consumer Protection is prepared to offer a high-level overview of the new rules that address such issues as: 
  • A borrower's ability-to-repay a mortgage loan and the definition of a "Qualified Mortgage";
  • High-cost mortgage rules and home ownership counseling;
  • Loan originator compensation; and,
  • Equal Credit Opportunity Act appraisals and valuations.
Use the resource link for information registering.

CUNA Describes 'Growing Threat' of Patent Trolls to Lawmakers

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WASHINGTON (12/18/13)--Demand letters from "patent trolls" represent a great and growing threat to credit unions and other end-users of technology, John Dwyer,  president/CEO of New England FCU, Williston, Vt., told the Senate Judiciary Committee this morning.
 
Dwyer testified on behalf of the Credit Union National Association and his own credit union at a
Click to view larger image John Dwyer,  president/CEO of New England FCU, Williston, Vt., tells the Senate Judiciary Committee that if left unchecked, the problem of "patent troll" demand letters will deter institutions like his from using new technologies,  including ATMs, online and mobile banking, remote check capture, and check processing. (CUNA Photo)
hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." Dwyer was the only financial services representative to speak at the hearing.
 
In his testimony, the credit union CEO said his credit union is now in the middle of expensive discovery in a patent infringement case related to 23 ATM machines it provides for members. "The case has been a costly and distracting headache," he said.
 
The case began, he explained, with an "ill-researched, vague demand letter" that referred to his credit union as a bank, did not specify which of his credit union's ATM machines allegedly infringed a patent, and contained absolutely no information as to why the entity believed the credit union infringed. The letter only provided a simple list of patent numbers, he said. Attempts to clarify claims made in the letter were met with similar form letters from the patent trolls, and Dwyer said "the troll has recently turned up the heat in its rhetoric."
 
He described another patent troll letter offering a financial institutuion 'a special one-time limited time offer for smaller Banks such as yours to receive a fully paid up sub-license' for $2,000 per ATM, and eventually upped this demand to $5,000 per ATM. "Frankly, this language sounds a bit more like a late-night infomercial than a serious attempt at dispute resolution," Dwyer said.
 
If left unchecked, Dwyer said, the problem of demand letters will deter institutions like his from
using new technologies at all, including ATMs, online and mobile banking, remote check capture, and check processing.
 
To help prevent future instances of patent trolling, Dwyer, in written testimony, said CUNA supports:
  • Giving the Federal Trade Commission enforcement and rulemaking authority over patent trolls that operate in unfair or deceptive ways;
  • Developing minimum disclosure standards that would help ensure that only demand letters trulyasserting a potentially valid claim of infringement are sent; and
  • Requiring an entity that sends more than 10 demand letters in a single calendar year to enter all letters into a registry that would be publicly available and maintained by a federal agency.
Use the resource link to read more of CUNA's testimony

CUNA Extends Exam Survey Deadline

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WASHINGTON (12/14/13)--The Credit Union National Association will let neither rain nor snow nor holiday dishes nor the late timing of a credit union's 2013 state or federal regulatory examination stand in the way of a credit union's desire to participate in the latest survey on experiences and impressions of the examination process.  CUNA and the state credit union associations have extended the deadline for completion to Jan. 10.
 
"We are responding to credit union requests by pushing the deadline into the new year," said CUNA Chief Economist Bill Hampel Tuesday. "Credit unions want to tell their examinations stories via our survey, but some have not yet had their 2013 visit from examiners. They want to include their most recent experience in their survey responses--and that is information CUNA finds worth waiting for." Credit union responses may be completely anonymous.
 
 
 
Hampel said the survey--CUNA's second on the examination topic--has already generated a lot of attention from credit unions--but not yet the more-than 1,500 responses drawn by the last survey. "We want to hear from as many credit unions as possible to assure our ongoing advocacy efforts on behalf of credit unions are fully informed with the latest information.  The more responses we receive from each state, the more useful the results will be."
 
The survey addresses such topics as:
*The length of on-site exam;
* How satisfied the credit union was with the exam and results; and,
* What problem areas, if any, were noted by the examiner.
 
It includes a series of questions to gauge how the credit union felt about the examiner's performance and the exam process, and asks what are the biggest issues credit unions would like CUNA and their leagues to focus on to reduce regulatory compliance burdens.

And, for the first time, CUNA has provided a section--optional, of course--through which credit unions can identify and rate individual examiners.
 
Use the resource link to access the CUNA survey and remember to participate by Jan. 10.
 

 

Use Real-life Members When Dealing with Media, TV Correspondent Urges CUs

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WASHINGTON (12/18/13)--Credit unions may have a great story to tell--but they've got to get out there and tell it, and use examples from their real-life members whenever practicable, a veteran ABC News consumer correspondent said in the latest "Inside Exchange" episode.
 
ABC News consumer correspondent Elisabeth Leamy told Credit Union National Association Executive Vice President of Communications Paul Gentile that credit unions have an "unprecedented opportunity" to tell their story because there lingers considerable animosity toward banks--particularly among younger people.

CFPB Wants FIs to Disclose Campus Financial Agreements

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WASHINGTON (12/18/13)--The Consumer Financial Protection Bureau called on financial institutions to be more transparent about commercial deals with colleges and universities.
The request, which focuses on debit and prepaid cards and accounts marketed toward students, came on the heels of an annual report to Congress about similar arrangements over credit cards.

"Students and their families should know if their school, whether well-intentioned or not, is being compensated to encourage students to use a specific account or card product," said CFPB Director Richard Cordray. "When financial institutions secretly give kickbacks to schools, they are engaging in risky practices."

The CFPB concluded in September that details about college and university-sponsored accounts are often difficult to obtain. Consumers wanting details about these deals may only find them after filing requests under state open records laws.

The agency's annual report on arrangements between credit card issuers and higher learning institutions found that such deals have declined since 2009, when Congress mandated the disclosure of details surrounding them. In 2009, there were 1,045 agreements that saw universities and colleges take in more than $84 million for over two million accounts. In 2012, there were 617 agreements worth over $50 million for over one million accounts.

The CFPB said that financial institutions "have shifted" to student checking and debit and prepaid card products, and that these agreements now "outnumber college credit card agreements."

Ostrowidzki Named for NCUA Region III Leadership Team

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ALEXANDRIA, Va. (12/18/13)--Joseph Ostrowidzki has been tapped by the National Credit Union Administration for associate regional director for operations in the agency's Region III office.

Ostrowidzki succeeds Myra Toeppe, who was named Regional Director in September. He currently serves as a Region III Supervisory Examiner and will begin his new duties Dec. 29.

Ostrowidzki has more than 26 years of experience in regulating credit unions and joined the NCUA as an examiner in 1987. Prior to becoming a Supervisory Examiner in 2010, Ostrowidzki served as Director of Insurance in Region III. He also has held positions as a supervision analyst, insurance analyst and training specialist.

Based in Atlanta, NCUA's Region III presently oversees federally insured credit unions in Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Ohio, Puerto Rico, South Carolina, Tennessee and the U.S. Virgin Islands. At the start of 2014, Ohio will move to Region II, and Arkansas and Louisiana will become part of Region III.

Consider CU Burden in New Payments Regs: CUNA Urges Fed

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WASHINGTON (12/17/13)--Federal Reserve Banks must ensure that credit unions and small financial institutions are able to access and utilize the latest developments in payments, without undue regulatory restrictions, as it develops a new payments framework, the Credit Union National Association said in a comment letter.

The Fed Banks are working to address potential gaps and opportunities in the payments system, including payment speed, closed payment communities, and international, mobile, and traditional payment channels. The Fed is also exploring where it fits in the payment system going forward.

"As the payment system continues to evolve, it is critical that credit unions and their providers have access and utilize the latest developments in payments," including mobile payments, payments systems that could potentially enable ubiquitous near-real-time payments, and a potential new centralized directory to be used for payments, CUNA Payments Policy Subcommittee Chair Jane Watkins wrote. Watkins is also the president/CEO of Virginia CU, Richmond, Va.

While credit unions support appropriate and flexible rules, Watkins said they are concerned with regulatory and other changes that may result in compliance burdens that will reduce the ability of credit unions to provide current payment products. Watkins also noted that increasing costs and reductions in payments-related revenue, including with debit interchange or overdraft, could have a negative impact on the ability of credit unions to offer important services to many consumers, as well as to expand current and develop new products and services.

The CUNA letter suggested the Fed Banks should continue to work with, and coordinate with, the Consumer Financial Protection Bureau, Federal Reserve Board, NACHA--The Electronic Payments Association, other regulators, and policymakers to target problem areas without creating new regulatory restrictions.

Watkins said CUNA appreciates the Fed Banks' plan to examine the costs and benefits of implementation, as well as ongoing costs, of offering "ubiquitous near-real-time payments." These payments could offer benefits to end users, different stakeholders, and the payment system, she said.
 
The CUNA letter also suggested the Fed banks:
  • Join in efforts to address cybersecurity issues;
  • Remain important providers and partners that help meet the payments needs of their members;
  • Continue to act as major service providers to the interbank market for financial institution payment services, given the role of the Fed Banks in the payment system and economy; and
  • Collaborate and work with regulators, financial institutions, and others on potential improvements to international payments.
For the full comment letter, use the resource link.

CUNA Unveils Major Speaker for GAC 2014

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WASHINGTON (12/17/13)--The Credit Union National Association is making a major announcement about a speaker of international renown slated for the 2014 Governmental Affairs Conference.

Tony Blair, one of the most respected and admired world leaders in the last 50 years, will offer GAC attendees an unparalleled analysis of the world's most difficult and complex issues. Blair, former Prime Minister of Great Britain and Northern Ireland, will bring his worldly perspective to the credit union system's top annual event at a key time not only for the U.S. economy, but for the future of the U.S. credit union system.

"Bringing Tony Blair to the GAC is an incredible opportunity," said Bill Cheney, CUNA President/CEO. "Admired as a great world leader, Mr. Blair brings an unprecedented level of experience and influence to the GAC stage. At a time when credit unions must "Unite for Good" to play an even more important role in consumers' lives, we will all benefit from hearing from someone who has made a great impact on the world stage, while tirelessly working for good in his own country," Cheney added. Unite for Good refers to CUNA's shared strategic vision, unveiled at the 2013 GAC, in which Americans choose credit unions as their best financial partner.

Since leaving Downing Street, Blair has served as the Quartet Representative to the Middle East. He represents the United States of America, United Nations, Russia and the European Union, working with the Palestinians to prepare for statehood as part of the international community's effort to secure peace. Blair also leads up a number of initiatives to bridge cultural and religious divides, engender international awareness of climate change, and foster public well-being--including the Tony Blair Faith Foundation, the Tony Blair Africa Governance Initiative, the Breaking the Climate Deadlock Initiative, and the Tony Blair Sports Foundation.

The 2014 GAC, set for Feb. 23 through 27 in Washington, D.C., is the credit union movement's premiere political event. The GAC gathers more than 4,000 credit union decision-makers in the nation's capital to hear from influential leaders and guide the credit union movement in building and maintaining America's trust.

To register for the 2014 GAC, use the resource link.

Online Lender Sued by CFPB for Illegal Servicing

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WASHINGTON (12/17/13)--California firm CashCall has been sued by the Consumer Financial Protection Bureau in that agency's first action against an online loan provider.

The CFPB filed suit against CashCall in the U.S. District Court for the District of Massachusetts. In the complaint, the CFPB alleged that CashCall, subsidiary WS Funding LLC, and an affiliated Nevada collection agency, Delbert Services Corporation, "engaged in unfair, deceptive, and abusive practices, including illegally debiting consumer checking accounts for loans that were void."

CashCall collected money "it had no right to take from consumers," CFPB Director Richard Cordray alleged. "Online lending is rapidly growing and deserves ample regulatory attention. The Consumer Financial Protection Bureau will take action against online lenders and servicers that engage in unfair, deceptive, or abusive practices," he added.

The CFPB said that CashCall and its partners entered into business with South Dakota online lender Western Sky Financial, which was situated on an Indian reservation and owned by a Cheyenne River Sioux Tribe member. The firm claimed that state laws did not apply to its business. "This relationship with a tribe does not exempt Western Sky from having to comply with state laws when it makes loans over the Internet to consumers in various states," the CFPB said.

According to the bureau, Western Sky provided borrowers with loans in amounts from $850 to $10,000, with upfront fees, lengthy repayment terms, and annual interest rates as high as 343%. Some consumers agreed to allow payments to be debited directly from their bank accounts. These loans were acquired by WS Funding and serviced by CashCall.

These loans, the CFPB charged, violated either licensing requirements or interest-rate caps--or both--in Arizona, Arkansas, Colorado, Indiana, Massachusetts, New Hampshire, New York, and North Carolina. "Under statutes in at least these eight states, any obligation to pay such loans was rendered void or otherwise nullified in whole or in part by law. Therefore, the defendants are collecting money that consumers do not owe," the CFPB said.

The CFPB suit seeks refunds for consumers, damages and civil penalties. The suit also requests that the defendants adhere to all federal consumer financial protection laws, including prohibitions on unfair, deceptive, and abusive acts and practices.

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

FHFA Seeks Comments on Loan Limit Drawback

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WASHINGTON (12/17/13)--The Federal Housing Finance Agency is seeking public comment on a plan that could gradually reduce maximum loan limits by over 4% for loans eligible to be purchased by Fannie Mae or Freddie Mac, the agency said yesterday.

Under the plan, the current statutory maximum loan limit for one-unit properties would decline from $417,000 to $400,000. The FHFA said the loan purchase limit would be reduced by the same percentage in other parts of the country, including high cost areas in the contiguous states where current limits are set at $625,500. Those loan purchase limits would be set at $600,000, according to the FHFA.

The Credit Union National Association is studying the proposal carefully and the agency has said that the proposed plan does not represent final action. However, CUNA is concerned about the potential reduction in the loan amount, particularly for high-cost areas. CUNA is also concerned that this proposal is moving forward before the new FHFA director, Mel Watt, has been sworn in.

CUNA will be reviewing the proposal with its Housing Finance Reform Task Force and CUNA Lending Council among other groups and will issue a CUNA Comment Call to summarize the proposal and encourage credit union mortgage lenders to comment shortly.

The proposal has not been published in the Federal Register yet; the agency is seeking comments through March 20.

Credit unions can comment on those issues and others such as:
  • Whether six months' advance notice is adequate for any changes that are made;
  • Whether it is preferable for FHFA to announce a multi-year schedule of decreases; and
  • To what date any future loan purchase limit reductions should be tied.
The FHFA said any changes will not apply to loans originated before Oct. 1, 2014.

In a comment letter filed with the agency in October, CUNA and a coalition of financial services and housing market representatives said reducing the size of mortgages that Fannie Mae and Freddie Mac can purchase "would have a very disruptive impact on the availability of affordable housing credit." See Oct. 10 News Now item: CUNA: Reducing Mortgage Limits Would Disrupt Housing Recovery.)

Mortgage Mix is Best QM Approach, CUNA's Dunn Tells Bloomberg BNA

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WASHINGTON (12/17/13)--A mixture of qualified mortgages (QM) and nonqualified mortgages may be the best approach for financial institutions to ensure loans are still available to creditworthy borrowers that are protected by fair lending laws such as the Equal credit Opportunity Act, Credit Union National Association Deputy General Counsel Mary Dunn told Bloomberg Business News Americas.

The Bloomberg story reported on QM guidance released by the National Credit Union Administration and other federal financial regulators late last week.

In that guidance the regulators said residential mortgage loans will not be subject to safety-and-soundness criticism solely because of their QM or non-QM status. The guidance addresses Ability-to-Repay and QM standards set to go into effect on Jan. 10. (See Dec. 16 News Now story: NCUA, Regulators Release QM Guidance.)

Dunn told Bloomberg that there are many creditworthy borrowers with debt-to-income ratios that exceed the limits proposed in the QM regulations. "You can still demonstrate an ability to repay a loan, but have a debt-to-income ratio that is higher than 43 percent," Dunn said.

"We think that a number of credit unions are looking at how they can make loans that wouldn't qualify as QMs," she added.

She said there is "real concern" among credit unions that if they just make QM loans, "there could be an overall disparate impact on some borrowers."

CUNA has noted the QM rule's 3% limitation on points and fees for a qualified mortgage loan may be problematic for some credit unions, and said the total debt to total monthly income ratio of 43% should be expanded.

CUNA and credit unions have also called on the Consumer Financial Protection Bureau to delay the effective dates of QM regulations and other upcoming mortgage rules, and protect credit unions and other mortgage originators from litigation. CUNA has also sought a one-year mortgage regulation implementation delay.

Patent Trolls Plague Some CUs, CUNA To Tell Lawmakers Today

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WASHINGTON (12/17/13)--Today the Senate Judiciary Committee takes a look at patent law reform and the Credit Union National Association will be there to detail the chaos that patent trolls are creating for credit unions across the country.

John Dwyer, president/CEO of New England FCU, Williston, Vt., testifies today at a Senate Judiciary Committee hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." It's scheduled to begin at 10 a.m. (ET).

Dwyer will testify on behalf of CUNA and his own credit union, and will be the only financial services representative speaking.

Other hearing witnesses include:
  • Printing Industries of America President/CEO Michael Makin;
  • Adobe Systems, Inc., Vice President and Associate General Counsel Dana Rao;
  • Coalition for 21st Century Patent Reform Senior Vice President Philip Johnson;
  • Alnylam Pharmaceuticals Vice President, Intellectual Property Steve Bossone, Ph.D.;
  • AMD Senior Vice President Harry Wolin; and
  • American Intellectual Property Law Association Executive Director Q. Todd Dickinson.
For more on the hearing, use the resource link.

NEW: Patent Trolls' 'Growing Threat' Described to Lawmakers by CUNA

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WASHINGTON (12/17/13, 10:44 a.m. ET)--Demand letters from "patent trolls" represent a great and growing threat to credit unions and other end-users of technology, John Dwyer,  president/CEO of New England FCU, Williston, Vt., told the Senate Judiciary Committee this morning.
 
Dwyer testified on behalf of the Credit Union National Association and his own credit union at a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." Dwyer was the only financial services representative to speak at the hearing.
 
In his testimony, the credit union CEO said his credit union is now in the middle of expensive discovery in a patent infringement case related to 23 ATM machines it provides for members. "The case has been a costly and distracting headache," he said.
 
The case began, he explained, with an "ill-researched, vague demand letter" that referred to his credit union as a bank, did not specify which of his credit union's ATM machines allegedly infringed a patent, and contained absolutely no information as to why the entity believed the credit union infringed. The letter only provided a simple list of patent numbers, he said. Attempts to clarify claims made in the letter were met with similar form letters from the patent trolls, and Dwyer said "the troll has recently turned up the heat in its rhetoric."
 
He described another patent troll letter offering a financial institutuion 'a special one-time limited time offer for smaller Banks such as yours to receive a fully paid up sub-license' for $2,000 per ATM, and eventually upped this demand to $5,000 per ATM. "Frankly, this language sounds a bit more like a late-night infomercial than a serious attempt at dispute resolution," Dwyer said.
 
If left unchecked, Dwyer said, the problem of demand letters will deter institutions like his from
using new technologies at all, including ATMs, online and mobile banking, remote check capture, and check processing.
 
To help prevent future instances of patent trolling, Dwyer, in written testimony, said CUNA supports:
  • Giving the Federal Trade Commission enforcement and rulemaking authority over patent trolls that operate in unfair or deceptive ways;
  • Developing minimum disclosure standards that would help ensure that only demand letters trulyasserting a potentially valid claim of infringement are sent; and
  • Requiring an entity that sends more than 10 demand letters in a single calendar year to enter all letters into a registry that would be publicly available and maintained by a federal agency.

Cheney Report: Risk-Based Net Worth Proposal on the Horizon

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WASHINGTON (12/16/13)--A proposed rule on risk-based net worth could be considered by the National Credit Union Administration as soon as next month, Credit Union National Association President/CEO Bill Cheney said in this week's edition of The Cheney Report.

The agency has said its developing risk-based capital framework will protect credit unions and consumers from losses, and replace the "outdated and insufficient" one-size-fits-all capital requirement. The NCUA plan could result in higher capital levels for credit unions with high concentrations of risky assets. The current 7% leverage capital standard, which is required by the Federal Credit Union Act, would remain the floor. However, the agency has said credit unions with assets of $50 million and above could be subject to improved risk-based capital requirements to better correlate required capital levels to risk.

"Particularly since no one outside of NCUA has seen the proposal, it remains of great concern to us. In our view, the current system for net worth standards (written into the law--unlike that of other financials) is flawed, but credit unions have adjusted accordingly and are doing well. In short: If it ain't broke, don't fix it," Cheney wrote.

NCUA Chairman Debbie Matz has said the risk-based capital rule, if adopted, is unlikely to impact many credit unions.

The Cheney Report also includes a timely reminder of how credit unions continue to "unite for good": Rogue CU, Medford, Ore., has created a Hope for the Holidays Campaign, which helps local families who need an extra hand during the holiday season. Twelve needy families that were nominated by community members were presented with a combined $6,500 in donated funds. Unite for Good refers to CUNA's shared strategic vision, unveiled at the 2013 Governmental Affairs COnference, in which Americans choose credit unions as their best financial partner.

Other issues addressed in this week's Cheney Report include:
  • Details on items approved at the December NCUA open board meeting;
  • NCUA student loan guidance;
  • The positive credit union news seen in the annual "American Customer Satisfaction Index";
  • What the recent budget accord means for credit unions; and
  • The status of several regulatory relief measures.
Use the resource link to read the latest in The Cheney Report.

CUNA Witness Will Testify on Patent Issues This Week

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WASHINGTON (12/16/13)--John Dwyer, president/CEO of New England FCU, Williston, Vt., will discuss credit union patent troll concerns in a Tuesday Senate Judiciary Committee hearing.

Dwyer will testify on behalf of the Credit Union National Association and his credit union at the hearing, "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." 

CUNA will be the only group testifying representing financial institutions.

The Innovation Act of 2013 (H.R. 3309), which would remove some of the financial incentives sought by firms that assert low-quality patents in the hope of quick settlements, was approved by the U.S. House early this month on a 325 to 91 vote.

The Senate is preparing to consider the issue. Judiciary Committee Chairman Pat Leahy (D-Vt.) and others have introduced their own bills to address the problem. (See Dec. 13 News Now item: CUNA Urges Hill Action on 'Main Street' Patent Reform.)

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.

Credit unions and others have also received vague demand letters from patent trolls, and CUNA hopes to see reforms that will affect these demand letters.

Dwyer is a member of CUNA's Federal Credit Union Subcommittee and is one of four credit union representatives on the 12-member Federal Reserve Bank of Boston First District Community Depository Institution Advisory Council.

CUNA on Bloomberg TV: Strong Seasonal Spending Could Continue into 2014

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WASHINGTON (12/16/13)--The strong seasonal spending seen so far this year could continue into early 2014, Credit Union National Association Chief Economist Bill Hampel said in a recent appearance on Bloomberg Television's Bottom Line with Mark Crumpton.

Click to view larger image CUNA Chief Economist Bill Hampel, right, appears on Bloomberg Television's Bottom Line with Mark Crumpton.
Retail sales rose by 0.7% in November, and these numbers indicate that holiday spending could increase by 3.5% to 4%, despite the shortened season and early concerns that there would not be a strong season, Hampel said.

This increase is in line with what was reported in the 14th annual holiday spending survey conducted by the Consumer Federation of America (CFA) and CUNA. That survey was released just ahead of the Thanksgiving holiday.

"This is going to be, I think, the strongest [holiday spending season] we've had since 2007...We're back to normal just about," Hampel told Crumpton.

However, Hampel noted, there has been a change in the mix of spending this year, with fewer shoppers going to brick and mortar stores and more doing their holiday shopping online. "We're in the middle of a long-term change of how business is done...brick and mortar stores are going to make some adjustments," Hampel noted.

He said consumer loan demand at the nation's credit unions is the strongest it has been since 2005. This demand, he said, has been largely fueled by new car purchases.

Unemployment could reach pre-recession levels by May of next year, and while wages for lower income Americans have been flat for some time, they too could turn upward next year, he added.

For the full interview, use the resource link.

CUs Should Not Be Subject To New Cyberthreat Requirements: CUNA to NIST

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WASHINGTON (12/16/13)--Credit unions and other financial institutions are already subject to robust cybersecurity and data security requirements, and should not be subject to additional prescriptive requirements, the Credit Union National Association said in a Friday comment letter to the National Institute of Standards and Technology.

Cybersecurity measures that credit unions are subject to include the Gramm-Leach-Bliley Act (GLBA) and other applicable data security laws, regulations, and standards from the Federal Financial Institution Examinations Council and the National Credit Union Administration.

CUNA in the comment letter said it supports NIST's goals to develop a "critical infrastructure" cybersecurity framework. However, the framework "should recognize existing, robust data security requirements and standards that apply to financial institutions," CUNA said.

The CUNA letter also urged NIST to coordinate closely with the National Credit Union Administration and other regulators to ensure a finalized framework "is consistent with, and does not expand the scope of, existing rules and regulations."

CUNA said any voluntary critical infrastructure initiatives that are developed must remain voluntary, and should not result in additional requirements on entities such as credit unions.

The letter also urged additional coordination between the public and private sectors on cybersecurity.

For the full comment letter, use the resource link.

NCUA, Regulators Release QM Guidance

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ALEXANDRIA, Va. (12/16/13)--Residential mortgage loans will not be subject to safety-and-soundness criticism solely because of their status as Qualified Mortgage or Non-qualified Mortgage loans, the National Credit Union Administration and other federal financial regulators said in guidance released on Friday.

The guidance addresses Ability-to-Repay and Qualified Mortgage standards set to go into effect on Jan. 10. The NCUA, Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued a joint statement to clarify safety-and-soundness expectations and Community Reinvestment Act (CRA) considerations related to QM and non-QM loans offered by regulated institutions.

In the release, the agencies said they continue to expect institutions to underwrite residential mortgage loans in a prudent fashion and address key risk areas in residential mortgage lending, including:
  • Loan terms;
  • Borrower qualification standards;
  • Loan-to-value limits;
  • Documentation requirements; and
  • Portfolio- and risk-management practices.
These standards apply regardless of whether a residential mortgage loan is a QM or non-QM loan, they said.

Agencies responsible for conducting CRA evaluations do not anticipate that financial institutions' decision to originate only Qualified Mortgages, absent other factors, would adversely affect their CRA evaluations.

For the full guidance, use the resource link.

CFPB Narrows Focus of Arbitration Work

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WASHINGTON (12/13/13)--Credit cards and checking accounts have been early targets as the Consumer Financial Protection Bureau examines the use of arbitration clauses, and CFPB Director Richard Cordray on Thursday said the agency has "narrowed and specified many of the remaining areas" it will look in to as it continues to research the issue.

The Dodd-Frank Wall Street Reform Act requested that the CFPB study the use of arbitration agreements in consumer financial services contracts. As a first step, the agency requested suggestions on the scope, methods and data sources it should use in its study. The results of the study will be reported to the U.S. Congress.

Cordray made his remarks at a Dallas field hearing on the issue. A preliminary CFPB study released during the hearing found that few consumers file arbitration cases, as roughly 9 out of 10 clauses allow banks to prevent consumers from participating in class actions.

Cordray noted one of the most notable findings about arbitration clauses is the stark contrast in the types of institutions that use them. "On the whole, larger institutions are more likely to include an arbitration clause in consumer contracts than community banks or credit unions. That raises interesting questions about why smaller institutions and credit unions do not use arbitration clauses as frequently in these markets," Cordray said.

Arbitration clauses are very common across all prepaid card contracts--"regardless of whether they are offered by a larger or smaller player," he added. "In fact, smaller players are much more likely to use arbitration clauses in prepaid card contracts than they are in credit card or checking account contracts."

The Credit Union National Association has said it supports the CFPB's attempts to evaluate how the use of pre-dispute arbitration agreements impacts consumers, and agreed that the CFPB should analyze the types and frequency of claims that consumers bring in arbitration. However, CUNA added, the agency should also consider and minimize any potential burdens that may be imposed on credit unions as a result of the study.

Home-based CUs May Need a Second Address Under NCUA Plan

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ALEXANDRIA, Va. (12/13/13)--A proposal that would modify the operations of home-based federal credit unions was one of the most discussed items at Thursday's National Credit Union Administration open board meeting.

Click to view larger image National Credit Union Administration board members hear a staff presentation on proposed regulations for home-based credit unions during Thursday's open board meeting. (CUNA Photo)
The proposal would require small home-based federal credit unions to have a business office of the credit union outside of a residence or have another public location that is appropriate for contacts with the NCUA. Also, the credit union would have to have either a dedicated phone number or email address for contact with the NCUA and members.

The rule eventually would prohibit the FCUs from operating out of homes. All federal credit unions would have to maintain a business office not located in a home within two years of the final rule's effective date. Storage of credit union records at residential locations would also be prohibited.

According to NCUA, there are approximately 95 remaining home-based, federally insured credit unions, 14 of which are state chartered. The agency plans to provide grants and other assistance to help these institutions relocate.

The NCUA proposed the changes to address concerns about member privacy, public access and the safety and working conditions of NCUA's examination staff.

Operating credit unions out of private residences raises regulatory and supervisory concerns, including operational risks, privacy risks and potential conflicts of interest, the NCUA said.

NCUA Chairman Debbie Matz said "most credit union members, especially young members, want to conduct business from their homes online, not visit someone else's private home to conduct business." Further, she said, operating a credit union inside the manager's home, with no internal controls, creates "ample opportunity for fraud and violation of members' privacy."

Examiner safety can also be threatened when they enter home-based credit unions, agency staff noted during the meeting. They recounted incidents in which examiners were bitten by dogs, denied the use of a restroom, or forced to work in other odd conditions as they complete their examinations.

NCUA board member Michael Fryzel was the lone dissenting vote on this proposal, and he questioned whether the Federal Credit Union Act gave the agency the authority to tell credit unions they must have commercial space.

Fryzel said requiring credit unions to operate out of a commercial space would not necessarily deter thieves. If somebody's going to steal they are going to steal regardless of whether the credit union is home based or in a big luxury building, he said. He also emphasized that many home-based or church-based credit unions do not want to grow. "In my opinion this is going to put a lot of them out of business if they need to get commercial space," Fryzel said.

The proposed rule was released for a 30-day comment period.

CUNA Urges Hill Action on 'Main Street' Patent Reform

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WASHINGTON (12/13/13)--Noting that the fight for patent litigation reform and demand letter relief "is truly a Main Street issue," the Credit Union National Association urged Senate lawmakers to protect businesses of all sizes from the "smash and grab tactics" employed by patent trolls.

In a letter to the Senate Committee on Commerce, Science and Transportation, CUNA and its consigners applauded ongoing bipartisan efforts in the U.S.  Congress to curb abusive patent litigation. The letter was sent to the committee's chairman, Sen. John Rockefeller (D-W.Va.),  and its ranking member, Sen. John Thune (R-S.D.),  as well as to the chairman of that panel's subcommittee on consumer protection, product safety, and insurance, Sen.  Claire McCaskill (D-Mo.) and the subcommittee's ranking member Dean Heller (R-Nev.).

The Innovation Act of 2013 (H.R. 3309), which would remove some of the financial incentives sought by firms that assert low-quality patents in the hope of quick settlements, was approved by the U.S. House last week on a 325 to 91 vote. It has moved on to the Senate.

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.

CUNA and others in the letter noted that "vague and misleading pre-litigation demand letters are at the very center of the patent troll problem. Many, if not most claims begin and end with a demand letter as companies quickly pay undeserved "licensing fees," to simply make the patent troll go away."

NCUA Approves Final Charitable Donation Account Rule

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ALEXANDRIA, Va. (12/13/13)--Credit unions will soon be permitted to invest in hybrid charitable and investment vehicles known as charitable donation accounts (CDAs) under a new regulation approved by the National Credit Union Administration on Thursday.

Specifically, the rule clarifies that federal credit unions are authorized to create and fund a CDA, a hybrid charitable and investment vehicle, as an activity incidental to the business for which the credit union is chartered, provided the account is primarily charitable in nature and meets other regulatory conditions to ensure safety and soundness.

"This innovative rule strikes the right balance to provide flexibility, but ensures that the majority of earnings received from the account will benefit charities and communities, rather than propping up a credit union's income statement," NCUA Chairman Debbie Matz said.

The rule includes a Credit Union National Association supported change that limits total investment in CDAs to 5% of the credit union's net worth for the duration of the account. The proposed version of this rule, released in September, set this limit at 3%.

A minimum of 51% of the total return from such an account would have to be distributed to one or more qualified charities. Distributions could be made to qualified charities no less frequently than every five years and when the account terminates.

CUNA Deputy General Counsel Mary Dunn noted that while the final rule made clear there is no requirement that a trust vehicle be used, if one is used the trustee must be regulated by the Office of the Comptroller of the Currency, the Securities and Exchange Commission, or other federal or state agency. "We will be talking more with NCUA about this," she said.

The final rule will become effective once it is published in the Federal Register.

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

CUNA-backed Senate Bill Introduced to Expand CU Access to FHLB System

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WASHINGTON (12/13/13)--Sens. Sherrod Brown (D-Ohio) and Rob Portman (R-Ohio) introduced bipartisan legislation Thursday intended to make it easier for privately insured credit unions to offer loans through the Federal Home Loan Bank (FHLB) system.
 
Currently, privately insured credit unions are unable to gain access to the FHLB system, which prevents them from receiving secured loans to make mortgage, small business, and other economic-development loans to their members.
 
Brown said that expanding the eligibility of the FHLB system to privately insured credit unions is long-overdue.  "By providing these financial intuitions with the ability to join the federal home loan bank system, we help these community institutions keep more local dollars invested in local communities."
 
The legislation is supported by the Credit Union National Association and the Ohio Credit Union League.
 
Brown and Portman said their legislation would provide more than 150 privately insured credit unions in nine states--including their own--access to additional forms of liquidity through membership in the FHLB system. The current prohibition on these institutions' participation stems from a 1989 statutory change that expanded FHLB membership only to commercial banks and federally insured credit unions.

The FHLB system is comprised nationally of 12 banks and more than 8,000 member institutions.

TCCUSF Oversight Budget, Mortgage Appraisal Exemptions Approved by NCUA

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ALEXANDRIA, Va. (12/13/13)--The 2014 Temporary Corporate Credit Union Stabilization Fund Oversight Budget will be just over $4.5 million, the National Credit Union Administration said at Thursday's open board meeting.

Technical changes to an agency rule on the corporate credit union rating system were also approved during the meeting, and board members heard a briefing on an interagency supplemental rule on appraisals for higher-priced mortgage loans.

The $4,525,000 budget represents a decrease of 26% from the oversight budget approved for 2013.

Credit unions will not be billed for this budget, and NCUA Chairman Debbie Matz said the budget will not change the agency's projected assessment for 2014. There will be no change in staffing as a result of the budget.

The funds will be used to cover certain corporate system resolution costs, including external valuation experts, tax consultants, attorneys, financial specialists and accountants.

In other budget news, Credit Union National Association Deputy General Counsel Mary Dunn noted that the average annualized travel spent per full time employee was $21,473 in 2013. While this was not an enumerated agenda item, the agency provides this and other financial highlights pertaining to its operating fund at each board meeting, she noted.

The technical amendments, which were swiftly approved on Thursday, make amendments to NCUA's regulations to reflect a recent policy change: In September 2013, the NCUA board adopted a policy change that converted the rating system for corporate credit unions from Corporate Risk Information System (CRIS) to CAMEL. The agency will evaluate corporate credit unions under the CAMEL system starting on Jan. 1.

The supplemental final rule on appraisals for higher-priced mortgage loans finalizes, with revisions, certain exemptions proposed in July 2013. Specifically, the proposal exempts from higher-priced mortgage loan appraisal requirements transactions secured by existing manufactured homes and not land; certain streamlined refinancings; and transactions of $25,000 or less.

CUNA generally supported the proposal.

For the full interagency proposal and more on the NCUA board meeting, use the resource link.

Budget Deal Good for CU Legislation: CUNA

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WASHINGTON (12/13/13)--One of the best things about the advancement of a two-year bipartisan budget deal, said Credit Union National Association Executive Vice President of Government Affairs John Magill late Thursday, is "a Congress not distracted by shutdowns is more likely to advance legislation benefitting credit unions, such as CUNA-backed relief from patent trolls, privacy act modifications and IOLTA legislation." IOLTA refers to Interest on Lawyers Trust Accounts.

It was widely reported last night that the House passed a two-year budget deal by 332-94, which dramatically reduced the likelihood of another government shutdown in 2014.

Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) crafted the agreement. It sets discretionary spending at more than $1 trillion for the next two fiscal years. It also attempts to offset the impact of broad spending cuts-called sequestration--that went into effect in March (The New York TimesDec. 12).

"A shutdown government," Magill said, "cannot move forward on important relief measures for credit unions." He added this caution, however: "At the same time, we have to remain ever watchful of any movement on the tax front that could threaten the credit union tax status."

NCUA Takes Bagumbayan CU Under Conservatorship

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 ALEXANDRIA, Va. (12/13/13)--The National Credit Union Administration and Illinois Department of Financial and Professional Regulation have assumed control of service and operations at Bagumbayan CU, Chicago.

Great Lakes CU, North Chicago, and the NCUA will manage the credit union as the NCUA works to resolve issues affecting the institution's safety and soundness. Normal member services will continue uninterrupted, the NCUA said.

Bagumbayan CU is the fifth federally insured credit union placed into conservatorship this year.

The conservatorship follows an October cease and desist order. In that order, the agency requested that the credit union not allow unapproved officials to attend board meetings or perform managerial and operational functions, resolve recordkeeping issues and Bank Secrecy Act violations, and correct other issues.

The NCUA said it has not made decisions about the long-term future of the credit union. Continued credit union service for the members, however, is a priority, the agency said.

Bagumbayan CU was chartered in 1964, has assets of $55,140 and currently serves 44 members, according to the credit union's most recent Call Report.

NEW: CUNA-backed Senate Bill Introduced to Expand CU Access to FHLB System

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WASHINGTON (12/12/13)--Sens. Sherrod Brown (D-Ohio) and Rob Portman (R-Ohio) introduced bipartisan legislation today intended to make it easier for privately insured credit unions to offer loans through the Federal Home Loan Bank (FHLB) system.
 
Currently, privately insured credit unions are unable to gain access to the FHLB system, which prevents them from receiving secured loans to make mortgage, small business, and other economic-development loans to their members.
 
Brown said that expanding the eligibility of the FHLB system to privately insured credit unions is long-overdue.  "By providing these financial intuitions with the ability to join the federal home loan bank system, we help these community institutions keep more local dollars invested in local communities."
 
The legislation is supported by the Credit Union National Association and the Ohio Credit Union League.
 
Brown and Portman said their legislation would provide more than 150 privately insured credit unions in nine states--including their own--access to additional forms of liquidity through membership in the FHLB system. The current prohibition on these institutions' participation stems from a 1989 statutory change that expanded FHLB membership only to commercial banks and federally insured credit unions.

The FHLB system is comprised nationally of 12 banks and more than 8,000 member institutions.

NEW: NCUA Approves Final Charitable Donation Account Rule

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ALEXANDRIA, Va. (12/12/13, UPDATED: 11:25 A.M. ET)--A final rule on charitable donation accounts has been approved at this morning's just-concluded National Credit Union Administration open board meeting.
 
Under the final rule, credit unions will be permitted to invest in hybrid charitable and investment vehicles known as charitable donation accounts (CDAs). These CDAs will allow federal credit unions to make investments that are otherwise prohibited, provided that the proceeds are primarily for charitable purposes.
 
The rule includes a Credit Union National Association supported change that limits total investment in CDAs to 5% of the credit union's net worth for the duration of the account. A minimum of 51% of the total return from such an account would have to be distributed to one or more qualified charities. Distributions could be made to qualified charities no less frequently than every five years and when the account terminates.
 
CUNA Deputy General Counsel Mary Dunn noted that while the final rule made clear there is no requirement that a trust vehicle be used for investments, CUNA continues to have questions regarding regulatory oversight should a trust vehicle be used. "We will be talking more with NCUA about this," she said.

CUs, FIs Get Social Media Guidance

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WASHINGTON (12/12/13)--Noting that social media use can impact a financial institution's risk profile, the National Credit Union Administration and its Federal Financial Institutions Examination Council partners released guidance addressing social media policy. It explores how consumer protection and compliance laws, regulations, and policies could be applied to the use of online social media platforms by financial institutions.

A financial institution, the FFIEC wrote, "should have a risk management program that allows it to identify, measure, monitor, and control the risks related to social media." The FFIEC said the size and complexity of such a program should be commensurate with the breadth of the financial institution's involvement in this medium.

Compliance, technology, information security, legal, human resources, and marketing specialists can all contribute to the development of the plan, and financial institutions should also provide guidance and training for employee official use of social media, the FFIEC said.

According to the guidance, components of a risk management program should include:
  • A clear governance structure;
  • Policies and procedures for the use and monitoring of social media;
  • Rules to ensure social media use complies with all applicable consumer protection laws and regulations;
  • An employee training program that incorporates the institution's policies and procedures for official, work-related use of social media, and potentially for other uses of social media, including defining impermissible activities;
  • An oversight process for monitoring information posted to proprietary social media sites;
  • Audit and compliance functions; and
  • Parameters for providing appropriate reporting to the financial institution's board of directors or senior management that enable periodic evaluation of the effectiveness of the social media program and whether the program is achieving its stated objectives.
The FFIEC was formed in 1978 to promote uniformity in financial institution regulation. In addition to the NCUA, the council is comprised of the heads of the Federal Reserve Board, the Federal Deposit Insurance Corp., the Comptroller of the Currency,  and the Consumer Financial Protection Bureau.

For the full FFIEC guidance, use the resource link.

CUNA Seeks CU Payment Risk Comment

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WASHINGTON (12/12/13)--Proposed changes to the Federal Reserve Board's Payment System Risk (PSR) Policy, and related changes to Regulation J, could impact credit union operations, payments processing, and account management with Fed Banks, and the Credit Union National Association is seeking credit union comments on these changes.

The PSR changes are intended to align current operations and processing times with the PSR posting rules, account for technology and processing changes, and strategically position the rules for faster clearing and settlement in the future, according to the Fed. Specifically, under the proposed PSR changes, the posting times for automated clearing house (ACH) debit and commercial check transactions would be earlier, CUNA noted in this week's Regulatory Advocacy Report.

The Fed proposal would also:
  • Move the posting of ACH debits processed by the Fed Banks' FedACH service overnight to 8:30 a.m. (ET) from 11 a.m. (ET) to align with the posting of ACH credits; and
  • Move the posting time for receiving most commercial check credits for deposits and debits for presentments to 8:30 a.m. (ET) and establish two other posting times of 1 p.m. (ET) and 5:30 p.m. (ET), and make other related changes. Currently, the posting times do not begin crediting or debiting for checks deposited and presented until 11:00 a.m. (ET).
Credit unions can provide CUNA with comment until Jan. 13. The Fed will accept comments within 60 days from the date of publication in the Federal Register, which is expected shortly.

CUNA will review these proposals with its Payments Policy Subcommittee, CUNA Deputy General Counsel Mary Dunn said.

Other issues addressed in the Regulatory Advocacy Report include:
  • Details from the Consumer Financial Protection Bureau's fall 2013 rulemaking agenda;
  • A preview of this week's National Credit Union Administration open board meeting;
  • A CFPB move to supervise certain nonbank student loan servicers; and
  • Highlights from the CFPB's annual ombudsman report.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link.

In Flood Insurance Rules, Consider Reg Burden: CUNA

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WASHINGTON (12/12/13)--Federal regulators should be mindful of placing additional burdens on credit unions as they develop regulations that would implement provisions in the Biggert-Waters Flood Insurance Reform Act of 2012 that require a lending institution to accept private flood insurance, the Credit Union National Association said this week.

The CUNA comments follow the October release of a joint agency proposal co-signed by the National Credit Union Administration, the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

The joint agency proposal would also require that regulated lending institutions satisfy mandatory purchase requirements outlined in that bill. The proposal would impose new escrow rules, create new and revised sample notice forms and clauses, and outline the circumstances under which a lender must terminate force-placed flood insurance coverage and refund payments to a borrower.

In the CUNA letter, Deputy General Counsel Mary Dunn requested that the agencies extend compliance dates or provide waivers when an institution is unable to meet a compliance date due to circumstances beyond its control.

Dunn said CUNA supports the private flood insurance provision in the proposal, but noted it should be at a lender's discretion whether to accept this insurance. Further, state insurance regulators should be required to provide documentation similar to what is required for statutory private insurance, she wrote.

CUNA also supports the proposed escrow requirements, but also requested additional clarification for home equity lines of credit and other second liens, which CUNA believes should not be covered. The comment letter also asked regulators to compare escrow requirement exceptions contained in the Biggert-Waters Act with Regulation Z to ensure consistency.

"We are concerned that the proposal complicates the new statutory escrow exception by creating multiple escrow schemes under which credit unions will be required to establish escrow accounts for flood insurance but possibly not for taxes and other related items," Dunn wrote.

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

Hensarling Announces Intensified Fed Reserve Scrutiny for 2014

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WASHINGTON (12/12/13)--What does the Federal Reserve get for its 100th birthday later this month?  Intense oversight.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Monetary Policy and Trade Subcommittee Chairman John Campbell (R-Calif.) Wednesday announced the "Federal Reserve Centennial Oversight Project" for 2014, calling it an "aggressive series of hearings…that will culminate with the development of legislation to reform how the nation's central bank operates."

Hensarling said his panel will "intensify and amplify" its oversight started in 2013 through a series of five hearings on the Fed and its conduct of monetary policy during.
 
"The Federal Reserve Centennial Oversight Project will be the most vigorous and sustained assessment and evaluation the Fed has received in its history," Hensarling said. "Our committee has an obligation to carefully scrutinize the Federal Reserve's decisions, especially since the Fed has either implicitly or explicitly assumed so many mandates and has, historically, been subject to little or no congressional oversight."

In addition to hearings, the oversight project will include: Research to examine a number of areas, including the Fed's multiple mandates; its role in the growth of the national debt; the central bank's accountability and transparency; the lines between monetary and fiscal policy; the Federal Reserve's independence; its role as lender of last resort; and the impact the Fed's monetary policy has on seniors and those nearing retirement.


 

NCUA Charitable Donation Rule to Be Finalized Today

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ALEXANDRIA, Va. (12/12/13)--A charitable donation account final rule will be the top item of interest when the National Credit Union Administration holds its last open meeting of 2013 today.

Other items on today's open board meeting agenda include:
  • A board briefing on a supplemental interagency rule on appraisals for higher-priced mortgage loans;
  • A final rule that will make technical amendments to the corporate credit union rating system;
  • The 2014 Temporary Corporate Credit Union Stabilization Fund oversight budget; and
  • A proposed rule addressing requirements for federal credit union examination sites.
The meeting is scheduled to begin at 10 a.m. (ET). Watch News Now for coverage.

Supervisory activities, personnel issues and an appeal under Part 701.14(e) and Part 747, Subpart J of the NCUA's Rules and Regulations are on the closed board meeting agenda.

Parts 701.14 and 747 of NCUA regulations address senior executive officer changes.

For the full agenda, use the resource link.

HUD Releases Its QM Final Rule

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WASHINGTON (12/12/13)--A final rule that sets the definition of "qualified mortgage" (QM) for single-family residential mortgage loans was released by the U.S. Department of Housing and Urban Development Wednesday.

The rule was published in the Federal Register. HUD was required under the Dodd-Frank Act to issue its own qualified mortgage rule, separate from the one issued earlier this year by the Consumer Financial Protection Bureau. The QM rule will replace the CFPB's QM definition for Federal Housing Administration loans or certain other HUD insured loans.

The HUD definition is similar to the CFPB definition, with some distinct differences. For instance, HUD's rule does not have a debt-to-income ratio requirement. The HUD rule also:
  • Requires FHA streamlined refinances to comply with the rule;
  • Modifies the CFPB's rebuttable presumption standard to clarify that a presumption is rebutted if the lender does not meet the underwriting requirements applicable to the transaction;
  • Maintains the existing regulatory structure for FHA-insured single-family mortgage programs for purposes of defining qualified mortgages, but augment these programs with certain features;
  • Defines all FHA-insured single-family mortgages to be qualified mortgages, except reverse mortgages insured under HUD's Home Equity Conversion Mortgage program; and
  • Incorporates safe harbor and rebuttable presumption standards.
The rule will become effective on Jan. 10, at the same time as the CFPB's QM rule takes effect, and will apply to mortgages with a case number assignment on or after that date.

Miller to Head NCUA Office of Continuity, Security Management

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ALEXANDRIA, Va. (12/12/13)--Joy Miller will serve as director of the National Credit Union Administration's new Office of Continuity and Security Management, starting Dec. 16.
 
The Office of Continuity and Security Management will focus on:
  • National continuity programs;
  • Emergency management and physical security;
  • Personnel security; and
  • Intelligence and information security. 
The office, which will begin its work on Jan. 6, will improve NCUA's security and continuity activities by consolidating operations in a single office. The office will also enhance the effective use of sensitive information among the agency's staff, the agency said in a release.

NCUA Chairman Debbie Matz stressed the agency reallocated existing resources to create the new office.

Miller currently serves as deputy assistant secretary for security at the U.S. Department of Health and Human Services. She has also served as senior advisor for global health security at the National Intelligence Council, as chief scientist at the National Center for Medical Intelligence, as division chief and senior intelligence officer at the Defense Intelligence Agency, and as senior public health officer in the U.S. Air Force.

Miller follows James L.  Patrick, Jr., who is retiring as NCUA's Director of the Division of Strategic and Continuity Planning after 13 years with the agency and 45 years of government service.

NEW: NCUA TCCUSF Oversight Budget Is $4.5M

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ALEXANDRIA, Va. (12/12/13, UPDATED: 10:25 A.M. ET)--The 2014 Temporary Corporate Credit Union Stabilization Fund Oversight Budget will be just over $4.5 million, the National Credit Union Administration said at this morning's open board meeting.

The $4,525,000 budget represents a decrease of 26% from the oversight budget approved for 2013.

Credit unions will not be billed for this budget, and NCUA Chairman Debbie Matz said the budget will not change the agency's projected assessment for 2014. There will be no change in staffing as a result of the budget.

The funds will be used to cover certain corporate system resolution costs, including external valuation experts, tax consultants, attorneys, financial specialists and accountants.

Watch News Now for more on the ongoing board meeting.

CompBlog Wrap-Up Preps CUs for Mortgage Reg Compliance

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WASHINGTON (12/10/13)--As credit unions prepare to comply with pending Consumer Financial Protection Bureau mortgage regulations, the Credit Union National Association continues to answer key questions: CUNA staff addressed one credit union's concern about semi-monthly payments, and provided general details on changes to mortgage loan originator (MLO) regulations and disclosure changes in this month's  CompBlog Wrap-Up.
 
First, the credit union query: How can a credit union comply with the periodic statement requirements in the CFPB's Mortgage Servicing final rule if it permits members, as a courtesy, to make semi-monthly payments on certain mortgage loans?
 
The answer is simple: CUNA compliance staff noted that credit unions may still issue one monthly statement covering the entire month or may decide to issue statements that reflect the semi-monthly payments in situations where the legal obligation requires a monthly payment, but semi-monthly payments are permitted for the convenience of the member. More details, as spelled out in the rule itself, are provided in the Wrap-Up.
 
Up next, CUNA provides a refresher on MLO regulations: The Wrap-Up details how credit unions can determine whether potential loan originators are qualified for the job, and what credit unions can do to ensure that MLOs receive appropriate training in connection with offering closed-end consumer credit transactions secured by a dwelling.
 
Outlines of the CFPB's integrated Truth in Lending Act and Real Estate Settlement Procedures Act disclosures, which were released last month, are also included in the Wrap-Up.
 
The Wrap-Up also lays out five things credit unions must know about the homeownership counseling list requirement included in the new CFPB mortgage rules, and provides information on the National Credit Union Administration's new fixed assets rule and supervisory letter on enterprise risk management.

And, as it does every month, the CompBlogUp 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 link.

Medical Niche Credit Card Ordered to Refund $34M to Consumers

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WASHINGTON (12/11/13)--A credit card issuer big in the niche market of credit card enrollments at doctors' and dentists' offices around the country is being ordered by the Consumer Financial Protection Bureau to refund up to $34.1 million to consumers because of alleged deceptive enrollment tactics.
 
The CFPB announcement Tuesday said GE Capital Retail Bank through its subsidiary, CareCredit, has been engaged in "harmful consumer practices" since January 2009 and that the bureau came to the case after receiving substantial complaints from consumers. 
 
CareCredit, according to the CFPB, is offered by more than 175,000 enrolled providers across the country.  Receptionists, office managers, and office staff sell it to patients when they are paying for their medical care, waiting to see the doctor or dentist, or sometimes in between treatments. 
 
"Our investigation showed that many patients thought they were signing up for an interest-free loan.  Or they may have thought they were signing up for an in-house payment plan with their doctor.  But the card was really a 'no interest if paid in full' product that is a much trickier deal," CFPB Director Richard Cordray said. "While the arrangement guarantees that the health-care provider gets paid, patients sometimes end up with huge credit card bills they cannot afford."
 
The CFPB estimates that more than 1.2 million consumers were wronged and could be eligible for money from the reimbursement fund. In the future, CareCredit will be required to be more transparent to consumers about its product.
 
Cordray said, "When people seek medical care, they are in a particularly vulnerable situation….So it is particularly important that a credit card company offering personal lines of credit to pay for health care is doing everything to the letter of the law--that they are treating people fairly, with dignity, and with the utmost transparency."

FDIC Provides More on Its Big Firm Resolution Plan

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WASHINGTON (12/11/13)--The Federal Deposit Insurance Corp.  (FDIC) announced Tuesday that it is publishing its Single Point of Entry (SPOE) strategy for the resolution of Systemically Important Financial Institutions (SIFIs) in the Federal Register with request for comment.
 
Under the Dodd-Frank Act, the FDIC is charged with resolving a SIFI in a manner that holds accountable the owners and management responsible for the failure of the company while maintaining the stability of the U.S. financial system. The FDIC explain in it announcement that creditors and shareholders must bear the losses of the financial company in accordance with statutory priorities and without imposing a cost on U.S. taxpayers.
 
The agency's resolution strategy was developed after consultation with public and private sector stakeholders and Tuesday's action is intended to seek further public comment.
 
"The FDIC has provided greater detail on how it envisions the implementation of various aspects of this strategy including such key issues such as capital, liquidity, governance and restructuring. The FDIC looks forward to detailed public comment to further inform our resolution strategy planning," FDIC Chairman Martin Gruenberg said in a release.
 
The FDIC's Advisory Committee on Systemic Resolution is scheduled to meet today.
 
Also on Tuesday, the FDIC was scheduled to consider a joint rule, along with other agencies, that would implement the Dodd-Frank ban on banks' proprietary trading, known as the Volcker Rule.
 
Use the resource link to access more information on both rules.

NCUA Guidance Clarifies Supervisory Expectations on Private Student Loans

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ALEXANDRIA, Va. (12/10/13)--The National Credit Union Administration Monday released  a supervisory Letter to Credit Unions (13-CU-15) intended to clarify the regulators' expectations about direct and indirect private student loan (PSL) products.
 
The NCUA noted it has observed steady growth in the PSL market since the agency began collecting Call Report data on them in December 2011. "PSLs are unlike other consumer-based loan products, and it is critical that credit unions have sound processes and controls in place to address their unique characteristics and risks," the agency said in an introduction to the letter.
 
The guidance addresses unique issues with PSLs, such as:
  • The postponement of repayment;
  • The fact that borrowers often have little credit history;
  • That repayment is often dependent on future employment; and,
  • That PSLs are often structured as a line of credit that is converted to a closed-end line.
Credit Union National Association Deputy General Counsel Mary Dunn said Monday that the guidance is well done and should be helpful to examiners and credit unions that provide private student loans to their members. 
 
For instance, she noted that Appendix A of the letter specifically addresses the differences between private and federal student loans. "This should be helpful because credit unions experiencing problems with their examiner's understanding of their private student loan programs often indicate the examiner failed to distinguish between PSLs and federally guaranteed SLs," Dunn said.
 
However, Dunn added that the guidance may nonetheless result in continued concerns that CUNA and the leagues will want to monitor with affected credit unions and the CUNA Lending Council. 
 
For example, the guidance directs examiners to consider whether the credit union's methodology for funding its Allowance for Loan and Lease Losses (ALLL) has fully considered relevant PSL default rate trends.  The way in which credit unions fund their ALLLs is an ongoing issue for many credit unions and whether the ALLL properly reflects PSL risks may remain an issue even after this guidance.
 
"Another issue is that examiners are directed to consider factors, such as concentrations of loans involving one school, that could have a broad impact on a PSL program. While such concerns may be fully appropriate in most circumstances, credit unions should have flexibility to extend loans that have a higher risk profile when the credit union can manage the risk," Dunn noted. 
 
Nonetheless, she added, the guidance acknowledges that PSLs can be an important loan product for credit unions that can handle the risks, have a strong asset liability management program, develop and maintain appropriate loan policies, engage in sound underwriting, and implement effective collection practices.

Senators Vote 57-41 for Watt as FHFA Leader

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WASHINGTON (12/11/13)--Rep. Mel Watt (D-N.C.) has been confirmed by a 57 to 41 vote in the U.S. Senate to become the director of the Federal Housing Finance Agency.
 
Earlier in the day, the Senate approved a series of procedural votes that cleared the way for the final approval of Watt's nomination.
 
The Obama administration's success in getting its nominee for FHFA director through the confirmation process owes a nod to the recent changes in the Senate's filibuster rules. 
 
The chamber voted a reported 57 to 49 to move Obama's FHFA choice forward. Prior to the filibuster rule changes, it would have required 60 votes to move ahead—a near impossibility in Watt's case where support and opposition were clearly delineated along party lines.
 
Watt was nominated by President Barack Obama in May. Watt has served in the U.S. Congress since 1992, and is a veteran member of the House Financial Services Committee. If confirmed by the Senate, he would replace FHFA Acting Director Edward DeMarco, who has led that agency since Sept. 1, 2009.

Senator Asks FTC to Investigate Payday Lender Lead Generators

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WASHINGTON (12/10/13)--Sen. Edward Markey (D-Mass.) has requested that the Federal Trade Commission investigate websites operating as "lead generators" for payday lenders.

Markey in a release noted that the lead generator sites collect personal data such as account numbers, social security numbers and routing numbers from consumers and provide that information to predatory lenders, without consumer consent or knowledge. Many consumers provide this information when they seek short-term loans. Once their information is passed on by lead generators, they may receive several unwanted loan offers.

"These business practices raise a number of concerns about what these lead generator websites do with consumers' personal information, whether they store and secure it and whether these websites sell this personal information without consumers' knowledge or consent," Markey said in a letter to FTC Chairwoman Edith Ramirez.

The Consumer Financial Protection Bureau in early November began accepting complaints on payday lenders. The Credit Union National Association praised the move, and maintains the agency should focus more attention on unregulated entities (News Now Nov. 7).

CUNA remains concerned that the agency not over-regulate in this area, and inadvertently put credit union alternatives out of commission for those members who need this service.

Under federal rules, credit unions are allowed to make short-term, small-amount loans with an annual interest rate of no more than 18%, with some exceptions. Under National Credit Union Administration guidelines, federally chartered credit unions are allowed to charge no more than 10 percentage points above the established usury ceiling--currently, the statutory maximum is 28%. 

Most credit unions that offer alternatives to conventional payday loans also limit fees, encourage members to open savings accounts and provide financial counseling.

FSOC Puts Spotlight on Cybersecurity Legislation

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WASHINGTON (12/10/13)--The Financial Stability Oversight Council (FSOC) met in open session Monday to discuss cybersecurity, as well as to receive a presentation from the Office of Financial Research on financial market developments, among other things.
 
Politico reported that officials from the U.S. Treasury Department told FSOC members that there is a significant need for cybersecurity legislation that goes beyond the Obama administration's executive order on "critical infrastructure" cybersecurity.  That order, when issued, incorporated some changes suggested by the Credit Union National Association to the agency. Cybersecurity legislation is supported by CUNA, and widely across the financial services industry.

Politico reported that a Treasury official said at the FSOC meeting that although work under the Executive Order is vital, it is not a substitute for legislation and that the administration hopes to work with Congress to keep laws apace with evolving cyber threats.

The National Credit Union Administration is an FSOC member.

New Monthly CUNA Webcast Keeps CUs Updated on Congress

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WASHINGTON (12/10/13)--This month, the Credit Union National Association debuts yet another tool to help keep credit unions up to speed on the latest developments from the U.S. Congress: CUNA's Legislative Affairs audio webcast.

The first 15-minute webcast has been posted to the CUNA.org site and is hosted by CUNA Senior Vice President of Legislative Affairs Ryan Donovan. It addresses the ongoing threats to the credit union tax status and how they can be combatted. Other topics in the audio webcast include:
  • The level of productivity of the U.S. Congress through October of this year;
  • The late 2013 and early 2014 congressional agenda;
  • The outlook for housing finance reform;
  • Regulatory relief measures that could help credit unions; and
  • Advice on how credit unions can advocate their priorities as they meet with members of Congress.
CUNA legislative staff will update the audio webcast on a monthly basis.

"The webcasts will be a valuable tool for credit unions, and can be played at board meetings, and used as pre-Governmental Affairs Conference and Hike the Hill briefing materials," Donovan said.

The next webcast will be offered as Congress returns for the second session of the 113th Congress. A February webcast will focus on GAC preparation.

To listen to this month's audio webcast, use the resource link.

Inspector General: Aggressive Agency Audits, Board Oversight Could Have Helped G.I.C. FCU

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WASHINGTON (12/10/13)--The systemic losses created by the failure of G.I.C. FCU, Euclid, Ohio, could have been mitigated with more aggressive National Credit Union Administration oversight, the NCUA Office of the Inspector General (OIG) wrote in a recent material loss review.

G.I.C. FCU served 3,476 members and had assets of approximately $15.5 million before it was closed in December 2012. The agency said it liquidated the credit union after determining it was insolvent and had no prospect for restoring viable operations.

The OIG material loss review reported that G.I.C. FCU failed due to an overstatement of $8.1 million in assets, primarily investments in certificates of deposit and cash, allegedly due to fraud.

Questionable management integrity and performance, weak supervisory committee oversight and weak board oversight "created an environment in which assets could be vastly overstated," the review said. Specifically, the review found that:
  • G.I.C. FCU senior management displayed a lack of integrity and did not manage the credit union in the best interest of its members;
  • The credit union's supervisory committee failed to obtain supervisory committee audits for fiscal years 2009, 2010, and 2011; and
  • G.I.C. FCU's board failed to keep complete and accurate minutes, did not to obtain board packets with information sufficient to execute its duties, and did not act as control over the supervisory committee by providing a forum for receiving the audit report and minutes of the Committee meetings.
The above issues could have been detected, and losses could have been prevented, if the NCUA had been more aggressive in requiring the completion of supervisory committee audits, confirmed account balances directly with institutions, and addressed risks related to supervisory committee and board of director failures, the OIG wrote in the review.

To prevent similar situations in the future, the NCUA OIG recommended the agency:
  • Reinforce certain policies and procedures to ensure examiners document, communicate, and follow-up on incomplete or otherwise unacceptable external auditor reports;
  • Revise policies and procedures to require that examiners gain an understanding through direct communication with external auditors of procedures performed to verify account balances, specifically the cash, investments, brokered CD's, and member accounts;
  • Consider requiring examiners to obtain audit reports directly from independent auditors rather than receiving them from credit union management to avoid potential manipulation; and
  • Revise examination guidelines to include a step requiring examiners to obtain independent verification of significant balances (e.g., greater than 10% of total assets) directly from third parties.
For the full material loss review, use the resource link.

As Adjournment Approaches, Congress Moves to Complete Work

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WASHINGTON (12/10/13)--With a scheduled adjournment approaching at the end of the week, Congress will race to wrap up unfinished business this week, which could include the confirmation of Rep. Mel Watt (D-N.C.) to lead the Federal Housing Finance Agency.

Conference reports on the Farm bill, the Defense bill and the budget could be considered before the House adjourns on Thursday or Friday of this week. The Senate may consider these bills as well. Also in the Senate, votes on pending judicial nominations are scheduled to be held.

Consideration of the defense authorization bill could also take place, and CUNA Senior Vice President of Legislative Affairs Ryan Donovan said CUNA is following that bill closely "because of its history of being an incubator, of sorts, for financial services policy."

Hearings scheduled for this week include:
  • A Tuesday Senate Finance Committee hearing on John Koskinen's nomination to oversee the U.S. Internal Revenue Service;
  • A Tuesday Senate Banking Committee hearing entitled "Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System.";
  • A Tuesday House Energy and Commerce manufacturing and trade subcommittee hearing on the state of online gaming and the Internet Poker Freedom Act (H.R. 2666). H.R. 2666 would establish a program for the licensing of Internet poker by States and federally recognized Indian tribes;
  • A Wednesday House Financial Services Committee hearing on international finance, during which U.S. Treasury Secretary Jack Lew will testify;
  • A Wednesday Senate Banking Committee hearing on rebuilding American manufacturing; and
  • A Thursday House Financial Services Committee hearing entitled "Rethinking the Federal Reserve's Many Mandates on Its 100-Year Anniversary."
When the House goes out this week, it is expected to adjourn until Jan. 6. The Senate has not announced an adjournment date, and may be in session next week.

CUNA has also released a new webcast to help credit unions keep track of Congress. For more on the webcast, see News Now story: New Monthly CUNA Webcast Keeps CUs Updated On Congress.

ACLU Suit Seeks FHFA Eminent Domain Details

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WASHINGTON (12/9/13)--The American Civil Liberties Union and the Center for Popular Democracy last week filed suit against the Federal Housing Finance Agency, seeking information on that agency's financial industry ties and its alleged "efforts to block municipalities from using eminent domain to prevent foreclosures."

The suit, which was brought under the Freedom of Information Act, was filed in the U.S. District Court for the Northern District of California.

The city of Richmond, Calif., this summer sent notice to holders of more than 620 mortgages, asking them to sell their loans to the city for 80% of the homes' fair value. The city then would write them down, and help the homeowners refinance their loans. If the offers aren't accepted, the city said it would use eminent domain to seize the loans at a value determined by a court.

Following these notices, the FHFA and Freddie Mac said they were considering taking legal action against the city of Richmond. The FHFA has expressed concern that losses resulting from such programs would ultimately be paid for by taxpayers.

The Credit Union National Association supports a broad range of programs to assist struggling homeowners and their communities, but believes that "using the power of eminent domain in this manner would harm our nation's housing markets and the very communities it is intended to help."

MBL Cap Increase Would Boost Small Biz Cash Access, CUNA Says

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WASHINGTON (12/9/13)--Credit unions share the U.S. House Small Business Committee's goal of increasing small business access to capital through the reduction of statutory and regulatory impediments. The Credit Union National Association suggested several ways that access could be improved, including increasing the member business lending cap, in a letter sent to committee members last week.

The letter was sent for the record of a Small Business subcommittee on economic growth, tax and capital access hearing entitled "Where Are We Now? Examining the Post-Recession Small Business Lending Environment."

In the letter, CUNA noted that "businesses want and need access to capital, but are experiencing difficulty and frustration when they approach their financial institution and discover that capital is not easily accessible, even if the business is successful."

Credit unions, CUNA said, "are well capitalized and exist to serve the financial needs of their members...Allowing the free market to function by removing the restrictions on the business lending portfolios of credit unions, will inject more capital in the market place and encourage growth in businesses and the communities in which they operate."

The letter spoke in support of the Credit Union Small Business Jobs Creation Act (H.R. 688), which would increase the MBL cap from 12.25% of assets to 27.5%. CUNA has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

"The bank lobby opposes this bill because they oppose credit unions; their arguments are without merit. The bill will not endanger the small banks in your community; the bill will not alter the nature or focus of credit unions; the bill is not inconsistent with the credit union mission or the purpose of their tax status," CUNA wrote.

Other suggestions for improving capital access include:
  • Treating non-owner occupied one to four family dwelling loans as real estate loans;
  • Increasing the de minimis credit union business loan amount to $500,000;
  • Encouraging small business development in underserved, urban and rural communities;
  • Excluding MBLs made to non-profit religious organizations from the MBL cap;
  • Fully exempting government guaranteed business loans from the MBL cap;
  • Enabling full credit union participation in the U.S. Small Business Administration's Section 504 program; and
  • Reducing the loan loss reserve requirement of the SBA's microloan program.
For the full CUNA letter, use the resource link.

Cheney Report: CUs' Vigilance Against Tax Attacks Must Include State Actions

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WASHINGTON (12/9/13)--While tax reform talk may soon subside in Washington over the holiday break, Credit Union National Association President/CEO Bill Cheney said credit unions must remain vigilant, as "attacks on our tax status in the states show no sign of letting up."

In this week's edition of The Cheney Report, Cheney noted that House Ways and Means Committee Chairman Dave Camp (R-Mich.) last week told reporters that tax legislation is unlikely to emerge from his committee before year's end, and that he would likely hold off unveiling a tax reform bill until February or March. CUNA Senior Vice President of Legislative Affairs Ryan Donovan said both parties agree on the need for tax reform, "but when you get down to the details, you see they are still pretty far apart." Republicans, Donovan said, oppose tax increases, but Democrats insist that new revenues are part of the discussion.

Cheney said the delay of federal tax proposals is "not stopping attacks by bankers in states such as South Dakota, which has been weekly fending off 'tax resolutions' against our tax status brought by bankers on a county-by-county basis."

In CUNA's view, the South Dakota attacks are part of a trend: Other threats have emerged in Illinois and in other states. One member of the House Ways and Means Committee, Rep. John Larson (D-Conn.), said "vigilance is eternal" in credit unions' campaign to maintain their tax status. Larson made his remarks in a video arranged by the Connecticut Credit Union League. (See Dec. 5 News Now story: Rep. Larson Urges CUs to Remain Vigilant in Tax Status Advocacy: Camp Says No Bill in 2013.)

CUNA continues to encourage credit unions to use CUNA and state credit union league resources, social media sites including Facebook, and micro-video site Vine, 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 ongoing tax talks.

This week's Cheney Report also includes:
  • The results of a recent House hearing on regulatory relief legislation;
  • A call for comments in CUNA's new exam survey; and
  • Details on CUNA's efforts to expand the compliance window for pending Consumer Financial Protection Bureau mortgage measures.
Use the resource link to read the latest in The Cheney Report.

CUNA's Schenk Discusses Economic Recovery in Wash. Post

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WASHINGTON (12/9/13)--The U.S. economy is "not all the way back to normal, but it's getting there," Credit Union National Association Vice President of Economics and Statistics Mike Schenk told The Washington Post last week.

Schenk's comments were incorporated into coverage on new U.S. Department of Labor numbers which show the U.S. economy added 203,000 jobs in November. The unemployment rate also fell to 7% during that month, and around 455,000 employees joined the workforce, the department reported.

"Given the headwinds in the federal government sector, it's pretty impressive overall," Schenk said. He noted he expects the economy to expand at a 3% rate in 2014.

Secretary of Labor Thomas Perez noted the November employment report continues the 45-month trend of private-sector job growth, with 8.1 million new jobs created over that time.

"In the last 12 months alone, American businesses have added 2.3 million new private-sector jobs. This puts the American economy in a strong position heading into the December holiday season," Perez said.

For the full Washington Post item, use the resource link.

Senate Banking Leaders Urge G-fees Stay Out of Budget Reconcilations

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WASHINGTON (12/6/13)--Credit risk guarantee fees charged by government-sponsored enterprises Fannie Mae and Freddie Mac must not be used as a potential revenue source during budget reconciliation talks, the leadership of the Senate Banking Committee urged the leaders of both the House and Senate Budget Committees Thursday.
 
"The guarantee fees are charged to cover losses in incurred by Fannie Mae and Freddie Mac," wrote Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho), of the banking committee.
 
"Each time they are increased and diverted for unrelated spending, homeowners are charged more for their mortgages and taxpayers are exposed to additional risk," the senators wrote Thursday.They added that each of the offsets makes reforming Fannie and Freddie more difficult because it increases the price tag of any legislation.
 
The Credit Union National Association also strongly opposes the use of the fees as a revenue source and has communicated that opposition in letters to federal lawmakers.CUNA has argued that guarantee fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from faulty loans. Increasing guarantee fees for other purposes effectively taxes potential homebuyers and consumers wishing to refinance their mortgages, CUNA has warned.
 
In the senators' letter, Johnson and Crapo noted that earlier this year an amendment, cosponsored by every member of the Senate banking panel, was included in the Senate Budget Resolution by unanimous consent.
 
"As you continue to negotiate an agreement on a budget, we urge you to uphold the intent of our bipartisan amendment and refrain from using guarantee fees as an offset," they concluded.
 
The letter was sent to Sens. Patty Murray (D-Wash.) and Jeff Sessions (R-Ala.) and to Reps. Paul Ryan (R-Wis.) and Chris Van Hollen (D-Md.).

Inbound Paypal Transfers Will Not Count Toward Remittance Rule Cap

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WASHINGTON (12/6/13)--Do credit unions need to add inbound PayPal transactions to the tally as they determine whether or not they will meet the 100 transfer threshold for coverage under new remittance regulations? No, the Credit Union National Association compliance team noted in a recent CUNA's Compliance Myths blog post on CompBlog.

A credit union does not have to count international automated clearinghouse transactions when it is the receiving depository institution, the CUNA post clarified.

One example highlighted in the blog post is an inbound PayPal transaction that debits a member's account. "Remember that the remittance transfer provider must be 'directly engaged with the sender to send a transfer of funds to a person in a foreign country," CUNA wrote. In this case, PayPal, not the credit union, is directly engaged with the sender as the originator of the ACH.

The Consumer Financial Protection Bureau has confirmed that this is a correct interpretation.

The CFPB's remittance rules, which became effective on Oct. 28, require financial institutions to provide consumers with prepayment and receipt disclosures that include the exchange rate, certain 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.

Credit unions will not be considered remittance transfer providers under the rule if:
  • They provided 100 or fewer remittance transfers in the previous calendar year; and
  • If they provide 100 or fewer remittance transfers in the current calendar year.
When tallying the 100, credit unions must count all the various types of remittance transfers covered by the rule together. However, transactions that do not count toward this 100 transfer total include:
  • Domestic wire/ACH transactions;
  • Transfers where the credit union is the recipient institution of the wire/ACH;
  • Debit card purchases from a merchant located in another country;
  • International transfers sent by businesses;
  • Prepaid cards purchased in the U.S. that are not delivered to a recipient abroad; and
  • Online bill payments to recipients located in another country where the agreement states that payments will be made solely by check, draft or similar instrument.
For more CompBlog compliance gems, use the resource link.

Final Charitable Donation Rule Leads Dec. NCUA Agenda

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ALEXANDRIA, Va. (12/6/13)--A final rule on charitable donation accounts will lead the day when the National Credit Union Administration holds its final open meeting of 2013 on Dec. 12.

The agency in September released a proposed rule that would permit credit unions to invest in hybrid charitable and investment vehicles known as charitable donation accounts (CDAs). These CDAs will allow federal credit unions to make investments that are otherwise prohibited, provided that the proceeds are primarily for charitable purposes.

The proposed rule would limit total investment in CDAs to 3% of the credit union's net worth for the duration of the accounts. A minimum of 51% of the total return from such an account would have to be distributed to one or more qualified charities. Distributions could be made to qualified charities no less frequently than every five years.

The Credit Union National Association approved of the NCUA proposal, which would "allow federal credit unions to do well by doing good." However, CUNA suggested some improvements that would facilitate credit union participation without raising safety and soundness concerns. Suggested changes included:
  • Making CDA disbursements on an annual basis;
  • Allowing corporate credit union to take part in CDAs; and
  • Allowing credit unions to recover their costs so that these do not impact the total investment return.
Other items on the December open board meeting agenda include:
  • A board briefing on a supplemental interagency rule on appraisals for higher-priced mortgage loans;
  • A final rule that will make technical amendments to the corporate credit union rating system;
  • The 2014 Temporary Corporate Credit Union Stabilization Fund oversight budget; and
  • A proposed rule addressing requirements for federal credit union examination sites.
The Thursday open meeting is scheduled to begin at 10 a.m. (ET).

Supervisory activities, personnel issues and an appeal under Part 701.14(e) and Part 747, Subpart J of the NCUA's Rules and Regulations are on the closed board meeting agenda.

Parts 701.14 and 747 of NCUA regulations address senior executive officer changes.

For the full agenda, use the resource link.

House Approves CUNA-Supported Patent Improvement Bill

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WASHINGTON (12/6/13)--The U.S. House's Thursday approval of The Innovation Act of 2013 (H.R. 3309) "is welcome news for credit unions who have become a target of patent trolls, particularly with regard to ATM and check processing technology," Credit Union National Association President/CEO Bill Cheney said.

The bill was approved by a 325 to 91 vote and will now move on to the Senate.

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 Thursday bill included several provisions important to credit unions, including language that gives the Patent and Trademark Office Director discretion to waive filing fees for Section 18 appeals. A CUNA-supported amendment that would require patent trolls to identify their parent entity when making a patent infringement claim was also included in the passed legislation.

Cheney said CUNA and credit unions appreciate the strong bipartisan vote. "This is welcome news for credit unions who have become a target of patent trolls, particularly with regard to ATM and check processing technology. The legislation is a strong step in the right direction, and we look forward to working with the Senate as they consider this issue," Cheney added.

CUNA and coalition partners on Wednesday supported H.R. 3309 in a letter sent to all House members. (See Dec. 5 News Now story: CUNA to House Leaders: Patent Bill Goes in 'Right Direction'.)

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'.)

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.

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.

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.

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%.

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.

NEW: Legislators, CUNA Witness Agree On Need For Reg Relief

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WASHINGTON (12/4/13, UPDATED: 1:45 P.M. ET)--Rose Bartolomucci, president/CEO of privately insured Towpath CU, Akron, Ohio, highlighted how regulatory compliance issues have hampered her credit unions' attempts to serve its 21,000 members at today's House Financial Services subcommittee on financial institutions and consumer credit hearing.

Bartolomucci testified on behalf of her credit union and the Credit Union National Association at the hearing, entitled "Examining Regulatory Relief Proposals for Community Financial Institutions."

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.

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.

Bartolomucci, who is also a former Ohio state credit union regulator, noted 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.

The credit union CEO also commented on allowing privately insured credit unions to join FHLB. Doing so 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.

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.

CFPB Expands Student Loan Oversight Authority

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WASHINGTON (12/4/13)--Oversight of student loan servicers will be expanded under a new Consumer Financial Protection Bureau-issued rule released Tuesday.

The bureau currently oversees student loan servicing at large banks. Under the new rule, CFPB oversight authority will be expanded to nonbank student loan servicers that manage more than one million federal or private loans. The CFPB will oversee these firms to ensure compliance with federal consumer financial laws.

Nonbank servicers who are not considered "larger participants" may still be subject to the bureau's supervisory authority if the bureau has reasonable cause to determine the servicer poses risk to consumers, CFPB added.

"Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules," CFPB Director Richard Cordray said. "This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers."

The CFPB said this new oversight regime will grant it the authority to oversee the seven largest student loan servicers and more than 49 million borrower accounts. The bureau noted this represents most of the activity in the student loan servicing market.
 
The CFPB has frequently noted the impact that student loan debt has on housing, small business ownership, retirement savings and rural communities. A comprehensive CFPB student debt report released this spring found that Americans hold approximately $1.1 trillion in outstanding student loan debt. One-in-five U.S. households have at least one resident that has taken out a student loan. The average outstanding student loan balance is $26,682. One-in-eight student loan borrowers owe more than $50,000, and 30% of all student loan borrowers are delinquent.

The Credit Union National Association has said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. CUNA has also formed a student loan working group to explore current issues related to credit unions' offering private student loans to members. The group is working to develop best practices for credit union student loans and to monitor CFPB and National Credit Union Administration student loan activities.

FinCEN Amends Funds Transfer, Transmittal of Funds Definitions

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WASHINGTON (12/4/13)--Technical amendments to the definitions of "funds transfer" and "transmittal of funds" under regulations implementing the Bank Secrecy Act (BSA) were approved by the Federal Reserve and the Financial Crimes Enforcement Network (FinCEN) this week.
 
The final rule adopts the amendments as proposed in November 2012, the Fed and FinCEN said. The changes maintain the current scope of funds transfers and transmittals of funds subject to BSA, are necessary in light of amendments to the Electronic Fund Transfer Act (EFTA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the agencies added.
 
Credit Union National Association Senior Director of Compliance Analysis Valerie Moss said that the BSA funds transfer regulations have always excluded from coverage funds transfers governed by the EFTA.

The Consumer Financial Protection Bureau's Regulation E remittance transfer regulation covers transactions that have traditionally been outside the scope of EFTA and Reg E, including consumer-initiated international wire transfers that were covered by BSA regulations.

"So, the BSA regulations had to be amended to maintain coverage of these types of transactions," she added.

For more on the amended definitions, use the resource link.

CUNA Witness Will Testify On Reg Burden Today

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WASHINGTON (12/4/13)--Credit union concerns regarding regulatory burden will be heard when Rose Bartolomucci, president/CEO of Towpath CU, a state-chartered, privately insured credit union in Akron, Ohio, testifies before the House Financial Services subcommittee on financial institutions and consumer credit today.

Bartolomucci is testifying on behalf of her credit union and the Credit Union National Association during the hearing, which is scheduled to begin at 10 A.M. (ET).

The hearing will focus on:
  • A bill to require federal financial regulators, including the National Credit Union Administration and Consumer Financial Protection Bureau, to assess whether proposed rules are duplicative or inconsistent with other federal rules, to take steps to address the duplication or inconsistency, and report to Congress within 60 days of issuing the rules;
  • A CUNA-supported bill that would permit privately insured credit unions to join a Federal Home Loan Bank; and
  • A bill that would adjust the CFPB's rural designation to align with the definition used by the U.S. Department of Agriculture.
Watch News Now for live coverage of today's hearing.

CUNA Examines CFPB Study On Bank Compliance Efforts

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WASHINGTON (12/4/13)--Credit unions may be interested in the results of a new regulatory burden study, despite the fact that they were not among the survey respondents. The Consumer Financial Protection Bureau study, which was released last week, is examined in this week's Credit Union National Association Regulatory Advocacy Report.

The CFPB study examined the operations of certain regulations for banks, in order to understand the day-to-day activities they perform to comply with regulations. The study focused on seven banks, with asset sizes from less than $1 billion to more than $100 billion. No credit unions were included in this study.

The study specifically focused on regulations that apply to retail checking accounts, savings accounts, debit cards, and overdraft services. More than 200 bank employees and executives were interviewed by the CFPB.

Through completion of the study, the CFPB said it hoped to:
  • Build knowledge about the extent and sources of compliance costs that may be associated with regulations that the bureau inherited;
  • Improve the bureau's and the public's abilities to describe and measure costs to comply with existing or potential new regulations; and
  • Refine the bureau's and the public's abilities to identify meaningful opportunities to reduce or avoid imposing unnecessary operational costs.
CUNA has urged the agency to consider the regulatory burdens and costs associated with each regulation that the bureau promulgates and that impacts credit unions. CUNA hopes the CFPB will consider cost implications for credit unions as part of such studies going forward, CUNA Deputy General Counsel Mary Dunn said.

Other issues addressed in the Regulatory Advocacy Report include:
  • The National Credit Union Administration's letter to credit unions on the new credit union service organization rule;
  • A CFPB action against a payday lender; and
  • The Federal Housing Finance Agency's announcement of 2014 loan limits.
A resource chart with information on current CUNA comment calls is also provided in the Report.

For this week's Regulatory Advocacy Report, CUNA members can use the resource link.

CU Activists Discuss 'Don't Tax' Campaign Involvement On Inside Exchange

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WASHINGTON (12/4/13)--With Congress entering its final weeks before the end of its first session, and talk of tax reform becoming more prevalent, credit union activism is more important than ever. In the latest edition of the Credit Union National Association's Inside Exchange, credit union activists tell CUNA's Paul Gentile how and why they became engaged with the "Don't Tax My Credit Union" campaign.

The Inside Exchange episode features executives and volunteers from credit unions discussing how they have encouraged their staffs and members in supporting the "Don't Tax" campaign. In particular, the credit union activists discuss with Gentile what's at stake for credit unions, how members are receiving the message, and some of the results they have seen.



CUNA and the leagues have set forth a revitalized push to engage credit unions in the campaign, including maintaining nearly constant contact with lawmakers. Since the campaign began in late May, more than 1.2 million contacts with lawmakers have already been made.

For more on Inside Exchange and Don't Tax My Credit Union advocacy efforts, use the resource links.

Exam Issues Will Be Emphasized In 2014, CFPB Ombudsman Says

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WASHINGTON (12/4/13)--The Consumer Financial Protection Bureau's Office of the Ombudsman in 2014 plans to shadow a bureau examination, and to visit a financial entity during work hours, to enhance its "ability to assist consumers and financial entities that contact the Ombudsman in the coming year."

In the CFPB Ombudsman's second annual report, the office of the ombudsman noted that financial institutions and related trade groups have brought exam concerns to the agency this year. Items highlighted include how a financial entity may elevate concerns about the examination and what may be expected during the examination lifecycle, at the end of the onsite, and at the end of the entire examination, the CFPB said.

The bureau is working to address these and other exam related issues, the ombudsman report noted.

Mortgage complaints and credit product complaints accounted for 55% and 21% of the complaints received by the ombudsman, respectively. Many consumers also had questions about what happened after they brought an issue with a given financial institution to the bureau. Others did not understand how the complaint process could assist on an individual consumer complaint, the ombudsman report said.

The report also contains ombudsman recommendations for the CFPB on how the bureau shares information and caller experiences with the CFPB contact center.

For the full CFPB ombudsman report, use the resource link.

NEW: Reg Burden A Real Threat For CUs, CUNA Tells Congress

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WASHINGTON (12/4/13, UPDATED: 10:25 A.M. ET)--"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 testimony before members of the House Financial Services subcommittee on financial institutions and consumer credit at a just-started hearing this morning.

Bartolomucci is testifying on behalf of the Credit Union National Association and her credit union at a hearing entitled "Examining Regulatory Relief Proposals for Community Financial Institutions."

"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.

A bill that would require the National Credit Union Administration, Consumer Financial Protection Bureau and other federal financial regulators to assess whether proposed rules are duplicative or inconsistent with other federal rules is one of today's agenda items.

The credit union CEO's testimony also commented on CUNA-supported legislation that would permit privately insured credit unions to join a Federal Home Loan Bank. "It has never seemed fair to our small institutions that some of the largest banks in the world, or insurance companies (which are not federally insured), or a foreign bank's U.S. subsidiary can borrow billions of dollars from the Federal Home Loan Bank System, but teachers in Ohio and Texas, firefighters in California, postal and county workers in Illinois and farmers in Indiana cannot...Can these privately insured credit unions engage in riskier activities than federally insured institutions? No. Is there a risk to the Federal Home Loan Bank System from this legislation? No...Will this change cause a significant number of credit unions to switch from federal to private insurance?  No," Bartolomucci said.

Bartolomucci also opined on a CUNA-supported 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. "The concern CUNA has with the definition in the current rule is that many credit unions make loans to those in rural communities, but the credit union itself may not be based in those communities. If the definition of "rural" does not change, these institutions will be limited in the types of products they can offer their members in these areas," she said.

Watch News Now for more on the hearing.

CUs Can Watch for Patent Bill, Reg Burden Hearing This Week

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WASHINGTON (12/3/13)--While the Senate remains out of session this week, the U.S. House and Credit Union National Association will be hard at work as a CUNA-supported patent bill is considered and a credit union witness testifies on regulatory burden.

The House is scheduled to consider the Innovation Act (H.R. 3309) and the Small Business Capital Access and Job Preservation Act (H.R.1105) this week.

H.R. 3309, which was introduced by Rep. Bob Goodlatte (R-Va.) in late October, would crack down on the so-called "trolls" who abuse the patent system by using low-quality patents to try to extract settlements from credit unions and other parties. CUNA supports the bill.

H.R. 1105 would provide a registration exemption for private equity fund advisors.

Rose Bartolomucci, president/CEO of Towpath CU, a state-chartered, privately insured credit union in Akron, Ohio, will discuss duplicative and inconsistent federal rules, and other credit union issues, before a Wednesday House Financial Services subcommittee on financial institutions and consumer credit hearing. The hearing is scheduled to begin at 10 a.m. (ET).

The hearing, entitled "Examining Regulatory Relief Proposals for Community Financial Institutions," will focus 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; 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.

A Tuesday House Judiciary regulatory reform, commercial and antitrust law subcommittee hearing entitled "The Bankruptcy Code and Financial Institution Insolvencies" has also been scheduled this week.

The Senate is scheduled to return to Washington on Dec. 9.

These and other valuable insights are provided each week in the CUNA Legislative Update.

NCUA: CU Loans, Members, Net Worth All Up in 2013 3Q

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ALEXANDRIA, Va. (12/3/13)--Federally insured credit unions are on the right course with loans, membership and net worth all increasing during the third quarter of 2013, National Credit Union Administration Chairman Debbie Matz said Monday, as the agency released its most recent trend data.

The total number of loans held by credit unions increased by 2.9% in the third quarter, continuing a trend that began in 2011. In total, credit unions held $631.5 billion in loans at the end of the quarter.

The Credit Union National Association's monthly numbers, released on Monday, showed similarly positive results. (See News Now story: CUNA Monthly Estimates Show Loan, Savings Increases.)

"The strong loan growth, at a 11.6% annual rate in the third quarter, is really good news for credit unions, and for the economy. Loans are credit unions' best asset, and the return to consumer loan growth over the past year will strengthen credit union balance sheets, CUNA Chief Economist Bill Hampel said.

The agency reported:
  • New auto loans grew by 4%, to total $69 billion;
  • Used auto loans grew by 3.1%, to total $125 billion;
  • First mortgage loans grew by 3.3%, to total $262.3 billion;
  • Net member business loan balances grew by 2.5%, to total $44.6 billion; and
  • Non-federally guaranteed student loans grew by 10.2%, to total $2.5 billion.
Credit union membership also increased by 726,911 during the quarter, bringing the national total to 95.9 million, a new record.

The credit union system's net worth ratio was 10.65% at the end of the third quarter, a 15 basis point increase from the 2nd quarter total. This is the highest net worth ratio reported since late 2008.

"The good news is we continue to see strong, positive trends in the industry. Credit unions are serving their members and investing in their communities by making the loans needed to purchase homes, buy cars and go to college. That said, smaller credit unions still face challenges in growing loan volume, generating earnings and attracting members, so NCUA must continue to provide them with needed assistance, training and support," Matz said.

Matz also warned that credit unions should take interest rate risk seriously, particularly in rate-sensitive deposits, fixed-rate mortgages and certain investments.

"As interest rates go up, credit unions could be caught between a rock and a hard place," Matz said. "They have been paring expenses and reducing loan loss reserves to maintain earnings. However, as they make new loans at lower interest rates than older loans coming off their books, they have been making longer-term investments to increase yield. If credit unions haven't planned carefully, the value of those investments could decline when rates rise."

The NCUA quarterly statistics are based on call report data submitted to and compiled by the agency for the quarter ending Sept. 30.

Senators Urge CFPB Mortgage Rule Delay

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WASHINGTON (12/3/13)--In a letter cosigned by 25 Senate colleagues, Sen. Roger Wicker (R-Miss.) called on the Consumer Financial Protection Bureau to hear the concerns of credit unions and other small institutions and "consider providing appropriate relief" from pending mortgage regulations, "including deferring implementation."

The letter, which was sent to CFPB Director Richard Cordray before the Thanksgiving congressional break, addresses the Consumer Financial Protection Bureau's six rules for mortgage products and services. The rules, which are required by the Dodd-Frank Act, are set to go into effect in January 2014 and include the bureau's Ability-to-Repay and Qualified Mortgage standards.

Credit Union National Association concerns are reflected in the letter, although the senators did not specify a time period for an implementation delay. CUNA has suggested that Congress grant a one-year extension of compliance deadlines for the pending CFPB mortgage rules. If such a delay cannot be created, Congress should provide credit unions with a buffer of at least six months as they work to come into compliance with qualified mortgage standards, CUNA has said. CUNA has also recommended that a similar six-month delay should also be applied to legal liability provisions of mortgage regulations.

The senators in the letter noted their constituents "are concerned that they will be hard pressed to come into compliance with the significant changes called for under these rules by the current deadline."

Compliance with these changes "will prove daunting" for small financial institutions with few compliance officers, and many institutions will not have appropriate software in place as of January 2014, the senators added.

Failure to comply with the pending regulations "could lead to market distortions" which could "adversely affect the availability of mortgage credit for consumers" in several states, particularly in rural or remote areas of the country, the legislators added.

For the full letter, use the resource link.

CUNA Launches New Survey Seeking CU Exam Challenges

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WASHINGTON (12/3/13)--Credit union experiences and impressions of the examination process are again being requested by the Credit Union National Association: CUNA has just released a new edition of its survey that gives credit unions the chance to provide feedback to CUNA and state leagues on their most recent examinations by the National Credit Union Administration and/or state regulators.

CUNA and the state credit union associations used the 2012 survey results to advocate this year on behalf of credit unions and improve NCUA and state regulator examinations. As it did last year, this latest survey covers such topics as length of on-site exam, how satisfied the credit union was with the exam and results, and which problem areas if any were noted by the examiner. It also includes a series of questions to gauge how the credit union felt about the examiner's performance and the exam process, and asks what are the biggest issues credit unions would like CUNA and their leagues to focus on to reduce regulatory compliance burdens.

And, for this year, CUNA has provided an optional section through which credit unions can identify and rate individual examiners.

"The 2012 survey produced much valuable information, and which we and several leagues used to good effect in discussions with regulators. Conducting such a survey positions the leagues and CUNA at the forefront of working to improve a very important aspect of our credit unions' lives, and provides credit unions with an anonymous, and therefore safe, way to be heard," CUNA Chief Economist Bill Hampel said.

Survey replies are confidential, and identifying information from individual credit union respondents will not be seen by individuals outside of CUNA's Market Research Department. Only summary results will be reported.

CUNA/CFA: Holiday Spending Expected To Increase This Year

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WASHINGTON (12/2/13)--More consumers plan to increase their spending during this year's holiday season, and fewer consumers plan to spend less than they did last year, according to the 14th annual holiday spending survey conducted by the Consumer Federation of America (CFA) and the Credit Union National Association.

Click to view larger image Credit Union National Association Chief Economist Bill Hampel (left) and Consumer Federation of America Executive Director Stephen Brobeck announce the results of their 14th annual joint survey on consumer holiday spending expectations. More than half (51%) of respondents with annual incomes below $25,000 said they would use most of a $5,000 windfall to pay down debt. Less than one-third (32%) of those with incomes above $100,000, said they would do the same. (CUNA Photo)
Since 2012, the percentage who said they would spend more than the previous year rose from 12 to 13, while the percentage who said they would spend less declined from 38 to 32. These changes continue the trend from 2011, when only 8% said they would spend more while 41% said they would spend less.

Nearly one-in-four (24%) said their financial situation was better this year than in 2012, while 29% said their financial situation was worse. The percentage of those who said it was worse was the smallest since CFA and CUNA began asking the question in 2009.

This year, 1,002 persons were interviewed by landline or cell phone between Nov. 7 and 10. 

The results are the strongest that the CFA/CUNA survey has seen since 2006, two years before the recession began, CUNA Chief Economist Bill Hampel noted. "Put differently, our holiday spending survey has shown five years of improvement in a row following the abysmal readings of 2008," he said.

"The survey suggests that holiday spending will increase at least as fast as last year. It is also encouraging that fewer Americans see their economic status as worsening, despite on-going federal budget issues in Washington," Hampel added.

The survey also revealed:
  • Men (15%) are more likely to increase spending than women (12%);
  • Respondents between the ages of 18 and 34 are more likely to increase spending than any other age group, with 27% saying they were likely to do so; and
  • African Americans (20%) and Hispanics (17%) were more likely to report increased spending plans than non-Hispanic Whites (12%).
Upper-income households were also marginally less likely to report an increase in holiday spending plans, and were also least likely to report a planned decrease in spending.

About one-half (51%) of survey respondents said recent controversies over federal government spending and borrowing had affected their holiday spending plans. Lower-income families were more likely to be affected by federal budget problems than high-income families.

The CFA and CUNA suggested that consumers looking to spend less this holiday season avoid impulse buying by sticking to a predetermined budget for gifts and other holiday items, use the Internet to comparison shop, and pay off any debts quickly.

Starting a holiday savings account or curbing spending by finding low- or no-cost ways to celebrate the holidays are also options, CFA Executive Director Stephen Brobeck said.

CUNA and CFA's tips to help consumers manage holiday debt, which traditionally accompany the survey findings, also note that holiday club accounts can be found at many credit unions, as can credit cards that typically have lower rates than those of other financial institutions.

Freddie, Fannie Conforming Loan Limits Steady For Another Year

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WASHINGTON (12/2/13)--As Federal Housing Finance Agency acting director Edward DeMarco hinted in late October (News Now Oct. 28), 2014 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will remain at $417,000 for one-unit properties in most areas of the country.
 
DeMarco said back in October that the FHFA would give at least six months' notice before lowering the statutory maximum, and said that it won't act until at least next spring. He said that any rule change would be "measured" to minimize market shocks.
 
The maximum conforming loan limits for one-unit properties, for loans purchased in 2014 and generally originated after Oct. 1, 2011 or before July 1, 2007, are $417,000 in most locations, but are as high as $625,500 in certain high-cost areas in the contiguous United States.  These numbers reflect the 2013 levels.
 
The loan limits are established under the terms of the Housing and Economic Recovery Act of 2008 (HERA) and are calculated annually.
 
HERA requires the loan limits to be set as a function of median home values in local areas: While some counties saw increases in home prices in 2012, no loan limit increases were evident after other HERA terms such as the statutory ceiling and floor were taken into account.

NCUA Prohibits Three From Future CU Work

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ALEXANDRIA, Va. (12/2/13)--The National Credit Union Administration has banned three former credit union employees from participating in the affairs of any federally insured financial institution.

The NCUA said the orders involve the following individuals:
  • Carrie Bomyea, a former Glass City FCU, Maumee, Ohio, employee who pleaded guilty to embezzlement charges. Bomyea was sentenced to 18 months in prison, five years supervised release and ordered to pay restitution in the amount of $199,576.35;
  • Armelinda Castillo, a former WesTex FCU, Lubbock, Texas, employee who was convicted of misapplication of funds by a bank employee. Castillo was sentenced to 37 months in prison, five years supervised release and ordered to pay restitution in the amount of $690,000; and
  • Yolanda O'Keefe, a former Connecticut Community CU, Pawcatuck, Conn., employee who entered into a pretrial rehabilitation program for the charge of larceny. O'Keefe has been ordered to attend and complete a Gamblers Anonymous program, stay away from the credit union's premises, and complete 50 hours of community service. She is also prohibited from all casinos.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

NCUA web site users can now access a new tool for searching agency administrative actions. Through the new tool, they can search prohibition and administrative orders by name, institution, city, state and year, the agency said.

Use the resource link to access all NCUA enforcement orders.

Spending Survey Again Receives Strong Press Coverage

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WASHINGTON (12/2/13)--The release of the Credit Union National Association's and Consumer Federation of America's 14th annual projection of consumers' holiday spending plans garnered widespread press coverage, including a live broadcast on C-SPAN. Over the weekend, clips from the pre-Thanksgiving press conference unveiling the survey results were also broadcast regularly on NBC's Channel 4 in Washington, D.C.


Click to view larger image Cameras are set up for live and taped coverage of this year's CUNA/CFA spending survey release. (CUNA Photo)
Other broadcasting and print groups that attended or covered the press conference included:
  • NBC;
  • Hearst Television;
  • Fox Business Channel
  • The Washington Times;
  • Epoch Times; and
  • Cronkite News.
Westwood One Radio and CNBC's Big Data Download followed up with CUNA after the event. The event was also noted in the Wednesday morning edition of Politico's Morning Tax column, and National Public Radio's Planet Money.

The survey, which was unveiled during a Wednesday event at the National Press Club in Washington, D.C., found that more consumers plan to spend more than they did last year, while fewer plan to reduce their 2013 holiday spending. (See related story: CUNA/CFA: Holiday Spending Expected To Increase This Year.)

Paul Gentile, CUNA's executive vice president of strategic communications and engagement, said the survey release "helps spread the word about credit unions and reinforce that credit unions are a trusted resource for consumers."

CUNA To Testify Wednesday On Duplicative Regs, More

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WASHINGTON (12/2/13)--The Credit Union National Association will testify Wednesday on a number of credit union issues, including duplicative and inconsistent federal rules.

Rose Bartolomucci, president/CEO of Towpath CU, a state-chartered, privately insured credit union in Akron, Ohio, will testify on CUNA's behalf before the House Financial Services subcommittee on financial institutions and consumer credit.
 
The hearing will focus on:
  • A bill to require federal financial regulators, including the National Credit Union Administration and CFPB, to assess whether proposed rules are duplicative or inconsistent with other federal rules, to take steps to address the duplication or inconsistency, and report to Congress within 60 days of issuing the rules;
  • A CUNA-supported bill that would permit privately insured credit unions to join a Federal Home Loan Bank; 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.
Rose is a member of the CFPB's Credit Union Advisory Committee. In 1998 she testified before the House Financial Services Committee on the landmark credit union bill, the Credit Union Membership Access Act.