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CUNA warns CFPB data collection could increase consumer exposure to ID theft

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WASHINGTON (2/11/14)--Consumer Financial Protection Bureau data collection practices could increase the risk of identity theft and fraud for consumers, the Credit Union National Association has warned.

Under the Dodd-Frank Act, the CFPB is permitted to gather information on organizations, their business conduct, markets, and activities of covered persons and service providers. This information is filed to the CFPB by financial institutions and other service providers. The CFPB has stressed that any personal information collected is stripped from the agency records.

CFPB Director Richard Cordray has said the data is used to examine overall trends, not individual transactions.

Lawmakers and others are concerned about the safety of this data, in light of the recent Target and Neiman Marcus data breaches. CUNA is also particularly concerned by the resulting obligations that these data collection efforts may create for credit unions. CUNA is continuing to voice its concerns in this area with the CFPB and lawmakers, and is preparing a letter to the CFPB on data security issues.

The CUNA concerns, noted in this week's Regulatory Advocacy Report , come as many in the U.S. Congress are taking a close look at consumer data security standards. Three data security hearings were held last week, and CUNA encouraged lawmakers to take a broad look at how consumer data is secured and the improvements that are necessary to prevent future breaches from taking place.

"Focusing on one payment method as the absolute answer to solving data security breaches is both shortsighted and distracts from the greater need of a federal data security framework for all entities," CUNA President/CEO Bill Cheney wrote in letters sent to select House and Senate committees last week.

Other topics tackled in this week's Report include:
  • CUNA's planned Governmental Affairs Conference session on the National Credit Union Administration's risk-based capital proposal;
  • CUNA comments on joint regulator diversity standards proposals;
  • Comments on the CFPB's mortgage closing process; and
  • The Federal Reserve Banks' payment system improvement update.
Use the resource link for this week's Regulatory Advocacy Report .

CFPB restructure bill 'a step in right direction,' CUNA says

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WASHINGTON (2/11/14)--A bill that would change the Consumer Financial Protection Bureau leadership structure and make some operational changes is s a step in the right direction, the Credit Union National Association said in a Monday letter to Congress.

The Consumer Financial Protection Safety and Soundness Improvement Act of 2013 (H.R. 3193) would help to assure credit unions--and other entities--already subject to considerable regulation are not unnecessarily burdened, CUNA President/CEO Bill Cheney said in a Monday letter to Speaker of the House John Boehner and House Democratic Leader Nancy Pelosi.

The letter was delivered to key lawmakers in anticipation of a vote this week on the bill.

"Credit unions remain among the most highly regulated entities in the financial services sector. While the CFPB has taken several steps to solicit feedback regarding the impact of its regulations on credit unions, the fact remains that regulatory burden has continued to increase in the two and a half years since the bureau" launched, Cheney wrote.

Cheney said credit unions are disappointed the CFPB has not used the full authority granted to it in the Dodd-Frank Act to exempt certain types of institutions from some regulations. "The CFPB's rules should target the abusers of consumers and encourage credit unions to provide services to their members, but that is not what has happened during the first few years of the CFPB's history," he wrote.

The CUNA CEO offered the remittance rule and mortgage rules as examples: "When the remittance rule was finalized, several credit unions stopped offering the service to their members. And we expect some credit unions to reduce credit availability to borrowers who may not qualify for qualified mortgages under the CFPB mortgage rules," he wrote.

"How exactly are consumers being better protected when the regulations promulgated by the CFPB reduce availability of and access to these financial services offered by not-for-profit cooperative credit unions?" Cheney asked.

H.R. 3193 would:
  • Restructure CFPB leadership from a single director to a five-member panel;
  • Authorize the Financial Stability Oversight Council to set aside any CFPB regulation that is found to be inconsistent with safe and sound operations of financial institutions;
  • Require the CFPB to take into consideration the impact of its rules on insured depository institutions;
  • Prohibit the CFPB from requesting, accessing, collecting, using, retaining or disclosing nonpublic personal information about a consumer, unless clearance has been granted; and
  • Make CFPB funding subject to the congressional appropriations process.
For the full CUNA letter, use the resource link.

ACI's Pociask warns of peril in banks' call for CU taxation in Hill blog post

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WASHINGTON (2/11/14)--State lawmakers should not heed bank calls to eliminate the nonprofit status of credit unions, American Consumer Institute Center for Citizen Research President Steve Pociask said in a blog post published in The Hill this week.

Pociask in his post noted that some banks are asking state legislators to pass resolutions calling on the U.S. Congress to eliminate the nonprofit status of credit unions, "effectively imposing new taxes on the banks' smallest of rivals." Essentially, Pociask said, "'too big to fail' banks--those first to get in line for federal help and bailouts--are coming to a statehouse near you and pleading for government help to raise the cost of their ankle biter competitors." This ask, he said, "smacks of protectionism."

"If banks feel that credit unions have a competitive advantage, why don't banks simply become nonprofits or operate in a break-even fashion to avoid taxation? Furthermore, if banks chose to operate as a Subchapter S corporation, its investors and stockholders could avoid paying dividend taxes. The truth is that banks have chosen not to return its earnings to its customers, and that is its prerogative, but that activity is taxable by choice," he said.

Pociask contrasted credit unions' member-owned nonprofit structure with that of banks, which have private investors and stockholders, can make lavish payments to board members, pay dividends to stockholders and make profits that are taxable.

"Since credit unions plow its retained earnings back into its member-owned entities, there really are no real profits to tax. Instead, credit union members have their benefits taxed at their personal income tax rates. If credit unions are taxed upfront, as banks have suggested, the result would be double-taxation of credit union members," he wrote.

Further, taxing credit unions would harm consumers. Eliminating the nonprofit status of credit unions could cost consumers $16 for every $1 of taxes saved, he estimated.

"That would be a really bad deal for consumers, taxpayers and voters," Pociask wrote.

For the full column, use the resource link.

Fed Chair Yellen set for first report to Congress

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WASHINGTON (2/11/14)--This week, new Federal Reserve Chair Janet Yellen will report on monetary policy and the state of the U.S. economy for the first time since taking on board leadership early this month.

Yellen will appear before members of the U.S. Congress at two hearings: Today's House Financial Services Committee hearing titled "Monetary Policy and the State of the Economy," and a Thursday Senate Banking Committee hearing titled "Semiannual Monetary Policy Report to the Congress."

The House hearing will feature a second panel of academics. Yellen will be the sole speaker at the Senate hearing. Both monetary policy hearings are part of a series of regular semi-annual accountings to Congress.

Other hearings on this week's schedule include a Wednesday Senate Small Business and Entrepreneurship Committee hearing on Maria Contreras-Sweet's nomination to serve as administrator of the U.S. Small Business Administration.

The House this week will also consider debt ceiling legislation and the Consumer Financial Protection and Soundness Improvement Act (H.R. 3193). CUNA supports H.R. 3193 (See News Now story: CFPB restructure bill 'a step in right direction,' CUNA says).

No House votes will be held Thursday or Friday to accommodate the House Democratic Caucus retreat.

FASB excludes CUs from ' public business entity' definition

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WASHINGTON (2/11/14)--The Financial Accounting Standards Board (FASB) recently issued a final standard that defines the term "public business entity," and it excluded credit unions from that definition. That is notable for credit unions because the definition will be used by FASB and its Private Company Council (PCC) to specify the scope of future accounting guidance.
The Credit Union National Association and other stakeholders asked FASB to improve its definition of "public business entity" to clear up current inconsistencies and complexities caused by having multiple definitions.  The new definition will make it clearer which nonpublic entities potentially qualify for alternative financial accounting and reporting guidance.
CUNA has maintained that credit unions clearly are outside the definition of a "public business entity" and therefore should be eligible for alternatives under Generally Accepted Accounting Principles--or GAAP--that are established by the PCC.
However, CUNA Assistant General Counsel Luke Martone cautioned, credit unions should proceed with some caution.
"FASB has stated that, 'decisions about whether an entity may apply permitted differences within U.S. GAAP ultimately may be determined by regulators...and other creditors, or other financial statement users that may not accept financial statements that reflect accounting or reporting alternatives for private companies,'" Martone noted.
"So, the extent of any latitude afforded to credit unions will also involve the National Credit Union Administration and that could be problematic--although we will push them for as much flexibility as possible.
"We will be discussing this issue again with senior NCUA staff during meetings at the CUNA Governmental Affairs Conference this month and encouraging them to allow eligible private company alternatives," Martone said.