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CUNA, League Toolkit Helps CUs Connect With Members On Tax Issue

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WASHINGTON (2/21/13)--The Credit Union National Association Thursday unveiled an important members-only toolkit--designed to help credit unions connect with their members and educate the public about credit unions as banks intensify their state-level attacks against the credit union tax status.

"CUNA and the leagues are empowering credit unions with the tools they need to ensure their members understand the value of membership," CUNA President/CEO Bill Cheney said, announcing the new Credit Union Tax Status Advocacy Toolkit webpage.

"Our research shows that when members understand the value of membership, they will stand with us to defend the exemption," he emphasized.

The new webpage features free materials in the form of radio ads, print ads, newsletter articles, state-level updates, materials to use in advocacy efforts with federal and state lawmakers, and much more.

Cheney encouraged credit unions to work with their members and to be prepared on the tax issue. " Whether federal tax reform happens in a week, two months or 10 months from now, we need not only an educated Congress, but also an educated membership," he said.

CUNA members can use the link below to access the host of advocacy materials.

Cheney Talks CU Priorities Ahead Of GAC

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WASHINGTON (2/22/13)--As the 2013 Governmental Affairs Conference approaches, the Credit Union National Association and 4,200 credit union representatives are preparing to "send a strong message" to Congress, CUNA President/CEO Bill Cheney said in a new interview.

"Our goal is to send a strong message… we need to meet with every congressional office, every House office, every Senate office," with protecting the credit union tax exemption at the top of the agenda, Cheney said.  "We also need to talk about reducing regulatory burden, we also need to talk about enhancing the charter… there's a lot that we need to cover," he added.

"Credit unions do a great job serving their members… and we've got a great story to tell." Cheney noted that many new members have joined the U.S. Congress following November's elections, and these new members need to be educated about the importance of credit unions in their communities. "It's important for us to talk to them here in Washington, but it's more important for the constituents to get out and see them, and that's a big part of what the GAC is about."

He noted that GAC attendees will also have the chance to hear from and meet with the National Credit Union Administration Board members and key agency staff and to hear from the Consumer Financial Protection Bureau Director and CFPB staff.

The CUNA CEO also previewed CUNA's new strategic vision for the credit union system. For more than a year, CUNA has been reaching out to credit unions, leagues, system partners and its leadership to develop and present a strategic vision to guide and inspire the movement's advocacy, communications and planning. Presentation of this new initiative and what it will mean for CUNA, leagues and credit unions going forward will be the thrust of Cheney's remarks to the GAC audience on Monday.

Cheney also touched on how credit unions communicate with their communities. He said credit unions need to continue to emphasize that they are "a better deal," and offer themselves up as a community of members that is self-governing, and has its members' best interests at heart. "That is so different from a bank," Cheney said. "We should highlight our differences… our differences are what make us a better deal for consumers, our differences are the reason we have a tax preference to begin with… people are waking up to the value of doing business with organizations that share their values," he emphasized.

Auto Loan Practices Attract CFPB Scrutiny

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WASHINGTON (2/22/13)--The Consumer Financial Protection Bureau is mulling legal action against at least four banks for their auto lending practices, Bloomberg reported on Thursday.

The CFPB last week reportedly gave the unnamed banks 15 days to explain the lending practices in question. Sources told Bloomberg the auto loan policies and practices identified by the CFPB may violate the Equal Credit Opportunity Act (ECOA). ECOA bans creditors from discriminating against credit applicants based on their race, color, religion, national origin, sex, marital status, and other select factors.

The Credit Union National Association in recent years has urged the Federal Trade Commission to apply consistent consumer protection rules for motor vehicle dealers offering motor vehicle financing. CUNA has noted that auto dealers, who are often the single point of contact for consumers during an auto purchase, are not always concerned with consumer protection. CUNA emphasized that auto dealers provide a significant portion of all motor vehicle loans and should not have a special exemption to inflate rates, charge hidden fees, or engage in other harmful practices. Providing consistent consumer protection rules would ensure a level playing field for all financial entities that provide motor vehicle lending or lease arrangements, CUNA has said.

Credit unions provide both direct and indirect loans to prospective motor vehicle purchasers, and 95% of credit unions nationwide are involved in the auto loan business. Consumers that use credit union loans instead of bank-originated loans to purchase a new vehicle worth $30,000 would save an average of $1,300 over the span of a five year loan, according to CUNA estimates.

Strong NCUSIF, TCCUSF Performances Decrease Premium Chances

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ALEXANDRIA, VA. (2/22/13)--The strong performances in 2012 of the National Credit Union Share Insurance Fund and the Temporary Corporate Credit Union Stabilization Fund, reported by the National Credit Union Administration Thursday, decrease chances for a premium assessment this year.

NCUA Chairman Debbie Matz, (center)  receives the quarterly insurance fund reports from NCUA Chief Financial Officer Mary Ann Woodson. Matz during the meeting noted that NCUSIF performance statistics "continue to trend in the right direction." (CUNA Photo)
The number of federal credit unions with CAMEL codes 3, 4 and 5 dropped significantly during 2012, according to the NCUA. The declining number of lower-rated credit unions, of course, reduces the exposure of the NCUSIF to potential losses.

The agency reported the NCUSIF ended 2012 with a 1.30% equity ratio, after transferring $88 million in "excess equity" to the Temporary Corporate Stabilization Fund. The NCUA said it calculated the ratio on an insured share base of $839.4 billion, compared to $795.3 billion at the end of 2011, indicating growth of 5.5%.

The NCUA also reported good 2012 results for the TCCUSF. Based on "preliminary and unaudited" information, for 2012 the total net position of the fund improved nearly $1.8 billion.

The agency staff noted that when the stabilization fund has outstanding borrowings from the U.S. Treasury, the Federal Credit Union Act requires the NCUA to make a distribution from the NCUSIF if the share insurance fund has an equity ratio above the normal operating level of 1.30% at year's end.

"Had the stabilization fund not existed, the $88 million would have been paid as a dividend to credit unions on their NCUSIF deposits. Instead, it will serve to lower future assessments," Credit Union National Association Chief Economist Bill Hampel points out.

Of the improved CAMEL ratings, NCUA Chairman Debbie Matz said, "Protecting the Share Insurance Fund is a top priority for NCUA, and the 2012 year-end results show that NCUA's prudent management and effective regulatory policies are working well."

At the February open board meeting the NCUA's chief financial officer also related that:

  • The total number of CAMEL code 3, 4 and 5 credit unions dropped 9.8%, to 1,940 at year-end 2012 from 2,150 in 2011;
  • Assets of CAMEL code 3 credit unions decreased to $119.3 billion at the end of the fourth quarter of 2012, a 16.3% drop from $142.5 billion on Dec. 31, 2011; and
  • For lowest ranked CAMEL code 4 and 5 credit unions, assets fell 35.4%, to $19 billion at the end of 2012, down from $29.4 billion for 2011.
As a result of the improving condition of stressed credit unions, the percent of total insured shares in CAMEL 4 and 5 credit unions declined from 3.3% to 2.0% during 2012. At the same time, shares in CAMEL 3 credit unions have fallen from 15.9% to 12.6% of insured shares. Therefore, shares in CAMEL 3, 4 and 5 credit unions are down from 19.2% of insured shares as of December 2011, to 14.6% as of December 2012.

Overall, the amount of assets in CAMEL Code 3, 4 and 5 credit unions have decreased 32.7% since reaching a high in September 2010.

There was no NCUSIF premium assessed in 2012 and the agency has projected a premium range between zero and 5 basis points for 2013.

CFPB Takes New Step In Private Student Loan Project

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WASHINGTON (2/22/13)--Credit unions and other lenders, educators and borrowers can now help the Consumer Financial Protection Bureau develop recommendations on how the student lending market can be improved.

The CFPB said it is gathering information from the public to develop options for policymakers to make repayment of private student loans more manageable for struggling borrowers. The CFPB in a release noted that private student loan borrowers who wish to pay their loans, but face high payments, lack alternative repayment and refinance options.

"Too many private student loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder… We will be analyzing plans for policymakers to consider that might help avoid a repeat of the mortgage meltdown for today's student loan borrowers," CFPB Director Richard Cordray said.

The CFPB suggested commenters could discuss:

  • How student loan burdens might impact the broader economy and hinder access to mortgage credit and automobile loans;
  • How distressed borrowers manage their student loan obligations;
  • What options currently exist for borrowers to lower their monthly payments on private student loans; and
  • The most effective mechanisms for communicating with distressed borrowers.
Commenters could also provide examples of successful alternate payment programs in other markets, and address how those examples can be tailored to treat student lending issues, the CFPB said.

The CFPB plans to accept comments until April 8. For more on the CFPB project, use the resource link.

The CFPB has noted that student loan debt, which surpassed $1 trillion in 2012, has exceeded credit card debt as the largest source of consumer debt in the U.S. More than $150 billion of this $1 trillion total is comprised of private student loans, and at least $8 billion of these private student loans are in default, the CFPB said.

CUNA estimates that around 300 credit unions currently offer student loans to their members. Credit unions also provide financial education and seminars relating to student lending generally, and encourage students to attend. The website also provides extensive financial education regarding student lending, through both written information and webinars.

The site is powered by Fynanz, a CUNA Strategic Services provider.

NCUA Actions Expand Rural District FOM, Allow CU TIPS Investment

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ALEXANDRIA, Va. (2/22/13)--The National Credit Union Administration on Thursday approved separate final rules that expand the definition of "rural district" for field of membership purposes, and grant new investment authority to credit unions.

Credit Union National Association President/CEO Bill Cheney said he was pleased that the February NCUA meeting focused on items that are positive, such as rule changes that will help credit unions going forward, and the reduction in CAMEL Code 3, 4 and 5 credit unions. "We will continue to push NCUA to take more steps that will give all federally insured credit unions more flexibility in their operations, particularly in light of the fact that credit unions' financial performance is doing so well," he said. (See News Now story: Strong NCUSIF, TCCUSF Performance Decrease Premium Chances).

The NCUA's "rural district" rule sets the definition at the greater of no more than 250,000 persons or 3% of the population of the state in which the majority of the district's persons are located. The NCUA noted that the rule does not change the other elements required to designate an area a rural district: Federal credit unions serving rural districts will still need to develop business and marketing plans to show how they will serve their surrounding communities.

NCUA Chairman Debbie Matz said, "This is really a move in the right direction and is responsive to be the needs of credit union members." She added that she looks forward to having the rule in effect to provide "federal credit unions serving rural areas greater flexibility to improve access to consumers who otherwise might not have access to affordable financial services."

The rural district changes are similar to those advocated by CUNA in meetings and a comment letter on the NCUA proposal. CUNA Board Member Roger Heacock presented data to NCUA to support making the changes.

CUNA Deputy General Counsel Mary Dunn urged the NCUA to allow as much authority as legally permissible to federal credit unions to facilitate their presence in these areas of the country that are often are in serious need of financial institution services. Dunn suggested that the NCUA, in the long-term, should allow credit unions that serve rural areas to determine for themselves the size of their fields of membership, governed by the credit union's resources to serve the area sufficiently and its ability to manage safety and soundness concerns.

The agency also moved to grant credit unions new investment authority by adding Treasury Inflation Protected Securities (TIPS) to the list of permissible investments in NCUA's Investment and Deposit Activities rule. "NCUA's research and analysis showed these securities could be a valuable tool for federal credit unions if properly managed, so we've acted to prudently provide greater regulatory flexibility," Matz said. Allowing such investments will help credit unions protect against inflation and manage interest-rate risk, Dunn has noted.

However, NCUA staff said credit unions should not just dive into TIPS investments. Due diligence will be needed, and investing in TIPS may not be appropriate for every federal credit union. Credit unions should also take care to ensure that TIPS remain a small part of their investment portfolio, the NCUA said.

Both rules will go into effect 30 days after they are published in the Federal Register.

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