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Rapid City Telco FCU released from NCUA cease-and-desist order

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ALEXANDRIA, Va. (2/26/14)--The National Credit Union Administration has lifted a cease-and-desist order that was filed against South Dakota-based Rapid City Telco FCU in early 2010.

The agency issued the order after the credit union's plan to build a new central office created regulatory and safety and soundness concerns. The NCUA release did not say whether these concerns have been addressed.

Rapid City Telco was opened in 1945, and currently serves 5,629 members through four branches. The credit union holds $45 million in assets.

NEW: Internet domain name just for CUs is on its way

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WASHINGTON (2/26/14, UPDATED 8:58 a.m. ET)--A new Internet domain name just for credit unions, .creditunion (dot credit union), is just about a reality.

The Internet Corporation for Names and Numbers (ICANN) has notified the Credit Union National Association that the domain name has been approved--and there are just a few more steps to take before it becomes available for credit unions' use.

Back in 2011, ICANN announced it would significantly broaden the number of approved top-level domain names beyond the limited number in use, such as .com, .org, .gov, .edu, CUNA submitted a .creditunion application on behalf of the credit union movement.

After this notice of approval, explains CUNA General Counsel Eric Richard, the next step for CUNA to negotiate a contract with ICANN and CUNA's designated registrar company.

"People are not just using dot-com domains anymore," says Richard, "This influx of new domain names could change the way people use the internet, and credit unions are evolving with the new digital landscape."

As Richard further notes, the new top level domain is beneficial both as a marketing opportunity and a tool for enhanced security.

"This new domain will be an excellent tool for marketing as well as an opportunity to establish legitimacy and online security. In the wrong hands a 'creditunion' domain could allow someone intent on committing fraud to do so from a seemingly legitimate platform.

"That is why CUNA will only allow credit union entities to obtain a ".creditunion" extention. As the largest national trade group for credit unions, we felt it important to secure the domain," Richard explains.

CUNA has nine months to take that next step and Richard predicted Wednesday that CUNA would likely make full use of that timeframe before completing the step.

But in nine months? Credit unions may see the arrival of a new domain name that looks a lot like them.

House vote on CFPB, NFIP reform bills set for this week

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WASHINGTON (2/26/14)--Separate bills that would reform the Consumer Financial Protection Bureau and the National Flood Insurance Plan, respectively, are scheduled to see votes in the full U.S. House this week.

The Consumer Financial Protection Safety and Soundness Improvement Act (H.R. 3193), would authorize the Financial Stability Oversight Council to stay or set aside any CFPB regulation that is found to be inconsistent with safe and sound operations of financial institutions.

The bill would also require the CFPB to take into consideration the impact of its rules on insured depository institutions, change the bureau's leadership structure and make some operational changes.

The Credit Union National Association called the bill a step in the right direction in a letter sent to Congress last week. CUNA President/CEO Bill Cheney said the bill would help to assure credit unions--and other entities--already subject to considerable regulation are not unnecessarily burdened.

A similar bill was passed on a bipartisan House vote in 2011, but it was not approved by the Senate.

The NFIP bill would delay planned National Flood Insurance Plan rate increases for up to four years, and would require the Federal Emergency Management Agency (FEMA) to complete an insurance affordability study and propose a framework that addresses affordability issues. The bill would also:
  • Eliminate the 50% cap on state and local contributions to levee construction and reconstruction;
  • Protect the so-called "basement exception," which allows the lowest flood-proofed opening in a home to be used for determining flood insurance rates;
  • Establish a Flood Insurance Rate Map Advocate within FEMA to answer current and prospective policyholder questions about the flood mapping process; and
  • Require FEMA to certify that the agency has fully adopted a modernized risk-based approach to analyzing flood risk.

Fed will release supervisory stress test results in March

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WASHINGTON (2/26/14)--March 20 is the day the Federal Reserve Board will release results from the latest supervisory stress tests conducted as part of the Dodd-Frank Act.
The Fed conducts the forward-looking exercises on large financial companies that it supervises. The exercises determine if financial institutions have sufficient capital to support operations and absorb losses during adverse economic conditions over nine quarters.
The Dodd-Frank Act supervisory stress test results include data such as post-stress capital ratios, revenue and loss estimates under the Federal Reserve's hypothetical adverse and severely adverse scenarios.
Related results from the Comprehensive Capital Analysis and Review will be released March 26.

NEW: Risk-based capital rule comments due 90 days from tomorrow

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WASHINGTON (2/26/14, UPDATED 10:04 a.m. ET)--The risk-based capital rule proposed by the National Credit Union Administration at its February open board meeting--and hotly discussed by credit unions since--is scheduled to be published tomorrow in the Federal Register.

That publication, in a sense a formality, changes nothing but it is consider "constructive notice," meaning interested parties are now noticed that the rule or proposal exists and what its precise parameters and details are.

Often comment periods or effective dates aren't set until the Federal Register notification occurs.

For the risk-based capital rule that means comments will be due 90 days from tomorrow.

The Credit Union National Association urged the NCUA from the start to address credit unions' "deep-seated concerns" regarding the risk-based plan. In fact, CUNA President/CEO Bill Cheney encouraged the regulators earlier this month to hold public hearings on the plan.

Cheney noted that hearings would produce an official record of discussions between credit unions and NCUA leadership that, in addition to comment letters, could assist the NCUA board in determining the best path for proceeding on the rule.

CUNA also has produced a video segment on the steps for writing an effective comment letter on this issue. (See resource link.)

NEW: Tax committee staff clarifies: No intention to impose additional tax on CUs--including UBIT

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WASHINGTON (2/26/14, UPDATED 6:24 p.m. ET)--It is not the intention of the House Ways and Means Committee to impart any additional taxes on federal credit unions, the committee staff clarified in response to inquiries by the Credit Union National Association. The exchange occurred just hours after House Ways and Means Committee Chairman Dave Camp (R-Mich.) unveiled his tax code reform plan.
As News Now reported earlier in the day, CUNA noted the specific credit union tax status was left untouched in the tax reform plan, but it did raise some additional tax issues that were of concern.
"This evening, CUNA senior staff contacted senior staff members of the House Ways and Means Committee to ask them why, under the tax reform discussion draft issued today by Chairman Dave Camp (R-Mich.), federal credit unions would be subject to unrelated business income tax (UBIT) under the details of the proposed tax reform measure," CUNA President/CEO Bill Cheney said after the high-level exchange.
"As a result of our discussion, the senior staff members told us that it was never their intention to impose any additional taxes on federal credit unions. Further, they told us that anything that would impose taxes on credit unions--including UBIT--was unintentional and is why they have established a process that includes release of a discussion draft.
"They told us they appreciated the head's up from us, and that they would work with us to iron out the details."
Cheney went on to underscore that credit unions greatly appreciate the willingness of the Ways and Means Committee staff to listen to concerns and respond accordingly. "We look forward to working with them, and Chairman Camp, as the tax reform process moves forward," Cheney added.
The CUNA leader also extended his thanks to the record 4,400 CUNA Governmental Affairs Conference participants who came to Washington this week to voice the views and concerns of credit unions; he emphasized that this result could not have occurred without them.

McWatters' NCUA nomination to get March 4 Senate Banking hearing

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WASHINGTON (2/26/14)--The Senate Banking Committee has announced a March 4 hearing for the nomination of Mark McWatters to become a member of the National Credit Union Administration (NCUA) board.

President Obama announced his intent to nominate McWatters in mid-December and sent the nomination to the Senate in early January. The NCUA nominee must be approved by the committee and the full Senate to take a seat on the NCUA board.

If confirmed, McWatters would replace board member Michael Fryzel, whose term ended Aug. 2. Fryzel will continue to serve until McWatters is confirmed.

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.

He 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 supervisory 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.

NEW: Millions exposed to 'Don't Tax' message by CUNA social media blitz

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WASHINGTON (2/26/14, UPDATED 1:04 p.m. ET)--Almost five and a half million Twitter and Facebook followers were exposed to the credit union message Tuesday through the latest "Don't Tax My Credit Union" social media event--hosted by the Credit Union National Association and state credit union associations on the eve of Rep. Dave Camp's (R-Mich.) expected release of a tax code reform draft.

Federal lawmakers got into the act to back the credit union tax status too--like with credit unions' two previous "Don't Tax Tuesday" advocacy blitzes.
  • Sen. Tammy Baldwin (D-Wis.) tweeted: @lakeviewcu Thanks for making your voices heard & engaging on this important issue. I stand with you - #DontTaxMyCU - TB
  • Rep. Lloyd Doggett (D-Texas) tweeted: I support credit unions as essential banking options to all Texans. Having worked with #creditunins for 3+ decades, I agree #DontTaxMyCU.
  • And from Sen. Mark Udall (D-Colo.): Glad to meet w Mtn West Credit Union Assoc. Credit unions play critical role in protecting consumers, creating #jobs.
As with two previous efforts, on July 23 and Sept. 10 last year, CUNA and state credit union leagues used social media to encourage credit unions, credit union members and other credit union advocates to contact state and federal lawmakers directly with the unified message of "Don't Tax My Credit Union."

Some of the tweets incorporated videos. Below are just three of the kinds of messages sent during those two earlier rounds of credit union mega-advocacy:
  • Shiro-oni:  @MaxBaucus @OrrinHatch Truth is, credit unions provide superior deposit & loan rates & greater protection from risk than banks #DontTaxMyCU.
  • StevePoniewaz:  Cooperative status is not a subsidy. Credit Union Members have paid their tax; #DontTaxMyCU@RepAnnWagner
  • Alabama CU: CUs return profits to their members. Taxing CUs hurts 1.8 million Alabamians. Visit and ell Congress #DontTaxMyCU
CUNA's "#DontTaxTuesday" Twitter and Facebook campaigns walked away with a Grassroots Innovation Award from the Public Affairs Council earlier this month.

NEW: Tax plan preserves tax exemption, but raises concern in other key area

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WASHINGTON (2/26/14, UPDATED 2:04 p.m. ET)--The specific credit union tax status is left untouched in a tax reform plan released today by House Ways and Means Committee Chairman Dave Camp (R-Mich.), but the plan does raise some additional tax issues that are of concern to the Credit Union National Association.

CUNA President/CEO Bill Cheney said, "The release of the tax reform proposal today by House Ways and Means Committee Chairman Dave Camp marks the beginning of an important new chapter in the tax reform process. We are gratified that the specific credit union tax exemption is untouched in the Camp proposal, based on our initial read. But we do have concerns that some federal credit unions could be subjected to tax liability under other portions of the tax code.

"After three years of mostly behind-the-scenes efforts, the chairman has found that there is no reason to change or eliminate our tax exemption. We consider this an endorsement of our long-held position that credit unions' cooperative, not for profit structure remains the bedrock upon which the tax exemption is built. Reinforcing our position over the past nine months were the actions by CUNA, state associations and credit unions, which together amassed 1.3 million contacts with lawmakers urging them 'don't tax my credit union.'

"We are concerned that the tax proposal appears to subject federal credit unions to a tax on 'unrelated business activities' for the first time. We will be working with lawmakers to obtain more clarity on this provision.

"The Camp proposal is the first word on tax reform, not the last. We know the tax reform process will be long, and will not conclude until a president signs a tax reform bill. Throughout the process, credit unions will continue to actively advocate for the credit union tax status."

CUNA, state credit union associations, credit unions and credit union members have been tireless in their advocacy on behalf of the credit union tax status. The "Don't Tax My Credit Union" campaign started in May 2013, garnering the 1.3 million direct messages to the U.S. Congress noted by Cheney.

Camp's plan to overhaul the tax code does recommend that the biggest U.S. banks and insurance companies would be required to pay a quarterly 3.5 basis-point tax on assets over $500 billion, according to various media outlets.

More generally, the plan for simplification of the tax code would cut the top income tax rate to 25% from 39.6% and impose a surtax on some of the wealthiest households in the country.

Issa calls for data protection without CU regulatory burden

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WASHINGTON (2/26/14)--House Oversight Committee Chair Darrell Issa (R-Calif.) said Tuesday that congressional leaders need to strengthen cybersecurity rules without mandating additional regulatory burdens on credit unions and other financial institutions.

Click to view larger image Small credit unions shouldn't be burdened by regulations to where they feel the need to become mega credit unions, says House Oversight Committee Chair Darrell Issa (R-Calif.) in his speech during the Tuesday session of CUNA's 2014 Governmental Affairs Conference. (CUNA Photo)
Issa said at the 2014 Credit Union National Association Governmental Affairs Conference in Washington that multiple congressional committees need to bring together public and private sector stakeholders to draft rules designed to prevent data breaches like the recent high-profile holiday season attack on Target.

The congressman also told attendees that the House Oversight Committee recently sent a list of questions to the retail conglomerate. The letter asked Target to disclose internal discussion between Nov. 1 and Dec. 13 in which employees or contractors discuss "any suspicion" that its security apparatus had been penetrated (Reuters Feb. 25).

CUNA and the Consumer Bankers Association have estimated that the theft, which affected some 40 million credit and debit card users' sensitive information, cost credit unions and banks roughly $200 million. CUNA CEO Bill Cheney said that credit unions have replaced 85% of the cards targeted in the attack at no cost to members (News Now Feb. 20).

Much like the response to the recent financial crisis, credit unions are concerned that they will be held responsible for complying with additional federal rules designed to remedy a problem they did not cause--something, Issa said, he is trying to prevent.

"After 2008, it was the credit unions that were unfazed, doing their jobs," he commented. "Small credit unions shouldn't be burdened by regulations to where they feel the need to become mega credit unions, which are more and more like big banks."

He said that current cybersecurity rules, like those enacted by the Gramm-Leach-Bliley Act of 1999, "fail to give credit unions a way to deal with cyberthreats." But he warned that mandating change could lead to "a single winner."

Issa told attendees that credit unions are dear to him--that in 1971 a federal credit union gave him a loan to buy a 1961 MGA, a sports car made by the now-defunct British Motor Corp.

"It was everything to me," he recalled, and joked, "I had a car I could work on night after night." He said that the hobby kept him busy, and he wondered what he would have done without it.

"Credit unions have changed my life," he said.

Issa also told attendees that credit unions shouldn't face regulatory impediments to small business loans, speaking as the former owner of "a small business, a micro business."

"There were credit unions that believed in me," he said.

CFPB meets CUNA request for CUAC deadline extension

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WASHINGTON (2/26/14)--The deadline for applications to the Consumer Financial Protection Bureau's Credit Union Advisory Council has been extended to March 14, CFPB Deputy Director Steve Antonakes said Tuesday morning.

Click to view larger image At CUNA's Governmental Affairs Conference Tuesday, CFPB Deputy Director Steve Antonakes tells credit unions he recognizes that losing market share to competitors that prioritize their earnings over serving the consumer is a drag on credit unions. (CUNA Photo)
The extension was granted at the request of the Credit Union National Association (CUNA). Antonakes told CUNA the good news just before he spoke at the morning session of CUNA's 2014 Governmental Affairs Conference.

In his remarks before GAC attendees, Antonakes said he brought a deep respect for credit unions with him when he came to join the CFPB in Washington. The bureau and credit unions share the goal of protecting consumers, Antonakes said.

The CFPB official said he recognizes that losing market share to competitors that prioritize their earnings over serving the consumer is a drag on credit unions.

Regarding the CUAC announcement, there will be eight seats open on that panel this fall. The CUAC was formed to ensure that the CFPB hears from smaller credit unions that are outside of its regulatory scope but will still be impacted, in some form, by CFPB regulations and/or actions.

The CUAC advises the CFPB on how its regulation of consumer financial products or services will impact credit unions with less than $10 billion in assets, and takes on other topics.

The 15 current members of the CUAC are:
  • Bernard Balsis, Independent Employers Group FCU, Hilo, Hawaii;
  • Rose Bartolomucci, Towpath CU, Fairlawn, Ohio;
  • Gary Bell, Cooperative Center FCU, Berkeley, Calif.;
  • John Buckley, Gerber FCU, Fremont, Mich.;
  • Carla Decker, District Government Employees FCU, Washington, D.C.;
  • Ron Ehrenreich, Syracuse (N.Y.) Cooperative FCU;
  • Kevin Foster-Keddie, Washington State Employees CU, Olympia, Wash.;
  • Mitchell Klein, Police and Fire FCU, Philadelphia;
  • Lily Lo, Northeast Community FCU, San Francisco;
  • Maria Martinez, Border FCU, Del Rio, Texas;
  • Marcus Schaefer, Truliant FCU, Winston-Salem, N.C.;
  • Camille Shillenn, Unified People's CU, Cheyenne, Wyo.;
  • Helen Godfrey Smith, Shreveport (La.) FCU;
  • Gregg Stockdale, 1st Valley CU, San Bernardino, Calif.; and
  • David Wright, Services Center FCU, Yankton, S.D.

Metsger tells GAC: CU directors, regulators aren't so different

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WASHINGTON (2/26/14)--The role of a volunteer credit union board member and that of a federal credit union regulator are not all that different, National Credit Union Administration (NCUA) board member Rick Metsger said Tuesday during the Credit Union National Association's 2014 Governmental Affairs Conference (GAC) in Washington.

Metsger should know. He's been both. And he said that both positions, in fact, require a person to be a regulator.
Click to view larger image Rick Metsger marks his six-month anniversary as an NCUA board member at CUNA's 2014 Governmental Affairs Conference Tuesday. (CUNA Photo)

"When I was a credit union director, my job wasn't to manage or micro-manage the operation of my credit union. It was to ask intelligent questions, help set policies, offer perspectives that others may not have considered and reassure our members that our credit union was not only safe today, but would be safe tomorrow and for the foreseeable future.

"My role at NCUA is similar," he said. Metsger was sworn in as an NCUA board member Aug. 26, 2013.

He went on to say:
  • A director's job is to  make sure underwriting and investment criteria are sound; a regulator's is to make sure examination and supervision criteria are sound.
  • A director wants to be reassured that his or her loan officers are asking the right questions and making the right decisions; Metsger, as a regulator, wants to be reassured that NCUA examiners are asking the right questions and making the right decisions.
The NCUA board member also addressed the issues of relevancy and mission, stating that even in the pursuit of the safety and soundness of the system in light of the rapidly changing financial marketplace, credit unions must not be so constrained by their regulator--or so risk-averse--that they cannot meet the financial needs of their members.

"Credit unions must remain relevant in the mix of financial services options available to the American public. A credit union that is safe and sound, but irrelevant to its members' needs, is not a viable outcome of regulation," he said.

During his speech to the record crowd of 4,400 credit union advocates at the CUNA GAC, Metsger noted that it has been six months to the week that he joined the agency as a board member.

He used the introduction to his speech to serve also as an introduction to himself to the credit union crowd. He noted that he has been "blessed with many careers" in his life: high school teacher, college basketball coach, life insurance agent, television news reporter, small business owner and Oregon state senator.

"I remember one Thanksgiving dinner when my elderly aunt leaned over to my wife and expressed concern that I didn't seem to be able to hold on to a job," he joked to the audience's great amusement.

Ways and Means members highlight their support for CUs at CUNA GAC

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WASHINGTON (2/26/14)--With House Ways and Means Committee Chairman Dave Camp (R-Mich.) expected to release his much-anticipated and much-delayed plan to overhaul the tax code today, attendees of the Credit Union National Association's 2014 Government Affairs Conference (GAC) lent an attentive ear to members of the committee who spoke at the GAC Tuesday.

Click to view larger image U.S. Rep. Linda Sanchez (D-Calif.) told CUNA's 2014 Governmental Affairs Conference audience that changing the credit union tax status would also severely hamper credit unions' ability to compete with banks. "More competition means more choices and better terms for consumers," Sanchez said. (CUNA Photo)
House Ways and Means Committee members who took the GAC stage offered credit unions unequivocal support. Although Reps. Linda Sanchez (D-Calif.), John Larson (D-Conn.) and Sandy Levin (D-Mich.) provided no guarantees that Camp's plan would not include a change to the credit union tax status, each spoke out against changing credit union tax status and offered high praise for the role credit unions play in their communities.
Sanchez, who told the audience she has been a credit union member since she was 16, said the Ways and Means Committee hopes to foster more economic certainty through tax reform. "Preserving the credit union tax status will help provide much of that needed certainty," Sanchez said. "Congress has consistently supported the credit union tax exemption because of the special manner in which credit unions serve their [members] as not-for-profit member-owned cooperatives."
Sanchez represents 158,000 credit union members in her district, she told the audience. "That includes firefighters, teachers, janitors, military personnel--the people who are the glue that hold our communities together," she said. "So as a member of the Ways and Means Committee, I am committed to ensuring that our tax code helps protect those middle-class families, and we've been working very hard to get a meaningful, serious tax reform bill done this year."
Click to view larger image U.S. Rep. John Larson (D-Mich.) said there is "broad-based support" for the preserving the credit union tax status on the House Ways and Means Committee, but urged credit unions to remain vigilant in continuing to work with legislators. (CUNA Photo)
Changing the credit union tax status would also severely hamper credit unions' ability to compete with banks. "More competition means more choices and better terms for consumers," Sanchez said.
Larson said there is "broad-based support" for the preserving the credit union tax status on the House Ways and Means Committee, but urged credit unions to remain vigilant in continuing to work with legislators.
Larson pledged his support for preserving the credit union tax status. "If we strengthen our financial institutions, if we work with credit unions, if we work with people in all walks of life that come to Washington D.C. to strengthen this country, we're going to be a better nation," he said.
Click to view larger image U.S. Rep. Sandy Levin (D-Mich.) advised credit unions to "make your numbers known" in Washington this week. "Yours is the voice of the typical family in this country," he said. "Let it be heard." (CUNA Photo)
As he introduced Levin, Michigan Credit Union League President/CEO Dave Adams read a statement Levin had offered the league in support of the credit union tax status: "I am committed to a thoughtful reform of our nation's tax code that ensures important policies such as the credit union tax exemption continue to serve the best interests of the American tax payer," Levin told the league.
Levin, who said he has been a credit union member for more than 50 years, said credit unions helped steer the U.S. economy out of the recent recession. "It was difficult for people to know where to turn if they needed to purchase something, if they needed to buy a car, if they needed to prevent foreclosure of a home," Levin said. "There was one place that people in this country could turn to, and that was a credit union."
Levin advised credit unions to "make your numbers known" in Washington this week, and also to court legislators that may not be familiar with the credit union story. "Tax reform is complicated, but the role of the credit unions isn't," Levin said "Yours is the voice of the typical family in this country. Let it be heard."

Royce to intro new MBL-related legislation this week

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WASHINGTON (2/26/14)--Legislation that would exempt certain housing loans from the member business lending cap will be introduced this week, Rep. Ed Royce (R-Calif.) told the Credit Union National Association's 2014 Governmental Affairs Conference attendees Tuesday.

Click to view larger image Rep. Ed Royce (R-Calif.), right, says it is fortunate that credit unions are in Washington for CUNA's 2014 Governmental Affairs Conference, the same week that House plans for comprehensive tax reform will be released. Credit union voices need to be heard, he says.  Royce is shown here being greeted by CUNA GAC emcee Paul Berry. (CUNA Photo)
The bill, known as the Credit Union Residential Loan Parity Act, would exempt one- to four-unit non-occupied dwellings from the cap.

"We should take a closer look at [the MBL regulation] and where it doesn't work, fix it," Royce said.

"While this legislation is not a panacea to your business lending woes it will provide relief," he added. The regulatory relief measure would also help increase affordable housing stock, Royce said.

These type of housing loans make up around 20% of credit union MBL balances, he noted.

He asked credit unions to add a request for bill co-sponsors to their list of asks when they hike Capitol Hill this week.

Do what you do best, "get some co-sponsors," he said.

Royce said the new bill will augment his other MBL work. His bill, the Credit Union Small Business Jobs Creation Act (H.R. 688), would increase the MBL cap to 27.5% of assets from 12.25%. 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.

Saying "the best defense is a good offense," Royce also highlighted other recent legislation he has introduced, including a bill that would extend National Credit Union Share Insurance Fund coverage to accounts such as Interest on Lawyers Trust Accounts and prepaid debit card master accounts.

House GOP Whip McCarthy concerned about excessive rules

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WASHINGTON (2/26/14)--House Majority Whip Kevin McCarthy (R-Calif.) said Tuesday that federal regulators are increasingly enacting new rules at a hefty cost to small businesses. 

Click to view larger image House Majority Whip Kevin McCarthy (R-Calif.) says credit unions are a symbol of free enterprise, risk and upward mobility and should be "unshackled to do more for small businesses." He spoke Tuesday at CUNA's 2014 Governmental Affairs Conference. (CUNA Photo)
The Republican congressional leader told the Credit Union National Association's 2014 Governmental Affairs Conference that the legislative branch issues fewer major rules than the executive branch, and that 19% of GDP is sapped by regulatory burdens. 

In a speech that cited the ideas and quotations of Abraham Lincoln, McCarthy paraphrased the 16th president, saying that "government should do for people what people can't do for themselves." 

"Credit unions do that every day in serving their members," he said, expressing concerns that regulations are hindering the not-for-profit institutions.  He said that credit unions represent the best of America's "exceptional nature."
"Credit unions are a symbol of free enterprise, risk and upward mobility," McCarthy said. He told attendees that he wanted the federal government to "unshackle and allow you to grow," with a particular concern for small business lending rules amid a sluggish post-2008 economic recovery. 

McCarthy also recalled how credit unions played a key role in his own life. He told the conference how after completing high school in Bakersfield, Calif., Kerns Schools FCU gave him a student loan to attend junior college.

He said that he received another line of credit after he decided to start selling cars, and that Kerns Schools allowed him to refinance his debt after he won a modest-by-today's standards $5,000 in the California lottery. He then invested in a local sandwich chain, which he sold to put himself through college. 

"I'd never make it to majority whip if I didn't belong to a credit union," McCarthy stated.  He also said, "No bank wanted to look at me."

Albright: Global reach--CUs can help Ukraine recover

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WASHINGTON (2/26/14)--Former Secretary of State Madeleine Albright said on Tuesday that credit unions can play a role in helping Ukraine emerge from its current political and economic turmoil.

The former top U.S. envoy said at the Credit Union National Association Governmental Affairs Conference in Washington that she discussed the matter with CUNA President/CEO Bill Cheney. Albright relayed to the audience during a question-and-answer period that Cheney told her Polish credit unions have been working with their Ukrainian counterparts, and "can make a huge difference."

Click to view larger image Former Secretary of State Madeleine Albright sits with CUNA's 2014 Governmental Affairs Conference emcee Paul Berry and answers questions the credit union audience tweeted in for her attention. Just prior to the question-and-answer session, Albright gave a broad speech which she wrapped up by saying that credit unions "are like Tom Hanks in the banking world: likeable, everywhere, and ain't misbehaving in 'The Wolf of Wall Street.'" (CUNA Photo)
Since the fall of the Soviet Union, the credit union movement has grown in Poland from 13 branches and 14,000 members in 1992, to almost 2,000 branches and 2.5 million members in the spring of 2012 (Polish National Association of Cooperative Savings & Credit Unions, July 2012). Former Polish President Lech Kaczynski--who was killed in a 2010 plane crash--said, during a 2009 visit to the Brooklyn, N.Y.-based Polish & Slavic FCU, that Poles visiting the U.S. two decades beforehand brought the credit union movement back to their country (News Now, Oct. 9 2009). He called it "the largest Polish social/financial success since 1989."

Now, Albright says, credit unions can pay it forward by helping the Ukrainian economy develop. 

She said that credit unions and other non-state actors--such as non-governmental organizations, multinational corporations and pension funds--can, more broadly, "help shape the international terrain" beyond any single country. Simply allowing the forces of globalization and the spread of technology, she opined, was not sufficient for creating civil society. 

"You can't tweet your way to democracy, stability and peace," she said.

Albright's speech, much like former British Prime Minister Tony Blair's CUNA GAC talk the day before, focused on a rapidly changing world. She laid out her personal philosophy of international relations, saying that foreign affairs are not like a chess game, as they are commonly described, but more akin to a game of billiards, in which a single action can have numerous unintended consequences.

Albright described globalization and information technology shaping this as a force multiplier, with crises in places like Ukraine, Pakistan, Syria and South Sudan reverberating beyond those countries' borders, and the rapid flow of information shaping the actions of people around the world.

"Gone are the days when a few countries could dominate," she said.
In that vein, she expressed hope that a "unity government" would emerge in Ukraine to unite the polarized eastern and western parts of the country, and that the international community would work together to "bailout" the country's ailing economy.
Albright also told her credit union audience about her personal history. She talked about her tumultuous childhood as a two-time refugee from Czechoslovakia--first, fleeing the Nazi invasion for England, and, after the war, seeking asylum from Stalinist rule in the U.S. Albright did note that her childhood and her diplomat father fueled her interest in global affairs and U.S. leadership--a path that led her to become the first woman secretary of state.

She told tales about her tenure as a top American diplomat, and life after prominent public service too. Albright said she would wear different types of pins to help convey the U.S. position during diplomatic negotiations, opting for a snake pin, for example, during a meeting with Iraqi officials after the state media in Baghdad under Saddam Hussein called her "an unparalleled serpent."

Albright also told the audience that former secretaries of state share a bond that crosses party lines, and that all living former secretaries of state meeting for dinner with the incumbent is a tradition--one that John Kerry's travel itinerary hasn't allowed for yet.

Albright did say that her own recent travels have bolstered her appreciation for credit unions. She fondly recalled meeting managers of a Kenyan credit union at a market in Kibera, Nairobi's largest slum, and how they described it as an institution built on mutual respect and cooperation, in which all members "put money in and trust each other." 
She also praised credit unions for being particularly welcoming of women executives, describing them "at the vanguard of progress." 

Albright also said how she was "tremendously proud" to be a part of the Aspen Institute panel of judges that awarded the 2013 McNulty Prize to Bill Bynum, president/CEO of Hope FCU, Jackson, Miss. She said that the credit union movement helps set the U.S. apart.

At the start of the speech, she had a similar message for attendees, albeit with a more light-hearted and pop-culture conscious tone. Albright told conference attendees that credit unions "are like Tom Hanks in the banking world: likeable, everywhere, and ain't misbehaving in 'The Wolf of Wall Street.'"

GAC breakout: MacAllister offers CUs payments forecast, planning advice

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WASHINGTON (2/26/14)--John MacAllister, principal of Dorado Industries, a global payment system consulting firm in Los Angeles,  offered credit unions a forecast on the near future of electronic payments technology and also provided tips for navigating the payments landscape during a Credit Union National Association 2014 Governmental Affairs Conference breakout session.
  • Look for a convergence of e-commerce and brick-and-mortar. As an example, MacAllister noted that PayPal accounts can be used at Home Depot. "That's good because that creates competition and innovation, and I think it accrues a benefit to the consumer and the issuer because there are more ways to use payment instruments" MacAllister said.
  • Look for more mobile clutter. Look for more instruments with names like dongles, sheaths and table stands that issue messages among mobile devices, but have one thing in common "the last message has something to do with payments," MacAllister said.
  • Look for more communications between consumers and merchants. "The minute your member approaches the store, if he or she has a Bluetooth phone, the merchant will be talking to your member," MacAllister said. "If they are talking about using a different card then the one your member has with your credit union, that's not good news for the credit union system."
  • There will be a cyber-currency.  Simply put, there is a need for it, MacAllister said. There's also a lot of money to be invested into developing one, and plenty of smart people to get it done. MacAlllister did not think that cyber-currency would be Bitcoin, however, which he called "poorly conceived and ill executed."
MacAllister also offered attendees tips to prepare for changes in the payments market:
  • Increase member card penetration. "To preserve the value of the mag stripe card ... you need to make sure that card penetration is as high as it could possibly be, as close to 85% or 95% as you can get it, and activiation or use rate is somewhere close to the national average, which is 20 uses per month, including point of sale and ATM transactions."
  • Find a relationship with the most ubiquitous mobile wallet solution for members. "If you don't have an articulation of a mobile strategy with regard to mobile payments, you need to build one pretty quick," MacAllister said.
  •  Investigate the amount of transactions that are being disintermediated by ACH and work to reverse it. About one in four PayPal transactions are made through ACH, MacAllister said. For most credit unions, "every time an ACH transaction replaces a debit transaction you're going to 44 cents in revenue to 15 cents in cost," he noted. He advised credit unions to monitor where their ACH transactions are originating.
  • Agree that merchants have something to offer and seek new relationships. "Interchange is going away," MacAllister said. "The question is, 'What are we going to replace it with?' If that happens, the next time somebody knocks on your door and offers you to authorize and settle a transaction for 15 cents, it's going to look pretty good." Also, big banks are the most likely to be the first to partner with big retailers, leaving credit unions out of the loop, MacAllister said.
Credit unions do have one advantage in the payments landscape, MacAllister said: Their willingness to collaborate. Credit unions can solve many of the above issues surround payments through credit union service organizations, MacAllister said.

"I can't imagine credit unions would approach this without taking a CUSO approach, a collaborative approach, to answer the questions, 'What do we do about a mobile wallet? What do you do about security? What do we do about cyber-currency?'" he said, "It's the only way to go."

'Make no little plans,' Fryzel tells GAC audience

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WASHINGTON (2/26/14)--Channeling architect Daniel Burnham, National Credit Union Administration board member Michael Fryzel urged 2014 Credit Union National Association Governmental Affairs Conference attendees to "Make no little plans. They have not the magic to stir men's blood."
Click to view larger image Credit unions are an unbeatable idea, the idea of people helping people get the funding they need to buy a home, purchase a car, send a child to college, and achieve a secure retirement, National Credit Union Administration board member Michael Fryzel tells a Tuesday session at CUNA's 2014 Governmental Affairs Conference. (CUNA Photo)

Burnham was instrumental in transforming an area of Washington dominated by marshland and railroad stations into the National Mall, one of the nation's jewels. Fryzel urged attendees to similarly make big plans of their own.
"The National Mall is pretty much finished," Fryzel said. "The credit union movement is not."
He urged credit unions to increase membership, provide opportunities for financial literacy and continue offering better rates on loans and savings while helping Americans prepare for retirement.
Fryzel acknowledged the credit union system faces challenges. He specifically identified burgeoning technology, increased regulatory burden, competition with banks, and the blind-siding nature of change as ongoing challenges.
He encouraged credit unions to make themselves "battle ready" and continually prepare for all challenges. "I believe you are as great as any challenge you face, because nearly all challenges are not natural disasters but human-caused," Fryzel said. 'Because they are human-caused, they can be human-fixed."
Again, Fryzel summoned history as a teacher. He cited the credit union movement's founders, who also faced "stiff winds" of adversity.
"If this movement were to suddenly disappear this morning," Fryzel said to his Tuesday morning credit union audience, "it would start right up again tomorrow."
"Why? Because it is a good idea, an unbeatable idea, the idea of people helping people get the funding they need to buy a home, purchase a car, send a child to college, and achieve a secure retirement. That is the banner you carry forward. Carry it higher and straighter."

MAP study shows value of member issue education, advocacy

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WASHINGTON (2/26/14)--Member service is the core of the credit union movement, and the Credit Union National Association's new Member Activation Program (MAP) study, released Tuesday, shows the value credit unions can derive from educating their members on key issues like the tax status and credit union difference.

The study was unveiled at CUNA's 2014 Governmental Affairs Conference with a quick video in the morning and a lengthy breakout session later in the day.

The yearlong study of 70,000 members in two credit unions--CommunityAmerica CU in Kansas City and University FCU in Austin, Texas--tested both for the techniques most effective in activating members to take grassroots action on their behalf, and whether doing so would have had any negative consequences for the credit union's brand or member relationship.

The results showed that the goals of generating grassroots contacts go hand in hand with increasing member loyalty and growing wallet share for the credit union. "We found that four out of five credit union members indicated they were more likely to conduct more of their personal financial services with a credit union after receiving a 'Don't Tax My Credit Union' email communication," CUNA Senior Vice President of Political Affairs Richard Gose said.

The study also revealed:
  • Credit union members want to be known as members, not as customers;
  • The credit union "brand" has a 97% favorability rating amongst those surveyed;
  • Members respond best to messages that show the differences between credit unions and Wall Street banks;
  • Members who receive advocacy outreach from their credit unions have a stronger bond with those institutions; and
  • About 82% of members are ready to do more business with their credit union after exposure to advocacy messaging.
CUNA has used the results of the study to develop an advocacy and outreach toolkit for credit unions of all sizes, and an email template for credit unions to use in contacting and educating their members on the tax status issue. Additional training tools for credit union leaders who want to do even more with their members are also on the way.

At this stage, Gose said CUNA has a simple question to ask: Credit unions should commit to contacting their members on the tax status by Tuesday, March 11. This action will generate additional contacts to remind Congress of the need to protect the credit union tax status, and will kick off or continue an important advocacy conversation with members.

"This type of contact can only lead to increased membership loyalty for credit unions," Gose said.

Tester seeks CU help to move housing reforms forward

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WASHINGTON (2/26/14)--Noting that the economy "will not fully recover until we further rebuild our housing market," Sen. Jon Tester (D-Mont.) on Tuesday encouraged credit unions to lobby for a bipartisan housing finance reform bill.
Click to view larger image Sen. Jon Tester (D-Mont.) says data security reforms are needed to build a system that better protects consumers through clearer rules and shared responsibility. Tester spoke Tuesday at CUNA's 2014 Governmental Affairs Conference. (CUNA Photo)

The Senate Banking Committee member made his remarks at the morning session of the Credit Union National Association's 2014 Governmental Affairs Conference.

Tester is a co-sponsor of the Housing Finance Reform and Taxpayer Protection Act (S. 1217). That bill, introduced by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), would wind down government-sponsored enterprises Fannie Mae and Freddie Mac and replace them with a new mortgage guarantor.

Tester said he is still discussing the bill with Warner and Corker, and spoke Tuesday in favor of provisions that will help small financial institutions "stay in the game." He also called for the 30-year fixed-rate mortgage to be retained.

A Senate Banking Committee markup of housing finance reform legislation is reportedly coming soon, and Tester said "there is a real window of opportunity to get housing finance reform done."

The senator also said data security reforms are needed, and noted that the recent Target data breach caused credit unions more than $30 million in damages. "The bottom line is we need a system that protects consumers through shared responsibility and better, clearer rules of the road," he said.

Kirkpatrick calls CUs 'cornerstone of economic development'

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WASHINGTON (2/26/14)--Calling credit unions "the cornerstone of economic development,"  Rep. Ann Kirkpatrick (D-Ariz.) offered her support for preserving the credit union tax status during a Credit Union National Association 2014 Governmental Affairs Conference speech Tuesday.

Click to view larger image Rep. Ann Kirkpatrick (D-Ariz.) praises credit unions for returning profits back to their members in the form better rates on products and services.  "That is real money to real working folks," she told Tuesday's audience at the CUNA 2014 Governmental Affairs Conference. (CUNA Photo)
She was described as "a true friend of credit unions" by Scott Earl, president/CEO of the Mountain West Credit Union Association, who introduced Kirkpatrick. She serves a rural district of 60,000 square miles in eastern Arizona, an area larger than Pennsylvania or Illinois. About 25% of the district's residents are Native American, the largest percentage of any U.S. congressional district, Kirkpatrick said.

"Life is a real struggle in my area, and always has been," Kirkpatrick said. "My work is dedicated toward creating an environment in which we have a strong, stable, diversified economy, and credit unions are key players in that vision by providing service in the district."

Kirkpatrick praised credit unions for returning profits back to their members in the form better rates on products and services. "That is real money to real working folks who are struggling to put gas in their pick-up trucks, food on their tables and buy clothing for their children," she said.

During their meetings with lawmakers credit unions should provide examples of how those rates make a difference in the communities they serve, Kirkpatrick advised. "Make sure to tell the stories of the people that you serve," she said.

GAC breakout: Industry experts give tips on combating data security issues

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WASHINGTON (2/26/14)--"We're never going to see the end of cyberintrusion ... there is too much rich data out there," said John Buzzard, FICO fraud banking product manager. You can, however, eliminate counterfeit products down the line once data is stolen, he noted.

Buzzard and other panelists on Tuesday advised credit unions on how to cope with an evolving data security environment during the Credit Union National Association's 2014 Governmental Affairs Conference.

The session was hosted by CUNA Senior Legislative Representative Jeremy Dalpiaz and featured comments from William Nelson, president/CEO, Financial Services Information Sharing and Analysis Center; and John Wallace, vice president of commercial products, CUNA Mutual Group.

Nelson said cybercrime is a global problem, with a complete service-based economy supporting their activities. There are also hacktivists such as wikileaks, Anonymous, Lulzsec, and state-sponsored hackers from China, Iran and other nations, he said. Hackers can trick search engines into displaying infected content and can use phishing or spearphishing tools to attack vendors, administrators and staff who may have access to financial information and other information.

The panelists cited on example of how pervasive the hacking culture has become: there is a multi-million dollar bounty payment waiting for the first person to break triple-DES encryption.

Nelson said hackers will often stop an attack if it takes too long or gets too complicated, so having multiple layers of security can force them to move on before they do damage.

His organization, FS-ISAC, has helped fight hacking attempts by developing "circles of trust" among those in the payments system.

Members will report incidents, others will respond, and alerts will be issued to members of the circle, he said.

Future data security threats include:
  • Strikes with customized, flexible and adaptable malware intrusions;
  • Sales and purchases of cards based on bank identification numbers; and
  • Attacks on payment cards that develop in two phases within the same breach, such as stealing consumer data, and executing PIN fraud.
Potential losses for credit unions include lost revenues, costs to notify members, lawsuits, regulatory scrutiny, operational costs and repetitional issues. Buzzard said credit unions more than ever are stepping out with strong messages about how their members are impacted by data breaches. The human cost of reissuing plastic is exponentially higher than estimates, and could be as high as $15 to $20 per card, he said.

To combat fraud, CUNA Mutual's Wallace said credit unions can examine and upgrade fund transfer controls and online banking security, continue with strong fraud detection, and educate their members.

Other steps credit unions can take to protect themselves from data security breaches include assessing their own data security risks and vulnerabilities, whether the risks are presented by ATMs, computer systems, third-party vendors or other sources, the panelists added.

Credit unions should also be careful to take care of their members and be transparent. Staying connected to evolving data security developments, and simply being prepared, are other steps they can take, the panelists said.