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CU tax status helps small biz workers CUNA to Treasury

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WASHINGTON (3/1/12)--The Credit Union National Association (CUNA) contacted U.S. Treasury Secretary Timothy Geithner this week to address the Obama administration's corporate tax reform proposal and to emphasize its good policy approach to the federal credit union tax status.

'We appreciate that the proposal does not identify the credit union tax exemption for elimination. We also appreciate the fact that your staff reached out to (CUNA) following the release of the proposal. We urge you to take steps to further clarify the intention of the administration to preserve and support the credit union tax status," wrote CUNA President/CEO Bill Cheney in a Feb. 28 letter.

Cheney noted that in 1917 the U.S. Attorney General--and later the U.S. Congress--granted credit unions an exemption from federal income tax because of their organization Structure: Credit unions are member-owned, not-for-profit financial cooperatives. The exemption, in effect since credit unions' inception in the United States, has been reaffirmed many times, including in 1935, 1936, 1937, 1951 and 1998.

The administration has noted its new tax reform proposal starts from the presumption that reform should eliminate all tax expenditures for specific industries, with the few exceptions that are critical to broader growth or fairness.

Cheney wrote that it is entirely consistent with the administration's goals to continue the credit union tax status, and would be a disservice to the American public to discontinue it.

"(W)e believe that each component of corporate tax reform should be evaluated not only on the basis of the revenue it may bring to the government – which would be relatively small in the case of credit union taxation – but also on the basis of the costs in terms of lost benefits to the economy, the country, consumers and small businesses," the CUNA leader wrote.

"If taxed, a very significant number of larger credit unions are expected to convert to banks and an equally significant number of smaller credit unions would simply liquidate," therefore reducing consumer access to credit unions and their benefits, Cheney said.

He added, "The remaining credit unions would have to pass the burden of taxation through to their members because they are wholly owned cooperatives, increasing the cost of accessing mainstream financial services."

Cheney underscored that it is not only credit union members--94 million working-class Americans--that benefit from credit unions generally higher savings rates and lower loan rates: "Even those consumers and small businesses that do not belong to a credit union benefit from the credit union tax exemption because the presence of credit unions in a market motivates banks to keep their rates and fees competitive."

"Taxing credit unions would amount to a gift of tens of millions of customers to the for-profit banking industry at a time when the public is exceptionally dissatisfied with that industry and actively pursuing alternatives," CUNA wrote.

CUNA backs joint FI bill bankers balk

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WASHINGTON (3/1/12)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) has announced that his panel will conduct a hearing next week to study a community bank bill that would, in part, increase a 500-shareholder threshold that requires a small bank to register with the Securities and Exchange Commission (SEC).

There have been widespread reports this week that Senate Majority Leader Harry Reid (D-Nev.) has signaled he will soon make time for a vote in that chamber for a larger legislative package, designed to spur small business growth, that could include the community bank measure.

John Magill, executive vice president of government affairs for the Credit Union National Association (CUNA), in response to reports reiterated CUNA's position that credit unions would support a package as long as it combined a credit union legislative priority with that of the banking industry.

CUNA backs an increase in credit union member business lending (MBL) as a means to help small businesses and create new jobs. Increasing the current 12.25%-of-assets cap to 27.5% would inject $13 billion in new credit and create 140,000 new jobs within the first year of enactment, according to CUNA estimates.

"If combining credit union and bank interests in a single bill is what it takes to help the economy by helping small businesses with increased MBL authority," Magill said," then we favor it. That would be fine by us."

According to the Feb. 29 issue of American Banker, there is an effort afoot in the Senate to create such a dual package.  The Banker reported that Sen. Mark Udall (D-Colo.), sponsor of MBL legislation in the Senate, has placed a hold on the community bank bill, thereby impeding its progress.

The newspaper reported that its sources said Udall is conditioning support of the package on the inclusion of an increase in MBL authority for credit unions.

The community bank, SEC-registration bill is strongly backed by the Independent Community Bankers of America (ICBA). That group has estimated that SEC registration can cost small banks around $100,000 in the first year and $50,000 in subsequent years.

However, the ICBA said Tuesday that it will withdraw support for the entire pro-small business package if the credit union MBL provision is included, according to the article.

Both the U.S. House and Senate have conducted hearings on CUNA-backed MBL Legislation. The House bill, the Small Business Lending Enhancement Act (H.R. 1418), was introduced by Rep. Ed Royce (R-Calif.) and has 120 additional co-sponsors. Udall's bill of the same name (S. 509) has 22 co-sponsors.

For more information on the Senate Banking Committee hearing and the MBL bills, use the resource links below.

FinCEN considers due diligence changes

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WASHINGTON (3/1/12)--The Financial Crimes Enforcement Network (FinCEN) is considering codifying, clarifying, consolidating, and strengthening its current customer due diligence (CDD) regulatory requirements, and has released an advanced notice of proposed rulemaking (ANPR) to collect public comment on potential CDD rule enhancements.

FinCEN said appropriate CDD policies, procedures, and processes assist financial institutions "in identifying, detecting, and evaluating unusual or suspicious activity" by accountholders.

While many institutions have adequate policies, FinCEN said it is concerned that there is a lack of uniformity and consistency in how financial institutions address their CDD policies.

The proposed CDD rule would cover financial institutions, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities. Establishing a uniform CDD regulation would strengthen the ability of financial institutions to identify and report illicit financial transactions and comply with all existing legal requirements, and help federal authorities as they investigate potential crimes. A uniform regulation would also promote greater global financial transparency and aid efforts to combat transnational illicit finance, FinCEN added.

The new regulations, if created, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion, FinCEN said.

Comments on the ANPR will be accepted for 60 days after the proposal is published in the Federal Register.

For the full FinCEN release, use the resource link.

Inside Washington (02/29/2012)

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  • WASHINGTON (3/1/12)--Fannie Mae Wednesday released its fourth-quarter and full-year 2011 financial results, which included a full-year net loss of $16.9 billion, compared with a loss of $14 billion for 2010. The increase was attributed mainly to a $6.1 billion increase in net fair value losses in 2011. For the fourth quarter, Fannie reported a net loss of $2.4 billion, compared with a net loss of $5.1 billion in the third quarter of the year. The company's fourth-quarter net loss was reflected in $5.5 billion in credit-related expenses, "the substantial majority of which were related to its legacy (pre-2009) book of business and due largely to a decline in home prices" …
  • WASHINGTON (3/1/12)--Although federal and state officials have yet to release the final terms of the national mortgage servicing settlement, Wells Fargo provided some details in its annual report, filed with the Securities and Exchange Commission Tuesday. Servicers will be released from several servicing and origination claims, Wells Fargo said. The releases given by the states and the federal agencies primarily apply to "covered servicing conduct" and "covered origination conduct." The federal release for covered origination depends on which agency and which law is involved, Wells Fargo said. The Department of Justice (DOJ) and the Treasury are releasing claims under federal consumer credit laws governing loan origination. DOJ has offered limited release for possible claims of intentional fraud under the Financial Institutions Reform, Recovery and Enforcement Act. The Federal Trade Commission is releasing claims relating to origination conduct. The Department of Housing and Urban Development's (HUD) release of claims relating to origination conduct is limited to claims based on false annual certifications of compliance that are submitted to the agency. HUD retains the right to pursue individual loan-level violations of the Federal Housing Administration origination rules and regulations, Wells Fargo said …
  • WASHINGTON (3/1/12)--Two Obama administration housing officials offered assurances on the financial stability of the Federal Housing Administration (FHA) on Tuesday. During questioning from Republican senators about the FHA's finances in a Senate Banking Committee hearing, Shaun Donovan, secretary of the Department of Housing and Urban Development said he was confident that the agency was taking steps to protect the FHA fund while helping the housing market recover. On Monday, the FHA announced that on April 1 it will increase premiums on all single-family loans that it insures. The increase will cost homeowners an average of $5 per month, FHA Acting Commissioner Carol Galante said Tuesday in testimony before the House Financial Services Committee. Although the FHA has projected substantial losses on loans made from 2006 to 2008, loans made in the last two and a half years are performing well, Galante said …

2012 Small CU Workshop schedule announced

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ALEXANDRIA, Va. (3/1/12)--The National Credit Union Administration's (NCUA) Office of Small Credit Union Initiatives (OSCUI) has announced the schedule for the 2012 round of Credit Union Workshops and Roundtables, with 31 daylong workshops and roundtables set to take place between March 3 and October 27.

CUNA Mutual Group is teaming with the OSCUI to present a series of fraud prevention training sessions during these meetings, entitled "Don't Give Fraud the Green Light – Mitigating Fraud in Your Credit Union." These sessions will "focus on best practices and solutions that help smaller credit unions manage risk and avoid fraud," CUNA Mutual Group senior risk management services manager Brad Mundine said.

During the sessions, credit unions will learn about the latest fraud concerns and control techniques. Best practices to help avoid fraud in the areas of wire transfer, fraudulent deposit, lending and employee dishonesty will be addressed.

"The power of collaboration can't be overstated, and we're proud to be a part of this effort and remain committed to providing risk management resources for credit unions of all asset sizes," Mundine added.

NCUA OSCUI director William Myers said "tapping into the expertise of external groups, like CUNA Mutual Group's specialists on fraud prevention, is a great way to improve the effectiveness of OSCUI's training programs."

The first workshop will be held this Saturday in Phoenix, Arizona. The workshops are free, and while they are geared toward smaller credit unions, representatives from any credit union may attend.

Other 2012 topics include:
  • Issues facing credit unions;
  • What OSCUI is, and what the office can do for credit unions;
  • Examination issues;
  • Asset and liability management; and
  • The duties of federal credit union directors.
For more information and to register, use the resource link.

Bank profits grow but small biz sees no benefits CUNA

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WASHINGTON (2/29/12)--Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. (FDIC) reported an aggregate profit of $26.3 billion in the fourth quarter of 2011, a $4.9 billion improvement from the $21.4 billion in net income the industry reported in the fourth quarter of 2010.

This is the 10th consecutive quarter that banks' earnings registered a year-over-year increase, but Mike Schenk, Credit Union National Association (CUNA) vice president of economics and statistics, said these record profits are not resulting in more capital for the nation's small businesses.

FDIC Acting Chairman Martin Gruenberg reported that banks reported higher positive aggregate earnings and reduced numbers of "problem" banks and failures. Loan balances increased in the final three quarters of the year, and banks of all sizes "continued to make substantial progress in improving their profitability," he added.

Total loans and leases increased by $130.1 billion, residential mortgage loan balances rose by $26 billion, and credit card balances grew by $21.3 billion, the FDIC reported. Deposits also increased by $249.7 billion during the quarter.

Beyond the top-line data, the FDIC data showed that U.S. bank small business lending continued to decline in the fourth quarter and that year-over-year bank small business loans outstanding declined by nearly 5% in 2011, Schenk said.

"It's great that the banking system is inching its way back from the abyss, but small businesses don't seem to be benefiting," he added. "In contrast credit unions have been lending to small businesses throughout the crisis and ensuing weak recovery, but many are now bumping up against the arbitrary 12.25% member business lending (MBL) cap. The FDIC data make it clear: the time is now for Congress to pass MBL cap increase legislation."

Separate pieces of House and Senate legislation would increase this cap to 27.5% of total assets, injecting $13 billion in new funds into the economy, and creating as many as 140,000 new jobs, according to CUNA estimates.

For the full FDIC release, use the resource link.

The National Credit Union Administration is expected to release fourth quarter results for the credit union system soon.

Moore Capito joins GAC lineup

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WASHINGTON (2/29/12)--As final preparations for the 2012 edition of the Credit Union National Association's (CUNA) Governmental Affairs Conference (GAC) begin, another high profile speaker has been added to the list: Rep. Shelly Moore Capito (R-W. Va.).



She has backed regulatory relief for credit unions and has pledged to support the credit union tax exemption, and recently supported credit union interests by serving as lead sponsor of the Financial Institution Examination Fairness and Reform Act (H.R. 3461). That legislation would allow financial institutions to appeal examination reports from federal financial regulators and would provide further clarity to those regulators. It would also give credit unions and other financial institutions access to decision-making information gathered in their exams and codify exam policy guidance for financial regulators.

Capito will be joined at the GAC by many other key U.S. House colleagues, including House Minority Whip Steny Hoyer (D-Md.), House Financial Services Committee Chairman Spencer Bachus (R-Ala.), House Majority Whip and House Financial Services Committee member Kevin McCarthy (R-Calif.), Assistant House Democratic Leader James Clyburn (D-S.C.), and Reps. Jeb Hensarling (R-Texas), Ed Royce (R-Calif.), Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.) and Carolyn McCarthy (D-N.Y.).

Sens. Jon Tester (D-Mont.), Mark Udall (D-Colo.) and Rand Paul (R-Ky.) are also scheduled to speak.

Consumer Financial Protection Bureau Director Richard Cordray, Former Secretary of State Condoleezza Rice, premier, non-partisan political analyst Charlie Cook, and journalistic duo Bob Woodward and Carl Bernstein are also on the schedule of speakers.

The 2012 GAC, which will take place March 18-22 at the Washington Convention Center in Washington, D.C., will provide more than 4,000 credit union representatives an opportunity to hear from influential leaders from Congress and the federal regulatory agencies during the meeting's sessions, as well discuss pressing credit union issues with federal lawmakers and regulators in private meetings.

Recognized as the premier conference to attend for political impact, credit union networking and industry updates, the GAC also offers a wide array of educational breakout sessions, the industry's largest exhibitor showcase, guest/family programs to tour Washington's sights, and special entertainment including an opening concert and the closing Gala Reception and Dance. This year's event will be kicked off by American Idol star Taylor Hicks, who will perform at the opening concert, sponsored by the CUNA Councils.

Registration, housing information, and other information can be found using the resource link below.

FBI crime report includes mortgage FI fraud

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WASHINGTON (2/29/12)--Mortgage and financial institution fraud were two of the high priority issues investigated by the Federal Bureau of Investigation's (FBI) White-Collar Crime program in 2011, the agency reported.

The FBI in its Financial Crimes Report to the Public covered trends in financial crime in the 2010 and 2011 fiscal years. The report describes trends in corporate fraud, securities and commodities fraud, healthcare fraud, insurance fraud, mass marketing fraud, and money laundering.

While the FBI said it continues to consider loan origination fraud to be the "most egregious type of mortgage fraud because of the high dollar losses" associated with it, the report noted that distressed homeowner fraud has displaced loan origination fraud as the number one mortgage fraud threat investigated in many FBI offices.

The agency noted these schemes, which victimize troubled homeowners, can take the form of false foreclosure rescue and loan modification programs, and mortgage debt elimination schemes.

In foreclosure rescue schemes, criminals mislead homeowners into believing they can save their home by transferring the deed or putting the property in the name of an investor. The perpetrators then sell the property to a third party investor or use a so-called "straw borrower" to purchase the home, create equity using a fraudulent appraisal, and steal the seller proceeds or fees paid by the homeowners, the FBI said.

While some of these foreclosure avoidance firms tell the former homeowners they may rent the home until they are in good enough financial condition to buy it back, the new homeowners often stop paying their mortgage, and the home goes back into foreclosure, the FBI added.

Loan modification schemers often ask homeowners to pay up-front for loan modification help, and either negotiate unfavorable terms for their clients or do not negotiate on behalf of their clients at all.

Overall, the FBI has continued to dedicate significant resources to mortgage fraud cases, and has increased the total number of agents investigating these cases to 325 in 2011. Only 120 agents investigated these cases in 2007. The agency had 2,691 pending mortgage fraud cases in 2011, and the FBI's investigative actions resulted in $1.38 billion in restitutions and $116.3 million in fines being paid in fiscal 2011.

The FBI said its financial institution fraud investigations often uncover organized criminal groups that take part in the sale and distribution of stolen and counterfeit corporate checks, money orders, payroll checks, credit and debit cards, U.S. Treasury checks, and currency.

One fraud case outlined  in the report was the St. Paul Croatian FCU case. In that case, former CEO Anthony Raguz allegedly issued more than 1,000 fraudulent loans to more than 300 account holders between 2000 and 2010, and allegedly accepted more than $500,000 in bribes, kickbacks and gifts from people obtaining the fraudulent loans.  (See related News Now, Feb. 28 story: Woman gets a day in prison in St. Paul Croatian fraud)

The scheme resulted in the credit union being placed into conservatorship in April 2010, and ultimately cost the National Credit Union Share Insurance Fund $170 million in losses.

Raguz plead guilty to federal charges earlier this year and will be sentenced on June 11. A number of other co-defendants are also being sentenced for their roles in the fraud ring.

For more of the FBI crime report, use the resource link.

Fed is pondering housing market fixes

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WASHINGTON (2/29/12)--The Federal Reserve (Fed) is working to understand the reasons behind continued mortgage and home market difficulties "and the tradeoffs involved in designing policies that would remove obstacles to normal market functioning," Fed Governor Elizabeth Duke said during a Tuesday Senate Banking Committee hearing.

Duke was joined at the witness table by U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan and Federal Housing Finance Agency Acting Director Edward DeMarco during the hearing, which was entitled "The State of the Housing Market:  Removing Barriers to Economic Recovery."

While recent economic difficulties slowed the purchase of new and existing homes, home sales have not picked up as the economy has recovered. "Six years after aggregate house prices first began to decline, and more than two years after the start of the economic recovery, the housing market remains a significant drag on the U.S. economy," Duke said in her testimony.

"In a typical economic cycle, as the economy turns down households postpone purchases of durable goods such as housing. Once the cycle bottoms out, improving economic prospects and diminishing uncertainty usually help unleash this pent-up demand. This upward demand pressure is often augmented by lower interest rates, to which housing demand is typically quite responsive," she told the banking panel, adding that the current economic recovery "has not followed this script."

She said that may be, in part, because the problems in the housing market are a cause of the downturn as well as a consequence of it.

Declining home values caused by economic issues resulted in $7 trillion in lost home equity, and "this substantial blow to household wealth has significantly weakened household spending and consumer confidence," she added.

Duke further noted that 12 million U.S. households owe more than their home is worth, and this lack of home equity is one of many factors that can lead to delinquencies, foreclosures and other issues if employment issues arise for homeowners. The high foreclosure rate caused by these issues is likely to continue, Duke said, and home prices will continue to decline as a result.

She added that tight lending markets are not helping to stoke demand, and said the Fed is considering addressing this issue by taking action to increase credit availability to households that wish to purchase a home or refinance their mortgage. The Fed may also explore the scope of future mortgage modifications and create new ways for owners of foreclosed properties "to dispose of their inventory responsibly."

Any new policy proposals "will require wrestling with difficult choices and tradeoffs, as initiatives to benefit the housing market will likely involve shifting some of the burden of adjustment from some parties to others," Duke said.

DeMarco in separate testimony addressed the steps his agency has taken to deal with housing issues, including "preventing foreclosures through loss mitigation, facilitating refinancing at today's low interest rates, and initiating a real estate owned (REO) program to address the supply of foreclosed homes."

DeMarco also addressed the Obama administration's strategic plan for the next phase of the conservatorships of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. The administration has suggested that the government gradually contract the GSEs' dominant presence in the marketplace while simplifying and shrinking their operations, and maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.

For more on the witnesses' testimony, use the resource links.

Inside Washington (02/28/2012)

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  • WASHINGTON (2/29/12)--Foreign institutions, and in some cases their governments, have protested that the U.S. is stepping outside of its jurisdiction in implementing a ban on bank proprietary trading. The so-called Volcker Rule--named for former Fed Chairman Paul Volcker, who first proposed the trading ban--is part of the Dodd Frank Act. "The proposed rule appears to extend well beyond U.S.-insured depository institutions and imposes significant restrictions on Canadian banking entities by limiting their use of U.S.-based resources, personnel and market infrastructure and by preventing them from trading with U.S. counterparties," Mark Carney, governor of the Bank of Canada and chairman of the Financial Stability Board, said in a letter to Federal Reserve Board Chairman Ben Bernanke. Other countries, including France, Germany, Mexico and Japan, share concerns that the rule could unintentionally harm liquidity, widen spreads and increase volatility at foreign institutions. They also argue that U.S. treasury bonds are treated more favorably than foreign debt under the rule …
  • WASHINGTON (2/29/12)--The Federal Reserve Board on Monday released action plans for its regulated banks to correct deficiencies in residential mortgage-loan servicing and foreclosure processing. The Fed also released engagement letters between supervised financial institutions and independent consultants retained by the firms to review foreclosures that were in process in 2009 and 2010. The action plans are required by formal enforcement actions issued by the Fed last year. The enforcement actions direct mortgage loan servicers to submit plans that describe how the institutions will: strengthen communications with borrowers by providing the name of a primary point of contact at the servicer; establish limits on foreclosures where loan modifications have been approved; establish robust, third-party vendor controls; and strengthen compliance programs …

CUNA to NCUA Lighten CU reg burden

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WASHINGTON (2/28/12)--The National Credit Union Administration (NCUA) could be moving in the right direction with its proposal to eliminate the Regulatory Flexibility (RegFlex) program and, instead, allowing federal credit unions to engage in activities permitted by the existing RegFlex rule without the need to apply for RegFlex designation. However, the agency should go further and give credit unions even greater freedom from burdensome regulations, the Credit Union National Association (CUNA) said in a comment letter Monday.

Under the proposal to eliminate RegFlex, the NCUA would allow all credit unions to: donate funds to charities of their choosing;  accept non-member deposits, subject to predetermined limits, from local governmental entities or other credit unions;  and purchase private-label commercial mortgage-related securities, subject to certain net worth constraints and safety and soundness rules. Other rights would also be granted to credit unions that are not covered under the RegFlex designation.

While the NCUA  intends the change to relieve general regulatory burden on credit unions and remove the burden created by the RegFlex application process, CUNA questioned how much the changes would actually help overburdened credit unions.

The NCUA has revised its RegFlex program several times over the years, and many of these changes have rendered the RegFlex program much less helpful to credit unions, CUNA Deputy General Counsel Mary Dunn noted in the letter.

"As the NCUA looks to relieve credit unions regulatory burden, it should revisit the elements addressed in the original RegFlex program and work from there," Dunn recommended.

For the full comment letter, use the resource link.

CUs help members banks help banks voter survey says

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WASHINGTON (2/28/12)--A recent Credit Union National Association (CUNA) poll of voters has revealed that 77% of those surveyed believe banks charge too much for their services, and assess too many fees on their customers. This was an increase of six percentage points over 2011's number.

Credit unions fared much better in terms of voters' assessment of fees. Only 9% of respondents said credit union fees are too high. That was a decrease of two percentage points from the previous year, and 11% is the highest this total has been in the past nine years.

The majority of survey respondents continued to recognize the credit union difference, as 78% said that credit unions are owned and operated for the benefit of their members and 71% said that credit unions "look out for the little guy."

Only 14% of respondents said that banks seek to benefit their customers, and 15% said that banks "look out for the little guy."

Credit unions were also recognized as an excellent lending choice for low-income citizens, with 54% of voters surveyed saying that credit unions were more willing to work with their low-income members. This perception has remained steady since 2004, with around half of those surveyed acknowledging the positive work of credit unions in low-income communities.

The percentage of respondents that believe that banks work with low income people is significantly lower, totaling 20% this year and never exceeding the 27% total recorded in 2009.

CUNA's 2012 National Voter Survey drew responses from 1,000 randomly selected registered voters in locations nationwide. CUNA has conducted an annual voter survey since 1999.

Specific financial products were also addressed in the survey, as 51% said they would prefer a credit union for a small personal loan, 48% said they would use a credit union to take out a new car loan, and 50% said they would obtain a used car loan from a credit union. Banks received ratings of around 35% for all three of these categories.

The surveyed showed credit unions had some work to do to compete in other areas. Credit unions continued to trail banks when it comes to credit cards, home mortgages, home equity lines of credit, and other financial services.

However, credit unions have posted significant gains in recent years, posting seven percentage point increases over 2007's results for home mortgages and HELOCs, and smaller gains in other financial services categories.

Credit unions did not lose ground to banks in any of these categories.

The vast majority of those voters surveyed said that credit unions should be allowed to offer their higher level of service to more Americans, with 82% saying that credit unions should be "able to grow."

Overall, the survey shows credit unions have outshone banks in consumers' perceptions of safety and soundness with 40% of respondents to a recent poll saying they believe credit unions are the safest financial institutions. Thirty four percent said they felt banks were safest, and another 19% said both institutions were equally safe. (This is the second in a series of News Now articles on the results of CUNA's 2012 National Voters' Survey. See related Feb. 23 story: Survey shows continuing growth in CU reputation.)

Monetary policy housing and Reg Q on Congress hearing agenda

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WASHINGTON (2/28/12)--With few votes scheduled as U.S. House and Senate members return to Washington this week, credit unions will want to keep an eye on hearings related to housing policy, monetary policy, and the impact of the recent repeal of Regulation Q.

The Senate Banking Committee on Tuesday will hold a hearing entitled "The State of the Housing Market:  Removing Barriers to Economic Recovery." U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Federal Reserve (Fed) Governor Elizabeth Duke, and Federal Housing Finance Agency Acting Director Edward DeMarco are expected to testify.

The House Financial Services insurance, housing and community opportunity subcommittee will also hold a housing hearing on Tuesday, as it meets to discuss HUD oversight issues. Acting Federal Housing Administration Commissioner Carol Galante and four HUD assistant secretaries are scheduled to testify.

Fed Chairman Ben Bernanke will deliver the semiannual monetary policy report to the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.

The House financial institutions subcommittee has scheduled a hearing on "Understanding the Effects of the Repeal of Regulation Q on Financial Institutions and Small Businesses" for Thursday.

The Fed last year released a final rule that repealed Regulation Q, and, as a result, community banks and other for-profit financial institutions are now be permitted to pay interest on commercial checking accounts. Many opposed the repeal, saying that it would have 'devastating' effects on smaller and community banks.

The Senate Budget Committee is also expected to hold a hearing on tax reform on Thursday, with a panel of academics scheduled to testify.

The Obama administration's new corporate tax reform plan, which was released last week, calls for a wide-range of corporate tax law changes, but nothing in the proposal specifically targets credit unions.

Debate over the tax proposal is expected to be contentious, and could continue into next year. The Credit Union National Association (CUNA) will continue to remain "engaged and vigilant" as the debate moves forward, CUNA President/CEO Bill Cheney said.

CUNA is also watching two bills that may receive consideration in the coming weeks.  The first is H.R. 4014, which would protect the privilege of information submitted to the Consumer Financial Protection Bureau. (See related Feb. 27 story: House could soon vote on CFPB privacy bill).

The Cybersecurity Act of 2012 (H.R. 2105) could also come up for a vote in the coming weeks.

Action needed on ATM issue CUNA to CFPB

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WASHINGTON (2/28/12)--The Credit Union National Association (CUNA) in a comment letter has asked the Consumer Financial Protection Bureau to review and suspend the duplicative ATM notice requirements under Regulation E, and revise its Reg E requirements to no longer mandate duplicate ATM notices.

Reg E, which implements the Electronic Fund Transfers Act (EFTA), is one of many consumer related financial regulations the CFPB is taking authority over.

Under current ATM notice requirements, credit unions and other financial institutions must display at each ATM location that fees will or may be charged. More detailed ATM fee information must also be provided before the transaction is completed, either by showing it on the ATM's screen or providing the ATM user with a small printed disclosure before the consumer is committed to paying the fee.

Credit unions and others have found that the outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb.

"We urge CFPB to use its authority to eliminate redundant ATM disclosures, which are of questionable utility to consumers and are subjecting credit unions to needless costs and potential lawsuits," CUNA Regulatory Counsel Dennis Tsang said in the CUNA comment letter.

CUNA has also called on Capitol Hill to address the ATM issue, cosigning a letter to Congress with the Electronic Funds Transfer Association (EFTA) and other groups. (See related Feb. 10 story: ATM disclosure changes needed, says CUNA joint letter)

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

Inside Washington (02/27/2012)

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  • WASHINGTON (2/28/12)--The Federal Deposit Insurance Corp.'s (FDIC's) Quarterly Banking Profile for the fourth quarter of 2011 is due out tomorrow and it also will include the banking and thrift  industry's full 2011 earnings. The third-quarter report, released in November, announced institutions' earning of $35.3 billion in the third quarter--a 50% jump from a year earlier.  Much of the dramatic rise was attributed to lower loss provisions. (American Banker Feb. 27) There will be an FDIC briefing today at 10 a.m. (ET) on the quarterly figures, which will include a statement from acting FDIC Chairman Martin Gruenberg, followed by a question-and-answer period with agency staff. …
  • WASHINGTON (2/28/12)--The U.S. Small Business Administration (SBA) has raised the size definitions of small businesses in the transportation and warehousing sector. The final rule will increase the revenue-based size standards in 22 industries and retain the current size standards for the remaining 37 industries in the sector.  The SBA estimates as many as 1,200 additional firms in this sector will become eligible for SBA programs as a result of these revisions.  The agency also has proposed a rule to increase the size standards for the health care and social assistance sector. The plan would increase the small business size standards for 28 industries in that sector, and as many as 4,100 additional firms could become eligible for SBA's programs and services if the proposed increases are adopted, according to the SBA. …
  • WASHINGTON (2/28/12)--It appears that continued pressure from consumer groups, and perhaps from state and federal officials, may be working to bring the opinion of the Office of the Comptroller of the Currency (OCC) more into alignment with the aforementioned parties and the Federal Reserve Board regarding whether borrowers who have received compensation from a mortgage servicer under the $25 billion settlement should have waive any rights to future legal action. The OCC has maintained that there may be some situations where a borrower should be required to waive legal rights as a condition of compensation under the independent foreclosure review being conducted by the 14 largest servicers. The Fed generally has been opposed to such releases. An article in the Feb. 27 issue of American Banker reported that a person involved in the process of building the remediation framework said borrowers would retain the right to sue mortgage servicers even under the $25 billion mortgage servicers' settlement. …

Inside Washington (02/24/2012)

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  • WASHINGTON (2/27/12)--Since it began accepting complaints about mortgage servicers online in December, the Consumer Financial Protection Bureau (CFPB) has fielded 2,300 complaints from consumers, Christopher C. Haspel, a senior adviser for securitization and servicing at the agency, said Thursday (American Banker Feb. 24). The most common complaint is that servicers repeatedly request documentation, although borrowers have already provided the information, said Haspel, speaking at a mortgage servicing conference sponsored by the Mortgage Bankers Association. Reforming the mortgage markets is one of the CFPB's primary responsibilities under the Dodd-Frank Act, and among its top priorities. The agency's goal is to form a single set of standards with input from other regulators, Haspel said …
  • WASHINGTON (2/27/12)--The Federal Deposit Insurance Corp. (FDIC) said it hopes a new study will help it build a better definition of community banks beyond asset size. Banks generally below $1 billion are considered "community" financial institutions. Richard Brown, the FDIC's chief economist, said the study will help the agency look at other attributes such as lending, core deposits and geographic service areas (American Banker Feb. 24). Banks with as much as $20 billion assets could be considered community financial institutions if they focus on serving their communities, said Randy Dennis, a banking consultant in Little Rock, Ark. The study indicated that non-community banks are on average 64 times larger than community banks--$17 billion compared with $280 million. The large banks were only 12 times larger in 1985 …

FinCEN may grant temporary e-filing extension

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WASHINGTON (2/27/12)--Small credit unions that lack internet access, and other institutions that meet certain criteria, could be given a temporary extension for complying with the Financial Crimes Enforcement Network's (FinCEN) new Bank Secrecy Act (BSA) electronic filing requirements, FinCEN announced late last week.

FinCEN will make electronic filing of all Bank Secrecy Act (BSA) reports mandatory on July 1. However, FinCEN said, small credit unions that do not have internet connectivity within their financial institution and file few BSA reports may submit a hardship exemption request for additional accommodation to arrange for the electronic submission of reports to FinCEN. FinCEN said any temportary exemptions that are granted to these institutions would not be extended beyond March 31, 2013.

Credit unions and other financial institutions that have the technical ability to e-file BSA Currency Transaction Reports (CTR) but are using aggregation systems that are currently incompatible with the BSA E-Filing System's batch and computer-to-computer reporting capabilities could also be granted an exemption, and given the time needed to update their computer systems. However, this reprieve would only last until December 31, FinCEN said.

The agency said it would also consider requests for temporary hardship exemptions, but noted that few of those exemptions would be granted. Any hardship exemptions that are granted would likely not be extended beyond March 31, 2013, FinCEN said.

Exemption requests must be filed with FinCEN by March 26.

FinCEN has said the switch to all-electronic BSA filing would improve efficiency, reduce costs for the financial industry, and enhance the ability of investigators, analysts, and examiners to gain better and more timely access to important financial information. Increased BSA E-Filing would also help FinCEN provide information relevant to money laundering and terrorist financing investigations to law enforcement in the quickest manner possible, shortening the lag time between when BSA reports are filed and when they can be accessed by authorities to two days, the agency added.

The Credit Union National Association (CUNA) has said it supports FinCEN's work to provide law enforcement with more useful and timely BSA data, and has encouraged credit unions to use electronic filing features, but also noted there are compliance and implementation cost concerns for credit unions.

CUNA in a comment letter urged FinCEN to work with the National Credit Union Administration (NCUA), state regulators, and third-party vendors "to minimize compliance costs related to the proposal," and suggested that FinCEN exempt credit unions with less than $50 million in assets from the e-filing requirements. CUNA also suggested that FinCEN provide a waiver for credit unions that demonstrate substantial core processing or system costs.

For a FinCEN release, a CUNA Comp Blog post on the issue and a comment letter on FinCEN's BSA changes, use the resource link.

House could soon vote on CFPB privacy bill

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WASHINGTON (2/27/12)--A House bill that would ensure that groups or individuals that supply information to the Consumer Financial Protection Bureau (CFPB) would not waive their right to privacy protections could soon see action in Congress, with a full House vote possible later this week.

Similar House and Senate bills, H.R. 4014 and S. 2099, would make technical amendments to the Federal Deposit Insurance Act. H.R. 4014 is notably cosponsored by House Financial Services Committee Chairman Spencer Bachus (R-Ala.), and S. 2099 is backed by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking committee minority member Richard Shelby (R-Ala.).

The types of privacy improvements contained in the bills have also been endorsed by CFPB Director Richard Cordray.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA appreciates the intent of both of these bills, and has worked closely with legislators and the National Credit Union Administration to ensure that both bills sufficiently protect credit unions. "We have received assurances that credit unions will be protected," Donovan added.

Pa. CU Assn. seeks support for capital bills

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WASHINGTON (2/27/12)--The Pennsylvania Credit Union Association (PCUA) has reached out to federal legislators, urging them to cosponsor the Capital Access for Small Business and Jobs Act (H.R. 3993), which would allow credit unions to obtain supplemental capital.

The PCUA board of directors and Governmental Affairs Committee signed a resolution supporting H.R. 3993 earlier this month (See News Now, Feb. 17), and last week circulated that resolution, with an attached letter, to Pennsylvania's U.S. House and Senate delegation.

Current law restricts credit unions to building their capital levels through retained earnings. Under the bill, supplemental capital would have to be uninsured and subordinate to other claims against a credit union. The bill also authorizes the National Credit Union Administration to set maturity limits on this capital and restrict the ability to raise supplemental capital to credit unions that are sufficiently capitalized and well-managed.

PCUA Chairman Michael Kaczenski in a release said that while "supplemental capital might not be for every credit union… the value of the credit union charter and the overall viability of the credit union movement would be improved if [credit unions gained] access to alternative sources of capital."

H.R. 3993 was introduced in early February by Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.), and currently has 8 additional cosponsors.

The Credit Union National Association (CUNA) in a recent letter to King and Sherman said the "visionary" legislation "would provide credit unions with appropriate ability to raise capital from sources other than retained earning without putting in jeopardy the 'one member, one vote' principle that is the bedrock of the credit union ownership structure.

"As credit unions emerge from the financial crisis, this legislation would improve the safety and soundness of credit unions by allowing them to develop a supplement cushion to reduce risk to the National Credit Union Share Insurance Fund (NCUSIF)," the letter added.

CUNA Chief Economist Bill Hampel in the most recent edition of CUNA's Credit Union NewsWatch said H.R. 3993 has been "carefully drafted to avoid raising issues that could jeopardize the federal credit union tax status." Hampel said the supplemental capital bill, if enacted, would help credit unions whose capital ratios have been reduced by the recent financial crisis and recession to much more rapidly rebuild their capital ratios. Credit unions would also benefit from the greater protection afforded the NCUSIF by greater capital ratios at those credit unions that choose to use supplemental capital, he added.

For more from the most recent edition of Credit Union NewsWatch, use the resource link.

CUNA CFPB should simplify Reg Z

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WASHINGTON (2/24/12)--The Consumer Financial Protection Bureau (CFPB) should make simplification of Regulation Z a priority, and consider how the entire mortgage application and consummation process can be improved for borrowers and lenders alike, the Credit Union National Association said in a recent comment letter.

The agency should also examine lending products that are covered by the rule to determine whether current requirements facilitate the ability of consumers to understand what is being offered to them, CUNA added.

Reg Z implements the Truth in Lending Act. CUNA in the letter noted that Reg Z is among the most complex and costly regulations to implement for credit unions, and said many credit unions have asked for more flexible guidance from the CFPB and the National Credit Union Administration on multi-featured open-end lending.

Credit unions are also concerned by portions of Reg Z that address 14-day advance notice requirements and sections that govern when increased penalty rates may be applied to delinquent accounts. There is also confusion regarding when preferential loan rates can be given to employees that take out accounts at their employing financial institution and whether the length of the cycle for issuing periodic statements should match the payment frequency terms of a given loan.

CUNA is currently reviewing Regulation Z with its Consumer Protection Subcommittee and Lending Council, and will provide additional comments and recommendations to the CFPB later this year.

For the full comment letter, use the resource link.

Home prices fell 0.1 in 2001 4Q FHFA reports

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WASHINGTON (2/24/12)--U.S. home prices decreased by 0.1% in the fourth quarter of 2011, the Federal Housing Finance Agency (FHFA) reported.

The 0.1% decrease is based on the FHFAs seasonally adjusted purchase-only house price index (HPI), which the FHFA said is calculated from home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages.

"While FHFA's national index shows a 2 percentage point price decline over the latest four quarters, twelve states and the District of Columbia posted price increases," FHFA Principal Economist Andrew Leventis noted. "When coupled with the fact that about half of all U.S. states saw price increases in the latest quarter, this growth adds to mounting evidence that real estate markets are seeing at least some signs of life," he added.

Home prices decreased by 1.1%, on an adjusted basis, during the quarter, and seasonally adjusted home prices fell 2.4% from the fourth quarter of 2010 to the fourth quarter of 2011, the FHFA said. However, the FHFA's seasonally adjusted monthly index for December was 0.7% higher than the total recorded in November.

Home prices in the West South Central census division, which includes Arkansas, Louisiana, Oklahoma and Texas, were the quarter's strongest, increasing by 1.1%. Home prices showed the sharpest decline in New York, New Jersey and Pennsylvania, falling by 1.2%.

For the full release, use the resource link.

Liquidity rule changes too broad CUNA says

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WASHINGTON (2/24/12)--The Credit Union National Association (CUNA) does not support the National Credit Union Administration's (NCUA) proposed emergency liquidity regulations for federally insured credit unions because CUNA does not agree that a new rule on liquidity is needed.

The CUNA comments were in response to a request for comments from NCUA regarding whether credit unions should be required to maintain access to emergency liquidity. The agency's notice outlines a number of options that credit unions could take to ensure they maintain needed liquidity in times of financial stress.

Under the notice, credit unions could ensure liquidity by:
  • Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or through a corporate credit union;
  • Obtaining and maintaining "demonstrated access" to the Federal Reserve Discount Window; or
  • Maintaining a certain percentage of their assets in highly liquid U.S. Treasury securities.


CUNA worked with various association groups and collected data, as it routinely does, to respond to the notice in its comment letter. The majority of commenters indicated they do not support a new emergency liquidity regulation.

CUNA does agree that monitoring and managing liquidity by credit unions, particularly larger ones, is very important for a smooth functioning payment and financial system, but added it has reservations about requiring all federally insured credit unions to develop and maintain access to federal sources of liquidity that are approved by NCUA.

"Credit unions should decide for themselves, based on their risks, whether an emergency liquidity source is called for and what the source or sources should be," CUNA Deputy General Counsel Mary Dunn wrote.

If NCUA does move forward with an emergency liquidity proposal, the agency should consider a credit union's level of payment-system risk and net worth, among other things, when it determines which credit unions should be subject to the rule, the CUNA letter continued.

Ninety percent of credit unions that responded to a CUNA comment call on the liquidity proposal said alternative federal sources, such as the Federal Home Loan Banks (FHLBanks), should be acceptable sources of liquidity to meet the needs of the NCUA liquidity proposal, if the agency moved forward.

CUNA strongly supported the use of FHLBanks for liquidity and offered several recommendations to improve the CLF, as well as access to the Federal Reserve's Discount Window for credit unions.

The 12 Federal Home Loan Bank presidents, in their own comment letter, urged the NCUA to add their banks to the agency's list of approved emergency liquidity providers for credit unions.

"Like Treasuries, FHLBank Consolidated Obligations are accepted as safe investments and have garnered support from regulators and market participants for their benefits as a source of liquidity during times of crisis," the presidents wrote.

They also said, "Unlike certain sources of liquidity that are only available during times of emergency, FHLBank (a)dvances serve as a source of liquidity for member institutions, enhancing their funding abilities in all economic cycles," the presidents added.

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

Inside Washington (02/23/2012)

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  • WASHINGTON (2/24/12)--The Obama administration on Thursday released a "Consumer Privacy Bill of Rights" that would give internet users more control over their personal information. The bill of rights states that consumers have the right to determine what personal data is collected by online firms, and to ensure that that data is handled securely and responsibly. They are also entitled to access and correct their personal data, and can "expect that organizations will collect, use, and disclose personal data in ways that are consistent" with the context in which they provide the data. Consumers also have the right to "easily understandable information about privacy and security practices," the proposal adds. The administration said these guidelines would be used as new privacy related laws and regulations are crafted. …
  • WASHINGTON (2/24/12)--Officials at the Department of Housing and Urban Development (HUD) offered assurances that U.S. taxpayers will not subsidize the $26 billion mortgage settlement. An article in last Friday's Financial Times argued that there is a taxpayer subsidy because modifications performed under the Treasury's Home Affordable Modification Program (HAMP) are eligible for credit under the settlement. In a blog post Wednesday, HUD said servicers cannot use HAMP incentives to meet their obligations under the settlement. HAMP pays incentives to encourage mortgage modifications, HUD said. While the incentives may include payments for reducing principal, most HAMP modifications do not include principal reduction. The settlement does not give any credit for these HAMP modifications. For the modifications that do include principal reduction, servicers only receive credit for the portion of the principal reduction that they themselves pay for, not for the portion covered by incentives in the program, HUD said …
  • WASHINGTON (2/24/12)--Carol Galante, acting assistant commissioner of the Federal Housing Administration (FHA), Wednesday said Bank of America's $1 billion dollar payment from the mortgage settlement was not a "gift" to bail out the FHA's mortgage insurance fund, but compensation for previous losses (American Banker Feb. 23). Galante did not dispute that the payment essentially kept the FHA's mortgage insurance fund from going in the red. As part of the $26 billion settlement with the five majors servicers, BofA agreed to a pay $l billion to resolve allegations of "fraudulent and wrongful conduct." The FHA plans to announce premium increases next week, said Galante, who spoke at a conference for mortgage servicers hosted by the Mortgage Bankers Association in Orlando, Fla. …
  • WASHINGTON (2/24/12)--Know anyone with a background in consumer protection, financial services, fair lending and civil rights, consumer financial products or services, or community development, who is not a federal lobbyist?  The Consumer Financial Protection Bureau announced Thursday that it is seeking nominations of just such people to become members of its Consumer Advisory Board. That panel of consumer experts will advise the bureau on emerging trends and practices in the financial services and products industry. Details of how to submit a nomination are included in a Federal Register document

Survey shows continuing growth in CU reputation

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WASHINGTON (2/23/12)--Credit unions outshone banks in consumers' perceptions of safety and soundness with 40% of respondents to a recent poll saying they believe credit unions are the safest financial institutions, compared to 34% naming banks. Nineteen percent of respondents said they trusted both types of institutions equally.

The numbers are the results of the 2012 Credit Union National Association (CUNA) National Voter Survey, which drew responses from 1,000 randomly selected registered voters in locations throughout the country.

"This result is remarkable in light of the fact that many of those polled were not even aware that credit unions are insured just the same as banks," said CUNA Senior Vice President of Political Affairs Richard Gose. Federally insured credit unions and banks are backed by the full faith and credit of the U.S. government up to $250,000.

"It is significant that credit unions have pulled so far in front of banks in terms of voters' trust," Gose added.

The perception of credit unions being as safe or safer than banks first appeared in CUNA's 2009 survey, when credit unions eked a slight advantage over banks at 37% versus 36%.  The 2012 six-percentage-point difference favoring credit unions is a far cry from 2004 results when 49% of voters sided with bank safety compared to 25% claiming the safety and soundness crown for credit unions. (That year 24% rated trust in credit unions and banks equally.)

In other results, the CUNA survey found that consumers' favorable opinions of credit unions held steady at 80%--a ranking that has varied little between 2004, when the question was first included in the survey, and 2012.  However, the favorability rating of banks continued its drop in 2012, hitting the lowest mark in over a decade.

The survey found that 69% of voters polled had a favorable view of banks.  That was a six percentage point drop from the previous year, and an even more dramatic drop from the 90% level banks held in 2004.

Another important finding for credit unions: In 2012 they pulled even with banks in consumer opinions about what form of financial institution is the best place for day-to-day checking and savings accounts. 

Back in 2004, banks, at 59%, had a 29-percentage point lead over credit unions at 30% (with 7% of respondents voting for both credit unions and banks).  That advantage dropped to 52% for banks, 33% for credit unions, and 11% for both 2009.

In the 2012 results, credit unions pulled up even at 43% with banks, with 10% of respondents choosing both.

"From a credit union perspective," Gose said, "voters' views are all trending in the right direction."

Look for more coverage of CUNA's National Voter Survey results in future editions of News Now. CUNA has been conducting an annual voter survey since 1999.

CUNA warns of burden in Reg B changes

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WASHINGTON (2/23/12)--Although the Consumer Financial Protection Bureau's (CFPB) interim final rule implementing the Equal Credit Opportunity Act substantially duplicates the Federal Reserve Board's Regulation B,  the few changes suggested by the bureau could impose unnecessary reporting burdens on credit unions, the Credit Union National Association (CUNA) warned the bureau.

The interim final rule was issued as part of the CFPB's ongoing project of requesting comment on how to streamline the regulations that were transferred to its authority from other agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In supplementary information accompanying the CFPB's request for comments, the bureau noted there are some changes to Reg B required by the Dodd-Frank Act.  They are, according  to the CFPB, needed to implement small business loan data collection requirements, as well as the right of consumers to be provided a copy of an appraisal.

CUNA urged the CFPB to do all it can to minimize the impact of any new reporting requirements on credit unions.  Also, CUNA recommended that the CFPB coordinate with the Fed to insure motor vehicle dealers are subject to the same data collection requirements as traditional depository institutions.

The supplementary information also said the CFPB may increase the duration of a record-keeping requirement. The change would recognize that Dodd-Frank expands a statute of limitations under Reg B from two to five years for filing civil actions, such as when a borrower or potential borrower files suit against a lender under the regulation.

"In recognition of the regulatory burdens that credit unions must already operate under, CUNA urges the CFPB to refrain from extending the recordkeeping requirements," CUNA wrote.

Use the resource link to read CUNA's complete comment letter.

CUs represented in CFPB overdraft discussion

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NEW YORK, N.Y. (2/23/12)—Helping members avoid overdrafts is consistent with the central mission of credit unions, Robert Allen, president/CEO of Long Island, N.Y.'s Teachers FCU, said in a Wednesday meeting with the Consumer Financial Protection Bureau (CFPB) in New York City.

Allen appeared on behalf of his credit union, the Credit Union Association of New York, and the Credit Union National Association (CUNA) at a panel discussion on overdraft fees. He was the only credit union representative speaking during the meeting. Representatives from large and community banks and consumer groups also joined CFPB staff at the meeting.

CFPB Director Richard Cordray during the meeting announced a new overdraft fee initiative, for which the bureau will seek public comment.  Cordray said the bureau will use the comments from consumers, the financial services industry, and other interested parties to craft new overdraft fee disclosures and rules.

He added that the CFPB also will use the commentary to assist with policymaking on overdraft practices and to prioritize the bureau's regulatory and education work. It is not clear to what extent credit unions will be part of this effort.  CUNA will be meeting again with CFPB staff on this issue.

Cordray will be speaking to CUNA's Government Affairs Conference next month at the Washington, D.C. Convention Center.

The agency has distributed questionnaires to large banks in an effort to evaluate how those institutions' overdraft policies affect consumers. The CFPB in a Wednesday release said it plans to examine the practice of re-ordering purchases and payments to maximize overdraft fees charge, whether consumers can anticipate and avoid overdraft fees, and how differences in the way institutions explain and promote overdraft programs may affect opt-in rates. As part of the project, the CFPB will also reexamine a recent Federal Deposit Insurance Corporation study that suggested that overdraft programs disproportionately impact low-income and young consumers.

The CFPB is also considering requiring a so-called "penalty fee box" – which would add information on the amount overdrawn, and total overdraft fees charged each month – be added to a consumers monthly checking account statement, and is developing a consumer overdraft fee education project.

Citing industry estimates, the CFPB said the average overdraft fee ranged from $30 to $35 in 2011, and has increased by 17% since 2005.

A study by the Federal Deposit Insurance Corporation published in 2008 found that consumers who overdrew 20 or more times per year paid an average of $1,610 in overdraft fees annually.

Allen said credit unions support meaningful overdraft fee disclosures, but added that the CFPB needs to consider the costs that credit unions and other institutions would bear as it addresses overdraft fee issues.

He noted that credit unions routinely charge lower overdraft fees than those charged by banks, and said his credit union refunds many account fees and makes financial counseling available to members. CUNA Regulatory Counsel Jared Ihrig accompanied Mr. Allen.

For more on the CFPB overdraft project, use the resource link.

Obama tax reforms do not address CUs CUNA

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WASHINGTON (2/23/12)—While the Obama administration's new corporate tax reform plan calls for a wide-range of corporate tax law changes, nothing in the proposal specifically targets credit unions, the Credit Union National Association (CUNA) has found.

The 25-page proposal seeks to lower the overall corporate tax rate across the board to 28% from 35%. It would eliminate many corporate tax loopholes and broaden the tax base, but would also expand access to some corporate tax deductions, and make some temporary deductions permanent.

CUNA President/CEO Bill Cheney noted Wednesday, "While credit unions are not mentioned specifically, the administration's plan does speak broadly of starting 'from a presumption that we should eliminate all tax expenditures for specific industries, with the few exceptions that are critical to broader growth or fairness.'"

"We believe, of course, that credit unions are essential to broad economic growth and that we provide fairness to consumers and small businesses in the financial marketplace. In recent months we have made this point repeatedly in multiple discussions with senior officials in the White House, at the U.S. Treasury and with key members of the tax-writing Senate Finance and House Ways and Means Committees," Cheney said.

Debate over the tax proposal is expected to be contentious, and Cheney said it could continue into next year. CUNA will, he said, continue to remain "engaged and vigilant" as the debate move forward.

"Preserving credit unions' tax status remains our highest legislative priority," the CUNA leader added.

Inside Washington (02/22/2012)

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  • ARLINGTON, Va. (2/23/12)--While state regulators share some concerns about loan participations with the National Credit Union Administration (NCUA), the National Association of Credit Union Supervisors (NASCUS)  wrote in a Tuesday comment letter that it cannot support the proposal in its current form. In its letter, NASCUS said that concerns about loan participations can be reduced with strong underwriting, adequate program contract review and effective third party due diligence. "We strongly recommend NCUA work with state regulators to address supervisory concerns regarding loan participations in a manner that does less harm to the dual chartering system, more effectively mitigates material risk, and improves oversight while not unnecessarily burdening credit unions," NASCUS wrote. NASCUS agreed that loan participations present some material risk, but it said NCUA's proposed rule fails to make a convincing case that is the best way to mitigate that risk, especially considering its impact on dual chartering and state law. Historically, state-chartered federally insured credit unions have looked to state law and regulation to govern their loan participation activities. The NCUA proposal effectively wipes out the distinction between state and federal charters, NASCUS said …

NCUA issues second economic update video

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ALEXANDRIA, Va. (2/23/12)--Recent national economic improvements, and the impact those improvements could have on credit unions, are discussed in the National Credit Union Administration's (NCUA) latest YouTube briefing by its Office of the Chief Economist (OCE).

NCUA Chief Economist John Worth, in the agency's second YouTube installment, also addresses how budget reductions by federal, state, and local governments could impact credit unions with government-focused fields of membership in the YouTube video.



The agency earlier this year announced it would release an ongoing series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The NCUA videos can be viewed on the NCUA's YouTube page by using the resource link below.

Teachers FCU rep to discuss overdraft issues at CFPB meeting

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NEW YORK, N.Y. (2/22/12)--Robert Allen, president/CEO of Long Island, N.Y.'s Teachers FCU, will discuss his credit union's approach to overdraft fees, checking account disclosures, and other membership issues at a Wednesday meeting with the Consumer Financial Protection Bureau (CFPB) in New York City.



Allen will appear on behalf of his credit union, the Credit Union Association of New York, and the Credit Union National Association (CUNA).  While he is the only credit union representative on the agenda, Allen and will be joined by other financial industry and consumer panelists.

CUNA staff, CFPB Deputy Director Raj Date and other agency staff will also attend the meeting.

Cordray earlier this month said bank overdraft protection programs were one of the areas on the bureau's radar screen, but did not give details on how the CFPB plans to address overdraft issues.

CUNA in a recent meeting with Cordray and CFPB staff raised concerns regarding overdraft protection issues, and said that "credit union members do not need to be protected from their credit unions." However, credit unions do need increased regulatory relief, they said.

According to CUNA estimates, 56% of credit unions that offer checking accounts offer overdraft protection, and 11% of those that offer overdraft protection do not charge a fee for the service. The median overdraft fee is $25, and 95% of those that assess the fee do so on a per-item basis.

Survey shows CU recognition trust growing

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WASHINGTON (2/22/12)--Credit unions continue to outshine banks in the eyes of consumers when it comes to everyday financial services and important values such as safety and soundness, according to a new Credit Union National Association (CUNA) survey.

A CUNA survey taken early this month found that 43% of respondents felt credit unions were the best place for consumers to keep their day to day savings and checking accounts, tying the number of respondents that preferred banks. This represents the first time credit unions have pulled even with banks on this question. Ten percent of respondents said they would use both institutions.

For years banks held the advantage. In 2004, 59% of the consumers surveyed said they preferred to use banks for their everyday transactions, compared to 30% for credit unions. Sixty-one percent of respondents to a similar 2008 survey said they preferred banks, compared to 40% that preferred credit unions.

The improvement shown in the 2012 survey results is a reflection of the consumer awareness gains credit unions have made in recent years, CUNA Senior Vice President of Political Affairs Richard Gose said.

This year's survey also found that credit unions continued to represent safety and soundness to consumers, with 40% of respondents saying credit unions were a safer place to keep their money. Thirty four percent said they preferred banks, and 19% said they felt that both types of institutions were safe places to store their funds.

Credit unions have eclipsed banks in this safety and soundness category since 2009, and this Improvement seems to be a result of the financial crisis, as a 2008 CUNA survey showed that 72% of respondents felt secure with their funds in a bank. Forty-five percent said they felt credit unions were safer at that time.

Bank favorability fell to 75% in the recent survey, while 80% of respondents said they viewed their credit unions favorably.

"From a consumer perspective, credit unions are trending in the right direction," Gose added. The survey drew responses from 1000 randomly selected registered voters in locations throughout the country.

Look for more coverage of CUNA's National Voter Survey results in future editions of NewsNow.

Inside Washington (02/21/2012)

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  • WASHINGTON (2/22/12)--The Federal Housing Finance Agency (FHFA) in a report to Congress outlined a strategic plan for the next phase of the conservatorships of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. FHFA Acting Director Edward DeMarco said the FHFA "is contemplating next steps to build an infrastructure for the secondary mortgage market that is consistent with existing policy proposals and will support any outcome of the leading legislative proposals." The FHFA document, entitled "A Strategic Plan for Enterprise Conservatorships: The Next Chapter in a Story that Needs an Ending," suggests that the government gradually contract the GSEs' dominant presence in the marketplace while simplifying and shrinking their operations, and maintain foreclosure prevention activities and credit availability for new and refinanced mortgages. …
  • WASHINGTON (2/22/12)--The Securities and Exchange Commission (SEC) could soon present a model that would bring U.S. accounting rules, known as U.S. Generally Accepted Accounting Principles (GAAP), in line with the International Accounting Standards Board's (IASB) rules. SEC chief accountant James Kroeker told Reuters (Feb. 21) that the agency is "optimistic" it can find a framework. The project has been delayed by other domestic issues, including the development of the Dodd-Frank Act. The SEC and IASB have also been busy aligning their own standards with one another to ease the possible U.S. market transition. The SEC model would likely apply to all sizes of U.S. firms. "Having a model that works for everyone, even if there is a delay in timing, is important, otherwise you ingrain the idea that the smaller companies will never have to change and you end up with a two GAAP system permanently in the U.S.," he said. …
  • WASHINGTON (2/22/12)--As the Federal Reserve pushes for greater transparency in interest-rate policies and emergency-lending programs, that body is itself making many decisions, and taking on vast new regulatory responsibilities, behind closed doors, The Wall Street Journal reported (Feb. 21). The Fed has held 47 votes on financial regulations since the Dodd-Frank Act became law in mid-2010, and 45 of those votes were made by email, not in person. The votes were not publicly disclosed until the Journal obtained them last week. While the closed meetings, and concealed votes, are not illegal, they do represent a change from prior practice. The Fed routinely held open meetings in the past, with as many as 31 public meetings, per year, being held in the 1980s and 1990s. However, the number of open meetings began to decrease in the 1990s and they now rarely occur. The delayed publication of regulatory opinions and, at times, dissents could have an impact on the financial market and Congress, the Journal noted. Fed representatives have said they provide plenty of disclosure on their regulatory work, and noted that open meetings, which are at times scripted, can be inefficient and add little value. "You can have a scripted meeting that does not show any engagement at all," Fed Governor Daniel Tarullo said. However, Tarullo noted he has asked for open meetings on many Fed rules. Former Federal Deposit Insurance Corporation Chairwoman Sheila Bair said "people have a right to know and hear the discussion and hear the presentations and the reasoning for these rules. All of the other agencies which are governed by boards or commissions propose and approve these rules in public meetings… I think it would be in the Fed's interest to do so as well." 

White House may unveil corporate tax plan today

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WASHINGTON (2/22/12)--As national press outlets last night reported that the Obama administration would release its corporate tax reform plan today, Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said CUNA will be on the watch for how the plan could affect credit unions.

"Preserving the credit union tax status is a top CUNA priority," Donovan said. "That is why we have engaged Congress and the administration on the value credit unions bring to consumers and small businesses. We will be monitoring developments very closely."

Early press accounts offered no details of what the administration might unveil.

Treasury to stop paying savings bond fees in April

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WASHINGTON (2/22/12)--Having discontinued over-the-counter sales of U.S. savings bonds earlier this year, the U.S. Treasury Department now has announced it will discontinue paying fees to credit unions, banks and all U.S. Savings Bond agents for redeeming savings bonds as of April 11.

Savings Bond agents are currently paid 30 cents for each redeemed savings bond they submit.

The Treasury is shifting redeemed bond processing from the EZ Clear Program to image-enabled bond processing on April 16, and the EZ Clear Program will be decommissioned following the transition, Treasury said.

Series EE and I savings bonds are currently available for purchase through the Treasury's online purchase platform, TreasuryDirect.com. Consumers can also use the Treasury's online platform to convert existing paper bonds into electronic bonds and to purchase savings bonds via a payroll savings plan.

Treasury estimates that the move from paper to electronic bonds will save $70 million in taxpayer funds over five years.

The Treasury estimated that 679 million paper bonds worth $180 billion remain in circulation, and paper savings bonds will still be accepted, Treasury said.

For the full Treasury release, use the resource link.

Final CFPB mortgage form releases inching along

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WASHINGTON (2/22/12)--The Consumer Financial Protection Bureau's (CFPB) Know Before You Owe mortgage form revision project is nearing its end, and the agency is collecting comments on its latest version of loan application and loan closing documents ahead of the final stage of revisions.

The CFPB's Know Before You Owe project, which began last year, asked for comment on several drafts of a sample mortgage form that combines certain consumer disclosures required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into one document. A separate mortgage closing form is also being developed. The CFPB is required to publish rules and model disclosures by July.

The agency this week announced it is testing its latest application and closing form revisions with consumers and finance industry representatives in the Austin, Texas area, and is also accepting comments on the two forms online. The latest prototype forms use similar terminology and a similar closing cost format, a change the CFPB said helps the forms work well together.

The CFPB encouraged commenters to consider how easy or difficult it is to find key loan terms or to identify changes to loan terms or costs as they review the forms. The agency also asks if the disclosures are generally easy to use and explain.

Representatives from credit unions and other small businesses that make mortgage loans and conduct mortgage closings will also have their chance to comment on the CFPB's revised application and closing forms in an upcoming meeting, the agency announced. The meeting, which will take the form of a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, "is another step in the CFPB's wide-ranging efforts to gather the input of the people who will be affected by our rules," CFPB Director Richard Cordray said.

SBREFA panels, which are comprised of representatives from the CFPB, the Office of Management and Budget, and the U.S. Small Business Administration's Office of Advocacy, are required by the Dodd-Frank Act to solicit input from small entity stakeholders prior to the issuance of a CFPB proposed rule that would impact a significant number of credit unions and community banks. The panels are charged with making recommendation to CFPB on how to reduce regulatory burden on small entities.

In announcing the meeting, the CFPB noted it is also considering additional changes to mortgage rules, such as:
  • Requiring delivery of mortgage settlement disclosures at least three business days before closing;
  • Adding new, cautionary language to mortgage cost-estimate disclosures; and
  • Writing rules that would prevent third parties that are also involved in the mortgage process from increasing mortgage-related fees above the limits presented in their pre-closing cost estimates.
These proposals will also be discussed during the SBREFA panel, according to the agency.

Cordray, in the meeting release, said all feedback provided during the meeting will be considered. "The CFPB is dedicated to issuing thoughtful, research-based rules that take into account not only the benefits to consumers but also how businesses of all sizes will be affected," he added.

Once this comment round is complete, the CFPB will make final revisions to the form. The agency said it would also begin work on writing the rules that govern these disclosures.

For more on the CFPB's Know Before You Owe project, use the resource link.

Annual disclosures burden consumers FIs CUNA

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WASHINGTON (2/22/12)--Sending an annual privacy notice to every consumer with whom a financial institution has a continuing relationship is confusing to the consumer and costly and burdensome to the financial institution, the Credit Union National Association CUNA) told the Consumer Financial Protection Bureau (CFPB).

Commenting on a CFPB interim final rule on Regulation P, which requires the annual disclosures, CUNA wrote that when credit union members or bank customers receive the same, unchanged information from their institution on an annual basis, they may forego reading an actual notice of change when it arrives in the mail.  They could be lulled into an assumption that the change notice is just another routine disclosure.

CUNA asked the CFPB to remove the annual requirement from Reg P, instead replacing it with a requirement that a new notice be sent only when there is a change in the institution's privacy policy. This would not affect a financial institution's existing responsibility to provide a privacy notice at the time the member/customer relationship is commenced.

An equally important reason to remove the requirement, CUNA underscored in its letter, is to "help to relieve the regulatory burden on financial institutions."

CUNA stated, "This is particularly true for small institutions for which mailing an annual privacy notice is often costly, posing a significant regulatory burden."

CUNA encouraged the CFPB to seek, if needed, statutory authority to remove the annual disclosure requirement.

Small Philly CDCU is shuttered

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ALEXANDRIA, Va. (2/21/12)--A small Philadelphia-based community development credit union was liquidated over the weekend by the National Credit Union Administration (NCUA).  Another Philadelphia credit union, TruMark Financial, assumed the members and purchased the loans of the failed People for People Community Development CU.

People for People CDCU is the second federally insured credit union to be liquidated in 2012. The NCUA said it decided to liquidate the 1,600-member, $635,000-asset credit union after determining the credit union was insolvent and had no prospect for restoring viable operations on its own. The credit union served a 14-mile section of North Philadelphia considered to be underserved by financial services.

The Pennsylvania Department of Banking concurred with the decision to liquidate People for People CDCU and with TruMark's purchase and assumption,  the NCUA said.

People for People CDCU was taken under NCUA conservatorship earlier this year, and the agency last fall issued a cease and desist order to People for People ordering the credit union to complete a financial statement audit, charge off uncollectible loans, properly fund its Allowance for Loan and Lease Losses, collect on delinquent loans guaranteed by a third party, reconcile general ledger accounts monthly, and establish and maintain a Bank Secrecy Act compliance program.

TruMark Financial has $1.35 billion in assets and has 96,134 members.  Accounts of the new TruMark Financial CU members are fully insured  and the new members will experience no interruption in services.

Wis. CU put into conservatorship

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ALEXANDRIA, Va. (2/21/12)--A M Community CU, Kenosha, Wis., Friday became the second federally insured credit union placed into conservatorship during 2012 when the National Credit Union Administration (NCUA), working cooperatively with the Wisconsin Office of Credit Unions, assumed control of service and operations.

Under the conservatorship, the $125-million asset credit union will be able to continue normal member services, while the NCUA works to resolve issues affecting the institution's safety and soundness. A M Community has about 16,000 members.

A M Community is a state-chartered, federally insured credit union whose membership is comprised of those who live or work in Wisconsin's Kenosha and Racine counties, as well as any employee of Chrysler Corporation.

CFPBs Cordray joins GAC lineup

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WASHINGTON (2/21/12)--Consumer Financial Protection Bureau (CFPB) Director Richard Cordray has remained busy since he took on his post early this year, appearing on behalf of his agency at several Capitol Hill hearings and other events, and he can now add another engagement to his packed speaking schedule: The Credit Union National Association's (CUNA) 2012 Governmental Affairs Conference (GAC).



The CFPB has been extremely active since it officially began its work last year, taking on rulewriting authority for many existing consumer financial protection laws, revising mortgage disclosures and closing forms, and beginning the process of supervising many nonbank financial entities. The agency is also accepting public comment on how consumer related financial regulations can be streamlined, and CUNA staff have met with the agency many times to discuss credit unions' regulatory burden and other priorities.

Key Capitol Hill lawmakers will also speak at the GAC, including House Minority Whip Steny Hoyer (D-Md.), House Financial Services Committee Chairman Spencer Bachus (R-Ala.), House Majority Whip and House Financial Services Committee member Kevin McCarthy (R-Calif.), and Assistant House Democratic Leader James Clyburn (D-S.C.).

Sens. Jon Tester (D-Mont.), Mark Udall (D-Colo.) and Rand Paul (R-Ky.), and Reps. Jeb Hensarling (R-Texas), Ed Royce (R-Calif.), Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.) and Carolyn McCarthy (D-N.Y.), are also scheduled to speak. Former Secretary of State Condoleezza Rice, premier, non-partisan political analyst Charlie Cook, journalistic duo Bob Woodward and Carl Bernstein are also among the notable speakers on the 2012 GAC schedule.

The 2012 GAC, which will take place March 18-22 at the Washington Convention Center in Washington, D.C., will provide more than 4,000 credit union representatives an opportunity to hear from influential leaders from Congress and the federal regulatory agencies during the meeting's sessions, as well discuss pressing credit union issues with federal lawmakers and regulators in private meetings.

Recognized as the premier conference to attend for political impact, credit union networking and industry updates, the GAC also offers a wide array of educational breakout sessions, the industry's largest exhibitor showcase, guest/family programs to tour Washington's sights, and special entertainment including an opening concert and the closing Gala Reception and Dance. And this year, the whole event will be kicked off by American Idol star Taylor Hicks, who will perform at the opening concert, sponsored by the CUNA Councils.

Additional speakers and session topics will be announced in the weeks to come.

Registration, housing information, and other information can be found using the resource link below.

CUNA term on BSAAG extended into 2015

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WASHINGTON (2/21/12)--The Financial Crimes Enforcement  Network (FinCEN)  has selected the Credit Union National Association (CUNA) to continue to fill the Credit Union Industry Trade Group position on the FinCEN  Bank Secrecy Act Advisory Group (BSAAG).

CUNA's new term extends through February 2015. 

The BSAAG is comprised of representatives from federal regulatory and law enforcement agencies, financial institutions, and trade associations.

CUNA has been a member of BSAAG since 2003 and currently also participates on the parent group and its working subgroups, including the Banking, Law Enforcement, Prepaid Access, and Suspicious Activity Report (SAR) Review subcommittees. 

CUNA Regulatory Counsel Dennis Tsang will be the group's BSAAG representative.

Loan participation proposal should be withdrawn CUNA

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WASHINGTON (2/21/12)--Recently proposed revisions to loan participation rules should be withdrawn, the Credit Union National Association (CUNA) urged in a comment letter sent to the National Credit Union Administration (NCUA) late last week.

Under loan participation revisions that were proposed at the agency's December Board meeting, all federally insured credit unions that are originators would need to retain a 10% interest in the loan or pool of loans participated. Federal credit unions are currently required to comply with this requirement, but the NCUA proposal would extend this requirement to state chartered federally insured credit unions as well.

All federally insured credit unions that purchase loan participations would be limited to 25% of their net worth for participations involving one originator. There would be no waiver allowed from this provision.

In addition, the proposal would set a 15% of net worth limit on purchasing credit unions on loans involving one borrower. The rule would allow this requirement to be waived in certain cases, but state chartered credit unions would have to apply to their NCUA Regional Director for approval.

"In today's overregulated environment, this proposal would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations," CUNA's Deputy General Counsel Mary Dunn said. While the letter urges NCUA to drop its proposal, it offers recommendations on how concerns about loan participations could be addressed without a new regulation.

If the NCUA determines that it must go forward with a rule, the letter urges the agency to allow credit unions to establish their own loan participation limits as part of their board policies. These limits would be subject to routine review in the examination process, CUNA suggested.

Just over 1,400 federally insured credit unions held over $12.4 billion in outstanding loan participations in 2011, according to the NCUA. Loan participation balances have grown by 28% since 2007, the NCUA added.  NCUA Chairman Debbie Matz last year said large volumes of participated loans tied to a single originator, borrower, or industry--or serviced by a single entity—can impact multiple credit unions if issues arise.

CUNA research has shown that credit union participation loans account for only 2.3% of total credit union loans, and just 1.3% of total credit union assets. "As a practical matter, credit union loan participations have a zero percent probability of bringing the financial system down and an imperceptibly higher risk of causing a collapse in the depository sector or even just the credit union sector," CUNA Chief Economist Bill Hampel said.

"While the proposal seeks to address concentration risks and other issues the agency has identified concerning loan participations, it would do so at the price of severely limiting, if not eliminating, sound participation programs that serve credit unions, their members, and other credit unions well" and would "seriously undermine lending programs and even earnings for some credit unions," CUNA said.

The concentration and underwriting limitations proposed would likely "minimize the ability of credit unions to mitigate risk through diversifying sources and types of loan participations," CUNA added.

CUNA has already discussed these and other concerns regarding the proposal with the NCUA, and will follow up with the agency in the coming days and weeks. Comments on the proposal are due to NCUA by February 21, and CUNA President/CEO Bill Cheney encouraged credit unions and leagues to weigh in on the NCUA proposal.

For the loan participation comment letter, use the resource link.

The regulatory burden faced by credit unions has also been addressed in a series of comment letters that CUNA filed with the Consumer Financial Protection Bureau last week. CUNA in those letters strongly urged the CFPB to thoroughly analyze new rules as well as existing rules transferred to the agency and consider how they could be amended to ease the regulatory burden faced by credit unions. (See related Feb. 15 story: Reg burden a concern as CFPB adds rules: CUNA)

Inside Washington (02/17/2012)

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  • WASHINGTON (2/21/12)--A report released Wednesday found at least one irregularity in 99% of California foreclosures examined, an indication of how endemic foreclosure abuse had become. The report, conducted by Aequitas Compliance Solutions Inc. for San Francisco's Office of the Assessor-Recorder, examined 382 foreclosures in California between January 2009 and October 2011. One or more clear violations of law were found in 84% of the loans, and 82% of the loans had evidence of at least one suspicious activity. The report said California's mortgage industry has undergone "remarkable innovation" since its real estate laws were written. "If there is one lesson to take away from this report, it is that, with so many homes being foreclosed and with so little oversight, California's foreclosure process appears utterly broken," the report said …
  • WASHINGTON (2/21/12)--Because of a bipartisan deal in Congress, government benefits will not be paid for from an increase in guarantee fees on Fannie Mae and Freddie Mac mortgages. The government-sponsored enterprises' fees were raised in December to pay for a two-month extension of the payroll tax cuts, and there was discussion that an extension of payroll tax cuts, extended unemployment insurance benefits and higher Medicare reimbursement rates could be financed with another increase (American Banker Feb. 17). The Mortgage Bankers Association, a trade group that represents lenders, had pressed lawmakers not to raise fees again. The deal reached by Congress Thursday will generate an estimated $15 billion in revenue by authorizing the Federal Communications Commission to auction television airwave licenses to wireless firms …
  • WASHINGTON (2/21/12)--Federal Reserve Chairman Ben Bernanke said the Fed would make an effort to prevent new rules from hurting the competitiveness of community banks. "Community banks make a critical contribution to the prosperity of both their localities and the nation as a whole, which is why we at the Federal Reserve and the other banking agencies are acutely interested in their long-term strength and viability," Bernanke said at conference on the future of community banking. Bernanke said small banks are particularly concerned with the implementation of the Dodd-Frank Act. He said the Fed will work to ensure that the more stringent requirements intended for larger institutions will not find their way to small banks …
  • WASHINGTON (2/21/12)--Among the candidates to replace Fannie Mae Chief Executive Michael Williams are the government-sponsored enterprise's own general counsel and the head of a banking industry trade group. Fannie's general counsel, Timothy Mayopoulos, is a leading internal candidate to replace Williams, who announced in January that he would step down when his successor is found, according to a Wall Street Journal (Feb. 17) report. Among external candidates, David Stevens, the CEO of the Mortgage Bankers Association, and Shekar Narasimhan, a mortgage industry consultant, have emerged as contenders …

Four funds get clean audits NCUA

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ALEXANDRIA, Va. (2/17/12)--The National Credit Union Administration (NCUA) has received "clean" audit opinions for its National Credit Union Share Insurance Fund (NCUSIF), Central Liquidity Facility, Community Development Revolving Loan Fund, and Operating Fund.

KPMG LLP completed the audits of the 2011 financial statements of all four funds.

NCUA Chairman Debbie Matz said the agency "takes its stewardship responsibilities very seriously" and works diligently to protect the NCUSIF and the other funds.

KPMG will issue its opinion on the Temporary Corporate Credit Union Stabilization Fund's 2011 financial statements in the coming months, the NCUA said.

The stabilization fund was created by the U.S. Congress in 2009 to provide flexibility to the NCUA as it worked to manage the impact of the costs to consumer credit unions associated with the troubled mortgage-backed securities purchased by the five failed corporate credit unions.

The stabilization fund received a clean--or unqualified--audit for 2010.

For the full KPMG audit opinions, use the resource link.

CUs encouraged to take part in AmericaMilitary Saves Week

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ALEXANDRIA, Va. (2/17/12)--National Credit Union Administration (NCUA) Chairman Debbie Matz Thursday encouraged credit unions to participate in next week's national savings campaign, America Saves/Military Saves Week.

America Saves/Military Saves Week begins on Sunday.

The motto for the 2012 program is: ""Set Goals, Make a Plan, Save Automatically."

Matz said the week gives credit unions new opportunities to kick-start their savings promotions and financial education programs. "By promoting automatic savings, credit unions can help their members buy homes, purchase cars, go to college, enjoy secure retirements and set money aside for emergencies," she added. Matz noted that savings at the nation's 7,179 federally insured credit unions jumped by $32.8 billion during the first nine months of 2011.

The NCUA said that credit unions can partner with local America Saves campaigns to offer a number of resources, including motivational workshops, posters and brochures.

America Saves Week is coordinated by the nonprofit Consumer Federation of America (CFA) in partnership with the American Savings Education Council.

Military saves week aims to persuade, motivate, and encourage military families to save money every month, and to convince leaders and organizations to be aggressive in promoting automatic savings.

For the NCUA release and more information on the America Saves and the Military Saves programs, use the resource link.

New CFPB tool to streamline comment process

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WASHINGTON (2/17/12)--The Consumer Financial Protection Bureau (CFPB) Thursday announced a new online comment tool to streamline its public comment process, as the bureau continues to accept public comment on how some financial regulations themselves could be streamlined.

Under the Dodd-Frank Act, rulewriting authority for consumer financial protection laws was transferred to the CFPB from federal financial institution regulators. The CFPB last year announced it would accept public comment on how these regulations could be streamlined "to make it easier for banks, credit unions and others to follow the rules" and to ensure that regulations work better for consumers and the firms that serve them.

The new online comment tool, which is hosted on the CFPB's homepage, consumerfinance.gov/regcomments/, asks for personal and business-related contact information, and then moves the user on to forms that collect specific comments on CFPB regulations.

The online comment form offers a scrollable list of 19 regulations the agency is accepting comment on, and also allows commenters to select individual sections of those regulations.

Commenters can then write what specific changes they would make, explain the rationale behind those changes, and provide additional details on how their suggested modifications would impact consumers and financial services firms.

The CFPB said commenters may consider suggesting provisions of regulations that should be:
  • Simplified, rationalized, or consolidated;
  • Relaxed, modified, or eliminated, perhaps for smaller firms or certain classes of transactions without undermining essential protections;
  • Updated to reflect current practices and technology;
  • Adjusted to avoid unintended consequences; or
  • Changed to remove an obstacle to responsible innovation.
The agency will accept streamlining suggestions until March 5.

The Credit Union National Association (CUNA) has asked credit unions to identify their highest priorities for updating, modifying, or eliminating specific provisions of regulations that are outdated, unduly burdensome, or unnecessary, and issued a comment call on the CFPB's regulatory streamlining endeavor.

CUNA continues to work with credit union leagues, the American Association of Credit Union Leagues' Regulatory Advocacy Advisory Committee, key CUNA subcommittees, credit union councils, and other credit union officials to develop regulatory streamlining suggestions, and is encouraging credit unions to offer their own recommendations to the CFPB.

For the new CFPB site and the CUNA comment call, use the resource links.

NCUA approves Corporate OneSoutheast Corp. merger

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ALEXANDRIA, Va. (2/17/12)--Corporate One FCU, Columbus, Ohio, and Southeast Corporate FCU, Tallahassee, Fla., have been officially approved to merge their operations by the National Credit Union Administration.

The merger was approved at a closed NCUA board meeting Thursday.

Corporate One President/CEO Lee Butke said the merger will "create a combined organization that will be highly efficient and financially strong, with an enhanced ability to serve our combined membership bases and credit unions across the country."

The merger "is a great opportunity for our members and we are anxious to bring the merger to a conclusion," Southeast Corporate President/CEO Brad Miller added.

The two corporates announced their intent to merge on Sept. 13 and signed a definitive merger agreement on Jan. 18.

Southeast Corporate provides liquidity, investment, payment, and other back-office services to more than 400 credit unions in the Southeast U.S., and manages $3 billion in assets. The corporate also owns portfolio management, data management, and web hosting firms. Corporate One works with 780 credit unions and manages $4.7 billion in assets.

The corporates said the main goal of the merger was to preserve the collective $63 million in member capital shares (MCS) held by members at Southeast Corporate.

The capital subscription phase of the merger will begin on Feb. 17, and the corporates said that members should receive official capital documents and a ballot to vote on the merger in the next 10 days.

The Corporate One and Southeast Corporate merger will be the fourth to take place this year once it is completed.

The agency continues to manage the resolution of the corporate credit union system, and it recently unwound the payment services of the failed U.S. Central Bridge FCU. The NCUA is working to make information on the costs associated with the resolution of the corporate credit union system's problems more widely available.

This month, the NCUA cancelled its customary open board meeting, with NCUA Chairman Debbie Matz saying board members concluded there were "no essential board action items to publicly consider" at that time.

Inside Washington (02/16/2012)

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  • WASHINGTON (2/17/12)--People seeking a review of their mortgage foreclosures under the federal banking agencies' Independent Foreclosure Review have until July 31 to submit their requests. The Office of the Comptroller of the Currency and the Federal Reserve Board Wednesday announced that the deadline for submitting requests the Independent Foreclosure Review has been extended. The new deadline provides an additional three months for borrowers to request a review if they believe they suffered financial injury as a result of errors in foreclosure actions on their homes in 2009 or 2010 by one of the servicers covered by enforcement actions issued in April 2011. The deadline extension provides more time to increase awareness of how eligible people may request a review through the Independent Foreclosure Review process and to encourage the broadest participation possible, the two regulators said …
  • WASHINGTON (2/17/12)--Two experts on executive compensation in the financial industry testified Wednesday that a pay proposal issued last April by banking regulators leads bank executives to take excessive risk. Robert Jackson of Columbia Law School said the proposal, required by the Dodd-Frank Act, leaves bonuses completely unregulated for employees who take risks at the largest banks (American Banker Feb. 16). Jackson also said that 4,742 bankers at JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America, Morgan Stanley and Wells Fargo received incentive pay of more than $1 million in 2008, the year the financial crisis began. Lucien Bebchuk of Harvard Law School said the regulators' proposal leads banks to take risks because it focuses on short-term, rather than long-term, results and the companies' stock prices at the expense of shareholders, bondholders and depositors …
  • WASHINGTON (2/17/12)--In the future, the Consumer Financial Protection Bureau (CFPB) will provide more detail to Congress and the public on its spending, the agency's director told a House panel on Wednesday. CFPB Director Richard Cordray, testifying before the House Financial Services Committee, said Republican concerns about information on the bureau's budget were fair (American Banker Feb. 16). He said the bureau's needs for its $448 million 2013 budget were more comprehensive because it adds staff in its second year. Republicans continued to argue they should have some authority in the CFPB budgeting process. Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, said that  the CFPB lacks oversight and accountability because it receives funding from the Federal Reserve Board. Democrats noted that Congress still has significant authority to oversee the bureau's activities. Wednesday was the sixth oversight hearing Congress has held in regard to the agency, said Rep. Barney Frank (D-Mass.) …
  • WASHINGTON (2/17/12)--U.S. Treasury Under Secretary for Terrorism and Financial Intelligence David S. Cohen, in a statement Thursday, said the U.S. welcomes the completion of the Financial Action Task Force's  (FATF) work to revise and strengthen its recommendations to combat the global threat of money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction. The FATF is an intergovernmental organization focused on developing and promoting national and international policies to combat money laundering and terrorist financing. The body's recommendations have been revised, the Treasury statement said, to provide governments with stronger tools to take action against financial crime and protect the integrity of the international financial system. At the same time, the new standards address new priority areas such as proliferation finance, corruption and tax crimes. The revisions are meant to reflect a risk-based approach, strengthening safeguards in areas that pose higher risks, and providing more flexibility to simplify measures in areas that pose a low risk for abuse …
  • WASHINGTON (2/17/12)--The Consumer Financial Protection Bureau (CFPB) has proposed adding debt collectors and consumer reporting agencies to the list of firms it oversees under its nonbank supervision program. The CFPB rule would subject debt collectors and credit reporting agencies that qualify as larger participants to the same supervision process that that agency applies to financial institutions, CFPB Director Richard Cordray said in a release. Debt collectors and credit reporting agencies have not been subject to federal supervision in the past. Debt collectors with more than $10 million in annual receipts from debt collection activities would be subject to supervision, a threshold that the CFPB said would bring 175 debt collection firms under agency oversight. These 175 firms account for 4% of all debt collection agencies, but handle 63% of the market. Consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities would be subject to supervision, the CFPB said. This would bring 30 consumer reporting agencies, which account for 94% of the yearly profits made in that market, under CFPB supervision. The CFPB's proposed rule will be open for public comment for 60 days after it is published in the Federal Register...

Mass. CU considers conversion to mutual co-op bank

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WASHINGTON (2/17/12)--In Brockton, Mass., the directors of HarborOne CU posted an announcement to its website yesterday informing members that the credit union is considering a charter conversion from state credit union to a Massachusetts-chartered mutual co-operative bank.

Credit Union National Association (CUNA) President/CEO Bill Cheney said of the announcement, "Ultimately, the interests of the members of the credit union need to be protected.

"That can only happen when the members--who will make the decision on whether to convert from a credit union to some other institution--have all of the facts about the impact on them as a result of the change, provided with complete transparency."

Cheney added that it is CUNA's view that the credit union charter is the best option for the members of a credit union.

Massachusetts Credit Union League President Dan Egan had this to say: "The league strongly believes the member-owned, not-for-profit, credit union charter is the charter of choice for providing the public with consumer-friendly financial products and services, and allows credit unions to offer a far better economic return."

He added, "Credit unions now have 2.5 million members in Massachusetts and 92 million members nationwide because they put the interests of consumers first. In the last quarter of 2011, credit unions grew dramatically as consumers searched for a financial institution that would best serve their needs."

The HarborOne directors, in their website notice, cited membership restrictions, lending rules, and access to capital as some of the reasons the charter change is being considered.

Egan noted, "While a credit union's management may appreciate the operational advantages of a bank charter, those benefits must extend to the credit union's members. Any charter conversion should be approached from the perspective of what is best for the credit union's member-owners."

Among the conversion consequences to members noted by HarborOne were the facts that volunteer directors of the credit union would become compensated directors under the mutual bank structure; also, HarborOne would lose its current tax status.

"Based upon its extensive analysis," HarborOne noted, "the board of directors believes…this tax impact would be more than offset by the enhanced earnings capacity through increased commercial and small business lending and…by adding more customers with an expanded marketing area."

HarborOne will accept comments from members through March 15. On March 21, the credit union's directors intend to consider the adoption of a plan of mutual charter conversion.

"In the event a conversion plan is adopted by the board of directors, we would file with our regulators for review of all the conversion-related materials to be sent to members, including an information statement covering in greater detail all of the matters referred to in this notice.

"Members should not expect to receive any conversion-related materials from HarborOne until this review is completed, which can take several months. Upon completion of this review, the conversion proposal would be submitted to the membership for a vote following a notice period no shorter than 90 days," the notice said.

HMDA exemption threshold up by 1M in 2012

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WASHINGTON (2/16/12)--Credit unions and other financial institutions with total assets of less than $41 million as of Dec. 31, 2011 will not need to collect and report Home Mortgage Disclosure Act (HMDA) data in 2012, the Consumer Financial Protection Bureau (CFPB) said on Wednesday.

Under HMDA in 2012, financial institutions with total assets of more than $41 million that have home or branch offices in defined metropolitan statistical areas must collect certain mortgage loan data and report it to federal regulators. The HMDA reporting threshold stood at $40 million in 2011.

HMDA thresholds are traditionally published in December of each year, but the CFPB did not set the 2012 threshold late last year. The Credit Union National Association (CUNA) raised this point with CFPB officials in early January, and asked that clarification concerning the 2012 threshold be provided as soon as possible.

The CFPB has issued an interim final rule on HMDA, and that rule became effective on Dec. 30, 2011. The interim final rule is substantially similar to the Federal Reserve's Regulation C, and CUNA will file an official comment letter with the CFPB on this interim final rule later this week.

The Dodd-Frank Act amended HMDA to require covered financial institutions to report the age of mortgagors and mortgage applicants, any points and fees payable at origination in connection with a mortgage, the difference between the annual percentage rate associated with a loan and a benchmark rate or rates for all loans, and the terms of a given mortgage loan, among other items.

According to the CFPB, these additional amendments required by the Dodd-Frank Act will be covered in future rulemakings by the agency, and are not made a part of the previously issued interim final rule or today's final rule.

CUNA asks regulators for more open-end loan guidance

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WASHINGTON (2/16/12)--The Credit Union National Association (CUNA), along with CUNA Mutual Group, has urged the Consumer Financial Protection Bureau (CFPB) and the National Credit Union Administration (NCUA) to revisit the regulation of multi-featured open-end lending (MFOEL) plans, and possibly provide additional guidance on these plans, saying that elements of current regulations are confusing some credit unions.

Multi-featured, open-end lending has been used by credit unions as a tool to assist in establishing long-term borrowing relationships with their members, and has served as a convenient way for consumers to obtain advances at the point of a transaction.

The Federal Reserve in 2010 changed the rules for MFOEL plans, saying that occasional or routine verification of certain credit information is permissible, but such verification may not be done as a condition of granting a particular advance for MFOEL plans to be treated as open-ended.

The NCUA issued guidance in 2010 to help federal credit unions comply with the Fed's Reg Z changes, but CUNA said confusion still abounds for credit unions concerning the concept of "occasionally or routinely" verifying certain credit information as well as the verification of credit information in connection with a consumer's request for certain advances under a MFOEL plan.

In a letter to CFPB Director Richard Cordray and NCUA Chairman Debbie Matz, CUNA and CUNA Mutual Group said that additional verification that allows for safe and sound lending practices should meet the requirements of the Truth in Lending Act and "serve credit union members well."

The letter also noted that credit unions are confused as to whether or not so-called hybrid or blended MFOEL plans, which combine elements of open- and closed-end loans, would comply with existing Reg Z rules. Financial institutions have used a combination of prior open-end loan agreements and closed-end loan disclosures in connection with these types of plans, but there is concern that this approach may not satisfy current regulatory requirements. CUNA and CUNA Mutual have asked for clarification on this issue, and also suggested the CFPB and NCUA give credit unions the time needed to comply with any regulatory changes or guidance that may result.

CUNA earlier this month met with Cordray on MFOELs and other issues, and the CFPB director at that time acknowledged that he was unaware of the issue until it was raised by CUNA senior staff. Cordray at that time had no immediate answer to the problem, but said he would have discussions with credit unions and the NCUA to determine what, if anything, should be done.

For the full CUNA/CUNA Mutual letter, use the resource link.

Remittance changes long overdue CFPB says

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WASHINGTON (2/16/12)--Recently approved remittance transfer changes "are long overdue," and will "benefit the financial industry if the result is greater trust in the marketplace," Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said on Wednesday.

Cordray spoke before the League of United Latin American Citizens annual legislative conference in Washington. "Up to this point, few protections existed for those sending international money transfers. Hidden fees and fluctuating exchange rates meant that consumers did not know how much money would be received on the other end," he said.

"If we can succeed in making these transactions more transparent, we will attract more customers who can compare options and achieve lower costs and reduced risk... our remittance rule should facilitate confidence in international money transfers by making them work better and with more certainty," Cordray added.

New remittance rules issued by the CFPB earlier this year require remittance transfer providers to disclose the exchange rate and all fees associated with a transfer so consumers know exactly how much money will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes.

The rule will become effective in February 2013.

The remittances regulation would affect most U.S. credit unions that provide consumers with international electronic funds transfer services because it broadly defines the term "remittances" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S., other than most transfers involving credit, debit, and prepaid cards.

Under an accompanying rule, credit unions that provide 25 or fewer international consumer-initiated electronic funds transfers per year are exempted from all aspects of the rule. However, credit unions performing more than 25 of these transactions a year would be subject to the rule if they provide international funds transfer services "in the ordinary course of business" under a facts and circumstances test.

The Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) are concerned that a number of credit unions that provide 'remittances' as defined by the rule will face challenges in complying with the new regulation, and CUNA has asked the CFPB to provide as much regulatory relief as possible through the accompanying 'safe harbor' standards.

In a meeting last week with CUNA President/CEO Bill Cheney, Cordray said the agency will certainly consider ways to address concerns of smaller institutions that provide remittances and encouraged CUNA to provide its recommendations to the agency, both in its comment letter on the proposal and in discussions with agency staff.

About 109 U.S. credit unions participate in WOCCU's IRNet, a remittance service operated by WOCCU Services Group. The service, which works primarily with Hispanic clients, transmits remittances to eight countries and has taken part in over $2.9 billion in total transactions since its inception.

Inside Washington (02/15/2012)

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  • WASHINGTON (2/16/12)--The Department of Housing and Urban Development (HUD) has withdrawn a proposal that would have allowed Farm Credit lenders to participate in the Federal Home Administration (FHA) home mortgage programs (American Banker Feb. 15). In a notice published in the Federal Register Monday that announced the withdrawal, HUD said that responses to the proposed rule were almost evenly split between supporters and opponents. Those in favor of the proposal said there is a need for credit in the rural farm system and that allowing Farm Credit lenders to offer FHA loans would help satisfy demand. Opponents say that community banks are meeting that need and if the scope of the FHA program broadened, it would increase government's role in the market, contrary to policymaker's intentions …
  • WASHINGTON (2/16/12)--An executive summary of the national mortgage settlement terms posted at www.nationalmortgagesettlement.com provides highlights of the deal announced last week. The settlement requires the five banks to allocate a total of $17 billion in assistance to borrowers who have the intent and ability to stay in their homes while making reasonable payments on their mortgage loans. At least 60% of the $17 billion must be allocated to reduce the principal balance of home loans for borrowers who are in default or at risk of default on their loan payments. To assist homeowners who are not delinquent on their payments but cannot refinance to lower rates because of negative equity, the banks must offer refinance programs totaling at least $3 billion. The new standards will prevent mortgage servicers from engaging in robo-signing and other improper foreclosure practices. The standards will require banks to offer loss mitigation alternatives to borrowers before pursuing foreclosure …
  • WASHINGTON (2/16/12)--The Federal Reserve Board on Tuesday announced its approval of Capital One's proposal to acquire ING Bank. The newly formed organization would not pose a systemic risk to the financial system and would provide benefits such as greater convenience, increased competition, or gains in efficiency, the Fed said. The benefits outweigh the possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, unsound banking practices, or risk to the stability of the U.S. banking or financial system, the Fed said. The proposal would allow Capital One to offer more types products and services, such as fixed-rate, 30-year mortgage loans, full-access checking accounts, automobile loans, small-business loans, commercial loans, and credit card and other consumer loans--none of which are provided by ING, according to the Fed …
  • ST. PAUL, Minn. (2/16/12)--Representatives from Minnesota credit unions and the Minnesota Credit Union
    Click to view larger image Click for larger view
    Network (MnCUN) travelled to Washington, D.C., on Feb. 6-8 for the first-ever small business Hike the Hill event, coordinated by the Credit Union National Association. The delegation from Minnesota joined 75 other small business and credit union representatives from across the country to encourage federal legislators to support two bills that propose raising the credit union member business lending cap from 12.25% to 27.5%. In Minnesota, lifting the cap would amount to the creation of 2,000 jobs and would make an additional $150 million available to lend to the state's small businesses. In the photo, representatives from Minnesota credit unions and MnCUN met with Rep. John Kline (R) (Photo provided by Minnesota Credit Union Network) …
  • WASHINGTON (2/16/12)--The Federal Deposit Insurance Corporation (FDIC) Wednesday reported a new phishing scam that is using the agency's name in an attempt to defraud accountholders. The emails generally inform accountholders that their ACH and Wire transaction abilities have been temporarily withheld because their "security version" has expired. The emails then provide a link through which accountholders can download and install "updated installations." This e-mail and link are fraudulent, and recipients should consider the intent of this e-mail as an attempt to collect personal or confidential information, or to load malicious software onto end users' computers, the FDIC said…
  • WASHINGTON (2/16/12)--The Consumer Financial Protection Bureau (CFPB) this week published information on service contract actions the agency took in 2011. The CFPB said the information is "organized by function to show how contracted resources were used by the agency to support its mission." The document was published in the Federal Register

NCUA attends first consumer protection group meeting

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WASHINGTON (2/15/12)--The National Credit Union Administration (NCUA) joined U.S. Attorney General Eric Holder, representatives from the U.S. Treasury Department, the Federal Bureau of Investigation, the Financial Crimes Enforcement Network, a trio of state attorneys general, and other financial and federal groups at the recent first meeting of the Financial Fraud Enforcement Task Force's (FFETF) Consumer Protection Working Group.

The Consumer Protection Working Group unites federal law enforcement agencies and regulators with state and local partners "to strengthen efforts to address consumer-related fraud, including schemes targeting vulnerable populations, such as the unemployed, those in need of payday loans, and those suffering from the burden of high credit card and other debt," the U.S. Department of Justice said in a release.

The group also will focus on scams that exploit prospective students, active-duty military personnel, and veterans, including payday lending practices, telemarketing or online marketing scams, business opportunity schemes, for-profit schools that engage in fraud or misrepresentation, and fraudulent third-party payment processors that facilitate payments on behalf of other fraudsters without the permission of the customer, the release said.

In its meeting Monday, the group set priorities and discussed ways they could work together to fight fraud and educate consumers. The group soon will establish a best-practices tool kit, legislative, regulatory and policy initiatives, and an information sharing structure, the release said.

Holder, in remarks delivered to kick off the inaugural meeting, said the schemes the group is combating "are as diverse as the imaginations of those who perpetrate them, and as sophisticated as modern technology will permit," but added the group is "tackling financial fraud, in all its forms, head on."

The Consumer Financial Protection Bureau is also a member of the working group, but a CFPB representative did not attend this meeting.

For more on the meeting, use the resource link.

CU Cherry Blossom Race attracts 162 lawmakers backing

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WASHINGTON (2/15/12)--Speaker of the House John Boehner (R-Ohio), Democratic Whip Steny Hoyer (D-Md.), Assistant Democratic Leader James Clyburn (D-S.C.) and Democratic Caucus Chairman John Larson (D-Conn.) will join 158 other members of the U.S. Congress and District of Columbia Mayor Vincent Gray as honorary chairs on this year's Credit Union Cherry Blossom Run, the annual 10 mile run and 5k run/walk event that raises funds for Children's Miracle Network Hospitals.

Click to view larger image Kicking off the 2011 Credit Union Cherry Blossom Run, CUNA President/CEO Bill Cheney tells attendees at a press conference held at Washington Children's Hospital that the credit union movement is the third largest corporate sponsor of CMNHospitals, following only WalMart and Costco. The Cherry Blossom run is one of the events that make this success possible, Cheney said, noting that it has raised more than $5 million in the 10 years credit unions have sponsored the race. (CUNA photo)
Congressional FCU President/CEO Charles Mallon in a release said, "The response from the 162 members of Congress and Mayor Gray is outstanding and very helpful to the collaborative efforts of credit unions to raise funds for hospitalized children." Mallon serves on the board of the race's title sponsor, Credit Union Miracle Day Inc. Credit Union Miracle Day Inc. has raised millions for the Children's Miracle Network in its 11 years of race sponsorship, and the group is slated to sponsor the race through 2016.

The Credit Union National Association (CUNA), the National Association of Federal Credit Unions and the two credit unions that serve members and employees of the House and Senate, Congressional FCU and Senate FCU, also support a separate "Capitol Hill Competition," a race-within-a-race for runners from congressional offices.

CUNA staff also volunteer at the race bag check tent, and this will be the 11th straight year that CUNA has worked in support of credit union involvement in the race.

The 40th running of the Credit Union Cherry Blossom run will take place on April 1. This year's event takes place on the second weekend of the National Cherry Blossom Festival, a five-week celebration of sporting and cultural events that commemorates the blossoming of the trees donated to the U.S. by Japan in the early 20th century.

The race staging area will be on the Washington Monument grounds, and the course will trace its traditional route past Washington's cherry blossom trees. The race headquarters hotel is located at the Westin Washington D.C. City Center Hotel.

Around 30,000 runners applied for spots in last year's race. A lottery for entry slots in this year's race took place in December. Runners who raised $500 or more for the Children's Miracle Network Hospitals via Credit Unions for Kids, the official event charity, were given guaranteed spots on the starting line.

Reg burden a concern as CFPB adds rules CUNA

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WASHINGTON (2/15/12)--As the Consumer Financial Protection Bureau (CFPB) continues to assume authority over consumer and finance-related regulations from other agencies, the Credit Union National Association (CUNA) has strongly urged the CFPB to thoroughly analyze new rules as well as existing rules transferred to the agency and consider how they could be amended to ease the regulatory burden faced by credit unions.

CUNA on Tuesday filed a trio of comment letters addressing the Fair Debt Collection Practices Act (Regulation F), disclosure requirements for non-federally insured financial institutions (Regulation I), and mortgage advertising practices and mortgage relief assistance services (Regulations N and O, respectively). CUNA in all these letters called on the CFPB to examine its existing and new regulatory authorities carefully, with the objective of providing meaningful regulatory relief--and that same message will be emphasized when CUNA files additional comment letters with the CFPB later this week.

The rules addressed in these three comment letters are a few of the many interim final rules that were issued by the CFPB for public comment. The interim final rules became effective on Dec. 30, and they substantially duplicate the existing text of the previously published regulations, only adding slight technical changes and transferring authority over these rules to the CFPB, as mandated by the Dodd-Frank Act.

Regulations F, I, N and O were previously handled by the Federal Trade Commission (FTC). Regulation M, which requires lessors, including credit unions, to provide consumers with uniform cost and other disclosures about consumer lease transactions, previously fell under the Federal Reserve's purview, or the FTC, in the case of state credit unions.  Regulations G and H address SAFE Mortgage Licensing Act rules addressed, and those regulations were monitored by financial institutions' prudential regulators.

Comment letters on Regulations M, G and H are due to the CFPB on Feb. 17.

For more CUNA comment letters, use the resource link.

Inside Washington (02/14/2012)

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  • VIENNA, Va. (2/15/12)--The Financial Crimes Enforcement Network (FinCEN) has issued its final rule defining non-bank residential mortgage lenders and originators (RMLO) as loan or finance companies for the purpose of requiring them to establish anti-money laundering programs (AML) and report suspicious activities (SAR) under the Bank Secrecy Act. When proposed, FinCEN noted in its Federal Register document, the rule suggested that the AML program and SAR filing regulations for RMLOs would be issued as the first step in an incremental approach to implementation of regulations for the broad loan or finance company category of financial institutions. "Thus, the definition of 'loan or finance company' would initially include only RMLOs, but would be structured to permit the addition of other types of loan and finance-related businesses and professions in future amendments." The effective date of the rule is April 16 and the compliance date is Aug. 13 …
  • WASHINGTON (2/15/12)--A proposed fee that big banks would pay for their role in the financial crisis will be more than doubled, the Obama administration announced Monday. Banks with assets of $50 billion or more, or 32 institutions, would be responsible for paying $61 billion in the course of 10 years, beginning next year, according to the Treasury Department (American Banker Feb. 13). The fee would be based on a bank's covered liabilities--its consolidated risk-weighted assets subtracted by its capital-insured deposits and certain loans to small business. Banks would be charged 17 basis points, but would be able to apply a 50% discount to more stable funding sources, such as long-term liabilities …
  • WASHINGTON (2/15/12)--The Consumer Financial Protection Bureau (CFPB) budget (CFPB) will increase 32% in fiscal year 2013, according to President Barack Obama's budget, released on Monday. The increase will account for compensation and benefits costs as CFPB continues to add employees. The CFPB's budget, which will total $448 million, comes from mandatory transfers from the Federal Reserve System (American Banker Feb. 13). The agency can request up to $597.6 million in 2013, and may ask for $200 million more in discretionary appropriations from Congress until 2014, but it does not expect to make further requests, according to yesterday's proposal. CFPB plans to hire more than 400 employees next year, increasing its staff from to about 1,359 in fiscal 2013 from about 942 in fiscal 2012 …
  • WASHINGTON (2/15/12)--The Federal Housing Administration (FHA) will announce more premium increases for home buyers in next week in an effort to improve the agency's finances and avoid a taxpayer bailout. A key FHA account, which holds reserves that exceed expected losses, will be depleted in the next year, according to the Obama administration's budget proposal, which was released Monday (American Banker Feb. 13). That account's balance has fell to $4.7 billion, which is below the requirement, established by Congress, that the fund remain above 2% of the FHA's total loan guarantees. But Shaun Donovan, secretary of the Department of Housing and Urban Development, which includes the FHA, said Monday the budget proposal does not account for an additional $900 million to $1 billion that the FHA will receive from last week's mortgage settlement with five large banks, and other possible settlements. The proposal also does not include the additional FHA premium increases that will be announced within the next week, Donovan said …
  • WASHINGTON (2/15/12)--Consumer Financial Protection Bureau (CFPB) Director and new Financial Literacy and Education Commission (FLEC) Vice Chair Richard Cordray in a Tuesday release said he is proud to work with his fellow FLEC members, adding that that group shares "a common vision of sustained financial well-being for all Americans." Cordray took part in his first FLEC meeting at the U.S. Treasury offices in Washington. The FLEC is comprised of representatives from the National Credit Union Administration, the U.S. Treasury, the U.S. Department of Education, the White House, and other governmental groups. Tuesday's meeting was the first of 2012. The FLEC meets every four months. During Tuesday's meeting, the FLEC focused on ways that third party vendors could use technology to help consumers better compare financial products. Cordray in a blog posted following the meeting said "the ability to understand and control one's finances is one of the most important life skills," and "creates a path to economic independence and mobility."...
  • WASHINGTON (2/15/12)--The Consumer Financial Protection Bureau (CFPB) this week published its semiannual report, which details the agency's plans between October 2011 and October 2012, in the Federal Register...

CDRLF CLF CDFI funding proposed for 2013

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WASHINGTON (2/14/12)--The maximum loan limitation of the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF) will continue at its fiscal 2012 level under the Obama administrations proposed budget for fiscal 2013. The CLF is authorized by the Federal Credit Union Act to lend up to 12 times its paid-in capital.

Under the Obama administrations proposed 2013 budget, funding for the NCUAs Community Development Revolving Loan Fund (CDRLF) program would fall slightly from 2012's funding total. The administration has requested $1.19 million for 2013. A total of $1.25 million in CDRLF funding was approved in the 2012 budget. The CDRLF provides loans and technical assistance to federal and state credit unions that are designated as low-income credit unions, as defined by NCUA regulations.

The CDRLF held 49 total loans to 44 credit unions, totaling $3.5 million in outstanding loans, in its portfolio as of Sept. 30, 2011, and the CDRLF awarded 188 technical assistance grants, totaling just over $1 million, last year. Assets in the CDRLF, including interest earned and appropriations, totaled $17.5 million as of Sept. 30, 2011.

Funding for the U.S. Treasury's Community Development Financial Institutions (CDFI) fund would hold steady in 2013, matching the 2012 budget's funding level of $221 million.

The administration's budget will be the subject of several hearings, as administration officials appear before the Senate Budget Committee, Senate Finance Committee, House Ways and Means Committee, and House Budget Committee hearings this week.

Financial info privacy leads week in D.C.

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WASHINGTON (2/14/12)--H.R. 3871, which would ensure that groups or individuals that supply information to the Consumer Financial Protection Bureau (CFPB) would not waive their right to privacy protections, will be the bill to watch for credit unions this week, and that piece of legislation is expected to come up for a House Financial Services Committee vote on Thursday.

Republican and Democratic lawmakers have recently spoken in support of the bill, and these privacy improvements have also been approved by CFPB Director Richard Cordray. The Credit Union National Association also backs the bill, noting in a letter sent last week that while section 205(j) of the Federal Credit Union Act protects privileged information submitted by credit unions to the National Credit Union Administration, state credit union supervisors, and foreign banking authorities, that section does not cover submissions to the CFPB.

The Reopening American Capital Markets to Emerging Growth Companies Act of 2011 (H.R. 3606), the SEC Regulatory Accountability Act (H.R. 2308), and the Swaps Bailout Prevention Act (H.R. 1838) will also be marked up during that hearing.

A full slate of hearings is set for this week, and the Obama administration's budget will be the subject of many of these hearings. Administration officials will appear before the Senate Budget Committee, Senate Finance Committee, House Ways and Means Committee, and House Budget Committee hearings this week. U.S. Treasury Secretary Timothy Geithner and Office of Management and Budget Acting Director Jeffrey Zients will appear during some of these hearings.

Other noteworthy hearings scheduled for this week include:
  • A Wednesday House Judiciary Committee hearing on President Barack Obama's recent recess appointments;
  • A Wednesday House Financial Services oversight subcommittee hearing on the CFPB budget;
  • A Wednesday Senate Banking financial institutions subcommittee hearing incentive compensation at large financial institutions; and
  • A Thursday Senate Homeland Security Committee hearing on the Cybersecurity Act of 2012.

Banking chair wants CU bank exam practices audit

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WASHINGTON (2/14/12)-- Senate Banking Committee Chairman Tim Johnson (D-S.D.) sent a letter to the inspectors general (IGs) of the National Credit Union Administration (NCUA), two federal banking agencies and the U.S. Treasury Department seeking an audit of the examination  practices of the federal financial institution regulators.

In the letter sent Feb. 10 Johnson wrote, "Recently, I have heard numerous concerns from community banks and credit unions that the financial regulators' examiners are conducting examinations with unclear standards or with inconsistent application of agency policies and procedures.

"Community banks and credit unions indicate that examination concerns create uncertainty in their business operations and hesitation to provide credit to their customers," the letter said, and added,  "While the regulators must ensure the safety and soundness of financial institutions, I believe responsible lending to families and small business owners is one key to our economic recovery."

"To help the (Senate Banking Committee) better understand the supervisory process of the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comprtroller of the Currency, and the (NCUA), I respectfully request that each of your offices conduct an audit of the specific agencies under your purview as appropriate," Joshnson wrote to the IGs.

Johnson's letter was sent less than two weeks after a House subcommittee hearing on The Financial Institution Examination Fairness and Reform Act (H.R. 3461). The Credit Union National Association (CUNA) testified in support of the legislation. It is opposed, as written, by the NCUA and banking agencies.

CUNA President/CEO Bill Cheney said Monday that CUNA is "encouraged by and appreciates" Johnson's letter requesting an audit of bank and credit union examination practices. 

"This is a key concern for credit unions…We are hopeful that this important forum will result in greater attention from NCUA  to credit unions' examination concerns and reasonable supervisory approaches that respect credit unions' rights when they disagree with examiner findings and directives.

"While we support the legislation, which has been introduced in the House of Representatives, the truth of the matter is that it should not take an act of Congress to address the concerns that credit unions have with the examination process. Credit unions have very reasonable expectations regarding that process:  they want more information about how decisions are made, including what regulatory or statutory authority was used to make determinations; they want consistent application of regulations; and, they want an appeals process absent the fear of retaliation.

"All of this can be done under existing law, but current practice too often falls short of these expectations," Cheney said.

He concluded, "Whether through the enactment of the House bill or more intense scrutiny as Chairman Johnson has proposed, we are pleased that Congress is taking the concerns we have raised seriously and we look forward to working with all who share our concern."

NCUA clarifies long-term mortgage mod rules

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ALEXANDRIA, Va. (2/14/12)--Mortgage loans that comply with a 40-year, long-term maturity limit when they are originated will continue to comply with that maturity limit, even if they are renegotiated and their maturity is extended, the National Credit Union Administration (NCUA) has said.

NCUA General Counsel Michael McKenna in a Feb. 10 legal opinion letter said this interpretation of the rule "is consistent with guidance provided under federal residential mortgage loan modification programs."

The NCUA in the letter provided an example of how the policy would work. In that example, the agency cited a 40-year mortgage loan that was originated in 1980 and refinanced in 2010. While the original maturity date of the mortgage was 2020, after refinancing, that maturity date has been extended until 2050. "The loan term is determined from the modification date, not the origination date," the agency said.

McKenna noted "all long-term mortgage loans and loan modifications are, of course, subject to safety and soundness review," and NCUA examiners "may have a basis to object to a particular loan modification for safety and soundness reasons, even if all regulatory requirements are satisfied."

For the full NCUA legal opinion letter, use the resource link.

Senate leaders urged to set NFIP vote

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WASHINGTON (2/14/12)--The National Flood Insurance Program (NFIP) was granted an extension to May 31 just as last year's congressional session ended and Senate leaders now are being urged by two of their colleagues to permanently extend the program, but with modernizations.

Sens. Jon Tester (D-Mont.) and David Vitter (R-La.)  urged the Senate majority leader, Harry Reid (D-Nev.), and minority leader, Mitch McConnell (R-Ky.),  to schedule debate on a  bill passed 406-22 by the House in July and also approved by the Senate Banking Committee with "overwhelming bipartisan support."

"The Senate should take this opportunity to capitalize on the bipartisan effort by the Senate Banking Committee and the House of Representatives to make major improvements to this important program," wrote Tester and Vitter in their Feb. 13 letter.  The senators added that they believe passage of a comprehensive NFIP reauthorization bill is "within reach."

The NFIP was established in 1968 and is intended to protect homes and businesses from financial ruin when flooding occurs.  The program was last authorized in 2004 to extend to 2008.  Since 2008, the program has been extended through a long series of short-term measures.

"In fact, the program expired four times in 2010 resulting in lapses totaling 53 days. It has been estimated that those program lapses resulted in the delay or cancellation of more than 1,400 home closings per day, further damaging our already fragile housing market," the senators wrote.

Both House and Senate bills would extend the flood insurance program for five years. The House bill has a provision, backed by the Credit Union National Association, that would preserve the rights of credit unions to protect their collateral from flood hazards. The provision addresses situations where borrowers have allowed flood insurance to lapse, and clarifies that subsequent flood insurance purchased by a credit union, or other lender, would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period.

The Senate NFIP reform discussion draft, approved by the banking panel, includes a provision--opposed by CUNA--that would require all mortgage lenders to escrow for NFIP premiums. Current law only requires lenders that escrow for taxes and insurance to also escrow for NFIP premiums.

CUNA has warned lawmakers the escrow requirement could drive some small mortgage lenders, including credit unions, out of the mortgage business because there is a significant cost involved with establishing escrow accounts, particularly for community banks, credit unions, and community-based lenders that have small lending volumes.

CFPB launches prototype periodic statement

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WASHINGTON (2/14/12)--The Consumer Financial Protection Bureau (CFPB) has completed one round of testing for its proposed periodic mortgage statement form, and is planning two additional rounds of testing between now and this summer.

The CRFB said its goal "is to create a statement that is easy to understand and that provides information to borrowers about current and past payments."

"We want to include all the important information but not overload the consumer with unnecessary details," the agency added.

The model form includes space for information on the:
  • principal loan amount;
  • current interest rate;
  • late fee structure; and
  • prepayment fee structure.
The form also includes space for mortgage servicer contact information.

A proposed form and related mortgage disclosure rule is expected to be released in the summer. However, the agency said, creditors, assignees, and mortgage servicers "will have some flexibility to tailor the model form to work for their needs and the needs of their customers."

The CFPB is also developing a standardized form for mortgage transaction and closing costs and a combined Truth in Lending Act/Real Estate Settlement Procedures Act (RESPA) document, and the agency is planning to develop new mortgage regulations once the mortgage disclosure form revision project is completed.

The Credit Union National Association continues to be actively involved in roundtable discussions and other forums with CFPB personnel and others as the mortgage revision process moves forward.

Inside Washington (02/13/2012)

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  • WASHINGTON (2/14/12)--Servicers could owe military borrowers millions under the terms of the $25 billion mortgage settlement. JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial will provide substantial financial compensation to servicemembers whose rights under the Servicemembers Civil Relief Act were violated (American Banker Feb. 13). Servicers must make minimum payments of $116,785 to any servicemembers affected since January 2006. The Justice Department seeks to have 100% of the victims identified and compensated, Thomas Perez, the assistant attorney general for the Justice Department's Civil Rights division, said Friday. Perez said he expects the settlement to be in excess of $20 million. Servicemembers also will receive compensation for lost equity and interest, and could receive higher payment for the same violation. Payment also could be made for additional harm, with no limit on the total liability, Perez said …
  • WASHINGTON (2/14/12)--Although a national mortgage settlement has reportedly been reached, its terms have yet to be released, raising doubts about the $25 billion deal. The settlement will not be made public until it is submitted to a court, spokespersons for both the Iowa attorney general's office and the Department of Justice told the American Banker (Feb. 10). The website created for the national settlement features a message that says the settlement document is "coming soon." However, a person familiar with the mortgage servicing pact told the Banker that a settlement term sheet does not yet exist …
  • ALBANY, N.Y. (2/14/12)--After the member business lending Hike the Hill initiative, coordinated by the Credit Union National Association, last week, two New York congressional representatives have signed on as co-sponsors of two separate pieces of legislation. Rep. Gregory Meeks (D) has signed on as an original co-sponsor of the newly introduced supplemental capital bill, H.R. 3993, and Rep. Gary Ackerman (D) added his name to the list of co-sponsors of the Small Business Loan Enhancement Act (H.R. 1418 and S. 509). "The signing on of these two co-sponsors so quickly on the heels of our Hike visits truly shows the effectiveness of grassroots advocacy and the importance of staying involved, informed and active," said William J. Mellin, president/CEO of the Credit Union Association of New York. Participating in the hike were Linda Armyn, senior vice president corporate strategy and governmental affairs, Bethpage FCU, Bethpage, N.Y;  Tansley Sterns, assistant vice president, corporate strategy and governmental affairs, Bethpage FCU; and Lawrence Jones, vice president, commercial lending, Bethpage FCU; Rob Nemeroff, director of marketing and public affairs, Melrose CU, Briarwood, N.Y.; Steven Sobotta, director of marketing, and Samuella Seisay, director of lending, Actors FCU, New York; Michael Tucci, president/owner, and Trevor Tucci, co-owner, Energy Fitness, St. James, N.Y; and William Mellin, president/CEO and Michael Lanotte, senior vice president/general counsel, Credit Union Association of New York …

FHFA should retain compliance role CUNA says

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WASHINGTON (2/13/12)—A Federal Housing Finance Agency (FHFA) plan to delegate responsibility to the Federal Home Loan Banks (FHL Banks) for determining their members' compliance with the FHFA's community support requirements would inappropriately force the FHL Banks to act both as lenders to their members and regulators of them.

That is the opinion of the Credit Union National Association (CUNA) as expressed in a Feb. 8 comment letter to the FHFA.

Under its current community support rules, the FHFA must conduct biennial reviews of the performance of selected FHL Bank member institutions, including credit unions, to evaluate their compliance with community support standards.  Compliance determines member institution eligibility for access to long-term FHL Bank advances.

"While credit unions are not subject to the (Community Reinvestment Act) or its associated reporting requirements, credit unions that are members of an FHL Bank must nonetheless submit to FHFA a Community Support Statement, which evidences each member credit union's record of lending to first-time homebuyers as part of this evaluation process," the CUNA letter noted.

Determination of compliance, CUNA maintained, is "inherently a regulatory function" and the FHFA is "best suited to determine compliance with its own regulations."

"The FHL Banks should be allowed to continue doing what they do best--fulfilling their mission by offering advances

and community investment products to their members," CUNA wrote.

Use the resource link to access the complete letter.

Feb. NCUA Report features fraud avoidance tips

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WASHINGTON (2/13/12)--A watchful eye and strong internal controls are credit unions' best defense against fraudulent activity, "while weak internal controls provide a breeding ground for substantial losses or even failure," the National Credit Union Administration (NCUA) said in a Region IV Report released last week.

The Region IV Report was released as part of the February edition of the agency's NCUA Report.

Financial fraud schemes can be particularly damaging to credit unions due to their member-owner structure, the agency noted. In the report, the NCUA warned that "recordkeeping problems, out of balance conditions, overdue audits or member account verifications, and manipulated records create a situation where fraud can "take root and go undiscovered."

A weak and/or uninvolved supervisory committee, limited staff, recordkeeping issues, and manipulated records are all common threads in fraud schemes, and many of these fraud schemes are perpetrated by trusted staff members, the NCUA said.

"Accurate and up-to-date records and audit trails" are fraud deterrents, and the agency also recommended that credit unions frequently evaluate and update their own internal controls to keep up with growth or incorporate new technology. "Once the internal control environment is assessed, then weakness can be determined and policies can be put in place for improvement," the NCUA said.

For more of this month's NCUA Report, use the resource link.

NCUA sends letter about N.C. dual exams

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ALEXANDRIA, Va. (2/13/12)--Dual examinations of North Carolina's state-chartered credit unions has ended for 2012, the National Credit Union Administration (NCUA) confirmed in a letter sent to those credit unions last week.

The agency discontinued its coordinated examinations with the North Carolina Credit Union Division, opting instead to begin separate exams for state-chartered federally insured credit unions in the state, after Raleigh, N.C.-based State Employees' CU got authorization from its state regulator and disclosed its state-issued CAMEL score earlier this year.

This action "violated the trust of confidentiality of CAMEL ratings," the NCUA said. The agency defended its decision to conduct dual examinations of North Carolina credit unions, saying they were needed to protect the National Credit Union Share Insurance Fund and the credit union system.

NCUA Chairman Debbie Matz last week said the NCUA's decision to examine North Carolina state-chartered credit unions was not meant to be burdensome.

NCUA staff said the dual exams only required a minor cost outlay, and the agency would not increase its assessment to pay for the exams.

For the full NCUA letter and prior News Now coverage of the issue, use the resource links.

CUNA seeks comment on NCUA TDR proposal

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WASHINGTON (2/13/12)--The National Credit Union Administration's (NCUA) Troubled Debt Restructuring (TDR) proposal, which has been labeled as a potential "important step forward" by the Credit Union National Association (CUNA), is out for comment, and CUNA is seeking credit union comment as it develops its own comment letter.

TDR loans, which have very specific accounting and reporting requirements, include certain loan modifications where a credit union or other lender grants a concession to a borrower and modifies the terms of a loan based on the borrower's financial situation. The financial statement notes and call report data associated with TDRs are also unique.

Current TDR reporting requirements force credit unions to segregate TDRs and report TDR payments as delinquent until the member has made timely and consecutive payments for six months after the modification. Credit unions are also usually required to manually track such payments. Many credit unions are struggling to work with homeowners that cannot pay their mortgage due to financial difficulties.

The NCUA's TDR proposal, which was released at last month's open board meeting, would allow credit unions to modify TDR loans without having to immediately classify those loans as delinquent. Credit unions would no longer be forced to track each TDR loan's performance manually for six months. The proposal would also set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications.

CUNA in the comment call asks whether loan workout policies created under the proposed regulations should tie aggregate program limits to net worth, rather than unimpaired capital and surplus. The comment calls questions also ask for more specific, technical comments on accrual loan status, parts of the proposal that impact the "past due" definition, TDR data elements,

Credit unions can also suggest any additions they would make to the TDR proposal, and comment on whether the proposed effective date, which would be 120 after the final rule is published in the Federal Register, and comment period should be extended.

CUNA is accepting comments until February 22. Comments to the NCUA are due by March 2.

For the full comment call, use the resource link.

Forbes blog joins pro-MBL voices

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WASHINGTON (2/13/12)--Access to capital "is essential for the health of the small business economy," and the current 12.25% of assets member business lending cap that is imposed on credit unions "is detrimental to the health of small business," the Small Business Authority (SBA) said in a Forbes.com blog post.

Separate pieces of House and Senate legislation would increase this cap to 27.5% of total assets, injecting $13 billion in new funds into the economy, and creating as many as 140,000 new jobs, according to Credit Union National Association (CUNA) estimates.

"Credit unions have better loan loss performance statistics than other financial institutions and have 92 million members across the United States, many of which desire business loans," the blog said, noting that credit unions have been making MBLs since the early 1900s, and did so with no cap on their ability to lend. The business lending activities of credit unions, which "are historically experienced in this field and have the capacity to lend" should not be limited, the blog post added.

The SBA blog post also highlighted CUNA's Small Business Hike the Hill, which took place last week in Washington. Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) advocated for an MBL cap increase during a Wednesday Capitol Hill press conference, and small business and credit union representatives from across the country met with their respective legislators to further spread the pro-MBL cap increase message. All in all, 75 small business and credit union representatives from 15 states are conducting their own state and district level MBL cap increase advocacy activities.

SBA also took part in the Hike the Hill activities.

The SBA is a CUNA Strategic Services provider. For the Forbes.com blog post, use the resource link.

MBL cap increase legislation has also been supported in a Huffington Post piece by Heartland Institute Vice President Eli Lehrer and an American Consumer Institute blog in The Hill.

The Progressive Policy Institute has also suggested allowing increased credit union member business lending authority to ease the credit squeeze on small businesses. A recent Small Business Majority, Main Street Alliance and American Sustainable Business Council survey of small business owners has shown that the vast majority of small business owners believe it is difficult to secure a business loan.

Inside Washington (02/10/2012)

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  • WASHINGTON (2/13/12)--U.S. Sen. Robert Menendez (D-N.J.), chairman of the Senate subcommittee on housing, transportation and community development, last week introduced a bill that would give financial institutions equity in homes in exchange for principal reductions on loans. The Preserving American Homeownership Act is specifically aimed at homeowners who owe more than their house is worth. Introducing his bill, Menendez said that more and more people are choosing to walk away from underwater mortgages, seeing it as their only viable option. He added that situation exacerbates the problems and his bill aims to break this cycle and give homeowners the relief they are looking for by working with lenders to find solutions acceptable to everyone. Under the program proposed by Menendez, lenders would, in effect, invest in homes so they would not carry bad debt on their books. The principal balance of the loan would be reduced to 95% of the re-assessed value of the home and over a three-year period, provided the homeowner is able to make reduced payments, the principal balance would be reduced in one-third increments per year. In exchange, the financial institution would receive a fixed share (at most 50%) of the increase in the home's value when the home is sold or later refinanced. The share depends on how much the financial institution initially reduced the principal …
  • WASHINGTON (2/13/12)--The Federal Trade Commission (FTC) last week issued a warning to marketers of six mobile applications used for background screening that they may be violating the federal Fair Credit Reporting Act (FCRA), which is intended to protect the privacy of consumer report information and ensure that the information supplied by consumer reporting agencies is accurate. According to the FTC, some apps include criminal record histories, which "bear on an individual's character and general reputation and are precisely the type of information that is typically used in employment and tenant screening." In its warning letters, the FTC reports it said, "If you have reason to believe that your background reports are being used for employment or other FCRA purposes, you and your customers who are using your reports for such purposes must comply with the FCRA." However, according to the letters, the FTC has made no determination whether the companies are violating the FCRA. The contacted companies are encouraged to review their apps, policies and procedures to be sure they comply with the FCRA …

2012 GAC adds more Hill heavyweights

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WASHINGTON (2/13/12)--Two more key Capitol Hill lawmakers have now joined the lineup of the Credit Union National Association's (CUNA) 2012 Governmental Affairs Conference (GAC), which takes place March 18-22 at the Washington Convention Center in Washington, D.C.

House Minority Whip Steny Hoyer (D-Md.) is scheduled to address CUNA's GAC during the Monday general session.



Hoyer is a long-time supporter of credit unions' tax status, fighting against congressional credit union challenges by saying taxing not-for-profit credit unions, which focus on helping low- and middle-income families and small businesses, is "bad for consumers." He served as House Majority Leader from 2007 until 2011, and has been a member of the House since 1980.

Bachus, who joined the House of Representatives in 1993 and has led the Financial Services Committee since early 2011, has called credit unions "an integral part of our financial system" and has praised credit unions for their pro-consumer work and their straightforward credit practices. He is a frequent GAC guest, and has fought against predatory lending practices, and authored legislation that lifted the federal deposit insurance level for credit unions and banks to $250,000.

House Majority Whip and House Financial Services Committee member Kevin McCarthy (R-Calif.) and Assistant House Democratic Leader James Clyburn (D-S.C.) have also joined the GAC lineup in recent weeks. Sens. Jon Tester (D-Mont.), who championed credit union concerns on debit interchange fee cap legislation, and Rand Paul (R-Ky.), who is a current co-sponsor of S. 509, which would increase the credit union member business lending cap, have also signed on as speakers.

Reps. Jeb Hensarling (R-Texas), Ed Royce (R-Calif.), Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.) and Carolyn McCarthy (D-N.Y.) and Sen. Mark Udall (D-Colo.) will also join former Secretary of State Condoleezza Rice, premier, non-partisan political analyst Charlie Cook, journalistic duo Bob Woodward and Carl Bernstein, and other notable speakers on the 2012 GAC schedule.

The annual GAC will provide more than 4,000 credit union representatives an opportunity to hear from influential leaders from Congress and the federal regulatory agencies during the meeting's sessions, as well discuss pressing credit union issues with federal lawmakers and regulators in private meetings.

Recognized as the premier conference to attend for political impact, credit union networking and industry updates, the GAC also offers a wide array of educational breakout sessions, the industry's largest exhibitor showcase, guest/family programs to tour Washington's sights, and special entertainment including an opening concert and the closing Gala Reception and Dance. And this year, the whole event will be kicked off by American Idol star Taylor Hicks, who will perform at the opening concert, sponsored by the CUNA Councils.

Additional speakers and session topics will be announced in the weeks to come.

Registration, housing information, and other information can be found using the resource link below.

CFPB privacy improvements receive bipartisan support

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WASHINGTON (2/10/12)--Republican and Democratic lawmakers, including House Financial Services subcommittee on financial institutions Chairman Shelly Moore Capito (R-W.Va.) and ranking subcommittee member Carolyn Maloney (D-N.Y.), this week spoke in support of H.R. 3871, which would ensure that groups or individuals that supply information to the Consumer Financial Protection Bureau (CFPB) would not waive their right to privacy protections.

Capito during a Wednesday House Financial Services financial institutions subcommittee hearing noted that these sorts of privacy changes have been supported by CFPB Director Richard Cordray, and said Cordray has urged Congress to act legislatively to make the changes. She said the legislation should move forward without delay.

CUNA expressed support for HR. 3871 in a letter to the subcommittee earlier this week. CUNA President/CEO Bill Cheney in that letter noted that while section 205(j) of the Federal Credit Union Act protects privileged information submitted by credit unions to the National Credit Union Administration, state credit union supervisors, and foreign banking authorities, that section does not cover submissions to the CFPB.

The hearing also featured discussion on bills that would make the CFPB's yearly funding subject to the congressional appropriations process and remove the CFPB's director from their current slot on the Board of Directors of the Federal Deposit Insurance Corporation.

Support for these two bills split along party lines.

Inside Washington (02/09/2012)

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  • WASHINGTON (2/10/12)--The National Association of State Credit Union Supervisors (NASCUS) pledged its support for HR 3993, the Capital Access for Small Business Jobs Act Wednesday. The legislation would allow credit union access to supplemental capital. "NASCUS applauds the introduction of this bill and enthusiastically supports the ability of state and federal regulators to be provided with this regulatory parity enjoyed by other federal regulators," said NASCUS President/CEO Mary Martha Fortney. For more coverage of H.R. 3993, read "CUNA welcomes 'visionary' CU capital bill."
  • WASHINGTON (2/10/12)--Rep. Elijah E. Cummings (D-Md.), ranking member of the House Committee on Oversight and Government Reform, and committee member John F. Tierney (D-Mass.) Wednesday sent a letter to Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA) raising questions about his recent response to Congress arguing that principal reduction programs do not serve the interests of American taxpayers. After months not responding to requests for data and analysis, and in the face of a subpoena request, DeMarco sent a response letter to Cummings and Tierney on Jan. 20, outlining his justification for refusing to approve any principal reduction programs for loans backed by Fannie Mae and Freddie Mac. "The single most significant revelation in your letter to Congress," wrote Cummings and Tierney, "is that, even based on your own questionable assumptions and data, principal reduction programs serve the taxpayer interests even when compared to your preferred alternative of forbearance ...
  • WASHINGTON (2/10/12)--The Federal Reserve Board on Wednesday postponed its closed meeting to discuss Capital One Financial Corp.'s proposed acquisition of ING Direct USA, the central bank said. The meeting has been rescheduled for 2:30 p.m. (ET) on Feb. 13. The postponement was made because of to a scheduling conflict, according to a Capital One spokesperson (American Banker Feb. 9). The Fed held three public hearings on the proposed deal under which Capital One would buy the U.S. online banking unit of ING Group. Community bankers and consumer advocates have criticized the deal, saying it will create another "too big to fail" institution. The Independent Community Bankers of American called for a moratorium on all acquisitions of institutions with assets of more than $100 billion until regulators finalize a new regulatory framework required by the Dodd-Frank Act for systemically important financial institutions. Capital One has said the deal would reduce systemic risk and create jobs ...
  • WASHINGTON (2/10/12)--The Consumer Financial Protection Bureau (CFPB) has received over 2,000 comments on student loan issues from consumer advocates, industry associations, banks, schools, and individual borrowers. The agency last year requested information on a series of issues impacting private student loans from origination to servicing to collection. The CFPB said many commenters were excited by the idea of a standard financial aid shopping sheet. Commenters said information on their estimated debt at graduation, estimated monthly payment after graduation, their likely ability to repay my loans, breakdowns of school costs, and historical information on how students of that school have repaid their own debts was most important. Students and others involved in education have also requested sections to review the key terms of student loans and additional information on federal work-study programs. Information on how average interest rates impact borrowing, how interest rates for federal loans compare to private loans, and when interest begins to accrue on different types of loans was also very important to commenters, the CFPB said. The CFPB is sharing these comments with the Department of Education, and that body will use the comments to publish its own financial aid information sheet. The agency is also set to deliver a comprehensive report on the private student lending market to Congress in the summer of 2012…

NCUA cancels Feb. meeting cites streamlining

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ALEXANDRIA, Va. (2/10/12)--The National Credit Union Administration (NCUA) has cancelled its previously scheduled Feb. 16 open board meeting, with NCUA Chairman Debbie Matz saying board members "concluded that there are no essential board action items to publicly consider at this time."

Matz added the NCUA understands "that many credit union officials are feeling overwhelmed by a large number of proposed and final regulations, many of which are mandated by statute and issued by several different agencies." The NCUA is "carefully evaluating which NCUA rules need to be streamlined, eliminated or clarified in 2012," and may cancel additional meetings this year, if needed, she said.

Any additional meeting cancellations will be made the month of the meeting.

The NCUA on Thursday also announced the agenda for its Feb. 16 closed meeting, which will go forward as scheduled. A merger request and various supervisory issues will be discussed at that meeting, which is scheduled to begin at 10:00 a.m. ET.

ATM disclosure changes needed says CUNA joint letter

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WASHINGTON (2/10/12)--The Credit Union National Association (CUNA) has joined with the Electronic Funds Transfer Association (EFTA) and other groups to urge members of the U.S. Congress to eliminate an unneeded ATM fee disclosure requirement "that has encouraged a large and growing number of frivolous lawsuits across the nation."

The Electronic Fund Transfer Act requires credit unions and other financial institutions to display at each ATM location that fees will or may be charged. The act also requires that more detailed ATM fee information must also be provided before the transaction is completed, either by showing it on the ATM's screen or providing the ATM user with a small printed disclosure before the consumer is committed to paying the fee.

Credit unions and others have found that the outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits.

In a joint letter to Congress, CUNA and other banking and trade groups said that both the number and cost of these lawsuits have risen precipitously over the past 18 months. Without some regulatory changes, "the number of these baseless lawsuits will continue to rise as will the cost of this service to consumers," and the number of ATMs that are made available to consumers could ultimately decrease, the letter warned.

The letter added that while this dual disclosure ATM regulation may have been useful when it was first released, technological improvements have meant that the size of the ATM screen-based fee disclosures has grown, eliminating the need for a second disclosure on the body of the ATM.

Additionally, most consumers expect to pay a fee at an ATM unless they are using an ATM owned or operated by the bank or credit union where they have their account or their financial institution has agreed to pay for the use of the ATM, the letter said.

The American Bankers Association, American Gaming Association, ATM Industry Association, Independent Community Bankers Association, and the National Association of Convenience Stores also cosigned the letter.

CUNA continues to believe that the Consumer Financial Protection Bureau has authority under the act and Regulation E to eliminate the requirement for notices on the outside of the ATM. CUNA discussed this with the CFPB earlier this week and the CFPB is considering its authority regarding this issue. However, given the need to resolve ATM notice issues, Congress should look into this as well, CUNA Deputy General Counsel Mary Dunn said.

For the full letter, use the resource link.

CFPB-NCUA webinar addresses broad CU issues

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WASHINGTON (2/10/12)—In a joint Town Hall session with the National Credit Union Administration (NCUA), Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said bank overdraft protection programs (ODP) are one of the areas on the bureau's radar screen.

Responding to a question from a credit union participant in the webinar who asked whether the bureau was going to review overdraft protection programs, Cordray said the bureau is looking at bank products, such as ODP, but that there is no news to report at this time regarding what the bureau will do.

Cordray added that there are area where the bureau might be willing to forego a formal regulatory process and just "talk through" problems.

For instance, the CFPB leader noted that he is seeing movement toward simplified and shortened credit card disclosures. He said that if there can be improvements for consumers without constraining financial institutions with more regulations, that could be a workable approach.

Cordray mentioned in his prepared remarks that the CFPB is seeking comments to streamline the regulations that have been shifted to its jurisdiction "without losing value for consumers," and urged credit unions to comment.

On another topic, a credit union representative asked Cordray whether the bureau will come out with additional guidance on the issue of multi-featured, open-end lending (MFOEL), a Regulation Z issue.

The NCUA issued guidance (see resource link) in 2010 to help federal credit unions comply with certain Federal Reserve Board changes to the Official Staff Commentary to Reg Z, but confusion still abounds for credit unions concerning the concept of "occasionally or routinely" verifying certain credit information as well as the verification of credit information in connection with a consumer's request for certain advances under a multi-featured open-end lending plan.

Multi-featured, open-end lending has been used by credit unions as a tool to assist in establishing long-term borrowing relationships with their members for over 30 years, and has served as a convenient way for consumers to obtain advances at the point of a transaction.

Cordray acknowledged that he was unaware of the issue until it was raised with him by the Credit Union National Association. He said he has no immediate answers to the problems, but will have discussions with credit unions and the NCUA to determine what, if anything, should be done.

NCUA's Matz at the joint webinar Wednesday addressed a recent development where the North Carolina credit union regulator allowed State Employees CU to make its CAMEL rating public and said the NCUA had no choice but to end its joint examinations. (See News Now, Feb. 9: NCUA addresses N.C. exam situation.)

She also addressed new rules on credit union service organizations and trouble debt restructuring loans.  For more on these issues, use the resource link below to access the Credit Union National Association's CompBlog posting (members only).

CUNA welcomes visionary CU capital bill

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WASHINGTON (2/10/12)--In a bill the Credit Union National Association (CUNA) says will enhance the safety and soundness of the credit union system, Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) have proposed to permit the National Credit Union Administration (NCUA) to allow credit unions to accept additional forms of capital, provided it does not alter the cooperative ownership structure of credit unions.

Three other members of Congress joined King and Sherman as original cosponsors: Reps. Ron Paul (R-Texas), Larry Kissell (D-N.C.) and Bob Filner (D-Calif.).

Current law restricts credit unions to building their capital levels through retained earnings. Under the newly introduced bill, supplemental capital would have to be uninsured and subordinate to other claims against a credit union.

Click to view larger image Rep. Peter King (R-N.Y.) (center), who, along with Rep. Brad Sherman (D-Calif.), introduced a supplemental capital bill for credit unions on Thursday, meets with New York credit union representatives and small business owners during CUNA's Small Business Hike the Hill. King and the hikers discussed the benefits of an increased member business lending cap, and supplemental capital for credit unions, during the meeting. Also pictured, standing behind King, from left to right, are: Melrose CU Director of Marketing and Public Affairs Rob Nemeroff; Actors FCU Lending Director Samuella Seisay; Bethpage FCU Senior Vice President of Corporate Development Linda Armyn; Actors FCU Marketing Director Steven Sobotta; Energy Fitness co-owners Trevor Tucci and Michael Tucci; Bethpage FCU Vice President of Commercial Lending Lawrence Jones; New York Credit Union Association President/CEO William Mellin; and New York Credit Union Association Senior Vice President/General Counsel Michael Lanotte. (CUNA photo)
The new bill (H.R. 3993) would also authorize the NCUA to set maturity limits on this capital and restrict the ability to raise supplemental capital to credit unions that are sufficiently capitalized and well-managed.

In a letter to colleagues this week seeking support for the bill, King said it will provide the NCUA with "the same authority and flexibility to adjust capital requirements in response to changes in economic conditions as Congress has provided to federal banking regulators."  They said it also will:

  • Rectify a flaw in a 1998 law that is discouraging manageable asset growth by financially healthy credit unions;
 

  • Ensure credit unions can continue to accept new deposit shares--even during tough economic times when demand for loans and other income-generating services are low; and
 

  • Allow credits unions to help keep private sector credit flowing at affordable rates even in recessionary times.
 

The National Credit Union Administration has backed an idea to permit a combination of supplemental and risk-related capital for credit unions.

NCUA Chairman Debbie Matz, in letters to the top members of the Senate Banking Committee and the House Financial Services Committee last year, urged statutory changes that would correct the disincentive she said is impacting even strong, well-capitalized credit unions.

She said that, to the detriment of consumers, current credit union prompt corrective action (PCA) rules discourage some credit unions from marketing their desirable products and services out of concern that attracting increased share deposits could deflate net worth positions.

CUNA, in its letter of support for the legislation sent to King and Sherman, said, "The lesson of the most recent financial crisis for financial institutions is that capital is king."

CUNA President/CEO Bill Cheney wrote, "This visionary legislation is all about ensuring that consumers and their communities will continue to receive support from their credit unions as they grow. The measure would provide credit unions with appropriate ability to raise capital from sources other than retained earnings while maintaining the 'one member, one vote' principle that is the bedrock of the credit union ownership structure.

"Further, it would improve the safety and soundness of credit unions by allowing them to develop a supplemental cushion to reduce risk to the National Credit Union Share Insurance Fund. Reps. King and Sherman are to be commended for introducing this bill, and we look forward to working with them toward passage by the House, and ultimately enactment."

NEW King and Sherman introduce CU capital bill

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WASHINGTON (2/9/12, UPDATED 12:04 p.m. ET)--In a bill the Credit Union National Association (CUNA) says will enhance the safety and soundness of the credit union system, Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) have proposed to permit the National Credit Union Administration (NCUA) to allow credit unions to accept additional forms of capital, provided it does not alter the cooperative ownership structure of credit unions.

Current law restricts credit unions to building their capital levels through retained earnings. Under the newly introduced bill, supplemental capital would have to be uninsured and subordinate to other claims against a credit union.

The bill (H.R. 3993) also authorizes the NCUA to set maturity limits on this capital and restrict the ability to raise supplemental capital to credit unions that are sufficiently capitalized and well-managed.

In a letter to colleagues seeking support for the bill, King said it will provide the NCUA with "the same authority and flexibility to adjust capital requirements in response to changes in economic conditions as Congress has provided to federal banking regulators."  They said it also will:

  • Rectify a flaw in a 1998 law that is discouraging manageable asset growth by financially healthy credit unions;
  • Ensure credit unions can continue to accept new deposit shares--even during tough economic times when demand for loans and other income-generating services are low; and
  • Allow credits unions to help keep private sector credit flowing at affordable rates even in recessionary times.
The NCUA has backed an idea to permit a combination of supplemental and risk-related capital for credit unions.

NCUA Chairman Debbie Matz, in letters to the top members of the Senate Banking Committee and the House Financial Services Committee last year, urged statutory changes that would correct the disincentive she said is impacting even strong, well-capitalized credit unions.

She said that, to the detriment of consumers, current credit union prompt corrective action (PCA) rules discourage some credit unions from marketing their desirable products and services out of concern that attracting increased share deposits could deflate net worth positions.

CUNA, in its letter of support for the legislation sent to King and Sherman, said, "The lesson of the most recent financial crisis for financial institutions is that capital is king."

"Capital is also the first line of defense in protecting taxpayers from deposit insurance losses. It is in everyone's best interest to have financial institutions that are well capitalized and able to weather whatever difficulties may occur," CUNA President/CEO Bill Cheney wrote.

"We believe your legislation would provide credit unions with appropriate ability to raise capital from sources other than retained earning without putting in jeopardy the 'one member, one vote' principle that is the bedrock of the credit union ownership structure.

"As credit unions emerge from the financial crisis, this legislation would improve the safety and soundness of credit unions by allowing them to develop a supplement cushion to reduce risk to the National Credit Union Share Insurance Fund."

NEW NCUA cancels Feb. open board meeting

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ALEXANDRIA, Va. (UPDATED: 10:15 a.m. ET, 2/9/12)--The National Credit Union Administration (NCUA) has cancelled its previously scheduled Feb. 16 open board meeting, with NCUA Chairman Debbie Matz saying board members "concluded that there are no essential Board action items to publicly consider at this time."

Matz added the NCUA understands "that many credit union officials are feeling overwhelmed by a large number of proposed and final regulations, many of which are mandated by statute and issued by several different agencies." The NCUA is "carefully evaluating which NCUA rules need to be streamlined, eliminated or clarified in 2012," and may cancel additional meetings this year, if needed, she said.

Any additional meeting cancellations will be made the month of the meeting.

The NCUA said it would still move forward with its scheduled Feb. 16 closed meeting.

NCUA addresses N.C. exam situation

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WASHINGTON (2/9/12)--National Credit Union Administration (NCUA) Chairman Debbie Matz said Wednesday that her agency supports the dual-chartering system and works closely with state regulators. However, when a state regulator "violated the trust of confidentiality of CAMEL ratings," the NCUA had no choice but to end its joint examinations.

The NCUA chairman was referring to a recent development where the North Carolina credit union regulator allowed State Employees CU to make its CAMEL rating public.

The CAMEL rating system is NCUA's method of evaluating the health of credit unions. The rating, adopted by the NCUA in 1987, is based upon five critical elements of a credit union's operations: (C) Capital, (A) Asset quality, (M) Management, (E) Earnings and (L) Asset liability management.

"We take confidentiality very seriously," Matz said, adding that if such confidentiality regarding examinations and CAMEL ratings is breached, it will cause problems for the credit union system.

NCUA Executive Director David Marquis added that a lack of confidentiality would affect how the agency's examinations are conducted. He also expressed concern that releasing CAMEL codes could create liquidity pressures, make it difficult to resolve problems, and increase losses in the National Credit Union Share Insurance Fund (NCUSIF).

Matz said the NCUA's decision to examine North Carolina state-chartered credit unions was not meant to be burdensome to credit unions, and that the agency wants to be "in and out" as quickly as possible.

The state regulator has only to end the "pilot program," and SECU to take its CAMEL rating off its website, and the issue will be resolved, Matz emphasized.

The NCUA officials made their remarks during a joint Town Hall session conducted with the Consumer Financial Protection Bureau.

A credit union participant of the joint session asked if credit unions will see an increased NCUSIF assessment because of the North Carolina situation, to cover the cost of the additional examinations.

NCUA's Marquis responded that these examinations only require "a very minor cost outlay" by NCUA. He said that it's only taking 1.5 full-time equivalent (FTE) employees to conduct these examinations, and the agency will be able to absorb that expense without an increased assessment.

The Credit Union National Association urged the NCUA this week to resolve differences regarding disclosure of a credit union's CAMEL rating and the use of dual exams as soon as possible.

For more on the Town Hall session, read Friday's News Now.

CFPB bill would ensure privacy CUNA (02/08/2012)

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WASHINGTON (2/8/12)--The Credit Union National Association (CUNA) Wednesday thanked Rep. Bill Huizenga (R-Mich.) for introducing H.R. 3871, which would ensure that groups or individuals that supply information to the Consumer Financial Protection Bureau (CFPB) would not waive their right to privacy protections.

HR. 3871 will be considered during a Wednesday House Financial Services financial institutions subcommittee hearing.

The hearing will also feature discussion on bills that would make the CFPB's yearly funding subject to the congressional appropriations process and remove the CFPB's director from their current slot on the Board of Directors of the Federal Deposit Insurance Corporation.

CUNA President/CEO Bill Cheney noted that while section 205(j) of the Federal Credit Union Act protects privileged information submitted by credit unions to the National Credit Union Administration, state credit union supervisors, and foreign banking authorities, that section does not cover submissions to the CFPB.

Cheney said Huizenga's bill "will ensure that when credit unions or other persons submit information to the CFPB, doing so will not be construed as waiving, destroying or otherwise affecting any privilege associated with the submission."

Cheney said he hopes Congress acts quickly on this legislation.

Small biz bring credit need message to Hill

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WASHINGTON (2/9/12)--Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.), chief sponsors of a House bill to increase the credit union member business lending (MBL) cap, stood with small business owners and credit union representatives Wednesday to conduct a press conference to spotlight small businesses' unmet need for capital--to grow and increase hiring capacity.

Royce said of the small business owners who came to Capitol Hill to support an increased MBL cap, "They are trying to put democracy in action." Royce said the business owners are asking for Congress' help with their capital needs, and said an increase in the MBL cap is a way Congress can help without having to increase the government's borrowing.

He cited the experience with the $30 billion Small Business Lending Fund, intended to encourage banks to lend more to small businesses. More than half the recipients of the taxpayer-funded SBLF money used it to repay their TARP borrowings, he noted.

"The point is there is a better way to go to help small businesses access capital…and that is the Small Business Lending Act," Royce said referring to his MBL bill.  That bill would increase the MBL cap to 27.5% of a credit union's total assets, up from the current 12.25% cap.

McCarthy, addressing the business owners and credit union representatives in the room, encouraged them to continue to meet with their federal lawmakers in Washington and at home to advocate for increased MBLs.

"With this Congress, if there are not enough voices, no one is going to do anything about it," McCarthy said, adding, "We can't do it alone.  We introduced (the bill).  You have to fight for it.  It's the people back home--all of you--that have to do the heavy lifting."

Click for slide showCUNA President/CEO Cheney (third from left) welcomes some of the small business representatives that gathered Tuesday and Wednesday in Washington, D.C. to urge federal lawmakers to support legislation that would increase the MBL cap. The small businesses represented the gamut of entrepreneurial opportunities--from a pet kennel owner to a construction contractor to an interior contractor to fitness business owners and more. (CUNA photo)
Credit Union National Association (CUNA) President/CEO Bill Cheney, addressing the gathering,  underscored that credit unions have small businesses all across the country supporting credit unions in their attempt to provide more credit through increase small business lending authority.

He noted that bankers are the only group to oppose credit union efforts to provide more credit to the nation's small businesses.

"This is not a bank versus credit union issue. This is straight forward," Cheney said and underscored an MBL increase would infuse $13 billion in new credit, and create 140,000 new jobs--all at no cost to taxpayers.

Also at the press conference were small business owners, representatives from small business trade groups and business think-tanks, and credit union representatives--all joining this week to show the link between small business' needs for credit and credit unions' desire to help fill that need.

Credit union and small business representatives from Alabama, California, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Tennessee, and Texas met with their congressional representatives following the press conference.

Brothers Michael and Trevor Tucci, who co-own St. John's, N.Y.-based Energy Fitness, told Rep. Peter King (R-N.Y.) that Long Island, N.Y.'s Bethpage FCU was there for them when they were working to open their first gym, and they want to be able to continue to work with the credit union as they continue to expand their small business.

New York Credit Union Association (NYCUA) President/CEO William Mellin said Energy Fitness is a great example of the many small businesses that are "busting at the seams and looking to expand," and said increasing the MBL cap would allow credit unions to help these businesses grow.

In a later meeting with Rep. Nan Hayworth (R-N.Y.), Samuella Seisay, lending director with Actors FCU, New York, N.Y., said the MBL cap is forcing her credit union to turn away eligible borrowers. NYCUA Senior Vice President/General Counsel Michael Lanotte added the MBL debate should be about how best to help small businesses.

This sentiment was mirrored in a Missouri Credit Union Association meeting with members of Rep. William Lacy Clay's (D-Mo.) staff.  Gary Hinrichs, CEO of O'Fallon, Mo.-based West Community CU said an MBL cap increase is not about banks versus credit unions… "it's about constituents." One such constituent, Becker Contracting Co. President Robert Becker, said he turned to West Community CU after his small bank decided to abruptly end their lending relationship, and added that he has been helped immensely by the credit union's much lower business loan rate.

Another credit union, Winston Salem, N.C.'s Truliant FCU, helped Permatech, Inc. CEO Joe Trettel expand his manufacturing business by taking on a new project in Saudi Arabia. Trettel told Rep. Brad Miller (D-N.C.) that the credit union loan allowed him to sustain his employee base, and, eventually, to grow the total number of employees at his business back to pre-recession levels.

Other small businesses and credit union representatives will conduct their own state and district level advocacy activities, with a total of 75 small business and credit union representatives from 15 states speaking up for an MBL cap lift.

The House (H.R. 1418) and Senate (S. 509) MBL bills have broad bi-partisan support. The House bill has 117 cosponsors and the Senate bill has 22 co-sponsors.

Cordray-CUNA meeting covers a range of CU issues

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WASHINGTON (2/9/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney on Wednesday told Consumer Financial Protection Bureau (CFPB) Director Richard Cordray that "credit union members do not need to be protected from their credit unions," but, rather, need increased regulatory relief.

Cheney and CUNA Senior Vice President and Deputy General Counsel Mary Dunn met with Cordray, CFPB Director of External Affairs Elizabeth Vale, and CFPB Public Affairs Specialist Leandra English.
CUNA President/CEO Bill Cheney and Senior Vice President/Deputy General Counsel Mary Dunn (both center) addressed regulatory relief, remittances, and other credit union issues in a Wednesday meeting with CFPB Director Richard Cordray (right) and CFPB Director of External Affairs Elizabeth Vale. (CUNA photo)


Cheney during the meeting added that credit unions should not be subject to additional rules, and reinforced that credit unions are democratically owned and controlled. He and Dunn also addressed other credit union issues, including the need for more flexible guidance on multi-featured open ended lending, duplicative and unnecessary ATM fee disclosure provisions that have created legal issues for some credit unions, and the CFPB's recent remittance final rule.

Cheney and Dunn called on the CFPB to coordinate with the National Credit Union Administration (NCUA) to ensure that regulations that impact credit unions are consistently interpreted by both entities, and also again raised concerns regarding annual privacy notices, overdraft protection issues, the need to improve the mortgage regulatory process and other issues.

CUNA also urged the CFPB to ensure that credit unions are represented as it develops its Consumer Advisory Board, Credit Union Advisory Council and the Small Business Regulatory Enforcement Fairness Act panel.

Cordray assured CUNA that the agency would fully consider credit unions' concerns and will look into issues CUNA raised, such as multi-featured open end lending. He also said that he wants to encourage credit union representation on these groups.

Inside Washington (02/08/2012)

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  • WASHINGTON (2/9/12)--Federal Reserve Board Chairman Ben Bernanke on Tuesday said that while U.S. banks are minimizing their exposure to European debt, increased problems overseas could have a negative impact here. "Risks remain that developments in Europe or elsewhere may unfold unfavorably and could worsen economic prospects here at home," Bernanke said in testimony before the Senate Budget Committee (American Banker Feb. 8). About 58% of U.S. banks tightened exposure to European firms and their subsidiaries in the fourth quarter, according to the Fed's most recent Senior Loan Officer Opinion Survey. European banks also have begun rebalancing their balance sheets, creating an increase in demand for U.S. banks. The Fed has kept an eye on the quality of the hedges that domestic banks are making to protect themselves from the European debt crisis, Bernanke said …
  • WASHINGTON (2/9/12)--President Barack Obama's nomination of a Republican to the board of the Federal Deposit Insurance Corp. (FDIC) could pave the way for the Senate confirmation of other nominees, including leadership roles within Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, according to observers. The GOP is widely believed to be intent on blocking any nominations because of the president's controversial recess appointment Richard Cordray as director of the Consumer Financial Protection Bureau (American Banker Feb. 8). But Obama's nomination of Jeremiah Norton, a JPMorgan Chase & Co. executive and former Treasury official in the Bush administration, to the fifth FDIC board seat, could open the doors for some deal making, observers said …

Small biz owners kick off MBL campaign

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WASHINGTON (2/8/12)—A restauranteur, a pet kennel owner, and a construction contractor are among those that have joined credit union representatives in Washington, D.C. this week to show the broad business appeal of lifting the credit union member business lending (MBL) cap.

Small business owners, representatives from small business trade groups and business think-tanks, and credit union representatives have joined forces for the Credit Union National Association's (CUNA) first-ever small business/credit union "Hike the Hill" event. The goal of the Hike is to have small business owners demonstrate the link between small business' needs for credit and credit unions' desire to help fill that need, and gain additional support for legislation that would increase the MBL cap to 27.5% of total credit union assets.

Jim Dobbins, owner of Winston-Salem, N.C.-based office interior contractor firm Sharpe Interiors, will tell his Washington representatives how his credit union and new business lender of choice, Allegacy FCU, helped his business continue after his former community bank called in his loan.

Stephanie Francois, owner of Bellevue, Nebraska-based Stella's Hamburgers, is another Hike participant. Fancois was set to take over the burger business, which had been in her family for over 50 years, at age 24, and needed a loan to complete the purchase from her uncle. Most banks would not lend to her, and those that would offered high rates, so she was stuck in a tough situation at first. However, she refinanced with the help of Omaha's SAC FCU, and that credit unions' lower rate helped her to keep the business in the family.

Brothers Jason Parker and Steve Parker, owners of New Jersey's K-9 Resorts, have used Financial Services FCU to help open franchise locations of their business, which started as a dog walking business during their high school years, and they will join New Jersey CU League representatives and credit unions from that state as they walk the halls of Congress this week.

Small businesses need for funds, and the help an MBL cap increase could provide to them, will be spotlighted in a Wednesday press conference on Capitol Hill. That press conference, which is scheduled for 11:00 a.m. (ET), will be hosted on Capitol Hill by Rep. Ed Royce (R-Calif.), who authored the House version of MBL cap lift legislation.

Manufacturers, a dentist, and a real estate developer are also among those making the case for an MBL cap increase this week. Visits with federal lawmakers took place on Tuesday and are scheduled for today.

Additional small businesses and credit union representatives will conduct their own state and district level advocacy activities. All in all, 75 small business and credit union representatives from 15 states are expected to speak up for an MBL cap lift.

Two MBL cap increase bills also have broad support, with several Democratic and Republican congressional cosponsors. H.R. 1418 and S. 509 would both increase the current 12.25% of assets credit union member business lending cap to 27.5%. CUNA has estimated that lifting the MBL cap would inject $13 billion in extra funds into the economy in the first year after enactment, helping small businesses create 140,000 new jobs at no cost to taxpayers.

CUNA N.C. league urge return of single exam

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WASHINGTON (2/8/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney has urged the National Credit Union Administration (NCUA) to meet with the North Carolina Credit Union Division "as soon as possible" to resolve differences regarding disclosure of a credit union's CAMEL rating and the use of dual exams.

Raleigh, N.C.-based State Employees' CU got authorization from its state regulator and disclosed its state-issued CAMEL score earlier this year, but the NCUA has disputed the disclosure of the credit union's CAMEL rating. The CAMEL rating system is NCUA's method of evaluating the health of credit unions. The rating, adopted by the NCUA in 1987, is based upon five critical elements of a credit union's operations: (C) Capital, (A) Asset quality, (M) Management, (E) Earnings and (L) Asset liability management.

The NCUA treats all CAMEL ratings as confidential information, and does not approve of these ratings being released to the public.

As a result of a recent CAMEL rating release, the NCUA has discontinued its coordinated examinations with the NCCUD, opting instead to begin separate exams for state-chartered federally insured credit unions in the state, over the next four weeks. The NCUA said the dual exams are needed to protect the National Credit Union Share Insurance Fund and the credit union system.

In other states, the NCUA routinely conducts joint safety and soundness examinations with the state regulator.

"No viable credit union in any state should be disadvantaged by the actions of a regulator, and subjecting state chartered credit unions to dual examinations simply because there is a dispute between the state and federal regulators is not a viable long term solution," Cheney said.  

The North Carolina Credit Union League has talked extensively with NCUA officials on this issue and organized meetings of that state's credit unions. The League has also called for the NCUA and NCCUD to meet on the issue in a letter released this week, and CUNA plans to work with all three parties as well.

Inside Washington (02/07/2012)

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  • WASHINGTON (2/8/12)--Senate Minority Leader Mitch McConnell, of Kentucky, and 38 other Republicans announced their intention to file an amicus brief and join a court challenge to President Barack Obama's recent recess appointment of Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB), as well as three other recess appointments  to the National Labor Relations Board (NLRB). In a letter dated Feb. 3, the Republican senators said the appointments "were unprecedented and unconstitutional" (American Banker Feb. 7). Cordray's appointment has not yet been challenged, but lawyers for Flatbush Gardens apartment complex in Brooklyn have asked a judge to throw out a complaint from the NLRB, arguing the recess appointments are invalid. Critics of the appointments argue that the Senate was technically not in recess, but was in a "pro forma" session during which no business is conducted when President Obama made the appointments on Jan. 4.  The Justice Department has issued a legal opinion supporting the decision …
  • WASHINGTON (2/8/12)--Federal Reserve officials will meet Wednesday to discuss Capital One Financial Corp.'s $9 billion proposed acquisition of ING Direct USA, the central bank said. The meeting will be closed to the public (American Banker Feb. 7). The Fed held three public hearings in Washington, Chicago and San Francisco on the proposed deal under which Capital One would buy the U.S. online banking unit of ING Group. Community bankers and consumer advocates have argued against the deal, saying it will create another "too big to fail" institution. Capital One has said the deal would reduce systemic risk and create jobs …
  • WASHINGTON (2/8/12)--A federal investigation into banks' credit card payment protection products could be the impetus for a change toward a more consumer-friendly market for the plans. The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau (CFPB) are investigating Discover Financial Services' marketing of its credit card payment protection products (American Banker Feb. 7). The products work similarly to insurance policies. Issuers who sell protection plans waive or defer credit card payments for card holders who experience events such as the birth of a new baby, a job loss or death. Banks on average return 21 cents of every dollar in payment protection premiums to consumers in the form of suspended or cancelled debt--a gross payout ratio that would be illegal if the products were categorized as insurance. The top nine card issuers posted $1.3 billion in pre-tax profits on the plans in 2009. That figure represents more than half of the $2.4 billion collected in fees paid by protection plan enrollees, according to the Government Accounting Office. The CFPB could be an agent of change, the Banker said. The 2009 Dodd-Frank Act gave the CFPB supervisory and enforcement authority for credit card debt protection products. The agency is reviewing changes to disclosure rules for debt cancellation and suspension agreements proposed by the Federal Reserve for its Regulation Z, according to CFPB spokesperson Jennifer Howard …
  • VIENNA, Va. (2/8/12)--The Financial Crimes Enforcement Network (FinCEN) Tuesday issued final rules that require non-bank residential mortgage lenders and originators to establish anti-money laundering (AML) programs and file suspicious activity reports (SARs), as is required by FinCEN of credit unions and other types of financial institutions. The final rule will be effective 60 days after publication in the Federal Register. The compliance date is six months after publication. In another step intended to combat fraud in the residential mortgage markets, FinCEN last November issued a proposal to require the government-sponsored enterprises--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--to develop AML programs and file SARs with FinCEN.  FinCEN said that taken together the two actions "provide additional tools for financial institutions and law enforcement to hold scammers accountable for their fraud and other financial crimes." The mortgage-related scams FinCEN has identified in its reports include false statements, use of straw buyers, fraudulent flipping, flopping, and identity theft. FinCEN said the new regulations likely will "significantly increase the number of mortgage-related SAR filings; give law enforcement and regulators more comprehensive data on specific crimes; and provide government and industry a more complete perspective on mortgage related crime trends nationwide" …

CFPB bill would ensure privacy CUNA

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WASHINGTON (2/8/12)--The Credit Union National Association (CUNA) Tuesday thanked Rep. Bill Huizenga (R-Mich.) for introducing H.R. 3871, which would ensure that groups or individuals that supply information to the Consumer Financial Protection Bureau (CFPB) would not waive their right to privacy protections.

H.R. 3871 will be considered during a Wednesday House Financial Services financial institutions subcommittee hearing. The hearing will also feature discussion on bills that would make the CFPB's yearly funding subject to the congressional appropriations process and remove the CFPB's director from their current slot on the Board of Directors of the Federal Deposit Insurance Corporation.

CUNA President/CEO Bill Cheney noted that while section 205(j) of the Federal Credit Union Act protects privileged information submitted by credit unions to the National Credit Union Administration, state credit union supervisors, and foreign banking authorities, that section does not cover submissions to the CFPB. Cheney said in a letter to Huizenga that the bill "will ensure that when credit unions or other persons submit information to the CFPB, doing so will not be construed as waiving, destroying or otherwise affecting any privilege associated with the submission."

Cheney said he hopes Congress acts quickly on this legislation.

IRS issues tax exempt correction to CUs

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WASHINGTON (2/8/12)--The U.S. Internal Revenue Service  (IRS) sent a letter of correction to credit unions that were erroneously informed that they lost their tax-exempt status due to a filing error by the credit unions'  "central organization."

The filing error, in fact, was that of the IRS, according to the agency's letter.

The Credit Union National Association (CUNA) and the Unrelated Business Income Tax (UBIT) Steering Committee (CUNA, American Association of State Credit Union Leagues, CUNA Mutual Group, National Association of State Credit Union Supervisors) worked with the affected credit unions to get a clarification from the IRS when the original notices went out in August.

Those notices told each credit union that because its central organization failed to meet its annual filing requirements for three consecutive years, the credit union's tax-exempt status was automatically revoked.

The notice, the IRS said in its correction,  also contained the following erroneous statement:

"Your organization is a subordinate in this revoked group ruling, so your organization ceased to be tax exempt on the date of your central organization's automatic revocation, even though your organization may have met its annual filing requirements."

The clarification stated:

'Revenue Ruling 60-364,1960-2 C.B. 382, held that a state agency may file a group information return on behalf of all the exempt state-chartered credit unions under its control and supervision, in lieu of each individual state-chartered credit union filing a separate information return. You received the letter containing the erroneous information because of the way state credit unions that filed group returns were maintained on our systems.

If you continue to meet your annual filing requirements, you may hold yourself out as tax exempt as long as you meet all other applicable requirements for tax exemption under the Internal Revenue Code."

The IRS apologized for any confusion the original  Letter 4777 may have caused and noted that if a credit union wants a determination letter recognizing its tax-exempt status, you must apply using Form 1024, Application for Recognition of Exemption Under Section 501(a) or for Determination Under Section 120, and pay the applicable user fee.

The letter included a toll free phone number, 1-877-829-5500, for any further questions.

CU comment sought on HUD mortgage appeals changes

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WASHINGTON (2/7/12)--The Credit Union National Association (CUNA) is seeking credit union comment on a Department of Housing and Urban Development (HUD) proposal that would eliminate the process for requesting alternative Federal Housing Administration (FHA) maximum mortgage amounts.

HUD currently limits the maximum principal obligation on FHA-insured single-family mortgages to either 115% of the median house price for a single-family home in a surrounding metropolitan area, or 65% of the national conforming limit. However, HUD allows this obligation to be challenged through an appeals process if any party involved in the mortgage "believes that a mortgage limit established by the [HUD Secretary] does not accurately reflect the median house prices in the area."

This HUD rule was implemented in the early 1980s, when HUD did not have comprehensive data for home sales transactions.

Under these current HUD rules, appeals could only be made in ten of the 3,234 counties in the U.S. and related territories, and HUD has not seen a mortgage-related appeal since 2008.

Overall, HUD has said this appeals process is outdated and unnecessary, and creates unneeded costs for the agency. HUD has said removing the appeals regulation would not have any impact on the calculation of area loan limits now or in the future.

CUNA has encouraged credit unions that have used the appeals process in the past, or that anticipate taking advantage of the appeals process in the future, to consider circumstances that would lead them to make an appeal before they provide their comment.

CUNA is accepting comments until March 1. For the full comment call, use the resource link.

IRS proposal provides retirement plan flexibility CUNA

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WASHINGTON (2/7/12)--The Credit Union National Association (CUNA) has said it supports the Internal Revenue Service's (IRS) efforts to clarify the process for determining whether a retirement plan an entity offers is a governmental plan, but also suggested ways the proposal could be improved in a recent comment letter.

The IRS is working to establish rules that would provide general guidance relating to the determination of whether a retirement plan is a governmental plan within the meaning of section 414(d) of the Internal Revenue Code, as there currently are no regulations interpreting this section of tax code, CUNA said.

Under the IRS proposal, a governmental retirement plan would be a plan that is established and maintained for its employees by the government, an agency of the government, or a "governmental instrumentality."

CUNA said federal credit unions have an interest in this issue because certain federal credit unions offer retirement plans to their employees that are considered non-governmental plans.

The IRS would determine which retirement plans do and do not meet these standards through a facts and circumstances test. That test asks whether an entity offering a given retirement plan performs or assists in a governmental function, is exempt from federal, state, and local tax, or receives financial assistance from the government, among other questions.

CUNA generally agreed with the proposed facts and circumstances test, as outlined, saying "it is the correct approach to outline a number of varying factors since the characteristics of employer-entities vary so widely." CUNA added that the proposed test "appears to recognize that a one-size-fits-all approach is inappropriate," but suggested that some of the terminology in the test questions could be sharpened and suggested the IRS add a question addressing how a given entity's trustees or operating board are selected to the test.

The IRS should also clearly state that the list of factors included in the proposed facts and circumstances test is not meant to serve as a checklist, CUNA added.

The ANPR also includes an example to illustrate the application of the facts and circumstances test to a federal credit union. In the example, the IRS concludes that FCUs are not governmental instrumentalities for purposes of section 414(d) based on the facts and circumstances test. CUNA said it supports this example, but suggested the IRS clarify portions of the explanation to demonstrate which factors from the facts and circumstances test led the IRS to make this determination.

For the full comment letter, use the resource link.

Hill press conference launches small biz Hike

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WASHINGTON (2/7/12)--The Credit Union National Association's (CUNA) first-ever small business/credit union "Hike the Hill" event begins today with a briefing and reception in Washington, D.C.  Also, the goal of the Hike--to have small business representatives help demonstrate the link between small business' needs for credit and credit unions' desire to help fill that need--will be spotlighted in a Wednesday press conference on Capitol Hill.

That press conference, which will be hosted by Rep. Ed Royce (R-Calif.), will take place in the Rayburn building of the U.S. Capitol at 11:00 a.m. (ET). Several small business owners, and representatives from small business trade groups and business think-tanks, will participate alongside credit union representatives at the press conference.

The small-business "Hike" is a two-pronged advocacy effort. Visits with federal lawmakers are planned for today and Feb. 8. Meanwhile, additional small business s and credit union representatives will be conducted state and district level advocacy activities.

A total of 75 small business and credit union representatives from 15 states are expected to visit their lawmakers in their House and Senate offices during the hike.

The small business advocates will tout the benefits of H.R. 1418 and S. 509, two bills that would increase the current 12.25% of assets credit union member business lending cap to 27.5%. Royce is the main sponsor of H.R. 1418.

CUNA has estimated that lifting the MBL cap would inject $13 billion in extra funds into the economy in the first year after enactment, helping small businesses create 140,000 new jobs at no cost to taxpayers.

CUNA President/CEO Bill Cheney said the aim of the hike is to "foster an environment in which lawmakers hear and see more about this key issue for small business owners and credit unions."

"We are hopeful that a vote to allow credit unions to help small businesses will occur soon--and that lawmakers will be armed with all of the facts when the votes come due," Cheney added.

Congress this week CFPB Dodd-Frank

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WASHINGTON (2/7/12)--Congressional scrutiny of the Consumer Financial Protection Bureau (CFPB) will continue this week, with the House Financial Services financial institutions subcommittee on Wednesday considering legislation that would change the structure and some authorities of the agency.

The bills in question would make the CFPB's yearly funding subject to the congressional appropriations process and remove the CFPB's director from their current slot on the Board of Directors of the Federal Deposit Insurance Corporation. H.R. 3871, a bill that would ensure that groups or individuals that supply information to the CFPB would not waive their right to privacy protections, may also be addressed during the hearing.

Wednesday will also feature a House Financial Services capital markets subcommittee hearing entitled "Limiting the Extraterritorial Impact of the Dodd-Frank Act." Finance industry insiders and others will testify during that hearing.

Other hearings are set for today, as the House Financial Services subcommittee on insurance, housing and community opportunity marking up the "Affordable Housing and Self-Sufficiency Improvement Act of 2012"; the "Emergency Fiscal Solvency Act of 2012"; and the "Homeless Children and Youth Act of 2011." The Senate Budget Committee today will also hold a hearing on "The Outlook for US Monetary and Fiscal Policy."  Federal Reserve Board Chairman Ben Bernanke will testify during that hearing.

The Senate Banking Committee will address the state of the housing market on Thursday, and that group's housing, transportation and community development subcommittee will hold a Plainfield, New Jersey-based foreclosure field hearing on that same day. Plainfield Mayor Sharon Robinson-Briggs, New Jersey General Assembly speaker pro tempore Jerry Green, and other community representatives will speak during that hearing.

Legislation will also be considered throughout the week.

iRoll Calli highlights new lawmakers MBL support

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WASHINGTON (2/7/12)--Citing new U.S. House member Suzanne Bonamici's (D-Ore.) interest in consumer protection issues, Capitol Hill publication Roll Call Monday highlighted Bonamici's strong interest in increasing the cap on credit union member business lending (MBL).

Bonamici told the publication that MBL legislation is among her top priorities, a message she shared in print and television interviews leading up to the recent special election held to fill the first district seat of Rep. David Wu's, who retired in August.

"I see this proposal as an excellent way to get capital to small businesses," she said.

Bonamici is scheduled to be sworn into her House position today. Her staff is working with the Credit Union National Association (CUNA) to schedule a meeting after the new congresswoman's swearing-in ceremony.

The Northwest Credit Union Association (NWCUA) has said the association is grateful for Bonamici's early support of raising the MBL cap, and looks forward to working with her.

The NWCUA and CUNA supported Bonamici, a long-time credit union backer, in the Democratic primary and then in the more recent special election. Also, Oregon credit unions backed Bonamici with phone bank and neighborhood canvassing efforts. (News Now Feb. 2)

Roll Call is a widely read publication covering Capitol Hill.

Use the resource link to read the Roll Call article.

Inside Washington (02/06/2012)

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  • WASHINGTON (2/7/12)--Recent orders from regulators have cited banks for not meeting updated accounting standards. Regulators have specifically cited banks' failures to report troubled debt restructurings (TDRs). The Office of Comptroller of Currency is flagging banks for not identifying loans as TDRs and not recording an allowance as required by Generally Accepted Accounting Principles, an unidentified bank accounting executive told the American Banker (Feb. 6). Regulators have stepped up guidance since the Financial Accounting Standards Board clarified guidance on TDRs last year, said Bill Massey, an accountant and consultant at Saltmarsh, Cleaveland & Gund. Most regulatory orders citing accounting issues tied to troubled debt restructurings were issued since June 30. Regulators have been enforcing the new rules since they went into effect, according to industry observers …
  • WASHINGTON (2/7/12)--Banks remain concerned that data shared with the Consumer Financial Protection Bureau (CFPB) during exams could be used against them in lawsuits, despite assurances for CFPB Director Richard Cordray that the agency will support legislation to protect the institutions' information. Banks worry that plaintiffs could argue that financial institutions waived their attorney-client privileges when they turned the information into the CFPB. In such cases, financial institutions could be subpoenaed to provide confidential data that might be used against them in lawsuits (American Banker Feb. 6). House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and Rep. Shelley Moore Capito, (R-W.V.) sent a letter to the CFPB last week asking the agency to stop requesting confidential information from banks until the panel can hold a hearing on the until legislation is in place. A committee hearing is scheduled for Wednesday …
  • WASHINGTON (2/7/12)--President Barack Obama on Friday said he will nominate Jeremiah Norton to serve on the board of directors of Federal Deposit Insurance Corp. Norton is currently an executive with J.P. Morgan Chase & Co (American Banker Feb. 6). Norton served from 2007 to 2009 as deputy assistant secretary in the Treasury Department, where he was a key adviser to former Treasury Secretary Henry Paulson during the financial crisis. He also worked as a staffer for Rep. Edward Royce (R.-Calif.) …

Upcoming FAF meeting to feature CUNA comment

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WASHINGTON (2/6/12)--The credit union perspective on the Financial Accounting Foundation's (FAF) planned Private Company Standards Improvement Council (PCSIC) will be presented this week by Credit Union National Association (CUNA) Accounting Subcommittee Chairman, and Patelco CU Chief Financial Officer, Scott Waite.

Waite is one of 13 individuals selected to take part in the meeting, which will take place on the Stanford University campus in Palo Alto, Calif. on Tuesday. Waite, who is a long-time advisory member of the Financial Accounting Standards Board (FASB), recently represented credit unions and CUNA at a FASB private-company accounting roundtable held last October.

The FAF has proposed the creation of a new Private Company Standards Improvement Council that would review U.S. generally accepted accounting principles (GAAP) and determine how those standards could be improved to better serve the needs of private companies. The group could then issue modifications, if needed. The council would be comprised of a single chairperson and between 11 and 15 other members, according to the FAF.

CUNA is concerned that the proposed council "would simply make recommendations" to FASB and "be unable to actually set standards."

CUNA has repeatedly emphasized that financial accounting standards for credit unions and other private companies need to be improved, and challenges that many credit unions and others face due to the complexity of existing accounting standards should be addressed. The most pressing accounting standard issues facing credit unions are the complexity of current standards and the lack of cost-benefit analyses in the standard-setting process, CUNA has said.

CUNA has also called on FASB to "take the steps necessary to mitigate the burden on smaller entities, particularly when there is no or only minimal resulting benefit."

Key lawmakers added to 2012 GAC speaking lineup

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WASHINGTON (2/6/12)--The lineup for the Credit Union National Association's (CUNA) 2012 Governmental Affairs Conference (GAC) continues to grow, with House Majority Whip Kevin McCarthy (R-Calif.) and Assistant House Democratic Leader James Clyburn (D-S.C.) among those signing on to speak this March.

Inside Washington (02/03/2012)

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  • WASHINGTON (2/6/12)--The Senate on Thursday overwhelmingly approved a bill making it illegal for members of Congress to trade stocks based on confidential information learned on the job. The Stop Trading on Congressional Knowledge (STOCK) Act passed 96-3, and will now go to the House for a vote (American Banker Feb. 3). Several amendments were added to the Senate bill. Under one amendment, political intelligence firms, which sell information they gather in meetings on Capitol Hill to financial market participants, must register in a manner similar to lobbyists. Another amendment extends the measure's requirements on reporting certain financial transactions to include executive-branch employees in addition to members of Congress and their aides. An unrelated amendment, passed Thursday, prohibits bonus payments to executives at Fannie Mae and Freddie Mac while government-sponsored enterprises are in government conservatorship …
  • WASHINGTON (2/6/12)--Federal Reserve Board Chairman Ben Bernanke on Thursday warned that the U.S. economy is at severe risk if the rising deficit is not placed under control. "Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis," Bernanke said. "As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy." The current trajectory of federal debt threatens to crowd out private capital formation and reduce productivity growth, Bernanke said. For the economy to achieve stability, U.S. fiscal policy must be placed on a sustainable path with debt relative to national income stable or declining over time, Bernanke said. "Attaining that goal should be a top priority," he added …
  • WASHINGTON (2/6/12)--Responding to criticism from a top House Republican, Federal Reserve Board Chairman Ben Bernanke defended the Fed's decision to release a paper that contends that the central bank had a stake in the housing market given its importance to the economy (American Banker Feb. 3). Rep. Scott Garrett (R-N.J.) said he was "taken aback" that the Fed released the paper while maintaining it does not get involved in fiscal policy. Bernanke said the Fed does have a stake in the housing market because of its importance to the economy and monetary policy. The Fed paper addressed policies that would minimize the number of properties entering the market of unsold homes, improve access to mortgages for credit worthy borrowers, and decrease the number of homeowners who are in the foreclosure process. The lack of growth in the housing sector has contributed to the slow economic recovery, Bernanke said …
  • WASHINGTON (2/6/12)--The Obama Administration will continue to work to wind down Government Sponsored Enterprises Fannie Mae and Freddie Mac, and will provide additional detail on specific housing market reform plans this spring. U.S. Treasury Secretary Tim Geithner in remarks made to the press late last week said the Obama administration plans to work with Senate Banking and House Financial Services Committee members to craft legislation. Overall, he said, this is a "critical year for financial reform," and added that the administration expects to put "key elements" of new financial system safeguards in place in the near future… 

Small biz reps to hike for MBL cap lift

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WASHINGTON (2/3/12)--Small business owners, small business trade groups and business think-tank representatives will join the Credit Union National Association (CUNA) and credit unions next week to press Capitol Hill-based legislators to approve a member business lending (MBL) cap increase for credit unions.

The Hill visits, which will take place on Feb. 7 and 8, are being coordinated and assisted by CUNA and selected state credit union leagues across the nation. A total of 75 small business representatives from 15 states are expected to visit their lawmakers during this small business hike.

The congressional visits are meant to show the link between small business needs for credit and credit unions' desire to help fill that need. "We want to foster an environment in which lawmakers hear and see more about this key issue for small business owners and credit unions," said CUNA President/CEO Bill Cheney.

Pending bills in both the U.S. House and Senate bills would lift the current 12.25% of assets cap to 27.5%. CUNA has estimated that lifting the MBL cap would inject $13 billion in extra funds into the economy in the first year after enactment, helping small businesses create 140,000 new jobs at no cost to taxpayers.

"We are hopeful that a vote to allow credit unions to help small businesses will occur soon--and that lawmakers will be armed with all of the facts when the votes come due," Cheney added.

Click to view larger image Click for larger view
CUNA is also promoting this credit union/small business synergy in a series of ads that will run in Capitol Hill-focused media, including "The Daily Caller" website and The Hill, Politico and Roll Call newspapers, next week.

In a letter to Congress sent earlier this week, CUNA cited a survey by pro-business groups--The Small Business Majority, Main Street Alliance and the American Sustainable Business Council--which showed that 64% of small business owners say that the availability of credit is hindering their growth.

Ninety percent of small businesses surveyed said they support making it easier for community banks and credit unions to lend to small businesses. Approximately 525 credit unions are approaching the 12.25%-of-assets MBL cap, according to CUNA.  (See News Now Feb. 2 story, "Small biz backs more MBLs, CUNA reminds lawmakers.")

Heartland backs MBL bills in iHuffPoi

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WASHINGTON (2/3/12)--Legislators that are looking for new ways to fight burdensome government regulations "can--and should--start by looking at credit union lending," Eli Lehrer, vice president of the Chicago-based think tank The Heartland Institute, said in a Thursday Huffington Post editorial.

"Credit unions, democratically run, member oriented financial cooperatives, often extend credit to groups having a difficult time getting it from banks and are right now sitting on millions of dollars they could lend to job creators if only Congress would repeal the regulations that stop them from doing it," he said.

A pair of similar bills, Sen. Mark Udall's (D-Colo.) S. 509 and Rep. Ed Royce's (R-Calif.) H.R. 1418, would increase the credit union member business lending (MBL) cap from 12.25% of total assets to 27.5%. The two bills remain active in Congress and enjoy bipartisan support, with S. 509 listing 22 co-sponsors and H.R. 1418 listing 114 co-sponsors.

Increasing the MBL cap would help the still ailing economy, the Credit Union National Association (CUNA) has emphasized, by injecting $13 billion in extra funds into the economy in the first year after enactment, helping small businesses create 140,000 new jobs at no cost to taxpayers.

Lehrer noted that banks, who do not want the extra competition that increased credit union lending would bring, continue to stand in the way of an MBL cap increase. This constant opposition "preserves profits for banks, but it doesn't do much good for the country or the small businesses that everyone on both sides of the aisle claims to support," Lehrer said.

Small businesses will advocate for MBL cap increase legislation next week as they 'hike the hill' alongside credit union representatives in a special fly-in organized by CUNA.  (See related story: Small biz reps to 'hike' for MBL cap lift).   Meanwhile, CUNA's Legislative Affairs team will also be bringing Eli Lehrer's Huffington Post op-ed to the attention of key congressional offices.

For the full Huffington Post blog, use the resource link.

CUNA launches monthly compliance wrap up

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WASHINGTON (2/3/12)--The Credit Union National Association's (CUNA) compliance team Thursday launched the first edition of its new compliance tool for credit unions--a monthly summary of vital compliance issues--all drawn from CUNA's highly followed CompBlog.

The monthly updates will provide a snapshot of major compliance issues, effective dates, and key questions that have been addressed in the CompBlog.  They are intended to supplement CUNA's daily compliance blog postings.

CUNA Senior Vice President or Compliance Kathy Thompson explains the monthly compilation's creation this way: "So many people--including CEOs of smaller credit unions--continue to tell us that,

while they love the blog, they still miss the dearly departed Compliance Challenge that gave them a monthly overview of key developments."

Some months, Thompson said, the summary will start with a few compliance-related inquiries that senior management may want to ask staff. And to entice readers to continue to read the daily blog,

CUNA will be launching, via the blog, the 2012 "Compie Award" nominations--called by Thompson "the compliance world's answer to Hollywood's Oscars."

Both the daily blog and the monthly summary formats are intended to help readers quickly scan what's happening that may impact operations.

CUNA's compliance experts can always be reached at cucomply@cuna.com for compliance questions or comments on how they can better serve readers.

Inside Washington (02/02/2012)

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  • ALEXANDRIA, Va. (2/3/12)--The National Credit Union Administration (NCUA) board has revised its 2012 meeting schedule. The board meeting scheduled for Thursday, Dec. 13 will now occur Thursday, Dec. 6. The revised 2012 board meeting schedule is available online  ...
  • WASHINGTON (2/3/12)--The House Oversight and Government Reform Committee on Wednesday held a hearing to address President Barack Obama's recess appointment of Richard Cordray as director of the Consumer Financial Protection Bureau last month (American Banker Feb. 2). The president also appointed four commissioners to the National Labor Relations Board while the Senate was in a "pro forma" session. House Oversight Committee Chairman Rep. Darrell Issa (R-Calif.) called the move "unprecedented." During testimony, Sen. Mike Lee (R-Utah) supported the popular Republican view that the Senate can only recess if the House provides permission. But Democrats said Senate Republicans were obstructing the confirmation process. In such cases, the president can exercise his judgment to make appointments, testified Michael Gerhart, a constitutional law professor at the University of North Carolina School of Law …
  • WASHINGTON (2/3/12)--The Obama administration's latest plan to help middle-class families refinance their homes would come with a cost of between $5 billion and $10 billion--paid for through a fee charged to the nation's largest banks (American Banker Feb. 2). Secretary Shaun Donovan of the Department of Housing and Urban Development told reporters at a press briefing at the White House those banks will pay the fee because they were largely responsible for the financial crisis. Republicans have called the fee a tax on big banks. More details on the refinancing plan will be available when the White House releases its fiscal 2013 budget in two weeks …
  • WASHINGTON (2/3/12)--The Federal Housing Finance Agency (FHFA) is scrapping a plan that would change the minimum fees paid Fannie Mae and Freddie Mac loans to a fee-for-service model. The FHFA faced industry wide opposition to the proposal. In an e-mailed statement, FHFA spokeswoman Corrine Russell said the agency received "useful input" on the proposal (American Banker Feb. 2). Servicing advisory firms have said that a fee-for-service plan would remove any financial stake servicers have in the compensation model. Most major servicers opposed any change, the Banker said. Critics of the current model maintain that because compensation is tied to performing loans, servicers have little incentive to invest in the human-resource intensive process of reforming delinquent loans …

CU-backed Bonamici wins House seat

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WASHINGTON (2/2/12)--Suzanne Bonamici (D-Ore.), who touted increased member business lending (MBL) for credit unions as part of her platform, easily defeated Republican opponent Rob Cornilles in Tuesday's special election for Oregon First District U.S. House seat, garnering 53.8% of the total vote.

Bonamici made her support for member business lending a key part of her campaign and platform, telling a local television station that supporting MBL legislation would be one of her first acts after she took office. She also promoted increasing the MBL cap in a YouTube video. (See Jan. 31 story, Bonamici touts MBLs in House-seat contest.)

Click to view larger image Northwest Credit Union Association representatives and credit union supporters pose with special election winner Suzanne Bonamici (second from right). Bonamici has pledged to support MBL cap increase legislation, as she did during her campaign, once she is sworn in to Congress later this month. (Northwest Credit Union Association photo)
Northwest Credit Union Association (NWCUA) Director of Legislative Advocacy Jennifer Wagner said the association is grateful for Bonamici's early support of raising the MBL cap, and looks forward to working with her. "In Suzanne Bonamici, we will have a champion who supports credit unions and their members," she added.

The NWCUA and the Credit Union National Association (CUNA) supported the long-time credit union backer in the Democratic primary and the more recent special election, and Oregon credit unions backed Bonamici with phone bank and neighborhood canvassing efforts. Oregon credit unions, and CUNA's Credit Union Legislative Action Council (CULAC), also financially backed her campaign.

Bonamici has said she is "honored" by the chance to serve her district, and said she would focus on job creation, ensuring small businesses have access to funding, and promoting balanced consumer protection laws once she takes office. She will replace former Rep. David Wu (D), who resigned last year.

The newly elected congresswoman is expected to be sworn in soon, and will need to run again in November's general elections to maintain her seat.

Oregon's first district extends from the greater Portland area into Yamhill, Washington, and Columbia counties, as well as the coastal county of Clatsop. It is a largely Democratic district. Half of the district's 414,515 registered voters cast ballots in the special election.

CUNA backs NCUA opposes exam fairness bill

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WASHINGTON (2/2/12)--The Financial Institution Examination Fairness and Reform Act (H.R. 3461) is  "a firm step in the right direction toward ensuring the federal financial institution regulatory agencies conduct fair exams, which are consistent with the law and regulation and ensure safety and soundness," West Virginia Credit Union League President/CEO Ken Watts said during a Wednesday House hearing. He was testifying on behalf of the Credit Union National Association (CUNA).

Click to view larger image West Virginia Credit Union League President/CEO Ken Watts (left) and NCUA Executive Director David Marquis (right) presented differing views during Wednesday's House subcommittee hearing on a bill intended to reform the federal financial institution examination process. (CUNA Photo)
The hearing featured two witness panels: One was comprised of Watts and other financial industry representatives who supported examinations reforms, and the other was comprised of federal financial institutions regulators, such as National Credit Union Administration (NCUA) Executive Director David Marquis, who did not support the bill as written.

The exam bill that was under scrutiny by the House Financial Services subcommittee on financial institutions would allow credit unions and other institutions to discuss examination concerns with a newly created Federal Financial Institution Examination Council (FFIEC) ombudsman, and to appeal regulator decisions before an independent administrative law judge.

The bill would also give credit unions and other financial institutions access to decision-making information gathered in their exams and codify exam policy guidance for financial regulators.

Watts said H.R. 3461 would not solve all of the examiner issues that credit unions face, but added the attention that the U.S. Congress gives to examination issues "will lead the NCUA and the other regulators to take steps to ensure that examiners treat credit unions fairly and that they acknowledge credit unions should have the flexibility to manage risk, consistent with legal and supervisory requirements."

Watts said that credit unions often do not voice their concerns related to the examination process due to the fear of retaliation from regulators. However, he added, the proposed creation of a third-party regulatory appeals process would create a "much improved" examination process for credit unions.

H.R. 3461 could be further strengthened, Watts said, by such additions as easing institutions' access to information that regulators use to make their material supervisory determinations and revising some exam standards.

He also recommended that the subcommittee add language to the bill that would direct regulators to identify additional costs associated with implementing H.R. 3461, and reduce their expenditures elsewhere within their budgets by the same amount.

Total implementation costs should also be divided between all financial industry regulators on a pro-rata basis so the NCUA, and, in turn, credit unions, do not pay for costs incurred by other regulators, he added. Legislators should also revise portions of the bill to better address the structural differences between credit unions and other institutions, Watts said.

Marquis testified that his agency recognizes that its examination process "can be improved and enhanced," but he warned that the bill could increase administrative costs, create new risks to the National Credit Union Share Insurance Fund, and impose "a one-size-fits-all approach" to financial institution examinations.

Marquis noted that the NCUA has already adopted a number of examination practices that fall in line with H.R. 3461, and said the NCUA is "committed to addressing legitimate concerns about the present exam process, minimizing regulatory conflicts, promoting procedural fairness, and advancing exam consistency."

Many of the legislators in attendance noted the need for regulatory examination improvements, with Rep. Ruben Hinojosa (D-Texas) saying that credit unions did not cause the financial crisis, and should not be stifled by overzealous regulators.

Other legislators, including Reps. Blaine Luetkemeyer (R-Mo.), Mel Watt (D-N.C.) and Don Manzullo (R-Ill.), called for reduced regulatory burdens for credit unions and other institutions.

H.R. 3461 is co-sponsored by the subcommittee chair, Rep. Shelly Moore Capito (R-W. Va.), and its ranking member, Rep. Carolyn Maloney (D-N.Y.) The bill has 77 co-sponsors.

JetStream FCU President/CEO Jeanne Kucey also testified, representing the National Association of Federal Credit Unions.

For more on Wednesday's hearing, use the resource link.

New plans to help underwater homeowners

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WASHINGTON (2/2/12)--Following up on statements made during his 2012 State of the Union address (News Now Jan. 25), President Barack Obama Wednesday released details of a new plan to help underwater homeowners and address ongoing difficulties in the housing market.

The president announced his "Plan to Help Responsible Homeowners and Heal the Housing Market" initiative saying it would "give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates."

"No more red tape. No more runaround from the banks. And a small fee on the largest financial institutions will make sure it doesn't add to our deficit," he said.

Obama also unveiled a series of other steps the administration will take to boost the housing market by helping distressed mortgage holders. For instance, he announced that the U.S. Department of Agriculture (USDA) and the Federal Housing Administration (FHA) are working to implement a low-cost, streamlined refinancing program enabling borrowers to make better use of today's low mortgage rates. 

Under this plan, FHA and UDSA borrowers must demonstrate they are current on their loans, but USDA is eliminating the need for a new appraisal, new credit report, and other documentation currently required in a refinancing.

FHA is removing loans from its "Compare Ratio," which is the process by which lenders' performance is reviewed.  This would make it possible for lenders to refinance loans for eligible borrowers without compromising their status as FHA-approved lenders. 

The administration's broad new plan to help underwater borrowers would require congressional action before it could be established. However, changes to existing rules, like the UDSA and FHA changes, could go ahead with action by the agencies involved.

Credit Union National Association General Counsel Eric Richard noted after the president's announcement that while the initiatives are not addressed specifically to credit unions, as active mortgage lenders and services, credit unions certainly would be affected by the programs.

Use the resource links below for more information on the administration's plans.

Inside Washington (02/01/2012)

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  • WASHINGTON (2/2/12)—U.S. Reps. Spencer Bachus (R-Ala.) and Shelley Moore Capito (R-W.Va.) sent a letter to the Consumer Financial Protection Bureau Tuesday requesting the agency to stop collected privileged information from financial institutions until Congress can determine if that information is protected (American Banker Feb. 1). The House Financial Services subcommittee on financial institutions and consumer credit will hold a hearing to address the issue, the letter said. Bachus chairs the House Financial Services Committee and Capito chairs the financial institutions subcommittee. Disclosing information could be considered a waiver of attorney-client privilege, and expose financial institutions to third-party subpoenas, Bachus and Capito said in the letter …
  • WASHINGTON (2/2/12)--The Federal Deposit Insurance Corp. Tuesday issued guidance on potential risks associated with third-party payments processors. The letter to financial institutions said certain types of payment processors may pose heightened money laundering and fraud risks if merchant client identities are not verified and business practices are not reviewed. Banks should evaluate their risk assessment program, be alert to consumer complaints, and act promptly when fraudulent or improper activities occur. "At a minimum, board-approved policies and programs should assess the financial institution's risk tolerance for this type of activity, verify the legitimacy of the payment processor's business operations, determine the character of the payment processor's ownership, and ensure ongoing monitoring of payment processor relationships for suspicious activity," the letter said …

Small biz backs more MBLs CUNA reminds lawmakers

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WASHINGTON (2/2/12)--Credit unions stood with their small business-owning members during the recent financial crisis, continuing to lend when others pulled back, and now approximately 525 are approaching the 12.25%-of-assets member business lending cap (MBL), the Credit Union National Association (CUNA) said in a letter sent to the top members of the House Small Business Committee Wednesday.

The letter to Chairman Sam Graves (R-Mo.) and ranking member Nydia Velazquez (D-N.Y. ) was sent in conjunction with the committee's hearing entitled, "The Path to Job Creation: The State of American Small Businesses." In it, CUNA President/CEO Bill Cheney urged the U.S. Congress to enact pending legislation that would raise the MBL cap to 27.5% of total assets. 

"The need for Congress to enact this legislation is clear," Cheney stated. He said a recent survey by the Small Business Majority, Main Street Alliance and the American Sustainable Business Council showed that 64% of small business owners say that the availability of credit is a serious or fairly serious problem  (News Now Jan. 27).

"Sixty-one percent say that it is harder today to get a small business loan than it was four years ago.  Ninety percent support making it easier for community banks and credit unions to lend to small businesses," Cheney noted. 

In fact, the Cheney letter went on to say, the only groups that oppose credit union business lending represent the banks that have pulled back access to credit when small businesses needed it the most, and have taken taxpayer money intended for small business lending and repaid their TARP obligations.  

From December 2007 until September 2011, credit union business loan portfolios increased over 42% while bank small business loans decreased by over 14%, according to call report data from the Federal Deposit Insurance Corp. and the National Credit Union Administration.

"Meeting the credit needs of entrepreneurial members is part of credit unions' DNA," Cheney told the lawmakers.  He reiterated that current legislation to increase the MBL cap would permit credit unions to lend an additional $13 billion to small businesses in the first year after enactment and help them to create 140,000 new jobs.

That boost to small business and the U.S. economy, Cheney reminded, would come at no cost to taxpayers.