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CDFI Fund Bond Program Detailed In Agency Release

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WASHINGTON (3/12/13)--The Community Development Financial Institutions (CDFI) Fund continues to develop its bond guarantee program, and has released a powerpoint presentation to educate credit unions and other CDFI Fund participants on the program before it is implemented.

Under the CDFI Fund bond program, notes or bonds of up to 30 years duration issued by CDFIs would have full guarantees from the U.S. Treasury. The bond program, which is still being developed, would support CDFI lending and investment by providing a source of long-term, patient capital to CDFIs, the CDFI Fund said. The bond guarantee program was enacted by the Small Business Jobs Act of 2010.

The bond program development is currently in the interim final rule stage. Comments on the interim final rule will be accepted until April 8.

The 85-page powerpoint presentation is identical to the document released at a series of February information sessions. The CDFI Fund said the document includes:

  • An introduction to the program's secondary loan requirements;
  • An overview of the CDFI Bond Guarantee Program's Interim Rule and financial structure;
  • Information on financial structure terms, requirements and timing, and risk assessments with respect to a bond issuance; and
  • Details on repayment and relending terms.
The CDFI Fund also plans to post transcripts of its information sessions, clarify elements of the rule through frequently-asked-question documents, and release webisodes to detail "more complex components" of the bond guarantee program. Additional workshops on the program are being planned.

The Credit Union National Association has recommended that credit unions that are designated CDFIs be eligible for guarantees on notes that could be used as secondary capital. CUNA added that credit unions should be allowed to count any proceeds from these bonds as supplemental capital.

For the CDFI Fund release, use the resource link.

Reps Hensarling, McHenry Seek Too Big To Fail Docs

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WASHINGTON (3/12/13)--House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) and Rep. Patrick McHenry (R-N.C.), who is chairman of that panel's subcommittee on financial services oversight and investigations, are seeking documents detailing how federal agencies assess the impact of potential criminal and civil cases against large complex financial institutions.

The lawmakers' letter to Attorney General Eric Holder and U.S. Treasury Secretary Jack Lew followed Holder's recent comments that some banks may be too big for the government to effectively prosecute.

Holder testified at a Senate Judiciary Committee hearing held last week,"I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy." Holder on Dec. 19 said the Department of Justice takes financial market stability into consideration, and works with outside experts, when it determines how best to move forward with potential prosecutions or other actions.

The letter asked for any communications regarding the economic impact that criminal or civil suits, or administrative actions, taken against large institutions could have. The letter suggested these records could come from the Department of Justice, the Office of the Comptroller of the Currency, the Treasury and/or the Financial Stability Oversight Council.

The letter asked the Administration to provide the documents by March 22.

Hensarling and McHenry in the letter said the committee may hold hearings on the issue.

NEW: House Approves Privacy Notice Bill

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WASHINGTON (UPDATED: 3/12/13, 5:20 p.m.ET)--The U.S. House has approved by voice vote the Eliminate Privacy Notice Confusion Act (H.R. 749), and the bill will now move on for Senate consideration.

Credit Union National Association President/CEO Bill Cheney said the bill "will make privacy notifications more meaningful by removing a costly and duplicative paperwork requirement that has been no real help to consumers.

"More people are apt to pay attention to privacy notices that are made when their financial institution's policies change rather than when these notices are issued annually as a matter of routine, so House passage is a benefit to consumers and credit unions alike," he added.

H.R. 749 would eliminate repetitive privacy notices by eliminating a requirement that the notices be sent annually. Under the terms of the bill, privacy notices would only to be sent when the privacy policy of a financial institution has changed. A similar bill passed the House in late 2012, but the Senate did not vote on the bill before the last session of Congress ended.

CUNA has backed the bill since it was introduced in the last session of Congress, and urged House members to vote yes on H.R. 749 in a letter sent Tuesday morning. Thousands of credit union representatives also sought support for the legislation when they met with their Washington representatives during the recently completed CUNA 2013 Governmental Affairs Conference.

The CUNA CEO thanked Reps. Blaine Luetkemeyer (R-Mo.) and Brad Sherman (D-Calif.) for their leadership on the privacy notice issue, and urged the Senate to take note of Tuesday's strong House vote "and act promptly in similar fashion to enact this important piece of legislation."

CUNA Senior Vice President for Legislative Affairs Ryan Donovan said a Senate companion bill could be released as soon as this week. Donovan said CUNA looks forward to working with the Senate to pass H.R. 749, or a similar companion bill.

NEW: CUNA Urges House Support Ahead Of Privacy Bill Vote

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WASHINGTON (UPDATED: 3/12/13, 11:05 a.m. ET)--The Credit Union National Association this morning continues its strong push for a vote, perhaps as soon as today, on the Eliminate Privacy Notice Confusion Act (H.R. 749).

In a letter sent to all members of the U.S. House today, CUNA President/CEO Bill Cheney has encouraged members to pass the legislation that CUNA says will help credit unions by reducing their operational burden and help consumers by ending a requirement that the notices be sent annually even when the conditions have remained the same. Under the terms of the bill, privacy notices would only to be sent when the privacy policy of a financial institution has changed.

The bill is on Tuesday's suspension calendar, and debate is expected to begin around 5 p.m. ET. A recorded vote, if requested, could take place thereafter.

CUNA strongly supports the bill and has worked closely with lawmakers to get the bill to this point.

Cheney in the letter said credit unions have sent an estimated one billion annual privacy notifications to members since 2001. However, he said, fewer than one-quarter of consumers read the privacy notifications they receive, according to one survey. More than three-quarters of consumers would be more likely to read them if they were only sent when the financial institution changed its policy, he noted.

"This suggests that the public policy goal of privacy notifications would be better achieved if the notices had more meaning to consumers." H.R. 749 achieves this end, Cheney wrote.

For the full CUNA letter, use the resource link.

CFPB: Nonbanks, Larger Banks Are Main Focus

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WASHINGTON (3/12/13)--Unregulated nonbank entities and large financial institutions are two of the prime targets of the Consumer Financial Protection Bureau's attention, CFPB Southeast regional director Jim Carley told a bank group last week (American Banker, March 11).

The Credit Union National Association has been encouraging the bureau to focus more attention in 2013 on regulating entities in the financial marketplace that engage in abusive practices, such as payday lenders, that have been unregulated or under-regulated to date. CUNA has also urged the agency to guard against overburdening credit unions with unnecessary rules. In fact, CUNA has called on the CFPB to bring its awareness of the credit union difference into play as it develops any new rules.

In a January letter to the agency, CUNA President/CEO Bill Cheney wrote that credit unions do not always expect to be exempt from new regulations. However, he added, "There are a number of factors unique to credit unions that support liberal use of the CFPB's exemption authorities for our members, and we urge the agency to be as proactive as possible in considering how those authorities should be applied."

"We urge the agency to help direct its appreciation of the way credit unions operate into meaningful regulatory relief for credit unions so that they can do even more to serve their communities," Cheney added.

CFPB Director Richard Cordray will speak before a Senate Banking Committee confirmation hearing today. (See News Now story: Cordray Nomination, Privacy Bill Vote, NCUA Meeting Fill the Washington Week)

Cordray Nomination, Privacy Bill Vote, NCUA Meeting Fill the Washington Week

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WASHINGTON (3/12/13)--Three items of interest to credit unions are on the Washington agenda this week: A Tuesday confirmation hearing for Consumer Financial Protection Bureau Director Richard Cordray, a potential vote on legislation that would eliminate burdensome annual privacy notice requirements, and the March National Credit Union Administration board meeting.

The Senate Banking Committee confirmation hearing is scheduled to begin at 10 a.m. (ET). Credit Union National Association Senior Vice President for Legislative Affairs Ryan Donovan said committee-level confirmation hearings can often provide those under an agency's oversight to highlight some of the regulatory burdens they face.

Cordray's nomination is expected to pass through the committee, but his prospects before the full Senate are uncertain, Donovan noted. This is the second time the CFPB director has been nominated for that post: The banking committee approved his nomination by a party-line 12-10 vote in late 2011, but he did not receive a full vote in the Senate. President Barack Obama appointed Cordray to the director position during a brief congressional recess in 2012.

Some Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the CFPB. One such change is replacing the director's position with a five-member panel of leadership as a way, supporters say, of making the CFPB's actions more transparent.

Legislation that would create such a panel (s. 205) has been introduced in the Senate.  The Credit Union National Association backs such a multi-member directors panel if it includes seats statutorily designated for credit union system representatives, including a state or federal credit union regulator, and possibly a state consumer agency representative.

While the CFPB and Cordray's nomination to lead that agency have proved polarizing for some, one item that has not been controversial is a CUNA-supported privacy notification bill, H.R. 749, the Eliminate Privacy Notice Confusion Act.

H.R. 749 would eliminate repetitive privacy notices by eliminating a requirement that the notices be sent annually. Under the terms of the bill, privacy notices would only to be sent when the privacy policy of a financial institution has changed.

The bill is on Tuesday's suspension calendar. Non-controversial bills are added to this calendar, and Donovan said it is expected to pass the House easily. A similar bill passed the House in late 2012, but the Senate did not vote on the bill before the last session of Congress ended.

"Getting the bill through the House early will give CUNA a lot of time to work it through the Senate," Donovan noted. CUNA hopes to see a companion bill introduced in the Senate, he added.

H.R. 1035, which would require a study of voluntary community-based flood insurance options and how such options could be incorporated into the national flood insurance program, could also be considered in the House this week.

Other items on this week's congressional agenda include:

  • A Wednesday House Financial Services housing and insurance subcommittee hearing entitled "Mortgage Insurance: Comparing Private Sector and Government-Subsidized Approaches.";
  • A Thursday House Financial Services oversight and investigations subcommittee hearing on too big to fail  institutions and the Government Accountability Office's assessment of the Financial Stability Oversight Council and the Office of Financial Research;
  • A House Judiciary courts and intellectual property subcommittee on abusive patent litigation;
  • A Senate Small Business and Entrepreneurship Committee hearing on small business access to capital and disaster recovery; and
  • A Joint Economic Committee hearing on federal debt issues.
These and other issues are covered in the CUNA Legislative Update, provided each week to CUNA members for the latest information involving Capitol Hill. Use the resource link to access this issue, as well as earlier ones.

The NCUA open board meeting, which is scheduled for Thursday, will feature discussion of a proposed rule addressing federal credit union ownership of fixed assets and a community charter conversion request. A purchase and assumption request, a merger request and requests under Section 205(d) of the Federal Credit Union Act are on the agenda for the closed NCUA board meeting.

CUNA: Banks' Attack On CU Bill Misfires

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WASHINGTON (3/12/13)--Banks' attacks against a supplemental capital bill for credit unions are spurious, will go nowhere, and run counter to a growing interest among members of Congress in capital reform not only for credit unions, but for financial institutions generally, said the Credit Union National Association Monday.

"The Independent Community Bankers of America Association's criticism of the Capital Access for Small Business Act (H.R. 719) is disingenuous and will be seen as such on the Hill," said CUNA Executive Vice President of Government Affairs John Magill Monday, after the ICBA circulated a letter to federal lawmakers attacking the legislation.

"The truth is, this bill is very balanced. That is and will continue to be our message on Capitol Hill. It would provide credit unions with the appropriate ability to raise capital from sources other than retained earnings without in any way jeopardizing the 'one member, one vote' principle that is the bedrock of the credit union ownership structure.

"Moreover, this bill also would strengthen the safety and soundness of credit unions by allowing them to develop a supplemental cushion as an added safeguard," Magill noted.

The bill was introduce Feb. 14 by Reps. Pete King (R-N.Y.) and Brad Sherman (D-Calif.) and would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts at a credit union. The bill is substantially similar to last year's H.R. 3993, which had 45 cosponsors.  "Congress is showing greater interest in capital reform, and we expect our legislation to be part of the discussion," said Magill.

In January, CUNA  named a four-pillar 2013 legislative agenda, which includes advancing charter enhancements and which named  supplemental capital and increased member business lending (MBL) as two priorities.  Within a day of the introduction of the supplemental capital bill, Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.)  reintroduced legislation (H.R. 688) to increase the MBL cap to 27.5% of assets, from the current 12.25%.  Both bills were the focus of advocacy efforts on Capitol Hill when more than 4,200 came to Washington recently for CUNA's Governmental Affairs Conference.

To counter the bankers' latest misinformation, CUNA is providing more information to key offices on Capitol Hill regarding the need for supplemental capital, as well as increased MBL authority, which CUNA estimates would help credit unions lend an additional $14.5 billion to small businesses in just the first year after enactment. This money, which would be made available at no expense to taxpayers, would in turn help small businesses create over 158,000 new jobs.

Regulatory Advocacy Report Features CUNA TILA/RESPA Comments

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WASHINGTON (3/12/13)--The Consumer Financial Protection Bureau continues its work to integrate Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) mortgage disclosures, and a Credit Union National Association comment letter on this project is one of many issues tackled in this week's Regulatory Advocacy Report.

In the comment letter, CUNA says it is concerned that the CFPB's proposal to test certain fixed rate and adjustable rate loans may not adequately address all loans in the product marketplace.

For example, CUNA Associate General Counsel Jared Ihrig wrote that CUNA does not see evidence that the CFPB is testing loans where features such as simultaneous second lien loans, refinance transactions, cash-out transactions, loans where buydowns may occur with third parties, loans with lender credits, or loans where there are non-borrowers signing the security instrument, but not the note, are occurring.

The CUNA comment letter called on the CFPB to expand the scope of its quantitative testing to include more loan scenarios as part of its proposed testing methodology.

"Without testing for these and other variables that can often be made part of borrowers' real estate transactions, CUNA believes that the combined TILA/RESPA disclosures may not adequately take into account the differences in these transactions, which may cause further concern and frustration for lenders and consumers, alike," Ihrig wrote. The CUNA comment letter suggested the CFPB incorporate points and fees calculations to its testing regime. CUNA also commented on the timing of the tests.

For the full comment letter, use the resource link.

This week's edition of the Regulatory Advocacy Report also features details on:
  • A CFPB survey on financial services marketed to higher education students;
  • Federal Financial Institution Examination Council social media guidance;
  • National Credit Union Administration regulation reviews;
  • The Financial Accounting Standards Board's (FASB) proposal regarding financial reporting of expected credit losses on loans and other financial assets, and more.
The FASB proposal was among many items covered in a CUNA "Pressing Regulatory and Compliance Issues Audio Conference" held last week. (See News Now coverage: FASB Changes, CFPB Agenda Detailed In CUNA Audio Conference: Part 2, and New Credit Rating, CFPB Info Featured In CUNA Pressing Issues Call)

Employees or volunteers of CUNA/state credit union league-affiliated credit unions can sign up to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Cheney Interviewed In Bloomberg BoA 'Gaffes' Article

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WASHINGTON (3/12/13)--Credit Union National Association President/CEO Bill Cheney was quoted in a Bloomberg/Business Week feature, also appearing in Sunday's Washington Post, on how Bank of America's rush in late 2011 to impose a $5 a month debit card fee backfired and drove consumers to join credit unions by the thousands.

Cheney was among those asked to comment for a feature story on B of A CEO Brian Moynihan. The feature chronicled missteps and rebounds by the mega-bank's CEO since he came on board in the wake of the financial crisis.

CUNA's Cheney noted in the article that the bank fee was a major miscalculation that sparked the consumer-led Bank Transfer Day, which allowed credit unions to gain hundreds of thousands of new account holders in the month after the $5 fee was announced (and later rescinded by B of A).  "Clearly, it was a strategic error, especially since they backed down from it," Cheney said. 

The article noted that the big bank's fee decision was "was met with protests at branches from Los Angeles to Boston."

CUNA has highlighted that credit unions reported phenomenal membership growth in 2011, with the boost from Bank Transfer Day, and that growth has continued to date, indicating that consumers trust credit unions with their financial business.

NCUA-CFPB Webinar Now Available Online

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ALEXANDRIA, Va. (3/12/12)--The National Credit Union Administration has posted to its website an archived version of its recent virtual town hall webinar with Consumer Financial Protection Bureau (CFPB) Director Richard Cordray.

During the Feb. 5 webinar NCUA Chairman Debbie Matz noted that the agency continues to examine credit union derivatives issues, and a proposed rule on derivatives could be released in the first half of 2013.

Cordray previewed some of his agency's future plans during the webinar and noted a final version of the proposed remittance transfer regulations will be released in February or March, and will become effective 90 days after it is released. He also noted his agency is also considering giving credit unions that hold $2 billion or less in assets, and make more than 500 mortgage loans per year, safe harbor from portions of qualified mortgage/ability-to-repay regulations. (News Now Feb. 6)

Also topics discussed during the webinar were:

  • Mortgage servicing rules;
  • NCUA's Regulatory Modernization Initiative;
  • Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and
  • CFPB's proposed overdraft regulations.
More than 1,700 participants took part in the 90-minute webinar. The archived audio recording of the virtual town hall and a written transcript of the webinar are available by using the first resource link below.