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Washington

NEW: Reports Say Johnson Won't Seek Re-election

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WASHINGTON (3/25/13, UPDATED 3:30 p.m. ET)--Sen. Tim Johnson (D-S.D.) will make an announcement tomorrow that he will not seek re-election, according reports, including an early one today from Reuters, which cited unnamed sources.

The report said Johnson, who is 66 and has served in the Senate for more than 15 years, has been expected to retire after his current term that will end in 2014.

Other reports say Johnson will make his announcement at 4 p.m. (ET) tomorrow at a press conference at the University of South Dakota, his alma mater.

Tools Added To CUNA Tax Advocacy Arsenal

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WASHINGTON (3/25/13)--New resources continue to be added to the Credit Union National Association's tax toolkit arsenal designed to provide materials to help credit unions talk to their members about the value of credit union membership and to fight back against banks that are targeting credit unions in tax status attacks.

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CUNA research has shown that when credit union members understand the value of membership, they will work with credit unions to defend their tax status.

National ads detailing how credit unions help save their members money, Oregon-specific ads that take a head-on approach to repelling bankers' tax status attacks, and online materials that fight back against bailed-out banks that are targeting credit unions are among the new items added to the tax toolkit arsenal.

CUNA's members-only toolkit is designed to help credit unions connect with their members and educate the public about credit unions as banks intensify their state-level attacks against the credit union tax status. The tax toolkit webpage features free materials in the form of radio ads, print ads, newsletter articles, state-level updates, materials to use in advocacy efforts with federal and state lawmakers, and much more.



The new ads take several forms: Radio, digital and print. The latest series of ads integrated into the toolkit:
  • Note that the credit union tax status helps credit unions make sure that members pay lower interest rates for loans, lower fees for financial services and, most importantly, receive higher returns on their savings, benefits that saved members nearly $5.8 billion in 2012;
  • Urge readers to tell legislators to oppose Wall Street efforts to cripple credit unions; and
  • Ask why the biggest banks in the country are attacking local Oregon credit unions, and encourage Oregonians to stop Wall Street banks from taking away their right to choose a local, trusted credit union.
Preserving the credit union tax status remains CUNA's top legislative priority, and CUNA Executive Vice President of Strategic Communications and Engagement Paul Gentile has emphasized that credit unions must work collaboratively to communicate the importance of that status to their members.

For more on CUNA's tax toolkit, use the resource link.

CFPB Issues Rule Implementing ATM Disclosure Law

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WASHINGTON (3/25/13)--ATM fee disclosure requirements are now simpler under a new rule issued by the Consumer Financial Protection Bureau. The rule implements a 2012 statutory revision to the Electronic Fund Transfer Act, Regulation E, to eliminate redundant ATM disclosures.

The Credit Union National Assocaiton and state credit union leagues advocated strongly for the amendment and CUNA worked closely with key members of the U.S. Congress and the CFPB on the legislation.    

The CFPB has amended Reg E by eliminating the requirement that a fee notice be posted "on or at" an ATM, and by deleting companion Regulation E Official Commentary.

An ATM operator must still provide an on-screen or paper disclosure which

includes the amount of the fee to be charged by the operator, before the consumer is committed to paying the fee.

This amendment will go into effect upon publication in the Federal Register. It implements legislation signed into law on December 20, 2012 (Pub.L. 112-216) .

CDFI Fund To Expand Funding For Community Health Centers

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WASHINGTON (3/25/13)--The development of community health centers in underserved communities will get a boost under an expanded initiative by the Treasury Department's Community Development Financial Institutions Fund (CDFI Fund).

The CDFI Fund announced Friday that its Capacity Building Initiative, designed to support new, innovative sectors of community development financing, will now feature a new "Financing Community Health Centers" series to finance and support those centers.

The series is a dedicated two-year effort to provide structured, specialized technical assistance and training services to CDFIs engaged in or planning to provide assistance to community health centers. The training will provide best practices on successful financing from experts in the field, as well as tools for interpreting the changing operating environment over the course of the next 24 months.

The CDFI Fund maintains that the training and technical assistance provided as part of the series holds the promise of simultaneously producing jobs, addressing the needs of vital community facilities, and developing the economies of the nation's low-income communities. Opportunity Finance Network has been selected as the training provider.

Use the resource link for more.

Bill Proposes Federal Student Loan Rate Cap

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WASHINGTON (3/25/13)--Rep. Karen Bass (D-Calif.) introduced a bill on Friday that would cap federal student loan interest rates at 3.4%, and also allow some borrowers to refinance their student loan debt to improve their rate.

Federally guaranteed loans make up 85% of total outstanding student loan debt, with private student loans comprising 15% of student loan debt. 

The bill, introduced Friday and known as the Student Loan Fairness Act, would also:

  • Require federal student loan holders to make 10 years of payments at 10% of their discretionary income, after which their student loan debt would be forgiven;
  • Allow borrowers whose student loan debt exceeds their income to convert their private loan debt into federal Direct Loans, and make those new federal loans subject to the 10/10 standard outlined above; and
  • Reward students who enter public service professions and work in underserved communities with a reduced loan forgiveness timeline.
Interest-free deferments would also be extended to student loan borrowers that have fallen on hard times under the terms of the bill. The legislation also aims to address tuition costs. For more on the bill, use the resource link.

Credit unions are starting to become more involved in private student lending, although the National Credit Union Administration noted in the month's edition of The NCUA Report that, for the most part, credit unions have been in this market for a relatively short time—most have offered private student loans for less than five years.

The agency said it expects credit unions to establish reasonable concentration limits for a private student loan portfolio to protect against risk.

Just one example of credit unions student loan growth is the case of Michigan credit unions in 2012. A strong lending performance propelled Michigan credit unions to record-setting results for 2012, according to the Michigan Credit Union League's analysis of data from the NCUA. One part of that loan growth was a 42% jump in student lending--with total student loans nearing $100 million.

For more of the NCUA report, use the resource link.

News In CU Hiring Is Positive, Says Cheney Report

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WASHINGTON (3/25/13)--This week's edition of The Cheney Report starts off with some positive economic news: Credit unions in 2012 hired at the highest rate since the Great Recession began in 2007.

The positive hiring news is "just another sign of increasing confidence by credit unions for their futures," Credit Union National Association President/CEO Bill Cheney wrote.

CUNA analysis of the National Credit Union Administration's 2012 year-end call report data showed that full-time employees at credit unions totaled nearly 234,000. This is an increase of more than 3% from 2011's total, when hiring was nearly flat, and a reversal of contractions in full-time employees in both 2009 and 2010, the CUNA CEO noted.

Other topics tackled in this week's Cheney Report include:

  • CUNA airing credit loss proposal concerns with the Financial Accounting Standards Board;
  • The NCUA's recent work to address fair lending compliance;
  • The Senate introduction on privacy notification legislation;
  • Housing reform news; and
  • Upcoming hearings on the regulatory burdens faced by small financial institutions.
Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs.

The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership, CUNA Executive Vice President of Strategic Communications Paul Gentile notes.

Past issues of The Cheney Report are archived on cuna.org.

CRL Report Blasts Big Banks On Payday Loans

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WASHINGTON (3/22/13)--A report by the Center for Responsible Lending condemned some big banks' payday lending practices, and suggested changes to the payday loan industry that would move lenders toward the higher standards and practices already followed by credit unions.

The report, released last week, slams the products provided by six large firms and says regulators should take immediate supervisory and/or enforcement action to stop them. They are Wells Fargo Bank, U.S. Bank, Regions Bank, Fifth Third Bank, Bank of Oklahoma and its affiliate banks, and Guaranty Bank.  CRL found that these payday loans carry an average annual percentage rate (APR) of 225% to 300%.

The report recommended that regulators:

  • Require that any small loan product be affordable without leading to a cycle of repeat loans;
  • Carry an effective APR of 36% or less;
  • Be underwritten based on an ability to repay the loan without taking out another loan shortly thereafter; and
  • Not require mandatory automatic repayment from the consumer's checking account.
The National Credit Union Administration currently allows federal credit unions to offer short-term small amount loans to their members as an alternative to predatory payday loans that are offered by other financial service providers. Federal credit unions may charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. For now, this amounts to an interest rate ceiling of 28%.

A $20 application fee may also be charged. The loans may total as high as $1,000 and may last for as long as six months, and the loans cannot be rolled over.

Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling, and encourage members to open savings accounts. They also in some cases provide incentives for members that switch to longer-term and lower-cost lending products.

The NCUA also is reviewing its small-amount, short-term loan rules to find ways to increase flexibility and enable more credit unions to engage in this form of lending.

CUNA Backs GSE Credit Risk Guarantee Amendment

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WASHINGTON (3/25/13)--The Credit Union National Association on Friday joined several financial services and real estate industry partners to support an amendment that would ensure that Fannie Mae and Freddie Mac credit risk guarantee fees are no longer used to offset the costs associated with unrelated policies that increase the deficit.

The amendment was introduced by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Committee Member Mike Crapo (R-Idaho) last week.

In a letter to the two legislators, CUNA and others noted that guarantee fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from faulty loans, and should be used only to manage the companies' credit risk. Increasing guarantee fees for other purposes effectively taxes potential homebuyers and consumers wishing to refinance their mortgages, the letter added. Fee increases unrelated to housing could also act to hinder the necessary reforms required of the housing finance system in the years ahead, the letter said.

Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco earlier this month said that agency will begin to build a new securitization infrastructure, including a joint venture to handle mortgage securitization, and contract Fannie Mae and Freddie Mac's dominant presence in the marketplace while simplifying and shrinking some of those firms' operations.

As requested by the FHFA, Freddie Mac last week released single-family loan-level credit performance data on 30-year fixed-rate mortgages. Freddie Mac said the dataset covers approximately 15.7 million fully amortizing fixed-rate single-family mortgages originated between January 1, 1999, and December 31, 2011, representing 53% of total mortgage acquisitions made during that period.

Freddie Mac in a release said the data will help to increase transparency, which helps investors build more accurate credit performance models in support of potential future single-family credit risk-sharing initiatives.

A range of mortgage market reforms have been discussed in Washington, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages.

CUNA has repeatedly encouraged the FHFA to ensure that any changes to secondary mortgage market structure allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.