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Washington

NEW: Cost Of Reg Burden Gets Human Face From CUNA Witness

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WASHINGTON (4/10/13, UPDATED 4:45 p.m. ET)--The overwhelming regulatory burden, and the difficulty of raising capital, have made it more difficult for her credit union to reach out effectively to the Hispanic community in her area, the Credit Union National Associatin's witness told a hearing today on providing credit unions with regulatory relief.

CUNA witness Pamela Stephens, answering questions during the just-recessed House Financial Services subcommittee hearing on credit union regulatory burden, succeeded in putting a face to the human cost of regulatory burden during the extensive question-and-answer session of the hearing.

Stephens, CEO of Security One FCU, Arlington, Texas, emphasized that her credit union is trying to reach out to the Hispanic community in her area, but regulatory burden and difficulty raising capital have made that more difficult. She made an appeal to remove a current restriction that credit unions may only use retained earnings as capital.

Also in response to a question, Stephens emphasized that a one-size-fits-all approach to financial services regulations, where a "Bank of America" and a small institutions like a credit union are treated the same--and rules aimed at financial services "bad actors"  are applied to community-minded and responsible players like credit unions--impede a credit union's ability to serve all its members.

And, Stephens emphasized, the reg burden problem "always gets worse, never gets better."

The Dodd-Frank Act and the creation of the Consumer Financial Protection Bureau have created a more difficult regulatory environment for credit unions, she said.

She said it is sometimes hard to understand what some of the regulatory changes are, what they mean, and how to comply.  Credit unions like her own are too small to afford the cost os a compliance officer and people like herself spend their nights and evenings wrestling with the copious rules and how to address them.

Also, she argued, "Members do not understand some of the new disclosures rules…Not many things coming down the pipe have been helpful to consumers now."

The credit union movement is losing around one credit union per day, and a huge part of it has to do with the regulatory burden they face. "If there's not somebody who is going to step to the plate and take care of that, consolidation seems to be the answer," she said.

News Now will have additional hearing coverage in its Thursday issue.

Hearing Today Is 'Step Toward Reg Relief'

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WASHINGTON (4/10/13)--Credit Union National Association witness Pamela Stephens takes to the witness table today to urge lawmakers to remove regulatory barriers that impede credit unions' ability to best serve the financial needs of their members.

Today's hearing by the House Financial Services subcommittee on financial institutions and consumer credit is the first of a series planned this year to study, in part, the impact of the Dodd-Frank Act. The credit union hearing occurs one week before an April 16 hearing on bank regulatory issues.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan has said that the April 10 session may be a turning point of sorts for credit unions.

"After dozens of hearings in the last Congress on regulatory burden, the House Financial Services Committee is sending a message through this regulatory relief hearing that they've heard the concerns and they want to hear about solutions," Donovan said when the hearing was announced in late March.

CUNA testified several times in the last Congress regarding the "ever-increasing, never-decreasing" complexity of the regulatory framework within which credit unions must operate.

Today's relief hearing, Donovan added, "hopefully represents the beginning of the process in this Congress to move legislation to provide relief to America's credit unions."

Stephens, who is CEO of $55-million-in-assets Security One FCU, Arlington, Texas, will note that this increased complexity has disproportionately impacted small credit unions.

While noting that creating an exhaustive list of regulatory relief proposals is impossible, Stephens will offer an extensive list of CUNA-backed reforms in her testimony.

Watch News Now for hearing coverage and follow NewsNowLiveWire on Twitter for immediate action updates.

Also, use the link below at 2 p.m. (ET) to listen to the hearing live.

NEW: CUNA Offers 35 Steps For CU Reg Relief

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WASHINGTON (4/10/13, Updated 3:30 p.m. ET)--Credit unions did not cause the financial crisis and don't engage in abusive practices, but "are being forced to pay the price and comply with the same rules designed for those who did cause the crisis," Security One FCU, Arlington, Texas, CEO Pamela Stephens said on behalf of her credit union and the Credit Union National Association at a House Financial Services subcommittee hearing today.

CUNA offered a 35-point plan for comprehensive regulatory relief that would help credit unions better serve their members by ceasing to require the diversion of so many resources to compliance with burdensome regulation.

Stephens, who is CEO of $55-million-in-assets Security One FCU, Arlington, Texas, told members of the House Financial Services financial institutions and consumer credit subcommittee that the burden of complying with ever-changing regulatory requirements is particularly onerous for small institutions like hers.

"If a smaller credit union offers a service, it has to be concerned about complying with most of the same rules as a larger institution, but can only spread those costs over a much smaller volume of business," she said in a prepared statement.

Regulatory burden is "a key reason that roughly 300 small credit unions merge into larger credit unions each year," she added.

Around 3,000 credit unions have five or fewer employees, CUNA notes.

"Regulatory burden is not a new problem for credit unions, but it is getting worse," she said. Since 2008, credit unions have been subjected to 157 rule changes from over 15 agencies, with most written before the Consumer Financial Protection Bureau issued its first rule. "That's almost one a week," Stephens said.

See more in tomorrow's News Now.

Senate Bill Introduces Payday Loan Rate Cap

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WASHINGTON (4/10/13)--Legislation that would impose a 36% maximum annual percentage rate cap on all open- and closed-end consumer credit transactions has been introduced in the U.S. Senate.

The bill, known as the Protecting Consumers from Unreasonable Credit Rates Act, would impact payday loans, mortgages, car loans, credit cards, overdraft loans, car title loans and refund anticipation loans, according to a release. The bill is co-sponsored by Sens. Richard Durbin (D-Ill.), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.) and Barbara Boxer (D-Calif.).

The bill would allow lenders to continue to charge initial application fees, insufficient funds fees and late fees. Measures to ensure that the federal law does not preempt stricter state laws are included in the bill. The bill would penalize violations of the 36% cap.

Durbin, Blumenthal and Merkley were also among those that introduced a bill to ban certain harmful online payday lending practices earlier this year. That bill, the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act (S. 172), has five consponsors.

Credit unions and the Credit Union National Association are committed to providing safe and affordable alternatives to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders.

CUNA supports the ability of credit unions to provide beneficial short-term, small amount loans as alternatives to predatory payday lending, which have "no place in the financial marketplace."

Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program.

TARP Watchdog: SBLF Little Used To Boost Lending

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WASHINGTON (4/10/13)--Former Troubled Asset Relief Program (TARP) banks that took part in the taxpayer-funded Small Business Lending Fund (SBLF) "have not effectively increased small-business lending and are significantly underperforming compared to non-TARP banks," the Office of the Special Inspector General for TARP (SIGTARP) reported on Tuesday.

While the SBLF was intended to incentivize bank small-business lending, 24 former TARP banks have not increased their lending, and the remaining former TARP banks have increased lending by $1.13 for each SBLF dollar they received, the report said. "By comparison, banks that did not participate in TARP but received SBLF funding have increased small-business lending by more than three times that amount--$3.45 for each $1 in SBLF funds," SIGTARP added.

"Basically, you have TARP banks taking unused TARP funds channeled to the SBLF and using it to pay off their TARP obligations instead of helping small businesses--it's unconscionable," said Credit Union National Association President/CEO Bill Cheney after the report became public. "This is just further evidence why Congress should take the far more logical step of enacting legislation to raise the member business lending cap. You'll see billions in new loans from credit unions to small businesses, with no need on our part for a TARP-like government handout."

The majority of former TARP banks that did not increase their lending after receiving SBLF funds instead used approximately 80% of those funds to repay their TARP obligations, the report found. "TARP banks had much to gain and little to lose from refinancing into SBLF irrespective of their small-business lending capability or willingness to lend," SIGTARP noted.

For the full SIGTARP report, use the resource link.

CUNA Urges Leeway For CUs To Help Student Borrowers

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WASHINGTON (4/10/13)--Following up on a recent meeting with the Consumer Financial Protection Bureau, the Credit Union National Association in a comment letter emphasized that credit unions should be given greater latitude to provide student loans to their members.

Many credit unions are growing their student lending programs, and CUNA Deputy General Counsel Mary Dunn noted that 600 credit unions currently offer private student loans to their members. "Like the CFPB, these credit unions want to ensure they provide products on favorable terms and that their members understand their responsibilities under student loan agreements--as credit unions do with other loan products they offer," Dunn wrote.

Recent CFPB data has shown that 87% of student lending complaints the agency has received originated from consumer dealings with seven firms, none of which were credit unions. "In fact, as the report indicates, out of the approximately 3,500 complaints about student loans, only one involved a credit union, and it is our understanding that the complaint has been satisfactorily resolved," Dunn added.

Dunn urged the CFPB to "recognize that there is no record of abuse by credit unions in this area of activity that would justify the imposition of additional regulations on credit unions."

The CUNA comment letter also recommends changes that could "help remove legal and other barriers that will enable credit unions to make even more student loans, consistent with their members' needs for such lending, current legal requirements, and reasonable safety and soundness considerations."

Extending the 15-year student loan maturity limit imposed by the Federal Credit Union Act is one such fix, Dunn said. Giving credit unions greater leeway to work with student loan borrowers and adjust the terms of their loans, as needed, could make monthly payments more manageable for borrowers and help credit unions minimize delinquencies or even charge offs, she wrote. CUNA has suggested this change to Congress and also intends to work with the CFPB and National Credit Union Administration to pursue this regulatory relief, she added.

Dunn also called on the CFPB to work with the NCUA and other financial regulators to ensure that credit unions and other creditors can offer student loan modifications, when needed, to their borrowers.

CUNA is forming a student loan advisory group to address these and other student lending issues, and that group plans to meet with officials from the CFPB and the NCUA, she added.

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

NEW: CUNA Offers 35 Steps For CU Reg Relief

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WASHINGTON (4/10/13, Updated 3:30 p.m. ET)--Credit unions did not cause the financial crisis and don't engage in abusive practices, but "are being forced to pay the price and comply with the same rules designed for those who did cause the crisis," Security One FCU, Arlington, Texas, CEO Pamela Stephens said on behalf of her credit union and the Credit Union National Association at a House Financial Services subcommittee hearing today.

CUNA offered a 35-point plan for comprehensive regulatory relief that would help credit unions better serve their members by ceasing to require the diversion of so many resources to compliance with burdensome regulation.

Stephens, who is CEO of $55-million-in-assets Security One FCU, Arlington, Texas, told members of the House Financial Services financial institutions and consumer credit subcommittee that the burden of complying with ever-changing regulatory requirements is particularly onerous for small institutions like hers.

"If a smaller credit union offers a service, it has to be concerned about complying with most of the same rules as a larger institution, but can only spread those costs over a much smaller volume of business," she said in a prepared statement.

Regulatory burden is "a key reason that roughly 300 small credit unions merge into larger credit unions each year," she added.

Around 3,000 credit unions have five or fewer employees, CUNA notes.

"Regulatory burden is not a new problem for credit unions, but it is getting worse," she said. Since 2008, credit unions have been subjected to 157 rule changes from over 15 agencies, with most written before the Consumer Financial Protection Bureau issued its first rule. "That's almost one a week," Stephens said.

See more in tomorrow's News Now.

CUNA: CUs Already Have Strong Data Security Standards

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WASHINGTON (4/10/13)--Credit unions are already subject to robust data security requirements and standards, and should not be subject to additional regulations, Credit Union National Association Assistant General Counsel Dennis Tsang wrote in a comment letter filed with the National Institute of Standards and Technology (NIST).

The CUNA letter follows an NIST request for information on developing a framework to improve cybersecurity for critical infrastructure.

While a limited number of credit unions and other financial institutions have been the subject of cyberattacks and data breaches, "these problems do not mean that more regulation in this area is required for financial institutions," Tsang noted. "On the contrary, financial institution systems have been tested like few others, and are probably ahead of some other sectors in the evolution and adoption of defensive measures," he wrote.

NIST should instead "focus on maximizing the ability of the federal government to address communications and other gaps that undermine the ability of sectors such as financial institutions to protect themselves" and fully assess whether new or revised security standards are needed for non-financial entities. Increased coordination between national enforcement and intelligence-gathering agencies could help to more quickly identify potential threats, the CUNA letter added.

Tsang in the letter suggested that NIST coordinate any critical Infrastructure cybersecurity initiatives it undertakes with both public and private stakeholders going forward, and also protect business confidentiality, individual privacy and civil liberties.

"By working with the Department of Homeland Security and national intelligence agencies, sector-specific agencies, including the U.S. Treasury, [National Credit Union Administration] and other regulators; the Financial Services Sector Coordinating Council (FSSCC) and other sector-coordinating councils, and CUNA and other trade associations, NIST will be better able to identify, refine, and guide the many interrelated cybersecurity considerations from all key sectors," he wrote.

CUNA is a member of the FSSCC, which is comprised of more than 50 financial services entities and associations and works closely with the Financial and Banking Information Infrastructure Committee. That group coordinates the government's critical infrastructure efforts. The NCUA and U.S. Treasury are members of the group.

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

New: House Subcommittee Members Have CU Reg Relief Legislation In Mind

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WASHINGTON (4/10/13, UPDATED 4:20 p.m. ET)--Regulatory relief legislation for credit unions has clearly been on the minds of House Financial Services subcommittee members today during a hearing on that subject at which Credit Union National Association witness Pamela Stephens presented CUNA's 35-point relief plan.

After multiple introductory statements by subcommittee members that noted a willingness to move forward on legislation, and after Stephens presented CUNA's relief plan, the vice chairman of the House Financial Services Committee, Rep. Gary Miller (R-Calif.) announced he will introduce a credit union relief bill.

Other subcommittee members noted interest is developing a legislative package t to address simultaneously credit union regulatory concerns along with those of community banks.  Stephens, who is CEO of Secuirty One FCU, Arlington, Texas, assured lawmakers that there are many issues credit unions and small banks could agree on.

The hearing continues.