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Overdraft comments now due to CUNA May 25

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WASHINGTON (4/27/12)--The Credit Union National Association (CUNA) has pushed its own overdraft comment deadline back to May 25 after the Consumer Financial Protection Bureau (CFPB) announced it would collect overdraft comments from credit unions and other interested parties until June 29. 

The CFPB launched its comment initiative on Feb. 28 and first intended it to end April 30. CUNA and others earlier this year requested the agency delay the comment deadline by at least 30 days.

CUNA Deputy General Counsel Mary Mitchell Dunn said the delay is a good development and will allow credit unions, leagues and CUNA, along with other interested parties, ample time to develop comments.

The CFPB is seeking information on how financial institutions' overdraft policies and practices affect consumers. The overdraft comments from consumers, the financial services industry, and other interested parties will be used to determine whether new overdraft fee disclosures and rules are needed and to assist with policymaking on overdraft practices. It will also be used to prioritize the CFPB's regulatory and financial education work, the agency said.

Concerned that the CFPB's questions were open ended, CUNA developed its own survey for credit unions to complete, the results of which will be used by CUNA to develop its overdraft comment letter.

In the survey, CUNA asks for basic information on the credit union's asset size, and what types of overdraft programs are offered to members. More specific questions addressing how members are made aware of available overdraft protection programs and how members are alerted to the possibility that a transaction may trigger an overdraft fee are also among the survey questions.

The CUNA survey does not collect any identifying information, and credit union participation will be strictly confidential.

For the CUNA survey, use the resource link.

CU-backed swap bill moves on to Senate

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WASHINGTON (4/27/12)--The Small Business Credit Availability Act (H.R. 3336), which would preserve the rights of credit unions and other small financial institutions to use swaps to hedge interest rate risk, will move on to the Senate after it passed a U.S. House vote this week.

The bill passed by a 312 to 111 vote, with 8 members of the House abstaining.

The Credit Union National Association (CUNA) supports the legislation, which would grant credit unions and other small financial institutions with under $1 billion in cumulative current uncollateralized credit risk exposure and potential future credit risk exposure an exception from portions of the Dodd-Frank Act that barred certain institutions from engaging in swap transactions.

"The House considered this legislation to reinforce that small financial institutions, including the credit unions eligible to engage in this activity, receive the exemption that Congress intended to provide under the Dodd-Frank Act," said Ryan Donovan, CUNA's senior vice president of legislative affairs.

The National Credit Union Administration (NCUA) currently allows a limited number of federal credit unions to engage in derivatives through an investment pilot program, and is considering expanding credit union derivative investment authority. CUNA has commended the agency for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third-parties. (See related April 5 News Now story: Allow CU derivative investments as risk management tool: CUNA to NCUA)

Registration for July 31 NCUA session opens

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ALEXANDRIA, Va. (4/27/12)—Registration for the July 31, Denver, Colo.-based National Credit Union Administration's credit union "listening session" has opened, the agency said Thursday.

The session is scheduled to be held between 1 and 4 p.m. ET. Registration will be limited to the first 150 reservations.

NCUA Chairman Debbie Matz said agency representatives are looking forward to hearing from credit union officials and volunteers in all six listening sessions, and added the agency welcomes open dialogue to improve its exam processes, regulations, and credit unions' safety and soundness.

The NCUA listening sessions will begin on May 2 in Boston, Mass., and are also scheduled for:

  • May 9 in Alexandria, Va.
  • June 5 in St. Louis, Mo.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
The agency also recently rescheduled a June 12 session in Orlando, Fla., moving it back a day to June 13.

For more on the sessions, use the resource link.

CDFIs have succeeded but also face difficulties report says

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WASHINGTON (4/27/12)--Community Development Financial Institutions (CDFIs) "have succeeded in lending to and investing in individuals and communities not served by conventional financial institutions, while maintaining loan performance standards generally equivalent to those of the conventional financial sector," but have also experienced some difficulties while doing so, the CDFI Fund said in a recent report.

The "CDFI Industry Analysis: Summary Report" was developed by the University of New Hampshire Carsey Institute's Center on Social Innovation and Finance, and examines the performance of 612 CDFIs between 2005 and 2010. The report examined 197 credit unions as part of the study. The study focused on capitalization, liquidity, portfolio health and risk-management issues faced by CDFIs, and how those institutions were impacted by the recent recession.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit.

The report found that CDFI credit unions "have been experiencing greater risk in their loan portfolios than traditional credit unions," with more than double the rate of delinquent loans as a percentage of total assets as the overall credit union industry. However, most of the CDFI credit unions examined had excellent portfolio quality, the report said.

CDFI Fund credit unions also recorded higher operating expense ratios, declining earnings, and rising delinquency rates, and had higher delinquency rates than the credit union industry as a whole, according to the report. Net income, returns on assets, and net interest margins also declined.

While the costs of working with underserved communities can be "somewhat higher," CDFI credit unions and other CDFIs "have learned to effectively manage the 'risk' that discourages conventional financial institutions from serving low- and moderate-income individuals and communities," the report said. Some of the risks and costs could be mitigated through certain operating procedure changes, according to the report.

Those changes include:

  • Creating networks, building infrastructure and improving the scale of operations;
  • Promoting the availability of longer-term capital;
  • Promoting streamlined access to industry data;
  • Promoting greater innovation and strengthening knowledge of best industry practices; and
  • Enhancing staff education and training efforts.
For the full CDFI Fund report, use the resource link.

Inside Washington (04/26/2012)

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  • WASHINGTON (4/27/12)--Changes made last October to the Home Affordable Refinance Program (HAMP), a mortgage refinance program designed to help troubled homeowners, have benefited big banks at the expense of homeowners and U.S. taxpayers, according to mortgage experts testifying at a Senate hearing on Wednesday.  Laurie Goodman, a senior managing director at Amherst Securities Group, said in written testimony at a Senate housing subcommittee hearing that borrowers are making big profits because they lack competition. HAMP is intended to make it easier for homeowners with Fannie Mae and Freddie Mac mortgages to refinance at lower interest rates. The program is designed for homeowners with good payment records who have seen the value of their homes drop. The revisions expanded access to the program. For example, borrowers who owe 25% more than their homes are worth could qualify for HAMP 2.0, as the new program is known. But critics say that the program now provides an advantage to the homeowners' existing servicers because they will not be required to purchase delinquent loans from Fannie and Freddie, while any potential competing servicers would be required to do so. Borrowers face obstacles and greater costs in obtaining a mortgage from any lender other than their current servicer, said Christopher Mayer, a professor at Columbia Business School …
  • WASHINGTON (4/27/12)--The Federal Housing Finance Agency (FHFA) announced the appointment of Denise Dunckel as senior associate director for the Office of Congressional Affairs and Communications where she will manage all internal and external communications for the agency. Dunckel previously served as senior business leader of Global Corporate Relations for Visa, Inc., where she managed the company's corporate, public policy and litigation communications strategies. Before joining Visa, Dunckel held senior public affairs positions at the U.S. Department of Education and the U.S. Department of Housing and Urban Development. She also served as senior press advance representative in the Office of Presidential Advance at the White House. She will join FHFA May 14 …
  • WASHINGTON (4/27/12)--Rep. Barney Frank (D-Mass.), former chairman of the House Financial Services Committee and co-author of namesake legislation the Dodd-Frank Wall Street Reform and Consumer Protection Act, issued a press release Thursday to announce the U.S. District Court for the District of Columbia has agreed to permit filing of an amicus brief submitted by House Democrats concerning the ability of the Commodities Futures Trading Commission to issue rules to limit speculation in commodities markets.  Frank noted that the amicus brief states "that the clear intent of Congress in enacting the (2010 law) was to require the (CFTC) to establish rules setting position limits on trading commodities futures and swaps."  Frank noted the Democratic brief, signed by 17 lawmakers, is a response to a lawsuit brought by the industry that  argues that the CFTC lacks authority to promulgate rules setting position limits before first conducting cost-benefit analyses on a case-by-case basis. Frank described the amicus brief signatories as "every member of the House who voted in conference for the financial reform bill and still serves in Congress …
  • WASHINGTON (4/27/12)--The Federal Reserve Board, along with the Federal Reserve Banks of Minneapolis and San Francisco, have scheduled a conference in Washington D.C. May 1 intended to explore ways to encourage economic growth in Native American communities.  "Growing Economies in Indian Country: A National Summit" is related to a series of forums organized by the Fed in partnership with the Interagency Working Group for Indian Affairs' Committee on Economic Development, a group of federal agency representatives who work with tribal governments. The Fed said its summit will provide a venue for tribal leaders, policymakers, financial industry professionals, and community development service providers to discuss:  challenges to economic development in Indian country; opportunities to strengthen Tribal enterprise development; opportunities to expand Native American entrepreneurship and access to small business capital; and opportunities to strengthen governance and legal structures. For more information, visit the conference website. Live online video will be available at 9:15 a.m. (ET) on May 1 …

CUNA highlights iBankeri survey showing readers back MBLs

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WASHINGTON (4/27/12)--The Credit Union National Association (CUNA) queried the American Banker Thursday asking: Based on your publication's own online survey results, why not write about all the banks that apparently have no quarrel with credit unions' member business lending (MBL) bill?

John Magill, CUNA executive vice president, government affairs, posed the question in a letter to the editor that ran in the online edition Thursday in response to the publication's April 23rd story, "Third Credit Union Dissents on Business Lending Bill."

If three dissenters is a story, asked Magill, then what about all the banks that have no objection to raising the credit union small business lending cap?  He noted that the American Banker's own online survey this week suggests such bankers are out there, apparently in droves.

"Your survey posed the question, 'Should credit unions be permitted to expand credit union small-business lending?' Sixty percent of your readers said yes, the competition is healthy, another 10% said yes, as long as credit unions have sufficient capital, and only 31% said no," Magill wrote.

Magill noted that it can be presumed the majority of American Banker readers are directly involved in or favorably disposed toward the banking industry.

"Who knew 70% support our efforts to increase small business lending and job growth? I think American Banker should write about some of these bank executives.

"Based on your survey, it shouldn't be at all hard to find them."

Magill said that in a credit union universe of some 7,500 institutions, one will never find an issue that sparks total agreement. But, he said, CUNA has tracked at least 60,000 contacts to the U.S. Congress since late March from credit unions, small businesses and others in support of S. 2231, the Credit Union Small Business Jobs Act. That bill would increase the MBL cap to 27.5% of assets, up from 12.25%, under certain conditions.

"Clearly,  our legislation has broad industry and small-business support, and the dissenters are in the distinct minority," Magill pointed out to the Banker.

Use the resource link to access the opinion letter and to read News Now coverage of the American Banker survey.