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Senate bill would expand credit relief for servicemembers

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WASHINGTON (5/24/12)--Legislation that would make it easier for active-duty military personnel to claim the protections under the Servicemembers Civil Relief Act (SCRA), and extend foreclosure protections offered under the SCRA to the surviving sponsors of military members, has been offered in the Senate.

The bill was introduced this month by Sen. Jack Reed (D-R.I.) and is co-sponsored by Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.), Mark Begich (D-Alaska) and Sheldon Brown (D-Ohio). Delaware Attorney General Beau Biden joined the senators and the Military Officers Association of America, the American Legion, AMVETS, the Non Commissioned Officers Association, and other groups to publicly support the bill.

"Giving our troops time to prepare for deployment and get their financial affairs in order is central to mission readiness," Reed said in a release, adding that "soldiers who are fighting on the frontlines to protect our country shouldn't have to needlessly fight with creditors and landlords back home."

"We must ensure the laws that protect our troops keep pace with the challenges they face," he added.

The bill, known as the Servicemember Housing Protection Act (S. 3179), has been referred to the Senate Committee on Veterans' Affairs, and similar legislation was recently introduced in the U.S. House by Rep. Elijah Cummings (D-Md.).

CFPB scrutinizes prepaid card practices

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DURHAM, N.C. (5/24/12)—Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced a new rulemaking effort to address prepaid cards, and discussed a number of issues surrounding the use and issuance of those cards, at a Wednesday field hearing in Durham.

Improving the safety and transparency of prepaid cards and their providers will be two main goals of the CFPB's rulemaking effort, Cordray said in remarks delivered at the hearing. He noted that prepaid cards do not come with many of the same protections that are offered to users of traditional account-tied debit and credit cards. "That is why we are considering how best to extend protections to prepaid cardholders in the event that a card is lost or stolen, unauthorized charges are made, or a processing error results in an incorrect charge amount," he said.

The CFPB will collect public comment on prepaid cards, and also will examine the costs, benefits, and protections related to overdraft features offered on prepaid cards, Cordray said, and will analyze how some of the terms of a given prepaid card can be disclosed before a consumer buys a prepaid card. The CFPB is also adding more than 80 answers on prepaid card issues to its own database of frequently asked financial questions, which is hosted on "These new entries give consumers an overview of prepaid cards and help address questions about obtaining, reloading, and using prepaid cards," Cordray said.

Representatives from Premier FCU, Greensboro, N.C., Piedmont Advantage CU, Winston Salem, N.C., the Credit Union National Association (CUNA), and the North Carolina Credit Union League (NCCUL) were among those at the hearing.

CFPB Deputy Director Raj Date, Rep. David Price (D-N.C.), and North Carolina Attorney General Roy Cooper also spoke during the hearing, and Date moderated a prepaid card panel that featured comment from consumer groups, industry stakeholders, and financial experts.

Peidmont Advantage CU's Belinda Wilson said her credit union offers prepaid cards to meet member's needs and to offer consumer choice, and noted that the cards offered by her credit union have low up-front costs and fees, and provide adequate disclosures.

CUNA will analyze the CFPB request for comment, and will be issuing its own regulatory comment call shortly.

TDR RegFlex are focus of todays NCUA meeting

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ALEXANDRIA, Va. (5/24/12)--Troubled Debt Restructuring (TDR) and Regulatory Flexibility (RegFlex) rule changes will lead the agenda at today's National Credit Union Administration (NCUA) board meeting, which is scheduled to begin at 10:00 a.m. ET.

The Credit Union National Association (CUNA) has supported the NCUA's TDR proposal, which was released earlier this year and would allow credit unions to modify TDR loans without having to immediately classify those loans as delinquent. TDR loans have specific accounting and reporting requirements, and the financial statement and call report treatment of TDRs are also unique.

The NCUA has hinted that the rules could become effective 120 days after they are published in the Federal Register.

CUNA encouraged the NCUA to give small credit unions more time to comply with the TDR changes, and also noted that the TDR proposal's different treatment of member business loans (MBLs) could create issues for credit unions with certain processing systems, forcing those credit unions to manually track MBLs that have been modified.

Another final version of a CUNA-supported proposal, a plan to eliminate the RegFlex program, is scheduled to be presented at today's meeting.

Under the proposal, 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.

CUNA supports the goals of this RegFlex proposal, but also suggested the NCUA could go beyond the parameters of this proposal, giving credit unions even greater freedom from burdensome regulations.

The first quarter National Credit Union Share Insurance Fund's first quarter results will also be presented during the meeting.

A final interpretive rule and policy statement on supervisory committees will also be released during the open portion of the meeting, and supervisory activities and an appeal will be addressed during the closed portion of the meeting.

For the full agenda, use the resource link.

CU voices heard at mortgage SBREFA panel

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WASHINGTON (5/24/12)—Credit unions should not be subjected to new regulatory requirements that could be created by pending mortgage origination regulation changes, Lisa Brown, president/CEO of Tallahassee-Leon FCU, Tallahassee, Fla., told Consumer Financial Protection Bureau (CFPB) officials at a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel discussion held Wednesday in Washington, D.C.

The CFPB is considering imposing certain restrictions on the charging of up-front points and fees, proposals for new rules regulating mortgage originator standards and compensation, and rules that would address mortgage loan originators' qualifications and compensation. (See related May 10 News Now story: Rules on mortgages fees, origination in the works, CFPB says)

The agency said it is considering:

  • Requiring lenders to give borrowers at least a certain minimum reduction of the interest rate in return for paying discount points on a mortgage;
  • Requiring lenders to offer consumers a no-discount-point loan option; and
  • Banning mortgage loan origination charges that vary with the size of the loan, instead allowing brokerage firms and creditors to only charge flat origination fees.
Brown, who was one of many financial services representatives that spoke during the meeting, stressed that smaller credit unions are carefully watching the CFPB's mortgage lending work, and are concerned by the impact that additional regulatory requirements could have on credit unions and their members.  She said potential changes to mortgage fee structures could impact the mortgage market in general, as well.

Generally, Brown noted, any increased regulation would put undue burdens on credit unions in an environment where the writing and re-writing of rules is already costing her members.

Credit Union National Association (CUNA) Senior Assistant General Counsel Jared Ihrig, Ronald Lauren, CEO of SIR FCU, Negaunee, Michigan, and representatives from community banks, mortgage bankers, and mortgage brokers also attended the SBREFA panel. The CFPB is required to hold SBREFA panels to gauge the potential impact that upcoming regulations could have on small businesses.

The CFPB is also considering setting qualification and screening standards for loan originators, and Brown warned that these additional potential requirements could prove costly for credit unions.

A full slate of mortgage rules is expected to be proposed by the CFPB this summer and finalized by January 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long of a transition period is necessary yet.

The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.

Hill rally helps highlight small biz MBL support

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WASHINGTON (5/24/12)--While the economy, taxes, energy,  and environment were among the overarching topics on the agendas of small businesses participating in the U.S. Chamber of Commerce-sponsored "Rally on the Hill" Wednesday, the Credit Union National Association's (CUNA) small business partners had credit union member business lending (MBL) on their minds.

This week is Small Business Week, and the rally on Capitol Hill was meant to help shine a spotlight on the top concerns of the nation's small businesses, things that impact bottom line, job creation and economic growth.

CUNA's small business partners have urged federal lawmakers to increase the cap on credit union member business lending as a way to ease their unmet credit needs, and they brought that message to the Hill on Wednesday.

CUNA, credit unions and small businesses are urging the U.S. Congress to increase the MBL cap to 27.5% of assets, up from 12.25%. CUNA estimates show that doing so would inject $13 billion in business loans into the economy and create as many as 140,000 new jobs in the first year after enactment, with no cost to taxpayers.

The small-business argument in favor of more credit union lending was reflected in a recent letter to the Dubuque Telegraph Herald from a farmer who said his century-owned family farm was in jeopardy until he switch his financial dealings to a credit union.

Stan Friedman, who identified himself as a Guttenberg, Iowa farmer, wrote, "My previous financial institution was pushing me to expand my operation beyond what I could physically or financially handle. My goal of operating a sustainable business that respected the environment wasn't profitable in its eyes. I realized I wouldn't be able to work with it unless I managed my business in the fashion it expected.

"I joined a local credit union so I could run my farm in the prudent manner that fits my values and goals. Credit unions are institutions run by local folks, so it already knew my family and worked with me to tailor my loan to fit my business goal.

"My credit union didn't care if I made it money; all it cared about was that I was creditworthy and able to make my payments."

Friedman urged his senators to pass the Senate MBL bill (S. 2231). The House also has pending MBL legislation (H.R. 1418).

Earlier this week News Now reported that the small business group, Women Impacting Public Policy, and the National Rural Electric Cooperative Association became the two latest groups to join the fight to increase the credit union member business lending cap. Use the resource link below to access the extensive list of CUNA's small business partners.

Inside Washington (05/23/2012)

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WASHINGTON (5/24/12)--Richard Fisher, president of the Federal Reserve Bank of Dallas and a former banker, called for a reduction in the size of the largest banks to help stabilize financial system. In an interview with American Banker (May 23) Fisher said he was in favor of using the term "right sizing," rather than "breaking up" the largest banks. Maintaining a grasp of risk management beyond mathematics becomes difficult as firms become increasingly larger, as evidenced by recent bank failures, Fisher said. Fisher has not made any specific proposals but he is joined in the collective voice to "right size" large banks by such industry leaders James Bullard, president of the Federal Reserve Bank of St. Louis; Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, Tom Hoenig, former president of the Federal Reserve Bank of Kansas City; and former Federal Deposit Insurance Corp.'s chairman Sheila Bair …

WASHINGTON (5/24/12)--Lawmakers on Tuesday expressed surprise that the heads of two regulatory agencies did not learn of trades that led to a massive loss at JPMorgan Chase until they were reported by the media (American Banker May 24). Mary Schapiro, who heads the Securities and Exchange Commission, and Gary Gensler, chairman of the Commodity Futures Trading Commission, said they were informed of the loss through the media. During a Senate Banking Committee hearing Tuesday, Sen. Richard Shelby (R-Ala.) asked Gensler to clarify how he received the reports. Schapiro and Gensler's testimony show that regulators still lack transparency in discerning the risk of activities undertaken by large financial institutions, three-and-a-half years after the collapse of insurer AIG. The transactions that caused the loss did not take place inside JP Morgan's U.S. broker-dealer, which is regulated by the SEC, Schapiro said. The trades took place in U.K. branch of JP Morgan's commercial bank, which is regulated by the Office of the Comptroller of the Currency, and in another U.K. branch. Democrats on the Banking Committee argued that JPMorgan losses illustrate why strong implementation of Dodd-Frank Act is needed to address the system risk presented by large financial institutions Republicans countered that Dodd-Frank seeks to micromanage financial institutions, which is an impossible task  …

WASHINGTON (5/24/12)--Sen. Bernie Sanders (I-Vt.)  introduced legislation to prohibit banking industry executives from serving as directors of the 12 Federal Reserve regional banks. Sen. Barbara Boxer (D-Calif.) is an original co-sponsor of the measure to end conflicts of interest involving regulators and the financial institutions they regulate.  She joined Sanders at a news conference introducing the bill. Sen. Mark Begich (D-Alaska) also is a co-sponsor. The recent multi-billion-dollar trading loss at JPMorgan Chase underscored the need for reform the Federal Reserve System, Sanders said. "It is a blatant conflict of interest for Jamie Dimon, the CEO and chairman of JPMorgan Chase, to serve on the New York Fed's board of directors," Sanders said. "If this is not a clear example of the fox guarding the henhouse, I don't know what is" …

NCUA video highlights improving economy

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ALEXANDRIA, VA. (5/24/12)--National Credit Union Administration (NCUA) Chief Economist John Worth outlines how key economic indicators, including consumer spending, consumer confidence, and job numbers, show the continued improvement of the U.S. economy in the NCUA's latest YouTube briefing.

"Recent news in economic indicators suggests the economy is growing and adding jobs. Consumer spending remains solid, and consumer confidence continues to edge higher," Worth said, adding that "overall, the economic environment remains a modest plus for credit unions."

This video is the latest in a series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

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