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CUs sound off in RBC comment letters

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WASHINGTON (5/23/14)--With only three business days left in the comment period for the National Credit Union Administration's risk-based capital (RBC) proposal, almost 900 comment letters already have been sent. In addition to the King-Meeks letter signed by 324 members of Congress, Sen. Al Franken (D-Minn.) submitted a letter last week, and former Senate Banking Committee Chair Al D'Amato has commented as well.

Sen. Heidi Heitkamp (D-N.D.), a member of the Senate Banking Committee, submitted a comment letter of her own Thursday, urging the NCUA board to commit to transparency during the process and incorporate feedback from industry participants.

"Credit unions have served farmers and ranchers for many years, by making safe and affordable agricultural loans," she wrote. "Several North Dakota agricultural groups are concerned the proposal risk-based capital rule will negatively affect agricultural lending in my state."

A letter signed by members of five different North Dakota-based agricultural organization also cautioned against the effects of changes to current RBC rules.

"It is because of this history of safe and sound loans that Congress created an exemption for rural based credit unions so that they would not be subject to the 12.25% cap on business lending," the letter reads. "If the RBC rule were to be finalized as proposed, this exemption would become moot and many credit unions may have to discontinue or decrease agricultural lending."

State credit union leagues, credit unions and other stakeholders have also contributed to the nearly 900 comment letters received by the NCUA, including the following:
  •  Joshua Roberts, controller and compliance officer, Enterprise CU, Brookfield, Wis., with $28 million in assets.: "Every credit union's balance sheet varies dramatically, and while some loans may have a higher inherent risk than others, certain considerations should be made, such as a credit union's low-income designation, opportunities to provide loans to lower rated paper, and assisting with credit building lending. Being held to this standard could result in these credit unions potentially not providing these lending products which are vital to the communities they serve."
  •  Mary Zillman, Brokaw CU, Weston, Wis., with $46 million in assets: "I am mystified as to why this rule needs to be imposed. We've offered many of these products for years, and have just weathered one of the most troubling times of our days. What is really driving this proposal?"
  •  Jacki Lerdal, vice president/manager, Power Co-op Employees CU, Humboldt, Iowa, with $28 million in assets: "Credit unions must know the standard they're managing to in terms of capital.  Allowing subjective authority to examiners in the field to arbitrarily establish capital guidelines higher than proposed guidelines eliminates that standard.  Including such a provision creates uncertainty and difficulty for our staff and board and prevents us from effectively managing the financial institution on behalf of our members."
  •  Martin R. Carter, CEO, Parkside CU, Livonia, Mich., with $76 million in assets: "While the FDIC fund became technically insolvent during each of the last two financial crises, the NCUSIF has performed very well under current PCA rules. I believe this NCUA proposal is misguided from the outset because it builds additional layers on top of already existing statutory standards that in many areas are more stringent than the Basel system for small banks. Credit unions are already highly regulated and restricted. The current leverage requirement of a 7% net worth ratio in order to be considered "well capitalized" is 40% higher than the comparable requirement on community banks ..."
To read more of Carter's comments, as well as a sampling of other comments received by the NCUA, use the resource link.

'Risky' nonbank practices subject of new CFPB report

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WASHINGTON (5/23/14)--A new report, issued Thursday by the Consumer Financial Protection Bureau, highlights what the bureau labeled as illegal actions that were uncovered by the bureau's new supervision of the payday, debt collection and consumer reporting markets.
"For the first time at the federal level, nonbank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers," said CFPB Director Richard Cordray, unveiling the report.
"The CFPB's oversight of banks and nonbanks alike is exposing risky practices and getting results for consumers. We are pleased that our supervision program has been able to return more than $70 million to consumers in recent months," Cordray added. The CFPB gained supervisory authority over the nonbank entities under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The new report generally covers supervisory activities between November 2013 and February 2014. In the three nonbank markets highlighted, examiners found that many companies had "systemic flaws" in their compliance management systems, such as consistently failing to have a system in place to track and resolve consumer complaints.
In the payday lending area, the CFPB report found:
  • Lenders deceiving consumers to collect debt;
  • Lenders illegally harassing borrowers and visiting consumers at work; and
  • Lenders hiring third-party collectors that illegally deceive and harass consumers.
In the debt collection market, the CFPB reported:
  • Debt collectors intentionally and illegally misleading consumers about litigation;
  • Debt collectors making excessive, illegal calls to consumers; and
  • Debt collectors failing to investigate consumer credit report disputes.
The bureau said it also discovered problems at consumer reporting agencies--including companies that are popularly called credit bureaus or credit reporting companies. The CFPB said its examiners found certain agencies did not handle consumer credit report dispute documents correctly and that some agencies were encouraging consumers to file disputes online or by telephone, but then refused to accept such disputes from some consumers.
Where CFPB examiners find problems, the bureau said in a release, they alert the company to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions.
Use the resource link for more detail on the CFPB report findings.

Stabilization fund, new regulatory review discussed at NCUA meeting

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ALEXANDRIA, Va. (5/23/14)--The National Credit Union Administration held its monthly board meeting Thursday, during which it issued a notice of request to review its regulations, provided information on the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and approved an addition of underserved counties to the field of membership of a credit union in the Southwest.

The NCUA board issued a notice and request for comment to review its regulations to identify outdated, unnecessary or burdensome regulatory requirements imposed on federally insured credit unions. The agency proposes to publish 10 categories of regulations for public comment over the next two years. The NCUA will accept public comment for 90 days following publication of the notice in the Federal Register , which is expected shortly.

The notice specifically requests comments on the first two categories, "Applications and Reporting" and "Powers and Activities." The NCUA is interested in comments regarding the need and purpose of the regulations, need for statutory change, overarching approaches and flexibility of the regulatory standards, and effect on competition.

In addition, the agency is seeking comments on reporting, recordkeeping and disclosures, consistency and redundancy, clarity, and scope of rules. The agency is also seeking comments on the burden on small credit unions.

The Credit Union National Association continues to urge the NCUA to reduce regulatory burdens for credit unions. It will be publishing a regulatory call to action to solicit feedback from credit unions.

In addition, the NCUA board was briefed on the financial condition of the TCCUSF as of March 31. Since the last report, agency staff noted that the stabilization fund net position has improved by $102 million, largely due to an improvement in the financial performance of the legacy assets associated with the NCUA Guaranteed Notes program.

As previously noted by the NCUA, the agency does not intend to charge a stabilization fund assessment to federally insured credit unions in 2014. CUNA has urged the NCUA to forego any further stabilization fund assessments on credit unions.

Finally, the NCUA board approved an addition to $205 million-asset AERO FCU's field of membership of two underserved areas. The Glendale, Ariz.-based credit union will expand to 413 census tracts in Maricopa County, Ariz., and 81 census tracts in Bernalillo County, N.M.--an area which includes seven Native American reservations with virtually no financial services. The population of the total area covered by the addition is approximately two million.

House subcommittee studies patent abuses

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WASHINGTON (5/23/14)--The Federal Trade Commission (FTC), one of eight witnesses called to testify Thursday before a House Energy and Commerce subcommittee, raised issues on patent demand letters, patent assertion entities (PAEs) and other consumer protection issues.

Lois Greisman, associate director of the FTC's Division of Marketing Practices, presented testimony that patent demand letters raise broad issues about patents in the United States.

The Credit Union National Association has urged lawmakers to act to curb the patent system abuses, saying reforms are desperately needed. CUNA and the state credit union leagues have been active on every level urging lawmakers and the Obama administration address patent reform.

During Thursday's testimony before the commerce, manufacturing and trade subcommittee, Greisman said, "The commission shares this subcommittee's goal of stopping deceptive patent demand letters while respecting the rights of patent holders to assert legitimate claims, and recognizes that achieving this goal is not easy."

The testimony also included comments on a draft bill that would prohibit deceptive patent demand letters, which would grant the FTC civil penalty authority in this area. The testimony also noted that the FTC is pleased that the proposed legislation would supplement, rather than replace, their existing authority under Section Five of the FTC Act.

When it comes to PAEs, otherwise known as patent "trolls," the testimony cited a study from the Executive Office of the President that found that suits brought by PAEs have increased to 62% of all infringement suits from 29% two years ago, and that this may have "a negative impact on innovation and economic growth."

The FTC is currently conducting a study to shed further light on practices of PAEs beyond litigation, to include an assessment of how PAE activity affects competition and innovation.

Use the resource link for more information.

Three CUNA-backed relief bills pass committee

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WASHINGTON (5/23/14)--Three credit union relief bills were passed by the House Financial Services Committee Thursday, part of a markup session continued from May 7.

The bills are:
  • H.R. 2673, the Portfolio Lending and Mortgage Access Act, introduced by Rep. Andy Barr (R-Ky.), would treat mortgage loans held in portfolio as qualified mortgages. It passed 36-23.
  • H.R. 4466, the Financial Regulatory Clarity Act of 2014, introduced by Reps. Shelley Moore Capito (R-W.Va.) and Gregory Meeks (D-N.Y.), would require financial regulators to determine whether new regulations are duplicative or inconsistent with existing federal regulations. It passed 34-25.
  • H.R. 4521, the Community Institution Mortgage Relief Act, introduced by Rep. Blaine Luetkemeyer (R-Mo.), would exempt credit unions and other lenders under $10 billion from certain Real Estate Settlement Procedures Act (RESPA) escrow requirements and exempt mortgage servicers servicing fewer than 20,000 loans from certain RESPA servicing requirements. It passed 43-16.
The Credit Union National Association sent letters of support for all three bills.
"These bills are small but important steps towards addressing the crisis of creeping complexity with respect to regulatory burden," said Ryan Donovan, CUNA's senior vice president of legislative affairs, told Housing Wire Thursday. "Credit unions appreciate the work of the sponsors and we look forward to seeing these bills come up for a vote on the House floor as soon as possible."

NCUA begins to assess penalties for late filers

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ALEXANDRIA, Va. (5/23/14)--The National Credit Union Administration has begun the process of assessing civil money penalties to 104 credit unions that filed 2014 first-quarter call reports late. The number of late filers is down 80% from the previous quarter.

"The goal is full compliance," NCUA Chair Debbie Matz said. "More credit unions filed their Call Reports in a timely fashion, but 104 late filers is still far too many. It was particularly troubling that most of the credit unions that filed late for the first quarter had not done so the previous quarter, so they came in late even after NCUA brought this issue to their attention and announced plans for assessing penalties."
Of the 104 credit unions that filed call reports late for the first quarter of 2014, 85 had been on time the previous quarter, and 93 of them were credit unions with assets of less than $50 million. For the last quarter of 2013, 561 credit unions failed to file on time. Credit unions that filed late in that quarter received a warning letter from the agency.
Credit unions that filed first-quarter call reports late will receive letters from the agency describing the penalties the agency is planning to assess. NCUA is reviewing each late filing to determine the assessments and whether or not there are any mitigating factors.
Matz sent a Letter to Credit Unions (14-CU-03) in January, advising that the agency would, beginning with the first-quarter 2014 call reports, impose civil money penalties on credit unions that file late as a deterrent against late filing.
Penalties would be assessed per day according to ranges set out in the Federal Credit Union Act and based on a credit union's asset size and the violation. NCUA will also consider mitigating factors such as a credit union's filing history and other circumstances, such as a natural disaster, that prevented timely filing.
Use the resource link for more information.