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NEW: NCUA Delineates Concerns With FASB Credit Impairment Plan

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ALEXANDRIA, Va. (5/31/13, UPDATED 5:30 p.m. ET)--National Credit Union Administration Chairman Debbie Matz urged the Financial Accounting Standards Board (FASB) to strongly consider how proposed credit impairment recognition changes could impact small- and medium-sized credit unions, and their ability to serve members of modest means, in a Friday letter to the board.
 
Matz said the compliance costs that this proposal could create are a particular concern for the agency. The NCUA also has safety and soundness concerns regarding the proposal, she added.
 
FASB has proposed an accounting standards update regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions. The proposed model would utilize a single "expected loss" measurement for the recognition of credit losses. It would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an "incurred loss" approach.
 
Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.

The Credit Union National Association welcomed the NCUA's letter to FASB. Earlier this week CUNA urged FASB to drop its proposal, calling it "the most critical regulatory concern credit unions have faced in quite some time, including rules or proposals that have been issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act."

The Monday issue of CUNA's News Now will provide more detail on the NCUA letter.

CU Loan, Membership Growth Strong In First Quarter

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ALEXANDRIA, Va. (5/30/13)--The National Credit Union Administration released figures Thursday that claim the fastest first-quarter loan growth for federally insured credit unions in five years, as well as dramatic membership growth of more than 800,000 new members.

To put the membership growth into perspective, Credit Union National Association figures show it to be the strongest quarter in credit union history.

CUNA President/CEO Bill Cheney said the membership numbers reflect "a real cultural shift that is taking place."

"Not only do credit unions generally offer better rates and lower fees, they have powerful appeal in today's environment where so many people are put off by big conglomerates and are turning instead to locally based, community-oriented businesses. 

"Credit unions, as cooperatives owned by the people they serve, embody those traits, and consumers are flocking to them in huge numbers.  Today new tools like our consumer web site, www.aSmarterChoice.org, make it easier than ever for consumers to find a credit union they can join," he added.

The NCUA also reported a decline in delinquencies and charge-offs in the first quarter of 2013, and said the data reflect "continuing overall improvement in the credit union industry's performance."

"As the economic recovery continues, American families are regaining their financial footing and so are federally insured credit unions," NCUA Chair Debbie Matz said. During the first quarter, credit unions closed on $600 billion in total loans and, with the membership growth, reached 94.6 million members.

The delinquency ratio of federally insured credit unions declined, dropping 14 basis points (bp) to 1.02%. Net charge-off ratios also dropped significantly by 12 bp, to 0.61%. The agency noted that the declines reflect significant improvement from the highs of 1.84% for delinquencies and 1.21% for charge-offs reached in 2009.

Federally insured credit unions reported net income of nearly $2.2 billion for the quarter, slightly above the industry's results in the last quarter of 2012. The industry's return-on-average-assets ratio fell by 3 bp but remained healthy at 83 bp.

Mike Schenk, CUNA vice president of economics and statistics, said of the credit union results, "As the economy and labor markets continue to improve, we fully expect credit union operating results overall to revert to the norm within the next year or so."

"However, that being said, we do believe that credit union bottom line results--net income as a percentage of average assets--will continue to reflect some of the tough headwinds in the economy.  For instance, we do not expect to see return on assets return to the 1% benchmark for the remaining 18 months of our current economic forecast."

Schenk added that CUNA expects to see loan demand remain high this year--driven by pent-up mortgage and auto loan demand.  Increases in mortgage loan activity are likely to shift from refinance to purchase requests, but to remain strong.

"Auto lending has been strong and people will continue the trend that has been building over the last couple of quarters and keep demand high," Schenk said, adding that credit unions are likely to benefit from much of the demand because of their superior rates, compared to banks.

"Credit union auto loan rates are currently about a point below bank rates. An average borrower could save about $1,000 with a credit union used auto loan at this time," he added.

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

New: NCUA Inspector General DeSarno To Retire Today

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ALEXANDRIA, Va. (5/31/13, UPDATED 3:47 P.M. ET)--National Credit Union Administration Inspector General William DeSarno will retire today after nearly 45 years of public service,  NCUA Chair Debbie Matz announced this afternoon.

James Hagen, the agency's current deputy Inspector General for Audit, will assume the Inspector General's position effective June 1.

DeSarno joined NCUA in 1997 and became the agency's Inspector General in 2005. He also has served as assistant inspector general for audits and deputy inspector general. DeSarno was the first to establish an Office of the Inspector General strategic plan, and also is known for having been involved in all aspects of his office, including planning, budget, staffing and structure.

Prior to joining NCUA, DeSarno served seven years with the U.S. Treasury Department's Inspector General's office and 18 years with the General Accounting Office, accumulating more than 14 years of management experience and more 20 years of experience supervising auditors. His government career began in the U.S. Army, including service in Vietnam.

See News Now Monday for more.

Final Garnishment Rule Is Out, Clarifies Proposal

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WASHINGTON (5/31/13)--As of June 28, a new final rule issued by the U.S. Treasury Department and several other federal agencies will establish procedures that credit unions must follow when they receive a garnishment order against an account holder who receives certain federal benefit payments by direct deposit.

The rule requires financial institutions that receive such a garnishment order to determine the sum of the federal benefit payments deposited to the account during a two-month period, and then to provide the account holder access to funds equal to that amount or to the current balance of the account, whichever is lower.

Within three business days of completing the account review, the financial institution must send a notice to the account holder informing that a garnishment order has been received, and provide a succinct explanation of garnishment, and include other information about the member's or customer's rights.  However, the final rule was revised to only require a notice to a member in cases where there are funds in the account in excess of the protected amount.

Credit unions have been complying with an interim final rule since May 1, 2011 and this final rule clarifies several issues. For instance, the issuing agencies continue to believe that financial institutions should not be permitted to collect a fee from the protected amount.  However, they did amend the rule to provide financial institutions with an opportunity, for five days following the account review, to impose a garnishment fee in the event that non-protected funds become available following the account review.

Also, the definition of "garnishment order" was revised to include orders or levies issued by a state or state agency or municipality. Levies issued by state revenue departments are now clearly subject to the rule.

For more on the garnishment rule, access the Federal Register document via the resource link below.

Sunset Extended For Two Federal Loan Mod Programs

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WASHINGTON (5/31/13)--Two government programs intended to keep troubled borrowers in their homes have been extended through 2015.

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to extend the Home Affordable Modification Program (HAMP) beyond its scheduled sunset at the end of this year and the streamlined modification initiative beyond its August 2015 sunset.

HAMP is designed to help homeowners keep their loans current, or  those who are already behind on their mortgage,  by reducing their  monthly payments. The streamlined modification initiative, which was launched by FHFA on March 27, gives borrowers who are at least 90 days late another path to avoid foreclosure and lower their monthly payments without requiring financial or hardship documentation.

The FHFA announcement followed a similar one earlier in the day from the U.S.  Treasury Department and the U.S. Department of Housing and Urban Development that extended HAMP for non-Fannie Mae and Freddie Mac loans. FHFA's directives make the extension applicable to loans owned or guaranteed by Fannie Mae and Freddie Mac.

The FHFA reported that since the first full quarter in conservatorship, which was the fourth quarter of 2008,  Fannie Mae and Freddie Mac have completed more than 2.7 million foreclosure prevention actions. Approximately half of these actions have been permanent loan modifications, including more than 435,000 permanent HAMP modifications.

CUNA Seeks Comment On NCUA Derivatives Plan

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WASHINGTON (5/31/13)--The Credit Union National Association is asking credit unions to comment on all aspects of a National Credit Union Administration proposal to allow well-run federal credit unions to use simple derivatives to hedge against interest rate risks (IRR). The request for comments is part of CUNA's overall review of the proposal.

Approved for comment at its May open board meeting, the NCUA  plan would allow only well-managed credit unions with $250 million or more in assets, and which have appropriate expertise, to apply for an agency derivatives investment program. Swaps and caps will be the only approved investments, the NCUA said. In addition to application costs, the proposal says fees will be charged to cover costs related to application processing and supervision of the program.

The NCUA estimated that 75 to 150 credit unions would apply for derivatives authority within the first two years of the program. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.

While it considers it a positive that the NCUA is considering permitting eligible credit unions to use simple derivatives to hedge against IRR, CUNA has said that credit unions have given initial feedback that  voice some concerns with the proposal.  The concerns include overly restrictive limits, the use of third-parties to help meet requirements and the proposed fee structure.

Use the resource link below to read CUNA's comprehensive Comment Call. NCUA is accepting public comments until July 2; CUNA requests comment by June 22.

Free Video Details NCUA Services To Small CUs

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 ALEXANDRIA, Va. (5/31/13)--A new video from the National Credit Union Administration showcases the programs of its Office of Small Credit Union Initiatives (OSCUI) that help small and low-income designated credit unions meet the changing needs of their members and communities.

"This new video will help small and low-income credit unions find and access the services and funding that NCUA provides," NCUA Chair Debbie Matz explains in an announcement. "We recognize that small and low-income designated credit unions are important to their members and their local communities. So, NCUA's OSCUI is working to ensure that viable credit unions can continue to survive and thrive."

The video is free and eight minutes long and called "Navigating for You."  It provides an overview of OSCUI's training and consulting services, the NCUA's grant and loan programs, and its strategic partnerships and outreach initiatives.

To read more about OSCUI's services and to access the video, use the resource link.

Also available to credit unions, the NCUA has made an audio recording of its 90-minute webinar, "Driving the Bottom Line: Results through Marketing," available online. During the webinar, more than 700 listened in as Sandi Carangi, director of Credit Union Marketing Services at the Pennsylvania Credit Union Association, and Gustavo Gruber, vice president of Coopera Consulting Inc., discussed marketing strategies to help credit unions improve outreach to current and potential members.

CFPB Files Consent Order Against Debt-Relief Company

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WASHINGTON (5/31/13)--A Florida debt-relief company is the subject of a complaint filed Thursday by the Consumer Financial Protection Bureau that charges the operation with misleading consumers across the country and charging "illegal fees" for their services.

The bureau plans to submit a proposed consent order that, if approved by the court, would halt the operations of the American Debt Settlement Solutions Inc. (ADSS),  prevent the company and its owner, Michael DiPanni, from providing debt-relief services in the future, and impose a $15,000 civil penalty fine.

"Today we are taking action to halt a debt-relief company we believe has been preying on financially vulnerable consumers," said CFPB Director Richard Cordray. "Consumers struggling to pay off a debt are among the most at risk and deserve better. We will continue to crack down on this type of harmful behavior."

Credit Union National Association Deputy General Counsel Mary Dunn commended the agency's action. "We are pleased that the agency is utilizing its many talents to target what appears to be abusive practices. This is the real value of the agency," she said.

The CFPB said in a release that its investigation found that ADSS and DiPanni "routinely charged consumers illegal upfront fees for debt-relief services that rarely, if ever, materialized."  The CFPB alleges the company charged approximately $500,000 in fees to hundreds of consumers in multiple states. The proposed consent order would award a judgment against the company of approximately $500,000, which would be suspended based on the company's inability to pay. (Use the resource link to read further allegations against the company and its owner.)

Earlier this month, the CFPB filed a complaint against two debt-relief providers, Mission Settlement Agency and Premier Consultant Group LLC, which would be made to halt their current practices, repay impacted customers and give up allegedly ill-gotten gains.

"These wolves in sheep's clothing take money from consumers who are already struggling to pay their bills, falsely promising them help while really making their problems worse," Cordray said at the time.

NEW: CFPB Adds State-search Capacity To Complaints Database

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WASHINGTON (5/31/13, UPDATED 10:45 a.m. ET)--The Consumer Financial Protection Bureau (CFPB) announced this morning that it has expanded its Consumer Complaint Database to include state-by-state information and also has added complaints about money transfers and credit reporting to the database.

"This data puts valuable information in the hands of consumers to help them understand what is happening in their states," said CFPB Director Richard Cordray. "And by adding credit reporting and money transfer complaints to the Consumer Complaint Database, we are making these important markets more transparent and accountable to all consumers."

The CFPB said its database has gone from logging nearly 90,000 complaints on credit cards, mortgages, student loans, bank accounts and services, and other consumer loans, like auto loans in March to 113,000 complaints today. The live database updates nightly.

While credit unions are not likely be the subject of a sizable number of consumer complaints, the Credit Union National Association has expressed concern that the public data release could have unintended consequences and has worked with the bureau to address concerns.

CUNA has warned that sensitive or confidential business or consumer information could be inadvertently disclosed when consumer complaints are filed in the database. "The bureau should take steps to minimize privacy risks and other unintended consequences," CUNA has said in a series of comment letters.

Use the resource link below to visit the expanded database and read News Now Monday for more on this story.