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NCUA prohibits embezzler from future CU work

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ALEXANDRIA, Va. (6/1/12)--Former SELCO Community CU employee Lenora Jane Colburn has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following her conviction on embezzlement charges.

Colburn, who recently managed a branch of the Oregon credit union and had served the credit union in various capacities since 1986, stole from the credit union to support a gambling habit, The Register-Guard reported.

The former credit union employee has been sentenced to an unspecified prison term and five years of supervised release. She will pay $146,583.64 in restitution.

SELCO has also sued Colburn, alleging breach of contract. The credit union has sought around $82,000 in damages in that suit, according to The Register-Guard.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Ability-to-repay mortgage rules delayed by CFPB

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WASHINGTON (6/1/12)--The Consumer Financial Protection Bureau (CFPB) has delayed the release of a final version of its ability-to-repay mortgage rule until later this year, and is asking for public comment on new data that could change how the agency designs the final rule.

Under the still developing rule, mortgage originators would be required to consider a homebuyers ability to repay their loan before a loan could be offered. The ability-to-repay rule was scheduled to be released as a final version in July, alongside a number of other CFPB mortgage disclosure and rule changes.

However, the CFPB said it decided to revisit elements of its ability-to-repay rule after the Federal Housing Finance Agency provided information on the performance of loans purchased or guaranteed by Fannie Mae and Freddie Mac between 1997 and 2011. The CFPB said it has also obtained data on other securitized mortgage loans.

This mortgage information can be used for a variety of analyses, such as modeling the relationship between ability to repay and variables such as consumers' ratios of debt to income, the CFPB said.

CFPB Director Richard Cordray in a release said the agency is "committed to gathering solid data to inform this important rule.  This notice gives the public an opportunity to comment on the information we have received so far, as well as an opportunity to submit additional data," he added.

Credit unions and other interested parties can comment on the new data and provide their own information on similar mortgage loans.

The CFPB emphasized that it is only accepting public comment on the new data, and is not accepting comment on the ability-to-repay rule itself. The agency will accept public comment until July 9.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA will be working with state credit union leagues, the CUNA Consumer Protection Subcommittee and the CUNA Lending Council to determine what further information could be provided to the CFPB to ensure the impact of the final rule is as minimal as possible on credit union operations.

Revised mortgage applications and mortgage loan closing documents and rules regulating mortgage origination points and fees and addressing mortgage loan originators' qualifications and compensation are being developed by the CFPB, and are set to be released this summer.

NCUA CUNA advise CUs on hurricane season

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WASHINGTON (6/1/12)--With the National Weather Service's National Hurricane Preparedness Week continuing until June 2, and the Atlantic Hurricane Season officially starting today, the National Credit Union Administration (NCUA) has reminded credit unions to "hope for the best, but prepare for the worst."

The National Oceanic and Atmospheric Administration's (NOAA) Jane Lubchenco said this Atlantic hurricane season is expected to be "less active" than those of recent years. NOAA's Climate Prediction Center said atmospheric and oceanic conditions favor a near-normal Atlantic hurricane season, with a 70% chance of nine to 15 named storms. Four to eight of those storms could become hurricanes, and one to three of those hurricanes could become so-called "major storms," with top winds of 111 miles per hour or higher. "But regardless of the outlook, it's vital for anyone living or vacationing in hurricane-prone locations to be prepared," Lubchenco said.

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Two named storms, Alberto and Beryl, have already appeared in the Atlantic, but neither of those storms reached hurricane strength.

The NCUA has consistently urged all federally insured credit unions to review their disaster preparedness and response plans in preparation for the 2012 hurricane season and other potential diasasters, agency public affairs specialist John Zimmerman said Thursday.

The NCUA has suggested that credit unions:

  • Implement pre-disaster actions to ensure a constant state of readiness and take steps to safeguard assets and vital records if an early warning is received;
  • Communicate disaster preparedness and response efforts before, during, and after an emergency to keep members, volunteers, employees, and regulators fully aware of the situation;
  • Utilize a cross-section of people to develop, test, and implement disaster preparedness and response plans;
  • Ensure back-ups are available for not only data but also personnel, worksites, equipment, vendors, and other resources; and
  • Treat disaster preparedness and response plans as "living documents" to be updated as circumstance change.
Disaster preparation resources are also available through the Federal Financial Institutions Examination Council and the federal government's Ready.gov website, the NCUA noted.

The Credit Union National Association (CUNA) also offers comprehensive disaster preparedness materials, including a checklist that asks credit unions if they have alternate plans to serve their members' needs if their conventional cash source is cut off, if they have the resources needed to keep their credit union open in the event of a power outage, and if they have the ability to deal with short-term relocation, if needed.

The CUNA disaster preparedness page also links to CUNA Strategic Services (CSS), which offers key products and services to assist credit unions in the event a disaster. CSS partner Agility Recovery provides disaster recovery services to credit unions across the country, and that CSS partner will team up with the U.S. Small Business Administration (SBA) to advise business leaders on how to manage crisis situations in a June 12 webinar. Agility and the SBA have also collaborated to develop a disaster preparedness website, preparemybusiness.org, and held a May 29 webinar that addressed hurricane-specific preparations.

CUAid, a natural disaster relief program administered by the National Credit Union Foundation and state credit union leagues, also remains active. The program raises funds through donations from the credit union community, and helps credit union employees, volunteers and members who have suffered unrecoverable losses. CU Aid is collecting donations at this time.

For more on CUNA's disaster preparedness resources, click the link.

Ex-bank customers save at CUs CUNA reminds

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WASHINGTON (6/1/12)--A recent Consumers Union study found that some big banks charge a fee even when an accountholder tries to avoid big bank bank fees by shifting their money away to a smaller institution. The Credit Union National Association (CUNA) took the  opportunity to remind that consumers save more than $6 billion per year in better rates and lower fees by choosing credit unions over banks.

Consumers Union publishes Consumer Reports Magazine, and also operates as a consumer public advocacy group.

Noting that "public outrage over unfair bank practices and rising fees has prompted more and more consumers to consider switching to new financial institutions in search of better deals," the publisher and consumer advocacy organization surveyed bank customers to see why some have remained with their bank. Cost and time constraints were the dominant factors, the survey found.

Overall, closing an account at one of the 10 largest banks in the U.S. could cost as much as $55. The report did not examine fee structures beyond those ten banks.

Consumers Union urged customers that are unhappy with their banks to vote with their dollars, and switch accounts. The consumer group provided several tips for consumers looking to transfer their accounts, including:

  • Opening their new account before closing the existing account;
  • Making a list of all automatic deposits and withdrawals that go into and are taken out of their existing account;
  • Rerouting paychecks into their new account; and
  • Keeping a small amount of funds in their existing account, at least for a short amount of time.
Consumer anger over high bank fees helped drive an increase in credit union membership in 2011 that has carried into 2012, as CUNA statistics showed credit unions gained half a million new members in March, bringing total membership to 95.2 million. The growth spurt indicates the momentum credit unions gained leading up to Nov. 5's  Bank Transfer Day activities is alive and well five months after that  event, and CUNA said credit unions should continue to make the most of that momentum. (See related May 9 News Now story: Member growth spurt: Half a million in March)

For more on the Consumers Union report, use the resource link.

Inside Washington (05/31/2012)

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  • WASHINGTON (6/1/12)--A top economic adviser to Mitt Romney said the Republican presidential candidate will soon offer detailed proposals for health care and financial regulation. Romney's adviser, Glenn Hubbard, told The Wall Street Journal the former Massachusetts governor will offer voters a clear distinction from President Barack Obama's health care and financial regulatory agenda. Among the changes Romney would propose are: replacing the process for winding down failing financial institutions that was created as part of the Dodd-Frank Act; moving or dismantling the Consumer Financial Protection Bureau; and winding down the mortgages and securities in the portfolios at Fannie Mae and Freddie Mac. Romney's budget goals include reducing government spending to 20% of gross domestic product by the end of his first term …

Some CU-backed candidates face runoffs

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WASHINGTON (5/31/12)--Two credit union-backed candidates will face U.S. Senate and House primary runoffs after their Tuesday Texas primary contests failed to declare clear winners.

One candidate, Lieutenant Governor David Dewhurst (R), will face Republican opponent Ted Cruz in a two-man runoff election on July 31. Dewhurst, who was endorsed by the Texas Credit Union League and has also received support from the Credit Union Legislative Action Council (CULAC), received 45% of the primary vote, but did not win the more than 50% of the vote needed to win the nomination outright. Cruz tallied 34% of all votes cast in the Republican primary.

The winner of that primary contest is expected to win the Senate seat of the retiring Sen. Kay Bailey Hutchison (R), as Texas has not had a Democratic senator in office since 1993. The Texas Democratic primary vote for this Senate contest will also be subject to a runoff vote.

In the House primary, CULAC-backed Marc Veasey (D), a current Texas state representative, received 36.7% of the total primary vote. Veasey will take part in a runoff election against Domingo Garcia (D), who received 24.9% of votes cast.

The runoff winner will take on a to-be-named Republican opponent for the state's newly created 33rd congressional district. That seat represents largely democratic areas of the Dallas-Fort Worth area.

Credit union candidates saw mixed results in other Texas races. Rep. Silvestre Reyes (D), an eight-term House member who was also backed by CULAC, lost his primary contest to former El Paso City Councilman Beto O'Rourke (D), who won with 50.5% of the total vote. O'Rourke will face Republican nominee Barbara Carrasco in November.

Another CULAC-backed candidate, Texas State Senator Michael Jackson (R), came in third in Tuesday's 36th congressional district Republican primary with 19.7% of the vote, and will not compete in the Republican runoff for that nomination. Steve Stockman and Stephen Takach, who received 21.7% and 22.4% of the total votes, will compete for that district's Republican nomination. The winner of that runoff is expected to win the House seat, as there is no Democratic candidate at this time.

The presidency, congressional seats, and state and local positions are all at stake in 2012, and the Credit Union National Association (CUNA), CULAC and state credit union leagues plan to work with credit union friendly candidates ahead of their general election contests.

Two CU-backed candidates face runoffs

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WASHINGTON (5/31/12)--Two credit union-backed candidates will face U.S. Senate and House primary runoffs after their Tuesday Texas primary contests failed to decide clear winners.

One of the candidates candidate, current Lieutenant Governor David Dewhurst (R), will face Republican opponent Ted Cruz in a two-man runoff election on July 31 to determine who will run as the Republican candidate for a Senate seat.

Although Dewhurst, who was endorsed by the Texas Credit Union League and also received support from the Credit Union Legislative Action Council (CULAC), received 45% of the primary vote, he needed to win more than 50% of the vote to be declared the winner. His opponent, Cruz, tallied 34% of all votes cast in the Republican primary.

The Texas Democratic primary vote for this Senate contest will also be subject to a runoff vote. The winner of the Republican  runoff  is expected to win the Senate seat of the retiring Sen. Kay Bailey Hutchison (R) as Texas has not had a Democratic senator in office since 1993.

In the U.S. House race, CULAC-backed Marc Veasey (D), a current Texas state representative, received 36.7% of the total primary vote. Domingo Garcia (D) also vied for the Democratic nomination, receiving 24.9% of the vote. Veasey and Garcia will face off in a runoff election against later this year.

The runoff winner will take on a to-be-named Republican opponent for the state's newly created 33rd congressional district. That seat represents largely democratic areas of the Dallas-Fort Worth area.

Credit union candidates saw mixed results in other Texas races. Rep. Silvestre Reyes (D), an eight-term House member who was also backed by CULAC, lost his primary contest to former El Paso City Councilman Beto O'Rourke (D), who won with 50.5% of the total vote. O'Rourke will face Republican nominee Barbara Carrasco in November.

Another CULAC-backed candidate, Texas State Senator Michael Jackson (R), came in third in Tuesday's 36th congressional district Republican primary with 19.7% of the vote.

Only the top two contenders will compete in the runoff for that nomination. Steve Stockman and Stephen Takach, who received 21.7% and 22.4% of the total votes, will compete for that district's Republican nomination. The winner of that runoff is expected to win the House seat, as there is no Democratic candidate at this time.

The presidency, congressional seats, and state and local positions are all at stake in 2012, and the Credit Union National Association (CUNA), CULAC and state credit union leagues plan to work with credit union friendly candidates ahead of their general election contests.

60-day NFIP extension awaits presidents signature

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WASHINGTON (5/31/12)--Legislation that would extend the National Flood Insurance Program (NFIP) for 60 days needs only President Barack Obama's signature to become law after the U.S. House passed the extension Wednesday afternoon.

The House bill, H.R. 5740, passed on a 402 to 18 vote. A Senate version of the 60-day extension legislation passed last week.

The program is set to expire today.

Legislation that would extend the NFIP for five years has been approved in the House and by the Senate Banking Committee. House and Senate members have both called for a long-term extension of the NFIP program, and for aspects of the program to be reformed.

The Credit Union National Association (CUNA) has urged for the NFIP to be extended or reformed, as credit unions and other lenders cannot write certain mortgages without NFIP coverage. CUNA this year  also joined a coalition of associations representing homebuilders, the insurance industry, other financial institutions, brokers, and others to ask Congress to act on NFIP issues.

CUNA seeks CU comment on CFPB issues

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WASHINGTON (5/31/12)--The Consumer Financial Protection Bureau (CFPB) is asking mortgage and remittance industry participants to detail how new regulations could create new compliance and cost issues for those institutions, and the Credit Union National Association (CUNA) has urged credit unions to add their voices to the discussion in a new comment call.

Federal law requires the CFPB to consider the burden that potential regulatory actions could create before the agency moves forward.

The CFPB will collect information on implementation costs, ongoing compliance costs, and other associated costs that new regulations could create for credit unions and other institutions through structured interviews, focus groups, conference calls, written questionnaires, and online surveys. The agency is also seeking information on how the costs created by new regulations could impact consumers, and the products that they are offered.

CUNA in its comment call asks credit unions if they support the CFPB's information collection plans, and whether the collection plans have "practical utility." Credit unions can also suggest ways the CFPB could enhance the quality, utility, and clarity of the information collection process, and how any information reporting burdens could be minimized.

The CFPB is working on new mortgage servicing and disclosure rules as well as overdraft fee regulations, and recently announced its intention to develop new rules for prepaid cards and supervising nonbank financial services providers.

The CFPB also has rulemaking authority over the Alternative Mortgage Transaction Parity Act; the Consumer Leasing Act; the Equal Credit Opportunity Act; the Fair Credit Billing Act; the Fair Credit Reporting Act; the Fair Debt Collection Practices Act; the Federal Deposit Insurance Act; the Homeowners Protection Act; the Home Mortgage Disclosure Act; the Home Ownership and Equity Protection Act; the Real Estate Settlement Procedures Act; the SAFE Mortgage Licensing Act; the Truth in Lending Act; the Interstate Land Sale Full Disclosures Act; and the Electronic Fund Transfer Act.

CUNA will collect credit union comments on this issue until June 11. For the full comment call, use the resource link.

Compliance ESIGN and the remittance transfer rule

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WASHINGTON (5/31/12)--Combined remittance notices that are provided electronically to credit union members and others that request remittance transfers online will be required to comply with the Electronic Signatures in Global and National Commerce (ESIGN) Act, Credit Union National Association (CUNA) Director of Compliance Information Valerie Moss said in a recent Comp Blog post.

These requirements fall under the Consumer Financial Protection Bureau's Regulation E remittance rule, which goes into effect on Feb. 7, 2013.

ESIGN imposes special requirements on businesses that use electronic records or signatures in consumer transactions, and requires certain disclosures to be provided to consumers before an electronic document can be "signed" online or an electronic transaction can be completed.

Moss in the blog post noted that when a sender electronically requests a remittance transfer, the financial institution that is originating the remittance transfer may provide the pre-payment notice to the sender in electronic form without regard to ESIGN's consumer consent provisions. The receipt may also be provided in electronic form, but must comply with ESIGN.

In the case of a combined notice, Moss said, ESIGN applies since half of the disclosure would fall under those requirements.

For more of CUNA's Comp Blog, use the resource link.

Inside Washington (05/30/2012)

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  • WASHINGTON (5/31/12)--Motivated, it said, by the upcoming 100th anniversary in December 2013 of the signing of the Federal Reserve Act and the 100th anniversary of the opening of the Federal Reserve Banks in November 2014, the Federal Reserve System is preparing an "inventory of historical materials."  The system intends to create its first single point of access to all its historical records, which will include documents, photographs, and audio and video recordings related to the Federal Reserve System and its leaders.  It will create Web access for materials that are currently available from a variety of sources, such as the Federal Reserve District Banks, the Fed Board of Governors and the Federal Reserve Archival System for Economic Research,  as well as websites housed at universities and other private collections. To continue to expand the inventory of materials available through a single point of online access, the Fed is asking historians, scholars and other members of the public to identify additional sources of Federal Reserve history  …
  • WASHINGTON (5/31/12)--Rep. Barney Frank (D-Mass.) announced yesterday that he has introduced a bill to prevent officers, directors and employees of financial firms from purchasing insurance that would keep them from having to pay a compensation "clawback" or a civil penalty from their personal assets when their actions result in harm to their companies. Reps. Henry Waxman (D-Calif.), ranking member of the House Committee on Energy and Commerce, and Collin Peterson (D-Minn.), ranking member of the Committee on Agriculture, are original co-sponsors of the Executive Compensation Clawback Full Enforcement Act of 2012, which would require any officer, director or employee of a financial firm who is required under a federal financial regulatory law to repay previously earned compensation or to pay a civil penalty to be personally liable for the amounts owed …
  • WASHINGTON (5/31/12)--Federal regulators are expected to reduce the 20% down payment required from borrowers for mortgage lenders to be exempt from holding added credit risk after securitization of home loans. Under the rule proposed by regulators in 2011 in the Dodd-Frank Act, banks would be required to maintain 5% of the credit risk for mortgages and other loans sold to the secondary market (Housingwire May 30). The exception--known as the qualified residential mortgage--requires a minimum 20% down payment from the borrower, a reduced debt-to-income ratio and other requirements. The Consumer Financial Protection Bureau (CFPB) has been working with administration and regulatory officials to ensure the rule does not limit mortgage availability. Regulators are expected to modify restrictions in the finalized rule following the CFPB's analysis, Housingwire said …
  • WASHINGTON (5/31/12)--Jeremy C. Stein on Wednesday took the oath of office for the Federal Reserve's Board of Governors. The oath was administered by Chairman Ben S. Bernanke. President Barack Obama announced his intention to nominate Stein on Dec. 27. The Senate confirmed him on May 17. Stein was nominated to an unexpired term ending Jan. 31, 2018. The seat was vacated by the resignation of Kevin M. Warsh on April 2, 2011. Prior to his appointment to the Board, Stein was the Moise Y. Safra Professor of Economics at Harvard University, where he taught courses in finance in the undergraduate and doctorate programs. From February to July 2009, Stein served in the Obama administration as a senior adviser to the Secretary of the Treasury and on the staff of the National Economic Council …

Short NFIP extension could get House vote

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WASHINGTON (5/30/12)--Legislation that would extend the National Flood Insurance Program (NFIP) for 60 days is expected to be considered by the U.S. House today, one day before the NFIP is set to expire.

The 60-day extension was approved by the Senate last week. With House approval, the bill would just need the president's signature to extend the program for two months.

Legislation that would extend the NFIP for five years has been approved in the House and by the Senate Banking Committee. In April, Sen. David Vitter (R-La.) introduced a bill that would authorized a longer-term extension of the program, but not as long as the House bill. His bill (S. 2344) would extend the NFIP through the end of this year.

The Senate, which is out this week due to the Memorial Day district work period, is expected to consider some form of a long-term extension of the NFIP when it returns to session in June.

This week, meetings this on the House committee schedule, in the financial services area, include:

  • A Thursday House Financial Services Committee markup of the Consumer Rental Purchase Agreement Act (H.R.1588) and H.R.3128, which would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act to adjust the date on which consolidated assets are determined for purposes of exempting certain instruments of smaller institutions from capital deductions; and
  • A Friday House Financial Services capital markets subcommittee hearing entitled: "Cyber Threats to Capital Markets and Corporate Accounts."

CUNA files with ICANN for .creditunion name

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WASHINGTON (5/30/12)--The Credit Union National Association (CUNA) has submitted an application for the ".creditunion" domain name to the Internet Corporation for Assigned Names and Numbers (ICANN).

ICANN has been taking applications from individuals and groups interested in buying the rights to new "top level domain names." Domain names are the words to the right of the dot in an Internet address (URL).

ICANN said it expects thousands of applications for specific domain names to be filed by this week. The domain name applications can encompass communities of businesses or services, such as ".creditunion" or ".news," and can also be used to market specific brands or products.

The ".creditunion" top level domain, if obtained, would be available to credit unions to supplement or replace their existing Web names at a roughly estimated cost of $100-$200 annually per credit union, according to CUNA.

Approved domain names will likely go live in 2013.

CUNA President/ CEO Bill Cheney said the move to reserve a credit union-specific top-level domain "ensures this important identifier will stay in credit union hands and will allow the credit union movement to collectively take full advantage of the next stage of the Internet's development and growth."

A CUNA survey of member credit union CEOs and others found that nearly 60% of respondents favored purchasing the ".creditunion" domain name. Nearly 70% said they would create an additional ".creditunion" domain name, or move their existing Web page to a new ".creditunion" address, if the new top-level domain name is approved.

Cheney Small biz CUs keep steady push for MBLs

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WASHINGTON (5/30/12)--With the Senate still to vote on credit union member business lending legislation, credit unions and small business owners must keep up the pressure on the U.S. Congress to increase small business' access to much-needed credit by raising the MBL cap, Credit Union National Association (CUNA) President/CEO Bill Cheney said on Tuesday.

Representatives from CUNA, credit union leagues, individual credit unions, and small business owners that have worked with their credit unions have met with staff of every U.S. Senate office ahead of a potential Senate vote on member business lending cap increase legislation, and these efforts "must continue if we are to be successful," he added.

Pending Senate and House bills would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%, under certain conditions, and CUNA has estimated that this increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers.

Senate leadership remains committed to a floor vote on the MBL legislation; a voting date has not yet been determined.

Cheney and CUNA staff have also met personally with 35 senators, and have plans to meet with more in the coming weeks, Cheney said.

"CUNA will work with leagues to ensure that every senator and every representative hears from small business owners and credit unions about this bill–not just once or twice, but on a very regular basis. We need a steady stream of contacts not only in Washington, but also in every state and every congressional district across the country," he added.

To help these ongoing MBL advocacy efforts, Cheney emphasized that credit unions that lend to small businesses must reach out to those they have served and encourage them to write, call and meet with their senators or their staff.

Credit unions that do not lend to small-business owning members should reach out to their senators and representatives and let them know that it is important that more small business credit is made available, because if small businesses are successful, credit unions will be successful, he said.

For more News Now MBL coverage, use the resource links.

Inside Washington (05/29/2012)

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  • WASHINGTON (5/30/12)--The Senate Banking Committee has invited JPMorgan Chase & Co. CEO Jamie Dimon to testify before the panel on June 7, committee chairman Tim Johnson (D-S.D.) announced Friday. A JPMorgan Chase spokeswoman would not confirm Dimon's appearance on that date. Johnson had previously said he would ask Dimon to answer questions about JPMorgan's $2 billion trading loss, but no date for the invitation had been announced (American Banker May 29). "In calling for Mr. Dimon to testify, I expect him to inform the committee of the details surrounding what has been reported to be a very complex trade," Johnson said last week …
  • WASHINGTON (5/30/12)--Jerome H. Powell on Friday took the oath of office as a member of the Federal Reserve's Board of Governors. The oath was administered by Chairman Ben S. Bernanke. President Barack Obama announced his intention to nominate Powell Dec. 27, and the Senate confirmed him May 17. Powell was nominated to an unexpired term ending Jan. 31, 2014, which was vacated by the resignation of Frederic S. Mishkin on Aug. 31, 2008. Prior to his appointment to the board, Powell was a visiting scholar at the Bipartisan Policy Center in Washington, D.C., where he focused on federal and state fiscal issues. From 1997 through 2005, Powell was a partner at The Carlyle Group. He served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush, with responsibility for policy on financial institutions, the Treasury debt market and related areas …
  • WASHINGTON (5/30/12)--For the first time, a financial regulator must meet with small financial institutions before proposing any rule that would significantly impact them. The change, deemed revolutionary by some industry observers, comes as the result of a Dodd Frank Act clause that extended The Small Business Regulatory Enforcement Fairness Act (SBREFA) to include the Consumer Financial Protection Bureau (CFPB) (American Banker May 29). Previously, SBREFA applied only to the Environmental Protection Agency and the Occupational Safety and Health Administration. The new requirement gives small businesses an opportunity help the CFPB shape its rules at an early stage, said Richard Eckman, a consumer financial lawyer with the law firm Pepper Hamilton. Under the SBREFA statute, when the CFPB believes it has a rule that will have significant impact on small businesses, the agency must form a panel that includes representatives from the Small Business Administration's chief counsel for advocacy and the Office of Management and Budget's Office of Information and Regulatory Affairs …

CU theft prompts NCUA prohibition order

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ALEXANDRIA, Va. (5/30/12)--A former Capstone FCU employee, Alexander Baduria Flores, has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following his conviction on grand theft charges. Capstone is located in Aliso Viejo, Calif.

Flores was sentenced to 120 days in prison and three years of supervised probation. He will also pay an unspecified amount in restitution, according to an NCUA prohibition order released Monday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Mortgage rules are topic of CFPB-CUNA meeting

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WASHINGTON (5/29/12)—The Credit Union National Association (CUNA) has significant concerns regarding both the individual and cumulative effects that the Consumer Financial Protection Agency's planned changes to mortgage rules will have on credit unions, and CUNA continues its meetings with the agency to detail these concerns.

The CFPB is developing mortgage-related proposals in such areas as mortgage originations, mortgage servicing, appraisals, Truth in Lending Act/Real Estate Settlement Procedures Act form consolidation, changes to the Home Owners Equity Protection Act (high rate, high fee mortgages) and requirements to consider a borrower's ability to repay a mortgage loan.

Most of these proposals are expected to be issued for comment in July.

In a meeting with CFPB officials late last week, CUNA urged the bureau to consider, as it moves forward with drafting the mortgage rules, that credit unions did not cause the financial crisis and have not engaged in abusive mortgage lending practices.

As consumer-owned cooperatives, CUNA reminded, credit unions have developed programs and services that seek to meet their members' needs for affordable lending products, rather than to maximize credit unions' income from fee-based services, as many banks do.

Peter Carroll, CFPB assistant director of mortgage markets, Sean O'Mealia, CFPB fellow, and Bart Shapiro, of the CFPB's office of community banks and credit unions, met with CUNA Deputy General Counsel Mary Dunn, Jared Ihrig, CUNA regulatory counsel, and Kristina Del Vecchio, CUNA counsel for special projects.

The CFPB is empowered to exempt financial service providers from certain regulatory requirements and CUNA called on the agency to work with the credit union system and to invoke that authority as broadly as possible to minimize the impact of these rules on credit unions.

For any rules that credit unions are subject to, CUNA urged the agency to be mindful of the overall impact on credit union mortgage originators and servicers, particularly since a number of credit unions rely on vendors to provide statements and meet other compliance responsibilities.

CUNA recommended that the agency include an executive summary with every major rulemaking and to spread out the issuance of proposals and stagger effective dates of final rules as much as possible.

CUNA will be following up with CFPB on all of these issues.

CUNA meets with NCUAs Fryzel on top CU concerns

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ALEXANDRIA, Va. (5/29/12)—In a meeting with senior Credit Union National Association (CUNA) staff urging regulatory relief for credit unions, National Credit Union Administration board member Michael Fryzel indicated there are no new rules on the NCUA's horizon, except for ones already proposed, such as those addressing loan participations and credit union service organizations (CUSOs).

CUNA President/CEO Bill Cheney reiterated CUNA's concerns with both pending proposals, which the trade group has called "regulatory overkill" and urged the agency to drop or change significantly.  Both proposals would introduce unnecessary limitations, CUNA has told NCUA, which "would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated" with the governed activities.

CUNA has urged a more targeted approach for the CUSO rule than exists within the proposal's existing parameters, and Fryzel at the meeting said he wanted to see any future NCUA regulations targeted to address a specific risk or risks and rules should be written in plain English so that credit unions have a clear understanding of their responsibilities.

Fryzel encouraged CUNA and credit unions to weigh in with further ideas for regulatory relief.  He reiterated that credit unions are having a good year and while the NCUA must address any problem areas, it should not interfere with sound credit union operations.

In addition to Fryzel and Cheney, those participating in the meeting were NCUA Senior Policy Advisor Sara Vega, CUNA General Counsel Eric Richard, and CUNA Deputy General Counsel Mary Dunn.

Dunn said after the meeting that · CUNA will be following up with future meetings with Fryzel and Vega.

Use the resource links to read more on the NCUA proposals addressing loan participations and CUSOs.

Government compiles refi scam resources for servicemembers

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Washington (5/29/12)--Homeowner seeking to apply for mortgage assistance through federal programs are at risk of being targeted by a growing number of scams design to take advantage of people at a very vulnerable time in their lives and government officials are issuing a fraud alert to members of the armed services about scams focused directly at their community.  

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Consumer Financial Protection Bureau (CFPB), and the U.S. Department of the Treasury (Treasury) issued an alert last week designed to raise awareness of these scams and provide a list of resources available for more information and for assistance with mortgage-related questions and how to report fraud.

"Members of the armed services community often face unique financial challenges and are at particular risk for this type of scam," said Christy Romero, Special Inspector General at SIGTARP, in announcing the fraud alert. "SIGTARP will continue to work with the CFPB and Treasury and our other partners in law enforcement to shut down these scams and to ensure that their perpetrators are held accountable for their crimes."

Use the link below to access the available resources.

Inside Washington (05/25/2012)

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  • WASHINGTON (5/29/12)--CKE Restaurants Inc., operator of such fast-food chains as Carl's Jr. and Hardee's, joined with with Burger King, 7-Eleven, International Dairy Queen Inc., Jack in the Box Inc., Starbucks Corp., The Wendy's Co. and Auntie Annie's Inc. last week to file a "friends of the court" brief in federal court backing the retailers' debit interchange lawsuit. That suit alleges that the Federal Reserve Board adopted an unreasonably high interchange cap on debit card transaction fees when it implemented provisions of the Dodd-Frank Act (Law360 May 24). The lawsuit was filed in November 2010 by the National Retail Federation, the Food Marketing Institute, the National Association of Convenience Stores and two retailers. The retailers argue that the Fed's final rule, which basically sets a 21-cents per transaction cap, included costs not permitted by the law. The Fed has filed a motion to dismiss the case, stating its rule is reasonable and within the authority granted by Dodd-Frank. As reported in the Credit Union National Association's (CUNA) News Now on March 16, CUNA and a coalition of trade associations representing thousands of small and large financial institutions filed their own amicus brief in the case, providing financial institutions' perspective regarding the Fed's rule. The joint brief underscored that consumers have not seen any pricing benefits for products and services merchants promised when they fought for a government-set cap on what card issuers may charge for their services  …
  • WASHINGTON (5/29/12)--Fannie Mae seeks to reduce the cost of force-placed insurance, in part by preventing banks from purchasing the product. In response to reports of self-dealing and kickbacks in the force-placed insurance market, Fannie said it would replace the loans it guarantees with policies acquired from providers of its choosing (American Banker May 25). Forced-place insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer. Fannie's request for comment, released to the public on Thursday, would cut banks out of the sales process and require insurers to bid separately for other components of the force-placed business. This would reduce the potential for insurers to sell policies aggressively and to lump administrative costs into the premiums they charge ...
  • WASHINGTON (5/29/12)--The expiration of the Transaction Account Guarantee (TAG)  on Dec. 31 could initiate a reshuffling of as much as $1.3 trillion deposits (American Banker May 25). TAG is a program in which includes made investments in more than 300 banks made during the financial crisis. It provides federal backing for noninterest bearing deposits. The Dodd-Frank Act extended the unlimited coverage, but lawmakers do not appear willing to extend it again. Some community banks could be required to obtain private market coverage if the program expires, but large banks have primarily benefited from the program, according to Joshua Siegel, CEO of StoneCastle Partners, a New York fund that invests in community banks …
  • WASHINGTON (5/29/12)--A Senate Banking Committee hearing offered hope for a bipartisan compromise on mortgage refinancing legislation. Sens. Bob Corker (R-Tenn.) and Robert Menendez (D-N.J.)  indicated they had positive discussions about the bill (American Banker May 25). Corker's approval would allow the bill to pass through the committee and help it garner the 60 votes required to to pass legislation in the Senate. The legislation would make refinancing easier for millions of homeowners holding Fannie Mae and Freddie Mac mortgages. Among the changes Corker wants in the legislation is a condition that would prevent homeowners from refinancing more than once. He would also like Fannie and Freddie retain the ability to return refinanced mortgages to their originators …
  • WASHINGTON (5/29/12)--Esther George, president of the Federal Reserve Bank of Kansas City, on Thursday said bankers should be allowed to maintain seats on the boards of the 12 regional Fed banks. Her comments were made two days after Sen. Bernie Sanders (I-Vt.) introduced legislation to prohibit banking industry executives from serving as directors of the 12 Federal Reserve regional banks. "Yes, bankers should serve," George said. "They provide valuable information about the economy, credit conditions, and the payments system." The aftermath of JPMorgan Chase & Co.'s $2 billion trading loss has raised concern about Wall Street's relationship with the Federal Reserve Bank of New York. Jamie Dimon, JPMorgan's chairman and CEO serves as a board director for the New York Fed …
  • WASHINGTON (5/29/12)--The Federal Reserve Board on Thursday released action plans for Citigroup and HSBC Finance Corporation to correct deficiencies in residential mortgage loan servicing and foreclosure processing. It also released the engagement letter between Ally Financial Inc. and the independent consultant retained by Ally to review foreclosures that were in process in 2009 and 2010. Also, the Federal Reserve released a supplemental agreement with Ally to address the institution's foreclosure review obligations following the recent action by Ally's mortgage servicing subsidiaries to seek protection under the U.S. Bankruptcy Code. The action plans are required by formal enforcement actions issued by the Federal Reserve last year. The enforcement actions require the mortgage loan servicers regulated by the Federal Reserve and the parent holding companies of mortgage servicers to submit acceptable plans to improve their procedures and controls and oversight of foreclosure activities. The enforcement actions further require the mortgage servicing subsidiaries to provide appropriate remediation to borrowers who suffered financial injury as a result of errors by the servicers …
  •  WASHINGTON (5/29/12)--The Commodity Futures Trading Commission (CFTC) will hold a public roundtable on Thursday to discuss the proposed regulations to implement Section 619--commonly known as the Volcker Rule--of the Dodd-Frank Act. Section 619 contains certain prohibitions and restrictions on the ability of banking entities to engage in proprietary trading and to have certain interests in, or relationships with, a hedge fund or private equity fund. The roundtable will consist of two panels that are composed of market participants and members of the public. The first panel, starting at 9:30 a.m. ET, will discuss the various hedging provisions and requirements of the CFTC's proposed Volcker Rule. The second panel will start at 2 p.m., and discuss the market-making sections of the CFTC's proposed Volcker Rule …

Prepaid card answers sought in CFPB request for comment

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WASHINGTON (5/29/12)--Information on the costs, benefits, and risks of prepaid card use has been requested in a new Consumer Financial Protection Bureau (CFPB) Advanced Notice of Proposed Rulemaking (ANPR).

The CFPB last week announced it would begin the process of regulating prepaid cards under Regulation E, Electronic Fund Transfers. Collecting public comment on prepaid cards is the first step, and the CFPB has not said when it will begin writing new prepaid card rules. Improving the safety and transparency of prepaid cards and their providers will be two main goals of the CFPB's rulemaking effort, the agency said.

The CFPB ANPR specifically asks:

  • How prepaid cards should be defined under Reg E, and whether certain cards, such as university or health spending cards, should be included under this definition;
  • Which parts of Reg E should and should not be applied to prepaid cards;
  • How prepaid card fee disclosures could be improved for consumers;
  • How the CFPB could help consumers better compare the terms of various prepaid cards; and
  • How prepaid card contract terms are communicated to consumers that have purchased the cards.
The CFPB's prepaid card info web page provides information on prepaid card market share and other facts. (CFPB graphic)
The CFPB also asked for information on the costs and benefits that adding overdraft protections or tying savings accounts to prepaid cards could create. Some prepaid cards also claim they will help consumers build their credit, and the CFPB has asked if these claims are true, and whether or not the agency should regulate how such claims are marketed to consumers.

Current information on the prepaid card market, and how the CFPB plans to address prepaid card market issues in the future, is laid out on a new CFPB web page, entitled "What's the deal with prepaid cards?"

For that web page, and the CFPB's prepaid card ANPR, use the resource links.

N.C. CU employee wins state primary recount

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GOLDSBORO, N.C. (5/29/12)--North Carolina Community FCU, Goldsboro, N.C., employee John Bell IV (R), who was supported by the North Carolina Credit Union League (NCCUL), will move on to an N.C. State House general election contest after a recount confirmed his recent defeat of incumbent Steven LaRoque (R).

Bell, who currently serves as a sales and business development manager at North Carolina Community FCU, Goldsboro, won by a mere 39 votes. He also won the initial primary election, which took place earlier this month, but LaRoque asked for a re-count.

He will face Democrat Jim Hardison in November's general election contest for the N.C. District 10 state house seat. District 10 includes parts of Greene, Lenoir and Wayne Counties.

The NCCUL's political action committee, CUPAC, supported Bell in his primary contest, and the league in a statement said Bell's general election candidacy is "an incredible opportunity for credit unions as we could potentially have one of our own helping to represent our interests at the North Carolina General Assembly."

Credit Union National Association Vice President of Political Affairs Trey Hawkins noted that that Bell's victory was a step in the right direction. "As important as it is to elect candidates who support credit unions, it's even more encouraging to have an actual credit union person run and win," he said.

CFPB proposes nonbank supervision rule

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WASHINGTON (5/28/12)--The Consumer Financial Protection Bureau's (CFPB) proposed nonbank supervisory and notification procedures, which were unveiled late last week, would allow the agency to reach nonbanks it would not otherwise supervise, while providing "a streamlined process that is fair and efficient," CFPB Director Richard Cordray said in a release.

The Dodd-Frank Wall Street Reform Act gave the CFPB the authority to supervise any nonbank that it has reasonable cause to determine is posing a risk to consumers based on complaints or other information it receives, the agency said.

Under the proposed notification rules, the CFPB would first tell a regulated nonbank that one or more of the products it is offering may be harmful to consumers. The nonbank entity would then be given a chance to respond to the CFPB allegations, and to provide any documentation that might support its argument. Nonbanks could  also consent to CFPB regulatory actions, instead of filing a response.

Nonbanks could also petition the CFPB to terminate supervision authority over their business after two years, the CFPB said.

The CFPB defines nonbanks as companies that offer or provide consumer financial products or services, but do not have bank, thrift, or credit union charters. Mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies would meet this definition, according to the CFPB.

The Credit Union National Association (CUNA) is reviewing the nonbank proposal and will file a comment letter that, consistent with its ongoing communications with the CFPB, will urge the agency to focus its efforts on such entities that are engaging in abusive practices in the financial marketplace and take steps to alleviate regulatory burdens for credit unions. CUNA will have a particlar focus on ensuring credit union service organizations are not needlessly entangled in new regulations.

The CFPB will accept public comment on the proposed rule until July 24.

All CUs get some RegFlex

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ALEXANDRIA, Va. (5/25/12)--The enhanced management and investment rights given to some credit unions under the National Credit Union Administration's regulatory flexibility (RegFlex) program will soon be extended to the 1,770 credit unions that are not covered under the RegFlex designation after the agency approved expansion of that program on Thursday.

According to the agency, the new rule will permit all credit unions to:
  • Donate funds to the charities of their choosing;
  • Accept non-member deposits, subject to predetermined limits, from local governmental entities or other credit unions;
  • Purchase private-label commercial mortgage-related securities, subject to certain net worth constraints and safety and soundness rules;
  • Purchase whole loans from other federally insured credit unions, in some cases;
  • Enter into borrowing-repurchase transactions in which the purchased securities have maturities exceeding the maturity of the borrowing-repurchase agreement, provided the investment value does not exceed net worth and subject to certain constraints;
  • Invest in zero-coupon securities, subject to certain net worth and investment maturity limits; and
  • Use a six-year time horizon to partially occupy unimproved property that is acquired for future expansion.
"By lifting unnecessary restrictions, granting additional powers, and increasing management flexibility, this RegFlex relief expansion advances NCUA's Regulatory Modernization Initiative and complements [President Barack Obama's] efforts to ease regulatory burdens where appropriate," NCUA Chairman Debbie Matz said.

Matz said the NCUA decided to expand its RegFlex program to cover all credit unions after seeing the success of the limited RegFlex program. However, the agency noted, some of the new RegFlex authorities will be limited to well-capitalized credit unions.

The NCUA said it would lay out information on the new authorities in an easy-to-reference table format, in a bid to help credit unions more easily determine which elements of RegFlex apply to them.

The RegFlex final rule will become effective 30 days after it is published in the Federal Register.

NCUSIF equity ratio up to 1.32

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ALEXANDRIA, Va. (5/25/12)--The latest National Credit Union Share Insurance Fund report, which was unveiled at Thursday's open board meeting, reflects the positive trends the credit union system is experiencing, the Credit Union National Association noted.

National Credit Union Administration (NCUA) Chief Financial Officer Mary Ann Woodson reported that the NCUSIF's equity ratio stood at 1.32% as of March 31, 2012. If the NCUSIF's equity ratio is above its normal operating level of 1.30% at year-end the excess must be transferred to the Temporary Corporate Credit Union Stabilization Fund to repay its borrowings. However, in response to a question from NCUA Board Member Gigi Hyland, Woodson said the agency anticipates the equity ratio will be 1.30% at the end of 2012.

The NCUA also reported that there were 396 CAMEL 4 and 5 credit unions, representing 2.98% of insured shares, or approximately $23.7 billion in assets, as of March 31. This is a decline from the 409 troubled credit unions that were reported as of December 31, 2011. CAMEL 4 and 5 credit unions held 3.31% of total insured shares at that time, totaling $26.3 billion in total assets, the NCUA said.

CAMEL 3 credit unions held 15.13% of insured shares as of March 31, and those shares represented $120.3 billion in funds.

Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent approximately 18.1% of total insured shares, down from the 19.2% total reported at the end of 2011.

There have been 7 total credit union failures thus far in 2012, as compared to a total of 16 during 2011, the NCUA report said.

The Temporary Corporate Credit Union Stabilization Fund's total net position remained constant at negative $5.2 billion, and the fund recorded a net operating income of $20.8 million as of March 31, the agency said.

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

TDR rule model of collaboration CUNA NCUA

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ALEXANDRIA, Va. (5/25/12)--The National Credit Union Administration's (NCUA) new Troubled Debt Restructuring (TDR) rule, which was approved at Thursday's open board meeting, is "a model of collaboration among the agency, the Credit Union National Association (CUNA), leagues and concerned credit unions," CUNA President/CEO Bill Cheney said, and he urged the agency to use this collaborative approach in future rulemakings.

Click to view larger image NCUA Director of Examinations and Insurance Larry Fazio (center left) tells NCUA Chairman Debbie Matz (center right) that the agency soon will issue a supervisory letter to credit unions to explain elements of the new TDR rules, and train examiners on the rules. The agency will also hold separate training webinars for examiners and credit union staff. Shown to Matz's right is NCUA board member Michael Fryzel; to the chairman's left is NCUA board member Gigi Hyland. (CUNA Photo)
TDR loans, which have very specific accounting and reporting requirements, include certain loan modifications where a credit union or other lender grants a concession to a borrower and modifies the terms of a loan based on the borrower's financial situation. The financial statement notes and call report data associated with TDRs are also unique.

Under the new rules, credit unions will soon be allowed to modify TDR loans without having to immediately classify those loans as delinquent. The new TDR rules, which will go into effect 30 days after they are published in the Federal Register, will set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications. The rules also make some changes to loan status calculations, and require credit unions to to discontinue interest accrual on loans that are 90 days or more past their due date.

Credit unions will need to establish their own written policies for TDR management and loan workout arrangements, and NCUA Chairman Debbie Matz during the meeting said that credit unions will be given some freedom to design their own policies and plans.

Credit unions will need to develop new written loan workout policies by Oct. 1. Consistent with finance industry practices, credit unions will also need to discontinue interest accrual on loans that are 90 days or more past due, and establish requirements for returning such overdue loans to accrual status, the agency added.

The NCUA will revise its own call report data requirements to reflect the new TDR standards by Dec. 31.

Many credit unions have struggled to work with homeowners that cannot pay their mortgage due to financial difficulties, and Matz credited credit union trade associations and volunteers with first bringing this TDR issue to the agency's attention. Overall, she said fixing these issues was a "community effort."

The agency in its final rule adopted CUNA-recommended changes to the treatment of TDRs -- including ensuring the rule is consistent with U.S. generally accepted accounting principles--called GAAP-- and clarifying certain confusing terms.

NCUA Director of Examinations and Insurance Larry Fazio said the agency would soon issue a supervisory letter to credit unions to explain elements of the new TDR rules, and train examiners on the rules. The agency will also hold separate training webinars for examiners and credit union staff.

CUNA staff are reviewing the new TDR rule, with a particular eye on its treatment of member business loans.

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

Inside Washington (05/24/2012)

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  • WASHINGTON (5/25/12)--The Federal Reserve Board on Wednesday announced the availability of a new video that explains how borrowers who believe they were financially harmed during the mortgage foreclosure process in 2009 and 2010 can apply for a free, independent foreclosure file review. Both English and Spanish versions of the video are available for viewing on the Federal Reserve Board's website and on YouTube. The brief announcement reminds borrowers that, as part of the enforcement actions taken in April by federal banking regulatory agencies, they may be eligible to receive compensation if the independent review finds evidence of direct financial injury due to servicer error. Borrowers are eligible for a review if their primary residence was in the foreclosure process in 2009 or 2010 and their mortgage loan servicer is participating in the Independent Foreclosure Review. The list of participating servicers can be found at: www.IndependentForeclosureReview.com or at www.federalreserve.gov/consumerinfo/independent-foreclosure-review.htm. The deadline to request a foreclosure review is July 31 …
  • WASHINGTON (5/25/12)--The Senate on Thursday approved legislation that would extend the National Floor Insurance Program (NFIP), which is set to expire on May 31, until the end of July. It is uncertain if the U.S. House will schedule a vote on the 60-day extension when House members return from their district work period next week. However, the House did approve legislation that would extend the NFIP until the end of June last week. House and Senate members have both called for a long-term extension of the NFIP program, and for aspects of the program to be reformed...

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 consumerfinance.gov. "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.

GAO asks CFPB for internal control improvements

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WASHINGTON (5/23/12)--The U.S. Government Accountability Office (GAO) has recommended that the Consumer Financial Protection Bureau (CFPB) improve aspects of its own accounting policies, and identified a number of other ways the CFPB could improve its internal controls.

In its report entitled "Opportunitiers for Improvement in the Bureau of Consumer Financial Protection's Internal Controls and Accounting Procedures," the GAO recommended that CFPB Director Richard Cordray direct his CFO to:

  • finalize and approve CFPB's documented accounting policies and procedures to include requirements for thoroughly documenting all key accounting policies and procedures;
  • augment the agency's internal control review procedures to include all components of CFPB controls, including controls over financial reporting services provided to the CFPB and key laws and regulations governing the CFPB's financial reporting functions; and
  • make changes to portions of the CFPB's travel reimbursement and contractor/employee payment policies.
The GAO also recommended the CFPB establish an agency-wide information security program in accordance with Federal Information Security Management Act (FISMA) guidance.

The GAO said the weakness identified did not represent material weaknesses or significant deficiencies in relation to CFPB's financial statements, but still warrant CFPB management's attention and action.

CFPB staff said the agency concurred with the GAO findings and recommendations, and added that the CFPB is working to address the issues identified in the report. The CFPB did not, however, specifically answer how the issues would be addressed.

For the full GAO report, use the resource link.

CUs CUNA N.C. league at Durham CFPB meeting

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DURHAM, N.C. (5/23/12)—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) will be among those attending today's Consumer Financial Protection Bureau (CFPB) field hearing on prepaid cards in Durham, N.C.

CFPB Director Richard Cordray, CFPB Deputy Director Raj Date, Rep. David Price (D-N.C.), and North Carolina Attorney General Roy Cooper will speak during the hearing. A witness panel of consumer groups, industry stakeholders, and financial experts will also get the chance to speak their minds in a discussion moderated by Date.

Martin Eakes, cofounder and CEO of community investment nonprofit Self-Help, which runs branches of N.C.'s Self Help CU in that state and branches of Self Help FCU in California, will be one of the panelists.

Prepaid cards are one of the many products the CFPB is focusing its early work on, and the CFPB has accepted public comment on how best to regulate prepaid credit card firms.

CUNA Regulatory Counsel Dennis Tsang, who will be in attendance, said today's hearing will present an excellent chance for credit unions to present their views on prepaid card issues.

The field hearing is scheduled to begin at 12:00 p.m. (ET) in the Durham Convention Center. The hearing will also be webcast live on the CFPB's homepage, consumerfinance.gov.

CUs have time to be heard on overdraft issues

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WASHINGTON (5/23/12)—There is still time for credit unions that wish to share information regarding their overdraft protection programs, and overdraft transfer and marketing practices, to do so through the Credit Union National Association's (CUNA) quick 12-question survey, but they must do so by this Friday, May 25.

The CUNA survey 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 anonymous.  The responses received through the survey will be critical as CUNA develops its comments to the CFPB on overdraft protection, CUNA Assistant General Counsel Luke Martone said.

CUNA developed the survey in response to a request for information by the Consumer Financial Protection Bureau (CFPB) earlier this year when it announced that it is seeking input from financial institutions and others to help evaluate how those institutions' overdraft policies affect consumers.

The CFPB's overdraft questions are particularly focused on marketing and disclosure of overdraft protection programs and practices and on how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.

The CFPB has said it plans to use overdraft comments from consumers, the financial services industry, and other interested parties to craft new overdraft fee disclosures and rules, assist with policymaking on overdraft practices, and to prioritize the bureau's regulatory and education work. The agency will accept comment on overdraft practices until June 29.

For the CUNA survey, use the resource link.

Montgomery Co. Teachers FCU ordered to desist in three areas

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ALEXANDRIA, Va. (5/23/12)—Montgomery County Teachers FCU of Derwood, Md., was the subject of an Order to Cease and Desist issued by the National Credit Union Administration on Tuesday.

The order requires the credit union to take the following actions:

  • Comply with regulatory and supervisory requirements pursuant to Prompt Corrective Action;
  • Ensure the financial statement audit is completed and all accounts are reconciled by May 31, 2012; and
  • Address operational deficiencies and strengthen internal controls.
The credit union's officials have agreed to the terms of the order. The credit union serves nearly 59,000 members and was chartered in 1950.

Use the resource link to read the cease and desist documents.

NCUA opens applications for grants and low-rate loans

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ALEXANDRIA, Va. (5/23/12)--The National Credit Union Administration (NCUA) on Tuesday began accepting low-income credit union (LICU) applications for loans and grants under the 2012 round of the Community Development Revolving Loan Fund (CDRLF).

Eligible credit unions may apply for as much as $25,000 in grant funding and loans of as much as $300,000, the agency said. Loans exceeding $300,000 may also be approved on a case-by-case basis, the NCUA said.

Applications must be received by the agency by June 29.



The agency is offering a total of $1.3 million in grants and $11 million in low-rate loans this year. Grant funds can be used to support LICU's financial literacy, staff and board member training, internship, and tax prep assistance efforts.

According to the NCUA, loan funds may be used to:

  • expand share draft or credit card programs;
  • create partnerships with community-based service organizations and government agencies;
  • acquire, expand, or improve office space or equipment;
  • initiate or expand micro-business, education, and real-estate loan programs; and
  • offer consumer-friendly, short-term alternatives to payday loans.
NCUA Chairman Debbie Matz said LICUs "fill a crucial role by providing needed access to financial products and services for individuals of modest means," adding that the CDRLF loans and grants "are designed to provide vital assistance to low-income credit unions so they will be available to serve their members for many years to come."

Eligible credit unions may file a single application for all funding initiatives, and reimbursement requests for multiple grant initiatives can be bundled together, the NCUA said earlier this year. These changes will allow the NCUA to process grant requests more quickly, and will also speed the disbursement of grant related funds, the agency added.

For the full NCUA release, use the resource link.

Inside Washington (05/22/2012)

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  • ALEXANDRIA, Va. (5/23/12)--The National Credit Union Administration has issued a revised agenda for its May 24 closed meeting.  A second supervisory activity was added for consideration. The agenda is available here: http://www.ncua.gov/about/BoardActions/Pages/BDMtg2012.aspx ...

  • WASHINGTON (5/23/12)--James H. Freis, the director of the U.S. financial intelligence unit, was dismissed Thursday by the U.S. Treasury Department. Treasury officials had asked Freis to step down Thursday morning without explanation and Freis declined to do so, according to the May 22 issue of American Banker. When Freis refused, he was notified by e-mail of his dismissal, a source told the Banker. Although a reason for the dismissal was not provided, the source said Treasury, FinCEN's parent agency, thought the financial intelligence unit was slow to implement regulations, and that more attention should have been paid to the enforcement of international financial crimes. Freis' dismissal ends a five-year tenure in which he oversaw the drafting of the toughest anti-money laundering regulations since the passage of the U.S. Patriot Act …
  • WASHINGTON (5/23/12)--President Barack Obama used his weekly radio address to once again defend the Dodd-Frank Act. The president cited  JPMorgan Chase's $2 billion-plus loss as an illustration of  the need for reforms. He criticized congressional Republicans and  "an army of financial industry lobbyists" delaying Wall Street reform. While JPMorgan Chase could withstand the blow, U.S. taxpayers are put at risk when financial institutions experience such losses, Obama said. "That's why it's so important that members of Congress stand on the side of reform, not against it; because we can't afford to go back to an era of weak regulation and little oversight; where excessive risk-taking on Wall Street and a lack of basic oversight in Washington nearly destroyed our economy," he added. "We can't afford to go back to that brand of 'you're-on-your-own' economics. Not after the American people have worked so hard to come back from this crisis" …

iWashington Posti notes CUNA White House work

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WASHINGTON (5/22/12)—The Credit Union National Association's (CUNA) high-level work on behalf of credit unions was highlighted this week in a front-page Washington Post item on the influence of lobbying groups in Washington.

The fight to increase the credit union member business lending (MBL) cap was addressed in the Post story, as a December 2010 meeting between Obama Administration economic adviser Larry Summers, Credit Union National Association (CUNA) President/CEO Bill Cheney, and CUNA Executive Vice President John Magill was referenced.

For the full story, entitled "White House visitor logs provide window into lobbying industry," use the resource link.

Are more CUs close to CFPB oversight

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WASHINGTON (5/22/12)--Credit unions continue to make the most of the momentum created by last year's Bank Transfer Day, attracting around half a million new memberships in March, as reported earlier in News Now.  These new memberships may be moving some credit unions closer to the $10 billion-assets threshold that triggers consumer protection enforcement and supervisory authority of the Consumer Financial Protection Bureau (CFPB).

Credit unions with less than $10 billion in assets are exempt from supervision and enforcement by the CFPB

Washington's Boeing Employees CU (BECU) could soon join the list of credit unions subject to CFPB examination.  It exceeded $10 billion in assets for the quarter ended March 31.  However, BECU would need to hold more than $10 billion in assets for four consecutive quarters to come under CFPB examination authority under CFPB rules set by teh Dodd-Frank Act.

North Carolina's State Employees CU, Navy FCU, and Pentagon FCU are the only credit unions that are currently subject to CFPB examination.

Marc Shafroth, Credit Union National Association (CUNA) director of data and statistics, said BECU's recent rate of growth means that credit union would likely come under CFPB examination authority in March 2013.

SchoolsFirst FCU, Santa Ana, Calif., could also join this list in the next few years, according to Shafroth. That credit union held $9.4 billion in assets as of March, and Shafroth said it may be another year before SchoolsFirst eclipses $10 billion in assets.

Alliant CU, Chicago, Ill., may also come close to the $10 billion-asset threshold in the coming years, as that credit union held $8.4 billion in assets as of March.

CUNA continues to press the CFPB to minimize the impact of CFPB rules on credit unions where possible and appropriate.

Womens policy group NRECA back MBLs

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WASHINGTON (5/22/12)—Small business group Women Impacting Public Policy and the National Rural Electric Cooperative Association (NRECA) are two of the latest groups to join the fight to increase the credit union member business lending cap, and the Credit Union National Association (CUNA) has urged credit unions and their members to keep pressure on Congress as members of the U.S. House return to their home districts this week.

MBL increase legislation, which has been offered in both the House and Senate, has received support from several pro-business, conservative, libertarian and free-market organizations, as well as credit unions across the country. A vote on the Senate MBL legislation could come at any time, but is not expected to take place this week. (See related May 21 News Now story: CUs, small biz to keep up MBL efforts: CUNA)

Senators could, however, address some key credit union issues this week.

One such issue is the National Flood Insurance Program (NFIP), which is still scheduled to expire on May 31. Legislation that would extend the NFIP until the end of June was approved by the House last week, and could be voted on by the Senate this week. Senators are also expected to consider legislation that would extend the NFIP by five years, and, potentially, reform elements of the program, this week.

The hearing schedule this week is relatively light, with the Senate Banking Committee scheduled to hold an oversight hearing on potential changes to derivatives regulation today and a hearing on the Responsible Homeowner Refinancing Act (S. 3085) on Thursday.

The Senate will begin its Memorial Day district work period at the end of this week, and is not set to return to Washington until June 4. The House is scheduled to hold its next session on May 29.

CUNA contacts IRS on tax revocations

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WASHINGTON (5/22/12)--Concerned that another round of problems with the Internal Revenue Service's (IRS) "automatic revocation process" for federal credit unions' tax exemption is about to occur, the Credit Union National Association (CUNA) joined three other credit union groups in a bid to head off potential Form 990-T issues for credit unions.

In a letter from a law firm representing CUNA, the National Association of State Credit Union Supervisors (NASCUS), CUNA Mutual Group and the American Association of Credit Union Leagues (AACUL), the IRS was asked to confirm that steps are "being taken to prevent a significant re-occurrence of the automatic revocations for the federally-chartered credit unions filing the Form 990-T." The letter was sent by the law firm of Caplin and Drysdale, Washington, DC.

The issue arises from federal credit unions' claiming the health insurance premium tax credit. To do so, federal credit unions are required to file Form 990-T – even though, as federal credit unions, they are exempt from filing Form 990 itself.

The IRS requires Form 990 filers to disclose the names and compensation of certain key employees such as directors, their 20 highest compensated non-executive employees, any independent contractors that work for the firm, and former high ranking or key employees.

The filing of 990 forms apparently triggers a search by the IRS computer for past Form 990 filings. If none are found for the federal credit union, an exemption revocation letter is automatically sent to the credit union. "But federal credit unions are not required to file Form 990 and should not be receiving these letters," said CUNA General Counsel Eric Richard.

"It is vital that the tax agency address this issue as soon as possible, and keep such letters from going out," he added.

The IRS last year notified several state-chartered credit unions, and some federally chartered credit unions, that they would lose their tax-exempt status after their respective regulators failed to file Form 990 tax returns on their behalf.

May 15 marked the annual deadline for filing a new Form 990 for those organizations that are required to file it. "The concern is now that we will see a whole new round of erroneous revocation letters from the IRS to federal credit unions because of that filing deadline and the situation that federal credit unions find themselves in, at no fault of their own," Richard said.

Inside Washington (05/21/2012)

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  • WASHINGTON (5/22/12)--New York City's Emigrant Bank is asking Congress to pass a bill that would push back the date by which banks needed to be under $15 billion in assets to avoid the new capital requirement. The bank received a $2.3 billion advance from the Federal Home Loan Bank of New York during the financial crisis because it was concerned that its uninsured high-balance depositors might flee. The loan temporarily pushed Emigrant's total assets over $15 billion--the threshold at which banks are subject to a provision of the Dodd-Frank Act that prevents them from counting trust preferred securities as part of their Tier 1 capital. The Dodd-Frank Act set the cut-off date for the threshold Dec. 31, 2009. The bill, which is sponsored by Rep. Michael Grimm (R-N.Y.) and co-sponsored by six of other House representatives from New York, would push that deadline back by three months. Emigrant Bank, which would be the only financial institution affected by the bill, currently has $10 billion in assets …

Wausau Wis. Postal ECU assetsliabilities purchased by CoVantage CU

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ALEXANDRIA, Va. (5/21/12)--The Wisconsin Office of Credit Unions liquidated Wausau Postal Employees CU of Wausau, Friday and appointed the National Credit Union Administration (NCUA) as liquidating agent.

The NCUA and CoVantage CU immediately signed an agreement for the Antigo, Wis., to purchase and assume Wausau Postal Employees' assets, liabilities, and membership.

The new CoVantage Credit Union members will experience no interruption in services and their accounts remain federally insured by the National Credit Union Share Insurance Fund up to $250,000.

CoVantage, afull-service, federally insured, state-chartered credit union, has $1 billion in assets and more than 74,000 members. CoVantage Credit Union serves the people who live or work in Wisconsin's Brown, Clark, Florence, Forest, Langlade, Lincoln, Marathon, Menominee, Oconto, Oneida, Outagamie, Portage, Shawano, Taylor, Waupaca, and Wood counties or in Michigan's Dickinson and Iron counties.

It was Wausau Postal Employees' declining financial condition that led to its closure and subsequent purchase and assumption, according to an NCUA announcement.  At the time of liquidation, the credit union served 845 members and had $8.4 million in assets.

Chartered in 1932, Wausau Postal Employees Credit Union served all postal and federal employees and their families in the 544 and 545 zip codes.

Wausau Postal Employees CU is the fourth federally insured credit union liquidation in 2012.

Inside Washington (05/18/2012)

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  • WASHINGTON (5/21/12)--Federal Deposit Insurance Corp. inspector general Jon Rymer will temporarily run the Securities and Exchange Commission's (SEC) inspector general office while the SEC seeks a permanent successor for H. David Kotz, its former IG, American Banker (May 18) reported Friday. Rymer is expected to oversee the IG responsibilities at both agencies concurrently until a permanent SEC watchdog is found, a source said. Kotz left the SEC in January after allegations of misconduct by the office surfaced. Last week, Sen. Chuck Grassley (R-Iowa) requested more information on the allegations. "The recent turmoil at the SEC inspector general's office raises questions about how well that office is functioning," Grassley said in a statement. "Information from all sides is necessary to try to establish where things went wrong and what the agency can do to refocus its watchdog capacity" …
  • WASHINGTON (5/21/12)--The Senate Banking Committee on Thursday requested JPMorgan Chase CEO Jamie Dimon to testify under oath about the $2 billion trading loss his company suffered last week. Sen. Tim Johnson (D-S.D.) announced that Dimon would be called to testify during two hearings the committee will hold with key financial regulators to address Wall Street reform. "Our due diligence has made it clear that the Banking Committee should hear directly from JPMorgan Chase's CEO Jamie Dimon, and following our two Wall Street reform oversight hearings I plan to invite him to testify," Johnson said in a statement …
  • WASHINGTON (5/21/12)--Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) Friday sent a letter to regulators calling on them to close the "JPMorgan Loophole." Although the Dodd-Frank Act prohibits banks from proprietary trading, the regulators' proposed rule creates a new loophole that could allow proprietary trading to continue even after the law goes into effect. The loophole would likely allow Wall Street banks to continue proprietary trading by calling it "portfolio hedging" even after the Volcker Rule is finally implemented, Merkley and Levin wrote. The letter was sent to the heads of the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the Commodity Futures Trading Commission. "So long as banks have the incentives to make these types of bets and are permitted to do so, they will," Merkley and Levin wrote. "As we have learned time and time again, establishing clear, strong rules of the road is critical for the healthy functioning of markets and our economy" …
  • WASHINGTON (5/21/12)--The Senate confirmed Jeremy Stein and Jerome Powell to the Federal Reserve's Board of Governors Thursday after their nominations were delayed for months by Republicans who argued Stein and Powell would be too supportive of Chairman Ben Bernanke's economic policies. Senate Majority Leader Harry Reid (D-Nev.) used last week's news of JP Morgan Chase's $2 billion trading loss to compel the Senate to move forward with the vote and secure the required 60 votes (American Banker May 18). With the confirmations of Stein and Powell, for the first time in six years the Federal Reserve board is at  full capacity. "Jay Powell and Jeremy Stein are ready to get to work, and I'm glad that my Senate colleagues set party politics aside and approved these individuals with strong bipartisan support," said Sen. Tim Johnson (D-S.D.), Senate Banking Committee chairman …

C-and-Ds ordered for two former U.S. Central figures

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ALEXANDRIA, Va. (5/21.12)--The National Credit Union Administration (NCUA) announced that cease-and-desist orders have been filed against Francis Lee and Joseph Herbst, both formerly affiliated with  U.S. Central FCU (U.S. Central) , located in Lenexa, Kan.

The orders were one of the terms of settlements between Lee and the NCUA and Herbst and the NCUA to settle potential claims against the men stemming from the conservatorship and eventual liquidation of U.S. Central.

Both Lee and Herbst consented to the order without admitting fault. The orders require Lee and Herbst to desist from the following actions:

  • Becoming an employee of, holding any office in, or otherwise participating in any manner in the conduct of the affairs of any federally insured corporate credit union;
  •  
  • Consulting or advising any federally insured corporate credit union on any matters involving or relating to investment securities, investment policy, or investment strategy; or
  •  
  • Selling any investment securities to any federally insured corporate credit union.
NCUA enforcement orders are online at http://go.usa.gov/yiJ and can be inspected atthe NCUA's Office of General Counsel between 9 a.m. and 4 p.m. Monday through Friday.

NCUA meets GAOs loss estimate recommendations

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WASHINGTON (5/21/12)--The Government Accountability Office (GAO) has informed the National Credit Union Administration (NCUA) that the agency has satisfied GAO's recommendations that the NCUA Office of Inspector General (OIG)  review the agency's loss estimates regarding the legacy assets of some of the corporate credit unions.

In a recent report, entitled "National Credit Union Administration: Earlier Actions Are Needed to Better Address Troubled Credit Unions (GAO-12-247),"  the GAO had  recommended that the NCUA provide its OIG supporting documentation that would verify the total losses incurred from Jan. 1, 2008 to June 30, 2011.

In a letter dated May 18, the GAO noted that the federal credit union regulator had, since that report, provided its OIG the supporting documentation on the loss estimates for the Corporate Credit Union Stabilization Fund and the NCUA 2010 Financial Statement Audit for Temporary Corporate Credit Union Stabilization Fund.

"Based on the documentation provided, the OIG has concluded the loss estimates are reasonable," GAO said in its letter.

Privacy notification bill introduced in House

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WASHINGTON (5/21/12)--The Eliminate Privacy Notice Confusion Act (H.R. 5817), which is intended to cut the regulatory burden on credit unions and other financial institutions by limiting requirements on privacy notifications, was introduced on Friday and is strongly supported by the Credit Union National Association (CUNA).

The bill, which is sponsored by Rep. Blaine Leutkemeyer (R-Mo.) and cosponsored by Reps. Scott Garrett (R-N.J.) and Lynn Westmoreland (R-Ga.), states that financial institutions that provide nonpublic personal information only in accordance with the provisions of the Graham Leach Bliley Act, that do not share it with affiliates, and that have not changed their policy and practice since disclosing the policy, shall not be required to send annual privacy notifications to their members or customers.

The bill would also shield state-licensed credit unions and other financial institutions from Graham Leach Bliley disclosure requirements, provided their respective states have their own privacy regulations on the books.

CUNA President/CEO Bill Cheney commended Rep. Leutkemeyer for his leadership in introducing this regulatory relief measure. "The bill would eliminate a number of unnecessary and, quite frankly, confusing mailings that are often ignored by consumers and will reduce costs for credit unions and reduce confusion for credit union members," he added.

Cheney said CUNA looks forward to working with Rep. Leuktemeyer and the cosponsors to enact the bill.

A model privacy form, which was required by the Graham Leach Bliley Act, was developed jointly by the National Credit Union Administration and the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission in 2009.

CUs small biz to keep up MBL efforts CUNA

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WASHINGTON (5/21/12)--With members of the U.S. House returning to their home districts for the Memorial Day district work period during this week's National Small Business Week, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said it is imperative that credit unions continue to communicate the help that they could lend to a still-recovering economy if member business lending cap increase legislation were enacted.

Two bills, S. 2231, and its House counterpart, H.R. 1418, would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%. Within the first year of enactment, the increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA estimates show.

Credit unions have pushed hard to garner congressional support for these two bills, and a vote on the Senate legislation could come at any time. Members of the Senate will leave Washington next week for their own district activities,

Most recently, credit union advocates from North Carolina and South Carolina, and credit union leagues from each of those states, made the case for an MBL increase in visits to Washington as part of CUNA's Hike the Hill activities.

And the North Carolina Credit Union League (NCCUL) has had more help in recent weeks, as the North Carolina Association of Realtors (NCAR) urged Sens. Kay Hagan (D) and Richard Burr (R ) to "take a stand for small businesses" and support S. 2231. "The failure of many North Carolina banks to finance construction projects has been a source of great concern for our organization and our members," the NCAR wrote.

NCCUL Senior Vice President of Association Services Dan Schline said the support of the North Carolina Realtors and the hundreds of small business owners from across the state continues to demonstrate that MBL cap increase legislation "has broad based support."

This broad-based support is also evident on the national level, as several pro-business, conservative, libertarian and free-market organizations have stepped up to support increasing the MBL cap this year.

Raleigh, N.C.-based community development nonprofit The Support Center showed the help that community development credit unions and other community development financial institutions have given to small businesses in that state in a recent report, which found that while large banks have been pulling back from small business lending, credit unions and other community-based lenders have been stepping in to try to fill the lending gap.

"These financial institutions serve low-income communities and provide loans to the small businesses that, in many cases, have been turned away from mainstream banks," but they need additional public and private support to keep small businesses afloat, the Support Center said.

For the full Support Center report, and more on how you can contact your legislators and urge them to support increased MBL authority for credit unions, use the resource links.

TDR RegFlex final lead NCUA agenda

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ALEXANDRIA, Va. (5/18/12)--A final version of new Troubled Debt Restructuring (TDR) rules and Regulatory Flexibility (RegFlex) program changes will be the lead items on the agenda when the National Credit Union Administration holds its next open board meeting at 10 a.m. ET on May 24.

The NCUA's TDR proposal, which was released in January, would allow credit unions to modify TDR loans without having to immediately classify those loans as delinquent. Credit unions would no longer be forced to track each TDR loan's performance manually for six months. The proposal would also set consistent standards for the management of loan workout arrangements that assist borrowers, and eliminate confusion between TDRs and other loan modifications.

TDR loans, which have very specific accounting and reporting requirements, include certain loan modifications where a credit union or other lender grants a concession—often involving modification to the terms of a loan—to a borrower that it would not have otherwise provided based on the borrower's financial situation. The financial statement and call report treatment of TDRs are also unique.

The Credit Union National Association (CUNA) and leagues have urged NCUA to improve reporting and regulatory treatment for TDRs for some time, and CUNA in a recent comment letter said the NCUA's proposal represents "an important step forward in terms of guidance and reporting requirements for TDRs."

The NCUA also recently proposed eliminating the RegFlex program, and a final version of that plan is scheduled to be presented at the meeting.

Under the proposal to eliminate RegFlex, 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.

A review of the first quarter National Credit Union Share Insurance Fund will also be presented during the meeting, and the agency will also release a final Interpretive Rule and Policy Statement on supervisory committees.

This will be the first open board meeting held since March, as the agency cancelled its scheduled April board meeting.

Supervisory activities and an appeal will be addressed during the closed portion of the meeting.

For the full agenda, use the resource link.

Fed posts updated HOEPA thresholds

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WASHINGTON (5/18/12)--The Federal Reserve this week released new reference rates that lenders must use to determine if loans for certain applications received in June 2012 will be subject to the Home Ownership and Equity Protection Act (HOEPA) under the Annual Percentage Rate (APR) trigger test.

HOEPA addresses certain deceptive and unfair practices in home equity lending, according to the Federal Trade Commission. The trigger test determines which loans would be subject to additional disclosures under Section 32 of Regulation Z. Under the test, first-lien loans with an APR that exceeds the current U.S. Treasury rate for a given security by 8% or more and second-lien loans with an APR that exceeds the Treasury rate by at least 10% would be subject to Section 32 disclosures.

The reference rate chart, which is frequently updated, can be used by credit unions to find the applicable interest rate for many Treasury securities. CUNA staff said credit unions can use the yield in effect on the 15th of the month that precedes the month they received a given loan application to make their trigger test calculations.

For the chart, use the resource link.

ATM disclosure fix introduced in Senate

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WASHINGTON (5/18/12)--The Credit Union National Association (CUNA) strongly supports Sen. Mike Johanns' (R-Neb.) introduction of legislation that would ease current ATM fee disclosure regulations, which "will protect credit unions and other ATM operators from frivolous lawsuits while at the same time maintaining important consumer protections," CUNA President/CEO Bill Cheney said.

The bill, which was introduced Thursday afternoon, is believed to be similar to House legislation sponsored by Reps. Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.).

Under that legislation, ATMs would only be required to display the ATM disclosures on a screen, and ATM users would be given the choice of opting in to ATM use fees.

Current physical ATM fee disclosure notice rules, which require all ATM operators to display both a physical placard on the machine and to provide an electronic disclosure of a fee that an ATM user may incur, would be eliminated.

Johanns' legislation "is common-sense measure will reduce regulatory burden on consumer-owned credit unions, without detriment to ATM users," Cheney added.

The ATM disclosure requirements have caused issues for credit unions and other financial institutions. CUNA has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and that pictures are then taken of the ATM to show noncompliance. Some ATM users may then use this as evidence of apparent non-compliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb. CUNA recently estimated that the total number of these lawsuits could be in the hundreds.

CUNA has written in support of the House ATM disclosure legislation, and has urged the Consumer Financial Protection Bureau to use its own authority under the Dodd-Frank Wall Street Reform Act and the Electronic Fund Transfer Act to amend Regulation E and eliminate the requirement for on-machine ATM fee disclosure notices.

Short NFIP extension passes House

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WASHINGTON (5/18/12)--Legislation that would extend the National Flood Insurance Program (NFIP) until June 30 passed the U.S. House by a 402 to 18 vote yesterday, and will now move on to the Senate.

The NFIP is scheduled to lapse on May 31. In the past the program has lapsed for brief periods, and these lapses have caused significant disruption in the mortgage underwriting process for some prospective homeowners.

The one-month extension, if it passes the Senate, would give members of Congress more time to craft a long-term extension with some program reforms. A vote on the month-long extension could be held in the Senate next week.

The Senate is expected to consider legislation that would extend the NFIP by five years, and, potentially, reform elements of the program, next week. However, an agreement on the number of amendments that could be attached to the NFIP bill must be reached before a vote on the five-year Senate extension could take place, Senate Majority Leader Harry Reid (D-Nev.) has reportedly said.

House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) and other House members have urged the Senate to pass a five-year extension. Legislation that would extend the NFIP for five years has already been approved in the House and by the Senate Banking Committee, but the full Senate has not acted on the legislation.

The Credit Union National Association has urged members of Congress to extend the NFIP or reform the program.

Cheney to iHuffPoi small-biz readers Know 5 things about Capitol Hill

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WASHINGTON (5/18/12)--A new column on the Huffington Post website from Credit Union National Association (CUNA) President/CEO Bill Cheney offers small business owners five suggestions for dealing with Capitol Hill and explains them in the context of the current effort to raise the cap restricting member business lending (MBL). Huffington Post is running the column just ahead of National Small Business Week, which starts Sunday. And an excerpt from the column, including a call to on the U.S. Congress to increase the MBL cap, was picked up by the San Francisco Chronicle.

"I hope the thoughts will resonate since I really come at them from two points of view: credit union trade association CEO pushing for a bill to boost our industry's small-business lending capacity, and long-time small business advocate," Cheney wrote in the Post column. The five points about Capitol Hill he called to small businesses' attention are:

  • Everyone likes to talk about supporting small business.  But, Cheney added, the reality is the U.S. Congress is not doing enough to support small businesses.  He noted how available credit to small businesses is still lagging, even as the economy has improved. Bank lending is still falling short, while current data show the credit union approval rate for small business loans is five times that of big banks (News Now, 5/11/12 ).
  • It's not all gridlock.  Cheney recognized election year partisanship makes passage of any legislation difficult, but noted bills that appeal to both sides are still getting through. "I think Sen. Mark Udall's (D-Colo.) legislation (S.2231) to expand credit unions' small business lending authority has a strong shot of making it past a filibuster this year."  Senate Majority Leader Harry Reid (D-Nev.) has promised a floor vote in this session on Udall's bipartisan bill, which would raise the MBL cap from 12.25% of assets to 27.5% for qualifying credit unions. CUNA, the leagues, credit unions and small businesses have been lobbying intensely for passage.
  • Congress needs to hear from small business owners. Although the banking lobby is "expending vast resources" to block the MBL bill, Congress will pay heed to small business owners, Cheney said, citing the examples of several small businessmen who took part in CUNA's small business Hike the Hill earlier this year. "The good news is that members of Congress still understand that small business owners play significant roles in their districts and that credit unions have been involved in small business lending since the early 1900s," Cheney explained. "It was only in the late 1990s that our lending was restricted, at the banks' urging."
  • Talk jobs, not just numbers.  "Job creation is on every member's mind right now," the CUNA leader noted. "That's why I personally emphasize in every meeting that raising the cap on credit union small business lending would translate into 140,000 new jobs created in just year one. It's simple really:  Issue more loans to businesses, and they'll spend more on new hiring."
  • Band together.   When lobbying an issue on Capitol Hill, it is important to have like-minded allies, Cheney advised. He noted CUNA is working with more than 30 pro-small businesses organizations in support of raising the MBL cap, from the National Association of Realtors to the National Council of Textile Organizations. "We may take different positions on (some) issues, but we all agree that the Hill can do better and make more capital available to small business owners," Cheney wrote.
These points are simple and straightforward, but they matter, he added. "If small business owners want to see more credit available, they need to keep their eye on Washington as much as their local lending institutions. Sure, organizations like mine know the ins and outs and the daily machinations of the legislative process. But a small business owner really knows what it means to support a small business."

Inside Washington (05/17/2012)

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  • WASHINGTON (5/18/12)--Operational risk is a supervisory priority for the Office of the Comptroller of Currency (OCC), Thomas Curry, the agency's head, said in a speech in Washington on Wednesday. "As regulators, one of our most important jobs is to identify risk trends and bring them to the industry's attention in a timely way," Curry said. "No issues loom larger today than operational risk in all its dimensions, the manner in which all risks interact, and the importance of managing those risks in an integrated fashion across the entire enterprise." Operational risk--generally defined as the risk of loss due to failures of people, processes, systems and external events--is embedded in every activity and product of a financial institution, Curry said. That risk is heightened when systems and procedures are complex, he added. "Given the complexity of today's banking markets and the sophistication of technology that underpins it, it is no surprise that the OCC deems operational risk to be high and increasing," Curry said. Inadequate systems and controls were key factors behind the recent problems in mortgage servicing and foreclosure documentation practices, he said. "Those banks did a poor job supervising both their own internal processes and the providers to which they outsourced some of these functions, and they are paying the price for their mistakes," Curry said …
  • WASHINGTON (5/18/12)--JPMorgan Chase presents no risk of loss to depositors or to taxpayers despite a $2 billion loss last week, House Financial Services Committee Chairman Spencer Bachus (R-Ala.) during a hearing of the House financial institutions subcommittee. Noting JPMorgan Chase's net worth of $189 billion and 2011 pre-tax profits $25 billion, Bachus said the loss represents about one month of earnings for the company (American Banker May 17). Laws should not prohibit financial services companies from taking risks, Bachus suggested. However, financial institutions deemed systemically important will be subject to stricter capital requirements than smaller institutions, said Lance Auer, the Treasury Department's deputy assistant secretary for financial institutions. Otherwise, firms will have incentive to become large so they can take more risk, he added …

CUNA CU tax status allows affordable choices

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WASHINGTON (5/17/12)--Recent credit union member growth, resulting in part from last year's "Bank Transfer Day," is an indication that Americans want choices besides banks -- and the credit union tax exemption helps ensure that they will find affordable alternatives, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a letter to House Ways and Means Oversight Subcommittee Chairman Charles Boustany (R-La.).

The letter came in response to a banker request that the subcommittee hold a separate hearing on the tax status of credit unions.

In his letter to Boustany, Cheney stated that reasoning behind the credit union tax exemption remains strongly in place. "Inasmuch as there has been no change in the ownership structure of credit unions and credit unions continue to fulfill their mission, as evidenced by their growth and the substantial positive variance in benefits compared to cost, suggestions that the credit union tax status should be altered in any way should be rejected," Cheney wrote.

Cheney also provided a summary of the history of the credit union tax exemption, and a recounting of more recent events regarding the financial crisis in the nation. "Credit unions did not cause the financial crisis, and did not need a taxpayer-funded TARP bailout to survive," Cheney wrote. "One of the reasons that this has been the case is that the not-for-profit credit union ownership structure is fundamentally different than the for-profit bank ownership structure," he added.

The subcommittee on Wednesday discussed the operations of tax-exempt organizations, but the subcommittee members did not discuss the credit union tax status during that hearing.

For the full CUNA letter, use the resource link.

Vote on month-long NFIP extension delayed

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WASHINGTON (5/17/12)--After debate last night on a bill (H.R. 5740) that would extend the National Flood Insurance Program (NFIP) for 30 days, the U.S. House delayed a vote on that bill until today or tomorrow.

Speaking on the House floor yesterday in favor of the temporary extension, lead sponsor Rep. Judy Biggert (R-Ill.) noted the bill would expand private sector participation in flood insurance and allow private insurance coverage to take the place of government insurance in mortgage applications.

Biggert said this temporary NFIP extension would give the U.S. Senate 'more than enough time' to pass meaningful flood insurance reform. House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and other House members joined Biggert in urging the Senate to pass a five-year extension.

The NFIP is scheduled to lapse on May 31.

Legislation that would extend the NFIP for five years has already been approved in the House and by the Senate Banking Committee, but the full Senate has not acted on the legislation. Biggert said there is no reason the House and Senate cannot reconcile differences between their respective version of NFIP five-year extension legislation (S. 1309 and H.R. 1309) in the coming days.

Senate Majority Leader Harry Reid (D-Nev.) late Tuesday attempted to pass S. 2344, which would extend the NFIP through the end of this year, by unanimous consent, but Sen. Tom Coburn (R-Ok.) did not agree. Coburn is reportedly working on legislation that would extend the NFIP for a longer time period, perhaps as much as five years, and reform elements of the program.

The Credit Union National Association (CUNA) has urged members of the U.S. Congress to extend the NFIP or reform the program, as credit unions and other lenders cannot write certain mortgages without NFIP coverage. CUNA also recently joined a coalition of associations representing homebuilders, the insurance industry, other financial institutions, brokers, and others to ask Congress to act on NFIP issues.

CFPB briefing includes CU reps

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WASHINGTON (5/17/12)--At a briefing at the Consumer Financial Protection Bureau (CFPB) on mortgage servicing proposals, Chris McDonald, Andrews FCU president/CEO, warned regulators that proposed mortgage periodic statement requirements could create unnecessary added costs and burdens for credit unions.

McDonald, who attended the CFPB briefing at the Credit Union National Association's (CUNA) request, urged the bureau to use its statutory authority to exempt credit unions from any new mortgage servicing requirements where appropriate and permissible.

The CFPB asked CUNA to recommend representatives from credit unions with between $175 million and $1 billion in assets to attend this week's briefing and feedback session.

In addition to McDonald, Russ McAtee, Andrew's chief operating officer, and Christina Mihalik, vice president of governmental affairs for the Pennsylvania Credit Union Association, also attended at CUNA's request, as did Cosimo Manzo, vice president of mortgage finance for First Heritage Financial LLC. First Heritage is a credit union service organization that services mortgage loans for 28 credit unions. Jared Ihrig and Kristina Del Vecchio, of CUNA's regulatory affairs department, also attended.

The CFPB is working to implement provisions of the Dodd-Frank Act that mandate several protections for homeowners regarding the servicing of their mortgage loans. These include:

  •  New disclosures for mortgage loan periodic statements, notice prior to reset of adjustable rate mortgage terms, and force-placed insurance notices--all intended to provide consumers with comprehensive and comprehensible information so they can better manage their obligations and avoid unnecessary problems;
  • New requirements for timely response from servicers when a borrower complains about possible errors, and for responses that tell the borrower how the complaint was resolved and why;
  •  Prompt crediting of payments, so consumers are not wrongly penalized with late fees or other fees because a servicer did not credit their payments quickly; and
  •  Timely response to requests for payoff information, so consumers can get their balance information when they need it.
 The CFPB has indicated that it intends to issue a proposed rule to implement these new statutory requirements sometime in July, and the rules must be finalized not later than Jan. 21, 2013.

In addition to the statutory requirements, the CFPB is considering using its authority over mortgage servicers to require:

  • Information management policies and procedures;
  • Policies for early intervention for troubled or delinquent borrowers; and
  • Policies and procedures for servicers to provide continuity of contact for borrowers needing information on their loans.

Inside Washington (05/16/2012)

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  • WASHINGTON (5/17/12)--Uncertainty within the housing market has discouraged both lender and home buyers, Federal Reserve Board Gov. Elizabeth Duke said Monday. Duke said uncertainty has slowed several aspects of the market: the strength of the economic recovery and the trajectory of future house prices; the costs and liabilities of originating and servicing mortgage loans; the regulatory environment; and the future structure of Fannie Mae and Freddie Mac. As long as economic conditions remain tepid and unemployment remains high, lenders will be hesitant to apply for credit, Duke said. Reluctance to make loans because of the higher cost of servicing delinquent loans could stem from uncertainty about future standards for delinquency servicing, she added. Some uncertainty was resolved by state attorneys' general settlement with the five largest servicers and the consent orders that 14 large servicers have entered into with federal regulators. However, only about two-thirds of mortgages are covered by the settlement terms or are subject to consent orders, she said. Regulatory uncertainty has arisen from Dodd-Frank Act requirements to define a "qualified mortgage" and a "qualified residential mortgage," both of which could affect the cost and availability of credit, Duke said. The future role of the government in the mortgage market also remains unclear. Nearly three and a half years after the Fannie Mae and Freddie Mac entered conservatorship, policymakers have not reached consensus about the future structure of the government-sponsored enterprises …
  • WASHINGTON (5/17/12)--Although it has support from both Republicans and Democrats, a bill that would protect privileged information provided to the Consumer Financial Protection Bureau (CFPB) by financial institutions remains mired in the Senate. Industry observers believe Sen. Bob Corker (R-Tenn.) delayed the bill's passage by attempting to attach it to a larger package of changes to the Dodd-Frank Act (American Banker May 16). An identical version of the bill recently passed the House on a voice vote. The bill amends the Federal Deposit Insurance Act, 12 U.S.C. 1811, to specifically state that materials that financial institutions provide to the CFPB remain privileged under both attorney-client and work product privileges …
  • WASHINGTON (5/17/12)--Senate Majority Leader Harry Reid (D-Nev.) Tuesday moved the Senate toward voice votes on President Barack Obama's two nominees for the Federal Reserve Board. A vote could come today on whether to consider the nominations of Jerome Powell and Jeremy Stein. Sixty votes will be needed to move forward with a debate on the nominees (American Banker May 16). Reid cited the $2 billion trading loss at JPMorgan Chase as impetus for moving forward with the votes. Minority Leader Mitch McConnell (R-Ky.) suggested Powell and Stein have bipartisan support. Both were approved in March by the Senate Banking Committee. But Sens. David Vitter (R-La.) and Jim Demint (R-S.C.), registered objections to the committee's approval. Vitter told The Wall Street Journal last week that he has been blocking the nominations because of the Federal Reserve's monetary policies and the two nominees' close relationships with Fed Chairman Ben Bernanke …

CUNA joint testimony seeks patent rule tweaks

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WASHINGTON (5/16/12)--The Credit Union National Association, the Financial Services Roundtable, and other financial services groups are largely supportive of the U.S. Patent Office's proposed patent law changes, but the patent proposal could also use some additional tweaks, Eliot D. Williams of Baker Botts L.L.P., will tell members of the U.S. Congress today.

Williams is scheduled to testify at a House Judiciary Committee hearing on implementation of the America Invents Act. U.S. Patent and Trademark Office Director David Kappos, Eli Lilly and Company General Counsel Robert Armitage, General Electric Chief Intellectual Property Counsel Carl Horton, 3M Chief Intellectual Property Counsel Kevin Rhodes, University of Michigan Associate General Counsel Richard Brandon, and Business Software Alliance Director of Government Relations Timothy Molino are also slated to testify.

The America Invents aims to protect businesses, including credit unions, from outside claims on some of their specific customer service, payment and marketing practices. It was signed into law by last September.

Outside patent claims, which are often brought by non-practicing entities, can become expensive for credit unions and others if they are end up in court.

In his testimony, Williams is expected to address section 18 of the new law, which creates a transitional program for review of business method patents.

"The importance of the transitional review program cannot be overstated," as the review program "offers a less-costly and more efficient alternative to litigation, so that businesses acting in good faith do not have to spend the millions of dollars it costs to litigate a business method patent of questionable validity," Williams' prepared testimony says. The review process allows the patentholder and patent challenger to make their own arguments, it adds.

However, Williams will suggest fees associated with the business method review program could be revised to ensure the program is "broadly accessible" to both large and small entities against whom covered business method patents are asserted. Accordingly, the fee should be reduced in instances where the petition is filed by a small (or micro) entity.

The current fee structure "may enable owners of business method patents to extract settlements from small entities using a settlement value based on avoiding the cost of filing a business method review which, in the case of patents with numerous claims, may exceed $100,000 -- even if the review is not ultimately granted," Williams will warn.

Williams will recommend that a staged fee structure could be used, imposing an initial fee due at the filing of a petition for business method review, and a subsequent fee due if the review is instituted.

Williams' testimonyt also represents the American Bankers Association (ABA), the American Insurance Association (AIA), the Independent Community Bankers of America (ICBA), NACHA – The Electronic Payments Association, and the National Association of Federal Credit Unions are also noted in his testimony.

Williams also suggested some technical changes and changes to definitions in the rule be added.

For more on the hearing, use the resource link.

Bill would extend NFIP to June 30

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WASHINGTON (5/16/12)--The National Flood Insurance Program (NFIP) would be extended until June 30 under legislation that is expected to be offered by Rep. Judy Biggert (R-Ill.) today.

The NFIP is scheduled to lapse on May 31.

In the past the program has lapsed for brief periods--three times in 2010, and CUNA has noted that these lapses have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

The Credit Union National Association (CUNA) has urged members of the U.S. Congress to extend the NFIP or reform the program, as credit unions and other lenders cannot write certain mortgages without NFIP coverage. CUNA also recently joined a coalition of associations representing homebuilders, the insurance industry, other financial institutions, brokers, and others to ask Congress to act on NFIP issues.

Comprehensive NFIP reform has not been agreed to in the House or Senate, but many Democrats and Republicans have said the NFIP is in need of reform, and other bills that would extend the NFIP and make some changes have been offered.

On the Senate side, S. 2344, which would extend the NFIP through the end of this year, was introduced recently by Sen. David Vitter (R-La.). Vitter has said he would offer the bill as a potential floor amendment.

Legislation that would extend the NFIP for five years has also been approved in the House and by the Senate Banking Committee.

Inside Washington (05/15/2012)

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  • WASHINGTON (5/16/12)--Sens. Sherrod Brown (D-Ohio) and Sen. Bob Corker (R-Tenn.) sent a letter to Housing and Urban Development Secretary Shaun Donovan expressing dissatisfaction with the Obama administration's decision to leave mortgage investors out of talks that led to a $25 billion mortgage servicer settlement. Investors in mortgage bonds complained they were left out of talks when the settlement was announced in February (American Banker May 15). Servicers will get credit for write-downs of mortgages that are separately owned by investors. Brown and Corker also posed several questions regarding potential conflicts between the owners of first liens, which include many bond investors, and the owners of second liens. Banks sometimes have conflicts of interest because they own second liens and also serve as the servicer of the first-lien mortgage. Last week the House voted to bar the Justice Department from taking part in further mortgage settlement talks without allowing bond investors to participate in negotiations …
  • WASHINGTON (5/16/12)--The Senate Banking Committee has not announced if it will call for executives of J.P. Morgan Chase to testify about the firm's $2 billion trading loss. In a statement released Monday, Committee Chairman Tim Johnson (D-SD) said the trading loss will be discussed during upcoming Wall Street reform implementation hearings. "The unfortunate news of J.P. Morgan's $2 billion trading loss confirms two things," Johnson said. "First, the good: Market reaction so far shows that the financial system and the bank itself are stronger today than in 2008, thanks to improvements adopted after the financial crisis including the Wall Street Reform Act. Second: The fact that this can happen at a bank with a solid reputation like J.P. Morgan is evidence that our banking regulators must remain vigilant, and why opponents of Wall Street reform must not be allowed to gut important protections for the financial system and taxpayers." In a letter, Sen. Bob Corker (R-Tenn.), a member of the Senate committee, asked Johnson to hold a hearing regarding the J.P. Morgan Chase trading losses. "Clearly the losses posted by JP Morgan are significant, and as policy makers we should understand in detail what has transpired," Corker said …
  • WASHINGTON (5/16/12)--U.S. Senate candidate and consumer advocate Elizabeth Warren called for more serious Wall Street reforms, including a modern Glass-Steagall Act to protect consumers from Wall Street gambles in the wake of J.P. Morgan Chase's $2 billion trading loss. "JP Morgan's recent losses show that there are still serious risks in our banking system, and if we don't act, then the next trade that goes bad could threaten our whole economy," Warren said. "A new Glass-Steagall would separate high-risk investment banks from more traditional banking. It would allow Wall Street to take risks, but not by dipping into the life savings and retirement accounts of regular people." In 1933, as a response to the crash of 1929, Congress passed the Banking Act, more commonly known as the Glass-Steagall Act, after its two authors, Sen. Carter Glass (D-W. Va.) and Rep. Henry Steagall (D-Ala.). Glass-Steagall is best known for separating commercial banks from investment banks, said Warren's press release. The idea was to divide the risky activities of investment banks from the core depository functions that consumers rely upon every day. Under Glass-Steagall, commercial banks, which take deposits from consumers, were prohibited from underwriting most types of securities; investment banks were allowed to underwrite securities, but could not receive deposits. The Glass-Steagall Act's regulations came under heavy attack starting in the 1980s and the Gramm-Leach-Bliley Act repealed its core provisions in 1999, the release said …
  • WASHINGTON (5/16/12)—The National Credit Union Administration's Office of the Inspector General has completed a review of the circumstances surrounding the agency's recent regulatory dispute with North Carolina State Employees CU (SECU). The North Carolina credit union regulator last year allowed SECU to make its CAMEL rating public, a decision the NCUA alleged "violated the trust of confidentiality of CAMEL ratings." The revelation of this CAMEL rating resulted in the NCUA ending temporary joint examinations in the state…
  • WASHINGTON (5/16/12)--Many financial industry observers believe the Consumer Financial Services Bureau (CFPB) must share oversight with other regulators in regard to unfair, deceptive or abusive acts or practices (UDAAP). The Dodd-Frank Act provided the CFPB with oversight authority for banks and nonbanks to comply with pre-existing and new consumer statutes and enforcement powers over larger institutions (American Banker May 15). But the regulators such as the National Credit Union Administration, Federal Deposit Insurance Corp., Federal Reserve Board, and Office of the Comptroller of the Currency maintained authority to ensure institutions under $10 billion in assets were in compliance with Dodd-Frank and its resulting regulations. In areas where a rule does not exist, the prudential regulators are obligated to make sure their institutions are not violating the law, said Michael Calhoun, president of the Center for Responsible Lending. CFPB Director Richard Cordray has said he does not anticipate writing a specific rule around UDAAP …
  • WASHINGTON (5/16/12)--The Federal Housing Finance Agency (FHFA) has released for public comment its strategic plan for 2013-17. FHFA is updating its plan, sent to Congress in February, to incorporate the conservatorships of Fannie Mae and Freddie Mac. FHFA said it set four goals for the plan: 1) create safe and sound housing government-sponsored enterprises (GSEs); 2) provide stability, liquidity and access in housing finance; 3) preserve and conserve enterprise assets; and 4) prepare for the future of housing finance in the U.S. All comments on the draft plan must be received by June 13 …

CU SAR filings up again FinCEN

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WASHINGTON (5/15/12)--The number of suspicious activity reports (SARs) filed by institutions that claimed the National Credit Union Administration (NCUA) as their primary regulator increased by 6% in 2011, continuing a trend that has seen SARs filed by credit unions increase every year since 1998, the Financial Crimes Enforcement Network (FinCEN) reported.

The NCUA is the only federal financial regulator that has shown an increase every year since 1998, FinCEN said.

In its SAR Activity Review--By the Numbers, FinCEN reported the total number of SARs filed by credit unions and other financial institutions increased by 13.5% in 2011, with mortgage fraud and check fraud continuing to rank as the most common criminal offenses.

Just over 92,000 mortgage loan fraud SARs were filed in 2011, an increase of more than 20,000, or 31%, above 2010's numbers. Check fraud, commercial loan fraud and credit card fraud SARs declined by 3%, 12% and 5%, respectively.

The largest increase in SARs filed related to consumer loan fraud, as the 32,285 SARs filed in 2011 represented an 127% increase when compared to 2010's total.

SARs reporting instances of debit card fraud and wire transfer fraud increased by 9% between 2010 and 2011, totaling 6,258 and 15,497, respectively.

Overall, the volume of SAR filings in 2011 represented a high over any previous calendar year, FinCEN reported.

For the full FinCEN report, use the resource link.

NFIP extension could come up this week

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WASHINGTON (5/15/12)--Legislation that would provide a short-term extension of the National Flood Insurance Program (NFIP) is expected to be considered by the U.S. House this week, but the NFIP would likely only be extended for a few weeks, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said.

The NFIP is scheduled to lapse on May 31, and CUNA in a letter sent to Capitol Hill last week urged members of the U.S. Congress to extend the NFIP or reform the program. (See related May 11 News Now story: CUNA calls for NFIP action in letter to Congress)

CUNA last week also joined a coalition of associations representing homebuilders, the insurance industry, other financial institutions, brokers, and others to ask Congress to act on NFIP issues.

Credit unions and other lenders cannot write certain mortgages without NFIP coverage. In the past the program has lapsed for brief periods--three times in 2010.

CUNA in a letter to Congress noted that previous lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

Though a comprehensive reform package has not been agreed to in the House or Senate, many Democrats and Republicans have said the NFIP is in need of reform.

Legislation that would extend the NFIP through the end of this year (S. 2344) was introduced recently by Sen. David Vitter (R-La.), and Senate Banking Committee members in a hearing held last week seemed to agree that a long-term reauthorization of the NFIP is needed. Vitter last week said he would offer S. 2344 as a floor amendment.

Legislation that would extend the NFIP for five years has also been approved in the House and by the Senate Banking Committee.

House financial hearings set for this week

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WASHINGTON (5/15/12)--Hearings on the Financial Stability Oversight Council's (FSOC) authority, regulator-led legal settlements, and the Dodd-Frank Wall Street Reform Act highlight the schedules of the House Financial Services Committee and related subcommittees this week.

The first of these hearings will take place on Wednesday, when the House subcommittee on financial institutions and consumer credit is scheduled to discuss how the FSOC would exercise its discretionary authority to designate nonbank financial firms as systemically significant financial institutions. The financial institutions and consumer credit subcommittee will meet again on Friday, as that group examines the Dodd-Frank Act's treatment of regulatory capital requirements.

Oversight of the Federal Deposit Insurance Corp.'s (FDIC) structured transaction program, which allows the FDIC to work with private entities to dispose of assets the regulator has acquired through bank bailouts and takeovers, will be addressed during a Wednesday House subcommittee on oversight and investigations hearing.

The full House Financial Services Committee on Thursday will examine federal financial regulatory agency practices when those agencies settle claims against defendants that neither admit nor deny wrongdoing in connection with the settlement. Also on Thursday, the House insurance, housing and community opportunity subcommittee will hold a hearing on issues affecting the ability of U.S. insurance and reinsurance companies to compete internationally.

Another hearing of interest this week is a Wednesday House oversight committee hearing on the operations of tax-exempt organizations. Subcommittee members are not expected to discuss credit union tax status, but Credit Union National Association (CUNA) staff will be watching the hearing closely.

Separate pieces of legislation related to import-export banks and tax credits for small businesses that hire new employees are among the items that could be considered in the Senate this week, and the Violence Against Women Act Reauthorization and Defense spending authorization are on the House schedule.

Another piece of legislation that could impact credit unions was introduced last week by Rep. Carolyn Maloney (D-N.Y.) That bill would require consumer consent before permitting overdraft fees for paper checks, automated clearinghouse (ACH) charges, and debit card swipe-terminal transactions on consumer accounts; would prohibit the practice of check resequencing to increase the number of overdraft fees; and would attempt to limit the amount and number of overdraft fees that can be charged, among other things.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said CUNA strongly supports the ability of credit unions to offer overdraft protection plans as a means to help their members resolve short-term financial problems. "We will watch this measure closely as it makes its way through the process with the aim of preserving credit unions' ability to offer their programs," he added.

The House is taking its Memorial Day District Work Period next week through May 29.  The Senate will be in session next week and recess May 28 through June 1.

iGo Directi promotes direct deposit for older Americans

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WASHINGTON (5/15/12)--May is Older Americans Month, and "there's no better time" to help seniors start to receive their Social Security benefits electronically, the U.S. Treasury's Go Direct program said this week.

The Go Direct program said making the switch to direct deposit would help seniors "save taxpayers money and immediately receive their payments in a more reliable way." The program has released news copy, fliers and posters for financial institutions and community organizations to inform citizens of the benefits of switching to direct deposit.

The Go Direct campaign, which started in 2004, also notes that direct deposit enhances safety and convenience.

The Treasury officially ended the use of paper checks for the payment of newly filed Social Security and other federal benefit payments on May 1, 2011, and all federal benefit payments will be made electronically beginning on March 1, 2013.

The Credit Union National Association is a Go Direct national partner and supports the check-safety and cost-savings goals for the program. For more information on Go Direct, use the resource link.

Inside Washington (05/14/2012)

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  • WASHINGTON (5/15/12)--The Office of the Comptroller of the Currency  has directed Allonhill to cease reviewing files related to the OCC's Independent Foreclosure Review as a primary independent consultant or subcontracted consultant due to a possible conflict of interest. The OCC took the action after Allonhill reported work for third parties that the agency determined to be inconsistent with the requirements for an independent consultant. The work at issue involved prior review for third parties of loans that are part of the same pool of loans that Allonhill was reviewing as part of OCC's review. The decision does not reflect on the quality of work performed to date by Allonhill but is necessary to ensure the independence of the loan review process going forward, the OCC said …
  • WASHINGTON (5/15/12)--The Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. Monday issued final guidance on stress testing practices for banks with assets of more than $10 billion. The guidance outlines general principles for a satisfactory stress-testing framework and describes various stress testing approaches and how the testing should be used at different levels within an organization. It also discusses the importance of stress testing in capital and liquidity planning and the importance of strong internal governance and controls as part of an effective stress-testing framework. The guidance does not implement the requirements in the Dodd-Frank Act or in the Federal Reserve Board's capital plan rule that apply to certain companies. Those requirements have been, or are being, implemented through separate proposals by the respective agencies …

Retailers file response in interchange lawsuit vs. Fed

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WASHINGTON (5/14/12)--A coalition of merchants who sued the Federal Reserve Board over the Fed's debit fee interchange rule mandated by the Dodd-Frank Act has filed its response to the Fed's motion to dismiss the case in a federal court in Washington, D.C.

The coalition filed its brief Friday in the U.S. District Court for the District of Columbia, one day after the key sponsor and author of the Dodd-Frank Act's interchange amendment, U.S. Sen. Richard Durbin (D-Ill.), filed an amicus brief supporting the retailers in the case. (See related story in Friday's News Now by using the resource link below).

The Credit Union National Association (CUNA) will review the case's latest developments in a meeting this afternoon with the national Clearing House Association and a coalition of  trade associations representing thousands of small and large financial institutions. CUNA and the coalition in March filed their own amicus brief in the case, providing financial institutions' perspective regarding the Fed's rule. Their joint brief underscored that consumers have not seen any pricing benefits for products and services merchants promised when they fought for a government-set cap on what card issuers may charge for their services (News Now March 16).

The retailers' suit alleges the Fed interchange cap is too high and that the Fed exceeded its authority on the rule. CUNA's and the coalition's briefs argue the cap is too low and that it does not allow debit card issuers to cover their costs and earn a reasonable rate of return on their investments.

N.C. S.C. leagues start spring Hill-hike season

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WASHINGTON (5/14/12)--Member business lending (MBL) legislation was again the focus last week, as credit union leaders from North Carolina and South Carolina hiked Capitol Hill to discuss key issues and other credit union priorities with their respective elected officials.

North Carolina Credit Union League (NCCUL)  staff and representatives from Raleigh's Local Government FCU; Winston Salem's Truliant FCU, Allegacy FCU, Winston-Salem FCU, and Members CU; Charlotte Metro FCU; and Salisbury's Lion's Share FCU took part in hill visits and an early reception at Credit Union House.

NCCUL President/CEO John Radebaugh, center-left, and others from the league and N.C. credit unions, discussed MBLs and other priorities with Rep. G.K. Butterfield's (D) legislative assistant Saul Hernandez (CUNA Photo)
Visits with Reps. Larry Kissell (D), Howard Coble (R), Renee Ellmers (R), David Price (D), Mike McIntyre (D), Mel Watt (D), G.K. Butterfield (D) and Patrick McHenry (R),  and Sen. Kay Hagan (D), and members of their staff were on the schedule. The hill visitors sought support on legislation that addresses financial examination fairness, ATM disclosure regulations, and supplemental capital for credit unions, as well as pending MBL legislation, during their visits.

"For the most part, the issues weren't new to our members of Congress," Dan Schline, NCCUL senior vice president of association services, said, "but the trip was another opportunity for credit union representatives to talk directly with our members of Congress."

Schline said this and other visits have helped North Carolina's credit unions develop strong  relationships with legislators that bring "real value" to the league's legislative advocacy efforts.

South Carolina Credit Union League (SCCUL) President/CEO Steve Fowler said his group's meetings were also productive. That group included SCCUL staff and representatives from Anderson (S.C.) FCU; Charleston's CPM FCU; Rock Hill's Family Trust FCU; Greenville's MTC FCU, SC Telco FCU and Greenville FCU; Florence's Health Facilities FCU; and Sumter's SAFE FCU.

SCCUL President/CEO Steve Fowler, right, and Rep. Mick Mulvaney (R) discuss the positive work credit unions have done in South Carolina at a Hike the Hill session held last week. (CUNA Photo)


Meetings with Reps. Joe Wilson (R) and Mick Mulvaney (R), and staffers from the offices of Reps. Jeff Duncan (R), James Clyburn (D) and Tim Scott (R), as well as Sens. Jim DeMint (R) and Lyndsey Graham (R), were on the agenda for the South Carolina group.

Both groups also met with National Credit Union Administration (NCUA) staff during their visit.

The Michigan Credit Union League and others from that state will make their own trek to Capitol Hill later this month, and groups from Maine, Kansas, Oregon, Washington, Missouri, Montana, Ohio and Texas are on the June Hike the Hill schedule. More visits are set to take place this fall.

MBL cap increase encourages competition ACI president says

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WASHINGTON (5/14/12)--Overall, America needs public policies that encourage competition, and Congress needs to "remove market entry barriers that suppress small business lending," American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask said in a recent blog post on the group's website, theamericanconsumer.org.

Pociask in his post again supported pending Senate and House bills that would increase the credit union member business lending (MBL) cap to 27.5% of a credit union's assets, up from 12.25%, under certain conditions. The Credit Union National Association (CUNA) has estimated that this increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers.

Senate leadership remains committed to a floor vote on the MBL legislation, but a voting date has still not been determined.

The ACI president noted that credit union loans to small businesses increased by 40% during the recession, while small business lending by banks fell by 20% over that same time period. Credit unions remain willing to lend to small businesses, but "their lending has been capped by an outdated law that suppresses small business access to capital and deters smaller credit unions from serving these businesses," he wrote.

Ending the market barrier imposed by the MBL cap "would increase competition and stimulate economic investment, and do so without increasing government spending," Pociask said.

For the full blog post, use the resource link.

NCUA prohibits one from CU work

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ALEXANDRIA, Va. (5/14/12)--Cynthia Harvey, a former employee of Allied Tube Employees FCU, Harvey, Ill., has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following her conviction on federal credit union fraud.

Harvey was sentenced to 41 months in prison, three years of supervised probation, and ordered to pay $802,619 in restitution, according to an NCUA prohibition order released Friday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Inside Washington (05/11/2012)

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  • WASHINGTON (5/14/12)--The Consumer Financial Protection Bureau (CFPB) may require each financial institution to maintain a single database for all consumer complaints, a representative from a bank that has gone through CFPB's exam process said Thursday (American Banker April 11).  Scott Feinstein, a senior vice president and legal counsel at Sovereign Bank, said that CFPB examiners asked questions about how Sovereign tracks complaints for different products, such as mortgages and cards. Feinstein said he believes the CFPB wants to take a "holistic view" of consumer complaints. CFPB examiners visited Sovereign in the past month, staying for about a week, Feinstein said …
  • ALEXANDRIA, Va. (5/14/12)--The National Credit Union Administration (NCUA) has cancelled today's planned closed board meeting, which was set to begin at 10:00 a.m. ET. However, the agency said, the May 24 open and closed board meetings are still scheduled ...
  • WASHINGTON (5/14/12)--Federal Reserve Board Chairman Ben Bernanke on Thursday denied that restrictive bank examiners are hurting the lending market. Since the financial crisis, bankers have maintained that examiners have targeted even sound loans, making banks hesitant to extend further credit. Bernanke said the central bank looked into specific concerns raised about the examination process and its effect on banks' willingness to lend. The Fed analyzed documentation for more than 300 loans, he said.  "We found that Federal Reserve examiners were appropriately implementing the guidance and were consistently taking a balanced approach in determining loan classifications," Bernanke said. "Moreover, the documentation we reviewed indicated that examiners were carefully considering the full range of information provided by bankers, including relevant mitigating factors, in determining the regulatory treatment for the loans" …
  • WASHINGTON (5/14/12)--U.S. Sen. Bob Casey (D-Pa.) on Thursday questioned the Federal Reserve's recent decision to allow three Chinese, state-owned banks to offer or expand retail banking services in the U.S. In a letter to Federal Reserve Chairman Ben Bernanke, Casey raised questions about the scrutiny given to these banks before approval and whether having the existence of state-owned, Chinese banks would undermine the private U.S. banking system. "China has a long and well documented record of undercutting U.S. companies and workers," Casey said. "China's history of flouting international trade rules requires that any involvement in the U.S. banking system needs close scrutiny." The Fed board announced Wednesday it was approving the application of the Industrial and Commerce Bank of China Ltd., China's largest bank, and two other Chinese firms to purchase The Bank of East Asia U.S.A., which operates in New York and California. The Fed also approved an application by the Bank of China to set up a branch in Chicago and an application by the Agricultural Bank of China Ltd. to establish a branch in New York City …
  • WASHINGTON (5/14/12)--U.S. Sens. Robert Menendez (D-N.J.) and Barbara Boxer (D-Calif.) on Thursday pressed the Federal Housing Finance Agency (FHFA) to introduce measures to make it easier for Fannie Mae and Freddie Mac borrowers to refinance their loans.  Menendez and Boxer introduced legislation last week that would enact those initiatives, but in a conference call Thursday they said the FHFA can move unilaterally to ease restrictions on homeowners. The bill would extend streamlined refinancing for all Fannie and Freddie borrowers, regardless of how much they owe compared to the value of their home; eliminate up-front fees on refinances; eliminate appraisal costs for all borrowers; remove additional barriers to competition; and require second lien holders and mortgage insurers who unreasonably block a refinance to pay a fine …
  • WASHINGTON (5/14/12)--Acting Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg Thursday summarized the FDIC resolution strategy for winding down troubled banks. The FDIC would likely place the parent company into receivership and pass its assets, principally investments in its subsidiaries, to a newly created bridge holding company, Gruenberg said. Equity claims of the firm's shareholders and the claims of the subordinated and unsecured debt holders would be left behind in the receivership. In exchange the receivership would have the equity in the bridge holding company as an asset. Initially, the bridge holding company would be owned by the receivership. Once the bridge company has established a capital base and its liquidity concerns are addressed, ownership and control of the surviving franchise would be transferred to private hands. To create the capital base of the bridge, some of the debt of the former parent company, which has been left in the receivership, would be converted to equity in the new bridge holding company, Gruenberg said. To do this, the FDIC would estimate the extent of losses in the receivership and apportion these losses to the firm's equity and subordinated and unsecured debt holders according to their order of priority. Read the full text of the speech here  ...

Durbin files amicus brief in retailers suit vs. Fed

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WASHINGTON (5/11/12)--The Credit Union National Association (CUNA) will participate Monday in a call with the Clearing House Association and others to review the amicus brief filed Thursday by U.S. Sen. Richard Durbin (D-Ill.), the primary author of the debit interchange fee proposal in the Dodd-Frank Act, in support of retailers' lawsuit against the Federal Reserve's rule that implements the interchange fee cap.

The Clearing House Association and CUNA are among a coalition of associations representing thousands of small and large financial institutions that in March filed their own amicus brief in the case. Their joint brief underscored that consumers have not seen any pricing benefits for products and services merchants promised when they fought for a government-set cap on what card issuers may charge for their services (News Now March 16).

Sen. Durbin filed his brief in the U.S. District Court of the District of Columbia. An amicus brief is filed in a court case by interested parties not named in a lawsuit. The court can accept or reject the brief as part of the case record.

In the brief, Sen. Durbin said he "agrees with the position of the [retailers] plaintiff that the final rule issued by the board is not in accordance with the plain text and intent of the Durbin Amendment in a number of crucial respects and that the rule must be revised to comply with the law."

Durbin's brief made these key points:

  • The Fed's proposal in December 2010 was largely consistent with the Durbin amendment, which clearly lays out the authority of the Fed to regulate debit interchange fees. The proposal allowed a 12 cent/transaction debit interchange fee for large issuers.
  • Based on lobbying from the financial services industry, the Fed changed the proposal and issued a final rule that is inconsistent with the language and intent of the Durbin amendment in a number of ways.
  • The Fed also used the final rule to further its own policy goals of being more generous to issuing banks (the final rule allows 21 cents plus five basis points and a one-cent fraud prevention adjustment/transaction) and providing a compromise between the banks and the merchants.
  • The statute directed the Fed to develop standards to determine whether an interchange fee is "reasonable and proportional" by only considering the incremental cost to the issuer for authorization, clearing and settlement (ACS) of the transaction.  The Fed exceeded its authority by including other costs that were not specified in the statute.  Such costs included those for fixed ACS costs, transaction monitoring, fraud losses, and network processing fees.
  • The Fed is wrong that the standards in its final rule are reasonable and proportional by setting a fee for large issuers that is roughly half of the average per transaction interchange fee, 44 cents.
  • The Fed's rule does not implement correctly the Durbin amendment's network provisions, which basically prohibit an issuer and payment network from having an exclusive agreement to process the issuer's debit card transactions.
  • The Fed misused Sen. Durbin's comment letter to support the provisions of its final rule on exclusivity. Under the final rule, a card must be enabled with at least two unaffiliated networks. However, the rule falls short of the statutory requirements because it does not "guarantee" that networks and issuers will not have contracts or requirements that restrict the number of networks available to process a transaction to less than two unaffiliated networks.  (The brief indicates that if a transaction is not compatible with PIN processing, such as some hotel charges, the transaction would not be able to be processed "over at least two unaffiliated networks.")
The retailers' suit alleges the Fed cap is too high. CUNA's and the coalition's briefs argue the cap is too low and that it does not allow debit card issuers to cover their costs and a reasonable rate of  return on their investments.

The Fed's initial interchange proposal would have set a per-transaction debit interchange fee cap for between seven cents and 12 cents per transaction. However, after receiving thousands of comments, the Fed decided to add the costs of using debit cards--such as network connectivity, hardware, software, and labor costs--in the final calculations, and it settled on a final cap at 21 cents for issuers having assets of $10 billion or more (News Now April 17).

The merchants' suit alleges the Fed's interchange rule exceeds the authority granted to it by Congress, that the final rule is "arbitrary, capricious" and "an abuse of process." (News Now March 6).

The Fed, in an April 13 brief, argued that the regulation "complies in all respects" with the authority granted to it by Congress "to promulgate regulations regarding interchange transaction fees in debit card transactions and network exclusivity and routing." (News Now April 17). The Fed also argued that Congress granted it authority to "consider other costs specific to a particular electronic debit transaction" as it developed the interchange fee regulation."

CU-backed candidates see mixed primary results

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WASHINGTON (5/11/12)--Credit union-backed candidates experienced mixed results in this week's electoral contests, as primaries were held in Indiana, North Carolina and West Virginia.

The biggest news of this week's primaries came when longtime incumbent Sen. Dick Lugar (R-Ind.), a 36-year veteran of that body, lost his primary to Indiana State Treasurer Richard Mourdock. Lugar was supported by the Credit Union Legislative Action Council (CULAC).

CULAC-backed candidates performed well in other Tuesday primary contests.

Indiana State Representative Jackie Walorski (R) won the GOP nomination to succeed Rep. Joe Donnelly (D) in the House, and will face Democratic nominee Brendan Mullen in what is expected to be a competitive general election contest for Indiana's second district House of Representatives seat. Another state rep and credit union supporter, Luke Messer (R), easily won the Republican nomination for the seat vacated by the retiring Rep. Dan Burton (R).

In North Carolina, strong credit union supporter Rep. Walter Jones (R) held on to his Republican nomination, and, on the state level, former North Carolina Community FCU, Goldsboro, N.C., employee John Bell IV (R), who was supported by the North Carolina Credit Union League, defeated incumbent State House member Steven LaRoque by a 54 vote margin. However, LaRoque has requested a recount, according to the Goldsboro Daily News.

Credit Union National Association Vice President of Political Affairs Trey Hawkins said CULAC "will continue to be in the game on behalf of credit union-friendly candidates, and will aggressively support credit union friends in this year's elections."

The presidency, congressional seats, and state and local positions are all at stake in 2012.

New exam manual out soon NCUA says

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ALEXANDRIA, Va. (5/10/12)--A new National Supervision Policy Manual for National Credit Union Administration (NCUA) examiners is scheduled to be finalized in June, the agency said today.

In releasing the new manual, the NCUA said it intends to ensure that credit unions are treated more consistently from region to region. The manual responds to the NCUA Board's direction to remove regional differences in quality control, and implements key recommendations from federally mandated Material Loss Reviews conducted by NCUA's Office of Inspector General, the agency added.

The Credit Union National Association (CUNA) and its Examination and Supervision Subcommittee plan to discuss the new exam manual with NCUA Director of Examinations and Insurance Larry Fazio.

Exam consistency was also emphasized in the recently completed National Training Conference. Training at that conference, which was held in Orlando, Fla., focused on bringing consistent approaches to interest rate risk, credit risk, and problem resolution at credit unions, the NCUA said. Veteran examiners at the conference shared best practices with newer examination hires, the agency added. Federally required training on ethics, diversity, and disability accommodations was also provided.

CUNA noted that while consistency can be positive, the goal is to have examiners treat credit union in a consistently professional manner, allowing the credit union to develop and implement its own solutions to address problems. CUNA will  continue to advocate this to NCUA.

The NCUA said its decision to hold the training conference in Orlando, and not its home base of Alexandria, Va., resulted in significant savings. All funds that were spent on the Orlando training session went to training, the agency emphasized.

For an NCUA release, use the resource link.

Rules on mortgages fees origination in the works CFPB says

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WASHINGTON (5/11/12)--The Consumer Financial Protection Bureau (CFPB) this week previewed upcoming mortgage rulemaking, hinting that rules regulating mortgage origination points and fees, and addressing mortgage loan originators' qualifications and compensation, are under development.

"Mortgages today often come with so many different types of fees and points that it can be hard to compare offers," CFPB Director Richard Cordray said in a release. "We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them," he added.

To address mortgage market issues, the CFPB 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.
The CFPB is also considering setting qualification and screening standards for loan originators. Under the potential standards, loan originators would need to meet certain character, fitness, and financial responsibility standards, would be required to submit to criminal background checks, and would need to undertake origination training that is specific to the types of loans they process.

Rules that would reaffirm a Federal Reserve Board regulation that prevents loan originators from receiving compensation based on a loans interest rate or other loan terms are also under consideration, the CFPB said.

A CFPB Small Business Regulatory Enforcement Fairness Act (SBREFA) panel discussion on these mortgage issues is expected to be held in the coming weeks, and 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.

For the full CFPB release, use the resource link.

CUNA calls for NFIP action in letter to Congress

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WASHINGTON (5/11/12)--The National Flood Insurance Program (NFIP) is scheduled to lapse at the end of this month, and the Credit Union National Association (CUNA) this week urged members of Congress to "extend the authority of this crucial program or pass comprehensive reform" soon to ensure that NFIP coverage continues.

Credit unions, as well as other lenders, cannot write certain mortgages without NFIP coverage. In the past the program has lapsed for brief periods--three times in 2010.

The CUNA letter noted that previous lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

Sen. David Vitter's (R-La.) S. 2344 would extend the NFIP through the end of this year. That bill was discussed during a Wednesday Senate Banking Committee hearing. Representatives from flood-prone municipalities, insurance and realty groups, and a conservation organization testified at the hearing. Those who testified all agreed that long-term reauthorization of the NFIP is needed. Committee members also agreed that an extension is needed.

Vitter during the hearing said he would continue to promote his legislation, and would propose, as a floor amendment, his NFIP Senate bill.

Legislation that would extend the NFIP for five years has also been approved in the House and by the Senate Banking Committee. CUNA in the letter said it supports a portion of the House-passed bill (H.R. 1309) that would allow lenders or servicers to charge the borrower for the cost of premiums and fees incurred by the lender or servicer in cases where a borrower who is required to have flood insurance either cancels or lets the required policy lapse and then fails to purchase flood insurance within 45 days after notification of the lapse.

The Senate should include this common-sense language in any bill flood insurance bill it considers, the letter said.

Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have agreed that the NFIP is in need of reform, but a comprehensive reform package has not been agreed to in the House or Senate.

CUNA this week joined the National Association of Home Builders, the Council of Insurance Agents and Brokers, and many other finance, insurance and construction groups to remind members of Congress that they could provide certainty for the housing market and strengthen our economic recovery continuing to ensure access to affordable flood insurance. (See related May 9 News Now story: CUNA, trades urge Senate to pass NFIP extension)

For the full CUNA letter, use the resource link.

Inside Washington (05/10/2012)

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  • WASHINGTON (5/11/12)--Christopher L. Peterson has been hired by the Consumer Financial Protection Bureau to serve as the agency's enforcement analyst, according to the law firm Ballard Spahr.  Peterson, who has taken a leave from his position as associate dean for academic affairs and professor of law at the University of Utah, is an outspoken critic of payday lending and the Mortgage Electronic Registration System (MERS). In an article that will be published later this year in the Washington & Lee Law Review, Peterson will recommend that cities and other local municipalities enact ordinances requiring payday lenders to prominently disclose "Warning: Predatory Lender" on their signage …
  • WASHINGTON (5/11/12)--Rep. Carolyn Maloney (D-N.Y.), senior member of the House Financial Services Committee, along with 46 co-sponsors, has introduced legislation that would limit the number of overdraft fees that can be charged to one per month and six per year. Overdrafts also would have to be "reasonable and proportional" to the cost of the transaction. Consumers would also be required to opt in to overdraft plans with clear disclosure of coverage and fees and improved notification procedures. Manipulation of transaction posting to maximize fees paid to financial institutions would be banned under the legislation. "The Federal Reserve opt-in rule for debit card overdrafts has been in effect since August 2010," Maloney said. "But it is quite clear more needs to be done in the area of consumer disclosures and to help consumers avoid multiple overdrafts. That's why my bill expands the opt-in requirement to paper checks, ATMs and recurring monthly payments--and also increases disclosure to consumers when an overdraft occurs, limits the fees' price and frequency, and bans the manipulation of transactions," she added …
  • WASHINGTON (5/11/12)--Sen. Sherrod Brown (D-Ohio) Wednesday introduced legislation designed to prevent large banks from putting the economy and financial system at risk. The Safe, Accountable, Fair, and Efficient (SAFE) Banking Act would institute a 10% cap on any bank's share of the total deposits of all insured U.S. banks. The liabilities that any one financial company can take on would be capped at 10%, relative to the U.S. financial sector. The non-deposit liabilities, including off-balance-sheet (OBS) exposure, of a bank holding company would be limited to 2% of the gross domestic product (GDP) for a nonbank financial institution. For a nonbank financial institution, the measure would impose a limit on the non-deposit liabilities, including OBS exposure, of 3% of the GDP. Bank holding companies and selected nonbank financial institutions would be held to a 10% leverage limit, including OBS exposure …
  • WASHINGTON (5/11/12)--The House of Representatives on Wednesday adopted an amendment to the Commerce, Justice Science and Related Agencies Appropriations Act of 2013, that will prohibit the Department of Justice (DOJ) from entering into any future residential mortgage-backed security settlement agreement with state attorney generals and banks that would take money away from private investors without their consent. The amendment, sponsored by Scott Garrett (R-N.J.), would bar the DOJ from being a party to a single or multi-state court settlement where funds are removed from any residential mortgage-backed securitization trust. Investors such as state retirement systems, 401(k) plans, public and private pension plans, insurance company annuities and mutual funds would be protected because the DOJ could not interfere with private contract rights or investors' right to due process before the government can take their property …
  • WASHINGTON (5/11/12)--Fannie Mae Wednesday reported net income of $2.7 billion for the first quarter, compared with a net loss of $6.5 billion in the first quarter of 2011 and following a net loss of $2.4 billion in the fourth quarter of 2011. The improvement was due primarily to lower credit-related expenses, resulting from a less significant decline in home prices, a decline in the company's inventory of single-family real estate owned (REO) properties, improved REO sales prices and lower single-family serious delinquency rates, the government-sponsored enterprise (GSE) said.  Fannie Mae did not require funding from Treasury Department in the first quarter. The company's 3.1 billion income in the first quarter of 2012 is sufficient to pay the first-quarter dividend of $2.8 billion. The GSE's total loss reserves, which reflect its estimate of the probable losses it has incurred on loans in its guaranty book of business, decreased to $74.6 billion as of March 31 from $76.9 billion on Dec. 31 …
  • ALEXANDRIA, Va. (5/11/12)--The National Credit Union Administration (NCUA) has scheduled a closed board meeting for 10:00 a.m. ET on Monday, May 14. Supervisory issues are on the agenda ...

Regs exams discussed at NCUA listening session

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ALEXANDRIA, Va. (5/10/12)--Regulatory burdens, examination concerns and how the National Credit Union Administration (NCUA) plans to address some current credit union priorities were addressed during the NCUA's second listening session held Wednesday.

The meeting was attended by about 70 credit union officials and 30 NCUA staff members.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn, West Virginia Credit Union League President/CEO Ken Watts, and representatives from the New Jersey, D.C./Maryland, and Pennsylvania credit union leagues were among those at the session.

Minimizing regulatory burdens and improving the examination process were again consistent themes. Credit union representatives said they were particularly concerned about the agency's pending loan participation and credit union service organization proposals. 

The NCUA has already indicated that it is revisiting those proposals and will be making changes, Dunn said. A major area of concern in the loan participation proposal has been the 25% ceiling on purchasing loan participations from any one originator. CUNA strongly opposed this and other provisions, and CUNA is meeting with senior NCUA staff to discuss this and other matters early next week.

Attendees said the NCUA should provide additional regulatory relief, including for member business lending (MBL). The NCUA said it is considering raising the ceiling on its definition of small credit unions to $18 million to $20 million in assets and removing the requirement for a personal guarantee on MBLs, a move that CUNA commends and has advocated for several years.

NCUA Chairman Debbie Matz said the agency wants to listen to credit unions, and to be mindful of their need do [their] business." NCUA Director of Examination and Insurance Larry Fazio added that "examiners need to listen better and more…but both parties (credit union officials and NCUA examiners) need to listen."

Fazio also addressed a specific issue of interest to most credit unions that have been recently examined… the issuance of Documents of Resolution (DoR) by their examiner.  "We are working to clarify the DoR process," Fazio told the group.  "We shouldn't regulate every aspect of risk management," he added.

Attendees also recommended that the NCUA:

  • Give credit unions advance notice when their examiner has been replaced;
  • Do more to survey credit unions following their last exam regarding the examination experience;
  • Reinforce that actions taken by NCUA examiners should reflect the agency's own rules and policies; and
  • Request that its examiners have a dialogue with the credit union's management about the credit union's strategic plan before the exam starts.
Attendees also recommended that the NCUA provide a letter to credit unions at the beginning of each year, along with the yearend financials from the previous year, that addresses examination trends and concerns the agency will flag that year through policies or other actions. A similar regulatory roadmap should be provided by the Consumer Financial Protection Bureau, they added.

Some of the recommendations received favorable reactions from Matz and NCUA staff, Dunn noted.

NCUAs Hyland to chair NeighborWorks America

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ALEXANDRIA, Va. (5/10/12)--National Credit Union Administration (NCUA) board member Gigi Hyland has become the board chair of NeighborWorks America, an affordable housing and community development organization.

Hyland has been the NCUA's representative to the NeighborWorks board since 2008, and she succeeds Thomas Curry as chair.  In announcing her appointment, Hyland said, "I look forward to continuing the work begun by Tom to prevent foreclosures where possible, create more affordable housing, and stabilize communities around the country."

NeighborWorks America works to provide access to homeownership and to safe and affordable rental housing. In the past five years, NeighborWorks' affiliated organizations have generated more than $19.5 billion in reinvestment in their communities, according to a release, which also stated that NeighborWorks America is the nation's leading trainer of community development and affordable housing professionals.

Determined by statute, NeighborWorks America's board consists of the heads of the financial regulatory agencies and the U.S. Department of Housing and Urban Developoment, who are presidential appointees subject to Senate confirmation, or their statutorily designated representatives.

NCUA letter provides IRR rule answers

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ALEXANDRIA, Va. (5/10/12)--The National Credit Union Administration (NCUA) explains its new interest rate risk regulations and advises credit unions on how to prepare for the new rules before they become effective this fall, in a new letter to credit unions (12-CU-05).

The letter is intended to assist credit unions in determining if they are subject to the new rule. The agency also included information on the questionnaire its examiners will use when they determine whether a covered credit union is complying with the IRR regulation.

The NCUA in January amended its federal share insurance regulations to include a requirement that federally insured credit unions have both a written IRR policy and an effective IRR management program. Credit unions with less than $10 million in assets are exempted from the new regulation. A credit union with between $10 million and $50 million in assets is only subject to the requirements if its first mortgage loans plus investments with maturities over five years equal or exceed 100% of its net worth.

NCUA staff have stressed that the IRR rules will not be "one-size-fits-all," and that the NCUA is providing flexibility for credit union managers and board members to develop their own policies.

Also, while the NCUA could withhold National Credit Union Share Insurance coverage of member accounts for credit unions that do not comply with the proposal, this would only happen in the most extreme of cases, the agency has said.

The Credit Union National Association will be monitoring the implementation of this rule very carefully. The rule will become effective on Sept. 30.

For the full letter to credit unions and the related questionnaire, use the resource link.

Unneeded regs costly for CUs members CUNA witness

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WASHINGTON (5/10/12)--The burden of excessive financial regulations has resulted in more than $2 million in additional costs for his credit union, and, in some cases, reduced service to members, Terry West, president/CEO of Vystar CU, Jacksonville, Fla., said during a Wednesday House subcommittee on financial institutions and consumer credit hearing on the impact of regulations on small financial institutions.

West, testifying on behalf of his credit union and the Credit Union National Association (CUNA), said Vystar wants to do right as a credit union, but is often challenged by the ever-changing regulatory environment.

Vystar CU  CEO Terry West, right, told House subcommittee chair Rep. Shelly Moore Capito (R-W. Va.), left, and other subcommittee members of the burdens that unneeded regulations have created for his credit union and its members. (CUNA Photo)


Credit unions have been "battered by the volume of regulatory changes" that have been made in recent years, he said. West estimated that credit unions have been subjected to in excess of 120 regulatory changes from at least 15 different federal agencies since 2008, and they are bracing for the next wave, which will occur once the Consumer Financial Protection Bureau (CFPB) hits its stride, he said.

"We have tried to estimate the cost and found it complicated because compliance reaches into so many areas," West said, adding that "after $2 million we stopped trying."

Regulatory compliance demands have resulted in the creation of new positions at Vystar, West said. In addition to its senior risk position, "we created a vendor management department, increased our Bank Secrecy Act staffing and are about to increase our number of information security officers.  We have had to increase staff because of compliance and the costs keep on coming," he said.

While his credit union does all it can to avoid increasing costs for members, Vystar was recently forced to increase the price it charges for remittances to pay for the cost of compliance. Vystar also has been forced to hold some mortgage rates steady, rather than lowering them, due to the cost of compliance.

Members are sometimes troubled by the additional time that certain regulations add to the mortgage approval process. West said his credit union recently was forced to delay offering some new products to members to give his staff more time to deal with compliance issues.

He was joined by First United Bank & Trust CEO William Grant, SRP FCU CEO Ed Templeton, First State Bank Chief Investment Officer Samuel Vallandingham, and Georgetown University law professor Adam Levitin during the hearing.

When prompted by Rep. David Scott (D-Ga.), the witnesses said eliminating outdated ATM disclosure regulations and modifying pending qualified mortgage regulations would be a good start to meaningful regulatory relief.

West in his testimony urged the CFPB to consider using its statutory authority to exempt credit unions and other financial institutions from new regulations, and to establish appropriate transaction thresholds, as needed.

Rep. Carolyn Maloney (D-N.Y.) asked if greater regulatory scrutiny of nonbank lenders would help traditional institutions, and the witnesses agreed that it would. West said making nonbank lenders subject to new regulations would be beneficial, as that change would allow credit unions to reach out to potential new members before they go to nonbank lenders.

For prepared testimony from West and other witnesses, use the resource link.

Inside Washington (05/09/2012)

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  • WASHINGTON (5/10/12)--The Obama administration pressed Republicans to pass legislation to make refinancing easier for troubled homeowners. During a speech in Albany, N.Y., President Barack Obama introduced a job-creation to-do list for Congress, which included passing the legislation. "First, Congress needs to help the millions of Americans who have worked hard, made their mortgage payments on time, but still have been unable to refinance their mortgages with these historically low rates," Obama said. "This would make a huge difference for the economy." The president estimated homeowners who refinanced would save at least $3,000 a year. In testimony before the Senate Banking Committee, Housing and Urban Development Secretary Shaun Donovan described how three proposed refinancing bills would help troubled homeowners (American Banker April 9). None of the bills have been introduced yet. One proposal would allow homeowners whose mortgages are not owned by Fannie Mae or Freddie Mac to refinance into a government-backed loan. Another measure would remove existing barriers to refinancing for homeowners whose loans are already backed by Fannie or Freddie. The third measure offers an incentive for borrowers to rebuild equity in their homes by taking loans of shorter duration when they refinance …
  • WASHINGTON (5/10/12)--Lawmakers on Tuesday argued about whether Congress or the Federal Reserve deserved more blame for the continuing high unemployment rate. Rep. David Schweikert (R-Ariz.), said the Fed has assumed Congress' traditional role in managing fiscal policy (American Banker April 9). Rep. Kevin Brady (R-Texas) has introduced a bill that would limit the Fed's focus to inflation and allow Congress to manage unemployment. Rep. Barney Frank (D-Mass.) pushed a counterproposal under which Federal Reserve Bank presidents would not vote at Federal Open Market Committee meetings.  Frank argued that because Federal Reserve Bank presidents are not nominated by the president and confirmed by the Senate, they should not have a significant role in the country's fiscal policy. But Frank also said Congress had failed to "step up" in addressing unemployment …
  • WASHINGTON (5/10/12)--The U.S. Small Business Administration is offering free networking and educational forums and dialogue with leading business experts during National Small Business Week, May 20-22 in Washington, D.C. The forums include a town hall with SBA Administrator Karen Mills on why small businesses are good for the long-term health of any economy; a social media forum on best practices for putting new media tools to work for small businesses; and an exporting forum on how SBA can help businesses find customers abroad.  The schedule also includes sessions on federal contracting, selling to large companies, and business matchmaking with major corporations and government agencies. The town hall and forum events will be webcast live to allow business owners across the country to participate if they cannot attend in person. While registration is required to attend forums and sessions in person, the live online webcast will be available free at www.NationalSmallBusinessWeek.com. To register to attend, find more information on the live webcast, or for a detailed schedule of events and speakers, visit the National Small Business Week website. The Credit Union National Association (CUNA) and credit unions are urging Congress to increase their MBL cap to 27.5% of assets from 12.25%, to allow credit unions to make more loans. CUNA estimates that lifting the cap would infuse $13 billion into the economy through small business loans and help create 140,000 jobs.…
  • WASHINGTON (5/10/12)--The Community Development Financial Institutions Fund (CDFI Fund) Wedesday released a study conducted by the U.S. Government Accountability Office (GAO), which examined whether the Community Development Financial Institutions Program (CDFI) and the New Markets Tax Credits Program (NMTC) were meeting goals set for proportionally awarding organizations that serve rural areas. The "study found that the CDFI Fund has met or exceeded its rural proportionality goals," said CDFI Fund Director Donna J. Gambrell. "This is a testament to the CDFI Fund's commitment to providing financing to revitalize all struggling communities, urban and rural alike." U.S. House Report 112-136, referenced by the Consolidated Appropriations Act of 2012, requires that GAO conduct a study on the concentration of CDFIs and NMTCs in urban areas and comment on the extent that program design, administration, or history contributed to the early establishment of CDFIs in urban areas. The GAO study found that the CDFI Program has a successful review process and established goals of matching the proportion of awards to the proportion of qualified applicants that primarily serve nonmetropolitan areas. The full summary can be found here ...

Senate stalls student lending vote

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WASHINGTON (5/9/12)--A Senate bill that would prevent federal student loan interest rates from doubling from 3.4% to 6.8% this summer failed to collect the votes needed to ensure debate by the full Senate on Tuesday, but could still be brought up for Senate approval in the future.

The Stop Student Loan Interest Rate Hike Act (S. 2343) would extend the reduced interest rate for Federal Direct Stafford Loans beyond the current cutoff date of July 1.

The 52 to 45 vote mainly followed party lines, but many Republicans and Democrats reportedly agree that federal student loan interest rates should remain low. The difference between the two sides appears to be how the cost of subsidizing student loans would be paid for.

S. 2343 would not alter credit union student lending, but other pieces of legislation that would impact credit union student loan practices have been offered in the Senate.

The Know Before You Owe Act of 2012 (S. 2280) was unveiled by Sens. Richard Durbin (D-Ill.) and Tom Harkin (D-Iowa), and has been referred to the Senate Banking Committee. That bill would require prospective borrower's school to confirm the student's enrollment status, cost of attendance and estimated federal financial aid assistance before the private student loan is approved, and a number of loan disclosures would also need to be provided to new loan recipients. Lenders would also need to frequently update students or loan holders on the status of their loan.

The Fairness for Struggling Students Act (S. 1102), which was also offered by Durbin in 2011, would make it easier for student loan debtors to discharge privately issued student loans in bankruptcy proceedings.

The Consumer Financial Protection Bureau is also addressing student loan issues, working with the U.S. Department of Education and launching the "Know Before You Owe" project to help borrowers, including student borrowers, understand debt implications. A full study on the role of schools in the private student loan marketplace, student loan underwriting criteria, repayment terms and behavior, loan servicing and loan modification, and other student loan issues is expected to be released by the agency this summer.

CUNA trades urge Senate to pass NFIP extension

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WASHINGTON (5/9/12)--The National Flood Insurance Program (NFIP) is scheduled to expire on May 31, but the Credit Union National Association (CUNA) and others are urging the Senate to reauthorize the NFIP "and avoid the costly consequences that would result in a lapse from failure to act," in a letter sent to elected officials and a full-page ad in D.C. publications.

Sen. David Vitter's (R-La.) S. 2344, would extend the NFIP through the end of this year. The bill is currently co-sponsored by fellow Louisianan Sen. Mary Landrieu (D), and was placed directly on the Senate's legislative calendar. It has not been marked up by the Senate Banking Committee. LEgislation that would extend the NFIP for five years has also been approved in the House and by the Senate Banking Committee.

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Credit unions, as well as other lenders, cannot write certain mortgages without NFIP coverage. In the past the program has lapsed for brief periods--three times in 2010.

The letter, which was sent to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), noted that more than 5.6 million policyholders in 21,000 communities nationwide depend on the NFIP as their main source of protection against property losses that result from flooding. "Without flood insurance, many residential and commercial real estate transactions across the country will come to a stop," potentially jeopardizing as many as 40,000 mortgage closings per month, the letter added.

The letter is co-signed by CUNA, the National Association of Home Builders, the Council of Insurance Agents and Brokers, and many other finance, insurance and construction groups. Many of those same associations have teamed up for a pro-NFIP extension advertisement that seeks to remind senators that "floods are not just a coastal issue," and that flood disasters have been declared in every state. "By continuing to ensure access to affordable flood insurance, Congress can provide certainty for the housing market and strengthen our economic recovery," the ad says.

The full-page ad will run through Thursday in Washington political papers Politico, Roll Call, Congress Daily, CQ Today, and The Hill.

CUNA strongly supports the NFIP program and backs short-term extensions, but also advocates for longer-term approval.

Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have agreed that the NFIP is in need of reform, but a comprehensive reform package has not been agreed to in the House or Senate.

FinCEN releases archived CTRSAR webinar

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WASHINGTON (5/9/12)--An archived version of the Financial Crimes Enforcement Network's (FinCEN) May 8 webinar, which featured overviews of the e-filing specifications for FinCEN's new Currency Transaction Reports (CTR), Suspicious Activity Reports (SAR), and Designation of Exempt Person (DOEP) reports, has been released by the agency.

The webinar was created to aid information technology (IT) professionals who are responsible for integrating FinCEN's new technical specifications into batch filing processes. These may be vendors of batch filing programs as well as in-house IT staff of financial institutions.

A review of FinCEN's Bank Secrecy Act e-filing test site and testing process and other e-filing specifications was also included in the webinar.

FinCEN is expected to offer additional webinars for financial institution employees and compliance professionals with BSA-related responsibilities at a future date.

For the archived FinCEN webinar, use the resource link.

Inside Washington (05/08/2012)

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  • WASHINGTON (5/9/12)--Banks are pressing the Federal Reserve to rework proposed Dodd-Frank Act regulations on stress tests, capital and liquidity requirements. The Fed has received 90 comment letters on the 173-page proposal, which would apply to all bank holding companies with more than $50 billion of assets and nonbank financial firms designated as systemically important by the Financial Stability Oversight Council. Some banks are concerned the proposal does not differentiate among institutions of different sizes. As part of its capital requirements, the proposal includes a risk-based capital surcharge. Banks complained that the amount of the surcharge is not specific. Banker concerns about liquidity requirements include how often stress tests must be performed, definitions of highly liquid assets and a one-size-fits-all approach. Banks also criticized the stress test requirements of the proposal. Among the concerns were the Fed's lack of transparency in the models used, overlapping tests with other regulators, scheduling and the disclosure of results …
  • WASHINGTON (5/9/12)--Paul Nash will succeed John Walsh as Office of Comptroller of Currency's (OCC) senior deputy comptroller and chief of staff.  Walsh announced that he is retiring this summer. Nash will join the OCC on May 21. He has been the deputy to the chairman for external affairs at the Federal Deposit Insurance Corp. since March 2009.  In that role, he oversaw the agency's Office of Legislative Affairs, the Office of the Ombudsman and the Office of Minority and Women Inclusion …
  • WASHINGTON (5/9/12)--Meg Burns, the Federal Housing Finance Agency's senior associate director for housing and regulatory policy, downplayed expectations of a government program to convert foreclosed properties into rental units. The Real Estate Owned (REO) Initiative was developed in conjunction with the Treasury Department, Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Reserve, Fannie Mae and Freddie Mac. The goals of the program were "fairly limited" and focused only on markets with supply-demand imbalance, Burns said. The application process is demanding and only applicants with deep operational expertise in both asset management and property management are approved, she added. "The enterprise portion of the REO market is limited, so the future benefit of the program may be more applicable to private financial institutions that choose to sell their inventory in this manner," Burns said …

FFIEC IT exam handbooks available online only

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WASHINGTON (5/8/12)--The Federal Financial Institutions Examination Council (FFIEC) announced it will no longer print hard copies of its IT Examination Handbooks, opting instead to make IT handbook content available in an electronic format only.

The IT Handbook consists of 11 booklets covering a variety of technology and technology-related risk management guidance for financial institutions and examiners, according to the FFIEC.

"In addition to reducing costs and saving resources, users will now have the ability to select the materials they wish to print–from a single page to the entire booklet," the FFIEC said in a release.

The change is prompted in part by recent upgrades to the functions and features of the FFIEC's online InfoBase. The FFIEC said it has improved the InfoBase to allow more frequent updates. Those updates can be viewed in a new "What's New" section of the FFIEC InfoBase website.

The InfoBase improvements will enable the FFIEC's partner agencies "to respond to changes in technology and the risk environment on an as-needed basis rather than waiting for the next revision of a particular booklet or booklets," the FFIEC said.

For more on the IT Handbook and InfoBase changes, use the resource link.

CUNA to testify on reg burden Wednesday

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WASHINGTON (5/8/12)--Terry West, president/CEO of Vystar CU, Jacksonville, Fla., will address how the growth of financial services regulations has impacted his credit union's ability to lend and to serve its members at a Wednesday House subcommittee on financial institutions and consumer credit hearing in Washington.

VyStar CU president/CEO Terry West (second from left) testifies on CUNA's behalf before a 2009 Senate Banking subcommittee hearing. This week, West will address before a House subcommittee hearing how financial regulations have distracted his credit union from its core goal of serving members. (CUNA Photo)
West will testify on behalf of his credit union and the Credit Union National Association (CUNA).

The hearing, which is entitled "Rising Regulatory Compliance Costs and Their Impact on the Health of Small Financial Institutions," is scheduled to begin at 10 a.m. ET on Wednesday. West is expected to be joined by First United Bank & Trust CEO William Grant, SRP FCU CEO Ed Templeton, First State Bank Chief Investment Officer Samuel Vallandingham, and Georgetown University law professor Adam Levitin.

In his testimony, West will focus on the impact that new and revised regulations have had on consolidation in the credit union system, and whether federal regulators are considering the cumulative impact of these types of rules on small fin institutions.

Subcommittee Chairman Rep. Shelley Moore Capito (R-W. Va.) in a statement said the hearing builds on field hearings the subcommittee has held across the country "regarding whether small financial institutions face significant regulatory burdens, and if so, guaranteeing that there is a workable regulatory regime so that these institutions can continue to survive and grow.

"We must ensure that we have a diverse financial system," she added.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said it is not clear if any additional new legislation will come from this series of hearings; however, he noted that bills related to financial institution examination fairness and ATM fee disclosure requirements were first raised at earlier sessions of this series of hearings.

The subcommittee earlier this year held field hearings in San Antonio, Texas, and Cleveland, Ohio, on the impact of regulations and small financial institutions. Maria Martinez, president/CEO of Border FCU, Del Rio, Texas, and Robert Glenn, president/CEO of Air Force FCU,  San Antonio, testified at the Texas hearing, and Stan Barnes, president/CEO of Canton, Ohio-based CSE FCU, testified in Cleveland.

Credit union concerns were also aired in a Las Vegas, Nev.-based subcommittee hearing on potential private sector solutions to foreclosure issues, with Sue Longson of El Monte, Calif.'s SCE FCU testifying. Central City CU, Marshfield, Wis., CEO and CUNA board member Pat Wesenberg and Mark Willer, chief operating officer of Royal CU, Eau Claire, Wis., also testified in a November field hearing in Wausau, Wis.

For more on Wednesday's scheduled hearing, use the resource link.

Congress back CUs Hike Hill on MBLs

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WASHINGTON (5/8/12)--The Credit Union National Association on Monday called on credit unions to keep up the pressure and continue to urge the U.S. Congress to support increased member business lending authority for credit unions, and the North Carolina and South Carolina credit union leagues will do just that when they visit Capitol Hill this week.

The leagues will be the first two groups to launch Hike the Hill events this spring, and will meet with their members of Congress and National Credit Union Administration board members during their two-day visit.

Overall this week, the House and Senate schedules will be busy, as Congress returns from a week-long district work period. The Fiscal Year 2013 Appropriations for the Departments of Commerce, Justice, Science and Related Agencies bill (H.R. 5326) and another budget bill are scheduled to be considered in the House this week, and the Senate is set to address  judicial nominations and the Stop Student Loan Interest Rate Hike Act (S. 2343).

Also of note is a Wednesday House subcommittee on financial institutions and consumer credit hearing, in which Terry West, President/CEO of Vystar CU, Jacksonville, Fla., is scheduled to testify on how the growth of financial services regulations has impacted his credit union's ability to lend and to serve its members. The hearing will focus on how compliance costs impact small financial institutions. (See related News Now story: CUNA to testify on reg burden Wednesday)

Several other hearings have been scheduled, including:

  • A Tuesday House domestic monetary policy and technology subcommittee hearing on pending legislative proposals that would overhaul the Federal Reserve System;
  • A Wednesday House insurance, housing and community opportunity subcommittee hearing on oversight of the Federal Housing Administration's reverse mortgage program for seniors;
  • A Wednesday Senate economic policy subcommittee hearing on long-term National Flood Insurance Program reauthorization;
  • A Wednesday Senate financial institutions and consumer protection subcommittee hearing on limiting government support for financial institutions; and
  • A Wednesday Senate Commerce, Science and Transportation Committee hearing on privacy protections.
The House Financial Services Committee recently released its May hearing schedule, and bank capital requirements under the Dodd-Frank Wall Street Reform Act, aspects of Federal financial regulatory agency legal settlement procedures, the Federal Deposit Insurance Corporation's Structured Transaction Program, and the Financial Stability Oversight Council's authority over nonbank financial firms are scheduled to be discussed.

For the full committee schedule, use the resource link.

Inside Washington (05/07/2012)

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  • WASHINGTON (5/8/12)--
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    A credit union delegation was part of a White House briefing session last Friday organized by the National Cooperative Business Association (NCBA). Credit Union National Association (CUNA) Cooperative Alliances Committee Chairman Mark Cummins thanked the Obama administration for its support of member business lending (MBL) legislation and urged its continued assistance in the push for enactment. Cummins, who is also president of the Minnesota Credit Union Network, emphasized how much more credit unions could do to help small businesses and create jobs with the passage of the Credit Union Small Business Jobs Act (S. 2231). "And it can be done at no taxpayer cost," he added. Co-op Alliances Vice Chair Diana Roberts, CEO of Hershey FCU, Hummelstown, Pa., also took note during the briefing of the growing regulatory burden credit unions face. Roberts pointed out smaller credit unions sometimes have to incur the added cost of outsourcing for compliance help (News Now May 7).  Members of the credit union delegation, shown here in front to the Old Executive Office Building, directly to the west of the White House, prior to the briefing are (from left): Tristram Coffin, CEO, Alternatives FCU, Ithaca, N.Y.; Cummins; Roberts; Mark Wolff,  CUNA senior vice president of communication; and Joe Bergeron, CEO, Association of Vermont Credit Unions. (Photo provided by National Cooperative Business Association) ...
  • WASHINGTON (5/8/12)--Regulation of nonbank players such as mortgage originators, mortgage servicers, payday lenders and private student lenders is the Consumer Financial Protection Bureau's (CFPB) top priority, the agency's director, Richard Cordray, said Friday. "With so many areas going unsupervised, at least at the federal level, it is no wonder that consumer financial markets are rife with concerns about how well they serve the public," Cordray said in remarks before the 2012 Simon New York City Conference. "Through our oversight, we are working to level the playing field and make sure that these businesses are playing by the rules and being held accountable for their actions." Cordray said the CFPB is working to build a consumer financial services marketplace where consumers can can see prices and risks up front and compare the pros and cons of different products. "We see financial education and disclosure as a problem of closing the sizeable gap between where consumers actually are in their financial capability and where they need to be to navigate consumer finance markets successfully, Cordray said. "We can close that gap in two distinct ways: by striving to elevate people's capacity to handle matters of personal finance, and by striving to reduce unnecessary complexity in the information provided in that marketplace" …
  • WASHINGTON (5/8/12)--The Consumer Financial Protection Bureau (CFPB) and the Justice Department are in discussions to hash out details about how they will jointly enforce the Equal Credit Opportunity Act. CFPB is required to transfer cases to the Justice Department if it identifies a pattern or practice of discrimination (American Banker May 4). It also has the authority to file its own cases against banks and other financial institutions in federal court. Patrice Ficklin, the CFPB's assistant director for its Office of Fair Lending and Equal Opportunity, said at a panel discussion in Washington with Assistant Attorney General Tom Perez, that her agency is trying to include, within settlement agreements, mechanisms that would help borrowers repair their credit and invest in the communities affected by discrimination--rather than provide direct financial compensation …
  • WASHINGTON (5/8/12)--Although President Barack Obama is considered the favorite in 2012 U.S. presidential race, the banking industry is supporting Mitt Romney and the Republican National Committee (RNC) through political donations by nearly 2-to-1, according to a May 4 American Banker article. The banking industry's support of Romney is spurred by anger over the increased burden of regulation from the Dodd-Frank Act. Bankers believe Romney would support policies more favorable to banks than Obama would in his second term, according to the Banker. Even if bankers support the president, it is unclear if they would be able to affect policy during Obama's second term, said Larry Sabato, director of the University of Virginia Center for Politics. In the 2008 presidential race, banking financial support was more evenly split between the two political parties. Commercial banks and their employees donated $3.4 million to Obama in 2008, and $2.4 million to Republican nominee John McCain, according to the Center for Responsive Politics. However, commercial banks donated about $1 million more to the RNC than they did to the Democratic National Committee during the 2008 campaign …

CUs CUNA stress MBL benefits in White House co-op meeting

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WASHINGTON (5/7/12)--Credit Union National Association (CUNA) Cooperative Alliances Committee Chairman Mark Cummins thanked the Obama administration for its support of member business lending (MBL) legislation and urged its continued assistance in the push for enactment during a White House briefing session last Friday organized by the National Cooperative Business Association (NCBA).

Cummins, who is also president of the Minnesota Credit Union Network, emphasized how much more credit unions could do to help small businesses and create jobs with the passage of the Credit Union Small Business Jobs Act (S. 2231), in a session hosted by Rosie Rios, the Treasurer of the U.S.  "And it can be done at no taxpayer cost," he added.

The MBL issue also drew attention during a presentation by Jon Carson, director of the White House Office of Public Engagement. Joseph Thomas, CEO of Fairfax County FCU, Fairfax, Va., said anything the administration could do to support MBL legislation would be appreciated. Carson said the administration believes "some good, smart ideas" can still be enacted this year despite the gridlock on Capitol Hill. Senate Majority Leader Harry Reid (D-Nev.) has promised to bring S. 2231 to the floor for a vote in this session.

Cummins, Thomas and Co-op Alliances Vice Chair Diana Roberts, CEO of Hershey FCU, Hummelstown, Pa., also took note of the growing regulatory burden credit unions face during the discussion with Rios. Roberts pointed out smaller credit unions sometimes have to incur the added cost of outsourcing for compliance help.   

Rios said she would relay these points in her discussions with Treasury officials.

The credit union delegation was part of 150 co-op leaders at the White House meeting, which NCBA organized to highlight 2012 as the International Year of Cooperatives and co-ops' role in economic growth. The co-op leaders discussed how their organizations create jobs, improve members' well-being and help their communities. "Co-ops build the middle class by empowering their member owners," noted NCBA interim CEO Liz Bailey. 

Credit union participants also included Joseph Bergeron, CEO, Association of Vermont Credit Unions, and Mark Wolff, CUNA senior vice president, communications.  Both serve on the NCBA board of directors. "The meeting raised the visibility of co-ops among key White House personnel and started a conversation that I know we and NCBA will seek to continue," Wolff noted.

Prior to the meeting, NCBA shared 15 case studies with White House officials, including those of Hope FCU, Jackson, Miss., and its outreach to low-income persons and the unbanked; and the Defense Credit Union Council and the affordable financial services its 210 members provide to military personnel. 

An "observation from participants" briefing paper spotlighted a CUNA point that credit unions as member-owned co-ops are truly 'Main Street" institutions. "They are not only in their communities, but 'of' their communities….They are locally based and they have a history of community involvement."

Other notable moments from the session:

  • White House Chief of Staff Jack Lew made an unscheduled appearance.  He praised credit unions as "a pretty fundamental source of capital and banking services for many Americans"  but said co-ops have "a bit of a branding problem."  Lew has been a credit union member but hadn't realized until this meeting that credit unions are co-ops.
  • Danielle Gray, deputy assistant to the president, National Economic Council, told the group:  "My mother worked for a credit union for 20 years--put me through school."
  • Jon Carson said he grew up around co-ops in Wisconsin, is a credit union member, and that his father works for Westby Co-op CU in Westby, Wis.
  • Hope FCU CEO Bill Bynum and Alternatives FCU (Ithaca, N.Y.) CEO Tristram Coffin spoke positively of the federal Community Development Financial Institutions (CDFI) program and New Market Tax Program, and suggested ways the administration could do more with both initiatives. Coffin also serves on CUNA's Cooperative Alliances Committee.
Co-op leaders urged the White House officials to look more closely at the co-op model when developing policy and to be more cognizant of cooperatives as examples of values-based, socially responsible institutions that empower individuals and invest in local communities.  Carson stressed a good way to make that happen is for co-ops to keep up the communication in Washington and locally with federal officials. "They want to hear your success stories," he said.

iCompBlogi roundup NCUA actions Reg Z changes updated

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WASHINGTON (5/7/12)--News on National Credit Union Administration actions, the latest on Regulation Z requirements, and updates on recent Consumer Financial Protection Bureau (CFPB) clarifications and pending CFPB projects are all featured in the April edition of the Credit Union National Association's CompBlog Monthly Wrap Up.

Recent regulatory news from Congress and a report from the NCUA's national staff conference in Orlando are revealed in the wrap up. The CUNA compliance wrap up also provides a new list of frequently asked credit union questions.

Among the items addressed in this month's list are:

  • Whether adverse action notices are required when a credit union denies a member's request to open an additional share account;
  • If credit unions are allowed to use funds collected from loan originations to pay for employee qualified profit sharing, 401(k), and employee stock ownership plans; and
  • Whether the Financial Crime Enforcement Network's new rule on non-bank mortgage lenders addresses credit union service organizations.
The March update also highlights the effective dates of pending changes to Regulation D, remittance changes, interest rate risk management policies, and the Bank Secrecy Act.

For more of CUNA CompBlog's monthly wrap up, and other compliance gems, use the resource links.

FinCEN should withdraw due diligence proposal CUNA

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WASHINGTON (5/7/12)--The Credit Union National Association (CUNA) said that while it supports the objective to improve the tracking of money laundering and terrorist financing, the Financial Crimes Enforcement Network (FinCEN) should not propose new customer due diligence regulations, as the increased regulatory burdens and costs on credit unions would far outweigh the purported benefits to FinCEN.

FinCEN recently released an Advanced Notice of Proposed Rulemaking (ANPR) proposing to codify, clarify, consolidate, and strengthen current consumer due diligence (CDD) rules. The proposed CDD rule would apply to financial institutions, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities, and would require these entities to establish and maintain policies for monitoring the accounts they hold. A key part of the FinCEN ANPR addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account that is held at an institution to assess the likelihood of suspicious activity.

FinCEN last week announced it would extend the comment deadline for this ANPR for another thirty days. The comment period was originally set to expire on May 4.

The proposed FinCEN regulations would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crimes.

Credit unions would have to attempt to obtain additional documentation and agreements related to all applicable members if "beneficial ownership" requirements were expanded, as proposed by the ANPR, CUNA Regulatory Counsel Dennis Tsang said. CUNA is especially concerned about this potential expansion, noting that it can be difficult for some credit unions to obtain such information from their members. Reviewing accounts to determine if they meet "beneficial ownership" standards can be time consuming, and the requirements can conflict or interfere with member confidentiality standards and can create fiduciary or legal issues, CUNA added. Credit unions and other financial institutions would also need to increase staffing and training resources, and make software and system changes to implement and maintain the potential "beneficial ownership" requirements, CUNA said.

FinCEN should abandon the due diligence ANPR and, instead, work with federal financial regulators to further clarify current Bank Secrecy Act and anti- money laundering rules, and develop more specific guidance to address related problem areas, the letter said. CUNA also suggested FinCEN work with the National Credit Union Administration, other federal and state financial institution regulators, and law enforcement authorities to address BSA, AML, and due diligence issues.

For the full comment letter, use the resource link.

Inside Washington (05/04/2012)

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  • WASHINGTON (5/7/12)--Trade groups are concerned about how the Consumer Financial Protection Bureau (CFPB) will define larger non-bank market participants under its supervision. Under the current proposal, the CFPB would regulate large debt collection and credit reporting firms. Trade groups say the proposal also would include small companies. "The mere fact that this rule identifies 'larger participants' does not mean that it has no impact on small business," David Hirschmann, president/CEO of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, said in a comment letter last month. The chamber maintains the CFPB's proposal does not comply with the Small Business Regulatory Enforcement Act, which requires the bureau to convene a panel of small business experts if the rule would substantially affect small firms (American Banker May 4). The proposal calls for firms with more than $10 million in annual debt collection receipts or those with more than $7 million in credit reporting receipts to be subject to CFPB supervision. The National Credit Reporting Association said the proposal should also consider the number of people employed by firms …
  • WASHINGTON (5/7/12)--The Treasury Department on Thursday provided additional details on its exit strategy for winding down the remaining bank investments in the Troubled Asset Relief Program (TARP). Treasury will use a combination of repayments, restructuring and sales of investments, Tim Massad, assistant secretary for financial stability, wrote in a blog entry. There are still 343 banks remaining in TARP's Capital Purchase Program, most of them community banks. Massad said only a few banks will repurchase their preferred shares. A "handful" of banks have proposed restructuring their investments, usually in the form of a merger or a plan to raise new capital, Massad said. Treasury, in turn, agrees to receive cash or other securities. The agency has participated in about 20 such transactions and will continue to do so in limited cases, Massad said. In March, Treasury sold its preferred stock investments in six banks through public auctions. The stock sales generated more than $362 million in income. "We expect the sale of existing investments to be an ongoing component of the wind down of TARP's bank programs," Massad wrote …

Co-ops CUNA hosted at White House

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WASHINGTON (5/4/12)--Credit Union National Association (CUNA) representatives will be among the 150 cooperative leaders, representing every cooperative sector across the country, meeting today with White House policymakers to discuss how co-ops are aiding the ongoing economic recovery, creating new jobs, and investing in their communities.

CUNA Co-op Alliances Committee Chairman and Minnesota Credit Union Network President/CEO Mark Cummins, Vice Chairwoman and Hershey FCU President/CEO Diana Roberts, committee member and Alternatives FCU CEO Tristram Coffin, and National Cooperative Business Association (NCBA) board member and Association of Vermont Credit Unions CEO Joseph Bergeron are also scheduled to attend the meeting, as are representatives from Jackson, Miss.'s Hope FCU.

The event is slated to start with a briefing from Obama administration staff, and attendees will also discuss financial cooperative issues, job creation, business development, and agriculture programs in separate breakout sessions with members of the administration.

"Every day cooperatives around the U.S. are stimulating the economy and we are pleased to have the opportunity to discuss our successes in job creation and ways to use the cooperative model to continue to strengthen communities large and small," Liz Bailey, NCBA interim president/CEO, said in a release. "Two million jobs are generated each year as a direct result of cooperatives, which illustrates the incredible impact that these organizations have on local economies," she added.

The White House event is one of many ways the NCBA is observing 2012's International Year of Cooperatives. This year has been named the International Year of Cooperatives by the United Nations and the U.S. Senate. The theme for the year is "Cooperative Enterprises Build a Better World," and CUNA has pledged to "lead efforts to engage the credit union community in the promotion of International Year of Cooperative activities."

For the full NCBA release, use the resource link.

AEA FCU continues to improve NCUA reports

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ALEXANDRIA, Va. (5/4/12)--The financial condition of AEA FCU, Yuma, Ariz., continues to improve under National Credit Union Administration (NCUA) conservatorship, the agency reported, noting that the credit union posted $839,096 in income in the first quarter of 2012.

Total assets held by the credit union stood at $245.1 million at the end of the quarter, and the credit union's net worth also improved by 18 basis points during the quarter.

The NCUA placed the credit union into conservatorship in late December, saying that it was not adequately capitalized under standards set forth in the Federal Credit Union Act and had earnings "insufficient to enable it to continue under present management." The agency at that time said the credit union's difficulties sprang from problems in its loan portfolio.

The loan difficulties were caused by a $50 million fraudulent business loan scheme. Yuma businessman Frank Ruiz; William Liddle, AEA's former vice president of lending; and Liddle's wife, Rhonda Liddle, allegedly took part in the scheme. Ruiz was recently sentenced to 24 months in prison and three years' supervision, and Liddle and his wife are awaiting sentencing.

The credit union recently completed an organization-wide rebranding effort, improved its credit and debit card services, and has enhanced its website.

"Our goal for 2012 is to continue the efforts to transition AEA back to a financially strong credit union," said Elizabeth Whitehead, NCUA Region V director. During the conservatorship, the agency has reduced the credit union's expenses, streamlined operations, and "began the process of returning AEA to the fundamental credit union business model," Whitehead said, adding that the NCUA has seen significant progress in all of these areas.

For the full NCUA release, use the resource link.

CUs bring reg concerns to NCUA listening session

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WASHINGTON (5/4/12)--In launching the first of her series of "Listening Sessions" to hear credit union concerns, National Credit Union Administration (NCUA) Chairman Debbie Matz acknowledged that there are concerns about regulatory burdens that are shared by many credit unions and she encouraged credit unions to raise those issues at the sessions.

At this week's Boston session, Matz said, "We can talk about anything except a specific credit union's supervisory issues," and told the group the agency's presentations had been minimized to give credit unions more time to raise their issues.

Among the 90 or more participating credit union officials were Dan Egan, president/CEO of the Massachusetts Credit Union League, New Hampshire Credit Union League, and Credit Union Association of Rhode Island, attended the session along with Credit Union Association of New York Credit Union President Bill Mellin, and Massachusetts/New Hampshire/Rhode Island leagues General Counsel Mary Ann Clancy.  Most attendees were from NCUA's Region I, which includes the northeastern region of the country.

NCUA board Members Gigi Hyland and Michael Fryzel, along with senior NCUA staff, also attended. Deputy General Counsel Mary Mitchell Dunn participated for the Credit Union National Association.

A variety of concerns were brought up at the meeting by credit union officials. One credit union representative urged that NCUA examiners not simply focus on the negative aspects of a credit union's operations during their examination and indicated that the examination report should reflect positive developments at the credit unions as well as any less favorable ones.

NCUA officials agreed this should be part of the process and NCUA Director of Examination and Insurance Larry Fazio indicated that during agency training, such as the recent conferences in Florida, examiners are being encouraged to look at the whole picture at the credit union.

Another credit union official raised the issue of the credit union regulatory model and questioned whether NCUA is taking any role in standing up to other agencies, including the Consumer Financial Protection Bureau (CFPB), on issues that may mean more regulations for credit unions such as the regulation of overdraft protection programs.

Matz said that the agency does discuss concerns with other regulators and that she recognizes credit unions have raised legitimate issues about their overdraft protection plans. The CFPB currently is studying financial institutions' overdraft protection programs.

Whether the NCUA is planning to assess National Credit Union Share Insurance Fund premiums based on risk was another question and the agency clarified that such a move would require a statutory amendment. The NCUA clarified for CUNA that the agency is not contemplating pursuing such legislation.

The agency also is looking at risk management and ways to improve prompt corrective action. CUNA will be monitoring those efforts very closely.

Problems that credit unions have had getting approvals from NCUA was another matter, including when there is a waiver of a regulatory provision involved. The agency encouraged the participants to submit recommendations for improvements in the waiver process.

NCUA should seek more guidance from credit unions on how to solve problems, one participant recommended, and another questioned an NCUA examiner's limiting definition of the word "direct" as it relates to the experience requirement for those engaging in member business lending.

Another question: When might Nevada and California return to Region V? The questioner was told Nevada may return next year although that is not certain and NCUA did not indicate when California may return to its former region.  Such decisions, based, in part, on consideration of resource needs, are made later in the year.

During the financial crisis, the NCUA shifted these states to NCUA Region II, which has a number of more experienced examiners.

The impact of credit union mergers and the consolidation that is ongoing in the system was also discussed, including what constitutes a "failed credit union," for purposes of agency takeover.  Currently, the agency must "prove that by the numbers the credit union will fail" before the NCUA can treat the institution as one that will not revive.

Whether the NCUA would consider returning to an 18-month examination cycle was also raised. The agency was not positive about that recommendation, but CUNA and the leagues plan to continue that discussion with the agency, particularly for well-managed credit unions.

NCUA's Fazio echoed the chairman's remarks that, overall, communication between credit unions and examiners needs to be improved. "We need to do more to listen to credit unions" during the examination process, Fazio said.

A dialogue between credit unions and examiners should occur before, during, and after examinations, to avoid any surprises, he added. When examiners do find issues at a credit union, they should give credit union management a chance to explain how they would deal with the issue, and should accept the credit union's solution, if it is reasonable, he added.

Fazio also emphasized that examiners are being instructed to cite the specific legal authority for their directives. This has been a major concern for number of credit unions who have felt that the examiner was being arbitrary in ordering certain directives and not able to provide any legal basis for their directives.

Also during the session, Matz noted CUNA for its work with the CFPB and said CUNA has been "very engaged."  She also noted CUNA's efforts to bring together accounting experts to discuss issues regarding troubled debt restructuring (TDR) that led to the development of the NCUA's recent TDR proposal. The proposal may be on the agency's monthly meeting agenda May 24.

Other listening sessions have been planned for:

  • May 9 in Alexandria, Va.;
  • June 5 in St. Louis, Mo.;
  • June 13 in Orlando, Fla.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
The sessions are scheduled to be held between 1 and 4 p.m. (ET). Registration is limited to the first 150 reservations.

CUNA and league officials are planning to attend all sessions to hear what credit unions raise as well as the  NCUA's responses, and will follow up with its Examination and Supervision Subcommittee and the NCUA on key issues brought p during the sessions.

For more on the sessions, use the resource link.

Inside Washington (05/03/2012)

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  • WASHINGTON (5/4/12)--Among the topics addressed in a recent private meeting between the Federal Reserve Board and CEOs of several major U.S. banks were pending regulatory reform laws, the results of stress tests and alternative credit ratings. The Fed made details of the meeting public Wednesday. Many of the issues were related to the Dodd-Frank Act. The Fed's policy is to make public any meeting in which Dodd-Frank is addressed. Bank executives attending the meeting included Lloyd Blankfein of Goldman Sachs, Richard Davis of U.S. Bancorp, Jamie Dimon of JPMorgan Chase & Co., James Gorman of Morgan Stanley, Jay Hooley of State Street Corp. and Brian Moynihan of Bank of America Corp. The meeting was held at the Federal Reserve Bank of New York. In regard to recent stress tests, banks' internal models did not synch with the Fed's models, raising questions from bankers. Among the proposed regulations discussed were a rule that would prohibit banks from participating in proprietary trading, known as the Volcker Rule, and alternatives credit ratings. Bankers said they were concerned that the Fed's proposed alternative credit ratings--required by the Dodd-Frank Act--may overstate the risk of certain assets …
  • WASHINGTON (5/4/12)--Republicans on the House Financial Services Committee issued a letter to the Federal Housing Finance Agency (FHFA) on Monday asking if the agency has the statutory authority to reduce mortgage principal at Fannie Mae and Freddie Mac. In the letter, the Republicans asked Acting FHFA Director Edward DeMarco six questions regarding the possible effects of principal reduction. Although the letter did not provide a specific recommendation on what the agency should do, congressional Republicans previously have sided those who have resisted write-down proposals (American Banker May 3). DeMarco has also expressed doubt about whether FHFA has the authority to mandate the write-downs. Last Friday, an FHFA spokeswoman said a decision on principal reduction will not be made until the agency concludes its principal forgiveness analysis and discussions with the Department of the Treasury …
  • WASHINGTON (5/4/12)--Without implementation of reforms to the financial system, regulators and lawmakers will have lost an opportunity to end "too big to fail," Federal Reserve Board Gov. Daniel Tarullo said Wednesday. Tarullo, speaking before the Council on Foreign Relations in New York, said post-crisis regulatory reform program has been primarily directed at the too-big-to-fail problem, and more generally at enhancing the resiliency of the largest financial firms. The Dodd-Frank Act established the Financial Stability Oversight Council (FSOC), which has the authority to regulate any non-bank financial firm whose failure could be the source of systemic problems, Tarullo said. Dodd-Frank also has mandated capital requirements and liquidation authority, he added. Under liquidation authority, the Federal Deposit Insurance Corp. can impose losses on a failed institution's shareholders and creditors, and replace its management. Tarullo also noted the Basel Committee's framework for calibrating capital surcharges for banks of global systemic importance. Another proposed reform is quantitative liquidity requirements. The Basel Committee generated two such proposals, both of which have been delayed, Tarullo said. "Of one thing I am sure: If we do not complete rigorous implementation of this complementary set of reforms, we will have lost the opportunity to reverse the pre-crisis trajectory of increasing too-big-to-fail risks," Tarullo said  …

CU credit report rights covered in iCU Magi

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WASHINGTON (5/3/12)--Credit unions and others that use consumer reports must have a "permissible purpose" to obtain them according to the Fair Credit Reporting Act (FCRA), and Credit Union National Association (CUNA) Director of Compliance Information Valerie Moss has outlined the circumstances under which the FCRA allows a credit bureau to release a credit report to a credit union in the May issue of CUNA's Credit Union Magazine.

In the article, Moss notes that credit unions may collect credit reports:

  • When they are instructed by a consumer, in writing, to obtain their credit report;
  • When a member applies for a new line of credit; and
  • When they are needed for pre-employment research on a given job applicant.
The reports can also be collected to aid credit account reviews or collections. However, only active members' credit reports can be collected for this purpose.

Moss writes that the FCRA does not allow financial institutions to access credit reports for members with paid off or closed accounts. Credit unions with a legitimate business need for information may also collect credit reports provided they are used in connection with a business transaction that's initiated by the consumer, or to review an account to determine whether the consumer continues to meet the terms of the account.

Credit bureaus may furnish credit reports without a consumer's specific authorization if they are tied to loan applications, but many credit unions and other institutions still require their members to authorize the release of their credit report in these cases, according to Moss.

With the exception of prescreened solicitations, credit unions may not use credit reports to market products and services to their members, she added.

Other compliance articles are available in the latest issue of Credit Union Magazine. For those articles, and more from the magazine, use the resource link.

IRS opens 2013 low-income tax clinic grant program

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WASHINGTON (5/3/12)--Applications for the 2013 round of the Internal Revenue Service's (IRS) Low Income Taxpayer Clinic (LITC) grant process will be accepted until June 15, the IRS said Wednesday.

LITCs represent low-income taxpayers in federal tax disputes the IRS for free or for a small charge. The LITCs also may provide tax education and outreach for taxpayers who speak English as a second language.

The IRS noted its LITC program awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain low income taxpayer clinics. Around $10 million in grants were issued to 165 organizations, including some credit unions, last year.

LITC applications from all locations will be accepted, but the IRS said it is particularly interested in receiving applications from organizations in underserved areas of the country.

For more on the LITC program, use the resource link.

Majority of consumers support co-op businesses NCBACFA

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WASHINGTON (5/3/12)—A recent National Cooperative Business Association (NCBA)/Consumer Federation of America (CFA) survey found more Americans think credit unions and other cooperative businesses have the best interests of their members and customers in mind more than do for-profit businesses.

The NCBA/CFA survey, administered by Opinion Research Corp International (ORC), questioned 1,008 respondents over the weekend of April 19. Based on the survey results, close to one-third of Americans (29%) identified themselves as members of a consumer cooperative.

The survey also revealed a favorable view of cooperatives in regards to their business trustworthiness and quality of service. In fact, co-ops received higher marks across the board than for-profit businesses.

Seventy-seven percent of respondents said co-ops are committed to providing the highest quality of service to their customers, compared to 64% that said that of for-profits.

Nearly 80% said co-ops could be counted on to meet their customer's needs, and 77% said co-ops offered fair, competitive prices, according to the survey. For-profit businesses had lower scores in each of those categories, receiving approval marks of 70% and 67%, respectively.

"This survey illustrates that the 29,000 cooperatives in this country offer a much-needed alternative that consumers appreciate," Liz Bailey, NCBA interim president/CEO, said.

"At a time when the entire business community is focused on demonstrating shared value and social responsibility, it's gratifying to know that Americans continue to place their trust in member-owned, democratically governed cooperative business enterprises," she added.

CFA Executive Director Stephen Brobeck said his group "has long believed that cooperatives offer pro-consumer services and enhance pro-consumer competition in the marketplace."

2012 has been named the International Year of Cooperatives by the United Nations and the U.S. Senate. The theme for the year is "Cooperative Enterprises Build a Better World," and the Credit Union National Association (CUNA) has pledged to "lead efforts to engage the credit union community in the promotion of International Year of Cooperative Activities."

CUNA is also taking part in a NCBA-led steering committee that is working to raise the profile of cooperatives, improve access to cooperative business, and reach out to government officials and the youth of the world to educate them on cooperative business.

The 7,400 credit unions in the United States represent the largest segment of the more-than 29,000 American cooperative businesses, holding nearly $1 trillion in assets and serving more than 92 million consumers.

Inside Washington (05/02/2012)

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  • WASHINGTON (5/3/12)--Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, Tuesday welcomed the dismissal of ethics allegations against him. The board of the Office of Congressional Ethics (OCE) voted 6-0 Friday to clear Bachus on allegations of insider trading. "The OCE's unanimous dismissal of these false allegations is a welcome conclusion to a destructive and disruptive, media-generated assault," Bachus said in a press release.  "It has been a long, painful, and frustrating experience to have a reputation built over many years sullied by untrue accusations." Bachus thanked former Securities and Exchange Commission (SEC) chairmen Harvey Pitt and Roderick Hills and former federal judge and SEC official Stanley Sporkin "for reviewing the allegations, determining they were false and meritless, and publicly coming to my defense" …
  • WASHINGTON (5/3/12)--In a letter to Acting FHFA Director Edward Demarco, two Democratic House members said Demarco's office purposely quashed a mortgage principal reduction program despite analyses that showed the initiative would save U.S. taxpayers money. In the letter, Reps. Elijah Cummings (D-Md.) and John Tierney (D-Mass.) said they obtained internal documents that reveal how Fannie Mae officials worked with Citibank beginning in 2009 to develop a "shared equity" principal reduction pilot program that ultimately was terminated for unspecified reasons. They said the documents show that Fannie Mae officials strongly supported the concept of principal reduction and fully evaluated its risks and benefits as they obtained the necessary internal approvals to finalize the program …
  • WASHINGTON (5/3/12)--Tony Renzi, executive vice president of single family business, operations and information technology at Freddie Mac, has resigned, effective May 11, according to a Securities and Exchange Commission filing (American Banker May 2). Renzi joined the government-sponsored enterprise in April 2011 after leaving GMAC Mortgage. He has taken a position with an unnamed financial services company, according to the filing …
  • WASHINGTON (5/3/12)--Patricia Geoghan, acting special master for the Troubled Asset Relief Program (TARP), outlined the principles used to determine compensation for executive pay of TARP recipients, in an interview with American Banker (May 2). In most cases, 75% of compensation is issued in stock, Geoghan said. Up to a third of the stock is in incentive compensation, which is based on achievement of performance metrics.  If performance goals are reached, then the executive can only cash out that award as the company repays its TARP obligations in 25% increments. The remaining stock compensation is issued on every payroll date, but instead of being paid in cash, executives are paid in stock or stock units that are promises to deliver stock in the future. Any cash salary is limited to no more than $500,000. The overall CEO compensation packages payable by American International Group, Ally Financial and General Motors have not increased, Geoghan said.  Although there has been some modification in the mix of stock salary and long-term restricted stock for the CEO group, the overall amount of CEO compensation is frozen at 2011 levels …

Inside Washington (05/01/2012)

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  • WASHINGTON (5/2/12)--John Munn was re-elected chairman of the Federal Financial Institutions Examination Council State Liaison's Committee (SLC). His term will run through April 30, 2013.  Munn is the director of the Nebraska Department of Banking and Finance, where he has served since January 2005. Munn was first elected chairman of the SLC in February 2008 for a partial term created when the previous chairman resigned.  Since May of 2008, Munn has been subsequently re-elected to five one-year terms.  Also, David J. Cotney, commissioner, Massachusetts Division of Banks, was reappointed to the SLC.  His nomination was first confirmed by the council in 2010 to complete a partial term vacancy created by the resignation of Sarah Bloom Raskin, upon her appointment to the Board of Governors of the Federal Reserve System. Cotney's first full term will continue through April 30, 2014. Cotney has more than 20 years experience with the Massachusetts Division of Banks. He previously served as the chief operating officer and senior deputy commissioner for administration and policy, and 10 years experience as deputy commissioner in various units of the division ...
  • WASHINGTON (5/2/12)--About 60% of lenders said they were now "much less likely" to originate home loans backed by Fannie Mae and Freddie Mae to an applicant with a FICO score of 620 and a 10% down payment than they were before the financial crisis, according to the Federal Reserve's Senior Loan Officer Opinion Survey. Banks provided several reasons for their hesitancy, including fear of exposure to residential real estate; effects of legislative changes, supervisory actions and new accounting standards; higher servicing costs for delinquent mortgages; and the challenges some borrowers face in obtaining second liens (American Banker May 1). The survey indicated banks were less likely to originate Fannie Mae and Freddie Mac-backed loans to potential borrowers with a FICO score of 680 regardless of the size of the down payment. Reservations by banks about using the government-sponsored enterprises for borrowers with a FICO score above 720 with a 10% down payment have changed little from 2006. About 71% of lenders said their likelihood to lend to those borrowers was about the same

May 8 webinar is for CTR SAR tech specifications

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VIENNA, Va. (5/2/12)--Information technology (IT) professionals--those responsible for integrating upcoming technical specifications for updates to the Financial Crimes Enforcement Network's (FinCEN) new Currency Transaction Report (CTR) and Suspicious Activity Report (SAR)--may be interested in a May 8 informational webinar.

The FinCEN webinar will also address recently released specifications for its new Designation of Exempt Person (DOEP) report. The session is specifically designed for those IT professionals responsible for integrating the new technical specifications into batch filing processes; these may be vendors of batch filing programs as well as in-house IT staff of financial institutions.

FinCEN representatives will discuss the following topics during the webinar:

  • Overview of the e-filing specifications for FinCEN's new CTR, SAR, and DOEP;
  • Overview of BSA e-filing test site and testing process; and
  • FAQs about the e-filing specifications.
FinCEN will be offering a separate webinar at a later date for financial institution employees and compliance professionals with BSA-related responsibilities.

It is recommended that participants of the IT webinar review the technical specifications prior to the session and document any specific questions for discussion. Use the resource link to access the specifications.

La. insurance commission is first to partner with FinCEN

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VIENNA, Va. (5/2/12)--The Louisiana Commissioner of Insurance and the Financial Crimes Enforcement Network (FinCEN) have signed a Memorandum of Understanding (MOU) that will allow the state and federal regulators to share information meant to better protect the financial industry and consumers from criminal activity and fraud.

FinCEN hopes this is just the first of many such agreements with states. The goal of the MOU are to enhance communication and coordination between FinCEN and state insurance departments to help states better identify, deter and interdict financial crime. FinCEN the agreement should also help states to efficiently pass information along to FinCEN, which would enhance its crime-fighting efforts.

Louisiana's insurance commissioner, James J. Donelon, is president-elect of the National Association of Insurance Commissioners, and FinCEN said he will "help set the standard for other states to follow."

"This is a significant tool that will enhance our efforts to better protect our consumers from fraud and other criminal activity," said Commissioner Donelon in the MOU announcement.

IRS announces 2013 VITA application deadline

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WASHINGTON (5/2/12)--Applications for the Internal Revenue Service's Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grant programs will be accepted until May 31, the IRS has announced.

The TCE Program offers free tax help to taxpayers who are 60 and older, and VITA offers free tax help to people earning $50,000 or less. Many credit unions offer these forms of tax preparation assistance.

Credit unions and community organizations that take part in the VITA Program receive IRS-provided training in the preparation of basic tax returns and establishment of tax preparation sites. Organizations that apply for funding in this round may receive annual VITA funding for as many as three years.

The IRS in a release noted it awarded $5.6 million in funds to 30 TCE grantees ahead of the most recent tax filing season. A total of $12 million was awarded to 213 VITA grantees in that same time period, and the IRS said the two programs had processed more than 2 million returns as of April 9.

Despite Fed survey jury out on interchange impact CUNA

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WASHINGTON (5/2/12)--While the Federal Reserve's study of the impact of the debit card interchange fee cap suggested that smaller issuers have only seen modest changes in their rates, Credit Union National Association (CUNA) President/CEO Bill Cheney said "the jury is still out" and credit unions continue to be concerned that market forces will ultimately drive down the fees that the exemption for smaller institutions is intended to protect.

For a CUNA summary of the Fed survery report, use the resource link below.

The survey, which was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and is intended to help the regulator monitor the interchange rule's impact on markets and the effectiveness of the interchange fee limitation exemption for small issuers, found that:

  • The average interchange fee received by credit unions and other debit card issuers that are exempt from the Federal Reserve's debit interchange fee cap was 43 cents per transaction in 2011;
  • The average interchange fee charged by financial institutions that are subject to the cap was far lower in that time period, totaling 24 cents per transaction; and
  • The average interchange fee in 2009 was 43 cents.
The Fed reported there were 46.7 billion debit card transactions in 2011, with a value of more than $1.8 trillion. This total was a 24% increase from 2009's transaction total of 37.6 billion, and a 27% increase from the amount of interchange income tallied in 2009, $1.4 trillion, the Fed added.

The survey collected data on all costs associated with debit card programs and debit card transactions from card issuers and payment network representatives.

The surveys are intended to compile aggregate or summary information concerning the costs incurred, and interchange transaction fees charged or received by issuers or payment card networks in connection with debit card transactions.

Overall, Cheney said, it would be a mistake to read too much into the results of Federal Reserve's debit card interchange fee survey.

The debit interchange fee cap regulations, which became effective last fall, limit debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allow an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.

Cheney on Tuesday noted that the debit fee regulations do not require card networks to maintain a two-tiered system; they do so only at their discretion. And secondly, it is too soon to tell whether the routing and exclusivity provisions that dictate the use of PIN or signature networks will over time undermine any two-tiered interchange fee structure by driving small-issuer rates toward the large-issuer cap.

The routing and exclusivity provisions in the interchange regulation have only been in effect since April 1, and the Fed survey only covers the fourth quarter of 2011, he also noted.

For more on the Fed survey, including CUNA's summary, use the resource links.

CU comment sought on NCUA annual reg review

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WASHINGTON (5/2/12)--Each year, the National Credit Union Administration (NCUA) reviews one-third of its regulations to identify any rule or provision that it deems "outmoded, ineffective, insufficient, or excessively burdensome," and the Credit Union National Association (CUNA) has asked credit unions to share their concerns regarding the NCUA's 2012 regulatory reform list, which was released earlier this year.

Regulations under review in 2012 include rules governing bylaws, fields of membership, fixed-asset ownership, mergers, and corporate credit unions, among others.

The NCUA will review the following regulations in 2012:
  • § 701.1 - Federal Credit Union Chartering, Field of Membership Modifications, and Conversions;
  • § 701.2 - Federal Credit Union Bylaws;
  • § 701.3 - Member Inspection of Credit Union Books, Records, and Minutes;
  • § 701.4 - General Authorities and Duties of Federal Credit Union Directors;
  • § 701.6 - Fees Paid by Federal Credit Unions;
  • § 701.14 - Change in Official or Senior Executive Officer in Credit Unions that are Newly Chartered or are in Troubled Condition;
  • § 701.19 - Benefits for Employees of Federal Credit Unions;
  • § 701.20 - Suretyship and Guaranty;
  • § 701.21 - Loans to Members and Lines of Credit to Members;
  • § 701.22 - Loan Participation;
  • § 701.23 - Purchase, Sale and Pledge of Eligible Obligations;
  • § 701.24 - Refund of Interest;
  • § 701.25 - Charitable Contributions and Donations;
  • § 701.26 - Credit Union Service Contracts;
  • § 701.30 - Services for Nonmembers Within the Field of Membership;
  • § 701.31 - Nondiscrimination Requirements;
  • § 701.32 - Payments on Shares by Public Units and Nonmembers;
  • § 701.33 - Reimbursement, Insurance, and Indemnification of Officials and Employees;
  • § 701.34 - Designation of Low-Income Status; Acceptance of Secondary Capital Accounts by Low-Income Designated Credit Unions;
  • § 701.35 - Share, Share Draft and Share Certificate Accounts;
  • § 701.36 - FCU Ownership of Fixed Assets;
  • § 701.37 - Treasury Tax and Loan Depositories; Depositories and Financial Agents of the Government;
  • § 701.38 - Borrowed Funds from Natural Persons;
  • § 701.39 - Statutory Lien;
  • § Appendix A to Part 701 - Federal Credit Union Bylaws;
  • § Appendix B to Part 701 - Chartering and Field of Membership Manual;
  • Part 702: Prompt Corrective Action;
  • Part 703: Investment and Deposit Activities;
  • Part 704: Corporate Credit Unions;
  • Part 705: Community Development Revolving Loan Fund Access for Credit Unions;
  • Part 706: Unfair or Deceptive Acts or Practices;
  • Part 707: Truth in Savings;
  • Part 708a: Bank Conversions and Mergers;
  • Part 708b: Mergers of Federally-Insured Credit Unions; Voluntary Termination or Conversion of Insured Status;
  • Part 709: Involuntary Liquidations of Federal Credit Unions and Adjudications of Creditor Claims Involving Federally Insured Claims Involving Federally Insured Credit Unions in Liquidation; and
  • Part 710: Voluntary Liquidations.
NCUA Chairman Debbie Matz in announcing the list said the agency is "committed to 'modify, streamline, expand, or repeal' rules that are not required by statute and would not jeopardize safety and soundness," and the NCUA has noted the 2012 round of reviews begins a new three-year rotation that will result in another complete review of all NCUA regulations by 2014.

Comments should be sent to CUNA by July 16.

The NCUA is accepting public comments on the substance and wording of each rule until Aug. 3.

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

NEW Fed releases interchange survey

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WASHINGTON (UPDATED: 12:30 p.m. ET, 5/1/12)—The Federal Reserve's interchange study, as required by the Dodd-Frank Act, was released earlier today.

Among the findings:

  • The average interchange fee received by credit unions and other debit card issuers that are exempt from the Federal Reserve's debit interchange fee cap was 43 cents per transaction in 2011;
  • The average interchange fee charged by financial institutions that are subject to the cap was far lower in that time period, totaling 24 cents per transaction; and
  • The average interchange fee in 2009 was 43 cents.
The Fed reported there were 46.7 billion debit card transactions in 2011, with a value of more than $1.8 trillion. This total was a 24% increase from 2009's transaction total of 37.6 billion, and a 27% increase from the amount of interchange income tallied in 2009, $1.4 trillion, the Fed added.

The Fed's interchange market surveys collect data on all costs associated with debit card programs and debit card transactions. The survey results are drawn from debit card issuers and payment card network representatives.

The surveys are intended to compile aggregate or summary information concerning the costs incurred, and interchange transaction fees charged or received by issuers or payment card networks in connection with debit card transactions.

The Fed surveys are intended to help the regulator monitor the interchange rule's impact on markets and the effectiveness of the interchange fee limitation exemption for small issuers.

The debit interchange fee cap regulations, which became effective last fall, limit debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allow an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.

The Credit Union National Association is analyzing the Fed report, and more on CUNA's analysis will be featured in Wednesday's News Now.

For more on the Fed survey, use the resource link.