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CU difference shows in overdraft programs CUNA to CFPB

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WASHINGTON (7/2/12)--Because of their cooperative structure, credit unions  do not have financial incentives to charge members the high fees that banks frequently do in order to maximize profits for shareholders--the Consumer Financial Protection Bureau (CFPB) should note this difference as it proceeds to write regulations governing overdraft protection programs, according to the Credit Union National Association (CUNA).

In a comment letter submitted to the CFPB Friday, CUNA's Deputy General Counsel Mary Dunn said that a recent study by the Pew Charitable Trusts, which compared the fee practices of the 12 largest credit unions with those of the 12 largest banks, bears out the difference in fee practices. Credit union fees are reasonable and CUNA has urged the agency not to regulate in this area. Dunn cited an April statement from CFPB Director Richard Cordray in which he said the agency does not intend to regulate fees.   

The Pew study found in 2011 the median fee charged by credit unions when the credit union covered the item was less than three-quarters of that charged by banks. The median fee charged by credit unions when transferring funds from an account of the member to cover the overdraft was $5, compared to $12 charged by banks, according to the study. 

The comment letter noted that CUNA and credit unions are strong proponents of fair lending practices and proper consumer disclosures.  In 2004, CUNA developed its policy on overdraft protection programs, which states that "when used appropriately by members, [overdraft protection programs] serve as a valuable alternative to overdrawing share drafts and are fully consistent with the philosophy and principles unique to the credit union system."   (Use the resource link to read the complete policy at the end of the comment letter text.)

CUNA asked the agency to be mindful that credit unions offer overdraft programs as a convenience and accommodation for their members and have indicated many members appreciate these services.  

Prior to developing its letter to the CFPB on overdraft protection programs, CUNA conducted a survey and over 500 members provided their responses. The survey made a distinction between Overdraft Protection/Transfer programs and Overdraft Privilege programs, even though the agency did not clearly define these terms. 

"Reflecting our members' practices, we defined an 'Overdraft Protection/Transfer' program as one in which funds are transferred to the member's checking account from the member's savings, money market, or other type of account to cover the amount of an item that would have otherwise been unpaid.  We define an 'Overdraft Privilege' program as one in which the credit union's own funds are used to cover the overdraft."

CUNA found that among credit unions that offer a type of Overdraft Protection/Transfer program, over 80% of respondents indicated that at least half of their members with checking accounts have signed up for one or more of these programs, indicating the importance of these services to those members. 

Almost all respondents inform their members of these programs through information included with the disclosures provided at account-opening, as well as by having staff inform members at account-opening.

In addition, roughly two-thirds of respondents have staff inform members of these programs upon being contacted by the member regarding an overdraft that has occurred.  These credit unions view this as a critical opportunity for the credit union to inform the member of a lower cost alternative to other forms of overdraft protection.

Use the resource link to read CUNA's full comments.

CUNA touts MBLs at congressional credit briefing

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WASHINGTON (7/2/12)--The Congressional Caucus on Access to Capital & Credit convened a briefing Friday that brought together representatives from both government and private lending--including the Credit Union National Association (CUNA) to represent credit unions--to discuss ideas of how to expand capital access to help boost the economy.

CUNA Chief Economist Bill Hampel tells attendees at a congressional briefing on credit access that credit unions need a higher member business lending cap if they are to continue to help small businesses during the economic recovery. (CUNA Photo)


Bill Hampel, CUNA's chief economist, used the forum to highlight a need for an increased cap on credit union member business lending (MBL) to help small businesses with an ongoing credit crunch.   

CUNA estimates that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

CUNA also has reported that in the four years since the recession began, credit union business loans outstanding rose by 45%, while small business loans at banks fell by 13.4% over the same period.

Hampel told the caucus audience that unless the MBL cap is increased, more than 500 credit unions may have to stop or slow their small business lending programs within the next few years.

"The point is," Hampel said, "these 500 credit unions--that incidentally hold about 75% of MBLs subject to the cap--are right now having to stop or slow their business lending solely because of this arbitrary cap.

"That is just plain wrong, particularly at a time when small businesses are crying out for more credit."

He noted there are bills in the U.S. House (H.R. 1418) and Senate (S. 2231) that would increase the cap to 27.5% of assets and noted it was a "no-brainer" way to increase capital for small businesses.

The capital and credit access caucus is co-chaired by Reps. David Schweikert (R-Ariz.) and Bobby L. Rush (D-Ill.). Also on the Friday program were representatives from: The U.S. Treasury Department's Community Development Financial Institutions Fund, the Security and Exchange Commission, the Small Business Administration, the American Bankers Association, the Independent Banks Association, CrowdCheck, the National Venture Capital Association, and Opportunity Finance Network.

NCUA used caution in audited statements CUNA

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WASHINGTON (7/2/12)--The most important implication for credit unions of the new Temporary Corporate Credit Union Stabilization Fund (TCCUSF) financial statements combined with the updated information posted Friday by the National Credit Union Administration on its website on Corporate System Resolution Costs is what it says about the likely remaining assessments for that fund, said Credit Union National Association (CUNA) Chief Economist Bill Hampel in a recent analysis.

The National Credit Union Administration (NCUA) received a clean audit of its corporate stabilization fund last week (News Now June 25). And, as promised when announcing the clean audit, the NCUA Friday posted an update to its the corporate system resolution loss projections through year-end 2011.

Hampel said that after analyzing both sets of information, he believes that the NCUA used "an abundance of caution" in developing the audited financial statements, which offered a negative net position of $5.3 billion as of December 2011 as the latest estimate of the amount to be paid in future stabilization assessments.  

In reviewing all the information, Hampel said, the negative net position is 80% of the way to the top of the projected loss range predicted at $2.7 billion to $6 billion. 

He said that because the negative net position is at the high end of the range, it appears to be a "very-unlikely-to-be-exceeded" number rather than a "most-likely-to-be assessed" number. 

"Assuming that the various outcomes are distributed fairly evenly around the $4.4 billion mid-point of the range, this suggests that the remaining assessments to credit unions will total about $4.4 billion rather than $5.3 billion.

"That would reduce by one the number of years remaining of roughly 10 basis point assessments to four to five," Hampel said.

Hampel reminded that the loss estimates are just that--educated predictions.

"The fact that the U.S. housing market has been improving over the past few months suggests the ultimate losses could be lower."

The NCUA has told CUNA that this year's assessment will be on the agenda for its board meeting on July 24.

Inside Washington (06/29/2012)

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  • CHICAGO (7/2/12)--The Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board Friday outlined the process for receiving and evaluating initial resolution plans--known as living wills--from big banks. Companies subject to the rule are required to file their initial resolution plans in three groups on a staggered schedule. Firms in the first group, which includes U.S. bank holding companies with $250 billion or more in total nonbank assets and foreign-based bank holding companies with $250 billion or more in total U.S. nonbank assets, must submit their initial resolution plans by today. The group includes Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. The Dodd-Frank Act requires that bank holding companies with assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Federal Reserve submit resolution plans annually to the FDIC and the Federal Reserve. Each plan must describe the company's strategy for rapid and orderly resolution under the Bankruptcy Code in the event of the company's material financial distress or failure. By regulation, the plans must be divided into a public section and a confidential section. The public section of the plans will contain detailed information to allow the public to understand the business of the covered company. The FDIC and the Fed said they will release the public section of the resolution plans on Tuesday, with preliminary reviews of the plans to be completed within 60 days …

Five-year NFIP extension okayed by House Senate

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WASHINGTON (7/2/12)--A long-term extension of the National Flood Insurance Program (NFIP) awaits the signature of the president and with that stroke of a pen the program receives an extension through 2017. The Credit Union National Association (CUNA) has strongly supported the extension.

On Friday the U.S. House passed the five-year extension of the flood insurance program by a vote of 373-52, and the Senate quickly followed suit and approved its version of the legislation, 74-19.

The next stop is the White House, where the president is expected to sign the extension into law well before the program's current July 31 expiration date.

CUNA President/CEO Bill Cheney said this action of Congress "provides credit unions with certainty for the future of the National Flood Insurance Program for the foreseeable future. CUNA and credit unions have been encouraging Congress to approve a multi-year authorization for several years for this important program. This comes in the wake of the NFIP being subject to almost a dozen short-term extensions since the last time it enjoyed a long-term extension.

"There have even been some instances of Congress allowing flood insurance to lapse, which had complicated the mortgage lending process. Congress' action will ensure that credit unions--and the consumers that they serve--can have a much greater degree of confidence in the lending process and the prospect of financing their homes."

Earlier last week, CUNA urged Senate lawmakers to include language addressing force-placed flood insurance in its final version of NFIP legislation. 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.

The House bill includes language that would allow lenders to charge borrowers for costs of premiums and fees incurred by the lender after borrowers required to have flood insurance either cancel or let the required policy lapse--and then fail to purchase flood insurance within 45 days after notification of that lapse.

The final version of the Senate NFIP adopted the CUNA-sought provision.

The flood insurance program was established in 1968 and is administered by the Federal Emergency Management Agency (FEMA). Prior to its existence, many homeowners, renters and businesses were unable to insure against flood losses because private insurers did not offer such coverage or because it was unaffordable.

Flood insurance is required by law in flood zone areas that are designated by recently updated FEMA maps. It is a necessary purchase by prospective homeowners before credit unions or other lenders can offer mortgages and other related products to homebuyers.

CUNA has worked diligently to convince Congress to extend the NFIP program because previous lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

Pre-break CUNA ads highlight MBL support

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Click download CUNA ad touts the U.S. Conference of Mayors' support of MBL cap increase.
WASHINGTON (7/2/12)--In advance of the U.S. House and Senate breaking this week for a July 4 District Work Session, the Credit Union National Association (CUNA) ran two ads in Politico, both of which underscored the broad coalition of support that exists for an increased cap on credit union member business lending.

One of the CUNA ads touted the recent addition of the U.S. Conference of Mayors as a vocal supporter of legislation to raise the cap. Last month, the mayors' conference adopted a resolution supporting S. 2231, the Senate version of legislation that would raise the cap to 27.5% of assets, up from the current 12.25% limit. The House has pending legislation that would do the same.

CUNA has estimated that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

Under the banner head "MORE JOBS," the ad says, "When Mayors from across the country agree on something, you know it's important..."  It notes the 187 members of the Conference of Mayors urges Congress to pass the MBL legislation to help small business members.

Click download CUNA ad highlights a long and varied lists of MBL supporter.
The second CUNA ad, featured just pages away from the first, highlights the large and growing number--and range--of organizations that back increased MBLs as a way to boost the economy at no cost to taxpayers.

That support encompasses small businesses, conservative think tanks as well as progressive community and minority advocacy organizations,  and groups like the National Association of Homebuilders, the National Association of Mortgage Brokers, the National Association of Professional Insurance Agents, and the National Association of Realtors.

CUNA urges credit unions and small business advocates to meet with House and Senate lawmakers in their home offices during the district work period to continue to encourage passage of the MBL bills.

Click on the ads displayed in this article to see a larger version.

CUNA touts MBLs at congressional credit access briefing

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WASHINGTON (7/2/12)--The Congressional Caucus on Access to Capital & Credit convened a briefing Friday that brought together representatives  from both government and private lending--including the Credit Union National Association (CUNA)  to represent credit unions--to discuss ideas of how to expand capital access to help boost the economy.

Bill Hampel, CUNA's chief economist, used the forum to highlight a need for an increased cap on credit union member business lending (MBL) to help small businesses with an ongoing credit crunch.  

CUNA estimates that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

CUNA also has reported that in the four years since the recession began, credit union business loans outstanding rose by 45%, while small business loans at banks fell by 13.4% over the same period.

Hampel told the caucus audience that unless the MBL cap is increased, more than 500 credit unions may have to stop or slow their small business lending programs within the next few years.

"The point is," Hampel said, "these 500 credit unions--that incidentally hold about 75% of MBLS subject to the cap--are right now having to stop or slow their business lending solely because of this arbitrary cap.

"That is just plain wrong, particularly at a time when small businesses are crying out for more credit."

He noted there are bills in the U.S. House (H.R. 1418) and Senate (S. 2231) that would increase the cap to 27.5% of assets and noted it was a "no-brainer" way to increase capital for small businesses.

The capital and credit access caucus is co-chaired by Reps. David Schweikert (R-Ariz.) and Bobby L. Rush (D-Ill.). Also on the Friday program were representatives from: The U.S. Treasury Department's Community Development Financial Institutions Fund, the Security and Exchange Commission, the Small Business Administration, the American Bankers Association, the Independent Community Bankers Association, CrowdCheck, the National Venture Capital Association, and Opportunity Finance Network.

NEW Five-year NFIP program just awaits presidents signature

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WASHINGTON (UPDATE 6/29/12, 2:27 p.m. ET)--A long-term extension of the National Flood Insurance Program (NFIP) awaits the signature of the president and with that stroke of a pen the program receives an extension through 2017. The Credit Union National Association (CUNA) has strongly supported the extension.

Earlier today the U.S. House passed the five-year extension of the flood insurance program by a vote of 373-52, and the Senate quickly followed suit and approved its version of the legislation 74-19.

So next stop is the White House, where the president is expected to sign the extension into law well before the program's current July 31 expiration date.

CUNA President/CEO Bill Cheney said, "Today's action by the Congress provides credit unions with certainty for the future of the National Flood Insurance Program for the foreseeable future. CUNA and credit unions have been encouraging Congress to approve a multi-year authorization for several years for this important program. This comes in the wake of the NFIP being subject to almost a dozen short-term extensions since the last time it enjoyed a long-term extension.

"There have even been some instances of Congress allowing flood insurance to lapse, which had complicated the mortgage lending process. Congress' action will ensure that credit unions--and the consumers that they serve--can have a much greater degree of confidence in the lending process and the prospect of financing their homes."

Earlier this week, CUNA urged Senate lawmakers to include language addressing force-placed flood insurance in its final version of NFIP legislation.

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.

The House bill includes language that would allow lenders to charge borrowers for costs of premiums and fees incurred by the lender after borrowers required to have flood insurance either cancel or let the required policy lapse--and then fail to purchase flood insurance within 45 days after notification of that lapse.

The final version of the Senate NFIP adopted the CUNA-sought provision.

The flood insurance program was established in 1968 and is administered by the Federal Emergency Management Agency (FEMA). Prior to its existence, many homeowners, renters, and businesses were unable to insure against flood losses because private insurers did not offer such coverage or because it was unaffordable.

Flood insurance is required by law in flood zone areas that are designated by recently updated FEMA maps. It is a necessary purchase by prospective homeowners before credit unions or other lenders can offer mortgages and other related products to homebuyers.

CUNA has worked diligently to convince Congress to extend the NFIP program because previous lapses in NFIP authorization have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.