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Washington Archive

Washington

NCUA Vows To Ensure Short-term Loan Compliance

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ALEXANDRIA, Va. (6/7/13)--The National Credit Union Administration will "aggressively pursue" institutions offering payday loans that do not meet agency-set standards, and will "continue to encourage credit unions to offer products that result in lower costs to credit union members," NCUA Chairman Debbie Matz wrote in a Thursday letter.

Matz's comments are in response to a National Consumer Law Center (NCLC)/Center for Responsible Lending (CRL) letter on federal credit union payday loan practices. That letter identified nine credit unions as offering "high-priced" short term loans. The letter also noted the positive work that many credit unions perform by offering reduced-rate short term loans.

"Credit unions work hard to develop programs that help their members. As NCUA notes, the number of credit unions that the NCLC is citing has decreased from 58 in 2010 to a very small number in its most recent letter to the agency," CUNA Deputy General Counsel Mary Dunn said. "Meanwhile, CUNA's consumer protection subcommittee plans to review its best practices in this area and on related issues," she added.

In the agency's response to the NCLC/CRL letter, Matz said that five of the nine credit unions identified by the NCLC and CRL are not making payday loans directly, but are referring their members to a third party, Xtra Cash LLC. The other four credit unions are offering products that comply with NCUA or other regulations, Matz emphasized.

The NCUA has no authority over third parties or credit union service organizations, she said. However, the agency does prohibit federal credit unions from referring their members, for a fee, to third parties that offer payday loans with annual percentage rates that exceed an agency-determined cap.

"NCUA will review each case and use every tool at our disposal to ensure the FCUs are complying," Matz wrote.

Loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program. That program permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. For now, this amounts to an interest rate ceiling of 28%.

Most credit unions offering payday loan alternatives also limit fees, provide member financial counseling and encourage members to open savings accounts.

CUNA Seeks BSA Answers From CUs

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WASHINGTON (6/7/13)--To better understand Bank Secrecy Act compliance burdens, the Credit Union National Association has asked credit unions for their comments on three key issues.

The three CUNA questions are:
  • What do you see as the biggest BSA compliance challenges and breakdowns?
  • What is the most costly BSA regulation that you comply with? and
  • What do you see as the least effective BSA regulatory requirement and why?
CUNA has asked that credit unions provide their feedback by June 11. Answers may be sent to CUNA Assistant General Counsel for Regulatory Research Dennis Tsang.

CUNA continues to participate on the U.S. Treasury Bank Secrecy Act Advisory Group (BSAAG), where CUNA advocates for efforts to minimize regulatory burdens on credit unions and small financial institutions that have limited compliance resources and staff, and more efficient BSA rules. Tsang said CUNA will participate in BSAAG meetings this month to review BSA compliance challenges with senior staff from the Financial Crimes Enforcement Network, financial regulators and financial institutions.

Financial Regulators Form Cybersecurity And Critical Infrastructure Working Group

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ALEXANDRIA, Va. (6/7/13)--The Federal Financial Institutions Examination Council (FFIEC) on Thursday announced the formation of a new working group to promote critical infrastructure and cybersecurity coordination.

The FFIEC Cybersecurity and Critical Infrastructure Working Group will enhance communication among FFIEC agencies, and further coordinate with other entities such as the Financial Services Sector Coordinating Council (FSSCC), which includes the Credit Union National Association and other financial industry members.

CUNA continues to be engaged on cybersecurity issues, by working with the credit union system, FSSCC, regulators, BITS, and other entities.

The FFIEC was formed in 1978 to promote uniformity in financial institution regulation. It is comprised of the heads of the National Credit Union Administration, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Consumer Financial Protection Bureau, the Council's State Liaison Committee, and a member of the Federal Reserve Board.

CUNA Voices Concerns With Joint Agency Letter On FASB Plan

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WASHINGTON (6/7/13)--A letter from the chair of the National Credit Union Administration to the Financial Accounting Standards Board on its pending proposal on credit losses will help reinforce credit unions' concerns, Credit Union National Association President/CEO Bill Cheney has said in a communication to NCUA Chairman Debbie Matz.

However, he criticized a joint letter filed by senior staff of a federal financial institutions regulators' group, saying it "does nothing to address distinctions between credit unions and big banks--which the proposal is intended to do in the first place."

In a letter sent Thursday to NCUA Chair Debbie Matz, Cheney stated that CUNA does not agree with key aspects of the joint letter to FASB on the board's proposed changes to the methodology for recognizing and reporting credit losses.

Cheney also stated that the joint letter also discounted "the impact of the proposal on earnings, which we feel is a major concern that must be factored into FASB's deliberations."

But Cheney noted that Matz' own letter to FASB would be of help to credit unions. "Although we feel the proposal will negatively impact institutions of all sizes, your letter focusing on concerns relative to a number of credit unions should help reinforce the problems this ill-advised proposal would create for many credit unions of all sizes," Cheney wrote.

CUNA filed a strongly worded letter with the FASB opposing its proposal May 29; the comment period closed May 31.

CUNA: Buzz Aside, Housing Policy Reform Will Be Long Road

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WASHINGTON (6/7/13)--Those in Washington, D.C. who care strongly about housing reform have been abuzz in recent days as they pour over and write about discussion drafts of a bill that would make changes to the government-sponsored housing enterprises and the entities that regulate them.

"It is not insignificant," said Credit Union National Association Senior Vice President Ryan Donovan Thursday, "that Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.) are putting pen to paper to create a bill to provide secondary mortgage market reform.  We welcome the effort and its potential to be a catalyst for housing finance reform."

"There is a lot of interest in the various versions of the draft legislation, which I think speaks to the level of interest there is in the issue and the desire among stakeholders to see this issue addressed.  But, there is no doubt that this process will be long--and it should be--because the consequences of getting it wrong are so great, especially with the economy in recovery."

CUNA is actively engaged in GSE and general housing policy reform discussions on Capitol Hill and is involved in a broad coalition of all depository institutions, title insurers and other stakeholders to monitor progress on the issue.

Donovan said that CUNA will be evaluating all housing finance reform proposals for consistency with the priorities the association has developed with the guidance of its Housing Finance Reform Task Force. CUNA has testified in the U.S. Congress on GSE reform and written to the Obama administration noting that the costs to the economy and housing market of failing to make necessary changes to housing policy great.

"Our key concern with any proposal enters the public debate is whether it encourages a well-regulated and well-capitalized secondary market that credit unions are able to access in a manner that allows them to continue to offer mortgages on the terms that credit union members demand. At the end of the day, that's how we will evaluate these proposals."

CU Tax Advocacy Gets Capitol Hill Coverage

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WASHINGTON (6/7/13)--The Credit Union National Association, state leagues and credit union supporters nationwide continue to fight to preserve the credit union tax exemption, and these advocacy efforts this week received broad coverage in Washington political paper The Hill.

The credit union tax status is one of many items being discussed as tax reform debates continue in the U.S. Congress, and The Hill reached out to many parties impacted by these discussions for its piece. Members of congress have said they are taking a so-called "blank sheet approach" to tax reform, theoretically removing all current exemptions from the code and adding exemptions back into the code after their merits have been considered.

CUNA Senior Vice President of Legislative Affairs Ryan Donovan said this kind of process changes the question that credit unions have to answer. Credit unions now need to explain why their tax exemption should exist, rather than simply demonstrate why their tax exemption is useful, he said.

To ensure credit unions are heard as these congressional discussions are held, CUNA has encouraged the more than 96 million credit union members nationwide to present a unified message to members of congress: Don't Tax My Credit Union! These efforts have led to more than 30,000 congressional contacts since CUNA and the leagues kicked off the large-scale, nationwide grassroots-mobilization campaign in mid-May.

Paul Gentile, CUNA executive vice president of strategic communications, said The Hill piece shows that credit union advocacy activity is being recognized in Washington. The story also reinforces that credit unions are just one of many groups trying to ensure their tax status remains intact. "It's good validation for members who may be wondering why we are going all out," Gentile said.

CUNA has created a new web site, DontTaxMyCreditUnion.org, a new Facebook page, a Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and a reformatted version of CUNA's tax advocacy tool kit to help credit unions and their members spread this message.

For the full story and more tax advocacy resources, use the links.

Student Lending Highlighted In Congress, Press

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WASHINGTON (6/7/13)--Stifling levels of post-graduate debt and looming federal student loan rate increases have kept student lending issues in the news in recent months. The Credit Union National Association's first annual High School Student Borrowing Survey, which found a surprising lack of financial knowledge among high school seniors, has been highlighted as part of this coverage in a recent Examiner.com article.

CUNA's survey, released last month, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.

The Examiner, an online publication, highlighting the CUNA survey Thursday, noted that Paul Gentile, CUNA executive vice president, strategic communications and engagement, said the findings "suggest not just a lack of awareness of college cost or how debt works but also a lack of basic financial knowledge." For more from this coverage, use the resource link.

The federal student loan rate is currently capped at 3.4%, and this limit will double to 6.8% on July 1 if Congress does not take action. Two student loan bills that could potentially address this situation failed to pass the Senate on Thursday.

The Student Loan Affordability Act (S. 953), which would cap federal student loan rates at 3.4% for another two years, failed a cloture vote on a 51 to 46 margin.

S. 1003, which would tie student loan interest rates to 10-year U.S. Treasury notes, plus 3%, failed by a 40 to 57 vote.

Other potential student loan fixes that have been introduced include:

  • The Smarter Solutions for Students Act (H.R. 1911), which would tie student loan interest rates to 10-year U.S. Treasury notes, and allow those student loan rates to reset each year. This bill passed the U.S. House in late May;
  • The Bank on Students Loan Fairness Act (S. 897), which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%;
  • The Student Loan Fairness Act (H.R. 1330), which would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate; and
  • The Federal Student Loan Refinancing Act (S. 1066), which would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%.