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Washington

Policymakers Set Tight Tax Reform Timeframe

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WASHINGTON (6/28/13)--Credit Union National Association President/CEO Bill Cheney said Wednesday that the good work credit unions and their members have done so far to tell lawmakers "Don't Tax My Credit Union" must be only the beginning of efforts to preserve the credit union tax status. Now that key policymakers have made it clear they mean to move quickly on tax reforms, credit union advocates must ramp up their volume, he encouraged.

The leaders of the Senate Finance Committee, Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah), sent a letter yesterday to all their Senate colleagues advising them to plan to be ready to tackle a tax reform vote early this Fall.

The letter notes that the committee will take a "blank slate" approach to its bill, which would remove all tax expenditures from the code and would add back in those that make the grade.

"Our tax code is bloated and outdated.  The income tax was established a century ago, in 1913.  And it has been a generation since our last tax reform in 1986.  As Chairman and Ranking Member of the Finance Committee, we are determined to complete tax reform this Congress," Baucus and Hatch pen in their "dear colleague" letter.

The senators' letters warns there is a tight timeframe for lawmakers who want to suggest language for the reforms; all proposed language for a bill must be submitted for the committee's consideration by July 26, it says.

"This is the scenario we have told credit unions to expect and it is the timing we have anticipated," said Cheney. "CUNA and the leagues launched our groundbreaking 'Don't Tax My Credit Union' campaign over a month ago to defend this threat.

"Our success will rest on credit unions engaging their members to send Congress a strong message: Don't Tax My Credit Union."

Cheney noted that credit unions offer higher returns on savings, lower rates on loans, and most importantly, low or no fees--and that these benefits combine to result in more than $8 billion in direct financial benefits each year to the 96 million Americans who belong to credit unions.

Already, by the end of yesterday, a total of almost 207,000 messages have been sent to the House and Senate. Some 300,000 people have seen the "Don't Tax My Credit Union" message via social media outlets like Facebook and Twitter. 

"That can only be a beginning to the voices Congress hears so lawmakers truly understand that a new tax on credit unions would be a tax on those 96 million credit unions members," Cheney said.

CUNA members may use the resource link to access CUNA tax-status advocacy tools.

Obama Creates Young American Financial Capability Council

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WASHINGTON (6/28/13)--The Obama Administration this week announced a new President's Advisory Council on Financial Capability for Young Americans to help young people "get the skills and knowledge they need to pursue successful careers and contribute to the nation's economy."

"Experience shows that a sound financial footing early in life is important to building wealth and establishing financial security. This new council will advise the president and his administration on ways to improve the financial skills of young Americans so that they can make smart decisions about going to college, using financial products, and even saving for their retirement," U.S. Treasury Assistant Secretary for Financial Institutions Cyrus Amir-Mokri said in a release.

The new advisory group will be led by the Treasury. The group will build on the work of the President's Advisory Council on Financial Capability.

Private, public, and nonprofit sector innovators will be invited to serve on the council. Treasury Secretary Jack Lew, Education Secretary Arne Duncan and Consumer Financial Protection Bureau Director Richard Cordray will also take part.

Additional council members will be announced soon, and the first council meeting will be held later this year, the Treasury release said.

For more on the council, use the resource link.

Metsger Pledges Effective, Not Excessive Reg Approach

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WASHINGTON (6/28/13)--Noting that regulators need to be watchful "in good times and bad," National Credit Union Administration board nominee Richard Metsger Thursday said credit union rules need to be modernized to address the threats presented by today's financial marketplace.

Click to view larger image Richard Metsger, right, purchased his first car, a 1957 Chevy, with the help of a $350 loan from Portland Teachers CU, and later went on to serve on that credit union's board of directors. Here, the former Oregon state senator and current NCUA board nominee is sworn in before a Senate Banking Committee nomination hearing. (CUNA Photo)
The NCUA nominee was responding to a question asked by Senate Banking Committee Chairman Tim Johnson (D-S.D.) during a nomination hearing. Johnson asked about the lessons credit unions have learned from the financial crisis, and what additional steps the agency should take to strengthen the credit union system.

Metsger said that interest rate risk, emergency liquidity access and tech-related concerns are the top level risks on the horizon that the agency should examine.

On interest rate risk, Metsger noted that credit unions are very involved in the mortgage marketplace. "We all know what happens in low interest rate environments...It's going to change eventually, we don't know when, or where, or how much...So credit unions need to be prepared," he said. As the regulator, NCUA should work to ensure credit unions are prepared for and manage that risk, he added.

Metsger also said ensuring that all credit unions have some sort of plan to access liquidity in emergency situations is vital.

Addressing technological risks will be another priority if he is confirmed, Metsger said. No matter how well credit unions are run, "the technology that has helped our lives so much has also created tremendous risk...systemic risk...to the share insurance fund." Credit unions can in a matter of milliseconds possibly have tens of millions of dollars taken away, he noted. "I will work diligently, if I am confirmed, to see that the rules and regulations of the NCUA are as contemporaneous as possible to meet the technological risks, particularly in the area of cybersecurity," Metsger said.

"If confirmed, my vision is for NCUA to be recognized as an agency that manages its own fiscal house well, proposes regulatory action that is effectively targeted to achieve the desired outcome without placing unnecessary burden on the credit unions themselves and, above all, maintains the confidence and trust the American public places in their local credit union," he said in a prepared statement.

"Updating, simplifying, eliminating and clarifying existing rules to ensure that they are effective, but not excessive, consistent with safety and soundness," will be another focus if he is confirmed to serve the agency, the nominee said. Credit union safety and soundness is "job one" of the regulator, and "must not be compromised," Metsger added.

"I firmly believe a regulatory agency should strive to be its own best critic," he said, referencing NCUA's review of one-third of its rules and regulations each year. "I can assure you that, if confirmed, this will not be merely a mechanical exercise for me. I will approach this rolling review with diligence."

Legislation that would increase the credit union member business lending cap was also briefly discussed during the hearing. Sen. Jack Reed (D-R.I.), a co-sponsor of the Small Business Lending Enhancement Act (S. 968), asked Metsger if increasing the MBL cap from 12.25% to 27.5%, as proposed in the bill, is a good idea. "I think it's a good idea to recognize that it is the purview of Congress to make decisions," Metsger said.

If confirmed, Metsger would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year, served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation. He was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

Other nominations discussed include: Rep. Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a member and chairman of the Council of Economic Advisers; Kara M. Stein of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar of Virginia, to be a member of the Securities and Exchange Commission.

The committee must vote on these nominations. If approved by the committee, the nominees will also need to be confirmed by a full U.S. Senate vote.

Sign In Today To Share 'Unite' Stories

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WASHINGTON (6/28/13)--There is a new way for the credit union community to share stories about steps they have taken to support the Credit Union National Association's Unite for Good initiative by fostering its goals of taking action to remove barriers, creating awareness and fostering service excellence.

To support the Unite for Good vision in which "Americans choose credit unions as their best financial partner," CUNA announced Thursday that it has expanded the Unite for Good site to host a virtual credit union community, which will allow credit unions to communicate no matter where they are.

Credit unions now have the option to create a profile on www.uniteforgood.org, and then share their stories, ask questions, and cultivate relationships with credit unions across the country.

"Working together is the foundation of success and that is why this initiative is so crucial to the credit union movement," said Paul Gentile, CUNA executive vice president of communications and strategic messaging.

"We wanted to create a space that encouraged credit unions to share their success, ask questions and get to know each other on a deeper level. Once we are all working together and presenting a unified front, then we will be able to achieve our vision of being Americans' best financial partner."

Although all posts will be visible to the public under the "share stories" tab, profile information will only be accessible to other members who have created a profile.

Credit unions can email uniteforgood@cuna.coop with questions or to request assistance setting up a profile or posting a story.

NEW: Miller Relief Bill Intro'd In House Today

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WASHINGTON (6/28/13, UPDATED 11:35 a.m. ET)--House Financial Services Committee Vice Chairman Gary Miller (R-Calif.) introduced long anticipated legislation today, H.R. 2572, that would provide regulatory relief for credit unions and community banks.

Miller's bill focuses on credit unions and topics discussed within its section range from such things as some enhancements to National Credit Union Administration authority, to improved capital standards for credit unions, to a cost-benefit analysis of rules, past and present.

"Credit unions wholeheartedly thank Rep. Miller for acting on their great need for regulatory relief so fewer resources are diverted from their true business of serving their members," Sam Whitfield, Credit Union National Association vice president of legislative affairs, said as CUNA welcomed the bill. He added CUNA's appreciation that Miller included CUNA in the development of his legislation.

Miller's bill will likely be joined by other regulatory relief legislative initiatives coming out of the financial services panel this year.

Other Financial Services Committee members are said to be preparing to offer bipartisan regulatory relief bills and are working to find for areas where credit union and community bank interests may intersect in a bill. CUNA has assured lawmakers that such areas exist; for instance, one such area is examination fairness legislation.

During a hearing in March, CUNA delivered a 35-point plan for credit union regulatory relief to federal lawmakers. Among changes promoted by CUNA are:

  • Increasing National Credit Union Administration budget transparency;
  • Adjusting the treatment of non-owner occupied one- to four-family dwelling loans for credit unions from business loans to residential real estate loans;
  • Increasing the maturity limit for higher education loans made by federal credit unions; and
  • Expanding investment authority in credit union service organizations.

CFPB to Auto Lenders: Refund $6.5M To Servicemembers

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WASHINGTON (6/28/13)--U.S. Bank and a nonbank partner, Dealers' Financial Services (DFS), will be made to repay $6.5 million in total proceeds to U.S. servicemembers under the terms of a Consumer Financial Protection Bureau enforcement action.

U.S. Bank and DFS allegedly violated the Truth in Lending Act and other federal laws that prohibit deceptive marketing and lending practices when they failed to disclose certain terms to participants in a Military Installment Loans and Educational Services (MILES) auto loan program.

The CFPB in a release said the firms specifically failed to properly disclose an allotment fee charged to participants, and did not inform participants on the timing of allotment payments. The companies also misrepresented the true cost and coverage of add-on products financed along with the auto loans, the CFPB added.

The military discretionary allotment system was established to help servicemembers make payments from their accounts while they were away on military duty. The system predates more modern automated payment systems such as automated withdrawals and electronic transfers.

Certain creditors can require military personnel to make payments through the allotment system rather than other forms of credit. Third-party allotment processors often charge fees, the CFPB said.

Around 50,000 servicemembers were impacted by these actions, the CFPB said. The payments will be sent to servicemembers that had outstanding MILES loans between Jan. 1, 2010 and today.

For more on the CFPB action, use the resource link.

CUNA Refutes Banks' Tax Attacks In Hill, White House Letters

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WASHINGTON (6/27/13)--Credit Union National Association President/CEO Bill Cheney Wednesday called it "offensive" that representatives of banks and thrifts, "which time and time again have needed taxpayer funded bailouts," have gone to top policy makers to say that "the government can no longer afford the credit union tax status." Cheney fought off the most recent bank attacks in letters to President Barack Obama and to Senate Finance Committee and House Ways and Means Committee leaders.

The CUNA letters were in direct and immediate response to letters the American Bankers Association sent to the president and the Independent Community Bankers Association sent to the Senate and House tax policy makers attacking the credit union tax status.

Cheney noted the positive benefits the credit union tax status conveys to everyday Americans. The evidence overwhelmingly suggests that credit unions are fulfilling the purpose of their tax exemption, Cheney noted. Credit unions offer higher returns on savings, lower rates on loans, and most importantly, low or no fees--and these benefits, combined, result in more than $8 billion in direct financial benefits each year to the 96 million Americans who belong to credit unions, he emphasized.

"The benefits from credit unions translate into real money that boosts communities and which consumers and small business owners can put in their pockets to use as they need or want to," the CUNA CEO noted.

Banks in recent days have elevated their attacks on the credit union tax status, as witnessed by the ABA and ICBA letters urging Obama and legislators to examine the credit union tax status.

Cheney warned in the CUNA letters that banks want to come to Congress and talk about how credit unions keep banks from making more money off of American consumers.

However, Cheney said, "the question is not whether the existence of credit unions adversely affects banks and their shareholders, but rather whether credit unions employ the tax status to fulfill the purpose for which it was created: 'to make more available to people of small means credit for provident purposes through a national system of cooperative credit, thereby helping to stabilize the credit structure of the United States.'"

Credit unions' cooperative structure leads them to be more risk averse, and this, in turn, leads to a countercyclical lending effect that permitted credit unions to continue to lend during the banking crisis when other lenders evacuated markets or were otherwise unable to lend, Cheney added.

The CUNA letters also refuted incorrect banker assertions regarding credit union structure and membership.

"Other than the banking trade associations' tired efforts, there is absolutely no evidence to suggest that the credit union tax status is controversial," Cheney wrote. "What is controversial," he added, "is the bankers' suggestion that credit unions ought to be taxed, which would in effect raise taxes on 96 million Americans."

Both CUNA letters also include a white paper that provides greater detail on the benefits consumers receive as a result of credit unions being in the marketplace.

For the full letters, use the resource links.

NEW: Baucus, Hatch Announce 'Blank Slate' Tax Reform; CUNA, Leagues Ready to Fight

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WASHINGTON (6/27/13, UPDATED 12:12 p.m. ET)--The leaders of the Senate Finance Committee, Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah), sent a letter to all their Senate colleagues today advising them to plan to be ready to tackle a tax reform vote early this Fall.

The letter notes that the committee will take a "blank slate" approach to its bill, which would remove all tax expenditures from the code and would add back in those that make the grade.

"Our tax code is bloated and outdated.  The income tax was established a century ago, in 1913.  And it has been a generation since our last tax reform in 1986.  As Chairman and Ranking Member of the Finance Committee, we are determined to complete tax reform this Congress," Baucus and Hatch pen in their "dear colleague" letter.

The senators' letters warns there is a tight timeframe for lawmakers who want to suggest language for the reforms; all proposed language for a bill must be submitted for the committee's consideration by July 26, it says.

"This is the scenario we have told credit unions to expect and it is the timing we have anticipated," said CUNA President/CEO Bill Cheney. "CUNA and the leagues launched our groundbreaking 'Don't Tax My Credit Union' campaign over a month ago to defend this threat.

"Our success will rest on credit unions engaging their members to send Congress a strong message: Don't Tax My Credit Union."

Cheney noted that credit unions offer higher returns on savings, lower rates on loans, and most importantly, low or no fees--and that these benefits combine to result in more than $8 billion in direct financial benefits each year to the 96 million Americans who belong to credit unions.

Already, there have been more than 170,000 visits to the "Don't Tax My Credit Union" site and 165,000 messages have been sent to the House and Senate. Some 300,000 people have also shown support for the "Don't Tax My Credit Union" campaign via social media outlets like Facebook and Twitter. 

"That can only be a beginning to the voices Congress hears so lawmakers truly understand that a new tax on credit unions would be a tax on those 96 million credit unions members," Cheney said.

Rep. Waters' Panel On Housing Reform Includes CUNA's Hampel

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WASHINGTON (6/27/13)--Credit Union National Association Chief Economist Bill Hampel will discuss credit union priorities for housing finance market reform during a Friday panel discussion organized and moderated by Rep. Maxine Waters (D-Calif.), the ranking Democrat of the House Financial Services Committee.

This is the second in a series of panels convened to discuss "how to best provide safe, decent, and affordable rental and homeownership options to American families, while taking steps to prevent another crisis that led to the conservatorships of [Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac] in 2008."

The previous panel discussion was held in April. "This panel discussion builds on that conversation by providing an opportunity for industry stakeholders to share their point of view on how to approach reform," Waters said.

CUNA has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

The panel discussion will also feature commentary from:

  • National Association of Realtors Senior Policy Representative Anthony Hutchinson;
  • Independent Community Bankers of America Vice President of Lending and Housing Policy Ann Grochala;
  • Mortgage Bankers Association Vice President of Single-Family Research and Policy Development Mike Fratantoni;
  • National Multi Housing Council Senior Vice President of Government Affairs Cindy Chetti; and
  • American Securitization Forum Executive Director Tom Deutsch.
The discussion will be held at 9 a.m. (ET) in the Rayburn House Office Building.

A Senate bill that would wind down Fannie Mae and Freddie Mac and replace them with a new mortgage guarantor, the Federal Mortgage Insurance Corporation (FMIC), was introduced on Tuesday.  President/CEO Bill Cheney noted that the bill "is an important first step to creating a secondary mortgage market that focuses on ensuring access to all financial institutions in need a functioning mortgage market, including credit unions." (For more, see June 26 News Now story: Senators Unveil Important First Step To GSE Reform.)

CUNA is open to a variety of approaches to reform and looks forward to working with all interested congressional leaders.

NEW: Metsger Pledges Effective, Not Excessive, Regulatory Approach

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WASHINGTON (UPDATED: 11:40 A.M. ET, 6/27/13)--National Credit Union Administration board nominee Richard Metsger said "updating, simplifying, eliminating and clarifying existing rules to ensure that they are effective, but not excessive, consistent with safety and soundness," will be a focus if he is confirmed to serve the agency.

"I firmly believe a regulatory agency should strive to be its own best critic," he said, noting the NCUA's policy of reviewing one-third of its rules and regulations each year. "I can assure you that, if confirmed, this will not be merely a mechanical exercise for me. I will approach this rolling review with diligence," he added.

Metsger made his remarks in a prepared statement before the Senate Banking Committee this morning.

The nominee, who would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year, served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation. He was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

"If confirmed, I will add a fresh set of eyes to policies old and new to reflect that diversity [of experience]," Metsger said.

He also listed the continued protection of the National Credit Union Share Insurance Fund as a priority. "Because the fund is capitalized by member credit unions themselves, it is in the best interest of member credit unions to have a strong, forward-looking regulator, committed to protecting the fund from losses," he said. 

Credit union safety and soundness is "job one" of the regulator, and "must not be compromised," Metsger added.

Concentration Risks, Examinations Highlighted in NCUA OIG Letter

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WASHINGTON (6/27/13)--There are currently 19 recommendations by the National Credit Union Administration  Office of Inspector General (OIG) that are open and unimplemented and, according to the OIG,  the top three in importance concern issues regarding concentration risks and examination procedures.

The NCUA OIG identified the unimplemented or partially unimplemented recommendations in response to a June 17 inquiry by Rep. Darrell Issa (R-Calif.), who heads the House Oversight and Government Reform Committee.

Named number one on the OIG's list of priorities is its recommendation that the NCUA determine whether to propose or change regulatory guidance to establish limits or other controls for concentrations that pose "an unacceptable safety and soundness risk," and to determine an appropriate range of examiner response to high risk concentrations.

The inspector general's letter notes that the agency agreed with the recommendation. The NCUA has provided training to examiners and issued a Supervisory Letter to credit unions (see resource link)  advising them how to evaluate and manage concentration risk.  

"NCUA further anticipates issuing--later in 2013--a proposed revision to update the risk-based net worth component of its current Prompt Corrective Action (PCA) regulation. In this regard, the agency has created a new taskforce to propose revisions to PCA and, to achieve this end, the taskforce is monitoring closely similar rulemaking in the banking industry," the letter notes.

Second on the open-actions list is an OIG recommendation for the NCUA to develop a "more specific process, such as trigger reports or standards, so examiners can better identify, analyze, and monitor loan concentrations during exams, as well as between exams."

The OIG notes that the NCUA has "current and future plans" to update its Automated Integrated Regulatory Examination Software (AIRES) to better guide examiners to the review of concentration risk.

To date, the OIG says, the agency has "enhanced the quarterly regional risk reports to better detect excessive growth of various loan investment products; updated the national risk reports to identify concentration risk, including excess levels in products such as real estate and (member business loans) and issued credit union and supervisory guidance addressing concentration risk and how to mitigate it."  

Final on the top three list is OIG's recommendation to require that examiners document and retain the "specific procedures and analysis performed during their quarterly review of the 5300 Call Reports" and then forward the analysis should then to the Supervisory Examiner for review.

Thus far, the OIG told Issa, the agency has added a worksheet to exam.xls within AIRES to help identify increasing levels of concentration. Further, the March 31, 2013, AIRES update included risk.xls, which is an excel workbook that provides a review for several key risk areas and helps determine appropriate risk-based examination scope steps.

"As with the first open recommendation noted above, we are continuing to monitor the agency's implementation efforts in this area as we plan and conduct current and future audits and (material loss reviews)," the letter concludes.

CFPB Defines 'Responsible Conduct' For Supervised Entities

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WASHINGTON (6/27/13)--When launching an enforcement investigation the Consumer Financial Protection Bureau looks for some specific factors to determine whether a financial entity's conduct was "responsible." The bureau has sent out a guidance bulletin to make it clear what some of those factors are.

Only the top four credit unions in total assets are supervised and examined by the CFPB.

The factors the CFPB includes in enforcement discretion include:
  • The nature, extent, and severity of the violations identified;
  • The actual or potential harm from those violations;
  • Whether there is a history of past violations; and,
  • A party's effectiveness in addressing violations.
In addition, the CFPB guidance notes that in addition to those and other factors, supervised entities can engage in certain activities-- both before and after the conduct in question-- that the bureau may favorably consider in exercising its enforcement discretion. A party may:

  • Proactively self-police for potential violations;
  • Promptly self-report to the bureau when it identifies potential violations;
  • Quickly and completely remediate the harm resulting from violations; and,
  • Affirmatively cooperate with any bureau investigation above and beyond what is required.
The CFPB  bulletin refers collectively to the above as "responsible conduct," and notes such conduct "may favorably affect the ultimate resolution of a bureau enforcement investigation."

Use the resource link to read more on this from the CFPB.

New Rules On CU Loan Participations Take Effect July 25

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WASHINGTON (6/27/13)--July 25 is the effective date of the National Credit Union Administration's final rule on loan participations, which implemented a number of improvements, sought by the Credit Union National Association, from the original proposal.

CUNA President/CEO Bill Cheney welcomed the agency's changes to its original plan and said it gave credit unions a "much more workable framework" to utilize loan participations.

"The original proposal had strict limitations and we are pleased to see that NCUA has taken into consideration the majority of CUNA's recommendations and worked with the system to make significant improvements in the final rule," Cheney said of the rule.

The NCUA last week approved the final rule and set a limit on loans from one originator of 100% of a credit union's net worth. This is up from the proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower. CUNA urged such changes and the CUNA board emphasized credit union concerns as it worked to make the rule more practicable.

CUNA also sought the formation of a working group, which the agency established.

"We think the process and outcome were improved as a result. We will be urging similar approaches in the future," said CUNA Deputy General Counsel Mary Dunn.

The NCUA also approved a provision so that credit unions pushed over the limit by new rule can move their loans into line: such credit unions would not have to sell loans immediately to come into compliance but can bring their participation activity into line in the ordinary course of business or seek a waiver.

The rule was published in the June 25 Federal Register, and that document sets the July 25 effective date.

Use the resource links to read more.

Senators Unveil Important First Step To GSE Reform

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WASHINGTON (6/26/13)--Tuesday's introduction of legislation that would wind down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and replace them with a new mortgage guarantor, the Federal Mortgage Insurance Corporation (FMIC), "is an important first step to creating a secondary mortgage market that focuses on ensuring access to all financial institutions in need a functioning mortgage market, including credit unions," Credit Union National Association President/CEO Bill Cheney said.

The bill, known as the Housing Finance Reform and Taxpayer Protection Act, was introduced by Sens. Bob Corker (R-Tenn.), Mark Warner (D-Va.), Mike Johanns (R-Neb.), Jon Tester (D-Mont.), Dean Heller (R-Nev.), Heidi Heitkamp (D-N.D.), Jerry Moran (R-Kan.) and Kay Hagan (D-N.C.).

The winding down of Fannie and Freddie, and the Federal Housing Finance Agency, would be accomplished within five years of the bill's potential passage. GSE assets would be sold off, and their charters would be revoked once the FMIC is established.

Under the terms of the bill, private entities would purchase mortgages from lenders. Those mortgages would then be reissued as securities and sold on to investors. Investors would need to maintain a 10% interest of equity for every dollar of risk.

New loans would not be required to go through the FMIC. Only those that wanted the government guarantee would be processed by the agency.

Sen. Warner in a release said the FMIC "replaces the failed 'housing goals' of the past with a transparent and accountable market access fund that focuses on ensuring there is sufficient affordable housing available for lower and middle-income buyers." The fund would not be paid for with taxpayer funds, but rather through a small FMIC user fee that only those who choose to use the system would pay, the Warner release added.

The bill would ensure that credit unions and other small institutions have direct access to the secondary market. CUNA has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

Cheney in a release thanked the senators for introducing the bill, and for fully considering credit union concerns as it was developed. "We recognize that the legislative process of housing finance reform will be a considerable effort, and credit unions are ready to work with lawmakers to enact changes that will ensure that smaller institutions continue to have fair and affordable access to a vibrant, well-regulated and affordable housing market," Cheney added.

For more on the bill, use the resource link.

Derivatives Rule Included In NCUA YouTube Update

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ALEXANDRIA, Va. (6/26/13)--A review of the National Credit Union Administration's recently proposed derivatives rule is one of many topics featured in a new two-part economic update video.

NCUA Chief Economist John Worth is joined by J. Owen Cole, Jr., director of capital and credit markets for the NCUA's Office of Examination and Insurance, in one of the new YouTube videos.

Other topics of discussion include:

  • Housing markets;
  • Labor markets;
  • Consumer confidence statistics; and
  • How interest rate increases could challenge credit unions.
The videos are 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.

CUNA Reviews Overdraft Issues At CFPB Meeting

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WASHINGTON (6/26/13)—The Credit Union National represented member credit unions Tuesday at a roundtable discussion on overdraft issues at the Consumer Financial Protection Bureau headquarters here.

In a report released last month, the bureau expressed concern about the ability of consumers to avoid overdraft costs, but did not recommend regulatory changes or changes to business practices. CUNA Senior Assistant General Counsel for Regulatory Advocacy Luke Martone represented CUNA at yesterday's meeting.

Current checking account issues, information on opt-in rates and disclosures were among the issues also discussed in the CFPB report, which was compiled from more than 1,000 consumer-submitted comments and other data research.

The report focuses on large bank practices and that no credit unions were directly studied by the CFPB. However, the report does include information voluntarily submitted by credit unions or their vendors in response to the bureau's request for information preceding the report.

CUNA has repeatedly stressed that overdraft protection and 'courtesy pay' are designed by credit unions to be a service to their consumer members, who have asked that they have continued access to such programs.

"Given that credit unions are member-owned financial services providers, credit unions strive to develop these programs in such a way the costs can be covered for the programs, but at reasonable fees for the members requesting the service. We believe credit unions should continue to have that flexibility to meet their members' needs," CUNA President/CEO Bill Cheney said last month.

Senate Banking Chair Calls On Regulators To Monitor Student Loans

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WASHINGTON (6/26/13)--As concerns over a potential student loan debt crisis grow nationwide, Consumer Financial Protection Bureau Assistant Director and Student Loan Ombudsman Rohit Chopra examined the parallels between the student lending and mortgage markets during a Tuesday Senate Banking Committee hearing.

During the committee hearing, entitled "Private Student Loans: Regulatory Perspectives," Chopra said the issues that student loan borrowers face are similar to those that some mortgage borrowers are still dealing with, and a potential student loan crisis could impact the economy at large. Origination of non-traditional products increased in both industries in the years before the financial crisis. Chopra said higher-risk loans with high interest rates were originated as documentation requirements and other checks that ensure high-quality loans fell by the wayside.

Adding fuel to the nation's student loan market concerns is the fact that the federal student loan rate, currently capped at 3.4%, will double for future loans to 6.8% on July 1 if Congress does not take action. Legislators are reportedly working to craft a solution.

In a statement opening the hearing, Senate Banking Committee Chairman Tim Johnson (D-S.D.) urged regulators "to be vigilant in monitoring growth in the private student loan market that may result from changes to the federal student loan market."

"It is critical that regulators respond quickly to marketplace changes, and that consumer protections are safeguarded when demand rises," Johnson said.

A comprehensive CFPB student debt report released last month found that Americans hold approximately $1.1 trillion in outstanding student loan debt. Former students that find themselves without a job after graduation can run into more trouble when they cannot repay their loans, Chopra said.

"For struggling homeowners and student loan borrowers, the consequences of being unable to find an affordable repayment option are severe," Chopra told members of the banking panel. Future purchasing power, including the ability to buy a home, could be impacted by student loan debt issues, he said.

Developing a robust student loan refinancing market could help alleviate some of these issues, Chopra suggested. "Even if such a program required public funds, or sharing the costs between the public sector and the owners of the loans, the economic benefits of facilitating restructuring activity at a scale might outweigh program costs," Chopra said.

Chopra noted that the CFPB has "been continuously collaborating with financial institutions, consumers, investors, and other policymakers" to improve the student lending market. The CFPB earlier this year asked the Credit Union National Association and credit unions to help address student loan issues.

CUNA in a meeting with the CFPB said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased.

CUNA has also suggested that giving credit unions greater leeway to work with student loan borrowers and adjust the terms of their loans, as needed, could make monthly payments more manageable for borrowers and help credit unions minimize delinquencies or even charge offs.

CUNA Backs More NACHA Changes To Ease Compliance Burdens

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WASHINGTON (6/26/13)--The Credit Union National Association generally supports clarifications proposed by NACHA--The Electronic Payments Association regarding operational issues relating to third parties in the Automated Clearing House (ACH) network, and encouraged NACHA to do even more to clarify its operating rules in ways that minimize compliance burdens on credit unions and other financial institutions that must follow NACHA standards.

NACHA's changes, proposed May 20, would clarify the definitions, roles, and responsibilities of service providers and senders that are third parties, and are intended to strengthen NACHA operating rules compliance among ACH participants. The proposal addresses five areas:
  • Clear identification of the originator in consumer debit authorizations;
  • Third-parties and receiver authorizations;
  • Definition of "third-party sender;"
  • Definition of "third-party service provider;" and,
  • Third-party audit requirements.
CUNA Assistant General Counsel Dennis Tsang wrote that the NACHA clarification sand technical changes should be helpful for third-parties as well as for other entities in the ACH network, including  credit unions that use such entities for processing.

He said CUNA backs NACHA's plan to provide supplemental information in the operating guidelines, which should provide examples regarding the new rules. CUNA also encouraged the development of additional resources that would be directed to smaller financial institutions for compliance and implementation purposes, and offered to collaborate on that effort.

Use the resource link to access all CUNA comment letters.

NEW: Loan Participation Rule Goes Into Effect July 25

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WASHINGTON (6/26/13, UPDATED 10:30 a.m. ET)--July 25 is the effective date of the National Credit Union Administration's final rule on loan participations, which implemented a number of improvements, sought by the Credit Union National Association, from the original proposal.

CUNA President/CEO Bill Cheney welcomed the agency's changes to its original plan and said it gave credit unions a "much more workable framework" to utilize loan participations.

"The original proposal had strict limitations and we are pleased to see that NCUA has taken into consideration the majority of CUNA's recommendations and worked with the system to make significant improvements in the final rule," Cheney said of the rule.

The NCUA last week approved the final rule and set a limit on loans from one originator of 100% of a credit union's net worth. This is up from the proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower.

The NCUA also approved a grandfather provision so that credit unions pushed over the limit by new rule can move their loans into line: such credit unions would not have to sell loans immediately to come into compliance.

The rule was published in the June 25 Federal Register, and that document sets the July 25 effective date.

Use the resource links to read more.

NCUA Nomination Could Move Quickly

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WASHINGTON (6/25/13)--Former Oregon State Sen. Rick Metsger's (D) nomination to become a member of the National Credit Union Administration board could progress quickly after his nomination hearing by the Senate Banking Committee this week.

Metsger's nomination will be discussed before the committee on Thursday, June 27, at 10 a.m. (ET).

Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said there is an interest in the Senate to hold confirmation votes on non-controversial nominations such as Metsger's in July. "There is a plausible path to have it happen in July," he added.

Metsger, who would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year, served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation. He was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

Other nominees on the committee's June 27 include Rep.  Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a member and chairman of the Council of Economic Advisers; Kara M. Stein of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar of Virginia, to be a member of the Securities and Exchange Commission.

FinCEN Restructures Information Channels

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WASHINGTON (6/25/13)--As information nerds know, "silos" can be bad because they inhibit related communication--even within an organization--and the Financial Crimes Enforcement Network (FinCEN) Monday announced it is tearing silos down to enhance communications.

Jennifer Shasky Calvery, who became FinCEN director last September, announced a reorganization with the underlying conceptual change being that employees will be organized by job function rather than by the stakeholder that they serve.

"In the new structure, information developed by an analyst in the Intelligence Division could more easily be provided to law enforcement, regulators, foreign partners, and industry to enable each of them to better carry out their individual responsibilities," Shasky explained. "This maximizes FinCEN's ability to further its anti-money laundering and counterterrorist financing efforts in a nimble and efficient way."

Shasky noted that under the former organizational structure, FinCEN was organized by stakeholder. The Analysis and Liaison Division served law enforcement. The Regulatory Policy and Programs Division served industry and regulators. The International Programs Division served foreign partners.

"Each division was vertically integrated to carry out all functions for its stakeholders and had its own analysts, policy specialists, liaisons, and enforcement specialists," she said.

Use the link to read the entire FinCEN release.

CFPB Issues Clarifications, 'Narrow' Changes To Mortgage Rules

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WASHINGTON (6/25/13)--The Consumer Financial Protection Bureau (CFPB) promised future clarifications, if needed, when it issued its January 2013 mortgage rules and on Monday the agency delivered just that.  The CFPB said its proposed clarifications and "narrow revisions" are intended to "ease implementation and pave the way for more effective consumer protections in the marketplace."

Among other things, the proposal amends and provides clarification on six major topics. These include: 

  • Facilitating the ability of servicers to offer short-term forbearance plans;
  • Addressing the process for correcting errors or mistakes that may occur when servicers perform initial completeness evaluations of loss mitigation applications, but later discover the application was incomplete;
  • Clarifying the definition of a loan originator;
  • Facilitating lending by small creditors, including those in rural or underserved areas;
  • Clarifying application of the prohibition on creditors financing credit insurance premiums; and
  • Adjusting effective dates of several provisions of the loan originator rule.
The CFPB also finalized rules that strengthened consumer protections for high-cost mortgages, and instituted a requirement that escrow accounts be established for a minimum of five years for certain higher-priced mortgage loans.

Interested parties have only until July 22 to comment on the proposed clarifications.  Use the resource link to read the CFPB's lengthy proposal.

CUNA Backs Rep. Huzienga's CFPB Bill

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WASHINGTON (6/25/13)--The "Ability to Repay" rule fixes contained in Rep. Bill Huzienga's (R-Mich.) Consumer Mortgage Choice Act (H.R. 1077) would address many credit union concerns, the Credit Union National Association wrote in a Monday letter to the legislator.

The Consumer Financial Protection Bureau in May finalized changes to the "Ability to Repay" rule, which will require lenders to determine a borrower's ability to repay before writing a mortgage loan. The rule is slated to take effect on Jan. 10, 2014.

CUNA remains concerned about the definition of points and fees in the amended CFPB rule, CUNA President/CEO Bill Cheney wrote. "Specifically, we are concerned that the inclusion of affiliated title charges remains as part of the points and fees definition," he said.

Huzienga's legislation addresses CUNA's concerns by excluding from the definition "all title charges, regardless of whether they are charged by an affiliated company, provided they are bona fide and reasonable."

Cheney said "defining points and fees in this way will maintain a competitive marketplace, prevent over-pricing or limiting choice in low-moderate income areas and allow consumers to enjoy the existing benefit of working through one entity for their new mortgage or refinance."

Huzienga's bill also addresses loan level price adjustment exclusions contained in the bill. These exclusions, if not eliminated, would impair the availability of credit for some credit union members, the CUNA letter warned.

For the full letter, use the resource link.

Student Loans, NCUA Nominee On Hill Hearing Agenda

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WASHINGTON (6/25/13)--With the July 1 deadline for federal student loan action rapidly approaching, student lending issues remain a high priority in the U.S. Congress. The Senate Banking Committee today has scheduled a full committee hearing entitled "Private Student Loans: Regulatory Perspectives."

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. Legislators are reportedly working to craft a solution. Other potential student loan fixes have also been introduced, but none have been passed.

Potential student loan fixes 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 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%.
Two other student lending bills failed in the Senate.

The Consumer Financial Protection Bureau last week emphasized that any federal student loan rate increase that occurs on July 1 will apply only to new loans. Federal direct loan rates will remain at 0% while a given student is still in school, the CFPB added.

Other hearings credit unions will want to watch out for this week include:

  • A Tuesday Senate Appropriations financial services and general government subcommittee hearing on the fiscal 2014 budget for the Commodity Futures Trading Commission and the Securities and Exchange Commission;
  • A Wednesday Joint Economic Committee hearing on reducing red tape through smarter regulations;
  • A Wednesday House Financial Services housing and insurance subcommittee hearing on how the U.S. Department of Housing and Urban Development's Moving-to-Work Program benefits public and assisted housing residents; and
  • A House Financial Services Committee hearing entitled "Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts."
The Senate Banking Committee will hold a hearing on the nominations of Richard Metsger to be a member of the National Credit Union Administration board, Melvin Watt to be director of the Federal Housing Finance Agency, and others on Thursday. (See News Now story: NCUA Nomination Could Move Quickly.)

CUNA: Bank Tax Rhetoric Tired, But Threat's Real

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WASHINGTON (6/25/13)--Banks have ramped up their attacks on the credit union tax status, taking their credit union-bashing arguments to President Barack Obama and administration officials as members of the U.S. Congress are preparing to develop comprehensive tax refrom legislation.

The banks urged Obama to examine the credit union tax status in letters sent last week.

This latest attack serves as clear message calling for continued vigilance and strong credit union advocacy in favor of the credit union tax status, Credit Union National Association Executive Vice President of Government Affairs John Magill noted Monday. He added that the bank attacks will only add fire to the current fight by credit unions and their members to preserve the credit union tax status and the public-policy benefits it provides for all Americans.

CUNA on Monday also reiterated that the reasons for supporting and maintaining the credit union tax status are as valid today as when they were first established by the U.S. Congress in 1934.

"Credit unions are exempt from the federal income tax because they are not-for-profit and member-owned, member controlled. Unlike banks that maximize profits for a small group of investors, credit unions exist to serve their members, including working families, small businesses, and the local community.

"Because they return benefits to members, they are able to offer higher returns on savings, lower rate on loans, and most importantly, low or no fees--and these benefits, combined, result in more than $8 billion in direct financial benefits each year to the 96 million Americans who belong to credit unions," Senior Vice President of Legislative Affairs Ryan Donovan said. Donovan said the banks have come up with nothing new in their tired rhetoric against credit unions.

And, he noted, credit union membership totals nationwide are increasing as millions of new members are seeing the positive benefits of credit unions.

Magill noted that the bank lobby usually amplifies their attacks on the credit union tax status when they want to divert attention from some problem of their own.

To oppose these and other tax status attacks, a large-scale, nationwide grassroots-mobilization campaign led by CUNA and the leagues continues to encourage 96 million credit union members nationwide to present a unified message to members of congress: Don't Tax My Credit Union!

Credit union advocates have delivered the message to members of Congress more than 135,000 times since mid-May, with the help of CUNA/league communication tools. The innovative campaign also uses newer media vehicles such as Facebook, a Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and social media micro-video site Vine. Around 300,000 individuals have used Facebook and Twitter to spread the message through social media.

CUNA has also developed a reformatted version of its tax advocacy toolkit to help credit unions and their members spread this message.

Actively participating in credit union grassroots activities and the political process is one tenet of CUNA's Unite for Good. Through Unite for Good, CUNA has called on credit unions to rally together to help create a nation in which "Americans choose credit unions as their best financial partner."

For more CUNA/league advocacy resources, and more on Unite for Good, use the resource links.

Supreme Court's May Not Be Last Word On Arbitration

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WASHINGTON (6/25/13)--The Supreme Court last week ruled in favor of giving financial services companies the right to include mandatory arbitration clauses in contracts with customers. The high court is set to discuss another case this Fall with potential ramifications for the Consumer Financial Protection Bureau and credit unions: A case addressing the constitutionality of President Barack Obama's recess appointments.

In the Arbitration case, a merchant that accepted American Express cards argued that the company was violating antitrust laws by charging rates up to 30% higher than fees for competing credit cards. However, the merchant lacked the funds to take on the case on its own, and a mandatory arbitration clause in the merchant's contract prevented it from joining with others in a class action suit.

The Supreme Court ruled 5-3 that under the Federal Arbitration Act, the merchant cannot challenge a class action waiver simply because the cost of pursuing individual legal action would be more expensive than the potential payout.

However, in this week's edition of the Credit Union National Association's Regulatory Advocacy Report, CUNA notes that the Supreme Court ruling may not be the final determination on this topic: The Dodd-Frank Act requires the CFPB to study the use of arbitration clauses in consumer financial services contracts. The bureau plans to survey 1,000 credit card holders on credit card agreements.

"Some in the financial services industry wonder if CFPB could prohibit mandatory arbitration agreements if the study shows that it would be in the public interest," CUNA Deputy General Counsel Mary Dunn wrote.

Another case that could impact the CFPB is set to be on the docket this fall. The court is scheduled to hear a case challenging President Barack Obama's recess appointment of three National Labor Relations Board members. A federal appeals court in January ruled that these appointments were unconstitutional.

Obama made the appointments on Jan. 4, the same time he appointed CFPB Director Richard Cordray.

The U.S. Constitution generally requires that senior officers of the government must be confirmed by the U.S. Senate, but when the Senate is in recess, the president can act alone by making a recess appointment.

Other items addressed in this week's Regulatory Advocacy Report include:

  • National Credit Union Administration board meeting results;
  • A  Financial Stability Oversight Council update;
  • Recent U.S. Small Business Administration actions;
  • CFPB remarks on mortgage rule implementation; and
  • CUNA's regulatory advocacy resource chart.
Employees or volunteers of CUNA and state credit union league member credit unions can sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Hill Hikes Keep CU Tax Status In Focus

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WASHINGTON (6/24/13)--Wisconsin and Arkansas credit union representatives kept the "Don't Tax My Credit Union!" message in front of the U.S. Congress last week as they met with their respective elected officials on Capitol Hill.

Click to view larger image Rep. Paul Ryan (R-Wisc.) (center-left) poses in his Capitol Hill office with, from left to right, Landmark CU COO Eric Kase, Summit CU CLO Dan Milbrandt and Wisconsin CU League Vice President of Government Affairs Tom Liebe. (WCUL photo)
These Hike the Hill visits followed on the heels of earlier efforts from credit union leaders from North and South Carolina, Oregon, Washington, Missouri, Michigan and Texas.

"Reports I am receiving back from these states focus on the importance of emphasizing the message that credit unions are concerned about preserving their tax exemption. Even our staunch supporters must be reminded how important the exemption is to credit unions," Credit Union National Association President/CEO Bill Cheney said in this week's edition of The Cheney Report.

The credit union tax status was a top topic for the Wisconsin Credit Union League, but they also addressed other key credit union issues, including:
  • The role of credit unions in a future housing finance system;
  • Member business loans; and
  • Supplemental capital.
Regulatory relief was another topic of conversation, and one credit union representative, Dan Milbrandt of Summit CU, Madison, Wisc., told a member of Rep. Jim Sensennbrenner's (R-Wisc.) staff that burdensome regulations are creating issues for his credit union. "We're just simple little town lenders trying to make loans to people," he emphasized.

The Northwest Credit Union Association also reported positive meetings with legislators from Washington and Oregon, where the benefits of the credit union structure and the importance of the not-for-profit tax exemption were central themes.

"As these visits to the Hill are going on, the message is being echoed by a growing number of contacts by credit unions and their members," Cheney noted.

The groundbreaking "Don't Tax My Credit Union!" campaign, which uses traditional means and social media to spread a pro-credit union message, has resulted in more than 120,000 contacts with lawmakers. Facebook and Twitter have pushed this message to a potential 240,000 persons, and hundreds of thousands of others have visited CUNA's website, donttaxmycreditunion.org.

The first stage of the 2013 Hike the Hill season wrapped up with last week's visits, but more visits are being planned for September.

"It's important to remember that this is not a three- or six-month campaign--this is a long-term effort," Cheney said of the tax status advocacy effort. "While these initial numbers are outstanding, we must keep the messages flowing throughout the Ssmmer, and well into the Fall," Cheney added.

This week's Cheney Report also includes:
  • Details on CUNA testimony before Congress;
  • An update on loan participation and qualified mortgage regulations; and
  • A preview of this week's America's Credit Union Conference.
Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership. To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

NEW: NCUA Nomination Could Move Quickly

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WASHINGTON (UPDATED: 6/24/13, 1 P.M. ET)--Former Oregon State Sen. Rick Metsger's (D) nomination to become a member of the National Credit Union Administration board could progress quickly if, as expected, it is approved by the Senate Banking Committee this week.

Metsger's nomination will be discussed before the committee on Thursday, June 27, at 10 a.m. (ET).

Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said there is an interest in the Senate to hold confirmation votes on non-controversial nominations such as Metsger's in July. "There is a plausible path to have it happen in July," he added.

Metsger, who would fill the vacant NCUA board seat created when former member Gigi Hyland exited last year, served as Oregon state senator from 1999 to 2011, where he chaired the Oregon Senate committee that heard all financial institution legislation. He was a member of the board of directors at Portland Teachers CU from 1993 to 2001 and has also been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

Other nominees on the committee's June 27 include Rep.  Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a member and chairman of the Council of Economic Advisers; Kara M. Stein of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar of Virginia, to be a member of the Securities and Exchange Commission.

Freddie Confirms Fee Reversal For CUs

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WASHINGTON (6/24/13)--The Credit Union National Association quickly secured confirmation last week: Freddie Mac will reverse course and refrain from imposing fees on mortgage sellers and servicers--including credit unions--that do not meet minimum activity thresholds.

The government-sponsored enterprise on May 15 had announced that effective Jan. 1, 2014, sellers and servicers that did not meet minimum activity thresholds for the prior calendar year would have been assessed a fee of $7,500 for low activity. Sellers and servicers would have had to sell loans with an aggregate unpaid principal balance of $5 million, or service or act as servicing agent for loans with an aggregate unpaid principal balance of $25 million in the prior calendar year, to avoid the fees.

Freddie Mac has changed course, stating that the fee will only apply to lenders that have Freddie Mac approval but do not sell or serviceanyof the company's mortgages. As long as a lender handles or writes at least one Freddie Mac loan over a three-year period, it will be able to avoid the fee.

"This is a welcome development," CUNA President/CEO Bill Cheney wrote in a letter sent last week to Freddie Mac CEO Donald Layton. "The fee would have unfairly burdened credit unions in rural and underserved areas where annual real estate sales activity and housing prices are not high enough to generate the dollar figures that meet Freddie Mac's thresholds," he said.

Earlier CUNA requested that the decision imposing these fees be revisited in a letter sent to Federal Housing Finance Agency Acting Director Ed DeMarco last week. It also was a topic of the testimony given by CUNA witness Jerry Reed of Alaska USA FCU to the House Financial Services subcommittee on financial institutions and consumer credit.

CUNA: FASB Framework Must Recognize CU Structure

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WASHINGTON (6/24/13)--The Credit Union National Association supports the efforts of the Financial Accounting Standards Board (FASB) to recognize "that there are material differences between private companies and public companies and that reporting requirements should reflect those distinctions, at least in some instances," in its proposed private company decision-making framework.
 
However, in a Friday comment letter to the standard setter, CUNA Assistant General Counsel Luke Martone said the uniqueness of the credit union structure should be recognized as FASB develops a decision-making framework that will guide the Private Company Council (PCC) as it determines whether exceptions to U.S. Generally Accepted Accounting Principles--or GAAP--for credit unions and other private entities are appropriate.
 
The framework should also help identify opportunities for reducing the complexity and costs associated with preparing financial statements in accordance with U.S. GAAP.

FASB and PCC are working to improve the process of setting accounting standards for private companies, and this process began with the release of a July 2012 discussion paper. The proposed framework followed the release of that paper, and many CUNA suggestions have been incorporated into the framework. Those suggestions regard:
  • The use of alternative recognition and measurement standards; and
  • The application of industry-specific guidance.
Use the resource link to read the complete CUNA comment.

WOCCU: Basel External Audit Rule Should Factor Complexity

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WASHINGTON (6/24/13)--Although the Basel Committee developed its External audits of banks consultative document to apply only to commercial banks and banking system, the World Council of Credit Unions recently asked the committee to consider its impact on smaller, less complex financial institutions because national and provincial credit union supervisors frequently apply the Basel Committee's international standards to credit unions.

In a comment letter to the committee sent Friday, World Council Chief Counsel Michael Edwards noted that his organization supports the external audits proposal in most respects.

"External audits are an important element of the safety and soundness regime of many banking institutions," Edwards wrote. But he added that whether external audits under the auditing standards applicable to publicly traded companies apply to an institution should depending on the size and complexity of the institution since public company audit standards can "impose significant regulatory burdens on small and medium institutions such as credit unions."

Those burdens, he added, can negatively impact credit unions' abilities to promote financial inclusion of unbanked persons and would be inconsistent with regulatory requirements for smaller credit unions in some jurisdictions that require on-site supervisory examinations of credit unions.

Edwards cites U.S. credit unions as an example of institutions that could be unduly burdened.  In this country, he says, credit unions are subject to examination by the National Credit Union Administration and, in some cases, also by state financial institution supervisors.

The Federal Credit Union Act does not require an external audit unless the credit union has more than $500 million in assets but federally insured credit unions with more than $10 million in assets that have an external audit must have the audit conducted according to generally accepted auditing standards.

"We believe that an external examination of a small credit union can limit the need for an external audit in a safe and sound manner, as is the case with smaller federally insured credit unions in the United States," Edwards wrote.

SBA Raises CU Small Biz Standard

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WASHINGTON (6/24/13)--A rule to raise the "small business" size standard for credit unions from $175 million in assets to $500 million, which was strongly supported by the Credit Union National Association when it was proposed, was approved last week by the U.S. Small Business Administration.

It goes into effect July 22.

The new size standard permits a greater number of credit unions, though still a relatively small number, to benefit from provisions that require federal agencies to assess and minimize regulatory costs for smaller entities, including those associated with the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement Fairness Act (SBREFA).

When commenting on the proposed rule, CUNA noted research results that showed SBA that both credit unions and banks with less than $500 million in assets are unlikely to have a compliance officer on staff.

CUNA also documented that credit union and banks with $175 million to $500 million in assets employ 75 FTEs on average, whereas those with $500 million to $750 million on average have double the number of employees.

"This further supports the concern that smaller institutions simply have fewer resources to meet compliance responsibilities," CUNA wrote.

While CUNA welcomed the higher standard, the group noted that the impact of the change will be relatively small. The change from $175 million to $500 million would increase the percent of total credit union and bank assets under the threshold from 3.5% today to still only 8.6%.

PEF FCU Placed Under NCUA Conservatorship

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ALEXANDRIA, Va. (6/24/13)--PEF FCU, Highland Heights, Ohio, has been taken under conservatorship, the National Credit Union Administration announced Friday.

The NCUA said it will work to resolve safety and soundness issues at the 2,974-member, $31.3 million-in-assets credit union.

Chartered in 1957, PEF Federal Credit Union serves 2,974 members and has assets of approximately $31.3 million, according to the credit union's most recent Call Report.

PEF was originally chartered in 1957 as Picker X-ray CU, and currently serves those that live, work, worship or attend school in the eastern section of Cuyahoga County, Ohio.
 
Members will still be able to conduct business at the credit union during the conservatorship.
 
For the full NCUA release, use the resource link.

CUNA Thanks Freddie Mac For Fee Reversal

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WASHINGTON (6/21/13)--Credit Union National Association President/CEO Bill Cheney is urging Freddie Mac CEO Donald Layton to confirm that the company has decided to reverse course and refrain from imposing fees on mortgage sellers and servicers that do not meet minimum activity thresholds.

The government-sponsored enterprise on May 15 announced that effective Jan. 1, 2014, sellers and servicers that did not meet minimum activity thresholds for the prior calendar year would have been assessed a fee of $7,500 for low activity. Sellers and servicers would have had to sell loans with an aggregate unpaid principal balance of $5 million, or service or act as servicing agent for loans with an aggregate unpaid principal balance of $25 million in the prior calendar year, to avoid the fees.

CUNA requested that the decision imposing these fees be revisited in a letter sent to Federal Housing Finance Agency Acting Director Ed DeMarco early this week. It also was a topic in testimony given by Jerry Reed of Alaska USA FCU to the House Financial Services subcommittee on financial institutions and consumer credit Tuesday.

According to published reports, the fee will only apply to lenders who have Freddie Mac approval but do not sell or service any of the company's mortgages, and that as long as a lender handles or writes at least one Freddie Mac loan over a three-year period, they will be able to avoid the fee. "This is a welcome development," Cheney wrote in his letter to Layton.

"The fee would have unfairly burdened credit unions in rural and underserved areas where annual real estate sales activity and housing prices are not high enough to generate the dollar figures that meet Freddie Mac's thresholds," Cheney added.

NCUA Approves Loan Participation Rule

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WASHINGTON (6/21/13)--The National Credit Union Administration's final rule on loan participations implemented a number of changes sought by the Credit Union National Association and is now a much more workable framework for credit unions to utilize loan participations, said CUNA President/CEO Bill Cheney.

The NCUA on Thursday approved a final rule on loan participations with a limit on loans from one originator of 100% of a credit union's net worth. This is up from the proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower.

The NCUA also approved a grandfather provision so that credit unions pushed over the limit by new rule can move their loans into line: such credit unions would not have to sell loans immediately to come into compliance.

"Loan participations are an important tool for credit unions and are an example of how credit unions cooperate together to better serve members," Cheney said. "The original proposal had strict limitations that would have limited the ability of credit unions to utilize participations. We are pleased to see that NCUA has taken into consideration the majority of CUNA's recommendations and worked with the system to make significant improvements in the final rule."

The rule will go into effect 30 days after its publication in the Federal Register.

During consideration of the rule this morning, NCUA Chair Debbie Matz emphasized that the rule focuses on purchasers, not originators. It is meant to protect the credit union system without discouraging credit union loan participations, she added.

The agency is "mindful that loan participations strengthen the credit union industry by providing a useful way for credit unions to diversify their loan portfolios, improve earnings, generate loan growth, manage their balance sheets, and comply with regulatory requirements," Matz said. "Credit unions also use liquidity obtained through the sale of loan participations to increase the availability of credit to small businesses and consumers," she noted.

CUNA raised serious concerns about the proposal when it was issued in December 2011, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

The NCUA board also approved an Illinois Member Business Loan (MBL) rule that was proposed by that state's credit union regulator. The rule is similar to the NCUA's current MBL rule.

NCUA regulations allow the agency to exempt federally insured, state-chartered credit unions from compliance with the agency's MBL rules if the board determines the state has developed an MBL rule that minimizes risk and accomplishes the overall objectives of NCUA's rule. Other states that have their own MBL rules are Maryland, Washington, Wisconsin, Texas, Oregon, and Connecticut.

For a summary of the meeting and a chart detailing the loan participation rule, use the resource links.

Senate Banking To Consider New NCUA Member Thursday

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WASHINGTON (6/21/13)--Next Thursday, June 27, at 10 a.m. (ET), the Senate Banking Committee will consider the nomination of former Oregon State Sen. Rick Metsger (D) to become a member of the National Credit Union Administration board.

Metsger was a member of the board of directors at Portland Teachers CU from 1993 to 2001.

He was named by the White House in May as a candidate to fill the vacant seat on the NCUA board, a position left open since former member Gigi Hyland exited last year. If confirmed, Metsger will join NCUA Chair Debbie Matz and board member Michael Fryzel to fill out the three-member board.

When the nomination was announced, Northwest Credit Union Association President/CEO Troy Stang said, "Sen. Metsger has a strong background of public service and certainly understands the complexity of the financial services landscape including the importance of safety and soundness in the credit union system.

"With so many consumers interested in becoming part of the cooperative credit union system, it's important the industry's regulatory and insurance system is led by the most qualified individuals. Sen. Metsger should complement the skills and talent on the NCUA board well with a solid focus on the future."

Among other highlights of Metsger's resume, he chaired the Oregon Senate committee that heard all financial institution legislation, and he has been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

Metsger also has been:
  • Oregon state senator from 1999 to 2011;
  • Oregon Senate president pro-tempore from 2009 to 2011; and
  • Oregon state Debt Policy Advisory Commission member from 2001 to 2011.
     Other nominees on the committee's June 27 include Rep.  Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a member and chairman of the Council of Economic Advisers; Kara M. Stein of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar of Virginia, to be a member of the Securities and Exchange Commission.

NCUA Issues Guidance On Credit Rating Rule

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ALEXANDRIA, Va. (6/21/13)--Supervisory guidance on a National Credit Union Administration rule regarding the use of credit ratings by natural-person credit unions has been sent to federal examiners and credit unions by the agency.

The credit ratings rule, required by the Dodd-Frank Act, was approved December 2012 by the NCUA and goes into effect this month. Dodd-Frank required all federal financial agencies to review their regulations for any use of credit ratings to assess the creditworthiness of a security or money-market instrument, to remove those references, and replace them with appropriate substitute standards.

The Letter to Credit Unions (13-CU-05) is intended to help credit unions understand examiners' focus on specific elements of a sound due diligence process, including:

  • Key factors to consider in analysis of credit risk for various investment types and counterparty agreements;
  • Guidance on structured securities analysis; and
  • Grandfathered investments.
The NCUA defined an "investment-grade" security under the new rule as a security in which the credit union determines the issuer has adequate capacity to meet the financial commitments under the security for the projected life of the asset or exposure even under adverse economic conditions. A security with "a minimal amount of credit risk" is one in which the issuer has a very strong capacity to meet the financial commitments under the security, the agency added.

NCUA Chairman Debbie Matz said at the December meeting the agency's goal in developing the new standards "was to make sure credit unions have the evaluation standards necessary to maintain their safety and soundness in today's investment environment."

NCUA staff at that time said that credit-risk examination processes will not change, but pledged that examiners will not take a rigid, "bright-line" approach when looking over credit union investment portfolios. Examiners will look at a credit union's investment process, pre-investment research, and what is done after an investment is made, NCUA staff said.

The newly released guidance illustrates how a credit union should fulfill its responsibility to make an independent determination about the risks associated with its investment purchases, without the sole reliance on nationally recognized statistical rating organization credit ratings.

CUNA 'Inside Exchange' Features Participation Rule Analysis

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WASHINGTON (6/21/13)--The new "loan participations" rule adopted by the National Credit Union Administration on Thursday is the topic of discussion in the latest episode of "Inside Exchange," the Credit Union National Association's regular video feature.

Paul Gentile, CUNA executive vice president of communications, and Mary Dunn, CUNA deputy general counsel, discuss the highlights of the just-adopted final rule, changes that were made to the rule as originally proposed, and the rule's impact on credit unions. (For more, see today's News Now story: NCUA Approves Loan Participation Rule)



CUNA created the "Inside Exchange" video series as a new way to directly communicate to member credit unions, and to provide detailed insights into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

For more on this new video, and previous videos featuring CUNA comments on credit union advocacy efforts, use the resource link.

The "Inside Exchange" videos can also be found by clicking on the "stay informed" section of the gray menu bar at the top of the cuna.org homepage and scrolling down to the "Inside Exchange" pane.

FTC To Investigate 'Patent Troll' Lawsuits

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WASHINGTON (6/21/13)--The Federal Trade Commission said Thursday it will launch an inquiry into the business practices of  "patent troll" companies that buy technology patents and then file lawsuits against software designers, product manufacturers and even financial institutions that may use processes similar to the patent.

Credit unions, banks, and check processors, for example, have been sued by companies over their remote-capture-image services by companies claiming to have a patent for that process (News Now May 30) and for Internet security technology used to provide identification authentication for mobile transactions on devices such as smartphones and tablets in the so-called "smartphone wars" (News Now July 13, 2012).

FTC Chairwoman Edith Ramirez said she would ask the commission to approve an inquiry to enable the FTC to issue subpoenas to patent-assertion entities (PAEs), often dubbed "patent trolls" (PCWorld.com June 20).  PAEs accounted for more than 60% of about 4,000 patent lawsuits filed last year, said The New York Times (June 19).

The agency will monitor for possible anticompetitive lawsuits and take antitrust enforcement action against the PAEs if warranted, Ramirez said in a patent law workshop Thursday sponsored by the American Antitrust Institute and the Computer & Communications Industry Association.

Many businesses find themselves victims of nuisance lawsuits that are far cheaper to settle than litigate, Ramirez said.

Credit unions, banks and entities such as PNC Financial Services Group, Electronic Data Systems Corp., Diebold, and First Data Corp. have been among the businesses that have entered settlements with companies trolling their patents (News Now May 30).  In one case, Catalyst Corporate FCU filed a preemptory lawsuit seeking a judgment it had not infringed on any process patents after it received such a demand letter from IP Navigation Group (News Now April 23, 2012, and July 13, 2012).

Last week President Barack Obama issued several executive orders directing the Patent and Trademark Office and other executive branch agencies to take action in protecting innovators "from frivolous litigation" by heightening disclosure of the names of patent owners.

The Times noted that one lawsuit threatened thousands of companies with patent infringement charges by hooking a document scanner up to a computer network and sending a scanned file by e-mail to an employee.

The FTC does not plan to single out any particular company in its investigation, but indicated it would focus on companies that are small, legal shell companies that gather patents and cite them in demand letters sent to businesses, and on large companies that snap up intellectual property rights portfolios from technology innovators such as Microsoft and Nokia.

NEW: CUNA Details Just-Approved NCUA Final Rule

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WASHINGTON (6/20/13, UPDATED: 5:15 p.m. ET)--The new "loan participations" rule adopted by the National Credit Union Administration earlier today is the topic of discussion in the latest episode of "Inside Exchange," the Credit Union National Association's regular video feature.

Paul Gentile, CUNA executive vice president of communications, and Mary Dunn, CUNA deputy general counsel, discuss the highlights of the final rule, changes that were made from the proposal, and the rule's impact on credit unions. (For more, see today's News Now story: NCUA Approves Loan Participation Rule)



CUNA created the "Inside Exchange" video series as a new way to directly communicate to member credit unions, and to provide detailed insights into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

For more on this new video, and previous videos featuring CUNA comments on credit union advocacy efforts, use the resource link.

The "Inside Exchange" videos can also be found by clicking on the "stay informed" section of the gray menu bar at the top of the cuna.org homepage and scrolling down to the "Inside Exchange" pane.

NEW: NCUA Issues Guidance On Credit Rating Rule

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ALEXANDRIA, Va. (6/20/13, UPDATED: 3:54 p.m. ET)--Supervisory guidance on a National Credit Union Administration rule regarding the use of credit ratings by natural-person credit unions has been sent to federal examiners and credit unions by the agency.

The credit ratings rule, required by the Dodd-Frank Act, was approved December 2012 by the NCUA and goes into effect this month. Dodd-Frank required all federal financial agencies to review their regulations for any use of credit ratings to assess the creditworthiness of a security or money-market instrument, to remove those references, and replace them with appropriate substitute standards.

The Letter to Credit Unions (13-CU-05) is intended to help credit unions understand examiners' focus on specific elements of a sound due diligence process, including:
  • Key factors to consider in analysis of credit risk for various investment types and counterparty agreements;
  • Guidance on structured securities analysis; and
  • Grandfathered investments.
The NCUA defines an "investment-grade" security under the new rule as a security in which the credit union determines the issuer has adequate capacity to meet the financial commitments under the security for the projected life of the asset or exposure even under adverse economic conditions. A security with "a minimal amount of credit risk" is one in which the issuer has a very strong capacity to meet the financial commitments under the security, the agency added.

NCUA Chairman Debbie Matz said at the December meeting the agency's goal in developing the new standards "was to make sure credit unions have the evaluation standards necessary to maintain their safety and soundness in today's investment environment."

NCUA staff at that time said that credit-risk examination processes will not change, but pledged that examiners will not take a rigid, "bright-line" approach when looking over credit union investment portfolios. Examiners will look at a credit union's investment process, pre-investment research, and what is done after an investment is made, NCUA staff said.

The newly released guidance illustrates how a credit union should fulfill its responsibility to make an independent determination about the risks associated with its investment purchases, without the sole reliance on nationally recognized statistical rating organization credit ratings.

CUNA: Freddie Mac Should Exempt CUs From Activity Fee

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WASHINGTON (6/20/13)--Freddie Mac's decision to impose fees on mortgage sellers and servicers that do not meet minimum activity thresholds "could hamper the ability of credit unions to serve their members in the mortgage marketplace," Credit Union National Association President/CEO Bill Cheney wrote in a letter to Freddie Mac CEO Donald Layton.

The government-sponsored enterprise (GSE) on May 15 announced that effective Jan. 1, 2014, sellers and servicers that do not meet minimum activity thresholds for the prior calendar year will be assessed a fee of $7,500 for low activity. Sellers and servicers must sell loans with an aggregate unpaid principal balance of $5 million, or service or act as servicing agent for loans with an aggregate unpaid principal balance of $25 million in the prior calendar year to avoid the fees.

Cheney urged the GSE to eliminate the minimum activity threshold fee or to exempt credit unions from the fee.

"The basis for the fee is questionable as applied to credit unions," he explained. Fannie says the fee is meant to support risk management efforts and offset other costs. However, Cheney wrote, "credit unions have not generated widespread losses to Freddie Mac, and should not be asked to pay a fee ostensibly for 'risk management.'

"The losses which Freddie Mac has experienced in the past five years were not caused by credit unions, and credit unions should not be asked to bear the burden of others," he said.

The CUNA CEO wrote the fees would impact small institutions that can afford them the least, especially impacting credit unions in rural and underserved areas where annual real estate sales activity and housing prices are not high enough to generate the dollar figures that meet Freddie Mac's thresholds.

Overall, he said, the fees could "contribute to some credit unions leaving the mortgage business altogether, restricting access to credit to millions of Americans."

For the full letter, use the resource link.

Freddie Mac was the topic of another CUNA letter sent this week. In that letter, Cheney told Federal Housing Finance Agency Acting Director Ed DeMarco that his agency's decision to prohibit Fannie Mae and Freddie Mac from purchasing mortgages that do not meet the definition of qualified mortgages could prevent credit unions from working with their members to customize financial products that meet their individual needs. (For more, see June 19 News Now story:  CUNA Warns FHFA QM Proposal Could Harm Credit Access.)

Three-day Disclosure Flexibility Still Issue In CFPB Rule

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 WASHINGTON (6/19/13)--Richard Cordray, who heads the Consumer Financial Protection Bureau, said in a letter to lawmakers Wednesday that his agency is "sensitive" to issues revolving around its proposed rule integrating mortgage disclosures required under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z).

The CFPB director was responding to recent letters from 82 members of Congress, 62 Republicans and 20 Democrats, who stated concerns with a provision in the proposal that would require that consumers receive final loan-cost disclosures at least three days before closing on the loan.  The provision is intended to give potential borrowers time to review the disclosure without pressure.

However, as pointed out by the lawmakers, as well as by the Credit Union National Association in a joint trade group letter, in a typical real estate transaction, changes frequently occur in the three days prior to closing that could increase a borrower's cost to close.

Additional flexibility is needed in the three-day requirement, concerned parties have said, or the CFPB's proposed rule could cause costly delays to closings, which could harm consumers by reducing their ability to make reasonable changes to their purchase, increasing their costs, putting at risk their mortgage rate lock and even the expiration of their purchase contract and earnest money deposit to the seller.

Cordray wrote that the bureau understands that things do sometimes change between the time of a three-day disclosure and the closing, and that not all changes justify delaying the closing date.

Cordray added that although the proposed rule specifies several exceptions that would not force an additional waiting period, the CFPB continues to review public comments to determine the "most appropriate way" to provide meaningful disclosures while avoiding unnecessary delays.

The final TILA/RESPA rule is expected out later this year, perhaps between September and December.

Tax Options Paper Gets Inside Exchange Spotlight

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WASHINGTON (6/20/13)--The threat level of credit unions of tax reform--raised by the release June 13 of a "tax options" paper by the Senate Finance Committee--is explored in the latest episode of "Inside Exchange," the Credit Union National Association's video series of key legislative, regulatory and political topics.

In this episode, titled "Impact of tax reform on credit unions," Paul Gentile, CUNA executive vice president of communications, and Ryan Donovan, CUNA senior vice president of legislative affairs, discuss what the "tax options" paper means for credit unions, how that affects the threat level for credit unions, and the process going forward. They also discuss why now is the time for credit unions to become engaged in preserving and protecting the tax exemption.



CUNA created the "Inside Exchange" video series as a new way to directly communicate to member credit unions, and to provide detailed insights into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

For more on this new video, and previous videos featuring CUNA comments on credit union advocacy efforts, use the resource link.

The "Inside Exchange" videos can also be found by clicking on the "stay informed" section of the gray menu bar at the top of the cuna.org homepage and scrolling down to the "Inside Exchange" pane.

NEW: Senate Banking To Consider New NCUA Member Thursday

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WASHINGTON (6/20/13, UPDATED: 2:30 p.m.  ET)--The nomination of former Oregon State Sen. Rick Metsger (D) to become the third member of the National Credit Union Administration will be considered by the Senate Banking Committee next Thursday, June 27, at 10 a.m. (ET).

Metsger was member of the board of directors at Portland Teachers CU from 1993 to 2001.

He was named by the White House in May as a candidate to fill the vacant seat on the NCUA board, a position left open since former member Gigi Hyland exited late last year. If confirmed, Metsger will join NCUA Chair Debbie Matz and board member Michael Fryzel.

When the nomination was announced said Northwest Credit Union Association President/CEO Troy Stang said, "Sen. Metsger has a strong background of public service and certainly understands the complexity of the financial services landscape including the importance of safety and soundness in the credit union system.

"With so many consumers interested in becoming part of the cooperative credit union system, it's important the industry's regulatory and insurance system is led by the most qualified individuals. Sen. Metsger should complement the skills and talent on the NCUA board well with a solid focus on the future."

Among other highlights of Metsger's resume, he chaired the Oregon Senate committee that heard all financial institution legislation, and he has been a board member of Financial Beginnings, a nonprofit focused on increasing students' financial literacy.

Metsger also has been:

  • Oregon state senator from 1999 to 2011;
  • Oregon Senate president pro-tempore from 2009 to 2011; and
  • Oregon state Debt Policy Advisory Commission member from 2001 to 2011.
     Other nominees on the committee's June 27 agenda include Rep.  Melvin L. Watt (D-N.C.) to be director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be chairman of the Council of Economic Advisers; Kara M. Stein, of Maryland, to be a member of the Securities and Exchange Commission; and Dr. Michael S. Piwowar, of Virginia, also to be an SEC member.

NEW: NCUA Approves Loan Participation Rule

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WASHINGTON (6/20/13, UPDATED 11:08 a.m. ET)--The National Credit Union Administration's final approved rule on loan participations implemented a number of changes sought by the Credit Union National Association and is now a much more workable framework for credit unions to utilize loan participations, said CUNA President/CEO Bill Cheney.

The NCUA this morning approved a final rule on loan participations with a limit on loans from one originator of 100% of a credit union's net worth.  This is up from the proposed 25% of net worth cap. Also very significant, the federal regulator approved an expanded waiver process for the single-originator limit and limits to one borrower.

The NCUA also approved a grandfather provision so that credit unions pushed over the limit by new rule can move their loans into line: such credit unions would not have to sell loans immediately to come into compliance.

"Loan participations are an important tool for credit unions and are an example of how credit unions cooperate together to better serve members," said Bill Cheney after the open board meeting this morning.

"The original proposal had strict limitations that would have limited the ability of credit unions to utilize participations. We are pleased to see that NCUA has taken into consideration the majority of CUNA's recommendations and worked with the system to make significant improvements in the final rule," he said.

The rule will go into effect 30 days after its publication in the Federal Register.

During consideration of the rule this morning, NCUA Chair Debbie Matz emphasized that the rule focuses on purchasers, not originators. It is meant to protect the credit union system without discouraging credit union loan participations, she added.

CUNA raised serious concerns about the proposal when it was issued in December 2011, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

A proposed Illinois Member Business Loan rule was the only other item on the open board meeting agenda. See News Now Friday for more information. Supervisory activity considerations will be considered during the closed board meeting.

SEC May Seek Guilt Admissions In Some Malfeasance Cases

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WASHINGTON (6/20/13)--Financial wrongdoers may soon be forced to admit their crimes as a part of the case settlement process, Securities and Exchange Commission Chairman Mary Jo White said this week.

White reportedly made her remarks at The Wall Street Journal's CFO Network Conference in Washington, D.C.

She said the agency would push for admissions of fault in the worst of cases, such as those with high degrees of investor harm.

However, White told reporters the change should not be interpreted as a criticism of the SEC's current settlement policy. The SEC will still reserve the right to allow alleged criminals to settle their cases without admitting or denying fault.

The new policy will not apply to cases that are already in the settlement process, White told Bloomberg.

One such case is a $285 million settlement the SEC reached with Citibank. U.S. District Court Judge Jed Rakoff rejected that suit in late 2011, saying the public should know more about Citigroup's actions.

NEW: Tax Options Paper Gets CUNA 'Inside Exchange' Spotlight

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WASHINGTON (6/19/13, UPDATED 5:15 p.m. ET)--The threat level of credit unions of tax reform--raised by the release June 13 of a "tax options" paper by the Senate Finance Committee--is explored in the latest episode of "Inside Exchange," the Credit Union National Association's video series of key legislative, regulatory and political topics.

In this episode, titled "Impact of tax reform on credit unions," Paul Gentile, CUNA executive vice president of communications, and Ryan Donovan, CUNA senior vice president of legislative affairs, discuss what the "tax options" paper means for credit unions, how that affects the threat level for credit unions, and the process going forward. They also discuss why now is the time for credit unions to become engaged in preserving and protecting the tax exemption.

CUNA created the "Inside Exchange" video series as a new way to directly communicate to member credit unions, and to provide detailed insights into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

For more on this new video, and previous videos featuring CUNA comments on credit union advocacy efforts, use the resource link.

The Inside Exchange videos can also be found by clicking on the "stay informed" section of the gray menu bar at the top of the cuna.org homepage and scrolling down to the "Inside Exchange" pane.

CUNA Warns FHFA QM Proposal Could Harm Credit Access

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WASHINGTON (6/19/13)--The Federal Housing Finance Agency's (FHFA) decision to prohibit government-sponsored enterprises Fannie Mae and Freddie Mac from purchasing mortgages that do not meet the definition of qualified mortgages (QM) could prevent credit unions from working with their members to customize financial products that meet their individual needs, Credit Union National Association President/CEO Bill Cheney wrote in a Tuesday letter to FHFA Acting Director Ed DeMarco.

"The ability of credit unions to customize their products is important because, as member-owned, democratically controlled financial institutions, credit unions understand that every member brings different circumstances to a home purchase transaction...And always look to exhaust every option in order to satisfy a member's needs," Cheney explained. These circumstances may lead to the creation of loans that fall outside the QM box, he added.

"The FHFA decision leaves the impression in the minds of many credit unions that this kind of individualization is no longer welcomed," Cheney wrote.

The Consumer Financial Protection Bureau issued standards to define QMs under the agency's "ability to repay" rules, and mortgage servicing rules, in January. The FHFA's purchasing prohibition would become effective at the same time as the CFPB's ability to repay rules: January 2014.

Loans with terms that do not exactly match certain CFPB QM requirements, such as 40-year loans, or loans with points and fees exceeding the thresholds established by the rule, will not be purchased by the GSEs.

The FHFA will allow the GSEs to continue to purchase loans that meet the underwriting requirements stated in their respective selling guides, including loans with debt-to-income ratios above 43%. Cheney in the letter commended this decision.

However, he wrote, the FHFA's decision could adversely impact "Americans who need the flexibility credit unions provide to their members the most." (See related story: CUNA Tells Lawmakers CUs Merit Full QM Exemption.)

CUNA: HUD Reporting Changes Would Ease CU Burdens

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WASHINGTON (6/19/13)--"Credit unions strongly support efforts to simplify their compliance obligations," including a proposed U.S. Department of Housing and Urban Development (HUD) rule that would streamline Federal Housing Administration (FHA) financial statement reporting requirements, Credit Union National Association Deputy General Counsel Mary Dunn said in a comment letter filed this week.

Under the HUD proposal, small credit unions and other financial institutions with less than $500 million in assets would not be required to submit separate annual audited financial statements as a condition of FHA lender approval and recertification. Unaudited statements that are submitted to the National Credit Union Administration or other prudential regulators would suffice.

Audited financial statements would only be required if HUD determines an institution poses heightened risk to the FHA insurance fund.

"We believe the proposed rule makes sense," Dunn wrote. "By aligning the FHA financial reporting requirements with those credit unions are already required to undertake, FHA will permit credit unions to avoid redundant compliance obligations and minimize compliance costs," she said.

"Credit unions currently face substantial regulatory burdens related to mortgage lending in light of the large volume of recently issued regulations coming from regulators with jurisdiction in this area," Dunn added.

For the full comment letter, use the resource link.

Waters Wants Probe Of Mortgage Servicers That Mislead On HAMP

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WASHINGTON (6/19/13)--Rep. Maxine Waters (D-Calif.), who is the ranking Democrat of the House Financial Services Committee, Tuesday called for an investigation of "Bank of America or any other mortgage servicer, who allegedly benefited by misleading borrowers eligible for the Home Affordable Modification Program (HAMP)."

The letter to Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Christy L. Romero was sparked by an article in Bloomberg that, according to a release from Waters, cited court documents in which former loan employees stated that, Bank of America, the second-biggest U.S. lender, allegedly schooled employees "to maximize fees" by "fostering and extending delay of the HAMP modification process by any means."

Waters' release said the congresswoman also sent a letters to the Office of the Comptroller of the Currency and the Federal Reserve Board to ask them to investigate "how or whether these allegations against Bank of America interact with the Independent Foreclosure Review settlement reached between regulators and mortgage servicers in January 2013."

NCUA Offers Tips On CyberGrants

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ALEXANDRIA, Va. (6/19/13)--Tips and guidance to help credit unions navigate the National Credit Union Administration's CyberGrants system are provided in this month's edition of the NCUA Office of Small Credit Union Initiatives FOCUS e-Newsletter.

The CyberGrants system is an online portal that allows credit unions to apply for multiple grant initiatives with a single application, and makes the agency's application review process more efficient.

The FOCUS article provides tips on:

  • Accessing the CyberGrants system;
  • Logging in;
  • Navigating and using the system; and
  • Completing and filing an application.
The NCUA began accepting 2013 funding round grant applications from low-income credit unions on Monday.

Eligible credit unions may apply for as much as $24,000 in funding. A total of $1.18 million in grant funds are available. Applications will be accepted until July 12, and grantees will be announced at the end of August.

The grant money may be used to support credit union financial literacy, product development, collaboration, staff and board member training, office relocation and computer modernization efforts, according to the agency.

For more of FOCUS, use the resource link.

CUNA Tells Lawmakers CUs Merit Full QM Exemption

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WASHINGTON (6/19/13)--Credit Union National Association witness Jerry Reed testified yesterday that credit unions worry that the Consumer Financial Protection Bureau's Qualified Mortgage (QM) rule will make it all but impossible for credit unions to write non-QM loans.

Reed, who is chief lending officer at Alaska USA FCU, said that the QM
Click to view larger image Rep. Shelly Moore Capito (R-W.Va.)  shakes the hand of Jerry Reed, the CUNA witness who testified Tuesday on behalf of credit unions regarding concerns about the CFPB's QM rule. Reed is chief lending officer at Alaska USA FCU. (CUNA Photo)
standard "designed to be an instrument of consumer protection, may serve as an instrument of prudential regulation, effectively setting a bureaucratic standard for loan quality."

Reed was representing credit unions at a House Financial Services subcommittee on financial institutions and consumer credit hearing on "Examining How the Dodd-Frank Act Hampers Home Ownership."

Reed told lawmakers that credit unions commend the CFPB for listening to their concerns and for incorporating many of their concerns into amendments to the mortgage rules. However, he underscored that credit unions continue to have serious apprehensions about how the QM rule will be implemented and believe that it could have the unintended effect of reducing credit union members' access to credit.

"Credit unions were created to promote thrift and provide access to credit for provident purposes to their members. The credit union structure and historical performance of credit union mortgage loan portfolios strongly support a full credit union exemption from the QM rule," Reed testified.

As not-for-profit financial cooperatives, Reed reminded, credit unions are owned by the members that they serve. This fundamental difference between the for-profit and not-for-profit sector of the financial services industry provides a significantly different incentive structure for those managing the institutions, Reed noted.

In addition, credit unions are primarily portfolio lenders, typically selling less than a third of their new originations. The fact that most of the loans they make will be held in their own portfolios is further incentive for them to be particularly attentive to the applicant's potential ability to repay.

"While we appreciate the fact that the bureau has provided a modest exemption for small volume originators, we question the need to apply this rule to credit unions in the first place, and urge the bureau to consider exempting credit unions from the rule entirely," Reed said.

Opening her subcommittee's hearing, Rep. Shelly Moore Capito (R-W.Va.) said it could be the very consumers that are meant to be protected by the CFPB's Ability-to-Repay mortgage rule, issued in conjunction with the QM rule,  that could be harmed by unintended consequences of the rule.

She said low-income consumers, and those in rural areas with low property values, could find the ability-to-repay rule eliminates mortgage lenders' ability to engage in "relationship lending." She said "case-by-case, local lending" could disappear because of "rigid mortgage lending rules" proposed by the CFPB.

Rep. Sean Duffy (R-Wis.) said there appears to be a bipartisan agreement on the need to fix some parts of  the Dodd-Frank Act, though other members spoke in favor of that law's provisions. For instance, Rep. Carolyn Maloney (D-N.Y.) said Dodd-Frank is intended to show "we learn from our mistakes." (See related story: FHFA QM Proposal Could Harm Credit Access, CUNA Warns.)

NCUA Adds Loan Participation Rule To Thursday Agenda

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ALEXANDRIA, Va. (6/19/13)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.

While the details of the final rule will not be available until the board meeting, the Credit Union National Association has raised serious concerns about the proposal as it was issued December 2011 and is hopeful important changes will be included in the final rule.

In its comment letter and subsequent advocacy efforts on the proposal, the CUNA urged the agency to withdraw it, as the net worth limitations on loan originations from one originator and one borrower in particular would be very problematic. CUNA also urged the agency to provide a waiver process.

CUNA also raised concerns about the impact of the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

A proposed Illinois Member Business Loan rule is the other item on the open board meeting agenda. Supervisory activity considerations will be considered during the closed board meeting.

The open meeting is scheduled to being at 10 a.m. (ET) on Thursday. The closed meeting will follow shortly thereafter.

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

CLARIFICATION: NCUA Adds Loan Participation Rule to Thursday Agenda

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ALEXANDRIA, Va. (6/18/13, UPDATED 7:10 p.m. ET)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.

While the details of the final rule will not be available until the board meeting, the Credit Union National Association has raised serious concerns about the proposal as it was issued December 2011 and is hopeful important changes will be included in the final rule.

In its comment letter and subsequent advocacy efforts on the proposal, the CUNA urged the agency to withdraw it, as the net worth limitations on loan originations from one originator and one borrower in particular would be very problematic. CUNA also urged the agency to provide a waiver process.

CUNA also raised concerns about the impact of the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

A proposed Illinois Member Business Loan rule is the other item on the open board meeting agenda. Supervisory activity considerations will be considered during the closed board meeting.

The open meeting is scheduled to being at 10 a.m. (ET) on Thursday. The closed meeting will follow shortly thereafter.

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

NEW: NCUA Plan Would Limit Loan Participations To 25% Of Net Worth

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ALEXANDRIA, Va. (6/18/13, UPDATED: 4:30 P.M. ET)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.

Under loan participation revisions that were proposed at the agency's December 2011 board meeting, all federally insured credit unions that are originators would need to retain a 10% interest in the loan or pool of loans participated. Federal credit unions are currently required to comply with this requirement, but the NCUA proposal would extend this requirement to state chartered federally insured credit unions as well.

All federally insured credit unions that purchase loan participations would be limited to 25% of their net worth for participations involving one originator. There would be no waiver allowed from this provision.

In addition, the proposal would set a 15% of net worth limit on purchasing credit unions on loans involving one borrower. The rule would allow this requirement to be waived in certain cases, but state chartered credit unions would have to apply to their NCUA Regional Director for approval.

The Credit Union National Association has urged the agency to withdraw the proposal, saying it would add to the regulatory burden of affected credit unions in a manner that is wholly disproportionate to the risks associated with loan participations.

NCUA Board Member Says Time For MBL Increase Is Now

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ALEXANDRIA, Va. (6/18/13)--"It's time for Congress to act" and pass legislation that would increase the credit union member business lending (MBL) cap, and give credit unions greater authority to access secondary capital sources, National Credit Union Administration Board Member Michael Fryzel wrote in the June edition of The NCUA Report.

"For the almost five years that I have sat on the NCUA board, national trade organizations, credit unions across the country and NCUA have tried to convince Congress to pass enabling legislation to increase the [MBL] cap and provide all credit unions with access to supplemental capital," Fryzel wrote. While the aftermath of the financial crisis meant less time to address these credit union priorities, "things are better now," he added.

"It's time Congress got serious" and reached a consensus on these two issues. Doing so, Fryzel said, "would enable credit unions to become stronger financial institutions, spur small business formation and growth, and help thousands of people across this country to get a job as a result of a credit union [MBL], or to join a credit union."

The Capital Access for Small Businesses and Jobs Act (H.R. 719) would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts toward capital ratio. It was introduced in February by Rep. Pete King (R-N.Y.) and has 31 co-sponsors, including Rep. Spencer Bachus (R-Ala.), the immediate past chair of the House Financial Services Committee.

Separate House (H.R. 688) and Senate (S. 968) MBL bills were also introduced earlier this year. Both bills would increase the MBL cap from 12.25% of assets to 27.5%. The Credit Union National Association has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

Each year that passes without passage of these bills "is another year of disappointment," Fryzel said. "Congress must provide the tools that can help create new jobs, build new businesses, improve the financial futures of our citizens and make credit unions stronger," he added.

For more of The NCUA Report, use the resource link.

CUs', Members' Action Strong As Tax Reform Enters Next Phase

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WASHINGTON (6/18/13)--Tax advocacy efforts by credit unions and their members have remained strong as the U.S. Congress prepares to draft comprehensive reform legislation in the coming weeks, with more than 100,000 separate congressional contacts being made to tell their legislators, "Don't Tax My Credit Union!"

"Tax reform is alive and well on Capitol Hill. The credit union tax status is in the mix, and credit unions need to remain aware and active to protect their tax status," Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said.

The last in a series of tax reform options papers is expected to be released later this week. A tax options paper on exempt organizations and charitable giving released last week included two options of particular interest to credit unions: The paper mentioned that one option for tax reform could be to "disallow tax-exempt status for certain organizations engaged in business activities, such as credit unions, nonprofit hospitals or certain types of insurance." The report also includes a discussion of options to expand Unrelated Business Income Tax.

With these and other papers having been released and discussed by the Senate Finance Committee, the process can move on to the next phase of writing new tax laws. Chairman Max Baucus (D-Mont.), chair of the Senate's powerful tax-policy committee and leader of the Joint Committee on Taxation, is calling for the tax reforms to be finalized and introduced before the August recess, Donovan noted.

The groundbreaking CUNA/state credit union league advocacy effort, which combines elements of traditional letter writing campaigns with new media methods to leverage the power of credit unions' 96 million members, continues to gain traction on social media: The Don't Tax My Credit Union! Facebook page has been viewed more than 265,000 times since mid-May. Pro-credit union messages have been widely shared through CUNA's Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and social media micro-video site Vine.

CUNA has also developed a reformatted version of its tax advocacy toolkit to help credit unions and their members spread this message. For more CUNA/league advocacy resources, use the resource links.

This week, the House is scheduled to consider the Federal Agriculture Reform and Risk Management Act of 2013 (H.R. 1947). The Senate is expected to consider judicial nominations and immigration reform.

Hearings on today's schedule include:

  • A House Financial Services financial institutions and consumer credit subcommittee hearing entitled "Examining How the Dodd-Frank Act Hampers Home Ownership." Alaska USA FCU Chief Lending Officer Jerry Reed will testify on CUNA's behalf at this hearing (For more, see today's story: QM Concerns Are Focus of CUNA Hill Testimony Today);
  • A House Financial Services oversight and investigations subcommittee hearing on the Consumer Financial Protection Bureau budget; and
  • A Senate Banking, Housing and Urban Affairs housing, transportation and community development subcommittee hearing on reverse mortgages and their impact on the Mutual Mortgage Insurance Fund.
The House Financial Services Committee has also set a Wednesday markup session for the Small Business Capital Access and Job Preservation Act (H.R. 1105), the Burdensome Data Collection Relief Act (H.R. 1135), the Audit Integrity and Job Protection Act (H.R. 1564) and H.R. 2374, to amend Section 913 of the Dodd-Frank Act.

QM Concerns Are Focus of CUNA Hill Testimony Today

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WASHINGTON (6/18/13)--Credit Union National Association witness Jerry Reed will detail credit union concerns with the Consumer Financial Protection Bureau's qualified mortgage regulations when he testifies before the House Financial Services financial institutions and consumer credit subcommittee hearing today entitled "Examining How the Dodd-Frank Act Hampers Home Ownership," scheduled to start at 10 a.m. (ET). Reed is chief lending officer at Alaska USA FCU.

While America's credit unions appreciate the improvements that the CFPB has made to the QM rule, credit unions "continue to have significant concerns with respect to how other regulators will use the bureau's regulation to impact credit union mortgage lending, and we question whether the rule should apply to credit unions in the first place," Reed wrote in prepared testimony.

Reed also said the CFPB "has not done enough to address credit unions' concerns that being subjected to the rule will actually reduce credit availability."

The prepared testimony also includes comments on language in the QM rule that addresses:

  • Debt-to-income ratios;
  • Points and fees limitations; and
  • The CFPB's ongoing examination of rural and underserved area definitions.
Representatives from the Conference of Bank Supervisors, the American Bankers Association, the Mortgage Bankers Association, the Center for Responsible Lending and the National Association of Realtors are also scheduled to testify today.

For more on the hearing, use the resource link.

NEW: CUNA Urges Full CU Exemption To Ability-to-Repay

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WASHINGTON (6/18/13, UPDATED 10:55 a.m. ET)--Credit Union National Association witness Jerry Reed this morning detailed credit union concerns with the Consumer Financial Protection Bureau's ability-to-repay and qualified mortgage (QM) rules.  Reed, who is chief lending officer at Alaska USA FCU, said credit unions commend the CFPB for listening to their concerns and for incorporating many of their concerns into amendments to the mortgage rules, but he underscored that credit unions continue to have serious apprehensions about how the QM rule will be implemented and believe that it could have the unintended effect of reducing credit union members' access to credit.

"Credit unions were created to promote thrift and provide access to credit for provident purposes to their members. The credit union structure and historical performance of credit union mortgage loan portfolios strongly support a full credit union exemption from the QM rule," Reed said as he testified at the House Financial Services subcommittee on financial institutions and consumer credit hearing on "Examining How the Dodd-Frank Act Hampers Home Ownership."

As not-for-profit financial cooperatives, Reed reminded, credit unions are owned by the members that they serve. This fundamental difference between the for-profit and not-for-profit sector of the financial services industry provides a significantly different incentive structure for those managing the institutions, Reed noted.

In addition, credit unions are primarily portfolio lenders, typically selling less than a third of their new originations. The fact that most of the loans they make will be held in their own portfolios is further incentive for them to be particularly attentive to the applicant's potential ability to repay.

"While we appreciate the fact that the bureau has provided a modest exemption for small volume originators, we question the need to apply this rule to credit unions in the first place, and urge the Bureau to consider exempting credit unions from the rule entirely," Reed said. (See related story: Rep. Capito Questions 'Rigid' CFPB Mortgage Rule.)

The QM rule is scheduled to go into effect January 2014.

Watch CUNA's News Now Wednesday for more.

NEW: Rep. Capito Questions 'Rigid' CFPB Mortgage Rule

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WASHINGTON (6/18/13, UPDATED 10:24 a.m. ET)--Opening today's House subcommittee hearing on "Examining How the Dodd-Frank Act Hampers Home Ownership," Rep. Shelly Moore Capito (R-W.Va.) said it could be the very consumers that are meant to be protected by the Consumer Financial Protection Bureau's Abilty-to-Repay mortgage rule that could be harmed by unintended consequences of the rule.

Capito, chairman of the House Financial Services subcommittee on financial institutions and consumer credit conducting today's hearing, said low-income consumers, and those in rural areas with low property values, could find the ability-to-repay rule eliminates mortgage lenders' ability to engage in "relationship lending." She said "case-by-case, local lending" could disappear because of "rigid mortgage lending rules" proposed by the CFPB.

Today's hearing, at which Credit Union National Association witness Jerry Reed will detail credit union concerns with the CFPB qualified mortgage (QM) regulations when he testifies, is the second in the subcommittee's on this issue.  The ability-to-repay rule was issued in conjunction with the QM rule. Reed is chief lending officer at Alaska USA FCU.

Rep. Sean Duffy (R-Wis.) said there appears to be a bipartisan agreement on the need to fix some parts of  the Dodd-Frank Act, though other members spoke in favor of that law's provisions. For instance, Rep. Carolyn Maloney (D-N.Y.) said Dodd-Frank is intended to show "we learn from our mistakes."

Watch CUNA's News Now for more.

Supreme Court Will Hear Fair Housing Case

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WASHINGTON (6/18/13)--The U.S. Supreme Court Monday announced it will hear a case that could decide the fate of the application of disparate impact theory under the Fair Housing Act. Disparate impact focuses on discrimination based on effects and not intent.  The case, known asMount Holly v. Mount Holly Citizens In Action Inc. (No.11-1507), is detailed in the June 17 issue of the Credit Union National Association's Regulatory Advocacy Report.

The case concerns a New Jersey township's plan to redevelop a blighted residential area occupied predominantly by low- and moderate-income minority households. The suit alleged that a disproportionate number of minorities would be affected by the relocation required by the plan and would be unable to afford the new housing proposed under the plan.

The current issue of the RAR notes that the Fair Housing Act makes it unlawful to "refuse to sell or rent after the making of a bona fide offer … or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin."  Despite the lack of textual support for disparate impact claims in the Fair Housing Act, the federal appeals courts have permitted the claims to proceed.

CUNA's regulatory experts explain that the case is important because the Consumer Financial Protection Bureau has also insisted that disparate impact claims are viable under the Fair Housing Act and the Equal Credit Opportunity Act even though they are not supported by the text of the statutes.

"The CFPB has discussed the use of disparate impact analysis in a letter discussing indirect lending. A decision in Mount Holly could very well determine the extent the CFPB can use disparate impact moving forward," says the RAR.

The Regulatory Advocacy Report is an important resource for CUNA members that compiles the hottest regulatory issues and information weekly.  CUNA members can access it and subscribe by using the resource link below.

NCUA Sets July 18 Online Town Hall

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ALEXANDRIA, Va. (6/17/13)--The National Credit Union Administration's regulatory modernization efforts, credit union industry performance and emerging credit union system risks will be among the topics discussed when agency Chairman Debbie Matz hosts a free town hall webinar on July 18.

"Effective regulation requires an ongoing, two-way dialogue and the sharing of important information…There will be a lot to discuss, and I'm looking forward to a lively, interesting dialogue," Matz said.

The webinar is scheduled to begin at 3 p.m. (ET). Other webinar topics include:

  • NCUA's proposed rule on derivatives;
  • Low-income credit unions;
  • Emergency liquidity and the Central Liquidity Facility; and
  • Guidance on credit ratings and risk management.
Webinar questions can be sent in advance to WebinarQuestions@ncua.gov. The subject line of the email should read, "NCUA Town Hall."

To register for the webinar, use the resource link.

Introduction Of Miller's CU Relief Bill Is Imminent

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WASHINGTON (6/17/13)--House Financial Services Committee Vice Chairman Gary Miller (R-Calif.) will soon unveil anticipated legislation that will open formal discussions in the U.S. House about possible regulatory relief measures for credit unions and community banks. The bill could be introduced as early as today.

Miller's bill will focus on credit unions and topics discussed within its section range from such things as enhancements to National Credit Union Administration authority in a few areas to improved capital standards for credit unions, to a cost-benefit analysis of rules, past and present.

"Credit unions wholeheartedly thank Rep. Miller for acting on their great need for regulatory relief so fewer resources are diverted from their true business of serving their members," said Sam Whitfield, Credit Union National Association vice president of legislative affairs. He added CUNA's appreciation that Miller included CUNA in the development of his legislation.

Miller's bill will join other CUNA-supported regulatory relief legislative initiatives already introduced in the House of Representatives, including:

  • The Credit Union Small Business Jobs Creation Act (H.R. 688),  which would permit business lending credit unions to apply to NCUA for the authority to lend up to 27.5% of their assets to small business members;
  • The Capital Access for Small Business and Jobs Act (H.R. 719), which would permit credit unions to accept supplemental forms of capital;
  • The Financial Institutions Examination Fairness and Reform Act (H.R. 1553), which would bring fairness to the examination and examination appeals processes;
  • The Community Lending Enhancement And Relief Act (H.R. 1750), which would exempt credit unions from several of the Dodd-Frank mandated mortgage rules, including new escrow rules; and,
  • The Capital Access for Small Community Financial Institutions (H.R. 1862), which would permit privately insured credit unions to join a federal home loan bank.
 Miller's credit union bill will likely be joined by other regulatory relief legislative initiatives coming out of the financial services panel this year.

Other Financial Services Committee members are said to be preparing to offer bipartisan regulatory relief bills and are working to find for areas where credit union and community bank interests may intersect in a bill. CUNA has assured lawmakers that such areas exist; for instance, one such area is examination fairness legislation.

During a hearing in April, CUNA delivered a 35-point plan for credit union regulatory relief to federal lawmakers. Among changes promoted by CUNA are:

  • Increasing National Credit Union Administration budget transparency;
  • Adjusting the treatment of non-owner occupied one- to four-family dwelling loans for credit unions from business loans to residential real estate loans;
  • Increasing the maturity limit for higher education loans made by federal credit unions; and,
  • Expanding investment authority in credit union service organizations.

Valley Pride FCU Signs LUA With NCUA

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ALEXANDRIA, Va. (6/17/13)--Valley Pride FCU, Plains, Pa., has agreed to "take steps to correct unsafe and unsound practices" under the terms of a letter of understanding and agreement (LUA) with the National Credit Union Administration (NCUA).

In the letter, the credit union agrees to:

  • Engage a qualified individual to reconcile bank and corporate accounts;
  • Engage a Certified Public Accountant to perform an opinion audit;
  • Obtain training for the board of directors; and
  • Implement internal control procedures through the Supervisory Committee.
The NCUA said it is working with the credit union to correct these issues. Violations of the LUA could result in civil financial penalties, cease and desist orders, removal and prohibition orders, or orders to liquidate, conserve or merge the credit union, the NCUA said.

The credit union will remain open and will serve its members while corrective actions are taken.

For the full NCUA release, use the resource link.

Bloomberg Notes CUs' Strong Support For Small Biz Hurt By Cap

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WASHINGTON (6/17/13)--A Bloomberg Business Week article cites the strong support credit unions provided small businesses during the Great Recession, and credited them with picking up the slack created as banks clamped down on credit to small business owners. But the article notes the statutory member business lending (MBL) cap is constraining credit unions' ability to keep lending.

The article warned that a new Biz2Credit Small Business Lending Index shows some decline in that activity by credit unions. The 12.25%-of-assets member business lending cap is one of the top reasons for this funding squeeze, Bloomberg noted. Bloomberg reported that credit unions are working hard to convince the U.S. Congress to ease the lending restrictions.

Also, Credit Union National Association Chief Economist Bill Hampel explained in the article that the Biz2Credit statistics are different than figures from the National Credit Union Administration, whose data for the first quarter of 2013 shows that credit unions made $3.9 billion in business loans early this year, an increase from the $3.1 billion total reported in the first quarter of 2012.

"A lot of small business lending is relationship-based and requires local knowledge," Hampel told Bloomberg. Biz2Credit's surveying method may not create an accurate representation of credit union loan application volume, he added.

CUNA continues to call on Congress to help credit unions and the economy at large by approving MBL cap increase legislation. U.S. House (H.R. 688) and Senate (S. 968) bills would increase the credit union MBL cap from 12.25% of assets to 27.5%. CUNA has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers and without increasing the size of government.

S. 968, which was introduced by Sen. Mark Udall (D-Colo.) in mid-May, currently has 15 co-sponsors. H.R. 688, introduced by Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.), has 102 co-sponsors.

More than 500 credit unions are at or quickly approaching the cap, accounting for approximately 60% of credit union business lending, CUNA President/CEO Bill Cheney noted in a letter to Congress early this month. "If the cap is not increased, the ability of these credit unions to continue to be there for their small business-owning members will be jeopardized," he added.

Cheney Highlights Strong CU System Leaders, Current And Future

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WASHINGTON (6/17/13)--Credit Union National Association President/CEO Bill Cheney last week thanked two retiring league presidents--Dan Plauda of the Illinois Credit Union League and Sylvia Lyon of the Credit Union Association of New Mexico--for their "tremendous contributions not only to the credit union systems in their respective states, but to the credit union system as a whole." While acknowledging that the credit union system "may be turning a page," with these and similar announcements from long-time league leaders in Massachusetts/New Hampshire/Rhode Island, Pennsylvania, South Carolina, and Tennessee--it also heralds a new, exciting chapter to come, Cheney added.

Plauda will be retiring on June 30, 2014 after 37 years of service to the credit union movement, the ICUL announced last week. (See June 11 News Now story: Plauda To Exit Illinois League June 2014.)

Lyon's pending retirement was also announced last week. CUANM Board Chairman and Rio Grande CU President/CEO Chris Fitzgerald in a statement thanked the 20-year credit union veteran for her efforts, which led to great successes in the areas of governance, strategic positioning, political advocacy and philanthropic commitment.

"New league leaders have been making their mark, spearheading innovations in league advocacy and service. The American Association of Credit Union Leagues is closely studying the evolution to anticipate its own members' needs and stay ahead of the curve," Cheney said in this week's edition of The Cheney Report.

This week's Cheney Report also includes:

  • Updates on tax and housing finance reform efforts;
  • Positive press coverage for aSmarterChoice.org; and
  • News on the Consumer Financial Protection Bureau's overdraft work.

Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

CUNA: Small Biz Week Is Time To Spotlight CUs' SBA Issues

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WASHINGTON (6/17/13)--Today kicks off National Small Business Week, a time proclaimed by the president each year for the last 50 to mark the importance of small businesses to the nation's economy. It is an ideal time, says Credit Union National Association Deputy General Counsel Mary Dunn, to highlight all that the country's credit unions do to support small businesses in their communities--and how much more they could do with improved policies.

"This is a good week to note that credit unions' member business lending (MBL) portfolios grew while banks' small business lending portfolios shrank during the past two decades and especially since the financial crisis that began in 2007-as documented by the U.S. Small Business Administration's (SBA) 2011 independent report 'The Increasing Importance of Credit Unions in Small Business Lending,'" Dunn notes.

"And, credit unions are willing to do even more if the U.S. Congress will pass bi-partisan legislation to increase the MBL cap to 27.5% of a well-capitalized credit unions assets--up from the current 12.25% cap," she says. CUNA estimates that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

Dunn adds that this week is also a good time to mention CUNA's ongoing review of SBA policies that have the unintended consequence of hindering credit union involvement in the agency's flagship 7(a) and 504 guaranteed lending programs.

"The cost and complexity of the application process to these good programs has been a stumbling block for some credit unions interested in this avenue for providing more credit to their small business members.

"CUNA continues to look for regulatory changes that would benefit credit unions and small businesses by making more credit available," Dunn notes.

Hearings On Dodd-Frank Impact On Housing, CFPB Spending, Round Out June Schedule

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WASHINGTON (6/17/13)--The House Financial Services Committee last week announced the hearing schedule for the remainder of this month, including a June 18 session at which Credit Union National Association witness Jerry Reed, chief lending officer of Alaska USA FCU, Anchorage, will represent credit unions.

The June 18 hearing, entitled "Examining How the Dodd-Frank Act Hampers Home Ownership," is scheduled to begin at 10 a.m. ET.

Also on the schedule are:

  • A June 18 oversight and investigations subcommittee hearing on Consumer Financial Protection Bureau spending;
 

  • A June 19 full committee markup of four bills that would reduce federal regulatory burdens for investors and job creators. The four bills are: The Small Business Capital Access and Job Preservation Act (H.R. 1105), the Burdensome Data Collection Relief Act (H.R. 1135), the Audit Integrity and Job Protection Act (H.R. 1564) and H.R. 2374, which would amend Section 913 of the Dodd-Frank Act;
 

  • A June 26 full committee hearing on "Too Big to Fail" institutions. Current and former Federal Reserve Bank presidents are scheduled to appear at that hearing; and
 

  • A June 26 housing and insurance subcommittee hearing on the U.S. Department of Housing and Urban Development's Moving-to-Work program.

Tax Reform Group Backs CU Tax Status

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WASHINGTON (6/14/13)--Americans for Tax Reform (ATR) President Grover Norquist has asked members of his group to take immediate action to urge lawmakers to "protect credit unions and all the good work they do" by opposing any punitive attempt to eliminate the credit union federal income tax exemption.

Click to view larger image Americans for Tax Reform has aided CUNA's advocacy efforts with a post on its own Facebook page. (Facebook/ATR photo)
This call created 6,200 contacts to the U.S. Congress. A posting with the same message on ATR's Facebook page, which is seen by more than 45,000 fans on the social networking site, has also seen significant traffic. The post has been shared more than 150 times and liked 252 times.

"Credit unions are superior to banks in many local communities because they are essentially owned by the customers, not a board of elites. It is because of financially achievable loans issued by credit unions that 96 million Americans are able to work towards the American Dream each day," Norquist wrote to ATR members, referring to the nationwide number of credit union members.

Increasing taxes on not-for-profit credit unions "would have dramatic consequences" for those millions of Americans that use their financial services, Norquist wrote in a recent communication to his group's supporters.

"Credit unions were established to help local communities...are often the only source of financing for disadvantaged communities" and "provide low cost credit alternatives to communities that are in dire need, but have no other means for obtaining loans," Norquist noted.

"Taking away their tax-exempt status will hinder their ability to help community members receive financial services," he said. Credit union loans help Americans start new businesses, go to school, purchase a car or help finance a home, he added.

The Credit Union National Association also has pointed out in its advocacy efforts that credit unions' not-for-profit financial cooperative structure differentiates them from banks and enables them to focus totally on member value and service, and, overall, prevents them from taking the types of risks banks take in the name of profits.

This difference in behavior creates substantial benefits for both credit union members and non-members as well, CUNA notes. Members benefit from lower rates on loans, lower fees on services, and higher returns on deposits. Credit unions' focus on exceptional service also keep competitive pressure on banks to the benefit of consumers.

CUNA and the leagues kicked off a large-scale, nationwide grassroots-mobilization campaign in mid-May to encourage credit union members nationwide to present a unified message to members of congress: Don't Tax My Credit Union! The innovative campaign combines traditional online email campaign methods with newer media vehicles such as Facebook, a Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and social media micro-video site Vine.

These efforts have led to more than 80,000 congressional contacts so far.

For more tax advocacy resources, use the links.

CUNA: New 'Tax Options' Paper Is Wake Up Call For CUs

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WASHINGTON (6/14/13)--The Senate Finance Committee's "tax options" paper on exempt organizations and charitable giving, released Thursday, included two options of particular interest to credit unions, noted Credit Union National Association President/CEO Bill Cheney.

The CUNA leader called the options paper "a wake-up call for action by credit unions."

First, the paper mentions that one option for tax reform could be to "disallow tax-exempt status for certain organizations engaged in business activities, such as credit unions, nonprofit hospitals or certain types of insurance."  CUNA had expected credit unions to be mentioned in the report and Cheney noted the paper represents confirmation that credit union taxation is an option that some in the U.S. Congress are considering. 

The report also includes a discussion of options to expand Unrelated Business Income Tax (UBIT).  While it does not list expanding UBIT to include federally chartered credit unions, the report does include as an option "Revise the UBIT rules for organizations engaged in commercial activity." 

"As Congress proceeds to consider comprehensive tax reform, rest assured that we are also monitoring proposals that may alter or impact the application of UBIT on credit unions," Cheney pledged.

The options paper yesterday was the ninth to be released by the committee in recent months.  It follows papers on simplifying the tax system for families and businesses, business investment and innovation, infrastructure, international competitiveness, and economic development.

"As CUNA has been saying for some time, our tax exemption, and its preservation for the long-term, is actively in the mix of discussion on Capitol Hill, as this 'options paper' clearly shows. That's why we launched our 'Don't Tax My Credit Union campaign," Cheney said.

He emphasized that credit unions are different from all other groups mentioned in the most recent paper. "We are cooperatives, operating on a not-for-profit basis, and actively returning billions of dollars in benefits each year to our members--benefits that far exceed any new revenue that would come from taxing credit unions.

"We can make the distinction that credit unions are different and preserve our tax status - if we speak up, now. Credit unions should contact their senators and congressmen without delay with the simple message, 'Don't Tax My Credit Union!'," he urged.

The groundbreaking grassroots advocacy campaign to support the credit union tax status combines CUNA's traditional efforts of such things as email-writing drives, with new social media and online outreach efforts.

For more CUNA/league advocacy resources, use the resource links.  (And see related News Nowstory: Tax Reform Group Backs CU Tax Status.)

Ill. MBL Proposal Is On NCUA's Next Open Meeting Agenda

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ALEXANDRIA, Va. (6/14/13)--A proposed Illinois Member Business Loan (MBL) rule is the lone item on the National Credit Union Administration's June open board meeting agenda.

The MBL rule was proposed by that state's credit union regulator, and is similar to the NCUA's current MBL rule. NCUA regulations allow the agency to exempt federally insured, state-chartered credit unions from compliance with MBL rules if the NCUA board determines the state has developed an MBL rule that minimizes risk and accomplishes the overall objectives of NCUA's rule.

Washington, Texas, Wisconsin, Connecticut, Oregon and Maryland have their own MBL regulations on state books.

State supervisory authorities must obtain NCUA regional office and NCUA board approval before their new state credit union regulations can become final.

Supervisory activity considerations will be considered during the closed board meeting.

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

CUNA To Testify Tuesday On Dodd-Frank Impact

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WASHINGTON (6/14/13)--Jerry Reed, chief lending officer of Alaska USA FCU, Anchorage, will represent credit unions next week when he testifies on behalf of the Credit Union National Association at a hearing entitled, "Examining How the Dodd-Frank Act Hampers Home Ownership."

The 10 a.m. (ET) hearing next Tuesday continues a study by the House Financial Services subcommittee on financial institutions and consumer credit of the impact on the housing market of the Qualified Mortgage rule recently issued by the Consumer Financial Protection Bureau under Dodd-Frank.

The QM rule, in part, requires mortgage lenders to determine at the time a loan is made that the borrower has a reasonable ability to repay it.

If a lender fails to determine that the borrower can repay the loan, the lender is subject to statutory damages and potential class action liability under the law. In addition, the Dodd-Frank Act permits borrowers to raise the lender's failure to satisfy the ability-to-repay requirement as a defense in foreclosure proceedings.

The subcommittee intends to examine how these and other provisions affect the housing market.

Also scheduled to testify are:
  • Charles A. Vice, Commissioner, Kentucky Department of Financial Institutions, on behalf of the Conference of State Bank Supervisors;
  • James C. Gardill, chairman of the board, WesBanco, Inc., on behalf of the American Bankers Association;
  • Debra W. Still, CMB, chairman, Mortgage Bankers Association; and
  • Gary Thomas, president, National Association of Realtors.

FDIC, CFPB Offer New Tool To Fight Older Adults Financial Exploitation

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WASHINGTON (6/14/13)--The Federal Deposit Insurance Corp. and Consumer Financial Protection Bureau have jointly launched a new financial resource tool intended to help older adults and their caregivers prevent elder financial exploitation across, a growing problem across the country.

Called Money Smart for Older Adults, the new resource is a stand-alone training module developed by both agencies as part of FDIC's Money Smart financial curriculum. It's designed to raise awareness among older adults--defined as 62 and older--and their caregivers about ways to prevent, identify and respond to elder financial exploitation, to plan for a secure financial future, and to make informed financial decisions.

The resource is available online (see first resource link below) and in hard copy format (see second link), and it is free.

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CU Collaboration Spotlighted In Upcoming NCUA Webinar

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ALEXANDRIA, Va. (6/14/13)--Collaboration initiatives and strategies that can help credit unions band together for the betterment of their communities will be the topic of an upcoming June 25 National Credit Union Administration webinar.

The free webinar, entitled "Credit Union Collaboration," is scheduled to begin at 2 p.m. ET. The NCUA's Office of Small Credit Union Initiatives will host the webinar. Ben Rogers of the Filene Research Institute, Crissy Ortiz of Optimal Talent Solutions and Guy Messick and Jack Antonini of the National Association of Credit Union Service Organizations will join OSCUI Director Bill Myers to present the webinar.

Topics on the webinar schedule include:

  • Reducing operating expenses and encouraging growth in membership and products and services;
  • Accessing financial resources through OSCUI's grant programs;
  • Succession planning and finding new managerial talent;
  • Developing performance metrics and establishing benchmarks for success; and
  • Maintaining a credit union's viability in a rapidly evolving financial services industry.
The NCUA said webinar participants may submit questions in advance by sending an e-mail to WebinarQuestions@ncua.gov. The subject line of the e-mail should read, "Credit Union Collaboration."

To register for the NCUA webinar, use the resource link.

New CFPB Page Consolidates Reg Guidance

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WASHINGTON (6/14/13)--The Consumer Financial Protection Bureau has consolidated its new and pending mortgage rules, and associated implementation materials, into a new one-stop regulatory resource for credit unions and others impacted by and interested in is rules.

The bureau's new Regulatory Implementation web page includes:

  • Mortgage rules at a glance;
  • Small entity compliance guides;
  • Videos;
  • Quick reference charts;
  • The 2013 rural or underserved counties list; and
  • Other materials.
"Our goal with this page is to provide access to our mortgage-related implementation resources though a single web page that makes the rule content more accessible for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff," the CFPB said in a release.

New resources will be added to the page as they are developed, the bureau added. For more on the CFPB page, use the link.

The CFPB stressed that the implementation materials are not substitutes for the underlying rules.

The Credit Union National Association's next members-only Regulatory Advocacy Report will be taking a deeper look at the new CFPB resource, noting such things as the page's links to a new table that lists for each mortgage rule:

  • All of the mortgage rules at a glance, including the Dodd-Frank Act citations;
  • Small entity compliance guides and videos;
  • Each Federal Register notice, including those for the proposed rules, final rules and any amendments or updates to the final rules; and
  • Other resources such as charts.
CUNA members may use the resource link below to sign up for the RAR, which is published each Monday.

FHFA To Congress: Fannie, Freddie Were 'Critical Concerns' In 2012

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WASHINGTON (6/14/13)--In its fifth annual report to the U.S. Congress, which detailed the agency's 2012 examinations of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency said it continued to deem the GSEs as "critical concerns," but noted both generated positive annual income for the first time since 2006.

The report also covers the FHFA's examinations of the 12 Federal Home Loan Banks (FHLB) and the FHLBs' joint Office of Finance.

In a release the FHFA highlighted the following points from the annual report:

  • Combined, Fannie and Freddie guaranteed $1.3 trillion in new mortgages, representing 77% of all mortgages originated in 2012;
  • Since the first quarter of the conservatorship, which was put in place in September 2008, Fannie Mae and Freddie Mac completed nearly 2.7 million actions to prevent foreclosures with more than half being loan modifications;
  • Almost 1.1 million homeowners refinanced through the Home Affordable Refinance Program--or HARP--in 2012, bringing the total to 2.1 million since it began in April 2009;
  • Through year-end 2012, the cumulative draws on the U.S. Treasury from Fannie and Freddie Mac totaled $187.5 billion and the GSEs have paid $55.1 billion in cash dividends to Treasury;
  • Key challenges facing Fannie and Freddie include ongoing stress in the nation's housing markets, the challenging economic environment, uncertainty regarding the long-term prospects of their operations and charters, and the need to implement the FHFA Strategic Plan for Enterprise Conservatorships; and
  • For a third consecutive year, all FHLBs recorded positive annual earnings making 2012 the most profitable year since 2007. The FHLBanks ended 2012 with total assets of $763.1 billion, down less than one percent from 2011.

NEW: Senate Finance Committee's 'Tax Options' Paper Notes CUs

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WASHINGTON (6/13/13, UPDATED 1:45 p.m. ET)--The release today of the Senate Finance Committee's "tax options" paper on exempt organizations--with the elimination of the credit union tax status written clearly in black and white as a reform option--should be a wake-up call for action by credit unions, Credit Union National Association President/CEO Bill Cheney said in immediate response to the paper's release.

The options paper today is the sixth to be released by the committee in recent months.  It follows papers on simplifying the tax system for families and businesses, business investment and innovation, infrastructure, international competitiveness, and economic development.

"As CUNA has been saying for some time, our tax exemption, and its preservation for the long-term, is actively in the mix of discussion on Capitol Hill, as this 'options paper' clearly shows. That's why we launched our 'Don't Tax My Credit Union campaign," Cheney said.

He emphasized that credit unions are different from all other groups mentioned in the most recent paper. "We are cooperatives, operating on a not-for-profit basis, and actively returning billions of dollars in benefits each year to our members--benefits that far exceed any new revenue that would come from taxing credit unions.

"We can make the distinction that credit unions are different and preserve our tax status - if we speak up, now. Credit unions should contact their senators and congressmen without delay with the simple message, 'Don't Tax My Credit Union!'," he urged.

The groundbreaking grassroots advocacy campaign to support the credit union tax status combines CUNA's traditional efforts of such things as email-writing drives, with new social media and online outreach efforts.

Also of note in the tax policy discussions, it was widely reported yesterday that key Republicans in the House, speaking at the 24th Annual Tax, Budget and Health Care Policy Seminar sponsored by law firm BakerHostetler, the Federal Policy Group, and the Yale Club of Washington, vowed to take this "once in a generation" opportunity to execute tax policy reforms.

For more CUNA/league advocacy resources, use the resource links. (Also, see related story in this issue of News Now: Don't Tax My CU Advocacy Contacts Top 80,000.)

Resource Links

Latest On Escrow, ARM Notices, Flood Insurance Highlighted In CompBlog

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WASHINGTON (6/12/13)--Answers to key escrow account, force-placed insurance and adjustable rate mortgage (ARM) questions are all featured in recent posts on the Credit Union National Association's regulatory and compliance resource, CUNA CompBlog.

The escrow blog post takes on ten popular credit union questions regarding the Consumer Financial Protection Bureau's new rule, including: 

  • Does the new escrow rule apply to mortgage loans a credit union already has on the books;
  • Are credit unions that meet all four of the criteria to be exempt from the new 5-year mandatory escrow account requirement still required to follow the 1-year escrow account requirement; and
  • Are credit unions required to establish an escrow account for a higher-priced loan secured by a trailer, if the member is living in said trailer.
Can a credit union force-place hazard insurance on a past-due mortgage account if the associated escrow account does not have enough funds to cover the hazard insurance premium? This question is also answered in CompBlog.

CUNA in the blog also clarifies another question regarding the CFPB's Regulation Z mortgage servicing final rule. Credit unions and others, CUNA explains, will not need to send ARM notices to their members and customers before the final rule is effective.

For more of these question and answer pieces and other CompBlog compliance gems, use the resource link.

Reverse Mortgage Bill Passes House

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WASHINGTON (6/13/13)--The Reverse Mortgage Stabilization Act (H.R. 2167), which would allow the Secretary of Housing and Urban Development (HUD) to alter the Federal Housing Administration's (FHA) "reverse mortgage" insurance program, passed the U.S. House by voice vote on Wednesday.

The bill is intended to help HUD make quicker changes to its Home Equity Conversion Mortgage (HECM) program. Home Equity Conversion Mortgages (HECMs) are federally insured reverse mortgages backed by the U.S. Department of Housing and Urban Development.

Currently, HUD changes to this program require a lengthy 18-month regulatory process before they can become final.  The bill was introduced by Reps. Mike Fitzpatrick (R-Pa.) and Denny Heck (D-Wash.), members of the House Financial Services Committee.

H.R. 2167 would allow the HUD secretary to make administrative and policy changes to the Home Equity Conversion Mortgage Program through a mortgagee letter "when immediate changes are necessary to improve the fiscal safety and soundness of the program," according to a House Financial Services Committee release announcing the  vote.

The bill requires Senate approval before it can be signed into law.

For more on the bill, use the resource link.

CDFI Fund Intros New Bond, Capacity Building Programs

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WASHINGTON (6/13/13)--The Community Development Financial Institutions (CDFI) Fund this week announced a pair of new initiatives: The first-ever round of the CDFI Bond Guarantee Program and a capacity-building training series to support CDFIs that are Minority Depository Institutions (MDIs).

Applications for the CDFI Bond Guarantee Program are now being accepted for the first time. The program, which was finalized this year, will back notes or bonds of up to 30-years duration issued by CDFIs with full guarantees from the U.S. Treasury Department, the fund's parent entity. The bond program will support CDFI lending and investment by providing a source of long-term, patient capital to CDFIs, according to the CDFI Fund.

A total of $500 million will be made available to CDFIs through this program.

The secretary of the Treasury may guarantee up to five bonds this year, and each bond will be for a minimum of $100 million. Multiple eligible CDFIs may pool together in a single $100 million-minimum bond issuance provided that each eligible CDFI participates at a minimum of $10 million, the CDFI Fund said in a release.

CDFIs may use bond funds for:
  • Supporting commercial facilities that promote revitalization, community stability, and job creation/retention;
  • The provision of basic financial services;
  • Affordable housing initiatives;
  • Job creation programs for low-income individuals; and
  • Community or economic development in low-income and underserved rural areas.
Community development and financial empowerment will also be addressed by the CDFI Fund's MDI capacity building series. The series will address the "unique challenges facing CDFI MDIs, and will build their capacity to provide community development and financial services to their target markets," through a series of customized training sessions and workshops, the CDFI Fund said.

Scheduled topics in this training and technical assistance program include:
  • Building leadership capacity;
  • Expanding capitalization;
  • Managing organizational transformation;
  • Enhancing operational performance; and
  • The impact of compliance on community financial institutions.
For more, use the link to the CDFI Fund website.

Don't Tax My CU Advocacy Contacts Top 80,000

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WASHINGTON (6/13/13)--Credit unions and their members continue to make their voices heard, making more than 80,000 congressional contacts to tell their legislators "Don't Tax My Credit Union!"--raising the number of contacts by 50,000 in just the last week.

The Credit Union National Association and state credit union leagues have developed a groundbreaking large-scale, nationwide grassroots-mobilization campaign to encourage the more than 96 million credit union members nationwide to present a unified message to members of congress: Don't Tax My Credit Union!

About 1,500 credit unions have heeded the advocacy call and have acted to help generate members' contacts to Capitol Hill.

"The word is out, and credit union members are engaging, and spreading the word about the benefits they get because of the credit union tax status. They are spreading the message through tweets, retweets, and other online posts,"  CUNA Senior Vice President of Political Affairs Richard Gose said Wednesday.

"Credit unions and the leagues are getting the message out and educating members on the importance of the credit union tax status," he added.

CUNA's advocacy web site, DontTaxMyCreditUnion.org, has welcomed 94,264 unique visitors since it went live in mid-May. Overall, the site has garnered 109,164 visits and 216,099 page views in that same time frame.

CUNA's grassroots "Don't Tax My Credit Union!" campaign takes a forward leap by combining traditional online email campaign methods with newer media vehicles such as Facebook, a Twitter handle @CUNAadvocacy, and hashtag, #DontTaxMyCU, and social media micro-video site Vine.

CUNA has also developed a reformatted version of its tax advocacy toolkit to help credit unions and their members spread this message.

For more CUNA/league advocacy resources, use the resource links.

NCUA Clarifies Electric Co-op FOM Considerations

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ALEXANDRIA, Va. (6/13/13)--The National Credit Union Administration would use a standard seven-item test, as set forth in the agency's Chartering and Field of Membership Manual, to determine if an electric cooperative qualifies to be included in a federal credit union's field of membership, NCUA General Counsel Mike McKenna said in a legal opinion letter.

The letter responded to a request for clarification, which asked if an electrical cooperative shared sufficient associational common bond to be included in a given credit union's field of membership.

"No one factor alone is determinative of membership eligibility as an association," including whether the cooperative requires its members to purchase electricity from it, McKenna wrote.

"In the end, the particular details of a cooperative's structure and other factors surrounding its operation will determine if its relationship with its members is primarily or incidentally a customer-client relationship and if it satisfies the totality of the circumstances test," McKenna said.

The seven factors that the NCUA must consider as part of the circumstances test are:

  • Whether members pay dues;
  • Whether members participate in the furtherance of the goals of the association;
  • Whether the members have voting rights. To meet this requirement, members need not vote directly for an officer, but may vote for a delegate who in turn represents the members' interests;
  • Whether the association maintains a membership list;
  • Whether the association sponsors other activities;
  • The association's membership eligibility requirements; and
  • The frequency of meetings.
NCUA considers all of these factors together, McKenna wrote.

For the full NCUA legal opinion letter, use the resource link.

Numbers Talk And 'Inside Exchange' Turns Up Volume

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WASHINGTON (6/12/13)--There were strong positives revealed in credit unions' first quarter financial performances and Credit Union National Association Chief Economist Bill Hampel gives the inside scoop on what it all means in CUNA's newest, five-minute "Inside Exchange" video.

In a bright back-and-forth with CUNA Executive Vice President of Strategic Communications and Engagement Paul Gentile, Hampel gives perspective to member growth, steady expansion of lending--and the implications for credit unions of rising interest rates in the future.



CUNA created the "Inside Exchange" video series as a new way to directly communicate to member credit unions, and to provide detailed insights into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

For more on this new video, and previous videos featuring CUNA comments on credit union advocacy efforts, use the resource link.

The Inside Exchange videos can also be found by clicking on the "stay informed" section of the gray menu bar at the top of the cuna.org homepage and scrolling down to the "Inside Exchange" pane.

CUNA Will Monitor CFPB's Continued Overdraft Study

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WASHINGTON (6/12/13)--The Credit Union National Association will closely watch progress as the Consumer Financial Protection Bureau (CFPB) continues its study of financial institution overdraft protection plans. CUNA believes credit unions must have continued flexibility to meet their members' needs by offering "bounce protection plans" at reasonable fees.

"From our point of view," CUNA President/CEO Bill Cheney said Tuesday after reviewing the just-released CFPB report on overdraft programs, " overdraft protection and 'courtesy pay' are designed by credit unions to be a service to their consumer members, who have asked that they have continued access to such programs.

"Given that credit unions are member-owned financial services providers, credit unions strive to develop these programs in such a way the costs can be covered for the programs, but at reasonable fees for the members requesting the service. We believe credit unions should continue to have that flexibility to meet their members' needs."

CFPB Director Richard Cordray stated clearly in a CFPB report on overdraft protection plans released yesterday that the bureau does not intend to impede the offering of this service. CUNA was among stakeholders included in an early briefing on Monday and CUNA President/CEO Bill Cheney was directly contacted by Cordray.

Although no policy recommendations were forthcoming in the report, the bureau  noted it will  continue to dig and sift for more information about the variety of programs offered and how they affect consumers' ability to anticipate and control their costs for financial services.

CUNA clarified with the agency early Tuesday that the report focuses on large bank practices and that no credit unions were directly studied by the CFPB. However, the report does include information voluntarily submitted by credit unions or their vendors in response to the bureau's request for information preceding the report.

Although no policy recommendations were forthcoming, the bureau will, however, continue to dig and sift for more information about the variety of programs offered and how they affect consumers' ability to anticipate and control their costs for financial services.

"Our report today examined overdraft practices at some of the country's larger (banks) and found wide variations across them when it comes to overdraft opt-in rates and costs," Cordray explained in a statement accompanying the report's release. 

"The gap may reflect differences in the substance of overdraft programs, or differences in customer base, or differences in marketing approaches. On this point, we are interested to dig in and learn more about the reasons why."

"Our review is intended to provide the factual basis to inform efforts to develop more uniform treatment of these issues across financial institutions," the report's executive summary declares.

The CFPB has supervisory and enforcement authority over financial institutions with more than $10 billion in assets, but its policies affect the overall financial market.

For small institutions, the report notes that an industry vendor that services 1,800 predominantly small institutions reported to the CFPB that NSF and overdraft revenues accounted for 78% of its community bank and thrift clients' deposit service charges and 51% of its credit union clients' fee income in 2012.

In a conversation with CFPB staff this morning, CUNA Deputy General Counsel Mary Dunn reminded that the difference is even more notable because of the capital pressures that face credit unions.  Unlike banks, credit unions can build capital only from retained earnings, from such things as fees for services. "Still affected credit unions work to provide the overdraft protection services their members want but with more reasonable fees."

Data in the report from a research firm strongly suggests fees are lower at many smaller institutions. The median NSF and median overdraft fee across nearly 800 smaller banks and credit unions (outside of the nation's 50 largest depositories) were both $30 in 2012. Per-item fees ranged across this sample from a low of $10 to a high of $45.

In his accompanying remarks, Cordray said the report has three "major takeaways":

  • First, the CFPB claims that data show that opting into overdraft coverage of ATM and debit card transactions makes consumers more vulnerable to increased costs and involuntary account closures;
  • Second, financial institutions have very different policies, procedures, and practices that can be highly complex and difficult for consumers to understand, yet greatly affect whether and how often they will incur overdraft fees; and,  
  • Third,the outcomes for consumers vary widely across financial institutions. The average amount of annual overdraft charges in the study of the largest banks was $225. But consumers at some other banks paid an average of $147, while consumers at others paid $298, more than twice as much.
CUNA is continuing conversations with the bureau to clarify key points and will be included in future meetings with the CFPB on this issue. CUNA is also reviewing its best practices recommendations regarding overdraft protection plans.

Use the resource link to access the CFPB report and Cordray's accompanying statement.

Electronic Signature Q&A Featured In CompBlog Wrap-Up

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WASHINGTON (6/12/13)--Key credit union questions regarding the Electronic Signatures in Global and National Commerce (ESIGN) Act are answered in the May/June edition of the Credit Union National Association's CompBlog Wrap-Up.

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.

Topics addressed in the ESIGN Q&A section include:

  • Digital signature and home banking platforms;
  • How credit union members can consent and/or confirm their consent electronically;
  • The ESIGN disclosures credit unions must provide before obtaining a member's consent to receive electronic records;
  • E-statement opt-ins and other disclosure issues;
  • Whether credit unions are required to redeliver returned e-mail messages; and
  • How long credit union websites must maintain copies of e-statements online.
  • Other Q&A entries address issues affecting mobile home loans and construction loans.
In the Wrap-Up, CUNA Federal Compliance Counsel Colleen Kelly and Federal Compliance Information & Research Manager Nancy DeGrandi also present the newest developments in the Consumer Financial Protection Bureau's ongoing mortgage revision work. The Wrap-Up also features details on new CFPB compliance resources and the Financial Crimes Enforcement Network's latest information for financial institutions.

And, as it does every month, the CompBlog Wrap-Up lists the upcoming effective dates of new regulations, important compliance articles and reports to read, as well as CUNA training programs.

For more of the CUNA CompBlog Wrap-Up, and other compliance gems, use the resource links.

Dismissal Arguments Heard In CFPB Constitutionality Challenge

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WASHINGTON (6/12/13)--Oral arguments were heard yesterday on a motion that could end a case that challenges the constitutionality of the Consumer Financial Protection Bureau.  The U.S. District Court for the District of Columbia heard arguments on a motion by the U.S. Department of Justice (DOJ) to dismiss the case. 

The suit, which was filed by State National Bank of Big Spring (Texas), the 60 Plus Association, and Competitive Enterprise Institute last year in federal court in Washington, D.C., also seeks to overturn the appointment of CFPB Director Richard Corday and the challenges the constitutionality of the Financial Stability Oversight Council (FSOC).

National Credit Union Administration Chair Debbie Matz and Cordray are among the nine federal officials named as suit co-defendants because the officials are members of FSOC.  The case does not seek to challenge NCUA separately.

Michigan, Oklahoma and South Carolina last year joined the suit, challenging the orderly liquidation authority that was granted to the federal government as part of the Dodd-Frank Act. Eight states in February filed a motion asking a federal district court to allow them to also join the suit.

As the court heard argument on the motion to dismiss the case, questions turned to whether State National Bank has been injured by the Dodd-Frank Act or the CFPB in such a way as to have constitutional standing to challenge the law, and whether those injuries are "ripe" or developed enough to be currently ready for a federal court to address them. 

State National argued that it was injured because it has incurred compliance costs in connection with the CFPB's mortgage servicing rule, because it has exited the market for issuing new mortgages due to the qualified mortgage rule and general uncertainty around the mortgage marketplace, and because it has exited the market for remittance transfers due to the CFPB's remittance rule.  The bank noted that its compliance costs included staff time and spending approximately $10,000 to join a bank "Compliance Alliance" to keep up with CFPB actions and developments in the regulatory landscape. 

The DOJ argued that none of these injuries are sufficient for standing to sue. The department noted that the bank falls within the CFPB's small servicer exemption from the mortgage servicing rules, precluding any injury from compliance efforts for that rule.  DOJ also argued that the bank's decision to exit the markets for remittance transfers and new mortgages cannot be fairly "traced" to the CFPB's actions, as opposed to some other business decision.

The constitutionality of Cordray's appointment as CFPB director was also discussed.

Earlier this year, the U.S. Court of Appeals for the D.C. Circuit ruled that President Barack Obama's recess appointments to the Equal Employment Opportunity Commission (EEOC) were unconstitutional.  This ruling could be precedent for the case heard Tuesday because the EEOC appointments occurred on the same date that the president appointed Cordray to his role, although that ruling is limited to the EEOC, not to the CFPB. 

The court again focused on whether State National has been injured by Cordray's appointment, as this is the only way in which State National can properly pose a challenge.  The DOJ has asked the U.S. Supreme Court to review the EEOC determination, while the court has not yet decided the motion to dismiss in the CFPB case heard yesterday, meaning that the status of Cordray's appointment is likely to remain in limbo for some time.

CUNA's Assistant General Counsel for Special Projects Robin Cook attended for CUNA to monitor the case for credit unions. He observed that the case makes a wide-ranging challenge to the Dodd-Frank Act and that the original complaint states that "Title X of the Dodd-Frank Act delegates effectively unbounded power to the CFPB, and couples that power with provisions insulating the CFPB against meaningful checks by the Legislative, Executive and Judicial Branches."

CUNA Continues Talks On Derivatives Concerns

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WASHINGTON (6/11/13)--The Credit Union National Association's efforts to express credit union derivative concerns continued during a June 6 conference call between National Credit Union Administration staff and members of CUNA's Examination and Supervision Subcommittee.

NCUA staff answered questions on the derivatives proposal. Details of the call are reported this week in CUNA's Regulatory Advocacy Report.

Concerns raised by CUNA subcommittee members included:

  • Application and examination fees;
  • The possibility of waivers to gain additional derivatives authority;
  • The $250 million net worth requirement to qualify for derivatives authority; and
  • Expertise requirements.
When asked about expertise requirements, NCUA staff said that under the proposal credit unions would have to have an experienced person on staff at the credit union and that contractors or third-parties would not be permissible to meet this requirement.

Overall, NCUA staff said the rule is designed to be workable and that the NCUA board welcomes comments on all aspects of the proposal.

CUNA's Examination and Supervision Subcommittee is developing recommendations on the proposal. omments on the proposal must be filed with the NCUA by July 29.

Other developments detailed in this week's Regulatory Advocacy Report include:

  • The Consumer Financial Protection Bureau's issuance of exam procedures for new mortgage rules;
  • CUNA concerns with NCUA delinquency reporting changes; and
  • CUNA's new survey on CFPB mortgage regulations, and requests for comment on remittance and Bank Secrecy Act developments.
Employees or volunteers of CUNA and state credit union league member credit unions can sign up below to receive the Regulatory Advocacy Report.

The Regulatory Advocacy Report is archived on cuna.org.

Congress' Exempt-Entities Tax Plan Expected Thursday

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WASHINGTON (6/11/13)--The Senate Finance Committee is expected to release its staff-prepared tax reform options paper on exempt organizations Thursday and according to Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan it would be a surprise--although a pleasant one--if the credit union tax status was not mentioned as a revenue option.

"The papers that have been released have laid out all of the options available under each particular subject matter--a kitchen sink approach, if you will.

"So, I'd expect credit unions to be discussed to some extent in the paper. In fact, I'd be pleasantly surprised if we're not," Donovan said.

Papers on simplifying the tax system for families and businesses, business investment and innovation, infrastructure, international competitiveness, and economic development are among those that have been released by the committee and discussed in private meetings.

Donovan emphasized that continued grassroots action is critical as the U.S. House and Senate continue their tax reform efforts. CUNA and the state credit union leagues continue to encourage the more than 96 million credit union members nationwide to present a unified message to members of Congress: Don't Tax My Credit Union!

The groundbreaking grassroots campaign combines CUNA traditional efforts of such things as email-writing drives, with new social media and online outreach efforts. (For more CUNA/league advocacy resources, use the resource links.)

Other items of credit union importance on this week's congressional calendar include a Wednesday House Financial Services Committee hearing entitled: "Beyond GSEs (government-sponsored enterprises): Examples of Successful Housing Finance Models without Explicit Government Guarantees," a House Financial Services capital markets subcommittee hearing on reducing barriers to capital formation, and a Senate Appropriations Committee hearing on cybersecurity threats and responses.

Thursday House and Senate hearings include:

  • A House Ways and Means Committee hearing entitled: "Tax Reform: Tax Havens, Base Erosion and Profit-Shifting";
  • A House Financial Services monetary policy and trade subcommittee hearing entitled "Assessing Reform at the Export-Import Bank.";
  • A House Financial Services housing and insurance subcommittee hearing on international regulations and U.S. insurer competitiveness; and
  • A Senate Banking Committee hearing entitled "Lessons Learned From the Financial Crisis Regarding Community Banks." (See June 10 News Now story: Senate Panel Looks For Community Bank Lessons From Financial Crisis)

CFPB Overdraft Report Doesn't Suggest Rule Changes

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WASHINGTON (6/11/13)--The Consumer Financial Protection Bureau has released its report on overdraft protection plans, and while the report--embargoed until midnight this morning--expresses concern about the ability of consumers to avoid overdraft costs, it does not recommend regulatory changes or changes to business practices.

The bureau used more than 1,000 consumer-submitted comments, and its own data research, to compile the report.

Current checking account issues, information on opt-in rates and disclosures are also discussed in the CFPB release.

The Credit Union National Association is studying the report this morning.  Watch News Now for a live update on its contents.

CUNA will clarify the following points, and more,  with the CFPB:
  • Did the study include credit unions? If so, how many? How many banks?
  • When does CFPB plan to target its next study, which will be on micro data?
  • Following that, are there additional plans in the works on these programs?

CU Supporters Among N.J. Special Election Candidates

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WASHINGTON (6/11/13)--The Credit Union National Association is closely watching the planned New Jersey special U.S. Senate election as the race unfolds.

A number of candidates that have entered the race are credit union supporters, including two-term Newark, N.J. Mayor Cory Booker (D), State Assembly Speaker Sheila Oliver (D), and U.S. House members Rush Holt (D) and Frank Pallone (D). Holt and Pallone have been credit union member business lending cap increase supporters in Congress, and Booker has expressed his support speaking at a number of credit union-related events. Oliver was a key sponsor of state assembly legislation to enable credit unions to become eligible municipal depositories.

Former Bogota, N.J., mayor and state gubernatorial candidate Steve Lonegan (R) and Dr. Alieta Eck (R) will compete for the Republican nomination in this contest.

"We've built strong relationships with many candidates, and credit unions are in good shape whatever the outcome of the special election," New Jersey Credit Union League Director of Government Affairs Chris Abeel said.

"Credit unions, the state league and CUNA have almost an embarrassment of riches with credit union-friendly candidates to choose from during this election," CUNA Vice President of Political Affairs Trey Hawkins added.

A Quinnipiac University poll released Monday indicates Booker is the early favorite. New Jersey has not elected a Republican to the U.S. Senate since 1972.

The candidates will vie for the former Senate seat of Frank Lautenberg (D-N.J.), who died at age 89 on June 3. The special election will be held on Oct. 16.

In the interim, State Attorney General Jeff Chiesa (R) will fill New Jersey's vacant Senate seat. Chiesa was appointed by Governor Chris Christie (R) late last week, and was sworn in on Monday.

CUNA, the leagues and credit unions have supported special election candidates in the past. One recent example of interim-election success is Rep. Suzanne Bonamici (D), who won the right to represent Oregon's first congressional district in early 2012.

Bonamici made her support for member business lending a key part of her campaign and platform, and has remained a strong credit union supporter during her time in office.

NEW: CFPB Overdraft Report Out: Study Will Continue

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WASHINGTON (6/11/13, UPDATED 11:27 a.m. ET)--Consumer Financial Protection Bureau Director Richard Cordray states clearly in the bureau's report on financial institutions' overdraft programs, released at midnight, that the bureau does not intend to impede the offering of this service. The Credit Union National Association was among stakeholders included in an early briefing on Monday and CUNA President/CEO Bill Cheney had a personal call from Cordray.

CUNA clarified with the agency this morning that the report focuses on large bank practices and that no credit unions were directly studied by the CFPB. However, the report does include information voluntarily submitted by credit unions or their vendors in response to the bureau's request for information preceding the report.

Although no policy recommendations were forthcoming, the bureau will, however, continue to dig and sift for more information about the variety of programs offered and how they affect consumers' ability to anticipate and control their costs for financial services.

"Our report today examined overdraft practices at some of the country's larger (banks) and found wide variations across them when it comes to overdraft opt-in rates and costs," Cordray explained in a statement accompanying the report's release. 

"The gap may reflect differences in the substance of overdraft programs, or differences in customer base, or differences in marketing approaches. On this point, we are interested to dig in and learn more about the reasons why."

"Our review is intended to provide the factual basis to inform efforts to develop more uniform treatment of these issues across financial institutions," the report's executive summary declares.

The CFPB has supervisory and enforcement authority over financial institutions with more than $10 billion in assets, but its policies affect the overall financial market.

For small institutions, the report notes that an industry vendor that services 1,800 predominantly small institutions reported to the CFPB that NSF and overdraft revenues accounted for 78% of its community bank and thrift clients' deposit service charges and 51% of its credit union clients' fee income in 2012.

In a conversation with CFPB staff this morning, CUNA Deputy General Counsel Mary Dunn reminded that the difference is even more notable because of the capital pressures that face credit unions.  Unlike banks, credit unions can build capital only from retained earnings, from such things as fees for services. "Still affected credit unions work to provide the overdraft protection services their members want but with more reasonable fees."

Data in the report from a research firm strongly suggests fees are lower at many smaller institutions. The median NSF and median overdraft fee across nearly 800 smaller banks and credit unions (outside of the nation's 50 largest depositories) were both $30 in 2012. Per-item fees ranged across this sample from a low of $10 to a high of $45.

In his accompanying remarks, Cordray said the report has three "major takeaways":

  • First, the CFPB claims that data show that opting into overdraft coverage of ATM and debit card transactions makes consumers more vulnerable to increased costs and involuntary account closures;
  • Second, financial institutions have very different policies, procedures, and practices that can be highly complex and difficult for consumers to understand, yet greatly affect whether and how often they will incur overdraft fees; and,  
  • Third,the outcomes for consumers vary widely across financial institutions. The average amount of annual overdraft charges in the study of the largest banks was $225. But consumers at some other banks paid an average of $147, while consumers at others paid $298, more than twice as much.
CUNA is studying the report and is continuing conversations with the bureau to clarify key points. CUNA will be included in future meetings with the CFPB  on this issue.  

Use the resource link to access the CFPB report and Cordray's accompanying statement.

Obama Taps Furman To Lead Econ Advisory Council

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WASHINGTON (6/11/13)--President Barack Obama Monday nominated Jason Furman to serve as the next chairman of the White House Council of Economic Advisers.

He would replace Alan Krueger if confirmed by the U.S. Senate. Furman joined the Obama administration as an assistant to the president for economic policy and the principal deputy director of the National Economic Council in 2009. He also served as a special assistant to the president for economic policy at the National Economic Council during the Clinton administration.

President Obama said "[Furman] understands all the sides of an argument, not just one side of it.

"He's worked tirelessly on just about every major economic challenge of the past four and a half years, from averting a second depression, to fighting for tax cuts that help millions of working families make ends meet, to creating new incentives for businesses to hire, to reducing our deficits in a balanced way that benefits the middle class," Obama added.

Senate Panel Looks For Community Bank Lessons From Financial Crisis

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WASHINGTON (6/10/13)--Sen. Tim Johnson's (D-S.D) banking panel has scheduled a look this Thursday at "Lessons Learned From the Financial Crisis Regarding Community Banks."

The scheduled witnesses at the 10 a.m. (ET) Senate Banking Committee hearing are:
  • Richard Brown, chief economist, of the Federal Deposit Insurance Corp.;
  • Jon T. Rymer, inspector general, also of the FDIC; and
  • Lawrance L. Evans, director of Financial Markets and Community Investment, of the U.S. Government Accountability Office.
Currently, the June 13 event is the final hearing for scheduled for Senate Banking for June.  The U.S. Congress will recess for a July 4 District Work Session.

CFPB Publishes Loan Originator, Mortgage Servicing Compliance Guides

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WASHINGTON (6/10/13)--Plain-English, small-entity compliance guides detailing recent changes to loan originator and mortgage servicing rules were released by the Consumer Financial Protection Bureau on Friday.

The guides give an overview of the rules, but are not substitutes for the underlying rules, the CFPB emphasized. The Credit Union National Association is reviewing the guidance and will be following up with the CFPB on any issues of concern.

Similar plain-English guides on ability-to-repay and qualified mortgage rules, escrow regulations, and changes to the Home Ownership and Equity Protection Act, the Equal Credit Opportunity Act, and sections of the Truth in Lending Act that impact higher-priced mortgage loan appraisals have also been released by the bureau.

The CFPB said it plans to update the guides periodically as rule clarifications are finalized. The new documents are part of a series of guides and other informational materials the CFPB plans to provide on its new mortgage regulations.

The bureau has said the goal of the guidance series is to provide a comprehensive rule summary in a plain language and frequently-asked question format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.

Use the resource link below to access the loan originator and mortgage servicing guides.

Cheney Report: CUs Concerned About Call Report Changes

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WASHINGTON (6/10/13)--Credit unions are concerned that a rule going into effect June 30 that changes how credit unions define delinquent loans in call reports could drive up the number of reportable loans for some credit unions, Credit Union National Association President/CEO Bill Cheney said in the most recent issue of The Cheney Report.

CUNA has brought the matter to the attention of senior NCUA staff, Cheney said.

Under the change announced last October, the definition of a delinquent loan will be based on the number of days delinquent--60--rather than the number of months--two.

The NCUA approved the change to bring its definition into line with that of the federal bank regulators.

"The effect, however," Cheney notes, "is that a seemingly nominal change is driving up the number of reportable loans for some credit unions. This is a particular problem for real estate loans, which are typically due on the first of the month."

Using days instead of months to determine reporting can significantly affect the timing of when and if these loan must be reported as delinquent.

Cheney noted that one credit union told CUNA the change would more than double its delinquency rate on the June report.

CUNA's Examination and Supervision Subcommittee, as well as CUNA staff, will continue to pursue the issue with the NCUA.

Use the resource link to read the full Cheney Report.

Matz Pledges Agency Support For Small CUs, CDCUs

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BALTIMORE, Md. (6/10/13)--Community development and other small credit unions promote economic empowerment and "are often the only federally insured institutions in low-income communities," and the National Credit Union Administration will continue to support them, NCUA Chairman Debbie Matz told attendees of the National Federation of Community Development Credit Unions' 39th Annual Conference on Serving the Underserved on Friday.

The NCUA currently aids these institutions through regulatory relief measures, shorter examinations, streamlined low-income designations, and expanded services from the Office of Small Credit Union Initiatives, she said.

"Your mission is more important than ever," Matz said. "As long as you stay true to your mission of member service, while NCUA stays true to our mission of safety and soundness, the future will be as rewarding as the past," she added.

"Low-income credit unions continue to lead the nation in loan growth, while charge-offs remain below the national average. Among credit unions that have had a low-income designation since 2009, return on average assets doubled," Matz said.

The NCUA chairman also discussed many of the challenges faced by small credit unions, including capital losses. "More than a third of credit unions under $50 million in assets are unprofitable," she noted. "That means they're losing capital, and if they're losing capital, they're in danger of falling below the Prompt Corrective Action (PCA) threshold."

Credit unions that fall below the PCA threshold face long odds against recovering while remaining independent, Matz emphasized. To protect their future, she encouraged small credit unions to maintain a capital cushion well above 7%. Credit union directors and management should also "develop a sound strategic plan, design strong internal controls, and practice thorough due diligence" to create a capital cushion, she added.

For Matz's full remarks, use the resource link.

NCUA Derivatives Details Discussed In CUNA Audio Conference

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WASHINGTON (6/6/13)--The National Credit Union Administration's recently released derivatives proposal was one of many topics discussed by Credit Union National Association staff during a "Pressing Regulatory and Compliance Issues Audio Conference" held last week.

CUNA is particularly interested in how the proposal would address the use of outside vendors and how fees collected by the agency would be spent. CUNA in recent meetings with the agency has also asked the NCUA how existing staffing levels would be adjusted to deal with derivatives supervision.

The NCUA derivatives proposal, released at the May open board meeting, would allow well-run federal credit unions to use simple derivatives to hedge against interest rate risks. The NCUA plan would allow only well-managed credit unions with $250 million or more in assets, and which have appropriate expertise, to apply for an agency derivatives investment program. Swaps and caps will be the only approved investments. Fees will be charged to cover costs related to application processing and supervision of the program.

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

CUNA staff during the conference said the NCUA kept the derivatives proposal simple to release it in a more timely fashion. The agency is particularly interested in credit union comments on fees and asset level cutoffs, CUNA staff said.

The audio conference also featured:
  • An update on U.S. Congress tax discussions;
  • The latest on Consumer Financial Protection Bureau regulatory actions; and
  • Discussion of other key legislative and regulatory topics.
An archived version of the conference will be released later this week.

CUNA Survey Seeks CU Comments On CFPB Ability-to-repay, QM Rule

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WASHINGTON (6/10/13)--Credit unions are asked to provide details on what actions they plan to take as a result of the Consumer Financial Protection Bureau's pending ability-to-repay and qualified mortgage (QM) rules through a new Credit Union National Association survey.

In the survey, CUNA asks credit unions to estimate what percentage of their loan volume falls outside of the QM loan definition. Credit unions can also suggest ways the CFPB could adjust the rule to provide greater flexibility.

The survey also seeks general credit union contact information and asset size details.

CUNA has asked that credit unions complete the survey by June 14. For the full survey, use the resource link.

The CFPB issued standards to define a "qualified mortgage" under the agency's "ability to repay" rules in January. The rule amended Regulation Z, which implements the Truth in Lending Act, to require creditors to make a reasonable, good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). It also establishes certain protections from liability under this requirement for "qualified mortgages."

The rule provides credit unions and other creditors that follow the QM standards with a "safe harbor" for compliance with the ATR provisions. Creditors will be entitled to greater legal protection for QMs than for other mortgage loans should the creditor be sued by a consumer for noncompliance with the ability to repay provisions.

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.

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%.

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.

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: 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."

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.

Bachus Will Add His Support To CU Capital Bill

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WASHINGTON (6/6/13)--Rep. Spencer Bachus (R-Ala.), immediate past chair of the House Financial Services Committee, has agreed to co-sponsor a credit union supplemental capital bill, the Capital Access for Small Businesses and Jobs Act  (H.R. 719).

The bill would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts toward capital ratio. It was introduced in February by Rep. Pete King (R-N.Y.) and reached 29 co-sponsors this week when Rep. Charles Rangel (D-N.Y.)  signed on with his support.

The Credit Union National Association  strongly backs the bill and the legislation has regulators' support as well. The League of Southeastern Credit Unions met with Bachus during the recent Memorial Day District Work Session to discuss credit union proirities, such as the supplemental capital bill.

Last month, National Credit Union Administration Chair Debbie Matz wrote to lawmaker King, and his chief co-sponsor, Rep. Brad Sherman (D-Calif.), to say that if the U.S. Congress enacts the capital-access bill, her agency will "promptly propose the necessary rule changes required for implementation."

Matz wrote, "As we witnessed during the recent economic crisis, maintaining sufficient capital is critical at time of economic stress...Your legislation would provide credit unions with an additional tool to promote sufficient capital--even under adverse economic conditions--and ensure that healthy credit unions would no longer be forced to turn away deposits in order to protect their net worth."

CUNA To Congress: Approve MBLs To Ease Small Biz Capital Crunch

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WASHINGTON (6/6/13)--Increasing the credit union member business lending (MBL) cap is "one very simple solution to assist small businesses in raising capital," Credit Union National Association President/CEO Bill Cheney wrote in a Wednesday letter to the U.S. Congress.

The letter was submitted for the record of a Thursday House Small Business investigations, oversight and regulations subcommittee hearing entitled "Financing America's Small Businesses: Innovative Ideas for Raising Capital."

Cheney in the letter said "credit unions understand that in order for the economy to fully recover, small businesses need access to credit, which will help their businesses grow. Credit unions have capital to lend, a history of prudent and safe small business lending, and a mission to help provide access to credit to their members--including their small business-owning members."

Congress could help credit unions unleash this capital, and help small businesses and the economy, by approving MBL cap increase legislation. U.S. House (H.R. 688) and Senate (S. 968) bills would increase the credit union MBL cap from 12.25% of assets to 27.5%. CUNA has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers and without increasing the size of government.

S. 968, which was introduced by Sen. Mark Udall (D-Colo.) earlier this month, currently has 15 co-sponsors. H.R. 688, introduced by Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.), has 100 co-sponsors.

More than 500 credit unions are at or quickly approaching the cap, accounting for approximately 60% of credit union business lending, Cheney noted. "If the cap is not increased, the ability of these credit unions to continue to be there for their small business-owning members will be jeopardized," he wrote.

Compliance: Answers To Your Mandatory Arbitration Clause Questions

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WASHINGTON (6/6/13)--If the effective date of prohibitions on financing credit insurance premiums in connection with certain mortgage loans has been delayed by the Consumer Financial Protection Bureau, have mandatory arbitration clauses also been pushed back? No, Credit Union National Association Senior Director of Compliance Analysis Valerie Moss explained in a recent Comp Blog post.

The compliance date for the premium financing prohibitions has been pushed back until Jan. 10, 2014, Moss said. However, portions of Regulation Z that prohibit the inclusion of mandatory arbitration provisions in any agreement for a closed-end loan secured by a dwelling or an open-end loan secured by the consumer's principal dwelling apply to loans for which an application is received on or after June 1, 2013.

Reg Z also prohibits interpreting any provisions in these agreements as barring consumers from bringing a claim in court for any alleged violation of Federal law, Moss added.  However, she said, the rule doesn't prohibit a consumer and creditor from agreeing to use arbitration after a dispute arises.

"Credit unions now using mortgage loan documentation containing such provisions should take steps to ensure that these clauses are removed from documentation for covered loans," Moss recommended.

Use the resource link for more CUNA compliance gems.

CFPB Shares Lending Rule Exam Emphasis

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WASHINGTON (6/6/13)--Examination procedure manuals for two lending regulations, the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA), have been released by the Consumer Financial Protection Bureau.

The CFPB in a release said the new manuals "are intended for use by CFPB examiners and the financial institutions and mortgage companies subject to the new regulations.

"They are the first round of updates for what will likely be multiple updates," the bureau said.

Examination procedures for ability-to-repay and mortgage servicing rules will also be released in the coming months, the CFPB added. The bureau also said it plans to publish additional interim examination procedures in the near future. These and other examination changes will eventually be incorporated into the CFPB's general supervision and examination manual.

The exam procedures, according to the CFPB, will help financial institutions and mortgage companies understand how they will be examined for CFPB rules that:
  • Set qualification and screening standards for loan originators;
  • Prohibit steering incentives;
  • Prohibit dual compensation;
  • Protect borrowers of higher-priced mortgage loans;
  • Prohibit the waiver of consumer rights;
  • Prohibit mandatory arbitration;
  • Require lenders provide appraisal reports and valuations; and
  • Prohibit single premium credit insurance.
For more on the new TILA and ECOA exam procedures, use the resource links.

NEW: Bachus Agrees To Co-Sponsor CU Supp Cap Bill

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WASHINGTON (6/5/13, UPDATED 1:40 p.m.. ET)--Rep. Spencer Bachus (R-Ala.), immediate past chair of the House Financial Services Committee, has agreed to co-sponsor a credit union supplemental capital bill, the Capital Access for Small Businesses and Jobs Act  (H.R. 719).

The bill would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts toward capital ratio. It was introduced in February by Rep. Pete King (R-N.Y.) and already has 29 co-sponsors, prior to Bachus signing on.

The Credit Union National Association  strongly backs the bill and the legislation has regulators' support as well.

Last month, National Credit Union Administration Chair Debbie Matz wrote to lawmaker King, and his chief co-sponsor, Rep. Brad Sherman (D-Calif.), to say that if the U.S. Congress enacts the capital-access bill, her agency will "promptly propose the necessary rule changes required for implementation."

Matz wrote, "As we witnessed during the recent economic crisis, maintaining sufficient capital is critical at time of economic stress...Your legislation would provide credit unions with an additional tool to promote sufficient capital--even under adverse economic conditions--and ensure that healthy credit unions would no longer be forced to turn away deposits in order to protect their net worth."

Ohio Catholic CU Can Now Serve State's Catholics

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GARFIELD HEIGHTS, Ohio (6/5/13)--Ohio Catholic FCU, Garfield Heights, Ohio, is extending its field of membership beyond the Cleveland Catholic Diocese it has served since 1954 to reach all Catholic dioceses in that state.

The credit union, currently with 16,500 member, $154-million-in-assets, has announced it has received National Credit Union Administration approval for the larger membership base.

Ohio Catholic's  CEO Todd Turner said in a statement posted to the credit union's website, "Our ongoing goal is to help members of the Catholic community achieve their financial goals and provide a faith-based experience every time members do business with us."

Turner added, "This is an indication of the inherent financial strength of our credit union. We are very proud of this recognition and the opportunity it provides."

Even before the new charter approval, Ohio Catholic FCU was the largest faith-based credit union in Ohio.

CUs Can Still Sign Up For Today's Pressing Issues Audio Conference

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WASHINGTON (6/5/13)--Credit unions can sign up until 2 p.m. ET today for the Credit Union National Association's second "Pressing Regulatory and Compliance Issues Audio Conference" of the year--offered free to affiliated credit unions.

Today's program will feature legislative and regulatory developments. Topics will include:

  • Tax reform and the threat to the credit union tax status;
  • CUNA's efforts in the U.S. Congress to provide regulatory relief to credit unions;
  • The Consumer Financial Protection Bureau's mortgage lending regulations; the status of regulations that become effective June 1; prohibition on financing credit life/disability, debt cancellation products' prohibition on arbitration clauses; escrow accounts for higher-priced mortgages; as well as the status of regulations to be effective January 2014;
  • A Financial Accounting Standards Board proposal on credit losses; and
  • National Credit Union Administration issues, such as prompt corrective action, the new proposal on derivatives authority and a quick overview of NCUA actions expected in the second half of 2013.
Use the resource link for registration and more information.

Need an NCUA 1944 Annual Report? Now Available Online

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ALEXANDRIA, Va. (6/5/13)--Aspiring credit union historians can trace the movement's development from the 1.3 million members and 3,815 institutions reported in 1944 to today's far higher totals. The National Credit Union Administration announced yesterday that it has made all annual reports since that year available online.

Click to view larger image The NCUA's archived 1944 credit union report gives a snapshot of the industry's early years, including this map. (NCUA image)


The annual reports cover nearly seventy years of credit union results. The NCUA on Tuesday said it released the archived reports "as part of its ongoing efforts to increase transparency."

The 1944 report, which was prepared by the Federal Deposit Insurance Corp.,  details the first years of the credit union movement following 1934's passage of the Federal Credit Union Act, and notes the rapid growth of credit unions as "the merits of the credit union plan were quickly recognized." It also addresses the issues that many credit union leaders faced in a wartime economy.

Total assets held by individual credit unions in 1944 ranged from as little as $100 to as much as $3.3 million.

The annual reports serve as the agency's official report to the president and Congress, and cover NCUA and credit union operations. The NCUA noted that many of these reports include audited financial statements for the agency's four permanent funds: the National Credit Union Share Insurance Fund, the NCUA Operating Fund, the Central Liquidity Facility and the Community Development Revolving Loan Fund.

For more on the reports, use the resource links.

NCUA Breaks Down Strong 1Q Results By State

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ALEXANDRIA, Va. (6/5/13)--First quarter 2013 credit union financial results, which represented the strongest quarter membership growth in credit union history, are broken down state-by-state in a new National Credit Union Administration Quarterly U.S. Map Review.

The  first quarter results, released last week by teh NCUA, reported membership growth of more than 800,000 new members and the fastest first-quarter loan growth for federally insured credit unions in five years. Credit Union National Association President/CEO Bill Cheney said the membership numbers reflect "a real cultural shift that is taking place.

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

This shift was strongest in the U.S. Virgin Islands, where membership increased by 18.5%. Idaho and Virginia led the mainland U.S., reporting membership increase rates of 7.5% and 7.4%, respectively.

Fourteen states, including Georgia and Washington, saw credit union membership growth rates of greater than 3%. Most states saw their credit union membership grow by at least 1%.

Loan growth was strongest in Idaho and Oklahoma, with credit unions in those states reporting combined loan volume increases of 12.4% and 12.2%, respectively, over the totals reported in the first quarter of 2012. Loans declined in Nevada, the Virgin Islands, Hawaii, Montana, and Arkansas, led by Nevada's 8.8 percent decline, the NCUA said.

Asset growth remained strong in Iowa and North Dakota, as consistent growth continued from 2012 fourth quarter into the first quarter of 2013. Growth was similarly strong in Idaho and Virginia, with those states also posting asset growth rates of 8% or above. Iowa had the fastest growth in total assets during the quarter, posting a 10.4% increase.

Nevada was the only state to post a decline in total assets during the first quarter of 2013, reporting a 3.2% decline.

Share and deposit growth and delinquency rates are also addressed in the NCUA release.

For the NCUA maps and an agency release, use the resource link.

CUNA: Concerns Linger About CFPB Small Servicer Exemption

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WASHINGTON (6/5/13)--While it supports some of the Consumer Financial Protection Bureau's proposed mortgage servicing changes, the Credit Union National Association in a comment letter said the agency has more latitude to exempt small servicers from the servicing requirements and should use it.

The comment letter follows bureau-proposed amendments to provisions regarding the small servicer exemption under Regulation X, Real Estate Settlement Procedure Act, eligibility for determining qualified mortgage status under Regulation Z, Truth in Lending Act, and other issues.

"The proposed changes reflect concerns that CUNA has raised with the CFPB, and we support the agency's efforts to factor credit unions' issues into its rule makings," CUNA Deputy General Counsel Mary Dunn wrote.

She particularly noted the CFPB's proposed change under section 1026.41(e)(iii)(A) of Reg Z that would allow credit unions and others to exclude mortgage loans they voluntarily service for nonaffiliated entities when determining whether the small servicer exemption applies "is an important change."

However, Dunn wrote, credit unions and CUNA are concerned by portions of the proposal that would grant exemptions to some credit union servicers based on the number of loans they actually service, but disqualify them from this exemption when they utilize a third party subservicer to service even one of their loans if the third party services more than 5,000 loans.

"Being able to use a subservicer facilitates a credit union's ability to make loans. We are hopeful that the CFPB will give this issue further consideration and allow servicers that predominately service their own loans but that also use a subservicer for some, say up to 25% of their loans, to continue to be exempt from key provisions of the servicing rule," Dunn wrote.

CUNA plans to discuss this issue with the CFPB in the future.

For the full comment letter, use the resource link.

CU, Bank Reg Relief Bill Could Come Soon

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WASHINGTON (6/4/13)--Comprehensive regulatory relief legislation could be considered by the House Financial Services Committee in the coming weeks. The Credit Union National Association is urging legislators to include greater supplemental capital and member business lending authority to this package, Ryan Donovan, CUNA senior vice president of legislative affairs, said Monday.

Financial Services Committee members are said to be preparing to offer a bipartisan regulatory relief bill, or bills, Donovan noted. This could be the subject of consideration in the committee later this month, if leaders are able to agree on the components of the bill, he said.

Committee members are looking for areas where credit union and community bank interests may intersect in a bill. CUNA has assured lawmakers that such areas exist; for instance, one such area is examination fairness legislation.

Pamela Stephens, CEO of Security One FCU, Arlington, Texas, presented CUNA's 35-point relief plan for regulatory relief during a March subcommittee hearing. Changes promoted by the CUNA plan include:
  • Increasing National Credit Union Administration budget transparency;
  • Adjusting the treatment of non-owner occupied one- to four-family dwelling loans for credit unions from business loans to residential real estate loans;
  • Increasing the maturity limit for higher education loans made by federal credit unions; and
  • Expanding investment authority in credit union service organizations.
Committee Vice Chairman Rep. Gary Miller (R-Calif.) announced his intention to introduce a credit union relief bill at that same hearing.

This week, the U.S. House is expected to focus on fiscal year 2014 appropriations bills, including defense and national security spending. The Senate is scheduled to resume consideration of the 2013 Farm Bill (S. 954).

Credit unions will also be interested in several hearings this week, including:

  • A Tuesday Senate Banking Committee hearing on Iran sanctions;
  • A Wednesday House Financial Services capital markets and government sponsored enterprises subcommittee hearing entitled "Examining the Market Power and Impact of Proxy Advisory Firms.";
  • A Wednesday House Small Business Committee hearing on reducing duplication and promoting efficiency at the U.S. Small Business Administration;
  • A Senate Banking housing, transportation, and community development subcommittee hearing on reverse mortgage sustainability; and
  • A Senate Banking Committee economic policy subcommittee hearing entitled "The State of the American Dream: Economic Policy and the Future of the Middle Class."
Innovative ideas for raising capital will be the topic of a Thursday House Small Business investigations, oversight and regulations subcommittee hearing.

NACHA Seeks Comment On ACH Third-Party Clarifications

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WASHINGTON (6/4/13)--NACHA--The Electronic Payments Association is seeking comment on its plan to more clearly define who is considered a third party within the Automated Clearing House (ACH) Network.

The proposed amendment to NACHA rules would clarify the definitions, roles, and responsibilities of third-party service providers and/ or third-party senders on ACH transactions.  The proposed clarifications are intended to strengthen compliance with NACHA operating rules among ACH participants.

Comments will be accepted by NACHA through June 28.  The Credit Union National Association will be reviewing the proposal with the CUNA Payments Policy Subcommittee.

Federal Regulators Back Small FI Accommodations In FASB Rule

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WASHINGTON (6/4/13)--The Federal Financial Institutions Examination Council (FFIEC), which is comprised of federal bank regulators plus the National Credit Union Administration, sent a letter to the Financial Accounting Standards Board that supported proposed credit impairment recognition changes but encouraged modifications to the proposal for "small and less complex entities."

The joint agency letter was issued the same day as the separate Friday letter from the NCUA that urged FASB to strongly consider how proposed credit impairment recognition changes could impact small- and medium-sized credit unions, and their ability to serve members of modest means. The letter said the compliance costs that the proposal could create are a particular concern for the agency and that the NCUA also has safety and soundness concerns regarding the proposal.

The Credit Union National Association has also voiced concern on behalf of credit unions and strongly opposes the FASB rule, saying it not only would be detrimental to the credit union system, but also could have serious, unintended consequences for borrowers and the economy.

CUNA urged FASB to drop the proposal or, if that's not feasible, to work with the credit union system to develop credit loss reporting standards for credit unions, separate from those for publicly traded companies, that will reflect the unique business model of credit unions while ensuring credit loss issues are reported appropriately. 

The FFIEC letter supports FASB's controversial effort to move from an incurred loss model to an expected loss model for measuring impairment as a way to respond to "one of the lessons learned from the financial crisis."  The letter said the FASB changes would address the "too-little, too-late" criticism of loan loss allowances sparked by the crisis by replacing the "probable incurred loss threshold" with a practice of measuring losses expected at the balance sheet date.

However, the FFIEC agencies back applying the proposed principles to "all reporting entities," but in a manner that is "appropriate and practical for their circumstances."

The letter said, "...(S)maller entities and those with less complex financial asset portfolios may be able to achieve the objectives of the (current expected credit loss) model through estimation practices that are less burdensome and costly than those that may be used by larger and more complex entities.

To accommodate the resource constraints faced by smaller institutions, the proposed standard could be modified to include additional practical expedients that satisfy the intended measurement objective, a transition period that considers the time and effort necessary to implement the new model, and condensed disclosure requirements."

Tax Policy Developments As Congress Returns

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WASHINGTON (6/4/13)--The Credit Union National Association continued to talk tax reform with Capitol Hill staff members during last week's recess, and CUNA remains focused on the U.S. Congress's ongoing efforts at tax reform as legislators return to Washington this week.

Leaders on the House Ways and Means Committee are also continuing their own tax reform work, he said.
 
As these discussions move along, CUNA continues to encourage the more than 96 million credit union members nationwide to present a unified message to members of congress: Don't Tax My Credit Union!
 
More than 30,000 congressional contacts have been sparked since CUNA and the leagues kicked off the large-scale, nationwide grassroots-mobilization campaign in mid-May.
 
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.
 
Spending bills, defense authorization, potential immigration reforms, student lending action and Internal Revenue Service issues are among the items on the near-term agenda for the U.S. Congress, but key tax writers have indicated that these other issues will not distract them from their tax reform task, CUNA Senior Vice President of Legislative Affairs Ryan Donovan noted.
 
For more CUNA/league advocacy resources, use the links.

FHFA To Study Fannie, Freddie Foreclosure Sales

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WASHINGTON (6/4/13)--The Inspector General for the Federal Housing Finance Agency (FHFA) has announced it will investigate how Fannie Mae and Freddie Mac are managing the sales of foreclosed properties. 

The review will scrutinize how the homes involved are repaired, maintained and marketed for sale, reports this week's Credit Union National Association Regulatory Advocacy Report.

The CUNA RAR notes that the government-sponsored housing enterprises owned approximately 192,000 foreclosed properties at the end of 2012, and nearly one million troubled mortgages that could reach foreclosure.

The FHFA IG has released a joint report with the U.S. Department of Housing and Urban Development Department IG entitled, "Joint Report on Federally Owned or Overseen Real Estate Owned Properties." Use the resource link to access the report.

Also in this week's RAR, free to CUNA members by subscription, are articles on the Consumer Financial Protection Bureau's delay of a credit insurance premium financing prohibition, and a Financial Accounting Standards Board request for comment on a private company decision-making framework, among many other topics.

Employees or volunteers of CUNA- and state credit union league-member credit unions can use the second link below to sign up for the Regulatory Advocacy Report.

The RAR is archived on cuna.org.

Sen. Lautenberg Of N.J. Dies At 89

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WASHINGTON (6/4/13)--Sen. Frank Lautenberg (D-N.J.) has died at age 89.
 
Lautenberg, a World War II veteran, first served in the Senate for 19 years from 1982 to 2001. He retired briefly but was re-elected when he decided to run again in 2003.
 
Earlier this year, Lautenberg, who was the Senate's oldest member, announced plans to retire in January 2015.
 
New Jersey Governor Chris Christie (R ) will appoint Lautenberg's immediate successor. Christie on Monday praised the senator for leading "a life well lived."

CFPB Expands Its Consumer Complaint Database

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WASHINGTON (6/3/13)--The Consumer Financial Protection Bureau (CFPB) announced Friday that it has expanded its Consumer Complaint Database to include state-by-state information and also has added complaints about money transfers and credit reporting to the database.

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

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

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

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

Regarding the ability to sort information by state, the CFPB said it will  add a new field to every complaint to identify the state from which it came.  The state designation will be in addition to the five-digit ZIP code information that consumer complainant have always been able to include.

Also on Friday, the CFPB said it was adding more than 6,000 credit reporting complaints to the database and will continue to will add new complaints as they come in and are processed. The CFPB began taking credit reporting complaints in October 2012.

Money transfers were the latest category of complaints that the CFPB began accepting and that happened in April; they now also are being updated to the Consumer Complaint Database. Money transfer complaints include domestic or international wire transfers.

For more on the CFPB announcement, use the resource link below.

30,000 Tax Advocacy Contacts Hit Capitol Hill

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WASHINGTON (6/3/13)--More than 30,000 congressional contacts have been sparked by the May rollout of a key credit union advocacy effort, the "Don't Tax My Credit Union" campaign launched by the Credit Union National Association and the state credit union leagues.

The campaign and its progress of is discussed in the latest edition of CUNA's "Inside Exchange" video update. CUNA and the leagues announced the large-scale, nationwide grassroots-mobilization campaign in mid-May as the U.S. House and Senate are making broad-based tax reform a major priority.

In this week's video, Richard Gose, CUNA senior vice president of political affairs, tells CUNA Executive Vice President of Strategic Communications and Engagement Paul Gentile he is "excited" to report the large number of contacts credit union supporters have made, and how much traction their efforts have created on the social media front.



"We're starting to see a lot of people follow us, retweet us, and just really get the word out there," Gose says of the social media response. "This is all about getting (the message) pushed out to the members, and getting as deep as we can in terms of education and knowledge about the tax issue and why (members) need to engage," he adds.

The "Inside Exchange" videos were created to give CUNA another direct line of communication to member credit unions, and provide detailed insights into what's happening in Washington, D.C., in the legislative, regulatory and political arenas.

For more on this new video, and a previous video featuring CUNA President/CEO Bill Cheney's comments on credit union advocacy efforts, use the resource link.

House Fin. Services Releases Two-week Hearing Schedule

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WASHINGTON (6/3/13)--The U.S. House and Senate return today for a four-week session leading up to a July 4 District Work Break.

On Friday, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) announced the committee's hearing schedule for the first half of June, while noting that the schedule is tentative and dependent upon witness availability and "other factors"  that may require changes.  Meetings become final only when a hearing notice is made public. Hearing notices can be found online using the resource link below.

The panel's tentative hearing schedule includes:

  • A June 5 hearing by the subcommittee on capital markets and government-sponsored enterprises to examine the market power and impact of proxy advisory firms;
  • A June 12 session by the full committee on alternative housing finance models;
  • Also on June 12, the subcommittee on capital markets and government-sponsored enterprises will study proposals to support capital formation;
  • On June 13, the subcommittee on monetary policy and trade will conduct a hearing to discuss reforms to the Export-Import Bank; and,
  • The Housing and insurance subcommittee, also on June 13, will hold a hearing on international insurance issues.

Six Banned From Future CU Work

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ALEXANDRIA, Va. (6/3/13)--The National Credit Union Administration Friday issued prohibition orders banning six individuals from participating in the affairs of any federally insured financial institution; four had pleaded guilty to embezzlement, one was adjudged guilty of receipt of stolen money, and one consented to the issuance of the prohibition order to avoid the time, cost and expense of administrative litigation.

The NCUA reported the orders involve the following former credit union employees and charges:

  • Jamie Askew, a former employee of St. Louis Community CU in St Louis, Mo., pleaded guilty to the charge of embezzlement from a credit union. Askew was to sentenced time served, five years of supervised release and ordered to pay restitution in the amount of $104,785.97;
  • Stacy Attisano, a former employee of Lawrence County School Employees' FCU in New Castle, Pa., pleaded guilty to the charge of embezzlement from an institution insured by NCUA. Attisano was sentenced to 30 months in prison, three years supervised release and ordered to pay restitution in the amount of $259,847;
  • Krista Marie Cousino, a former employee of St. Patrick Carleton FCU in Carleton, Mich., pleaded guilty to the charge of embezzlement in a credit union. Cousino was sentenced to 270 days in prison, five years of probation and ordered to pay restitution in the amount of $160,000;
  • Kerry Higashi, a former employee of Kauai Teachers FCU, Union in Lihue, Hawaii, was adjudged guilty of embezzlement from a federal credit union. Higashi was sentenced to one month in prison, five years of supervised release and ordered to pay restitution in the amount of $44,043.82;
  • Christopher Langley, a former employee of Eastern New York FCU in Napanoch, N.Y., consented to the issuance of a prohibition order to avoid the time, cost and expense of administrative litigation; and,
  • Halina Mielczarek, a former employee of United Nations FCU in Long Island City N.Y., was adjudged guilty of receipt of stolen money. Mielczarek was sentenced to five months in prison, three years of supervised release and ordered to pay restitution in the amount of $87,665.96.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link to access NCUA enforcement orders.

enforcement actions of other federal regulators

NCUA Voices Concerns With FASB Credit Impairment Plan

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ALEXANDRIA, Va. (6/3/13)--National Credit Union Administration Chairman Debbie Matz urged the Financial Accounting Standards Board (FASB) to strongly consider how proposed credit impairment recognition changes could impact small- and medium-sized credit unions, and their ability to serve members of modest means, in a Friday letter to the board.
 
Matz said the compliance costs that this proposal could create are a particular concern for the agency. The NCUA also has safety and soundness concerns regarding the proposal, she added.

The Credit Union National Association strongly opposes the FASB rule because it would be detrimental to the credit union system and could have serious, unintended consequences for borrowers and the economy.
 
It is an unusual step for the NCUA to weigh in in this manner with FASB, an action that is likely to draw extra attention from the accounting body. 
 
The NCUA makes points similar to those CUNA has made about how the FASB plan would unnecessarily burden the resources of credit unions and have the unintended consequence of reducing available credit options for consumers during this time of economic rebuilding.


The FASB proposal would update accounting standards regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions. The proposed model would utilize a single "expected loss" measurement for the recognition of credit losses. It would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an "incurred loss" approach.
 
Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.
 
Matz in the agency letter noted that many small- and medium-sized credit unions lack the resources to perform complex economic analysis at the time of loan underwriting. This lack of resources could force these credit unions to make the difficult choice of paying third-party economic consultants, or cutting back on their lending activities.
 
"Either choice would result in lower net income and reduced services to consumers, which would threaten the viability of these institutions over the long term," the NCUA chairman noted.
 
"Since credit unions were the only federally insured financial institutions to increase lending throughout the recent economic downturn, discouraging credit union lending would negatively impact consumers going forward," she wrote.

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

NCUA Closes Two FCUs, Making Nine For the Year

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ALEXANDRIA, Va. (6/3/13)--On Friday, the National Credit Union Administration announced the liquidations of $1.6 million-asset NCP Community Development FCU (NCP) of Norfolk, Va. and of $59.7 million-asset First Kingdom CU of Selma, Ala., bringing the total number of closing for the year to nine.

In Virginia, Chartway FCU, of nearby Virginia Beach, Va., assumed NCP's member shares. Chartway is a federal credit union with more than 188,000 members and assets of $1.9 billion.

Back in February, the NCUA placed NCP into conservatorship, an act taken to bolster the credit union's financial stability and operations. However, the agency subsequently decided the credit union was insolvent and had no prospect for restoring viable operations. 

NCP served 709 members and was chartered in 1999.  It served  "certain underserved communities" in Norfolk, Chesapeake and Portsmouth, Va., the NCUA said.

In Alabama,  Riverdale CU, also of Selma, immediately assumed First Kingdom Community FCU's member shares, thereby assuring uninterrupted service for the 76 former First Kingdom Community members. Riverdale is a federally insured, state-chartered credit union with assets of $59.7 million and which serves 8,360 members.

First Kingdom Community had been placed into conservatorship in May 16, but the NCUA said it made the decision to liquidate after determining this was the best course of action for continued member service.  

The small community-chartered credit union was established in 2007 to serve people who live, work, worship, or attend school in, Dallas County, Ala.; businesses and other legal entities located in the county; spouses of persons who died while within First Kingdom's field of membership; employees of the credit union; volunteers in the community; members' immediate family or household; and organizations of such persons.

Internet Body Gives CUNA Preliminary OK For .creditunion Domain Name

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WASHINGTON (6/3/13)--The Credit Union National Association has won preliminary approval from the Internet Corporation for Names and Numbers (ICANN), the international body that authorizes web extensions, for the Internet domain name .creditunion (dot credit union). The new domain name is expected to be finalized and go live early next year.

CUNA submitted an application for the .creditunion domain name, which was selected from almost 2,000 generic, top-level domain name applications that had gone to ICANN over the past four months.

In 2011, ICANN announced it would significantly broaden the number of approved top-level domain names beyond the limited number in use, such as .com, .org, .gov, .edu, and.coop.  The action prompted CUNA to submit a .creditunion application on behalf of the credit union movement.

"As the national trade group for credit unions, CUNA felt compelled to secure the .creditunion extension," said CUNA General Counsel Eric Richard.  "We recognized there was both value to the credit union system, and potential abuse if it were not properly safeguarded."

For example, Richard said in the wrong hands a .creditunion domain could allow someone intent on committing fraud to do so from a seemingly legitimate platform.  Or credit unions might have faced high fees to secure a site on the domain if it went to someone willing to sell to the highest bidder.  "That's why we felt it was so important for CUNA to be the gatekeeper," Richard added.

The new domain will also have positive marketing and communication benefits for credit unions  that CUNA didn't want credit unions to be left out of, said Paul Gentile, CUNA executive vice president of strategic communications.

Already, he noted, well-known U.S. companies have sought domain names to associate with their brands, like .Chevy or .AIG, and other financial services categories like .bank and .insure are in the process of being created. 

"Making sure we in the credit union system have control of our own domain name is right in line with our strategic vision to 'Unite for Good' by removing barriers, raising awareness, and fostering service excellence," Gentile added.

Now that ICANN has given CUNA preliminary approval, the next several months will be focused on finalizing details.  Final approval is anticipated, and the .creditunion domain is expected to go live in early 2014.

CUNA has already set up a mechanism for credit unions to register their interest.  Credit unions interested in this issue are asked to use the resource link below to complete an important survey.

Credit unions can also email dotcreditunion@cuna.coop for any questions or comments. These opportunities for feedback are nonbinding, and CUNA is asking credit unions to express their interest by Aug. 1.

CUNA also expressed its gratitude to CUNA Mutual Group and Co-op Financial Services, both of whom assisted in funding the $185,000 application cost.  CUNA also intends to work with the World Council of Credit Unions and foreign regulatory authorities so that CUs around the world can use .creditunion.

NCUA's Hagan Becomes IG As DeSarno Retires

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ALEXANDRIA, Va. (6/3/13)--National Credit Union Administration Inspector General William DeSarno announced his retirement Friday after completely nearly 45 years of public service.

NCUA Chair Debbie Matz announced that James Hagen, the agency's current deputy Inspector General for Audit, would assume the Inspector General's position over the weekend--effective June 1.

Matz praised DeSarno's service, saying, "Bill DeSarno built a long and distinguished career in public service, holding positions demanding the highest levels of public trust.  He has been consistently diligent and independent, always looking for ways to improve the performance of his office and the agency. He has handled complex issues with skill and integrity. His many insights and investigations have improved the operations of NCUA and ensured that credit unions remain a safe place to save and borrow."

NCUA board member Michael Fryzel also said that DeSarno's  outstanding career at NCUA earned him  the respect of the entire Washington, D.C., Inspector General community.  Fryzel said, "He has handled a tough job in a fair, consistent and independent manner. His efforts to modernize and make the Inspector General's office more responsive and involved in improving the agency are well-recognized."

The agency's Office of Inspector General is charged with promoting the economy, efficiency and effectiveness of NCUA programs and operations and detecting  and deterring fraud, waste and abuse. It is considered integral to the NCUA's mission of monitoring and promoting safe and sound federally insured credit unions. The Inspector General conducts independent audits, investigations and other activities and keeps the NCUA and the U.S.  Congress fully and currently informed of their work.

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

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

CUNA: CFPB Changes Move QM In Positive Direction

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WASHINGTON (6/3/13)--Recent Consumer Financial Protection Bureau changes to ability-to-pay/qualified mortgage (QM) rules are a step in the right direction, Credit Union National Association President/CEO Bill Cheney said in this week's edition of The Cheney Report.

The changes include:
  • The creation of a transitional period when small lenders can make balloon mortgage loans under certain conditions. These balloon mortgage loans would still qualify as QM loans; and
  • Extending QM status to held loans that are made by credit unions and community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgages annually, even if the borrower's debt-to-income ratio exceeds the rule's 43% QM threshold.
"Both changes will be helpful to credit unions and respond to concerns we have repeatedly raise," Cheney wrote. (For more on these changes, see the May 30 News Now story: CFPB Issues Exemptions To Ability-to-Repay Rule.)
 
CUNA continues to review these changes to gauge their full impact on credit unions, Cheney added.
 
These and other changes were discussed in a meeting between Cheney and CFPB Director Richard Cordray last week. "He wanted to highlight several key changes and exemptions that ease the rule's impact on credit unions," Cheney noted. The two leaders in that meeting also addressed a broad range of topics, including payday loans and overdrafts.
 
"The best thing we can do is to continue to educate Cordray and the CFPB about the great things credit unions are doing for their members," Cheney said.
 
This week's Cheney Report also includes:
  • An update on tax advocacy efforts;
  • CUNA comments on Financial Accounting Standards Board credit impairment rules; and
  • A congratulations to the credit unions everywhere that helped attract 800,000 new members in the first quarter of 2013.
Each Friday, The Cheney Report delivers Cheney's insights on three to four key events and policy developments affecting credit unions into the e-mail inboxes of credit union CEOs. The report also provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.