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President Obama marks 80th FCU Act anniversary with CU praises

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WASHINGTON (6/27/14)--President Barack Obama issued a message on the 80th anniversary of the signing of the Federal Credit Union Act Thursday, praising credit unions for their dedication to providing affordable financial services.
 
The message from the White House noted that at the dawn of its history in this country, "This system of nonprofit, cooperative credit unions enabled individuals to come together to promote thrift and lift up one another" as President Franklin Roosevelt signed the act in the midst of the Great Depression. Today, the president said, credit unions remain "vital financial institutions that play an important role in our economy."
 
He commended credit unions for serving "Americans of all backgrounds and professions--from public employees to employees of large and small businesses" and for offering "affordable loan many of our people count on." He noted credit unions' service to underserved and low-income and rural communities.
 
The president also wrote, "As we mark this special milestone, I commend the staff of the National Credit Union Administration and all those who work and volunteer in our Nation's credit unions. Your efforts support Americans as they strive to reach their financial dreams, and they help ensure these institutions can remain viable and valuable in the years to come."

Lively back and forth defines RBC Listening Session

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LOS ANGELES (6/27/14)--It was a lively back and forth at Thursday's National Credit Union Administration Listening Session here, with credit union participants enumerating their concerns with the regulator's risk-based capital (RBC) plan and the agency responding with thoughts about possible changes to the proposal.
 
In fact, by about midway through the session NCUA Chair Debbie Matz made it clear that "everything is on the table" regarding possible changes to the RBC plan proposed in January.  While she said the agency is not required to put a revised version of the proposal out for a separate comment period--beyond the one that concluded May 28--she also said very clearly that there is "no rush" to the finish line on this rule.
 
Matz told the session that the risk-based plan for natural-person credit unions started 2 1/2 years ago when the NCUA was working out the problems of the corporate credit unions during the country's mortgage market meltdown. She said the NCUA became frustrated that some credit unions had greater risk than their capital covered.
 
She said the agency will assess all comments and come up with a better rule, but found it hard to justify not having a risk-based capital RBC rule.
 
During the session, NCUA Director of Examination and Insurance Larry Fazio emphasized that the agency's intention is not to ask the credit union system to hold more capital, but to ask "outliers" to hold more capital. NCUA Chief Economist John Worth, responding to a credit union concern that the plan, as written, will seriously impact long-term growth in a negative way, said the agency is looking at long-term impact and will integrate those considerations into the "next round."
 
Credit Union National Association Deputy General Counsel Mary Dunn, attending the Los Angeles session, said the credit union interaction with regulators seemed productive. "Chairman Matz and her staff could not have been clearer that they intend to roll up their sleeves on this proposal and make changes.
 
"However, it is so important that credit unions must keep up their advocacy efforts, to make sure the changes made are the changes that really are needed," Dunn said.
 
The Los Angeles session featured 142 registrants, while the upcoming Chicago and Alexandria, Va., sessions are at capacity with 167 and 150 registrants, respectively.
 
This year's Listening Sessions were announced in February by NCUA Chair Matz and are the first such sessions since Matz hosted a series in 2012. She credited the 2012 sessions as leading to regulatory relief and streamlined examination reports.
 
Regarding the NCUA's RBC proposal, CUNA was among the more than 2,000 stakeholders filing comment letters with the agency. CUNA called the proposal one of the most potentially harmful new rules proposed for credit unions in the wake of the financial crisis.
 
Among CUNA's issues with the proposal are claims that it violates the Federal Credit Union Act with its "well-capitalized" requirement as well as hinders credit unions' capabilities to meet member needs, particularly regarding business and mortgage lending.
 
Legislators from around the country have also commented on the proposal, many in response to concerns raised by their constituent credit unions. One letter sent in May was signed by 324 members of the U.S. Congress and more than 10 current and former senators and additional representatives have also added their voices with individual letters.

NCUA releases membership-benefits video of '80 Years of FCUs'

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ALEXANDRIA, Va. (6/27/14)--Legislators who signed the Federal Credit Union Act into law 80 years ago had no idea the way financial services would evolve in the subsequent decades, but they made the right decision to sign, said National Credit Union Administration Board Chair Debbie Matz marking the anniversary Thursday.
 
"I'm sure neither President Franklin Delano Roosevelt nor Congress could have envisioned the kinds of changes in financial services that have taken place since 1934," Matz said. "However, I am just as sure they would agree that providing affordable financial services and consumer choices at cooperative, non-profit, democratic institutions is just as important today as it was when the Federal Credit Union Act became law on June 26, 1934."

The NCUA is marking the anniversary with a video documenting the history of the credit union system, its mission, and the benefits of membership.


The agency has also created a commemorative web page that includes special graphics, a timeline and facts about credit unions. Credit unions are welcome to download these products and share them on their own websites.

Credit unions today have close to 100 million members and nearly $1.1 trillion in assets, while never losing a penny of insured savings at federally insured credit unions. Matz also noted the credit union system has weathered more than a dozen recessions while coming out of each one stronger than before. She reaffirmed the NCUA's commitment to keeping pace with growth and change and preparing for new challenges that are sure to come.

The NCUA is also running a social media campaign during this week that will debut several shareable 80th anniversary graphics. To follow the campaign, use the hashtag #FCU80 on Twitter or Facebook.

CDFIF/CDRLF funding passed by House, Senate panels

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WASHINGTON (6/27/14)--A fiscal year 2015 spending budget that includes the Community Development Financial Institutions Fund (CDFIF) and Community Development Revolving Loan Fund (CDRLF) has been passed by the full House Appropriations Committee by a 28-21 margin.

CDFIF funding has been set at $230 million, an increase from the $226 million budgeted last fiscal year. The funds will be used primarily toward monetary awards and tax credits designed to promote access to capital in both urban and rural low-income communities.

From the funds requested, $177 million is for financial and technical assistance grants, $20 million is for administrative expenses, $18 million is for the Bank Enterprise Award program and $15 million for Native Initiatives.

In addition, the bill contains $1.071 million for the CDRLF, a fund used by the National Credit Union Administration for technical assistance grants. Established in 1979, the fund is designed to assist officially designated low-income credit unions in providing basic financial services, including low-interest loans.

The bill also passed the Senate appropriations subcommittee on financial services and general government by a voice vote. The Senate bill requests the same $230 million for the CDFIF.

According to a statement released by the Senate committee, the bill also authorizes the U.S. Department of the Treasury to guarantee $1 billion in bonds to community development financial institutions by providing long-term, low-rate financing for community development in "our nation's communities hardest hit by the economic downturn." These grants are expected to be provided at no cost to the taxpayer.

Compliance resources for consumer rules launched by NCUA

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ALEXANDRIA, Va. (6/27/14)--The National Credit Union Administration has unveiled a new Consumer Compliance Regulatory Resource web page designed to help credit unions comply with consumer lending rules required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

"We've experienced a number of important changes to the rules governing mortgages and other consumer lending products and services since the passage of the Dodd-Frank Act," NCUA Chair Debbie Matz said.

"Often it's been difficult for credit unions to find the critical regulatory information they need, but NCUA's new Consumer Compliance Regulatory Resource web page consolidates these resources in a single, easily accessible location. I encourage all credit union compliance officers and managers to link to and use this new resource page."

The new page features content from the NCUA, Consumer Financial Protection Bureau, Federal Financial Institutions Examination Council and other federal agencies, and includes information on mortgage lending, credit cards and fair lending.

Credit unions can also access regulations, regulatory alerts, letters to credit unions, webinars, compliance guides, videos and other resources on the NCUA site.

Use the resource link below for more information.

Metsger: Balance in capital, risk key to effective regulation

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ALEXANDRIA, Va. (6/26/14)--National Credit Union Administration board member Rick Metsger expressed his support for a bill that would allow credit unions to have access to supplemental capital. Speaking to the Massachusetts Credit Union League Monday, Metsger echoed support given by NCUA Chair Debbie Matz for the Capital Access for Small Businesses and Jobs Act (H.R. 719). Metsger also spelled out several adjustments he would like to see in the agency's risk-based capital (RBC) proposal before it is finalized.

Click to view larger image National Credit Union Administration board member Rick Metsger, addressing the Massachusetts Credit Union League, details several adjustments he would like to see in the agency's risk-based capital proposal before it is finalized. (Massachusetts Credit Union League photo)
Regarding the NCUA's RBC plan, Metsger said there is "significant review, analysis and revision ahead" before the NCUA's proposed RBC rule could be made final. He said he has concluded that the following areas already require adjustment:
  • Lengthening the phase-in period for any final rule;
  • Clarifying that only the NCUA board, not examiners, can raise individual credit unions' capital requirements;
  • Adjusting the risk weights for investments in credit union service organizations and corporate perpetual capital;
  • Modifying the risk weight for cash at the Federal Reserve; and
  • Altering risk weights when other federal agencies have provided guarantees.
Metsger said he is looking for better ways to deal with interest rate concentration risk, and that he will continue to evaluate comments and analysis of those components.

He also recommended that supplemental capital should be permitted by regulation for RBC purposes for any federally insured credit union. The Credit Union National Association  is a proponent of this idea.

The Capital Access for Small Businesses and Jobs would allow credit unions--beyond those with low-income designation--to access supplemental capital.  CUNA strongly supports this bill and similar bills to broaden credit union access to capital.

"H.R. 719 would provide credit unions with an additional tool in their toolbox," Metsger told his credit union audience. "With Congress recognizing the statutory barriers credit unions face in raising additional capital, enactment of this bill would provide a two-pronged approach to enhancing credit union capital with both regulatory and congressional action." He added, however, that the bill is not a panacea.

Metsger also added his view that the bill is not a prerequisite for adoption of a risk-based capital rule as is being currently being considered by the NCUA.

The regulator also said he has asked the NCUA's Office of Public and Congressional Affairs to continue to educate lawmakers about the need for supplemental capital. Matz supports the bill and has said so in a letter sent last year to Rep. Peter King (R-N.Y.), the bill's sponsor. (See related story: Sen. Merkley says NCUA RBC rules add complexity without benefit: Listening Sessions start. )

Paul Gentile, president/CEO of the Massachusetts Credit Union League, commented, "We appreciate NCUA board member Metsger recognizing the importance of supplemental capital and the need for the RBNW (risk-based net worth) proposed rule to be revised."

Gentile added, "The fact that credit unions have more capital today than they did when the recession started means credit unions should not be burdened with excessive capital requirements. They should be encouraged to continue to give members a good deal, not hampered by capital requirements that don't effectively reflect the risk in the system." Gentile is also president of the New Hampshire and Rhode Island state credit union associations.

CUNA's Hampel: CUs mark 80 years of dedicated member service under FCU Act

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WASHINGTON (6/26/14)--When credit union members got up this morning they may not have realized it, but they awoke to two significant credit union milestones that reflect both the strength of the credit union movement and its dedication to member service.

 
Click to view larger imagePresident Franklin Delano Roosevelt signed the Federal Credit Union Act into law 80 years ago today.

"On this day, June 26, 80 years ago, Congress had passed the Federal Credit Union Act and President Roosevelt signed it into law," Credit Union National Association Interim President/CEO Bill Hampel observed in a statement marking the occasion. "It set federal oversight in place and provided for the development of credit unions as a way to promote thrift among the American people." Now, 80 years later, there are more than 6,600 independent, consumer-owned, volunteer-led, democratically controlled credit unions, vital to the well-being of their nearly 100 million members, he noted.

Credit unions are on the very cusp of reaching that membership milestone--attracting their 100 millionth membership this summer.

Hampel also remarked of credit unions, "These financial institutions continue to serve the country well, safely managing almost $1 trillion of member savings and nearly $700 billion in loans to members, and a full portfolio of modern payments services.

"Throughout the years, as big Wall Street banks grew more distant from their customers, credit unions have offered a smarter choice. At CUNA, we're proud that credit unions are institutions that Americans can choose to be their best financial partner."

CUNA is preparing to begin marking the 100 million membership mark next month and in August. (See related story: ' Selfies' via new website will help show the face of 100 million CU memberships.)

HUD, FHFA IG nominations move forward

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WASHINGTON (6/26/14)--The Senate Banking Committee approved the nominations of two potential Obama administration officials Wednesday: San Antonio Mayor Julian Castro to be secretary of the Department of Housing and Urban Development (HUD) and Laura Wertheimer to be inspector general for the Federal Housing Finance Agency (FHFA).

The committee voted 16-6 in favor of sending Castro's nomination on to the full U.S. Senate for a confirmation vote. The panel approved Wertheimer's nomination by voice vote, which also moves her name forward for confirmation.

Castro would succeed current HUD Secretary Shaun Donovan. HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all Americans. It is the parent organization to the Federal Housing Administration, which, in part, insures mortgages made by financial institutions.

The FHFA regulates government-sponsored housing enterprises Fannie Mae and Freddie Mac, and the 12 Federal Home Loan Banks.

Sen. Merkley says NCUA RBC rules add complexity without benefit: Listening Sessions start

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ALEXANDRIA, Va. (6/26/14)--As the National Credit Union Administration prepares for its first Listening Session of the year today in Los Angeles, the agency continues to receive comments from federal lawmakers regarding their proposed risk-based capital (RBC) rule. On Wednesday Sen. Jeff Merkley (D-Ore.) became the latest legislator to send his comments to the agency.

While Merkley said he supported the idea of the NCUA taking steps to ensure the stability of credit unions, he highlighted several concerns brought to him from Oregon credit unions.

"[C]redit unions' current capital regulation is a source of strength for their balance sheets," he wrote. "It allows them, as small institutions, to manage their risks in a simple way and serve their members and communities through even the toughest downturns. In short, those leverage rules should be maintained."

He pointed to past experiences with risk-based capital requirements at banks, which Merkley said have historically added complexity without building enough capital to absorb losses in a financial crisis.

"It is also worth remembering that credit unions are cooperatives and are not able to raise capital from new shareholders like banks. Asking them to change their approach to capital should be done carefully and only with sufficient time to adjust, lest those changes unduly impact their ability to serve their members," he wrote.

Merkley cited concerns from credit unions with assets as small as $50 million, many of which serve low-income communities in Oregon, that are concerned about being viewed as "complex" under the new rule. He urged the NCUA to exercise care in applying the proposed rules to institutions that can truly be defined as complex.

Today's NCUA Listening Session from Los Angeles will be from 1 to 4 p.m. (PT), however, it will not be streamed online. Watch News Now for more details.

Two other listening sessions will be held--one from 1 to 4 p.m. (CT) July 10 in Chicago and one at the NCUA headquarters in Alexandria, Va., from 1 to 4 p.m. (ET) July 17.

FHFA reaches out to HARP-eligible homeowners

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WASHINGTON (6/26/14)--The Federal Housing Finance Agency (FHFA) will take new steps to reach homeowners who could benefit from the Home Affordable Refinance Program (HARP), the agency announced Wednesday.

Last year the FHFA launched a public awareness campaign across the country to reach eligible borrowers and encourage them to participate in HARP, a campaign that now includes town hall-style events in cities with the highest number of "in-the-money" borrowers yet to use a HARP refinance. 

Borrowers are considered "in-the-money" if they meet the basic HARP eligibility requirements, have a remaining balance of $50,000 or more on their mortgage, have a remaining term on their mortgage greater than 10 years, and a mortgage interest rate of at least 1.5% higher than current market rates.

To be eligible for HARP, homeowners must:
  • Have a loan owned or guaranteed by Fannie Mae or Freddie Mac;
  • Have a mortgage originated on or before May 31, 2009;
  • Have a current loan-to-value ratio of greater than 80%; and
  • Be current on mortgage payments, with no late payments in the last six months and no more than one late payment in the last 12 months.
The agency also unveiled an interactive online map indicating the number of estimated "in-the-money" borrowers eligible for HARP in every zip code, county and metropolitan statistical area in the country. 

"We know that there are hundreds of thousands of borrowers who can still benefit from HARP and are essentially leaving money on the table by not taking advantage of the program," said Mel Watt, FHFA director. 

Watt will join housing experts and community leaders in a town hall-style meeting at the Woodson Regional Library in Chicago July 8 to discuss the benefits of HARP and encourage the approximately 36,000 currently eligible Chicago residents to participate in the program.

The FHFA estimates that these borrowers could save $2,000 to $3,000 each year by refinancing their mortgage. 

The event is geared to local community and civic leaders who can share information about HARP with homeowners in the Chicago area.  Event attendees will receive a dedicated toolkit specific to Chicago describing in greater detail the elements of HARP and how borrowers stand to benefit from the program. 

FHFA will announce future HARP events in the coming weeks.

Use the resource link below for more information.

FTC issues fed court order against deceptive debt collection

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WASHINGTON (6/26/14)--The Federal Trade Commission (FTC) filed a federal court order against a Houston-based debt collection company, prohibiting it from using allegedly deceptive tactics. RTB Enterprises, Inc., which does business as Allied Data Corp., and Raymond T. Blair, its president and sole shareholder, agreed to the order Wednesday. The FTC alleges the company used deceptive tactics to "bully English- and Spanish-speaking consumers into paying debts and unnecessary fees."

According to a complaint filed by the FTC, the defendants violated the FTC Act and the Fair Debt Collection Practices Act by collecting more than $1.3 million using false and deceptive methods. These fees were so-called "convenience fees" and "transaction fees" from consumers who authorized payments by telephone.

The defendants allegedly trained their collectors to deceive consumers into believing that payments were not accepted by U.S. mail and that the fees were unavoidable. In some instances, the fees were added to consumers' accounts without their knowledge or consent, the FTC alleges.

The FTC also charged that defendants' collectors deceived English- and Spanish-speaking consumers by falsely claiming to speak for attorneys, falsely threatening to sue consumers who did not pay and using schemes to coerce consumers into paying or providing their personal information.

"It's illegal for debt collectors to lie, make false threats, use a false identity, or trick people into paying a debt or an unauthorized fee," said Jessica Rich, director of the FTC's Bureau of Consumer Protection.

The federal court order imposes a penalty of $4 million. This will be partially suspended based on inability to pay once Blair surrenders assets totaling $100,000. The order also prohibits Blair and his company from repeating the deceptive practices alleged in the complaint, and requires them to disclose information about fees they charge and the steps consumers can take to avoid paying.

Use the resource link below for more information.

Royce marks FCUA 80th anniversary with Congressional Record statement

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WASHINGTON (6/24/14)--To mark the 80th anniversary of the Federal Credit Union Act, signed by President Franklin Roosevelt on June 26, 1934, Rep. Ed Royce (R-Calif.) has submitted a statement for today's Congressional Record honoring credit unions. It also recounts the founding of CUNA.
 
Royce says in his statement that credit unions are "are part of the great fabric that makes our country strong." He notes that credit unions are cooperatives--"bound together by a common set of business principles and values: voluntary membership; democratic control; economic participation; autonomy and independence; member education; cooperation among cooperatives; and concern for community." Royce is a member of the House Financial Services Committee and sponsor of a number of pro-credit union bills.
 
Royce's statement recounts the creation and history of credit unions in the United States, and of CUNA, which was created after the signing of the FCUA credit unions recognized, Royce said, the "need for stronger national representation and unity." CUNA replaced an earlier entity known as the Credit Union National Extension Bureau.
 
Royce's statement recounts how credit union service has evolved over the decades as consumers' needs have become more complex.
 
He noted that the number of consumer-members of credit unions has soared and is now on the cusp of 100 million memberships across the nation.
 
Royce's statement concludes: "Credit unions continue to innovate with new services and tools to help their members build economic security.
 
"The work Congress did 80 years ago in passing the Federal Credit Union Act continues to serve the country well.
 
"In fact, the influence credit unions have on the entire financial system saves all consumers money with generally lower rates for loans and higher rates for savings--no matter where they bank. An impressive $8 billion dollars in savings in 2013 alone is attributed to credit unions.

"Today, credit unions are utilized by their members for the convenience, prices, product choice, and financial education they offer.
 
"Credit unions are living up to the promise outlined in their principles. They are institutions that their members and all Americans can choose to be their best financial partner."

CUNA attends White House update on housing reform

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WASHINGTON (6/25/14)--Housing reform was the topic as leaders of housing and financial institution trade groups--including the Credit Union National Association's interim President/CEO Bill Hampel--gathered at the White House Tuesday to discuss prospects for future action.
 
CUNA was the only credit union trade group present at the session.
 
In the meeting with senior administration leaders, Hampel highlighted the increased friction that exists in the housing finance system, in part because of cumbersome Qualified Mortgage rules. Hampel noted that QM problems are driving up mortgage costs, while driving down availability, and encouraged policymakers to eliminate the frictions to ease mortgage credit availability.
 
Hampel said the meeting also addressed issues lenders are having with loan documentation, appraisals and guarantee fees. Hampel said the group noted a common desire for more training for financial institutions' examiners so they are able to more consistently support policy goals.
 
For instance, it was noted that while policymakers in Washington are repeatedly calling for increased credit availability to help the economy get going again, that message has yet to be universally reflected in financial institutions' supervisory examinations.
 
CUNA has attended a series of White House meetings this year on housing and housing finance reform issues, including an exclusive meeting requested by White House officials in April.

FFIEC launches cybersecurity resource page

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WASHINGTON (6/25/14)--The Federal Financial Institutions Examination Council (FFIEC) has launched a cybersecurity website to serve as a general repository for current and future cybersecurity materials from the council. The page will contain links to joint statements from federal financial institution regulators, webinars and other information for financial institutions.

The launch of the new site coincides with a pilot program at more than 500 community institutions to gather information compiled by state and federal regulators. The information is meant to assist regulators in assessing "how community financial institutions manage cybersecurity and their preparedness to mitigate increasing cyber risks," according to a statement released by the FFIEC.

The program also aims to help regulators make risk-informed decisions for more effective supervisory programs, guidance and examiner training. Regulators will focus primarily on risk management and oversight, threat intelligence and collaboration, cybersecurity controls, service provider and vendor risk management, and cyber incident management and resilience.

Also this month, the FFIEC 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, which includes the Credit Union National Association and other financial industry members.

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.

Use the resource link below for more information.

Roll Call highlights CULAC as a top-giving PAC this election cycle

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WASHINGTON (6/25/14)--The Credit Union National Association's Credit Union Legislative Action Council (CULAC) said May was its largest month for giving this election cycle, according to a report by Roll Call. CULAC gave out $229,000 and raised $3,035,732 this cycle placing it in the publication's top five most-active PACs for the month. Roll Call also highlighted the strongly bipartisan nature of CULAC contributions, with 50.39% of contributions going to Republican candidates and 49.46% going to Democratic candidates.

Richard Gose, CUNA's senior vice president for political affairs, said CUNA's and CULAC's campaign finance decisions are based on backing leaders who will do the most for credit unions and their almost-100 million members.

"Like all of our political activities, our PAC contributions aren't focused on helping candidates of one party or the other. First and foremost we look to help candidates that understand and support credit unions," he said.

Several candidates attempting to win election to the U.S. Congress are directly affiliated with credit unions. In California's 31st District, Pete Aguilar, Democratic candidate and mayor of Redlands, Calif., is the former vice president of Arrowhead CU, with $773 million in assets.

Aguilar was the recipient of a $197,189.03 independent expenditure for direct mail and digital advertising, both in English and Spanish by CULAC. CULAC had previously contributed $10,000 to Aguilar's campaign, and he has strong support from the California Credit Union League and local credit unions.

The certified vote count in the district has Aguilar 209 votes ahead of Republican candidate Lesli Gooch for the second spot on November's ballots. The San Bernardino Sun reports that Gooch will likely call for a recount, but cites the San Bernardino County registrar of voters who says there were no anomalies in the first count, making a change in the vote count unlikely.

The highest vote getter between Aguilar and Gooch will face Republican Paul Chabot in November for the seat left open by the retiring Rep. Gary Miller (R).

In Georgia, Republican Mike Collins, congressional candidate for the 10th District is a board member of Associated CU, based in Norcross, Ga., with $1.3 billion in assets, will be in a runoff election July 22. If elected in November, Collins would be the first credit union board member elected to Congress from Georgia.

Several candidates in Georgia finished high in the polls, but did not get the requisite 50% of the vote, so they will face off against another candidate in a July 22 runoff election.

CUNA and CULAC have been successful in supporting dozens of candidates around the country during primary season, with several notable examples:
  • Credit union-backed candidate Sen. Mitch McConnell (R-Ky.) handily defeated challenger Matt Bevin in the Kentucky Republican primary May 20. McConnell, the current Senate minority leader, was supported by $156,000 worth of television ads from CULAC.

  • In Alabama, state Rep. Paul DeMarco (R) was the top vote-getter in his primary and will face off against Gary Palmer in a July 15 runoff election. DeMarco was the recipient of more than 54,000 partisan communication mailers to credit union member households, and CULAC and the League of Southeastern Credit Unions are working on more support for the runoff.

  • Incumbent Rep. Hank Johnson (D-Ga.) defeated his opponent in the May 20 primary moving closer to being elected to a fifth term as representative to Georgia's 4th District. Johnson is a longtime credit union supporter who co-sponsored a bill to raise the cap on credit union member business loans (MBL) to 27.5% of assets, up from 12.25%.

Fed to emphasize speed, security in payment system reform

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NEW YORK (6/24/14)--Sean Rodriguez, an official at the Federal Reserve Bank of Chicago, provided an update recently on the work of the Federal Reserve Banks on payment system reform and creating a new structural framework to facilitate faster payments.
 
Rodriguez last week told a group of attendees in New York that the Fed has been analyzing non-bank providers simulating real-time payments in closed systems ( BankInfoSecurity June 18). He said that the research has led the Fed to believe that a new faster payment system rather than revamping the existing systems would bring more benefits the U.S. economy. 
 
The Credit Union National Association and its Payment Subcommittee have met with Federal Reserve Bank officials. Last December, CUNA submitted a comment letter on the Fed initiative. CUNA continues to meet with Fed Banks, trade associations, credit unions and other stakeholders to discuss proposed changes to the payments system.
 
Rodriguez called on credit unions and banks to collaborate, saying that an agreement on timing and the method of reform were a necessary prerequisite.  
 
Amid the push for change, the Fed is focused on strong data security, transaction validation, authentication, and obscuring or removing data used to process payments, according to BankInfoSecurity .
 
Rodriguez, who has worked at the Federal Reserve for 30 years, is the senior vice president of industry relations for the Fed's financial services branch. He made the remarks before 75 industry representatives at a town hall-style meeting--one of many that the Fed held between June 16 and June 23. 
 
The estimated time required to complete the new payment system could be between three and five years, according to BankInfoSecurity . The Fed has said that it expects to publish a white paper this autumn on how it will proceed on the matter. 

CUNA has said it will continue its efforts, in coordination with the leagues and key payment system entities, to help ensure the interests of credit unions are well-represented as changes develop.

NCUA to hold free mobile app webinar

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ALEXANDRIA, Va. (6/24/14)--The National Credit Union Administration announced Monday that it will be holding a free webinar on mobile applications.

The virtual event, titled "Mobile Applications--The Next Step," is set to take place on July 9 at 2 p.m. (ET). Speakers include:
  • Rob Gaynor, founder and chief product officer of Malauzai, a mobile banking software company geared toward community banks and credit unions;
  • Todd Riggleman, CEO of Al-Gar FCU, Cumberland, Md., with $36 million in assets;
  • Tansley Sterns, chief impact officer of the Filene Institute;
  • Laurie Bryan, consultant, Fiserv, a financial services software company; and
  • Lisa Minor, an NCUA Office of National Examinations and Supervision payments systems specialist.
The panel will be hosted by Dominic Carullo, economic development specialist at the NCUA Office of Small Credit Union initiatives.

In a press release, the NCUA said that participants "will hear from credit unions that have successfully developed and implemented their own mobile strategies."

Mobile applications was one of the hot topics at this year's Credit Union National Association Payments Roundtable in May in Las Vegas.

For instance, Jason Oxman, CEO of Electronics Transactions Association, told roundtable participants that about 70% of consumer spending is being done electronically and there are one billion plastic cards in circulation in the United States today.

"Clearly, consumers love electronic payments. They also love mobile phones. There are 325 million mobile phone subscriptions in the U.S. and about 65% of those mobile phones are smartphones," Oxman said. "If consumers love electronic payments, and if consumers love mobile phones, the logical conclusion is that there's high potential for acceptance of mobile payments ( News Now May 7)."

See the resource link for webinar registration.

This week in Congress: CDRLF, CDFIF votes among scheduled items

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WASHINGTON (6/24/14)--Legislation setting the funding for the National Credit Union Administration's Community Development Revolving Loan Fund Program (CDRLF), as well as the U.S. Treasury Department's Community Development Financial Institution (CDFIF), will be voted on this week by the House and Senate appropriations committees. The votes will be today and Wednesday respectively.

Last week, the House Appropriations subcommittee on general government passed the fiscal year 2015 appropriations bill by a voice vote. That bill would set funding for the CDFIF program at $230 million, an increase from $226 million last fiscal year. The CDFIF is designed to help promote access to capital and local economic growth in urban and rural low-income communities through monetary awards and the allocation of tax credits.

The bill also contains $1.071 million for the CDRLF program. These funds are available for technical assistance for low-income designated credit unions.

Also of interest to credit union this week:
  • Today, the House Financial Services Committee will hold a full committee hearing on "The Annual Report of the Financial Stability Oversight Council;"
  • On Wednesday, the Senate Banking, Housing and Urban Affairs Committee will hold a full committee hearing on "The Financial Stability Oversight Council Annual Report to Congress;" The Senate Homeland Security and Governmental Affairs Committee will hold a full committee markup to vote on the nomination of Shaun Donovan to be director of the Office of Management and Budget and pending legislation; and the Senate Banking, Housing and Urban Affairs Committee Economic Policy Subcommittee will hold a hearing on "Dreams Deferred: Young Workers and Recent Graduates in the U.S. Economy."
At the conclusion of this week's session, the House and the Senate will both be in recess until the week of July 7.
 

CUNA meets with NCUA Chair on RBC suggestions

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WASHINGTON (6/24/14)--National Credit Union Administration Chair Debbie Matz reiterated the agency's willingness to consider significant changes to its risk-based capital proposal in a meeting with the Credit Union National Association.
 
During the meeting Thursday, which included agency senior staff, CUNA raised a number of concerns. The association's analysis indicates unnecessary and harmful overcapitalization would result if the proposal is adopted as issued for comment in January.   
 
"We are encouraged that NCUA is considering revisions to many, if not most aspects, of the proposal," CUNA Interim President/CEO Bill Hampel said. He emphasized that many credit unions question the need for a new RBC proposal, given the health and economic performance of credit unions during the recent severe financial crisis.  CUNA strongly opposes the current proposal, as addressed in its comment letter filed May 28 with the agency (see resource link).

Matz stated that the agency has had many internal discussions on a number of the issues that CUNA has raised and welcomed further dialogue with the association and credit unions. A central theme of the discussion was how to distinguish the small number of problem credit unions that should hold more capital from well-run credit unions that already have more than sufficient capital and can manage their risks while covering any losses.
 
"We feel the discussion was frank and constructive," said CUNA's General Counsel Eric Richard.

Consistent with its comment letter, CUNA is urging the agency to adopt a range of recommendations to achieve a more favorable outcome for credit unions, which Hampel Richard, and Deputy General Counsel Mary Dunn raised during the meeting. The key revisions that CUNA is seeking including major improvements to:    
  • Lower the RBC requirement for a credit union to be well-capitalized so that it is no higher than the RBC requirement to be adequately capitalized;
  • Retain the 1% NCUSIF deposit in the calculation of RBC;
  • Address the provision that would authorize NCUA to impose additional minimum capital beyond what the rule requires;
  • Revise key risk-weightings, particularly in the areas of member business loans, mortgages, mortgage servicing and CUSO investments;
  • Develop a more complete definition of "complex" credit unions so that fewer credit unions will be covered by the rule; and
  • Provide ample time for credit unions to comply with a RBC final rule.
Hampel highlighted CUNA's concern that interest rate risk should be addressed as a supervisory or regulatory issue, and not as part of a risk-based capital requirement. He also recommended that supplemental capital should be permitted by regulation for RBC purposes for any federally insured credit union.
 
"CUNA will be continually following up with NCUA over the coming weeks and months on the RBC proposal to maintain the dialogue and reinforce our members' concerns. We look forward to future productive discussions with Chairman Matz and agency staff on our recommendations," Dunn said.

The official comment period for the proposal ended May 28. The NCUA is now holding three public Listening Sessions across the country to give interested parties more opportunity to comment and ask questions. The first session is Thursday in Las Vegas, Nev.

Committee approves TRIA, FSOC reform legislation

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WASHINGTON (6/23/14)--The House Financial Services Committee has approved reforms to the Terrorism Risk Insurance Program and to the Financial Stability Oversight Council (FSOC).

The following is a summary of the bills the committee passed last week:
 
  • The TRIA Reform Act of 2014 (H.R. 4871), introduced last week by Rep. Randy Neugebauer (R-Texas) (News Now June 19). The bill was approved 32-27 Thursday.  It would extend the Terrorism Risk Insurance Program for five years, while making no programmatic changes for the first year of the extension. Under the bill's provisions, TRIA payments would be initiated by a higher threshold. By 2019, the program would be triggered by an attack--one not caused by a nuclear, chemical, biological or radiological attack--only if damages exceed $500 million. The current threshold is $100 million.
  • H.R. 4881, a bill to place a one-year moratorium on the authority of FSOC to make financial stability determinations. It too was sponsored by Neugebauer, and it was approved 32-27.  The bills would prevent the FSOC from designating any new insurance companies or asset managers as "systemically important" for one year as the U.S. Congress continues to review the FSOC's process for deeming bank and non-bank institutions as such.
  • The FSOC Transparency and Accountability Act (H.R. 4387), sponsored by Rep. Scott Garrett (R-N.J.) was approved 32-27. The bill is intended to improve the FSOC's transparency and accountability by opening their meetings to non-FSOC members. It also increases oversight of FSOC decisions including systemic designations.

Hensarling, Capito contact NCUA regarding RBC plan concerns

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WASHINGTON (6/23/14)--More heavy hitters from Capitol Hill have weighed in with concerns about the National Credit Union Administration's proposed risk-based capital proposal. The chairman of the House Financial Services Committee and a second high-ranking member of that panel submitted a letter Friday.
 
At issue is the NCUA proposal that would impose on credit unions with greater than $50 million in assets new standards that would restructure the agency's current "prompt corrective action" regulation to involve calculation of a capital-to-risk-assets ratio.
 
Rep. Shelley Moore Capito (R-W.Va.), who heads the House Financial Services subcommittee on financial institutions and consumer credit, and Rep. Jeb Hensarling (R-Texas), who chairs the parent financial services panel, joined forces Friday to ask the federal regulator to consider whether its proposed risk weights--which deviate markedly in some areas from the standards banking regulators have applied for banks--are appropriate.
 
The letter asks the NCUA to:
  • Take into account the cost and burden of implementing new risk-based capital requirements beyond the current leverage ratio;
  • Provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions; and
  • Give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.

NCUA's next step on RBC plan: Listening sessions begin this week

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WASHINGTON (6/23/14)--This week, the National Credit Union Administration kicks off its three Listening Sessions on the agency's risk-based capital proposal.
 
A Los Angeles session is June 26. July 10 is Chicago. And the final forum is in Alexandria, Va. on July 17.
 
"It is important that the agency board members hear from as many credit unions as possible during this next phase," reminds Credit Union National Association interim President/CEO Bill Hampel.  He noted that just last week CUNA had a series of positive meetings with NCUA board members and staff on the proposal.
 
CUNA has requested that the NCUA broadcast and record the sessions, a request made even more important by the fact that the Chicago and Alexandria sessions are already at capacity and some anxious to attend are being assigned to a waiting list.
 
Space is limited at each session to 150 people, but the Chicago event was able to accommodate 170 attendees, due to additional space in the room.
 
NCUA Chair Debbie Matz told News Now last week that Listening Sessions are generally most productive when registrants come to a session with ideas for proposed solutions.
 
She added, "NCUA board members and senior staff will be there to listen, so we'll ask participants to share with us suggestions for how they believe the regulatory and supervision process can be improved."

New IRR resource page, video unveiled by NCUA

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ALEXANDRIA, Va. (6/23/14)--The National Credit Union Administration on Friday produced a new web page with information about interest rate risks.
 
The website includes videos, visual information about trends that impact interest rate risk, and links to NCUA rules, guidances, sample letters to credit unions and recommended best practices. 
 
The interest rate risk video that was most recently produced by the NCUA is also available on the regulators' YouTube channel.
 
NCUA Chair Debbie Matz said in a press release that credit unions are "faced with extraordinary interest rate risk challenges" due to shifts in the make-up of portfolios. She encouraged them to utilize the new resources.
 
"In the event of a rapid change in interest rates, the result at some credit unions would be stressed earnings and the possibility of large declines in economic value," she added. "While we are aware that many credit unions are well positioned to manage this risk, there are others that have potentially excessive exposure to interest rate risk that could result in losses to the entire system."
 
NCUA Chief Economist John Worth described the way credit unions are using investments as a "critical emerging risk."
 
"Over the past five years, credit union's long-term investments jumped as a share of assets," he said. "In a rising rate environment, long-term investments have the potential combined with other fixed-rate assets to anchor interest income at low levels even as interest costs move higher."

FHA on lookout for 'deceptive' marketing for reverse mortgages

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WASHINGTON (6/23/14)--The Federal Housing Administration has published a guidance warning lenders that deceptive reverse mortgage marketing could lead to fines or administrative action.

The guidance, released last week, reminds financial institutions that they're forbidden from leading consumers to believe that a reverse mortgage "contains any features or limitations that are inconsistent with FHA's requirements."

The federal mortgage insurer told lenders that: it must explain that the FHA backs both fixed- and adjustable-rate mortgages; borrowers may change the method of adjustable-rate payment at any time; fixed-rate loans must be disbursed in a single sum; adjustable-rate mortgages allow for five payment options and future draws, and that the age of the youngest borrower (or non-borrowing spouse) determines the amount of funds available ( American Banker June 19).
 
Borrowers must also clearly publish a disclaimer that "informs the public the information was not compiled by the Department of Housing and Urban Development or FHA."

Reverse mortgages are referred to in the guidance as Home Equity Conversion Mortgages (HECM).
 
  American Banker reported that the guidance was specifically issued to protect senior citizens, a prime market for reverse mortgages.

CUNA letter in WSJ: CU assets well managed, pose no undue risk

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WASHINGTON (6/23/14)--In a Letter to the Editor of the Wall Street Journal, published Saturday, the Credit Union National Association defended credit unions strong record of managing interest rate risk.
 
Interim President/CEO Bill Hampel underscored that credit unions have always taken a conservative stance in their stewardship of member assets in managing interest-rate and credit risk. The letter was penned in response to a June 6 Journal article focusing in interest-rate risk at credit unions, and included comments by National Credit Union Administration Chair Debbie Matz.
 
Hampel reminded, "Credit unions' exposure to long-term assets is well-managed and poses no undue risk to the federal insurance fund protecting credit union members' savings. Further, the lending of these consumer-owned financial institutions remains prudent. Although long-term assets stand at 35% of total assets, they are dwarfed by the 51% of total funds from long-term sources: net worth and core deposits."
 
That mix, Hampel explained, means that when interest rates do rise, credit unions' interest costs will increase by much less. The CUNA leader also reiterated that credit unions' moderate approach to credit standards is borne out by their loss record.

"(C)redit-union loan losses were less than half those at for-profit banking institutions throughout the recession and have since returned to very low prerecession levels," Hampel said.

The National Association of Federal Credit Unions also submitted a letter, which is printed.

Use the resouce link below.

McCarthy chosen as next House majority leader

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WASHINGTON (6/20/14)--Multiple media outlets flashed alerts at about 3:19 p.m. (ET) yesterday: 49 year-old House Majority Whip Kevin McCarthy (R-Calif.) has been chosen to serve as the next House majority leader.

The Washington Post reported that McCarthy is serving his fourth term in Congress and that his
Click to view larger image Rep. Kevin McCarthy, shown here addressing CUNA's Governmental Affairs Conference, has had positive experiences with credit unions, especially the one that gave him loans for his education and his business. (CUNA Photo)
victory Thursday makes him "the fastest-rising majority leader in American history."  McCarthy's competitor of the position was Rep. Raul Labrador (R-Idaho).
McCarthy's election comes after Rep. Eric Cantor's (R-Va.) announced his resignation from that post after a surprise primary loss to Dave Brat, an economics professor at Randolph-Macon College in Ashland, Va.

When McCarthy announced his intention to run for the House Republican leader spot,  John Magill, executive vice president of government affairs for the Credit Union National Association, noted that McCarthy is "well-respected, and well-liked, among his colleagues, and his door is open to credit unions for our views."

As a member of the House Financial Services Committee, McCarthy has spoken at CUNA's Governmental Affairs Conference, including this year during which he shared his concern about the growing regulatory burden.

It was also reported that Rep. Steve Scalise of Louisiana won the race for majority whip--McCarthy's current spot--making him the No. 3 Republican in the House. Scalise was among the 324 members of the House who signed a letter relating lawmakers' concerns regarding the National Credit Union Administration's risk-based capital proposal.

NEW: Hensarling, Capito contact NCUA regarding RBC plan concerns

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WASHINGTON (6/20/14, UPDATED  12:49 p.m. ET)--More heavy hitters from Capitol Hill have weighed in with concerns about the National Credit Union Administration's proposed risk-based capital proposal.
 
At issue is the NCUA proposal that would impose on credit unions with greater than $50 million in assets new standards that would restructure the agency's current "prompt corrective action" regulation to involve calculation of a capital-to-risk-assets ratio.
 
The chairman of the House Financial Services Committee chairman and a second high-ranking member of that panel submitted a letter today.
 
Rep. Shelley Moore Capito (R-W.Va.), who heads the House Financial Services subcommittee on financial institutions and consumer credit, and Rep. Jeb Hensarling (R-Texas), who chairs the parent financial services panel, joined forces Friday to ask the federal regulator to consider whether its proposed risk weights--which deviate markedly in some areas from the standards banking regulators have applied for banks--are appropriate.
 
The letter asks the NCUA to:
  • Take into account the cost and burden of implementing new risk-based capital requirements beyond the current leverage ratio;
  • Provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions; and
  • Give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.

New rule will reduce burdens on voluntary liquidations of FCUs

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ALEXANDRIA, Va. (6/20/14)--Federal credit unions seeking to voluntarily liquidate will face less of an administrative burden after the National Credit Union Administration board passed a final rule Thursday. The rule, first proposed in February, is the first revision of voluntarily liquidation procedures since 1993.

"We are not encouraging more credit unions to liquidate, we want to be clear about that," said NCUA Board Chair Debbie Matz. "Voluntary liquidation is a path credit unions may choose, an option that is open in certain circumstances. In those circumstances, we want to make the process as orderly as possible ... For any credit union that chooses to liquidate, this rule will reduce administrative burden while making sure every member receives their insured funds."

The final rule clarifies the existing calculation of pro rata distributions to members, which will be calculated from either the date the credit union board votes for liquidation, or from the date of the last share draft, whichever is later.

It also requires that preliminary pro rata distributions to members be limited to the applicable National Credit Union Share Insurance Fund insured amount.

The rule contains several additions designed to allow voluntarily liquidating federal credit unions use technology in the process by permitting those institutions to publish required creditor notices in either electronic media or newspapers of general circulation.

Federal credit unions are also enabled to issue share payouts to members through electronic payments.

In addition, the rule increases the asset-size threshold for requiring multiple creditor notices to $50 million from $5 million.

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

Use the resource link below for more information.

NCUA proposes to allow FCUs to securitize own loans

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ALEXANDRIA, Va. (6/20/14)--The National Credit Union board took steps at its monthly meeting Thursday to allow a natural person credit union to securitize loans it has originated, as well as a companion proposed rule that would allow for safe harbor during securitization.

Securitization can be used as an activity incidental to the business for which a federal credit union is chartered, if the transaction meets certain requirements. The proposed rule would also apply to federally insured, state-chartered credit unions (FISCUs) that are permitted by state law to securitize their assets.

The proposed rule would establish seven minimum safety and soundness requirements for a federal credit union engaging in securitizing assets: compliance with all federal and state laws and regulations; independent risk management; an annual audit; sufficient board knowledge regarding the activities; relevant management expertise; a Board-approved securitization policy; and internal controls.

Dale Klein, senior capital markets specialist with the Office of Examination and Insurance, said securitization could provide credit unions that originate certain loans three benefits: an additional source of liquidity, possible reduction of interest rate risk associated with originated fixed rate loans, and a chance for certain credit unions to better optimize capital management.

The Credit Union National Association has said it believes the proposed rule could be helpful for credit unions that originate loans and wish to securitize their assets but as issued, may only be useful to very large credit unions. 

"I estimate a credit union would have to originate at least $100 million worth of securitizable loans each quarter. Only credit unions with vast origination capacities would be able to do that," Klein said.

A credit union that securitizes assets would have to create an issuing entity to hold the assets collateralizing the asset-backed security. The proposed rule would limit the amount of residual interests and retained interests that a federal credit union may carry to 25% of the its net worth. 

NCUA Board Member Rick Metsger said while there are a few credit unions who are capable of securitizing loans, he thinks "it's a good tool to have in the toolbox" for institutions that are able.

After a final rule is adopted, NCUA staff stated that guidance will be provided to assist credit unions who may choose to securitize their loans. 

The proposed securitization rule is related to another proposed rule discussed by the board, a proposed safe harbor rule that governs the authority of the Board, when acting as conservator or liquidating agent for any federally insured credit union, to disaffirm or repudiate transfers of financial assets in connection with a securitization or participation.

NCUA Board Chair Debbie Matz called the proposed rule "essential to creating a viable market for credit union securitizations," and that it would protect investors in the event of a credit union being conserved or liquidated. The proposed rule would provide greater certainty to promote investor confidence and a level playing field for credit unions to sponsor securitizations.

CUNA will be issuing a regulatory call to action shortly to solicit input and feedback from credit unions. The NCUA is seeking comments on both proposed rule for 60 days following their publication in the Federal Register.

Use the resource links below for more information.

Senate approves McWatters for NCUA post

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WASHINGTON (6/20/14)--The U.S. Senate confirmed J. Mark McWatters Thursday to the
Click to view larger image J. Mark McWatters (right) shakes hands with Sen. Mike Crapo of Idaho, ranking Republican member of the Senate Banking Committee, prior to that panel's confirmation hearing for McWatters. Sen. Bob Corker (R-Tenn.) is in the background. (CUNA Photo)
National Credit Union Administration board. He will join NCUA Chair Debbie Matz and board member Rick Metsger to form the three-person board.

Matz said of the newest board member, "Mark is experienced, thoughtful, judicious and values a collaborative process to get things done. I know credit unions and their members will be well served by his presence on the board."

She noted that as she welcomes McWatters to the board, she also says farewell to board member Michael Fryzel. "For the last five years, I have considered Mike a partner in the agency's efforts to contain the fallout from the corporate credit union crisis and mitigate the effects of the Great Recession. Credit unions were well served by his judgment during some very dark days, and he left the system better than he found it. I wish Mike all the best in his future endeavors."

Bill Hampel, interim president/CEO of the Credit Union National Association, offered CUNA's congratulations to McWatters.  Hampel said Thursday, "His extensive experience in business, the private practice of law, teaching, congressional staff work, and other endeavors will help him bring a unique perspective to the issues.

"We at CUNA look forward to discussing a range of issues with Mr. McWatters, including the importance of a strong safety and soundness regulator, while at the same time providing much needed regulatory relief for credit unions."
 
On June 12, CUNA sent a letter to Sens. Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), urging the Senate to schedule a vote on McWatters so the board would have a full contingent as it considers comments on its risk-based capital proposal.
 
McWatters, who was nominated by President Barack Obama in December, will serve a term that ends in August 2019.
 
McWatters will replace Fryzel--though likely not immediately.  Fryzel began his term in July 2008. Although Fryzel's term expired Aug. 2 of last year, the Republican on the board agreed to remain in service until his successor was confirmed. Hampel also extended well wishes to outgoing board member Fryzel and commended him for his efforts to minimize the impact of the agency's stress testing rule and other concerns. 
 
Members of the NCUA are appointed by the U.S. president and confirmed by the Senate. No more than two board members can be from the same political party, and each member serves a staggered six-year term.
 
During his March nomination hearing before the Senate Banking Committee, McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences."
 
Previously, McWatters served as a member of the Troubled Asset Relief Program (TARP) Congressional Oversight Panel, and prior to that he practiced for more than 25 years as a domestic and cross-border tax, corporate finance and mergers and acquisitions attorney.
 
McWatters received his J.D. degree from the University of Texas School of Law, a master of laws degree from Columbia University School of Law and a master of laws degree in taxation from New York University School of Law.

Appraisal exemptions would be extended under NCUA plan

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ALEXANDRIA, Va. (6/20/14)--The National Credit Union Administration has issued a proposal to revise two of its regulations regarding appraisals. The amendments would equalize the NCUA and banking regulatory agencies' in treatment of exemptions from a requirement to obtain an appraisal for certain extensions of credit transactions.

This change is aimed at facilitating the ability of federally insured credit unions to modify a real estate-related loan held by the credit union more easily so they can better assist borrowers in times of a distressed housing market.

"Like our rule on Troubled Debt Restructuring, this proposed rule is an example of how NCUA is working to help keep credit union members in their homes," said NCUA Chair Debbie Matz said. "The proposed rule both gives relief to homeowners and reduces unnecessary paperwork for credit unions."

The proposal would eliminate a redundant requirement that federal credit unions make available to any requesting member a copy of an appraisal used in connection with that member's application for a first-lien loan on a dwelling. It would narrow the scope of this requirement to cover only loans secured by a subordinate lien on a dwelling. 

Federal credit unions would still be subject to the requirement that all creditors must automatically provide applicants with free copies of all appraisals and other written evaluations developed in connection with an application for a loan to be secured by a first lien on a dwelling. 

The proposed rule also requires the appraisal to be available for a period of 25 months after the applicant has received notice from the credit union of the action taken on the application for a loan secured by a subordinate lien on a dwelling.

The second proposed change would exempt a transaction from the appraisal requirement involving an existing extension of credit at the lending federally insured credit union, provided that: 
  • There is no advancement of new monies, other than funds necessary to  cover reasonable closing costs; or
  • There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union's real estate collateral protection after the transaction, even with the advancement of new monies. 
The board is allowing a 60-day comment period for the proposed rule after it is published in the Federal Register. The Credit Union National Association will post a Regulatory Call to Action to seek feedback from credit unions on this proposed rule.

Use the resource link below for more information. Also, see related stories from the NCUA open meeting: NCUA proposes to allow FCUs to securitize own loans; New rule will reduce burdens on voluntary liquidations of FCUs; and, Mainstreet cites regulatory relief, desire for increased service, for charter change.

CFPB orders bank to pay $225M in relief for credit card practices

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WASHINGTON (6/20/14)--The Consumer Financial Protection Bureau has ordered GE Capital Retail Bank, now known as Synchrony Bank, to provide approximately $225 million in relief to consumers affected by what it labeled "illegal and discriminatory" credit card practices. The order represents the federal government's largest credit card discrimination settlement in history.

GE Capital must refund $56 million to approximately 638,000 consumers who were subjected to deceptive marketing practices. It must also provide an additional $169 million to approximately 108,000 borrowers excluded from debt relief offers because of their national origin, part of a joint enforcement action by the CFPB and U.S. Department of Justice.

GE Capital promoted five different debt cancellation add-on products, which examiners from the CFPB identified as misrepresenting to consumers by:
  • Leading consumers to believe they would not have to pay for these products as long as they paid off the balance on their billing statement. In fact, consumers could only avoid the fee in very specific circumstances.

  • Failing to disclose consumers' ineligibility. In calls with telemarketers, many consumers mentioned that they were retired or disabled, however, the telemarketers neglected to tell the consumers that they would not be eligible for key debt cancellation benefits, and the consumers bought the products without this information.

  • Failing to disclose that consumers were making a purchase. In many cases, telemarketers made it seem like the consumers were receiving a benefit, updating their accounts, handling other administrative tasks. In these conversations, it was not obvious to consumers that they were buying something and would be charged a fee.

  • Marketing products as a limited time offer. Many customer service representatives falsely told consumers that these debt cancellation products were a "limited time offer" while nothing about the availability of these products was limited. 

The action related to the discriminatory credit card practices resulted from GE Capital's self-reporting of the issue, which led to a joint investigation between the CFPB and the Department of Justice. GE Capital offered two promotions allowing credit card customers with delinquent accounts to settle balances by paying a specific portion of their debt.

The CFPB said these offers were not extended to any customer who indicated they preferred to communicate in Spanish or had a mailing address in Puerto Rico, even if the customer met the promotion's qualifications. This meant that Hispanic populations were unfairly denied the opportunity to benefit from these promotions.

Such discrimination is in direct violation of the Equal Credit Opportunity Act, which prohibits creditors from discriminating in any aspect of a credit transaction on the basis of characteristics such as race and national origin.

The $225 million enforcement action stems from a CFPB examination conducted between December 2012 and February 2013. The Bureau has ongoing supervisory authority over GE Capital and will continue to conduct examinations of GE Capital to ensure its compliance with federal consumer financial law.

Use the resource link below for more information.

Voluntary liquidation, assets securitization, safe harbor on today's NCUA agenda

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ALEXANDRIA, Va. (6/19/14)--The National Credit Union Administration board will cover several topics in its monthly open meeting today, including a final rule containing the first update of the voluntary liquidation rule since 1993.
 
The board has proposed to amend its voluntary liquidation regulation to reduce administrative burdens on voluntarily liquidating federal credit unions. The rule would also recognize technological advances since the last revision by:
  • Permitting liquidating federal credit unions to publish required creditor notices in either electronic media or newspapers of general circulation;
  • Increasing the asset-size threshold for requiring multiple creditor notices;
  • Requiring that preliminary partial distributions to members not exceed the insured limit for any member share account;
  • Specifying when liquidating federal credit unions must determine member share balances for the purposes of distributions; and,
  • Permitting liquidating federal credit unions to distribute member share payouts either by wire or other electronic means or by mail or personal delivery.
The board will also discuss a proposed rule that would amend Part 721 of the NCUA's rules and regulations to allow credit unions to securitize their own loans. Another proposed rule to be discussed regarding safe harbor is a companion to the securitization proposed rule.
 
This proposed rule clarifies that the NCUA will recognize assets that are properly securitized, or which qualify as loan participation, as the property of investors, and the agency will not claim these assets in liquidation. This proposed rule closely follows the safe harbor adopted by the Federal Deposit Insurance Corporation.
 
The board will also discuss a proposed rule on appraisal requirements. This comes as a response to comments received during the NCUA's annual regulatory review. The Credit Union National Association requested an update to the appraisal rule in its 2013 comment letter to the NCUA for its annual regulatory review.
 
The proposed rule would amend the NCUA's requirement for making appraisals available to applicants and the appraisal requirements for transactions involving an existing extension of credit. NCUA has stated it believes these changes will reduce unnecessary regulatory burden on credit unions.

NEW: Senate confirms McWatters to take NCUA board seat

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WASHINGTON (6/19/14, UPDATED  2:32 p.m. ET)--The U.S. Senate today confirmed J. Mark McWatters to the National Credit Union Administration board. He will join NCUA Chair Debbie Matz and board member Rick Metsger to form the three-person board.
 
"Our congratulations to board member McWatters on his confirmation by the U.S. Senate to serve on the NCUA board," said Bill Hampel, interim president/CEO of the Credit Union National Association. "His extensive experience in business, the private practice of law, teaching, congressional staff work, and other endeavors will help him bring a unique perspective to the issues. We at CUNA look forward to discussing a range of issues with Mr. McWatters, including the importance of a strong safety and soundness regulator, while at the same time providing much needed regulatory relief for credit unions."
 
On June 12, CUNA sent a letter to Sens. Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), urging the Senate to schedule a vote on McWatters so the board would have a full contingent as it considers comments on its risk-based capital proposal.
 
McWatters, who was nominated by President Barack Obama in December, will serve a term that ends in August 2019.
 
McWatters replaces Michael Fryzel, who began his term in July 2008. Although Fryzel's term expired Aug. 2 of last year, the Republican on the board agreed to remain in service until his successor was confirmed.
 
Members of the NCUA are appointed by the U.S. president and confirmed by the Senate. No more than two board members can be from the same political party, and each member serves a staggered six-year term.
 
During his March nomination hearing before the Senate Banking Committee, McWatters said he intends to work with NCUA board members, agency staff and external stakeholders "in an open and respectful manner, with the goal of finding a common ground and working cooperatively through any differences."
 
Previously, McWatters served as a member of the Troubled Asset Relief Program (TARP) Congressional Oversight Panel, and prior to that he practiced for more than 25 years as a domestic and cross-border tax, corporate finance and mergers and acquisitions attorney.
 
McWatters received his J.D. degree from the University of Texas School of Law, a master of laws degree from Columbia University School of Law and a master of laws degree in taxation from New York University School of Law.

House subcommittee passes bill with funding for CDFIF, CDRLF funding

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WASHINGTON (6/19/14)--The House Appropriations subcommittee on general government passed the fiscal year 2015 appropriations bill Wednesday by a voice vote.

Funding for the Community Development Financial Institutions Fund (CDFIF) program was set at $230 million, an increase from $226 million last fiscal year. The fund is designed to help promote access to capital and local economic growth in urban and rural low-income communities through monetary awards and the allocation of tax credits.

The bill also contains $1.071 million for the Community Development Revolving Loan fund program. These funds are available for technical assistance for low-income designated credit unions.

In addition, the bill contains language that would require the Consumer Financial Protection Bureau receive funding by requesting appropriations from the Committees on Appropriations of the House of Representatives and the Senate; the Committee on Financial Services of the House of Representatives; and the Committee on Banking, Housing and Urban Affairs of the Senate.

The bill states that these requests "shall include the amount of the funds requested, an explanation of how the funds will be obligated by object class and activity and why the funds are necessary to protect consumers."

The funding bill would next be considered by the full committee before a full House vote is possible. 

A look at consumer complaints that move from CFPB to NCUA

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WASHINGTON (6/19/14)--A Credit Union National Association compliance staffer describes in CompBlog this week  just  what happens to a consumer's complaint once the Consumer Financial Protection Bureau passes it along to the National Credit Union Administration.
 
The CFPB only reviews complaints from members of credit unions with more than $10 billion in assets, and all others to the NCUA.  CUNA's compliance specialist, Justin Santopietro, interviewed NCUA staff on their processes.
 
After talking with CFPB and NCUA officials, Santopietro found that the NCUA system is streamlined and well-staffed, with complaints processed within two months. The complaints from the CFPB, he learned, are fed directly into the NCUA system, and are therefore well-integrated into the federal credit union regulators' existing system.
 
Before addressing a grievance, however, the NCUA determines whether or not the complaint falls within the scope of its purview. If it does, according to NCUA, the regulator sends copies of the complaint to the appropriate credit union's supervisory committee CEO. The credit union is given 20 days to respond. 
 
The whole process of investigation and response, Santopietro was told, generally takes less than 60 days.
 
Recent complaints, mostly deal with mortgage servicing, fees, student loans and fraudulent activity.
 
CUNA members can read Santopietro's full report of the NCUA complaint registry using the resource link below.

Neugebauer bill would extend TRIA, reduce taxpayer funding

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WASHINGTON (6/19/14)--Rep. Randy Neugebauer (R-Texas) has introduced a bill that would extend the Terrorism Risk Insurance Program for five years while making no programmatic changes for the first year of the extension.
 
Neugebauer, who chairs the House Financial Services subcommittee on housing and insurance, said the one-year moratorium would give the market time to adjust to planned changes.  Also, he said the bill would take off  "the training wheels" of the TRIA program--created after the Sept. 11 terrorist attacks to lend stability to the economy--and "transition to a terrorism risk insurance market that is less dependent on a taxpayer-funded backstop."
 
The House Financial Service Committee has scheduled a Thursday markup session on Neugebauer's  TRIA Reform Act of 2014 (H.R. 4871). 
 
Under the bill's provisions, TRIA payments would be initiated by a higher threshold. By 2019, the program would be triggered by an attack--one not caused by a nuclear, chemical, biological or radiological attack--only if damages exceed $500 million. The current threshold is $100 million.
 
Other provisions include:
  • Decreasing the federal share of insurers' losses from 85% to 80% and enhances the program's taxpayer repayment requirements; and
  • Clarifying and streamlining the terrorism certification process to better protect policyholders and maintain the program's current activation and co-pay thresholds for less predictable, catastrophic nuclear, chemical, biological or radiological events throughout the length of the reauthorization.
Use the resource link to access the bill's language.

NCUA's Metsger considers CUNA's concerns on RBC proposal

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ALEXANDRIA, Va. (6/19/14)--National Credit Union Administration board member Rick Metsger and his senior policy advisor, Mike Radway, met with Credit Union National Association officers this week to discuss the agency's Risk-Based Capital proposal.
 
Separate CUNA meetings with NCUA Chair Debbie Matz and NCUA Director of Examination and Insurance Larry Fazio also are scheduled for this week. CUNA already has met with NCUA General Counsel Mike McKenna and is working to meet soon with others at the agency.
 
"The discussion was comprehensive and productive," reported CUNA Deputy General Counsel Mary Dunn.  "It is clear that Board Member Metsger is studying the comments and has an open mind in terms of considering significant improvements to the final rule. In addition to reading many of the comment letters, he is also meeting with state leagues and credit union groups across the nation to better understand their concerns and priorities. CUNA appreciates his efforts and approach to reviewing recommendations that would minimize the impact of the proposal on credit unions without undermining the agency's safety and soundness objectives."
 
CUNA's meeting with Metsger discussed at length significant recommendations to achieve a better outcome for credit unions.  Areas that CUNA highlighted included:
  • Lowering the RBC component for well-capitalized credit unions so that it is no higher than the RBC component for adequately capitalized CUs;
  • Allowing the 1% NCUSIF deposit to be included in the calculation of RBC;
  • Eliminating the provision that would authorize NCUA to impose additional minimum capital beyond what the rule requires;
  • Revising the risk-weightings, particularly in the areas of member business loans, mortgages, mortgage servicing and CUSO investments;
  • Providing a more complete definition of "complex" credit unions so that fewer credit unions will be covered by the rule; and
  • Providing ample time for credit unions to comply with a RBC final rule.
The need to improve the examination process so legitimate and material issues can be spotted sooner in problem credit unions, while well-managed credit unions are not subjected to unwarranted examiner intrusion, was also discussed.  In addition, the importance of addressing interest rate risk as a supervisory or regulatory issue and separate from the RBC proposal was reviewed. Depending on the scope and nature of the changes the agency makes in the RBC proposal, CUNA also stated that having an additional opportunity to comment on a new proposal could be useful to credit unions and the NCUA alike.
 
"CUNA will continue its rigorous regulatory advocacy efforts, as long as it takes, to urge the agency to make a range of significant changes to the RBC proposal," noted CUNA Interim President/CEO Bill Hampel.

Stakeholders assess new CFPB mortgage rules with Consumer Advisory Board

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RENO, Nev. (6/19/14)--The Consumer Financial Protection Bureau's Consumer Advisory Board (CAB) hosted an open meeting to discuss the impact of new mortgage rules that took effect earlier this year. The multi-session meeting featured several panel discussions and question and answer sessions with various officials from the CFPB.
 
"The CAB is designed to bring us input from those who work in these markets and on-the-ground with consumers," said Steve Antonakes, deputy director of the CFPB. "We use that feedback to inform our policymaking and to evaluate the effectiveness of our rules and also to consider its implications for the Bureau's other programs.
 
Antonakes also addressed concerns about the quality of regulators since the rules have been implemented. He said that while the CFPB did not put a lot of time and effort in training prior to the implementation of the rules, in the past six months the bureau has trained "hundreds" of CFPB examiners and prudential regulators. He also said the CFPB is now focused on compliance on a broad scale.
 
Adam Levitin, professor of law at Georgetown University and CAB member, said that certain lenders are concerned with more detailed lending requirements, and that it could lead to increased possibilities of putbacks, when the lender is required to repurchase a sold mortgage. Levitin said this could contribute to a tightness when it comes to availability of credit.
 
Other comments raised during the meeting include:
  • One individual said the accessing credit has been tight in recent months, with financial institutions saying the cost for compliance with the new rules is high, but the cost of noncompliance is higher. He also said that financial institutions are noticing less loans for an amount under $100,000 being issued, which makes it more difficult for low and moderate income borrowers to access credit.

  • According to one speaker, there have been "tremendous problems" with nonbank lending in regards to loan modifications.

  • Another speaker expressed concerns with increased costs when it comes to making mortgage loans. She said some institutions have seen a 30% increase in processing costs, others have claimed as much as an 68% increase, and there are concerns this could be passed to borrowers in the form of additional fees.

  • Bill Bynum, vice chair of the board and CEO of the Hope Enterprise Corporation/Hope Credit Union, said he has seen a bigger share of the market purchasing non-qualified mortgage loans.

  • One individual said the new eRegulations tool is helpful for getting through several of the more intricate section of the rule, stakeholders would benefit from connectivity to regulations from other federal regulatory institutions.
 
According to the CFPB, a video of the meeting will be posted to their website in the coming weeks.

Rep. Perry urges 'changes and clarifications' for RBC proposal

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WASHINGTON (6/18/14)--Rep. Scott Perry (R-Penn.) became the latest congressman to weigh in on the National Credit Union Administration's risk-based capital (RBC) proposal with a letter Tuesday. Perry requested further clarifications and changes to the proposal, which sets a higher risk-based requirement on top of the 7% leverage ratio required of credit unions to be well-capitalized.
 
His letter specifically requests: that the NCUA board to take into account the cost and burden of implementing the proposed rule and an NCUA board perspective on how the proposed concentration-based risk weights are calibrated and why they differ from bank weights.
 
Perry classified credit unions' function as "an important source of liquidity" during the financial crisis of the past few years, adding "these cooperatives did not engage in the risky lending practices that led to the crisis, and nearly all maintained their well-capitalized status."
 
The letter cites the NCUA's report that the 10 credit unions that would become undercapitalized as a result of the proposed rule would need to retain $63 million in in risk-based capital to become adequately capitalized. It also mentions the estimate from industry representatives, including the Credit Union National Association, that the number could be as high as $7 billion in capital drawn out of the economy.
 
"Because of credit unions' limited avenues for raising capital, this proposal likely would force them to charge higher lending and financial services fees, reduce dividend payments to members and deter new depositors," the letter reads. "Before proceeding with a final rule, I urge the NCUA to consider the economic impact and consequences of reduces liquidity and financing for families and small businesses."
 
Perry also expressed reservations over the 18-month implementation timeline currently proposed by the NCUA, citing concerns that it is "much too short for credit unions appropriately to recalibrate their books without adversely impacting service to their members" and urging the NCUA to give more time to stakeholders who wish to comment and for credit unions to implement the rule once it becomes final.

Retailers appeal credit card interchange fee lawsuit settlement

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WASHINGTON (6/18/14)--The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) requested that an appeals court overturn a judge's approval of a lawsuit settlement involving credit card interchange fees from Visa and MasterCard. The two retailer organizations claim the settlement was negotiated by a select group of merchants.
 
An interchange fee, sometimes called a "swipe fee," occurs when a credit card transaction takes place. It goes to the financial institution that issued the card to pay for the cost of providing the card and the transaction services, including fraud protection.
 
U.S. District Court Judge John Gleeson ruled in December 2013 ruled in favor of the settlement, and the appeal has been filed with the 2nd U.S. Circuit Court of Appeals in New York.
 
"A broad cross section of the American retail industry numbering thousands of businesses from iconic national department store chains and general merchandise chains to apparel outlets, specialty shops, restaurants and one-location Main Street stores thoughtfully analyzed the settlement and concluded that it offers them no benefit," reads a brief filed by the NRF and RILA Wednesday. "While a settlement this skewed was bound to be unpopular, the extent of dissatisfaction within the retail industry has been extraordinary."
 
The brief cites a number of what merchants claim are legal errors in the decision, including failure to adequately balance the monetary relief against the requirement to give up future legal claims, dismissing "substantive and thoughtful" opposition and ignoring a court-appointed expert's opinion that the proposal for surcharging was of "uncertain" value that would "have only a small impact" on interchange fees.
 
Opponents of the settlement claimed it "fails to reform the price-fixing system under which Visa and MasterCard set fees for credit cards," cards issues by thousands of financial institutions around the country.
 
The card companies proposed in the settlement that instead of lower fees, a surcharge be passed along to consumers. According to the NRF and RILA, major retailers rejected the surcharge proposal saying it was the opposite of what they had sought.
 
"The settlement would grant only pennies on the dollar compared with overcharges the lawsuit claimed and small retailers would see as little as a few hundred dollars each," reads a statement released Wednesday by NRF. "Retailers who reject the monetary settlement would still be bound by other restrictions the court would not allow them to opt out of, including a prohibition on future lawsuits over the fees."
 
The lawsuit was originally filed in 2005, and was brought by 19 retailers and trade associations. Ten of those plaintiffs, including all of the associations, rejected the settlement when it was proposed in 2012.
 
Use the resource link below for more information.

CFPB, fed. partners, file complaint, proposed order requiring $550M from SunTrust

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WASHINGTON (6/18/14)--The Consumer Financial Protection Bureau, along with the U.S. Department of Justice, Department of Housing and Urban Development and attorneys general in 49 states and the District of Columbia, filed a proposed federal court order requiring SunTrust Mortgage, Inc. to provide more than $540 million in relief to homeowners in response to servicing wrongs.
 
In addtion to the $540 million to homewners--$500 million in loss-mitigation relief to underwater borrowers and $40 million to approximately 48,000 consumers who lost homes to foreclosure--the order also requires SunTrust to provide $10 million to the federal government. A CFPB release says the parties filing the order uncovered substantial evidence that SunTrust was engaged in systemic mortgage servicing misconduct.

According to the CFPB, the joint complaint against Sun Trust "is not a finding or ruling that the defendants have actually violated the law. The proposed federal court order will have the full force of law only when signed by the presiding judge."
 
The complaint, filed in the federal district court in the District of Columbia, alleges that SunTrust:
  • Failed to promptly and accurately apply payments made by borrowers, and charged unauthorized fees for default-related services;
  • Failed to provide accurate information about loan modification and other loss-mitigation services, failed to properly process borrowers' applications and calculate their eligibility for loan modifications, and provided false or misleading reasons for denying loan modifications;
  • Provided false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by SunTrust; and
  • Robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims.
Under the terms of the proposed order, SunTrust must:
  • Provide at least $500 million in relief to underwater borrowers over a three-year period, including reducing the principal on mortgages for borrowers who are at risk of default and reducing mortgage interest rates for homeowners who are current but underwater on their mortgages. If SunTrust fails to meet this requirement, it must pay a cash penalty equal to at least 125 percent of the shortfall.
  • Refund $40 million to consumers whose loans it serviced who lost their homes to foreclosure between Jan. 1, 2008 to Dec. 31, 2013. All consumers who submit valid claims will receive an equal share of the $40 million. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts.
  • Pay $10 million to cover losses it caused to the Federal Housing Administration, Department of Veterans Affairs and the Rural Housing Service.
  • Establish additional homeowner protections, including protections for consumers in bankruptcy.
The agreement only covers SunTrust's violations before Jan. 10, 2014, when the CFPB's new mortgage servicing rules took effect. It does not prevent the CFPB from pursuing civil enforcement actions against SunTrust for violations of these rules. 
 
The Department of Justice also announced Tuesday SunTrust must pay a $418 million penalty in a parallel mortgage lending filing.

House committee hears from Cordray, CFPB 'whistleblower' in separate hearings

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WASHINGTON (6/18/14)--The House Financial Services Committee will hold two hearings about the Consumer Financial Protection Bureau today. At 10 a.m. the committee will hear from CFPB Director Richard Cordray, who will deliver his agency's semi-annual report,  and at 2 p.m. the Financial Services Oversight and Investigations subcommittee will hear from  CFPB employees on allegations of discriminatory and retaliatory practices within the bureau.
 
According to a report from Politico, Ali Naraghi, a bureau employee of Persian heritage, will testify about alleged experiences in a "culture of intimidation and retaliation."
 
Both hearings will take place in room 2128 of the Rayburn House office building, and will be streamed live online.
 
In addition, the Senate confirmation of J. Mark McWatters to the National Credit Union is still expected sometime this week.
 
Use the resource link below for more information.

Part 2 of NCUA anti-money laundering webinar June 25

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ALEXANDRIA, Va. (6/18/14)--The National Credit Union Administration will host an anti-money laundering webinar with the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN) June 25, starting at 2 p.m. (ET). The session is the second part of the "How to Be in Compliance with OFAC and FinCEN" webinar series.
 
The webinar will use real-world scenarios and case studies to explore anti-money laundering compliance issues credit unions may face during daily operations. Diane Rector, training manager in NCUA's Office of Small Credit Union Initiatives, will host a panel that includes:
  • Rachel Nagle, senior advisor for compliance programs at OFAC;
  • Anthony Harris, deputy office director of FinCEN's liaison division; and
  • Thomas Lawler, compliance project officer with FinCEN.
Staff from the NCUA's Office of Examination and Insurance will also participate in the webinar.

The panel will provide examples of best practices that can help credit unions create a well-developed and well-implemented Bank Secrecy Act and anti-money laundering program. Participants will also be able to ask questions about their own compliance concerns.
 
Online registration for this free webinar is now open, and participants may submit questions in advance at WebinarQuestions@ncua.gov, with the e-mail subject line "OFAC and FinCEN Compliance Webinar."
 
The first session of this webinar series was offered May 21 (News Now April 6) and provided an overview of OFAC's and FinCEN's programs, their enforcement authorities and their relationships with other financial services regulators.
 
Use the resource link below for more information on the June 25 web-based session.

House Ways and Means' Paulsen pens concerns regarding NCUA RBC plan

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WASHINGTON (6/17/14)--Rep. Erick Paulsen (R-Minn.), a member of the powerful House Ways and Means Committee, warns that credit unions in his state would be adversely impacted by the National Credit Union Administration's risk-based capital proposal and he urged the agency to make revisions before issuing a final rule.
 
Paulsen said that 84% of Minnesota credit unions that would be affected by the NCUA proposal would see their cushions above the well-capitalized level shrink, and almost 9% would fall from well-capitalized to the lower adequately capitalized ranking.
 
The lawmaker from Minnesota went on to warn that many credit unions would have to raise capital in order to comply with the proposed rule--and that the situation could be tough on consumers as well.
 
"Because of credit unions' limited avenues for raising capital, it is likely this proposal would force them to charge higher lending and financial services fees and reduce dividend payments to members," he wrote in a letter to the NCUA chair.
 
"Before proceeding with a final rule, I would encourage the NCUA to take into account the economic impact of this added burden on the state's credit unions," he said.
 
Reflecting the concerns of others on Capitol Hill, Paulsen also asked the federal credit union regulator to review the proposed risk-weight calibrations carried in the proposal and to explain why some are "considerably higher" than those applied to banks.  He also urged the NCUA to adopt a longer implementation period than the 18 months currently proposed.
 
Paulsen's letter joins a long and growing list from federal lawmakers who are informing the NCUA of their concerns about the RBC plan, as written.  The NCUA has already received are a record number of comments on the proposal--in excess of 2,050.  Those from Capitol Hill include one co-signed by 324 House members, and others by current and former U.S. senators.
 
The Credit Union National Association submitted a detailed, 47-page comment letter to underscore what it called the plan's inherent flaws and the damaging impact it would generate.
 
"Indeed, the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher," the CUNA letter states.

Supreme Court mandates new look at ruling that allows MBS lawsuits

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WASHINGTON (6/17/14)--The Supreme Court yesterday instructed the U.S. Court of Appeals for the 10th Circuit to re-examine a ruling that allowed the National Credit Union Administration to sue several banks for alleged deceptive practices when selling mortgage-backed securities. This stems from a Supreme Court decision last week that defined in the environmental context the difference between statutes of limitation and statutes of repose, and whether various forms of "pausing" the period of time set forth by statute apply to statutes of repose.
 
The NCUA has brought suit against certain banks while serving as the liquidating agent of several failed corporate credit unions, alleging that deceptive information was used to form, market and sell the mortgage-backed securities.
 
Banks have claimed the NCUA missed the three-year window to file suit, a claim that was overturned by the Denver-based 10th Circuit Court of Appeals. The court cited a past provision that extends the deadline for a government regulatory agency to sue on behalf of a failed financial institution.
 
Now the 10th Circuit Court of Appeals must examine whether or not the recent Supreme Court decision warrants a change in its own ruling, specifically whether the Supreme Court's definition is enough to overturn the 10th Circuit's previous decision.
 
The directive from the Supreme Court to the 10th Circuit does not necessarily indicate a need for the 10th Circuit to change its opinion, but rather instructs the court to look at the decision in light of the new law established in the environmental case.
 
"Neither decision precludes the possibility of future settlements, nor would it signal anything about the way these cases are heard in the future," said Eric Richard, executive vice president and general counsel for the Credit Union National Association. "The worst case scenario is just that several of the NCUA's claims would be eliminated."
 
Regardless of what the 10th Circuit Court of Appeals decides, the losing party will have the opportunity to appeal to the Supreme Court, which can then decide whether or not to take the case.
 
"NCUA still has many other opportunities, both before the 10th Circuit and Supreme Court if necessary, to argue that these cases should proceed," Richard said. "Even if NCUA is ultimately unsuccessful on this issue, there are still other claims against these same defendants that should be unaffected. Those other claims would still offer the possibility of recovering money on behalf of credit unions."
 
The NCUA has settled similar suits with J.P. Morgan, Bank of America, Citigroup, Deutsche Bank Securities and HSBC, resulting in more than $1.75 billion in settlements lost by the corporate credit union investments. According to the NCUA, these recovered funds will be used to reduce the amount of future corporate stabilization assessments on credit unions.
 
"We continue to commend the NCUA for bringing these cases in its capacity as conservator of corporate credit unions," Richard said. "They have led the way for federal regulators in these matters, and its efforts have brought enormous dividends for credit unions."
 
A total of 13 cases from the NCUA are pending.  One case is awaiting an appeal at the Ninth Circuit Court of Appeals on this same issue.  Most of the others are in discovery.

CFPB consumer advisors to discuss mortgage trends at first open meeting

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RENO, Nev. (6/17/14)--The Consumer Financial Protection Bureau's new policy on transparency for meetings will make its debut Wednesday when its Consumer Advisory Board hosts a public session to discuss recent themes and trends in the mortgage market, as well as new resources available for consumers looking to purchase a home.
 
The meeting will be the first open-to-the-public for the Consumer Advisory Board, and the bureau will be applying its open approach to gatherings of its other advisory councils as well. The board and councils were established in 2012, and meetings are now being made open to the public in response to numerous requests from stakeholders, including the Credit Union National Association. 
 
The Wednesday CAB meeting will feature remarks from CFPB Director Richard Cordray, Abhishek Agarwal, CFPB acting assistant director of mortgage markets and Brian Webster, CFPB program manager of mortgage markets and Margaret Anderson, CFPB product manager of consumer engagement.
 
It will be held at Truckee Meadows Community College in Reno, Nev., from 10 a.m. to 5 p.m. (PT). In addition to being open to the public, it will be streamed live online.
 
Use the resource link below for more information.

NCUA provides insights on supervision of 'reputation risk'

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ALEXANDRIA, Va. (6/17/14)--The National Credit Union Administration, responding to a May 22 request from Rep. Jeb Hensarling (R-Texas), has written several insights into reputation risk and how it applies to the NCUA's supervisory activities.
 
Hensarling, chair of the House Committee on Financial Services, wrote to federal regulators asking for the way reputation risk is used, what data it draws conclusions from and what the effects of a poor rating would mean for a financial institution ( News Now May 28). In addition to the NCUA, Hensarling wrote the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation.
 
NCUA Chair Debbie Matz acknowledged in her letter that "reputation risk may be difficult to quantify and measure especially in advance of an event," but said it is only one of seven key risks evaluated by the NCUA. Those include: credit risk, interest rate risk, liquidity risk, compliance risk, transaction risk, strategic risk and reputation risk.
 
Matz also emphasized that reputation risk is not a stand-alone indicator, but is part of a "broad range of other qualitative and quantitative indicators."
 
As part of the Federal Financial Institutions Examination Council (FFIEC), the NCUA uses the capital, asset quality, management, earnings and liquidity (CAMEL) rating to asses risk on a system-wide basis.
 
"NCUA does consider reputation risk along with six additional key risks in its supervision of federally insured credit unions and the assignment of CAMEL ratings. All seven risks are interrelated," the letter reads. "After evaluating those risks, an examiner determines the impact the combined risks can have on a credit union's financial and operation resilience in current and prospective terms."
 
The letter goes on to state that the NCUA does not pursue enforcement of other supervisory action based on reputation risk alone.
 
"Qualitative factors may learn to high levels of reputation risk. However, NCUA does not force an institution to change its business practices simply on a reputation risk matter," the letter reads. "We instead would address the underlying unsafe and unsound condition contributing to the reputation risk concern."

FHFA provides Fannie, Freddie conditions in annual report

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WASHINGTON (6/17/14)--The Federal Housing Finance Agency (FHFA), in its annual report to Congress, provided the results of their annual examinations of government sponsored enterprises Fannie Mae and Freddie Mac. The FHFA has authority to annually examine the two enterprises under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
 
"A key component of FHFA's mission is to ensure that Fannie Mae and Freddie Mac are operating in a safe and sound manner so that they may continue to serve as a reliable source of liquidity and funding for housing finance and community investment," the report reads.
 
The FHFA praised Fannie Mae, aka the Federal National Mortgage Association, for progress during 2013 to improve its risk profile and strengthening oversight.
 
"That improvement resulted largely from the adoption in more conservative underwriting; improvements in macroeconomic factors, as reflected by significant home price appreciation in recent years; and management's focus on reducing the level of problem assets through loan modifications, short sales, real estate owned dispositions and liquidation of assets in the retained mortgage portfolio," the report reads.
 
The report goes on to note that while Fannie Mae had $84 billion in net income in 2013, a considerable increase over $17.2 billion in 2012, the elevated level of earnings is unsustainable, as it was driven by non-recurring sources of income, including a tax benefit and an increase in credit-related income.
 
"Notwithstanding the benefit that credit-related income provided to 2013 earning, high levels of problems assets are likely to continue to apply downward pressure on earnings," the report reads. "Further earnings will also be adversely impacted by the mandated decrease in the size of Fannie Mae's retained mortgage portfolio."
 
Freddie Mac, aka the Federal Home Loan Mortgage Corporation, also took positive steps in 2013, according to the FHFA, but continues to operate with a high level of problem mortgage loans and private-label securities acquired from before conservatorship.
 
"The chief source of concern is the year-end 2013 single family seriously delinquent mortgage rate, which is five times greater than the rate in 2006," the report reads. "Freddie Mac also has a high level of private-label mortgage-backed securities, residual risk from modifications and relief finances and ongoing contemporary credit risks."
 
The report also notes that those risks are mitigated somewhat by a higher quality in the single family book of business acquired since 2009, which is a growing proportion of the total book.
 
In addition, financial performance at Freddie Mac continued to improve, with net income of $48.7 billion in 2013, the highest recorded ever for Freddie Mac. But like Fannie Mae, Freddie Mac's current level of earnings is not sustainable due to non-recurring items and the planned reduction of the retained mortgage investment portfolio.
 
Use the resource link below for the full report.

Yellen swears in Fed board members

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WASHINGTON (6/17/14)--Federal Reserve Board Chair Janet Yellen administered the oaths of office Monday for Lael Brainard as a member of the Fed  board of governors and for Jerome H. Powell, who was sworn in for a second term on the board and Stanley Fischer, who was sworn in as vice chair.

The three Fed board members were nominated by President Obama in January 2014 and Brainard and Powell were confirmed by the U.S. Senate on June 12. Their terms expire on Jan. 31, 2026, and Jan. 31, 2028, respectively.  Fischer was confirmed by the Senate on May 21, and confirmed as vice chair on June 12. His term as vice chair expires June 12, 2018.

Use the resource link below to access Fed biographies of each board member.

Timing right for a McWatters vote this week

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WASHINGTON (6/16/14)--J. Mark McWatters could be confirmed as the newest member of the National Credit Union Administration by the Senate this week, joining the three-person board alongside Chair Debbie Matz and board member Rick Metsger.
 
McWatters, the current assistant dean for graduate programs at Southern Methodist University's School of Law, will replace Michael Fryzel, whose term expired last August but who agree to stay on the board until a successor was confirmed. McWatters was nominated by President Barack Obama in December.
 
The Credit Union National Association wrote to Senate Majority Leader Harry Reid (D-Nev.) and Sen. Minority Leader Mitch McConnell (R-Ky.) late last week urging them to confirm McWatters as soon as possible, so he can be brought up to speed on the latest developments in the NCUA's risk-based capital program before a rule is made final.
 
"Our concern is that if the Senate does not act on his nomination soon, he may not have sufficient time on the board to be properly informed and engaged prior to a vote on the final rule," the letter reads.
 
CUNA Interim President/CEO Bill Hampel said that the association is compelled to act to seek McWatters' approval because of the wide-ranging implications the NCUA's risk-based capital proposal would have on credit unions.
 
"CUNA has not historically taken positions on presidential nominations, and we are not expressing a view on the merits of this nomination," Hampel said, adding,  "Nevertheless, we believe it is critical that the Senate take action on the nomination because NCUA is beginning the process of finalizing a rule that will have substantial impact on credit unions and their ability to serve their members."

Senate confirms 3 Fed Reserve officials

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WASHINGTON (6/16/14)--Last week, the Senate confirmed three new officials to join the Federal Reserve's board of governors. Stanley Fischer was named vice chair of the Fed, while Lael Brainard and Jerome Powell were confirmed as board members.
 
Fischer, who will serve directly under Fed Chair Janet Yellen, has been involved in international banking for several decades. He served as chief economist for the World Bank from 1988 to 1990 and was first deputy managing director of the International Monetary Fund from 1994 to 2001.
 
In 2005 he was appointed governor of the Bank of Israel, where he served until 2013. President Barack Obama nominated Fischer for vice chair of the Fed in January. Fischer was approved by a vote of 63-24.
 
Brainard was an associate professor of applied economics at the Massachusetts Institute of Technology Sloan School of Management before taking the position of deputy national economic adviser and chair of the Deputy Secretaries Committee on International Economics in the Clinton administration.
 
In 2010 she became the undersecretary of the Treasury for international affairs, where she served until November 2013. She was confirmed to the Federal Reserve board of governors by a 61-31 vote in the Senate last week.
 
Powell took his position on the board of governors in May 2012 to fill a term that expired in January of this year. He was confirmed by a Senate vote of 67-24.
 
Before being named to the board, he served as a visiting scholar at the Bipartisan Policy Center in Washington, D.C., and was an assistant secretary and undersecretary of the Treasury under in the George H.W. Bush administration.

In 1st 'President's Report,' Hampel notes it's 'full steam ahead'

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WASHINGTON (6/16/14)--In the new "President's Report," Credit Union National Association Interim President/CEO Bill Hampel reminded that CUNA would not skip a beat in representing credit unions after former President/CEO Bill Cheney's departure last week.
 
Cheney is now the president/CEO of SchoolsFirst FCU, Santa Ana., Calif., succeeding Rudy Hanley who is retiring after more than 30 years at the $10 billion-plus-asset credit union.
 
The weekly publication, previously known as "The Cheney Report," will continue to inform CUNA membership about the work being done at the legislative, regulatory and credit union system level.
 
Among this week's topics:

  • The National Credit Union Administration's risk-based capital (RBC) proposal drew a record 2,052 comment letters, including one from the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness.
     
  • Sens. Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.) received a letter from CUNA urging that the Senate take immediate action on the confirmation of J. Mark McWatters to the NCUA board to ensure he would have adequate time to learn about pending issues before the board--including the RBC proposal.
     
  • As the June 30 deadline nears, CUNA is working on its comment letter regarding NCUA's field of member proposal for associational common bonds.
     
  • Seven different regulatory relief bills moved forward in the U.S. House of Representatives including the Mortgage Choice Act that amends the Truth in Lending Act by improving definitions provided for points and fees in a mortgage transaction. Other bills that passed through the House Financial Services Committee addressed the Consumer Financial Protection Bureau.
     
  • A wrap-up of last week's primary elections, which resulted in a win for former credit union executive Pete Aguilar (D), who is running in California's 31st District, and a loss for House Majority Leader Eric Cantor (R-Va.)

McCarthy, potential No. 2 House leader, familiar face at GAC

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WASHINGTON (6/16/14)--House Majority Whip Kevin McCarthy (R-Calif.), who announced his bid for the House majority leader position, has had positive experiences with credit unions, especially the one that gave him loans for his education and his business.
 

McCarthy's bid comes on the heels of House Majority Leader Eric Cantor's (R-Va.) resignation from the leadership position after losing in last week's primary to Dave Brat, an economics professor at Randolph-Macon College in Ashland, Va.
 
"Mr. McCarthy is well-respected, and well-liked, among his colleagues, and his door is open to credit unions for our views," said John Magill, executive vice president of government affairs for the Credit Union National Association. "We look forward to working with him in the future under any circumstances, and certainly if he becomes majority leader."
 
As a member of the House Financial Services Committee, McCarthy has spoken at CUNA's Governmental Affairs Conference, including this year during which he shared his concern about the growing regulatory burden.
 
"Credit unions are a symbol of free enterprise, risk and upward mobility," McCarthy told the 2014 GAC audience ( News Now Feb. 26), expressing concerns that regulations are hindering the not-for-profit institutions.  
 
He also recalled how credit unions played a key role in his own life. To attend junior college, he took out a loan from Kern Schools FCU, Bakersfield, Calif., now with $1.2 billion in assets.
 
McCarthy said that he received another line of credit after he decided to start selling cars, and that Kern Schools allowed him to refinance his debt after he won a modest-by-today's standards $5,000 in the California lottery. He then invested in a local sandwich chain, which he sold to put himself through college.
 
"I'd never make it to majority whip if I didn't belong to a credit union," McCarthy stated. 
 
McCarthy was first elected to the House in 2006. He was previously an aide to former Rep. Bill Thomas, R-Calif., for a decade, and he succeeded Thomas when the congressman retired.
 
After the 2010 midterm elections, McCarthy was elected to serve as majority whip of the U.S. House.

 
House Majority Whip Kevin McCarthy (R-Calif.), who is in line to be elected as House majority leader this week, has spoken to the Credit Union National Association's Governmental Affairs Conference a number of times. (CUNA photo)

Payday lending concerns outweigh mobile at CFPB field hearing

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NEW ORLEANS (6/16/14)--The purpose of the Consumer Financial Protection Bureau's field hearing in New Orleans last week was to discuss mobile financial services, but once the hearing was open to the public, payday lending became a major topic of discussion.
 
"In this modern age where people can manage their money on the go, there is great potential to provide access to more consumers and allow them to take greater control of their financial lives," said CFPB Director Richard Cordray. "At the same time, using mobile devices for all sorts of banking services can make some transactions cheaper or faster or both. But we need to make sure that the legal and regulatory framework can keep up effectively."
 
While security in mobile financial services is a key concern of the CFPB, Cordray said they were also a valuable tool to allow access to services for populations that are physically unable to use brick-and-mortar institutions for their financial needs.
 
After remarks from Cordray and other officials, the meeting was opened to the public, where payday lending quickly became the topic of discussion. Together Louisiana, a grassroots organization, organized a caravan to the hearing in order to express the need for change when it comes to payday loans ( The New Orleans Advocate June 12).
 
According to The New Orleans Advocate , the group asked Cordray specifically to:

Many speakers at the hearing were there because they felt the state of Louisiana was not doing enough to combat the practice, so consumers are seeking intervention at the federal level ( American Banker June 12).
 
The CFPB has announced that payday lending would be part of its spring 2014 rulemaking agenda, with a special emphasis on whether rulemaking is warranted for payday loans and other deposit advance products.
 
In addition, the CFPB released a report on payday lending in March that found, among other things, that more than 80% of payday loans or rolled over or followed by another loan within 14 days, and half of all loans are a part of a rollover sequence of at least 10 loans.
 
Use the resource links below for more information.

  • Prohibit payday lenders from lending to consumers who have been in debt with payday loans for more than 90 days over the past year;
     
  • Require payday lenders to determine a borrower's ability to repay before a loan is approved; and
     
  • Require payday lenders to report transactions to a regulatory authority.

CFPB fines N.J. title co. for referral kickbacks

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WASHINGTON (6/16/14)--The Consumer Financial Protection Bureau has ordered New Jersey-based Stonebridge Title Services Inc. to pay a $30,000 civil penalty as a result of paying illegal kickbacks for referrals.
 
The CFPB charges that Stonebridge paid commission to more than 20 independent sales representatives who referred title insurance business to Stonebridge.
 
"Kickbacks drive up the costs of getting a mortgage and put law-abiding companies at a disadvantage," said CFPB Director Richard Cordray. "The consumer bureau will continue to take action against companies that seek to attract consumers through illegal schemes."
 
The CFPB found that beginning in 2008 and continuing until at least 2013 Stonebridge solicited people to provide it with referrals and offered to pay commissions of up to 40% of the title insurance premiums. These practices violated Section 8 of the Real Estate Settlement Procedures Act (RESPA), which prohibits kickbacks and payment of unearned fees in the context of residential real estate transactions.
 
Paying commissions for referrals is allowed under RESPA if the recipient of the payment is an employee of the company paying the referral. However, the CFPB investigation found the individuals in question were independent contractors.
 
Use the resource link below for more information.

Hike the Hill reinforces congressional support for Maine CUs

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WASHINGTON (6/16/14)--The Maine Credit Union League's Hike the Hill trip, June 9-11, provided reinforcement of congressional support for the state's credit unions.
 

Twenty-three states are scheduled for this year's Hike the Hill program. Hike the Hill, which runs from May to September, is sponsored by the Credit Union National Association and state leagues to give credit union officials a chance to bring the credit union message to their elected representatives and federal regulators in the nation's capital.
 
Among those participating from Maine on this year's trip was the Maine House Minority Leader Rep. Ken Fredette, who has been on the board of Sebasticook Valley FCU, Pittfield, Maine, with $80 million in assets, for nearly 20 years.

On his first hike, Fredette said the trip showed "the strength of Maine's credit unions in Washington, and the value and importance of communicating with legislators.  Personal relationships and getting involved play a crucial role in legislative success at both the state and national level. I thoroughly enjoyed being a part of the trip." 
 
Each member of the state's congressional delegation reiterated appreciation for all that Maine's credit unions do for the residents of Maine, for being an essential part of Maine's economy, and for demonstrating leadership on raising funds for ending hunger and other causes.   
 
League President John Murphy thanked each member of the delegation for their strong support of credit union issues and for their service to the people of Maine.

"Every opportunity to meet with each member of our congressional delegation and discuss a variety of issues important to credit unions further solidifies and reinforces the strong relationship we have with our elected officials," Murphy said. "We value these relationships, and the support we receive from each of them."

 
Click to view larger image From left, Ryan Donovan, Credit Union National Association senior vice president of legislative affairs; Rep. Ken Fredette, Minority Leader of the Maine House and board member of Sebasticook Valley FCU, Pittsfield, Maine; and John Murphy, Maine Credit Union League president, at an evening reception the league hosted at Credit Union House following a legislative briefing from CUNA. (Maine Credit Union League photo)

July 1 date for new Fed collateral margins

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WASHINGTON (6/13/14)--The Federal Reserve will have new collateral margins for discount window lending and payment system risk purposes starting July 1.
 
According to the Fed, the changes are a result of the most recent periodic review of margins and valuation practices, with updated market data incorporated.
 
The most significant change from the current collateral margins table is separate margins for fixed-rate and floating-rate individually deposited loans. For example, the margin requirement for consumer loans and leases has dropped to 46% for fixed-rate loans and 50% for floating rate loans, from 76%. This will increase the collateral requirement for credit unions who issue those type of loans.
 
The upper margin ranges have either stayed the same or dropped one percentage point, while the lower bound of the margin ranges have been reduced significantly across the categories for typical credit union loans.
 
Currently 493 credit unions have pre-pledged collateral at the Fed. As of March, total credit union borrowings from the Fed were $2.97 million by four credit unions.
 
Under National Credit Union Administration rules, federally insured credit unions with assets of $250 million or more are required to have access to a backup federal liquidity source for emergency situations through the Fed's discount window or NCUA's Central Liquidity Facility.
 
There are no changes to the principles behind the Fed's collateral management practices of frequent revaluation of assets; use of margins to mitigate Reserve Bank exposure to market and credit risk; use of the best available data and periodic reassessments of model assumptions. There are no changes to the range of assets accepted as collateral.
 
The Fed has indicated it will notify credit unions before the July 1 implementation date if their pledged collateral is insufficient.
 
Use the resource link below for more information.

IRS adopts taxpayer bill of rights

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WASHINGTON (6/13/14)--The Internal Revenue Service has adopted a 10-part "Taxpayer Bill of Rights" that is intended to provide consumers with a better understanding of their rights within the tax code.
 
"This information is critically important for taxpayers to read and understand," said IRS Commissioner John A. Koskinen. "We encourage people to take a moment to read the 'Taxpayer Bill of Rights,' especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see."
 
The document is intended to take the rights embedded in the tax code and make them more visible by grouping them into 10 categories, similar to the Bill of Rights that appends the U.S. Constitution.
 
It has been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. This comes after several years of discussions with the Taxpayer Advocate Service (TAS), an independent office within the IRS meant to represent the interests of taxpayers.
 
Nina E. Olson, the head of the TAS, said adoption of a "Taxpayer Bill of Rights" has been a goal since 2007 and listed it as the top priority of her office in her most recent annual report to Congress.
 
"[T]axpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights," she said. "I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system."
 
The 10 provisions in the "Taxpayer Bill of Rights" are:
  • The right to be informed;
  • The right to quality service;
  • The right to pay no more than the correct amount of tax;
  • The right to challenge the IRS's position and be heard;
  • The right to appeal an IRS decision in an independent forum;
  • The right to finality;
  • The right to privacy;
  • The right to confidentiality;
  • The right to retain representation; and
  • The right to a fair and just tax system.
Koskinen said the IRS plans to highlight the publication in mailings to taxpayers, all IRS facilities, the IRS.gov website and the IRS employee intranet. The publication initially will be available in English and Spanish, with versions in Chinese, Korean, Russian and Vietnamese to come.

Voluntary liquidations on NCUA's June meeting agenda

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ALEXANDRIA, Va. (6/13/14)--Voluntary liquidations will be among the topics at the National Credit Union Administration's June meeting, set for 10 a.m. (ET) Thursday.
 
The board will consider the final rule update for voluntary liquidations, which details the process that federally insured credit unions must follow should they choose to liquidate.
 
The Credit Union National Association submitted a comment letter on the voluntary liquidation proposal in May, where it expressed general agreement with the NCUA's efforts to update the rule, while emphasizing clear reinforcement within the rule that liquidation of a credit union is a "drastic step."
 
"We recognize that a small number of credit unions may choose to liquidate but we urge NCUA to add language to the rule requiring agency staff to work with a credit union considering such an option to find ways to either continue operation or merge with another credit union, in order to ensure members will continue to have access to a credit union if at all possible," the letter reads.
 
The voluntary liquidation rule was last updated by the NCUA in 1993.
 
Other items to be discussed include proposed rules and regulations for asset securitization, safe harbor and appraisals.
 
The board will also hear a request from Mainstreet CU, Lenexa, Kan., with $355 million in assets, that has requested to convert to a federal charter from a state charter.

Cantor GAC appearance backdrop for Fox Business analysis

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WASHINGTON (6/13/14)--The Credit Union National Association and its signature conference offered a backdrop to a Fox Business segment about U.S. Rep. Eric Cantor (R-Va.) stepping down as House majority leader.
 
Click to view larger image U.S. Rep. Eric Cantor's (R-Va.) appearance at CUNA's Governmental Affairs Conference served as a backdrop for Fox Business commentary Thursday.
During a Thursday morning analysis by Mike Emanuel on Fox Business , background video included Cantor's introduction by Virginia Credit Union League President/CEO Rick Pillow at the 2013 CUNA Governmental Affairs Conference. The video continued to show Cantor speaking to GAC attendees.
 
On Wednesday, Cantor resigned from the No. 2 position in the House after losing in Tuesday's primary to Dave Brat, an economics professor at Randolph-Macon College in Ashland, Va.
 
House Republicans will hold an election for Cantor's position June 19.
 
"Rep. Cantor has been a friend to the Commonwealth's credit unions stretching back to his service in the Virginia General Assembly," said David Miles, Virginia league senior vice president. "The congressman's campaigns have always been able to count on the dedicated support of credit union volunteers. We were surprised by the results of the primary, but now look forward to meeting with the Republican and Democratic candidates for the 7th District seat to educate them about credit unions and our issues."

Regulatory burden driving CU mergers: Filene white paper

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MADISON, Wis. (6/13/14)--Increased regulatory developments and the cost for credit unions to comply with them is driving the growing trend of credit union mergers, according to a new white paper from the Filene Research Institute.
 
"Only Up: Regulatory Burden and Its Effects on Credit Unions"--written by Giovanni Ferri, professor of economics, LUMSA University, Rome, and Panu Kalmi, professor of economics, University of Vaasa, Finland--considers the number of regulations imposed on U.S. and Canadian credit unions since the financial crisis.
 
The large financial institutions and their practice of "uninformed credit" led to a regulatory environment that does not take into account the "informed credit" and relationship banking used by credit unions, the report noted.
 
Regulation may be generating artificial economies of scale, thereby weakening the cooperative business model, the report noted, adding that there is a "very strong negative relationship between the size of a credit union and the relative intensity of its regulatory compliance costs."
 
Smaller credit unions with high compliance costs often cite regulatory concerns as a reason to merge, and more than 50% of past mergers indicated compliance stress factored into decision.
 
Rising costs are driven by the additional staff needed to maintain compliance. U.S. credit unions increased the numbers of full-time employees devoted to regulatory compliance by 70%--more than four times the increase in the average number of employees--between 2007 and 2012. Canadian credit unions also increased compliance staff by 94% in the same time frame.
 
The report concluded that the increased burden--especially the "one size fits all" approach--may result in credit unions being "fundamentally disadvantaged" or begin behaving like commercial banks.
 
For the full report, use the resource link.

McWatters approval needed for NCUA to assess RBC proposal: CUNA letter

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WASHINGTON (6/13/14)--Commending current National Credit Union Administration board member Michael Fryzel, the Credit Union National Association said taking action on the nomination of J. Mark McWatters to the NCUA board is "critical." Some key sources have indicated the Senate could vote on his nomination soon.
 
CUNA's letter, sent to Sens. Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.) Thursday, urged the Senate to schedule a vote on McWatters soon so the board has a full contingent as it considers comments on its risk-based capital (RBC) proposal, conducts "Listening Sessions" in the next several weeks and moves toward developing a final rule over the course of the coming months.
 
"We believe it is critical that the Senate take action on the nomination because NCUA is beginning the process of finalizing a rule that will have substantial impact on credit unions and their ability to serve their members," CUNA Interim President/CEO Bill Hampel wrote.
 
The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
The proposal has drawn the concern of 324 members of the House of Representatives and current and former members of the Senate as well as 12 Federal Home Loan Bank presidents and a U.S. Chamber of Commerce group. (See News Now June 11: U.S. Chamber group warns RBC plan is 'mismatch' of tools, biz model.)
 
"Because the complexity of the proposal and the significance of its potential impact on credit unions and their ability to serve their members is so great," Hampel wrote, "it is in the best interests of the communities credit unions serve to ensure that the NCUA board members who will vote on the final rule be involved in the rulemaking process to the greatest extent possible."
 
"To be clear, we do not know how Mr. McWatters may view the proposed rule or what suggestions for changes he may bring to the process; we have had no contact with him on any substantive issue or concerning his confirmation," the letter states. "Our concern is that if the Senate does not act on his nomination soon, he may not have sufficient time on the board to be properly informed and engaged prior to a vote on the final rule."
 
Lastly, CUNA noted, "We are not aware of any opposition to Mr. McWatters' confirmation, and we urge the Senate to take action on the nomination as soon as possible."
 
McWatters is set to replace NCUA board member Fryzel, who began his term in July 2008. Although Fryzel's term expired Aug. 2 of last year, the Republican on the board agreed to remain in service until his successor was confirmed. CUNA's letter noted that his service on the board, and, "in particular, his participation in this rulemaking has been commendable."
 
McWatters was nominated in December.

Common bond proposal comments due to NCUA June 30

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ALEXANDRIA, Va. (6/13/14)--The deadline to comment on the National Credit Union Administration's common bond provisions of its chartering and field of membership rules is fast approaching. The Credit Union National Association is accepting comments through June 23, while the NCUA will accept comments through June 30.
 
The proposed amendments would prohibit an association forming primarily for the purpose of expanding credit union membership by expanding criteria in the "totality of circumstances" test, which is used by the NCUA to determine if an association meets its requirements.
 
Under the proposal, alumni associations, religious organizations, churches, homeowner associations, scouting groups, electric cooperatives and labor unions could be automatically included in a credit union's field of membership as long as such groups meet service area and other related requirements.
 
NCUA would grandfather existing members from all qualified associations that are currently in a federal credit union's field of membership.
 
NCUA also proposes to allow automatic approval for associations that have a "mission based on preserving or furthering the culture of a particular national or ethnic origin," and seeks input on other categories of associations that should receive automatic approval.
 
Use the resource links below for more information.

House Committee passes more of CUNA-backed bills

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WASHINGTON (6/12/14)--The House Financial Services Committee continued its markup of regulatory relief bills Wednesday, passing 10 bills that were held over from Tuesday's voting session, including four that were backed by the Credit Union National Association.
 
The CFPB Inspector General Act (H.R. 3770), which would create an independent inspector general for the bureau, passed 39-20. An amendment offered by Rep. Maxine Waters (D-Calif.) failed. It would have removed the Senate confirmation requirement for the IG post.
 
The Bureau Examination Fairness Act (H.R. 4804), which sets several restrictions on CFPB examinations, would prohibit the bureau from including enforcement attorneys in examinations, regulate bureau data requests during the course of an examination, place time limitations on the completion of examination field work and the issuance of exam reports and supervisory letters, and prohibit concurrent limited-scope exams at the same institutions. It passed 33-26.
 
"Recognizing the need for efficient and meaningful exams, as well as the judicious use of credit union resources during such examinations, we believe this legislation takes a step in the right direction," CUNA wrote in a comment letter this week.
 
The Bureau Advisory Opinion Act (H.R. 4662) passed 32-27. The act directs the bureau to create a process by which entities subject to CFPB rulemaking, including credit unions, can submit questions about prospective products and services and receive a confidential opinion from the director of the bureau within 90 days on their conformance with federal consumer financial law.
 
The committee passed the Bureau Guidance Transparency Act (H.R. 4811) 35-24, an act that would require the CFPB to provide a public notice and comment period before issuing any guidance in final form.
 
Use the resource link below for a News Now story on the two CUNA-supported bills that passed the committee Tuesday.

CFPB launches mobile financial services inquiry

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WASHINGTON (6/12/14)--The Consumer Financial Protection Bureau has launched an inquiry into opportunities and challenges that come along with the use of mobile financial services. To that end, the CFPB is seeking comment from a variety of stakeholders about their use of such services.
 
"By accessing the Internet, downloading certain applications, or using text messaging, people can now complete most of their transactions and a great deal of their financial management by using their phones and other mobile devices," said CFPB Director Richard Cordray. "Consumers are using their devices to pay bills online or send funds to other consumers or businesses. More and more they are engaged in mobile banking, using their phones as tools to access their existing accounts at a bank or credit union or some other type of financial institution."
 
Cordray cited one independent researcher that estimated approximately 74,000 users per day began using mobile financial services last year. In initiating the request for information on those services, he said the bureau is specifically looking for information on:
  • Whether using mobile devices opens up financial services and money management options for millions of unbanked consumers, particularly low-income and younger populations, and whether these options are cheaper than traditional financial services.
  • How mobile products and services can be a tool to help consumers manage money in real time financial decisions are being made. According to a Federal Reserve study, 69% of mobile banking users said they checked their account balance before making a large purchase, and half decided not to make the purchase because of their account balance.
  • What types of customer service or technical assistance are available to consumers when they use mobile products, especially if a mobile product is the only access to their financial institution. The bureau is also seeking information on any additional protections consumers may need when they lose their device or if they get cut off from the cell or Internet service on their device.
  • What kind of information companies are collecting on consumers, whether it is being disclosed to consumers and how that information is used, especially for low-income consumers. The bureau is also examining whether data breaches are more common on mobile devices as compared to traditional computers.
Comments will be accepted by the bureau through Sept. 9.

The CFPB will hold a field hearing in New Orleans on mobile financial services today at 11 a.m. (ET). The event will feature remarks by Cordray, as well as testimony from consumer groups, industry representatives and members of the public.

Use the resource link below for the CFPB's official request for information.

After record 2,052 comments, NCUA's next steps on RBC plan

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ALEXANDRIA, Va. (6/12/14)--The National Credit Union Administration's risk-based capital proposal received a record 2,052 comment letters by the May 28 deadline, surpassing the previous record of 1,300 received in 1995 on proposal that set all rules for federally insured corporate credit unions.
 
The agency said all RBC letters will all be posted to its website by today.
 
Next up for the NCUA is a series of listening sessions starting June 26 in Los Angeles. This will be followed by one in Chicago on July 10 and one at the NCUA headquarters in Alexandria, Va., on July 17. Each session will run from 1 to 4 p.m. local time. 
 
NCUA Chairman Debbie Matz said Wednesday, "I always look forward to these interactive events, and I hope participants see them as opportunities for constructive dialogue."
 
She told News Now, " It's most productive when registrants come to a session with ideas for proposed solutions. NCUA board members and senior staff will be there to listen, so we'll ask participants to share with us suggestions for how they believe the regulatory and supervision process can be improved."
 
Space is limited at each session to 150 people, but the Chicago event was able to accommodate 170 attendees, due to additional space in the room. Since the Chicago session is full, additional registrants will be placed on a waiting list and will be notified if any current registrants cancel.
 
The Los Angeles and Alexandria sessions both have room for more with 117 and 131 people registered, respectively. Attendance numbers are as of June 9.
 
NCUA Chair Debbie Matz and board member Rick Metsger will attend all three sessions, while board member Michael Fryzel, who hails from Chicago,  is currently scheduled to attend that session.

Also in attendance at the session and available for questions will be a number of NCUA staff, including Executive Director Mark Treichel, Director of Examination and Insurance Larry Fazio, General Counsel Mike McKenna, Chief Economist John Worth, Office of Consumer Protection Director Gail Laster, Office of Corporate Credit Unions  Director Scott Hunt, and Office of Small Credit Union Initiatives Director Bill Myers, as well as regional directors and supervisory examiners.
 
The sessions will not be live-streamed or made available as recordings, but the NCUA said the sessions are open to photographers and press reporters.

CUNA: Cantor a 'CU friend' during 13 years on Hill

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WASHINGTON (6/12/14)--Credit unions will lose a friend on Capitol Hill with Rep. Eric Cantor's Republican primary loss in Virginia Tuesday, said Credit Union National Association Executive Vice President of Government Affairs John Magill.

"Cantor had a veritable open-door policy for credit unions and our issues during his 13 years in the House.  He addressed CUNA's Governmental Affairs Conference in 2009, 2010, 2013 and again this year and often noted credit unions' important role in helping their communities," Magill noted.

Cantor stepped down from the House Majority Leader position Wednesday after a surprise upset in which he lost the primary to Dave Brat, an economics professor at Randolph-Macon College in Ashland, Va.  The election for Cantor's position will be June 19, according to GOP sources (CNN.com June 11).

NEW: CUNA calls on Senate leaders to act on McWatters nomination

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WASHINGTON (6/12/14 UPDATED 9 a.m. ET)--Today the Credit Union National Association sent a letter to Sens. Harry Reid (D) and Mitch McConnell (R) calling for the chamber to schedule the nomination of J. Mark McWatters to be a member of the National Credit Union Administration board.
 
In today's letter, the trade association said it was not expressing a view on the merits of McWatters' nomination, but rather the importance of having a full complement of board members as the federal regulator.
 
"Nevertheless, we believe it is critical that the Senate take action on the nomination because NCUA is beginning the process of finalizing a rule that will have substantial impact on credit unions and their ability to serve their members," CUNA Interim President/CEO Bill Hampel wrote.
 
The NCUA has proposed a risk-based capital rule that has drawn the concern of 324 members of the House of Representatives as well as current and former members of the Senate.
 
"To be clear, we do not know how Mr. McWatters may view the proposed rule or what suggestions for changes he may bring to the process; we have had no contact with him on any substantive issue or concerning his confirmation," the letter states. "Our concern is that if the Senate does not act on his nomination soon, he may not have sufficient time on the Board to be properly informed and engaged prior to a vote on the final rule."
 
Lastly, "We are not aware of any opposition to Mr. McWatters' confirmation, and we urge the Senate to take action on the nomination as soon as possible."

McWatters is set to replace Michael Fryzel on the board, who began his term in July 2008. Although Fryzel's term expired Aug. 2 of last year, the Republican on the board agreed to remain in service until his successor was confirmed.
 
McWatters was nominated in December.

SBA unveils new interactive lending platform tools

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WASHINGTON (6/12/14)--Maria Contreras-Sweet, administrator of the Small Business Administration (SBA), announced new steps intended to ensure a more inclusive atmosphere for entrepreneurs. Speaking at the Center for American Progress here Tuesday, Contreras-Sweet outlined several ways the SBA would go about simplifying access to services and capital for small businesses.
 
She said "technology is the key" when it comes to bringing capital access systems up to speed with new ways consumers are accessing financial services.
 
"The prevailing challenge we face has been that our loan documentation is too complex and labor-intensive," Contreras-Sweet said.
 
She announced a new process by which the SBA can bring new lenders into the SBA system, while augmenting loan volume and multiplying points of sale. The SBA's Office of Capital Access has been testing a predictive business-scoring model for the past decade, which will combine an entrepreneur's personal and business credit score, making it easier for financial institutions to do business with the administration.
 
"This model is cost-reducing and credit-based. It ensures that risk characteristics, not socio-economic factors, determine who is deemed creditworthy," Contreras-Sweet said.
 
The new business-scoring model will be combined with another new initiative called SBA One, an interactive, user-friendly lending platform designed to automate uploading of documents and generation of forms for SBA 7(a) loans. The platform will also allow electronic signatures.
 
Contreras-Sweet said the combination of the new scoring and SBA One will save financial institutions "hours of processing time and thousands of dollars" on each loan, while encouraging more institutions to partner with the administration.
 
"By making the process quicker, cheaper and more intuitive, these reforms will help existing lenders do more small-dollar lending," she said.
 
In addition to the streamlined loan process, Contreras-Sweet said she also hoped to tailor more programs to connect women, minority and veteran-owned businesses with capital, as well as serving as a "market maker" for small businesses by opening new channels within the federal government, corporate supply chains and international commerce.
 
In March, the SBA extended a 7(a) guaranteed loan program fee waiver into 2015, an action the Credit Union National Association called "an effective way to increase borrower participation in this important SBA loan program." Under that waiver, there are no upfront and annual fees of 7(a) loans of $150,000 or less.

Use the resource link below for more information.

U.S. Chamber group warns RBC plan is 'mismatch' of tools, biz model

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ALEXANDRIA, Va. (6/11/14)--An organization formed solely for the purpose of promoting "a modern and effective regulatory structure for capital markets" said it has "strong concerns and reservations" regarding the National Credit Union Administration's proposed Prompt Corrective Action, Risk-Based Capital (RBC) proposal.
 
The Center for Capital Markets Competitiveness (CCMC), created by the U.S. Chamber of Commerce to promote fully functioning capital markets in the 21st century, warned the NCUA's attempt to impose Basel III-type bank capital standards on credit unions is a "mismatch of tools and business models."
 
"The CCMC believes that the NCUA has failed to take into account critical aspects of how capital is used and, in some cases, has not paid sufficient attention to procedural detail," the organization said in a May 28 comment letter to the federal regulator.

The CCMC said its specific concerns include:
  • A failure to consider impacts on Main Street businesses and the economy;
  • The need for an enhanced cost-benefit and economic analysis before the RBC proposal can be finalized;
  • The need for a resolution of conflicts with other legislative and regulatory initiatives; and
  • An over-broad application of the RBC proposal, as well as a "truncated" implementation period.
The proposal would allow only an 18-month implementation period.
 
The CCMC said of credit unions that they are "an important and integral part of the diverse mosaic that makes up the financial system. Credit unions are a key fixture that provides the ability of individuals and families to save and borrow to meet the needs of everyday life, prepare for the future or engage in endeavors such as starting or running a business.
 
"Additionally, credit unions, while not as large a lender as banks, are an important provider of liquidity for small Main Street businesses."
 
The letter goes on to say that credit unions have fulfilled this mission through a low-risk model that avoids over-leveraging and excessive risk-taking.
 
It continues, "The CCMC is concerned that the NCUA has not considered how the use of bank-style capital levels may adversely impact credit unions or the implications of this rulemaking upon the non-financial business community and the broader economy.
 
"This is particularly concerning as capital and liquidity requirements that are too high are as dangerous as capital and liquidity requirements that are too low (original emphasis)."
 
Use the resource link to access the complete letter.

CFPB hosts mobile financial services hearing Thursday

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NEW ORLEANS (6/11/14)--The Consumer Financial Protection Bureau will hold a field hearing on mobile financial services Thursday at 11 a.m. (ET). The event will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives and members of the public.
 
The hearing will take place on the third floor of the Old U.S. Mint, 400 Esplande Ave., in New Orleans. It is open to the public, but an RSVP is required. The CFPB blog will also host a live video stream.

Use the resource links below for more information.

CUNA applauds VA's proposed 'qualified mortgage' definition

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WASHINGTON (6/11/14)--The Credit Union National Association praised the U.S. Department of Veterans Affairs' interim final rule on qualified mortgages (QM) in a comment letter filed Monday and urged the VA to make the rule permanent.

The interim final rule, in effect since May 9, designates a QM as any loan that the VA makes directly to a borrower; Native American direct loans; and vendee loans, which are made to purchasers of properties the VA acquires as a result of foreclosures in the guaranteed-loan program.
 
"This is a practical, common sense approach, fully consistent with the Dodd-Frank Act that we support. This approach provides important flexibility to lenders making VA loans in regard to the qualified mortgage requirements and limitations," reads the comment letter. "In our view, consumers and the mortgage market generally would benefit if much more flexibility is provided for all creditors to lend to borrowers, who for example do not meet the Consumer Financial Protection Bureau's 43% debt-to-income (DTI) benchmark."
 
The Dodd-Frank Act requires the VA, the Department of Housing and Urban Development, the Department of Agriculture and the Rural Housing Service to define the types of loans they insure, guarantee or administer that are qualified mortgages.
 
The VA's rule replaces the CFPB's temporary qualified mortgage rule that exempts VA loans from the 43% DTI ratio threshold. Under the rule, all purchase money origination loans and refinances, other than certain Interest Rate Reduction Refinance Loans (IRRRLs), guaranteed or insured by the VA are defined as "safe harbor qualified mortgage loans."
 
In order for a VA IRRRL to be considered a safe harbor qualified mortgage, the loan must meet the following conditions:
  • The loan being refinanced was originated at least six months before the new loan's closing date;
  • The veteran has not been more than 30 days past due during the six months preceding the new loan's closing date;
  • The recoupment period for all allowable fees and charges financed as part of the loan or paid at closing does not exceed 36 months; and,
  • All other VA requirements for guaranteeing an IRRRL are met.
Some VA IRRRLs are considered "rebuttable presumption qualified mortgages" under the rule, which means the borrower is provided an opportunity to challenge that the lender did not make a good faith determination that the borrower has a reasonable ability to repay the loan.
 
According to the VA, 95,000 of the loans it guaranteed in 2013 would have exceeded the CFPB's 43% DTI ratio, and nearly 5,000 would have exceeded the APR limit to qualify for the qualified mortgage safe harbor. 
 
The comment period for the interim final rule closed Monday, and the VA has stated it hopes to move forward with a final soon because of the certainty the final rule will provide veterans and lenders.

As background, in January 2013, the CFPB amended Reg Z to define QM and also created a temporary exception for VA-guaranteed loans. The VA's approach in the interim final rule is to define which VA loans satisfy QM requirements, notwithstanding other limitations, to remove stakeholder's uncertainties concerning VA loans. 

Use the resource link to access CUNA comment letters.

House begins markup of CUNA-backed reg relief bills

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WASHINGTON (6/11/14)--The House Financial Services Committee has started markup on a number of bills supported by the Credit Union National Association, with two passed by the committee and several slated for a recorded vote later today.
 
The bills relate to the structure and reach of the Consumer Financial Protection Bureau (CFPB).
 
The Bureau of Consumer Financial Protection Small Business Advisory Act (H.R. 4383)  passed by voice vote.  The bill would create a small business advisory board at the bureau, and features a manager's amendment to codify the credit union and community bank advisory councils, voluntarily created by the CFPB director,  so they become permanent features of the CFPB advisory board make up.
 
CUNA strongly supports the bill and submitted a comprehensive comment letter in March 2013 on the need for such a bill, and testified to that effect before Congress in June.
 
H.R. 4383 was introduced by Rep. Robert Pittenger (R-N.C.) April 3. CUNA worked with Pittenger's office on the legislative language, and submitted a comment letter to a subcommittee hearing in May, as well as a letter Monday supporting the bill, among others.
 
The Bureau Advisory Commission Transparency Act (H.R. 4262) also passed Tuesday by a voice vote. The act clarifies that the Federal Advisory Committee Act does apply to the Consumer Financial Protection Bureau, meaning the CFPB now must open bureau advisory committee meetings to the public.
 
In a letter to the committee Monday, CUNA advocated for the act, saying the meetings should be open to the public "as they provide an important forum for credit union representatives to share concerns and provide practical guidance to the agency on operational and public policy issues."
 
Members of the committee called for a recorded vote for two bills, which will likely begin today at 10 a.m. today. They include:
  • The CFPB Inspector General Act (H.R. 3770), which would create an independent inspector general for the bureau. Rep. Maxine Waters (D-Calif.) has added an amendment that the Inspector General for the CFPB will not have to be confirmed by the Senate. That amendment will also be up for a recorded vote; and,
  • The Bureau Examination Fairness Act (H.R. 4804) which sets several restrictions on CFPB examinations, including a restriction that prevents the CFPB from including enforcement attorneys, place time limits on examination field work and prohibit concurrent examinations at the same institutions.

NCUA reminds CUs to amend CUSO agreements

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ALEXANDRIA, Va. (6/11/14)--Federally insured credit unions investing in or lending to a credit union service organization (CUSO) must amend the contractual agreement by the end of this month, in accordance with the new CUSO rule from the National Credit Union Administration.

The NCUA sent a Letter to Credit Unions (14-CU-07)  reminding them of the new rule, which will take effect June 30.

The NCUA also has posted a May 29 clarification of a provision in its CUSO  regulation.  Specifically, the agency clarified for a law firm that a federally insured credit union receiving products or services from a CUSO is not required to enter into a written agreement in which the CUSO is obligated to submit an annual report to the NCUA if the credit union does not have an investment in or loan outstanding to the CUSO.  
 
The NCUA changed its CUSO rule last November. It now requires any federally insured credit union that has an outstanding loan to, or an investment in a CUSO, to enter into a written agreement requiring the CUSO to submit annual reports to the NCUA, as well as a state supervisory authority if the credit union is state-chartered.
 
A federally insured credit union that only receives products or services from a CUSO is not subject to the new requirement.
 
According to the NCUA, the "intent of this change is to permit NCUA to obtain financial information directly from each CUSO, rather than through each credit union."
 
Use the resource links below for more information.

Treasury releases BSA data sharing practices with counterrorism center

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WASHINGTON (6/10/14)--Although the U.S. Treasury Department allows the country's intelligence agencies to access reports that financial institutions file, under the Bank Secrecy Act, on suspicious or large money transfers by their members or customers, the department said that it sets limits on the information it shares ( Bloomberg June 9).

The department released its information-sharing protocol over the weekend, saying it was doing so in response to a public records request. It described how information is shared in bulk with the National Counterterrorism Center, the organization with authority to collect, store and analyze data collections on U.S. citizens. The NCTC uses pattern analysis to search for suspicious behavior.

Bloomberg quoted NCTC Director Matthew Olsen as stating that financial dates can be some of the most relevant as to how people are connected. He added that it is vital that his center have access to Trasury's Financial Crimes Enforcement Network (FinCEN) database.

U.S. financial institutions file more than 15 million currency-transaction reports each year. CTRs are required for any money transfer of $10,000 or more into or out of an account. Also, more than 1.5 million suspicious-activity reports are filed annually by financial institutions, brokerages, money-transfer businesses and casinos.

FinCEN Director Jennifer Shasky Calvery told Bloomberg in an interview that the information that it shares is not raw data--it's already been flagged as suspicious. Also, she said, the information-sharing protocol seeks to balance privacy and the prevention of national-security threats.

Mortgage Choice Act passes, appropriations on radar

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WASHINGTON (6/10/14)--The U.S. House passed the Mortgage Choice Act (H.R. 3211) by a voice vote Monday evening under suspension of the rules. Both houses of the U.S. Congress are in session this week, and they will remain in session through the end of the month.
 
H.R. 3211 would make two adjustments to the Truth in Lending Act definition of fees and points to ensure greater consumer choice in mortgage and settlement services, which is why it has been supported by the Credit Union National Association.
 
Under the current Ability to Repay/Qualified Mortgage rule, points and fees may not exceed 3% of the loan amount. According to CUNA, what constitutes a "fee" and a "point" toward the cap varies depends on who makes the loan, and what arrangement the borrower makes to obtain title insurance.
 
The bill would clarify those definitions, as well as exclude title insurance and escrowed homeowner insurance premiums from points and fees, making sure those amounts are not counted toward the 3%.   
 
Rep. Bill Huizenga (R-Mich.), sponsor of the bill, spoke on the floor about the negative effects of the current 3% cap on points and fees, and praised the bipartisan support the bill received. Supporters on the floor also said the bill was about "fairness and opportunity," and that the bill will allow more access to credit and choice for consumers, especially low- and moderate-income consumers.

Later in the week, the House will consider H.R. 4800, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act for fiscal year 2015.
 
H.R. 4800 makes fiscal year 2015 appropriations for the Department of Agriculture, the Food and Drug Administration the Farm Credit Administration, and specifies certain uses, limits and prohibitions for the use of funds appropriated by the act.
 
Also this week, the Senate is expected to hold votes on several nominations, which could include the nomination of J. Mark McWatters to the National Credit Union Administration board.
 
In addition, Senate action is expected on the Bank on Students Emergency Loan Refinancing Act (S.2432). The bill would allow most individuals with both federal and private student loans to refinance those loans into new federal direct loans at interest rates specified in the bill. Additionally, the legislation would amend the Internal Revenue Code to impose a new minimum tax on certain high-income taxpayers.

HUD alignment of ARM, FHA rate adjustments assist compliance: CUNA

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WASHINGTON (6/10/14)--A U.S. Department of Housing and Urban Development (HUD) proposal to revise the Federal Housing Administration's (FHA) regulations governing its single-family adjustable-rate mortgage (ARM) program is needed to enable lenders to meet notification requirements prior to a borrower's rate adjustment.
 
The Credit Union National Association made that point in its June 9 comment letter to HUD regarding the plan.
 
The proposed revisions would align FHA interest rate adjustment and notification regulations with the requirements for notifying mortgagors of ARM adjustments, as required by the regulations implementing the Truth in Lending Act (TILA), as recently revised by the Consumer Financial Protection Bureau.

HUD is proposing to require FHA-approved lenders, in setting a new interest rate for an ARM loan, to use the current index figure that is the most recent one available--45 days, rather than the current 30 days--before the date of an interest rate adjustment. 
 
CUNA supports this proposed requirement, as revising the current 30-day look-back period to 45 days would enable lenders to meet the 60- to 120-day notification period prior to any adjustment to a borrower's monthly payment, as required by the CFPB's mortgage servicing rules.
 
With the proposed change to the look-back period as proposed, CUNA also supports the agency's plan  to cross-reference FHA's regulations to the disclosure and notification requirements for interest rate and payment adjustments for ARMs, including the timing, content and format of these disclosures as contained in section 1026.20(c) and (d) of Regulation Z under the CFPB's mortgage servicing rules. 
 
CUNA maintains that this cross-referencing and requiring FHA-approved mortgagees to comply with the ARM notification requirements as contained in the CFPB's mortgage servicing rules will assist in providing greater uniformity for ARM loan interest rate notifications for a larger number of consumers nationwide. 
 
Use the resource link to access the complete comment letter.

Obama to cap student loan payments starting Dec. 2015

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WASHINGTON (6/10/14)--President Barack Obama signed an executive order Monday allowing borrowers to limit repayment of federal student loans to 10% of their monthly incomes, according to a report from the Associated Press. The order will take effect in December 2015 and will affect approximately five million borrowers.
 
In his weekly video address Saturday, Obama touted the benefits of a college education, citing statisticsthat say the unemployment rate of college graduates is about half of those who have graduated high school, while graduates of a four-year college earn on average $15,000 more per year than someone with just a high school diploma.
 
"Over the past three decades, the average tuition at a public four-year college has more than tripled. The average undergraduate student who borrows for college now graduates owing almost $30,000," he said.
 
Obama also directed the Departments of Education and the Treasury Monday to work together to help borrowers manage student debt in several ways:
  • Offering performance-based contracts with private companies to provide better service through a federal student loan program. These competitive contracts are meant provide companies with incentives to find new and innovative ways to best serve students and taxpayers and to ensure that borrowers are repaying their loans. 

  • Directing the Department of Education to match student borrower portfolios against the Department of Defense's database to identify service members who can have their student loan interest rates capped at 6% through the Service Member Civil Relief Act.

  • The secretaries of the Treasury and Education will work with Intuit Inc. and H&R Block, two of the country's largest tax preparation firms, to communicate information about federal student loan repayment options with borrowers during the tax filing process.

  • The administration will work with Intuit to communicate with federal student loan borrowers through Intuit's free personal finance product, Mint.com, which is used by 15 million people. The product includes the capability to provide personalized information about federal loan repayment options based upon the information that a user has already provided.

  • The Department of Education will increase efforts to identify borrowers who may be struggling to repay and provide them with timely information about their options supporting them through the repayment process and helping them avoid or get out of default.
Obama announced a similar plan with a 10% cap in 2010, but only for those who started borrowing after October 2007.

CUNA cites concerns with international remittance cap

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WASHINGTON (6/10/14)--The Credit Union National Association has filed a comment letter with the Consumer Financial Protection Bureau regarding its proposed international remittance rule. The provision permits federally insured credit unions and other depository institutions to estimate certain remittance pricing disclosures.
 
The current proposal would extend the temporary provision, set to expire July 21, 2015, by an additional five years.
 
CUNA has long been an advocate for improvements in the CFPB's remittance rule but has numerous concerns with the current rule generally. Primarily, CUNA objects to the 100 transfers per year exemption for international remittances, which it calls "arbitrary and far too low."
                                        
According to a survey conducted by CUNA this month, 19 of 39 responding credit unions have reduced or eliminated remittance products due to the CFPB's rule. The respondents represented credit unions ranging in assets from $50 million to $3 billion.
 
The survey also indicated that while credit unions provide these services as an accommodation to members, many price their transfers only to recoup costs with no additional income and several lose money to provide these services.

A remittance generally is a transfer of money by a worker to an individual in his or her home country.
 
"As we continuously pointed out, the agency has ample statutory authority to reconsider the international remittance transfer rule's exemption threshold and increase it. We continue to believe the agency can and should invoke its exemption authority in recognition that credit unions are not-for-profit and were not causing any of the abuses that necessitated the rule," the letter reads.
 
CUNA is also concerned that the proposed clarification of the definition of "error," which is based on a provider's failure to deliver a transfer by the date of availability, could increase regulatory burdens on credit unions. CUNA believes the CFPB should exclude delays related to fraud, screenings and other legal or regulatory requirements from the definition of "error."
 
However, CUNA supports the following parts of the proposal:
  • Transfers to or from U.S. military installations located in foreign countries should continue to be considered "state-to-state" transfers for purposes of the international remittance transfer rule;
  • Clarification that only transfers from accounts primarily used for personal, family or household purposes would be subject to the remittance rule;
  • Faxes should not be subject to additional requirements for electronic disclosures; and
  • That an international remittance transfer provider should have flexibility to conduct the transaction verbally by telephone after receiving an inquiry from a consumer in writing.
CUNA also stated that the CFPB "should provide a delayed effective date of at least 90 days from the issuance of a final rule to provide adequate time for credit unions and other providers to implement any international remittance transfer rule changes."

Use the resource link to access this and other CUNA comment letters.

House to study CUNA-backed CFPB reform legislation

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WASHINGTON (6/10/14)--The House Financial Services Committee will mark up six bills relating to the structure and reach of the Consumer Financial Protection Bureau today starting at 10 a.m. (ET). These bills have been supported by the Credit Union National Association in a letter submitted to the committee Monday.
 
"Credit unions have significant interest in the activities of the bureau because even though credit unions with less than $10 billion in assets are exempt from the Bureau's examination authority, they are not exempt from the bureau's rulemaking authority," wrote CUNA President/CEO Bill Cheney in the letter.
 
The following House bills will be discussed:
  • The CFPB Inspector General Act (H.R. 3770), which would create an independent inspector general for the bureau. Currently, the inspector general of the Federal Reserve serves as the inspector general for the CFPB. The bill was introduced by Rep. Steve Stivers (R-Ohio).

  • The Bureau of Consumer Financial Protection Small Business Advisory Act (H.R. 4383), which would create a small business advisory board at the bureau. A manager's amendment is likely to be offered to codify the credit union and community bank advisory councils. H.R. 4383 was introduced by Rep. Robert Pittenger (R-N.C.)

  • The Bureau Advisory Commission Transparency Act (H.R. 4262), which would clarify that the Federal Advisory Committee Act applies to the CFPB and would, in effect, open bureau advisory committee meetings to the public.  Rep. Sean Duffy (R-Wis.) introduced this bill.

  • The Bureau Advisory Opinion Act (H.R. 4662), to direct the CFPB to create a process by which entities subject to bureau rulemaking, including credit unions, can submit questions to the bureau about the conformance of prospective products and services and receive, within 90 days, a confidential opinion from the director of the CFPB on the conformance of the product with consumer financial law. This bill was introduced by Rep. Bill Posey (R-Fla.).
In addition to the bills above, the following drafts will be discussed:
  • The Bureau Guidance Transparency Act, which would require the CFPB to provide a public notice and comment period before issuing any guidance in final form. Introduced by Rep. Marlin Stutzman (R-Ind.).

  • The Bureau Examination Fairness Act would improve the examinations process for credit unions examined by the CFPB. It would prohibit the bureau from including enforcement attorneys in examinations, regulate bureau data requests during the course of the examination, place time limitations on the completion of examination field work and the issuance of exam reports and supervisory letters and prohibit concurrent limited-scope exams at the same institutions. Introduced by Rep. Mick Mulvaney (R-S.C.).

Sen. Baldwin urges 'appropriate' risk weights for CUs

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WASHINGTON (6/10/14)--Another voice from Capitol Hill is weighing in on the National Credit Union National Administration's risk-based capital proposal. This time it is Sen. Tammy Baldwin (D), who is urging the federal credit union regulator in a letter today to work with credit unions from her state of Wisconsin to ensure that the RBC rules are "appropriate for the risks on their balance sheets."

"As you know, Wisconsin's credit unions are an important source of financial services in my state.  They serve 2.4 million members, many from rural areas.

"These credit unions have contacted me with a number of concerns about the proposal, chief among them is that the rule does not properly capture the risks involved in their lending decisions," Baldwin writes.

The NCUA proposal would, in part,  change risk-based capital ratios and require higher minimum levels for credit unions with concentrations of assets in real estate loans, member business loans, or high levels of delinquent loans.

Baldwin's letter today joins more than 2,000 already sent to the NCUA.  The contacts include a joint letter sent last week by Sens. Tim Johnson (D-S.D.), the Banking Committee's chair, and Mike Crapo (Idaho), its ranking Republican member, which calls for a clear, well-calibrated, effective RBC rule, letters from Sen. Heidi Heitkamp (D-N.D.), a member of the Senate Banking Committee, Sen. Al Franken (D-Minn.), and former Senate Banking Committee Chair Al D'Amato, as well as a joint letter signed by a bipartisan coalition of 324 House lawmakers.

The Credit Union National Association ardently opposes the RBC plan as written and has expressed to the NCUA a willingness and desire to  work with the agency on both a comprehensive strategy and on a narrower new rule approach.

CUNA said in its own letter of comment that the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher.

21 states already on 2014 CU Hike the Hill calendar

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WASHINGTON (6/9/14)--Credit union representatives from Michigan, Minnesota and Maine are the first ones scheduled for this year's Hike the Hill program. Hike the Hill, which runs from May to September is sponsored by the Credit Union National Association and state leagues to give credit union officials a chance to bring the credit union message to their elected representatives and federal regulators in the nation's capital.
 
The Minnesota Credit Union Network (MnCUN) and the Maine Credit Union League are in Washington, D.C., today and tomorrow, where they will conduct meetings at Credit Union House with CUNA staff before meeting with their elected officials in the House and Senate office buildings.
 
Members from MnCUN will also meet with National Credit Union Administration Chair Debbie Matz and a representative from the Consumer Financial Protection Bureau during their visit.
 
In previous years, credit union representatives have used Hike the Hill to discuss everything from member business lending and data security to housing finance reform and credit union charter enhancements. Delegations from 21 states are scheduled for Hike the Hill this year.
 
Hike the Hill is a program that goes hand in hand with another of CUNA's grassroots program, Project Zip Code, a secure program that counts credit union members and matches them by congressional district, state legislative district and county.
 
Information from Project Zip Code assists CUNA and state leagues with federal and state-level advocacy efforts, and helps demonstrate to elected officials how important it is to support credit union-backed legislation and policies.
 
Use the resource links below for more information.

Former CU VP moves closer to spot on November ballot

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REDLANDS, Calif. (6/9/14)--Democratic congressional candidate and former credit union vice president Pete Aguilar is moving closer to the second spot on the California ballot to represent the state's 31st District.

According to the information released Thursday evening, Aguilar holds a 183-vote lead over Republican Lesli Gooch for a chance to face Republican Paul Chabot in November for the seat currently held by retiring Rep. Gary Miller (R).
 
In California's new "jungle primary" system, the top two primary finishers will face off in the general election, regardless of party. Chabot, the top finisher, received 26.8% of the vote.
 
As of Thursday evening Aguilar had received 17.35% of the vote to Gooch's 17%, a difference of 183 votes. Observers estimated there are between 1,700 and 2,400 additional ballots to be counted, likely split among the seven candidates in the primary. The Los Angeles Times, Roll Call and Politico have all reported that Aguilar will take the second spot on the ballot.
 
Aguilar released a statement Thursday night declaring victory, saying he was "honored that Inland Empire families have given me the chance to move on to the November election and ultimately represent them in Congress."
 
The California Credit Union League and the Credit Union Legislative Action Council heavily supported Aguilar's bid, and are expected to do so through November. CULAC contributed $10,000 directly to Aguilar's campaign, and financed a $198,000 independent expenditure, which was used for direct mail, digital ads, Pandora radio spots and a website.
 
"We're proud to support Pete Aguilar," said Trey Hawkins, Credit Union National Association vice president of political affairs. "We believe his background working at a credit union, and hence understanding of the unique role credit unions play in their communities, will give him unique insight into the challenges faced by the working families of California's Inland Empire."
 
Aguilar was previously the vice president of Arrowhead CU, with $820 million in assets and based in San Bernardino, Calif. He is currently the mayor of Redlands, Calif.
 
Gooch has not conceded, but fourth-place finisher Eloise Gomez Reyes, who finished 758 votes behind Aguilar, has conceded and endorsed Aguilar.
 
The results will not become official until July 1, and a recount can be called for within five days.

CUNA: WSJ report takes unbalanced view of CU interest rate risk

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WASHINGTON (6/9/14)--A Wall Street Journal story published Friday regarding credit union interest rate and credit risk misses some important points, according to Credit Union National Association analysis of credit union financials.
 
The Journal item, "Credit Unions Ramp Up Risk," makes a claim that credit unions are piling up long-term assets, thus exposing themselves to "potentially significant losses if interest rates rise" and worrying regulators in the process.  The Journal story also says that "a similar increase in long-term assets" is playing out at smaller banks.
 
CUNA analysis shows that credit union long-term asset exposure is manageable: Long-term assets stand at 35% of total assets--a five percentage point increase compared to pre-recession levels, but a reasonable exposure given that it is dwarfed by the 51% of assets in net worth and core deposits (regular savings and share drafts).   
 
CUNA President/CEO Bill Cheney notes that in the specific case of the unrealized losses that the National Credit Union Administration reports in the article, CUNA finds those to be modest in the context of total capital and earnings at credit unions.
 
"The aggregate $1.34 billion in unrealized losses on investments reported in the article is equal to only 1.2% of the total $117 billion in credit union net worth and to only 17% of first quarter annualized earnings, which were $8 billion. No strain to the federal insurance fund appears imminent," Cheney notes.
 
The CUNA leader goes on to explain that even a significant increase in market interest rates would not necessarily cause unrealized losses to become realized losses. "Credit unions, right now, have an abundance of liquidity, with an average loan-to-share ratio of 69%, suggesting the pressure to sell any securities with unrealized losses is quite low. It also is worth noting that unrealized losses today are about equal to those seen in 2004."
 
Further, as CUNA said last week in its comment letter to NCUA on its risk-based capital proposal, credit unions have been in this situation before and have come out well.  Beginning in June of 2004 the Federal Reserve Board began to raise short-term interest rates, and by July 2006 the federal funds interest rate had increased by roughly 425 basis points, to a monthly average of 5.24%.
 
Yet, Cheney remarks, despite this substantial market interest rate shock, CUNA is unable to identify--either through material loss reports (MLRs) or by other means--any strain on the National Credit Union Share Insurance Fund (NCUSIF) caused by natural-person credit union exposure to interest rate risk.
 
"The NCUSIF ratio actually increased over the period from $1.27 per $100 in insured shares at the start of 2004 to $1.31 per $100 at year-end 2006. Similarly, we are unable to identify any natural person credit union with more than $50 million in assets that failed as a result of too-high exposure to interest rate risk," says the CUNA CEO.
 
"Our analysis acknowledges the likelihood that some credit unions experienced reduced net interest income as a result of the rise in interest rates. Significantly, however, there is no evidence that this caused losses to the NCUSIF. In fact, the total of $20 million in insurance losses in the three years from 2004 to 2006, following the dramatic increase in interest rates, is less than half the $50 million in losses in the two previous years."
 
Cheney underscores that the CUNA analysis does not imply that credit unions shouldn't manage interest rate risk. "They must. It's simply to say that credit unions have a strong track record of strong interest rate risk management."
 
The Journal article also quotes unnamed analysts suggesting that credit unions are at the same time taking on additional credit risk by lowering underwriting standards.  However, CUNA analysis finds no evidence of this and in fact shows that credit union loan loss rates have recently returned to pre-recession levels.  
 
"The simple fact is that credit union lending has always been safer than any other group of lenders, and there is no reason to believe this has recently changed," Cheney emphasizes.
 
Cheney said CUNA is sending a letter to the Journal's editors today "correcting the false and misleading aspect of their story."

Fed to host webinar on TILA-RESPA Integrated Disclosures

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WASHINGTON (6/9/14)--The Federal Reserve will host a webinar to discuss the new Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosures rule from 2 to 3 p.m. (ET) June 17.

The webinar, presented by the Consumer Financial Protection Bureau, will be the first in a series to address to new rule as it is implemented by financial institutions over the next year.
 
The session will provide an overview of the final rule and the new disclosures, as well as address basic compliance questions. Subsequent webinars will address implementation and interpretive questions about the rule.
 
The CFPB announced the webinars are meant to consolidate and address questions "in a way that promotes consistent understanding of the rules and provides a resource that stakeholders may reference."
 
The new rule consolidates existing mortgage disclosures required under TILA and RESPA into two integrated forms to make it easier for consumers to understand and locate key information. The rule also integrates the substantive and procedural requirements for providing disclosures to consumers.
 
Use the resource links below for registration and more information.
 
 

Mortgage Choice Act vote, CFPB transparency, currency costs hearings on House agenda

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WASHINGTON (6/9/14)--The House returns from break this week, and House Financial Service Committee Chair Rep. Jeb Hensarling (R-Texas) has announced the hearing schedule for this week.
 
At 10 a.m. (ET) Tuesday, the full committee will mark up legislation aimed at bringing accountability and transparency to the Consumer Financial Protection Bureau, which includes: H.R. 3770, the CFPB Inspector General Act of 2013; H.R. 4262, the Bureau Advisory Commission Transparency Act; H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act; H.R. 4539, the Bureau Research Transparency Act; H.R. 4604, the CFPB Data Collection Security Act; the Bureau Guidance Transparency Act; H.R. 3389, the CFPB Slush Fund Elimination Act; H.R. 4662, the Bureau Advisory Opinion Act and the Bureau Examination Fairness Act.
 
On Wednesday at 11:30 a.m., the Monetary Policy and Trade Subcommittee will hold a hearing to review issues related to production costs of U.S. circulating coins and currency. This will include a discussion on the usefulness of coins and currency in everyday business, and the way it is distributed and circulated through the economy.
 
Also on the House floor this week is H.R. 3211, the Mortgage Choice Act of 2013, a bill that is supported by the Credit Union National Association. The bill would amend the Truth in Lending Act to improve upon the definitions provided for points and fees in connection with a mortgage transaction.

NEW: CUNA: WSJ report takes an unbalanced view of CU interest rate risk

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WASHINGTON (6/6/14, UPDATED 12:24 p.m. ET)--A Wall Street Journal story published today regarding credit union interest rate and credit risk misses some important points, according to Credit Union National Association analysis of credit union financials.
 
The Journal item, "Credit Unions Ramp Up Risk," makes a claim that credit unions are piling up long-term assets, thus exposing themselves to "potentially significant losses if interest rates rise" and worrying regulators in the process.  The Journal story also says that "a similar increase in long-term assets" is playing out at smaller banks.
 
CUNA analysis shows that credit union long-term asset exposure is manageable: Long-term assets stand at 35% of total assets--a five percentage point increase compared to pre-recession levels, but a reasonable exposure given that it is dwarfed by the 51% of assets in net worth and core deposits (regular savings and share drafts).   
 
CUNA President/CEO Bill Cheney notes that in the specific case of the unrealized losses that the National Credit Union Administration reports in the article, CUNA finds those to be modest in the context of total capital and earnings at credit unions.
 
"The aggregate $1.34 billion in unrealized losses on investments reported in the article is equal to only 1.2% of the total $117 billion in credit union net worth and to only 17% of first quarter annualized earnings, which were $8 billion. No strain to the federal insurance fund appears imminent," Cheney notes.
 
The CUNA leader goes on to explain that even a significant increase in market interest rates would not necessarily cause unrealized losses to become realized losses. "Credit unions, right now, have an abundance of liquidity, with an average loan-to-share ratio of 69%, suggesting the pressure to sell any securities with unrealized losses is quite low. It also is worth noting that unrealized losses today are about equal to those seen in 2004."
 
Further, as CUNA said last week in its comment letter to NCUA on its risk-based capital proposal, credit unions have been in this situation before and have come out well.  Beginning in June of 2004 the Federal Reserve Board began to raise short-term interest rates, and by July 2006 the federal funds interest rate had increased by roughly 425 basis points, to a monthly average of 5.24%.
 
Yet, Cheney remarks, despite this substantial market interest rate shock, CUNA is unable to identify--either through material loss reports (MLRs) or by other means--any strain on the National Credit Union Share Insurance Fund (NCUSIF) caused by natural-person credit union exposure to interest rate risk.
 
"The NCUSIF ratio actually increased over the period from $1.27 per $100 in insured shares at the start of 2004 to $1.31 per $100 at year-end 2006. Similarly, we are unable to identify any natural person credit union with more than $50 million in assets that failed as a result of too-high exposure to interest rate risk," says the CUNA CEO.
 
"Our analysis acknowledges the likelihood that some credit unions experienced reduced net interest income as a result of the rise in interest rates. Significantly, however, there is no evidence that this caused losses to the NCUSIF. In fact, the total of $20 million in insurance losses in the three years from 2004 to 2006, following the dramatic increase in interest rates, is less than half the $50 million in losses in the two previous years."
 
Cheney underscores that the CUNA analysis does not imply that credit unions shouldn't manage interest rate risk. "They must. It's simply to say that credit unions have a strong track record of strong interest rate risk management."
 
The Journal article also quotes unnamed analysts suggesting that credit unions are at the same time taking on additional credit risk by lowering underwriting standards.  However, CUNA analysis finds no evidence of this and in fact shows that credit union loan loss rates have recently returned to pre-recession levels.  
 
"The simple fact is that credit union lending has always been safer than any other group of lenders, and there is no reason to believe this has recently changed," Cheney emphasizes.
 
Cheney said CUNA is sending a letter to the Journal's editors today "correcting the false and misleading aspect of their story."

Bank agencies seek comment on reducing regulatory burden

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WASHINGTON (6/6/14)--Mirroring an action the National Credit Union Administration took at its May 22 open board meeting, federal bank regulators this week launched a mandated effort to gain industry opinion about which rules should be studied for possible elimination.
 
The review is required of federal financial institution regulators by a 1996 law. The Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) makes regulators identify outdated, unneeded or unnecessarily burdensome rules every 10 years.
 
The banking regulators issued a joint release Wednesday, saying "the EGRPRA review may facilitate the identification of statutes and regulations that share similar goals or complementary methods where one or more agencies could eliminate overlapping requirements.

"Alternatively, commenters may identify regulations or statutes that impose requirements that are no longer consistent with the way that business is conducted and that, therefore, the agencies might eliminate."  The release is from the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp.

In May, the NCUA announced they would publish 10 categories of regulations for public comment over the next two years--under the EGRPA rules. The first set of comments is due by Sept. 2, and covers "Applications and Reporting" and "Powers and Activities."

The NCUA is interested in comments regarding the need and purpose of the regulations, need for statutory change, overarching approaches and flexibility of the regulatory standards, and effect on competition.

The federal financial institution regulators will jointly publish three additional Federal Register notices for public comment at regular intervals over the next two years. Each notice will address at least one category of the regulations.

The NCUA also reviews one-third of its body of rules every year, so every rule is reviewed for updates or elimination every three years.

Stalled GSE g-fee changes under review

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WASHINGTON (6/6/14)--The Federal Housing Finance Agency (FHFA) is requesting comment on changes to the guarantee fees (g-fees) that Fannie Mae and Freddie Mac charge lenders.
 
In January, FHFA Director Mel Watt suspended implementation of pending g-fee changes until they received further review.
 
The proposed changes were developed under former acting Director Ed DeMarco. The FHFA had planned to increase base guarantee fees for all mortgages by 10 basis points, update the upfront guarantee fee grid to better align pricing with the credit risk characteristics of the borrower, and eliminate the upfront 25 basis point adverse market fee, except in the four states whose foreclosure carrying costs are more than two standard deviations greater than the national average.

The Credit Union National Association raised the issue of containing g-fees when President/CEO Bill Cheney and senior CUNA staff met with director Watt and his FHFA advisers in April. Working with the CUNA Lending Council and CFO Council, CUNA will file a strong letter urging the agency to limit fees as much as possible and consider their impact on smaller lenders.  
 
Fannie Mae and Freddie Mac charge g-fees to cover costs associated with providing a credit guarantee to ensure the timely payment of principal and interest to investors in mortgage-backed securities if a borrower fails to pay.  

In its Request for Input released Thursday, the FHFA poses questions related to such things as the optimum level of g-fees required to protect taxpayers, and the implications for mortgage-credit availability.
 
Comments should be submitted to the Federal Housing Finance Agency, Office of Policy Analysis and Research, 400 7th St. SW, Ninth Floor, Washington, D.C. 20024 or via FHFA.gov. The deadline is Aug. 4.


Fannie Mae updates Unemployment Forbearance requirements

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WASHINGTON (6/6/14)--Fannie Mae has updated the requirements for its Unemployment Forbearance program, which allows borrowers to have their payments temporarily reduced or suspended in the event they become unemployed. The updated rules allow loan servicers to approve the use of the program without Fannie Mae's approval.
 
A borrower can be approved for the Fannie Mae Unemployment Forbearance Program by the loan servicer if:
  • The borrower's mortgage payment is in imminent default or the mortgage loan delinquency is less than or equal to 12 months as of the evaluation date; and
  • All other applicable Unemployment Forbearance eligibility requirements from the Fannie Mae servicing guide are met.
The initial forbearance period is the lesser of six months or upon notification from the borrower of re-employment.
 
Loan servicers may not offer forbearance for more than six consecutive months while the mortgage remains in their mortgage-backed securities pool. After the sixth consecutive month, it must be removed from the pool.
 
In its official announcement, Fannie Mae encourages mortgage servicers to implement the revised policy immediately, but it must be implemented no later than Sept. 1.

U.S. Dist. judge rules against payday lender

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WASHINGTON (6/6/14)--U.S. District Judge Gloria M. Navarro has found AMG Services Inc. deceived customers taking out payday loans by adding undisclosed charges and inflated fees, according to a Federal Trade Commission (FTC) announcement.
 
The decision represents the latest FTC victory in its crackdown on deceptive payday lenders.
 
Navarro ruled that in many cases the Overland Park, Kan., firm inflated fees, leaving borrowers with supposed debts of more than triple the amount they had borrowed. In one example cited by the FTC, the defendants allegedly told a consumer that a $500 loan would cost $650 to repay, then attempted to charge him $1,925 to pay it off. Deceptive loan documents were used by AMG Services in connection with at least five million consumer loans, according to the release.
 
Navarro also found that the defendants' lending practices were deceptive because key portions of defendants' loan documents were "convoluted," "buried," "hidden" and "scattered," and she further cited evidence indicating that the defendants' "employees were instructed to conceal how the loan repayment plans worked in order to keep potential borrowers in the dark."
 
The FTC suit against the defendants behind AMG Services began in 2012, alleging it violated the FTC Act by piling on undisclosed and inflated fees, and by threatening borrowers in debt collection calls with arrest and lawsuits. The defendants violated the Truth in Lending Act by giving inaccurate loan information to borrowers, and the Electronic Fund Transfer Act by requiring consumers to preauthorize electronic withdrawals from their bank accounts as a condition of obtaining credit, according to the FTC.   
 
The Federal Trade Commission reached a partial settlement on other issues last year with the principal AMG defendants, barring the settling defendants from using threats of arrest and lawsuits as a tactic for collecting debts, and from requiring all borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of obtaining credit.
 
Litigation in the case will continue to determine the liability of each defendant and the damages the court will impose.
 
Use the resource link below for more information.

NCUA state data shows loan, membership growth hot spots

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ALEXANDRIA, Va. (6/6/14)--Idaho credit unions were at the top of many categories in the National Credit Union Administration's state-level data from the first quarter of this year. The NCUA Quarterly U.S. Map Review is prepared by NCUA's Office of the Chief Economist and tracks performance indicators for federally insured credit unions in the 50 states and the District of Columbia.
 
The review includes two key state-level economic indicators: unemployment rates and home price changes, and also has data on median loan growth and median return on average assets (ROAA) to aid comparisons of typical credit unions across states.
 
Among the state-level findings are:
  • Outstanding loans grew faster in 44 states, and seven states saw slower growth. Idaho (17.7%) and Iowa (14.1%) had the fastest growth;

  • Memberships grew in 43 states with Idaho (8.7%) and Virginia (8.2%) reporting the fastest growth. Of the eight states where membership declined, Indiana experienced the largest contraction at 4.1%;

  • Compared with the first quarter of 2013, ROAA was higher in 14 states, unchanged in one state and lower in 36 states. Utah had the highest ROAA  at 128 basis points (bp), followed by North Carolina (112 bp). New Jersey (24 bp) and Connecticut (26 bp) posted the lowest ROAA;

  • Federally insured credit unions in Idaho (8.9%) and Arizona (8%) experienced the fastest overall growth in total assets. Assets fell 1.3% in Massachusetts, 0.7% in New Jersey and 0.5% in Maryland;

  • Idaho posted the largest gain of any state in federally insured credit unions' shares and deposits, with 8%. Shares and deposits fell in Massachusetts (2.5%), Maryland (0.5%) and New Jersey (0.3%); and

  • New Jersey (1.8%) and Delaware (1.6%) posted the highest total delinquency rates. New Hampshire (0.4%) and North Dakota (0.5%) had the lowest.
According to the NCUA, statewide declines in assets, loans, shares and members in Massachusetts over the past year resulted from the conversion of a large credit union to a bank.

Use the resource link below for more information.

CUNA: CFPB small-servicer exemption must help more CUs

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WASHINGTON (6/6/14)--The Credit Union National Association, in a letter to the Consumer Financial Protection Bureau, has outlined several suggestions to amendments to the 2013 mortgage rules, suggestions designed to help smaller credit unions benefit from the rules. CUNA believes these alterations will make it easier for small credit unions to serve communities, particularly low- and middle-income consumers.
 
CUNA asked the CFPB to expand its small servicer exemption through changes to its proposed alternative definition. The bureau currently proposes to allow nonprofit entities that are part of a larger association of nonprofits to fall under Regulation Z's small-servicer exemption.
 
This definition does not go far enough to exempt other nonprofit entities such as credit unions, CUNA noted. Comparing credit unions' role in housing finance for their members and local communities with similar 501(c)(3)-designated entities, credit unions should not be excluded from the small-servicer definition, CUNA maintained.
 
The CFPB's Title XIV mortgage rules names four exceptions to the rules that apply only to small creditors. To qualify for these exceptions, the creditor must have originated--together with its affiliates--500 or fewer first-lien loans and have less than $2 billion in assets at the close of the preceding calendar year.
 
"There are more than 200 credit unions in the country that have less than $2 billion in assets but originated more than 500 first-lien loans," said Jared Ihrig, CUNA's associate general counsel. "Raising the limit to at least 5,000 originations on first-lien loans will allow many more credit unions to take advantage of the exceptions available, which will allow more credit union lenders to provide an increased level of mortgage credit availability."
 
CUNA said it generally supports the CFPB's proposal to provide a cure mechanism for lenders that originate loans meant to be qualified mortgages (QM), but which have points and fees that are over the general 3% cap. The cure mechanism under consideration by the bureau proposes a period of 120 days after consummation of a loan in which the creditor can issue a refund to the consumer of the excess amount over the allowable 3% cap if the loan was made in "good faith" and meets other QM requirements. 
 
However, the letter states CUNA's concerns that a 120-day cure period may not allow ample time for credit unions to refund the overage, particularly since many credit unions outsource their post-consummation mortgage loan reviews. CUNA requests at least a 180 days after consummation to give lenders an "adequate amount of time to issue a refund to affected consumers."
 
CUNA also requests clarification on the phrase "good faith" when referring to the loan requirement.
 
"While we appreciate the bureau's efforts in providing examples as to what would and would not constitute 'good faith' by way of examples contained in the proposed official staff commentary to the rule, CUNA would recommend that the CFPB consider providing additional details and examples to further clarify this term," the letter reads.

CUNA, World Council brief USAID staffers on CU worldwide development

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WASHINGTON (6/5/14)--Credit union development, worldwide and here in the United States, was the subject of a joint presentation by the leaders of the Credit Union National Association and the World Council of Credit Unions (World Council) during a one-hour session Wednesday hosted by the U.S. Agency for International Development (USAID).
 
Click to view larger image CUNA President/CEO Bill Cheney (facing camera) outlines the financial benefits that consumers realized from credit unions in 2013--nearly $8.5 billion--during a presentation before staffers at the U.S. Agency for International Development. At right, in background, is World Council of Credit Unions CEO Brian Branch. (CUNA photo)
CUNA President/CEO Bill Cheney gave participants an overview of the origins of U.S. credit unions, as well as their current state with a continuing trend of increased lending and membership s as reported by the National Credit Union Administration in its call report data released Tuesday.
 
He focused on the financial benefits that credit unions provide to consumers-- nearly $8.5 billion in savings in 2013--in part through lower rates on loans, higher returns on savings and lower and fewer fees. Cheney also noted the recent, surging growth of credit union memberships, now on the threshold of 100 million nationwide.
 
Cheney and Brian Branch, president/CEO of World Council, noted that the same solutions successfully implemented by U.S. credit unions to reach that membership milestone also have helped millions of people in developing and emerging economies. Branch noted such innovations as mobile technology strategies that leverage networks to serve more members more effectively and to extend savings and credit to remote areas.
 
Branch also explained the roles that credit unions are taking around the world to benefit consumers, including such developments as: Agricultural lending programs that have improved small-farmer access to markets; a remittance service that has transferred more than $4 billion to recipients through credit unions around the world in the past 10 years, and a cooperative-led, Islamic-based finance model.
 
He also noted how the use of mobile technology to extend credit union services to remote areas around the globe is becoming more widespread, and how--for the past 15 years--the World Council has linked credit union movements through electronic payments, including remittances, shared branching, card services, and now mobile technology.

Primaries result in some good news for CUs' candidates

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WASHINGTON (6/5/14)--Of 11 closely watched credit union-backed candidates who ran in Tuesday's primaries in eight states, eight emerged victorious and will move on to November, two will face a runoff election in the coming months and one race stands too close to call.
 
In California, Democrat Pete Aguilar, the former vice president of Arrowhead CU, with $773 million in assets, is neck and neck with Republican Lesli Gooch for the second spot in November's election for the 31st Congressional District seat. In California, the top two vote getters in a primary move on to November, and Republican Paul Chabot has locked in the first slot.
 
Aguilar currently holds 17.4% of the vote, ahead of Gooch's 16.5%, a lead of 390 votes. Aguilar had not been declared the second-place finisher as of Wednesday, with provisional ballots still to be counted. Aguilar was the recipient of almost $198,000 in independent expenditures by the Credit Union Legislative Action Council (CULAC).
 
In Mississippi, incumbent Sen. Thad Cochran (R), who received support from CULAC and the Mississippi Credit Union Association, trails by less than 1% with 99% of precincts reporting. Cochran garnered 48.9% of the vote, while his opponent state Sen. Chris McDaniel getting 49.6%. A primary runoff is scheduled for June 24.
 
In Alabama, state Rep. Paul DeMarco (R) was the top vote-getter with 33% of the vote and will face off against Gary Palmer (who received 20% of the vote) in a July 15 runoff election. DeMarco was the recipient of more than 54,000 partisan communication mailers to credit union member households, and CULAC and the League of Southeastern Credit Unions are working on more support for the runoff.
 
In Iowa, state Rep. Pat Murphy (D) was able to avoid a party convention to decide the nominee by collecting 36.7% of the vote and will move on to November's general election. Murphy, a former state House speaker, has been a noted champion for credit union causes dating back to the early 2000s. Murphy is endorsed by the Iowa State Credit Union League and supported by CULAC.
 
Other credit union-backed candidates that won easily in Tuesday's primaries:
  • California 25th Congressional District: CULAC and California Credit Union League-backed candidate Tony Strickland (R), a former state senator, finished at the top of an eight-person field with 29.4% of the vote and will face Steve Knight, a Republican who finished with 28.3% of the vote, in November.

  • California 35th Congressional District: State Sen. Norma Torres (D), backed by CULAC and CCUL, took 67.1% of the vote to win the primary and will face off against Christina Gagnier (D), who received 15.5% of the primary vote, again in November.

  • California 45th Congressional District: State Sen. Mimi Walters (R) took 44.7% of the vote, first place in the primary, and will face second-place finisher Drew Leavens, who took 28.6% of the vote, in November.

  • Montana Senate: Rep. Steve Daines (R-Mont.) took 83% of the vote in the Republican primary. He will face Sen. John Walsh (D) in November, who was appointed to the seat following Sen. Max Baucus' (D) appointment to be the U.S. ambassador to China.

  • Montana At-large District: Daines vacated this seat to run for Senate, and Democrat John Lewis won the primary against former state House Speaker John Driscoll with 64% of the vote. Lewis, backed by credit unions, will face Republican Ryan Zinke in November.

  • New Jersey 1st Congressional District: State Sen. Donald Norcross (D), backed by the New Jersey Credit Union League and CULAC, won both the special Democratic primary for Rep. Robert Andrews' unexpired term as well as the Democratic primary for a full term. If he wins both the special general election and the general election, both held the same day on Nov. 4, he will then be sworn in, first to complete the term until January, and then for a full term in the next Congress.

  • South Dakota Senate: Former Gov. Mike Rounds (R) won his primary with 56% of the vote and is expected to prevail in the heavily Republican district against Democrat Rick Weiland in November.

CUNA requests specific guidance from IRS on FATCA

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WASHINGTON (6/5/14)--The Credit Union National Association has written a letter to the Internal Revenue Service Office of General Counsel outlining concerns with the Foreign Account Tax Compliance Act (FATCA), particularly the broad reach of the act's coordinating regulations issued in March.
 
"CUNA urges the IRS to issue guidance specifically for U.S. financial institutions that do not transact business with foreign financial institutions or nonfinancial foreign entities. The several hundred pages of FATCA-related regulations, both Chapters 3 and 4, are complex," reads the letter, signed by Colleen Kelly, federal compliance counsel at CUNA. "The majority of the rules do not apply to domestic U.S. financial institutions, but important compliance information could be buried anywhere in all of these regulations."
 
In addition to a request for written guidance, CUNA expressed concern with new procedures addressing Forms W-8BEN and W-9.
 
W-8BEN forms are obtained by credit unions from their nonresident alien members who claim exception for deposit interest income. Under the new rules, the form could be considered incorrect if the form contains "U.S. indicia," such as a current U.S. mailing address.
 
As for the changes to the Form W-9, to avoid confusion, CUNA believes that FATCA language that does not apply to U.S. accounts should not be required on U.S. account documentation.

Johnson, Crapo call for 'clear, well-calibrated, effective' RBC rule

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WASHINGTON (6/5/14)--The leadership of the Senate Banking Committee has asked federal credit union regulators to carefully consider any negative impact their risk-based capital proposal could have on credit unions' agricultural lending and on their ability to raise and maintain certain capital levels.
 
Sens. Tim Johnson (D-S.D.), the banking panel's chair, and Mike Crapo (Idaho), its ranking Republican member, were addressing the National Credit Union Administration's plan that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule, issued for comment in January, would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
The senators sent a letter Wednesday to urge the NCUA to finalize rules that are "clear, well-calibrated, and work effectively with other prudential requirements to ensure that there are no unintended consequences."
 
"The NCUA should also provide clear guidance on how credit unions should plan for supervision going forward and provide sufficient time for credit unions to adjust and comply with any new standards," the legislators wrote.
 
The NCUA reports it has received more than 2,000 comments on the risk-based capital (RBC) plan. The Credit Union National Association, in its comment letter, said, "(T)he economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher."
 
On Wednesday, CUNA President/CEO Bill Cheney thanked Sens. Johnson and Crapo, on behalf of CUNA and the state credit union associations, for speaking out on the important issues related to the agency's RBC plan.  Cheney underscored that the concerns of the senators must be addressed.
 
He added, "CUNA supports risk-based capital but does not support it in this manner, which is why we continue to urge NCUA to withdraw their proposal. However, if the agency insists on moving forward, reissuing a new proposal for comments from the credit union system and other stakeholders is essential."

CUNA emphasizes a willingness and desire to work with the NCUA on both a comprehensive strategy and on a narrower new rule approach.
 
In a response sent last Friday to 324 members of Congress who voiced concerns regarding the RBC proposal, NCUA Chair Debbie Matz indicated some of the areas in which the agency will consider changes. She noted that risk-weights, implementation time, and the proposal's impact on credit markets were among issues the regulators would review carefully moving forward.

NCUA chair honored by NeighborWorks America

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ALEXANDRIA, Va. (6/5/14)--Debbie Matz, chair of the National Credit Union Administration, has been recognized by NeighborWorks America for "exceptional leadership, dedication and commitment" to the organization's mission.

Founded in 1978 as the Neighborhood Reinvestment Corp., NeighborWorks is one of the country's pre-eminent organizations dedicated to promoting affordable housing and community development.
 
Matz served on the NeighborWorks America board of directors from January 2002 to October 2005, and from October 2012 to January 2014, with the latter stint including a term as vice chair. She appointed NCUA board member Rick Metsger as the NCUA representative on the NeighborWorks America board in January.
 
During Matz's most recent term on the board, NeighborWorks America and the Neighborworks network generated more than $4.68 billion in public and private investment and assisted more than 300,000 families with their housing needs.
 
In a resolution of appreciation passed by the NeighborWorks America board, Matz was commended for "her unflagging creativity, energy, and perseverance to build partnerships between the NeighborWorks network and credit unions, in which credit unions reached new markets with affordable loans and NeighborWorks America provided counseling to help borrowers become successful homeowners."

Nation's capital group bids farewell to Cheney as CUNA CEO

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WASHINGTON (6/5/14)--More than 60 members of the Washington community--including members of the U.S. Congress, federal regulators, trade association executives and local credit union leaders--gathered at Credit Union House Wednesday to wish Bill Cheney well before he returns to California next week to become CEO at SchoolsFirst FCU in Santa Ana.
 
During the event, CUNA Chairman Dennis Pierce noted to the group Cheney's accomplishments as CUNA president and CEO, particularly in developing a strategic vision for the credit union movement at large ("Americans choose credit unions as their best financial partner"), establishing a "535-seat strategy" to ensure every member of Congress hears from credit unions, and leading the charge on the "Don't Tax My Credit Union" campaign, which resulted in 1.4 million contacts with Congress from credit union supporters, urging lawmakers to maintain the credit union tax status.

"Those of us in attendance here tonight--and the institutions and organizations that are represented--personify the impact that Bill Cheney has had while in Washington as the leader of CUNA: He brought us all together," Pierce told the group.
 
"As Bill has said many times: He's not leaving CUNA, he's just changing roles and that he intends to remain as active as ever as CEO of a CUNA-member credit union," Pierce said. "We're thankful for that."

NCUA Q1 report highlights CU loan, membership growth

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ALEXANDRIA, Va. (6/4/14)--Credit union lending and memberships continued to increase in the first quarter of 2014, according to the National Credit Union Administration call report data released Tuesday. The data also showed higher interest rates that slowed mortgage originations.
 
"The continued growth in credit union lending and gains in membership during the first quarter are positive signs," NCUA Chair Debbie Matz said. "Investing in people and communities will produce dividends for credit unions in many respects, but the higher interest rate environment of late 2013 and the first quarter of 2014 slowed mortgage originations. To protect the (National Credit Union) Share Insurance Fund, NCUA continues to closely monitor the risks posed by rising interest rates, long-term investments and fixed-rate mortgages."
 
According to the report, federally insured credit unions' total assets grew $42.6 billion, or 4%, from the first quarter of 2013, to reach $1.1 trillion total. Membership in federally insured credit unions grew by 831,635 in the first quarter of 2014, reaching a new high of 97.1 million.
 
The number of federally insured credit unions fell to 6,491 at the end of the first quarter, a decline of 3.9%, which the NCUA says is consistent with the trend over the last 40 years of consolidation.
 
The growth in total loans contributed to 69.2% overall loan-to-share ratio, a rise of 3.3 percentage points. This makes it the highest first-quarter ratio since 2010.
 
First mortgage loans reached $272.6 billion, up 9.7% from the first quarter of 2013, with approximately 61% of those loans fixed rates. However, mortgage originations dropped significantly, with credit unions originating an annualized $42.6 billion in fixed-rate, first real estate loans in the first quarter, down from $102.9 billion in the first quarter of 2013.
 
According to the NCUA, the decline reflects a reduction in mortgage refinancing activity and is consistent with the slowdown in the housing market during the quarter.
 
Outstanding loans rose by 8.8% in the first quarter compared with the first quarter of 2013, with notable growth in new auto loans (13.9%), used auto loans (11.3%), net member business loan balances (11.1%) and non-federally guaranteed student loans (26.5%).

The Credit Union National Association's monthly credit union estimates aligned with the NCUA numbers, with loans outstanding increasing 8.9% over the past 12 months. (See related story: Monthly CU survey indicates double-digit loan growth.)
 
CUNA Senior Economist Steve Rick said the outstanding loan numbers are very promising.
 
"We've been waiting to see numbers like these since 2009. It means the economy is improving, and uncertainty is on the decline," he said. "Credit union members have more confidence so they're more willing to take out loans."
 
Other highlights from the report include:
  • Federally insured credit unions' return-on-average-assets ratio remained at 78 basis points at the end of the first quarter, equal to the 2013 year-end figure and down 5 basis points from a year earlier. Net income in the quarter ending March 31 was $2.1 billion, down slightly from a year earlier;
  • Interest income rose $241.9 million from a year earlier, while non-interest income fell $248.6 million for the quarter, with declines in both fee income and other operating income. The decline in non-interest income is partially due to a reduction in mortgage refinancing activity, a result of the rise in longer-term interest rates that began in the late spring of 2013. Expenses in the first quarter of 2014 were up slightly;
  • Overall, federally insured credit unions remain well-capitalized, with 96% reporting a net worth at or above the statutorily required 7%; and
  • The percentage of loan charge-offs due to bankruptcy declined to 18.4%, below the 19.3% level at the end of the first quarter of 2013.
The figures are based on call report data submitted to and compiled by the NCUA for the quarter ending March 31. Also on Tuesday, CUNA released its monthly credit union estimates.  See related story: Monthly CU survey indicates double-digit loan growth.
 
Use the resource link below for more information about the 5300 Call Report quarterly data.

NEW: Johnson, Crapo urge 'well-calibrated' RBC final rule

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WASHINGTON (6/4/14, UPDATED 5:21 p.m. ET)--The leadership of the Senate Banking Committee has asked federal credit union regulators to carefully consider any negative impact their risk-based capital proposal could have on credit unions' agricultural lending and on their ability to raise and maintain certain capital levels.
 
Sens. Tim Johnson (D-S.D.), the banking panel's chair, and Mike Crapo (Idaho), its ranking Republican member, were addressing the National Credit Union Administration's plan that would replace existing risk-based net worth requirements with new risk-weighted asset and capital requirements.  The rule, issued for comment in January, would apply to federally insured "natural person" credit unions with more than $50 million in assets.
 
The NCUA reports it has received more than 2,000 comments on the risk-based capital (RBC) plan. The Credit Union National Association, in its comment letter, said, "(T)he economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher."

CUNA emphasizes a willingness and desire to work with the NCUA on both a comprehensive strategy and on a narrower new rule approach.
 
In a response sent last Friday to 324 members of Congress who voiced concerns regarding the RBC proposal, NCUA Chair Debbie Matz indicated some of the areas in which the agency will consider changes. She noted that risk-weights, implementation time, and the proposal's impact on credit markets were among issues the regulators would review carefully moving forward.

Retailers reported to seek Supreme Court review of interchange case

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WASHINGTON (6/4/14)--A group of retail merchants will take its case involving debit card interchange fees to the Supreme Court, Reuters reported Monday. The probable appeal represents the latest in the merchants' battle over the Federal Reserve Board's implementation of a debit card interchange fee cap required by a 2010 law.
 
Once requested, the merchants will then have to wait to see if the Supreme Court decides to hear the case, known as NACS v. Board of Governors of the Federal Reserve System.
 
An interchange fee, sometimes called a "swipe fee," occurs when a debit card transaction takes place. It goes to the financial institution that issued the card to pay for the cost of providing the card and the transaction services, including fraud protection.
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act called for the cap on the fees, and required the Fed to implement it. In 2011, the Fed announced a cap at 21 cents per transaction for issuers with more than $10 billion in assets.
 
The Fed was subsequently sued by a group of merchants, who claimed the cap was too high. In July 2013, a U.S. District Court struck down the cap, but that decision was overturned in March by a three-judge panel of the U.S. District Court of Appeals.
 
The Credit Union National Association has advocated, along with a broad coalition of trade groups, that the cap is too low and filed an amicus brief in April 2012 that said the cap does not allow debit card issuers to cover their costs and a reasonable rate of return on their investments.
 
The joint brief described how small and large financial institutions are harmed by the Fed's tight fee ceiling. It underscored that consumers have not seen any pricing benefits for products and services promised by the merchants when they were fighting for a government-set cap on what card issuers may charge for their services.

Senate Banking votes for 7-year extension for TRIA

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WASHINGTON (6/4/14)--The Senate Banking Committee Tuesday voted 22-0 to approve the Terrorism Risk Insurance Program Reauthorization Act of 2014 (S. 2244), which would extend the program--established in 2002 under the Terrorism Insurance Act--by seven years. The new termination date would be Dec. 31, 2021.
 
TRIA requires property and casualty insurers to offer coverage for foreign acts of terrorism on U.S. soil and provides a federal backstop for that coverage. It was scheduled to expire at the end of this year.

The program was created in the aftermath of the Sept. 11 terrorist attacks when, after suffering steep losses, insurance companies ceased terrorism coverage as part of their commercial property policies. The program has since been reauthorized by Congress twice.
 
Senate Banking Committee Chairman Tim Johnson (D-S.D.) said of his panel's vote, "This seven-year extension of TRIA will continue to help promote economic growth and provide certainty for commercial property development and job creation across the country while protecting the taxpayer. With such a substantial bipartisan vote out of the Banking Committee, I thank my colleagues on both sides of the aisle and plan to continue working with them to move the bill through the Senate in a timely manner."

There is support for a similar measure in the House.  The Terrorism Risk Insurance Program Reauthorization Act (H.R. 2146), with 70 co-sponsors, was referred to the House Financial Services Committee in May 2013 and would extend TRIA coverage until Dec. 31, 2024.
 
If separate extension bills are passed by the full House and Senate, any differences--such as the extension date--would be worked out by conference committee prior to being sent to the president to be signed into law.

Bruns is new NCUA deputy inspector general

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ALEXANDRIA, Va. (6/4/14)--William Bruns, who has been with the National Credit Union Administration since 2008 and who has 26 years of federal auditing experience, is the agency's new deputy inspector general.

NCUA Inspector General James Hagen, making the announcement, said Bruns brings a wealth of knowledge and experience to the position. "Working with him in the past, I have found he maintains the independence of the Office of Inspector General while offering solid and constructive recommendations on how the agency can improve its operations," Hagen said.

Bruns previously served as a senior auditor in the inspector general's office. He was responsible for auditing and evaluating the business programs, as well as the safety and soundness, of federal credit unions and the National Credit Union Share Insurance Fund.

He has conducted or overseen nearly every material loss review of liquidated credit unions since joining the agency, as well as having overseen its financial statement audits and collaborating on congressional requests, the announcement noted.

U.S., European officials report banking-data hacker's bust

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WASHINGTON (6/4/14)--Two computer networks allegedly used by hackers to steal banking information have been busted by the Federal Bureau of Investigation, Interpol and government agencies from several European countries, according to The New York Times and other media outlets.

U.S. and European officials have been quoted as saying that by taking over control of the networks, they have disrupted two of the world's most devastating and pervasive viruses, which have hit millions of computers worldwide.

The sting operation targeted GameOver Zeus, through which foreign hackers target the data of U.S. banks, and CryptoLocker, generally used to infect computers in a way that makes data become inaccessible through encryption (American Banker June 3). The latter is referred to as "ransomware" because hackers subsequently demand money to release the victim's computer files from encryption.

The Times reported that since CryptoLocker started spreading in 2013, people have paid millions to retrieve usable files.

News media said that last weekend, government agents in Europe and the United States seized control of servers that operated the attacks. They identified a 30-year-old suspect from Russia, Evgeniy Bogachev, alleging that he is the person behind the attacks, according to court documents and Europol.

Visa announces new prepaid card designation

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FOSTER CITY, Calif. (6/4/14)--Visa Inc. announced Tuesday a new designation for reloadable prepaid cards, aiming to simplify fees and improve consumer protection. The designation was developed in conjunction with the Center for Financial Services Innovation and The Pew Charitable Trusts.
 
Simplified fees mean that cardholders will be charged a flat monthly fee that includes all basic activities. No fees will be charged for declined transactions, customer service, in-network ATM withdrawals, balance inquiries, PIN or signature transactions, or overdrafts.
 
There will also be a quick-use guide provided to consumers to find the lowest-cost way to use the prepaid cards.
 
Other consumer protections on the cards include:
  • Individual National Credit Union Administration or Federal Deposit Insurance Corp. insurance required;
  • Dispute resolution rights under the Federal Reserve's Regulation E;
  • Coverage under Visa's zero liability policy; and
  • Access to Visa's Prepaid Clearinghouse Services to mitigate prepaid card fraud.
Prepaid programs must meet a set of standards to qualify for the new Visa prepaid designation and identification seal.
 
Visa also announced that it will aim "to keep prepaid at the forefront of financial services innovation," which includes working with industry leaders to improve consumer financial health through education, new products and ways to safely build credit.
 
It also plans to work with other card networks to introduce a global tokenization standard to enhance security of digital payments, particularly for shopping on smartphones, tablets and other devices.

NCUA's response to King-Meeks letter highlights potential changes to RBC plan

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WASHINGTON (6/3/14)--In a response sent Friday to 324 members of Congress who voiced concerns regarding the National Credit Union Administration's risk-based capital (RBC) proposal, NCUA Chair Debbie Matz indicated some of the areas in which the agency will consider changes.

Matz was responding to a letter sent to the agency on May 15 authored by Peter King (R-N.Y.) and Gregory Meeks (D-Fla.). Most notably the letter, authored by Reps. Peter King (R-N.Y.) and Gregory Meeks (D-Fla.) questioned the effect the proposal would have on credit unions and their members, as well as the proposed risk-weight calibration and the timeline for compliance.

Matz said in her letter, and the other NCUA board members have mentioned on numerous occasions, that the feedback submitted, which includes more than 2,000 comment letters received, would be taken into account as the agency moves forward to finalize a RBC plan.

In her letter on Friday, she noted that risk-weights, implementation time, and the proposals impact on credit markets were among issues the regulators would review carefully moving forward. The King-Meeks letter expressed concern the proposed concentration-based risk weightings could affect mortgage and small business credit availability.

"[A]s part of the rulemaking process, the NCUA Board will carefully consider the comments received when determining how best to calibrate the final risk weights, including any comments received about the risk weights for real estate loans, agricultural loans, and member business loans," she wrote.

The NCUA has proposed several risk weights, such as a lower 75% for credit unions' consumer loans compared to the banking system's risk weight of 100%.

As far as the implementation timeline, Matz said she shared the concern in the King-Meeks letter, and pledged that the NCUA would re-evaluate the amount of time needed before the final rule goes into effect.  The NCUA plan currently sets the implementation period at 18 months.

Matz also said that, upon issuing the final rule, the NCUA will provide further clarity as to how they calculated risk weights, and why they may in some instances differ from the risk weights for federally insured banks.

Use the resource links below for more information.

This week in Congress: Senate markup of S.2244, nominations debate

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WASHINGTON (6/3/14)--The House of Representatives is in recess this week, while the Senate returns to session after its Memorial Day District Work Break.
 
The Senate Banking Committee will hold two meetings this week: a full committee markup of S. 2244, the Terrorism Risk Insurance Program Reauthorization Act of 2014 scheduled for today, and a subcommittee hearing called "Student Loan Servicing: The Borrower's Experience" Wednesday.
 
S. 2244 would extend the Terrorism Risk Insurance Program established under the Terrorism Insurance Act of 2002 to Dec. 31, 2021, which is a seven-year extension past the original termination date of Dec. 31, 2014.
 
The Senate will also debate several nominations this week, including Sylvia Mathews Burwell for Secretary of Health and Human Services and Sharon Bowen for Commissioner of the Commodity Futures Trading Commission.
 
The Credit Union National Association will monitor the Senate floor this week in the event that it proceeds with the consideration of J. Mark McWatters to be a member of the National Credit Union Administration board.
 
The House Financial Services Committee has delayed a markup of 13 bills originally scheduled for last week. CUNA previously sent a letter in support of three of those bills which are awaiting markup: H.R. 3770, the CFPB-IG Act of 2013; H.R. 4262, the Bureau Advisory Commission Transparency Act; and H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act.
 
Ryan Donovan, senior vice president for legislative affairs for CUNA, said the association will review the remaining bills before the mark-up to determine whether or not they will weigh in. The markup is expected to resume next week.

CUNA: CFPB Changes date for pre-rule activities relating to overdraft practices

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WASHINGTON (6/3/14)--The Consumer Financial Protection Bureau (CFPB) has changed the date for further pre-rule activities on overdraft practices in its Spring 2014 rulemaking agenda and moved the date to February 2015.
 
The CFPB's analysis is meant to build off a June 2013 white paper summarizing the CFPB's initial findings of overdraft practices, taken from supervisory data from nine large banks.
 
According to its initial reports, this white paper "highlighted a number of possible consumer protection concerns, including how consumers opt in to overdraft coverage for ATM and one-time debit card transactions, overdraft coverage limits, transaction posting order, overdraft and insufficient funds fee structure, and involuntary account closures."
 
The official Spring 2014 list of agency rules posted by the Office of Information and Regulatory Affairs states that an analysis of overdraft regulations is considered to be in the "pre-rule stage." (Updated June 4.)

CUs, CULAC, state leagues back 11 candidates in today's primaries

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WASHINGTON (6/3/14)--Eleven credit union-backed candidates in eight states are running in today's primary elections, with each receiving support from their state credit union leagues, as well as the Credit Union Legislative Action Council (CULAC).
 
In Alabama's 6th District, state Rep. Paul DeMarco (R-Homewood) will face off against six other Republican candidates. DeMarco has been endorsed by the League of Southeastern Credit Unions (LCSU).  LCSU and CULAC sent more than 54,000 mailers to Republican households with credit union members. The top two finishers of the primaryh will face off in a runoff election on July 15.
 
In California, Pete Aguilar, a former vice president at Arrowhead CU, with $773 million in assets, will face off against six candidates for the 31st District seat. Aguilar is the current mayor of Redlands, Calif., and has been supported by a $198,000 independent expenditure from CULAC, which was used for direct mail, digital ads, Pandora radio spots and a website.
 
Elsewhere in California, former state Sen. Tony Strickland (R) will run against seven candidates in the 25th District, state Sen. Norma Torres (D) faces three others in the 35th District, and State Sen. Mimi Walters (R) faces off against three others in the 45th District.
 
All candidates have been backed by CULAC and the California Credit Union League. The top two candidates from each primary will face off in the November election.
 
Iowa state Rep. Pat Murphy (D) has been endorsed by the Iowa Credit Union League and will face off against four other Democrats in the primary. Murphy is a strong credit union supporter, taking their side during a state tax battle in the early 2000s.
 
Murphy needs to receive at least 35% of the vote, otherwise a party convention will decide the nominee.
 
Mississippi Sen. Thad Cochran (R) is expected to face a tight primary race, where he hopes to get a majority of the votes against two other candidates to avoid a runoff vote on June 24.
 
In Montana, the Montana Credit Union Network and CULAC are backing Rep. Steve Daines (R) in the state's senate race, to fill the seat left open by former Senate Finance Committee Chairman Max Baucus (D). Daines leaves his at-large congressional seat open with his run for Senate, and credit unions have backed Democrat John Lewis for that seat. Lewis would face the winner of a five-way Republican primary in November.
 
New Jersey state Sen. Donald Norcross (D) has earned the backing of the New Jersey Credit Union League and CULAC in today's election that will serve as a special election to fill the 1st District seat of Rep. Bob Andrews (D-Haddon Heights), who resigned, as well as the Democratic primary for November's election. Norcross is facing two other challengers.

In South Dakota, the retirement of Sen. Tim Johnson (D), current chair of the Senate Banking Committee, has left a crowded field trying to take his place. CULAC is backing former Gov. Mike Rounds in the Republican primary.

CUNA: NCUA should respond to Hill RBC concerns with meaningful changes to proposal

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ALEXANDRIA, VA. (6/2/14)--The National Credit Union Administration responded Friday to 324 federal lawmakers who voiced concern about the agency's proposed risk-based capital plan. The bipartisan collection of House members joined Reps. Peter King (R-N.Y.) and Gregory Meeks (D-N.Y.) earlier this month to express their concern over the NCUA proposed rule and urged the federal agency to ensure the proposal does not adversely affect small businesses and credit union members.
 
Credit Union National Association President/CEO Bill Cheney immediately issued a statement expressing CUNA's appreciation of the NCUA's acknowledgement of the very significant interest on the part of Congress regarding the proposed rule on risk-based capital. He also thanked Matz for reiterating the agency's willingness make changes to the proposal.
 
However, Cheney emphasized that the concerns expressed in the letter from Capitol Hill, signed by three-quarters of House members, might not be acknowledged through changes by the board as it finalizes the rule.
 
"Congress is concerned that NCUA is proposing risk-weights that are, in some cases, more stringent than the standards imposed on small banks; they don't want a rule that has a significant adverse impact on otherwise very healthy credit unions; and they want credit unions to have more than enough time to comply with the rule. It is critical that NCUA respond to these concerns not only with today's letter, but with meaningful changes to the final rule," the CUNA leader said. 
 
He added, "We strongly encourage the board to also give very careful consideration to the views of the members of Congress who worked on H.R. 1151 in 1998. Former Banking Committee Chairman Alphonse D'Amato, former Sen. Richard Bryan and former Speaker Newt Gingrich, all have expressed concern that the proposed rule would exceed the authority conveyed to NCUA in 1998.  The congressional intent is clear in the minds of these lawmakers, and the final rule should be consistent with that intent."
 
Finally, Cheney stated, the NCUA should reconsider its portrayal of the impact the proposed rule would have on credit unions. 
 
"The agency knows very well that credit unions operate with capital cushions at the behest of their examiners and to avoid inadvertently dropping below required capital levels.  While the rule would not require them to maintain these capital buffers, commonsense and sound business practice do. 
 
"Nothing in the proposed rule alters the reality that most credit unions will not want to live on the edge of prompt corrective action, especially in light of this new complicated rule. There is absolutely no doubt that impact this proposal, if finalized, will be more significant than the estimates generated by NCUA," Cheney warned.

While on one hand the NCUA letter to lawmakers attempts to refute concerns involving such critical subjects as implementation costs, raised by CUNA and others; on the other the agency assured it will remain mindful of the costs and benefits of the rule so credit remains available. 
 
Matz also acknowledge the volume of comments letters--estimated by the agency Friday morning to be around 2,000--and the length of some comments--like CUNA's 47-page letter--and said they indicate a thoughtful review of all relevant issues. She pledged that before adopting a final rule, all comments will be analyzed and evaluated and noted the board member will carefully consider comments on risk weights including those for mortgages, agricultural loans and member business loans.
 
On another important point, Matz assured that the agency would reevaluate whether the proposed 18-month implementation period should be extended.

CFPB sets spring rulemaking agenda

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WASHINGTON (6/2/14)--The Consumer Financial Protection Bureau has released its spring rulemaking agenda, as required under the Regulatory Flexibility Act. Items in the agenda are considered in the pre-rule stage, proposed rule stage or final rule stage.
 
The agenda is as follows:
  • Mortgages: The CFPB recently convened a small business review panel to discuss potential amendments to the Home Mortgage Disclosure Act. They also plan to focus on implementing a Dodd-Frank Act directive to consolidate and streamline federal mortgage disclosures required under the Truth in Lending Act and Real Estate Settlement Procedures Act. They will also address clarifications and amendments to the 2013 mortgage rules.

  • Defining "larger participants:" Implementation of their supervisory program for certain nonbank entities by defining "larger participants" in various markets for consumer financial products and services. The CFPB has previously defined larger participants in consumer debt collection, credit reporting and student loan servicing and are in the process of finalizing a rule defining larger participants in the international money transfer market.

  • Debt collection: An assessment of issues in various other markets for consumer financial products. In November, the CFPB issued an advance notice of proposed rulemaking seeking comment, data, and information from the public about debt collection and received more than 23,000 comments.

  • Payday loans and prepaid cards: Researching and considering whether rulemaking is needed in the areas of payday and deposit advance products, as well as consumer overdraft products. The CFPB released a report that analyzed payday lending and found that four of five payday loans are rolled over or renewed within 14 days. They also hope to issue a proposed rule to strengthen consumer protections for the prepaid cards.

  • Privacy disclosures: The CFPB also expects to issue a proposal regarding notices that consumers receive each year from their financial institutions to explain their information sharing policies.
Portions of the agenda will be published in the Federal Register , and the complete list can be found by using the resource link below.

'Operation Choke Point' amendment accepted over concerns of program overreach

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WASHINGTON (6/2/14)--Rep. Blaine Luetkemeyer (R-Mo.) and a bipartisan group of five members of Congress successfully offered an amendment to the Commerce, Justice and Science Appropriations Bill early Friday morning that denies funds to operate the "Operation Choke Point' program, an amendment that was passed by voice vote on the House floor. The measure has not been considered by the Senate.
 
Operation Choke Point was introduced in 2013 as an initiative from the U.S. Department of Justice, allowing its Financial Fraud Task Force to investigate whether financial institutions and payment processing companies were enabling fraudulent activity. It eventually came under fire, with opponents claiming the initiative is separating consumers from access to financial services.
 
"Despite vigorous bipartisan congressional oversight, including letters, hearings and direct conversations with the regulators, we continue to hear from small businesses in our communities that they are unable to obtain basic banking services such as bank accounts and lines of credit due to activities associated with 'Operation Choke Point,'" reads a letter submitted Thursday and signed by Luetkemeyer and Reps. Mick Mulvaney (R-S.C.), Kevin Yoder (R-Kansas), Ed Perlmutter (D-Colo.), Alcee Hastings (D-Fla.) and Tony Cardenas (D-Calif.).
 
This letter is a follow-up to one signed by 23 members of Congress in March, stating that they have received numerous reports that Operation Choke Point enforcement was causing many financial institutions to be discouraged from processing lawful transactions.
 
The Credit Union National Association submitted a letter to the House Financial Services Committee in April, stating that while CUNA support's the federal government's role in fighting fraud, it was concerned that Operation Choke Point was creating serious risks to consumers and the economy ( News Now April 8). 
 
The amendment passed Thursday prohibits the DOJ from using funds in the Commerce, Justice and Science bill to carry out Operation Choke Point.

Merchants want extension to decide if to appeal interchange loss to Supreme Court

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WASHINGTON (6/2/14)--The merchants groups that sued the Federal Reserve Board over the regulator's implementation of a statutory debit card interchange cap is not ready to call it quits on its lawsuit.

The merchant coalition in  NACS v. Board of Governors of the Federal Reserve System  filed an application Friday with the Supreme Court seeking an additional 30 days to decide whether to file a petition for writ of certiorari. In plainer terms, the merchants have filed a document which a losing party may file with the Supreme Court asking the high court to review the decision of a lower court.

The merchants' petition is currently due to be filed by June 19. The 30-day extension, if granted, would move the deadline to July 21.

In early May, the merchants let an important deadline pass and did not request a rehearing of their case--making an appeal to the Supreme Court their only option to move forward--if they indeed do choose to move forward.

The merchant interchange claims challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high.  The Credit Union National Association and its partner members of The Clearing House coalition maintain that the cap, in fact, is too restrictive.
A ruling in March by the U.S. Court of Appeals for the District of Columbia Circuit unanimously rejected claims that the Fed interchange rules violated the plain text of the Durbin Amendment to the Dodd-Frank Act. The ruling became official May 12.

Agencies clarify NFIP maximum building coverage limit

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WASHINGTON (6/2/14)--Several federal agencies, including the National Credit Union Administration, have released a statement raising the National Flood Insurance Program (NFIP) maximum limit of building coverage available to $500,000 from the previous amount of $250,000.

Coinciding with Sunday being the official start of hurricane season, this rule applies to non-condominium residential buildings designed for use for five or more families. The maximum content coverage for policies covering such buildings will remain at $100,000 per policy.
 
The Federal Deposit Insurance Corp. (FDIC), Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve,Farm Credit Administration and NCUA jointly issued the statement.
 
The change comes as a result of the Biggert-Waters Flood Insurance Reform Act of 2012, which extended the NFIP's authority through September 2017, and mandated major flood insurance reforms, including phasing out subsidies for many properties and raising the cap on annual premium increases.
 
The new coverage limits are available for new policies, policy renewals, or existing policies with change endorsements effective on or after June 1. The increase in the maximum amount of coverage available under the NFIP could affect the minimum amount of flood insurance required for both existing and future loans secured by buildings.
 
The release also states that "if, as a result of the increase in the maximum limit of building coverage for these buildings, a lender or its servicer determines on or after June 1, 2014, that the building securing the designated loan is now covered by flood insurance in an amount less than required by federal flood insurance regulation, it should take steps to ensure that the borrower obtains sufficient coverage, including force placing insurance pursuant to federal law."
 
If the borrower fails to obtain sufficient coverage within 45 days of notification, the lender or purchaser must purchase coverage on the borrower's behalf. The lender or its servicer may charge the borrower for the cost of premiums and fees incurred, including premiums and fees incurred for coverage beginning on the date on which flood insurance coverage did not provide a sufficient coverage amount.
 
Use the resource link below for more information.

FTC refunds nearly $3 million after mortgage scam

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WASHINGTON (6/2/14)--The Federal Trade Commission will pay out almost $3 million to more than 6,300 consumers who fell victim to a mortgage relief scam.
 
Starting in mid-2010, entities called Prime Legal Plans and Reaching U Network marketed mortgage relief services in English and Spanish. They contacted consumers who were in debt and told them they would have attorneys review consumers' mortgage loan documents to see if they were in compliance with the law, telling consumers that "80% of mortgages contain some fraud."
 
The entities told consumers the findings would help them negotiate lower mortgage rates, but instead charged up to $750 a month while doing nothing to help consumers stave off foreclosure.
 
On company websites, these entities claimed to be a private charity working for consumers, and would regularly cold call consumers, even ones on the Do Not Call list. The FTC has charged that these entities violated the Telemarketing Sales Rule, the FTC Act and the Mortgage Assistance Relief Services Rule.
 
"Consumers should carefully evaluate offers of help in lowering their mortgage payments or saving their homes from foreclosure," reads a statement released by the FTC. "Consumers should also know that it is illegal for anyone to collect money up-front for loan modification or foreclosure rescue services."
 
The FTC's Mortgage Relief Scams website lists many of the common ways fraud can be perpetrated on homeowners, including:
  • Phony counseling or phantom help: Scam artists tell you that if you pay them a fee, they will negotiate a deal with your lender to reduce your mortgage payments or to save your home. They may claim to be attorneys or represent a law firm and tell you not to contact your lender, lawyer or credit counselor. Sometimes, phony counselors insist you make your mortgage payments directly to them while they negotiate with the lender.
     
  • Rent-to-buy schemes: Con artists tell you to surrender the title to your house as part of a deal that allows you to stay there as a renter and buy it back later. They say that surrendering the title will let a borrower with a better credit rating get new financing and prevent the loss of the home.
     
  • Bait-and-switch: Con artists give you papers they claim you need to sign to get another loan to make your mortgage current. But buried in the stack is a document that surrenders the title to your house to the scammers in exchange for a "rescue" loan.
The FTC, through an administrator, will mail checks that must be cashed by July 21. The amount consumers will receive varies depending on how much they lost. Consumers who have questions should call 1-877-291-8511 or visit the FTC refunds website.
 
The FTC reminds consumers that it never requires consumers to pay money or provide information before redress checks can be cashed.
 
Use the resource links below for more information.

With May enforcement orders, NCUA blocks 9 from FI work

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ALEXANDRIA, Va. (6/2/14)--In its May enforcement orders prohibiting nine individuals from participating in the affairs of any federally insured financial institution, the National Credit Union Administration noted that five of the individuals pleaded guilty to theft or larceny while four others consented to the issuance of the prohibition order to avoid the time and expense of administrative litigation.

According to an NCUA releases, the May enforcement orders involved the following individuals:
  • Beth Ann Ledbetter, a former employee of Valley CU, Tuscumbia, Ala., with $63 million in assets, who pleaded guilty to the charge of bank larceny. Ledbetter was sentenced to a two-year probation, six months of home detention and ordered to pay the United States a special assessment of $100;
  • Stacey Mathes, another former employee of Valley CU, also pleaded to the charge of bank larceny. Mathes was sentenced to a two-year probation, six months of home detention and ordered to pay the United States a special assessment of $100;
  • Tonya Payne, a third former employee of Valley CU, in Tuscumbia, pleaded guilty to the charge of bank larceny. Payne was sentenced to a two-year probation, six months of home detention and ordered to pay the United States a special assessment of $100;
  • Trina Mercier, a former employee of Central Maine FCU, Lewiston, Maine, with $85 million in assets, consented to the issuance of an order of prohibition to avoid the time and expense of administrative litigation;
  • Rita Ouellette, also a former employee, or institution-affiliated party, of Central Maine FCU, Lewiston, consented to the issuance of an order of prohibition to avoid the time and expense of administrative litigation;
  • Brenda Page, a former employee of Northern Energy FCU in Mankato, Minn., with $1.7 million in assets, consented to the issuance of an order of prohibition to avoid the time and expense of administrative litigation;
  • Angie Rapper, a former employee of Bayer CU in Kansas City, Mo., with $7 million in assets,  pleaded guilty to the charge of theft of credit union funds. Rapper was sentenced to 21 months in prison and five years of supervised release, and ordered to pay restitution in the amount of $144,405.80;
  • Jolina Sanchez, a former employee of Azusa City Employees FCU in Azusa, Calif., with $2.5 million in assets, consented to the issuance of an order of prohibition to avoid the time and expense of administrative litigation; and,
  • Anne Schaal, a former employee of Aurora (Ill.) Firefighters CU, with $1.9 million in assets, was convicted of the charge of theft over $10,000 but less than $100,000. Schaal was sentenced to a three-year probation and five months of electronic home monitoring.
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 view NCUA's enforcement order--searchable by name, institutions, city, state and year. The webpage also provides links to the enforcement actions of other federal banking regulators against other institutions or their affiliated parties.