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CUs need relief from Dodd-Frank Cheney tells lawmakers

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WASHINGTON (7/24/12)--As rules emanating from the Dodd-Frank Wall Street Reform and Consumer Protection Act continue to be proposed and finalized, compliance burdens will mount against smaller financial institutions, such as credit unions, the Credit Union National Association (CUNA) warned federal lawmakers Thursday.

In a letter submitted for the record of a hearing by the House Financial Services subcommittee on oversight and investigation  on the impact of the Dodd-Frank Act, CUNA President/CEO Bill Cheney wrote, "Congress should continue its prudent oversight of regulatory agencies as they continue to propose and finalize rules coming out of the Dodd-Frank Act and keep a keen eye on the cost of compliance and growing regulatory burden for smaller financial institutions, such as credit unions, that were not a party to the financial crisis.

"We served our members through the financial crisis and continue to do so in its aftermath."

The CUNA letter also focused on several specific regulatory issues. Regarding:

  • The Consumer Financial Protection Bureau's (CFPB) statutory authority to exempt certain entities from a number of rules being developed by the agency, CUNA expressed concern that the CFPB is not doing enough to extend relief to credit unions and others from certain compliance responsibilities. 
  • A Dodd-Frank imposed rule to regulate remittance transfers, CUNA said the current plan to exempt credit unions and other issuers who do fewer than 25 transactions per year should be increased to exempt those who do no more than 1,000 remittance transfers per year, to provide compliance relief to more small providers;
  • A new definition for qualified mortgages, which will determine proper underwriting standards for borrowers, CUNA backed the CFPB's plan to delay action until after the November elections.  CUNA also offered comments regarding specific provisions of the proposal that address a safe harbor alternative, prepayment penalties, lower documentation qualified mortgages, Balloon Payment Qualified Mortgages  for lenders in rural and underserved areas, and a delayed compliance date.
Use the link to read CUNA's complete letter.

Dodd-Frank remains CUNA priority two years in

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WASHINGTON (7/20/12)--This week marks the two-year anniversary of the Dodd-Frank Wall Street Reform Act's passage, and while much of the law has still not been implemented, the Credit Union National Association's (CUNA) priority continues to be limiting the impact of Dodd-Frank related regulations on credit unions.

The Dodd-Frank Act was controversial from the start, and remained so after it was signed into law. The act has been the subject of several House hearings in recent weeks, and legislative changes to the regulation have been discussed by members of Congress. Republican presidential candidate Mitt Romney promises or threatens--depending on one's perspective--to repeal the law if he is elected.

In addition to being controversial, implementation is also complicated with 2,319 pages of law needing to be transformed into rules. Regulators are simply taking more time than was expected to develop Dodd-Frank rules. Portions of the Dodd-Frank Act have not been implemented by their proposed deadlines.

While little in the law directly impacts credit unions,  some aspects of the law are already affecting credit unions.

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

While the debit interchange fee limits are only meant to apply to credit unions with more than $10 billion in assets, CUNA recently said the "jury is still out" on how effective this exemption has been.  CUNA also continues to monitor whether credit unions suffer any negative impact as a result of merchants steering customers toward lower-fee cards. CUNA set up a site last fall to allow credit unions to report any such abuses.

The Federal Reserve in a survey released this spring reported that the average interchange fee received by credit unions and other debit card issuers that are exempt from the debit interchange fee cap was 43 cents per transaction in 2011. The average interchange fee charged by financial institutions that were subject to the cap during that same time period was far lower, totaling 24 cents per transaction, the Fed said.

CUNA has noted that credit unions continue to be concerned that market forces will ultimately drive down the fees that the exemption for smaller institutions is intended to protect.

The Consumer Financial Protection Bureau (CFPB), which was created as a result of the Dodd-Frank Act, has taken over many consumer-oriented regulatory tasks from other federal regulators in the two years since the law was passed.

One CFPB project that could have a substantial impact on credit unions is the CFPB's final remittance transfer rule, which is scheduled to come into effect on Feb. 7, 2013. Under the rule, remittance transfer providers would be required to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes.

CUNA has warned that the remittance regulation "will significantly diminish the availability of international transfer services and increase the cost of such services for consumers." A "safe harbor" that would shield smaller institutions that process low volumes of remittance transfers from the pending regulation has been proposed, and could be finalized this summer.

The CFPB initially proposed a safe harbor cap of 25 or fewer transfers per year. CUNA has suggested a minimum safe harbor cap of 1,000 transfers.

The final safe harbor cap will likely be higher than 25, but unfortunately much lower than 1000, CUNA Director of Compliance Information Valerie Moss said.

The agency's highest profile project as of late has been a comprehensive re-working of mortgage application and closing documents, and related rules. The mortgage document changes and rules that implement those changes were released for public comment earlier this month, and CUNA continues to review the 1,099-page CFPB mortgage proposal.

For now, CUNA is concerned with portions of the proposal that would expand Regulation Z's definition of "finance charge" and sections that address settlement disclosure timing. The CFPB has claimed that the mortgage changes would not increase the cost of mortgage lending, but CUNA has countered this argument, noting that "a dollar spent on regulatory compliance is a dollar diverted from lending."

New ability-to-repay regulations were expected to be finalized by the CFPB by mid-2012, but those rules have been postponed until after the November election. The agency has also postponed the release of a final definition of "qualified mortgage" until that time.

Other near-term CFPB projects include rulemakings on expedited funds, private student lending regulations, deposit/share account insurance disclosures for non-federally insured financial institutions, and various rules that were transferred to the agency, such as the Home Mortgage Disclosure Act, Equal Credit Opportunity Act and Requirements for Prepaid Cards.

The CFPB is also examining how it could streamline existing regulations that are now under its purview.

Overall, CUNA continues to urge the CFPB to consider exempting credit unions from agency rulemakings. "While the CFPB has been tasked by Congress to implement 18 laws and assume other duties, the agency was also given broad authority to minimize the compliance burdens of its rules on entities such as credit unions," CUNA Deputy General Counsel Mary Dunn said in a June comment letter to the CFPB. "The role of the CFPB in alleviating compliance burdens for institutions that are already heavily regulated is as important as its responsibility to develop and implement regulations for entities that, prior to the establishment of the CFPB, escaped meaningful government oversight," she added.

Direct Express benefits card gets high marks

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WASHINGTON (7/20/12)--Nearly all of those that use their Direct Express prepaid debit card to receive monthly Social Security payments are satisfied with the card, and 93% of users would recommend the card to others, a U.S. Department of the Treasury Financial Management Service survey has found.

"We hope that hearing about the extremely high satisfaction with the Direct Express card will encourage check recipients to make the switch to the card or direct deposit as soon as possible," Treasury Financial Management Service commissioner David Lebryk said in a release. "For four years, millions of senior citizens, people with disabilities and other Americans who lack access to traditional banking services have used their Direct Express cards to pay bills, withdraw cash and make purchases without worrying about their paper checks being lost or stolen or paying check-cashing fees," he added.

The Treasury continues to urge social security recipients to switch to direct deposit through its Go Direct program. The Credit Union National Association (CUNA) is a Go Direct national partner and supports the check-safety and cost-savings goals for the program.

All federal benefit recipients will be required to receive their Social Security and other federal benefit payments electronically through direct deposit beginning on March 31, 2013.

For the full Go Direct release, use the resource link.

CUNA in iHuffPoi Congress should hear CUs not banks

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WASHINGTON (7/20/12)—In a new column in The Huffington Post, Credit Union National Association (CUNA) President/CEO Bill Cheney poses a simple question. Which group should Congress listen to: Credit unions, with a plan to help small business and create jobs at no taxpayer expense? Or the banks, which "offer roadblocks rather than solutions?"

Coming down in favor of unions should be a "no brainer," writes Cheney.

Small businesses still need access to capital, the CUNA CEO emphasized. Nearly one-quarter of small business owners attempted to secure loans from banks in the past year, and more than half of those business owners that looked for loans were denied, according to one survey cited by Cheney. This is a clear indication that a substantial number of small businesses continue to need more access to capital, he said.

Credit unions could help alleviate these capital concerns if the MBL cap was increased to 27.5% of total assets, from 12.25% of assets. Doing so would inject $13 billion in new funds into the economy and create 140,000 new jobs. Bills that would increase the MBL cap have been offered in both the U.S. House and Senate.

Many in Congress, Cheney noted, are listening to consumer-owned, democratically controlled, not for profit credit unions and supporting legislation that would help small businesses spur the economic recovery.

But, surprisingly, Cheney said, some legislators won't or can't listen -- or are having trouble making up their minds. Unfortunately, some legislators are likely confused by bankers' bombast, he said. But they shouldn't be.

"In what universe is it reasonable, moral or commendable to listen to -- and act on the recommendations of -- an industry that offers roadblocks, rather than solutions, to getting our economy back on track?," he said.

As further evidence, the CUNA leader noted:

  • Polling revealed that 90 percent of small business owners believe that the availability of small business loans is a problem;
  • Data from financial institution regulatory reports suggest that banks -- both large and small -- are turning away many business borrowers, with loans outstanding declining by -2.0 percent last year. At the same time, credit union business loans increased by 5.1 percent; and
  • Total bank business loan portfolios declined over the cycle, while credit union business loan portfolios grew at a healthy rate.
Cheney urged readers of the popular news and opinion web site to urge their senators to pass S. 2231, the Credit Union Small Business Jobs Act, and support credit unions that back small business and our nation's economic recovery.

For the full Huffington Post column, use the resource link.

Inside Washington (07/19/2012)

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  • WASHINGTON (7/20/12)--Sen. Bob Corker, (R-Tenn.), a member of the Senate Banking, Housing and Urban Affairs Committee, Wednesday announced that he has dropped his opposition to a bill that prevents the public disclosure of sensitive consumer information from the Consumer Financial Bureau's regulated entities. Corker also announced that he is an original co-sponsor of legislation that combines the CFPB privilege bill with the ATM sign bill. That legislation is working its way through the Senate, bringing an ATM fix closer to a final vote (News Now July 19). The most recent Senate ATM action took place this week. Language that would revise Regulation E to only ATM fee disclosures to be presented only on an ATM's screen was combined with a CFPB provision that would address how the agency handles information from entities it regulates. Current law requires ATMs to notify customers of transaction fees, both through posted placards and information on the digital displays. This dual-notification requirement has generated lawsuits against ATM operators in cases in which signs were removed by vandals or plaintiffs. Credit Union National Association President/CEO Bill Cheney recently encouraged the Senate to take up ATM disclosure legislation as soon as possible and provide credit unions with much needed regulatory relief. H.R. 4367, a House bill that addressed only ATM fee disclosure issues, passed the House last week by a 371 to 0 vote …
  • WASHINGTON (7/20/12)--A new poll indicates broad consumer support for the Consumer Financial Protection Bureau (CFPB) and other reforms in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The poll was conducted by Lake Research Partners on behalf of the Center for Responsible Lending (CRL), AARP, National Council of La Raza, and Americans for Financial Reform. About 73% of likely voters support Dodd‐Frank's expansion of federal oversight to include mortgage brokers, payday lenders and other financial entities not previously subject to federal regulation, versus 20% who oppose it. About 60% favor more oversight of financial companies such as banks, mortgage lenders, payday lenders and credit card companies, compared with 29% who say there should be less oversight. Roughly 73% favor tougher rules for Wall Street financial companies, versus 17% who oppose further regulation. Consumers also supported the CFPB, with 74% in favor of the agency, while 19% oppose it …
  • WASHINGTON (7/20/12)--Jeremiah Norton, a recently confirmed Federal Deposit Insurance Corp. director, Wednesday said he was unwilling to back a two-year delay of implementation of the Basel III capital accord. Norton and Thomas Hoenig were the only board members to raise concerns about three proposals for the Basel III capital accord at a June meeting (American Banker July 19). Norton called Basel implementation a "real issue" for small banks and suggested that another system be incorporated for small financial institutions …
  • WASHINGTON (7/20/12)--Federal Reserve Board Chairman Ben Bernanke on Wednesday said a bill that would increase Congress' authority to audit the Fed's monetary policy decisions would be a "mistake." The expanded authority would create a political influence on the Fed's monetary policy decisions, Bernanke said in testimony before the House Financial Services Committee (American Banker July 19). The bill, sponsored by Rep. Ron Paul (R-Texas), would in effect give Congress permission to ask the Government Accountability Office (GAO) to review decisions by the Fed about interest rates and examine discussions and policy actions undertaken by the Federal Open Market Committee. If the bill passed, Bernanke said a lawmaker could potentially challenge a decision to raise the federal funds rate by asking the GAO to obtain all records, transcripts and materials related to the Fed's deliberations to get an independent opinion if the right decision was made …
  • WASHINGTON (7/20/12)--Recipients of Veterans Affairs (VA) Chapter 35 education benefits recently received a check-insert encouraging them to switch to direct deposit for this benefit payment by contacting their VA regional office. Beneficiaries also may visit their financial institution branch to make the switch. However, only Veterans Affairs can make the switch. The Go Direct Online Enrollment system and call center cannot sign up VA Chapter 35 education benefits for direct deposit. The Go Direct enrollment system can only switch VA Compensation or Pension payments to direct deposit. If beneficiaries receiving a Chapter 35 education benefit would like to switch to direct deposit for Chapter 35 education benefits, they must provide their financial institution routing number and account number. They will then need to complete the direct deposit sign-up process as specified on the insert they received, either by calling 1-888-GI-BILL-1 (442-4551) or visiting their VA Regional Office …