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NCUA July economic update available on iYouTubei

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ALEXANDRIA, Va. (7/26/12)--Consumer installment credit, auto loans, and consumer spending are among the issues addressed in the National Credit Union Administration's (NCUA) latest YouTube economic briefing.

NCUA Chief Economist John Worth also covers recent developments in the housing markets and employment sector, and emerging economic risks, in the new video.

This video is the latest in a series of YouTube videos to inform the public and credit unions about general economic and credit union specific developments.

The videos can also be viewed on the NCUA's YouTube page by using the resource link below.

CU QuickCash gets nod in House credit-access hearing

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WASHINGTON (7/26/12)--The Credit Union QuickCash small loan program, which is offered at several Nebraska credit unions, provides consumers short-term, small amount loans (STS loans) at interest rates far below those charged by traditional payday lenders, Nebraska financial regulator John Munn told members of the U.S. House this week.

Munn, who serves as director of the Nebraska Department of Banking and Finance, testified during a Tuesday House Financial Services financial institutions and consumer credit subcommittee hearing in Washington, the Nebraska Credit Union League (NCUL) reported in a recent press release. The credit union QuickCash loans allow consumers to borrow $500 at an annual percentage rate of 18%, Munn noted. Loans must be repaid within 60 days, and there is no credit report requirement.

The QuickCash loan program was created last fall, and tested in some markets, by a group of six Lincoln, Neb., credit unions, the NCUL release noted. QuickCash loans are now offered throughout the state. NCUL President/CEO Scott Sullivan following the hearing said the league is proud that Nebraska credit unions can provide their members "with the short-term funds that they need at a reasonable cost and in a way that does not lead the member into a cycle of debt."

The Tuesday subcommittee hearing, entitled "Examining Consumer Credit Access Concerns, New Products and Federal Regulations," focused on the Consumer Credit Access, Innovation, and Modernization Act (H.R. 6139). That bill would create a federal charter for payday lenders and make those lenders subject to Office of the Comptroller of the Currency oversight.

Munn during the hearing said payday lenders did not need to be federally chartered. Regulation of payday lenders would be better left to state authorities, he said.

A recent Pew Charitable Trusts study found that 5.5% of American adults have taken out a payday loan in the last five years. Overall, 12 million borrowers spend approximately $7.4 billion on payday loans each year, Pew said. On average, borrowers take out eight loans of $375 per year. These borrowers pay $520 in interest on these loans, Pew reported.

The effective interest rate charged on some payday loans can be as high as 521% once the loan is paid off, according to the Pew survey.

Credit unions have several programs that offer short-term small-dollar loans at far more favorable terms. The National Credit Union Administration currently allows federal credit unions to offer short-term small amount loans to their members as an alternative to predatory payday loans that are offered by other financial service providers. Federal credit unions may charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. A $20 application fee may also be charged. The loans may total as high as $1,000 and may last for as long as six months, and the loans cannot be rolled over.

The Credit Union Better Choice program, which is sponsored by the Pennsylvania Credit Union Association in partnership with the Pennsylvania Treasury Department and the Pennsylvania Department of Banking, offers 90-day loans at an 18% APR. Financial counseling is also offered as part of the program.

Other small loans are offered by credit union through REAL Solutions, the signature program of the National Credit Union Foundation.

Inside Washington (07/25/2012)

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  • WASHINGTON (7/26/12)--The Office of the Comptroller of the Currency (OCC) Tuesday registered its opposition to a bill that would permit regulators to grant federal charters to nonbank consumer lenders. The Consumer Credit Access, Innovation, and Modernization Act would apply to firms that offer installment and other small-dollar loans with repayment terms longer than 30 days, according to supporters, who also claim the bill would ease the state regulatory burden for lenders (American Banker July 25). The bill would not apply to payday loans. However, the bill would require the OCC to charter companies as national consumer credit corporations--some which are already under outstanding cease-and-desist orders, said Grovetta Gardineer, OCC deputy comptroller for compliance policy. The OCC would not have the ability to deny a charter application unless it expressly found a product or service was harmful to consumers. This would potentially allow lenders to reintroduce products the OCC has already disallowed at national banks, such as payday, tax-refund anticipation and auto title loans, Gardineer said …

Consider CU burden in prepaid card rules CUNA

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WASHINGTON (7/26/12)--New disclosures and consumer protections for users of general-purpose reloadable prepaid debit cards would offer many benefits to consumers, but the potential application of some Regulation E requirements may not be appropriate for the different risks and attributes of these cards, the Credit Union National Association (CUNA) said in a comment letter filed this week.

The CUNA comment letter is in response to an advanced notice of proposed rulemaking (ANPR) issued earlier this year by the Consumer Financial Protection Bureau (CFPB).

The CFPB announced in May it would begin the process of regulating prepaid cards under Reg E, which implements the Electronic Funds Transfers Act. Before launching the rule-writing effort, the agency ANPR is seeking information on the costs, benefits, and risks of prepaid card use.

The CFPB has said that improving the safety and transparency of prepaid cards and that of their providers will be two main goals of its rulemaking effort.

CUNA, in its comment letter, suggested that the CFPB first take steps to reduce the abusive practices of some non-depository institutions that provide prepaid cards before any Reg E rulemaking is initiated. In fact, the CFPB has announced plans to use its authority under the Dodd-Frank Wall Street Reform Act, to begin supervision of some larger non-depository institutions soon.

CUNA noted that, also under Dodd-Frank, the agency authority to prescribe rules and take actions against entities, which could include prepaid card participants, that are engaged in "unfair, deceptive or abusive acts or practices" on prepaid cards.

If the CFPB does decide to apply Reg E rules to prepaid cards, the agency should provide appropriate flexibility and limit additional compliance requirements, CUNA said.

CUNA also suggested that traditional periodic statements should not be required as part of a prepaid card product.

Reg E error resolution and liability provisions could be adjusted to account for the increased risks related to prepaid cards, and the regulation could also be modified to give prepaid card issuers additional time to investigate and resolve errors and disputes, the comment letter said.

The CFPB could also amend language that requires prepaid card issuers to resolve disputes or provisionally credit funds to card users within ten business days, CUNA added.

CUNA noted that card issuers can have issues when they try and contact prepaid cardholders, and subjecting prepaid card issuers to a hard ten-day deadline could increase instances of prepaid card fraud.

Overall, CUNA encouraged the CFPB to coordinate with credit unions on any regulatory issues regarding prepaid cards to minimize compliance burdens. The CFPB should also work with the National Credit Union Administration (NCUA) and other regulators as it develops prepaid card regulations. Any future prepaid card rulemaking should be preceded by a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, CUNA said.

For the full CUNA comment letter, use the resource link.

CUNA encourages IYC cross-sector co-op interaction

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WASHINGTON (7/26/12)--The 2012 International Year of Cooperatives, as much as it is an opportunity to raise general awareness, has been an opportunity to encourage greater interaction between different types of cooperative sectors, including credit unions, said Mark Wolff, senior vice president of communications with the Credit Union National Association (CUNA) during an IYC webinar.

The webinar, "Add value through the International Year of Cooperatives," was organized by the National Cooperative Business Association (NCBA) for its membership.  Other participants included NCBA IYC Program Manager Eric DeLuca; Brian Donovan, general administrator, University of Texas Inter-Cooperative Council Inc.; Emily Lippold Cheney, executive director, North American Students of Cooperation; and Brian Van Slyke, founder of the Toolbox for Education and Social Action.

CUNA's Wolff pointed to credit union and credit union league participation in a number of IYC events and actions, including Cabot Creamery Cooperative's recently concluded community bicycle tour up the East Coast and the "co-cycle" co-op bike tour organized by students of Hampshire College, which enlisted organizational support from UMass Five FCU in Amherst, Mass.

He also noted that CUNA has coordinated with state credit union leagues and used communications channels such as CUNA's daily online news service, News Now, social media, and video messages to steer credit unions to IYC resources, like the communications tools on the web site.

CUNA President/CEO Bill Cheney and World Council of Credit Unions President/CEO Brian Branch also have used video messaging to urge participation in the initiative, a site created by the International Cooperative Alliance that is highlighting a co-op story each day during the international year; it has already spotlighted a number of credit unions.

As another resource for credit unions, Wolff said CUNA's Cooperative Alliances Committee is developing a white paper with suggestions and examples of how credit unions and other co-ops can interact more closely, whether through business opportunities or advocacy efforts. 

The NCBA, the National Cooperative Grocers Association, and the National Rural Electric Cooperative Association, for example, are members of a pro-small business coalition that supports legislation to raise the statutory cap on credit union member business loans.

"One of the benefits of IYC we saw early on was that it's a great opportunity to raise awareness generally, yes, but also to raise cross-sector co-op awareness," Wolff said.  "Using IYC as a means to help co-ops learn about and do more with one another may be the 'low hanging fruit.'  But it's good fruit nonetheless and very much worth going after."  He said CUNA and state leagues can be resources for co-ops looking to become more engaged with credit unions.

NCBA's DeLuca also urged co-ops during the webinar Tuesday to "tell your story," saying it is the central building block of advocacy and awareness efforts.  He too noted the web site has a number of useful tools and resources in that regard.