Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive

Washington

In Texas CU-friendly candidate gets CU league support

 Permanent link
WASHINGTON (8/1/12)--"Whether their candidate wins or loses an election, credit unions win politically when they become actively involved--like Texas credit unions just did--trying to get credit union-friendly candidates elected," Richard Gose, Credit Union National Association (CUNA) Senior Vice President of Political Affairs said Tuesday night.

He congratulated Texas credit unions and the Texas Credit Union League (TCUL) for its energetic Get-Out-the-Vote effort in advance of the Texas Republican Senate runoff contest between Lieutenant Governor David Dewhurst and former State Solicitor General Ted Cruz, and the effort didn't let up until yesterday's vote.

Dewhurst was endorsed by the TCUL, and the TCUL and credit unions distributed pro-Dewhurst postcards to registered Republican voters across the state in recent weeks. More than 52,000 credit union member households received multiple mailers from the league in what was credit unions' first partisan communication for a Senate candidate.

Late Tuesday night, AP called the race in favor of Cruz.

Gose said of the results, "The results do nothing to detract from the importance of the Texas effort. You can only win when you try."

Dewhurst supported key credit union issues, including increasing the member business lending cap, during his campaign, and the TCUL's Winter Prosapio said Dewhurst, overall, understands the credit union difference.

"He has been there for credit unions as lieutenant governor, and has a track record of being with the League on many critical credit union issues," she added.

Dewhurst in a TCUL video noted that credit unions have continued lending and working with their members in a difficult economy.

CUNA Vice President of Political Affairs Trey Hawkins commended the league and Texas credit unions for their efforts. CUNA's Credit Union Legislative Action Council--known as CULAC—also supported Dewhurst in his initial primary contest and this recent runoff.

Dewhurst and Cruz were pitted against each other in a runoff election after Dewhurst in May failed to win the 50% of votes needed to secure the Republican Senate nomination. Dewhurst received 45% of the primary vote, while Cruz tallied 34% of all votes cast in the primary.

The results of the runoff are expected to be official today. The winner will run against a Democratic challenger for the Senate seat of the retiring Sen. Kay Bailey Hutchison (R) this fall.

Texas has not had a Democratic senator in office since 1993.

Texas State Rep. Marc Veasey (D) also received support from CULAC in his in the Democratic nomination bid. Veasey faced former State Rep. Domingo Garcia (D) in a runoff election in the newly created 33rd district of Texas. Veasy, defeated his Democratic runoff opponent 53% - 47%. He is favored in the Democratic seat for November.

Hawkins said CULAC "will continue to be in the game on behalf of credit union-friendly candidates, and will aggressively support credit union friends in this year's elections."

The presidency, congressional seats, and state and local positions are all at stake in 2012.

CUs lose champion with LaTourette retirement

 Permanent link
WASHINGTON (8/1/12)--Credit unions are losing a champion with Rep. Steve LaTourette's (R-Ohio) decision to retire from the House of Representatives once his current term expires, said Credit Union National Association (CUNA) Executive Vice President John Magill. LaTourette announced late Monday that he would not seek re-election  after nine terms in the House.

"Steve will long be remembered by credit unions for the bold role he took, as a second-term congressman, when he sponsored the 1998 Credit Union Membership Access Act (H.R. 1151), which preserved the right of consumers to join credit unions.

"His leadership was one of the keys to victory in that battle," Magill said.

LaTourette cited the lack of congressional compromise as one reason behind his decision to retire.

The congressman joined fellow credit union champion, former Rep. Paul Kanjorski (D-Pa.), as a lead sponsor of H.R. 1151.

More recently, LaTourette supported legislation that would have delayed the effective date of debit interchange fee cap regulations. Also over his tenure, he has supported the Credit Union Regulatory Improvements Act, credit union share insurance increase legislation and CUNA-backed data security legislation.

The legislator will officially notify state Republican officials of his decision to retire on Aug. 8, several news outlets reported. The timing will allow state authorities to appoint a candidate for this fall's election, avoiding a special primary.

The eventual Republican candidate will face Democrat Dale Blanchard this November. The winner of that election will represent Ohio's 14th congressional district, which is in the northeast corner of the state.

FinCEN warned of due diligence regs burdens

 Permanent link
WASHINGTON (8/1/12)--Credit unions would face significant challenges and costs if expanded customer due diligence (CDD) regulations that were proposed by the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) are finalized, noted Credit Union National Association Regulatory Counsel Dennis Tsang following a Tuesday public hearing.

CUNA joined financial services groups, regulators and members of the law enforcement community at the hearing, which focused on a CDD advanced notice of proposed rulemaking (ANPR) issued this spring.

A key part of the FinCEN customer/member due diligence plan--issued in February--addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account that is held at an institution to assess the likelihood of suspicious activity.

The new regulations, if created, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion, FinCEN has said.

CUNA remains concerned regarding parts of the FinCEN ANPR that would expand "beneficial ownership" requirements. Credit unions would be required to obtain additional documentation and agreements related to all applicable members if these requirements were expanded.

CUNA has noted that reviewing accounts to determine if they meet "beneficial ownership" standards can be time consuming for credit unions, and the requirements can conflict or interfere with member confidentiality standards and can create fiduciary or legal issues

The information needed to review these accounts can also be difficult to obtain, and credit unions may need to increase their staff and make costly software changes to comply with the requirements, CUNA added.

Many hearing attendees shared CUNA's "beneficial ownership" concerns, and said the potential broad scope of the FinCEN CDD rules could create issues for financial services providers.

CUNA in a comment letter filed earlier this year suggested that FinCEN abandon the due diligence ANPR and, instead, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules.

FinCEN has said it will schedule additional public hearings on the CDD proposal, but those hearings have not been set yet.

CFPB recounts six months of action

 Permanent link
WASHINGTON (8/1/12)--Consumer complaints, and how those complaints have been resolved, were addressed in the Consumer Financial Protection Bureau's (CFPB) latest semiannual report to the U.S. Congress.

The agency said it received 55,300 consumer complaints between July 21, 2011 and June 30, 2012. Mortgage issues prompted 43% of those complaints, and 34% of the complaints received were tied to credit card accounts.

More than half of the mortgage complaints related to loan modifications, foreclosures or collections. The CFPB said a large number of consumers expressed confusion about whether making timely trial period payments would help them receive permanent mortgage modifications.

One-quarter of the complaints related to loan servicing. Loan application issues were also common, the CFPB reported.

Fourteen percent of the 18,800 credit card complaints reported to the agency involved billing issues, and 10% were tied to interest rate issues. Identity theft incidents, credit reporting issues, late fees and collection disputes were also reported to the CFPB.

Account management was a chief concern in 41% of the 8,100 bank account complaints filed, and many consumers also said the terms of some overdraft protection plans were confusing.

Around 80% of the complaints received by the CFPB were forwarded on to the institution named in the complaint, and just over one-in-four of these complaints resulted in financial relief for the consumer. Three percent of the complaints were closed without monetary relief. More than half of the complaints were closed with an explanation to the consumer, and 13% of the complaints are still under review.

The agency also detailed the steps it has taken to improve financial institution oversight, and enhance consumer protections, over the past year.

CFPB Director Richard Cordray was scheduled to discuss the report before the Senate Banking Committee on Tuesday, but that hearing was removed from the schedule.

For the full CFPB report, use the resource link.

Final NCUA listening session Exams reg burden redux

 Permanent link
DENVER, Colo. (8/1/12)--As they have been in earlier meetings held across the country, regulatory burdens and examination issues were central themes at the National Credit Union Administration's (NCUA) July 31 listening session in Denver, Colo.

NCUA Chairman Debbie Matz was joined at the Denver session by NCUA staff, including Executive Director Dave Marquis, Director of Examination and Insurance Larry Fazio, NCUA examiners and regional representatives.

Around 80 credit union and corporate credit union employees attended the listening session, which was the sixth and final listening session planned this summer. The sessions were held, in part, to create an open dialogue between the agency and those it regulates.

Attendees again suggested how the NCUA could improve its examination process, and the importance of communication between examiners and credit union staff was emphasized by NCUA staff and credit union representatives.

The NCUA's recently released liquidity proposal, and the future of the agency's Central Liquidity Facility, were also discussed during the session.

Previous listening sessions included discussions of the increasing trend of small credit union mergers, Low Income Credit Union designations, overdraft fees, interchange, member business lending and related waivers, loan participations, and the agency's recent decision to eliminate its regulatory flexibility rule and extend similar management and investment rights to all credit unions.

The Credit Union National Association and its examination and supervision subcommittee will follow up with the NCUA on key issues brought up during these listening sessions.

Compliance Enter your photo to win

 Permanent link
WASHINGTON (7/30/12)—Want to get away? Credit union compliance-types that have tried in vain to escape the office during their summer breaks can enter their best photos of people, places or things that have reminded them of work while on vacation to the Credit Union National Association's (CUNA) new summer Comp Blog contest.

CUNA's Kathy Thompson poses before a sculpture that some might say looks suspiciously similar to the CUNA logo. (CUNA Photo)
This summer's contest asks Comp Blog readers to send a "vacation" photo, and explain why that photo reminded you of something work related.

"As used by compliance people, a 'vacation' is defined as anything that occurs outside of nine-to-five, Monday through Friday, since compliance people never really sleep or vacation," CUNA Senior Vice President for Compliance Kathy Thompson explained.

The photos can be old or new, but they must include an explanation or caption of why the photo relates to the office, regulations, or other work matters.

Any photo that makes CUNA's compliance team laugh will win… a coveted, priceless prize. And a "Compliance Rules!!!" pin.

The contest will end on Aug. 22.

iGo Directi releases new PSA

 Permanent link
WASHINGTON (7/31/12)--The U.S. Treasury's Go Direct campaign has developed a new public service announcement that outlines the three steps federal benefit recipients can take to receive their funds through direct deposit, and the Direct Express Debit MasterCard.



The ad is being offered to television stations nationwide for broadcast.

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 Go Direct video, use the resource link.

Cybersecurity bill CUNA industry partners watch progress

 Permanent link
WASHINGTON (7/31/12)--The Credit Union National Association (CUNA) and a coalition of partners, including the Banking Industry Technology Secretariat, continue to evaluate a recently introduced U.S. Senate cybersecurity bill, with that legislation set for discussion and a possible vote this week.

The bill, known as the Cybersecurity Act of 2012 (S. 3414), would establish voluntary cybersecurity standards in a bid to improve critical information protections.

CUNA and others are concerned that the voluntary security standards could eventually become mandatory, thus imposing a new burden on financial institutions.

CUNA has repeatedly said that the data security standards followed by credit unions and other financial institutions are strong, and the addition of new potentially duplicative data security standards could create issues for credit unions.

S. 3414 would also establish a National Cybersecurity Council, which would include appointed representatives from the Department of Commerce, Department of Defense, Department of Justice, the intelligence community, and various "sector-specific" federal agencies, as appropriate.

The council, according to a White House release, would "coordinate the identification of voluntary cybersecurity practices for critical cyber infrastructure."  The council would also present yearly assessments of the state of the nation's cybersecurity to various congressional committees.

Amendments are expected to be offered once the bill comes up for debate prior to a vote. CUNA has worked with senators on data security amendments, and those may be offered as part of the amendment process.

Sen. Joe Lieberman (I-Ct.), a sponsor of the bill, noted in a release that the number of cyber-attacks increased 17-fold between 2009 and 2011, and added that many of those attacks targeted critical infrastructure.

"Defense of our most critical networks, largely owned by the private sector, is vital to our national security and economic prosperity," Lieberman said in a joint release with fellow cosponsor Sen. Susan Collins (R-Maine). The senators urged their colleagues to approve the new cybersecurity legislation.

If the Senate passes a cybersecurity bill, that body will have to work out any differences between its bill and a bill approved earlier this year by the  U.S. House before new rules can become law.

The Cyber Intelligence Sharing and Protection Act (CISPA), which passed the House this spring, would task an Office of the Director of National Intelligence with developing cyber-threat information sharing guidelines between public- and private-sector organizations.

The bill would also provide privacy protections for consumers by limiting the inclusion of consumer data in shared threat information.

CUNA trades ask remittance rule delay

 Permanent link
WASHINGTON (7/31/12)--New remittance regulations are set to go into effect early next year, and in a letter Monday the Credit Union National Association (CUNA) urged legislators to add their voices to a growing call for regulators to push back the implementation date and study the potential impact of the pending rule.

The Consumer Financial Protection Bureau's (CFPB) final remittance transfer rule, which is scheduled to take effect on Feb. 7, 2013, would require remittance transfer providers 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.

Reps. Blaine Luetkemeyer (R-Mo.) and Yvette Clarke (D-N.Y.) are circulating a letter that urges CFPB Directgor Richard Cordray and the CFPB to delay remittance rule implementation until Feb. 2015. In the meantime, the agency could "undertake a comprehensive study of how international transfers are used today for all segments of the consumer population, and the impact of the current rule on consumers, pricing for international transfers for a range of dollar amounts, and product accessibility," the legislators' letter suggests.

The American Bankers Association, the Independent Community Bankers of America, the National Association of Federal Credit Unions and the National Bankers Association joined CUNA in urging legislators to co-sign that letter.

While the remittance rules are intended to provide greater transparency and certainty, smooth error resolution procedures, and increase access to low-cost transfer services for consumers who utilize remittances and international wire transfer services, they would add dramatically to the costs of providing these services, and create mandates that are simply not possible for community-based institutions to implement, the joint trade letter said.

"The end result is likely to be fewer and more costly choices for consumers as credit unions and community banks stop offering these services. This is clearly not what Congress intended," the joint trade letter added.

CUNA and these groups noted they strongly support, and historically always ensure, appropriate consumer disclosures of fees and product terms. However, the CFPB remittance rule will make it difficult and costly for financial institutions to continue to offer remittance services. "If not delayed and, hopefully, modified, the CFPB's remittances rule will result in fewer choices and more costs for consumers," the trades wrote.

House Senate hold final meetings before recess

 Permanent link
WASHINGTON (7/31/12)—As the U.S. Congress prepares to leave for a month-long August recess at the end of this week, credit unions will want to watch the House and Senate for potential votes and hints at how Congress could proceed when legislators return to Washington later this year.

Both the House and Senate are scheduled to return to Washington in early September, after the Democratic and Republican national political conventions, to name each party's presidential nominee, have ended.

Meanwhile this week, the Senate Banking Committee, today, will receive the Consumer Financial Protection Bureau's (CFPB) semi-annual progress report. CUNA met with Senate Banking Committee staff last week to discuss credit union concerns and interactions with the CFPB ahead of this hearing.

The House Financial Services capital markets and government sponsored enterprises subcommittee has scheduled a Wednesday session to vote on the Equitable Treatment of Investors Act (H.R. 757), the Fostering Innovation Act (H.R. 6161), and a bill that would amend the Securities Exchange Act of 1934 to clarify provisions relating to the regulation of municipal advisors (H.R. 2827).

The House Small Business Committee will also be in session on Wednesday, as that group holds a hearing titled "Know Before You Regulate: The Impact of CFPB Regulations on Small Business." The name of the hearing is a play on the CFPB's "Know Before You Owe" program meant to improve disclosures to borrowers.

A Senate Finance Committee hearing has also been scheduled for Wednesday. That hearing, entitled "Tax Reform: Examining the Taxation of Business Entities," will focus on the different taxation of business entities structured as corporations versus passthroughs, and consider how related tax rules could be changed.

This week, the full House is expected to take up the Job Protection and Recession Prevention Act (H.R. 8) and the Pathway to Job Creation through a Simpler, Fairer Tax Code Act (H.R. 6169). H.R. 8 would extend tax cuts that are scheduled to expire at the end of this year until 2013. H.R. 6169 would allow Congress to expedite consideration of tax reform bills, beginning in 2013.

That body could also consider agriculture legislation this week.

The Senate is expected to discuss cybersecurity legislation this week. (See related News Now story: CUNA, industry partners watching cybersecurity bill progress.)

Inside Washington (07/30/2012)

 Permanent link
  • WASHINGTON (7/31/12)--Since the financial crisis of 2009, the U.S.'s Financial Standards Accounting Board (FASB) has been working to harmonize U.S. accounting standards with International Financial Reporting Standards (IFRS), but the effort appears to some to be unraveling.  Once the convergence of standards seemed inevitable, but a reluctance by FASB to accept an international deal on loan-loss provisions has introduced doubt.  Due to concerns that an international model for loss provisions could result in under-reserving, FASB at a joint July 18 meeting put off agreeing with The International Accounting Standards Board (IASB) on a joint impairment proposal. Leslie Seidman, the U.S. board's chairman, said FASB still wants to hammer out a converged standard on impairment but believes the U,S,'s questions must be addressed before moving forward with an Exposure Draft.  IASB Chairman Hans Hoogervorst,  according to a transcript of the joint meeting, noted that both boards have made three attempts to address concerns.  He added that he is worried that the whole effort is going to unwind (American Banker July 30). …


  • WASHINGTON (7/31/12)--As the U.S. Treasury Department continues to work to wind down its Troubled Asset Relief Program (TARP) and recoup the $1.2 billion used to bailout banks, the department announced its latest effort fell short of its recoupment goal.  Treasury was unable to sell some of the preferred shares it owns of two community banks because it did not receive sufficient bids for the securities. According to an announcement made Friday, Treasury will regain about $248.5 million from its latest auctions.  However, it did not sell its Series B preferred stock in First Community Financial, Joliet, Ill., and its Series A preferred stock in First Western Financial, Denver, Colo.  The department also noted it sold only about two-thirds of its Series C preferred stock in First Western. There were 10 other banks included in this most recent round of auctions. The 12 banks had received a combined $322 million from December 2008 to December 2009 under TARP (American Banker July 30). …

NCUA sends CU letter on corporate stabilization assessment

 Permanent link
ALEXANDRIA, Va. (7/30/12)—The National Credit Union Administration (NCUA) is distributing a Letter to Credit Union (12-CU-09) to answer what it calls key questions about its July 24 action setting an assessment for the Temporary Corporate Credit Union Stabilization Fund of 9.5 basis points (bp) of a credit union's insured shares as of June 30, 2012.

Each credit union will receive an invoice in September for the 2012 assessment, the NCUA letter says, adding that payment will be due on Oct. 9.

The NCUA currently estimates the remaining costs of the corporate stabilization effort, after this year's assessment, to be in the range of $1.9 billion to $5.2 billion. Using the midpoint of that range, Credit Union National Association Chief Economist Bill Hampel estimates it would take four more years of assessments similar to this year's rate to complete payments.

Alternatively, with lower annual assessments, of 5 bp for example, the $3.6 billion would be paid off in seven years. Hampel added that the actual future costs will depend on the pace of recovery of the economy in general and the housing market in particular.

The NCUA letter explains that the funds generated by the 9.5 bp assessment this year, along with borrowed funds from the U. S. Treasury, will be used to pay fund obligations coming due through the end of this year.

The primary remaining obligation among these, the agency notes in the letter, is $3.5 billion of medium-term notes issued by corporate credit unions and guaranteed by the stabilization fund.

The NCUA projects that, based on March 31  Call Report data when credit unions reported a "relatively strong" return on average assets (ROA) of 0.89%, the assessment likely will reduce ROA for 2012 by eight bp and the aggregate net worth ratio by five bp.

The letter says a credit union should record the assessment expense on the September 2012 Call Report using the Temporary Corporate CU Stabilization Fund Assessment line (account code 311) on the Statement of Income and Expense.  It tells credit unions to consult with accounting practitioners for further guidance in recording the assessment.

The Letter to Credit Unions also addresses examinations as they relate to the corporate assessment, and remaining projected assessments.  (Use the resource link to read the complete letter>)

The NCUA says that credit unions with questions related to the calculations and projections should contact its Office of Examination and Insurance at 703-518-6360 or email@ncua.gov. For questions related to the assessment invoice and payments, they can email ncusif@ncua.gov.

Credit unions can also access additional information on the NCUA's website (link below) by clicking on the tab "Credit Union Resources and Information" and selecting "Corporate System Resolution Costs" or "NGN Program Information" from the menu. These websites are updated semi-annually.

NCUA to AACUL 1000 CUs to get LICU eligibility letters

 Permanent link
CHICAGO (7/30/12)--The National Credit Union Administration (NCUA) soon will send letters to nearly 1,000 credit unions indicating they are eligible for low-income designation, a status whose benefits include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances, NCUA Chairman Debbie Matz told league presidents last Friday attending the American Association of Credit Union Leagues (AACUL) summer meeting in Chicago.

"Almost 1,000 credit unions would meet the LICU designation but don't have it," Matz said. "I know with some credit unions there's a stigma to a low-income designation. I hope you will help them get over that," she told the league presidents.

Matz said a letter to these eligible credit unions would likely go out this week or next.

CUNA President/CEO Bill Cheney said NCUA's action will give credit unions greater awareness of their options. "It is a determination that needs to be made by individual CU CEOs and their boards, and the NCUA letter will help them make a more informed decision," he said. Cheney also noted many credit unions that desire more member business lending (MBL) authority or supplemental capital will not qualify as LICUs, "so the agency's action should have no bearing on the need for Congress to pass these two very important pieces of legislation."

Matz also told the AACUL group NCUA plans to "improve the regulatory environment" based on input received from her recent series of "listening sessions" with credit unions around the U.S., including plans to expand the regulatory definition of small credit union beyond the current $10 million asset level, a change CUNA has long advocated through its Small Credit Union Committee. Matz added interest in such an expansion is shared by NCUA Board Member Gigi Hyland, who also addressed the AACUL meeting.

Other changes the agency is considering include removing the personal guarantee requirement on MBLs, expanding the definition of rural field of membership to make it more flexible, allowing CUs to hold Treasury Inflation Protected Securities, and liberalizing rules to encourage more CUs to offer low cost payday loan alternatives.

The actions are part of a broader agency regulatory modernization effort, which also included recent Board decisions to improve its rule on troubled debt restructuring (TDR) and to pull back pending proposals on credit union service organizations (CUSOs) and loan participations based on concerns expressed by CUNA, leagues and credit unions.

"We heard you on a number of different issues," Matz said, taking special note of CUNA Deputy General Counsel Mary Dunn's help pulling together a credit union/league working group to provide input to improve the TDR rule.

Matz also repeated announcements from earlier last week on agency plans to create a new Office of National Examinations and Supervision to focus on credit unions with assets over $10 billion and corporate credit unions, and to expand the work of NCUA's Office of Small Credit Union Initiatives to provide more training and consultation for those small credit unions that have been struggling. She said she hopes leagues will also assist in this regard with small credit unions.

Lastly Matz urged leagues and CUNA to help explain liquidity options to credit unions in light of the agency's recent liquidity proposal and the impact the closing of U.S. Central Bridge in October will have on dramatically reducing available emergency liquidity through the Central Liquidity Facility. CUNA has a task force working expressly on this issue.

In her remarks Board Member Hyland also encouraged leagues to urge credit unions to comment on the liquidity proposal. "Ensure credit unions are at least thinking about this--'What will happen should I need emergency liquidity and where will I go?'"

Matz and Hyland also responded to concerns voiced by several league presidents about the impact on the dual chartering system of the agency's proposed rule on troubled state credit unions, which would permit NCUA to assign a lower CAMEL rating when theirs conflicts with a higher one assigned by the state regulator.

Matz emphasized the proposal is needed in the agency's role as protector of the National Credit Union Share Insurance Fund, and said it only affects about  2% to 4% of state credit unions. Hyland said she believes "It's better to have two guards on watch than one," especially when some state regulatory authority budgets have been cut back.

Trinity CU taken under NCUA conservatorship

 Permanent link
ALEXANDRIA, Va. (7/30/12)--Trinidad, Colo.-based Trinity CU has been taken under conservatorship, the National Credit Union Administration (NCUA) announced Friday.

The Colorado Division of Financial Services placed the $4 million asset, 1,100-member credit union into conservatorship and appointed the NCUA as conservator last week.

The credit union is in troubled financial condition, and the NCUA said it would work to resolve safety and soundness issues at the credit union. The credit union will provide normal member services during the conservatorship, the NCUA said.

Trinity was founded in 1939 to serve the members of Trinidad's Holy Trinity Parish, but has expanded its charter to serve residents of Las Animas County, Colo.

Fed finalizes interchange fraud-prevention charge

 Permanent link
WASHINGTON (7/30/12)--The Federal Reserve on Friday made final an interim final rule that will allow some debit card issuers to charge an extra penny per transaction in debit interchange transaction fees.

To be eligible for the extra transaction fee, financial institutions must develop and implement policies and procedures to reduce the occurrence and costs of fraudulent debit card transactions, the Fed said. These policies and procedures also will need to be reviewed annually, at minimum. The procedures may be updated from time to time, the Fed noted.

Issuers that do not comply with fraud prevention standards would not be permitted to charge the extra penny in debit interchange fees, the Fed said.

The final rule amendments will be effective on Oct. 1. Credit unions with less than $10 billion in assets will not be subject to the final rule.

The Credit Union National Association (CUNA) last year urged the Fed to allow debit card issuers to charge four to five cents per transaction to cover fraud prevention costs. That adjustment would better cover costs  incurred when financial institutions investigate the source of a data breach or theft, attempt to stop any instances of fraud, and deal with the aftermath of the theft or data breach, CUNA said. The increased fraud prevention adjustment also would help protect smaller issuers whose fraud prevention costs often represent a larger portion of their total debt card program costs, CUNA added.

CUNA also recommended that the Fed periodically revisit the fraud prevention cost issue to see if the costs have changed and whether any future adjustments are necessary.

The Fed's final interchange rule, which became effective last year, sets a debit interchange fee cap of 21 cents and allows an additional five basis points of the value of the transaction to cover fraud losses.

For the Fed release, use the resource link.

CFPB nonbank supervision efforts get CUNA support

 Permanent link
WASHINGTON (7/30/12)--The Credit Union National Association (CUNA) in a comment letter said it strongly agrees with the Consumer Financial Protection Bureau's (CFPB) plan to begin supervision and regulation of non-depository institutions that provide risky consumer financial products or services.

The Dodd-Frank Wall Street Reform Act gave the CFPB the authority to supervise any nonbank that it has reasonable cause to determine is posing a risk to consumers, based on complaints or other information it receives. Nonbanks, as defined by the CFPB, would be companies that offer or provide consumer financial products or services, but do not have bank, thrift, or credit union charters. Mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies would meet this definition, according to the CFPB.

Under the CFPB's proposed nonbank rules, the agency would first tell a regulated nonbank that one or more of the products it is offering may be harmful to consumers. The nonbank entity would then be given a chance to respond to the CFPB allegations and to provide any documentation that might support its argument.

Nonbanks could also consent to CFPB regulatory actions, instead of filing a response, or  they could petition the CFPB to terminate supervision authority over their business after two years.

CFPB Director Richard Cordray earlier this year said the proposed rules would allow the agency to reach nonbanks it would not otherwise supervise, while providing "a streamlined process that is fair and efficient."

CUNA said it supports the CFPB's efforts to "maintain a bright line between entities subject to its rulemaking and regulated entities that should not be." CUNA in the letter added that supervised nonbanks that ask the CFPB to stop supervising their activities "should adequately demonstrate why supervision is no longer required" and include a progress report demonstrating how the institution has reduced its risks to consumers.

The CFPB should also identify any remaining gaps in consumer protection in the financial markets, including under rulemakings concerning "larger participants" and other non-depository entities, CUNA added.

For the full comment letter, use the resource link.

CUNA WOCCU back FATCA action

 Permanent link
WASHINGTON (7/30/12)--The Credit Union National Association (CUNA) supports recent congressional efforts to delay implementation of the Foreign Account Tax Compliance Act (FATCA), and will continue to work to raise awareness of the burden that will be imposed on credit unions if this regulation is allowed to be implemented, CUNA Senior Vice President of Legislative Affairs Ryan Donovan said last week.

FATCA is designed to create a tax information reporting and withholding system for certain payments that are made to foreign financial institutions (FFIs) and other entities.

The Internal Revenue Service's (IRS) proposed regulations to implement FATCA would require FFIs, including credit unions, to register with the IRS and detect taxable account activity by U.S. citizens in foreign countries.

The IRS has said that its FATCA rules would also require U.S.-based credit unions and financial institutions to file Forms 1042-S for payments of deposit interest or dividends in amounts of $10 or more that are made to nonresident alien members and customers. These financial institutions must also conduct due diligence regarding whether credit union members' payments to overseas FFIs are to an FFI that is not FATCA compliant.

FATCA would also require U.S. credit unions to withhold 30% of any funds that are transferred to non-FATCA compliant FFIs.

The rule would apply to payments made on and after Jan. 1.

CUNA has urged Congress to pass legislation to prevent FATCA from going into effect on Jan. 1, noting that the compliance burdens and overhead costs credit unions would face as a result of these proposed changes would far exceed any benefit to the IRS.

Rep. Bill Posey (R-Fla.) last week introduced legislation that would stop FATCA from being implemented. Posey's bill was added as an amendment to the Regulatory Freeze for Jobs Act (H.R. 4078), which passed the U.S. House by a 245 to 172 vote. H.R. 4078 has moved on to the Senate, but may not pass that body due to its partisan nature.

Sens. Jim DeMint (R-S.C.), Rand Paul (R-Ky.), Saxby Chambliss (R-Ga.) and Mike Lee (R-Utah) have also criticized FATCA in a letter sent to U.S. Treasury Secretary Tim Geithner last week. The senators asked for more information on the potential costs of FATCA changes, and whether FATCA-related agreements that the Treasury is entering into with foreign governments would violate consumer privacy.

The World Council of Credit Unions (WOCCU) has also been advocating for repeal or significant modification of FATCA, including by testifying at an IRS Public Hearing on FATCA in May.

"We are glad that members of Congress are concerned about FATCA's undue compliance burdens on small, locally owned credit unions. Repealing FATCA will help free credit unions around the world to use their resources to serve their members," WOCCU President/CEO Brian Branch said.

For more on the issue, use the resource links.

Inside Washington (07/27/2012)

 Permanent link
  • WASHINGTON (7/30/12)--Treasury Secretary Timothy Geithner Thursday said he opposed an extension Transaction Account Guarantee program (TAG), during testimony before the Senate Banking Committee. The Federal Deposit Insurance Corp. initiated TAG as a voluntary program in 2008 during the financial crisis to address concerns that a large number of account holders might withdraw their uninsured account balances from financial institutions due to economic uncertainties (American Banker July 27). Geithner said it is not necessary to extend the program, based on the judgment of "relevant authorities." Geithner's comments drew criticism from bankers, who favor the extension of TAG.  The American Bankers Association last week said it supported a two-year extension of the program …
  • WASHINGTON (7/30/12)--A proposal by the Securities and Exchange Commission (SEC) to reform money market mutual funds should be released to the public for comment as soon as possible, said Treasury Secretary Tim Geithner Thursday. The public's comments are needed so the SEC can move forward with reforming money market mutual funds in the event of another financial crisis, Geithner said (American Banker July 27). The proposal was delayed due to gridlock among the SEC's commissioners, the Banker said. Among the approaches to reform being considered are using a floating net-asset value in place of fixing the value at $1 per share, as funds are priced now. During the 2008 financial crisis, the value of one money market fund fell below $1 per share. The government subsequently guaranteed $3.5 trillion in funds …
  • WASHINGTON (7/30/12)--The House of Representatives voted Thursday to postpone an Internal Revenue Service (IRS) rule that would require U.S. banks to report tax information on foreign deposits. The regulation, set to go in to effect next January, requires that U.S. banks disclose to the IRS the identities of foreigners with deposits (American Banker July 27). Bankers in borders states such as Florida and Texas that rely on deposits from Latin America worry that the rule would affect their local economies. By a 251-165 vote, the U.S. House backed a measure to delay implementation of the IRS measure until nationwide unemployment improves to 6%. However, the bill is unlikely to become law, according to the Banker. A similar Senate measure has 21 co-sponsors, but Sen. Bill Nelson (D-Fla.) is the only Democrat to co-sponsor the measure …

Mortgage payday loan plans introd by Senator

 Permanent link
WASHINGTON (7/27/12)--Two plans of potential interest to credit unions, one that would create a new home refinancing program and another that would limit some online payday lending practices, were introduced by Sen. Jeff Merkley (D-Ore.) this week.

The mortgage plan would allow homeowners that owe more than their home is worth to refinance at reduced interest rates. Under the plan, the Federal Housing Administration, Federal Home Loan Banks or the Federal Reserve would establish a temporary trust that would purchase underwater mortgages that meet certain criteria. The temporary housing trust could be funded with money that has already been allocated to state or federal financial regulators, Merkley said.

Homeowners whose mortgages are held under the trust would then be given three years to refinance their loan. A white paper describing the plan outlines three refinancing options for homeowners:
  • A 15-year, 4% mortgage that would aim to rebuild home equity;
  • A 30-year, 5% mortgage that would aim to reduce monthly payments; or
  • A two-part mortgage, consisting of a first mortgage for 95% of a home's current value and a "soft second" mortgage on the remaining 5%. The second mortgage would not accrue interest or require payment for five years.
Loans held in the portfolio could be sold to private investors, or paid off by homeowners, the paper said.

Merkley said the plan could be developed into a pilot program without the need for legislative action.

In addition releasing the refinancing plan outlined in the white paper, Merkley also this week proposed a bill that would restrict some online payday lending practices. The legislation, known as the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act, would close federal loopholes that allow some online lenders to use practices that are banned in many states, Merkley said in a release.

The bill would:
  • Require all lenders to abide by state rules governing short-term small-amount lending practices;
  • Stop payday lending by offshore websites;
  • Give the Consumer Financial Protection Bureau the authority to shut down payment processing for online lenders that are violating state and other consumer lending laws, but avoiding enforcement;
  • Ensure that third parties cannot gain control of consumer bank accounts through remotely created checks;
  • Prevent online payday lenders from removing funds from consumer checking accounts without authorization; and
  • Ban so-called "lead generator" websites that portray themselves as payday lenders, but actually collect consumer information on applications that are sold on to payday lenders.
Merkley said it is unacceptable that financial predators are "using the 'Wild West' of the Internet" to strip wealth from families.

"We must close the loopholes that have allowed companies to utilize practices already banned in many states," he added.

Compliance CUNA clears confusion on SAFE Act deadline

 Permanent link
WASHINGTON (7/26/12)—Credit unions and mortgage loan originators (MLOs) that registered with the Nationwide Mortgage Licensing System & Registry (NMLS) last year must complete their annual Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) independent testing by the end of this year, the Credit Union National Association (CUNA) said in a recent Comp Blog post.

According to Comp Blog, some credit unions noted that Federal Reserve Board-supervised institutions were required to complete their annual SAFE Act testing by July 29, 2012. Credit unions have questioned whether this deadline also applied to them.

However, CUNA Director of Compliance Information Valerie Moss noted in her Comp Blog post, the National Credit Union Administration's position is that "annual" means within a calendar year; similar to the agency's requirement for an annual Supervisory Committee audit. In other words, testing may be performed any time in the calendar year and does not have to be completed by July 29.

Financial institutions and their residential MLOs were required to complete initial NMLS registration by July 29, 2011. MLOs that are not registered on the NMLS are prohibited from originating residential mortgage loans.

The SAFE Act requires independent testing of a credit union's policies and procedures for complying with the act, and related implementing regulations, "at least annually." Testing may be conducted by credit union personnel or outside parties.

NCUA to shift exam focus to largest CUs

 Permanent link
ALEXANDRIA, Va. (7/27/12)—Noting that one-size-fits-all supervision is "no longer appropriate in a credit union industry with nearly 100 million members and more than $1 trillion in assets," National Credit Union Administration (NCUA) Chairman Debbie Matz on Thursday announced a new office that will focus on regulating corporate and high-asset credit unions.

The NCUA said the new Office of National Examinations and Supervision, which is scheduled to be up and running by Jan. 1, 2013, will allow the agency to concentrate more hours and more attention where more of the industry's risk is held. Oversight and examination of corporate credit unions and credit unions with more than $10 billion in assets will be the main priorities for the new office.

The office will begin examination and oversight of corporates on Jan. 1, 2013, and will take on oversight of large credit unions on Jan. 1, 2014, the agency said.

Credit Union National Association (CUNA) President/CEO Bill Cheney said the announcement is in line with recent NCUA indications that it would devote a greater amount of resources to the oversight of larger credit unions.

"However, if the intent of this action is to place undue supervisory attention on well-managed, larger credit unions, that would be cause for concern at CUNA," he said. CUNA's Examination and Supervision Subcommittee will be scrutinizing this plan closely and will have further discussions with the NCUA board and agency staff, he added.

Nearly half of all NCUA examination hours are spent on credit unions that hold less than $50 million in assets, while credit unions with more than $1 billion in assets receive only 10% of NCUA examination hours, the agency noted in a release. The NCUA will spend less time examining well-performing small credit unions once the new office is established, the release added.

The new office will strengthen exam consistency and leverage national and regional expertise to promote high quality evaluations of risk and risk management practices, Matz said. "This is not about keeping credit unions from getting too big to fail; it's about keeping them from failing," she added. The new examination office was one of many NCUA initiatives announced at the National Association of Federal Credit Unions Annual Conference in Nashville, Tenn. (See related News Now story:  Short-term loan, teller changes among items on NCUA short-list)

The agency also announced a new Small Credit Union Examination Program (SCUEP), directed toward credit unions with less than $10 million in assets, last week. The SCUEP program is intended to streamline the examination process for small credit unions that have a solid record of performance, meaning, in part, a CAMEL rating of 1, 2 or 3.

"Small credit unions that are financially and operationally sound and present lower risk will typically have shorter examinations and more concise examination reports," the NCUA said in a letter to credit unions. (See related July 23 News Now story: Small CU examinations addressed by NCUA)

Examinations have been a top topic at recent NCUA listening sessions, with many credit unions criticizing NCUA examiners for their overuse of Documents of Resolution. Others have called for greater communication between examiners and credit union staff, and noted that receiving two separate lists of regulatory requests, from NCUA and state examiners, can create issues for credit unions.

Short-term loan teller changes on NCUA short-list

 Permanent link
ALEXANDRIA, Va. (7/27/12)—Potential changes to the National Credit Union Administration's (NCUA) definitions of "small credit unions" and "rural fields of membership" are welcome, and reflect policy changes advocated by the Credit Union National Association (CUNA), President/CEO Bill Cheney said on Thursday.

NCUA Chairman Debbie Matz on Thursday said the agency in the coming months plans to broaden its definition of small credit unions to allow more credit unions to receive technical assistance and regulatory relief from the agency. The agency also intends to expand rural field of membership districts.

CUNA recently discussed field of membership issues with the agency, including recommendations to facilitate greater service to rural districts and other communities.

Other regulatory initiatives the NCUA is considering include:

  • Allowing credit unions to buy Treasury Inflation Protected Securities;
  • Approving the use of video teller machines in order to comply with field of membership rules for serving underserved areas; and
  • Increasing the maximum application fee for short-term small-amount loans.           
Matz said the NCUA is considering these actions due to credit union comments, and added that the agency would continue to listen to credit unions.

The NCUA chairman announced the potential regulatory changes at the National Association of Federal Credit Unions Annual Conference in Nashville, Tenn. Matz also unveiled plans to establish a new Office of National Examinations and Supervision during the conference. (See related News Now story: NCUA to shift exam focus to largest CUs)

Inside Washington (07/26/2012)

 Permanent link
  •  WASHINGTON (7/27/12)--The Office of the Comptroller of the Currency (OCC) Thursday announced enforcement actions against Capital One, N.A., and Capital One Bank (USA), N.A., for violations and compliance deficiencies related to the Servicemembers Civil Relief Act (SCRA)., the law that provides servicemembers relief from certain obligations and temporarily suspends judicial and administrative proceedings and transactions involving civil liabilities when military service affects the servicemember's ability to meet or attend to civil matters. The OCC enforcement actions first requires the banks to improve their policies and procedures for determining whether servicemembers who request certain benefits provided by the SCRA are eligible for such benefits, ensuring that the SCRA benefits are calculated correctly, and verifying the military status of servicemembers prior to seeking or obtaining a default judgment. It also requires the banks to ensure the retention of accurate and complete records that document the basis for decisions regarding servicemembers' eligibility for SCRA benefits or protections, and to develop and implement a comprehensive SCRA training program for employees. Finally, the enforcement actions require the banks to establish" robust oversight "of and controls over their third-party vendors that provide marketing, sales, delivery, servicing, and fulfillment of services for the banks' financial products, such as credit card accounts, mortgage loans, motor vehicle finance loans, and consumer loans and lines of credit ...
  • WASHINGTON (7/27/12)--By a 327-to-98 vote, the House on Wednesday passed a bill that increases Congress' authority to audit the Federal Reserve's monetary policy. The bill, sponsored by Rep. Ron Paul (R-Texas), in effect gives 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 (Associated Press July 27). Last week in testimony before the Housing Financial Service Committee, Federal Reserve Board Chairman Ben Bernanke stated his opposition to the bill. Bernanke said expanded authority would create a political influence on the Fed's monetary policy decisions (News Now July 21) …
  • WASHINGTON (7/27/12)--In news that should come as a relief to bankers and loan investors, loan participation agreements will not be defined as swaps in Dodd-Frank Act-related rules issued by the Securities and Exchange Commission and the Commodity Futures Trading Commission (American Banker July 26). Defining the agreements as swaps would have required buyers to gain more information about borrowers and stagnated cash trading in loans. Under loan participation agreements, the original lender sells the rights and risks associated with a loan, but remains the lender of record. Interest paid by the borrower comes to the new investor through the original lender …


  • WASHINGTON (7/27/12)--Former Citigroup CEO Sandy Weill's call for the breakup of big banks attracted widespread response in Washington on Wednesday. In an interview on CNBC's "Squawk Box," Weill suggested commercial banks and investment banks should be separated, which would essentially reinstate the Glass-Steagall Act (American Banker July 27).  Rep. Carolyn Maloney (D-N.Y.), who voted for the repeal of Glass-Steagall in 1999, called Weill's comments "absolutely huge." Rep. Walter Jones (R-N.C.) said voting for the Glass-Steagall's repeal was among the worst votes he has made in his 18 years in Congress. Although he had not yet heard Weill's comments, Treasury Secretary Timothy Geithner said that the Dodd-Frank Act provides strong disincentives against banks growing larger--primarily through tough capital requirements---and should be give longer to provide results …


  • WASHINGTON (7/27/12)--In anticipation of this November's elections, former Senate Banking Committee chair and current ranking minority member Richard Shelby (R-Ala.) this week announced his intention to chip away at financial regulations imposed by the Dodd-Frank Wall Street Reform Act. In a speech before the U.S. Chamber of Commerce, Shelby highlighted several actions he would take if the Senate returns to Republican control next year. He would work to replace the Consumer Financial Protection Bureau's single director with a five-member board, and make that agency's funding subject to the appropriations process. He also said the U.S. housing finance system, and the government's role in housing finance, would be examined. Shelby would also work to repeal portions of Dodd-Frank that "had nothing to do with the financial crisis" ...


  • WASHINGTON (7/27/12)--The Federal Deposit Insurance Corp. (FDIC), as part of its ongoing Community Bank Initiatives, announced in a Financial Institutions Letter made public Thursday that it is developing a regulatory calendar to help community banks stay up-to-date on changes in federal banking laws, regulations and supervisory guidance. The calendar highlights notices of proposed, interim and final rulemakings,  as well as supervisory guidance to financial institutions issued by the FDIC and the Federal Financial Institutions Examination Council, other joint issuances with other regulators, and independent issuances by other regulators relevant to the FDIC's supervisory examination programs …

NCUA July economic update available on iYouTubei

 Permanent link
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

 Permanent link
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)

 Permanent link
  • 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

 Permanent link
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

 Permanent link
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 usa2012.coop 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 stories.coop 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 usa2012.coop web site has a number of useful tools and resources in that regard.

2012 TCCUSF assessment is 9.5 bp

 Permanent link
ALEXANDRIA, Va. (7/25/12)—Credit unions will be charged a 2012 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment of 9.5 basis points (bp) of their insured shares as of June 30, the National Credit Union Administration (NCUA) announced at Tuesday's July open board meeting.

"The assessment is just about what we expected, falling right in the middle of the forecasted eight to 11 bp range," Credit Union National Association (CUNA) President/CEO Bill Cheney said. 'The good news--to the extent there is some for credit unions--is that this year's assessment is much smaller than last year's 25 bp charge," he added.

Click to view larger image CUNA Chief Economist Bill Hampel has projected a range of possibilites for future TCCUSF assessments.


The TCCUSF assessment is expected to bring in $790.5 million in funds to help cover the costs of corporate credit union stabilization. Invoices for the assessment will be mailed to credit unions in September, and payment will be due by Oct. 9, the NCUA said. Credit unions should record the TCCUSF assessment as an expense on their August financial reports.

The assessment will reduce the aggregate net worth ratio of all credit unions from 10.01% to 9.96%, with an average 6 bp decline, according to the NCUA. A total of 335 credit unions will not post net income this year as a result of the assessment costs, the NCUA added.

"The primary determinant of the size of this year's assessment is the cash flow needs of the stabilization fund, rather than any change in expected losses over the life of the fund," CUNA Chief Economist Bill Hampel said. The NCUA said the funds generated by the assessment, combined with borrowed U.S. Treasury funds, will pay $2.66 billion in net obligations that are due in 2012. The obligations are mainly principal and interest on maturing medium term notes issued by corporate credit unions and guaranteed by the TCCUSF, the agency added.

Federally insured credit unions will have paid $4.1 billion in corporate resolution expenses once this round of assessments has been collected, according to the NCUA. Credit unions can expect between $1.9 billion and $5.2 billion in remaining assessments, and this total would be paid off between 2013 and 2021, the agency said.

"Future TCCUSF assessments should be based more on spreading out the remaining losses on the legacy assets held by the fund, rather than on cash flow concerns," Hampel said.

"Since the legacy assets are primarily private-label, mortgage-backed securities, the actual losses will depend on the future of the economy in general and the housing market in particular," he added.

Assuming the $3.6 billion mid-point of NCUA's published remaining assessment range, Hampel said credit unions would pay off the remaining costs in about four years at assessment rates similar to this year's. Three years of ten bp assessments, and an eight bp assessment in the fourth year, would cover the remaining corporate stabilization costs, he added.

NCUA sees improvement in CAMEL Code CUs

 Permanent link
WASHINGTON (7/25/12)--The National Credit Union Administration (NCUA) cited an improvement--small though it may be--in the percentage of credit union assets now being held by institutions with lower CAMEL ratings.

In its most recent report on the status of credit union industry insurance funds, the NCUA reported CAMEL code 3, 4, or 5 institutions represented 16.1% of credit union assets as of June 30,  down from the previous quarter's total of 16.3%.

A total of 1,679 credit unions were classified as CAMEL Code 3 in the most recent quarter, eclipsing the previous quarter's total by 17. CAMEL 3 credit unions held 14.7% of insured shares in the quarter ended June 30, and those shares represented $123 billion in funds. CAMEL 3 credit unions held $138 billion in assets during the quarter, the NCUA reported.

The number of CAMEL 4/5 credit unions also increased by three in the most recent quarter, bringing the total to 399 as of June 30. Camel 4/5 credit unions held nearly $57 billion in total assets, and 3.2% of insured shares, according to the NCUA.

NCUA Chief Financial Officer Mary Ann Woodson reported that the National Credit Union Share Insurance Fund (NCUSIF) and the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) both remained steady during the second quarter of 2012. The NCUSIF's equity ratio was 1.3%, within the NCUA's normal operating level. NCUA staff released the 2012 TCCUSF assessment during Tuesday's meeting. (See related News Now story: 2012 TCCUSF assessment is 9.5 bp)

The NCUSIF lost $13.4 million during the quarter. However, the NCUSIF recorded $5.5 million in net income during the first half of 2012. Twelve consumer credit unions have failed so far in 2012, and these failures have created $94.6 million in costs, the NCUA said.

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

Troubled CU liquidity rules unnecessary CUNA

 Permanent link
ALEXANDRIA, Va. (7/25/12)--A pair of proposed rules that would allow the National Credit Union Administration (NCUA) to determine when a state chartered credit union is in "troubled condition," and alter emergency liquidity requirements for natural person credit unions, are unnecessary, Credit Union National Association (CUNA) President/CEO Bill Cheney said following Tuesday's NCUA open board meeting.

Under the "troubled condition" proposed rule, the NCUA would be added to the list of regulators that may determine whether a state-chartered federally insured credit union's (FICU) financial issues are enough to label the credit union as "troubled." The NCUA would also be permitted to assign a CAMEL Code 4 or 5 rating to those credit unions.

Currently, the CAMEL rating assigned by a state supervisor alone determines if a state-chartered FICU is in "troubled condition."

The NCUA in a release noted that it has seen an increased number of credit unions with assets between $250 million and $500 million experiencing some degree of financial stress, and has increased the number of joint examinations it participates in as a result. The NCUA and state credit union regulators have, at times, issued different CAMEL scores following these examinations. "While the actual number of examinations where this has happened is relatively small, it is nonetheless significant from a supervisory perspective, particularly given the rise in credit unions experiencing stress," the NCUA said in a release.

Expanding the definition of "troubled condition," as proposed, would strengthen the oversight abilities of the NCUA and state regulators, and better protect the National Credit Union Share Insurance Fund from future losses, the NCUA said.

However, Cheney said the proposed changed to the Federal Credit Union Act's "troubled condition" definition "raises concerns about the possible impact it would have on expanding NCUA's authority and on dual chartering."

The proposed "troubled condition" definition changes will be released for a 60-day public comment period. CUNA will review the NCUA proposal with its Examination and Supervision Subcommittee, the National Association of State Credit Union Supervisors, the American Association of Credit Union Leagues and others.

The NCUA's proposed rule regarding access to emergency liquidity, which was unveiled on Tuesday, will also be released for a 60-day comment period.

Many credit unions are able to access emergency liquidity through corporate credit unions that are agents of U.S. Central Bridge Corporate FCU. U.S. Central holds stock in the NCUA's Central Liquidity Facility (CLF). However, credit unions will need to find alternate sources of emergency liquidity once U.S. Central closes, the NCUA noted.

Under the new proposal, credit unions with less than $10 million in assets would need to maintain a basic written emergency liquidity policy, but would not be required to take further action.

All FICUs with assets of $10 million or more would be required to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations.

FICUs with assets of $100 million or more would be required to have access to a backup federal liquidity source for emergency situations. 

The NCUA said these credit unions can ensure access to backup liquidity by:

  • becoming a member of the CLF;
  • becoming a CLF member through a CLF agent; or
  • establishing direct borrowing access to the Federal Reserve's Discount Window.
Some credit unions with more than $100 million in assets currently do not have transaction accounts, and would not be eligible to access the Fed discount window. However, NCUA staff said Fed officials have indicated these credit unions may be able to set up a de minimis amount of transaction accounts to access the Fed discount window.

NCUA Chairman Debbie Matz said the approach outlined in the agency's proposal "provides flexibility for credit unions to reset and put in place a reliable and stable source of backup liquidity." Matz during the NCUA meeting said she is concerned about how portions of the proposal could impact small credit unions, and encouraged them to comment.

Cheney said CUNA has serious concerns about any new rule for credit unions, including in the area of liquidity. The CUNA CEO urged the agency to focus on the guidance the federal financial agencies have already produced on liquidity issues, rather than release new rules.

CUNA's System Liquidity Task Force, chaired by VyStar CU, Jacksonville, Fla., CEO Terry West, will review the liquidity proposal in detail, and will consider recommendations regarding the future of the CLF.

The agency will soon release a document detailing background information on the CLF for credit unions that may not be familiar with the fund. An NCUA webinar on the status of the CLF is being planned for Aug. 14, and another on the impact of U.S. Central's closing is being planned for October, the agency said.

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

Budget FCU interest rate addressed at NCUA meeting

 Permanent link
ALEXANDRIA, Va. (7/25/12)--The National Credit Union Administration's (NCUA) decision to reduce its projected 2012 budget by $2 million, as announced on Tuesday, is a step in the right direction, according to the Credit Union National Association (CUNA), but CUNA also encouraged the agency to make greater budget cuts.

The budget reduction, the setting of the interest rate cap for federal credit unions, and a briefing on an interagency Truth in Lending Act (TILA) proposal were three of the many items on Tuesday's busy July NCUA open board meeting agenda.

NCUA Chairman Debbie Matz, center, and board members Gigi Hyland, right, and Michael Fryzel discuss one of many agenda items at Tuesday's NCUA open board meeting. (CUNA Photo)


Under the NCUA's adjusted 2012 budget, employee pay and benefits were reduced by $3.6 million. However, the agency said this reduction was offset somewhat by increases in travel expenses, rent, administrative costs and contractor support.

The budget decrease, which amounts to a reduction of less than 1%, brings the total 2012 budget to $235 million. This is the third mid-year budget decrease the agency has approved. NCUA staff said that the decrease will be deducted from the amount credit unions would otherwise owe to fund the 2013 agency budget.

The NCUA board during the meeting also voted unanimously to maintain the current 18% interest rate ceiling for federal credit union loans through March 10, 2014. The agency is required by the Federal Credit Union Act to set the ceiling, at least every 18 months, if the rate ceiling is to exceed the 15% maximum rate established by law.

The agency will notify federal credit unions of the unchanged interest rate ceiling in an upcoming letter.

The NCUA board members were also briefed on plans regarding an upcoming interagency proposed rule on appraisal requirements for "higher-risk" mortgages under TILA. The rule, which is required by the Dodd-Frank Wall Street Reform Act, would change some home appraisal requirements, require lenders to provide free home appraisal reports to borrowers, and introduce new requirements for short-term sales. NCUA staff noted that federal financial agencies are currently working through their own approval processes, and a proposed rule is expected to be released in August.

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

Inside Washington (07/24/2012)

 Permanent link
  • WASHINGTON (7/25/12)--The Federal Housing Finance Agency in May signed a contract with New York-based PricewaterhouseCoopers to create contingency plans to avoid taking into receivership Fannie Mae, Freddie Mac and the Federal Home Loan Banks (American Banker July 25). FHFA does not intend to take the companies or the banks into receivership, said agency spokeswoman Denise Dunckel, who described the planning activity as "routine" and not an indication of the condition of Fannie Mae, Freddie Mac or the Federal Home Loan Banks. Fannie Mae and Freddie Mac have been operating under U.S. conservatorship since September 2008, when risky loans threatened the government-sponsored enterprises …
  • WASHINGTON (7/25/12)--In a conference call with reporters Monday, Consumer Financial Protection Bureau Director Richard Cordray touted a new form designed to make it easier for students to compare financial aid offers. The Financial Aid Shopping Sheet was designed in partnership with the U.S. Department of Education. The form describes scholarships and loans and lays out the total cost of attendance including tuition, fees, other expenses and options for federal aid. The form can help students understand how much debt they may have after graduation and what their monthly payment could look like. "This form, which presents a model of what all financial aid award letters should be, would provide a uniform way to inform potential students of their true college costs--before they commit to a school," Cordray said …
  • WASHINGTON (7/25/12)--Federal Reserve Board Chairman Ben Bernanke, addressing the Children's Defense Fund National Conference, Cincinnati, Ohio, via a prerecorded video, discussed the relationship between the education of the nation's children and the success of its economy. "When individuals are denied opportunities to reach their maximum potential, it harms not only those individuals, of course, but also the larger economy, which depends vitally on having a skilled, productive work force. As a result, we all have a stake in the essential work that you are doing for our children," the Fed chairman told the advocacy group audience. Bernanke said that programs to enrich experiences for children, especially those that also involve parents, benefit children from all backgrounds, but have the strongest influence on children from disadvantaged environments. He noted that the Fed system sponsors financial literacy and economic education programs for school-age children, with a special outreach effort for lower-income children …
  • WASHINGTON (7/25/12)--Federal Reserve Board Governor Sarah Bloom Raskin, addressing the Graduate School of Banking at Colorado, Boulder, Colo., on July 23, reiterated her concerns that the Volcker Rule needs to be strengthened to ensure it works to prohibit proprietary trading by federally insured banks and their affiliates, such as broker-dealers. She noted that she dissented when it came time for the Fed to vote for approval of the proposed implementation of the Volcker Rule. "One reason for my vote was my sense that the proposed regulation''s guard rails were insufficient. I was concerned that, as proposed, the guard rails were too broad and would allow banks to be able to go too far off the road. Further, I was concerned that the guard rails as crafted could be subject to significant abuse--abuse that would be very hard for even the best supervisors to catch," Bloom Raskin said …

Compliance dollars better spent on members CUNA testifies

 Permanent link
WASHINGTON (7/25/12)--At a House subcommittee hearing investigating whether the actions of the Consumer Financial Protection Bureau (CFPB) are, in effect, restricting consumer access to credit,
CUNA witness Doug Fecher is greeted by House subcommittee chairman Patrick McHenry (R-N.C.) before testifying on the problems credit unions face under increasinig regulatory burden. (CUNA photo)
credit union witness Doug Fecher warned that every dollar a credit union must spend complying with regulatory changes is a dollar it cannot spend to benefit its members.

Fecher is president/CEO of Wright-Patt CU, of Fairborn, Ohio, and represented the Credit Union National Association (CUNA) at the House Oversight and Government Reform Committee financial services subcommittee hearing Tuesday.

Fecher noted in his testimony that the 2010 Dodd-Frank Wall Street Reform Act charged the CFPB with reviewing all statutes and regulations that were placed by that law under the CFPB's jurisdiction, which Fecher said could result in hundreds of additional rule changes that credit unions could be required to address.

"This is why credit unions have a significant amount of anxiety with respect to the potential impact the bureau will have on their ability to serve and lend to their members," the CUNA witness told the House panel of lawmakers.

With due respect to the CFPB, Fecher added at one point, the regulator just "doesn't get it" regarding the burden and cost borne by credit unions due to increasing regulations.

He also noted that there is a significant amount of frustration within the credit union system with respect to further rules from the CFPB in response to the financial crisis because credit unions did not cause the financial crisis.

"(Credit unions) did not seek or receive any taxpayer bailout, and they did not engage in the type of activity that prompted the creation" of a bureau to protect consumers from abusive practices in the financial services arena, said the CUNA witness in his testimony.

Noting the CFPB's statutory authority to extend relief to credit unions and others from certain compliance responsibilities, Fecher said CUNA believes the bureau has more exemption authority than it has yet exercised.

"We are very concerned that the bureau seems to be picking and choosing when to use the statutory flexibility…The bureau's failure to use this authority as Congress intended may ultimately drive good actors out of markets, forcing consumers to do business with those entities that remain."

Fecher asked lawmakers to "aggressively urge" the CFPB to use its exemption clause so the weight of compounding rules "that are intended for abusers and the largest financial institutions" does not overburden credit unions and other smaller financial institutions.

Members of the subcommittee, including its chairman, Rep. Patrick McHenry (R-N.C.), repeatedly voiced concern during the hearing regarding the ability of credit unions and community banks to shoulder the ongoing and growing regulatory burden.

For example, Rep. Frank Guinta (R-N.H.), in an unusual move, drew attention to the plight of small financial institutions by quoting directly from CUNA testimony even before Fecher delivered his
The ranking member of the House Oversight subcommittee on financial services, Rep. Mike Quigley (D-Ill.), second from right, welcomes CUNA witness Doug Fecher while another witness--CFPB Director Richard Cordray, second from left,--looks on. (CUNA photo)
remarks.

CFPB Director Richard Cordray was the first witness at the hearing and he testified and answered lawmakers' questions for slightly more than two hours. Cordray noted a number times that credit unions and other smaller financial institutions merit a different regulatory approach than do big institutions.

Cordray said credit unions' knowledge of their members, or what he called a "high-touch" approach to credit allotments, distinguishes them and other small lenders from "volume-driven" lenders whose credit decisions are based more fully on straight statistics. The "high-touch" business approach may mean credit unions and other smaller institutions do not have to be subject to the same rules as "volume-driven" lenders, Cordray acknowledged.

Cordray noted a number of times that the bureau strives to work with small institution stakeholders and announced in response to a question that a CFPB credit union and community bank working group should be operative within a month.

Also testifying at the CFPB hearing were:  Mark A. Calabria, director of Financial Regulation Studies at the Cato Institute;  Steven I. Zeisel, executive vice president and general counsel of the Consumer Bankers Association; and,  Michael D. Calhoun, president of the Center for Responsible Lending.

CUNA's testimony also addressed regulatory issues such as the CFPB current efforts to integrate redundant mortgage disclosure requirements into a simpler disclosure form for consumers, remittance rules and a pending definition revisions for "Qualified Mortgages" that will determine proper underwriting standards for borrowers.

Use the resource link to read CUNA's complete written testimony.

Hearings highlight busy Washington week

 Permanent link
WASHINGTON (7/24/12)--Credit unions will want to watch Washington this week as a series of financial hearings highlight U.S. House and Senate schedules.

One noteworthy hearing is scheduled to take place today. Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio, is scheduled to testify on behalf of the Credit Union National Association and his credit union. The 10 a.m. hearing will focus on the Consumer Financial Protection Bureau's (CFPB) impact on credit markets. (See related News Now story: Wright-Patt CU CEO testifies today on CUNA's behalf)

The House Financial Services financial institutions and consumer credit subcommittee has also scheduled a Tuesday hearing entitled "Examining Consumer Credit Access Concerns, New Products and Federal Regulations." The private student lending market, and how lenders can provide greater flexibility to borrowers, will be examined at a Tuesday Senate Banking Committee hearing.

The House Financial Services Committee on Wednesday will discuss the Financial Stability Oversight Council's annual report with U.S. Treasury Secretary Tim Geithner on Wednesday. A similar hearing is scheduled to be held in the Senate Banking Committee on Thursday.

Tax-exempt organizations will be examined during a Thursday House Ways and Means oversight subcommittee hearing. This is the second in a series of hearings, and U.S. Internal Revenue Service operations, charitable organizations and unrelated business income tax (UBIT) are all scheduled to be discussed.

Neither the tax status of federal credit unions nor the UBIT status of credit unions is expected to come up during the discussion. Not-for-profit credit unions have long believed that income from financial products of all kinds, including sales of insurance products like credit life insurnace and investment products, such as stocks, bonds, mutual funds and annuities, made available by state-chartered credit unions to their members should not be subject to UBIT. The IRS has attempted to assess UBIT on some credit union products, and affected credit unions have successfully defended their right for that income to remain untaxed in in the federal courts.

The Senate is expected to discuss tax cut and tax extension options later in the week, and could also consider cyber-security legislation. However, a firm Senate agenda had not been released at press time.

Bills addressing Obama administration energy policy and the "Regulatory Freeze for Jobs Act of 2012" (H.R. 4078) are expected to be discussed in the House.

Inside Washington (07/23/2012)

 Permanent link
  • WASHINGTON (7/24/12)--A Federal Reserve Board proposal that would place strict limits on the amount of credit exposure the largest banks can have to a major counterparty would overstate the level of excess risk exposures, according to new study by the Clearing House, a trade group. The Fed's plan, released in December, would require banks with more than $50 billion of assets to maintain a two-tier structure in how they limit their counterparty exposures (American Banker July 23). Large banks must comply with a 25% limit on exposure to a single counterparty, as required by the Dodd-Frank Act, but the Fed has said it may impose a secondary limit of 10% on some large banks. Big banks affected by the proposal say the single counterparty credit risk limit is too strict and would cause them to rebalance their portfolios, reducing the liquidity of the derivatives and securities lending markets. The current exposure method in the proposal overstates the underlying risk and is not an accurate exposure measurement tool, said Bob Chakravorti, the Clearing House senior vice president and chief economist ...

CUNA testifies today at House hearing on CFPB

 Permanent link
WASHINGTON (7/24/12)--The burden of complying with ever-changing and ever-increasing regulatory requirements continues to create issues for credit unions and other small institutions, Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio, will tell members of the House Oversight and Government Reform Committee financial services subcommittee today.

Fecher, who is testifying on behalf of the Credit Union National Association, is scheduled to to speak at a 10 a.m. (ET) hearing entitled "Credit Crunch: Is the Consumer Financial Protection Bureau (CFPB) Restricting Consumer Access to Credit?"

In prepared testimony, Fecher will note that credit unions have been battered by the volume of regulatory changes and by concerns sparked by the financial crisis.  Credit unions are bracing for the next wave of rules created by the Dodd-Frank Wall Street Reform Act.

Regulatory compliance costs reduce credit unions' net income, and while these costs will not drive credit unions into immediate insolvency, they will reduce the protective cushion provided by capital, leaving credit unions less resilient during the next big financial shock, Fecher will note. 

"Credit unions face a crisis of creeping complexity with respect to regulatory burden. This burden will, in my opinion, have a negative impact on credit unions' ability to extend credit to members at reasonable costs. It is not just one new law or revised regulation that challenges credit unions, but the cumulative effect of all regulatory changes," Fecher's testimony will say.

Also scheduled to testify this morning are CFPB Director Richard Cordray, Cato Institute Director of Financial Regulation Studies Mark Calabria, Consumer Bankers Association Executive Vice President Steven Zeisel, and Center for Responsible Lending President Michael Calhoun.

TCCUSF assessment should be low-end CUNA

 Permanent link
WASHINGTON (7/24/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney in a letter to the National Credit Union Administration (NCUA) urged the agency to set its 2012 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment at the lowest end of its projected eight to 11 basis point of insured shares range.

Considering that estimates of total remaining TCCUSF assessments are still in the range of $4 billion to $4.5 billion, the 2012 assessment should charge credit unions "no more than is necessary for liquidity purposes," Cheney added in the letter.

The CUNA letter was sent ahead of today's NCUA open board meeting. The agenda for the meeting includes:

  • Adjustments to the agency's 2012 operating budget;
  • Discussions of the interest rate cap for federal credit unions;
  • A proposed rule addressing the agency's definition of a credit union that is in "troubled condition";
  • A briefing on an interagency Truth in Lending Act proposal;
  • A report on the status of the agency's insurance funds; and
  • A new emergency liquidity regulation.
The CUNA letter also urged the NCUA to take significant steps to reduce its budget for the remainder of 2012. The agency should also contain expenses and staffing levels for 2013, and develop a budget that does not require any additional funding from credit unions, Cheney wrote. "An even better outcome would be for the agency to cut its budget and to decrease the costs to credit unions needed to operate the agency," he added.

Cheney in the letter noted CUNA has "serious concerns about any new rule for credit unions, including in the area of liquidity." Rather than seeking to regulate liquidity, "a better approach would be to focus on the guidance the federal financial agencies have already produced on liquidity issues," Cheney told the NCUA.

CUNA recognizes that a thorough consideration of  liquidity sources for credit unions should include NCUA's Central Liquidity Facility. CUNA Chief Economist Bill Hampel on Monday noted that the CLF was created 30 years ago to address situations that existed at that time, and the program could use an update. CUNA's System Liquidity Task Force, chaired by VyStar CU, Jacksonville, Fla., CEO Terry West, believes there is a role for the CLF, but is examining how the fund is operated and funded.

The task force will meet with NCUA officials in the coming weeks and will report any recommendations to the CUNA Governmental Affairs Committee which reports to the CUNA Board.

For the full CUNA letter, use the resource link.

Small CU examinations addressed by NCUA

 Permanent link
ALEXANDRIA, Va. (7/23/12)—The National Credit Union Administration (NCUA) highlighted its new Small Credit Union Examination Program (SCUEP), directed toward credit unions with less than $10 million in assets, in a Letter to Federal Credit Unions (12-FCU-03) made public Friday.

The examination program is intended to streamline the process for small credit unions that have a solid record of performance, meaning, in part, a CAMEL rating of 1, 2 or 3.

"Small credit unions that are financially and operationally sound and present lower risk will typically have shorter examinations and more concise examination reports." The NCUA says in the letter.  It continues, "While we expect the majority of small credit unions will reap the benefits of the new SCUEP, Regional Offices do have discretion to either expand the scope of an exam or exclude an eligible (federal credit union) based on its level of risk."

The letter assures that SCUEP-eligible credit unions will continue to receive professional and thorough examinations that focus on areas of weakness, adverse trends or higher risks.

Credit unions receiving a SCUEP examination will continue to see:

  • Examination time commensurate with credit union size, structure, and risk profile;
  • Emphasis on improved communication with management;
  • Focus on issues and risks relevant to the credit union;
  • Optional meetings with the board of directors for qualifying credit unions;
  • Customized examination reports; and
  • Additional supervision where appropriate.
"NCUA believes the risk-focused SCUEP, coupled with training and assistance from OSCUI (the Office of Small Credit Union Initiatives)  will result in improved small credit union operations and a better allocation of agency resources," the letter states.

The letter goes on to describe the goals of OSCUI and how small credit unions can access those free services.

Use the resource link to read the complete letter.  Also see "NCUA releases guidance on multi-featured open-end loans" (this issue of News Now) to read details of another Letter to Federal Credit Unions released Friday by the agency.

NCUA offers guidance on multi-featured open-end loans

 Permanent link
ALEXANDRIA, Va. (7/23/12)--The National Credit Union Administration (NCUA) Friday issued guidance (Letter to Federal Credit Unions 12-FCU-02) on multi-featured open-end lending (MFOEL) and provided best practices for MFOEL plans used as single accounts with separate sub-accounts for different loan products.

The Credit Union National Association (CUNA) and CUNA Mutual Group in February had urged the Consumer Financial Protection Bureau (CFPB) and the NCUA to revisit the regulation of multi-featured open-end lending plans and to possibly provide additional guidance on these plans, noting that elements of current regulations are confusing some credit unions.

The Federal Reserve Board issued changes to Regulation Z's open-end credit rules in January 2009 and rulemaking authority for Regulation Z transferred from the Fed to the CFPB on July 21, 2011. The NCUA letter issued Friday supersedes and replaces NCUA's Letter to Federal Credit Unions 10-FCU-02, which contained NCUA's previous guidance on this subject.

In preparing this letter, the NCUA consulted with the CFPB on the interpretation of Reg Z as it relates to MFOEL.

The NCUA guidance notes that credit unions are prohibited from using open-end disclosures when safety and soundness requires that underwriting be performed for a particular loan product at the time funds are advanced.

"Credit unions using MFOEL plans are permitted to verify a person's creditworthiness to ensure it has not deteriorated (and revise credit limits and terms accordingly), but they must not perform underwriting because a person has requested a particular advance that would be treated as open-end credit under the plan," the letter says.

For MFOEL plans, credit unions may only verify credit information on a periodic or ad hoc basis.

The NCUA guidance also addresses blended-approach credit plans that use an umbrella loan agreement for a member's open-end lines of credit and closed-end loans. "The blended approach is not an MFOEL plan," the guidance states.

The NCUA letter suggests that federal credit unions, in complying with the open-end lending rules, "consider" the following best practices:

  • Draft and approve policies and procedures that differentiate open-end lending from closed-end lending.  This should include specific processes for opening MFOEL plans, performing "occasional or routine" verification, issuing advances within open-end policies, and establishing specific credit limits for each feature within the plan;
  • Use legal counsel as warranted to review the credit union's policies, procedures, and documents for compliance with Reg Z;
  • Ensure the credit union's data processing provider can support the credit union's policies and procedures for MFOEL. Data processing systems must be able to identify members with MFOEL plans and send periodic statements appropriately;
  • Ensure staff receives necessary training, including training of staff beyond the lending department. For example, member service representatives and call center staff should be knowledgeable with MFOEL terms and processes;
  • When MFOEL plans are secured by collateral such as a member's residence, it is still appropriate for credit unions to verify the collateral value with each advance;
  • Portfolio credit scorings are appropriate if done on a routine, periodic or ad hoc basis for the entire MFOEL portfolio, but are not permissible in conjunction with a particular member advance that will be treated as open-end credit;
  • After opening MFOEL plans, credit reports should be used on a routine, periodic or ad hoc basis to verify continued creditworthiness – not to underwrite an individual advance. Verification should not be specifically triggered by, or tied to, an advance request. For example, using credit report information to complete a debt-to-income ratio computation is impermissible if triggered by an advance request. Such computations may only be done on a periodic or ad hoc basis as part of a credit union's "occasional or routine" verification procedures;
  • Credit unions should determine whether a particular advance is properly characterized as open-end or closed-end credit and provide the appropriate disclosures. Credit unions should use closed-end lending practices and disclosures when it is appropriate to perform underwriting at the time of the advance request. Examples of traditional MFOEL products where closed-end disclosures are generally more appropriate include vehicle-secured loans and large-balance unsecured loans; and
  • Credit unions may use a blended approach that uses a single master loan agreement for a borrower's open-end and closed-end loans, provided that appropriate disclosures are given (and appropriate open-end and closed-end rules are followed).
The NCUA also issued a supervisory letter to examiners that directs them not to discourage MFOEL or blended programs. It says that examiners should, instead, ensure that credit unions understand and comply with the regulatory requirements regarding multi-featured lending, as well as provide "for the safety and soundness of the credit union."

The complete Letter to FCUs and the guidance to examiners can be accessed through the resource links below.

GAO recommends increased SCRA exams

 Permanent link
WASHINGTON (7/23/12)--The Credit Union National Association (CUNA) has warned that the National Credit Union Administration (NCUA) could soon step up its efforts to review credit union compliance with the Servicemembers Civil Relief Act (SCRA).

The U.S. Government Accountability Office in a report issued last week recommended that the NCUA and other federal financial regulators "conduct more extensive loan file testing for SCRA compliance."

To determine the frequency of SCRA compliance examinations, the GAO selected a random sample of 160 depository institutions, including credit unions, and reviewed their own examination files. The GAO's sample included only institutions that hold mortgages in their loan portfolios and service those loans themselves, or institutions that service mortgages for other institutions.

Federal regulators' oversight of SCRA compliance has been limited, the GAO found. The GAO noted that the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve all examined higher percentages of institutions for SCRA compliance than did NCUA.

Overall, the GAO report estimated that federal financial regulators only examined 48% of the financial institutions they oversee for SCRA compliance between 2007 and 2011. And, the GAO added, around half of these examinations featured loan file reviews. The GAO also noted that these loan reviews only featured examinations of loans that the financial institution identified as involving servicemembers.

Independently selecting a statistical sample of loan files would have provided greater assurance of SCRA compliance, the GAO said.

The GAO report recommended that "regulators and other agencies that oversee mortgage activities should also explore opportunities for information sharing on SCRA compliance oversight."

The SCRA protects active duty members of the military from civil claims and default judgments.

Legislation that would make it easier for active-duty military personnel to claim SCRA protections, and extend foreclosure protections offered under the SCRA to the surviving sponsors of military members, was introduced earlier this year by Sen. Jack Reed (D-R.I.). The bill, known as the Servicemember Housing Protection Act (S. 3179), has been referred to the Senate Committee on Veterans' Affairs. Similar legislation has also been introduced in the U.S. House.

Student lending needs fixes CFPB DOE say

 Permanent link
WASHINGTON (7/23/12)--Revising the Truth in Lending Act to clarify the definition of "private student loan" is one of many steps that Congress could take to improve the educational lending market for students, families, schools and financial institutions, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said in a recent report.

The recommendation is one of many made in a joint CFPB/U.S. Department of Education (DOE) private student lending industry report that was released last week. The report was mandated by the Dodd-Frank Wall Street Reform Act.

The report found that loosened lending standards between 2005 and 2007 made private student loans risky for many consumers, and led to many students borrowing more than they needed to finance their educational expenses. The private student loan market grew to $20 billion in 2008, and private student loan default rates "have spiked significantly" since that time. More than 850,000 individual student loans are in default, the report noted. This adds up to $8 billion in unpaid loans.

While federal student loan terms are usually more favorable than private loan terms, the CFPB/DOE examination found that many students did not exhaust their federal Stafford Loan limits before they took out private student loans. Borrowers also lacked an understanding of key differences between private and federal student loans.

Congress could require lenders to work more directly with educational institutions during the student loan origination process. The report suggested that lenders verify that the loan amount requested by a student does not exceed the student's needs, and said private lenders could also be required to examine a borrower's federal loan eligibility before they take out a student loan.

Schools and lenders could also do more to inform borrowers of student loan costs before they take them out, and Congress could also examine recent bankruptcy law changes that make student loans non-dischargeable debt in bankruptcy proceedings.

Six colleges and four state university systems last month agreed to work with the CFPB and DOE to provide key financial information to incoming students. The information, which includes details on college costs, financial aid options, grant and scholarship information, and estimated loan repayment rates, will be provided to students starting in 2013.

The CFPB and DOE are also working together on an online student financial aid comparison tool. The agencies hope to officially launch the tool during the next school year.

The Credit Union National Association estimates that around 300 credit unions currently offer student loans to their members. Credit unions also provide financial education and seminars relating to student lending generally, and encourage students to attend. The CUStudentLoans.org website also provides extensive financial education regarding student lending, through both written information and webinars. The site is powered by Fynanz, a CUNA Strategic Services provider.

Conventional mortgages ARMs reach record lows

 Permanent link
WASHINGTON (7/23/12)--Interest rates for 30- and 15-year fixed-rate mortgages, as well as those for five-year adjustable-rate mortgages, fell to record lows during the week ended July 19, Freddie Mac reported.

Thirty-year fixed-rate mortgages averaged 3.53%, down from the 3.56% average reported last week, and the 4.52% average rate reported this time last year.

Fifteen-year fixed-rate mortgages averaged 2.83%. Those mortgages averaged 2.86% last week, and 3.66% this time last year.

Both five-year and one-year Treasury-indexed, hybrid ARMs averaged 2.69% during the week. Five-year ARMs averaged 3.27% and 1-year ARMs averaged 2.97% this time last year.

"Fixed mortgage rates are remaining low and helping to stir the housing market," Freddie Mac Chief Economist Frank Nothaft noted.

New single-family home construction increased for the fourth-straight month in June, and homebuilder confidence for the next six months recently reached its highest level since March 2007, he noted.

For the full report, use the resource link.

Inside Washington (07/20/2012)

 Permanent link
  • WASHINGTON (7/23/12)--In the two years since the Dodd–Frank Act became law, federal regulators have heard overwhelmingly from the nation's biggest banks, according to a new Sunlight Foundation analysis of financial regulatory agency meeting logs. Since July 21, 2010, when Dodd-Frank was signed into law, regulators at three major banking regulatory agencies--the U.S. Treasury Department, the Federal Reserve and the Commodities Futures Trading Commission have reported meeting with 20 big banks and banking associations on average a combined 12.5 times per week compared with an of average 2.3 weekly meetings with reform-oriented groups. The top 20 banks show up 1,298 times in meeting logs at the three agencies. Groups favoring tighter regulations of the financial markets show up 242 times. Goldman Sachs appears 181 times. JP Morgan Chase is close behind with 175 total meetings, followed by Morgan Stanley with 150, and Bank of America with 122 …

CUs need relief from Dodd-Frank Cheney tells lawmakers

 Permanent link
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

 Permanent link
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

 Permanent link
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

 Permanent link
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)

 Permanent link
  • 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 …

Complaint site could create privacy woes CUNA

 Permanent link
WASHINGTON (7/19/12)--The Consumer Financial Protection Bureau's (CFPB) consumer credit card complaint database and policy statement, unveiled last month, could create privacy risks for credit unions and other financial institutions, the Credit Union National Association (CUNA) reiterated in a comment letter filed on Wednesday.

CUNA raised similar points as the CFPB was developing the consumer complaint database earlier this year.

The CFPB database, which now lists 1749 complaints against financial institutions of at least $10 billion in assets, provides details on the credit card issue that prompted a consumer complaint, the zip code of the consumer that made the complaint, and the company against which the complaint was made. Information on how the complaint was resolved and whether it was resolved in a satisfactory fashion is also included.

The bureau plans to add consumer complaints on other types of financial products to the consumer complaint database.

While credit unions will not likely be the subject of a sizable number of consumer complaints, CUNA said it was still concerned that the public data release could have unintended consequences.

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

CUNA also encouraged the CFPB to make any necessary adjustments to the data to minimize potentially misleading implications. "The publicly released data should be adjusted to account for differences among institutions and the product or service at issue, such as the size of the institution, the relative size of the institution's offering of the product or service, and the different types and characteristics of the financial product or service," CUNA said.

The CFPB is planning to include only non-narrative data that does not contain confidential information for complaints on other non-credit card financial products.

CUNA in the letter urged the CFPB to consider the potential benefits of including some limited narrative information in these databases. "For example, it may be helpful to the public to have a better understanding of the substance of the complaint if the consumer's description and institution's written response were included along with the other information regarding the complaint," CUNA wrote.

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

ATM bill developing in Senate

 Permanent link
WASHINGTON (7/19/12)--Legislation that would ease the burdensome ATM fee disclosure regulations that have created legal and financial issues for many credit unions is now working its way through the Senate, bringing an ATM fix closer to a final vote.

The most recent Senate ATM action took place this week. Language that would revise Regulation E to only require ATM fee disclosures to be presented on an ATM's screen was combined with a Consumer Financial Protection Bureau (CFPB) provision. The CFPB provision would address how the agency handles information from entities it regulates.

The ATM and CFPB bill, known as S. 3394, was introduced by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking committee member Richard Shelby (R-Ala.) on Tuesday.

Sens. Jon Tester (D-Mont.), Sherrod Brown (D-Ohio), Claire McKaskill (D-Mo.), Mike Crapo (R-Idaho), Mike Johanns (R-Neb.) and Kay Hagan (D-N.C.) have also signed on to cosponsor the bill.

Interested parties are working to ensure that all Senators are supportive of this measure before it moves forward.

CUNA 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 only addressed ATM fee disclosure issues, passed the House last week by a 371 to 0 vote.

Matz 10 things to know about NCUA

 Permanent link
ALEXANDRIA, Va. (7/19/12)--A list of 10 things credit unions may not know about the National Credit Union Administration (NCUA), as written by NCUA Chairman Debbie Matz, is one of the featured

articles in the July edition of The NCUA Report.

In her monthly article, Matz notes that the agency cannot change NCUA regulations that are required by law or those written by other agencies. Matz also pledges that the NCUA is making every effort to provide regulatory relief to credit unions, and that the NCUA is providing a wide range of assistance to small credit unions.

Also in the issue, board member Gigi Hyland discusses how credit unions can keep their well-earned reputations for customer service intact. ANd in his column, fellow board member Michael Fryzel tells credit unions that it may be time for the agency to better tailor some one-size-fits-all regulations to create a better fit.

Interagency guidance addressing mortgages held by servicemembers and how assumptions about non-maturity shares can impact credit unions' interest rate risk are also addressed in the July NCUA Report.

For the full report, use the resource link.

Inside Washington (07/18/2012)

 Permanent link
  • WASHINGTON (7/19/12)--Comptroller of the Currency (OCC)  Thomas Curry Tuesday said his agency will be more aggressive in implementing anti-money laundering (AML) controls. Testifying before a Senate Permanent Subcommittee on Investigations that examined years of lax anti-money-laundering controls at HSBC Holdings PLC's U.S. offices, Curry said the OCC did not act fast enough in addressing HSBC's security issues. "With the benefit of hindsight, the OCC could have, and should have taken this action sooner," Curry said. He said the agency has made adjustments to account for Bank Secrecy Act (BSA) and AML deficiencies and react sooner. The agency also will review other areas such as training, staffing, recruitment, policies and interagency coordination and  to make improvements in its BSA/AML supervision program …

FinCEN updates on e-filing problems

 Permanent link
VIENNA, Va. (7/19/12)--The Financial Crimes Enforcement Network (FinCEN) has updated credit unions and other financial institutions on recent Bank Secrecy Act (BSA) electronic filing problems saying the system is now functioning properly and FinCEN has completed the processing of backlog data.

E-filing of all BSA reports became mandatory on July 1.  That requirement effective date combined with a concurrent and massive power outage in the Washington, D.C. metropolitan area--of which Vienna, Va. is a part-- resulted in delays, failed login sessions and, in a few cases, mistaken rejections of properly filed reports.

State and federal financial regulators have been informed of the unique circumstances that arose during this period and examination staff should consider these events when reviewing a financial institution's filings for this period.

As a reminder and reflected in FinCEN's Feb. 24 Notice to Financial Institutions on the Exemption Process, FinCEN acknowledges that financial institutions may at times, and on limited occasions, have ad hoc administrative difficulties in submitting BSA reports electronically within the required timeframes.

At such times, financial institutions should contact FinCEN's regulatory helpline at 1-800-949-2732 to alert FinCEN of the compliance concerns and to determine the best option to ensure the required information is submitted in the most expedient manner.

Capital One fines prompt CFPB card guidance

 Permanent link
WASHINGTON (7/19/12)--Credit unions should be aware of compliance guidance posted yesterday by the Consumer Financial Protection Bureau (CFPB) that addresses marketing practices associated with certain "add-on" features related to credit cards.

The guidance was, at least in part, prompted by the CFPB's announcement of its first public enforcement order, which requires Capital One Bank (U.S.A.), N.A., to refund approximately $140 million to two million customers and pay an additional $25 million penalty because of alleged deceptive marketing tactics used by Capital One's vendors.

CFPB said it determined that Capital One vendors pressured or mislead consumers into paying for "add-on products," such as payment protection and credit monitoring, when they activated their credit cards.

CFPB said the compliance bulletin puts other financial institutions on notice that the bureau "will not tolerate deceptive marketing practices, and institutions will be held responsible for the actions of their third-party vendors."

The bulletin addresses Regulation B (Equal Credit Opportunity Act) and Regulation Z (Truth in Lending Act) provisions, as they relate to credit card practices. While only credit unions with more than $10 billion in assets fall directly under CFPB supervision, on matters involving interpretive guidance on consumer protection laws and regulations under the CFPB's purview the National Credit Union Administration will defer to the CFPB.

The guidance sets forth both steps to be taken to ensure vendors market and sell credit card add-on products in a manner that limits the potential for statutory or regulatory violations and related consumer harm, as well as a list of features that should be included in compliance management by financial institutions that offer credit card add-on products.  (See resource link to read guidance.)

The CFPB enforcement action Tuesday was taken in coordination with the Office of the Comptroller of the Currency.  Between the agencies actions, Capital One was assessed $60 million in total civil money penalty with $150 million in total restitution to cardholders. 

Use the resource link to read the examiners' findings regarding Capital One opt-in marketing practices.

House panel may launch LIBOR investigation

 Permanent link
WASHINGTON (7/18/12)--The House Financial Services Committee is expected to soon begin an investigation into alleged manipulation of the London interbank offered rate (LIBOR) and other interest rates.

The Los Angeles Times, The Wall Street Journal and other publications reported this week that the committee's chairman, Rep. Spencer Bachus (R-Ala.), and its ranking minority member, Rep. Barney Frank (D-Mass.), told their committee colleagues they plan to hold hearings on LIBOR distortion in the near future. Potential legislative actions will likely be discussed during those hearings, The Journal reported.

Committee members could also touch on the subject when Federal Reserve Chairman Ben Bernanke delivers his semi-annual monetary policy report today.

LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.

British bank Barclays PLC recently admitted that some of its employees between 2005 and 2009 conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The firm has been fined by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission, and the United Kingdom's Financial Services Authority.

Governments and authorities in several countries are investigating big banks for any role in potential interest-rate-manipulation schemes, and the relationships between financial regulators and some large firms are also being scrutinized.

The Senate Banking Committee is also investigating LIBOR manipulation, and will hold hearings on the issue this month.

The LIBOR issues will further sully the reputation of big banks, but are unlikely to have a significant impact on credit unions, Credit Union National Association Chief Economist Bill Hampel said recently. (See July 16 News Now story: LIBOR issues unlikely to affect CUs: CUNA.)

TCCUSF federal rate cap more on NCUA agenda

 Permanent link
ALEXANDRIA, Va. (7/18/12)--The National Credit Union Administration's (NCUA) 2012 Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment will be unveiled when the agency holds its July open board meeting next Tuesday at 10 a.m. ET.

NCUA Director of Examinations and Insurance Larry Fazio last month acknowledged to the Credit Union National Association (CUNA) that the agency's 2012 TCCUSF assessment could be in the range of eight and 11 basis points (bp). Earlier this year, CUNA predicted the 2012 corporate stabilization assessment would be around nine bp of insured shares in 2012.

Access to emergency liquidity will also be discussed at the open board meeting. The NCUA in late 2011 asked for public comment on whether credit unions should be required to maintain access to emergency liquidity, and outlined a number of options that credit unions could take to ensure they maintain needed liquidity in times of financial stress.

The agency suggested credit unions could ensure liquidity by:
  • Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or through a corporate credit union;
  • Obtaining and maintaining "demonstrated access" to the Federal Reserve Discount Window; or
  • Maintaining a certain percentage of their assets in highly liquid U.S. Treasury securities.
CUNA and credit unions earlier this year said they did not support a new emergency liquidity regulation. "Credit unions should decide for themselves, based on their risks, whether an emergency liquidity source is called for and what the source or sources should be," CUNA said in a comment letter to the NCUA.

An adjustment to the agency's 2012 operating budget, and, potentially, a change to the interest rate cap for federal credit unions are also on the agenda.

The federal credit union loan interest-rate ceiling has stood at 18% for some time, and the NCUA last year voted to maintain that rate ceiling. The agency is required by the Federal Credit Union Act to set the ceiling, at least every 18 months, if the rate ceiling is to exceed the 15% maximum rate established by law.

A proposed rule addressing the agency's definition of a credit union that is in "troubled condition," and a board briefing on an interagency Truth in Lending Act proposal, are also on the schedule.

The NCUA's quarterly report on the status of the National Credit Union Share Insurance Fund (NCUSIF) and the TCCUSF will also be presented.

A closed NCUA board session will not follow the open meeting this month. Instead, the monthly closed board meeting will be held on Monday, July 23. A creditor claim appeal and a discussion of supervisory activities are on the agenda for the closed meeting, which is scheduled to begin at 2:30 p.m. ET.

For more on the July open and closed NCUA board meetings, use the resource links.

Michigan CUs discuss issues with CFPB

 Permanent link
WASHINGTON (7/18/12)--Credit union leaders from across Michigan joined Michigan Credit Union League CEO David Adams and league staff to urge the Consumer Financial Protection Bureau (CFPB) to consider the credit union difference in terms of structure, pricing, and membership, as it moves forward with future rulemaking.

More than a dozen credit union representatives met with CFPB Director Richard Cordray and CFPB Assistant Director Raj Date after a Monday field hearing in Detroit. The CFPB during that hearing announced plans to regulate credit reporting agencies. (See related July 17 News Now story: Credit reporting agencies to come under CFPB scrutiny)

Click to view larger image Consumer Financial Protection Bureau (CFPB) officials and other industry experts speak before a packed house at Monday's CFPB field hearing in Detroit. CFPB Director Richard Cordray met with Michigan credit unions and the Michigan Credit Union League later in the day. (MCUL photo)


A representative from Mortgage Center, a credit union service organization based in Southfield, Mich., also took part in the meeting.

Cordray and the group discussed the CFPB's recent mortgage disclosure proposal, financial elder abuse, retained income and the general regulatory climate for credit unions during the meeting. The group of credit union leaders told Cordray that they could do more to help consumers if the CFPB, in turn, helped credit unions.

Date said the CFPB wants to help credit unions by regulating irresponsible lenders that helped create the recent financial crisis. He noted that credit unions suffered twice due to the crisis: Once when irresponsible lenders pushed good lenders out of the mortgage market, and a second time when the financial markets crashed.

Adams emphasized that credit unions are also concerned about government attempts to regulate overdraft programs. "When the government tinkers with pricing, it has unintended consequences," Adams noted.

Genisys CU Vice President of Public Relations Lon Bone detailed how his credit union helps members that are about to incur overdraft fees by alerting them when the amount of funds in their account dips below a certain level. Cordray said this overdraft alert system is "an appealing practice."

Regulation CC, which governs when credit unions must make funds available that are deposited into share draft/checking accounts and what disclosure they must make about their check-hold policies, was also discussed during the meeting.

Christian Financial CU CEO Patty Campbell said financial institutions have had trouble complying with portions of the regulation that require them to provide a quick turnaround on deposited checks. The required turnaround on checks makes fraud easier, she said, adding that "if you want to deposit checks, there should be a hold on them."

Adams said the group was encouraged by how receptive Cordray was to credit union concerns.

Credit unions represented at the meeting included: Christian Financial CU, Roseville; Michigan First CU, Lathrup Village; Dort FCU, Flint; Omni Community CU, Battle Creek; Lake Trust CU, Lansing; Genisys CU. Auburn Hills; University of Michigan CU, Ann Arbor; and Co-op Services CU, Dearborn.

Inside Washington (07/17/2012)

 Permanent link
  • WASHINGTON (7/18/12)--Global banking giant HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls, a Senate Permanent Subcommittee on Investigations probe has found. The subcommittee conducted a year-long investigation into HSBC and has detailed its findings in a 330-page report released yesterday, along with more than 100 documents, including bank records and internal emails. The bank's federal bank regulator, the Office of the Comptroller of Currency, tolerated HSBC's weak AML system for years, said Sen. Carl Levin, D-Mich., the subcommittee chairman. "If an international bank won't police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money," Levin said …
  • WASHINGTON (7/18/12)--The Federal Reserve said staff will review submitted questions about potential filings, otherwise known as pre-filings, before the submission of formal filings on potential bank acquisitions. Pre-filings may include information such as business plans, presentations outlining potential proposals, or other items about which potential applicants may have questions. The process is expected to benefit community banking organizations that do not file applications frequently and also pre-filers with novel proposals, the Fed said. The review of pre-filings is expected to take about 60 days …
  • WASHINGTON (7/18/12)--U.S. Treasury Secretary Timothy Geithner today will preside over a meeting of the Financial Stability Oversight Council (FSOC), and there will be a live webcast of the open session. The FSOC was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act and is intended to provide comprehensive monitoring of the country's financial system to ensure stability. National Credit Union Administration (NCUA) Chairman Debbie Matz is one of the council's 10 voting members. There are also five non-voting members …
  • WASHINGTON (7/18/12)--The Office of the Comptroller of the Currency (OCC) announced Tuesday that Donna Deale has been named deputy comptroller for thrift supervision. Deale will lead the OCC's ongoing effort to integrate the supervision of federal savings associations into its mission while working to ensure a "balanced, consistent interpretation and application of supervisory policies to the thrift industry." Deale was with the Federal Home Loan Bank Board in 1986 and moved to the Office of Thrift Supervision (OTS) when it was established in 1989. Last year Deale transferred to the OCC's Chief National Bank Examiner's Office as a senior operations risk expert. The OCC announcement said Deale, in that role, provided critical leadership to the effort to integrate OCC and OTS supervision policies, while accommodating the regulatory and statutory differences that are unique to the thrift industry  …
  • WASHINGTON (7/18/12)--The Consumer Financial Protection Bureau has released a semiannual update of its rulemaking agenda... .

Dodd-Frank hearings continue in House Senate this week

 Permanent link
WASHINGTON (7/17/12)--Congressional committees last week held several hearings on the impact of the Dodd-Frank Wall Street Reform Act as the two-year anniversary of that legislation's passage approaches. Similar hearings are on the schedule this week in Washington.

The first of these hearings will take place today, with the Senate Agriculture, Nutrition and Forestry Committee focusing on the Dodd-Frank Act's impact over the last two years.

Commodity Futures Trading Commission Chairman Gary Gensler and Robert Cook, director of the Securities and Exchange Commission's division of trading and markets, are among those scheduled to testify.

The impact of the Dodd-Frank Act will also be the key topic during separate Thursday hearings in the House Financial Services financial institutions and consumer credit subcommittee and the House Financial Services oversight and investigations subcommittee. The consumer credit subcommittee hearing will focus on credit access; the oversight and investigations subcommittee hearing will focus on how the act has affected small businesses, communities and families.

The House Financial Services Committee's capital markets and government sponsored enterprises subcommittee will convene the final Dodd-Frank hearing of the week to discuss how the legislation has changed pending legislation and affected municipal advisers.

A Thursday House Ways and Means Committee hearing on tax reform and the U.S. manufacturing sector also is planned, but the highest-profile hearings of the week may take place today and Wednesday. Federal Reserve Chairman Ben Bernanke will deliver his semi-annual monetary policy report to the full Senate Banking and House Financial Services committees on today and tomorrow, respectively.

Bills addressing campaign finance reforms and job outsourcing are scheduled for debate in the Senate, and the House is expected to discuss defense appropriations this week.

Credit reporting agencies to come under CFPB scrutiny

 Permanent link
WASHINGTON (7/17/12)--The Consumer Financial Protection Bureau (CFPB) this fall will begin supervision and examination of consumer credit reporting agencies with more than $7 million in annual receipts, the agency announced on Monday.

The agency said its examination authority will cover about 30 firms that account for 94% of total credit report industry receipts. There are around 400 firms in the $4 billion consumer credit reporting market, according to CFPB estimates. The three largest credit reporting agencies produce more than three billion consumer credit reports each year, and maintain credit records on more than 200 million Americans, the CFPB said.

Speaking at a Monday field hearing in Detroit, Mich., CFPB Director Richard Cordray said dispute resolution and credit report accuracy would be two areas of emphasis for the agency. Inaccurate credit reports deprive lenders of the information needed to properly assess credit risk, and can also cause borrowers to be wrongly denied loans, charged higher interest rates, or passed over for jobs, he added.

Cordray said the agency also would work with credit reporting agencies to improve the accuracy of credit report information. The credit report dispute resolution process can be "unreasonably laborious" for consumers, he added, noting that credit reporting agencies can be slow to report the results of investigations to those consumers.

Audience members suggested the CFPB could also examine credit repair firms.

The consumer credit report rule is the first of many CFPB rules that would define "larger participants" in nonbank markets. Under the supervisory program, the CFPB will examine credit reporting bureaus for federal consumer financial law compliance and assess whether risks to consumers exist. The CFPB also will have the right to take enforcement actions.

The supervisory program will begin after Sept. 30, the agency said.

Consumer education will also be a component of the CFPB's credit reporting work. The agency Monday released a consumer advisory on credit reports and a question and answer document as part of that education initiative.

The CFPB advisory highlights what consumers should look for in their credit reports and how to correct any mistakes. Tips on how to monitor credit and avoid identity theft are also included.

Michigan Credit Union League President/CEO Dave Adams and representatives from Michigan credit unions later met with Cordray and other CFPB staff. The credit unions included:

  • Christian Financial CU, Roseville;
  • Michigan First CU, Lathrup Village;
  • Dort FCU, Flint;
  • Omni Community CU, Battle Creek;
  • Lake Trust CU, Lansing;
  • Genisys CU. Auburn Hills;
  • University of Michigan CU, Ann Arbor; and
  • Co-op Services CU, Dearborn.

FHFA One in five May refinances tied to HARP

 Permanent link
WASHINGTON (7/17/12)--One in five mortgages refinanced in May were refinanced through the Home Affordable Refinance Program (HARP), marking the largest market share percentage that program has seen since it began operating in 2009, the Federal Housing Finance Agency (FHFA) reported.

More than 78,000 HARP refinances have been completed as of May 2012, exceeding the total number of HARP refinances completed in 2011, the agency noted. HARP refinances have been most prevalent in Arizona, Florida, Michigan and Nevada, where they accounted for 40% of the mortgages that were refinanced in each of those states.

More than half of those that used HARP to refinance in Arizona and Nevada were underwater on their mortgages, and 40% to 50% of California, Florida and Idaho HARP refinancers owed more than their homes are worth.

The FHFA in a release said the increased volume of HARP refinances is partly due to record low 30-year mortgage rates. However, the FHFA said recent changes to the program also contributed to the increased volume.

"These numbers show HARP 2.0 is accomplishing the goals set forth--to provide relief to borrowers who might otherwise be unable to refinance due to house price declines," FHFA Acting Director Edward DeMarco said.

The Obama Administration last October revised HARP by:
  • Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
  • Removing the 125% loan-to-value ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
  • Waiving certain representations and warranties made by lenders on loans owned or guaranteed by Fannie Mae and Freddie Mac;
  • Eliminating the need for a new property appraisal where there is a reliable automated valuation model estimate provided; and
  • Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to Fannie Mae and Freddie Mac on or before May 31, 2009.
Senate Democrats earlier this year encouraged the FHFA to make further efforts to allow refinancing by homeowners with Fannie Mae and Freddie Mac mortgages. In a letter to DeMarco, the senators said the FHFA should reduce or eliminate loan-level price adjustments for HARP refinances where Fannie and Freddie already carry credit risk, and streamline the refinance process for homeowners with more than 20% equity in their homes.

For the FHFA release, use the resource link.

Settlement could bring a 50 million cost for CUs

 Permanent link
WASHINGTON (7/16/12)--Reduced credit card interchange rate fees--mandated as a result of an historic lawsuit settlement between merchants and credit card companies--could cost credit unions with credit card programs up to a total of $50 million, according to estimates by the Credit Union National Association (CUNA).

Visa, MasterCard and several large banks, defendants in a lawsuit brought by groups of merchants and their trade associations, on Friday agreed to pay billions to merchants to settle a long-standing credit card interchange fee class action lawsuit. In addition, the settlement requires a reduction in credit card interchange rate fees (IRF) of 10bp for an eight-month period, likely beginning in mid-2013.

The rate reduction applies to all card issuers, including credit unions.

If the total credit IRF reduction is $1.2 billion, credit unions with credit card programs would lose about $50 million in total revenues, or about 0.5 bp on their total assets, CUNA Chief Economist Bill Hampel said. This loss would be concentrated among the relatively small number of credit unions that have very active credit card programs, he noted.

The National Association of Convenience Stores on Friday rejected the settlement. However, the Electronic Payments Coalition (EPC) attributed that position to the trade groups' interest in keeping its damage claims alive.

EPC, in a statement, also said that, with the exception of NACS, all other class representatives through their court appointed lead counsel have "determined that this settlement is in their best interests as well as the millions of other merchants they represent." The settlement resolves all competitive issues between merchants and the networks, EPC said.

According to press reports over the weekend, some merchant groups, including the National Community Pharmacists Association and the National Grocers Association, said that they are still reviewing the court documents and assessing its impact on their members.

Other aspects of the settlement include:

  • Visa, MasterCard and the banks would create a $6.05 billion fund (a record amount for a class action settlement) to repay retailers for past fees charged.
  • Retailers would be permitted to assess "check out" fees or surcharges on credit card purchases, which has previously been prohibited by Visa and Mastercard rules.
CUNA President/CEO Bill Cheney said that the surcharging aspect of the settlement--as well as the provision that consumer-owned credit unions would see a reduction in interchange revenue-- are signs that the settlement does nothing for consumers.

"We all know that interchange revenue enables credit unions to provide essential and cost-effective credit card services to their consumer members. We also know that the temporary reduction in interchange revenue that credit unions will experience will not likely find its way into the pockets of consumers, but will more likely into those of merchants," Cheney said.

However, the credit union leader added that "importantly, this settlement means the issues in this case are now closed, once and for all."

CUNA seeks first round of CFPB mortgage comments

 Permanent link
WASHINGTON (7/16/12)--The Consumer Financial Protection Bureau (CFPB) last week proposed a new, simplified mortgage disclosure form and released rules that implement the mortgage form changes. The Credit Union National Association (CUNA) is asking credit unions for general and specific suggestions on how elements of the CFPB proposals could be improved.

The proposed rules amend Regulation Z, which implements the Truth in Lending Act (TILA), and Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA). The regulations back up the changes made to the TILA and RESPA forms that homebuyers are given when they apply for and close a mortgage. (See related July 10 News Now story: CFPB unveils proposed mortgage disclosure forms)

The mortgage rules would apply to the majority of consumer mortgages, but would not apply to home equity lines of credit, reverse mortgages, or mortgages that are secured by mobile homes or dwellings that are not attached to land. Creditors that process five or fewer mortgages per year would also not be subject to the rules.

CUNA continues to work through the 1099 page CFPB mortgage rule release, and is planning multiple comment calls and surveys on different aspects of the proposal.

Most of the CFPB proposal has a comment deadline of Nov. 6, but there are two significant provisions that have a comment deadline of Sept. 7. Those two provisions are addressed in this first comment call.

One such provision would require lenders to include most up-front costs associated with a mortgage to be included in the finance charge. Under the proposal, loan charges or fees would need to be included in the finance charge, but late fees, delinquency or default charges, seller's points, some escrow payments and most insurance premiums would not need to be included.

CUNA in the comment call asks credit unions which fees should be removed from or added into the proposed finance charge structure, and whether the proposed changes to the finance charge structure would create financial or compliance burdens for credit unions.

The CFPB has also asked for earlier comment on a list of disclosures it is considering delaying. That list includes disclosures related to:

  • Negative amortization features;
  • State law protections for borrowers regarding deficiency judgments;
  • Partial payment policies;
  • Mandatory escrow accounts;
  • Escrow waivers;
  • Monthly payments for variable rate loans;
  • Repayment analysis;
  • Settlement charges and fees;
  • Mortgage origination fees;
  • Total interest as a percent of principal; and
  • Optional appraisal management company fee disclosures.
CUNA's comment call asks whether the compliance date for these disclosures should be extended, and if delaying the compliance date for these disclosures until January 2014 would be sufficient.

CUNA has asked credit unions to respond to this first comment call by Aug.10. For the CUNA comment call, use the resource link.

The association's second comment call will have additional details on the requirements contained within the proposed rule.

Inside Washington (07/13/2012)

 Permanent link
  • WASHINGTON (7/16/12)--The Department of Justice on Thursday reached a $175 million settlement with Wells Fargo Bank to resolve the government's allegations that the bank discriminated against qualified African-American and Hispanic borrowers between 2004 and 2009 in violation of the Equal Credit Opportunity Act and the Fair Housing Act. As part of the settlement--which is subject to the U.S. District Court's approval--Wells Fargo will provide $125 million in compensation to borrowers who were victimized by its widespread practice of charging higher fees and rates to non-white borrowers. The bank will provide another $50 million in direct payments for down payment assistance to residents within eight metropolitan areas where the bank's discriminatory practices had a significant impact. Wells Fargo also has agreed to injunctive relief, monitoring, and an internal review of its retail mortgage lending practices--with additional compensation for minority borrowers who received subprime loans from its retail division while white borrowers with similar credit profiles were offered prime loans. "The department's action makes clear that we will hold financial institutions accountable, including some of the nation's largest, for lending discrimination," said Deputy Attorney General James M. Cole at a press conference announcing the settlement. "An applicant's creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for" …
  • WASHINGTON (7/16/12)--The Federal Deposit Insurance Corp. (FDIC) sent a letter to insured financial institutions last week discouraging them from charging specific customer fees for deposit insurance or from stating or implying that the FDIC is charging such fees. While FDIC-insured depository institutions (IDI) are not prohibited from passing the costs of deposit insurance on to customers, "institutions that characterize fees in this manner may (1) reveal information that could be used to determine an institution's confidential supervisory ratings, (2) mislead customers into believing that the FDIC charges IDI customers or requires IDIs to charge customers for deposit insurance, or both," the regulator said in the letter. In the past, the FDIC has advised banks in published advisory opinions that it does not prohibit them from passing deposit insurance costs to depositors with notice that the cost is for that purpose, but those opinions pre-date risk-based pricing and are obsolete, the regulator said …

CDFI Fund announces 2012 NMTC program

 Permanent link
WASHINGTON (7/16/12)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund on Friday opened the 2012 round of the New Market Tax Credit (NMTC) program.

The CDFI Fund in a release said it would make up to $5 billion in tax credits available during the 2012 round of the NMTC, pending authorization by the U.S. Congress.

Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities. To do so, it permits individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs). Those investments must be made in designated Community Development Entities (CDEs). The CDFI Fund allocates the tax credits annually through a competitive application process.

CDFI Fund Director Donna Gambrell said the NMTC program "has been the key to financing countless investments in low-income communities, investments that have bettered the lives of Americans across the country."

This is the 10th year the CDFI Fund has conducted the program. The NMTC program has made 664 awards, totaling $33 billion in tax credit allocations, during that time, the CDFI Fund said.

Applications for CDE certification must be received by Aug. 3, and applications for the NMTC itself must be received by Sept. 12.

For the CDFI Fund release, use the resource link.

LIBOR issues unlikely to affect CUs CUNA

 Permanent link
WASHINGTON (7/16/12)--The global investigation into manipulation of the London interbank offered rate (LIBOR) and other interest rates will further sully the reputation of big banks, but the interest rate issues are unlikely to have a significant impact on credit unions, Credit Union National Association (CUNA) Chief Economist Bill Hampel said.

LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.

British bank Barclays PLC recently admitted that some of its employees conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The manipulations took place between 2005 and 2009.

Regulators have fined Barclays, and governments and individuals may also take legal actions against Barclays and other firms. Some Barclays executives resigned following the LIBOR revelations.

"The LIBOR manipulations apparently took place several years ago, and are unlikely to be occurring now. The interest rate distortions that did exist were likely to have been measured in basis points rather than percentage points," Hampel said. "Credit unions that peg one or more products to LIBOR should be prepared to answer member questions arising from the publicity. And, of course, there is likely to be a flurry of legal actions stemming from the scandal, and credit unions could get caught up in the crossfire," he added.

Barclays agreed to pay $160 million in fines, and to implement compliance and internal control measures, under a settlement it reached with the U.S. Department of Justice (DOJ) late last month. The U.S. Commodity Futures Trading Commission has also imposed a $200 million fine on Barclays, and the U.K.'s Financial Services Authority (FSA) has fined it around $92 million.

British authorities also are looking into the relationship between Barclays and the FSA, and governments and authorities in several countries are investigating big banks such as JP Morgan and Citigroup for their roles in potential interest-rate-manipulation schemes.

The Senate Banking Committee is also planning to investigate interest-rate-manipulation allegations, and is holding briefings to inform committee members on how the manipulations may have impacted American consumers and the U.S. financial system. The committee will hold hearings in July with Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, committee Chairman Tim Johnson (D-S.D.) said.

A group of 12 senators last week asked U.S. Attorney General Eric Holder, Geithner, Bernanke, the National Credit Union Administration and other U.S. financial regulators on the Financial Stability Oversight Council to undertake "a thorough, independent investigation into the LIBOR manipulation scandal." Banks and employees that have broken the law "should face appropriate criminal prosecution and civil action," the letter added. The senators in that letter also asked the DOJ to examine "allegations that U.S. and foreign bank regulators may have been aware of this wrongdoing for years," and to hold any regulators that knew of the abuses accountable for their failure "to stop wrongdoing that they knew, or should have known about."

A Barclays employee in early 2008 told Federal Reserve Bank of New York representatives that "underreporting of LIBOR was prevalent in the market," according to documents released by the New York Fed Friday.

The New York Fed said it "helped to identify problems related to LIBOR and press the relevant authorities in the U.K. to reform this London-based rate." Geithner, who was the head of the New York Fed at that time, discussed LIBOR issues in an e-mail to Bank of England Governor Mervyn King. Geithner suggested that United Kingdom regulators improve the integrity and transparency of the rate-setting process, and make LIBOR submissions subject to internal and external audits.

Exam issues remain high priority CUs to NCUA

 Permanent link
SAN DIEGO, Calif. (7/13/12)--Examination issues again loomed large as the National Credit Union Administration (NCUA) this week held its fifth credit union listening session in San Diego, Calif.

NCUA Chairman Debbie Matz was joined at the session by NCUA Executive Director Dave Marquis, Director of Examination and Insurance Larry Fazio, Region II Director Jane Walters, General Counsel Mike McKenna, and Office of Small Credit Union Initiatives Director Bill Myers. Regional supervisory examiners also answered questions from the audience.

Attendees made suggestions on how the examination process could be improved, and the NCUA officials said they were aware of the burden that regulations and examinations can create for credit unions.

Some credit union representatives criticized NCUA examiners' overuse of Documents of Resolution (DOR). Matz said due to the improving condition of the credit union system, examiners are now being instructed to restrict the use of DORs to only material examination findings. She said the agency expects the number of DORs filed with credit unions to decline in the future.

The agency staff also recognized that receiving two separate lists of regulatory requests, from NCUA and state examiners, can create issues for credit unions. Matz and the NCUA representatives said they would work to encourage increased coordination between state and federal examination teams. The federal regulator also clarified that the California Department of Financial Institutions' "examiner in charge" would serve as the lead examiner for joint examinations held in that state.

Credit unions that have demonstrated net-worth ratios of 6% or higher for four consecutive quarters should be removed from the restrictions imposed under the Net Worth Restoration Plan (NWRP), the NCUA said. Listening session attendees said they were concerned by NCUA rules that prevent credit unions under NWRPs from providing loans to members who are above a specified debt-to-income ratio. The agency officials said they would take this and other NWRP issues under consideration.

The importance of communication between examiners and credit union staff was one of many issues that the NCUA again addressed at this listening session.

Credit union representatives also asked the agency to work toward a quicker, more consistent, and less redundant member business lending (MBL) waiver process. NCUA staff said they are reconsidering their waiver approach. They added that blanket waivers should be made available in some cases, and appeared to be receptive to credit union suggestions that loan participants should not be required to request duplicate waivers if the lead lender in a loan participation has acquired a waiver.

The agency added that it would work with credit unions to address issues related to Allowances for Loan Losses (ALL), ALL funding levels, and Asset Liability Management modeling issues.

The agency will hold the last of its scheduled listening sessions on July 31 in Denver, Colo., and Credit Union National Association (CUNA) will attend that meeting. CUNA and its examination and supervision subcommittee will follow up with the NCUA on key issues brought up during this and other listening sessions.

Registration for the final listening session is limited to the first 150 reservations. See resource link for more information.

Mortgage fraud leads title escrow BSA filings

 Permanent link
WASHINGTON (7/13/12)--Mortgage loan fraud, structuring fraud and false statement fraud are among the most frequently reported crimes in title market- and escrow market-related Bank Secrecy Act (BSA) filings sent to the Financial Crimes Enforcement Network (FinCEN), the agency reported this week.

In its first comprehensive study of suspicious activity reports (SARs) and other related BSA forms filed in the title and escrow markets, the agency noted that thousands of banks, money service businesses and other financial institutions have suspected crimes were being committed at various title and escrow companies. The study covers the period between 2003 and 2011.

Title and escrow companies are not required to file SARs, but some have reported suspected crimes by employees or others on other FinCEN form 8300 payment statements that they are required to file.

Around $122 million have been reported in escrow and title firm SARs filed between 2003 and 2011. Mortgage loan fraud has been the most frequent subject of SARs reporting suspected title or escrow firm malfeasance since 2003.

California was the most frequently listed location of filers, branches, and subjects on SARs filed in the firms, and the majority of suspicious activities reported took place in Texas. Some filed SARs were also tied to business in China, Nigeria, Canada and other foreign locales.

Potential mortgage fraud also was suspected in half of the SARs filed by title and escrow companies in 2011, the agency added. The number of reports linked to potential crimes at escrow and title companies peaked in 2005 and has fallen significantly since then.

The mortgage fraud attempts often feature mortgage brokers and title, escrow or real estate agents who have helped borrowers falsify their mortgage applications by providing untrue employment, income and asset data. Identity theft and the filing of multiple mortgage loan applications for multiple properties were also commonly reported crimes, according to FinCEN.

Title or escrow agents have also reportedly taken part in predatory lending practices and colluded in property flipping schemes, FinCEN said.

BSA reports also noted attempted check fraud, check kiting, wire fraud and money laundering schemes.

This first study of BSA reports filed by and on title and escrow firms will help inform FinCEN's ongoing efforts to identify regulatory gaps that criminals look to take advantage of, and will help the agency address those gaps and mitigate those risks through public awareness, support to law enforcement, or appropriate regulatory action, FinCEN Director James Freis said.

For a FinCEN release, use the resource link.

Financial factors led to May NCUA mergers

 Permanent link
WASHINGTON (7/13/12)--The National Credit Union Administration (NCUA) announced 24 mergers were approved in May, citing poor financial conditions as the primary factor in nearly half of the mergers reported.

Expanded services, inability to obtain officials, and loss of field of membership also played a part in many of the mergers.

NCUA approved the following mergers:

  • UFCW Local 342 FCU, with $5.5 million in assets, Mineola, N.Y., into $4.7 billion asset Bethpage CU, Bethpage, N.Y.;
  • Hartford Postal Employees CU, with $10 million in assets, Wethersfield, Conn., into $1.3 billion asset American Eagle CU, East Hartford, Conn.;
  • Massachusetts State Employees CU, with $71 million in assets, Boston, Mass., into $1 billion asset Metro CU, Chelsea, Mass.;
  • Mountain Valley FCU, with $6.9 million in assets, Nitro, W. Va., into $169 million asset West Virginia FCU, Salem, W. Va.;
  • California Pacific FCU, with $41 million in assets, and CD FCU, with $76 million in assets, both of Concord, Calif., into $1.6 billion asset Western FCU, Manhattan Beach, Calif.;


  • University Drive VAH FCU, with $8 million in assets, Pittsburgh, Pa., into $12 million asset VA Pittsburgh Employees FCU, Pittsburgh, Pa.;
  • Tetco Employees FCU, with $2.4 million in assets, West Chester, Pa., into $260 million asset Benchmark FCU, West Chester, Pa.;
  • South Berkeley FCU, with $2.3 million in assets, Martinsburg, W. Va., into $286 million asset Bayer Heritage FCU, Proctor, W. Va.;
  • Queen Street Baptist Church FCU, with $70,699 in assets, Hampton, Va., into $1.6 billion asset Langley FCU, Newport News, Va.;
  • New Bethel A.M.E. FCU, with $95,382 in assets, Philadelphia, Pa., into $854 million asset Philadelphia FCU, Philadelphia, Pa.;
  • Lower Bucks Hospital FCU, with $1.7 million in assets, Bristol, Pa., into $1.2 billion asset American Heritage FCU, Philadelphia, Pa.;


  • North Orange County CU, with $61 million in assets, Fullerton, Calif., into $565 million asset Credit Union of Southern California, Whittier, Calif.;
  • Atlanta Teachers FCU, with $7.2 million in assets, Atlanta, Ga., into $75 million asset Credit Union of Atlanta, Atlanta, Ga.;
  • Baptist Regional Medical FCU, with $8.1 million in assets, Pensacola, Fla., into $127 million asset Harvesters FCU, Cantonment, Fla.;
  • St. Luke Parish FCU, with $8.9 million in assets, Beavercreek, Ohio, into $78 million asset Incenta FCU, Englewood, Ohio;
  • Georgia Department of Public Safety CU, with $13 million in assets, Atlanta, Ga., into $533 million asset Justice FCU, Chantilly, Va.;
  • Abilene Telco FCU, with $4.5 million in assets, Abilene, Texas, into $10 million asset First Priority CU, Abilene, Texas;


  • Sunrise CU, with $18 million in assets, Green Bay, Wis.,  into $803 million asset Fox Communities CU, Appleton, Wis.;
  • Cleaver-Brooks CU, with $1.4 million in assets, Milwaukee, Wis., into $134 million asset Appletree CU, West Allis, Wis.;
  • CY-Hannibal CU, with $1 million in assets, Palmyra, Mo., into $51 million asset United Community CU, Quincy, Ill.;
  • Hawaii Stevedores/Castle & Cooke Hi CU, with $11 million in assets, Honolulu, Hawaii, into $714 million asset Aloha Pacific FCU, Honolulu, Hawaii;
  • Shoshone County School Employees CU, with $930,417 in assets, Pinehurst, Idaho, into $486 million Potlach No 1 FCU, Lewiston, Idaho; and
  • Montana First CU, with $63 million in assets, Missoula, Mont., into $451 million asset Horizon CU, Spokane Valley, Wash.

Inside Washington (07/12/2012)

 Permanent link
  • WASHINGTON (7/13/12)--House Republicans on Wednesday argued the potential negative impact of a pending rule--part of the Dodd-Frank Act--that would require proof of a borrower's ability to repay a mortgage loan (American Banker July 12). The most contentious part of rule is how regulators will define "qualified mortgages"--a special type of mortgage with fewer compliance requirements. The hearing before the House Financial Services financial institutions subcommittee was one of six planned by the Republicans to address the effects of the Dodd-Frank Act. July 21 marks the two-year anniversary of the Dodd-Frank Act being signed into law …
  • WASHINGTON (7/13/12)--The U.S. Small Business Administration has joined with the Department of Veterans Affairs and the Department of Defense to launch a training program for transitioning service members and veterans to help them become entrepreneurs and create jobs.  Operation Boots to Business: From Service to Startup is a national initiative that will be piloted with the U.S. Marine Corps. The program will pilot in four locations: Quantico, Va.; Cherry Point, N.C.; Camp Pendleton, Calif.; and Twenty-Nine Palms, Calif.  It will be expanded nationwide during fiscal year 2013 with the goal of providing entrepreneurial training and awareness to transition service members from all branches of the military …
  • WASHINGTON (7/13/12)--The Federal Reserve has released new supervisory guidance related to bank acquisition applications...

CFPB sets July 16 credit reporting hearing

 Permanent link
WASHINGTON (7/12/12)--Credit reporting will be the lone item on the agenda when the Consumer Financial Protection Bureau (CFPB) meets with credit unions and others at a planned July 16 field hearing in Detroit, Mich.

CFPB Director Richard Cordray is scheduled to speak at the hearing, which will also feature testimony from finance industry representatives, academics, and representatives from consumer-oriented groups.

Michigan Credit Union League President/CEO Dave Adams and local Michigan credit unions will also attend.

The CFPB has identified credit reporting agencies as one of the many entities it could regulate, but the agency has otherwise not addressed the credit reporting industry.

The Dodd-Frank Wall Street Reform Act transferred Fair Credit Reporting Act (FCRA) rulemaking authority to the CFPB as of July 21, 2011, and FCRA regulations were republished, with slight changes, as an interim final Regulation V rule five months later.

The CFPB fair credit regulation "substantially duplicates" most of the interagency FCRA regulations issued by the National Credit Union Administration (NCUA), the Federal Trade Commission (FTC), and federal banking agencies, as well as the stand-alone FTC regulations.

The CFPB does not currently have the authority to promulgate rules regarding FCRA provisions on: the disposal of consumer information, identity theft red flags, and rules on the duties of card issuers regarding changes of address.

CUNA last year advised credit unions to continue to refer to NCUA and FTC regulations, and not Reg V, for these provisions.

ICU MagazineI features CUNA on CUs trust funds

 Permanent link
WASHINGTON (7/12/12)--While credit unions lack full trust powers, they can open trust accounts for their members, Credit Union National Association (CUNA) Federal Compliance Counsel Colleen Kelly said in the July edition of Credit Union Magazine.

Federal credit unions are not permitted by law to administer trust accounts. While some states may legally allow state-chartered credit unions to administer trusts, it is unlikely that any credit unions do so, Kelly said. However, some credit unions do offer full trust services to their members through affiliated credit union service organizations, she noted. Credit unions simply hold trust account funds, and cannot disburse trust account funds.

Credit unions can offer either revocable trusts, such as a payable on death (POD) accounts, or irrevocable trusts. A written trust agreement establishes an irrevocable trust where the grantor gives up all power to revoke the trust.

POD trust accounts can be easily opened at credit unions, but other trust accounts can be more complicated.

Trust agreements are often lengthy legal documents, and Kim Bohannon, a compliance and risk management officer with TVA Employees CU, Knoxville, Tenn., recommends that members provide their credit union with a one-page declaration that includes simply the information the credit union needs to open the account. Information on the delcaration can include the title of the trust, the date on which the trust was executed and the names and contact information of the trustees, beneficiaries and others taking part in the trust.

Trust accounts are addressed in National Credit Union Administration (NCUA) share insurance regulations, Kelly said. Various combinations of trust account owners and beneficiaries can impact insurance coverage for trust accounts in different ways.

The Credit Union Magazine article reminds readers that the NCUA no longer limits insurance coverage to "qualified beneficiaries." As long as the beneficiary is a natural person, charity or nonprofit organization, the beneficiary will be insured separately, Kelly said.

For more of the Credit Union Magazine piece, use the resource link.

CUs need mortgage rule relief CUNA

 Permanent link
WASHINGTON (7/12/12)--The Credit Union National Association (CUNA) encouraged members of the U.S. Congress to support extending the compliance date for pending mortgage rules, and to urge the Consumer Financial Protection Bureau (CFPB) to exempt credit unions from the mortgage rules where possible, in a Wednesday statement.

The letter was submitted for the record ahead of a Wednesday U.S. House Financial Services financial institutions and consumer credit subcommittee hearing on the Dodd-Frank Wall Street Reform Act's impact on the mortgage market. The CFPB, which was created by the Dodd-Frank Act, earlier this week proposed a new, simplified mortgage disclosure form that combines elements of Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosure forms into a single document. New mortgage rules were also proposed to implement these RESPA/TILA changes, and CUNA's letter focused on these rules.

CUNA said it is still reviewing the 1,099 page proposal, but one initial concern is a CFPB claim that the proposed mortgage changes would not increase the cost of mortgage lending. "A dollar spent on regulatory compliance is a dollar diverted from lending. So, in fact, some mortgage reforms in the Dodd-Frank Act do negatively impact access to mortgage credit for consumers," CUNA said.

As it reviews the CFPB proposal, CUNA is also focusing on how the rule's proposed revision of the finance charge definition could impact credit unions. In the letter, CUNA said that expanding this definition could change home appraisal, escrow and ability-to-repay requirements in some cases.

CUNA said it generally supports the CFPB's proposed definition of a "qualified mortgage," and particularly backed portions that would treat qualified mortgages as a legal safe harbor. Without adequate safe harbor, credit unions could be faced with frivolous foreclosure defense litigation, CUNA said.

The CFPB is still determining a final compliance date for its proposed RESPA/TILA mortgage rules. The agency should give credit unions "as much time as possible" to comply with the rules, once they are finalized, CUNA said.

Overall, CUNA said, the CFPB should use the authority granted to it by Congress to exempt credit unions from new regulations as much as possible. CUNA said the CFPB has greater exemption authority than it has been exercising, and is concerned that the CFPB "seems to be picking and choosing" when to provide regulatory relief.

Inside Washington (07/11/2012)

 Permanent link
  • WASHINGTON (7/12/12)--The White House yesterday announced executive orders that will relaunch the U.S. Small Business Administration's (SBA) Small Loan Advantage Program and increase the maximum loan amount available under that program to $350,000. The cap was previously set at $250,000. Paperwork for disaster loans and other SBA loans would also be reduced under another executive order …
  • WASHINGTON (7/12/12)--Freddie Mac is exploring ways to reduce the amount it pays for force-placed insurance, according to an executive with the second-largest insurance carrier in the market. The government-sponsored enterprise is in discussion with a trade group to develop a lender-placed insurance cost solution to lower the cost to the investor program, John Dickson, a vice president of QBE First Insurance Services, at a hearing held by Florida's Office of Insurance Regulation last week (American Banker July 11). Under standard mortgage terms, borrowers are contractually obligated to maintain hazard insurance. In the event that homeowners fail to maintain such coverage, mortgage servicers are entitled to buy force-placed coverage on their behalf and bill the homeowners. Consumer advocates and insurance regulators in New York and California have criticized banks for reinsuring or collecting commissions on the policies they buy, saying the policies amount to kickbacks and inflate the price of coverage …
  • WASHINGTON (7/12/12)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) Tuesday outlined the committee's plan for looking into allegations of potential widespread manipulation of the London interbank offered rate (LIBOR) and other rates. LIBOR is used by financial institutions to set interest rates on a variety of financial products including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is set based on information provided by 18 global financial institutions, including several U.S. banks. "At my direction, the committee staff has begun to schedule bipartisan briefings with relevant parties to learn more about these allegations and related enforcement actions," Johnson said. "It is important that we understand how any manipulation may impact American consumers and the U.S. financial system." The Banking Committee will hold hearings in July with Treasury Secretary Timothy Geithner and Federal Reserve Chairman Benjamin Bernanke, Johnson said
  • WASHINGTON (7/12/12)--The National Flood Insurance Program (NFIP) is now officially extended until Sept. 30, 2017, after President Barack Obama signed the Biggert-Waters Flood Insurance Reform Act of 2012 into law on July 6. The NFIP bill calls for flood insurance reforms, including the phasing out of subsidies for many properties, raising the cap on annual premium increases, allowing multifamily properties to purchase NFIP policies, imposing minimum deductibles for flood claims, requiring the NFIP administrator to develop a plan for repaying the debt incurred from Hurricane Katrina, and establishing a technical mapping advisory council to deal with map modernization issues…
  • WASHINGTON (7/12/12)--The Federal Reserve on July 16 is scheduled to auction off $3 billion in 28-day term deposits through its Term Deposit Facility. The minimum bid will be $10,000, and the maximum bid amount, per institution, will be $1.25 billion. The awarded deposits will settle on July 19, and will mature on Aug. 16…

CU supporter resigns from Congress

 Permanent link
WASHINGTON (7/11/12)--The resignation of Rep. Thaddeus McCotter (R-Mich.) leaves a void for credit unions in Michigan and the country, the Michigan Credit Union League (MCUL) said on Tuesday.

"Thad McCotter has been an important ally to the credit union movement," MCUL CEO David Adams added.

McCotter first served in the U.S. Congress in 2003, was a member of the House Financial Services Committee, and co-sponsored separate bills that would increase the credit union member business lending cap and grant credit unions greater access to supplemental capital. He also spoke at the Credit Union National Association's 2010 Governmental Affairs Conference.

McCotter last Friday announced he would resign from his seat after he did not gain the number of signatures needed to appear on a primary ballot.

The Michigan Bureau of Elections in May found only 277 of the 2,000 signatures McCotter turned in were valid, and the former congressman is being investigated for possible election fraud by Michigan state authorities.

CUNA urges Senate to take up ATM bill

 Permanent link
WASHINGTON (7/11/12)--While the U.S. House's unanimous passage of legislation that would ease duplicative ATM regulations is "an important milestone," Credit Union National Association (CUNA) President/CEO Bill Cheney said there is more work to be done.

The ATM bill, H.R. 4367, passed the House Monday night by a 371 to 0 vote. Cheney encouraged the Senate to take up the ATM regulation measure as soon as possible and provide credit unions with much needed regulatory relief.

The bill would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on a screen.

The current ATM disclosure requirements are creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits. CUNA has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and then pictures are then taken of the ATM to show noncompliance with disclosure rules. Some ATM users may then use this as evidence of apparent noncompliance and as grounds for lawsuits, and the total number of these lawsuits could be in the hundreds. Many credit unions are settling the suits to avoid the cost of litigation, CUNA has said.

After the House vote, Cheney said credit unions across the country appreciate the passage of H.R. 4367, and noted that consumers won't be adversely affected by the elimination of this redundant sign because the bill maintains the obligation that consumers opt-in to any ATM fees before a transaction is processed.

"CUNA is working with senators and their staff to move the ATM legislation through the Senate as quickly as possible, and we remain hopeful that the Senate will consider the bill soon," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.

FinCEN sets July 31 due diligence hearing

 Permanent link
WASHINGTON (7/11/12)--The Financial Crimes Enforcement Network (FinCEN) has scheduled a July 31 public hearing to collect additional comments on customer due diligence (CDD) regulations it proposed earlier this year.

The hearing is scheduled for  9:30 a.m. to 5:30 p.m. ET  at the U.S. Treasury office. FinCEN has invited regulators, members of the law enforcement community, finance industry representatives and others to attend or submit comments. The hearing will be the first in a series of hearings on the potential due diligence regulations, FinCEN said.

Saying it was concerned by a lack of uniformity and consistency in how financial institutions address their CDD policies, FinCEN in March released an Advanced Notice of Proposed Rulemaking (ANPR). It proposed to codify, clarify, consolidate and strengthen CDD rules. The proposed rule would apply to financial institutions, securities brokers and dealers, mutual fund brokers and dealers, futures commission merchants, and some introducing commodities brokers, and would require them to establish and maintain policies for monitoring the accounts they hold.

A key part of the FinCEN ANPR addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account held at an institution to assess the likelihood of suspicious activity. The proposed FinCEN regulations would be one part of a broader U.S. Treasury strategy to enhance financial transparency to strengthen efforts to combat financial crimes.

The Credit Union National Association (CUNA) in a comment letter said that while it supports the objective to improve the tracking of money laundering and terrorist financing, the increased regulatory burdens and costs the proposed rules would create for credit unions would far outweigh the purported benefits to FinCEN. CUNA noted it can be difficult for some credit unions to obtain certain account information from their members, and said the FinCEN rules could conflict or interfere with member confidentiality standards, resulting in potential fiduciary or legal issues.

FinCEN should abandon the due diligence ANPR and, instead, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules, CUNA suggested.

For more on the FinCEN ANPR, and CUNA's comment letter, use the resource links.

CFTC exempts most CUs from derivatives rules

 Permanent link
WASHINGTON (7/11/12)--The Commodity Futures Trading Commission (CFTC) on Tuesday approved a final rule to exempt, as end users, credit unions with under $10 billion in assets from the terms of pending derivatives regulations, and introduced a proposal that would also exempt certain larger credit unions from those same rules.

If the proposal, which the Credit Union National Association (CUNA) has already weighed in with the agency to support, is adopted, virtually all credit unions will avoid the CFTC's rules on derivatives. "This could be important particularly if regulations limiting the ability of credit unions to use plain vanilla instruments to hedge interest rates are further considered by the National Credit Union Administration," CUNA Deputy General Counsel Mary Dunn said.

The CFTC rule finalizes definitions of swaps, security-based swaps and security-based swap agreements. The new swap definitions are effective immediately, according to the CFTC.

Portions of the Dodd-Frank Wall Street Reform Act would bar certain institutions from engaging in swap transactions, and require institutions that engage in swaps to sell and buy them through federally registered clearinghouses and open markets. However, these regulations could not become effective until swaps were defined by federal regulators.

With the new definitions approved, some of the swap regulations could become effective in about 60 days, the CFTC said.

In addition, the CFTC approved a rule to provide an exemption for small financial institutions, under which credit unions and other end-user financial institutions with fewer than $10 billion in assets will not be subject to pending mandatory swaps clearing requirements. CUNA called for this exemption in a 2011 comment letter and supported it in subsequent discussions with policymakers.

CFTC Chairman Gary Gensler said the regulatory burdens faced by smaller institutions were discussed as the CFTC considered the exemption.

The exemption from the swap clearing requirements also could be extended to credit unions with more than $10 billion in assets under a separate CFTC proposal issued on Tuesday. That proposal would provide a so-called "cooperative exemption" for cooperative businesses if all of a given business's members are non-financial entities, financial entities to which the "small financial institution exemption" applies, or cooperatives. This definition would likely cover credit unions with more than $10 billion in assets that meet the exemption criteria, CUNA Assistant General Counsel Luke Martone said.

The proposed exemption will be open for public comment for 30 days after it is published in the Federal Register, and CUNA will submit a comment letter on the proposal.

Federal credit unions are allowed to enter into some types of over-the-counter agreements, which would meet the definition of "swaps," and some state credit unions have this authority as well. Relatively few credit unions use derivatives to hedge interest-rate risk.

Regulators warn of outsourced cloud computing risks

 Permanent link
WASHINGTON (7/11/12)--Credit unions and other financial institutions should clearly identify and mitigate legal, regulatory, and reputational risks before they decide to use cloud computing for data storage and other computing purposes, the Federal Financial Institutions Examination Council (FFIEC) said in a Tuesday release.

In cloud computing, data are not held in one central spot, but are shared among different servers and locations.

Outsourcing to cloud computing providers can help reduce costs and improve the flexibility, scalability and speed of data use and storage, the FFIEC said. However, credit unions and other institutions should perform adequate due diligence before any moves to such systems are made, and should be aware of cloud-specific security and regulatory issues.

Cloud computing is another form of outsourcing, with the same basic risk characteristics and risk management requirements as traditional forms of outsourcing, the FFIEC said.

Financial institutions should assess the strength of any cloud computing firm's internal controls, and examine their own data security standards, before moving forward, the FFIEC suggested. Cloud storage could increase the frequency and complexity of security incidents, the FFIEC noted. The regulators said financial institutions and cloud computing providers should ensure that their firms effectively monitor their systems for security-related threats, and be sure to have appropriate forensic strategies for investigation and evidence collection in the event of a security breach.

Cloud computing also can create new compliance issues if customer data are stored or processed overseas. Overseas data storage can make it more difficult for financial institutions to assess compliance. Also, due diligence may be more complex and difficult in an environment where the cloud computing service provider processes and stores data overseas, the FFIEC warned.

For the full FFIEC release, use the resource link.

Inside Washington (07/10/2012)

 Permanent link
  • WASHINGTON (7/11/12)--As part of its ongoing efforts to wind down and recover its remaining Capital Purchase Program (CPP) investments under the Troubled Asset Relief Program (TARP), the Department of the Treasury Monday said it will sell more preferred stock and subordinated debt CPP investments. Treasury has recovered $264 billion from TARP's bank programs through repayments, dividends, interest and other income--compared with the $245 billion initially invested. Treasury has remaining outstanding CPP investments in 325 banks.  Beginning July 23, the Treasury will auction the preferred stock and subordinated debt for First Western Financial, Denver; CBS Banc-Corp., Russellville, Ala.; Exchange Bank, Santa Rosa, Calif.; Market Street Bancshares, Mount Vernon, Ill.; Fidelity Financial, Wichita, Kan.; Marquette National, Chicago; Premier Financial Bancorp, Huntington, W. Va.; Diamond Bancorp, Washington, Mo.; Park Bancorp., Madison, Wis.; Trinity Capital, Los Alamos, N.M.; First Community Financial, Joliet, Ill.; and Commonwealth Bancshares,  Louisville, Ky. …
  • WASHINGTON (7/11/12)--Banks participating in the Small Business Lending Fund (SBLF) increased their business lending by $433 million during the first quarter, the Treasury Department announced Monday. Of the 281 participating banks, 84% increased their business lending over baseline levels, according to a report released by Treasury. More than 69% increased their business lending by 10% or more. The SBLF program is designed to increase lending to small businesses by making capital available to community banks and community development loan funds. It provided $30 billion to banks with less than $10 billion of assets, including banks that wished to repay TARP funds (News Now April 26). As of March 31, SBLF participants have increased their lending by $5.2 billion over their aggregate baseline, according to Treasury. The Credit Union National Association (CUNA) and credit unions are urging the U.S. Congress to increase credit unions member business lending (MBL) cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said …
  • WASHINGTON (7/11/12)--Responding to criticism that the Consumer Financial Protection Bureau's (CFPB) complaint database is unfair, CFPB Director Richard Cordray said the database puts pressure on companies to compete for customer service. In an interview with American Banker (July 10), Cordray called the database part of "a free market of ideas" and said it is the agency's job to weed through unfounded complaints that critics claim the system encourages. Regarding delays on the qualified mortgage rule, Cordray told the Banker the mortgage market will be more negatively affected by a poorly crafted rule than any delays that would be necessitated to draft an effective rule …

Problems with NMLS renewal activity report

 Permanent link
WASHINGTON (7/10/12)--Every July 1, the Nationwide Mortgage Licensing System and Registry (NMLS) updates its online Renewal Activity Report to help institutions to prepare for upcoming registration renewal season.  However, this year the NMLS has warned that its renewal report carries some incorrect information on the renewal status of certain mortgage loan originators (MLOs) as "exempt" when, in fact, the renewal status was "eligible for renewal."

"Until this issue is resolved, institutions should not rely on this report to determine who is required to renew to maintain an active registration for 2013," the NMLS says on its website.

The NMLS is working to resolve the issue and said it will provide updates as appropriate on its Resource Center website (use the resource link below).

Title V of the 2008 Housing and Economic Recovery Act brought about the licensing and registration requirements for mortgage originators, and was the result of problems with mortgage lending, especially with subprime mortgage loans. Now, any individual who originates residential mortgages must annually register with the NMLS as a "registered loan originator."

MLOs have to renew their registration annually between Nov. 1 and Dec. 31 unless initial registration occurred less than six months prior to the end of the renewal period. In addition, credit unions' NMLS institution accounts must be renewed on an annual basis, regardless of when the institution's account was created.

Congress this week Marking second Dodd-Frank anniversary

 Permanent link
WASHINGTON (7/10/12)--With this month marking the second anniversary of the Dodd-Frank Wall Street reform package, the House Financial Services Committee will be taking a look at the impact of that law.

The House Financial Services subcommittee on capital markets and government-sponsored enterprises will hold the first in the series of hearings today with a session to examine the effect that the act has had on U.S. capital markets, businesses, investors, and consumers. The hearing is expected to have a particular focus on derivatives regulation; the so-called Volcker Rule, intended to ban banks from making certain speculative investments; risk retention; and single counter-party credit limits.

The House Judiciary subcommittee on intellectual property, competition and the Internet has scheduled a hearing for today titled, "Impact of Dodd-Frank Act: Financial Services Competition."

On Wednesday, the House Financial Services subcommittee on financial institutions and consumer credit will hold a hearing titled, "Impact of Dodd-Frank Act: Mortgage Banking."

The House was expected to vote last night on a Credit Union National Association–supported ATM disclosure bill. (See related story: CUNA encourages 'yes' vote on ATM bill.)

CFPB unveils proposed mortgage disclosure forms

 Permanent link
WASHINGTON (7/10/12)--Taking what it might consider to be a one-two punch against the confusion that can surround consumers during the mortgage origination process, the Consumer Financial Protection Bureau (CFPB) Monday proposed a new, simplified mortgage disclosure form and also proposed to expand protections afforded consumers who take out mortgages that are considered "high cost."

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA will provide a summary of the extensive CFPB documents this week.

The CFPB's revised disclosure form combines the lengthy, duplicative, and, many say, confusing disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act into a single, more readable document.

"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," said CFPB Director Richard Cordray in a release.

"Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."

The proposed forms, which consumers will receive after applying for a loan and before closing, are part of the CFPB's Know Before You Owe mortgage project. Regulators spent more than a year researching the changes, as well as testing,  writing, and reviewing the proposal before its public unveiling.

The agency lists the following as the key improvements of the revised form:

  • Simpler than the old forms. Consumers can understand and compare different mortgages more effectively, and examine their estimated and final terms and costs more easily, helping them make the right decisions for themselves and their families.
  • Highlights information consumers need. Interest rates, monthly payments, the loan amount, and closing costs are all right there on the first page of the CFPB proposed form. Also, the first page explains how the interest rates, payments, and loan amount might change over the life of the loan, including the highest they can go. In addition, the forms offer more information about taxes, insurance, and other property costs so consumers can better understand the total cost.
  • Easier to look out for risks. The forms provide clear warnings about features some consumers may want to avoid, such as prepayment penalties and an increase in the loan balance (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, industry and regulators will be able to address compliance questions more easily.
  •  More time to consider choices. Lenders must give the Loan Estimate to consumers within three business days of applying for a loan and consumers must receive the Closing Disclosure at least three business days before closing on a loan. This will allow consumers to decide whether to go ahead with the loan and whether they are getting what they expected.
  • Limits on closing cost increases. The proposed rule would restrict circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.
Regarding consumer protections for high-cost mortgages, the CFPB proposed to extend protections under the Home Ownership and Equity Protection Act, as mandated by the Dodd-Frank Act.

The CFPB's proposal would:

  • Ban potentially risky features. For mortgages that qualify as high-cost based on their interest rates, points and fees, or prepayment penalties, the proposed rule would generally ban balloon payments (a large, lump sum payment usually due at the end of the loan), and would completely ban prepayment penalties.
  • Ban and limit certain fees. The CFPB's proposed rule would ban fees for modifying loans, cap late fees, and restrict the charging of fees when consumers ask for a payoff statement (a document that tells borrowers how much they need to pay off the loan).
  • Require housing counseling for high-cost mortgages. The proposed rule would require consumers to receive housing counseling before taking out a high-cost mortgage. In addition, the CFPB's proposal would implement TILA counseling requirements for first-time borrowers taking out certain mortgage loans that permit negative amortization. The proposal would also implement an amendment to RESPA to generally require that a list of housing counselors or counseling organizations be provided to all mortgage applicants.
Comments will be accepted by the CFPB on its high-cost loan proposal until Sept. 7.  That is also the comment deadline for sections 1026.1 (c) and 1026.4 of the TILA-RESPA disclosure plan.  For the rest of that proposal, CFPB will accept comments until Nov. 6.

CUNA, with its Consumer Protection Subcommittee and Housing Finance Reform Task Force, will be analyzing both CFPB proposals and drafting CUNA comment letters.

Inside Washington (07/09/2012)

 Permanent link
  • WASHINGTON (7/10/12)--Acting Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg said it is difficult to weigh the possible effects of expiration of the Transaction Account Guarantee (TAG) program because of a shaky economy. The TAG program has helped stabilize banks and the economy, Gruenberg wrote in a letter to Congress, dated June 29 (American Banker July 9). FDIC initiated TAG as a voluntary program in 2008 during the financial crisis to address concerns that a large number of account holders might withdraw their uninsured account balances from financial institutions due to economic uncertainties. West Virginia Rep. Shelley Moore Capito (R-W. Va.) has asked the FDIC to assess the cost of a program that allows banks to offer its customers unlimited deposit insurance on noninterest-bearing transaction accounts (News Now June 11) …
  • WASHINGTON (7/10/12)--Eighteen trade groups have called into question the legality of a plan by a venture capital firm and three California municipalities to use eminent domain powers to seize mortgage loans from private investors. California's San Bernardino County and two of its city governments, Fontana and Ontario, would restructure the mortgages to help troubled borrowers stay in their homes. "We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues," said the letter, signed by organizations, including the Securities Industry and Financial Markets Association and the American Bankers Association. "It would also be immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions." But when the program was featured in a Wall Street Journal article, a spokesman said the county is not committed to the idea

NEW CFPB unveils proposed mortgage disclosure forms

 Permanent link
WASHINGTON (UPDATE 7/9/12 3:45 p.m. ET)--Taking what it might consider to be a one-two punch against the confusion that can surround consumers during the mortgage origination process, the Consumer Financial Protection Bureau (CFPB) Monday proposed a new, simplified mortgage disclosure form and also proposed to expand protections afforded consumers who take out mortgages that are considered "high cost."

Credit Union National Association (CUNA) Deputy General Counsel said CUNA will provide a summary of the extensive CFPB documents this week.

The CFPB's revised disclosure form combines the lengthy, duplicative, and, many say, confusing disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act into a single, more readable document.

"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," said CFPB Director Richard Cordray in a release.

"Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."

The proposed forms, which consumers will receive after applying for a loan and before closing, are part of the CFPB's Know Before You Owe mortgage project. Regulators spent more than a year researching the changes, as well as testing,  writing, and reviewing the proposal before its public unveiling.

The agency lists the following as the key improvements of the revised form:

  • Simpler than the old forms. Consumers can understand and compare different mortgages more effectively, and examine their estimated and final terms and costs more easily, helping them make the right decisions for themselves and their families.
  • Highlights information consumers need. Interest rates, monthly payments, the loan amount, and closing costs are all right there on the first page of the CFPB proposed form. Also, the first page explains how the interest rates, payments, and loan amount might change over the life of the loan, including the highest they can go. In addition, the forms offer more information about taxes, insurance, and other property costs so consumers can better understand the total cost.
  • Easier to look out for risks. The forms provide clear warnings about features some consumers may want to avoid, such as prepayment penalties and an increase in the loan balance (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, industry and regulators will be able to address compliance questions more easily.
  • More time to consider choices. Lenders must give the Loan Estimate to consumers within three business days of applying for a loan and consumers must receive the Closing Disclosure at least three business days before closing on a loan. This will allow consumers to decide whether to go ahead with the loan and whether they are getting what they expected.
  • Limits on closing cost increases. The proposed rule would restrict circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.
Regarding consumer protections for high-cost mortgages, the CFPB proposed to extend protections under the Home Ownership and Equity Protection Act, as mandated by the Dodd-Frank Act.

The CFPB's proposal would:

  • Ban potentially risky features. For mortgages that qualify as high-cost based on their interest rates, points and fees, or prepayment penalties, the proposed rule would generally ban balloon payments (a large, lump sum payment usually due at the end of the loan), and would completely ban prepayment penalties.
  • Ban and limit certain fees. The CFPB's proposed rule would ban fees for modifying loans, cap late fees, and restrict the charging of fees when consumers ask for a payoff statement (a document that tells borrowers how much they need to pay off the loan).
  • Require housing counseling for high-cost mortgages. The proposed rule would require consumers to receive housing counseling before taking out a high-cost mortgage. In addition, the CFPB's proposal would implement TILA counseling requirements for first-time borrowers taking out certain mortgage loans that permit negative amortization. The proposal would also implement an amendment to RESPA to generally require that a list of housing counselors or counseling organizations be provided to all mortgage applicants.
Comments will be accepted by the CFPR on its high-cost loan proposal until Sept. 7.  That is also the comment deadline for sections 1026.1 (c) and 1026.4 of the TILA-RESPA disclosure plan.  For the rest of that proposal, CFPB will accept comments until Nov. 6.

CUNA, with its Consumer Protection Subcommittee and Housing Finance Reform Task Force, will be analyzing both CFPB proposals and drafting CUNA comment letters.

Western Bridge story comes to an end

 Permanent link
ALEXANDRIA, Va. (7/10/12)--Catalyst Corporate FCU of Plano, Texas, completed the migration of Western Bridge Corporate FCU's 326 capitalizing members and services last week, and the National Credit Union Administration (NCUA) announced the subsequent liquidation of Western Bridge late Friday.

The Western Bridge story has been unfolding since 2009, when the NCUA conserved Western Corporate and created Western Bridge. In 2011, the members of Western Bridge initially sought but failed to capitalize a new corporate credit union, United Resources Corporate FCU.

As conservator of Western Bridge, NCUA sought an acquisition partner with a goal to minimize service disruption to the consumer credit union members of Western Bridge and to ensure the "best financial outcome" for the Temporary Corporate Credit Union Stabilization Fund.

After a competitive bidding process in December, the regulator awarded Catalyst the exclusive right to acquire Western Bridge.

"The closing of Western Bridge's doors is an important milestone for the entire credit union system," said NCUA Chairman Debbie Matz, in announcing the agency's move. "Consistent with NCUA's Corporate Resolution Plan, we have smoothly transferred the former corporate's members and services to Catalyst while minimizing costs for all credit unions."

With the transfer of Western Bridge's members, Catalyst Corporate now has 1,232 members and $147 million in capital. Western Bridge is the first federally insured corporate credit union liquidated in 2012.

CUNA encourages yes vote on ATM bill

 Permanent link
WASHINGTON (7/10/12)--In anticipation of a House vote last night on a bill that would eliminate a dual-disclosure requirement on ATMs, the Credit Union National Association (CUNA) encouraged House lawmakers to approve the "common sense" bill.

In a letter to House leadership, CUNA noted the bi-partisan support enjoyed by the bill and reiterated the group's strong support for the legislation that it says eliminates an unnecessary regulatory burden on credit unions and other financial institutions.

The bill (H.R. 4367), which was unanimously approved in a House Financial Services Committee mark up on June 27,  would eliminate portions of Regulation E that require financial institutions that provide ATM services to display a physical notice on an ATM that a fee will be charged. They are also required to display the fee disclosures on their screen.

Under the legislation, ATMs would only be required to display the ATM disclosures on their screens, and give ATM users the choice of opting in to such a fee.

In addition to being an unnecessary regulatory burden for credit unions, CUNA has argued the external ATM disclosure requirement is creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits.

The CUNA letter noted the external disclosure requirement "has led unscrupulous individuals to remove the physical placard and sue the ATM operator for noncompliance, costing financial institutions hundreds of thousands of dollars."

"The threat of lawsuits has caused many credit unions to go to extraordinary steps to document compliance, increasing the cost of operating ATMs to the detriment of credit unions' member-owners," wrote CUNA President/CEO Bill Cheney.

"H.R. 4367 is a common sense piece of legislation that will reduce regulatory burden without harming ATM users," Cheney concluded his letter.  Use the resource link to access the CUNA letter.

(EDITOR'S NOTE: The House unanimously passed the bill last night, 371-0.)

Inside Washington (07/06/2012)

 Permanent link
  • WASHINGTON (7/9/12)--The Office of the Comptroller of the Currency and the Federal Reserve failed to clearly communicate with homeowners that they were eligible for financial assistance related to their mortgage foreclosures, according to a report from the Government Accountability Office (GAO). "Readability tests found the initial outreach letter, request-for-review form, and website to be written above the average reading level of the U.S. population, indicating that they may be too complex to be widely understood," the GAO said. Regulators also did not solicit input from consumer groups when reviewing the initial communication materials, according to the report. Communication materials developed by mortgage servicers with input from regulators and consultants included information about the purpose, scope and process for the foreclosure review and noted that borrowers may be eligible for compensation. However, the materials did not provide specific information about remediation. "Without informing borrowers what type of remediation they may receive, borrowers may not be motivated to participate," the report said …

House could vote on ATM bill today

 Permanent link
WASHINGTON (7/9/12)--Legislation that would help credit unions and other financial institutions by easing duplicative ATM regulations is on the U.S. House suspension calendar for this week, and could receive a full House vote as early as today.

The bill (H.R. 4367) would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will

be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on their screen, and give ATM users the choice of opting in to such a fee.

These ATM disclosure requirements are creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits. The Credit Union National Association (CUNA) has

noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and then pictures are then taken of the ATM to show noncompliance with disclosure rules. Some ATM users may then use this as evidence of apparent noncompliance and as grounds for lawsuits, and the number and cost of these lawsuits continues to climb.

CUNA President/CEO Bill Cheney said the bill is "a common-sense solution that will alleviate an unnecessary compliance burden and reduce instances of baseless litigation."

The House Financial Services Committee unanimously approved the bill before the July 4 district work period, and committee members at that time said they hoped the bill could be moved on to the Senate quickly.

The bill has 145 House co-sponsors.

Recovery on slower track CUNA economists

 Permanent link
WASHINGTON (7/9/12)--Credit Union National Association (CUNA) economists have revised their economic forecast, and while they expect the economic recovery to remain on track, they now have a slightly less optimistic view of the near-term economic future.

The new CUNA outlook--developed during a quarterly economic forecast meeting held last week--reflects a marginal downward adjustment to overall economic growth, CUNA Senior Economist Mike Schenk said.

CUNA economists lowered their U.S. gross domestic product (GDP) growth estimates to 2% for 2012, and 2.5% for 2013. They had previously estimated GDP growth rates of 2.6% for 2012 and 3% for 2013. These changes reflect consumer caution arising from a softer-than-anticipated labor market recovery and from uncertainty surrounding the Eurozone crisis and U.S. budget issues, Schenk noted.

The CUNA economists continue to expect the unemployment rate to remain elevated and to improve only marginally over the next year-and-a-half.  The new economic forecast calls for an average 7.75% unemployment rate in 2013, slightly higher than the group's previous estimate of 7.5%.

Slower labor market improvement and nagging uncertainty mean that changes in headline inflation--as measured by the Consumer Price Index (CPI)--will likely be less pronounced than previously thought, Schenk said. The economists now expect CPI to increase by 1.75% in both 2012 and 2013. They previously predicted CPI increases of 2% for 2012 and 2013.

"This all continues to signal a somewhat wider spread between long-term and short-term interest rates over the forecast horizon. The Federal Reserve is expected to keep its overnight interest rate target close to 0%, at least through year-end 2013. On the other hand, longer-term rates are likely to increase – just not as quickly as previously believed," Schenk said.

The group's forecast now calls for the 10-year Treasury interest rate to average 1.7% in 2012 and 2.25% in 2013.  This is down from the 2.15% and 2.75% expected averages in the previous predictions.

Credit union operating results will continue to improve, but at a somewhat slower pace than previously thought, Schenk said. The new baseline forecast suggests credit unions will experience slightly faster savings growth in the near-term and slightly slower loan growth. "Credit union savings balances are now expected to increase by 6% in 2012--up from the previously anticipated 5% increase--as more cautious consumers forego some spending and borrowing," Schenk noted.

Credit union loan balances are expected to increase by 3% in 2012 and 5% in 2013--down from the previous projections of 4% in 2012 and 6% in 2013.

Earnings, while continuing to improve, are expected to show a less pronounced increase than reflected in the previously released forecast. Credit union return on assets (ROA) averaged 0.68% in 2011 and was expected to increase to 0.9% in both 2012 and 2013. The revised outlook calls for ROA of 0.8% in 2012 and 0.9% in 2013.

For the full revised forecast, use the resource link.

Examiners ID CU risk areas NCUA OIG says

 Permanent link
ALEXANDRIA, Va. (7/9/12)--National Credit Union Administration (NCUA) regional management and staff are identifying and monitoring potential high-risk areas, and ensuring that risks are adequately addressed, the NCUA's Office of the Inspector General (OIG) said in a recent report.

The NCUA OIG reviewed examiner actions from 25 credit unions. Five credit unions from each of the five NCUA regions were chosen for the study.

NCUA examiners had recently addressed high risk issues such as concentration, liquidity, and interest rate risks at 19 of those 25 credit unions, the OIG found. At these credit unions, NCUA examiners performed follow-ups for open Documents of Resolution (DOR) items, held or planned onsite and offsite contacts with the credit unions, drafted and/or issued Regional Director Letters and letters of understanding, changed CAMEL ratings, or took other actions, the OIG reported.

The OIG report also found that existing issues at four of the six remaining credit unions had been previously addressed by NCUA examiners in some fashion, and reported that examiners had either performed or were scheduled to perform followups at all six of the credit unions.

However, NCUA staff did question the actions of state examiners in two instances.

The OIG did not recommend any changes to the NCUA's examination regime.

NCUA examiners have received a new standardized National Supervision Policy Manual for examiners. The new manual, the NCUA said earlier this year, will help ensure that credit unions are treated more consistently from region to region. The manual responds to the NCUA Board's direction to remove regional differences in quality control, and implements key recommendations from federally mandated Material Loss Reviews conducted by NCUA's Office of Inspector General, the agency added.

The Credit Union National Association has said that while examination consistency can be positive, the goal is to have examiners treat credit unions in a consistently professional manner, allowing the credit unions to develop and implement their own solutions to address problems.

For the OIG report, use the resource link.

FinCEN e-filing change results in user issues

 Permanent link
WASHINGTON (7/9/12)--The Financial Crimes Enforcement Network's (FinCEN) Bank Secrecy Act (BSA) e-filing system and e-filing telephone help desk are both experiencing extremely high volume, and this volume is creating issues for some users, FinCEN has said.

The high e-filing volume "may result in intermittent delays in a filer's ability to submit required reports or complete the on-line application process for a new BSA E-Filing System account," FinCEN said in a post on its homepage, www.fincen.gov. The high call volume is resulting in extended hold times and, in some cases, busy signals, FinCEN added.

FinCEN said it is aware of both of these issues, and is working to resolve them. In the meantime, e-filing system users that are having issues can reach FinCEN staff at the following addresses:

  • For E-File technical questions: BSAEfilinghelp@fincen.gov
  • For regulatory inquiries related to form completion or selection:BSA_Resource_Center@fincen.gov
  • For form completion or selection issues specific to FBAR: fbarquestions@irs.gov
  • For law enforcement related matters: liaisonservices@fincen.gov
  • 314 Inquiries from Law Enforcement: le314a@fincen.gov
  • 314 Inquiries from Financial Institutions: sys314a@fincen.gov
  • General FinCEN Inquiries: webmaster@fincen.gov
  • For any other matters, you can also send your inquiry to webmaster@fincen.gov.
Electronic filing of all BSA reports became mandatory on July 1. Currency Transaction Reports, Designations of Exempt Persons, and Suspicious Activity Reports are among the reports that can be e-filed. Almost all BSA reports now need to be e-filed, but Currency and Monetary Instrument Reports are not covered under the e-filing requirement.

FinCEN has said the switch to all-electronic BSA filing will improve efficiency, reduce costs for the financial industry, and enhance the ability of investigators, analysts, and examiners to gain better and more timely access to important financial information. Increased BSA E-Filing will also help speed up financial crime investigations, the agency added.

NEW FinCEN e-filing change results in user issues

 Permanent link
WASHINGTON (UPDATED: 1:20 P.M. ET, 7/6/12)--The Financial Crimes Enforcement Network's (FinCEN) Bank Secrecy Act (BSA) e-filing system, and e-filing telephone help desk, are both experiencing extremely high volume, and this volume is creating issues for some users, FinCEN has said.

The high e-filing volume "may result in intermittent delays in a filer's ability to submit required reports or complete the on-line application process for a new BSA E-Filing System account," FinCEN said in a post on its homepage, www.fincen.gov. The high call volume is resulting in extended hold times and, in some cases, busy signals, FinCEN added.

FinCEN said it is aware of both of these issues, and is working to resolve them. In the meantime, e-filing system users that are having issues can reach FinCEN staff at the following addresses:

  • For E-File technical questions: BSAEfilinghelp@fincen.gov
  • For regulatory inquiries related to form completion or selection:BSA_Resource_Center@fincen.gov
  • For form completion or selection issues specific to FBAR: fbarquestions@irs.gov
  • For law enforcement related matters: liaisonservices@fincen.gov
  • 314 Inquiries from Law Enforcement: le314a@fincen.gov
  • 314 Inquiries from Financial Institutions: sys314a@fincen.gov
  • General FinCEN Inquiries: webmaster@fincen.gov
  • For any other matters, you can also send your inquiry to webmaster@fincen.gov.
Electronic filing of all BSA reports became mandatory on July 1. Currency Transaction Reports, Designations of Exempt Persons, and Suspicious Activity Reports are among the reports that can be e-filed. Almost all BSA reports now need to be e-filed, but Currency and Monetary Instrument Reports are not covered under the e-filing requirement.

FinCEN has said the switch to all-electronic BSA filing will improve efficiency, reduce costs for the financial industry, and enhance the ability of investigators, analysts, and examiners to gain better and more timely access to important financial information. Increased BSA E-Filing will also help speed up financial crime investigations, the agency added.

Inside Washington (07/05/2012)

 Permanent link
  • WASHINGTON (7/6/12)--John Fairbanks has been named the new public affairs specialist at the National Credit Union Administration (NCUA). Fairbanks joins NCUA from the Brookings Institution, where he served as a senior media relations officer. Prior to joining Brookings, Fairbanks served as the public affairs manager for the Vermont Housing Finance Agency for eight years. He also has five years' of communications and press experience in Congress …

NCUA must improve FSOC info security inspector says

 Permanent link
ALEXANDRIA, Va. (7/6/12)--The National Credit Union Administration (NCUA) should coordinate with the Financial Stability Oversight Council (FSOC) and its member regulators to improve its own protections for private FSOC information, and better protect FSOC information from unauthorized disclosure, the NCUA's Office of the Inspector General (OIG) said in a recent review.

NCUA Chairman Debbie Matz is a member of the FSOC, which was created when the Dodd-Frank Wall Street Reform Act was signed into law in 2010. The council provides a forum for discussion between various regulatory agencies and has also been tasked with monitoring markets for disturbances and overseeing the resolution of troubled financial institutions.

Treasury Secretary Tim Geithner is the current chairman of the FSOC. Federal Reserve Chairman Ben Bernanke, Comptroller of the Currency Thomas Curry, Securities and Exchange Commission Chairman Mary Schapiro, Federal Deposit Insurance Corp. Chairman Martin Gruenberg, Consumer Financial Protection Bureau Director Richard Cordray, Commodity Futures Trading Commission Chairman Gary Gensler, and Federal Housing Finance Agency Acting Director Edward DeMarco are also voting members of the council. An independent insurance industry representative is also given a vote, and non-voting members and observers also attend FSOC meetings.

In its analysis of NCUA information security practices, the OIG found that the agency, in general, does a good job of protecting sensitive information. However, the OIG said the NCUA's policies or procedures for handling, protecting and controlling confidential non-public information, analyses or documentation of FSOC deliberations were limited.

The OIG said potential improvements could include:
  • Protecting oral communication of confidential non-public FSOC information;
  • Inventorying or tracking FSOC information requests and responses;
  • Controlling access to and authorizing release of confidential non-public information to FSOC, FSOC member agencies or other external parties, such as the U.S. Congress; and
  • Placing appropriate markings on FSOC information to identify it as containing confidential information.
The NCUA responded to the OIG report, saying that its existing information security policies, procedures, and training are effective. However, the agency said it would work with its fellow FSOC members to implement improved information security policies, procedures, and practices for FSOC information.

For the full OIG report, use the resource link.

Compliance Remittance rate-risk changes on the way

 Permanent link
WASHINGTON (7/6/12)--Details on the Consumer Financial Protection Bureau's (CFPB) upcoming remittance regulation, and the National Credit Union Administration's (NCUA) pending interest rate risk (IRR) rules, are among the items covered in the June edition of the Credit Union National Association's (CUNA) CompBlog Monthly Wrap-Up.

The June edition of the Wrap-Up was published on July 2.

The remittance and IRR info, Bank Secrecy Act e-filing news and compliance dates for the NCUA's new Troubled Debt Restructuring regulation are all covered in a new occasional CompBlog Wrap-Up feature, known as Compliance Shorts.

The "Compliance Shorts" column also prepares credit unions for compliance challenges coming in the next year, including changes to Regulation B adverse action notices, Regulation V risk-based pricing model forms, and Regulation Z credit card application and solicitation model forms.

Click for slide showCUNA's CompBlog Wrap-Up also periodically features cartoons that mix comedy and compliance issues.
CUNA in the Wrap-Up notes that credit unions with more than $10 billion in assets will be required to amend their Reg B adverse action notices to list the CFPB as the agency that examines them for Equal Credit Opportunity Act (ECOA) compliance. This change will need to be made by January 1, 2013.

State-chartered credit unions will not need to make this change, and federal credit unions should list the NCUA's Office of Consumer Protection as their ECOA examiner on these forms, CUNA adds.

The Reg V and Reg Z changes are also simple, and merely involve adding CFPB information to the forms. These changes will also need to be made by Jan. 1, 2013, CUNA said.

This edition of the Wrap-Up features a list of CUNA training programs to prepare credit unions for a myriad of coming compliance conundrums, and to educate credit union staff on some general credit union/finance industry issues.

The question-and-answer section of the Wrap-Up highlights questions addressed by CUNA's compliance staff in the CompBlog during the month of June.

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

CFPB prepares folks for new mortgage disclosures

 Permanent link
WASHINGTON (7/6/12)--In what it indicated was one of probably three website posts on the subject, the Consumer Financial Protection Bureau (CFPB) Thursday started to prepare consumers, credit unions and other financial institutions, and any other interested parties, for the upcoming introduction of the new combined mortgage disclosure form.

To the home-buying and potential home-buying public, the CFPB message said:

"If you've ever applied for a mortgage loan, you've received two forms required by federal law: a two-page Truth in Lending form and a three-page Good Faith Estimate. They are meant to give you the basic facts about home loans that you apply for and to help you pick the mortgage product that's best for you. But these forms have overlapping information and complicated terms and are just plain difficult to understand."

The CFPB goes on to note that it has worked months to gather comments from consumers and lending industry representatives from across the country as it designed a simplified disclosure document.

"Soon, we will submit a Notice of Proposed Rulemaking to the Federal Register to begin the public notice-and-comment process.

"When we submit the proposed rule, we're also going to release a lot of interesting information here on our site: a side-by-side comparison of the existing forms and the new ones, reports on what we learned from testing the forms and from our discussions with small businesses, a timeline of the project leading up to this point, and a new way of presenting the rules and commentary that tell industry how to fill out the forms."

So stayed tuned.

NCUA CU foundation strengthened in 2011

 Permanent link
ALEXANDRIA, Va. (7/5/12)--Credit unions continued to demonstrate stability and resilience as the National Credit Union Administration (NCUA) worked to strengthen the foundation of the credit union system, the NCUA said in its 2011 Annual Report.

The report, entitled Foundation for the Future, noted that credit union membership increased by 1.3 million during the year, according to NCUA numbers. Delinquencies decreased, and credit union income increased by 41.2% during 2011, the agency added. Another key indicator--return on average assets--climbed to 68 basis points (bp) by the end of the year, an 18 bp increase from 2010's total. The number of credit union failures also declined in 2011, the NCUA added.

The NCUA in the report also highlighted its regulatory modernization work, which addressed safety and soundness risks while lessening regulatory burdens.

The report also detailed the agency's 2011 regulatory actions, which included approving regulations that aim to:

  • Strengthen the corporate credit union regulatory framework;
  • Enhance the financial literacy of credit union directors;
  • Improve low-income designation procedures;
  • Ease access to the Community Development Revolving Loan Fund; and
  • Resolve credit union failures at reduced costs.
The NCUA's work on interest rate risk, troubled debt restructurings, emergency liquidity and regulatory flexibility was also noted in the report.

The report serves as the agency's official report to the President and Congress, and covers NCUA and credit union operations. The report also tabulates 10 years of financial trends for credit unions and the National Credit Union Share Insurance Fund.

For the full NCUA report, use the resource link.

The Credit Union National Association's Examination and Supervision Subcommittee will be reviewing the report and following up on issues of concern, and will emphasize that credit unions still are burdened by regulations, despite the agency's regulatory modernization work.

CUs can detail elder fin ed efforts in CUNA comment call

 Permanent link
WASHINGTON (6/5/12)--The Consumer Financial Protection Bureau (CFPB) has increased its efforts in the fight against elder financial abuse, and credit unions can detail the steps they have taken to educate older members, and help prevent elder financial abuse, in a new Credit Union National Association (CUNA) Comment Call.

In the comment call, CUNA asks for details on any financial education, counseling, or tailored personal finance management programs that are offered by credit unions.

Credit unions can also report any financial education efforts that focus on mitigating the financial exploitation of older military veterans.

The CFPB has also asked for public comment on any fraudulent or deceptive practices that target elderly Americans and their families.

Comments must be submitted to CUNA by Aug. 10, and the CFPB is accepting comments until Aug. 20.

An estimated $2.9 billion was stolen from financially exploited senior citizens in 2010, according to the CFPB. The agency said reported instances of financial theft from seniors grew by 12% between 2008 and 2010, and the Financial Crimes Enforcement Network (FinCEN) in 2011 reported a sharp increase in the number of financial institutions that filed Suspicious Activity Reports related to elder financial abuse.

Large ATM withdrawals, abnormal debit transactions, and sudden non-sufficient fund charges are some of the many signs of elder financial abuse. Credit unions and other financial service providers should also be aware of caregivers that take a sudden interest in a senior citizen's financial activities, caregivers that attempt to speak for the senior citizen, or caregivers that refuse to leave a senior citizen's side when they are discussing financial matters, FinCEN recommended.

For the CUNA comment call, use the resource link.

Chamber urges CFPB to define abusive

 Permanent link
WASHINGTON (7/5/12)--The Consumer Financial Protection Bureau (CFPB) should clearly define what constitutes an "abusive" financial product or practice, and take stronger steps to verify consumer complaints before they are published in public forums, the U.S. Chamber of Commerce said in a recent letter to CFPB Director Richard Cordray.

In the letter, David Hirschmann, president/CEO of the Chamber of Commerce's Center for Capital Markets Competitiveness, said a CFPB policy statement defining "abusive" practices "will help to prevent divergent interpretations of the 'abusive' standard around the country, and provide much needed clarity to legitimate businesses trying their best to ensure that their actions comply with the law."

The CFPB director has previously indicated that the agency would not define the term "abusive."

Hirschmann in the letter argued that without a clear definition, state attorneys general and state regulators could institute enforcement actions depending on their individual interpretations of the term. It is the CFPB's responsibility to ensure the law is enforced consistently and does not create separate standards that result in excessive compliance burdens being placed on the credit market, he wrote.

The agency's practice of publishing company-specific consumer complaint information on its website could also create issues for market participants, the letter said.

The CFPB last month unveiled an online database of consumer credit card complaints.

The database details the issue that prompted a consumer complaint, the ZIP code of the consumer that made the complaint, and the company against which the complaint was made. Information on how the complaint was resolved, and whether it was resolved in a satisfactory fashion, is also included.

The letter suggested the CFPB could make a few fundamental changes to this database "to ensure the government is not disseminating misleading information." Publishing only company-specific figures related to complaint resolutions is one way the agency could guard against fraudulent or malicious manipulation of the database, the letter said.

"This will help to ensure the validity of the underlying complaint, and help to ensure the information is actually useful to consumers," the letter added.

The letter also encouraged the CFPB to stop including enforcement attorneys as part of the examination process, noting that this practice can turn the exam process into an adversarial proceeding.

Publishing more organizational information on its homepage, and regularly releasing a schedule of planned proposed and final rulemakings, would also help the agency and those it regulates, the letter added.

For the full letter, use the resource link.

The Credit Union National Association (CUNA) has recommended actions the CFPB could take to minimize regulatory burdens in recent meetings with the agency, including exempting credit unions from potential overdraft fee regulations. CUNA has also urged the CFPB to provide credit unions with relief from final remittance regulations.

Inside Washington (07/03/2012)

 Permanent link
  • WASHINGTON (7/5/12)--As of June 30, about half of the 31 failed-bank resolutions this year involved an acquirer purchasing a whole bank without any loss sharing from the Federal Deposit Insurance Corp. (FDIC). That indicates the agency is moving away from covering losses created by failed-bank buyers as the economy improves (American Banker July 3). Under loss-sharing deals, the FDIC assumes some of a buyer's risk from taking over bank with a weak portfolio. It is designed to attract more bidders for a damaged institution and ensure that assets stay in the private sector. Last year, 34% of the deals involved an acquirer purchasing a bank without any loss shared from the FDIC. In 2010, just 9% of deals were made without loss sharing. Failures are typically smaller now than during the financial crisis, according to observers. Bidders are also more comfortable with the economic environment and the portfolios for which they are bidding, such as single-family mortgages, said Pamela Farwig, a deputy director in the FDIC's division of resolutions and receiverships …
  • WASHINGTON (7/5/12)--The Federal Housing Finance Agency (FHFA) announced Tuesday that it has received a good response from qualified investors interested in participating in the agency's pilot real estate-owned (REO) initiative announced in February.  FHFA solicited bids in the second quarter of the year for qualified investors to purchase about 2,500 single-family, Fannie Mae-foreclosed properties. Fannie Mae offered for sale pools of properties in geographically concentrated locations across the U.S.  "FHFA undertook this initiative to help stabilize communities and home values in areas hard-hit by the foreclosure crisis," said Edward J. DeMarco, FHFA acting director. "As conservator of Fannie Mae and Freddie Mac, we believe this pilot program will assist us in achieving our objectives and help to maximize the benefit to taxpayers. We are pleased with the response from the market and look forward to closing transactions in the near future" …

NCUA issues CandD to former WesCorp HR officer

 Permanent link
ALEXANDRIA, Va. (7/3/12)--Former Western Corporate FCU (WesCorp) employee Thomas Swedberg has agreed to the terms of a National Credit Union Administration (NCUA) cease and desist order that would prevent him from working for any federally insured corporate credit union.

Swedberg was the director of human resources for the former $34 billion corporate credit union, and was one of five former WesCorp employees that were sued by the agency.

The order, which was released to the public by the NCUA last Friday, bans him from:

  • Becoming an employee of, holding any office in, or otherwise participating in any manner in the conduct of affairs of any federally insured corporate credit union;
  • Consulting or advising any federally insured corporate on any matters involving or relating to investment securities, investment policy, or investment strategy; or
  • Selling any investment securities to any federally insured corporate credit union.
Swedberg consented to the order, without admitting fault, the NCUA said.

The NCUA in its lawsuit against former senior WesCorp officials had alleged that they were negligent in monitoring mortgage-backed security investments that were made by the corporate, and that there was a breach of fiduciary duty and fraud related to these investments, which resulted in $6.8 billion in portfolio losses. The WesCorp employees filed counterclaims and affirmative defenses against NCUA, alleging the agency was aware of WesCorp's investment strategies and approved of and encouraged the strategies.

Swedberg was not involved in the purchase of these failed investments, but was among those who received payments through WesCorp's Supplemental Executive Retention Plan, netting a lump sum of $1.2 million in 2008.

The former WesCorp employee and the agency filed a settlement agreement with a federal court in Los Angeles, dismissing the case against him, in April of this year. Former WesCorp Chief Risk Officer Timothy Sidley and Chief Investment Officer Robert Burrell have also agreed to cease-and–desist orders with the agency, and settled the charges against them.

Former WesCorp President/CEO Robert Siravo and Chief Financial Officer Todd Lane have not settled with the agency.

CUs keep up drive for MBLs other CU issues

 Permanent link
WASHINGTON (7/3/12)--Credit union advocates from Missouri, Montana, Ohio and Texas participated in the Credit Union National Association's (CUNA) ongoing Hike the Hill efforts last week, seeking congressional support for member business lending (MBL) cap increase legislation, enhanced supplemental capital access, ATM fee disclosure fixes and other credit union priorities ahead of this week's July 4 district work period.

MBL cap increase legislation, which has been introduced in the U.S. House and Senate, would help credit unions increase their lending to local small businesses, the credit union advocates said.

Click to view larger image Montana credit union representatives discuss key credit union priorities with credit union supporter Sen. Jon Tester (D-Mont.) and members of his staff, at a meeting in Washington. (CUNA photo)
The Senate version of MBL legislation is expected to come up for a vote this year. The Credit Union National Association (CUNA) has estimated that lifting the MBL cap to 27.5% of assets, from 12.25%, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment. Both benefits come at no cost to taxpayers.

Nearly two dozen Texas credit union leaders traveled with Texas Credit Union League (TCUL) representatives for their Washington meetings, and members of that group visited with key members of the House Financial Services Committee and others from their state. Duplicative ATM disclosure regulations are creating issues for credit unions nationwide, as some are vandalizing disclosure placards on ATMs and suing financial institutions for noncompliance.

One member of the Texas group told of how the credit union was targeted by a frivolous ATM lawsuit, with the credit union paying a $10,000 settlement. Nine-tenths of the settlement amount went to the attorney that brought the case, and the TCUL said this story seemed to resonate with elected officials.

Legislation (H.R. 4367) that would help eliminate frivolous lawsuits by removing dual ATM disclosure requirements was passed unanimously by the House Financial Services Committee last week. H.R. 4367 has 145 co-sponsors, and could come up for a full House vote once Congress returns to Washington next week.

The Montana group also covered these national issues, and regional issues, during their meetings with Sens. Jon Tester (D) and Max Baucus (D), and Rep. Dennis Rehberg (R). The Montana group noted that the job growth created by the recent oil boom in the eastern part of the state is resulting in changes for credit unions and communities alike. Credit union members that own land, and oil rights, above Eastern Montana's Bakken oil field are receiving large payouts, and, in turn, are making large share deposits. However, they are not taking out any loans. Share growth is outpacing loan growth, and, as a result, capital is being eroded, the credit union representatives said. "This is an excellent example of a place where supplemental capital could be of great assistance," Montana Credit Union Network President/CEO Tracie Kenyon stressed.

More than 20 Ohio credit union leaders joined Ohio Credit Union League staff during their meetings last week, and the Ohio group met with many key members from their state, including Reps. Steve Chabot (R) and Jim Renacci (R) and Sen. Sherrod Brown (D).

Meetings with Sens. Claire McCaskill (D) and Roy Blunt (R), and Reps. Todd Akin (R), Russ Carnahan (D), William Lacy Clay (D), Emanuel Cleaver (D), Jo Ann Emerson (R), Sam Graves (R), Vicky Hartzler (R), Billy Long (R) and Blaine Luetkemeyer (R) were on the schedule for Missouri Credit Union Association staff and credit union representatives from that state.

The Missouri and Montana groups also met with National Credit Union Administration staff during their visits.

More Hike the Hill visits are scheduled for this fall.

CUNA has encouraged credit unions and small business advocates to meet with House and Senate lawmakers in their home offices during the district work period to continue to encourage passage of the MBL bills. CUNA also noted the broad support that MBL legislation has gained in recent ads. (See July 2 News Now story: Pre-break CUNA ads highlight MBL support).

CUNA seeks comment on two CFPB releases

 Permanent link
WASHINGTON (7/3/12)--The Consumer Financial Protection Bureau (CFPB) has asked for public comment on nonbank supervisory and notification procedures and information on general purpose prepaid cards that are offered by financial institutions. The Credit Union National Association (CUNA) has encouraged credit unions to provide comments on both of these issues to the CFPB and CUNA in a pair of new Comment Calls.

The CFPB proposed rules set up the process under which the agency could supervise nonbanks to prevent them from offering financial products or services that pose risks to consumers. The CFPB rules for nonbanks do not apply to credit unions, but CUNA continues to monitor the potential impact to credit unions from CFPB supervision of nonbank entities and the implementation of the Dodd-Frank Act.

CUNA in its Comment Call asks credit unions for recommendations regarding how the CFPB should supervise nonbank entities, and whether or not credit unions believe that the potential nonbank supervision standards could impact credit unions or the credit union system.

The CFPB is also seeking information on the costs, benefits, and risks of prepaid card use. The agency in May announced it would begin the process of regulating prepaid cards under Regulation E, which implements the Electronic Funds Transfers Act. The CFPB has not said when it will begin writing new prepaid card rules, but improving the safety and transparency of prepaid cards and their providers will be two main goals of the CFPB's rulemaking effort, according to the agency.

CUNA in this second Comment Call asks if certain aspects of Reg E should be applied to prepaid cards, and how the CFPB could minimize compliance costs as it develops potential prepaid card rules. CUNA is also seeking credit unions' general comments on how prepaid card products are designed and marketed.

Comments are due to CUNA by July 9. The CFPB deadline for comments on either issue is July 24.

For the two comment calls, use the resource links.

Inside Washington (07/02/2012)

 Permanent link
  • WASHINGTON (7/3/12)--Regulatory agencies Friday announced the availability of the 2012 list of distressed or underserved nonmetropolitan middle-income geographies where revitalization or stabilization activities will receive Community Reinvestment Act (CRA) consideration as "community development." "Distressed nonmetropolitan middle-income geographies" and "underserved nonmetropolitan middle-income geographies" are designated by the agencies in accordance with their CRA regulations. The criteria for designating these areas are available on the Federal Financial Institutions Examination Council website (http://www.ffiec.gov/cra/). The designations reflect local economic conditions, including triggers such as unemployment, poverty and population changes. The U.S. Census Bureau revised some census tract boundaries as a result of the 2010 census. The current list of distressed or underserved nonmetropolitan middle-income geographies does not reference the 2011 designation. Geographies on the 2012 list will not necessarily have a corresponding 2011 geography  …
  • WASHINGTON (7/3/12)--April foreclosure statistics from Lender Processing Services (LPS) were inaccurate, said the Federal Housing Administration (FHA) on Friday. LPS provides statistical services to several federal agencies, as well as state and local governments. Statistics released by LPS in May showed FHA foreclosure starts had increased 73% in April, to 63,129 from 36,311 in March (American Banker July 2). The agency said LPS reported a higher number of monthly FHA foreclosure starts than FHA's data show, the agency said. LPS uses data supplied by the Department of Housing and Urban Development, which oversees FHA. FHA and LPS they are working together to identify the data discrepancy