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NCUA: More than 2,100 CUs designated as low-income

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WASHINGTON (8/11/14)--More than 2,100 credit unions are designated low-income credit unions (LICUs), the National Credit Union Administration announced Friday, marking two years since the agency began advocating for more credit unions to become designated.

A total of 2,107 credit unions with a combined 23.6 million members and $218 billion in assets have the low-income designation as of August 2014. Before the 2012 campaign, there were 1,140 LICUs, and an additional 821 credit unions accepted the designation from August 2012 to August 2013.

Click to view larger image An NCUA graph showing the growing number of LICUs.
"NCUA introduced the low-income credit union initiative two years ago as part of my Regulatory Modernization Initiative," NCUA Chair Debbie Matz said. "This was a significant easing of a regulatory burden for those credit unions that were eligible for the designation. These credit unions have expanded access to affordable financial services to low- and moderate-income members, developed financial literacy programs and increased their own service capacity through staff training."

Matz went on to say that LICUs are often the only insured depository institutions that serve low-income and underserved areas, providing affordable financial services and investing in ways to grow communities, such as small business and member lending.

The initiative was announced Aug. 7, 2012, and 1,003 credit unions were notified of their eligibility, and that they were essentially pre-qualified for the designation.

To qualify for the designation, a majority of the credit union's members must meet low-income threshold data based on the 2010 census.

Benefits of the designation includes:
  • An exemption from the statutory 12.25% cap on member business lending, which expands access to capital for small businesses and helps credit unions diversify portfolios;

  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans;

  • Eligibility for nomination for free NCUA consulting;

  • Ability to accept deposits from nonmembers; and

  • Authorization to obtain supplemental capital.
More than 70% of LICUs are have assets of less than $50 million.

Use the resource link below for a fact sheet on the LICU designation.

Analysis of CFPB HMDA proposal in July CompBlog Wrap-Up

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WASHINGTON (8/11/14)--The Credit Union National Association's CompBlog took a look last month at the Consumer Financial Protection Bureau's (CFPB) new Home Mortgage Disclosure Act (HMDA) proposed rule. The CFPB issued a 573-page proposed rule intended to improve information reported about the residential mortgage market.

While the CFPB believes the proposal will provide information about the residential mortgage market, access to credit, as well as easing reporting requirement for some small financial institutions, CUNA believes that the requirements will be costly and cumbersome to credit unions ( News Now Aug. 7), particularly the mandatory reporting of home equity lines of credit (HELOCs).

The CompBlog July roundup also covered a number of significant regulatory issues that arose last month, including:
  • Federal regulators', including the National Credit Union Administration, guidance on HELOCs nearing their end-of-draw periods, which occurs when the principal amount of a HELOC must begin to be repaid;
     
  • The Financial Crimes Enforcement Network's (FinCEN) proposed customer due diligence requirements, latest suspicious activity report bulletin and other information on money-laundering concerns and Bank Secrecy Act violations;
     
  • The NCUA's proposed regulatory relief changes, proposal to amend fixed assets and guidance on how examiners will enforce FinCEN guidance for legal marijuana-based businesses; and
     
  • The CFPB's new interpretive rule on ability-to-repay, equal treatment for same-sex married couples and input in its new eRegulations tool.
The roundup also includes a recap of CUNA's latest compliance webinar, "New Credit Union Compliance Officers: Advice from the Front Line."

Use the resource links below for more information and to access July's CompBlog Wrap-Up.

Changes in FICO scoring could improve credit access

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SAN JOSE, Calif. (8/11/14)--The most-used credit score in the country will no longer include records of consumers failing to pay bills if the bills are paid or settled, according to a report by The Wall Street Journal .

The change is expected to lead to higher FICO scores for those consumers, which could lead to more lending at financial institutions such as credit unions. Fair Isaac Corp.'s FICO credit score is based on consumer credit files of three national credit bureaus--Experian, Equifax and TransUnion.

Fair Isaac announced last week it would stop including records of a consumer failing to pay a bill if the bill has been paid, or settled with a collection agency. The company also said it will give less weight to unpaid medical bills that are with a collection agency.

Lower FICO scores can lead to loan denials, or higher interest rates, and according to The Wall Street Journal , collections can affect credit scores as much as foreclosures and bankruptcies.

"Credit unions already work closely with members seeking credit, and this FICO change will give them another tool to help more members with their credit needs," said Mike Schenk, interim chief economist for the Credit Union National Association. "It will also help credit unions keep credit costs to members down."

Credit unions are already generally able to provide lower loan rates to members. According to CUNA's Economics and Statistics Department, financing a $25,000 new automobile for 60 months at a credit union will save a member an average of $146 per year in interest expense compared with a bank.

John Ulzheimer, a credit expert at consumer credit website Credit Sesame , told The New York Times last week that the FICO change likely wouldn't be the difference between a loan approval or denial, but it is enough to lead to a more advantageous rate. But consumers whose score is currently deflated due to medical debts can expect to see their score "go through the roof," Ulzheimer said.

The Wall Street Journal cited data from credit bureau Experian that says approximately 64.3 million consumers in America have medical debt collection on their credit report.

The Consumer Financial Protection Bureau released a study in May that said 99.4% of medical debt information is reported to national credit rating agencies (NCRAs) by collection agencies.

"The use of medical collections in credit scoring models has generated concerns stemming from the unique circumstances under which these debts arise and come to be reported to the NCRAs. Among their unique characteristics is that consumers may sometimes be unaware that the medical collections exist," the report reads. "If consumers are unaware of their medical collections or they view them as illegitimate because they are charges their insurance should have paid, then these debts may provide little information about their creditworthiness."

Use the resource link below to access the CFPB's report.

FTC refunds $800K to consumers ensnared by mortgage relief scams

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WASHINGTON (8/11/14)--More than 1,300 customers who fell prey to mortgage relief scams will be receiving checks totaling approximately $800,000. The Federal Trade Commission (FTC) announced that refund checks will be sent, though an administrator, to 1,305 consumers affected by two related scams.

In one scheme, a company using the name Precision Law Center alledgedly made false promises to consumers that if they sued their lenders along with other homeowners in so-called "mass joinder" lawsuits, they could obtain favorable mortgage concessions or stop the foreclosure process.

In the other, using names such as FreeFedLoanMod.org, HouseHoldRelief.org and MyHomeSupport.org, defendants charged consumers for "forensic loan audits," and allegedly misrepresented that they could use the results to force lenders to give them better mortgage terms.

According to the FTC, consumers should carefully evaluate offers of help in lowering their mortgage payments or saving their homes from foreclosure. It is illegal for anyone to collect money upfront for loan modification or foreclosure relief services.

Use the resource link for more information on mortgage relief scams.

Truckeroo gives D.C. a taste of CU difference

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WASHINGTON (8/11/14)--To celebrate the milestone of 100 million credit union memberships, the Credit Union National Association sponsored the August Truckeroo in Washington, D.C., Friday.

CUNA volunteers, along with other credit union supporters, manned a table throughout the day, handing out "Credit unions are a smarter choice" T-shirts and slap koozies to keep beverages cold.

Located next to the Washington National stadium, the CUNA section offered jump-shot basketball or cornhole games for the many who stopped by.

Employees from local credit unions including Money One FCU, Largo, Md., with $107 million in assets; Prince George's Community FCU, Bowie, Md., with $142 million in assets; NRL FCU, Alexandria, Va., with $455 million in assets; and DGE FCU, Washington, D.C., with $51 million in assets, were also on hand to assist in spreading the good news about the 100 million membership milestone.

The monthly festival features more than 20 food trucks with offerings ranging from cheesesteaks to lobsters, as well as live music throughout the day. There were plenty of dessert options as well, including Italian ice, crepes and a variety of cheesecakes.

See the Storify below for tweets and pictures from the event.