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Pa. CUs: RBC rule could stop growth for capital buffer

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PHILADELPHIA (8/18/14)--Credit unions could be facing a "huge overhaul" with the National Credit Union Administration's risk-based capital (RBC) proposal, according to a report in the Philadelphia Business Journal .

Brian Schmitt, chief financial officer, American Heritage FCU, Philadelphia, with $1.4 billion in assets, said he recommends three years to comply, not the proposed 18 months, and that his credit union's growth would be stalled.

"We need a longer period of time to react to a rule than banks," he told the Journal . "For us, the fact that our excess capital would dwindle from $35 million to $300,000 means we would have to stop our growth until we could build up our capital buffer sufficient to go ahead and continue to expand."

Schmitt went on to say that the rule would require American Heritage FCU to keep 10.5% of risk-based assets in capital in reserve at all times. "We're currently under rules where it's 7% so even though we didn't cause tremendous losses to the nation ... they are dramatically increasing the reserve," he added.

Michael Wishnow, senior vice president of communications and public relations, Pennsylvania Credit Union Association, said that the RBC proposal is stricter than similar proposals for banks, according to the Journal .

"If you look back through the recession, credit unions fared pretty well relative to the rest of the financial sector," he said. "We don't really need quite so stringent risk-based capital requirement, particularly those that weigh heavily on certain loan classifications. Building capital in the credit union environment is a much more difficult and slower process."

At a recent Listening Session held by the NCUA in Alexandria, Va., NCUA board member Rick Metsger said that under the current proposal, only two credit unions are considered undercapitalized.

"I don't think anybody here believes that out of all of the credit unions in the country, only two are struggling with capital," Metsger said. "Obviously the current rule isn't giving us a very good picture of what the capital requirement should be."

Pennsylvania Congressional lawmakers have been among the 27 senators and 332 representatives to question the proposal. Sen. Patrick Toomey (R) and Rep. Scott Perry (R) both wrote in with concerns about the proposed implementation period, risk weights and justification for the new rule.

The Credit Union National Association has advocated that the NCUA withdraw the proposal and instead pursue RBC standards as part of a multifaceted capital reform strategy. If the rule stays, CUNA has expressed concerns with the proposal's interest rate risk scheme, risk weights and implementation period.

NCUA Chair Debbie Matz has said the agency will consider the more than 2,000 comment letters on the proposal. She said the implementation period will be changed, and the risk weights will likely be adjusted as well.

Futures trading group offers fraud-recovery tips

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WASHINGTON (8/18/14)--Fraud can target consumers and financial institutions alike, according to the U.S. Commodity Futures Trading Commission (CTFC), which recently issued tips for victims on mitigating damage and preventing a reoccurrence.

As the federal agency that regulates commodity futures, options and trading markets, the CTFC's mission includes addressing fraud and other manipulative practices.

The commission advised monitoring financial information by reviewing any asset or income disclosures reported that included the misinformation for loans and other mechanisms.

The CTFC reports that consumers who have been victims of fraud before can become targets, because fraudsters often share details about people they have successfully targeted or approached.

In addition, fraud victims are vulnerable to "recovery fraud," when fraudsters contact people who already lost money and claim to be law enforcement officers or lawyers, advising victims that they can help recover lost money.

Placing an initial fraud alert on credit reports will reduce the risk that an identity thief will open accounts using personal stolen personal information. Identity theft victims can place an initial 90-day fraud alert by contacting one of the three credit rating agencies Experian, Transunion or Equifax. That agency must, in turn, contact the other two agencies on the victim's behalf.

Use the resource link below for more information.

RBC goal to match capital to risk: Matz to Bridenstine

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ALEXANDRIA, Va. (8/18/14)--In response to an Aug. 1 letter from Rep. Jim Bridenstine (R-Okla.), National Credit Union Administration Chair Debbie Matz noted the goal of the agency's risk-based capital (RBC) proposal.
"With the proposed rule, our goal is to ensure that those federally insured credit unions that have a higher appetite for risk hold enough capital to match that risk," Matz wrote in her Aug. 14 response. "In other words, the proposal seeks to scale the capital requirement based on an individual credit union's balance sheet risks."
Bridenstine's letter read, "NCUA examiners already have the ability to mitigate concentration risk through other regulatory actions, it appears that the inclusion of concentration risk as a part of the calculation of capital rules could be redundant and place credit unions at a competitive disadvantage relative to other insured depository institutions."
Matz also identified the five candidates for revised risk weights--in part due to input from comment letters and the three Listening Sessions.
"They include the risk weights for investments, mortgages, and member business loans, as well as credit union service organizations and corporates.
"The final rule will make appropriate changes in each of these areas to ensure that credit unions continue to make safe investments and provide sound loans to homeowners, member small businesses, family farms, and consumers, including those in Oklahoma," Matz wrote.

The Credit Union National Association has advocated that the NCUA withdraw the proposal and instead pursue RBC standards as part of a multifaceted capital reform strategy. CUNA has expressed concerns with the proposal's interest rate risk scheme, risk weights and implementation period should the rule prevail.

Big data's risks, rewards for consumers: FTC webinar

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WASHINGTON (8/18/14)--An exploration of "big data" and how it can affect financial institutions and consumers, particularly low-income and underserved consumers, will be the topic of a Federal Trade Commission (FTC) workshop Sept. 15 in Washington, D.C.

With smartphones, social networks, cloud computing and predictive analytic techniques enabling the collection, analysis, use and storage of data in a ways not possible a few years ago, there are benefits and drawbacks.

New insights into medicine, education, and transportation, improved product offerings and more effectively tailored advertisements can be offset by concerns about whether big data may be used to categorize consumers in ways that may affect them unfairly, or even unlawfully.

According to the FTC, financial institutions, as well as retailers and other service providers, use big data to offer discounts to certain customers, tailor advertising for financial products or assess credit risks of certain populations.

The workshop, which will consists of academics, business and industry representatives and consumer advocates will address the following issues:
  • How are organizations using big data to categorize consumers?

  • What benefits do consumers gain from these practices? Do these practices raise consumer protection concerns?

  • What benefits do organizations gain from these practices? What are the social and economic impacts, both positive and negative, from the use of big data to categorize consumers?

  • How do existing laws apply to such practices? Are there gaps in the legal framework?

  • Are companies appropriately assessing the impact of big data practices on low income and underserved populations? Should additional measures be considered?
The workshop is free and open to the public, but seating will be limited and attendance will be on a first-come, first-served basis starting at 8 a.m. (ET) Sept. 15. No pre-registration is required.

A live webcast of the workshop will also be available on the day of the event.

Use the resource link below for more information.

'Patent troll' study OK'd by OMB

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WASHINGTON (8/18/14)--The White House's Office of Management and Budget approved Friday the Federal Trade Commission request to launch a two-part study on "patent trolls."
The FTC study will request information from patent assertion entities, manufacturers and others. It will focus both on reviewing general patent troll activity and comparing trolls' enforcement efforts to that of manufacturers and other nonpracticing entities in the wireless chipset industry ( Law360 Aug. 15).
The investigation will look at how patent assertion entities organize their corporate legal structure, what types of patents they hold, and how they acquire patents and generate revenue. It also will examine how the companies engage in licensing demands and litigation, what patent assertion costs the companies face and how much money they earn from their activities.
The Credit Union National Association has been a longtime advocate of meaningful patent reform. In July, the trade association submitted a joint letter supporting the Targeting Rogue and Opaque Letters Act that passed the House subcommittee on commerce, manufacturing and trade ( News Now July 14).
"Financial institutions of every size have been targeted by Patent Assertion Entities, often referred to as patent trolls, who in most cases assert patents of dubious quality through vaguely worded demand letters or intentionally vague complaints," the letter reads. "Indeed, patent trolls' recent focus on credit unions and community banks threatens to pose additional, unwarranted costs on lenders and the communities they serve."

CFPB sets 2015 dollar amounts for Reg Z provisions

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WASHINGTON (8/18/14)--The Consumer Financial Protection Bureau (CFPB) has issued a final rule regarding Regulation Z, which implements the Truth in Lending Act (TILA). The final rule reviews the dollar amounts for several provisions in the regulation, as required annually, based on the annual percentage change reflected in the Consumer Price Index in effect June 1.

The amounts for 2015 are:

Effective Jan. 1, 2015, a covered transaction is not a qualified mortgage unless the transaction's total points and fees do not exceed:

  • Penalty fees safe harbor: $27 for a first late payment and $38 for each subsequent violation within the following six months;

  • Home Ownership and Equity Protection Act (HOEPA) loans: $20,391, effective Jan. 1, 2015;

  • Adjusted statutory fee trigger for HOPEA loans: $1,020, also effective Jan. 1, 2015;

The minimum interest charge disclosure thresholds will remain unchanged in 2015.

The final rule reviews the dollar amounts for provisions implementing amendments to TILA under the Credit Card Accountability Responsibility and Disclosure Act of 2009, the Home Ownership and Equity Protection Act of 1994 and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

  • 3% of the total loan amount for a loan greater than or equal to $101,953;
  • $3,059 for a loan amount greater than or equal to $61,172 but less than $101,953;
  • 5% of the total loan amount for a loan greater than or equal to $20,391 but less than $61,172;
  • $1,020 for a loan amount greater than or equal to $12,744 but less than $20,391; and
  • 8% of the total loan amount for a loan amount less than $12,744.

FHFA seeks comments on next strategic plan

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WASHINGTON (8/18/14)--The Federal Housing Finance Agency (FHFA) is requesting input for its strategic plan for the fiscal year 2015-2019. The plan outlines the agency's priorities as regulator for the Federal Home Loan Bank System, as well as regulator and conservator of government-sponsored enterprises Fannie Mae and Freddie Mac.

The plan sets forth three goals for the agency: to ensure safe and sound regulated entities, ensure liquidity stability and access in housing finance and to manage the ongoing conservatorships of Fannie Mae and Freddie Mac.

To ensure the liquidity, stability and access in housing finance, the FHFA's strategies include:
  • Work to ensure ongoing liquidity in the marketplace for new mortgages and mortgage refinancings and continue the critical tasks of foreclosure prevention and loss mitigation;

  • Monitor access to mortgage credit by assessing trends in the availability of mortgage credit to both single-family and multifamily borrowers;

  • Support multifamily housing needs with a focus on the affordable and underserved segments of the market. The agency expects the enterprises to maintain a multifamily liquidity presence in all geographic areas and through all market cycles with a focus on the affordable segment of the market;

  • Collaborate with other federal regulators to identify and address foreign and domestic risks, to coordinate supervision efforts consistent with each agency's respective examination and supervision responsibilities, to complete inter-agency rulemakings and to pursue efforts that streamline and increase efficiency of regulatory activities; and

  • Monitor housing markets and conduct independent studies and reports that analyze various factors impacting access to housing finance for qualified borrowers and financial institutions. The information resulting from this analysis will contribute to FHFA's ability to ensure liquidity, stability and access in the housing finance markets.

Comments must be received by Sept. 15.

Use the resource link to access the full report, and for more information on how to comment.
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