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NEW: CUNA, Partners File Interchange Case Brief

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WASHINGTON (UPDATED: 8/28/13, 3:20 P.M. ET)--The Credit Union National Association and a broad coalition of financial industry representatives just filed a supplemental briefing in the ongoing debit interchange fee court case.

The brief addresses three major points, including arguments against requiring or allowing the Federal Reserve Board to draft an new version of the Dodd-Frank-imposed fee cap regulations to be implemented on an interim basis, either as the Fed's appeal proceeds or after.

Merchant plaintiffs filed a brief in the case earlier today, and the Fed has also filed its brief. Watch News Now for more on the Fed brief.

In the brief, CUNA and coalition partners argue:
  • There is no legal basis for the court to order an independent agency to draft an interim rule.  Under Supreme Court and D.C. Circuit precedent, only the Fed can determine whether and when to issue any such rule;
  • In any event, the court should not require an interim rule. A rush to issue a new, temporary rule will harm all affected interests, including consumers, and threaten the effective functioning, stability, and security of the electronic debit-card payments system; and
  • An order requiring the Fed to issue an interim rule will almost certainly result in more litigation, further muddying the regulatory landscape in an area where parties need certainty. 
For these reasons, the financial institution coalition has asked the court to keep the current Fed regulation in place pending the Fed's appeal. The American Bankers Association, Consumer Bankers Association, Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Association of Federal Credit Unions and National Bankers Association joined CUNA in filing the brief.

The briefs were requested by U.S. District Court for the District of Columbia Judge Richard Leon. Leon late last month struck down the Fed's rules on debit interchange fees and routing procedures under the Durbin Amendment. He ruled at that time that the Fed did not follow narrow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment. The interchange regulation, however, is still intact due to a stay on the judge's order.

The Fed has appealed this decision.

In their brief, the merchants asked the court to keep the current Fed rule in place during the appeal, believing this is "critical to prevent substantial harm" that they believe could occur to the merchants if the protections of the Durbin Amendment's interchange regulation are left entirely unimplemented during the appeal process.

Merchants did, however, support forcing the Fed to issue an interim final rule.

Appeals Court Backs NCUA In Case v. RBS Securities, Others

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ALEXANDRIA, Va. (8/28/13)--The U.S. 10th Circuit Court of Appeals issued a ruling Tuesday that will allow the National Credit Union Administration to move forward with its lawsuit against 12 firms, including RBS Securities, which claims losses stemming from residential mortgage-backed securities (RMBS) sold to corporate credit unions.

The agency asked the court on July 31 to expedite its review of an earlier Kansas federal court's ruling that dismissed the claims against Barclays Capital on the grounds they were time-barred and the NCUA hadn't filed the case in time.
 
NCUA Chair Debbie Matz Tuesday evening issued this statement: "We're pleased with the court's decision.  We will continue to pursue our claims against firms that sold faulty mortgage-backed securities to corporate credit unions. As liquidating agent for the corporate credit unions, NCUA has a duty to maximize recoveries from responsible parties in order to limit losses to federally insured credit unions."

As noted, the NCUA filed the lawsuit as the liquidating agent for the corporates. Its lawsuits claim that the brokers' offering documents for the RMBS had material misrepresentations about the underlying loans that backed the securities.
 
NCUA has filed lawsuits against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual, and Bear Stearns  alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.
 
In related actions, the agency has reached $335 million in settlements with Bank of America, Citigroup, Deutsche Bank Securities and HSBC.

NEW: Fed Agencies Release QRM, Risk Retention Proposal

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WASHINGTON (UPDATED: 8/28/13, 11:40 A.M. ET)--Another round of proposed credit risk retention regulations, including a new definition of "qualified residential mortgage" (QRM) with modifications that the Credit Union National Association had urged, was released by the Federal Reserve, Federal Deposit Insurance Corp. and four other federal regulators today.

However, CUNA has a number of concerns about the new 505-page proposal, which will be addressed in future comment letters to the agencies. Comments are due Oct. 30.

The proposed QRM definition would be identical to the definition adopted by the Consumer Financial Protection Bureau for a "qualified mortgage" (QM). While CUNA noted this is a marked improvement from the original proposal, CUNA continues to seek additional latitude for credit unions under the CFPB's QM standards. CUNA will press for such flexibility under the QRM proposal.

The agencies are also seeking comments on an alternative definition of QRM that would include underwriting standards.

Under the Dodd-Frank Act, credit unions are not directly covered by the QRM proposal. However, CUNA has been weighing in with the various regulators on the QRM issues because there is a concern that the secondary market will conform to QRM standards and that examiners will expect federally insured institutions to meet QRM requirements.   

Any closed end loan secured by a dwelling would be under the proposal.

CUNA will post a Comment Call  on the QRM provisions later this week.

The U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Office of the Comptroller of the Currency, and the Securities and Exchange Commission joined the Fed and FDIC in releasing the proposed rule.

For more, use the resource link.

E-Filing Comment Deadline Approaches

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ALEXANDRIA, Va. (8/28/13)--Credit unions have until Sept. 3 to comment on a National Credit Union Administration proposal to require all federally insured credit unions (FICUs) to file financial, statistical, and other reports and credit union profiles with the agency only electronically.

The current rule allows FICUs to file these reports electronically or by manually sending the information to the NCUA. Credit unions are only required to file financial information online only if they have the capacity to do so, but under the proposal all FICUs would have to maintain a computer with internet access and an e-mail address.

When the agency proposed the change at its July 25 open board meeting, staff noted that a 30-day public comment timeframe, rather than the more-typical 60-days, would be sufficient for what the agency considers a "simple change.'

The Credit Union National Association issued a Comment Call seeking credit unions' views on the proposal and will be submitting a letter of comment with the agency later this week.

Use the resource links to access that and other CUNA Comment Calls, as well as the Federal Register document regarding the e-filing proposal.

CUNA Participates In Cybersecurity Meeting At Commerce

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WASHINGTON (8/28/13)--The Financial Services Sector Coordinating Council for Critical Infrastructure (FSSCC) participated in a meeting at the U.S. Department of Commerce Tuesday to discuss the National Institute of Standards and Technology (NIST) critical infrastructure cybersecurity framework to implement parts of the president's Executive Order on cybersecurity. The Credit Union National Association is part of the FSSCC.
 
At the meeting, NIST Director Patrick Gallagher and other senior staff discussed upcoming cybersecurity developments.  CUNA and other representatives discussed the need for additional regulatory coordination with the federal financial regulators, including the National Credit Union Administration, and other agencies to ensure that the NIST framework is consistent with existing rules and regulations.   
 
On July 1, NIST released a discussion draft outline on a "Framework to Reduce Cyber Risks to Critical Infrastructure" (see resource link). 
 
"We are encouraged the draft framework is being developed through a private-public partnership and is designed to be an 'adaptable, flexible, and scalable tool for voluntary use' to 'complement rather than to conflict with current regulatory authorities,'" said Dennis Tsang, CUNA regulatory counsel, who attended the meeting.
 
NIST plans to issue a proposed cyber framework this October for notice and comment, and to finalize the framework by February 2014.     
 
CUNA submitted a comment letter NIST in April, emphasizing that credit unions and financial institutions are already subject to robust data security requirements and standards, and should not be subject to additional regulations.  However, CUNA stressed that additional coordination on cybersecurity would be helpful.  Use the second resource link to read the CUNA comment letter.
 
 

CUNA: 13 Days Left For In-District Tax Talks with Lawmakers

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WASHINGTON (8/28/13)--There are 13 days left for credit union advocates to  reach out to federal lawmakers while in their home offices and garner support for the Don't Tax My Credit Union message, Credit Union National Association Senior Vice President of Political Affairs Richard Gose emphasized this week.

The current congressional District Work Break ends Sept. 9 and when Congress returns to session then, tax code reform will be one of the hot topics of discussion.

"We need to make sure the importance of maintaining the credit union tax status is at the forefront of legislators' minds as they return to Washington early next month. Any face time spent with legislators in the coming days is time well spent," Gose added.

CUNA President/CEO Bill Cheney said it is easy to question whether or not tax reform will ultimately get done in this Congress, but stressed that drafts of tax reform legislation that are being written right now could frame the debate on tax reform for the foreseeable future. "We want credit union interests to be protected no matter what," Cheney said.

Recent credit union contacts have reaped results, with Rep. John Conyers (D-Mich.) this week becoming the latest legislator to publicly back the credit union tax status. (See News Now item: Rep. Conyers Joins The Growing Ranks On CUs' Tax Status.)

Credit union advocacy efforts through the Don't Tax My Credit Union campaign have remained strong, with more than 730,000 contacts coming through CUNA's donttaxmycreditunion.org website.

"We've been very pleased at the passion with which folks have engaged through social media and other means," Gose added.

Overall, the Don't Tax campaign is solidifying support for credit unions and increasing grassroots activity as people are looking for other ways to help the credit union cause. CULAC had its most successful January-to-June fundraising period ever, tallying $1.06 million in donations during that time. That is 18% more raised to support credit union candidates than was raised in the same period of the last cycle, CUNA Vice President of Political Affairs Trey Hawkins noted.

And, while banks are trying to reverse this momentum with social media attacks of their own, credit union supporters have responded in kind. Many have used the bank social media accounts and hashtag to point out the $200 billion in bailout funds that banks were given by the government, or to remind them of the value that credit unions provide to their members each day.

"Walking the halls of Congress in the last couple of weeks, we have found the bank attacks have not had a lot of legs. But they have energized credit unions. There's nothing like an erroneous bank attack to get credit unions fired up," CUNA Executive Vice President of Government Affairs John Magill said.

Service Expansions Behind July CU Mergers

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ALEXANDRIA, Va. (8/28/13)--There were 23 credit union mergers approved by the National Credit Union Administration in July, with 16 of these mergers being made in a bid to expand credit union services to new membership.

Billion-dollar credit unions such as Westerra CU, Denver, Colo., TTCU The Credit Union in Tulsa, Okla., and Western FCU, Manhattan Beach, Calif., were among those that were approved to expand their service areas by merging with smaller neighbors. Other mergers approved by the NCUA included:
  • Lima Ohio Postal Employees FCU, which merged into nearby Topmark FCU due to a lack of growth;
  • Harper & Row Keystone Employees FCU, Throop, Pa., which merged into Scranton, Pa.'s Penn East FCU due to a declining field of membership;
  • Angelus Can Employees FCU, Los Angeles, which lost its sponsorship and merged into Vons CU, El Monte, Calif.; and
  • Delta Wye FCU, Dorchester, Mass., which was merged into River Works CU, Lynn, Mass., due to poor financial conditions.
Middlsex Healthcare FCU, Middletown, Conn., and Savage Arms Employees CU, Westfield, Mass., were both approved to merge into other credit unions after they failed to obtain officials. Seasons FCU, Middletown Mass., will take on Middlesex members and assets, and Pioneer Valley FCU, Springfield, Mass., will take on the members and assets of Savage Arms Employees, according to the agency.

The July Insurance Report of Activity also noted one approved common bond expansion, 614 approved and 20 deferred multiple common bond expansions, and six approved and two deferred community expansions.

For the full NCUA report, use the resource link.

Fed, Merchant Briefs Due Today In Interchange Case

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WASHINGTON (8/28/13)--Briefs on whether the Federal Reserve Board should issue a potential interim interchange rule are expected to be submitted by the Fed, plaintiffs representing merchants, and other interested parties today. The Credit Union National Association will join a coalition of financial trade groups in filing a brief.

Earlier this week, the Fed filed a consent motion for a stay of U.S. District Court for the District of Columbia Judge Richard Leon's July 31 interchange decision, pending appeal.

This motion was filed with the consent of merchant representatives, who are the plaintiffs in this case. The Fed and merchant representatives have both said they support a longer stay of Leon's order, pending a resolution of the Fed's appeal, CUNA General Counsel Eric Richard said last week.

The consent motion, which was filed late Monday, follows last Wednesday's hearing in that court, at which Fed General Counsel Scott Alvarez said the board plans to appeal Leon's decision. Alvarez last week said the Fed wishes to bring this case to finality quickly, and would work expeditiously to address interchange case issues once the appeal is filed. The Fed is also planning to file a motion to expedite this appeal, which could bring the case to its conclusion within nine months to one year.

Leon late last month struck down the Fed's rules on debit interchange fees and routing procedures under the Durbin Amendment. He ruled at that time that the Fed did not follow narrow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment.

The judge has instructed the Fed to rewrite and/or revise the regulations, which require a cap on fees card issuers may charge merchants for their debit transaction services.

CFPB, Labor Dept. Unite To Address Disabled Worker Financial Issues

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WASHINGTON (8/28/13)--The Consumer Financial Protection Bureau and Department of Labor (DoL) have announced a new partnership--one intended to help consumers with disabilities get the information they need to understand money management, savings, credit, and how to evaluate financial choices.  Equally important, the effort will help them know where to get assistance if they are treated unfairly.

The CFPB said in a release that all consumers need the information noted above, but added that individuals with disabilities "often face barriers and challenges in moving toward economic security and self-sufficiency." If entering the workforce, these new workers may never have had a savings or checking account, or may have no credit record, the release said.  It added that for those going back to work after an injury or illness, credit scores may have suffered because of the impact the event had on their income.

Through the partnership, the CFPB and DoL's Office of Disability Employment Policy will develop and distribute educational materials, resources, and technical assistance to the clients' and professional staff of American's Job Center, operated by DoL.