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CUNA's Richard: What Three Things 'Scare' CUs The Most?

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WASHINGTON (9/25/13)--With Halloween approaching next month, there will soon be many scary things in the air, but Credit Union National Association General Counsel Eric Richard told the CUNA's 2013 Attorney's Conference Tuesday to forget witches--"the three things credit unions are most scared about are compliance, litigation and enforcement."

Overall, Richard said, regulatory complexity continues to increase, creating more and more emerging issues for credit unions. "CUNA will continue our efforts, working with credit unions and leagues, to ensure that these developments do not have unintended consequences for the credit union system or impose unnecessary regulatory burdens on your clients," he said.

"The good news is that, for credit unions, the worst of [the Consumer Financial Protection Bureau's mortgage rule writing]--and the uncertainty this creates--seems to be behind us," Richard said. The bad news, he said, is that credit unions now have to figure out how to live in the new world with new ability-to-repay, mortgage escrow, high-cost mortgage lending, home ownership counseling, mortgage servicing rules, mortgage loan originator compensation, and appraisal rules, and others, forever.

"This compliance obligation is no easy task for even the most sophisticated of America's financial institutions. It can be a killer for community-based institutions like credit unions," he said.

He urged the assembled crowd to help spread this message: "compliance is unavoidable, and the time for compliance is now. If credit unions are not ready in January, they face many litigation and enforcement risks that may harm the institutions and the way they serve their members."

The bottom line is that, for most credit unions, compliance is the most important legal task they face this year, Richard said.

Ongoing litigation is also creating uncertainty about other rules. Proposed amendments have come out over and over again in 2013, and sometimes final rules that have already been implemented "face a collateral attack in court," Richard said. One such rule is the Federal Reserve's interchange regulation, which is currently being discussed as part of a legal challenge from merchants.

The Fed is appealing the merchant challenge, and CUNA is doing everything it can to ensure the D.C. Circuit Court of Appeals is aware of credit union concerns as the case moves forward, Richard emphasized.

And then, there is enforcement: A potentially very significant development in regulatory enforcement came from the CFPB this year when it brought a case using the "abusive" prong of unfair, deceptive or abusive acts or practices (UDAAP) enforcement authority. The challenge credit unions face is that UDAAP is not clear, Richard said. UDAAP itself is vague, and the CFPB has not provided guidance. "Lots of uncertainty remains over UDAAP authority, and this is an area to watch over the coming years," he said.

CDFI Fund Gives $21M To 35 LICUs, Out Of $150M Awarded

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WASHINGTON (9/25/13)--More than $21 million in funds will be released to 35 low-income credit unions through the U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund).

"The fiscal year 2013 round of the CDFI Program provides more awards than any other round in the CDFI Fund's history," said CDFI Fund Director Donna Gambrell. In total, $150,289,499 in Financial Assistance and Technical Assistance awards will be provided to 148 awardees.

"By expanding the reach and impact of this program to more organizations, the CDFI Fund is supporting more economic development efforts than ever before to bring new life to struggling communities," Gambrell added.

Overall, Fiscal Year 2013 CDFI program applicants requested a total of $410.8 million, which was a $15 million jump over last year's requests of nearly $395.7 million. Credit unions made 73 requests for a total of around $77 million in funds.

The CDFI fund helps locally based financial institutions--including credit unions--offer small business, consumer and home loans in communities and populations that lack access to affordable credit. Credit unions that are certified to take part in the CDFI program may apply for as much as $2 million in funding to help maintain their credit union's presence in the community.

The credit unions that received funds are: 1st Bergen FCU, Hackensack, N.J.; Alliance CU, Fenton, Mo.; ASI FCU, Harahan, La.; Cascade Forest Products CU, Vancouver, Wash.; Choices FCU, St. Louis, Mo.; East River Development Alliance FCU, Long Island City, N.Y.; Electro Savings CU, St. Louis, Mo.; Express CU, Seattle, Wash.; First Light FCU, El Paso, Texas; FM Financial CU, Flint, Mich.; GECU, El Paso, Texas; Greater Abbeville FCU, Abbeville, S.C.; GTE FCU, Tampa, Fla.; and Guadalupe CU, Santa Fe, N.M.

Others include Gulf Coast Community FCU, Gulfport, Miss.; Hope FCU, Jackson, Miss.; Jefferson Financial CU, Metairie, La.; Joplin Metro CU, Joplin, Mo.; KC Terminal Employees/Guadalupe Center FCU; Kansas City, Mo.; Latino Community CU, Durham, N.C.; New York University FCU, New York, N.Y.; North Coast CU, Rocky River, Ohio; Nueva Esperanza Community CU, Toledo, Ohio; Opportunities CU, Winooski, Vt.; Poplar Bluff FCU, Poplar Bluff, Mo.; Santa Cruz Community CU, Santa Cruz, Calif.; Self-Help FCU, Durham, N.C.; Shreveport FCU, Shreveport, La.; South Central Missouri CU, Willow Springs, Mo.; St. Louis Community CU, St. Louis, Mo.; Syracuse Cooperative FCU, Syracuse, N.Y.; TMH FCU, Tallahassee, Fla.; Unite Burlington CU, St. Louis, Mo.; and United CU, Mexico, Mo.

For more on this year's CDFI Fund awards, use the resource link.

NCUA, Fed Agencies Unite On Elder Abuse Prevention, Guidance

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ALEXANDRIA, Va. (9/25/13)--National Credit Union Administration Chairman Debbie Matz in a letter to credit unions (13-CU-08) strongly encouraged them to ensure their staff members are "trained on the potential signs that might trigger a report of elder abuse or financial exploitation."

"Elder abuse involves the illegal or improper use of an older adult's funds, property or assets. Older adults can become targets of financial exploitation by family members, caregivers, financial advisors, home repair contractors, and scam artists. If you or your staff know the older adults in your membership, you may be able to spot irregular behavior or account activity," Matz wrote.

She also urged credit unions to review their own policies and procedures "to ensure they are consistent with state law and the interagency guidance regarding reporting requirements when a financial institution suspects elder abuse or financial exploitation."

The letter follows Tuesday's release of joint federal financial regulatory guidance which clarifies that financial institutions may report suspected elder financial abuse to appropriate authorities.

This reporting authority is provided under the Gramm-Leach-Bliley Act, the agencies said in a release. The NCUA and others emphasized that financial institution employees can report suspected irregular transactions, account activity, or other behavior that signals financial abuse. Suspected elder financial abuse may be reported to local, state or federal agencies, they said.

"Older adults can be attractive targets for financial exploitation and may be taken advantage of by scam artists, financial advisers, family members, caregivers, or home repair contractors," and recent studies have shown that a small number of financial abuse acts are in fact reported, the agencies noted.

The Federal Reserve, Consumer Financial Protection Bureau, Federal Deposit Insurance Corp., Federal Trade Commission, Office of the Comptroller of the Currency and the Commodity Futures Trading Commission joined the NCUA in issuing guidance.

The NCUA on Tuesday also released new financial literacy resources page on their website.

For the letter to credit unions, the joint agency guidance, and the NCUA financial literacy resources, use the resource links.

House Financial Services Sets Early Oct. Agenda

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WASHINGTON (9/25/13)--Flood insurance, Consumer Financial Protection Bureau accountability and providing financial services access to unserved and underserved communities are some of the items on the early October U.S. House Financial Services Committee agenda.

The specific schedule for these hearings is as follows:
  • An Oct. 1 financial institutions and consumer credit subcommittee hearing to discuss legislative proposals to bring more accountability, reform and transparency to the CFPB;
  • An Oct. 9 capital markets and government sponsored enterprises subcommittee hearing on legislation to further reduce impediments to capital formation;
  • An Oct. 10 monetary policy and trade subcommittee hearing on international central banking models; and
  • An Oct. 10 financial institutions and consumer credit subcommittee hearing focused on unbanked and under-banked areas.
The hearing schedule is tentative. All hearings are scheduled to be held in Room 2128 of the Rayburn House Office Building.

113 Small, Mid-sized Banks Still Owe $2.7B in TARP, WSJ Reports

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WASHINGTON (9/25/13)--More than 113 small- and mid-sized banks that received taxpayer funds through the U.S. Treasury's Troubled Asset Relief Program (TARP) are still on the hook for $2.7 billion in borrowed government money, the Wall Street Journal reported this week.

This debt is creating issues for the Treasury, which is looking to offload the stakes it took up in these small institutions. According to the Treasury, 79 of these banks are behind on their payments to the government, and 63 of those banks have missed 10 payments or more. In some cases, troubled banks are filing for bankruptcy, a move that wipes out any taxpayer-held equity when they fold.

As many banks continue to hold out on repaying their debts, and lending to their small business-owning customers, credit unions, which received no TARP funding, continue to advocate for measures that would help them increase their lending activities in surrounding communities.

Separate House (H.R. 688) and Senate (S. 968) member business lending (MBL) bills were introduced earlier this year. Both bills would increase the MBL cap from 12.25% of assets to 27.5%. The Credit Union National Association has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers. Both bills enjoy bipartisan support.

H.R. 688 has 115 House co-sponsors, and S. 968 is co-sponsored by 17 senators.

Stiff BSA Violation Penalties Handed Out To Two Banks

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VIENNA, Va. (9/25/13)--A $4.1 million civil money penalty against Saddle River Valley Bank in Saddle River, N.J., was announced by the Financial Crimes Enforcement Network (FinCEN) Tuesday. The penalty was assessed, according to FinCEN, after it was determined that the bank violated several provisions of the Bank Secrecy Act (BSA) from 2009 through May 2011.
 
The FinCEN announcement noted the bank consented to the assessment.
 
FinCEN worked with the Office of the Comptroller of the Currency (OCC) and the U.S. Attorney's Office for the District of New Jersey and concluded that the bank "willfully violated aspects of the BSA's program, recordkeeping, and reporting requirements" by:
  • Lacking an effective anti-money laundering (AML) program reasonably designed to manage the risks of money laundering and other illicit activity;
  • Failing to conduct adequate due diligence on foreign correspondent accounts; and
  • Failing to detect and adequately report in a timely manner suspicious activities in the accounts of foreign money exchange houses, also known as casas de cambio.
Saddle River Valley Bank, according to FinCEN, executed $1.5 billion worth of inadequately monitored transactions on behalf of Mexican and Dominican casas de cambio despite publicly available information, such as a FinCEN advisory, that "provided ample notice of the heightened risks of dealing with these institutions."
 
"It's pretty remarkable that a small community bank in suburban New Jersey was attracting more than a billion dollars in transactions with customers in Mexico and the Dominican Republic, and nobody thought it was too good to be true," FinCEN Director Jennifer Shasky Calvery said.
 
"Banks of all sizes, in any part of the country, may be tempted by such lucrative ventures. However, banks must use common sense in evaluating customer risk or seemingly lucrative business could become quite the opposite,"  she advised.
 
FinCEN's penalty is concurrent with a $4.1 million civil money penalty assessed by the OCC, and will be satisfied by one payment of $4.1 million to the U.S. Department of the Treasury. In addition, the U.S. Attorney's Office for the District of New Jersey will collect $4.1 million from the bank through civil asset forfeiture. The bank ceased operations in 2012 and the combined collection amount of $8.2 million represents the majority of its remaining assets.
 
In a related story, TD Bank NA Monday consented to pay $57.5 million to settle allegations by the U.S. Securities and Exchange Commission, FinCEN, and the OCC that the bank from April 2008 to September 2009 failed to file suspicious activity reports--or SARs--on activity in accounts belonging to Rothstein Rosenfeldt Adler, P.A., the Fort Lauderdale, Fla.  law firm, the OCC noted, through which Scott Rothstein ran a $1.2 billion Ponzi scheme.