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FSOC lacks approach to ID emerging fin. threats: GAO

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WASHINGTON (9/22/14)--The Financial Stability Oversight Council (FSOC) "still lacks a comprehensive, systematic approach to identify emerging threats to financial stability," according to a Government Accountability Office (GAO) report released last week.

The report was done as a follow-up to recommendations given by the GAO to the council in September 2012.

The FSOC was created by the Dodd-Frank Act to identify and address threats to financial stability. The council consists of 10 voting and five nonvoting members. The 10 voting members include nine federal regulators and an independent insurance expert.

In September 2012, the GAO gave the council nine recommendations involving three areas: emerging threats and risks identification; transparency and accountability; and collaboration and coordination.

The recent report states that:
  • The Office of Financial Research (OFR) has made some progress in developing data tools to support FSOC since the 2012 report, but GAO's observations of two of these tools suggest that one tool does not focus on risks to the financial system, while another remains in a prototype phase;

  • FSOC has taken steps to improve its communication with the public but could do more to improve transparency and accountability, such as with a transparency policy approved in May. But FSOC staff said that they did not intend to keep detailed minutes of meetings because of the confidential information discussed;

  • FSOC staff also said that the impact of designating nonbanks for enhanced supervision would be assessed as part of a mandated January 2016 study. However, FSOC has not begun to prepare for this study; and

  • FSOC has taken steps to improve collaboration and coordination among member agencies but does not plan to act on some of GAO's recommendations on coordination. Staff said they did not plan to clarify the roles and responsibilities of the council, the OFR and member agencies because the overlapping responsibilities for monitoring systemic risk had not been problematic.
According to its report, the GAO "maintains that action is needed as its past work has shown that the lack of clear roles and coordination can lead to duplication, confusion and regulatory gaps."

Information for the GAO's study was obtained from June through September from staff and documents relating to the GAO's 2012 recommendations.

Use the resource link to access the complete report.

Inside Washington (09/22/2014)

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  • DETROIT (9/22/14)--The Federal Housing Finance Agency (FHFA) will hold its third event to reach homeowners who could benefit from the Home Affordable Refinance Program (HARP) in Detroit Oct. 2. The event will highlight the benefits of HARP and provide tools to help community leaders reach the more than 27,000 Detroit area residents still eligible to benefit substantially from a HARP refinance.  These borrowers could save more than $1,800 per year by refinancing. FHFA officials and panelists will also discuss FHFA's Neighborhood Stabilization Initiative (NSI),which entails both pre- and post-foreclosure strategies for assisting borrowers who have fallen behind on their mortgage payments. Detroit is the first pilot city for this new initiative. Borrowers are considered "in-the-money" if they meet the basic HARP eligibility requirements, have a remaining balance of  $50,000 or more on their mortgage, have a remaining term on their mortgage of greater than 10 years, and their mortgage interest rate is at least 1.5% higher than current market rates ...

Nussle takes helm of CUNA today

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WASHINGTON (9/22/14)--Jim Nussle today formally begins his tenure as president/CEO of the Credit Union National Association, the nation's largest advocacy group for credit unions.
Click to view larger image CUNA President/CEO Jim Nussle speaks to attendees at the Iowa Credit Union League convention last week. Nussle formally takes leadership of the national trade association today. (Iowa Credit Union League Photo)
Nussle, a former Iowa congressman and director of the Office of Management and Budget (OMB), is taking the reins just as the credit union movement is celebrating the achievement of reaching 100 million memberships.
"The individuals who make up the more than 100 million memberships at credit unions trust their credit unions to provide them, their families and their small businesses with the financial services they expect and need," Nussle said, adding that he will work to ensure the credit union message and policy priorities are heard on the Hill and nationwide.
Nussle, 54, served in the U.S. House from 1991 to 2007 as a Republican representative for Iowa's 1st and 2nd Congressional Districts. He also served as chair of the House Budget Committee, which oversees the federal budget process, including review of all bills and resolutions on the budget.
Under President George W. Bush, Nussle was the 36th OMB director, serving from 2007 to 2009. He also was a member of the president's National Economic Council, National Security Council, Homeland Security Council and National Domestic Policy Council.
Most recently, Nussle was president of Growth Energy, a trade association of renewable energy companies and industry partners focused on alternative energy sources, such as ethanol.
Nussle also has been a contributor and guest host for CNBC 's "Squawk Box" and "The Kudlow Report" and has appeared on MSNBC and CNN .

Comments on customer due diligence, fixed assets, Reg. C due in Oct.

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WASHINGTON (9/22/14)--Comments on proposals from the National Credit Union Administration, Consumer Financial Protection Bureau (CFPB) and the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) are due during the month of October. The Credit Union National Association is also collecting comments on the proposals in question.

The proposals are:
  • FinCEN, customer due diligence. The proposal would amend Bank Secrecy Act regulations by strengthening customer due diligence obligations for financial institutions to identify and verify beneficial owners of legal entity customers. Comments are due to CUNA today and to FinCEN Oct. 3;

  • NCUA, fixed assets. The agency has proposed to remove the waiver requirement for federal credit unions to exceed the 5% aggregate limit on investment in fixed assets. The proposal would allow credit unions to exceed the 5% limit if it implements a fixed-assets management program. Comments are due to CUNA by Oct. 1 and to the NCUA by Oct. 10; and

  • CFPB, Home Mortgage Disclosure Act (HMDA) Regulation C. The proposal would revise tests for determining which institutions are covered under the HMDA. Covered entities, including credit unions that trigger Regulation C compliance, would be required to report HMDA data if they originate 25 covered loans other than open-end lines of credit and commercial lines of credit, in the previous calendar year. Comments are due to CUNA by Oct. 15 and to the CFPB by Oct. 29.
Use the resource links below to access CUNA's regulatory advocacy comment call homepage, as well as previous News Now coverage of the proposals in question.

CFPB has mortgage scammers, nonbank auto lenders on radar

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WASHINGTON (9/19/14)--The Consumer Financial Protection Bureau is proposing to oversee nonbank auto finance companies, and it also announced a lawsuit against an online payday lender this week.

The bureau also released a supervision report that details auto lending discrimination against banks, resulting in approximately $56 million in redress for as many as 190,000 consumers.

The proposed rule would allow the bureau to supervise nonbank auto finance companies that make, acquire or refinance 10,000 or more loans or leases in a year. The CFPB would be supervising them to ensure they are complying with federal consumer financial law.

According to CFPB estimates, about 38 auto finance companies would be subject to this new oversight. These companies originate around 90% of nonbank auto loans and leases, and in 2013 provided financing to approximately 6.8 million consumers.

Currently, the bureau supervises large banks making auto loans, but not nonbank auto finance companies. Under the Dodd-Frank Act, it has authority to supervise certain nonbanks the bureau defines through rulemaking as "larger participants" in a market.

The bureau's report details auto-lending discrimination uncovered at banks under CFPB supervision over the past two years.

Examiners found that these indirect auto lenders had discretionary pricing policies that resulted in discrimination against African-American, Hispanic, Asian and Pacific Islander borrowers. As a result, these borrowers paid more for their auto loans than similarly situated non-Hispanic white borrowers.

The CFPB announced in a separate statement that it is taking action to halt operations of an online payday lender. The bureau alleges that the Hydra Group is running an "illegal cash-grab scam," using information bought from online lead generators to access consumers' checking accounts to illegally deposit payday loans and withdraw fees without consent.

According to the CFPB, the Hydra Group then uses falsified loan documents to claim that the consumers had agreed to the phony online payday loans.

At the request of the bureau, a U.S. District Court judge has temporarily ordered a halt to the operation and frozen Hydra Group's assets. The lawsuit also seeks to return the ill-gotten gains to consumers and levy a fine on the company.

Use the resource links below for more information.

Carolinas league asks for 2nd RBC comment period

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RALEIGH, N.C. (9/19/14)--John Radebaugh, president/CEO of the Carolinas Credit Union League (CCUL), has written to the National Credit Union Administration to request a second comment period on the agency's risk-based capital (RBC) proposal.

In his letter, sent earlier this week, Radebaugh expressed CCUL's support of a more comprehensive RBC effort but said the current proposal could "negatively impact the credit union system by jeopardizing member access to competitive and safe financial products and services."

The letter cites the more than 2,000 comment letters received by the NCUA, including those from more than 350 members of Congress. It also mentions the agency's previously stated willingness to revise risk weightings, which could have an impact on credit unions' strategic planning.

"Through the comment period and beyond, the NCUA has responded to inquiries, acknowledged necessity of changes to the revised rule and participated in ongoing conversations with credit union stakeholders, actions that indicate NCUA's awareness that revisions to the RBC rule will have a significant impact on the industry," Radebaugh wrote. "Given the strength of the credit union system, there is no dire need for rapid adoption of a final risk-based capital structure."

The CCUL believes that the issuance of a supplemental rule with a comment period would be "most appropriate" and in the best interest of the credit union system.

TCCUSF update, tech amendments approved by NCUA

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ALEXANDRIA, Va. (9/19/14)--A light agenda greeted new National Credit Union Administration board member J. Mark McWatters Thusday for his first monthly board meeting.

The meeting consisted of a report on the Temporary Corporate Credit Union Corporate Stabilization Fund, during which NCUA again stated there will be no assessment this year and future assessments are also highly unlikely, some technical amendments and the approval of a community charter expansion.

The Corporate Stabilization Fund currently stands at $51.2 million, a $91.6 million improvement from the $40.4 million deficit at the end of the first quarter. This is the first positive balance for the fund.

Mary Ann Woodson, chief financial officer of the NCUA, said the improvements to the fund are due primarily legacy assets from the agency's Guaranteed Notes Program, as well as recent corporate credit union litigation settlements.
Click to view larger image New NCUA board member J. Mark McWatters listens to a presentation from NCUA Associate General Counsel Frank Kressman at the board's monthly meeting Thursday. (CUNA Photo)

"Based on information we have at this time, the fund remains stable and is acting consistent with our expectations," Woodson said.

NCUA Chair Debbie Matz added that rebate possibilities cannot be addressed until final accounting on the fund is done, which would likely be in 2020 or 2021.

The board unanimously approved technical amendments to parts 701, 706 and 790 of the agency's rules and regulations.

The changes are:
  • A repeal of the NCUA's rulemaking authority governing unfair or deceptive acts or practices, located in 12 CFR part 706, due to the Dodd-Frank Act;

  • An amendment to part 790 of the agency's rules and regulations, which conforms them to the NCUA's current central and field office structures; and

  • Amending the agency's payday alternative loans regulation to replace the terms "short-term, small amount loans" and "STS loans" with the terms "payday alternative loans" and "PAL loans."
Frank Kressman, associate general counsel for the NCUA, said because the rule is "non-substantive and technical," it is exempt from the notice and comment period provisions in the Administrative Procedures Act.

The rules will be considered final once they are published in the Federal Register .

The meeting also included approval of expansion of the community charter for First Service FCU, Groveport, Ohio, with $136 million in assets. The expansion will allow it to serve people who live, work, worship or regularly conduct business in Delaware, Fairfield, Franklin, Licking, Madison, Morrow, Pickaway and Union counties.

"Approval of this expansion would provide access to credit union services to an additional 115,000 people residing in 189 census tracts in underserved areas," said Leilani Stamper, NCUA consumer access analyst. "Members will benefit from the credit union's no monthly service fee checking account program, short-term loans, shared secured Visa and financial literacy and education programs."

First Service FCU was first chartered by the NCUA in 1956 as Lockbourne FCU, to serve Lockbourne Air Force Base. It converted to a community charter in 1984 to serve a portion of Columbus, Groveport, Canal, Winchester, Pickerington and Rickenbacker Industrial Park. In 1999, its charter was expanded to serve Franklin County, Ohio.

The NCUA also announced Thursday that the board unanimously voted to name Rick Metsger board vice chair. Mestger was first nominated for the NCUA board in May 2013, and his term will expire in August 2017.

Use the resource link below to access the board documents from Thursday's meeting.