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CUs dig deep on RBC plan at Chicago Listening Session

Washington
CHICAGO (7/11/14)--The room was packed and the concerns were earnest at the National Credit Union Administration's Listening Session in Chicago Thursday. As expected, the primary topic of the day was the NCUA's proposed risk-based capital rule. NCUA board member Michael Fryzel helped open the meeting by reminding the more than 160 people in attendance that the current RBC rule is just a proposal, and that when it comes to changes, "everything is on the table."

"We want a rule that provides safety and soundness without unduly limiting credit union operations," he said.

NCUA Chair Debbie Matz said both the Office of the Inspector General and the Government Accountability Office have pushed the NCUA to get an RBC system in place.  "We are going forward with risk-based capital, but we will address the issues that have been identified," she said.

After initial remarks by the regulators, credit union attendees--sitting at round tables--were asked to identify by group what their primary concerns are.

Several credit union representatives requested a re-issue and new comment period for the proposal, since a number of significant changes are likely.  In response, Matz said that if after the NCUA reviews the proposed rule, if the rule's intent changes significantly it will require a new comment period. She also the 18-month implementation period for the new rule will likely be changed. A longer implementation period is one of CUNA's requests if the NCUA goes forward with a final rule.

Another credit union remarked that there would be a greater benefit if examiners were better trained than imposing an "unnecessary" new RBC rule. The NCUA responded by saying that a lot of resources go to examiner training, but the effectiveness is limited because of high rates of turnover.  The agency also invited credit unions' ideas on how to improve examiner training.

Several credit unions raised issues with the risk weights, particularly those that would be applied to member business loans, mortgages, and longer term investments.  One expressed concern that his credit union's members might be misled into believing his credit union was more risky than a bank with the same balance sheet because the bank's risk-based capital ratio would be higher under Basel rules than under NCUA's proposal. 

It was also a credit union concern that the RBC rule was trying to create a "no-risk-allowed system," which would devalue the credit union charter option.

A credit union with a significant business lending activity pointed out that applying higher risk weights to greater concentrations of MBLs ignored the wide diversity that can exist in a business loan portfolio.  NCUA Director of Examination and Insurance Larry Fazio said there was no way to make the RBC rule as precise as some credit unions have requested. He added that there will be more risk weight analytics available for credit union review in the final version of the rule.

Fazio also told the credit union crowd that the more robust the RBC system is, the more comfortable will examiners be with net worth ratios not substantially above 7%.

NCUA Chair Debbie Matz stated during the back-and-forth discussion that the agency has no intention to eliminate the separate 10.5% risk-based capital requirement for a credit union to be well capitalized.   The Credit Union National Association and other critics of the current RBC proposal have argued that the Federal Credit Union Act prohibits the NCUA from setting a higher capital requirement for well-capitalized credit unions than for those that are deemed adequately capitalized.

Other topics addressed at the session included fines for late Call Report filers and interest rate risk. Matz said the number of late filers is going down, but the NCUA has been too lenient in the past. She added that if there is a valid excuse for late filing, the credit union in question will not be penalized.

Matz also addressed the issue of interest rate risk. She said the NCUA went through the first quarter call reports to identify credit unions with more than $1 billion in assets, and while some had adequate interest rate risk, "there is still some work to do."

She followed that up by saying that the NCUA is focused primarily on credit unions that are large enough to pose risks that are too high.

Recordings of the session will be posted on the CUNA website when available. The NCUA's third and final Listening Session of the year will be July 17 in Alexandria, Va.

CUNA to drive home need for reg relief at House hearing

Washington
WASHINGTON (7/11/14)--The Credit Union National Association has asked Ohio credit union CEO Doug Fecher to speak for the credit union movement on regulatory relief before Congress Tuesday.

Fecher, president/CEO of Wright-Patt CU in Beavercreek, Ohio, with $2.8 billion in assets, will testify before the House Financial Services Committee's subcommittee on financial institutions and consumer credit at a hearing titled "Examining Regulatory Relief Proposal for Community Financial Institutions."

Fecher will address regulatory burden and its effect on credit unions. He will address topics such as the Federal Reserve's Regulation D, which places limits on pre-authorized withdrawals and transfers, risk-based capital, the Credit Union Residential Loan Parity Act, Consumer Financial Protection Bureau examination thresholds and more.

CUNA has testified more than a dozen times in the past three years on regulatory relief matters, and Fecher has testified on behalf of CUNA multiple times. The hearing is scheduled to start at 2 p.m. (ET).

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Housing fin. reform must ensure CU access to markets: CUNA

Washington
WASHINGTON (7/11/14)--Credit Union National Association interim President/CEO Bill Hampel wrote to three U.S. representatives Wednesday asking for consideration for credit unions during the housing finance reform process.

The letter is addressed to Reps. John Delaney (D-Md.), John Carney (D-Del.) and James Himes (D-Conn.), sponsors of the Partnership to Improve Homeownership Act (H.R. 5055), which was introduced Thursday.

The bill would establish an insurance program through Ginnie Mae. All government-guaranteed, single-family and multi-family mortgage-backed securities would be supported by a minimum of 5% private sector capital, standing in a first-loss position. The remaining 95% of the risk would be shared equally between Ginnie Mae and a private reinsurer.

It would also wind down Fannie Mae and Freddie Mac, revoking their charter but allowing them to be sold and recapitalized as entities with different business plans without any of their current unique powers.

In CUNA's letter, Hampel thanks the congressmen for their support of housing finance reform, and praises their act for continuing the dialogue that will lead to the future mortgage finance system.

"As we have said throughout the housing finance reform debate, any legislation to reform the secondary mortgage market should ensure that credit unions have equal access to a well-regulated and well-capitalized secondary market, and should preserve the ability of borrowers to get mortgage products with predictable payments, like the 30-year fixed rate mortgage," Hampel's letter reads. "The new system should be durable enough to withstand economic distress and the transition to the new system should be reasonable and orderly."

Use the resource link below for the full text of the bill.

Ways and Means' Marchant, Sen. Banking's Heller voice RBC plan concerns

Washington
WASHINGTON (7/11/14)--New voices from both the House Ways and Means Committee and the Senate Banking Committee have joined the chorus of concerns regarding the National Credit Union Administration's proposed risk-based capital (RBC) plan. Republicans Rep. Kenny Marchant (Texas) and Sen. Dean Heller (Nev.) sent letters to the agency July 10 .
 
Ways and Means' Marchant asked the NCUA to:
  • Identify the statutory authority upon which the agency is relying to impose a higher risk-based capital requirement on well-capitalized credit unions;
  • Explain why the NCUA is attempting to regulate concentration and interest-rate risk thorough the addition on new capital requirements as opposed to relying on NCUA examiners to monitor risks of individual credit unions;
  • Identify the statute that gives the NCUA any authority to impose individual capital requirements on credit unions; and
  • Explain why 18 months, as proposed, is an adequate implementation time.
Senate Banking's Heller warns in his letter that the risk weights in the proposed rule may be "unduly burdensome" and could "reduce the availability or affordability of loan products and restrict credit" available through credit unions.
 
Heller added that credit unions in his state have warned him that the RBC plan, as written, will force a change in how they operate and require more time spent on regulatory compliance at a cost to helping the state's "struggling economy."
 
Other members of the Senate Banking Committee who have weighed in with concerns include its chairman, Sen. Tim Johnson (D-S.D.); its ranking member, Sen. Mike Crapo (R-Idaho); and Sen. Heidi Heitkamp (D-N.D.). From House Ways and Means, Rep. Erick Paulsen (R-Minn.) also has warned that credit unions in his state would be adversely affected by the NCUA's RBC proposal.
 
(See related story: NCUA gets more specific on RBC plan review at Chicago Listening Session.)

IBEW Local 816 FCU closes

Washington
ALEXANDRIA, Va. (7/11/14)--The National Credit Union Administration announced late Thursday that it has liquidated IBEW Local 816 FCU, Paducah, Ky., after determining the credit union was insolvent and had no prospect for restoring viable operations.
 
The $6.3 million-asset credit union served 929 members. It is the sixth federally insured credit union liquidation in 2014.
 
The NCUA's Asset Management and Assistance Center will issue correspondence in the near future to individuals holding verified share accounts in the credit union. Members with additional questions about their insurance coverage may contact the center toll-free at 800-715-0777 between 8 a.m. and 5 p.m. (CT) Monday through Friday.
 
Member deposits are federally insured by the National Credit Union Share Insurance Fund. Administered by NCUA, the Share Insurance Fund insures individual accounts up to $250,000, and a member's interest in all joint accounts combined is insured up to $250,000. The fund separately protects IRA and Keogh retirement accounts up to $250,000 and has the backing of the full faith and credit of the United States.

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Payday lender must refund $5 million for illegal practices

Washington
WASHINGTON (7/11/14)--One of the largest payday lenders in the country is the subject of an enforcement action announced Thursday by the Consumer Financial Protection Bureau, forcing it to provide $5 million in refunds and a $5 million penalty.

The CFPB found that Irving, Texas-based ACE Cash Express has been using illegal debt collection tactics, including harassment and false threats of lawsuits and criminal prosecution to pressure overdue borrowers into taking out additional loans.

"ACE used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt," said CFPB Director Richard Cordray. "This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back. The CFPB was created to stand up for consumers, and today we are taking action to put an end to this illegal, predatory behavior."

ACE offers payday loans, check-cashing services, title loans, installment loans and other consumer financial products and services online and at many of its 1,500 retail storefronts in 36 states and the District of Columbia.

The CFPB found that ACE used the following "aggressive and unlawful" collections practices:
  • ACE debt collectors led consumers to believe they would be sued or subject to criminal prosecution if they did not make payments, even though ACE did not actually sue consumers or attempt to bring criminal charges against them for non-payment of debts;

  • Debt collectors told consumers in-house and third-party collection fees would be collected, despite corporate policy that states collectors cannot charge collection fees and cannot report non-payment to credit reporting agencies; and

  • Some ACE in-house and third-party collectors abused and harassed consumers by making an excessive number of collection calls, and in some cases, ACE repeatedly called the consumers' employers and relatives and shared the details of the debt.
These tactics were used to create a false sense of urgency to lure overdue borrowers into payday debt traps, according to the CFPB. ACE would encourage overdue borrowers to temporarily pay off their loans and then quickly re-borrow from ACE.

Even after consumers explained to ACE that they could not afford to repay the loan, ACE would continue to pressure them into taking on more debt. Borrowers would pay new fees each time they took out another payday loan from ACE.

The $5 million in consumer refunds will go to overdue borrowers harmed by the illegal debt collection tactics during the period covered by the order. These borrowers will receive a refund of their payments to ACE, including fees and finance charges.

The $5 million fine will be made to the CFPB's Civil Penalty Fund.

Use the resource link for more information.
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