Interchange Hearing Scheduled

U.S. Capitol DomeWith the Federal Reserve's April 21 deadline to craft a final rule on government controls on interchange fees steadily approaching, the House Financial Services Committee has tentatively scheduled a February 17th hearing to study the Fed's planned implementation. Credit unions, Leagues and CUNA have urged outright repeal of proposed interchange fee regulations. However, in the absence of repeal, credit unions and their trade associations have argued that lawmakers and the Federal Reserve should take time to review the interchange rules, and has urged lawmakers to conduct hearings on the interchange fee proposal. As was mentioned in the last Creating Influence a small group of Georgia credit union officials visited with the two Georgia members on the Financial Services Committee on January 5th, Reps. Lynn Westmoreland and David Scott, to share with them the credit union perspective.

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Washington, D.C. News

Interchange Hearing Scheduled
Westmoreland, Scott Subcommittee Assignments Announced
President Obama Orders Review of Regulations
Baucus, Reid Introduce Bill to Repeal Form 1099 Requirement in Health Care Law

State News

2011 Grassroots Academy
Early Morning Eggs

Industry News

CU Call to Action Re: Interchange Rule Hitting Press
Foreclosure Management for CUs Covered in NCUA Letter
Matz Urges Changes to Capital Statutes
Guidance on CU Exam Issues

Public Influence

Mercer Shares CU Side of Fed’s Proposed Interchange Fee Changes
Examiner.com Shares 11 Financial Resolutions for 2011
Consumer Confidence Good News, CUNA Tells Media
Credit Union Card or Bank Card? Take a Look at the Fees
Moses C. Davis Awards: Honoring Excellence in Georgia
Statewide News Coverage
CUs in the News
Consider This
Paying Attention

News of Interest

Supreme Court Rules for JPMorgan Chase in Credit Card Case
New Wave in Payments?

 
January 28, 2011
 
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Georgia Credit Union Affiliates
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Stay on top of what's happening with credit union advocacy by reading Creating Influence, the Georgia Credit Union Affiliates' advocacy e-newsletter! If you’d like to be added to the distribution list, email Advocacy@gcua.org or call an Advocacy Team member – Cindy Connelly, Mike Culbertson, Anita Paul or Brandee Bickle – at 800-768-4282.
 
Washington, D.C. News
 

Interchange Hearing Scheduled

With the Federal Reserve's April 21 deadline to craft a final rule on government controls on interchange fees steadily approaching, the House Financial Services Committee has tentatively scheduled a February 17th hearing to study the Fed's planned implementation. Credit unions, Leagues and CUNA have urged outright repeal of proposed interchange fee regulations. However, in the absence of repeal, credit unions and their trade associations have argued that lawmakers and the Federal Reserve should take time to review the interchange rules, and has urged lawmakers to conduct hearings on the interchange fee proposal. As was mentioned in the last Creating Influence a small group of Georgia credit union officials visited with the two Georgia members on the Financial Services Committee on January 5th, Reps. Lynn Westmoreland and David Scott, to share with them the credit union perspective.

The Fed's interchange provisions, which were released just before the end of the year, could cap debit card interchange fees that are paid by merchants to card issuers at as little as seven cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. The Fed proposal will remain open for public comment until February 22nd. Fed officials during their December meeting said that the interchange provisions, if ultimately approved, would likely not become effective until after April. Also on the committee's agenda, based on a tentative two-month schedule released by its chairman, Rep. Spencer Bachus (R-Ala.), are hearings on:

  • Monetary policy and jobs, Feb. 9 (10 a.m.)
  • GSE reform, Feb. 9 (2 p.m.)
  • Markup of committee oversight plan, Feb. 10
  • Implementation of derivatives provisions of Dodd-Frank Act, Feb. 15 (10 a.m.)
  • Government-sponsored enterprises' (GSE) legal fees, Feb. 15 (2 p.m.)
  • Financial Crisis Inquiry Commission, Feb. 16 (10 a.m.)
  • Housing finance, Feb. 16, (2 p.m.)
  • The Fed's interchange plan, as mentioned, Feb. 17
  • GSE reform, March 1
  • HUD FY 2012 budget, March 2
  • Humphrey-Hawkins semi-annual Federal Reserve report on monetary policy, March 3
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Westmoreland Scott
U.S. Reps. Lynn Westmoreland (left) and David Scott (right)

Westmoreland, Scott Subcommittee Assignments Announced

U.S. Reps. Lynn Westmoreland and David Scott will serve on the Financial Institutions and Consumer Credit Subcommittee as part of their work on the House Financial Services Committee. The subcommittee oversees all financial regulators, such as the NCUA and the Federal Reserve, all matters pertaining to consumer credit including the Consumer Credit Protection Act and access to financial services, as well as the safety and soundness of the financial services system. Credit union advocates will recall that both Congressmen met with credit union individuals in the districts at Hike at Home meetings in 2010 to discuss issues of importance to the industry. Continued relationship building with both of the legislators (along with the rest of the Congressional delegation) is important in addressing credit union issues.

To build relationships and educate all of the new members of the House Financial Services Committee, CUNA held an “Understanding Credit Unions” meeting on Capitol Hill on January 24th. Approximately 50 congressional staff attended the briefing, including two from Georgia, which focused on how credit unions are different, the challenges credit unions face, and what Congress can do to help credit unions better serve their members. Look for opportunities to engage with your legislators and their staff in the district.
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President Obama Orders Review of Regulations

President Obama recently issued an executive order requiring government agencies to take a close look at current and proposed regulations to ensure they are not hampering business or job growth. Steps outlined in the order include extended compliance dates, simplified compliance procedures or outright exemptions for small businesses. If such alternatives are not recommended, the agencies must supply written justification. Click here for a link to the fact sheet on the order.
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Baucus, Reid Introduce Bill to Repeal Form 1099 Requirement in Health Care Law

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Senate Majority Leader Harry Reid (D-Nev.) introduced a bill on January 25th, that would repeal a provision in the health Care law requiring businesses to file Internal Revenue Service Form 1099 on every annual purchase of goods from a vendor above $600.

"We have heard small businesses loud and clear and are responding to their concerns," Baucus said. "Small businesses need to focus on creating good-paying jobs – not filing paperwork. Many of my colleagues on both sides of the aisle want to work with the small-business community to eliminate these requirements, and it is my hope we can come together to pass legislation quickly."

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State News
 
Gov. Nathan Deal
Governor Nathan Deal (center) addresses Grassroots Academy Participants
2011 Grassroots Academy

On January 27th, more than 50 credit union advocates traveled to the Capitol for the Grassroots Academy to gain knowledge of Georgia’s legislative process and leaders, and build relationships to benefit all credit unions in the state. Participants heard firsthand what may happen in the weeks to come of the session from Speaker of the House David Ralston, met with Governor Nathan Deal, saw what “successful grassroots” is from the legislator’s perspective by previous House Majority Leader Jerry Keen, and what the Department of Banking and Finance is seeking in legislative changes this session. Closing the packed day was an informal audience with the new Senate Banking and Finance Chairman Jack Murphy and new House Banks and Banking Chairman Greg Morris.

Want to learn more about what bills are being considered in the state session? Every session thousands of bills are filed, yet a mere couple of hundred make it across the finish line. Throughout the process the Advocacy Team reviews every single bill for relevance. So far, the Legislature has introduced over 200 bills, and some new officials are undoubtedly still getting organized as this is a little slower than normal. To see all of the bills that are being monitored on behalf of credit unions, please click here.
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Eggs & Issues Breakfast
Left to right: Ken Merritt, State Employees CU; Brian Akin, North Georgia CU; Mark Outler, Credit Union of Georgia; Brandee Bickle, GCUA; Emily James, Georgia Power FCU; Cindy Connelly, GCUA; Jay Gratwick, Delta Community CU, and Chris Leggett, LGE Community CU
Early Morning Eggs

Credit union leaders joined the more than 2,000 people at the Georgia Chamber of Commerce Eggs and Issues breakfast in the early hours of January 25th. This event is held each year at the beginning of the session and is a good opportunity to hear the legislative priorities of the Governor, Lieutenant Governor and Speaker of the House. The focus of the message was education, jobs and water . . . with references to the Tax Council’s recommendations on remodeling Georgia’s tax code.

Readers of Creating Influence will recall that the proposal leans towards lowering taxes on income and raising (or expanding) taxes on consumer purchases, including a patchwork of services and items not subject to the state sales tax such as safe deposit box rentals, credit card membership fees, and person-to-person sales of cars, boats and airplanes. As reported in the last edition of Creating Influence, several tax exemptions are being recommended to sunset or be abolished, but it is clear, from their message to the Eggs and Issues audience, that neither the Speaker of the House nor the Lieutenant Governor is putting this proposal on any fast track. Stay tuned.
 
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Industry News
 

Call to ActionCU Call to Action Re: Interchange Rule Hitting Press

During a national press call on January 20th, Jim Blake, president/CEO of HarborOne Credit Union, reiterated the credit union call to scrap the Federal Reserve Board's plan to implement government restrictions on interchange fees. The Massachusetts credit union CEO underscored that the practical ramifications for consumers of the plan to limit interchange fees could be numerous and dire. The press teleconference was organized by the Electronic Payments Coalition (EPC). CUNA is an EPC member, and tapped Blake to give the credit union perspective.

Blake said that already, even before any implementation rule has been finalized, there is broad talk about the possibility that interchange fee limits could drive up consumers' check costs, eliminate some card rewards programs, and force limits on the number of card swipes allowed per month – or a lower limit on what size charges can be applied to debit cards. The Fed plan, which seeks to implement provisions enacted by the Dodd-Frank financial regulatory reform package, offers a dual framework for determining what the law calls "reasonable" interchange fees. One plan would provide issuers with a safe harbor of seven cents per transaction, and set a maximum interchange fee cap of 12 cents per transaction. An alternative framework would simply cap the maximum interchange fee at 12 cents per transaction. These safe harbors and/or caps would be reevaluated by the Fed every two years.

CUNA has estimated that up to 67 percent of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40 percent.

Under the Dodd-Frank Act, card issuers with under $10 billion in assets would be exempt from the proposed rule changes. The exemption covers most, but not all, credit unions. However, credit unions, Leagues and CUNA remain concerned that a two-tiered pricing system could lead merchants to set incentives for consumers to use only big-issuers' cards, which would have a lower per transaction cost for the merchant.

In a related story, Bloomberg News reported that Rep. Barney Frank (D-Mass.) said he was ready to work with House Republicans, now in the majority, to force changes in the Fed's interchange fee proposal. Frank and former Sen. Christopher Dodd (D-Conn.), were the key architects of the Dodd-Frank Wall Street reform bill requiring the Fed to set the fee limits. The Fed is accepting public comment on its proposal until Feb. 22, and the agency has said that it is unlikely that a final plan would be ready by April. Credit unions across Georgia have been sending letters to the Fed on this proposed rule – as of press time Georgia credit union advocates have sent in more than 350 letters. Please click here and send one today to share your concern.

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Foreclosure Management for CUs Covered in NCUA Letter

Pending NCUA examination standards will address the need for appropriate due diligence when dealing with outside vendors, quality control reviews on foreclosure processes, and stress event analysis and reporting, the NCUA said in a recent letter to credit unions. The NCUA in that letter also urged federal credit union directors to perform their own in-depth reviews of their mortgage documentation and foreclosure management processes. Specifically, credit unions should be aware of issues related to the Mortgage Electronic Registration System (MERS), missing or defective loan documents, and documentation deficiencies related to so-called "robo-signing."

Credit unions should also monitor for contractual buy-back risks associated with serviced mortgages, the NCUA said. To properly deal with these and other mortgage-related issues, credit unions should ensure that their credit union has established appropriate policies and procedures for all aspects of the foreclosure process. A credit union's staff should be qualified to properly handle foreclosures, and its internal controls should be able to adequately deal with the foreclosure process. Credit unions should also ensure that their oversight, due diligence and controls related to third-party servicers that perform foreclosures on behalf of the credit union are adequate. Any foreclosure action should be accompanied by the required legal documentation, and information on the number and volume of foreclosure actions, as well as the financial impact of those foreclosure actions, should be disclosed to a credit union's board of directors, the NCUA added.

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Matz
NCUA Chairman
Debbie Matz
Matz Urges Changes to Capital Statutes

To the detriment of consumers, current credit union prompt corrective action (PCA) rules discourage some credit unions from marketing their "desirable products and services" out of concern that attracting increased share deposits could deflate net worth positions, NCUA Chairman Debbie Matz warned key lawmakers. Matz recommended Congress address by permitting a combination of supplemental and risk-related capital for credit unions. In letters to the top members of the Senate Banking Committee and the House Financial Services Committee, Matz urged statutory changes that would correct the disincentive that she said is impacting even strong, well-capitalized credit unions.

In her letter, Matz specifically proposed two reforms that would enable the NCUA to reverse the disincentive for credit unions to accept deposits from their members. They are to:
  • Allow qualifying credit unions to exclude assets that carry zero risk, such as short-term U.S. Treasury securities, from the definition of "total assets." NCUA would set a minimum net worth requirement, and would also determine that share growth is the cause of declining net-worth, not poor management or unsafe practices, before a credit union would be allowed to exercise this exclusion.
  • Authorize qualifying credit unions to issue supplemental capital. The form of supplemental capital would be subject to strict regulatory prescriptions that address safety and soundness criteria, protect investors, and preserve the cooperative credit union governance model.
"Congress already permits low-income designated credit unions to offer uninsured supplemental capital accounts to non-members," noted Matz in a release about the NCUA letters. "Modifying the Federal Credit Union Act to permit qualifying credit unions to offer uninsured alternative capital instruments subject to regulatory restrictions, and expanding the Act's definition of ‘net worth' to include those instruments, would allow well-managed credit unions to better manage net worth levels under varying economic conditions. It is clear that controlling accelerated, unmanageable growth of credit union assets was a principal purpose of PCA, and NCUA's implementing regulations respect that goal. It is for that reason that in the course of implementing PCA over the last nine years, NCUA did not propose statutory remedies in response to occasional periods of reluctance by credit unions to grow assets. That reluctance in the present period of national economic distress has become acute, however, warranting a statutory remedy."
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Guidance on CU Exam Issues

After an exhaustive look at credit unions' increasing frustrations, CUNA’s Supervisory Issues Working Group chaired by Paul Mercer, the Ohio League President, has developed a bill of "examination rights," which is detailed and cross-referenced to the NCUA examiner guide. Within a 64-page guidance document titled "Supervisory Issues and Examinations: Guidance For Credit Unions During The Current Economic Times And Beyond," is a list of 24 "examination rights," which include such things as the right of credit unions to "manage risk without being directed by examiners to eliminate it," and the right to "appeal examiner findings, conclusions, or directives without retaliation from their regulator" among others.

The publication also includes sections dealing with general duties of examiners, credit union examination concerns, which are based on survey responses directly from credit unions, handling disagreements with examiners and recommendations – for both credit unions and NCUA alike – for improving the examination process. This free booklet is available to all affiliated credit unions here.

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Public Influence
 

Mercer Shares CU Side of Fed’s Proposed Interchange Fee Changes

On January 24th, Mike Mercer, president/CEO of GCUA, spoke with Steve Goss of WABE News (Atlanta’s National Public Radio affiliate) about the Fed’s proposed rate change on interchange fees. Mercer explained the exclusion in the law that exempts financial institutions with less than $10 billion in assets. “There’s a problem though, and that is that it’s easier said than done to create a two-tiered system for these interchange fees, and that’s the thing that has us worried in credit unions,” he said. “It’ll make it very difficult for smaller institutions to continue to offer debit cards.”

Goss acknowledged the potential challenge the new law could cause for smaller financial institutions if merchants refuse to accept their debit cards knowing the interchange fees will be higher. To that point, Mercer commented that there could be an overall effort to move transactions away from cards altogether, particularly as mobile payments and other smart phone technologies become increasingly popular. “We think this will serve as an incentive to move payments completely away from cards.”

As mobile payments gain wider acceptance, the question remains as to whether the lower costs that merchants realize from lower interchange fees will be passed down to consumers. To that point, Mercer cited a study in Australia which indicates that under a similar model, consumers have not benefited from the savings realized by large retailers and that this would likely be the case in the U.S. should the interchange fees change.

To listen to the entire interview, click here.

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Examiner.com Shares 11 Financial Resolutions for 2011

In an article featured in the January 26th issue of Examiner.com, the president and CEO of CORE Credit Union in Statesboro, Bobby Michael, shares some tips to help consumers build a solid financial foundation. Michael told Examiner.com that building credit is a wise thing for consumers to do. “If you want to build credit but don’t have the credit necessary to get a regular credit card or loan, secured credit cards and loans are great options,” he said.

When asked what people can do now to put them in better positions down the road, Michael said, “The key is to cut unnecessary spending.” This can be done by going out to eat less or going to less expensive restaurants. Go on fewer vacations or shop around for the very best vacation deals. Use coupons whenever possible. Becoming more frugal doesn’t always mean people have to completely abolish their way of living, the article states, but it does mean they have to become smarter and more analytical about the way they spend money.

Among his other tips, Michael touted the value and ease of joining a credit union. “People would be amazed at how easy it is to join a credit union,” adds Michael.

Click here to read the entire article.

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Consumer Confidence Good News, CUNA Tells Media

A January rise in consumer confidence is good news for the economic recovery, the Credit Union National Association (CUNA) told CNNMoney.com Tuesday. "The bottom line is, it's pretty good news," said Mike Schenk, CUNA senior economist. "On the other hand, we're a long way from feeling like happy days are here again."

The Consumer Confidence Index shot up to 60.6 in January, from 53.3 in December, the Conference Board, a New York-based private research group that compiles the index, said Tuesday. The reading climbed to its highest level since May.

Other media outlets are featuring a comment Schenk made to Bankrate.com Monday about savers facing yield droughts for certificates of deposit because interest rates remain low and the Federal Reserve isn't likely to take action any time soon.

"Without those substantial increases in economic activity, without improvements in labor markets, you won't have inflation pressures," Schenk said. Schenk's comment was picked up by foxbusiness.com, Yahoo! Finance U.S. and Yahoo! Finance Canada.

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Credit Union Card or Bank Card? Take a Look at the Fees

In a January 13th post, Forbes.com advises readers to compare APRs, annual fees and late fees when considering whether to use a credit card issued by a bank or one issued by a credit union. The article notes that while the huge national banks all tend to lean towards offers with lower initial APRs and higher fees, a large percentage of credit unions lean towards offers with lower fees and comparable APRs. “Based on this, you might assume that credit unions would have higher APRs than banks to make up for the lower fees, but this is not the case. Datatrac data shows that credit unions actually have lower average credit card APRs than banks, flying in the face of traditional card marketing,” the article mentions.

Click here to read the entire story.

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Moses C. Davis Awards: Honoring Excellence in Georgia

Named for the man who is recognized as the founding father of the Georgia credit union movement, the Moses C. Davis Volunteer and Professional of the Year Awards recognize the credit union volunteer/professional who has recently gone above and beyond the normal call of duty to support the credit union movement. Since the program’s inception in 1985, the Moses C. Davis Awards have recognized the very best volunteers and professionals of the Georgia credit union movement – individuals who have displayed the highest levels of service and professionalism and personify the credit union philosophy, “People Helping People.”

Moses C. Davis AwardsIn years past, one volunteer and one professional have been selected from among nominees for each of the three credit union districts in the state. This year, the entire state will celebrate one outstanding professional and one outstanding volunteer from all nominations received. Winners of this award will be recognized for their efforts to help craft an environment that allows credit unions to grow and prosper in order to better serve their members. Individuals nominated for this award should have a record of productive service to their credit union, the League and its subsidiaries, chapters, the Credit Union National Association and the international credit union system.

Individuals, credit union boards and chapters can nominate individuals for each category from an affiliated credit union. It is the responsibility of the sponsor to describe the exceptional contributions that the nominated individual(s) have made that make them worthy of the award. Nominations should be sent to the president/CEO of Georgia Credit Union Affiliates by March 1st. Nominations will be judged by an outside panel before April 1st, and winners will be acknowledged at the 2011 GCUA Annual Convention in Savannah.

For the nomination form and additional information, click here.

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Statewide News Coverage

Get the latest in statewide news coverage, click here.

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CUs in the News

Get the latest in local CU coverage, click here

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Consider This

View archives of this monthly e-news brief sent to journalists, click here.

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Paying Attention

View the quarterly report and poll of Georgia credit union members and CU trends, click here.

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News of Interest
 

Supreme Court Rules for JPMorgan Chase in Credit Card Case

JPMorgan Chase did not violate Truth in Lending Act disclosure requirements under Regulation Z when it raised a customer's credit card interest rate for default without providing written notification, the U.S. Supreme Court ruled on Monday January 24th. The unanimous decision in the case – Bank USA, N.A. v. McCoy – resolved a class-action suit that began in 2004.

The high court said JPMorgan Chase's cardholder agreement stipulated the bank could increase lead plaintiff James McCoy's interest rates without notification in the event of a default because the pre-2009 version of Reg Z did not require a change-in-terms notice.

While the Federal Reserve has since amended Reg Z to require lenders to give borrowers 45 days’ notice before increasing interest rates, the decision should shut the door on any pending class-action litigation based on previous versions of the regulation. Read the decision.

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Phone with Visa logoNew Wave in Payments?

Wave your mobile to pay for coffee? The January 26th edition of The New York Times reported that Starbucks customers will be able to pay for their purchases with their cell phones instead of pulling out cash or cards. Various technology and payments companies, including PayPal, Bling Nation, Square, Venmo and now-deceased dot-com start-ups, have been experimenting with ways to wean Americans off cash, credit cards or both. But the introduction of mobile payments in Starbucks stores may be the most mainstream example yet.

Owners of BlackBerrys, iPhones or iPod Touches can use them to pay by downloading the free Starbucks Card app and holding their phones in front of a scanner at Starbucks cash registers. There is no Starbucks app for Android phones, although the company said it was working on one. The money is subtracted from their Starbucks account, which they can load with credit cards or, on iPhones, with PayPal funds.

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