Senate Hearing on Credit Union Small-Business Lending Bill

U.S. CapitolOn Thursday, June 16th the Senate Banking Committee held a hearing on S. 509, legislation that would expand credit union business-lending authority to 27.5 percent of total assets. CUNA President Bill Cheney, NCUA Chairman Debbie Matz, and other credit union and bank representatives testified during the hearing. During his testimony, Cheney shared that bank loans to businesses have fallen by 4 percent since March, while credit union business lending has increased by 5 percent during that same time period.

Read more
 

Washington, D.C. News

Senate Hearing on Credit Union Small Business Lending Bill
Sen. Corker Urges Fed to Include 'All Costs' in Interchange Rule
Financial Data Protection Gets House, Senate Committee Attention
CFPB Ready to Supervise Large Institutions, With or Without a Director

State News

Senate Democrats Name New Leadership
Engage Your Credit Union in Advocacy Activities

Industry News

Fed to Release Final Debit Interchange Rule June 29th
NCUA Sues Securities Firms, Hopes to Recover Millions
Support for Prepay Concept . . . with Key Changes
Appeals Filed in CU Cases on Foreclosure Notification

Public Influence News

Debit Card Fraud Puts CUs in the Spotlight
WSJ: CUs Still Outdo Banks on Deals
Fake-Check Scam Awareness Campaign Update
CUs in the News
Consider This
Paying Attention
Statewide News Coverage

News of Interest

Fed Lowers Outlook for Economic Growth
Foreclosures Fall for 8th Straight Month
American Express Unveils Prepaid Debit Card
Nine Most Annoying Bank Fees
Small Banks, Credit Unions Fear Debit Fee Declines

News of the Competition

Media Focus on Failed Banks
PNC to Purchase RBC Bank

June 24, 2011

 
Project ZIP Code
 
Contact Your Legislator
 
Maximize the Power of the Media
 
State Legislative Update
 
Legislative Grids
 

Georgia Credit Union Affiliates

AMERICA'S CREDT UNIONS

Extend the Reach of Creating Influence

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
 

Senate Hearing on Credit Union Small-Business Lending Bill

On Thursday, June 16th the Senate Banking Committee held a hearing on S. 509, legislation that would expand credit union business-lending authority to 27.5 percent of total assets. CUNA President Bill Cheney, NCUA Chairman Debbie Matz, and other credit union and bank representatives testified during the hearing. During his testimony, Cheney shared that bank loans to businesses have fallen by 4 percent since March, while credit union business lending has increased by 5 percent during that same time period.

Matz
NCUA Chairman
Debbie Matz

Banks have remained reluctant to lend in spite of the federal government's gifting them with $30 billion in taxpayer-funded small-business lending incentives. Cheney contrasted the MBL cap lift proposal with these recent government-backed actions, saying that the cap lift is "a job creation proposal that would not cost the taxpayers a dime and would not increase the size of government." The cap lift is a necessary change for smaller credit unions to become more involved in business lending. The additional income will allow credit unions that otherwise would not have participated in business lending to bring in personnel with business lending expertise and to establish the procedures, safeguards, and internal controls needed to run a business lending program. Cheney mentioned that the cap is a reason that so few credit unions do business lending.

NCUA Chair Matz shared the agency’s support of increasing the current MBL cap. In her remarks she underscored credit unions' favorable delinquency rates and the positive safety and soundness record associated with such credit union loans. And Matz noted if legislative changes increase the current cap on member business lending, NCUA would move swiftly to amend its rules and vigorously supervise the law's implementation. Matz also countered one of the bankers’ arguments by testifying that raising the "artificially low" cap, which stands at 12.25 percent of assets, would increase the safety and soundness of credit unions by helping them diversify their portfolios and reducing risk concentrations.

During the hearing, ABA Chairman Stephen Wilson argued that raising the cap for qualifying credit unions will effectively turn them into tax-exempt banks without the needed regulatory requirements, and that expanding the lending cap is inconsistent with the credit union mission of serving consumers, especially those of modest means. Wilson added that lifting the business-lending cap also raises serious safety and soundness concerns because it encourages larger, riskier loans without the assurance of adequate oversight. He suggested that credit unions that want expanded business lending should convert to a mutual bank charter, which provides greater flexibility, preserves the mutual-member focus that credit unions find desirable, and is accompanied by experienced regulators' supervision. Immediately following the hearing CUNA sent a letter to all senators saying that it is disturbing that bankers seem more concerned with keeping credit unions from lending to small businesses than with helping small businesses themselves.

At press time, S. 509 has 19 co-sponsors, including Senate Majority Leader Harry Reid (D-Nev.). Fellow co-sponsor Sen. Charles Schumer (D-NY), in a statement submitted for the hearing record, called the cap lift a "commonsense way to immediately increase the amount of credit available to small businesses." A House version of MBL cap lift legislation was introduced earlier this year by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-NY), and that bill has 38 total co-sponsors.

Back to top
 
 
Corker
U.S. Sen. Bob Corker

Sen. Corker Urges Fed to Include 'All Costs' in Interchange Rule

Following the Senate vote against the Tester amendment, Sen. Bob Corker (R-TN) urged Federal Reserve Chairman Ben Bernanke “to include all costs that are available" when implementing the Durbin debit-card interchange amendment. The letter stated:

Failure to incorporate all costs available under the law will result in a loss of innovation on the part of banks and card networks and will put considerable additional pressure on America's community banks, many of whom are already struggling under the weight of additional regulatory burdens. Worse, ultimately this regulation will harm consumers, who will miss out on new electronic payment innovations and be forced to pay more for the debit card services upon which they already rely.
See Corker's letter here. In addition, Senator Mark Udall (D-CO) also sent a letter to Fed Chairman Bernanke. To read a copy of that letter click here.
Back to top
 
 

Financial Data Protection Gets House, Senate Committee Attention

On June 21st the Senate Banking Committee held a hearing titled “Cybersecurity and Data Protection in the Financial Sector." Witnesses included Kevin Streff, associate professor and director of the Center for Information Assurance, Dakota State University; Leigh Williams, BITS president, The Financial Services Roundtable; and Marc Rotenberg, president, Electronic Privacy Information Center.

Computer securityAlso on the calendar, the House Financial Services Committee has scheduled a field hearing June 29 at the National Computer Forensics Institute in Alabama to take a close look at cybercrimes. The committee's chairman, Rep. Spencer Bachus (R-Ala.), said in an announcement that a recent series of high-profile cyberattacks, such as one in which the CIA fell victim, should "serve as a major wakeup call for our country. Cybercriminals here at home and abroad are constantly trying to discover and exploit weaknesses in our security, both on a national level and a personal level. The committee's hearing at the National Computer Forensics Institute could not come at a more appropriate time as the frequency of these attacks appears to be growing."

Other recent cyberattacks noted by Bachus include hacking incidents at the International Monetary Fund, the European Union's headquarters, Citigroup, Sony Corp., Lockheed Martin Corp., RSA Security, the U.S. Senate and Nintendo Co. The committee's field hearing at the National Computer Forensics Institute will examine the threat hackers pose to individuals, businesses and financial institutions; the methods hackers employ; and ways law enforcement has been able to foil hackers and solve cyber crimes. And recently, the Secure and Fortify Data Act, intended to establish uniform nationwide standards for data security and data breach notification, was discussed during a hearing conducted by the House Energy and Commerce subcommittee on commerce, manufacturing and trade.

Back to top
 
 

CFPB Ready to Supervise Large Institutions, With or Without a Director

Steven Antonakes, the top bank supervisor at the Consumer Financial Protection Bureau (CFPB), said oversight of banks with more than $10 billion in assets will start as planned on July 21, regardless of whether a director is in place. "There are 111 banks, thrifts and credit unions in that category of supervision – about $10 trillion, or 80% of the U.S. banking assets. The consumer bureau will conduct 'point-in-time examinations' that will last four to 12 weeks, depending on the size and complexity of the firm. Presuming that the exam is clean, we’re out of your hair for two years’ time,” Antonakes said. “You’ll see us more frequently, if there are issues to be addressed," he added. These are the first specifics we've seen about exams and exam timeframes. Institutions with assets of $10 billion or less in assets will be monitored for CFPB-rule compliance by their existing prudential regulator. The CFPB won't gain the full authority granted by the Dodd-Frank Act until it has a Senate-confirmed director. President Barack Obama has yet to select a nominee. Read the full story.
Back to top
 
 
State News
 
Henson
State Sen.
Steve Henson

Senate Democrats Name New Leadership

Senate Democrats voted unanimously on June 20th to have two veteran Atlanta legislators take the reins during the politically charged special session on redistricting in August and then during next year's regular session. The Senate elections were necessary because of the resignation of Sen. Robert Brown of Macon, as he is running for mayor of Macon this fall. The fiery Brown had led the caucus since 2005.

The leadership shift furthers the transformation of the Democratic Party from one headed by rural conservatives to a party whose power is centered in Atlanta. The Democratic leaders in the House are also from metro Atlanta. Senate Democratic Whip Steve Henson of Tucker won Brown's post, and Sen. Vincent Fort of Atlanta won Henson's. Henson said he intends to focus on the legislative issues of fair redistricting, increased education funding, stricter ethics laws and helping low-income workers. He'll try to work with Republicans, he said, but won't be shy about publicly objecting over disagreements.

Back to top
 
 

Hands/worldEngage Your Credit Union in Advocacy Activities

Looking to engage your entire credit union in advocacy activities, but not sure where to begin? Look no further. The Government Influence Team is pleased to provide a sample Model Credit Union Advocacy Involvement Plan to assist credit unions in developing strategic advocacy initiatives so that the management, staff, volunteers, and even members can be engaged in creating a positive reputation for the credit union.

By utilizing this resource, credit union leaders have the framework and tools necessary to influence credit union members, potential members, policy makers, media, and business leaders for the betterment of all credit unions. Encompassing multiple facets of involvement, the plan is divided into four frameworks:

  • Legislative
  • Regulatory
  • PAC
  • Community Outreach

While some activities may be more applicable to state-chartered credit unions, the majority of the guidelines are universal to both state and federal charters. Success with any vital activity requires a plan; utilize a plan for your credit union's advocacy involvement today!

Back to top
 
 
Industry News
 

Fed to Release Final Debit Interchange Rule June 29th

The Federal Reserve Board will unveil its final rule on debit interchange on Wednesday, June 29, the board announced this week on June 21. The board will hold a public meeting to consider the final rule governing debit card interchange fees and routing provisions. Stay tuned!

Back to top
 
 

NCUA Sues Securities Firms, Hopes to Recover Millions

NCUA logoOn Monday June 20th NCUA filed two lawsuits seeking to recover millions of dollars from securities firms alleged to have violated federal and state securities laws. NCUA is charging the firms with misrepresentation in the sale of hundreds of securities, and NCUA has said more suits could come.

NCUA took the legal action in its role as liquidating agent for five failed corporate credit unions. The suits are against J.P. Morgan Securities, LLC, and RBS Securities, Inc. and involve damages in excess of $800 million. NCUA's suits claim the sellers, issuers and underwriters of the "questionable securities" made numerous material misrepresentations in the offering documents.

The institutions being sued by NCUA have significant resources to defend their actions, and will no doubt use those resources to the fullest extent. Earlier this week GCUA shared with all affiliated CEOs and marketing contacts talking points as well as the recent Wall Street Journal article on the lawsuit. To read the article, please click here.

Back to top
 
 

Support for Prepay Concept . . . with Key Changes

Reaction from credit unions to NCUA’s voluntary corporate stabilization fund prepayment plan has been mixed nationwide and in Georgia. With the help of the GCUA Regulatory Response Committee , GCUA filed a comment letter on June 20th which endorsed the concept of prepaid assessments but made a few recommendations that could improve credit union participation in the program. To read the GCUA letter click here. The recommendations that were outlined in the GCUA comment letter are:

  • Recommended that NCUA increase the minimum participation threshold for its prepayment plan from $300 million to $1.5 billion . . . as doing so would increase the amount of possible assessment reduction, thereby making the program more attractive for credit unions.
  • Encouraged NCUA to allow credit unions of any size to participate in the plan if they wish to do so.
  • NCUA should pay interest on the prepaid balance.

While the deadline for comments to the NCUA on the design of its voluntary prepayment plan has ended, that is not the deadline for credit unions to inform the agency of whether or not it will participate, or to what extent. The National Credit Union Administration (NCUA) just announced a special open meeting for next Wednesday, June 29, to consider its plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. Credit unions will likely have approximately 40 days after that announcement to tell NCUA whether or not they will commit any funds to the plan.

The National Credit Union Administration (NCUA) just announced a special open meeting for next Wednesday, June 29, to consider its plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment.

Back to top
 
 

ForeclosureAppeals Filed in CU Cases on Foreclosure Notification

In three cases that hinge on the applicable statute of limitations for a consumer to protest allegedly defective pre-sale Uniform Commercial Code notices in the context of subsequent auto repossession, plaintiffs have filed appeals of a federal court's recent decisions dismissing their cases. The appeals target decisions by a federal court last month to deny borrowers' claims that their credit unions, through an agent – the now bankrupt subprime auto broker Centrix Financial – used faulty pre-sale notices that allegedly did not include information required by Missouri's version of the Uniform Commercial Code.

The credit unions later repossessed the vehicles from borrowers who fell behind in payments between November 2004 and January 2005. The plaintiffs filed these lawsuits against the credit unions in November and December 2010.

The federal court denied plaintiffs' claims saying that their suits were not filed within the five-year statute of limitations that the judge said applied to the cases. The plaintiffs argued, however, that a six-year statute of limitations should apply with respect to these claims. The U.S. Court of Appeals for the Eighth Circuit will now decide whether the District Court's decision that a five-year statute of limitations applied was correct. Centrix Financial is not a party in the lawsuit because it is in Chapter 11 bankruptcy reorganization in Colorado. The cases involved are Moran v. Missouri Central CU, Rashaw v. United Consumers CU, and Knight v. Central Communications CU.

Back to top
 
 
Public Influence News
 
Card fraudDebit Card Fraud Puts CUs in the Spotlight

A recent debit card fraud incident placed Georgia credit unions in the media spotlight last week, when Atlanta-based WSB-TV was contacted by a credit union member. The member, also an employee of the station, experienced debit card fraud activity. GCUA learned of the news story and quickly responded by providing information and talking points to credit unions. Members of several Atlanta-based credit unions reported that they had been hit with fraudulent charges and withdrawals on their debit cards.

Back to top
 
 
WSJ: CUs Still Outdo Banks on Deals

Credit unions not only are increasingly attracting a broader-based membership, they still are offering significantly better deals than those at large banks that assess heavy fees, The Wall Street Journal said Saturday. "[Credit unions] typically offer better rates than banks on auto and personal loans, certificates of deposit, money-market accounts, home-equity lines of credit, savings and checking accounts, and credit cards – virtually everything except mortgages – according to data compiled by market-research firm Informa Research Services Inc. of Calabasas, Calif.," wrote Nicole Ridgway in the article "Where the Banking Deals Are: Credit Unions Still Outdo Their Bank Counterparts, and It's Easier to Get In." "The deals are looking even better to consumers as rates on bank products fall near multi-decade lows," she continued. "Over the past five years, membership at credit unions has grown by an average of 1.3% a year, with the total membership reaching 91.8 million in 2010, according to the Credit Union National Association ..."

Also, an October 2010 Bankrate.com study indicates credit union members pay substantially less in fees for ATM transactions and insufficient funds. The study indicated customers with checking accounts at traditional banks paid an average fee of $30.47 for insufficient funds and $2.33 each time they used an out-of-network ATM. By comparison, a separate Bankrate study in March 2011 indicated that credit union members with checking accounts paid an average fee of $26.05 for insufficient funds and $1.28 for using another bank's ATM. The article also gave specific examples of how credit unions still are offering good deals for auto loans, credit cards, certificates of deposit, money-market accounts and personal loans.

The article steers readers to aSmarterChoice.org to find a credit union.

Back to top
 
 
Fake checkFake-Check Scam Awareness Campaign Update

Last year GCUA, in partnership with the Consumer Federation of America (CFA), the Governor's Office of Consumer Affairs and others, launched the "Don't Become a Target Campaign" to educate consumers about how to avoid getting ripped off by these fake check scams. About 28 Georgia credit unions are participating in the program. This past week, the Consumer Federation of America and the National Consumers League released additional tips about how to avoid fake-check scams, including two new videos: one on sweepstakes/lottery fake-check scams, and the other on work-at-home fake-check scams. Link to those resources here. You are welcome to use the tips and videos for your consumer education efforts. For more information contact Susan Grant of the CFA at (202) 939-1003.

Back to top
 
 

CUs in the News

Get the latest in local CU coverage, click here.

Back to top
 
 

Consider This

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

Back to top
 
 

Paying Attention

View the current issue as well as archives of this quarterly report, click here.

Back to top
 
 

Statewide News Coverage

Get the latest in statewide news coverage, click here.

Back to top
 
 
News of Interest
 

Fed Lowers Outlook for Economic Growth

The Hill newspaper reported that on Wednesday June 23, the Federal Reserve downgraded its outlook on the economy, lowering its prediction for annual growth to less than 3 percent of gross domestic product. The Fed now expects the economy will grow between 2.7 percent and 2.9 percent in 2011, down from the 3.1 percent to 3.3 percent estimate it held in April. The Fed also expects the unemployment rate will decline less quickly than earlier expectations. The Fed now expects the rate in 2011 to fall between 8.6 percent and 8.9 percent, up from the 8.4 percent to 8.7 percent range expressed in April. The unemployment rate currently stands at 9.1 percent.

Despite the tempered expectations, the Fed has maintained that it expects the economic recovery to gain steam as time passes, and its projections reflect that. The central bank expects the economy to grow 3.3 percent to 3.7 percent in 2012, down slightly from April's estimate of 3.5 percent to 4.2 percent. But in 2013, its expectations are largely unchanged, with anticipated economic growth falling between 3.5 percent and 4.3 percent. To read more click here.

Back to top
 
 

Foreclosure cleanupForeclosures Fall for 8th Straight Month

Foreclosure filings experienced their eighth straight month of declines, according to RealtyTrac. In May, filings fell 33 percent from a year earlier and 2 percent month-over-month, according the online marketplace of foreclosed properties. The number of homes that were repossessed (referred to as REOs or real estate-owned properties) in May also declined to 66,879, down 3.8 percent from April and 29 percent year-over-year, the firm said.

The huge year-over-year drop in foreclosures doesn't necessarily mean the housing market is staging a recovery, however. James Saccacio, the CEO of RealtyTrac, says the declines are likely due to the lingering effects of the "robo-signing" scandal, which broke last September, when it was discovered that banks were playing fast and loose with foreclosure documents. To read more click here.

Back to top
 
 

American ExpressAmerican Express Unveils Prepaid Debit Card

American Express recently announced that it is introducing a prepaid debit card, marking what could be the start of a shift away from conventional charge cards for many consumers. Prepaid cards allow consumers to load a card with money and spend only that money. And the cards aren't attached to a bank account, so anyone can use them. In 2010, there was $65 billion worth of prepaid card transactions – up 35 percent from $48 billion in 2009. Click here to read more.

Back to top
 
 

AnnoyingNine Most Annoying Bank Fees

CNN Money recently published an article that detailed the nine most annoying bank fees. They said given the recent restrictions placed on fees and interest rates, the nation's banks are looking for extra pennies anywhere they can get them. As a result, they say it’s now costing consumers to do everything from redeeming their own reward points to receiving money in their account. They mention that some of the fees that consumers are now seeing are new and others have been around for a while, the ones that are listed are some of the most downright annoying to the writer.

  • Forgetting to update your address
  • Cashing in your coins
  • Talking to a human teller
  • Losing your debit card
  • Getting a paper statement
  • Requesting old statements
  • Receiving money by wire
  • Redeeming rewards points
  • Closing your account
Back to top
 
 

Small Banks, Credit Unions Fear Debit Fee Declines

On June 11th, WSBTV.com published an article about the potential repercussion of the vote on the delay of the Durbin amendment. The article asks the question “Could a limit on the fees retailers pay on debit card purchases cause your bank or credit union to fail? “ The author wrote that that's the dire picture some are painting as a cap on so-called swipe fees nears.

An attempt to delay the start of a cap on the amount banks and payment processors, like Visa and MasterCard, can charge merchants for handling debit transactions failed to pass the Senate on Wednesday, June 13th. That means the Federal Reserve will go ahead and implement the rule, part of last summer's financial regulatory overhaul. The Fed has proposed a 12-cent cap for each debit purchase, a sharp cut from the average 44 cents retailers now pay. The regulator must issue a final version of the rule, which will take effect on July 21, in order to give financial institutions and processing networks the time to comply. It is possible that the 12-cent cap could change before the rule is finalized.

Back to top
 
 
News of the Competition
 

Media Focus on Failed Banks

On June 19th and June 20th, The Atlanta Journal-Constitution ran a series of articles on failed banks in Georgia.

Back to top
 
 

PNCPNC to Purchase RBC Bank

The Atlanta Business Chronicle reported on June 20th that PNC Financial Services Group Inc. will buy RBC Bank, the U.S. retail banking unit of Royal Bank of Canada, for $3.45 billion. With the purchase, PNC will become the fifth largest bank in the U.S. in branches, and gain a significant foothold in the Southeast. RBC Bank is currently the seventh largest bank in Atlanta, with 52 branches and $2.6 billion in deposits. To read more, please click here.

Back to top