House Hearing on Increased MBL for Consumers

U.S. CapitolOn Wednesday, October 12th the House Financial Services subcommittee on financial institutions and consumer credit heard a wide variety of testimony-from multiple sides – on increasing the credit union member business lending cap to provide consumers expanded access to credit. Georgia has two members of Congress that sit on that subcommittee (Rep. Lynn Westmoreland (R-3) and Rep. David Scott (D-13)) and both attended the hearing and made opening remarks about their interest in the information that would be provided by the participants. Congressman Scott stayed throughout the hearing asking some supportive questions.

NCUA Chairman Debbie Matz, Jeff York, president/CEO of California-based Coasthills FCU, and others testified on behalf of credit unions, sharing the benefits a higher credit union member business lending cap would have on the nation's economy and small businesses. The sole purpose of the hearing was for the MBL bill H.R. 1418, the Small Business Lending Enhancement Act, which would increase the MBL cap to 27.5 percent of assets. The cap currently stands at 12.25% of assets, which was instituted in 1998 and has not been increased since.

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Washington, D.C. News

House Hearing on Increased MBL for Consumers
Congress and the CFPB Hear from Credit Unions on the Big Issues
Rep. Woodall Takes MBL Message to the House Floor After Meeting with CUs
Cordray CFPB Nomination Approved by Senate Banking Committee
House Bill Introduced to Repeal Debit Interchange Cap

Industry News

Possible Relief in Sight? NCUA to Review TDR Standards

State News

Positive News on Financial Front at Hike at Home

Public Influence News

Poll, Press and Public Discord Against BoA's Debit Card Fee Announcement
CU Staffers Gear Up for Professional Development at REAL Deal Reunion
GCUA Brings Home Industry Awards
CUs in the News
Consider This
Paying Attention
Statewide News Coverage

News of Interest

Georgia 4th in Foreclosure
Trend in Another State: Demolishing Foreclosed Properties
Small-Business Optimism Index Rises
Debit Card Rewards Programs Down 30 Percent

News of the Competition

Stolen Identities and Fraudulent Loans

October 14, 2011

 
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 Washington, D.C. News
 

House Hearing on Increased MBL for Consumers

On Wednesday, October 12th the House Financial Services subcommittee on financial institutions and consumer credit heard a wide variety of testimony-from multiple sides – on increasing the credit union member business lending cap to provide consumers expanded access to credit. Georgia has two members of Congress that sit on that subcommittee (Rep. Lynn Westmoreland (R-3) and Rep. David Scott (D-13)) and both attended the hearing and made opening remarks about their interest in the information that would be provided by the participants. Congressman Scott stayed throughout the hearing asking some supportive questions.

NCUA Chairman Debbie Matz, Jeff York, president/CEO of California-based Coasthills FCU, and others testified on behalf of credit unions, sharing the benefits a higher credit union member business lending cap would have on the nation's economy and small businesses. The sole purpose of the hearing was for the MBL bill H.R. 1418, the Small Business Lending Enhancement Act, which would increase the MBL cap to 27.5 percent of assets. The cap currently stands at 12.25% of assets, which was instituted in 1998 and has not been increased since.

Matz
NCUA Chairman Debbie Matz testifies

In testimony, Matz said that "more than one in five credit unions making member business loans that are subject to the cap have reached 50 percent or more of this [12.25 percent of assets] ceiling." Later, as part of a panel of five witnesses, York said his $617 million-asset credit union's business loan portfolio currently stands at around 7 percent of assets, and added that his credit union could reach the upper limit of the 12.25 percent lending cap within six months. However, credit unions "cannot simply lend up to the cap and then halt lending," as doing so could harm their ability to lend to current business-owning members. York said credit unions that consider getting into the business lending marketplace are also forced to examine whether there would be a benefit in business lending if cap concerns would force them to slow down or end this practice within a few months. York noted that credit union business lending increased by 4.4 percent in the 12-month period ended June 2011, adding that small-business lending by commercial banks declined by 2.6 percent during that same time period.

From the regulatory perspective of MBL: Matz in her testimony said providing more reasonably priced loans for small businesses, enhancing safety and soundness through diversification for credit union portfolios, and creating new jobs are the three main benefits of the MBL cap increase. She added that her agency would "promptly revise" credit union regulations to protect safety and soundness if MBL cap increase legislation is enacted. "NCUA would also remain vigilant in carrying out our supervisory authorities," she added. The NCUA in a release noted the legislation would allow "experienced, well-capitalized and well-managed credit unions" to "gradually increase member business lending portfolios, by no more than 30 percent annually."

Act NowFrom the opposing viewpoint: Testifying bank representatives said that the demand for small-business loans was not high at the moment. However, York in his testimony countered those statements, saying that small-business owners are coming to credit unions for help after they are turned away for loans at banks. The bankers were pulling out all the stops – even quoting some credit unions in their testimony who opposed raising the cap and of course offering up one of their usual solutions, that credit unions that wanted higher caps on business lending should just convert to mutual savings banks.

The bankers have been making claims in Congress that the credit union tax exemption should be closely tied to MBL, and the increase in MBL should be considered within the context of the federal tax exemption, which they will say gives credit unions an advantage over banks in making loans, something credit union advocates need to continue to work against to counteract this message. If you have not engaged your coworkers on the call to action for MBL, please do so today HERE.

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Hike the Hill - Isakson
Hikers meet with U.S. Sen. Johnny Isakson, center

Congress and the CFPB Hear from Credit Unions on the Big Issues

Sharing their time to promote and protect credit unions, 19 Georgia credit union advocates traveled to Washington, D.C., to engage Congress on key credit union issues from October 4th through the 6th. This short period of time was packed with an audience with the Consumer Financial Protection Bureau and meetings with the 15 members of Congress from Georgia. The meetings with the federal legislators stressed the importance of credit unions in the marketplace, and provided an ideal window to press Congress to raise the credit union member business lending cap, as the hearing on MBL was one week after the Hill visits were held (see above article).

It was clear from the meetings that legislators on both sides of the aisle do not anticipate much to move in the gridlock that is being experienced in Congress, but several of the legislators were interested in the components of the MBL bills (S. 509 and H.R. 1418). It was readily apparent from the meetings that the opposition to these bills, the for-profit institutions, are lobbying against small businesses and credit unions, citing that credit unions have an unfair advantage.

Hike the Hill participantsIn addition to asking Congress to increase the MBL cap for credit unions, the meetings also provided the opportunity to demonstrate the overwhelming regulatory burden placed on credit unions and how members are negatively impacted by the diversion of time and resources towards complying with ever-increasing regulations. This message was shared when the Hike participants sat down with Bart Shapiro, senior advisor of the Consumer Financial Protection Bureau. Shapiro heard from the credit unions firsthand on the importance of streamlining regulations and eliminating duplicative efforts, wherever possible. Following the Hikers’ meeting with Rep. Tom Price (R-6), his staff reached out to credit unions to gather additional information so Congressman Price and his staff may work on a Republican Policy Committee Regulatory Spotlight article focusing on burdens that if lifted, would help businesses.

Our thanks go out to these Hikers and their credit unions; there is no substitute for an in-person meeting when demonstrating what is important to our industry.
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Woodall
U.S. Rep. Rob Woodall
Rep. Woodall Takes MBL Message to the House Floor After Meeting with CUs

After sitting down with Georgia credit union leaders at a Hike the Hill meeting, Rep. Rob Woodall (R-7) took the message of increasing MBLs to the next level: by sharing it with his fellow Congressmen on the floor of the House on October 5th. Noting that one of the few things Congress can agree on is the need to create new jobs, Woodall called for greater support of legislation that would increase the credit union member business lending (MBL) cap.

With so many struggling to cope with layoffs and home foreclosures, helping small-business owners should be a priority, Woodall said, adding that "anyone who has talked to small business knows they are having a hard time accessing credit." If MBL cap increase legislation were approved, "every credit union in America would be able to take part in funding small businesses and helping them succeed," Woodall said. The legislator noted that H.R. 1418 is co-sponsored by 53 Democrats and 31 Republicans, an increasingly rare situation in what is now a frequently divided D.C. To read more and watch Woodall’s MBL speech on behalf of credit unions, please click here.
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Cordray CFPB Nomination Approved by Senate Banking Committee

Cordray
Richard Cordray
The Senate Banking Committee on October 6th approved the nomination of Richard Cordray to be Consumer Financial Protection Bureau director. Cordray's nomination was approved by a 12-10 vote, and will now move on for a vote in the full Senate. However, Cordray's nomination still faces several obstacles as more than 40 senators have said they will not vote to confirm any CFPB nominee unless changes to the CFPB are enacted. Those changes include increasing CFPB leadership to a five-member commission and reforming some operational rules.

Speaking before the committee following the nomination hearing, Treasury Secretary Tim Geithner encouraged members of the committee who did not support Cordray's nomination to meet with the CFPB nominee. Geithner said Cordray is "exceptionally qualified" for the job, and reminded the senators that a "vast array" of financial institutions will remain outside the scope of consumer protection regulations if the Senate fails to nominate a CFPB director. In the interim, CUNA has encouraged Cordray to "consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions" and has also encouraged the CFPB to establish an Office of Regulatory Burden Monitoring to help the agency "track, consider, and help mitigate the cumulative regulatory burden under which credit unions and others must operate."
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House Bill Introduced to Repeal Debit Interchange Cap

Reps. Jason Chaffetz (R-Utah) and Bill Owens (D-N.Y.) on October 12th introduced H.R. 3156, a bill to "repeal the debit card interchange price control provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and restore balance to the electronic payments system." In announcing the bill, Chaffetz in a release said the debit interchange cap rule "is a perfect example of the dangers of price controls and the inefficiency of government intervention in the free market." He added that the "legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue." Read more.

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Industry News
 

Question markPossible Relief in Sight? NCUA to Review TDR Standards

NCUA announced on October 6th that they will review the Troubled Debt Restructuring (TDR) policy to make recommendations for change. TDR loans, which have very specific accounting and reporting requirements, occur when a credit union or other lender grants a concession to the borrower and modifies the terms of the loan based on the borrower's financial situation. The financial statement notes and call report data associated with TDRs are also unique.

NCUA Chairman Debbie Matz said the agency "supports credit union efforts to find creative solutions for members who need loan modifications to stay in their homes," and added that the NCUA "is seeking solutions that would better assist credit unions which are working diligently to provide members with alternatives to foreclosure." However, Leagues and CUNA have followed up on credit union complaints that NCUA examiners have sometimes discouraged TDRs. Credit unions are also burdened by regulatory requirements that force credit unions to segregate TDRs and report TDR payments as delinquent until the member has made timely and consecutive payments for six months after the modification. This generally requires credit unions to manually track such payments.

NCUA board member Gigi Hyland in July said an Interpretive Ruling and Policy Statement (IRPS) on TDRs, if released, would recommend that credit unions adopt charge-off, loan grading and modification frequency standards that are similar to those currently used by banks. Credit unions would be advised to create and implement their own limits on the number and frequency of loan extensions, loan deferrals, loan renewals and loan rewrites, and would need to develop effective risk management, reporting and internal controls related to these types of loans, Hyland said. Stay tuned!
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State News
 
Hike the Hill -- Willard
From left: Brandee Bickle, GCUA; State Rep. Wendell Willard; Susan Tiller, LGE Community CU; and Cept Hardin, Associated CU
Positive News on Financial Front
at Hike at Home

On Friday, October 7th credit union advocates discussed foreclosures, property registries, and the downsides to a judicial foreclosure system with State Rep. Wendell Willard, Chairman of the House Judiciary Committee. Chairman Willard has a direct impact on many of the bills that could drastically change the lending practices of Georgia financial institutions, and is often pushed by other interest groups seeking bills that could negatively alter our industry. The Hike group utilized the opportunity to thank the chairman for his leadership, and provide insight on how credit unions … and the members they serve would be harmed if certain legislative initiatives were passed.

Of special note: during the meeting, Chairman Willard shared that neither he nor the leadership of the House was interested in altering Georgia’s foreclosure process … and would not change Georgia to a judicial foreclosure state. Also of interest to credit unions was his focus on continuing to work towards uniform property registry standards, so as to provide all institutions a sense of commonality when they have a foreclosed property in a county or municipality with a registry. Willard shared that he wants to ensure that any fees and fines would mirror the actual cost of running the registry, and would not be utilized as an income producer for the municipality/county.

Thank you to all Hikers for sharing their time at these events. Hike at Home meetings are always beneficial as they strengthen bonds with the individuals who can impact our industry, and at this meeting the information gleaned was positive for all credit unions!
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Public Influence News
 

Poll, Press and Public Discord Against BoA's Debit Card Fee Announcement

AngryDemonstrating that not all press is good press, The Washington Post published an online poll of its readership on whether they would change their money habits due to Bank of America’s new policy on debit card fees. Click here for the results. To read more national press against the debit card fees being introduced by the larger institutions, please click here for the September 29th article in The New York Times.

The same negative reaction to BoA’s move was heard here in Georgia not just in the press, but in the normal course of consumer behavior. Consumers have been overheard at public ATMs berating the fees and seeking another option, and state legislators at local events shared with members of the Government Influence Team that they will be changing their institution to a credit union due to the fees being publicized. On the Internet … the Huffington Post is encouraging consumers to move to credit unions, and there is a viral FaceBook page dedicated to moving from a bank to a credit union on November 5th, or as the site refers to it: “Bank Transfer Day.”

Amid the recent announcements from Wells Fargo and Bank of America about adding fees to their debit cards, an influx of news stories reported complaints and a near revolt from bank customers. Read some of the Georgia news stories:

Mad at bank fees? Credit unions get another look
Atlanta Journal-Constitution

Fed Up with Fees? Ways to Break Up with Your Bank
WTVM TV, Columbus, GA

Reaction to BofA's proposed new debit card fee
Macon.com

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CU Staffers Gear Up for Professional Development at REAL Deal Reunion

The 4th Annual REAL Deal Reunion is scheduled for Thursday, November 3rd at the Wyndham Peachtree City Conference Center. The full-day event will feature a morning session covering best practices at REAL Deal credit unions, as well as innovative programs in other states. Speakers include:

  • Marshall Boutwell of Gwinnett FCU, who will provide the nuts and bolts of operating a profitable Fresh Start Auto Loan program.
  • Bobby Michael of CORE CU, who will describe his success at lending to C, D and E credit score borrowers.
  • A representative from the National Credit Union Foundation’s REAL Solutions program, who share valuable information about starting and running a successful Second Chance Checking Account.

The afternoon will feature professional development meetings of three of the state’s credit union networking councils:

  • Human Resources – featuring attorney Jonathan Martin
  • Marketing – featuring marketing expert Julie Ferguson
  • Risk Management – covering the latest in this ever-changing field

Registered attendees may attend the entire day of events. REAL Deal Liaisons may choose one of the networking council meetings to attend in the afternoon, and members of the networking councils may attend the REAL Deal Reunion in the morning.

For registration information, click here.

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ElectionWatch logoGCUA Brings Home Industry Awards

At the recent American Association of Credit Union Leagues (AACUL) Communicators Conference, GCUA was honored with three awards. In the category Logo Design, GCUA won first place for its creation of the logo for ElectionWatch 2010. Growth By Design®, the marketing firm of GCUA, created the logo to encourage credit unions to get involved in the 2010 elections.

Honorable Mention awards were received by GCUA in the categories of Best Use of Social Media for its Credit YOUnions Facebook page, and in the Best League Annual report category for its 2011 report titled “Navigating the Future.”

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CUs in the News

Get the latest in local CU coverage, click here.

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Consider This

Customers Heading to Credit Unions and Smaller Banks After Debit Card Fees
WJBF.com Augusta

New Bank Fees Spark Growth at Ga., Credit Unions, Small Banks

Atlanta Business Chronicle

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

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

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Statewide News Coverage

Get the latest in statewide news coverage, click here.

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News of Interest
 

Georgia 4th in Foreclosure

The Atlanta Journal-Constitution reported on October 13th that Georgia has the distinction of being ranked fourth nationally in foreclosure filing rates during the third quarter of 2011 and foreclosures could start climbing again after months of drops, according to numbers released by RealtyTrac:

  • Nevada led the nation with one of every 44 homes showing a foreclosure filing during the quarter;
  • California was second with one for every 88 homes;
  • Arizona was third with one of every 93, and
  • Georgia was fourth with one of every 121 homes, according to RealtyTrac numbers.

The metro Atlanta area fared worse than the state, with one in 89 homes showing a filing. Florida rounded out the top five in RealtyTrac's list with one of every 130 homes showing a filing. Vermont had the lowest rate, where one of every 8,483 homes had a filing.

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BulldozerTrend in Another State: Demolishing Foreclosed Properties

The Washington Post reported on October 13th that a handful of the nation’s largest banks have begun giving away scores of properties that are abandoned or otherwise at risk of languishing indefinitely and further dragging down already depressed neighborhoods. The banks have even been footing the bill for the demolitions—as much as $7,500 a pop. Four years into the housing crisis, the ongoing expense of upkeep and taxes, along with costly code violations and the price of marketing the properties, has saddled banks with a heavy burden ... in some instances it is cheaper to knock them down.

The city of Cleveland, OH was highlighted in the article, citing that the demolitions in some cases have paved the way for community gardens, church additions and parking lots. Even when the result is an empty lot, it can be one less pockmark. While some widespread demolitions could risk hollowing out the urban core of struggling cities such as Cleveland, advocates say that the homes being targeted are already unsalvageable and that the bulldozers are merely “burying the dead.”
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Small-Business Optimism Index Rises

The Small-Business Optimism Index rose 0.8 points to 88.9 in September, its first gain in seven months, the National Federation of Independent Business recently reported. NFIB Chief Economist Bill Dunkelberg said small businesses are reluctant to add workers or increase investments while they wait for signs the economic recovery will be sustained. "An increase in consumer spending would be the best imaginable stimulus right now, not gimmicky Washington policies," he said. Read the release.
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Debit Card Rewards Programs Down 30 Percent

The availability of debit card rewards offers fell 30 percent over the past year—a direct result of the Dodd-Frank Act’s debit interchange restrictions, according to a new Bankrate.com survey. The survey also found that 71 percent of debit rewards cards currently have no annual or monthly fees, while fees for programs that are not free range from $1.50 to $10 per month. In addition, 71 percent have no cap on rewards and 61 percent have no expiration date.

Bankrate.com senior financial analyst Greg McBride, however, warned that the costs and terms of the programs are in flux. "In addition to fewer debit reward programs, I expect that over time the programs that do remain in the marketplace will be less generous, will see a higher propensity for fees, and more of the offers will be funded by the merchants," he said. Bankrate.com surveyed the five largest banks, thrifts and credit unions in 10 key U.S. markets between August 22 and September 9. Read More.
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News of the Competition
 

HandcuffsStolen Identities and Fraudulent Loans

On October 11th The Atlanta Journal-Constitution reported that a former bank employee from Villa Rica is in the midst of court proceedings on charges that she siphoned money out of customer accounts and stole identities to make fraudulent loans. Sherri Whitlock Hines, 40, was indicted in Carroll County Superior Court on five counts of theft by taking and seven counts of identity fraud. Hines is a former employee of Community & Southern Bank.

Police allege that Hines took more than $60,000 from client bank accounts, and the total taken could rise to more than $100,000, including fraudulent loans. She was fired from the bank earlier this year, police said, and an internal audit uncovered several discrepancies that were reported to police.
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