February 24, 2012

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Georgia Capitol State Legislature at Full Steam
As the General Assembly reaches day 25 of its 40-day schedule, a session already full of issues affecting credit unions grows even busier.

  Dueling Banjos? No, It's Two Banking Committees!
The state Legislature's House and Senate banking committees both met this week to hear testimony on multiple bills, some or all of which could eventually end up having an impact on credit unions.

  Presidential Plan on Tax Reform
President Obama plans to review the corporate tax code to cut "loopholes and subsidies" and cut the corporate tax rate by 20 percent, but nothing in the proposal targets credit unions specifically.

  Expanding the Legislative Influence for All Credit Unions
One credit union chapter's invitation to a state legislator to address its quarterly meeting provides a good example of the way such outreach helps the industry build the connections needed to benefit all Georgia credit unions.


Want to Know Where Legislators Stand
on Credit Union Issues?
New scorecards on the Georgia Credit Union Affiliates website can help you keep track of how your legislators stand on credit union issues.

  CFPB Looks into Overdraft Program Issues
The Consumer Financial Protection Bureau (CFPB) launched an inquiry into checking account overdraft programs and sought input on a prototype account-statement "penalty fee box" that would detail overdrafts and fees charged.

  CFPB Adding Rules, Potential Regulatory Burden
As the CPFB assumes authority over consumer and financial regulations previously overseen by other agencies, credit union advocates urge the bureau to review existing and new rules, to find ways of providing regulatory relief.

  Olens Joins Foreclosure Reform in Georgia
Georgia Attorney General Sam Olens announces that Georgia will join in the $25 billion settlement with the country's five largest mortgage servicers over abusive mortgage servicing practices.

  Loan-Participation Proposal Should Be Withdrawn,

GCUA and CUNA send comment letters to the National Credit Union Administration (NCUA), urging the agency to withdraw proposed revisions to loan-participation rules affecting credit unions.

Georgia CapitolState Legislature at Full Steam

This week the state Legislature reached day 25 of the 40-day schedule. What has been one of the most hectic sessions for credit unions continues to find ways to increase in the level of activity. This week there were several bills of industry interest in addition to the two Banking Committee meetings that were held on Wednesday the 22nd (see related article). Of interest to credit unions:

  • On Monday, February 20th a House Judiciary subcommittee heard the Judicial Foreclosure Bill HB 781 by Rep. Dar’shun Kendrick (D-Lithonia). This bill seeks to slow down the pace of foreclosures by changing Georgia from a non-judicial state, to a judicial foreclosure state, which would require any foreclosure to go through the court system. In addition, the bill would prevent any financial institution from pursuing deficiency judgments. The Government Influence Team was on hand to present testimony against the bill, and to speak with legislators on the issue. Although several of the committee members were in favor of the judicial foreclosure language, it was ultimately tabled and the bill did not move forward.
  • On Tuesday, February 21st the House Judiciary Committee heard the Foreclosure Right to Cure Bill HB 419 by Rep. Billy Mitchell (D-Stone Mountain). This bill, which had originally increased the length of a foreclosure notice period, now only seeks to outline a debtor’s right to cure a foreclosure, provided they pay all past due payments, late fees and fines in good funds at a minimum of five days prior the date of foreclosure. It was not altered in committee, and passed out retaining solely the “right to cure” language.
  • Also, on February 21st the House Judiciary Committee discussed the Bankruptcy Exemption Reform Bill (SB 117) by Sen. Jesse Stone (R-Waynesboro). As reported in previous editions of Creating Influence and in the Legislative Update email, this bill does not mandate the steep increases originally sought in the personal, property and wild-card exemptions, and only seeks to increase the real property exemption. There were no attempts to change the small increases in the bill, and the Committee moved it forward. If passed into law, this bill would increase the real property exemption from $10,000 to $21,500 -- $20,000 to $43,000 for joint spousal debtors) -- and $21,500 for principal residences, slightly lower than the federal exemptions.
  • On February 22nd the Senate Judiciary Committee met to address the Residential Real Property Rights Bill SB 365 by Sen. Bill Hamrick (R-Carrollton). As reported in last week’s Legislative Update email, the Government Influence Team learned that Sen. Jesse Stone (R-Waynesboro) has been working with lobbying interests to move the bill forward. However, he is seeking to limit it in scope and no longer require additional disclosures in the loan agreement, nor the issues of potentially voiding a mortgage or creating the opportunity for judicial foreclosure. Sen. Stone has been open to discussing the bill, and seeks to outline in law that only attorneys may have the ability to close a real estate loan or initiate a foreclosure.
  • The Tenant Provision Bill HB 445 by Rep. Andy Welch (R-McDonough) is set to be heard (as of press time) on the afternoon of Friday, February 24th. His bill seeks to expand the rights of renters in a foreclosure, and no longer retains the language that originally sought to force foreclosing parties to refund any security deposits that had been paid by a tenant. Rep. Welch has reached out to the Government Influence Team multiple times to address concerns, and the Team continues the dialogue on this issue.

Georgia Capitol at sunsetIn addition, on the radar this week was the Derivatives Exposure Bill HB 886 by Rep. Bruce Williamson (R-Monroe). This bill allows those state banks that participate in derivatives to be in compliance with the Dodd-Frank Act by allowing the exposure to be counted within the bank’s legal lending limits. This bill passed the House on Tuesday, February 21st and now travels to the Senate for consideration.

Added to all of this activity on credit union issues is the continuous flood of bills being introduced that require lobbying efforts:

To learn more about the daily activity on the above bills and others that are being monitored on behalf of credit unions, please access the Georgia credit union legislative tracking site, and follow the @GCUAGov Twitter account for up-to-the-moment activity.

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Dueling banjosDueling Banjos? No, It's Two Banking Committees!

On Wednesday, February 22nd, both the Senate Banking and Financial Institutions Committee and the House Banks and Banking Committee met separately to hear testimony on multiple bills as legislators work quickly in this second half of the state session to move their legislative initiatives forward. Whenever one of the Banking Committees meets, it is almost certain that bills of industry interest will be addressed. During these meetings, bills that are written to address one area of the financial marketplace can be quickly amended to impact any and all areas, including credit unions.

In the Senate Banking and Financial Institutions Committee, Sen. Don Balfour (R-Snellville) presented the Small Business Borrower Protection Act (SB 448). This bill is intended to rein in negative practices by some large management companies in the marketplace that are buying up large distressed-asset pools of foreclosed properties with the intent on only going after the debtors, and not maintaining the properties. Earlier in the week the Government Influence Team met with Sen. Balfour to address some areas of the bill that inadvertently included the ability to discount portfolios (credit card, mortgage lending, etc.) to sell on the secondary market. Sen. Balfour was open to the changes requested by the Team to prevent unintended consequences on operations and lending practices of credit unions and other financial institutions, and in the committee the bill was amended to exempt all federally insured financial institutions. The bill passed out of the committee and moves forward.

The House Banks and Banking Committee moved forward three bills:

  • The Department of Banking and Finance’s Housekeeping bills (HB 945 and HB 946) by Rep. Sam Teasley (R-Marietta) were passed out of committee after a long side discussion on the Department’s role in ensuring banks repay TARP funds before paying dividends (which was not a part of the bills). These bills now move forward, and there are no provisions contained in the bills that would impact credit unions.
  • The Merchant Acquirer Limited Purpose Bank Act HB 898 by Rep. Earl Ehrhart (R-Powder Springs) was passed out of committee. The Government Influence Team addressed this bill with Rep. Ehrhart this week, who shared that it has been modified and simplified by the Department of Banking and Finance Commissioner Rob Braswell to focus solely on the intent, which is to provide Georgia companies such as Global Payments and TYSYS the ability to maintain their own settlement accounts at these narrowly defined bank charters. As a sure sign of trust, during the testimony on the bill, members of the committee reached out to the Government Influence Team privately to learn more about the issue and the motives behind the bill.

There are times where not just legislators, but other industry leaders reach out to credit unions for help. There was one bill that had been removed at the last minute from the agenda: the Debt and Creditor Adjustment Bill HB 901 by Rep. Tom Weldon (R-Ringgold). This bill seeks to alter how debt adjustment companies operate in Georgia. Although the Government Influence Team has had a plethora of bills on its plate that could directly impact credit unions, this bill would have impacted consumers negatively and had been contacted by industries and legislators alike. The Team was able to quietly alert certain consumer watch groups at the Capitol, who were not aware of the bill, so that Rep. Weldon could learn all sides of the issue. He had the bill subsequently pulled from the calendar.

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White HousePresidential Plan on Tax Reform

The New York Times reported on February 22nd that President Obama will ask Congress to review the corporate tax code and remove dozens of “loopholes and subsidies” to reduce the corporate tax rate from 35% to 28%. While the Obama administration's new corporate tax reform plan calls for a wide-range of corporate tax law changes, nothing in the proposal specifically targets credit unions. The manufacturing industry would see an even lower rate at 25% in the plan. A full overhaul though of the corporate tax code is highly unlikely, with the businesses that would lobby in defense of their current breaks, or other industries trying to win new ones. An interesting point in the article cites a study by the Government Accountability Office from 2008 that found that 55 percent of American companies paid no federal income taxes during at least one year in a seven-year period, so one could speculate that if the plan moves forward, much of the Congressional review of the corporate tax code will be directed at tax expenditures. To read more about credit unions and the tax plan click here.

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State Rep.
Bill Hembree
Expanding the Legislative Influence for All Credit Unions

On Thursday, February 23rd, the Greater Atlanta Chapter hosted State Representative Bill Hembree (R-Winston), Chairman of the Industrial Relations Committee, at its quarterly meeting to build relationships and learn more about what is happening at the state Capitol that could impact credit unions. Chairman Hembree spoke to credit union leaders on the issues facing Georgia, the importance of being involved legislatively, and the best avenues to engage in grassroots activities.

Our thanks go out to the Greater Atlanta Chapter for inviting Chairman Hembree. By connecting with legislators in meetings such as this, it strengthens the ability to shape legislation on the behalf of ALL credit unions in Georgia. If your Chapter is considering topics for future meetings, please consider inviting your legislator(s). The time they spend with our industry pays off in dividends!

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Want to Know Where Legislators Stand on Credit Union Issues?

Question markWith elections just around the corner, the Government Influence Team has added a new tool to the Grassroots educational armory for Georgia credit unions. The key votes that state legislators made on issues that mattered to our industry have been compiled into a scorecard to provide credit union advocates quick access to see what legislators are supportive of our positions. Click here to see the state House and Senate Voting Scorecards.

In addition, on the federal level a profile page has been produced to provide a quick glance of how Georgia’s delegation stands on credit union issues, and the level of access with the legislators and their key staff. Click here to see the Georgia Congressional Delegation Profile sheet.

Everything is about relationships, and the closer the credit union industry becomes to those elected to serve, the more likely the scorecards and profiles reflect lots of green. Look for opportunities to build relationships with your elected officials.

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CFPB Looks into Overdraft Program Issues

On February 22nd, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray launched an inquiry into checking account overdraft programs to determine how these practices are impacting consumers. As part of that inquiry, the CFPB is seeking public input on a prototype “penalty fee box,” a disclosure on a consumer’s checking account statement that would highlight the amount overdrawn and total overdraft fees charged.

CPFB logoCordray said the Bureau will use the comments from consumers, the financial services industry and other interested parties to craft new overdraft fee disclosures and rules. CFPB has also said they will use the commentary to assist with policymaking on overdraft practices and to prioritize the bureau's regulatory and education work.

The CFPB has distributed questionnaires to large banks in an effort to evaluate how those institutions' overdraft policies affect consumers. The CFPB plans to examine the practice of reordering purchases and payments to maximize overdraft fees charge, whether consumers can anticipate and avoid overdraft fees, and how differences in the way institutions explain and promote overdraft programs may affect opt-in rates. As part of the project, the CFPB will also reexamine a recent Federal Deposit Insurance Corporation study that suggested that overdraft programs disproportionately impact low-income and young consumers.

Citing industry estimates, the CFPB said the average overdraft fee ranged from $30 to $35 in 2011, and has increased by 17% since 2005. A study by the Federal Deposit Insurance Corporation published in 2008 found that consumers who overdrew 20 or more times per year paid an average of $1,610 in overdraft fees annually.

For credit unions, CUNA estimates, 56% of credit unions that offer checking accounts offer overdraft protection, and 11% of those that offer overdraft protection do not charge a fee for the service. The median overdraft fee is $25, and 95% of those that assess the fee do on a per-item basis.
Click here to read the CFPB release.

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CFPB Adding Rules, Potential Regulatory Burden

As the Consumer Financial Protection Bureau (CFPB) continues to assume authority over consumer and finance-related regulations from other agencies, credit unions, Leagues and CUNA have strongly urged the CFPB to thoroughly analyze new rules as well as existing rules transferred to the agency and consider how they could be amended to ease the regulatory burden faced by credit unions.

New rulesOn February 14th, a trio of comment letters on behalf of credit unions were filed addressing the Fair Debt Collection Practices Act (Regulation F), disclosure requirements for non-federally insured financial institutions (Regulation I), and mortgage advertising practices and mortgage relief assistance services (Regulations N and O, respectively). CUNA in all these letters called on the CFPB to examine its existing and new regulatory authorities carefully, with the objective of providing meaningful regulatory relief.

The rules addressed in these three comment letters are a few of the many interim final rules that were issued by the CFPB for public comment. The interim final rules became effective on December 30th, and they substantially duplicate the existing text of the previously published regulations, only adding slight technical changes and transferring authority over these rules to the CFPB, as mandated by the Dodd-Frank Act:

  • Regulations F, I, N and O were previously handled by the Federal Trade Commission (FTC).
  • Regulation M, which requires lessors, including credit unions, to provide consumers with uniform cost and other disclosures about consumer lease transactions, previously fell under the Federal Reserve's purview, or the FTC, in the case of state credit unions.
  • Regulations G and H address SAFE Mortgage Licensing Act rules addressed, and those regulations were monitored by financial institutions' prudential regulators.
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Olens Joins Foreclosure Reform in Georgia
Attorney General Sam Olens

On February 13th, Insider Advantage reported that Georgia Attorney General Sam Olens announced that Georgia would be joining 49 states in the $25 billion agreement with the nation’s five largest mortgage servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citi and Ally/GMAC – over abusive mortgage servicing practices arising out of the record number of foreclosures brought on by the recession. Georgia's share of the settlement is estimated at more than $814 million.

The article reported that in addition to holding the mortgage service providers accountable for past foreclosure fraud, the settlement puts in place brand-new reforms designed to protect homeowners. “This agreement will bring stability to the housing market by instituting comprehensive mortgage servicing standards and offering immediate relief to many borrowers who have the intent and ability to stay in their homes," said Olens. Industry practices such as 'robo-signing' (falsifying signatures on foreclosure paperwork) and mortgage servicing misconduct, such as 'dual-tracking' (pursuing foreclosure even while a loan modification process was under review) spurred the action by the attorneys general.

What does this mean? Georgia borrowers who owe more on their mortgage than their home is currently worth will have access to $101.8 million in funds to assist them in refinancing at current rates; and $526 million in direct relief for those needing loan modifications immediately. Borrowers who lost their homes to foreclosure between 2008 and 2011 qualify for immediate cash payments of up to $2,000, from $82 million designated for Georgia without giving up any private claims against lenders. According to Olens, Georgia will receive an immediate direct payment of $104 million, which must be paid into the state treasury and disbursed by the General Assembly, "to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud."

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WriteLoan-Participation Proposal Should Be Withdrawn, GCUA and CUNA Tell NCUA

NCUA-proposed revisions to loan-participation rules should be withdrawn, GCUA and also CUNA urged in their comment letters sent before the comment letter deadline of February 21st. At the December NCUA board meeting the federal regulator issued the proposal that would revise the NCUA's existing loan-participation investment rules to all federally insured state credit unions (FISCUs) that purchase participations in loans originated by other credit unions.

Under loan-participation revisions that were proposed, all federally insured credit unions that are originators would need to retain a 10% interest in the loan or pool of loans participated. Federal credit unions are currently required to comply with this requirement, but the NCUA proposal would extend this requirement to state-chartered, federally insured credit unions as well.

All federally insured credit unions that purchase loan participations would be limited to 25% of their net worth for participations involving one originator. There would be no waiver allowed from this provision.

In addition, the proposal would set a 15% of net worth limit on purchasing credit unions on loans involving one borrower. The rule would allow this requirement to be waived in certain cases, but state-chartered credit unions would have to apply to their NCUA Regional Director for approval.

While both letters urges NCUA to drop its proposal, the GCUA letter acknowledges some parts of the proposal that could be acceptable and offers recommendations on how concerns about loan participations could be addressed. Click here to read the GCUA comment letter.

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