May 4, 2012
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Finish line Stop a Race Before the Finish Line? Absolutely Not!
The credit union member business lending bill has not yet been voted on, and that means there's still time for you to make a difference by asking your U.S. Senators to support this important legislation.

  Westmoreland Signs on as Co-Sponsor of ATM Disclosure Bill
U.S. Rep. Lynn Westmoreland has joined in co-sponsoring a bill to repeal a burdensome requirement that ATMs be labeled with fee-disclosure placards in addition to displaying those disclosures on their electronic screens.

  Possible Extension to NFIP . . . Allowing Time to Fine-Tune Reform Efforts
One of Louisiana's U.S. Senators has introduced a bill to extend the National Flood Insurance Program through the end of the year, which would provide time to work through some controversial reforms to the program.

  Credit Union-Supported Swap Bill Moves Forward
The U.S. House has passed legislation that would allow credit unions and other small financial institutions to use swaps to hedge interest rate risk, a practice the Dodd-Frank Act now prohibits for some institutions.

  Tax Reform Talk Looms On Horizon
Georgia U.S. Senator Saxby Chambliss continues to seek a bipartisan solution to the federal budget deficit, advocating a mix of spending cuts and tax-loophole closures.

  Federal Reserve Releases Interchange Study, Impact on CUs Still Unclear
The Federal Reserve issued a study on the impact of legislation that capped debit card interchange fees, but since most credit unions are exempt from the cap, the effect of the law on credit unions has yet to be known.

  Good News! Foreclosed Property Registry Standards Bill Signed Into Law
Georgia's governor signed into law a bill that will set standards for how cities and counties can design registries of foreclosed and/or vacant properties; the measure is expected to ease the compliance burden on credit unions.

  State Highlights Foreclosure Prevention Resources
The state of Georgia's newly designed website for state resources includes a potentially valuable blog on understanding and preventing foreclosures.

  Forget Road Rage, the New Issue Is Mortgage Rage!
The troubled housing market and struggling economy have given rise to the kind of unpleasant behavior that has been dubbed "mortgage rage."

  GCUA Annual Report Is Electronic!
Georgia Credit Union Affiliates' 2011 Annual Report is now available online, in a more environmentally friendly electronic format.

  Just When You Thought All Competitors Had Been Fought Off
The latest competitor in the mortgage-lending business is one that many might not expect - wholesale-club operator Costco.

  Banks Aggressively Courting the Lower-Income Demographic
Large banks, seeking to replace income lost to recent regulations on debit and credit card fees, are again pitching products and services, some carrying high fees, to their low-income customers.

  Community Banks with New Opportunity for Increasing Capital
Small community banks have gotten some regulatory relief from the federal JOBS Act, which includes a provision raising the number of bank shareholders at which a bank must register with the SEC to 2,000, from its former level of 350.

Stop a Race Before the Finish Line? Absolutely Not!

A race is not over until the finish line is crossed, and the same is true with moving legislation forward. Credit unions in Georgia are well aware of the nationwide call to action for MBL legislation, a bill that is definitely gaining traction and for which a vote is still pending. This bill, S. 2231 by Senator Mark Udall (D-CO), would increase the member business lending cap from 12.25% to 27.5% of assets. Leadership has shared that the projected vote count is growing, and that they would like to call it up once a strong 60-Senator support count is confirmed. Your involvement today can make the difference for the credit union industry for years to come.

Red letterThank you for all of the efforts on this issue. Credit unions in Georgia have engaged their staff with the call to action, sending emails and calling Senator Saxby Chambliss (R) and Senator Johnny Isakson (R) to encourage them to support Senator Udall’s bill. And, there are 26 credit unions in Georgia who have met or greatly exceeded their call to action goal. Is your credit union one of those yet? Regardless if you currently offer member business loans, now is the time to stand up for credit unions. The banking industry in Georgia has been pushing against the credit union’s ability to serve members, and the credit union voice on this issue needs to be heard. Here are the ways you can stand up for credit unions:

  • Send emails: The call to action to send messages to the Senators can be found here.
  • Make phone calls: call the Senators’ offices by utilizing the toll-free number (1-877-642-4223) that automatically routes to them (two calls are needed per person; one for each Senator).
  • Engage your small-business members: If your credit union issues business loans, contact your small-business members to reach out to the Senators and urge their support for the Credit Union Small Business Jobs Bill. This reinforces the message that it is a small-business issue, and combats the banks’ “us versus them” message.

Below are a few talking points from last month’s Grassroots Liaison newsletter that may also serve well in rallying your troops and answering questions from board members and staff:

  • Why should I do this? It takes political action by the entire industry to shape legislation, and the time for action is now. It is not common that there is a “credit union issue only” bill that is up for action in D.C., and the banks have massive efforts in opposition. Your involvement and the involvement of your credit union will help combat the banks’ message that it is a bank versus credit union issue . . . it is a helping small business issue.
  • Neither Sen. Saxby Chambliss nor Sen. Johnny Isakson has signed on to support the credit union MBL . . . does sending them an email really do anything? Yes, yes, and then some. They need to be aware how many of their constituents want this to pass. They are hearing from bankers on why they shouldn’t support credit unions. They need to hear from credit unions. Legislators can make up their minds at any moment . . . right up until the vote.
  • We don’t do business loans. This call to action is vital to every credit union, regardless of whether it makes business loans. If we lose, our adversaries will be much more emboldened to oppose us on other key issues. But if we win, credit unions will be well positioned to continue to help small businesses through the recovery, and we send a clear signal that credit unions are as powerful as ever.
  • Engaging staff is one thing, but we’re not comfortable sending something out to membership. While it would be wonderful if all of the 1.8 million members in the state of Georgia reached out to the Senators on this issue, that is too optimistic! Engage as far down as you can . . . and if your credit union is not open to going to membership on this issue, please . . . engage your staff (and ask your staff to engage their families, thereby indirectly tapping into some of your membership!).
Fatigue can easily set in on anyone, whether they are running a race or pushing with legislation . . . but the finish line IS within sight. Please do not give up. The banking community has become almost unglued on this bill, indicating that while it may feel that we are running in place . . . we are not. Your involvement IS making a difference! Take the time to engage your staff today if you have not already.
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U.S. Rep.
Lynn Westmoreland
Westmoreland Signs on as Co-Sponsor of ATM Disclosure Bill

Georgia Rep. Lynn Westmoreland (R-3) has joined the growing list of co-sponsors for H.R. 4367, the bill to remove duplicative ATM fee disclosure regulations. As reported in the last edition of Creating Influence, this bill would protect credit unions and other financial institutions from frivolous lawsuits by repealing the outdated requirement that a placard must be attached to ATMs stating that a fee may be charged. (ATM monitors already show such fee disclosures and require customers to opt-in before moving forward with a transaction that would result in a fee).

At least one such lawsuit has been filed against a Georgia credit union, and four such lawsuits have been filed against community banks in Georgia. Nationwide there have been 90 class action lawsuits brought against credit unions in 17 separate states since this scam was discovered (click here for more information.) This bill is likely to be on the fast track, with more co-sponsors and a similar bill likely to be introduced soon in the Senate. Westmoreland joins other Georgian Rep. David Scott (D-13) on the bill; Scott was one of the two individuals to introduce the legislation.

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Possible Extension to NFIP . . . Allowing Time to Fine-Tune Reform Efforts

Flood signThe National Flood Insurance Program has escaped demise through a series of temporary extensions, and a new short-term reprieve has been introduced in the U.S. Senate. The NFIP is currently set to expire on May 31st (timely as it is right before hurricane season!). Credit unions, as well as other lenders, cannot write certain mortgages without NFIP coverage, and in the past the program has lapsed for brief periods – three times in 2010.
Sen. David Vitter (R-LA) introduced S. 2344 on April 24th to extend the NFIP through the end of this year. The bill was placed directly on the Senate's legislative calendar, thereby circumventing the banking committee, which has been working on controversial NFIP reform issues for years. CUNA strongly supports the NFIP program and backs short-term extensions, but also advocates for longer-term approval.

Why has the committee work been “controversial”? The controversial provisions that have been proposed in the Senate committee appear to be holding up any long-term reauthorization, and are problematic for credit unions. In fact, CUNA has warned lawmakers, they could have the unintended effect of driving some small mortgage lenders, including credit unions, out of the mortgage business. Particularly at issue is a section of the Senate Banking Committee's NFIP reform discussion draft, which would require all mortgage lenders to escrow for NFIP premiums. Current law only requires lenders that escrow for taxes and insurance to also escrow for NFIP premiums. CUNA has alerted key Senate lawmakers that there is a significant cost involved with establishing escrow accounts, particularly for credit unions, community banks, and community-based lenders that have small lending volumes.

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DomeCredit Union-Supported Swap Bill Moves Forward

The Small Business Credit Availability Act (H.R. 3336), which would preserve the rights of credit unions and other small financial institutions to use swaps to hedge interest rate risk, will move on to the Senate after it passed a U.S. House vote with a vote of 312 to 111. CUNA supports the legislation, which would grant credit unions and other small financial institutions with under $1 billion in cumulative current uncollateralized credit risk exposure and potential future credit risk exposure an exception from portions of the Dodd-Frank Act that barred certain institutions from engaging in swap transactions.

NCUA currently allows a limited number of federal credit unions to engage in derivatives through an investment pilot program, and is considering expanding credit union derivative investment authority. CUNA has commended the agency for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third parties.

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U.S. Sen. Saxby Chambliss
Tax Reform Talk Looms On Horizon

On April 21st U.S. Sen. Saxby Chambliss provided an update of his “Gang of Six” efforts to the Atlanta Press Club on a bipartisan solution to the ballooning federal deficit – and the possible end of George W. Bush-era tax cuts that will expire on Dec. 31. Chambliss has advocated for a mix of spending cuts and the elimination of tax loopholes, and while the Gang of Six never got to specifics, the Simpson-Bowles debt-reduction commission in 2010 recommended the elimination of many tax deductions – including one for interest paid on second home mortgages. And, while no one has come out against credit unions . . . under the very broad brush strokes of the commission's proposals, the panel could eliminate the credit union tax exemption without taking into consideration whether such a change in policy could have dire consequences.

Chambliss’ tax reform efforts were also highlighted in the April 30th article in Insider Advantage Georgia, citing that the Gang of Six continues to look at tax reform . . . despite the elections looming in the background. “We're not giving up. We're still meeting," Chambliss said. "... We're going to continue to work at it." He has also lobbied for a debate between the presidential nominees just on balancing the budget. It is widely believed in the press however that this presidential debate topic will not come to fruition given the risks to any campaign for giving specifics on such a controversial issue, regardless of one’s political stance. Chambliss, who does not have to worry about re-election this year, has offered some politically risky choices of his own as he has said the farmers he defends are going to have to take a hit in the Farm Bill. And, he talks about "tax reform" and "closing loopholes" as a way to generate revenue -- another way to say killing those deductions and credits found on the 1040 form. He also went so far as to applaud Mitt Romney for considering elimination of the mortgage deduction on second homes, but Chambliss recognizes no politician is going to completely eliminate mortgage and charitable deductions. Chambliss says he's willing to take the criticism for pursuing deficit reduction. Stay tuned!

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Federal Reserve Releases Interchange Study, Impact on CUs Still Unclear

Money question markWhile the Federal Reserve's study of the impact of the debit card interchange fee cap suggested that smaller issuers have only seen modest changes in their rates, the jury is still out on the long-range impact, and credit unions continue to be concerned that market forces will ultimately drive down the fees that the exemption for smaller institutions is intended to protect. Please click here for CUNA’s summary of the Fed survey report.

The survey, which was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and is intended to help the regulator monitor the interchange rule's impact on markets and the effectiveness of the interchange fee limitation exemption for small issuers, found that:

  • The average interchange fee received by credit unions and other debit card issuers that are exempt from the Federal Reserve's debit interchange fee cap was 43 cents per transaction in 2011;
  • The average interchange fee charged by financial institutions that are subject to the cap was far lower in that time period, totaling 24 cents per transaction; and
  • The average interchange fee in 2009 was 43 cents.
  • The Fed reported there were 46.7 billion debit card transactions in 2011, with a value of more than $1.8 trillion. This total was a 24% increase from 2009's transaction total of 37.6 billion, and a 27% increase from the amount of interchange income tallied in 2009, $1.4 trillion, the Fed added.

The survey collected data on all costs associated with debit card programs and debit card transactions from card issuers and payment network representatives. The surveys are intended to compile aggregate or summary information concerning the costs incurred, and interchange transaction fees charged or received by issuers or payment card networks in connection with debit card transactions.

The debit interchange fee cap regulations, which became effective last fall, limit debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allow an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap; currently ALL Georgia credit unions are exempt.

And, the debit fee regulations do not require card networks to maintain a two-tiered system; they do so only at their discretion. Secondly, it is too soon to tell whether the routing and exclusivity provisions that dictate the use of PIN or signature networks will over time undermine any two-tiered interchange fee structure by driving small-issuer rates toward the large-issuer cap. The routing and exclusivity provisions in the interchange regulation have only been in effect since April 1, and the Fed survey only covers the fourth quarter of 2011.

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Gold DomeGood News! Foreclosed Property Registry Standards Bill Signed Into Law

Credit union advocates will be pleased to know that on May 1st Governor Deal signed into law the Foreclosure Registry Bill (HB 110) by Rep. Mike Jacobs (R-Atlanta). This new law will set uniform standards on how cities and counties can design foreclosure and/or vacant property registries, and is positive for credit unions as it will exempt financial institutions as owners of a property through foreclosure from registering (and paying fees), provided they file the deed within 60 days with required contact information sent to the city and/or county. This legislation was heavily lobbied and promoted by credit unions and the Government Influence Team for the past two legislative sessions . . . as it will help eliminate compliance burden, lessen expenses, and provide some sort of reasonable expectations if a city or county instituted a new registry. This law is effective on July 1, 2012.

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Prevent foreclosureState Highlights Foreclosure Prevention Resources

The State of Georgia recently unveiled its newly designed website for state resources (anyone who accessed the previous edition could attest to the need for the change!). While there is still a wide variety of information found there, one resource that is easily attainable to the casual viewer is the “Understanding & Preventing Foreclosures” blog. This area collects links of multiple existing resources from the Department of Banking and Finance and Department of Community Affairs, as well as a guide from the Attorney General’s office on mortgages and foreclosures.

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Forget Road Rage, the New Issue Is Mortgage Rage!

MobAnyone who has had the pleasure of driving through Atlanta can imagine the palpable sense of road rage. However, a disturbing trend brought on by a combination of woes in the housing market (declining values, vacant homes, and financial issues) brings us to a new low: mortgage rage. The April 26th edition of The Atlanta Journal-Constitution chronicled the growing issue. Common courtesy and decency amongst people can quickly be replaced with anger, frustration, and poor choices when placed in a pressure cooker of stress . . . whether they are coping with rush hour or the realities of the economic environment. While the article depicts normally unheard-of situations in communities, from a credit union perspective this environment could be utilized as an opportunity to be a bastion for the weary consumer. Credit unions could benefit by revisiting customer service practices to ensure that a “mortgage rage” situation doesn’t happen on their watch!

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GreenGCUA Annual Report Is Electronic!

In an effort to “Go Green,” GCUA has shared its 2011 Annual Report electronically. This report provides the highlights, accomplishments and outcomes of the Georgia credit union movement in 2011. Find it here.

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Just When You Thought All Competitors Had Been Fought Off

CompetitorsCompetition can come from the likely . . . and sometimes unlikely places for credit unions. How about a Costco mortgage to go with that 30-count package of three-ply toilet tissue rolls or that 35-count shrink-wrapped package of ready-made green tea? The wholesale membership club competitor has entered the full-service mortgage loan business, and it’s already issued more than 10,000 loans, according to a CNN Money report. The loans include traditional mortgages, refinancing and loans for veterans.

Costco has teamed up with First Choice Bank to give members access to lenders with competitive loan terms through an online portal. Members plug in their mortgage request information and the site provides a list of possible lenders. The member then decides which lender to pursue, instead of lender after lender contacting the Costco member. The lender does not know the member’s identity until after it is chosen. Costco also eventually plans to offer health and auto insurance, and student loans, the report says. The warehouse retailer already offers recreational vehicle and boat loans. Costco’s main competitor in the wholesale market, Sam’s Club, offers small-business loans of $5,000 to $25,000 through an alliance with Superior Financial Group.

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UnderbankedBanks Aggressively Courting the Lower-Income Demographic

On April 25th The New York Times reported that an increasing number of the nation’s large banks — U.S. Bank, Regions Financial and Wells Fargo among them — are aggressively courting low-income customers with alternative products that can carry high fees. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees. Banks say that they are offering a valuable service for customers who might not otherwise have access to traditional banking and that they can offer these products at competitive prices.

Analysts in the banking industry say that lending to low-income customers, especially those with tarnished credit, is tricky and that banks sometimes have to charge higher rates to offset their risk. Still, in an April survey of prepaid cards, Consumers Union found that some banks’ prepaid cards come with lower fees than cards from nonbank competitors. While banks have offered short-term loans and some check-cashing services in the past, they are introducing new products and expanding some existing ones:

  • Last month, Wells Fargo introduced a reloadable prepaid card.
  • Regions Financial in Birmingham, AL unveiled its “Now Banking” suite of products that includes bill pay, check cashing, money transfers and a prepaid card.

Opportunity for Credit Unions? Reaching the so-called unbanked or underbanked population — people who use few, if any, bank services — could be lucrative, industry consultants said. And, credit unions are well positioned to reach out to the underserved and unbanked . . . in a manner that is profitable for both the consumer and the credit union. The numbers are there to create a positive bottom line: Kimberly Gartner, vice president for advisory services at the Center for Financial Services Innovation, said that such borrowers were a $45 billion untapped market, and the FDIC estimates that about nine million households in the country do not have a traditional bank account, while 21 million, or 18 percent, of Americans are underbanked.

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Community Banks with New Opportunity for Increasing Capital

Community banks just received some regulatory relief with the opportunity to raise more capital through an interesting change: They no longer have to worry when one of their shareholders dies or gets divorced! Previously they had to adhere to a regulation that required the community banks to register with the Securities and Exchange Commission if it has more than 500 shareholders. Banks often would carefully maintain shareholder count at 350 to avoid the cost and hassle of registering. But the level was always at risk of rising, as one shareholder could turn into four through unexpected consequences. Now, small-bank CEOs can stop counting shareholders as closely and turning potential investors away at the door: the JOBS Act signed into law this month includes a provision that raises the number of shareholders at which small banks must register with the SEC to 2,000.

NumbersThe change means that small banks are free to raise capital by attracting new investors without taking on regulatory burdens that are associated with the SEC filings. It also could increase bank mergers and acquisitions, which last year stood at the second-lowest level since 1980. The move potentially could affect hundreds of community banks around the country. Just 16% of the nation's roughly 7,400 banks and thrifts are publicly traded, according to research firm SNL Financial. Many of those are thinly traded, but most are required to file quarterly and annual financial reports with the securities agency. The JOBS Act also makes it easier for small banks to deregister with the SEC, permitting them to do so with 1,200 shareholders, compared with the current threshold of 300.

Many banks aren't likely to raise their shareholder base; community banks are often closely held among a small group, especially those that are family-run institutions. Some, however, are eager to attract more capital and investors, especially if they can now avoid the expense, which could be as much as $200,000 a year, of filing quarterly and annual financial reports with the SEC. To read the April 23rd Wall Street Journal article on this change, please click here.

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