May 18, 2012
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Reg. relief Credit Unions Testify for Relief from Regulatory Burden
Excessive regulation is costing credit unions money, which results in higher costs to members for services, a Florida credit union executive testified in a congressional hearing.
  Growing Georgia Support on ATM Disclosure Bill
More Georgia legislators have joined the effort to do away with the federal requirement that ATMs display both electronic and physical fee notices, a rule that allows for costly class-action lawsuits for noncompliance.

  Push Continues to Have Senate Pass NFIP
CUNA and others are urging the U.S. Senate to reauthorize the National Flood Insurance Program, without which thousands of mortgage closings could be in jeopardy. The program is set to expire on May 31.

  Overdraft Fee Limitation Bill Introduced
A U.S House Financial Services Committee member introduced legislation to place new limits on overdraft fees charged by banks and credit unions.

  Senate Stalls Student Lending Vote
The U.S. Senate failed to approve a bill that would keep the interest rate on federal student loans from doubling to 6.8 percent on July 1, but the measure could still be considered by the Senate in the future.

  Bankers Push Congress to Investigate Credit Union Tax Exemption
The American Bankers Association urged a U.S. House Ways and Means Committee panel to consider credit unions' tax exemption as part of the panel's recently begun review of tax-exempt organizations.

  Mike Mercer Elected Vice Chair of NCB Board
Mike Mercer, GCUA CEO and chairman of CUNA, has been elected vice chairman of the board of directors of the National Cooperative Bank, and is in line for the NCB board chairmanship next year.

  Growing Legislative Strength for Credit Unions
Credit union groups in two areas of Georgia recently demonstrated the value of building relationships with elected officials by meeting with a U.S. Representative and a state Senator earlier this month.

  Regulatory Burden Review at the State Level
May 15 was the deadline for all state agencies to submit reports to the office of Georgia Gov. Nathan Deal, reviewing their rules and regulations with the goal of reducing unnecessary regulatory burdens on businesses and individuals.

  Resource Spotlight: Legislative Grids
Legislative Grids, posted on the GCUA website, are a handy way to keep track of state and federal legislation, where legislators stand on the issues, and calls for grassroots help that have gone out to credit unions.

  CFBP Agenda: Rules on Mortgages Fees, Originations
The Consumer Financial Protection Bureau outlined new rules it is considering to make the mortgage-lending process more transparent for consumers.

  Retailers Continue Legal Battle on Interchange
A merchants' group has filed its response to the Federal Reserve's motion to dismiss the merchants' lawsuit over the Fed's limits on debit-card interchange fees. The merchants believe the Fed set the cap on fees too high.

  America’s Credit Unions Reach $100 Million Raised for CMN
Credit Unions for Kids, an effort by U.S. credit unions to raise money for children's hospitals, has reached the $100 million milestone in its fundraising for Children's Miracle Network Hospitals since 1996.

  BoA Offering Loan Forgiveness to 200K Borrowers
Bank of America, as part of a settlement with prosecutors over the bank's foreclosure practices, has offered to reduce the principal amounts owed by about 200,000 mortgage borrowers who are underwater on their loans.

  Anger Against Big Banks Continues to Brew
The City Council of New York City plans to vote to require that banks make public their efforts at social responsibility, before the Council decides which banks will get the city's deposits.

Credit Unions Testify for Relief from Regulatory Burden

Washington, DCThe burden of excessive financial regulations has resulted in more than $2 million in additional costs for his credit union and in some cases, reduced service to members, Terry West, president/CEO of Vystar CU, Jacksonville, Fla., said during the May 9th House subcommittee on financial institutions and consumer credit hearing on the impact of regulations on small financial institutions. West, testifying on behalf of his credit union and CUNA, said Vystar wants to do right as a credit union, but is often challenged by the ever-changing regulatory environment.

Credit unions have been "battered by the volume of regulatory changes" that have been made in recent years, he said. West estimated that credit unions have been subjected to in excess of 120 regulatory changes from at least 15 different federal agencies since 2008, and they are bracing for the next wave, which will occur once the Consumer Financial Protection Bureau (CFPB) hits its stride, he said. "We have tried to estimate the cost and found it complicated because compliance reaches into so many areas," West said, adding that "after $2 million we stopped trying."

Regulatory compliance demands have resulted in the creation of new positions at Vystar, West said. In addition to its senior risk position, "we created a vendor management department, increased our Bank Secrecy Act staffing and are about to increase our number of information security officers. We have had to increase staff because of compliance and the costs keep on coming," he said. While his credit union does all it can to avoid increasing costs for members, Vystar was recently forced to increase the price it charges for remittances to pay for the cost of compliance. Vystar also has been forced to hold some mortgage rates steady, rather than lowering them, due to the cost of compliance.

He was joined by First United Bank & Trust CEO William Grant, First State Bank Chief Investment Officer Samuel Vallandingham, Georgetown University law professor Adam Levitin and SRP FCU CEO Ed Templeton during the hearing. During his testimony, Templeton shared that the greatest challenge facing many credit unions is the cumulative impact of the rapidly growing number of regulatory burdens in the wake of the financial crisis. While any one single regulation may not be particularly burdensome, the layering of new regulation on top of old and outdated regulation can completely overwhelm small financial service providers like credit unions. Unfortunately, every dollar spent on compliance, whether stemming from a new law or outdated regulation, is a dollar that could have been used to reduce cost or provide additional services or loans to members.

During the hearing Georgia Congressman Rep. David Scott (D-13) prompted West to share that eliminating outdated ATM disclosure regulations and modifying pending qualified mortgage regulations would be a good start to meaningful regulatory relief (see related article below).

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Growing Georgia Support on ATM Disclosure Bill

Special thanks to Georgia Representatives Hank Johnson (D-4), John Lewis (D-5) and Tom Price (R-6) who have joined with Reps. David Scott (D-13) and Lynn Westmoreland (R-3) and 40 other legislators sponsoring HR 4367. They are standing tall and saying it’s time to stop the regulatory burden caused by Regulation E and the dual ATM fee notice requirements. While the bill is just beginning the legislative process, it is garnering bipartisan support!

Georgia Congressional districtsUnder the Electronic Funds Transfer Act (EFTA), and its implementing regulation (Regulation E), ATMs are required to provide two separate notices regarding fees that may be assessed during a transaction: a physical disclosure and an electronic disclosure. The EFTA carries a private right of action which allows anyone to sue a financial institution for noncompliance, which can result in significant civil judgments. The statute prescribes that in a successful class action, plaintiffs are entitled to recover “the lesser of $500,000 or 1 per centum of the net worth of the [ATM operation]”, plus attorney’s fees and costs. And from May 2010 through December 2011, more than 90 lawsuits were filed against credit unions for noncompliance.

This issue affects all credit unions with ATMs, regardless of whether they have been sued. As the number of disclosure lawsuits has increased, credit unions have been forced to take steps to document compliance, sending staff to ATMs on a regular basis to photograph physical ATM fee placards. H.R. 4367 eliminates this physical disclosure while ensuring consumer protection and protecting the financial institutions from class action lawsuits and thereby protecting credit union members from picking up the tab of these lawsuits.

And in late breaking news: Late on May 17th, Senator Michael Johanns (R-NE), along with Sens. Mark Warner (D-VA), Jon Tester (D-MT) and Bob Corker (R-TN), introduced the Senate companion bill to H.R. 4367.

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Flood insurancePush Continues to Have Senate Pass NFIP

The National Flood Insurance Program (NFIP) is scheduled to expire on May 31. However, CUNA and others are urging the Senate to reauthorize the NFIP "and avoid the costly consequences that would result in a lapse from failure to act," in a letter sent to elected officials and a full-page ad in D.C. publications. Sen. David Vitter's (R-La.) S. 2344 would extend the NFIP through the end of this year. The bill is currently co-sponsored by fellow Louisiana Sen. Mary Landrieu (D), and was placed directly on the Senate's legislative calendar and has not been marked up by the Senate Banking Committee. Legislation that would extend the NFIP for five years has also been approved in the House and by the Senate Banking Committee.

Credit unions and other lenders cannot write certain mortgages without NFIP coverage. In the past the program has lapsed for brief periods – three times in 2010. The letter, which was sent to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), noted that more than 5.6 million policyholders in 21,000 communities nationwide depend on the NFIP as their main source of protection against property losses that result from flooding. "Without flood insurance, many residential and commercial real estate transactions across the country will come to a stop," potentially jeopardizing as many as 40,000 mortgage closings per month, the letter added.

Current as of press time: On May 17th the House approved HR 5740 that would extend the NFIP until June 30th. However, this extension bill still needs Senate approval. Stay tuned!

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OverdraftOverdraft Fee Limitation Bill Introduced

On May 9th, House Financial Services Committee member Carolyn Maloney (D-N.Y.) introduced the Overdraft Protection Act of 2012, H.R. 5691 which would require depository institutions (banks and credit unions) to obtain consent before activating overdraft fees for paper checks, automated clearing house charges and debit card transactions, be limited to charging one overdraft per month and six per year, and be prohibited from adjusting the posting order of transactions if it creates more overdrafts.

The legislation also would require that fees be "reasonable and proportional" to the amount of the overdraft; require the Consumer Financial Protection Bureau to conduct a study on prepaid debit card overdraft fees; and grant the CFPB rulemaking authority over such fees. Forty-six other Representatives have signed on to the measure. Maloney introduced similar legislation in 2009. "The Federal Reserve opt-in rule for debit card overdrafts has been in effect since August, 2010. But it is quite clear more needs to be done in the area of consumer disclosures and to help consumers avoid multiple overdrafts," Maloney said in a press release. Read the Maloney press release.

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Student loans costSenate Stalls Student Lending Vote

A Senate bill that would prevent federal student loan interest rates from doubling from 3.4% to 6.8% this summer failed to collect the votes needed to ensure debate by the full Senate on May 8th but could still be brought up for Senate approval in the future. The Stop Student Loan Interest Rate Hike Act (S. 2343) would extend the reduced interest rate for Federal Direct Stafford Loans beyond the current cutoff date of July 1. The 52 to 45 vote mainly followed party lines, but many Republicans and Democrats reportedly agree that federal student loan interest rates should remain low. The difference between the two sides appears to be how the cost of subsidizing student loans would be paid. S. 2343 would not alter credit union student lending, but other bills or actions that would impact credit union student loan practices are surfacing:

  • The Know Before You Owe Act of 2012 (S. 2280) was unveiled by Sens. Richard Durbin (D-Ill.) and Tom Harkin (D-Iowa), and has been referred to the Senate Banking Committee. That bill would require a prospective borrower's school to confirm the student's enrollment status, cost of attendance and estimated federal financial aid assistance before the private student loan is approved, and a number of loan disclosures would also need to be provided to new loan recipients. Lenders would also need to frequently update students or loan holders on the status of their loans.
  • The Fairness for Struggling Students Act (S. 1102), which was also offered by Durbin in 2011, would make it easier for student loan debtors to discharge privately issued student loans in bankruptcy proceedings.
  • The Consumer Financial Protection Bureau is also addressing student loan issues, working with the U.S. Department of Education and launching the "Know Before You Owe" project to help borrowers, including student borrowers, understand debt implications. A full study on the role of schools in the private student loan marketplace, student loan underwriting criteria, repayment terms and behavior, loan servicing and loan modification, and other student loan issues is expected to be released by the agency this summer.
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Bankers Push Congress to Investigate Credit Union Tax Exemption

TaxThe American Bankers Association called on the House Ways and Means Committee to include credit unions' tax exemption in its Oversight Subcommittee's review of tax-exempt organizations that started during a hearing on May 16th. In a letter sent to subcommittee Chairman Charles Boustany (R-La) the ABA President and CEO Frank Keating said “Such a careful investigation is important, as the credit union industry ... has more than $1 trillion in assets and represents a significant source of lost tax revenue that makes the U.S. debt situation worse."

Keating explained that credit unions were never intended to be simply tax-exempt banks. Yet there are 183 with more than $1 billion in assets each, and many of them offer business loans, trust and asset management services, investment products, auto loans, credit cards and home mortgages -- just like tax-paying banks. ABA encourages the committee to review the industry's tax-exempt status, "particularly ... those credit unions that have diversified to the point that they bear no resemblance to the traditional credit unions Congress envisioned to be worthy of [such] status," Keating said. "Having a hearing specifically on the credit union tax-expenditure would be a good first step ... ."

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Mike MercerMike Mercer Elected Vice Chair of NCB Board

Mike Mercer, CEO of Georgia Credit Union Affiliates and CUNA Chairman, was elected vice chair of the National Cooperative Bank (NCB), the financial services company serving cooperatives in the U.S., during its annual meeting in Washington, D.C. Elected chairman for 2012 was Al Plamann, president/CEO of Unified Grocers, Commerce, Calif. Mercer will be in line to become chairman of the group after his term as chairman at CUNA expires in 2013. The annual meeting also celebrated the 2012 International Year of Cooperatives (IYC), which was formed under a United Nations declaration. IYC is a global effort to educate the public on the benefits of cooperatives.

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WeightsGrowing Legislative Strength for Credit Unions

Meeting with elected leaders grows legislative strength for all credit unions. This simple activity is a powerful way to illustrate the positive impact that credit unions have on the members they serve, and to collectively discuss important topics, build relationships, and further enhance the credit union industry. It is also an ideal opportunity not only to educate legislators on issues of importance to our industry, but also to glean insight from elected officials on upcoming legislative initiatives. Credit unions across Georgia have been active in building legislative relationships: Augusta area credit unions met with U.S. Congressman John Barrow (D-12) on Wednesday, May 2nd and the Southeast Georgia Chapter met with State Senator William Ligon (R-Brunswick) on Monday, May 14th.

Thank you to the credit union leaders for sharing their perspectives with these two legislators; this activity provides an excellent opportunity to build and strengthen relationships between elected leaders and the credit union industry. Watch for opportunities to meet with your legislators, and invite them to your chapters . . . the time you share with them today can pay dividends in the future!

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ReviewRegulatory Burden Review at the State Level

On Tuesday, May 15th, every state agency was to submit a report to Gov. Nathan Deal on the burdensome regulations or duplications that are hampering businesses. Governor Deal issued an executive order in February at the suggestion of a group of executives who participated in his “Competitiveness Initiative.” Their assignment was to find ways to help employers create more jobs, and most of their recommendations concerned tax cuts, incentives and improving public education. Deal instructed the agencies to "immediately review their respective rules and regulations to ensure they are not imposing unnecessary burdens on individuals and businesses." None have submitted reports ahead of the deadline.

Deal's office won't be showcasing any triumphs of newfound efficiency right away, according to his spokesman Brian Robinson. "After individual agencies submit their findings, we will do a comprehensive review with agency leadership to help implement these changes," he said. The idea of stripping away unneeded red tape to allow businesses to recover from the recent recession and resume hiring is one shared by most elected officials. During this year's legislative session, House Speaker David Ralston assigned a special committee to conduct hearings and search for cumbersome regulations. However, during the hearings most of the witnesses complained about federal or local rules or even the policies of private insurance companies. Most people believe that the most burdensome regulations to be from the federal government, but also believe it is worth asking the question at the state level. The biggest challenge at the state level typically revolves around professional-licensing requirements.

A problem with asking the agencies to police themselves is that they may not perceive a given regulation as unneeded and burdensome or may be reluctant to admit it. Of course, well-run agencies may not have anything to report any way!

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SpotlightResource Spotlight: Legislative Grids

Have you ever wanted a quick way to find out what are the hot issues and positions on legislation? One of the MANY resources available to credit unions is the Legislative Grids, tools to help you stay informed. Housed in the Advocacy area of the GCUA site there are legislative grids for both federal and state issues (and they are highlighted on each Creating Influence in the toolbar!). The grids include a recap of the issue, where legislators stand on the issue, and also what, if any requests for grassroots help has gone out to credit unions. Click here to see the current grids.

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CFPB logoCFBP Agenda: Rules on Mortgages Fees, Originations

The Consumer Financial Protection Bureau (CFPB) previewed upcoming mortgage rulemaking on May 9th hinting that rules regulating mortgage origination points and fees, and addressing mortgage loan originators' qualifications and compensation, are under development. "Mortgages today often come with so many different types of fees and points that it can be hard to compare offers," CFPB Director Richard Cordray said. "We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them," he added. To address mortgage market issues, the CFPB said it is considering:

  • Requiring lenders to give borrowers at least a certain minimum reduction of the interest rate in return for paying discount points on a mortgage;
  • Requiring lenders to offer consumers a no-discount-point loan option; and
  • Banning mortgage loan origination charges that vary with the size of the loan, instead allowing brokerage firms and creditors to charge only flat origination fees.
  • The CFPB is also considering setting qualification and screening standards for loan originators. Under the potential standards, loan originators would need to meet certain character, fitness and financial responsibility standards, would be required to submit to criminal background checks, and would need to undertake origination training that is specific to the types of loans they process.
  • Rules that would reaffirm a Federal Reserve Board regulation that prevents loan originators from receiving compensation based on a loan’s interest rate or other loan terms are also under consideration, the CFPB said.
A CFPB Small Business Regulatory Enforcement Fairness Act (SBREFA) panel discussion on these mortgage issues is expected to be held in the coming weeks, and a full slate of mortgage rules is expected to be proposed by the CFPB this summer and finalized by January 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long a transition period is necessary yet. The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.
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Tug of warRetailers Continue Legal Battle on Interchange

A group of merchants who sued the Federal Reserve Board over the Fed's debit fee interchange rule mandated by the Dodd-Frank Act has filed its response to the Fed's motion to dismiss the case in a federal court in Washington, D.C. The merchants filed their brief on May 11th in the U.S. District Court for the District of Columbia, one day after the key sponsor and author of the Dodd-Frank Act's interchange amendment, U.S. Sen. Richard Durbin (D-Ill.), filed an amicus brief supporting the retailers in the case.
CUNA will review the case's latest developments in a meeting this afternoon with the National Clearing House Association and a coalition of trade associations representing thousands of small and large financial institutions. CUNA and the coalition in March filed their own amicus brief in the case, providing financial institutions' perspective regarding the Fed's rule. Their joint brief underscored that consumers have not seen any pricing benefits for products and services merchants promised when they fought for a government-set cap on what card issuers may charge for their services.
The retailers' suit alleges the Fed interchange cap is too high and that the Fed exceeded its authority on the rule. CUNA's and the coalition's briefs argue the cap is too low and that it does not allow debit card issuers to cover their costs and earn a reasonable rate of return on their investments.

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America’s Credit Unions Reach $100 Million Raised for CMN

Credit Unions for Kids logoCredit Unions for Kids, a collaborative effort in the credit union community to raise money for children’s hospitals, recently announced that it has raised more than $100 million for Children’s Miracle Network Hospitals since 1996. Credit Unions for Kids is only the third Children’s Miracle Network Hospitals partner to hit this significant milestone.

In 2011, the Credit Union for Kids program raised $8.7 million for children’s hospitals across the country, with $463,000 raised by Georgia credit unions. Georgia ranked fifth in the nation in fundraising efforts for Credit Unions for Kids. “2011 was a landmark year for our credit union partners,” said John Lauck, president and CEO of Children’s Miracle Network Hospitals. “Their performance speaks volumes about the character of those in the movement. Given the unprecedented challenges facing the industry, credit unions could have cut back on their fundraising, but instead they pushed forward to raise $100 million. We congratulate Credit Unions for Kids on this achievement and thank them for enabling our hospitals to impact the lives of more kids and their families.”

In 2012, participating credit unions have three national campaigns supporting local Children’s Miracle Network Hospitals. The Change A Child’s Life coin collection campaign concluded April 30. Miracle Jeans Day fundraising will occur August 1 – September 12, and the Holiday icon campaign will run November 1 – December 31. The three national campaigns complement the various fundraising initiatives the credit unions do in their local communities.

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BoA Offering Loan Forgiveness to 200K Borrowers

Debt forgivenessOn May 11th, the Atlanta Business Chronicle reported that Bank of America Corp. has begun mailing letters to about 200,000 mortgage borrowers who are underwater on their homes per their agreement with prosecutors. In the letters, BoA says it is offering to reduce the principal amount owed as a way to save borrowers an average of 30 percent on monthly payments. Atlanta continues to have high rates of foreclosures, and BoA is the third largest bank by market share here. It’s one of several banks that have launched programs to ease the housing pain in this market.

The move is required by a previously reported legal settlement Charlotte, N.C.-based BoA struck with prosecutors investigating claims of foreclosure wrongdoings at the bank. To avoid additional fines, BoA agreed to the extra reductions for the small group of homeowners. To be eligible, homeowners must be underwater and be more than 60 days past due. The bank will mail all letters by the end of September.

Additionally, BoA is offering smaller levels of principal reduction to borrowers that owe more than 120 percent of their home’s value and are behind on payments. That is required by a $25 billion settlement agreed to by 49 state attorneys general, federal prosecutors and the nation’s largest banks.

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BrewingAnger Against Big Banks Continues to Brew

In the Big Apple, with the huge trading loss at JPMorgan Chase intensifying criticism of the nation’s big banks, the New York City Council plans to vote to require banks to make public their efforts to be socially responsible before the city decides where to deposit the billions of dollars it keeps in banks. The city currently deposits money at 31 banks — among them JPMorgan Chase, Citibank, Bank of America, Capital One, Deutsche Bank, HSBC and Wells Fargo — chosen for their financial soundness and ratings by federal and state agencies.

However, leaders of the Council say those criteria are no longer enough. As the Occupy Wall Street movement focuses attention on the role of banks in the financial crisis, and the JPMorgan loss prompts calls for increased regulation, council members want the city to begin weighing the services banks offer in poor neighborhoods when determining which ones to do business with. Cleveland and Philadelphia have had laws in place for over a decade similar to the one being proposed in New York, and now the financial crisis has led several other cities to consider them. Pittsburgh recently passed a bill that requires banks that want city deposits to submit community reinvestment plans every two years. Los Angeles, Boston, and San Diego are all considering similar measures. To read more, please click here for the May 14th article in The New York Times.

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