|Momentum Grows to Pass ATM Bill
Of positive note to credit unions: On June 27th, the House Financial Services Committee approved the ATM Disclosure Bill (H.R. 4367). With this committee vote, Congress has taken a big step toward fixing a case of regulatory redundancy! Credit union leaders will appreciate that the committee responded quickly to the industry’s arguments on the need to fix this problem and spare credit unions from duplicative costs that provide no added benefit to consumers. On-screen disclosures have eliminated the need for a physical notice on ATM machines, and the bill passed by the committee is a common-sense solution that will alleviate an unnecessary compliance burden and reduce instances of baseless litigation (see related article on recent class action lawsuit in Tennessee).
The vote happened shortly after CUNA and nine other trade groups sent a letter urging the Senate Banking and House Financial Services Committees to immediately pass legislation (H.R. 4367/S. 3204) that would repeal the duplicative requirement that a placard must be attached to ATMs stating that a fee may be charged. The letter outlined that the placard disclosure is duplicative because the actual fee also appears on ATM video monitors – with sharper and larger images than in the 1990s – before the transaction is completed. But if the placard is not attached, Regulation E (Electronic Funds Transfer Act) permits successful class-action plaintiffs to recover the lesser of $500,000 or 1 percent of the ATM operator's net worth plus attorneys’ fees and costs, the trade groups said. As a result, litigants have removed placards, photographed ATMs without them and filed lawsuits. The total number of lawsuits could be in the hundreds, and many credit unions are settling to avoid the cost of litigation.
The House bill as of press time has 134 co-sponsors and the Senate bill has 18 co-sponsors, including almost all of the Georgia delegation in Congress. Reps. Jack Kingston (R-1), Sanford Bishop (D-2), Lynn Westmoreland (R-3), Hank Johnson (D-4), John Lewis (D-5), Tom Price (R-6), Rob Woodall (R-7), Austin Scott (R-8), Tom Graves (R-9), Phil Gingrey (R-11), John Barrow (D-12), and David Scott (D-13) have all signed onto the bill, with both Georgia Senators Saxby Chambliss (R) and Johnny Isakson (R) signed onto the Senate version.
Who is against the legislation (other than the enterprising individuals who are creating the lawsuits)? Recently, some consumer groups – Consumers Union, Consumer Action and the U.S. Public Interest Research Group (PIRG) – have urged members of Congress to oppose ATM disclosure relief legislation; the Consumer Federation of America did not take a formal position on the legislation after discussion with CUNA. The consumer groups are concerned that consumers could engage in an ATM transaction without knowing the full extent of fees that could be charged if the disclosure placards are removed.
And following a meeting with CUNA lobbyists, the American Association of Justice – the main trial lawyers’ group – moved from a position of opposition to a neutral position.What now? This legislation is one step closer to becoming law, and the outlook for this bill is good. It is expected that the full House of Representatives will take up the bill the week of July 9th on the noncontroversial suspension calendar. After that, it is anticipated that the Senate will take up the bill in short order. CUNA, Leagues and credit unions will continue to work diligently to enact this regulatory relief measure, and hopefully this will be a sign of things to come in terms of reducing regulatory burden for credit unions.
|U.S. Mayors Add Support to CU
Small Business Jobs Bill
During the June U.S. Conference of Mayors in Orlando Fl, city leaders from around the country passed a resolution in support of S.2231, the Credit Union Small Business Jobs Bill. This legislation enjoys a broad base of support – from conservative think tanks to progressive community organizations – and is expected to add 140,000 jobs and $13 billion to the U.S. economy, at no cost to taxpayers.
By allowing credit unions to loan up to 27.5 percent of total assets to small businesses (versus the current cap of 12.25 percent), this bill would provide much-needed stimulus to main street businesses, which form the backbone of local economies in cities throughout the nation. This assistance couldn’t come soon enough for some business owners. A recent joint report by the Small Business Majority, Main Street Alliance and the American Sustainable Business Council found that 90 percent of small businesses experience problems accessing credit.
|Agreement Reached on Student Loan Issue
The Wall Street Journal reported on June 26th that Senate leaders reached a tentative deal to keep most student-loan interest rates at 3.4 percent for another year, preventing the rates from doubling on Sunday July 1st and potentially resolving a contentious election-year issue. It remains to be seen how conservative House Republicans will react to the agreement, since some have expressed concern about the $6 billion price tag, however the Senate is optimistic that House leaders will go along. House leaders declined to comment on the tentative agreement, which would resolve a key dispute by using changes in pension laws to fund the lower interest rates.Congress initially reduced student loan rates five years ago to help students through a difficult economic stretch. If legislation is not passed, the interest rate would rise to 6.8 percent for about 7.4 million undergraduates over the next year. With both parties now agreeing on the goal of keeping low rates, the disagreement has centered on how to offset the cost. Under the emerging deal, the money would come in part from increasing the premiums that firms pay the Pension Benefit Guaranty Corp. to insure their pension plans.
Credit unions across Georgia are making the most of the 2012 elections by engaging with candidates, a powerful action as it develops strong relationships with elected officials, as well as help those leaders who protect and promote credit unions return to office. The past two weeks were filled with several opportunities for credit union advocates to build influence with federal and state legislators:
These two events are just the most recent campaign activities by credit union individuals as our industry has been active in several campaigns in previous months; please click here to see how credit unions have been engaging in the 2012 elections... and there are other events pending in the upcoming months. Although politics is a personal matter, having a voice on legislative issues is a priority. The actions legislators take have a direct impact on how you serve your members. Take advantage of the opportunities this election year provides to engage in campaigns, and please share with the Government Influence Team.
On Wednesday, June 27th credit union advocates from Credit Union of Georgia and LGE Community Credit Union sat down with one of the leaders of the state Senate to further the legislative influence the industry has under the Gold Dome. State Sen. Doug Stoner (D-6) serves as the Democratic Caucus Chairman, and as such shapes how his party votes on key issues in the Senate. While Sen. Stoner has a good understanding of credit unions and the legislative issues of industry importance, this local meeting provided an ideal opportunity to share key points of what makes credit unions unique, and the significant impact they have on over 1.9 million members in the state (and over 34,200 members in his district!).Sen. Stoner provided the credit union group with his insight on the inner workings of the Senate, the political pressures between and within the parties, and the political chess game to move legislation forward. The credit unions in turn provided him with a strong understanding of the positive benefits of being a financial cooperative. Thank you to the Hike participants for sharing their time and building understanding of our industry and developing a relationship with a key legislative leader. When an opportunity arises to participate with a Hike at Home meeting, take the time as it is in investment in the entire industry!
|And the Wave of ATM Disclosure Lawsuits Continues
A federal court in Tennessee on June 26th certified the class action status of a lawsuit that alleges Hope Community CU, Jackson, Miss., violated the Electronic Funds Transfer Act (EFTA) by failing to provide a fee disclosure at three of its ATMs. In the lawsuit, filed in the U.S. District Court for the Western District of Tennessee, plaintiff Vicki Campbell alleges that Hope Community's Memphis, Tenn. branch did not provide disclosures at three ATMs. Campbell is seeking to represent "as many as several thousand" consumers who initiated transactions at the ATMs.
|Lawsuit Against CFPB Ropes In NCUA
A Texas bank and two organizations have filed a lawsuit in a federal court in Washington, D.C., contesting the constitutionality of the Consumer Financial Protection Bureau (CFPB), the appointment of CFPB Director Richard Cordray and the Financial Stability Oversight Council (FSOC). The suit names as co-defendants nine top officials of various federal agencies, including NCUA Chair Debbie Matz and Cordray. The officials are all ex officio members of FSOC. The suit was filed June 21 in the U.S. District Court for the District of Columbia by State National Bank of Big Spring (Texas), the 60 Plus Association, and Competitive Enterprise Institute (CEI).
The CFPB is an agency created by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the FSOC was created by Title I of that act. The complaint alleges that Titles I and X of the Dodd-Frank Act "comprise unprecedented violations of the basic concept of separation of powers and the checks and balances that flow from the scheme of a tripartite government."The complaint argues that Title X "delegates effectively unlimited power to the CFPB to litigate, investigate or regulate over practices that the CFPB deems to be 'unfair,' 'deceptive' or 'abusive,' but does not define the terms, leaving those terms to the CFPB to interpret and enforce, either through ad hoc litigation or through regulation." That leaves entities such as the bank "to discover CFPB's interpretation of the law only after the bank has executed a mortgage or consumer lending transaction" and results in a "chilling effect" forcing lenders "to either risk federal prosecution or curtail their own services and products."
|Study on Georgia, Economic Recovery and the Durbin Amendment
A recent study that focuses on the Durbin Amendment’s impact on Georgia’s economic recovery has surfaced on the national level. The study, by the Competitive Enterprise Institute (CEI) for the Georgia Public Policy Foundation cited that the federal regulations that cap the swipe fees on debit card transactions will harm the ability of Georgia's credit unions and banks to lend to small businesses and could hamper the state's economic recovery.
Credit unions are good at what they do. But is that enough?
This was the question that GCUA CEO and CUNA Board Chairman Mike Mercer offered to urge credit unions to take further steps to secure their place in the future, during his speech at America's Credit Union Conference (ACUC) in San Diego, California. "Good won't be good enough," said Mercer. He likened the movement to very good sports teams that make it to the playoffs but haven't yet won the big game. "In some ways, being good is worse than being bad," he said. "If you're bad, you have the license to make change – big changes. If you're good, it's 'well, let's not mess with things,' or 'we'll just work a little harder next year.'" It's not about the history of results but more about the attitude for approaching the future and doing "what it takes to win it all."
The “good won't be good enough” frame of mind should also be applied to the CUNA league support system. “The leagues and CUNA exist fundamentally to project influence outside the credit union world and to cause consensus inside. One can't be done without the other." Without consensus, Mercer said, "there can be no meaningful influence. The system has been good for decades, he said, citing accomplishments on share drafts, the tax exemption, field of membership and member business lending. CUNA and the leagues have deflected Community Reinvestment Act, obtained carve-outs for most credit unions in the Dodd-Frank Act, although that work isn't done yet, fixed troublesome provisions in the Credit CARD Act, turned back the Internal Revenue Service's unrelated business income tax and others. There's enough good to rationalize any degree of resistance to change.”
“New structures that foster greater interdependence – not independence – should be designed for the future framework of consensus building. Big ideas that address major problems affecting millions of people should be cultivated, metrics for evidence of success should be embraced, and credit unions should aim for nothing less than being the premier financial partners for American citizens."
|Helping the Underserved Grow Some Green!
Despite the challenges, community development credit unions (CDCUs) have been stepping up to help millions of people in need. This was the focus of the National Federation of Community Development Credit Unions' (Federation's) the 38th Annual Conference on Serving the Underserved, held June 13-16 in Atlanta, Georgia.
In his remarks at the Opening Ceremonies, CUNA Chairman Mike Mercer pointed to the impressive impact these institutions have been making. "During the depth of those crisis years (Dec '07 - Dec '09), lending at banks fell by 10 percent, but lending grew at credit unions by 8 percent and at CDCUs, lending grew by nearly 11 percent. Over the same time period, credit unions saw a savings influx of 18 percent, but saving grew by 24 percent at CDCUs."
NCUA Chairman Matz echoed Mercer during her plenary presentation noting that "as a group, low-income credit unions led the nation in lending throughout the recession of 2008-2009, as well as the steady recovery of recent years. Between December 2007 and March 2012, low-income credit unions expanded loans by $11 billion (57.6 percent). During the same time period, the entire credit union industry expanded loans by $45 billion (8.6 percent), while banks and thrifts decreased loans by approximately $500 billion (6.3 percent)."
In his farewell address, Cliff Rosenthal – former Federation CEO for 32 years and now Assistant Director of the Consumer Financial Protection Bureau in Washington, D.C. – remarked on the impact of the Federation on CDCUs. "In 1983, the Federation had no net worth. Today we have nearly $9 million in net worth, [and] the Federation has been able to make more than $15 million in secondary capital investments, more than $100 million in deposits, and several millions of dollars in grants to our members."
|CUs Spotlighted as Great Financial Option for Georgians
The June 22nd issue of the Atlanta Business Chronicle featured a full section on Georgia credit unions. Twenty credit union experts were featured in the section, plus GCUA President Mike Mercer, CUNA President Bill Cheney, and several representatives from GCUA. Among the story topics covered were membership and savings growth, new leadership at the state’s credit unions, how credit unions are employing technology, and responsible business lending.
“Georgia credit unions are healthy, safe and secure,” said League Chairman,Marshall Boutwell, CEO of Gwinnett FCU. “Finding new and better ways to help consumers afford life is what we are all about. It isn’t easy and progress will be measured one member at a time, but progress is being made. Georgia credit unions have a good reputation among consumers and we work hard every day to earn it.”
To read the entire section, click here.
Are You Protected?
The subject of overdraft protection programs (ODP) has received media attention once again (see related article above), as lawsuits have been filed against several credit unions across the country (none in Georgia), as well as major national banks. The lawsuits accuse the credit unions of unfairly generating increased revenue from overdraft fees by improperly manipulating payment of member debit card transactions.
These issues come at a time when the Consumer Financial Protection Bureau (CFPB) is investigating ODP practices by financial institutions to determine the most appropriate way to resolve payment issues for the benefit of consumers. Credit unions are reminded to clearly disclose their overdraft protection practices to members, and to educate members on how the program works. In 2005, NCUA wrote a letter to credit unions on the subject of overdraft protection programs, and it might be a good idea to review your programs with that letter (NCUA 05-CU-03). Remember that additional changes to overdraft programs were made in 2009 regarding opt-in and truth in savings disclosures.
A GCUA survey from the spring of 2008 suggested that at that time, most Georgia credit unions cleared the small items first and then the large ones. According to John M. Floyd & Associates, to remain above reproach when dealing with members and even the media, credit unions should clear transactions in numerical order as presented.
The CFPB is working on this issue as we go to press and will likely set rules soon. The issues the CRPB are reviewing are:
In the meantime, this is a great opportunity for credit unions to go above and beyond to educate members about how their program works – regardless of the order in which payments are cleared.
Click the links below to read articles about this issue:
|Some Bold Moves in Georgia Banks’ Search for Growth
The Atlanta Journal-Constitution reported on June 19th that due to weak loan demand and a slow economic recovery, a number of Georgia community banks that weathered the crisis are getting bolder in the search for new business. Some are turning to lines of business, such as wealth management, corporate banking or mortgage lending, which are offered more often by their big-bank brethren. A few are even opening or considering new branches, though the industry trend in branching has been to shrink the number of outposts.
The moves are byproducts of a tough economy and a need to diversify revenue streams following the turmoil in residential and commercial real estate development lending. Development loans were a key cog in the business plans of many community banks before the crisis. But slow economic growth has made replacing expiring loans with new ones more difficult. “They’ve got to put their money in other places,” said Ed Snow, an attorney and chairman of the banking and real estate practice at Burr & Forman in Atlanta.
How are they faring? Georgia's banks turned a collective profit in the first 90 days of 2012, marking the fourth straight quarter in the black for an industry still healing from the financial collapse and Great Recession. The state’s industry wallowed in the red for 10 quarters from the end of 2008 through the first quarter of 2011.