August 10, 2012
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Primary Elections Primer
Thanks to all the credit union people who took part in campaign activity leading up to the recent primary election – your efforts made a difference!

  What to Expect When Congress Returns
What Congress will do in its lame-duck session after the November election will depend on how the election goes, but there's no shortage of issues that need to be addressed.

  One Agreement at Hand
Leaders in Congress agreed to a six-month continuing resolution to fund the federal government through March 2013, which if adopted would avoid a fight over spending during the lame-duck session after the election.

  CFPB Finalizes Remittance Rule Amongst Opposition
After extensive debate, the Consumer Financial Protection Bureau released its final rule on remittances, exempting institutions that transact 100 or fewer remittances per year.

  Unlocking MBL Dollars? NCUA Initiative May Double
Number of Low-Income Credit Unions

A move by the National Credit Union Administration to streamline the process by which federal credit unions are designated low-income credit unions could result in a big jump in member business lending, which is unlimited in LICUs.

  You Can Make the Difference
Very low voter turnout is expected for the August 21 primary runoff election, so credit unions have an opportunity to influence the contested races by encouraging their members to vote.

  State Legislative Group Supporting CU Policies
The National Conference of State Legislatures is expected to adopt this week a policy statement supporting the dual chartering system for credit unions and opposing the federal government's preemption of state regulatory authority.

  International Year of Cooperatives: Bet You Didn’t Know...
The well-known hotel chain Best Western, as a cooperative of independently owned and operated lodgings, provides an example of the resilience of the cooperative business model, even in difficult economic times.

  In the CU Push for Regulatory Relief, This Doesn’t Help
The state of New York accused London-based Standard Chartered Bank of helping Iran evade U.S. economic sanctions for years, raising the question of whether regulators are doing enough to rein in money-laundering.

  Big Banks Turning on Each Other
Rather than banding together against government scrutiny, as in the past, some large banks implicated in manipulation of interest rates have decided to go their own ways to minimize the appearance of cozy relationships.

  And the CU Movement Keeps Growing –
Dutch Entrepreneurs Start Up CUs

Entrepreneurs in the Netherlands, frustrated by lack of access to credit from banks, have addressed the problem by forming a credit union, due to begin operations in September.

Election DayPrimary Elections Primer

Did you vote in the Primary Elections? More than 1.6 million Georgians did, and while there are several races that are yet to be decided across the state that are in a runoff... for many candidates the July 31st Primary was the only barrier standing between them and an elected position. However, competition in these races can be seen as either feast or famine. There were races with no competition whatsoever, and on the opposite spectrum races with multiple primary competition and/or general competition. But what do these races encompass? This year, all 14 U.S. Representative seats are up for election (which includes one newly-created district), all 56 state Senate seats, and 180 House seats are up for election.

Credit unions can do one of two things... wait for the results of these elections and see if our supporters return to office, or work to make a difference in their campaigns. And while everyone has their political preferences, the relationships that credit unions have with key legislators are extremely valuable in pursuing legislative initiatives to help credit unions continue to serve their members. Credit unions made a HUGE difference in the 2012 election season already: More than 140 individuals from 15 unique credit unions were directly involved in five Congressional races and four state races, building relationships and supporting credit union supporters. Most recent credit union campaign activity in the weeks leading up to the July 31st primary:

  • Georgia’s Own CU held a campaign event for State Sen. Jack Murphy (R-Cumming) on July 13th,
  • leadership from Coosa Valley FCU engaged in a campaign event for U.S. Rep. Tom Graves (R-14) on July 28th, and
  • leadership from GEMC FCU hosted a campaign event for U.S. Rep Rob Woodall (R-7) on July 29th.

Thank youThank you to these, and all of the credit unions to date that lent a hand in campaign activities. Every candidate supported by all of the credit union individuals has moved forward (one state race is pending; State Sen. Bill Heath (R-Bremen) is currently in a runoff).

The time that these credit union individuals shared made a direct positive impact on the elections (some of which were very close), and helped build even stronger relationships with people who make decisions on the bills that impact our industry. Not convinced that your time or vote can make a difference? Georgia’s Own CU hosted a meet and greet for Senate Banking Chairman Jack Murphy two weeks before the primary... and he won by just 113 votes! For more details on the races and credit union impact please click here.

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U.S. Capitol interiorWhat to Expect When Congress Returns

Congress is presently in the midst of a five-week recess and will return in September... after which there will be only a handful of legislative days before the November 6th election. The outcome of the election will greatly influence the amount of work that can be completed before the new Congress is seated in January. If the conditions allow, the lame-duck session has the potential to be massive. Considering only the items that Congress needs to get done before year end, it is easy to see how Congress could fill up the seven weeks between the November election and the close of 2012:

  • Congress will need to resolve how to handle expiring tax cuts,
  • the spending cuts which will automatically go into effect as a result of the sequestration process,
  • the deficit facing the postal service,
  • expiring welfare programs,
  • expiring unemployment benefits,
  • and the debt ceiling just to name a few.

With so much left on the “required” agenda, the conventional wisdom is that November and December will be particularly active in Washington. Of course, the outcome of the elections is going to play a very significant role in whether those on Capitol Hill want to tackle these issues at the end of the year, or let the next Congress (and perhaps next President) deal with the problems. So what should credit unions expect? CUNA and Leagues are preparing for a very active lame-duck session, but no one will know exactly what type of lame duck will unfold until after the election. But where do the credit union priorities in Congress stand?

Member Business Lending
Senate Majority Leader Harry Reid has promised a vote on MBL legislation before the end of the year. Hundreds of meetings have been held by CUNA staff, Leagues and credit unions since GAC, and as time has progressed there is more confidence in the ability to win an up-or-down vote on the Credit Union Small Business Jobs Act. CUNA is exploring every opportunity to advance this legislation before the election, and banks have priorities that they would like to see addressed in the short-term as well... who have also been working hard against credit unions’ MBL efforts. The overwhelming message CUNA and Leagues have received from Senators is that they would like to see a legislative package that includes provisions for credit unions and banks which could benefit small businesses. Combining the Credit Union Small Business Jobs Act and the banks’ extension of the Transaction Account Guarantee Program (TAG) could produce exactly that type of package. Regardless, CUNA has been working closely with key leaders in Congress to ensure that TAG does not move without MBLs.

Buried in paperRegulatory Burden
Reducing regulatory burden is a key priority for CUNA and Leagues, who have urged Congress to encourage – and in some cases, direct – regulators to reduce burden on credit unions. The four areas of focus with respect to relieving regulatory burden have been ATM Fee Disclosures, Privacy Notification, Remittances, and Exemption Authority.

  • ATM Fee Disclosures
    In July, the House of Representatives passed the credit union-supported ATM Fee Disclosure bill (H.R. 4367 / S. 3204). The House vote was the culmination of months of effort started last year during Hike the Hill visits. But the votes don’t just happen: This took the work of Leagues, credit unions and CUNA staff to generate the support of the 145 House cosponsors and work to address the concerns of the consumer groups. The bill is currently stalled in the Senate by unrelated matters. The Senate Banking Committee leadership has combined the ATM bill with a piece of legislation designed to protect the privilege of information submitted to the CFPB. This combined legislation (S. 3394) is being held by Sen. Jim DeMint (R-SC) for reasons unrelated to either issue. Senator DeMint has had a hold on the stand-alone privilege bill (S. 2099) because he wants an up-or-down vote on the repeal of the Dodd-Frank Act. He is unlikely to release his hold on S. 3394 unless he gets that vote; and, he is unlikely to be granted that vote. This leads us to a standstill, but to be clear: Credit unions support moving the ATM bill as quickly as possible – whether it is combined with the privilege bill or on its own. Work continues to resolve the hold situation on the combined bill, and the ATM bill could move quickly if it was put forward as a stand-alone measure.
  • Privacy Notification
    Earlier this summer, Reps. Blaine Luetkemeyer (R-MO), Brad Sherman (D-CA), and Gregory Meeks (D-NY), introduced H.R. 5817, the Eliminate Privacy Notice Confusion Act. This legislation would amend the Gramm-Leach-Bliley Act to require financial institutions to send privacy notification to consumers only when their privacy policy has changed. Leagues and CUNA are working to lay the groundwork for this legislation in a manner similar to the efforts on the ATM bill, and have received positive response from Congressional members and staff. Even though time is short, it is not outside the realm of possibility that this bill could get through committee this year if momentum grows by adding co-sponsors in August.
  • Remittances
    Reps. Blain Luetkemeyer (R-MO) and Yvette Clarke (D-NY) are encouraging House members to sign on to a letter encouraging the CFPB to delay and study the impact of its proposed remittances regulation. CUNA has been working with a number of other trades to develop this letter, and encourages support for it.
  • Exemption Authority
    CUNA has testified before the 112th Congress 17 times, seven in 2012. Most of these hearings were utilized to discuss concerns with the “crisis of creeping complexity” credit unions face with respect to regulatory burden. As the CFPB has started using its rulemaking authority, CUNA has pushed for the CFPB to use its authority under Section 1022 of the Dodd-Frank Act to exempt credit unions from its regulations. CUNA has also raised concerns with the proposals to integrate the RESPA/TILA disclosures, the qualifying mortgage (QM) and qualifying residential mortgage (QRM) proposals, as well as the remittances rule. CUNA and Leagues will continue to seek these opportunities to encourage Congress to put pressure on the regulators to reduce regulatory burden on credit unions.

Supplemental Capital
Credit unions around the country continue to educate members of Congress regarding the importance of capital reform for credit unions. The number of members sponsoring the supplemental capital legislation has increased steadily.

While no immediate threat to the credit union tax status is seen, credit unions, Leagues and CUNA are mindful that Congress is likely to engage in comprehensive tax reform next year. CUNA and Leagues have always felt prepared for a tax battle; we are taking steps now to be even better equipped. CUNA has developed a plan and is evaluating resources in the event that the tax status comes under direct threat later this year or in the next Congress.

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Hands/WorldOne Agreement at Hand

Congressional leaders have agreed to adopt a six-month continuing resolution after the August recess that would fund the federal government through next March, Senate Majority Leader Harry Reid (D-Nev.) said on July 31st. The agreement enables lawmakers to avoid a spending fight during what is expected to be a hectic lame-duck session following the November election. The six-month continuing resolution would be prorated at the 2013 spending level set by the Budget Control Act last August. The current fiscal year ends on Sept. 30, and Congress will have eight legislative work days in September to pass the funding measure.

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CFPB Finalizes Remittance Rule Amongst Opposition

The Consumer Financial Protection Bureau, amongst much debate on Capitol Hill in the weeks prior, released its long-anticipated remittance rule on August 7th. The final rule will provide a safe harbor exemption for certain institutions from the requirements of the remittances rule issued previously by the CFPB that implements provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding new consumer disclosures for remittance transfers.

CFPB logoCUNA had warned the bureau that its remittance transfer rule, as proposed, would impose unsustainably high compliance costs and legal liabilities that could force credit unions with relatively small volume international payments programs to eliminate such programs. CUNA had urged the bureau to increase its proposed safe harbor exemption for small remittance issuers from 25 remittances per year to no fewer than 1,000 remittances a year. Although the CFPB did increase the safe harbor exemption in the final rule, it extended it only to providers that transact 100 or fewer remittances per year. The CFPB indicated at least 80% of credit unions that offer remittance services would be exempt.

The CFPB, in a release, said it concluded that those institutions that consistently conduct 100 or fewer remittance transfers per year do not provide transfers in the "normal course of business" and therefore are not subject to the new requirements. Also, the CFPB said, if a company that provided 100 or fewer remittance transfers in the previous year provides more than 100 remittance transfers in the current year, the rule provides a reasonable transition period to come into compliance.

The bureau's new remittance disclosure rule will take effect Feb. 7, 2013. This final rule is only on the safe harbor and preauthorized transfers. It affects international wires and international ACH transfers. Disclosures must generally be provided when the consumer first requests a transfer and again when payment is made. The rule also provides consumers with error resolution and cancellation rights.

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NCUA logoUnlocking MBL Dollars? NCUA Initiative May Double
Number of Low-Income Credit Unions

More small businesses across America will have greater access to needed capital from federal credit unions through a NCUA initiative to streamline the process for federal credit unions to receive a low-income designation (LICU). NCUA sent letters to 1,003 federal credit unions notifying them of their eligibility for the LICU designation on August 7th, and 35 of those were in Georgia.

NCUA’s initiative was incorporated into a relief and recovery package for drought-stricken states announced at the White House. Of the LICU-eligible institutions, 470 federal credit unions — representing 47 percent of potential new LICUs, 52 percent of potential new assets, and 54 percent of potential new members — are headquartered in states identified by the National Oceanic and Atmospheric Administration as having “extreme” drought conditions.

"With this initiative, we are cutting regulatory red tape and expanding access to capital for small businesses, which should translate into job creation," said NCUA Board Chairman Debbie Matz. "Providing small businesses with the money needed to open their doors, create jobs, or expand operations will help our economy. This action is particularly timely for the 27 states devastated by this summer’s historic drought."

One of the important benefits of the designation is the ability of LICUs to make unlimited member business loans. NCUA projects this initiative could unlock between $250 million and half a billion dollars in new, near-term business lending if all qualified federal credit unions participate. The initiative could double the number of LICUs and increase their member business lending by nearly 75 percent. Rather than waiting for credit unions to complete the required paperwork to become a LICU, NCUA contacted the credit unions alerting them of LICU eligibility. Credit unions receiving letters may now "opt-in" with a simple reply that agrees to the LICU designation.

To qualify as a LICU, a majority of a federal credit union’s membership (50.1%) must meet low-income thresholds based on 2010 Census data. In addition to the exemption from the statutory 12.25 percent statutory cap on member business lending for credit unions, other advantages derived from the LICU designation include:

  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans,
  • Ability to accept deposits from non-members, and
  • Authorization to obtain supplemental capital.

For more information about the LICU designation initiative, click here.

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Golden eggYou Can Make the Difference

On August 21st, there will be several primary runoff races ranging from federal, to state, to local that will be decided... and voter turnout is expected to be dismal. In just the primary elections held on July 31st, only 31% of the registered voters cast a ballot... with some counties as low as 18% (click here for a county-by-county voter turnout). With some races being decided by just a handful of votes, who shows up to the polls has an enormous impact on each of our lives and our industry.

This is an opportunity for credit unions. Credit unions can make a difference in the upcoming August 21st runoff and every subsequent election by encouraging their members to vote. It’s easy, and can be accomplished by utilizing one or all of the following three steps:

The simple process of encouraging others to vote can build influence for all credit unions.

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State Legislative Group Supporting CU Policies

Provisions backed by credit unions reinforcing support for a dual chartering system with an option to retain private insurance are key provisions of the Banking and Financial Services Policy Directive that the National Conference of State Legislatures (NCSL) is scheduled to adopt this week at its annual meeting in Chicago. Many state legislators, including many key leadership individuals from Georgia, utilize NCSL guidance when crafting legislation.
Thumbs up"NCSL believes that state credit union supervisors have the primary responsibility for assuring the safety and soundness of credit unions chartered by and operating under state law and regulation NCSL supports the authority of state governments to determine how state financial institutions must be insured and opposes any efforts by the federal government to preempt states' authority to govern state deposit insurance requirements,'' according to the policy statement, which is the result of a condensation and combination of existing policies.
The conference said it feels the need to take a strong stance because it is "concerned that Congress, the federal banking regulators, and the federal courts have sought to nationalize control of financial services in Washington, D.C." The statement goes on to say that states must "provide a credible regulatory environment,'' so credit unions avoid practices that can threaten the National Credit Union Share Insurance Fund's (NCUSIF) financial solvency. It added that the National Credit Union Administration has a "legitimate role'' if state agencies don't do their job properly, but the federal agency's "regulations and policies should be crafted in a way that minimizes the preemption of state authority."

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IYC logoInternational Year of Cooperatives: Bet You Didn’t Know...

Best Western Hotel chain is a co-op! That’s right. Based in Phoenix, Arizona, the Best Western cooperative was founded in 1946 when M.K. Guertin, a California-based hotelier, decided to implement a central reservations system to make it easier to provide lodging for travelers in the motels located along legendary route 66.

One hundred percent of members’ fees are reinvested in services for hoteliers. Best Western is a “voluntary” hotel chain operating as a cooperative, meaning it is neither an integrated chain nor a franchise. Upon joining the Best Western cooperative, each hotelier retains its operational independence and becomes an associate of the chain. As such, Best Western hoteliers are the only beneficiaries of the activities developed by the chain. They contribute between 0.8% and 1.5% of their revenue to the cooperative.

Best Western is a prime example of how resilient the cooperative model has been throughout the economic crises: Its revenues are more than seven times greater than its expenditures! Click here to read more about this cooperative business.

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In the CU Push for Regulatory Relief, This Doesn’t Help

PushingThe Washington Post asked the question on August 7th if regulators are doing enough to rein in money laundering, citing that regulators are catching flak for not acting quickly enough to stop banks that helped Iran flout U.S. sanctions. This week, the state of New York said London-based Standard Chartered Bank concealed $250 billion in Iranian transactions, violations that persisted for nearly a decade. A number of international banks, including Lloyds, Barclays and Credit Suisse engaged in similar behaviors, but it took years before regulators put their foot down.

State and federal agencies routinely audit to ensure compliance with anti-money-laundering rules, but critics say enforcement actions have fallen short of serving as a deterrent, with punishments resulting in fines but no jail time. Policing the world’s banking system, others say, is no small task and regulators are doing as much as they can in the face of rampant deception.

Some federal regulators wanted to move slower on Standard Chartered to make sure they had the strongest case possible. The bank said “99.9 percent” of the transactions were legitimate, and about $14 million slipped through the cracks. But that may still be enough to put its ability to operate in the United States in jeopardy. In 2003, the Federal Reserve Bank of New York first raised concerns about the bank’s money-laundering controls after discovering deficiencies. Standard Chartered entered into an agreement with regulators to shore up its controls and conduct an independent audit of its transactions from 2002 to 2004. The bank, with the help of consultant Deloitte & Touche, allegedly omitted critical transactions from its report to regulators, according to an investigation unveiled Monday by Benjamin Lawsky, superintendent of New York’s Department of Financial Services. Deloitte denied any wrongdoing.

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Big Banks Turning on Each Other

The August 5th edition of The New York Times zeroed in on the new financial environment... that major banks, which often band together when facing government scrutiny, are now turning on one another as an international investigation into the manipulation of interest rates gains momentum. With billions of dollars and their reputations on the line, financial institutions have been spreading the blame in recent meetings with authorities, according to government and bank officials with knowledge of the matter. While acknowledging their own wrongdoing, institutions are pointing out actions at other banks that they believe are worse — and in some cases, extend to top executives.

BankOne official involved in the case said that banks are emphasizing that “we’re not as bad as the next guy.” The Swiss bank UBS, which has a history of regulatory run-ins, has shared e-mails, instant messages and other information suggesting it had colluded with traders at Deutsche Bank, HSBC and the Royal Bank of Scotland to manipulate key interest rates, according to court documents and bank employees. In talks with authorities, HSBC is providing its own account of the activities, according to a lawyer briefed on the matter. Citigroup has also detailed rate manipulation with other banks. When the British bank Barclays recently negotiated a settlement with authorities, it highlighted that other European institutions took part in the rate-rigging scheme, said officials close to the case. Like UBS, Barclays has provided information on activities involving HSBC and Deutsche Bank.

Typically, big banks such as these often try to negotiate a common deal to avoid getting singled out for bad behavior, as seen earlier this year when five banks collectively struck a multibillion-dollar agreement with federal authorities to address foreclosure abuses. However, with the rate investigation, institutions are not sharing information or even discussing the case with rivals. In part, they do not want to appear to have close ties with their rivals, since such cozy relationships are part of the government’s inquiry. “There is no information-sharing among banks unlike the past 15 years of federal investigations,” said a lawyer involved in the case.

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WindmillAnd the CU Movement Keeps Growing –
Dutch Entrepreneurs Start Up CUs

Dutch entrepreneurs are fed up with the difficulty of getting bank credit and are planning to set up credit unions to solve the problem, the Dutch paper Financieele Dagblad reported on August 8th. The first Dutch credit union will begin in September under the name Midden-Nederland.

Midden-Nederland was formed when a group of entrepreneurs from Amersfoort and Gooi en Eemland had lunch together and found they shared one frustration: the lack of credit from banks, says the FD. They set up a credit union whose members include a removal company, a pension advice agency and a wine wholesaler, and plans are under way for credit unions run by bakers, motoring organizations and entrepreneurs from Noord-west-Veluwe.

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