SEPTEMBER 21, 2012
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U.S. Capitol Generating MBL Buzz on the Hill
Capitol Hill event focuses attention on the importance of passing legislation to enable a higher cap on member business lending by credit unions.

  Chairman Bachus Urges Senate Vote on ATM Placard Bill
The chairman of the House Financial Services Committee asked the Senate majority leader to allow the Senate to vote on legislation repealing the requirement for ATMs to have placards advising of possible fees.

  State Hearing on MVR Laws
A Georgia legislature study committee held the first of a series of planned hearings on Georgia's motor vehicle law, which includes several areas of potential relevance to the credit union industry.

  Ray of Light in the Regulatory World?
The National Credit Union Administration's September 20 meeting included several items potentially positive for credit unions, including regulatory relief, new investment options, and alternatives to payday lenders.

  What Is a Qualified Mortgage? Groups Urge CFPB
to Use a Broad Definition

Trade groups for credit unions and other financial service businesses urged the Consumer Financial Protection Bureau to adopted a broad definition of "qualified mortgage," to ensure broad access to affordable mortgage loans.
  Credit Unions the Sole Spot of Mortgage Lending Growth
Credit unions were the only type of financial institution to increase mortgage lending in 2011, according to a recent report by the Federal Financial Institutions Examination Council.

  Who Needs a Credit Union? More People Now than Ever
The percentage of U.S. households that are unbanked or underbanked rose slightly between 2009 and 2011, to 28.3 percent, according to statistics released recently by the Federal Deposit Insurance Corporation.

  Getting Out the Vote
There's plenty at stake in the upcoming elections, from local offices to the presidency of the United States. Read on for links to resources including candidate information, sample ballots and more.

  Small Dollar Lending Faucet Is Open
As large banks turn away from small-business lending in favor of issuing credit cards, microlenders – both nonprofit and for-profit – are finding a ready market for the funding they provide, said an article in The Wall Street Journal.

  A Growing Player in the Small-Business Competition
Two newspapers reported that an Atlanta-based company that lends cash to online merchants raised $30 million in new capital, and plans to use the money to improve operations, increase staffing and expand its offerings.

  Running with the Online Banks
The Wall Street Journal reported that big online banks have been increasing the interest rates on their depositors' savings accounts, in some cases to levels 10 times as high as what was previously available.

BeesGenerating MBL Buzz on the Hill

On September 12th, credit union advocates gathered on Capitol Hill to encourage Congress to adopt credit union business lending legislation. Live-streamed on the Internet, the event was designed to demonstrate the urgency of the member business lending (MBL) legislation to the offices of House and Senate members. The sponsors of Senate and House bills to give credit unions more business lending authority — Sen. Mark Udall (D-CO) and Rep. Ed Royce (R-CA) — made special appearances at the event, which drew nearly 200 credit union and small business supporters, as well as members of congressional staff. The event also included panels of small-business advocates, credit unions and small business owners.

Presented by the Washington-based publication The Hill, the event was designed to highlight House and Senate legislation that would increase the credit union MBL cap to 27.5% of assets, from 12.25%. Members of both parties support the MBL cap increase bills, and H.R. 1418 has 140 co-sponsors, including four from Georgia: U.S. Reps. Sanford Bishop (D-2), Hank Johnson (D-4), John Lewis (D-5), and Rob Woodall (R-7). In the Senate, S. 2231 has 21 co-sponsors and Senate leadership remains committed to a floor vote on the MBL legislation. Udall highlighted to the crowd that lifting the MBL cap would grow the economy: "Simply put, there are credit unions with money to lend, and small businesses in many communities that need loans to spur job growth. Why don't we get government out of the way and let our economy grow?"

In one of the panel discussions, Eli Lehrer of the R Street Institute said the two MBL bills are policy changes Congress needs to consider "seriously" and at the earliest possible date. Panelists said they saw no clear reason to oppose an MBL cap increase, and while banks have claimed there is no demand for small-business loans, John Arensmeyer, CEO of The Small Business Majority, said his own experience has shown universal demand for small-business loans across the country.

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U.S. Rep. Spencer Bachus
Chairman Bachus Urges Senate Vote on ATM Placard Bill

On September 12, House Financial Services Committee Chairman Spencer Bachus (R-Ala.) urged Senate Majority Leader Harry Reid (D-Nev.) to allow the Senate to vote on the credit union-supported ATM placard bill (H.R. 4367) before it recesses for the November elections. The legislation, which the House passed by a 371-0 vote on July 9th, would protect credit unions and other financial institutions from frivolous lawsuits by repealing the outdated, duplicative requirement that a placard must be attached to ATMs stating that a fee may be charged. “The Senate has an opportunity to stem the tide of baseless, nuisance lawsuits that threaten consumers’ access to ATMs, especially in rural and locations that are prone to vandalism,” Bachus said in a letter. Bachus emphasized that there is no meaningful opposition to H.R. 4367. “This bill is a model for what Congress should be doing: it is pro-consumer; it eliminates unnecessary red tape; it fixes a real problem; and it is bipartisan.” Stay tuned!

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Georgia CapitolState Hearing on MVR Laws

On September 12th, the state Legislature began the first of a series of study committee meetings to review the entire motor vehicle code section of Title 40 Georgia law. This hearing was monitored as any and all areas of MVR law could be subject to change (and for credit unions, issues of interest range from sales to lending, titling to registrations, and liens to security interests). However, given the stance the committee took in this first meeting, it is likely that any proposed changes will be directed solely at the criminal provisions of the traffic code, and not areas of credit union interest. During the testimony though, one individual who provided citizen testimony in the hearing utilized the opportunity to articulate an off-topic issue of how Georgia is a nonjudicial foreclosure state!

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Ray of lightRay of Light
in the Regulatory World?

NCUA’s September 20th meeting covered items that should be positive for credit unions, as opposed to those that will impose undue burdens and create barriers for credit unions that divert their resources from member service. Key points from the meeting:

  • A proposed new definition of “small credit union” from $10 million in assets to $30 million. This proposal will only have a 30-day comment period as NCUA is seeking to move on this matter quickly to provide greater relief for smaller credit unions.
  • A proposed rule that would permit federal credit unions to purchase Treasury Inflation Protected Securities, which will be open for a 60-day comment period.
  • A proposed rule that would expand the agency's definition of "rural district" for fields of membership to the greater of 200,000 or 3 percent of the state’s population, which will be open for a 60-day comment period; and an
  • Advanced Notice of Proposed Rulemaking related to payday-alternative loan regulations, which will be open for a 60-day comment period.

NCUA is seeking to encourage more federal credit unions to offer payday alternative loans. In September 2010, NCUA moved to allow federal credit unions to offer short-term, small amount loans to members. The loans, which serve as alternatives to payday loans that are offered by other financial service providers, come with certain restrictions and NCUA is seeking comments regarding the permissible interest rates, loan range, timing of loan maturities, and other current requirements. To learn more on the details of this and the other proposed rules, please click here for CUNA’s summary of the NCUA Board meeting.

Also of note, NCUA Board Member Gigi Hyland plans to resign on October 5th of this year. Hyland has served on the board since November 2005. Her term technically expired in August 2011, and Carla Decker, CEO of District Government Employees Federal Credit Union, was originally nominated for the position but withdrew her name from the running back in March of this year. No nominee has been announced as of press time.

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What Is a Qualified Mortgage? Groups Urge CFPB to Use a Broad Definition

Credit unions joined other financial trade groups in urging the Consumer Financial Protection Bureau (CFPB) to broadly define qualified mortgages and provide mortgage lenders with a legal safe harbor from ability-to-repay litigation. In a September 14th letter to CFPB Director Richard Cordray, CUNA and the groups said the qualified mortgage definition must meet three requirements:

  • Qualified mortgage must be broadly defined to include the vast majority of very high quality loans being originated in today's market;
  • The product, documentation and underwriting requirements must be based on objective, bright-line standards; and
  • Lenders and investors must be granted a clearly defined legal safe harbor from ability-to-repay litigation when they originate loans that meet the qualified mortgage standards.

CFPB logoA broad qualified mortgage definition, with bright-line standards embedded in a legal safe harbor, "is the only sure means to serve the widest array of qualified borrowers with affordable credit," the letter said. Under a still-developing CFPB rule, mortgage originators would be required to consider a homebuyer's ability to repay a loan before the loan is offered. The CFPB's ability-to-repay requirements would apply to consumer credit transactions that are secured by a dwelling and be further defined by the agency's definition of a qualified mortgage.

Organizations joining CUNA on the letter are the American Bankers Association, the American Financial Services Association, the Consumer Bankers Association, the Community Mortgage Banking Project, the Consumer Mortgage Coalition, the Housing Policy Council of the Financial Services Roundtable, the Independent Community Bankers of America, the Mortgage Bankers Association and the National Association of Federal Credit Unions.

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Credit Unions the Sole Spot of Mortgage Lending Growth

Finding moneyWhile credit union mortgage lending increased by 8.5%, the total number of originated loans of all types and purposes declined by 780,000 between 2010 and 2011, in part due to a 13% decline in refinancings, the Federal Financial Institutions Examination Council (FFIEC) reported on September 18th. These numbers are part of the FFIEC's data on the mortgage applications, originations, purchases, and denials that were filed by credit unions and other Home Mortgage Disclosure Act (HMDA) covered financial institutions in 2011. Under HMDA, credit unions with total assets of more than $40 million that have home or branch offices in defined metropolitan statistical areas must collect their loan data and report it to federal regulators.

Credit unions were the only type of financial institution to increase mortgage lending in 2011, according to the HMDA data. Mortgage lending at banks decreased by 7.1%, and mortgage lending at thrifts declined by 24.1% during 2011. The Federal Reserve in a separate release on the FFIEC data noted that the overall credit scores of borrowers are "considerably higher now than at any point in the past 12 years." The median score of mortgage borrowers has risen about 40 points since the end of 2006.

The Fed noted that the 7.1 million loan originations reported in 2011 is the lowest loan total recorded in HMDA data since 1995's total of 6.2 million. Government-backed loans originated through the Federal Housing Administration's mortgage insurance program, the Department of Veterans Affairs (VA) loan guarantee program, and other government programs accounted for nearly 50% of all home purchase loans made in 2011, a slightly smaller share than the total reported in 2010.

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Who Needs a Credit Union? More People Now than Ever

HandsMore than one in four U.S. households (28.3%) are either unbanked or underbanked, a slight increase from 2009, according to 2011 statistics released September 12th by the FDIC. Credit unions' ongoing efforts to help people afford life — particularly low-income members — and their outreach efforts to largely unbanked or underbanked populations are needed now more than ever. The announcement comes just as the NCUA reported that hundreds of credit unions have accepted its low-income designation, meaning they can accept supplemental capital and use an exemption from the small business lending cap under certain circumstances to assist their members. In August, NCUA notified 1,003 credit unions that they were eligible for the program. Low-Income Credit Unions (LICUs) are also eligible for Community Development Revolving Loan grants and low-interest loans, and may accept deposits from non-members, such as unbanked households relying on payday lenders for financial services.
More than 821,000 more U.S. households have become unbanked since the first survey in 2009, a 0.6 percentage point increase, according to the FDIC's 2011 National Survey of Unbanked and Underbanked Households. More than half of all unbanked households say they do not have an account because they believe they do not have enough money or that they do not need or want an account. Three in 10 households in the U.S. do not have a savings account. Other key findings:

  • One in 12 U.S. households — 8.2%, or 10 million households — is unbanked. Roughly 17 million adults live in unbanked households.
  • One in five households (20.1% or 24 million households with 51 million adults) is underbanked.
  • Of the households, 29.3% do not have a savings account, while about 10% do not have a checking account. Nearly two-thirds have both savings and checking accounts.
  • One-fourth of households report having used at least one alternative financial service such as non-bank check cashing or payday loans in the past year. Nearly one in 10 used two or more types of these services. Also, 12% of households report using these services in the past 30 days, including four out of 10 unbanked and underbanked households.

 Regardless  of whether a credit union is an LICU or not, state or federal charter, and regardless of asset size, all consumers can benefit from joining a credit union.

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VoteGetting Out the Vote

Credit unions across Georgia have been educating their staff and membership on key voter registration dates, encouraging voter turnout and shedding light on the importance of voting through ElectionWatch 2012. Time is of the essence! Georgians have until October 9th to register to vote in the November elections. The November elections will decide:

  • the President,
  •  all 14 Georgia U.S. Representatives,
  • all 56 Georgia State Senators,
  • all 180 Georgia State Representatives,
  • various District Attorneys,
  • Supreme Court Justices, and
  • other judges and local races.

Want to print what will be on your ballot, or see where you can vote in advance of the November 6th election? Click here for this information and more to be ready for your vote prior to advance voting, which begins on October 15th. If you are not 100 percent sure who will receive your vote in the top race, here is the USA Today candidate match game that matches up your presidential pick based on your issue quiz responses.

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FaucetSmall Dollar Lending Faucet Is Open

The September 12th edition of The Wall Street Journal reported how millions of small business owners in the U.S. are finding it difficult to access mainstream banking because of their modest means. The article cited that many are turning to microlending or loans of often just a few thousand dollars, for the funds they need to upgrade or buy equipment. Microlending is well established in developing countries like Bangladesh and Mexico, and is growing in the U.S.

Why? Many large banks in the U.S. are turning away from small-business loans, preferring instead to issue business credit cards to small-business owners, according to Bob Coleman of Coleman Publishing, a website and weekly newsletter about small-business finance. The U.S. nonprofit microlenders generally receive funding from private donations and from state and federal programs, and nearly all of them are classified as community development financial institutions and receive block grants ranging from about $1,000 to $1.5 million annually through the U.S. Small Business Administration. Of note:

  • The U.S. agency distributed nearly $47.5 million in microloans during its 2011 fiscal year, the largest sum in its 20-year history, through 170 nonprofit lenders.
  • In the last decade, the SBA microloan program's average loan size has steadily declined from about $14,200 to $11,750, a sign that lenders have continued to supply small-dollar loans, even as credit dried up during the economic downturn.
The Business Center for New Americans, Grameen America, and members of the Accion U.S. Network in New York, Chicago and Texas are all partners with the SBA microloan program. Grameen America says it so far has made more than 25,000 loans with an average loan size of $2,200 since opening in 2008. Some for-profit U.S. microlenders, typically small, closely held banks, such as Borrego Springs Bank in California, $142 million in assets, offer bigger microloans of $20,000 to $50,000 apiece.
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A Growing Player in the Small-Business Competition

CabbageThe Atlanta Journal-Constitution and the Atlanta Business Chronicle reported on September 18th that Kabbage, an Atlanta-based company that gives cash advances to online merchants, has raised $30 million from new and existing investors. Kabbage was launched in late October 2010 and serves the burgeoning market of online merchants “overlooked” by traditional financial institutions. The new round of financing now brings the total amount of equity that the company has raised to $56 million since its formation.

What is its business model? Kabbage gives cash advances to companies that use online retail sites such as eBay and Amazon to sell their products. Instead of using credit reports, Kabbage analyzes data — including UPS shipping data, the potential recipient’s QuickBooks accounting information and how active the merchant is on Facebook and Twitter — to determine whether to provide money. The online businesses typically use the money for working capital for day-to-day operations.

Kabbage plans to use its $30 million cash infusion for four different things, said Marc Gorlin, the company’s chairman and a co-founder. The company plans to beef up its data and technology operations; expand so it can extend cash advances to small businesses that aren’t solely online; add international merchants; and increase staffing (currently has 70 employees). The company gives cash advances that range between $500 and $50,000, and is testing lines of credit “well over” $100,000, Gorlin said. “We want to make the process of getting cash fast and painless,” Gorlin said. “Small businesses already have pain associated with getting cash, and many can’t.” Sound familiar?

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BullRunning with the Online Banks

The September 18th edition of The Wall Street Journal reported that the large online banks are bucking a financial industry trend and raising their interest rates for savers. Is this due to consumers’ dissatisfaction with the rates, or is it rather due to new online bank in the market heating up competition? Regardless of the root cause, for some account holders these new rates present an opportunity to earn up to 10 times as much in interest, but only for some, and only if it’s worth chasing higher yields from one to another. Read more here

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