NOVEMBER 16, 2012
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The Countdown Is On!
With so many issues competing for the attention of the lame-duck Congress, it will take a focused and persistent effort by CU advocates to secure action on the much-needed member business lending legislation.

  Watchful Eye on CU Tax Status
Credit unions recently got a pointed reminder of the need for legislative vigilance – the mistaken inclusion, in a bill introduced in the U.S House, of language calling for elimination of credit unions' tax-exempt status.

  Painting Our Own Future
Credit union advocates' actions on behalf of pro-credit union candidates helped secure re-election of those candidates to Congress and to the Georgia Legislature.

  Impact of Elections on U.S. Senate Banking Committee
Two Democratic members of the U.S. Senate Banking Committee chose not to run for re-election, but newly elected Sen. Elizabeth Warren may be angling for a seat on the committee, according to press speculation.

  Significant Change Ahead for U.S. House Financial Committee
A dozen current members of the U.S. House Financial Services Committee won't be returning to the panel, making it certain that there will be significant change on the panel in the next Congress.

  It’s Them, Not Me! ATM Industry Files Against Interchange Settlement
An ATM industry trade group has filed an amicus brief opposing the proposed settlement of interchange-fee legislation, contending that the settlement's language might be construed to include ATM deployers.

  Path to Regulatory Relief
As the Consumer Financial Protection Bureau reviews Regulations Z and X, the credit union industry has asked the CFPB to provide for regulatory relief wherever possible.

  CUs Suggest Alternative High-Cost Trigger
The Credit Union National Association has suggested an alternative to two approaches the CFPB is considering as part of its redefinition of what constitutes a finance charge for a mortgage.

  Electronic Titling Phase-In
Georgia credit unions have asked the state Department of Revenue for three additional months before the mandatory phase-in of electronic lien and titling, to give CUs more time for due diligence.

  Insurance Exchange in GA? Better Stay in Bed
Georgia Gov. Nathan Deal hinted that he would not implement a state health insurance exchange as part of the federal health care overhaul, and it was reported that the state had stoppled planning such an exchange.

  CU Survey on Holiday Spending in the Media
InsiderAdvantage reported that, according to a recent Georgia Credit Union Affiliates survey, 97 percent of Georgians plan to spend the same amount or less this holiday season, compared with last year.

  Think the Bank (or the CU) Down the Street Is Your Competition? Think Again.
The New York Times reported that major retailers such as Wal-Mart, Home Depot and Costco are stepping up their efforts in the financial marketplace with such products as prepaid ATM cards and home-improvement loans.
ClocksThe Countdown Is On!

The ability to create success, legislatively or otherwise, more often comes from perseverance and seizing the opportune moment. Although the time in which credit unions can move forward federal legislative initiatives this year is quickly ticking away, there is still an opportunity, and credit unions are working to create legislative success in Congress. Georgia credit union leaders and small business owners are traveling to Washington, D.C., to join other credit union advocates and small businesses from across the country at the National MBL Hike the Hill on November 27th-28th. The credit union member business lending (MBL) bills S. 2231/H.R. 1418 to incrementally increase the MBL cap is one of the issues set to be addressed by the U.S. Senate in the lame-duck session, and is the sole focus of these visits.

Call to ActionThe MBL legislation was identified by Senate Leader Harry Reid (D-NV) as one of his 26 unfinished business items for the year, and it comes at a hectic time in Congress. This lame-duck session may prove to be the most active period for the 112th Congress as both parties will have to work to address the "fiscal cliff" via a combination of tax increases and public spending cuts – one of the largest political priorities on the horizon. There are also appropriations bills, various tax extenders, and the Farm Bill, which expired on September 30, which need to be addressed by Congress. This en masse show of force by credit unions from around the country is vital in drawing focus to the MBL bill.

Be a part of the efforts to make this lame-duck session the opportune moment to move forward MBL. Help support the lobbying of your fellow Georgia credit union advocates today; engage ALL of your credit union team now in sending Congress the message that credit unions support raising the MBL cap. Click here to access the Legislative Action Center and send a message of support of the Member Business Lending bills.

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EyeWatchful Eye on CU Tax Status

On November 14th legislation was introduced in the House of Representatives to essentially implement the Bowles-Simpson deficit reduction plan (H.R. 6474) by Rep. Dennis Ross (R-FL). This bill proposes to make several changes to the tax code, closing loopholes and eliminating tax expenditures, including the credit union tax exemption.

Immediately credit unions snapped into action and Ross’ legislative staff has shared emphatically that the inclusion of the credit union tax status was a drafting error. The credit union tax status was intended to be retained, not eliminated. Unfortunately, the rules of the House do not permit them to withdraw the bill or modify it. However, the staff has assured credit unions that in the (unlikely) event that the legislation moves, they will seek to make a change to the bill.

While Rep. Ross is a strong supporter of credit unions and this was an oversight, this issue is a stark reminder of the threat that the tax status is under in an environment where Congress is considering comprehensive tax reform. Credit unions will continue to monitor any tax legislation closely and work with policymakers to ensure that the credit union tax status is maintained.

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Painting Our Own Future

Last week, the elections came to a close. As a result, the political picture of the U.S. remains mostly unchanged. From a credit union perspective though, one point of note is that all of the strong credit union supporters in Congress won their re-election bids and will return. PaintBut this did not happen by accident. Credit unions across the country were active in key, tight races such as Sen. Jon Tester (D-MO) who was central in the legislative efforts that attempted to halt the interchange provisions (see related article below).

In Georgia, the majority of the tight races were at the primary level (with a few notable exceptions), and credit unions made a positive impact on the outcome of these and the general elections. Overall there were 255 Georgia credit union individuals from 27 separate credit unions to engage in the campaigns of 14 candidates (seven federal, seven state). These individuals helped return credit union supporters to Congress and to the Statehouse. They built inroads with legislators and built influence for the entire industry.

Our thanks to all the credit unions that engaged in campaigns this year and to many others that were ready in the event more legislators needed assistance. To read the full GCUA analysis of the federal and state elections, please click here.

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Impact of Elections on U.S. Senate Banking Committee

U.S. CapitolThe Democrats picked up two additional seats in the U.S. Senate Wednesday, Nov 7th, as Banking Committee member Jon Tester (D-MO) narrowly defeated Rep. Denny Rehberg (R-MO), and former North Dakota Attorney General Heidi Heitkamp (D) edged out Rep. Rick Berg (R) in races so close that they could not be called on election night. That leaves the new Senate with 53 Democrats, 45 Republicans and two independents – Sen. Bernie Sanders (VT), who caucuses with the Democrats, and newly elected former Maine Gov. Angus King, who supported President Obama but has refused to say which party’s caucus he intends to join. The current Senate is composed of 51 Democrats, 47 Republicans and two independents.

How do the elections impact the Senate Banking Committee, a committee of keen interest to credit unions? There will be little turnover in the Senate Banking Committee as Tester, Sherrod Brown (D-OH), Bob Corker (R-TN) and Robert Menendez (D-NJ) were all re-elected. Two committee members who will not be returning are Sens. Daniel Akaka (D-HI) and Herb Kohl (D-WI), who opted not to run for another term. Which brings up much speculation in the press that CFPB architect and newly elected Sen. Elizabeth Warren (D-MA) is vying for a seat on the committee. Stay tuned!

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Significant Change Ahead for U.S. House Financial Committee

ChangeThe new U.S. House so far has 234 Republicans and 195 Democrats, with six races still left to be decided. But what is known is that the House Financial Services Committee will have new faces, as 12 current members are not returning. This is a significant change to the existing makeup of the House Financial Services Committee, the committee that determines the fate of many of the bills of credit union interest.

Those members who were not successful in their elections were Reps. Judy Biggert (R-IL) , Nan Hayworth (R-NY), Robert Dold (R-IL), Francisco Canseco (R-TX), Frank Guinta (R-NH) and Joe Baca (D-CA). In addition, committee member Rep. Joe Donnelly (D-IN) will not return to the House as he was elected to the Senate, and ranking member Rep. Barney Frank (D-MA), Reps. Ron Paul (R-TX), Donald Manzullo (R-IL) , Gary Ackerman (D-NY) and Brad Miller (D-NC) did not seek re-election. Of note to Georgia credit unions, both of our state’s two current Financial Committee members, Reps. Lynn Westmoreland (R-3) and David Scott (D-13), are returning. The final makeup of the committee is yet to be seen.

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It’s Them, Not Me! ATM Industry Files Against Interchange Settlement

PenguinsThe ATM Industry Association (ATMIA) announced that it has filed an amicus brief in the U.S. District Court in conjunction with other opponents of the proposed class-action settlement between merchants and MasterCard/VISA. ATMIA contends that the language of the agreement is so broad and vague that it might be construed to include ATM deployers, even though the original claims were made by merchants engaged in the sale of goods or services.
ATMIA asserts that the proposed agreement is flawed as written. Most ATM cards have been replaced by debit cards, which can be used either for ATM transactions or purchases at the point of sale. MasterCard and VISA debit cards represent the vast majority of that market. As a result, the settlement class definition captures a majority of the cards used for ATM transactions and, thus, the deployers of those ATMs. However, even if the ATM deployers were drawn into the settlement class, they would not be eligible to receive an award of damages, because an ATM deposit/withdrawal transaction is not a purchase, ATMIA said. Therefore, an ATM deployer could involuntarily become a party to this class action settlement, and at the same time, be barred from receiving any benefit.

Credit unions were not a party to the litigation, but will be impacted by the injunctive relief settlement terms: temporary reduction in credit card interchange, surcharging and buying groups. The settlement's proposed reduced credit card interchange rate fees could cost credit unions with credit card programs up to $50 million total. The settlement would require a reduced interchange rate fee (IRF) of 10 basis points for an eight-month period, likely beginning in mid-2013, and would apply to all card issuers, including credit unions. If the total credit IRF reduction is $1.2 billion, credit unions with credit card programs would lose about $50 million in total revenues or about 0.5 basis points on their total assets, according to the Credit Union National Association. The loss would be concentrated among a relatively small number of credit unions with very active credit card programs.

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RoadPath to Regulatory Relief

The regulatory environment for credit unions and other financial institutions is becoming progressively more complex, and credit unions, Leagues, and CUNA are constantly working to analyze, prepare for and respond to a number of proposals from regulatory agencies. To help alleviate regulatory burden, Georgia credit unions, along with CUNA, have urged the Consumer Financial Protection Bureau (CFPB) in its amending of Regulation Z and X to combine certain mortgage disclosure relating to loan application and closing. Suggested changes include the elimination of duplicative disclosures and the removal of burdensome requirements with disclosures, consistency between the provisions of Reg Z and Reg X, and lender flexibility on when to involve settlement agents. As a whole, credit unions are asking the CFPB to provide for regulatory relief wherever possible as the agency reviews these regs! Please click here to read the letter submitted on behalf of Georgia credit unions.

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CUs Suggest Alternative High-Cost Trigger

The Consumer Financial Protection Bureau (CFPB) is planning to expand its definition of finance charge for mortgages, and this expanded finance charge definition, if adopted, could subject more credit union loans to additional limits and requirements under the Home Ownership Equity Protection Act (HOEPA), referred to as high-cost loans.

CFPB logoUnder the CFPB's related finance charge definition proposal, lenders would be required to include most up-front costs associated with a mortgage in the finance charge disclosed to borrowers. Loan charges or fees would need to be included in the finance charge, but late fees, delinquency or default charges, seller's points, some escrow payments and most insurance premiums would not need to be included. Since the finance charge is a large part of the annual percentage rate (APR) calculation, an expanded definition of finance charge would result in an expanded or increased APR. An increase in the APR is likely to cause more mortgage loans to meet or exceed HOEPA's APR coverage thresholds.

The CFPB has proposed two new thresholds for determining whether a given loan would or would not be subject to HOEPA coverage. The agency will likely choose one of these two thresholds for the final rule. CUNA has serious concerns with both alternatives the CFPB has offered, and suggested a third approach that blends elements of the two CFPB approaches in their recent comment letter on the proposal. If adopted by the CFPB in the final rule, the CUNA alternative approach could mitigate for credit unions the unintended increase in HOEPA coverage that would result from an expanded finance charge.

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CircuitsElectronic Titling Phase-In

On November 6th, Georgia credit unions asked the State Department of Revenue to allow for additional time before the mandatory phase-in of electronic lien and titling. The new shift from voluntary to mandatory electronic lien and titling was passed in the 2012 state session. However, the DOR has stated that effective January 1, 2013 the commissioner would require the phase-in of security interest holders and lien holders to receive notice of recordings of security interest and liens electronically. The GCUA comment letter asks the DOR to push back the implementation process three months in each phase-in category to provide credit unions additional time for due diligence. Stay tuned.

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Insurance Exchange in GA? Better Stay in Bed

A day after the elections, Gov. Nathan Deal hinted that he will not implement a Georgia health insurance exchange as part of the 2010 federal health care overhaul. The Athens Banner Herald reported on November 7th that Deal would not disclose his decision until notifying federal authorities, but that the state stopped planning an exchange once federal agencies wrote regulations that he says restrict Georgia's ability to design its own program.

SleepyThe decision to stop, Deal says, is "probably a pretty good indication of where we are headed.” A provision in the federal Affordable Healthcare Act gives states the option to run the exchanges or default to the federal government, and these exchanges would allow individuals to shop for private insurance. Whether consumers see real differences between a federal or state exchange remains to be seen. Congress set a January 1, 2013, deadline for states to have an operable exchange, and states had until November 16 to submit an outline for an exchange or notify federal authorities that they decline to open their own.

An interesting wrinkle is that on November 9, the U.S. Dept of Health and Human Services extended the deadline for application submission to January 1, 2013. However, it is not likely to alter Deal’s direction. Deal said he was initially inclined to consider a state-run exchange, and in 2011, he appointed a committee that advised him on how to proceed. However, that panel opted against recommending a state-managed exchange. When asked for an example of a policy that Georgia could not implement as part of the exchanges, Deal cited "association plans," a concept that would allow a professional or trade association to form a large group insurance pool — similar to large employers — to spread risk and, theoretically, make coverage affordable.

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Shopping cartCU Survey on Holiday Spending in the Media

InsiderAdvantage reported on November 12thon the upcoming trend in holiday spending utilizing the Georgia Credit Union Affiliates Saving and Purchasing Survey. The article shared that Georgians will be clutching their purses this holiday season, according to the survey that shows 97 percent of shoppers plan to spend the same or less than last year. The survey data comes from 7,000 people who save or borrow from credit unions in Georgia. Seventy percent plan to pay for their gifts with cash and 12 percent with credit cards, a slight decline from last year's 16 percent plastic users.

The article further mentions that a large group of consumers will borrow. According to Grace Lollar, president of Richmond Community Federal Credit Union in Gracewood, Ga., "Wages have not risen for most of our membership, but the cost of living has gone up. Most of our members rely heavily on holiday loans to pay for their purchases." A separate survey conducted by the National Retail Federation shows the average person nationally plans to spend $750 this holiday season, up ten bucks from last year for a 4.1 percent increase in overall sales. That compares to the credit union survey where 58 percent say they will spend less than $500.

These results mean the overall sales increase is being funded by just a few people, notes Mike Mercer, president of GCUA. "A lot of the global lift in holiday spending is really coming from a very small portion of the population," he said. Bargain hunting will be the strategy for most people. They will stick with discount stores, comparison-shop with their smart phones as they cruise the aisles, and rely to a greater extent on purchases they get online, according to the Retail Federation's data.

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Think the Bank (or the CU) Down the Street Is Your Competition? Think Again.

BankThe New York Times reported on November 14th of the growing player in the financial market. Banks? Credit unions? Think again. Wal-Mart, Home Depot, Sam’s Club and Costco are competing for your business (and your members may already utilize them!). The article highlights how major retailers are stepping into the financial marketplace. Customers can withdraw cash at an ATM with prepaid cards from Wal-Mart, take out loans at Home Depot for a kitchen renovation or kick-start a new venture with small-business loans from Sam’s Club. This year, Wal-Mart even started to test selling a life insurance policy. Consumer advocates are torn about the growth of this shadow banking industry. They see it as the ability to get financial products into the hands of people who otherwise might not qualify for them, but these products are not always subject to the same regulations as bank products are. Likewise, to turn a profit, retailers generally charge more to people with poor credit or none at all.

For the retailers, banking products are not huge profit centers but a business strategy, meant to put money into customers’ hands and get them buying more. Retailers were once interested in actually becoming banks. Sears, in the 1980s, tried a “socks and stocks” strategy that included acquiring the Dean Witter brokerage firm. Wal-Mart sought a banking charter for almost a decade before finally abandoning the quest in 2007. While supermarket chains have leased space to credit union or bank branches for years, they are now offering their own products or teaming with small financial firms to do an end run around big banks.

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