MARCH 22, 2013
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US Capitol CU-Supported Privacy Notice Bill Passes House, Is Introduced in Senate
The U.S. House passed a bill that would eliminate the requirement that privacy notices be sent out annually, instead requiring that such notices be sent only when a financial institutions's privacy policy has changed.

 
     
  Overdraft Legislation Introduced in the House
Two U.S. Representatives introduced a bill that would cap overdraft fees, limit the number of overdrafts allowed per year, and require financial institutions to post credits and debits in a particular order.

 
  Cordray: 'CFPB Should Protect CUs'
Consumer Financial Protection Bureau Director Richard Cordray, in a Senate Banking Committee confirmation hearing, said the bureau's regulatory actions should "protect and preserve [credit unions'] traditional model of lending."

 
  Senate Banking Panel Approves Cordray, White Nominations
The Senate Banking Commitee, by a 12-10 vote, approved the nomination of Richard Cordray to continue as CFPB director, and voted 21-1 to approve the nomination of Mary Jo White as Securities and Exchange Commission chairman.

 
  House Committee Hearing Looks at Bank Failures;
CUs to Have Reg Burden Hearing

A House Financial Services subcommittee held a hearing to look into the 414 bank failures from 2008 through 2011, while a committee spokesman told CUNA that the panel plans to hold a hearing on credit unions' regulatory burden.

 
  FHFA's DeMarco: Reform Legislation Needed on Fannie, Freddie
Federal Housing Finance Agency Acting Director Edward DeMarco told the House Financial Services Committee during a hearing on March 19th that Congress must determine the future of Fannie Mae and Freddie Mac.

 
  Chairman Hensarling: GSE Reform on Panel's Agenda
House Financial Services Committee Chairman Jeb Hensarling (R-TX) recently said his panel would vote on a bill to eliminate Fannie Mae and Freddie Mac, but he did not provide timing or details on the legislation.

 
  March Madness
With the state Legislature having reached day 37 of its 40-day session, and the final three days scheduled for next week, the rush is on for legislators to move their respective bills, generating a large volume of committee activity.
 
  Is There a Doctor in the House?
A March 17 article in Insider Advantage illustrated precisely what the final days of the state session are like, with the analogy of "performing surgery" on hundreds of bills in an effort to pass them and eliminate unwanted provisions.

 
  Unthinkable? CU Members Vote to Convert to Bank
Members of HarborOne CU in Brockton, MA, voted to convert the $1.9 billion asset credit union to a mutual cooperative bank charter, with roughly 62 percent of voting members casting their ballots in favor of the change.

 
  Now This Is Scary
An article in the March 19 edition of The Wall Street Journal shared what may be a coming retirement crisis, citing data showing that powerful forces are combining to squeeze individuals and companies trying to save for the future.

 
 
 
CU-Supported Privacy Notice Bill Passes House, Is Introduced in Senate

The U.S. House approved by voice vote on March 12th the Eliminate Privacy Notice Confusion Act (H.R. 749), and the bill now moves to the Senate for consideration. This bill will make privacy notifications more meaningful by removing a costly and duplicative paperwork requirement that has been no real help to consumers.

On Thursday, March 21st, Senate Banking Subcommittee on Financial Institutions Chairman Sherrod Brown (D-OH) and committee member Sen. Jerry Moran (R-KS) introduced legislation to end the redundancy of privacy notices. The bill (S. 635) diverges slightly from the language of a similar bill passed recently in the House. While both bills would eliminate a requirement that privacy notices be sent on an annual basis and would instead allow the notices to be sent only when the privacy policy of a financial institution has changed, the Senate bill would require credit unions and other financial institutions to make their privacy policies always accessible in some form in order to qualify for the bill's exemption from sending annual privacy notices.

H.R. 749 would end repetitive privacy notices by eliminating a requirement that the notices be sent annually. Under the terms of the bill, privacy notices would only to be sent when the privacy policy of a financial institution has changed. A similar bill passed the House in late 2012, but the Senate did not vote on the bill before the last session of Congress ended. Credit unions supported the bill since it was introduced in the last session of Congress, and CUNA urged House members to vote yes on H.R. 749 in a letter sent the morning of the vote. This bill was also one of the issues raised by Georgia credit union advocates when they met with their Washington representatives during the CUNA 2013 Governmental Affairs Conference. Our thanks to Georgia Congressmen Reps. Lynn Westmoreland (R-3) and Tom Graves (R-14) for co-sponsoring this credit union-supported legislation!

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OopsOverdraft Legislation Introduced in the House

On March 19th, Reps. Carolyn Maloney (D-NY) and Maxine Waters (D-CA) introduced the Overdraft Protection Act of 2013, H.R. 1261, which would amend the Truth in Lending Act. The bill would cap overdraft fees. In addition to capping overdraft fees, the bill proposes to impose a limit on the number of overdrafts a member could use per year to six, and require financial institutions to post credits and debits in a particular order. Overdraft protection plans that are reasonably structured can help ensure consumers will have access to funds when needed.

Credit unions have had concerns with legislative and regulatory proposals that make it more difficult for them to offer these services to their members. This legislation is far from final, as of this publication date it has 42 Democratic co-sponsors and none from the Republican side of the aisle. To read the press release click here.

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CordrayCordray: 'CFPB Should Protect CUs'

Credit unions and community banks did not engage in practices that caused the financial crisis, and the Consumer Financial Protection Bureau (CFPB)'s regulatory actions "should take account of that fact and protect and preserve their traditional model of lending, which is a very responsible model and good for many communities across this country," CFPB Director Richard Cordray said on March 12th. Cordray made the remarks during a Senate Banking Committee confirmation hearing. Committee Chairman Tim Johnson (D-SD) started Cordray's questioning by noting that credit unions and community banks continue to raise concerns about regulatory burden, and asking how the CFPB plans to address these issues while protecting consumers.

The CFPB has met with credit unions and other small financial institutions in South Dakota and elsewhere, and the CFPB's work has been influenced by these meetings, Cordray responded. Georgia credit union advocates will recall Cordray was in Georgia speaking with credit union leaders just last month on the agency's qualified mortgage rule, escrow rule and servicing rule. The CFPB has created separate credit union and community bank advisory councils to speak regularly and specifically with small financial institutions about the issues they face. The regulation of non-banks and the shadow banking system are areas of emphasis for the agency.

The agency's structure and funding were also touched on during the hearing (as Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the agency). Cordray said he is open to working with the Senate to further develop transparency and accountability of the agency. House and Senate Republicans have supported replacing the CFPB director's position with a five-member panel of leadership. CUNA backs such a multi-member panel of directors if it includes seats statutorily designated for credit union system representatives, including a state or federal credit union regulator, and possibly a state consumer agency representative. Cordray's nomination is expected to pass through the committee, but his prospects before the full Senate are uncertain.

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Senate Banking Panel Approves Cordray, White Nominations

On Tuesday, March 19th, the Senate Banking Committee approved by a 12-10 party-line vote the nomination of Richard Cordray to continue as director of the Consumer Financial Protection Bureau. The panel also approved by a 21-1 vote the nomination of Mary Jo White to be Securities and Exchange Commission chairman.

Senate Majority Leader Harry Reid (D-NV) said the full Senate would vote on the nominations “sometime after Easter.” The Senate is expected to confirm White, but Cordray faces 43 Republican senators who have pledged to block the confirmation of Cordray or any other nominee for CFPB director unless the bureau’s structure is reformed. Cordray's nomination passed the committee in 2011, but ultimately failed to get a vote in the Senate. President Barack Obama appointed Cordray to the CFPB director position during a brief Congressional recess in 2012, and Cordray's term as director will end this year if he is not confirmed.

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Westmoreland
U.S. Rep. Lynn Westmoreland
House Committee Hearing Looks at Bank Failures;
CUs to Have Reg Burden Hearing

The House Financial Services subcommittee on financial institutions and consumer credit conducted a "state of the community banking industry" hearing Wednesday, March 20, that looked into the causes of the 414 bank failures that occurred from 2008 through 2011.
 
The hearing was ordered by a bill, sponsored by Rep. Lynn Westmoreland (GA-3) and enacted into law last year (P.L. 112-182), that required the Government Accountability Office (GAO) to issue a study on community banks and for the U.S. Congress to conduct a hearing within 150 days of the issuance of the study, which came out in January.
 
The single panel of witnesses Wednesday featured four staff representatives from the Federal Deposit Insurance Corporation and one from the GAO.
 
A committee spokesman told CUNA staff the panel does intend to hold a hearing to study the regulatory burden of credit unions. That session will be part of a 2013 series to study, in part, the impact of the Dodd-Frank Act. A date will be announced in the near future.

In fact, the series is a continuation of regulatory burden hearings conducted in 2012, in which the Credit Union National Association repeatedly testified on how the growth of financial services regulations has impacted credit unions.

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FHFA's DeMarco: Reform Legislation Needed on Fannie, Freddie

Fannie and FreddieCongress must provide legislation to determine the future of Fannie Mae and Freddie Mac, Federal Housing Finance Agency Acting Director Edward DeMarco told the House Financial Services Committee during a hearing on March 19th. "The U.S. housing finance system cannot really get going again until we remove this cloud of uncertainty and it will take legislation to do it," DeMarco said. "Fannie Mae and Freddie Mac were chartered by Congress and by law, only Congress can abolish or modify those charters and set forth a vision for a new secondary market structure."

He explained the FHFA is doing what it can to encourage private capital to come back into the marketplace. But as long as "there are two government-supported firms occupying this space, full private sector competition will be difficult, if not impossible, to achieve," DeMarco said. He added he has observed a developing consensus among private market participants that the conforming conventional mortgage market cannot operate without the taxpayer providing the ultimate credit guarantee for most of the market. "That clearly is one policy outcome, but I do not believe it is the only outcome that can give our country a strong housing finance system," DeMarco said. "I believe it is possible to rebuild a secondary mortgage market that is deep, liquid, competitive and operates without an ongoing reliance on taxpayers or, at least, a greatly reduced reliance on taxpayers, if that is what we set our minds to accomplishing." To read more click here.

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Hensarling
U.S. Rep.
Jeb Hensarling
Chairman Hensarling: GSE Reform on Panel's Agenda

In related news, House Financial Services Committee Chairman Jeb Hensarling (R-TX) recently said his panel would vote on a bill to eliminate Fannie Mae and Freddie Mac, but he did not provide timing or details on the legislation. Committee member John Campbell (R-CA) said Hensarling plans to hold hearings in the coming weeks on the issue. He added that private discussions on the bill's specifics could be held in May or June.




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BasketballMarch Madness

As of today, Friday March 22nd the Georgia General Assembly is on its 37th day of the 40-day session. The remaining three days will be held next week, with the final day "sine die" on Thursday, March 28th. Now that the end is literally in sight, the rush is on for legislators to move their respective bills, generating a large volume of committee activity (see related article below). Several committee-addressed issues of interest to credit unions:

  • On Thursday, March 21st the House Banks and Banking Committee held a second hearing on SB 139 by Sen. Butch Miller (R-Gainesville) and moved the bill forward. This bill impacts businesses that fall under the Georgia Industrial Loan Act, and seeks to allow an additional $50 fee to cover credit verification. The Government Influence Team worked with legislators to amend the language to ensure that current lending procedures are not inadvertently impacted by what the industrial loan industry is seeking. In earlier drafts, this bill would have the unintended consequence of making ANY closing fee be no more than $50, and/or negatively impact auto lending. In the current version, credit unions are not impacted. It now awaits consideration of the full House.
  • In multiple meetings this week, the House Judiciary Committee addressed bankruptcy reform found in HB 531 by Rep. Mike Jacobs (R-Brookhaven). This bill seeks to institute an increase to the bankruptcy exemption for motor vehicles from $3,500 to $5,000. Credit unions will recall Rep. Jacobs is seeking this change to help debtors retain a vehicle in the event of bankruptcy. In discussions with the Government Influence Team, he has committed not to seek additional changes or a change to the wild-card exemption (which would have been burdensome). This bill was introduced too late in the session to move forward by Crossover Day; therefore it was attached to a "live" bill in the committee: SB 105 by Sen. Hardie Davis (D-Augusta) which seeks to protect charities who unknowingly receive donations that may be fraudulent. In an interesting twist, there was an attempt by some interests to attach HB 82 by Rep. Earl Ehrhart (R-Powder Springs) to SB 105 as well. Credit union advocates will recall this bill would require a successor creditor to provide notice to a guarantor, and allow the guarantor 90 days in which to purchase the debt obligation. It only applies to a successor credit or who is not a depository institution, or an affiliate that is federally insured. However, in this new language the bill would have inadvertently removed credit unions from the provision that denotes the ability to receive payment from a successor creditor. This issue was defeated in committee; however this bill is being watched closely.
  • On Wednesday, March 20th the Senate Judiciary Committee moved forward HB 160 by Rep. Mike Jacobs (R-Brookhaven), which is of interest as it opens up the financial institution code of law (and as such, is a prime target for unwanted amendments that can impact financial operations). This bill seeks to amends the state’s foreclosure registry standard for language consistency and ban recurring recording fees that run indefinitely with the land (recurring fees paid every time ownership changes). The bill was amended in the hearing, and while the change does not impact credit unions, the issue is monitored closely as it is a potential vehicle for negative foreclosure amendments and/or property association attempts to supersede lien priority.
  • Also on the 20th, the Senate Judiciary Committee addressed HB 434 by Rep. Tom Weldon (R-Ringgold), which seeks to codify case law regarding materialmen's liens. This bill was prompted due to an outlier court case where a lien was limited to the physical improvement to the real property, and did not include the “soft costs” as is typical in materialmen's lien case law. And, with any bill that opens up lien law, it is watched closely to prevent undesired attempts on lien statues.

In addition to the above, there were multiple hearings monitored where potential "vehicles" for the HOA industry attempts to supersede the lien priority of financial institutions were watched (as there have been multiple attempts by HOA lobbyists this session to force foreclosing parties to be responsible for unpaid fees and fines). Coupled with the high level of committee hearings, the full Senate and House are monitored closely as they vote on bills. At this stage of the session, many attempts are made by others to amend bills on the floor of the chamber as it is being debated. Issues pending of note:

  • SB 185 by Sen. Jesse Stone (R-Waynesboro) was sent back to committee but is anticipated to be addressed by the full House soon. This bill is the byproduct of the State Bar Uniform Commercial Code Committee to bring Georgia law on par with other states. The legislation would clarify the transactions between creditors and debtors, and would be beneficial to credit unions and other financial institutions – especially those that lend in multiple states – as it would bring consistency. Credit unions will recall this bill had to be modified for a technical correction as the committee passed a version of the legislation that it did not intend to pass!
  • HB 83 by Rep. David Knight (R-Griffin) is anticipated in the full Senate for a vote. This bill seeks to correct a current regulatory opinion that states if a real estate agent is involved in a short sale, the agent is guilty of a felony. If passed and signed into law, it would reverse the regulatory language and allow the practice (that many real estate agents engage in presently) to be permissible. This issue is one that the government influence team follows as the bill opened the section of law applying to financial institutions and, needs to be watched closely to prevent any negative amendments on operational procedures, foreclosure practices, lending capabilities, etc.
  • HB 289 by Rep. Trey Kelly (R-Cedartown) is pending a full vote by the Senate. This bill seeks to clarify state law governing electronic fund transfers to be in compliance with federal provisions as a part of the Dodd-Frank Act.
  •  HB 175 by Rep. Dustin Hightower (R-Carrollton) is also pending a full vote in the Senate. Credit unions will recall this bill, which seeks to codify case law regarding property covenants, is one to watch, as it opens up possibilities for various property association interests who have continually sought to supersede the priority lien status of financial institutions.
  • The full House may consider SB 113 by Sen. Emanuel Jones (D-Decatur) soon. This legislation seeks to limit how businesses are served notice, and to prevent summonses or garnishments from falling through the cracks, by requiring that they be served to a registered agent (as opposed to whoever is at the front door).

With only three days left, what else is anticipated moving forward? The state Legislature will be in session Monday the 25th and Tuesday the 26th, with the final day on Thursday the 28th. These days will go well into the evening hours as the lion’s share of bills that pass for this entire year will do so in these three days. Issues will likely arise as amendments to moving bills, and the Government Influence Team is watching for any last-minute efforts by HOA interest to supersede the priority lien status of financial institutions, or attempts by members of House leadership to regulate deficiency judgments to name a few. With the last day likely to adjourn around midnight, watch for the next edition of Creating Influence for a final wrap-up of activity. Stay tuned!

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Is There a Doctor in the House?

On March 17th, Insider Advantage ran an article illustrating precisely what these final days of the state session are like, with the analogy of “performing surgery” on hundreds of bills. It references the bills that passed Crossover Day, and what is happening to these pieces of legislation inside the committees. The article states this is "where the scalpel, needles and thread come in. Legislators and lobbyists who saw bills they supported fall by the wayside after missing the March 7th Crossover deadline are feverishly urging committees to attach the wording of those bills as amendments to living bills. At the same time, other legislators are voting in committee to remove unwanted provisions from bills."

Georgia HouseA prime example of this was a case in which 13 amendments were offered to one bill, some adding and some subtracting words – with two amending another amendment. And what is happening with more frequency in the floor sessions are "the agrees and disagrees," where the authors of bills ask the whole House or Senate to either accept or reject the changes created by all that surgery. Agreement sends the amended bills to Governor Nathan Deal where he will have until May 7th to sign or veto them.

Some background: A "disagree" gives the other chamber the opportunity to recede from its position and accept the original version after all or, more commonly, to insist, which sets up the need for a conference committee to negotiate the differences. Agrees and disagrees happen fast, without debate, without an agenda and in any order. That forces legislators and observers to keep on their toes. When conferees are appointed, conference committees start happening in committee rooms, private offices and even hallways all over the Capitol complex, with no meeting notices or announcements. Most are over in minutes, and Capitol veterans consider this week the beginning of the most dangerous period, the time when the surgeons are at work.

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Unthinkable? CU Members Vote to Convert to Bank

UnthinkableMembers of HarborOne CU in Brockton, MA, have voted to convert the $1.9 billion asset credit union to a mutual cooperative bank charter. Roughly 62 percent of voting members cast their ballots in favor of the change. Of its 139,078 members, more than 22,433 – or 21 percent – of eligible voters actually voted by mailing ballots or attending a special member meeting held March 11th. The votes were confirmed by an independent auditing firm, and now (along with the materials used for the vote) will now go to state banking officials and NCUA.
 
The credit union is the largest state-chartered credit union in New England. The credit union had said when it applied for the change that it had to turn down mortgage lending business because its charter was limited to four counties, it was nearing its member business lending cap, and it could not grow in the Boston market. NCUA had said the credit union could have petitioned the state to widen its geographic boundaries and that it was not near its MBL cap. Both CUNA and the Massachusetts Credit Union League have said a credit union charter is the best option for credit union members and any decision should be in the best interest of the members.

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ClownNow This Is Scary

The March 19th edition of The Wall Street Journal shared what may be the next crisis – a retirement crisis. Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sets near highs and the economy shows signs of improvement. New data show that powerful financial and demographic forces are combining to squeeze individuals and companies that are trying to save for the future and make their money last. In the report by the Employee Benefit Research Institute, it was found:

  • 57 percent of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes,
  • only 49 percent reported having so little money saved in 2008, and
  • 28 percent of Americans have no confidence they will have enough money to retire comfortably — the highest level in the study's 23-year history.

This is not an individual problem. These same forces are weighing on corporate balance sheets. Based on another recent report, the Society of Actuaries said rising life expectancies could add as much as $97 billion to corporate pension liabilities in coming years, an increase of up to 5%. While Americans are living longer, the extended life spans will make it tougher for workers trying to stretch retirement savings and put additional strains on pension plans.

The above individuals likely encompass many credit union members, but the future does not need to be so scary for them. As individuals contemplate retirement, or their lack of options, they will need credit unions more than ever to help them navigate the best options for their financial future!

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