APRIL 19, 2013
Facebook logo Twitter logo
Government Influence
Project Zip Code
Contact Your Legislator
State Legislative Update
State Legislative Grid
Federal Legislative Grid
 
Public Influence
Consider This®
CUs in the News
Maximize the Power of the Media
Paying ATTENTION®
Quarterly Member Benefits Index
Statewide News Coverage
 
How Can Congress Provide CUs Regulatory Relief? Here Are 35 Ways!
In an April 10th House Financial Services subcommittee hearing, CUNA presented a 35-point plan for relieving the regulatory burden on credit unions.

 
     
  Educating Congress on CU Tax Status
The House Ways and Means Committee has asked credit unions and other stakeholders to brief the panel's financial services tax reform working group on the public policy reasons backing their respective tax exemptions.

 
  Ray of Light: Exam Fairness Bills Introduced
Bills to help ease the examination process and promote fairness were introduced in both the House and the Senate on April 15; the House bill's co-sponsors included a Georgia representative.

 
  Sen. Durbin Introduces Interest-Rate Cap Bill
U.S. Sen Richard Durbin introduced a bill that would impose a 36 percent maximum annual percentage rate cap on all open and closed-end consumer credit transactions.

 
  Positive Move: Cybersecurity Bills Pass House
With support from CUNA and other groups, the U.S. House passed three bills addressing the need for increased cybersecurity. The bills now go to the Senate for consideration.
 
  GAO Study Examines ATM Fees
The U.S. Government Accountability Office issued a report on ATMs that found that while fees have increased in recent years, it's still possible to obtain cash without fees, especially at credit unions.

 
  Top Republican to Ease Regulatory Burden on CUs
The Hill reported that Rep. Gary Miller (R-CA), a top Republican on the House Financial Services Committee, is preparing to introduce legislation to ease the regulatory burden on credit unions around the country.

 
  No Monkey Business Here – Governor Quickly Signing Bills
Into Law

Following a review by his office, Gov. Nathan Deal signed into law two bills recently passed by the Georgia Legislature, one dealing with the motor vehicle tax and title process and the other with loan closing fees.

 
  GA Senator Co-Sponsors CU-Supported Privacy Notice Bill
U.S. Sen. Saxby Chambliss of Georgia signed on as a co-sponsor of a Senate bill eliminating the requirement that financial institutions send out annual privacy notices when there has been no change to a privacy policy.

 
  Anatomy of a Bank Failure: High Concentrations of
Construction, Commercial Real Estate Lending

A study by the Comptroller of the Currency and the Federal Reserve found that banks with excessive construction and commercial real estate lending failed at higher rates during the financial crisis than banks without such exposure.

 
  Foreclosure Cash Payments
The Atlanta Business Chronicle reported that SunTrust and 12 other banks will begin making cash payments to borrowers who were involved in foreclosure during the financial crisis.

 
  Retiring Regulators + Consulting Firm = Congressional Questions
The New York Times reported that nearly two thirds of the senior executives at Promontory Financial Group, a consulting firm, were previously employed by agencies overseeing the financial industry.

 
 
 
35How Can Congress Provide CUs Regulatory Relief? Here Are 35 Ways!

U.S. House members showed interest in regulatory relief for credit unions, and outlined some of their own plans for credit union action during the April 10th House Financial Services subcommittee hearing in which CUNA shared a 35-point plan for relieving credit union regulatory burden. CUNA's comprehensive plan highlights ongoing concerns with the National Credit Union Administration, the Consumer Financial Protection Bureau and the Financial Accounting Standards Board, among others.

In this hearing titled "Examining Credit Union Regulatory Burdens," subcommittee members said they favored streamlining regulations for credit unions and allowing greater investment opportunities, including access to supplemental capital. Lawmakers also asked pointed questions about qualified mortgages and the true costs of regulatory burdens, and commented on the need for increased lending to small business owners during the hearing. Legislative fixes to some of the burdensome issues facing credit unions were also discussed:

  • Rep. Gary Miller (R-CA), vice chairman of the House Financial Services Committee, announced he will introduce a credit union relief bill (see related article);
  • Rep. Carolyn Maloney (D-NY) said she is working on legislation that would ensure that credit union loans made to businesses impacted by disasters do not count against the member business lending (MBL) cap.
  • Rep. Ed Royce (R-CA) discussed the MBL cap, and his bill (H.R. 688) that would increase that cap from 12.25 percent-of-assets to 27.5 percent-of-assets.

In the hearing, the point was reiterated that credit unions could better serve their members if resources were not drained on compliance issues. To address regulatory burdens, it was suggested Congress:

  • require the NCUA budget process to become more transparent by an annual open hearing on its spending plans;
  • help credit unions make more small-business loans by fully exempting government-guaranteed business loans from the MBL cap; and increasing the de minimis credit union business loan amount to $500,000;
  • make improvements to Regulation D by increasing the number of automatic transfers allowed from a member’s savings to share accounts;
  • increase the maturity limit for higher education loans made by federal credit unions; and
  • increase the NCUA board membership from three members to five members, including a state regulator's presence, and modernizing other aspects of the board structure.
Back to top

U.S. CapitolEducating Congress
on CU Tax Status

The House Ways and Means Committee has asked credit unions and other stakeholders to brief the panel's financial services tax reform working group on the public policy reasons backing their respective tax exemptions. While no legislator CUNA has spoken with has suggested credit union taxation is on the table as a tax reform or spending issue, none has suggested CUNA should be anything but vigilant on this key issue as tax reform talks move forward and all sorts of ideas are thrown into the discussions. To further educate Congress, CUNA lobbyists and President/CEO Bill Cheney met last month with Rep. Adrian Smith (R-NB), chairman of the Ways and Means Committee's financial services tax reform working group.
 
Credit unions are exempt from federal income tax because they are not-for-profit financial cooperatives with a mission of providing access to credit and promoting thrift to their members, and consumers benefit to the tune of $8 billion annually in terms of lower rates on loans, lower fees on services, and higher returns on deposits. Non-members benefit as well, because credit union competition helps keep bank savings rates higher and loan prices lower. Preserving the credit union tax status remains CUNA's top legislative priority. Credit unions need to unite to amplify our voices in Washington and we must work collaboratively to communicate the importance of our tax-exempt status to our members and our elected officials.

On April 15th the educational efforts to preserve the credit union tax exemption continued, with CUNA’s letter responding to the above House Ways and Means Committee request to outline why the credit union tax treatment under the current code should continue. In the letter to lawmakers, CUNA again emphasized the positive effects of the credit union tax exemption, and the need to maintain the current tax status going forward.

The letter is one of many being sent to House Ways and Means Committee members. "Congress is essentially starting with a blank sheet of paper as it rethinks the current taxation system, and everything is up for consideration," said Cheney.

Back to top

Ray of lightRay of Light: Exam Fairness Bills Introduced

Just days after the hearing on how to alleviate the regulatory burden credit unions face, both the House and the Senate had bills introduced to help ease the examination process and promote fairness on April 15th. As in the last Congress, Sens. Jerry Moran (R-KS) and Joe Manchin (D-WV) introduced a bill to improve the federal examination process for credit unions and other financial institutions. S.727, the Financial Institutions Examination Fairness and Reform Act, would:

  • make available to financial institutions the information used to make decisions in their examination;
  • codify certain examination policy guidance;
  • establish an ombudsman at the Federal Financial Institution Examination Council to which financial institutions could raise concerns with respect to their examination; and
  • establish an appeals process before an independent administrative law judge.

A House version of similar legislation was introduced by Reps. Shelly Moore Capito (R-WV) and Carolyn Maloney (D-NY), HR 1553. This House version already had one Georgia co-sponsor; U.S. Rep. Lynn Westmoreland (R-3).  Credit unions will be watching these bills closely.

Back to top

DiceSen. Durbin Introduces
Interest-Rate Cap Bill

Legislation that would impose a 36 percent maximum annual percentage rate cap on all open and closed-end consumer credit transactions has been introduced in the U.S. Senate. The Protecting Consumers from Unreasonable Credit Rates Act (S. 673) would impact payday loans, mortgages, car loans, credit cards, overdraft loans, car title loans and refund anticipation loans. The bill is co-sponsored by Sens. Richard Durbin (D-IL), Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Sheldon Whitehouse (D-RI) and Barbara Boxer (D-CA). The bill would allow lenders to continue to charge initial application fees, insufficient funds fees and late fees. Measures to ensure the federal law does not pre-empt stricter state laws are included in the bill, and it would penalize violations of the 36 percent cap. Durbin introduced a similar bill (S. 3452) in the last Congress, but it did not advance. Read Durbin’s press release.

And while this legislation would go beyond just payday lenders, Senators Durbin, Blumenthal and Merkley were also among those who introduced a bill to ban certain harmful online payday lending practices earlier this year. That bill, the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act (S. 172), has five co-sponsors.

Credit unions and CUNA are committed to providing safe and affordable alternatives to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders. Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18 percent, although there is some flexibility under NCUA’s short-term, small amount loan program.

Back to top

SecurityPositive Move: Cybersecurity Bills Pass House

The U.S. House passed three cybersecurity bills on April 16th with CUNA as part of the coalition of financial trade groups urging support for the legislation trio. The three cybersecurity bills are:

  1. The Cybersecurity Enhancement Act (H.R. 756), which supports increased public and private cybersecurity research;
  2. The Advancing America's Networking and Information Technology Research and Development Act (H.R. 967) which will refocus the National High-Performance Computing Program on a larger mission and increase research and development within the program; and
  3. The Federal Information Security Amendments Act (H.R. 1163), which will update the Federal Information Security Management Act and require federal agencies to comply with National Institute of Standards and Technology computer standards and perform risk-based analysis of cyber threats to develop appropriate controls.

The financial services industry is committed to cybersecurity efforts "and will remain a willing partner with the Congress and the administration to secure our nation's cyber infrastructure," the trade group letter said. CUNA co-signed the letter with the American Bankers Association, the Consumer Bankers Association, the Electronic Funds Transfer Association, the Financial Services Roundtable, the Independent Community Bankers of America, NACHA-The Electronic Payments Association and the Securities Industry and Financial Markets Association. The bills now move to the Senate for consideration.

Back to top

GAO Study Examines ATM Fees

On April 11th, the United States Government Accountability Office issued a Report to Congressional Requesters regarding ATM surcharges. The 64-page report, "Automated Teller Machines: Some Consumer Fees Have Increased," arises from a 2008 GAO report on ATM fee increases and responds to a request from Congress for a review of issues related to these increases.

ATMThe GAO also analyzed two types of data from firms specializing in the financial services industry:

  • data on fees charged by financial institutions from 2007 to 2012 that are general to all financial institutions in the U.S.; and
  • nongeneral data on fees charged by independent ATM operators that were procured by "mystery shoppers" at 100 judgmentally selected independent ATMs in 2012.

The GAO report observed that consumers have many ways to obtain cash without incurring any fees at all, such as using ATMs within their financial institution's network. ATM fees have risen in recent years from a median of $1.56 in 2007 to $2 by the end of last year. Last year, 96 percent of institutions assessed surcharges, compared to 87 percent in 2007. The average estimated surcharge rose from $1.75 in 2007 to $2.10. Their research on credit unions found:

  • Credit unions’ ATM surcharges for out-of-network ATM transactions averaged 17 cents less last year than those charged by banks;
  • Foreign fees, which are fees benefitting the institution alone, were 23 cents lower at credit unions than at banks;
  • More consumers are able to withdrawal cash without a fee at an ATM if they use a credit union;
  • Consumers can obtain cash without a fee 95 percent of the time at a credit union, while consumers can obtain cash without a fee from a bank just 85 percent of the time.
Back to top

U.S. CapitolTop Republican to Ease Regulatory Burden on CUs

On April 11th The Hill reported that Rep. Gary Miller (R-CA), a top Republican on the House Financial Services Committee, is preparing to introduce legislation to ease the regulatory burden on credit unions around the country. The article highlights the pain credit unions have felt in large part to the Dodd-Frank Wall Street Reform Law, which has prompted financial regulators to churn out hundreds of new rules to prevent a repeat of the economic crisis of the late 2000s. Rep. Miller hopes to create a distinction between credit unions and big banks in the eyes of regulators, as credit unions are not to blame for the reckless practices that led to the recession.

"While I fully support effective federal regulation in the financial services sector, it is clear that credit unions did not contribute to the financial crisis," said Miller, vice chairman of the Financial Services panel. "Accordingly, they shouldn't find themselves caught up in and threatened by a wave of regulation aimed at those that did." If enacted, the Miller bill would empower NCUA to modify CFPB rules as they relate to credit unions, provided the change does not block objectives. It would also authorize the NCUA to develop a separate credit union-specific capital system that better reflects those institutions' risks and update the investment options available to credit unions.

Back to top

No Monkey Business Here – Governor Quickly Signing Bills into Law

MonkeyAs soon as the 2013 state session concluded, Governor Nathan Deal began the bill review process on March 29th. Before the governor signs (or vetoes) a bill, his office completes a thorough review on each of the passed bills. Although there is a high volume of issues that must be dissected, some bills have already been signed into law, two of which were those addressed by credit unions in the legislative process:

  • MVR TITLE/TAX PROCESS: Technical corrections to the overhaul of the title fee/tag process in Georgia that passed in 2012 originally contained in HB 80 by Rep. Tom Rice (R-Norcross), then amended into IRS tax code revision bill HB 266 was the first bill signed into law. Of interest to credit unions: The changes contained in the new law direct the use of the book value (as opposed to purchase value) for used motor vehicle title fees, and maintain the provision that exempts an entity from paying the title fee if the auto was acquired through repossession. On April 10th, Governor Deal signed into law another technical correction found in HB 463, also by Rep. Rice, to allow the tax offices the ability to deviate from the established fair market value of a used vehicle in the event the consumer appealed the amount.
  • CLOSING FEES: On April 9th, Governor Deal signed into law SB 139 by Sen. Butch Miller (R-Gainesville). This bill only applies to businesses that fall under the Georgia Industrial Loan Act, and allows an additional $50 fee to cover credit verification. During the legislative process, earlier drafts would have had the unintended consequence of making ANY closing fee be no more than $50, and/or negatively impact auto lending. This bill was addressed by the Government Influence Team to ensure that current lending procedures are not inadvertently impacted by what the industrial loan industry is seeking.

To see bill activity as it happens, please click here.

Back to top

Chambliss
U.S. Sen. Saxby Chambliss
GA Senator Co-Sponsors CU-Supported Privacy Notice Bill

On April 15th, Sen. Saxby Chambliss (R-GA) signed on to S. 635, which would eliminate the need to send annual privacy notifications when there is no change. Credit union advocates will recall that a similar bill (HR 749) passed the full House on March 12th. This bill was also one of the issues raised by Georgia credit union advocates when they met with members of Chambliss' D.C. staff during the CUNA 2013 Governmental Affairs Conference and is being monitored closely.



Back to top

SilhouetteAnatomy of a Bank Failure: High Concentrations of Construction, Commercial Real Estate Lending

Banks with concentrations of construction and total commercial real estate lending exceeding supervisory criteria in 2006 interagency guidance failed at higher rates during the financial crisis than banks with lower concentrations, according to a white paper the Office of the Comptroller of the Currency and the Federal Reserve released on April 3rd.

The study found that 23 percent of banks that exceeded both the construction and CRE lending supervisory criteria failed during the economic downturn from 2008 through 2011, compared with 0.5 percent of banks not exceeding either of the criteria. "Construction lending was a key driver in many failures," the OCC said in a press release. "An estimated 80 percent of the losses to the [FDIC] insurance fund from 2007 to 2011 can be attributed to banks exceeding the . . . construction criteria."

Back to top

CashForeclosure Cash Payments

The Atlanta Business Chronicle reported on April 9th that SunTrust is among 13 banks that will begin payments to 4.2 million borrowers April 12, after an agreement was reached between the Office of the Comptroller of the Currency and the Federal Reserve Board with the mortgage servicers. The agreement gives $3.6 billion in cash payments to borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010 with mortgages serviced by one of 13 banks including SunTrust, Bank of America and Wells Fargo, according to a statement by the Fed.

The payments will range from $300 to $125,000. For borrowers whose mortgages were serviced by 11 of the 13 servicers ─ except Goldman Sachs and Morgan Stanley ─ checks will be sent in several waves beginning with 1.4 million checks on April 12. The final wave is expected in mid-July 2013. More than 90 percent of the total payments to borrowers at those 11 servicers are expected to have been sent by the end of April.

Back to top

Retiring Regulators + Consulting Firm = Congressional Questions

Question markHeard of Promontory Financial Group? Lawmakers have. On April 9th The New York Times reported on this consulting firm filled with so many former bureaucrats and political insiders it has become known as Wall Street’s shadow regulator. Nearly two-thirds of its roughly 170 senior executives previously worked at agencies overseeing the financial industry.

Building off of past connections, the Promontory Financial Group has emerged as a major power broker in Washington, helping Wall Street navigate an onslaught of new rules and regulatory scrutiny. Promontory accompanied Morgan Stanley when the bank urged regulators to rethink limits on risky trading. It also joined Bank of America, Citigroup and other big banks at the Treasury Department to discuss plans for dismantling failing financial firms.

But Promontory and other consultants are now facing scrutiny in Congress, amid growing unease over their influence and their close ties to federal authorities. The Senate Banking Committee held a hearing on April 11th to examine whether regulators inappropriately "outsource" oversight to consultants like Promontory, which are paid billions of dollars by the banks. Behind the scenes, the firm acts as an advocate for banks, helping draft letters challenging crucial rules and discussing reforms with regulators. While Promontory has not registered as a lobbyist since 2009, the firm’s executives have met with regulators at least 10 times in the last two years on issues like the Volcker Rule that curbs risky trading. From a credit union perspective, situations such as these are watched to protect our industry from being wrapped into any legislative "fix."

Back to top