OCTOBER 18, 2013
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A One-Two Punch for Credit Unions
The focus in Washington DC has been on the shutdown, the debt ceiling crisis, and furloughed federal employees. With Congressional committee staffs operating at reduced staff levels for the past two weeks what does that mean for tax reform?

 
     
  Regulation D Study Bill
On October 3rd Representatives Robert Pittenger (R-NC) and Carolyn Maloney (D-NY) introduced H.R. 3240, the Regulation D Study bill. This legislation would direct the GAO to conduct a study on the Federal Reserve’s use of Regulation D as a tool to conduct monetary policy and the impact its use has on consumers, credit unions and other depository institutions.

 
  Reduce Mortgage Limits? Disruption to Housing Recovery
Reducing the size of mortgages that Fannie Mae and Freddie Mac can finance "would have a very disruptive impact on the availability of affordable housing credit," the ongoing housing recovery and the economy as a whole, CUNA said in a joint letter sent to Federal Housing Finance Agency Acting Director Ed DeMarco on October 9th.

 
  New Fed Chairman Nomination
The Washington Post reported on President Obama's October 9th nomination of Federal Reserve Vice Chair Janet Yellen to lead the U.S. central bank. Yellen would become the first female chief of the nation’s central bank - or any major central bank.

 
  Future Picture: CU Exam Changes
Changes that will streamline credit union examination reports and improve the overall exam process by setting clearer expectations for credit unions and examiners will be introduced on Jan. 1, NCUA said in a letter to credit unions (13-CU-09) released on October 8th.

 
  CFPB Unveils Additional Mortgage Guidance
Communications with family members after a borrower dies, contact with delinquent borrowers, and treatment of consumers who have filed for bankruptcy or invoked certain protections under the Fair Debt Collection Practices Act are addressed in a new bulletin and interim final rule released by the Consumer Financial Protection Bureau (CFPB) on October 15th.

 
  Free Risk-Based Lending Webinar
An overview of risk-based lending and details on how that practice has become an important part of consumer lending will be provided in an Oct. 22 NCUA webinar. The free webinar, entitled "Risk-Based Lending--More than a Loan Pricing Tool," is scheduled to begin at 2 p.m. (ET).

 
  A Cautionary Tale of an Autodial Settlement
Bank of America recently reached a preliminary $32 million settlement with consumers that alleged violations of the Telephone Consumer Protection Act (TCPA). In the aftermath of this settlement, credit unions are encouraged to be mindful of any autodialed calls placed to members' cell phones, which under certain circumstances can violate the TCPA and open the credit union up to liability.

 
  Lending Opportunity?
On October 14th the New York Times reported on medical loans and medical credit cards: a growing number of health care professionals are urging patients to pay for treatments not covered by insurance through financing arranged quickly in the providers' offices.

 
  Surprise! Bank Fees at Record High
Checking fees at banks are at a record high, according to Bankrate's 2013 Checking Survey, further evidence that credit unions, with their emphasis on lower fees, remain the smarter choice for fee-conscious consumers.

 
 
 
A One-Two Punch for Credit Unions

The focus in Washington DC has been on the shutdown, the debt ceiling crisis, and furloughed federal employees.  As such, Congressional committee staffs had been operating at reduced staff levels for the past two weeks.  In this type of environment, one may wonder why bother fighting so hard on tax reform?  With the current Congressional disapproval rating at 95%, something’s got to give.  And moving out of the crisis with the temporary end to the shutdown, there will be immense pressure on lawmakers to show that they can get something done, and tax reform may be just that issue.  The tax reform process has been a bi-partisan effort with focus in both the House and the Senate, and the problems that led us to the fiscal cliff and to the debt ceiling problem have not gone away.  The debt in excess of $14 trillion and the annual budget deficits the government has seen is the prime environment to tee up the tax-writing committees for comprehensive reform.  As such, credit unions need to remain vigilant in their efforts to keep the Don’t Tax My Credit Union message. 

Here in Georgia, over 92,000 messages have been sent to Congress (please click here for breakdown).  These messages have come from credit union employees, board and members in a variety of ways:  emails, postcards, phone calls, letters, and social media messages.  How is your credit union engaging?  Regardless how, the important part is to ENGAGE and send messages to DC.  Your members are worth it!  There are wide options of how to generate contacts to Congress.  Looking for a unique spin on the call to action?  Check out the below credit union’s one-two punch of getting involved!

LGE Community Credit Union
LGE Community CU took the idea of engaging on this legislative issue, and combined it with the importance of being involved politically to generate literally a one-two punch of success. They have engaged in postcards, social media, emails to the credit union family - but it was a Don’t Tax My CU PAC fundraiser that generated a lot of member interaction! The credit union purchased Don't Tax My CU buttons for staff, and combined it with a jeans day fundraiser for Georgia CUPAC.  For a donation staff can be casual, engage members on the Don’t Tax My CU campaign with the buttons (and the casual attire!), and raise money for the PACs...all while illustrating the importance of being involved.

But why was it important to get heavily involved with the campaign? Andrea Shorr, Marketing Manager of LGE Community CU shared why they found it important to get involved:  “this is a campaign that affects all credit unions – big or small; in-state or out-of-state – and quite frankly, we needed to be involved in this campaign”.  They believe it is “essential to our business that we continue to keep our tax-exempt status” and created this unique idea to educate their team and their members on the Don’t Tax campaign.  They have found that their unique twist with the buttons and the PAC fundraiser was “visible and different compared to posting something on our website or sending out an email.  Not to mention, it was a dual campaign in that we were able to raise funds for the PAC.”

What steps did you take to educate your board, team and/or your members? Shorr highlighted the educational efforts on the campaign, and that they utilize email updates to both the board and staff on to announce the credit union button days. They have engaged their team and members in a variety of ways:  social media, emails, newsletter articles, and postcards.  Shorr cites that the postcards for Senators and Representatives were also “a great tool for educating members in a simple, easy-to-read and understand format”.

The buttons are a great idea, as well as the tie-in to PAC...how did you make it work? Shorr said that “staff tends to participate in fund raising events that allow staff to wear jeans, so we thought we would purchase the buttons and give staff an opportunity to wear the button with jeans and a credit union logo shirt for a one-time donation to the PAC.  It was a win-win!”  The credit union has held two jean days, with a third for the entire week of October 15 – October 18.  CEO Chris Leggett thought it would be a great way to celebrate International Credit Union Day, and be fun to give staff the chance to wear our “campaign gear” for the week!  And Shorr keeps the message in front of the team in efforts to engage as many staff as possible in this effort.

Did you experience any negativity or push-back from staff or members? Shorr shared “Not at all, members have been happy to participate and I think they’re excited to voice their opinion about an issue that affects their credit union”.  And their members notice, and want to know more.  The credit union saw a “great deal of support from the postcard campaign, and the buttons have been a conversation starter for staff when talking to members”.  This is a great job keeping a fresh spin on this long campaign!

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Regulation D Study Bill

On October 3rd Representatives Robert Pittenger (R-NC) and Carolyn Maloney (D-NY) introduced H.R. 3240, the Regulation D Study bill.  This legislation would direct the GAO to conduct a study on the Federal Reserve’s use of Regulation D as a tool to conduct monetary policy and the impact its use has on consumers, credit unions and other depository institutions.  CUNA has been working with Reps. Pittenger and Maloney for several months to develop this legislation and will work with the sponsors toward its enactment.  A copy of the letter of support for this bill can be found here.

 

 

 

 

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Reduce Mortgage Limits? Disruption to Housing Recovery

Reducing the size of mortgages that Fannie Mae and Freddie Mac can finance "would have a very disruptive impact on the availability of affordable housing credit," the ongoing housing recovery and the economy as a whole, CUNA said in a joint letter sent to Federal Housing Finance Agency Acting Director Ed DeMarco on October 9th.  The letter follows a recent FHFA announcement that it is considering reducing Fannie Mae and Freddie Mac loan limits. Any change would be implemented on Jan. 1, 2014.

"Not only is lowering loan limits bad for housing, we question to what extent FHFA's authority would allow for such a change considering Congressional intent when passing [the Housing and Economic Recovery Act (HERA) of 2008] was certainly opposed to a reduction," the letter said. HERA clearly indicates that the maximum loan limits for loans taken on by Fannie and Freddie shall not drop below the current limit of $417,000 and "lowering the loan limits further restricts liquidity and makes mortgages more expensive for households nationwide. Without affordable financing, families are unable to purchase or refinance homes, and those who wish to sell find it more difficult, all of which will continue to prolong our housing crisis," the cosigners wrote.

The letter was co-signed by the American Escrow Association, American Financial Services Association, American Land Title Association, Asian Real Estate Association of America, Coalition of US Mortgage Insurers, Community Home Lenders Association, Community Mortgage Lenders of America, Leading Builders of America, Mortgage Bankers Association, National Association of Federal Credit Unions, National Association of Hispanic Real Estate Professionals, National Association of Home Builders, National Association of REALTORS® and The Realty Alliance.



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New Fed Chairman Nomination

The Washington Post reported on President Obama’s October 9th nomination of Federal Reserve Vice Chair Janet Yellen to lead the U.S. central bank.  Yellen would become the first female chief of the nation’s central bank — or any major central bank.  As Fed chairman, she would have vast power over the economy, and her record suggests that she would use it to continue (for as long as possible) a Fed stimulus program aimed at boosting growth. She would also be the top regulator of the nation’s financial system, an area in which less is known about her views. Yellen, 67, who was chairman of the Council of Economic Advisers in the Clinton administration, would become the first Democrat to lead the Fed since Paul A. Volcker stepped down in 1987. And, Yellen is not expected to face any significant opposition in the Senate, which must confirm her for the post.

The President announced Yellen’s nomination at the White House with outgoing Fed Chairman Ben S. Bernanke.  Bernanke, who has resisted officially announcing his departure until a successor is named, will have served eight consequential years. He presided over an unprecedented rescue of the financial system in 2008 and similarly unprecedented steps to try to get the economy growing faster in the years since then.  Those efforts continue — with a commitment to keep short-term interest rates near zero for several more years, as well as an $85 billion per-month program of bond purchases, which seek to drive down interest rates on mortgages and other loans even further.

Financial analysts expect Yellen to continue the approach set forth by Bernanke, but her nomination will coincide with a new chapter in the Fed’s history.  With the unemployment rate at 7.3 percent, some Fed officials as well as outside economists say it will soon be time for the central bank to begin winding down its extraordinary stimulus. That’s likely to happen later this year or early next, when the Fed scales back its bond-buying program.  Many economists had assumed that the Fed would begin doing so last month, but officials decided to wait when financial markets showed intense concern over Fed policy.

In coming years, managing the Fed’s exit from stimulus without causing the economy to slump is likely to be a difficult - and, in many ways, unprecedented - challenge, given the wide scope of the central bank’s role in the economy today.



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Future Picture: CU Exam Changes

Changes that will streamline credit union examination reports and improve the overall exam process by setting clearer expectations for credit unions and examiners will be introduced on Jan. 1, NCUA said in a letter to credit unions (13-CU-09) released on October 8th. These changes have been long sought by credit unions, and NCUA noted it considered feedback from credit union industry officials as it developed these changes. The agency also incorporated recommendations from the U.S. Government Accountability Office and NCUA's Office of Inspector General.  Changes:

 

  • The agency is separating the Document of Resolution (DOR) and Examiner's Findings sections of the examination reports into stand-alone documents.  Examiner concerns and documented support for material problems listed in the examinations will be included in the DOR, along with corrective action plans, the agency added. "This will help credit unions and NCUA implement timely problem resolution of the most critical and material concerns" and "enhance consistency in the exam process," the letter said.  These and other changes will better clarify the priority exam action items to be resolved, reduce redundancy, and ensure consistency.
  • A new status update template has been developed as part of the exam document changes. The update will provide details on credit union outstanding administrative actions, including Letters of Understanding and Preliminary Warning Letters, the agency said. The informal discussion document will be eliminated.
  • Examiners will need to follow up with credit union officials on any outstanding DOR items within 120 days after the timeframe for completion has passed. Credit unions that have received DORs instructing them to cease unsafe or unsound practices will need to notify their respective NCUA Regional Office in writing once they have implemented corrective actions.
  • Reasonable solutions provided by a given credit union will become the corrective action plan included in the DOR.


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CFPB Unveils Additional Mortgage Guidance

Communications with family members after a borrower dies, contact with delinquent borrowers, and treatment of consumers who have filed for bankruptcy or invoked certain protections under the Fair Debt Collection Practices Act are addressed in a new bulletin and interim final rule released by the Consumer Financial Protection Bureau (CFPB) on October 15th.

The releases are meant to clarify portions of pending CFPB mortgage servicing regulations that have not yet been addressed. The CFPB release provides examples of mortgage servicer policies and procedures that will ensure that family members, heirs, or other parties who have a legal interest in the home are identified and contacted if a mortgage holder dies. Mortgage assumption and loss mitigation measures are also addressed, and the bureau also attempted to answer questions regarding the interplay of the servicing rules, bankruptcy code, and the Fair Debt Collection Practices Act (FDCPA). The bureau has also clarified aspects of regulations that require consumers to receive housing counseling before taking out a high-cost mortgage.  The CFPB interim final rule also addresses:

  • The steps that mortgage servicers must take to reach out to delinquent borrowers, and what they must communicate and provide to those borrowers;
  • Some exemptions from regulations that require mortgage servicers to provide periodic account statements and certain early intervention contacts to borrowers in bankruptcy proceedings.
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Free Risk-Based Lending Webinar

An overview of risk-based lending and details on how that practice has become an important part of consumer lending will be provided in an Oct. 22 NCUA webinar.  The free webinar, entitled "Risk-Based Lending--More than a Loan Pricing Tool," is scheduled to begin at 2 p.m. (ET).

Tom Penna, NCUA Office of Small Credit Union Initiatives Economic Development Specialist, Susan George, CEO of Lake Shore FCU, and Kelly Haaksma, CEO of Greater Chautauqua FCU will host the webinar and discuss how their credit unions have used risk-based loans to serve their members, increase loan volume, and create new sources of income while mitigating unnecessary risks.  The webinar will also feature useful reporting tools that a board of directors and management can use to get a better understanding of the risks present in a credit union's loan portfolio.  For more details and to register, please click here.



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A Cautionary Tale of an Autodial Settlement

Bank of America recently reached a preliminary $32 million settlement with consumers that alleged violations of the Telephone Consumer Protection Act (TCPA). In the aftermath of this settlement, credit unions are encouraged to be mindful of any autodialed calls placed to members' cell phones, which under certain circumstances can violate the TCPA and open the credit union up to liability.

The settlement is believed to be the largest in TCPA history. Plaintiffs in the case claimed that Bank of America autodialed their cell phones resulting in calls or texts without their prior consent. Courts in many cases have determined that debt collection calls made to cell phones using an automatic telephone dialing system or a pre-recorded voice violate the TCPA if the called party has not provided their "prior express consent" to receiving such calls. The Federal Communications Commission, which issues TCPA rules, has also considered debt collection calls within the scope of the TCPA.

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Lending Opportunity?

On October 14th the New York Times reported on medical loans and medical credit cards: a growing number of health care professionals are urging patients to pay for treatments not covered by insurance through financing arranged quickly in the providers’ offices.  These loans and cards, which were first marketed over a decade ago for cosmetic surgery, are now common place among others who are facing large out of pocket costs for their necessary health needs. 

This could be an interesting way to help your members with their lending needs.  Think it’s just a New York City issue?  The financing company that was highlighted is in Georgia:  iCare Financial of Atlanta which offers financing plans through providers’ offices.  A review by The New York Times of dozens of customer contracts for medical cards and lines of credit, as well as of hundreds of court filings in connection with civil lawsuits, shows how perilous such financial arrangements can be for patients — and how advantageous they can be for health care providers.

Why is the current arrangement perilous to the consumer?  The article highlighted that many of these cards initially charge no interest for a promotional period, typically six to 18 months, an attractive feature for people worried about whether they can afford care. But if the debt is not paid in full when that time is up, costly rates — usually 25 to 30 percent — kick in. If payments are late, patients face additional fees and, in most cases, their rates increase automatically. The higher rates are often retroactive, meaning that they are applied to patients’ original balances, rather than to the amount they still owe.  For patients who are struggling to afford life, the financial consequences can be dire.


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Surprise! Bank Fees at Record High

Checking fees at banks are at a record high, according to Bankrate's 2013 Checking Survey, further evidence that credit unions, with their emphasis on lower fees, remain the smarter choice for fee-conscious consumers.  ATM fees, overdraft fees and monthly maintenance fees were also at record highs, according to the survey. But after years of steep declines, the share of checking accounts considered free may be stabilizing, said Bankrate.
 
Between 2009 and 2012, free checking declined to 39% of checking accounts from 76%. This year, 38% of checking accounts offered by major banks are free, down 1 percentage point from last year's study. The percentage of banks offering free checking also dropped in the first half of the year, according to the MoneyRates.com Bank Fees Survey. Less than 30.31% of banks surveyed had no monthly maintenance fee--the lowest percentage since 2009. That figure is a drop from 36.6% recorded at the end of 2012.  In 2011, roughly 34.7% reported charging no fees--the lowest percentage until now.
 
Those who do pay monthly fees are paying more than ever, according to Bankrate's survey.  The survey found: 

  • The average fee on a checking account rose from $5.48 to $5.54 per month. 
  • ATM fees also hit an all-time high, with banks now charging noncustomers an average of $2.60 to use their ATMs, up from $2.50 last year. 
There's another way to avoid fees, said Karin Bonding, a lecturer in personal finance at the University of Virginia's McIntire School of Commerce.  Shop around.  "You don't have to go to a bank, there are other options," Bonding said. Instead, she suggested checking out a credit union or online financial services provider.  According to Bankrate.com's 2013 Credit Union Checking Survey, released in March, 72% of America's 50 largest credit unions offer free checking.


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