FEBRUARY 7, 2014
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Target Breach a Focus in Congress (Issue 1 of 6)
The impact of the Target data breach is being felt in Congress, where several hearings have been held and one Senator has called for an investigation by the Consumer Financial Protection Bureau.

  10 Percent of All CU Credit and Debit Cards Hit by Breach (Issue 2 of 6)
In a letter to the U.S. Senate, CUNA and other financial services representatives said the Target data breach has affected 10 percent of the credit and debit card customers of every credit union and bank in the country.

  State Overdraft Legislation Clears House, Next Step Senate (Issue 3 of 6)
The state House has passed a bill declaring that overdraft fees are not considered interest and are not subject to Georgia's usury laws. The bill would protect credit unions from legal issues involving overdraft programs.

  Georgia Effort to Curb Patent Trolls Moves Forward (Issue 4 of 6)
The Georgia House passed a bill that would make the state less attractive to patent trolls, who try to extract settlements from financial institutions by alleging patent infringement involving the institutions' use of technology.

  Other State Legislative Issues (Issue 5 of 6)
About halfway through its session, the Legislature continues to deal with a large volume of proposed legislation, dealing with subjects such as mortgage licensing, deficiency judgments, electronic benefits cards and more.

  Credit Unions Host State Legislature (Issue 6 of 6)
Credit union leaders used a reception for state legislators as an opportunity to build relationships, communicate the benefits of credit unions and discuss issues affecting the industry one-on-one with lawmakers.

TargetTarget Breach a Focus
in Congress (Issue 1 of 6)

The impact of the Target breach has generated waves in Congress, with Sen. Charles Schumer (D-NY) calling on the Consumer Financial Protection Bureau to investigate, credit unions lobbying legislators on the negative impact and lawmakers holding multiple hearings (see related article below). Sen. Patrick Leahy (D-VT) said in the February 4th Senate Judiciary Committee hearing, "American consumers deserve to know when their private information has been compromised and what a business is doing in response to a cyber attack.” Target CFO John Mulligan and Neiman Marcus Group Chief Information Officer Michael Kingston were among those testifying during the hearing titled "Privacy in the Digital Age: Preventing Data Breaches and Combating Cybercrime." 

After an attack, "time is of the essence for law enforcement seeking to catch the perpetrator, and also for consumers who want to protect themselves against further exposure," Leahy added. Leahy, who chairs the committee, has previously introduced S. 1897 the Personal Data Privacy and Security Act, which would establish consumer data security standards for companies, and require them to notify consumers when a data breach has occurred. 

In the hearing, it was shared that merchants and financial services industry will need to move together collectively as data security issues are addressed and the payment system is upgraded, according to Mulligan. He said his firm is working closely with federal investigators to catch data breach perpetrators. While Mulligan advocated for the adoption of chip and PIN technology by card providers and merchants alike, another witness, Symantec Corporation Senior Vice President of Security Product and Services Fran Rosch, said chip and PIN is not a panacea but is a step in the right direction. From the credit union perspective, CUNA has called on legislators to ensure that consumers know where their information was breached, urging legislators to follow two principles as they consider data security: 

  • All participants in the payments system should be responsible and be held to comparable levels of data security requirements; and
  • Those responsible for the data breach should be responsible for the costs of helping consumers.

There were additional multiple hearings this week on data security following the credit union, industry and public outcry after the data breaches (see below related article). 

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U.S. Capitol10 Percent of All CU Credit and Debit Cards Hit by Breach (Issue 2 of 6)

The Target data breach has affected 10 percent of the credit and debit card customers of every credit union and bank in the country, CUNA and other financial services representatives said on February 3rd in a letter to the U.S. Senate. The letter was submitted for the record of a hearing conducted on the same day by the Senate Banking subcommittee on national security and international trade and finance titled "Safeguarding Consumers' Financial Data."

"The financial services industry stands ready to assist policymakers in ensuring that robust security requirements apply to all participants in the payments system," CUNA and the cosigners said. "Our payments system is made up of a wide variety of players: financial institutions, card networks, retailers, processors, and new entrants. Protecting this eco-system is a shared responsibility of all parties involved and all must invest the necessary resources to combat increasingly sophisticated breach threats to the payments system," the letter added. This letter was cosigned by the American Bankers Association, The Clearing House, the Consumer Bankers Association, the Financial Services Information Sharing and Analysis Center, The Financial Services Roundtable, Independent Community Bankers of America and the National Association of Federal Credit Unions.

Other data security hearings this week were:

  • February 4th Senate Judiciary Committee hearing titled "Privacy in the Digital Age: Preventing Data Breaches and Combating Cybercrime" (see related article above);
  • February 5th House Energy and Commerce manufacturing and trade subcommittee titled "Protecting Consumer Information: Can Data Breaches Be Prevented?"; and a
  • February 6th Senate Banking Committee hearing titled "Oversight of Financial Stability and Data Security."
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State Overdraft Legislation Clears House, Next Step Senate (Issue 3 of 6)
State Rep. Richard Smith

On Wednesday, February 5th the state House passed one of the key bills for credit unions, HB 824, introduced by Rep. Richard Smith (R-Columbus). This bill seeks to bring consistency and clarity to overdraft programs at state-chartered credit unions and banks, asserting that overdraft fees are not subject to usury laws and are not considered interest. This bill is favorable to credit unions as there have been legal challenges (against Synovus Bank and three other banks) on overdraft, as well as a challenge to the constitutionality of the July 2013 Bank Overdraft Fee Declaratory Order issued by the Georgia Department of Banking and Finance (but not to the related credit union Declaratory Order – yet). The DBF Declaratory Orders declared parity of state institutions with federal credit unions and national banks, allowing that overdraft fees imposed by state-chartered institutions in connection with deposit accounts are not subject to Georgia's usury laws. The passage of this bill would reinforce the Declaratory Orders and help protect credit unions and other financial institutions from legal issues surrounding overdraft programs – and have a direct positive impact for credit unions.

This issue has been lobbied heavily on behalf of credit unions (and efforts continue). A promising outcome from these efforts was seen this week when the bill quickly passed out of the House Banks and Banking Committee hearing on Monday the 3rd, cleared the House Rules Committee on Tuesday the 4th, and then overwhelmingly passed the full House on the 5th. The legislation now travels to the Senate for consideration, and GCUA continues its lobbying efforts to support this legislation.

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State Rep. Bruce Williamson
Georgia Effort to Curb Patent Trolls Moves Forward (Issue 4 of 6)

This week another bill helpful to credit unions (and businesses in general) took several steps forward in the process to become law: HB 809 by Rep. Bruce Williamson (R-Monroe). This legislation seeks to curb the growing threat of patent trolls. Patent trolls are those who use low-quality patents to attempt to extract money from settlements with credit unions, banks and others. While it is a federal issue to be addressed in Congress, this legislation seeks to make Georgia less attractive to those patent trolls, helping to halt attempts to prey upon credit unions and others.

Nationwide, credit unions and banks have received obscure, vague demand letters from patent trolls citing the infringement on patents for the use of certain ATM technologies, check imaging applications, check cashing applications and mobile payment options – costing institutions thousands of dollars to fight (or settle). To protect credit unions from these predatory demand letters, GCUA testified in support of this legislation and continues to educate legislators on this issue. The bill moved quickly this week; passing out of the House Banks and Banking Committee on Tuesday, February 4th and then the full House on Thursday, February 6th. It now travels to the Senate, and GCUA continues to lobby legislators for support of this issue.

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Georgia LegislatureOther State Legislative Issues (Issue 5 of 6)

In addition to the above overdraft and patent troll bills, the state Legislature is busy debating a large volume of bills as the speed of the session has not slowed. As of press time, the Legislature is on the 19th day of the 40-day schedule, and legislators are quickly running out of time to move their bills forward. While the above articles highlight two of the key bills of interest to credit unions, below are some additional topics of industry interest from this week:

  • Mortgage licensing: HB 750 by Rep. Spencer Frye (D-Athens) passed the House Banks and Banking Committee on Tuesday, February 4th. This legislation seeks to add Habitat for Humanity to those entities (which include credit unions) that are exempted from mortgage licensing requirements, and in his testimony Rep. Frye thanked credit unions for their help in perfecting the language of the bill. Our thanks to Rep. Frye for working with GCUA when he received amendment attempts from others that could have been detrimental to the credit union mortgage licensing exemption.
  • Deficiency Judgments: There have been several attempts over the past two years seeking to regulate deficiency judgments (where a guarantor of a loan that is not performing is sued by the lender or purchaser of the debt obligation). HB 917 by Rep. Brian Strickland (R-McDonough) is one of the anticipated bills on this issue for 2014, and seeks to alter the foreclosure process, adding notification requirements, and adding multiple layers in the case of a foreclosure sale. This legislation is presently being analyzed, and any issues will be addressed.
  • EBT Cards: In 2013 there were multiple bills seeking to place limits on how state-issued EBT (electronic benefits) cards could be accessed. The restrictions would have placed additional burdens on the entities where the cards would be presented for use, and, of note to credit unions, would have prevented ATM access. GCUA has been in discussions with Rep. Andy Welch (R-McDonough) on his EBT bill HB 138, and he shared that he will remove the language on ATMs. GCUA will continue to monitor this issue, and our thanks to Rep. Welch for hearing our concerns on not placing this additional compliance and operational burden on credit unions.
  • Consumer Lawsuit Lending: HB 801 by Rep. Earl Ehrhart (R-Powder Springs) seeks to regulate an unregulated lending process by those entities who offer loans to individuals who may receive legal settlements. This bill presently exempts financial institutions from the newly sought regulations, but the issue will continue to be monitored.
  • File It Under Sweeping Changes: There has been activity on a bill that seeks to make sweeping changes to civil forfeiture laws (HB 1 by Rep. Wendell Willard (R-Sandy Springs)); a bill  overhauling how electronic documents can be "discovered" in legal proceedings (HB 643, also by Rep. Willard), and a bill completely revamping how one can become (and continue to be) a notary public  (HB 815 by Rep. Andy Welch (R-McDonough)). GCUA has been monitoring these issues as they navigate the legislative process to protect credit union operations.
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Gold Dome with treesCredit Unions Host State Legislature (Issue 6 of 6)

On Tuesday, February 4th credit union leaders spent time sharing their insight and thanks with members of the state Legislature, growing influence for the industry at the Legislative Reception that was held in conjunction with the February League and GCUS Board Meetings, as well as the Advocacy Policy Committee and GA CUPAC Trustees meetings. One attendee, Rep. Brett Harrell (R-Snellville), even went out on Twitter to thank credit unions for the event! This evening was an ideal opportunity to build relationships with legislators, communicate how credit unions help consumers afford life, and speak one-on-one with them on the above state issues of importance to our industry. Our thanks to the credit unions in attendance; you made a significant positive impact on the level of influence for all credit unions!

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