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CURRENT Newsletter | 12 September 2013

Sep 12, 2013 by Lewis Wood

News and Information For and About Virginia's Credit Union System

Headline News

News About Credit Unions

Compliance/Regulatory Affairs News

Governmental Affairs News

Financial Services/Marketplace News

Education & Networking Opportunities

News From Credit Unions

Chapter News

Marketing News

Security/Fraud Prevention

Technology News

Headline News

CUNA Don't Tax Tuesday Again Boosts Advocacy Efforts

The newest phase of a credit union social-media advocacy blitz targeted at Capitol Hill to deliver the message "Don't Tax My Credit Union" paid off big Tuesday. It brought the total numbers of hits to the Credit Union National Association's www.DontTaxMyCreditUnion.org site to over 1 million views since being launched in May and helped the campaign generate an overall total of 850,000 the messages to member of Congress.

"This campaign was more successful than we could have anticipated," CUNA President/CEO Bill Cheney said today. "The level of engagement we saw on Don't Tax Tuesday is a testament to the power of social media and to the dedication of credit union members, who value their credit unions so much that they actually want to stand together and advocate for protecting that value with lawmakers," he added.

The major social media push used Twitter, Facebook, as well as CUNA's own DontTaxMyCreditUnion.org websites--in Spanish and English--to generate over 5,000 tweets, 600 Facebook posts and 8,000 emails to lawmakers.

[read more]
[related: CUs' 'Don't Tax Tuesday II' Ups Message Total To 850,000]
[related: Cheney Report: Tax, Housing Policy Top Billing As Congress Returns]
[related: CUs, Members Pump Up Volume On #Don't Tax Tuesday Two]
[related: Tax Battle: Banks on Offensive Against Credit Unions]

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Credit Reporting - The Creditor's Duty to Investigate Disputes (A Refresher Course)

Recently, the Consumer Financial Protection Bureau (CFPB) issued a bulletin (CFPB Bulletin 2013-09) intended to remind creditors what is expected of them when a consumer formally disputes something that the creditor has reported to the credit reporting agencies (CRAs). 

See the latest CompliancePro Blog post for more details.

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Third-Party Vendors, Risk Management Addressed In NCUA Report

Potential National Credit Union Administration actions to address third-party vendor issues and tips on understanding risk management are among the topics addressed in the latest edition of The NCUA Report. In the Report, NCUA Chairman Debbie Matz reveals that the agency "will be asking Congress for authority over third-party vendors."

Such vendors, she noted, could threaten credit unions' safety and soundness. Matz in her monthly column recalled the situation that American International Group (AIG) faced during the economic crisis, when a small, unregulated division of that huge firm crashed the company. "Dangers to the credit union system could be lurking in such regulatory blind spots," Matz wrote.

[read more]
[related: NCUA Board Meeting Today Is Metsger's Debut]

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Save the Date: Fiserv EFT Users Meeting Nov. 7

Join us Nov. 7 in Richmond for the Fiserv EFT Users Meeting. Location: Doubletree – Richmond Airport Hotel. Topics will include Fraud Prevention, UChoose Rewards, and an EMV Update.

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News About Credit Unions

Consumer Credit Increases 4.5% In July, CUs See Rise

U.S. consumer credit increased a seasonally adjusted 4.5% or $10.4 billion in July, for a total of $2.852 trillion borrowed during the month, according to the Federal Reserve's Consumer Credit report. Money borrowed from credit unions totaled $254.7 billion.

The Fed report was released Monday afternoon. Underlying trends lifting consumer credit stayed the same--demand for auto and student loans continue to push up credit balances. However, households remain reluctant to add to their credit card debt, said Moody's Economy.com (Sept. 9). At credit unions, borrowing climbed by $3.1 billion from the $251.6 billion in June.

[read more]

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MasterCard Lobbyist Warns CUs On Continued Interchange Fight

MasterCard’s chief lobbyist on Wednesday told credit union executives merchants will not end their fight over card interchange, even after piling up big wins on the Durbin amendment, the pending antitrust settlement and the recent court decision overruling the Federal Reserve’s debit cap as too low. “The merchants are hungry, they want more,” Tucker Foote, vice president of government affairs for MasterCard, told NAFCU’s Congressional Caucus yesterday.

He predicted merchants will continue to lobby to expand the Durbin amendment cap to include institutions below the current $10 billion threshold and to limit interchange on credit transactions, too. “They want more,” Foote said. He predicted that even if the federal court issues final approval on the landmark, $7.2-billion antitrust settlement with MasterCard and Visa – a hearing is scheduled for Thursday – merchants will continue their legal assault on the two card networks. “The merchants will continue to litigate,” he said. (Credit Union Journal, Sept. 12)

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Filene Study: Use Microloans To Boost Biz Lending

Many credit unions want to enter or expand business lending, and one opportunity to do so is through offering microloans, according to a new Filene Research Institute study.

"Microloan Feasibility Study: Can Small Business Lending Become Big Business For Credit Unions?" by Dave Grace, managing partner, Dave Grace & Associates, indicates that market conditions, borrower demand and lending characteristics suggest that microloans and credit  unions may be a good match. The implication for credit unions is that microloans are exempt from credit unions' regulatory cap on business loans, and credit unions can develop win-win relationships with microborrowers.

[read more]

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Credit Union Investment Study Explores Best Practices

The breadth of investment service offerings at credit unions and how to better serve their members in this area is the focus of a new study. The 2012-2013 Credit Union Investment Services Benchmarking Study was conducted by management consultant firm Kehrer Saltzman & Associates in Charlotte, N.C.

The annual study of credit union securities brokerages monitors trends in the sale of investments and life insurance in credit unions, and identifies best industry practices, according to the firm. The analysis also draws on data from third-party broker dealers on 782 credit unions offering investment services.

[read more

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CUNA Sees JPMorgan Student Loan Exit As CU Opportunity

JPMorgan Chase said it will stop taking student loan applications after Oct. 12 and exit the student loan business (Fox Business, Reuters), thereby eliminating a significant player in the competition for private student loans. "As banks exit student loans, more and more credit unions are getting involved in student loans," noted Paul Gentile, of the Credit Union National Association, after the global firm's announcement.

CUNA figures show that credit unions have $2.2 billion in private student loans. "There has been fantastic growth in the area recently," Gentile said, "For the first six months of 2013, credit union private student lending is up 26%. And some 617 credit unions offer their members private student loans." Gentile underscored that credit unions offer low-cost private student loans and have a long track record of low default rates compared to other providers.

[read more]

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Times-Dispatch Article Asks: What's the Difference Between a Credit Union and a Bank?

A Smart Money post poses the question: What's the difference between a credit union and a bank? In answering the question, Bruce Williams notes credit unions' member-owned structure and the betters rates offered by credit unions vs. banks. He also notes that membership eligibility can vary greatly from credit union to credit union.

[read more]

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Compliance/Regulatory Affairs News

Richard Cordray on What’s Next for the Consumer Protection Bureau

As the first director of the Consumer Financial Protection Bureau, Richard Cordray is building a new regulatory regime from scratch. The undertaking is no small feat considering the vast terrain of the financial services industry that the bureau must cover: payday lending, debt collection, mortgages, prepaid cards, student loans, auto loans, credit cards and more.

Although the CFPB has hammered away at these issues since its inception in 2011, the prolonged fight over Cordray’s Senate confirmation at times overshadowed the bureau’s efforts. His confirmation over the summer cleared the way for the agency to take more aggressive steps to police the industry.

[read more]

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Consumers Are Now FIs' Greatest Regulatory Threat

Financial institutions need to revamp their "customer" service operations to encourage irate consumers to complain to them instead of turning to the Consumer Financial Protection Bureau, where a complaint could spark added regulatory scrutiny.

In multiple speeches and public pronouncements, CFPB officials have aggressively urged consumers to file a complaint on the agency's public database, which has swelled to more than 200,000 complaints since going live in March. The agency uses that data to determine where it will focus its attention next, including both what regulations it writes and enforcement actions it takes against individual institutions.

As a result, some observers said institutions need to realize that the best way to avoid the added attention or an enforcement action derived from complaints is by making it easier for consumers to resolve the issue with the institution first. That includes improving the visibility of their complaint-taking systems and attempting to address problems quickly before a consumer seeks out regulators for help. (American Banker Online, Sept. 11)

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'Safe Harbor' for QM Loans May Not Protect Banks

A legal safe harbor designed to protect lenders that make "qualified mortgage" loans from consumer lawsuits is likely to expose institutions to potentially even greater liability, according to several banking experts. In theory, under the Consumer Financial Protection Bureau's final mortgage rules, low-priced loans that meet all the criteria of QM are supposed to be largely immune from consumer lawsuits. But lawyers are warning that in practice, consumers might successfully challenge a financial institution if it fails to fit any one of the many criteria laid out by the CFPB in defining the term.

"The challenge is that lenders can't just waltz into court and say, 'this was a QM loan.' They have to prove it," said Julie Williams, a managing director and head of the domestic advisory practice at Promontory Financial Group, and the former chief lawyer for the Office of the Comptroller of the Currency. "As people have looked at the requirements for QM more closely, I think the takeaway is that the requirements are quite extensive and quite complex."

The CFPB provided two legal protection options for lenders within its qualified mortgage rule so long as they verify a borrower's ability to repay and meet a debt-to-income ratio of no more than 43%. Lenders can either receive a rebuttable presumption for higher-priced loans typically given to borrowers with weaker credit; or they can receive a higher legal safe harbor protection on lower priced loans. The problem, observers said, is that there are complicated metrics built into the criteria for safe harbor that could easily trip up a bank if it was challenged in court.

For example, the rule has certain criteria for how a bank calculates the point-and-fees structure of a loan that could open the door to greater liability. (American Banker Online, Sept. 6)

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Governmental Affairs News

100% for VACUPAC

Henrico Federal Credit Union has 100% participation in the Virginia Credit Union Political Action Committee (VACUPAC) from board members, committee members, and staff. VACUPAC is a non-partisan, voluntary organization that allows credit union members to raise money to support candidates for state office who are open to listening to credit union concerns.

A portion of VACUPAC funds are forwarded to the national political action committee that supports candidates for the U.S. House and Senate. Learn more about VACUPAC by contacting your League's Karin Sherbin at 800.768.3344, ext. 626 or ksherbin@vacul.org.

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House Leadership Puts GSE Reform on Backburner

House Majority Leader Eric Cantor's failure to include mortgage finance reform in his legislative agenda for the fall has sparked more questions about whether Rep. Jeb Hensarling can advance his legislation to the floor this year. In a memo to Republican lawmakers sent late last week, Cantor detailed eleven major issues to be addressed, including the budget, debt ceiling, possible military action in Syria and the nation's food stamps program.

While the Virginia Republican noted in the memo that the list is not exhaustive, observers said that the conspicuous absence of housing finance reform from the agenda highlights the long odds the bill faces in getting consideration before the end of the year. (American Banker Online, Sept. 10)

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Waters to Release Rival GSE Bill

Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, said Tuesday that she is preparing to unveil an alternative housing finance reform proposal to rival more conservative legislation backed by many House Republicans. Waters criticized the GOP plan, spearheaded by Financial Services Committee Chairman Jeb Hensarling, R-Texas, during a speech Tuesday at the National Association of Federal Credit Unions congressional caucus, arguing that it seeks "a radical remake that is not viable."

"Housing finance reform must maintain an affordable 30-year fixed-rate mortgage, protect taxpayers by making any guarantee fully paid for, support affordable rental housing and importantly, ensure that all financial institutions including credit unions can equally participate," she said during the speech. Hensarling's bill, called the Protecting American Taxpayers and Homeowners Act, would unwind Fannie Mae and Freddie Mac and remove a government guarantee from the secondary market. (American Banker Online, Sept. 11)

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Financial Services/Marketplace News

Proposed Fed Policy Change Offers CUs Good and Bad News: Yardeni

A strengthening U.S. economy that leads to changes in the Federal Reserve policy regarding cost of funds may mean both good news and bad news for America’s credit unions. The financial crisis in 2008 led the Fed to establish an unconventional monetary policy through which the Fed funds rate was lowered to near zero in hopes of sparking an economic upswing. In addition, a series of bond buying programs, collectively known as “quantitative easing” was instituted to lower longer-term rates.

The Fed’s forward guidance linked the policies to unemployment and inflation rates, two economic indicators that have begun to ease in recent months. The programs pushed bond yields to historic lows, but both yield curve and credit spreads have begun to widen.  A resulting change in these policies in early 2014 could see a significant upswing in credit union lending, as well as increased competition for member loans, according to Ed Yardeni, economist, consultant and ardent Fed watcher for the past 33 years. 

[read more]

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MBA Index Shows Housing Finance Money Tightening

An index compiled by the Mortgage Bankers Association suggests lenders have begun to tighten standards for housing finance loans as they prepare to implement new qualified mortgage regulations. The MBA's Mortgage Credit Availability Index draws on data from the AllRegs Market Clarity product.

A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit, the MBA said. According to the Association, the Index slid 0.7% to 111.5 in August, the first time it moved down after four consecutive months of increases.

[read more]
[related: Housing Finance Applications Continuing to Drop Sharply]

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Moebs: Overdraft Revenue Increases Resulting From Higher Fees

During the latest quarter, consumer overdrafts declined 2.8% to seven overdrafts per checking account annually at financial institutions nationally, making it the lowest consumer usage of overdrafts since 1999, but overdraft revenue hit $31.3 billion annually due to higher overdraft fees, according to the latest quarterly study by Moebs Services.

“Overdraft volume decreased as consumers reacted to uncertain economic times, so America’s financial institutions reacted by increasing price,” said Michael Moebs, economist and CEO at the research firm in Lake Bluff, Ill.

Financial institutions have raised the median price of overdraft fees by 3.4% since 2011, with credit unions leading the way, the report noted, although credit unions are still the "cheaper" option. “For almost two years, since the third quarter of 2011, the median price nationally was $29 with the banks and thrifts higher at $30 and credit unions at $25,” the report stated.

“Over the past two years, credit unions have increased their fees from $25 in 2011, to $27 in 2012 and now $28 in 2013.”

[read more]

[related: Bank Survey Shows Customers Fed Up With Fees]

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Regional Banks Predict Weak Loan Demand for Rest of Year

Regional bank executives doused anyone bullish on loan demand with a bucket of cold water this week. Their message at an industry confab: loan demand remains tepid or, in some cases, has worsened. Perhaps the most pessimistic among the bank executives appearing at the Barclays Global Financial Services Conference in New York was Kelly King, the chairman and chief executive of BB&T.

The $183 billion-asset company, which has branches in the Southeast and Mid-Atlantic, expects loan growth to be sluggish for the next two or three years. "It's not appropriate to be doom and gloom — it's just appropriate to be careful," King said. Recent economic figures have shown that rising rates have put a damper on borrowing, and the feeling that lending is off was widespread at the conference among King's peers. (American Banker Online, Sept. 11)

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Education & Networking Opportunities

League Compliance Webinar Sept. 18

Your League's Quarterly “Compliance Hot Topics” Conference Call is slated for Wednesday Sept. 18 at 2:30 p.m. This webinar covers current compliance hot topics with your Virginia Credit Union League Compliance Team. Space is limited. Please send an email to compliance@vacul.org to reserve your place for this important webinar.

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Fall Compliance Conference Oct. 16-18

Join us Oct. 16-18 in Williamsburg for your League's Fall Compliance Conference. On Tap: Sessions on fair lending, adverse action, fraud losses and how to avoid them, powers of attorney and much more. Location: Fort Magruder Hotel.
[register now]

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News From Credit Unions

Belvoir Federal Donates School Supplies to Fort Belvoir Elementary School

Belvoir Federal Credit Union employee’s collected $615 in donations to help elementary children purchase school supplies for the upcoming school year. Belvoir Federal hosted one week of casual dress whereby employees could donate $3 per day or $10 for the week.

From the nearly 80 employees at the credit union, over $600 was collected which went toward purchasing school supplies for the Fort Belvoir Elementary School.

[read more]

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CUNA Mutual Group Ranks No. 19 in 2013 InformationWeek 500

CUNA Mutual Group has been ranked No. 19 in this year’s InformationWeek 500 – a list of the top technology innovators in the U.S. The company was honored for its Retirement Radar mobile annuity planning application. It is the 11th year CUNA Mutual Group has been named to the InformationWeek 500 and the second time it has ranked in the Top 20. It was the highest-ranked insurance company on the 2013 list, which was announced Monday and can be found at www.informationweek.com/500.

“We are extremely honored by our No. 19 ranking for this year’s InformationWeek 500,” said Rick Roy, CUNA Mutual Group senior vice president and chief information officer. “As a company, we are very focused on developing mobile products and services that not only deliver the best 'customer' experience for credit union members, but also strengthen market share for credit unions."

[read more]

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Mid-Atlantic Corporate Tackles Latest IT/Security Issues at Annual Conference

Covering a wide range of security topics and industry trends, Mid-Atlantic Corporate Federal Credit Union hosted its annual IT and Security Conference Aug. 14-15. Approximately 100 credit union professionals attended the IT and security event, where the overriding theme was the growing concern about social-engineering threats and keeping members’ sensitive information protected.

“As innovative technologies come to the market, the need intensifies for new security measures and greater awareness of potential threats,” said Dick Carberry, security administrator at Mid-Atlantic Corporate. “This is especially true for financial institutions, like credit unions, that must protect members’ sensitive information.”

[read more]

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Chapter News

Roanoke Valley Chapter Plans Sept. 17 Meeting

League General Counsel Nathan Bowden will offer a program on regulatory updates and compliance hot topics at the Roanoke Valley Chapter's Sept. 17 meeting. Location: Salem Civic Center. Time: Social at 6 p.m.; dinner at 6:30 p.m.; and program at 7 p.m.

[learn more]

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Tidewater Chapter to Host Sept. 19 Charity Golf Tournament

Join the Tidewater Chapter Sept. 19 for its Inaugural Golf Challenge at Sewells Point Golf Course in Norfolk! Format will be four-man captain’s choice, with an entry fee of $125 per player. Cost includes a hot dog lunch, cart, range balls, green fees and cookout dinner. Shotgun start at 1 p.m.

Proceeds will benefit Children's Hospital of the King's Daughters, the area's local Children’s Miracle Network Hospital. Sponsorships are also available, ranging from $250 to $1,000.

[learn more]

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Richmond Chapter Offers White House Ornaments as VACUPAC Fundraiser

It is that time of year again! The Richmond Chapter of Credit Unions will be selling the 2013 White House Ornament to benefit the Virginia Credit Union Political Action Committee. The cost will be $20 for each ornament. To place an order, please send your information to Chris Miller by Sept. 30.

The Chapter will be ordering several shipments, so the sooner you place your order, the sooner you can get your ornaments delivered! Ornaments are not returnable or refundable, so only order what you plan to purchase or sell at your credit union. Payment is due by Oct. 29 (checks payable to Chesterfield FCU). Each credit union will receive credit for the amount it raises through ornament sales. Help us reach our 2013 VACUPAC goal.

[learn more]

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Marketing News

Digital Drifters: Javelin Study Cites Missed Bill Pay Business

A report from Javelin Strategy + Research could not be more ominous. Financial institutions, credit unions included, have dropped the ball with a huge market segment that simply overlooks them when it comes to digital bill pay.

Noted the Javelin report titled “2013 Online Banking and Bill Payment Forecast:” (Bill pay) adoption will remain unacceptably flat through 2018 unless financial institutions take action to upgrade services, counter misperceptions about paying bills at FIs, and specifically target 29 million Americans who are only one step away from paying bills at their bank or credit union.

“The priority list of holdouts is topped by a newly identified segment of nearly 11 million Digital Drifters, defined as consumers who bank online and use mobile banking but do not pay bills at their primary FI,” the report said.

[read more]

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Security/Fraud Prevention

New CUNA OpSS Council White Paper Discusses Fraud Trends

Whether it’s a new scam or a new twist on an old scheme, fraud continues to increase as the avenues for perpetrating it expand. At the same time that phone, email, and other traditional pathways continue to be used, criminals now have an ever-expanding menu of fraud delivery options—from online and mobile banking to remote deposit capture. Fraud complaints reported through the Consumer Sentinel Network increased from 325,519 in 2001, to 2,061,495 in 2012.

Online fraud losses, in particular, increased 8.3% in 2012, according to the Federal Bureau of Investigation.  Why is fraud increasing at the same time the tools and methods for preventing and detecting it are expanding and improving?

A new white paper from the CUNA Operations Sales & Service Council, “Fraud Trends: New and Repurposed Scams and Schemes,” examines some of the trends and forces behind the continued uptick—including the ease of online access, the “new mafia,” and economic factors.

Many fraudsters employ a “multichannel” approach—making first contacts with victims through one channel, and finishing off their crimes through another. The paper is available online in the white paper section of www.cunacouncils.org.

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Technology News

Mitek Launches Mobile Photo Account Opening to Banks

Mitek Systems is offering financial institutions a mobile photo account opening feature, using a mobile device's camera to scan and capture any needed documentation. The software also lets the consumer immediately fund the account using mobile check capture.

The account opening feature lets consumers hold their ID in front of their mobile device's camera, and Mitek's MiSnap technology takes a short video to capture and auto-fill information, such as the consumer's name and address. The user then chooses what kind of account to open (checking, savings, credit) and creates a username and password. (American Banker Online, Sept. 11)

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