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CURRENT Newsletter | 23 July 2019

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Headline News

Advocacy / Governmental Affairs

Compliance / Regulatory News

News About Credit Unions

Financial Services / Marketplace

Education / Networking Opportunities

News From Credit Unions

Headline News

VACUPAC Fall Classic Oct. 16; We Need Golfers, Sponsors!

The Virginia Credit Union Political Action Committee (VACUPAC) Fall Golf Classic hits the links Oct. 16, at the Lake Chesdin golf course (21801 Lake Chesdin Parkway, Chesterfield, 23838). Please consider joining us as a golfer and/or sponsor and help support the League’s only statewide fundraiser for your PAC!

NOTE: Save the Date of Oct. 17 for your League’s Annual Advocacy Forum. Popular speaker Bob Holsworth returns to dish on the 2019 General Assembly races and the 2020 elections.

Equifax Reaches $700M Settlement Over 2017 Data Breach

Equifax Inc. agreed to pay approximately $700 million in monetary relief and civil penalties to resolve U.S. consumer-related litigation and regulatory matters in connection with a September 2017 data breach that affected about 150 million people.

On behalf of our member credit unions, your League joined a lawsuit against Equifax in October 2017, brought by Berman Fink Van Horn P.C., the same Atlanta, Ga.-based law firm that successfully represented us in the Home Depot data breach. Credit unions and other leagues joined this same suit as plaintiffs. In January 2019, the Court dismissed the claims of some financial institutions and trade associations for lack of standing. The Court agreed that the financial institution plaintiffs that actually issued payment cards compromised in the breach did have legal entitlement, or “standing” to sue, and upheld the majority of the claims brought by the card-issuing financial institutions. 

“Data breaches are an ongoing issue for our member credit unions,” said League President Rick Pillow. “Credit unions were forced to bear substantial costs in addressing the fallout of the Equifax breach. We continue to call on Congress to address data security and the liability issues surrounding data breaches, and until they do, we'll continue to protect the interest of Virginia-based credit unions wherever necessary, including the courts.”

If approved by the U.S. District Court for the Northern District of Georgia, the agreements would resolve multi-district consumer class-action litigation, as well as investigations by the Federal Trade Commission, the Consumer Financial Protection Bureau, the attorneys general of 48 states, Puerto Rico and Washington, D.C., and the New York Department of Financial Services.

A consumer restitution fund of up to $425 million will be available to pay for three-bureau credit monitoring for consumers whose information was impacted in the breach, actual out-of-pocket losses related to the breach and other consumer benefits, such as identity restoration services. The company also agreed to pay a total of $290.5 million directly to certain state and federal regulatory agencies and to pay attorneys' fees and costs. (S&P Global Market Intelligence, July 22)

[RELATED: Equifax's $650 Million Settlement: Financial Security Experts React]
[RELATED: Consumers Could Get Up to $20,000 Apiece in Equifax Settlement — How to Get Your Share]

Summary of 2019 General Assembly Bills

Recently, we outlined key changes in state law affecting credit unions and their operations in three areas: Combating Financial Exploitation & Elder Abuse, Virginia Uniform Transfer to Minors Act and Decedent Accounts. 
Hunton Andrews Kurth has prepared a detailed summary of those new laws, as well as an overview of other legislation of interest to credit unions from this year's General Assembly session.

Click here for the summary.

Latest Project ZipCode Release Available

Project ZipCode version 19.0 is now available for download! The user manual can be accessed here.

All credit unions are invited to participate in this advocacy and grassroots effort. Project Zip Code (PZC) is a user-friendly, secure, online program that counts your members and matches them by congressional district, state legislative district, and county.

Many credit union members reside in states other than the state in which their credit union is domiciled.  This is why it's important that all credit unions participate; without full participation, we can't get a clear picture of our grassroots strength! Project Zip Code aids in federal and state advocacy efforts and participation provides operational benefits. Credit unions can view credit union members by geographic area, which can be useful in placing ATMs and shared branching.

To download the latest version, click here. If you are already participating in Project ZipCode, you will also receive an individual update on the upgrade. Contact your League’s Karin Sherbin with any questions or to get involved.

Leadership Program for Women Will Host Sept. 18 Workshop

The Virginia Sister Society of the Credit Union Global Women’s Leadership Network has one workshop remaining for calendar year 2019. The Sept. 18 session will spotlight principles for leadership greatness.

These programs are free and are designed for women working in leadership positions at credit unions across the commonwealth. Gentlemen are also invited.


NCUA Board Finalizes Rules, Issues ‘Second Chance’ Proposal

The NCUA Board last Thursday finalized two rules and issued a proposed Interpretive Ruling and Policy Statement (IPRS) called the “Second Chance” IRPS. Both rules finalized by NCUA reflect changes requested by CUNA/Leagues in their comment letters.

NCUA’s final rule on real estate appraisals was adopted largely as proposed. However, it does not adopt a proposed change that would replace the current exemption for existing extensions of credit with a different exemption. CUNA strongly opposed this proposed change in its comment letter on the proposal. NCUA finalized its fidelity bonds rule, as well.

The final rule incorporates several changes from the proposed rule designed to reduce regulatory burden, including not requiring a supervisory committee to review a fidelity bond renewal, reducing the mandatory discovery period to one year following an involuntary liquidation and providing increased flexibility to a provision that sunsets board approval of fidelity bond forms.

Both final rules will become effective 90 days after being published in the Federal Register.

The proposed IRPS would update and revise the existing IRPS regarding statutory prohibitions imposed by the Federal Credit Union Act, which prohibits, except with prior NCUA Board approval, any person who has been convicted of any criminal offense involving dishonesty or breach of trust, or who has entered into a pretrial diversion or similar program in connection with a prosecution for such offense, from participating in the affairs of an insured credit union.

It would amend and expand the current de minimis exception to reduce the scope and number of offenses that would require an application to the NCUA Board.


CECL FAQ Document, Training Sessions Planned

The Financial Accounting Standards Board, which issued the current expected credit loss (CECL) standard, has issued a second CECL question-and-answer document about the standard. FASB staff also announced that it is planning a series of training sessions around the country to discuss issues addressed in the document to help smaller institutions with CECL implementation, with more information to follow.


Advocacy / Governmental Affairs

Equifax Hasn't Heard The Last from Congress About Data Breach

Despite having to cough up over half a billion dollars in a settlement with federal and state authorities, Equifax is likely not done answering to Congress for its 2017 data breach.

The company has agreed to pay restitution and fines as part of the deal with the Federal Trade Commission, Consumer Financial Protection Bureau and state authorities for the breach, which affected roughly 148 million Americans.

The new price tag is extra motivation for the credit bureaus and other companies that handle personal consumer data to strengthen their cybersecurity defenses. But several lawmakers who called for sweeping reforms in the wake of the breach but were not able enact new rules will likely want to study the settlement and continue the discussion about legislative requirements, according to experts.

Sen. Mark Warner, D-Va., who has supported mandatory fines on companies hit by data breaches, said that he is glad consumers will be compensated, but that Congress needs to impose structural reforms on the credit reporting industry. (American Banker, July 22)

Senior House Republican Proposes Credit Reporting Changes

A senior House Republican is proposing to give the Consumer Financial Protection Bureau supervision and examination authority over large credit reporting firms.

Rep. Patrick McHenry, R-N.C., the ranking member of the House Financial Services Committee, has proposed several reforms to the credit reporting industry aimed at improving consumers’ access to credit. McHenry’s bill would give the CFPB authority to oversee the cybersecurity efforts of credit reporting agencies such as Equifax, TransUnion and Experian. It would also bar credit reporting agencies from using Social Security numbers to verify consumers. (Credit Union Journal, July 19)

Trump Team Wary of Fannie-Freddie Fix Before 2020 Election

The Trump administration is growing wary of taking bold steps toward freeing Fannie Mae and Freddie Mac from federal control before the 2020 election, said people familiar with the matter, in part because of the political risk of potentially upending the U.S. mortgage market.

While White House and Treasury Department officials are eager to end the companies' decade-long conservatorships, they see the task as arduous, slow-moving and extremely complicated, said the people who asked not to be named in discussing internal deliberations.

Adding to the challenge is that Treasury Secretary Steven Mnuchin is spending much of his time on more pressing priorities, including the trade war with China, debt ceiling negotiations with Congress and imposing sanctions on Iran and other nations. Still, Mnuchin, who has experience in the mortgage banking industry, works on housing finance weekly, according to one of the people. (National Mortgage News, July 15)

Compliance / Regulatory News

Effective Dates for CFPB’s Payday Rule

CUNA’s Compliance team has received questions regarding which provisions of the Consumer Financial Protection Bureau’s short-term, small-dollar (payday) loan rule are delayed and which will become effective in August.

In response, staff has created a CompBlog entry detailing the effective dates.

June 6 final rule from the CFPB delays the compliance date for most of the Mandatory Underwriting Provisions to Nov. 19, 2020 (they were originally set to go into effect Aug. 19 of this year).

See the CompBlog entry for a specific list of provisions extended to Nov. 19, 2020, provisions not extended will become effective Aug. 19.

FHA Postpones Digital Signature Requirement for Appraisals

The Federal Housing Administration is delaying a plan to put a hard stop on home loan files that lack digitally signed appraisals.

The FHA previously planned to make extensible markup language signatures compatible with its electronic appraisal delivery system a requirement on Aug. 5. (National Mortgage News, July 15)

News About Credit Unions

Taxi Fallout Tests CUs’ Reputation

As the taxi medallion debacle continues to unfold, credit unions’ positive reputation may be taking a hit. There are many threads to the ongoing drama – allegations of poor credit union management, questions about oversight by the NCUA, evidence that borrowers took out loans they did not understand and allegations that the NCUA has been unwilling to negotiate with drivers who found themselves unable to repay the loans.

And that doesn’t include the indictment of the former CEO of a major taxi credit union and taxi medallion owner.

As shoes continue to drop, the credit union industry risks taking a hit to its reputation, according to Casey Boggs, president of ReputationUs, a public relations consulting company that deals with such issues.

“They know it’s an issue,” Boggs said. “They know it’s a risk.”

The best thing is to take ownership and become part of the solution, he said.

And the industry is responding appropriately, Boggs added.

He said, for instance, William Mellin, president/CEO of the New York Credit Union Association, is serving on a task force that is studying the city’s taxi medallion industry.

“I think that’s a good thing because they don’t have all the answers yet,” he said, adding that one way to deal with such crises is to take ownership and work toward a solution.

The taxi medallion issue was thrown into the limelight in May, when The New York Times reported that many taxi drivers used brokers to apply for loans and did not understand the terms of the loans.

And many, if not most, of those loans were provided by credit unions.


Financial Services / Marketplace

Credit Union Trends Report Available

The Credit Union Trends Report is a monthly "pulse check" on the state of the credit union marketplace, often placed in a historical context. The report for July 2019 is available now.

The report found that during the first five months of 2019, loan balances rose 1.5% below the 3.5% reported in 2018. However, at the same time, credit union savings balances grew 7.1% over the last year, above the 6.1% 10-year average growth rate. This is due to members’ desire to save rather than spend.

Click here to read the full report from CUNA Mutual Group.

CUNA Lowers Growth Forecast Again

CUNA on Friday said that it has again cut its forecast for 2019 credit union loan growth as it expects U.S. economic growth to diminish in the coming year.

In the CUNA Economic Outlook video recorded last week, CUNA Senior Policy Analyst Samira Salem credit union loan portfolios are expected to rise 7.5% this year, down from its previous forecasts of 7.75% in April and 8% last fall. April forecast of 7% growth for 2020 remains.


Why Credit Unions Must Plan for Mergers Not Yet on the Horizon

As the credit union system continues to consolidate, mergers and acquisitions have become one of the primary growth strategies for institutions across the movement. And with strategic planning sessions about to begin at CUs nationwide, many experts say institutions on both sides of the transaction – those merging and being acquired – should be discussing the topic as part of their planning sessions.

CUNA Mutual Group’s most recent data shows 5,550 active credit unions in the country today, a decline of 172 from one year prior. Data from the National Credit Union Administration shows a decline in the number of mergers each year since 2014, but the number of active CUs is also slowing.

Mark Sievewright, founder and CEO of the Sievewright and Associates consultancy, said he “very much” expects the consolidation trend to continue and possibly accelerate slightly. He recalled making a prediction a decade ago that there would be fewer than 5,000 credit unions in the U.S. by the end of 2020.

“My latest point of view is we are likely to have less than 3,000 credit unions by the end of 2030,” he said. “The drive for scale in our movement is palpable right now, and I have a fundamental belief that the definition of what ‘scale’ means is changing as credit unions must invest to keep up with advancements in technology.”

Sievewright noted it was not that long ago a credit union with $500 million in assets was considered large. As a sign of change, he pointed to the proposed merger of BB&T and SunTrust to create Truist Financial, a deal partly driven by the ongoing need for big tech investments at institutions of all sizes.

“For credit unions, the new definition of ‘scale’ has moved further along the asset spectrum and is heading toward $5 billion in assets, which is where I think it will be 10 years from now,” he assessed. “I believe we will see more mergers between larger credit unions, not just smaller credit unions merging into their larger counterparts. Also, I believe more credit unions will ask to expand across state lines to create scale.” (Credit Union Journal, July 23)

Senators Press Fed's Powell on Real-Time Payments

A bipartisan group of senators on the Banking Committee is pressing the Federal Reserve to detail its possible development of a real-time payments platform, questioning how a government-run system would work in tandem with privately run systems.

Sens. Mark Warner, D-Va., Thom Tillis, R-N.C., David Perdue, R-Ga., Jon Tester, D-Mont., and Tom Carper, D-Del., wrote to Fed Chairman Jerome Powell that while they are open to the Fed pursuing a competing real-time payment system, they are unclear how it would benefit consumers.

The Clearing House launched a real-time payments network in 2017, which is used by instant interbank payment systems like Zelle, PayPal and Venmo. But many community banks have been asking the Fed to create its own system, an option officials have been considering. Politico reported last week that the Fed is poised to issue a proposal soon. (American Banker, July 22)

Education / Networking Opportunities

East Coast Marketing Conference Sept. 26-27 in Richmond

Registration is now open for the East Coast Marketing Conference, scheduled for Sept. 26-27, in Richmond! Education topics will include marketing to Millennial Moms; turning data into action; influencing and creating a more productive workplace; spicing up your marketing; and onboarding new members.

Registration is $349 for both days for the first person registered from your credit union; then $329 per person for additional registrants.

You can reserve rooms now at the Hilton Richmond Downtown (501 E. Broad St., Richmond, 23219). The hotel's discounted rate of $165 is good Wednesday through Saturday (a deposit of one night is required at the time of reservation). Call 804.344.4300 and use code VACUL. Discount ends Aug. 29.


LenderSelect Hosting Free Webinars July 24, Aug. 20

You’re invited! Our friends at Lender Select Mortgage are hosting two free webinars.

  • Free webinar: Creating a Mortgage Marketing Plan for Community Financial Institutions
    July 24 2 PM 
  • Free webinar: Turning Your Front-Line Staff Into Sales Ambassadors
    Aug 20 2 PM EST

Discovery Conference™ 2019 Registration is Now Open!

The virtual Discovery Conference, hosted by CUNA Mutual Group, is back and better than ever – loaded with insights for credit union professionals at all levels, and conveniently available at your fingertips.

The conference is packed with valuable content to help credit unions jumpstart their strategic planning. Sessions include: Maximize Your Credit Union’s Digital Experience with Behavioral Economics & Content Marketing; Bridging the Gap Between Financial Institutions & Fintechs; Digital Trends Shaping the Financial Sector; and The Amazonification of Borrowing Money.

There is no cost to attend, no travel expenses, and no time out of the office. With sessions scheduled throughout the day on Aug. 15, you can participate based on your own schedule – all day, or a portion of the day.


News From Credit Unions

Credit Union Cultivator LLC Welcomes Hampton Roads Educators Credit Union

Credit Union Cultivator LLC announced it has onboarded Hampton Roads Educators Credit Union Inc., headquartered in Hampton, Virginia.

Hampton Roads Educators Credit Union has joined our growing industry list which allows them to effectively segment their members and identify the right marketing product approach with a few simple clicks.


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