Volume 29, Number 13 July 30, 2009
Volume 29, Number 13 July 30, 2009
HEADLINE NEWS
CUNA Pursues CARD Act Compliance Concerns
Nearly 2,500 credit union representatives, including Dona Palermo (Dover FCU), Suzanne Porter (First State FCU), and Susan Fallon (Delaware League) tuned into a CUNA audio conference on July 28 regarding the Credit Card Accountability, Responsibility and Disclosure (CARD) Act.
The 90-minute conference addressed concerns over portions of the CARD Act that are subject to an August 20 compliance date, which in addition to credit cards also covers all open-end lines of credit. The rule was implemented by the Federal Reserve.
The Credit Union National Association (CUNA) continues its efforts to address what is for credit unions a troublingly short compliance framework for new Federal Reserve rules implementing the CARD Act. CUNA is pursuing both regulatory and legislative fixes to the compliance date problem.
The CARD Act aims to prevent lenders from making arbitrary changes to interest rates and terms associated with credit cards that have an existing balance. However, CUNA has been working with the Fed to convey credit union concerns regarding a specific requirement in Section 106.
That section prohibits creditors from claiming a payment is late unless that creditor adopts reasonable procedures to ensure that periodic statements are delivered to consumers no later than 21 days before the payment due date.
The section, says CUNA, is very problematic both because it is one of the very few provisions that apply to all open-end credit, not just credit cards, and because of the upcoming August 20 effective date.
CUNA Senior Assistant General Counsel Jeff Bloch said audio conference discussion focused exclusively on the huge compliance problems associated with the 21-day disclosure requirement.
“One suggestion for compliance that was discussed, and seemed the most viable, was an idea of putting due dates on the statements for both the current month and the next month to ensure that members receive the 21-day notice for all payments, without requiring the dismantling of consolidated statements or altering due dates, many of which are chosen by the members themselves,” Bloch said
“Unfortunately, the Fed attorney said that approach would violate the ‘spirit’ of the rule,” Bloch commented, but assured that CUNA will continue to pursue the “multiple due dates” approach with the Fed because it seems to be “the most viable, and maybe the only realistic, means in which to comply with these provisions.”
There is an archived version of the CUNA audio call available through the CUNA website. Go to:http://training.cuna.org/audio/TA7289_fct.html.
| More CARD Act information is contained in the current manager/CEO mailing. |
Volunteer Conference Materials Will Soon Be Available
The Delaware Credit Union League and the MD/DC Credit Union Association will host the 13th Annual Volunteer Leadership Conference (VLC) October 23-25 at the Clarion Fontainebleau Hotel in Ocean City, Maryland.
The VLC offers another exceptional line-up this year with a Friday afternoon appearance by CUNA CEO Dan Mica. Mica will open the VLC with “A Conversation with Dan Mica,” as he provides his unique insight on where credit unions are – and where they are going.
On Saturday morning, NCUA Board member Gigi Hyland and Mid-Atlantic Corporate CEO Jay Murray will update volunteers on the regulatory environment and corporate stabilization issues.
The League will be mailing a brochure to all CEOs and board chairs at the beginning of August. Information will also be posted on the League website. For more information, call Alice Smith.
NCUA NOTES
18% FCU Ceiling Good for 18 Months
The National Credit Union Administration (NCUA) at its July 16 meeting voted to continue the 18% interest rate ceiling for loans made by federal credit unions. The ceiling is set for an 18-month period from September 10 to March 10, 2011. The agency will issue a “Letter to Federal Credit Unions” soon to notify them of this decision. The current 18% ceiling was due to revert to 15% on September 10 absent NCUA’s action. Additional information about this action can be found on NCUA’s website:
http://www.ncua.gov/GenInfo/BoardandAction/DraftBoardActions/Item4b_Supplemental
InformationUpdate070209Final.pdf.
NCUA Overdraft Disclosure Rule
A final rule adopted by NCUA will require credit unions to disclose on periodic statements the dollar amounts charged for overdraft fees and returned item fees, both for the month and the year-to-date.
The NCUA action more closely aligns the federal credit union regulator’s Truth in Savings Act rule and its official staff commentary with that of the Federal Reserve Board’s Regulation DD. Until now, only credit unions that promote or advertise payment overdraft services were required to provide these disclosures. The rule is effective as of January 1, 2010.
The final rule will also require credit unions to provide account balance information through an automated system that discloses only the amount of funds available for withdrawal, without including the additional funds that would be available under an overdraft program.
Additionally, the rule removes current provisions regarding the electronic delivery of disclosures.
New Online Call Report System
A new online call report system approved by NCUA is expected by agency staff to eliminate many of the redundancies that occur under the existing reporting regime.
The NCUA adopted a final rule at its board meeting that will provide a secure, web-based system to allow federally insured credit unions to submit financial reports, reports of officials, and other information online.
The new approach will replace the current 5300 call report system for natural-person credit unions in late 2009; then in 2010 it will supplant the 5310 call report for corporate credit unions.
The NCUA hopes to send details of the new program in a Letter to Credit Unions in early September and make the system mandatory for credit unions with internet access by October 1.
The NCUA estimates that around 435 credit unions without internet access will submit paper call reports in lieu of the online system initially, and NCUA will enter that call report information into the online system for them. Because under the new system all data may be submitted from any computer with an internet connection, NCUA will no longer issue software to submit the reporting data.
NCUA will hold several informational webinars on this new system. The first session will be held on August 12 at 1 p.m. to provide details of the new system. For more information on this session, go to: http://www.ncua.gov/Resources/CreditUnionDevelopment/Registration.aspx.
Other NCUA News
• The National Credit Union Administration earlier this month named Marcia Sarrazin as Acting Director for Region 2, which includes Delaware, the District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia, and Alaska. Sarrazin most recently served as Associate Regional Director of Region 3.
• The National Credit Union Administration has released its 2009 Directory of Federally Insured Credit Unions. It contains a state-by-state alphabetical listing of all active federally insured credit unions as of January 1, 2009. The directory, published annually, also lists all corporate credit unions, as it features national statistics on credit unions and corporate credit unions.
• NCUA joined five other agencies in releasing revised interagency questions and answers regarding flood insurance and requested public comment on several new ones. The Interagency Questions and Answers Regarding Flood Insurance (2009) consists of 77 questions and answers. You may access this information by going to: http://www.fdic.gov/news/news/financial/2009/fil09042.html.
COMPLIANCE UPDATE
Payday Lending Program Guidance
NCUA in “Letter to CUs #09-FCU-05” said that while a number of credit unions are interested in offering short-term loans to their members, credit unions should use these programs to provide their members with a bridge from short-term loans to “more mainstream products and services.”
According to the NCUA release, credit unions can avoid the negative perception of payday loan products by “clearly” disclosing “the costs and risks associated with loans” and providing transparent application processes and advertisements to their members. Credit unions should also ensure that their loan products comply with applicable consumer protection laws, including the Equal Credit Opportunity Act, Regulation B, the Truth in Lending Act and Regulation Z, and other related regulations.
Credit unions should also control credit concentration risks through setting “borrower and program limits,” the NCUA said.
NCUA also suggested that credit unions provide terms that encourage their members to take part in more traditional financial programs by limiting the number of payday loans and rollovers a member may take part in, “imposing substantial waiting periods between loans,” providing financial counseling to members that take out short-term loans, and allowing their members to rescind a loan within 24 hours, free of charge.
In instances where an FCU refers its members to a third-party vendor that services payday loans, that FCU would be “in violation” of NCUA rules if the terms of those loans are misleading to consumers. Referring credit union members to a third-party vendor in exchange for finder’s fees would also create a “significant reputation risk” and would run “contrary to the FCU’s central mission to serve its members,” the NCUA release added.
To see the NCUA’s full guidance on payday loans, use the resource link: http://www.ncua.gov/news/express/xfiles/09-FCU-05.pdf.
Mortgage Compliance: July 30
On July 30, credit unions had to begin complying with the Federal Reserve Board’s final rule amending Regulation Z to implement provisions of the Mortgage Disclosure Improvements Act (MDIA). Under the Fed’s rule, CUs must make good faith estimates (GFE) of the required mortgage disclosures. The disclosure has to be on its way to a member in no more than three business days after receiving that member’s application for a dwelling-secured, closed-end loan. Loan closing may occur on or after the seventh business day after the delivery or mailing of those disclosures. If the loan rate cited in the GFE changes more than 0.125%, a CU must provide a corrected disclosure.
Many more points are found in CUNA’s eGuide:
http://www.cuna.org/reg_advocacy/member/analysis/fed_060309.html.
CUs Hamstrung in Providing Small Business Loans
Credit unions are one of four options mentioned for small business loans in a story posted on The Wall Street Journal Online recently. American Spirit FCU and Eagle One FCU were also mentioned as approved Small Business Administration (SBA) lenders in an article in The Sunday News Journal, July 26.
Both articles indicated that many lenders have discontinued lending to small businesses. Both CUNA economist Bill Hampel and CUNA spokesperson Patrick Keefe, who were interviewed in the articles, noted that credit unions are still in the game and are lending. However, they could do even more to meet small business needs if they were not limited by the statutory 12.25% lending cap.
Credit unions have the capacity to make more loans, but they’re largely hamstrung by a 1998 federal law that caps the amount of assets credit unions can loan to businesses, Hampel said. As big banks falter, demand for business loans at credit unions is rising and outpacing the cap at some credit unions, he said.
A bill to raise the cap from 12.25 to 25% of assets has recently been submitted to Congress. Representatives Paul Kanjorski (D-PA) and Ed Royce (R-CA) have introduced H.R. 3380, the Promoting Lending to America’s Small Businesses Act. Delaware CUs are urged to write to Congressman Castle to support this bill through CUNA’s online system: http://capwiz.com/cuna/home/.
DELAWARE NOTES
In June, DEL-ONE (Delaware FCU) partnered with Delaware State University’s Juneteenth program to provide financial education to 25 young women on the following topics: the importance of savings, how to save and attain good credit, and how to become financially responsible.
Debbie Jewell, Del-One business development manager, (far right) with Juneteenth participants
Kudos to the following CUs that received 5-star ratings from BauerFinancial, Inc., an independent financial institution rating and research firm: American Spirit, Chestnut Run, Delaware Alliance, Delaware State Police, Dover, DPL, First State Refinery, New Castle County Delaware Employees, New Castle County School Employees, Provident, U-Del, and Wilmington Postal. The ratings are based upon 2009 first quarter financial data as reported to financial regulators. Five stars (superior) is the highest rating given by the firm. Nine additional CUs received four-star (excellent) ratings: Del-One (Delaware), Delaware First, Delaware River and Bay Authority Employees, DEXSTA, Edge Moor DuPont Employees, ICI America, Louviers, Milford Memorial, and Preferred Financial. The three Delaware CUs with less than $1.5 million in assets are not rated.
Mid-Atlantic Corporate FCU announces that SUSSEX COUNTY FCU is now enrolled in the DPD share draft program.
EDUCATIONAL OPPORTUNITIES
August QuickBites Teleconferences
One-hour sessions run from 11 a.m.-noon:
• 8/6 Top Ten IT Security Issues
• 8/19 Building Members From Indirect Borrowers
• 8/27 Preventing Elder Fraud
The two-hour session runs from 11 a.m.-1 p.m.
• 8/11 Fair Credit Reporting Act and Fair Debt Collection Practices Act
The fee for the one-hour sessions is $99; the two-hour session fee is $169. The deadline to register with Bernadette Hines: one week before the session.
CU Marketing Strategy and Local Community Involvement – Two sessions: 1) Wednesday, August 5, from 5:30-7:30 p.m. at the League office, and 2) Thursday, August 6, from 4:30-6:30 p.m. at Del-One, 270 Beiser Boulevard, Dover. Volunteers will explore strategies to grow membership and to make a real impact on their communities. Fee: $95. Space is still available.
Cards Council Session: “A House of Cards…A Look Inside the New Credit Card Law” – Thursday, August 27, from 10 a.m.-noon at the League office. John Kilduff will review the mandates of this new law and discuss how your CU can position your credit card program to continue to generate profits and manage risk. No fee for council members; $100 for non-council members. Registration deadline: August 21.
PLAN AHEAD |
September 30 Marketing Council Meeting
October 7 Strategies for Economic Survival in a Mean World
(for CUs under $100M in assets)
October 15 Golf Outing for Educational Scholarship Funds
October 23-25 Volunteer Leadership Conference
November 18 IRA Basic Training
November 19 IRA Advanced Training
TOGETHER is published on the 15th and 30th of each month by the Delaware Credit Union League, 4 Quigley Boulevard, New Castle, DE19720. Information to be published should be sent or phoned into the League no later than the Monday of the week preceding the publication date. Telephone: (302) 322-9341 or (800) 292-7875. This newsletter can also be found on the League website: www.dcul.org. Hard copies of the newsletter will be mailed to each credit union CEO/manager for distribution to those without computer access. Readers can receive a reminder when the newest edition is posted to the Web by emailing susan@dcul.org. Editor: Alice Smith (alice@dcul.org).