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  • NCUA Collects $445 Million from International Bank Due to Faulty Mortgage-Backed Securities, Recovers Nearly $4.7 Billion to Date

    Securities

    On May 1, the National Credit Union Administration (NCUA) announced it has collected $445 million from a Switzerland-based bank over claims stemming from losses borne by two liquidated credit unions related to faulty mortgage-backed securities they bought from the bank. As part of the settlement, NCUA will dismiss its 2012 lawsuit filed in the U.S. District Court in Kansas on behalf of the credit unions and brought against the bank for violations of federal and state laws through its alleged misrepresentations in the sale of mortgage-backed securities. Notably, the bank is not admitting fault as part of the deal. The $445 million in recoveries will be used to pay claims against the liquidated corporate credit unions, “including those of the Temporary Corporate Credit Union Stabilization Fund.” “This latest recovery . . . provide[s] a measure of accountability for the firms that sold faulty securities to the corporate credit unions,” acting NCUA Chairman Mark McWatters said. “It remains incumbent on NCUA to provide transparency in terms of the settlements, the legal fees and other costs that go with them, and how these affect the Stabilization Fund.” To date, NCUA’s recoveries from financial institutions alleged to have sold faulty securities to five corporate credit unions, leading to their collapse, have reached nearly $4.8 billion.

    Securities Mortgages credit union NCUA

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  • Credit Unions, Small Banks Encourage Fed Payments System Operational Role

    FinTech

    On April 18, three industry organizations representing community banks and credit unions—the Credit Union National Association (CUNA), the Independent Community Bankers of America (ICBA), and the National Association of Federally-Insured Credit Unions (NAFCU)—sent a letter urging the Federal Reserve System (Fed) to provide central bank settlement services in support of private sector development of future payment systems, rules, and standards. The letter also urges the Fed to take on three operational roles in addition to settlement capabilities: (i) to serve as an “on-ramp” to real-time payments; (ii) to serve as a real-time payments operator, much as it currently is an operator for checks, automated clearinghouse payments, and wire transfers; and (iii) to maintain a “payments directory” that would link together financial institutions and private-sector payments directories. The organizations argue, among other things, that the Fed’s commitment to these operational roles is critically important to achieving the “much-needed goals of safety, equitable access, and ubiquity” in developing an improved payments system. The letter emphasizes that the organizations are not requesting that the Fed develop rules or standards for real-time payments, but rather take the position that such efforts “should be left for private sector rules and standards organizations.”

    As previously covered by InfoBytes, the Fed created the Faster Payments Task Force and the Secure Payments Task Force in June 2015 to lead industry efforts toward a speedier and better payments system. The CFPB also issued a set of guiding principles aimed to help private industry better protect consumers as new, faster electronic payment systems continue to emerge. (See InfoBytes coverage)  The April 18 letter “applaud[s] the formation of both [Task Forces]” and “strongly encourage[s] the ongoing commitment of the [Fed] to lead and catalyze payments industry activities until the desired outcomes stated in the 2015 Strategies for Improving the U.S. Payments System paper are achieved.”

    Fintech credit union Community Banks ICBA NAFCU CUNA Federal Reserve CFPB

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  • Credit Union Trade Association Submits Letter in Support of Proposed CFPB Exemption

    Federal Issues

    On March 5, Credit Union National Association (CUNA) President Jim Nussle submitted a letter to Rep. Roger Williams (R-Texas), supporting his introduction of H.R. 1264—the Community Financial Institution Exemption Act. The bill, referred to the House Financial Services Committee on February 28, provides an exemption from rules and regulations of the CFPB for community financial institutions with under $50 billion in assets. “The rules are, in large part, implemented to address abuses perpetrated by the large institutions and other previously nonregulated providers, and not small institutions like credit unions and small banks,” Nussle wrote. “While we believe that the statute presently provides the CFPB authority to exempt credit unions under $50 billion from its rulemaking, the bureau has been unwilling to effectively use the exemption authority.”

    Federal Issues CFPB credit union House Financial Services Committee

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  • NAFCU Recommends FSOC Use Authority to Rein in CFPB

    Consumer Finance

    On February 28, the National Association of Federally-Insured Credit Unions (NAFCU) sent a letter to Treasury Secretary Steven Mnuchin urging him to use his position as chairman of the Financial Stability Oversight Counsel to alleviate the CFPB's “burdensome” regulatory impact on credit unions. The letter, among other things, urges the Secretary and FSOC to use the Counsel’s authority to set aside CFPB regulations as leverage to “spur renewed dialogue between the Bureau and the federal banking agencies regarding rules that may actually pose systemic risk to the financial sector.” The NAFCU attached an appendix to the letter listing 10 CFPB rules that the group finds “ripe for further review.” The letter was sent a day before FSOC’s March 2 executive session—its first under Secretary Mnuchin. Separately, the CUNA is holding its annual governmental affairs conference in Washington this week, bringing in 5,000 credit union advocates from around the country.

    Consumer Finance NAFCU CFPB credit union FSOC Treasury Department

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  • District Court Dismisses Bank Trade Group’s Lawsuit Regarding Credit Union Business Lending Rule

    Consumer Finance

    On January 24, the U.S. District Court for the Eastern District of Virginia issued an order dismissing a suit seeking to overturn a rule that allows federally regulated credit unions to expand their business lending activities. The complaint, filed in September 2016, claimed the NCUA  exceeded the plain language of its statutory authority by permitting such business lending activities  The bank trade group further alleged that because credit unions are tax-exempt, they offer commercial loans at a lower price than the trade group’s community bank members, resulting in injury to those institutions. The court, however, stated that the bank trade group failed to prove its claim or show that injury was caused to its members. “Merely codifying an extant rule in part of a new regulation does not effectuate a reopening. If anything, this reflects the agency’s view that its earlier rule is ... settled to the point that it may serve as a foundation for further rule-making,” Judge Cacheris wrote.

    Banking State Issues NCUA credit union

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  • McWatters Named Acting NCUA Chairman

    Consumer Finance

    On January 25, President Trump appointed J. Mark McWatters as the acting chairman of the National Credit Union Administration (NCUA). McWatters succeeds Rick Metsger, who will remain a NCUA Board Member. McWatters was nominated to the NCUA Board by then-President Barack Obama on January 7, 2014 and took office following Senate confirmation on August 26, 2014. Prior to joining NCUA’s Board, McWatters—a licensed attorney and CPA—worked in a variety of public and private sector roles, including serving on the Governing Board of the Texas Department of Housing and Community Affairs and as a member of the Troubled Asset Relief Program Congressional Oversight Panel. He also served as counsel to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), who, following McWatters’ appointment, issued the following statement:

    “I commend President Trump for appointing Mark McWatters to this key position. Mark is highly capable and extremely well qualified for this role. He brought a free market-oriented, transparent and accountable perspective to the NCUA Board. At a time when the regulatory burden of the Dodd-Frank Act has led to a drastic decline in the number of credit unions serving Americans, Mark’s leadership as Acting Chairman is greatly needed.”

    Banking NCUA Miscellany Trump credit union

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  • CFPB Seeks Advisory Council Applications

    Consumer Finance

    As explained in a January 16 blog post, the CFPB recently set up three “advisory groups”—the Consumer Advisory Board, the Community Bank Advisory Council, and the Credit Union Advisory Council—in anticipation that the groups would provide information about emerging trends and practices in the consumer financial marketplace and to open lines of direct communication with smaller financial institutions. On January 16, the Bureau requested applications seeking to fill vacancies in all three groups, which have seats that will become vacant in the fall of 2017. According to the post, the CFPB is seeking individuals with expertise in a variety of consumer protection issues, including representatives of banks serving underserved communities, representatives of communities impacted by higher priced mortgages, employees of credit unions and community banks, and academics. Applications are due March 1.

    Consumer Finance CFPB Community Banks Miscellany credit union

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  • FinCEN Penalizes New York Credit Union for Failure to Manage High-Risk International Financial Activity

    Federal Issues

    On December 14, the Financial Crimes Enforcement Network (FinCEN) announced that it had assessed a $500,000 civil money penalty against a federally-chartered, low-income designated, community development credit union, for “significant violations” of anti-money laundering regulations. According to FinCEN, the credit union had historically maintained an AML program designed to address risks stemming from its designated field of membership in New York, NY. However, in 2011, the credit union began providing banking services to many wholesale, commercial money services business, some of which were located in high risk jurisdictions or engaged in high risk activities, without taking steps to update its AML program. As a result, the credit union was unable to detect and report suspicious activity and was left particularly vulnerable to money laundering.

    Federal Issues Criminal Enforcement International Anti-Money Laundering FinCEN credit union

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