A U.S. District Court judge today invalidated a portion of the National Credit Union Administration’s field of membership (FOM) rule.
Judge Dabney Friedrich declared invalid and vacated two aspects of the rule challenged by the American Bankers Association in a lawsuit against NCUA: (1) the inclusion of Combined Statistical Areas with fewer than 2.5 million people, and (2) the dramatic expansion of a “rural area” to include areas with up to 1 million people -- which in some cases could encompass entire states. She noted that NCUA’s actions in these areas “are manifestly contrary to the [Federal Credit Union] Act."
However, the judge upheld the parts of the rule that allow federal credit unions to serve Core-Based Statistical Areas without serving the urban core that defines the area, and the ability to add “adjacent areas” to existing well-defined local communities on a case-by-case basis. Judge Friedrich upheld both of those provisions, concluding that “neither [are] in excess of the agency’s statutory authority nor arbitrary and capricious.” She added, however, that “the approach to Core-Based Statistical Areas pushes against the outer limits of reasonableness.”
Read the opinion.
Thursday, March 29, 2018
Auction of Taxi Medallions Had No Bidders
Crain's New York Business is reporting that there were no bidders at a March 28 auction of 15 foreclosed taxi medallions held by Bay Ridge Federal Credit Union (Brooklyn, NY).
The credit union set the stating price of the each medallion at $200,000, knowing that it would probably not get any bidders.
In recent auctions, taxi medallions sold for approximately $185,000.
Getting no bids, the credit union took possession of the medallions in a so-called credit bid.
The CEO of the credit union stated that it would offer financing to owner-drivers who pay $300,000 to $325,000 for a medallion.
Read the story.
The credit union set the stating price of the each medallion at $200,000, knowing that it would probably not get any bidders.
In recent auctions, taxi medallions sold for approximately $185,000.
Getting no bids, the credit union took possession of the medallions in a so-called credit bid.
The CEO of the credit union stated that it would offer financing to owner-drivers who pay $300,000 to $325,000 for a medallion.
Read the story.
Significant Jump in Compensation Wiped Out Merger Target's Net Worth
The net worth of NARC Federal Credit Union (Beltsville, MD) was wiped out prior to its merger to Agriculture Federal Credit Union (Washington, D.C.) by a significant increase in employee compensation.
On October 1, 2017 Agriculture Federal Credit Union acquired NARC Federal Credit Union.
At the end of the third quarter of 2017, NARC FCU was critically undercapitalized with total net worth of negative $623,577. However, the prior quarter the credit union's net worth was $1,565,677.
The dramatic decrease in the credit union's net worth was driven by a material increase in employee compensation and benefits.
NARC FCU reported $2,237,817 in employee compensation and benefits as of September 30, 2017. This was a 10-fold increase in total compensation from a year earlier of $201,594.
NARC had 3 full-time employees. It appears that at least one NARC FCU employee was richly rewarded from this merger.
A Freedom of Information Act request was filed with the National Credit Union Administration seeking documents associated with this merger.
However, some information in this merger package was redacted, making it impossible to determine if compensation arrangements were part of the merger.
On October 1, 2017 Agriculture Federal Credit Union acquired NARC Federal Credit Union.
At the end of the third quarter of 2017, NARC FCU was critically undercapitalized with total net worth of negative $623,577. However, the prior quarter the credit union's net worth was $1,565,677.
The dramatic decrease in the credit union's net worth was driven by a material increase in employee compensation and benefits.
NARC FCU reported $2,237,817 in employee compensation and benefits as of September 30, 2017. This was a 10-fold increase in total compensation from a year earlier of $201,594.
NARC had 3 full-time employees. It appears that at least one NARC FCU employee was richly rewarded from this merger.
A Freedom of Information Act request was filed with the National Credit Union Administration seeking documents associated with this merger.
However, some information in this merger package was redacted, making it impossible to determine if compensation arrangements were part of the merger.
Wednesday, March 28, 2018
Economist: OD Revenues at CUs Have Grown for 25 Straight Years
Analysis by Mike Moebs, CEO and Economist of Moebs $ervices (Lake Forest, IL), found that overdraft (OD) revenues at credit unions posted their 25th consecutive annual increase.
Moebs estimated that overdraft revenues at credit unions grew by almost 5 percent in 2017 compared to 3 percent at banks.
According to Moebs, overdraft revenues for all financial institutions were $34.3 billion in 2017, up from $33.3 billion in 2016.
The press release noted credit unions accounted for 19 percent of all overdraft revenues versus 79 percent for banks and 2 percent for thrifts.
However, Moebs cautioned that overdraft prices are no longer price inelastic. According to Moebs, banks are recognizing that overdraft prices are price elastic, but most credit unions have not.
Moebs stated that financial institutions that lower their overdraft prices, especially under $20 per overdraft, will achieve more revenues, more consumers using overdrafts, more checking accounts, and greater profit.
Moebs estimated that overdraft revenues at credit unions grew by almost 5 percent in 2017 compared to 3 percent at banks.
According to Moebs, overdraft revenues for all financial institutions were $34.3 billion in 2017, up from $33.3 billion in 2016.
The press release noted credit unions accounted for 19 percent of all overdraft revenues versus 79 percent for banks and 2 percent for thrifts.
However, Moebs cautioned that overdraft prices are no longer price inelastic. According to Moebs, banks are recognizing that overdraft prices are price elastic, but most credit unions have not.
Moebs stated that financial institutions that lower their overdraft prices, especially under $20 per overdraft, will achieve more revenues, more consumers using overdrafts, more checking accounts, and greater profit.
Tuesday, March 27, 2018
OIG: NCUA Lacked Comprehensive Records Management Program
The National Credit Union Administration (NCUA) Office of Inspector General (OIG) determined that the NCUA lacks a comprehensive records management program. The combination of a lack of resources and competing priorities kept management from creating a viable records management program.
The time period of the audit was 2012 through 2016.
The OIG found that NCUA did not have a comprehensive records management framework, retention, and disposal system in place. Offices throughout the NCUA do not know how to properly archive hard copy and electronic records. For example, Office of General Counsel "staff kept some closed legal files in unsecured file cabinets in unlocked file rooms... As a result, unauthorized personnel or other unauthorized individuals could have potentially accessed sensitive information."
In addition, NCUA had no checklist to follow when an employee left the agency to ensure all of their electronic and hard copy records were properly assessed for records management purposes.
The OIG concluded that the agency needed to improve communications about records management. For example, the OIG found that management did not timely or accurately update the NCUA Board on specifics related to records management and did not give comprehensive guidance to staff on how to handle office or personal records in the conduct of their day-to-day duties.
The OIG also discovered that those charged with governance over records management for the agency did not consistently follow applicable laws, regulations, and guidance to ensure the NCUA had a comprehensive records management program in place.
For example, management did not provide training to staff for records management, as required by National Archives and Records Administration (NARA) regulations and NARA and Office of Management and Budget (OMB) circulars.
The report noted that NCUA management on January 31, 2018 belatedly issued a records management policy.
The OIG made five recommendations to NCUA management that will help the agency implement a comprehensive records management program.
Read the OIG audit.
The time period of the audit was 2012 through 2016.
The OIG found that NCUA did not have a comprehensive records management framework, retention, and disposal system in place. Offices throughout the NCUA do not know how to properly archive hard copy and electronic records. For example, Office of General Counsel "staff kept some closed legal files in unsecured file cabinets in unlocked file rooms... As a result, unauthorized personnel or other unauthorized individuals could have potentially accessed sensitive information."
In addition, NCUA had no checklist to follow when an employee left the agency to ensure all of their electronic and hard copy records were properly assessed for records management purposes.
The OIG concluded that the agency needed to improve communications about records management. For example, the OIG found that management did not timely or accurately update the NCUA Board on specifics related to records management and did not give comprehensive guidance to staff on how to handle office or personal records in the conduct of their day-to-day duties.
The OIG also discovered that those charged with governance over records management for the agency did not consistently follow applicable laws, regulations, and guidance to ensure the NCUA had a comprehensive records management program in place.
For example, management did not provide training to staff for records management, as required by National Archives and Records Administration (NARA) regulations and NARA and Office of Management and Budget (OMB) circulars.
The report noted that NCUA management on January 31, 2018 belatedly issued a records management policy.
The OIG made five recommendations to NCUA management that will help the agency implement a comprehensive records management program.
Read the OIG audit.
Monday, March 26, 2018
GAO Report Highlights the Need of Improved Regulator Collaboration on Fintech
The Government Accountability Office (GAO) in a recent report noted that improved collaboration among regulators could lead to better consumer protection and regulatory oversight in the Fintech space.
The report noted that Fintech firms are currently subject to an uneven regulatory framework, with a patchwork of state and federal agencies overseeing certain fintech providers, while others remain largely outside the regulatory scope.
The GAO found that the National Credit Union Administration (NCUA) was not included in the Federal Reserve's Interagency Fintech Discussion Forum or the Treasury Department's Interagency Working Group on Marketplace Lending. The report stated that the "lack of NCUA participation in the Interagency Fintech Discussion Forum may preclude NCUA and the other participating agencies from sharing information that could be useful in efforts to oversee the risks that fintech poses to their regulated institutions."
In addition, NCUA commented that, unlike other federal banking regulators, it does not have the authority to examine third-party vendors. In order to examine any services provided by Fintech players to credit unions, NCUA must rely on credit unions to voluntarily provide information on the third-party service provider. The agency noted that this potentially creates challenges in evaluating the activities of Fintech players.
The agency wrote that it will monitor the risk posed by Fintech firms by working with the other banking regulators.
The report made 16 recommendations. Those recommendations specific to NCUA include:
The report noted that Fintech firms are currently subject to an uneven regulatory framework, with a patchwork of state and federal agencies overseeing certain fintech providers, while others remain largely outside the regulatory scope.
The GAO found that the National Credit Union Administration (NCUA) was not included in the Federal Reserve's Interagency Fintech Discussion Forum or the Treasury Department's Interagency Working Group on Marketplace Lending. The report stated that the "lack of NCUA participation in the Interagency Fintech Discussion Forum may preclude NCUA and the other participating agencies from sharing information that could be useful in efforts to oversee the risks that fintech poses to their regulated institutions."
In addition, NCUA commented that, unlike other federal banking regulators, it does not have the authority to examine third-party vendors. In order to examine any services provided by Fintech players to credit unions, NCUA must rely on credit unions to voluntarily provide information on the third-party service provider. The agency noted that this potentially creates challenges in evaluating the activities of Fintech players.
The agency wrote that it will monitor the risk posed by Fintech firms by working with the other banking regulators.
The report made 16 recommendations. Those recommendations specific to NCUA include:
- The Chair of the Board of Governors of the Federal Reserve System should invite NCUA to participate in the Interagency Fintech Discussion Forum.
- The Chairman of the NCUA should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services.
- The Chairman of the NCUA should formally evaluate the feasibility and benefit of establishing an office of innovation or clear contact point, including at least a website with a dedicated email address.
- The Chairman of the NCUA should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation.
Friday, March 23, 2018
981 Federally Insured Credit Unions Reported Losses in 2017
According to year-end Call Report data, 981 federally-inured credit unions reported losses. In other words, 82 percent of federally insured credit unions had positive net income during 2017, a slight improvement compared to 2016.
The chart below shows the number of credit unions reporting losses by asset size (click on image to enlarge). The majority of credit unions reporting losses were under $10 million in assets.
Forty-seven federally insured credit unions reported losses of $1 million or more in 2017 with 5 credit unions reporting losses in excess of $10 million.
Below is a chart reporting the 10 credit unions with the largest losses for 2017.
On the other had, the ten credit unions reporting the highest net income in 2017 had aggregate net income of $2.64 billion.
The chart below lists the ten credit unions with the highest net income.
The chart below shows the number of credit unions reporting losses by asset size (click on image to enlarge). The majority of credit unions reporting losses were under $10 million in assets.
Forty-seven federally insured credit unions reported losses of $1 million or more in 2017 with 5 credit unions reporting losses in excess of $10 million.
Below is a chart reporting the 10 credit unions with the largest losses for 2017.
On the other had, the ten credit unions reporting the highest net income in 2017 had aggregate net income of $2.64 billion.
The chart below lists the ten credit unions with the highest net income.
Thursday, March 22, 2018
LGE Community CU to Acquire Georgia Heritage Bank
LGE Community Credit Union (Marietta, GA) has entered into a definitive agreement to purchase Georgia Heritage Bank (Dallas, GA).
LGE Community Credit Union is a $1.27 billion asset credit union with 11 branches. Georgia Heritage Bank has $94.7 million in assets and has branches in Cobb and Paulding Counties.
The boards of directors of both LGE Community Credit Union and Georgia Heritage Bank have unanimously approved the transaction.
The transaction is expected to close in the third quarter of 2018 and is subject to the approval by Georgia Heritage Bank’s shareholders, receipt of regulatory approvals and other customary closing conditions.
The terms of the deal were not disclosed.
Read the press release.
LGE Community Credit Union is a $1.27 billion asset credit union with 11 branches. Georgia Heritage Bank has $94.7 million in assets and has branches in Cobb and Paulding Counties.
The boards of directors of both LGE Community Credit Union and Georgia Heritage Bank have unanimously approved the transaction.
The transaction is expected to close in the third quarter of 2018 and is subject to the approval by Georgia Heritage Bank’s shareholders, receipt of regulatory approvals and other customary closing conditions.
The terms of the deal were not disclosed.
Read the press release.
Two Recent Court Decisions of Importance to Banks and CUs
Last week, two federal courts issued decisions of importance to financial institutions.
On March 16, a federal appellate court set aside some of the Federal Communications Commission’s constraints on when and how businesses can contact customers by phone. The FCC’s expansive interpretations under the Telephone Consumer Protection Act had created compliance challenges for financial institutions seeking to contact their customers with important account information.
The three-judge panel of the D.C. Circuit Court of Appeals ruled that the FCC’s definition of an autodialer was “unreasonably expansive,” since it would appear to cover ordinary smartphones, not just equipment designed to make robocalls. The court also vacated the FCC’s policy on calls made to numbers belonging to people who had consented to receive calls but that had since been reassigned to non-consenting persons; the court said that the FCC’s safe harbor (which allowed only one call before incurring liability) was arbitrary and capricious. The court upheld the FCC’s approach to handling how call recipients can revoke previously granted consent to calls but concluded that a caller and call recipient may contractually agree to specific revocation mechanisms.
On March 15, the Fifth Circuit Court of Appeals vacated the Department of Labor's fiduciary rule. The rule would have imposed a fiduciary standard of care on broker-dealers and investment advisers that provide investment advice to retirement plan investors. The court found that the rule's new definition of fiduciary conflicted with the Employee Retirement Income Security Act. The court also found that the rule did not meet the reasonableness tests under so-called Chevron deference.
On March 16, a federal appellate court set aside some of the Federal Communications Commission’s constraints on when and how businesses can contact customers by phone. The FCC’s expansive interpretations under the Telephone Consumer Protection Act had created compliance challenges for financial institutions seeking to contact their customers with important account information.
The three-judge panel of the D.C. Circuit Court of Appeals ruled that the FCC’s definition of an autodialer was “unreasonably expansive,” since it would appear to cover ordinary smartphones, not just equipment designed to make robocalls. The court also vacated the FCC’s policy on calls made to numbers belonging to people who had consented to receive calls but that had since been reassigned to non-consenting persons; the court said that the FCC’s safe harbor (which allowed only one call before incurring liability) was arbitrary and capricious. The court upheld the FCC’s approach to handling how call recipients can revoke previously granted consent to calls but concluded that a caller and call recipient may contractually agree to specific revocation mechanisms.
On March 15, the Fifth Circuit Court of Appeals vacated the Department of Labor's fiduciary rule. The rule would have imposed a fiduciary standard of care on broker-dealers and investment advisers that provide investment advice to retirement plan investors. The court found that the rule's new definition of fiduciary conflicted with the Employee Retirement Income Security Act. The court also found that the rule did not meet the reasonableness tests under so-called Chevron deference.
Wednesday, March 21, 2018
Taxi Medallion Lender Progressive Sells Office Condo for $18.1 Million
The Commercial Observer is reporting that troubled taxi medallion lender Progressive Credit Union (New York, NY) sold its 19,105-square-foot office condominium in Midtown South for $18.1 million.
The space spans the entire seventh floor and a portion of the eighth floor in the building at 131 West 33rd Street between Avenue of the Americas and Seventh Avenue.
The story noted that Progressive owns a 5,031-square-foot condo on the eighth floor of the building.
Read the story.
The space spans the entire seventh floor and a portion of the eighth floor in the building at 131 West 33rd Street between Avenue of the Americas and Seventh Avenue.
The story noted that Progressive owns a 5,031-square-foot condo on the eighth floor of the building.
Read the story.
Outstanding Enforcement Actions, 2010 - 2017
In the National Credit Union Administration's 2017 Annual Report, the agency reported outstanding enforcement actions against federally insured credit unions fell from 306 in 2016 to 296 in 296.
Enforcement actions include Preliminary Warning Letters, Letters of Understanding and Agreement (both published and unpublished), Cease and Desist Orders, and Conservatorships.
The following table provides information on the number of outstanding enforcement actions by type of action for both state chartered credit unions (SCCU) and federal credit unions (FCU) between 2010 and 2017.
Enforcement actions include Preliminary Warning Letters, Letters of Understanding and Agreement (both published and unpublished), Cease and Desist Orders, and Conservatorships.
The following table provides information on the number of outstanding enforcement actions by type of action for both state chartered credit unions (SCCU) and federal credit unions (FCU) between 2010 and 2017.
Tuesday, March 20, 2018
GAO: Expand CRA to CUs
The Government Accountability Office (GAO) is recommending that the Community Reinvestment Act (CRA) be expanded to nonbanks, including credit unions.
The report noted that stakeholders requested that CRA be applied to mainstream credit unions. Advocates believed that subjecting credit unions to CRA would bolster their branching and lending to low-and moderate-income communities. GAO pointed out that National Community Reinvestment Coalition found that during the Great Recession credit unions were more apt to retreat from modest-income neighborhoods than banks, because credit unions are not subject to CRA, while banks are.
GAO further noted that a think tank discussion group recommended that credit unions should be brought under CRA-like regulations. Discussants thought it would make sense for credit unions to perform CRA-like duties in return for maintaining their charters or designations as community development financial institutions.
However, a participant in the nonfederal bank regulator discussion group thought it was unnecessary to expand CRA to credit unions, because credit unions are already owned by their members and play a vital role in their communities.
Other recommendations made by the GAO included revising the lending and service tests and expanding assessment areas.
These recommendations were forwarded to the Department of the Treasury, which is planning to review how CRA is being implemented.
The report was requested by Senator Elizabeth Warren (D - MA) and Representative Elijah Cummings (D - MD).
Read the report.
The report noted that stakeholders requested that CRA be applied to mainstream credit unions. Advocates believed that subjecting credit unions to CRA would bolster their branching and lending to low-and moderate-income communities. GAO pointed out that National Community Reinvestment Coalition found that during the Great Recession credit unions were more apt to retreat from modest-income neighborhoods than banks, because credit unions are not subject to CRA, while banks are.
GAO further noted that a think tank discussion group recommended that credit unions should be brought under CRA-like regulations. Discussants thought it would make sense for credit unions to perform CRA-like duties in return for maintaining their charters or designations as community development financial institutions.
However, a participant in the nonfederal bank regulator discussion group thought it was unnecessary to expand CRA to credit unions, because credit unions are already owned by their members and play a vital role in their communities.
Other recommendations made by the GAO included revising the lending and service tests and expanding assessment areas.
These recommendations were forwarded to the Department of the Treasury, which is planning to review how CRA is being implemented.
The report was requested by Senator Elizabeth Warren (D - MA) and Representative Elijah Cummings (D - MD).
Read the report.
Monday, March 19, 2018
Regents: CU Use of University Name Could Pose Reputation Risk
The Des Moines Register is reporting that the Iowa Board of Regents is concerned that the University of Iowa Community Credit Union could pose a reputational risk to the University of Iowa.
A member of the Iowa Board of Regents stated that "a scandal at the credit union could wreak havoc" on the University of Iowa, as many Iowans are confused about the relationship between the credit union and the university.
The story notes that the credit union does not have a formal affiliation with the university.
In 2007, the credit union tried to change its name, but the name change was rejected by the credit union's membership.
Read the story.
A member of the Iowa Board of Regents stated that "a scandal at the credit union could wreak havoc" on the University of Iowa, as many Iowans are confused about the relationship between the credit union and the university.
The story notes that the credit union does not have a formal affiliation with the university.
In 2007, the credit union tried to change its name, but the name change was rejected by the credit union's membership.
Read the story.
Sunday, March 18, 2018
Class Action Lawsuit Proceeds Against Northeast Credit Union over Overdraft Fees
A federal judge is allowing a class action lawsuit to proceed against Northeast Credit Union (Portsmouth, NH) over its overdraft practices.
The complaint alleged that Northeast Credit Union imposes overdraft fees using the customers' available balances not actual or ledger balances.
The plaintiff, Joseph Walbridge, claims that he had $111.09 in his checking account and made a debit card payment of $32.43. Northeast Credit Union determined that Walbridge had insufficient funds in his account and assess an overdraft fee of $32. The credit union assessed two more overdraft fees of $32 each.
The federal judge allowed three counts against Northeast Credit Union to proceed, including that the credit union breached its account opt-in agreement.
The complaint seeks to include anyone who incurred an overdraft fee from Northeast Credit Union.
Read the order.
Read the story.
The complaint alleged that Northeast Credit Union imposes overdraft fees using the customers' available balances not actual or ledger balances.
The plaintiff, Joseph Walbridge, claims that he had $111.09 in his checking account and made a debit card payment of $32.43. Northeast Credit Union determined that Walbridge had insufficient funds in his account and assess an overdraft fee of $32. The credit union assessed two more overdraft fees of $32 each.
The federal judge allowed three counts against Northeast Credit Union to proceed, including that the credit union breached its account opt-in agreement.
The complaint seeks to include anyone who incurred an overdraft fee from Northeast Credit Union.
Read the order.
Read the story.
Friday, March 16, 2018
Merger Would Create $2.2 Billion CU with Branches in 5 States
Denali Federal Credit Union (Anchorage, AK) and NuVision Credit Union (Huntington Beach, CA) are proposing a merger.
The combined $2.2 billion institution would have branches in the five states of Alaska, Washington, Arizona, California and Wyoming.
According to a fact sheet, Denali FCU looked at 30 potential credit union merger partners inside and outside of Alaska before deciding to partner with NuVision.
Branches in Washington and Alaska will retain the Denali name and brand.
Denali FCU stated that the proposed merger would diversify the credit union's economic base, improve operational efficiency, and put it in a stronger competitive posture.
The deal requires approval from the National Credit Union Administration and Denali FCU's members. If all approvals are received, the deal is expected to be finalized by the end of 2018.
Read more.
The combined $2.2 billion institution would have branches in the five states of Alaska, Washington, Arizona, California and Wyoming.
According to a fact sheet, Denali FCU looked at 30 potential credit union merger partners inside and outside of Alaska before deciding to partner with NuVision.
Branches in Washington and Alaska will retain the Denali name and brand.
Denali FCU stated that the proposed merger would diversify the credit union's economic base, improve operational efficiency, and put it in a stronger competitive posture.
The deal requires approval from the National Credit Union Administration and Denali FCU's members. If all approvals are received, the deal is expected to be finalized by the end of 2018.
Read more.
Thursday, March 15, 2018
Beverly Bus Garage FCU Conserved
The National Credit Union Administration (NCUA) on March 14 placed Beverly Bus Garage Federal Credit Union, in Chicago, Illinois, into conservatorship.
The NCUA placed Beverly Bus Garage Federal Credit Union into conservatorship because of unsafe and unsound practices at the credit union.
The credit union had a net worth ratio of 41.92 percent, according to its most recent Call Report. However, the credit union at the end of 2017 had a delinquency rate of 5.96 percent and net charge-off rate of 5.26 percent -- both measures were well above their peer average.
Beverly Bus Garage Federal Credit Union is a federally insured credi union with 1,300 members and assets of $4,029,521.
This is the second credit union to be placed into conservatorship this year.
Read the press release.
The NCUA placed Beverly Bus Garage Federal Credit Union into conservatorship because of unsafe and unsound practices at the credit union.
The credit union had a net worth ratio of 41.92 percent, according to its most recent Call Report. However, the credit union at the end of 2017 had a delinquency rate of 5.96 percent and net charge-off rate of 5.26 percent -- both measures were well above their peer average.
Beverly Bus Garage Federal Credit Union is a federally insured credi union with 1,300 members and assets of $4,029,521.
This is the second credit union to be placed into conservatorship this year.
Read the press release.
Bill Excludes Non-Owner Occupied Home Loans from Member Business Loan Cap
The Senate passed on March 14 S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act. A section of the bill would exempt one-to-four family non-owner occupied home loans at credit unions from the aggregate member business loan (MBL) cap of 12.25 percent of assets.
According to the Congressional Budget Office (CBO), there is an estimated $18 billion of such loans on the balance sheets of credit unions.
CBO believes that credit unions holding approximately 20 percent of these non-owner occupied home loans would benefit from this section of the bill, "because they are approaching the cap on the amount of member business loans."
If S. 2155 becomes law, CBO estimates that these credit unions "would issue about 10 percent more loans for non-owner occupied homes each year."
The growth in non-owner occupied home loans at these credit unions would come at the expense of taxable financial institutions -- primarily commercial banks and thrifts.
CBO expects this provision to increase the federal deficit by $10 million over the 2018 - 2027 time period.
However, the CBO analysis does not look at the impact of this section on the ability of credit unions to originate more business loans, as these credit unions will have more breathing room relative to the MBL cap. Presumably the expansion in business lending would come at the expense of taxpaying financial institutions. This would suggest that CBO's estimate of this section of the bill understates the federal deficit.
Read CBO's analysis (go to page 9).
According to the Congressional Budget Office (CBO), there is an estimated $18 billion of such loans on the balance sheets of credit unions.
CBO believes that credit unions holding approximately 20 percent of these non-owner occupied home loans would benefit from this section of the bill, "because they are approaching the cap on the amount of member business loans."
If S. 2155 becomes law, CBO estimates that these credit unions "would issue about 10 percent more loans for non-owner occupied homes each year."
The growth in non-owner occupied home loans at these credit unions would come at the expense of taxable financial institutions -- primarily commercial banks and thrifts.
CBO expects this provision to increase the federal deficit by $10 million over the 2018 - 2027 time period.
However, the CBO analysis does not look at the impact of this section on the ability of credit unions to originate more business loans, as these credit unions will have more breathing room relative to the MBL cap. Presumably the expansion in business lending would come at the expense of taxpaying financial institutions. This would suggest that CBO's estimate of this section of the bill understates the federal deficit.
Read CBO's analysis (go to page 9).
Tuesday, March 13, 2018
Half of CUs Report Fewer Members in 2017 Compared to 2016
While overall credit union membership grew in 2017, the membership growth was largely concentrated at larger credit unions.
The National Credit Union Administration reported that half of federally insured credit unions had fewer members at the end of the fourth quarter of 2017 than a year earlier.
About 75 percent of credit unions with declining membership had assets of less than $50 million.
Median membership growth was negative in 20 states. At the median, membership declined the most in New Jersey (-1.2 percent), the District of Columbia (-1.1 percent), and Pennsylvania (-1.0 percent).
On the other hand, Vermont had the highest median membership growth rate at 3.3 percent, followed by New Mexico at 2.8 percent and Oregon at 2.5 percent.
Read the report.
The National Credit Union Administration reported that half of federally insured credit unions had fewer members at the end of the fourth quarter of 2017 than a year earlier.
About 75 percent of credit unions with declining membership had assets of less than $50 million.
Median membership growth was negative in 20 states. At the median, membership declined the most in New Jersey (-1.2 percent), the District of Columbia (-1.1 percent), and Pennsylvania (-1.0 percent).
On the other hand, Vermont had the highest median membership growth rate at 3.3 percent, followed by New Mexico at 2.8 percent and Oregon at 2.5 percent.
Read the report.
Evansville Teachers FCU to Acquire American Founders Bank
Louisville Business First is reporting that Evansville Teachers Federal Credit Union (Evansville, IN) plans to acquire American Founders Bank of Louisville (KY).
Evansville Teachers FCU has $1.5 billion in assets. American Founders Bank has $113 million in assets.
The acquisition will allow the credit union to expand its presence in the Louisville market.
The price of the deal was not disclosed.
The transaction is subject to regulatory approval and is not expected to close until later in the year.
Read the story.
Evansville Teachers FCU has $1.5 billion in assets. American Founders Bank has $113 million in assets.
The acquisition will allow the credit union to expand its presence in the Louisville market.
The price of the deal was not disclosed.
The transaction is subject to regulatory approval and is not expected to close until later in the year.
Read the story.
Monday, March 12, 2018
Notre Dame FCU's Highly Redacted Application for Secondary Capital
Notre Dame Federal Credit Union (Notre Dame, IN) issued $12 million in secondary capital with a maturity of 10-years during the fourth quarter 2017, according to its secondary capital application.
A Freedom of Information Act (FOIA) obtained copies of highly redacted initial and revised applications of the credit union and a copy of the National Credit Union Administration's approval letter.
The credit union stated that the secondary capital will be used to expand deposit and credit services of its members and its communities without curtailing expected future growth of the credit union. It will also assist the credit union in providing mission-related loans, such as zero percent holiday loans up to $1,000, favorable rates for first-time car buyer, and loans for home/appliance repairs up to $5,000.
The application redacts information on the ratio of qualified secondary capital to regular reserves plus retained earnings in 2017, but also the ratio in 2027 at maturity. However at the end of 2017, the ratio of qualified secondary capital to regular reserves plus retained earnings was 27.76 percent.
The credit union further stated that the issuance of secondary capital will strengthen its capital base. With the injection of secondary capital, the credit union's net worth ratio went from 8.06 percent at the end of the third quarter of 2017 to 9.74 percent at the end of 2017.
The National Credit Union Administration (NCUA) wanted to know how the credit union will repay its secondary capital at maturity. The credit union stated it would use liquid accounts at correspondent institutions and its available lines of credit. However, several lines of the application were redacted. This might suggest that the credit union will issue new secondary capital to repay maturing secondary capital.
The NCUA redacted information on how Notre Dame FCU will offset the cost of secondary capital. Also, there was no information on the cost of the secondary capital.
A Freedom of Information Act (FOIA) obtained copies of highly redacted initial and revised applications of the credit union and a copy of the National Credit Union Administration's approval letter.
The credit union stated that the secondary capital will be used to expand deposit and credit services of its members and its communities without curtailing expected future growth of the credit union. It will also assist the credit union in providing mission-related loans, such as zero percent holiday loans up to $1,000, favorable rates for first-time car buyer, and loans for home/appliance repairs up to $5,000.
The application redacts information on the ratio of qualified secondary capital to regular reserves plus retained earnings in 2017, but also the ratio in 2027 at maturity. However at the end of 2017, the ratio of qualified secondary capital to regular reserves plus retained earnings was 27.76 percent.
The credit union further stated that the issuance of secondary capital will strengthen its capital base. With the injection of secondary capital, the credit union's net worth ratio went from 8.06 percent at the end of the third quarter of 2017 to 9.74 percent at the end of 2017.
The National Credit Union Administration (NCUA) wanted to know how the credit union will repay its secondary capital at maturity. The credit union stated it would use liquid accounts at correspondent institutions and its available lines of credit. However, several lines of the application were redacted. This might suggest that the credit union will issue new secondary capital to repay maturing secondary capital.
The NCUA redacted information on how Notre Dame FCU will offset the cost of secondary capital. Also, there was no information on the cost of the secondary capital.
Sunday, March 11, 2018
Tax Reform Has Eliminated the Case for CU Tax Subsidy
Scott Hodge, president of the nonpartisan Tax Foundation, wrote that with banks’ effective tax rates lowered by the recent tax bill, credit unions have even less of a case to remain untaxed.
“Credit unions were becoming anachronisms before the enactment of the [tax bill], but that status should be declared official now that the tax gap between banks and credit unions has effectively been closed,” Hodge wrote. “If they are going to act like banks and subsidize sports stadiums like banks, it is time that they paid taxes like banks.”
He also effectively rebutted credit union lobbyists’ arguments that taxing credit unions would cause losses of income tax revenue. “Such studies amount to one-sided accounting, ignoring the fiscal costs of the taxpayer subsidies to credit unions and the economic impact that their tax-advantaged competition has on taxpaying for-profit banks,” he wrote. “And, how is it that repealing the tax subsidy that is already costing the federal treasury some $36 billion over the next decade could ‘cost’ the federal government $38 billion? That makes no sense.”
Read the Real Clear market op-ed.
“Credit unions were becoming anachronisms before the enactment of the [tax bill], but that status should be declared official now that the tax gap between banks and credit unions has effectively been closed,” Hodge wrote. “If they are going to act like banks and subsidize sports stadiums like banks, it is time that they paid taxes like banks.”
He also effectively rebutted credit union lobbyists’ arguments that taxing credit unions would cause losses of income tax revenue. “Such studies amount to one-sided accounting, ignoring the fiscal costs of the taxpayer subsidies to credit unions and the economic impact that their tax-advantaged competition has on taxpaying for-profit banks,” he wrote. “And, how is it that repealing the tax subsidy that is already costing the federal treasury some $36 billion over the next decade could ‘cost’ the federal government $38 billion? That makes no sense.”
Read the Real Clear market op-ed.
Thursday, March 8, 2018
Consumer Credit at CUs Grew in January
The Federal Reserve reported on March 7 that outstanding consumer credit at credit unions grew in January 2018 by $4.1 billion to $429.1 billion, according to the G.19 report.
Revolving credit at credit unions contracted in January to $57.4 billion from $58 billion in December 2017.
Nonrevolving credit expanded by $4.7 billion in January to $371.7 billion.
Revolving credit at credit unions contracted in January to $57.4 billion from $58 billion in December 2017.
Nonrevolving credit expanded by $4.7 billion in January to $371.7 billion.
Fewer Regulatory Actions Issued by NCUA in 2017
The National Credit Union Administration (NCUA) issued fewer Preliminary Warning Letters (PWLs) and Letters of Understanding and Agreement (LUAs) in 2017.
According to information obtained by a Freedom of Information Act, the agency issued 56 PWLs in 2017 -- down from 69 in 2016.
There were 10 fewer LUAs issued in 2017 compared to 2016 with 105 issued in 2017. All of the LUAs were unpublished.
In addition, there was not a change in the number of cease and desist orders (CDOs) issued at 2.
The following chart shows the number of PWLs, LUAs, and CDOs issued by NCUA between 2013 and 2017.
According to information obtained by a Freedom of Information Act, the agency issued 56 PWLs in 2017 -- down from 69 in 2016.
There were 10 fewer LUAs issued in 2017 compared to 2016 with 105 issued in 2017. All of the LUAs were unpublished.
In addition, there was not a change in the number of cease and desist orders (CDOs) issued at 2.
The following chart shows the number of PWLs, LUAs, and CDOs issued by NCUA between 2013 and 2017.
Wednesday, March 7, 2018
CBO: Bill to Block NCUA's Risk-Based Capital Rule Would Increase NCUSIF Losses
The Congressional Budget Office (CBO) found that a bill to prevent the National Credit Union Administration's risk-based capital rule from going into effect on January 1, 2019 would increase losses to the National Credit Union Share Insurance Fund (NCUSIF).
H.R. 4464, Common Sense Credit Union Capital Relief Act of 2017, "would reduce the amount of capital that certain credit unions would be required to hold and would change how credit unions account for the risk profile of their assets to federal regulators," according to the CBO
CBO wrote that lowering the amount of capital that a credit union must hold would increase the likelihood that a credit union would fail. As a result, this would lead to higher losses to the NCUSIF.
CBO's baseline projection for the NCUSIF’s gross cost is $1.2 billion over the 2018-2027 period. CBO estimates that enacting the bill would increase gross NCUSIF cost by almost one-third over the same time period.
However, CBO notes that NCUSIF losses would be offset by higher premiums and fees paid by credit unions.
Therefore, the bill would have minimal impact on the federal deficit. CBO estimates net direct spending under the bill would increase by $50 million over the 2017-2018 period. This increase in net direct spending is due to a lag between the timing of losses and assessments.
Read the CBO report.
H.R. 4464, Common Sense Credit Union Capital Relief Act of 2017, "would reduce the amount of capital that certain credit unions would be required to hold and would change how credit unions account for the risk profile of their assets to federal regulators," according to the CBO
CBO wrote that lowering the amount of capital that a credit union must hold would increase the likelihood that a credit union would fail. As a result, this would lead to higher losses to the NCUSIF.
CBO's baseline projection for the NCUSIF’s gross cost is $1.2 billion over the 2018-2027 period. CBO estimates that enacting the bill would increase gross NCUSIF cost by almost one-third over the same time period.
However, CBO notes that NCUSIF losses would be offset by higher premiums and fees paid by credit unions.
Therefore, the bill would have minimal impact on the federal deficit. CBO estimates net direct spending under the bill would increase by $50 million over the 2017-2018 period. This increase in net direct spending is due to a lag between the timing of losses and assessments.
Read the CBO report.
Monday, March 5, 2018
Federally Insured Credit Union Earnings Top $10 Billion for 2017
The National Credit Union Administration reported record net income at federal insured credit unions of $10.4 billion for the calendar year of 2017. Net income for 2017 was up 9.2 percent compared to 2016.
Interest income rose by 11.5 percent over the year to $47.5 billion and non-interest income increased by 4.2 percent to $18.1 billion.
Interest expense totaled $7.6 billion for 2017, up 15.0 percent from one year earlier. Non-interest expenses grew by 6.3 percent over the year to $41.2 billion in the fourth quarter. Rising labor expenses, which were up $1.4 billion, accounted for more than half of the increase in non-interest expenses.
Provision for loan and lease losses rose $1.3 billion over the year, or 25.9 percent, to $6.4 billion at the end of 2017.
The return on average assets for federally insured credit unions was 78 basis points over the year ending in the fourth quarter of 2017, up slightly from 76 basis points in the fourth quarter of 2016. Higher net interest margins,
The median return on average assets across all federally insured credit unions was 38 basis points, up 4 basis points from the fourth quarter of 2016.
Higher net interest margin and lower operating expenses as a percent of average asset positively affected return on average assets. However, lower fee and other income and non-operating income and higher provision for loan and lease losses negatively impacted return on average assets.
Loans, deposits, and assets were up at federally insured credit unions in 2017.
Total assets rose by 6.7 percent over the year to $1.38 trillion in the fourth quarter of 2017.
Total loans outstanding increased $88 billion over the year to $957.3 billion. Credit union loan balances rose over the year in every major category, compared to the end of 2016. At the end of 2017, over 20 percent of all credit union loans were indirect loans.
Shares and deposits rose by 6.1 percent during the year to $1.16 trillion.
Because loans were growing at a faster rate than shares, the loan to share ratio increased from 79.55 percent at the end of 2016 to 82.56 percent at the end of 2017.
Delinquencies and net charge-offs increased in 2017.
Delinquent loans increased by 7.5 percent in 2017 to almost $7.8 billion. The delinquency rate at federally insured credit unions was 81 basis points in the fourth quarter of 2017, down from 83 basis points one year earlier.
Net charge-offs at federally insured credit unions rose by $19.1 percent in 2017 to $5.4 billion. The net charge-off ratio for all federally insured credit unions was 60 basis points in the fourth quarter of 2017, up from 55 basis points in the fourth quarter of 2016.
Net worth ratio increased for 2017.
The credit union system’s net worth increased by $10.3 billion, or 7.3 percent, over the year to $151.1 billion. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.96 percent of assets in the fourth quarter of 2017, up 7 basis points from 10.89 percent one year earlier.
Secondary capital that counted as net worth increased by 22.55 percent during 2017 to almost $223.5 million.
At the end of 2017, 97.9 percent of federally insured credit unions had a net worth ratio of at least 7 percent -- the minimum requirement for being well-capitalized. Forty-one federally insured credit unions were undercapitalized at the end of 2017. In comparison, 37 federally insured credit unions were undercapitalized at the end of 2016.
Read the press release.
View NCUA Chart Pack.
Interest income rose by 11.5 percent over the year to $47.5 billion and non-interest income increased by 4.2 percent to $18.1 billion.
Interest expense totaled $7.6 billion for 2017, up 15.0 percent from one year earlier. Non-interest expenses grew by 6.3 percent over the year to $41.2 billion in the fourth quarter. Rising labor expenses, which were up $1.4 billion, accounted for more than half of the increase in non-interest expenses.
Provision for loan and lease losses rose $1.3 billion over the year, or 25.9 percent, to $6.4 billion at the end of 2017.
The return on average assets for federally insured credit unions was 78 basis points over the year ending in the fourth quarter of 2017, up slightly from 76 basis points in the fourth quarter of 2016. Higher net interest margins,
The median return on average assets across all federally insured credit unions was 38 basis points, up 4 basis points from the fourth quarter of 2016.
Higher net interest margin and lower operating expenses as a percent of average asset positively affected return on average assets. However, lower fee and other income and non-operating income and higher provision for loan and lease losses negatively impacted return on average assets.
Loans, deposits, and assets were up at federally insured credit unions in 2017.
Total assets rose by 6.7 percent over the year to $1.38 trillion in the fourth quarter of 2017.
Total loans outstanding increased $88 billion over the year to $957.3 billion. Credit union loan balances rose over the year in every major category, compared to the end of 2016. At the end of 2017, over 20 percent of all credit union loans were indirect loans.
Shares and deposits rose by 6.1 percent during the year to $1.16 trillion.
Because loans were growing at a faster rate than shares, the loan to share ratio increased from 79.55 percent at the end of 2016 to 82.56 percent at the end of 2017.
Delinquencies and net charge-offs increased in 2017.
Delinquent loans increased by 7.5 percent in 2017 to almost $7.8 billion. The delinquency rate at federally insured credit unions was 81 basis points in the fourth quarter of 2017, down from 83 basis points one year earlier.
Net charge-offs at federally insured credit unions rose by $19.1 percent in 2017 to $5.4 billion. The net charge-off ratio for all federally insured credit unions was 60 basis points in the fourth quarter of 2017, up from 55 basis points in the fourth quarter of 2016.
Net worth ratio increased for 2017.
The credit union system’s net worth increased by $10.3 billion, or 7.3 percent, over the year to $151.1 billion. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.96 percent of assets in the fourth quarter of 2017, up 7 basis points from 10.89 percent one year earlier.
Secondary capital that counted as net worth increased by 22.55 percent during 2017 to almost $223.5 million.
At the end of 2017, 97.9 percent of federally insured credit unions had a net worth ratio of at least 7 percent -- the minimum requirement for being well-capitalized. Forty-one federally insured credit unions were undercapitalized at the end of 2017. In comparison, 37 federally insured credit unions were undercapitalized at the end of 2016.
Read the press release.
View NCUA Chart Pack.
Minority Credit Unions Down 4 Percent, 10 Percent Were Problem CUs
The National Credit Union Administration (NCUA) Quarterly Report looks at minority credit union data.
According to the NCUA Quarterly Report, NCUA either regulated or supervised 580 federally insured credit unions that self-identified as a minority credit union or minority depository institution, as of June 30, 2017 -- down nearly 4 percent from 603 a year earlier.
While minority credit unions were 10 percent of all federally insured credit unions, they accounted for 3 percent of the industry's assets.
Eighty-nine percent of minority credit unions have assets under $100 million. The vast majority of minority credit unions — 81 percent — have assets of less than $50 million. An additional 8 percent have assets between $50 and $100 million. There were 66 minority credit unions, or 11 percent, with assets of more than $100 million at the end of the reporting period.
Approximately 77 percent of minority credit unions, or 448, have the low-income designation.
Ninety-five percent of minority credit unions are well-capitalized versus 2 percent that were undercapitalized, at the end of the second quarter of 2017.
Sixty-five percent of minority credit unions were profitable with 110 minority credit unions reporting a return on average assets in excess of 1 percent.
A majority of minority credit unions reported a delinquency rate in excess of 1 percent. The median delinquency rate was 1,3 percent for minority credit unions versus a median delinquency rate of 0.68 percent for all federally-insured credit unions.
Ten percent of minority credit unions had composite CAMEL ratings of 4 and 5. A credit unions with a composite CAMEL ratings of 4 and 5 is a problem credit union. In fact, minority credit unions make up a disproportionate share of federally insured credit unions with a composite CAMEL ratings of 4 and 5, as only 3.2 percent of all federally insured credit unions have a composite CAMEL ratings of 4 and 5.
Read the report.
According to the NCUA Quarterly Report, NCUA either regulated or supervised 580 federally insured credit unions that self-identified as a minority credit union or minority depository institution, as of June 30, 2017 -- down nearly 4 percent from 603 a year earlier.
While minority credit unions were 10 percent of all federally insured credit unions, they accounted for 3 percent of the industry's assets.
Eighty-nine percent of minority credit unions have assets under $100 million. The vast majority of minority credit unions — 81 percent — have assets of less than $50 million. An additional 8 percent have assets between $50 and $100 million. There were 66 minority credit unions, or 11 percent, with assets of more than $100 million at the end of the reporting period.
Approximately 77 percent of minority credit unions, or 448, have the low-income designation.
Ninety-five percent of minority credit unions are well-capitalized versus 2 percent that were undercapitalized, at the end of the second quarter of 2017.
Sixty-five percent of minority credit unions were profitable with 110 minority credit unions reporting a return on average assets in excess of 1 percent.
A majority of minority credit unions reported a delinquency rate in excess of 1 percent. The median delinquency rate was 1,3 percent for minority credit unions versus a median delinquency rate of 0.68 percent for all federally-insured credit unions.
Ten percent of minority credit unions had composite CAMEL ratings of 4 and 5. A credit unions with a composite CAMEL ratings of 4 and 5 is a problem credit union. In fact, minority credit unions make up a disproportionate share of federally insured credit unions with a composite CAMEL ratings of 4 and 5, as only 3.2 percent of all federally insured credit unions have a composite CAMEL ratings of 4 and 5.
Read the report.
Sunday, March 4, 2018
Financial Trades Write House Leaders on Data Breach Notification Legislation
Seven financial trade organizations wrote to House leaders on February 28 underscoring the need for businesses across all industries to be held to the same data protection and breach notification standards currently adhered to by regulated financial institutions.
The associations expressed support for draft legislation released by Reps. Blaine Luetkemeyer (R-Mo.) and Carolyn Maloney (D-N.Y.) that would create a level playing field of nationally consistent data protection standards and post-breach notification requirements. This bill would not create duplicative standards for financial institutions which are already subject to robust standards, but rather extend similar expectations to other sectors that handle consumer data.
However, this exclusion of banks and credit unions from duplicative notification requirements has been the target of recent negative campaigns circulated by the National Retail Federation and the Retail Industry Leaders Association, which incorrectly suggest that banks and credit unions do not notify customers of breaches on their computer systems and call once again for universal "chip and PIN." The ads from the retailer groups also mischaracterize and exaggerate the share of data breaches occurring at banks and credit unions.
The financial trades refuted the notification assertion, noting that “banks and credit unions have long been subject to rigorous data protection and breach notification practices for financial institutions to follow,” and that in the event of a data breach, banks and credit unions work continuously to communicate with customers, reissue cards and enact measures to mitigate the effects of fraud. They added, however, that “no solution will work unless everyone has an obligation to take these steps.”
The letter was signed by the American Bankers Association, Consumer Bankers Association, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions, and The Clearing House.
Read the letter.
The associations expressed support for draft legislation released by Reps. Blaine Luetkemeyer (R-Mo.) and Carolyn Maloney (D-N.Y.) that would create a level playing field of nationally consistent data protection standards and post-breach notification requirements. This bill would not create duplicative standards for financial institutions which are already subject to robust standards, but rather extend similar expectations to other sectors that handle consumer data.
However, this exclusion of banks and credit unions from duplicative notification requirements has been the target of recent negative campaigns circulated by the National Retail Federation and the Retail Industry Leaders Association, which incorrectly suggest that banks and credit unions do not notify customers of breaches on their computer systems and call once again for universal "chip and PIN." The ads from the retailer groups also mischaracterize and exaggerate the share of data breaches occurring at banks and credit unions.
The financial trades refuted the notification assertion, noting that “banks and credit unions have long been subject to rigorous data protection and breach notification practices for financial institutions to follow,” and that in the event of a data breach, banks and credit unions work continuously to communicate with customers, reissue cards and enact measures to mitigate the effects of fraud. They added, however, that “no solution will work unless everyone has an obligation to take these steps.”
The letter was signed by the American Bankers Association, Consumer Bankers Association, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions, and The Clearing House.
Read the letter.
Saturday, March 3, 2018
Michigan First CU Sues Detroit Pistons over Breach of Sponsorship Agreement
Crain's Detroit Business is reporting that Michigan First Credit Union (Lathrup Village, MI) sued Palace Sports & Entertainment and the Detroit Pistons.
The complaint alleged that the Piston breached a 2016 sponsorship agreement, when it signed an exclusive agreement deal with Flagstar Bancorp over its move from the Palace of Auburn Hills to Little Caesars Arena in Detroit. The credit union argued it suffered a loss of goodwill with the termination of the sponsorship agreement.
As background, the credit union signed an exclusive sponsorship agreement on November 9, 2016 with Palace Sports & Entertainment and the Detroit Pistons. On August 27, 2017, the sponsorship agreement was terminated after the Pistons had announced on November 22, 2016 it would begin playing at Little Caesars Arena in the 2017 - 2018 basketball season.
The Michigan Court of Appeals reversed a trial court decision granting the credit union an injunction requiring the Pistons to uphold a commitment to negotiate a new deal.
Read the Appeals Court Opinion.
Read the story.
The complaint alleged that the Piston breached a 2016 sponsorship agreement, when it signed an exclusive agreement deal with Flagstar Bancorp over its move from the Palace of Auburn Hills to Little Caesars Arena in Detroit. The credit union argued it suffered a loss of goodwill with the termination of the sponsorship agreement.
As background, the credit union signed an exclusive sponsorship agreement on November 9, 2016 with Palace Sports & Entertainment and the Detroit Pistons. On August 27, 2017, the sponsorship agreement was terminated after the Pistons had announced on November 22, 2016 it would begin playing at Little Caesars Arena in the 2017 - 2018 basketball season.
The Michigan Court of Appeals reversed a trial court decision granting the credit union an injunction requiring the Pistons to uphold a commitment to negotiate a new deal.
Read the Appeals Court Opinion.
Read the story.
Friday, March 2, 2018
GAO: Regulators Failing to Assess Cumulative Burden of Rules on CUs and Community Banks
The Government Accountability Office (GAO) found that depository institution regulators fail to assess the cumulative burden of all rules imposed on community banks and credit unions.
The GAO conducted interviews and focus groups with over 60 representatives from community banks and credit unions regarding the most burdensome regulations.
These representatives identified regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers as the most burdensome.
GAO was told that these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes.
GAO made 10 recommendations to the Consumer Financial Protection Bureau (CFPB) and the four depository institution regulators.
GAO recommended that the CFPB "assess the effectiveness and guidance on mortgage disclosure regulations and publicly issue its plans for the scope and timing of its regulation reviews and coordinate these with other regulators' review process."
In addition as part of their regulatory burden reviews, the depository institution regulators should develop plans to report quantitative rationales for their actions and addressing the cumulative burden of regulations.
Read the report.
The GAO conducted interviews and focus groups with over 60 representatives from community banks and credit unions regarding the most burdensome regulations.
These representatives identified regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers as the most burdensome.
GAO was told that these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes.
GAO made 10 recommendations to the Consumer Financial Protection Bureau (CFPB) and the four depository institution regulators.
GAO recommended that the CFPB "assess the effectiveness and guidance on mortgage disclosure regulations and publicly issue its plans for the scope and timing of its regulation reviews and coordinate these with other regulators' review process."
In addition as part of their regulatory burden reviews, the depository institution regulators should develop plans to report quantitative rationales for their actions and addressing the cumulative burden of regulations.
Read the report.
Thursday, March 1, 2018
CU CEO: It Is Time to Tax Large Multiple Common Bond CUs
Nearly a month after Senate Finance Committee Chairman Orrin Hatch (R-Utah) wrote to the National Credit Union Administration questioning the federal tax exemption for the largest credit unions, one credit union CEO in an op-ed agreed that the time is now to explore taxation for those institutions.
In an op-ed in Credit Union Journal, Rob Taylor, president and CEO of Idaho State University Credit Union in Pocatello, Idaho, echoed Hatch’s concerns about large, multiple common bond credit unions that have been allowed to expand and, in many cases, compete with smaller credit unions. Often, these expansions are harmful to small credit unions “that have stayed true to their original fields of membership,” Taylor said.
He added that “the NCUA is contributing to this decline [in credit unions] with their laissez-faire approach to overlapping fields of membership.”
Taylor noted that most consumers already have access to a credit union given the broad availability of multiple common bond and community-chartered credit unions. Therefore, NCUA granting overlapping fields of membership should be rare and not a streamlined process.
“The problem with [the credit union] movement is most of us have been indoctrinated to believe our common enemy are bankers … when in fact the real threat to our future lies within our own industry,” he said. “I agree with Sen. Hatch that many larger credit unions operate in the same manner as taxable banks, and I believe it’s time for them to convert to bank charters and be taxed like the ‘big boys.’”
Read the op-ed.
In an op-ed in Credit Union Journal, Rob Taylor, president and CEO of Idaho State University Credit Union in Pocatello, Idaho, echoed Hatch’s concerns about large, multiple common bond credit unions that have been allowed to expand and, in many cases, compete with smaller credit unions. Often, these expansions are harmful to small credit unions “that have stayed true to their original fields of membership,” Taylor said.
He added that “the NCUA is contributing to this decline [in credit unions] with their laissez-faire approach to overlapping fields of membership.”
Taylor noted that most consumers already have access to a credit union given the broad availability of multiple common bond and community-chartered credit unions. Therefore, NCUA granting overlapping fields of membership should be rare and not a streamlined process.
“The problem with [the credit union] movement is most of us have been indoctrinated to believe our common enemy are bankers … when in fact the real threat to our future lies within our own industry,” he said. “I agree with Sen. Hatch that many larger credit unions operate in the same manner as taxable banks, and I believe it’s time for them to convert to bank charters and be taxed like the ‘big boys.’”
Read the op-ed.
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