The Milwaukee Journal Sentinel is reporting that University of Wisconsin Credit Union (Madison, WI) has taken a $13.1 million "loss contingency" charge due to an alleged fraud scheme involving fake U.S. Department of Agriculture guaranteed loans.
University of Wisconsin Credit Union disclosed it had invested in the nonexistent USDA loans through Milwaukee-based Pennant Management Inc.
News reports are alleging that Nikesh A. Patel, a prominent hotelier in Orlando, Florida and operator of First Farmers Financial LLC, sold $176 million in fake USDA-backed loans to various investors.
Read the story.
Read press release.
Friday, November 14, 2014
Thursday, November 13, 2014
Bank and CU Trade Groups Refute Misleading Claims by Retailers
Trade groups representing banks and credit unions yesterday wrote to Congress to rebut “inaccurate and misleading” arguments from retailers for a uniform federal law governing data breach notification.
“Financial institutions have developed and maintain robust internal protections to combat criminal attacks and are required by federal law and regulation to protect this information and notify consumers when a breach occurs that will put them at risk,” the financial groups wrote. “In contrast, retailers are not covered by any federal laws or regulations that require them to protect the data and notify consumers when it is breached.”
The letter described to congressional leaders the strong data security structure employed by banks and credit unions, noting that retailers do not have similar internal safeguards or external oversight. “It is only when coupled with the development of strong internal data protection standards and robust oversight that the retail community will find itself in a better position to protect consumers and their confidential personal financial information from criminal abuse,” the groups wrote.
Read the letter.
“Financial institutions have developed and maintain robust internal protections to combat criminal attacks and are required by federal law and regulation to protect this information and notify consumers when a breach occurs that will put them at risk,” the financial groups wrote. “In contrast, retailers are not covered by any federal laws or regulations that require them to protect the data and notify consumers when it is breached.”
The letter described to congressional leaders the strong data security structure employed by banks and credit unions, noting that retailers do not have similar internal safeguards or external oversight. “It is only when coupled with the development of strong internal data protection standards and robust oversight that the retail community will find itself in a better position to protect consumers and their confidential personal financial information from criminal abuse,” the groups wrote.
Read the letter.
Wednesday, November 12, 2014
Credit Unions Jumping into Wealth Management
The Silicon Valley Business Journal reported on local credit unions entering into the wealth management business.
Diana Dykstra, president and CEO of the California and Nevada Credit Union Leagues, stated that she believes this movement into wealth management is a natural progression for some credit unions, especially those that serve a more affluent population.
For example, Technology Credit Union has a 15-person in-house team dedicated to wealth management. The credit union plans to start offering trust services in 2015.
However, the article notes that targetting services for affluent customers can blur the line between credit unions and big banks.
Read the article.
Diana Dykstra, president and CEO of the California and Nevada Credit Union Leagues, stated that she believes this movement into wealth management is a natural progression for some credit unions, especially those that serve a more affluent population.
For example, Technology Credit Union has a 15-person in-house team dedicated to wealth management. The credit union plans to start offering trust services in 2015.
However, the article notes that targetting services for affluent customers can blur the line between credit unions and big banks.
Read the article.
Monday, November 10, 2014
Once Again, NCUA Fails to Disclose Enforcement Order
During the closed National Credit Union Administration (NCUA) Board meeting on October 23, the NCUA Board considered an administrative enforcement action under Section 206 of the Federal Credit Union Act.
The agency also decided to keep this administrative enforcement action confidential.
However, keeping administrative enforcement actions confidential was not the intention of Congress, when it enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Congress wrote that the federal banking agencies, including NCUA, were to make public administrative enforcement orders.
While the Federal Credit Union Act does allow NCUA to not publish an administrative enforcement action if it is in the public interest, I believe lawmakers wanted this discretionary authority to be rarely used.
NCUA's fears that such disclosures will harm a credit union is ill-founded. There is no evidence that the publication of an enforcement order will harm a depository institution.
By keeping this administrative enforcement action confidential, the NCUA Board is once again thumbing its nose at the rule of law.
The agency also decided to keep this administrative enforcement action confidential.
However, keeping administrative enforcement actions confidential was not the intention of Congress, when it enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Congress wrote that the federal banking agencies, including NCUA, were to make public administrative enforcement orders.
While the Federal Credit Union Act does allow NCUA to not publish an administrative enforcement action if it is in the public interest, I believe lawmakers wanted this discretionary authority to be rarely used.
NCUA's fears that such disclosures will harm a credit union is ill-founded. There is no evidence that the publication of an enforcement order will harm a depository institution.
By keeping this administrative enforcement action confidential, the NCUA Board is once again thumbing its nose at the rule of law.
Thursday, November 6, 2014
CUNA Could Not Save Senator Udall and Other CU Supporters
The Credit Union National Association (CUNA) spent $1.2 million on independent expenditures and $1.4 million on partisan communications during this mid-term election cycle.
Despite these expenditures, some high-profile credit union supporters lost their elections.
The biggest loss on election night was Senator Mark Udall (D), who is the chief Senate sponsor of a bill that would increase the credit union member business lending cap from 12.25 percent of assets to 27.5 percent of assets. Senator Udall was defeated by Rep. Cory Gardner (R) in the Colorado Senate race. CUNA spent $400,000 on direct mail to credit union members urging them to support Udall.
In the Iowa Senate race, CUNA-supported Rep. Bruce Braley (D) was defeated by Republican Iowa State Senator Joni Ernst. CUNA spent approximately $265,000 on a series of eight mailers for Rep. Braley, who is a cosponsor of several pro-credit union bills in the House of Representatives.
In California's 25th District, Republican Tony Strickland lost to fellow Republican Steve Knight. CUNA spent $99,000 for Rep. Strickland with the money going to direct mail production and postage.
In Florida, Rep. Steve Southerland (R) lost his bid for a third term in the 2nd District, falling to Democrat Gwen Graham. CUNA spent $176,340 in television advertisements for Rep. Southerland.
Despite these expenditures, some high-profile credit union supporters lost their elections.
The biggest loss on election night was Senator Mark Udall (D), who is the chief Senate sponsor of a bill that would increase the credit union member business lending cap from 12.25 percent of assets to 27.5 percent of assets. Senator Udall was defeated by Rep. Cory Gardner (R) in the Colorado Senate race. CUNA spent $400,000 on direct mail to credit union members urging them to support Udall.
In the Iowa Senate race, CUNA-supported Rep. Bruce Braley (D) was defeated by Republican Iowa State Senator Joni Ernst. CUNA spent approximately $265,000 on a series of eight mailers for Rep. Braley, who is a cosponsor of several pro-credit union bills in the House of Representatives.
In California's 25th District, Republican Tony Strickland lost to fellow Republican Steve Knight. CUNA spent $99,000 for Rep. Strickland with the money going to direct mail production and postage.
In Florida, Rep. Steve Southerland (R) lost his bid for a third term in the 2nd District, falling to Democrat Gwen Graham. CUNA spent $176,340 in television advertisements for Rep. Southerland.
Wednesday, November 5, 2014
Hear No Evil, See No Evil, Speak No Evil
However, I have not seen the same regulatory zeal from the National Credit Union Administration (NCUA) regarding credit union flood insurance compliance.
In fact, I don't recall NCUA publicly citing any credit unions in recent history for flood insurance violations.
It is hard to believe that there is not a single credit union out of compliance with the flood insurance requirements. After all, there are over 6,000 credit unions and credit unions accounted for 7 percent of all mortgage originations, according to the 2013 HMDA data.
I suspect the dearth of flood insurance violations is because NCUA fails to do a deep dive into credit union books regarding flood insurance compliance.
So, while banks and credit unions are subject to the same requirements on flood insurance, there are differences between bank and credit union regulators with regard to the enforcement of these requirements.
NCUA would rather hear no evil, see no evil, and speak no evil about credit unions.
Monday, November 3, 2014
NCUA Lacks BSA Transparency
The Federal Deposit Insurance Corporation's Office of the Inspector General recently released a report looking at FDIC's respose to Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) concerns at FDIC examined banks.
The report looked at a four-year period between October 1, 2009 and September 30, 2013.
The audit repoted on the number of BSA examinations and visitations conducted by FDIC and state banking agencies. The report also provided summary statisitics for each fiscal year on:
The report found that during the four-year period
However, the National Credit Union Administration (NCUA) with the exception of a few published enforcement orders does not disclose any information regarding BSA and AML concerns at NCUA examined credit unions.
As a matter of transparency, NCUA should publish summary statistics regarding BSA and AML concerns at credit unions. For example, FDIC in its annual report publishes the number of BSA examinations and the number of consent orders and memoranda of understanding that are based in whole or in part on apparent BSA violations.
In addition, NCUA's Office of the Inspector General needs to conduct an audit of the agency with regard to BSA supervision. This issue has not been the focus of an an Inspector General audit over the last 15 years.
It seems that such an audit is well overdue.
Read the FDIC Audit Report.
The report looked at a four-year period between October 1, 2009 and September 30, 2013.
The audit repoted on the number of BSA examinations and visitations conducted by FDIC and state banking agencies. The report also provided summary statisitics for each fiscal year on:
- the number of banks cited for apparent BSA violations,
- the number of apparent violations,
- the number of formal and informal enforcement actions imposed on FDIC-supervised banks,
- and the number of referrals to the Financial Crimes Enforcement Network (FinCen) for the issuance of Civil Money Penalties (CMP).
The report found that during the four-year period
"the FDIC and/or applicable state regulator cited FDIC-supervised institutions for 3,294 apparent violations of BSA-related regulations, agreed to or issued 175 BSA-related informal and formal enforcement actions, and made 22 referrals to FinCEN for CMPs."
However, the National Credit Union Administration (NCUA) with the exception of a few published enforcement orders does not disclose any information regarding BSA and AML concerns at NCUA examined credit unions.
As a matter of transparency, NCUA should publish summary statistics regarding BSA and AML concerns at credit unions. For example, FDIC in its annual report publishes the number of BSA examinations and the number of consent orders and memoranda of understanding that are based in whole or in part on apparent BSA violations.
In addition, NCUA's Office of the Inspector General needs to conduct an audit of the agency with regard to BSA supervision. This issue has not been the focus of an an Inspector General audit over the last 15 years.
It seems that such an audit is well overdue.
Read the FDIC Audit Report.
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