CUS SEEK EXEMPTION FROMCONSUMER PROTECTION BUREAU
WASHINGTON-Credit union executives called on Congress last week to help them deflect new regulations being drafted by the fledgling Consumer Financial Protection Bureau, saying proposals in the pipeline will add significant costs and manpower burdens.
Terry West, president of Florida's $5-billion VyStar CU, called on Congress during this morning's hearing to ensure that the new consumer agency exercises powers included in the Dodd-Frank Act to exempt certain classes of financial services providers-like credit unions-from new rules. "We encourage the subcommittee to closely monitor the rules that the CFPB has under consideration and urge the Bureau to exercise this authority with alacrity," West told members of the House Financial Services Subcommittee on Consumer Credit.
The credit union lobbying comes as the six-month-old consumer agency is taking over the consumer regulations once written and enforced by the Federal Reserve. All credit unions must comply with those consumer regulations, even as the new agency's examinations will be limited to just the four credit unions over $10 billion in assets.
West, who is representing CUNA at this morning's hearing, and Ed Templeton, president of South Carolina's $600-million SRP FCU who is representing NAFCU, said credit unions are particularly troubled by a pending CFPB regulation to require comprehensive new disclosures on wire remittances. Both credit union executives suggested the new regulation, effective in February 2013, could drive credit unions out of the remittance market altogether, just as many credit unions have begun offering the service over the past few years.
Meantime, Templeton testified to a decrease in debit fees since last October's enactment of the Dodd-Frank's Durbin amendment of as much as two cents a transaction, which he attributed to the market conditions created by the new rule. He said that will cost his credit union about $300,000 in lost revenue this year.
The two executives also expressed concerns about pending CFBP rulemaking on mortgage disclosures and servicing, and a revisiting of requirements on credit card disclosure and overdraft protection passed by Congress just two years ago. "Battered by the volume of regulatory changes which have taken place over the last three years, credit unions are bracing for the next wave which will occur once the CFPB hits its stride," said West.
Templeton said NAFCU hopes the CFPB will also take its mandate to reduce regulatory burden seriously. "If the CFPB and other regulators will not do this in a timely and effective manner, Congress must step in and do so," he said.
Rep. Carolyn Maloney, the Democratic congresswoman who helped write the credit card and overdraft laws, said the main function of the new consumer agency is to regulate non-financial institution players in the financial services markets, like payday loan companies, check cashers and remittance providers.
VyStar's West urged the lawmakers to see that the CFPB uses the Dodd-Frank's exemption clauses to protect credit unions and other smaller players in the market. "We have and will continue to strongly urge the CFPB to consider using its statutory authority to exempt from its regulations certain products or classes of financial institutions or establish transaction thresholds when appropriate. And, we hope the subcommittee will do the same," he stated.
This morning's hearing is part of a continuing series held by the Financial Services Subcommittee, which included field hearings at sites across the country, exploring regulatory relief for small credit unions and banks.
GOP SENATORS BLOCK VOTE
ON DEMS' STUDENT LOAN BILL
WASHINGTON-Republican senators blocked efforts last week to vote a Democratic-sponsored bill that would have retained the current 3.4% rate on Stafford loans over disagreement between the two parties on how to pay the $6-billion-a-year cost.
The Republicans want to take the money from the preventive healthcare fund in President Obama's health care program and the Democrats want to fund it by raising Social Security and Medicare payroll taxes on high-earning stockholders of some privately owned corporations.
The Republican plan has no chance of passing because President Obama has promised to veto it if it gets to his desk.
Without congressional action the rate on the loans to almost seven million people will double July 1 to 6.8% because of a 2007 law that gradually lowered the rates. The loan rate is critical to credit unions who set their own student loan rates based on the Stafford rate.
Subsidized Stafford loans are for low- and middle-income students. The higher rates, should they occur, would only affect students taking out new loans starting July 1. The loans generally are paid off over a decade or more after graduation. Allowing interest rates to double would cost the typical student about $1,000 over the life of the loan.
FANNIE MAE OUT OF THE RED,
REPORTS $2.7B PROFIT FOR Q1
WASHINGTON-Fannie Mae said last week it stopped hemorrhaging red ink in the first quarter and had a $2.7-billion profit.
That means that Fannie will not need any additional government bailout funds for the quarter, after having received almost $120 billion since the September 2008 takeover by the federal government. Last week Freddie Mac announced a $1.2-billion loss for the first quarter and requested an additional $19 million in bailout funds.
The two companies are critical to credit unions as they buy as much as half of all residential mortgages originated by credit unions for repackaging as mortgage-backed securities on the secondary market.
Fannie said credit-related expenses decreased by nearly two-thirds in the first quarter, and total loss reserves are expected to have peaked as of Dec. 31.
The first quarter profit compares to a loss of $6.5 billion in the first quarter of 2011 and a loss of $2.4 billion in the fourth quarter of 2011.
Fannie said the significant improvement in the company's financial results in the first quarter of 2012 was due primarily to lower credit-related expenses, resulting from a less significant decline in home prices, a decline in the company's inventory of single-family real estate owned properties coupled with improved REO sales prices, and lower single-family serious delinquency rates.
