NCUA Letter to Credit Unions: Interagency Statement on LIBOR Transition

Dear Boards of Directors and Chief Executive Officers:

As a follow-up to Letter to Credit Unions 21-CU-03, LIBOR Transition, this letter provides additional reminders related to LIBOR’s discontinuance.

Five federal financial institution regulatory agencies, in conjunction with the state bank and state credit union regulators, are jointly issuing the enclosed statement to emphasize the expectation that supervised institutions with LIBOR exposure will continue to progress toward an orderly transition away from LIBOR.[1] The NCUA encourages all federally insured credit unions to transition away from using U.S. dollar LIBOR as a reference rate as soon as possible, but no later than December 31, 2021, and to ensure existing contracts have robust fallback language that includes a clearly defined alternative reference rate.

Please contact your NCUA Regional Office or state supervisory authority if you have any questions about this important topic. Read the Letter to Credit Unions

 

Save The Date

IRS Reporting Proposal Scaled Back, but Still 'Flawed'

On Tuesday, Senate Democrats distributed an update to the controversial IRS reporting requirements that the credit union industry has been very vocally opposed to since it was unveiled in late June.

According to the updated proposal rolled out Tuesday, it would require financial institutions to report inflows and outflows of personal and business accounts, as well as transfers between accounts of the same owner, if it is more than $10,000 per year. The proposal floating around for the past four months had the threshold at $600 per year.

The requirements do not apply to payroll deposits for wages or to those receiving Social Security benefits.

In response to the updated IRS reporting proposal, NAFCU President/CEO Dan Berger said, “It has become abundantly clear that Americans oppose the IRS obtaining additional information on their financial accounts. The updated plan is nothing more than window dressing in an attempt to shore up support for a flawed proposal. Instead of creating financial privacy risks for consumers and adding compliance costs for our nation’s community financial institutions, Treasury and the IRS should focus its attention on the data it already has to increase tax compliance.”

In a statement, CUNA’s Chief Advocacy Officer Ryan Donovan said, “Every time this proposal changes, it gets worse. For the country’s minimum wage workforce, there is no fundamental difference between a $600 reporting threshold and a $10,000 reporting threshold. Now proponents expect credit unions and banks to play arbiter, declaring what does and doesn’t meet proposed exceptions like wages and down payments. They’ve just taken something very invasive and made it incredibly more so while turning an average compliance bad dream into a waking nightmare.”

He added, “The revised proposal is a huge leap in the wrong direction.”

Several dozen credit union, bank and consumer groups have voiced their opposition to any such move by the IRS. At one point last month, it appeared the proposal had died during negotiations with members of the House Ways and Means Committee. However, it was quickly revived inside the full House version of the budget reconciliation bill.

On Monday, NAFCU released a new video explaining the potential ramifications to credit unions of the proposal. In the video, featuring NAFCU Associate Director of Communications Amanda Dela Cruz, she said, “This dramatic change will have the IRS collecting and analyzing your financial transactions. Most Americans would find themselves subject to this new reporting, even at higher thresholds, such as $10,000. “

Cruz continued, “This new reporting requirement would create new compliance burdens for credit unions and data privacy concerns for consumers. You can help stop this proposal before it’s too late.”

According to the IRS and the Biden Administration, this proposal would not track or analyze individual transactions, as claimed by credit union and banking lobbying organizations.

CUNA and NAFCU stated they would continue pushing back against this proposal throughout the budget reconciliation process.

IRS Reporting Requirement Has Turned Into Uphill Battle for CUs

 

It’s in. It’s out. It’s in again.

On Thursday, NAFCU, CUNA and more than 100 associations sent a letter to all members of the U.S. House of Representatives and Senate asking them to reject a proposed IRS reporting requirement that credit union trades have been pushing back against since July.

The proposed IRS reporting requirement would require financial institutions, including credit unions, to report the inflows and outflows of personal and business accounts, as well as transfers between accounts of the same owner, if it is more than $600 per year.

The proposal found new life inside the House version of the budget reconciliation bill after it was rejected in the version approved by the House Ways and Means Committee last month. On Tuesday, Speaker of the House Nancy Pelosi (D-Calif.) said the IRS reporting requirement would be included in the House version of the bill.

CUNA, NAFCU and other organizations voiced their objections to the proposal in a joint letter. While the letter stated that the groups understand the intention that IRS reporting requirements are tied to an attempt to identify those committing tax fraud, “the unintended consequence is the overly broad proposal will directly impact almost every American and small business with an account at a financial institution.”

“We believe that this program is costly for all parties, not fit for purpose, and loaded with the potential for unintended and serious negative consequences,” the letter stated. “As associations representing a broad cross-section of financial and business interests, we urge you to oppose any efforts to institute this new reporting regime.”

While there have been reported compromises to the proposal to increase the threshold from $600 to $10,000, the group’s letter pushed back on the possible compromise. “While recent proposals suggest that increasing the de minimis threshold to $10,000 is less objectionable, this is a flawed assumption and will not significantly reduce the scale of this new IRS program.”

According to CUNA, nearly 500,000 messages have been sent by credit union stakeholders responding to action alerts to send their concerns to Capitol Hill using CUNA’s Grassroots Action Center.

In a statement, Ryan Donovan, CUNA chief advocacy officer said, “Their concern is shared by Americans of every walk of life. We are disappointed that Congress continues to have this on the table.”

BIN There, Done That: Air Force FCU Topples An Attack

In late April 2021, transactions totaling close to six figures from the same retailer hit the credit union in nearly one fell swoop. Transaction data from Air Force FCU’s core provider indicated all the charges were card-not-present purchases, which tipped Miller off to the fraud.

The cooperative had to act quickly.

Because the retailer, which Miller declines to name, is a large, legitimate business, the credit union couldn’t simply cut off those transactions. However, during its due diligence, Air Force FCU learned the attack came from only one of the several networks through which it processes transactions, and it could shut off transactions from specific card networks.

“We made the decision to stop all transactions from that network for two days,” Miller says. “It stopped the fraud in its tracks and gave us enough time to figure out our next move.”

The credit union’s chief technology officer along with several risk employees began to thoroughly review Air Force FCU’s daily credit card transaction reports. A pattern soon emerged. Miller says her exceptions report often state “card destroyed,” “card lost,” “card stolen,” or “wrong pin.” Not this time.

“We saw was a huge pattern of ‘card not found,’” Miller says. “Plus, these were all from the same vendor and the impacted card numbers ran in a sequential order. It just wasn’t normal.”

The fraudsters, however, had accurate card information so transactions were going through, putting the credit union on the hook for losses. And the hackers were sophisticated, Miller says. They used different names, different dollar amounts, and even different addresses — not always in the United States.

“People were really buying stuff,” Miller says. “It was going as far away as Colombia.”

The Response

Air Force FCU implemented immediate changes to its card numbering logic — no longer would the same several digits appear for each card. By altering the pattern, the credit union hoped to make hacking more complicated. Additionally, the credit union reissued every card that was affected by the attack, but it did not reissue cards en masse.

“It’s a long process to reissue like that,” Miller says. “And it wasn’t going to stop the bleeding.”

The fact the dollar amounts tended to be small posed a challenge to identifying fraudulent charges. And because it was a well-known retailer, members weren’t always aware they were victims. Air Force FCU posted a message on its home banking platform asking members to review their statements carefully for suspicious activity. It did not name the retailer because the attack ultimately wasn’t the retailer’s fault. In fact, the retailer was helpful.

“When we contacted them, they were eager to help us stop the fraud,” Miller says.

Internally, three employees in the risk department started reviewing daily core and card processor reports looking for context clues for potential fraud. Of primary focus are those “card not found” transactions, especially sequential card numbers used in close succession.

“The crook spends his whole day looking for ways in. We’re going to be behind the curve in trying to catch up, but we’ll do everything we can.” Cathy Miller, SVP & Chief Risk Officer, Air Force FCU

Looking forward, Air Force FCU hopes its risk review process will curb future fraudulent activity and is evolving its cybersecurity efforts, which include a new information security committee. Miller knows the battle is far from over, but that doesn’t mean it’s not worth the fight.

“The crook spends his whole day looking for ways in,” Miller says. “We’re going to be behind the curve in trying to catch up, but we’ll do everything we can.”

 Callahan & Associates, Inc.

New Goldman Sachs Analysis Says Home Prices Have Yet to Peak

NEW YORK–With home prices at record highs following record appreciation in recent years, many borrowers and lenders alike are going to be surprised by a new report from Goldman Sachs that is predicting prices have yet to peak.




The investment bank is projecting that home prices will grow another 16% by the end of 2022.

“Despite price increases of 20% over the past year, the analysts at Goldman Sachs suggest that homes remain ‘relatively affordable’ thanks to historically low mortgage rates,” CNN Business reported. “But continued strong demand among buyers and ongoing low inventory will keep pushing prices even higher, according to the report.”

While the home inventory situation has improved, with more homes for sale and price growth moderating a bit, Goldman's analysts say the supply and demand imbalance is expected to continue through next year, according to the report.

“But it is questionable whether demand will remain as strong going forward, given the high prices. About two-thirds, 66%, of respondents to a University of Michigan survey on homebuyer sentiment said this is not a good time to buy a home, according to the report,” CNN Business reported. “That's the highest it has been since the early 1980's.”

‘Reluctant Bulls’

Goldman’s analysts described homeowners remain “reluctant bulls,” who still intend to buy despite thinking it's a bad time.

According to the Goldman Sachs, its model looked at supply, demand, affordability and home prices.

“It projects that strong demand and tight supply will gradually erode affordability and make homes so pricey that more people will drop out of the market,” CNN Business stated. “That reduced demand will ultimately allow for more inventory on the market and eventually the supply-demand imbalance will ease. But not before prices jump another 16% by the end of next year.”

In addition to home prices continuing to move higher, rents will continue to rise as well, the analysts said, and regulatory efforts from the White House, Congress or individual states or municipalities to alleviate the housing shortage may not be enough, CNN Business stated.

 

CommonWealth One FCU Turns Over ATM Fleet to Dolphin Debit

ALEXANDRIA, Va.–CommonWealth One FCU said it has turned over operations of its entire fleet of ATMs to Dolphin Debit, a provider of ATM management solutions.

All of the credit union’s 15 ATMs have been replaced by Dolphin Debit, including those in major select employer group (SEG) locations, the company said. The $440-million credit union has more than 37,000 members, serving Northern Virginia, Washington, D.C., and two counties in Virginia’s Shenandoah Valley, as well as a large number of federal government and other SEGs. 

For CommonWealth One, it turned out to be a straightforward decision to partner with Dolphin Debit, as the credit union was coping with an aging fleet and a looming major investment in new machines, according to Dolphin Debit.

“We were at a point where we were going to have to replace the fleet because they required upgrades. Our machines were pretty dated. Dolphin provided a way for us to do that cost-effectively,” said Shamus McConomy, chief operations officer for CommonWealth One FCU. “We were managing it in-house, but we were attracted to outsourcing because it is more turnkey, so we can take some administrative items off our plates, especially when it comes to maintenance. We were also looking for cost savings.”

Finding Savings

CommonWealth One reported it found those savings after comparing three outsourcing partner candidates, Dolphin Debit said. McConomy said that while the cost advantages that Dolphin Debit offered were the main driver in the decision, there were other factors as well.

“The team at Dolphin is really good to work with. They are responsive, and came across as a good partner for us. They have followed through on that,” he said. “One of the biggest benefits is that they handle the remote locations completely. It’s not that hard to manage machines at branches, but it has been a tremendous help for our remote locations.”

According to Dolphin Debit, ATMs and a broad national ATM network are important to CommonWealth One’s service strategy, McConomy said, as many of its military members are frequently on the move. He also said the credit union is looking into upgrading to ITMs – interactive teller machines – particularly at a few of its SEG branches where teller staffing can sometimes be an issue.

Facing a Choice

“It is when their ATM fleets age that credit unions face that big choice between a huge capital investment in machine upgrades and replacements or outsourcing with us for a much more cost-effective pay-as-you-go approach,” said Gary Walston, CEO of Dolphin Debit. “For many of our credit union clients, that has been the tipping point for their decision.”

For info www.dolphindebit.com

Final Rule on Transition to LIBOR Coming in January, Says CFPB

WASHINGTON–The CFPB said it expects to issue a final rule in January 2022 to assist in covered institutions’ transition away from use of the London Interbank Offered Rate (LIBOR) as a reference rate in consumer credit contracts.

The CFPB included a statement related to LIBOR in a report to Congress that was posted on the agency’s website.

The Bureau issued its proposed LIBOR transition rule in June of 2020.

In its new report, the CFPB said that for creditors for home equity lines of credit (HELOCs) (including reverse mortgages) and card issuers for credit card accounts, the rule would facilitate the transition of existing accounts to an alternative index “well in advance” of LIBOR’s anticipated expiration at the end of 2023.

It would also address change-in-terms notice provisions for HELOCs and credit card accounts and how they apply to the transition away from LIBOR, to ensure “consumers are informed of the replacement index and any adjusted margin,” the Bureau said.

Card Compliance

Moreover, the Bureau said to facilitate compliance by card issuers, the rule will address how the rate re-evaluation provisions applicable to credit card accounts apply following the transition from LIBOR to a replacement index.

The CFPB also said it is continuing its work with other federal financial regulators to develop a proposed rule addressing quality control standards for automated valuation models (AVMs) for real estate appraisals.

How CU Economists are Responding to Latest Jobs Numbers

WASHINGTON–What many are calling the newest jobs report disappointing, it has some positives, according to economists with both CUNA and NAFCU.

The federal government said that during September nonfarm payrolls rose by just 194,000 in the month, after many analysts had been saying they expected as many as 500,000 new jobs to be reported. According to the fed data, the topline number was hurt by a 123,000 decline in government payrolls, while private payrolls increased by 317,000.





Dawit Kebede, CUNA

Despite the weak jobs total, the Bureau of Labor Statistics reported wages were up sharply. The monthly gain of 0.6% pushed the year-over-year rise to 4.6% as companies use wage increases to combat the persistent labor shortage.

‘Still Reluctant to Travel’

“Following the Delta surge in August, various indicators started showing signs of improved economic activity,” noted CUNA Senior Economist Dawit Kebede. “The September jobs report is weaker than expected, but the good news is that while hiring has remained stagnant, the unemployment rate declined to 4.8%.

“Small employment gains in the leisure and hospitality industry show, despite the declining trend of the Delta virus, people are still reluctant to resume in-person activities.”

Kabede added that for “several members of the Federal Reserve, a stronger September jobs report would have met the employment test to start tapering asset purchases. However, declining unemployment rates could suffice for the Federal Reserve to start slowing down the purchase of Treasury and mortgage-backed securities as early as next month.”





Curt Long, NAFCU

Some Positive Signs

NAFCU Chief Economist and Vice President of Research Curt Long said there are some positives to be found in the newest numbers.

“Payroll gains disappointed in September, failing to hit the 200,000 mark for the first time in the calendar year,” said Long. “However, there were positive signs buried below the headline number. Much of the weakness was concentrated in local education, which is likely due to faulty seasonal adjustments. Meanwhile, restaurant and retail employment picked up at a time when COVID cases were cresting, which bodes well for the October report. As compared to August, job gains in September were skewed toward full-time work, and average hours worked per employee picked up. Wage growth accelerated to 4.6% versus the prior year, which should help blunt the impact of strong inflation.”

NCUA Board Member Rodney E. Hood Remarks at the National Council of Firefighters Credit Unions (NCOFCU)

NCUA Director addresses NCOFCU attendees in Fort Worth TX.

 

 

Thank you very much for the kind introduction. It’s a pleasure to join you today, and I’m especially delighted that conditions are so much improved that we’re able to gather in person. After what we’ve been through the last year and a half, I think we’re all ready for a gradual return to a more normal footing, even if we still have some way to go to reach that point.

I spend a lot of time studying what credit unions are doing, and one of the best parts of this job is that I’m regularly reminded of how powerful the credit union model can be for making a difference in our communities. This initiative is a true testament to the strength of that model. I certainly look forward to checking in on the progress of this program so we can see how it works – it looks like a promising experiment.

 Read his complete presentation HERE 

 

Save the Date October 5-8, 2022 New Orleans 

 

 

The National Council of Firefighter Credit Unions Inc. (NCOFCU) Closes its 20th Annual Meeting and Conference

Fort Worth, TX October 2, 2021 - Credit Unions serving first responders from across the country met in Fort Worth, TX on September 29 - October 2 to discuss issues facing their credit unions. This was NCOFCU's 20th annual meeting for credit unions serving the firefighter and the first responder community. 

NCOFCU CEO, Grant Sheehan, said: "The conference was very well attended by credit unions from across the country." Sheehan added, "This is not your run-of-the-mill conference. It's unique, as all attendees have a common bond in serving their select group of members– firefighters and first responders."

Key topics discussed included the national economic outlook, mobile banking, business lending, legislation, NCUA regulatory update, executive succession planning, salary setting methodologies, new technology coming at CUs, case study marketing programs, implementing social media programs, and both business and personal cybersecurity.

Speakers included Rodney Hood, NCUA Director; Kurt Long, NAFCU; Michael Petrone, CUNA Mutual Group; Michael Moebs, CEO Moebs Services; Randy Thompson, TCT Solutions; Marsha Earl, NetEx Consulting; Brendan McDonough, McDonough Consulting; DeeDee Myers, DDJ Myers Ltd; Eric Isham, CEO Omnicommander; Jim Davis, Fort Worth Fire Chief; Michael McCormick, NCOFCU Board Chairman; Tim Green, CEO F&A Credit Union; Donya Johnson, CEO Nashville Firefighter CU; Bonnie Sensing, Treasurer Nashville Firefighters CU.

The 2022 NCOFCU conference will be in New Orleans, LA, at the Royal Sonesta October 5-8, 2022.

The council meets once a year at the NCOFCU Credit Union Conference and continues their established relationships through NCOFCU's Website www.ncofcu.org, Blog, Newsletters, Facebook, Tweets, and Listserv. This exclusive networking leads to the continued discussions of best business practices, products, and services that cannot be found anywhere else.

NCOFCU is the only organization exclusively representing credit unions serving first responders that collectively serve over 950,000 members and control more than 20 billion in assets. The council's purpose is to protect and preserve the vision and purpose of credit unions serving first responders. In addition, NCOFCU seeks to leverage its collective resources to further first responder credit unions' growth, development, and interests by providing educational and informational exchange opportunities, promoting safety and financial soundness.

A volunteer board of directors directs the council. Members of the board include; Chairman: Michael McCormick, V. Chairman San Diego Firefighters FCU; 1st V. Chairman: Bonnie Sensing Treasure Nashville Firefighters CU; 2nd V. Chairman: David Lantrip Director Houston Firefighters FCU; Treasurer: Gene Benick Newark Firefighters FCU; Secretary: Brian Kurzel Director Charlotte Fire Dept. CU; Directors: Linda Williams CEO Akron Fire & Police CU; Michael Tobler Chairman NY Firefighters Bravest FCU; Andy Doyle Director F&A CU; John Cowin Chairman Syracuse Firefighters CU; Associate Directors: Sean Costello Director Boston Firefighters CU; Ronald Jackson Treasurer Firefighter First FCU; Al Comeaux Chairman Baton Rouge CU; Staff: Grant Sheehan CEO

About the National Council of Firefighter Credit Unions Inc.

The National Council of Firefighter's Credit Unions (NCOFCU) was founded in the State of Florida on February 22, 2010, by representatives of the nation's firefighter credit unions. Information is available from the Councils' website at https://ncofcu.org or by contacting Grant Sheehan at 305-755-3302, ceo@ncofcu.org.