"I believe it is extremely important for credit unions to be included in the definition of 'bank' as it pertains to Reg R," Hoaglin said. "This omission will cause hardship for credit unions that offer these identical investment programs in that in the current environment credit unions must rely on the Chubb no action letter put forth by the SEC in 1993."

The Chubb letter from Catherine McGuire, Chief Counsel, SEC Division of Market Regulation, to Chubb Securities Corp. authorized banks, thrifts, and credit unions to enter into third-party brokerage arrangements under certain conditions without the financial institution having to register. It also said a "required service corporation" involved in such arrangements did not have to register. NCUA issued Dec. 1993 Letter to Credit Unions No. 150 that specifically recognized that CUSOs may participate with a credit union and a broker in such arrangements. Although it did not specifically address the necessity of registration with the SEC, it stated generally that credit unions must comply with all laws and regulations applicable to the activity.

"As many third party broker dealers have discovered, having to rely solely on Chubb leaves credit union programs exposed to the whimsical interpretation by the various state securities regulators," Hoaglin said,

If credit unions are not included, Hoaglin is concerned about the fallout because "some of these regulators take an arbitrary and capricious approach to their oversight of the networking agreements provided for in Chubb."

By including credit unions in Regulation R, Hoaglin said "it will create a level playing field for all investment programs, banks and credit unions alike."

–[email protected]

Time to Lift Field of Membership Restrictions is Now, CEO Urges

SEATTLE — With the plethora of choices consumers now have when choosing their financial institution, the time may be overdue for credit unions to open their fields of memberships even more.

Bob Harvey, president/CEO of $484 million Seattle Metropolitan Credit Union, is frustrated with membership restrictions and looks forward to the day when they are removed.

"In this day and age of consumerism, choice, and competition, field of membership restrictions serve to hamper growth of credit unions as well as denying access to services," Harvey said.

It has hit home for the CEO who recently looked to conduct a real estate transaction in another state and had to search through credit unions to find one that would "meet my needs." Even though credit unions have been asked to and may soon be required to serve all members of their communities, in many states, even if they wanted to, they could not, Harvey added.

"Imagine, as a consumer, you're looking for a credit union and you search various Web sites to see if you 'qualify' for entrance," Harvey said. "How does that make you feel when you're denied membership? Can you envision the uproar if a consumer walked into a bank and was told 'I'm sorry you can't have an account here'?"

Compounding the shutout, is the possibility that many consumers still don't know that there are regulations in place that limit access to credit unions, Harvey said. The message: "The credit union just wants to be exclusive."

"Even for those credit unions with community fields of membership, many consumers just don't know that they are now eligible because of prior history," Harvey said. "It's unfortunate that our constitutional right of freedom of association does not extend to many potential credit union members. Dismal membership growth the last few years in the industry would suggest it's time for a change in the law."

–[email protected]

Up the Thresholds for Member Business Lending, Investment in CUSOs

NEWPORT BEACH, Calif. — As the number of co-sponsors for the Credit Union Regulatory Improvements Act of 2007 continues to climb, two key provisions could help credit union business lending programs and CUSOs.

Tom Davis, president/CEO of NACUSO, is hoping the bill will eventually become law because CURIA would update the 12.25% of assets cap placed on credit union member business lending in 1998 and replace it with 20% of total assets. CUNA has said the new cap would be equal to or stricter than business lending caps imposed on thrift institutions.

This provision would provide "greater flexibility with loan rates and maturities," Davis said. In addition, the legislation would exclude loans or loan participations to nonprofit religious organizations from the member business loan limit. The definition of a member business loan now excludes loan(s) that are equal to or less than $50,000. CURIA 2007 would amend the definition to exclude loans of $100,000 or less.

Davis would also like to see CURIA become law because of the flexibility it would afford CUSOs. An individual federal credit union is currently authorized to invest in aggregate up to 1% of its unimpaired capital and surplus in CUSOs. In addition, the same limitation applies to loans credit unions may make to CUSOs. With the passage of CURIA, both limits would rise to 2%.

–[email protected]

Enough with the Regulations! Exec Pleads

OGDEN, Utah — At any given time, credit unions are called on to offer their feedback on proposed regulations from a litany of agencies ranging from NCUA to the Securities and Exchange Commission but one executive believes enough is enough.

When asked what regulation involving credit unions would he like to see implemented and why, Kerry Wangsgard, vice president and director of trust services at $3.9 billion America First Credit Union, kept it short and to the point.

"My personal thoughts are that the financial industry is becoming so regulated that the last thing we need is more regulation," Wangsgard said. "It creates inefficiencies and adds to our cost of doing business."

–[email protected]

Field of Membership Reform Still Important

ARLINGTON, Va. — "The No. 1 regulatory priority is going to be dealing with field of membership," NAFCU Senior Counsel and Director of Regulatory Affairs Carrie Hunt said. She noted that NAFCU is glad NCUA is undertaking a review of it regulations in this area after the board turned down a few application appeals. We hope "that credit unions that apply for a community charter get the community charter if they comply with the law," Hunt said. NAFCU also wants to ensure each regional office is treating the applications in the same manner and the group is encouraged by NCUA Board Member Gigi Hyland's public comments.

In this review, NAFCU would also like to see what regulatory "refinements" could be done for voluntary mergers of a community charter and SEG-based credit union when one is heading for disaster as it pertains to maintaining the SEGs. Right now, she pointed out, "Two CEOs sitting there don't have the power to merge the credit unions until it fails."

–[email protected]

Fortney: Time for NCUA to Consolidate Rules and Regs

ARLINGTON, Va. — "NASCUS believes that the NCUA rules and regulations applying to federally insured credit unions should be incorporated into one section, Part 741, instead of incorporating rules by reference," NASCUS President/CEO Mary Martha Fortney said simply. "This is an important regulatory goal for NASCUS because it would help differentiate between NCUA's rules as a chartering entity and NCUA's rules as the administrator of the insurance fund." It would also ease the regulatory burden of small credit unions, she said, and clarify misunderstandings.

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BSA Relief is Necessary, Says CUNA

WASHINGTON — "The number one regulatory challenge for credit unions is coping with the Bank Secrecy Act," CUNA Deputy General Counsel and Senior Vice President for Regulatory Advocacy Mary Dunn stated. "Challenges include knowing what regulators expect; dealing with zealous examiners; trying to keep up with the latest requirements and regulatory guidance; and SAR and CTR requirements.

CUNA General Counsel Eric Richard added, "Part of the solution lies in narrowing the scope of compliance, such as requiring CTRs and SARs for fewer transactions–but that would take a legislative change." However, having a better understanding of what NCUA is expecting would help in the meantime, he said.

Kathy Thompson, CUNA senior vice president for compliance, said better guidance for credit unions might include what the regulator considers "good risk assessments, due diligence procedures, and real-life examples" of proper compliance. Just a "road map" and not a "list of 'to-dos,'" which neither credit unions nor NCUA want.

–[email protected]

NCUA Board Member Reg Wants Vary

ALEXANDRIA, Va. — Here's a look at what the three-member NCUA Board would like to see in regulatory relief:

"My top regulatory priorities are PCA reform and expanding service to the underserved. Both involve legislative action, and I will continue to urge Congress to improve the current PCA system by allowing credit unions to grow in a safe and sound manner within a risk-based system and to also give credit unions the flexibility to accomplish the task of serving disadvantaged communities," said NCUA Chairman JoAnn Johnson.

"Communities without financial institutions serving the underserved leave America's most vulnerable consumers to the hands of predatory lenders and pawn shops. My top priority as a regulator is to ensure that all Americans, especially those in underserved communities, have access to the affordable financial products that credit unions are uniquely equipped to provide," said NCUA Vice Chairman Rodney Hood.

"My number one regulatory priority is to improve the value of the federal charter. This means seeking ways to help credit unions meet the needs of underserved communities, clarifying and simplifying the community chartering process, reducing regulatory burden, and improving the examination process," said NCUA Board Member Gigi Hyland.

–[email protected]

ATM Executives Express a Variety of Regulatory Concerns

ARLINGTON, Va. — ATM and EFT network leaders expressed a wide variety of regulatory and legislative changes that, their executives said, would significantly assist them in their business.

CO-OP Financial Services, the parent organization of the nations largest fee-free ATM Network, would benefit most from a federal law on data breach notification and compensation, according to Jim Hanisch, senior vice president with CO-OP.

"Right now it seems highly unlikely that Congress is going to do anything about this problem until after the 2008 elections and that means we are going to be looking at between 30 to 40 different sets of laws on data breach notification, Hanisch said.

These laws impact more of CO-OP's EFT and debit processing business, Hanisch explained and make it difficult for the processor to put plans into place for what it will do when notified of data breaches.

Hanisch also explained that the EFT and card processing CUSO would also favor a federal law addressing pre-paid cards.

"There have been a series of court cases which have answered some of the pre-paid questions at the federal level, but there really hasn't been anything to address questions at the state level. We think that such a law would help pre-paid cards advance more quickly," Hanisch explained.

Ben Psillas, president of the Allpoint ATM network, explained that his organization didn't have a regulatory agenda in regards to government as much as it was trying to prepare for what the next regulation from Visa, MasterCard or the federal government might be.

"We spend some time trying to figure out what the next Triple DES or ADA will be," said Psillas, referring to the data security standards that Visa and MasterCard put into place for ATM and EFT transactions and to the Americans With Disabilities Act, which carried a federal mandate to make all ATMs across the country accessible to the disabled.

Psillas noted that most ATM networks, like Allpoint, do not actually deploy ATMs, but argued that such sweeping, industry wide regulations impact the networks since many ATM deployers, including CUs, tend to see the networks as leaders. The networks also have to take the regulations into account when planning their marketing and technical strategies, Psillas explained.

Jim Park, president and CEO of Credit Union 24 ATM and EFT network said Credit Union 24 would do best if government would lay off any additional regulation and instead focus on cooperating with the network to focus on common problems like fraud prevention.

"In our case I would have to say that government functions best which functions least," Park said, adding that he hoped that government agencies would continue to work with Credit Union 24 and other networks on fraud prevention.

"We have had several different anti-fraud efforts going on with other organizations including government agencies," Park explained. "We would hope they would continue and expand those associations before they put any more regulations into place," he said.

–[email protected]

Dames: Simplify BSA!

WEST JORDAN, Utah — Mountain America Credit Union CEO Gordon Dames is ready for Bank Secrecy Act relief.

"I would like to see the BSA [Bank Secrecy Act] simplified with the bureaucracy and paperwork eliminated or simplified for members we know not to be part of drug laundering or terrorism. For example: Long term members or aged members who would be very unlikely to be doing either. In addition, I'd like to see the law on fields of membership eliminated," said Dames. "Let the board of directors determine who the credit union will serve. Sure, there will be overlap between credit unions but it will be the members who decide which credit union can best meet their service needs and not some regulator. This would also reduce the cost of regulation by taking the regulator out of the field of membership arena and it would help diminish the bank/credit union conflict. Just some thoughts."

–[email protected]

McGill: We Need CURIA Badly

MIRAMAR, Fla. — Getting the CURIA bill passed, specifically for Eastern Financial Federal Credit Union, increasing the cap on business loans to 20% versus 12.25% and increasing the exclusion cap on member business loans from this calculation from $50,000 today to $100,000, said Eastern Financial FCU CEO Stephen McGill.

"Doubling the amount we can invest or lend to a CUSO from 1% of unimpaired capital and surplus to 2% of unimpaired capital and surplus.

"It would give Eastern greater flexibility to serve the communities we represent by providing more opportunities to our local business member-owners. This greater flexibility creates a 'win-win'. For the member it is improving their financial well-being. For Eastern it is a new, core program that generates an additional revenue stream. Currently, we are nearing the maximum amount we can lend to our business members. This change would allow Eastern to serve an additional 750 -1,250 small business owners with their lending needs.

"In addition, we want the option to invest and or lend more to CUBC, LLC, and the Business CUSO that was established with seven other credit unions to broaden and expand the services provided by this turnkey solution."

–[email protected]

Savoie: What's a Sound Business Practice?

METAIRIE, La. — Louisiana Corporate Federal Credit Union CEO Dave Savoie thinks corporate regs are sufficient, but the exam process needs work.

"The main area where improvement could be realized is the application of the body of regulation in the examination process. In our last exam, two of every three examiner findings were referenced solely to 'SBP' or sound business practices and were not referenced to any section of the act, regulation, bylaws, letters to corporates, IRPS, accounting manual, etc. Based on discussions with colleagues, this seems to be the norm in both corporate and natural person credit unions.

"Since there is no codification of SBP, it is often a practice that an individual examiner thinks is a good idea or has seen in operation in another corporate. The lack of a codification of the major source of reference for examination findings removes a source of discipline in the exam process. It can also result in competitive advantages and disadvantages when similar institutions are required to utilize varying practices with varying expense requirements.

"This is different from regulatory flexibility. Regulatory flexibility involves regulatory forbearance or modifying action on a known and stated regulatory issue because a modification or forbearance would result in a greater good. The use of SBP without codification can result in as many sets of regulations as there are examiners. The current body of law, regulation, and published interpretation seems to be effective based on the corporate system's high level of strength, but it does not seem to be sufficient to support by reference the majority of examination issues. Some revisions to the body of regulations, the examination function, or both, are needed to bring the two in greater harmony."

–[email protected]