CURRENT Newsletter | 25 March 2021 - Virginia Credit Union League

Our partner attorneys at Woods Rogers produced an updated video on Virginia’s COVID-19 Workplace Emergency Standards. On January 27, 2021, the Virginia Department of Labor and Industry (DOLI) enacted a Permanent Workplace Safety Standard to address COVID-19.

The good news is most Credit Unions already took many of the steps needed for compliance. However, the Permanent Safety Standards add some new formal requirements, which attorneys Lilias Gordon and Patrick Bolling address.

View the video (simply step through the registration process for immediate access.)
Read the Woods Rogers Guidance (League website password required. Register here if you need one.)

Required Compliance Training Document Posted to InfoSight

Check out the Required Compliance Training information that has been added under the “Other Resources” area of InfoSight! This document provides an overview of the mandatory compliance training requirements and the associated citation for that requirement. Basically, it’s an excellent and handy reference to ensure you’re providing all required training for all areas of your CU – from the frontline to your Board of Directors.

View document (League website password required. Register here if you need one.)

Webinar: Why Text Messaging is Essential for Your Credit Union

Secure, TCPA-compliant Text Messaging with your members is easy with Eltropy's award-winning platform! Eltropy's CEO and co-founder Ashish Garg will share how Eltropy’s secure and compliant platform can help your credit union communicate effectively during the pandemic and beyond. Learn more by joining us for an April 1 webinar (2 p.m.).

Online Training for Supervisory Committees

Popular credit union consultant Ancin Cooley has created a web-based course for supervisory committee members, offering the most comprehensive overview of the role, duties, responsibilities and resources available to committee members. The five modules offer you a fun, interactive learning experience with bonus content and even quizzes to test your content retention.

Learn more
Register Now (Your League is offering volume discounts for multiple registrations from the same credit union. Use our registration to ensure you receive the discount.)

Credit Unions: Help Us Thank Teachers, Schools for Efforts During Pandemic; Deadline is April 2

It’s been an especially tough year for our teachers, educators and school staff. The League’s Financial Education Committee has launched a new initiative called “Message of Hope” to thank those educators for their work in continuing to educate and mentor young people during the pandemic.

They are also reminding educators that credit unions stand ready as a financial education resource, by providing classroom materials and presentations, including virtual or in-person participation.

If you want to thank your local educators for their tremendous work during the pandemic, contact your League’s Mary Amyx for details on recording a short video message via Tribute.

Learn more about the “Message of Hope” initiative!

Do Investments in DEI Drive ROI? Filene Launches 10-Minute Survey to Get Answers

Research shows 97% of firms with more than 1,000 employees are investing in DEI programs. The same holds for many credit unions. But are these investments actually working? The Filene Research Institute is launching an effort to find out.

Research shows that it is not enough simply to “have diversity,” noted Filene. “Organizations that leverage effective DEI practices and policies perform better in terms of value, risk, and growth,” it added.

But Filene said industry-specific research is needed to know what solutions yield the best results. To that end, Filene said it has officially launched a new research project within its Center of Excellence for Diversity, Equity and Inclusion to establish a benchmark for the credit union industry.

Filene said it is asking credit union CEOs, HR leaders or DEI leaders to complete the 10-minute DEI Practices and Policies Survey by April 18.

Overview of Fiserv's Card Expert Solution: Free April 22 Webinar

Transform your data into actionable insights that drive fact-based, consumer-focused decisions.

League partner Fiserv will offer a free webinar April 22 that will assist you in understanding key portfolio metrics, cardholder behaviors and how their relation to your credit union's card strategy is paramount for success. Learn how Fiserv’s “Card Expert” solution can help enrich your card strategies and build member engagement.

Illinois Caps Consumer Rates at 36%; Adopts State-Level CRA for CUs, Other FIs

Illinois Gov. J.B. Pritzker signed a bill Tuesday capping interest rates on consumer loans at 36% and another bill that establishes community reinvestment standards for state-chartered financial institutions.

The anti-predatory-lending law, which takes effect immediately, applies across all consumer loan categories. Auto title loans in Illinois currently have an average annual percentage rate of 179%, and payday loans have an average APR of 297%, according to the governor’s office.

The other new law establishes standards for state regulators to assess lending by state-chartered banks, credit unions and nonbank mortgage lenders in economically disadvantaged communities.

The Illinois community reinvestment law is designed to incentivize additional safe lending into low-income and moderate-income communities, according to the governor’s office.

Unlike the federal Community Reinvestment Act, it applies to credit unions and nonbank mortgage lenders. Illinois joins a small number of states, including New York, Connecticut and Massachusetts, that have their own community reinvestment laws. (American Banker, March 23)

Advocacy / Governmental Affairs

CU Trades Say Lifting MBL Cap Would Allow Billions in Small Business Lending

Credit union trade groups have called on Congress to lift the statutory 12.25% cap on business lending, contending that move would free up billions of dollars that would allow credit unions to continue to make loans to small business.

CUNA this week warned the House Financial Services Committee that many credit unions are approaching the cap, which limits credit unions to extending business loans up to 12.25% of their assets.

“Given the financial needs of so many small businesses, now is the time to provide credit unions with additional flexibility to serve their business members by lifting the cap,” CUNA President/CEO Jim Nussle wrote in a letter to committee leaders.

Nussle said the trade group has conservatively estimated that removing the cap would provide more than $5.5 billion in capital to small and informal business ventures, creating almost 50,000 jobs during the next year.

Learn more

Rep. Waters Demands Data From Investment Firms on Diversity, Inclusion

House Financial Services Committee Chairwoman Maxine Waters, D-Calif., and Rep. Joyce Beatty, D-Ohio, chair of the Subcommittee on Diversity and Inclusion, want data from the nation’s 31 largest investment firms — including BlackRock, Charles Schwab, Fidelity and Vanguard — on their diversity and inclusion practices.

“We are making progress to ensure a comprehensive understanding of diversity and inclusion performance in the financial services industry,” Waters and Beatty wrote in a letter dated March 18, which Waters released Monday.

“However, this cannot be achieved until organizations, especially the largest investment managers, disclose their diversity data and policies with the [Offices of Minority and Women Inclusion] OMWIs, Congress, and the public,” they explained.

Learn more

Compliance / Regulatory Affairs

Credit Risk: Documentation, Planning Are Critical

When it comes to credit risk, credit unions were offered insights from NCUA on areas at which examiners will be look, forbearance extension reporting, plans that need to be developed, and even the neighborhoods in which CUs might want to hand out their business cards. Those issues and others were addressed during a webinar hosted Wednesday by the agency.

Victoria Bennett, senior credit specialist in NCUA’s Office of Examination and Insurance, emphasized the agency wants to know what credit unions will be actively doing regarding the institution’s credit risk.

“We want to see your documentation on it. Who, what, when, where, why and how,” said Bennett. “Document what you have going on. We are going to want to know how strong your capital and earnings are. If you are dealing with high credit risk, your capital and earnings is what’s going to carry you through.”

In addition, Bennett said the agency will be monitoring any credit unions getting into what it believes to be high-risk endeavors.

Learn more

Failure to Modernize BSA Thresholds Adds Unnecessary Compliance Burden

CUNA supports legislation from Rep. Barry Loudermilk (R-Ga.) that would modernize Bank Secrecy Act (BSA) reporting thresholds for the first time since 1970. The bill is the Financial Reporting Threshold Modernization Act (H.R. 2040).

“The failure to modernize the reporting thresholds has led to the imposition of an unnecessary compliance burden on many credit unions due to the obligation to collect and report nonsuspicious information,” the letter reads.

H.R. 2040 would increase the Currency Transaction Report (CTR) threshold of $10,000 to an updated $30,000. The legislation would also increase the dollar amount thresholds for filing Suspicious Activity Reports (SARs) from $5,000 to $10,000 for most financial institutions and $2,000 to $3,000 for money service businesses.

CUNA supports H.R. 2040’s goal to narrowly tailor when and how reports of suspicious financial activity are triggered to reduce low-value reporting while maintaining financial inclusion.

Learn more

TCPA Has ‘Chilling Effect’ on CU-Member Communications

Credit unions suffer unequal treatment for having made important and welcome calls to members under the Telephone Consumer Protection Act (TCPA), CUNA said in an amicus brief filed Wednesday in Lindenbaum v. Realgy, LLC. CUNA called on the U.S. Sixth Circuit Court of Appeals to affirm the U.S. District Court for the Northern District of Ohio’s dismissal of the TCPA lawsuit in light of the Supreme Court’s decision in Barr v. American Association of Political Consultants, Inc. in July 2020.

In that case the Supreme Court found that a 2015 amendment to the TCPA was unconstitutional and eliminated the addition going forward. However, credit union calls made between the 2015 amendment and the 2020 decision were still subject to unequal treatment under the TCPA during that time.

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Markets, FIs Need to Move Faster in Moving Away from LIBOR, Says Fed Report

The financial markets need to pick up the pace when it comes to migrating away from LIBOR, according to a new report from a Federal Reserve committee.

According to the Fed, the move away from the most popular interest rate reference tool and the widely used benchmark will need to “materially accelerate” for the market to be adequately prepared to use the new base measure, the Fed said.

According to the Fed analysis, some products, such as business loans, have not diminished the use of the London Interbank Offer Rate (LIBOR) in setting interest rates.

“With essentially nine months left to end-2021, it is critical that market participants are actively taking steps to support the transition using the tools available now,” said Tom Wipf, chairman of the Fed Bank of Boston’s Alternative Reference Rates Committee (ARRC,) in a statement accompanying release of the report.

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NCUA Chairman Sees Reasons to Be Positive; Urges CUs to Not Garnish Stimulus Checks

The outlook is getting better for both the credit union system and the country as a whole, according to NCUA’s chairman.

During a Town Hall Meeting with the Maine Credit Union League, NCUA Chairman Todd Harper said the coronavirus pandemic continues to present challenges, but there remains a reason for optimism.

Harper also discussed the practice by some financial institutions, including credit unions, of garnishing economic stimulus payments due to debts by some members.

“As we saw with stimulus payments last year, some credit unions decided to garnish these funds instead of stepping up and working with their members,” Harper said. “Credit unions that do this again should consider the reputational issues that will come from these practices.”

Learn more

News From Credit Unions

BayPort Credit Union Opens Three New Branch Locations

BayPort Credit Union announced the opening of three new branch locations. As part of the credit union’s continued commitment to convenience and service to members, the three new branches will open in March and April and are located in Gloucester, Chesapeake, and Virginia Beach.

Learn more

Education & Training

Lending Risks Webinar April 14

Have a question you’d like to ask a risk consultant on lending trends and risks? Join us for a live webinar/ question-and-answer session where industry experts will focus their time on addressing what’s top-of-mind for you and your credit union peers.

During this session, we’ll cover:

Latest loan scams and trends
Shift to digital and impact on lending
Consumer Skip-a-Pay Programs
Member authentication

With digital lending a common practice for many credit unions, please share your insights regarding your 2021 lending focus, risks & loss controls by responding to this short Lending Benchmark Survey. Your input will help develop more peer comparisons with the aggregated results being made available during upcoming lending sessions and resources within the Protection Resource Center. The Benchmark Survey is optional but should take only 5 minutes to complete.

Financial Services / Economy

Virginia Could Soon Push More Workers to Save for Retirement

Thousands of Virginia workers would gain the option of automatically putting away part of their paychecks for retirement under legislation the General Assembly passed last month to help private-sector employees who lack access to a savings plan through their employer.

The bill, awaiting action by Gov. Ralph Northam, establishes a state-administered program that would offer IRA accounts to workers with no other retirement plan options, particularly employees of small businesses, self-employed people and gig workers.

The accounts would be optional, but workers would be enrolled by default and would have to opt-out if they want to keep their whole paycheck. The plans would be portable, meaning workers could keep putting money into the same account even if they switch jobs.

Covered businesses would have to help interested workers participate in the program, mainly by setting up their accounting systems to allow payroll deductions to be made, but they wouldn’t have to contribute funds of their own.

The program, scheduled to take effect no sooner than 2023, would be run by the Virginia College Savings Plan’s governing board, a group of finance and investment professionals that already administers plans meant to help families build savings for higher education expenses.

The Northam administration spoke in favor of the bill during the session, but it’s not clear if the governor will sign the bill or propose more changes. Because the program won’t take effect for at least several years, lawmakers have time to make additional changes before the rollout. The bill also calls for the creation of a working group to make additional recommendations.

Learn more

The ‘P’ In P2P No Longer Stands for Pushback, As Consumers Are Embracing Service

Resistance to P2P services is waning, as many of the reasons for not using the solution appear to be losing popularity, a new study reveals.

The largest overall reason in 2018 for declining to use person-to-person payments–“I don’t have a reason to use P2P–declined to 36% in 2020 from 47% in 2018. In 2019, 42% of consumers said they “prefer to use cash” over P2P services, according to a Mercator Advisory group report—2020 North American Payments Insights: Debit - Continued Change.

“Not surprisingly in a pandemic environment, that sentiment dipped to 30% in 2020,” Payments Journal stated in its analysis.

P2P services are increasingly being used to share costs with others, pay bills, and pay for things in-stores.

In 2020, 23% of consumers used P2P to split a bill, up from 17% in 2018 and 2019. For the last three years, one in five P2P consumers used the service to buy a gift.

Learn more

Fed Officials Continue to See Post-COVID Inflation Jump as Temporary

Federal Reserve officials this week downplayed concerns that inflation could permanently take off after the COVID-19 pandemic, saying they expect the coming burst of inflation to be temporary.

There is "a lot of slack in the economy" with nearly 10 million Americans still out of work, and while the new $1.9 trillion stimulus will provide a large boost to the economy, its impact will diminish over time, Fed Vice Chairman Richard Clarida said March 25 at an Institute of International Finance conference.

Former Treasury Secretary Larry Summers and other prominent commentators have warned of a stimulus-fueled inflation spike, with Summers telling Bloomberg Television that the U.S. is suffering from the "least responsible" macroeconomic policy in decades. The Fed, he said, will add more fuel to the fire because it has "stuck to its guns" on keeping short-term interest rates at effectively 0%.

Asked about such concerns, Clarida said he disagreed that the stimulus package will represent a "long-term persistent upward risk to inflation." While there is massive pent-up demand from consumers that will be unleashed once the pandemic ends, there is also "enormous pent-up supply" that will limit any inflationary impacts, Clarida said.

The Fed will not "take anything for granted" and will be alert to any signs that temporary inflation increases become more permanent, a development that the Fed can rein in through its usual method of tighter monetary policy, Clarida said.

The bigger problem for the past decade has been too-low inflation, New York Fed President John Williams said at a Syracuse University and Onondaga Community College event on March 24. Central banks around the world have struggled to hit their inflation targets and the pandemic-induced downturn has put more downward pressure on prices, he said. To offset some of those pressures, Fed officials are now aiming for a modest and temporary overshoot of their 2% goal. (S&P Global Market Intelligence, March 25)

Risk Management

War Against Coronavirus Has Also Led to a War Against Digital Fraud, New TransUnion Study Finds

The war against the coronavirus has also led to a war against digital fraud, according to one new report.

A new quarterly analysis of global online fraud trends by TransUnion found that since the COVID-19 pandemic began, fraudsters have dramatically increased their rate of digital schemes against businesses.

In addition, TransUnion’s recent Global Consumer Pulse Study found that more than one-in-three global consumers have recently been targeted by digital fraud related to COVID-19.

TransUnion said its conclusions about fraud against businesses based on intelligence from billions of transactions and more than 40,000 websites and apps contained in its flagship identity proofing, risk-based authentication and fraud analytics solution suite, TransUnion TruValidate.

Learn more

Fed, Treasury Vow to Evaluate Climate Change Risk to Financial System

Two top Federal Reserve officials and Treasury Secretary Janet Yellen reaffirmed the government's commitment to assessing the risks climate change poses to the financial system.

In a speech Tuesday, Federal Reserve Board Gov. Lael Brainard announced the formation of the central bank's Financial Stability Climate Committee. The panel will have a macroprudential focus “to identify, assess and address climate-related risks to financial stability,” she said.

The committee will address “not only potential climate shocks, but also whether climate change might make the financial system more vulnerable in ways that could amplify these shocks and cause broader knock-on effects that could harm households, businesses, and communities,” Brainard said in a speech at a virtual conference hosted by the Boston-based nonprofit Ceres.

Fed Chair Jerome Powell, testifying Tuesday alongside Yellen before the House Financial Services Committee, said separately that the central bank is “at a very early stage of understanding the risks to regulated financial institutions from climate change.”

He argued that the Fed has a responsibility to assess climate change risks to ensure the soundness of the banking system, despite the view among some GOP lawmakers that the central bank should avoid the issue.

“It is an exploration in understanding better what the risks are to the core of our financial system, and we feel like that’s our obligation to understand that,” Powell said. “The financial institutions are very much actively doing this on their own. It’s not something we’re forcing them to do.”

The Fed's new committee is in addition to the Fed’s new Supervision Climate Committee, which aims to develop a program to safeguard the resilience of banks to climate risk, Brainard said. (American Banker, March 23)

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