CURRENT Newsletter | 9 February 2021 - Virginia Credit Union League

The 2021 regular session of the General Assembly adjourned for the Senate on Friday ; the House on Monday. Both chambers will reconvene tomorrow for a special session called by the Governor for the purpose of completing this year’s business.

We continue to monitor a number of bills being carried over to the special session.

Your League supports HB1964 (Del. Lamont Bagby), believing the State Corporation Commission should have more flexibility in working with troubled credit unions prior to insolvency.
Your League has worked to amend HB2175 (Del. Luke Torian) to protect creditors’ interest with respect to judgment liens.
Your League has worked with a large group of stakeholders on companion bills HB2307 (Del. Cliff Hayes)/SB1392 (Sen. Dave Marsden) to draft a data privacy bill for consumer protection. Credit unions are exempted owing to our compliance with the Gramm Leach Bliley Act, but laws that touch on consumer data protection are obviously of keen interest to credit unions.

Also of note:

Legislation (HB2137) requiring essential businesses employing more than 25 employees to provide 5 days of paid leave to essential workers. We will continue to monitor the bill as credit unions are designated essential businesses. Of note: PTO, in lieu of sick leave, is acceptable under the bill.
We are also monitoring legislation that would force some small businesses to pay state income taxes on forgivable loans received through federal government assistance programs, such as the Paycheck Protection Program. Because Virginia does not automatically conform its state tax code to the federal tax code, it must approve tax conformity legislation annually. Usually a routine matter, a House committee this year advanced legislation that failed to provide an income tax exemption for Paycheck Protection Program (PPP) loans, which are tax exempt at the federal level. The House and Senate have since passed bills that provide a tax break to small businesses, though they differ on the size of those tax breaks.
While the General Assembly has voted to legalize marijuana, we recognize there is still no federal law that would allow credit unions and banks to process financial transactions for legal, state-licensed cannabis businesses. Marijuana is still considered illegal under federal law and many credit unions and banks are reluctant to serve such businesses, fearing federal sanctions. Credit unions supported the federal Secure and Fair Enforcement (SAFE) Banking Act during the last Congress, which would have provided protections for financial institutions that serve cannabis businesses and ancillary businesses in places where cannabis is legal. The U.S. House passed the bill, but it stalled in the Senate. More on this issue here.

Southeast CUNA Management School Going Virtual for 2021

Although many things have changed in the past year, Southeast Regional Credit Union Schools’ (SRCUS) commitment to providing an outstanding educational experience for credit union professionals remains strong, and in this spirit, is delighted to announce that registration will open soon for the VIRTUAL 2021 Southeast CUNA Management School.

While there will be some things that look a bit different from the traditional on-campus program, participants will also experience many of the same amazing opportunities that the in-person program offers.

Learn more

League YPN Plans Feb. 11 Lunch & Learn

Join young professionals from across the Commonwealth Feb. 11, for the Young Professionals Network’s first virtual meet-up of the year. Guest speakers Diana Kevorkian and Diana Flowers will offer a session on “Networking 101” in anticipation of a return to in-person meetings later this year!

Everyone (young professional or not) is invited to attend! The hour-long session begins at 1 p.m.

Learn more and register

CUNA Mutual Group Hosts Office Hours: Cybersecurity Webinar Feb. 17

CUNA Mutual Group invites you to connect with their Risk Consultants, risk and insurance partners, and your credit union peers to ask questions regarding the latest risks, loss trends, and mitigation tips related to cybersecurity.

The hour-long webinar is slated for Feb. 17 at 2 p.m.

Learn more | Register

FISERV Hosting Free Webinar Feb. 25 on Fraud Trends

As 2021 begins to take shape, the pandemic has seen consumers move to and embrace e-commerce channels. As the payment shift continues, what are the impacts to fraud and what can credit unions continue to do to mitigate their risk? FISERV, your partner in payments, will continue its exploration into fraud trends that matter to your credit union during our Feb. 25 webinar.

Start time for the free, hour-long webinar is 10 a.m.

League Hosting Compliance, Regulatory Update Webinar March 17

Join us March 17 for a free compliance/regulatory update with attorney Jay Spruill. The hour-long webinar (10 a.m. start time) will cover frequently asked questions on the League compliance hotline, key federal regulatory issues, and any recently enacted state laws that might affect your operations.

Also, feel free to send your questions prior to the webinar to your League’s Mary Amyx at mamyx@vacul.org. She’ll gladly forward them to Jay to ensure they are covered during the webinar.

Learn more and register here.

Foreign Transaction Fees Cause Litigation Concerns

Plaintiff attorneys are pursuing class action litigation against some credit unions involving foreign transaction fees being assessed on debit cards. These complaints allege the credit unions' disclosures are misleading by stating that foreign transaction fees will be assessed when the transactions are “made” in foreign countries; however, the member is actually located in the U.S. and the merchant is located in a foreign country.

View Alert

CUNA Economist Examines Latest Trends, Pandemic’s Impact

CUNA Chief Economist Mike Schenk examines how the pandemic and economy have changed in recent weeks, and more, in CUNA’s latest Economic Update Video.

The presentation itself, along with previous videos, can be found on CUNA’s Economics website.

The video covers:

A review of five concerns heading into 2021;
January’s economic “Hits and Misses;” and
A strategic blunder that could jeopardize credit union success in 2021.

Advocacy / Governmental Affairs

New Senate Banking Chair Indicates Willingness to Move on Cannabis Legislation If…

Sen. Sherrod Brown (D-OH), who is the new chairman of the Senate Banking, Housing and Urban Affairs Committee, said he is willing to consider moving on legislation that would allow the cannabis industry access to the banking system if the measure is coupled with sentencing reform for drug offenses.

Brown told Cleveland.com his priority in the new post is to help the country cope with the coronavirus pandemic, followed by providing emergency assistance for renters facing eviction and homeowners facing foreclosure, and support for public transit.

Brown said the committee’s first hearing will be about how the pandemic has disproportionately affected communities of color.

As CUToday.info previously reported, in 2019 the House of Representatives overwhelmingly passed legislation that would allow credit unions and banks to process financial transactions for legal, state-licensed cannabis businesses without fear of federal sanctions because marijuana is still considered illegal under federal law.

That bill stalled in the Senate due to opposition from the former chair of the Senate Banking Committee, Sen. Mike Crapo (R-ID).

Senate Bill Would Create $75B Homeowner Assistance Fund

Sen. Jack Reed (D-R.I.), introduced a bill this week to create a $75 billion Homeowner Assistance Fund. Reed introduced the bill with lead co-sponsors Sens. Sherrod Brown (D-Ohio) and Patrick Leahy (D-Vt.)

“This bill will help prevent mortgage defaults, foreclosures, and displacements of Americans who are still feeling the economic impact of this pandemic,” said CUNA President/CEO Jim Nussle. “We strongly support this bill and look forward to working with legislators to move it forward.”

The fund would be allocated in part based on a formula that weighs state unemployment claims relative to the number of national unemployment claims, according to the legislators.

Learn more

Compliance / Regulatory Affairs

CUNA Compliance Management eSchool to Cover Regulators’ Expectations

Credit union compliance staff will learn federal regulations for compliance management and dig into the tools and technology they can use to improve their systems by attending CUNA Compliance Management eSchool March 5, 12 and 19.

“There is now an increased expectation from federal and state regulators for credit unions to have a strong compliance management program in place,” said Jess MacLagan, instructional design manager at CUNA and a former credit union compliance officer. “Not only that, but credit unions are expected to know the ‘ins and outs’ of the system they have in place.”

Attendees will also learn how to audit their compliance management program and how RegTech (regulatory technology) can support the goals of their compliance program.

Sessions scheduled for the eSchool are:

Compliance Management Systems – A Regulatory Perspective – led by CUNA Compliance Counselors Whitney Nicholas and Patricia O’Connell
Compliance Auditing – How is Your CMS Performing? – led by Stephanie Cartwright, regulatory compliance consultant and former compliance officer at Pelican FCU
Using RegTech to Manage Your Compliance Management System – led by Tracy Blaske, director of compliance solutions for CUNA who held the positions of compliance officer and CEO in a 20-year credit union career

Learn more

Examining NCUA’s Supervisory Priorities for 2021

The National Credit Union Administration (NCUA) released its exam priorities in January for the year, with many of the priorities related to the impact or potential impact of the continuation of the coronavirus pandemic on your credit union.

The agency has reinforced its examination posture remains of performing duties offsite until further notice.

Learn more

CFPB Considers Halting Implementation of QM, Debt Collection Rules

The Consumer Financial Protection Bureau is looking to delay the implementation dates of the Qualified Mortgage and debt collection rules and will resume collecting data on home loans, credit cards and prepaid cards.

Acting CFPB Director Dave Uejio wrote in a blog post late Wednesday that the CFPB needs more time to consider rules that were implemented — but have not yet gone into effect — under the Trump administration.

“I will be assessing regulatory actions taken by the previous leadership and adjusting as necessary and appropriate those not in line with our consumer protection mission and mandate,” Uejio wrote, adding that changes include ways to “explore options for preserving the status quo with respect to QM and debt collection rules.”

In June, the CFPB extended the QM rule until April 2021, further delaying an exemption from strict underwriting guidelines given to Fannie Mae and Freddie Mac during the last financial crisis. The changes are not a surprise. Many had expected the CFPB under President Biden would move to delay the effective dates of several rulemakings started under former CFPB Director Kathy Kraninger, including two recent debt collection rules finalized in October and December.

The debt collection rules for the first time would restrict how often debt collectors can call borrowers, to seven calls per week, and would require collectors to provide detailed disclosures on old debts that have exceeded the statute of limitations. (American Banker, Feb. 5)

MBL, PCA Flexibility Would Help CUs Continue Member Service

Congress should take further legislative action to ensure credit unions remain in a position to serve their members, CUNA wrote to the House Financial Services Committee Thursday. CUNA’s letter was sent for the record of a hearing on the need for additional COVID-19 stimulus.

“CUNA appreciates the steps taken in the 116th Congress that helped credit unions remain in a position to serve their members…As such, credit unions have tailored their service to meet immediate and long-term needs of their members by providing low- and no-interest loans, payment forbearance, fee waivers, payroll advances, loan modifications, and other services that help meet the needs of their members in crisis,” the letter reads.

“While we understand that the next COVID-19 bill could be moved through Congress under process which may limit the inclusion of certain policies, we urge you to consider not just the immediate needs of Americans, but the long-term economic recovery,” it adds.

CUNA urged Congress to take the following actions:

Exempt member business loans from the cap during and for one year after the national emergency;
Provide temporary flexibility to NCUA to offer forbearance from Prompt Corrective Action requirements;
Call on the Treasury Department to provide clear guidance for the eligibility of the Emergency Capital Investment Program to insure the Rapid Response Program process does not favor past Community Development Financial Institutions Fund awardees.

Learn more

Financial Services / Economy

Credit Union Loans Grow at Slowest Pace Since Tail of Great Recession

Credit unions ended 2020 with their slowest loan growth in more than five years as the continued weakness in auto loans and credit card use was compounded by slowing growth in real estate, according to reports released Friday.

CUNA’s Monthly Credit Union Estimates showed credit unions had $1.19 trillion in total loans at Dec. 31, up 5% from a year earlier.

CUNA chief economist Mike Schenk said the last time loan growth was that low was around 2012. “At that point we were limping out of the Great Recession.”

That wasn’t the only record Schenk noticed. Savings grew 20.6% to $1.62 trillion, contributing to a loan-to-share ratio that fell to 73.6%, the lowest level since March 2015 and down from 84.2% in December 2019.

“A low loan-to-share ratio is arguably good in the middle of an economic crisis because then you can meet your demand for cash,” Schenk said. “On the other hand, there are earning implications related to having a very low loan-to-share ratio, especially in an environment where investments are yielding very close to zero.”

Membership grew a healthy 3.1% to 126.6 million, which means credit union membership was growing seven times faster than population growth, he said.

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Credit Union Auto Lending Growth Slows, But Still Grows

The COVID-19 pandemic has helped to stunt the growth of credit union auto lending, but that essential product remains a major part of the movement’s loan portfolio.

While some measures, such as market share, dipped year over year, loan quality – as measured by delinquencies – has held up well through the economic upheaval, according to Callahan & Associates’ analysis of third-quarter 2020 data from the NCUA, the most recent available.

In fact, delinquency in the third quarter hit its lowest mark since 2013. While some of this improvement in asset quality can be chalked up to credit unions deferring payments on auto loans during the pandemic, this is still an impressive measure. It is worth noting that while delinquency is at a healthy level on average across the industry, until more information is available related to the proportion of loans in deferment and forbearance, this is only one view of member health.

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How Long Can Credit Unions Keep the Mortgage Momentum Going?

Credit union executives are hoping to keep the mortgage momentum going in 2021.

Many lending lines are expected to be tepid for much of the year, including commercial loans and credit cards. Home loans have been a bright spot for the industry, however, thanks to high demand driven by low rates.

The question is how long lenders can keep that up.

"The Fed is on record that interest rates will remain at historic lows for the foreseeable future, which in our view means at the very least through 2022," said Jim Adkins, managing partner of the consulting firm Artisan Advisors. "It is a good time to be a mortgage lender."

Loans secured by 1-to-4-family residential properties increased $42.1 billion, or 9.0%, to $508.8 billion, according to third-quarter data from the National Credit Union Administration, the most recent figures available. In the 12 months ending Sept. 30, 2019, those figures were up by 6.1%. (American Banker, Feb. 9)

Why Mortgage Lending Standards Will Ease in 2021

Economists and housing experts say mortgage lending standards will likely loosen in 2021, despite the increased risk of delinquencies ahead.

Such a scenario illustrates the growing disparities in the U.S. housing market. As one struggling group of homeowners braces for the end of forbearance and navigates COVID-19-related economic shocks, another segment is better positioned than ever to scoop up properties that become available.

Learn more

Big Banks, Big Tech Face-Off Over Swipe Fees

The fees generated from consumers’ debit card spending have long been a source of acrimony between big banks and retailers. But now the banks have a new adversary: Apple, PayPal and other fresh competitors from the tech industry.

In recent months, banking heavyweights have sought to persuade the Federal Reserve Board to cap the revenue that some tech firms collect from debit cards — a move that would bring those companies under the rules that already apply to larger banks. The campaign sets up a clash between large incumbents and Silicon Valley firms that have been gradually encroaching on the industry’s turf.

“If they are going to act like a bank, they should be regulated like a bank, too,” one big-bank official said in comments that could presage a wider fight over a range of issues.

The showdown over debit card fees involves an enormous pot of money — more than $20 billion annually across the banking industry. It offers the big banks an opportunity to fight on favorable terrain, since the tech companies, including some of the most valuable firms in the world, have been taking advantage of a regulatory exemption that was intended to benefit much smaller firms. (American Banker, Feb. 7)

Millennial Estate Planning Surges During Pandemic: Survey

Since the beginning of the pandemic, the volume of individuals seeking estate planning solutions, especially online, has more than doubled as the realization of the impact of the COVID-19 has come to a head, Trust & Will, an online estate planning platform, reported Thursday.

Researchers analyzed data from nearly 20,000 individuals aged 25 to 40 who reported creating wills or trusts in 2020. Seventeen percent of them cited the pandemic as the reason.

“We saw a huge increase in the number of Millennials completing wills last year, which is a positive trend considering that more than 60% of adult Americans do not have a will in place,” Cody Barbo, founder and chief executive of Trust & Will, said in a statement.

“We decided to study the millennial audience specifically to see how the unrest we experienced in 2020 acted as a trigger for younger audiences to consider their end-of-life and estate planning.”

Thirty-eight percent of survey participants said they created an estate plan after the birth of a child, and 13% did so as part of general life planning.

The study found that Millennials care deeply about their pets and charitable causes. Three in four pet owners in the cohort appointed a guardian for their pets.

Learn more

Risk Management

FinCEN Issues Warning Over Growing Fraud Related to the Pandemic

The Financial Crimes Enforcement Network (FinCEN) is alerting financial institutions to a rise in fraud trends related to the healthcare industry as the coronavirus pandemic continues.

FinCEN outlined 16 red flag indicators to watch for, and provided additional details into submitting suspicious activity reports (SARs) for these frauds.

Of note, the fraud is targeting Medicare, Medicaid and the Children's Health Insurance Program (CHIP), TRICARE, healthcare programs provided through the Veterans Affairs Department, and relief funds provided to healthcare providers through the Paycheck Protection Program and Health Care Enhancement Act.

Types of Activity

The illicit activity includes:
Unnecessary services
Billing schemes
Kickbacks
Healthcare technology schemes related to COVID-19 testing, treatments, or cures
Telefraud and telehealth schemes to collect personally identifiable information (PII) and submit fraudulent claims
Fraudulently obtaining COVID-19 healthcare relief funds
Identity theft

The 16 red flags are broken out into four sections of types of illicit activity to help financial institutions better identify suspicious activity. FinCEN recommends accessing its other coronavirus-related advisories for activity that doesn't fall into the healthcare industry.

Learn more

Credit Union News

ABNB Welcomes New Executive Vice President Tony Caccese

ABNB Federal Credit Union welcomes Anthony “Tony” Caccese as its new Executive Vice President reporting to Charles A. Mallon Jr., President and CEO.

Caccese has been working in finance for over 35 years, beginning as a Staff Accountant in 1986 and quickly rising to managerial and senior leadership roles. Throughout his career, he has dedicated himself to the “People Helping People” philosophy of credit unions every step of the way. He has previously served as Vice President and CFO at State Employees Credit Union in Maryland, as well as at Congressional Federal Credit Union in Washington, DC.

Learn more

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