Posts filed under ‘General’

Four Things You Should Know This Morning

Camden Fine, the President of the Independent Community Bankers of America is one of the best provocateurs in the financial industry. He has really landed a good punch this week with a letter expressing outrage over the one billion dollars in legal fees, paid to the law firms which secured settlements against some of the largest banks in the world on behalf of credit unions. He even suggests that the episode demonstrates that “NCUA is in over its head in overseeing an increasingly complex and concentrated industry.” While I have a soft spot for bomb throwers – it’s time to set the record straight before this argument gains any more traction. For me, Chairman McWatters’ halfhearted defense of the agency’s decision to litigate, in which he throws previous board members under the bus, doesn’t go quite far enough.

Rather than be so outraged at the allegedly exorbitant fees paid by NCUA, why isn’t Mr. Fine outraged that the OCC and the FDIC didn’t come up with the idea of taking similar actions on behalf of those small community banks that suffered so much as a result of the excessive risks taken by the world’s largest financial institutions? Surely, they could have used 3.8 billion dollars in settlement money.

And I’m not going to concede that the fees paid by NCUA are out of line. This litigation is the legal equivalent of experimental brain surgery. It is high stakes and extremely expensive. Simply put, it’s not the type of litigation for which you can simply call up one of those guys or gals who slapped their faces on the back of buses.

Finally, when Mr. Fines talks about the one billion dollars in fees, he should be honest enough to admit that the billion dollar investment in holding investment banks accountable will save American tax payers money in the future. Next time the bankers need another massive bailout – and history tells us that there will be a next time – expect the OCC and the FDIC to use the example provided by the agency allegedly in over its head to get money back from the institutions responsible for creating the mess.

VANTIV Purchases Wordplay Group for 10.4 Billion

Further proof that payment processors are the new cool kids on the block, comes this morning with news that Vantiv has agreed to buy payment processor Wordplay Group for 10.4 Billion. This morning’s American Banker quotes Wordplay CEO Philip Jansen as saying that “The combination of scale, innovation, technology and global presence will mean that we can offer more payment solutions to businesses large, small, global or local.”

JP Morgan Chase to Stop Issuing Replacement Debit Cards

This bit of news is surprising to me. JP Morgan Chase has decided to cancel its program that it has had in place since 2012 that allows customers to instantly replace lost debit cards at many of its 5,300 branches. The decision is reportedly a reaction to an uptick in fraud.

Why does this surprise me? Because it seems that many of the potential fraud issues can be mitigated with proper identification procedures. And the ability to quickly replace lost debit card seems like it would be a real selling point to consumers.

One final note. Am I the only one a little scared that two megalomaniacal narcissists with access to nuclear weapons who have demonstrated a lifelong aversion to compromise are now busy yelling at each other?

August 10, 2017 at 8:59 am Leave a comment

Is Wells Fargo The Citizen Kane of Banking ?

Wells Fargo is in the news again. For those of us who would like to see the CFPB’s powers scaled back that is not a good thing.

The NY Times is reportingg this morning that more than 800,000 people who took out car loans from the banking behemoth were charged for auto insurance they  did not need, and some of them are still paying for it.  These  payments resulted in 274,000 delinquencies and 25,000 repossessions.

When wells’ Account opening shenanigans were uncovered regulators responded with guidance on properly incentivizing front line staff.  My guess is you will soon be seeing guidance on properly notifying members about collateral protection insurance.  It’s a quiet Summer Friday so use some of it to review your auto loan insurance requirements with an eye towards ensuring that members are receive proper notification.  Here is an opinion letter from NCUA authorizing credit unions to use such insurance .

One of my favorite scenes  in the movie Citizen Kane is when one of the reclusive mogul’s former advisers  explains that  it’s easy to make a lot of money if all you want to do is make a lot of money. Everyday all lending institutions,  irrespective of their size, have  to balance the cost of compliance against  the need to generate income.  Wells is an example of what happens when executive’s decide that it’s a lot easier to make money when you don’t follow the rules.

July 28, 2017 at 8:59 am Leave a comment

What The “Summer From Hell” Says About Our Payments System

Down- Staters are experiencing what Governor Cuomo has dubbed “The Summer from Hell” as long overdue repairs are made to a dilapidated overpriced and overused transit system built for the world that existed a century ago.

I wonder if we are headed for the same type of crisis in our payments system. Its rules and regulations were written. and its infrastructure was built, to cater to an internet-free world in which all phones were dumb. In my worst case scenario we end up with a two tier system in which the “Haves” bank at the institutions that can afford to invest in a  real-time payment network (think NACHA on steroids) and the “Have-Nots” are stuck waiting for the late train.

The 300 member Faster Payments Task Force, which was established by the Federal Reserve in 2015 to grapple with these issues, released its recommendations last Friday.  It envisions a world in which banks, credit unions and other financial institutions are voluntarily interwoven into a twenty-first century  payments system that can accommodate  multitudinous  payment platforms, products and consumers,  ranging from the “unbanked” college freshman with her reloadable prepaid card, to the “One percenter” who expects  to shift money in an out of several accounts with the touch of his smart phone.  Settlement would take place around the clock.

In my experience there are two reasons governments convene task forces: (1)so they can say they are  dealing with a really serious problem which they  have no idea how to solve or (2) They know exactly what they want to do but  want someone else to take the blame. My guess is that  a lot of the latter  is taking place here.  I expect the Fed to push many of these recommendations.

But there is a fly in the ointment. As the report notes, a number of countries have addressed these challenges through mandates or the development of a national faster payments system with a single operator. In contrast, the United States is taking a market-driven approach to payment system innovation that avoids government mandates.

I’m not sure the country can get the system it needs without mandates to protect the little guys but we will have to wait and see.

July 27, 2017 at 9:39 am Leave a comment

Does NCUA’s Restructuring Plan Make Cents\Sense?

NCUA announced Friday that it plans to shut down Region 1 as part of a restructuring of its operations.  Region 3, based in Atlanta,  is also marked for death. Region 1 overseas the following states:  federally insured credit unions in Connecticut, Maine, Massachusetts, Michigan, New Hampshire, New York, Rhode Island, Vermont, and Wisconsin.

In a press release NCUA explained that it plans to:

  • Consolidate the agency’s five regional offices into three by closing the Albany, New York, and Atlanta, Georgia offices and eliminate four of the agency’s five leased facilities;
  • Create an Office of Credit Union Resources and Expansion by redefining and realigning chartering and field-of-membership, credit union development, grants and loans, and minority depository institutions programs;
  • Restructure the Office of Examination and Insurance into specialized working groups; and
  • Realign the Asset Management and Assistance Center to include changes to the servicing business model and moving to a financial supervisory structure.

In concept it’s hard to argue against a reorganization. I just looked up the numbers and since 2003, when NCUA last  did this, there were 9,574 credit unions today there are 5,857. There were 687 NY  CUS in 2003 and only 362 today.  At the same time, aggregate  industry assets have increased.  That means that regulators should be focusing on a smaller number of larger institutions irrespective of where they are located.

That being said, this is a process that will  have to be monitored closely. First, there is the symbolic value: New York is the center of finance in this country and regulators should be embedded into its ebb- and- flow. Second, even in the age of the internet physical   proximity matters.

Finally, consolidations don’t always result in big savings, especially when Government is involved.  After all, no matter how many regional offices NCUA closes it still has to send out examiners.  And in any bureaucracy the time it can take to carry out a restructuring can further dull its fiscal benefits. NCUA staff will be reduced through attrition.

The bottom-line is that  the industry has to make sure that the benefits really do outweigh the costs not just in terms of finances but in terms of ensuring that credit unions are subject to appropriate and efficient oversight.

 

July 24, 2017 at 9:07 am Leave a comment

Industry Talks the Talk and Walks the Walk

The credit union industry’s long, national nightmare dealing with the fallout from the mortgage meltdown is not quite over, but, NCUA, by laying out its roadmap for a post-crisis framework and giving some money to credit unions in the process, has taken an important step in ongoing efforts to move beyond the crisis once and for all.

For those of you who haven’t seen the news yet, the agency announced several important steps yesterday. It announced that it would be shutting down the Temporary Corporate Credit Union Stabilization Fund which has been in existence since 2009. In addition, it wants to raise the Share Insurance Fund equity ratio to 1.39% of insured credit union assets from 1.30%. If all goes according to plan, credit unions will be getting some money back.
While it’s too early to comment on the specifics – which is a fancy way of saying I need to get a lot more comfortable with the proposal’s intricacies before I start blogging about them – I’ve said it before and I will say it again: the credit union industry writ large should be proud of how it has conducted itself over the last several years. It demonstrated that it not only talks-the-talk but walks-the-walk when it comes to the shared benefits and responsibilities that come with being part of a cooperative system.
• It repaid its debts without costing the American taxpayer a cent.
• All institutions contributed and sacrificed to get the job done.
• Credit unions working jointly with NCUA scaled back the size of the corporate system and limited its powers, doing more to address systemic risk than the banking industry, which created this mess in the first place.
• The agency’s aggressive and innovative use of the legal system to recover funds from some of these banks not only saved credit unions money but has provided a model that all regulators will use in the future to save taxpayer money.
That is a record to be proud of. Had the banking industry and its regulators conducted themselves with the same level of competency and accountability, the American public wouldn’t be quite as cynical as it is today.

July 21, 2017 at 9:12 am Leave a comment

Oh Canada!

With its impeccably mild-mannered citizenry, a  national anthem that normal people can actually  sing with gusto, and  a rational  political environment,   I typically have nothing but praise for my fellow  hockey-loving brethren to the North, Justin Bieber notwithstanding

But recently they have clamped down on their credit unions in a way that has gotten attention from U.S. credit unions and for good reason. In late June, Canada’s Financial regulator banned non- banks from using the word bank.  The prohibition not only prohibits non-banks from using the word bank as part of their name-fair enough-but also outlaws usages of the word which suggest that credit unions engage in  banking activity. For example Canadian CUs are prohibited from telling members about their Mobile Banking, Telephone Banking or Branch Banking services; nor can they tell members that they can “Bank” at their convenience.

Of course, this is downright foolish not to mention downright Orwellian.  Credit unions offer banking services. Word meanings change.  A  Bank originally referred to a dirt embankment not a place where people put their money for safekeeping .  Today bank is often used  as a verb or adjective as in “I prefer to do my banking at night” or “that credit union provides great banking services.”  The real confusion will come from credit unions having to explain to their members that they provide “on-line credit unioning services that are better than the online banking services offered down the street.”

There seems to be spasms of these linguistic battles every so often. I checked in with my good friends at CUNA yesterday and they pointed out that there are about a dozen states where this could be an issue. Similar attacks were previously brought not just in Vermont, which I blogged about five years ago, (Time fly’s when you are having fun) but in Washington State.

In reality, there is only so much banks can tweak us over this ridiculous issue. Commonsense and the First Amendment are on our side and I think the banks know this.

Don’t get me wrong, only banks should be allowed to call themselves banks and only credit unions should be allowed to call themselves credit unions. Government has a responsibility to make it clear to people what type of institution they are dealing with but actions such as Canada’s  are a pernicious attempt to monopolize the language for one industry’s benefit  What’s next? Is the   Toronto Raptors basketball team going to be banned from taking “bank shots?”

Oh Canada!

 

July 20, 2017 at 9:59 am 4 comments

What Visa’s “War On Cash” Says About the Future of Your Credit Union

In one of the savviest PR moves I’ve seen in quite some time, with a simple press release Visa has gotten the mainstream press talking about the utility of cash,  particularly for small service businesses.

No one thinks that the wallet is destined to join the Smithsonian anytime soon, but by offering grants to small businesses that agree to stop accepting cash Visa has highlighted one of the  key trends that is reshaping banking.

Cash will not always be King. After all, Cash evolved over thousands of years to  provide a means for merchants,  pilgrims  and crusaders to buy and sell goods far from home without getting stiffed at the checkout counter.  It’s had a nice run.

Today, currency moves around the world in seconds and block chain technology has the potential to eliminate any confusion over who owes whom what and when.

Consumers get this. In its 2016 Payments Study report the Fed estimates that 117.5 billion consumer payments were made using noncash methods in  2015 compared with only 50.7 billion in 2000. It points out  that “the substantial increase in the number of consumer noncash payments suggests that, not only were consumer payment choices shifting away from checks for both purchases and bill payments, but there also likely was significant replacement of consumer cash payments as well.”

As this trend accelerates how you process payments is going to become almost as important as the loans and rates you offer. This is why Vanitu  has made a $10 billion bid to buy British payments processor Wordplay Group and why JP Morgan Chase is reportedly considering a  counteroffer.   And it’s why the American Banker is reporting  this morning that Bank of New York Mellon’s decision  to hire Charles W. Scharf, who sits on Microsoft’s Board of Directors, as its new CEO, signals the Board’s recognition  that  to survive long-term, it “will have to look more and more like a payments Mellon.”

July 18, 2017 at 9:07 am Leave a comment

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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