ADVOCACY POLICY COMMITTEE MEETING Tuesday, August 2, 2016 10:00 a.m. – 2:00 p.m.

GEORGIA CREDIT UNION AFFILIATES BOARD ROOM 6705 SUGARLOAF PARKWAY SUITE 200 DULUTH, GA 30097

ADVOCACY POLICY COMMITTEE GCUA Board Room 6705 Sugarloaf Pkwy Ste 200 Duluth Tuesday, August 2nd 10:00 am

AGENDA 10:00 a.m.

Convene 

Discussion Topics:  Outside Industries’ Efforts in Grassroots o Realtors o NRA  State Law Review Task Force Efforts o Issues o Next Steps  Credit Union Awareness Initiative  2016 Elections o Credit Union Impact/Involvement

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Federal Issues  Congress o Hike the Hill: June Results and September Focus  NCUA  CFPB

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State Issues  2016 Legislative Wrap Up  Developing Issues in 2017 o Engagement of Advocacy Policy Committee

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Business Items  2016 Legislative/Regulatory Survey

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Support Materials  CUPAC Trustee 2nd Quarter Report  Advocacy Outreach Report  Regulatory Response Committee Update  Advocacy Plan Update  Minutes

GCUL –ADVOCACY POLICY COMMITTEE 2016-2017

Statement of Purpose: To represent Georgia credit union views in the formation of recommendations to the League Board about policy positions in connection with Governmental Affairs and Public Relations. Name

Credit Union

Terry Hardy, Chairman

MembersFirst CU

Phyllis Cochran

Augusta VAH FCU

Greg Connor

Associated CU

Dee Dee Côté

Robins Financial CU

Janet Davis

Kinetic CU

Jennifer Fiorenza

Mutal Savings CU

Mike Gudely

Southeastern CU

Todd Gustafson

Georgia United CU

Andy Harris

Coosa Valley FCU

Rob Hatefi

Coca-Cola FCU

Chuck Head

Atlanta Postal CU

Jerry Jordan

CGR CU

Laura King

LGE Community FCU

Brant Malone

Credit Union of Georgia

Bob Manning

Delta Community CU

Trish Payne

Savannah Schools FCU

Leta Stepp Reeves

Powerco FCU

Sherry Saxon

Augusta Metro FCU

Dale Taratuta

Georgia Heritage CU

OUTSIDE INDUSTRIES’ EFFORTS IN GRASSROOTS o Realtors o NRA

National Association of Realtors Efforts in Grassroots

National Association of Realtors Efforts in Grassroots

Raymon White, Principal Raymon White is a seasoned public affairs and business development consultant with more than 20 years experience in the southeast and across the country. He currently serves as a principal with Commonwealth Group Partners, LLC, a public affairs and business development firm he founded. White has built his career with a healthy mix of government, political and private sector experience and developed his political prowess through grassroots campaign involvement and countless election campaigns over the last 20 years. Since founding Commonwealth Group Partners, LLC, White has served as a consultant representing a wide range of business interests and associations before the Executive and Legislative branch in multiple states along with assisting clients in opening new markets and expanding existing markets. With first-hand knowledge of the political process, White has delivered reliable resultsdriven advice, insider knowledge and countless victories to a wide range of corporate, association, non-profit and public sector clients. White has represented some of the top businesses and business organizations, served on the finance committee for the re-election of Governor Sonny Perdue and Lt. Governor Casey Cagle, as a Georgia Delegate to the 2004 Republican National Convention in New York City, and as an advisor and fundraiser to numerous campaigns. Prior to moving to Georgia, White developed strategic insight into the way government operates while serving as an aide in the administration of former Tennessee Governor Don Sundquist for more than five years. During his tenure with the Sundquist Administration, White served the Commissioner of Transportation as special assistant where he was a liaison between private industry and government agencies on various construction projects and a liaison with federal, state and local elected officials and trade associations on behalf of state government agencies. White is a member the American-Swiss Foundation and an alumnus of the Young Leaders Conference of the American-Swiss Foundation. He is a graduate of the University of Tennessee where he received a Bachelor of Arts degree in political science and currently resides in Atlanta, Georgia.

PolitiFact Florida: No, the NRA didn't really give a South Florida Democrat an A grade By Allison Graves, Times Staff Writer Sunday, July 17, 2016 9:47pm

Jim Waldman, a former House member from Lauderdale-by-the-Sea, sees a bad grade from the National Rifle Association as a selling point. But Parkland lawyer Gary Farmer, his well-funded primary challenger for the newly redrawn District 34 seat, calls it a false advertisement. Farmer's campaign distributed emails and fliers saying Waldman earned an "A" from the NRA. Waldman said that's wrong, holding up a "D" from the NRA in 2010 and his voting record on gun legislation in the Florida House. "Unfortunately, a political committee led by Gary Farmer is spreading lies about my record on guns," Waldman wrote in an email to campaign subscribers. "They're spending tens of thousands of dollars mailing a FALSE claim to voters that I received an 'A' from the NRA." He continued: "Check the report card. Their claim is an absolute lie." With both camps taking aim, PolitiFact Florida stepped into the ring. This fight started in early July, when Farmer's campaign sent a mailer to residents of District 34 that said Waldman received an "A" from the NRA in 2010. In addition to fliers, Farmer also sent an email that claimed Waldman received an "A" rating for six years. This email included a screenshot from the NRA's Political Victory Fund, which gives grades to politicians based on their support for Second Amendment rights (grades are visible to NRA members). It also cited Project Vote Smart, a website that aggregates candidate information. Farmer spokesman Jay Shannon said the NRA screenshot was captured July 1. Farmer's camp also showed us another screenshot from Project Vote Smart showing Waldman with an "A" in 2010 (and an "F" in 2008). PolitiFact was able to confirm the Vote Smart screenshot through the Wayback Machine, which archives Web pages from the Internet. Shortly after the Farmer campaign took these screenshots, the campaign claims the grade changed from an "A" to a "D" on the NRA's website. After the NRA changed its grade, Waldman spokeswoman Ashley Walker called Project Vote Smart to report an error on its site, and it also changed the grade from an "A" to a "D" on July 11. Project Vote Smart aggregates information from other organizations, so it makes sense it would change the grade if the NRA's website reflected something different. But why did the NRA's grade change in the first place? Farmer's email suggests friends of Waldman in the NRA changed it on his behalf. But he has no proof to back this up, and the NRA tells a different story. Marion Hammer, the former president of the NRA and the executive director of the Unified Sportsmen of Florida, said Waldman never received an "A" from the NRA. Hammer would only say the NRA noticed the 2010 grade was listed as an "A" sometime this year and changed it back to a "D." "Anyone who knows anything about Jim Waldman should know he would never get an 'A' from (the) NRA and should be suspicious enough to check it out before using it," she said.

Waldman has typically voted not to expand gun rights during his tenure in the House, with a few exceptions. In 2014, Waldman voted yes on two bills supported by the NRA. One bill, dubbed the "Pop-Tart" bill, relaxed Florida's zero-tolerance policy in schools by prohibiting administrators from disciplining children for playing with simulated weapons. The bill passed 97-17, with 25 Democrats crossing party lines to vote for it. The other bill Waldman supported was the "warning shot" bill, partly inspired by Marissa Alexander, who was convicted in 2012 of three counts of deadly assault after firing a shot in the direction of her estranged husband and two of his children. This bill passed in the House 92-24, with 18 Democrats in favor. Hammer emphasized that the NRA changed the grade to correct the record, adding that the NRA would never change grades as favors to candidates, no matter if they are aligned with the organization's views or not. The real proof, she said, is in the magazines that the NRA Political Victory Fund sends out during election time. According to NRA report cards, Waldman earned a "D" in 2012 and 2010, and an "F" in 2008. He did not fill out the NRA questionnaire for 2006, so there is no grade for that year. Waldman hasn't returned the questionnaire for 2016 and will probably receive a "D" again, Hammer said. We never got a clear explanation as to why the grade was posted incorrectly in the first place. Hammer said she was not going to investigate the issue further, calling it a waste of "effort and energy in order to settle a dispute between two antigun Democrats." Erroneous posting aside, the NRA made it clear that Waldman would never would receive an "A" in its book, and his previous NRA marks are poor. Waldman's statement is accurate, so we rate it True. Read more rulings at PolitiFact.com/florida.

Why the Gun-Control Lobby is Playing Catch-Up with the NRA Though they support highly popular aims, the groups still lack the cultural influence of the NRA By Alexis Sottile July 7, 2016

On a recent evening in New York's West Village, 160 people calling themselves GAG — Gays Against Guns — pack an auditorium at the Lesbian, Gay, Bisexual & Transgender Community Center to celebrate a victory, and plan for the road ahead. The previous day, at the city's Pride parade, GAG had organized a large die-in, as well as a procession of 49 people in white shrouds, representing the victims of the shooting at Orlando's Pulse nightclub. The actions had been picked up by outlets likeNBC, The New York Times and NPR. "I think we got so much coverage because there was such a hunger for something like us to emerge," Tim Murphy, the group's media coordinator, says at the event. "I think it was cathartic for the gun-control movement, and the spectators." GAG members say they're determined to win where others have languished. Speaker after speaker talks of bringing to the gun-control movement a crucial element so many of them have developed over decades of activism: visibility. The NRA is a household name for those on all sides of the gun issue, but fewer Americans might be able to rattle off the names of some of the nation's biggest gun-control groups: Everytown for Gun Safety, Moms Demand Action, Americans for Responsible Solutions, the Violence Policy Center or even the Brady Campaign to Prevent Gun Violence — the oldest and most stalwart of the groups. In some ways, this fact is odd. Gun-control advocates point to numerous recent polls showing that 80 to 90 percent of Americans support common-sense gun reforms opposed by the NRA: expanded background checks, keeping guns out of the hands of domestic abusers and banning sales to those on the federal terror watch list. "The only place you can go in America and not see 90 percent support for expanded background checks is Congress," quips Brady Campaign spokesperson Brendan Kelly. So why are organizations supporting these highly popular aims lacking the same cultural influence as groups like the NRA? In part, it may be that NRA supporters historically have been more prone to action. As George Stephanopoulos once said, after his stint as an advisor to Bill Clinton, "Let me make one small vote for the NRA. They're good citizens. They call their Congressmen. They write. They vote. They contribute. And they get what they want over time." (The NRA touts this quote on its website, leaving off a line in which Stephanopoulos disavows the group's goals.) But another part of the issue may be time. As activists point out, the NRA has had a considerable head start in terms of delivering its message. The NRA was founded in 1871, by a pair of former Civil War generals. The modern gun-control movement was birthed almost 100 years later, in 1974. Granted, the NRA formed its lobbying arm in 1975, a year after the founding of what is now the Brady Campaign (then it was the National Council to Control Handguns). But prior to that, the NRA had a

century over which to collect membership fees and develop fundraising models for their efforts. The group had begun tracking legislation and engaging in direct mailings on voting issues in the 1930s, and had spent that time winning over "hearts and minds" by developing two print magazines (a third was later added, in the Nineties), national shooting competitions, police-certification training programs and the like. The NRA doesn't just have a "guns everywhere" approach; it has an "NRA everywhere" approach. Contributing to the NRA's seeming ubiquity is the fact that the organization outspends gun-control groups by a ridiculous margin when it comes to supporting politicians who are sympathetic to its interests. But most activists say the gun-control lobby need not exactly match the coffers of the NRA in order to achieve its aims. They say they've been playing a decades-long game of catch-up, and they're finally starting to do so. Every new tragedy, they say, brings new converts, and new donors, to the cause, particularly after Sandy Hook. "Engagement has skyrocketed," says the Brady Campaign's Kelly. We haven't seen this before. There is a growing momentum of people who have had enough, and we have the wind at our back to keep this up." Shannon Watts, the founder of Moms Demand Action, the grassroots arm of Everytown for Gun Safety, says the boost has been dramatic. "We do have [funding] now. We have finances from Mayor Bloomberg and over 100,000 donors. The NRA has never had to deal with that [level of public opposition] before." A representative for Americans for Responsible Solutions, the group founded by former Congresswoman Gabby Giffords, who was shot in the head in 2011, notes that "we do need to bring some balance" to fundraising levels, as compared to the NRA. "We need to get to a point where a member of Congress will vote as to what the feelings are of their constituents, instead of thinking of their own election," says the group's spokesperson, Mark Prentice. Still, he agrees the ground is shifting. Direct communication with voters is finally a reality on the guncontrol side of the issue: text messages, telephone calls, reminders to vote. "For a long time, these were things only the gun lobby was doing. Now increasingly we're competing on the same playing field," he says. Part of that work has meant changing what constitutes the playing field. Numerous advocates say the gun-control lobby had started looking to the LGBTQ community even before last month's tragedy, and had learned a lesson from its successful strategy with marriage equality: taking the fight to the states. According to a summary compiled last month by the Law Center to Prevent Gun Violence, in the three-and-a-half years since Sandy Hook, 138 new gun-violence-prevention laws have been enacted in 42 states. The gun-control movement is working state-by-state toward a twin set of gun reforms: expanding background checks and the protection of domestic-violence victims. Since the Brady Bill was signed into law in 1993, background checks have been required for gun sales by all licensed gun dealers. There was always a loophole that allowed checkless sales at gun shows, but that loophole became a sinkhole with the birth of the Internet, on which gun sales were largely unregulated. Advocates say the Brady Bill was a great leap forward for a brick-and-mortar world, but not for the world of today. The other area of focus is closing what's known as the "boyfriend loophole". The Supreme Court recently upheld the ban on those convicted of misdemeanor domestic violence from owning guns, but the legal definition of domestic violence is too narrow, advocates say. Current federal gun laws do nothing to protect women and others who have been abused by a partner with whom they do not live or share a child, or for a person who has been terrorized by a stalker. So, state by state, advocates are working to update the definition of domestic abuse to reflect modern realities of dating.

Delaware, Connecticut and Hawaii are the most recent states to embrace expanded protection, and since 2008, more than 30 new state laws have passed going further than federal laws to protect victims. "Last year, we killed more than 70 bad gun bills supported by the NRA," says Moms Demand Action's Watts. "These are things that would have sailed through statehouses before." Still, there's much work left to do to approach anything like the successes of the NRA, or even the LGBTQ movement. Back at the Gays Against Guns meeting, Murphy discusses a conference call he'd been on with three longtime gun-control advocates, who had implored him to bring the LGBTQ movement's fearlessness to bear on the gun issue — the goal being to flip Congress in the upcoming election and ultimately pass a new national assault-weapons ban. The gun-control movement is "still broken after the inability to pass a bill after Sandy Hook," Murphy says. Talk turns to next steps, visibility and a shaming campaign aimed at politicians and corporations who've taken money from the NRA. "There are corporations such as Hertz Rent a Car who give discounts to [NRA members]. It's vacation season. They want our business. It's them or us. They have to choose," says GAG member Ken Kidd, to riotous applause. The discussion then turns to developing talking points to counter NRA arguments such as "guns don't kill people, people kill people." In the back of the room, GAG member Billy Erb stands up. "How about, 'from my warm, living heart,' instead of 'from my cold, dead hands?'"

Keith Hatcher Keith Hatcher is a contract lobbyist with thirty years’ experience working with the Georgia General Assembly. Keith spent twenty-nine years as the Director of Governmental Affairs for the Georgia Association of Realtors(GAR) before starting his own consulting firm. Keith is proud to have spent years working to protect private property rights and the free enterprise system. He ran a statewide campaign to defeat a ballot initiative which would have doubled the real estate transfer tax and oversaw a Realtor independent campaign to elect Casey Cagle Lt. Governor. He has twice served as Chairman of the Real Estate Trade Group, a coalition of real estate related business groups. Keith has received the GAR President's award and was recognized and honored on the U.S. Senate floor by Johnny Isakson on his twenty fifth anniversary with GAR. Despite his total devotion to the “game” of golf he remains a twelve handicap but he did manage to work his way through college with a pool cue.

STATE LAW REVIEW TASK FORCE EFFORTS o Issues o Next Steps

Report of the State Law Taskforce The State Law Taskforce met on June 17, 2016 at the Atlanta Postal CU Trade Port office in Atlanta. Committee members present: Chairman Bob Manning, Candy Bracewell, Eric Broome, Bob Clampett, Christina O’Brien, George Reynolds, and Stacy Tallent Unable to attend:

Terry Hardy

Staff members present:

Mike Mercer, Cindy Connelly, Diana Houston, Brandee Bickle, and Amber Salgado

Other members present:

Steve Pleger and Bo Fears with the Department of Banking and Finance

Background: After the May 2016 annual meeting, League Board Chair, Barry Heape appointed a State Law Review Task Force whose charge was to assist staff in identifying opportunities to enhance the state laws affecting credit unions. The Department of Banking and Finance is charged with drafting and recommending Housekeeping changes to the Financial Institution Code to the Governor if needed. In recent years, the Department has met with GCUA staff to discuss any possible revisions that the industry might want to see in the code to improve the operating environment for credit unions. This year, it was decided to take the concept a step further and to include a task force of credit union professionals to take part in the discussions. Summary of the Meeting: To begin the meeting, GCUA staff and staff from the Department of Banking and Finance shared with the attendees that the idea behind the meeting was to have a dialog between the regulator, the state trade association and credit unions on ideas that should be reviewed for either undue burden on credit unions or ideas for enhancements to simplify or clarify compliance with the law. The idea is for participants to share their perspectives about what laws and rules are not essential as written today and have a tendency to cause uncertainty, and undue burden either on credit unions or department staff. It was discussed that the review/discussion is a process, and while the group will be proposing concepts and possibly even new wording for revision to law and rules that others will need to approve those steps. For credit unions, the recommendations of the group will be presented to the Advocacy Policy Committee and then the League Board for their approval. The Department will need to have their internal staff working group sign-off on proposed changes and then the Commissioner and finally the Governor before any changes can be submitted to Legislative Counsel and Legislators for inclusion in a possible housekeeping bill. The group started with a review of eight specific areas that had been identified either by credit unions in discussions with GCUA staff or by staff at the Department of Banking and Finance. The following represents a summary of the discussions during the meeting and behind this report are the working draft sheets that the group reviewed and recommended revisions. 1

Fixed Asset Limitation Reason for Review: Current law provides that the Department must approve all purchases of real property for the “convenient transaction” of a credit union’s business. In addition, the Department’s rules require that the Department approve every fixed asset investment of a credit union. The Department thinks the requirement that it approve all fixed asset investment is unnecessarily burdensome for both the industry as well as the Department. The Department proposes that it only approve fixed asset investments over 40% of total equity capital and reserves (excluding ALL). Although the Department would not want to be in the approval process, the Department would propose that it be made aware of any real estate purchased for expansion purchases or any leasehold interest under the 40% threshold. It is proposed that fixed asset purchases up to 40% do not need approval; anything over shall be approved by the Department. The credit union participants reminded the Department that NCUA just removed their fixed asset limitation and believed that a similar adjustment should be reviewed. Credit union’s find this 40% a burden. The Department believed that even though NCUA says the fixed asset limit is removed, the rule says it will be left up to examiners to feel comfortable with the credit unions plans. So they aren’t sure the limit really goes away it just becomes more of an exam issue. During the discussion one idea was floated to increase the limit from 40 percent to 60 percent. While we do not want to look just like the state’s for-profit financial services providers we do not understand why we should be in a more restrictive position. Banks in Georgia have a 60% limit on their fixed assets before they have to ask for a waiver. This concept seemed to have some support from the participants. Another idea that was suggested is to base this number on the camel rating; those at tier 1 & 2 receive more flexibility (I.E. no cap) while those rated 3 and below remain at (the new cap of) 60%. The group was supportive of increasing the percentage limit. Merger Language Changes Reason for Review: A review of the merger provision in the existing state credit union code requires both the merging credit union members and the continuing credit union members to vote to approve a merger. This seems unnecessary and a costly regulatory burden that could stop possible mergers in the future. The membership vote is not required if the state regulatory classifies the merger as an emergency merger, similar to what NCUA also does. It has been the practice of the credit unions and the Department to not enforce both votes, but they do require the merging credit union members to vote. This type transaction was considered within the Department as a P&A which doesn’t require both memberships to vote – but to a layman it is in effect a merger. This change will match what is allowed between FCUs and also what has been done in practice. The consensus is to only require the merging credit union member votes; this will streamline the process and avoid confusion among non-merging members.

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Employee Benefit Language (CUOLIs) Reason for Review: Credit Unions have for over 10 years been utilizing some employee benefit investment options to keep and retain good talent. The products are in the banking world called BOLIs and in the credit union space known as Credit Union Owned Life Insurance (CUOLI). CUOLI’s are an efficient method for credit unions to partially offset the costs of employee benefit programs. CUOLI is a life insurance product purchased by the credit union on the lives of a select group of employees. It enables credit unions to direct funds into otherwise impermissible investments with minimal increased risk to the credit union. The state credit union act doesn’t clearly state that these products are permissible and it also doesn’t forbid a credit union from offering this type of product. Federally chartered credit unions are allowed to offer such products. And in Georgia, on the bank side, they have a specific provision allowing this type of investment. Discussion ensued around adding specific language in the state credit union act that will plainly state permission for such products and then DBF will write implementing rules for credit unions. During the discussion some concern was raised if we add specific language for CUOLI’s what about additional benefit programs that credit unions might have such as split-dollar insurance programs. The Department was open to specifically allowing CUOLI’s and also stated they wanted to make sure whatever is done doesn’t limit credit union options when it comes to offering benefit programs. The final result of the discussions was that the Department would continue to review and ensure that if any changes are made it wouldn’t negatively impact the possibility of credit unions from offering additional employee benefit programs. Supervisory Audit Language Changes Reason for Review: Georgia law does not currently set forth a number of high level auditing requirements for credit unions. As a result, the Department receives a wide range in the quality of audits. Many audits the Department receives contain adequate information; however, a large number do not address many important functions of the credit union (it is unclear whether these functions were not reviewed or simply not written up in the audit). Although the Department does not expect the exact same information in each audit, the Department believes that the same general concepts should apply to each audit. Adopting uniform standards is especially important if examinations of credit unions become less frequent. In the event the Department and/or NCUA conducts fewer examinations, then the regulators will need to rely more on the audits from the individual institutions. In addition, it is the Department’s belief that these proposed standards will make it easier for an audit, be it external or internal, to uncover fraud and report it to the board and/or management. The Department has suggested a number of changes but that following are ones the Department wanted to highlight: 1) All credit unions are required to keep records in accordance with GAAP.

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2) An external auditor (an independent CPA) must conduct the audit of all credit unions with assets of $15 million or more. 3) Audit reports that express an unqualified opinion are provided to the Department upon request but all other audits must be provided within 15 days of receipt by the credit union. 4) The prescriptive account confirmation rule is eliminated and replaced with a general requirement of account confirmation. 5) The external audit must include a verification of loan and share accounts, cash reconciliation, and verification of funds borrowed by the credit union. 6) An internal audit framework is spelled out for the first time. It was agreed that since these concepts are much more restrictive than what federal credit unions have today that the changes could potentially harm smaller asset sized credit unions. It was shared that NCUA has an existing rule that federally insured credit unions must comply with and it is not as stringent as what the Department proposes. In the end a small sub set of participant agreed to work with the Department to see if any common ground can be found to deal with the Departments concerns while not causing a massive increase in financial costs to credit unions. The group has already met by phone two additional times and hopes to have some agreement soon to share with the other Task Force members.

Amending Language around Leasing Space (Primarily Occupied) Reason for Review: Current law provides that a credit union may obtain real property for the “convenient transaction” of a credit union’s business. The purpose of this limitation is to prevent credit unions from speculating on real estate. The limitation has been previously interpreted as precluding credit unions from leasing any portion of credit union premises. The Department can envision a number of scenarios where leasing space may be in the best interest of the credit union and the underlying facts would not indicate that the credit union engaged in speculation. For example, a credit union may wish to utilize less space in an existing branch as it has made a business decision to de-emphasize the importance of branches. Recently NCUA has said it was also open to FCUs leasing space to others as long as the FCU occupies at least 50 percent of the space. The proposed language would provide some additional flexibility to authorize the Department to approve leasing in certain limited circumstances. If the Department doesn’t want to change the state credit union act they could leave the same or similar language to what they have today and just issue a rule or an interpretive ruling describing their support. Uninsured Shares Reason for Review: For the last few years the Department has been concerned that the current language in O.C.G.A. § 7-1-650(b) which states that state chartered credit unions could accept non – member deposits as long as they weren’t paid a rate of interest greater than members and could not be allowed to be held in share draft or checking accounts. This section was added many years ago to 4

ensure, that Georgia had a framework ready if/and when supplemental capital was approved by Congress, if a state chartered credit union received low-income designation and in the case of a Georgia credit union needing to offer capital shares as permitted today in Georgia law. With Georgia legislators being so focused on federal insurance there was concern within the Department, that if a credit union were to accept non-member deposits, then there is the risk that these deposits would not be federally insured. In the event of a failure, this could have a systemic impact on the credit union industry as consumers may fundamentally question whether their deposits at their credit union are insured. The Department believes that this power should be revised to clearly state that a state-chartered credit union can accept non-member deposits only if the deposits are federally insured or are expressly authorized by federal law (e.g. low income credit unions, deposits from other credit unions) and as expressly authorized by the credit union’s bylaws. It was shared that the few credit unions that report non-member deposits - those deposits are from other credit unions and expressly allowed by law. In the end the task force did not see why clarifying the intent could be a problem and was supportive of the language change. The only concern might be if the climate ever changed and private insurance was once again allowed in this state, but that doesn’t seem likely. Field of Membership Issues Businesses located in Residential Areas Reason for Review: Georgia law currently provides that “societies, associations, partnerships, and corporations composed of persons who are eligible for membership may be admitted to membership in the same manner and under the same conditions as such persons.” O.C.G.A. § 7-1-651(b). O.C.G.A. § 7- 1-630(b) provides that a common bond includes, among other items, residence within a well-defined neighborhood, community or rural district. The Department has historically interpreted these provisions as authorizing a partnership, corporation, or LLC as being within the field of membership of a residential common bond if the business entity is headquartered within the community. A concern has been expressed that the Department’s view is not readily apparent and, therefore, credit unions are unaware that these businesses are within the field of membership. Language was proposed clarifying this point. It was suggested we add the words “or headquartered” to enable local businesses to become members. However, the task force members were concerned that pursuing this clarification may generate opposition from other financial institutions. Some question the risk in opening up this issue; it is thought that eventually field of membership will fade away. The consensus was to try to make the change, if there are objections, pull back as this is just putting in code what is already the interpretation of the regulator. Adding people that Work within a Residential Area Reason for Review: Georgia law currently provides that only an individual residing within a residential common bond is within the credit union’s field of membership. Although the addition of adding community common bond (residential areas) for federal credit unions is more restrictive than state law, federal law provides that an individual that “lives, works, and worships” within the 5

community common bond is within the field of membership. State chartered credit unions have the ability to add employers and their employees in addition to their residential areas to the field of membership and, thus, indirectly memberize some employees working within the community. If the law would allow including those individuals employed within the residential common bond, it may reduce the number of field of membership applications submitted to the Department as there would appear be a decreased need to submit SEG based field of membership applications. It was suggested we add “employment” so that people can join a credit union where they work. Similar to the issue above, the task force members were concerned that pursuing this clarification may generate opposition from other financial institutions. Some question the risk in opening up this issue; it is thought that eventually field of membership will fade away. The consensus was to try to make the change, if there are objections, pull back as credit unions already have a method to accomplish this with just a little more paperwork burden. Before concluding the meeting, the issue of whether a state chartered credit union could purchase whole loans, similar to what NCUA allows under their eligible obligation rule was brought up for discussion. It was noted that the Department has been open with allowing this process in the past by requiring a credit union to submit a letter application under the incidental powers provision of the Georgia financial institutions code. It was recommending that this could be addressed with a small language change to code and new rules drafted that would set parameters for these transactions taking into account safety and soundness. The group was supportive of adding this to potential items to be addressed in Housekeeping legislation in 2017. The meeting concluded after an open forum discussion that laid out a couple of additional issues for the group to address when they meet again. Additional Issues to Address: o o o o o

Transfer of capital between credit unions Permissible Investments Incidental Powers Branch expansion Code re-write

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Issue: Should Georgia law be revised to relax certain fixed asset limitations? Reason for Review: Current law provides that the Department must approve all purchases of real property for the “convenient transaction” of a credit union’s business. In addition, the Department’s rules require that the Department approve every fixed asset investment of a credit union. The Department believes the requirement that it approve all fixed asset investment is unnecessarily burdensome for both the industry as well as the Department. The Department proposes that it only approve fixed asset investments over 40% of total equity capital and reserves (excluding ALLL). Although the Department would not want to be in the approval process, the Department would propose that it be made aware of any real estate purchased for expansion purchases or any leasehold interest under the 40% threshold. Suggestion for Change: § 7-1-650. Powers

A credit union shall have, in addition to the powers common to all corporations under the laws of this state, the following powers: (1) It may receive funds from its members or other financial institutions in the form of shares and deposits on accounts or as evidenced by certificates of deposit issued by the credit union but shall not have the power to offer third-party payment services except as authorized under Code Section 7-1-670; (2) It may receive savings deposits from nonmembers in such manner as the bylaws may provide, but such deposits many not be subject to check and may not bear a greater rate of interest than the rate of interest paid to members for the same class of deposit; (3) It may make loans to members subject to approval by its credit committee or authorized employees pursuant to Code Section 7-1-658; (4) It may also invest, on the authority of its board of directors or by employees authorized by the board of directors, funds in the following manner: (A) In obligations of the United States, including bonds and securities upon which payment of principal and interest is fully guaranteed by the United States; obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, or any corporation designated in Section 846 of Title 31 of the United States Code as a wholly owned government corporation; or in obligations, participations, or other instruments of or issued by or fully guaranteed as to principal and interest by the Federal National Mortgage Association or the Government National Mortgage Association; (B) In general and direct obligations of the State of Georgia, its counties, districts, and municipalities

which have been validated as provided by law, if no more than 25 percent of the shares and deposits of a credit union shall be invested in the obligations of any one such obligor; (C) In loans to other credit unions, provided the loans do not exceed 10 percent of the shares, deposits, and surplus of the investing credit union; (D) By depositing its funds in banks, savings and loan associations, and credit unions; by purchasing certificates of deposit and savings certificates which such financial institutions are authorized to issue; and by selling or purchasing federal or correspondent (daily) funds or loan participations through such financial institutions; subject to limitations prescribed in regulations issued by the department; and (E) In any other types of investments authorized by the department, including commercial paper, provided such investments shall not, in the aggregate, exceed 10 percent of the shares, deposits, and surplus of the investing credit union. In lieu of the foregoing limitation, any credit union may invest up to 15 percent of its equity capital as defined by the department in authorized investments issued by any single obligor; (5) It may borrow from any source, but the total of such borrowings shall at no time exceed 50 percent of paid-in shares, deposits, and surplus. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this paragraph to permit an individual credit union to borrow for emergency purposes; (6) It may undertake, with the approval of the department, other activities which are not inconsistent with this chapter or regulations adopted pursuant thereto; provided, however, no such approval shall be granted unless the commissioner determines the activities do not present undue safety and soundness risks to the credit union involved; (7) It may organize and engage in business without having any stated amount of capital subscribed or paid in other than that derived from the subscribers' qualifying shares, may commence business with only such capital authorized and paid in as may be provided in its bylaws, and may provide for the payment and withdrawal thereof as and in the manner provided by its bylaws; (8) It may purchase, hold, and convey real estate for the following purposes only: (A) Such real estate as shall be necessary for the convenient transaction of its business, subject to the prior approval of the department except to the extent authorized by regulation; (B) Such real estate as shall be conveyed to it in satisfaction of debt previously contracted in the course of its business; and (C) Such real estate as it shall purchase at sales under judgments, decrees, or mortgage foreclosures pursuant to mortgages or security deeds held by it;

(9) Real estate acquired in the cases provided for by subparagraphs (B) and (C) of paragraph (8) of this Code section and real estate which has ceased to be used primarily as credit union premises may be held subject to a determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided that no such property may be held for more than five years without the prior written approval of the department. Properties, other than real estate, which are acquired in satisfaction of debts previously contracted and which a credit union is not otherwise authorized to own shall be held for no longer than six months unless such time period is extended by the department. Disposition of such property may be financed by the credit union without the advance of additional funds irrespective of the purchasers' membership in the credit union and of ordinarily applicable collateral margin requirements; (10) It may provide through an amendment to its bylaws which shall be approved by two-thirds of its membership present and voting as otherwise provided in this part for the elimination or limitation of the personal liability of a director to the members in their capacity as shareholders of the credit union to the same extent as a bank or trust company operating under the provisions of this chapter. ____________________________________________________________________________________ 80-2-4-.02 Investment of Credit Union Funds in Fixed Assets; Letter Form Application and Regular Form Application; Requirements.

(1) The aggregate investment by a Ccredit unions that are well capitalized and well managed as defined below in (e) may expand their investment in fixed assets by filing a letter form application, provided that total investments in fixed assets doshall not exceed 40 percent of total equity capital and reserves (excluding the allowance for loan losses) except that a greater sum may be invested with the prior approval of the Department. This letter form application shall contain the following:

(a) A description of the fixed asset expansion that is contemplated;

(b) An indication of the total proposed amount of fixed assets after the expansion and the percentage that this investment represents of total equity capital and reserves (excluding the allowance for loan losses account);

(c) An indication of the dollar amount of depreciation that would be recognized on an annual basis and the effective life being used to write off fixed assets;

(d) An indication that there is no involvement by any director, committee member, officer or employee of the credit union or any related interest thereof, in the fixed asset expansion. If there is any involvement it should be detailed in the letter form application. (e) A statement that the credit union meets the criteria for expedited processing, which is defined as:

(i) The credit union must be well capitalized as defined by the capital requirements of the Department and the National Credit Union Administration;

(ii) The credit union must have received a CAMEL composite rating of 1 or 2 at the most recent examination; and

(iii) The credit union is not subject to any written agreements, orders or other enforcement actions or administrative agreements with the Department or the National Credit Union Administration. (2) In the event a credit union invests in a leasehold and the investment does not cause the credit union to exceed the fixed asset limitation set forth in paragraph (1), the credit union shall provide the Department with written notification of the investment.

(23) In the event that total credit union investments in fixed assetsApplications for approval to invest in fixed assets in an amount in excessed of forty (40) percent of total equity capital and reserves (excluding the allowance for loan losses) or the credit union does not meet the requirements in (e) above, the credit union shall complete a full application on formsshall be made on a form provided by the Department of Banking and Finance.and must provide for an orderly plan of restoring the fixed asset investment to the forty (40) percent limitation within not more than five (5) years. (4) Nothing herein shall be construed as permitting a credit union to acquire real estate without the prior approval of the Department or as expressly provided in Rule 80-2-4-.03. Authority Ga. L. ' 7-1-650; ' 7-1-663; O.C.G.A. ' 7-1-61. ___________________________________________________________________________ 80-2-4-.03 Purchase of Real Estate for Future Expansion; Letter Notification.

(1) The purchase of real estate solely for expansion purposes may be made without the prior consent of the Department and by letter notification when: (a) The real property is to be utilized solely as credit union premises within five years of the date of purchase; (b) The purchase of the real property does not result in the credit union exceeding the fixed asset limitation; (c) The credit union is not subject to any special requirements whereby the Department requires prior approval for such purchases; and (d) If a director, officer, or committee member is a party to the transaction, a certification is provided stating that all requirements of O.C.G.A. §7-1-656 and the provisions of any applicable federal requirement have been satisfied. (2) The letter notification shall state the date of purchase, purchase price, location of the property, and why the credit union qualifies for letter notification under the provisions of this rule. (3) The ability to hold property for future expansion shall expire five (5) years from the date of purchase unless the property is utilized as credit union premises prior to that time. Credit unions holding property beyond the five year period must divest themselves of the property through sale unless the time limitation is extended by the Department. Authority Ga. L. 1974, pp. 733, 789.

Comments: Priority: 2

Issue: Should Georgia law be amended to clarify that credit unions when merging only need to have the members of the credit union being merged have their members approve the transaction? Reason for Review: A review of the merger provision in the state credit union code requires both the merging credit union members and the continuing credit union members to vote to approve a merger. This seems unnecessary and a costly regulatory burden that could stop possible mergers in the future. It has been the practice of the credit unions and the Department to not enforce both votes, but they do require the merging credit union members to vote (while this transaction is filed as a P&A which doesn’t require both memberships to vote – but to a layman it is in effect a merger.) This change will match what is allowed between FCUs and also what has been done in practice. Suggestion for Change: § 7-1-667. Mergers

(a) A credit union may, with the approval of the department and in accordance with such uniform rules and regulations as it shall make and promulgate, be merged with another credit union under the articles of such credit union. Such merger may occur regardless of whether the credit unions serve the same field of membership, so long as there is adopted a plan agreed upon by the majority of the board of each credit union joining the merger and approved by not less than a majority of the members of each the credit union being acquired present and eligible to vote at the meetings called for that purpose. The department may allow waiver of the member vote if, in its judgment, the merger is necessary to protect the safety and soundness of either or both credit unions. All property, property rights, and interests of the merging credit union shall, upon merger, be transferred to and vested in the continuing credit union without deed, endorsement, or other instrument of transfer; and the debts and obligations of the merging credit union shall be deemed to have been assumed by the continuing credit union; and thereafter the articles of the merging credit union shall be void. (b) The provisions of Article 8 of Chapter 4 of Title 14, relating to merger and consolidation, shall no longer be applicable to credit unions. (c) For purposes of this Code section, the term "credit union" shall include a federal credit union. (d) When a credit union merges with another credit union, one shall be designated as the continuing credit union by the credit unions participating in the merger. The participating credit union that is not the continuing credit union shall be designated as the merging credit union. (e) The department may disapprove of a merger if it finds the merger would not be consistent with safe and sound practices. (f) The department shall, in its discretion, approve or disapprove a merger on the basis of its

investigation and the criteria set forth in subsections (a) and (e) of this Code section. The department shall give written notice to: (1) The Secretary of State of its approval of a merger along with a copy of the notice of merger; and (2) The parties to the plan of its decision and, in the event of disapproval, a statement in general of the reasons for its decision. (g) The rights and privileges of the members of each merging credit union shall remain intact, provided that, if any person is a member of more than one of the participating credit unions, such person shall only be entitled to one set of membership rights in the continuing credit union.

Comments:

Priority: 2

Issue: Should Georgia law be amended to clarify that credit unions can offer employee benefits plans specifically Credit Union Owned Life Insurance or(CUOLIs)? Reason for Review: Credit Unions have for over 10 years been utilizing some employee benefit investment options to keep and retain good talent. The products are in the banking world called BOLIs and in the credit union space known as Credit Union Owned Life Insurance (CUOLI). CUOLI’s are an efficient method for credit unions to partially offset the costs of employee benefit programs. CUOLI is a life insurance product purchased by the credit union on the lives of a select group of employees. It enables credit unions to direct funds into otherwise impermissible investments with minimal increased risk to the credit union. It is not clear in the state credit union act if these products are permissible – but it isn’t also forbidden. On the bank side, they have a specific provision allowing this type of investment. To that end, attached is a draft proposed revision to §7-1-650 to incorporate this concept.

Suggestion for Change: § 7-1-650. Powers

A credit union shall have, in addition to the powers common to all corporations under the laws of this state, the following powers: (1) It may receive funds from its members or other financial institutions in the form of shares and deposits on accounts or as evidenced by certificates of deposit issued by the credit union but shall not have the power to offer third-party payment services except as authorized under Code Section 7-1-670; (2) It may receive savings deposits from nonmembers in such manner as the bylaws may provide, but such deposits may not be subject to check and may not bear a greater rate of interest than the rate of interest paid to members for the same class of deposit” (3) It may make loans to members subject to approval by its credit committee or authorized employees pursuant to Code Section 7-1-658; (4) It may also invest, on the authority of its board of directors or by employees authorized by the board of directors, funds in the following manner: (A) In obligations of the United States, including bonds and securities upon which payment of principal and interest is fully guaranteed by the United States; obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, or any corporation designated in Section 846 of Title 31 of the United

States Code as a wholly owned government corporation; or in obligations, participations, or other instruments of or issued by or fully guaranteed as to principal and interest by the Federal National Mortgage Association or the Government National Mortgage Association; (B) In general and direct obligations of the State of Georgia, its counties, districts, and municipalities which have been validated as provided by law, if no more than 25 percent of the shares and deposits of a credit union shall be invested in the obligations of any one such obligor; (C) In loans to other credit unions, provided the loans do not exceed 10 percent of the shares, deposits, and surplus of the investing credit union; (D) By depositing its funds in banks, savings and loan associations, and credit unions; by purchasing certificates of deposit and savings certificates which such financial institutions are authorized to issue; and by selling or purchasing federal or correspondent (daily) funds or loan participations through such financial institutions; subject to limitations prescribed in regulations issued by the department; and (E) In any other types of investments authorized by the department, including commercial paper, provided such investments shall not, in the aggregate, exceed 10 percent of the shares, deposits, and surplus of the investing credit union. In lieu of the foregoing limitation, any credit union may invest up to 15 percent of its equity capital as defined by the department in authorized investments issued by any single obligor; (5) It may borrow from any source, but the total of such borrowings shall at no time exceed 50 percent of paid-in shares, deposits, and surplus. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this paragraph to permit an individual credit union to borrow for emergency purposes; (6) It may undertake, with the approval of the department, other activities which are not inconsistent with this chapter or regulations adopted pursuant thereto; provided, however, no such approval shall be granted unless the commissioner determines the activities do not present undue safety and soundness risks to the credit union involved; (7) It may organize and engage in business without having any stated amount of capital subscribed or paid in other than that derived from the subscribers' qualifying shares, may commence business with only such capital authorized and paid in as may be provided in its bylaws, and may provide for the payment and withdrawal thereof as and in the manner provided by its bylaws; (8) It may purchase, hold, and convey real estate for the following purposes only: (A) Such real estate as shall be necessary for the convenient transaction of its business, subject to the prior approval of the department;

(B) Such real estate as shall be conveyed to it in satisfaction of debt previously contracted in the course of its business; and (C) Such real estate as it shall purchase at sales under judgments, decrees, or mortgage foreclosures pursuant to mortgages or security deeds held by it; (9) Real estate acquired in the cases provided for by subparagraphs (B) and (C) of paragraph (8) of this Code section and real estate which has ceased to be used primarily as credit union premises may be held subject to a determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided that no such property may be held for more than five years without the prior written approval of the department. Properties, other than real estate, which are acquired in satisfaction of debts previously contracted and which a credit union is not otherwise authorized to own shall be held for no longer than six months unless such time period is extended by the department. Disposition of such property may be financed by the credit union without the advance of additional funds irrespective of the purchasers' membership in the credit union and of ordinarily applicable collateral margin requirements; (10) It may provide through an amendment to its bylaws which shall be approved by two-thirds of its membership present and voting as otherwise provided in this part for the elimination or limitation of the personal liability of a director to the members in their capacity as shareholders of the credit union to the same extent as a bank or trust company operating under the provisions of this chapter.; (11) It may procure, for its benefit, insurance on the life of any of its directors, officers, or employees or any other person whose death might cause financial loss to the credit union; or, pursuant to any contract lawfully obligating the credit union as guarantor or surety, on the life of the principal obligor.

Comments: Priority: 2

Issue: Should Georgia rules and regulations be revised to require more robust auditing standards? Reason for Review: Georgia law does not currently set forth a number of high level auditing requirements for credit unions. As a result, the Department receives a wide range in the quality of audits. Many audits the Department receives contain adequate information; however, a large number do not address many important functions of the credit union (it is unclear whether these functions were not reviewed or simply not written up in the audit). Although the Department does not expect the exact same information in each audit, the Department believes that the same general concepts should apply to each audit. Adopting uniform standards is especially important if examinations of credit unions become less frequent. In the event the Department and/or NCUA conducts fewer examinations, then the regulators will need to rely more on the audits from the individual institutions. In addition, it is the Department’s belief that these proposed standards will make it easier for an audit, be it external or internal, to uncover fraud and report it to the board and/or management. The Department has suggested a number of changes but I would like to highlight a couple of the proposed revisions: 1) All credit unions are required to keep records in accordance with GAAP. 2) An external auditor (an independent CPA) must conduct the audit of all credit unions with assets of $15 million or more. 3) Audit reports that express an unqualified opinion are provided to the Department upon request but all other audits must be provided within 15 days of receipt by the credit union. 4) The prescriptive account confirmation rule is eliminated and replaced with a general requirement of account confirmation. 5) The external audit must include a verification of loan and share accounts, cash reconciliation, and verification of funds borrowed by the credit union. 6) An internal audit framework is spelled out for the first time. Suggestion for Change:

80-2-1-.01 General Requirements for Accounting Procedures. (1) A credit union reporting assets of $5,000,000 or more for two consecutive quarters is required to maintain its books of account in accordance with generally accepted accounting principles, including a complete and accurate account of: (a) All of its assets, whether in its name or in the name of another person; (b) All of its liabilities, its borrowings, and any security interests in its assets; and (c) All of its income, expenses, capital gains and losses. (2) Each credit union shall, by the end of each month, prepare a financial statement reflecting its position and operations of the preceding month. This statement, to be prepared from the accounts of the general ledger of the credit union, shall include a complete report of the credit union's earnings, setting forth in detail all items of income and expense. It shall be signed by an officer of the credit union and attested to by one member of the Supervisory Committee. A notice, which the credit union shall at all times display, shall be posted in a public area of its main office and each branch office, informing its members that the monthly financial statement may be examined, upon request of a member, at each

office of the credit union. The notice shall include at a minimum, directions as to who to contact to view the statement. (3) Each credit union shall file with the Department a complete report of its condition as of the last business day in March, June, September and December of each calendar year and at such other dates as the Commissioner may determine. Such reports shall be filed no more than thirty (30) days after the close of the applicable accounting period. Each such report shall be on forms prescribed by the Department and shall be attested as provided on the form. _____________________________________________________________________________________ 80-2-6-.01. Supervisory Audits.

(1) Every Supervisory Committee shall have an annual audit of the credit union performed, which must be comprehensive in scope covering the period elapsed since the last annual audit, and submit a summary of the audit results at the next annual meeting of the members of the credit union. (1)(2) For purposes of Rule 80-2-6, the below terms shall be defined as follows: a. “External auditor” means an outside compensated, Certified Public Accountant (CPA) that is independent or works for an entity that is independent of the institution being audited. b. “Independent” means an auditor must be personally and financially independent from the credit union’s employees, members of the board of directors, and members of their immediate families. (3) The annual audit must be performed by a licensed external auditor. However, if the credit union has assets of less than $15 million, the Supervisory Committee may elect to have the annual audit conducted by the internal auditors of any sponsoring group, concern, or association of credit unions that are independent and approved by the Department in writing Under either scenario, annual audits shall be made in accordance with generally accepted auditing standards and procedures as set forth in pronouncements of the American Institute of Certified Public Accountants

(4) Upon completion of the annual audit, one copy of the audit and the engagement letter shall be forwarded to the Department. (a) Audit reports in which the auditor expresses an unqualified opinion shall be provided to the Department upon request. Audit reports in which the auditor expresses anything other than an unqualified opinion, including, but not limited to, a qualified opinion, an adverse opinion, or a disclaimer of opinion, shall be provided to the Department within fifteen (15) days following receipt by the financial institution. Audit reports submitted to the Department shall be accompanied by the Letter to Management, if applicable, detailing any reportable conditions discovered

during the audit engagement. Failure to obtain the required opinion audit, or the auditor’s report thereof, shall be reported to the Department within fifteen (15) days of discovery. (b)The engagement letter should clearly define the extent of the audit work including, the scope of the audit, the objectives, the resource requirements, and the audit timeframes, and the resulting reports. (1)If the audit is performed by a licensed independent accountant or firm of accountants, the individual or firm must forward both documents directly to the Department. (2)If the audit is performed by the internal auditors of any sponsoring group, concern, or association of credit unions, the Supervisory Committee must forward both documents to the Department. (5) If the audit is conducted by a licensed independent accountant or firm of accountants, the individual or firm is responsible for the preparation and maintenance of any work papers used to the support the findings and conclusions in the audit. Conversely, if the audit is conducted by the internal auditors of any sponsoring group, concern, or association of credit unions, the Supervisory Committee shall be responsible for the preparation and maintenance of any work papers used to support the finding and conclusions in the audit. Under either scenario, the work papers shall be subject to review by the Department and must be made available to the Department upon request.

(6) At frequent intervals but, under no circumstances, less than annually, the Supervisory Committee shall also make an inspection of the assets and liabilities of the credit union, the credit union’s loan and deposit accounts, and the credit union’s information technology. The Supervisory Committee shall also have supplementary audits performed upon request of the Department. Authority Ga. L. 1974, pp. 705, 733, 904; 1981, pp. 1245, 1250.

80-2-6-.02. Percentage of Accounts to be Confirmed by Supervisory Committee.

(1) In the event a credit union does not render statements on all share, deposit, and loan accounts at least annually, the Supervisory Committee shall confirm 100% of all such accounts annually in accordance with Paragraph (3) of this section.

(1) If statements of all share, deposit, and loan accounts are rendered to members either through the mail or hand delivered by the treasurer, other officers, or employees of the credit union at least annually, the Supervisory Committee shall confirm 100% of all such accounts at least every two years. In lieu of regular confirmations, the Supervisory Committee may elect to mail out regular statements of such accounts.

(1) All confirmations performed by the Supervisory Committee including the mailing of statements of share, deposit, and loan accounts shall be under controlled conditions, as follows: The Supervisory Committee shall be responsible for determining that share, deposit and loan ledgers are in balance with the general ledger preparatory to mailing copies of such statements of accounts to the members. The treasurer, assistant treasurer, bookkeeper, or any other person normally assigned to the task of posting member ledger accounts shall not participate in the preparation or mailing of such statement of accounts. The members shall be advised by either a notation on the statement or by an enclosure that: “If the amount shown on the statement does not agree with your records, please notify the chairman of the Supervisory Committee of any difference.” A self-addressed envelope should be enclosed for the member's convenience.

Authority Ga. L. 1974, pp. 705, 733, 904; 1981, pp. 1245, 1250.

80-2-6-.03. Applicable Auditing Standards.

An audit of a credit union by an independent accountant or firm of such accountants or the internal auditors of any sponsoring group, concern, or association of credit unions shall be made in accordance with generally accepted auditing standards as set forth in pronouncements of the American Institute of Certified Public Accountants.

Authority Ga. L. 1974, pp. 705, 733, 904; 1981, pp. 1245, 1250. _____________________________________________________________________________________

80-2-6-.04. Scope of Audit.

(1) The external auditor should be generally familiar with the statutes, rules, and regulations under which the credit union being audited operates, and with its charter and bylaw provisions. The annual audit should incorporate the necessary procedures to satisfy the auditor that there is compliance with the applicable requirements that might materially affect the credit union's financial position of operation. (2) Such annual audit shall include a review of the credit union’s internal controls and such other tests and reviews of the credit union’s records as deemed appropriate by the external auditor, including, but not limited to, verifications of the credit union’s loan and deposit accounts as well as adequate testing and review of the credit union’s information technology activities. (3) Specific Requirements for the annual audit:

(a) The audit must state the method and degree of direct verification and analyze the results by schedule. The audit should indicate whether positive or negative account confirmations were used, number of confirmations mailed, number of replies received, number of undeliverable confirmations, analysis of discrepancies disclosed, and degree of follow-up confirmation for non-replies and undeliverable confirmations; (b) The audit must include a verification of loan and share accounts; (c) The audit includes a cash reconciliation, including an adequately documented physical cash count, and also includes an affirmative verification of investments and deposits made by the audited credit union;

(a)(d) Verification of the status of funds borrowed by the audited credit union, including promissory notes and certificates;

(b)(e) The audit must confirm that internal routines and controls were evaluated and no exceptions were found or that certain listed exceptions were noted; and

(f) The audit must set forth in sufficient detail the general scope of the audit performed.

Authority Ga. L. 1974, pp. 705, 733, 904; 1981, pp. 1245, 1250. _____________________________________________________________________________________ 80-2-6-.05 The Internal Auditor

(1) Internal Audit System. An institution should have an internal audit system that is appropriate to the size of the institution and the nature and scope of its activities. The internal audit system should consist of qualified persons. The internal audit system shall provide for:

a. b. c. d. e.

Adequate monitoring of the system of internal controls through an internal audit function; Adequate testing and review of information systems; Adequate documentation of tests and findings and any corrective actions; Verification and review of management actions to address material weaknesses; and Review by the institution's audit committee or board of directors of the effectiveness of the internal audit systems.

(2) The Board of Directors of every credit union shall name an internal auditor. If the credit union names an employee as the internal auditor, then the internal auditor must not audit his/her department.

(3) The internal auditor shall: a. Report a summary of audit activities to the Board of Directors at least annually; b. Implement the credit union's internal audit program; and a.c. Monitor the implementation of corrective action with respect to audit exceptions, including but not limited to internal control exceptions, discovered by the internal audit program or reported by the external auditor. (4) A credit union can designate an external auditor as its internal auditor. In the event an external auditor is designated as the internal auditor, then the Board of Directors or the Supervisory Committee must appoint an internal liaison among the officers of the credit union that will be responsible for coordinating the internal audit function with the external auditor and overseeing compliance with the internal audit requirements.

Comments: The Department intends on proposing similar revisions for banks. Priority: 2

Issue: Should Georgia law be revised to create the possibility that a credit union could lease office space in certain limited circumstances? Reason for Review: Current law provides that a credit union may obtain real property for the “convenient transaction” of a credit union’s business. The purpose of this limitation is to prevent credit unions from speculating on real estate. The limitation has been previously interpreted as precluding credit unions from leasing any portion of credit union premises. The Department can envision a number of scenarios where leasing space may be in the best interest of the credit union and the underlying facts would not indicate that the credit union engaged in speculation. For example, a credit union may wish to utilize less space in an existing branch as it has made a business decision to de-emphasize the importance of branches. The proposed language would provide some additional flexibility to authorize the Department to approve leasing in certain limited circumstances. Depending on the interest in leasing space, it may be beneficial to create a regulatory framework. Suggestion for Change: § 7-1-650. Powers

A credit union shall have, in addition to the powers common to all corporations under the laws of this state, the following powers: (1) It may receive funds from its members or other financial institutions in the form of shares and deposits on accounts or as evidenced by certificates of deposit issued by the credit union but shall not have the power to offer third-party payment services except as authorized under Code Section 7-1-670; (2) It may receive savings deposits from nonmembers in such manner as the bylaws may provide, but such deposits many not be subject to check and may not bear a greater rate of interest than the rate of interest paid to members for the same class of deposit; (3) It may make loans to members subject to approval by its credit committee or authorized employees pursuant to Code Section 7-1-658; (4) It may also invest, on the authority of its board of directors or by employees authorized by the board of directors, funds in the following manner: (A) In obligations of the United States, including bonds and securities upon which payment of principal and interest is fully guaranteed by the United States; obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, or any corporation designated in Section 846 of Title 31 of the United States Code as a wholly owned government corporation; or in obligations, participations, or other instruments of or issued by or fully guaranteed as to principal and interest by the Federal National Mortgage Association or the Government National Mortgage Association;

(B) In general and direct obligations of the State of Georgia, its counties, districts, and municipalities which have been validated as provided by law, if no more than 25 percent of the shares and deposits of a credit union shall be invested in the obligations of any one such obligor; (C) In loans to other credit unions, provided the loans do not exceed 10 percent of the shares, deposits, and surplus of the investing credit union; (D) By depositing its funds in banks, savings and loan associations, and credit unions; by purchasing certificates of deposit and savings certificates which such financial institutions are authorized to issue; and by selling or purchasing federal or correspondent (daily) funds or loan participations through such financial institutions; subject to limitations prescribed in regulations issued by the department; and (E) In any other types of investments authorized by the department, including commercial paper, provided such investments shall not, in the aggregate, exceed 10 percent of the shares, deposits, and surplus of the investing credit union. In lieu of the foregoing limitation, any credit union may invest up to 15 percent of its equity capital as defined by the department in authorized investments issued by any single obligor; (5) It may borrow from any source, but the total of such borrowings shall at no time exceed 50 percent of paid-in shares, deposits, and surplus. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this paragraph to permit an individual credit union to borrow for emergency purposes; (6) It may undertake, with the approval of the department, other activities which are not inconsistent with this chapter or regulations adopted pursuant thereto; provided, however, no such approval shall be granted unless the commissioner determines the activities do not present undue safety and soundness risks to the credit union involved; (7) It may organize and engage in business without having any stated amount of capital subscribed or paid in other than that derived from the subscribers' qualifying shares, may commence business with only such capital authorized and paid in as may be provided in its bylaws, and may provide for the payment and withdrawal thereof as and in the manner provided by its bylaws; (8) It may purchase, hold, and convey real estate for the following purposes only: (A) Such real estate as shall be necessary for the convenientthe credit union occupies or intends to occupy primarily for the transaction of its business, subject to the prior approval of the department; (B) Such real estate as shall be conveyed to it in satisfaction of debt previously contracted in the course of its business; and (C) Such real estate as it shall purchase at sales under judgments, decrees, or mortgage foreclosures

pursuant to mortgages or security deeds held by it; (9) Real estate acquired in the cases provided for by subparagraphs (B) and (C) of paragraph (8) of this Code section and real estate which has ceased to be used primarily as credit union premises may be held subject to a determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided that no such property may be held for more than five years without the prior written approval of the department. Properties, other than real estate, which are acquired in satisfaction of debts previously contracted and which a credit union is not otherwise authorized to own shall be held for no longer than six months unless such time period is extended by the department. Disposition of such property may be financed by the credit union without the advance of additional funds irrespective of the purchasers' membership in the credit union and of ordinarily applicable collateral margin requirements; (10) It may provide through an amendment to its bylaws which shall be approved by two-thirds of its membership present and voting as otherwise provided in this part for the elimination or limitation of the personal liability of a director to the members in their capacity as shareholders of the credit union to the same extent as a bank or trust company operating under the provisions of this chapter. Comments: Priority: 2

Issue: Should Georgia law be amended to clarify which deposits from non-members state-chartered credit union can receive? Reason for Review: The Department is concerned that the current language in O.C.G.A. § 7-1-650(b) could be interpreted as permitting credit unions to accept non-member deposits as long as the funds are deposited in a savings account and the amount of interest does not exceed the interest paid to members. If a credit union were to accept such deposits, then there is the very real risk that these deposits would not be federally insured. In the event of a failure, this could have a systemic impact on the credit union industry as consumers may fundamentally question whether their deposits at their credit union are insured. The Department believes that this power should be revised to clearly state that a state-chartered credit union can accept non-member deposits only if the deposits are federally insured or are expressly authorized by federal law (e.g. low income credit unions, deposits from other credit unions) and as expressly authorized by the credit union’s bylaws. Suggestion for Change: § 7-1-650. Powers

A credit union shall have, in addition to the powers common to all corporations under the laws of this state, the following powers: (1) It may receive funds from its members or other financial institutions in the form of shares and deposits on accounts or as evidenced by certificates of deposit issued by the credit union but shall not have the power to offer third-party payment services except as authorized under Code Section 7-1-670; (2) It may receive savings deposits from nonmembers only if the deposits are: insured by or through a federal public body or are expressly authorized by state or federal law; made in such manner as expressly authorized by the bylaws; may provide, but suchnot depositeds many not be subject to checkin a share draft account; and may not bearing a greater rate of interest than the rate of interest paid to members for the same class of deposit; (3) It may make loans to members subject to approval by its credit committee or authorized employees pursuant to Code Section 7-1-658; (4) It may also invest, on the authority of its board of directors or by employees authorized by the board of directors, funds in the following manner: (A) In obligations of the United States, including bonds and securities upon which payment of principal and interest is fully guaranteed by the United States; obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, or any corporation designated in Section 846 of Title 31 of the United States Code as a wholly owned government corporation; or in obligations, participations, or other instruments of or issued by or fully guaranteed as to principal and interest by the Federal National

Mortgage Association or the Government National Mortgage Association; (B) In general and direct obligations of the State of Georgia, its counties, districts, and municipalities which have been validated as provided by law, if no more than 25 percent of the shares and deposits of a credit union shall be invested in the obligations of any one such obligor; (C) In loans to other credit unions, provided the loans do not exceed 10 percent of the shares, deposits, and surplus of the investing credit union; (D) By depositing its funds in banks, savings and loan associations, and credit unions; by purchasing certificates of deposit and savings certificates which such financial institutions are authorized to issue; and by selling or purchasing federal or correspondent (daily) funds or loan participations through such financial institutions; subject to limitations prescribed in regulations issued by the department; and (E) In any other types of investments authorized by the department, including commercial paper, provided such investments shall not, in the aggregate, exceed 10 percent of the shares, deposits, and surplus of the investing credit union. In lieu of the foregoing limitation, any credit union may invest up to 15 percent of its equity capital as defined by the department in authorized investments issued by any single obligor; (5) It may borrow from any source, but the total of such borrowings shall at no time exceed 50 percent of paid-in shares, deposits, and surplus. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this paragraph to permit an individual credit union to borrow for emergency purposes; (6) It may undertake, with the approval of the department, other activities which are not inconsistent with this chapter or regulations adopted pursuant thereto; provided, however, no such approval shall be granted unless the commissioner determines the activities do not present undue safety and soundness risks to the credit union involved; (7) It may organize and engage in business without having any stated amount of capital subscribed or paid in other than that derived from the subscribers' qualifying shares, may commence business with only such capital authorized and paid in as may be provided in its bylaws, and may provide for the payment and withdrawal thereof as and in the manner provided by its bylaws; (8) It may purchase, hold, and convey real estate for the following purposes only: (A) Such real estate as shall be necessary for the convenient transaction of its business, subject to the prior approval of the department; (B) Such real estate as shall be conveyed to it in satisfaction of debt previously contracted in the course of its business; and

(C) Such real estate as it shall purchase at sales under judgments, decrees, or mortgage foreclosures pursuant to mortgages or security deeds held by it; (9) Real estate acquired in the cases provided for by subparagraphs (B) and (C) of paragraph (8) of this Code section and real estate which has ceased to be used primarily as credit union premises may be held subject to a determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided that no such property may be held for more than five years without the prior written approval of the department. Properties, other than real estate, which are acquired in satisfaction of debts previously contracted and which a credit union is not otherwise authorized to own shall be held for no longer than six months unless such time period is extended by the department. Disposition of such property may be financed by the credit union without the advance of additional funds irrespective of the purchasers' membership in the credit union and of ordinarily applicable collateral margin requirements; (10) It may provide through an amendment to its bylaws which shall be approved by two-thirds of its membership present and voting as otherwise provided in this part for the elimination or limitation of the personal liability of a director to the members in their capacity as shareholders of the credit union to the same extent as a bank or trust company operating under the provisions of this chapter.

Comments: Priority: 2

Issue: Should Georgia law be amended to expressly provide that a business headquartered within a community common bond is within the field of membership? Reason for Review: Georgia law currently provides that “societies, associations, partnerships, and corporations composed of persons who are eligible for membership may be admitted to membership in the same manner and under the same conditions as such persons.” O.C.G.A. § 7-1-651(b). O.C.G.A. § 71-630(b) provides that a common bond includes, among other items, residence within a well-defined neighborhood, community or rural district. The Department has historically interpreted these provisions as authorizing a partnership, corporation, or LLC as being within the field of membership of a community common bond if the business entity is headquartered within the community. A concern has been expressed that the Department’s view is not readily apparent and, therefore, credit unions are unaware that these businesses are within the field of membership. The Department has attached proposed language clarifying this point. However, the Department is concerned that pursuing this clarification may generate opposition from other financial institutions. Suggestion for Change: § 7-1-651. Membership; shares

(a) The membership of the credit union shall consist of the initial subscribers and such other persons within the field of membership as may have subscribed to one share, which has been paid by a person or the credit union, together with the required entrance fee and complied with all other requirements contained in the bylaws. No subscriber or other member shall hold more than one share out of any class of shares. The bylaws may provide for separate classes of shares for borrowers and depositors and for the par value of each share for each class, but in no event shall the par value be less than $1.00. (b) Societies, associations, partnerships, and corporations composed of persons who are eligible for membership or headquartered within the field of membership may be admitted to membership in the same manner and under the same conditions as such persons. (c) A person or corporation who leaves the field of membership may be permitted to retain his membership in the credit union at the discretion of the board of directors. Comments: There is a possibility that this perceived expansion of the field of membership will be opposed by the banking industry. The more revisions that are made to the field of membership, the more likely it becomes that there will be push back. Also, if the revision is defeated, then an argument could be made that the General Assembly has rejected the Department’s historic interpretation. Priority: 2

Issue: Should Georgia law be amended to provide that an individual working within a community common bond falls within the field of membership? Reason for Review: Georgia law currently provides that only an individual residing within a community common bond is within the credit union’s field of membership. Although the community common bond for federal credit unions is more restrictive than state law, federal law provides that an individual that “lives, works, and worships” within the community common bond is within the field of membership. Also, although not currently within the community common bond, credit unions have the ability to add employers to the field of membership and, thus, indirectly memberize some employees working within the community. Thus, by including employment within the community common bond, it may reduce the number of field of membership applications submitted to the Department as there would appear to be a decreased need to submit common employer field of membership applications. Suggestion for Change: § 7-1-630. Initial subscribers; contents and filing of articles; other required filings; fee for investigation; selection of initial directors

(a) Any number of persons, not less than eight, having a common bond, as defined in subsection (b) of this Code section, may incorporate for the purpose of organizing a credit union in accordance with this article. The persons so desiring to become incorporated shall execute articles which shall set forth the following: (1) The name of the proposed credit union; (2) The territory in which it will operate; (3) The location where its initial registered office will be located; (4) The names and addresses of the subscribers, their occupation, length of service, and that each has subscribed to one share and paid for same; (5) The names and addresses of the original directors; (6) The proposed field of membership specified in detail and having the same common bond as the subscribers; (7) That the purpose and nature of the business are to conduct a credit union with the rights and powers granted by this article; and (8) The term of the existence of the credit union, which shall be perpetual unless otherwise limited. (b) For purposes of this article, "common bond" is described as that specific relationship of occupation, association, or interest; residence or employment within a well-defined neighborhood, community, or rural district; employees of a common employer; or members of a bona fide cooperative, educational, fraternal, professional, religious, rural, or similar organization which tends to create a mutual interest between persons sharing the relationship. Persons related by blood, adoption, or marriage to or living in

the same household with a person within such common bond and the surviving spouses of deceased members shall also be considered within the common bond. (c) The subscribers shall file the articles with the department together with the fee specified in Code Section 7-1-862. The department shall certify a copy of the articles and return it to the subscribers. (d) The subscriber shall file with the department a certificate from the Secretary of State attesting that the name of the proposed credit union has been reserved as authorized by Code Section 7-1-131. (e) The subscriber shall file with the department a copy of the proposed bylaws setting forth the following: (1) The date of the annual meeting, the manner of conducting the same, the number of members constituting a quorum and regulations as to voting, and the manner of notification of the meeting, which shall comply with Code Section 7-1-6; (2) The number of directors, which must be not less than five nor more than 25, all of whom must be members, and their powers and duties, together with the duties of the officers elected by the board of directors; (3) The qualifications for membership of those coming within the initial common bond as required by this article; (4) The conditions under which shares may be issued, paid for, transferred, and withdrawn; deposits received and withdrawn; loans made and repaid; and funds otherwise invested; and (5) The charges which shall be made, if any, for failure to meet obligations punctually; whether or not the credit union shall have the power to borrow; the method of receipting for money; the manner of accumulating a reserve; the manner of determining and paying interest and dividends; and such other matters consistent with this article as may be requisite to the organization and operation of the proposed credit union. (f) The subscriber shall pay such fee as shall be established by regulation of the department to defray the cost of the investigation required by Code Section 7-1-632, provided that the department shall not be required to set such fee if in its judgment the fee would discourage the organization of credit unions under this article. (g) The subscriber shall select at least five qualified persons who agree to serve on the board of directors. A signed agreement to serve in these capacities until the first annual meeting or until the election of their successors, whichever is later, shall be executed by those who so agree and filed with the department along with the proposed bylaws. Comments: There is a possibility that this expansion of the field of membership will be opposed by the banking industry. Priority: 2

CREDIT UNION AWARENESS INITIATIVE

Credit Union Awareness: Talking about the credit union difference makes a difference

Awareness Landscape Too few know about credit unions and how we’re different Opportunity emerging to launch a sustained awareness effort early in 2017 Now is the time to prepare National consumer survey of credit union difference ads

Opportunity revealed Proven messages: Different from banks/not a bank Not-for-profit, not Wall Street

89%

Member-owned, Main Street

Total positive impact on feeling about credit unions

Return earnings to members

 59% much more  30% somewhat more

• Lower fees • Higher interest on savings

Impact of credit union ads customers interested in moving one or more 82% Bank accounts to a credit union credit union members interested in doing more 68% Non-PFI business with their credit union support credit unions over banks in a public 88% Would policy fight – was 68% prior to seeing the ad BOTTOM LINE: Consumers pick credit unions over banks the more they understand how we’re different from a bank

GROWING IS WINNING

Strategic Overview The Credit Union Awareness Initiative is: a  Not a national branding campaign first step/building block toward a broader  Not a national advertising campaign strategy to strengthen membership and enhance the credit union advocacy voice  Not a Hail Mary or one-time effort

INSIDE-OUT

100 million members who don’t fully understand the CU difference

CHOIR

SUSTAIN-MEASURE

350,000 credit union leaders, Create a sustainable effort; employees and volunteers; transparently measure results 6,000 credit unions; 1,000s of partners

Questions & Comments? [email protected] 202-508-3626

Your Strongest Advocate™

The research is clear and conclusive: Driving greater awareness of the credit union difference among members and the general public expands market share and share of wallet, and increases consumer engagement with credit union advocacy efforts. Talking about the difference makes a difference.

E XE C U T I VE SUMMARY The opportunity to define ourselves has never been greater. In raising awareness of the credit union difference, we can tap into one of the most powerful motivators in America today – the dislike of Wall Street and large national banks. The member-benefit structure of credit unions is much preferred and an advantage that can be leveraged to grow market share and political influence. Why act now? The persistent lack of awareness of the credit union difference makes us vulnerable to being defined negatively by our competitors and limits our ability to reduce regulatory burden. The choice is to define ourselves or let others do it for us. Raising awareness about the credit union difference is good for members, good for our business, good for our communities – and essential for the future of our movement. To illustrate this point, we conducted a national poll recently and found that 89 percent of people respond positively to messages that provide unmistakable market distinction. Understanding these differences hits the bottom line: 82 percent of the respondents who were bank-only customers expressed interest in moving at least one of their accounts to a credit union. Two-thirds of our members who did not use a credit union as their primary financial institution (PFI) said they were likely to move a greater share of their business to our side. And an astonishing 88 percent said they’d support credit unions over banks in a public policy fight.

How Credit Unions are Different from Banks

CREDIT UNIONS

Not-for-Profit

Unlike Wall Street banks

Member-Owned

Just like Main Street

Return Earnings to Members

With lower fees & higher interest on savings

But perhaps most importantly, 40 percent of non-members did not know that they could join a credit union. These responses are consistent with extensive national opinion survey research conducted by CUNA over the past 16 years. The research includes more than 16,000 interviews, statewide polls in 12 states, focus groups with members and non-members, ad testing, and feedback collected through our Member Activation Program (MAP).

This summary was prepared by CUNA.

cuna.org

Your Strongest Advocate™

RESEARCH BRIEF Overview Traditional marketing practices by credit unions tend to emphasize lower-cost products and services. And yet, a gap in awareness remains - even among members. Consistent findings from a large volume of CUNA research show that if we explain our purpose and how we’re different from banks, we can substantially increase awareness of the credit union difference. Educating consumers about credit unions provides four benefits: // People who use credit unions as their PFIs strengthen their existing relationships; // People who do not use credit unions as their PFI – or non-PFIs – will do a greater share of banking with credit unions; // Large numbers of bank-only customers will consider becoming credit union members; and // Advocacy engagement among consumers will grow.

CUNA Research CUNA research consistently supports these findings. Our findings are drawn from numerous research projects, including: // National polls of Americans for 16 years (more than 16,000 interviews); // Statewide polls in 12 states with more than 5,500 interviews the past two years; // Focus groups with members and non-members; // MAP research, including direct testing of tens of thousands of credit union members, sorted by their response to “Don’t Tax My Credit Union” calls to action; and // Ad testing, conducted online in both Iowa and nationwide (“Remember” and “Name”).

Awareness Survey

National Polling National trends remain very consistent over time. The numbers here, which are current, have not changed significantly in years. // When asked about whether banks or credit unions paid taxes, most people said credit unions did not;

36

U NAWA

RE

Tax Status 6%

8

4%

AWARE

% A WA R E

Not-for-Profit

6

// But when asked a direct question about whether credit unions paid taxes, 86 percent said they were unaware credit unions did not pay federal taxes.

14%

U NAWA

RE

National Survey This summary was prepared by CUNA.

31

% A WA R E

1 0%

AWAREcuna.org

Your Strongest Advocate™

Similarly: // When asked whether banks or credit unions were not-for-profit, most people intuited credit unions were; // But when asked a direct question about the credit union not-for-profit status, 64 percent said they were unaware credit unions were not-forprofit; and // Most importantly 40 percent of nonmembers do not know they can join a credit union. Providing information about how credit unions operate generates a very strong positive response.

Positive Response

Favorable response about information on how credit unions operate

87%

They return earnings to members through lower loan rates and higher rates on savings

83%

They are run by boards of elected members

82%

They are not-for-profit

In this context, the contrast with banks is stark: 83 percent agreed that credit unions were “better for the middle class, because they return earnings to the local community, while most bank profits go to Wall Street.”

Ad Testing Consumer research consistently has shown that raising “awareness” about how and why credit unions are different from banks motivates consumer behavior for both policy action and share of wallet. In a proof-of-concept test, CUNA commissioned two TV ads in Iowa during a “Don’t Tax My Credit Union” fight in January 2016. That research was replicated in a nationwide poll in April 2016. The findings were eye-opening, consistent with state tests, and relevant to credit unions’ bottom line. Both ads did very well among consumers. The numbers below represent responses to Ad #1 and Ad #2. // Huge, positive response on ad metrics: “Clear, understandable message” (86%-87% positive); they “make you feel better about credit unions” (80%-83% positive); and successful at “being persuasive” (74%-76% positive); // Awareness campaign theme test: We saw a big impact on positive feelings toward credit unions – 89 percent more positive after “learning that credit unions are different from banks because credit unions are not-for-profit and member-owned, sharing their earnings with members in the form of charging lower fees or paying higher interest rates;” and // A gain in market share and share of wallet after ad exposure: 82 percent of bank-only customers expressed interest in moving at least one of their accounts to a credit union, and 68 percent of non-PFI credit union members said they were likely to do a greater share of their banking with their credit union.

This summary was prepared by CUNA.

cuna.org

Your Strongest Advocate™

BOTTOM LINE Expanding credit union awareness offers an opportunity to appeal to both current and potential members based on the fact that our products and services offer greater consumer value. What’s more, we can tap into a powerful personal theme by explaining why credit unions have advantages over competitors.

After learning more about the credit union difference

82%

Bank customers interested in moving one or more accounts to a credit union

68%

Non-PFI credit union members interested in doing more business with their credit union

88

Would support credit unions over banks in a public

% In raising awareness, credit policy fight – was 68% prior to seeing the ad unions will be harnessing one of the most powerful attitudinal motivators in America today: The dislike for Wall Street and large national banks, and connecting that to the much-preferred member-benefit structure of credit unions. Data suggest a strong potential to expand both market share and share of wallet by taking advantage of this opportunity by significantly ramping up a consistent and sustainable shared marketing and communications effort by individual credit unions, state leagues, and CUNA.

the credit union

This summary was prepared by CUNA.

cuna.org

2016 ELECTIONS o Credit Union Impact/Involvement

2016 Primary Elections Overview The primary elections held very few surprises, with the majority of the incumbents winning by strong margins. While some votes are yet to be finalized, the turnout was notably light: over 882,500 voters statewide went to the polls, which is only 18% of registered voters. Credit union efforts in the elections held significantly high influence when one considers how few people voted, making the campaign work and PAC funds contributed all the more influential for the industry.

Credit Union Involvement Leading Up to the Primary Elections In addition to credit union efforts to encourage voter turnout through ElectionWatch and raising PAC funds for political donations, there were nine credit unions along with GCUA staff were physically involved in one congressional race and three state races; this support was for US Rep. Doug Collins, State Rep. Brooks Coleman, State Rep. Tom Dickson, and State Rep. Brett Harrell. All of these candidates in the primary successfully move forward, with the race for Rep. Dickson advancing to a runoff. Our thanks go to the credit union individuals from Associated CU, Atlanta Postal CU, Georgia’s Own CU, Georgia United CU, Hallco Community CU, North Georgia CU, Peach State FCU, Platinum FCU, and Rome Kraft FCU for engaging in physical campaign activity. As the general elections approach, we encourage credit unions to take advantage of the opportunities to participate in physical campaign efforts.

Congressional Races Summary In Georgia, all 14 US Congressmen and one US Senate seat were on the ballot, with competition (and future competition) at varying levels. There are six races that have already been decided, with another nine federal legislators yet to be elected: No Competition

Primary Competition Only (all with multiple opponents)

General Competition Only

Both Primary and General Competition US Sen. Johnny Isakson*multiple primary opponents Open Seat-District 3*multiple primary opponents US Rep. Austin Scott (R-8)

US Rep. Buddy Carter (R-1)

US Rep. Doug Collins (R-9)

US Rep. Sanford Bishop (D2)

US Rep. Jody Hice (R10) US Rep. David Scott (D-13)

US Rep. Barry Loudermilk (R11) US Rep. Tom Graves (R-14)

US Rep. Hank Johnson (D4) US Rep. John Lewis (D-5) US Rep. Tom Price (R-6) US Rep. Rob Woodall (R-7)

US Rep. Rick Allen (R-12)

Five of the eight races with primary competition faced multiple candidates. Even with the multiple opponents, all incumbents won handily without being forced into a runoff. The open seat for the 3rd district is the sole federal race in a runoff. Voters in the 3rd congressional district will decide between ex-mayor Drew Ferguson (who is supported by GCUA) and previous state Senator Mike Crane in that July runoff. The winner will face general opposition in November.

State Races Summary All 236 state legislative seats were up for election with few upsets; only two incumbents lost with ten races that have been forced into runoffs. Of note to credit unions: all four credit union board members who serve in the state Legislature have either won their elections or advanced, with one (Rep. Dickson) in a runoff. To win in Georgia, a candidate must garner over 50% of the votes cast. Dickson fell short by just 16 votes of reaching that mark. If one ever wondered if voting counts-it counts!

Similar to the Congressional races, there were few surprises with the elections for state Senate and House. Incumbents thought to have challenging primaries won across the State Elections that Determine Winner of board, leaving very few competitive races left to be decided in November. The majority (182) of Seat the state races have been determined at this point, with 47 races remaining once the 10 General (Nov 8) 47 runoffs are held (only three runoffs will face general competition also). Overwhelmingly, Runoff (July 26) 10 entire elections are decided early in the May primary, with a smaller population of voters casting the ballots for state legislative offices. 236 State Races (May 24) 182 Races Decided on May 24 Primary 0

50

100

150

200

250

Influence of Credit Union PAC Fundraising In Georgia, funds are raised for two PACs to support political campaigns: GA CUPAC and CULAC. GA CUPAC is the state credit union PAC that contributes to state legislators, and CULAC is the federal PAC funded by credit unions nationwide. Because of the dollars raised by the industry for the PACs, 127 federal and state races on the primary ballot were supported by credit unions. All of the 15 races for federal office received financial support from CULAC, with just over $27,000 contributed in 2016. CULAC saw a 100% success rate in the elections with all supported candidates successfully advancing. Only one, the open seat for the 3rd congressional district, will be decided in a runoff. Out of the 236 state seats, there were 112 active campaigns supported by GA CUPAC with $35,000 donated to state campaigns in 2016 alone (with another $15,000 contributed to the two main state parties and caucuses). GA CUPAC supported PRIMARY RACE PAC SUPPORT candidates had a 97% success rate, with 109 advancing to their next race (or winning outright), and two yet to be Federal Races decided in the runoff. Supported by CULAC, 15 State Races Not Supported, 124

State Races Supported by CUPAC, 112

The runoffs will be held on July 26th, and the general election on November 8th. During the year, opportunities to build influence and impact the elections will continue. We thank all of the credit unions for their efforts fundraising for the PACs, working on campaigns, encouraging members to vote, and connecting with elected officials to grow the relationships held by the industry.

2016 Elections: Credit Union Impact Voter Engagement and Information Credit unions were provided the get-out-the-vote website for members in March, which included various tools available to engage in the elections and encourage others to vote. It also contains general information about the candidates, elections, and how to register. In addition, credit unions were also provided information on the stance of legislators on the top bills of credit union interest in June. In June (as well as July), credit unions were provided insight into three runoffs of industry interest with a one-page info sheet for staff/board on each of the candidates. PAC Dollars Thanks to the dollars raised by the industry for the PACs, 127 federal and state races on the primary ballot were supported by credit unions and three races in the July runoff. Contribution to State Campaigns: $56,000 was donated to state campaigns on behalf of credit unions as of the end of June ($40,000 to state races, $15,000 to political parties, $1,000 to caucuses). The $40,000 to state races represents 112 campaigns in the May 24th Primary out of the 236 seats. Credit union supported candidates saw a 97% success rate, with 109 advancing to the next race (or winning outright) and two decided in the runoff. Federal Campaigns: Georgia credit unions have contributed $59,336 to CULAC, which is 83% of its individual CULAC goal of $71,085. CULAC has contributed $37,000 to Georgia federal candidates by the 2nd quarter, with all 15 races for federal office receiving support from CULAC. There is a 100% success rate in the federal Primary elections with one, the open seat for the 3rd congressional district, decided in the runoff. Physical Campaign Assistance

Runoff Assistance, 1

Eleven credit unions (out of 20 contacted) along with GCUA staff provided physical campaign assistance to two Congressional candidates and four state candidates (and an additional fifth effort for one of the state candidates). There were a total of 12 legislators Physical Campaign Assistance contacted for potential Legislator Connections assitance (see adjacent chart), with seven connections already complete and three in Legislators Legislators Seeking Legislators Engaged with CU planning for General General Declining , 2 Campaign Assistance, 3 elections. The type of Assistance, 6 assistance is driven by the legislator’s needs; efforts to date have included partisan 0 2 4 6 8 10 12 14 communications to Legislators (Federal and State) members, in district visit with credit unions, yard signs placement at credit unions and with staff in district, fundraiser assistance, and two phone banking nights. To date, support has been provided to US Rep. Doug Collins, US Rep. Candidate Drew Ferguson, State Rep. Brooks Coleman, State Rep. Tom Dickson, State Rep. Brett Harrell, State Sen. Jeff Mullis, and additional runoff effort for Dickson.

CONGRESS & REGULATORS

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY Taxation and Protecting the Not-for-Profit CU Tax Exemption

The statutory credit union tax status provides credit unions with an exemption from federal income tax because of their cooperative business structure. Bankers continue to push for taxation of credit unions that have “gone beyond their original mission.” Concerns about the rising federal budget deficit in the coming years will likely mean that Tax Reform including the CU tax exemption, worth$1.6 billion annually, will be looked at in the future by Congress

Member Business Lending Cap Increase

Credit unions are statutorily limited to 12.25% of assets in Member Business Loans, a limit established in 1998 in HR 1151. Credit unions want to strip the cap off. Banks oppose. Small business

STATUS Credit Union Specific Legislation Congress has been wrestling with the deficit and tax issues and the discussion now on Capitol Hill involves total reform of the tax code. As tax reform is being contemplated, credit unions can be inadvertently (or intentionally) swept into bills and this issue will be monitored closely. In 2014 the winds of Congress shifted from tweaking the tax code to possibly starting with a blank sheet of paper and seeing who still deserves their corporate income tax exemption. Because

of this change it is imperative that Congressional leaders hear from credit union members and get an education about the value the exemption provides to all consumers. On February 26, 2014 House Ways and Means Committee Chairman Dave Camp released his comprehensive tax reform plan. The legislation preserved the credit union tax status and, although there was some initial concern that it might have applied UBIT obligations to federally chartered credit unions, after discussion with Committee staff, it was clear that was not their intent. On July 8, 2015 the United States Senate’s Finance Committee released a business income tax reform report. Among the recommendations for reforms, no mention was made of altering credit unions’ tax status in any way. The report also did not suggest new UBIT (Unrelated Business Income Tax) changes for credit unions. However, the report does recommend that all tax-exempt organizations be required to file their I.R.S. Form 990s electronically. On March 2, 2015, Reps. Ed Royce (R-Calif.) and Gregory Meeks (D-N.Y.), introduced the Credit Union Small Business Jobs Creation Act (H.R. 1188.) This legislation is identical to a bill introduced by Royce in the last Congress to increase the Member Business Lending Cap on credit unions. Page 1 of 23

GCUL POSITION Support status quo. The statutory tax status is as relevant today as it was when first granted. In 1917, the U.S. Attorney General--and later the U.S. Congress--exempted credit unions from a federal income tax obligation because of their organization structure: CUs are member-owned, not-for-profit financial cooperatives. The exemption that has been in effect since credit unions' inception in the United States, has been reaffirmed many times, including in 1935, 1936, 1937, 1951 and 1998.

Support passage of meaningful MBL legislation to raise or lift the cap.

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Member Business Lending Cap Increase

groups and their allies could be the decisive factor in the outcome. In previous Congresses influential DCbased trade associations have stepped up to support legislation including the National Association of Manufacturers, the National Association of Realtors, the National Association of Professional Insurance Agents, and the National Association for the Self-Employed.

STATUS

GCUL POSITION

The bill will raise a bill that would raise the cap on credit union member business lending (MBL) to 27.5% of assets. To qualify for the higher MBL threshold, credit unions must be well capitalized, have a history of MBL experience, be operating at no less than 80% the cap for the previous year and receive approval from the National Credit Union Administration. In 2015, S. 2028, a companion bill to the above was introduced by Senator Rand Paul (R-KY) and Sen. Sheldon Whitehouse (D-RI). That bill has 7 co-sponsors. The bill has 93 co-sponsors. Georgia co-sponsors: Reps. Bishop (D-2), Johnson (D4), Lewis (D-5) and Woodall (R-7)

Member Business Lending

A bill that would exempt business loans to veterans from credit unions' statutory cap was introduced on February 26, 2015 by Rep. Jeff Miller (R-Fla.). The bill, H.R. 1133, is identical to a bill introduced last Congress and would amend the Federal Credit Union Act to enhance credit union lending to veterans looking to start or finance a small business.

Support passage of meaningful MBL legislation to raise or lift the cap.

The bill has 19 co-sponsors.

Member Business Lending

Exempt non-owner occupied 1- to 4family dwelling from the MBL Cap

Georgia co-sponsors: none S. 1440, introduced by Senator Ron Wyden (D-OR) on May 21, 2015, would exempt non-owner occupied 1 to 4 family dwellings from the MBL cap. If a bank makes a loan for this type of dwelling it is considered a residential mortgage, today for credit unions it is considered a member business loan – this bill would just allow parity for credit unions with banks. The legislation is known as the Credit Union Residential Loan Parity Act. The House has a companion Page 2 of 23

Support passage of meaningful MBL legislation to raise or lift the cap.

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Member Business Lending

STATUS

GCUL POSITION

bill, H.R. 1422, introduced on March 18, 2015 by Rep. Ed Royce (R-CA). That legislation is also known as the Credit Union Residential Loan Parity Act. The House bill has 19 co-sponsors. The Senate bill has 2 co-sponsors. Georgia House co-sponsors: none Georgia Senate co-sponsors: none

Membership in the FHLB for privately insured Credit Unions

Legislation that would allow privately insured credit unions to apply for membership with the Federal Home Loan Bank (FHLB). The bill would correct a drafting error from the 1989 legislation that opened the FHLB system to commercial banks and federally insured credit unions. It would allow the 130 privately insured credit unions around the country to access additional liquidity.

On January 13, 2015, four Representatives introduced a bill that would allow privately insured credit unions to apply for membership with the Federal Home Loan Bank (FHLB). The Capital Access for Small Community Financial Institutions Act of 2015 (H.R. 299) was introduced by Reps. Steve Stivers (R-OH), Joyce Beatty (D-OH), Pat Tiberi (ROH) and Andre Carson (D-Ind.) The bill has 3 co-sponsors. The Senate has a companion bill S. 1367 by Senator Joe Donnally (D-IN) and it has 1 cosponsor. This issue was added to the highway conference bill and was passed by both chambers December 2015 and then signed into law by the President December 4, 2015. Georgia co-sponsors: none

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Supportive but since Georgia doesn’t allow private insurance it won’t have a major impact on our state.

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY Membership Parity in the FHLB for Credit Unions

A proposed Federal Housing Finance Agency (FHFA) rule would require all Federal Home Loan Bank (FHLB) member credit unions, but only certain banks, to hold 10 percent of assets in “residential mortgage loans” on an ongoing basis

STATUS The Federal Home Loan Bank Act treats similarly sized credit unions and community banks differently with respect to eligibility to join the Federal Home Loan Bank System. Today “Community Financial Institutions” are exempt from a requirement that 10% of assets must be dedicated to residential mortgage loans in order to access the liquidity provided by FHLBs… instead only 1% asssets must be directed to housing in these institutions. The definition limits Community Financial Institutions to FDIC insured institutions. H.R. 2473, introduced by Rep. Clay (D-MO) and Rep. Randy Neugebauer (R-TX) would correct the disparity in the FHLB Act.

GCUL POSITION Support passage

The bill has 12 co-sponsors.

Supplemental Capital

Credit unions are currently unable to raise capital other than through retained earnings. The bill would permit the National Credit Union Administration board to allow credit unions to accept other forms of capital, provided that the board's action does not alter the cooperative ownership structure of credit unions.

Georgia co-sponsors: none On February 13, 2015 Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) introduced the Capital Access for Small Businesses Act, H.R. 989. The members first introduced the legislation in the 113th Congress. The legislation will minimize the probability of credit union insolvency, and ensure credit unions can continue to best serve their members while being able to grow and meet the needs of new members.

Support passage

The capital would be required to be uninsured and subordinate to other claims against a credit union. The NCUA board would also be allowed to set maturity limits on supplemental capital, and restrict the ability to raise such capital to credit unions that are sufficiently capitalized and well managed. The bill has 32 co-sponsors.

NCUA Budget Transparency

Legislation that would ask the U.S. Government Accountability Office (GAO)

Georgia co-sponsors: none On February 27, 2015, Rep. Mick Mulvaney (R-S.C.), introduced The NCUA Budget Transparency Act (H.R. Page 4 of 23

Support concept

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) NCUA Budget Transparency

NCUA Budget Transparency

to study the National Credit Union Administration's budgeting practices and identify ways the agency can increase the transparency of its process to its regulated credit unions, the U.S. Congress and the public in general.

The legislation would bring transparency to NCUA’s budget process by requiring the agency to hold a budget hearing – something they haven’t done since 2009. Stakeholders and the public would be allowed to observe the budget discussion by the NCUA board members and staff during the hearing. In addition to allowing the public to participate in the hearing, there would be a comment period that would follow where stakeholders can submit statements and letters before the NCUA finalizes their budget.

STATUS

GCUL POSITION

1176). This legislation has been advocated for by CUNA and the trade association has worked steadily toward that end since the NCUA ceased its budget-hearing process in 2009. The bill has 0 co-sponsors. Georgia co-sponsors: none Two bills have been introduced to require NCUA to hold public hearings and receive comment on their budget. The bill would direct the NCUA to establish a process by which the public, including members of the credit union community, may examine and comment on the agency’s proposed annual budget prior to adoption. Additionally, this legislation would ensure that members of the NCUA Board, who must vote to adopt the annual budget, have adequate opportunity to review specific expenditures and overall methodology in order to make an informed decision as to whether the budget as proposed accurately reflects the needs of the agency. This process would increase transparency and accountability at the agency, and engender public trust, thereby strengthening and supporting the agency’s mission. S. 924, The National Credit Union Administration Budget Transparency Act that was introduced on April 14, 2015 by Senator Dean Heller (R-NV) and its companion bill H.R. 2287, The National Credit Union Administration Budget Transparency Act that was introduced on May 13, 2015 by Rep. Nick Mulvaney (R-SC) and and Kyrsten Sinema (D-AZ). The House bill has 32 co-sponsors. The Senate bill has 2 co-sponsors. Georgia co-sponsors: House: Rep. David Scott (D-13)

Page 5 of 23

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) NCUA Budget Transparency NCUA and Overhead Transfer Fee Issues

STATUS

Senate co-sponsors: none The legislation would require any overhead transfer of agency expenses to the insurance fund to be legitimate, substantiated, insurance-related costs.

H.R. 5869 is co-sponsored by Reps. Mick Mulvaney (RS.C.) and Denny Heck (D-Wash.). The bill would ensure that any overhead transfer of agency expenses to the NCUSIF be for insurance related costs. The legislation would require NCUA provide a detailed analysis of how funds in the Share Insurance Fund are used and to share said report with the public. The OTR determines what percentage of the NCUA’s operating budget will be drawn from the National Credit Union Share Insurance Fund and used to cover expenses related to federal share insurance. In August 2015, the NCUA announced it would publish and seek comment on its OTR methodology for the first time in January 2016. The House bill has 0 co-sponsors. Georgia co-sponsors: House: none

Risk Based Capital

GCUL POSITION

The legislation requires regulators to study whether the NCUA has the legal authority to set tiered risk-based thresholds; assess how capital riskweights should be set for credit unions relative to other kinds of depository institutions; detail the rationale behind the agency's revised proposal; and review the impact excess capital could have on credit union lending and examinations. Regulators will have nine months to complete the study and report to Congress and will be required to wait another four months before finalizing the

Reps. Stephen Fincher (R TN), Bill Posey (R FL), and Denny Heck (D WA), are the lead sponsors for H.R. 2769, The Credit Union Risk Based Capital Study Act of 2015. The legislation, which would require NCUA to hold off on finalizing its new capital rule for more than a year. The agency released a revised risk-based capital proposal in January that proved narrower and less stringent than an earlier version of the rule debated last year, but the plan remains hotly contested by the credit union industry, which has argued it could prove costly and unnecessary On September 30, 2015 the House Financial Services Committee passed the bill and sent it to the floor for action.

Page 6 of 23

Support

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Risk Based Capital

STATUS

GCUL POSITION

The House bill has 16 co-sponsors.

rule.

Georgia co-sponsors: House: none

General Financial Institution Legislation Exam Fairness

Amends the Federal Financial Institutions Examination Council Act of 1978 to require a federal financial institutions regulatory agency to make a final examination report to a financial institution within 60 days after the later of: (1) the exit interview for an examination of the institution, or (2) the provision of additional information by the institution relating to the examination. Sets a deadline for the exit interview if a financial institution is not subject to a resident examiner program and prescribes examination standards for financial institutions

Congressman Lynn Westmoreland (GA-03) and Congresswoman Carolyn Maloney (NY-12) introduced H.R. 1941, the Financial Institution Examination Fairness and Reform Act in April 2015. The bipartisan legislation addresses three main concerns about the financial institution examination process of community banks and credit unions: the timeliness of examinations, adherence to examination standards, and the current appeals process. The legislation would make available to financial institutions the information used to make decisions in their examination; codify certain examination policy guidance; establish an Independent Examination Review Office at the Federal Financial Institution Examination Council (FFIEC) to which financial institutions could raise concerns with respect to their examination; and, establish an appeals process before an independent administrative law judge. This bill was passed out of Financial Service Committee on July 29, 2015. On March 18, 2015 Senator Jerry Moran (R-KS) introduced, S. 774, the Financial Institutions Examination Page 7 of 23

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Exam Fairness

STATUS

GCUL POSITION

Fairness and Reform Act. The bill would: - Make available to financial institutions the information used to make decisions in their examination; - Codify certain examination policy guidance; and - Establish an ombudsman at the Federal Financial Institution Examination Council to which financial institutions could raise concerns with respect to their examination. The House bill has 73 co-sponsors. The Senate bill has 23 co-sponsors.

Regulatory Relief

This bill amends the Administrative Procedure Act to revise and expand the requirements for federal agency rulemaking by requiring agencies to base all preliminary and final factual determinations on evidence and to consider the legal authority under which the rule may be proposed, the specific nature and significance of the problem the agency may address with the rule, any reasonable alternatives for the rule, and the potential costs and benefits associated with such alternatives.

Georgia co-sponsors: House: Rep. Lynn Westmoreland (R-3), Rep. Rob Woodall (R-7) and Rep. David Scott (D13) Senate co-sponsors: Senator David Perdue (R) and Senator Johnny Isakson (R) Representative Bob Goodlatte (R -VA), introduced H.R. 185, the Regulatory Accountability Act of 2015 on January 7, 2015. It passed the House on January 13, 2015 by a vote of 250 to 175. The only Georgians to oppose were Johnson, Lewis and David Scott, all other Georgians supported the legislation. The bill requires agencies to publish advance notice of proposed rulemaking in the Federal Register for major rules and for high-impact rules (rules having an annual cost on the economy of $100 million or $1 billion or more, respectively) and for negative-impact on jobs and wages rules and those that involve a novel legal or policy issue arising out of statutory mandates. The notice must include a written statement identifying the nature and significance of the problem the agency may address with a rule, the legal authority under which the rule may be proposed, the nature of and potential reasons to adopt a novel legal or policy position, and a solicitation for written data, views, or arguments from interested persons. Page 8 of 23

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Regulatory Relief

STATUS Additionally, the bill: (1) sets forth criteria for issuing agency guidance that is likely to lead to an annual cost on the economy of $100 million or more, a major increase in cost or prices, or significant adverse effects on competition, employment, investment, productivity, innovation, or ability to compete or guidance that involves a novel legal or policy issue arising out of statutory mandates; and (2) expands the scope of judicial review of agency rulemaking by allowing immediate review of rulemaking not in compliance with notice requirements and establishing a substantial evidence standard for affirming agency rulemaking decisions. The bill has 21 co-sponsors. 20 Republicans and 1 Democrat.

Regulatory Relief

The intent of the legislation is to improve accountability and transparency in the United States financial regulatory system, protect access to credit for consumers, provide sensible relief to financial institutions.

Georgia co-sponsors: Rep. Doug Collins (R-9) Senator Richard Shelby introduced S.1484, The Financial Institution Regulatory Improvement Act of 2015 in June of 2015. FRIA has eight titles and includes a broad range of regulatory relief and other provisions that amend the Dodd Frank Act and several other financial institution laws. While the overall scope of the bill is broad, the individual provisions – especially with respect to regulatory relief – are fairly targeted and many have received bipartisan support in the Senate and House. FRIA would provide, to varying degrees, regulatory relief for FIs of all sizes, tailor the regulatory structure for systemically important banks and begin the restructuring of the Federal Reserve System and the housing finance system - Fannie Mae and Freddie Mac. The bill has 0 cosponsors. Page 9 of 23

GCUL POSITION

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY Regulatory Relief

Legislation that would ensure regulatory rulemaking considers the impact on small businesses. It would ensure complete analysis of potential impacts on small businesses.

STATUS Legislation that would ensure regulatory rulemaking considers the impact on small businesses was introduced on January 26, 2015 by Rep. Steve Chabot (R-OH). The bill known as The Small Business Regulatory Flexibility Improvements Act of 2015 (H.R. 527) would improve and modernize the Regulatory Flexibility Act (RFA), a 1980 law that requires federal agencies to account for the impact of regulation on small businesses. It would ensure complete analysis of potential impacts on small businesses.

GCUL POSITION Support concept

The bill has 21 co-sponsors--19 Republicans and two Democrats. The legislation passed the House by a vote of 260-163 on February 5, 2015. Georgia co-sponsors: Rep. Doug Collins (R-9) Regulatory Relief

Over the last several years, an avalanche of new regulations has greatly impacted the ability of financial institutions of all sizes — credit unions and community banks in particular — to serve their members/customers and communities. Many regulations have been indiscriminately applied to the whole industry whether or not they make economic or practical sense. Regulators should be empowered — and directed — to make sure that rules, regulations and compliance burdens fit the various segments of the industry appropriately.

On June 25, 2015 Rep. Scott Tipton (R-CO) and Rep. Andrew Barr (R-KY) introduced H.R. 2896, “Taking Account of Institutions with Low Operation Risk Act of 2015.” The legislation will reduce regulatory burden for financial institutions with lower risk profiles relative to systemically significant institutions by requiring financial regulators to take risk into account when promulgating regulations.

The House bill has 112 co-sponsors.

Georgia co-sponsors: House: Rep. Jody Hice (R-10)

Page 10 of 23

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY Elimination of Annual Privacy Notice

The bill would amend the Gramm-LeachBliley Act to exempt from its annual privacy notice requirement any financial institution that: • Provides nonpublic personal information only in accordance with specified requirements; and • Has not changed its policies and practices with regard to disclosing nonpublic personal information from those disclosed in the most recent disclosure sent to consumers.

STATUS On January 28, 2015 Reps. Blaine Luetkemeyer (R-Mo.) and Brad Sherman (D-Calif.) introduced a bill that would change annual privacy notice requirements for certain financial institutions. The bill is titled the Eliminate Privacy Notice Confusion Act (H.R. 601). The Eliminate Privacy Notice Confusion Act will make privacy notices sent to consumers by financial institutions more meaningful by eliminating the requirement that the notices be sent annually, and requiring them only to be sent when the privacy policy of the financial institution has changed. Luetkemeyer and Sherman were the chief sponsors of H.R. 749, the “Eliminate Privacy Notice Confusion Act,” during the last Congress. The bill previously passed the House by voice vote in the 112th and 113th Congress. On Feb. 10, 2015 Sen. Jerry Moran (R-Kan.) and Sen. Heidi Heitkamp (D-N.D.) introduced the senate companion bill on the above privacy notification legislation. The Privacy Notice Modernization Act (S. 423) would allow financial institutions that do not share customer information the option to forego delivery of the annual written notice unless there has been a change in the privacy policy. An identical version of the bill was introduced in the last Congress, but because it was not taken up, it needed to be reintroduced in order to be considered by the 114th Congress. During the 113th Congress the bill had 76 cosponsors in the Senate. The bill, H.R. 601, the Eliminate Privacy Notice Confusion Act passed the House by Voice Vote on April 13, 2014. The House bill has 57 co-sponsors. The Senate bill has Page 11 of 23

GCUL POSITION Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Elimination of Annual Privacy Notice

STATUS

GCUL POSITION

50 co-sponsors Georgia co-sponsors: Rep. Lynn Westmoreland (R-3) Senate GA co-sponsors: Senators Isakson and Perdue On March 4, 2015, H.R. 1233 was introduced by Rep. Blaine Luetkemeyer (R-Mo.). That bill entitled Community Lending Enhancement and Regulatory Relief Act of 2015 or the CLEARR Act of 2015 was a compilation of many regulatory relief measures – one of them being the privacy notice issue. H.R. 1233 has 99 co-sponsors. Six Georgians are on this bill: Reps. Buddy Carter (R-1), Westmoreland (R-3), A. Scott (R-8), Collins (R-9), D. Scott (D-13) and Graves (R14). This issue was added to the highway conference bill and was passed by both chambers December 2015 and then signed into law by the President December 4, 2015.

Patent Troll

In recent years, there has been an exponential increase in the use of weak or poorly granted patents by patent trolls to file numerous patent infringement lawsuits against American businesses with the hope of securing a quick payday and this legislation hopes to combat "unfair and deceptive" patent lawsuits.

On January 28, 2015, CUNA and other national trade groups sent a joint letter to Congress outlining concerns about patent trolls and urging Congress to take action against them. The Innovation Act was first introduced in October 2013 and approved by the U.S. House in December 2013, but since it was not passed by the Senate, it needed to be reintroduced to be considered by the 114th Congress. On February 5, 2014 a bill that would combat abusive patent lawsuits was introduced (H.R. 9) by Rep. Bob Goodlatte (R-Va.). The re-introduced version of the bill: Page 12 of 23

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Patent Troll

STATUS • • • •

• •

•

GCUL POSITION

Requires plaintiffs to disclose who the owner of a patent is before litigation, so that it is clear who the real parties behind the litigation are; Requires plaintiffs to actually explain why they are suing a company in their court pleadings; Requires courts to make decisions about whether a patent is valid or invalid early in the litigation process; Requires judges to award attorneys' fees to the victims of a lawsuit when parties bring lawsuits or claims that have no reasonable basis in law and fact. This provision applies to both plaintiffs and defendants who file frivolous claims; Requires the Judicial Conference to make rules to reduce the costs of discovery in patent litigation; Creates a voluntary process for small businesses to postpone expensive patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiffs; and Requires the U.S. Patent and Trademark Office to provide educational resources for those facing abusive patent litigation claims.

On April 29, 2015 a Senate companion bill was introduced by Senator Grassley (R-IA). That bill has 6 co-sponsors. The bill has 27 co-sponsors.

Mortgage Lending

The legislation would exempt mortgage loans made by financial institutions under $10 billion in assets and held in portfolio for three years from RESPA’s escrow requirements; the legislation would also exempt mortgage servicers that service fewer than 20,000 mortgages annually from the requirements of Section 6 of RESPA.

Georgia co-sponsors: none H.R. 1529, The Community Institution Mortgage Relief Act of Support passage 2015, was introduced on March 23, 2015 by Rep. Brad Sherman (D-CA) and would amend the Truth in Lending Act to create a safe harbor from requirements for an escrow or impound account for the payment of taxes and hazard insurance in the case of mortgage loans made by a creditor with consolidated assets of $10 billion or less that holds the Page 13 of 23

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Mortgage Lending

STATUS

GCUL POSITION

loan on its balance sheet for three years after its origination. A creditor shall be deemed to have complied with the threeyear balance sheet requirement if it transfers a loan by reason of its bankruptcy or failure, the purchase of it by another, or by a supervisory act or recommendation from a state or federal regulator. The Consumer Financial Protection Bureau is required to exempt mortgage servicers that service 20,000 or fewer mortgage loans from requirements of the Real Estate Settlement Procedures Act of 1974 pertaining to the servicing of mortgage loans and administration of escrow accounts.

Mortgage Fees

The bill would clarify the definition of points and fees in the Truth in Lending Act as well as exclude title insurance and escrowed homeowner insurance premiums from the cap set for points and fees.

The bill has 2 co-sponsors. Georgia co-sponsors: none On February 3, 2015, The Mortgage Choice Act (H.R. 685), was re-introduced by Rep. Bill Huizenga (R-Mich.). The bill is identical to a version introduced in the 113th Congress. However, the Senate did not act on the legislation so it must be re-introduced for consideration in both chambers this year. The bill would adjust the definition of fees and points in the Truth in Lending Act to ensure greater consumer choice in mortgage and settlement services. Under the current Ability to Repay/Qualified Mortgage rule, points and fees may not exceed 3% of the loan amount. What currently constitutes a "fee" and a "point" toward the cap varies depends on who makes the loan, and what arrangement the borrower makes to obtain title insurance. The bill would clarify those definitions, as well as exclude title insurance and escrowed homeowner insurance premiums from points and fees, making sure those Page 14 of 23

Support

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (Cont.) Mortgage Fees

STATUS

GCUL POSITION

amounts are not counted toward the 3%. The bill has 37 co-sponsors.

Mortgage Loans – TRID

Provide for safe harbor from the enforcement of integrated disclosure requirements for mortgage loan transactions under the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act.

Georgia co-sponsors: Reps. Buddy Carter (R-1) and David Scott (D-13) On July 7, 2015, Senators Tim Scott (R-SC) and Joe Donnelly (D-IN) introduced S. 1711, which would delay the effective date of the TILA-RESPA Integrated Disclosures (TRID) regulation until the end of the year. Like the House companion, introduced earlier this year by Representatives Steve Pearce (R-NM) and Brad Sherman (D-CA), H.R. 2213, the legislation would hold harmless institutions that show a good faith effort toward complying with the rule. The House Bill has 44 co-sponsors Georgia co-sponsors: Rep. Lynn Westmoreland (R-3) The Senate bill has 18 co-sponsors.

Mortgage Loans – TRID

The bill would delay the implementation of the CFPB’s TILA-RESPA integrated disclosure (TRID) rule and create a safe harbor protecting credit unions from legal recourse.

Georgia co-sponsors: Senator Johnny Isakson and Senator David Perdue Legislation has been introduced that will delay the implementation of the Consumer Financial Protection Bureau’s new mortgage rule, and create a safe harbor protecting credit unions from legal recourse through Feb. 1, 2016. The bill concerns the CFPB’s Truth in Lending ActReal Estate Settlement Procedures Act integrated disclosure (TRID) rule, which is effective starting Oct. 3. H.R.3192: the “Homebuyers Assistance Act,” introduced by Reps. French Hill (R-AK) and Brad Sherman (D-CA) would prevent regulators from taking supervisory actions against lenders, and would shield lenders from a private right of Page 15 of 23

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Mortgage Loans - TRID

STATUS

GCUL POSITION

action during the transition, provided the lenders make good faith efforts to comply with TRID. The legislation passed the House on October 7, 2015 overwhelmingly (vote 303 to 121) and now awaits action in the Senate. All Georgia Republican members voted for the bill and all Georgia Democratic members voted against the legislation. The bill has 1 co-sponsors. Georgia co-sponsors: none

Data Breach and Cybersecurity

On January 28, 2015, Reps. Joe Barton (R-TX) and Bobby Rush (D-IL) re-introduced the Data Accountability and Trust Act (DATA Act) in the House of Representatives. The bill (H.R. 580), which has been introduced several times in previous years, would provide a nationwide data security standard, backed by FTC enforcement and civil penalties, as well as provisions requiring notification to affected individuals in the event of a data breach.

Federal data breach legislation must contain strong national data protections and consumer notification standards, combined with effective enforcement provisions, Legislation should contain the following five principles: • Strong national data protection and consumer notification standards with effective enforcement provisions applicable to any party with access to important consumer financial information;

Meanwhile, Sen. Bill Nelson (D-FL) introduced a similar bill, the Data Security and Breach Notification Act (S. 177) in the Senate. The Senate bill is also a re-introduction of a previous bill, which would provide FTC-enforced security standards and individual breach notifications. The House bill has 4 co-sponsors. The Senate bill has 1 co-sponsors.

•

Banks and credit unions are already subject to robust data protection and notification standards. These GrammLeach-Bliley Act requirements must be recognized;

•

Inconsistent state laws and regulations should be preempted in favor of strong

Georgia co-sponsors: none

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FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY

STATUS

federal data protection and notification standards;

(cont.) Data Breach and Cybersecurity

Data Breach and Cybersecurity

GCUL POSITION

Legislation that would apply data security standards and consumer notification requirements to all industries that handle sensitive information and would provide meaningful and consistent protection for consumers nationwide. And the legislation recognizes that any standards should be appropriate for the size and complexity of the entity.

S. 961 introduced by Senators Carper (D-DE) and Blount (R-MO) on April 15,2015 and H.R. 2205 introduced by Randy Neugebauer (R-TX) and Representative John Carney (D-DE) on May 1, 2015 attempt to set a federal standard to protect consumer data across the payment system currently does not exist. The legislation is known as The Data Security Act of 2015. With the recent data security breaches at major retailers that have put millions of consumers at risk, the need to pass legislation to establish such a standard could not be more evident. Protecting consumer information is a shared responsibility of all parties involved. Page 17 of 23

•

In the event of a breach, the public should be informed where it occurred as soon as reasonably possible to allow consumers to protect themselves from fraud. Banks and credit unions should be able to inform their customers and members about the information regarding the breach, including the entity at which the breach occurred; and

•

The costs of a data breach should ultimately be borne by the entity that incurs the breach, since credit unions and banks bear a disproportionate burden in covering the costs of breaches occurring beyond their premises.

Support passage

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY

STATUS

GCUL POSITION

The Data Security Act of 2015 would ensure that all entities that handle sensitive financial and personal information have common-sense safeguards and processes in place to protect data and provide notice to consumers in the event of a breach. The bills call for a uniform national data security standard and date notification standard that would apply to merchants… the standards essentially are a mirror image of the Gramm-Leach-Bliley Act (GLBA). House bill passed out of committee on 12, 9, 2015. The House bill has 41 co-sponsors. The Senate bill has 2 co-sponsors. Georgia House co-sponsors: Rep. Jody Hice (R-10) and Rep. David Scott (D-13)

Operation Choke Point Repeal

Legislation that limits federal regulators' ability to pressure financial institutions to terminate specific accounts or restrict services to consumers.

Georgia Senate co-sponsors: none On February 5, 2015 Rep. Blaine Luetkemeyer (R-Mo.) introduced the Financial Institution Customer Protection Act (H.R. 766), which would restrict enforcement of the U.S. Department of Justice's (DOJ) Operation Choke Point. Passed the House on February 4, 2016. Luetkemeyer's bill limits the ability of federal regulators to pressure a depository financial institution to terminate a specific member account. It would also prevent regulators from otherwise restricting or discouraging a depository institution such as a credit union from entering into or maintaining a financial services relationship with a specific customer unless certain criteria is met. Operation Choke Point was introduced by the DOJ in 2013, and allows its Financial Fraud Task Force to investigate whether financial institutions and payment-processing companies were enabling fraudulent activity. Page 18 of 23

Support

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Operation Choke Point CFPB Reform

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The bill has 30 co-sponsors. Georgia co-sponsors: none The legislation amends the Inspector General Act of 1978 to establish an independent inspector general for the CFPB. The position would be appointed by the president and then confirmed with the advice and consent of the Senate. There are currently more than 30 federal departments or agencies that have an independent inspector general.

On February 12, 2015, Rep. Steve Stivers (R-Ohio), along with Rep. Tim Walz (D-Minnesota), re-introduced the Bureau of Consumer Financial Protection-Inspector General Act of 2015, (H.R. 957) a bill that would create the position of an independent Inspector General for CFPB. Previous legislation introduced in early 2014 would increase oversight and accountability of the CFPB, including switching the leadership of the bureau from a sole director, Richard Cordray, to a commission of five individuals. While it is believed this version of the Bill has a greater chance of making it to the House floor for a vote, especially with backing from some House Democrats, it’s highly uncertain the bill can pass in the Senate where Republican control is not as strong. It is also considered highly unlikely that President Obama would sign the bill, even if it were passed. The House bill was reported out of committee on September 30, 2015. Near the end of February, Sen. Rob Portman (R-Ohio) reintroduced in the Senate a companion bill to the Stivers bill, (S.510) that would create the position of an independent inspector general at the Consumer Financial Protection Bureau. The House bill has 10 co-sponsors. The Senate bill has 15 co-sponsors. Georgia co-sponsors: House - none and Senate: Johnny Isakson

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Support concept

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY CFPB Reform

To amend the Consumer Financial Protection Act of 2010 to strengthen the review authority of the Financial Stability Oversight Council

STATUS On March 4, 2015 H.R. 1263, the Consumer Financial Protection Safety and Soundness Improvement Act of 2015 was introduced by Rep. Sean Duffy (R-WI.) The legislation would authorize the Financial Stability Oversight Council (FSOC) to stay or set aside any regulation of the Consumer Financial Protection Bureau (CFPB) upon a determination by a majority of its members that the regulation is inconsistent with safe and sound operations of financial institutions and to require the CFPB to take into consideration the impact of its rules on insured depository institutions. The House bill has 3 co-sponsors. Georgia co-sponsors: House - none

Amends the Consumer Financial Protection Act of 2010 to replace the Consumer Financial Protection Bureau as an independent bureau within the Federal Reserve System, with an independent Financial Product Safety Commission that is to regulate the offering and provision of consumer financial products or services. States that the Commission (like the current Bureau) shall be composed of five members with strong competencies and experiences regarding consumer financial products and services, each to serve for a term of five years, and appointed by the President by and with the advice and consent of the Senate.

H. R. 1266, was introduced on March 4, 2015 by Rep. Randy Neugenauer (R-TX) and is known as the Financial Product Safety Commission Act of 2015. It amends the Consumer Financial Protection Act of 2010 to make the Bureau of Consumer Financial Protection an independent Financial Product Safety Commission that is to regulate the offering and provision on consumer financial products and would be composed of 5 members appointed by the President.

The House bill has 52 co-sponsors. Georgia co-sponsors: 2 - Reps. Lynn Westmoreland (R-3), Rep. Jody Hice (R-10) and David Scott (D-13)

Prohibits the Chair of the Commission from submitting requests for estimates Page 20 of 23

GCUL POSITION Support concept

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) CFPB Reform

related to appropriations without prior Commission approval.

CFPB Reform

This bill amends the Consumer Financial Protection Act of 2010 to change the source of funding for the Consumer Financial Protection Bureau (CFPB) from Federal Reserve System transfers to annual appropriations. Under current law, the transfers from the Federal Reserve System permit the CFPB to be funded outside of the annual congressional appropriations process.

STATUS

Senator David Perdue (R) introduced, S.1383 entitled the ‘‘Consumer Financial Protection Bureau Accountability Act of 2015,” on May 19, 2015. The bill would make the CFPB subject to the congressional appropriations process. Currently, pursuant to Dodd-Frank, the CFPB is entitled to receive automatic annual funding through transfers from the Fed that are capped at a fixed percentage of the Fed’s total 2009 operating expenses.

GCUL POSITION

Support concept

The introduction of the bill follows Senator Perdue’s attempt in March 2015 to make the CFPB subject to the congressional appropriations process through an amendment to the Senate’s 2015 Budget Resolution. The Senate bill has 17 co-sponsors. Georgia co-sponsors: Senator David Perdue and Senator Isakson

CFPB Exemption Small Institutions

Provides an exemption from rules and regulations of the Bureau of Consumer Financial protection for community financial institutions with assets 10 Billion and below.

On July 14, 2015, Rep. Roger Williams (R-TX), introduced H.R. 3048. The legislation would exempt all financial institutions of $10 billion or below in assets from the rules and regulations promulgated by the CFPB. Section 1022 of the Dodd-Frank Act and a number of the enumerated consumer laws expressly authorize the Bureau to provide exemptions from the requirements of statutes or implementing regulations generally or the requirements of certain provisions specifically. These various statutory provisions individually and together grant broad authority to the Bureau and constitute a strong legal framework to support the agency’s reasonable use of its exemption Page 21 of 23

Support

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) CFPB Exemption Small Institutions

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authority, but to date CFPB hasn’t been using the authority. Under the bill, the Bureau could revoke an exemption to a specific rule relating to a specific class of community financial institution if the CFPB makes a detailed, written finding that the class of community financial institutions has engaged in a pattern or practice of activities that were detrimental to the interests of consumers. The bill also allows the Bureau to change a rule or regulation issued prior to the date of enactment if the effect of the change expands a current exemption or reduces the costs and the regulatory burden associated with complying with the rule or regulation on credit unions or community banks. The bill has 45 co-sponsors. Georgia co-sponsors: Re. Lynn Westmoreland (R-3)

Banking Specific Legislation Bank Regulatory Burden Relief

Legislation that would exempt community banks, with fewer than $10 billion of assets, from what would be considered unnecessary or burdensome requirements.

On July 16, 2015, Senator Susan Collins (R-Maine) introduced, S. 1799, the Community Bank Sensible Regulation Act of 2015. The legislation seeks bank regulatory parity with NCUA existing authority to exempt small credit unions from unnecessary regulatory burden. The bill would provide this authority to the FDIC, the Office of the Comptroller of the Currency, and the Federal Reserve, and would apply to small community financial institutions with less than $10 billion in assets. The bill was added to a financial service appropriations bill last week and would allow financial regulators to exempt community banks, with fewer than $10 billion of assets, Page 22 of 23

Reviewing

FEDERAL LEGISLATIVE & KEY REGULATORY OVERSIGHT ISSUES 114th CONGRESS – July 25, 2016 ISSUE SUMMARY STATUS TCUL POSITION ISSUE SUMMARY (cont.) Bank Regulatory Burden Relief)

STATUS

GCUL POSITION

from what would be considered unnecessary or burdensome requirements. The bill has 0 co-sponsors. Georgia co-sponsors: none

Note: Any referenced bills above can be accessed by logging into www.congress.gov and entering the bill number. If you have any questions on the above legislation, contact either Cindy Connelly, Sr. VP Government Influence or Brandee Bickle, Senior Advocacy Officer at 800-768-4282.

Page 23 of 23

Updated July 15, 2016

TOP FEDERAL CREDIT UNION ADVOCACY ISSUES Credit Union Powers 1. Field of Membership 2. Member Business Lending 3. Supplemental Capital Examination and Supervision 1. Regulatory Relief 2. Examination Issues 3. Incentive Based Compensation 4. Credit Impairment 5. NCUA Budget 6. Operation Choke Point 7. Incentive Based-Compensation Consumer Protection 1. Regulatory Relief 2. Debt Collection 3. Fiduciary 4. Overdraft Protection Housing 1. Federal Home Loan Bank Membership 2. Home Mortgage Disclosure Act Payments 1. Merchant Data Breach 2. Interchange Fees 3. Patents

4. State Credit Union Act Modernization 5. Prize-Linked Savings 6. Public Deposits

8. 9. 10. 11.

Overhead Transfer Rate Risk-Based Capital Service to Marijuana Businesses Puerto Rico

5. 6. 7. 8. 9.

Overtime Pay Payday Lending Telephone Consumer Protection Act Arbitration Transportation Network Companies

3. Mortgage Lending Legislation 4. TILA / RESPA

Tax and Budget Policy 1. Federal Tax Status 2. State Tax Battles 3. Appropriations Process

1

Updated July 15, 2016

Credit Union Powers Field of Membership (NCUA) Status: Proposed rule comment deadline closed February 8. Final rule pending; possibly on the September NCUA board agenda. The proposal would give FCUs a broader menu of field of membership options to respond to changes in the marketplace and technology and advancement of state credit union charters. CUNA urged NCUA to reform these regulations and made dozens of recommendations. NCUA’s proposal includes several CUNA-suggested changes, including: • Expanding the population limit in a rural district from 250,000 to 1 million; • Allowing a Congressional district to serve as a “Well Defined Local Community,” thus allowing credit unions in states with only one Congressional district to serve the entire state; • Adding flexibility to the use of “Core Based Statistical Areas” by eliminating the need to serve the “core” and allowing areas to be combined; and • Streamlining the paperwork process for adding groups with 3,000 or more potential members to a multiple group credit union. Overall, we believe the proposal is positive for credit unions. CUNA has commented on the proposal and believes the NCUA can and should do more such as eliminating the population limit for a Metropolitan Statistical Area, improving conversion processes, and reinstating a narrative process for purposes of establishing a well-defined Community. Member Business Lending (NCUA) Status: NCUA finalized the MBL rule on February 18. In June of 2015, NCUA issued a proposed MBL rule designed to give credit unions greater flexibility and autonomy in offering commercial loans. We strongly support the proposed overhaul of NCUA’s current MBL regulation. The proposal was finalized in February 2016. The final rule: • Changed the MBL regulation from the current prescriptive approach to a more principle-based methodology. While this change provides more flexibility and autonomy to credit unions, it emphasizes and requires sound risk management practices for commercial lending. • NCUA retains rigorous and prudential supervision of all credit union commercial lending activities. • The MBL cap is presented as a multiple (1.75 times) of net worth which is more closely aligned with the language in the FCU Act. (Note: This proposed change would not increase the cap.) • There is a new definitions intended to help differentiate commercial loans subject to the MBL cap from commercial loans that invoke the safety and soundness provisions but are not otherwise subject to the cap. • Increased oversight by credit union boards is required to ensure policies and procedures are consistent with the rules and principles of safety and soundness. • Examination of loans and policies will be more thorough. • The personal guarantee requirement was eliminated in is effective now. The rest of the rule has a January 1, 2017 implementation date. Member Business Lending (Congress) Status: H.R. 1188 was introduced in the House/S. 2028 was introduced in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs.

2

Updated July 15, 2016

Unfortunately, since 1998, credit unions have been subject to an arbitrary statutory cap on business lending of 12.25% of a credit union’s total assets; as a result, today, many credit unions are rapidly approaching the cap while others choose not to engage in business lending because of the cap. CUNA continues to urge Congress to allow those credit unions approaching this cap to apply to NCUA for authority to lend beyond the cap—up to 27.5% of total assets (H.R. 1188/S. 2028). This approach, targeted toward well-capitalized credit unions with demonstrated success in business lending, enjoys the support of the Department of Treasury, which worked with NCUA to help develop proposed legislation. If the cap is not increased, it will jeopardize the ability of credit unions at or approaching the cap to help small businessowning members raise capital. On the other hand, permitting credit unions with experience in business lending to expand lending to their small business-owning members, could result in an additional $16 billion to small businesses in the first year, helping them to create more than 150,000 new jobs. Other policy changes could help spur capital formation in specific sectors, such as residential real estate. For example, whereas banks issuing loans secured by non-owner occupied residential properties with 1-4 units may count them as residential loans, credit unions that make identical loans must treat them as commercial loans, which count against the cap. Changing this policy not only would bring parity between credit unions and banks offering identical products but it would spur significant additional investment in affordable rental properties. CUNA supports the efforts by Representative Ed Royce and Representative Jared Huffman to fix this disparity (H.R. 1422). Supplemental Capital (NCUA and Congress) Status: Representatives Peter King (R-NY) and Brad Sherman (D-CA) introduced H.R. 989 in the House. NCUA is still working on a supplemental capital rule for purposes of its risk-based capital rule. H.R. 989 would permit the NCUA Board to allow credit unions to accept supplemental forms of capital for purposes of complying with the statutory prompt corrective action requirements, if the Board’s action does not alter the cooperative ownership structure of credit unions and is subordinate to other claims against the credit union. The legislation enjoys the support of NCUA. H.R. 989 will provide credit unions with an additional way to raise capital other than retained earnings without putting in jeopardy the “one member, one vote” principle that is the bedrock of the credit union ownership structure. As credit unions emerge from the financial crisis, this legislation would improve the safety and soundness of credit unions by allowing them to develop a supplemental cushion to reduce risk to the National Credit Union Share Insurance Fund. State Credit Union Act Modernization Status: Improving state credit union laws is at the top of the agendas of many credit union leagues. Many leagues are seeking to decrease credit unions' regulatory burdens and empower credit unions with increased authorities and greater parity with federal credit unions and other state financial institutions. Legislative proposals include, among others, field of membership expansions, authority to hold public funds and director compensation. When modernizing their credit union acts, leagues undergo an intricate process. The process involves a great deal of input from member credit unions and discussions with credit union regulators. Many leagues rely on CUNA’s Model Credit Union Act to help frame issues and initiate discussions within the credit union system and among public policymakers. The Model Credit Union Act provides model language for all 47 state credit union acts. To accomplish this, many of the provisions are general to allow for more specific editing by each league. Some provisions offer alternatives depending on how credit unions operate in a particular state and some provisions are very progressive. Prize-Linked Savings (State) Status: Twenty (20) states expressly allow prize-linked savings programs: Arizona, Arkansas, Connecticut, Illinois, Indiana, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New York, North Carolina, Oregon, Rhode Island, South Carolina, Virginia, and Washington.

3

Updated July 15, 2016

Prize-linked savings programs motivate people to save money by offering them prizes linked to their savings accounts. The concept of prize-linked savings was pioneered by Harvard Business School professor Peter Tufano and his nonprofit, Doorways to Dreams Fund (D2D). In 2009, D2D collaborated with the Michigan Credit Union League and others to launch a successful prize-linked savings program. Michigan credit unions were able to do this because a provision in the Michigan Credit Union Act allows savings raffles. Despite Michigan’s economy, 11,666 members at eight Michigan credit unions sa ved $8.56 million in the first year of the program. Most of the savings comes from first-time members and under-banked members. Public Deposits (State) Status: Twenty-five (25) states have laws that expressly permit credit unions to accept public funds and permit government entities to deposit public funds in credit unions: Arizona, California, Connecticut, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Washington and Wisconsin. Public deposits are public funds deposited in a financial institution by the treasurer of a state or local government, or any agency thereof. State and local governments deposit billions of dollars in financial institutions, primarily banks. Credit unions want the ability to accept these deposits; however, (i) some state credit union acts do not allow credit unions to accept public deposits and (ii) some state laws preclude government entities from depositing funds in credit unions. Because credit unions carry similar levels of deposit insurance as banks and often pay higher interest rates on deposits than banks, state and local governments can benefit from a choice of where they deposit their funds. Allowing credit unions to accept public deposits is in the public interest because it could spur competition and lead to higher earnings for public entities. Additionally, allowing credit unions to accept public funds could reduce deposit risk for state treasurers by spreading the risk of such deposits over a greater number of financial institutions.

Key Accomplishments – 2016 • • •

Field of Membership: More than 11,000 comment letters submitted. Member Business Lending: CUNA-supported rule finalized. State Credit Union Act Modernizations: Modernizations enacted in Alabama, Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Louisiana, Michigan, Missouri, Virginia and Wisconsin.

4

Updated July 15, 2016

Examination and Supervision Regulatory Relief (NCUA) Status: Continuing advocacy efforts to achieve regulatory relief, provisions included in Jeb Hensarling's Financial CHOICE Act reforms to Dodd-Frank. Regulatory relief continues to be a significant issue of concern for credit unions, Leagues, and CUNA. Credit unions must comply with a number of new and revised requirements from not only NCUA and the CFPB, but also from the Federal Reserve Board, the Financial Accounting Standards Board, and others. Credit unions are rightly concerned about the range of rules they are facing. CUNA continues to push for regulatory relief by urging NCUA to refrain from issuing even more regulations and to address examination concerns, and by seeking regulatory improvements such as eliminating restrictions associated with field of membership that are not statutorily required. In Title 1 of Financial Services Chairman Jeb Hensarling's Financial CHOICE Act, credit unions with a leverage ratio above 10 percent would have an option to operate under reduced regulatory burden. This would include relief from NCUA's interest rate risk, liquidity requirements, and risk-based capital requirements. Examination Issues (NCUA and Congress) Status: Extended Exam Cycle Likely in 2017, NCUA Studying More Extensive Overhaul to Exam and Supervision Process. Much progress has been made on an extended exam cycle. NCUA Chairman Metsger, in a letter to Jeb Hensarling, Chairman of the House Financial Services Subcommittee, stated that his goal was to have the extended exam cycle in place for the 2017 exam cycle. The letter was prompted by Chairman Hensarling’s announcement last week that the Financial CHOICE Act would include, among many other important provisions, an 18-month exam cycle for certain credit unions. Also, Rep. Frank Guinta (R-NH) introduced H.R. 5419 which would also amend the Federal Credit Union Act to extend the NCUA’s examination cycle to 18 months. NCUA is forming a working group called the Exam Flexibility Initiative, which has the goal to recommend broader changes to NCUA’s examination and supervision program. This group is to look at all aspects of the supervision process including the length and scoping of examination, coordination with state regulators and other issues. NCUA has told CUNA staff that their long term goal is to completely rethink and reform the exam process. CUNA has started a Supervisory Improvement Process initiative aimed at working with NCUA over the next several years as the agency updates its supervision, examination process and systems used for supervision. CUNA will work with all stakeholders to ensure that NCUA receives input from as many stakeholders as possible. Credit unions continue to alert us to a number of exam-related issues, including examiners frequently directing credit unions to take actions without providing the authority for such actions. When this occurs, credit unions often feel examiners are acting arbitrarily and without justification. While examination concerns seem to be abating in areas across the country, credit unions continue to have concerns that the appeals process and training for examiners are inadequate and that NCUA should address these concerns. CUNA will continue to push reforms of these areas with the agency. Legislation pending in both chambers (the Financial Institution Examination Fairness and Reform Act, H.R. 1941/S. 775) would establish an independent ombudsman to which financial institutions could raise concerns with respect to their examination and establishes an independent appeals process before an administrative law judge. The bill passed the

5

Updated July 15, 2016 House Financial Services Committee 45-13; Section 104 of the Shelby bill includes similar language. The Hensarling proposal for regulatory reform also includes H.R. 1941. Credit Impairment (FASB) Status: Final standard issued in June 2016. In June, the Financial Accounting Standards Board (FASB) issued its changes to its accounting standard for determining credit impairment on loans and other financial instruments. The final standard delays by one year the effective date tentatively agreed on during a meeting last fall; the original proposal did not set forth a possible effective date. The impairment standard will be effective for credit unions (and other private companies) for annual periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. This is a big win for CUNA, which urged FASB to provide credit unions with at least three years (from issuance of a final standard) to comply with the changes. In addition to the delayed effective date, FASB made several other positive changes to the standard since it was initially proposed three and a half years ago. In particular, during a meeting earlier this month, FASB announced changes that will provide additional flexibility, stating that there is no one methodology that entities must use. FASB’s intent is that each institution apply the method that is appropriate for its portfolio based on the knowledge of its business and processes. This is a major improvement that CUNA specifically advocated for in a March letter we sent with the Community Bankers of America (ICBA) to FASB Chairman Russell Golden. Also in March, CUNA initiated its Grassroots Action Center to urge credit unions to contact Golden directly with their concerns, resulting in over 1,000 individual letters sent to the standard-setter. The credit impairment standard will implement the CECL (current expected credit loss) approach for determining credit impairment. This contrasts with the current method because instead of using information on past performance the CECL model would require reporting entities, including credit unions, to estimate the present value of cash flows associated with all loans and other assets that are not expected to be collected over the life of the loan or asset. National Credit Union Administration Budget (Congress) Status: H.R. 2287 was voted out of the House Financial Services Committee (40-16). S. 924 was introduced in the Senate and referred to the Banking, Housing, and Urban Affairs Committee. H.R. 2287/ S. 924, the National Credit Union Administration Budget Transparency Act would bring transparency and accountability to the National Credit Union Administration (NCUA) budgeting process by requiring the agency to hold a public hearing and allow for an open comment period where stakeholders can submit comments. The National Credit Union Administration Budget Transparency Act would direct the NCUA to establish a process by which the public, including members of the credit union community, may examine and comment on NCUA’s proposed annual budget prior to adoption. Additionally, this legislation would ensure that members of the NCUA Board, who must vote to adopt the annual budget, have adequate opportunity to review specific expenditures and overall methodology in order to make an informed decision as to whether the budget as proposed accurately reflects the needs of the agency. This process would increase transparency and accountability at the agency, and engender public trust, thereby strengthening and supporting the agency’s mission. In July 2015, the Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing with then-NCUA Chairman Debbie Matz on the agency’s budget process. During the hearing members of the subcommittee repeatedly pointed to a lack of transparency, bloated budgets, and dissatisfactory explanations from NCUA as a reason that passage of H.R. 2287 is necessary. The NCUA budget provision is included in Financial Services Chairman Jeb Hensarling's Financial CHOICE Act proposal. Operation Choke Point (Congress) 6

Updated July 15, 2016

Status: H.R. 766 passed House 250-169, Senate companion S. 2790 referred to Banking Committee. Operation Choke Point is a Department of Justice initiative that pressures financial institutions to terminate or restrict accounts with certain types of businesses considered "high risk" (e.g., payday lenders, gun vendors, pawn shops). H.R. 766/S. 2790 would limit Operation Choke Point's reach. The legislation would limit Federal banking regulators’ ability to discourage or restrict depository institutions from entering into or maintaining a financial services relationship with specific customers unless certain criteria are met. The legislation would also limit regulators’ ability to pressure financial institutions to terminate customer accounts, requiring regulators to have a material reason for termination that is not based solely on ideological reasoning. The bill passed the House and is awaiting Senate action. H.R. 766 is also included in the Hensarling Financial CHOICE Act regulatory reform package. Incentive-Based Compensation (NCUA) Status: The comment period closes July 22. The Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); Federal Housing Finance Agency (FHFA); National Credit Union Administration (NCUA); and U.S. Securities and Exchange Commission (SEC) (Agencies) are seeking comment on a joint proposed rule that revised the proposed rule published by the agencies on April 11, 2011 that regulates incentive based compensation at financial institutions. The Agencies are required by section 956 of the Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to jointly issue the proposed rule. The proposed rule would (1) prohibit incentive-based payment arrangements that the Agencies determine encourage inappropriate risks by certain financial institutions by providing excessive compensation or that could lead to material financial loss; and (2) require those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate Federal regulator. The proposed rule applies to financial institutions, including credit unions that have $ 1 billion or more in assets a required by the Dodd Frank. These “covered” financial institutions or “covered” credit union (CCU) are divided into three tiers referred to levels by proposed regulation. The levels are: • Level 1 - greater than or equal to $250 billion • Level 2 - greater than or equal to $50 billion and less than $250 billion • Level 3 - greater than or equal to $1 billion and less than $50 billion Level 3 credit unions will mainly be subject to disclosure of incentive based compensation plans to regulators for review. Level 2 credit unions will be subject to deferral and clawback requirement for parts of incentive compensation over time for certain defined senior officials and significant risk takers. Overhead Transfer Rate (NCUA) Status: The comment period closed on April 26. The NCUA Board recently published for notice and comment for the first time the NCUA Operating Fee methodology as well as the current methodology used to determine the Overhead Transfer Rate. NCUA's operating budget has two primary funding mechanisms: 1. 2.

An Overhead Transfer which is funded by both federal and federally insured state chartered credit unions; and Annual Operating Fees charged only to Federal Credit Unions.

CUNA will work to ensure that the methodology used to fund NCUA's operating budget is established consistent with fairness to state and federal credit unions and the Federal Credit Union Act and only support those expenses to the National Credit Union Share Insurance Fund that are legitimate substantiated "insurance-related costs. In our comment letter, we urged the NCUA to ensure a fair distribution of the charges for the supervision of credit unions consistent with the FCU and proposed an alternative method that properly allocates charges pursuant to the 7

Updated July 15, 2016 FCUA. The OTR has dramatically increased as well as NCUA's overall budget, yet the Operating Fee for Federal Credit Unions has declined. NCUA should rely more on state examiners and implement the extended exam cycle which will further reduce its budget. CUNA strongly advocates that the NCUA should not benefit a Federal credit union over a State-chartered credit union or a State-chartered credit union over a Federal credit union and should adjust the OTR and Operating Fees accordingly. Risk-Based Capital (NCUA) Status: Final rule issued in October 2015. The NCUA Board voted 2 to 1 to finalize its second Risk-Based Capital (RBC2) proposal. As proposed, this final rule is effective on Jan. 1, 2019. This extended implementation timeline is something that CUNA pushed hard for and is glad to see. Upon the NCUA's final vote, CUNA President/CEO Jim Nussle said, “Make no mistake—CUNA firmly believes the NCUA’s risk-based capital rule is a solution in search of a problem. Since the initial proposal 20 months ago, CUNA and the Leagues together executed one of the most coordinated and successful advocacy campaigns in the past 15 years to ensure the best possible result for credit unions in the final rule. Without our advocacy efforts, there is absolutely no question that the final rule would have been much worse for credit unions.” The NCUA identified the following as the most significant changes the final rule is making: •

• • •

Reducing the effective weight for equity investments in CUSOs, perpetual contributed capital at corporate credit unions, and certain other higher risk equity investments to 100% if the total equity exposure is less than 10% of the sum of the credit union's capital elements of the RBC ratio numerator. The NCUA estimates 95% of credit unions with such investments will receive a lower risk weight; Reducing the risk weight to zero percent for share-secured loans where the shares securing the loan are on deposit at the credit union; and Allowing a lower risk weight for certain charitable donation accounts. The NCUA plans a separate proposal for supplemental capital, which it says will final before the RBC2 implementation in 2019. We are glad to have the supplemental capital rule in place by the effective date of the RBC rule, in order to allow supplemental capital for purposes of RBC compliance. We also appreciate Chair Matz’s statement that NCUA is not currently planning a separate interest rate risk rule.

In our broad advocacy on RBC, we sought removal of the capital adequacy provisions, reduction in a number of the risk weights, further explanation of the conditions under which goodwill could be included in the risk-based capital ratio, and delayed implementation until 2021. While we are disappointed that NCUA kept the “capital adequacy” requirement, we will be pushing for examiner guidance and training to place some boundaries around “this wild card capital requirement.” We expect NCUA will issue guidance on the new rule by early 2018, and NCUA will not be examining for the final rule until 2019. Service to Marijuana Businesses (Congress) Status: H.R. 2076 was introduced in the House/S. 1726 was introduced in the Senate. Marijuana businesses operating under state laws that have legalized medicinal or recreational marijuana for the most part have been denied access to the mainstream financial system because institutions that provide financial services can be prosecuted under federal law. This has led many of these businesses to operate using large amounts of cash, creating safety risks and making taxation difficult. Legislation introduced in the House and the Senate provides a safe harbor for depository institutions providing financial services to a legitimate marijuana-related business, prohibiting a federal banking regulator from: 1.

Terminating or limiting the deposit or share insurance of a depository institution solely because it provides financial services to a marijuana-related legitimate business; or 8

Updated July 15, 2016 2.

Prohibiting, penalizing, or otherwise discouraging a depository institution from offering such services.

Financial institutions would still be required to comply with current Financial Crimes Enforcement Network (FinCEN) guidance. Puerto Rico (Congress) Status: Congress is expected to enact legislation addressing the Puerto Rico debt crisis this year. Puerto Rico credit unions are generally healthy but hold a significant amount of municipal and commonwealth debt. These credit unions are not CUNA members and most are not insured by the NCUSIF. Nevertheless, they have reached out to us and the New York League to help advocate with them in Congress and before NCUA. The credit union system is exposed to reputational risk if these credit unions fail as a result of the debt crisis. CUNA staff have been in regular contact with the leaders of the Puerto Rican system and have been assisting them in their advocacy efforts. In general, they seek a resolution that would allow them to renegotiate the debt with the government.

Key Accomplishments – 2016 • • • • •

Operation Choke Point: CUNA-supported legislation passed House of Representatives. Overhead Transfer Rate: Methodology published by NCUA, Comment letter filed. Examination Frequency: Moved NCUA from “no” to “working on how to implement extended exam cycles for healthy credit unions.” Supervisory Improvements: NCUA has announced efforts to modernize the call report and the examination process. NCUA Budget: NCUA Chairman Metsger has announced that there will be a board briefing on the NCUA budget at the October board meeting. CUNA and other stakeholders will be invited to participate.

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Updated July 15, 2016

Consumer Protection Regulatory Relief (CFPB) Status: Continuing advocacy efforts to achieve regulatory relief. Regulatory relief continues to be a significant issue of concern for credit unions, Leagues, and CUNA. Credit unions must comply with a number of new and revised requirements from not only NCUA and the CFPB, but also from the Federal Reserve Board, the Financial Accounting Standards Board, the Department of Labor, the Federal Communications, Commission, the Federal Trade Commission and others. Credit unions remain concerned about regulatory overlap, and differing agendas from several different federal regulators, which will bring additional compliance burdens to credit unions in 2016. CUNA continues to push for regulatory relief by urging the CFPB to make greater use of its exemption authority for credit unions. In June, House Financial Services Chairman Jeb Hensarling unveiled a package of reforms to Dodd- Frank. The proposal includes several CUNA-supported provisions that have previously passed the Financial Services Committee, including changing the CFPB leadership to a five-person commission and bringing the Bureau under the appropriations process. The reforms also include the TAILOR Act (instructing the CFPB to account for size and risk when regulating entities), the Operation Choke Point provision, giving flexibility to credit unions to serve their me mbers' mortgage needs by allowing mortgage loans held in portfolio to be exempt from the Qualified Mortgage (QM) rules imposed by Dodd-Frank, and the Examination Fairness provision. Debt Collection (CFPB) Status: Field hearing scheduled for July 28; SBREFA Panel expected later in 2016. In fall of 2013, the CFPB released an Advance Notice of Proposed Rulemaking for the Fair Debt Collection Practices Act, which included questions about whether first party creditors should be subject to this statute. The Bureau also widely circulated a survey to consumers seeking information about their experiences with debt collection. The CFPB has indicated they intend to hold a SBREFA panel before releasing a proposed rule on debt collection. We expect a SBREFA panel will be held later in 2016, with a proposed rule following shortly after that. The CFPB has scheduled a field hearing for July 28. CUNA opposes any regulation of the debt collection efforts of credit unions and other first-party debt collectors. CUNA agrees that unscrupulous business practices, including those performed by certain third-party debt collection agencies, should not be tolerated. However, to address those issues, we urge the CFPB to utilize a targeted approach that focuses on third-party debt collectors that engage in abusive and/or illegal collection efforts. Fiduciary (Department of Labor) Status: Final rule was issued on April 6. The DOL finalized a rule defining who is a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974, (ERISA) which included adding brokers and advisers providing advice to individual retirement accounts (IRA). CUNA raised concerns with the DOL about the overly broad definition in the proposed rule about what is considered investment advice, and took issue with the proposed “education carve out” for the rule which we did not believe went far enough. While CUNA remains aware that parts of this rule will add compliance burdens to credit union service organizations (CUSO), and potentially credit unions offering certain product and services, we are pleased that the DOL considered some of our concerns and made some important modifications to the final rule. In the

10

Updated July 15, 2016 final rule the DOL, with respect to investment education in particular, describes in detail four broad categories of non fiduciary educational information and materials. It also provides some specific examples of what it considered advice. We believe this change will help credit unions continue to have conversations with their members about financial education, and have the ability to provide general information about opportunities to save and plan for the future. If credit union employees are not receiving fees or other compensation for providing investment advice or recommendations, the rule will likely not be triggered. However, credit unions should review their compensation structures to determine whether this rule could be applicable particularly in the context of IRAs. This rule has been challenged in court and litigation is ongoing. Overdraft Protection (CFPB) Status: Proactively meeting with CFPB and working with other trades in advance of a potential SBREFA panel in 2016. Credit unions offer overdraft protection services as a convenience and accommodation for their members, and members appreciate these services. The CFPB‘s rulemaking agenda indicates pre-rule activity for an overdraft proposal in 2016, but we believe new regulation on overdraft protection services is unnecessary. CUNA anticipates that a SBREFA panel for overdraft will be held in the second half of 2016, and we plan to participate in it. Consumers remain highly satisfied with overdraft products, as indicated by the low number of consumer complaints about overdraft. In 2015 out of the CFPB’s 500,000-plus consumer complaints, only 1.5% pertained to overdraft. Further, credit unions, as member-owned financial cooperatives, provide these services as a courtesy and convenience to members. Members who do not want these services can opt-out at any time. Often consumers turn to overdraft as their best option during times of financial distress, and their other options are much worse. Other inferior alternatives to overdraft could include seeking a payday loan, or even worse an illegal offshore or online loan. As the CFPB considers what next steps it might take regarding overdraft services, we urge it to take into consideration the importance of overdraft services to consumers who do not want to be embarrassed at the point of sale and want the comfort of knowing a purchase or transaction, such as a mortgage payment, will be honored. CUNA is very concerned about potential rulemaking in this area. As we have stressed with the agency, overdraft protection programs are offered by credit unions as a member service, and we are working to ensure the CFPB does not undermine the ability of credit unions to help their members avoid having items that are unpaid. Credit unions are consistently reported as having lower overdraft fees than banks, which is among the reasons CUNA urges the Bureau to exempt credit unions from any overdraft regulation. We continue to encourage the CFPB to collect additional data and perform research about how credit unions and their members will be impacted by any potential rulemaking in this area. We do not support broad new regulation of overdraft services that would limit the flexibility of credit unions to structure their services appropriately, including the regulation of overdraft fees. As the CFPB itself has noted on several occasions, the Dodd-Frank Act did not give it the authority to regulate fees, and we are hopeful this would include the reasonable fees that credit unions charge for overdraft protection. We expect the CFPB to hold a SBREFA panel in 2016, possibly by early fall. Cordray has indicated a possible rulemaking in 2017. Overtime Pay (Department of Labor) Status: Final rule was issued on May 18. The Department of Labor finalized its rule for overtime pay, changing the salary threshold to qualify as an exempt employee from $23,600 annually to $47,476. The DOL projects that 4.2 million workers will be directly affected by the change, and that another 8.9 million will be indirectly affected by reducing the ambiguity of their status. According to CUNA’s staff salary report, and from feedback we have heard from our members, we believe this rule will sweep in a fairly high percentage of credit union employees, especially in rural areas and at smaller credit unions. The final rule included some of CUNA’s requested changes, including a lower threshold (which was originally proposed at $50,440), an automatic update of three years as opposed to every year, and no change to the standard duties test. 11

Updated July 15, 2016 Despite the improvements made to the final rule, we remain concerned that credit unions will face increased regulatory burdens as a result of the rule. Particularly, for smaller credit unions and those in rural and underserved areas. Payday Lending (CFPB) Status: Proposed rule was issued on June 2. The CFPB’s proposed rule includes some reforms to predatory lending practices, but unfortunately also sweeps in consumer friendly credit union loans. The proposal would cover two types of loans: (1) “short-term” loans that have terms of 45 days or less; and (2) “longer-term” loans with terms of more than 45 days that have a “total cost of credit” exceeding 36% and either a “leveraged payment mechanism” or a security interest in the consumer’s vehicle. The proposed rule would make it an abusive and unfair practice for a lender to make a covered short-term or longer-term loan without determining upfront that the consumer will have the ability to repay the loan (the “full-payment test”). However, there are two conditional exemptions to the full-payment test. One is mirrored after the NCUA PAL program and the other has a default rate of below 5% with an all-in cost of no more than 36% with no prepayment fees (excluding a reasonable origination fee). While the CFPB nominally exempted the NCUA PAL program in its proposal, our early analysis indicates that it is not a complete exemption, and there are still additional burdens to those offering loans under the PAL program or similar loans. This is fairly problematic because credit unions have expressed that it is already difficult to meet the stringent requirements of the PAL program—so making it even harder to participate in this program or other similar programs at state chartered credit unions could be a deterrent for those hoping to serve this market. We believe a better approach to assure consumer friendly credit union products are not impacted is to completely exempt credit unions from this rule. The CFPB in its proposal has used its Section 1022 exemption authority, but should use it in a more meaningful way to protect consumers who rely on credit union small dollar loans. Telephone Consumer Protection Act (FCC) Status: FCC released Omnibus Order in July 2015. CUNA has engaged in the litigation challenging it. In July 2015, the Federal Communications Commission released an Omnibus Declaratory Ruling and Order concerning the Telephone Consumer Protection Act (TCPA) that immediately went into effect. The TCPA is under the jurisdiction of the FCC and governs communications when using an autodialer to contact consumers on their cell phones. Some credit unions use certain calling devices to assist in the dialing process when contacting their members for a variety of reasons, including assisting in limiting human error when dialing and to efficiently contact consumers about their account information. While CUNA supports the concept of preserving consumers’ rights to privacy on their cell phones and protecting financial information, the FCC’s Order goes far beyond the scope or purpose of the TCPA—which incidentally was enacted in 1991 before cell phones and mobile devices were commonly used. In the Order, the FCC recognized the importance of receiving information from financial institutions—and provided a CUNA-supported exemption. However, the exemption contains conditions that are difficult, if not impossible, to comply with. As a result of this Order, there is an immense amount of uncertainty for financial institutions about what might qualify as an auto dialer; whether they are effectively meeting conditions for exemptions; how they can communicate with consumers with reassigned numbers; how consumers can revoke consent; and whether the numbers they have for consumers meet the technicalities laid out for calling the right party even within one family. CUNA is urging Congress to consider the impact this Order may have on restricting consumers’ ability to receive timely account information, and understand it may make it more difficult for credit unions to communicate with their members about fraud, data breaches, and other pertinent account updates. Additionally, this Order will create substantial compliance burdens and potentially subject credit unions to frivolous TCPA related litigation. CUNA filed a joint amici brief with the D.C. Circuit Court in support of litigation challenging the Order. CUNA will also file comments in response to the FCC’s implementation of the Budget Act, which provides exemptions under the TCPA for debt owed to or guaranteed by the federal government.

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Updated July 15, 2016

Arbitration (CFPB) Status: CFPB issued a proposed arbitration rule on May 5, 2016. Comment period ends August 22. The proposed rule, if finalized, would effectively eliminate pre-dispute arbitration and would require financial institutions to insert language into their arbitration agreements reflecting this limitation. CUNA has expressed concerns that this would limit options for resolving disputes and could increase the incidences of frivolous class action litigation against financial institutions, which could cause members to suffer when costs rise and resources are depleted. CUNA is also advocating that since credit unions are owned by their members, and, as not-for-profit financial cooperatives, they have incentive to and a long history of prioritizing the needs of their members and as a result, the CFPB should take these differences into account by exempting credit unions when it releases its final rule. The proposal would also require providers that use pre-dispute arbitration agreements to submit certain records relating to arbitral proceedings to the Bureau. CUNA has expressed concerns that this could be duplicative of the CFPB’s already public facing complaint database, which has yet to resolve several issues, including concerns about complaint handling and validation. CUNA also has concerns that the proposed rule could add increased compliance burdens for indirect lenders. The House Financial Services Committee held a hearing on the arbitration issue, and CUNA submitted a letter for the record expressing concern with the proposed rule. The Hensarling Financial CHOICE Act contains a provision repealing the CFPB's authority to restrict arbitration. Transportation Network Companies (State) Status: In many of the 31 states that enacted TNC legislation, legislatures amended bills to include credit union protections such as a comprehension and collision insurance requirement, a lienholder notification clause and an affirmation of credit unions’ ability to force place insurance. The emergence of transportation network companies, like Uber and Lyft, poses a risk for credit unions because members who use personal vehicles to drive for these companies may not have sufficient insurance. In 2015, the insurance industry and TNCs agreed to compromise model legislation requiring insurance for TNC drivers that covers death, bodily injury and property damage from the moment drivers log into a TNC network. The model legislation did not require TNC drivers to have comprehensive and collision insurance coverage for personal vehicles that have liens on them, thus creating potential lapses in coverage that leave credit unions at risk for losses of collateral. Exclusions of coverage for claims during TNC-related activities magnifies the risk to credit unions. CUNA continues to advocate with state lawmakers, TNCs and the insurance industry for the inclusion of provisions in model and state bills that would protect both credit union members and credit unions in their role as lienholders.

Key Accomplishments – 2016 • • • •

Transportation Network Company (TNC): TNC bills with credit union protections were enacted in Iowa, Mississippi, Missouri, Rhode Island, South Dakota, West Virginia and Utah. Fiduciary Rule: Final Fiduciary rule includes CUNA suggested improvements. CFPB Exemption Authority: 329 Members of the House signed a letter to the CFPB urging the Bureau to use its exemption authority. CFPB Exemption Authority: CFPB exercises its Section 1022 exemption authority for the first time in the payday lending proposal.

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Updated July 15, 2016

Housing Federal Home Loan Bank Membership Parity (Congress) Status: H.R. 2473 was introduced in the House/S. 1484 was introduced in the Senate and includes FHLB Parity language. CUNA continues to advocate for statutory change to ensure equal access for Small Credit Unions to Federal Home Loan Bank System which can provide liquidity and flexibility for financial institutions to more effectively manage mortgage portfolio. Current law treats similarly sized credit unions and community banks differently with respect to eligibility for membership in the Federal Home Loan Bank (FHLB) system. Under the FHLB Act, "Community Financial Institutions" are exempt from a requirement that 10% of assets must be dedicated to residential mortgage loans in order to access the liquidity and flexibility offered by FHLBs. Instead, only 1% of assets must be directed to housing for these institutions. However, the FHLB Act currently limits the definition of "Community Financial Institution" to FDIC-insured institutions with less than $1 billion in average total inflation-adjusted assets. Because the FDIC does not insure them, however, credit unions under $1 billion in assets cannot meet the current definition of "Community Financial Institution," and therefore are subject to the more rigorous 10% threshold to join the FHLB in their jurisdiction. In the House, CUNA supports H.R. 2473, introduced by Representatives Neugebauer (R-TX) and Clay (D-MO) that would create parity between small banks and credit unions in terms of FHLB access. In the Senate, CUNA supports passage of S. 1484, section 124 of which would achieve the same result. Additionally, CUNA was able to secure changes to a finalized rule from the Federal Housing Finance Agency (FHFA), eliminating an onerous proposal to require FHLB members to demonstrate adequate mortgage assets on an ongoing basis. The FHFA noted that since 98 percent of FHLB members were already in compliance, the burden to financial institutions associated with this proposal would have far outweighed any potential benefit. Home Mortgage Disclosure Act (CFPB and Congress) Status: Final rule was issued in October 2015. The final rule mandates reporting for closed-end mortgage loans and Home Equity Lines of Credit (HELOCs). The key provisions of the rule are as follows: • Credit unions that make 25 closed-end mortgage loans or 100 HELOCs in each of the two preceding calendar years must report HMDA data (provided you meet other criteria as well)—previously the reporting threshold was having at least $44 million in assets and having a home or branch office in a Metropolitan Statistical Area (MSA); • Effective date for most entities is January 1, 2018—first reporting on January 2019; • Requires reporting information about applications and loans for most closed-end mortgage loans and adds mandatory data collection and reporting for HELOCs and reverse mortgages: o 17 Dodd-Frank Act required data points; o Added an additional 16 CFPB-created data points (originally proposed 20) • Eliminates public disclosure of a lender’s modified loan/application register (LAR). However, a credit union will need to provide public notice indicating its LAR may be obtained on CFPB’s website. CUNA is concerned the CFPB has not solicited public comment on fields that will be made public once reporting commences. The rule calls for the use of a “balancing test” by the CFPB but does not otherwise indicate which fields will be public. CUNA has concerns over the extensive data collection and how this data will be used. We will continue to press the CFPB for further relief to credit unions that were not otherwise engaged in the practices that led to the imposition of HMDA and CRA. In the House, CUNA supports H.R. 4993, which would require the Government Accountability Office (GAO) to complete a study on the data the CFPB is requesting from lenders; and H.R. 4997, which would raise the thresholds for

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Updated July 15, 2016 compliance to 100 closed-end and 200 open-end mortgages. Both bills are included in Chairman Hensarling's Financial CHOICE Act. Mortgage Lending Legislation (Congress) Status: CUNA continues to monitor potential developments in housing finance reform to ensure equitable secondary market access for credit unions. CUNA also supports efforts to allow mortgages held in portfolio by credit unions to be deemed compliant with the Qualified Mortgage (QM) provision of the Dodd-Frank Act. In the wake of the financial crisis and subsequent conservatorship of the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, many in Congress have called for significant reform of the housing finance system in order to protect taxpayers. In the last Congress, numerous proposals emerged for housing finance reform, including legislation introduced by Senate Banking Committee Members Senators Crapo (R-ID) and Johnson (D-SD). However, CUNA has voiced strong opposition to any significant changes to the housing finance system that could limit credit unions' access to the secondary mortgage market, or result in pricing discrimination for credit unions' secondary market access by the largest banks. The sense of urgency in Congress has faded somewhat as Fannie Mae and Freddie Mac have returned to profitability and are now paying dividends to the US Treasury. Nevertheless, CUNA continues to monitor and evaluate all proposals for changes to the housing finance system to ensure all credit unions would continue to enjoy equal access and fair pricing in secondary markets to be able to effectively manage their mortgage portfolios and extend mortgage credit to their members. Additionally, because of their unique relationship with their members, credit unions who elect to hold in portfolio and service certain mortgages directly should not be subject to arbitrary, one-size-fits-all rules about the structure or terms of such loans. CUNA strongly supports current efforts in both the House (H.R. 1210) and Senate (S. 1484) to give additional flexibility to credit unions to serve their members' mortgage needs by allowing mortgage loans held in portfolio to be exempt from the Qualified Mortgage (QM) rules imposed by Dodd-Frank. H.R. 1210 passed the House 255-174 in November 2015. The legislation is also included in the Hensarling reform package. Truth in Lending Act & Real Estate Settlement Procedures Act (CFPB) Status: Final rule adopted/Rulemaking forthcoming to fix TRID issues/concerns. The Dodd-Frank Act directs the CFPB to integrate the TILA and RESPA mortgage loan disclosures. The new three-page Loan Estimate, which replaces the Good Faith Estimate (GFE) and the “early” TILA disclosures, is designed to provide information that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. The new five-page Closing Disclosure, which replaces the HUD-1 form and the closing TILA disclosures, is designed to provide information that will be helpful to consumers in understanding all of the costs of the transaction. The new integrated disclosures apply to most closed-end consumer mortgages. The final rule does not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The final rule also does not apply to loans made by persons who are not considered “creditors,” because they make five or fewer mortgages in a year or extend credit to a consumer 25 or fewer times in a year. Credit unions were required to comply with the final rule in October 2015. CUNA urged the CFPB in meetings and in writing to provide a “hold-harmless” period for compliance and liability on the new rules until January 2016, for credit unions that make good faith efforts to comply. CUNA and other trade associations sent a letter to the CFPB on this matter in March 2015. CUNA also urged Members of Congress to encourage the CFPB to provide this “hold-harmless” period. This April, in response to months of CUNA advocacy, Director Cordray indicated in a letter to industry t hat the Bureau is working toward issuing a NPRM in July to amend the final TRID rule to ease compliance issues.

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Updated July 15, 2016

Key Accomplishments – 2016 • •

•

FHLB Membership Parity: FHFA removed a CUNA-opposed provision requiring credit unions to maintain membership eligibility throughout the course of FHLB membership. Small Creditor Exemption under Regulation Z: Implementing CUNA-supported legislation, the CFPB adopted the CUNA-supported threshold for activity in a rural area necessary to qualify for the small creditor exemption. TRID: Convinced a reluctant CFPB to commence rulemaking to fix TRID/TILA/RESPA issues.

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Updated July 15, 2016

Payments Merchant Data Breach (Congress) Status: H.R. 2205 passed House Financial Services 45-9, Senate companion S. 961 pending. Retailers do not face the same strict data security standards that financial institutions are subject to under Gramm Leach Bliley (GLBA). Major merchant data breaches expose credit unions to significant monetary costs and reputational risk. H.R. 2205 and S. 961 would provide: • • • • •

Strong national data protection and consumer notification standards with effective enforcement provisions. Recognition of robust data protection and notification standards to which credit unions and banks are already subject. Preemption of inconsistent state laws and regulations in favor of strong Federal data protection and notification standards. Ability for credit unions and banks to inform customers and members about a breach, including where it occurred. Shared responsibility for all those involved in the payments system for protecting consumer data. The costs of a data breach should ultimately be borne by the entity that incurs the breach.

The legislation passed the House Financial Services Committee 45-9, and the Senate bill is still awaiting committee action. Interchange Fees (Congress) Status: H.R. 5465 was introduced by Rep. Randy Neugebauer to repeal the Durbin Amendment, which imposed price controls and routing requirements for PIN/debit transactions. The Durbin Amendment was part of the Dodd-Frank Act of 2010. The Durbin Amendment required the Federal Reserve Board to promulgate rules that impose price controls on PIN/debit transactions. Credit unions and banks with assets less than $10 million are exempt from the price controls but are subject to routing and exclusivity requirements. These requirements have driven down the revenue that all credit unions receive from PIN/debit transactions. Furthermore, the price controls have added incentive for merchants to quite accepting signature/debit transactions. The Federal Reserve Bank of Richmond released a study in 2015, which found that Durbin has cost credit unions and banks $8 Billion a year in interchange revenue, with no reduction in prices charged to consumers. This transfer with no benefit demonstrates that Durbin is a failed policy. CUNA will continue to pursue H.R. 5465 and other legislation and litigation to preserve credit unions’ right to set interchange rates. Patents (State) Status: In 2013, Vermont became the first state to pass a patent troll law. Today, most states have enacted legislation to make it more difficult for people to assert patent claims in bad faith and to provide stiffer penalties against those who do. A map of state patent legislation can be found here. Patent trolling has garnered attention at both the national and state level. “Patent trolls” are people or companies who sue other companies, including credit unions, for patent infringement based on questionable claims in order to collect license fees. Using a hypothetical example to illustrate the problem, a patent troll (PT) sends a letter to a credit union which asserts that the credit union is using technology in its ATMs that infringes on PT’s vague patent. In the letter, PT demands that the credit union pay PT a specific amount of money (typically within a short time frame) or PT will sue the credit union for infringement. Businesses targeted by patent trolls often do not have the time or resources to fight these 17

Updated July 15, 2016 assertions, so they pay the amount demanded to avoid the cost of investigating and litigating. Patent trolling can drain resources from businesses and increases prices for consumers.

Key Accomplishments – 2016 • • •

Interchange: CUNA prevailed in an interchange surcharging case in U.S. District Court in Texas. Patent Abuse: State patent infringement legislation was enacted in Arizona, Florida, Minnesota, Rhode Island, South Carolina and Wyoming. Data Breach: Won a favorable ruling affirming CUNA’s standing in its lawsuit against Home Depot.

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Updated July 15, 2016

Tax, Budget, and Appropriations Policy Credit Union Tax Status (Congress) Status: Credit unions continue to face attacks on their federal income tax status. In June, House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady released a blueprint for comprehensive tax reform.

The banking lobby vigorously opposes credit unions’ federal income tax-exempt status, and lists the elimination of the credit unions’ tax “advantage” as a higher priority than enacting legislative initiatives to benefit their own industry. Contrary to the bankers’ arguments, credit unions do pay taxes—payroll taxes, real estate taxes, and some other property taxes. In addition, dividends paid to credit union members are taxed as ordinary income. Congress bases the credit union tax exemption on credit unions’ structure as not-for-profit financial cooperatives and their mission to promote thrift and provide access to credit for provident purposes.

The federal tax-exempt status is the crux of the credit union movement, and remains the priority issue for all credit unions, regardless of asset size, field of membership, and products and services offered. Many in the credit union movement believe credit unions would not be able to survive as cooperatives if Congress repealed the federal tax status because it could lead to a sharp decline or elimination of credit unions. Credit unions also provide a market alternative that helps moderate increases in bank fees and charges for all consumers. Without credit unions, consumers would be greatly disadvantaged, and in some cases, be forced out of the financial mainstream.

On June 24th , House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady released a blueprint for comprehensive tax reform. The reform package was the sixth and final agenda paper, part of Ryan’s A Better Way issues agenda. The report is meant to be a platform outlining solutions to a number of current issues facing the country. The paper covers tax reform from an individual and business perspective. The report is broad and lacks specific details, including which credits, deductions, and tax expenditures will be cut. The Ways and Means Committee expects to work on the blueprint for reform this year, with a goal of having it ready for legislative action next year.

CUNA continues to meet with Members of the House and Senate, as well as their staff, regarding the importance of the credit union federal income tax status. State Credit Union Tax Battles (State) Status: Recently, credit unions have faced state tax battles in several states, including Alaska, Illinois, Iowa, Michigan, New Jersey, New Mexico, South Dakota, Vermont and Washington. While no bills taxing credit unions have been introduced, the battles come in the form of legislative proposals, media stories (earned and paid) and research studies. CUNA and the leagues have vigorously responded to attacks with state action alerts, advertisements, research studies and media responses. Regulatory Relief through the Appropriations Process (Congress) Status: Credit unions have the opportunity to achieve significant regulatory relief through the Congressional Appropriations Process. The full House of Representatives has passed the Financial Services and General Government 19

Updated July 15, 2016 Appropriations Act for FY 2017. The bill includes significant relief for banks and credit unions and several amendments to strip these provisions from the bill were defeated by the full House of representatives. The Senate Appropriations Committee has passed its version of the bill with some important provisions for financial institutions. It is likely that an omnibus spending bill will be agreed to before the end of 2016. It is unknown which regulatory relief provisions will be included in the final package. On July 7th, the House of Representatives passed the FY2017 Financial Services and General Government (FSGG) Appropriations Act (H.R. 5485). This bill included several CUNA-supported provisions addressing regulatory burden for credit unions. Credit union friendly items in the bill include: • Changing the leadership structure of the CFPB to a five-person board and placing the bureau under the appropriations process; • Requiring the CFPB to study the use of arbitration prior to issuing any new regulations. This would affect the bureau’s recent proposal on arbitration; • Allowing for residential mortgages held in portfolio by lenders to be recognized as qualified mortgages for the purposes of the CFPB's mortgage lending rules. These efforts would especially help community bankers and credit unions who have decreased their mortgage lending business in recent years due to onerous regulatory requirements; • Supporting efforts to clarify the definition of ‘‘points and fees’’ for qualified mortgages in ord er to improve access to credit for low and moderate income borrowers; and • Stopping the CFPB from proceeding with its short-term, small-dollar loan proposal. The committee report also contains a number of other items of interest to credit unions, including: • CUNA-supported language that would call for the Federal Communications Commission to revisit its Telephone Consumer Protection Act (TCPA) order, and address technical questions that may be impossible for financial institutions to resolve. This includes clearing up whether an exemption for financial institutions to contact consumers with additional information can actually be used, and urging the FCC to provide more flexibility to the requirements. • Directing the CFPB to report to the Senate and House Appropriations Committees, Senate Banking Committee and House Financial Services Committee on how it has used its section 1022 exemption authority to tailor its rulemakings to community financial institutions within 120 days of the bill’s enactment; • Directing the Government Accountability Office (GAO) to determine the impacts of the Foreign Account Tax Compliance Act on U.S. citizens living abroad. The GAO must also make recommendations on FATCA implementations, and both must be done within 180 days of enactment of the bill; • Directing the Office of Critical Infrastructure Protection and Compliance Policy to report to several Congressional committees on ways to improve cybersecurity and an update on collaboration across the financial services sector within 60 days of the bill’s enactment. • Directing the CFPB to consider its recent actions related to auto lending that are reducing competition, regulating auto dealers, and raising costs to consumers. The bill also contains funding of key programs that assist low-income credit unions that serve underserved areas and members of modest means, including: • Maintaining the annual $2 million for the NCUA’s Community Development Revolving Loan Fund, which provides grants and loans to low-income designated credit unions; and • Increasing the funding to $250 million for the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund, which awards funds to certified CDFIs, including the 276 credit unions certified as of April 30. The bill also maintains funding for the two Small Business Administration (SBA) programs that are crucial to credit unions: • $28.5 billion for the SBA’s 7(a) program, which allows the government to guarantee up to 85% of loans, with the guaranteed portion not counting against credit unions’ cap on member business lending; and • $7.5 billion for the SBA’s 504 loan program, which is used for long-term, fixed-rate financing on major fixed assets, such as equipment and real estate. On June 15th, the Senate Appropriations Committee approved the FY 2017 Financial Services and General Government (FSGG) appropriations bill. The Committee report includes language urging Treasury to work with financial regulators to address student debt. Additionally, the bill itself contained: • Funding for the Community Development Financial Institutions (CDFI) fund at $234 million, $500,000 more than FY16, and $16 million less than the bill passed last week by the House Appropriations committee; • Maintaining $2 million for NCUA's Community Development Revolving Loan Fund (CDRLF); and 20

Updated July 15, 2016 •

Funding a new account called the Cybersecurity Enhancement Account. The Committee recommends $47,743,000 for the initiative. It is "designed to bolster the (Treasury) Department's cybersecurity posture and mitigate threats to the U.S. financial infrastructure." It will also "improve identification of cyber threat and better protect information systems from attack; provide a platform to enhance efficient communication, collaboration, and transparency around the common goal of improving not only the Cybersecurity of the Treasury Department, but also the Nation’s financial sector." In the committee markup, an amendment from Sen. Jeff Merkley (D. Ore.) was passed that prohibits funds from being used to penalize financial institutions that provide financial services to certain persons in States and jurisdictions where marijuana is legal.

Key Accomplishments – 2016 •

•

Federal Tax Reform: Rep. Devin Nunes (R-CA) drafted legislation that would have resulted in credit unions being subject to the federal income tax. CUNA was able to convince the Congressman's staff to explicitly exempt credit unions from this new tax. The Vermont League defeated an attempt by the Vermont Bankers Association to amend a budget bill to add credit union taxation.

21

June 2016

Supervisory Highlights Issue 12, Summer 2016

Table of contents Table of contents......................................................................................................... 1 1. Introduction ........................................................................................................... 2 2. Supervisory observations .................................................................................... 4 2.1

Automobile origination............................................................................. 4

2.2 Debt collection .......................................................................................... 6 2.3 Mortgage origination ................................................................................ 8 2.4 Small-dollar lending ............................................................................... 12 2.5 Fair lending ............................................................................................. 13 2.6 Remedial actions ..................................................................................... 18 3. Supervision program developments ................................................................. 20 3.1

Examination procedures......................................................................... 20

3.2 Recent CFPB guidance ............................................................................ 22 4. Conclusion .......................................................................................................... 24

1

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

1. Introduction As the Consumer Financial Protection Bureau (CFPB or Bureau) enters its fifth year, it continues to examine bank and nonbank providers of consumer financial products and services under the Bureau’s jurisdiction. 1 In this twelfth edition of Supervisory Highlights, the CFPB shares recent supervisory observations in the areas of auto origination, debt collection, mortgage origination, small-dollar lending and fair lending. The findings reported here reflect information obtained from supervisory activities completed during the period under review. In some instances, not all corrective actions, including through enforcement, have been completed at the time of this report’s publication. The CFPB’s supervisory activities have either led to or supported a recent public enforcement action, requiring nearly $5 million in consumer remediation and an additional $3 million in civil

1

The CFPB supervises depository institutions and credit unions with total assets of more than $10 billion, and their

affiliates. In addition, the CFPB has authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to supervise nonbanks, regardless of size, in certain specific markets: mortgage companies (originators, brokers, servicers, and providers of loan modification or foreclosure relief services); payday lenders; and private education lenders. The CFPB may also supervise “larger participants” in other nonbank markets as the CFPB defines by rule. To date, the CFPB has issued five rules defining larger participants in the following markets: consumer reporting (effective September 2012), consumer debt collection (effective January 2013), student loan servicing (effective March 2014), international money transfers (effective December 2014) and automobile financing (effective August 2015).

2

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

money penalties. 2 In addition to these public enforcement actions, Supervision continues to resolve violations using non-public supervisory actions. When Supervision examinations determine that a supervised entity has violated a statute or regulation, Supervision directs the entity to implement appropriate corrective measures, including remediation of consumer harm when appropriate. Recent supervisory resolutions resulted in restitution3 of approximately $24.5 million to more than 257,000 consumers. Other corrective actions included, for example, developing improved policies and procedures, building enhanced monitoring systems to ensure compliance, and improving training for employees. This report highlights supervision work generally completed between January 2016 and April 2016 (unless otherwise stated), though some completion dates may vary. Any questions or comments from supervised entities can be directed to [email protected].

2

The CFPB Office of Enforcement also brought other actions unrelated to supervisory activities.

3

The term “restitution” as used in this report refers specifically to monetary relief (or redress) to consumers, whereas remediation includes both monetary and non-monetary forms of relief.

3

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

2. Supervisory observations Below are some of Supervision’s recent examination observations in automobile origination, debt collection, mortgage origination, small-dollar lending and fair lending.

2.1

Automobile origination

The Dodd-Frank Act 4 gave the CFPB supervisory authority over “larger participants” of certain markets for consumer financial products or services as the Bureau defines by rulemaking. In June 2015, the CFPB finalized its automobile finance market larger participant regulation. 5 In this market, automobile loans can be made through direct or indirect lending channels. For direct lending, consumers go directly to a bank, credit union, or other lender and apply for and obtain a loan. Consumers will commonly get an interest rate quote or a conditional commitment letter from the bank or credit union before going to the dealership to buy an automobile. In indirect lending, also called dealer-arranged financing, consumers obtain auto financing from a lender through a dealership.

4

12 USC 5514(a)(1)(B).

5

12 CFR 1090.108.

4

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

The CFPB conducted examinations focused on assessing compliance management systems (CMS) and automobile financing practices to determine whether entities are complying with applicable Federal consumer financial laws.

2.1.1

Deceptive practice in advertising add-on gap coverage products and disclosure of payment deferral terms

Examiners determined that one or more auto lenders deceptively advertised the benefits of their gap coverage products, leaving the impression that these products would fully cover the remaining balance of a consumer’s loan in the event of vehicle loss. 6 In fact, the product only covered amounts below a certain loan to value ratio. Bureau examiners further found that one or more auto lenders engaged in a deceptive practice by using a telephone script that created the false overall net impression that the only effects of taking advantage of a loan deferral would be to extend the maturity of the loan and to accrue interest during the deferral, but omitted informing consumers that the subsequent payment would be applied to the interest earned on the unpaid amount financed from the date of the last payment received from the consumer. This way of applying the payment could result in the consumer paying more finance charges than originally disclosed. These violations are under review by the Bureau to determine what, if any, remedial and corrective actions should be undertaken by the relevant financial institutions.

2.1.2

CMS deficiencies

At one or more institutions, examiners determined that an overall weak CMS allowed violations of Federal consumer financial law during the review period. Weaknesses included the failure to raise compliance-related issues to the institution’s board of directors or other principal (Board); failure to follow institution’s policies and procedures in daily practices; failure to properly

6

5

An act or practice is deceptive when there is a material representation, omission, act or practice that misleads or is likely to mislead the consumer and the consumer has a reasonable interpretation of the representation, omission, act or practice. 12 USC 5536(a)(1)(B) prohibits deceptive acts or practices.

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

monitor and correct business line practices to align with Federal consumer financial law; failure to adequately track training completed by employees and the Board; and failure to adequately follow up on consumer complaints with a corresponding failure of compliance audit to highlight deficiencies in the consumer complaint response process. The relevant financial institutions have undertaken remedial and corrective actions regarding these violations, which are under review by the Bureau.

2.2

Debt collection

The Supervision program covers certain bank and nonbank creditors who originate and collect their own debt, as well as certain larger nonbank third-party debt collectors. During recent examinations, examiners identified an unfair practice and violations of the Fair Debt Collection Practices Act (FDCPA). 7

2.2.1

Miscoding of accounts unsuitable for sale by debt sellers

During one or more examinations, examiners determined that debt sellers, as a result of widespread coding errors, sold thousands of debts that did not properly reflect that: (1) the accounts were in bankruptcy, (2) the debt sellers had concluded the debts were products of fraud, or (3) the accounts had been settled in full. The relevant accounts sold were in, or likely to be subject to, collections. Supervision concluded that this practice was unfair. 8 In some cases, coding failed to reflect a pending bankruptcy proceeding when the debt seller had received notice that the consumer had filed for bankruptcy. In other instances, one or more

7

15 USC 1692-1692p.

8

12 USC 5531(c); 5536(a)(1)(B).

6

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

debt sellers either failed to code accounts to indicate that a fraud claim was pending or failed to code accounts to indicate that fraud had occurred. In other cases, one or more debt sellers failed to include codes indicating that the debt seller(s) had settled the relevant accounts in full. These errors caused or were likely to cause substantial injury in the form of subjecting consumers to debt collection efforts either: (1) prohibited by the automatic stay provisions of the Bankruptcy Code, 9 or (2) on debts for which the consumer was not responsible because the relevant accounts were impacted by fraud or were settled in full. Supervision directed one or more debt sellers to redress consumers impacted by each category of the three coding errors and to enhance service provider oversight to include critical vendors performing collections and processes relating to debt sale arrangements, such as suppliers providing coding services.

2.2.2

Use of misleading statements regarding repayment options

Section 807(10) of the FDCPA prohibits a debt collector from using any false representation or deceptive means to collect any debt. 10 Examiners determined that one or more collectors falsely represented to consumers that a down payment was necessary in order to establish a repayment arrangement, when the collectors’ policies and procedures included no such requirement. In other cases, one or more collectors falsely represented that the only option for repayment was using a checking account, when the debt collectors’ policies and procedures did not limit repayment to checking accounts. Supervision directed one or more debt collectors to analyze their process to determine why the collectors made false representations to consumers regarding payment options and based on such analysis, to determine the appropriate corrective action to ensure future compliance.

9

11 USC 362.

10

7

15 USC 1692e(10).

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

2.3

Mortgage origination

During the review period covered by this report, several mortgage origination examinations focused upon reviewing compliance with provisions of CFPB’s Title XIV rules, 11 existing Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) 12 disclosure provisions, 13 and other applicable Federal consumer financial laws. Examiners also evaluated entities’ CMS. Examiners found general compliance with the reviewed Federal consumer financial laws, though many entities continue to have CMS deficiencies.

2.3.1

Incorrect calculation of the amount financed on loans with discount credits

Regulation Z requires the amount financed to be calculated by determining the principal loan amount or the cash price (minus any down payment), adding any other amounts that are financed by the creditor and that are not part of the finance charge, and subtracting any prepaid finance charge. 14 Regulation Z also provides that finance charges disclosed are treated as accurate if they are understated by no more than $100 or are greater than the amount required to be disclosed. 15 One or more institutions incorrectly calculated the amount financed on loans with discount credits, and subsequently incorrectly calculated the finance charge on the same

11

These Title XIV rules include the Loan Originator Rule (12 CFR 1026.36), the Ability to Repay rule (12 CFR 1026.43), and rules reflecting amendments to the Equal Credit Opportunity Act and Truth in Lending Act regarding appraisals and valuations (12 CFR 1002.14 and 12 CFR 1026.35).

12

TILA is implemented by Regulation Z and RESPA by Regulation X.

13

These mortgage origination examination findings cover a period preceding the effective date of the Know Before You Owe Integrated Disclosure Rule. The disclosures reviewed in these exams are the Good Faith Estimate (GFE), the Truth in Lending disclosure, and the HUD-1 form.

14

12 CFR 1026.18(b).

15

12 CFR 1026.18(d)(1).

8

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

loans. The calculation method used to determine the amount financed for these loans resulted in a negative finance charge and an amount financed that exceeded the stated loan amount, resulting in a violation of Regulation Z. Supervision directed that the practice cease and that training and revised policies and procedures be provided to ensure that disclosures were calculated accurately.

2.3.2

Failure to comply with RESPA Section 8

RESPA Section 8 and its implementing Regulation X generally prohibit the acceptance of any fee, kickback or other thing of value in exchange for a referral. 16 An affiliated business arrangement (ABA) is permitted so long as it meets the requirements of RESPA by not offering anything of value in exchange for a referral. 17 Bureau examiners found that one or more institutions had ABAs that did not fully meet the requirements of a compliant ABA under RESPA. One or more institutions provided a referral and required the use of an affiliated provider of flood determination and tax services, a settlement service that is not among the prescribed settlement services (attorney, credit reporting agency or real estate appraiser chosen by the lender) that may be required by a lender who makes a referral and has a compliant ABA. 18 The majority of consumers who received the incorrect ABA disclosure did not pay the fees charged by the affiliated service provider as these fees were lender paid. Supervision directed the institutions to revise the affiliated business disclosures to avoid improper referrals.

16

12 USC 2607(a); 12 CFR 1024.14(b).

17

12 USC 2607(c)(4); 12 CFR 1024.15.

18

12 CFR 1024.15(b)(2).

9

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

2.3.3

Failure to provide Fair Credit Reporting Act adverse action notices

Section 615(a) of the Fair Credit Reporting Act (FCRA) 19 requires that if any person takes any adverse action with respect to any consumer that is based on information contained in a consumer report, the person must provide the consumer with notice of the adverse action (e.g., a denial of credit) including: (1) the name, address, and telephone number of the consumer reporting agency that furnished the report to the person; (2) a statement that the consumer reporting agency did not make the decision to take the adverse action; (3) the consumer’s right to obtain a free copy of a consumer report from that consumer reporting agency; and (4) the consumer’s right to dispute with the furnishing consumer reporting agency the accuracy or completeness of information contained the consumer report. 20 One or more institutions took adverse action based on information in consumer reports 21 but failed to make the required disclosures. Examiners found these actions to be violations caused by a lack of both appropriate training and adequate policies and procedures. Supervision directed the institutions to revise their training and policies and procedures mechanisms to ensure that employees provide FCRArequired information on adverse action notices.

2.3.4

Failure to properly disclose interest on interest-only loans

Regulation Z requires that creditors disclose interest-only loan payment amounts that will be applied to interest and principal. These amounts must be itemized and labeled as “interest

19

15 USC 1681m(a).

20

15 USC 1681m(a)(3)-(4). If a numerical credit score is used in taking the adverse action, the credit score and other score-related information is also required. See 15 USC 1681m(a)(2).

21

10

The credit score was not a factor in these decisions.

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

payment” and “principal payment.” 22 One or more institutions offering interest-only bridge loans 23 failed to accurately disclose the interest payment because it erroneously included a portion of the monthly payment amount that was to be applied to fees financed into the principal balance. This failure, due to a software error to separately itemize and properly disclose the correct interest and principal payment, violated Regulation Z. Supervision directed the institutions to examine and assess whether the monthly payment amounts of the affected loans were correctly applied to accrued interest and the principal amount. Institutions were also directed to ensure that the final balloon payment was assessed in accordance with the mortgage note.

2.3.5

CMS deficiencies

At one or more institutions, examiners concluded that a weak CMS allowed violations of Regulations V, X, and Z to occur. For example, one or more supervised institutions had weak oversight of automated systems, including inadequate testing of codes that calculate the finance charge and the amount financed when originating residential loans to consumers. In addition, one or more supervised entities failed to monitor for changes that would require updated disclosures to comply with applicable Federal consumer financial laws. To address the above findings, Supervision directed entities to enhance their monitoring and corrective action and compliance audit practices prior to using revised disclosures, and to revise training, policies and procedures, monitoring and corrective action, and compliance audit practices to ensure that adverse action notices were properly completed.

22

12 CFR 1026.18(s)(3)(ii)(B).

23

A bridge loan is a short term loan with a term of 12 months or less, such as a loan to finance the purchase of a new dwelling, or connected with the acquisition or construction of a dwelling intended to become the consumer’s principal dwelling. See 12 CFR 1026.32(d)(1)(ii)(B), 1026.35(b)(2)(i)(C) and 1026.43(a)(3)(ii).

11

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

After Supervision notified the entities’ management of these findings, the entities took corrective action to improve their CMS.

2.4

Small-dollar lending

The Dodd-Frank Act gave the CFPB supervisory and enforcement authority over payday lenders, who generally provide small-dollar loans directly to consumers. Since launching its payday lending supervisory program in January 2012, the Bureau has conducted multiple examinations for compliance with Federal consumer laws. During the review period, examiners evaluated lenders’ compliance with Regulation E, 24 which implements the Electronic Fund Transfer Act. 25 Among other things, these reviews assessed compliance with requirements related to preauthorized electronic fund transfers (EFTs). Regulation E provides that when the amount of a preauthorized EFT differs from the preceding EFT, the designated payee must provide notice in advance of the transfer. 26 It also provides an optional, alternative approach whereby the payee may give the consumer the option of receiving notice only when the amount of a payment either falls outside a specified range, or only when the transfer differs from the most recent transfer by more than the agreed upon amount. 27 The Rule commentary provides that the specified range must be one that could be anticipated by the consumer.

24

12 CFR Part 1005.

25

15 USC 1693 et seq.

26

12 CFR 1005.10(d)(1).

27

12 CFR 1005.10(d)(2).

12

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

Examiners found that the installment loan agreements of one or more entities failed to set out an acceptable range of amounts to be debited, in lieu of providing individual notice of transfers of varying amounts. These ranges could not be anticipated by the consumer because they contained ambiguous or undefined terms in their descriptions of the upper and lower limits of the range. When examiners found such violations, Supervision directed that entities take the following steps: For new loans, revise loan agreements to specify a range of amounts that consumers can



reasonably anticipate if the firms elect to continue to give the consumer the option of receiving notice of a range of transfers instead of providing advance notice of each preauthorized EFT that varies in amount. For existing loans not governed by a revised agreement, notify borrowers of the amount



of any new transfer that will vary from the amount of the previous transfer or from the preauthorized amount before initiating the new transfer.

2.5

Fair lending

2.5.1

Reporting actions taken for conditionally-approved applications with unmet underwriting conditions

Compliance with the Home Mortgage Disclosure Act (HMDA) and Regulation C remains a top priority in the Bureau’s fair lending examinations. 28 Among other things, Regulation C requires covered depository and non-depository institutions to submit to the appropriate Federal agency data they collect and record pursuant to Regulation C, including the type of action taken on

28

See CFPB Bulletin 2013-11, Home Mortgage Disclosure Act (HMDA) and Regulation C – Compliance Management; CFPB HMDA Resubmission Schedule and Guidelines; and HMDA Enforcement, available at http://files.consumerfinance.gov/f/201310_cfpb_hmda_compliance-bulletin_fair-lending.pdf.

13

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

reportable transactions. 29 Financial institutions use the codes listed in Appendix A of Regulation C when reporting the type of action taken on an application or loan. 30 Under Regulation C, when an institution issues a loan approval subject to the applicant’s meeting underwriting conditions and the application does not result in an origination, the reported “action taken” code varies according to the following circumstances: 31 

If the institution sent the applicant a written notice of incompleteness pursuant to Regulation B, 32 and the applicant responded to the request for additional information within the period of time specified in the notice but the applicant did not meet the underwriting conditions, then the action taken is reported as “Application denied” (Code 3). 33



If the institution sent the applicant a written notice of incompleteness pursuant to Regulation B, and the applicant did not respond to the request for additional

29

12 CFR 1003.4(a), (a)(8); 12 CFR 1003.5(a)(1).

30

See 12 CFR 1003, App. A, I.B.

31

Underwriting conditions here do not include “customary loan commitment or loan-closing conditions, such as a clear-title requirement or an acceptable property survey.” 12 CFR Part 1003, Supp. I, 1003.4, cmt. 4(a)(8)-4.

32

See 12 CFR 1002.9(c)(2).

33

See 12 CFR Part 1003, Supp. I, 1003.4, cmt. 4(a)(8)-4 (financial institutions report Code 3, “Application denied,” “[i]f an institution issues a loan approval subject to the applicant’s meeting underwriting conditions (other than customary loan commitment or loan-closing conditions, such as a clear-title requirement or an acceptable property survey) and the applicant does not meet them”).

14

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

information within the period of time specified in the notice, then the action taken is reported as “File closed for incompleteness” (Code 5). 34 

If the institution did not send the applicant a written notice of incompleteness pursuant to Regulation B, and the applicant did not meet the underwriting conditions, then the action taken is reported as “Application denied” (Code 3). 35



If the applicant expressly withdrew the application before a credit decision was made, then the action taken is reported as “Application withdrawn” (Code 4). 36

During one or more HMDA data integrity reviews conducted substantially within the last year, examiners found that after issuing a conditional approval subject to underwriting conditions, the institutions did not accurately report the action taken on the loans or applications. For example, examiners found where one or more institutions issued a conditional approval subject to the applicants meeting underwriting conditions, and then the applicants withdrew their applications before the institutions made a credit decision, the institutions incorrectly coded the action taken as “Application denied” (Code 3) or “File closed for incompleteness” (Code 5) instead of “Application withdrawn” (Code 4). In other instances, examiners found that one or more institutions incorrectly coded the action taken as “Application approved but not accepted” (Code 2) instead of “Application denied” (Code 3) after the applicants failed to respond to a conditional approval subject to the applicants meeting underwriting conditions, and did not

34

12 CFR 1003 App. A, I.B.1.e (“Use Code 5 if you sent a written notice of incompleteness under 1002.9(c)(2) of Regulation B (Equal Credit Opportunity) and the applicant did not respond to your request for additional information within the period of time specified in your notice.”).

35

See 12 CFR Part 1003, Supp. I, § 1003.4, cmt. 4(a)(8)-4.

36

12 CFR 1003, App. A, I.B.1.d (“Use Code 4 only when the application is expressly withdrawn by the applicant before a credit decision is made.”).

15

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

send the applicants either a written notice of incompleteness or an adverse action notice as required by Regulation B. 37 Supervision directed one or more institutions to enhance their policies and procedures regarding their HMDA reporting of the actions taken on loans and applications and, where necessary, provide adverse action notices. Supervision also required one or more institutions to resubmit their HMDA Loan Application Register (LAR) where the number of errors exceeded the CFPB’s HMDA resubmission thresholds.

2.5.2

Equal Credit Opportunity Act special purpose credit programs

The Equal Credit Opportunity Act (ECOA) 38 and Regulation B 39 permit a creditor to extend special purpose credit to applicants who meet eligibility requirements for certain types of credit programs. 40 Regulation B specifically confers special purpose credit program status upon: Any special purpose credit program offered by a for-profit organization, or in which such an organization participates to meet special social needs, if: (i)

The program is established and administered pursuant to a written plan that

identifies the class of persons that the program is designed to benefit and sets forth the procedures and standards for extending credit pursuant to the program; and

37

12 CFR 1002.9(a)(1)(ii).

38

15 USC 1601 et seq.

39

12 CFR Part 1002.

40

15 USC 1691(c)(3) (providing that ECOA’s prohibitions against discrimination are not violated when a creditor refuses to extend credit offered pursuant to certain special purpose credit programs satisfying Regulation Bprescribed standards); 12 CFR 1002.8 (special purpose credit program standards).

16

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

(ii)

The program is established and administered to extend credit to a class of

persons who, under the organization’s customary standards of creditworthiness, probably would not receive such credit or would receive it on less favorable terms than are ordinarily available to other applicants applying to the organization for a similar type and amount of credit. 41 The commentary to Regulation B clarifies that, in order to satisfy these requirements, “a forprofit organization must determine that the program will benefit a class of people who would otherwise be denied credit or would receive it on less favorable terms. This determination can be based on a broad analysis using the organization’s own research or data from outside sources, including governmental reports and studies.” 42 During the course of the Bureau’s supervisory activity, examination teams have observed credit decisions made pursuant to the terms of programs that for-profit institutions have described as special purpose credit programs. Examination teams have reviewed the terms of the programs, including the written plan required by Regulation B, and the institution’s determination that the program would benefit a class of people who would otherwise be denied credit or would receive it on less favorable terms. In one or more reviews, examiners observed programs that were established pursuant to these provisions of ECOA and Regulation B. For example, in one or more reviews, examiners observed a small business lending program providing credit to minority-owned businesses. The program was established and administered pursuant to a written plan and was based on a determination that minority-owned firms were otherwise more likely to be denied credit than non-minority owned firms.

41

12 CFR 1002.8(a)(3).

42

12 CFR Part 1002, Supp. I, 1002.8, cmt. 8(a)-5.

17

SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

In addition, in one or more reviews, examiners observed a mortgage lending program with special rates and terms for individuals with income below certain thresholds or buying property in areas where the median income was below certain thresholds. The program was established and administered pursuant to a written plan and was based on a determination that applicants meeting one or both of the aforementioned criteria had credit characteristics that otherwise would result either in denial of mortgage credit or in higher-priced mortgage credit. In every case, special purpose credit program status depends upon adherence to the ECOA and Regulation B requirements for special purpose credit programs. A program, for example, offering more favorable pricing or products exclusively to a particular class of persons without evidence that such individuals would otherwise be denied credit or would receive it on less favorable terms would not satisfy the ECOA and Regulation B requirements for a special purpose credit program. With that in mind, however, the Bureau generally takes a favorable view of conscientious efforts that institutions may undertake to develop special purpose credit programs to promote extensions of credit to any class of persons who would otherwise be denied credit or would receive it on less favorable terms.

2.6

Remedial actions

The public enforcement actions listed below resulted, at least in part, from recent supervisory work. As described above, Supervision also continues to resolve matters using non-public supervisory tools, where appropriate.

2.6.1

Public enforcement actions

The Bureau’s supervisory activities resulted in or supported the following public enforcement action.

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Citibank, N.A. On February 23, 2016, the CFPB took action43 against Citibank, N.A. (Citibank) for illegal debt sales practices. Citibank, from February 2010 until June 2013, provided inaccurate and inflated annual percentage rate (APR) information for almost 130,000 credit card accounts it sold to debt buyers. These buyers then used the exaggerated APR in debt collection attempts. Citibank also failed to promptly forward to debt buyers approximately 14,000 customer payments totaling almost $1 million. This delayed the updating of account balances and subjected consumers to collection efforts from debt buyers after they had already, in reality, paid off their account. The CFPB ordered Citibank to provide nearly $5 million in consumer relief and pay a $3 million penalty for selling credit card debt with inflated interest rates and for failing to forward consumer payments promptly to debt buyers.

2.6.2

Non-public supervisory actions

In addition to the public enforcement actions above, recent supervisory activities have resulted in approximately $24.5 million in restitution to more than 257,000 consumers. These nonpublic supervisory actions generally have been the product of CFPB ongoing supervision and/or targeted examinations, involving either examiner findings or self-reported violations of Federal consumer financial law. Recent non-public resolutions were reached in the areas of automobile finance and remittances.

43

See press release at http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-citibank-to-provide-reliefto-consumers-for-illegal-debt-sales-and-collection-practices/.

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SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

3. Supervision program developments 3.1

Examination procedures

3.1.1

Coordination with state and federal regulators on supervisory matters

The CFPB coordinates certain supervisory activities with appropriate federal and state bank and nonbank regulators. At the state level, coordinated supervision helps maximize the agencies’ collective effectiveness at protecting consumers, increasing efficiency, avoiding supervisory duplication, and minimizing burden on supervised entities. The CFPB, the Conference of State Bank Supervisors (CSBS), other state agency associations, and 62 agencies in all fifty states, the District of Columbia, Puerto Rico, and Guam have joined a cooperative Memorandum of Understanding (MOU) to facilitate coordinated activities.

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SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

In addition, the Bureau and state regulatory agencies (through CSBS) have established a Framework 44 for cooperation and coordination on state bank and nonbank examinations. The Bureau works with state regulators and other state regulatory associations on nonbank supervisory matters through the State Coordinating Committee (SCC) referenced under the Framework to facilitate scheduling of and participation in coordinated examinations. The Bureau and the SCC have conducted multiple coordinated examinations during the review period and are currently preparing the 2017 nonbank coordinated examination schedule. The Bureau has also implemented processes to share its examination schedules, examination reports, and supervisory letters with its state counterparts. At the federal level, the Bureau coordinates with the prudential regulators, including the Office of the Comptroller of the Currency (OCC), the Federal Reserve Banks and the Board of Governors of the Federal Reserve System (Federal Reserve), the National Credit Union Administration (NCUA), and the Federal Deposit Insurance Corporation (FDIC), regarding various supervisory matters. In connection with very large state-chartered banks and credit unions and certain nonbanks under the CFPB’s supervisory authority, the CFPB may coordinate with both the appropriate state and federal agencies. Representatives of the Bureau and the federal prudential regulators meet regularly to coordinate supervisory and other activities, and supervisory staff at the Bureau and the federal prudential regulators confer on a routine basis to discuss examinations and other supervisory matters regarding particular institutions.

44

For more on the framework, see http://files.consumerfinance.gov/f/201305_cfpb_state-supervisory-coordinationframework.pdf.

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SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

3.2

Recent CFPB guidance

The CFPB is committed to providing guidance on its supervisory priorities to industry and members of the public.

3.2.1

Expiration of the suspension of credit card agreement submission under TILA (Regulation Z)

Regulation Z requires credit card issuers to submit their currently-offered credit card agreements to the Bureau, to be posted on the Bureau's website. In April 2015, the Bureau suspended that submission obligation for a period of one year. That suspension has expired, and a submission was due on the first business day on or after April 30, 2016 (i.e., May 2, 2016). 45

3.2.2

Interagency guidance regarding deposit reconciliation practices

On May 18, 2016, the CFPB jointly released guidance with the Federal Reserve, the FDIC, the NCUA, and the OCC regarding deposit account reconciliation practices. This guidance informs financial institutions about supervisory expectations regarding customer account deposit reconciliation practices. The guidance establishes the supervisory expectation that financial institutions will adopt deposit reconciliation policies and practices that are designed to avoid or reconcile discrepancies, or designed to resolve discrepancies so that customers are not disadvantaged. In addition, the guidance affirms the expectation that financial institutions will effectively manage their deposit reconciliation practices to comply with applicable laws and regulations and to prevent potential harm to customers. The guidance also notes that financial institutions should

45

Submission instructions can be found on the Bureau’s website at http://www.consumerfinance.gov/creditcards/agreements/.

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SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

implement effective CMS to ensure compliance with applicable laws and regulations, and fair treatment of customers. The guidance notes that a financial institution’s deposit reconciliation practices may, depending on the facts and circumstances, violate the prohibition against unfair, deceptive, and abusive acts or practices found in Section 5 of the Federal Trade Commission Act and sections 1031 and 1036 of the Dodd-Frank Act. 46 The Bureau expects to continue coordinating with other agencies on these issues, and will consider appropriate action if law violations are identified at institutions or their service providers, consistent with the Bureau’s authority.

46

See, for example, the CFPB’s action against Citizens Bank, summarized in the Fall 2015 edition of Supervisory Highlights available at http://files.consumerfinance.gov/f/201510_cfpb_supervisory-highlights.pdf and the Order issued on August 12, 2015 available at http://files.consumerfinance.gov/f/201408_cfpb_consent-order-rbscitizens.pdf.

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SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

4. Conclusion One of the Bureau’s goals is to provide information that enables industry participants to ensure their operations remain in compliance with Federal consumer financial law. The CFPB recognizes the value of communicating program findings to CFPB-supervised entities to aid their efforts to comply with Federal consumer financial law, and to other stakeholders to foster better understanding of the CFPB’s work. To this end, the Bureau remains committed to publishing its Supervisory Highlights report periodically in order to share information regarding general supervisory and examination findings (without identifying specific institutions, except in the case of public enforcement actions), to communicate operational changes to the program, and to provide a convenient and easily accessible resource for information on the CFPB’s guidance documents.

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SUPERVISORY HIGHLIGHTS, ISSUE 12 - SUMMER 2016

STATE ISSUES o 2016 Legislative Wrap Up o Developing Issues in 2017 o Engagement of Advocacy Policy Committee

HB 51 to provide individuals recourse from paying homeowner associations fees if purchasing tax liens. By Rep. Tommie Benton (R-Jefferson)

Did it pass? YES. It was monitored to protect against superseding lien attempts by HOAs.

REAL ESTATE TRANSFER TAX:

Out of the 4,800 state bills analyzed for potential impact to the industry, there were more than 360 that were lobbied and monitored to protect credit unions in the 2016 State Session. The top 25 bills for credit unions: CREDIT UNION LENDING OPERATIONS HB 759 protects credit union ability to lend, speak to members, and handle compliance without an attorney. By Rep. Wendell Willard (R-Sandy Springs)

Did it pass? YES; GCUA spend significant time obtaining the bill, testifying, and lobbying this issue.

GARNISHMENT PROCESS OVERHAUL SB 255 corrects the garnishment constitutionality issue by changing how they are processed in the state. By Sen. Jesse Stone (R-Waynesboro)

Did it pass? YES; was monitored to ensure passage, and what passed did not create operational burdens.

CREDIT UNION LAW ENHANCEMENTS HB 811 creates multiple changes to credit union law including creating ability to remove or suspend a director and allows flexibility to hold real estate without prior approval of DBF. By Rep. Bruce Williamson (R-Monroe)

Did it pass? YES. GCUA helped promote the legislation.

HB 364 opened section of law on the real estate transfer tax. By Rep. David Knight (R-Griffin).

FIREARMS DEALER ANTI-FINANCIAL DISCRIMINATION SB 282 gives gun industry protections by Attorney General investigation against financial institutions that refuse service. By Sen. Jesse Stone (R-Waynesboro)

Did it pass? Did it pass? NO, but was amended onto HB 1060 that passed. GCUA lobbied issue heavily to obtain amendments.

Did it pass? YES, but did not impact any area of credit union lending or taxation.

ACCOUNTS FOR DISABLED: HB 768 allows Georgia to participate in new federal ABLE account program designed to help disabled individuals save.

Did it pass? YES.

By Rep. Lee Hawkins (R-Gainesville)

HB 1060 an unrelated gun bill that was amended in the final days of the session with SB 282.

Did it pass? YES, but with GCUA amendments to provide that it is By Rep. Rick Jasperse (R-Jasper) not discrimination to follow law, regulation, or membership restrictions, as well as create parity between charters for preemption.

D

OE T E V

MORTGAGE LENDING

LIENS SB 206 allows a purchaser to uncover if there are water liens and a way to extinguish if they are not shared prior. By Sen. William Ligon (R-Brunswick)

Did it pass? YES. GCUA worked to remove language that would have created issues with priority lien status.

HB 869 brings the state in line with federal laws on mortgage disclosures and privacy requirements. By Rep. Alan Powell (R-Hartwell) SB 422 forced upkeep of neglected properties and directed county to pay for noncompliance with a lien or foreclosure. By Sen. JaNice VanNess (R-Conyers)

Did it pass? YES. It was monitored to ensure that mortgage lending operations were not impacted. Did it pass? NO.

SR 360 creates study to analyze what state should do to curb data breaches and strengthen consumer data protection.

IGNITION INTERLOCK DEVICES HB 205 was directed at how ignition interlock devices are utilized with DUIs. By Rep. Tom Rice (R-Norcross)

Did it pass? YES. Monitored to protect “2nd chance” auto lending programs.

By Sen. Brandon Beach (R-Alpharetta)

BOARDS OF DIRECTORS SB 128 makes changes on how various boards of directors operate.

Did it pass? YES, but without any negative amendments to By Sen. John Kennedy (R-Macon) increase liability of board members.

EBT CARDS AND ATM OPERATIONS SB 389 on preventing welfare benefit fraud; restricted EBT card use at ATMs (and physical placement of ATMs). By Sen. Hunter Hill (R-Atlanta)

Did it pass? NO, but GCUA successfully lobbied to have the ATM language removed.

TAX REFORM SB 280 would cap mortgage interest deduction to pay for a personal income tax cut on individuals.

Did it pass? NO.

HB 1141 Fair Tax act that expands sales tax, including new1 taxes on financial transaction fees and services. By Rep. Emory Dunahoo (R-Gillsville)

TITLE PAWN PROVISIONS

NOTARIES HB 381 would overhaul the process in which one becomes a notary public and increase responsibilities.

Did it pass? NO.

By Rep. Andy Welch (R-McDonough)

BOAT TITLING HB 356 sought to implement a tax and title process for boats similar to the TAVT system for autos.

Did it pass? NO.

Did it pass? NO.

By Rep. Chuck Efstration (R-Dacula) SB 397 would rewrite power of attorney statues with same unintended consequences.

Did it pass? NO. While this bill seeks to protect against fraud, as drafted would create issues in helping consumers. Did it pass? NO.

CYBERSECURITY

By Sen. John Albers (R-Roswell)

By Rep. Tom McCall (R-Elberton)

PRIZED LINKED-SWEEPSTAKES SAVINGS ACCOUNTS

By Sen. Josh McKoon (R-Columbus)

By Sen. Judson Hill (R-Marietta) SB 276 would set provisions for notifying consumers of a data breach, with exemption for those already regulated.

By Sen. Rick Jeffares (R-McDonough)

Did it pass? NO. Provisions were amended onto an unrelated bill, but was removed.

SB 403 would set up prized linked Did it pass? NO. based savings accounts.

By Rep. Ron Stephens (R-Savannah)

HB 918 to modernize the power of attorney statutes including financial power of attorney.

SB 371 sought to make changes to pawnbroker provisions and allow for a monthly installment loan.

HB 1001 sought to make changes Did it pass? NO. to pawnbroker provisions and allow for a monthly installment loan.

POWER OF ATTORNEY

By Sen. Judson Hill (R-Marietta)

Did it pass? YES.

Did it pass? NO.

State Legislative Issues- July 25, 2016 ISSUE

SUMMARY

STATUS

Operations

GCUA discovered that the law that provides for financial institutions to lend, discuss finances with members, and handle compliance without an attorney present did not include credit unions … thereby opening up the industry to legal action.

HB 759 was introduced by Rep. Wendell Willard (R-Sandy Springs) at the request of GCUA specifically to protect credit unions and include them by law in the exemption that allows them to operate. It was signed into law the same year it was introduced (2016).

Firearms Dealer AntiFinancial Discrimination

States around the country saw the firearms industry seek legislation in 2016 to send a message to the Federal Government against “Operation Chokepoint” actions … and testified against credit unions, banks, and payment processing companies that have stopped serving them (or refused service).

SB 282 by Sen. Jesse Stone (R-Waynesboro) sought to give the gun industry protections from federal regulatory actions and penalize financial institutions that do not provide service (or diminish existing service).

Garnishments

Georgia’s garnishment statue was ruled unconstitutional by one of the courts, thereby halting all garnishments in that area of the state (and other areas of the state following its lead).

SB 255 introduced by Sen. Jesse Stone (R-Waynesboro) was an overhaul of the garnishment laws in Georgia, and corrected the constitutionality issue by changing how all garnishments are processed in the state. It was signed into law the same year it was introduced (2016).

GCUA POSITION GCUA spent countless hours actively lobbying this bill to move it forward.

GCUA opposed the initial version of the bill, and worked diligently to obtain changes and amendments After much changes to the language of the bill, it was then added onto another to make it more palatable bill HB 1060 which had multiple firearms-related provisions outside of the for credit unions. financial discrimination piece, and was vetoed by the Governor.

• •

•

As this is an overhaul of the law, there are changes in credit union procedures in processing garnishments, with new notices to provide (the court case centered around the lack of notice to consumers). A final amendment to the bill was added on March 15th to provide credit unions and others more time to respond to garnishment notices on accounts: The bill originally stated 24 hours to assess the account; it now would provide credit unions five days to check the account and another 10 days to respond. Even with this last amendment to minimize impact to credit unions, GCUA continued to work to ensure that what is being sought by the Legislature was not changed to inadvertently require that only attorneys be utilized in responding to garnishments.

Page 1 of 8

GCUA supported the legislation as it is important for Georgia to have a garnishment process that works-and one that everyone understands. It was also worked very closely to ensure that the corrections did not become burdensome in the process.

State Legislative Issues- July 25, 2016 ISSUE Foreclosures

Foreclosures: Property/Condo Association Issues

SUMMARY A legislative priority for credit unions is to ensure that there are no substantial changes to the Georgia no judicial foreclosure laws. In every state session since the housing crisis, there have been multiple attempts to alter the foreclosure procedures in this state.

STATUS HB 31 introduced by Rep. Billy Mitchell (D-Stone Mountain) would allow a debtor to “cure” a foreclosure by making all past due payments, late fees and charges up to five calendar days’ prior the sale of their property. It did not pass. HB 115 by Rep. Billy Mitchell (D-Stone Mountain) same as the above HB 31; this bill seeks to allow a debtor the right to "cure" a foreclosure by making all past-due payments, late fees and charges up to five days’ prior the sale of the property. This bill is a vehicle for attempts to increase the foreclosure notice period and lengthen the time individuals can stay after a foreclosure is initiated. It did not pass.

HB 173 by Rep. LaDawn Jones (D-Atlanta) seeks to add additional required language on foreclosure notices. It did not pass. An off-shoot of the rampant SB 117 by Sen. Jesse Stone (R-Waynesboro). The credit union lobbying team number of bills directed at spoke in opposition on this bill last week as the legislation seeks to force foreclosing parties to pay back fees and fines to condo associations (a foreclosures are the repeat attempts by property association maximum of six months’ worth of charges). This would increase the cost of foreclosure, as well as impact the ability of loans on Georgia properties to be interests to supersede the lien priority status of credit unions and sold in the secondary market. The committee did not pass SB 117 (after much other financial institutions. These lobbying against the issue). However, additional attempts by the condo property association groups wish association interests are anticipated. to force the foreclosing party to pay any past due fees/fines owed HB 685 by Rep. Brian Strickland (R-McDonough) was addressed in the committee process in February, but did not move forward. This outlined how to the association. condo/homeowner associations can reinstitute a board to maintain common areas, and was monitored to ensure that there were no attempts to force credit unions to be on the hook for back fees/fines. GCUA learned that homeowner association interests may bring forward a comprehensive bill next year to address multiple provisions of their act. It will be monitored closely to protect credit union lending operations.

Page 2 of 8

GCUA POSITION GCUA position on any bill that addresses foreclosures: Any attempts to convert Georgia to a judicial foreclosure system for foreclosures are opposed, as well as any broad lengthening of the foreclosure notice period.

Any attempt to supersede the credit union lien priority by property associations or others is opposed.

State Legislative Issues- July 25, 2016 ISSUE Liens

SUMMARY The housing crisis has also generated multiple attempts by others (such as the above property associations) to obtain . . . or in some cases, guarantee payment for taxes or services rendered.

STATUS

GCUA POSITION

HB 51 by Rep. Tommie Benton (R-Jefferson) seeks to alter the tax lien process on real property, and would require the purchaser to be exempt from paying all unpaid property association fees. This issue was tabled in 2015 due to political reasons, but passed in 2016 and was signed into law.

Monitor bills addressing tax liens for any onerous language, and address any legislative issues.

HB 81 by Rep. Scot Turner (R-Holly Springs); with some tax-redemption sales a nuance in law allows parties to purchase/ redeem tax liens through a series of shell corporations to create a "super lien" status at the same level as a tax lien, thereby superseding the priority status of financial institutions. This issue was tabled in 2015 due to political reasons, and while anticipated in 2016 it did not see action.

Oppose any non tax lien changes that would supersede the credit union lien priority.

SB 206 by Sen. William Ligon (R-Brunswick) focused on how unpaid water liens are handled, and provided an avenue for the purchaser of a property an avenue to extinguish them (and not be saddled with the debt). This bill was signed into law in 2016. SB 422 by Sen. JaNice VanNess (R-Conyers) would have forced the upkeep of neglected properties by directing the county to pay for any issue of noncompliance with a lien or foreclosure on the property. This bill did not pass. HB 938 by Rep. Brian Prince (D-Augusta) would address blighted properties by providing the purchaser of a tax lien the ability to recoup the reasonable cost of upkeep of the property (did not move past the House Judiciary Committee process). HB 653 by Rep. Don Parsons (R-Marietta) did not pass a House Ways and Means hearing once it was uncovered that the intent was to allow a private debt collector the ability to supersede all liens (including those of financial institutions). HB 912 by Rep. Bruce Williamson (R-Monroe), which sought to create a tax lien digest that would house all tax liens in the state, failed to move forward in the House Ways and Means committee.

Page 3 of 8

State Legislative Issues- July 25, 2016 ISSUE

SUMMARY

Regulatory Changes: Dept of Banking and Finance Housekeeping, Treasury Department

Annual legislative update and edits to the regulatory law governing credit unions and other financial institutions.

STATUS GCUA has worked with the DBF throughout 2015 to procure provisions in the Housekeeping bill for changes in operations and opportunities for credit unions, and mitigate unintended issues from revisions. In 2016, HB 811 by Rep. Bruce Williamson (R-Monroe) was the culmination of that effort and contained multiple changes to credit union law: • • • • •

Taxation

There are various bills introduced that seek to review the tax exemptions, change the tax code, or alter tax deductions/credits that are monitored to protect credit unions.

Streamline the federal parity section for credit unions that was successfully procured in 2015, Outline a set process in which a credit union can remove or suspend a director, Create a basis for the department's purview over virtual currency, Outline a procedure for credit unions to hold real estate in specific instances subject to a majority vote of its directors without prior approval of the department, and Remove prohibitions for state-chartered institutions against a fee for checks drawn on that institution.

SB 283 by Sen. John Kennedy (R-Macon) was pursued by the state Treasury to makes a technical adjustment to the formula for large dollar pools of public funds (such as UGA’s deposits) due to Basel III changes. While not applicable to credit unions, it was a bill where GCUA fielded questions with legislators in the Capitol. SR 350 by Sen. Judson Hill (R-Marietta) urges Congress to enact the Fair Tax Act. HB 364 by Rep. Jay Powell (R-Camilla). This bill originally was directed at the real estate transfer tax, and it opened up the section of law for any changes in this area. However, in committee the language was substituted and does not impact any area of credit union lending or taxation. This bill did not pass in 2015, but did see additional action in 2016 and was signed into law. HB 435 by Rep. BJ Pak (R-Lilburn) is a tax-reform proposal from 2015 that would lower the personal income tax, but cap the mortgage interest deduction. It did not pass. HB 445 by Rep. John Carson (R-Marietta) is extensive tax-reform proposal from 2015 that removes a large number of credits and deductions and Page 4 of 8

GCUA POSITION Support the DBF’s housekeeping legislation and continually work with the DBF to address any changes as necessary in 2017. Monitor other agencies regulatory improvement bills for potential impact to credit unions.

Monitor; oppose any legislation that would remove the income tax exemption on the state level.

State Legislative Issues- July 25, 2016 ISSUE

SUMMARY

Taxation (continued)

STATUS

GCUA POSITION

expands several areas of what is taxable. Currently out of the 81 pages of changes there are no financial transaction items in the bill, intangible property taxes, or credit union income taxes. It did not pass. SR 43 by Sen. John Albers (R-Roswell) would institute a study committee to analyze and review all special tax exemptions. If this committee is approved, it will be one that will require much time in the off session to monitor and protect credit union interests. The Senate amended an aquarium tax credit bill, HB 238, that was introduced by Rep. Ben Harbin (who retired in 2015) with the entire text of SB 280, tax reform legislation by Sen. Judson Hill (R-Marietta) that sought to cap the mortgage interest deduction to pay for a personal income tax cut on individuals. The House did not bring up the bill for consideration. SR 988 by Sen. Jesse Stone (R-Waynesboro) is solely a resolution that urges the federal and state government to shift their income tax structure to the Fair Tax structure.

Debt Settlement Companies

There have been regular attempts by debt settlement companies to procure the ability to operate in Georgia.

Lending Operations

Outside of the foreclosure issues, there are various bills that can impact the lending operations in Georgia that are monitored closely.

HB 1141, the Georgia Fair Tax Act was introduced by Rep. Emory Dunahoo (R-Gillsville) too late in the session to see action, but it is worth noting that the bill would expand the sales tax to a variety of new items not taxed presently, including financial transaction fees and services. The issue will continue to be monitored. HB 387 by Rep. Trey Kelley (R-Cedartown) from 2015 seeks to permit debtsettlement companies to operate in Georgia. This bill being monitored to ensure that credit unions are not wrapped into the compliance requirements, as well as to protect consumers’ ability to utilize credit union accounts to pay back debts. It did not pass. HB 462 by Rep. Alan Powell (R-Hartwell). This legislation from 2015 is directed at a niche equipment leasing company; however, it opens up the potential for changes to lending operations and is being monitored to protect against compliance burdens. It did not pass. HB 267 by Rep. Trey Kelly (R-Cedartown) seeks to clarify the requirement in law of two witnesses attesting to deeds and mortgages, with the notary public sufficing for one. This bill did not pass as a stand-alone legislation, but was inserted into the above HB 322 that did pass and was signed into law … but the bill was still eligible and could be amended. Page 5 of 8

Monitor

Monitor

State Legislative Issues- July 25, 2016 ISSUE

SUMMARY

Lending Operations (continued)

STATUS

GCUA POSITION

HB 356 by Rep. Ron Stephens (R-Savannah) is the anticipated boat-titling bill that seeks to implement a taxation and titling process for boats similar to the one that is in place with the TAVT system for autos. This bill was debated multiple times in committee from 2015 to 2016, however no agreement could be reached between the parties that collect the tax and receive the tax. HB 869 by Rep. Alan Powell (R-Hartwell) removes out of date (and inconsistent) provisions in the law and brings the state in line with federal laws on mortgage disclosures and privacy requirements. It passed and was signed into law in 2016. HB 205 by Rep. Tom Rice (R-Norcross) was directed at how ignition interlock devices are utilized with DUIs. It did not wrap in any second chance auto lending programs, and was signed into law in 2016.

Payment Cards

Accounts

The state legislature often addresses bills that can impact payment card operations and/or interchange in the state; as such these issues are actively addressed.

HB 914 by Rep. Sam Teasley (R-Marietta) sought to increase consumer awareness of those that attempt to coerce new mortgage holders into paying money for a copy of the instrument conveying real estate. The bill would require them to state that the notice is a solicitation. It moved through the committee process but did not “cross over” by day 30. The months leading up to the 2016 session along with the first few weeks were full of activity educating legislators on why retailers attempts to mandate chip and pin cards would not resolve fraud. No bills on this issue were introduced. SR 883 by Sen. Brandon Beach (R-Alpharetta) creates a study committee to analyze the payments processing industry in Georgia, and what the state can do to invest in the market. HB 768 by Rep. Lee Hawkins (R-Gainesville) allows Georgia to participate in the new federal ABLE account program designed to help disabled individuals save. It passed, but only after the tax deduction component was stripped from the bill. It was signed into law in 2016. SB 403 by Sen. Josh McKoon (R-Columbus) would set up prized linked based savings accounts in Georgia. It did not pass.

Page 6 of 8

Monitor.

Support any positive additions to law for consumers, and monitor for any compliance burdens.

State Legislative Issues- July 25, 2016 ISSUE

SUMMARY

Accounts (continued)

ATMs

Boards of Directors, Employees

STATUS

GCUA POSITION

HB 802 by Rep. Sam Teasley (R-Marietta) will increase the tax deduction on contributions to 529 savings accounts in an effort to encourage families to save for college. It was signed into law in 2016.

While there have been no direct attempts to add additional regulations to ATMs, they are often inadvertently wrapped into other bills … and if left unchecked, would be detrimental.

Bills are introduced that seek to change how various boards of directors operate, or how employees are treated.

SR 736 by Sen. Charlie Bethel (R-Dalton) would create a study committee to analyze the number of Georgia employers who offer retirement/savings programs for employees, and develop a public/private partnership to provide savings programs for those that do not. SB 389 by Sen. Hunter Hill (R-Atlanta) was directed at preventing welfare fraud. An early version of the bill would restrict the physical placement of ATMS … but after speaking with GCUA, that language was removed. It did not pass. HB 847 by Rep. David Clark (R-Buford) expanded the penalties to those who commit public assistance fraud, and was monitored to ensure that the ATM language was not attached. It did not pass. SB 128 by Sen. John Kennedy (R-Macon) made changes to state law on how boards of directors of certain organizations are handled, but did not include any language that would increase the liability of board members or impact how credit unions operate. It was signed into law in 2016.

Monitor.

Monitor.

SB 293 by Sen. Vincent Fort (D-Atlanta) would raise Georgia’s minimum wage to $15.00 an hour. It did not pass. HB 824 by Rep. Kimberly Alexander (D-Hiram) would require all employers to provide paid sick leave, outlining rules on notification of time available and on employer record retention. It did not pass.

Power of Attorney

In 2016 there were multiple attempts to modernize the power of attorney statue.

SB 242 by Sen. Michael Williams (R-Cumming) would require companies with sick leave policies to permit employees' use for immediate family members. It did not pass. HB 918 by Rep. Chuck Efstration (R-Dacula) would modernize the power of attorney statues, including financial power of attorney. It sought to limit fraud, however it unintendedly created issues … specifically with financial inisuttions’ ability to help consumers. It did not pass. SB 397 by Sen. Judson Hill (R-Marietta) was similar to the above, and did not pass.

Page 7 of 8

Monitor.

State Legislative Issues- July 25, 2016 ISSUE Data Security

SUMMARY

STATUS

GCUA POSITION

While data security is a broader issue for the Federal government, this issue can be studied on the state level to urge Congress to act.

HR 473 by Rep. Dudgeon (R-Johns Creek) seeks to create a study committee in the off session to committee to analyze cyber security and card breaches.

Support thoughtful consideration and analysis of the cybersecurity issues, while ensuring that credit unions are not negatively impacted.

SB 276 by Sen. John Albers (R-Roswell) would set provisions for notifying consumers of a data breach, with exemption for those already regulated. It did not pass. SR 360 by Sen. Brandon Beach (R-Alpharetta) creates a study committee to analyze what the state should do to curb data breaches and strengthen consumer data protection.

Notary Publics

There has been a three-year attempt to modernize the notary public statue.

Title Pawn

Bills that are directed at other players in the financial marketplace are to be watched closely as they can inadvertently impact credit unions.

SB 321 by Sen. Hunter Hill (R-Atlanta) sought to increase protections against public disclosure of consumer information held at the state level HB 381 by Rep. Andy Welch (R-McDonough) sought to overhaul and modernize the process by which one becomes a notary public. It would require training and background checks as well as detailed (10 years) record-keeping by the notary. Throughout the process the bill has been amended multiple times to make it less burdensome, and to ensure that regular business operations at financial institutions are safe. This bill did not pass. SB 371 by Sen. Rick Jeffares (R-McDonough) sought to make changes to pawnbroker provisions and allow them to charge for a monthly installment loan. It did not pass. HB 1001 by Rep. Tom McCall (R-Elberton) is similar to the above, and did not pass.

Page 8 of 8

Monitor.

Monitor.

State Issues: Developing Topics for 2017 When the State Legislative Session begins on January 9th, it brings a fresh slate for bills as no legislation carries over from 2016. However, there will be issues to resurface, along with new topics that credit unions will need to address at the State Capitol. While the timing is premature to see potential legislative initiatives for 2017, there are several issues already anticipated for next year. From a state wide perspective, it is likely that expanding legalized gambling, religious liberties, healthcare issues (bed tax, Medicare expansion), education reform, and attempts at state tax adjustments are on the horizon. In addition, the social and political issues that consume the third and fourth quarter of 2016 will influence legislation that is introduced early. Transgender bathrooms, marijuana use expansion, and public safety issues could ebb and flow in the process and find their way into legislation. The elections will also have an impact on the state legislature, as well as the four main state legislative caucuses’ elections for leadership of their respective groups. And, all committee chairmen could change for 2017 … however, the volume of change in chairmanships seen after the 2014 elections is not anticipated. Another factor that will weigh into any 2017 issue is the 2018 elections; namely current legislators seeking higher office. Power struggles will likely be more palatable as individuals position and align themselves, and will likely prompt several long term legislators to end their political careers earlier than expected. And, continual residue from the Governor’s bill vetoes will be in play. Watch for ambitious legislators to take sides early and loudly, and those who serve in the legislature because they enjoy policy creation have a more challenging year. But outside of the developing issues with people and potential legislation, below are several topics that relate to credit unions anticipated in 2017: • • • • • • • • • • • • • •

Operational Improvements to Credit Union Charter Operation Choke Point Reactions in State Ignition Interlock Devices Payments/Chip and Pin Mandates Cybersecurity Foreclosures/Required Upkeep and Notification of Neglected Properties State Tax Changes Liens (Tax Liens, Lien Registries, HOA/Condo Association Superseding Attempts) Overdraft Programs and Arbitration Clauses Consumer Savings (Prized Linked Savings Accounts, Retirement Plans) EBT Reform and Restrictions and/or Notifications for ATMs Board Liability Eldercare/Power of Attorney/Notary Reforms Collateral Damage/Impact from Other Industries

Georgia Supreme Court OKs lawsuit against SunTrust Bank Jul 8, 2016, 2:51pm EDT Dave Williams Staff Writer Atlanta Business Chronicle

The representative of a deceased plaintiff got the go-ahead from the Georgia Supreme Court Friday to attempt to mount a class-action lawsuit against SunTrust Bank. The late Jeff Bickerstaff, now represented by his mother, took the bank to court in 2010 claiming he was charged exorbitant overdraft fees in violation of Georgia’s usury laws. He then followed up on the original suit in 2013 with a motion to certify as plaintiffs in the case all Georgia citizens with a SunTrust deposit agreement who in the previous four years had paid a fee on an overdraft of $500 or less from an ATM or debit card transaction. The bank’s lawyers argued that an arbitration clause written by SunTrust provided that only one individual customer could exercise his right to reject arbitration and, thus, only one person could sue the bank on behalf of himself. Lower courts agreed and denied Bickerstaff’s motion, prompting an appeal to the state Supreme Court. In Friday’s unanimous ruling, the high court held in favor of Bickerstaff and sent the case back to the state Court of Appeals for further action. “In the case filed by Bickerstaff, it is undisputed that the purported class numbers at least 1,000, and SunTrust has stipulated that it is unfeasible for so many depositors with relatively small claims to bring such claims individually,” Justice Robert Benham wrote for the court. Benham’s opinion cited two previous Georgia Supreme Court decisions during the last decade establishing that a single representative of a class of plaintiffs may satisfy conditions for a lawsuit on behalf of the class members and that those class members may subsequently ratify the acts of the representative as their own. Dave Williams covers Government

BUSINESS ITEMS o 2016 Legislative/Regulatory Survey

Survey : Questions

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Your responses will help provide us with insight and perspective. Progress:

Alternative Payment Platforms

1. Our credit union utilizes alternative payment platforms (such as Apple Pay, Samsung). Yes No

Auto Lending

2. Do you offer an auto loan program that utilizes ignition starter-interrupters? If YES, please answer question 3 also. Yes No

3. If you answered Yes to Question 2, do you provide notice before shutting off the vehicle? Yes No

7/18/2016 4:51 PM

Survey : Questions

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Chip and PIN/EMV

4. Please select one: Our credit union has issued EMV Chip cards. Our credit union has not, but plans to do so in the next 12 months. Our credit union presently has no plans to offer EMV Chip cards. Our credit union does not offer cards.

Compliance/Regulatory Burdens

5. Approximately what has your credit union spent in compliance for YTD 2016? A. 0-$25,000 B. $25,000-$75,000 C. $75,000-$150,000 D. Above $150,000

7/18/2016 4:52 PM

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Foreclosures

6. Has the number of foreclosures increased or decreased at your credit union since 2015? Increased Decreased N/A

7. What is the average period of time between the moment of delinquency and the point where a foreclosure is initiated by your credit union? 30 days 60 days 90 days Higher

7/18/2016 4:52 PM

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Grassroots Communication with Legislators

8. I would be willing to contact my legislator if an issue arose on a federal or state level. Yes No

9. I would be willing to reach out to staff and board to do the same. Yes No

10. I would be willing to reach out to my membership to do the same. Yes No

7/18/2016 4:53 PM

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Membership: Gun Dealers/Manufacturers

11. Are there any gun dealers/manufacturers in your membership? Yes No

12. Has your credit union declined services to someone in that industry? Yes No

13. Are you under any regulatory pressure to not serve that industry? Yes No

7/18/2016 4:53 PM

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Plastic Card Fraud

14. What has your credit union experienced in estimated net fraud losses associated with plastic card fraud for YTD 2016?

50 characters left.

15. If applicable, what is your estimated cost of card reissuance for YTD 2016?

50 characters left.

Prize-Linked Savings Accounts

16. If available, would your credit union offer prize-linked savings accounts to members (i.e., savings accounts with a sweepstakes component)? Yes No

7/18/2016 4:54 PM

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Tax Reform

17. Most of the "fair tax" legislation include expanded taxes on services, some of which include financial services. While these bills have not passed, attempts will continue. Please share your thoughts on the potential impact to your credit union (financially, operationally, etc) a shift like this would bring:

350 characters left.

7/18/2016 4:54 PM

SUPPORT MATERIALS o CUPAC Trustee 2nd Quarter Report o Regulatory Response Committee Update o Advocacy Plan Update o Minutes

6705 Sugarloaf Parkway, Suite 200 Duluth, GA 30097 800.768.4282

GA CUPAC/CULAC Quarterly Report 2nd Quarter 2016 At the end of the 2nd quarter $133,099 was raised for the PACs with a total of 21 credit unions at or above their goal. This is slightly above the 2015 trend line where $128,513 was raised with the same number of credit unions at goal by midyear. However, fundraising is fluid and any change at a credit union (new management, a conversion, staffing) can derail the most successful program. As such, time and resources continue to be dedicated to analyze individual fundraising levels and encourage credit unions to engage (and to not let existing programs fall by the wayside).

2016 PAC FUNDRAISING BY TYPE Raffles 4%

Deduct A Buck 23%

Silent Auction (Chapter) Annual 0% Meeting 10%

Payroll Deduction (League) 2%

Quail Hunt 13%

GAC Raffle 3% Dress Down Days 17%

Personal Donations 1%

Paint Ball 16% Golf 11%

Sales (Candy, Misc) 0%

Georgia credit unions employ a variety of programs; the adjacent chart illustrates how all money was raised as of June 30th. In addition to helping credit unions identify a fundraising method ideal for their culture, there are regular efforts to grow overall PAC awareness and how it is vital to the industry. This education is done one on one, credit union staff training, Chapter events, and the GCUA Annual Meeting. At that meeting alone, 130 people from 55 credit unions, vendors and GCUA supported the PACs.

Contribution to Campaigns: due to the fundraising efforts of the industry $56,000 was donated to state campaigns on behalf of credit unions as of the end of June ($40,000 to state races, $15,000 to political parties, $1,000 to caucuses). The $40,000 to state races represents 112 campaigns in the May 24th Primary out of the 236 seats. Credit union supported candidates saw a 97% success rate, with 109 advancing to the next race (or winning outright), and two will be decided in the July runoff. CULAC Highlights: CULAC has a goal of raising $2.42 million nationwide for 2016. Georgia credit unions have contributed $59,336, which is 83% of its individual CULAC goal of $71,085. CULAC has contributed $37,000 to Georgia federal candidates by the 2nd quarter, with all 15 races for federal office receiving support from CULAC. There is a 100% success rate in the federal elections with one, the open seat for the 3rd congressional district, to be decided in the July runoff. Georgia CUPAC/CULAC are the state and federal political action committees (PACs) for credit unions. Contributions to Georgia CUPAC/CULAC are not tax deductible for federal income purposes and are generally evenly distributed between the two PACs. Contributions are strictly voluntary and you have the right to refuse to contribute without reprisal. Contributions from individuals outside of the solicitable class will be returned. Federal election law requires us to report the name, address, occupation and name of employer for individuals who contribute $200 or more in a calendar year.

PAC Fundraising June 30, 2016

Name Delta Community CU Atlanta Postal CU Robins FCU Georgia's Own CU Associated CU Georgia United CU LGE Community CU The Southern FCU Kinetic CU Peach State FCU CDC FCU Credit Union of Georgia MidSouth Community FCU DOCO CU Southeastern FCU AFLAC FCU Powerco FCU Coosa Valley FCU Coca-Cola CU MembersFirst CU Emory Alliance CU United 1st FCU Marshland Community FCU GeoVista CU GEMC FCU Excel FCU Augusta Metro FCU Family First CU Interstate Unlimited FCU Georgia Heritage FCU CGR CU Pinnacle CU Northwest Georgia CU Credit Union of Atlanta Mutual Savings CU Augusta VAH FCU MEA FCU CORE CU Hallco Community CU Fort Gordon & Community CU

2016 Raised $1,649.35 $3,910.45 $13,046.86 $11,110.00 $12,111.97 $21,508.14 $1,012.00 $586.87 $8,396.17 $2,597.00 $9.00 $1,347.00 $19,554.95 $1,899.53 $93.87 $250.00 $1,655.00

$2,953.69 $341.00 $285.00 $790.00 $3,617.87 $305.00 $20.00 $245.00 $70.00 $145.00

$160.00 $3,017.69 $123.87 $290.00 $189.00 $750.00

2016 Fair Share $32,147.60 $11,168.10 $16,269.70 $18,213.20 $16,460.50 $14,142.40 $11,001.80 $3,247.30 $4,150.80 $4,122.10 $1,779.20 $3,257.50 $3,389.40 $4,310.80 $2,924.30 $1,677.10 $2,152.10 $2,505.90 $1,422.90 $2,370.60 $1,922.40 $2,060.10 $1,286.50 $2,814.70 $1,319.80 $1,470.10 $1,660.30 $1,140.60 $1,503.20 $864.30 $1,272.70 $1,144.60 $1,292.90 $1,842.40 $608.40 $912.80 $796.50 $911.40 $1,124.20 $623.70

Fair Share Met?

YES

YES YES

YES

YES

YES

2015 Raised $16,822.77 $4,816.50 $25,392.47 $30,900.00 $17,287.70 $22,120.65 $1,671.00 $14,594.00 $13,750.50 $4,001.00 $3,878.00 $4,298.00 $20,775.45 $3,025.45 $510.00 $3,410.17 $40.00 $3,123.05 $1,524.00 $10,065.12 $652.00 $89.83 $1,438.90 $1,378.38 $2,722.95 $1,188.00 $899.83 $1,514.00 $15.00 $1,420.00

YES

YES

$610.50 $2,815.20 $1,425.50 $200.00 $835.00 $1,118.90

2015 Fair Share $30,191.30 $10,760.60 $15,680.60 $17,650.30 $16,306.10 $13,216.80 $10,554.40 $3,294.30 $4,124.40 $4,065.00 $1,774.60 $3,278.40 $3,521.40 $4,189.80 $2,575.60 $1,875.40 $2,139.10 $2,433.90 $1,425.20 $1,876.70 $1,953.40 $1,955.50 $1,279.10 $2,635.30 $1,438.90 $1,293.80 $1,479.30 $1,114.00 $1,323.40 $829.20 $1,421.60 $1,195.50 $1,270.20 $1,913.70 $610.50 $886.30 $831.60 $892.50 $1,082.40 $659.50

PAC Fundraising June 30, 2016

Name Platinum FCU Workmen's Circle CU, Inc. Altamaha FCU Members United CU Southeast FCU Health Center CU North Georgia CU Georgia Power Northwest FCU Southern Pine CU BOND Community FCU On the Grid Financial Piedmont Plus FCU Lanier FCU Rose City FCU Savannah Schools FCU United Methodist Connectional FCU Flowers Emp. Credit League HEA FCU Georgia Power Valdosta FCU Fort McPherson CU Community United FCU 1st Choice CU Savannah Federal CU Stephens-Franklin Teachers FCU Savannah Postal CU North Georgia Community FCU Glynn Co. Federal Emp. CU Coweta Cities & Co. Emp. FCU Georgia Pine FCU Memorial Health CU Artesian City FCU Habersham FCU Rome Kraft Emp. CU Three Rivers CU Northside FCU GPA CU The Wright CU Combined Emp. CU First Reliance FCU Ethicon CU

2016 Raised $20.00

$30.00 $2,440.00 $382.50 $5.89

$60.00 $195.00

$389.53 $14.53

$740.00 $10.00 $10.00

$20.00 $166.26 $371.23 $15.00 $347.50

2016 Fair Share $756.80 $128.20 $900.80 $1,005.10 $686.50 $740.90 $883.40 $631.20 $211.80 $483.80 $624.10 $867.80 $469.10 $885.40 $378.00 $489.40 $604.80 $356.20 $371.40 $457.50 $352.00 $860.10 $174.40 $163.80 $230.30 $331.60 $131.50 $348.70 $138.70 $426.70 $244.30 $349.40 $171.10 $475.20 $498.20 $144.90 $154.70 $364.40 $268.90 $118.30

Fair Share Met?

YES

2015 Fair Share $722.00 $124.20 $1,094.69 $828.80 $301.00 $930.60

2015 Raised $5.00

$2,780.00 $1,821.00 $1,600.00 $324.06

$139.83 $505.00

YES

$352.89 $29.85

$10.00 $279.83 $700.00

YES

$519.83 $420.69 $1,250.00

YES YES YES

$39.83 $344.57 $602.68 $287.76 $416.00

$763.80 $824.00 $615.60 $211.60 $494.60 $708.70 $856.50 $440.80 $832.30 $363.20 $479.70 $594.00 $372.50 $352.60 $539.50 $345.30 $915.60 $179.80 $175.70 $230.40 $229.70 $137.90 $356.00 $148.20 $430.80 $239.40 $335.20 $174.50 $462.30 $447.60 $141.30 $154.30 $437.90 $255.10 $116.20

PAC Fundraising June 30, 2016

Name Walker Co. Educators FCU Valdosta Teachers FCU Atlanta FCU Fieldale CU Genuine Parts CU Regional Members FCU BEKA FCU RIG Emp. CU RCT FCU Colquitt Co. Teachers FCU Mercy FCU Jeff Davis CU Locoga FCU Macon Firemen's CU Multiple Employee Group FCU Ware County School Emp. FCU Mead Emp. CU Georgia Guard CU Savastate Teachers FCU Coffee Co. Teachers FCU Georgia Power Macon FCU ELCO FCU Brosnan Yard FCU Macon-Bibb ECU Flint FCU Towns Union Educators FCU CRMC Emp. CU Patterson Pump FCU United Neighborhood FCU Flint River Emp. FCU Roper Corp. Emp. CU Macon Water Works CU Harris Emp. CU Berrien Teachers FCU Omega Psi Phi Fraternity FCU Local 461 FCU Rabun-Tallulah FCU Richmond Co. Health Emp. CU Big Bethel AME Church FCU FAB Church CU

2016 Raised $812.04

$99.90 $93.87

$1,286.84

$5.89 $389.53

$5.89

$5.90

$5.89 $24.00 $900.00

$5.89

$600.00

2016 Fair Share $131.90 $203.90 $243.90 $204.10 $99.90 $151.20 $110.40 $72.60 $343.30 $164.00 $186.80 $62.30 $106.80 $69.00 $89.10 $60.70 $82.00 $101.80 $76.60 $129.00 $76.00 $71.00 $80.10 $131.80 $73.10 $72.60 $98.50 $44.90 $104.30 $31.30 $70.10 $21.50 $21.80 $27.50 $106.80 $52.40 $17.10 $21.00 $30.10 $28.20

Fair Share Met? YES

2015 Raised $700.00 $739.96

YES

$98.80 $40.00 $1,265.00

YES

$777.82

YES

$44.83 $29.85 $329.95

$19.95

$29.85

YES

$19.95 $70.00 $400.00 $700.00

$19.95

YES

$300.00 $39.87

2015 Fair Share $128.70 $201.10 $255.50 $205.80 $98.80 $133.50 $109.80 $74.20 $331.00 $160.80 $185.10 $64.60 $104.00 $70.50 $94.50 $57.60 $95.80 $107.40 $72.30 $126.30 $90.50 $69.00 $77.60 $143.40 $72.70 $59.00 $89.50 $44.80 $74.50 $31.30 $70.30 $20.30 $33.10 $27.70 $82.70 $52.80 $18.00 $23.20 $30.60 $24.50

PAC Fundraising June 30, 2016

Name Stephens Co. Comm. FCU Tabernacle FCU Chattahoochee FCU Family Savings CU Five Star CU IBM Southeast Emp. FCU Phenix FCU SRP FCU CULS GCUA Other Sources Total

2016 Fair Share $11.90 $650.00 $22.00 $93.00 $35.00 $85.00 $20.00 $93.02 $1,311.22 $476.00 $5,169.00 $1,672.00

2016 Raised

Fair Share Met? YES

$133,098.60

*2015 total includes PAC monies raised from credit unions merged prior 2016.

2015 Fair Share $11.60 $400.00 $39.40

2015 Raised

$1,725.00 $190.00 $47.00 $750.00 $504.00 $9,535.00 $1,970.00 21

$257,251.43

55

Report of the Outreach Advocacy Committee (Sub-Committee of Advocacy Policy Committee) The Outreach Advocacy Committee met on July 11, 2016 at the Georgia Credit Union Affiliates offices. Committee members present: Chairman Brian Akin, Andy Anderson, Kimberly Ford, Mark Littleton, Eve Nimkar, Laura Ryll, Allen Upchurch Unable to attend:

Daniel Caldwell, Mark Nofi, Matt Selke, Shawn Turpin,

Staff members present:

Kristi Arrington, Angi Harben, Allie Jackson, and Amber Salgado

Other members present:

Douglas Kiker, Zan McKelway via phone

Update Statement of Purpose It was suggested that the statement of purpose is outdated and no longer personifies the mission of this committee; all agreed on updating it. Current Statement of Purpose: To identify ways credit unions can serve people of modest means that contribute positively to the financial well-being of the credit union and serve to differentiate credit unions from other for-profit suppliers. New Statement of Purpose agreed by all: To identify ways credit unions help people afford life while raising awareness of the credit union difference and contributing positively to the communities they serve. Outreach Initiatives/International Credit Union Month Campaign The number of credit unions participating in the Switch to Save ICU month initiative is dwindling. The group decided that it was time to retire the initiative. There was discussion around backing an outreach program such as Purple Heart Homes or Action Ministries as the statewide ICU initiative. The committee felt that it would be difficult to get all credit unions on board with one outreach initiative due to the fact that even though all are very worthy, each credit union has its own focus for outreach. It was decided that the statewide ICU campaign should focus on telling the story of how credit unions Help People Afford Life. Stories will be gathered through a contest (details below) and shared with all audiences including consumers, media, elected officials, credit union staff, etc. In terms of outreach initiatives, a discussion took place on the best way to share worthy initiatives that are brought to the League with credit unions. Since all credit unions have their own focus, the committee charged staff with building a clearinghouse for outreach initiatives. A receptacle of what different credit unions focus on in terms of outreach (military, kids, etc.). That way when an outreach

initiative is brought to the League, rather than asking all credit unions to get on board even if it doesn’t fit their culture, the information can be shared with those most likely to be receptive to the program. Helping People Afford Life In an effort to gather member stories for the ICU initiative and as a way to encourage frontline staff to embrace Helping People Afford Life, committee members approved rolling out a contest. During the month of August, credit union employees will be encouraged to share ways that they help people afford life. The contest will be run locally at credit unions so each credit union will have their own stories to share with media, members, etc. A winner from each credit union will then proceed to the statewide contest where they will have a chance to win a substantial cash prize. Credit unions are encouraged to share all HPAL stories with the League (not just the winning entry) for statewide messaging use. Contest details and tools will be shared with credit unions immediately due to the required timing of the contest so stories can be used in ICU messaging. CUNA National Awareness Initiative Committee members engaged in discussion with CUNA via conference call about the new national awareness initiative. CUNA’s national initiative is aimed at supplementing efforts like HPAL rather than implementing a new national brand/ad campaign. The national initiative fits in line perfectly with the Georgia HPAL initiative. Both complement and support each other. It was decided that the Outreach Advocacy Committee would designate a Task Force to engage in further discussions with CUNA on ways to work together and elevate the success of both initiatives while increasing awareness of credit unions. A Task Force was appointed consisting of Andy Anderson, Mark Littleton and Allen Upchurch from the Advocacy Outreach Committee, Doug Kiker and Zan McKelway from CUNA and Kristi Arrington and Angi Harben from GCUA.

Media & Communication Training Training is scheduled for Tuesday, September 13, 2016. CUNA staff will be invited to discuss the national awareness campaign and internal messaging. Other topics include both internal and external messaging, effective storytelling, social media and the ever popular media panel luncheon. Consumer Survey Media Outreach Tool There is a decline in the participation of the consumer survey. The statistics obtained through this survey are important and add to the success of the statewide public relations campaign. There was a discussion among committee members on how to make the process easier and more appealing in order to increase participation. Timing turned out to be a major deterrent. It was suggested that the survey be released to credit unions at least 45 days before it is to begin so it can be shared with members through additional vehicles such as newsletters.

Recommendations from Committee: 1) Build a receptacle of what different credit unions focus on in terms of outreach (military, kids, etc.) so when an outreach initiative is brought to the League, rather than asking all credit unions to get on board even if it doesn’t fit their culture, the information can be shared with those most likely to be receptive to the program. 2) Roll out the HPAL contest designed to encourage credit union frontline staff to embrace HPAL and share stories of how they Help People Afford Life. Once local contests are concluded, promote all local winners to the statewide version of the contest. Use all stories gathered in ICU media outreach initiatives. 3) Assign Task Force of Advocacy Outreach Committee members and CUNA staff to engage in further discussions with CUNA on ways to work together and elevate the success of both initiatives while increasing awareness of credit unions. 4) Back up the timeline for the bi-annual consumer surveys so they can be shared at least 45 days before the survey is set to start, allowing it to be shared with members through alternative vehicles such as newsletters and statements.

2016 Mid-Year Regulatory Committee Report Promoting and defending credit unions at the Federal and State level is the goal of GCUA’s overall advocacy efforts, which includes both the legislative and regulatory arenas. In the regulatory arena, the CUNA-League system monitors issues impacting credit union operations and speaks out in support of credit unions through comment letters. The GCUA Regulatory Response Committee and GCUA staff spend many hours analyzing regulations and working to influence government agencies. The Credit Union Regulatory Agenda in 2016 includes a goal for pursuing a better regulatory environment for credit unions. In Washington D.C., CUNA and Leagues’ regulatory advocacy initiatives and efforts will concentrate on improving the examination process, minimizing restrictions, and maximizing flexibility for credit unions. At the start of 2016, the credit union regulatory outlook promised to be another challenging year of implementing financial reforms required by the regulators. We are a little more than mid-way through the year, and so far that has proven true. We have also seen a renewed focus on cyber-security, Fair Lending Issues, BSA and the recent small dollar lending regulations released by Consumer Financial Protection Bureau (CFPB). The compliance burden on credit unions continues. And because of the compliance burdens credit unions are more concerned than ever with the number of proposals and the impact of those proposals on their operations. The GCUL Regulatory Response Committee has been active in reviewing, analyzing and formulating responses on various proposals. GCUA staff is active in communicating with CUNA staff to relay the concerns of Georgia credit unions, so their issues can be addressed on a much larger scale. The committee, on behalf of Georgia credit unions, submitted letters (through the end of June) on 6 separate issues to 3 different federal agencies. The Regulatory Response Committee has also been watching carefully as the CFPB and other regulators continue to address concerns with student loan servicing, Fair Lending, Debt Collection practices, and even changes in the Labor rules. The biggest issue credit unions have addressed in the first part of 2016 dealt with NCUA proposed changes to the field of membership rules. Over 600 letters were written by Georgia credit union activists from 34 different credit unions. Our letter supported the proposal but made recommendations of additional ways in which the committee believed NCUA could provide additional relief for federal credit unions in serving consumers. In addition, the committee worked with the CFO council to engage their members in responding to FASB on its proposed changes known as (CECL) or the current expected credit loss model and its impact on credit unions. For a list of issues that have been shared and discussed by the Regulatory Response Committee see the chart below:

1

2016 Proposals and Proposals Open for Comment as of July 25, 2016

COMMENT DEADLINE

PROPOSALS OPEN FOR COMMENT

AGENCY

STATUS

RFI for Small Dollar Proposed Rule

10/14/2016

CFPB

Open

CFPB Small Dollar Proposal

10/7/2016

CFPB

Open

Community Development Revolving Loan Fund

8/22/2016

NCUA

Open

Arbitration Proposal

8/22/2016

CFPB

Open

Amendment to the Annual Privacy Notice Requirement under Gramm-Leach-Bliley

8/10/2016

CFPB

Open

2016 Regulatory Review

8/8/2016

NCUA

Open

NCUA Occupancy Rule

6/27/2016

NCUA

Closed

Joint Agency Rule on Incentive-Based Compensation

7/22/2016

NCUA

Closed

Student Loan Borrower Communications

6/10/2016

CFPB

Closed

Exemptions for the TCPA for Government Debts

6/3/2016

FCC

Closed

Military Lending Act Proposal

5/17/2016

DOD

Closed

National Strategy for Financial Literacy Update

5/4/2016

Treasury

Closed

NCUA Strategic Plan 2017-2021

4/4/2016

NCUA

Closed

Changes to the BSA Currency Transaction Report

3/29/2016

FinCEN

Closed

FHFA Proposal on Fannie and Freddie’s Duty to Serve

3/17/2016

FHFA

Closed

Request for Information Regarding HMDA Resubmission Guidelines

3/11/2016

CFPB

Closed

The Holder Rule

2/10/2016

Other

Closed

NIST RFI: Updates to the Cybersecurity Framework

2/9/2016

Other

Closed

NCUA Field of Membership Proposal

2/3/2016

NCUA

Closed

Regulatory Impact Assessment & Initial Regulatory Flexibility Analysis re FinCEN’s CDD Proposal

1/22/2016

FinCEN

Closed

Request for OMB to Review Information Collected Under HMDA (Reg C)

1/11/2016

CFPB

Closed

2

Goal Progress Monitor – June, 2016 2016 Company Wide Goal #2:

Accomplish the activities outlined in the 2016 Advocacy Plan during 2016. Performance Status: WOW!!! X

Good!

OK

Behind

Plans for Additional Progress: • • • •

Continue dialogue with targeted legislators for potential campaign activity, and connect credit unions with election efforts. Continue strategy to engage credit unions with legislators in the district and in Washington DC. Provide credit unions timely information on legisltaive and regulatory issues. Identify opportunities to grow the number of “key contacts” between legislators and credit unions, and continue relationship building between the industry and elected officials. ll f di i h h l il i i i d i l di st

Accomplished During 1 Quarter •

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All 13 of the Advocacy Plan activities are at the accomplishment level at or above the “OK” standards of achievement, with 9 rated higher at the “GOOD” or “WOW” level (8 at GOOD, 1 at WOW). This was while navigating the state session through the majority of the 1st quarter and successfully passing credit union legislation. Highlights: o Enhanced legislative influence of the industry through regular communication and engagement with legislators and credit unions: provided key credit union statistics to all 236 state legislators and key staff through 3 infographic cards and legislative version of Paying Attention during session (with the message reinforced with imagery at legislative reception), increased the Twitter following of @GCUAGov by 50 through targeting of legislators to increase their awareness of credit union bills, held legislative reception in February to connect credit union board leadership with state officials. Produced and held a state GAC day (“Grassroots Academy”) in January engaging 45 individuals. Created updated federal content for legislative micro-site and utilized members of Congress. Highlighted work of South Georgia who proactively engaged US Congressman Austin Scott for a local visit, and obtained 100% support of Georgia Congressional delegation on “dear colleague” letter urging regulatory relief from CFPB. o Promoted credit union involvement in Advocacy: 12 editions of Creating Influence were produced illustrating the key federal and state issues (advanced publication schedule during state session), over 110 attendees at GAC in Washington DC, utilized two strong personal key contacts of State House Banking members to procure a pro-credit union amendment in firearms legislation, election website (“ElectionWatch”) was created and distributed for credit unions to utilize with members, credit unions were encouraged to engage in campaigns via the 3rd video in the “What’s on the GL” series. Began the preliminary analysis of races after qualifying to determine where credit unions could be involved, identified legisators for potential in-district connections (Hike at Homes), and encouraged credit unions to participate with advocacy-focused tools (Project Zip Code, PAC fundraising). o Expanded awareness footprint of credit unions: earned 5.6 million media impressions, earned $36,970 in unpaid media coverage, held meeting of senior leadership with business news reporter of AJC, conducted media visits in 5 geographic areas and received non-paid coverage in 8 of the major GA media markets to have comprehensive coverage of credit union issues, and produced multiple public relation resources: 3 editions of Consider This, 1 Paying Attention video, various social media outlets (LinkedIn, blog, Twitter), and 3 HPAL training videos.

Accomplished During 2nd Quarter •

All of the 13 Advocacy Plan activities are at the accomplishment level at or above the “OK” standards of achievement, with 11 rated higher at the “GOOD” or “WOW” level (9 at GOOD, 2 at WOW). Highlights: o Enhanced legislative influence of industry through regular communication and engagement with legislators: distributed to all 236 state legislators, 16 federal legislators and key staff a legislative version of Paying Attention with tailored statistics on credit unions, revamped @GCUAGov Twitter strategy has produced an additional 100 follwers in the 2nd quarter (which includes legislators, legislative staff, mainstream media, political consultans and business groups). Connected with legislators in persion at 54 political events in the 2nd quarter, and senior GCUA staff traveled to DC for meetings with 8 Congressional offices, and met with an additional 4 at DC events. o Promoted credit union involvement in Advocacy: 6 editions of Creating Influence were produced (which included a final analysis of bills that impact credit unions in the State Session in April, a summary of credit union involvement in the Primary elections in May, a take-awa one-pager for staff/board education on Primary runoffs of industry interest in June). Worked with Growth By Design to illustrate the “Top 25 Bills” of the 2016 state session and distributed to credit unions at Annual Convention and via email, and created voting record profiles of all 236 state legisaltors on the top bills to denote their stance. Communicated key election dates with credit unions through 8 emails in the 2nd quarter, and engaged 11 individual credit unions with the campaigns of two Congressional candidates and four state candidates (partisan communications, in district visit, yard signs, phone banking). Engaged 2 existing key-contact credit unions with their relationship-legislators, reached out to all key contacts of state legisaltors to promote interaction post session (to date, there are 61 total key contacts of federal and/or state legislators), and engaged credit unions with 3 additional legislators in efforts to cultivate new relationships. o Expanded awareness footprint of credit unions: earned 36.6 million media impressions, receivied non-paid coverage in 11 Georgia media markets, and earned $189,950 in unpaid media coverage through the production and dissemination of multiple publications, releases, video, and media visits. In addition, conducted the mid-year consumer survey to generate messaging for the future.

Accomplished During 3rd Quarter •

Accomplished During 4th Quarter •

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GEORGIA CUPAC TRUSTEES Joint Session with Advocacy Policy Committee Capital City Club Downtown Atlanta February 9, 2016 Minutes The joint meeting of the Advocacy Policy Committee and the Georgia CUPAC Trustees was called to order at 1:00 p.m. on Tuesday, February 9, 2016 by CUPAC Chairman Tim Bridges at the Capital City Club Downtown Atlanta. CUPAC Trustees Present:

Tim Bridges, Chairman; Mike Mercer, Treasurer; Dee Dee Cote and Robert Youngblood.

CUPAC Trustees Absent:

Pat Conn, Betsy Mercier, Wanda Rutledge.

Advocacy Policy Committee Members Present:

Greg Connor, Dee Dee Cote, Janet Davis, Mike Gudely, Todd Gustafson, Chuck Head, Bob Manning, Leta Stepp Leta Stepp Reeves, Sherry Saxon, Dale Taratuta.

Advocacy Policy Members Absent:

Terry Hardy, Pat Conn, Jennifer Fiorenza, Rob Hatefi, Jerry Jordan, Chris Leggett, Brant Malone.

Staff Present:

Cindy Connelly, Brandee Bickle, Jamie Fristoe, Diana Houston, Kristi Arrington, Maureen Bock and Kay Lytle.

Also Present:

Adam Cleveland, Thompson O’Brien Kemp & Nasuti, P.C. and Elizabeth Eurgubian, Deputy Chief Advocacy Officer for Regulatory and Executive Branch Relations (CUNA), Christina O’Brien, Robins Financial CU, Ralph Jones and Bill Moniz (Credit Union Loan Source).

The Federal Regulatory Landscape for 2016: Elizabeth Eurgubian, CUNA Deputy Chief Advocacy Officer and Senior Counsel of Regulatory and Executive Branch Relations, was introduced to outline the federal regulatory issues which will be addressed in 2016. CUNA’s depiction of the top fifteen regulatory issues was included in the meeting materials as additional background for Ms. Eurgubian’s discussion. The top fifteen regulatory issues on CUNA’s radar include: 1) 2) 3) 4) 5) 6) 7) 8)

Credit Impairment (FASB) Cyber Security Issues (FFIEC & NCUA) Debt Collection (CFPB) Examination Issues (NCUA) Field of Membership (NCUA) Home Mortgage Disclosure Act (CFPB) IOLTA (NCUA) Member Business Lending (NCUA) -1-

-DRAFT9) Overdraft Protection (CFPB) 10) Overtime Pay (Department of Labor) 11) Payday Lending (CFPB) 12) Regulatory Relief (CFPB & NCUA) 13) Risk-Based Capital (NCUA) 14) Telephone Consumer Protection Act (FCC) 15) Truth in Lending Act & Real Estate Settlement Procedures Act (CFPB) Election Year Strategy 2016: The qualification period for candidates wishing to run for office is March 7 through March 11. Once the qualification period is complete, the races are analyzed to determine where credit union assistance could be applicable. The races for credit unions to consider in 2016 include one of the two U.S. Senate seats for Georgia, all fourteen of the seats for U.S. Representatives and all 236 seats of the state legislators. There are no statewide races in Georgia in 2016. GCUA’s election identification strategy and the potential avenues of credit union campaign involvement were discussed at length. Message Delivery Via Emerging Technologies: Election year messaging will be prominent, utilizing a legislative mobile website, connections through social media via Facebook and Twitter, and video releases such as “CEO Perspective” and “On the GL”. Sample screen shots of the Legislative Mobile Website were reviewed. Media touch points accomplished during 2015 were depicted, along with a Statewide Public Messaging Update itemizing media impressions and social media touch points. Emerging State Issues: Brandee Bickle discussed five emerging state issues in the current session: 1) 2) 3) 4) 5)

Member Eligibility Third Party Loan Originations Merger/Purchase and Assumptions Capital Sufficiency Fixed Assets

A detailed table highlighting sections of law and/or regulation relative to each of the issues was made available for review and discussion. State Legislative Update: Adam Cleveland, Associate with the law firm Thompson O’Brien Kemp & Nasuti, P.C., discussed the Garnishment Bill (H.B. 759) which passed the House on February 8th and the Senate on February 9th. Items of note relative to this bill include: •

No requirement of swift adjudicated judgment -2-

-DRAFT• • • • •

Exemption language only references banks (and not credit unions) Child support, wages, financial institutions as business entities – left to the legislature Legal Aid ignored financial institutions – will need to send notices themselves The Bill will be effective 30 days after the Governor signs Leadership on both sides rubber stamped this Bill.

Grassroots Involvement: The fourth quarter Georgia CUPAC/CULAC Report was summarized. By the end of 2015, a record high $257,251 was raised by over 90 credit unions and support organizations for the PACs, with 55 credit unions reaching or exceeding their PAC goal. Georgia CUPAC provided $80,000 to state level campaigns, representing over 130 fundraising events. The funds were distributed between the two state parties, caucuses, constitutional offices and the House and Senate. In addition, at the end of 2015, $114,624 was forwarded to the federal PAC (CULAC) to support Congressional candidates nationwide. CULAC fundraising had a strong final quarter nationwide, with $2.4 million raised by credit unions throughout the country. Federal Legislative Update: Cindy Connelly outlined the Federal Legislative and Key Regulatory Oversight Issues that had not been addressed by Ms. Eurgubian earlier in the meeting. A detailed chart depicting numerous issues was made available for review. Supervision Priorities (State): Four areas of focus that state chartered credit unions can anticipate in their examinations in 2016 include: 1) 2) 3) 4)

Cyber Security Sensitivity to Market/Interest Rate Risk New DBF Rules Third Party Relations/Vendor Due Diligence

Supervision Priorities (Federal): The CFPB Consumer Finance Report indicates 2016 agenda items will include: 1) 2) 3) 4)

Mandatory Consumer Arbitration Small-Dollar Lending Regulation Larger Participant Rule Enforcement Orders, providing additional guidance on UDAAP in the installment lending industry. 5) Other Activity, including addressing prepaid accounts, overdrafts on checking accounts, debt collection and mortgage servicing. -3-

-DRAFTReview/Approve Georgia CUPAC Minutes: The minutes of the February 3, 2015 joint session meeting with the Advocacy Policy Committee and the Georgia CUPAC Trustees were presented for approval. Dee Dee Cote moved to approve the February 3, 2015 minutes as presented. Robert Youngblood seconded the motion. Motion carried with a unanimous vote. Georgia CUPAC Disbursement Plan: The 2016 CUPAC budgeted Disbursement Plan was provided for review. It was noted that there is some flexibility in the disbursements if requests are submitted in a timely manner. Dee Dee Cote moved to approve the 2016 Budgeted Disbursement Plan. Robert Youngblood seconded the motion. Motion carried with a unanimous vote. Review/Approve Georgia CUPAC Financials: Jamie Fristoe outlined the December 31, 2015 Georgia CUPAC financials and projections for 2016, noting that of the $257,000 in contributions received, $195,524 had been distribution on the state and national level. Robert Youngblood moved to approve the December 31, 2015 financials and projections through 2016 as presented. Dee Dee Cote seconded the motion. Motion carried with a unanimous vote. Adjourn: Having determined there was no further business to discuss, the meeting adjourned. Respectfully submitted,

D. Kay Lytle, Recording Secretary

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