CrossState Daily…02/17/2023

The CrossState offices will be closed on Monday, February 20, in observance of Presidents’ Day. We will resume normal operations on Tuesday, February 21. Thank you.

Protect Your Members from Elder Abuse with Free Senior$afe Training

Credit unions play an important role detecting and protecting their members from elder abuse and exploitation. To ensure credit union staff know the signs of elder abuse and exploitation, they will need to undergo financial abuse training, such as the free Senior$afe Training presented by CrossState on April 6 at 10 a.m. This hybrid event invites you to join your peers and the presenters live and in-person at the CrossState Harrisburg Office or sign in on Zoom. Sign up now.

Section 303 of S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, provides immunity from suit for individuals and credit unions disclosing the suspected exploitation of a senior citizen to a covered agency under certain conditions. One of the conditions is that credit union employees who may report suspected exploitation receive training on how to identify and report the suspected exploitation of a senior citizen internally, and as appropriate, to government officials or law enforcement authorities, including common signs that indicate the financial exploitation of a senior citizen.

Representatives from the PA Department of Banking and Securities (DoBS) will be presenting a free Senior$afe seminar in-person to both New Jersey and Pennsylvania credit union professionals.

Don’t Sleep on the Sweetheart Convention Deal

Time is running out for you to save an additional $30 on a guest registration for Connect Annual Convention, May 18-20, in Hershey, PA. Despite Valentine’s Day being a few days ago, CrossState has a few suggestions of how you can explain why your gift is late. First, register yourself and your guest using the code, “SWEETHEART,” then prepare your story with the suggestions below.

Suggested Explanation 1 — Blame with Buzzwords: Your first gift was lost in transit after being delayed by supply chain and staffing issues.

Suggested Explanation 2 — Focus on Feelings: I know you were really upset about the Super Bowl outcome, so I wanted to wait until you felt better to give you your gift.

Suggested Explanation 3 — Honesty Hour: To be honest, I don’t like Valentine’s Day and I totally forgot about it. So, here’s a coupon I used to bring you on a work trip with me.

Let us know if you use any of these and how they go over.

Check Out What’s Trending on CrossState InfoSight

CrossState InfoSight is known for providing up-to-date operational and compliance information to assist staff in all areas of the credit union. The trending topics from the Accounts Channel for January 2023 include trusts, minor accounts, and deceased member issues.

Trusts: This topic is chock full of state-specific information about the various types of trust accounts and includes a list of definitions, a checklist, FAQs, and additional resources. 
 
Minor Accounts: Establishing savings accounts for minors presents some unique service delivery issues for credit unions. This topic presents various aspects of minor accounts including state-specific considerations. 
 
Deceased Member Issues: In the event of a member’s death, a credit union must determine the proper disposition of the remaining funds in the member’s account(s). In addition to summary information, this topic includes a checklist, FAQs, resources, and addresses state-specific considerations.

Check out these topics and more, just click here to access CrossState InfoSight today.

Booker, Pressley Reintroduce Bicameral ‘Baby Bonds’ Legislation to Tackle Wealth Inequality

U.S. Sen. Cory Booker (D-NJ) and U.S. Rep. Ayanna Pressley (D-MA) this week reintroduced the American Opportunity Accounts Act, legislation that would create a federally funded savings account for every child in order to make economic opportunity a birthright for everyone in America and help close the racial wealth gap. The lawmakers’ bill comes as baby bonds programs gain traction nationwide.

The American Opportunity Accounts Act, also known as “baby bonds,” would give every child a chance at economic mobility by creating a seed savings account of $1,000 at birth. The funds would sit in an interest-bearing account that would receive additional deposits each year depending on family income. At age 18, account holders could access the funds in the account for allowable uses like buying a home or paying for educational expenses. The legislation is paid for by making changes to federal estate and inheritance taxes.

At birth, every American child would be given an “American Opportunity Account” seeded with $1,000. Each year, children would receive up to an additional $2,000 deposit into their American Opportunity Account, depending on family income. These funds would sit in a federally insured account managed by the Treasury Department, achieving roughly 3% interest. Account holders may not access the money until they reach age 18 and will only be able to use the funds for allowable uses like homeownership and higher education — the kind of human and financial capital investments that changes life trajectories.

The bill is cosponsored by: Sens. Dick Durbin (D-IL), Ed Markey (D-MA), Jeff Merkley (D-OR), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Sherrod Brown (D-OH), Richard Blumenthal (D-CT), Chris Van Hollen (D-MD), Brian Schatz (D-HI), Sheldon Whitehouse (D-RI), Chuck Schumer (D-NY), Tammy Baldwin (D-WI), Amy Klobuchar (D-MN), and Kirsten Gillibrand (D-NY).

The list of endorsing organizations can be found here.

Political Roundup — February 17, 2023

This week in politics, the races for the legislative races in New Jersey are heating up with people declaring their candidacy for the primaries and the New Jersey Senate’s 24^th district race is getting chippy.

National News

Retail Sales Jump as Americans Defy Inflation and Rate Hikes

America’s consumers rebounded last month from a weak holiday shopping season by boosting their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy’s resilience in the face of higher prices and multiple interest rate hikes by the Federal Reserve.

The government said Wednesday that retail sales jumped 3% in January, after having sunk the previous two months. It was the largest one-month increase since March 2021, when a round of stimulus checks gave a big boost to spending. Excluding the pandemic era, January’s rise was the largest in more than two decades.

Driving the gain was a jump in auto sales, along with healthy spending at restaurants, electronics stores, and furniture outlets. Some of the supply shortages that had slowed auto production have eased, and more cars are gradually moving onto dealer lots. The enlarged inventories have enabled dealers to meet more of the nation’s pent-up demand for vehicles.

Wednesday’s robust retail sales figures, along with a strong January job report, suggest that the economy remains durable, perhaps even strengthening, and at little risk of succumbing to a recession anytime soon.

Brisk consumer spending, though, can also intensify upward pressure on inflation. The latest measure of consumer inflation showed that it slowed slightly on a year-over-year basis in January but rose sharply from December to January.

The combination of solid spending and hiring will also likely raise pressure on the Federal Reserve to raise its benchmark interest rate even further. The Fed has already signaled that it expects to carry out two more quarter-point hikes, to a range of 5% to 5.25%, which would be the highest level in 15 years. On Tuesday, Deutsche Bank said it expected the Fed to add two additional hikes on top of that this year, to a range of 5.5% to 5.75%.

For all the challenges facing consumers, they continue to show resilience. Several factors likely helped propel last month’s spending. About 70 million recipients of Social Security and other government pension programs last month received an 8.7% boost in their benefit checks, an annual cost-of-living adjustment to offset inflation. It was the largest such increase in 40 years.

The job market also surged in January, with nearly a half-million new jobs added. The unemployment rate reached 3.4%, its lowest level since 1969. With many businesses still eager to hire and keep workers, average wages and salaries have risen about 5% from a year ago — among the fastest such rates of increase in decades.

Regulatory News

What Does the CFPB’s Credit Card Penalty Fees Mean for Your Credit Union?

On February 1, 2023, the Consumer Financial Protection Bureau (CFPB) issued their proposal to amend Regulation Z regarding Credit Card Penalty Fees.  When the CFPB didn’t adjust their annual safe harbor thresholds with the other annual updates this year, it was clear this plan was coming.  The CFPB’s recent (over the past few years) campaigns related to Junk Fees also painted a clear picture that a proposal like this was on the way.

The proposed rule would:

Adjust the safe harbor dollar amount for late fees to $8 (reduction from $30) and eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type;

Eliminate the annual inflation adjustments to the amount of safe harbor late fees each year; and

Provide that late fee amounts must not exceed 25% of the required minimum periodic payment due.

While the proposal is specifically related to late fees at this time, the CFPB is also seeking comments on whether the proposed amendments should apply to other penalty fees (such as over-the-limit fees, returned payment fees, etc.) and eliminate the corresponding safe harbor provisions.

Comments are also being solicited on whether card issuers should be prohibited from imposing late fees on consumers that make their required payments within 15 calendar days following the due date.

CrossState will be submitting comments on the proposed rule. If you have comments or concerns regarding the rule, please contact the CrossState Compliance Team.

NCUA Board Issues Proposed Rule on FOM, Approves Cyber Incident Notification Requirements Final Rule

The National Credit Union Administration (NCUA) Board met Thursday. The Board issued a proposed rule to amend the chartering and FOM rules through nine changes to enhance consumer access to financial services, especially in low- and moderate-income communities while reducing duplicative or unnecessary paperwork and administrative requirements. The Board also adopted a final rule to require credit unions to notify the NCUA as soon as possible but no later than 72 hours after they reasonably believe that a reportable cyber incident has occurred. This notification requirement provides an early alert to the NCUA and does not require credit unions to provide a full incident assessment to the NCUA within the 72-hour timeframe. The Board also received a briefing on the Share Insurance Fund Quarterly report.

Proposed Rule: Chartering and Field of Membership (Part 701, Appendix B)

The proposed changes cover underserved areas, community based FOMs, and some more broadly applicable FOM provisions. The proposed rule:

Makes changes on underserved areas that multiple common bond FCUs may seek to add to their FOMs. The changes would streamline existing application requirements and clarify the role of data and criteria that other federal agencies provide relating to underserved areas.
Includes provisions to simplify application requirements for community based FCUs by eliminating the need to submit redundant or less useful information and providing a standard form for business and marketing plans. In addition, the proposed rule would eliminate the business and marketing plan requirement for certain FISCUs that seek to convert to a federal charter while serving the same community FOM. Further, the proposed rule would expand the community based FOM affinities to recognize the growth of telecommuting and remote work for companies headquartered in a community.

Includes a provision to allow all FCUs to better capture the ongoing bond between individuals within a field of membership and their immediate family members following the death of a member.

Comments will be accepted for 90 days following publication in the Federal Register.

Final Rule: Cyber Incident Notification Requirements (Part 748)

The final rule is consistent with the proposed rule, which CUNA largely supported. The NCUA will provide more detailed reporting guidance before the effective date of September 1, 2023.

Board Briefing: Share Insurance Fund Quarterly Report

Thursday’s report on the Share Insurance Fund showed total income of $83.1 million and net loss of $18.9 million for the quarter ending December 31, 2022. The balance sheet indicated total liabilities and net position of $20.364 billion. The Fund’s reserve balance stands at $185.2 million as of the end of the fourth quarter, with $7.7 million being for specific reserves. In 2022, there were six credit union failures, at a total cost of $9.8 million; fraud was a contributing factor in five of the six failures. Over the past several years, fraud has been a contributing factor in roughly 75% of credit unions.

The number of CAMELS Code 4/5 credit unions increased slightly from the preceding quarter to 122; CAMELS Code 3 credit unions also increased slightly to 769. Of note, this change resulted in a more than tripling of assets held by CAMELS Code 3 credit unions with at least $1 billion in assets (from $7 billion to $24.8 billion). Overall, over 96% of assets are held by CAMELS Code 1/2 credit unions; this is a decrease from over 97% in the preceding quarter.

As of December 31, the equity ratio of the Share Insurance Fund is 1.30%, this is an increase from 1.26% as of June 30. The primary driver of the increase in the ratio is a decrease in insured shares; an improvement in the investment portfolio yield and a low loss rate from credit unions also contributed to the increase. The Normal Operating Level of the Fund is 1.33%.

Friday Tidbit

Yale Honors Work of 9-Year-Old Girl Who is Stomping Lantern Flies in New Jersey

When 9-year-old Bobbi Wilson heard about the Hoboken campaign to eradicate the spotted lanternfly, she took the message to heart, whipped up some homemade, non-toxic, spotted lanternfly poison out of vinegar, and headed out to do her part.

Yale decided to highlight this citizen scientist, as she donated her collection of 27 lantern flies to the Peabody Museum of Natural History database and received the title “donor scientist.”

“We wanted to show… how inspiring she is, and we just want to make sure she continues to feel honored and loved by the Yale community,” Ijeoma Opara, an assistant professor at the school, said in a statement.

It’s an unfortunate thing as the lanternfly is quite beautiful, but its piercing-sucking talons can damage over 70 species of native and ornamental plants but have a preference for high-value ag commodities like grapes and stone fruit.

Native to China, they are typically kept in check via parasitic wasps and were accidentally introduced to the United States in 2014. Feeding on plant sap, their bodies create a sugary excretion called honeydew which collects on or around trees and cultivates sooty molds which can lead to tree death.

Wilson was joining in New Jersey’s “Stomp it Out” campaign to help clear out the winged devils from the state. The campaign recommends three things: killing any individuals seen on one’s property, scraping off the “egg masses” which are greyish slimes that contain between 30 and 50 eggs that they lay in wintertime, and cutting down about 90% of all the Ailanthus altissima trees, also known as the “tree of heaven,” which belies its presence as an invasive pest species.

As the weather turns toward spring, both New Jersey and Pennsylvania residents need to keep an eye out for these insects and stomp them out to protect our crops and trees.

Newsmakers

PSECU Security Manager Discusses Ethical Hacking on Local News

Harrisburg, PA — PSECU Security Manager Scott Lenker joined local news station Fox 43 recently to discuss current cyber security trends and his work as an “ethical hacker.”

In the segment, Lenker explained that with so many accounts, online hacking attempts are just part of the workday.

“We’re seeing attacks come from China, from Russia, even North Korea, and we have to make sure those attacks don’t get through,” Lenker said.

In order to protect customer information from prying eyes, Lenker uses his skills as a United States-certified ethical hacker. His proactive approach to cybersecurity is common among other ethical hackers that use their hacking skills for good, rather than for damage.

“From a certified ethical hacker standpoint, we actually break into the systems, we make sure that we’re the first people to find the vulnerabilities, so if we break into and find the vulnerabilities, we’re able to fix it before the bad guys are able to get in,” said Lenker.

Most hackers are able to manipulate a user’s online account through various means, regardless of a user’s protection plan, according to Lenker. Virtual private networks and two-factor authentication can be bypassed, sometimes by the user themselves without their knowledge. 

Watch the full segment here.

Search News