Weekly Roundup: 3/22/2024 - March Madness Edition

Happy Friday everyone! March Madness is officially upon us, and I hope your bracket is in better shape than mine. While I got the first seven games right yesterday, the last nine didn't exactly go my way, and I've already lost one final four team in the process. But hey, that's why they call it "madness" right?

As we know, in the world of credit union compliance, the madness isn't just contained to March - it's a year-round affair. Let's take a look at some of the happenings this week.

South Region - Texas Court Denies Bankers' Request for Injunction on CFPB Credit Card Rule

On Wednesday, a Texas federal judge declined to issue an immediate injunction halting implementation of the CFPB's credit card late fee rule, which would lower the safe harbor for credit card late fees to $8. As you might recall from our weekly roundup on 3/8, several banking trade association and chamber of commerce groups quickly joined forces to challenge the legality of the final rule just days after it was published by the CFPB. The case was filed in the U.S. District Court for the Northern District of Texas.

The decision to file in Texas has been viewed by many as what's sometimes called forum shopping. Texas federal courts have tended to be more friendly to business interests. However, in this case, it may have backfired. The judge questioned the connection between this case and his court, and in denying the request for an expedited injunction, highlighted that his court has one of the busiest dockets in the country.

“Given these statistics, the Court does not have the luxury to give increased attention to certain cases just because a party to the case thinks their case is more important than the rest,” Judge Pittman wrote. “There are simply too many cases that demand the Court’s full attention.”

Without injunctive relief, the credit card late fee rule, which only directly applies to credit card issuers with over one million active credit cards, could remain (for now) on track to be effective 60 days after its publication in the federal register. However, the legal challenges to the rule are far from over, and we'll be monitoring this case and the rule and things continue to develop.

East Region - Government Funding Bill Advances, Includes Funds for CU Priorities

After months of eleventh hour continuing resolutions that kicked the government shutdown deadline forward by weeks or months, it appears Congress may be heading toward passing bills which would fund the government through September 30th.

This morning the House passed the legislation - which contains six funding bills - by a 286-134 vote. The package now heads to the Senate, who is expected to take up the bills quickly and get it to President Biden before the midnight deadline.

The bill would fund the National Flood Insurance Program through September 30th. It also contains funds for the CDFI Fund, the NCUA's Community Development Revolving Loan Fund, the U.S. Agency for International Development's Cooperative Development Program, and for FinCEN.

You can read more about the credit union impact here and keep an eye on the news for updates as the bill advances.

Midwest Region - Carrie Hunt pens op-ed on Interchange Risks and Advocacy Efforts

America's Credit Unions Chief Advocacy Officer Carrie Hunt penned an op-ed this week in CUInsight highlighting the dangers of interchange threats facing credit unions. In the article, she highlights recent efforts by the merchants to advance the Credit Card Competition Act (CCCA), which is patroned by Senators Durbin (D-Ill.) and Marshall (R-Kan.). As most of you know we've been pushing back against this bill since its introduction in 2022. While there does not seem to be a strong appetite among lawmakers to hear this bill as a standalone issue, we closely monitor any large spending packages to make sure we oppose any efforts to have the bill included in those. This will include this week's government funding bill, the NDAA later this year, and others.

Carrie also notes the threat to debit interchange revenue posed by the Federal Reserve's proposed rule to lower debit interchange caps. Despite claims that the rule would only impact large financial institutions over $10 billion in total assets, we know it would reduce revenue for all financial institutions, which is what happened when these caps went into effect with the first Durbin amendment.

On debit interchange, there is some action in Congress that could impact the Federal Reserve's process. First, Rep. Blaine Luetkemeyer (R.-Mo.) has introduced a bill which would require the Fed to study the possible impact of their rule on small financial institutions and others impacted before moving forward. Second, a bipartisan group of lawmakers wrote a letter to Fed Chair Jerome Powell raising their concerns that the rule could impact access to banking services for millions of Americans.

Several trade groups also this week released a "one-pager" debunking some of the common myths surrounding interchange, which you can read here.

Fighting back against threats to interchange revenue and telling the whole story about what the ways credit unions serve their members because of this revenue source has been and remains a top advocacy priority for the League.

West Region - NCUA Releases Q4 System Performance Data, Assets and Delinquencies Growing

Ok I somewhat cheated here - the NCUA Quarterly Data covers all regions, not just the West. Nevertheless, the quarterly data release by the agency gives us a window into trends of credit union balance sheets and income statements.

Highlights from the report for the fourth quarter of 2023 include:

• The credit union system’s net worth increased by $8.7 billion, or 3.8 percent, over the year to $24.5 billion.
• The return on average assets for federally insured credit unions was 69 basis points in 2023, down from 88 basis points in 2022. The median return on average assets across all federally insured credit unions was 60 basis points, up 10 basis points from a year earlier.
• Net income for federally insured credit unions in 2023 totaled $15.2 billion, down $3.5 billion, or 18.8 percent, from 2022. Interest income rose $26.6 billion, or 37.3 percent, over the year to $98.1 billion. Non-interest income rose $1.2 billion, or 4.9 percent, to $25.0 billion, largely reflecting an increase in other non-interest income.
• The delinquency rate on non-commercial real estate loans was 56 basis points in the fourth quarter of 2023, 13 basis points higher than in the fourth quarter of 2022. The credit card delinquency rate rose to 211 basis points from 148 basis points one year earlier. The auto loan delinquency rate increased 23 basis points over the year to 90 basis points in the fourth quarter of 2023.
• The net charge-off ratio was 61 basis points, up 27 basis points compared with the fourth quarter of 2022.
• Total loans outstanding increased $96.2 billion, or 6.4 percent, over the year, to $1.60 trillion. The average outstanding loan balance in the fourth quarter of 2023 was $17,922, up $778, or 4.5 percent, from one year earlier.
• Total shares and deposits rose by $31.2 billion, or 1.7 percent, over the year to $1.88 trillion in the fourth quarter of 2023.

That's all this week - have a great weekend, and if your bracket is still alive, may the odds be ever in your favor.