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NCUA adds low risk asset discussion to agenda

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ALEXANDRIA, Va. (10/19/10)--The National Credit Union Administration (NCUA) on Monday added discussion of an interim final rule that addresses the low risk asset definition in Section 702 to the list of items up for consideration during Thursday’s monthly board meeting. The NCUA last week officially announced that its NCUA Guaranteed Notes (NGNs) will carry a 0% risk weight and will be backed by the Federal government. The NCUA said that the NGNs, which will be offered on the open market this week, will be permissible investments for credit unions. The Agency will also release its national merger registry, which would provide the names of potential credit union merger partners, and discuss final rules on fixed assets and the regulatory flexibility (RegFlex) program during the meeting.

Guidance for CUs on STS loan rules NCUA

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ALEXANDRIA, Va. (10/19/10)--Via a regulatory alert released last week, the National Credit Union Administration (NCUA) issued a series of questions and answers to assist federal credit unions in setting up a short-term, small amount (STS) lending programs. The NCUA last month made final an interim rule that allows federal credit unions to offer STS loans to their members as an alternative to predatory payday loans that are offered by other financial service providers. The final rule allows federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. A $20 application fee may also be charged. The loans may total as high as $1,000 and may last for as long as six months, the NCUA added in the release. The loans will not be permitted to rollover. The new rule will go into effect on Oct. 25. Credit unions “are required to establish underwriting standards in their written lending policies for short-term small loans,” the NCUA said. However, the best practices portion of the NCUA’s STS rule “is guidance, not a regulatory requirement,” the NCUA added. NCUA examiners will review STS loan policies, procedures and processes for evidence of proper underwriting. The examiners also will work to ensure that the STS loans “are being made in a way that provides the member with the best chance to successfully repay a loan made under this rule,” and that the application fees collected “are being used to recoup costs associated with processing an application and not to account for the riskier nature of this type of lending.” The examiners will also monitor credit unions to make sure they are complying with the NCUA’s 20%-of-net-worth limit for these types of loans. The NCUA will collect this and other information over the course of the next 12 to 18 months, and may make additional revisions to the rule as needed. For the NCUA release, use the resource link.

Fed rule to prohibit real estate appraiser coercion

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WASHINGTON (10/19/10)—Real estate appraisers will be “free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions” and will “receive customary and reasonable payments for their services” following a Federal Reserve interim final rule release. The Federal Reserve interim rule, released on Monday, would prohibit appraiser coercion by outside parties and would prevent “appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions.” The Fed will also require creditors or settlement service providers to report any appraiser misconduct to state licensing authorities. The interim final rule is required under the Dodd-Frank Act and is intended to replace the earlier Home Valuation Code of Conduct. The rule will become effective on April 1, 2011. Public comments on the rule will be accepted for 60 days after it is published in the Federal Register. The Credit Union National Administration (CUNA) will have additional information and a comment call in the coming days, and will submit its own comments to the Fed. For the Fed release, use the resource link.

CU bank employees aid fin. fraud fight FinCEN finds

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WASHINGTON (10/19/10)--“While suspected cases of identity theft are on the rise, vigilant financial institution employees are reportedly rejecting over half of fraudulent vehicle or student loans facilitated by identity theft prior to funding,” a Financial Crimes Enforcement Network (FinCEN) survey has found. "FinCEN's study of identity theft Suspicious Activity Reports (SARs) reveals how important suspicious activity reports can be to deterring illicit activity," FinCEN Director James Freis Jr., said. “The vigilance of employees of financial institutions is apparently deterring greater losses when the employees suspect loans are tied to false identities," Freis added. The FinCEN study found that identity theft “was the sixth most frequently reported characterization of suspicious activity,” behind structuring/money laundering, check fraud, mortgage loan fraud, credit card fraud, and counterfeit check fraud. The number of identity theft-related SARs filed increased by 123% over the number reported in 2004. The total number of SAR filings increased by 89% during that same time period. FinCEN found that credit card fraud “was the most frequently co-reported suspicious activity characterization with identity theft, appearing in over 45.5% of sample filings,” and that just over one-quarter of total reported identity thefts were committed by a perpetrator that knew the victim. SAR report filers “credited routine financial institution account monitoring” with revealing identity theft in over 20% of the filings covered by the survey, FinCEN said. While 28% of identity theft victims uncovered the thefts during a review of their own accounts, “credit reports, law enforcement investigations, collection agencies, and credit monitoring services were responsible for revealing identity theft in a decreasing percentage of sample filings,” FinCEN added. For the FinCEN release and study, use the resource link.

Inside Washington (10/18/2010)

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* WASHINGTON (10/19/10)--The Credit Union National Association (CUNA) is part of a coalition that will help consumers prevent identity theft by supporting Protect Your Identity Week (PYIW), Oct. 17-23. Identity theft remains the top complaint reported to the Federal Trade Commission, occurring more than 10 million times annually. Created by the National Foundation for Credit Counseling and the Council of Better Business Bureaus, PYIW is linked to educational events nationwide and a website,, that provides information about local events, resources and a consumer quiz. Advice in Spanish is also available …

FinCEN BSA rule reorganization out early next year

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WASHINGTON (10/19/10)--The Financial Crimes Enforcement Network (FinCEN) announced that its streamlined reorganization of its Bank Secrecy Act (BSA) rules will be implemented on March 1, 2011. FinCEN will move the BSA regulations into a new Chapter X of Title 31 of the Code of Federal Regulations (CFR). The reorganization splits the regulations “into general and industry-specific parts, ensuring that a financial institution can identify its obligations under the BSA in a more organized and understandable manner.” However, FinCEN said that it “has not made any substantive changes to the BSA rules.” The BSA reorganization moves definitions and regulatory obligations that are applicable to all or a number of regulated persons/financial institutions under the header of "General Provisions". The “General Provisions” section will be divided into the following subparts:
* Subpart A: General definitions; * Subpart B: Programs; * Subpart C: Reports required to be made by financial institutions; * Subpart D: Records required to be maintained by financial institutions; * Subpart E: Special information sharing procedures (money laundering and terrorist financing); * Subpart F: Special standards of diligence; prohibitions; and special measures; * Subpart G: Administrative rulings; * Subpart H: Enforcement; penalties; and forfeiture; * Subpart I: Summons; and * Subpart J: Miscellaneous.
Regulatory obligations that are applicable to particular industries are divided into industry-specific sections. Among these sections are sections covering credit unions/banks, casinos, and other money services businesses. FinCEN has also created an online citation translator to “provide an automated way for financial institutions to translate a regulatory citation from 31 CFR Part 103 to 31 CFR Chapter X and vice versa.” For the full FinCEN release, use the resource link.
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