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NCUA issues red flags exam guidance

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ALEXANDRIA, Va. (11/3/08)—The National Credit Union Administration (NCUA) said Friday that for credit unions not in compliance as of Nov. 1 with the identity theft “red flags” rule, examiners will consider the credit union’s progress and compliance efforts to date when developing appropriate plans for corrective action. In an official letter, the NCUA communicated to credit unions the “red flags” examination procedures adopted earlier this month by the Federal Financial Institutions Examination Council (FFIEC), comprised of the NCUA and the federal bank and thrift regulators. The NCUA also reaffirmed that the effective date for federal credit union compliance with the “red flags” rule remained Nov. 1. Earlier this month—and just about a week after the FFIEC approved the examination procedures to determine compliance--the Federal Trade Commission (FTC) said it would suspend compliance enforcement of the rule for six months until May 1, 2009. The FTC action covered state-chartered credit unions, along with a broad array of other entities. At that time, the FTC stated that its delay did not affect other federal agencies' enforcement of the original Nov. 1 deadline. The agency explained that it moved back its compliance timetable to give creditors and financial institutions "additional time in which to develop and implement written identity theft prevention programs." The agency said that during its outreach effort, it found some industries and entities under the FTC's jurisdiction were uncertain about their coverage under the rule. After the FTC action, however, federal credit unions questioned whether the NCUA might act to put federal and state credit unions on the same compliance schedule and the Credit Union National Association pursued clarification. In fact, CUNA President/CEO Dan Mica sent a letter to the NCUA Thursday asking for clarification regarding FTC’s decision to delay the enforcement date. The letter was a follow up of CUNA’s earlier discussions with NCUA staff. CUNA received a response that clarified that examiners will be flexible. The identity theft “red flags” rule, along with a companion rule governing how to handle address discrepancies on consumer reports, was issued under the Fair and Accurate Transactions Act of 2003 (FACT Act) and became effective Jan. 1 this year. The "red flags" rule requires an institution to develop and implement a written identity theft prevention program designed to detect, prevent, and mitigate identity theft in connection with any new or existing "covered account." A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. The address discrepancy rule, in part, requires a user of consumer reports to develop reasonable policies and procedures to confirm that the report relates to the consumer whose report was requested when there is an address discrepancy. To assist credit unions in compliance, the NCUA announced it will issue an examiner checklist to review for compliance during exams which will be sent via express to all credit unions early next week.

CUNA seeks comment on share insurance signage plan

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WASHINGTON (11/3/08)—Does a recent interim final rule issued by the National Credit Union Administration (NCUA) minimize burdens associated with incorporating temporary new share insurance limits into official signage? The Credit Union National Association (CUNA) is asking credit unions to comment by Dec. 11. The rule amends the NCUA’s share insurance regulation to make it consistent with recent actions by the U.S. Congress that temporarily increases the maximum share insurance amount to $250,000, up from $100,000. The temporary authority also increases the coverage for custodial loan accounts, also known as mortgage servicing accounts. The increase in the share insurance amount will be in effect until Dec. 31, 2009, unless it is extended or made permanent, and the interim final rule went into effect Oct. 22. That rule describes necessary changes to make the official insurance sign reflect the higher ceiling. Credit unions may:
* Continue to display the current sign, and there will be no penalty for credit unions that choose this option; * Display a sign that the NCUA will distribute and post on its website that reflects the temporary increase; or * Alter the current sign to reflect the temporary increase, by hand or otherwise, as long as the altered sign is legible. This could be done by placing a sticker that reads “$250,000” over the portion of the current sign that reads “$100,000.”
Credit unions that do not alter the current signs may post additional signs in their lobbies or place a notice on their websites. For mortgage servicing accounts, share insurance coverage will be expanded by insuring the principal and interest portion of a borrower’s payment separately from the borrower’s individual accounts, making coverage more consistent with that provided by the Federal Deposit Insurance Corp. The NCUA has said it believes its interim final rule will provide the greatest flexibility possible with regard to displaying the official sign that incorporates the new insurance limits, while also providing members with the necessary information. In its Comment Call, CUNA asks credit unions to comment. Comments are due to the agency by Dec. 22.

Webinar from CUNA offers latest share insurance info

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WASHINGTON (11/3/08)—The Credit Union National Association is offering a Nov. 4 webinar to update credit unions on the latest information regarding share insurance rules. Tomorrow’s session is intended to help credit unions:
* Gain a full understanding of how credit union accounts are now insured by the National Credit Union Share Insurance Fund (NCUSIF) up to at least $250,000; * Hear about insurance coverage for share accounts, share draft accounts, trusts accounts, and IRAsand others; * Get a good understanding of NCUA’s recent changes in the beneficiary rules and how beneficiaries can increase the amount of insurance on an account; and * Learn how to determine how much of your members account balances are insured.
The webinar is 2-3:30 p.m. EST. Use the resource link below for registration.

Inside Washington (10/31/2008)

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* WASHINGTON (11/3/08)--House Financial Service Committee Chairman Barney Frank (D-Mass.) last week criticized any financial institution that is “distorting the legislation that Congress passed at the president’s request to respond to the credit crisis.” He said the intent of Congress in authorizing the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) was to make funds available for increased lending. Any use of the these funds for any purpose other than lending--bonuses, severance pay, dividends, acquisitions of other institutions and more--is a violation of the terms of the act, the chairman said in a release. He said his committee will conduct oversight hearings Nov. 12 and 18 ... * WASHINGTON (11/3/08)--The Securities and Exchange Commission (SEC) last week hosted a roundtable discussion on mark-to-market (MTM) accounting, giving proponents and detractors of the accounting method a forum to discuss their differences. Certain assets, some of which are held by credit unions, are required to be measured using the MTM accounting technique. This essentially requires these assets to be valued at the price they could be sold for today on the open market. The recently enacted Emergency Economic Stabilization Act requires the SEC to conduct a study on MTM accounting and report its findings to Congress by Jan. 2. The study is to include the effects of MTM accounting on a financial institution’s balance sheet. The act also authorizes the SEC to suspend application of MTM. Those opposed to the use of MTM argue that a financial institution’s intention to hold assets for the long term should be a factor in valuing them. Those in favor of the accounting technique argue that allowing a bank’s management to value assets will only lower investor confidence. The debate will continue at the SEC’s next roundtable on Nov. 21 ... * WASHINGTON (11/3/08)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) sent a letter to President Bush urging him to move forward with foreclosure prevention efforts, saying that media reports have exaggerated the administration’s progress (American Banker Oct. 31). The administration needs to use loan guarantees and credit enhancements for systematic loan modifications with the Federal Deposit Insurance Corp., he said ... * WASHINGTON (11/3/08)--The National Credit Union Administration (NCUA) was presented with the Combined Federal Campaign (CFC) President’s Award. The award, the highest CFC award given to an agency, is granted when an agency has at least 75% employee participation in the CFC or a $275 per capita gift. During 2008, NCUA’s Central and Region II office staffs gave an average CFC gift of $506, with a participation rate of 72.4%. “Credit unions succeed because volunteers give their time and effort,” said NCUA Chairman Michael Fryzel. “For the past 75 years, federal credit unions have been instrumental in helping people achieve their financial goals. Volunteer donations go a very long way in improving the lives of others, especially in these difficult financial times.” ... * WASHINGTON (11/3/08)--National Association of State Credit Union Supervisors (NASCUS) President/CEO Mary Martha Fortney encouraged the National Credit Union Administration to continue working with regulators as the economic crisis affects the examination and supervision of state-chartered, federally insured credit unions. She also addressed the importance of future regulatory enhancements including access to supplemental capital, prompt corrective action changes and increased member business lending capabilities. She explained that NASCUS and state regulators are committed to working with NCUA to ensure credit unions have the resources to remain safe and sound ...