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NCUA chair to testify on state of the industry

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WASHINGTON (10/9/09)--Deborah Matz will make her first appearance before Congress as National Credit Union Administration Chairman during an October 14 Senate financial institutions subcommittee hearing on the state of the banking industry. The hearing, which will take place at 2:30 p.m. ET in room 538 of the Dirksen Senate Office Building, will also feature testimony from Federal Deposit Insurance Corporation Chairman Sheila Bair, Comptroller of the Currency John Dugan, Federal Reserve Governor Daniel Tarullo, Office of Thrift Supervision Deputy Director, Examinations, Supervision, and Consumer Protection Timothy Ward, and North Carolina Commissioner of Banks and Conference of State Bank Supervisors Chairman Joseph Smith. While the financial regulatory reform debate continues in Washington. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said recently that any plan to combine financial institution regulation under a single regulator would not apply to credit unions.

Fed further amends check processing operations

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WASHINGTON (10/9/09)—The Federal Reserve on Thursday announced that on October 17 it will transfer its check processing operations from the head office of the Federal Reserve Bank of Dallas to the Federal Reserve Bank of Cleveland. The Fed announced that effective November 14 it will also transfer to Cleveland the check processing operations of the Los Angeles branch of the Reserve Bank of San Francisco. The moves reflect an overall restructuring of the Fed’s check processing operations, and are a response to consumers’ and businesses’ shift from using paper checks toward electronic payments. According to the Fed, all check processing will be handled by the Cleveland office by early next year. For the full Fed release, use the resource link.

Inside Washington (10/08/2009)

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* WASHINGTON (10/9/09)--The Federal Housing Administration (FHA)--which insures mortgages with low down payments--may need a government bailout, reported Thursday. FHA has $54 billion more in losses than it can handle, said a former Fannie Mae executive. The agency may need a bailout in two to three years, said consultant Edward Pinto. FHA’s volumes have quadrupled in the last three years as private insurers and lenders scale back in a struggling housing market. However, FHA Commissioner David H. Stevens said the agency doesn’t need a bailout. FHA’s reserves exceed more than its insurance--$30 billion, he said. About 14.4% of FHA’s loans were delinquent as of June 30, and 2.98% were in foreclosure, according to the Mortgage Bankers Association ... * WASHINGTON (10/9/09)--Fannie Mae and Freddie Mac will likely incur steeper funding costs if the Federal Reserve Board stops purchasing debt and mortgage-backed securities from the enterprises and the Federal Home Loan Banks March 31, financial observers say. The Senate Banking Committee was scheduled to meet Thursday to discuss the enterprises’ future and what role they would take in the mortgage markets after the economic crisis passes. If the Fed stops buying debt and securities in the first quarter, it will be a mistake because the change could drive up interest rates, said Joe Murin, managing director of the Collingwood Group. The Fed has said it would buy $1.25 trillion of mortgage-backed securities and $200 billion of debt from Fannie and Freddie. So far, the central bank has bought $882.6 billion in mortgage-backed securities and $131.2 billion in debt (American Banker Oct. 8) ... * WASHINGTON (10/9/09)--The delay on enacting regulatory reform of the financial services sector may not be a bad thing, according to Sheila Bair, Federal Deposit Insurance Corp. (FDIC) chairman (American Banker Oct. 8). It could give the nation extra time to find the roots of the crisis, Bair said during a speech Tuesday. She supports an Obama administration plan to create a consumer protection agency, although she has said it should not have oversight over banks. Rather, it should focus on nonbanks that made subprime loans--which triggered the financial crisis. Also on Tuesday, Bair said bank failures would probably continue through 2010. Banks are still working through loans they shouldn’t have made. Regulators want lending to continue, but only prudent lending, she said ... * WASHINGTON (10/9/09)--A plan to regulate over-the-counter derivatives has divided regulators and House Financial Services Committee Chair Barney Frank (D-Mass.). During a Wednesday hearing, regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) said Frank’s bill was too weak. He acknowledged the criticism and said he would make some changes. He said he was unsure about a concern regarding a provision to allow end users to enter into derivatives contracts without using a clearinghouse. Market participants should be able to profit off of derivatives, Frank said. Also during the hearing, CFTC Chair Gary Gensler suggested ways to improve the bill. Standardized derivative contracts should be traded on electronic trading platforms or exchanges, he said. He also said that instead of having regulators require clearance of standard derivatives, lawmakers should enforce clearance. Frank’s bill also left out some regulatory oversight, according to Henry Hu, SEC director of the division, risk, strategy and financial innovation. Frank said he could accommodate requests, but did not want to require that end users clear standard derivatives. The Obama administration also has drafted a derivatives bill. The legislation is tougher than Frank’s because it would not give banks and others much flexibility to avoid using a clearinghouse for derivatives hedged for risk ...

CFPA up for Oct. 14 committee vote

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WASHINGTON (10/9/08)—The discussion draft of the Consumer Financial Protection Agency (CFPA) Act of 2009 (H.R. 3126) is among four bills slated for a vote by the House Financial Services Committee on Oct. 14. Also on the committee’s list: H.R. 3606, to amend the Truth in Lending Act to make a technical correction to an amendment made by the Credit CARD Act of 2009. In a recent letter, the Credit Union National Association (CUNA) urged lawmakers to support H.R. 3606, introduced by Rep. Peter Welch (D-Vt.). The legislation would change troublesome Section 106 of the CARD Act, a provision that prohibits creditors from treating payments as being late unless the creditor adopts reasonable procedures to ensure that periodic statements are mailed or delivered to the consumer no later than 21 days before the payment due date. Regarding the CFPA proposal, CUNA has expressed credit union concerns to legislators over the examination and enforcement authorities that could be conveyed to the CFPA. CUNA also seeks clarification that the chairman of the National Credit Union Administration will be given a seat on the CFPA Oversight Board and direction that the CFPA director would take into account disclosure requirements under other laws in order to enhance consumer compliance and reduce regulatory burden. Also up for a committee vote next Wednesday are:
* Discussion draft of the Over-the-Counter Derivatives Markets Act of 2009; and * H.R. 3763, to amend the Fair Credit Reporting Act to provide for an exclusion from Red Flag Guidelines for certain businesses.

Altering interchange fees could reduce consumer choice CUNA testifies

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WASHINGTON (10/9/09)--Testifying on behalf of the Credit Union National Association (CUNA), Local Government FCU Executive Vice President Mark Caverly told legislators assembled at a Thursday hearing on interchange fees that changing those fees would “reduce consumer choice for payment options, allow merchants to discriminate against credit unions and other small issuers,” and allow merchants to assess deceptive and perhaps illegal surcharges on their customers.
Click to view larger image Testifying on behalf of CUNA, Mark Caverly told legislators that changing interchange fee systems would limit options for consumers. Pictured right: CUNA's Ryan Donovan.
Addressing the general use of interchange fees among credit unions, Caverly in prepared remarks told the lawmakers that the proceeds from interchange fees help support their card programs and “cover some of the costs associated with risk of non-payment that the card issuers assume, the risk of fraud and other data breaches that occur at merchants, and the administrative costs of the program.” “In short, the benefits merchants receive from accepting our cards far exceeds any interchange fees we receive,” he added. Caverly’s credit union, which is based in Raleigh, North Carolina, currently holds $957 million in assets from 178,000 members, and issues 173,000 debit cards and 16,000 credit cards. LGFCU receives just over 14% of its monthly income from interchange fees, Caverly added. Caverly questioned the motives of merchants and associated groups that seek to avoid paying their fair share of transactions, and opined that some merchant organizations may be trying to “drive credit unions… out of the payment card business.” Portions of the act which would abolish the ““honor all cards” rule would, if passed, create “mass confusion” for customers and would “make it impossible” for Caverly’s credit union to attract or retain members through a “competitive card program” for consumers. Additionally, while merchants and merchant groups have decried interchange fees as overly costly, Caverly said that the fees have remained “relatively flat” over time. Rep. Jeb Hensarling (R-Texas) expressed caution that both H.R. 2382 and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009 , which was discussed during a later portion of the hearing, could “exacerbate” the credit crunch at a time when small businesses are already having difficulty getting access to credit. However, Rep. Peter Welch (D-Vt.) spoke up in favor of H.R. 2382, which he introduced, saying that the legislation represented “basic fairness and reasonable regulation of credit card and large bank practices.” Rep. Bill Shuster (R-Pa.) also lent his support to both pieces of legislation, saying that “action is needed to help level the playing field between consumers, small businesses, and credit card companies by requiring greater transparency and prohibiting unfair and abusive practices when it comes to interchange fees.” While she said that she understands the opposition of credit unions and small banks to any interchange fee changes, Rep. Maxine Waters (D-Calif.) said that there “have to be some changes” to the current interchange fee structure. While the “overall problems and abuses” of the interchange fee system trump some of the issues cited by credit unions and small banks, Waters promised to take their concerns into account as legislation moves forward.