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CUNA Matz seek CU exemption from systemic risk legislation

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WASHINGTON (11/18/09)--The Credit Union National Association (CUNA) has urged lawmakers to support an amendment to H.R. 3996, the Financial Stability Improvement Act of 2009, offered by Rep. Brad Sherman (D-Calif.), which would, in effect,exclude all credit unions from contributing to a stabilization resolution fund for systemically risky institutions. H.R. 3996 would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation (FDIC), to cover the cost of resolving failing financial companies that are systemically important to the financial system. The National Credit Union Share Insurance Fund (NCUSIF) currently has similar authority with respect to insured credit unions. The stability bill, as currently written, would direct the Federal Deposit Insurance Corporation (FDIC) to assess financial companies, including credit unions, with over $10 billion in total assets to provide the initial funding for the new fund, and to replenish the fund in the future. Sherman’s bill would raise the current $10 billion-asset funding threshold to $75 billion, effectively exempting all credit unions. While the current $10 billion threshold removes all but three credit unions from the effects of the legislation, lifting the asset cap to $75 billion would protect Navy Federal FCU, Pentagon FCU and State Employees CU from the bill. In the letter, which was addressed to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and ranking member Rep. Spencer Bachus (R-Ala.), CUNA detailed several reasons that credit unions should be excluded from the legislation, including their member-owned, not-for-profit cooperative business plans. Credit unions “exist to provide financial services to their member-owners” and “by definition face a set of incentives that are very different from those confronting for-profit financial companies,” the letter added. While the Sherman amendment “would not provide for the complete exclusion of credit unions from the scope of this legislation,” it would address “significant credit union concerns,” CUNA added. Separately, National Credit Union Administration Chairman Debbie Matz sent a letter Tuesday to committee Chairman Barney Frank (D-Mass.) that expressed concerns shared by CUNA, saying it was not “equitable to require credit unions to participate in the resolution fund to be managed by FDIC.” While the costs of dealing with large-scale financial firm failures should not be born by the greater taxpaying public, Matz does not believe that credit unions should be included either. Credit unions pose little to no systemic risk to financial markets, as “even the failure of the largest credit union would have no systemic effect outside of the credit union industry,” the NCUA letter said. Matz also questioned the “advisability” of allowing a federal agency outside of the NCUA “to take supervisory action against credit unions.” Matz also thanked Frank for including the NCUA in the planned Financial Services Oversight Council, saying that the NCUA “looks forward to working cooperatively” within the council, which will “provide an excellent forum for interagency discussion and will be an effective mechanism to strengthen safety and soundness regulation.” As reported in The Hill, Rep. Ed Perlmutter (D-Colo.) may soon introduce a separate amendment that would give financial regulators increased authority over the actions of the Financial Accounting Standards Board (FASB), which is currently under the oversight of the Securities and Exchange Commission (SEC). CUNA would support Perlmutter's intent to give greater congressional oversight of accounting standards. Debate on H.R. 3996 is expected to continue this week, and it is not known when the bill could pass out of committee. For the CUNA letter, use the resource link.

Inside Washington (11/17/2009)

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* WASHINGTON (11/18/09)--Angela Sanders has been named staff assistant to National Credit Union Administration (NCUA) Chairman Debbie Matz. Sanders previously served as executive assistant to PNC Bank. She has 20 years of administrative assistant experience in the government public, private and non-profit sector ... * WASHINGTON (11/18/09)--The Federal Reserve Board Monday announced proposed rules that would restrict the fees and expiration dates on gift cards. The rules would protect consumers from unexpected costs and would require that conditions on gift cards be clearly stated. The rules would prohibit inactivity and services fees on gift cards unless there has been at least one year of inactivity, and the consumer is given clear disclosures about the fees. Expiration dates for the cards must be five years after the date of issuance, or five years after the date when the funds were last loaded. The rules generally cover retail gift cards and network-branded gift cards. The rules are issued under Regulation E (Electronic Fund Transfers) to implement the gift card provisions of the Credit Card Accountability, Responsibility and Disclosures Act of 2009 ... * WASHINGTON (11/18/09)--The Federal Reserve Board’s independence will likely be debated under draft legislation introduced by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) last week. Dodd’s proposal aims to improve governance at the banks by requiring chairmen of the 12 regional banks to be nominated by the president and confirmed by the Senate, but industry critics said the requirement could make the financial system increasingly political while slowing financial reform efforts (American Banker Nov. 17). Dodd said he doesn’t like the way presidents are currently selected because it’s “contradictory.” During an interview last week with CNBC, Dodd said he would like the Senate to confirm Fed bank chairmen the way the Fed confirms governors. David Berenbaum, executive vice president of the National Community Reinvestment Coalition, said the public would have more confidence in the central bank if it was clear of conflicts of interest ... * WASHINGTON (11/18/09)--Rep. Scott Garrett (R-N.J.) asked Treasury Secretary Timothy Geithner Monday to clarify which companies would pay into a fund intended to resolve systemically important institutions (American Banker Nov. 17). The House Financial Services Committee is currently considering legislation to require financial companies with $10 billion or more in assets to pay into a fund. Garrett requested an answer from Geithner by the end of the week ... * WASHINGTON (11/18/09)--Federal Reserve Board Chairman Ben Bernanke said he does not support breaking up large financial institutions (American Banker Nov. 17). During a speech in New York, Bernanke dismissed a suggestion by Mervyn King, Bank of England governor, to break up big banks. Simply making banks smaller would not work because banks can be “systemically critical even if they are somewhat smaller” or if they are connected with out banks. There may be situations in which a regulator would force an institution to cut back on commercial banking activities, but it’s difficult to draw a “bright line,” he added ...

Let regulators handle overdraft CUNA to Senators

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WASHINGTON (11/18/09)--Credit Union National Association (CUNA) President/CEO Dan Mica has encouraged members of the Senate Banking Committee to suspend further consideration of S. 1799, the Fairness and Accountability in Receiving Overdraft Coverage Act of 2009 (FAIR Act), saying that he has “grave concerns” regarding the effect that the legislation “would have on credit union members who use and value the overdraft protection services their credit union provides.” The letter, which was submitted as written testimony in advance of Tuesday’s hearing on overdraft fees, added that “the provisions of S. 1799 that would limit the number of overdraft fees that could be charged per month and per year would simply end overdraft programs to the detriment of many consumers who truly value these programs.” The hearing included testimony from the Center for Responsible Lending's Eric Halperin and Pentagon FCU President/CEO Frank Pollack, among others. While CUNA “recognizes concerns exist about how some overdraft protection programs operate,” Mica, noting the recently released Federal Reserve rule that requires credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions, said that taking a regulatory approach would be the most efficient means of tackling the issue. Though the requirements may present “significant compliance issues for some credit unions,” CUNA said that the Fed rule “significantly improves consumer protections with respect to these programs, by ensuring that consumers are made aware of the existence of these programs and requiring an opt-in in order to use overdraft protection programs with respect to ATM and one-time debit transactions.” Under S. 1799, credit union members would incur more non-sufficient fund fees, pay more merchant return check fees, and have more bad checks reported to consumer reporting agencies. Merchants would also be forced to deal with increased numbers of bounced checks, according to the letter. “Overlapping, duplicative and frequently changing regulatory and statutory mandates” would also have negative effects on credit unions, the letter added. “We hope the Fed action, as well as the fact that Congress is presently considering the creation of a consumer financial protection agency, will give Congress pause in pursuing the various legislative proposals pending before both chambers,” Mica wrote. To see the letter in full, use the resource link.

National Hike the Hill planning underway

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WASHINGTON (11/18/09)—The Credit Union National Association (CUNA) and the state leagues are putting the wheels in motion to bring credit union representatives to Washington in mid-December just before Congress is likely to begin voting on key issues affecting credit unions. “Whether it’s overdraft protection, regulatory reform, systemic risk, or the many, many other issues it is tackling, Congress needs to hear from us: ‘We didn’t start the fire; don’t penalize us for the financial meltdown,’” said CUNA President/CEO Dan Mica. Mica said he has contacted each league and asked them to begin identifying credit union representatives who can come to Washington next month for a “National Hike the Hill.” “In the hectic days that come at the end of a session, Congress often finds itself pressured by time to take action, which could end up affecting us for years to come, ” Mica said. “We think it important that Congress hear from credit unions heard before a number of these issues can come up for vote as Congress rushes to leave town days just before the holidays.” The CUNA leader said more information about the National Hike the Hill would be provided to credit unions in the coming days, primarily through the leagues.

Hyland applying finishing touches to alt cap guidance

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WASHINGTON (11/14/09)—The finishing touches are being applied to National Credit Union Administration board member Gigi Hyland’s white paper on credit union alternative capital and it could be before the agency board by January. Hyland told league presidents at the American Association of Credit Union Leagues Annual Meeting in Naples, Fla. last week that she is just now “putting the finishing touches” on the report that is intended to help guide the NCUA deliberation on secondary capital. “I want to be sure it is as thorough and complete as it can possibly be,” Hyland said. While earlier she had hoped to complete it by December, she said January is now more realistic given her recent focus on the coming corporate credit union proposal, expected to be unveiled by the agency at its meeting this Thursday. Hyland said the white paper will look at alternative capital with credit unions’ cooperative model in mind, balanced with the economy’s impact on the credit unions, their interest in additional capital sources, and consumer protection considerations. “We’ll discuss the fact that statutory changes are needed, and there are other tweaks in PCA (NCUA’s prompt corrective action rules) that would allow NCUA to be responsive in times like this,” she added. Once finalized, the paper, Hyland said, will be sent to the agency’s regional offices for comment and then shared with fellow NCUA board members to see how they want to proceed with it. Still to be determined is whether it will be on the board meeting agenda for action or used internally as a reference. “It’s really up to the NCUA board to figure out” what is done with the white paper,” he said. On member business lending (MBL), Hyland emphasized the need for credit unions to do the necessary due diligence and understand the risk parameters, a need that would become more pronounced if Congress raises the current statutory cap on MBLs. The MBL issue will be the subject of a webinar Hyland is hosting today (see resource link). Examiners will discuss what they are seeing in the field, what is working and what is generating concern, she said. NCUA MBL Webinar Today

Model privacy form unveiled by regulators

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WASHINGTON (11/18/09) -- Eight federal financial regulators, including the National Credit Union Administration (NCUA), released a final model privacy notice form intended to make it easier for consumers to understand how financial institutions collect and share information about consumers. Development of a simpler privacy form was required under 2006 amendment to the Gramm-Leach-Bliley (GLB) Act, signed into law in 2000. Critics argued that the notices required under GLB were legalistic and difficult to understand for ordinary consumers. Credit unions, banks and thrifts are not required to use the new form released Tuesday. However, its use assures "safe harbor" compliance with regulatory disclosure requirements. The rule implementing the new form is effective 30 days after it is published in the Federal Register, which could occur later this week. However, the rule also allows for a transition period until Jan. 12, 2012, for dropping the sample clauses now included in the appendices of the agencies’ privacy rules. According to a joint-agency release, the agencies conducted extensive consumer research and testing to develop the newly released model form. The final model privacy form was developed jointly by the NCUA and the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission. Use the resource link to access the rule.

NCUA moves closer to final SAFE Act rule

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ALEXANDRIA, Va. (11/18/09)— The Federal Deposit Insurance Corp. (FDIC) announced the approval of a draft final rule to implement the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). The National Credit Union Administration (NCUA) and the other federal bank and thrift regulators are still working through some issues and will follow suit at a later date. Under the SAFE Act, employees of financial institutions, or their subsidiaries that act as residential loan originators, are required to register with the Nationwide Mortgage Licensing System and Registry. The FDIC plan states:
* For purposes of the registry, each mortgage originator must obtain a unique identifier, and maintain the registration; * Financial institutions must require employees acting as residential mortgage loan originators to comply with the S.A.F.E. Act’s requirements to register and obtain a unique identifier; * Financial institutions must adopt and follow written policies and procedures designed to assure compliance with these requirements.
In a July comment letter to the NCUA on its proposed S.A.F.E. Act rule, the Credit Union National Association (CUNA) requested that privately insured credit unions have access to the mortgage registry even though they are not covered under the rules. In addition, CUNA suggested changes to the threshold for determining which financial institutions would be covered by the rules and requested that there be an exception for loan modifications.