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NCUA bans two from CU work (11/30/2012)

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ALEXANDRIA, Va. (12/3/12)--Joyce Judy, a former credit union president who allegedly invested $500,000 of a member's money in a racetrack that turned out to be an international scam, is one of two individuals now prohibited from participating in the affairs of any federally insured financial institution.

The National Credit Union Administration issued prohibition orders against Judy and Kimberly Unger on Friday.

Judy late last year was sentenced to 26 months in prison for one count of fraud. She has also been sentenced to three years of supervised release and has been ordered to repay $500,000 in restitution.

Judy was president of Little Rock, Ark.-based Arkansas Employees FCU when the investment incident occurred in late 2009. She allegedly persuaded a member to invest in what she thought was a certificate of deposit, said prosecutors. Judy pooled the funds with $500,000 of her own funds. A business partner wired the money overseas without her permission, and the funds disappeared.

Unger consented to her prohibition order to avoid the time, cost and expense of litigation. She is a former employee of Spencerport FCU, Spencerport, N.Y.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full NCUA release, use the resource link.

Privacy notice bill would help consumers CUs CUNA

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WASHINGTON (12/3/12)--Legislation providing an exception for costly annual privacy policy notification requirements if the policy has not changed since it was last disseminated is favored by credit unions, Credit Union National Association (CUNA) President/CEO Bill Cheney wrote in a letter to Reps. Blaine Luetkemeyer (R-Mo.) and Brad Sherman (D-Calif.).

The bill, the Eliminate Privacy Notice Confusion Act (H.R. 5817), could receive a U.S. House vote today.

In the letter, Cheney notes that H.R. 5817 would eliminate a costly and unnecessary compliance burden for credit unions. "The bill eliminates repetitive notices that are often ignored by consumers, and enhances consumer protection by ensuring that when a consumer receives a privacy notification, it has significance and is not redundant. The legislation also reduces future compliance burden for credit unions and other financial institutions," Cheney wrote.

Separately, Cheney noted that CUNA's support for H.R. 5817 is in keeping with the association's persistent efforts to reduce the regulatory burden on credit unions.

Other initiatives include support for:
  • An ATM disclosure bill that passed the House earlier this year;
  • An examination fairness bill on which CUNA testified in February; and
  • Other legislation making reforms to the Consumer Financial Protection Bureau.
For the full letter, use the resource link.

MBL increase is common sense iHuffPoi column says

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WASHINGTON (12/3/12)--Increasing the credit union member business lending (MBL) cap is "simply common sense," John Arensmeyer, CEO of The Small Business Majority, and Erica Schroder, operations director at R Street Institute, said in a joint Huffington Post column published late last week.

The co-authors noted that while their organizations are often on opposite sides of the ideological spectrum, they both believe that the U.S. Congress must act to free up more small business credit. "In particular, we think lawmakers should approve a regulatory relief effort that would allow credit unions to lend more money to small business," they said.

The column cited a Small Business Majority survey, which found that more than 60% of small business owners are having issues accessing the credit they need. "Congress has made an effort to change this situation, such as creating a 'small business lending fund,' but the numbers demonstrate it's just not enough. A pragmatic solution to this problem is to change outdated regulations that limit credit unions--democratically governed, nonprofit financial cooperatives--from meeting consumer needs," the columnists wrote.

"Getting more credit to small business owners can get them, and the national economy, on track to a full and sustained recovery. There's no reason for Congress to delay action. Credit unions must be allowed to make more loans to small businesses," the column added.

Bills that would increase the credit union MBL cap to 27.5% of assets, up from the current 12.25% cap, have been introduced in the U.S. House (H.R. 1418) and Senate (S.2231).

The Senate MBL legislation could be considered any day during the lame duck session. The Credit Union National Association (CUNA) has estimated that the proposed MBL cap increase could inject $13 billion in funds into the economy, creating as many as 140,000 new jobs in the first year following enactment.

For the full Huffington Post column, use the resource link.

Inside Washington (11/30/2012)

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  • WASHINGTON (12/3/12)--Martin J. Gruenberg and Thomas M. Hoenig were officially designated last week by President Barack Obama as the chairman and vice chairman of the Federal Deposit Insurance Corp. (FDIC).  On Nov. 15, the U.S. Senate confirmed both men for their respective positions. The president recently signed the orders making the confirmations official. Both were confirmed by the Senate for six-year terms as members of the FDIC board of directors on March 29, 2012 ...
  • WASHINGTON (12/3/12)--Officials of two key regulatory agencies told lawmakers they would take into account bank input on regulatory burdens as they finalize rules on capital and liquidity mandated by Basel III (American Banker Nov. 30). George French, deputy director of risk management supervision for the Federal Deposit Insurance Corp. told a joint hearing of two House Financial Services subcommittees last week that regulators recognize the close linkage and potential interactions have to be taken into account. Michael Gibson, director of the division of banking supervision and regulation for the Federal Reserve, said that agency is "sensitive" to the comments of community banks and has learned much from those comments. Lawmakers at the hearing said while there need to be improved capital requirements, regulators need to accommodate the unique characteristics of smaller institutions. Rep. Jeb Hensarling (R-Texas), the incoming chairman of the House Financial Services Committee, said it is a very poor case for more complex capital standards that do not recognize the difference between large money center banks and community financial institutions …
  • WASHINGTON (12/3/12)--Banking regulators should delay implementing the Volcker Rule for at least two years because of its complexity, the current and future chairmen of the House Financial Committee wrote in a letter to the heads of five regulatory agencies (American Banker Nov. 30). Given the time that it will take regulators to agree on one version of the Volcker Rule, as well as the tremendous uncertainty that market participants face in trying to anticipate what the final rule will look like, Chairman Spencer Bachus (R-Ala.), who will step down from his post at the end of this Congress, and Rep. Jeb Hensarling (R-Texas), who will succeed him next year, wrote that they respectfully suggest that the Federal Reserve Board delay the Volcker Rule's effective date until two years after the date on which the final rule is promulgated. The lawmakers sent the letter on Thursday to the heads of the Fed, Federal Deposit Insurance Corp., Commodity Futures Trading Commission, Securities and Exchange Commission and the Office of the Comptroller of the Currency.  The rule, which regulators are expected to finalize in early 2013, implements a provision of the Dodd-Frank Act banning proprietary trading by banks and is aimed at banks which hold federally insured deposits from placing depositors' money at risk. It is named for former Federal Reserve Chairman Paul Volcker, who has pushed the proposal. The lawmakers also asked the regulators to issue a cost-benefit analysis of the rule ...

Border Lodge CU closed by NCUA state regs

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ALEXANDRIA, Va. (12/3/12)--Border Lodge CU, Derby Line, Vt., became the 11th federally insured credit union to be liquidated in 2012 when the Vermont Department of Financial Regulation closed the credit union to conserve the assets and protect the interests of credit union members.

The state regulators appointed the National Credit Union Administration (NCUA) as liquidating agent.

State-chartered Border Lodge CU began operations in 1963. The credit union served 1,097 members and held $3.1 million in assets at the time of its closure. The credit union served employees of varied and approved occupational groups who work within Orleans County, Vt., and members of the immediate families of such persons and associations composed primarily of the same people, according to the NCUA.

Member deposits at the credit union are insured up to $250,000 by the National Credit Union Share Insurance Fund.

For the full NCUA release, use the resource link.

CUNA backs plan to allow FCU TIPS investments

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WASHINGTON (12/3/12)--Federal credit unions should be permitted to invest in Treasury Inflation Protected Securities, the Credit Union National Association (CUNA) said in a comment letter to the National Credit Union Administration (NCUA).

Allowing such investments, as proposed by the NCUA, will allow credit unions to protect against inflation and manage interest-rate risk, wrote CUNA Senior Vice President and Deputy General Counsel Mary Dunn. She also urged the agency to work with state regulators to find a way to let well-managed state credit unions invest in these securities.

Currently, investments in TIPS are allowed under a limited basis under a pilot program.

CUNA believes that "a credit union should undertake sufficient analysis before purchasing any TIPS and be able to manage its TIPS investments on an ongoing basis, current requirements regarding due diligence and risk management are sufficient, and no additional requirements in these areas should be imposed on credit unions in connection with TIPS authority,'' she wrote.

The TIPS market has been in existence for 15 years and TIPS are fully guaranteed by the U.S. government. The principal is adjusted based on changes in the Consumer Price Index, while the interest rate, which is paid semiannually on the adjusted principal, remains fixed.

Use the resource link to access CUNA comment letters.

FHFA guarantee fee changes could impact CUs CUNA

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WASHINGTON (12/3/12)--The Federal Housing Finance Agency's (FHFA) plan to adjust the guarantee fees that government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac charge for single-family mortgages will have a discriminatory effect on credit unions and other smaller financial institutions, the Credit Union National Association(CUNA) said in a comment letter.

The planned FHFA adjustments would increase the guarantee fees for single-family mortgages in states where GSE costs related to state foreclosure practices are higher than the national average; these states are Connecticut, Florida, Illinois, New Jersey, and New York.

The FHFA considered three factors as it developed the guarantee fee methodology. Those factors are:

  • The expected number of days it takes a GSE to foreclose on a home in a particular state;
  • The average per-day carrying cost that the GSEs incur in that state; and
  • The expected national average default rate on single-family mortgages acquired by the GSEs.
In the comment letter, CUNA Assistant General Counsel Luke Martone suggested that other factors be considered, such as the number of foreclosures over a set period of time, and how factors beyond the control of lenders or consumers, such as state law provisions on foreclosures or judicial review of foreclosure proceedings, affect the processing of foreclosures.

Overall, the comment letter encouraged the FHFA to work with lenders of all types and sizes, including credit unions, to reform the secondary market and to promote the housing market recovery.

For the full comment letter, use the resource link.