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Inside Washington (12/17/2008)

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* WASHINGTON (12/18/08)—Credit unions can still register for a a Dec. 22 Credit Union National Association audio call titled "SBA Lending For Credit Unions: Opportunities and Challenges in the Current Economic Environment." Among the speakers participating in the call will be Frank Kressman, staff attorney with the National Credit Union Administration (NCUA), Grady Hedgespeth, SBA's Director of Financial Assistance, and Nicholas Owens, National Ombudsman and Assistant Administrator for Regulatory Enforcement Fairness at the SBA, who will moderate the program. The agency experts will also discuss NCUA's member business lending requirements and how they impact SBA lending… * ALEXANDRIA, Va. (12/18/08)—The National Credit Union Administration (NCUA) has made an archived version of its Dec. 16 audio call on CU HARP and CU SIP available online. The call-in session, co-hosted by the NCUA, Credit Union National Association and National Association of Federal Credit Unions, reiterated the details of the two programs—one to help troubled borrowers keep their homes, the other to shore up the liquidity of the corporate credit unions. It also underscored some important upcoming deadlines for credit unions interested in participating. CU HARP stands for the Credit Union Homeowners Affordability Relief Program. CU SIP stands for the Credit Union System Investment Program… * WASHINGTON (12/18/08)--The Federal Reserve Board announced Tuesday restructuring changes of check processing operations in the Sixth and Eighth Districts. As of Feb. 21, 2009, the head office of the Federal Reserve Bank of St. Louis no longer will process commercial checks, and banks currently served by that office will be reassigned to the head office of the Federal Reserve Bank of Atlanta. As a result of these changes, some checks deposited in the affected regions that currently are non local checks will become local checks that are subject to shorter permissible hold periods ... * WASHINGTON (12/18/08)--The Federal Deposit Insurance Corp. (FDIC) began prepping Tuesday for more bank failures by increasing its 2009 budget 84% to $2.24 billion. During the third quarter, the Deposit Insurance Fund decreased by 23.5% to $34.6 billion due to bank failures. The FDIC also approved a staffing level for 2009 of 6,269--an increase of 1,459 from the beginning of this year. The agency also issued two final rules: one that would permit a banking organization to reduce the amount of goodwill it must deduct from tier 1 capital by any associated deferred tax liability, and another to require troubled insured depository institutions to provide details to the FDIC regarding adequate position level documentation of the counterparty relationships of the failed institutions ... * WASHINGTON (12/18/08)--Rep. Maxine Waters (D-Calif.), chair of the House Financial Services subcommittee, is calling servicers to help her constituents avoid foreclosure (American Banker Dec. 17). Waters and her staff have helped seven borrowers so far, and are working on 30 more cases. Their constituents must sign a waiver to allow her office to deal with servicers. She has designated one full-time staff member to help constituents get loan modifications and gets involved personally when the foreclosure date is near. Waters supports Federal Deposit Insurance Corp. Chairman Sheila Bair’s loan modification plan, and has criticized the Treasury Department for failing to adopt it ... * WASHINGTON (12/18/08)-The Center for Responsible Lending, in a report published Tuesday, urged regulators and the Federal Reserve to do more to help protect consumers against abusive credit card practices. The center’s research indicated that only 3% of Americans understand the difference between teaser rates and rates on purchases and cash advances; one out of every 10 credit card balances carry a penalty interest rate the cardholder doesn’t understand; and penalty pricing and payment allocation hike interest rates, making borrowing most costly for consumers ...

Compliance Take a CTR quiz

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WASHINGTON (12/118/08)—The Bank Secrecy Act, also known as BSA or the bane of compliance officers’ existence, lays out pretty precise rules about when a credit union may designate a Phase II exemption for a member business account. The Credit Union National Association’s December Compliance Challenge features a number of BSA-related questions that reflect the changes brought about by the new currency transaction report (CTR) exemption rules issued by the Financial Crimes Enforcement Network (FinCEN) this month. For instance, what can you do if your federal credit union has a business account that engages in a number of frequent transactions throughout the year that trigger currency transaction report (CTR) filings and your member service representative would like to know if the business account would qualify for a Phase II exemption for non-listed businesses? Let’s say the business account generates a number of currency transaction report (CTR) filings and your member service representative would like to know if the business account would qualify for a Phase II exemption for non-listed businesses. Take this multiple choice quiz: According to the BSA (31 CFR 103.22), in order to qualify for a Phase II exemption from CTR filing, a business would must maintain its account with the credit union for a minimum number of months and have engaged in a minimum number of transactions per year. Which one of the following is correct?
* A. A business would have to maintain its account for at least 12 months and have at least 8 transactions per year to qualify. * B. A business would have to maintain its account for at least 6 months and have at least 20 transactions per year to qualify. * C. A business would have to maintain its account for at least 2 months and have at least 5 transactions per year to qualify. Or, * D. A business would have to maintain its account for at least 8 months and have at least 8 transactions per year to qualify.
Did you know the correct answer is “C”—or did you just guess right? Use the resource link below to find out why “C" is correct and to read more compliance jewels.

NCUA to vote today on unfair practices CUSO activities

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WASHINGTON (12/18/08)—At its open board meeting today, the National Credit Union Administration (NCUA) is scheduled to take up final rules on unfair and deceptive practices and credit union service organization (CUSO) activities, as well as receive a share insurance fund report. The NCUA is expected to mirror an expected Federal Reserve Board action approving stricter rules to ban unfair and deceptive credit card practices. The NCUA must act if the Fed rules are to apply to federal credit unions. Regarding CUSO activities, the NCUA in April proposed changes to its rules that would expand and clarify permissible CUSO activities. The proposed rule would also give NCUA access to the books and records of CUSOs that are owned by federally-insured, state-chartered credit unions (FISCUs); require FISCUs to maintain a separate corporate identity from their CUSOs; and would limit the ability of undercapitalized federal credit unions to recapitalize a CUSO. The Credit Union National Association said in a comment letter that the NCUA is moving in the right direction with its proposal, but could go further to enhance CUSO's abilities to meet credit unions' needs. CUNA urged the NCUA to broaden CUSO authority by allowing them to choose from the range of activities permissible for federal credit unions. In particular, CUSOs should be able to engage in indirect automobile lending services and to sell loan participation interest in a credit card portfolio to credit unions, CUNA said. The NCUA posted a revised meeting agenda to its website Wednesday that added a closed meeting to its schedule. Considerations for that closed sessions are “supervisory activities” and a personnel matter.

CU comments wanted on Fed disclosure plan

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WASHINGTON (12/18/08)—To implement mortgage disclosure rules brought about by this year’s Mortgage Disclosure Improvement Act (MDIA), the Federal Reserve Board has proposed changes to its Regulation Z and the Credit Union National Association (CUNA) seeks credit union comment on the plan. In its comment call, CUNA reminds credit unions this is just the beginning of changes to come. The Fed is in the process of reviewing Reg Z in its entirety and will issue more changes to the mortgage disclosure provisions sometime next year. For now, theThe MDIA requires creditors to mail or deliver good faith estimates of mortgage loan costs within three business days after receiving a loan application and before any fees are collected, other than a reasonable fee for obtaining a credit report. The term “business day” is defined as any day in which the lender’s office is open for business. CUNA notes these early disclosure provisions are consistent with the Fed’s recent final rule that amends the Home Ownership Equity Protection Act (HOEPA), which imposes this requirement for the consumer’s primary home. The MDIA now broadens this requirement to include all dwellings, such as second homes. These requirements will apply to refinancings and home equity loans, but they will not apply to home equity lines of credit (HELOC), which are considered “open-end” loans and not subject to these provisions of TILA and Regulation Z. Use the resource link below to read more about the Fed proposal and to access CUNA’s comment call. CUNA requests comment by Jan. 15. The Fed Wednesday extended its comment period to Feb. 9 from Jan. 23.

Mica explains CU difference on CNBC-TV

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WASHINGTON (12/18/08)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday took an opportunity on national television to spell out the credit union difference, note how credit unions are still lending to consumers in today's economy, discuss a federal backup plan for corporate credit unions, and explain why credit unions need their own federal regulator. In a comprehensive live interview on CNBC “Squawk on the Streets,” Mica first responded to a question from host Erin Burnett about how credit unions differ from banks. The CUNA leader said, “In clear, quick terms, a credit union is a not-for-profit financial institution. Banks are for-profit. There's the bank, the shareholder and you. They try to make money to get to it the shareholders. The credit unions, there's you and the credit union. Any money left over goes to you.” Mica also noted that credit unions have equal federal insurance through the National Credit Union Share Insurance Fund as banks and thrifts have through the Federal Deposit Insurance Corp. All federally insured accounts currently are covered to $250,000, he said. Mica also spoke about the strength and soundness of credit unions, noting that they "have 11% capital nationwide--the rest of the financial services industry would love to say that." And because of their strong capital position and their avoidance of the problem types of subprime loans that have unsettled the housing and mortgage markets, Mica emphasized, credit unions are still making loans.
Click for member-only video CUNA President/CEO Dan Mica on CNBC Wednesday. Click for member-only video. (Photo provided by CUNA)
"They've made very conservative loans, based on relationships," said the head of CUNA. However, Mica also explained that credit unions are “getting some collateral damage” because everything around credit unions is starting to collapse. For that reason, Mica said, the corporate credit unions that support credit union liquidity need to have the same kind of federal backups available to banks. When asked if a single financial regulator would be a good idea for credit unions, Mica said that the unique nature of credit unions makes such a plan a bad one. He also doubted the success of an idea that would lump credit unions with the same commercial bank leaders who have said they want to put credit unions out of business.