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Inside Washington (12/08/2011)

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  • WASHINGTON (12/9/11)--The Federal Deposit Insurance Corp. (FDIC) Wednesday approved a $3.28 billion budget for 2012, which is 15.4% lower than this year's budget. The drop is attributed primarily to a steadily declining workload since the height of the economic crisis. The agency plans to eliminate more than 500 non-permanent employees who work in resolution operations. Spending on work related to failed banks is expected to decline about 32% from this year's budget to $1.5 billion. However, other budget areas will grow because of the FDIC's new duties under the Dodd-Frank Wall Street Reform Act, such as its oversight role with systemically important institutions. "It appears that the peak of the recent banking failures may have passed, and the FDIC is now positioned to begin reducing budget and staffing levels while continuing to fulfill our mission and maintain readiness to handle remaining bank failure and supervisory challenges," said FDIC Acting Chairman Martin Gruenberg in the FDIC's announcement. "While this budget reflects our priority to reduce costs where prudent, it also allocates the resources needed to implement new authorities under (Dodd-Frank), primarily the FDIC's ability to facilitate the orderly resolution of a large, complex financial institution."  The board approved a staff of 8,704 employees, a reduction of 565 positions from this year's staff. More than one-third of the FDIC's 2012 staffing will be temporary employees who will assist with bank closings; perform follow-up work related to the management and sale of failed bank assets; and support supervision of a continued high number of problem banks. There were 157 bank failures in 2010 and 90 so far this year …

Loan participations RegFlex liquidity on NCUA agenda

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ALEXANDRIA, Va. (12/9/11)--Loan participations, Regulatory Flexibility (RegFlex), and an advance notice of proposed rulemaking on liquidity access are among the items on the National Credit Union Administration's (NCUA) Dec. 15 agenda.

The loan participation issue has been addressed by the agency in recent months, with NCUA Chairman Debbie Matz this fall saying the agency would develop a new loan participation protection rule covering both originators and buyers to require originators to retain some of the original loan risk on their balance sheets, and require buyers to do more due diligence.

CUNA recently commented on another December agenda item, requesting that the NCUA reinstate the RegFlex program.

The final version of a proposed NCUA corporate credit union proposal will also be addressed during the meeting. The NCUA earlier this year released a series of technical amendments and clarifying changes to its corporate credit union rule, Part 704. The proposed changes amend NCUA regulations to exclude Central Liquidity Facility (CLF) stock subscriptions from the definition of net assets. The proposal also clarifies that violations of the weighted average life of a corporate's assets are not subject to capital category reclassification. The proposal would require the preparation of investment action plans for such violations. These changes were made to "relieve regulatory burden where warranted" and ease access to liquidity, the NCUA has said.

The NCUA's strategic plan for the years 2011 through 2014, the 2012 Annual Performance Budget, the 2012 Budget for NCUA Guaranteed Note Securities Management and Oversight, and National Security Delegations of Authority are also on the agenda.

The NCUA will also respond to Virginia-based Henrico FCU's request to expand its community charter during the meeting.

The closed board meeting, which typically immediately follows the open board meeting, has been rescheduled to Dec. 14.

For more on the NCUA board meeting, use the resource link.

CFPB director appointment blocked in Senate

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WASHINGTON (12/9/11)--The U.S. Senate on Thursday elected not to hold a full vote on the Obama administration's nominee to lead the Consumer Financial Protection Bureau (CFPB), Richard Cordray, defeating a cloture motion by a 45-to-53 vote. A total of 60 yes votes would have brought Cordray's confirmation vote to the Senate floor.

President Barack Obama said "there is no reason" for Cordray not to be nominated, and added the White House would "continue pushing on this issue." The White House in a release said his administration would explore all options and take nothing "off the table" with respect to ensuring that the CFPB is able to fulfill its mission of protecting consumers. Obama did not rule out a recess appointment.

The nomination of a CFPB director has been controversial, with legislators for or against the appointment lining up mostly by party lines. Some Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the CFPB. One such change is replacing the director's position with a five-member panel of leadership as a way, supporters say, of making the CFPB's actions more transparent.

Wheres My Debit Discount site launched by EPC

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WASHINGTON (12/9/11)--An Electronic Payments Coalition (EPC) research project has found that "there is no evidence that American consumers are benefitting from the Durbin amendment, despite overwhelming evidence that the retail industry is experiencing significant savings," and the EPC is presenting the results of its own consumer study on a new website: wheresmydebitdiscount.com.



The Federal Reserve's final debit interchange rule, which became effective in October, caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents. The regulation also allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards.

Industry data cited on the EPC website said that retailers have saved $825 million since the interchange cap came into effect, and Bloomberg Government has estimated that retailers will bring in an additional $8 billion in revenues per year as a result of the interchange changes.

The EPC researched standard merchant pricing before and after the Oct. 1 implementation of this interchange fee cap by making 84 separate shopping trips to 21 retail locations of four major national retail brands in six U.S. cities. The EPC said this field research found that customers paid, on average, 1.7% more for the same products after the debit interchange cap was implemented.

While the U.S. Congress justified the interchange fee cap "in part because of proclamations by retailers that consumers would benefit in the form of lower prices," the EPC said its field research has shown that 76% of surveyed retailers have not passed any of the savings created by the debit fee cap on to their shoppers.

The Credit Union National Association (CUNA) and others warned that retailers would not pass on any savings to their customers as the interchange cap legislation made its way through Congress. CUNA is an EPC member.

Lawmakers Card reforms hurt stay-at-home spouses

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WASHINGTON (12/9/11)--Rep. Carolyn Maloney (D-N.Y.) and several other U.S. House members have asked the Consumer Financial Protection Bureau (CFPB) to conduct an extensive review of the impact that ability-to-pay rules that were imposed by the Credit Card Accountability Responsibility and Disclosure (CARD) Act and became effective on Oct. 1 are having on the ability of some consumers to obtain credit.

The ability-to-pay rules, which are now part of Regulation Z, require a card issuer to consider a consumer's independent ability to make required payments on a credit card account, regardless of the consumers age, before opening a new card account or increasing the credit limit on an existing account. Outside of community property states, a card issuer may not rely solely on household income provided by an applicant on a credit card application, but will need to obtain additional information about the applicants independent income. Information concerning the applicant's income or salary, however, may be relied on in order to determine whether the applicant has the ability to make the required payments.

In a letter to de facto CFPB leader Raj Date, the legislators said the CFPB should amend Regulation Z if it finds that these rules are causing any negative effects. House Financial Services Committee Chairman Spencer Bachus (R-Ala.), Rep. Barney Frank (D-Mass.) and Rep. Louise Slaughter (D-N.Y.) were among the letter's 25 co-signors.

The letter notes one unintended consequence of these rules: limiting the ability of stay-at-home spouses to secure new lines of credit. In one case, an issuer said the average line of credit assigned to women was well below the average assigned to men. "In addition, approval rates have declined significantly for women in certain age groups, especially for those 62 and over, who may be particularly likely to rely on the income of other household members," the letter adds.

Maloney said Congress needs to make sure "that women are not subject to credit denials because of a misreading of the law. Nonworking spouses must continue to have access to credit using household income, and the CFPB has the tools to tell if that is happening."

Overall, the CFPB "can look across the credit card issuing industry" to determine any potential negative impacts of the rule, and can collect first-hand stories of financial issues through its consumer complaint collection processes, the letter said. The legislators recommended the CFPB begin this process before the end of the year.

Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA applauds the lawmakers for requesting the study. "Like these lawmakers, CUNA is also concerned about unintended consequences of this or any other major rulemaking," she added.

For the full letter, use the resource link.

Senate votes May extension for flood insurance

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WASHINGTON (12/9/11)--Legislation that would extend the National Flood Insurance Program (NFIP) until May 31 has been approved in the U.S. Senate by a voice vote, and is now awaits a House vote.

The legislation was introduced by Sen. David Vitter (R-La.). A House vote on the legislation has not been scheduled yet. The NFIP has been funded by short-term resolutions for some time, and unless the House approves the extension and it is then signed into law by President Barack Obama, the program currently set to expire on Dec. 16.

The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA supports and appreciates the Senate action backing even a short-term extension, and encourages the House to pass the bill quickly.

"However, we also think it is important that Congress consider a long term extension of this program to provide stability and predictability," he added.

Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have said the NFIP is in need of reform. The NFIP has been on the Government Accountability Office's (GAO) high-risk list since 2006, when the program had to borrow from the U.S. Treasury to cover losses from the 2005 hurricanes, and its outstanding debt and operational and management challenges have kept it there.

NEW Senate Blocks Cordray CFPB Nomination

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WASHINGTON (UPDATED: 11:30 A.M. ET)—The U.S. Senate this morning elected not to hold a full vote on the Obama administration's nominee to lead the Consumer Financial Protection Bureau (CFPB), Richard Cordray, defeating a cloture motion by a 45-to-53 vote. A total of 60 yes votes would have brought Cordray's confirmation vote to the Senate floor.

President Barack Obama today said the White House would "continue pushing on this issue."

The nomination of a CFPB director has been controversial, with legislators for or against the appointment lining up mostly by party lines. Some Senate Republicans have consistently said they would block any CFPB nominee if certain structural changes were not made to the CFPB. One such change is replacing the director's position with a five-member panel of leadership as a way, supporters say, of making the CFPB's actions more transparent.

Deputy U.S. Treasury Secretary Neil Wolin has countered, however, that the transparency concerns are unfounded, for instance saying in this week's Treasury Notes Blog post that the CFPB does not lack accountability nor transparency. Treasury is parent agency to the consumer bureau.