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CUNA to attend CFPB CARD Act conference

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WASHINGTON (2/17/11)—The Credit Union National Association (CUNA) will be one of many groups discussing credit card interest rates, re-pricing, and other issues during an upcoming Consumer Financial Protection Bureau (CFPB)-led conference on the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. The conference will take place next week at the U.S. Treasury offices in Washington D.C. and will “bring together academics, industry leaders, consumer advocates, and voices from within government,” CFPB architect Elizabeth Warren said. The CFPB will take over a number of regulatory roles from the Federal Reserve and other agencies on July 21. The National Credit Union Administration (NCUA), however, will remain mostly independent, and credit unions holding under $10 billion in assets will not be examined by the CFPB. Warren in a speech delivered earlier this week said that the CFPB would use the meeting to gain insight into the real world impact of the CARD Act. Meeting participants will “look at the data from multiple directions” and “analyze how the industry has reacted and how consumers are responding” to the CARD Act, Warren said. This information will help the CFPB understand how it can “make credit markets work better,” Warren added. The CFPB had not released a list of summit guests at press time. The CARD Act prohibits and restricts a number of credit card practices and imposes limits on certain fees. CUNA has outlined credit union CARD Act concerns, and the credit union point of view on other financial issues, during recent meetings with the CFPB and other Treasury officials. Warren in a statement released earlier this month said that the CFPB will work to reduce some regulatory burdens faced by credit unions and other financial institutions and will review the impact of its own rules on credit unions. CUNA also wrote the Fed earlier this year to express concern at portions of the CARD Act that would require creditors to consider only an individual credit applicant's ability to make payments, and not other household income, when determining an individual's creditworthiness. For the comment letter and more on the CARD Act, use the resource links.

NCUA seeks small-issuer interchange exemptions

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ALEXANDRIA, Va. (2/17/11)--The Federal Reserve should add “meaningful exemptions for smaller card issuers” to its current interchange fee proposal, National Credit Union Administration (NCUA) Chairman Debbie Matz said in a letter to Fed Chairman Ben Bernanke. Credit Union National Association (CUNA) President/CEO Bill Cheney called Matz’s comments “a good step” into the interchange fee discussion. Matz in the letter also called on the Fed to reflect portions of the Dodd-Frank Wall Street Reform Act that address small institution pricing issues. Matz added that Dodd-Frank explicitly exempts card issuers with total assets under $10 billion from any interchange fee regulation, and said that credit unions should be exempted from requirements related to network exclusivity and routing restrictions as well. Failure to exempt credit unions from these requirements “could significantly increase both fixed and variable costs for these small institutions, resulting in an inability to remain competitive with larger card issuers,” Matz said. Cheney also noted Matz’s “well-considered remarks with regard to routing and exclusivity,” and commended the NCUA for the timeliness of the remarks. The House financial institutions and consumer credit subcommittee has scheduled a hearing on the economic impact of interchange fee changes for later today. Allied CU President/CEO Frank Michael will testify on behalf of his Stockton, Calif.-based credit union and CUNA during the hearing. (See related story: CUNA to Congress: Stop, study, start over on interchange) For the NCUA release, use the resource link.

Stop study start over on interchange CUNA

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WASHINGTON (2/17/11)--Allied CU, Stockton, Calif., President/CEO and Credit Union National Association (CUNA) witness Frank Michael today will urge Congress to halt the progress of the Federal Reserve’s interchange proposal and study the impact that interchange changes would have on financial institutions and consumers alike before the interchange rulemaking process can continue. Michael will testify alongside representatives from several financial institutions, a small business, vand nationwide convenience store chain 7-11 during the House financial institutions and consumer credit subcommittee’s hearing on the economic impact of interchange fee changes. Federal Reserve Governor Sarah Raskin will also testify during the hearing, which begins at 10:00 a.m. ET and will be led by subcommittee head Rep. Shelley Moore Capito (R-W. Va.).
Click to view larger image House Financial Institutions Subcommittee Chairman Shelly Moore Capito (R-W.Va.) enjoys a lighter moment during her discussion about Interchange with (from left) Ken Watts, president/ CEO of the West Virginia Credit Union League, and Bill Cheney, president/CEO of the Credit Union National Association. The three met Tuesday to discuss the interchange issues prior to today’s hearing. (CUNA Photo)
The credit union CEO’s testimony is expected to focus on the benefits that the current payment system provides to consumers, merchants, and financial institutions, and the issues that the proposed interchange changes, if enacted, could cause credit unions. Michael is expected to address flaws in the statute, as well as in the Fed’s implementation plans, specifically focusing on how the Fed’s proposed implementing regulation could render the proposed exemption for institutions with under $10 billion in assets meaningless. The interchange plan offers a dual framework for determining interchange fees. One plan would provide issuers with a safe harbor of seven cents per transaction, and set a maximum interchange fee cap of 12 cents per transaction. A second alternative framework would cap the maximum interchange fee at 12 cents per transaction. These safe harbors and/or caps would be reevaluated by the Fed every two years. Merchants have claimed that the resulting savings will be passed on to consumers, but CUNA has repeatedly questioned that assumption, noting that moving forward with the interchange provisions could force credit unions to cease offering debit card programs to their members. CUNA and its Electronic Payments Coalition partners have also opposed the interchange changes through a 30-second television ad that is currently airing in the Washington D.C. media market. (See related Feb. 14 story: Interchange ads launches by CUNA and partners) House colleagues, including Financial Services Committee Chairman Spencer Bachus (R-Ala.) and ranking minority party member, Rep. Barney Frank (D-Mass.), have in recent months commented on the potential impact that interchange changes could have on consumers and financial institutions. Finance committees in both the House and Senate have stated that review of interchange fee changes would be a priority in the 112th Congress, but additional hearings have not yet been planned. The Fed is accepting comment on the interchange provisions until Feb. 22, but does not expect the changes to be implemented until after April. The new rules would become effective in July, if approved.

Senate Banking looks at Dodd-Frank six months in

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WASHINGTON (2/17/11)--The Senate Banking Committee is slated to conduct an oversight hearing today, which has as its title “Dodd-Frank Implementation: A Progress Report by the Regulators at the Half-Year Mark.” The hearing is the first by the banking panel since Sen. Tim Johnson (D-S.D.) has taken the reins as its new chairman, and the session is expected to provide a broad study of regulators’ efforts to draft the rules that will put into practice the more-than-2,000 pages of the Wall Street Reform Act. Credit unions may be interested to watch whether the Dodd-Frank provision ordering the Federal Reserve to set interchange fees comes under scrutiny. There is a concurrent hearing, a 10 a.m. (ET), on that topic alone in the House as the Financial Services Committee conducts its session, “Understanding the Federal Reserve’s Proposed Rule on Interchange Fees: Implications and Consequences of the Durbin Amendment.” Frank Michael, president/CEO of the Stockton, Calif.-based Allied CU, is scheduled to testify on behalf of the Credit Union National Association (see related story: CUNA to Congress: Stop, study, start over on interchange). Witnesses for the Senate Banking Dodd-Frank hearing include:
* Ben S. Bernanke, chairman, Federal Reserve Board; * Sheila Bair, chairman, Federal Deposit Insurance Corporation; * Mary Schapiro, chairman, U.S. Securities and Exchange Commission; * Gary Gensler, chairman, U.S. Commodity Futures Trading Commission; and * John Walsh, acting Comptroller of the Currency.

Examiners handbook InfoBase gets redesign

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WASHINGTON (2/17/11)--In a move that could conceivably improve communications between federal financial regulators and their examiners, the Federal Financial Institutions Examination Council (FFIEC) announced an improvement in its information distribution process. The FFIEC, comprised of the National Credit Union Administration (NCUA) and the federal bank and thrift agencies, announced the launch of its redesigned IT Examination Handbook InfoBase. The IT InfoBase is the primary distribution method for the IT Examination Handbook. “The new IT InfoBase is expected to have a beneficial impact on the user experience and will enable more timely updates to the IT Handbook in the future. This update does not implement any changes to the content of the IT Handbook, or related guidance,” said a release distributed by the NCUA. Credit unions have voiced increasing frustration with the federal examination process, and the Credit Union National Association (CUNA) regularly advocates for improved examiner training. Also, in January, after an exhaustive look at credit unions' problems with the process, CUNA unveiled a bill of "examination rights," developed by its Supervisory Issues Working Group, which is detailed and cross-referenced to the NCUA own examiner guide. Within a 64-page guidance document titled "Supervisory Issues and Examinations: Guidance For Credit Unions During The Current Economic Times And Beyond," CUNA lists 24 "examination rights," which include such things as the right of credit unions to "manage risk without being directed by examiners to eliminate it," and "appeal examiner findings, conclusions, or directives without retaliation from their regulator." To read the CUNA document, and for an electronic version of the FFIEC IT Examination Handbook Series, use the resource links below.

Incentive-based comp. plan leads NCUA discussion

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ALEXANDRIA, Va. (2/17/11)—Unsafe and unsound incentive-based compensation will be a main focus of today’s National Credit Union Administration (NCUA) monthly board meeting, and corporate federal credit union chartering guidelines, Credit ratings and interest-rate ceilings are also on the agenda. The Credit Union National Association’s Deputy General Counsel and Senior Vice President for Regulatory Advocacy Mary Dunn has said that the incentive-based compensation guidelines will not require reporting of executive salaries. Rather, the guidelines will seek to discourage credit unions from giving bonuses for risky financial activity by directors. Dunn said that the NCUA regulation would be substantively similar to a recent joint federal regulator proposal that, according to a Federal Deposit Insurance Corporation (FDIC) release, “prohibits incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive, or that may lead to material losses.” Credit unions with over $1 billion in assets will be subject to the regulation. The NCUA and other federal regulators are required to write joint regulations on executive compensation by the Dodd-Frank Wall Street Reform Act. The NCUA last year banned awarding so-called "golden parachute" executive compensation packages to executives of troubled corporates, and introduced new rules that require corporates to disclose their executive compensation packages. A final vote on a corporate federal credit union chartering proposal is scheduled to take place during the meeting. The NCUA late last year proposed new chartering guidelines that would help the agency’s Office of Corporate Credit Unions (OCCU) to judge whether a proposed corporate credit union would uphold the provisions of the Federal Credit Union Act, promote safety and soundness within the credit union industry, and provide quality services to members. The NCUA's monthly report on the status of its insurance funds will also be delivered during the open portion of the meeting, and a creditor claim, insurance appeals, and supervisory matters will be discussed during the closed portion of the meeting. For the full NCUA meeting agenda, use the resource link.

CU reps named to new Fed advisory panel

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WASHINGTON (2/17/11)—Tinker FCU President/CEO Michael Kloiber and Randolph-Brooks FCU President/CEO Randy Smith will represent the interests of credit unions on the Federal Reserve’s Community Depository Institutions Advisory Council (CDIAC) when it meets for the first time later this year. Tinker FCU is based in Oklahoma City, Oklahoma. Universal City, Texas’s Randolph-Brooks FCU currently holds $3.7 billion in assets. The Fed announced the establishment of the CDIAC in October. The CDIAC, which will include credit union, bank and thrift representatives, "will provide input to the (Fed) on the economy, lending conditions, and other issues." The Fed has selected one member from each of its 12 Fed local advisory councils to serve on the CDIAC. The CDIAC replaces the Thrift Institutions Advisory Council, which was established by the Fed in 1980 and advised the Fed on thrift institutions, mortgage finance, and regulations. Both Kloiber and Smith were TIAC members. For the full Fed release, use the resource link.

Inside Washington (02/16/2011)

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* WASHINGTON (2/17/11)--Elizabeth Warren, the Obama administration official in charge of setting up the Consumer Financial Protection Bureau (CFPB), on Tuesday lashed out at Republican critics of the agency’s funding (American Banker Feb. 16). She also previewed credit card disclosure reforms aimed at curbing hidden fees and unfair rate hikes. Currently, the CFPB receives its funding from the Federal Reserve, which gives the agency an independent funding stream outside of the appropriations process in Congress. But Warren said critics are trying to “chip away” at the bureau's independence. Rep. Randy Neugebauer (R-Texas) has introduced a legislated proposal that would subject the bureau’s funding to congressional scrutiny amid growing concerns about government spending. Warren said such threats threaten the agency's independence. She also previewed a credit card summit she is hosting on Feb. 22. Warren has advocated simpler credit card agreements, but the industry has argued such changes come too soon after passage of the Credit Card Accountability, Responsibility and Disclosure Act. Warren said she hopes to establish “a fact base” upon which the CFPB can develop a better understanding of the CARD Act … * WASHINGTON (2/17/11)--House Republicans and Democrats on Tuesday traded jabs about the the economic impact of derivatives regulations in a prelude to a broader fight over agency budgets that will be needed to write and enforce the new rules during a House Financial Services Committee hearing (American Banker Feb 16). GOP lawmakers maintain derivatives restrictions were creating fear in the markets, potentially driving U.S. capital offshore and possibly resulting in lost jobs. Republicans also argued derivatives did not cause the financial crisis. “Let’s be clear up-front, right at the beginning of this hearing, end users of derivatives did not cause the financial crisis,” said House Financial Services Committee Chairman Spencer Bachus in his opening statement. “They were among its victims. Although the 2,300-page Dodd-Frank Act was promoted as being directed at Wall Street, as we are coming to understand more clearly, it is the end users of derivatives who will bear so much of the regulatory brunt of this law. As a result, hundreds of American companies could take their capital and jobs elsewhere. One study, released just yesterday, concludes that upward of 130,000 jobs could be lost if U.S. regulators impose new restrictions on derivatives transactions too broadly,” Bachus added. But Democrats--backed by the testimony of regulators--maintain that the new rules would only increase transparency, make discovery easier and boost confidence in the markets, which would feed economic growth …

Texas CU purchasesassumes assets liabilities members of Utah CU

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ALEXANDRIA, Va. (2/17/11)--A $119 million-asset Utah credit union was liquidated Tuesday by the National Credit Union Administration (NCUA), and a San Antonio, Texas-based credit union purchased and assumed its assets, liabilities and members. The Utah institution, Family First FCU, Orem, was serving about 18,000 members when it was closed. Last July 30, the NCUA assumed control of its operations with a stated goal of “continuing credit union service to the members at a safe, sound credit union.” Former Family First members become members of the purchasing Security Service FCU with no interruption in credit union service. Security Service is a full-service institution with $6 billion in assets and 800,000 members. This is the second federally insured credit union liquidation in 2011.