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Small biz owners kick off MBL campaign

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WASHINGTON (2/8/12)—A restauranteur, a pet kennel owner, and a construction contractor are among those that have joined credit union representatives in Washington, D.C. this week to show the broad business appeal of lifting the credit union member business lending (MBL) cap.

Small business owners, representatives from small business trade groups and business think-tanks, and credit union representatives have joined forces for the Credit Union National Association's (CUNA) first-ever small business/credit union "Hike the Hill" event. The goal of the Hike is to have small business owners demonstrate the link between small business' needs for credit and credit unions' desire to help fill that need, and gain additional support for legislation that would increase the MBL cap to 27.5% of total credit union assets.

Jim Dobbins, owner of Winston-Salem, N.C.-based office interior contractor firm Sharpe Interiors, will tell his Washington representatives how his credit union and new business lender of choice, Allegacy FCU, helped his business continue after his former community bank called in his loan.

Stephanie Francois, owner of Bellevue, Nebraska-based Stella's Hamburgers, is another Hike participant. Fancois was set to take over the burger business, which had been in her family for over 50 years, at age 24, and needed a loan to complete the purchase from her uncle. Most banks would not lend to her, and those that would offered high rates, so she was stuck in a tough situation at first. However, she refinanced with the help of Omaha's SAC FCU, and that credit unions' lower rate helped her to keep the business in the family.

Brothers Jason Parker and Steve Parker, owners of New Jersey's K-9 Resorts, have used Financial Services FCU to help open franchise locations of their business, which started as a dog walking business during their high school years, and they will join New Jersey CU League representatives and credit unions from that state as they walk the halls of Congress this week.

Small businesses need for funds, and the help an MBL cap increase could provide to them, will be spotlighted in a Wednesday press conference on Capitol Hill. That press conference, which is scheduled for 11:00 a.m. (ET), will be hosted on Capitol Hill by Rep. Ed Royce (R-Calif.), who authored the House version of MBL cap lift legislation.

Manufacturers, a dentist, and a real estate developer are also among those making the case for an MBL cap increase this week. Visits with federal lawmakers took place on Tuesday and are scheduled for today.

Additional small businesses and credit union representatives will conduct their own state and district level advocacy activities. All in all, 75 small business and credit union representatives from 15 states are expected to speak up for an MBL cap lift.

Two MBL cap increase bills also have broad support, with several Democratic and Republican congressional cosponsors. H.R. 1418 and S. 509 would both increase the current 12.25% of assets credit union member business lending cap to 27.5%. CUNA has estimated that lifting the MBL cap would inject $13 billion in extra funds into the economy in the first year after enactment, helping small businesses create 140,000 new jobs at no cost to taxpayers.

CUNA N.C. league urge return of single exam

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WASHINGTON (2/8/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney has urged the National Credit Union Administration (NCUA) to meet with the North Carolina Credit Union Division "as soon as possible" to resolve differences regarding disclosure of a credit union's CAMEL rating and the use of dual exams.

Raleigh, N.C.-based State Employees' CU got authorization from its state regulator and disclosed its state-issued CAMEL score earlier this year, but the NCUA has disputed the disclosure of the credit union's CAMEL rating. The CAMEL rating system is NCUA's method of evaluating the health of credit unions. The rating, adopted by the NCUA in 1987, is based upon five critical elements of a credit union's operations: (C) Capital, (A) Asset quality, (M) Management, (E) Earnings and (L) Asset liability management.

The NCUA treats all CAMEL ratings as confidential information, and does not approve of these ratings being released to the public.

As a result of a recent CAMEL rating release, the NCUA has discontinued its coordinated examinations with the NCCUD, opting instead to begin separate exams for state-chartered federally insured credit unions in the state, over the next four weeks. The NCUA said the dual exams are needed to protect the National Credit Union Share Insurance Fund and the credit union system.

In other states, the NCUA routinely conducts joint safety and soundness examinations with the state regulator.

"No viable credit union in any state should be disadvantaged by the actions of a regulator, and subjecting state chartered credit unions to dual examinations simply because there is a dispute between the state and federal regulators is not a viable long term solution," Cheney said.  

The North Carolina Credit Union League has talked extensively with NCUA officials on this issue and organized meetings of that state's credit unions. The League has also called for the NCUA and NCCUD to meet on the issue in a letter released this week, and CUNA plans to work with all three parties as well.

Inside Washington (02/07/2012)

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  • WASHINGTON (2/8/12)--Senate Minority Leader Mitch McConnell, of Kentucky, and 38 other Republicans announced their intention to file an amicus brief and join a court challenge to President Barack Obama's recent recess appointment of Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB), as well as three other recess appointments  to the National Labor Relations Board (NLRB). In a letter dated Feb. 3, the Republican senators said the appointments "were unprecedented and unconstitutional" (American Banker Feb. 7). Cordray's appointment has not yet been challenged, but lawyers for Flatbush Gardens apartment complex in Brooklyn have asked a judge to throw out a complaint from the NLRB, arguing the recess appointments are invalid. Critics of the appointments argue that the Senate was technically not in recess, but was in a "pro forma" session during which no business is conducted when President Obama made the appointments on Jan. 4.  The Justice Department has issued a legal opinion supporting the decision …
  • WASHINGTON (2/8/12)--Federal Reserve officials will meet Wednesday to discuss Capital One Financial Corp.'s $9 billion proposed acquisition of ING Direct USA, the central bank said. The meeting will be closed to the public (American Banker Feb. 7). The Fed held three public hearings in Washington, Chicago and San Francisco on the proposed deal under which Capital One would buy the U.S. online banking unit of ING Group. Community bankers and consumer advocates have argued against the deal, saying it will create another "too big to fail" institution. Capital One has said the deal would reduce systemic risk and create jobs …
  • WASHINGTON (2/8/12)--A federal investigation into banks' credit card payment protection products could be the impetus for a change toward a more consumer-friendly market for the plans. The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau (CFPB) are investigating Discover Financial Services' marketing of its credit card payment protection products (American Banker Feb. 7). The products work similarly to insurance policies. Issuers who sell protection plans waive or defer credit card payments for card holders who experience events such as the birth of a new baby, a job loss or death. Banks on average return 21 cents of every dollar in payment protection premiums to consumers in the form of suspended or cancelled debt--a gross payout ratio that would be illegal if the products were categorized as insurance. The top nine card issuers posted $1.3 billion in pre-tax profits on the plans in 2009. That figure represents more than half of the $2.4 billion collected in fees paid by protection plan enrollees, according to the Government Accounting Office. The CFPB could be an agent of change, the Banker said. The 2009 Dodd-Frank Act gave the CFPB supervisory and enforcement authority for credit card debt protection products. The agency is reviewing changes to disclosure rules for debt cancellation and suspension agreements proposed by the Federal Reserve for its Regulation Z, according to CFPB spokesperson Jennifer Howard …
  • VIENNA, Va. (2/8/12)--The Financial Crimes Enforcement Network (FinCEN) Tuesday issued final rules that require non-bank residential mortgage lenders and originators to establish anti-money laundering (AML) programs and file suspicious activity reports (SARs), as is required by FinCEN of credit unions and other types of financial institutions. The final rule will be effective 60 days after publication in the Federal Register. The compliance date is six months after publication. In another step intended to combat fraud in the residential mortgage markets, FinCEN last November issued a proposal to require the government-sponsored enterprises--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--to develop AML programs and file SARs with FinCEN.  FinCEN said that taken together the two actions "provide additional tools for financial institutions and law enforcement to hold scammers accountable for their fraud and other financial crimes." The mortgage-related scams FinCEN has identified in its reports include false statements, use of straw buyers, fraudulent flipping, flopping, and identity theft. FinCEN said the new regulations likely will "significantly increase the number of mortgage-related SAR filings; give law enforcement and regulators more comprehensive data on specific crimes; and provide government and industry a more complete perspective on mortgage related crime trends nationwide" …

CFPB bill would ensure privacy CUNA

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WASHINGTON (2/8/12)--The Credit Union National Association (CUNA) Tuesday thanked Rep. Bill Huizenga (R-Mich.) for introducing H.R. 3871, which would ensure that groups or individuals that supply information to the Consumer Financial Protection Bureau (CFPB) would not waive their right to privacy protections.

H.R. 3871 will be considered during a Wednesday House Financial Services financial institutions subcommittee hearing. The hearing will also feature discussion on bills that would make the CFPB's yearly funding subject to the congressional appropriations process and remove the CFPB's director from their current slot on the Board of Directors of the Federal Deposit Insurance Corporation.

CUNA President/CEO Bill Cheney noted that while section 205(j) of the Federal Credit Union Act protects privileged information submitted by credit unions to the National Credit Union Administration, state credit union supervisors, and foreign banking authorities, that section does not cover submissions to the CFPB. Cheney said in a letter to Huizenga that the bill "will ensure that when credit unions or other persons submit information to the CFPB, doing so will not be construed as waiving, destroying or otherwise affecting any privilege associated with the submission."

Cheney said he hopes Congress acts quickly on this legislation.

IRS issues tax exempt correction to CUs

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WASHINGTON (2/8/12)--The U.S. Internal Revenue Service  (IRS) sent a letter of correction to credit unions that were erroneously informed that they lost their tax-exempt status due to a filing error by the credit unions'  "central organization."

The filing error, in fact, was that of the IRS, according to the agency's letter.

The Credit Union National Association (CUNA) and the Unrelated Business Income Tax (UBIT) Steering Committee (CUNA, American Association of State Credit Union Leagues, CUNA Mutual Group, National Association of State Credit Union Supervisors) worked with the affected credit unions to get a clarification from the IRS when the original notices went out in August.

Those notices told each credit union that because its central organization failed to meet its annual filing requirements for three consecutive years, the credit union's tax-exempt status was automatically revoked.

The notice, the IRS said in its correction,  also contained the following erroneous statement:

"Your organization is a subordinate in this revoked group ruling, so your organization ceased to be tax exempt on the date of your central organization's automatic revocation, even though your organization may have met its annual filing requirements."

The clarification stated:

'Revenue Ruling 60-364,1960-2 C.B. 382, held that a state agency may file a group information return on behalf of all the exempt state-chartered credit unions under its control and supervision, in lieu of each individual state-chartered credit union filing a separate information return. You received the letter containing the erroneous information because of the way state credit unions that filed group returns were maintained on our systems.

If you continue to meet your annual filing requirements, you may hold yourself out as tax exempt as long as you meet all other applicable requirements for tax exemption under the Internal Revenue Code."

The IRS apologized for any confusion the original  Letter 4777 may have caused and noted that if a credit union wants a determination letter recognizing its tax-exempt status, you must apply using Form 1024, Application for Recognition of Exemption Under Section 501(a) or for Determination Under Section 120, and pay the applicable user fee.

The letter included a toll free phone number, 1-877-829-5500, for any further questions.