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NCUA suit seeks 11.8 million from Rachleff estate

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WASHINGTON (3/12/09)—The National Credit Union Administration (NCUA) has filed suit against the estate of the financial adviser to the now-closed New London Security FCU, seeking to recover $11.8 million in losses. The NCUA lawsuit, reported Wednesday by, alleges that the credit union’s financial adviser and board member Edwin Rachleff created fraudulent account statements that claimed the credit union was worth $11.8 million. Rachleff, who was 82 and a broker for A.G. Edwards who handled investments for the credit union, committed suicide by jumping from an apartment building. The death occurred after the credit union was closed and news reports at the time said Rachleff was despondent about failing eyesight. The NCUA liquidated New London Security in July 2008, stating the credit union, chartered in 1935, was insolvent and had no prospects for restoring viable operations. In a release a month later, the agency noted that the activities that necessitated the liquidation were under investigation by NCUA and federal criminal authorities since the July liquidation.

Fryzel notes agency Hill agenda

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WASHINGTON (3/12/09)—At a state and federal credit union regulators’ annual meeting this week, National Credit Union Administration (NCUA) Chairman Michael Fryzel said his agency continues to seek from Congress “all necessary tools for to deal with the stresses on the credit union industry.” Fryzel was addressing the annual NCUA/National Association of State Credit Union Supervisors (NASCUS) three-day National Regulators Conference in Chicago, Ill. He said his agency has been pressing its case for increased borrowing authority for the National Credit Union Share Insurance Fund, as well as an extension of the premium repayment period, with federal lawmakers. “Now, more than ever, credible, straightforward and level-headed approaches to Congress are essential. Neither NCUA nor the industry can afford to mischaracterize the situation facing credit unions. There are problems in the industry, but there are also solutions if we work together,” Fryzel told the gathering. A NASCUS release noted that nearly 80 state regulators attended the meeting with NCUA board members, regional directors and staff, and NASCUS representatives.

Plan to make BSA rules user-friendly backed by CUNA

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WASHINGTON (3/12/09)—The Credit Union National Association (CUNA) backed a plan by the Financial Crimes Enforcement Network (FinCEN) to better codify Bank Secrecy Act (BSA) information and said it will serve to simplify financial institution compliance. FinCEN proposes to move the Bank Secrecy Act regulations to a new Chapter X and organize the regulations within that chapter by financial industry to make it easier for institutions to find the appropriate regulatory requirements. In a comment letter to FinCEN, CUNA Federal Compliance Counsel Nichole Seabron noted the following points of the FinCEN plan:
* As outlined, Chapter X will be organized in a manner that specifies the regulatory obligations applicable to particular industry sectors; * Chapter X will feature consistent numbering and section divisions intended to make the regulatory requirements more accessible; and * FinCEN also proposes to add a standard definition for BSA, which does not exist in current regulation.
The proposed rule also would make minor technical changes to BSA regulations, such as updating mailing addresses and points of contact. CUNA supports FinCEN’s efforts to create more user-friendly BSA regulations and agrees that these proposed changes will facilitate use of the regulations.

Inside Washington (03/11/2009)

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* WASHINGTON (3/12/09)—The U.S. Supreme Court ruled 5 to 4 this week that a federal court lacked the authority to move a dispute between Discover Financial Services and a cardholder into arbitration. The decision involved a case brought by Discover, which was originally addressed in state court. It is a common practice for lenders to go through state courts to force delinquent borrowers to make good on their debts, but when borrowers act to dispute the lenders’ claim, the lender can force the dispute into arbitration. The lender then often seeks to switch to federal courts, which may be perceived as more amenable to the lender’s case. However, the Supreme Court ruling made it so lenders must now request to move a dispute to arbitration through the state courts. (American Banker March 11) Credit Union National Association (CUNA) Counsel for Special Projects Michael Edwards said of the decision, “This does not change a financial institution's ability to get a borrower to agree to binding arbitration, but it does mean that a financial institution will more frequently have to convince state courts that the binding arbitration provision in a borrower's loan or lease agreement is fair enough not to be voided by the court as 'unconscionable,' especially if the financial institution has already filed suit against the borrower in state court before asking for arbitration.” Generally, Edwards added, state courts are more skeptical of the fairness of binding arbitration than federal courts, and are, therefore, less likely to require that a dispute be moved to binding arbitration or to enforce an arbitrator's decision… * WASHINGTON (3/12/09)—An eight-year battle between bankers and the National Association of Realtors about the banks’ attempts to move into real estate brokerage activities has ended with the bankers acknowledging they have given up the fight. Congress has passed an appropriations bill that contains a permanent ban on the Treasury Department and Federal Reserve Board from finalizing a 2000 plan to authorize banks to get into the brokerage business. The American Bankers Association, leader in the push for real estate broker powers for banks, said it is giving up the issue and that it was not, at this time, any longer a priority issue for bankers (American Banker March 12)… * WASHINGTON (3/12/09)—Legislation was introduced this week called the Fannie Mae and Freddie Mace Full Disclosure Act. It would require the government-sponsored enterprises to pay registration fees and make public information required by the Securities and Exchange Commission. One of the bill’s chief sponsors, Rep. Adam Putnam (R-Fla.) said one of the many factors involved in the country’s current economic meltdown was a failure to require enough transparency and accountability from Fannie and Freddie. Rep. Ed Markey (D-Mass.) is the bill’s chief co-sponsor. (American Banker March 12)…