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CUNA to FOX Fed interchange plan needs work

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WASHINGTON (3/16/11)—The Credit Union National Association (CUNA) took its interchange fight to local airwaves this week, telling a D.C.-based Fox affiliate that the Federal Reserve’s interchange fee reduction plan does not account the total costs of running debit card accounts. The debit-related costs incurred by credit unions include the cost of dealing with instances of debit card fraud, attempts to prevent these types of fraud from occurring, and other varied costs associated with offering debit services to their members. Fixed costs, such as network fees, also factor in to the costs borne by credit unions, CUNA Chief Economist Bill Hampel said during the broadcast. The interchange fight was also covered this week in online news source, with CUNA’s Vice President of Communications and Media Outreach Pat Keefe counting the 4,000 recent attendees of CUNA's 2011 Governmental Affairs Conference among those that have discussed the interchange provisions with lawmakers. The Fed's proposed interchange rule would set a seven to 12 cent limit on the card swipe fees charged by many debit card issuers. Credit unions and other financial institutions with under $10 billion in assets are exempt from the proposed rule, but CUNA has voiced concerns that the exemption will not work in practice. CUNA, a number of legislators, and other organizations such as the NAACP have all urged the Fed to take greater time to consider the impact that interchange fee changes could have on financial institutions and consumers. Separate bills that would delay interchange implementation were released in both the House and Senate on Tuesday.

Fed should continue work toward interchange fix CUNA

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WASHINGTON (3/16/11)--The Credit Union National Association (CUNA) continues to “push aggressively” for credit union relief regarding debit card interchange fee regulation, urging President Barack Obama and Federal Reserve Chairman Ben Bernanke to help protect small issuers from the impact of the Dodd-Frank interchange amendment – as Congress pledged to do. The Fed's proposal, which was issued for a public comment period that ended December 16, 2010, does not provide any mechanism to enforce the exemption Congress provided to small issuers from the rate setting provisions under the proposed regulation. Also, the proposal would cap debit card interchange fees that are paid by merchants to large debit card issuers at no more than twelve cents per transaction, despite the fact that costs to all issuers to provide debit card programs are much higher. By law, issuers with under $10 billion in assets are entitled to be exempted from the interchange fee rate setting provisions. However, if the exemption is not meaningful, all issuers may effectively be covered under the proposed rate caps, CUNA has said. CUNA President/CEO Bill Cheney in a Tuesday letter to Bernanke noted that the Fed leader and other federal regulators, including the heads of the National Credit Union Administration and the Federal Deposit Insurance Corp., have raised serious concerns about the impact of the proposal on small issuers. “No one has been able to prove that this proposed exemption would actually work as planned,” Cheney added. Allowing the interchange regulations to go forward as planned will force credit unions to “raise fees for accounts and services, or drop product offerings, or both, the CUNA leader said in his letter. “This cannot be sound public policy and cannot be what any policymaker intended. Credit unions want to continue providing attractive choices in the financial marketplace to their consumer and small business members,” Cheney added. The interchange rate setting provisions would become effective on July 21. However, delaying interchange implementation has been proposed to allow regulators and Congress additional time to study the issue. (See related story: Planned Senate delay ‘adequate’ for study: CUNA) CUNA has also urged Bernanke to support the delay. Cheney’s letter to President Obama is similar to the letter to Bernanke; a copy of the same letter is being sent to U.S. Treasury Secretary Tim Geithner and Consumer Financial Protection Bureau architect Elizabeth Warren. For the full Fed letter, use the resource link.

Lawmakers push FHFA on Fannie Freddie loan mods

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WASHINGTON (3/16/11)--A coalition U.S. House members have urged the Federal Housing Finance Agency to allow principal adjustments to mortgages held by its regulated entities, Fannie Mae and Freddie Mac. In a letter signed by the ranking minority member of the House Financial Services Committee, Rep. Barney Frank (D-Mass.) and 49 House colleagues, the lawmakers said that the guiding principal of FHFA’s conservatorship of the two housing government-sponsored enterprises must be “minimizing taxpayer loss.” The letter claims that the FHFA’s standing opposition to principal modifications in efforts to stave off foreclosures in fact drives up taxpayers’ costs. “Foreclosures result in a loss of 70% or more on the mortgage, and claims against the homeowners for the difference, even in jurisdictions that allow such claims, are usually worthless. Sustainable mortgage modifications that avoid foreclosure will almost always reduce the loss to the enterprise. The legislators letter follows reports last week (News Now March 10) of a group of state attorneys general (AG) and several federal agencies negotiating a settlement agreement with the major mortgage servicers. The state AGs circulated a 27-page outline of what they would like to see in a settlement agreement to address concerns about how mortgage servicers have handled foreclosures. Credit union would not be subject to such enforcement actions. However, the Credit Union National Association (CUNA) has strongly opposed federal legislation that would allow mortgage modifications, which are typically referred to as “cramdowns.” Bills promoting cramdowns have been defeated in recent years, and CUNA continues to monitor recent events for any possible impact on credit unions.

CUs have consumer track record CUNA tells Durbin

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WASHINGTON (3/16/11)--Credit unions are distinguished from all other interested parties in the ongoing interchange debate by having “the one demonstrated history of passing savings to consumers as part of a business model,” the Credit Union National Association (CUNA) said Tuesday in a letter to a key lawmaker. “What distinguishes credit unions from other financial firms and merchants in this debate is our concern for the impact on the consumer,” CUNA President/CEO Bill Cheney penned. “Last year alone, consumers benefited to the tune of $10 billion from better rates and lower fees by using credit unions rather than banks.” “Credit unions are different: the member-owned, not-for-profit structure is central to how they conduct business. At the end of the day, credit union members benefit when the credit union does well, and that benefit is reduced when the credit union is challenged,” Cheney added. The letter was addressed to the architect of the interchange language that was adopted as part of the Dodd-Frank Wall Street Reform Act, Sen. Richard Durbin. It was prompted when Illinois Democrat chided credit unions for their alliance with banks and other financial services providers in the interchange fight. CUNA has urged the U.S. Congress to “stop, study and start over” before the Federal Reserve Board implements its plan to set a seven to 12 cent cap on debit card interchange fees. CUNA is concerned that statutory language meant to exempt all but the three largest credit unions from the rule will fail to protect small issuers from the impact of the rule and will drive up costs to credit unions members and other consumers. As the Fed’s April implementation deadline draws closer, real concern about its potential negative impact is being expressed not only by credit unions and banks, Cheney noted, but by key regulatory officials, consumer groups and “other noteworthy commentators concerned about the impact on smaller financial institutions, consumers or both.” Cheney pledged to keep up the fight against the interchange plan on behalf of credit unions and consumers, and sought Durbin’s support for the growing effort to encourage the Fed to enforce the small issuer exemption, or to seek a legislative remedy in the likely event that the Fed concludes it does not have the authority to enforce the exemption.

Inside Washington (03/15/2011)

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* WASHINGTON (3/16/11)--The next meeting of the Financial Stability Oversight Council (FSOC) will take place at 3 p.m. ET Thursday, according to the U.S. Treasury Department. The council, created by the Dodd-Frank Act to identify threats to the financial system, will consider a proposal on designating financial market utilities. In January the council outlined a list of factors to use to help gauge when a firm poses risks to the system and merits additional oversight. The FSOC is chaired by Treasury Secretary Timothy Geithner and includes Federal Reserve Board Chairman Ben Bernanke as well as other key regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission. The meeting on Thursday will be the council’s fourth … * WASHINGTON (3/16/11)—U.S. Treasury Secretary Tim Geithner addressed the Obama administration’s proposals for mortgage market reform in a Tuesday Senate Banking Committee hearing, saying that the administration is “committed to a system in which the private market – subject to strong oversight and strong consumer investor protections – is the primary source of mortgage credit.” The Obama administration released its proposals for housing market reform last month. One proposal would almost completely privatize the housing finance system, limiting the government's role to assisting low-income and veteran homebuyers. A second proposal would create a system through which the government would back mortgages only in times of financial distress. Under a third proposed option, the government could also use a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Geithner said that each of these solutions would require legislative action, and added that “failing to act would exacerbate market uncertainty.” However, he added, “haste would be counterproductive – possibly destabilizing the housing finance market or even disrupting the broader recovery”… * WASHINGTON (3/16/11)--Nearly 40 Missouri credit union representatives from 13 credit unions visited Capitol Hill to share
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concerns about debit interchange and member business lending with Missouri‟s federal lawmakers at the Credit Union National Association’s Governmental Affairs Conference Feb. 27-March 3. “Our elected officials listened to our issues and seemed to be engaged in working with us,” said Jason Peach, chief financial officer of West Community CU, O’Fallon, Mo. Lawmakers who met with credit unions included Sen. Roy Blunt (R); Rep. William “Lacy” Clay (D); Rep. Todd Akin (R), Rep. Russ Carnahan (D), Rep. Vicky Hartzler (R), Rep. Billy Long (R), Rep. Blaine Luetkemeyer (R) Pictured hee with Missouri credit unions and the Missouri Credit Union Association is Blunt, center. (Photo provided by Missouri Credit Union Association) ...

Senate House bills would delay Fed interchange plan

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WASHINGTON (3/16/11)—Credit Union National Association (CUNA)
Sen. Jon Tester (D-Mont.), shown here addressing CUNA’s 2011 Governmental Affairs Conference this month, introduced legislation Tuesday that would delay the effective date of a Dodd-Frank Act interchange rule by two years, to allow for more time to study its impact. (CUNA Photo)
President/CEO Bill Cheney said last night that the proposed interchange delays introduced in both the Senate and House Tuesday give credit union members and other consumers “a ray of hope that the debit card programs they have come to appreciate may continue unchanged, at least for the short term.” He urged House and Senate lawmakers to support the legislation that would extend the rulemaking timeline and effective date of proposed interchange fee regulatory changes. The Senate bill (S. 575), introduced by Sen. Jon Tester (D-Mont.), would establish a two-year delay for the Federal Reserve’s proposal to implement the Dodd-Frank interchange provisions, which limit debit card interchange fees. It would require the Fed, the National Credit Union Administration, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency to submit a study on the impact of any proposed interchange rule changes to the Senate Banking Committee and the House Financial Services Committee. The study would address the impact of the rules on credit unions and other debit card issuers, merchants, and consumers. The legislation, the Debit Interchange Fee Study Act, was co-sponsored by Sens. Bob Corker (R-Tenn.), Jon Kyl (R-Ariz.), Ben Nelson (D-Nev.), Tom Carper (D-Del.), Pat Roberts (R-Kan.), Chris Coons (D-Del.), Mike Lee (R-Utah) and Pat Toomey (R-Penn.). The House bill (H.R. 1081), introduced by Rep. Shelly Moore Capito (R-W.V.), would delay the interchange rule effective date for one year and would also direct federal agencies to study the impact that interchange changes would have on credit unions and other card issuers, consumers, and merchants. The bill would require the Fed to write new interchange regulations within four months if the study were to find that the proposed exemption for financial institutions with under $10 billion in assets would not be effective. The regulations would also need to be rewritten if the study found that the Fed’s proposal did not encompass all debit card-related costs or would harm consumers. “We very much appreciate the support both Rep. Capito and Sen. Tester have given to credit unions and their members. The legislation they have championed are important steps in the process of ensuring that, ultimately, seamlessly acceptable debit cards will continue to be available to credit union members at the lowest cost and the highest efficiency,” Cheney said in appreciation of the lawmakers’ efforts. He added,“We have a long way to go in this process, but credit unions and their members are much better positioned today than we were not so long ago, and particularly before we brought 4,000 credit union folks to town two weeks ago to make our voices heard on Capitol Hill.” Cheney was referring to the credit union representatives who participated in CUNA’s 2011 Governmental Affairs Conference here from Feb. 28-March 3, a regular part of which are visits with federal lawmakers to discuss key credit union issues. In addition to Moore Capito, House sponsors of the delay include Rep. Debbie Wasserman Schultz (D-Fla.), as well as 26 of their colleagues: Reps. Blaine Leutkemeyer (R-Mo.), Jim Renacci (R-Ohio), Ed Perlmutter (D-Colo.), Jeb Hensarling (R-Texas), Ed Royce (R-Calif.), Francisco Canseco (R-Texas), Randy Neugebauer (R-Texas), Michele Bachmann (R-Minn.), Gregory Meeks (D-N.Y.), Tom McClintock (R-Calif.), John Carney (D-Del.), Bob Gibbs (R-Ohio), Gary Peters (D-Mich.), Wally Herger (R-Calif.), Ken Marchant (R-Texas), Mike Kelly (R-Pa.), Roscoe Bartlett (R-Md,), Jason Chaffetz (R-Utah), Larry Kissell (D-N.C.), Gary Miller (R-Calif.), Dale Kildee (D-Mich.), Carolyn McCarthy (D-N.Y.), Jared Polis (D-Colo.), Gerry Connelly (D-Va.), Bill Owens (D-N.Y.), and Lynn Woolsey (D-Calif.). The interchange provisions, which under Dodd-Frank are scheduled to be made final in April and effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. CUNA has repeatedly suggested that the Fed should work with Congress to delay interchange regulation implementation to allow more time for consideration of how the interchange regulations would impact credit unions, as well as consumers. CUNA has created a grassroots action alert to encourage credit union nationwide to contact their legislators to urge support of the House and Senate bills. For CUNA’s action alert, use the resource link.