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Geithner asks defense groups to support CFPA

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WASHINGTON (3/25/10)—The U.S. Treasury Department gathered military advocacy groups for a roundtable discussion Thursday to focus on consumer financial protections and how the Obama administration believes a new Consumer Financial Protection Agency would benefit military families. CUNA Deputy General Counsel Mary Dunn attended on behalf of Defense Credit Union Council CEO Arty Arteaga and CUNA. The meeting outlined how military families are often a target for unscrupulous lenders, such as some payday lenders that keep families trapped in an endless cycle of debt. Treasury Secretary Geithner took the opportunity of the meeting to urge support for an independent CFPA ; the House passed regulatory reform legislation calls for separate agency, while the Senate bill would house the agency within the Federal Reserve. He said military families, so often hard hit by abusive practices, deserve a consumer agency. A separate CFPA has drawn opposition from banking and other financial groups, but Geithner said he believes the administration is making headway in garnering support. CUNA has emphasized the need for CUs to continue to be examined by their prudential regulator if a new consumer protection body is created.

Inside Washington (03/25/2010)

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* WASHINGTON (3/25/10)—The Credit Union National Association issued a final rule analysis on a new rule from the Financial Crimes Enforcement Network (FinCEN) amending the Bank Secrecy Act's Information Sharing rules. The rule expands access to the information sharing procedure by allowing certain foreign law enforcement agencies, as well as state and local law enforcement agencies to utilize the system. The rule also clarifies that FinCEN may utilize the information sharing process on its own behalf and on behalf of other "appropriate Treasury components”… * WASHINGTON (3/26/10)—Speculation in Washington, D.C. is that recent success in the fight on Capitol Hill to pass health-care reform may give a boost to the chances of the Obama administration’s drive to pass financial regulatory reform. (American Banker March 25) Lawmakers from parties see momentum building behind the reform bill that has all but stalled out a number of times in the last months. The Senate Banking Committee approved the reform bill 13-10 late Monday and did so without a single favorable vote from Republican members. However, analyst are surmising that Republicans can’t treat this reform package as they did the health-care bill; opposing the financial regulatory reform bill could well be seen as taking the side of Wall Street rather than Main Street… * ALEXANDRIA, Va. (3/25/10)--National Credit Union Administration
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board member Michael Fryzel commended Teachers CU, of South Bend, Ind., for its focus on direct member contact through a variety of credit union-sponsored events, and on offering “outstanding financial service.” Fryzel noted, “More than 75 years ago a small group of teachers decided they wanted to help those in need of credit. They pooled their funds and began a credit union rich in both traditional and non-traditional member services.” The result of that effort is now Indiana’s largest credit unions with more than $2 billion in assets. Pictured (left to right): Teacher CU Senior Vice President of Affiliated Businesses Greg Danner, Senior Vice President of Sales & Marketing Paul Marsh, President/CEO Rick Rice, Fryzel; Teacher CU Board Chairman David Sage, Senior Vice President/CFO Amy Sink, Senior Vice President/Chief Counsel Val Miller, and Executive Vice President/COORick Nettesheim. (NCUA Photo)…

High Court Some student loans dischargeable in bankruptcy

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WASHINGTON (3/26/10)--Credit unions should “be vigilant” if members that hold student loans declare chapter 13 bankruptcy. Following a March 23 Supreme Court ruling, student loan debtors could no longer need to prove “undue hardship” in a court of law to be relieved of interest associated with their student loans debts if the credit union or other student loan creditor fails to object to the discharge of student loan interest proposed in a debtor's Chapter 13 plan. Under current law, student loans are not dischargeable unless the debtor can prove “undue hardship,” and the rules for what constitutes”undue hardship" are extremely rigid. While the Supreme Court's ruling does not effect the "undue hardship" requirement per se, the Court held that the Bankruptcy Court only needs to make the "undue hardship" determination if student loan creditor requests a hearing on that issue. In the case, United Student Aid Funds, Inc. v. Espinosa, the Supreme Court decided that the U.S. Department of Education could not seek to collect student loan interest in 2000. The debtor had completed his Chapter 13 plan in 1997, under which he paid off the principle of his student loans, and the Bankruptcy Court had declared the loans' accrued interest discharged at that time. The court held that the creditor's opportunity to object to the discharge of the debtor's student loan interest, in this case, took place in 1994 when, according to the Court, the student loan creditor “received notice” of the defendant’s bankruptcy plan. That plan, which “proposed repaying the principal on his student loan debt and discharging the interest once the principal was repaid,” was forwarded to the lender by the Bankruptcy Court, and the lender “did not object to the plan or to the debtor's failure to initiate" a hearing regarding whether repayment of the interest would constitute an "undue burden." Specifically, the lender did not respond to the plan. Overall, CUNA’s Michael Edwards said, the ruling means that credit unions should more closely scrutinize the bankruptcy plans filed by members with student loans to see if the debtor is proposing to discharge student loan principle or interest and, if so, object to the plan and request a hearing on the "undue hardship" issue. This ruling would potentially affect future bankruptcy cases involving federal- and state-chartered credit unions, as well as other financial institutions which make student loans. For the full Supreme Court ruling, use the resource link.

Bernanke Fed will exit markets when ready

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WASHINGTON (3/26/10)--Speaking before the House Financial Services Committee on Thursday, Federal Reserve Chairman Ben Bernanke said that while “the economy continues to require the support of accommodative monetary policies,” the Fed has been working to ensure that it has “the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.” “We have full confidence that, when the time comes, we will be ready to do so,” he added. The Fed has terminated or is phasing out many of the “special lending facilities” that were established to “stabilize the financial system and encourage the resumption of private credit flows to American families and businesses” in the wake of the recent financial market destabilization. The closure of the Feds “emergency lending facilities” and many “adjustments to the terms of discount window loans” are in response to “the improving conditions in financial markets,” Bernanke said, and “they are not expected to lead to tighter financial conditions for households and businesses and hence do not constitute a tightening of monetary policy, nor should they be interpreted as signaling any change in the outlook for monetary policy.” However, Bernanke added, the Fed will “tighten” some “monetary conditions to prevent the development of inflationary pressures.” For Bernanke’s full testimony, use the resource link.

HAMP to modify up to 4M mortgages by 2012

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WASHINGTON (3/26/10)--Testifying before a House Committee on Oversight and Government Reform hearing on foreclosure prevention, Treasury Assistant Secretary for Financial Stability Herbert Allison said that the Administration’s Home Affordable Modification Program (HAMP) is on course to modify as many as 4 million mortgages by 2012. The program aims to help struggling homeowners by modifying their mortgages. According to numbers released last year, a total of 17 credit unions have taken part in the HAMP program. Seven of those credit unions are located in foreclosure-ravaged California. A total of 822,000 homeowners had taken part in the trial phase of the HAMP program as of February, and 32% of those homeowners have been approved for permanent loan modifications, according to Allison. Going forward, Allison said that the Treasury would issue regular reports on compliance activities related to HAMP. Allison also said that the implementation of HAMP “must continue to be improved” and that “program enhancements must continue” for HAMP to “reach its potential.” The Treasury is reportedly considering altering HAMP by imposing a moratorium on certain types of foreclosures, by forcing lenders to delay foreclosures by one month if they denied a borrower a mortgage modification and by considering allowing trial modifications to be extended beyond the current deadline.

CUNA WOCCU express concern over remittance provision

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WASHINGTON (3/26/10)--The definition of remittances in the recently introduced Senate financial regulatory reform package is “overly broad” and “would essentially make it impossible for credit unions to continue to offer any form of international electronic fund transfer services to their members, the Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) said in a March 25 letter to Senate Banking Committee Chair Chris Dodd (D-Conn.) The language will affect any form of international electronic fund transfer services credit unions offer their members, whether or not those transactions are truly “remittances” sent by an immigrant home to his or her family, CUNA added. CUNA encouraged Dodd to consider exempting credit unions or, more broadly, exempting transactions that are routed through programs administered by the major central banks, including Fedwire, Fed Global ACH, NACHA ACH, and the SWIFT system. Allowing these provisions to apply to credit unions “may have the effect of driving credit unions and small banks out of the international electronic funds transfer business, handing an oligopoly to the big banks, MoneyGram, Western Union, and other money transfer businesses,” CUNA said. About 109 U.S. credit unions participate in WOCCU's IRNet, a remittance service operated by WOCCU Services Group. The service, which works primarily with Hispanic clients, transmits remittances to eight countries and has taken part in over $2.9 billion in total transactions since its inception. Overall, $307 billion in remittances were sent from the U.S. to other nations in 2008, according to WOCCU estimates. Credit unions also participate in wire transfer services that are not specifically remittances, and CUNA in the letter said that these types of transactions will also be affected, as the language in Dodd’s bill will still cover these types of transactions “in a way that will lead most, if not all, U.S. credit unions to cease providing any form of international electronic funds transfer service to its members.” More specifically, CUNA noted that portions of the new regulations that affect remittances conflict with sections of the Uniform Commercial Code, a law adopted by all states concerning electronic funds transfers performed by banks and credit unions. The bill would also “increase costs for remittances, increase liability for remittance transfer providers and slow down the remittance process,” CUNA added. CUNA has also asked Dodd to remove portions of the bill that would amend the Federal Credit Union Act, as these amendments would simply reiterate current Federal credit union authority, “and may actually limit the ability of Federal credit unions to offer other types of international money transfers as well as the ability of the National Credit Union Administration to regulate international money transfers.” For the full CUNA letter, use the resource link.