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Washington Archive

Washington

Eyes on reg reform debates chances in Senate this week

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WASHINGTON (4/27/10)—While the U.S. Senate on Monday did not approve officially beginning debate on financial regulatory reform, with a cloture vote failing, Senate leaders will continue to negotiate portions of the bill and will push to begin debate this week. S. 3217, the Restoring American Financial Stability Act, would affect the credit union system by limiting the National Credit Union Administration's (NCUA) regulatory authority to credit unions with under $10 billion in assets. The regulatory reform package would also address many issues facing the broader financial services industry. The Credit Union National Association (CUNA) has lobbied Congress not to limit the NCUA’s oversight of credit unions, regardless of asset size. CUNA has also asked legislators to narrow the legislation's definition of remittances. CUNA is concerned that the current "overly broad" definition would essentially make it impossible for credit unions to continue to offer any form of international electronic fund transfer services to their members. The Senate may debate a Food Safety bill if the regulatory measures are not brought to the floor this week. Several hearings are also scheduled this week, with the House Financial Services Committee setting up markups of legislation that would alter the National Flood Insurance Program, among other items. The House Judiciary Committee will also address financial issues on Wednesday by holding a hearing on H.R. 2695, the Credit Card Fair Fee Act of 2009, with the Electronic Payments Coalition, of which CUNA is a member, set to testify. H.R. 2695, which was offered by Reps. John Conyers Jr. (D-Mich.) and Bill Shuster (R-Pa.) last year, would permit merchants to negotiate fees with financial institutions via an antitrust exemption. The House Financial Services Committee will also be busy on Wednesday, with various subcommittees holding hearings on legislative proposals to preserve public housing, reviewing the Financial Crimes Enforcement Network oversight reports, and promoting small enterprises in Haiti. The role of banks and the U.S. Treasury in the housing market will also be discussed in a Senate Committee session this week.

Privacy SAR confidentiality on NCUA semiannual review

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WASHINGTON (4/27/10)—In its latest semiannual regulatory agenda, the National Credit Union Administration (NCUA) said it plans to undertake a routine review of recent changes to the “substantive requirements” of its rule on Unfair or Deceptive Acts and Practices, among other items. The NCUA board earlier this year voted to withdraw its UDAP rule, effective July 1. As a result, federal credit union examiners will not be checking for compliance preparations with the UDAP rule, but instead will be instructed to consider a credit union's compliance with portions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. UDAP rules are being superseded as the various portions of the CARD Act become law. The NCUA will also review “an interagency rule on model privacy notices and ways financial institutions can make them clear and conspicuous” and said that it likely will not take additional regulatory action “concerning the scope of confidentiality applicable to filed Suspicious Activity Reports (SAR) in the next year.” The SAR reporting rules were previously on the NCUA’s regulatory agenda. Overall, the NCUA RegFlex reviews aim to evaluate the impact of NCUA rules on small credit unions that hold under $10 million in assets. The regulatory agenda, published in the Federal Register, details upcoming regulatory developments within the NCUA. For the full release, use the resource link.

CUNA summary Recent UBIT cases could help CUs challenges

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WASHINGTON (4/27/10)--According to a recent memo, state-chartered credit unions that are subject to unrelated business income tax (UBIT) may now "have a good defense against civil tax penalties" that the U.S. Internal Revenue Service (IRS) could try to impose on credit unions that do not declare UBIT due on income from the sale of credit life and disability insurance, Guaranteed Asset Protection coverage, and other financial products. Credit Union National Association (CUNA) executive vice president and general counsel Eric Richard said that the memo, which was prepared at the request of and with the support of the UBIT Steering Committee, “should be helpful to credit unions in having a dialogue with their outside auditors about what, if any, UBIT liabilities need to be accounted for in their financial statements and in their tax filings." The UBIT Steering Committee is comprised of CUNA representatives and members of the American Association of Credit Union Leagues, the National Association of State Credit Union Supervisors, and CUNA Mutual Group. According to the memo from the law firm Foley & Lardner LLP, the recent decisions in federal court cases involving Bellco CU and Community First CU may give other credit unions "substantial authority" sufficient to not pay UBIT on sales of these products without being subject to tax penalties for maintaining a frivolous tax law position. Services such as mutual funds, stocks, and annuities, as well as income qualifying as "royalties," such as from a third-party vendor's sale of accidental death and dismemberment (AD&D) insurance policies to members, are also addressed by this decision. In the U.S District Court for the District of Colorado, Judge Christine M. Arguello earlier this month ruled that Bellco CU's income derived from credit life and disability insurance, sold directly or indirectly, as well as royalty income from AD&D insurance should not be subject to UBIT. Arguello's ruling supplements a 2009 summary judgment ruling which found that Bellco CU's commissions from a vendor's sales of financial products and services such as stocks and annuities to its members were "substantially related" to its tax-exempt purpose and so therefore not subject to UBIT. For a more thorough analysis of the Bellco ruling, use the resource link.

Inside Washington (04/26/2010)

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* WASHINGTON (4/27/10)--The best way to achieve a compromise on a hot topic in the regulatory reform bill is to study it, according to American Banker (April 26). Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) 1,300-page bill contains more than two dozen studies on topics including industrial loan companies and the Volcker Rule. The high number of studies indicates that many of the issues in the bill are intricate, and suggests lawmakers are serious about dealing with them in the future. Because the number of studies could grow before the bill becomes law, there might be a “long process” for regulatory reform, said Cornelius Hurley, Boston University School of Law professor. Some issues--like the Volcker Rule--may need multiple studies. Some financial observers said the studies aren’t a good use of time, but they may prove valuable. The studies are a way to compromise and move toward a consensus, said Jane D’Arista, research associate with the Political Economy Research Institute at the University of Massachusetts Amherst ... * WASHINGTON (4/27/10)--The Federal Deposit Insurance Corp. (FDIC) has reduced the number of projected bank failures for this year, said Chairman Sheila Bair. Things are improving, Bair told a cable news outlet on Friday (American Banker April 26). There will be more than 140 failures this year but there will be fewer than what the agency predicted three months ago, she said. The projection of failures will peak at the end of the year, and it’s likely predominantly smaller banks will be closed. Some institutions that were near insolvency and on the FDIC’s problem list have recovered ...