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Government compiles refi scam resources for servicemembers

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Washington (5/29/12)--Homeowner seeking to apply for mortgage assistance through federal programs are at risk of being targeted by a growing number of scams design to take advantage of people at a very vulnerable time in their lives and government officials are issuing a fraud alert to members of the armed services about scams focused directly at their community.  

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Consumer Financial Protection Bureau (CFPB), and the U.S. Department of the Treasury (Treasury) issued an alert last week designed to raise awareness of these scams and provide a list of resources available for more information and for assistance with mortgage-related questions and how to report fraud.

"Members of the armed services community often face unique financial challenges and are at particular risk for this type of scam," said Christy Romero, Special Inspector General at SIGTARP, in announcing the fraud alert. "SIGTARP will continue to work with the CFPB and Treasury and our other partners in law enforcement to shut down these scams and to ensure that their perpetrators are held accountable for their crimes."

Use the link below to access the available resources.

Inside Washington (05/25/2012)

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  • WASHINGTON (5/29/12)--CKE Restaurants Inc., operator of such fast-food chains as Carl's Jr. and Hardee's, joined with with Burger King, 7-Eleven, International Dairy Queen Inc., Jack in the Box Inc., Starbucks Corp., The Wendy's Co. and Auntie Annie's Inc. last week to file a "friends of the court" brief in federal court backing the retailers' debit interchange lawsuit. That suit alleges that the Federal Reserve Board adopted an unreasonably high interchange cap on debit card transaction fees when it implemented provisions of the Dodd-Frank Act (Law360 May 24). The lawsuit was filed in November 2010 by the National Retail Federation, the Food Marketing Institute, the National Association of Convenience Stores and two retailers. The retailers argue that the Fed's final rule, which basically sets a 21-cents per transaction cap, included costs not permitted by the law. The Fed has filed a motion to dismiss the case, stating its rule is reasonable and within the authority granted by Dodd-Frank. As reported in the Credit Union National Association's (CUNA) News Now on March 16, CUNA and a coalition of trade associations representing thousands of small and large financial institutions filed their own amicus brief in the case, providing financial institutions' perspective regarding the Fed's rule. The joint brief underscored that consumers have not seen any pricing benefits for products and services merchants promised when they fought for a government-set cap on what card issuers may charge for their services  …
  • WASHINGTON (5/29/12)--Fannie Mae seeks to reduce the cost of force-placed insurance, in part by preventing banks from purchasing the product. In response to reports of self-dealing and kickbacks in the force-placed insurance market, Fannie said it would replace the loans it guarantees with policies acquired from providers of its choosing (American Banker May 25). Forced-place insurance is an insurance policy taken out by a lender or creditor when a customer does not carry insurance on an asset. The charges for this insurance are passed on to the customer. Fannie's request for comment, released to the public on Thursday, would cut banks out of the sales process and require insurers to bid separately for other components of the force-placed business. This would reduce the potential for insurers to sell policies aggressively and to lump administrative costs into the premiums they charge ...
  • WASHINGTON (5/29/12)--The expiration of the Transaction Account Guarantee (TAG)  on Dec. 31 could initiate a reshuffling of as much as $1.3 trillion deposits (American Banker May 25). TAG is a program in which includes made investments in more than 300 banks made during the financial crisis. It provides federal backing for noninterest bearing deposits. The Dodd-Frank Act extended the unlimited coverage, but lawmakers do not appear willing to extend it again. Some community banks could be required to obtain private market coverage if the program expires, but large banks have primarily benefited from the program, according to Joshua Siegel, CEO of StoneCastle Partners, a New York fund that invests in community banks …
  • WASHINGTON (5/29/12)--A Senate Banking Committee hearing offered hope for a bipartisan compromise on mortgage refinancing legislation. Sens. Bob Corker (R-Tenn.) and Robert Menendez (D-N.J.)  indicated they had positive discussions about the bill (American Banker May 25). Corker's approval would allow the bill to pass through the committee and help it garner the 60 votes required to to pass legislation in the Senate. The legislation would make refinancing easier for millions of homeowners holding Fannie Mae and Freddie Mac mortgages. Among the changes Corker wants in the legislation is a condition that would prevent homeowners from refinancing more than once. He would also like Fannie and Freddie retain the ability to return refinanced mortgages to their originators …
  • WASHINGTON (5/29/12)--Esther George, president of the Federal Reserve Bank of Kansas City, on Thursday said bankers should be allowed to maintain seats on the boards of the 12 regional Fed banks. Her comments were made two days after Sen. Bernie Sanders (I-Vt.) introduced legislation to prohibit banking industry executives from serving as directors of the 12 Federal Reserve regional banks. "Yes, bankers should serve," George said. "They provide valuable information about the economy, credit conditions, and the payments system." The aftermath of JPMorgan Chase & Co.'s $2 billion trading loss has raised concern about Wall Street's relationship with the Federal Reserve Bank of New York. Jamie Dimon, JPMorgan's chairman and CEO serves as a board director for the New York Fed …
  • WASHINGTON (5/29/12)--The Federal Reserve Board on Thursday released action plans for Citigroup and HSBC Finance Corporation to correct deficiencies in residential mortgage loan servicing and foreclosure processing. It also released the engagement letter between Ally Financial Inc. and the independent consultant retained by Ally to review foreclosures that were in process in 2009 and 2010. Also, the Federal Reserve released a supplemental agreement with Ally to address the institution's foreclosure review obligations following the recent action by Ally's mortgage servicing subsidiaries to seek protection under the U.S. Bankruptcy Code. The action plans are required by formal enforcement actions issued by the Federal Reserve last year. The enforcement actions require the mortgage loan servicers regulated by the Federal Reserve and the parent holding companies of mortgage servicers to submit acceptable plans to improve their procedures and controls and oversight of foreclosure activities. The enforcement actions further require the mortgage servicing subsidiaries to provide appropriate remediation to borrowers who suffered financial injury as a result of errors by the servicers …
  •  WASHINGTON (5/29/12)--The Commodity Futures Trading Commission (CFTC) will hold a public roundtable on Thursday to discuss the proposed regulations to implement Section 619--commonly known as the Volcker Rule--of the Dodd-Frank Act. Section 619 contains certain prohibitions and restrictions on the ability of banking entities to engage in proprietary trading and to have certain interests in, or relationships with, a hedge fund or private equity fund. The roundtable will consist of two panels that are composed of market participants and members of the public. The first panel, starting at 9:30 a.m. ET, will discuss the various hedging provisions and requirements of the CFTC's proposed Volcker Rule. The second panel will start at 2 p.m., and discuss the market-making sections of the CFTC's proposed Volcker Rule …

Prepaid card answers sought in CFPB request for comment

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WASHINGTON (5/29/12)--Information on the costs, benefits, and risks of prepaid card use has been requested in a new Consumer Financial Protection Bureau (CFPB) Advanced Notice of Proposed Rulemaking (ANPR).

The CFPB last week announced it would begin the process of regulating prepaid cards under Regulation E, Electronic Fund Transfers. Collecting public comment on prepaid cards is the first step, and the CFPB has not said when it will begin writing new prepaid card rules. Improving the safety and transparency of prepaid cards and their providers will be two main goals of the CFPB's rulemaking effort, the agency said.

The CFPB ANPR specifically asks:

  • How prepaid cards should be defined under Reg E, and whether certain cards, such as university or health spending cards, should be included under this definition;
  • Which parts of Reg E should and should not be applied to prepaid cards;
  • How prepaid card fee disclosures could be improved for consumers;
  • How the CFPB could help consumers better compare the terms of various prepaid cards; and
  • How prepaid card contract terms are communicated to consumers that have purchased the cards.
The CFPB's prepaid card info web page provides information on prepaid card market share and other facts. (CFPB graphic)
The CFPB also asked for information on the costs and benefits that adding overdraft protections or tying savings accounts to prepaid cards could create. Some prepaid cards also claim they will help consumers build their credit, and the CFPB has asked if these claims are true, and whether or not the agency should regulate how such claims are marketed to consumers.

Current information on the prepaid card market, and how the CFPB plans to address prepaid card market issues in the future, is laid out on a new CFPB web page, entitled "What's the deal with prepaid cards?"

For that web page, and the CFPB's prepaid card ANPR, use the resource links.

N.C. CU employee wins state primary recount

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GOLDSBORO, N.C. (5/29/12)--North Carolina Community FCU, Goldsboro, N.C., employee John Bell IV (R), who was supported by the North Carolina Credit Union League (NCCUL), will move on to an N.C. State House general election contest after a recount confirmed his recent defeat of incumbent Steven LaRoque (R).

Bell, who currently serves as a sales and business development manager at North Carolina Community FCU, Goldsboro, won by a mere 39 votes. He also won the initial primary election, which took place earlier this month, but LaRoque asked for a re-count.

He will face Democrat Jim Hardison in November's general election contest for the N.C. District 10 state house seat. District 10 includes parts of Greene, Lenoir and Wayne Counties.

The NCCUL's political action committee, CUPAC, supported Bell in his primary contest, and the league in a statement said Bell's general election candidacy is "an incredible opportunity for credit unions as we could potentially have one of our own helping to represent our interests at the North Carolina General Assembly."

Credit Union National Association Vice President of Political Affairs Trey Hawkins noted that that Bell's victory was a step in the right direction. "As important as it is to elect candidates who support credit unions, it's even more encouraging to have an actual credit union person run and win," he said.

CFPB proposes nonbank supervision rule

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WASHINGTON (5/28/12)--The Consumer Financial Protection Bureau's (CFPB) proposed nonbank supervisory and notification procedures, which were unveiled late last week, would allow the agency to reach nonbanks it would not otherwise supervise, while providing "a streamlined process that is fair and efficient," CFPB Director Richard Cordray said in a release.

The Dodd-Frank Wall Street Reform Act gave the CFPB the authority to supervise any nonbank that it has reasonable cause to determine is posing a risk to consumers based on complaints or other information it receives, the agency said.

Under the proposed notification rules, the CFPB would first tell a regulated nonbank that one or more of the products it is offering may be harmful to consumers. The nonbank entity would then be given a chance to respond to the CFPB allegations, and to provide any documentation that might support its argument. Nonbanks could  also consent to CFPB regulatory actions, instead of filing a response.

Nonbanks could also petition the CFPB to terminate supervision authority over their business after two years, the CFPB said.

The CFPB defines nonbanks as companies that offer or provide consumer financial products or services, but do not have bank, thrift, or credit union charters. Mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies would meet this definition, according to the CFPB.

The Credit Union National Association (CUNA) is reviewing the nonbank proposal and will file a comment letter that, consistent with its ongoing communications with the CFPB, will urge the agency to focus its efforts on such entities that are engaging in abusive practices in the financial marketplace and take steps to alleviate regulatory burdens for credit unions. CUNA will have a particlar focus on ensuring credit union service organizations are not needlessly entangled in new regulations.

The CFPB will accept public comment on the proposed rule until July 24.