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Washington Archive

Washington

Todays audio call to discuss possible improvements to corporate prepayment plan

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WASHINGTON (6/13/11)—During today’s free 45-minute audio conference on issues surrounding a proposal to allow credit unions to prepay some of their total assessments to the Temporary Corporate Credit Union Stabilization Fund, Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn will lead a discussion that likely will address possible improvements to the plan. Credit unions can still register for the CUNA 2 p.m. (CT) session that will feature Dunn as moderator and speakers including s on the call will be CUNA President/CEO Bill Cheney, National Credit Union Administration (NCUA) Deputy Director Larry Fazio, and CUNA Chief Economist Bill Hampel. The NCUA proposed the voluntary prepayment plan at its May open board meeting and is accepting public comment through June 20. The NCUA prepayment program could help reduce credit unions' assessment for 2011 substantially, depending on credit unions' participation, and it would help even out assessments for subsequent years, CUNA has noted. CUNA is offering the audio conference to credit union officials who continue to have questions about the proposal, to help address those questions and facilitate credit unions' understanding of the proposal. Much of the 45-minute call will be reserved for questions. Use the resource link to register. For those who cannot participate in the live event, use the second resource link to register for an archived version to be available within 48 hours of the live event.

NCUA places BCT FCU into conservatorship

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ALEXANDRIA, Va. (6/13/11)— BCT FCU, of Binghamton, N.Y., is now operating under National Credit Union Administration (NCUA) management after the agency assumed control Friday. The NCUA will continue normal services to the credit union’s 3,911 members and will work to resolve issues affecting the institution’s safety and soundness. BCT FCU has served New York’s southern tier’s educational community for 67 years. The NCUA said in a release announcing its supervisory action that the decision to conserve a credit union enables the institution to continue regular operations with expert management in place, correcting previous service and operational weaknesses. During conservatorship, members may therefore continue to conduct business at the credit union. The Federal Credit Union Act authorizes the NCUA board to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, protect members’ interests, or protect the federal share insurance fund. BCT is the sixth federally insured credit union placed into conservatorship during 2011.

Cheney to Treasury Aid CU interchange solution search

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WASHINGTON (6/13/11)—No issue is more significant to the credit union system now than a favorable resolution regarding debit card interchange fees, and Credit Union National Association (CUNA) President/CEO Bill Cheney has urged U.S. Treasury Secretary Tim Geithner “to help pursue solutions that will help small issuers without undermining the interchange statute.” Cheney in a letter to Geithner asked the Treasury Secretary to discuss ways to protect credit unions and other small issuers with Federal Reserve Chairman Ben Bernanke, and suggested several ways that the Fed could achieve that goal. Among Cheney’s suggestions are:
*Requiring card networks to report to the Fed once a two-tiered debit interchange fee structure has been established; *Requiring ongoing updates of the status of the two-tiered fee system. These updates could be reported to Congress; *Ensuring that the Fed accounts for all allowable and reasonable costs when it sets the interchange fee rate cap; and *Exempting small issuers from routing and exclusivity provisions, or delaying implementation of those provisions for a minimum of 24 months.
Cheney said that the issue is simple: “Congress provided that the Fed consider interchange costs for large issuers, but directed that debit card interchange income to small issuers be protected. That is unquestionably the outcome that Congress intended when it approved the exemption for small issuers as part of the interchange law.” While interchange implementation delay legislation was narrowly defeated in the Senate last week, Cheney said that the 54 to 45 vote count still shows that senators are skeptical over whether or not the interchange plan would work as intended. Cheney said that credit unions can use the support of these senators “as a tool” to help improve the interchange implementation rule being drafted by the Fed. CUNA is pressing the Fed to help minimize negative effects on credit unions and their members, and also remains active in the courts, joining TCF Financial in litigation that challenges the interchange provisions. (See related story: TCF/Fed oral arguments set for June 16) For the full letter to the Treasury, use the resource link.

Inside Washington (06/10/2011)

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* WASHINGTON (6/13/11)—One credit union was among those to receive a total of nearly $10 million in matching grants for Low Income Taxpayer Clinics in the 2011 Internal Revenue Service (IRS) grant cycle. El Paso Credit Union HOAP, Inc. received a $40,000 grant, according to an IRS release. Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations. For the 2011 grant cycle, the IRS awarded LITC grants to 165 organizations … * WASHINGTON (6/13/11)--The Treasury Department announced Thursday it will deny foreclosure-prevention program incentive payments to mortgage servicers that are not modifying loans according to the administration's guidelines. Treasury has begun to withhold incentive payments from Wells Fargo, Bank of America and JPMorgan Chase until they improve their performance in the Making Home Affordable Program (American Banker June 10). The program aims to reduce monthly mortgage payments for struggling borrowers. Participants receive incentive payments for each mortgage they permanently modify. Participants were assessed in three categories: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance. According to the new assessments, the three banks to be denied incentive payments made substantial errors in determining eligibility for the program, communicating with potentially eligible borrowers and calculating the incentives they are owed … * WASHINGTON (6/13/11)--As regulators wrestle with the definition of a qualified residential mortgage (QRM)-- mortgages that would be exempt from risk retention--Federal Deposit Insurance Corp. Chairman Sheila Bair said Thursday she would eliminate the exemption entirely(American Banker June 10). Regulators proposed a 20% down payment and certain debt-to-income restrictions as the exemption standard. Banks and consumer advocates said restrictions that rigid would only benefit the wealthy and become the new standard for conforming loans. Blair, in remarks to the Council on Foreign Relations, suggested it would be better to do away with a QRM standard and still require a retention rate of 5% …

Derivatives discussion on NCUA agenda

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ALEXANDRIA, Va. (6/13/11)--The National Credit Union Administration has previously indicated that it would consider allowing credit unions to use derivatives to help manage interest rate risks, and an advanced notice of proposed rulemaking seeking comments on this concept is set to be considered at this month’s NCUA open board meeting. This month’s meeting will take place at 10:00 a.m. ET on June 17. The meeting was originally scheduled for Thursday, June 16. The final version of an NCUA proposal that would permit federal credit unions to use "statistically valid" random samples of member income data to prove their low-income status to the agency is also scheduled to be released during the June meeting. This alternative approach would allow credit unions that do not qualify as low-income according to the NCUA’s geocoding software to draw member income data from their own loan files or surveys. This data could then be used to prove a given credit union’s low-income status. CUNA supported this proposal, but encouraged the NCUA to provide credit unions with a more detailed explanation of what should be covered in the narrative and supporting material sections of a credit union’s low-income status application. Current NCUA regulations require a credit union to show actual income data from a minimum of 50% of its membership, plus one additional credit union member as an alternative basis for qualifying as low-income. So-called "golden parachutes" and indemnification payments will return to the NCUA agenda for the second consecutive month, with the agency covering technical corrections to those rules. The NCUA's monthly report on the status of its insurance funds will also be delivered during the meeting. A closed NCUA session will follow the open meeting. A waiver request, personnel issues and supervisory matters will be discussed during the closed meeting. For the full NCUA meeting agenda, use the resource link.

New compliance audio conference offered June 15

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WASHINGTON (6/13/11)--SAFE Act registration, proposed changes to current risk-based pricing regulations, and other compliance issues will be covered during a June 15 audio conference presented by the Credit Union National Association. The audio conference, which will begin at 1:00 p.m. CT, is recommended for credit union and league compliance professionals, credit union management, directors, volunteers or anyone interested in credit union compliance. The cost of registration is $89. CARD Act clarifications, changes to the National Foundation for Consumer Credit’s (NFCC) CARD Act National Locator Line, and related changes to Regulation Z periodic statements, will also be covered. Other topics include Regulation CC changes and coverage of ATM surcharge disclosures. CUNA Director of Compliance Information Valerie Moss, Federal Compliance Counsel Nicole Seabron, and Assistant General Counsel and Senior Compliance Counsel Mike McLain will lead discussion. The audio conference will be archived, and conference registrants will also have access to related archives for six months. For more on the audio conference, use the resource link.

TCF interchange arguments set for June 16

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WASHINGTON (6/13/11)—The next stage of TCF National Bank’s appeal to block the Federal Reserve's implementation of proposed debit card interchange fee cap regulations will take place on June 16, when the U.S. Court of Appeals for the Eighth Circuit hears oral arguments regarding a preliminary injunction. Those arguments will take place at 1:30 p.m. CT in St. Louis, Missouri before a three judge panel. TCF's initial lawsuit, which was filed in October, alleged that the government cannot constitutionally write laws--such as the interchange law--that would arbitrarily prevent a business from recovering its costs sufficiently to avoid losses on its business operations. The suit also included other constitutional arguments. The U.S. District Court for the District of South Dakota in Sioux Falls in April denied TCF's motion for a preliminary injunction, but did not dismiss the case. The Fed has countered TCF’s argument in its own appeals court brief, stating that nothing in TCF’s contract with Visa “guarantees any minimum interchange fee or even limits the circumstances in which Visa can reduce the fee schedule." The Fed added that the district court found that "there is no statutory or contractual provision guaranteeing TCF a certain level of interchange income." CUNA, the Clearing House Association LLC, American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions have joined to support some aspects of TCF’s arguments via an amicus brief. With a legislative solution to the interchange implementation issue off the table for now, Credit Union National Association President/CEO Bill Cheney said that credit unions are focusing on the legal and regulatory systems to challenge the pending debit interchange fee cap. CUNA has developed a list of 13 specific points senators should be asked to make to the Fed, including asking the agency to require the card networks to report to the Fed that they have developed a two-tiered system that will provide higher fee income for small issuers than the board allows for large issuers. For prior coverage of this case and the general interchange issue, use the resource links.