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MBL amendment could be offered for Senate jobs bill today

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WASHINGTON (6/30/10)—The U.S. Senate voted Tuesday to proceed on a bill intended to stimulate small business lending in communities, H.R. 5297, the Small Business Lending Fund Act. Sen. Mark Udall (D-Colo.) is expected today to offer a Credit Union National Association (CUNA)-supported amendment to the package that would increase the credit union member business lending cap to 27.5% of assets, up from 12.25%. In an Action Alert issued yesterday, CUNA President/CEO Dan Mica asked league presidents to mobilize quickly to urge Senate members both to back the possible MBL amendment, and to keep fighting enactment of a provision in the financial regulatory reform bill that would require government price setting of interchange fees. Timing of the consideration of the Udall amendment is complicated both by memorials for Sen. Robert Byrd, who died early Monday, as well as the expected debate of the Regulatory Restructuring Conference Report and other business pending before the Senate. While it is possible that the Senate will complete consideration of the amendment this week, CUNA believes it is more likely that the amendment will remain pending through the Independence Day District Work Period. Udall, who has supported credit union efforts to increase member business lending as a way to improve credit availability for small businesses, earlier this year drafted a stand-alone MBL bill that would have raised the MBL cap to 25% of assets. A similar bill was introduced by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (D-Calif.) in the House. However, in moving to add the credit union provisions to the larger job-stimulus package, Udall is expected to offer an amendment reflecting a U.S. Treasury-backed proposal to increase MBLs to 27.5% of assets, which that agency sent to Capitol Hill this month. In addition to more than doubling the current cap, the Udall amendment also may propose that the growth of a given credit union's MBL portfolio may be no more than 30% annually; credit unions that wish to lift their MBL cap must be well capitalized, must be lending at a ratio near the current cap for the previous four quarters, must have a minimum of five years of underwriting and servicing MBLs, and ; must demonstrate sufficient experience in managing these types of loans. The Senate small business bill--to which the MBL language may be added--also proposes a government-backed $30 billion fund intended to enhance the ability of small banks to lend to customers who own small businesses. CUNA has estimated that lifting the MBL cap—even just to 25% of assets--could create over 100,000 new jobs and inject over $10 billion in funds into the economy, however, at no cost to taxpayers. The House earlier this month voted 241-182 in favor of a bill to provide the community bank funds, but the House bill did not address credit union MBL authority. The House could adopt the Senate version of the bill during conference committee proceedings conducted to work out differences in the two chambers’ bills. Prior to the Senate’s possible action today, the National Association of Realtors wrote on behalf of 1.1 million NAR and associates members reiterating support for the MBL increase. In a letter sent to every senator, the NAR wrote that the MBL increase for credit unions would allow “these community-focused financial institutions to play a more significant and much needed role in our nation’s economic recovery.” The letter did note opposition, however, to the administration’s proposal to require credit unions to have at least five years of MBL experience in order to qualify for the higher limit. “This would unfairly prevent credit unions that have proven to be well-capitalized and ready to lend to the small business community from participation,” the NAR letter noted. The NAR is one of more than a dozen national business organizations that have publicly supported increased member business lending for credit unions.

Frank underscores CU exemption from new interchange rules

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WASHINGTON (6/30/10)--House Financial Services Committee Chairman Barney Frank (D-Mass.), a central figure in the recently completed House-Senate financial regulatory reform conference report, assured his colleagues that the Federal Reserve’s new rules governing interchange fees would not apply to credit unions or other small institutions with under $10 billion in assets. Frank in a Tuesday notice to House Democrats said that credit unions and other small issuers would be permitted to “continue to issue their debit cards without any market penalty.” Following the release of the letter, the Credit Union National Association (CUNA) said that it planned to work with the Fed to ensure that credit unions with under $10 billion in assets were held exempt from the Fed interchange changes if those changes are passed into law. CUNA President/CEO Dan Mica said Tuesday that the Frank memo would serve as excellent notice of the Congress's strong intent to exempt credit unions and community banks from the reaches of the provision that requires the Fed to set interchange fees. Mica said the memo gives the Fed strong guidance to follow in the event that the provision is enacted and the Fed is called upon to implement it. Negotiations for the financial regulatory reform bill had seemed to have concluded last week, but those negotiations appeared to have reopened on Tuesday. CUNA and credit unions have repeatedly urged legislators to oppose any financial regulatory reform bill that includes interchange provisions, and CUNA continues to present its case for removing interchange changes from the final bill to lawmakers as they continue their discussions. With the majority of the financial regulatory bill agreed to, the bill may still come up for final votes in the House and Senate this week. However, legislators are still finding reaching a final consensus on the exact form of the bill to be difficult. Senators are still tweaking their version of the bill, with conversations a proposed tax on banks looming large. While there have not been a number of changes, one change that may be added prior to the final House and Senate votes is an increase in the assessments imposed by the Federal Deposit Insurance Corporation. The exact timing of a final vote is also put into question by the recent death of long-standing West Virginia Senator Robert Byrd, who died on Monday, aged 92. Byrd will lie in state on the floor of the Senate on Thursday.

NCUA notes progress with capital plan reviews

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ALEXANDRIA, Va. (6/30/10)--The majority of the 111 credit union applications for the U.S. Treasury’s Community Development Capital Initiative (CDCI) have now been reviewed by the National Credit Union Administration (NCUA), with most of those reviewed applications then being forwarded on to the Treasury. The 111 credit union requests have sought a collective $282 million in funding from the CDCI, which makes secondary capital investments of up to 3.5% of assets in eligible low-income credit unions. The NCUA is reviewing the applications for financial soundness, and is notifying accepted credit unions of their status. The NCUA expects to complete its review process in July. The National Federation of Community Development Credit Unions has estimated that over $100 million of the CDCI funds could be distributed to eligible credit unions, and Treasury Secretary Tim Geithner earlier this month said that the Treasury would likely begin disbursing CDCI funds next month. The NCUA in a release said that it has aided credit union applicants that needed to clarify or revise their secondary capital plans, with NCUA Chairman Debbie Matz saying that she wanted the NCUA to “bring a positive and supportive approach to the table when it came to credit union participation in this important initiative.” For the NCUA release, use the resource link.

CUNA CUs back trio of S.C.-based political contenders

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WASHINGTON (6/30/10)--Credit union backers, with the support of the Credit Union National Association’s (CUNA) federal PAC, the Credit Union Legislative Action Council (CULAC), and the South Carolina Credit Union League, won a trio of Republican primary contests in South Carolina last week. In one such House primary runoff, current state representative Tim Scott, who has served on the board of Charleston, S.C.-based Heritage Trust FCU, which holds $430 million in assets from 50,000 members, defeated Paul Thurmond, son of the late politician Strom Thurmond. If Scott wins, he will likely be the first African American Republican to serve in the House of Representatives since Oklahoma's J.C. Watts retired from Congress in 2002. In another runoff, current state representative Jeff Duncan, a well known backer of the credit union cause, defeated challenger Richard Cash with 51% of the total vote. Duncan will face Democratic nominee Jane Dyer in November. Prosecutor Trey Gowdy defeated South Carolina District 4 incumbent Bob Inglis, winning nearly three-quarters of primary votes in the process. Gowdy will vie with Paul Corden for the now-open Congressional seat. CUNA expects all three nominees to win handily in this November's general election.

Inside Washington (06/29/2010)

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* WASHINGTON (6/30/10)--The Federal Reserve on Tuesday officially published in the Federal Register a final rule that amends Regulation Z (Truth in Lending) by preventing lenders from charging late fees that are over $25 or penalty fees that "exceed the dollar amount associated with the consumer's violation." The new rules, which will come into effect on August 22, also prevent lenders from charging so-called "inactivity" fees on accounts. This publication is the final step in implementation of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009… * WASHINGTON (6/30/10)--A recently completed Government Accountability Office review of the Federal Deposit Insurance Corp. (FDIC) found that over a quarter of the FDIC’s 93 loss-share estimates produced during 2009 contained errors. The loss-share accounting errors, once corrected, boosted the FDIC’s finances by $138 million. However, the GAO noted that the FDIC still showed a "material weakness" in its loss estimate methodology. The FDIC overestimated its loss-share cost estimates by $270 million, American Banker reported... * WASHINGTON (6/30/10)--The U.S. Supreme Court this week found that the structure of the Public Company Accounting Oversight Board, which implements the corporate governance and accounting reform requirements called for in the Sarbanes-Oxley Act of 2002, violates constitutional separation-of-powers principles. In the court’s opinion, the rules governing the PCAOB made it too difficult for board members to be removed by the president or other government heads, American Banker reported. The PCAOB, which was created by the congress following the WorldCom and Enron collapses, was given extensive regulatory authority over accounting firms that audit publicly traded companies ...