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TCF Bank withdraws interchange case

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WASHINGTON (7/1/11)--TCF National Bank on Thursday moved to voluntarily dismiss a months-long legal challenge to the Federal Reserve's implementation of new debit interchange fee regulations. TCF last October filed suit against the Fed in the U.S. District Court for the District of South Dakota. TCF alleged that it is unconstitutional for the government to require a business to charge below-cost rates that negatively impact business. The district court in April denied TCF’s motion for a preliminary injunction, indicating the issue was not ripe for decision because the Fed had not yet issued its final regulations on debit interchange. It also denied the Fed's motion to dismiss the case. The bank later appealed to the Eighth Circuit Court of Appeals but that court on Wednesday refused TCF's request for a preliminary injunction to halt the debit interchange fee regulations. The bank asked the district court to dismiss its case at a hearing held early on June 30 in Sioux Falls, S.D. The bank asked for a voluntary dismissal without prejudice, so it would retain the option to re-file the case at a later date. The Credit Union National Association (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 earlier this year filed a pair of amicus briefs in support of some aspects of TCF's arguments against the interchange statute. The amicus briefs were filed in both courts. However, CUNA did not support TCF’s argument that the interchange rule’s small issuer exemption violated the Equal Protection Clause of the U.S. Constitution. The appeals court also dismissed this argument. The final interchange rule, which was unveiled by the Fed on Wednesday, caps large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses, and the Fed has also issued a separate proposal that would permit issuers to charge an additional penny per transaction if they meet certain fraud prevention standards. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted. The Fed's initial proposal would have set a cap of 12 cents per transaction. CUNA continues to analyze the Fed’s final interchange rule.

NCUA expands disaster policy due to Midwest floods

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ALEXANDRIA, Va. (7/1/11)--The National Credit Union Administration (NCUA) on Thursday again expanded the scope of its disaster relief policy as severe weather and flooding continued to impact the Midwest. The expansion is a reaction to severe weather and flooding that is impacting areas of Montana, Nebraska, Indiana, Kansas and Iowa. These areas were recently named federal disaster areas by the Obama administration. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses. Under the policy, the agency will, where necessary, encourage credit unions to make loans with special terms and reduced documentation to affected members, reschedule some credit union examinations, guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund, and make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility. The NCUA last month reached out to aid credit unions and members impacted by severe flooding in North Dakota, Tennessee and Minnesota and flooding and tornadoes in Missouri. The agency also activated its disaster relief policy in Kentucky, Louisiana and Iowa due to flooding last month, and took similar action following early May tornadoes in the southeast. For more on the NCUA's disaster relief efforts, see the NCUA's release and prior News Now coverage.

CUNA backs patent system reforms

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WASHINGTON (7/1/11)--The Credit Union National Association (CUNA) has joined 12 other trade associations to encourage Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to bring H.R. 1249, the “Leahy-Smith America Invents Act,” to the Senate floor soon. H.R. 1249 would alter the patent application system by awarding a patent to the first inventor to file a given application. The legislation also provides greater time for the public to provide input on a patent and changes the rules under which an existing patent may be challenged. CUNA and its fellow trade associations are specifically backing section 18 of the bill, a portion of the bill that would protect credit unions and other businesses from outside claims that some specific customer service, payment and marketing practices have already been claimed under existing business method patents. These patent challenges, which are often brought by non-practicing entities, can become expensive for credit unions and others if they are heard in court. H.R. 1249 would allow the Patent and Trademark Office (PTO) to examine patent challenges outside of the court system. The bill also increases PTO funding. The joint trade association letter, which was also sent to Senate Judiciary Committee Chairman Pat Leahy (D-Vt.) and Ranking Member Charles Grassley (R-Iowa), said that the patent reforms proposed in H.R. 1249 would spur innovation, create jobs, "and ensure that the Patent and Trademark Office (PTO) has the tools necessary to maintain our patent system as the best in the world.” The bill passed the House by a 304 to 117 vote last week, and similar legislation received nearly unanimous support in the Senate earlier this year. The letter was cosigned by the American Bankers Association, the American Council of Life Insurers, the American Financial Services Association, the American Insurance Association, the Clearing House Association, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, the Mortgage Bankers Association, the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, and the Securities Industry and Financial Markets Association. CUNA joined these trade groups to successfully defeat a recent amendment that would have removed section 18 from the bill. Two letters addressing patent-related issues have also been recently filed by the joint trade groups. For the full letter, use the resource link.

New Fed CFPB inspector general appointed

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WASHINGTON (7/1/11)--Mark Bialek will begin his term as inspector general of the Federal Reserve and the Consumer Financial Protection Bureau (CFPB) on July 25. Bialek, according to a Fed release, will “lead the Office of Inspector General staff in promoting the economy, efficiency, and effectiveness” of Fed and CFPB operations and “in preventing and detecting waste, fraud, and abuse.” The incoming inspector general will succeed recent retiree Elizabeth Coleman. Bialek most recently held the position of deputy inspector general at the Environmental Protection Agency. He previously held other related legal positions at that agency, and has also worked at the Department of State and the Department of Commerce. The CFPB is scheduled to take over a number of consumer-oriented responsibilities from various financial regulators later this month.

Inside Washington (06/30/2011)

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* WASHINGTON (7/1/11)--Calling prepaid access products “the fastest growing area within the payments sector,” the Office of the Comptroller of Currency (OCC) issed guidance Wednesday supporting national banks’ participation in prepaid programs. The OCC stressed the importance of consumers understanding the products and their associated costs. OCC also cited potential risks to financial institutions, including fraud and money laundering. “To limit potential risks to banks and consumers, however, national banks should implement comprehensive risk management programs that provide appropriate oversight and controls commensurate with the risk, complexity of the activities, and use of any third-party providers to facilitate the prepaid programs,” the guidance said … * WASHINGTON (7/1/11)--Financial firms continued to vie for position in the swaps marketplace in the wake of the Dodd-Frank Act during a Senate Banking subcommittee hearing on securities, insurance and investment. Dodd-Frank established swap execution facilities, similar to the exchanges where securities are traded, in an effort to create more transparent pricing and reduce systemic risk in derivative markets where trades were previously made over the counter (American Banker June 30). About 40 firms will apply to become swaps execution trading facilities, according to testimony at the hearing. But market participants said they expect the market to consolidate to 15 or 20 firms within two years. Jurisdiction of swaps regulation is split between two agencies. The Securities and Exchange Commission (SEC) will regulate security-based swaps. The Commodity Futures Trading Commission (CFTC) will have authority over other swaps. The hope among lawmakers is that the SEC and CFTC will synchronize their rules, according to the Banker