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Matz to iWash. Posti CUs offer payday loan alternatives

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ALEXANDRIA, Va. (6/7/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz said in the Washington Post Monday that credit unions are authorized to offer loans designed to provide members affordable short-term cash, and that the loans are “very attractive” compared to triple-digit costs of payday loans. Matz noted that it was just last September that the NCUA approved the rule to allow federal credit unions to offer the short-term, small amount loans to their members. Interest rates for these loans must be capped at a maximum of 10 percentage points above the established interest rate ceiling. The current maximum APR on these loans would be 28%. A $20 application fee may also be charged. Matz said that with a 28% ceiling, the short-term credit union loans have a higher annual rate than conventional loans, which are capped for federal credit unions at 18%. But, she added in her published letter to the editor, a recent Post article titled “Credit unions increasingly offer high-rate payday loans” was misleading. The Post reported that credit unions are offering alternative short-term loan products, with some of those loans having an effective interest rate of over 100% when the $20 loan application fee is factored in to a $200 short-term loan. “Predatory lending in any form is wrong,” Matz wrote, and added, “I am committed to protecting consumers and preventing predatory lending by credit unions and their affiliates.” However, she added, the “picture the story painted was misleading. More credit unions are offering payday loan alternatives.” For Matz's Washington Post item, use the resource link.

Interchange vote could happen by midweek

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WASHINGTON (6/7/11)--A final vote on Senate legislation that would delay the implementation of a new debit interchange fee cap could happen as early as midweek, with a remote possibility the vote could occur today. Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) in March introduced S. 575, a bill that would delay implementation of the Federal Reserve’s rules to implement the interchange fee cap ordered by last year’s Dodd-Frank Wall Street Reform Act. The Tester-Corker bill would also require a study of the rules’ impact on consumers, credit unions and other financial institutions, and merchants. Similar delay legislation has been offered in the House, but House members have said that they would wait for the Senate to act first on the interchange issue, since that legislation was first offered in the Senate. Senate Majority Leader Harry Reid (D-Nev.) yesterday indicated that the interchange delay could be one of the first amendments offered to a bill the Senate is scheduled to take up today—a bill to reauthorize the Economic Development Administration. The Fed's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but the Credit Union National Association, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. Members of the House of Representatives are in their home districts this week, but the full Congress is scheduled to be in session beginning on June 13. The Senate Banking Committee on Thursday will discuss National Flood Insurance Program reauthorization. Members of the House of Representatives are in their home districts this week, but the full Congress is scheduled to be in session beginning on June 13.

Compliance CUs have NFCC counseling line options

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WASHINGTON (6/7/11)—Credit unions will have free alternatives when the National Foundation for Credit Counseling’s (NFCC) begins charging for its CARD Act National Locator Line (NLL) phone service on July 1. For instance, GreenPath Debt Solutions will provide a similar service for free, according to the Credit Union National Association (CUNA). GreenPath is a CUNA strategic provider. Its service will satisfy Regulation Z requirements that a toll-free number be listed among the loan repayment disclosures to help members obtain information about credit counseling services. Money Management International is also offering a free counseling line. The NLL is a third-party service that provides credit union members and other financial services consumers with a list of local credit counselors. The NFCC last month said that it and various member agencies "can no longer bear the full cost” of operating the service. The NFCC-provided phone service will cost a minimum of $80 per month when prepaid for 12 months. Those that do not prepay will be charged $100 monthly. Credit unions and other financial institutions since Feb. 22, 2010 have been required to prominently display on their statements a toll-free number providing cardholders information about accessing debt management services and credit counseling with nonprofit credit counseling agencies. The requirement, which is a result of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, allows creditors to either provide their own toll-free services or engage with third-party providers. CUNA Senior Compliance Counsel Mike McLain said that credit unions must decide whether to move to one of the above recommended services or to stay with the NFCC program before June credit card statements are processed. “Credit unions will need to perform their own due diligence to insure that the provider selected complies with Regulation Z requirements for the toll-free number consumers may use to obtain information about credit counseling,” McLain added. GreenPath finance director Thomas Butler said that GreenPath’s phone service will provide credit union members access to three NFCC providers. He added that a more robust version of a CARD Act compliant line that includes individual credit union-branded messaging, real time reporting, and other capabilities will be released in the near future.

FHFA reports loan mod foreclosure prevention drops

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WASHINGTON (6/7/11)—The total number of loan modifications made during the first quarter of 2011 dropped to 86,201 from 119,778 in the first quarter, the Federal Housing Finance Agency (FHFA) reported in Monday’s quarterly Foreclosure Prevention & Refinance Report. This is the third straight quarter that loan modifications have declined. The number of foreclosure prevention actions made during the first quarter of 2011 dropped to 171,531 from the previous quarter’s total of 208,416. However, refinancings made through the Obama Administration’s Home Affordable Refinance Program (HARP) increased 21% during the quarter, totaling 752,000 loans. The Federal Housing Finance Agency earlier this year extended the HARP program until June 30, 2012. It was set to expire at the end of this month. The FHFA reported that more than 36,300 Home Affordable Modification Program (HAMP) trials transitioned to permanent modifications during the first quarter, increasing the total number of active HAMP permanent modifications by 13%, totaling 320,500 during the quarter. The administration last year estimated that HAMP would modify as many as 4 million mortgages by 2012. Foreclosure starts declined while completed third-party and foreclosure sales increased in the first quarter. The report also noted that loans that were modified in 2010 have resulted in “deeper payment reductions for a greater proportion of borrowers than in earlier periods,” and the majority of these loans progressed from trial periods to full loan modifications. More than 1.6 million foreclosure prevention actions have been completed since late 2008, according to the report. For the full report, use the resource link.

Inside Washington (06/06/2011)

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* WASHINGTON (6/7/11)—Federal Reserve Board Gov. Daniel Tarullo on Friday defended an international proposal to levy an additional capital charge on the largest financial institutions. The Basel Committee on Banking Supervision has proposed a new set of capital standards that would require international financial institutions to hold a common equity ratio of at least 7% by 2019 (American Banker June 6). The committee also plans to add a capital surcharge for the largest banks. In a speech before the Peter G. Peterson Institute for International Economists, Tarullo dismissed arguments that the capital surcharge would hurt the economy. Banks say a capital surcharge would prevent them from earning the rate of return demanded by investors, forcing them to reduce their balance sheets and placing a drag on the economy. Tarullo said that logic is flawed. “To the extent that equity investors demand higher rates of return from financial firms than from non-financial firms, it is largely because financial firms are so much more highly leveraged,” he said. “Thus the risk of loss is greater, even as the prospect for outsized returns on the limited equity is improved” …