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CFPB rules outline enforcement approach

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WASHINGTON (6/7/12)--The Consumer Financial Protection Bureau (CFPB) has outlined its procedures and practices for enforcing federal consumer law in four new rules.

Three of the rules are final rules, and will become effective once they are published in the Federal Register. Credit Union National Association Regulatory Counsel Jared Ihrig noted the CFPB rules will only address enforcement, not regulation.

Ihrig said the CFPB's investigation rules are most relevant for credit unions. The agency release said the rule "lays out an efficient and fair process for conducting CFPB investigations," and covers procedures for issuing civil investigative demands. The rule also describes the rights of individuals who are under CFPB investigation.

Final rules addressing adjudication proceedings and how the CFPB is updated on state-level legal actions involving Dodd-Frank Act compliance have also been developed by the CFPB.

The fourth rule is an interim final rule that implements the Equal Access to Justice Act, which, according to the CFPB, allows some prevailing parties in administrative proceedings to recover attorney fees and expenses.

The CFPB said the rule sets forth who can seek to recover legal costs, and how they may attempt to do so.

Public comment on the interim rule will be accepted for 60 days after it is published in the Federal Register.

For more on the rules, use the resource link.

Inside Washington (06/06/2012)

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  • WASHINGTON (6/7/12)--The Treasury Tuesday said it will sell preferred stock in seven banks as part of its efforts to wind down the Troubled Asset Relief Program. The banks are: Ameris Bancorp, Moultrie, Ga.; Farmers Capital Bank Corp., Frankfort, Ky.; First Capital Bancorp Inc., Glen Allen, Va.; First Defiance Financial Corp., Defiance, Ohio; LNB Bancorp Inc., Lorain, Ohio; Taylor Capital Group Inc., Rosemont, Ill.; and United Bancorp Inc., Ann Arbor, Mich. Treasury has recovered $264 billion from TARP's bank programs through repayments, dividends, interest, and other income--compared with the $245 billion initially invested. It has remaining outstanding preferred stock investments in 343 banks.  Treasury intends to announce additional preferred stock auctions in the coming weeks and expects to begin the auctions, which will be registered public offerings, on or about June 11 …
  • WASHINGTON (6/7/12)--Community banks for the most part are sufficiently capitalized to meet the new minimum capital levels required by Basel III capital rules, George French, the Federal Deposit Insurance Corp. (FDIC) deputy director of  risk management supervision said Tuesday (American Banker June 6). The FDIC board will meet June 12 to discuss implementation proposals for the Basel international agreement. Most community banks "overwhelmingly" meet the capital requirements proposed by the Basel committee, French said at a meeting of the FDIC's community bank advisory panel …
  • WASHINGTON (6/7/12)--The Systemic Risk Council, a private sector, volunteer group led by former Federal Deposit Insurance Corp. chair Sheila Bair, will convene this month to monitor and encourage regulatory reform of U.S. capital markets focused on systemic risk. The independent, non-partisan council was formed by CFA Institute, a global association of investment professionals, and The Pew Charitable Trusts, an independent nonprofit organization. The Systemic Risk Council comprises experts in investments, capital markets and securities regulation, including senior adviser Paul Volcker, former chair of the Federal Reserve.  Concerns over the slow progress of regulators and standard-setters prompted the council's formation, Bair said.  The group will monitor and evaluate the agencies that oversee the implementation of Dodd-Frank provisions related to systemic risk, including the Financial Stability Oversight Council and the Office of Financial Research. "The great challenge is to devise a system to identify risks that threaten market stability before they become a danger to the general public," said Bair. "As evidenced by the 2008 crisis and even recent headlines, we need a more effective and efficient early-warning system to detect issues that jeopardize the functioning of U.S. financial markets before they disrupt credit flows to the real economy. And two of the most critical tasks are how to impose greater market discipline on excess risk taking and effectively end the doctrine of too-big-to-fail" …

CU candidates win big in Tuesday primaries

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WASHINGTON (6/7/12)--Credit union-backed primary candidates "had a good night" on Tuesday, with the majority of them moving on to run in November's general election contests, Credit Union National Association Vice President of Political Affairs Trey Hawkins reported.

All in all, the Credit Union Legislative Action Council (CULAC) supported candidates in 57 of Tuesday's 78 primary contests, and 57 of those CULAC-backed candidates will run in November's general election. Primaries were held in California, Iowa, Montana, New Jersey, New Mexico and South Dakota.

One of those candidates is current U.S. House member Martin Heinrich (D-N.M.), who will run for New Mexico's open Senate seat after he defeated primary opponent Hector Balderas (D) by winning 59.1% of the Democratic primary votes. Heinrich, who is backed by CULAC and the Credit Union Association of New Mexico (CUANM) and has supported House member business lending legislation, will face Republican Heather Wilson this fall.

Also in New Mexico, Ron Griggs, who has credit union ties, defeated former Independent Community Bankers Association of New Mexico Chair Sarah Dion Kidd-Johnson to win the Republican state senate nomination for the 34th district. Griggs, who won 57.4% of the vote, was backed by CUANM.

Not all of the wins on Tuesday were clear-cut primary victories, however. Changes to California's primary process mean that the top two finishers in each U.S. House and Senate primary race, regardless of party affiliation, will face each other this fall.

The biggest result in California for credit unions was credit union champion Rep. Brad Sherman's (D) first-place finish in California's 30th district, where the incumbent picked up 42% of the total vote. He will face fellow incumbent Howard Berman (D) this November.

Other successful CULAC-backed candidates in California included incumbent Sen. Diane Feinstein (D) and current House members Jeff Denham (R) and Brian Bilbray (R), as well as California House candidates Doug La Malfa (R), Jared Huffman (D), David Valadao (R), Tony Cardenas (D), Janice Hahn (D), Alan Lowenthal (D) and Juan Vargas (D).

Hawkins said CULAC will continue to support many of these credit union friends in this fall's election.

Matz highlights MBLs CU difference in iMarketWatchi

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WASHINGTON (6/7/12)--Credit unions provide a readily available funding source for businesses with loan demands that banks refuse to meet, and "generally have lower rates on loans than their competitors," National Credit Union Administration (NCUA) Chairman Debbie Matz noted in a recent MarketWatch interview.

Credit unions "make very small loans that frequently banks won't makep--the average loan is only about $230,000--for things like a day-care center or an auto repair shop. Sometimes banks are reluctant to make loans that small," Matz said. However, some credit union small business lending practices are being impacted by the 12.25% of assets member business lending cap, she said. The NCUA supports credit unions that "want to lift the cap and help communities create jobs," Matz added.

Credit unions' nonprofit, member-owned business model results in rates that are more favorable than bank rates "on almost every metric," and Matz noted that credit unions return their profits to members by lowering rates on loans and raising rates on deposits, with average credit card rates of 11.64%, below the 13.22% average bank rate. New three-year car loan rates average 3.7% at credit unions, lower than the 5.47% bank average rate, Matz added.

She emphasized that credit unions "provide services to people of all walks of life." And though credit unions were created to provide credit to people of modest means, anyone can now join a credit union. "It used to be you had to belong to a certain group but many serve anyone in a particular community. It's become much easier to join one," Matz said.

Reaching new members is a must for credit unions if they want to be around in 10 or 20 years, Matz said, and she again encouraged credit unions "to make sure services can be accessed from anywhere, anytime, through mobile devices, and that they can make loans on the spot."

More credit unions are starting to understand the need for mobile services, she added.

The NCUA chairman also emphasized the safe business practices of many credit unions, noting that credit unions are not allowed to engage in the kind of risky business practices that recently created issues for J.P. Morgan. "Credit unions operate within a very narrow margin on derivatives and only as hedges on interest rates. Right now, only seven credit unions are piloting plain vanilla derivatives. It takes an incredible amount of expertise so we're treading cautiously," she said.

While other financial regulators may move to address the issues brought to light by J.P. Morgan's missteps, the NCUA is unlikely to react by changing credit union regulations, Matz said. However, she did detail some of the NCUA's recent regulatory work, noting that the agency is examining all of its current regulations "to see where changes should be made to avoid duplication and streamline."

For the full interview, use the resource link.

House panel told of CFPB CARD Act credit-access plans

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WASHINGTON (6/7/12)--The Consumer Financial Protection Bureau (CFPB) is continuing its review of the impact that ability-to-pay rules imposed by the Credit Card Accountability Responsibility and Disclosure (CARD) Act are having on the ability of some consumers to obtain credit, and could address these credit access issues as soon as this summer, CFPB Associate Director Gail Hillebrand said.

Hillbrand testified before a Wednesday House subcommittee on financial institutions and consumer credit hearing entitled "An Examination of the Federal Reserve's Final Rule on the CARD Act's 'Ability to Repay' Requirement."

The ability-to-pay rules, which are now part of Regulation Z, require a card issuer to consider a consumer's independent ability to make required payments on a credit card account before opening a new card account or increasing the credit limit on an existing account. Outside of community property states, a card issuer may not rely solely on household income provided by an applicant on a credit card application, but will need to obtain additional information about the applicants independent income. Information concerning the applicant's income or salary, however, may be relied on in order to determine whether the applicant has the ability to make the required payments.

The CFPB last December reached out for public comment on any issues that the ability-to-pay rules were creating for lenders and borrowers, and the comment period ended on June 4. The agency is reading through those comments at this time, Hillebrand said.

Legislators last year contacted the CFPB, noting that the ability-to-repay rules were in some cases limiting the ability of stay-at-home spouses to secure new lines of credit and asking the CFPB to investigate the issue. The Credit Union National Association (CUNA) backed the call for a CARD Act study.

In prepared testimony delivered on Wednesday, Hillebrand said the agency is examining how it can "mitigate the risk that stay at home spouses might be denied credit that they can, in fact, afford to repay," and is considering how CFPB guidance could address this and other issues created by the ability-to-repay rules.

She noted that household income that is deposited into joint accounts "is legally available to both account holders, and may be considered in determining the ability of either one of them to repay a loan." However, the ability-to-repay rule, as currently written, does not currently specifically address joint accounts or checking accounts, instead only advising card issuers to "take into account assets such as savings accounts" when it determines an individual's creditworthiness.

For more on the hearing, use the resource link.