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Washington Archive

Washington

Comprehensive reg reform one step closer with House vote

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WASHINGTON (7/1/10)--The House last night voted 237-182 to pass sweeping reforms of the financial regulatory structure. Following Wednesday’s positive vote the Credit Union National Association (CUNA) said that while it opposes that legislation due to its included interchange fee provisions, the remainder of the bill “strikes a careful balance in protecting consumers while providing meaningful financial reform.” CUNA has repeatedly opposed interchange fee changes that would allow the Federal Reserve to intervene in the setting of those fees. “Nearly everyone recognizes that credit unions did not cause the financial meltdown and that they had no part in it; however, credit unions continue to be collateral damage, even in the proposed solutions, particularly with respect to interchange,” CUNA adds in a letter that was sent to all House members. The financial regulatory reform legislation substantially restructures financial regulations and provides consumers with a new level of protection. One organization that would potentially be tasked with that protection is the proposed Bureau of Consumer Financial Protection. While the BCFP will oversee the operations of many financial entities, the National Credit Union Administration will continue to supervise credit unions with under $10 billion in assets and enforce their compliance with consumer protection law. The Bureau will be funded by the Federal Reserve Board of Governors, and credit unions will not be required to pay more for the new Bureau than they do currently do for such supervision. Another credit union victory noted by the CUNA letter was portions of the legislation that make permanent the $250,000 deposit insurance level under the National Credit Union Share Insurance Fund and provide parallel insurance coverage for credit union business share accounts with bank business transactions accounts. CUNA in the letter also applauded a portion of the legislation that is expected to increase the number of small-dollar loans made by qualifying credit unions and decrease consumer dependence on payday loan providers and loan sharks. The regulatory reform package, which was constructed during a recently completed conference committee, must also pass the Senate before it can become law. It is not known if the Senate will vote on the package before the upcoming Independence Day recess. For the full CUNA letter, use the resource link.

Case for MBL increase undeniable CUNA

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WASHINGTON (7/1/10)--Saying there is "no doubt" that more needs to be done to help small businesses and encourage job creation, Credit Union National Association (CUNA) President/CEO Dan Mica on Wednesday called on senators to support Sen. Mark Udall’s (D-Colo.) S. 4443, an amendment that would lift the member business lending (MBL) cap for credit unions to 27.5% of their total assets. “The Udall amendment is one of the only small business proposals that would lead to substantial job creation without cost to taxpayers, or an increase in the size of government. The concept is simple: permit well managed credit unions that have capacity to lend and that are approaching the current statutory credit union business lending cap to continue to lend to their small business-owning members,” Mica added in a letter sent to all senators. The Senate must vote on whether to attach Udall’s amendment to H.R. 5297, the Small Business Lending Fund Act, which is intended to stimulate small business lending in communities. While H.R. 5297 was not voted on Wednesday before the Senate adjourned, it is thought that it could come up for a vote following the Independence Day district work period. H.R. 5297 also proposes a government-backed $30 billion fund that would enhance the ability of small banks to lend to customers who own small businesses. CUNA and credit unions have touted MBL legislation as a way that credit unions could also help reinvigorate the economy, reiterating that it comes with no cost to taxpayers. Also according to CUNA estimates, lifting the MBL cap even just to 25% of assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers. Udall’s legislation is nearly identical to a U.S. Treasury release that proposed increasing the MBL cap for well capitalized, adequately experienced credit unions to 27.5% of assets. That proposal also states that the growth of a given credit union's MBL portfolio may be no more than 30% annually, and that credit unions that wish to be subject to the increased cap 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. Mica this week urged credit union leagues to work to ensure that Udall’s amendment gains the support needed to be added to the full bill and, eventually, to become law. A similar bill that was offered by Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) currently has well over 100 House co-sponsors. For the full CUNA letter, use the resource link.

Inside Washington (06/30/2010)

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* WASHINGTON (7/1/10)—Former American International Group (AIG) executive Joseph Cassano on Wednesday told members of the Financial Crisis Inquiry Commission that his organization‘s credit derivative-related losses would have been less substantial if the U.S. government hadn’t unwound those derivatives as a condition of the 2008 bailout of AIG, The Wall Street Journal reported. While many related AIG's financial troubles can be linked to its derivatives portfolio, a 2009 report found that the majority of AIG's shortfall was concentrated in lines of insurance in which claims develop slowly, such as professional liability and worker's compensation. Cassano, who headed AIG's Financial Products division between 2002 and 2008, told the commission that many of AIG’s mortgage collateralized debt obligations were not entirely tainted by weak underwriting standards, and that AIG’s debt pools would not have realized extensive losses due to the recent market turbulence and accounting losses… * ALEXANDRIA, Va. (7/1/10)--The National Credit Union Administration on Wednesday announced that it has archived, in full, an online town hall meeting which took place on June 28. The NCUA addressed its upcoming regulatory plans, and some recent developments, during the online town hall … * WASHINGTON (7/1/10)--The Federal Reserve Monday announced the results of an auction of $2 billion in 28-day term deposits through the Term Deposit Facility. The Fed received nearly $11.14 billion in competitive bids and more than $121 million in non-competitive bids. The awarded deposits will settle today and mature on July 29. The Fed is set to conduct a third and final auction July 12, which will offer 84-day term deposits (News Now June 2) ...

NCUA gives strong support to financial reform bill

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ALEXANDRIA, Va. (7/1/10)—The National Credit Union Administration (NCUA) has come out in “strong support” of the financial regulatory reform bill that was hammered out last week by a House-Senate conference committee and now awaits a final vote in both chambers of the U.S. Congress. The legislative package, aimed primarily at Wall Street and meant to establish barriers to a repeat of the country’s recent crisis prompted by a meltdown of housing and mortgage markets, also includes reforms of interest to credit unions. Those reforms include the creation of a consumer financial protection bureau, making permanent an increase in federal deposit insurance to $250,000 per account, and extending on an equal basis for credit unions and banks unlimited federal insurance for non-interest bearing accounts. In a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) Tuesday, NCUA Chairman Debbie Matz cited the above provisions as reason for her agency’s support of the reg reform package. Frank and Dodd were leadership of the conference committee. Matz’s letter did not address a hot-button topic that has been in the forefront of many credit unions’ concerns in recent weeks, that of a provision that would require government controls of a portion of the fees merchants pay to use the electronic payments system, known as interchange fees. Credit Union National Association (CUNA) President/CEO Dan Mica expressed surprise that the NCUA’s letter did not take note of debit interchange. “The bill’s interchange provision has generated more outpouring of concern from credit unions than any issue we have seen in many years. In the short time since NCUA released its letter I have been deluged with calls and comments from credit unions expressing their frustration that NCUA would 'throw them under the bus' by endorsing the legislation without at least acknowledging the concerns raised about the interchange language," Mica said. The Credit Union National Association (CUNA), which along with the state leagues and credit unions launched a herculean effort to block the provision, ultimately has opposed the overall reform bill because of its inclusion of the interchange language. The reg reform package was expected to be voted by the House Wednesday and is awaiting a final vote by the Senate. CUNA’s strong opposition to the interchange language has been fueled, in large part, because of concerns that the amendment would hurt consumers by driving up their debit card fees, with no compensatory advantages to those consumers. CUNA has also said that the interchange rule change forces the Federal Reserve into a role of a price-fixing body, when interchange fees should be driven by market forces. CUNA’s opposition campaign generated hundreds of visits by credit union advocates to federal lawmakers, as well as over 600,000 email and phone contacts seeking withdrawal of the amendment. If signed into law, CUNA will spearhead efforts to address credit union concerns during the regulation and implementation process.

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 ...

Final reg reform vote could come this week

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WASHINGTON (6/29/10)--With the Monday morning passing of long-serving West Virginia Senator Robert Byrd (D), the exact schedule of events on Capitol Hill remains fluid. However, with Congress’s Independence Day district work period looming at the end of the week, there is a significant amount of work to be done, including a potential vote on the financial regulatory reform package. A report on that package, which was compiled by members of a House and Senate conference committee, was released over the weekend, and is being reviewed by Credit Union National Association (CUNA) staff this week. CUNA and affiliated credit unions have maintained that they will opposed the legislative package as long as the interchange language is included, and have urged legislators to vote no on the reform package. The House may debate the full, final version of the reform bill today or tomorrow, with the Senate also potentially holding its own debate on the agreed-to language this week. The Senate may also discuss H.R. 5297, the Small Business Lending Fund Act, if a cloture vote related to that bill successfully passes later today, and could hold a separate vote on legislation that would temporarily extend the National Flood Insurance Program (NFIP) this week. CUNA and other similar groups from throughout Washington wrote Senators last week to urge them to pass the NFIP plan. The National Credit Union Administration has recommended that credit unions with loans that would be subject to the NFIP, which has been suspended since June 1, continue making those loans while the program is lapsed.

Fed to alter payment system risk policy for all in 2011

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WASHINGTON (6/29/10)—The Federal Reserve on Monday announced that it will revise its Payment System Risk (PSR) policy for all depository institutions in 2011. The PSR policy revisions, which were adopted by the Fed in 2008, will “encourage financial institutions “to pledge collateral to cover daylight overdrafts by providing collateralized daylight overdrafts at a zero fee and by raising the fee for uncollateralized daylight overdrafts to 50 basis points (bp),” according to a Fed release. A daylight overdraft is a negative balance in an institution’s Federal Reserve account at any time during the Fedwire operating day. The PSR was revised to improve intraday liquidity, operational, and credit risks in the wholesale payment system. According to the Fed, financial institutions that may incur daylight overdraft fees will be required to adopt net debit caps, which are daily ceilings on their total daylight overdraft positions. Under the Fed’s changes, biweekly daylight overdraft fee waivers will also increase from $25 to $150, and the penalty fee for institutions without regular access to the discount window will increase from 136 bp to 150 bp. The exact implementation date for these policy changes will be announced 90 days in advance, the Fed added. For the Fed release, use the resource link.

Matz Merger advice final corp. rule NCUSIF assessmentall coming

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ALEXANDRIA, Va. (6/29/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz on Monday previewed the agency’s upcoming regulatory actions, saying that plans to address corporate credit unions and a determination of the National Credit Union Share Insurance Fund (NCUSIF) assessment are all on the near-term agenda. Speaking during a Monday town hall webinar, Matz said that the NCUA’s final rules for corporate credit unions, which were originally scheduled to be released this month, will likely be addressed by September, Matz said. While she did not go into specifics on what those new rules would cover, she did say that the final rule would incorporate a number of suggested improvements. The corporate rules will not be released for a comment period, NCUA staff added. In the event that natural person credit unions do not elect to maintain the current corporate credit unions system, the NCUA said that it does have contingency plans that could be put in place. The past, present and future of the corporate credit union crisis will also be covered by a series of NCUA-created DVDs which will address the many questions and concerns of credit unions regarding the crisis, its resolution, and the future treatment of legacy assets held by those corporate credit unions. The second in that series of three DVDs was published online by the NCUA on Monday, and these guides will be sent in DVD form once all are completed. The NCUA would also likely release its plan for addressing legacy assets held by those corporate credit unions around late summer, not in June as the agency previously hoped. NCUA Deputy Executive Director Larry Fazio said that the legacy assets held by credit unions would be “isolated and funded” to ensure that they are not interfering with the business practices of corporate credit unions as they move forward. While the NCUA earlier this month indicated that the NCUSIF assessment for credit unions would be determined later this year, no concrete statements on the exact number of basis points that that assessment would be were discussed. However, during the call, Matz and NCUA staff said that the assessed amount would fall within prior projections of 15-40 basis points. The NCUA earlier this month assessed a 13 basis point levy on the assets of natural person credit unions. The NCUA will also release guidance for credit unions that are seeking voluntary mergers later this week, Matz added.

Inside Washington (06/28/2010)

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* WASHINGTON (6/29/10)--Credit unions lost “a true friend” when Sen. Robert Byrd (D-W.Va.) died Monday morning at the
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age of 92, West Virginia Credit Union League (WVCUL) Senior Vice President Rich Schaffer told News Now Monday. “We have lost an ally and statesman,” Schaffer said. As late as last Friday, Byrd’s staff was in contact with the state league regarding the financial reform package the senator was closely monitoring. Byrd was a record nine-term senator who assumed that office in 1959, following three terms in the House of Representatives. In this 2005 photograph, Byrd (left) is shown with WVCUL President Kenneth Watts at Credit Union House on Capitol Hill. Byrd was third in line of succession from the president, following Vice President Joe Biden and House Speaker Nancy Pelosi… * WASHINGTON (6/29/10)--The Treasury Department's inspector general (IG), who oversees such things as operations at the Office of Thrift Supervision (OTS), reported recently that the OTS ineffectively regulated regulating BankUnited before the Coral Gables, Fla. The report said the regulator failed to make the bank change its aggressive, high-risk lending strategy that largely caused the thrift’s 2009 failure. OTS also allowed BankUnited to backdate a capital infusion from its holding company, the report said. (American Banker June 25) The back-dating strategy at the agency, involving other thrifts, had earlier led to the dismissal of two senior OTS officials. public Thursday. The IG report was required because the BankUnited failure caused a "material loss" to the Deposit Insurance Fund… * WASHINGTON (6/29/10)--The Federal Deposit Insurance Corp. (FDIC), in its just-released summer 2010 issue of “Supervisory Insights,” takes a look at the agency’s increased use of “loss-sharing agreements” to deal with bank failures, and also examines how the financial crisis has highlighted the need for greater transparency and strengthened consumer protections in the financial system. There is also a feature explains how provisions of the Credit Card Accountability Responsibility and Disclosure Act and amendments to Regulation Z will affect bank product offerings and operations. The publication also provides guidance for examiners in assessing banks’ CARD Act compliance…

Arrowhead Central CU placed into conservatorship

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ALEXANDRIA, Va. (6/28/10)--Arrowhead Central CU, an $876 million asset credit union based in San Bernardino, Calif., has been placed into conservatorship "due to declining financial condition," announced the National Credit Union Administration (NCUA) Friday. By assuming control, the agency will continue credit union service to Arrowhead's 152,000 members and ensure safe and sound credit union operations, NCUA said in the announcement. Service to members continues uninterrupted, and member funds are federally insured up to $250,000 per account by the National Credit Union Share Insurance Fund. Arrowhead, a full-service credit union has provided financial service to people residing in the counties of San Bernardino and Riverside, Calif. The decision to conserve a credit union enables the credit union to continue normal operations with expert management in place correcting previous service and operational weaknesses, NCUA said. According to local media, Arrowhead was set to sell four branches this weekend to Alaska USA FCU, a transaction designed to bolster Arrowhead's financial condition. Beginning today, branches in Victorville, Barstow, Hesperia and Big Bear Lake were to switch ownership to Alaska FCU. Members served by those branches would have until Aug. 31 to decide whether to transfer their accounts to Alaska USA ( San Bernardino County Sun (June 25). The Barstow branch confirmed its sale was complete (DesertDispatch.com June 25). In addition, the Apple Valley Branch was to close, effective today. The branch was located in a grocery store, which did not agree to transfer a lease to Alaska USA. The sale would put Arrowhead's total branches at 19 and was expected to bolster Arrowhead's capital ratio to 4.3%, said the report. In March, Arrowhead sold its Sawyer Cook Insurance subsidiary for an undisclosed amount (News Now March 3). Arrowhead took several measures last year to raise its capitalization ratio, including closing four branches and laying off 60 employees (News Now Jan. 8, 2009). At that time Arrowhead CEO Larry Sharp told News Now that San Bernardino and Riverside counties had the largest foreclosure rate in the country. "Our credit union was not impacted by the subprime issues, but rather by the downturn in the economy that resulted from the subprime problems," he said at the time. There is 10% unemployment in our area that could reach 12% by year-end. Also the bankruptcy rate is up 125% now in our area. We don't know how deep this thing is."

Inside Washington (06/25/2010)

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* WASHINGTON (6/28/10)--A recent Treasury Department inspection of the Office of Thrift Supervision found that that organization failed to properly regulate the now-failed $13-billion-in-assets BankUnited and specifically " did not impose limits or restrict BankUnited's concentration and growth in high-risk option" adjustable-rate mortgages. The report also found that the OTS did not accurately assess BankUnited’s underwriting or risk-weighting practices and allowed the thrift to improperly backdate a capital infusion, American Banker reported…

NCUA staff covers SAFE Act finalization registration

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WASHINGTON (6/28/10)--National Credit Union Administration (NCUA) attorney Regina Metz updated credit unions on the status of implementing the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act during a recent Credit Union National Association (CUNA) audio conference. During the conference, Metz explained that there are two steps that have yet to be completed: Finalizing SAFE regulations and creating the national registration procedures. The NCUA and all of the federal banking agencies except the Office of Thrift Supervision (OTS) have approved the interagency SAFE regulations. The NCUA Board approved the regulations in April, and once the Office of Management and Budget approves the OTS rule, the agencies will publish a final rule in the Federal Register. The rule will be come effective the first date of the calendar quarter 60 days after publication. Metz, who represents NCUA on the interagency SAFE working group, indicated that the agencies hope to publish a final rule by the end of July, which would mean an October 1 effective date; otherwise, the rules are expected to become effective Jan. 1. However, as Metz explained, credit union employees still can’t actually register until the Nationwide Mortgage Licensing System and Registry is structured to accept registrations from bank and credit union employees. The NCUA and the federal banking agencies are working with the Conference of State Bank Supervisors on the registry, which they hope to have ready early next year. Employees will have 180 days after the agencies provide a public notice announcing that the registry is accepting initial registrations. Metz indicated that once the first round of registrations is completed, the agencies envision annual renewals would occur between Nov. 1 and Dec. 31 of each year. The SAFE regulations will require that credit unions adopt policies to assure that their employees who originate residential mortgages provide the required information (such as fingerprints and employment history), obtain a unique identifying number, and register. A key question is who will be required to register. Metz discussed the information found in the regulation’s Appendix A, which provides examples of which employees are considered to originate mortgage loans and therefore will need to register, once the system is up and running. Only bank and credit union employees are subject to the registration procedures, Metz said. Others engaged in residential mortgage lending, including employees of credit union service organization (CUSOs), as Metz explained, are subject to more extensive state licensing procedures that include not only registration and having a unique identifier number, but also periodic testing. In response to an audience question, Metz noted that the cost of registration has yet to be determined. “The regulation’s expected fall ‘effective date’ would only mean that credit unions have to start developing their written polices and procedures to ensure compliance with the new rule and can start identifying which employees will be subject to SAFE registration,” explained Valerie Moss, CUNA’s Director of Compliance Information. “Based on what we’re hearing, credit unions should assume that registration will occur the first half of 2011. And remember, employees engaged in home equity lending and refinancings are covered by SAFE,” she added. Moss also noted that participants in CUNA’s audio-conference raised some practical issues that CUNA will pursue with NCUA, such as how to report if more than one registered person is involved in a mortgage loan decision. “As credit unions review the regulatory requirements, please continue to feed us your operational questions so we can raise them with NCUA,” said Moss. In addition to the SAFE Act update, CUNA staff covered other areas that currently require special attention by credit unions, including:
* Last minutes details credit unions should be sure to take care of before the Regulation Z open-end rules go into effect on July 1; * A brief overview of the new Regulation Z Credit Card Act rules that go into effect on Aug. 22; * A quick rundown of the Federal Reserve Board's clarifications to the Regulations E overdraft rules that are effective July 1 (Aug.15 for accounts opened prior to July 1); * A reminder for credit unions to get ready to start receiving direct disputes from members regarding information in their consumer reports on July 1; * A heads up regarding available information that credit union mortgage lenders should consider during lapses in the National Flood Insurance program (NFIP); * A brief overview of what the garnishment of federal benefit payments requirements might look like; and * An update on the provisions in the financial reform bill that are of interest to credit unions.
For an archived version of the audio conference, use the resource link.

CUNA asks Senate to pass NFIP extension

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WASHINGTON (6/28/10)--Saying that “every day of delay” adds to “confusion and risk for families in the real world,” the Credit Union National Association (CUNA) joined several other associations in asking the Senate to “take immediate action” and pass legislation that would reauthorize and extend the National Flood Insurance Program (NFIP). H.R. 5569, which passed the House of Representatives last Thursday, would reauthorize and extend the NFIP through Sept. 30. In the release, the associations said that while they agreed that the NFIP needs substantial reform, “America’s property owners depend on this important federal program administered with the help of the property casualty insurance industry.” “Since the program expired, those who need insurance can’t get it. Those who have it can’t increase coverage. And anyone trying to buy property that requires federal flood insurance is out of luck — creating yet another disruption in a struggling real estate market,” the letter added. Members of Congress have tried several times to extend the NFIP and other government-backed programs, with no luck. The NFIP has been lapsed since June 1. The NFIP is vital to many credit unions, as the mortgages they write for properties in a floodplain are required to have flood insurance, CUNA said. The NCUA last week provided credit unions with guidance on how best to deal with the lapse, stating that credit unions may continue to make loans without flood insurance. (See related story: NCUA guides CUs through NFIP lapse) For the full letter, use the resource link.

CUNA disappointed by reg reform bills interchange treatment

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WASHINGTON (6/28/10)--Credit Union National Association (CUNA) President/CEO Dan Mica on Friday said that he was “disappointed” that House and Senate regulatory reform conferees allowed legislation that would enable government intervention in interchange fee negotiations to remain in the final version of financial regulatory reform. “Although the amendment limiting interchange for credit unions remains in the final bill, credit unions did an extraordinary job in not only expressing the shortcomings of the amendment, but also making changes to it,” Mica added Changes made to the legislation include a requirement that would force the Federal Reserve to account for fraud prevention costs when it determines interchange fees, an exemption for government pre-paid cards, and the removal of a provision that would have allowed merchants to discount between payment card networks. A provision that will force merchants that accept payment from one payment network to accept all debit cards that operate under that network was also added. The House-Senate conference committee staff is expected to release a final report early this week, and the final version of the reform bill should move on to the House and Senate floors this week. "The major upheaval this legislation will cause to the present debit interchange system contravenes the broader reform bill's stated goal of consumer protection," Mica noted. "Millions of consumers will very likely face higher fees as credit unions cope with the lost interchange revenue that has helped underwrite the cost of their card services," he added. CUNA, along with credit unions, will continue urging lawmakers to oppose the final reform bill as long as it contains costly revisions to the current system for processing debit payments. “If the interchange provision does become law, our efforts will turn to the rulemaking process, once it begins with the Federal Reserve, where we intend to fully represent the interests and concerns of credit unions,” Mica said. CUNA also plans to focus its efforts on ensuring that the carveout, which exempts credit unions and other financial institutions with under $10 billion in assets from the interchange restrictions, works under the Fed’s rule. The Fed will also be required to report on the impact that its interchange rules are having on credit unions and other small issuers in its yearly report to Congress. Another victory for credit unions is the inclusion of the National Credit Union Administration chairman on a proposed financial stability oversight council. The broader financial reform bill would also create a new Consumer Financial Protection Bureau within the Federal Reserve. Credit unions with assets under $10 billion would not be examined by the new bureau. Late in negotiations, conferees also agreed to exempt auto dealers from the bureau's purview.

Inside Washington (06/24/2010)

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* WASHINGTON (6/25/10)--Reps. Judy Biggert (R-Ill.) and Darrell Issa (R-Calif.) won the adoption of an amendment to the regulatory reform bill Wednesday that would require the inspector general of the Federal Deposit Insurance Corp. (FDIC) to investigate whether political pressure was involved with securing private-sector assistance for troubled banks. The amendment targets Chicago-based ShoreBank, which secured $140 million of private investments in May. The FDIC and the Illinois Department of Financial and Professional Regulation issued a cease-and-desist order against the bank in July. It is unknown whether the Senate will support it, said American Banker (June 24) ... * WASHINGTON (6/25/10)--The Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency Thursday issued the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on June 29, 2009. In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production ...

FinCEN reports slight SAR drop

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WASHINGTON (6/25/10)--The Financial Crimes Enforcement Network (FinCEN) this week reported that the total amount of suspicious activity reports (SARs) filed decreased slightly to 1.28 million in 2009. FinCEN recorded 1.29 million SARs in 2008. The number of SARs filed by depository institutions, including credit unions, also dropped to 720,309 in 2009, down from the 732,563 SARs that were filed in 2008. While FinCEN did not classify its SAR numbers by type of depository institution, it did report that the number of SARs addressing potential mortgage fraud increased by 4% in 2009. “Suspected incidents of credit card fraud increased 5% in 2009,” FinCEN added. In all, 27% of the suspicious activity reported by depository institutions in 2009 was attributed to suspected fraud-related activities including check fraud, commercial loan fraud, consumer loan fraud, credit card fraud, debit card fraud, mortgage loan fraud, and wire transfer fraud. Mortgage loan fraud and check fraud remain the only two SAR characterizations that have experienced an increase every year since 1996. For the full FinCEN report, use the resource link.

Compliance Challenge Reg E disclosures must be made individually

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WASHINGTON (6/25/10)--In June’s edition of Compliance Challenge, the Credit Union National Association (CUNA) discloses that Regulation E does not allow credit unions to inform their members of new Reg E opt-in requirements via the credit union's newsletter. Opt-in notices must be provided before members may consent or opt in to the credit union's overdraft service for ATM and one-time debit card transactions, CUNA said. Those notices must inform the member on the steps needed to opt-in to the program. A credit union can provide a form to fill out and return in person or mail back to the credit union; a readily available telephone line that members can call to opt-in; or for members who have agreed to do business electronically, a Web-based form where members can click on a check box and then click a button to confirm their choice. Assuming the member elects to opt in, the credit union must send confirmation of the member’s opt-in choice in writing or electronically, if the member agrees to electronic communication. CUNA again addressed Reg E in a separate question that asked if credit unions may charge their members non-sufficient fund (NSF) fees when suspending the overdraft service for ATM and one-time debit card transactions. When asked recently by CUNA staff, Federal Reserve Board staff said that credit unions may charge fees in these instances since the member consented to the service and neither the credit union nor the member cancelled coverage. However, CUNA added, credit unions should notify their members that they may still incur NSF fees during the suspension period. Credit unions will have to craft these notifications very carefully in order to charge fees during this period, CUNA added. For the full compliance challenge, use the resource link.

Inside Washington (06/23/2010)

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* WASHINGTON (6/24/10)--The Congressional Oversight Panel of the Troubled Asset Relief Program has said the Obama administration’s efforts to slow foreclosures have not been effective. A report released Monday by Treasury indicates that 350,000 homeowners received a permanent loan modification, but another 430,000 were removed from the Home Affordable Modification Program (American Banker June 23). Treasury Secretary Timothy Geithner, who testified before the panel, defended the program, arguing that homeowners were eliminated from the program because they could not verify their income. Initially, Treasury allowed trial modifications with little or no income verification but later changed that policy, Banker said ... * WASHINGTON (6/24/10)--House and Senate conferees of the regulatory reform bill were expected Tuesday to approve language to make it tougher for federal regulators to pre-empt state consumer protection laws, but did not tackle the issue, said American Banker (June 23). Financial observers expected Senate conferees to agree to language noting that the Office of the Comptroller of the Currency (OCC) can only pre-empt state laws that interfere with banking. The Senate offer countered language House conferees sought, which would have forced the OCC to prove that a federal standard already existed before pre-empting a state law. At the end of the conference, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) rejected the House language and left the issue hanging ... * WASHINGTON (6/24/10)--The Federal Deposit Insurance Corp. (FDIC) adopted a final rule that extends the Transaction Account Guarantee (TAG) program for six months, from July 1 through Dec. 31. Under TAG, customers of participating insured depository institutions are provided full coverage on qualifying transaction accounts. FDIC Chairman Sheila Bair said that while the program “has proven to be critical to ensuring our financial system’s stability, it was established as a temporary program. Ultimately, it should be up to Congress to determine our insurance limits. Adoption of this final rule allows the opportunity for Congress to conclude its current deliberations relative to this program.” The rule--almost identical to an interim rule adopted on April 13--requires that interest rates on qualifying negotiable order withdrawal accounts offered by banks in the program can be reduced to 0.25% from 0.5%. It requires TAG assessment reporting based on average daily account balances but makes no changes to the assessment rates for participating institutions. It also provides for another extension for a period of time not to exceed Dec. 31, 2011 ...

NCUA guides CUs through NFIP lapse

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WASHINGTON (6/24/10)—The National Credit Union Administration (NCUA) on Wednesday said that while the National Flood Insurance Plan (NFIP) remains inactive due to the lack of a congressional response, credit unions may continue to make loans without flood insurance. Making these loans are not considered violations of the NCUA’s Part 760: Loans in Area Having Special Flood Hazards, but the NCUA in its guidance stressed that credit unions should “continue to make flood determinations, provide timely, complete, and accurate notices to borrowers, and comply with other parts of the flood insurance regulations.” Credit unions must also “evaluate safety and soundness and legal risks and prudently manage those risks” while the NFIP continues its inactive period. “Lenders need to have a system in place so that policies are obtained as soon as available following reauthorization for properties subject to mandatory flood insurance coverage,” the NCUA guidance added. The NFIP is vital to many credit unions, as the mortgages they write for properties in a floodplain are required to have flood insurance. Since flood insurance is unavailable in many parts of the country, the NFIP is an important resource to credit unions and other lenders. The NFIP and certain other government programs lapsed on June 1, when Congress again failed for the third time this year to extend the authority of the NFIP. However, legislation that would extend the authorizations for the NFIP and certain other programs is pending in Congress. For the full NCUA release, use the resource link.

NCUA should mirror FDICs flexible approach CUNA says

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WASHINGTON (6/24/10)—The rate of the insurance assessments that are charged to banks covered by the Federal Deposit Insurance Corp. (FDIC) will remain steady through the end of this year, the FDIC has announced. The FDIC plans to apply a uniform three basis-point increase in assessment rates beginning on Jan. 1. The FDIC current assessment rate will return its deposit insurance fund to a positive balance by 2012. The Credit Union National Association's (CUNA) senior vice president and deputy general counsel, Mary Dunn, said that the FDIC’s decision “indicates its recognition of the economic realities that many banks it insures are facing and its willingness to hold off inflicting more pain on those banks through increased premiums at this time.” “This is the kind of flexibility that credit unions encourage the National Credit Union Administration (NCUA) to use, such as by allowing the National Credit Union Share Insurance Fund’s (NCUSIF) normal operating level to be set closer to 1.2%, as CUNA has advocated,” Dunn said. “This would help to mitigate credit unions' NCUSIF costs, without going under the 1.2% statutory benchmark under which more premiums would be triggered,” she added. The NCUA expects to levy an assessment to replenish the NCUSIF later this year. CUNA has estimated that this assessment could be somewhere between five and 10 basis points (bp), bringing the total amount assessed by the NCUA , including the 0.134% of insured shares assessed this month for the corporate credit union stabilization program, this year to between 18 and 23 bp of insured shares.

Geithner backs CUs CDCI program as aid to small businesses

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WASHINGTON (6/24/10)--U.S. Treasury Secretary Timothy Geithner this week promoted credit unions and other community development financial institutions as one of many ways that the Treasury is helping improve the availability of credit to small businesses. A total of 111 community development credit unions (CDCUs) have applied for the Treasury’s Community Development Capital Initiative (CDCI), which makes secondary capital investments of up to 3.5% of assets in eligible low-income credit unions. The applicants are being reviewed for financial soundness by the National Credit Union Administration, and could receive a portion of $100 million in total funding. The Treasury has received some of those applications and “expects to begin funding by next month," Geithner said. The National Federation of Community Development Credit Unions' board also pledged to make an additional $1 million in secondary capital available as matching funds for member CDCUs that might not be immediately eligible for CDCI investments. Commenting on Geithner’s remarks, federation President Cliff Rosenthal said that the inclusion of CDCUs in the CDCI program “is a recognition of the vital work credit unions and other community-based lenders are having on Main Streets nationwide,” and a major victory for the credit union movement.

With interchange CUs oppose fin reg reform bill

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WASHINGTON (6/24/10)--Saying that debit interchange provisions “would not only adversely affect how credit unions provide access to members’ accounts,” but would also “increase costs to credit union members,” Credit Union National Association (CUNA) President/CEO Dan Mica and affiliated credit unions urged legislators to vote no on the current financial regulatory reform package. CUNA’s executive committee on Wednesday also agreed that CUNA and credit unions should oppose the regulatory legislation as long as the interchange language was included. If the interchange provisions were not part of the bill, CUNA would not oppose H.R. 4173, the Restoring American Financial Stability Act of 2010, Mica added. The interchange changes, which were agreed to by both branches of the legislature on Tuesday, would allow the federal government to impose controls on the fees paid to use electronic payment networks. Mica said that while the increased consumer costs that the interchange changes would represent are not what proponents of H.R. 4173 originally intended, those costs “will be the reality for consumers unless the debit interchange provision is removed or modified significantly.” CUNA and credit union leagues are encouraging their member credit unions to write, call and request meetings with lawmakers in their home districts both over the coming weekend and in the near future to discuss the interchange provisions and the legislation in general. In a letter to Congress, Mica said that credit unions did not cause the financial meltdown and have “worked with Congress over the last year in an attempt to minimize the adverse impact that this legislation will have on credit unions and their members, while at the same time recognizing that consumers of financial products, especially those provided by currently unregulated entities, need greater protection.” That letter also reiterated CUNA’s previous claims that the under $10 billion of assets carveout, while well intentioned, “will not work” because there is no mechanism in the legislation that requires payment card networks to operate a two-tier interchange rate system. “Because of this, we believe the interchange rate received by credit unions would converge on the large-institution rate,” the letter adds. For the full letter, use the resource link.

FHFA reports 1Q spike in mortgage mods refinancings

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WASHINGTON (6/23/10)--The Federal Housing Financing Agency (FHFA) on Tuesday reported that loan modifications and refinancings by Fannie Mae and Freddie Mac “increased significantly in the first quarter as the volume of permanent modifications under the Administration’s Home Affordable Modification Program (HAMP) tripled, and refinancings steadily grew under the Home Affordable Refinance Program (HARP).” In a release, the FHFA said that foreclosure prevention activities increased 75%, with HAMP permanent modifications totaling 136,000 and HARP cumulative refinance volume increasing 53% during the first quarter of 2010. A total of 66% of loan modifications that were completed in the final quarter of 2009 reduced the monthly payments of participating mortgage holders by over 20%, the FHFA added. An administration official earlier this year said that the HAMP program, which aims to help struggling homeowners by modifying their mortgages, is currently on course to modify as many as 4 million mortgages by 2012. A total of 17 credit unions took part in the HAMP program in 2009. For the full release, use the resource link.

FinCEN plan would place more cards under BSA

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WASHINGTON (6/23/10)—The Financial Crimes Enforcement Network (FinCEN) has added prepaid debit cards to the list of financial services covered by the Bank Secrecy Act (BSA). The proposed rule applies to non-bank/credit union providers of prepaid access. FinCEN Director James Freis said that the rule, which will apply to cards, cell phones, electronic serial numbers, key fobs, and other funding sources that have been paid for beforehand, would address “vulnerabilities in the current prepaid access environment while maintaining the flexibility to permit new developments in technology, markets and consumer behavior.” FinCEN in the release said that the changes aim to address “regulatory gaps” that have grown as prepaid financial services have increased and became more complex. “The ease with which prepaid access can be obtained, combined with the potential for relatively high velocity of money through accounts involving prepaid access and anonymous use, may make it particularly attractive to illicit actors,” the release added. FinCEN hopes to remedy these situations by altering some terminology and imposing registration, suspicious activity reporting, and recordkeeping requirements on prepaid financial service providers. FinCEN will exempt some low-risk forms of prepaid financial products from these requirements, however. For the full FinCEN release, use the resource link.

Senate conferees accept House option on interchange

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WASHINGTON (6/23/10)--The Credit Union National Association (CUNA) on Tuesday repeated its call for credit unions to oppose Congress’s final financial regulatory reform bill, as the House Senate lawmakers voted to accept a House proposal that retained portions of that bill that would modify current interchange practices. Following the late afternoon decision by the Senators, CUNA Senior Vice President of Legislative Affairs said that CUNA "opposes the big bill with interchange in it, not the concept of financial regulatory reform." The agreed-to version of interchange legislation would allow the federal government to impose controls on the fees paid to use electronic payment networks. While the proposal does currently exempt financial institutions with under $10 billion in assets from the terms of the legislation, CUNA and others have said that that carve out is unlikely to matter, as smaller issuers will likely be pushed aside by favorable deals between merchants and big issuers. CUNA has repeatedly stated that, among other things, altering the current interchange rules would result in an artificially low debit interchange rate that would force small issuers to recoup losses through other means. The interchange provisions as written would hurt consumers by driving up debit card fees, with no compensatory advantages to consumers, CUNA has said. CUNA and various state credit union leagues continued to make their case to legislators during Hill visits on Tuesday, and hundreds of credit union representatives, alsong with over 650,000 credit union backers, have contacted their legislators to voice their opposition to the interchange fee changes in recent weeks. Legislators are aiming to wrap up the financial regulatory reform conference committee by the end of this week. House Financial Services Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Chris Dodd (D-Conn.) on Tuesday disclosed that the committee will discuss prudential regulation on Wednesday, with limited debate on derivatives set to take place on Thursday. Legislative offers, counter-offers, as well as votes, will take place on those days as well. The committee this week agreed to legislation addressing thrifts, deposit insurance reforms, hedge funds, credit rating agencies, executive compensation, and investor protections, among other items.

Inside Washington (06/22/2010)

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* WASHINGTON (6/23/10)--Federal regulators are working to remedy flaws in the executive compensation practices of large banking companies, said American Banker (June 22). In a review of the top 25 financial firms, the Federal Reserve Board spotted multiple deficiencies in the pay practices. The Fed did not detail which banks had problems, but it said it sent notices to the firms last month with information about areas that needed attention. Financial observers said the notices may indicate firms have not updated their pay practices. However, Fed officials noted Monday that they expect some improvements soon. Many large banking organizations already have made some changes in their incentive compensation policies, said Fed Gov. Daniel Tarullo, though he said more work needs to be done. The Fed issued proposed guidance in October on proper executive pay practices and said it would review the practices at the largest firms to see how they had done ... * WASHINGTON (6/23/10)--The Treasury Department has hired 12 small firms to help Morgan Stanley assist the government’s sale of Citigroup Inc.’s common stock. Morgan Stanley is acting as a sales agent for Treasury (American Banker June 22). Treasury is working to unload $7.7 billion shares of Citi common shares ... * WASHINGTON (6/23/10)--The Senate confirmed Marie C. Johns, a longtime advocate for small businesses, on Tuesday as Deputy Administrator of the U.S. Small Business Administration (SBA). Johns will be the second-ranking official at SBA, with responsibility for management, policy development and program supervision. Johns is a managing member of L&L Consulting LLC, an organizational effectiveness and public policy consulting practice ...

CUNA reviews House interchange alternative urges CU opposition

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WASHINGTON (6/22/10)--After an initial review of alternative interchange language offered yesterday by the House as a substitute to a Senate provision in the financial regulatory reform bill, the Credit Union National Association (CUNA) urged credit unions to continue working for improvements to interchange provisions. “We will continue working for improvements in the interchange provisions, and we urge you to continue your efforts to oppose the inclusion of the interchange bill in the financial reform legislation,” said CUNA Senior Vice President of Legislative Affairs John Magill. CUNA also provided a brief summary of some key provisions of the new interchange amendment. They include the following:
* The Federal Reserve would write regulations on interchange fees and whether they are reasonable and proportional to the marginal costs incurred by issuers relating to a transaction. The Fed board would issue rules within nine months of enactment (probably around March/April 2011). The rules would take effect within a year. The costs would be limited to incremental costs of authorization, clearance and settlement plus costs related to preventing fraud; * Credit unions and banks with assets of less than $10 billion would be exempt from the rate-setting rules directly. However, the extent to which this exemption would work in practice is unclear and subject to much debate; * There is no enforcement mechanism to ensure merchants would accept lower interchange fees from bank debit cards and higher interchange fees from credit union debit cards; * The amendment would prohibit issuers and networks from inhibiting the ability of merchants to direct the routing of transactions; * Federal and state government benefits and reloadable prepaid cards would be exempt from the rate settings; * The Fed would be authorized to require any issuer (including credit unions of all sizes) to provide information to the board regarding the regulation of interchange fees and must disclose aggregate information on costs and fees by issuers or payment card networks in connection with debit transactions. (This is a new provision about which CUNA is concerned. However, CUNA notes that if the Fed has to set interchange fees based on costs, it will be useful for them to include credit union data); * In its rules, the Fed would have to consider the similarity between debit transactions and checks that clear the Federal Reserve System at par and to distinguish between the incremental costs incurred by an issuer for its role in settlement, clearance or authorization for a particular transaction; * In writing the rule, the Fed board would have to consult with the National Credit Union Administration (NCUA) and other federal regulators; * The Fed would also be directed to write rules on network fees to ensure network fees are not used to compensate an issuer or to evade the board’s rules; * The amendment does provide that merchant discounts for the form of payment (cash versus debit card, for example) may not differentiate on the basis of the issuer or network. Incentives for the use of credit cards may not differentiate on the basis of issuer or payment network and such incentives must be offered to all buyers and disclosed; * Payment networks may not limit the ability of merchants to set minimum dollar values up to $10 for the acceptance of credit cards; and * Merchants would not be able to discriminate between debit cards or credit cards within a payment network on the basis of the issuer.
CUNA will provide detailed analysis of any final interchange bill.

New interchange language same concerns says CUNA

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WASHINGTON (6/22/10)— The Credit Union National Association (CUNA) said Monday that credit unions "would almost certainly" have to oppose a final financial regulatory reform bill unless lawmakers remove or significantly change even the modified debit interchange provisions put forward yesterday by House conferees. CUNA is studying changes offered Monday by House lawmakers to interchange language, which could be included in a final financial regulatory reform package currently being worked out by a House-Senate conference committee. In a letter to the top members of the House Financial Services Committee and the Senate Banking Committee, CUNA President/CEO Dan Mica wrote that CUNA continues to have “grave concerns regarding the affect that these provisions would have on credit unions and their members.” The letter was also sent to each conference committee member. Both House and Senate versions of the interchange language would require the Federal Reserve to set interchange fees, considering only certain factors in the price-setting formula. In its letter, CUNA continued to encourage the conferees to remove the interchange language from the base text of the reform bill, or to adopt a “more realistic and fair delineation of costs” to be considered and to add enforcement provisions to the prohibition of merchant discrimination against credit unions’ cards. The CUNA letter noted that in lieu of the language’s removal or significant improvement, CUNA and credit unions would “almost certainly” oppose the enactment of the larger reform package. CUNA and credit unions have waged an exhaustive effort against the interchange provision, arguing that it would save merchants money on their costs of doing business while taxing consumers with new fees. CUNA and the leagues organized a national Hike the Hill effort on the interchange issues earlier this month, drawing hundreds of credit union activists to Capitol Hill to meet with legislators. Those in-person visits have been backed by more than 600,000 email and phone contacts on the subject. Both House and Senate versions of the interchange provision offer a carve-out for issuers with less than $10 billion in assets. Critics—including CUNA—have argued that the carve out would not work and could cause additional problems for smaller issuers, who could be pushed aside by favorable deals between merchants and big issuers. “The House offer fails to address the most significant concern of credit unions; specifically that the carve-out envisioned by the provisions is unworkable and not meaningful,” CUNA’s Mica wrote. “Nothing in the House offer directs the payment card networks to operate the two-rate system that would be necessary for the carve-out to work; nothing in the House offer includes enforcement provisions to require merchants to accept credit union cards were a two-rate system to exist; further, the legislation provides significant disincentives for payment networks to honor the carve-out,” Mica pointed out. The CUNA letter also reiterated serious concerns that the interchange provision will result in an “articificially low debit interchange rate” that would force small issuers to recoup losses “through other means.” While the Federal Reserve is directed by the House language to consider fraud prevention costs when fixing the debit interchange rate, it is specifically prohibited from considering other operational costs. “While we oppose the government price-fixing proposed by this legislation, if the government is going to set a price, we believe that all costs should be taken into consideration,” the letter said.

Inside Washington (06/21/2010)

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* WASHINGTON (6/22/10)--Card industry representatives have criticized a Washington hearing about interchange fees because they said it gave their side little opportunity to move forward with its position. On June 15, the Senate Appropriations Committee hearing featured payment industry witness Bruce Sullivan, Visa Inc.’s vice president and head of government services. Sullivan, the lone witness, seemed “ill-prepared” to answer Sen. Dick Durbin (D-Ill.)’s questions about consumer interchange and declined comment on several points, said American Banker (June 21). The Electronic Payments Coalition also said the forum was an inappropriate substitute for an official Senate hearing. Durbin proposed the interchange amendment. The Credit Union National Association and credit unions oppose the amendment because they said it would hinder credit unions’ ability to offer card products and services. The House has submitted a substitute proposal on interchange to be considered for the final regulatory reform bill (SEE RELATED: New interchange language, same concerns, says CUNA) ... * WASHINGTON (6/22/10)--Conferees spent last week making some significant changes to the regulatory reform bill--including scaling back a capital provision and overhauling the deposit insurance system--but more lies ahead, said American Banker (June 21). There is just one week left for conferees to work on key parts of the legislation, including risk retention, consumer protection, derivatives oversight and interchange fees. Some of the tougher subjects are slated to be taken up today, including interchange--which the Credit Union National Association (CUNA) and many credit unions oppose. CUNA has said the legislation would hinder credit unions’ ability to offer card products and services. Also this week, conferees are scheduled to tackle a derivatives provision, which would require banks to spin off their derivatives operations. Sen. Blanche Lincoln (R-Ark.), a conferee and the provision’s author, appears to determined to keep the provision a part of the final bill ... * WASHINGTON (6/22/10)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Friday that policymakers should address the government’s role with Fannie Mae and Freddie Mac after the regulatory reform bill is complete. Bair said government involvement in mortgage finance is justified, but said there must be clarification regarding the enterprises’ governmental functions and which functions are subject to “discipline of the marketplace” (American Banker June 21). Fannie and Freddie were placed into conservatorship by the government in September 2008 ...

CUNA releases FTC Fed final rule analyses

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WASHINGTON (6/22/10)--The Credit Union National Association (CUNA) addressed the Federal Trade Commission’s (FTC) final rule that requires disclosures for financial institutions that do not have federal deposit or share insurance in a recently published final rule analysis. The FTC’s final rule, which will become effective on July 6, requires institutions to inform their members or customers that the institution is not federally backed and that the federal government does not guarantee the depositor will receive money if the institution fails. While a proposal released in 2005 would have required financial institutions to provide this notice to each member or customer in writing, financial institutions may now comply with the rule by posting a disclosure of their insurance situation, in some instances. Those publicly placed disclosures must be visible at each station or window place where deposits are received, at each principal place of business, in all branches where the institution accepts deposits or opens accounts. The disclosures must also be visible on the financial institutions home page. The final rule does not apply to financial institutions that do not receive deposits in amounts less than the maximum insurance level of $250,000. CUNA also addressed recent Federal Reserve Board clarifications to Regulation E, the Electronic Fund Transfer Act, and Regulation DD, the Truth in Savings Act (TISA) in a separate final rule analysis. One item noted by the Fed changes, which were released late last month, was a clarification that institutions may not assess fees for the payment of ATM and one-time debit card overdrafts if consumers do not opt-in to their overdraft programs. The Fed at that time also clarified that Reg DD does not require financial institutions "to exclude from the consumer's balance funds that may be transferred from another account" under retail sweep programs. To read the final rule analyses, use the resource links.

Fed posts new rules for same-day ACH service

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WASHINGTON (6/22/10)--The Federal Reserve Board, beginning on Aug. 2, will offer “an opt-in, same-day settlement service” for Automated Clearing House (ACH) debit payments. The new federal reserve service will apply to all depository institutions. The Fed said that FedACH customers may opt-in to the service, which will “be limited to transactions arising from consumer checks converted to ACH and consumer debit transfers initiated over the Internet and phone.” The debit transfers will post to institutions' Federal Reserve accounts at 5:00 p.m. ET and same-day return debit transfers will post at 5:30 p.m. ET, the release added. For the full release, use the resource link.

NCUA to CUs Assessment decision was not taken lightly

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ALEXANDRIA, Va. (6/22/10)--The National Credit Union Administration (NCUA) on Monday communicated directly with credit unions, telling them that the recent decision to repay corporate credit union stabilization costs by assessing a 13 basis point per insured share fee on natural person credit unions “was not taken lightly.” The NCUA is currently required to repay the U.S. Treasury a total of $1.5 billion for funds that were borrowed to prop up the corporate credit union system. The assessment, which will be invoiced in July or August and will come due in mid-August, will cover $1 billion of that total, with the NCUA covering the remaining $500 million by reducing “the liquidity assistance provided to corporate credit unions in September.” The letter to credit unions provides that federally insured credit unions should calculate the assessment based on insured shares and deposits as of March 31. Credit unions can record the expense on the line National Credit Union Share Insurance Fund stabilization expense (account code 311) on the June call report. While several credit union officials have asked the NCUA if it could “ease the burden of assessments” for credit unions that have prudently managed their risks, the NCUA’s letter to credit unions said that the Federal Credit Union Act requires the regulator to share the burden of any premium or assessment among all in the credit union system. The NCUA letter also covered some of the decisions looming on the horizon, including decisions that natural person credit unions will have to make regarding whether or not corporate credit unions should be recapitalized, if they should switch to another corporate credit union, or if they should seek out a non-CU source for the services that the corporates once provided. The NCUA said that it “plans to do its part to resolve the issues within the corporate credit union system,” adding that it will soon “propose a plan to remove the toxic assets that have depleted capital from investors in corporate credit unions” and will also “finalize a new corporate credit union regulation that will prevent the concentration of high-risk assets and build a stronger buffer to protect capital.” That asset plan “will ensure that new corporates begin with clean balance sheets,” and will ensure that those clean balance sheets are maintained, the agency added. For the full NCUA letter, use the resource link.

Inside Washington (06/18/2010)

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* WASHINGTON (6/21/10)--The Federal Housing Administration (FHA) is looking for outside help to prevent defaults in its single-family mortgage portfolio, which is worth $760 billion. FHA said its loan-level reviews are lacking the detail needed to identify loans that could end up in delinquency, default or foreclosure (American Banker June 18). The agency is planning to hire a third-party contractor to find and repair deficiencies in its systems, and better the agency’s ability to detect fraud and monitor risk. FHA insures 20% to 25% of home loans written today, said the Banker ... * WASHINGTON (6/21/10)--Regulatory reform bill conferees agreed Thursday to scale down a provision sponsored by Sen. Susan Collins (R-Maine) that would eliminate use of trust-preferred securities as Tier 1 capital. Conferees agreed to exempt institutions with less than $500 million in assets and grandfather existing trust-preferreds for some bank holding companies. Senate and House conferees clashed on how to grandfather in the institutions, and it is not clear how the final provision will look. House Financial Services Committee Chairman Barney Frank (D-Mass.) said the House would provide its counter on the measure on Tuesday. Collins’ amendment originally would have treated all holding companies the same and would be effective immediately. The financial services industry raised concerns that the provision might cause some institutions to be considered undercapitalized ...

CUNA again pushes interchange ahead of conf. committee debate

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WASHINGTON (6/21/10)--With the financial regulatory reform conference committee set to discuss interchange fees on Tuesday, members of credit union leagues nationwide will make a final push today to urge their legislators to remove interchange language from the final bill. As currently written, the financial regulatory reform bill would, among other things, allow the federal government to impose controls on the fees paid to use electronic payment networks. The interchange provisions as written would hurt consumers by driving up debit card fees, with no compensatory advantages to consumers, the Credit Union National Association (CUNA) has said. CUNA President/CEO Dan Mica said that CUNA’s ultimate goal is “the elimination of the entire interchange amendment.” Credit union backers also continue to contact their representatives, with the number of phone calls and emails to D.C.-based legislators totaling over 600,000 as of last Friday. Overall, the efforts of CUNA and credit union backers have seen interchange opposition gain some traction. Over 130 members of the House last week came out publicly to oppose Sen. Richard Durbin’s (D-Ill.) legislation. The interchange opposition has also received significant coverage in both local and national media outlets, and hip hop entrepreneur Russell Simmons, who also owns a debit-card service for the under-banked, has urged Congress not to make well-intentioned financial reforms “at the expense of the poor.” Simmons’ editorial appeared in The Huffington Post late last week.(See related story in News Now's System section, "Russell Simmons: Interchange amendment hurts 'underserved.'") The bicameral conference committee is expected to continue through the end of this month, and legislators have said that the final version of the negotiated financial reform bill would make its way to President Barack Obama’s desk in early July.

Pressing compliance issues CUNA offers June 24 audio conference

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WASHINGTON (6/21/10)—The status of compliance with interagency Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act regulations that require residential loan originators to register with the Nationwide Mortgage Licensing System and Registry will be among the pressing compliance issues featured in a June 24 Credit Union National Association (CUNA) audio conference. The session also will address compliance challenges associated with the following rules:
* Regulation Z (Reg Z) open-end credit rules that go into effect on July 1; * Reg Z credit card rules that go into effect on Aug. 22; * Regulation E overdraft rules for ATM and one-time debit card transactions, effective July 1 (or Aug. 15 for accounts in existence before July 1); * Fair and Accurate Credit Transactions Act (FACTA) accuracy and direct dispute rule, effective July 1); * The Credit Card Accountability, Responsibility and Disclosure (CARD) Act's credit card and gift card rules, effective Aug. 22; * Federal Financial Institutions Examination Council's (FFIEC) revised “Bank Secrecy Act/Anti-Money Laundering Examination Manual”; * Status of the National Flood Insurance Program (NFIP); and * A brief update on provisions of interest to credit unions in the financial regulatory reform bill, which currently being hammered out by a House-Senate conference committee.
The Pressing Compliance Issues Audio Conference is offered by CUNA on a quarterly basis. In addition to CUNA compliance staff, the June 24 session will feature a special presentation on the SAFE Act regulations by National Credit Union Administration (NCUA) attorney Regina Metz. The NCUA and all of the federal banking agencies except the Office of Thrift Supervision have approved the interagency regulations. The NCUA and the federal banking agencies are working with the Conference of State Bank Supervisors to modify the Registry so that it accepts registrations from all covered individuals. When fully operational, credit union mortgage loan originators will have six months to complete initial registrations on the system. They also will have to obtain a unique identifier and maintain this registration. Use the resource link below for registration information.

All fed benefits to be paid electronically after March 2013 Treasury says

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WASHINGTON (6/21/10)--All federal benefits that are filed on or after March 1, 2011 will be paid electronically, the Treasury said last week. Those payments will be made via either direct deposit or the Direct Express Debit MasterCard card, the Treasury added. Individuals that are currently receiving their benefit payments via paper check will be asked to accept their benefits electronically by March of 2013. The change will save over $125 million annually, according to the Treasury. “Electronic payments are widely acknowledged as providing a safer, more convenient and cost-effective way for people to get their payments,” and the Treasury’s electronic initiative “will provide significant, measurable benefits to the American people, in terms of saving taxpayer dollars, decreasing the impact on the environment and reducing the administrative burden on government,” the Treasury added. The Treasury said that the proposal would have “no immediate impact” on its Go Direct campaign. The Treasury will accept comments on the proposal until August 18, and the Credit Union National Association (CUNA) will soon review the proposal with its payments and consumer protection subcommittees. CUNA will also discuss the proposal with the credit union councils. The Treasury began its Go Direct program, which encourages Americans to switch to direct deposit, in 2004. CUNA is a Go Direct national partner and supports the check-safety and cost-savings goals for the program. For the Treasury release and the proposal, as published in the Federal Register, use the resource link.

NCUA schedules closed board meeting for June 24

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ALEXANDRIA, Va. (6/21/10)--The National Credit Union Administration (NCUA) on Friday announced that it will hold a closed session on June 24. According to an NCUA release, the board will discuss supervisory activities during the meeting. The meeting will take place at 9:30 am E.T. For the full NCUA release, use the resource link.

CUNA concerned by Treasurys garnishment review requirements

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WASHINGTON (6/21/10)--Credit Union National Association (CUNA) on Friday said that credit unions have serious concerns with a U.S. Treasury proposal that would implement statutory restrictions on the garnishment of federal benefit payments. The Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Personnel Management issued the proposal in April. The agencies said that the rule was a response to "recent developments in technology and debt collection practices that have led to an increase in the freezing of accounts containing federal benefit payments." Specifically, the Treasury proposal would “establish procedures that financial institutions must follow when a garnishment account order is received for an account in which there is a direct deposit of Federal benefit payments,” CUNA said. This would include requiring institutions to review the account history during the 60-day period prior to the receipt of the garnishment order. According to CUNA, many credit unions lack the data processing capability to conduct these reviews and would be distracted from their true goal of serving their members if the proposal became law. Credit unions that have the data processing capabilities necessary to execute these reviews “may not have the capability to review a 60-day historical period,” CUNA added. CUNA has suggested that the Treasury modify its rules by allowing financial institutions to “use a flat amount that the account holder would have access to, such as the lesser of $2,200 or the balance in the account,” rather than imposing an across the board 60-day review requirement. The $2,200 figure was considered by the agencies as a possible alternative to the proposal, although they did not indicate how this thresold was determined. CUNA in the comment letter also spoke in support of portions of the proposal that would not require financial institutions to undertake additional reviews if funds are transferred from a primary to a secondary account. For the full comment letter, use the resource link.

Inside Washington (06/17/2010)

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* WASHINGTON (6/18/10)--The federal bank and thrift regulatory agencies have proposed a change to Community Reinvestment Act (CRA) rules that they say is intended to support stabilization of communities affected by high foreclosure levels. The proposed rule change specifically would encourage depository institutions to support the Neighborhood Stabilization Program (NSP) administered by the U.S. Department of Housing and Urban Development (HUD). It would allow banking institutions to receive CRA consideration for NSP-eligible activities in additional NSP-targeted areas and thereby, it is hoped, leverage government funding targeted to these areas. Also on the CRA front, bank and thrift agencies announced Thursday that there will be a series of public hearings on updated rules that implement the CRA. There are currently four hearings planned around the country: July 19, in Arlington, Va.; Aug. 6 in Atlanta; Aug. 12 in Chicago; and Aug. 17 in Los Angeles. The agency involved is the Federal Reserve Board. It intends to consider how to update the regulations to reflect changes in the financial services industry, changes in how banking services are delivered to consumers today, and current housing and community development needs… * WASHINGTON (6/18/10)--The House passed legislation this week that would temporarily save millions of gift cards from being destroyed under the Credit Card Accountability, Responsibility and Disclosure Act. The bill would delay the effective date of rules that require cards to prominently display expiration dates. Originally, the rules would have gone into effect Aug. 22, but will now be effective Jan. 31. Cards produced before April 1 would be affected (American Banker June 17). The measure aims to avoid having to destroy the cards and cardholder agreements, said Terry Maher, partner with Baird Hom LL law firm and general counsel for the Network Branded Prepaid Card Association ... * WASHINGTON (6/18/10)--Conferees on the regulatory reform bill analyzed provisions that would give the Government Accountability Office (GAO) more power to audit the Federal Reserve Board and also give shareholders a nonbinding vote on executive compensation (American Banker June 18). Conferees agreed to allow GAO to conduct ongoing audits of the Fed’s monetary policy decisions after a two-year delay, but disagreed on limitations regarding its emergency lending powers. Regarding executive compensation, conferees were not able to resolve some differences. The House version would give shareholders a nonbinding vote on golden parachute packages for senior executives, while the Senate did not want to add a provision. The final bill includes a measure to allow a similar vote on general compensation ... * WASHINGTON (6/18/10)--A spending bill that would extend jobless benefits has been set back in the Senate after Democrats struggled to garner support for the measure. Senate Finance Chairman Max Baucus (D-Mont.) said he hopes Democrats’ moves to narrow benefit payments to the unemployed and pare down a proposal to suspend cuts in Medicare payments to doctors would help move the bill toward passage (Wall Street Journal June 17.) Changes also were made to a proposed tax on income that managers of hedge funds earn. Sen. Dianne Feinstein (D-Calif.), who supported the bill, said she questioned how long unemployment insurance--at 99 weeks currently--would run. Senators also approved a measure that would lengthen the time individuals have to qualify for a homebuying tax credit. The credit, originally set to expire June 30, would run through Sept. 30, although buyers would have had to enter into the purchase contract by April 30 to qualify ...

FinCEN reports jump in foreclosure rescue scams

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VIENNA, Va. 6/18/10)--Suspicious Activity Reports (SARs) that note foreclosure rescue scams increased dramatically in 2009, according to the Financial Crimes Enforcement Network (FinCEN), and the agency said it is not clear whether the activity has skyrocketed or financial institution awareness of the fraud has increased. In its report entitled “Loan Modification and Foreclosure Rescue Scams—Evolving Trends and Patterns in Bank Secrecy Act (BSA) Reporting,” FinCEN said it analyzed more than 3,500 SARs filed from 2004 through 2009, 3,000 of which were filed in 2009. In addition to a dramatic rise in this type of fraud report, FinCEN said its analysis shows that the nature of foreclosure rescue scams has shifted during the period examined in the study. The earlier SARs identified persons or entities that purported to be loan modification or foreclosure rescue specialists, but who were later identified as fraudsters who targeted financially troubled homeowners with promises of assistance. “The scams involved the homeowners signing quit claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan,” FinCEN noted. Later SARs zero in on scams that FinCEN said reflect “an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms”. Following receipt of large advance fees, scammers rarely, if ever, provided any service. FinCEN added: A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were given bogus documents, or were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal. Use the resource link below to see the top 10 major metropolitan areas reporting these scams and to read more about the FinCEN report.

As House aids bank lending MBL cap lift remains option

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WASHINGTON (6/18/10)—A government-backed $30 billion fund that would ease the ability of small banks to lend to customers who own small businesses inched one step closer to becoming law on Thursday. The House bill, which would provide funds that small community banks could then use to lend to small businesses, passed by a 241-182 vote. It is not entirely clear where that $30 billion in funding would come from. The Credit Union National Association (CUNA) and a growing list of backers, including the U.S. Treasury, Rep. Paul Kanjorski (D-Penn.), and Sen. Mark Udall (D-Colo.), have posited that the current lending crunch could be eased by lifting the 12.25% of assets cap on credit union member business lending. Both Udall and Kanjorski have prepared separate bills that would increase the MBL cap, and Kanjorski’s bill continues to enjoy strong support in the House. The Treasury also recently proposed lifting the MBL cap to as high as 27.5% of total assets, and Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, has said that that committee would soon take up the topic of MBLs. CUNA has estimated that lifting the MBL cap to 25% of a credit union's assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers.

FOM proposal approved by NCUA with modifications

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ALEXANDRIA, Va. (6/18/10)--The National Credit Union Administration (NCUA) on Thursday approved a final version of previously proposed chartering and field of membership (FOM) policy changes, setting objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple political jurisdictions.
Click to view larger image NCUA Chairman Debbie Matz and Board Memeber Michael Fryzel are briefed on one of many topics tackled at the June 17 NCUA meeting
Under the final rule, single political jurisdictions, such as a county, may continue to be the basis for a new or expanded community charter without having to meet further statistical standards. While portions of the original proposal were retained that eliminated the so-called “narrative approach” from the application, that specified how underserved areas and single political jurisdictions may be addressed, and that grandfathered previously approved well-defined local communities into the new regulations, the NCUA did make some changes in the final rule. One such change is an alteration that would allow districts with populations of 200,000 or less to be classified as “rural” for credit union community charter purposes. The upper population limit for this classification was 100,000 under the previous proposal. NCUA Chairman Debbie Matz said that the NCUA’s revised proposal removes some of the more “burdensome” elements of the previous charter application process and provides credit unions with the “flexibility” to serve consumers that would otherwise go unserved. Matz warned that while charter approval will not be “automatic,” the NCUA proposal, which will be enacted 30 days after it is published in the Federal Register, “dramatically improves” both the application process and the NCUA’s ability to evaluate those applications. NCUA staff has previously estimated that the redesigned process will shorten the amount of time needed to approve an application to "a couple of months" in most situations, with the more difficult situations needing slightly more time to be resolved. The NCUA during the meeting also voted to authorize regional directors and the director of the Office of Small Credit Union Initiatives “to process a broad range of chartering transactions” to help expedite the overall chartering process. The NCUA will also seek to ensure that credit union marketing plans address how those credit unions will implement their business plans to serve the entire community and that the plans address the needs of the underserved and various demographic groups. Other factors will also be considered, and the NCUA members during the meeting noted that credit unions should not fear immediate corrective action if their business plans do not immediately conform to the new NCUA standards.

NCUA assesses 13-bp charge to repay corporate CU coverage

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ALEXANDRIA, Va. (6/18/10)--Credit unions will soon be charged an assessment of 0.134% of insured shares as the National Credit Union Administration (NCUA) collects a portion of the funds necessary to pay for the costs of the corporate stabilization. Invoices for the assessment will go to credit unions in July with the assessment due in August. In accordance with the stabilization fund established by Congress last year, the agency may collect the funds necessary to cover the costs of corporate stabilization over a period of as long as seven years. The NCUA assessment of the likely amount of those costs is in the neighborhood of $6 billion, but the actual amount of the losses will not be known for some time, Credit Union National Association (CUNA) Chief Economist Bill Hampel said. This year’s assessment will provide $1 billion toward the eventual losses, he added. Credit unions should expense their assessment in June and report the expense on their June 2010 call reports, according to NCUA. CUNA President/CEO Dan Mica said that while the NCUA’s assessment is close to CUNA’s prior predictions, it “is still a burden on the nation’s credit unions coping with a recovering economy. “Given that, and looking forward, we are hopeful that the agency will take the necessary actions to keep future assessments to cover corporate credit unions costs and for the National Credit Union Share Insurance Fund (NCUSIF) at the lowest level possible,” Mica added. NCUA Chairman Debbie Matz said that the agency would discuss a separate assessment to replenish the NCUSIF later this year. Hampel predicted that the pending NCUSIF assessment would be somewhere between 5 and 10 basis points (bp), bringing the total amount assessed by the NCUA this year to between 18 and 23 bp. In it’s monthly report on the status of the NCUSIF, which was delivered later in the NCUA's monthly board meeting, the NCUA staff noted that the fund’s equity ratio was at 1.22% as of the end of May 2010, adding that the fund increased it’s reserves for both specific and non-specific natural-person credit union (NPCU) losses by $132 million, bringing the total amount of its reserves to $1.1 billion. The NCUA’s $1.1 billion “provision” for natural person credit union insurance losses “is not this year's expense,” but is “what the NCUSIF has expensed over the past couple of years in anticipation of future losses,” Hampel added. “The language NCUSIF uses can be confusing compared to credit union terminology. The ‘Provision for CU Losses’ is analogous to a credit union’s allowance for loan losses, and the NCUSIF’s ‘Insurance Loss Expense’ is similar to a credit union’s loan loss provision,” Hampel said. Overall, insurance loss expenses are “running at budget” this year, and “expenses for the rest of the year will likely depend primarily on changes in the number and size of troubled credit unions,” Hampel added.

Inside Washington (06/16/2010)

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* WASHINGTON (6/17/10)--Sen. Susan Collins (R-Maine) said Tuesday that she is working to revise her regulatory reform bill provision--which would eliminate the use of trust-preferred securities as Tier 1 capital--to include a five-year phase-in for certain financial institutions. She also said she is investigating whether smaller institutions with less than $5 billion in assets should be treated differently under the provision. Collins’ measure was not intended to prevent federal funds from counting toward Tier 1 capital, she said in an interview with American Banker (June 16) ... * WASHINGTON (6/17/10)--In an unexpected move, lawmakers added language to regulatory reform legislation that would overhaul the deposit insurance system. The changes would set the deposit insurance limit at $250,000 indefinitely, and extend a program that would give unlimited guarantees for certain accounts and the Federal Deposit Insurance Corp. more leeway to set premiums (American Banker June 16). House and Senate conferees Tuesday agreed to keep the $250,000 limit permanent and retroactive to cover 2008 failures. The limit was increased to $250,000 from $100,000 in October 2008, and was set to return to $100,000 after 2013. (See related story: “Reforms may add NCUA to oversight council, cement NCUSIF level”) ... * WASHINGTON (6/17/10)--The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac, who are operating in conservatorship, to delist their common and preferred stock from the New York Stock Exchange and any other national securities exchange. After the delisting, the stock is expected to be quoted on the Over-the-Counter Bulletin Board. The direction does not indicate any reflection on either entity’s performance. It is related to stock and exchange requirements for maintaining price levels and curing deficiencies, said FHFA Acting Director Edward DeMarco. Each enterprise’s common stock price has been at about $1 over 30 trading days for most months since the conservatorships became effective in September 2008 ...

Reforms may add NCUA to oversight council cement NCUSIF level

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WASHINGTON (6/17/10--As credit unions await further action on interchange legislation, there have been a number of other developments related to the bicameral discussion of financial regulatory reform. One such development was the Tuesday approval of language that would permanently increase the share insurance limit of the National Credit Union Administration’s (NCUA) National Credit Union Share Insurance Fund (NCUSIF) to $250,000. The conference committee on Wednesday also began discussion of legislative language that would require financial institutions with over $1 billion in assets to disclose compensation structures that include any incentive based elements. That legislative language would also require federal financial regulators to eliminate seemingly inappropriate or imprudently risky compensation practices as part of solvency regulation. Conferees will also discuss including the NCUA in the potential Financial Stability Oversight Council later today, and the Credit Union National Association (CUNA) expects this proposal, which will be made by the House members of the committee, to be added to the final regulatory reform bill. While CUNA supports making the NCUSIF limit permanent, CUNA has opposed the proposed compensation disclosure measures. CUNA has urged legislators to oppose the compensation disclosure measures via a letter to conferees Rep. Barney Frank (D-Mass.), Rep. Spencer Bachus (R-Ala.), Sen. Chris Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.). CUNA President/CEO Dan Mica said that while he understands the concerns regarding the effect that compensation structures that encourage excessive risk-taking “have on the safety of financial institutions and the economy,” the current proposal unnecessarily covers credit unions and would create an unnecessary regulatory burden. Mica noted that credit unions, which have an average chief executive salary of $93,000, “neither caused the economic crisis nor engaged in the type of compensation arrangements that this language seeks to address.” “Therefore, we urge the Conference Committee to reject either the House Offer or amend it to exclude credit unions from its scope,” Mica added. For the full letter, use the resource link.

131 House members sign letter urging conferees to strike interchange

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WASHINGTON (6/17/10)--A total of 131 House members, led by Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Tex.), weighed in on the interchange debate Wednesday, telling their congressional colleagues of their “grave concerns” over portions of the financial regulatory reform package that would allow the federal government to impose controls on the fees paid to use electronic payment networks. In a letter sent Wednesday to House and Senate conferees, the legislators urged their colleagues to reject the interchange language that would “devastate credit unions and community banks, while providing no discernible benefits for consumers.” The 70 Democratic and 61 Republican legislators also called for greater analysis and consideration of the many issues surrounding the interchange system, adding that there was “far too much uncertainty” that the “sweeping” changes wrought by this interchange legislation could “harm both consumers and the small financial institutions” that are vital to economic recovery. "This letter sends a powerful signal to conferees that the Senate interchange amendment should be taken out of the broader regulatory reform bill," noted Credit Union National Association President Dan Mica. "The fact so many House members object to its inclusion is further evidence the interchange amendment, at a minimum, deserves more study and careful consideration to avoid unintended consequences that will hurt consumers. It should not be part of the broader reform legislation." Four additional House members also produced their own letters opposing interchange changes. In a Wednesday release, Schultz said that the interchange amendment would force Americans to “pay more for basic banking products and credit cards” and prevent them from receiving the “valuable services like fraud and identity theft protection” that are paid for by the current interchange system. “Worse, the Senate amendment destroys the economics of prepaid debit card programs, which are increasingly relied upon to deliver banking products to underserved and unbanked recipients because they provide a convenient, lower cost form of payment. Under the Senate amendment, consumers lose,” she added. Rep. Marchant also commented in the release, saying that the interchange legislation would allow the government to “pick the winners and losers in a private transaction.” The letter and release follow recent Hill visits from hundreds of credit union representatives and ongoing calls and emails from over 550,000 credit union backers nationwide. Those credit union activists have all urged legislators to remove the interchange language, which was only included in the Senate version of regulatory reform. Mica this week urged credit union leaders to keep up the drive against interchange limits and thanked legislators for opposing the interchange changes. The interchange provisions were also discussed during a Wednesday Senate Appropriations subcommittee hearing chaired by Sen. Richard Durbin (D-Ill.), who sponsored the interchange amendment that was added to the Senate’s regulatory reform bill last month. Interchange is expected to be addressed by the conference committee early next week. For the full letter, use the resource link.

NCUA to discuss FOM changes today

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ALEXANDRIA, Va. (6/17/10)--The National Credit Union Administration (NCUA) later today will discuss the final version of recently proposed chartering and field of membership (FOM) policy changes that would set objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple group zones. The FOM changes, which were proposed late last year, have also proposed a new, objective definition for rural districts. Overall, the Credit Union National Association (CUNA) has said that the NCUA’s planned changes are too restrictive. CUNA will provide more pointed analysis of the NCUA’s plan following today’s meeting, which will take place at 10 a.m. ET. While the NCUA meeting will also include discussions of the delegation of chartering authority, the NCUA on Tuesday removed discussion of a proposed rule on interest rate risk policies from the list of items to be considered. The NCUA also will discuss the accounting standards, the payment of insured shares, and assessments related to its Temporary Corporate Credit Union Stabilization Fund will have its monthly report on the status of its National Credit Union Share Insurance Fund during the meeting. During the closed portion of the meeting, the NCUA will discuss a number of supervisory activities.

NCUA to CUs Work constructively to resolve CRE issues

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ALEXANDRIA, Va. (6/17/10)—The National Credit Union Administration (NCUA) has encouraged credit unions to “work constructively with member-borrowers to implement prudent member business loan workouts that are in the best interest of both the credit union and the member-borrower.” Wednesday the NCUA released guidance that centered on a recent Federal Financial Institutions Examination Council policy statement that aims to aid credit unions and other financial institutions that are working with commercial real estate borrowers experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The policy statement stressed that performing loans--including those that have been renewed or restructured on reasonable modified terms--made to creditworthy borrowers will not be adversely classified solely because the value of underlying collateral has declined. The NCUA in the release recommended that credit unions working with member-borrowers in financially stressed situations maintain risk management practices “appropriate for the complexity and nature of the lending activity, and consistent with safe and sound lending practices and regulatory requirements.” “Prudent loan workout arrangements should improve the prospects for repayment of principal and interest, and should be supported by a comprehensive analysis of the member-borrower’s willingness and ability to repay the loan, an evaluation of support provided by guarantors, and a current assessment of the underlying collateral,” the NCUA added. For the full NCUA release, use the resource link.

Mica urges CUs Keep pushing on interchange

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WASHINGTON (6/16/10)--Credit Union National Association (CUNA) President/CEO Dan Mica Tuesday urged credit union leaders to keep up the drive against interchange limits, particularly in the face of this week’s massive push by merchants to convince lawmakers to impose controls on the fees paid to use the electronic payments network. Mica said on a national call to credit union league presidents that
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credit unions still face an uphill battle to convince lawmakers to remove interchange limits from a final financial regulatory reform package, which is currently being hammered out in Congress. But despite the enormity of the challenge, Mica said, credit unions have gotten further on the issue than may have been considered possible just a few weeks earlier. Last week, hundreds of credit union advocates came to Washington, D.C., to urge lawmakers to contact the House-Senate conferees and urge them to remove interchange language form the regulatory reform legislation. In addition, about 525,000 contacts were made via email and phone calls. The interchange provisions as written would hurt consumers by driving up debit card fees, with no compensatory advantages to consumers, the credit union representatives told lawmakers. The credit union reps also urged lawmakers on both sides of the aisle to sign a letter being circulated by Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Texas) that calls on conferees to strip the interchange language from the bill. More than 120 House members have signed on in support of the letter after the credit unions visits. In the midst of this week’s merchants’ fly-in, there is also a
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battle-of-the-ads running in Capitol Hill publication. The minority bankers group, the National Bankers Association, warns in an ad that the interchange amendment would hurt “low-income consumers” the most. An ad sponsored by America’s Credit Unions states, “92 Million Credit Union Members Say No to a Fee on Their Debit Card.” And another, backed by the California Credit Union League, California Independent Bankers, the Texas Credit Union League, IBAT, and the Nevada Credit Union League, says, “Giant retailers want you to pay their cost of doing business.” On the other side of the debate, one ad with a "if it quacks like a duck" theme urges Congress to tax credit unions for opposing the interchange amendment, saying if credit unions want to take the same position as the banks they should be taxed like banks. The ad is sponsored by a group calling itself American Family Voices--and yesterday the group began faxing the ad to credit unions. "Faxes to CUs? That tactic is ridiculous and will only get our members even more fired up at the grassroots level to oppose the interchange amendment," Mica noted. Another such ad, one by the National Association of Convenience Stores, urges lawmakers to accept the interchange amendment and attempts to draw a connection to “big bank bailouts” in the interchange discussion. Informally calling the latest call to action “Operation Push Back,” CUNA’s Mica again urged credit union advocates to re-double efforts to gain lawmaker support in removing interchange language from the bill, even if only to give it a full vetting under the congressional hearing process. The amendment was added late in the Senate’s debate of its reform package through the amendment process. Mica encouraged credit union advocates to go out of their ways to thank federal lawmakers who have already signed on to the Wasserman Schultz-Marchant letter. It is expected that the House-Senate conferees may vote on the interchange amendment next Tuesday.

Inside Washington (06/15/2010)

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* WASHINGTON (6/16/10)--If the Office of Thrift Supervision (OTS) and Office of the Comptroller of the Currency (OCC) merge, the thrift charter’s days might be numbered, according to American Banker (June 15). The agencies’ merger--through enactment of the regulatory reform bill--could get rid of some of the benefits associated with choosing the thrift charter, which means a single agency would tasked with enforcing two different sets of rules, the Banker noted. Conferees were expected to address some of the issues about the merger during a session Tuesday. The OTS and OCC already have transition teams, though the House and Senate bills would give the agencies a year to finish the merger, with an extension of six months, if needed. After the merger, the OTS would be gone within 90 days. OCC will then supervise thrifts and the Federal Reserve Board will oversee their holding companies ... * WASHINGTON (6/16/10)--Sen. Tom Carper (D-Del.) and other senators Monday wrote to conferees on regulatory reform legislation, requesting that language in the Senate bill regarding a pre-emption compromise be placed in the final bill (American Banker June 15). Carper’s pre-emption amendment was changed from its original version to allow greater authority for state attorneys general to enforce over national banks. The compromise will provide national banks with “greater certainty and predictability” while strengthening consumer protection, they wrote ... * WASHINGTON (6/16/10)--President Barack Obama has written a letter to House and Senate leaders asking them to approve legislation that would create a $30 billion fund to boost small business lending. The House is expected to tackle the legislation this week, and the Senate is slated to follow suit. Obama also asked Congress to tax financial institutions that benefited from the financial bailout ...

NCUA removes interest rate risk policy discussion from agenda

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ALEXANDRIA, Va. (6/16/10)--The National Credit Union Administration (NCUA) on Tuesday removed discussion of a proposed rule on interest rate risk policies from the list of items to be considered at its June 17 board meeting. An additional discussion on NCUA supervisory activities was also added to the closed portion of the meeting. The NCUA is still scheduled to discuss the final version of recently proposed changes to its chartering and field of membership (FOM) policies at the board meeting, which will take place at 10 a.m. ET. Other topics of discussion will include the delegation of chartering authority and a proposed rule addressing the NCUA's requirements for insurance, interest rate risk policies and programs. The NCUA also will discuss the accounting standards, the payment of insured shares, and assessments related to its Temporary Corporate Credit Union Stabilization Fund will have its monthly report on the status of its National Credit Union Share Insurance Fund during the meeting.

Narrow interchange hearing set for this afternoon

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WASHINGTON (6/16/10)—Although debate on the interchange legislation contained in the Senate’s financial regulatory reform package will not occur in earnest until next week, interchange will be discussed later today during a Senate Appropriations Committee hearing entitled “Oversight of Federal Payment of Interchange Fees: How to Save Taxpayer Dollars.” The hearing, which will take place at 2:30 this afternoon, will feature testimony from the U.S. Treasury’s Gary Grippo, the Government Accountability Office’s Alicia Puente Cackley, and Amtrak’s Janet Langenderfer. A second panel will include testimony from both financial and mercantile representatives, as well as the U.S. Public Interest Research Group. The hearing will be chaired by Financial Services and General Government subcommittee chairman Richard Durbin (D-Ill.) who introduced the interchange legislation that is in the Senate version of regulatory reform. The House version of the bill does not contain any interchange-related language. The hearing follows the Monday release of a U.S. Treasury report which found that the federal government would save taxpayer funds by negotiating future interchange charges with card networks. The Electronic Payment Coalition, which counts the Credit Union National Association among it's members, has said that this study proves that broad-based regulations to limit interchange fees are not needed. The Senate bill’s interchange language would allow the government to control interchange fees. Durbin has written in a carve out that would exempt financial institutions with under $10 billion in assets from the terms of the interchange legislation, but the Credit Union National Association has repeatedly said that that carve out would not be meaningful because there is no requirement for the payment card networks to operate a higher rate system for small issuers. Hundreds of credit union representatives from across the country came to Washington last week to voice their opposition to the interchange changes, and over half a million credit union backers have done the same through phone calls or electronic messages to their elected representatives.

CUNA releases SAFE Act Analysis

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WASHINGTON (6/16/10)--The Credit Union National Association (CUNA) on Tuesday released a final rule analysis on the final rules for implementing the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act. The SAFE Act requires residential loan originators that work for financial institutions that are regulated by the National Credit Union Administration (NCUA) and other federal financial institution agencies to register with the Nationwide Mortgage Licensing System and Registry. These employees will also be required to maintain this registration. Financial institutions that are covered under the Act will also be required to adopt and implement written policies and procedures to ensure compliance with these requirements. The SAFE Act also requires lenders to tailor these policies to best meet the nature, size, complexity, and scope of their mortgage lending activities. Federally-insured credit unions will be covered by these rules, but credit union service organizations (CUSOs) will not. The rules will also apply to privately insured credit unions when certain conditions are met and agreements reached between NCUA and the state regulator. Otherwise, these privately insured credit unions will need to be registered and licensed under state law. The new rules will come into effect on the first day of the calendar quarter 60 days following the SAFE Act’s publication in the Federal Register. However, full compliance dates will be staggered over a 180-day implementation period. For the full CUNA Final Rule Analysis, use the resource link.

Fed releases final Reg Z changes

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WASHINGTON (6/16/10)--The Federal Reserve Board has begun implementation of the third stage of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 by officially approving a final rule that will protect card users from “unreasonable late payment and other penalty fees.” The rule also requires lenders to “reevaluate recent interest rate increases and, if appropriate, reduce the rate," Fed Governor Elizabeth Duke said in a release. Specifically, the final rule 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 changes also prevent lenders from charging so-called "inactivity" fees on accounts. These rules will come into effect on August 22. Portions of the CARD Act that prohibit rate increases in the first year that a credit card account is active, require cosignors for credit card accounts taken out by an individual under 21 years of age, require that creditors obtain the consent of the cardholder before charging over the limit fees, and limit many of the fees associated with so-called "subprime" credit cards were approved by the Fed earlier this year. For the Fed release and the Fed’s guide on the new credit card rules, use the resource links.

Interchange remittance discussions could come next week

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WASHINGTON (6/15/10)--Although discussions of the to-be-resolved financial regulatory reform package will continue this week, big ticket items for credit unions, including interchange provisions, are not likely to be discussed until next week. An official schedule has not been released, but it is expected that investor protections, executive compensation, corporate governance, systemic risk regulation, resolution authority, and payments/clearing and settlement issues will be discussed by the conference committee this week. Discussion of the proposed Consumer Financial Protection Bureau, as well as remittances—two issues of interest to many credit unions--has been pushed back until next week. While that fact makes this a relatively quiet week in Congress on the financial services front, there will still be some action in the Senate, with discussion on a tax extenders bill that would fund the National Flood Insurance Plan (NFIP) and the Stimulus Act’s small business provisions set to take place. That legislation, if passed by the Senate this week, would still need House action to move forward. The NFIP and the aforementioned small business provisions are currently lapsed. The House will also reportedly consider H.R. 5297, the Small Business Lending Fund Act, on Wednesday. That legislation, which was passed out of committee last month, would create a $30 billion small business lending fund for community banks. The Credit Union National Association, and, lately, governmental bodies such as the U.S. Treasury and legislators such as Rep. Barney Frank (D-Mass.), have all back increasing lending to small businesses by lifting the current 12.25% of assets cap on credit union member business lending (MBL). The Treasury has itself proposed lifting the cap to as high as 27.5%, and MBL legislation introduced by Rep. Paul Kanjorski (D-Penn.) currently has 122 House cosponsors and will likely come up for discussion in House committees soon.

Mica Interchange plan is pro-merchant anti-consumer

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WASHINGTON (6/15/10)--Credit Union National Association (CUNA) President/CEO Dan Mica said Monday that CUNA and credit unions just do not agree with a key senator's view that interchange legislation will be "good for consumers." Mica was commenting on a letter he received Friday from Sen. Richard Durbin (D-Ill.), in which Durbin stated that the changes that his legislation would bring to the interchange fee system would benefit consumers. Durbin also addressed his letter to Camden Fine, President/CEO of the International Community Bankers Association. "We appreciate Sen. Durbin's comments," Mica said in a statement. "However, we just cannot agree with his view that the change is good for consumers." Mica noted that someone has to pay to provide this service, which clearly benefits the merchants, and credit unions cannot absorb the costs under the strictures of this proposed law. "Those costs will be borne by consumers – members of credit unions. That is not a good outcome for them or for credit unions,” Mica added. Durbin’s legislation, which was added to the Senate version of regulatory reform just prior to passage, would ask the government to control interchange fees. While Durbin has touted a carve out that would exempt financial institutions with under $10 billion in assets from the terms of the interchange legislation, CUNA and others have said that that carve out would not be meaningful because there is no requirement for the payment card networks to operate a higher rate system for small issuers. The House version contains no interchange language, and over 100 House members from both major political parties last week urged their congressional colleagues not to include language on interchange fees in the final bicameral legislative package. That “dear colleague” letter, which was offered up by Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Texas), followed several days of direct credit union advocacy in the form of a national fly-in. Over 1,000 credit union activists met directly with their legislators, and a further 500,000 credit union backers have contacted their legislators to urge them to oppose the interchange provisions. Members of the media have also challenged assertions that the interchange alteration would be good for consumers, with an Investor’s Business Daily editorial stating that large retailers, including Walgreen’s, would win out over small businesses and consumers. Those retailers would simply “shift their costs of processing credit and debit cards to consumers,” the editorial added. (For the full story, use the resource link.) Mica said that CUNA and other credit union representatives will continue to press their concerns on Congress about the interchange language. Interchange fee legislation should be taken up by the conference committee early next week.

Inside Washington (06/14/2010)

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* WASHINGTON (6/15/10)--Debate is ensuing regarding which agency would replace the Office of Thrift Supervision (OTS) on the board of the Federal Deposit Insurance Corp. (FDIC). OTS will soon be eliminated. The decision will be made by conferees of the two regulatory reform bills. Conferees could address the issue as early as today. There are essentially three options, according to American Banker: give the seat to the Federal Reserve Board, give the seat to the proposed consumer protection bureau, or return the FDIC to a three-member board from a five-member board. The House version advocates giving the Federal Reserve Board the seat, while the Senate favors the seat going to the proposed consumer protection bureau (June 14). The FDIC’s board was widened to five members under a 1989 law that addressed reform during the savings and loan crisis. Prior to that law, three agencies--the FDIC chairman, an independent director and the comptroller of the currency--oversaw the operations ...

NCUSIF other NCUA funds are auditor approved

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ALEXANDRIA, Va. (6/15/10)--The National Credit Union Share Insurance Fund (NCUSIF) has officially received “clean” audit opinions for 2008 and 2009, with auditors also certifying the “financial accuracy” of the National Credit Union Administration’s (NCUA) operating fund, its community development revolving loan fund, and its central liquidity facility. In a Monday release, NCUA Chairman Debbie Matz said that she was pleased by the results of the audits, which were posted immediately after they were completed, adding that transparency would “continue to be a hallmark of NCUA’s operations.” Deloitte & Touche LLP completed the NCUA’s 2008 audits, and KPMG LLP, which completed the 2009 audits, will also release its audit of the NCUA’s Temporary Corporate Credit Union Stabilization Fund (TCCUSF) soon. "Credit unions and the more than 90 million consumers who have federally insured accounts should know the National Credit Union Share Insurance Fund that protects their deposits up to $250,000 has also now received two unqualified opinions of its financial condition," Matz said, She added that the NCUA would be “more vigilant than ever” in it’s efforts to “keep the credit union system strong” and “reduce risk, strengthen capital, and enhance the overall supervision of the credit union industry.” Credit Union National Association Deputy General Counsel May Dunn noted, ""We recognize the financial statements identify some problem areas for NCUA to address and the process for completing these statements was uncommonly long, raising a number of questions within the credit union system for the delay. "On the timing score, however, we agree with the NCUA's objective to provide a more accurate reflection of the financial condition of the NCUSIF and the agency's operations." The NCUA will take up the NCUSIF and the TCCUSF this week, and board member Michael Fryzel on Monday reiterated the agency’s stance that separating the corporate stabilization fund and share insurance fund assessments would improve the transparency of the assessment process and improve the accuracy of credit union budget estimates. “Separation would not increase the total amount of assessments but it would clarify exactly what each assessment is for: The Share Insurance Fund assessment for losses at natural person credit unions, and the Corporate Stabilization Fund assessment for losses at corporate credit unions,” Fryzel added. The NCUA’s recently proposed changes to its field of membership rules, some of which the Credit Union National Association has criticized as overly restrictive, will also be discussed at the board meeting, which will take place on Thursday. For the NCUA's audit release, use the resource link.

Inside Washington (06/11/2010)

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* WASHINGTON (6/14/10)--For those interested in witnessing the opening salvos of the House and Senate conferees during their first meeting to hammer out a final financial regulatory reform package, C-Span’s coverage of the day’s events is available online. The conferees next meet tomorrow, June 15, and again on June 16 and 17. C-Span will continue to broadcast the proceedings live. Last Thursday’s event consisted largely of opening statements that were, pretty consistently, divided along party lines, focusing mainly on the perceived causes of the financial crisis. However, a few hours in, credit union observers may have been gratified to hear the opening round fired against an amendment currently in the Senate reform package that would require the Federal Reserve to intervene in setting interchange fees. The Credit Union National Association (CUNA), state leagues and credit unions have been engaged in a herculean push to inform federal lawmakers of the dangers posed to consumers and to credit unions by that interchange provision. About 1,000 credit union advocates traveled by plane, train, bus and car last week to participate in CUNA’s Hike the Hill effort on interchange. So far, abou 450,000 have made contact with lawmakers via email or phone calls. On Thursday, Rep. Gregory Meeks (D-N.Y) was first to broach the subject, saying that the “hastily” added provision was crippling for credit unions, community banks and the country’s poor… * WASHINGTON (6/14/10)--The House passed a bill Thursday that aims to help the Federal Housing Administration (FHA) boost its capital reserves by charging borrowers a higher annual premium (American Banker June 11). FHA’s Mutual Mortgage Insurance Fund has experienced loan losses that have drained its capital ratio to 0.53%, below the minimum 2% standard. The bill was authored by Rep. Maxine Waters (D-Calif.), who chairs the House Financial Services Committee’s housing subcommittee. The bill will allow FHA to increase its annual premium up to 1.55% from 0.55%. However, FHA said it would not raise the premium immediately. Instead, the agency will charge an annual rate of 0.90% for borrowers who make a downpayment of 5% or less, and 0.85% for borrowers with larger downpayments. The premium changes will generate $4.1 billion for 2011, FHA estimated ... * WASHINGTON (6/14/10)--Federal Reserve Board Vice Chairman Donald Kohn said Friday that Fed Chairman Ben Bernanke has requested that Kohn remain on the board until a new governor is appointed. Kohn will leave no later than Sept. 1. Kohn said in March he intended to resign when his term was up on June 23. While he remains on the board as a governor, he will continue to participate in all board and Federal Open Market Committee meetings ...

NCUA orders corrective actions

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ALEXANDRIA, Va. (6/14/10)-- Sperry Associates FCU, of Garden City Park, N.Y. has been ordered by the National Credit Union Administration (NCUA) to take a series of corrective actions. Those actions include efforts to correct:
* Declining capital; * Participation lending losses; * Potential unrecognized investment losses; * Inadequate due diligence; and * Inadequate testing of high risk areas.
The NCUA, as it released the letter Friday, said the agency and credit union are working closely “ to make a sustained, conscientious effort to correct noted adverse conditions.” The credit union did not return a call ionviting comment. Also on Friday, the NCUA released highlight of a speech by board member GIgi Hyland, to the National Association of Credit Union Supervisory and Audit Committees in Baltimore, on the vigilance needed in the supervisory committee role. The Supervisory/Audit Committee’s role is not “just about counting cash and making sure the books are in order,” but rather includes ensuring management and board members are “fulfilling their responsibilities as good stewards of the members’ money.” She added, “Your auditor should report to you and not management or the board of directors. (This) concept is universal regardless of the size or composition of the organization. "When we as a regulator and insurer see serious breakdowns in these basic principles of independence, we often encounter serious and emerging problems in the organization. Erosion of the principles is often symptomatic of a larger lack of diligence and integrity of the overall control environment.”

Mica in iBankratei History shows consumers lose in interchange controls

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WASHINGTON (6/14/10)—In an online article by credit card expert Leslie McFadden in Bankrate.com, Credit Union National Association (CUNA) President/CEO Dan Mica says that if merchants win their fight to get government price controls on interchange fees, history shows consumers will reap no benefit. Mica, quoted extensively in an article called “Would debit interchange reform help consumers?,” notes that merchants argue that their government-enforced cost savings on fees charged to participate in the electronic payments system would promote savings for consumers. That’s not what recent history shows, Mica pointed out. Savings were not passed on to consumers in Australia where government stepped in 2003 and regulated regulate interchange fees, Mica noted. The article, in fact, point out that a study executed by economists in the London office of CRA International revealed quite the opposite. The research found that the Reserve Bank of Australia's reductions in interchange fees increased annual fees and reduced card benefits for consumers. Mica also made the point that a provision meant to carve out small institutions—like credit unions from the reach of the interchange language--could actually penalize both smaller institutions and the customers that use their debit cards. "Under this senate amendment they would allow the networks--American Express, Visa, MasterCard-- to, with this so-called carve out, to allow credit unions to get more of a fee," Mica says. However, credit unions and community banks know that if merchants are able to pay less in interchange for a big bank’s card, which would be covered by amendment, they could simply ask customers to use card other than the one from the small issuer. Mica explains that the provision would not prevent such discrimination.

New NCUA grants would serve low-income members

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ALEXANDRIA, Va. (6/14/10)—There will be new and enhanced National Credit Union Administration (NCUA) grant programs this year to benefit low-income credit union members, the agency’s chairman announced Friday. The grants, which Chairman Debbie Matz said are intended to help credit unions that serve low-income members increase outreach to their local communities, may be used to provide such things as financial education, offer student internships and create jobs at credit unions. In her announcement Matz noted that grants are now available for credit unions to develop plans in order to apply for secondary capital from the U.S. Treasury’s Community Development Capital Initiative. The grants are available through the agency’s Community Development Revolving Loan Fund. “Through the CDRLF, NCUA will also continue to offer loans and grants to help certified low-income credit unions pursue staff and board training; enhance their technology and internal processes; offer the Volunteer Income Tax Assistance (VITA) program; and meet emergency needs,” Matz said. She made her remarks at the 36th annual Serving the Underserved Conference of the National Federation of Community Development Credit Unions in Pittsburgh. Pa. She said there is $1.25 million in available for grants and $6.8 million available for loans through NCUA this year.

CUNA Lawmaker letter crucial to interchange fight

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WASHINGTON (6/14/10)—In a effort coordinated by Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Texas), a bi-partisan list of 105 U.S. House members have signed on, as of late Friday, in support of an effort to urge financial regulatory reform conference committee members not to include language on interchange fees in the final legislative package. Credit Union National Association (CUNA) President/CEO Dan Mica immediately commended the effort: “This letter will be crucial in building momentum among lawmakers to remove interchange from the bill. Credit unions are gravely concerned about the consequences of the interchange language, particularly its impact on their members who will face higher fees if it becomes law. “We will continue to press our concerns on Congress about the interchange language, as we did this week with 1,000 credit union activists on the Hill, and continuing contacts with Congress by credit unions nationwide – now at more than 450,000 since May 24.’ At issue is a late-added provision found in the Senate version of the reg reform bill that would ask the government to control interchange fees. The House version contains no interchange language. The House letter to conferees says, “This language will devastate credit unions and community banks, while providing no discernable benefits for consumers.” It underscores other concerns regarding the interchange language, and in part cites numerous articles in the national press that have “highlighted the potential unintended consequences of the interchange amendment, particularly its negative impact on consumers.” An additional concern of those 85 who signed the letter is the lack of transparency regarding the process by which the language was added to the Senate bill. “(W)e also have strong reservations about the lack of congressional review, debate or study about these provisions. The debit rate-setting provision has never been vetted by any committee in either chamber. “Furthermore, the recently completed (Government Accountability Office) report was almost exclusively dedicated to the impact of related interchange legislation on the credit card market, not the debit card market. Yet that study still concluded that ‘the costs of [credit] card acceptance might shift from merchants to card holders if interchange fees were limited.’” “We believe the GAO’s conclusion raises similar concerns about the impact of these changes on consumers of debit cards,” the coalition of lawmakers wrote. Credit union advocates in town this week for CUNA’s national grassroots campaign, launched to oppose the interchange amendment, supported the Wasserman-Schultz-Marchant effort and urged their lawmakers to sign on in support of the letter. CUNA asks credit unions to continue contact with lawmakers and request that they sign on to the Wasserman Schultz-Martchant letter by the close-of-business-Tuesday deadline.

Inside Washington (06/10/2010)

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* WASHINGTON (6/11/10)--The Latino community “needs credit unions that understand and serve their unique needs,” said National Credit Union Administration (NCUA) board member Gigi Hyland at the National Federal of Community Development Credit Unions’ Latino Credit Union Conference in Pittsburgh. She encouraged credit unions to continue their commitment to innovative outreach. “Part of your continuing challenge is to earn and maintain the trust” of the Latino communities served by Latino-focused credit unions, she said. Hyland also discussed NCUA initiatives to recognize the unique role that Latino, other community and low-income credit unions can play. Specifically, she addressed the recent NCUA supervisory letter on low-income credit unions and community development credit unions, NCUA’s proposal on small dollar loans, its Community Development Capital Initiative and member business lending. “Many of your efforts have focused on financial education and serving community members with the products they need,” she said. From NCUA’s perspective, “I’ve been firmly committed to trying to improve the dialogue between examiners, low-income credit unions and community development credit unions” ... * WASHINGTON (6/11/10)--A provision by Sen. Susan Collins (R-Maine) in the Senate version of the reform bill could have banks flooding capital markets or pursuing preferred-to-common stock conversions, said American Banker (June 10). Collins’ amendment would no longer allow bank securities held by the Treasury through the Troubled Asset Relief Program to count toward a banking company’s Tier 1 capital. D. Barry Hester, a lawyer for Bryan Cave, said the provision would mean a number of banks would be considered undercapitalized. Michael Iannaccone, president of MDI Investments Inc., said 350 banking companies could be forced to raise more capital. Sheila Bair, chairman of the Federal Deposit Insurance Corp., supports the amendment. The amendment is critical to ensure that financial institutions hold enough capital to absorb losses during financial stress, Bair has said in a letter to Collins ... * WASHINGTON (6/11/10)--A report is expected to be released today by the Treasury Department indicating how many banks in the Troubled Asset Relief Program (TARP) have missed six dividend payments to the government (American Banker June 10). Banks in TARP must pay a 5% quarterly dividend to the government until the funds are repaid. About 74 banks have deferred at least one payment, while a dozen banks have missed four payments, according to a March Treasury report. Today’s report will show how many missed the latest payment on May 17 ... * WASHINGTON (6/11/10)--The House was expected to pass a bill Thursday to recapitalize the Federal Housing Administration (FHA) by allowing it to raise borrowers’ annual premiums. The agency has backed an increasing number of loans during the financial crisis--about 30% of all new mortgages in 2009 and 20% of refinancings. But the losses have drained its capital reserves. The Mutual Mortgage Insurance Fund has a capital ratio of 0.53%, below the minimum 2%. The bill, introduced by Rep. Maxine Waters (D-Calif.), would allow FHA to raise its premium to 1.55% from the current cap of 0.55%. FHA said it would not immediately raise the premium--rather, it would charge an annual rate of 0.90% for borrowers who make downpayments of 5% or less, and 0.85% for borrowers with bigger downpayments ... * WASHINGTON (6/11/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has endorsed a plan that would force banks to divest their derivatives operations. The plan is championed by Sen. Blanche Lincoln (R-Ark.), who has been fighting an uphill battle to keep her provision in the regulatory reform bill (American Banker June 10). Dodd said Lincoln’s primary win this week increased the chances of the provision being included in the reform bill. Some financial observers said the derivatives issue could be addressed through changing language that would implement the Volcker Rule to ban proprietary trading. Dodd did not say if he favored the approach ...

NCUA liquidates Orange County Employees CU

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ALEXANDRIA, Va. (6/11/10)--The National Credit Union Administration (NCUA) on Thursday began the process of liquidating the $1.7 million asset Orange County Employees CU. In a release, the NCUA said that the Orange, Texas-based credit union, which served 1,000 members, was shuttered by the Texas Credit Union Department, due to its deteriorating financial condition. The assets and members of Orange County have been taken on by Orange, Texas’ Sabine FCU, which currently holds $150 million in assets from 150,000 members. Sabine’s membership is spread throughout Orange County, as well as neighboring Hardin and Jefferson Counties. Orange County is the ninth credit union to be liquidated in 2010.

CUs interchange efforts noted in iWash. Posti

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WASHINGTON (6/11/10)--As the Credit Union National Association’s (CUNA) recent Hike the Hill was wrapping up, The Washington Post noted the influence that credit union activists are having on the legislative process, reporting that “again and again, big banks have been outpaced by small-town interests, proving that even when it comes to overhauling financial regulation, politics really is local.” Hundreds of credit union activists from across the country descended on Washington this week to warn their legislators of the dire impact that changes to interchange legislation would have on their credit unions, their members, and the many nonprofit organizations that count on credit unions for their financial services. Around 400,000 credit union backers have also reached out to their respective legislators, urging them via phone and email to oppose changes to interchange legislation. The Post story noted these efforts, as well as the work of credit union backers that were “swarming Capitol Hill” to oppose interchange legislation. CUNA President/CEO Dan Mica said that the Post coverage “shows the tremendous effort by credit unions to take on this issue – even though, relatively speaking, credit unions are a small player in the entire process.” “The fact is,” Mica added, that the efforts of credit unions, credit union leagues, and credit union members “are being noticed – as they should be.” “The entire Washington community now can see for themselves what a determined credit union movement is all about,” he added. The Post story also quoted Rep. Barney Frank (D-Mass.), who currently serves as House Financial Services Committee Chairman and is one of several House members that will serve as conferees during the ongoing debate on financial regulatory reforms, which began with opening statements by both House and Senate members on Thursday. "The major influence has been legitimate grassroots networks” such as credit unions, Frank said. Credit unions and auto dealers "are the kinds of operations that have members in every district. People who get sponsored by big institutions have had very little impact," Frank told the Post.

Community charter FOM manual on NCUA slate

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WASHINGTON (6/11/10)--The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET next Thursday, will discuss the final version of recently proposed changes to its chartering and field of membership (FOM) policies. The FOM changes, which were proposed late last year, would set objective and quantifiable criteria to determine the existence of a well-defined local community for areas that encompass multiple group areas. A new, objective definition for rural districts was also proposed at that time. The Credit Union National Association (CUNA) in comments submitted to the NCUA earlier this year opposed the proposal, recommending that the NCUA provide more leeway for applications involving multiple political jurisdictions and rural districts. CUNA also strongly opposed FOM changes that would prevent credit unions from demonstrating a community is present through the use of narrative information. Other topics of discussion will include the delegation of chartering authority and a proposed rule addressing the NCUA’s requirements for insurance, interest rate risk policies and programs. The NCUA also will discuss the accounting standards, the payment of insured shares, and assessments related to its Temporary Corporate Credit Union Stabilization Fund will have its monthly report on the status of its National Credit Union Share Insurance Fund during the meeting. During the closed portion of the meeting, the NCUA will discuss supervisory activities. For the full NCUA release, use the resource link.

NEW 85 in House sign on Dont include interchange in reg reform

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WASHINGTON (6/11/10)—In a effort coordinated by Reps. Debbie Wasserman Schultz (D-Fla.) and Kenny Marchant (R-Texas), a bi-partisan list of 85 U.S. House members have signed on in support of an effort to urge financial regulatory reform conference committee members not to include language on interchange fees in the final legislative package. Credit Union National Association (CUNA) President/CEO Dan Mica immediately commended the effort: “This letter will be crucial in building momentum among lawmakers to remove interchange from the bill. Credit unions are gravely concerned about the consequences of the interchange language, particularly its impact on their members who will face higher fees if it becomes law. “We will continue to press our concerns on Congress about the interchange language, as we did this week with 1,000 credit union activists on the Hill, and continuing contacts with Congress by credit unions nationwide – now at more than 450,000 since May 24." At issue is a late-added provision found in the Senate version of the reg reform bill that would ask the government to control interchange fees. The House version contains no interchange language. The House letter to conferees says, “This language will devastate credit unions and community banks, while providing no discernable benefits for consumers.” It underscores other concerns regarding the interchange language, and in part cites numerous articles in the national press that have “highlighted the potential unintended consequences of the interchange amendment, particularly its negative impact on consumers.” An additional concern of those 85 who signed the letter is the lack of transparency regarding the process by which the language was added to the Senate bill. “(W)e also have strong reservations about the lack of congressional review, debate or study about these provisions. The debit rate-setting provision has never been vetted by any committee in either chamber. “Furthermore, the recently completed (Government Accountability Office) report was almost exclusively dedicated to the impact of related interchange legislation on the credit card market, not the debit card market. Yet that study still concluded that ‘the costs of [credit] card acceptance might shift from merchants to card holders if interchange fees were limited.’” “We believe the GAO’s conclusion raises similar concerns about the impact of these changes on consumers of debit cards,” the coalition of lawmakers wrote. Credit union advocates in town this week for CUNA’s national grassroots campaign, launched to oppose the interchange amendment, supported the Wasserman-Schultz-Marchant effort and urged their lawmakers to sign on in support of the letter.

House Senate begin final financial reg reform debate

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WASHINGTON (6/11/10)—The bicameral debate over the final version of financial regulatory reform legislation began in earnest with opening statements on Thursday, with the discussion, which was divided along party lines, focusing mainly on the perceived causes of the financial crisis. A series of day-long sessions are scheduled to follow on June 15, 16 and 17. Negotiations will continue between June 18 and 26, with final votes tentatively set to occur between June 28 and July 2. The discussions will be aired live on C-SPAN. House leaders Nancy Pelosi (D-Calif.) and John Boehner (R-Ohio) earlier this week named their respective Democratic and Republican conferees for the inter-chamber financial regulatory reform debate. House Financial Services Committee Chairman Barney Frank (D-Mass.) joins ranking committee member Spencer Bachus (R-Ala.) and Reps. Paul Kanjorski (D-Pa.), Joe Barton (R-Texas), Maxine Waters (D-Calif.), Sam Graves (R-Mo.), Carolyn Maloney (D-N.Y.), Darrell Issa (R-Calif.), Luis Gutierrez (D-Ill.) and Frank Lucas (R-Okla.). Reps. Mel Watt (D-N.C.), Lamar Smith (R-Texas), Gregory Meeks (D-N.Y.), Ed Royce (R-Calif.), Dennis Moore (D-Kan.), Judy Biggert (R-Ill.), Mary Jo Kilroy (D-Ohio), Shelley Moore Capito (R-W.Va.), Gary Peters (D-Mich.), Jeb Hensarling (R-Texas) and Scott Garrett (R-N.J.) are also taking part in the conference committee. Select other House members from the judiciary, energy, agriculture, government reform, and small business committees will also address portions of the bill that fall under their respective committee jurisdictions. The Senate named its own list of conferees, which includes Sen. Banking Committee leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.), among others, last week. It is thought that the interchange amendment could be addressed by the conference committee early next week. Hundreds of credit union representatives from across the country came to Washington this week to discuss credit union concerns over interchange with their legislators. Additionally, around 400,000 credit union backers from across the country have contacted their legislators via phone calls and email to urge them to remove the Senate interchange amendment from the final version of the bill. To contact your legislators, use the resource link.

New Market Tax Credit still a popular program

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WASHINGTON (6/10/10)--The U.S. Treasury's Community Development Financial Institutions (CDFI) Fund on Wednesday announced that it has received 250 separate applications for portions of the $5 billion in funds that are being made available during the 2010 round of its New Market Tax Credit (NMTC). Credit unions and other financial institution requested a combined total of over $23 billion in funds. The Treasury announced the first round of the 2010 NMTC program in April. In a release, CDFI Fund Director Donna Gambrell said that she is “very pleased to see demand for the New Markets Tax Credit continue to rise in light of the challenges that the current economic climate presents for underserved communities." “The sustained increase in the number of applications indicates how important the New Markets Tax Credit is for attracting new investment and promoting job creation and economic recovery in distressed communities,” Gambrell added. Organizations that have received the NMTC credits, which are awarded through a competitive application process, have raised $15.8 billion in equity investments since the program began in 2002, according to the CDFI Fund. Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities by permitting individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments. Those investments must be made in designated Community Development Entities. The list of applicants that will receive funds through NMTC allocations should be announced this December, the CDFI release said. For the full release, use the resource link.

Inside Washington (06/09/2010)

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* WASHINGTON (6/10/10)--In a Wednesday article, “Durbin’s Curb on Debit Fees Draws Fire for Hurting Consumers,” Bloomberg Businessweek highlights Rep. Debbie Wasserman Schultz’s (D-Fla.) concerns that a Senate proposal to limit card interchange fees will enrich merchants at the expense of consumers. Wasserman Schultz has opposed previous attempts to regulate interchange on credit cards. She intends, along with Rep. Kenny Marchant (R-Texas), to send a letter opposing the amendment to a bipartisan panel of House and Senate conferees who are charged with merging the two houses’ versions of the financial overhaul bill. In a related event, the Credit Union National Association (CUNA) issued a recent action alert on interchange that has resulted in more than 280,000 e-mail and phone contacts to federal lawmakers, which request opposition to the interchange provision. CUNA and the state leagues also have organized a “fly-in” effort, which has resulted in close to 1,000 credit union advocates coming to Washington, D.C. Tuesday through today to meet face-to-face with legislators. As part of the visits, CUNA has encouraged credit union reps to gather support for the Wasserman Shultz-Marchant letter to conferees today … * ALEXANDRIA, Va. (6/10/10)--The National Credit Union Administration (NCUA) Wednesday posted on its website the first of three videos to help credit unions understand the corporate credit union crisis. Track No. 1, which covers the history and services of corporate credit unions, is available at the link. Track No. 2 will describe types of corporate credit union investments, how the investments were affected by financial market declines, and how problems with investments affected corporates and threatened the credit union system. Track No. 3 will focus on NCUA's efforts to stabilize the credit union system, ensure access to adequate liquidity and uninterrupted lending and payment processing, and achieve the least costly outcome for federally insured credit unions. NCUA Board Chairman Debbie Matz said that "more information about the history, structure and function of the corporates will assist credit unions in making sound decisions about the future." When all three tracks are posted online, NCUA will send a free DVD of the tracks to all federally insured credit unions ... * ALEXANDRIA, Va. (6/10/10)--The National Credit Union Administration (NCUA) has selected Herb Yolles to serve as temporary Region III Director, effective through the end of this year. Yolles was named acting director or Region III, which covers Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Ohio, South Carolina, Tennessee, Puerto Rico and the U.S. Virgin Islands, in May. The NCUA explains the difference between the two posts like this: a temporary posting is the the permanent Regional Director for a specific period of time. The agency can only detail a person to a higher position for up to 120 days. Any longer than that, and the agency must let all compete for the temporary position. Alonzo Swan previously served as Region III Director and was reassigned to the position of special assistant to Executive Director Dave Marquis early last month. Yolles first joined the NCUA in 1978 and has served as Chief Financial Officer, Deputy Director of Examination and Insurance, President of the Central Liquidity Facility, Inspector General, and, most recently, as Associate Regional Director of Operations in Region II … * WASHINGTON (6/10/10)--Legislation that would extend the current deposit insurance coverage of $250,000 per account at all financial institutions that failed in 2008 is gaining leverage and could be included in the final regulatory reform bill (American Banker June 9). The measure aims to assist depositors of IndyMac Bank, who lost money when the thrift failed. The bill, sponsored by Reps. Jane Harman (D-Calif.) and David Dreier (R-Calif.), has garnered support from House Financial Services Committee Chairman Barney Frank (D-Mass.) and the Federal Deposit Insurance Corp. IndyMac failed three months--in July 2008--before Congress extended the deposit insurance limit to $250,000 from $100,000. Credit unions’ deposit insurance through the National Credit Union Share Insurance Fund also was extended to $250,000 per account from $100,000 per account ... * WASHINGTON (6/10/10)--With conferees beginning discussions today on regulatory reform legislation, Sen. Susan Collins (R-Maine) said she is open to adding a phase-in of existing trust-preferred securities into a provision she’s sponsoring that would rid the use of such securities as Tier 1 capital. Collins, who has not abandoned her argument that trust-preferreds should not count toward capital, told American Banker that she’s looking into some suggestions regarding a transition period if the provision is implemented (June 9). Collins, who supported the Senate bill and will be a crucial swing vote to prevent a filibuster on the final reform legislation, didn’t comment on whether she’d oppose the legislation if her provision is dropped ... * WASHINGTON (6/10/10)--A bill that would create a $30 billion fund to boost small business lending is expected to pass the House this week and move to the Senate next week. The House Financial Services Committee approved the bill on May 19, which aims to provide capital to community banks to spark small business lending. Some lawmakers have said they oppose the bill, arguing it is a repeat of the Troubled Asset Relief Program (American Banker June 9). The Credit Union National Association (CUNA) is lobbying to raise the 12.25% of assets cap on member business lending at credit unions to 25%. CUNA estimates that if the cap is lifted, $10 billion would be freed nationally to help small businesses, and about 100,000 jobs could be created ... * WASHINGTON (6/10/10)--Senate Democrats are supporting a plan to raise taxes on investment fund manager profits (American Banker June 9). The plan proposes a 33% effective rate on fund-manager income, now taxed at 15%. The House passed a similar proposal last month that would impose a 35% tax on the income. The tax is part of a $140 billion package to provide jobless benefits and expired tax breaks, which the Senate began debating on Tuesday. Senate Democrats also proposed a 31% rate for carried-interest profits from investments of seven years or more to please senators concerned about the effect of the increase on venture capitalists and real estate partnerships ...

EPC broadcast highlights CUs small inst. interchange concerns

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WASHINGTON (6/10/10)—The Electronic Payments Coalition (EPC) brought together representatives of the Credit Union National Association (CUNA) and other groups representing small financial institutions to discuss the dangers government limits on interchange fees would pose for consumers, credit unions and small community banks. The focus of the EPC’s live online video news conference Wednesday was an amendment included in the Senate version of a broad financial regulatory reform package (S. 3217) that would require the Federal Reserve to set interchange fees. Addressing the concerns of credit unions, CUNA President/CEO Dan Mica explained that, if passed into law, government control of interchange fees is going to cost consumers “a lot of money.” If merchants are able to deflect some of the cost of using the electronic payments system, “there are millions, if not billions, of dollars of costs here and someone has to pick it up,” Mica said. “Credit unions will have to pass on the costs. Credit unions are not-for-profit financial institutions. The costs will have to (be covered) from somewhere,” Mica said. He noted that for their 100-year history, credit unions have been well known for charging smaller fees for financial services. “This (change in interchange rules) would force us to charge more fees,” Mica explained. "This (interchange provision) truly isn’t about consumers the way it is constructed right now. It’s about the big-box retailers trying to change the rules of the game and reap some really heavy windfall profits.” The CUNA leader also pointed out that the interchange amendment, attached during the last minutes of debate on the Senate bill, has no place in a regulatory reform package that is meant to address failures in the financial system that resulted in the economic meltdown. Worse yet, he added, is that interchange provisions have not been vetted through the congressional hearing process, and are not backed by either the White House or U.S. Treasury Department. “Our own federal agency that oversees credit unions just told me this morning they don’t have enough data to even comment on this. This is not the time to move forward on this.” CUNA Board Chairman Harriet May added another warning on behalf of consumers, saying that the poorest consumers could pay the heaviest price if merchants start to set minimum purchases on pre-paid benefits cards—forcing those consumers to buy more than they need at that time to reach a minimum. May is also CEO of GECU in El Paso, Texas, a low-income designated CU. The interchange proposal would allow merchants to offer discounts for cash, checks or competing card brands, as well as set minimum or maximum limits on consumer purchases that use credit cards. “A leading advocate for pre-paid debit cards to assist the poor came out and said ‘don’t rain on the poor.’ It will force individuals to buy more. This is not wise spending, and it’s not a way to help the consumer,” May said. She was alluding to a letter to Congress from Russell Simmons, the co-founder of the hip-hop record label Def Jam and the developer of the RushCard, a reloadable Visa debit-card for low-income consumers (News Now 6/8/10). Also participating in the half-hour broadcasts were representatives of the Independent Bankers Association of America (ICBA) and the National Association of Federal Credit Unions. Speaking on behalf of small banks, ICBA President Camden Fine also raised concerns about unintended consequences of the interchange provision. He said thousands of community banks may find they cannot offer their members cards. “Customers will lose” as will small, mainstream merchants, Fine said. The press conference will be available on line. Use the resource link below.

iWash. Timesi Interchange limits equal higher checkATM fees

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WASHINGTON (6/10/10)--Citing credit union concerns specifically, the Washington Times weighed in on the interchange battle raging right now in Washington, and in an editorial Wednesday said that asking the Federal Reserve to determine rates charged for use of the payments network would lead to consumers paying higher fees for checking and for ATM use. The editorial notes that “representatives from 1,000 credit unions around the country have descended on Congress for an ‘all-out assault’” to oppose the interchange amendment. It quotes the Credit Union National Association's top lobbyist, John Magill, who explains how “congressional meddling with the fees” would create unintended consequences that would harm credit union members. The editorial notes that lawmakers are being asked to take a stand on whether the government should be allowed to carve out a role in fee setting as congressional leaders continue to meet to hammer out differences between House and Senate versions of the financial regulatory reform bill. The Senate version contains the provision, added during the final amendment process, that would ask the Fed to determine fees for, as the editorial put it, “use of the payment network built by Visa, MasterCard and other companies.” The Washington Times piece notes:
* Fees vary, but based on industry averages, when a customer buys a $100 item from Wal-Mart using debit, the store keeps roughly $98. The remaining $2 takes care of the costs of processing the transaction and covering losses from fraud. The interchange fee, $1.50, goes to the bank that issued the card, and 50 cents goes to Wal-Mart's bank, which handled the initial transaction; and * It's important to note that [financial institutions], not credit-card companies, issue cards. Without the fee, [financial institutions] would have no incentive to offer such cards.
Merchants, pushing for lower fees through government intervention, have worked to convince lawmakers that consumers would benefit if retailers pay lowered interchange fees. The Times editorial says to that: Government by good intention frequently results in…unintended consequences. That's why Congress should not get involved in picking winners and losers in this battle. Banks need incentives to issue cards, and businesses need incentives to accept them. The market, not the Fed, is most able to strike the right balance.

CU interchange hikes cover the Hill

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WASHINGTON (6/10/10)—With the financial regulatory reform conference committee set to start this week, hundreds of credit union representatives from across the country combined forces to urge their legislators to remove the Senate's proposed interchange amendment from the bill during the final round of consideration. The interchange provision would allow government intervention in setting interchange fees. Twenty-two representatives from eight Iowa credit unions and the
Click to view larger imageSen. Tom Harkin (D-Iowa), who has been named as a Senate conferee to work out a final financial regulatory reform package, met with 22 credit union representatives from his state to hear their concerns regarding a provision that, if adopted, would allow the government to set interchange fees. Answering the senator's questions, the Iowa credit union delegation explained that a proposed carve out in the provision intended to shield credit unions and community banks from it's impact would not have the power to do so. Also shown is Legislative Assistant Zachary Schechter Steinberg to the senator's left. CUNA Chief Economist Bill Hampel (foreground)also attended the Iowa meeting. (CUNA Photo)
Iowa CU League met with Sen. Tom Harkin, a Democrat from that state. Harkin, named as one of the Senate’s conferees, listened to credit union concerns for almost 30 minutes, as the Iowa delegation explained how the interchange amendment could threaten credit union operations and harm consumers by driving up card costs. Harkin started the session by saying he is a “strong supporter of credit unions” and wondered if there was some "middle ground" that could be achieved on the interchange language. At the conclusion of the meeting, however, Harkin told the credit union officers that some of the information presented was new to him. “You’ve given me things to think about,” he told the Iowa Hike the Hill participants. Iowa Credit Union League President Patrick Jury acknowledged to Harkin that the issues are complicated and encouraged the senator to keep the provision out of the reform package as non-germane, and to consider it during the regular process of hearings where it can be considered "on its own, in the light of day." The interchange legislation did not make its way into the House version of financial regulatory reform, and credit union advocates are leaning on House members to convince their colleagues in the Senate that removing the interchange fee legislation from the final version of the reform bill is the right move. One of the many House members that met with credit union
Click to view larger imageThe Virginia Credit Union League’s Rick Pillow (left), along with other credit union advocates from throughout the Commonwealth, discussed with Rep. Rob Wittman (R-Va.) (pictured right) the challenges that interchange changes would impose on consumers and credit unions and the promise that lifting the member business lending cap could mean for for the country's economic woes.(CUNA Photo)
representatives on Wednesday was Rob Wittman (R-Va.). Wittman, a former community banker, told the assembled group of Virginia credit union representatives that he recognizes that the current carveout, which would exempt financial institutions with under $10 billion in assets from the interchange legislation, would not achieve its stated goal. While many have claimed that that carveout would protect credit unions, the Credit Union National Association and others have repeatedly warned that the carveout would not be meaningful because there is no requirement for the payment card networks to operate a higher rate system for small issuers. One credit union representative also discussed a previously unmentioned consequence of interchange changes, noting that funding to many nonprofit organizations could be reduced, as the credit unions that they work with to manage their finances would no longer have the ability to share interchange-related dividends with them. Member business lending was also discussed during the meeting. Another meeting that took place was between representatives from Illinois credit unions and Rep. Peter Roskam (R-Ill.). In that meeting, the Illinois group stressed the important role that interchange fees play in helping credit unions cover the costs of potential fraud cases and providing surcharge-free ATMs to their members. Carl Sorgatz, CEO of Naperville, Ill.-based Hawthorne CU and the Illinois Credit Union League’s Patricia Huffman also explained that retailers would likely be able to direct their consumers away from credit union cards and toward other preferred forms of payment. Several outlets have reported that Rep. Barney Frank (D-Mass.) and his staff are reviewing the Senate’s financial regulatory reform bill, which could be released today. The full list of Senate conferees has been released, and Rep. Ed Royce (R-Calif.) on Wednesday said that he would be one of the several House members that will take part in the committee's discussions. It is thought that the interchange amendment could be addressed by the conference committee early next week.

CUNA CUs gather ahead of interchange Hill visits

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WASHINGTON (6/9/10)—Credit Union National Association (CUNA) President/CEO Dan Mica last night welcomed hundreds of credit union advocates, who have come here in planes, trains, buses and cars to fight possible statutory interchange controls, by saying, “You are doing what is right for credit unions. You are doing what is right for consumers. You are doing what is right for the country.”
Click to view larger imageCUNA and league leaders take some time to relax at the CUNA reception before the Wednesday Hike the Hill on interchange. (From Left): CUNA President/ CEO Dan Mica, CUNA Chairman Harriet May (foreground), New Jersey League President Paul Gentile, and Connecticut League President Tony Emerson. (CUNA Photo)
CUNA hosted a briefing and reception for some 800 credit union and state league activists who are bringing the credit union message--opposing government controls on interchange fees-- to every member of the U.S. Congress this week. Rep. Jason Chaffetz (R-Utah) also welcomed the credit unions crowd, as did newly seated CUNA Chairman Harriet May. Chaffetz, a member of the House Judiciary Committee, said the interchange provisions in the Senate-approved version of a financial regulatory reform package are “absolutely, totally wrong.” “The consequences will be that it will hurt the people you are trying most to help,” Chaffetz said, reflecting CUNA’s argument that the interchange provisions will hurt ordinary Americans who have a need of affordable financial services. May told the crowd she was “absolutely amazed” and “thrilled” by the turn out of credit union grassroots power. “It is so incredibly important what we are facing right now,” she said, and added, “It is your job this week to stand up for credit unions and what credit unions stand for—that members get financial services at a reasonable price.” The focus of this week’s flood of Capitol Hill visits, which come just before the House and Senate conferees are set to hash out a compromise version of financial regulatory reform, will be a provision that would require the federal reserve to intervene in the setting of interchange fees. CUNA Senior Vice President John Magill, also speaking to the credit union crowd, said, “The message to lawmakers is simple: Remove the Senate interchange amendment.” Magill has noted that CUNA, credit unions and state leagues will "reach every member of Congress" during the Hike. Also, nearly 280,000 separate contacts have been made by credit union backers nationwide in the last two weeks urging their legislators to remove the interchange legislation from the final version of regulatory reform.

Mica Retailers wrong on interchange

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WASHINGTON (6/9/10)--Responding to Retail Industry Leaders Association (RILA) claims that most credit unions are exempt from pending interchange changes, Credit Union National Association (CUNA) President/CEO Dan Mica on Tuesday said that the Senate interchange amendment would adversely affect credit unions and urged lawmakers to talk to credit unions, not the RILA, if they want to know the real story. In a message distributed to members of the U.S. Congress, the RILA claimed that 99.96% of all credit unions would be unaffected by Sen. Richard Durbin’s (D-Ill.) interchange amendment in the Senate financial regulatory reform bill. That's not so, Mica countered, noting that CUNA has repeatedly stated that the legislation’s “carve-out” for credit unions with under $10 billion in assets “will not be meaningful because there is no requirement for the payment card networks to operate a higher rate system for small issuers, and there would be no incentive for them to do so.” The interchange language, added to the Senate’s financial regulatory reform bill during the amendment process, would allow government intervention in setting interchange fees. The House version of the reform package is silent on interchange, and CUNA has launched an aggressive push to keep it out of a final bill. Mica added that many observers expect that if the Federal Reserve is given authority to set the debit interchange rate for large issuers, that rate, or a rate quite close to it, will become the debit interchange rate for all issuers, including smaller ones that are not intended to be covered under the rules. “Coupled with the expanded discounting ability of merchants, even if a two-tiered pricing system persisted, interchange rates paid to smaller issuers would come under substantial downward pressure,” Mica added. Credit union representatives from across the country are in Washington this week to urge their lawmakers to remove Durbin’s amendment from the final version of regulatory reform legislation. An additional 270,000 credit union representatives, employees and members have contacted their legislators with the aid of CUNA and credit union leagues. The Arizona Consumers Council also wrote legislators on Tuesday, urging them to remove interchange fee legislation from consideration in order to, at a minimum, study the impact that the legislation would have on the financial services options that are made available to consumers. A group of House and Senate conferees is expected to begin the financial regulatory reform conference process this week.

Inside Washington (06/08/2010)

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* WASHINGTON (6/9/10)--Candidates rumored for the next Comptroller of the Currency include Federal Deposit Insurance Corp. Vice Chairman Marty Gruenberg, Federal Reserve Board Gov. Dan Tarullo, Treasury Assistant Secretary Michael Barr, North Carolina Banking Commissioner Joe Smith, and New York Banking Commissioner Richard Neiman (American Banker June 8). President Barack Obama will nominate the next comptroller in several weeks. The regulatory reform bill, which financial observers expect will be signed by July 4, will remove the current comptroller, John Dugan. Dugan’s five-year term expires Aug. 4 ... * WASHINGTON (6/9/10)--Speaking to a Washington, D.C.-area affordable housing group, Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said the government should re-evaluate 25 years of policies that helped contribute to a 69% homeownership rate. The policies include multiple tax reductions for homeownership, private securitization practices that appear flawed and risky growth of the government-sponsored enterprises (American Banker June 8). The effect pushed up home prices, making homes less affordable to the low-income. Also, Bair said the FDIC is close to implementing a plan to securitize failed-bank assets. The agency intends to finish its first securitization of commercial real estate loans within the next two months, she said ... * WASHINGTON (6/9/10)--There are five core principles for balancing access to credit and sound risk management, according to Federal Reserve Board Gov. Elizabeth Duke. They are: adequate consumer protection, prudent underwriting, transparency, simplicity and properly aligned incentives. Duke also said that she believes the nation “is on the right path” to financial stability after the financial crisis. It’s time to work together to build a new consumer banking model--one that will be shaped by the scars of the past, she added. Duke spoke Tuesday at a banking industry conference ... * WASHINGTON (6/9/10)--The Financial Crisis Inquiry Commission, which was assembled by Congress to find the roots of the nation’s financial crisis, has issued a subpoena to Goldman Sachs Group. The commission said Goldman “dragged its feet” over requests for information and then dropped “hundreds of millions of pages of documents” on the panel, said The Wall Street Journal (June 8). The commission is primarily interested in Goldman’s relationship with American International Group, an insurance giant that was bailed out by the government in 2008. The subpoena demands interviews with several Goldman executives, including CEO Lloyd Blankfein. A Goldman spokesman said the company will provide the information requested. Goldman was sued in April by the Securities and Exchange Commission over a subprime mortgage security, and was publicly criticized by the Senate permanent subcommittee on investigations regarding other deals Goldman unfairly profited from, lawmakers say. Goldman has said it did nothing wrong ...

NCUA bans four from CU work

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ALEXANDRIA, Va. (6/9/10)--The National Credit Union Administration (NCUA) issued orders prohibiting the following individuals from participating in the affairs of any federally insured financial institution.
* Jason Rene Kisor, a former employee of Pen Air FCU of Pensacola, Fla., was convicted of theft, embezzlement or misapplication of funds. Kisor was sentenced to three days imprisonment with a credit of one day, five years of supervised release and ordered to pay $58,123 in restitution; * Melissa Laliberte, a former employee of Meriden Franco-American FCU of Meriden, Conn., was convicted of embezzlement from a credit union and filing a false income tax return. Laliberte was sentenced to 51 months in prison on Count One and 36 months in prison on Count Two, followed by 36 months of supervised release on Count One, and 12 months supervised release on Count Two. Laliberte will also pay $961,871 in restitution to the NCUA and the Internal Revenue Service. * Christine McLamb, a former employee of Health Facilities FCU of Florence, S.C., was convicted of embezzlement and sentenced to 75 months imprisonment, five years supervised release, and ordered to pay $1,033,965 in restitution; and * Cynthia Vaughan, a former manager of Rockland Employees FCU, Spring Valley, N.Y., based upon her indictment for three counts of Bank Fraud in violation of 18 U.S.C. § 1344.
Use the resource link below to view NCUA enforcement orders online.

Housing small biz funding coming up in House

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WASHINGTON (6/8/10)—While credit unions will be focused on interchange activity this week, the Credit Union National Association will also be monitoring the House for action on the Federal Housing Agency and Small Business Lending. The House on Thursday is expected to consider H.R. 5702, the FHA Reform Act, which would allow the FHA to adjust its premium structure for new borrowers while still providing affordable mortgage insurance to the underserved individuals that the FHA is intended to serve. The legislation, as currently written, also enhances the FHA’s authority to terminate lenders' approval to originate or underwrite loans backed by FHA insurance in instances where the FHA has found evidence of fraud or noncompliance. The House may also bring up H.R. 5297, the Small Business Lending Fund Act, later this week. That legislation would create a $30 billion small business lending fund for community banks. CUNA’s own plan to strengthen funding for small businesses has also been a topic of conversation lately, with the U.S. Treasury and Rep. Barney Frank (D-Mass.) each publicly backing lifting the current 12.25% of assets cap on credit union member business lending. The Treasury’s MBL proposal, which would lift the cap to as high as 27.5%, provided the credit union in question attained certain funding and soundness thresholds, was recently sent to the Hill. Frank in recent weeks has promised that MBL legislation would come up for discussion in his Financial Services Committee soon. Sen. Mark Udall (D-Colo.) and Rep. Paul Kanjorski (D-Penn.) have each introduced their own member business lending proposals, and Kanjorski’s proposal currently has 122 House cosponsors. CUNA has publicly backed lifting the MBL cap, saying that doing so would inject over $10 billion in funds into the economy and create up to 100000 new jobs at no cost to taxpayers.

Hundreds of CU reps to mobilize on interchange in Hill visits

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WASHINGTON (6/8/10)--Starting today, nearly 800 credit union representatives from across the nation will again spread the credit union message and, more specifically, will engage their respective elected representatives to drum up opposition to portions of the Senates financial regulatory reform package that address interchange fees. The Credit Union National Association’s latest Hike the Hill, which will take place today and tomorrow, is expected to “reach every member of Congress,” CUNA’s Senior Vice President of Legislative Affairs John Magill said. However, a delegation from Louisiana has opted to focus on in-district work on interchange to allow their Washington-based legislators to continue to monitor the ongoing oil spill in the Gulf of Mexico. CUNA is also taking the interchange argument to the broadcast media this week by airing an advertisement in several key states. An amendment offered by Sen. Richard Durbin (D-Ill.) and included in the Senate regulatory reform bill would allow government intervention in setting interchange fees. However, the House version of financial regulatory reform legislation does not contain similar language. While retailers have argued that reducing interchange fee expenses would allow them to pass on savings to consumers, CUNA has countered by stating that these new rules could allow merchants to direct consumers to use preferred forms of payment. CUNA has also said that this rule change forces the Fed into the role of a price-fixing body, when interchange fees should be driven by market forces. The interchange legislation could potentially be addressed during the House/Senate conference committee, which could potentially begin this week. CUNA expects the conference committee to hold session on June 15-17 and June 22-24. The House is expected to name its conferees on Wednesday. The Senate recently named Chris Dodd (D-Conn.), Tim Johnson (D-S.D.), Jack Reed (D-R.I.), Chuck Schumer (D-N.Y.), Richard Shelby (R-Ala.), Bob Corker (R-Tenn.), Mike Crapo (R-Idaho), Judd Gregg (R-N.H.), Blanche Lincoln (D-Ark.), Patrick Leahy (D-Vt.), Tom Harkin (D-Iowa) and Saxby Chambliss (R-Ga.) to serve as its conferees.

Regulators offer guidance on NCUA- and FDIC-assisted acquisitions

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WASHINGTON (6/8/10)--In a joint statement released on Monday, federal financial regulators said that the approval of financial acquisitions should be “conditioned on the acquiring institution's commitment to maintain specified levels of capital to address the risk of significant retrospective adjustments to the bargain purchase gain or other risks.” The release, entitled “Interagency Supervisory Guidance on Bargain Purchases and [Federal Deposit Insurance Corporation (FDIC)]- and [National Credit Union Administration (NCUA)]-Assisted Acquisitions,” aims to “address supervisory considerations related to business combinations that result in bargain purchase gains and the impact such gains have on the acquisition approval process.” Specifically, the release recommends that so-called “acquiring institutions” should “apply the acquisition method of accounting to all business combinations, including bargain purchase transactions and assisted acquisitions.” “Any estimated bargain purchase gain will be affected by retrospective adjustments made during the accounting measurement period to the acquisition-date fair values of assets acquired and liabilities assumed in the combination,” the release adds. According to the release, federal regulatory agencies may “impose capital preservation and other conditions in their approvals of acquisitions of institutions” due to concerns regarding the “quality and composition of capital” when bargain purchase gains are “expected to result from a business combination” and any associated fair value estimates “have not yet been validated.” For the full release, use the resource link.

Inside Washington (06/07/2010)

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* The National Credit Union Administration (NCUA) on Monday reported that Millbury, Ohio-based Woodco FCU ”sustained major damage” due to a weekend tornado touch down. While the $8.9 million in assets, high-school-based credit union was damaged by the storm, the credit union was empty at the time. The NCUA’s Region III staff will assist the credit union, which will temporarily relocate within the week. The NCUA also encouraged the FCU to “make loans with special terms and reduced documentation to affected members,” to “reschedule routine examinations if necessary,” and to use the available NCUA resources to back lines of credit and loans… * The Canadian Government has awarded a bank charter to U.S.-based big box retailer Wal-Mart. The retailer in 2007 withdrew its application for an Industrial Loan Company (ILC) charter, which was filed with the U.S. Federal Deposit Insurance Corporation. The ILC charter, if granted, would have permitted Wal-Mart to open individual branches in its stores. However, Wal-Mart representatives at the time denied that they intended to start their own financial institution, saying that the ILC application was aimed at reducing their overall transaction costs. Wal-Mart currently operates over 8000 stores in 15 countries, and allows financial institutions to provide a number of services through in-store branches…

NCUA key topics webinar set for June 28

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ALEXANDRIA, Va. (6/8/10)--The National Credit Union Administration (NCUA) and Chairman Debbie Matz will discuss a number of credit union-specific issues during an upcoming June 28 web-based virtual town hall. The 90-minute town hall will begin at 3 PM E.T. and will allow participants to communicate directly with NCUA officials, including Matz. An NCUA representative told News Now that the meeting is part of Chairman Matz's "ongoing interest in providing the industry with periodic updates on a variety of topics, including corporate credit unions, examination issues and field of membership rulemaking." Matz has said that communication with credit unions would be an important part of her tenure as NCUA chair. Previous open meetings in both this year and 2009 focused on the aforementioned issues as well as alternative capital and the continuing economic challenges facing natural-person credit unions. To register for the NCUA event, use the resource link.

Def Jam exec advocate for unbanked opposes interchange language

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WASHINGTON (6/8/10)—Adding to the growing concert of opposition against government limits on interchange fees, Russell Simmons, co-founder of the hip-hop label Def Jam, voiced his concerns about the issue on behalf of 80 million “underbanked” Americans “who are left out of the banking system.” He cited the recent joint letter from Credit Union National Association (CUNA) and the Independent Community Bankers of American (ICBA) on the inadequacy of a carve out for smaller institutions as an influence on his decision to speak out. Simmons, based in New York, publicized, via The Huffington Post Monday, a letter he recently sent to Sen. Richard Durbin (D-Ill). Simmons’ letter said he is “gravely concerned about the potential unintended consequences” of an amendment, designed by Durbin, that would require the Federal Reserve Board to intervene in setting interchange fees. Describing himself as a long-time advocate for the poor and a business owner of a debit-card service for the under-banked, Simmons said his mission has been to provide needed access to debit cards with “transparent low pricing and services that help our users budget, build credit, buy affordable healthcare and participate in the U.S. economy,” something he said many can take for granted. The Def Jam founder said he has no stake or interest in the “politics of regulating large banks, or the various lobbying efforts on their behalf, or on behalf of large retailers who want to see interchange fees reduced.” But, he added, his is extremely concerned about the impact the interchange provision could have on credit unions, community banks, and “specialist providers to the under-banked,” and their ability to provide card services at affordable rates. “That in turn would hurt the poor and the underserved by either raising fees or limiting the availability of this vital service. This would have a grotesquely unfair impact on the most vulnerable and the most heavily hit consumers, including minorities,” Simmons said, and vowed, “I would be compelled to fight this publicly and actively.” Simmons noted the recent CUNA-ICBA letter and said he was alarmed by the groups’ arguments that a carve-out provision in the amendment for financial institutions with less than $10 billion in assets would not work for a number of reasons. One reason cited is that card issuers may not have the ability, or willingness, to make a distinction between institutions in processing payments and sharing interchange revenue. Simmons letter comes as the U.S. House and Senate prepare to negotiate a final financial regulatory reform bill, which many reports say could be ready for President Obama’s signature by July 4. The Senate bill contains language that would allow the government to limit interchange fees, while the House version is silent on the topic. The language was added as a late amendment and was never vetted through the congressional hearing process. CUNA has launched a massive grassroots campaign to try to convince lawmakers not to include the language in a final bill. More than 209,000 communications have been sent to federal lawmakers by credit union advocates, and hundreds of credit union representatives are expected to make personal visits to lawmakers on June 9-10.

Inside Washington (06/04/2010)

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* WASHINGTON (6/7/10)—Changes to the Federal Reserve Board’s Regulation E, which implements the Electronic Fund Transfer Act, and Regulation DD, which implements the Truth in Savings Act, go into effect July 6, according to recent Federal Register documents. The Reg E final rule limits the ability of financial institutions to assess overdraft fees for paying automated teller machine (ATM) and one-time debit card transactions that overdraw a consumer's account, unless the consumer affirmatively consents, or opts in, to the institution's payment of overdrafts for those transactions. The Reg DD final rule addresses depository institutions' disclosure practices related to overdraft services, including balances disclosed to consumers through automated systems. Sec. 230.11(a)(1)(i) of the rule has a later, Oct. 1, effective date…

Mica seeks NCUA support on interchange

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WASHINGTON (6/7/10)--In a letter sent to National Credit Union Administration Chairman Debbie Matz late last week, Credit Union National Association (CUNA) President/CEO Dan Mica urged the NCUA to “help educate members of Congress” that Sen. Richard Durbin’s (D-Ill.) interchange fee legislation, if passed into law, would “significantly reduce net income” for credit unions that offer debit cards. “Credit unions offering debit cards represent nearly 70% of all credit unions, hold 97% of credit union assets and serve 96% of all credit union members. For these credit unions, there is no more important issue today than defeating the interchange amendment,” Mica added. Durbin’s amendment, which was added to the Senate’s version of financial regulatory reform legislation, would allow government intervention in setting interchange fees. The House version of financial regulatory reform legislation, which was passed late last year, has no interchange language, and both the House and Senate are currently working toward resolving differences between their respective versions of reform. CUNA, credit union leagues, and members and employees of credit unions large and small contacted congressional representatives to urge them to remove Durbin’s amendment from the regulatory reform package, and those efforts will continue this week with a national hike the hill. While retailers have argued that reducing interchange fee expenses would allow them to pass on savings to consumers, CUNA and various news organizations have recently noted that the proposed changes, which were backed by merchants, may in fact harm consumers. Specifically, CUNA has argued that the new interchange rules would allow merchants to herd consumers toward preferred forms of payment. To read Mica’s letter, use the resource link.

White House official CUNA meet on interchange

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WASHINGTON (6/7/10)—A key White House official met with the Credit Union National Association (CUNA) Friday to hear the credit union position on pending legislation that would allow the government to set interchange fees. CUNA adamantly opposes the adoption of the interchange provision in a final regulatory reform bill, which is currently being worked out as the House and Senate rectify their separate versions of reforms. In the meeting CUNA President/CEO Dan Mica emphasized that the interchange provisions are a most serious threat facing credit unions. He underscored the following points:
* The U.S. Congress has not thoroughly studied the impact of the interchange amendment; * The provision will affect small issuers disproportionately; and * Consumers will be the big losers by incurring new fees if the interchange provision becomes law.
The White House meeting occurred just three days after CUNA engaged in a similar session with Assistant U.S. Treasury Secretary for Financial Institutions Michael Barr. And both meetings occurred against a backdrop of an all-out grassroots effort by CUNA, the leagues and credit unions to convince federal lawmakers to stand in opposition to interchange language being included in a final regulatory reform bill. As of Friday, more than 200,000 had responded to CUNA’s call for grassroots interchange advocacy and made contact, via email and phone calls, on Capitol Hill on the issue. CUNA and the leagues are also sponsoring a national fly-in this week, asking credit union advocates to make personal visits with their lawmakers in Washington, D.C. on the issues involved.

CUNA takes to airwaves in interchange fight

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WASHINGTON (6/7/10)—With action on interchange fee legislation set to pick up even more this week, the Credit Union National Association (CUNA) will call on individual citizens in districts nationwide via a series of radio ads. The ad, which will be broadcast statewide in Arizona, Georgia, Iowa, Idaho, Rhode Island, South Dakota, Tennessee, and Vermont, as well as in Kansas City, Missouri, encourages consumers to “say no” to changing how fees are collected on your debit card. The ad provides a toll-free phone number that concerned individuals can use to reach their respective congressional offices.
Download the pdf Download the pdf
CUNA is also advocating for eliminating the interchange fee changes through a print ad campaign that will run in D.C.-based news media this week. CUNA has made the print campaign, which calls the new debit card use fees that would likely take the place of merchant-paid interchange fees “nothing more than a new tax on consumers,” available to credit union leagues nationwide as well. CUNA and other credit union representatives will take the anti-interchange fight to the halls of congress this week during a Hike the Hill on June 8 and 9, and CUNA President/CEO Dan Mica late last week encouraged the National Credit Union Administration to discuss the difficulties that interchange fee-less credit unions would face if the interchange legislation passes into law. (See related story: Mica seeks NCUA support on interchange) The interchange legislation, which would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, was introduced into the Senate version of financial regulatory reform by Sen. Richard Durbin (D-Ill.) The House version of reform does not contain similar legislation. CUNA has recently said that this rule change forces the Fed into the role of a price-fixing body, when interchange fees should be driven by market forces.

Inside Washington (06/03/2010)

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* WASHINGTON (6/4/10)--Lending to small businesses has been declining, Federal Reserve Board Chairman Ben Bernanke said in a speech this week in Detroit. Outstanding loans to small businesses dropped to $660 billion in the first quarter of this year from $700 billion in the second quarter of 2008. “From the potential borrower’s point of view, particularly a borrower who has been able to obtain loans in the past, these changes may feel like a reduction in the supply of credit; from the lender’s point of view, the problem appears to be a lack of demand from creditworthy borrowers,” Bernanke said. “Although lenders and borrowers may have different perspectives, our collective challenge is to help ensure that creditworthy borrowers have access to credit so that they can expand their businesses or increase payrolls, helping our economy to recover.” The Credit Union National Association (CUNA) and credit unions have lobbied to lift credit unions’ caps on member business lending to 25% from 12.25%. CUNA figures show lifting the cap would bring $10 billion in new credit and create more than 100,000 new jobs ... * WASHINGTON (6/4/10)--Auto lending could experience tighter regulation because of the financial crisis, and financial observers anticipate that this tightening will specifically affect car repossession. Car repossession is governed by state laws, but some financial experts say more oversight of the auto industry could take place through regulatory reform. If there is an “integrated consumer finance regulator, I have no doubt that auto finance, broadly speaking, would be an important area for it to focus its agenda,” said Raj Date, chairman and executive director of the Cambridge Winter Center for Financial Institutions Policy. There were two million self-help repossessions in 2009, some by unlicensed individuals and criminals, said the National Consumer Law Center (American Banker June 3). No license is required to carry out repossessions in 33 states, the center said. The center has proposed that states stop self-help repossession and involve law enforcement authorities. Some also say repossession agents should complete a standard licensing process, the Banker said ...

Lifting MBL cap gives small biz fresh capital NAR

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WASHINGTON (6/4/10)--The National Association of Realtors (NAR) this week continued its recent support of raising the member business lending (MBL) cap for credit unions, telling News Now that “lifting the current cap on credit union business lending will provide fresh capital that small businesses need at no cost to the American taxpayer, which will help contribute to our nation’s economic recovery." "Improving access to capital for small businesses has been widely acknowledged as a critical part of growing the American economy,” the NAR representative added. NAR also testified in favor of lifting the MBL cap beyond the current 12.25%-of-assets threshold before Congress last month and has directly advocated on behalf of credit unions through their own hike-the-hill style program. The U.S. Treasury, Rep. Paul Kanjorski (D-Penn.) and Sen. Mark Udall (D-Colo.) have all proposed separate pieces of legislation aimed at the MBL cap, with the Treasury proposing to lift the cap to as high as 27.5% of a credit union’s total assets. The House and Senate bills each propose lifting the MBL cap to 25% of a credit union’s total assets, and Kanjorski’s bill currently enjoys broad support, with 122 cosponsors. The Credit Union National Association has estimated that lifting the MBL cap to 25% of a credit union's assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers. Rep. Barney Frank (D-Mass.) last month indicated that his House Financial Services Committee would hold a vote on MBL legislation "fairly soon."

Interchange efforts increase before next weeks Hill hike

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WASHINGTON (6/4/10)—With the number of responses to the Credit Union National Association's (CUNA) call for grassroots interchange advocacy totaling over 150,000 as of Thursday night, credit unions and credit union leagues also are working to urge their federal lawmakers to block interchange language from a financial regulatory reform package. The House and Senate are currently working toward resolving differences between their respective versions of financial regulatory reform bills. The Senate bill proposes to allow government intervention in setting interchange fees, while the House bill has no interchange language. Among the many leagues working to positively change the financial regulatory reform package are groups from Ohio, Pennsylvania, Michigan, Wisconsin, California and Oklahoma. The Ohio Credit Union League has noted the more than 7,000 contacts with Ohio congressmen and women that have been made by over 2,300 leaders from 91 Ohio credit unions. The Madison Chapter of the Wisconsin Credit Union League last week ran a full-page, open letter to debit card users in the Wisconsin State Journal and has also taken to social networking websites such as Facebook to encourage “friends” to fight the new interchange regulations. The Pennsylvania League has also highlighted the efforts of Hershey FCU, Patriot FCU, American Heritage FCU, Guthrie FCU, Erie FCU, and PSECU, and encouraged its member credit unions to “inundate district offices with letters, phone calls, and faxes” and to oppose interchange changes by directly speaking with their congressional representatives at local appearances. Sen. Richard Durbin’s (D-Ill.) interchange proposal, which would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, continues to receive critical press. The Washington Times was among the latest news source to speak against interchange changes, with a Wednesday editorial warning readers that Durbin’s amendment is “aimed at your wallet.” “Inevitably,” the editorial adds, the costs of running debit card programs “will be shifted from merchants to consumers.” CUNA continues to encourage all state credit union leagues to coordinate with their member credit unions to ensure that their D.C.-based representatives are informed of the dangers that interchange legislation poses to credit unions and to promote participation in next week’s Hike the Hill, which will give credit union leagues and employees direct access to their elected representatives.

Foreclosures among next items before Fed consumer advisers

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WASHINGTON (6/4/10)-The Federal Reserve Board announced Thursday that its Consumer Advisory Council (CAC) intends to take up foreclosure issues at its next meeting, on June 17. A Fed announcement said CAC members will discuss loss-mitigation efforts, including the Administration’s Making Home Affordable program, neighborhood stabilization initiatives and challenges, and other issues related to foreclosures. Also on the agenda:
* The Home Mortgage Disclosure Act: In the context of the Fed board’s review of Regulation C, which implements HMDA, CAC members will consider whether revisions to HMDA rules in 2002, which required lenders to report mortgage pricing data, have helped generate useful and accurate information about the mortgage market; the need for additional data and other improvements; and what emerging issues in the mortgage market may warrant additional research; and * The Community Reinvestment Act (CRA): There will be discussion regarding the future of CRA, including possible changes in light of developments in the financial services industry and issues associated with the foreclosure crisis.
The CAC advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. The group meets three times a year in Washington, D.C. and meetings are open to the public. Alan Cameron, president/CEO of the Idaho Credit Union League, is a representative on the council. His term runs through 2010.

Financial institution assessed 1M penalty for BSA violations

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VIENNA, Va. (6/4/10)—The Financial Crimes Enforcement Network (FinCEN) revealed Thursday that it assessed a $1 million civil money penalty against a savings bank in New Jersey for violating a number of Bank Secrecy Act (BSA) requirements. FinCEN cited Pamrapo Savings Bank, S.L. A., of Bayonne, with a lack of internal controls, unqualified BSA compliance personnel, “relatively non-existent” training, and deficient independent testing. FinCEN said the deficiencies resulted in a “wholly ineffective” BSA compliance program which, in turn, resulted in a failure to file a substantial number of currency transaction and suspicious activity reports in an accurate and timely manner. FinCEN further charged that the bank misled regulators about its attempt to fix the problems. Pamrapo Savings Bank, without admitting or denying the allegations, consented to payment of the civil money penalty, FinCEN said in a release. FinCEN, an arm of the U.S. Treasury Department, was created to enhance U.S. national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems. “Without an effective (anti-money laundering) program, a financial institution deprives law enforcement of valuable tools made available for investigations under the BSA, and exposes the institution to illicit activity,” said FinCEN Director James H. Freis, Jr. “Information reported to FinCEN can be the tip-off that triggers an investigation or provides significant support to an investigation already underway. This can only happen when a financial institution has an effective anti-money laundering program in place.” FinCEN said the Pamrapo investigation and resulting civil money penalty was part of a coordinated effort with the U.S. Attorney's Office for the District of New Jersey, the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice, and the Office of Thrift Supervision. FinCEN’s assessment is in addition to forfeiture and civil money penalty actions by the DOJ and OTS, respectively, in March 2010.

Inside Washington (06/02/2010)

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* WASHINGTON (6/3/10)--The structure of a proposed consumer protection agency will soon be determined as lawmakers begin hashing out the House and Senate regulatory reform bills next week (American Banker June 2). The House bill would create an independent agency, while the Senate version would form an autonomous unit in the Federal Reserve Bank. Under the Senate bill, the agency also would be funded by the Fed--$500 million--while the House bill would fund the agency from 10% of the Federal Reserve System’s operating costs, assessments on large financial institutions and $200 million from Congress each year. Consumer groups and proponents of the agency as a stand-alone unit say the Senate’s funding approach is better because the House bill’s appropriations process could hamper the agency by adding conditions on how to use the funding it receives. The Senate bill also allows the agency to be run by an independent director appointed by the president and confirmed by the Senate. The House bill provides for a director to be appointed by the president and then be transitioned to a commission structure. The Obama administration has said it has no preference on how the agency is housed ... * WASHINGTON (6/3/10)--The National Association of State Credit Union Supervisors (NASCUS) reiterated its position that the National Credit Union Administration (NCUA) should defer to state law for merger and conversion issues of federally insured, state-chartered credit unions. NASCUS’ comments were in response to NCUA’s proposed rule regarding mergers and conversions. NASCUS said it shares NCUA’s concerns that important decisions regarding the future governance of a credit union must be handled fairly and transparently. However, NCUA’s rulemaking should be limited to federal credit unions, NASCUS said. With regard to the provisions impacting credit union mergers into mutual savings banks, NCUA is substituting its standard of fiduciary duty for that of the states, which concerns NASCUS. NASCUS recommended that “NCUA work with state regulators of non-federally insured credit unions to craft mutually acceptable standards that would address NCUA’s concerns without eviscerating the state authority that allows credit unions to choose their share insurance option” ... * WASHINGTON (6/3/10)--The Federal Reserve Board has named Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, Calif., to fill a vacancy on its Consumer Advisory Council. The council advises the board on its responsibilities under the Consumer Credit Protection Act and on other consumer financial services matters. Previously, Brown worked at the National Housing Law Project, where she directed the organization's initiatives on predatory lending, Section 8 homeownership and Rural Housing Service foreclosure avoidance. Brown also founded and served as the director of the community economic development unit at a community law center in Berkeley, Calif. Alan Cameron, president/CEO of the Idaho Credit Union League, is a representative on the council. His term runs through 2010 ...

NCUA extends corporate share coverage through Sept. 2012

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ALEXANDRIA, Va. (6/3/10)--The National Credit Union Administration (NCUA) on Wednesday announced that it has extended the expiration date of its Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) to Sept. 30, 2012. The TCCUSGP, which was scheduled to expire on June 30, 2012, backs up the National Credit Union Share Insurance Fund's (NCUSIF) coverage of all shares, excluding paid-in-capital and membership capital accounts, at corporate credit unions. The NCUA in March had extended the program until June 30, 2012. The program became effective for Central Corporate CU, Corporate America CU, Kansas Corporate CU, Kentucky Corporate FCU, Southeast Corporate FCU, and VACORP FCU on May 29, 2009. Existing deposits will continue to be covered, as will new investments with maturities of two years or less in participating corporate credit unions that are made before Sept. 30, 2010.

CUs post 1.1B in returns in first quarter reports NCUA

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ALEXANDRIA, Va. (6/3/10)--In its recent analysis of the first quarter call reports of all 7,498 federally insured credit unions, the National Credit Union Administration (NCUA) reported credit union net income “posted a positive return of $1.1 billion, with a return on average assets ratio of 0.47%.” Total assets rose by 5.86% during the quarter, which ended on March 31. The NCUA report, which was released on June 2, also noted a 4.68% increase in credit union net worth and a 1.35% rise in total credit union membership. Investments, cash and cash equivalents also increased to a total of $290.1 billion during the quarter, a 28.61% rise from the previously reported amount. Total shares in credit unions increased by nearly 11%, but the NCUA noted that slowed loan growth, when combined with this total share increase, resulted in a decline in credit union loan to share ratios. The NCUA noted that credit unions are “challenged by a declining demand for loans across the board.” The NCUA reported a loan-to-share ratio of 73.16% as of March 31, down from the 76.06% reported in 2009. In an NCUA release, Chairman Debbie Matz said that while “some of the short-term numbers are moving in the right direction,” credit unions “still have a long way to go before overcoming all of the residual issues from the economic downturn of the past two years.” The NCUA is “working diligently to ensure that credit unions maintain strong balance sheets so that they can continue to serve members well through the economic recovery and beyond,” Matz added. For the NCUA release, use the resource link.

Interchange battle receives national local coverage

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WASHINGTON (6/3/10)—National online publication The Motley Fool recently backed up credit union claims regarding pending interchange legislation, saying in an editorial that while it seems like “what's bad news for the banks” would be good news for consumers, “it's far from clear whether ordinary consumers will benefit at all from the legislation.” “For the most part, customers have never seen the direct impact of interchange fees,” the story said, adding that those same customers “may never see any direct benefit from new limits” on interchange fees. Retailers have argued that reducing interchange fee expenses would allow them to pass on savings to consumers, but, as the story notes, “if the changes are extended to credit card interchange fees, then some consumers could actually end up being worse off.” “With another source of revenue under attack, it's even more likely that customers will face annual fees and other direct costs to offset lost interchange fee income,” the story added. A more local perspective on the interchange fight was provided by the Dayton Business Journal, which noted that credit unions depend on interchange income to offset the costs of offering a debit card system to their members. The story focused on the efforts of Ohio-based Wright-Patt CU and Day Air CU and also cited Ohio Credit Union League claims that “debit cards issued by credit unions not complying with the rate enacted by the Fed could be turned down by retailers at the point of purchase, giving merchants the authority to discriminate against certain cards.” The Credit Union National Association (CUNA) has called on credit union members, employees and supporters nationwide to urge their legislators to oppose changes to the current interchange fee structure. CUNA is backing grassroots actions, and has also met with the U.S. Treasury this week to outline credit union concerns regarding the current interchange fee legislation.

Inside Washington (06/01/2010)

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* WASHINGTON (6/2/10)--Lawmakers hope to sign off on the regulatory reform bill before the July 4 recess, but they face a huge task of enacting about 120 required rules and completing mandated reports, said American Banker (June 1). An analysis by Sullivan & Cromwell indicated that more than 250 required and recommended studies and rulemakings are in the Senate bill. Margaret Tahyar, partner at Davis Polk, told the newspaper that she wondered when regulators will find the time to tackle the rules and studies. Tahyar estimated 125 rulemakings under the Senate bill, 45 reports or studies, and 33 rulemakings that agencies are permitted to complete. More than a dozen agencies would be involved, she said. The Senate passed its version of the regulatory reform bill May 20. The Credit Union National Association worked with lawmakers and sought many improvements on behalf of credit unions that were included in the bill: retention of the National Credit Union Administration (NCUA) as the prudential regulator of credit unions; inclusion of language that directs a new Bureau of Consumer Financial Protection to guard against burdening credit unions and other financial institutions with burdensome duplicative regulations by ensuring that outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed to reduce unwarranted regulatory burdens; and designation that the NCUA examine credit unions with less than $10 billion in total assets for compliance with consumer protection regulations ... * WASHINGTON (6/2/10)--The Federal Reserve has scheduled three small-value auctions of term deposits through its Term Deposit Facility over the next two months. The first auction, June 14, will offer $1 billion of 140-day term deposits. The second auction, June 28, will offer 28-day term deposits. The third auction, July 12, will offer 84-day term deposits. The Fed may schedule up to two more auctions later this summer ...

CUNA Fiduciary duty corp. rules need greater clarity

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WASHINGTON (6/2/10)--The Credit Union National Association (CUNA) in a comment letter asked the National Credit Union Administration (NCUA) to clarify credit union directors’ "existing fiduciary duties” as well as how state corporate laws “apply to federal credit unions on issues not addressed by the Federal Credit Union Act (FCUA) and NCUA regulations.” Doing so “would also protect member rights without having negative operational consequences” and “would be consistent with current NCUA policies as well as the legislative history and judicial interpretation of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) provisions on which the proposed rule is premised,” the CUNA letter added. The NCUA earlier this year proposed a significant rewrite of portions of Sections 701, 708a, and 708b of its rules to address the fiduciary duties of federal credit union directors, credit union-to-bank mergers, and charter and insurance conversions. While the NCUA’s proposed prohibition on director indemnification is, according to CUNA, “unnecessary” and could make it more difficult for federal credit unions to “find qualified, volunteer board members,” CUNA wrote in support of “ensuring directors should understand the finances and balance sheet of the credit union they serve.” “However, it should be the credit union board's collective responsibility to ensure this is the case for each board member and not an authority that an examiner could enforce against an individual director,” and credit union boards “should have a written policy that could be reviewed” by examiners, CUNA added. Generally, CUNA “strongly” urged the NCUA “to support greater regulatory relief for credit unions because credit unions continue to face a challenging business and regulatory environment,” adding that the NCUA’s rules, as proposed, “would increase the complexity and lead times of the affected transactions, especially for credit union to credit union mergers.” For the full letter, use the resource link.

FHFA seeks improved GSE funding for underserved communities

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WASHINGTON (6/2/10)--The Federal Housing Finance Agency (FHFA) has published for public comment a proposed rule that would require government-sponsored entities (GSEs) Fannie Mae and Freddie Mac to “serve very low-, low- and moderate-income families” in the “manufactured housing, affordable housing preservation, and rural markets.” The FHFA proposal would require Fannie and Freddie to “take actions to increase the liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for underserved markets while adhering to the requirements of conservatorship.” Fannie Mae and Freddie Mac were placed into conservatorship in 2008 in a bid to reduce the uncertainty in the financial markets regarding GSE bonds and mortgage-backed securities. The GSEs would be “required to provide an underserved markets plan” on which those entities would be assessed. The FHFA proposal would create a method for evaluating the GSE’s performance in underserved markets. According to the release, the FHFA would evaluate the GSEs use of new loan products and underwriting guidelines and would judge the extent of their “outreach to qualified loan sellers.” The FHFA would also evaluate the volume of loans purchased by the GSEs and the “amount of investments and grants in projects that assist in meeting the needs of the underserved markets.” For the full FHFA release, use the resource link.

Grassroots interchange opposition strong and growing

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WASHINGTON (6/2/10)--While the halls of Congress have emptied for the week, grassroots credit union advocacy regarding interchange legislation continues this week through both legislator-led town hall meetings and credit union activism on several fronts. One of those fronts is a Credit Union National Association-backed effort to verbally and electronically reach out to representatives, and this communication effort resulted in over 80,000 individual contacts as of Tuesday. CUNA is asking credit union backers to urge their legislators to oppose federal intervention into the current interchange rules. An amendment offered by Sen. Richard Durbin (D-Ill.) which was successfully added to the Senate’s regulatory reform package would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions. CUNA has recently said that this rule change forces the Fed into the role of a price-fixing body, when interchange fees should be driven by market forces. State credit union leagues have also chipped in to back credit union concerns, and Virginia- and Louisiana-based credit union leagues are among those that have joined state-level small banking associations to publicly oppose federal interchange intervention. Illinois Credit Union League President/CEO Daniel Plauda also publicly opposed the interchange changes, writing in a Springfield Journal op-ed that the “reality” of the proposed interchange legislation is that merchants are attempting to “push costs directly into the pocketbooks of the very people who use [the convenient card payment system] every day.” The interchange amendment will also “destroy the ability of small issuers, such as credit unions,” to provide debit and credit card services to their customers and members. Another opposing voice is some state governments, with The Washington Post on Tuesday reporting that a number of state treasurers are considering contacting federal lawmakers to detail their own concerns that proposed interchange fee limits “could endanger state programs that use prepaid cards to dispense crucial benefits.” As reported in the Post, a total of 47 states distribute some benefits via prepaid cards. The Post article also noted that retailers could potentially turn away customers that use government-provided prepaid cards or force those customers to meet an established minimum purchase amount to avoid using another form of payment.

CDFI launches 2010 fin. ed. and counseling pilot

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WASHINGTON (6/2/10)--The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund on Tuesday announced that the 2010 round of it’s Financial Education and Counseling (FEC) Pilot Program, which awards funds to organizations that provide financial education services to potential homebuyers, has begun. Educational services, for the purposes of the FEC Program, may be activities that increase the financial knowledge and decision-making capabilities of homebuyers and assist them in developing budgets, increasing their savings, reducing their debt, financing or planning for major purchases, and generally improving financial stability. In a release, CDFI Fund Director Donna Gambrell said that the FEC program’s educational initiatives “continue to be vital tools for economic development, especially when they benefit prospective homebuyers in distressed communities.” Congress appropriated $4.15 million in funding for the 2010 edition of the FEC program, which was established last year. Of that $4.15 million, $3.15 million will be made available to organizations located in Hawaii. The remaining $1 million will be granted to a number of organizations that applied for funds during 2009 but were not helped due to the large number of applications received. Applications for the 2010 round must be received by July 8. For the CDFI release, and application materials, use the resource link.

CUNA brings interchange message to Treasury

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WASHINGTON (6/2/10)—Assistant U.S. Treasury Secretary for Financial Institutions Michael Barr listened to the Credit Union National Association (CUNA) delineate credit union concerns regarding pending interchange legislation, in a private meeting Monday. During the meeting, CUNA President/CEO Dan Mica also hand-delivered a letter for U.S. Treasury Secretary Timothy Geithner urging him to protect credit unions from becoming collateral damage as a result of interchange provisions included in the Senate’s regulatory restructuring legislation, which is pending consideration by a House and Senate Conference Committee. The pending interchange amendment would require government intervention in what is now a free-market process—setting the rate of interchange fees merchants pay for the benefits associated with electronic payments. In the meeting with Barr and letter to Geithner, Mica underscored to the Treasury that the interchange provisions are the “most serious threat” currently facing credit unions. Mica, with senior CUNA staff, told the Treasury officials that CUNA believes the Sen. Richard Durbin (D-Ill), who drafted the interchange language, had and has no intention of harming credit unions. “Indeed he instructed his staff to try to work with the Illinois Credit Union League and CUNA to improve the legislation,” Mica noted. However, the CUNA chief added, “While we worked to the very last minute on this, we were not able to achieve sufficient improvements to make the language workable for credit unions.” “(W)e cannot sit by and let credit unions and their members suffer unintended consequences that will result in direct and substantial reductions in credit unions’ net worth--at the very time every reasonable policy maker is encouraging financial institutions to maintain and build ample capital,” Mica said. CUNA also used the opportunity of the meeting and letter to thank Treasury for the Obama administration’s efforts to support an increased member business lending (MBL) cap for credit unions, and for the department’s work to help craft legislation to accomplish that objective. In an important development last week, Treasury said it "could support proposals to increase credit union (MBL) provided safety and soundness concerns are addressed." The department forwarded legislative language to Capitol Hill, which it had worked out with key credit union supporters in Congress, such as Sens. Mark Udall (D-Colo.) and Charles Schumer (D-N.Y.) and Rep. Paul Kanjorski (D-Pa.), as well as the National Credit Union Administration. CUNA also weighed in throughout the development of the provisions to push for the most advantageous language possible. Use the resource link below to access CUNA interchange resource materials.

Mica rallies CUs on interchange issues video

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WASHINGTON (6/2/10)—Credit Union National Association (CUNA) President/CEO Dan Mica continues to urge credit unions to act now and to act in numbers to fight the adoption of interchange amendments to a final financial regulatory reform package. In a new video produced Monday, Mica issues an urgent call for credit union action against an amendment in the Senate reform package that would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions. The House version of the bill has no interchange amendment and CUNA is fighting to keep it out of a final bill. Mica warns that the fight against the interchange provision is a tremendous uphill battle. But he adds that the modification in interchange rules would be very costly to credit unions without any mitigating benefits to consumers. “The chances of getting this done are not good,” Mica says candidly. But, he strongly urges, “We have no choice, no choice, but to let Congress know how strongly we are opposed the interchange amendment.” Mica urges credit unions to:
* Use the Memorial Day District Work Break to contact federal lawmakers in their home districts; * Light up the phones in lawmakers’ offices with calls in opposition to the interchange provisions; * Send emails in opposition; * Join CUNA in Washington June 8-9 for a national Hike the Hill.
Use the link below to view the video call to action and to access resources on the interchange issue.