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Noting closing Mica says CUs can help consumers

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WASHINGTON (7/14/08)—News late Friday that the Office of Thrift Supervision closed IndyMac Bank, F.S.B., Pasadena, Calif., underscores the need for the U.S. Congress to explore ways to increase credit availability for consumers, said Credit Union National Association President/CEO Dan Mica. Mica said that as the economy experiences a credit crunch in many sectors, credit unions stand "ready, willing and able to help alleviate the problem and promote economic growth." He said that willingness could be enhanced to the benefit of the consumer by two legislative proposals currently pending congressional action. He urged Congress to support provisions contained in the Credit Union Regulatory Improvements Act (H.R. 1537, S. 2967) that would improve a current 12.25%-of-assets cap on member business lending (MBL) by raising it to 20% of assets. He also urged lawmakers to exempt from the cap MBLs made in underserved areas. Mica also noted the value of prompt corrective action reform, changing the current system to one that more accurately reflects risk. Such a change, Mica said, could free up more funds that could be turned into loans for credit union members. In its announcement the OTS named Federal Deposit Insurance Corporation (FDIC) conservator of the closed institution. The FDIC will transfer insured deposits and substantially all the assets of IndyMac Bank, F.S.B., Pasadena, CA, to IndyMac Federal Bank, FSB. The OTS statement said: Brokered deposits will be held by the FDIC and those insured deposits will be paid off when the insurance determination is complete. IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008. As conservator, the FDIC will operate IndyMac Federal Bank, FSB to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by IndyMac Bank, F.S.B. Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. On-line and phone banking services this will be operational on Monday. Loan customers should continue making loan payments as usual. Starting today, IndyMac Federal Bank, FSB's 33 branches will observe normal operating hours and will continue to offer full banking services, including on-line banking. For additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919.

MSB vote back on House calendar

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WASHINGTON (7/14/08)—A delayed vote a House bill intended to encourage credit unions and banks to serve money services businesses (MSBs) appears to be over. The Money Services Business Act (H.R. 4049) is back on the House suspension calendar this week. Posted on Tuesday’s House agenda, the MSB is listed as the first of 16 items the House intends to decide that day. Although a vote was expected last week, the bill was removed mid-week from the voting schedule. The bill was introduced in 2007 by Rep. Carolyn Maloney (D-N.Y.), chairman of the House Financial Services subcommittee on financial institutions. Other members of the House Financial Services Committee to back the bill include its chairman, Rep. Barney Frank (D-Mass.), and ranking member Spencer Bachus of Alabama. The bill seeks to clarify that financial institutions serving MSBs would not be responsible for whether the MSB is complying with anti-money laundering laws and any other applicable Bank Secrecy Act (BSA) requirements. In 2006, the Financial Crimes Enforcement Network (FinCEN) began seeking public comment regarding the impact of BSA regulations on the ability of money services businesses (MSBs) to open and maintain accounts and obtain other banking services at depository institutions.

Dodd introduces his credit card curbs

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WASHINGTON (7/14/08)—Senate Banking Committee Chairman Christopher Dodd (D-Conn.) last week introduced a bill intended to curb such credit card practices as “universal default,” “any time, any reason'' repricing, multiple over-limit fees, and youth marketing. Dodd floated a draft of his legislation in April but said at the time that he would wait until regulators and the industry had a chance to curb perceived abuses. Dodd decided to go ahead with his legislation at this time because he believes both the government and private industry have failed to address the issues he has said negatively impact consumers, according to John Hildreth, senior legislative representative for the Credit Union National Association (CUNA). Among the bill’s provisions are prohibitions against:
* Interest charged for debt paid on time; * Interest charges on any portion of credit card debt which the credit card holder paid on time during the grace period’ * Credit card issuers from increasing interest rates on cardholders who are in good standing for reasons unrelated to the cardholder's behavior with respect to that card, a practice referred to as “universal default;” * Charging interest on credit card transaction fees, such as late fees and over-the-limit fees; and * Charging of repeated over-the-limit fees for a single instance of exceeding a credit card limit.
The bill also orders a government study of interchange fees, the fees charged merchants by credit card companies each time a consumer uses a card for a purchase. The House is expected to vote this week on legislation that would give merchants an antitrust exemption to negotiate interchange fees. (See relat4ed story, “Interchange bill markup expected Wednesday.”) On the House side, Rep. Carolyn Maloney (D-N.Y.), who chairs the House Financial Services subcommittee on financial institutions, introduced a package of credit card reforms in February called the Credit Cardholder's Bill of Rights (H.R. 5244). The bill was introduced with 40 co-sponsors and also is intended to curb abusive credit card practices, such as some interest-rate increases and late fees. CUNA applauds congressional and regulatory action to end discriminatory, predatory, deceptive, and abusive lending practices. However, it has several reservations regarding certain proposals aimed at achieving these ends. For instance, CUNA is concerned that a prohibition against universal default practices would prevent card issuers from adjusting a card holder’s interest rate based on their total credit risk. CUNA has noted that credit unions must often examine a card holder’s credit report, to approve a credit line increase for example. Negative information on a credit report would lower that credit score and thus a card issuer would have to consider that in its ongoing relationship with the card holder. On May 2, a joint proposal from the National Credit Union Administration, the Federal Reserve Board, and the Office of Thrift Supervision was released regarding overdraft protection plans and practices relating to credit cards. The plan also included possible amendments to Regulation Z (Truth in Lending) and Regulation DD (Truth in Savings) to complement the unfair acts and deceptive practices proposals. For credit cards, the proposal addressed time periods for making payments, payment allocations, interest rate increases on outstanding balances, fees resulting from credit holds, methods for computing balances subject to interest charges, excessive security deposits and fees charged when credit is issued, and advertisement that include multiple interest rates and multiple credit limits. For more on credit card proposals and CUNA’s position, use the resource link below.

Interchange bill markup expected Wednesday

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WASHINGTON (7/14/08)--The House Judiciary Committee is expected to vote Wednesday on bill that would set up a government tribunal as mediator in disputes that could occur relating to interchange fees based on consumer use of credit and debit cards. The committee will likely take up a bill known as the Credit Card Fair Fee Act (H.R. 5546), according to the Electronic Payments Coalition (EPC), of which the Credit Union National Association (CUNA) is a member. The legislation would give merchants an antitrust exemption to negotiate interchange fees. At issue are the fees charged merchants by credit card companies each time a consumer uses a card for a purchase. H.R. 5546 has a companion bill (S. 3086) of the same name pending action in the Senate. Additionally, Rep. Peter Welch (D-Vt.) has introduced a bill to require credit card companies to disclose their interchange rates, terms, and conditions to consumers and businesses. CUNA, all members of the EPC and the U.S. Department of Justice are among opponents of the “fair fee” legislation. CUNA opposes legislation that would regulate interchange because it believes that such action would adversely affect consumer options, competition and technology innovation. Credit unions use interchange fee revenue to offer credit and debit cards to their members. The revenue covers the costs and risks the credit union incurs in the card system, including consumer nonpayment and fraud. The Justice Department, commenting on the plan, wrote earlier this month, “The antitrust laws are the chief legal protector of the free-market principles on which the American economy is based. Companies free from competitive pressures have incentives to raise prices, reduce output, and limit investments in expansion and innovation to the detriment of the American consumer." The letter also warned that the bill seeks to counter "perceived market power on the part of large credit card networks" by shifting power to merchants negotiating with those networks. In a related story, a bill introduced last week by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to address abusive credit card practices includes a provision that would require a government study of interchange fees. (See “Dodd introduces his credit card curbs“)