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Fed addresses CARD Act compliance problem

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WASHINGTON (7/16/09)—The Federal Reserve Board Wednesday issued an interim final rule under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act and included supplementary information that addresses a problem regarding sending out statements 21 days before a payment is due. Under the CARD Act, this provision applies to all open-end credit, not just credit cards, and is effective Aug. 20. The Credit Union National Association (CUNA) has been working with the Fed to convey credit union concerns about the fast-approaching compliance date for the provision that would reach way beyond credit cards and also cover such things as: general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and home equity lines of credit and--of particular concern to credit unions--to multi-featured, open-end lending programs. CUNA has urged an extended compliance timeframe. The interim final rule itself does not change the requirements in the law. However, in the supplementary information that accompanied the rule, the Fed acknowledged the difficulty in compliance. The Fed indicated that "for a short period of time after August 20," periodic statements for open-end credit other than credit cards may disclose due dates that are inconsistent with the 21-day requirement under certain circumstances. There must, for instance, be prominent disclosure elsewhere, either on the statement or in an insert, that the payment will not be treated as late if received within 21 days after the statement was mailed. CUNA staff remains in contact with Fed attorneys to further clarify the meaning of "a short period of time." “Our goal is to obtain at least an oral assurance from the Fed's staff that ‘a short period of time’ will allow a credit union to do nothing more than to provide this alternative disclosure to accountholders until the effective date of the final version of this rule,” said CUNA Senior Assistant General Counsel Jeffrey Bloch late Wednesday. Feb. 22, 2010 is the effective date for other sections of the CARD Act. This interim rule will be out for comment for 60 days. During that time CUNA will work to ensure that a final rule provides additional flexibility, both with regard to limiting the scope of the provisions to credit cards or, in the alternative, providing credit unions and others with the time necessary to comply, Bloch said. CUNA will be hosting an audio call soon, which will provide additional information about the interim final rule, including the latest on the "21-day" issue. Watch CUNA’s News Now for details.

Inside Washington (07/15/2009)

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* WASHINGTON (7/16/09)--A proposal by several federal agencies requiring originators at banks, thrifts and credit unions to be licensed by 2010 under a registration system created for nonbank lenders is generating criticism from industry representatives who say the proposal could impair loan modifications. The registry aims to increase tracking and accountability of originators, and reduce fraud by requiring originators to submit updated personal information and provide fingerprints. Although the proposal didn’t draw any controversy when it was considered by the Federal Deposit Insurance Corp. (FDIC) board in May, it has been cited by some industry groups as going too far (American Banker July 15). The proposal is intrusive because employees already undergo background checks, and community banks should be exempt because they already are scrutinized at the federal and state levels, according to one letter filed July 7. Another letter, dated July 9, said regulatory agencies should reduce the compliance burden on financial institutions and develop a standard form that could be adopted by all banks. Agencies involved with the proposal besides the FDIC include the National Credit Union Administration, the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Federal Reserve Board and the Farm Credit Administration ... * WASHINGTON (7/16/09)--Completed loan modifications fell 12% in April to about 13,800, according to the Federal Housing Finance Agency’s Foreclosure Prevention Report. The report details actions taken by Fannie Mae and Freddie Mac to prevent unnecessary foreclosures. Loan modifications accounted for 48% of all completed foreclosure prevention actions in April, compared with 47% in March. Completed short sales and deeds in lieu increased 15% in April to 4,000--more than three times the volume one year earlier. Delinquencies also continued to rise about 71,700 more loans going 60 days or more delinquent in April, the report said ... * WASHINGTON (7/16/09)--Congressional leaders announced appointments to the Financial Crisis Inquiry Commission Wednesday. Commissioners include: Bill Thomas, senior adviser, Buchanan, Ingersoll and Rooney; Douglas Holtz-Eakin, president, DHE Consulting LLC; Peter Wallison, co-director for Financial Policy Studies at the American Enterprise Institute; Keith Hennessey, assistant to the president for Economic Policy and director of the National Economic Council, 2008-2009; Phil Angelides, former California state treasurer; Brooksley Born, former chair of the Commodities Futures Trading Commission; John Thompson, chairman of the board of directors at Symantec Corp.; Bob Graham, former U.S. senator and governor of Florida; Heather Murren, retired managing director for Global Securities Research and Economics at Merrill Lynch; and Byron Georgiou, president of Georgiou Enterprises. Thomas, selected to serve as vice chair of the commission, was a former chairman of the House Ways and Means Committee from 2001 to 2007. Congress established the commission to investigate the causes of the financial crisis and the collapse of major financial institutions ...

OCCs Dugan to appear on this weeks HandFF Radio

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WASHINGTON (7/16/09)--Comptroller of the Currency John Dugan will discuss consumer protections for reverse mortgages during a July 19 appearance on Home & Family Finance Radio. During the interview, Dugan will discuss the growth of reverse mortgages and the potential risks posed to consumers. Dugan is also expected to detail the various forms of protections available to consumers that choose to take part in reverse mortgages and provide insight on the work that the Office of the Comptroller of the Currency (OCC) is doing to address reverse mortgage-related issues. The comptroller recently outlined many of his concerns in a press release, warning that reverse mortgages “pose significant compliance risks” and urging regulators to “get out in front of this issue, before real problems develop” so that reverse mortgage loans can be made in a way that benefits lenders and borrowers alike. According to Dugan, regulators should ensure that pending interagency guidance on reverse mortgages is “sufficiently robust” to protect consumers. While the OCC would monitor banks to “ensure compliance” with the resulting guidance and existing regulations, Dugan said that “guidance alone is not enough to address the consumer protection issues” related to reverse mortgages.

House appropriations bill could increase CDRLF funding

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WASHINGTON (7/16/09)--Credit Union National Association (CUNA) President/CEO Dan Mica on Wednesday thanked Rep. Alcee Hastings (D-Fl.) for adding to the House Financial Services and General Government Appropriations Bill an amendment that would increase funding for the Community Development Revolving Loan Fund (CDRLF) to $1.25 million for the 2010 fiscal year. The National Credit Union Administration (NCUA) in May requested $1 million in funding for the CDRLF for 2010. The amendment, which would add $250,000 to the CDRLF’s current level of funding, was offered as part of a manager’s amendment to the appropriations bill. That bill is expected to pass the House Rules Committee during a vote to be held later today. The CDRLF, which is administered by the NCUA’s Office of Small Credit Union Initiatives, provides low-interest loans and technical assistance grants to low-income designated credit unions. These small credit unions are then able to offer services like free income tax preparation and financial literacy classes to their members.

Bankruptcy rule must protect members says CUNA

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WASHINGTON (7/16/09)—The Credit Union National Association (CUNA) urged the U.S Solicitor General to continue to defend the Bankruptcy Reform Act in order to help protect credit union members from the cost of some debtors’ unscrupulous use of bankruptcy law. CUNA’s July 15 letter to Solicitor General Elena Kagan centers on the U.S. Supreme Court’s recent agreement to review the constitutionality of certain provisions in the 2005 bankruptcy law. The pending cases center on whether bankruptcy lawyers may counsel debtors to run up additional debt after deciding to declare bankruptcy but before the petition has been filed. “We were pleased that, during your confirmation hearing, you cited numerous factors that you said favored continuing the defense of the constitutionality of the Act,” CUNA President/CEO Dan Mica wrote. Mica explained that the issue of such abusive behavior in bankruptcy is of special importance to credit unions because, as member-owned, not-for-profit cooperatives serving as financial intermediaries between savers and borrowers, credit unions’ money is their members’ money. “When one credit union member has his or her debts discharged through bankruptcy, the credit union and its other member-owners ultimately pay for these debts through depletion of the cooperative’s jointly owned capital as well as lower dividends on savings and higher interest rates on loans. “This is particularly true for the many credit unions with fewer than $10 million dollars in assets for which losses of even thousands of dollars can have a material impact on operations and, in some cases, threaten a credit union’s viability as a going concern,” Mica warned. He assessed, “The government has a compelling, legitimate interest in regulating this form of speech because of bankruptcy’s harmful impact on credit unions and their members, especially during this major recession.” Mica concluded: “Credit unions have a long track record of giving their members a fair deal, and we see no persuasive argument why lawyers have a constitutional right to counsel their clients to capture as much of a credit union’s cooperatively-owned capital as possible through the bankruptcy process. “The public policies underlying 11 U.S.C. § 526(a)(4) are sound and we hope that you decide to continue the defense of that provision before the U.S. Supreme Court.”

Senate Banking schedules July 22 hearing for Matz

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WASHINGTON (7/16/09)--The Senate Banking Committee has scheduled a July 22 hearing on the nomination of Deborah Matz to a position on the National Credit Union Administration (NCUA) board Matz was named in May as President Barack Obama's choice to become the new NCUA chairman. Matz is a former member of the NCUA board, confirmed by the Senate on March 22, 2002 for a term that ended August 2005, although she remained a few months longer to assure a smooth transition to a new member. Matz was executive vice president and chief operating officer of $800 million-in-assets Andrews FCU, in Suitland, Md., until June 2008. If confirmed, Matz will fill a vacancy created by the expiration of Rodney Hood's term on the NCUA board.  Although that term expired in April, Hood has agreed to remain on the board until a new member's arrival. Current chairman Michael Fryzel will retain a spot on the board, but as a Republican will become the minority member on the three-person executive board. Board member Gigi Hyland is the third component to the board. The Credit Union National Association has noted that Matz has strong credit union credentials and that the trade group anticipates she will continue her role as "a solid and competent regulator

Community First CU judge rejects government appeal

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GREEN BAY, Wis. (7/16/09)--Saying that none of their arguments suggested “that the jury lacked an evidentiary basis for reaching its verdict,” U.S. District Judge William Griesbach on Tuesday rejected a Department of Justice motion which sought to overturn a recent jury verdict in favor of Community First Credit Union’s challenge against the federal government over the Internal Revenue Service's (IRS) position on credit union unrelated-business income taxation (UBIT). On May 14th, a jury found in favor of the credit union's refund claim of $54,604, the full amount the credit union sought, plus costs. The amount represented taxes paid on credit life and credit disability insurance and guaranteed asset protection (GAP) products. In the July 14 ruling, Griesbach said that the government’s challenge, which asked the court to “reweigh the evidence and find that the jury should have preferred its version of the evidence” to the credit union’s, was “outside the bounds” of what is allowed under Federal Rule 50. Under Federal Rule 50, courts may “grant judgment as a matter of law when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.” The government will have 60 days to appeal Griesbach’s ruling. In another pending court case that is relevant to credit unions, Judge Christine M. Arguello has scheduled a five-day jury trial for the case of Bellco Credit Union v. U.S. Colorado-based Bellco filed suit against the government in May seeking a nearly $200,000 refund from the Internal Revenue Service for UBIT taxes paid on accidental death and disability insurance, credit life and disability insurance, and other financial services. Both parties in the tax dispute have filed motions for summary judgment, and no decision has been made yet. The Community First CU decision is not expected to directly affect the proceedings in the Bellco case.

CUNA CUs wants positive reg changes Mica tells PBS

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WASHINGTON (7/16/09)--In an interview with the PBS Nightly Business Report’s Susie Gharib, Credit Union National Association (CUNA) President/CEO Dan Mica said that CUNA “would be interested in” the new financial regulations proposed by legislators as long as they would replace some current regulations rather than adding to the heavy regulatory burden. Asked if CUNA is "opposing any new regulations for credit unions," Mica said that CUNA and credit unions have not publicly opposed all new regulation for credit unions, and have expressed a willingness to work toward reasonable regulation that would offer increased “transparency and access” to credit union members. However, CUNA and credit unions would seek to create “good public policy” that works to “everyone’s advantage” by seeking to modify any unneeded or excessive regulations, he added.
Much of the PBS segment focused on how CUs are faring in today's difficult economic environment, when more of their memebers are suffering job losses. That is certainly affecting credit unions, but many other businesses as well, Mica pointed out. Mica also emphasized credit unions have conservative underwriting practices and a willingness to work with members to modify or extend the terms of existing mortgage loans. That, in turn, has helped credit unions avoid high default rates, Mica said. While credit unions in troubled economic areas like Florida, Nevada and California are feeling greater strain, Mica said that many continue to do well, and credit unions in these areas are seeing “green shoots” and some signs of stability. While there are still ongoing challenges, Mica reported that credit unions in these areas continue to maintain strong capital ratios. In a pre-produced segment on CUs that preceded Mica's interview, BrightStar Credit Union in Sunrise, Florida, was spotlighted as an example of a CU in a hard-hit area that has continued to perform well. "We were never involved in subprime lending," said CEO Ralph Crockett. "We've had conservative lending practices and sets of policies, and we've always adhered to those policies and programs," he added.

Monetary policy too big to fail on House hearing agenda

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WASHINGTON (7/16/09)—Federal Reserve Board Chairman Ben Bernanke is scheduled to deliver his semiannual report on monetary policy and the state of the economy before the House Financial Services Committee July 21. Bernanke will repeat his remarks before the Senate Banking Committee at a date yet to be made public. Also newly noticed on the House committee’s hearing schedule, and also slated for July 21, is an examination of the issues of “too big to fail” financial institutions. The committee’s study of systemic risk will look at whether some institutions truly are too big for the country to allow them to fail and, if so, what should be done about such a situation. A witness list was not yet available.

CUNA league back successful Chu for House seat

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WASHINGTON (7/16/09)--Judy Chu, a Democrat from California who has indicated support for credit union issues, was victorious in her special election for the House seat from the 32nd district. Chu, who ran against similarly named, but no relation, Betty Chu on the GOP ticket, will fill the seat vacated by Hilda Solis when she accepted the post of U.S. Secretary of Labor. C. M. Agrella also sought the position as a Libertarian. CUNA’s Credit Union Legislative Action Council (CULAC) supported the new congresswoman with a $2500 contribution. She was also backed by the California CU League. Chu won with just over 61% of the vote.

MICA Cool tempers must reign in hot Washington temps

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WASHINGTON (7/16/09)—In the nation’s capital in July, hot temperatures and work fatigue may push lobbyists or lawmakers to lose their cool, but good leaders remember to keep their emotions in check, counsels Credit Union National Association President/CEO Dan Mica in The Hill. In his most recent monthly K Street Insider column in the Capitol Hill publication, Mica recounted a lobbying experience where, despite his best intentions, he lost his cool, and offered what he called “ a few simple words about cooling off this summer” for lobbyists tempted to fly off the handle. “If we decide to lose our tempers, whether with congressional members, staffers or our own trade-association members, the cost may be too expensive in the end. Years of access may be gone in seconds. Decades of respect can be forgotten in minutes,” he reminded his readers. Mica acknowledge summer can be a tough time to keep emotions out of one’s work day: “By July, many of us are tired. We cannot wait for the August recess to come. Emotions run high as it becomes clear that deadlines are looming and legislation is moving at a snail’s pace.” He added that at the trade-association level, members are demanding to see accomplishment while, and on the congressional scene, demands are made on members and staffers while those accomplishments are called into question. "The lesson to remember is simply this: Keep your emotions in check. There is always another day on Capitol Hill,” Mica advised. He added, “Any issue --if you become too emotionally involved in it — can become fodder for a screaming match. A lobbyist’s responsibility is to constantly ask: “Is this worth it? Am I willing to lose it all? Is time to speak up? “Constituents are looking for solutions and for all of us to keep our tempers in check.” As its name implies, The Hill's K Street Insider column focuses on the lobbying business rather than CU issues. For the past two years, Mica has been one of a select number of former policymakers who became lobbyists that write the widely read column in rotation.