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Judge dismisses suit against former WesCorp directors

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LOS ANGELES (7/29/11)—A federal district court judge has granted a motion to dismiss the case brought by the National Credit Union Administration (NCUA) against Western Corporate FCU’s former directors. U.S. District Court Judge George Wu this week dismissed complaints by the NCUA that alleged breach of fiduciary duties against WesCorp’s former directors. The suit had named former directors Bill Cheney(president/CEO of the Credit Union National Association), Gordon Dames, Robert Harvey, James Jordan, Timothy Kramer, Robin Lentz, John Merlo, Warren Nakamura, Brian Osberg, David Rhamey and Sharon Updike. However, the judge has denied a request by the failed corporate’s officers to dismiss separate charges against them. The NCUA suit names Robert A. Siravo (WesCorp's former president/CEO), Todd M. Lane (former chief financial officer), Thomas E. Swedberg (former vice president, human resources), and Bob Burrell (former chief investment officer) and alleges breaches of fiduciary duties. The NCUA has further alleged Siravo and Swedberg manipulated the WesCorp’s Supplemental Executive Retirement Plans (SERP) to increase pay-outs and that Lane was "enriched" by executing an early payout agreement in exchange for his SERP rights. The NCUA brought its lawsuits against the officers and directors in its role of conservator for Wescorp. The suit against the officers will continue to proceed toward trial, although the judge, in oral comments, did raise some concerns and questions about the NCUA's case against the officers as well. The next step is the “discovery” phase, through which each side gathers additional evidence. Wu has set a scheduling conference for Aug. 25.

CFPB to release third draft of combined mortgage form

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WASHINGTON (7/29/11)--The third draft of the Consumer Financial Protection Bureau’s combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures will be released next week, the CFPB said in a Thursday release. The combined form is required under the Dodd-Frank Act and is intended to reduce mortgage lender regulatory burden and make mortgage disclosures less confusing to consumers. The CFPB has released and collected comment on two separate drafts of a simplified mortgage disclosure form. The agency said it has received more than 18,000 comments since the first draft of the combined form was released in May. The CFPB previewed some of the issues it will look at more closely in this third draft of its new mortgage form. Those issues include:
* Rephrasing the way that borrowers are warned of potential issues with interest rates and monthly loan payments; and * Determining “the appropriate level of detail of fee disclosures for consumers.” The CFPB said that commenters “were divided over the benefits of greater itemization of fees versus a simpler, more concise format” on the second page of the form.
The CFPB will also move the “important dates” section of the form onto the front page, and will put sections of the form addressing mortgage points “on its own subject line for better clarity.” The Credit Union National Association (CUNA), leagues and credit unions have worked with the CFPB on this project. For instance, CUNA in May met with the CFPB to discuss the first stage of the streamlining process and additional meetings are in the works. CUNA has urged the CFPB to continue to reach out to stakeholders as it moves forward with this and other projects. The CFPB, in blog posts and official reports, has said it is "committed to remaining attentive" to the concerns of credit unions and other small financial institutions, and looks forward to addressing the concerns of credit unions and community banks throughout the development of CFPB priorities. For the CFPB release, use the resource link.

Today is NCUA prepayment participation deadline

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ALEXANDRIA, Va. (7/29/11)—Credit unions that wish to take part in the National Credit Union Administration’s (NCUA) voluntary Corporate Stabilization Fund assessment prepayment plan must notify the agency of their intent by the end of the day. Credit unions that wish to take part in the plan may pledge a minimum of $1,000, or 5 basis points (bp) of March 31, 2011 insured shares, whichever is greater. The maximum that can be committed is 48 bp of those same shares. The agency has set the target size of the program at $500 million, and will not move forward with the plan if less than $500 million is pledged by credit unions. If credit unions pledge funding beyond the NCUA’s proposed $500 million target program size, each credit union’s payment will be a prorated portion of its total fund commitment. The prepayment plan could reduce the 2011 regular assessment from about 25 bp to about 18.5 bp. NCUA Chairman Debbie Matz has emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. A recent Credit Union National Association (CUNA) white paper noted that the prepayment plan was not as large as CUNA had hoped, but it could prove vital for some credit unions. CUNA has encouraged credit unions to consider the extent to which the program will benefit them and whether they should participate. CUNA Chief Economist Bill Hampel said that some credit unions have told CUNA that they will participate, while others have indicated that they will not. “We really don’t have a good read on how this will come out” he said. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the prorated amounts that have been pledged from credit union accounts on Aug. 18. The NCUA is expected to set its 2011 Temporary Corporate Credit Union Stabilization Fund assessment at an Aug. 29 meeting. For CUNA’s white paper, use the resource link.

CUNA on CNN Money Debt debate unsettling markets

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WASHINGTON (7/29/11)--Credit Union National Association (CUNA) Chief Economist Bill Hampel told that the Congressional rhetoric surrounding the debt ceiling debate, which has reached a fever pitch in recent days, “is creating high level of uncertainty among market participants," adding that financial markets will "remain jittery until a deal is done." A House vote on Rep. John Boehner’s (R-Ohio) version of cap lift legislation was slated for last night, but was ultimately postponed late in the evening. Sen. Harry Reid (D-Nev.) has said that the House bill would not pass the Democrat-controlled Senate. The Congressional Budget Office reported that Boehner’s proposal would increase the debt cap by $2.5 trillion and reduce the deficit by as much as $1.1 trillion through a series of steps to be taken between 2012 and 2021. President Obama and federal lawmakers have until early August to increase the government's statutory borrowing authority or risk defaulting on the nation's debt. Debt cap negotiations "always go down to the last minute and get resolved. But there is a nagging doubt this time around," Hampel said. The Dow Jones Industrial Average dropped for the fifth straight day on Thursday, falling 62 points to a total of around 12440. CUNA continues to closely monitor debt cap debate developments, with a close eye on any possible changes that could threaten the federal credit union tax status. CUNA Senior Vice President of Legislative Affairs John Magill repeated that there has been no indication that the credit union exemption is being considered in the debt ceiling debate. "Preserving the federal credit union tax status remains a top CUNA priority and the volatility surrounding the debt ceiling negotiations makes it prudent for CUNA to remain on the alert. "However, neither the Democrat's preferred debt package nor the Republican's plan takes aim at credit unions at this point," Magill said.

NACHA seeking comment on operating rule issues

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WASHINGTON (7/29/11)--Credit unions can provide the Electronic Payments Association (NACHA) with comment on a proposal that would require written authorization for debit entries to a business account, and other proposed rule changes that are meant to eliminate problems caused by some NACHA operating rules, via a new comment call. NACHA is asking for credit union views on proposed changes to the scope of accounts receivable conversion rules and return reason codes. Removing the current requirement that an originating depository financial institutions (ODFI) or originator must suffer a loss in order to dishonor an untimely return, and other changes to rules that impact ODFIs, have also been proposed. For the full comment call, use the resource link.

Inside Washington (07/28/2011)

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* WASHINGTON (7/29/11)--A provision of the Dodd-Frank Act that requires elimination of references to credit ratings in most bank regulations has proven difficult to implement, regulators told the House subcommittee on financial oversight on Wednesday. The law requires regulators to substitute references to credit ratings with other standards of creditworthiness. But regulators said finding alternatives has been difficult, and those they have found are not necessarily superior to credit ratings. Among the alternatives the Federal Reserve is considering are market-based indicators such as bond spreads, approaches that rely on balance-sheet financial ratios, and internal risk assessments by banks, according to Mark Van Der Weide, senior associate director of the Federal Reserve Board’s division of banking supervision (American Banker July 28). The Credit Union National Association (CUNA) has said it is concerned with the potential unintended effects of the National Credit Union Administration's (NCUA) proposal to completely prohibit credit unions from relying on credit ratings to assess credit risk. CUNA, in a recent comment letter, argued that the Dodd-Frank Act “does not require that regulators preclude the institutions they oversee from relying on credit ratings.” * WASHINGTON (7/29/11)—Plaintiffs’ attorneys have moved to unseal records in a key class action suit regarding bank overdraft practices. If it is granted, Wednesday’s motion in Larsen v. Union Bank N.A. could prompt greater public scrutiny of banks’ motives for handling transactions in sequences that produce more overdraft charges (American Banker July 28). The plaintiffs intend to make similar requests to unseal court records for other banks, said Bruce Rogow, co-lead counsel for the plaintiffs. Lawrence King, the judge in the case, also supported a methodology for determining damages that was key to a $203 million ruling against Wells Fargo & Co. in a California-specific overdraft suit. The court’s references to the California case may prove damaging for bank defendants in the Union Bank case. Northern California District Court Judge William Alsup ruled against Wells Fargo. That case has been appealed.