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Recent Hill battle brings great MBL recognition CUNA

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WASHINGTON (7/30/10)--The recent Capitol Hill battle that embroiled a small business jobs package has taken its toll on that legislation, but credit unions have been able to use the process to shine a positive light on increased member business lending, said Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill Thursday. CUNA and credit unions worked fervently to add a provision to the small business bill that would increase credit union business lending authority to 27.5% of total assets, up from the current 12.25% cap. Sen. Mark Udall (D-Colo.) crafted an amendment proposing that increase and has urged his colleagues in the Senate to add it to the body of the bill. During the process, CUNA and credit unions have been able to make the case for increased MBL authority to lawmakers and in the media. The effort, in fact, gained the backing of the Obama administration. “This is the closest credit unions have ever gotten in their pursuit for increased MBL authority. Lawmakers, and the nation at large, have learned how much this simple legislative change could do to help our nation and its small businesses,” Magill said late Thursday. As Udall has noted on the Senate floor, CUNA estimates that more than $10 billion in credit could become available if the MBL cap were lifted, even if just to 25%. The statutory change would also serve to add 108,000 jobs into a struggling market. “The overall bill may be a victim of politics. But credit unions have received attention and recognition on Capitol Hill, and we'll be back at the first opportunity to finish the job,” Magill said.

Collins strips interchange ban from appropriations bill

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WASHIINGTON (7/30/10)--Sen. Susan Collins (R-Maine) Thursday successfully offered an amendment to an appropriations bill that struck language that would have banned payment card networks from charging the federal government a credit card interchange rate higher than the lowest interchange rate available on the market. The Collins amendment, supported by the Credit Union National Association (CUNA), instead instructs the Government Accountability Office (GAO) to conduct a study on the feasibility of allowing the federal government to impose convenience fees for the use of credit cards for the purchase of goods and services. John Murphy and the Maine league also worked closely with the senator. CUNA President/CEO Bill Cheney underscored, "While we know the interchange battle will continue on other legislation, this is an important victory and we are very appreciative of Senator Collins's leadership on this issue." The amendment was passed by the Senate Appropriations Committee by voice vote. In backing the amendment, CUNA said in the a letter to Collins, that proponents of recent interchange language in the Dodd-Frank Act, which allows the government to set interchange fees, “profess that their intent is not to harm small issuers.” Cheney wrote, “The stinging impact of the reduction of interchange fee revenue hits the smaller institutions disproportionately, and, in the case of credit unions, trickles down to the credit union member. “Large for-profit institutions can more easily absorb a reduction in interchange fee revenue; and, inasmuch as the interchange fee is a fee paid to the issuer, the impact on the payment card networks is negligible. The erosion of interchange fee revenue seriously threatens credit unions’ ability to offer low-cost access to financial services that is often much lower than what banks offer.” Also of interest to credit unions in the bill before the Appropriations Committee are provisions that would set funding for the U.S. Treasury Department Community Development Financial Institutions (CDFI) Fund, and the National Credit Union Administration's Community Development Revolving Loan Fund (CDRLF), and Central Liquidity Facility.

Golden parachutes would end for execs at low-ranked CUs

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ALEXANDRIA, Va. (7/30/10)--The practice of providing so-called “golden parachutes” to departing executives would be prohibited for federally insured credit unions with CAMEL Codes 4 or 5 or in an otherwise troubled condition under a proposed rule approved by the National Credit Union Administration (NCUA) on Thursday. If finalized, the rules would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. According to an NCUA release, the rule aims to safeguard the National Credit Union Share insurance fund (NCUSIF) by “preventing the wrongful or improper disposition” of credit union assets.” The rule also seeks to “inhibit unwarranted rewards” for credit union executives that may have contributed to their credit unions financial troubles. The rule also provides credit unions with “greater clarity on the distinction between legitimate employee severance payments and improper golden parachute payments.” The prohibitions on "golden parachutes" will not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements. In addition, credit unions would be permitted to appeal to the NCUA for a waiver which would allow an otherwise prohibited "golden parachute" under certain circumstances, such as in connection to a supervisory merger. Congress established the statutory basis for these rules in 1990, but the NCUA did not issue a proposed regulation on this issue at that time. The NCUA is also working on substantially identical rules for corporate credit unions, and NCUA board member Gigi Hyland said that a unified set of golden parachute prohibitions should be established once both sets of rules are adopted. The status of troubled credit unions was also addressed during the NCUA’s monthly report on the status of the NCUSIF and its Temporary Corporate Credit Union Stabilization Fund. During that presentation, NCUA Chief Financial Officer Mary Ann Woodson reported a slight increase in the number of CAMEL Code 4 and 5 credit unions, but noted a slight decrease in the percentage of total shares that are held in those troubled credit unions. According to Woodson, the .54 basis point decrease was due to an increase in total insured credit union shares as well as the positive progression of one credit union from CAMEL Code 4/5 status to CAMEL Code 3 status. The distribution of total assets in CAMEL code credit unions held relatively steady, Woodson added.

TIS regs low income definition budget changes OKd by NCUA

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ALEXANDRIA, Va. (7/30/10)--The National Credit Union Administration (NCUA) at its July open Board meeting officially adopted an interim final rule amending its Truth in Savings regulations to reflect recent clarifications that were made by the Federal Reserve (Fed). The Truth in Savings Act requires the NCUA to establish regulations substantially similar to those established by the Fed within 90 days of the effective date of the Fed’s rules. Specifically, the Fed earlier this year amended Regulations DD and E. Regulation DD addresses depository institutions' disclosure practices related to overdraft services, including balances disclosed to consumers through automated systems. Regulation E prohibits fees for overdrafts in connection with ATM and one-time debit card transactions, unless the consumer agrees or "opts-in" to these fees. The NCUA’s interim final rule will become effective 30 days after it is published in the Federal Register, but NCUA staffers said that the agency will accept comments for a 60 day period. The NCUA also made minor revisions to the technical definition of “low income members” during the meeting. The changes have no impact on the current operations of credit unions or the NCUA, according to staff. The agency’s budgetary outlook was also addressed during the open session of the meeting, with NCUA staff reporting that the NCUA reduced its total 2010 operating budget by $2 million. The NCUA estimated that $2 million in savings will be passed on to federal credit unions in the form of a reduced 2011 federal credit union operating fee. NCUA staff reported that the $2 million in net savings is drawn from $9 million in gross savings. However, those gross savings were offset by $7 million in new expenses, including funds that were spent on outside accounting consultants. Another expense accrued by the NCUA was an upcoming pro-credit union advertising campaign which will feature personal finance guru Suze Orman. The ad campaign, which will be waged via the online, broadcast, and print media, will tout the safety and soundness of credit unions, and remind both current and potential members that up to $250,000 of their deposits are fully insured by the National Credit Union Share Insurance Fund.

Inside Washington (07/29/2010)

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* WASHINGTON (7/30/10)--The House Financial Services Committee and its subcommittee on capital markets, insurance and government-sponsored enterprises (GSEs) announced Thursday that they will continue their series of hearings on the future of housing finance starting in September. The subcommittee, chaired by Rep. Paul Kanjorski (D-Pa.) will conduct an oversight hearing of the GSEs, and the full committee, headed by Rep. Barney Frank (D-Mass.), will continue its examination of policy options for restructuring the nation’s housing finance system. Kanjorski said in a release, “We also will examine the present policies related to calculating guarantee fees, including whether these charges are appropriately priced to cover risks and provide a reasonable return. Moreover, as our housing markets begin to stabilize, we will begin to consider innovative ideas for recovering the costs resulting from the decision to place Fannie Mae and Freddie Mac into conservatorship”… * WASHINGTON (7/30/10)--The House Financial Services Committee Wednesday approved two housing measures: H.R. 4868, the Housing Preservation and Tenant Protection Act of 2010 and H.R. 5814, the Public Housing Reinvestment and Tenant Protection Act. Both were approved in the same mark-up session as an Internet gambling bill the Credit Union National Association has been monitoring, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act (SEE RELATED: House committee approves Internet gambling legalization). H.R. 4868 aims to stem the loss of affordable rental housing nationwide and prevent the displacement of low-income tenants. H.R. 5814 aims to preserve the nation’s public housing program, which provides affordable rental housing for about three million Americans in 1.2 million households ... * WASHINGTON (7/30/10)--The Senate Banking Committee confirmed Janet Yellen as vice chairman of the Federal Reserve Board. Peter Diamond and Sarah Bloom Raskin also were nominated as governors of the board. The appointments now move to the full Senate for consideration (American Banker July 29).

CU testifies New interchange big blow to small institutions

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WASHINGTON (7/30/10)--Speaking before a House subcommittee on investigations and oversight hearing on the impact of interchange fees on small businesses, Clearview FCU’s vice president of lending Ron Celaschi said that “any reduction in interchange revenue” would deal a “serious blow” to his credit union and its members. Noting that the interchange provisions, which allow the Federal Reserve to intervene in the setting of interchange fees, were added to the recently enacted financial regulatory reform legislation without a full committee review, Celaschi urged Congress to repeal the interchange provisions “before the intended and unintended consequences of interchange regulation are realized.”
Rep. Jason Altmire (D-Pa.) meets Ron Celaschi before the vice president of lending for Clearview FCU, Moon Township, Pa., testifies before a House Small Business subcommittee Thursday on the how interchange fees affect small business. (CUNA photo)
“No appreciation was given to the consequences that the legislation would have on community financial institutions,” he added. Celaschi, who testified on his own behalf, detailed his Moon Township, Penn.-based credit union’s unique experience with interchange fees. While interchange fees provide a steady source of income for many large financial institutions, Celaschi said that his credit union runs it’s debit program “at a loss” because of the value that his members place on the program. Specifically, Celaschi said that while his credit union spends a total of $2.9 million to run its debit card program, it only brought in $1 million in interchange fee income during 2009, resulting in a $1.9 million funding gap. Any further reductions in interchange will force his credit union to impose fees on members to make up the lost revenue, a move that will undeniably harm the members, Celaschi added. Celaschi also took the opportunity to publicly back an increase in the statutory member business lending cap for credit unions to 27.5%, saying that doing such would allow credit unions to “be a part of the solution to the small business credit crisis.” He added that his own credit union, which currently lends an average of $70,000 to the small businesses that it works with, is “committed” to helping the small businesses in its community. The Credit Union National Association has fully analyzed the impact that the interchange provisions would have on credit unions. For that analysis, use the resource link. CUNA is also working with the Fed to ensure that rules that exempt financial institutions with under $10 billion in assets from the terms of the interchange legislation are closely followed.