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Fed FTC finalize credit disclosure changes

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WASHINGTON (7/7/11)--The Federal Reserve and the Federal Trade Commission have issued a final version of rules that require creditors to add new details to the risk-based pricing (RBP) notices that are distributed to their members. Creditors are required to disclose credit scores and related information to consumers in risk-based pricing (RBP) notices under the Fair Credit Reporting Act (FCRA) if a credit score was used in setting the credit terms. The new rule will also require creditors to disclose on adverse action notices a credit score that was used in taking any adverse action against a consumer and any information relating to that score. The credit score disclosures are required by the Dodd-Frank Act. Credit unions and other financial institutions will need to add the following to their RBP and adverse action notices:
• A statement that a credit score takes into account information in a consumer report and a credit score can change over time; • The specific numerical credit score used in making the credit decision; • The range of possible credit scores; • Key factors that adversely affected the credit score such as late payments and high credit utilization; • The date on which the credit score was created; and • The name of the consumer reporting agency that provided the credit score.
The Credit Union National Association (CUNA) has said that whether or not credit unions will need to replace their current RBP forms with new ones is not certain. The answer to that question depends on whether a credit union uses a consumer's credit score to set the material terms of credit, CUNA added. The new rules will become effective 30 days after they are published in the Federal Register. The Fed said that it expects the rules to be published soon.

Inside Washington (07/06/2011)

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* WASHINGTON (7/7/11)--The Federal Housing Administration (FHA) may tighten borrowers’ required debt-to-income ratios, a move that could keep many consumers out of the mortgage market (American Banker July 6). Although the agency has yet to issue definitive ratios, lenders fear such tightening could hurt the still-recovering housing market and cause a further decline in home prices. But a hard cap on debt-to-income ratios likely would lower delinquency rates and bolster the financial health of the FHA’s Mutual Mortgage Insurance fund, according to the agency. The FHA is assessing the variables that go into its Total Scorecard automated underwriting system. Robert Ryan, FHA’s acting commissioner, suggested the debt-to-income ratios could be tightened, and instead of automated approval, lenders would conduct manual reviews to ensure borrowers had adequate income or savings … * WASHINGTON (7/7/11)--The Federal Deposit Insurance Corp. (FDIC) board of directors approved the authority to dismantle “too-big-to-fail” financial firms as part of the government’s effort to end bailouts of large firms because the government lacked an effective way to wind them down (The Wall Street Journal July 6). Dodd-Frank gave the FDIC resolution powers for firms deemed too systemic to be wound down through bankruptcy. In Chairman Sheila Bair’s last meeting, the board also approved rules allowing the government to recover compensation from executives whose actions lead to the failure of a financial services firms. Bank executives could be subject to clawbacks on their pay if they do not conduct their responsibilities with “the degree of skill and care an ordinarily prudent person in a like position would exercise under similar circumstances,” the agency said … * WASHINGTON (7/7/11)--The Office of the Comptroller of the Currency (OCC) has published a community development investments electronic newsletter that provides a guide for national banks seeking to expand their small-business lending initiatives. The newsletter describes new federal initiatives created by the Small Business Jobs Act and additional enhancements to Small Business Administration (SBA) credit support programs designed to provide sources of capital so banks can provide financing to small businesses. The online newsletter describes the Small Business Jobs Act’s flagship programs, the Small Business Lending Fund and the State Small Business Credit Initiative. It also highlights federal programs designed to promote mission-focused and entrepreneurial small businesses and small business exports. Community Developments Investments can be accessed on the OCC’s website … * WASHINGTON (7/7/11)--The Federal Housing Administration (FHA) has published updated condominium policy guidelines and instructions that clarify the approval and recertification process and policies for condo projects. FHA’s mortgagee letter includes a condominium policy guide and implementation schedule identifying timelines for lenders to comply with the guidelines. The Housing and Economic Recovery Act of 2008 required the issuance of updated administrative guidance and regulations. “This guidance formalizes and expands the policies we put in place in 2009 and lays the groundwork for a more formal rulemaking process going forward,” said FHA's Acting Commissioner Robert Ryan. The Condominium Project Approval and Processing Guide is available online

SBA Red Cross offer lessons in preparedness

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WASHINGTON (7/7/11)--The U.S. Small Business Administration (SBA) has joined the American Red Cross to “intensify outreach efforts to educate the public about the importance of having a disaster recovery plan in place.” The outreach efforts will include SBA/Red Cross-sponsored disaster preparedness workshops. Credit unions will want to look out for these workshops, which will be organized by district SBA and Red Cross offices. The agencies will also promote the Red Cross Ready Rating program, a Web-based tool that helps businesses gauge their emergency preparedness and provides individualized feedback on how a business’s preparedness can be improved. American Red Cross CEO Gail McGovern noted that 15% to 40% of businesses fail following a natural or man-made disaster. “By partnering with the SBA to get more families and businesses prepared for emergencies, we hope to save both lives and livelihoods,” she added. SBA Administrator Karen Mills in a release said that the SBA/Red Cross collaboration will help the two agencies “draw on each other’s resources to make emergency preparedness a way of life for individuals and businesses.” The SBA and Red Cross also advised businesses and individuals to prepare by reviewing their insurance policies, copying and storing any sensitive documents, and stocking an emergency kit with cash, medical supplies, water, food, and other items. For the full SBA/Red Cross release, use the resource link.

Stabilization Fund fee expected to be on August NCUA agenda

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ALEXANDRIA. Va. (7/7/11)—As mentioned in the July 5 issue of News Now, the National Credit Union Administration (NCUA) announced last week it is setting aside its longstanding practice of omitting an August meeting from its monthly open board meeting schedule and will hold a special meeting on Aug. 29. The agency board members are expected to discuss the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment that will be applied to credit unions for the year. The meeting is scheduled for 1 p.m. (ET). The TCCUSF, established in 2009, covers corporate stabilization-related expenses. In 2010, telling credit unions that the agency is "very mindful of the effect" that assessments have on their balance sheets, the NCUA separated the assessment related to National Credit Union Share Insurance Fund costs associated with problem natural person credit unions and those associated with NCUA's Corporate Stabilization Fund. The action was intended to improve the transparency of NCUA's assessment process and to improve the accuracy of credit unions' budget estimates.