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CLF NCUA consider shifting USC stock ownership

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ALEXANDRIA, Va. (8/12/09)--The National Credit Union Administration (NCUA) board and the Central Liquidity Facility (CLF) board will consider shifting stock ownership from U.S. Central to other individual natural person credit unions or "agent groups" of credit unions via sales of shares, said CLF President Owen Cole in an NCUA webcast Monday. This transfer is one of many options that the boards could consider in the coming months, and Cole said that they could present a proposal for public comment “for the industry to consider.” The NCUA recently announced the transfer of accounts holding $1.8 billion of CLF funds from U.S. Central FCU to the U.S. Treasury and said that it is exploring "alternatives" regarding the transfer of primary ownership of CLF stock to other credit unions or groups of credit unions "through the anticipated reforms to the corporate network." During the webcast, Cole said that the transfer from U.S. Central was related to accounting issues. The NCUA in a recent release said that the change resulted from the CLF's consultations with its auditor, and sources have indicated that the Treasury favored this change. According to the NCUA release, the CLF fund transfer was due to an auditor determination that U.S. Central’s role as both an investor in the CLF and as the agent holding the CLF's funds, including the cash resulting from its own investments in CLF stock, could have resulted in some assets being double counted. Cole said that the CLF has proven to effectively maintain liquidity throughout the credit union system. Cole also touted the benefits of investing in the CLF through direct means or through agents, adding that natural-person credit unions should continue to support the CLF’s ability to provide liquidity by including the CLF as part of their total investment plan.

Inside Washington (08/11/2009)

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* WASHINGTON (8/12/09)--Sen. Christopher Dodd (D-Conn.), chair of the Senate Banking Committee, declared a victory after American Express Co. and Discover Financial Services said they would eliminate overlimit fees, or fees charged to cardholders who exceed their credit limits (American Banker Aug. 11). Dodd continues to support the creation of a consumer protection agency, which has been proposed by the Obama administration. Dodd also has said the Fed should require consumers to opt in for overdraft protection to keep them from being charged fees ... * WASHINGTON (8/12/09)--The Financial Accounting Standards Board (FASB) is considering using mark-to-market accounting as the default method for valuing financial instruments. Financial observers say the rule, if approved, would provide investors with a better perspective on companies’ financial health while simplifying accounting rules (American Banker Aug. 11). The proposal would also help define when companies should use mark-to-market accounting to value their assets. Many banking groups oppose the FASB proposal, saying that companies should not have to absorb the dropping values of loans they have no intention of selling. In April, FASB adopted rule changes on mark-to-market accounting and on treatment of other-than-temporary-impairment of assets. The Credit Union National Association said the action was a positive development and would help credit unions and financial institutions with some market issues. However, it noted that FASB could have done more (News Now April 3) ... * WASHINGTON (8/12/09)--Esther H. Vassar has been appointed national ombudsman and assistant administrator for Regulatory Enforcement Fairness for the Small Business Administration (SBA) by SBA Administrator Karen Mills. Vassar previously served as a commissioner and chair of Virginia’s Alcohol Beverage Control Board. In her role at the SBA, she will help small businesses that experience excessive or unfair federal regulatory enforcement actions, such as repetitive audits or excessive fines and other actions ... * WASHINGTON (8/12/09)--Yolanda Garcia Olivarez was appointed regional administrator for the Small Business Administration (SBA) for Region VI, which is headquartered in Dallas. The region includes Texas, Arkansas, Louisiana, New Mexico and Oklahoma. Olivarez has worked in trade, commerce and financial services industries for 35 years. Since 1995, she has been a senior vice president/commercial lender and business development officer at Wells Fargo ...

Hyland interview continues call for diversity in CUs

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ALEXANDRIA, Va. (8/12/09)--National Credit Union Administration (NCUA) board member Gigi Hyland renewed her call for stronger diversity within the credit union movement, telling attendees at a credit union conference that “diversity and collaboration are the cornerstones for credit unions’ future sustainability and success.” Hyland’s comments, which were delivered before the African-American Credit Union Coalition’s annual conference, echoed statements made during a recent interview with News Now staff. During the interview, Hyland said that credit union directors should work to ensure that their leadership at both the staff and the board level “truly reflects” the diversity of their field of membership. Reflecting the true scope of their membership is of particular importance to community credit unions, which have a slightly different business model and different goals from the majority of credit unions. While the NCUA board must continue to talk about diversity in credit unions, Hyland said that the board must also lead by example by being aware of its own internal practices. Both the NCUA and individual credit unions should also work “in their own individual way” to foster interest in credit unions among younger potential members to ensure the future sustainability of the credit union business model. Continuing the credit union system’s emphasis on financial education is key not just to empowering people and helping them understand and manage their money, but also to helping them to recognize “the credit union difference,” Hyland added. Hyland told News Now that while she looks forward to welcoming incoming NCUA Chairman Deborah Matz back to the board, she is unsure whether the seating of a new, Democratic chair will mark a significant shift in the tone of NCUA actions. While it’s a “very partisan process” to get on the board, Hyland said that the partisanship on the board “is not as strong as some people might think it would be” once the board members begin their work. Each board member's “charge” is to “protect the safety and soundness” of credit unions and the insurance fund while also working to protect consumers, and partisanship does not come into play in the deliberation of issues related to that stated mission, Hyland said. Generally, Hyland said that she could not anticipate what types of changes would be advocated by Matz. More specifically, Hyland said that she did not know what form the NCUA’s pending rule changes for corporates would take. However, public comment will be crucial to how the NCUA moves forward to address any changes to corporate governance. While unsure whether the NCUA would take on the issue itself, she advocates that credit unions offering alternatives to short-term payday loans should “offer those products in a manner that is consistent with the credit union mission and not chase fees for the sake of chasing fees.”

CFA asks Fed to extend CUs open-end credit deadline

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WASHINGTON (8/12/09)—The Consumer Federation of America (CFA) Tuesday has sent letters asking that credit unions be granted more time to comply with the 21-day Credit CARD Act notice requirement for open-end plans other than credit cards. The CFA sent the letters at the urging of the Credit Union National Association (CUNA) after multiple discussions with CFA. CFA noted that a Federal Reserve Board rule intended to implement a section of the Credit Card Accountability, Responsibility and Disclosure Act--or Credit CARD Act--would affect a unique product "offered by credit unions." That section of the Fed rule requires that a creditor may not treat a payment on any open-end plan as late unless the creditor has adopted reasonable procedures to ensure that periodic statements have been mailed at least 21 days prior to the due date. In similar letters to the Fed and to Senate Banking Committee Chairman Christopher Dodd (D-Conn.), the CFA said the primary focus of the 21-day notice requirement is credit card issuers and added regarding the application of the 21-day rule to credit cards, that it is “a very important provision that will help consumers who responsibly pay their bills avoid unjust late payment fees.” However, the CFA noted to the regulator and the lawmaker that the provision will also affect other forms of open-end credit, “including multi-featured credit plans with sub-accounts that credit unions have been permitted to offer for decades. “We believe that the credit unions have identified legitimate implementation difficulties for a complicated and useful product that was not the primary focus of this requirement,’ the letter said. It added: “CFA has worked with credit unions closely over the years, and we know that they will make every effort to comply with this provision as quickly as possible.” The Credit Union National Association (CUNA) has warned that applying a brief compliance timeframe to a complicated and entailed compliance process could present insurmountable problems for credit unions, and CUNA President/CEO Dan Mica late last month encouraged credit unions to communicate their concerns regarding the issues surrounding the CARD Act with the Fed. While CUNA is working with the Fed to delay the current compliance date of Aug. 20, it has also created a compendium of information to help credit unions tackle many of the compliance challenges that lay ahead. To see the CUNA compliance guide, use the link.

NCUA extends temporary corporate guarantee date

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ALEXANDRIA, Va. (8/12/09)--The National Credit Union Administration (NCUA) in its most recent update on the status of the corporate credit union system said that it has extended the expiration date of its Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP) until Dec. 31, 2011. The TCCUSGP, which backs up the National Credit Union Share Insurance Fund's (NCUSIF) coverage of all shares--excluding paid-in-capital and membership capital accounts--at corporate credit unions, was scheduled to expire on Sept. 31, 2011. The extension will cover new deposits with maturities of two years or less in participating corporate credit unions made before Dec. 31. In other corporate credit union news, the NCUA said that U.S. Central FCU has “established $8.8 billion in contingent borrowing capability” with the help of the TCCULGP. U.S. Central is also maintaining $7.8 billion in liquidity, and recorded $537 million in other-than-temporary-impairment (OTTI) charges for the second quarter of 2009, reducing its remaining member capital shares to 37% of the original balance. Fellow corporate credit union WesCorp recorded $541.1 million in OTTI charges during the second quarter, and the impact that the Temporary Corporate Credit Union Stabilization Fund is having on the OTTI charges for both corporate credit unions is still being evaluated. For the full NCUA release on the corporates, use the resource link.