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Inside Washington (08/11/2010)

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* WASHINGTON (8/12/10)--Financial industry experts expect that many merchants will steer customers toward cheaper payment methods soon, now that merchants can do so without violating contracts, said American Banker (Aug. 11). Some may push consumers to use personal identification-number payments over signature-based transactions, the newspaper said. Retailers likely will impose minimum transaction amounts for cards, which is a practice MasterCard and Visa had prohibited until reform legislation--the Dodd-Frank Act--allowed it. Processors, who worry that steering customers away from certain payment methods could reduce transaction volumes, are telling retailers that turning away payments could cost them sales. However, debit cards could benefit if merchants set limits on credit cards, because consumers would be forced to use debit to pay for less expensive items. Bob Baldwin, president and chief financial officer of Heartland Payment Systems, said merchants should carefully look at sales records and processing expenses before imposing minimums. Heartland recently sent a notice to its merchants saying the minimum allowed under Dodd-Frank cannot exceed $10 and applies only to credit cards ... * WASHINGTON (8/12/10)--The Federal Deposit Insurance Corp. (FDIC) proposed guidance for public comment on how the banking institutions it supervises should implement and maintain oversight of automated overdraft payment programs. The proposal focuses on ways banks can monitor their programs for excessive use by consumers as short-term credit. Under new rules, banking institutions must give consumers the opportunity to opt-in to overdraft protection. Consumers have until Sunday to opt-in ... * WASHINGTON (8/12/10)--The Federal Deposit Insurance Corp. (FDIC) plans to create two new divisions to handle consumer protection and systemic resolutions, the agency said Tuesday (American Banker Aug. 11). The Office of Complex Financial Institutions will conduct reviews and oversee bank holding companies with more than $100 billion in assets. A Division of Depositor and Consumer Protection also will be established to complement the activities of the Consumer Financial Protection Bureau, which was created under the recently enacted regulatory reform bill ... * WASHINGTON (8/12/10)--A new Federal Housing Administration (FHA) program could help up to 1.5 million people who are current on their mortgages but owe more than their homes’ value. Participation will likely be in the low six figures, but would be higher than earlier FHA programs, the agency said (American Banker Aug. 11). FHASecure helped fewer than 1,000 borrowers, and Help for Homeowners aided fewer than 100. Under the new program, servicers would write down a loan by at least 10%. The first lien has to be written down to 97.75% of the home’s current value before being refinanced--a “short refi.” For second liens, the combined loan-to-value after refinancing cannot be more than 115%. The program offers a debt-to-income ratio of 50% and homeowners’ total monthly mortgage payments cannot be more than 31% of monthly income ...

CU-backed candidates fare well in primaries

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WASHINGTON (8/12/10)--Credit union-backed candidates came out victorious in some of this week’s primaries in Georgia, Colorado, and Connecticut. Supported by the Credit Union National Association (CUNA), Georgia Credit Union Affiliates, and Gwinnett FCU in the GOP primary runoff for a shot at retiring Rep. John Linder’s (R) seat, Linder's chief of staff Rob Woodall, defeated conservative talk show host Jody Hice 56% to 44%. CUNA, the Georgia League, and the Lawrenceville. Ga.-based Gwinnett Federal conducted a partisan communications campaign on Woodall's behalf, mailing 8,500 credit union members of Gwinnett Federal two mailers in support of Woodall. In addition to CUNA’s Credit Union Legislative Action Council’s (CULAC's) $10,000 in direct donations to Woodall in the primary and runoff, CULAC also financially supported the Georgia league's mailings with a $2500 donation. “The district is heavily Republican, so Woodall should easily win the general election and is likely to prove a strong credit union supporter,” said Trey Hawkins, CUNA vice president of political affairs, after the primary. He also noted that CULAC was one of only two federal political action committees--or PACs--to back Woodall in his primary against the favored candidate in that race. In Colorado, the credit union-favored candidate in the Democratic primary for a U.S. Senate seat was Michael Bennet (D), who defeated his primary challenger Andrew Romanoff 52% to 46%. Bennet, who is a strong credit union supporter and a backer of the legislative effort to increase the credit union member business lending cap, will face Weld County District Attorney Ken Buck in a highly competitive race in November. Credit union support in Connecticut helped secure a successful bid by state attorney general Richard Blumenthal, who won the Democratic nomination to replace retiring Sen. Chris Dodd (D). Currently, Blumenthal is expected to prevail over the Republican nominee, former WWE CEO Linda McMahon, although her public commitment to spend $50 million in personal funds has the potential to make the race competitive. Also of note in this month’s primary votes, long-time credit union supporter Rep. Roy Blunt (R), of Missouri, beat eight Republican challengers to face the state’s Secretary of State Robin Carnahan (D) for a seat vacated by retiring Sen. Kit Bond (R). And in Tennessee's primary, credit union-backed incumbent Rep. Steve Cohen (D), a co-sponsor of MBL legislation, staved off a strong challenge from former the Memphis mayor, Willie Herenton (D). The Missouri Credit Union Association announced it is mailing Democrat and Republican primary winners a candidate’s with questions focusing on credit union concerns. The league said the candidates responses will be published in the autumn edition of Missouri Courier.

FOX Congress stifles Main Street with MBL inaction

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WASHINGTON (8/12/10)--A recent article from FOX Network’s Small Business Center zeroed in on “Eight Ways Congress is Stifling Main Street.” Number four among the gripes was that lawmakers won’t allow credit unions to increase their member business lending (MBL) authority. FOX quoted the Credit Union National Association’s (CUNA’s) research findings that show if the cap were simply doubled to 25% of total assets, up from the current 12.25% limit, credit unions could add $10 billion of small business credit within the first year of enactment, and could produce more than 100,000 new jobs. CUNA also stresses that these benefits to the economy come at no cost to taxpayers. “Though bills introduced in both the House and the Senate enjoy broad support, no action whatsoever has been taken,” noted FOX writer Rob Reuteman. Reuteman said he based his article on National Small Business Association’s (NSBA’s) May 27, 2010 report: “Squandered Opportunities and Misplaced Priorities: Why Small Business is Too Big to Fail.” CUNA is urging credit unions to continue advocacy efforts for an MBL amendment, drafted by Sen. Mark Udall (D-Colo.), which would increase the cap to 27.5%. Udall and other Senate supporters want the MBL language attached to a small business jobs bill currently under Senate consideration. (See related story: CUNA-- Five week break equals MBL opportunity.)

Fed interim rule sets gift-card disclosure dates

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WASHINGTON (8/12/10)--The Federal Reserve Board, charged with implementing the 2009 Credit Card Accountability Responsibility and Disclosure Act, approved an interim final rule Wednesday that changes the effective dates applicable to new gift card rules in order to be consistent with the recent legislation that changed these dates. The mandatory compliance date for the gift card rules rules was set for Aug. 22. However, after these rules were issued, the U.S. Congress enacted a law in which the disclosure requirements required on cards issued before April 1, 2010 would not be effective until January 31, 2011, under certain conditions. Those conditions include: there is no expiration date on the funds, replacement cards are issued at no cost, and these disclosures are provided by way of in-store signs, consumer service calls, websites, and general advertising. However, Credit Union National Association (CUNA) reminds that the portions of the new gift-card rules that address notices, fees and expiration dates will still come into effect on the original date of Aug. 22. During the transition period, gift-card issuers may notify consumers of their rights through signage, customer service numbers, websites, and general advertising.

CUNA Five-week break equals MBL opportunity

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WASHINGTON (8/12/10)--Although the calendar of the U.S. Congress gets pretty wobbly this time of year with work days being added and deleted based on various pressures, there are in fact 41 weekdays left before the targeted adjournment date and credit unions should make good use of each one to advocate for credit union issues. That was the message, in part, of Credit Union National Association (CUNA) President/CEO Bill Cheney Wednesday as he continued to rally grassroots advocacy support for credit union priorities, such as an increased cap for credit union loans to small business members. The window for MBL action, in fact, is even more narrow, with credit unions having between now and Sept. 13 to work to convince federal lawmakers to approve this important change this year. “We are at a crucial point in our effort to expand the member business lending cap,” Cheney emphasized. “We’ve never been closer to success than we are today, but there is still much we must do if we want to see this legislation enacted by Congress.” The U.S. Senate, currently in a five-week recess, is expected to complete consideration of the Small Business Lending Fund Act when back in session on the thirteenth. The bill includes $30 billion in funds to encourage banks to lend more to small businesses, but as yet does not include an amendment drafted by Sen. Mark Udall (D-Colo.) that would increase the member business lending (MBL) cap to 27.5%, up from 12.25%. CUNA has estimated that the statutory cap change would bring $10 billion of new credit to the country’s small business and underscores that it would do so at no cost to taxpayers. The change could also spark the creation of 108,000 new jobs, providing another boost for the economy. Cheney urged credit unions to use the current August District Work Period to meet with senators on their home turf and seek support for the MBL increase. Use the opportunity, Cheney advised, to refute banker rhetoric in opposition to the Udall MBL amendment. “The August recess gives us a terrific opportunity to reach senators at home--in meetings in their state offices, at town hall or campaign events. It also gives us time to generate additional grassroots letters and emails,” Cheney said.

Administration announces 3B in new foreclosure aid

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WASHINGTON (8/12/10)--U.S. Treasury Assistant Secretary for Financial Stability Herb Allison Wednesday announced the government would provide additional support for homeowners struggling with unemployment through two existing targeted foreclosure-prevention programs. Treasury will make $2 billion of additional assistance available for the Housing Finance Agency’s (HFA’s) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund). Additionally, the U.S. Department of Housing and Urban Development (HUD) soon will launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance to mortgage holder at risk of losing their home and who have experienced a “substantial reduction” in income due to involuntary unemployment, underemployment, or a medical condition. Qualified mortgage holders could receive up to 24 months of assistance. "HUD's new Emergency Homeowner Loan Program will build on Treasury's Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures," said Bill Apgar, HUD Senior Advisor for Mortgage Finance. "Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the administration's efforts to stabilize housing markets and communities across the country." For more on the programs, and to see what states are eligible for funds, use the resource link below.