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Compliance Where does line fall on APR increase ban

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WASHINGTON (8/25/10)--Change is in the air for many credit unions that offer credit cards, and one credit union has asked the Credit Union National Association if the rules imposed by the now effective Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) would prevent them from switching all credit cards to variable-rate plans. According to CUNA’s August Compliance Challenge, the CARD Act’s prohibition on increases to the annual percentage rates (APR) and fees during the first year after an account is opened applies to accounts opened on or after Feb. 22, 2010. Generally, Reg. Z permits the APR and fees to be increased at any time after a credit card account is opened only if certain exceptions apply. For example, an increase in the APR upon the expiration of an introductory or promotional period is permitted, provided certain disclosures are given to the member before the start of the introductory or promotional period. Furthermore, an increase in the APR or fee due to completion of a workout arrangement or the failure of the member to complete a workout arrangement is permitted, provided certain disclosures are given to the member prior to commencement of the workout arrangement. Additionally, an increase in the APR on a credit card account is also permitted where the account opening or card agreement provides for changes in the rate according to the operation of an index that is not under the control of the creditor and is available to the general public. Finally, an increase in the APR and fees is permitted if the creditor provides a 45-day notice of change in terms. However, unlike the prior exceptions, this last exception does not permit a card issuer to increase an APR or any fee during the first year after the account is opened. For the full Compliance Challenge, use the resource link.

CUNA Dodd-Frank rule burden lighter than some fear

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WASHINGTON (8/25/10)—While the recently enacted financial regulatory reform package contains numerous changes to current financial laws, the Credit Union National Association’s (CUNA) Senior Vice President/Deputy General Counsel Mary Dunn said that many fewer of them than most fear, perhaps about 35 of the new anticipated regulations, may impact credit unions, with a number of the changes likely only altering existing regulations. While credit unions are still going to experience burdens related to the regulations, there may not be that many “wholesale” changes, Dunn added during the first of two CUNA audio conference calls, adding that no one knows for sure how various provisions will be regulated. However, key rules that will impact many credit unions brought on by the spate of reforms are those the Federal Reserve Board (Fed) will write on interchange fees and related issues. While CUNA strongly opposed the interchange fee provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Dunn said that CUNA is now working with the Federal Reserve to ensure that any future fee structure that is imposed on financial institutions is as “reasonable and proportional” as possible. CUNA is also advocating a two-tiered system, with smaller fees for larger issuers and larger fees for smaller issuers, which would include most credit unions, Dunn added. Overall, CUNA is encouraged key staff appreciate these concerns raised during conversations CUNA has had with members of the Fed, Dunn said. Another change created by the reform package is the creation of the new Consumer Financial Protection Bureau, and while much of this new organization’s oversight abilities will not apply to credit unions, CUNA Vice President of Legislative Affairs Ryan Donovan said that the creation of the CFPB represents a significant opportunity for the existing financial regulatory structure to be streamlined. The CFPB, as well as changes to home mortgage lending rules, truth in lending requirements, risk retention policies, and remittance policies, will be covered during the second audio conference call, which is scheduled to take place at 2 P.M. ET today. To register for the audio conference, use the resource link.

Inside Washington (08/24/2010)

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* MINNEAPOLIS, Minn. (8/25/10)-- Addressing the Defense Credit Union Council’s 47th Annual Conference and Showcase here Tuesday, National Credit Union Administration board member Michael Fryzel praised defense credit unions for providing “outstanding financial services to the men and women who serve in our armed forces.” Fryzel told his audience of nearly 200 that the job they do on the nation’s military bases across the world, especially in providing financial counseling to service members from their first week of basic training and throughout their lives, is “not only commendable but goes above and beyond the call of duty.” On another subject, Fryzel told the credit union representatives that he believes it will take the efforts of “both the regulator and the regulated” to face upcoming challenges and ensure the survival and growth of the credit union system. “We must keep our head high and our shoulder broad as we carry the industry forward through this difficult period” that will lead to better financial times for the nation, he said… * WASHINGTON (8/25/10)--As the government hammers out new policy regarding a revamp of the nation’s housing policy in general, and the failed mortgage giants Fannie Mae and Freddie Mac specifically, policymakers will have to take a very close look at government guarantees.(The Wall Street Journal Aug. 24) The big challenge will be to figure out what types of loans or mortgage-backed securities should be given a guarantee, and how much the government should charge the housing industry for its backing. New policy must finely delineate between pricing a guarantee to accurately reflect the level of risk it poses to the taxpayer, while not pricing it so high that the cost of the guarantee to mortgage borrowers becomes too high. Alex Pollock, resident fellow at the American Enterprise Institute, acknowledged that setting the right fee to adequately reflect the value-vs.-cost ratio will be quite a challenge. However, Pacific Investment Management's Bill Gross, said at the administration’s housing summit last week that to suggest the private market can come back to take the place of the government simply won't work… * WASHINGTON (8/24/10)--The U.S. Court of Appeals in New York, in an Aug. 20 docket entry, declared it would not reconsider its ruling that demands that the Federal Reserve Board disclose the identity of financial firms that were kept alive by a government bailout. (Bloomberg News Aug. 24) The Fed had asked the court to review its decision and now may take its case to the U.S. Supreme Court. The appeals court decision, which upheld a lower-court ruling, requires the Fed to release documents of the unprecedented $2 trillion loan program that started after the 2008 collapse of Bear Stearns Cos… * WASHINGTON (8/25/10)--While many credit the Federal Reserve Board under Ben Bernanke’s leadership as having steered the economy away from a second Great Depression, some subsequent policy decisions by that agency are just becoming more contentious as the economic recovery is showing some signs of reversal.(The Wall Street Journal Aug. 24) In fact, the most contentious issue to come over the Fed’s horizon recently is whether to infuse more money into the system and buy long-term securities beyond what was purchased through a bond-buying program that ended in March. With a back drop of a sputtering recovery, an Aug. 10 meeting of the Fed’s top officials featured perhaps some of the most diverse debate since Ben Bernanke began his tenure as Fed chairman four-and-a-half years ago. At least seven of 17 Fed officials, to some degree, spoke against a proposal that would change the way the Fed manages its huge portfolio of securities--but the move was approved…

NACHA warns of second phishing scam

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WASHINGTON (8/25/10)—NACHA, the electronic payments association, is again warning of a phishing scam perpetrated by individuals that are claiming to be representatives of NACHA. The scam mirrors earlier reports of emails that claimed that the accountholder in question made an unauthorized auto clearinghouse (ACH) transaction. NACHA reported similar emails late last month. While the email says that the transaction was “rejected” by NACHA, the organization has again stated that it “does not process nor touch the ACH transactions that flow to and from organizations and financial institutions.” “NACHA does not send communications to individuals or organizations about individual transactions that they originate or receive,” NACHA added in a Tuesday release. NACHA warned recipients not to click on the link included in the email, and added that similar fraudulent emails, with some changes, could be sent in the future. NACHA also recommended the use of antivirus programs. For the full NACHA advisory, use the resource link.