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Money laundering conviction prompts prohibition order

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ALEXANDRIA, Va. (9/22/11)--The National Credit Union Administration (NCUA) on Wednesday prohibited former Orange County Employees FCU, Orange, Texas, President and Treasurer Sandra Cooper from future work at any federally insured financial institution following her recent conviction on money laundering charges. Cooper is set to serve 63 months in prison and three years of supervised probation, and will pay around $1.18 million in restitution following her conviction. Cooper, who was one of two employees of the credit union, embezzled around $1.16 million in funds from the credit union over a four and half year period, according to the U.S. Department of Justice. She was indicted by a federal grand jury in December of 2010, and plead guilty in late February 2011. The credit union, which held $1.7 million in assets and served 1,000 members, was liquidated by the NCUA last year. The credit union was shuttered by the Texas Credit Union Department due to its deteriorating financial condition, and its assets and members were taken on by Orange, Texas' Sabine FCU. The agency noted that violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Interchange steering informant site launched by CUNA

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WASHINGTON (9/22/11)--New debit interchange fee cap regulations, which become effective on Oct. 1, prohibit merchants from discriminating against credit union issued cards, and the Credit Union National Association (CUNA) is helping credit unions report any instances of discrimination—generally referred to as “steering”-- through a new website. The site, which was added to the members-only section of, allows credit unions to report any instances of merchants tampering with the purchase process, or favoring other forms of payment over credit union debit cards. A website submission form provides space for credit unions to record the name and location of the merchant in question, the type of card involved, the name and location of the credit union affected, and any comments on the merchant/consumer interaction, among other things. Any information reported to CUNA on the site will remain confidential, and the names of the credit unions involved will not be disclosed, but relevant portions of the reports may be shared with state credit union leagues and depending on the problem, may also be reported to the National Credit Union Administration or state regulators. Reports will also be used in CUNA discussions with the Federal Reserve about the impact the agency’s interchange rules has on credit unions. In addition to reporting to CUNA, affected credit unions should also report instances of discrimination involving Visa or MasterCard, directly to those networks through online forms provided by each network. Once a credit union has submitted its report to CUNA, CUNA’s website will direct the user to the web address for the appropriate network’s complaint form. CUNA on the site reminds credit unions that new interchange regulations do not allow merchants to steer their customers toward using certain cards or to refuse to accept, or frustrate the acceptance of debit cards due to the fact they were issued by credit unions or small issuers not subject to the debit interchange transaction fee cap. However, CUNA notes, merchants may provide discounts to consumers based on how they pay for a good or service, such as by cash, debit card or credit card. The site adds that CUNA has not heard of any evidence that any merchants are disfavoring credit union debit cards or that they plan to do so in the future. CUNA also continues to work with the networks in an effort to insure credit unions’ debit card interchange fee income is preserved, as much as possible. For the members-only site, use the resource link.

Vale CFPB wants to cut reg burden for good guys like CUs

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WASHINGTON (9/22/11)--Minimizing the regulatory burden on “good guys” like credit unions, while making sure that the market is not harmed by the actions of others, is a key goal of the Consumer Financial Protection Bureau (CFPB), CFPB Assistant Director for Community Banks and Credit Unions Elizabeth Vale said during a Credit Union National Association (CUNA) Hike the Hill event in Washington, D.C. on Wednesday.
CFPB official Elizabeth Vale covered that agency’s current and future work on behalf of credit unions and consumers in remarks delivered Wednesday before credit union groups from across the country. (CUNA Photo)
Vale spoke before a group of credit union advocates from Idaho, Wisconsin, Kentucky, Florida, Alabama, Kansas, and Minnesota. Bart Shapiro, the senior adviser for the CFPB’s Office of Community Banks & Credit Unions, also appeared before the group. Citing the CFPB’s great working relationship with CUNA, Vale said that she and the agency are well aware of the regulatory burdens faced by credit unions, and that the CFPB should hear directly from credit unions "early and often" so regulatory problems can be averted before they need to be corrected. She added that the CFPB is looking for ways to eliminate or modify some current troublesome regulations, and wants to use the same process used in the ongoing revisions of Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) as other regulations are revised. The CFPB is working to combine TILA and RESPA mortgage disclosures into one single document. That work began earlier this year when the agency released the first of several drafts of a combined mortgage form, and is scheduled to be completed later this year. The CFPB has relied heavily on the input of consumers, financial institutions and other professionals and has published each version of its combined form on its homepage for comment.

Net worth equity ratio revisions on todays NCUA agenda

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ALEXANDRIA, Va. (9/22/11)--The National Credit Union Administration’s (NCUA) final rule on net worth and equity ratio definitions will be the lead discussion item when it meets later today. The NCUA in March proposed amending the Federal Credit Union Act's definition of "net worth" for natural-person credit unions under NCUA's Prompt Corrective Action authorities to allow the NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. The NCUA proposal also included a "technical correction" to its regulatory definition of "net worth." This technical correction would generally decrease the amount of a combined credit union's "net worth" in a credit union merger. The agency also proposed equity ratio changes that clarify that the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions. These changes were scheduled to be discussed at the NCUA's July open board meeting. However, the changes were removed from the agenda shortly before the meeting took place. The Credit Union National Association (CUNA) supported some of these changes, but also strongly opposed the bargain purchase gain changes. CUNA was concerned that the proposal would result in a decrease in the combined credit union's net worth. CUNA and its Accounting Subcommittee, which is chaired by Patelco CU CFO Scott Waite, have worked with credit union accountants on the bargain purchase gain issue. The NCUA during the meeting is also set to discuss delegations of agency authority, and the customary monthly insurance fund report is scheduled to be presented. The closed portion of the NCUA's meeting will feature a charter and merger request as well as an appeal under Section 701.4 and Part 747, Subpart J of the NCUA's regulations. Supervisory activities and personnel issues will also be covered during the closed meeting. For the full NCUA agenda, use the resource link.

Fryzel CUs have grown to be best mortgage biz lenders

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WASHINGTON (9/22/11)—National Credit Union Administration (NCUA) board member Michael Fryzel Wednesday reiterated his agency’s support for a higher member business lending (MBL) cap and alternative sources of capital for credit unions. Fryzel said that over the last 30 years credit unions have “grown to being arguably the best writers of mortgages and best business lenders in America.” “Given this record, should credit unions not be allowed to make even more business loans and to grow by means of alternative or risk-based capital,” Fryzel asked during an address to the National Association of Federal Credit Union’s Congressional Caucus. “A hundred years ago, many ordinary Americans were not getting the kind of credit or the kind of financial services they deserved,” he said. “Credit unions were seen as an idea that could help these people. “Now credit unions help 91 million Americans. They give efficient, effective and sound financial services and adequate credit to ordinary Americans from coast to coast with nothing else in mind than helping the persons who come for that education.” He said the U.S. Congress should be reminded that not one dollar of taxpayer money has gone to save a credit union or to pay for an insured savings account. The National Credit Union Share Insurance Fund is funded by credit unions. Fryzel referenced current pending legislation and NCUA’s support to increase member business lending above the current statutory cap of 12.25% of assets, allowing credit unions to grow through alternative or risk-based capital. Bills are pending action in the House (H.R. 1418) and Senate (S. 509) to increase the cap to 27.5%. The House bill, introduced by Rep. Ed Royce (R-Calif.), has a total of 61 co-sponsors. The Senate bill, introduced by Sen. Mark Udall (D-Utah), has 21 senators backing it.

Inside Washington (09/21/2011)

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* WASHINGTON (9/22/11)--Misaligned incentives were a primary reason behind the pervasive problems within the mortgage servicing industry, Raj Date, the de facto head of the Consumer Financial Protection Bureau, said Tuesday (American Banker Sept 21). Date, speaking before the American Banker Regulatory Symposium, said consumers do not choose their mortgage servicers as they do their lenders, which reduces the incentive for servicers to treat borrowers properly. Servicing a delinquent loan costs dramatically more than servicing a performing loan because of the one-on-one contact with borrowers, collection efforts and specialized staff required, Date said. Instead of investing in the necessary resources to properly service delinquent loans, many servicers illegally cut corners and loosened operating protocols. “A comprehensive approach to servicing that protects consumers, investors, the financial sector, and the housing market requires the coordinated action of many federal regulators,” Date said. “With that in mind, the bureau is working with other federal agencies to develop common-sense national servicing standards” … * WASHINGTON (9/22/11)--U.S. Rep. Shelley Moore Capito (R-W. Va.), a member of the House Financial Services Committee, said Tuesday she is disappointed that Republicans have not been able to resolve the future of Fannie Mae and Freddie Mac since taking control of the House in January (American Banker Sept 21). Capito, speaking before the American Banker Regulatory Symposium, said she was surprised the GOP had not accomplished more in regard to the government-sponsored enterprises. Capito, who chairs the House financial institutions and consumer credit subcommittee, said a split among Republicans about how to wind down Freddie and Fannie has contributed to the delay. She said she is not among those in favor of dissolving the government-sponsored enterprises … * WASHINGTON (9/22/11)--The Fourth District Court of Appeals ruled that computer records are “inadmissible hearsay” in foreclosure proceedings, a decistion that could make it more difficult for mortgage servicers to use computer records as evidence without additional verification. The Florida court ruled that Ralph Orsini, an employee at mortgage servicer Home Loan Services Inc., could not rely on computer records to verify the mortgage debt of a delinquent homeowner. The computer records were compiled by the previous servicer of the mortgage, Litton Loan Servicing LLC. Orsini did not verify the information in any other manner. The ruling could have sweeping implications in the lending and loan servicing industries, said Michele Stocker, chair of the financial services litigation practice group at Greenberg Traurig LLP …