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Inside Washington (01/12/2010)

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* WASHINGTON (1/13/10)--President Barack Obama said he plans to garner up to $120 billion through a fee on financial institutions that would earn back some of the money lost in the Troubled Asset Relief Program and help reduce the nation’s deficit (Bloomberg News Jan. 12). The administration hasn’t said how it would assess the fee, but details will be released in the fiscal 2011 budget, which Obama will give to Congress next month. The government’s $700 billion financial rescue plan last year contributed to a record $1.4 trillion national deficit ... * WASHINGTON (1/13/10)--Sen. Bob Corker (R-Tenn.) has asked the Obama administration to justify why the cap on Fannie Mae and Freddie Mac’s government financing should be removed (American Banker Jan. 12). He sent a letter to Treasury Secretary Timothy Geithner Monday asking whether the government effectively nationalized the enterprises and how the government will keep shareholders and debt holders from unfairly benefiting from the cap’s removal. Under a Dec. 24 deal, Treasury removed the $200 billion cap on the enterprises’ borrowings. They were placed into conservatorship in September 2008 ... * WASHINGTON (1/13/10)--Testifying this week before the Financial Crisis Inquiry Commission will be: Eric Holder, attorney general; Sheila Bair, Federal Deposit Insurance Corp. chairman; Mary Schapiro, Securities and Exchange Commission chairman, Lisa Madigan, Illinois attorney general; and John Suthers, Colorado attorney general. The commission will hold two days of hearings. Bank executives from Goldman Sachs, JP Morgan Chase, Bank of America and Morgan Stanley, were slated to testify today. The commission aims to find what caused the financial crisis ...

FinCEN provides flexibility on CIP issues

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WASHINGTON (1/13/10)--The Financial Crimes Enforcement Network (FinCEN) in a recent letter advised a financial institution whose customers cannot meet existing customer identification (CIP) requirements due to their participation in state-run address confidentiality programs (ACP). In the letter, FinCEN has determined that that customers who participate in a state-run ACPs “shall be treated as not having a residential or business street address and a secretary of state, or other state entity serving as a designated agent of the customer consistent with the terms of the ACP, will act as another contact individual for the purpose of complying with FinCEN’s rules. Therefore, the financial institution will collect the street address of the ACP sponsoring agency for purposes of meeting its CIP address requirements.” FinCEN addresses a situation in which a customer of a financial institution is “having difficulty establishing accounts or changing their address to the post office box that has been assigned to them” by state authorities. Many of these individuals taking part in these ACPs are victims of crimes and are seeking state protection. Under the Bank Secrecy Act, financial institutions must “implement a CIP that includes, at a minimum, risk-based policies and procedures that enable the [financial institution] to form a reasonable belief that it knows the true identity of its customers.” This relationship is usually established through the filing of a residential or business street address. In the event that there is not a valid business or street address to file, the BSA allows customers to provide the residential or business street address of a close relative of other personal contact. For the full FinCEN letter, use the resource link.

Fed issues final CARD Act rules

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WASHINGTON (1/13/10)--The Federal Reserve Board on Tuesday approved amendments to Regulation Z, Truth in Lending, which implement provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The rules go into effect Feb. 22. The CARD Act legislated sweeping credit card industry reforms aimed at protecting consumers. Known by the partial acronym the "Credit CARD Act," the new law is intended to prevent lenders from such things as making arbitrary changes to the interest rates and terms associated with a card that holds an existing balance. Specifically, the new law and implementing regs prohibit rate increases in the first year that a credit card account is active, require cosignors for credit card accounts taken out by an individual under 21 years of age, require that creditors obtain the consent of the cardholder before charging over the limit fees, and limit many of the fees associated with so-called “subprime” credit cards. In a release, Fed Governor Elizabeth Duke said that the rule, which “bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts,” marks “an important milestone in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly.” Other portions of the CARD Act will be implemented by the Fed in the near future and will become effective on Aug. 22. Additionally, the rule incorporates the Regulation Z open-end final rules that were issued in Jan. 2009. These rules also finalize the interim final rules that were issued in July and that were effective this past Aug. 20. The Fed has also withdrawn its unfair and deceptive acts and practices rule. While the National Credit Union Administration, which was party to those rules, has not yet publicly withdrawn them, the Credit Union National Association (CUNA) anticipates that the NCUA will withdraw them soon. CUNA will be reviewing this rule closely to also determine the extent that they may impact 2009’s open-end Reg Z rules, including the upcoming July 1 compliance date for those rules. CUNA will also hold an audio call on the new rules in the coming weeks.

Cyber attack training exercise offered to financial institutions

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WASHINGTON (1/13/10)--The Financial Services Information Sharing and Analysis Center (FS-ISAC) has announced that on Feb. 9-11 it will hold a simulated nationwide cyber attack as part of a training program. The FS-ISAC has invited financial institutions, card processors, retail outlets, third party service providers, corporate treasurers, and government entities to take part in the test. The testing exercise will take place over a three day period, and is free of charge. During the simulated attack, participants will be asked to detail how they would respond to a series of attack scenarios. These responses will then be assessed, and suggestions for improvement, along with information on best security and response practices, will be made. According to the FS-ISAC, participants in the exercise will later be able to “evaluate” their “current risk mitigation procedures related to cyber attacks and identify potential critical gaps in planning,” will “engage in a live test” of their “ability to respond to major cyber attack incidents,” and will “raise awareness” of the procedures needed to respond to “cyber threats.” The testing exercise is supported by the BITS Financial Services Roundtable, of which the Credit Union National Association (CUNA) is a member. The U.S. Chamber of Commerce, the Federal Reserve Retail Payments Office, and other assorted groups are also supporting the testing. CUNA is the only credit union trade group represented in BITS, and has extensive information on BITS on its regulatory homepage. For more information on BITS, use the resource link.

Informational sessions offered on CDFI certification

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WASHINGTON (1/13/10)--The U.S. Treasury Department’s community Development Financial Institutions (CDFI) Fund announced an its 2010 series of conference calls regarding CDFI certification. The calls are intended to serves as a forum for credit unions and other potential certification applicants to ask questions of CDFI Fund staff about becoming a certified CDFI. Credit unions and other organizations may be CDFI certified to provide financing and related services to communities and populations that lack access to credit, capital and financial services. To become certified, an organization must: be a legal entity, have an eligible primary mission, be a financing entity, serve an eligible target market, be accountable to the target market, provide corresponding development services, and not be controlled by a government entity. Among other benefits, CDFI certification allows applicants to apply for financial assistance through the CDFI Program. The schedule of conference calls is outlined below:
* Jan. 21, 3-4 p.m. (ET); * Feb. 18, 3-4 p.m. (ET); * March 18, 3-4 p.m. (ET); * April 15, 3-4 p.m. (ET); * May 20, 3-4 p.m. (ET); and * June 17, 3-4 p.m. (ET).
No prior registration is necessary to participate. The same call-in and PIN numbers apply to each of the conference calls: Participants need to call (202) 927-2255 and enter the PIN 864232. For more information about CDFI certification eligibility and the application process, use the resource link below.

CDFI Fund pledges high bar for 2010 success

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WASHINGTON (1/13/10)—The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund said it is setting a high bar for success in FY 2010 in its efforts to increase its effectiveness in providing economic development opportunities in the nation’s most underserved communities. “We are aiming to meet and exceed the accomplishments of last year with greater internal operating efficiencies and by expanding our assistance to underserved communities with new initiatives,” the CDFI Fund Director Donna Gambrell noted in a release. She said first-quarter 2010 initiatives include a first round of the Capital Magnet Fund, and awards under a new Financial Education and Counseling (FEC) Pilot Program. The Capital Magnet Fund is a competitive grant program for CDFIs and other nonprofits to attract private capital for development, preservation, rehabilitation, and purchase of affordable housing for low-income families, as well as economic development activities or community service, which in conjunction with affordable housing activities will implement a concerted strategy to stabilize or revitalize a low-income area or underserved rural area. Through the FEC Pilot Program, the CDFI Fund will provide grants to enable eligible organizations to provide a range of financial education and counseling services to prospective homebuyers. The CDFI Fund, also for the first time, is co-sponsoring the National Interagency Community Reinvestment Conference on March 14-18 in New Orleans, La. Gambrell noted, “This is the first time a non-regulatory agency is officially co-sponsoring the conference and a fantastic tribute in our 15th anniversary year to how far the CDFI Fund has come since its inception. We will continue to build partnerships in FY 2010 with other government and non-governmental organizations interested in improving conditions in low-income communities." The CDFI Fund will receive nearly $247 million in resources in 2010 under its largest-ever appropriations–approximately a 130% increase over the $107 million in regular appropriations received in 2009.