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Compliance The rules on e-statements

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WASHINGTON (1/30/09)—Everyone is looking for cost savings in this tough economy and fictitious ABC CU is no different. An astute staff member suggests: Let’s just expedite our members’ transition from paper statements to electronic ones. It’s an appealing idea, management thinks while picturing the cost savings on paper, mailing costs, even processing expenses. But let’s check what our compliance expert says about this first, some cautious party proposes. Can ABC CU simply convert members still receiving paper statements to e-statements? What if the credit union offers the option to opt-out at any time? Well, it is a good thing the credit union has young Sara on its staff because she has been boning up on compliance issues. She knows: The credit union cannot automatically convert members without first getting their consent (opt-in) to receive e-statements. "Participation in e-commerce must be voluntary under the federal e-signature statute—known as ESIGN,” Sara says. The compliance experts at the Credit Union National Association (CUNA) back her up on this. They note ESIGN requires consumers to express their consent electronically, or confirm their consent electronically, in a manner that reasonably demonstrates that they’ll be able to access information electronically. Also, prior to consenting, consumers must be provided with a disclosure informing them of their rights regarding any electronic transaction, as well as a statement of hardware and software requirements for the access and retention of electronic records. For more on this, and other compliance challenges, use the resource link below.

Internet not a service facility NCUA

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WASHINGTON (1/30/09)—The National Credit Union Administration (NCUA) reiterated its stance that a credit union’s Web site does not qualify as a service facility under the agency’s chartering and field of membership requirements. If formation of a separate credit union is not practical, a multiple common bond credit union may add a new group to its field of membership if it shows the NCUA it is “within reasonable proximity to the location of the group.” The group would have to be within “reasonable proximity” of a service facility of the credit union. A service facility can be a credit union-owned branch, ATM, or mobile branch, among other things. It cannot, said the NCUA, be a Web site. “A credit union’s Internet website lacks a physical presence so cannot meet the statutory requirements to be within reasonable proximity of the groups,” the agency said in a Jan. 12 legal opinion letter. The observation was made by NCUA General Counsel Robert Fenner in response to a letter from Ronald L. Burniske, President/CEO, Chartway FCU, Virginia Beach, Va. Burniske had requested the agency consider modifying NCUA regulations to include internet banking services within the definition of a service facility in this instance.

Inside Washington (01/29/2009)

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* WASHINGTON (1/30/09)--The Treasury Department announced that it will post investment contracts for future completed transactions to its website within five to 10 business days. For contracts already completed, documents will be posted on a rolling basis. Nine contracts completed under the Capital Purchase Program were posted Wednesday. “We are taking a step toward increased transparency by committing to place all of our Troubled Asset Relief Program investment agreements on the Internet so that taxpayers can see how their money is being spent,” said Treasury Secretary Tim Geithner ... * WASHINGTON (1/30/09)--The Board of Governors of the Federal Reserve System swore in Daniel K. Tarullo as a Fed governor Wednesday. Tarullo was nominated to an unexpired term ending Jan. 31, 2022. He previously taught courses in international financial regulation, international law and banking law at Georgetown University Law Center. Before joining Georgetown, Tarullo worked in several senior positions in the Clinton administration ... * WASHINGTON (1/30/09)--House of Representatives Agriculture Committee Chairman Collin Peterson (D-Minn.) proposed a bill Wednesday that would prevent investors from engaging in credit default swap (CDS) trading unless they own the underlying bonds. U.S. trading also would be processed by a clearinghouse (Bloomberg.com Jan. 29). The bill would kill the CDS market, according to Tim Backshall, chief strategist, Credit Derivatives Research LLC. About 80% of the CDS market is traded by investors who don’t own the bonds, said Eric Dinallo, superintendent, New York Department of Insurance. CDSs are based on bonds used to analyze a company’s ability to pay back debt. Buyers are paid in face value for the cash equivalent if a borrower doesn’t adhere to debt agreements. Regulators have stepped up pressure on banks to use clearinghouses for CDSs and improve transparency amid the financial crisis ... * WASHINGTON (1/30/09)--Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) introduced a bill Wednesday that would give the government access to the books of certain financial institutions. Called the Troubled Asset Relief Program (TARP) Enhancement Act, the bill would require any party that receives U.S. Treasury Department TARP funds to give the Government Accountability Office access to its books…