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Inside Washington (01/03/2011)

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* WASHINGTON (1/4/11)--As of Dec. 31, the Small Business Administration (SBA) had approved more than $10.3 billion in loan guarantees since President Obama signed the Small Business Jobs Act of 2010 on Sept. 27. The Jobs Act included an extension of reduced fees and higher guarantee loan enhancements in the agency’s two largest loan programs. SBA Administrator Karen Mills noted that in three months all of the $505 million in subsidies provided in the Jobs Act to support loan enhancements has been used by the agency’s national network of lending partners. As a result, the SBA has activated its loan queue to redirect any remaining funds that result from loan cancellations to Jobs Act loans. During the fourth quarter, SBA approved nearly 22,000 small business loans for $10.47 billion, supporting $12.16 billion in lending. The amounts are greater than the volume for Jobs Act loans over the same period because they exclude some loans that were not eligible for Jobs Act enhancements …

Agency to provide CU systems transition tracking in 2011

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ALEXANDRIA, Va. (1/4/11)--Natural person credit unions that are temporarily receiving payment services from so-called “bridge” corporate credit unions will, beginning with the June 30, 2011 call report cycle, be able to track their payment system service transition via an online credit union profile, the National Credit Union Administration (NCUA) said in a recent release. The NCUA has also provided both guidance and a payment systems checklist to give credit unions the resources needed to successfully analyze payment system services and make prudent decisions regarding potential service provider changes. Corporate credit unions are often used to aid natural person credit unions in the operation of their clearing, settlement and payment systems, and can also offer other behind the scenes business assistance to credit unions. Credit unions that plan to transfer some of their existing services to another corporate credit union “must work diligently to ensure a safe and sound transition” and work to minimize disruption to any member payment services, the NCUA said. The agency will later this year hold a “Payment Systems Checklist” webcast and will also provide credit unions with under $50 million in assets with their own public forum during a series of workshops. The NCUA also encouraged credit unions to perform a due diligence review on their service providers and to fully understand each payment service provided by their corporate credit union to make informed decisions before any changes are made to those services. For the full NCUA release, use the resource link.

NCUA tech corrections bill could become law this week

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WASHINGTON (1/4/11)--A technical corrections bill that would provide the National Credit Union Administration (NCUA) with new tools to address both troubled individual credit unions and the larger corporate credit union crisis could be signed into law this week, and the Credit Union National Association (CUNA) plans to closely monitor its implementation going forward. The legislation, S. 4036, was approved on the final day of the 111th Congress. The legislation will alter the Federal Credit Union Act by permitting the NCUA to make payments to the Temporary Corporate Credit Union Stabilization Fund without borrowing from the U.S. Treasury. The legislation also clarifies that the equity ratio of the National Credit Union Share Insurance Fund (NCUSIF) is based solely on the unconsolidated financial statements of the NCUSIF. The legislation will also give credit unions the ability to count Section 208 assistance as net worth for the purposes of prompt corrective action (PCA). Under the terms of the legislation, the Government Accountability Office will investigate the NCUA in an attempt to uncover the reasons for recent corporate credit union failures and evaluate the adequacy of the NCUA's response to the failures of the corporates. The resulting report, which will be delivered to the Senate Banking Committee and House Financial Services Committee within six months after the legislation is enacted, will also evaluate the effectiveness of the NCUA's PCA implementation and examine whether the agency has been effective in implementing recommendations made by its Inspector General and contained in Material Loss Review Reports.

CUNA Hearings on Fed interchange proposal needed

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WASHINGTON (1/4/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney on Monday urged the House Financial Services Committee to hold hearings on the Federal Reserve’s debit interchange proposal as soon as possible, with an eye toward encouraging the Fed to delay full implementation of the interchange rule until after these hearings are held and a comprehensive congressional review has been completed. The Fed’s interchange provisions, which were released just before the end of the year, could cap debit card interchange fees that are paid by merchants to card issuers at 12 cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. The Fed proposal will remain open for public comment until Feb. 22. Fed officials during their December meeting said that the interchange provisions, if ultimately approved, would likely not become effective until after April. Cheney in the letter to House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) and ranking member Rep. Barney Frank (D-Mass.) noted that no congressional hearings were held on the interchange provision prior to its enactment, and that there is virtually no legislative history regarding the amendment. “This is troubling given the fact that the legislation to which it was attached received considerable consideration by both chambers and was subject to an exhaustive conference committee process,” Cheney added. Hearings on the interchange issue would be timely and critical, and would help determine how best to ensure that credit unions and other small issuers are not subjected to the artificially low debit interchange fee structure the Fed is proposing for large issuers, Cheney added. In a letter to the lawmakers, Cheney argued that the interchange provisions could have tragic consequences for credit unions, and would impact all users of debit cards. Cheney noted that the interchange amendment lacks an enforcement mechanism for the small issuers’ exemption, and said that there is no guarantee the payment card networks will operate a two-tiered system the exemption necessitates for small issuers. Bachus and Rep. Jeb Hensarling (R-Texas) in a recent letter to the Fed questioned the speed with which the interchange legislation was moved through Congress. Frank last month also contacted the Fed, noting that the implementation of still-pending interchange regulations, if not properly crafted, "may have unintended consequences" for credit unions and consumers. (See related story 12/23/10: Bachus, Hensarling: Could $10B exemption harm CUs?) For the full comment letter, use the resource link.