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Washington Archive

Washington

Fed FTC issue final piece of the FACTA puzzle

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WASHINGTON (1/6/10)--The Federal Reserve Board and the Federal Trade Commission announced final rules in late December that represent the final piece of the Fair and Accurate Credit Transactions Act (FACTA) implementation puzzle. The new rules implement Section 311 of FACTA. FACTA, in turn, amended the Fair Credit Reporting Act (FCRA) in 2003. Credit unions must comply with the new requirements by Jan. 1, 2011. This newest FACTA final rule generally requires a creditor to provide a consumer with a notice when that consumer is receiving credit on less favorable terms than the lender’s other borrowers with better borrowing histories. The risk-based pricing notice requirements apply only to credit that is primarily for personal, household, or family purposes, but not in connection with business credit. The final rules provide creditors with several methods for determining which consumers must receive risk-based pricing notices. Also, as an alternative to providing risk-based pricing notices, the final rules permit creditors to provide consumers who apply for credit with a free credit score and information about their score. The agencies have provided model forms for each of the risk-based pricing notices and alternative credit score disclosures. There is also an exception to the rule for a creditor that provides the consumer with an FCRA adverse action notice in connection with the transaction. The FCRA statute originally called for a Dec. 1, 2004 effective date for the “risk-based pricing” plan, but it has proven to be one of the most controversial rules issued under the Act. For one thing, it was a challenge to try to develop a consensus on terms used in the rule. Also, as expressed by the Credit Union National Association during the proposal process, there were concerns about how to decide who gets the required notices and also how members or customers might react to the notices.

IRS plans new rules for tax return preparers

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WASHINGTON (1/6/10)--The Internal Revenue Service (IRS) this week announced that it will soon propose tightening its regulation of paid tax return preparers by requiring them to register with the service and to complete competency exams. The new rules, once proposed, would apply to paid tax preparers other than attorneys, certified public accountants, and enrolled agents, a list which would include credit unions that offer tax preparation services to their members for a fee, or related credit union service organizations. The proposal will not apply to the current tax filing season, which ends on April 15. The Credit Union National Association (CUNA) is watching this closely for its possible impact on tax return assistance provided by credit unions to their members for a fee. According to the IRS, paid tax return preparers would be required to “register with the IRS and obtain a preparer tax identification number.” “These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid,” the IRS added. Competency tests and ongoing professional education would also be required for these tax return preparers, and the ethical rules found in Treasury Department Circular 230 would also be extended to these preparers. “This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct,” the IRS said. In a release, the IRS said that the “higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.”

Analysis of HMDA asset-size exemption threshold offered by CUNA

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WASHINGTON (1/6/10)--The Credit Union National Association (CUNA) has analyzed the Federal Reserve Board’s determination that financial institutions with assets of $39 million or less as of December 31, 2009 will be exempt from the data collection requirements set forth by the Home Mortgage Disclosure Act for the current calendar year. The asset-size exemption for depository institutions was also $39 million during 2009. The threshold is based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the twelve-month period that ended in November 2009. The HMDA, which helps determine whether financial institutions are serving the housing needs of their communities and assisting in fair lending enforcement, requires many depository institutions and certain for-profit, nondepository institutions to collect, report and disclose data about applications for, and originations and purchases of, home mortgage loans, home improvement loans and refinancings. Data reported include the type, purpose, and amount of the loan; the race, ethnicity, sex and income of the loan applicant; and the location of the property. For the full analysis, use the resource link.

CUNA seeks comment on federal guidance on reverse mortgages

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WASHINGTON (1/6/10)—The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Financial Institutions Examination Council’s (FFIEC) proposed guidance for reverse mortgages. The guidance will seek to help financial institutions ensure that their risk management and consumer protection practices adequately address the compliance and reputational risk associated with reverse mortgages. A reverse mortgage is a loan against a residence to provide cash to assist with living expenses, typically in the form of a lump sum or fixed monthly disbursement to the borrower. The National Credit Union Administration is one of several financial institution regulators that comprise the FFIEC, and the agency will be applying the guidance to federally insured credit unions. Specifically, the guidance recommends that credit unions and other financial institutions "provide adequate information" and "qualified independent counseling" for consumers that opt to take part in reverse mortgage products. Financial institutions should also "inform borrowers about reverse mortgage alternatives that they already offer," according to the guidance. The guidance also addresses related policies, procedures, and internal controls and third party risk management, and the FFIEC will issue both supervisory guidance to financial institutions and sample disclosures once the guidance is finalized. CUNA has suggested that those who do submit comments provide input on tailoring the FFIEC guidance to credit unions. More generally, CUNA has also asked for suggested additions or deletions to the guidance. Comments are due to CUNA by Feb. 9. Comments solicited to the FFIEC should be submitted by Feb. 16. To view the CUNA comment call, use the link.

Inside Washington (01/05/2010)

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* WASHINGTON (1/6/10)--Richard Blumenthal, Connecticut attorney general, is urging the Federal Reserve Board to mandate that credit card interest rates and fees return to last year’s levels after banks raised them because the Credit Card Accountability, Responsibility and Disclosures (CARD) Act was signed into law. He wrote a letter to Fed Chairman Ben Bernanke Monday (Dow Jones Jan. 5). Blumenthal cited an American Bankers Association letter that said big banks are charging “enormous” fee increases on low-risk consumers to recoup losses. The CARD Act was passed in May and goes into effect Feb. 22. Until then, interest rate increases apply to future purchase and current balances. After Feb. 22, companies can raise rates on future purchases but not on current balances unless a cardholder is 60 days past due on payments ... * WASHINGTON (1/6/10)--The Small Business Administration (SBA) has again extended its Community Express Pilot Program through Dec. 31, 2010. Credit unions are eligible for the program. The extension will help the SBA evaluate the changes it made to the program in 2008. Under those changes, SBA opened eligibility to any small business whose office was located in a HUBZone or Community Reinvestment Act designated area. It also restricted lenders to charge at maximum the standard 7(a) loan rates--2.25% over prime for maturities under seven years and 2.75% for maturities of seven years or longer; one additional percentage point for loans between $25,000 and $50,000; and two additional percentage points for loans under $25,000 ...