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Inside Washington (10/19/2009)

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* WASHINGTON (10/20/09)--Reports by the Federal Deposit Insurance Corp.’s (FDIC) Office of Inspector General indicate the FDIC did not “enforce its own guidelines to rein in excessive commercial real estate lending by at least 20 banks that later collapsed” (Bloomberg Oct. 19). FDIC examiners didn’t find the issue early enough and should have taken stronger action after seeing the banks had “dangerously” high loan levels before failing, the reports said. Ninety-nine financial institutions have closed this year--compared with a historical high of 179 in 1992 during the Savings and Loan crisis. The number of failed banks is expected to increase because of delinquency rates on commercial real estate (CRE) mortgages, said Matthew Anderson, partner, Foresight Analytics, a real-estate market consulting firm. FDIC Chairman Sheila Bair has said CREs pose the largest threat for banks ... * WASHINGTON (10/20/09)--The House Financial Services Committee will vote today on a preemption measure that would allow state governments to protect bank customers by restricting the banks beyond federal laws. The measure, if approved, would roll back a preemption doctrine that has allowed banks to answer only to federal regulators (The Washington Post Oct. 19). The Obama administration supports the change because it views preemption as a cause of the financial crisis. If the change is approved, 50 additional regulators would oversee the nation’s largest banks. The issue of preemption has gradually gained more attention. In 1999, when the Office of the Comptroller of the Currency said banks didn’t need to comply with California ATM fee laws. In 2004, the OCC issued a blanket exemption that asserted sole authority to oversee national banks--a stance that has been consistently upheld by federal courts ... * WASHINGTON (10/20/09)—The Federal Trade Commission has extended the comment period on its proposed changes to the Telemarketing Sales Rule (16 CFR part 310) to address concerns about debt relief services. Originally set to wind down Oct. 9, the FTC extended the comment period to Oct. 26. The FTC proposed rule, issued in July, is intended to fight deceptive and abusive telemarketing of debt relief services that hawk their ability to reduce consumers’ credit card and other unsecured debt…

New Dodd bill would set overdraft rules

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WASHINGTON (10/20/09)—Sen. Christopher Dodd (D-Conn.), who heads the Senate Banking Committee, unveiled his new bill Monday that would limit the fees financial institutions can charge on overdraft protection services. According to a release from Dodd’s office, The FAIR Overdraft Coverage Act would:
* Require financial institutions to get a customer’s or member’s consent before enrolling them in an overdraft protection program for ATM and debit card transactions; * Limit the number of overdraft coverage fees that could be charged to one per month and six per year; *Require fees to be proportional to the cost of processing the overdraft; * Prohibit institutions from manipulating the order in which they post transactions in order to rack up extra fees; * Require that accountholders be notified when they overdraw an account and be given the option of being notified by email, text or traditional mail; and * Require a warning if an ATM or branch teller transaction will overdraw an account, and give the accountholder the option to cancel the transaction.
The Credit Union National Association (CUNA) has noted that overdraft protection plans are a service that is fully consistent with the credit union philosophy and mission to serve members’ financial needs and to help them resolve short-term financial problems. CUNA maintains that such programs, when used appropriately by members, serve as a valuable alternative to overdrawing share drafts. CUNA has said it would support new law or regulation that:
* Prohibits the manipulation of debits and credits with the intent of generating overdraft fees; * Provides clear and conspicuous disclosure of all costs associated with these programs to ensure that credit union members have the ability to compare the costs and features of overdraft protection programs among the various types of financial institutions that offer them; * Recognizes, consistent with the current Federal Reserve Board position, that funds accessed through overdraft protection programs are not loans and do not require that fees be calculated and disclosed as an “annual percentage rate” under the Truth in Lending Act; * Permits, but does not require, credit unions to obtain a written agreement from members to participate in an overdraft protection program, while recognizing the need to allow members to decline participation in the program if they so choose; and * Does not impose new burdensome requirements on credit unions with which compliance would be difficult to achieve. This would include, but is not limited to, requiring new disclosures on automated teller machine transactions.
The Federal Reserve Board is also drafting new rules on overdraft protection plans. However, some member of the U.S. Congress, Dodd among them, have expressed frustration with the regulators’ efforts.

Congress CFPA debate continues vote pending

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WASHINGTON (10/20/09)--The dominant credit union issue on the Hill this week is the continued debate over H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act, and discussion of this legislation will resume in the House later today. Rep. Barney Frank’s (D-Mass.) House Financial Services Committee is scheduled to continue amendatory action on the CFPA legislation, with votes expected on Wednesday afternoon. The committee is also expected to vote on H.R. 3763, to amend the Fair Credit Reporting Act to provide for an exclusion from Red Flag Guidelines for certain businesses, and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, on Wednesday. A total of 37 amendments to the CFPA legislation were introduced last week, and seven of those were decided. One that was added to the bill would limit the proposed CFPA's examination and enforcement authority to credit unions over $1.5 billion in assets and banks with more than $10 billion in assets, while allowing institutions whose assets fall below those thresholds to remain under the enforcement authority of their prudential regulator.The Credit Union National Association has expressed its displeasure with this amendment, and on Friday met with Frank in an effort to find a mutually agreeable solution before the bill reaches the House floor. While CUNA is not concerned over the shifting of regulation writing authority, such as the Real Estate Settlement Procedures Act or the Home Mortgage Disclosure Act, to the CFPA, CUNA Vice President of Legislative Affairs Ryan Donovan has said that the tasks of examination and enforcement regarding credit unions must remain in the hands of the National Credit Union Administration. A manager’s amendment offered by Frank also addresses remittances, and CUNA has communicated with Frank on this issue as well, expressing concern over the potential for increased remittance costs. An amendment that would have exempted all credit unions and small banks from the terms of the CFPA was also offered by Reps. Jeb Hensarling (R-Texas) and Scott Garrett (R-N.J.), but the amendment failed on a recorded vote. The housing market will also be discussed during the week, with Department of Housing and Urban Development Secretary Shaun Donovan testifying before the Senate Banking Committee on Tuesday. The status of the first-time homebuyers tax credit will also be discussed before the House Ways and Means Committee Subcommittee on Oversight on Thursday.

CUNA nominates pair to Feds TIAC

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WASHINGTON (10/20/09)--The Credit Union National Association (CUNA) has nominated two credit union system veterans for membership on the Federal Reserve’s Thrift Institutions Advisory Council (TIAC). In a letter sent to Fed Governor Elizabeth Duke, CUNA Chairman Kris Mecham said that METRO Credit Union President/CEO Robert Cashman and US Federal Credit Union President/CEO William Raker “are highly articulate, well-regarded leaders within the credit union industry and their communities” who “possess great financial system experience and would bring significant expertise to the work of the Council.” Cashman, who currently serves on CUNA’s Board of Directors and Governmental Affairs Committee, has also worked with the Massachusetts Credit Union League and served as Director of the nation’s first corporate credit union, the Central Credit Union Fund. He has worked within the credit union movement for 26 years. Raker has led US Federal Credit Union, which holds $800 million in assets from 76,000 members, for 12 of his 30 years in the credit union system, and previously served in other capacities at Fort Knox Federal Credit Union Control Data Credit Union Services. The TIAC, an advisory group, was established by the Fed in 1980 and meets three times per year with the Fed’s Board of Governors to discuss developments relating to thrift institutions, mortgage finance, and regulations.