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Student loan debt cap disclosures could see changes

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WASHINGTON (10/27/11)—Student lending was a hot topic on Wednesday, as President Barack Obama and de facto Consumer Financial Protection Bureau (CFPB) director Raj Date each announced plans that could significantly alter the student loan landscape.

The agencies have taken the first step by developing a sample form and releasing that form for public comment. Date said the CFPB/Department of Education prototype form "makes it easier for students to compare offers side-by-side by using the same format and standard terms" and "clearly distinguishes between loans and scholarships, and lays out options for federal aid."

The CFPB homepage provides an area for general comment on the sample form, and asks commenters to prioritize standard loan disclosure items, including:
  • The school's graduation rate;
  • How the expected amount of student debt compares to national averages;
  • How much the student loan compares to average loans at that school and other schools;
  • Estimated debt and estimated monthly payment following graduation; and
  • The student's likely ability to repay their loans.
The CFPB this week also unveiled a Student Debt Repayment Assistant, a web-based tool that the CFPB said would provide borrowers with access to information on income-based repayment, deferments, alternative payment programs, and more. The CFPB is also planning to collect public and industry comment on the private student loan market in the coming weeks, and "will use this information to prioritize consumer education and policy efforts."

The agency and the Department of Education are scheduled to issue a comprehensive report on the private student lending market to Congress by July 2012.

Student loans were also a topic of discussion in the White House on Wednesday, as President Barack Obama announced a proposal that would cap student loan payments at 10% of a borrower's discretionary income and relieve student debt entirely after payments have been made for a 20-year period, beginning in 2012.

Obama also proposed allowing student loan borrowers to reduce their current interest rate by as much as 0.5% and announced a student loan consolidation program that would allow borrowers to and make a single payment each month, with incentives to encourage on-time repayment. The Obama administration estimated these changes would aid 1.6 million borrowers, and said administration officials would reach out to eligible borrowers in early 2012 to introduce them to this program.

Under current law, students may limit their loan payments to 15% of their income. Student loan debts are also forgiven after 25 years.

Credit Union National Association (CUNA) General Counsel Eric Richard said Obama's student loan initiative seems to be focused primarily on colleges and universities. "To the extent that there are new disclosure best practices, guidelines, or requirements, those might have an indirect impact on the financial institutions that work with schools to create financial aid packages," Richard said, adding that CUNA will assess what, if any, impact the plan could have on credit unions.

For more on the CFPB and Obama administration student loan initiatives, use the resource links.

Small biz seeks hard-to-find credit CUNA tells lawmakers

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WASHINGTON (10/27/11)—There still is a "healthy demand" for small business loans despite current economic conditions, and credit unions could provide more of those loans if the 12.25% of assets member business lending (MBL) cap was increased, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a Wednesday letter to the chairman of the House Financial Services subcommittee on financial institutions and consumer credit.

The letter to Rep. Shelley Moore Capito (R-W. Va.) follows this month's subcommittee hearing on H.R. 1418, the Small Business Lending Enhancement Act, at which CUNA testified. H.R. 1418 would lift the MBL cap to 27.5% of a credit union's total assets. CUNA has estimated this cap lift would add $13 billion in new funds to the economy and create 140,000 new jobs in the first year following enactment.

During the MBL hearing, bankers attempted to stir doubts that any unmet demand exists for small business credit, and therefore increased MBL capacity is unneeded. Some committee members questioned how much demand exists.

Cheney refuted the bankers' points in the recent CUNA letter, saying "the demand for small business loans is present in the market and the data suggest that banks continue to constrict credit availability while credit unions are expanding their business loan portfolios."

The CUNA CEO cited a Pepperdine Capital Markets Project survey that indicated that 95% of owners of privately held businesses wanted to expand their business, but only 53% had the financial means to do such. The report also found that 38% of businesses surveyed were seeking new sources of financing, and 65% of banks that responded to the survey said they had seen an increased demand for small business loans.

The CUNA letter noted that total bank business loan portfolios have declined by almost 14% during the current economic downturn, while credit union business loan portfolios grew at a healthy rate of over 40%. Any reduced borrowing from small businesses, and a corresponding reduction in small business expansion and job creation, "can be traced in large part to ongoing reductions in lending activity among the nation's commercial banks," Cheney said.

The letter also challenged banker statements that allowing increased credit union business lending would effectively "crowd out" bank business lending and said bank representatives grossly misrepresent the impact of raising the credit union business lending cap on their own lending volumes. "The vast majority of that new lending could be accomplished without any reduction in bank loans," the letter noted.

"With the banks controlling 95% of the commercial lending market, even a doubling of credit union market share would not significantly alter their dominance of this market," the letter said.

For the full letter, use the resource link.

Deficit reduction panel holds third public hearingbr

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WASHINGTON (10/27/11)—The Joint Select Committee (JSC) on Deficit Reduction conducted its third public hearing Wednesday and, for the second time, heard from Congressional Budget Office Director Doug Elmendorf, as he was the sole witness of the panel's session.

Elmendorf reminded the committee that the CBO would need proposed deficit-reduction initiatives by the beginning of November in order to project the budget impact of the legislation in time for the JSC to vote on it by its Nov. 23 deadline. The CBO impact-assessment process is referred to as "scoring" the legislation.

Sen. Patty Murray (D-Wash.), who with Rep. Jeb Hensarling (R-Texas) is co-chair of the committee, noted the next JSC public hearing is set for Nov. 1. Hensarling seemed to address skeptics' fears that the committee is not making adequate progress toward its goal of identifying $1.5 trillion in budget cuts by saying, "(U)ntil the stroke of midnight on November 22, we still have plenty of time to do the committee's work."

The joint select committee, also called the Super Committee, was created by the Budget Control Act in August.  In addition to Murray and Henslaring, the panel members are: Democratic Sens. Max Baucus (Mont.) and John Kerry (Mass.), Republican Sens. John Kyl (Ariz.), Rob Portman (Ohio), and Pat Toomey (Penn.), House Democrats, Reps. Xavier Becerra (Calif.), Jim Clyburn (S.C.), and Chris Van Hollen (Md., and House Republicans, Reps. Fred Upton and Dave Camp, both of Michigan.

NCUA reschedules Nov. board meetings

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ALEXANDRIA, Va. (10/18/11)--The National Credit Union Administrations (NCUA) November open board meeting will start an hour earlier than previously scheduled: 9 a.m. (ET) on Nov. 17.

The agency on Monday also announced that its November monthly closed board meeting will be moved to 10 a.m. (ET) on Wednesday, Nov. 16.

That meeting was scheduled for 11:30 a.m. (ET) on Nov. 17. The next open board meeting will take place at 10 a.m. (ET) on Oct. 27, and a closed session will follow that open meeting.

The agencys December board meeting is scheduled for 10 a.m. (ET) on Dec. 15. The NCUA late last month released the monthly open board meeting schedule for 2012.

The dates for the NCUA's 2012 board meetings are:
  • Jan. 26;
  • Feb. 16;
  • March 15;
  • April 12;
  • May 24;
  • June 21;
  • Juy 19;
  • Sept. 20;
  • Oct. 18;
  • Nov. 15; and
  • Dec. 13.

Inside Washington br

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  • WASHINGTON (10/27/11)--H.R. 1263, a bill that would amend the Servicemembers Civil Relief Act (SCRA) to extend protections against sale, foreclosure, and seizure of property to the surviving spouses of deceased servicemembers, would also require institutions with annual assets greater than $10 billion to maintain a toll-free telephone number to provide assistance to members of the military. The asset level was incorrectly reported in an Oct. 17 News Now article. Click here to read the corrected article. ...
  • WASHINGTON (10/27/11)--West Coast Bank, Lake Oswego, Ore., has been ordered by the Federal Deposit Insurance Corp. (FDIC) to pay a $390,000 fine and repay customers at least $350,000 in fees for overdrafting their accounts. The order, announced Monday in a regulatory filing by the bank, settles allegations by the FDIC that $2.5 billion asset West Coast deceived customers with its "Courtesy Coverage" overdraft protection. West Coast Bank did not admit to or deny the charges in signing the order. West Coast has agreed to correct all violations and review its program to ensure it complies with FDIC guidelines within 60 days. Under the agreement, West Coast's board is required to "participate fully" in the oversight of the bank's compliance management system and undergo educational training that specifically address consumer protection laws …
  • WASHINGTON (10/27/11)--The Federal Housing Finance Agency (FHFA)  announced that  two Freddie Mac board members, having reached the company's mandatory retirement age, will be stepping down from the board at the end of the current term in February 2012.  They are  Chairman John Koskinen and Robert Glauber, who is chairman of the Governance and Nominating Committee. To promote a smooth transition, FHFA Acting Director Edward J. DeMarco said in a release, Christopher Lynch, currently chairman of the Freddie Mac board's audit committee, will assume the chairmanship of the Freddie Mac board, effective at the December 2011 board meeting. Separately, the FHFA release noted, Laurence E. Hirsch notified the Freddie Mac on Oct. 18 that he will not seek re-election to the company's board of directors when his current term expires. Current Freddie Mac CEO Charles Haldeman, Jr. recently informed the board of his intention to step down some time in the coming year. FHFA Acting Director DeMarco requested that the outgoing and incoming board chairs work with the board and FHFA on developing a succession plan for the position of CEO …

SCRA mortgage protection changes pass House

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WASHINGTON (10/17/11)--The House late last week approved H.R. 1263, a bill that would amend the Servicemembers Civil Relief Act (SCRA) to extend protections against sale, foreclosure, and seizure of property to the surviving spouses of deceased servicemembers.

Members of the military and their spouses who are in financial distress would be protected from sale, foreclosure, or seizure of their property for 12 months under the legislation.

These protections would be in effect until Dec. 31, 2017. Current law protects military staff from foreclosure for nine months. However, those protections are set to expire on Dec. 31, 2012, and servicemembers would be protected only for 90 days if further action is not taken.

The bill, if passed into law, would also require credit unions and other lenders to create a new position to ensure their institution is in compliance with the SCRA. That employee also would be tasked with distributing information to servicemembers whose obligations and liabilities are covered by the law.

In addition, the bill would require institutions with annual assets greater than $10 billion to maintain a toll-free telephone number to provide assistance to members of the military. That number would need to be posted on the institutions website.

The bill was referred to the Senate Committee on Veterans' Affairs late last week, and it would need Senate approval before it can be signed into law.