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SBA program extension bill moves forward

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WASHINGTON (10/29/09)--The House and Senate each passed legislation Wednesday that would temporarily extend U.S. Small Business Administration programs. The Senate approved S. 1929 and in a statement following the passage of the bill, author Sen. Mary Landrieu (D-La.) said that the extension is intended to ensure “that the agency has the stability it needs to provide our innovators and job creators the assistance they need to remain successful.” The House then approved a similar bill, clearing the way for the authorization to be sent to the White House for the president’s signature once differences are worked out between the two bills. The House measure extends the programs through January and the Senate bill pushes them into April. Rep. Nydia Velázquez (D-N.Y.), chairwoman of the House Committee on Small Business, said of the House action, “This will allow small businesses to go on using the valuable services of the SBA, while the House and the Senate continue our work to comprehensively reauthorize the Small Business Administration.” She noted that later this week the House will consider H.R. 3854, a bill to comprehensively update the SBA’s capital access initiatives. The SBA late last month also extended its Gulf Opportunity Pilot Loan Program, which provided 301 loans to small businesses in areas affected by Hurricanes Katrina and Rita, for a total of $25.2 million in funds during 2008. That program will continue until Sept. 30, 2010. Small business lending has also been a focus of the Obama administration, with the president last week announcing a series of initiatives aimed at spurring small business lending. Credit Union National Association President/CEO Dan Mica has offered CUNA’s assistance in the event that the administration, the U.S. Treasury Department, Congress, and the SBA decide to "achieve higher limits for key SBA programs, such as 7(a) and 504 programs." Credit unions can provide loans to businesses through these programs. However, CUNA also steadfastly recommends that legislators lift the current cap on member business lending (MBL) by credit unions to 25% of a credit union's total assets, a move which CUNA has estimated could provide as mush as $10 billion in new small business loans. A bill that would lift the MBL cap, H.R. 3380, is currently awaiting action in the House Financial Services Committee.

Too big bill unlikely to address CUs CUNA

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WASHINGTON (10/29/09)--Commenting on recently introduced draft legislation aimed at controlling systemic risk in the financial system, Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said that CUNA “does not believe credit unions pose a systemic risk to the financial system.” He added that credit unions will likely not be “covered by or affected directly by the legislation. “If even one of the largest credit unions were to fail, as costly as that might be to the credit union system, it would not threaten the overall financial system,” he added. The draft bill, which was released by House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) earlier this week, would create a monitoring system intended to reduce the threats that systemically risky firms pose to the financial system. The legislation also would establish a process for shutting down large, financially troubled nonbank financial institutions in a way that minimizes impact on U.S. taxpayers and the financial system. The bill also contains general provisions aimed at overhauling the country's financial regulatory system. The Federal Reserve Board would be granted oversight, regulatory, and enforcement powers over systemic firms under the legislation, which would also create an interagency regulatory council to advise legislators on financial regulation, American Banker reported. The National Credit Union Administration would serve on this regulatory board, if established. The Fed also may be granted the power to impose uniform standards for liquidity, risk-based capital, and leverage, American Banker added. CUNA is currently analyzing the legislation.

Pew credit study shows the CU difference Mica says

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WASHINGTON (10/29/09)--A recently released Pew Charitable Trusts study on unfair or deceptive credit card practices “underscores that a consumer in need of a credit card would do well to look to credit unions,” Credit Union National Association President/CEO Dan Mica said. “This study is another example of an independent third party which has confirmed that credit unions, on their own and without prompting from regulators, provide their members with honest, fair deals,” Mica said. He added that “it is further evidence that all the new regulations coming down on financial services are unlikely to change the behavior of credit unions since they are already doing the right things.” However, Mica said, “credit unions are concerned that the costs of complying with these new regulations will affect the deals they are able to offer their members.” The Pew study, which gathered information on about 400 credit cards issued by the 12 largest banks and the 12 largest credit unions, found that credit cards offered by credit unions provide their members with more reasonable annual percentage rates, cash advance fees, late fees, and other fees. The report also found that penalty fees at the largest credit unions are nearly half those assessed by larger banks. The report also suggested that many of the terms of credit union credit cards could provide “useful benchmarks” as the Federal Reserve Board creates new “reasonable and proportional” penalty rules, as required by the CARD Act. According to the Pew report, 99.7% of bank cards allowed the issuer to raise interest rates on outstanding balances by changing the account agreement unilaterally. Additionally, 90% of bank cards had penalty interest rates that could be triggered by late payments or over-limit transactions, according to the study. Further, 95% of bank cards allowed issuers to apply payments to low interest balances first, hampering a cardholder's ability to pay down higher interest balances. The other 5% did not disclose the issuer's policy, Pew reported. Commenting on the Pew report, Wisconsin Credit Union League President/CEO Brett Thompson said the study confirms what many credit union members "already know--that by owning the financial institution where you borrow and save, you’re protected from unnecessary fees. “Because there are no shareholders expecting profits--just members leveraging their ownership of the cooperative for better deals on financial services--credit unions consistently earn high marks for fairness to consumers,” he added. The league has communicated the results of the Pew study to local media and has also shared information with credit union insiders for further distribution.

CUNA witness Staatz to testify at overdraft hearing

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WASHINGTON (10/29/09)—Rod Staatz, president/CEO of SECU in Maryland, will testify Friday on overdraft issues before the House Financial Services Committee on behalf of the Credit Union National Association (CUNA) and credit unions. The hearing will zero in on H.R. 3904, a newly introduced bill that would amend the Truth in Lending Act with the intent of establishing fair and transparent practices related to overdraft protection programs offered by depository institutions. CUNA supports the ability of credit unions to offer overdraft privilege programs as a way to serve members’ financial needs and to help them resolve short-term financial problems. CUNA promotes “best practices” standards to distinguish credit union overdraft services from many bank programs that have been marketed to boost fee income without regard for the best interests of consumers. The House bill was introduced by Reps. Carolyn Maloney (D-N.Y.) and Barney Frank (D-Mass.), and is cosponsored by Reps. Luis Gutiérrez (D-Ill.), Gary Ackerman (D-N.Y.), Michael Capuano (D-Mass.), Keith Ellison (D-Minn.), Anna Eshoo (D-Calif.), Rubén Hinojosa (D-Texas), Paul Hodes (D-N.H.), Walter Jones (R-N.C.), Paul Kanjorski (D-Pa.), Daniel Maffei (D-N.Y.), Brad Miller (D-N.C.), Gwen Moore (D-Wis.), Jackie Speier (D-Calif.), and Maxine Waters (D-Calif.). Similar legislation has been introduced in the Senate, and the Federal Reserve is also reportedly working to address overdraft protections. House Financial Services Chairman Rep. Barney Frank (D-Mass.) has also indicated that the Consumer Financial Protection Agency, the plan for which could come to the House floor within the next month, could itself create new overdraft rules. The committee had not announced a full witness list for the hearing at press time.

Inside Washington (10/28/2009)

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* WASHINGTON (10/29/09)--National Credit Union Administration (NCUA) board member Michael E. Fryzel visited Lake Michigan CU, Grand Rapids, Mich. “It was a pleasure discussing the success story of
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this outstanding credit union with the officials responsible for its forward movement,” Fryzel said. “They are true to their philosophy of providing financial products and services that bring superior value, security, and convenience to their members.” Lake Michigan CU serves residents in 36 counties in western Michigan. It has 26 branch locations, 67 ATMs, and is Michigan’s largest credit union. “Lake Michigan CU recently was ranked No. 12 in the U.S. in returns to members among credit unions over $1 billion in assets, and for the second year in a row was named one of West Michigan’s ‘Best & Brightest’ companies to work for,” Fryzel added. From left are: Julie Blitchok, senior vice president of retail operations and marketing; Jeremiah Kossen, vice president of operations; Michael Winks, senior vice president of lending; Fryzel; Sandy Jelinski, president/CEO; Bill Schirmer, executive vice president/chief financial officer; and Michael DeFors, vice president of information services at the Michigan Credit Union League. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (10/29/09)--Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) are proposing legislation that would place a 30% withholding tax on income at foreign banks that do not disclose the identity and content of accounts owned by Americans (American Banker Oct. 28). The bill aims to boost an Internal Revenue Service (IRS) program where foreign institutions agree to confirm American depositors’ identities and alert the IRS of earned income in the accounts. President Barack Obama said he supports the bill. Treasury Secretary Tim Geithner said it would narrow tax gaps and create a better tax system. The withholding tax is one of 13 provisions geared to punish tax havens, which could generate $9 billion during the next 10 years. Tax evaders cost the U.S. tens of billions of dollars per year in unpaid taxes, Baucus said ...