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Inside Washington (10/30/2009)

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* WASHINGTON (11/2/09)--Overdraft policies may change the way financial institutions offer free checking programs, according to financial industry observers (American Banker Oct. 30). Legislation proposed last month by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to control overdraft fees may mean that financial institutions will have to find other ways to earn noninterest income. Financial institutions have offered free checking for some time as a way to gather deposits, but the product may have to be retooled. Hank Israel, director of payments and checking at Novantas LLC said financial institutions will still tout the product as free, but it “will become a damaged item. Banking companies could be “pinched,” added Kevin Jacques, former Treasury Department economist. Many banks have become too dependent on noninterest income, he said. The fee changes also could harm proactive banks, noted Robert E. Marling Jr., CEO of Woodforest National Bank. The company has allowed its customers to opt out of overdraft protection and has refunded overdraft fees, he said ... * WASHINGTON (11/2/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said publishing a public list of systemically important financial companies constitutes a moral hazard because once individuals find out their institution is on the list, they’ll think their deposits are protected (American Banker Oct. 30). Frank, who opposes publishing a list, is working on legislation with Treasury Secretary Timothy Geithner that would increase supervision of large financial companies and create a system to help them if they are in trouble. Geithner has said it would be too difficult to keep a “too big to fail” list. Federal Reserve Board Gov. Dan Tarullo agreed, saying that because of some disclosures to analysts and shareholders, it’s likely the institutions would be known. Rep. Spencer Bachus (R-Ala.) said it’s “foolish” to keep the list a secret. Market participants would be able to quickly figure out who is on the list based on regulatory constraints placed on each systemic firm, he said ...

Regulators adopt CRE workout guidance

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WASHINGTON (11/2/09)--The National Credit Union Administration (NCUA), in coordination with the Federal Financial Institutions Examination Council (FFIEC), is adopting a policy statement on commercial real estate (CRE) loan workouts. The statement will help financial institutions, including credit unions, who are working with CRE borrowers who have diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The guidance stresses that performing loans--including those that have been renewed or restructured on reasonable modified terms--made to creditworthy borrowers will not be adversely classified solely because the value of underlying collateral is declined. NCUA does not require credit unions to adopt a uniform regulatory classification schematic of loss, doubtful, substandard or special mention. A credit union should apply an internal loan grade based on its evaluation of credit risk. The guidance also details risk-management practices for loan workouts that support prudent and pragmatic credit and business decision-making within the framework of financial accuracy, transparency, and timely loss recognition. Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers’ financial conditions will not be criticized for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications.

Mica asks president to sign CARD fix

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WASHINGTON (11/2/09)—The Credit Union National Association (CUNA) Friday sent a letter to President Barack Obama encouraging him to sign the CARD Act Technical Corrections Act (H.R. 3606) into law. The bill was approved mid-October by the House and by the Senate late Thursday. The bill corrects section 601 of the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act and declares that a 21-day late-notice rule would apply only to credit cards -- and not open-end credit in general. Mica noted in the CUNA letter that the original bills inadvertent omission stating that the 21-day rule applies only to credit cards has set credit unions “reeling from an unintended consequences.” Under the legislative fix, Mica has noted, “credit unions may continue the practices of sending members consolidated billing statements, changing payment due dates for members who had previously chosen a due date based on their specific financial situation, and continuing bi-weekly payment plans -- all essential tools consumers use to manage their finances in the ways that best suit their needs." “We hope you will agree that a technical correction is appropriate and sign this measure into law,” Mica penned the president.

House approves SBA financing act

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WASHINGTON (11/02/09)--H.R. 3854, the Small Business Financing and Investment Act, passed the House of Representatives by a vote of 389-32 late Thursday. Of particular interest to credit unions are portions of the legislation that would temporarily extend increased Small Business Administration loan guarantees that were enacted in recent Federal stimulus bills. The legislation, as currently written, also increases eligibility for, and loan limits under, the SBA's Microloan program which provides small-scale loans to startup, newly-established, or growing small businesses for working capital or the acquisition of materials, supplies, or equipment. The bill would also establish an SBA program to help finance “early-stage small businesses in specified targeted industries.” The bill will now move on to the Senate. In comments delivered on the House floor, Rep. Nydia M. Velázquez (D-N.Y.) praised the bill as “a bipartisan product” that “addresses a key concern for small firms, and ensures they have the resources to help grow our economy.” Velázquez in her statement also cited portions of the bill that would open “new avenues for seed capital and microloans” for “the aspiring entrepreneur,” provide “fresh funds for investment” for mid-market ventures, and create “room for targeted risk and innovation” for “the established business.” “Through innovation and ingenuity, small businesses have created enormous wealth for our nation. But America’s economic engine doesn’t run on good ideas alone. Small firms need capital to not only get off the ground, but to operate and grow. That’s why H.R. 3854 delivers better funding options to small firms at every stage of development,” Velázquez said.

Sens. Dodd Isakson push homebuyer tax credit extension

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WASHINGTON (11/02/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Johnny Isakson (R-Ga.) have collaborated to extend access to first-time homebuyer tax credits that were set to expire at the end of the month. “Every economist will tell you we have to steady the housing market before the economy will turn around,” Dodd said in a statement, adding that “we can’t afford to let this tax credit expire now.” “We need to be fighting with everything we’ve got.” According to the release, the agreement extends the $8,000 first time Homebuyers Tax Credit and also creates a new $6,500 tax credit for homeowners that purchase a new home between December 1, 2009 and April 30, 2010. The tax credit will be made available to single homebuyers with up to $125,000 in income and joint income tax filers with up to $225,000 in total income, but will not be available for home purchases totaling more than $800,000. The agreement also extends the tax credit to individuals that are in the market for a new home but have owned their current home for five years or longer. Over 70% of existing homeowners will be eligible for the tax credit, according to the statement. The tax credit extension legislation will be attached to an unemployment insurance extension bill that will come up for a Senate vote this week.

Senate fixes 21-day CARD Act problem

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WASHINGTON (10/30/09)—Just two weeks after House members approved H.R. 3606, the CARD Act Technical Corrections Act, by voice vote, their colleagues in the Senate voted by unanimous consent to ratify the bill. Next stop for the measure: The president’s desk to be signed into law. Credit Union National Association President/CEO Dan Mica hailed the House and Senate actions calling the votes “a crucial accomplishment.” The correction to section 601 of the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act declares that a 21-day late-notice rule would apply only to credit cards -- and not open-end credit in general. “Our thanks to the Senate today, and particularly to Majority Leader Harry Reid (D-Nev.), for quickly bringing this vital measure to the floor for action. Credit unions have been absolutely reeling from the unintended consequences of this section of the Credit CARD Act,” Mica said after the Senate vote Thursday. CUNA has worked closely with lawmakers and their staff, Mica noted, warning that the CARD Act, as originally written, was problematic. It would prevent credit unions from granting biweekly payment plans to their members, from sending members consolidated billing statements, and would force them to change payment due dates for members that had previously chosen due dates based on their specific financial circumstance. The situation was particularly knotty for Home Equity Lines of Credit (HELOC) because the due date of a HELOC is often a contractual term. “Once this measure is signed into law credit unions may continue the practices of sending members consolidated billing statements, changing payment due dates for members who had previously chosen a due date based on their specific financial situation, and continuing bi-weekly payment plans -- all essential tools consumers use to manage their finances in the ways that best suit their needs,” Mica noted. The CUNA leader also commended Rep. Peter Welch (D-Vt.) for bringing the original measure to the House floor and thanked state leagues for their support with many key Senate and House leaders.

Regulators testify on financial services oversight

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WASHINGTON (10/30/09)--In testimony delivered before a House Financial Services hearing on Systemic Regulation, Prudential Matters, Resolution Authority and Securitization, U.S. Treasury Secretary Timothy Geithner plainly stated that “the current rules in place for our financial system are inadequate and outdated.” The draft legislation would bring the current regulatory framework “into the 21st century, granting the government carefully constrained power to contain damage to the economy while managing the failure of large, complex financial institutions,” Geithner said, adding that it “represents a comprehensive, coordinated answer to the moral hazard problem posed by our largest, most interconnected financial institutions.” In a statement, Rep. Barney Frank (D-Mass.) said that his draft legislation would seek to “establish federal ‘resolution authority’ which would make it possible to wind down very large, failing firms without using taxpayer funds.” “We are going to reform securitization with some risk retention,” Frank said, adding that the draft legislation would also restrict “irresponsible subprime loans,” would regulate derivatives, and would end the existence of unreported, unregistered large enterprises. In her own prepared testimony, Federal Deposit Insurance Corporation Chairman Sheila Bair cited the need for improved resolution authority, improved supervision and regulation, and a comprehensive financial services oversight council to help “impose greater market discipline on systemically important institutions.” Any new regulatory structure should address “the industry’s excessive leverage, inadequate capital and over-reliance on short-term funding,” Bair said, adding that the structure should also “ensure real corporate separateness” and prevent banks from participating in “risky activities” such as “proprietary and hedge fund trading.” Additionally, the costs of winding down “large, systemically important firms” should not be borne by taxpayers, according to Bair. Rather, she said, “losses should be borne by the stockholders and bondholders of the holding company, and senior management” of failing firms should be replaced. In her testimony, Bair called for the establishment of a Financial Company Resolution Fund “that is pre-funded by levies” on financial firms with at least $10 billion in assets. Federal Reserve Board Governor Daniel Tarullo emphasized the importance of moving forward with the “administrative and legislative reform agenda” discussed during Thursday’s testimony, saying that the reforms, “taken together, will enhance financial stability” and “reduce both the probability and severity of future crises.” However, Rep. Scott Garrett (R-NJ) said he was “struck” by the amount of power given to the Federal Reserve under this draft plan. Garret added that he was “uncomfortable” with the “sweeping, unchecked power” that, under the draft legislation, could be granted to “an entity that failed to effectively regulate many of the large bank holding companies already under its purview.”

CUNA to testify vs. arbitrary overdraft-protection limits

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WASHINGTON (10/30/09)—Although sympathetic with congressional intent to ban abusive practices connected with overdraft protection plans, the Credit Union National Association (CUNA) will testify today that pending bill H.R. 3904 is not the way to go. At a 9:30 a.m. (ET) House Financial Services Committee hearing today, CUNA witness Rodney Staatz will warn that The Overdraft Protection Act of 2009 could well force credit unions to drop courtesy pay programs to the detriment of consumers. Staatz is president/CEO if State Employees Credit Union (SECU) of Maryland. Staatz intends to tell the committee that while credit unions have several concerns with H.R, 3904, primary among them is its proposed limit on the number of overdrafts that can be provided by a credit union to a member. H.R. 3904 prohibits credit unions and other financial institutions from charging more than one overdraft fee per month and no more than six in a calendar year per transaction account. CUNA strongly supports the ability of credit unions to offer overdraft protection plans as a means to help their embers resolve short-term financial problems. Such programs, CUNA maintains, when used appropriately by consumers, serve as a valuable back-up to overdrawing checking accounts or relying on payday lenders or check-cashing businesses, and are fully consistent with the philosophy and principles of the credit union system. Staatz will use credit unions’members stories to illustrate to lawmakers how overdraft protection plans can make a positive difference in peoples lives. Also scheduled to testify are: Jim Blaine, president, North Carolina State Employees CU; Dennis Dollar, Dollar Associates, LLC; Mark A. Colley, president/CEO, Tulsa Postal and Community FCU, on behalf of National Association of Federal Credit Unions; Jean Ann Fox, director of financial services, Consumer Federation of America; Nessa Feddis, vice president and senior counsel, center for regulatory compliance, American Bankers Association; Eric Halperin, director, Washington office, Center for Responsible Lending; Pamela Banks, senior policy counsel, Consumer Union; Richard Hunt, president, Consumer Bankers Association; and, R. Michael S. Menzies, Sr., president/CEO, Easton Bank and Trust, on behalf of Independent Community Bankers Association.

Inside Washington (10/29/2009)

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* WASHINGTON (10/30/09)--The Federal Reserve Bank will likely benefit the most from a bill introduced by House Financial Services Committee Chairman Barney Frank (D-Mass.) that addresses systemic risk. The bill would give the Fed the ability to overrule regulators, break up firms and force undercapitalized companies into involuntary bankruptcy (American Banker Oct. 29). The committee scheduled a hearing for Thursday on the role of the Fed. Banking regulators and Treasury Secretary Timothy Geithner are slated to testify. The Credit Union National Association (CUNA) has said that Frank’s bill will likely not affect credit unions. Credit unions don’t pose a systemic threat to the overall financial system, CUNA said ... * WASHINGTON (10/30/09)--Banks have commented that they would rather pre-pay their assessments over the next few years to boost the Deposit Insurance Fund (DIF) instead of paying another special assessment. The Federal Deposit Insurance Corp. (FDIC) has proposed the prepayment plan to beef up the DIF’s reserves (American Banker Oct. 29). The FDIC’s prepay proposal was released Sept. 29 and banks could comment on the plan until Wednesday. John Lund, chief financial officer of Rockville Bank, said the plan is the “least painful” of all options. Chris Scribner, vice president, Regions Financial Corp., said the prepayment is the “right step at this time.” The plan would allow the industry to be responsible for the DIF balance while minimizing the impact on lending at banks, he wrote in his letter. The American Bankers Association supports the proposal, but warned it would come with a cost, because some banks may not have the liquidity for the request ... * WASHINGTON (10/30/09)--Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair said U.S. financial companies should prepay into a fund that the government could use to help large failed banks. Bair spoke at a House Financial Services Committee hearing Thursday (Bloomberg.com Oct. 29). Congress should create a Financial Company Resolution Fund that would require institutions with more than $10 billion in assets to pay before a firm fails, she said. Investors in the failed companies also should absorb losses, she added. The fund is more beneficial than an ex-post funded system because it allows all large firms, instead of just the survivors, to pay the assessments. It also avoids a pro-cyclical nature of requiring payments after a systemic crisis, she said. House Financial Services Committee Chairman Barney Frank (D-Mass.) and the Treasury agreed on a compromise bill that would recover taxpayers’ costs in helping the failed companies ... * WASHINGTON (10/30/09)--The Federal Reserve Thursday was expected to complete its $300 billion Treasury purchase program while signs prevailed that the seven-month program stabilized the housing market and staved off increases in borrowing costs (Bloomberg.com Oct. 29). The benchmark 10-note, which determines the rates on corporate bonds and mortgages, never moved above 4% after the Fed bought the debt. The rates are less than a half percentage point more than the day before the program was announced in March. The U.S. sold $1.25 trillion in bonds and notes, which is more than double of those sold last year. George Goncalves, chief fixed-income rates strategies in New York at Cantor Fitzgerald LP, said the Fed’s purchases likely kept rates from rising faster in April through June, when 10-year notes were at 4% ...

A second House committee approves CFPA legislation with changes

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WASHINGTON (10/30/09)--The House Energy and Commerce Committee on Thursday approved H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act of 2009, by a recorded vote of 33 to 19. The committee also attached a managers’ amendment, introduced by Rep. Henry Waxman (D-Calif.), which would shift CFPA authority from a single executive to a five-member commission of presidential appointees. The committee also approved a separate amendment that would require the Comptroller General to examine the effects that any regulations issued by the CFPA have had on small businesses. Commenting on the managers’ amendment, House Financial Services Chairman Rep. Barney Frank (D-Mass.) said that these changes would “weaken the capacity of the agency to provide consumer protection.” “The director will have the benefit of an oversight board of bank regulators and consumer groups as well as a diverse advisory board to provide broader input. But that input should be provided without diminishing the capacity to act promptly and effectively which is best done by a single regulator,” Frank added. The CFPA legislation, which passed the House Financial Services Committee last week by a vote of 39-29, would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. The Energy and Commerce Committee oversees the Federal Trade Commission, which, as reported in The Wall Street Journal, would be strengthened by the CFPA legislation and would "craft regulations more quickly" and have a greater ability to "impose civil penalties on companies." Although the goal of consumer protection is a worthy one, Credit Union National Association President/CEO Dan Mica said that he has "significant concerns about the impact that elements of this legislation will have on credit unions and their members." CUNA is working with Frank to modify the bill before it moves on to the full House. To see the managers' amendment in full, use the resource link.

NCUA liquidates Second Baptist Church CU in Calif.

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ALEXANDRIA, Va. (10/30/09)—Former members of Los Angeles-based Second Baptist Church CU will now be served by Rancho Dominguez, Calif.’s Prosperity FCU after the National Credit Union Administration (NCUA) on Thursday announced that it is liquidating the failed credit union, Second Baptist. The NCUA was appointed liquidating agent by the California Department of Financial Institutions earlier in the week. In a separate release, the California Department of Financial Institutions cited “insolvency and failure to obey an order” as reasons for the credit union closure. Prosperity FCU, which currently holds $14.4 million in assets from 2,900 members, will now serve the 340 former members of Second Baptist. Second Baptist is the 12th federally insured credit union to be liquidated in 2009, according to the NCUA. Nevada state regulators closed Las Vegas-based Cumorah CU late last week, and Rantoul, Ill.-based Credit Union 1 has assumed Cumorah's deposits and assets.

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 ...

Inside Washington (10/27/2009)

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* WASHINGTON (10/28/09)—The House Financial Services Committee made the following series of announcements late Tuesday. The committee and U.S. Treasury Department released draft legislation to address the issue of systemic risk and “too big to fail” financial institutions. The draft bill would: Create a monitoring system intended to reduce the threats that systemically risky firms pose to the financial system; establish a process closing large, financially troubled nonbank financial institutions in a way minimizes impact on U.S. taxpayers and the financial system; and overhaul the country’s financial regulatory system. The committee also voted 67-1 in favor of the Private Fund Investment Advisers Registration Act of 2009 (H.R. 3818), a bill to require more financial providers to register with the Securities and Exchange Commission. The committee reconvenes today to continue consideration of the discussion draft of the Accountability and Transparency in Rating Agencies Act and the discussion draft of the Investor Protection Act of 2009… * WASHINGTON (10/28/09)--National Credit Union Administration (NCUA) board member Michael Fryzel visited with Mark E. Easton, deputy chief financial officer for the Department of Defense, and Arty Arteaga, president/CEO of the Defense Credit Union Council, in Washington, D.C. They discussed credit unions’ products and services for military members. “Credit unions located on our military bases and at Department of Defense facilities across the globe, are dedicated to providing financial services to the millions of men and women who serve our country,” Fryzel told the group. Arteaga, Easton and Fryzel also talked about pending congressional actions on credit card issuers, returned checks and consumer protection that would affect credit unions ... * WASHINGTON (10/28/09)--The Missouri Credit Union Association (MCUA) traveled to Washington, D.C., Oct. 21-22 to meet with its federal lawmakers. MCUA Senior Vice President of Public and Legislative Affairs Peggy Nalls, and Vice President Amy McLard followed up on several issues credit unions raised with their lawmakers in August and September. These included the Credit Card Accountability, Responsibility and Disclosures Act; small business lending; the proposed consumer financial protection agency; interchange fees and the Community Reinvestment Act. MCUA met with Rep. Ike Skelton (D); staff of Sens. Christopher Bond (R) and Claire McCaskill (D); U.S. Rep Russ Carnahan (D); U.S. Rep Emanuel Cleaver (D); Rep. Roy Blunt (D) and staffer Brian Diffel; U.S. Rep. Blaine Luetkemeyer (R) and staffer Chris Brown; and staffers from the offices of U.S. Reps. Todd Akin (R), William Clay (D), Jo Ann Emerson (R) and Sam Graves (R). From left are Nalls (left) and Rep. Skelton. (Photo provided by the Missouri Credit Union Association) ... * WASHINGTON (10/28/09)--Regulators are divided on how to boost the Federal Deposit Insurance Corp.’s (FDIC) Deposit Insurance Fund (DIF). During a meeting, FDIC Chairman Sheila Bair said she supported requiring banks to pre-pay three years’ worth of premiums to funnel $45 billion into the fund (American Banker Oct. 27). John Dugan, comptroller of the currency, and John Bowman, acting director of the Office of Thrift Supervision, said it would be better if banks could pay the assessment over time. Jim Marcuccilli, president/CEO of Star Financial Bank, Fort Wayne, Ind., said the DIF should be infused by a credit line from the Treasury. Two other FDIC board members, Marty Gruenberg and Tom Curry, are expected to support the pre-pay assessment plan. Comments on it are due today ... * WASHINGTON (10/28/09)--Critics of the regulatory reform plan that would place power into one agency should be focusing on the Treasury Department instead of the Federal Reserve Board, financial observers say (American Banker Oct. 27). The Treasury could end up overseeing systemic risk, according to several proposals in Congress. Giving the Treasury a bigger role could ignite political concerns, some observers say, but others say giving Treasury a more direct role makes sense. Douglas Elliott, Brookings Institution fellow, says Treasury will always have the authority in a systemic failure because taxpayers will have to back up the failed institution. The Treasury also could have a hand in deciding which systemically risky firms go into receivership. The Obama administration has proposed giving Treasury the authority to appoint an agency to be the receiver for a systemically important institution. However, critics say that would give the Treasury too much authority. Phillip Swagel, former Treasury assistant secretary for economic policy in the Bush administration, says he disagrees with allowing Treasury to spend money without congressional approval ...

CU comments on Fed Card Act rule due soon

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WASHINGTON (10/28/09)--As the Credit Accountability, Responsibility and Disclosure (CARD) Act continues to come under the spotlight on Capitol Hill, it also is the focus of some upcoming regulatory actions. Credit unions have until Nov. 20 to comment on a Federal Reserve Board plan to implement portions of the CARD Act. The proposal addresses provisions of the CARD Act that limit minimum payment warnings to credit cards and prohibit interest rate increases for existing balances and during the first year the account is opened. The Fed has also asked for input on portions of the act that require the consent of consumers before fees can be charged on over-the-limit accounts and require co-signors for cardholders less than 21 years of age, unless they can prove that they can make the minimum payments. In Congress, the compliance date of certain CARD Act provisions could be moved up for some issuers to Dec. 1 by a bill approved by the House Financial Services Committee. An amendment that would exempt depository institutions with under 2 million credit cards in circulation from the expedited effective dates contained in the bill, offered by Rep. Shelley Moore Capito (R-W.V.) and Rep. Brad Sherman (D-Calif.), was added to the legislation via voice vote. Sherman also joined Rep. David Scott (D-Ga.) to offer an amendment to strike from the bill the expedited effective dates for gift cards. This amendment was also added via voice vote. The Senate may also soon take up H.R. 3606, the CARD Act Technical Corrections Act, which, if passed by the Senate and signed into law by the President, would clarify that a 21-day disclosure requirement for late payments applies only to credit card accounts and not to all open-end credit. The Credit Union National Association has also requested comments on the Fed proposal from credit union industry insiders in a recently published comment call. CUNA is accepting comments until November 10, 2009. To see the CUNA comment call, use the resource link.

Dodd rate-freeze bill may move quickly to a vote

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WASHINGTON (10/28/09)--Legislation that would freeze credit card interest rates and fees until the recently-passed Credit Card Accountability, Responsibility and Disclosure (CARD) Act comes into full effect has been fast tracked and could soon be voted on in the Senate. Commenting on S.1927, introduced on Monday, Sen. Chris Dodd (D-Conn.) said that the bill was an effort to combat the practices of credit card companies that “have been jacking up rates in a last ditch effort to squeeze customers before all of the bill’s provisions can take effect.” The legislation would end many of the abuses of credit card companies that are “looking for ways to get around the protections this Congress and the American people demanded” and would “further protect customers today,” Dodd added. The Credit Union National Association is currently analyzing the legislation. "We're taking a look at the bill and talking with our members about the potential impact if would have on their operations," said Ryan Donovan, vice president of legislative affairs. The House Committee recently passed legislation that accelerates the effective date of the CARD Act from Feb. 22 to Dec. 1, and that legislation is awaiting a vote in the full House or Representatives. CUNA worked with legislators to add an amendment that would exempt depository institutions with under 2 million credit cards in circulation from the expedited effective dates contained in the bill. CUNA also supported an amendment that would strike expedited effective dates for gift cards from the bill.

NCUA slates free Nov. 18 MBL webinar

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Alexandria, Va. (10/28/09)—The National Credit Union Administration (NCUA) Tuesday announced a Nov. 18 webinar to outline the regulators’ perspective on member business lending. The 90-minute webinar, starting at 1 p.m. ET, is free and open to the public. The session, the agency said in its announcement, will draw from the diverse expertise at the NCUA Central Office, NCUA Regional Offices and state regulators. It will provide “guidance, best practices and insight into examination of member business lending,” and the session will be interactive with Q-and-A an integral part of the presentation. The agency moderator will be board member Gigi Hyland. NCUA Panelists include:
* Linda Jekel, director of Credit Unions for the state of Washington, Division of Credit Unions; *Erika Eastep, Member Business Lending Program Officer, Office of Examination and Insurance, NCUA; and * Linda Vick, Agricultural and Commercial Lending Specialist, Region IV, NCUA.
A registration link for the webinar will be posted online at www.ncua.gov with the next few days.

30-year mortgage rate drops reports FHFA

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WASHINGTON (10/28/09)—The average interest rate on conventional 30-year, fixed-rate, mortgage loans of $417,000 or less dropped by seven basis points in September, down to 5.23%, the Federal Housing Finance Agency (FHFA) reported yesterday. The rate for shorter-term loans--15-year, fixed-rate loans of $417,000 or less—averaged an increase of 15 basis points, up to 4.77%. In its Monthly Interest Rate Survey for September , the FHFA also reported:
* The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 5.15%, which was down from 5.23% in August; and * The effective interest rate, reflecting the amortization of initial fees and charges, was 5.24%, a decrease of nine basis points from 5.33% the month before;
The average loan-to-price ratio was 74.5%, a slight drop from August when it was 74.6% , and the average loan amount decreased by $9,400 to $212,400 in September. Use the resource link below to read more.

Inside Washington (10/26/2009)

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* WASHINGTON (10/27/09)--Members of the New Jersey Credit Union League (NJCUL) recently hiked Capitol Hill in Washington, D.C., to discuss with their constituents the proposed consumer financial protection agency; the Credit Card Accountability, Responsibility and Disclosures (CARD) Act; and other legislation involving overdrafts, interchange and member business lending. There was a high level of interest in the CARD Act and the effects the law would have on credit unions, according to NJCUL (The Weekly Exchange Oct. 19). “It was clear that Congress is looking for real-world examples of how these laws will affect credit unions and ultimately affect consumers,” said Paul Gentile, league president/CEO. Before hiking the Hill, the group started its day at Credit Union House with a regulatory briefing from the National Credit Union Administration and a legislative briefing with staff at the Credit Union National Association. (Photo provided by the New Jersey Credit Union League) ... * WASHINGTON (10/27/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) could introduce legislation that would affect how the government deals with financial institutions slated to be “too big to fail” (The New York Times Oct. 26). Frank’s bill would make it easier for the government to take over troubled institutions, eliminate management and shareholders, and change the terms of loans held by the institution. Treasury Secretary Timothy Geithner was expected to endorse the changes to the bill during a House Financial Services Committee hearing Tuesday. The Obama administration’s “too big to fail” plan would already make it more expensive to be a large financial company whose failure could endanger the financial system and economy. The companies would be required to keep more money in reserves and would have more difficulty borrowing against their assets ... * WASHINGTON (10/27/09)--The director of the proposed consumer financial protection agency--approved by the House Financial Services Committee last week--would have extensive power. The director would be under advisement from two oversight panels but would not have to follow recommendations. Instead, the director would have the ability to address unfair or deceptive practices. Elizabeth Warren, professor at Harvard University, is perceived by industry observers to be the top candidate for the position. The financial services industry has balked at the agency, saying it could damage the industry. Rep. Barney Frank (D-Mass.), author of the consumer protection agency bill, supports it. During a press conference last week, Frank said a “top-heavy governance structure” could leave a consumer vulnerable without protection ... * WASHINGTON (10/27/09)--Consolidating bank supervisors into one agency would lead to failure, Rep. Barney Frank (D-Mass.) said. He told reporters at a press conference that there is “no remote chance of it happening." The idea of a single regulator has been pushed by Senate Banking Committee Chairman Christopher Dodd (D-Conn.), who plans to make consolidation a part of an upcoming reform bill ...

Congress this week Overdraft on the agenda

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WASHINGTON (10/27/09)--The most noteworthy Washington news for credit unions may not happen until the end of the week as the House Financial Services Committee has scheduled a hearing on H.R. 3904, "The Overdraft Protection Act of 2009," for this Friday. The legislation, introduced by Reps. Carolyn Maloney (D-N.Y.) and Barney Frank (D-Mass.), would, according to www.thomas.gov, “amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions.” The bill 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-Penn.), Daniel Maffei (D-N.Y.), Brad Miller (D-N.C.), Gwen Moore (D-Wisc.), 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 Chair 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 witness list for the hearing at press time. Another issue of interest to credit unions will be discussed on the Senate side on Thursday, with the Senate Judiciary Committee holding a markup session on S.1490, the "Personal Data Privacy and Security Act of 2009"; and S.139, the "Data Breach Notification Act." The House later today will consider H.R. 3854, the Small Business Financing and Investment Act. The Credit Union National Association has touted credit unions' ability to help small businesses in a tightening market through offering business loans to their members. The House will also discuss H.R. 2996, the Interior Appropriations Bill, and begin work on a continuing resolution to fund the government until December 15, 2009. The Senate also began consideration of H.R. 3548, the Unemployment Compensation Extension Act of 2009, on Monday.

CUNA reloads interchange postcard efforts

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WASHINGTON (10/27/09)--The Credit Union National Association's (CUNA) interchange postcard campaign continues apace, and CUNA has ordered 100,000 postcards in addition to the 250,000 already distributed to meet the demands of the grassroots communication effort. The postcards, which feature the iconic credit union little guy pictured on a credit card, have been distributed to natural person credit unions by the state credit union leagues. The postcards are then handed out by employees, such as tellers, to credit union members as they do business at their local branches. CUNA announced that it hoped to have credit union members mail all 250,000 individual postcards to the Senate by the end of November, and, as noted, CUNA has already ordered another 100,000 pieces in response to requests for more from league nationwide. As Christina Mihalik, vice president of governmental affairs of the Pennsylvania CU Association said in her re-order communication to CUNA, "They're going like hot cakes!" Mihalik said Monday, "We appreciate the response and support of all Pennsylvania's credit unions that made contacts electronically or by postcards. The voice of credit unions and consumers--that interchange hurts us all--has been heard loud and clear by Pennsylvania's Congressional delegation." The interchange outreach effort has also resulted in over 60,000 emails being sent to Congressional representatives. CUNA has fiercely opposed merchant proposals that would affect interchange fees. Interchange reflects a merchant's fair share of the costs of the convenient card system and supports everything from re-issuing cards compromised by merchant data breaches to providing a call center to contact if a card is lost or stolen. Credit union leagues have also used CUNA’s Hike the Hill program, the 2009 version of which concludes this week with a visit from the Iowa Credit Union League, to communicate with Congressional representatives on interchange and other issues central to credit union success.

NCUA sends CU Letters on premium assessments signage

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ALEXANDRIA, Va. (10/27/09)--In the first of two letters to credit unions published on Monday, the National Credit Union Administration (NCUA) reminded credit unions, as it did at last month's board meeting also, that an assessment of 0.15% of insured shares will be collected from federally insured credit unions during the fourth quarter. The NCUA has taken this action to aid the National Credit Union Share Insurance Fund's (NCUSIF) as it works to recapture its equity and repay $310 million in funds the Corporate Credit Union Stabilization fund has borrowed from the U.S. Treasury. “Maintaining the NCUSIF at 1.30% will promote confidence in the NCUSIF and give NCUA maximum flexibility to address troubled institutions,” the NCUA added in the letter. “The invoice for the assessment will be sent in the fourth quarter of 2009 with payment due within 30 days of the invoice date,” the letter added. The NCUA has also notified credit unions of a change in its signage requirements. According to the letter, the NCUA has altered its “official insurance sign and official advertising statement” to “permit federally-insured credit unions flexibility in advertising.” To see the NCUA letters, use the resource link.

Data security debate returns

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WASHINGTON (10/27/09)--The data security debate returns to Congress this week as the Senate Judiciary Committee has scheduled for Thursday a markup session on S.1490, the "Personal Data Privacy and Security Act of 2009"; and S.139, the "Data Breach Notification Act." S. 1490, introduced by Sen. Patrick Leahy (D-Vt.) earlier this year, would “prevent and mitigate identity theft, to ensure privacy, to provide notice of security breaches, and to enhance criminal penalties, law enforcement assistance, and other protections against security breaches, fraudulent access, and misuse of personally identifiable information.” S. 139, introduced by Sen. Diane Feinstein (D-Calif.), would “require Federal agencies, and persons engaged in interstate commerce, in possession of data containing sensitive personally identifiable information, to disclose any breach of such information.” Similar legislation has been active in the House, with H.R. 2221, the Data Accountability and Trust Act, which would require businesses to notify affected customers when outside parties gain access to sensitive information due to a security breach, passing the House Energy and Commerce Committee by voice vote earlier this month. Credit Union National Association (CUNA) President/CEO Dan Mica commented at the time that while entities that have experienced data breaches in recent years may not have the necessary contact information to reach the individuals whose accounts may have been compromised, the financial institutions of affected accountholders do. CUNA supports allowing financial institutions to charge retailers for any costs incurred by the financial institution that is forced to notify its accountholders following a data breach. Data security has long been a hot topic on the Hill, and several data security bills worked their way through the House and Senate in 2005, 2006 and 2007, although lawmakers never completed debate on the issue, and legislation remains pending. However, data security is still an increasingly important issue, and TJX Cos. was at the center of 2007 data breach that resulted in an $8 million gift card and electronic goods scam that used credit card data stolen from the retailer. Also, Heartland Payment Systems announced earlier this year that millions of credit card accounts from credit unions nationwide may have been compromised following a data breach. Visa and MasterCard also fell victim to a less serious data breach earlier this year.

NCUA takes over 5 million-asset First Delta FCU

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ALEXANDRIA, Va. (10/26/09)—A need to correct “previous service and operational weaknesses” of First Delta FCU, Marks, Miss. moved the National Credit Union Administration (NCUA) to assume control of the $5 million-asset credit union Friday, according to a release from the agency. The NCUA noted that the credit union remains open and operating to serve its 5,500 members. First Delta provides full financial services to people residing in Quitman, Panola, Tallahatchie and Coahoma counties. The NCUA’s goal in placing the institution into conservatorship is to “continue credit union service to the members and ensure safe and sound credit union operations.” At the NCUA open board meeting last Thursday, CFO Mary Ann Woodson noted that, as of the end of September, there had been 21 credit union failures in 2009 compared to 18 for all of 2008. In a comparative number for banks, the Federal Deposit Insurance Corp. announced seven more bank failures late Friday, which tipped the number of failed banks to 106. All considered small banks, the smallest of the failed banks had $327.4 million in assets. The FDIC found banks to purchase and assume all the assets of the failed institutions.

CUNA completes 1st Minn.-based campaign school

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WASHINGTON (10/26/09)--Representatives from the Credit Union National Association (CUNA) this week completed another successful campaign school event, holding the latest in the series of educational sessions for over a dozen credit union professionals and volunteers in St. Paul, Minn. Attendees of the campaign school, the first held in the state, included local political aspirants such as a current city councilman and a Water and Soil Conservation District Supervisor. CUNA Political Director Trey Hawkins said that “one way credit unions can become more effective is to elect public officials who have a background in the credit union movement.” The need for legislators that understand the challenges faced by credit unions is made all the more important by the number of issues faced by credit unions at this time, including potential changes to interchange fees, the compliance burdens represented by the CARD Act, and potential changes to overdraft fee regulations. CUNA’s Senior Vice President of Political Affairs Richard Gose, who led much of the discussion at the campaign school, praised Minnesota credit unions for their “dedicated involvement in politics.” Attendees also heard behind the scenes stories from the candidacy process from Minnesota State Senator Chris Gerlach and State Representative Steve Simon. The campaign school was co-hosted by the Minnesota Credit Union Network (MnCUN). Successful graduates of previous campaign schools have gone on to win positions in West Virginia, Nevada, and Iowa. CUNA’s campaign schools are part of a continued effort to promote political involvement among credit union professionals and volunteers, and CUNA has currently scheduled a minimum of seven additional campaign schools in states throughout the nation during the 2009-2010 election cycle. CUNA also offers online courses for credit union representatives that are interested in political advocacy. Mara Humphrey, MnCUN Vice President-Governmental Affairs, echoed those sentiments in a press release, saying that “Minnesota credit unions’ increased involvement in politics has demonstrated that credit unions can have a significant impact on politics and can be prominent players in the election process.” “Through this Campaign School and our other political programs and activities, we are raising the political profile of Minnesota credit unions. Elected officials regularly turn to credit unions for support and viewing us as go-to resources for information on issues important to our movement,” she added.

Interchange changes would carry steep price for consumers CU CEO warns

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WASHINGTON (10/26/09)--NARFE Premier FCU President/CEO Anthony Walker has warned that “cardholders would pay a steep price” if merchants succeed in getting Congress to alter the current interchange fee structure. In a viewpoint published in American Banker, Walker, who leads the Alexandria, Virginia-based, $123-million-in-assets, 10,000-member credit union, said that while merchants claim that they are looking to protect consumers and offer them lower prices on items that they purchase from retailers, “what it's really about is protecting their profits and shifting costs to the general consumer.” While Merchant representatives that recently testified before the House Financial Services Committee said that their constituents would give back to consumers “in different ways, depending on things like costs, competition and their own economics,” Walker focused on one potential perk that the Merchants Payment Coalition reps promised for purchasers: “free gift wrapping.” Walker also detailed the “huge benefits” that merchants receive due to their acceptance of credit and debit cards, saying that they are able to “outsource their credit risk to financial institutions who issue those cards and are left ‘holding the bag’ if a customer doesn't pay their bill” at a price of “less than 2 cents on a dollar.” “Merchants get protection from fraud and theft, guaranteed payment, efficient record keeping and faster checkout,” and also benefit from “higher sales” since “consumers aren't constrained by the amount of cash they have in their wallet” when they make purchases, he added. Saying that interchange reflects a merchant's fair share of the costs of the convenient card system, the Credit Union National Association has fiercely opposed any merchant-proposed changes to the current interchange fee regime, and has launched its own interchange grassroots advocacy campaign which will advocate credit union views on interchange through thousands of postcards to Senators in Washington.

House committee schedules Friday hearing on overdraft bill

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WASHINGTON (10/26/09)--While legislation related to the CFPA and the CARD Act both passed through the House Financial Services Committee last week, there is still work to be done, and the path toward financial regulatory reform will march on when the full Committee holds a Friday morning hearing on The Overdraft Protection Act of 2009. Sen. Christopher Dodd (D-Conn.) has introduced overdraft legislation on the Senate side as well. Dodd’s bill, S. 1799, The FAIR Overdraft Coverage Act, would limit the fees that financial institutions can charge on overdraft protection services. House Financial Services Chair Rep. Barney Frank (D-Mass.) has also indicated that the CFPA could itself create new overdraft rules. The Federal Reserve Board is also drafting new rules on overdraft protection plans, and some in Congress, including Dodd, have expressed frustration with the regulators' efforts. A full Committee hearing on Systemic Regulation, Prudential Matters, Resolution Authority and Securitization is scheduled for Thursday morning. The Committee has not yet provided witness lists for either of these hearings. Financial Services Committee markups will take place earlier in the week, with debate on discussion drafts of H.R. 3818, the Private Fund Investment Advisers Registration Act of 2009, H.R. 3817, the Investor Protection Act of 2009, and the Accountability and Transparency in Rating Agencies Act set to take place on Tuesday morning. The Committee will also discuss a substitute amendment to H.R. 2609, the Federal Insurance Office Act of 2009, during this time.

Compliance Challenge Overdraft fee notification

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WASHINGTON (10/26/09)--In this month’s Compliance Challenge, the Credit Union National Association (CUNA) reminds credit union compliance managers that Federal regulations do not currently require credit unions to send a notice each time that courtesy pay fees or overdraft fees are charged to member accounts. “It is just considered a best practice to do so,” CUNA said. Citing the National Credit Union Administration’s (NCUA) recently issued Legal Opinion Letter No. 09-0608 regarding the Mailing of Insufficient Funds (NSF) / Overdraft Notices to Members, CUNA said that federal credit unions are not required to send a notice each time an NSF or overdraft occurs. However, CUNA added, the NCUA’s Truth in Savings rule does require credit unions to disclose any NSF and overdraft fees that are debited from a member’s account on that member’s periodic financial statement. The fees should also be itemized by fee type and dollar amount, according to the letter. The NCUA has also provided additional guidance on interagency best practices which recommends that federal credit unions promptly notify their members of any overdraft fees. However, this is only guidance and is not an actual regulatory requirement that is enforced by the NCUA. To see the full compliance challenge, use the resource link.

Inside Washington (10/23/2009)

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* WASHINGTON (10/26/09)--The success of the Federal Reserve Board’s proposed plan to govern executive compensation will depend on whether it changes the way bankers are paid (American Banker Oct. 23). The plan will change compensation only if it is coupled with a “say-on-pay” proposal to prevent risky compensation practices, said Cornelius Hurley, a former Fed lawyer. However, shareholders have not been a part of the discussion about executive compensation. The Obama administration has proposed giving shareholders a nonbinding vote on compensation, but the provision was not included in the Fed’s proposal. The proposal comes as Kenneth Feinberg, the Treasury Department’s “pay czar” introduced pay standards that would cut the salaries of the 25 highest-paid executives at Citigroup and Bank of America ... * WASHINGTON (10/26/09)--The Treasury Department will begin slowing the Troubled Asset Relief Program (TARP) and improving its focus on homeowners and small businesses, Herb Allison, Treasury assistant secretary for financial stability, told the Congressional Oversight Panel Thursday. Elizabeth Warren, panel head, said she was concerned about the financial markets because “many of the factors that caused the crisis remain in place” (American Banker Oct. 23). However, she said she was encouraged that Treasury plans to wind down TARP. Allison said the department would wind down the Capital Purchase Program and other key programs at the end of the year. Allison also noted that banks will repay another $50 billion to the TARP fund during the next year. The Treasury has already received more than $70 billion in principal repayments and $6.5 billion in other interest and fees from TARP participants ... * WASHINGTON (10/26/09)--The Federal Reserve may not lose credit on the emergency programs it used to fight the financial crisis, according to William Dudley, Federal Reserve Bank of New York president (Reuters Oct. 22). Dudley spoke at the Federal Reserve Bank of Boston’s annual conference. The Fed’s emergency facilities are naturally slowing, and the exit of some of the liquidity facilities is “going well,” Dudley said. Fed Vice Chair Donald Kohn echoed Dudley’s sentiments, saying that the liquidity facilities are “in the process of winding down without losses.” The Fed also is not likely to suffer losses when it sells the mortgage-backed securities it acquired during the crisis ...

Mica urges president Let CUs continue to help small businesses

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WASHINGTON (10/23/09)—Credit union small business members are turning to their credit unions for loans because they cannot find credit elsewhere, including at banks, Credit Union National Association (CUNA) President/CEO Dan Mica wrote to President Barack Obama Thursday. Mica offered CUNA’s wholehearted support of small business initiatives announced by the president on Wednesday, which included increased loan limits for key Small Business Administration (SBA) programs. Mica volunteered CUNA to work with the U.S. Treasury Department, SBA and U.S. Congress to “achieve higher limits for key SBA programs, such as 7(a) and 504 programs today.” In his letter, Mica underscored to Obama that credit unions have continued to support the credit needs of their communities during the country’s economic crisis and noted that credit union member business lending (MBL) activity grew by 14% for the 12-month period ending in June. “However,” Mica urged the president, “this growth cannot continue because of the statutory cap on credit unions' aggregate MBLs. Credit unions have a ceiling on the amount of member business loans they can make -- 12.25% of total assets -- despite very low MBL loss rates. We estimate that if the cap is eased, approximately $10 billion could be provided in new small business loans.” Mica urged administration and congressional support for H.R. 3380, the Promoting Lending to America's Small Businesses Act, to increase the MBL cap to 25% of a credit union's total assets. It also would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. The Mica letter was also sent to the attention of U.S. Treasury Secretary Timothy Geithner, SBA Administrator Karen Mills, National Credit Union Administration Chairman Debbie Matz and U.S. Treasury Assistant Secretary for Financial Institutions Michael Barr.

Corp CUs alt capital are stars of NCUA town hall

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WASHINGTON (10/23/09)—The much-anticipated new rules for corporate credit unions could be considered the star of the National Credit Union Administration’s (NCUA’s) virtual town hall meeting Thursday, but the subject of alternative capital also got important attention. During an extensive Q-and-A period, NCUA Chairman Debbie Matz was asked for NCUA's reaction to a recent joint proposal submitted by the Credit Union National Association and the National Association of Federal Credit Unions on alternative capital. Matz responded that the agency is aware of the trade groups’ joint proposal. She added that current alternative capital rules come from a statutory requirement and is not something the NCUA can change without new statutory authority. Matz added that the board currently has not taken a position, but that it is her own view that there are some credit unions that would benefit from alternative capital. She warned that a change in alternative capital rules would not be a "magic bullet" and would not save all credit unions from troubles and, she added, the NCUA would not permit problem Code 4 or 5 credit unions to offer such capital to their members. Matz also opined that alternative capital must preserve the cooperative nature of credit unions and members and it must be transparent that these accounts are not insured. The chairman added that NCUA has not been asked by U.S. Congress for its position on the subject, but would respond when asked. In a separate development, Matz was quoted Wednesday by Bloomberg.com in a reaction to President Obama’s initiatives to promote credit availability for small businesses. She noted that credit unions that qualify as community development financial institutions (CDFIs), named in the administration plan, are the only credit unions currently allowed to receive outside capital. CDFIs serve low-income communities. She said, that Congress and the Obama administration "should consider whether to change the law so that other credit unions could receive outside funds." When opening the NCUA’s town hall meeting, Matz noted that more than 800 interested parties had tuned in for the session. Matz affirmed that a proposed final rule on the agency’s comprehensive revamping of the regulations governing corporate credit unions will be issued at the Nov. 19 open board meeting. The rule, NCUA General Counsel Bob Fenner reiterated, will have four key component parts. They are: capital, investments, governance and asset/liability management. Fenner assured listeners that the rule will include phase-ins and delayed effective dates “as appropriate.” There likely will be a 90-day comment period for the proposed final rule. The interim final rule generated more than 500 comments. The virtual town hall meeting followed the agency’s open board meeting which addressed insurance topics and approved a community charter conversion. (See related story: NCUA ratifies NCUSIF cap increase, community CU conversion.) For more on the NCUA’s corporate credit union rule, use the resource link below.

Inside Washington (10/22/2009)

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* WASHINGTON (10/23/09)--Speaking to the Exchequer Club in Washington Wednesday, Federal Reserve Board Gov. Daniel Tarullo discussed several ways to contain the problem that several of the nation’s largest banks are considered “too big to fail.” He suggested Congress create a special resolution procedure for systemically important firms, requiring large firms to have specified forms of contingent capital, and improve disclosure requirements for financial institutions. He also recognized that even if the measures are implemented, the “too big to fail” problem may still be tough to contain. Other alternatives he noted included “reversing the 30-year trend that allowed progressively more financial activities within commercial banks and more affiliations with non-bank financial firms. The idea is presumably to insulate insured depository institutions from trading or other capital market activities that are thought riskier than traditional lending functions,” Tarullo said. “Another approach would be to attack the bigness problem head-on by limiting the size or interconnectedness of financial institutions. Some observers have even suggested that existing large firms should be split up into smaller, not-too-big-to-fail entities.” But even without “too big to fail” problems, financial instability can still occur, he added ...

Expedited CARD Act moves forward with CU amendments

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WASHINGTON (10/23/09)--The House Financial Services Committee on Thursday approved H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. This legislation would move all of the outstanding effective dates in the Credit CARD Act to Dec. 1. An amendment that would exempt depository institutions with under 2 million credit cards in circulation from the expedited effective dates contained in the bill, offered by Rep. Shelley Moore Capito (R-W.V.) and Rep. Brad Sherman (D-Calif.), was added to the legislation via voice vote. Sherman also joined Rep. David Scott (D-Ga.) to offer an amendment to strike from the bill the expedited effective dates for gift cards. This amendment was also added via voice vote. The Credit Union National Association has supported both of these amendments and worked closely with these offices on the amendments. CUNA in a letter to committee Chairman Barney Frank (D-Mass.) and ranking Republican Spencer Bachus (R-Ala.) further praised the Capito/Sherman amendment, saying that it “recognizes the burden” that the expedited effective dates provided by H.R. 3639 would have on small issuers. “Many steps need to be taken before credit unions and others will be able to comply” with the CARD Act in “any orderly fashion,” CUNA President/CEO Dan Mica said, adding that “while the three month period between December and February is a relatively short period of time, it is a critical period of time for credit unions to take these necessary steps.” Federal Reserve Board Chairman Ben Bernanke has also presented the Fed’s views on H.R. 3639, saying that while he could not predict how the accelerated CARD Act effective date would affect interest rates and availability of credit to consumers, the new date “would mean that consumers would receive important benefits and protections earlier.” Responding to a series of questions from Bachus, Bernanke added that the Fed would “issue final regulations without waiting for comments” if the new, accelerated compliance date of Dec. 1 prevented them from receiving industry comments in a timely fashion. The Fed may also have to implement portions of the CARD Act governing fees and disclosures for gift and other prepaid cards, credit card penalty fees, and rate increases without advance public comment if the effective dates of those provisions are moved forward to Dec. 1. Both large and small creditors “must make extensive changes to their systems and business models” to comply with the CARD Act, and Bernanke said that the amount of time needed to comply with the act “may vary by creditor and provision.”

NCUA ratifies higher NCUSIF cap oks community CU conversion

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ALEXANDRIA, Va. (10/23/09)--The National Credit Union Administration (NCUA) as expected has approved a final rule that will increase the National Credit Union Share Insurance Fund (NCUSIF) coverage for members of credit unions to $250,000 through 2013. Approval of this rule puts the amount of member funds that are insured by the NCUA on par with the amount covered by the Federal Deposit Insurance Corporation. The NCUA also approved final versions of interim measures that increased overage for revocable trust accounts and mortgage servicing accounts. NCUA staff indicated during the meeting that the small number of public comments received and the lack of public opposition to the interim version of the rule indicated that the time had come to make the interim rule final.
Click to view larger image NCUA Chairman Debbie Matz displays the 10 1b. document associated with the community charter conversion being considered by the agency at the Thurday open meeting. In December the agency will vote on a final rule to streamline the conversion process.(CUNA Photo)
NCUA Chairman Debbie Matz complimented the rule as a “pro-consumer” application of regulations, and urged NCUA staff to look for other instances where regulations can be improved for the benefit of credit union members. The board also approved the Kansas State Supervisory Authority’s request for an exemption from Section 712.3(d)(3) of NCUA's Rules and Regulations, which dictates that an federal credit union that intends to lend to or invest in a credit union service organization (CUSO) must confirm that the CUSO will grant the NCUA and other regulatory authorities access to its records and internal controls before that federal credit union invests in or lends to the CUSO. However, Matz expressed some reservations that allowing state supervisors to take advantage of this exemption for the first time could create a precedent.
Click to view larger image The NCUA board listens to staff attorney Frank Kressman's presentation on a final revocable trust account rule, which, in part, eliminates the concept of "qualifying beneficiary." (CUNA Photo)
US #1364 Federal Credit Union’s request to convert to a community charter that would cover “persons who live, work, worship, or attend school in, and businesses and other legal entities located in Lake or Porter Counties in Indiana” was also approved by the Board during the meeting. Matz spoke in support of the conversion, saying that allowing the credit union to switch charters would strengthen the credit union’s financial condition while also helping the community. However, NCUA Board Member Michael Fryzel told News Now that the NCUA would monitor the progress of the credit union's conversion over the next year and would encourage them to go back and follow up on their conversion plan if the credit union has not increased its activity within the economically depressed city of Gary, Indiana, which lies in Lake County, Indiana. Matz also said that members of the credit union community can expect a proposed rule streamlining the community credit union charter process at the NCUA’s December board meeting. Turning to the NCUA’s statistics on the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and NCUSIF, NCUA Chief Financial Officer Mary Ann Woodson reported that the 21 credit union failures that have taken place as of last month have resulted in nearly $95 million in losses to the NCUA’s insurance fund. Woodson also reported a total increase of 55 CAMEL Code 4/5 problem credit unions from the amount reported one year ago, and debuted a new slide comparing the total shares of CAMEL Code 3 troubled credit unions. Also of interest, the NCUA board did not, as intended, address the issue of NCUSIF cost estimates for natural person credit unions for 2010. It is now anticipated that the board will consider this at its November 19th meeting.

House Fin. Svcs. Comm. approves CFPA Act

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WASHINGTON (10/23/09)--The Obama Administration’s proposed Consumer Financial Protection Agency came one step closer to creation on Thursday when the House Financial Services Committee approved H.R. 3126, the Consumer Financial Protection Agency Act, by a vote of 39-29. While the Credit Union National Association (CUNA) has acknowledged the need for greater consumer protections, CUNA President/CEO Dan Mica said that he has “significant concerns about the impact that elements of this legislation will have on credit unions and their members.” Several amendments to the legislation were offered, with one that 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 drawing the interest of CUNA. CUNA indicated that it would not support the CFPA legislation if this amendment remained attached to the bill, and Mica and league president Daniel Egan met late last week with Committee Chairman Barney Frank (D-Mass.) to discuss the issue. Following the meeting, Mica said that Frank "indicated a willingness to work with us to see if we can find a mutually agreeable solution before the bill goes to the floor for a House vote." CUNA has also advocated that the tasks of examination and enforcement regarding credit unions must remain in the hands of the National Credit Union Administration. The CFPA legislation would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools.

CUNA CU MBLs could help Obama small biz plan

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WASHINGTON (10/22/09)—The Credit Union National Association (CUNA) will urge President Barack Obama to include increased member business lending (MBL) for credit unions as part of his just-launched initiatives to help small businesses. Obama, along with U.S. Treasury Secretary Timothy Geithner and U.S. Small Business Administrator Karen Mills, announced a series of measures Wednesday intended to get more credit to the country’s small businesses. The efforts included such things as seeking legislation to increase maximum SBA loan sizes and increased support of community bank lending through the administration’s Financial Stability Plan. CUNA President/CEO Dan Mica intends to contact the administration about credit union member business lending. CUNA notes that while much of Obama announcement’s focus was on community banks, data shows growth in business lending at those banks is almost imperceptible and actually has declined at all banks by over 8%. However, CUNA underscores, credit unions have a very different record on small business lending through their MBL programs. MBLs grew by 14% for the 12-month period ending in June of this year as small business members turn to their credit unions because they cannot find credit elsewhere, including at banks. Mica intends to note the 12.25% of statutory cap on credit unions' aggregate MBLs exists despite their low loss rates. CUNA estimates that if the cap were eased, approximately $10 billion could be provided in new small business loans. On July 29, Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) introduced H.R. 3380, the Promoting Lending to America’s Small Businesses Act, to increase the MBL cap to 25% of a credit union’s total assets. It also would raise the “de minimis” threshold for a loan to be considered a “member business loan” to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. CUNA believes the administration and Congress should support a legislative fix to the MBL cap as an important step to ensure credit is available to small businesses, which will promote economic recovery.

Inside Washington (10/21/2009)

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* WASHINGTON (10/22/09)--The Obama administration is planning to order companies that received the most aid from government bailouts to significantly decrease the compensation of their highest-paid executives. The plan is expected to be announced by the Treasury within the next few days (The New York Times Oct. 21). The seven companies receiving bailout funds--including Citigroup, Bank of America, American International Group, General Motors, Chrysler, and funding arms of the two auto companies--will have to cut cash payouts to their 25 best-paid executives by about 90% compared with last year. The cash the executives would have received will be replaced with stock that they won’t be able to sell immediately. Total executive compensation will drop by about 50% ... * WASHINGTON (10/22/09)--The Federal Deposit Insurance Corp. (FDIC) plans to let its debt guarantee program expire at the end of October, said FDIC Chairman Sheila Bair at a board meeting Tuesday (American Banker Oct. 21). A six-month extension is available for banks that participated in the program. They can apply for permission to issue the debt until April 30 by proving they can’t issue non-guaranteed unsubordinated debt in the marketplace and that they are viable. About 4,464 institutions participated in the program ... * WASHINGTON (10/22/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) supported extending a first-time homebuyer tax credit that will expire next month (American Banker Oct. 21). Dodd was joined by Sen. Johnny Isakson (R-Ga.) in support. Both testified at a hearing Tuesday on the credit, which provides first-time homebuyers with $8,000. Dodd said “we still need to use every tool at our disposal” to fix the problem of the housing crisis, and that reducing foreclosures needs to be part of the effort. The tax credit can be maximized only if it works with a program to protect struggling homeowners from foreclosure, he added ... * WASHINGTON (10/22/09)--Two banking groups oppose consolidating bank regulatory agencies into one (American Banker Oct. 21). The Independent Community Bankers of America and the American Bankers Association sent letters to Senate and House banking committee leaders, saying consolidation would undermine the dual banking system. The Senate Banking Committee has discussed creating a single regulator. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said he is working on a bill that would create a single financial regulator. The consolidation, however, would not apply to credit unions (News Now Oct. 1) ...

Committee acts on CFPA amendments vote expected today

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WASHINGTON (10/22/09)--The House Financial Services Committee on Wednesday continued debate on H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act, following a number of voice votes on amendments that were discussed earlier in the week. A final vote on the bill is expected today. An amendment that would have allowed prudential regulators to veto CFPA regulations that threaten the safety and soundness of the financial institutions that they oversee, which was offered by Reps. Ed Royce (R-Calif.) and Jeb Hensarling (R-Texas), failed by voice vote on Tuesday. Hensarling also offered amendments that would prohibit the CFPA from banning certain types of financial products and would suspend the authority of the CFPA to prescribe regulations if the unemployment rate in the United States is greater than 8%, but these amendments also failed by voice vote on Tuesday. An amendment that would require so-called “financial autopsies” of foreclosures and bankruptcies, identifying the underlying causes of the financial issues and identifying whether or not specific financial products or services appear to have caused a substantial number of the bankruptcies or foreclosures, was also offered by Reps. Alan Grayson (D-Fla.), William Macy Clay (D-Mo.), Brad Miller (D-N.C.) and Jackie Speier (D-Calif.). The Credit Union National Association is also monitoring an amendment, offered by Rep. Gwen Moore (WI), that would eliminate the explicit mention of credit insurance as a product that can be regulated by the CFPA.

Health care amendment could help small CUs

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WASHINGTON (10/22/09)--Small federally and state-chartered credit unions may become eligible to receive small business health care tax credits under S. 1796, America's Healthy Future Act, health care reform legislation recently approved by the Senate Finance Committee. These tax credits are designed to aid small businesses in offsetting the cost of providing health insurance for their employees. For tax-exempt small employers, like credit unions, the tax credits could be used to decrease the amount of payroll taxes the employer pays to the IRS. As originally constructed, the bill did not extend the same tax credits or other assistance to small tax-exempt employers that were offered to small for-profit businesses that provide healthcare insurance to their employees. Credit Union National Association (CUNA) President/CEO Dan Mica, in a letter sent to Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican Charles Grassley of Iowa, called for equal benefits for all small employers to provide health care coverage for their employees, saying that “employer parity and basic fairness must prevail and the bill’s incentives should apply to all small employers.” However, CUNA has not taken a position on any other aspects of the health care reform debate, and is not actively engaging in other related issues. Under the amended legislation, the tax credit would be a portion of the healthcare premiums paid by a small employer and would vary according to the number of employees and their average salaries. Full tax credits would be granted to employers with fewer than 10 employees and with average annual salaries of under $20,000, while partial tax credits would be granted to employers with between 10 and 25 employees and with average annual salaries between $20,000 and $40,000. The credits, which would amount to as much as 2 5% for non-profits with employer-paid healthcare premiums, would only be available during the 2011 and 2012 tax years. A maximum credit of 35% of employer health care premiums paid would be granted to tax-exempt employers after 2012 if they participate in the bill's healthcare insurance "state exchanges". While the amended bill offers small nonprofit employers a smaller credit than that offered to for-profit employers, CUNA Senior Legislative Representative John Hildreth said the legislation represents “ a starting point in further discussions on this specific issue with lawmakers in both the House and Senate who are currently writing healthcare reform legislation".

Senate close to vote on CARD Act fix

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WASHINGTON (10/22/09)—Just a week after House members approved H.R. 3606, the CARD Act Technical Corrections Act, by voice vote, their colleagues in the Senate appear poised to take up that bill. After the House vote, Credit Union National Association (CUNA) President/CEO Dan Mica urged quick Senate action, saying it was needed urgently to “save credit unions and their consumer members both money and peace of mind." CUNA, the leagues, and credit unions have worked closely for weeks with lawmakers and their staffs to explain credit union concerns about a 21-day late notice requirement found in section 601 of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. H.R. 3606, if passed by the Senate and signed into law by the President, will clarify that the 21-day applies only to credit card accounts and not to all open-end credit. CUNA has warned lawmakers that the CARD Act, as currently written, would prevent credit unions from granting biweekly payment plans to their members, from sending members consolidated billing statements, and would force them to change payment due dates for members that had previously chosen due dates based on their specific financial circumstance. The situation is particularly problematic for Home Equity Lines of Credit (HELOC) because the due date of a HELOC is often a contractual term. CUNA has maintained that the 21-day provision was originally intended to cover only credit card accounts and was inadvertently changed during the legislative process. A Senate vote H.R. 3606 could come this week.

CUNA economic update A look at corporates

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WASHINGTON (10/21/09)—Within an extensive economic update and outlook on credit unions presented this week at the American Institute of Certified Public Accountants Conference on Credit Unions in Chicago, Bill Hampel shared his insights on the corporate credit union situation. Hampel is chief economist of the Credit Union National Association. First, Hampel said, significant losses in the Western Corporate CU and U.S. Central Corporate CU portfolios will occur over the next one to five years. However, the actual amount of those losses, Hampel noted, depends on the future course of interest rates, the economy, housing markets, and housing finance. Because of this, the rate and depth of future losses are “unknown, and unknowable.” Hampel noted that GAAP, or Generally Accepted Accounting Principles, unfortunately require a single number representing loss estimates for financial statement purposes. Because there is no way to have any confidence about what that number is, GAAP is a misleading way to deal with the situation. On the economy, Hampel noted that the nation’s general economic trends that will affect credit unions in the near term, and said that the country’s freefall has ended and predicted a return to modest growth. However, the bad news in unemployment figures is not over, Hampel said, anticipating that the unemployment rate will continue to “drift up.” In this context, credit unions can expect continued strength in savings growth and weak loan demand. High loan losses will continue to place downward pressure on earnings. Overall, he added, although the worst is behind us, for the near term credit unions are facing a “fragile low-growth economy.”

Corporate CU sues U.S. Central over excess capital

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WASHINGTON (10/21/09)--In legal documents filed late last week, Wisconsin-based Corporate Central CU is seeking the reimbursement of $6 million in excess investments from U.S. Central FCU. In the court complaint, which was filed in U.S. District Court for the Eastern District of Wisconsin, Corporate Central claims that a late 2008 change in U.S. Central’s bylaws prevented Corporate Central from receiving $6 million in funds via a Membership Capital Share (MCS) refund. This change involved an alteration to policies governing the recalculation of required MCS balances to create an “adjustment refusal policy” that would prohibit MCS refunds to U.S. Central members, even in the event that a member was entitled to a MCS refund based on its investment and loan levels. U.S. Central’s previous policy required member credit unions to maintain MCS and other capital equal to at least 5% of their total investments in U.S. Central and associated loans from U.S. Central. This percentage was recalculated every six months, and members could reportedly receive refunds of excess MCS if their total investments and loans with U.S. Central had decreased. The complaint alleges that the bylaw change was invalid because some U.S. Central board members, who are not specifically named in the complaint, should have allegedly recused themselves from voting on the bylaw change. According to the complaint, the voted on policy represented “a pecuniary benefit” to some U.S. Central board members whose institutions would not have received a refund of MCS at that time because it “eliminated or reduced the amount of capital they would have been required to contribute in the absence of the Adjustment-Refusal Policy.” Additionally, Corporate Central has alleged that the National Credit Union Administration violated equal protection of rights under the U.S. Constitution by allowing the adjustment refusal policy adopted by U.S. Central to continue once the NCUA became U.S. Central's conservator. U.S. Central did not notify Corporate Central of the policy change until Dec. 22, 2008, according to the complaint. Corporate Central held just over $1.3 billion in both direct and indirect investments in U.S. Central as of Dec. 31, 2008. The causes of action named in the complaint are conversion, breach of contract, violation of bylaws, violation of equal protection of rights, and declaration of rights. NCUA Director of Public and Congressional Affairs John McKechnie said that the agency is reviewing the complaint and does not comment on pending litigation.

Matz encourages CUs to use new CDFI ed. program

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ALEXANDRIA, Va. (10/21/09)--National Credit Union Administration (NCUA) Chairman Debbie Matz on Tuesday welcomed the launch of the U.S. Treasury's Community Development Financial Institutions (CDFI) Fund’s Financial Education and Counseling (FEC) Pilot Program as “another avenue for credit unions to explore as they seek new resources to benefit their members.” According to the CDFI Fund, the goal of the FEC program is “to identify successful methods resulting in positive behavioral change for financial empowerment, and to establish program models for organizations to carry out effective financial education and counseling services to prospective homebuyers.” The CDFI Fund will award funds to organizations that provide financial education services to potential homebuyers. The CDFI Fund on its Web site said that those educational services may be activities that increase the financial knowledge and decision-making capabilities of homebuyers and assist them in developing budgets, increasing their savings, reducing their debt, financing or planning for major purchases, and generally improving financial stability. The CDFI Fund was given $2 million for the implementation of this program in March of this year. Commenting on the FEC Program, Matz said that “financial education is a natural service for credit unions,” and encouraged credit unions “to use all resources at their disposal to help members expand their financial knowledge.” The CDFI Fund will hold a conference call for organizations interested in applying for funding through the FEC Program on Thursday, October 22, 2009 at 2:00 p.m. ET. Organizations that are interested in applying must do so by 5:00 p.m. ET on November 19, 2009.

CUNA sparks interchange grassroots action

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WASHINGTON (10/21/09)--The Credit Union National Association (CUNA) continues to stride toward its goal of sending 250,000 interchange postcards to Senators in October. CUNA launched its interchange grassroots advocacy campaign, which features symbolic credit card postcards bearing the iconic credit union little guy, earlier this month.
Click to view larger imageA member at North Caroilna-based Welcome FCU fills out her postcard, becoming one of thousands taking part in CUNA's grassroots advocacy.
Credit union leagues nationwide have distributed the materials, which include interchange talking points and other communications materials aimed at educating credit union members on the interchange issue. One grassroots action hotspot is North Carolina, where the North Carolina Credit Union League has helped distribute 8,500 postcards to 13 credit unions, with some branches already running out. Nearly 600 individual postcards were sent to Senators Richard Burr (R-N.C.) and Kay Hagan (D-N.C.) on Oct. 16th, and North Carolina Credit Union League Director of Political Affairs Mickey Fanney told News Now that the League expects to send out another 500 postcards to its member credit unions before the end of this week.
CU members sign interchange postcards before they are mailed to their Senators.
Fanney said that “the dedication of member owners to their credit union and its success” is one factor that sets credit unions apart from other financial institutions, adding that the dedication to see credit unions succeed and continue to bring the best value to members "shines when we run a grassroots campaign such as the interchange postcards.” Virginia’s credit unions are also among those that have responded to the call for action, requesting 10,000 campaign postcards from the Virginia Credit Union League. Karma Samartino of Boise, Idaho’s Idahy FCU commented on the efforts of individual credit unions, saying that her credit union “continually” works to inform members on legislative activity that will affect their personal financial accounts. “It is important to our members to know that their opinions matter with the Idaho Congressional Delegation and the postcards provide the opportunity to get that message to our U.S. Senators. We are fortunate in Idaho to have Congressmen that listen and respond to what their constituents say,” she added. CUNA has fiercely opposed merchants proposals that would affect interchange fees. Interchange reflects a merchant's fair share of the costs of the convenient card system and supports everything from re-issuing cards compromised by merchant data breaches to providing a call center to contact if a card is lost or stolen.

CUNA analyzes reserve reporting requirements

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WASHINGTON (10/21/09)--The Credit Union National Association (CUNA) has posted a final rule analysis on the Federal reserve Board’s recent amendments to the reserve and reporting requirements for depository institutions under Regulation D. Regulation D addresses reserve and reporting requirements for credit unions, banks and thrifts by requiring reserve balances and frequency of reporting commensurate with funds held by these depository institutions in certain Federal Reserve accounts. The Fed has increased the amount of funds that are exempt from reserve requirements during 2010 to $10.7 million, up from the $10.3 million exemption ceiling that was provided in 2009. Any funds in excess of the exemption ceiling but less than $55.2 million, the so-called “low reserve tranche,” will be subject to a 3% reserve requirement. Any funds in excess of the low reserve tranche will be subject to a $1.3 million reserve requirement as well as a 10% surcharge, CUNA reported. The Fed has also established new compliance dates. Depository institutions that report weekly will apply the reserve requirements to their 14-day reserve computation periods beginning on December 1, 2009, and the corresponding reserve maintenance period beginning on December 31, 2009. Depository institutions that report quarterly will apply the reserve requirements to their 7-day reserve computation periods beginning on December 15, 2009, and the corresponding reserve maintenance period beginning on January 14, 2010. The deposit cutoff level of $243.1 million, the reserve requirement exemption amount, and the reduced reporting limit will be used for all depository institutions. To see CUNA’s final analysis of the Fed amendments, use the resource link.

Hyland 2010 assessment is unpredictable

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WASHINGTON (10/21/09)—The National Credit Union Administration (NCUA) cannot predict what credit unions’2010 share insurance assessment will be because of the unknown future of such things as expenses, share growth, investment yields and resolution costs, according to NCUA board member Gigi Hyland. However, she added, budgeting between 15-30 basis points would likely be appropriate. Hyland noted that the agency would disseminate more information on the issue following either the Oct. 22 board meeting or the Nov. 19 meeting. She made her made remarks earlier this week at an American Institute of Certified Public Accountants Conference on Credit Unions. At last month’s board meeting, Melinda Love, director of NCUA's Office of Examination and Insurance, said she thought credit unions could plan on a 15-30 basis point assessment for next year. Chairman Deborah Matz wanted more precision in that figure for credit union planning purposes and requested that staff bring a more honed estimate of 2010 premium costs to the Oct. 22 meeting. How this is presented will be of interest, however, because some observers note that if the agency announces a precise figure for the future premium assessment, accountants may require credit unions to book the costs this year. Also on the agenda, as reported earlier in News Now, are the regular monthly report to the NCUA board on the state of the NCUSIF, as well as action on a final rule addressing increased federal share insurance coverage to $250,000 through 2013 and increased coverage for revocable trust accounts.

Inside Washington (10/20/2009)

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* WASHINGTON (10/21/09)--TierOne Corp., Lincoln, Neb., and Citizens First Bancorp, Port Huron, Mich., are among several financial institutions that are being required by regulators to restate their second quarter financial statements. The restatements will result in capital ratios below regulator minimums at both companies (American Banker Oct. 20). The restatements will likely become more common at financial institutions as regulators scrutinize banks’ loan and asset value assessments. In the past, a bank could give its estimated values of a loan and that would be sufficient, according to Douglas Landy, partner, Allen & Overy LLP. Now, that’s not good enough, he said. Citizens First’s re-assessment was driven by differences with the Federal Deposit Insurance Corp. In a securities filing earlier this month, the bank said its $35.3 million allowance for losses was not adequate. At TierOne, the bank differed with the Office of Thrift Supervision on the value of its underlying collateral. Before the restatement, TierOne’s numbers came out looking better than they had, said Theodore Kovaleff, Horwitz and Associates analyst, but now, “all bets are off.” TierOne told American Banker it tries to be as realistic as possible with its numbers, but new information often arises ... * WASHINGTON (10/21/09)--The Federal Reserve Bank of New York said Monday that it is testing a market tool that could potentially absorb excess cash from the financial system, but said it was not ready to use the tool. The tool would reverse repurchase agreements to drain excess reserves from the central bank to avoid the risk of inflation (The New York Times Oct. 20). During a reverse repurchase agreement, the Fed sells assets like treasuries in exchange for cash with an agreement to re-purchase them later at a higher price--thus removing cash from the system, the newspaper said ... * WASHINGTON (10/21/09)--National Credit Union Administration board member Michael E. Fryzel spoke at the Valley of the Sun Chapter of the Arizona Credit Union League’s dinner celebrating International Credit Union Day in Phoenix. He urged credit union officials to speak out about the good things credit unions are doing--like providing scholarships, supporting community events, holding fundraisers and going to the extra mile to help credit union members. “They truly exemplify the credit union philosophy of people helping people,” Fryzel said ...

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.

Inside Washington (10/16/2009)

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* WASHINGTON (10/19/09)--Sen. Richard Shelby (R-Ala.) said he would push to revise the Federal Reserve Act so bankers would not be able to choose their own regulators. Doing so is “unhealthy” and is a conflict of interest, Shelby told CNBC in a Thursday interview (American Banker Oct. 16). Directors of regional banks are split into three classes: A, B and C. Class A and B directors are chosen by their member banks, while C directors are selected by the Federal Reserve ... * WASHINGTON (10/19/09)--Interest in the Federal Reserve board’s liquidity programs is dropping. On Wednesday, the number of loans the Fed provided to depository institutions through its Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF) dropped to zero (American Banker Oct. 16 and News Now Dec. 3). AMLF is a lending facility that provides funding to U.S. depository institutions and bank holding companies to finance their purchases of high-quality asset-backed commercial paper from money market mutual funds. The program is intended to assist money funds that hold such paper in meeting demands for redemptions by investors and to foster liquidity in the market, according to the Federal Reserve. No new credit extensions will be made after Feb. 1. In a related item, lending through the Fed’s discount window also grew less than half of 1% during the past week, and traditional borrowing by commercial banks fell 4.7% to $27.2 billion ...

Matz sets corporate CU meeting for Nov. 5

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ALEXANDRIA, Va. (10/19/09)--National Credit Union Administration Chairman Deborah Matz, board members, corporate credit unions, and trade associations will discuss corporate credit union capital accounts and other issues during a Nov. 5 meeting, the NCUA announced on Friday. During a speech before members of the Association of Corporate Credit Unions, Matz said that she has heard “loud and clear” the message that many in the corporate credit union system “believe that there should be some mechanism within the corporate structure to allow contributed capital accounts to be replenished if losses don’t fully materialize as projected.” The meeting, which will feature members of the NCUA’s senior staff and will take place at the NCUA’s headquarters in Alexandria, Virginia, is a response to these concerns. The NCUA continues to develop new rules for corporate credit unions, and the board is looking to release a proposed version of these new rules by its mid-November board meeting, which will take place on Nov. 19.

CUNA NAFCU unite for alternative capital proposal

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WASHINGTON (10/19/09)--The Credit Union National Association (CUNA) and the National Association of Federal Credit Unions (NAFCU) announced their support for secondary capital for credit unions in a Friday joint letter to members of the National Credit Union Administration (NCUA) Board. The letter, which was signed by CUNA President/CEO Dan Mica and NAFCU President Fred Becker, noted that while the credit union system faces many issues, there is “none more important” for beleaguered credit unions than the issue of alternative capital. A similar letter is being sent to the National Association of State Credit Union Supervisors and to the National Federation of Community Development Credit Unions. While CUNA supports broad authority for credit unions to be able to obtain secondary capital, CUNA has agreed to work with NAFCU to support alternative capital for credit unions that would come from their members, which could also include sponsor organizations and select employee groups. They also agreed that credit unions should be able to count in their net worth calculations assistance received from NCUA under section 208 of the Federal Credit Union Act. The alternative capital would not be federally insured, and would be subordinated to other claims against an insured credit union and the National Credit Union Share Insurance Fund. According to the letter, the two groups aim “to achieve alternative capital authority for federally insured credit unions this year.” The credit union leaders asked the NCUA Board members for their support of the measure in an expression of unity by the credit union community as it prepares to take the legislative proposal forward. The legislative proposal represents “an important step forward on this critical issue,” and the CUNA and NAFCU leadership asked for the NCUA’s support going forward as they “move toward expeditious enactment” of the legislation in Congress.”

Conversion application among NCUA agenda items

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ALEXANDRIA, Va. (10/19/09)--The National Credit Union Administration (NCUA) at its upcoming Oct. 22 board meeting will consider a request from US #1364 Federal Credit Union to convert to a community charter. During the early session, the NCUA will also discuss a final rule, which will follow up on previously issued interim final rules on increased National Credit Union Share Insurance Fund coverage to $250,000 through 2013 and increase coverage for revocable trust accounts, NCUA General Counsel Bob Fenner told News Now. The board will also consider an additional request from the Kansas State Supervisory Authority for an exemption from Section 712.3(d)(3) of NCUA’s Rules and Regulations, which dictates that an federal credit union that intends to lend to or invest in a credit union service organization (CUSO) must confirm that the CUSO will grant the NCUA and other regulatory authorities access to its records and internal controls before that federal credit union invests in or lends to the CUSO. Section 712.3(d)(3) also applies to federally insured state-chartered credit unions pursuant to 12 C.F.R. 741.222. It is likely that the Kansas State Supervisory Authority is seeking this exemption on the basis that it will have access to the CUSO's books and records. The NCUA will also consider its monthly Insurance Fund Report at the meeting. As is routine, a closed session of the NCUA board will follow the early open session. The NCUA Board will discuss supervisory activities and personnel matters during this portion of the meeting.

Rep. Frank CUNA meet on CFPA concern

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WASHINGTON (10/19/09)—Credit Union National Association (CUNA) President/CEO Dan Mica and league president Daniel Egan met Friday with House Financial Services Committee Chairman Barney Frank (D-Mass.). They discussed credit union objections to an amendment to Consumer Financial Protection Agency (CFPA) legislation that would divide treatment of credit unions along asset size in an attempt to address unintended competitive disadvantages. Less than 24 hours earlier, Frank’s panel adopted an amendment offered by Reps. Brad Miller (D-N.C.) and Dennis Moore (D-Kan.) that 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. For institutions whose assets fall below those thresholds, enforcement authority would stay with their prudential regulator. Egan is president of the Massachusetts Credit Union League, New Hampshire Credit Union League and Credit Union Association of Rhode Island. CUNA has declared it would be compelled to oppose H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act, if its final version included the amendment that would treat credit unions differently based on asset size. Mica has noted, "A key principle of ours in approaching financial regulatory reform has been for examination authority to remain with credit unions' primary regulator. We cannot support legislation that would apply this principle only to a portion of the nation's credit unions, as envisioned in this amendment." He added that "a basic premise of the credit union movement is to never be divided against itself in any way." In their meeting with Rep. Frank, Mica said, the chairman "indicated a willingness to work with us to see if we can find a mutually agreeable solution before the bill goes to the floor for a House vote.”

Inside Washington (10/15/2009)

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* WASHINGTON (10/16/09)--The House Financial Services Committee approved the first-ever comprehensive regulation of the over-the-counter (OTC) derivatives marketplace. The bill, approved Thursday by a 43-26 vote, requires that all standardized swap transactions between dealers and large market participants, referred to as “major swap participants,” must to be cleared and must be traded on an exchange or electronic platform. According to a committee release, a major swap participant is defined as anyone maintaining a substantial net position in swaps, exclusive of hedging for commercial risk, or whose position creates such significant exposure to others that it requires monitoring. OTC derivatives include swaps, which are contracts that call for an exchange of cash between two counterparties based on an underlying rate, index, credit event or the performance of an asset… * WASHINGTON (10/16/09)--The Federal Deposit Insurance Corp. (FDIC) could finalize rules on Tuesday to end its temporary guarantee of unsecured debt starting Oct. 31. The agency last month proposed two options for ending the program (American Banker Oct. 15). One plan would forbid participants from issuing protected debt after the end of the month. A second option would have the same deadline but give institutions in distress another six months to apply for emergency coverage. The plan was launched last October as a part of the Temporary Liquidity Guarantee Program ... * WASHINGTON (10/16/09)--Credit and asset-quality declines for commercial real estate (CRE) loans may continue, banking regulators said Wednesday. CRE lending presents the biggest area of risk for credit losses at Federal Deposit Insurance Corp. (FDIC) institutions, said FDIC Chairman Sheila Bair at a Senate Banking subcommittee hearing (American Banker Oct. 15). FDIC-insured institutions hold a large stake of commercial mortgage debt outstanding, leaving their exposure to CRE loans at a “historic high,” she added. CRE loans backed by nonresidential or nonfarm properties account for nearly $1.1 trillion, or 14.2% of total loans. Business bank bankruptcies have increased 64% during the first half of the year, according to the Office of Thrift Supervision. Credit quality continues to worsen, added Comptroller of the Currency John Dugan ...

House Committee adds exemption to CFPA legislation

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WASHINGTON (10/16/09)--An amendment to H.R. 3126, the Consumer Financial Protection Agency Act which would limit the examination and enforcement authority of the Consumer Financial Protection Agency (CFPA) over insured depository institutions to credit unions with more than $1.5 billion in assets and banks with more than $10 billion in total assets, passed by a voice vote on Thursday afternoon. The amendment was offered by Reps. Brad Miller (D-N.C.) and Dennis Moore (D-Kan.). Responding to the passage of the amendment, Credit Union National Administration (CUNA) President/CEO Dan Mica said that CUNA would be “compelled to oppose” the legislation, as “a basic premise of the credit union movement is to never be divided against itself in any way.” “A key principle of ours in approaching financial regulatory reform has been for examination authority to remain with credit unions’ primary regulator. We cannot support legislation that would apply this principle only to a portion of the nation’s credit unions, as envisioned in this amendment,” Mica added. Committee Chairman Rep. Barney Frank (D-Mass.) has indicated that he is willing to discuss this issue between mark-up and floor consideration. Mica said that CUNA would “have no choice but to oppose” the CFPA bill if an “accommodation cannot be reached on the substance of the CFPA bill as amended.” CUNA is working with legislators to produce additional amendments that would exempt credit unions completely or set an exemption threshold at a higher standard than that of asset size. CUNA has also circulated alternative language to the bill that would address credit union issues such as the CFPA's impact on examinations, enforcement, preemption of existing rules, and regulatory burden. The House Financial Services Committee will continue discussion and markup of H.R. 3126, which would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools, early next week, with a vote likely to occur on Wednesday. The Committee on Thursday approved the Over-the-Counter Derivatives Markets Act of 2009 by a 43-26 vote.

ICU Day recognized by Congress

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WASHINGTON (10/16/09)--Hailing the positive contributions of U.S. credit unions that have provided “affordable and safe financial services to many Americans of moderate means,” Rep. Brad Sherman (D-Calif.) on Thursday commemorated International Credit Union Day by citing the “equally notable” contributions that credit unions have made internationally in a statement submitted to the Congressional Record. Sherman also praised credit unions as “a means to promote economic growth and democratic practices” for over 186 million members of communities in 97 nations. “Credit unions make a difference on a global scale by providing access to affordable financial services,” including microloans, “for those who otherwise would have been excluded from the financial sector,” Sherman added. Sherman also noted credit union outreach to the unbanked in rural areas and praised the “innovative technology solutions” that are being extended via the World Council of Credit Unions. “In many countries, credit unions lead economic democratization, a step closer to political democratization by providing economic security and sustainability and exposing lower-income communities to free-market principles and democratic values that will help eradicate terrorism at its roots,” he added. The financial services offered by credit unions “help expand job opportunities, improve local economies and promote democracy,” and aid the “post-conflict rebuilding of societies and economies in war-torn countries,” and the “democratization of societies” via the “one-member one-vote principle of credit unions.” In short, offering a “sustainable development solution to some of the world’s poorest countries,” is, as Sherman ultimately highlighted, is the “credit union difference.”

CUs urged to comment on CARD Act rules

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WASHINGTON (10/16/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Reserve Board's proposal to implement the portions of the Credit Accountability, Responsibility and Disclosure (CARD) Act that will become effective on February 22, 2010. Items addressed by the Fed proposal include provisions that will limit the CARD Act's minimum payment warning provisions to credit cards, prohibit interest rate increases for existing balances and during the first year the account is opened, require the consumer's consent before charging fees for exceeding the credit limit, and require co-signors for cardholders that are under the age of 21 if they cannot otherwise demonstrate that they can make the minimum payments. These requirements as well as additional requirements addressed in this proposal will be discussed during an audio conference call on Oct. 20. The call, which will be led by CUNA Senior Assistant General Counsel Jeff Bloch, will also feature commentary from Federal Reserve Board Senior Attorney Benjamin Olson, PSCU Financial Services General Counsel Steve Salzer, CUNA Assistant General Counsel Michael McLain, and UW Credit Union Chief Credit Officer Mike Long. Comments may be submitted to CUNA and can be submitted to the Fed for thirty days following the proposal being published in the Federal register. To view the CUNA comment call, and register for the CUNA audio conference call, use the resource links.

Inside Washington (10/14/2009)

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* WASHINGTON (10/15/09)--Representatives of the American Bankers Association Tuesday offered a plan for the federal government to resolve failed systemic financial institutions. Under the plan, the president could seize a systemic firm based on the recommendations of government entities, including the Treasury. A special agency would handle the resolution, which would be overseen by the Federal Deposit Insurance Corp. (FDIC). In July, Treasury proposed giving systemic authority to either the Securities and Exchange Commission or the FDIC. The bankers said the FDIC’s deposit insurance role should not be “disturbed” (American Banker Oct. 14) ... * WASHINGTON (10/15/09)--In order to strengthen the financial system, progress on three distinct fronts needs to be made, according to William Dudley, president/CEO of the Federal Reserve Bank of New York. Dudley spoke at a financial services luncheon in New York City Tuesday. The three fronts needing improvements are: a more thorough and complete risk capture so that the capital adequacy rules more effectively encompass a broader set of risk exposures than before; rules that encourage the conservation of capital in adverse economic and financial circumstances; and tougher regulatory requirements, including the use of a contingent capital instrument that would automatically replenish equity capital in times of stress ... * WASHINGTON (10/15/09)--The Treasury is pushing American International Group (AIG) to cut $198 million in scheduled retention payments as the company and government officials continue debating over executive pay packages that have triggered criticism in the financial industry (American Banker Oct. 14). The special inspector general for the Troubled Asset Relief Program, Neil Barofsky, has told the company to cut the payments. A decision on the payments is affecting efforts to recoup $45 million in retention payments given to AIG employees in March. About $19 million of the $45 million in pledged repayments have been received ...

NCUA NASCUS tell lawmakers tough times arent gone

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WASHINGTON (10/15/09)—Despite many signs of general economic improvement, National Credit Union Administration (NCUA) Chairman Deborah Matz said the credit union movement faces difficult challenges through 2010 and beyond as a result of the harsh effects of the economic downturn spurred by a mortgage market meltdown. Matz, testifying before the Senate Banking subcommittee on financial institutions on the state of the banking industry, said, however, she is “confident that the credit union industry can and will weather the storm.” She noted that the NCUA, in response to the harsh operating environment caused by problems in the economy, has enhanced supervision, shortened examination cycles, increased the number of federal examiners, and upgraded risk-management systems. “While the year ahead will be challenging, I am confident that we and the credit union industry we regulate will be stronger in the end,” Matz said. “NCUA has an obligation to consumers: As a safety and soundness regulator, we will be successful if we preserve strong credit unions capable of meeting the financial needs of their members.” Matz noted that 98% of federally insured CUs are adequately capitalized and, in written testimony, pointed out that a “savings flight to quality” has brought about a 16% increase in savings during the first half of this year. However, she also noted that assets in troubled, CAMEL 4 and 5-rated credit unions almost doubled from December 2008 to August 2009. The NCUA chairman also referenced the corporate credit unions’ exposure to mortgage-backed securities that first created a liquidity shortage, then later capital impairments, which, she said, “affected the entire credit union system.” “Given the tenuous real estate market,” Matz said. “NCUA expects additional losses to materialize.” Also testifying, National Association of State Credit Union Supervisors (NASCUS) Chairman Thomas Candon concurred that the state of the credit union industry is generally good, Still, he said, economic issues such as unemployment, delinquencies and charge-offs are affecting the consumer credit portfolios of credit unions. Candon told members of the subcommittee that credit unions need options to raise capital, specifically access to supplemental capital. “Allowing credit unions access to supplemental capital with regulatory approval and robust oversight will improve credit unions’ ability to react to market conditions, grow safely into the future and serve their members in this challenged economy,” stated Candon. “We feel strongly that now is the time to permit this important change.” The Credit Union National Association is currently working with NASCUS and the National Association of Federal Credit Unions to develop a joint proposal for reforming alternative capital rules for credit unions. In fact, CUNA and NAFCU met Wednesday to draft a letter to the NCUA regarding the plan. Other witnesses before the subcommittee included: Chairman Sheila Bair of the Federal Deposit Insurance Corp.; Comptroller of the Currency John Dugan; Federal Reserve Board Governor Daniel Tarullo; and Timothy Ward, deputy director of examinations, supervision, and consumer protection, of the Office of Thrift Supervision.

New IRS video helps late Form 990 filers

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WASHINGTON (10/15/09)--The Internal Revenue Service (IRS) announced its launch of a new case study and video program to help exempt organizations and their tax preparers better understand the revised Form 990 series, which must be filed for the 2008 tax year. State-chartered credit unions are required to file a Form 990 (unless included in a group 990), and must file it by the 15th day of the fifth month after the end of its fiscal year. For state chartered credit unions that are calendar year filers, the 2008 form was due May 15, but credit unions that filed for an extension may find the new IRS information helpful in understanding the revised reporting requirements. In April, the IRS provided a preparation checklist for tax-exempt organizations filing the Form 990 (see resource link below). The tips from the checklist that are most relevant to credit unions include:
* Determining if the organization is eligible to file the Form 990-EZ for 2008; *Reviewing the redesigned 2008 Form 990 and final instructions (released in December 2008); *Identifying the appropriate schedules to complete; * Identifying officers, directors, and key employees; * Preparing to answer new questions about governance, executive compensation and insider transactions; and * Establishing and modifying internal systems to prepare for filing season.
The new IRS video is intended to illustrate key points and answer important questions about the new Form 990, revised for the first time in 30 years. Use the link below to access the IRS video help. http://www.irs.gov/charities/article/0,,id=210358,00.html

CFPA percolating vote could come today

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WASHINGTON (10/15/09)--Votes and debate on a host of financial reforms will continue today as House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) on Wednesday said that further consideration would be delayed until later in the week. A vote on the Over-the-Counter Derivatives Markets Act of 2009 is expected to take place this morning. Frank did not say when a final vote on H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act of 2009, could take place, but hinted that he would like to “move quickly” on the legislation, even though his committee has until Friday to potentially move the legislation forward. Frank targeted this afternoon for further debate on that legislation. A managers’ amendment from Frank, which includes changes to portions of the bill addressing examination and pre-emption, is expected to be discussed later today. Rep. Jeb Hensarling (R-Texas) spoke against the CFPA legislation, calling it a “new, large, draconian” agency with “sweeping powers” that would be based on “subjective opinions of what is abusive.” Some “non-controversial” amendments were offered on Wednesday afternoon, and a host of amendments to the CFPA legislation have been filed, one of which is a proposal to set a $1.5 billion asset trigger for credit unions and a $10 billion asset level for banks in terms of prudential regulator examination and enforcement authority. CUNA Vice President of Legislative Affairs Ryan Donovan said that CUNA “would not be in support of any legislative language that divides credit unions by setting different treatment by asset size.” Donovan added that the outcome of the amendment is unclear, and that secondary amendments which would be more favorable to credit unions may be offered. Even still, Donovan said, there may also be opportunity to further affect the legislation after mark-up. CUNA also expressed concern over a managers’ amendment to the CFPA legislation that would address remittances. In a joint letter with World Council of Credit Unions President/CEO Pete Crear and CUNA President/CEO Dan Mica highlighted the potential for increased costs as one drawback of this amendment. The amendment would also slow down the remittance process. The letter also criticized an amendment to the Federal Credit Union Act that is redundant with existing authority and could limit the capabilities of federal credit unions and their regulator. The letter noted that there are “many outstanding questions regarding this section of the manager’s amendment and its effect on the remittance services credit unions currently offer their members,” adding that while Mica and Crear hoped that the Committee would address their concerns during mark-up, they would “be happy” to work with committee members before the House begins consideration of the legislation.

Steve Bosack is NCUA chairmans chief of staff

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ALEXANDRIA, Va.(10/15/09)—National Credit Union Administration (NCUA) Chairman Debbie Matz announced that as of Oct. 13 her chief of staff is Steve Bosack, who exits as deputy director of the National Credit Union Foundation (NCUF) to take the new position. Bosack helped oversee numerous NCUF programs, including REAL Solutions, Credit Union Development Education, Social Impact Management, Innovation Grants, federal grants and CUAid. He played a major role in disaster relief efforts by helping distribute a record $3.5 million in grants to credit unions on the U.S. Gulf Coast following Hurricane Katrina. This is a second stint at NCUA for Bosack, as it is for his chairman. Bosack served as Matz’s top aide for almost two years when Matz was a member of the agency’s board from 2003-2005. Prior to that, Bosack worked for 10 years with the Credit Union National Association (CUNA), where he served as vice president of public relations and, later, vice president of information services. Before joining CUNA, Bosack was associate editor of Credit Union Times, a national credit union trade industry publication.

CUNA comments on Feds reimbursement revisions

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WASHINGTON (10/14/09)--An analysis of a final rule addressing amendments to the Federal Reserve's Regulation S, the Right to Financial Privacy Act, is now available on the Credit Union National Association's (CUNA) website. Regulation S establishes the rates and conditions under which a government agency must reimburse a financial institution for costs incurred in producing customer financial records under the Right to Financial Privacy Act. The Regulation S revision amends the personnel fees that may be charged for searching and processing document requests to $22 per hour for clerical or technical support, $30 per hour for specialized computer support, and $30 per hour for support from a manager or supervisor. These rates would be adjusted every three years, beginning on September 30, 2012. The Fed rules will become effective on July 1, 2010. For more detailed analysis of the new rules, use the resource link.

FinCEN extends AML outreach to sub-5B fin. inst.

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WASHINGTON (10/14/09)--The Financial Crimes Enforcement Network (FinCEN) is increasing its outreach effort to financial institutions and has announced it will begin gathering information from depository institutions with under $5 billion in assets on their efforts to implementing anti-money laundering (AML) programs. This outreach effort builds on “knowledge gained from FinCEN's previous program of meetings and informational visits with larger financial institutions,” the FinCEN release said. In remarks accompanying a Tuesday release, FinCEN Director James H. Freis, Jr. said that FinCEN’s outreach is an effort to “hear about how smaller-to-moderate size depository institutions are implementing anti-money laundering (AML) programs, the unique challenges facing these institutions, and where additional guidance from FinCEN could be helpful." According to the release, FinCEN will select no fewer than 15 institutions to examine how they comply with the four components of a Bank Secrecy Act compliance program, which include the designation of a compliance officer, staff training, proper internal controls, and independent audit. FinCEN recently completed a similar program that focused on the 15 largest depository institutions. Financial institutions that wish to participate in the program may email outreach@fincen.gov by November 30, 2009. According to FinCEN, the email should contain contact information for their institution, the asset size and geographic location of the institution, and the type of charter that the institution operates under. Financial institutions should also tell FinCEN whether they prefer an on-site visit from FinCEN or will visit FinCEN offices themselves. For the full FinCEN release, use the resource link.

CARD Act corrections pass House via voice vote

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WASHINGTON (10/14/09)--The House of Representatives on Tuesday approved by a voice vote H.R. 3606, the CARD Act Technical Corrections Act, which was introduced by Rep. Peter Welch (D-Vt.) last month. In a statement following the vote, Credit Union National Association (CUNA) President/CEO Dan Mica commended the legislators for their “vital action” that could "save credit unions and their consumer members both money and peace of mind.” However, Mica added that “Senate action is still urgently needed for consumers and credit unions to realize relief,” and he encouraged Senators “to take similar action as soon as possible.” While the House vote is a positive move, CUNA’s Senior Vice President for Compliance Kathy Thompson encouraged credit unions to continue with their compliance efforts on the 21-day requirement, emphasizing that there is no bill comparable to H.R. 3606 in the Senate at this point. In a letter sent earlier in the day, Mica urged members of Congress to approve H.R. 3606, which would clarify that the 21 day notification requirements of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act apply only to credit card accounts. Mica in the letter reiterated an earlier statement that credit unions are "currently reeling from an unintended consequence of the CARD Act." The legislation, if signed into law, would insert language specifying that Section 106 of the CARD Act, which prevents creditors from treating payments as being late unless the creditor adopts reasonable procedures to ensure that periodic statements are mailed or delivered to the consumer no later than 21 days before the payment due date, only applies to credit card account holders. This section currently applies to all open-end loans, including general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and other forms of loans, not just credit cards. Mica said that the CARD Act, as currently written, would prevent credit unions from granting biweekly payment plans to their members, from “sending members consolidated billing statements,” and would force them to change payment due dates for members that had previously chosen due dates based on their “specific financial situation.” Mica said that this is “particularly problematic” for Home Equity Lines of Credit (HELOC) “because the due date of a HELOC is often a contractual term.” CUNA believes the provision was originally intended to cover only credit card accounts and was inadvertently changed during the legislative process, and Mica detailed some of the increased costs and reduced services that credit union members may face if the technical corrections to the Credit Card Accountability, Responsibility and Disclosure (CARD) Act were not made in a letter sent late last week. Following yesterday's vote Mica also acknowledged the work of the Association of Vermont Credit Unions. Prior to the bill’s introduction last month, the Vermont league worked closely with with Welch and his staff to discuss the dilemma credit unions face if the 21-day disclosure rule were to apply to all open-end credit.

Capt. Phillips hero of ship hijacking to close CUNA GAC

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WASHINGTON (10/14/09)--Captain Richard Phillips of the Maersk Alabama, a modern-day hero of the high seas, will be the closing speaker at the Credit Union National Association’s 2010 Governmental Affairs Conference this February. The Maersk Alabama became the center of an extraordinary international drama last April when the ship was hijacked by Somali pirates, the first hijacking of a U.S. ship in more than 200 years. To protect his crew, Capt. Phillips made a conscious decision to put himself in harm’s way, offering himself as a hostage. The standoff ended when Navy SEAL snipers saw one of the pirates aim his AK-47 machine gun at Phillips and concluded he was in “imminent danger.” President Obama has praised Phillips’ “selfless concern for his crew” and said the courage he displayed through the ordeal is “a model for all Americans.” At the GAC, The Maersk Alabama captain will share his compelling story and some valuable leadership lessons gleaned from the experience that are relevant to all business leaders today. Phillips joins a GAC roster that includes former Federal Reserve Board Chairman Alan Greenspan, economist Larry Kudlow of CNBC’s "The Kudlow Report," and a political point/counterpoint that pits former Vermont Governor and Democratic presidential candidate Howard Dean against MSNBC “Morning Joe” host and former Republican congressman Joe Scarborough. CUNA’s 2010 GAC is Feb. 21-25 at the Washington Convention Center in Washington, D.C. Registration and housing lines are open. Click the resource link below for more information. Use the resource link below for mor 2010 GAC information.

CUNA-NAFCU meeting on alt. capital today

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WASHINGTON (10/14/09)—The Credit Union National Association (CUNA) will meet with the National Association of Federal Credit Unions (NAFCU) today to begin a draft of the groups’ letter to the National Credit Union Administration (NCUA) on a joint proposal for reforming alternative capital rules for credit unions. “It is our understanding that we have reached an agreement with NAFCU on a proposal,” said CUNA Deputy General Counsel Mary Dunn Tuesday. CUNA is also working with the National Association of State CU Supervisors on the alternative capital plan. In the letter to NCUA, CUNA and NAFCU will propose that credit unions be allowed to accept and count as capital funding such sources as:
* Members of the credit union; * Member sponsors and select employee groups of CUs; and * Assistance provided to credit unions by NCUA under Section 208 of the FCU Act.
Additional capital would not be federally insured and could pay a higher return to members. The additional capital would also be subordinated to other claims against a credit union and the National Credit Union Share Insurance Fund. The NCUA is developing its own white paper study on alternative capital issues. First expected to be released in December, board member Gigi Hyland indicated at recent NCUA Town Hall meetings that the agency would likely advance that timing. Federal lawmakers have indicated to CUNA that agreement on an approach to alternative capital must be reached by CUNA, NAFCU, NCUA, NASCUS, and U.S. Treasury Department for a plan to become a viable topic on Capitol Hill.

Inside Washington (10/12/2009)

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* WASHINGTON (10/13/09)--Interested credit unions are reminded to sign up for the Credit Union National Association's (CUNA) audio conference call Oct. 20 at 2 p.m. EDT on portions of the Credit Card Accountability, Responsibility and Disclosure Act that will take effect Feb. 22. The call will cover parts of the act addressing minimum payment warnings on credit card statements, interest rate increase prohibitions, and portions of the act that require co-signors for cardholders under age 21. The call will be led by CUNA Senior Assistant General Counsel Jeff Bloch and feature Federal Reserve representative Benjamin Olson, PSCU Financial Services’ Steve Salzer, CUNA assistant general counsel and senior compliance counsel Michael McLain and University of Wisconsin CU Chief Credit Officer Mike Long ... * WASHINGTON (10/13/09)--Divisions over foreclosure mitigation--particularly between liberal Democrats and the Obama administration--are widening. On Friday, the Treasury issued a statement saying it had met its goal to modify 500,000 loans before a Nov. 1 deadline. On Monday, the Congressional Oversight Panel released a report indicating Treasury needs to re-examine the Home Affordable Modification Program because it deals with the housing crisis as it was six months earlier instead of the current situation (CongressDailyPM Oct. 9). The panel found that the program works only for certain mortgages, and does not help those struggling with job loss. Sen. Jack Reed (D-R.I.) has introduced legislation to fund grants for states to create mandatory mediation programs between lenders and borrowers; require lenders to evaluate if a borrower is eligible for a modification before; and give $7 billion to states to offer homeowners’ grants. House Financial Services Chairman Barney Frank (D-Mass.) also has said he would attach legislation to allow bankruptcy judges to cram down the terms of a mortgage onto the House’s regulatory reform measure. The Credit Union National Association has said that allowing bankruptcy judges to change the terms of a mortgage would lead to borrowers’ gaming of the system. A dissatisfied borrower could stop payments on a home and possibly be able to keep it ...

Sunday i NY Timesi Mica urges dont be fooled on interchange

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WASHINGTON (10/13/09)--In an op-ed published in the Sunday edition of The New York Times, Credit Union National Association President/CEO Dan Mica urged legislators “not to be fooled” into passing “legislation that hurts one of the most important building blocks of our economy at a time when we can least afford it.” Responding to a recent Times story on interchange legislation, Mica said that “nearly all” credit unions are “concerned about the extremely harmful effects that interchange legislation would have on the services credit unions offer their members.” Eliminating or reducing interchange fee income could force credit unions “into the impossible decision” of raising member fees or ceasing participation in card programs, Mica added. CUNA has fiercely opposed merchants proposals that would affect interchange fees, saying that interchange reflects a merchant's fair share of the costs of the convenient card system.

Congress this week Reg reform votes on calendar

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WASHINGTON (10/13/09)--While the week for Congress began with the Columbus Day holiday, legislators on the House side will discuss H.R. 3606, the CARD Act Technical Corrections Act, when they reconvene today. H.R. 3606, which was introduced by Rep. Peter Welch (D-Vt.) last week and has been supported by the Credit Union National Association, would clarify that the 21 day notification requirements of the CARD Act apply only to credit card accounts. The week will continue with a pair of committee meetings set for Wednesday, and one of them will feature National Credit Union administration Chairman Deborah Matz representing the NCUA before Congress for the first time since her confirmation earlier this year. The hearing, which will focus on the state of the banking industry, will take place before the Senate financial institutions subcommittee and will also feature testimony from Federal Deposit Insurance Corporation Chairman Sheila Bair, Comptroller of the Currency John Dugan, and Federal Reserve Governor Daniel Tarullo, among others. The House Financial Services Committee on Wednesday has also scheduled full committee markup sessions of H.R.3763, which would amend the Fair Credit Reporting Act to provide an exclusion from so-called “red flag” guidelines for certain businesses, and H.R. 3639, the "Expedited CARD Reform for Consumers Act of 2009." H.R.3126, the "Consumer Financial Protection Agency Act of 2009"; will also be discussed during this markup session, which could extend into Thursday. CUNA’s Vice President of Legislative Affairs Ryan Donovan speculated that amendments addressing examination, enforcement, credit insurance, and preemption issues could come up during the discussion of H.R. 3126.

Fryzel details intense start to NCUA career

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WASHINGTON (10/13/09)—Financial failures, market crashes, and the overall economic impact on individual credit unions and the corporate credit union system punctuated what was a “very intense” beginning to his tenure as National Credit Union Administration (NCUA) chairman, and the board had to make many tough decisions during that time, current NCUA board member Michael Fryzel told News Now. “We faced many problems,” but once those problems were laid out for credit unions “the industry was able to pull together” and handle those problems from within, without the need for direct government assistance, Fryzel added. Working to ensure the viability of the corporate credit union system and, in turn, of individual credit unions was the greatest accomplishment of his tenure, Fryzel said. However, Fryzel added, he regrets not having a long enough tenure to adequately address some internal NCUA issues and make certain improvements to the NCUA staff. Having both a former chairman and former board member turned chairman on the NCUA board--as is now the case--is an unprecedented event. Fryzel said that the combination of himself, NCUA Chairman Deborah Matz, and board member Gigi Hyland gives credit unions the “most knowledgeable and credit-union-familiar board that has ever been in charge of the NCUA.” Fryzel expressed his confidence in Matz’s ability to “move forward with what needs to be done” and keep the agency moving in the “right direction” while continuing to address the needs of natural person and corporate credit unions. The NCUA continues its work toward the creation of its own consumer protection agency, and while Fryzel said that he cannot comment on how that agency would interact with the Obama administration’s proposed Consumer Financial Protection Agency (CFPA), the NCUA plans to have its own safeguards in place so that it can “make the argument for credit unions.” An NCUA’s consumer protection agency should not create “significant additional costs” for credit unions, he said, adding that he did not think that the CFPA, if approved, would create additional burdens for credit unions. Of member business loans, Fryzel said that there is a “niche” for some credit unions to offer business loans to their members, and does not oppose lifting the member business loan cap as long as credit unions make them “carefully and with the full understanding of how difficult those loans can be.” The NCUA should also be allowed to “put in place the necessary rules that will ensure the safety and soundness of the funds of the credit unions that are making those loans,” Fryzel added. The NCUA’s recent town hall meetings, which took place in 3 sites nationwide, have given the board “excellent” feedback, and the board is reviewing comments as it develops its new rules for corporate credit unions, which are expected to become permanent in early 2010. While he expects credit unions and the nation in general to continue to see financial hardship in the near future, Fryzel said that credit unions remain the “premier source” of financial services in this country, and will continue to serve their members into the future. Read the Oct. 19 issue of CUNA's Credit Union NewsWatch for more of Fryzel's views on credit union issues, including the future of alternative sources of capital.

NCUA other key players at White House bid for CFPA

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WASHINGTON (10/12/09)—The White House Friday called together a variety of Washington players to make another bid for support for the administration’s proposed Consumer Financial Protection Agency (CFPA) and among them, according to the National Credit Union Administration (NCUA), was that agency’s chairman. Along with NCUA Chairman Deborah Matz was Federal Deposit Insurance Corp. Chairman Sheila Bair, U.S. Treasury Secretary Timothy Geithner, as well as key members of the U.S. Congress, such as Rep. Paul Kanjorksi (D-Pa.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.). When asked for a comment, NCUA Director of Public and Congressional Affairs John McKechnie said, "The Chairman shares the President's commitment to enhancing consumer protections, and is prepared to work with Congress on the evolving proposal." The Obama administration introduced CFPA legislation in June. The bill seeks to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools. The House Financial Services Committee announced last week that a discussion draft of the Consumer Financial Protection Agency Act of 2009 (H.R. 3126) is among four bills slated for a vote on Oct. 14.

21-day fix scheduled for House vote Tuesday

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WASHINGTON (10/12/09)—A bill intended to fix a troublesome 21-day disclosure provision in the Credit CARD Act is scheduled to be considered by the House tomorrow. The legislation, H.R. 3606, or the CARD Act Technical Corrections Act, has been placed on the House suspension calendar, generally reserved for bills not considered highly controversial. H.R. 3606 was introduced by Rep. Peter Welch (D-Vt.) and last week the Credit Union National Association (CUNA) sent a letter to the leadership of the House Financial Services Committee urging support for the measure. The legislation would amend Section106 of the CARD Act, a provision that prohibits creditors from declaring a payment as being late unless the creditor adopts reasonable procedures to ensure that periodic statements are mailed or delivered to the consumer no later than 21 days before the payment due date. As written, the section applies to all open-end loans, including general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and other forms of loans, not just credit cards. Welch's bill would insert the words "a credit card account under" into Section 106, thereby removing its application from the other forms of open-end credit. CUNA has been working closely with House leaders and Welch to bring the technical correction bill to a House vote. The group believes the provision was originally intended to cover only credit card accounts and was inadvertently changed during the legislative process. CUNA has highlighted problems faced by credit unions due to complications caused by the current structure of the CARD Act provision and warned that credit union members could face increased costs and reduced services if technical corrections are not made.

Postcard campaign launched to back CUNA interchange effort

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WASHINGTON (10/12/09)--The Credit Union National Association (CUNA) will continue its interchange grassroots advocacy by launching a new postcard campaign to voice credit union views on the issue, aiming to send 250,000 cards to the Senate in October. The postcards, which look like a credit card bearing the iconic credit union little guy, have been mailed to state credit union leagues for distribution to natural person credit unions during the week of October 12.
Click to view larger image Click for larger view
CUNA has provided credit union management with a letter which explains the issue to their employees, and those tellers will then also seek to briefly educate their credit union members on the interchange issue. The postcards may then be handed out by employees, such as tellers, to credit union members as they do business at their local branches. Once the postcards have been signed by credit union members, they will be forwarded on to Senators on an at least weekly basis. Postcards may also be mailed individually, but all postcards will need to be mailed by November, according to CUNA. CUNA has also provided interchange talking points as well as other artwork and communications materials which may be tailored by credit union leagues and individual credit unions. CUNA has fiercely opposed merchants proposals that would affect interchange fees. Interchange reflects a merchant's fair share of the costs of the convenient card system and supports everything from re-issuing cards compromised by merchant data breaches to providing a call center to contact if a card is lost or stolen. The issue of interchange fees loomed large on Capitol Hill last week, with Local Government FCU Executive Vice President and CUNA representative Mark Caverly telling legislators at a Thursday House hearing that government intervention into the interchange fee system would reduce consumer choice and allow merchants to discriminate against credit unions and other small card issuers.

Inside Washington (10/09/2009)

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* WASHINGTON (10/9/09)--House Financial Services Chairman Barney Frank (D-Mass.) told reporters last week that action on an interchange bill is an “open question.” He called his committee’s hearing on the issue Thursday, at which the Credit Union National Association (CUNA) testified on behalf of credit unions, the beginning of a serious look at the issue, but told the press that he had no immediate plans beyond the hearing. The chairman noted that support for interchange fee legislation has been stronger in the Senate than it has been in the House. The difference between legislative bodies was the reason that interchange fee provisions were not included in credit card legislation passed earlier this year (American Banker Oct. 9). A separate story in the same issue noted that VISA Inc. launched an advertising campaign in Washington intended to spotlight the benefits of credit and debit cards over paper checks and money. Early in the week, print and digital ads appeared in D.C. and on Thursday--hearing day--television and radio ads began airing. On the other side of the issue, 7-Eleven Inc. and other retailers have run an intense campaign in favor of government restrictions on interchange fees. Gathering signatures in its shops over the summer, 7-Eleven delivered a petition to federal lawmakers with more than 1.66 million signatures backing interchange fee regulation. VISA and MasterCard have revealed studies that conclude consumers did not fully understand the issues involved in the petition. CUNA testified that regulation of interchange fees would interfere with consumer choice ... * WASHINGTON (10/12/09)--The Treasury Department announced that more than 500,000 trial loan modifications are in progress under the Making Home Affordable Program. The goal was originally set to reach 500,000 modifications by Nov. 1. Though modifications are being issued at a faster rate than new homeowners are becoming eligible, the Obama administration said it believes that “more can and should be done to assist struggling homeowners and to stabilize the housing market.” Senior Treasury Department and Department of Housing and Urban Development officials planned to discuss improving servicer efficacy and responsiveness to borrowers during the modification process in meetings Thursday ... * WASHINGTON (10/12/09)--Steps are needed to address transparency and accountability challenges in the Troubled Asset Relief Program (TARP), the Government Accountability Office (GAO) said in a report. As of Sept. 25, Treasury had disbursed $364 billion in TARP funds, but it has yet to update its projected use of funds for most programs. The projections will consider current market conditions, program participation rates and repurchases. The GAO expects the department’s ability to plan for and execute the plan’s next steps will be limited without more estimates about expected uses for the fund and the amount of money left. The GAO recommends that Treasury Secretary Timothy Geithner coordinate with the Federal Reserve and Federal Deposit Insurance Corp. (FDIC) to ensure that the decision to extend or eliminate TARP is considered in a broader market context; document and communicate the results of its determination; and update its projected use of funds. Treasury agreed with the first two recommendations, but regarding the third recommendation. The department said it regularly re-evaluates funding needs ... * WASHINGTON (10/12/09)--Senate Republicans Thursday pushed to include Fannie Mae and Freddie Mac into regulatory reform. Sen. Richard Shelby (R-Ala.) said the Obama administration made no effort to include the government-sponsored enterprises (GSEs) in its proposal. Instead, it said the GSEs would be dealt with next year--a move Shelby questioned during a Senate Banking Committee hearing. Sen. David Vitter (R-La.), agreed, saying it was odd Fannie and Freddie are “nowhere on the radar.” Committee Democrats avoided discussing the GSEs’ absence from the plan (American Banker Oct. 9). Taxpayers will have to eat the GSEs’ losses, said Peter Wallison, American Enterprise Institute fellow. Also during the hearing, Sen. Tim Johnson (D-S.D.) asked William Shear, Government Accountability Office (GAO) director of financial markets, how the proposed reform would affect mortgages. The GSE structure addressed regional disparities in mortgage rates, Shear said. The current financial system is large and diverse...a return to regional disparities is unlikely, he added ... * WASHINGTON (10/12/09)--Rep. Darrell Issa (R-Calif.) has challenged the Federal Reserve Board and the Treasury Department to explain documents indicating the government was aware of $3.6 billion in bonuses Merrill Lynch distributed, despite earlier claims that the government didn’t know about the bonuses (American Banker Oct. 9). Joe Price, the bank’s chief financial officer, said he gave the Treasury and the Fed documents about the bonuses on Dec. 17. Former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke have said they did not know about the bonuses prior to Merrill’s merger with Bank of America. The company wasn’t hiding information from the government, Issa said in a letter to Bernanke and Paulson. If the bonuses were unfair, the government should have raised questions or objected before the company gave out another $20 billion of taxpayer money, Issa said ...

CUNA moves forward on alternate capital proposal

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WASHINGTON (10/12/09)—The Credit Union National Association (CUNA) is moving forward with a proposal to the National Credit Union Administration on additional capital for credit unions as a result of an agreement with the National Association of Federal Credit Unions(NAFCU). Under the proposal, credit unions would be allowed to obtain alternative capital from their members and limited other sources, according to CUNA President/CEO Dan Mica. Mica said Friday, “This proposal has potential for giving credit unions access to additional strength to help them weather economic downturns and other strains on their capital base. It is the result of careful consideration that began with the CUNA board meeting in Estes Park, Colo., last month, and subsequent discussions with NAFCU.” Mica added that the proposal will soon be forwarded to NCUA for its review and concurrence. “With CUNA and NAFCU now in agreement, CUNA strongly believes that the agency has an opportunity to act with Congress in this current environment,” CUNA’s leader said. He noted that CUNA will also be working with the National Association of State Credit Union Supervisors on the proposal. The proposal would allow credit unions to accept and count as capital funding from such sources as:
* Members of the credit union; * Sponsors and member select employee groups of CUs; and * Assistance provided to credit unions by government in limited circumstances (such as Section 208 assistance).
In each of these cases, the additional capital would not be federally insured and could pay a higher return on interest. The additional capital would also be subordinated to other claims against the credit union. “We are hopeful the NCUA can soon review this proposal, so that the credit union movement can move forward in a united fashion in presenting it to the Congress for full consideration,” Mica said. “In today’s financial climate, we feel an urgency and opportunity exists for congressional action to assist the nation’s credit unions in best serving their members.”

NCUA chair to testify on state of the industry

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WASHINGTON (10/9/09)--Deborah Matz will make her first appearance before Congress as National Credit Union Administration Chairman during an October 14 Senate financial institutions subcommittee hearing on the state of the banking industry. The hearing, which will take place at 2:30 p.m. ET in room 538 of the Dirksen Senate Office Building, will also feature testimony from Federal Deposit Insurance Corporation Chairman Sheila Bair, Comptroller of the Currency John Dugan, Federal Reserve Governor Daniel Tarullo, Office of Thrift Supervision Deputy Director, Examinations, Supervision, and Consumer Protection Timothy Ward, and North Carolina Commissioner of Banks and Conference of State Bank Supervisors Chairman Joseph Smith. While the financial regulatory reform debate continues in Washington. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said recently that any plan to combine financial institution regulation under a single regulator would not apply to credit unions.

Fed further amends check processing operations

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WASHINGTON (10/9/09)—The Federal Reserve on Thursday announced that on October 17 it will transfer its check processing operations from the head office of the Federal Reserve Bank of Dallas to the Federal Reserve Bank of Cleveland. The Fed announced that effective November 14 it will also transfer to Cleveland the check processing operations of the Los Angeles branch of the Reserve Bank of San Francisco. The moves reflect an overall restructuring of the Fed’s check processing operations, and are a response to consumers’ and businesses’ shift from using paper checks toward electronic payments. According to the Fed, all check processing will be handled by the Cleveland office by early next year. For the full Fed release, use the resource link.

Inside Washington (10/08/2009)

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* WASHINGTON (10/9/09)--The Federal Housing Administration (FHA)--which insures mortgages with low down payments--may need a government bailout, Bloomberg.com reported Thursday. FHA has $54 billion more in losses than it can handle, said a former Fannie Mae executive. The agency may need a bailout in two to three years, said consultant Edward Pinto. FHA’s volumes have quadrupled in the last three years as private insurers and lenders scale back in a struggling housing market. However, FHA Commissioner David H. Stevens said the agency doesn’t need a bailout. FHA’s reserves exceed more than its insurance--$30 billion, he said. About 14.4% of FHA’s loans were delinquent as of June 30, and 2.98% were in foreclosure, according to the Mortgage Bankers Association ... * WASHINGTON (10/9/09)--Fannie Mae and Freddie Mac will likely incur steeper funding costs if the Federal Reserve Board stops purchasing debt and mortgage-backed securities from the enterprises and the Federal Home Loan Banks March 31, financial observers say. The Senate Banking Committee was scheduled to meet Thursday to discuss the enterprises’ future and what role they would take in the mortgage markets after the economic crisis passes. If the Fed stops buying debt and securities in the first quarter, it will be a mistake because the change could drive up interest rates, said Joe Murin, managing director of the Collingwood Group. The Fed has said it would buy $1.25 trillion of mortgage-backed securities and $200 billion of debt from Fannie and Freddie. So far, the central bank has bought $882.6 billion in mortgage-backed securities and $131.2 billion in debt (American Banker Oct. 8) ... * WASHINGTON (10/9/09)--The delay on enacting regulatory reform of the financial services sector may not be a bad thing, according to Sheila Bair, Federal Deposit Insurance Corp. (FDIC) chairman (American Banker Oct. 8). It could give the nation extra time to find the roots of the crisis, Bair said during a speech Tuesday. She supports an Obama administration plan to create a consumer protection agency, although she has said it should not have oversight over banks. Rather, it should focus on nonbanks that made subprime loans--which triggered the financial crisis. Also on Tuesday, Bair said bank failures would probably continue through 2010. Banks are still working through loans they shouldn’t have made. Regulators want lending to continue, but only prudent lending, she said ... * WASHINGTON (10/9/09)--A plan to regulate over-the-counter derivatives has divided regulators and House Financial Services Committee Chair Barney Frank (D-Mass.). During a Wednesday hearing, regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) said Frank’s bill was too weak. He acknowledged the criticism and said he would make some changes. He said he was unsure about a concern regarding a provision to allow end users to enter into derivatives contracts without using a clearinghouse. Market participants should be able to profit off of derivatives, Frank said. Also during the hearing, CFTC Chair Gary Gensler suggested ways to improve the bill. Standardized derivative contracts should be traded on electronic trading platforms or exchanges, he said. He also said that instead of having regulators require clearance of standard derivatives, lawmakers should enforce clearance. Frank’s bill also left out some regulatory oversight, according to Henry Hu, SEC director of the division, risk, strategy and financial innovation. Frank said he could accommodate requests, but did not want to require that end users clear standard derivatives. The Obama administration also has drafted a derivatives bill. The legislation is tougher than Frank’s because it would not give banks and others much flexibility to avoid using a clearinghouse for derivatives hedged for risk ...

CFPA up for Oct. 14 committee vote

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WASHINGTON (10/9/08)—The discussion draft of the Consumer Financial Protection Agency (CFPA) Act of 2009 (H.R. 3126) is among four bills slated for a vote by the House Financial Services Committee on Oct. 14. Also on the committee’s list: H.R. 3606, to amend the Truth in Lending Act to make a technical correction to an amendment made by the Credit CARD Act of 2009. In a recent letter, the Credit Union National Association (CUNA) urged lawmakers to support H.R. 3606, introduced by Rep. Peter Welch (D-Vt.). The legislation would change troublesome Section 106 of the CARD Act, a provision that prohibits creditors from treating payments as being late unless the creditor adopts reasonable procedures to ensure that periodic statements are mailed or delivered to the consumer no later than 21 days before the payment due date. Regarding the CFPA proposal, CUNA has expressed credit union concerns to legislators over the examination and enforcement authorities that could be conveyed to the CFPA. CUNA also seeks clarification that the chairman of the National Credit Union Administration will be given a seat on the CFPA Oversight Board and direction that the CFPA director would take into account disclosure requirements under other laws in order to enhance consumer compliance and reduce regulatory burden. Also up for a committee vote next Wednesday are:
* Discussion draft of the Over-the-Counter Derivatives Markets Act of 2009; and * H.R. 3763, to amend the Fair Credit Reporting Act to provide for an exclusion from Red Flag Guidelines for certain businesses.

Altering interchange fees could reduce consumer choice CUNA testifies

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WASHINGTON (10/9/09)--Testifying on behalf of the Credit Union National Association (CUNA), Local Government FCU Executive Vice President Mark Caverly told legislators assembled at a Thursday hearing on interchange fees that changing those fees would “reduce consumer choice for payment options, allow merchants to discriminate against credit unions and other small issuers,” and allow merchants to assess deceptive and perhaps illegal surcharges on their customers.
Click to view larger image Testifying on behalf of CUNA, Mark Caverly told legislators that changing interchange fee systems would limit options for consumers. Pictured right: CUNA's Ryan Donovan.
Addressing the general use of interchange fees among credit unions, Caverly in prepared remarks told the lawmakers that the proceeds from interchange fees help support their card programs and “cover some of the costs associated with risk of non-payment that the card issuers assume, the risk of fraud and other data breaches that occur at merchants, and the administrative costs of the program.” “In short, the benefits merchants receive from accepting our cards far exceeds any interchange fees we receive,” he added. Caverly’s credit union, which is based in Raleigh, North Carolina, currently holds $957 million in assets from 178,000 members, and issues 173,000 debit cards and 16,000 credit cards. LGFCU receives just over 14% of its monthly income from interchange fees, Caverly added. Caverly questioned the motives of merchants and associated groups that seek to avoid paying their fair share of transactions, and opined that some merchant organizations may be trying to “drive credit unions… out of the payment card business.” Portions of the act which would abolish the ““honor all cards” rule would, if passed, create “mass confusion” for customers and would “make it impossible” for Caverly’s credit union to attract or retain members through a “competitive card program” for consumers. Additionally, while merchants and merchant groups have decried interchange fees as overly costly, Caverly said that the fees have remained “relatively flat” over time. Rep. Jeb Hensarling (R-Texas) expressed caution that both H.R. 2382 and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009 , which was discussed during a later portion of the hearing, could “exacerbate” the credit crunch at a time when small businesses are already having difficulty getting access to credit. However, Rep. Peter Welch (D-Vt.) spoke up in favor of H.R. 2382, which he introduced, saying that the legislation represented “basic fairness and reasonable regulation of credit card and large bank practices.” Rep. Bill Shuster (R-Pa.) also lent his support to both pieces of legislation, saying that “action is needed to help level the playing field between consumers, small businesses, and credit card companies by requiring greater transparency and prohibiting unfair and abusive practices when it comes to interchange fees.” While she said that she understands the opposition of credit unions and small banks to any interchange fee changes, Rep. Maxine Waters (D-Calif.) said that there “have to be some changes” to the current interchange fee structure. While the “overall problems and abuses” of the interchange fee system trump some of the issues cited by credit unions and small banks, Waters promised to take their concerns into account as legislation moves forward.

CARD Act audio call offered Oct. 20

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WASHINGTON (10/8/09)—The Credit Union National Association (CUNA) on Oct. 20 will hold an audio conference call on portions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that will become effective on Feb. 22, 2010. Topics covered during the audio conference call will include portions of the CARD Act addressing minimum payment warnings on credit card statements, some interest rate increase prohibitions, and portions of the act that require co-signors for cardholders that are under the age of 21. Additional requirements of this portion of the CARD Act will also be discussed during the call, which will be led by CUNA Senior Assistant General Counsel Jeff Bloch. The call will also feature commentary from Federal Reserve representative Benjamin Olson, PSCU Financial Services’ Steve Salzer, CUNA associate Michael McLain, and UW Credit Union Chief Credit Officer Mike Long. To register for the 90-minute, 2:00 p.m. (ET) audio conference, use the resource link.

Interchange fees help consumer choice CUNA will testify today

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WASHINGTON (10/8/09)--Both interchange fees and the Credit Card Accountability, Responsibility and Disclosure (CARD) Act will be discussed in a hearing before the House Financial Services Committee today, with Mark Caverly, executive vice president of Raleigh, N.C.-based Local Government FCU testifying on behalf of the Credit Union National Association (CUNA) and the Electronic Payments Coalition (EPC). In prepared testimony, Caverly said that the current card payment system allows his credit union to grant its members “the opportunity to deal with a local institution they know and trust” while also “gaining access to a global payments system,” and also allows his credit union to “compete with the largest financial institutions” while addressing the “expenses and responsibilities” of a credit card program. The hearing will focus on H.R.2382, the Credit Card Interchange Fees Act of 2009, which would aim to limit so-called unfair practices in electronic payment systems, and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would move up the effective date of some portions of the CARD Act to December of this year. Commenting on H.R. 2382, the EPC in a recent release called that legislation “one of the most egregious assaults on consumer protection that this country has seen in some time.” The bill, which the EPC said “details precisely how consumers would end up paying more,” is an outlet for retailers to continue to use a service that brings them “more sales, higher profits and reduced acceptance,” while leaving their customers to “pick up the tab.” CUNA has publicly opposed any interchange fee legislation, saying that any restrictions on interchange fee negotiation would ultimately harm consumers by limiting options and hindering competition and technological innovation. H.R. 3639 will set an earlier effective date for the CARD Act and would push forward the effective dates for CARD Act provisions addressing gift cards, reviews of past consumer interest rate increases, and requirements addressing the penalties and fees that can be assessed to credit accounts to Dec. 1. While CUNA is not scheduled to testify on H.R. 3639, CUNA did express opposition to the bill in a letter sent Wednesday to Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.). In the letter, CUNA stated that the accelerated compliance timetable presented in H.R. 3639 may “raise even greater compliance concerns for credit unions,” as they “do not typically run their own credit card operations” and “cannot simply pour more resources into their programs to comply on short notice.” Credit unions would also need greater leeway to test some of the data processing changes associated with implementation of the CARD Act, CUNA President/CEO Dan Mica added. Other witnesses scheduled to testify at the hearing include Independent Community Bankers of America representative Ann Duplessis and National Association of Federal Credit Unions President/CEO Fred Becker. Several retail and banking industry representatives and academics are also scheduled to appear during the hearing. To read the CUNA letter in full, use the resource link.

Changes to CARD Act in view

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WASHINGTON (10/8/09)--The Credit Union National Association (CUNA) has advised leaders of the House Financial Services Committee that credit union members may face increased costs and reduced services if technical corrections to the Credit Card Accountability, Responsibility and Disclosure (CARD) Act are not made. In a letter sent Wednesday to the committee chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.), CUNA President/CEO Dan Mica reiterated that credit unions are “currently reeling from an unintended consequence of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act,” enacted earlier this year. In the letter, CUNA advocates that legislators support H.R. 3606, which was recently introduced by Rep. Peter Welch (D-Vt.). This legislation would change troublesome Section 106 of the CARD Act, a provision that prohibits creditors from treating payments as being late unless the creditor adopts reasonable procedures to ensure that periodic statements are mailed or delivered to the consumer no later than 21 days before the payment due date. As written, the section applies to all open-end loans, including general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and other forms of loans, not just credit cards. Welch’s bill would insert the words “a credit card account under” into Section 106, thereby removing its application from the other forms of open-end credit. CUNA believes the provision was originally intended to cover only credit card accounts and was inadvertently changed during the legislative process. CUNA has highlighted some of the problems faced by credit unions due to the current structure of the CARD Act provision. One example given in the letter was an increase in costs associated with an inability to provide credit union members with consolidated billing statements, a change that Mica estimated could cost credit unions as much as $2.25 per month per loan. Credit union members may also lose the right to choose their payment date and would see changes to the terms of their home equity lines of credit if the CARD Act legislation is not altered, according to CUNA. "We hope the Committee will agree that a technical correction is appropriate and will support passage of technical corrections legislation as quickly as possible,” Mica wrote. To read the full letter, use the resource link.

Inside Washington (10/07/2009)

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* WASHINGTON (10/8/09)--Bank of America Corp. announced Tuesday that it would not reprice its customers’ credit card accounts after consumers expressed concerns about the change in terms of consumer credit card accounts between now and the effective date of the Credit Card Accountability, Responsibility and Disclosures (CARD) Act. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) applauded the move, saying that more credit card companies should do the same (American Banker Oct. 7). The announcement precedes a hearing scheduled for today in the House Financial Services Committee, which will discuss moving up the date of the CARD Act’s effective date ... * WASHINGTON (10/8/09)--It’s unlikely that many banks will receive a waiver from the prepayment assessments the Federal Deposit Insurance Corp. (FDIC) has imposed on financial institutions to bolster the reserves of the Deposit Insurance Fund. The FDIC said it would give distressed institutions a waiver, but financial institutions said applying for a waiver could bring their troubles to light (American Banker Oct. 7). The FDIC has said it would not disclose names of institutions asking for waivers. The waivers could be especially problematic for institutions that are publicly traded and under Securities and Exchange Commission rules, said John Douglas, former FDIC counsel. In addition, banks may not want to make the case to regulators that they’re having problems, said Kip Weissman, partner at Luse Gorman Pomerenk and Schick PC ... * WASHINGTON (10/8/09)--The League of Southeastern Credit Unions went to Washington, D.C., for its first Hike the Hill events Sept. 30 and Oct. 1. Participants included credit union and league staff. During the hike, the league met with the entire Alabama congressional delegation and 23 of 27 members of the Florida delegation.
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Hill hikers discussed the Credit Card Responsibility, Accountability and Disclosures Act; overdraft protection; interchange fees; maintaining the National Credit Union Administration’s independence as the sole credit union regulator; member business lending; and preventing Community Reinvestment Act requirements from being applied to credit unions. From left are: Mark Landreth, league senior vice president of governmental affairs; Rich Simonton, CEO, Insight Financial CU, Orlando, Fla.; Patrick La Pine, league president/CEO; Rep. Bill Posey (R-Fla.); Justin Thames, league political action coordinator; and Tom Gannon, senior legislative representative, Credit Union National Association. (Photo provided by the League of Southeastern Credit Unions) ...

Presidents council on fin lit to meet Nov. 3

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WASHINGTON (10/8/09)--The President's Advisory Council on Financial Literacy has scheduled an open meeting for Nov. 3 to discuss the council's priorities and how it can best advise the President and the Secretary of the Treasury. According to a Federal Register announcement of the meeting, a Treasury official also will provide an update about the status of the recommendations made by the advisory council in January 2008. The 19-member advisory panel was established under then-President George W. Bush. The National Endowment for Financial Education (NEFE)—the Credit Union National Association's partner in expanding financial literacy education throughout U.S. schools--was named as member to the new board. At the inaugural meeting in February 2008, NEFE CEO Ted Beck told the council that NEFE's High School Financial Planning Program (HSFPP) has reached more than 800,000 high school students. He also noted NEFE's efforts to create a pilot program for college students. CUNA’s own Financial Literacy Task Force has found that credit unions have been strong backers of financial literacy efforts. At the time the President’s council was launched, a CUNA poll found that nearly 80% of responding credit unions with assets of $10 million or more offered financial education to adults or youth. To participate in the advisory council session, please refer to the Federal Register link below.

CUNA Improvements still possible in CFPA mark up

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WASHINGTON (10/8/09)—With a mark up on Consumer Financial Protection Agency (CFPA) legislation expected next week, the Credit Union National Association (CUNA) continues to work with Capitol Hill staff of credit union concerns regarding the planned new agency. CUNA Senior Vice President of Legislative Affairs John Magill has noted that House Financial Services Committee Chairman Barney Frank (D-Mass.) continues his interest in discussing possible changes to the bill, H.R. 3216, the Consumer Financial Protection Agency Act. CUNA has been circulating alternative language to the bill that would address credit union issues such as the CFPA’s impact on examinations, enforcement, preemption of existing rules, and regulatory burden. “Chairman Frank is holding his cards close to his chest regarding what changes he would or would not allow in mark up,” Magill said. “So we continue to work with members of the committee in preparation for the committee’s vote.” In general, H.R. 3216 seeks to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools, an idea that was introduced by the Obama administration earlier this year. Frank has circulated some possible changes to the bill, such as eliminating a requirement that financial institutions offer so-called "plain vanilla" financial products, as well as language that would prevent the proposed CFPA from approving or changing the business plans of a financial institution under the agency's oversight. While Frank's legislative changes, which have been circulated via a discussion draft, would still allow the CFPA to require financial institutions to provide improved disclosures to their consumers, non-financial businesses, including merchants, retailers, and other non-finance-related businesses would not come under the CFPA.

NCUA releases 2010 open meeting schedule

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ALEXANDRIA, Va. (10/8/09)--The National Credit Union Administration (NCUA) has set its 2010 monthly board meeting schedule. The three-member NCUA board routinely meets the third or fourth week of each month, except August, when no meeting is scheduled. Specific dates for 2010 NCUA Board meetings follow:
* January 29 * February 18 * March 18 * April 29 * May 20 * June 17 * July 15 * No August meeting * September 16 * October 21 * November 18 * December 16
The Board meeting schedule is subject to change. Use the resource link below to view the calendar online.

Inside Washington (10/06/2009)

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* WASHINGTON (10/7/09)--The Department of Veterans Affairs (VA) has asked financial institutions to honor emergency advance education payments that have been issued as checks from U.S. Bank. These checks, which began being issued last Friday, are for combat veterans to pay their educational benefits for the 2009 school term, and will be accompanied by a letter from the VA that validates the legitimacy of the check. According to the Credit Union National Association, some credit unions have questioned the validity of these checks, as they are drawn to U.S. Bank rather than the Department of the Treasury, as usual. Financial institutions that want to verify a given check may do so by contacting the VA at 1-800-827-2166. Additional contact information may be found at www.va.gov .... * WASHINGTON (10/7/09)--The financial services industry needs to either support a proposed consumer protection agency, or prepare to be overrun by individual financial reforms that would affect credit cards, overdrafts and interchange fees, policy analysts say (American Banker Oct. 6). Bankers continue to oppose the creation of a consumer agency, but House Financial Services Committee Chairman Barney Frank (D-Mass.) said last month they need to pick their battles. Frank said he plans to continue pushing individual reforms until an agency is created. The chairman also is conducting a hearing Thursday on card reform and interchange fees. Meanwhile, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is expected to introduce legislation that would restrict overdraft fees. Consumer advocates say policymakers should keep pressure on the banks. The credit card industry “deserves a kick in the head for what they are doing,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. If Frank wants to go “a la carte” for awhile on reforms, he has the group’s support, Mierzwinski added ... * WASHINGTON (10/7/09)--A version of a derivatives regulation bill, by House Financial Services Committee Chairman Barney Frank (D-Mass.), would give financial institutions and others more flexibility to use derivatives for hedging purposes without sending them through a clearing house. In comparison, a Treasury draft of a bill submitted to Congress in August would require all end user firms to use a clearing house unless they could show the derivative would be used to hedge against risk. Though Frank’s bill is more flexible, larger banks may not support it because they would still have to fulfill clearing and exchange-trading requirements (American Banker Oct. 6). Financial observers also say it would hurt dealers’ profits. The bill appears to have won the support of moderate Democrats, but it’s unclear what members of the House Agriculture Committee, which oversees the Commodity Futures Trading Commission (CFTC), think about the matter. A hearing is scheduled for today to further discuss the bill. CFTC Chairman Gary Gensler is slated to testify ...

Federal consumer panel meeting to focus on CARD Act

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WASHINGTON (10/7/09)--The Federal Reserve Board’s Consumer Advisory Council (CAC) has scheduled proposed rules to implement the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 as one of several topics of discussion for its next meeting, which will take place on Oct. 22. According to the Fed’s notice, the complete CAC agenda also includes discussion of proposed rules regarding disclosures related to closed-end mortgages and home-equity lines of credit and potential consumer protections for home-secured credit. Foreclosure issues will also be discussed during the meeting, with a particular focus falling on loss mitigation efforts, the Obama administration’s Making Home Affordable program, and other topics. Other items may be added to the agenda, if requested by CAC members. Parties that wish to present their views to the CAC on these topics may send written statements to Jennifer Kerslake, Secretary of the Consumer Advisory Council, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. The Credit Union National Association earlier last month nominated American Southwest CU President/CEO Brian Barkdull to represent credit union interests on the 30-member CAC panel.

New Web page celebrates creation of CUNA

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WASHINGTON (10/7/09)--Videos of the inspirational speeches given at the 75th anniversary of the founding of the Credit Union National Association (CUNA), recorded by CUNA staff, are now up and ready for viewing on the CUNA website. The speeches and a recreation of a historic photo of CUNA's founders took place at the Sept. 16 commemoration of CUNA’s founding. Current credit union leaders and descendants of credit union pioneers met in Estes Park, Colo., the original location where American credit union pioneers developed and ratified the original CUNA charter three-quarters of a century before. The commemoration of CUNA’s founding was marked by speeches, a celebratory toast, dedication of a new plaque commemorating the founding of the nation’s largest credit union organization, and the restaging of an iconic photo of CUNA founders taken in 1934, featuring credit union movement officials, supporters and officers of today. Speaking at the event were CUNA President/CEO Dan Mica; CUNA Chairman Kris Mecham; American Association of Credit Union Leagues Chairman Rosie Holub; Kathy Pelletier, granddaughter of CUNA founder and first Managing Director Roy F. Bergengren; and Catherine and Bill Herring, children of CUNA founder and movement pioneer Louise McCarren Herring. The videos, as well as a downloadable photo of those who joined to recreate the iconic photo of the founders of CUNA, can be viewed at the new CUNA web page. To view the new web page, use the resource link.

Mica touts CU difference in Bloomberg TV interview

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WASHINGTON (10/7/09)--Public demand and congressional action could force banks to adopt many of the conservative, pro-consumer business practices currently employed by credit unions, but credit unions will still be “driven by a different motive” than that of banks, Credit Union National Association President/CEO Dan Mica said during a Monday appearance on Bloomberg TV.


While banks will never be confused with credit unions, they may have to “pay more attention to what consumers want and not just what shareholders want,” Mica added. Mica also commented on the democratically owned-and-operated nature of credit unions, which is “clearly very different” from the way that the shareholder-beneficial banking industry is set up. More specifically, Mica highlighted the beneficial lending and mortgage rates that credit unions have always provided to their members, as well as the strong 10% capitalization ratios that are currently held by credit unions. Mica also touted recent increases in mortgages, which are up by 8% for credit unions, and member business lending, which he said has increased by 14%. “All in all, we are out there lending, and that is what this economy needs,” Mica added. While the exact format of the proposed Consumer Financial Protection Agency will likely change as it moves through the legislative process, Mica said that Congress “will almost certainly get something out,” as there is a strong will among some congressional leaders, Treasury Secretary Timothy Geithner, and President Barack Obama to create the new agency.

Online NCUA Town Hall set for Oct. 22

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ALEXANDRIA, Va. (10/6/09)—The National Credit Union Administration reported that more than 130 attended its final of three Town Hall-style meetings to gather credit union comment on regulatory issues. The final meeting was held yesterday in San Diego, Calif. For those unable to attend any of the live Town Hall meetings, NCUA Chairman Deborah said she will host an online webinar Oct. 22 at 3 p.m. Sign up information will be posted on the NCUA website later this week. Matz said in a release that she considered the live meetings “invaluable in providing a forum for real dialogue and genuine input to the regulatory process." Matz added, "As NCUA moves forward with rulemaking on corporates, I am confident that the information and suggestions garnered will become a key ingredient in what I expect to be a strong and durable new rule. And the discussions regarding the variety of other relevant issues such as member business loans, the examination process and alternative capital have added new dimensions to our assessment of those topics as well." The first live meeting was held in St. Louis, Mo. on Sept. 15, and the second last week in National Harbor, Md., which is in the Washington, D.C. area.

CUNA backs lawmakers urging for UIGEA delay

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WASHINGTON (10/6/09)—At a time of economic crisis, it is too great a burden on regulators and the financial services industry to move ahead with rules to implement the Unlawful Internet Gambling Enforcement Act (UIGEA), according to a bi-partisan coalition of 19 lawmakers. House Financial Services Committee Chairman Barney Frank (D-Mass.) and 18 other members of that panel sent an Oct. 1 letter to the heads of the U.S. Treasury Department and the Federal Reserve Board, the agencies charged with implementing UIGEA. The lawmakers requested the UIGEA effective date be pushed back a year. Credit Union National Association (CUNA) President/CEO Dan Mica Monday applauded the committee’s letter urging delay. “While CUNA supports efforts to eliminate payments to unlawful Internet gambling businesses, we have consistently raised concerns about impractical aspects of UIGEA,” Mica said in a letter addressed to Frank and circulated to Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke, as well as National Credit Union Administration Chairman Deborah Matz. Under the Internet gambling law, credit unions, as well as other financial institutions, must establish and implement policies and procedures to identify and block restricted transactions, or rely on those established by the payments system. In the committee’s letter to Geithner and Bernanke, the lawmakers acknowledged that the regulators did not seek the task of implementing what has always been a controversial law. “We…believe this is an unreasonable burden on regulators and the financial services industry at a time of economic crisis, and it contradicts the stated intent of the Financial Services Committee,” the letter stated. CUNA opposes the agencies' draft implementation proposal. Also, CUNA testified against the plan at a House Financial Services Committee hearing in April. CUNA witness Harriet May, president/CEO of GECU, El Paso, Texas, reiterated CUNA's concerns that aspects of the proposal would be difficult, if not impossible, to implement. May also said financial institutions could be swamped by the compliance burdens associated with UIGEA. The current plan to implement the complicated law, she said, lacks clarity and sufficient definition of terms. The lawmakers’ correspondence also referenced H.R. 2266, a currently pending bill that would push the UIGEA compliance date back to Dec. 1, 2010—one year from the current date. Without predicting the outcome, the letter states, “We believe this legislation is likely to move.”

Inside Washington (10/05/2009)

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* WASHINGTON (10/6/09)--A delegation of 16 individuals representing 15 credit unions recently spent two days in Washington, D.C., lobbying legislators as a part of the Illinois Credit Union League’s annual "Hike the Hill” event. The delegates attended a presentation by Rep. Peter Roskam (R-Ill.) at Credit Union House, and participated in a briefing with Credit Union National Association legislative and public affairs staff.
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The credit union representatives then traveled to Capitol Hill to meet with their lawmakers and discuss their opposition to interchange fees and Community Reinvestment Act regulation for credit unions. They also talked about support for increasing member business lending caps and maintaining the National Credit Union Administration (NCUA) as the independent federal credit union regulator. In addition, the group met with Sen. Richard Durbin (D-Ill.) and attended an NCUA board meeting. “Our political success over the years has been due in large part to organized events to educate lawmakers about credit unions,” said Dan Plauda, Illinois league president/CEO. “This year’s ‘Hike the Hill’ was another opportunity for attendees to visit their federal lawmakers and NCUA regulatory officials to maintain a strong political and regulatory future.” Pictured are the Illinois representatives in front of Credit Union House. (Photo provided by the Illinois Credit Union League) ... * WASHINGTON (10/6/09)--House Financial Services Committee Chairman Barney Frank (D-Mass.) circulated a discussion draft of legislation that would regulate over-the-counter (OTC) derivatives. Frank also said that the committee will schedule a hearing for Wednesday to discuss the reform of the OTC derivatives market and the discussion draft, which was released Friday ... * WASHINGTON (10/6/09)--Financial services representatives are debating whether a single bank regulator could threaten the dual banking system (American Banker Oct. 5). Community bankers and Federal Deposit Insurance Corp. Chairman Sheila Bair say that a single regulator would focus attention on the nation’s largest institutions, which could disadvantage smaller banks. They also argue that eventually, banks would not have a reason to opt for a state charter since they would have an additional regulator but no benefits of a national charter. However, single regulator proponents--like Senate Banking Committee Chair Christopher Dodd (D-Conn.)--say that a single regulator can be created without disadvantaging small financial institutions. The end of a dual banking regulator is just a scare tactic, said Lawrence Kaplan, a lawyer at Paul, Hastings, Janofsky and Walker LLP. It’s unlikely anyone would get rid of state regulation, he said. Kip Weissman, a partner at Luse Gorman, added that a single regulator would weaken the state charter, so companies would switch to a federal charter. However, Doug Elliot, Brookings Institution economic studies fellow, said the concerns are just a “resistance to change.” Dodd has assured credit unions that plans for a single regulator would not apply to credit unions (News Now Sept. 30) ...

Congress this week CUNA to testify on interchange CARD Act

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WASHINGTON (10/6/09)—Among items of interest on Capitol Hill for credit unions this week, Mark Caverly of Local Government FCU is scheduled to testify Thursday at a hearing on interchange fees. He will speak on behalf of the Credit Union National Association (CUNA) and the Electronic Payments Coalition. Caverly, executive vice president of the Raleigh, N.C.-based credit union, will testify before the House Financial Services Committee on H.R.2382, the Credit Card Interchange Fees Act of 2009 and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. The proposed interchange bill would amend the Truth in Lending Act to prohibit certain electronic payment system network practices and required increased disclosures. The Credit Union National Association (CUNA) has publicly stated that changing the current interchange fee structure, as some merchants, including 7-Eleven, have promoted doing, would adversely limit consumer options, competition and technological innovation. CUNA believes interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants and discussions regarding what value should be placed on the use of electronic payments should be within the purview of the industry participants. Legislation that would allow merchants to negotiate interchange fees has also been introduced in the Senate, but it is expected that neither H.R. 2382 nor the Senate-based legislation will be brought up for a vote during the fall session. Regarding H.R. 3639, that bill would move up the effective date of some portions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to December of this year. Bill sponsor Rep. Carolyn Maloney (D-N.Y.) has said that the "breadth and depth" of interest-rate hikes that credit card companies are imposing ahead of the full imposition of the CARD Act points to the need for "faster consumer protections." Ryan Donovan, CUNA vice president of legislative affairs, has said the outlook for the legislation is uncertain. "The legislation seeks to move a February effective date up to this December, which is only about 10 weeks from now. In order for the bill to become law in that timeframe, it would seem that the bill would need to move through the legislative process at incredible speed," he noted. Other items of credit union interest on Capitol Hill this week included:
* On Tuesday, a Senate Small Business and Entrepreneurship Committee hearing titled The Recovery Act for Small Businesses: What is Working and What Comes Next?; * On Wednesday, a Senate Banking subcommittee hearing titled Securitization of Assets: Problems and Solutions; * On Thursday, in addition to Caverly’s appearance before House Financial Services, the Senate Banking Committee hearing will look at "The Future of the Mortgage Market and the Housing Enterprises”; and * On Friday, a different Senate Banking subcommittee has scheduled a hearing on the topic of restoring credit to manufacturers.
CUNA is a member of the Electronic Payments Coalition.

Inside Washington (10/02/2009)

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* WASHINGTON (10/5/09)--In a move to put Republicans on the defensive, House Financial Services Committee Chair Barney Frank (D-Mass.) said at a Thursday hearing that the Federal Reserve Board would benefit the most from their opposition to a consumer protection agency. The legislation being pushed by some Democrats would rid the Fed of its consumer protection powers in favor of a separate agency to oversee financial products and services in the market. The Fed has not taken a side on the matter, but it would lose part of its staff if the proposal passes (American Banker Oct. 2). Rep. Spencer Bachus (R-Ala.) said that Republicans do not oppose taking consumer protection responsibilities from the Fed. Rather, they oppose vesting the consumer protection powers into a new agency, which could limit choice. Bernanke said a more comprehensive approach to regulation is needed, and all federal financial supervisors and regulators should monitor risks in the financial system as part of their oversight responsibilities ... * WASHINGTON (10/5/09)--Jeffrey B. Kindler and James S. Tisch have been elected to the Federal Reserve Bank of New York board as class B directors, the bank announced Thursday. Kindler will serve the unexpired portion of a three-year term until Dec. 31, and Tisch will serve the unexpired portion of a three-year term until Dec. 31, 2010. Kindler is chairman and CEO of Pfizer. Tisch is president/CEO of Loews Corp. The New York Fed board of directors has nine members, three of whom are appointed as Class C directors. The remaining six are Class A and B directors. Class A directors are drawn from the banking community, while Class B and C directors are chosen from outside the business community, and typically represent business, industry, agriculture, labor or consumers ... * WASHINGTON (10/5/09)--National Credit Union Administration (NCUA) board member Michael Fryzel was named Honorary Grand Marshal of the Pulaski Day Parade held in honor of Polish General Casmir Pulaski, on Sunday. Fryzel is the first Polish American to be named to the NCUA board and to serve as chairman. He was presented with a plaque for his dedication and support of the credit union movement and his role int the parade. Fryzel also acknowledged the work by Polish and Slavic FCU in Brooklyn, N.Y. “The credit union exemplifies what credit unions do best, give back to the community and provide the support for all types of events,” he said. “They provide scholarships, support cultural events and continue to serve their members and meet their financial needs. I commend them for their efforts.” From left are: Bodgan Chmielewski, CEO of Polish and Slavic FCU; Curtis Sliwa, CEO of Guardian Angels and grand marshal of the parade; and Fryzel. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (10/5/09)--Staff from the Credit Union National Association (CUNA) and the chairman of CUNA's Accounting Subcommittee, Scott Waite of Patelco CU, San Francisco, recently discussed credit unions' concerns on several current accounting issues--including expansion of the application of fair value when valuing loans and loan-related accounts such as the allowance for loan losses. They also discussed the range of potential difficulties that credit unions could face if the Financial Accounting Standards Board (FASB) makes such changes to fair value accounting standards. During a conference call with FASB Chairman Robert Herz and several senior FASB members, CUNA outlined some of the key differences between financial reporting of credit unions and of other financial institutions. Proposed changes to the fair value rule, which FASB expects to release as an exposure draft in the coming months, are still in development. On the call, CUNA urged Herz to consider the uniqueness of credit unions as the board proceeds through the rulemaking process. One board member asked CUNA representatives how certain exemptions in the rule might affect credit unions. CUNA is encouraged that FASB is at least aware that many smaller institutions, including credit unions, will have difficulty complying with the impending proposed changes to the fair value rule. Although an exact date has not been set, CUNA representatives said that they have been invited to have additional dialogues with the chairman and other members of FASB staff soon. Representing CUNA on the call were Deputy General Counsel and Senior Vice President Mary Dunn and Regulatory Counsel Luke Martone ...

Visa to Congress Ignore merchant interchange claims

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WASHINGTON (10/5/09)--Visa has become the latest financial institution to weigh in on the interchange debate, saying that legislators and the public should not be swayed by the dramatic delivery by 7-Eleven executives of 15,000 booklets of signatures supporting interchange fee reforms. The comments from Visa, reported recently in CardLine, echo the sentiments of the Credit Union National Association (CUNA) and other members of the electronic payment coalition. According to Visa, the merchants push toward interchange fee legislation is more about retailers looking to take advantage of consumers by having them help shift the burden of business costs onto themselves in the form of surcharges. Changing the current interchange fee structure would limit consumer options, competition and technological innovation, according to CUNA. CardLine cited Visa research which found that 78% of consumers said that the benefits of accepting credit and debit cards outweigh the costs of accepting them for many retailers. A report commissioned by MasterCard found that 80% of people who signed the 7-Eleven petition "mistakenly believed" that consumers would benefit from lower interchange rates. (See related story: MasterCard says 7-Eleven misled consumers on interchange)

CUNA N.M. CUs combine forces for campaign school

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WASHINGTON (10/5/09)--The Credit Union National Association (CUNA) last week completed the latest in a series of educational endeavors, holding its New Mexico Campaign School 2009 in conjunction with the Credit Union Association of New Mexico. The campaign school, which is the second held in New Mexico, was attended by a number of state legislators. State campaign veteran Doug Turner, who is a candidate for the Republican Party’s nomination for governor of New Mexico, served as a presenter during the campaign school.
Click to view larger image CUNA Senior Vice President of Political Affairs Richard Gose leads campaign school attendees. (CUNA Photo)
CUNA’s Senior Vice President of Political Affairs Richard Gose and Political Director Trey Hawkins also covered a number of topics during the school, including campaign management, Get-Out-The-Vote targeting, communications and fundraising. Former Democratic Governors Association Deputy Political Director Daniel Sena also appeared as a guest speaker during the one-day event, which was held in Albuquerque. According to Hawkins, the ultimate goal of the campaign schools is to “train future elected officials on how to run professional campaigns and ultimately help elect more credit union members to office.” CUNA’s schools have garnered significant results, with campaign school graduate Betty Ireland moving on to become West Virginia Secretary of State. Other successful campaign school alumni include Sharon Frederick, who was elected to the State of Nevada Board of Education, and Bob Kressig, who was elected to the Iowa State House. CUNA has planned seven more campaign schools for the coming months, and also offers online courses for credit union representatives that are interested in political advocacy.

NCUA announces dual CU closures

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ALEXANDRIA, Va. (10/2/09)--The National Credit Union Administration (NCUA) on Thursday reported that Alaska USA FCU will assume the assets and members of The Members’ Own FCU after Members’ Own accepted Alaska USA’s sale offer. Members of The Members’ Own FCU, which held $85 million-in-assets from 11,000 members, will now be able to take advantage of “a broad array of financial services offered throughout the United States” via $4.1 billion-in-assets, 375,000-member Alaska USA FCU, the NCUA release announcing the purchase said. Alaska USA currently serves its membership via 56 branches in Alaska, California, and Washington, and also does business through a 5,600-unit network of shared branches, according to the NCUA. The NCUA has also announced a second credit union closure, reporting that San Antonio-based Security Service FCU will assume the assets and member shares of West Texas CU, which has been liquidated. The $78 million in assets and 25,000 members of the El Paso, Texas-based credit union will now be served by the $5 billion-in-assets, 680,000 member credit union which serves Air Force members throughout the country. In a release announcing the acquisition, Security Service FCU President/CEO David Reynolds said his credit union was "pleased" to welcome former West Texas CU members to the "family," adding that he looks "forward to serving and being part of the El Paso community."

CUNA issues comment call on HELOC changes

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WASHINGTON (10/2/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the Federal Reserve Board’s issuance of a proposed rule that would amend the disclosure requirements of Regulation Z for home-equity lines of credit (HELOCs). The proposal, which will require creditors to provide specifically designed disclosures for a given consumers credit account, will replace the current generic, one-page HELOC disclosure. The information will also be presented in a tabular format, and creditors will need to present similar information in a similar format at the time of the account’s opening as well. Under the proposal, creditors will also be required to notify consumers of any changes to their account 45 days before those changes are to come into effect. Creditors will also be prevented from terminating any accounts that have not passed a 30-day late payment threshold. Comments are due to CUNA by Dec. 10. Comments solicited by the Fed should be submitted by Dec. 24. To view the CUNA comment call, use the link.

House committee to hold hearing on Interchange CARD Act changes

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WASHINGTON (10/2/09)--The House Financial Services Committee on Thursday announced that it has scheduled for Oct. 8 a hearing on H.R. 2382, the Credit Card Interchange Fees Act of 2009 and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. The Credit Union National Association (CUNA) has publicly stated that changing the current interchange fee structure, as some merchants, including 7-Eleven, have promoted doing, would adversely limit consumer options, competition and technological innovation. CUNA believes interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants and discussions regarding what value should be placed on the use of electronic payments should be within the purview of the industry participants. Legislation that would allow merchants to negotiate interchange fees has also been introduced in the Senate, but it is not expected that H.R. 2382 nor the Senate-based legislation will be brought up for a vote during the fall session. While it is not certain if and when a vote could happen, committee Chairman Barney Frank (D-Mass.) and House colleague Carolyn Maloney (D-N.Y.) recently introduced H.R. 3639, which, if approved, would move up the effective date of some portions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to December of this year. The committee has not announced witnesses for the hearing.

Inside Washington (10/01/2009)

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* WASHINGTON (10/2/09)--Rep. Mel Watt (D-N.C.) criticized banking industry representatives during a House Financial Services Committee hearing Wednesday, saying that they were preventing him from improving a bill that would create a consumer protection agency. Watt, chair of the monetary policy subcommittee, has been viewed as an ally to the banking industry--which has balked at the idea of such an agency (American Banker Oct. 1). At Wednesday’s meeting, Watt accused the bankers of trying to kill the bill instead of improving it. The bankers’ approach to the bill is “exasperating” and change in the financial services industry is needed, Watt said. Rep. Barney Frank (D-Mass.), who is drafting the bill that would create such an agency, said he is confident the legislation would pass. Watt and other lawmakers, including Rep. Melissa Bean (D-Ill.), have indicated they would like to tailor the agency’s proposed powers. Two-thirds of subprime mortgages were originated by nonbank lenders, and because of that, Bean has questioned whether the agency should focus on subprime mortgages ... * WASHINGTON (10/2/09)--National Credit Union Administration (NCUA) board member Michael Fryzel recently visited Great Lakes CU in North Chicago.
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He toured the credit union and discussed credit union issues with Vikki Kaiser, Great Lakes CEO. “It is encouraging to see the efforts being made to meet the financial needs of their members,” Fryzel said. Great Lakes CU has $595 million in assets. From left are: Lorraine Kost, senior vice president of administration; Lee Piekarz, board chair; Kevin Bogac, senior vice president of information systems; Robert Green, director; Kaiser; Fryzel; Yvonne Bailey, vice president of marketing and planning; Bertine Nixon, director; and Kamil Sakici, senior vice president and chief financial officer. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (10/2/09)--Ben Bernanke, Federal Reserve Board chairman, told lawmakers Thursday that the Fed should regulate the nation’s largest financial institutions. The Fed’s experience and power make it well-suited to be a consolidated supervisor for large institutions, Bernanke said. The responsibility for monitoring risk should be given to a council of regulators, including agencies that have power over various financial companies, he said. The council could monitor risks affecting investment banks, commercial and mortgage lenders, and pension and hedge funds (The New York Times Oct. 2). Democratic and Republican lawmakers have expressed skepticism about giving the Fed more power. Some have said they want to reduce the central bank’s power ...

MasterCard says 7-Eleven misled consumers on interchange

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WASHINGTON (10/2/09)—MasterCard Inc. released a study that charges consumers were misled by a 7-Eleven Inc. petition intended to drum up support for interchange fee regulations. On Wednesday, 7-Eleven executives made a dramatic deliver of 15,000 booklets of signatures to federal lawmakers as part of merchants’ push for interchange rate reform. This summer, MasterCard commissioned KRC Research to survey more than 1,000 adults in August and then again in September on interchange issues (American Banker Oct. 1). Seventy-three percent of the respondents, half contacted online, half by phone, agreed with the statement "the cost of accepting credit card payments" is a business cost merchants should bear, and 71% agreed that it is unfair for consumers to pay merchants' expenses for accepting cards. However, 80% of people who signed the petition "mistakenly believed," according to the MasterCard report, that consumers would benefit from lower interchange rates. (See related story: House interchange hearing on Oct. 8)