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Compliance Statements must comply with new overdraft rules Jan. 1

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WASHINGTON (12/16/09)--On Jan. 1, 2010, all credit unions that offer overdraft services will have to comply with new Truth-in-Savings (TIS) requirements for disclosing aggregate overdraft fees on periodic statements. Under the National Credit Union Administration’s (NCUA’s) revised Part 707, all credit unions--not just those that promote overdraft services as previously required—must disclose on periodic statements the aggregate dollar amount totals for “overdraft fees” and for “returned item fees,” both for the statement period as well as for the calendar year-to-date. Banks must comply with similar rules under the Federal Reserve Board’s Regulation DD. The regulations require that the periodic statement disclosure be provided in tabular format, as illustrated in NCUA’s model form B-12. "Credit unions have asked whether they can omit the gridlines in the table, or use alternate terminology to describe the fees disclosed," according to Valerie Moss, CUNA's director of compliance information. "According to both the Fed and NCUA, credit unions must follow the model format--including showing gridlines-- and use the terms 'overdraft fee' and 'returned item fee,' even if the credit union doesn't have a formal overdraft program but still covers overdrafts for a fee," she added. This is intended to help consumers understand which items are overdrafts honored for a fee and which ones are returned unpaid. The TIS regulation also requires account balances disclosed through automated systems, such as ATM, website, or telephone response system, to exclude additional amounts the credit union may provide to cover overdrafts. Credit unions may, however, disclose a second balance that includes funds provided by an overdraft service or line of credit, so long as the institution prominently states that the balance includes these additional amounts. Use the resource links below for more information. Note that in the December Credit Union Magazine article there is an artwork error in Table 1: the gridlines were removed, but should appear in the model form.

Inside Washington (12/15/2009)

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* WASHINGTON (12/16/09)--During a meeting with the heads of the nation’s largest financial institutions, President Barack Obama expressed that he was frustrated with the banks because while their CEOs have said they support financial reform, their lobbyists have resisted. Obama said that there is a large gap between lobbying activities and what he has heard in the White House. “I urged them to close that gap,” he said (American Banker Dec. 15). Administration officials say banks are not lending enough money--especially when it comes to small businesses. Credit unions could inject more than $10 billion into the economy and create more than 108,000 jobs if their member business lending caps were raised, according to Credit Union National Association President/CEO Dan Mica. Currently credit unions can lend no more than 12.25% of their assets. Regarding Monday’s meeting, Mica said: “The very people who met with the president today are the same people who oppose allowing credit unions to help” (News Now Dec. 15) ... * WASHINGTON (12/16/09)--The board of directors of the Federal Deposit Insurance Corp. (FDIC) approved a $4 billion budget for 2010. It also revised the 2009 budget to $2.6 billion. The 2010 budget is an increase of more than 55% from 2009 because of bank failures. The receivership funding component of the 2010 budget, the vast majority of which is funded by receiverships, will be $2.5 billion, up from $1.3 billion in 2009. This includes funding for the continuing work associated with bank failures that have occurred the past two years. The budget also contains contingency funding for the possible continuation of an elevated number of bank failures in 2010. The 2010 budget increase also is partially attributable to increased supervisory activity related to the rising number of troubled banks which the FDIC oversees. The board also approved an authorized 2010 staffing level of 8,653 employees, up from 7,010 in 2009. Almost all the additional staff will be hired on a temporary basis. They will be hired primarily to assist with bank closings; to perform follow up work related to the management and sale of failed bank assets; and to conduct bank examinations and perform other bank supervisory activities. There were 25 bank failures in 2008 and 133 so far this year ... * WASHINGTON (12/16/09)--The Shadow Financial Regulatory Committee Monday criticized Congress and the Obama administration for not addressing the government-sponsored enterprises as a part of regulatory reform. It also said that curbing compensation packages at large financial firms could actually hurt firms’ value (American Banker Dec. 15). Government subsidies could ruin the value in the firms in which the government has the greatest stakes, the committee said. The committee is a group of independent experts on the financial services industry who meet regularly to study and critique regulatory policies...

SBA wants to draw in more CUs banks says Mills

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WASHINGTON (12/16/09)—U.S Small Business Administrator Karen Mills said this week that involving more of its lending partners, including credit unions, in SBA guaranteed loan programs is the “right formula” to get more credit to markets currently being underserved. Mills, speaking at the National Press Club here, plugged her agency’s efforts to increase guarantee amounts for SBA loans and to waive fees as a way to get more lenders to participate. Prior to her address, Mills spoke to Credit Union National Association (CUNA) President/CEO Dan Mica and thanked him for his recent letter to the president noting credit unions' willingness to lend to small businesses. CUNA has underscored that while banks have pulled back on lending at a time the nation’s communities sorely need it to ride out the economic turbulence, credit unions are still lending. In fact, CUNA is working vigorously to raise credit unions’ statutory authority for making small business loans to 25% of assets, up from the current 12.25%. Lifting of the member business lending (MBL) cap could infuse as much as $10 billion in credit and create at least 108,000 new jobs, according to CUNA studies. An increased cap would also enable credit unions to participate more heavily in SBA programs. Regarding SBA programs, CUNA has a longstanding effort to address with the SBA issues of complex applications and high fees as a roadblock to credit union participation to 7 (a) and 504 guaranteed loan programs. Mills reiterated to Mica her willingness to work with CUNA and credit unions more closely. In her address Tuesday, Mills said increased involvement by SBA lending partners is the "right formula to serve the marketplace that's not being served today."

Lawmakers back higher MBL power on CNN Tonight

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WASHIINGTON (12/16/09)—Reps. Brad Sherman (D-Calif.) and Thaddeus McCotter (R-Mich.) on "CNN Tonight" Monday gave a positive nod to increasing the ability of credit unions to provide member business lending (MBL). While expressing his opinion that some aspects of the Troubled Asset
Rep. Brad Sherman (D-Calif.) addresses credit union advocates participating last week in CUNA's National Hike the Hill effort. (CUNA Photo.)
Relief Program—known as TARP—have worked, Sherman added that what must be done now to help the economy is “take some action so we have small business lending.” “One key element,” Sherman said, “is to let credit unions make small business loans. I think that could provide over 100,000 jobs and we wouldn’t even have to have a meeting at the White House.” Sherman was alluding to President Barack Obama’s meeting that day with whom the president called “fat cat” bankers. Obama was trying to get the bankers to loosen their tight grip on credit. Rep. Thaddeus McCotter (R-Mich.), also a guest on the show, seconded Sherman’s credit union endorsement. McCotter said, “One of the things we should look at, as Brad (Sherman) pointed out, is ways that we can get credit unions to continue to help us with this.” He added, “They’ve been very smart citizens throughout trying to make business loans and loans for consumer purchases.” During the Credit Union National Association’s (CUNA’s) recent National Hike the Hill, hundreds of credit union advocates blanketed Capitol Hill to encourage lawmakers to back legislation to lift the MBL cap to 25% of assets, up from the current 12.25% limit. CUNA research has shown that the change could infuse $10 billion of credit into markets and, as noted by Sherman, create at least 108,000 new jobs.

GAO says FinCEN could do better in reporting

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WASHINGTON (12/16/09)—Credit unions and other financial institutions that may struggle to keep up with reporting requirements under the Bank Secrecy Act (BSA) may or may not have a sympathetic response to recent government findings regarding the Financial Crimes Enforcement Agency (FinCEN). The Government Accountability Office (GAO) found in a recent study that FinCEN does not always do such a great job reporting detailed information to law enforcement agencies (LEAs). The Treasury Department bureau also sometimes fails to communicate adequately about the various types of products it can provide. On the plus side, the GAO report noted that of the 20 LEAs that responded to a question about which FinCEN services they found most useful, 16 cited direct access to BSA data--records of financial transactions possibly indicative of money laundering that FinCEN collects--as the most valuable service FinCEN provides. This backs up what FinCEN has been telling financial institutions for years regarding the value and use of the data providing through Suspicious Activity Reports and Currency Transaction Reports. . Additionally, 11 federal LEAs said a FinCEN tool that allows them to go through FinCEN to contact financial institutions nationwide to locate information related to ongoing investigations is an important service. And 16 said they value FinCEN’s increased development of complex analytic products, such as reports identifying trends and patterns in money laundering. However, three of five LEAs—of those identified by the bureau as its top users--complained that FinCEN does not provide detailed information about the various types of products it can provide. They also stated that they would like more information about when completed products become available. Two of these top users reported that FinCEN fails to communicate why it accepts some requests for support and rejects others. Nor does the agency seek law enforcement advice on planned analytic work, even though doing so, the report said, “could improve the quality and relevance of its products to its LEA customers”. “Communicating more detailed information to LEAs could help FinCEN ensure that it is effectively carrying out its mission to support the investigation and prosecution of financial crimes,” stated a summary. For more on the GAO report, use the resource link below.