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Washington Archive

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Inside Washington (12/03/2010)

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* WASHINGTON (12/6/10)--Saying there was more disclosure and less understanding than ever, President Barack Obama’s top consumer adviser said on Thursday the newly formed Consumer Protection Bureau should seek to make financial products more understandable for consumers rather than serve as a clearinghouse for cumbersome regulation. Speaking before the Consumer Federation of America Elizabeth Warren said: “It is this simple: No customer should be asked to take out a loan without knowing the costs or the risks of the deal. And every customer should be able to compare different financial products straight up. Regulations should be about making sure that customers have the information they need to make the decisions that are right for them.” As an example, Warren cited the Credit Card Accountability Responsibility and Disclosure Act She said that although consumers are better offer after the legislation, complex pricing schemes drive up costs for both consumers and financial institutions. “Right now, there are a lot of lawyers who are working overtime to figure out how to render the CARD Act rules ineffective,” Warren said. “At the same time, consumers look over their credit card terms and still see pages of fine print and wonder what is buried in there.” Warren said the Consumer Protection Bureau has an opportunity to define clear goals and set a direction that is good for families, competition and the economy. CUNA SVP and Deputy General Counsel Mary Dunn also addressed the CFA conference. Credit unions with less than $10 billion in assets will be under CFPB rules, but the prudential federal regulator, the National Credit Union Administration, will enforce them ... * WASHINGTON (12/6/10)--The Internal Revenue Service Friday issued the 2011 optional standard mileage rates used to calculate the deductible costs of driving for business, charitable, medical or moving purposes. Beginning on Jan. 1, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 51 cents per mile for business miles driven; 19 cents per mile driven for medical or moving purposes; and 14 cents per mile driven in service of charitable organizations. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates ...

NCUA notes proactive approach to crisis in 2008-09 report

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ALEXANDRIA, Va. (12/6/10)—The National Credit Union Administration (NCUA) in its 2008-2009 annual report noted that its “proactive approach” to the financial crisis that threatened both the credit union system and the economy as a whole “reaffirmed public trust in the credit union system’s safety and soundness, positioning credit unions to emerge from the crisis with public confidence intact.” The report, entitled Stability Through the Crisis, serves as the NCUA’s official report to the President and Congress, and covers the NCUA and credit union operations. The report also tabulates 10 years of financial trends for credit unions and the National Credit Union Share Insurance Fund, the NCUA said in a release. The NCUA added that the report also carries forward the complete audited financial statements of all funds managed by the NCUA. The proactive approach, according to the NCUA, included actions to stabilize the corporate credit union system such as increasing its Central Lending Facility (CLF) lending limit to $41.5 billion and creating the Temporary Corporate Credit Union Liquidity Guarantee Program. The NCUA also increased the federal member share account limit to $250,000 and helped the corporate system “continue to meet the needs of its member credit unions” by conserving the two largest corporates, U.S. Central FCU and Western Corporate FCU, in 2008. The agency followed up on those actions in 2009 by creating the Temporary Corporate Credit Union Stabilization Fund to help cover corporate losses and creating new corporate credit union rules to prevent such losses from happening again. The NCUA’s experience during the “years of crisis” showed “the value of rigorous regulation, diligent oversight, and a robust insurance fund,” NCUA Chairman Debbie Matz said. The NCUA’s increased supervision “contributed significantly to the credit union system’s ability to withstand the extraordinary economic shocks over the past two years. Working together, our proactive approach reaffirmed public trust in the safety and soundness of credit unions, and positioned the industry to emerge from the crisis in the coming years,” she added. For the full release, use the resource link.

Deficit dropping proposal fails to move forward

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WASHINGTON (12/6/10)--A comprehensive deficit reduction plan that could trim nearly $4 trillion from the $13.8 trillion U.S. national debt over the next nine years failed on Friday to secure the 14 votes needed to move on to Congress. The deficit reduction plan gained 11 of a possible 18 votes. President Barack Obama in a statement said that he and his economic team would study many of the proposals contained in the plan in the coming weeks as they develop their budget and priorities for 2011. Credit Union National Association Vice President of Legislative Affairs Ryan Donovan said that CUNA "does not expect Congress to consider the Commission's report before the end of the year." The plan, which was developed by Obama's fiscal commission, advocated cutting military spending, increasing the retirement age from 67 to 69, and other spending reforms. Most importantly for credit unions, the plan recommended significant cuts in tax expenditures related to home mortgages, healthcare, capital gains, and dividends. The credit union tax exemption also fell under the broader umbrella of “tax expenditures.” The plan, however, did not mention the credit union tax exemption by name. Credit Union National Association (CUNA) President/CEO Bill Cheney said that the credit union tax exemption “is one of the best investments that this nation makes for the more than 90 million Americans that are credit union members. But if the Deficit Commission’s plan becomes law, that solid investment would be wiped out -- which would be disastrous for all consumers.”

Fed Interchange proposal on its way

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WASHINGTON (12/6/10)—Federal Reserve Governor Elizabeth Duke last week hinted that a comprehensive proposal aimed at addressing interchange fees and debit card transaction routing would be released for comment “soon.” Duke, who made the remarks during a Federal Reserve Bank of Philadelphia Payment Cards Center Conference last week, did not give any further information on the date. However, Duke said that she is “aware of the high level of interest” in interchange fees and transaction routing, and recognizes the importance of the statute and its implementation for the future development of the payment card industry. Under the terms of the Dodd-Frank Act, the Fed is required to set the interchange fees paid to financial institutions by merchants. The Credit Union National Association (CUNA) has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. CUNA is discussing the interchange issue with the Fed and has also reached out to Treasury officials to discuss how various debit card-based government benefit programs could be affected by the pending interchange regulations. Democratic Maine Reps. Mike Michaud and Chellie Pingree last month urged the Fed to recognize the pro-credit union protections that were built into the Dodd-Frank Act. "While the law is clear that small issuers with $10 billion in assets or below are exempt from the debit interchange transaction regulations, they are not exempt from the impact that regulations on institutions above $10 billion in assets will have on small issuers," the representatives said in a joint letter. For Duke’s full statement, use the resource link.

30- 15-year mortgage rates continue slow climb

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WASHINGTON (12/5/10)--The average rate on both 30-year and 15-year fixed-rate mortgages rose again last week, continuing a gradual rise from record lows that began in mid-November. As reported in Freddie Mac's most recent mortgage rate survey, the rate on 30-year mortgages averaged 4.46% and 15-year mortgages averaged 3.81%. Those mortgage rates averaged 4.40% and 3.71% last week, respectively. Both five-year and one-year adjustable rate mortgages remained low, but increased, with average rates of 3.49% and 3.25% reported. While the mortgage rates remained low, Freddie Mac Vice President/Chief Economist Frank Nothaft noted that house price indices are “trending downwards." For the full release, use the resource link.