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Inside Washington (12/30/2009)

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* WASHINGTON (12/31/09)--Credit unions offering qualified tuition savings program accounts--529 accounts--are eligible to insure them through the National Credit Union Share Insurance Fund (NCUSIF), the National Credit Union Administration said in a letter. The accounts can be insured through NCUSIF as public units or on a pass-through basis if membership and traceability requirements are met. Several states have established qualified tuition savings programs under the Internal Revenue Code and are placing the funds in federally insured credit unions. One requirement for qualified programs under the code is that participants acquire an interest in a state trust instead of depositing the funds directly with a financial institution ... * WASHINGTON (12/31/09)--Analysts are debating the impact of easing the limits on securities holdings at Fannie Mae and Freddie Mac. Last year, Fannie and Freddie were required by the Treasury to shrink their mortgage portfolios when they were placed in conservatorship. The idea was to make the companies’ size and growth more manageable (The Wall Street Journal Dec. 30). Last week, Treasury eased the requirement, which means Fannie and Freddie won’t have to sell mortgages next year and could even buy mortgages. Treasury also suspended a $400 billion cap on the bailout subsidy the government will offer through the next three years. Fannie and Freddie can now purchase delinquent loans, and new accounting rules that take effect next year will make it more cost effective for the companies to buy bad loans, said Mahesh Swaminathan, Credit Suisse senior mortgage analyst. A Treasury official said the eased limits weren’t intended for Fannie and Freddie to be active mortgage buyers, but the government may not object to their presence in the market. Karen Shaw Petrou, managing partner of Federal Financial Analytics, said the moves make sense in the short-term because they avoid market volatility, but limitless aid could make it harder for Fannie and Freddie to separate themselves from the government ...

NCUA seeks to intervene in WesCorp lawsuit

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ALEXANDRIA, Va. (12/31/09)--The National Credit Union Administration (NCUA), which serves as conservator of Western Corporate FCU (WesCorp), announced Wednesday it has filed papers in superior court in Los Angeles to intervene as plaintiff in a lawsuit against several current and former employees and officials of WesCorp. The civil action has been brought by seven natural person credit unions that are members of WesCorp that alleges negligence and breach of fiduciary duties in connection with WesCorp’s substantial investments in residential mortgage-backed securities and collateralized debt obligations. The NCUA said in its announcement that it is the proper plaintiff in the case and that the court should allow the agency to take the place of the current plaintiffs. In that capacity, the NCUA could determine whether and how to proceed with any action against WesCorp’s former board members and employees, the release said. The NCUA noted that WesCorp has been operating under federal control since being placed into conservatorship in March and, as conservator, the NCUA operates WesCorp through a management team. Therefore, the agency is “successor to all the rights titles, powers and privileges of the credit union and any of its members, accountholders, officers or directors.” NCUA concluded it had an obligation to intervene on behalf of all members of WesCorp. NCUA General Counsel Bob Fenner stated that "as conservator, NCUA has an obligation to protect the interests of all the members of WesCorp. NCUA has been actively investigating whether legal action is appropriate against many different parties, including former WesCorp officials, to redress the losses the institution has suffered. That investigation is continuing. "Federal law provides that NCUA as conservator is the appropriate party to represent the interests of all members in connection with any recovery attempts. While we did not choose to initiate this litigation, we believe NCUA has an obligation to intervene because claims of this nature belong to all of WesCorp’s members, not just the first plaintiffs to arrive at the courthouse.”

New FCRA allowable-charge ceiling announced

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WASHINGTON (12/31/09)—As of Jan. 1, 2010, the Federal Trade Commission (FTC) ceiling on allowable charges under Section 612 Fair Credit Reporting Act (FCRA) drop to $10.50, down from the $11 ceiling this year. Section 612 of the FCRA covers when a consumer has a right to get a free credit report and 612(f) addresses the cost that a credit bureau can charge a consumer for a credit report that it doesn't have to give for free. Since 1996, the FTC has been required to increase an $8 figure referred in the law on Jan. 1 each year to reflect changes in the Consumer Price Index (``CPI''). According to the FTC, the CPI increased 33.98% between the 1997 FCRA effective date and September 2009. “This increase in the CPI, and the requirement that any increase be rounded to the nearest fifty cents, results in a maximum allowable charge of $10.50 effective January 1, 2010,” the FTC noted in it Federal Register document published Wednesday. Use the resource link below for more.

FinCEN Spanish-language CTR pamphlet available

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WASHINGTON (12/30/09)--The Financial Crimes Enforcement Network (FinCEN) has made available a Spanish-language version of its brochure “Notice to Customers: A CTR Reference Guide.” The guide is designed to be a resource for credit unions and other financial institutions to address questions frequently asked by members or customers regarding the Bank Secrecy Act (BSA) requirement to report transactions in currency that exceed $10,000. "Currency transaction reports provide unique and reliable information that is essential to supporting investigations and detecting criminal activities," said FinCEN Director James Freis, Jr. when announcing the Spanish-language brochure last month. "We hope that financial institutions find this pamphlet useful for communicating with a wider range of customers the importance of compliance with the reporting requirement." According to FinCEN, its pamphlets use “plain language” to explain the reporting requirement to those who may not be familiar with a financial institution's obligations under the BSA. They explain that large currency transactions are not illegal, but that financial institutions are required to obtain information from their customers when these transactions occur, and that if a customer attempts to break up, or "structure," transactions in order to evade the CTR reporting requirement, there are potential civil and criminal consequences. Use the resource link below to access the Spanish- and English-language booklets.

Compliance CARD Act 21-day rule clear now

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WASHINGTON (12/31/09)—In November, President Barack Obama signed the CARD Act Technical Corrections Act (H.R. 3606) into law putting to rest a situation that had been plaguing credit unions since the original Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed in May. Christy, the compliance manager at DEF FCU, read all about it in the Nov. 10 issue of News Now and now wants to act on the information. But the whole situation has been, let’s say, a bit confusing for some who must deal with the nuts and bolts of compliance. The original bill set off the confusion by incorrectly implying that a 21-day late notice requirement applied to all open-end credit, and the Credit Union National Association successfully argued that it had always been lawmakers' intent to apply the provision only to credit cards. That resulted in the CARD Fix Act, which stated unequivocally that the 21-daydisclosure timing requirement between provision of the periodic statement and the payment due date applied only to credit card accounts rather than all open-end credit. Christy also read tjat the 21-day timing continues to apply to all open-end credit. She knows that DEF FCU provides a 10-day period after an open-end loan payment due date before the credit union imposes a late fee. Christy believes the credit union must now change the timing of the late fee charge to 21 days from the date their periodic statements are mailed. Is Christy correct? CUNA’s Compliance Challenge tells Christy and other folks like her that no, this interpretation is not correct. Use the resource link below to read why in question eight, and then enjoy more CARD Act guidance in questions one through seven. Fed's interim final rule to amend Reg Z, implementing two provisions of the Credit Card Accountability Responsibility and Disclosure Act http://edocket.access.

Recession breeds lifelong savings habit says report

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WASHINGTON (12/31/09)—As the Credit Union National Association (CUNA) has reported, through October, year-to-date credit union savings balances experienced their fastest growth since 2001. According to a recent report from the National Bureau of Economic Research, the increased consumer attention to savings may not disappear any time soon. The National Bureau of Economic Research is a private, nonprofit research organization that says on its website is dedicated to promoting a greater understanding of how the economy works. The organization’s report on savings rates said an upside to the country’s ongoing financial crisis is that it may forge a new, lifelong devotion to savings among Americans between the ages of 18 and 25. (American Banker Dec. 30) Recessions have a very formative effect on working young people, the report posits. Analyzing recessions between 1963 and 2006, the bureau found that younger folks who experience a recession feel a lack of control over their careers. They pin success more to luck than to their personal positive attributes or actions. Such skeptical attitudes just increase if that young person has been fired due to the impact of a recession or if they have seen a relative lose a job. The attitude may be more realistic than cynical, according to the report, because while the national unemployment rate is currently around 10%, among 16- to 19-year-olds it is more than 26%. CUNA figures show that the new attention to savings goes
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across the board—at least for now. Credit union savings balances increased 1.6% in October 2009 and 10.3% during the first 10 months of 2009. During October, share drafts rose 7.3%, followed by regular shares (2.6%), and money market accounts (1.8%). One-year certificates increased 0.8%, while individual retirement accounts decreased 0.6%. "With members in no mood to take on additional debt, credit union investment portfolios rose almost 30% so far this year," Steve Rick, CUNA senior economist, reported to News Now.