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CUNA analyzes CARD Act rule for CUs

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WASHINGTON (2/2/10)—A comprehensive breakdown of the Federal Reserve Board’s recently published final rules that restrict a number of credit card practices has been posted to the Credit Union National Association’s (CUNA’s) website. The CUNA analysis involves the second set of Fed rules to implement the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act). They become effective Feb. 22. CUNA is offering an audio conference call today on the provisions covered in the Fed’s new rule. The conference call, scheduled for 1-2:30 p.m. (CT), will feature Benjamin Olson and Amy Henderson, senior attorneys in the Fed’s division of consumer and community affairs, Mary-Lou Heighes, a Credit Union Compliance Expert (CUCE) and president of Compliance Plus, Inc., Jeff Bloch. senior assistant general counsel for CUNA, and Mike McLain, assistant general counsel and senior compliance counsel for CUNA. The rules include:
* Restrictions on some changes in interest rates; * A requirement for minimum payment warnings on credit card statements; * A requirement for a co-signers for consumers under the age of 21 opening a card account; and * A requirement that payments above the minimum amount be applied to balances with the highest interest rate, in addition to a number of other requirements.
The CUNA analysis points out that the Fed made a significant change to its proposed rule before making them final. In the official staff commentary there is a new restriction for credit unions that use variable rates with a fixed minimum rate, or “floor.” Attached to the end of the CUNA Final Rule Analysis is a separate memorandum that outlines guidance from the Fed on this issue. The rule also finalizes the earlier interim final rule that implements the CARD Act provisions that were effective as of Aug. 20, 2009. This includes the requirement to send periodic statements at least 21 days before the payment is due and the requirement to provide a 45-day notice when the rate and certain terms of a credit card account are changed. Most of the CARD Act provisions apply only to credit cards. However, it notes, early last year the Fed issued comprehensive rules to amend the Regulation Z open-end credit rules, which encompass credit card, as well as other open-end plans, and a number of those are also addressed in the CARD Act. Provisions of earlier Regulation Z rules that are not addressed in the CARD Act will remain in effect. The provisions of these rules that are inconsistent with the CARD Act provisions have been amended or withdrawn to ensure consistency. The applicable provisions of the unfair and deceptive acts and practices (UDAP) rules that were issued by the National Credit Union Administration (NCUA) early last year have been withdrawn, since they address similar issues. Use the resource links below to read CUNA complete analysis of the new CARD Act rules and for more CARD Act conference call information.

Blockbuster CUNA campaign school wraps up in Montana

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WASHINGTON (2/2/10)--In the first round of campaign schools to take place in 2010, the Credit Union National Association (CUNA) last week combined forces with the Montana Credit Union Network to introduce prospective candidates for local office to the key techniques and the rigors of running their own campaign. The campaign schools, which took place in Billings, Mont. on Friday, and other locations during the week, were covered extensively by The Billings Gazette and the Bozeman Daily Chronicle, and were attended by over 170 potential candidates, the largest number that CUNA has seen for some time. Additional sessions of the campaign school, which was also backed by the Montana Electric Cooperative Association and the Montana Chamber of Commerce, took place last week in Great Falls, Missoula, and Bozeman. Topics covered during the campaign school sessions included campaign management, fundraising, message development, and get-out-the-vote planning, and potential candidates at the Montana sessions planned to contend for a broad swath of positions, from local Justice of the Peace to State Representative. CUNA's Vice President of Political Affairs Trey Hawkins said the main goal of the campaign schools, which have been held in Montana every-other year since 2000, "is to give first-time candidates an overview of how to put together an effective campaign. Ultimately, though, we think it sends a message to these candidates that credit unions are sophisticated when it comes to politics and elections. Hopefully they will remember that once they are in office." CUNA has also scheduled its first ever campaign schools to be held in North Carolina this month and additional campaign school sessions have been tentatively set to take place in Ohio as well.

CDFI CU program funding could increase in fiscal 2011

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WASHINGTON (2/2/10)--The Obama Administration's fiscal 2011 budget, which was released on Monday, contains modest budgetary increases for both the U.S. Treasury's Community Development Financial Institutions (CDFI) Fund and the National Credit Union Administration's (NCUA) Community Development Revolving Loan Fund (CDRLF) program. Under the proposed budget, the amount of funds made available to the CDFI during fiscal 2011 would increase to $250 million, up from the $246.75 million that was made available for fiscal 2010. The CDFI fund, which provides grants to support the work of community development financial institutions, has set high goals for 2010, with CDFI Fund Director Donna Gambrell saying that the CDFI Fund is "aiming to meet and exceed the accomplishments of last year with greater internal operating efficiencies and by expanding our assistance to underserved communities with new initiatives," including the first round of the Capital Magnet Fund and awards under a new Financial Education and Counseling (FEC) Pilot Program. NCUA programs would also benefit, with the amount granted to the CDRLF for 2011 increasing to $2 million and the NCUA's Central Liquidity Facility also slated for an increase in funding. The Senate late last year removed the borrowing cap on the CLF and gave the CLF $43.8 billion in contingent liquidity to lend to eligible credit unions as part of an appropriations bill. The CDRLF, which was established by Congress in 1979, makes non member deposits and loans at a rate of 1% for five-year terms, and the NCUA employs the CLF, as needed, to inject capital into the credit union system. While the Senate has not yet acted on tax extenders, President Obama has requested a two year extension of the New Markets Tax Credit, which expired on December 31, 2009, and Congress is expected to complete an extenders package, which will be retroactive to Jan. 1, 2010, later this year.

Student loan bill support slipping in Senate

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WASHINGTON (2/2/10)--Legislation that would effectively end government-subsidized support of student lending by credit unions and other financial institutions passed the House with ease last September, but has seemingly stalled in the Senate. The House version of the bill, H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, which would terminate the Federal Family Education Loan Program (FFELP) in favor of increased funding for government-run Pell Grant programs, passed the House by a 253-171 vote late last year. While a similar bill has not yet been introduced in the Senate, Sen. Tom Harkin (D-Iowa) is known to support the goals of the bill. The Credit Union National Association last year warned against the consequences of eliminating FFELP, saying that doing so would limit the choices presented to prospective college students. Specifically, the over 1,000 credit unions that provide, service, and support student loans, would likely be forced out of the student loan business. The Obama administration also supports eliminating FFELP, and various estimates indicate that doing so could save the federal government as little as $47 billion or as much as $81 billion over a ten-year period.

House Senate see stacked committee schedules

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WASHINGTON (2/2/10)--While credit unions may be awaiting action on several pieces of pending legislation, including financial regulatory reforms, there will be no shortage of other action in the congressional committees this week. The Senate Banking Committee on Tuesday will hold a hearing on "Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies," with the House Budget Committee discussing President Barack Obama's budget for the 2011 fiscal year. Thursday will be heavy on finance for the Senate side of Congress, with the Senate Banking Committee scheduled to discuss constraining risky investment activity by banks and financial institutions and the the Senate Commerce, Science and Technology Committee set for a hearing on the role of the Federal Trade Commission in protecting consumers of financial products. The House Financial Services Committee and the House Small Business Committee on Friday were scheduled to end the week by holding a joint hearing on small business and commercial real estate lending in smaller markets, but that hearing has been postponed until further notice. However, credit union issues will be presented directly to members of Congress during a Friday joint Credit Union National Association / World Council of Credit Unions congressional staff briefing on the state of credit unions in Afghanistan. On the political end, the Senate Rules and Administration Committee, the House Judiciary Committee Subcommittee on the Constitution, Civil Rights and Civil Liberties, and the House Administration Committee will all hold separate hearings this week on the recent Supreme Court decision to allow unlimited corporate and non-profit spending in elections.

Inside Washington (02/01/2010)

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* WASHINGTON (2/2/10)--Policymakers should consider raising the amount of money the Federal Deposit Insurance Corp. (FDIC) has to deal with bank failures, the Obama administration said in its 2011 budget, which was released Monday (The Wall Street Journal Feb. 1). The current reserve ratio range of 1.15% to 1.5% is inadequate, the proposal said. If the reserve ratio is increased, banks may have to pay higher premiums. At the end of September, the deposit insurance fund ratio dropped to 0.16%. The FDIC has worked to increase its fund by charging special fees and mandating a three-year premium pre-payment to raise $45 billion. However, bank failures continue. Last month, there were 15 failures, ahead of the 2009 pace that had 140 failures at year-end ... * WASHINGTON (2/2/10)--Four liquidity programs implemented by the Federal Reserve Board to prevent economic collapse shut down Monday. The programs are: The Primary Dealer Credit Facility, the Term Securities Loan Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility and the Commercial Paper Funding Facility. The Term Asset-Backed Securities Loan Facility and the Fed’s purchases of debt and mortgage-backed securities from Fannie Mae and Freddie Mac will end in March. Last week, President Barack Obama likened the government programs helping banks to a “root canal,” but financial observers said the programs were vital in preventing economic collapse (American Banker Feb. 1). The Fed was able to meet the market’s needs with the programs, said Song Won Sohn, lecturer in business and economics at California State University Channel Islands ... * WASHINGTON (2/21/10)--Lawrence Summers, White House economic adviser, said the Obama administration’s proposals to overhaul financial regulation are not an attack on banks (American Banker Feb. 1). Rather, they are an attempt to create a better financial system. Obama has proposed taxing big banks and limiting their growth. Summers said the constraints will reduce risk-taking and will not interfere with institutions’ abilities to serve customers. Also, it doesn’t make sense for banks to feel as though they have enough capital to pay bonuses to employees but not enough to reimburse taxpayers, he added. Summers spoke at the World Economic Forum in Davos, Switzerland ... * WASHINGTON (2/21/10)--Banks need to prepare for a changing rate environment, said participants at a Federal Deposit Insurance Corp. (FDIC) symposium Friday. Some banks that have held onto long-term assets may not be prepared for rates to normalize (American Banker Feb. 1). Panelists recommended that bankers form a committee to focus on the mix of assets and liabilities, using hedging instruments such as interest rate derivatives and focus on core depositors to mitigate risk ...