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CU literacy program noted at presidents council

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WASHINGTON (2/14/2008)--President George W. Bush’s Advisory Council on Financial Literacy held its inaugural meeting yesterday in Washington, D.C., with the Credit Union National Association’s (CUNA) financial education partner seated at the table. During the first meeting, council members introduced themselves, proposed financial literacy initiatives and established subcommittees.
Click to view larger image CUNA Regulatory Attorney Luke Martone (left) and National Endowment for Financial Education (NEFE) President/CEO Ted Beck in the Treasury's Cash Room before the start of yesterday's inaugural meeting of the President's Advisory Council on Financial Literacy. CUNA and NEFE have a partnership for the High School Financial Planning Program. (Photo provided by CUNA)
Ted Beck, CEO of the National Endowment for Financial Education (NEFE)—CUNA’s eight-year partner in financial literacy efforts--serves on the panel. Cutler Dawson, president/CEO of Navy Federal CU in Merrifield, Va., also is a member. 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 that NEFE’s efforts to create a pilot program for college students. “Financial literacy is a continuous process,” said Beck. U.S. Rep. Judy Biggert (R-Ill.), who formed the Financial and Economic Literacy Caucus in 2005, provided opening remarks and acknowledged NEFE’s Beck. CUNA partnered with NEFE in 2000. Under the partnership, CUNA encourages credit unions to have their local schools offer HSFPP, which is a free financial education resource for high school students. The student guides carry the America's Credit Unions brand. As part of the literacy council’s organization agenda, five subcommittees will address:
* Financial Literacy for Youth; * Workplace Financial Education; * Financial Access for Underserved; * Research on State of Financial Literacy in the U.S.; and * Outreach.
The 19-member council’s mission is to focus exclusively on economic empowerment issues. It operates under the guidance of the U.S. Treasury Department with the specific charge of "keeping America competitive and assisting citizens in understanding and addressing financial matters." Charles R. Schwab, chairman/CEO of the Charles Schwab Corp., serves as the council's chairman. Operation HOPE Founder, Chairman/CEO John Hope Bryant is vice-chairman. The council’s next meeting is scheduled for June 18.

CUNA urges careful FACT Act definitions

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WASHINGTON (2/14/08)—The Credit Union National Association (CUNA) supports proposed Fair and Accurate Credit Transactions (FACT) Act rules and guidelines intended to enhance the “integrity” and “accuracy” of information furnished to credit bureaus. CUNA argues, however, that both terms should be defined in guidelines, not within the rules themselves. Under an inter-agency plan proposed last November, consumers would be able to directly dispute inaccuracies about certain information reflected on their consumer reports with the furnishers of that information. The proposal was issued by the National Credit Union Administration (NCUA), the Federal Trade Commission (FTC), and other agencies are required to develop rules under provisions of the Fair and Accurate Credit Transactions (FACT) Act. In comment letter to the NCUA and FTC, CUNA said it is “very concerned” with the proposal’s definition of accuracy, which requires that the information provided to the credit rating agencies (CRAs) be completely “without errors.” CUNA suggested that the phrase be deleted from the definition. CUNA said that it believes the definition of “accuracy” should also apply to the provisions of the proposal that require furnishers of credit information to investigate disputes, based on a direct request from the consumer. Further, CUNA argued that it is unnecessary for the definition to include a requirement that furnishers update the information as necessary to ensure the information is correct. “Credit unions recognize that updating the information is necessary, but are concerned that new regulatory requirements may necessitate significant operational changes. The agencies should clearly indicate that institutions will not be required to undergo arbitrary exercises, but will be expected to keep the information current,” the CUNA letter recommended. .CUNA also urged caution with the definition of “integrity” found in the regulators’ plan and warned that the definition should not dictate the form and manner in which credit information should be reported. CUNA also recommended to the NCUA that its examiners be trained so they understand that many credit unions may not need to develop extensive policies and procedures. Also, the agencies should consider developing model policies and procedures that credit unions may use. Use the resource link below to read CUNA’s complete comment.

Inside Washington (02/13/2008)

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* WASHINGTON (2/14/08)—The Senate Banking Committee Wednesday voted 11-10 to approve a bill that would serve to ban most commercial firms from owning industrial loan corporations (ILCs). ILCs are state-chartered banks offering limited financial services and fall under Federal Deposit Insurance Corp. supervision. (CongressDailyPM Feb. 13). Sen. Mike Crapo (R-Idaho) had been expected to introduce financial institutions regulatory relief provisions as an amendment to the ILC bill, but scrapped his plans after the Credit Union National Association and the National Association of Federal Credit Unions Tuesday said credit unions could not support a lopsided package. The draft amendment would have proposed to increase business lending limits and auto lending investment limit for thrifts, but failed to address the credit union member business lending ceiling or modification of the credit union prompt corrective action system to a risk-based approach … * WASHINGTON (2/14/08)--Rep. Maxine Waters (D-Calif.) could propose legislation that would ban foreclosures unless loan mitigation efforts are made. Acceptable mitigation efforts include late-payment waivers, loan-term modification, forbearance, maturity date extension, or moving the loan to another mortgage company (American Banker Feb. 13). Borrowers who could prove their credit scores were affected by subprime adjustable-rate mortgages would not be disqualified from mitigation. Industry representatives say the bill would cause problems because it would break existing mortgage contracts and open loan servicers to lawsuits ... * WASHINGTON (2/14/08)--Comptroller of the Currency John Dugan called for revisions to the Community Reinvestment Act (CRA) to provide CRA consideration for community development investments in middle-income communities distressed by foreclosures. Dugan also asked Congress to require nonbanks to comply with CRA requirements. The nonbanks played a large role in the subprime mortgages, and because they are not covered by CRA, they have no CRA incentive to address these problems, he said ...

Franks panel takes broad look at CRA

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WASHINGTON (2/14/08)—The House Financial Services Committee Wednesday began what its chairman has said will be a broad study of the 31-year-old Community Reinvestment Act (CRA), and as expected the fact that credit unions do not fall under CRA requirements was noted during the hearing proceedings. CRA was enacted in the late 1970s to stop banks from denying credit to consumers and small businesses in low-income areas The general picture that developed during the testimony of three panels of witnesses at Wednesday’s hearing was that CRA has been an important piece of legislation to encourage better lending practices. The committee heard from federal banking and thrift regulators, and industry and consumer groups. The regulatory agencies represented at the hearing were the Federal Reserve Board, Comptroller of the Currency, Federal Deposit Insurance Corp., and the Office of Thrift Supervision. In general, those witnesses concurred that CRA had been successful in its intent and suggested relatively minor changes that they said could update the law sufficiently to address emerging issues. “While the hearing today was broad and exploratory, we know that there are more to come and we will be following developments closely,” said Ryan Donovan, CUNA vice president of legislative affairs, after the hearing. He noted that it is likely that, as during a question-and-answer session with witness John Taylor of the National Community Reinvestment Coalition, the committee will hear occasional calls to apply CRA to credit unions. Donovan reiterated CUNA’s opposition to the imposition of CRA requirements on credit unions. “It would make no sense to impose CRA on credit unions for the simple reason that credit unions may only lend to their members, who are the sources of their deposits, and therefore--by their very nature--comply with the spirit of the Act,” Donovan said. CUNA analysis has shown that as credit union ability to serve communities has increased, their performance in lending to low- and moderate-income (LMI) borrowers is superior to other lenders. According to 2005 and 2006 data collected through Home Mortgage Disclosure Act (HMDA) reporting:
* Credit unions make a greater proportion of HMDA-covered loans to LMI borrowers than do other mortgage lenders; * Credit unions approve first mortgage loans to LMI and minority borrowers at much higher rates than do other lenders. Similarly, credit unions deny first mortgage loans to LMI and African American borrowers at much lower rates than do other lenders; * Credit unions are much less likely than other lenders to make high-rate loans. When credit unions make high-rate loans the rates tend to be substantially lower than the rates typically charged by other lenders; and * Credit unions are portfolio lenders, whereas other lenders are much more likely to use the originate-to-sell model--which has been recognized as one of the key drivers of sub-prime lending abuse and recent mortgage market disruptions.
The House Financial Services Committee is expected to conduct additional hearing on CRA, focusing on the law’s relevancy today and ways in which it could be modified to better reflect the changing financial services environment.

House members see CUs to the rescue column

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WASHINGTON (2/14/08)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday shared a little sunshine with House members on a cold, dank Washington day: a Dow Jones News Service column on how credit unions are helping their communities amid rising mortgage foreclosure rates. In an accompanying note to the lawmakers, Mica explained that the column shows “how credit unions are filling the gap created by other lenders who are dropping out in the wake of the subprime crisis.” “As the column’s author notes: ‘Credit unions to the rescue. Unlike big lenders, credit unions didn’t suffer heavy losses in recent months because they never made risky subprime loans,’” Mica pointed out. The Feb. 11 article also highlighted CUNA Chief Economist Bill Hampel’s assessment that most credit unions have strong balance sheets and near-record capital levels, which allow them to make any type of loan despite the subprime crisis. A version of the article also appeared on Wednesday on WSJ Online.