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Inside Washington (02/06/2008)

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* WASHINGTON (2/7/08)--Robert Steel, Treasury undersecretary for domestic finance, expressed that he would be open to expanding the Hope Now alliance mandate if the interest-rate freezes do not help enough subprime borrowers with adjustable-rate mortgages (American Banker Feb. 6). Steel answered questions regarding the alliance during an American Securitization Forum conference in Las Vegas Tuesday and indicated the Treasury may consider additional foreclosure prevention … * WASHINGTON (2/7/08)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) was expected to meet with Federal Reserve Board Chairman Ben Bernanke yesterday to discuss the foreclosure crisis (American Banker Feb. 6). Dodd met with Treasury Secretary Henry Paulson Jan. 25 to discuss similar topics, and is scheduled to meet today with Federal Deposit Insurance Corp. Chairman Sheila Bair today regarding commercial ownership of industrial loan companies … * WASHINGTON (2/7/08)--Thirty small banks have been chosen by the Federal Deposit Insurance Corp. for a two-year pilot project regarding small-dollar lending products. The study aims to identify replicable small-dollar loan products can be used as payday loan alternatives. Participation in the study is voluntary. Best practices will be used as a resource for other financial institutions …

New IRS filing requirements for some state-chartered CUs

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WASHINGTON (2/6/08)—A new Internal Revenue Service filing requirement kicks in this year for small state credit unions that have not been obliged to file IRS Form 990s or 990-EZs. Small credit unions with "gross receipts" of $25,000 or less are now required to electronically file Form 990-N or e-Postcard. “It is important for state-chartered credit unions to be aware of the rule change, and our analysis indicates that about 350 will be affected by the new requirement,” Lilly Thomas, assistant general counsel for the Credit Union National Association, said Tuesday. A CUNA Final Rule Analysis defines gross receipts as the total amounts an organization received from all sources during its annual accounting period, without subtracting any costs or expenses. Credit unions that are required to file the e-Postcard should have received a notice from the IRS informing them of their requirement. CUNA warns credit unions that failure to file a required e-Postcard for three consecutive years will result in the loss of tax-exempt stautus. The form is due by the 15th day of the fifth month after the close of the organization’s tax period. For example, if their tax period ends on Dec. 31, 2007, the form is due May 15, 2008. There are a few exceptions for organizations not required to file Form 990 or Form 990-EZ that have gross receipts of less than $25,000, and would not be required to file the new e-Postcard (new Internal Revenue Code Section 6033(i)). These include federal credit unions as well as credit unions that are included in a group 990 return. To read the full CUNA analysis, use the resource link below.

Fed consumer advisers to take up mortgages foreclosures

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WASHINGTON (2/6/08)—The Federal Reserve Board announced Wednesday that its Consumer Advisory Council (CAC) intends to take up proposed rules for residential mortgage transactions an foreclosure issues at its next meeting, scheduled for March 6. The CAC advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. The group meets three times a year in Washington, D.C. I n January, the Fed named 10 new members to the CAC, including Alan Cameron, president/CEO of the Idaho CU League who was nominated by the Credit Union National Association (CUNA). Cameron is also head of the CUNA head Consumer Protection Subcommittee. CUNA believes that it is very important for credit unions as consumer-owned co-ops to have representation on the Fed’s consumer advisory board because it does have the Fed’s ear on consumer regulatory issues, The 30 members of the CAC are appointed by the Board of Governors to serve staggered three-year terms.

Reps. Frank Maloney seek credit card bill support

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WASHINGTON (2/6/08)—Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, and Rep. Carolyn Maloney (D-N.Y.), who heads that panel’s financial institutions subcommittee, have asked fellow House members for support for credit card reforms. In what is known as a “Dear Colleague” letter, Frank and Maloney noted that they are introducing comprehensive credit card legislation they say addresses major abuses, while fostering fair competition and “the values of the free market.” According to the bill’s designers, it would:
* Offer cardholders the right to cancel their card when faced with a rate increase while paying off their existing balance at the rate they agreed to when they borrowed it; * Bar issuers from applying rate increases retroactively, to existing balances, for reasons unrelated to whether cardholders have paid their bills on time: * Ban collection of interest on amounts already paid; * Require issuers to allocate a cardholder's payment between their balances, where cardholders have balances at different rates; * Stop issuers from using "prime rate", "fixed rate" and similar terms in a deceptive way by setting a single definition of such terms; * Require that payments made before 5pm EST on the due date be considered on time and be credited that day; * Require that for cards whose total fixed fees over a year exceed 25% of the credit limit, all fees for the year be paid up front, before the card is issued.
The letter said that Frank and Maloney plan to move forward promptly with legislative hearings and markups this spring. Last year, Frank put card reform on his committee’s legislative priorities agenda and charged Maloney with the task. The New York congresswoman in August, after convening a roundtable discussion with credit card issuers and consumer groups, identified four principles she said would guide her credit card reform legislation. The first “pillar” is to ensure consumers are able to repay their debt before a credit card is issued. The second pillar is simpler consumer disclosures. The third is to better inform cardholders throughout the time they hold a card. The final is to promote consumer education by issuers that would encourage "responsible, successful credit use, especially among new credit entrants and customers with special needs."