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iCompliance Challengei covers benefit garnishments

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WASHINGTON (3/24/11)—In this month’s Compliance Challenge, the Credit Union National Association (CUNA) notes that most, but not all federal benefits are exempt from garnishment. The U.S. Treasury, in conjunction with four other federal agencies, has issued an interim final rule which protects the following benefits payments from garnishments and claims of judgment creditors: social security payments, supplemental security income, veterans administration benefits, federal railroad retirement benefits, and federal employees retirement system benefits. The other agencies on the rule are, not surprisingly, the Social Security Administration, the Department of Veteran Affairs, the Railroad Retirement Board, and the Office of Personnel Management. CUNA notes, though, that the final rule provides that garnishment orders obtained by the U.S. and child support orders (for child support programs administered under Title IV-D of the Social Security Act) can be processed against these benefits. Credit unions may follow their normal procedures for garnishment orders in these instances. Credit unions generally must review a member’s account within two days of receiving any garnishment order, and must examine two months of recent account activity during this review. However, account reviews are not required if the garnishment order is obtained by the U.S. or is a child support-related order. Garnishment fees may not be charged against protected funds. However, garnishment fees may be charged against any petty cash that is in a given account at the time of a garnishment order review. For more of this month’s Compliance Challenge, use the resource link.

Wall St. right target to recoup corporate losses CUNA

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WASHINGTON (3/24/11)—Credit Union National Association (CUNA) General Counsel Eric Richard said the National Credit Union Administration (NCUA) is “looking at the right kind of parties” if the agency, as reported, intends to attempt to reclaim billions in securities-related corporate credit union losses from the biggest Wall Street firms. The Wall Street Journal on Wednesday reported that the NCUA has threatened legal action against Merrill Lynch, Goldman Sachs Group Inc., J.P. Morgan Chase, and Citigroup. The agency is reportedly seeking repayment of billions in losses that corporate credit unions sustained after their purchase of large amounts of mortgage-backed securities. The NCUA has said that it will sue if it is not paid, the Journal reported. CUNA’s Richard said that these Wall Street firms “have the potential to provide significant reimbursement of the credit union system’s recent losses.” However, reclaiming these losses may be a long, difficult process for the NCUA, Richard added. The NCUA told News Now that it does not comment on potential legal matters. Several corporate credit unions, including the conserved U.S. Central FCU and Western Corporate FCU, bought substantial amounts of highly rated mortgage-backed and asset-backed securities before 2009. These securities were severely devalued as a result of the turmoil in the overall mortgage market. The credit union regulator has reportedly alleged that the documentation for securities that Goldman sold to several now conserved corporate credit unions contained false statements and left out many key details. The NCUA took over more than $50 billion in mortgage-backed bonds from the failed credit unions. The agency was also forced to create a Temporary Corporate Credit Union Share Insurance Fund and is charging assessments to natural person credit unions to pay for the cost of stabilizing the troubled corporate credit union system. The NCUA has also repackaged and begun selling $35 billion of those bonds as NCUA Guaranteed Notes in another attempt to deal with these so-called legacy assets.

CUNA asks for CU input on Fed equal credit plan

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WASHINGTON (3/24/11)—The Credit Union National Association (CUNA) has issued a regulatory comment call on a Federal Reserve proposal that would require credit unions to disclose a member’s credit score and other information in the event of a so-called “adverse action.” Adverse actions can include instances where a credit request is rejected or an account interest rate is increased. Any key factors that adversely affected the member’s credit score, the date on which the credit score was created, and the name of the company or person that issued the credit score must also be disclosed under the Fed proposal. The proposal would add these disclosures to the model notices provided under Regulation B - Equal Credit Opportunity Act (ECOA). The new model notices would comply with the adverse action provisions of the ECOA and the Fair Credit Reporting Act (FCRA). Credit unions using the new model notices would not generally be liable for improper discrimination or use of credit information with respect to credit applications, according to CUNA. The new disclosures are required by the Dodd-Frank Act, and will become effective on July 21. CUNA in its comment call asks if the Fed should update any other model notices or forms. Credit unions may also comment on whether a portion of the proposal that requires creditors to provide both the key factors and the specific reasons for taking an adverse action should be changed. Comments should be submitted to CUNA by April 8. The Fed will receive public comments until April 14. For the comment call, use the resource link.

Key definitions could change CU comment sought

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WASHINGTON (3/24/11)—Proposed revisions to “net worth” and “equity ratio” definitions will soon be up for public comment, and the Credit Union National Association (CUNA) is asking credit unions to provide their own input on these proposals. One National Credit Union Administration (NCUA) proposal would amend the Federal Credit Union Act's definition of “net worth” for natural-person credit unions under NCUA’s Prompt Corrective Action (PCA) authorities to allow the NCUA’s Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. The NCUA proposal also included a “technical correction” to its regulatory definition of “net worth.” This technical correction would generally decrease the amount of a combined credit union’s “net worth” in a credit union merger. The proposed equity ratio changes would clarify that the National Credit Union Share Insurance Fund’s equity ratio must be based solely on the financial statements of the NCUSIF alone without consolidation with other statements, such as those of conserved credit unions. CUNA in the comment call asks credit unions if the proposed net worth changes are “reasonable,” and whether or not the NCUA remove any proposed requirements or add additional requirements when it creates its final rule. Credit unions may also generally address the NCUA’s equity ratio proposal in their comments. Comments should be submitted to CUNA by May 4. The NCUA proposal should be published in the Federal Register by the end of the month, and the agency will accept comments for 60 days after it has been published. For the comment call, use the resource link.

Inside Washington (03/23/2011)

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* WASHINGTON (3/24/11)--Large banks will have to pay more for deposit insurance under a new regulation set to go into effect April 1 (American Banker March 23). Under current rules, a bank's deposit insurance premium is based on its total domestic deposits, with adjustments made for examination ratings, brokered deposits and balance sheet risk. Under the new rules, mandated by the Dodd-Frank-Act, Federal Deposit Insurance Corp. deposit assessments will be based on a bank's average consolidated total assets, minus its average tangible equity capital. Community banks lobbied for the change, arguing that large banks are subject to more and should contribute more to the deposit insurance fund. In a white paper released this week, the deposit insurance assessments charged by regulators to credit unions and banks will be “very similar” over the coming decade, revising previous estimates that predicted higher bank assessments, according to Credit Union National Association (CUNA) Chief Economist Bill Hampel …