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Inside Washington (03/28/2012)

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  • WASHINGTON (3/29/12)--Federal Reserve Board Chairman Benjamin Bernanke said it would be a great accomplishment to end the "too big to fail" era as part of financial reform. Bernanke, speaking before a group of George Washington University students, said too big to fail is unfair, and bad for the financial system and financial institutions (American Banker March 28). It fosters an incentive for large institutions to take bigger risks because of an implied understanding the government would not allow them to fail, he said. At the time of the financial crisis, regulators didn't have the necessary tools to safely let institutions fail without threatening the entire financial system. Rules created by the Dodd-Frank Act provide regulators with those tools, Bernanke said. Dodd-Frank also prohibits the Fed's emergency lending powers that allowed it to provide funding to non-banks, he added …
  • WASHINGTON (3/29/12)--U.S. banks, businesses, and consumers are benefiting from an agreement between the Federal Reserve and other central banks to swap dollars for Euros and other foreign currencies, William Dudley, president of the Federal Reserve Bank of New York, Tuesday told the House subcommittee on domestic monetary policy. "Our principal aim is to protect U.S. banks, businesses and consumers from adverse economic trends abroad," Dudley said, noting that the swaps seem to be working. "In conjunction with the European Central Bank's long-term refinancing operations, the swaps have helped European banks avoid the significant liquidity pressures we feared a few months ago and have reduced the risk that they would need to sell off their U.S. dollar assets abruptly," he said. …
  • WASHINGTON (3/29/12)--The House on Tuesday approved a bill that raises the threshold that requires banks to register with the Securities and Exchange Commission (SEC) from 500 shareholders to 2,000. The provision also increases the threshold that triggers de-registration from 300 shareholders to 1,200 (American Banker March 28). The bill, known as the JOBS Act, will allow some small banks to avoid the costs of SEC registration. The bill is part of a larger package of legislation aimed at making it easier for small businesses to raise capital. The bill passed by a 380-41 margin, and now goes to President Barack Obama for his signature. The Senate approved the bill by a 73-26 margin March 22 …
  • WASHINGTON (3/29/12)--The Consumer Financial Protection Bureau (CFPB) is expected to release a final rule by the end of June that would require lenders to verify a borrower's ability to repay a mortgage, unless they make a loan that falls under the definition of a "qualified mortgage (QM)" Raj Date, the deputy director of the CFPB said Tuesday (American Banker March 28). Before the rule came under the CFPB's authority, the Federal Reserve offered two alternative QM proposals. One would provide a total safe harbor from liability for lenders, an approach favored by the industry. The other would provide a "rebuttable presumption" protection. Date did not say which approach the CFPB favors …

Banned Former DC FCU board member must leave FI work

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ALEXANDRIA, Va. (3/29/12)--The National Credit Union Administration (NCUA) has prohibited former District Government Employees FCU, Washington, D.C., board and supervisory committee member James Talbert from participating in the affairs of any federally insured financial institution.

District Government Employees FCU is also known as DC FCU.

The prohibition order is the result of an NCUA investigation which followed last year's release of the examination records and CAMEL rating of DC FCU. Those records were leaked to the press last fall, weeks after DC FCU CEO Carla León-Decker was nominated to join the NCUA board by President Barack Obama. León-Decker earlier this year removed her name from consideration for the NCUA post.

NCUA Chairman Debbie Matz asked for a full investigation "to determine which among the parties with access to the confidential examination information, whether NCUA or the credit union's board or management," released the credit union's exam records and CAMEL rating.

The NCUA investigation found that Talbert "had breached his fiduciary duties" by unlawfully disclosing the exam records and CAMEL code information. Talbert consented to the issuance of a prohibition order to avoid the time, cost, and expense of administrative litigation, the NCUA said.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

CFPB seeks comment on mortgage project consumer surveys

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WASHINGTON (3/29/12)--The Consumer Financial Protection Bureau (CFPB) continues to solicit public comment on its work, officially publishing a trio of comment notices in the Federal Register this week.

One comment request relates to the CFPB's mortgage revision project. The CFPB continues to work toward a final version of its combined Truth in Lending Act (TILA)/Real estate Settlement Procedures Act (RESPA) form, and the agency is planning to contract an outside consumer research firm to conduct quantitative testing once the forms have been finalized. This testing, the CFPB said, will "examine whether the disclosures aid consumers in understanding the terms of the mortgage loan that is the subject of the disclosure," and the results of the testing will help the agency gauge the effectiveness of the mortgage disclosures.

In its request for comments, the CFPB asks commenters whether this type of information collection is needed, and for any suggestions on how the "quality, utility, and clarity of the information to be collected" could be improved.

The CFPB is asking for the same sort of comments regarding planned periodic consumer surveys and tests. The surveys and tests would help the agency determine how effective its financial literacy and public outreach efforts have been, and the results will help the CFPB improve future outreach and education efforts, the CFPB said.

The agency is also planning to commission a yearly consumer research survey "to better understand the attitudes, understanding, and behaviors of American adult consumers around issues of consumer finance." The survey, the CFPB said, will help "assess consumers' awareness of, engagement in, and the ultimate impact of, the Bureau's efforts to educate and empower consumers to improve their financial decision-making skills and outcomes."

The initial survey will be used to measure the general public understanding and awareness of financial services and products, and future surveys "will also measure the effectiveness of the Bureau's efforts to educate and empower consumers," the CFPB said. The agency plans to conduct these surveys through online and telephone-based surveys, but the CFPB said it would also consider other ways to gather survey results.

Commenters can give the CFPB feedback on whether or not they feel this planned yearly survey is needed, and how the information collection process for the survey could be improved.

Comments on all three releases must be received by the CFPB by May 29, 2012.

For the full CFPB releases, as published in the Federal Register, use the resource links.

Compliance Exclusivityrouting rules effective April 1

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WASHINGTON (3/9/12)--The Credit Union National Association's (CUNA) CompBlog in a recent post reminded credit unions that the Federal Reserve's Regulation II's debit card network exclusivity and routing requirements are scheduled to come into effect on April 1.

Regulation II implements the provisions of section 920 of the Electronic Funds Transfer Act that govern debit card interchange fees and network routing and exclusivity limitations. The regulation requires a debit card issuer or payment card network to ensure that debit cards can be processed on at least two unaffiliated networks--one signature and one PIN network--if the card has both signature and PIN capabilities.

Alternatively, an issuer could provide a debit card that can be processed on two or more unaffiliated signature networks, but not on any PIN networks, or that can be processed on two or more unaffiliated PIN networks, but not on any signature networks, CompBlog said.

Regulation II also prohibits issuers and payment card networks from limiting a merchant's ability to choose the network on which a transaction is routed, with respect to those networks on which the debit card is enabled to be used. 

The requirements apply to all debit card issuers, regardless of asset size.

The section was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

CompBlog noted that many credit unions have already been steadily working with their vendors to comply with Regulation II.

For more on Regulation II, see CUNA's CompBlog by clicking on the resource link.

Remittance rule covers disclosures exclusions CUNA

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WASHINGTON (3/29/12)--The Credit Union National Association (CUNA) has released a final rule analysis of new Consumer Financial Protection Bureau (CFPB) protections for consumers who transfer money internationally.

The rule broadly defines these "remittance transfers" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S. including automated clearinghouse (ACH) and wire transfers, and products such as the World Council of Credit Unions' IRnet.

Under the CFPB remittance rule, remittance transfer providers must disclose the exchange rate and all fees associated with a transfer so consumers know exactly how much money will be received on the other end.

These disclosures must be provided in writing before the transfer is initiated, and must include the exchange rate, fees and taxes, and the amount of currency to be received by the recipient.

A receipt must also be provided after the remittance is transmitted. This receipt must also include information about error resolution, provider and regulator contact information, and the availability of the funds upon receipt. The remittance rule also requires remittance transfer providers to investigate disputes and fix mistakes.

Error resolution rights, standards for resolving errors and recordkeeping rules, and cancellation and refund policies for all remittance transfers, including those with an estimated exchange rate, such as those falling within the partial exemption for federally insured credit unions, are also addressed by the rule.

The rule also allows consumers that are sending the remittances to cancel the transfer, and receive a full refund of the transfer amount and any fees, if the remittance is cancelled within 30 minutes.

There are two exceptions for the actual amount of currency to be received that allow an estimated exchange rate.  Federally-insured credit unions and other institutions, in some situations, will be granted temporary exemptions if they cannot determine certain disclosed amounts for reasons beyond their control.

This exemption is scheduled to expire on July 21, 2015.

Also, remittance providers that cannot determine the amounts to be disclosed because of the laws of, or the method by which transactions are made in a recipient country, will also be granted permanent exceptions. The method by which transactions are made exception is for international ACH transfers that are under the Federal Reserve's FedGlobal ACH program.

Credit unions and financial institutions that provide remittance services to consumers, as well as money transfer organizations such as Western Union or MoneyGram, will be subject to the rule. CUNA recommended that credit unions that work with these groups contact them to determine applicable changes to their contractual or compliance requirements. The final rule does not apply to most transfers involving credit, debit, and prepaid cards.

The CFPB is considering certain changes to the final rule, including setting a threshold that would minimize the impact of the rule on community banks, credit unions, and other companies that do not normally process these transactions.

The CFPB expects to complete any further rulemaking on these issues before the final rule becomes effective on Feb. 7, 2013.

For the full CUNA Final Rule Analysis, use the resource link.