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Fed plan would shield card users from penalties fees

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WASHINGTON (3/4/10)--The Federal Reserve (Fed) has proposed amending Regulation Z “to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider increases in interest rates.” The proposed rule is the third portion of the Fed's phased implementation of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. These portions of the CARD Act will become effective on Aug. 22. In a release announcing the potential changes, Fed Governor Elizabeth Duke said that the proposal "addresses two key costs of using a credit card--fees and interest rates." The rule, if approved, “would prevent credit card issuers from charging large penalty fees for small missteps by consumers and would require issuers to reevaluate rate increases imposed since the beginning of last year," she added. Specifically, the proposal would prevent card issuers from charging late payment and over limit fees in excess of the amount of the purchase which triggered the fee. Inactivity fees and, in some cases, multiple penalty fees would also be prevented under the proposal. Credit issuers would also be required to “inform consumers of the reasons for increases in rates” and “evaluate” any rate increases made since Jan. 2009. These rates could then potentially be reduced. The proposal will remain open for comment for thirty days after it is published in the Federal Register.

Flood insurance SBA programs extended to March 28

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WASHINGTON (3/4/10)--Funding for the National Flood Insurance Program, Stimulus Act small business loan guarantee programs, federal unemployment insurance, COBRA benefits, and other select federal programs was temporarily extended when President Obama signed H.R. 4691, the “Temporary Extension Act of 2010.” The legislation extends funding for flood insurance and small business provisions through March 28th. However, the legislation does not contain longer-term solutions to these issues. Under the legislation, the Small Business Administration will be provided $60 million in funding until March 28. The legislation also extends some fee reductions and eliminations associated with the small business loan programs contained in the Stimulus Act. While the House passed similar legislation last week, these and other federal programs expired last Sunday due to inactivity on the part of the Senate. H.R. 4213, which would extend flood insurance and small business provisions through the end of 2010, is awaiting a vote, and could be voted on this week.

NCUA says cease building plan to CU in S.D.

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ALEXANDRIA, Va. (3/4/10)--The National Credit Union Administration (NCUA) on Wednesday issued a cease and desist order against South Dakota-based Rapid City Telco FCU. The NCUA issued the order after the credit union’s plan to build a new central office created regulatory and safety and soundness concerns. Rapid City Telco has agreed to obey the order, according to the NCUA. The order was the first to be made in 2010. Rapid City Telco currently serves over 6,000 members through four branches.

Inside Washington (03/03/2010)

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* WASHINGTON (3/4/10)--President Barack Obama will not announce his nominations to fill vacancies on the Federal Reserve Board this week, according to an administration official speaking on condition of anonymity. Obama has not made any decisions or offers, the official said (American Banker March 3). On Monday, Fed veteran and vice chair Donald Kohn announced he would step down from the position when it expires in June. His resignation will leave a third opening on the seven-member board ... * WASHINGTON (3/4/10)--Offshore-banking legislation pending in the House may not require foreign financial institutions to have every customer verify that their account does not benefit a U.S. taxpayer, according to Treasury Department officials (Dow Jones March 3). Banks would be able to rely on existing information from anti-money-laundering safeguards to confirm the accounts are not tied to U.S. taxpayers, the newspaper said. No additional reporting to the U.S. Internal Revenue Services (IRS) would be needed. The bill aims to curb offshore tax evasion. A 30% withholding tax would be applied to all payments originating in the U.S. to foreign entities that did not enter into IRS disclosure agreements ... * WASHINGTON (3/4/10)--Sen. Carl Levin (D-Mich.) proposed Tuesday a reserve fund that a bank could use when collateral posted by small business borrowers drops in value. The reserve would be funded by contributions from small businesses and matching contributions from the government and states. The move would help community banks lend to small businesses (American Banker March 3). Similar legislation has been introduced in the House by Levin’s brother, Rep. Sander Levin (D-Mich.). The bill could pass in the House, but its fate in the Senate is unclear, observers said. The Credit Union National Association (CUNA) is advocating giving more credit to small businesses. CUNA would like to see lawmakers raise the member business lending cap at credit unions from 12.25% to 25% ... * WASHINGTON (3/4/10)--A tentative agreement between Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Bob Corker (R-Tenn.) would give the Federal Reserve Board power to enforce consumer protection. House Financial Services Committee Chairman Barney Frank (D-Mass.) called the deal “a bad joke” (American Banker March 3). Sen. Richard Shelby (R-Ala.) said the new consumer protection division would operate without the Fed’s input. Regulators also should have the power to veto consumer protection proposals, he said. Dodd and Corker’s plan also would allow regulators to appeal rules to a new systemic council that could override them with a two-thirds vote. Shelby said allowing the council to override rules was “silly.” The president would appoint a Senate-confirmed director of consumer protection that could write rules for all banks and nonbanks. However, the division could only enforce the rules against institutions with more than $10 billion in assets and large mortgage lenders. Banks with fewer assets would be examined by a primary regulator. When asked by reporters how the proposal was shaping up, Corker said the talks are “continuing to go well.” Sen. Dick Durbin (D-Ill.), the No. 2 Democrat in the Senate, said he was open to what Dodd suggests. A strong consumer protection agency is needed, Durbin said ...

New Ways and Means chair is MBL supporter

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WASHINGTON (3/4/10)— Rep. Fortney “Pete” Stark (D-Calif.), named yesterday as new chairman of the House Ways and Means Committee, is co-sponsor of a House bill (H.R. 3380) to increase the credit union business lending cap, notes Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill. Stark also recently signed a letter, circulated to House colleagues by the H.R. 3380’s primary sponsors, that urges House leadership to add similar MBL provisions to a jobs-creation legislative package. The current House proposes a 25%-of-assets MBL cap, up from the current 12.25% limit, and would increase the "de minimis" threshold for these loans to $250,000. After Pelosi’s announcement that Stark will fill in on an interim basis as Rep. Charles Rangel (D-N.Y.) takes a leave of absence from the top post of the powerful Ways and Means panel, CUNA’s Magill underscored that CUNA will reach out to Stark to strengthen a relationship and share credit union issues.