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Inside Washington (03/31/2008)

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* WASHINGTON (4/1/08)--The Federal Reserve Banks Monday announced changes to the schedule for previously announced check processing infrastructure changes as consumers and businesses continue the shift from paper checks to electronic payments. The revised schedule takes effect immediately. Seven sites will change this year, compared with the five sites originally scheduled. The announcement marks the banks’ sixth annual review of their check infrastructure ... * WASHINGTON (4/1/08)--Secretary of the Department of Housing and Urban Development Alphonso Jackson announced that he will step down from his position. His resignation is effective April 18. Jackson said he resigned to spend more time with his family. His resignation coincides with the Bush administration’s pressure on the department to help solve the foreclosure crisis (The New York Times March 31) ...

FTC-TJX settlement constructive says CUNA

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WASHINGTON (4/1/08)—A Federal Trade Commission (FTC) decision to require TJX Cos. to beef up security and submit audits--every other year for the next 20 years--by independent third-party security professionals appears to be a constructive settlement, according to the Credit Union National Association (CUNA). The FTC last week announced its resolution with the company whose hacked information was the source in 2007 of in the largest reported breach of credit and debit card information in history. TJX is parent company to such discount retail stores as TJ Maxx, Marshalls and Homegoods. CUNA General Counsel Eric Richard said Monday the FTC agreement with TJX appears to be comprehensive and should “send a message to merchants that they must take appropriate security measures to protect customer data.” “If all merchants were to take similar measures, credit unions would, I think, be exposed to less risk and have to consider reissuing large numbers of cards much less frequently," Richard said. The FTC announcement noted that TJX, as well as data brokers Reed Elsevier and Seisint, have agreed to settle charges that each engaged in practices that, taken together, failed to provide reasonable and appropriate security for sensitive consumer information. The settlements will require that the companies implement comprehensive information security programs and obtain the audits. The breach event, coupled with a significant increase in sophisticated attempts to phish personal information from consumers, were integral to changes in the way credit unions and their members deal with security issues. More credit unions are taking precautions by offering credit monitoring identity theft services and security solutions.

Mica Treasurys perilous plan has long road

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WASHINGTON (4/1/08)--After reviewing details of the U.S. Treasury’s long-term plan to overhaul the nation’s financial institution regulatory structure, Credit Union National Association (CUNA) President/CEO Dan Mica remained convinced the plan is perilous for credit unions and consumers.
During yesterday's briefing on the Treasury's regulatory proposal, U.S. Treasury Secretary Henry Paulson listens to CUNA President/CEO Dan Mica, who asserted the proposal could put credit unions out of business. Paulson rejected that notion and said such an outcome was not Treasury's intent. (Photo source: Bloomberg.com)
Mica attended Treasury Secretary Henry Paulson’s briefing Monday on the agency’s regulatory restructuring blueprint. Paulson explained details in the 212-page report and the thinking behind its development. A summary of the report was leaked to the media during the weekend. During Monday’s briefing in Washington, Mica explained to Paulson that the Treasury proposal would result in the demise of credit unions as they function today. Paulson rejected that assertion and said “If you read the executive summary, you'll see it is not our intent and that would not be the effect.” Mica said the report’s language indicates otherwise:
* All institutions desiring federal deposit insurance--whether banks, thrifts, or credit unions; including state-chartered institutions--would be required to obtain the new "federal insured depository institution" (FIDI) charter (report p. 160); * The recommendation would combine the five federal regulatory bodies into three--the National Credit Union Administration would cease to exist; * Cooperative institutions could operate under the FIDI charter. However, to qualify for the tax-exemption, these institutions would be required to elect “community status” and meet a series of apparently stringent tests in terms of asset size, field of membership, and service to the underserved. It appears small banks also could meet such tests and claim the tax-exemption (report p. 161); * A Presidential Executive Order may be issued to all federal regulators expanding an existing interagency working group and directing them to more closely coordinate during the current financial crisis. After the expansion, NCUA will still not be included; * Finally, there is insufficient information about the new federal regulatory body that would oversee all payment systems.
Mica emphasized that the provisions of greatest concern to credit unions are long-term recommendations, which Paulson dubbed an “aspirational plan” that “requires thoughtful discussion”--as well as congressional action. Lawmakers on Capitol Hill would not address them anytime in the foreseeable future and certainly not in this Congress, according to Mica. Despite the lengthy timetable, the CUNA leader remained especially bothered by one aspect of the report. “What may be most disturbing about the Treasury plan is its assumption that financial institutions can be compared solely on the basis of the services they offer, without regard to structural and cultural differences between different types of institutions,” said Mica. “As a result, Treasury does not acknowledge any unique contribution from credit unions based on their not-for-profit, cooperative structure.” Use the resource link below to review Treasury’s complete 212-page blueprint.

Hill covered with CUNAs Treasury blueprint letters

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WASHINGTON (4/1/08)—As part of comprehensive actions to alert federal policy- and lawmakers of concerns about the U.S. Treasury’s blueprint for regulatory restructuring, Credit Union National Association (CUNA) President Dan Mica Monday sent a letter to every member of Congress. Mica expressed credit unions’ grave concerns regarding the Treasury plan that ultimately would phase out the National Credit Union Administration (NCUA) and place banks and credit unions under one regulator's oversight, as well as merge various charters into a single charter type. "The strategy regarding credit unions reveals Treasury's apparent total disregard for the uniquely democratic and consumer-owned structure of credit unions and the pocket book benefits from better rates and services their consumer/members are provided," Mica said in the letter sent to each House and Senate member. He underscored the fact that credit unions have not contributed to the current housing and credit problems the nation is experiencing. Yet the Treasury proposal, he said, "would eliminate one of the few sectors of the financial services industry that has consistently acted in the best interest of consumers." Mica urged the country’s lawmakers to “make a strong statement regarding the important role that credit unions play in helping America's consumers through these difficult economic times by quickly enacting H.R. 1537." He was referring to the Credit Union Regulatory Improvements Act, know as CURIA. CURIA would provide for a risk-based capital system, raise the ceiling on credit union loans to members for business purposes, and clarify that all federally insured credit unions are eligible to add underserved areas to their field of membership. The Treasury’s strategy regarding credit unions, Mica said, serves to reveal the department’s “apparent total disregard for the uniquely democratic and consumer-owned structure of credit unions and the pocket book benefits from better rates and services their consumer/members are provided." In a related story, NCUA Chairman JoAnn Johnson said in a statement that the Treasury’s plan “raises important issues about the optimal structure for governmental oversight of U.S. financial markets. She said that while the NCUA agrees with safety and soundness objectives, “we have significant concerns that the many consumer benefits of the credit union system would be threatened by any restructuring proposal that may blur the credit union charter and that eliminates the separate regulatory and insurance function for federally insured credit unions." The NCUA will conduct a detailed review of the Treasury report, Johnson said.

Go Direct offers new fin ed tools

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WASHINGTON (4/1/08)—Opportunities to offer consumers’ a bit of financial education are blossoming all over this Spring, with April named Financial Literacy Month and May designated Older American Month. The U.S. Treasury Department’s “Go Direct” program to encourage direct deposit of government benefits checks is offering downloadable tools to inform seniors about the benefits of having checks deposited automatically into their accounts. Those tools include:
* A Financial Literacy Month overview providing ways to incorporate Go Direct into existing financial literacy efforts; * PowerPoint slides with key information about the benefits of direct deposit, which can be incorporated into existing presentations; * A “Direct Deposit Myths and Facts” sheet for hand-out at presentations, workshops or meetings, a flyer that is intended to identify and dispel common misconceptions about direct deposit.
Additional downloadable items specifically designed for use during Financial Literacy Month are: for you to download and include in your financial literacy efforts. Below are additional items specifically for April Financial Literacy Month for you to download and include in your financial literacy efforts. Newsletter copy, poster, web banner – "take charge of your finances,” web banner – "sign up for direct deposit," event flier, telephone hold message script, statement stuffer and statement message. The Credit Union National Association (CUNA) is a Go Direct national partner and supports the check-safety and cost-savings goals for the program. Paper checks make up only 20% of the total number of Social Security payments, but they account for more than 90% of reported problems. In fiscal year 2007, for example, nearly 60,000 Treasury-issued checks were forged -- totaling an estimated $56 million. Direct deposit eliminates the risk of check fraud and helps protect people from identity theft. Use the resource link below to access the Treasury materials.

Power breakfast keeps CUs in Hill view

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WASHINGTON (4/1/08)—With three broadly known U.S. senators on the risers, the Credit Union National Association (CUNA) will continue to keep credit unions in the focus of Capitol Hill Wednesday with its seventh “Power Breakfast” Organized by National Journal and MSNBC, co-sponsored by CUNA and various other enterprises, the power breakfast series has typically attracted close to 100 Capitol Hill staffers, lobbyists and reporters. On April 2, the offering will feature a discussion on the upcoming presidential election, called “Super-Surrogates: The candidates biggest supporters state their case.” The phrase “super surrogate” is meant to capture the speakers’ positions as not only superdelegates, but also as official representatives of one of the campaigns. Scheduled participants in the discussion are:
* Sen. Evan Bayh (D-Ind.), who has backed Sen. Hillary Clinton (D-N.Y.) in her bid for the presidency; * Sen. Richard Durbin (D-Ill.), a supporter for the Democratic contender from his state, Sen. Barak Obama; and * Sen. Lindsey Graham (R-S.C.), who has cast his support behind Sen. John McCaiin (R-Ariz.).
The exchange will be moderated by Linda Douglass, of the National Journal, Ron Brownstein, of Atlantic Media Company, and Chuck Todd, of NBC News. It is co-sponsored by Boeing. According to CUNA Political Director Trey Hawkins, by participating in the power breakfast series, CUNA assures that "insiders from Capitol Hill and in the Washington lobbying community are seeing credit unions in the thick of the political process."