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Inside Washington (03/31/2010)

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* WASHINGTON (4/1/10)--The Federal Deposit Insurance Corp. Advisory Committee on Economic Inclusion will meet today in Washington, D.C., to discuss safe transaction and savings products and strategic planning. Speakers on the agenda include Michael Barr, assistant secretary for financial institutions, Treasury Department, and Peter Tufano, Sylan C. Coleman professor of financial management, Harvard Business School. Alan Branson, chief operating officer, Enterprise Corp. of the Delta/Hope Community CU, Jackson, Miss., also is slated to speak on strategies for products to underserved and low-to-middle income consumers ... * WASHINGTON (4/1/10)--Lawmakers are debating the role that the Federal Deposit Insurance Corp. (FDIC) should take in resolving any troubled, systemically significant financial firm. A reform bill in the Senate addressing this issue has been criticized for giving FDIC too much leeway in the resolution process, but the Treasury and FDIC say flexibility is necessary to keep a major failure from affecting the economy. However, key Republicans are using the issue as an argument against the bill, sponsored by Senate Banking Committee Chairman Christopher Dodd (D-Conn.). The bill could come up for a vote April 12. Andrew Gray, FDIC spokesman, said the flexibility contained in the Dodd bill reflects current statutory authority in the FDIC’s resolution process. The legislation allows the FDIC to “package and market” a failed institution in a way that maximizes returns, he said (American Banker March 31). Dodd’s bill is not a “bailout” bill, according to a Dodd aide. Republicans have argued that reform legislation needs to prevent “too big to fail” situation and ensure taxpayers are not on the hook for helping failed banks ...

Regulator offers guidance on NFIP lapse

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WASHINGTON (4/1/10)--Following the March 28 expiration of the National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) has no authority to issue new flood insurance policies, issue increased coverage on existing policies, or issue renewal policies until the program has been reauthorized by Congress. The Federal Reserve (Fed) this week issued informal guidance to help institutions address certain issues that may arise during the lapse period, and that guidance will apply to this current lapse period and any future lapses of the NFIP. While the Fed guidance applies to its member banks at this time, the National Credit Union Administration may issue guidance soon on how the lapse affects compliance with Section 760 of its own regulations. According to the Fed’s guidance, lenders may continue to make loans that would normally be subject to the flood insurance provisions during an NFIP lapse period. However, lenders are expected to make flood determinations, provide timely and accurate notice to borrowers regarding flood insurance requirements and comply with other parts of the flood insurance regulations. Additionally, lenders are expected to evaluate safety and soundness and legal risks and to manage those risks during the lapse period. Finally, lenders are expected to put procedures in place to ensure that policies are expeditiously obtained after reauthorization for properties that are required to have flood insurance coverage. For the Fed's guidance, use the resource link.

CUNA urges Fed to change Reg E interpretation

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WASHINGTON (4/1/10)--The Credit Union National Association (CUNA) has urged the Federal Reserve to consider changing its interpretation of the recent Regulation E overdraft rules to allow credit unions and others to charge members an overdraft fee in certain, specific situations, even if the member does not opt-in to the program, as otherwise required under these new rules. These specific situations include instances where intervening transactions reduce the account balance after the debit transaction is authorized, but before it is paid, and when merchants request authorization for a transaction in an amount less than the actual total of the purchase, according to CUNA. Card network rules require credit unions and others to pay these transactions, even if they result in an overdraft and regardless of whether the member opts-in. CUNA also recommended that the Fed further clarify any potentially murky sections of its upcoming rules by publishing and maintaining a list of frequently asked questions. These overdraft rules were issued under Regulation E, the Electronic Fund Transfer Act and become effective on July 1, although fees may be charged without the opt-in for current accounts until August 15. The comment letter responds to the Fed's recently proposed clarifications to these rules that prohibit fees for overdrafts in connection with ATM and one-time debit card transactions, unless the consumer agrees or “opts-in” to these fees. The Fed also issued proposed clarifications to the recent changes to Regulation DD, the Truth in Savings Act (TISA), that impose disclosure requirements for overdraft plans, which also becomes effective on July 1. This proposal would clarify provisions with regard to the disclosure of overdraft and returned-payment fees. While Regulation DD does not apply to credit unions, the TISA requires the National Credit Union Administration (NCUA) to issue substantially similar rules. CUNA called on the Fed to allow credit unions and other financial institutions to refer to overdraft and returned-payment fees as “Total Overdraft Fees for Paid Items” instead of “Total Overdraft Fees” on their periodic statements, “which will further distinguish the paid overdraft items from items that are returned unpaid and that are also required to be disclosed.” For the full comment letter, use the resource link.

Gubernatorial candidate in Fla. supports MBLs

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WASHINGTON (4/1/10)--Florida CFO and Democratic candidate for governor Alex Sink this week became the latest public official to endorse increasing the cap on member business lending (MBL) for credit unions. Sink, in a letter to the National Credit Union Administration urged Chairman Debbie Matz to continue the fight for an MBL cap lift. Sink added that 90% of all commercial activity in Florida is related to small businesses. Credit unions “are an important partner in giving small businesses the tools they need to grow jobs” and build the economy, Sink wrote. There are currently 104 House sponsors for Rep. Paul Kanjorski’s (D-Penn.) H.R. 3380, which would increase the cap on member business lending by credit unions to 25% of assets and raise the de minimis threshold for those loans to $250,000. The Credit Union National Association (CUNA) has strongly supported this legislation, saying that the bill would help inject $10 billion into the economy and create over 108,000 new jobs at no cost to taxpayers. League of Southeastern Credit Unions President/CEO Patrick La Pine said that Sink’s support is “timely” for credit unions in Florida. “To have CFO Sink write a letter to the NCUA voicing the support of the state’s elected chief financial officer shows our credit unions that state leaders understand that credit unions are doing their part to lend money, help their members and that they can do more,” he said. CUNA is also engaged in an ongoing dialogue with the U.S. Treasury on the MBL issue. CUNA is also urging credit unions to use the current recess of the U.S. Congress to pursue meetings with lawmakers on their home turf.