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CUNA Internet gambling laws burdens need Hills action

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WASHINGTON (4/3/08)—Credit Union National Association (CUNA) board member
Click to view larger image CUNA board member Harriet May, CEO of GECU, El Paso, Texas, greets House Financial Services Committee member, Rep. Luis Gutierrez (D-Ill.) before testifying at that panel’s look a the Internet gambling law passed in 2006. CUNA Vice President of Legislative Affairs Ryan Donovan is far left in picture. (Photo provided by Bob Knudsen.)
Harriet May Wednesday urged Congress to address burdens that would be imposed on credit unions and other financial institutions seeking to comply with the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. The U.S. Treasury Department and Federal Reserve Board were jointly charged under the law with drafting implementing regulations, a task the Fed has publicly called “challenging.” The Fed has noted that its challenge is to craft a role for financial institutions without having an adverse effect on the country’s payment system. The UIGEA rules have not been finalized. May, testifying before the House Financial Services Committee, reiterated CUNA’s concerns that credit unions could be swamped by the compliance burden associated with UIGEA. She stated that the proposal as issued should not be adopted. May is CEO of GECU of El Paso, Tex. Under the Internet gambling law, financial institutions must establish and implement policies and procedures to identify and block restricted transaction or rely on those established by the payments system. “We are concerned that the scope of these requirements is not realistic,” May told the House panel. She added that one of credit unions’ fundamental fears is that they already have an “extraordinary” burden with “heavy policing responsibilities” under the Bank Secrecy Act and Office of Foreign Assets Control rules. She warned that any increased policing role could interfere with financial institutions’ fundamental business to provide financial services to their communities. May said that while CUNA does not support or condone illegal Internet gambling the current statute and implementing proposal create great concerns for financial institutions, which are particularly untimely given the current economic crisis. However, the CUNA witness made the following additional points:
* Any final rule should provide a mechanism to verify when a payment transaction is intended for illegal Internet gambling; * It should define what is meant in its directive that covered entities address “due diligence;” currently it noted the term without defining or explaining what is meant by it; * It should clarify what are institutions' “due diligence” requirements, a term is which is used but not defined in the proposal; and * Because of the problems and complexities that will be association with implementation, institutions should have at least 18 months to determine how to meet the new requirements.
May also noted that CUNA backs the Internet Gambling Regulation and Enforcement Act (H.R. 2046), introduced by House Financial Services Committee Chairman Barney Frank (D-Mass.). It would require Internet gaming businesses to be licensed and pay user fees to the Financial Crimes Enforcement Network. “The bill could be a vehicle for the Department of Justice to take the lead in not only monitoring the entities that are complying with registration, but also developing a list of those businesses or individuals involved in illegal Internet gambling activities.” Remaining witnesses before the committee were Louise L. Roseman, director of the division of reserve bank operations and payment systems, of the Federal Reserve System. Valerie Abend, deputy assistant secretary for critical infrastructure protection and compliance policy, of the Treasury Department, and representatives from The Financial Services Roundtable, Wells Fargo & Co., and the American Bankers Association.

New fraud schemes One targets CU employees keystrokes

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ALEXANDRIA, Va. (4/3/08)—The National Credit Union Administration (NCUA) issued alerts to credit unions on fraud schemes, one of which is a new type of phishing scam the regulator said poses “a significant risk” to credit unions. The credit union regulator was notified by the Federal Bureau of Investigations about a new type of information attack, one that targets employees of credit unions. These schemes differ from other types of attacks in that the criminals seek to infect the employees’ computers with malicious software secretly recording their keystrokes. The scammers send out e-mails addressed to the employees by name at their credit union e-mail addresses. The e-mails fraudulently appear to be official correspondence from either a governmental agency or a vendor of the credit union, according the NCUA. The emails include an attachment appearing as an invoice or complaint letter. When the attachment is opened, malicious software is installed that records the users’ keystrokes, the agency’s director of examination and insurance, David Marquis, said in an alert. “Once downloaded, the software is designed to monitor username and password logins and record the activity entered on the compromised machine. “Credit unions should examine their computers for the presence of malicious password stealing software and take necessary steps to eradicate such software,” Marquis wrote. In a separate alert, the NCUA informed credit unions of a scam that involves falsely filing an identity theft claim for the purposes of improving one’s credit report and credit score. The perpetrators claim identity theft and file police reports, causing disputed accounts to be removed from their credit reports either permanently due to lack of investigation or conclusion, or temporarily while under dispute, the NCUA said, “While the accounts are removed, credit history improves and credit scores increase dramatically. The perpetrator then obtains credit from one or more credit grantors during the time when the credit score is inflated. The loans obtained through the use of the improved credit history and credit score subsequently go unpaid,” said the advisory.

Inside Washington (04/02/2008)

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* WASHINGTON (4/3/08)--From left: U.S. Sens. Dick Durbin (D-Ill.), Lindsey
Click to view larger image Click for larger view
Graham (R-S.C.), and Evan Bayh (D-Ind.) participated in yesterday’s Power Breakfast dubbed "Super-Surrogates: The candidates biggest supporters state their case." Durbin represented Sen. Barak Obam (D-Ill.); Graham represented Sen. John McCain (R-Ariz.); and Bayh represented Sen. Hillary Clinton (D-N.Y.). The exchange included candidate’s positions on the economy, Iraq war, leadership, and housing. Linda Douglass, of the National Journal, Ron Brownstein, of Atlantic Media Company, and Chuck Todd, of NBC News moderated the event. Organized by National Journal and MSNBC, and co-sponsored by CUNA, more than 100 Capitol Hill staffers, lobbyists and reporters attended ... * WASHINGTON (4/3/08)--Information regarding economic stimulus payments created by the Economic Stimulus Act of 2008 is available on the “What’s New” section of, National Credit Union Administration (NCUA) Chairman JoAnn Johnson announced yesterday. The rebates, $600 for individuals and $1,200 for married couples, will be distributed in May. The NCUA also warned against identity theft scams involving the stimulus payments ... * WASHINGTON (4/3/08)--The Federal Reserve Board has created an interactive map that shows foreclosure and subprime loan information for each of the 50 states. Users can select one of 12 options to see how each state has been affected by the mortgage crisis ...

CU stance on Treasury plan ripples

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Click to view larger image CUNA President/CEO Dan Mica, right, and Bloomberg Television anchor Kathleen Hays discuss the Treasury's recently released regulatory blueprint, which CUNA says will be detrimental to credit unions and consumers. The interview happened Wednesday on the Russell Senate Building rotunda balcony and was aired live by the business network. (Photo provided by CUNA)
WASHINGTON (4/3/08)—After a weeklong drumbeat of press coverage, Credit Union National Association (CUNA) President/CEO Dan Mica explained to Bloomberg Television viewers yesterday the association’s concerns about the Treasury “blueprint” for financial regulatory reform. Mica told Bloomberg anchor Kathleen Hays that the regulatory plan unveiled Monday, March 31, by Treasury Secretary Henry Paulson would essentially eliminate credit unions if its long-term recommendations were put into place. The CUNA leader also explained that credit unions were not the cause of today’s housing and credit crisis and that the not-for-profit cooperatives have been lauded by policy makers for their performance and willingness to help consumers in these troubled times. On such issues in Congress, credit unions are on the side of consumers, he said. In a related development yesterday, House Financial Services Committee Chairman Barney Frank (D-Mass.) said Congress will ensure the Treasury blueprint will not harm credit unions. (See related story.)

Kentucky FOM suit gets CUNA backing

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WASHINGTON (4/3/08)--The Credit Union National Association (CUNA) is arguing that a lower court in Kentucky got it wrong when it applied federal administrative law precedents to a credit union field of membership lawsuit in that state. CUNA this week filed an amicus brief with the Kentucky Court of Appeals in a case filed by Home Federal Savings and Loan Association in May 2006 and referred to as Home Fed. Sav. & Loan v. Kentucky. That suit against the Kentucky Office of Financial Institutions (OFI) alleges that the OFI has no authority under Kentucky law to approve geographic field of membership bylaws for Kentucky credit unions. On Oct. 25, 2007, the Kentucky Circuit Court for Franklin County sided with the plaintiff and ruled that the OFI exceeded its statutory authority when it approved geographic fields of membership for six state-chartered credit unions between 2000 and 2005. CUNA's amicus brief states that the lower court incorrectly applied federal administrative law precedent, instead of Kentucky administrative law, to deny the OFI judicial deference. And the court further erred, CUNA argues, because if correctly applied the federal precedent would have compelled the court to back the state regulator under judicial deference. Under judicial deference, if the statutory language in question is ambiguous, the court is required by law to give deference to the regulator’s interpretation unless the interpretation is unreasonable. A third point in the CUNA brief criticizes the court for failing to consider the actual facts of the case, never having investigated the actual fields of memberships of the credit unions named in the suit. The Kentucky CU League has been involved in the case since it filed an amicus brief in 2007. The plaintiff thrift's complaint was submitted by the General Counsel of the Kentucky Bankers Association. CUNA General Counsel Eric Richard Wednesday explained CUNA’s involvement in the case: “This lawsuit is part of a pattern in which bankers have been challenging community charters in state courts around the country." In addition to Kentucky, Richard noted, multiple cases have been brought in Missouri, since resolved by state legislation, and Pennsylvania. The six credit unions named in the bankers’ lawsuit are:
* Members Choice CU, a $101.7 million asset credit union based in Ashland; * $11.5 million asset C&O United CU, Edgewood; * $77.7 million asset Service One CU, Bowling Green; * $30.7 million asset Beacon Community CU, Louisville; * $57 million asset GTKY CU, Lexington; and * $43 million asset Kentucky Employees CU, Frankfort.