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Healthcare payment costs should be limited CUNA to NACHA

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WASHINGTON (4/30/12)--The Electronic Payments Association (NACHA) should minimize costs on financial institutions that process healthcare reimbursement payments through the automated clearing house (ACH) network, the Credit Union National Association (CUNA) suggested in a comment letter.

NACHA has considered changing some of its information processing protocols for healthcare payments, and has provided three different approaches for how this change could be accomplished. According to CUNA, all three possibilities would result in higher costs for credit unions and other Receiving Depository Financial Institutions (RDFIs). CUNA said that rather than adopting one of the three suggested changes, NACHA should continue to permit RDFIs to provide healthcare payments information on CCD+ entries to assist their healthcare receivers based on the capabilities and preferences of both the RDFI and its receiver.

The CUNA comment letter also said RDFIs should not be required to automatically deliver reassociation data to healthcare receivers for each payment that is processed, as most payments are processed correctly. Not all healthcare receivers would want to receive the reassociation data automatically for every payment that is processed, CUNA added.

For the full comment letter, use the resource link.

CDFI CUs remain true to mission study says

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WASHINGTON (4/27/12)--Community Development Financial Institutions (CDFIs) have remained true to their mission, and "have succeeded in lending to and investing in individuals and communities not served by conventional financial institutions, while maintaining loan performance standards generally equivalent to those of the conventional financial sector," the CDFI Fund said in a report.

The "CDFI Industry Analysis: Summary Report" was developed by the University of New Hampshire Carsey Institute's Center on Social Innovation and Finance, and examines the performance of 612 CDFIs between 2005 and 2010. The report examined 197 credit unions as part of the study. The study focused on capitalization, liquidity, portfolio health and risk-management issues faced by CDFIs.

The Treasury's CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit.

The CDFI fund report found that CDFI credit unions, and other institutions, have been "willing to take risks and serve customers with financial products that traditional capital markets are unlikely to provide."

However, the report noted, these risks, when coupled with the recent recession, created issues in some cases. While the majority of CDFI credit unions examined in the report had excellent loan quality, some CDFI credit unions experienced greater amounts of delinquent loans, higher operating expense ratios, declining earnings, and higher delinquency rates between 2005 and 2010.

Some of the risks and costs could be mitigated through certain operating procedure changes, according to the report.

For the full report, use the resource link.

In-district MBL advocacy key this week CUNA

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WASHINGTON (4/30/12)—Increased media coverage and still-growing support from Washington advocacy groups have kept member business lending (MBL) legislation in the spotlight in recent weeks, and continued credit union support of legislation that would increase the MBL cap will remain pivotal as members of Congress return home to their districts this week.

Pending Senate and House bills would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%, under certain conditions, and the Credit Union National Association (CUNA) has estimated that this increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers.

Senate leadership remains committed to a floor vote on the MBL legislation, but a voting date has still not been determined.

"We have more confidence in the level of support in Congress today than we did two months ago, and we continue to build support every day," Ryan Donovan, CUNA's senior vice president of legislative affairs, said. To help build upon this strong base of support, Donovan said, credit union representatives can arrange to meet with federal lawmakers in their home offices, town hall meetings, and other venues this week. Credit unions should contact lawmakers on their Facebook pages and through Twitter to urge them to vote in favor of MBL legislation.

The House and Senate members are scheduled to remain in their home districts until May 6.

While bankers have stepped up their vocal opposition to increasing the MBL cap in anticipation of the Senate vote, several political- and consumer-oriented Washington groups have also joined the fray, touting the boost that an MBL cap increase could give to small businesses.

A group that identifies itself as a coalition of conservative, libertarian and free-market organizations have voiced their support for the MBL cap increase, calling MBL legislation "a sound, free-market, deregulatory action that will create jobs, help small business, and assist veterans."

The Consumer Federation of America (CFA) also urged legislators to support the MBL bills, which, in the CFA's words, would "expand access to affordable credit for small businesses and help strengthen local marketplaces that serve consumers well." And American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask has supported an MBL increase in a blog post and an editorial in political news publication The Hill. (See related News Now story: ACI op-ed: MBL cap inhibits competition, hurts small business)

The MBL fight, and the benefits that a cap increase could provide to the broader economy, have received press coverage in other localities, with The Wichita Eagle, the Colorado Springs Business Journal, Oklahoma's NewsOK, Minnesota's Finance & Commerce, the Baltimore Business Journal, the Sacramento Business Journal and Missouri's Springfield Business Journal running original reporting and editorials. (See related April 27 News Now story: Credit unions press MBL case with media)

For more News Now MBL coverage, use the resource links.

ACI op-ed MBL cap inhibits competition hurts small business

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WASHINGTON (4/30/12)--American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask, in an editorial published in The Hill last week, said the only "unlevel playing field" in the fight between credit unions and banks regarding increased member business lending (MBL) is that credit unions are subject to an MBL cap that prevents them from lending to small businesses.

He said the banks' cry of an "unlevel" playing field is just "weak and disingenuous lobby-speak." Pociask also noted that compared with banks, credit union lending produces a third of the delinquency rate and bad debt. Current law limits the amount credit unions can loan to business-owning members to 12.25% of the credit union's total assets. "This is unfortunate since, compared with banks, credit union lending produces a third of the delinquency rate and bad debt," Pociask said.

Keeping the MBL cap in place also "maintains an economic barrier to entry that protects near-monopoly status for banks that collectively control 95% of small business lending," Pociask said. "In other words, the arbitrary cap on credit union lending is a regulation that inhibits competition and protects competitors (the banks)," he added.

Legislation that would increase the MBL cap to 27.5% of assets has been introduced in the House and Senate, and Senate leadership remains committed to a vote on their version of MBL legislation. Rep. Ed Royce (R-Calif.), who is an original cosponsor of House MBL legislation, has said he would push for a vote on his bill once Senate action is complete. "Public policy needs to encourage competition, remove market entry barriers, encourage investment— and do all of this without government funding," Pociask said, adding that the MBL cap increase would mean "more loans at lower market risk."

Pociask also wrote in favor of the MBL cap bills in a blog post last week. (See related April 26 News Now story: MBL increase brings choice, credit access: ACI blog) CUNA is encouraging credit union supporters to ask their elected representatives to support MBL cap increase legislation during this current weeklong congressional district work period. (See related News Now story: In-district MBL advocacy key this week: CUNA) For the full editorial, use the resource link.

Inside Washington (04/27/2012)

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  • WASHINGTON (4/30/12)--The Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program (TLGP), a financial system stabilization program created around the same times as the Troubled Asset Relief Program (TARP),  will expire at the end of this year after receiving much less attention than TARP. Participants paid fees to take part in the program, saving it from the criticism that plagued TARP (American Banker April 27). The TLGP also included full temporary coverage of noninterest bearing checking deposits in transaction accounts. The FDIC reported this week it had started transferring unused reserves into the agency's Deposit Insurance Fund. The program--including both the debt and deposit guarantees--stands to finish up essentially with more than $8 billion in net profit—barring the failure of any banks participating in the program. Earlier this month, FDIC officials said that, $2.7 billion in funds originally set aside for potential TLGP defaults had been moved into the DIF at the end of 2011, increasing the balance for the agency's traditional deposit-coverage fund …
  • WASHINGTON (4/30/12)--The Obama administration, which had originally proposed funding a mortgage refinancing program with a tax on big banks, appears to be distancing itself from that approach. The bank tax was met with criticism as soon as it was announced during President Barack Obama's Sate of the Union address in January (American Banker April 27). That administration has yet to introduce a refinancing plan. Housing and Urban Development Secretary Shaun Donovan said Thursday that the administration is working on a bill with members of Congress, and he is hopeful that legislation will be introduced in the next few weeks. Donavan said talks with members of Congress include looking for alternate ways of funding the program. The refinancing program would allow homeowners whose mortgages are not backed by the federal government--and who have not qualified for other government refinance initiatives--to take advantage of low interest rates by locking into a government-backed loan. But the plan has been criticized by House Republicans, who have dismissed it as election-year politics …
  • WASHINGTON (4/30/12)--Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) led a group of 22 senators in calling on regulators meet the July 21 deadline for writing a rule that would ban banks from participating in proprietary trading.  In a letter to Federal Reserve Chairman Ben Bernanke and other regulators, the senators reminded the agency heads of the major role high-risk trading had in the makings of the financial crisis, and the need for the Volcker Rule protection. "The American people suffered greatly because of the financial crisis," the senators wrote. "The Volcker Rule is a critical protection to help ensure that such a crisis does not happen again.  The economy needs these protections, our constituents deserve these protections, and the law demands these protections.  Please implement a clear, strong, and effective Volcker Rule without delay." The letter lists out specific issues with the proposed Volcker Rule, but asks that it not be delayed or scrapped. It urges the regulators to adopt the best elements from the proposed rule; eliminate loopholes; draw clear lines based on objective data and observable markets; strengthen CEO and board-level accountability and public disclosure; and provide coordinated and consistent enforcement, including data sharing by regulators …