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CFPB board if created must add CU expertise CUNA

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WASHINGTON (4/7/11)—In a hearing that focused largely on the composition of the pending Consumer Financial Protection Bureau’s (CFPB) leadership, SECU of Maryland CEO Rod Staatz suggested that a credit union representative be added to the lineup if the CFPB leadership structure is expanded beyond a single individual.
Click to view larger image SECU of Maryland CEO Rod Staatz tells federal lawmakers Wednesday that the Consumer Financial Protection Bureau should exempt credit unions, and the pro-consumer products they provide, from any onerous rules that the bureau might create. (CUNA Photo).
H.R. 1121, the Responsible Consumer Financial Protection Regulations Act, was one of a pair of bills discussed at the House Financial Services subcommittee on financial institutions and consumer credit Wednesday hearing. That bill would replace the proposed single CFPB director position with a five-person panel. While many saw the need for greater diversity in CFPB leadership, others noted that broadening CFPB leadership beyond a single agency head could create gridlock and delay critical, pressing rulemaking. Many legislators, including Rep. Carolyn McCarthy (D-N.Y.), noted that credit unions were not the cause of the recent financial crisis, which provided the impetus for the creation of the CFPB. Grand Rapids State Bank CEO Noah Wilcox, Consumer Bankers Association President Richard Hunt, Bank of Bennington CEO Leslie Andersen, Washington Gas Light FCU CEO Lynette Smith, U.S. Chamber of Commerce Center for Capital Markets Competitiveness Director Jess Sharp, Director, NAACP Senior Vice President for Advocacy and Policy Hilary Shelton, and Georgetown University Law Center Professor Adam Levitin also testified during the hearing. H.R. 1351, the Consumer Financial Protection Safety and Soundness Improvement Act, was also discussed during the hearing. Staatz said that CUNA and his credit union support portions of that bill that would replace the proposed two-thirds voting approval threshold with a simple majority threshold to strengthen the review authority of the Financial Stability Oversight Council of regulations issued by the CFPB. Staatz in written testimony also encouraged legislators to urge the CFPB to exempt credit unions, and the pro-consumer products they provide, from any onerous rules that the CFPB may create. A formal exemption process has not been established, and Staatz asked subcommittee members to ensure that a process is created in a timely fashion. Staatz also took the opportunity to cover the credit union difference, noting that while credit unions have to make “a little profit” to ensure their safety and soundness, credit unions “exist” for their members. “They own us,” he said of credit union members.

Go Direct Direct deposit deadline is May 1

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WASHINGTON (4/7/11)--Individuals applying for Social Security or other federal benefits will begin receiving their payments exclusively via direct deposit on May 1. The Treasury began its Go Direct program, which encourages Americans to switch to direct deposit, in 2004. The Go Direct campaign notes that direct deposit enhances safety and convenience. To sign up for direct deposit, eligible enrollees will need to know their financial institution's routing transit number, the type of account that the funds will be deposited into, and the account number. The payments will then be made to credit union accounts, bank accounts, or Direct Express Debit MasterCard card accounts, according to the U.S. Treasury. The Credit Union National Association (CUNA) is a Go Direct national partner and supports the check-safety and cost-savings goals for the program.

CUNA ICBA meet with senators on interchange delay

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WASHINGTON (4/7/11)—As an outward sign of the crucial nature of the interchange issue, the leaders of community banks and credit unions, in a rare showing, teamed up to visit with key senators to discuss the proposal’s impact on small financial institutions.
Click to view larger image CUNA President/CEO Bill Cheney, right, urges Sen. Susan Collins (R-Maine) to join the list of legislators supporting stopping, studying and starting over on interchange fee cap regulations. (CUNA Photo)
CUNA President/CEO Bill Cheney and Independent Community Bankers of America (ICBA) President/CEO Camden Fine met with Sens. Susan Collins (R-Maine) and Richard Blumenthal (D-Conn.) on Wednesday. Both senators supported Sen. Richard Durbin’s (D-Ill.) interchange fee cap when it was added to the Dodd-Frank Wall Street Reform Package. That interchange amendment, set to go into effect in late July, could lower the amount of transaction fees charged to seven cents per transaction. The interchange legislation would exempt credit unions and other small institutions with assets of $10 billion and under from the terms of the regulations. However, there is much debate over whether this proposed exemption would work as planned. As CUNA and the ICBA noted in the Wednesday meetings with lawmakers,
Click to view larger image Sen. Richard Blumenthal (D-Conn.) is shown between CUNA President/CEO Bill Cheney (right) and ICBA President/CEO Camden Fine (left) as he listens to the two trade association leaders’ outlines of how extensive the negative impact of the debit card interchange fee limit will be for small issuers like credit unions and community banks. (CUNA Photo)
it may not have been clear at the time lawmakers voted in favor of the interchange amendment that the planned $10 billion exemption for small issuers would not even impact portions of the interchange regulations that address routing and exclusivity fees. Cheney emphasized CUNA and ICBA are often on opposite sides of an issue and that the groups’ joint effort on interchange underscores ”how devastating an impact that these proposed regulations would have on small issuers.” CUNA has warned that the arbitrary interchange fee cap does not fully account for the costs of running debit card programs, and many credit unions have said that they would be forced to increase some fees, eliminate certain products and services, and could go so far as cutting staff members or closing down branches if the fee restrictions go through. These types of actions would reduce the level of service provided to members and could prevent some current credit union members from having access to the banking system in general.

Inside Washington (04/06/2011)

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* WASHINGTON (4/7/11)--The National Credit Union Administration (NCUA) has issued a Letter to Federal Credit Unions (11-FCU-04) that reiterates the agency’s recent decision to extend the current interest-rate ceiling on loans originated by federal credit unions through Sept. 10, 2012. The decision means the allowable annual percentage rate is 18% for most loans and 28% for loans made under NCUA’s recently approved Short-Term Small Loan program, which is intended to help credit unions battle predatory payday lending. In its letter, the NCUA notes that due to potential volatility in interest rates over the next 18 months, the agency will closely monitor credit markets and will reconsider the interest-rate ceiling before September 2012 should conditions warrant … * WASHINGTON (4/7/11)—Eight bills passed by the House Financial Services capital markets that aim to speed up the reform of the government-sponsored enterprises have the mortgage market worried (American Banker April 6). Democrats oppose the measures, citing a nervous mortgage market, while advocating a more comprehensive solution for the future of Fannie Mae and Freddie Mac. The bills include a proposal by House Financial Services Committee Chairman Spencer Bachus (R-Ala.) to suspend the Fannie Mae and Freddie Mac employee compensation systems; a bill by Rep. Ed Royce (R-Calif.) to end the GSEs’ affordable housing goals; a measure by Rep. Judy Biggert (R.-Ill.) to establish an inspector general within the Federal Housing Finance Agency; and a measure by oversight subcommittee Chairman Randy Neugebauer (R-Texas) to increase Fannie and Freddie’s guarantee fees over two years. Rep. Jeb Hensarling (R-Texas) also introduced a bill to set annual limits on the size of each GSE’s retained portfolio, increasing the limits over five years … * WASHINGTON (4/7/11)--Former Fannie Mae CEO Daniel Mudd is being investigated by the Securities and Exchange Commission (SEC) for statements he made to Congress in 2007 regarding the government-sponsored enterprise’s financial health prior to its seizure by federal regulators (Bloomberg News April 6). At the time, Mudd told lawmakers Fannie Mae’s exposure to subprime loans was “minimal.” Within 18 months, Fannie Mae and Freddie Mac were placed under conservatorship as a result of massive loan losses. Regulators may be trying to determine the extent of Mudd’s knowledge about the loans when he testified before Congress. The SEC’s investigation includes several individuals who were executives at Fannie Mae during the crisis and centers on how the firm represented its exposure to subprime mortgages to investors. The SEC has notified Mudd and at least three other former executives at Fannie Mae and Freddie Mac that it intends to purse civil action enforcement against them. Among those served notices is Richard Syron, former CEO of Freddie Mac. Syron, testifying during the same congressional hearing as Mudd, said that Freddie Mac was not heavily invested in subprime loans … * WASHINGTON (4/7/11)--Although the bills are seen by some observers as having a long, perilous road before them, a House subcommittee Wednesday approved eight bills intended to reform the oversight and operations of Fannie Mae and Freddie Mac. The chairman of the House Financial Services subcommittee on capital markets and government-sponsored enterprises, Rep. Scott Garrett (R-N.J.), said the passage of the bills “represents an important milestone in our ongoing effort to end the bailout of Fannie Mae and Freddie Mac, protect taxpayers from further losses and level the playing field so that the private sector can re-enter the marketplace.” The bills would next be considered by the full committee…

Education fin lit initiatives will get CDRLF boost

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ALEXANDRIA, Va. (4/7/11)--Low income credit unions could soon boost their current educational endeavors after the National Credit Union Administration (NCUA) on Wednesday announced that it will make $200,000 in grants available through its Financial Education and Financial Literacy Initiative. The NCUA initiative is a new technical assistance grant (TAG) project, and is related to the agency’s Community Development Revolving Loan Fund (CDRLF). The agency in a release said that the Financial Education and Financial Literacy Initiative aims to “improve financial literacy among the general population, particularly students.” The NCUA said that projects that would be eligible for funding include:
* Educational partnerships with schools, teacher associations, and parent groups; * Partnerships with credit counseling organizations to offer training to help members improve their credit scores and access to credit; and * Enhancement of online financial education modules.
Programs that provide counseling for first-time homebuyers and partnerships with organizations that offer general financial literacy and education opportunities would also be eligible for funding, the NCUA said. Eligible credit unions may receive up to $5,000 in funds. Applications for the initiative will be accepted from April 18 through May 20, the NCUA said. The educational initiative will run on a yearly basis. Additional information on other CDRLF programs will be announced as their funding is determined, the NCUA said.

Short-lived stay lifted from Fed loan compensation rules

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WASHINGTON (4/7/11)--The U.S. Court of Appeals for the District of Columbia Tuesday lifted a stay on the implementation of the Federal Reserve's Regulation Z Loan Originator Compensation final rule, a stay that, effectively, lasted two business days. The brief court order dated April 5, in part, states: “Upon consideration of the emergency motion for expedited relief and the emergency motion to stay implementation of final rule pending appeal, the response thereto, and the reply, it is ORDERED that the administrative stay entered on March 31, 2011, be dissolved.” This lawsuit connected to the Fed rules has nothing to do with the SAFE registration process for mortgage loan originators, the Credit Union National Association notes. The new order is the most recent result of emergency relief requests filed in the appellate court in late March by the National Association of Mortgage Brokers (NAMB) and National Association of Independent Housing Professionals (NAIHP). Earlier, these parties filed a pair of lawsuits against the Fed in the U.S. Federal District Court for the District of Columbia. The suits, which sought a temporary restraining order and a preliminary injunction to prevent enforcement of the Regulation Z final rule, were rejected by the District Court in late March. The final rule central to the dispute and set to come into effect on April 1 applies to closed-end consumer credit transactions that are secured by a dwelling. The Fed's final rule prohibits payments to loan originators, including mortgage brokers and loan officers, based upon the terms or conditions of the loan such as the interest rate. The rule would also prevent loan originators from being paid more compensation if the borrower accepts an interest rate higher than the rate required by the lender. This is commonly referred to as a "yield-spread premium." The practice of "steering" consumers toward loans that are not in their best interest to increase a loan originator's compensation would also be banned under the rule. Loan originators would still be permitted to receive compensation that is based on a fixed percentage of the loan amount, however.