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CUNA to IRS Withdraw nonresident interest proposal

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WASHINGTON (4/11/11)—The Credit Union National Association (CUNA) has asked the Internal Revenue Service to withdraw a proposed rule that would expand reporting requirements for interest paid to nonresident aliens, saying that the proposal’s costs to financial institutions and consumers “will far outweigh any benefit to the IRS.” The IRS proposal, which was released in January, would require credit unions and other financial institutions to report on their Form 1042-S interest of $10 or more earned annually on deposit accounts held by nonresident aliens who are residents of any foreign country. The current nonresident reporting requirement only applies to Canadian expatriates. CUNA Deputy General Counsel Mary Dunn said that this reporting expansion “could be setting a precedent that credit unions do not want to see repeated.” The proposal would apply to any covered institution that pays interests on accounts for nonresident aliens anywhere. Dunn said that CUNA could not specifically estimate how many credit unions this proposal would impact if it came into effect. CUNA in a comment letter to the IRS said that credit unions, as financial institutions, already shoulder a significant compliance burden as the result of current IRS reporting requirements and are among the most heavily regulated financial institutions. In addition, the letter noted that the IRS has not “provided a compelling reason why the expanded reporting requirements are necessary.” The IRS has abandoned two previous attempts to introduce similar reporting requirements. The first attempt happened in 2001, with the second coming in 2002.

Fed increases jumbo mortgage escrow threshold

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WASHINGTON (4/11/11)--The Federal Reserve earlier this month increased the annual percentage rate (APR) threshold for determining whether a “jumbo” residential first mortgage would require establishment of an escrow account. The APR threshold, under Regulation Z, has been increased to 2.5% above the average prime offer rate (APOR) on similar “jumbo” mortgage products. However, the Credit Union National Association has noted that credit unions have the option to continue to follow the lower 1.5% above APOR threshold that applied prior to this change. So-called “jumbo” mortgages -– those that are too large to be sold to Fannie Mae or Freddie Mac -– are normally mortgages of $417,000 or more, but the minimum amount can be higher in jurisdictions with higher costs of living. The change was required by the Dodd-Frank Act, and became effective on April 1. For CUNA’s full final rule analysis on this issue, use the resource link.

CUNA plans national interchange teleconference

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WASHINGTON (4/11/11)--Interchange continues to be the issue of the moment for many credit unions, and the Credit Union National Association (CUNA) will give credit unions the latest developments on the interchange issue plus guidance on how to mobilize their members during an April 13 national teleconference. The teleconference will begin at 3 P.M. ET and should last about 30 minutes. CUNA President/CEO Bill Cheney noted that “the time window for action is relatively short,” so credit unions, the Leagues, and CUNA “must further step up our efforts” to ensure that the proposed interchange implementation delay becomes reality. CUNA will underscore the need for credit unions to get their membership involved in the interchange fight, and will review the various resources and strategies for doing so during the call. To register for the call, use the resource link. There is no cost to participate. The Federal Reserve by July 21 is expected to release a final rule that could cap interchange fees at as low as seven cents per transaction. CUNA has said the rule will force up debit card costs for consumers and has urged Congress to delay implementation and study the surrounding issues. Earlier this week, CUNA unveiled a “Call on Congress” campaign aimed at CU members, including a toll-free number, (877) 422-3525, to help credit union members urge their congressional representatives to save free checking accounts at credit unions. CUNA, the Leagues and credit unions are also developing a district-based letter-writing campaign. CUNA is providing Leagues and credit unions with posters, sample letters, and other materials to push this effort forward. Cheney and CUNA have also produced a new video that calls on the 93 million credit union members nationwide to contact their members of Congress on interchange. That video is posted on CUNA’s facebook page, Youtube.com and an interchange resource page on cuna.org. Interchange delay measures have been introduced in the House and Senate. The House interchange delay legislation had 71 co-sponsors as of Friday. Sen. Jon Tester (D-Mont.), who, along with Sen. Bob Corker (R-Tenn.), introduced interchange delay legislation in the Senate, has reportedly said that he believes he can reach the 60 votes needed for Senate passage of that bill. The Senate bill had 17 cosponsors on Friday.

Inside Washington (04/08/2011)

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* WASHINGTON (4/11/11)--Rep. Barney Frank, the ranking Democrat on the House Financial Services Committee, Thursday expressed optimism about a Senate bill delaying the proposed interchange rule (American Banker April 8). The Debit Interchange Fee Study Act would suspend implementation of the proposed rule for two years and calls for a one-year study of debit interchange fees. Frank said a key to the climate surrounding the interchange proposal came in February when Federal Deposit Insurance Corp. Chairman Sheila Bair and Federal Reserve Board Chairman Ben Bernanke warned the rule could hurt small banks despite an exemption in the law for institutions with less than $10 billion of assets. Frank said if a bill passes in the Senate, he believes it will move through the House quickly. The Credit Union National Association (CUNA) supports the new bill and opposes a cap on interchange fees and has told federal lawmakers that the proposed interchange rule would limit consumer options, competition and technological innovation. Interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments’ participants, CUNA said … * WASHINGTON (4/11/11)--The Federal Deposit Insurance Corp. (FDIC) appears to have softened its position on overdraft program guidance (American Banker April 8). In a banker conference call and in a "frequently asked questions" (FAQ) release on the topic, the FDIC indicated institutions under its supervision can communicate with customers who repeatedly incur overdraft charges via periodic statements rather than through in-person or telephone contacts. Cynthia Blankenship, vice chairman and chief operating officer of the $290 million-asset Bank of the West in Grapevine, Texas, first suggested the approach to FDIC Chair Sheila Bair during the recent Independent Community Bankers of America convention. Bair said the approach sounded workable. Blankenship said the original guidance, issued in November, was costly and cumbersome. The original guidance mentioned only telephone or in-person contact as means of contacting habitual overdraft users. In the conference call and the FAQ, the FDIC noted that banks have other alternatives. For example, a bank could expand on information it is already required to include in a customer’s normal statement …