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Washington Archive

Washington

Utah Central CU closed members now served by Chartway FCU

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ALEXANDRIA, Va. (5/2/11)—The National Credit Union Administration said it was Utah Central CU’s declining financial condition that led to its liquidation, announced Friday by the agency. The Salt Lake City, Utah credit union’s assets, liabilities and members were purchased or assumed immediately by Chartway FCU, of Virginia Beach, Va. Utah Central was established in 1940 to serve employees, directors and committee members of other credit unions in Utah. The credit union had approximately $157 million in assets when closed, and served 22,000 members. Chartway FCU is a full-service credit union and its members will have access to a broad array of financial services offered throughout the United States. With approximately $1.8 billion in assets, Chartway has branches in Arkansas, Florida, Georgia, New Jersey, North Carolina, Ohio, Rhode Island, Texas, Utah, and Virginia. It serves around 207,000 members. This is the seventh federally insured credit union liquidation in 2011.

Breach argues for interchange delay CUNA says

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WASHINGTON (5/2/11)--Days after a widespread data breach occurred, the Credit Union National Association (CUNA) noted that the Federal Reserve’s interchange fee cap regulations would give merchants a profit windfall while leaving credit unions to “cover even more of the costs of merchant data breaches." The data breach in question happened when credit card numbers and other personal information of 77 million users of Sony’s online gaming platform PlayStation Network was compromised and potentially stolen last week by hackers. Credit unions are reissuing credit and debit cards to their impacted members just in case information has been compromised, and CUNA President/CEO Bill Cheney in the letter noted that “the expense for taking this action is not reimbursed by Sony; rather, credit unions rely on interchange revenue to cover the cost of debit program administration, including in these circumstances, reacting to a merchant data breach.” The CUNA letter encouraged Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) to continue to fight for an interchange delay. A Senate bill introduced by the legislators would delay implementation of the interchange legislation by two years and would order federal regulators to study the impact that the interchange changes could have on consumers, financial institutions, and others. The bill, S. 575, has 16 co-sponsors. The proposed interchange rule would lower the maximum fee charged per debit card transaction to 12 cents, or lower. The statute, as enacted, would exempt credit unions and other small institutions with assets of $10 billion and under from the terms of the regulations. The effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. Without meaningful protections in the regulation ensuring that a planned exemption for credit unions and other financial institutions with $10 billion or less in assets is workable, the Fed’s proposed rule “will affect all debit-card issuing credit unions,” Cheney wrote. “Data breaches like the one we learned about this week will only exacerbate the problem for credit unions because the proposal would not allow these costs to be taken into consideration.” For the full letter, use the resource link.

Credit gap MBL cap lift fight continue CUNA

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WASHINGTON (5/2/11)--“Increasing the member business lending cap remains a top priority, especially in light of the country's continuing need for new sources of credit for small businesses,” Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said. Credit union lending is growing, and could grow even faster if legislation that could lift the MBL cap to 27.5% of total assets is approved by Congress. CUNA Senior Economist Mike Schenk told Northwestern University’s Medill Reports that banks continue to pull back from lending to small businesses, “but in contrast, credit union portfolios are growing fairly strongly.” H.R. 1418, which would lift the MBL cap to 27.5%, was introduced by Reps. Ed Royce (R-Calif.), Carolyn McCarthy (D-N.Y.), Russ Carnahan (D-Mo.), Hank Johnson (D-Ga.) and Gary Peters (D-Mich.). The bill had 12 cosponsors as of Friday. Similar legislation (S. 509) was introduced by Sens. Mark Udall (D-Colo.) and Olympia Snowe (R-Maine) in March. That bill had 18 cosponsors as of Friday. Schenk said that lifting the cap from the current 12.25% of total assets to 27.5% of assets “could land up to $13 billion in additional loans and 140,000 jobs throughout the nation in the first year after the cap is raised.” Schenk added that credit unions’ high quality loan portfolios put them “in a better position to lend.” The Washington Post has also noted the scarcity of funds that are currently available to small businesses, and reported last week on banks reluctance to lend to small business. For both stories, use the resource links.

CUNA to Fed Expand definitions in new TILA proposal

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WASHINGTON (5/2/11)--The Credit Union National Association (CUNA) has urged the Federal Reserve to adopt more expansive definitions of “underserved” and “rural” that include areas that have been determined to be “underserved” or “rural” by other federal agencies as the Fed implements new Truth in Lending Act (TILA) mortgage escrow account requirements. The Fed has proposed regulations that would change the requirements for when financial institutions must establish mortgage escrow accounts for higher-priced mortgage loans and also change mortgage escrow account disclosure requirements. Creditors that mainly operate in underserved and rural areas, make 100 or fewer mortgages, and do not resell those mortgages on the open market would not be subject to these proposed escrow requirements. CUNA in a Friday comment letter said that limiting the definitions of “underserved” and “rural” to only the most underserved and the most rural counties will limit access to mortgage credit in many underserved areas. Expanding the definitions of these terms to encompass National Credit Union Administration (NCUA) and other federal agency definitions of “underserved” and “rural” would help financial institutions that operate in underserved and rural areas “continue to provide needed mortgage credit to their communities without incurring additional regulatory burden,” the letter adds. CUNA did note, however, that many aspects of the proposal—including portions of the proposal that define “higher-priced” mortgages and many of the proposed disclosure requirements—are expressly required by the Dodd-Frank Act and leave the Board with limited discretion in implementing these statutory provisions. In addition to requesting several additional clarifications and technical changes, the CUNA comment letter also asked the Fed to delay compliance with the rule for a six month to one year period after the agency issues the final version of the regulation so that credit unions and their third-party vendors have sufficient time to comply with the new requirements.

Inside Washington (04/29/2011)

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* ALEXANDRIA, Va. (5/2/11)--The National Credit Union Administration has added discussion of a second supervisory matter to the agenda of its planned May 4 closed board meeting. The meeting will take place at 2 P.M. ET in Alexandria, Va. The board held a pair of closed board meetings earlier this month, with an April 5 meeting being held in San Diego, Calif. The agency's customary monthly open board meeting is still scheduled for May 19...

Fannie Freddie to coordinate late mortgage guidelines

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WASHINGTON (4/29/11)—Fannie Mae and Freddie Mac will soon align their guidelines for servicing delinquent mortgages that they own or guarantee in an effort to help servicers better resolve delinquencies, to keep owners in their homes, and to minimize taxpayer losses. The mortgage servicers plan to issue new detailed guidelines to mortgage servicers in the second or third quarters of this year. The alignment, which was ordered by Federal Housing Finance Agency Acting Director Edward DeMarco, will, according to the FHFA, “establish uniform servicing requirements as well as monetary incentives for servicers that perform well and penalties for those that do not.” DeMarco said that the directive should “result in earlier servicer engagement to identify the best solution available for homeowners, given their individual circumstances.” The updated guidelines will streamline and expedite borrower outreach, align mortgage modification terms and requirements, and establish a consistent schedule of performance-based incentive payments and penalties, the FHFA said. Servicers will be required to contact borrowers as soon as they become delinquent and servicers will need to focus solely on remediating the given delinquency. The FHFA release added that “the foreclosure process may not commence if the borrower and servicer are engaged in a good-faith effort to resolve the delinquency.” Each delinquency case must be reviewed to ensure that foreclosure alternatives have been considered, and financial incentives will be provided to “encourage servicers to continue to help borrowers pursue a foreclosure alternative.” “Once fully implemented by the servicing industry, the Enterprises’ aligned policies should give homeowners a greater understanding of the process and faster resolution by requiring earlier contact, more frequent communication, and prompt decisions,” DeMarco said. For the full release, use the resource link.

Inside Washington (04/28/2011)

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* WASHINGTON (4/29/11)--In the first-ever press conference held by the Federal Reserve, Chairman Ben Bernanke steered the discussion toward monetary policy. Bernanke’s remarks focused on the Federal Open Market Committee’s decision Wednesday to keep the federal funds rates unchanged and its intent to complete a $600 billion bond purchase in June (American Banker April 28). Bernanke was not asked questions about the banking industry, the interchange proposal or the credit market. Though the press conference is viewed as a step toward transparency within an agency guarded in secrecy, Bernanke did not address that topic directly. He said the benefits of speaking directly with the press outweigh some of the risks, despite the argument that some remarks by the chairman might create market volatility. During the press conference, Bernanke warned that the deficit is by far the most pressing economic concern for the U.S. … * WASHINGTON (4/29/11)--In a 5-to-4 decision, the Supreme Court on Wednesday ruled that businesses may require customers to sign binding arbitration agreements that prohibit them from joining class-actions (American Banker April 28). The decision is viewed as a victory for banks and other corporations, but a provision in the Dodd-Frank Act allows the Consumer Financial Protection Bureau (CFPB) to potentially limit arbitration agreements. Jo Ann Barefoot, a co-chair with Treliant Risk Advisers and a former deputy comptroller at the Office of the Comptroller of the Currency, said she believes consumer advocates will turn to the CFPB in the wake of the ruling. Barefoot said mandatory arbitration has been a major complaint of consumer groups for years and Dodd-Frank provides leeway for the CFPB to overturn the ruling. Mandatory arbitration agreements often are used for credit cards, auto financing, installment loans and checking and deposit accounts. The Dodd-Frank Act requires the CFPB to study the use of the agreements in connection with consumer financial products and provide a report to Congress. The act also allows the agency to issue rules that may limit or prohibit arbitration agreements if it determines that it would protect consumers ... * WASHINGTON (4/29/11)--The Federal Reserve is featuring three cities in a series of video reports that showcase promising neighborhood stabilization efforts in the wake of the foreclosure crisis. The announcement was made on Wednesday by Federal Reserve Governor Elizabeth Governor Elizabeth A. Duke at the 2011 Federal Reserve Community Affairs Research Conference in Arlington, Va. “Over the last several years, every community across the country has felt the effects of the financial crisis,” said Duke. “Foreclosed, vacant, and abandoned properties threaten neighborhoods nationwide, and community leaders are working to stabilize those neighborhoods. While the problem touches every community, it doesn’t look the same in each because it’s shaped by the circumstances that prevailed in those neighborhoods before the crisis hit. The neighborhoods featured are in Phoenix, Detroit and Cleveland. The videos are featured on the Federal Reserve Web site

CUs use Congress break to keep up interchange drive

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WASHINGTON (4/29/11)—With the July 21 final interchange fee cap implementation date drawing near, credit union advocates nationwide continued to use this week’s congressional district work period to reach out to their representatives and urge them to stop, study and start over on interchange. The Pennsylvania, Ohio, New York, North Carolina, Delaware, Minnesota and Missouri leagues were among those reporting significant interaction with their legislators on the interchange issue during individual meetings and community town halls, and credit union members nationwide have spoken out against the interchange fee cap at their local events. The Ohio Credit Union League said that over 10,000 credit union members in that state have signed a petition urging Sen. Sherrod Brown (D-Ohio) to support Senate interchange delay legislation pending action in the U.S. Congress. League representatives have also met with Brown in recent days. Leagues nationwide have also worked with local news outlets to publish editorials backing the interchange delay. The California and Nevada Leagues grassroots efforts have resulted in over 52,000 letters to Congress as of April 27, and the league told News Now that more are expected. Credit unions in those states are also engaging their members directly to aid the anti-interchange cap fight. The Credit Union National Association’s (CUNA) own grassroots communications efforts, many of which have been made via CapWiz, have resulted in nearly 185,000 congressional contacts. CUNA Senior Vice President of Legislative Affairs John Magill said that credit union backers must work to ensure that the momentum that interchange implementation delay legislation has gained in recent weeks can continue when Congress returns to session next week. Magill added that it is “important that credit unions not ease up” in the critical period between now and the proposed July 21 interchange fee cap implementation date. The timeline for action is tighter than one might think, with a number of holidays and constituent work weeks planned between now and the end of July, Magill added. The proposed interchange rule would lower the maximum fee charged per debit card transaction to 12 cents, or lower. The statute, as enacted, would exempt credit unions and other small institutions with assets of $10 billion and under from the terms of the regulations. The effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. Separate House and Senate bills would delay implementation of the new interchange rules and would order a study of the impact a debit card interchange fee cap would have on consumers, financial institutions, and merchants. In the House, Rep. Shelley Moore Capito's (R-W.V.) H.R. 1081 has 84 cosponsors. The Senate version of interchange delay legislation (S. 575), introduced by Sen. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), has 16 co-sponsors. For more on CUNA’s interchange delay efforts, use the resource link.

Two CUs among pilot lenders for energy improvement program

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WASHINGTON (4/29/11)--University of Virginia Community CU and SOFCU Community CU will join 16 other lenders in a joint federal pilot program that will help qualified borrowers finance energy saving home improvements through low-cost loans. University of Virginia Community CU is based in Charlottesville, Va. SOFCU Community CU's home office is located in Grants Pass, Ore. The program was created by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Energy. The loans, which will be known as PowerSaver loans, will be backed by the U.S. Federal Housing Administration. The loans will offer homeowners up to $25,000 in funding for a host of energy-efficient home improvements, including installation of replacement doors and windows, insulation, heating and cooling systems, solar panels, geothermal systems, and water heaters. Up to 90% of the loans will be covered by FHA mortgage insurance. However, credit unions and other lenders will be required to retain the remaining risk on each loan, a move that the federal agencies said would incentivize “responsible underwriting and lending standards.” The loans will only be made available to borrowers with satisfactory credit histories and adequate levels of debt and home equity. HUD Secretary Sean Donovan said that the PowerSaver program would help credit-worthy homeowners finance upgrades while cutting their energy bills and boosting the local job market. HUD has predicted that the pilot program could create up to 3,000 new jobs. “While FHA and these lenders are jumpstarting this pilot, we hope its success will lead to a growing private sector interest in making these types of loans," he added. Energy Secretary Dr. Steven Chu said that the program is “the right thing to do” for the environment, the economy and “the pocketbooks of American families." For the full release, use the resource link.

NCUA releases 2011 regulatory review targets

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ALEXANDRIA, Va. (4/28/11)--Bank Secrecy Act compliance, debt collection procedures, and Freedom of Information Act requests are among the items that are scheduled to be reviewed by the National Credit Union Administration (NCUA) in 2011. Regulations covering security programs, suspected crime reports, and suspicious transactions are on the agenda, as are rules addressing records preservation programs, appendices-record retention guidelines and catastrophic act preparedness guidelines. Post-employment restrictions for some NCUA examiners will also be reviewed. The NCUA reviews its full regulatory catalogue every three years, and schedules reviews of portions of its regulations on a rotating basis. The agency in its release said that its goal is to ensure that “all regulations are clearly articulated and easily understood.” Comments on the clarity and content of the regulations are welcome, the agency added. The NCUA will accept comment on these items until August 5. For the full release, with the entire list of rules to be reviewed, use the resource link.

Vensures challenge to NCUA to be heard on May 11

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WASHINGTON (4/28/11)--Vensure FCU's request to delay the National Credit Union Administration's (NCUA) conservatorship of the credit union will be heard before a U.S. District Court on May 11. U.S. District Court for the District of Columbia Judge Rosemary Collyer on Tuesday denied Vensure's request for a temporary restraining order to immediately halt the NCUA's conservatorship of the credit union. Collyer said that the Federal Credit Union Act does not allow a temporary restraining order under these circumstances. The Mesa, Ariz.-based credit union earlier this week challenged the NCUA's April 15 conservatorship, claiming that the NCUA's action "was arbitrary and capricious and threatens to significantly damage or destroy" the credit union. The complaint adds that the agency's conservatorship order "contained only cursory and incomplete facts to support the grounds for conservancy and included no exhibits, appendices or empirical data in support." The credit union also noted that the NCUA "took possession of the very financial records [the credit union] needs to demonstrate that conservatorship is improper." The plaintiffs also claimed that the NCUA violated due process in going forward with the conservatorship last week. While the NCUA had repeatedly noted deficiencies in the credit union's operations, the credit union claimed that its fortunes had improved under the stewardship of its new directors, adding new members and services. The new management, which took over in 2009, also worked with the NCUA to implement changes set forth in several letters of understanding and agreement. The credit union in the complaint admitted that it had taken part in poker-related fund transactions, and said that its work with online poker sites had helped it increase its size from a $150,000 asset credit union to one that held millions in assets. Vensure said that it never intended to permanently depend on these revenues. The credit union said that its directors had recently voted to stop doing business with the online poker companies, and said that it would have remained solvent, even without the funds provided by its financial relationship with the gambling firms. An NCUA official declined to comment on the case.

May 4 NCUA closed meeting scheduled

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ALEXANDRIA, Va. (4/28/11)--The National Credit Union Administration will hold a special closed board meeting on May 4. The agency has said that it will discuss supervisory matters during this meeting, which will take place in Alexandria, Va. The board held a pair of closed board meetings earlier this month, with an April 5 meeting being held in San Diego, Calif. The NCUA's customary monthly open board meeting is scheduled for May 19.

Reminder Federal benefit payments go electronic on May 1

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WASHINGTON (4/28/11)--The U.S. Treasury this week reminded federal benefit recipients that it will officially “retire” the use of paper checks for the payment of social security and other federal benefit payments on May 1. Individuals applying for Social Security or other federal benefits will begin receiving their payments exclusively via direct deposit at the start of next month. 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. Those who lack bank accounts or who would rather use prepaid accounts can receive their benefits through a prepaid debit card. Individuals that choose this prepaid card route will need to notify their federal benefit agency. The Treasury has made new Go Direct campaign materials available to coincide with the May 1 transition date. Those materials include social media tips, a direct deposit checklist, and news briefs for credit unions, other financial institutions, and various community organizations. 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. The Credit Union National Association (CUNA) is a Go Direct national partner and supports the check-safety and cost-savings goals for the program.

Inside Washington (04/27/2011)

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* WASHINGTON (4/28/11)--In a letter to Treasury Secretary Timothy Geithner, Matthew E. Zames, chairman of the Treasury Borrowing Advisory Committee, warned that a default could trigger another financial crisis. Zames, who also serves as managing director of JP Morgan Chase, said any delay by Treasury in making an interest or principal payment could cause foreign investors, who hold nearly half of outstanding Treasury debt, to reduce their purchases of Treasuries, and sell some of their existing holdings. A default by Treasury, or delay in raising the debt ceiling, could also lead to a downgrade of the U.S. sovereign credit rating. Zames warned that another financial crisis could trigger a run on money market funds, as was the case in September 2008 after the failure of Lehman Brothers. A default could also disrupt the $4 trillion Treasury financing market, which could sharply raise borrowing rates for some market participants, Zames said. The rise in borrowing costs and contraction of credit would have damaging consequences for the still-fragile current recovery …

FinCEN rule defines foreign accounts CUNA analysis

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WASHINGTON (4/27/11)--The Financial Crimes Enforcement Network (FinCEN) has made final a series of foreign financial account reporting regulations and the Credit Union National Association (CUNA) offers the following analysis. The regulations, which amend the Bank Secrecy Act (BSA) and became effective on March 28, identify the persons required to file the reports and the types of accounts that are reportable. The regulations also provide information on potential exemptions from the rule. CUNA, in its final rule analysis, notes that the rule clarifies that officers and other employers that file reports of foreign bank and financial accounts are not expected to personally maintain the records of the foreign financial accounts of their employers. The rule also states that filers may rely on portions of the rule to determine their foreign account-related filing obligations if previous filings were deferred under U.S. Treasury guidance. The FinCEN rule provides exceptions for officers or employees of credit unions that are examined by the National Credit Union Administration. A similar exception has been provided for officers or employees of financial institutions that are regulated by other federal regulatory agencies. Specifically, officers or employees of credit unions and other institutions that have signature or other authority over foreign financial accounts that are owned or maintained by their financial institution would not be required to file reports on accounts that the individual has no financial interest in. The rules will apply to reports filed by June 30, and will also apply to all reports filed thereafter.

Vensure files challenge to NCUA conservatorship

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WASHINGTON (4/27/11)--Vensure FCU this week challenged the National Credit Union Administration’s (NCUA) move that placed the Mesa, Ariz.-based credit union into conservatorship on April 15, claiming that the NCUA’s action “was arbitrary and capricious and threatens to significantly damage or destroy” the credit union. The credit union has elected to open its case in the U.S. District Court for the District of Columbia. The credit union in its complaint challenged the NCUA’s conservatorship, saying that the agency’s conservatorship order “contained only cursory and incomplete facts to support the grounds for conservancy and included no exhibits, appendices or empirical data in support.” The credit union also noted that the NCUA “took possession of the very financial records [the credit union] needs to demonstrate that conservatorship is improper.” The plaintiff, Vensure, in an expedited motion for discovery has asked the NCUA to provide “the factual basis” for the credit union’s conservatorship, the facts and circumstances that led to the decision to conserve the credit union, information on the credit union’s compliance with NCUA regulations, and any audits and examinations that have been completed over the past five years. A full hearing has not yet been scheduled. An NCUA representative told News Now that the agency does not comment on ongoing legal matters. Vensure FCU serves employees of Vensure Employer Services, Inc., employees of various related companies, and their families. The NCUA in announcing the conservatorship said that it is authorized under the Federal Credit Union Act to appoint itself as conservator "to conserve the assets of a federally insured credit union, protect members' interests, or protect the National Credit Union Share Insurance Fund." News accounts have said that the credit union was one of 16 financial institutions that allegedly held funds tied to recent Federal Bureau of Investigation actions taken against online gambling sites PokerStars, Full Tilt Poker and Absolute Poker. Vensure is one of three federally insured credit unions to be placed into conservatorship this year.

SECCFTC plan meeting on swaps

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WASHINGTON (4/27/11)--The implementation schedule for final rules related to swaps and security-based swaps will be discussed during a pair of joint Securities and Exchange Commission (SEC)/Commodity Futures Trading Commission (CFTC) roundtables. The roundtables are set for May 2 and 3 and will be held at the CFTC’s home office in Washington, D.C. As noted in the Federal Register, the regulators during the meetings will consider whether to propose joint rules relating to the definitions of ‘‘swap,’’ ‘‘security-based swap,’’ ‘‘security-based swap agreement,’’ the regulation of mixed swaps, and books and records requirements regarding security-based swap agreements. A credit rating-related discussion is also on the agenda, according to the Register. The discussions will be open to the public, and the agencies plan to accept public comment on the potential rules following their meeting. They did not propose a public comment deadline. The SEC earlier this year proposed exempting credit unions with under $10 billion in assets from mandatory securities-based swaps clearing requirements. Without this exemption, credit unions could be effectively prohibited from hedging risk using over-the-counter options or other derivatives when a security, such as a bond, is the underlying asset. Federal credit unions and some state credit unions are allowed to enter into certain types of over-the-counter agreements that would meet the definition of "security-based swaps." The Dodd-Frank Act gives the SEC the leeway to consider exemptions from the swap requirements, but the SEC is not required to exempt any financial institution from the requirements. The Credit Union National Association (CUNA) backed this proposal, but also insisted that it could go further. (See News Now related Feb. 7 story: CUNA backs SEC's CU swap clearing exemption.)

Inside Washington (04/26/2011)

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* WASHINGTON (4/27/11)--Shutting down Freddie Mac and Frannie Mae--a cornerstone of the Republican strategy to shrink government—is proving to be an uphill battle in both the House and Senate (msnbc.com April 26). In the Repubican-led House, a sweeping overhaul bill by Rep. Jeb Hensarling (R-Texas) has yet to gain consensus, according to House Financial Services Committee Chairman Spencer Bachus (R-Ala.). In the Senate, a measure from Sen. John McCain (R-Ariz.) must get through a Democratic majority. Republicans want to turn the mortgage market over to banks and other private lenders. Maintaining Freddie Mac and Fannie Mae since the housing bust has cost tax payers $150 billion, said msnbc.com. Representatives from both the Republican and Democratic parties agree Freddie and Fannie should be minimized to lure private lenders back into the market, GOP members generally want to move faster and further … * WASHINGTON (4/27/11)--The Federal Reserve’s power to pay interest on bank reserves, an authority granted by Congress in 2008, may come into play today (American Banker April 26). The Federal Open Market Committee began a two-day meeting Tuesday and among the items on the agenda is whether to proceed with a $600 billion in bond purchases. How closely the fed funds rate follows the movements of those bonds could determine the success of using interest on reserves as a policy tool. Still to be determined is the margin between interest reserves and the effective funds rates, according to Dino Kos, a managing director at Hamiltonian Associates Ltd. Kos said that if the fed rate trades at a stable, narrow discount to the interest on reserves, then tightening policy through the interest on reserves is feasible. A wide spread would undermine the strategy, he said. Watch News Now this afternoon for updates … * WASHINGTON (4/27/11)--Including expected opposition from Republicans and bankers, President Barack Obama has another opponent for his yet-to-be-named nominee to head the Consumer Financial Protection Bureau (CFPB): time (American Banker April 26). As of Tuesday, only 10 legislative weeks remained for the Senate to confirm the selection before the bureau officially assumes its rulemaking and enforcement authorities. The short time frame leaves the president with two options: Nominate a candidate who would be approved with little debate, a challenge given the controversy surround CFPB's very existence, or make a recess appointment, a move that is sure to spark controversy among GOP opponents. After the president sends his nomination to the Senate, the Banking Committee would take several weeks to research the candidate prior to confirmation hearings, which could take up to a week. The committee may take another week or two to vote on the nomination. Then the Senate must take time for a floor debate. If Republicans seek to block or filibuster the nomination, the final vote could be held up for another week …

Inside Washington (04/25/2011)

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* WASHINGTON (4/26/11)--The Treasury Department said in a report that the Public-Private Investment Program (PPIP), created in 2009 to allow the government and investment firms to buy assets from banks, earned about $1.7 billion in the first quarter (The Hill April 25). PPIP brought in about $523 million in cumulative equity distributions and around $1.2 billion in unrealized gains, according to Treasury. Public-private investment funds had withdrawn about $20.9 billion--or about 71%--of the $29.4 billion in debt and equity capital that had been committed to the program, according to the report. Treasury previously had announced PPIP’s 2010 fourth-quarter gains at $314 million in cumulative equity distributions and $1.08 billion in unrealized gains …

Fed clarifies portions of new TILA rules

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WASHINGTON (4/26/11)--The Federal Reserve Board in Monday’s Federal Register made final a number of clarifications to its Credit Card Accountability Responsibility and Disclosure (CARD) Act. The clarifications relate to the Fed’s final rule and are intended to help card issuers more fully understand their compliance obligations under changes to Regulation Z. The Fed had released the clarifications in a proposed rule that was issued in early November 2010. Specifically, the clarifications state:
* Promotional programs that waive interest charges for a specified period of time are subject to the same protections as promotional programs that apply a reduced rate for a specified period. For example, a card issuer that offers to waive interest charges for six months would be prohibited from revoking the waiver and charging interest during the six-month period unless the account becomes more than 60 days delinquent. * Application and similar fees that a consumer is required to pay before a credit card account is opened are covered by the same limitations as fees charged during the first year after the account is opened. Because the total amount of these fees cannot exceed 25% of the account's initial credit limit, a card issuer that, for example, charges a $75 fee to apply for a credit card with a $400 credit limit generally would not be permitted to charge more than $25 in additional fees during the first year after account opening. * When evaluating a consumer's ability to make the required payments before opening a new credit card account or increasing the credit limit on an existing account, card issuers must consider information regarding the consumer's independent income, rather than his or her household income.
The clarifications will become effective on October 1. The Fed noted, however, that financial institutions may comply with the final rule ahead of that effective date. The CARD Act, which was enacted in May 2009, made a series of changes to credit card rules, which were implemented under Reg. Z Truth in Lending rules. For the full release, as published in the Federal Register, use the resource link.

Compliance Existing balances maintain fixed rates

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WASHINGTON (4/26/11)--Non-variable rate credit card accounts with outstanding balances must continue to have that same non-variable rate apply to the outstanding balance, even if a credit union converts the account to a variable-rate card. The variable rate must only be applied to new transactions, according to the Credit Union National Association (CUNA). In this month’s Compliance Challenge, CUNA notes that Section 226.55(d)(2) of the Federal Reserve’s Regulation Z prohibits lenders from changing the rate on a credit card outstanding balance unless one of the exceptions applies. This is true even when the balance is transferred from the current account to another credit card issued by the same creditor or the account is closed or is acquired by another creditor. The exceptions include the completion of an introductory or promotional period, a variable-rate plan based on an index that is not under the control of the creditor, the completion or failure to complete a workout arrangement, or the account becomes 60-days delinquent. These rules do not apply to Home Equity Lines of Credit (HELOC). Card issuers may not change the annual percentage rate on a HELOC unless the rate change is based on an index that is not under the card issuer’s control and is available to the general public. While the above restrictions are imposed under Reg Z, that regulation also allows financial institutions to change a non-variable rate to a variable rate upon expiration of a specified period of time, CUNA adds. For more of this month’s Compliance Challenge, use the resource link.

Delay needed on prepaid card rule CUNA urges

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WASHINGTON (4/26/11)--The Credit Union National Association (CUNA) in a comment letter has urged the U.S. Treasurys Financial Management Service to delay mandatory compliance of pending prepaid debit card rules by at least six months. The proposed delay would give credit unions the time needed to deal with the prepaid debit card rules and what CUNA termed the "tremendous uncertainty" regarding the regulation of debit card interchange.

The Federal Reserves final rule, which is expected to impose a debit fee interchange charge cap of a maximum of 12 cents per card swipe, is set to be released before July 21. However, legislators are promoting bills that would delay the implementation of the rule for as long as two years.

CUNA in the letter said that credit unions and other financial institutions will need time to deal with this rule while they are adopting new ACH codes, providing appropriate staff training, and implementing the processing changes. The interim final rule would permit credit unions to offer prepaid debit cards to receive Federal benefit payments if those cards are:

Offered by a federally-insured credit union;

Set up to meet the requirements for pass-through share insurance by the National Credit Union Share Insurance Fund;

Not attached to a line of credit or loan agreement where the delivery of Federal payments would trigger repayment; and

In compliance with all requirements that currently apply to payroll cards under Regulation E.

CUNA does not support provisions that would make financial institutions liable if they receive Federal payments on prepaid cards not intended for Federal benefit payments, as long as they take reasonable measures to identify Federal benefit payments, such as with the new ACH codes.

CUNA also urged the Treasury to minimize potential compliance costs for credit unions and said that the regulator could work with credit unions and other financial institutions to obtain operational and compliance guidance. CUNA suggested that this guidance could address prepaid cards and loan agreements and related disclosures.

For the full comment letter, use the resource link.

NCUA reports on green progress on Earth Day

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ALEXANDRIA, Va. (4/25/11)--The National Credit Union Administration (NCUA) celebrated Earth Day by hailing the increased success of its "greeNCUA" initiative, a project that the agency said has “produced tangible results aimed at protecting the planet.” “Everyone knows that NCUA works to ensure that credit unions remain in the black. NCUA, however, also works to go green each day of the year,” said NCUA Chairman Debbie Matz. The agency in a release noted that it recycled 43.5 tons of paper in 2010 and earlier this year encouraged its employees to bring in their own personal outdated or nonworking electronics, cables, CDs, and DVDs for proper recycling or destruction. Matz in the release said that she hopes credit unions will follow the NCUA’s lead and adopt green practices. “Earth Day is a great opportunity for everyone to make lasting changes that conserve our limited resources for future generations. One easy way for credit unions to cut paper use and to learn about NCUA’s work even earlier is to sign up for NCUA Express. In the near future, NCUA will expand this service to do even more to protect the environment,” Matz added. The NCUA Express system saves paper by directly communicating with credit unions via email. The greeNCUA initiative was launched in late 2009, and resulted in new recycling programs, energy-efficiency improvements and increased communication about environmental concerns at the NCUA.

Matz addresses FFIEC rate risk in interview

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ALEXANDRIA, Va. (4/25/11)—National Credit Union Administration (NCUA) Chairman Debbie Matz last week said she will work to restore “the responsibility and accountability in our financial system” during her term as leader of the Federal Financial Institutions Examination Council. Matz in an interview with CU Broadcast added that she is “honored to serve and establish the credit union industry as a larger part of the overall big picture of the financial industry.” Matz added that she has already “initiated discussions with the different sub-committees on how the FFIEC will address the many challenges now facing consumers and the financial services industry.” The NCUA Chairman took charge of the FFIEC, which promotes uniformity in financial institution regulation, on March 4. She is the first credit union representative to lead the group in over 20 years. The agency’s interest rate risk proposal was also discussed during the interview. The proposal, which was released last month and is open for comment until May 23, would require credit unions to develop a written policy on interest rate risk and to create their own interest rate risk management programs. The NCUA leader said that credit unions must establish these interest rate risk policies “to remain profitable.” “It’s extremely important credit unions remain proactive about interest rates right now because eventually interest rates will rise from today’s historic lows,” she added. Matz also addressed the agency’s NCUA-Safe public awareness campaign, the recently announced financial literacy grants, and the launch of its MyCreditUnion.gov website. For more on the interview, use the resource link.

CUNAs Magill covers interchange fight in iWSJi

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WASHINGTON (4/25/11)--Credit unions have been “extremely busy,” working on a grassroots push to delay the implementation of interchange fee changes, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill told The Wall Street Journal last week. The Journal item covered lobbying efforts in the wake of Dodd-Frank Act. Magill said that CUNA’s top priority “has been building support for legislation to delay the debit-card [interchange] rule.” The interchange provisions could lower the maximum fee charged per debit card transaction to 12 cents. Credit unions and other small institutions with assets of $10 billion and under would be exempt from the terms of the regulations, but many argue that this proposed exemption will not work as planned. The interchange regulation is expected to be released before its July 21 effective date. In the meantime, CUNA and credit union backers nationwide are working to grow support for House and Senate legislation that would delay implementation of the regulations. The separate House and Senate bills, which were introduced earlier this year by Rep. Shelley Moore Capito (R-W.V.) and Sen. Jon Tester (D-Mont.), respectively, would also order a study of the interchange cap’s impact on consumers, financial institutions and merchants. Credit union supporters are working in home districts to urge their legislators to support a delay, and CUNA and the leagues' own legislative advocacy actions have helped credit unions generate nearly 150,000 contacts to Congress. Interchange legislation has also been challenged in the courts, with TCF National Bank bringing its own suit against the Federal Reserve. (See related story: April 21: State of the interchange rule)

Inside Washington (04/22/2011)

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* WASHINGTON (4/25/11)--Federal Reserve Chairman Ben Bernanke’s longtime project to make the Fed “more transparent and consensus-driven” will bear fruit later this week when the Fed holds its first-ever post policy meeting press conference. (The Wall Street Journal April 22) The scheduled press conference comes amid continued economic troubles and internal disagreements over the Fed’s own policies. The WSJ noted that Bernanke’s “new one-man show” could “undercut the collegiality” that he has built within the Fed. However, many of his colleagues support the new press conferences …

NCUA makes key changes to final corporate CU rule

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ALEXANDRIA, Va. (4/22/11)--The National Credit Union Administration (NCUA) on Thursday approved a final corporate credit union rule that alters some corporate internal control and reporting requirements, but made some key changes from its original proposal.
Click to view larger image The NCUA's finacl corporate credit union rule, approved on Thursday, changes some corporate internal control and reporting requirements, but does not limit credit union choice regarding corporates and does not require so-called 'voluntary' payments into the corporate stabilization fund. (CUNA Photo)
For instance, the agency’s final rule did not include a part of the proposal that would have limited credit union membership in the corporates to one at a time. The final also dropped a plan to require virtually every entity that is a member of a corporate credit union to contribute to the Temporary Corporate Credit Union Stabilization Fund. Credit Union National Association (CUNA) President/CEO Bill Cheney credited the NCUA for eliminating these two potential corporate credit union requirements that CUNA “strongly argued were at odds with the interests of credit unions and the agency’s legal authority.” Cheney said that the decision to allow credit unions to belong to more than one corporate “will develop broader support for corporate credit unions that are well-managed and are able to meet agency and credit union due diligence scrutiny.” He added that the NCUA was right to drop the corporate stabilization-related proposal. The final rule, which was approved unanimously by the board, will require corporates to conduct all board of director votes as recorded votes, and to include any “no” votes or abstentions of individual directors in the meeting minutes. Corporates will also be required to establish enterprise-wide risk management (ERM) committees staffed with at least one independent risk management expert. The corporates will also need to incorporate audit, reporting, and audit committee practices that are modeled on Federal Deposit Insurance Corporation (FDIC) requirements and the Sarbanes-Oxley Act. Under these audit requirements, corporate credit unions will need to ensure that material accounting adjustments conform to U.S. Generally Accepted Accounting Principles (GAAP) and file their yearly reports, audits, and other similar reports with the NCUA. Corporates will be permitted to charge one-time or periodic membership fees. There will be no membership vote on the fees, and the corporate will have the authority to expel any member that does not pay a required membership fee within 60 days of the fee’s invoice date. New rules applying to income that corporate credit union executives may receive from related credit union service organizations were also approved. The NCUA said it does not intend to apply these same executive compensation standards to credit unions. The agency reviewed over 200 comment letters on the proposal, and NCUA Board Member Gigi Hyland said that the final rule appropriately balanced credit union industry concerns with what the agency believed should be addressed by the regulations. Portions of the final rule that address corporate board responsibilities, compensation disclosures, and membership fees will come into effect after they are published in the Federal Register. Most of the final rule’s audit and reporting requirements will come into effect on January 1, but some will be delayed for an additional year. The requirement for an assessment by an independent public accountant will not be effective until January 1, 2014. The ERM provisions are expected to come into effect by April of 2013. NCUA Chairman Debbie Matz said that extending many of the corporate rule’s deadlines was one way that the agency could lighten the regulatory burden.

Corporate CUSOs supervision addressed by board

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ALEXANDRIA, Va. (4/22/11)--The main focus of the National Credit Union Administration’s (NCUA) Thursday meeting was the release of a final corporate credit union rule, but other items relating to corporates were also on the agenda. The agency during its open meeting voted to allow corporate credit union service organizations (CUSOs) to provide information technology (IT) services and investment/ asset-liability management services. Corporate CUSOs are currently authorized to conduct brokerage services and investment advisory services. The approved IT services may include web development, hosting, and content management, as well as web security services and software development. IT consulting will also be permitted. Approved investment and asset-liability management services may include asset liability management-related consulting, reporting, and advisory services. The agency also addressed some of its own policies during the meeting, making final the interim Interpretive Ruling and Policy Statement that consolidates the NCUA’s Supervisory Review Committee’s policies and gives that committee the authority to review Technical Assistance Grant denials. The Interpretive Ruling and Policy Statement also addresses appeals to the Supervisory Review Committee regarding CAMEL Code ratings 3, 4 and 5, loan loss reserve provisions, loan classifications, and revocations of RegFlex authority for federal credit unions. The NCUA Supervisory Review Committee is an independent appellate panel that reviews credit unions’ appeals of material supervisory determinations.

Agency insurance losses remain below estimates

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ALEXANDRIA, Va. (4/22/11)—The National Credit Union Administration (NCUA) did not report writing off any National Credit Union Share Insurance Fund (NCUSIF) assets as insurance loss expense for the second time in as many months.
Click to view larger image Click for larger view
Click to view larger image Click for larger view
The agency had originally budgeted $54.2 million in funds to cover expected insurance loss expenses for the month of March but those projected losses did not materialize. NCUA CFO Mary Ann Woodson reported that the NCUSIF’s equity ratio stood at 1.29% as of March 31, and added that $140 million of the NCUSIF’s $1.2 billion in reserves are allocated for expected losses related to specific, troubled natural-person credit unions. A total of $1 billion of those NCUSIF reserves remain unallocated. Woodson in her report noted that the number of CAMEL Code 4 and 5 credit unions increased by 6 in March. The 366 total CAMEL 4 and 5 credit unions represent 5% of insured shares, or $37 billion. The number of CAMEL 3 credit unions declined by 5, dropping that total to 1798. CAMEL 3 credit unions represent 17% of insured shares, or $132 billion. To access this month's NCUA insurance report, use the resource link.

Legal opinion covers CU directorrealtor conflicts

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ALEXANDRIA, Va. (4/22/11)--Current lending rules allow volunteer credit union directors, but not paid officials, to represent a member as a real estate agent in the sale of the member’s home, the National Credit Union Administration (NCUA) said in a recent legal opinion letter. The letter, which was written by NCUA Associate General Counsel Hattie Ulan, specifically responded to a situation in which a director represented a member that faced foreclosure by the first mortgage lender and was in default on a home equity loan that they had obtained from the given credit union. Ulan said that the volunteer director “may receive a commission from an outside party for selling property secured by a loan made by the [credit union,] absent any steering of the borrower to the director’s business interests." Specifically, the NCUA has stated that directors may not receive, directly or indirectly, “any commission, fee or other compensation in connection with any loan made by the credit union.” Listing or selling a property that is financed by the credit union is considered to be “‘in connection with’ the loan” by the NCUA. However, volunteer officials are granted “an exception” to this rule, “provided that no referral has been made by the credit union or the official.” Ulan said that the agency “adopted the exception so as not to discourage volunteers from serving on boards or interfere with their livelihoods.” For the full legal opinion letter, use the resource link.

Inside Washington (04/21/2011)

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* WASHINGTON (4/22/11)--The Senate Banking Committee announced a series of staff changes--both new hirings as well as promotions. Drew Samuelson, who has served for 24 years as chief of staff for Sen. Tim Johnson (D-S.D.), who heads the banking panel, is now senior adviser. Charles Yi will serve as chief counsel and deputy staff director--returning to Capitol Hill after a stint at the U.S. Treasury Department (American Banker April 21). Other staff changes include: Marc Jarsulic, who returns to the committee as chief economist; Laura Swanson, who has worked in Johnson’s office since 2005, has been appointed the committee's new policy director; Jeff Siegel joins the committee as senior counsel; Erin Barry as a professional staff member for housing issues; Glen Sears as a senior policy adviser for oversight efforts; Catherine Galicia as senior counsel on consumer protection issues; and Lynsey Graham as senior counsel ... * WASHINGTON (4/22/11)--U.S. Treasury Department Deputy Secretary Neal Wolin followed up his recent defense of the pace of Dodd-Frank Act implementation by again addressing attacks against the financial reform measures in a recent blog post. Wolin in his post said that the lawmakers that drafted Dodd-Frank “took great care to protect and strengthen” small financial institutions, “helping to ensure that we avoid the concentration that exists in the banking sectors of so many other countries which are dominated by just a handful of very large institutions" (American Banker April 21). Wolin particularly emphasized the role that reduced assessments and higher deposit insurance protection can have in helping smaller institutions. Increased prudential standards and stronger nonbank oversight will also reduce some competitive advantages that the current system gives to larger institutions, Wolin said … * WASHINGTON (4/22/11)--The Federal Deposit Insurance Corp. Thursday sent a letter to its insured banks regarding the agency’s proposal to repeal a statutory prohibition that has banned the payment of interest on demand deposits. The repeal was ordered by the Dodd-Frank Wall Street Reform Act and, like many of provisions of that law, is effective July 21. The agency’s communication reminded interested parties that they have until May 16 to comment …

Inside Washington (04/20/2011)

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* WASHINGTON (4/21/11)--The Department of Housing and Urban Development (HUD)on April 15 warned lenders of pending guidelines that will tighten the rules regarding when its name, initials or logo may be attached to websites and other marketing materials (American Banker April 20). The department will impose penalties and fines on lenders or third-party loan originators that seem to exaggerate their ties to HUD or make their websites or publications appear to be tied to the U.S. government … * WASHINGTON (4/21/11)--The Federal Trade Commission (FTC) this week filed contempt charges against Sam Tarad Sky, Allrepco LLC, Credit Restoration Brokers LLC and Debt Negotiations Associates LLC, alleging that deceptive promotional practices by the credit/debt relief providers violate a previous federal court order. The FTC alleges that the trio of defendants charged initialization fees for credit repair services and did not provide adequate disclosure of their debt relief services. The defendants also encouraged customers to lie about their economic situation to illegally qualify for government-provided food stamps, and charged consumers for their credit, debt relief and food stamp “products.” The FTC legal action was field on April 12 ...

NCUA tells CUs to evaluate corp. CU membership

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ALEXANDRIA, Va. (4/21/11)--The National Credit Union Administration (NCUA) has encouraged credit unions to “explore their options and understand the pros and cons to continuing with current practices” or transitioning to new corporate credit union service providers. NCUA Office of Corporate Credit Unions Director Scott Hunt added that credit unions that wish to remain or become members of a corporate should review the corporate’s capital plan and capital offering circular, and “attend informational sessions or speak with their assigned representatives to learn more about the future of the corporate.” Hunt co-signed the NCUA letter, which was addressed to Members United Bridge Corporate FCU, Southwest Bridge Corporate FCU, and Western Bridge Corporate FCU. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said that “because credit unions will be providing the capital corporate credit unions need to meet regulatory requirements, credit unions should weigh their options for payment, settlement and other support services very carefully. “Reviewing the capitalization plan of their current corporate credit union, once NCUA has approved the plan, is a good place to start,” Dunn added. Undercapitalized corporate credit unions earlier this year submitted their recapitalization plans to the NCUA, and those plans are currently under agency review. The NCUA’s new capitalization rules, which will, among other things, require corporates to maintain escrow accounts for accumulated capital, come into effect on Oct. 20. Corporate and bridge corporate credit unions that have submitted plans to the NCUA must share those plans with their member credit unions by May 31, and Hunt said that the agency is “expeditiously reviewing the submitted capitalization plans” in anticipation of this May deadline. Dunn said that with the NCUA’s late October deadline rapidly approaching, credit unions should “develop their plans now for how they will assess their options and decide what choices are best for them.” For the full NCUA release, use the resource link.

April 21 State of the interchange rule

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WASHINGTON (4/21/11)--Today was the original statutory deadline for the Federal Reserve's final interchange fee cap proposal, but, as the agency announced last month, the day will come and go without a final plan being unveiled. CUNA and credit unions continue to advocate for a delay of the pending Fed rule, which is still set to go into effect on July 21. CUNA is concerned that the Fed's delay of the April 21 launch date may not give credit unions and other financial institutions the time needed to evaluate and respond to a final proposal before it goes into effect. The interchange provisions could lower the maximum fee charged per debit card transaction to 12 cents. The legislation, as currently written, 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. The legislation is being challenged on several fronts. One such front is the halls of Congress, where legislation that would delay implementation is pending. The bills also would order a study of the impact a debit card interchange fee cap would have on consumers, financial institutions, and merchants. In the House, Rep. Shelley Moore Capito’s (R-W.V.) H.R. 1081 has 84 cosponsors. The Senate version of interchange delay legislation (S. 575), introduced by Sen. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), has 16 co-sponsors. The effort to add additional sponsors to these two pieces of legislation has moved to legislators’ home districts this week. CUNA, state credit union leagues, and credit unions nationwide are collaborating on a grassroots "Call on Congress" campaign, and other outreach and education efforts are being made in an effort to convince Congress and the Fed to "stop, study and start" over on interchange. CUNA and the leagues' own legislative advocacy actions so far have helped credit unions generate nearly 150,000 contacts to Congress nationwide, and more contacts are expected. Interchange legislation has also been challenged in the courts, with TCF National Bank bringing its own suit against the Federal Reserve. TCF’s suit, which was filed last October, states that the government cannot write laws that would arbitrarily prevent a given business from recovering its costs sufficiently to avoid losses on its various business operations. It also alleges that portions of the Dodd-Frank Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional, and argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. For more on CUNA's interchange delay efforts, use the resource link.

NCUA to consider corporate CU rule today

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ALEXANDRIA, Va. (4/21/11)--The National Credit Union Administration's (NCUA) is scheduled to consider a final corporate credit union rule at its meeting this morning. The agency’s chairman already noted earlier this month that staffers were "working diligently" on "potentially significant changes" to its corporate proposal. The agency has reviewed 227 comment letters on the proposal, which was published for comments in November. That plan would alter some internal control and reporting requirements. It also proposed to limit credit union membership in corporates generally to one corporate at a time. It would also set up a process under which all entities that use a corporate credit union would make a “voluntary” payment into the Corporate Stabilization Fund or face negative consequences. Credit Union National Association's (CUNA) Deputy General Counsel Mary Dunn has noted significant concerns regarding the proposal, including the provision to limit credit union membership to a single corporate credit union. Another issue involves the provision that would essentially require all entities using corporate credit unions to pay into the Corporate Stabilization Fund, a plan for which CUNA does not believe the NCUA has legal authority. The NCUA's monthly report on the status of its insurance funds will also be delivered during the meeting. Watch News Now LiveWire for live updates from the meeting, which starts at 10 a.m. (ET).

Fed proposes new mortgage origination standards

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WASHINGTON (4/20/11)--Creditors would be required to determine a consumer's ability to repay their mortgage before finalizing the loan under a Federal Reserve proposal that was unveiled on Tuesday. The Fed proposal amends the Truth in Lending Act as proscribed by language in the Dodd-Frank Wall Street Reform Act. The Fed changes also establish minimum mortgage underwriting standards. The proposal would apply to all consumer mortgages other than equity lines of credit, timeshare plans, reverse mortgages, or temporary loans, the Fed noted. Credit Union National Association (CUNA) Senior Assistant General Counsel Michael Edwards said that the mortgage rule changes reflect congress’s attempt “to require, among other things, at least some minimal underwriting of mortgage loans, in response to evidence that many non-depository mortgage lenders did not engage in safe and sound underwriting practices before the financial crisis.” The Fed proposal offers four possible ways to comply with the new requirements, including two possible alternative definitions of a the “qualifying mortgage” compliance options. In addition to making “qualifying mortgages,” other proposed compliance options include considering eight weighing factors regarding the borrower’s ability to repay as part of the underwriting process, certain types of balloon payments loans made in rural and underserved areas, and refinancing mortgages with negative amortization, interest-only payments, or balloon payments into more traditional mortgages. Under the proposal, lenders could comply by considering eight weighing factors as part of the underwriting process, such as income and assets, employment status, the monthly payment on the mortgage, the borrower’s other debt obligations, borrower’s credit rating, the borrower’s debt-to-income ratio, and similar factors. For the “qualifying mortgage” compliance option, on proposed definition of “qualifying mortgage” would be a loan of 30 years or fewer – without negative amortization, interest-only payments, or a balloon payment – that has fees and points under 3% of the loan value. The underwriting of the mortgage would need to be based on the maximum interest rate that could apply in the first five years of the loan (such as in the case of an adjustable rate mortgage), and would need to use a payment that fully amortizes the loan. Any other mortgage obligations would also need to be taken into account by the lender prior to the loan being approved. Under this alternative, making “qualifying mortgages” would be treated as a safe harbor for lenders. A second, alternative definition of “qualifying mortgage” would require much of the underwriting criteria covered above, and would provide a rebuttable presumption of compliance in place of a safe harbor. Lenders would also need to consider and verify a potential homebuyer’s employment status, debt obligations, and credit history. Monthly payments on any concurrent mortgages and the borrower’s monthly debit-to-income ratio or residual income would also need to be considered. Lenders could also offer so-called balloon-payment qualified mortgages of five 5 years or longer duration in designated “rural” or “underserved” areas if the lender complies with the “qualified mortgage” requirements and underwrites the mortgage based on the scheduled payment other than the balloon payment. Nonstandard mortgages with features such as negative amortization, interest-only payments, or balloon payments may be refinanced into standard mortgages if borrowers are able to repay their refinanced mortgage. The Fed would also require the underwriting of the newly refinanced standard mortgage to be based on the maximum interest rate possible during the first five years of the loan. The Fed will accept comments on its 474 page proposal until July 22. The final rule will be released by the Consumer Financial Protection Bureau, which will take jurisdiction over Regulation Z/Truth in Lending oversight and rulemaking on July 21. CUNA continues to analyze the Fed proposal.

Treasury responds to SandP rating reduction

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WASHINGTON (4/20/11)--U.S. Treasury Secretary Tim Geithner on Tuesday said that he disagreed with Standard & Poor's (S&P) move to cut the long-term AAA credit rating of the U.S. to negative, noting that the potential for consensus on how to improve the country’s long term fiscal condition is better than it has been. S&P on Monday said that the credit rating cut was partly due to a "material risk" that U.S. policy makers might fail to reach an agreement on how to address the nation's medium- and long-term budget challenges by 2013. Such a result would “render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns," S&P said. Geithner in an appearance on CNBC said that both Democrats and Republicans agreed that reforms need to be made to bring down long term deficits. “Both sides understand that if we are going to do this, we have to do it together,” he added. The Treasury leader said that legislators would be wise to lock in “credible” targets for potential savings in the budget. “Where we agree on specifics, we can do that too,” he added. Deputy Treasury Secretary Neal Wolin also spoke out on Tuesday, defending the government’s implementation of the Dodd-Frank Act. Wolin said he was responding to allegations of a lack of coordination by regulators and complaints that the reforms implemented by Dodd-Frank would unfairly disadvantage U.S. firms that compete in the global market. Wollin also spoke out against criticism of the pace of Dodd-Frank’s reforms, saying that regulators “have been and are moving quickly but carefully to implement this legislation” and “continue to seek public input.” The Deputy Secretary added that getting the details of the regulations right “remains critical.” “Although there may be reasonable debate about the substance of Dodd-Frank implementation work, there is no question that regulators have been implementing the statute in a careful, considered, and serious manner,” Wolin said. However, House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) continued to criticize the pace of Dodd-Frank reforms, saying in a release that it remains “difficult for individual firms – especially small businesses – and the public at large to meaningfully participate and offer their insights and observations.”

WesCorp directors seek NCUA suit dismissal

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LOS ANGELES, Calif. (4/20/11)--The former directors and officers of Western Corporate FCU (WesCorp) have asked U.S. District Judge George Wu to dismiss the National Credit Union Administration’s second complaint in its $6.8 billion lawsuit against the former leaders of the now conserved corporate. The former WesCorp directors accused the NCUA of 20-20 hindsight in the charges lodged in its second complaint, which was filed on Feb. 22. That document alleges that WesCorp officers and directors breached fiduciary duties by failing to impose "prudent concentration limits" on WesCorp's increasing concentration of private label mortgage backed securities (MBS) and Option ARM MBS. Overall, the NCUA has repeatedly claimed that the former WesCorp officials did not use sufficient care when they made certain investments before the recession hit the corporate system. In their response to the second NCUA complaint, the former directors state that their decisions on investments are protected from retroactive second-guessing under California's Business Judgment Rule if the process by which they made decisions reasonably relied on expert input from management and others. The directors contend that NCUA has failed to allege any departure from this type of process. In addition, the former directors note that the NCUA’s second complaint “consists of retreads–-old allegations made fatter but in no material way made better.” The defense motion also notes that while the NCUA has held WesCorp under conservatorship since 2009, and has had full access to that corporate’s books and records since that time, the agency today “is no closer to stating a claim than when it started this crusade against unpaid, uninsured volunteer directors. “The claims against the directors should be dismissed without further leave to amend,” the motion adds. Judge Wu earlier this year allowed the agency to file its second amended complaint during a tentative ruling that favored the former directors. In that tentative ruling, Wu warned that NCUA would have to prove the directors are not covered by California's Business Judgment Rule, which provides directors "broad discretion in making corporate decisions and [allows] these decisions to be made without judicial second-guessing in hindsight (News Now Feb. 3). Wu at that time also ruled that the NCUA’s allegations of improper motives or conflict of interest are insufficient and said "the end result [of the amended complaint] might very well be the same."

Inside Washington (04/19/2011)

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* WASHINGTON (4/20/11)--A Federal Deposit Insurance Corp. (FDIC) report issued earlier this week claims that regulators in 2008 could have successfully wound down Lehman Brothers Holdings Inc., avoiding further shock to the market and preventing a taxpayer-funded bailout, if the powers given to the agency by the Dodd-Frank Act had been in place. (Reuters, 4/19/11) Critics have said that the FDIC’s claims, which were made in a 19 page document, are overly optimistic. The FDIC’s pending resolution authority, which is set to come into effect later this year, would allow that agency, with the approval of other regulators, to temporarily operate troubled holding companies or insurance firms until they can be sold or shut down… * WASHINGTON (4/20/11)—A 43-member group of House Democrats late last week called for “reforms that reduce the risk to taxpayers and that create conditions for the private sector to play a larger role in the secondary mortgage market." The group has also called for the eventual winding down of mortgage backers Fannie Mae and Freddie Mac, American Banker reported. Among the mortgage reforms touted by Reps. Jim Himes (D-Conn.), Gary Peters (D-Mich.) and others are a strong private market and maintaining 30-year fixed-rate mortgages.

House Financial Services announces May hearings

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WASHINGTON (4/19/11)--Hearings on the impact of regulations and government policies on job creation and the economy in general have been tentatively scheduled for May by House Financial Services Committee Chairman Spencer Bachus (R-Ala.). An in-depth review of the Dodd-Frank Act, and a markup of legislation that would extend the deadline of some derivative-related portions of that Act, is set for May 12. National Flood Insurance Program reauthorization and the Consumer Financial Protection Bureau (CFPB) will also be discussed during that hearing. CFPB-related bills will also be marked up on May 4, and a subcommittee will examine the Federal Reserve’s compliance with the Dodd Frank Act and the Freedom of Information Act on May 11. The House subcommittee on capital markets and government sponsored enterprises will hold a hearing on a to-be-determined topic later on that same day. The committee on May 3 will focus on job creation and capital formation. Bachus in the release said that the economy needs “government policies that promote growth, job creation and a competitive financial marketplace.” The U.S. Treasury Department will deliver its yearly report on the international finance system on May 5. The committee in a release noted that the schedule “remains tentative and will depend upon witness availability and other factors that may require changes.” Witnesses for the hearings will be announced in the near future. Members of congress will be in their home districts until early May. The Credit Union National Association has urged credit union backers nationwide to contact their representatives during this in-district work period. (See related April 14 story: CUNA’s Cheney: Further interchange action is critical)

CU rep among three FFIEC re-appointments

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WASHINGTON (4/19/11)--Texas Credit Union Commissioner Harold Feeney was one of three members of the Federal Financial Institutions Examination Council’s (FFIEC) State Liaison Committee (SLC) to be reappointed on Monday. Feeney’s reappointment was confirmed by the National Association of State Credit Union Supervisors. Doug Foster, commissioner of the Texas Department of Savings and Mortgage Lending, and John Munn, director of the Nebraska Department of Banking and Finance, were also reconfirmed. The SLC encourages “the application of uniform examination principles and standards by state and federal agencies” and allows state regulators to “participate in the development of those principles and standards.” The SLC is a five-member panel of state financial regulatory agencies. Massachusetts Division of Banks Commissioner David Cotney and Kentucky Department of Financial Institutions Commissioner Charles Vice also serve on the SLC. SLC members serve two year terms. Feeney and the other two recently reappointed members are set to serve until March 31, 2013. National Credit Union Administration (NCUA) Chairman Debbie Matz earlier this month agreed to assume leadership of the FFIEC for a two year term. Matz is the first NCUA leader to take charge of the FFIEC in more than 20 years.

CUNA seeks credit union check collection comments

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WASHINGTON (4/19/11)--The Credit Union National Association (CUNA) has encouraged credit unions to comment on a Federal Reserve proposed rule that would amend its Regulation CC to increase next business day availability, and encourage electronic check processing and returns. The Fed proposal, which is part of the Dodd-Frank Act, will force credit unions and other financial institutions to increase to $200 the amount of deposited funds that will be made available for next business day availability. Credit unions will need to make this change by July 21. Under the proposal, a credit union or another depositary institution (the first institution to which a check is transferred) would be entitled to an expeditious check return only if it agrees to receive returned checks electronically. CUNA has also noted that the Fed would only entitle credit unions or another depositary institutions (the first institution to which a check is transferred) to an expeditious check return if it agrees to receive returned checks electronically. The Fed proposal would also shorten the reasonable additional hold extension from 5 to 2 business days for most checks and would apply check collection and return provisions, including warranties, to electronically-created items. The proposal removes all references to "nonlocal" checks and requires updates of model disclosure forms. However, credit unions using current model forms would be granted a 12 month safe harbor. CUNA in the comment call asks credit unions how various deposit- and return-related risks can be decreased. Credit unions may also comment on conversion costs, compliance costs, and other costs related to accepting electronic check returns. The Fed has also asked credit unions whether they charge back a customer’s account for returned checks. Comments are due to CUNA by May 20. Comments solicited by the Fed should be submitted by June 3. For the full comment call, use the resource link.

Inside Washington (04/18/2011)

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• WASHINGTON (4/18/11)--The Federal Deposit Insurance Corp.’s (FDIC) plan to require further account insurance limit training for bank employees has banks both large and small, and their lobbying representation, complaining about the potentially burdensome changes. Banks have also noted that the FDIC’s training initiative could conflict with their own proprietary training programs, and have suggested that the FDIC itself – not the banks – educated consumers on FDIC insurance. However, as reported in Monday’s American Banker, some financial institutions have argued that establishing a standardized, industry-wide training regime could illuminate the often confusing realm of deposit insurance. The FDIC rules have varied in recent years, with the once standard $100,000 deposit coverage limit being temporarily raised to $250,000 per deposit during the financial crisis. Differing standards are applied to different account categories, such as joint accounts opened by married couples, trust accounts, and retirement accounts. The FDIC has noted that many consumers are confused by these differing standards, and some of those same consumers have complained that employees at their respective banks cannot accurately explain their account issues. The FDIC said it is “concerned that these situations could cause financial harm to depositors” and undermine consumer confidence. The agency has estimated that its to-be-developed computer-based training regime would take less than two hours for employees to complete … * WASHINGTON (4/19/11)--The Federal Reserve Board has redesigned and expanded the frequently-asked-questions (FAQs) section of its website with new questions and answers addressing the Fed’s roles and actions, currency and coin, consumer issues, the banking and financial system, and the economy. The new Current FAQs provides many answer links with related information and resources, and videos accompany some answers. The first topic in the new FAQs: How do I determine if a banknote is genuine? What should I do if I think I have a counterfeit note? ... * WASHINGTON (4/19/11)--Oversight of savings and loan holding companies will shift from the Office of Thrift Supervision to the Federal Reserve in July, and the Fed is seeking comment on how savings and loan oversight could be improved once it takes over (American Banker, April 18). The Fed has said that it will integrate thrift holding companies into its current supervisory programs, but has added that it is looking for general comment on how it should evaluate its own supervisory programs. Input on any risks and other characteristics that are specific to savings and loan holding companies has also been requested. The Fed is accepting comments through May 23 …

Inside Washington (04/15/2011)

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* WASHINGTON (4/18/11)--Lawmakers last week were critical of the risk-retention proposal made by regulators, saying it will provide fewer consumers opportunities to purchase homes (American Banker April 15). Members of the House Financial Services capital markets subcommittee said the proposal’s definition of “qualifying residential mortgages” (QRMs)--which are exempt from the risk-retention requirements but must meet strict underwriting criteria, including a 20% down payment by borrowers--could be a loss of access to credit consumers. Some said community banks would not be able to offer non-QRM mortgages, leaving the market dominated by the biggest banks. Other areas of contention were the inclusion of limited servicing standards in the risk-retention plan and an exemption for government-sponsored enterprises while they are in conservatorship. Regulators say the QRMs represent only a small slice of the market. Fannie Mae and Freddie Mac are exempt because they offer a 100% credit guarantee for any loans they purchase, and retain them when the loans are sold as mortgage-backed securities … * WASHINGTON (4/18/11)--Acting Comptroller of the Currency John Walsh Thursday defended bank regulators for moving forward with enforcement action against the 14 largest mortgage servicers even while several of those banks continue to negotiate with state attorneys general and other federal agencies (American Banker April 15). Some observers say the enforcement actions will help the services gain leverage in ongoing negotiations. But Walsh said the regulators’ actions are not in conflict with those negotiations. “My hope is that our enforcement actions will establish a framework, and the actions that state law enforcement officials and the other federal agencies may take will be complementary to, and consistent with, what we are doing,” he said. “This is a messy process, and it will take time to put things right. There may be misunderstandings and disagreements along the way” … * WASHINGTON (4/18/11)--Members of both political parties on Thursday criticized the Financial Stability Oversight Council for a lack of details on designating financial institutions as systemically important as outlined in the Dodd-Frank Act (American Banker April 15). Randy Neugebauer (R-Texas), the chairman of the House Financial Services oversight subcommittee, said the council’s guidance lacked transparency and was little more than a word-for-word restatement of Dodd-Frank’s language. The council has released two proposals outlining the process for designating nonbank financial companies as systemically important, but neither provided details of regulators’ plans …

TCF appeals interchange case ruling

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WASHINGTON (4/18/11)--TCF National Bank (TCF) last week again sought to block the Federal Reserve’s implementation of proposed interchange fee cap regulations by appealing a recent ruling in its case against the Fed. The bank’s expedited appeal request was filed in the U.S. Court of Appeals for the Eighth Circuit. The appeal relates to an April 4 ruling in which U.S. District Court for the District of South Dakota Judge Lawrence Piersol declined to dismiss TCF's suit against the Fed--but also declined to issue an injunction based on the statute. Credit Union National Association (CUNA) General Counsel Eric Richard said that CUNA would “continue to monitor this litigation closely, and will do whatever needs to be done to protect the interests of credit unions.” The TCF suit, which was filed last October, states that the government cannot write laws that would arbitrarily prevent a given business from recovering its costs sufficiently to avoid losses on its various business operations. It also alleges that portions of the Dodd-Frank Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional. In the suit, TCF also argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. CUNA, the Clearing House Association L.L.C., American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions have backed TCF in its suit. CUNA and the other groups are backing TCF in an effort to explain the detrimental effect that the Fed's interchange provisions would have on the "stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues the (Fed's) action raises." The Fed's interchange fee rate cap regulations could lower interchange fees to no more than 12 cents per transaction. As indicated by Fed Chairman Ben Bernanke, the Fed is not expected to meet the April 21 statutory deadline for releasing a final regulation on the interchange fee cap provisions. However, the Chairman indicated his commitment to approve a final rule by the July 21 effective date, if not sooner.

Texans CU Vensure FCU placed into conservatorship

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ALEXANDRIA, Va. (4/18/11)--The National Credit Union Administration (NCUA) on Friday placed Mesa, Ariz.'s Vensure FCU and Texans CU of Richardson, Texas, into conservatorship. The agency said that it continues to insure the shares of members of both credit unions. Texans CU holds $1.6 billion in assets from 133,000 members. Vensure currently holds $4.7 million in assets from 144 members. Texans CU serves residents of Collin, Dallas, Rockwall, Travis, and Williamson, as well as parts of Denton County. Vensure FCU serves employees of Vensure Employer Services Inc., employees of various related companies, and their families. The NCUA in its release said that it is authorized under the Federal Credit Union Act to appoint itself as conservator “to conserve the assets of a federally insured credit union, protect members’ interests, or protect the National Credit Union Share Insurance Fund.” The pair of conservatorships were the second and third to take place this year. There have also been four credit union liquidations this year.

Obama signs 1099 extension repeal

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WASHINGTON (4/18/11)--President Barack Obama late last week signed into law legislation that repeals an extension of Internal Revenue Service Form 1099 reporting requirements that was approved last year. The extension, which was approved as a "pay-go" effort to offset the cost to taxpayers of the new healthcare reform law, would have extended existing 1099-MISC reporting provisions to cover payments for goods valued over $600. Credit unions and other businesses have long been required to report on their Form 1099-MISC certain payments of $600 or more that will be considered income by the IRS. The Credit Union National Association has backed the repeal, noting that requiring 1099-MISC forms on goods would have been extremely burdensome and had questionable value in actually increasing federal revenue. Rep. Dave Camp (R-Mich.), who sponsored an early version of the bill, estimated that the tax law change would save taxpayers $20 billion over a 10-year span and would reduce the deficit by more than $166 million over that same time period.

Tester repeats call for interchange implementation stall

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WASHINGTON (4/18/11)--Sen. Jon Tester (D-Mont.) last week again called for further consideration of an interchange fee cap proposal, saying in a Thursday floor statement that Congress needs to stop, study and “make sure [it is] doing the right thing” before moving forward. “If we do not measure twice and cut once, we’re bound to create a whole new set of problems,” he added. Tester, along with Sen. Bob Corker (R-Tenn.), has introduced legislation that would delay implementation of the interchange legislation by two years and would order federal regulators to study the impact that the interchange changes could have on consumers, financial institutions, and others. The legislation, S. 575, had 16 co-sponsors as of Friday. The interchange provisions, which could become effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. The legislation, as currently written, 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. The senator noted that federal regulators, including Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair, have publicly questioned whether small issuers would benefit from this exemption. Tester in his comments also said that while backers of the interchange legislation claim that it would help small businesses, it can actually present greater problems for them by potentially limiting their access to free checking accounts. “This notion that some have raised that these proposed rules are a slam dunk for small businesses … it is simply false,” he said. The interchange changes could also limit consumer access to debit accounts, potentially pushing some individuals out of the banking system altogether. Credit Union National Association (CUNA) President/CEO Bill Cheney last week said that "the time window for action is relatively short," and urged credit unions and their members to take part in a "Call on Congress" campaign launched by CUNA and the leagues that will encourage legislators to "stop, study and start" over on interchange. Cheney has asked credit union backers nationwide to meet with their respective legislators in their home districts during the current district work period, which will run through April 29. Additional outreach and education efforts are being made through the leagues, individual credit unions, and social media outlets. To join these efforts, which include district-based letter writing campaigns, emails, and phone calls to legislators, use the resource link.

Inside Washington (04/14/2011)

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* WASHINGTON (4/15/11)--Concluding a two-year bipartisan investigation, Sens. Carl Levin (D-Mich.) and Tom Coburn (R-Okla.), chairman and ranking Republican on the Senate permanent subcommittee on investigations Wednesday released a 635-page final report on their inquiry into the primary causes of the financial crisis. The report catalogs conflicts of interest, heedless risk-taking and failures of federal oversight that helped push the country into the deepest recession since the Great Depression. “High risk lending, regulatory failures, inflated credit ratings, and Wall Street firms engaging in massive conflicts of interest contaminated the U.S. financial system with toxic mortgages and undermined public trust in U.S. markets,” said Levin. The Levin-Coburn report expands on evidence gathered at four subcommittee hearings in April 2010, examining four aspects of the crisis through detailed case studies: high-risk mortgage lending, using the case of Washington Mutual Bank, a $300 billion thrift that became the largest bank failure in U.S. history; regulatory inaction, focusing on the Office of Thrift Supervision’s failed oversight of Washington Mutual; inflated credit ratings that misled investors, examining the actions of the nation’s two largest credit rating agencies, Moody’s and Standard & Poor’s; and the role played by investment banks, focusing primarily on Goldman Sachs, in creating and selling structured finance products that foisted billions of dollars of losses on investors, while the bank itself profited from betting against the mortgage market … * WASHINGTON (4/15/11)--U.S. regulators on Wednesday announced enforcement actions on 14 large banks to address negligence residential mortgage loan servicing and foreclosure processing. The orders did not include fines, though the Federal Reserve said it plans to announce monetary sanctions at a later date. Some attorneys general and administration officials urged agencies to fine big banks $20 billion or dedicate a like amount to modifying distressed mortgages (The Wall Street Journal April 14). The actions taken Wednesday require each servicer to take a number of actions, including making significant revisions to certain residential mortgage loan servicing and foreclosure processing practices. Each servicer must, among other things, strengthen coordination of communications with borrowers by providing borrowers the name of the person at the servicer who is their primary point of contact; ensure that foreclosures are not pursued once a mortgage has been approved for modification unless repayments are not made; establish controls and oversight over the activities of third-party vendors; provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process; and strengthen programs to ensure compliance with state and federal laws regarding servicing and foreclosures Observers cautioned that the orders could make it more difficult for state attorneys general to extract greater concessions from the banks. Iowa's attorney general said it would not change his state’s approach in negotiations …

Comment on NCUA compensation proposal sought

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WASHINGTON (4/15/11)--The Credit Union National Association (CUNA) has reached out to credit unions, asking them to comment on a proposed rule that seeks to ensure that financial institutions account for risk when they design their individual incentive-based compensation arrangements, such as bonuses or commissions. Credit unions and other financial institutions with $1 billion or more in assets would be required to ensure that their incentive-based compensation arrangements "appropriately balance risk and financial rewards," are "compatible with effective controls and risk management," and are "supported by strong corporate governance," according to the proposal. The Dodd-Frank Act defines incentive-based compensation to mean any variable compensation, in any form, that serves as an incentive for performance. The proposal states that “generally, compensation that is awarded solely for, and the payment of which is solely tied to, continued employment (e.g., salary) would not be considered incentive-based compensation.” The compensation proposal does not cover salaries or other compensation, such as bonuses, where risk is not involved. Credit unions with $10 billion or more in total assets would be forced to comply with additional requirements. The proposed rule was jointly issued by the NCUA, the Federal Reserve, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission. The proposed provisions would be effective six months after publication of the final rule in the Federal Register, with annual reports due within 90 days of the end of a credit union’s fiscal year. CUNA in the comment call asks if this planned six-month effective date delay gives impacted credit unions enough time to comply with the proposed rules. CUNA has also asked if the proposed definition of “compensation” for credit unions, which differs slightly from the definition applied to other institutions, should be changed. Comments are due to CUNA by May 16. Comments solicited by the NCUA should be submitted by May 31. For the full comment call, use the resource link.

Final corporate CU rule leads April agency discussion

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ALEXANDRIA, Va. (4/15/11)--The National Credit Union Administration’s (NCUA) final corporate credit union rule will be a key item for the board’s consideration when it convenes for its next monthly board meeting on April 21. NCUA Chairman Debbie Matz earlier this month said that agency staffers were "working diligently" on "potentially significant changes" to its corporate proposal. The agency has reviewed 227 comment letters on the proposal. The NCUA’s corporate proposal, which was published for comments in November, would alter some internal control and reporting requirements and proposed limiting credit union membership in corporates generally to one corporate at a time. It would also set up a process under which all entities that use a corporate credit union would pay into the Corporate Stabilization Fund or face negative consequences. “The Credit Union National Association’s (CUNA) biggest concerns regarding the proposal include whether credit unions would be limited to membership in only one corporate credit union. Other issues involve the provision that would essentially require all entities using corporate credit unions to pay into the Corporate Stabilization Fund,” CUNA Deputy General Counsel Mary Dunn said. CUNA has also asked if there is sufficient legal authority to support these changes. Corporate credit union service organization activities and guidelines for the agency’s supervisory review committee will also be discussed. The NCUA's monthly report on the status of its insurance funds will also be delivered during the meeting. A closed NCUA session will follow the open meeting. Insurance appeals and supervisory matters will be discussed during the closed meeting. For the full NCUA meeting agenda, use the resource link.

CUNA interchange teleconference archive posted

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WASHINGTON (4/15/11)--Audio of Wednesday’s national credit union interchange teleconference has now been posted on the Credit Union National Association’s (CUNA) homepage. During the 30-minute audio call, CUNA President/CEO Bill Cheney said that now is the time for credit unions to band together and use their "big voice" to oppose proposed interchange changes. The opportunities to ask legislators to stop, study and start over on interchange fee cap legislation are growing fewer as the July 21 effective date approaches, and Cheney said that the upcoming two-week congressional district work period provides one such opportunity. Credit union representatives that secure meetings with their respective legislators during this work period should thank the legislators that are supporting an interchange implementation delay, and ask those who have not yet signed on as co-sponsors to do so. "There is really no better way to talk to a member of Congress than face-to-face," Cheney emphasized. To hear the teleconference in full, use the resource link.

Rep. Biggert backs CU Youth Week on House floor

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WASHINGTON (4/15/11)--National Credit Union Youth Week, which starts on Sunday and runs through the 23rd, is one of many ways that non-profits and other groups work “to protect consumers and prepare our children to prosper in today’s sophisticated marketplace,” Rep. Judy Biggert (R-Ill.) said in a Thursday statement delivered on the House floor.

The legislator in her statement also noted that National Credit Union Youth Week “focuses on teaching young Americans about the benefits of setting goals and saving to reach them.” Credit unions and leagues nationwide are preparing special activities for National Credit Union Youth Week. (See related story: CUs prepared for National CU Youth Week) Biggert spoke to recognize April as Financial Literacy Month. The National Credit Union Administration (NCUA) chose Financial Literacy Month to kick off its new Financial Education and Financial Literacy Initiative, a technical assistance grant (TAG) project that will aim to "improve financial literacy among the general population, particularly students." NCUA Chairman Debbie Matz this week said that the NCUA “is dedicated to giving students everywhere the opportunity to gain financial skills.” Grants provided through the initative will “facilitate credit union efforts to ensure that today’s teenagers develop the ability to make smart financial decisions,” she said. The NCUA initiative will make $200,000 in grants available to credit unions that take part in programs related to in-school financial counseling, first-time homebuyer counseling, online financial literacy efforts, and other financial literacy projects. (See related April 7 story: Education, fin lit initiatives will get CDRLF boost) “This initiative invests in our future,” Matz added.

CUNAs Cheney Further interchange action is critical

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WASHINGTON (4/14/11)--This is a critically important time for credit unions nationwide to band together and use their "big voice" to continue calling on legislators to stop, study and start over on interchange fee cap regulations, Credit Union National Association (CUNA) President/CEO Bill Cheney emphasized during a Wednesday audio conference call with credit unions around the nation. Around 1,000 credit unions took part in the call. An archived recording of the 30-minute call will soon be posted on CUNA’s home page for those who were unable to participate yesterday. Cheney during the call noted the pending July 21 effective date for the interchange provisions, and said credit unions are at a critical junction because "the time window for action is relatively short." He added that credit unions, through this current interchange fee cap battle, are in effect fighting to save free checking--an important message for credit union members and other consumers to know. A key element of the current grassroots push is the "Call on Congress" campaign launched by CUNA and the leagues that provides a toll-free phone number, website and other resources so that credit unions can mobilize their members in urging Congress to "stop, study and start" over on interchange, Cheney explained. Two separate pieces of legislation, one in the House and one in the Senate, would delay the effective date of the interchange action. These bills would also require regulators to study the impact that the interchange fee cap would have on consumers, financial institutions, and merchants. The House interchange delay legislation was introduced by Rep. Shelly Moore Capito (R-W.Va.) and currently has 78 co-sponsors. Sen. Jon Tester (D-Mont.) introduced the interchange delay legislation in the Senate. That bill has 16 co-sponsors. Members of Congress will return at the end of this week to their home districts for a two-week work period, and Cheney said that this presents a key opportunity for credit union advocates to urge their respective legislators to support an interchange implementation delay. Credit union representatives should thank the legislators who are supporting an interchange implementation delay, and ask those who have not yet signed on as co-sponsors to do so. He urged credit union representatives to reach out to members of Congress in their home districts and schedule meetings during the break. "There is really no better way to talk to a member of Congress than face-to-face," Cheney emphasized. Outreach and education efforts are being made through the leagues, individual credit unions, and social media outlets. CUNA, credit unions and leagues are collaborating on district-based letter writing campaigns, and posters, sample letters and other materials have also been distributed to help credit unions push this effort forward. Cheney during the call noted that credit unions that have engaged their own members to help with outreach have seen as much as 20% of those members take action. "That is tremendous," he said. CUNA and the leagues' own legislative advocacy actions so far have helped credit unions generate nearly 93,000 contacts to Congress nationwide, Cheney added. To join CUNA's Call to Action on interchange, use the resource link.

Safeguarding CU tax exemption a priority CUNA

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WASHINGTON (4/14/11)--With potential tax reform discussions on the horizon, Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill reminded credit unions that CUNA would vigilantly monitor upcoming budget discussions for any mentions of the credit union tax exemption. CUNA has repeatedly emphasized that credit unions save consumers more than $6 billion a year in better rates and lower fees--far more than would be gained by taxing credit unions. And because credit unions are not-for-profit and member-owned, taxing credit unions really amounts to taxing their 92 million members. Those savings are passed on to members via better pricing of financial services. “The credit union tax exemption is one of the highest-yielding investments the federal government has made,” CUNA President/CEO Bill Cheney said. The exemption also helps ensure that consumers have choices beyond commercial, for-profit banks. President Barack Obama in a Wednesday speech proposed several measures to reduce the deficit, including tax code reforms and cuts in both military and domestic spending. These cuts would save an estimated $4 trillion over the course of 12 years.

Inside Washington (04/13/2011)

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* WASHINGTON( 4/14/11)--The Federal Deposit Insurance Corp. (FDIC) on Tuesday updated its loss, income, and reserve ratio projections for the Deposit Insurance Fund (DIF) over the next several years. The projected cost of FDIC-insured institution failures for the five-year period from 2011 through 2015 is $21 billion, compared to estimated losses of $24 billion for banks that failed in 2010. The agency noted that while the projections are uncertain, the DIF should become positive this year and reach 1.15% of estimated insured deposits in 2018. The Dodd-Frank Act requires that the fund reserve ratio reach 1.35% by Sep. 30, 2020. The FDIC said it likely will consider a proposal later this year to implement the requirement in Dodd-Frank to offset the effect of increasing the reserve ratio from 1.15% to 1.35% on institutions with assets of less than $10 billion. Following seven quarters of decline, the DIF balance has increased for four consecutive quarters. The balance stood at negative $7.4 billion at year-end 2010, up from negative $8 billion in the prior quarter and negative $20.9 billion at the end of 2009 … * WASHINGTON (4/14/11)--Fourteen of the largest mortgage servicers had significant deficiencies in their foreclosure processing, according to enforcement actions filed by their regulators yesterday. These deficiencies included the filing of inaccurate affidavits and other documentation (so-called “robo-signing”), poor oversight of attorneys and other third parties, inadequate staffing and training of employees, and poor communications with borrowers who sought to avoid foreclosures. The enforcement action required banks to ensure that their affiliated servicers took corrective measures and address any deficiencies identified in the review. In a statement, the Federal Deposit Insurance Corp. said it supports a single point of contact for homeowners to work with during the foreclosure process … * WASHINGTON (4/14/11)--Five federal agencies are seeking comment on a proposed rule to establish margin and capital requirements for derivatives as required by the Dodd-Frank Act. The amount of margin required under the proposed rule would vary, based on the relative risk of the counterparty and of the swap or security-based swap. Dealers would not be required to collect margin from a commercial end user as long as its margin exposure is below an appropriate credit exposure limit established by the swap entity. Swap dealers would also not be required to collect margin from low-risk financial end users so long as its margin exposure does not exceed a specific threshold. The rule is proposed by the Federal Reserve Board, the Farm Credit Administration, the Federal Deposit Insurance Corp. the Federal Housing Finance Agency, and the Office of the Comptroller of the Currency. The proposed rule would require swap entities regulated by the five agencies to collect minimum amounts of initial margin and variation margin from counterparties to non-cleared swaps and non-cleared, security-based swaps. The proposed margin requirements would apply to new, non-cleared swaps or security-based swaps entered into after the proposed rule’s effective date. The proposal also seeks comment on several alternative approaches to establishing margin requirements …

Compliance Credit reporting changes coming

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WASHINGTON (4/14/11)--The July implementation deadline for many portions of the Dodd-Frank Act is approaching, and many credit unions still have questions regarding how the new Dodd-Frank rules will impact their practices. As covered in this month’s Compliance Challenge, two of the many coming changes will impact disclosures required by the Fair Credit Reporting Act (FCRA). The Federal Reserve Board and the Federal Trade Commission proposed regulations regarding the credit score disclosure requirements of the Dodd-Frank Act. The statute requires creditors to disclose credit scores and related information to consumers in risk-based pricing (RBP) notices under the FCRA if a credit score was used in setting the credit terms. The Compliance Challenge addressed whether or not credit unions would need to replace their current RBP forms with new ones once the proposal is finalized. The Credit Union National Association has said that the answer to that question will depend on whether a credit union uses a consumer’s credit score to set the material terms of credit. The Dodd-Frank Act will also require creditors to disclose on adverse action notices a credit score that was used in taking any adverse action against a consumer and any information relating to that score. The Fed proposed to amend the combined Equal Credit Opportunity Act (ECOA)-FCRA model adverse action notices to include credit score information as well. Both the RBP and adverse action notices would be amended to include the following:
* A statement that a credit score takes into account information in a consumer report and a credit score can change over time; * The specific numerical credit score used in making the credit decision; * The range of possible credit scores; * Key factors that adversely affected the credit score such as late payments and high credit utilization; * The date on which the credit score was created; and * The name of the consumer reporting agency that provided the credit score.
The proposed RBP changes would add two new forms, giving credit unions a total of four risk-based pricing notices to contend with. For more specifics on these forms, see this month’s Compliance Challenge. Comments on the RBP and adverse action changes are being accepted through the end of today.

CDFI Fund budget remains high despite federal budget cuts

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WASHINGTON (4/13/11)--Funding for Community Development Financial Institution (CDFI) Fund programs, including financial and technical assistance, will, in spite of federal budget cuts, “remain significantly above historical averages,” the National Federation of Community Development Credit Unions has said. A total of $38 billion in funding cuts is proposed as part of the continuing resolution that was agreed to late last week. The continuing resolution would determine federal government spending until Sept. 30 of this year. The continuing resolution would provide the CDFI Fund with $227 million in funds, a $23 million cut from the amount proposed for fiscal 2011. The administration sought $250 million in CDFI funding for FY 2011. The federation said it takes this slight spending reduction “as a strong statement of Obama Administration support for the CDFI Fund.” However, the federation noted that there could be “significant program reductions next year” if certain spending cuts are approved. Legislators have proposed a total of $88 million in cuts for housing counseling assistance under the Department of Housing and Urban Development. The federation in its release said that several housing counseling programs would cease operations on October 1, “severely reducing the supply of responsible counseling services in communities across the country.” The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. According to the Treasury Department in January, credit unions represent 13% of the total applicant pool for the 2011 round of the CDFI Fund program.

CUNA trades note depth of interchange delay allies

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WASHINGTON (4/13/11)--The Credit Union National Association (CUNA) has joined eight other trade associations to point out “the extraordinary breadth and depth of organizations and government officials” that have expressed concern over the Federal Reserve’s plan, which would set a cap on debit interchange fees. In a letter to key regulators, the groups cite critical comments made by the Federal Deposit Insurance Corp., the National Credit Union Administration (NCUA), the Comptroller of the Currency, several senators, various chambers of commerce and other groups. The criticisms have noted the need for additional study of the impact of the new interchange regulations, the harm that the new regulations could inflict on consumers, small merchants and small financial institutions, and other legal considerations related to interchange fee cap implementation mandated for debit card services by the Dodd-Frank Wall Street Reform Act. The trade group letter was sent to Fed Chairman Ben Bernanke, U.S. Treasury Secretary Tim Geithner, and NCUA Chairman Debbie Matz, as well as other key regulators. The letter was also sent to the White House and House and Senate financial services committee leaders. Interchange concerns also have been aired by TechNet, a technology industry group that represents firms such as Apple, Cisco, craigslist, eBay, Symantec, Google, HP, Intel, Facebook, Microsoft and Yahoo. According to a TechNet letter, which was sent to Sen. Susan Collins (R-Maine) last week, the new interchange provisions will “drive networks to cut costs by routing consumer’s financial transactions through cheaper networks regardless of a network’s security or functionality. TechNet also predicted that the interchange proposal would impact payment network operations by making cost savings a greater priority than security. “The new regime would also make it more difficult for banks and other financial institutions to quickly and efficiently identify fraud and other financial infringements on networks operating with minimal security components,” the letter adds. CUNA has called on Congress to “stop, study and start over” on the interchange fee cap regulations. Credit union backers have made over 85,000 separate contacts to members of Congress since CUNA launched an action alert last month. This type of direct, grassroots advocacy is vital to the interchange fight, and CUNA later today will hold a conference call to prepare credit unions and their members for additional action during the upcoming district work session. (See related story: Registration still open for CUNA call on interchange) For the letters, use the resource links.

House subcommittee to study risk-retention plan

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WASHINGTON (4/13/11)--A joint agency risk-retention rule released in March is scheduled to come under the scrutiny of the House Financial Services subcommittee on capital markets at a hearing scheduled for Thursday. The proposed rule aims to address abuses in the mortgage lending market that contributed to the financial crisis and would do so by requiring a loan securitizer--but not most loan originators--to retain a 5% economic interest in a material portion of the credit risk for any asset that it transfers, sells, or conveys to a third party. The subcommittee hearing will examine the implications of the proposed rule to determine its effects on liquidity and the cost of credit to homeowners, students, consumers and businesses seeking financing, according to the subcommittee announcement. Rep. Spencer Bachus (R-Ala.), head of the parent committee, said in the release, “Requiring securitizers to retain some ‘skin in the game,’ will hopefully encourage them to take more care in selecting high quality assets. For risk retention to be successful, however, the standard must not stifle the securitization of loan products, thereby raising costs to consumers and cutting down on the availability of credit.” The Credit Union National Association (CUNA) has questioned the potential impact of the 5% risk requirement on the credit union mortgage market even though the proposal would generally exempt originators from these requirements. CUNA has emphasized that credit unions did not participate in abusive practices, and has noted concerns that credit union mortgage lending will be impacted by these rules and standards that develop in the marketplace. The risk-retention proposal has been released by each of the following agencies: the Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve, the Department of Housing and Urban Development, and the Federal Housing Finance Agency. The first panel of subcommittee witnesses includes a representative from each of the aforementioned agencies. The second panel includes representatives from the securities industry and from the Center for Responsible Lending.

Registration still open for CUNA call on interchange

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WASHINGTON (4/13/11)--Registration will remain open until 1 p.m. (ET) for the Credit Union National Association‘s (CUNA) National Credit Union Briefing on Interchange, which will be held today at 3 p.m. (ET). In addition to providing an update, the free 30-minute session also will offer guidance on how to mobilize credit union members on the issue. The Dodd-Frank Wall Street Reform Act has ordered the Federal Reserve to have a cap on debit card interchange fees in place by July 21. CUNA, and many others, are seeking a delay of that deadline so the U.S. Congress can address unintended consequences of the rule. CUNA President/CEO Bill Cheney, who will lead the call, has noted that "the time window for action is relatively short" with the statutory implementation date looming. Cheney said that because of the tight timeframe, credit unions, the leagues, and CUNA "must further step up our efforts" to ensure that a proposed interchange implementation delay becomes reality. Use the resource link below to register for the briefing session. CUNA Audio Conference Registration

Inside Washington (04/12/2011)

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* WASHINGTON (4/13/11)--The proposed settlement sought by the 50 state attorneys general and a host of federal agencies with the top five mortgage firms could create “unintended negative consequences” for housing and financial markets and extend the foreclosure crisis, according to a study by three economists (American Banker April 12). The study said the settlement would drive up the number of defaults and servicing costs; slow down new home construction and consumer spending; and increase mortgage rates by 20 to 45 basis points per year. Under the settlement, servicers must add new requirements to mortgage documentation, interaction with borrowers, relationships with active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems. These changes would be cost prohibitive, driving up servicing costs, defaults and foreclosure inventory, said the study. The study, commissioned by the financial services industry, was conducted by Charles Calomiris, a professor of financial institutions at Columbia Business School; Eric Higgins, a professor of finance at Kansas State University; and Joseph Mason, the chair of banking at Louisiana State University and a senior fellow at the Wharton School … * WASHINGTON 4/13/11--The fiscal budget negotiated between lawmakers and the Obama administration late Friday includes annual audits of the Consumer Financial Protection Bureau (CFPB) by both the private sector and the Government Accountability Office (American Banker April 12). The audits will “monitor [the CFPB’s] impact on the economy, including its impact on jobs, by examining whether sound cost-benefit analyses are being used with rulemakings,” according to a summary provided in a blog post by House Speaker John Boehner (R-Ohio). In another blog post, the White House said it avoided Republican efforts to limit funding for the establishment of the CFPB. “They also wanted to limit funding for the establishment of the new Consumer Financial Protection Bureau and block the Environmental Protection Agency from enforcing clean air and water rules,” the White House blog post said. “While we made significant cuts, we just couldn't afford to cut these important programs that are critical to our nation” …

Credit data due when regs are implemented CFPB

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WASHINGTON (4/13/11)--Credit unions and other financial institutions are not yet required to comply with regulations that would order them to “collect and report information concerning credit applications made by women- or minority-owned businesses and by small businesses,” according to the Consumer Financial Protection Bureau (CFPB). CFPB General Counsel Leonard Kennedy said in a letter released this week that the regulatory change, which is mandated by the Dodd Frank Act, would not become effective “until the [CFPB] issues necessary implementing regulations.” The new regulation, which amends the Equal Credit Opportunity Act, is meant to “facilitate enforcement of fair lending laws” and help regulators and the public identify the needs of surrounding communities and local businesses. "Given the sensitivity of the data at issue, we believe Congress intended that the bureau first provide guidance regarding appropriate procedures, information safeguards and privacy protections. Waiting to commence information collection until implementing regulations are in place will also ensure that data is collected in a consistent, standardized fashion that allows for sound analysis by the bureau and other users of the data," Kennedy added. For the full letter, use the resource link.

Inside Washington (04/11/2011)

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* WASHINGTON (4/12/11)--Federal Home Loan Banks and their members are asking the Federal Housing Finance Agency (FHFA) to drop a proposal that increases the requirements to be a part of the the cooperative bank system (American Banker April 11). The banks argue the plan is too limiting and would threaten the future of the Home Loan Bank System. William White, chairman and president of the $262.1 million asset Dearborn Federal Savings Bank in Michigan., said the new requirements, laid on top of changes brought about by the Dodd-Frank Act could bring the economy to a “screeching halt.” The proposal would require members to permanently hold at least 10% of their assets in mortgages, create long-term mortgage lending requirements, and stick to an explicit home financing policy. Failure to adhere to any of these requirements would end a bank's membership in the Home Loan Bank System. Currently, institutions must meet certain qualifications, such as the 10% threshold for mortgage assets, but do not have to maintain them … * WASHINGTON (4/12/11)--Proposed restrictions to the Small Business Lending Fund (SBLF) may lead some banks to forego the program. The bill, proposed by U.S. Sen. Olympia J. Snowe (R-Maine) would require banks to repay SBLF distributions within 10 years and prohibit institutions that received Troubled Asset Relief Program funds from participating (American Banker April 11). The fund would sunset after 15 years under the proposal. Snowe said she believes the program would be costly to taxpayers and encourage high-risk lending. “While I would prefer to terminate this fund altogether, it is unlikely based on the current political environment, which is why we must work to protect taxpayers from some of its most egregious provisions,” Snowe said in a press release announcing the bill. Kip Weissman, a partner at the law firm of Luse Gorman Pomerenk & Schick, said the contingencies could prevent the SBLF from meeting its objectives …

CFPB state AGs announce coordination framework

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WASHINGTON (4/12/11)--The Consumer Financial Protection Bureau (CFPB) and the Presidential Initiative Working Group of the National Association of Attorneys General (NAAG) announced a Joint Statement of Principles Monday, saying it is the first step in “forging a new partnership between federal and state officials to protect consumers of financial products and services.” Elizabeth Warren, Special Advisor to the President on CFPB, said she anticipated the cooperative agreement will have a profound effect on the consumer financial markets. She made her remarks at the NAAG Presidential Initiative Summit in Charlotte, NC. Warren’s prepared remarks to summit participants noted: “Together, we can pose a greater deterrent to unscrupulous financial services providers. We can protect more consumers, and we can ensure that more institutions follow the rules.” The joint principles were developed to advance three goals shared by the CFPB and state attorneys general to intended to ensure protections for consumers of financial products and services:
* Protect consumers of financial products or services from unlawful acts or practices; * Provide clear rules that improve the marketplace for consumers and remove unfair competition for the benefit of law-abiding businesses; and * Find ways to promote understanding and address concerns raised by consumers about financial products or services as efficiently and effectively as possible.
Use the resource link below for more details.

CFPB to launch study on TILA-RESPA form design

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WASHINGTON (4/12/11)--The U.S. Treasury Department is preparing to launch a study to see what direction its Consumer Financial Protection Bureau (CFPB) should take when it begins to design a combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures. The nascent CFPB is charged under the Dodd-Frank Wall Street Reform Act to integrate the various TILA and RESPA disclosures into a single document comprehensible by consumers. Last week the CFPB transition team published a notice in the Federal Register intended to get the go-ahead from the Office of Management and Budget to execute an information collection regarding the combined TILA-RESPA form. Based on that submission, CFPB is proposing “one-on-one cognitive interviews” with both consumers and lenders to “inform the design” of the new disclosures. The CFPB submission asks for expedited approval for the study, noting that Dodd-Frank requires a proposed rule be issued by July 21. The study needs to be initiated, therefore, by May, the request says. The Credit Union National Association (CUNA) obtained the full submission to OMB from the Treasury Department last week. CUNA Senior Assistant General Counsel Michael Edwards reviewed the submission and called it a positive step that CFPB is planning to gain the perspectives of all relevant stakeholders --lenders, brokers, as well as consumers.

From NCUA How to write a good comment letter

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ALEXANDRIA, Va. (4/12/11)--When National Credit Union Administration (NCUA) Chairman Debbie Matz assured credit unions in the agency’s monthly newsletter that the NCUA does in fact read--and sometimes heed--comments on regulatory proposals, she also shared tips on what makes a good comment letter. Matz said the NCUA’s attention to comment letters will be in evidence at its April 21 open meeting, where “potentially significant changes" will be unveiled for the agency’s proposed rule on corporate credit unions that was issued in November (News Now April 8). She said the draft changes are being based on a review of the 227 letters sent to the agency by interested parties. And, for future comment letter writing, the chairman provided four tips:
* Do Your Research: Visit www.ncua.gov to find information about each NCUA proposed rule and the deadline for comments. Use the agency website to view already submitted comment letters written by other stakeholders. * Consider Unintended Consequences: Read the preamble of each proposed rule to understand NCUA’s intent. Inform the NCUA about changes that credit unions might have to implement in order to comply with the proposal, and also about any unintended consequences the proposal might generate. * State Your Position Clearly: While a credit union might support or oppose some proposals in their entireties, letter writers are also encouraged to go on record when they support certain provisions and oppose others. * Suggest Alternatives: When opposing a proposed rule in whole or in part, let the agency know why. Matz says the most effective comment letters propose reasonable alternatives. “I assure you: NCUA is open-minded about workable solutions consistent with sound public policy,” she assured.
Matz described the federal rulemaking process as one that seeks to strike “the fairest possible balance” between requirements of applicable law, the agency’s mission to protect safety and soundness, and its effort to minimize any adverse impact on credit unions. “We look forward to reading your comment letters!” Matz concluded in her newsletter column. The Texas Credit Union League has arranged with Matz to appear in a Web video offering of the letter-writing guidance. It’s part of the league’s training initiative intended to increase the number of comment letters written from credit unions to regulators--and recognition that writing comment letters can be intimidating for some credit union leaders. Texas league members can access the video using the link below.

CU grassroots push on interchange needed in recess

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WASHINGTON (4/12/11)--Credit union and credit union member grassroots action on interchange is critically important during an upcoming two-week District Work Session for the House and Senate, the Credit Union National Association (CUNA) reminded Monday. CUNA has announced a National Credit Union Briefing on Interchange, which will be held on Wednesday, April 13, to update credit unions on the latest developments on the interchange issue. It also will provide guidance on how to mobilize credit union members on the issue. The 30-minute teleconference is scheduled for 3 p.m. (ET). Federal lawmakers’ attention last week and this has been all but usurped by federal budget issues--and the threat and resolution of a possible government shutdown. The House returns to session today and is expected this week to consider, among other things, a continuing resolution to fund the government for the remainder of the fiscal year. On Thursday and Friday, the House will consider the budget resolution for fiscal year 2012 and various alternative budget proposals. The Senate will then take up the long-term continuing resolution that the House is expected to pass. Additional action on the small business bill, which has been on the Senate floor for several weeks, is also possible. All this budget work has left little room for work on other issues--including measures of key interest to credit unions, such as pending bills that would delay the looming July deadline for the Federal Reserve to issue a rule to cap debit card interchange fees. CUNA Senior Vice President of Political Affairs Richard Gose said Monday that credit unions and their members have executed a total of 85,000 grassroots contacts on interchange since CUNA launched its action alert last month. He said it is critical that the level of effort continue, and that credit unions contact lawmakers on the issue while they are in their home districts beginning the week of April 18. (Use the resource link below to access CUNA Action Alert.) Also of interest this week in Congress:
* The Senate Banking Committee has scheduled a hearing for today on “Building the New Derivatives Regulatory Framework: Oversight of Title VII of the Dodd-Frank Act." Also today, the committee is expected to consider the nominations of Katharine Abraham to be a member of the Council of Economic Advisers; Carl Shapiro to be a member of the Council of Economic Advisers; and Eric Hirschhorn to be undersecretary of commerce for export administration; * On Wednesday, the House Ways and Means committee will conduct a hearing on “How the Tax Code’s burdens on Individuals and Families Demonstrate the Need for Comprehensive Tax Reform”; and * On Thursday’s calendar, the House Financial Services Committee has noted a hearing on “Oversight of the Financial Stability Oversight Council.” The panel’s subcommittee on capital markets and government-sponsored enterprises has scheduled a hearing on “Understanding the Implications and Consequences of the Proposed Rule on Risk Retention.”

With or without govt shutdown NCUA remains open

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ALEXANDRIA, Va. (4/11/11)—Government workers were anxiously awaiting news on Friday about a resolution to the apparent impasse in the congressional budget debate, and breathed a sigh of relief when lawmakers beat the midnight deadline for coming to a compromise agreement. However, before the government hammered out its six-month budget deal that cut $38 billion and averted a government shutdown, the National Credit Union Administration (NCUA) in a letter to credit unions (No. 11-CU-05) stated in no uncertain terms that it would be in full operating mode whether or not their was a federal shutdown. “As a self-funded agency, NCUA will remain open and operate business as usual in the event of a government shutdown,” NCUA Chairman Debbie Matz said in a Letter to Federal Credit Unions. Considering the contentious bi-partisan differences regarding the federal budget, it may be information credit unions will want to remember for possible future budget impasses. Matz reminded credit union directors that the agency operates outside of the congressional appropriations process. Thus, the National Credit Union Share Insurance Fund would continue to protect individual deposits without interruption, and other operations, such as inspections, would continue unabated if the government ever shut down because of funding.

CDCU loses fight to stay viable on its own

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ALEXANDRIA, Va. (4/11/11)—Little Mission SF FCU may have tried hard to avoid the action, but on Friday the National Credit Union Administration liquidated the $6 million-asset San Francisco community development credit union (CDCU). Its assets, liabilities and members were purchased and assumed by Self-Help FCU, Durham, N.C. However, in their own release after the NCUA announcement, Mission SF and Self-Help lauded their combination and said the "partnership is a proactive step by both credit unions to capitalize on their relative strengths and expand their capacity to provide responsible financial services to working families in San Francisco." It said Mission SF will operate as a division of Self-Help FCU. In January of this year, Mission SF appealed for help to avoid a merger. It was one of two independent CDCUs remaining in California serving a predominately Latino community, and was hit hard by the economic downturn. In a release at the time, Mission SF said it needed to raise $200,000; half of it by Feb. 15, and the second $100,000 by March 15. "Mission SF is determined to avoid a merger and continue to offer the vital and unique services it has provided to its members and the community for over 40 years," said the credit union in a press release. On Friday, the NCUA announced it had assumed control of operations at Mission SF and immediately signed an agreement with Self-Help that allows for continued service to the former members of the San Francisco CDCU “at a safe, sound credit union.” Self-Help is a full-service institution with $210 million in assets and 31,000 members. At closure, Mission SF served about 2,500 members. Formed in the Mission District by Latino immigrants in 1971, Mission SF served as an entry point to the mainstream financial services for new immigrants with financial education, basic financial services and loans. It now served the children and grandchildren of many of its founders. This is the sixth federally insured credit union liquidation in 2011.

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 …

Congressmen urge closer look at interchange impact

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WASHINGTON (4/8/11)--A quartet of Democratic and Republican congressmen have urged their House colleagues to “take a close look” at merchants' interchange fee cap claims and to determine “whether allowing the Federal Reserve to set interchange rates would be good for consumers.” The letter, which was co-signed by Reps. Gary Peters (D-Mich.), James Renacci (R-Ohio), Ed Perlmutter (D-Colo.) and Steven LaTourette (R-Ohio), encouraged members of Congress to co-sponsor H.R. 1081, which would delay the effective date of the Fed’s interchange fee cap provisions by one year. That bill would also require a study of an interchange fee cap’s impact on consumers, financial institutions, and merchants. The Fed’s interchange proposal, set to go into effect in late July, could lower the amount of transaction fees charged to seven cents per transaction. In the letter, the legislators note that financial institutions would likely need to increase fees, end free checking, or eliminate some member or consumer benefits to make up for the funds lost due to reduced interchange fees. “There is no evidence that merchants would pass their savings from reduced interchange rates on to consumers through lower prices,” the letter adds. In closing, the legislators noted that the increased costs and decreased access to the banking system make the interchange legislation “bad for consumers.” The House interchange delay legislation was introduced by Rep. Shelly Moore Capito (R-W.Va.) and currently has 71 co-sponsors. 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 has gathered the 60 votes needed for Senate passage of that bill. For the letter, use the resource link.

NCUA Referral fees can be conflict of interest

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ALEXANDRIA, Va. (4/8/11)--Allowing a federal credit union employee who serves as director of lending to be paid for referring rejected mortgage applications to an outside mortgage banker is “an impermissible conflict of interest,” the National Credit Union Administration (NCUA) said in a recent legal opinion. The conflict of interest would exist whether the credit union employee is paid a referral fee or a salary by the outside broker, the agency adds. In the opinion, NCUA Associate General Counsel Hattie Ulan specifically notes that the agency’s lending rules prohibit employees “from receiving directly or indirectly, any commission, fee or other compensation in connection with any loan made by the credit union.” The rule does include an exception for some cases, but that exception would not apply when a credit union or an employee makes a referral to an outside party. These conflict of interest prohibitions are meant to ensure “that employees and management make appropriate decisions regarding lending,” the agency said. “Loan officers must decide whether to grant or deny loan applications absent economic incentives that could influence decisions against the best interests of members and the [credit union].” Ulan also noted that the referral arrangement may violate portions of the Real Estate Settlement Procedures Act prohibit any person from accepting payment for referrals. For the full NCUA letter, use the resource link.

CUNA video calls 93M members to interchange action

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WASHINGTON (4/8/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney in a new video calls on the 93 million credit union members nationwide to contact their members of Congress and ask them to “stop, study and start over” on interchange fee cap legislation.
The video has been posted on CUNA’s Facebook page, Youtube.com, and an interchange resource page on cuna.org. The interchange fee proposal does not account for all the costs related to running a debit card program. As CUNA Board Chairman Harriet May mentions, the proposal does not account for fraud-related costs. The video also features remarks from Rep. Debbie Wasserman-Schultz (D-Fla.), in which she asks: Who “can price for the risk of fraud on a $1,000 flat-panel TV with a 12-cent interchange fee.” While credit unions, as non-profits, do not want to raise fees, Cheney in the video warns that they may be forced to if the interchange cap proposal goes through. “This change will have a negative impact ... on our members,” May warns.

House introduces MBL cap lift legislation

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WASHINGTON (4/8/11)--Legislation that would lift the credit union member business lending (MBL) cap to 27.5% of total assets was introduced in the House on Thursday. Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) introduced the bill, and Reps. Russ Carnahan (D-Mo.), Hank Johnson (D-Ga.) and Gary Peters (D-Mich.) are original co-sponsors of H.R. 1418, the Small Business Lending Enhancement Act. The bill is similar to Senate legislation offered by Sens. Mark Udall (D-Colo.) and Olympia Snowe (R-Maine) last month. Credit Union National Association (CUNA) President/CEO Bill Cheney thanked the legislators for introducing the bill. Cheney added that this legislation, coupled with the Senate bill, gives credit unions reason to believe “that they may--soon--be able to do more to help our nation’s economy grow and prosper.” Royce in a release said that the MBL cap lift legislation “takes an important step in shifting our current economic path and putting Americans back to work.” McCarthy added that she was “proud to reach across the aisle-–and across the country--to help our small businesses and entrepreneurs grow at this critical time." CUNA has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall spoke in support of his bill on the Senate floor last week, calling on his fellow senators to help him "get government out of the way" and allow credit unions to increase their lending to small businesses. The Senate bill has 18 co-sponsors, and Senate Banking Chairman Tim Johnson (D-S.D.) has said he is interested in examining the MBL legislation in his committee.

Inside Washington (04/07/2011)

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* WASHINGTON (4/8/11)--Regulators testified at a Senate Banking Committee hearing on the state of community banking Wednesday, saying that the proposed interchange rule could hurt small financial institutions. Officials from the Federal Reserve Board, Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency acknowledged that the exemption for financial institutions under $10 billion may not benefit many small financial institutions (American Banker April 7). Lawmakers at the hearing remarked about the unusual level of agreement between regulators and the industry in their reservations about the law. Even FDIC Chairman Sheila Bair, who is a strong supporter of Dodd-Frank, sent a letter to the Fed raising concerns about the interchange proposal. The Credit Union National Association opposes the cap on interchange fees and has urged Congress to stop the Fed's work on the interchange proposal and study the possible unintended consequences of the Dodd-Frank Act provision …

CUNA report makes sense of legacy asset numbers for CUs

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WASHINGTON (4/8/11)--The Credit Union National Association (CUNA) has released to its member credit unions and leagues a white paper that provides an overview of the wide range of estimates that have been presented regarding potential losses on corporate credit union legacy assets, and tries to make sense of the numbers for credit unions. As background, the CUNA report notes that the financial crisis of 2007 to 2009 wreaked havoc on some securities held in corporate credit union portfolios--with most of the troubled assets found in the portfolios of the five corporates that were eventually conserved by the National Credit Union Administration (NCUA). Once conserved, the troubled assets fell under the management of the NCUA’s Corporate Stabilization Fund, which is funded by assessments against credit unions, after the depletion of the capital of the five corporates. The agency’s legacy assets plan entails placing the assets in a trust and issuing NCUA Guaranteed Notes to fund them until they either amortize and mature, or default. The CUNA white paper is titled, “Estimating the Value of Legacy Assets: What We Do and Don’t Know About the Ultimate Cost to Credit Unions of the Corporate Stabilization Fund.” It posits that the crucial question facing credit unions on legacy assets is “how large are the remaining losses to be paid” over the next 11 years of the program? To an extent the answer to that question, according to white paper author and CUNA chief economist Bill Hampel, is “unknown and unknowable.” It depends on the pace of the economic recovery, and particularly on the outlook for unemployment and home prices. However, Hampel argues that “rigorous analysis” can narrow the range, thereby helping credit unions plan for the future. With the announcement of its Legacy Assets plan last September, the NCUA released a range of total loss estimates of $14 billion to $16 billion. CUNA, however, says its analysis of all available information to date shows the range of ultimate losses is wider than that, from $9 billion to $16 billion. These ranges depend on different scenarios of future home prices and unemployment. Assuming a moderate continued economic recovery and no significant further reduction in home prices, the CUNA white paper suggests the ultimate cost may likely be closer to $12 billion than $15 billion. “More important than any specific valuation of the legacy assets is a basic understanding by credit unions of the issue. That is what this white paper seeks to address,” Hampel wrote. Specifically the white paper:
* Generally describes the nature and amount of the legacy asset portfolios of the five conserved corporates; * Describes how three concepts of valuation of a portfolio of troubled securities might vary; * Explains that what we know for sure is very limited; * Explains at a high level how rigorous portfolio valuation models work, and reports on the results of publicly available valuations using such valuation models; * Reports on an important analysis of a subset of the legacy assets (those acquired by U.S. Central and WesCorp) by MEMBERS Capital Advisors (MCA), a subsidiary of the CUNA Mutual Group. The MCA analysis is being released with this white paper for the first time; and * The white paper and MCA analysis are available only for the internal use of CUNA members.
CUNA members can access the full report using the resource link below.

Matz Changes coming to Novembers corporate CU plan

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ALEXANDRIA, Va. (4/8/11)--“Potentially significant changes” are now being drafted for a National Credit Union Administration (NCUA) proposed rule on corporate credit unions that was issued by the agency in November. In her “Chairman’s Report” in the April issue of “The NCUA Report,” Debbie Matz writes that agency staff are now “working diligently” to draft changes based on their review of the 227 letters sent to the agency by interested parties. The rule in question proposed to make further changes to the agency’s regulation on corporate credit unions, subsequent to dramatic amendments the board adopted two months earlier. Matz noted that the corporate rule will be considered at the next NCUA open board meeting, which is scheduled for April 21. The Credit Union National Association (CUNA), in a comment letter in January, noted serious concerns with the proposal. For instance, CUNA doubted that it would be sound public policy to go forward with a provision to limit credit unions to membership in one corporate credit union at a time. CUNA also questioned NCUA’s legal authority to require a “voluntary payment” into the agency’s Corporate Credit Union Stabilization Fund from non-federally insured credit unions (FICU) concurrent to an NCUA assessment on FICUs for the fund. Overall, Matz’s monthly column focused on tips to write an effective comment letter--and the corporate rule changes were cited as an illustration of how the agency truly considers commenters’ remarks. Credit unions interested in the chairman’s tips on effective letter writing should use the link below to access the entire column.

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.

Cheney Merchants mislead on interchange

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WASHINGTON (4/6/11)--Also on the interchange front today, Credit Union National Association (CUNA) President/CEO Bill Cheney is featured in a USA Today editorial urging readers not to be swayed by retailers misleading rhetoric, which obfuscates the interchange debate. Cheney in his editorial noted that while some claim that arguing against the Federal Reserve’s interchange cap regulations means supporting “bank bailouts” or lining the pockets of Wall Street bankers, that claim leaves out one important detail: small institutions, including credit unions and community banks, “are Main Street.” “Nobody is lining our pockets,” he added. And while merchants and others have claimed that allowing the Fed to cap interchange fees would be “pro consumer,” Cheney noted that the proposed law would “have a profound impact on how members are served by their credit unions, likely forcing them to charge new and unwanted fees for debit cards.” “That's not ‘pro-consumer,’" he said. Cheney in his editorial reiterated CUNA’s call to stop, study and start over on interchange fee legislation. “Before the law and rules take effect, the impact on consumers — including 92 million credit union members — should be properly explored,” he said. Some of the effects of this legislation are already known: Funds that credit unions use to cover the cost of offering and maintaining debit card accounts will be curbed. Cheney noted that recovering debit-related costs “might not be a big deal” for the big banks. “They already charge very high fees, and some have said that free checking is a thing of the past,” he said. However, Cheney warned that “member-owned, not-for-profit credit unions might also have to pass the costs on to their members — as lower return on savings or as fees on debit cards or other transactions.” “It's the last thing credit unions want to do, but they might have no choice,” he said. Legislation introduced by Rep. Shelley Moore Capito (R-W.V.) would delay interchange rate cap implementation by one year while the Fed studies interchange's impact on consumers, credit unions and merchants. That legislation has 71 cosponsors, including former House Financial Services Committee Chairman Barney Frank (D-Mass.). Sen. John Tester's (D-S.D.) bill, which would order a similar study and would delay implementation by two years, has 17 cosponsors. CUNA, credit unions and credit union leagues are offering a host of new resources that will help consumers engage their congressional representatives on this crucial issue. For the USA Today editorial and more on CUNA’s grassroots interchange action, use the resource links.

CUNA CUs seek exemptions from CFPB rules

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WASHINGTON (4/6/11)—SECU of Maryland CEO Rod Staatz later today is expected to encourage legislators to urge the Consumer Financial Protection Bureau (CFPB) to exempt credit unions, and the pro-consumer products they provide, from any onerous rules that the CFPB may create.
SECU of Maryland CEO Rod Staatz, shown speaking before the Consumer Federation of America in 2009, will testify on behalf of his credit union and CUNA during today’s hearing. (CUNA Photo)
Staatz will testify before a House Financial Services Financial Institutions & Consumer Credit Subcommittee hearing on legislative proposals to improve the structure of the Consumer Financial Protection Bureau (CFPB). Section 1022 of the Dodd-Frank financial reform package, which authorizes the CFPB to administer, enforce, and implement financial regulations, also gives that agency the authority to exempt any class of covered entities or products from its rules. A formal exemption process has not been established, and Staatz will implore subcommittee members to ensure that a process is created in a timely fashion. The SECU CEO is one of six panelists that will testify on H.R. 1121, the Responsible Consumer Financial Protection Regulations Act, and H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act. H.R. 1121 would replace the single CFPB director with a five member Consumer Financial Protection Commission. Staatz is expected to suggest that legislators add additional positions to the commission, including a spot for a regulator with credit union experience. The hearing is scheduled to begin at 10 A.M. ET.

Form 1099 changes just need presidents signature

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WASHINGTON (4/6/11)--The Senate on Tuesday approved by a vote count of 87 to 12 a bill that would repeal a burdensome extension of Internal Revenue Service Form 1099 reporting requirements. As a "pay-go" effort to offset the cost to taxpayers of the new healthcare reform law, Congress last year extended the 1099-MISC reporting provisions to cover payments for goods valued over $600. Rep. Dan Lungren’s (R-Calif.) H.R. 4 would repeal this extension, and would also repeal an additional Form 1099 rental real estate related reporting requirement. Credit unions and other businesses have long been required to report to the on Form 1099-MISC certain payments of $600 or more that will be considered income by the IRS. Lungren’s legislation, which passed the House with 324 affirmative votes last month, incorporated language authored by Rep. Dave Camp (R-Mich.). Lungren hailed the Tuesday passage of the bill as “a great day for small business owners in (his) district and all across America.” Camp in a release estimated that the tax law change would save taxpayers $20 billion over a 10 year span and would reduce the deficit by more than $166 million over that same time period. The Credit Union National Association earlier this year backed the bill, noting that requiring 1099-MISC forms on goods was extremely burdensome and had questionable value in actually increasing federal revenue. Camp implored President Barack Obama to work with legislators to “find other ways to reduce the heavy burden of federal mandates, regulations and paperwork that take employers’ time, energy and resources away from creating jobs.” President Obama must still sign the bill before it can become law.

Inside Washington (04/05/2011)

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* WASHINGTON (4/6/11)--Elizabeth Warren defended her role in pending mortgage settlement talks in a letter sent to House Financial Services Committee Chairman Spencer Bachus on Monday. Warren, in charge of setting up the Consumer Financial Protection Bureau (CFPB), was responding to complaints that she went further than providing advice in addressing alleged careless mortgage practices by big banks. In the letter, Warren said the CFPB provided advice to federal and state officials regarding the potential servicing settlement, but added it would be inappropriate for her to disclose the contents of the inter-agency discussions. She stressed that the CFPB is not conducting settlement negotiations with mortgage servicers …

Franks call for interchange delay significant says CUNA

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WASHINGTON (4/6/11)—Rep. Barney Frank’s comments in support of a delay of the Federal Reserve’s debit card interchange fee rule are “extremely welcome and helpful,” said Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill, and their importance “cannot be overstated.” Frank, of Massachusetts, is the ranking minority member of the House Financial Services Committee as well as a key author of the Dodd-Frank Wall Street Reform Act. On Tuesday, he announced his support of legislative action to postpone the deadline for the Federal Reserve to issue a rule on debit card interchange fees. In his statement of support Frank noted a recent announcement by the Fed that it would not be able to meet a statutory deadline of April 21 to propose a final rule. The Dodd-Frank Act requires the Fed to meet that deadline to propose a rule to set a ceiling on what debit card issuers may charge retailers who use that payment system. “The Federal Reserve’s announcement that they cannot meet the deadline on interchange fees confirms my view that this is the only part of the financial reform bill that needs to be amended. For this reason, I support legislative action to postpone the deadline so that we can revisit it,” Frank said. He did not address a July 21 effective date that is also set by the law. The Credit Union National Association also supports a delay and has backed bills in the House and Senate. Rep. Shelley Moore Capito's (R-W.V.) bill would delay interchange rate cap implementation by one year while the Fed studies interchange's impact on consumers, credit unions and merchants. That legislation has 72 cosponsors and is known as the Consumers Payment System Protection Act (H.R. 1081). Sen. John Tester's (D-S.D.) bill, the Debit Interchange Fee Study Act of 2011 (S. 575), would order a similar study and would delay implementation by two years. It has 17 cosponsors.

FASB impairment changes unneeded CUNA says

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WASHINGTON (4/6/11)--Noting that credit unions are already “among the most highly regulated financial institutions in this country,” the Credit Union National Association (CUNA) has said that a number of proposed accounting changes are inappropriate for credit unions. Under a joint Financial Accounting Standards Board (FASB) / International Accounting Standards Board (IASB) proposal, entities would need to base expected losses on all available information—including forward-looking information, as well as assign financial assets to a "bad book" or "good book" for purposes of determining their impairment allowance. CUNA in a recent comment letter to FASB said that these and other changes to accounting for the impairment of certain financial instruments are inappropriate for credit unions because of their unique cooperative structure. Credit union members “already receive significant disclosures about the accounts they wish to open and maintain and about the financial condition of their institutions,” and thus there would likely be little, if any, benefit in providing their members with additional disclosures, CUNA added. In addition, CUNA questioned whether such disclosures “should be imposed on credit unions through the accounting standards setting process.” CUNA suggested that financial institution regulators such as the National Credit Union Administration would be better equipped to impose these disclosures. However, CUNA added, there is no evidence that additional disclosures are needed. The proposed requirements may be more appropriate for publicly traded entities, especially since shareholders’ investments in a publicly traded company are subjected to risks that generally do not apply to credit union deposits,” which are generally insured up to $250,000 per account, the comment letter adds. Portions of the proposal are likely “too complex for many entities and may be inconsistent with the actual practice of estimating losses or managing credit risk,” CUNA said. Specifically, CUNA said it is concerned that many smaller reporting entities lack the ability to accurately estimate the lifetime expected losses of open portfolios of assets. Many of FASB’s suggested financial statement changes could severely burden credit unions while supplying little or no benefit to the credit union, its members, or its regulator, CUNA added. CUNA encouraged FASB to extend the comment period on this proposal. However, the comment period ended late last month. For the full comment letter, use the resource link.

NCUA responds to FCU director rule concerns

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ALEXANDRIA, Va. (4/6/11)—Recent National Credit Union Administration (NCUA) rules on the duties of federal credit union directors, and limits on the forms of payment that those directors can be given, do not present new problems for credit union leadership, NCUA General Counsel Bob Fenner said. Fenner’s remarks were made in a recently published legal opinion letter. That letter responded to an earlier letter that was cosigned by the Credit Union Association of Colorado, the Credit Union Association of Wyoming, the Northwest Credit Union Association, the Montana Credit Union Network, the Arizona Credit Union League, the California and Nevada Credit Union Leagues, and the Idaho Credit Union League. The leagues alleged that the NCUA’s new rules addressing the duties of federal credit union directors create “a litigation trap for credit unions who may be accused of not acting in the interests of a particular faction” of credit union members. The letter added that many board actions can bolster the credit union itself without harming members. However, those members also may not “find immediate benefit,”the letter adds. Fenner said that the NCUA rule does not shift the burden of proof onto a credit unions directors, and does nothing to increase the odds of a successful lawsuit against those directors. Fenner also said that the NCUA’s rules do not require management “to consider only the ‘immediate’ benefit” to their members. “Directors can consider, and are encouraged to consider, the long term benefits” to their members, Fenner added. The Credit Union National Association (CUNA) is in active dialogue with NCUA officials on the issues addressed by this letter, and CUNA will seek clarification on the issues raised by the letter in further discussions with the agency. For the full legal opinion letter, use the resource link.

Judge leaves TCF interchange suit open for now

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WASHINGTON (4/5/11)—In an action that leaves open the opportunity to challenge the Federal Reserve Board's debit interchange rule once it is issued, a federal court declined to dismiss TCF National Bank's (TCF) suit against the Fed--but also declined to issue an injunction based on the statute. Credit Union National Association (CUNA) General Counsel Eric Richard said that Monday’s developments were “just one step in a long legal process and CUNA will continue to be a part of that process.” The legal work will go forward, especially after the Fed issues its regulations under the Interchange Amendment – but the Fed’s announcement last week about its inability to meet the April 21 rule deadline makes the timing highly uncertain,” he added. The Fed’s interchange fee rate cap regulations, which could lower interchange fees to as low as seven cents per transaction, are set to go into effect on July 21. A final version of a proposal is expected to be offered before that effective date, even though the Fed last week said that it would not meet the statutory April 21 deadline for a proposal. Monday’s court action followed the first round of oral arguments in TCF’s lawsuit against the debit card interchange fee provisions of the Dodd-Frank Act. The arguments were heard in U.S. District Court for the District of South Dakota by Judge Lawrence Piersol. Credit Union Association of the Dakotas’ Director of Compliance Amy Kleinschmit, who attended the hearing, noted that a large media contingent was part of the fully packed courtroom. The TCF suit, which was filed last October, alleges that portions of the Dodd-Frank Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional. Specifically, the suit states that the government cannot write laws that would force a given business to take a loss on one of its various business operations. TCF also argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. CUNA, the Clearing House Association L.L.C., American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions have backed TCF in its suit. CUNA and the other groups are backing TCF in an effort to explain the detrimental effect that the Fed's interchange provisions would have on the "stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues the (Fed's) action raises." CUNA is also encouraging legislators to tell the Fed to stop, study and start over on the interchange proposal.

Call on Congress on interchange CUNA urges CUs

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WASHINGTON (4/5/11)—Saying that “the time has come to more aggressively reach out to credit union members to broaden the grassroots effort on debit interchange issues,” Credit Union National Association (CUNA) President/CEO Bill Cheney on Monday announced a host of new resources that will help consumers engage their congressional representatives on this crucial issue. CUNA on Monday unveiled a toll-free number, (877) 422-3525, to help credit union members urge their congressional representatives to save free checking accounts at credit unions. At issue is an interchange rule included in the Dodd-Frank Wall Street Reform Act that requires the Federal Reserve to set the fee debit card issuers may charge merchants who use that payment system. 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. On the grassroots front, CUNA, the Leagues and credit unions are developing a district-based letter-writing campaign. CUNA will provide Leagues and credit unions with posters, sample letters, and other materials to push this effort forward. Cheney said that CUNA’s “Call on Congress” will engage credit union members and “keep up constant contact with their lawmakers –both in Washington and at home.” The interchange provisions, which could become effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. The 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. Federal regulators, including Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair, have publicly questioned whether small issuers would benefit from this exemption. Fed Chairman Ben Bernanke this week said that his agency would not be able to meet a statutory April 21 deadline for the issuance of proposed debit interchange fee standards. The new standards are currently set to go into effect on July 21. “If the rules proposed by the Federal Reserve to fix prices on debit interchange go into effect July 21 as mandated by law, many credit unions will have some very hard choices to make about how to offer services to their members,” said CUNA’s Cheney. “Credit union members may be forced to pay new fees for their debit cards and face elimination of services such as free checking.” CUNA has called on legislators to “stop, study and start over” on the interchange proposal. Legislation to delay the implementation of the interchange proposal is active in both the House and Senate, and credit union backers have made more than 50,000 separate contacts in support of these delays since March 15. Rep. Shelley Moore Capito’s (R-W.V.) bill would delay interchange rate cap implementation by one year while the Fed studies interchange’s impact on consumers, credit unions and merchants. That legislation has 68 cosponsors. Sen. John Tester’s (D-S.D.) bill, which would order a similar study and would delay implementation by two years, has 17 cosponsors. For more on CUNA’s grassroots actions, use the resource link.

Fed loan compensation rules delayed pending appeal

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WASHINGTON (4/5/11)--The U.S. Court of Appeals for the District of Columbia last Thursday stayed implementation of the Federal Reserve’s Regulation Z Loan Originator Compensation final rule. This lawsuit has nothing to do with the SAFE registration process for mortgage loan originators, the Credit Union National Association notes. Implementation of the Regulation Z rule is now delayed until further order of the Appellate Court. The implementation delay is the 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). These relief requests followed a pair of early March lawsuits that these parties filed 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 Appellate Court required the Fed to file its response to the emergency relief requests by Monday April 4th and both the NAMB and the NAIHP are required to file their reply to the Fed’s response by Tuesday April 5th. The final rule, which was 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.

CUNA to testify this week on CFPB issues

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WASHINGTON (4/5/11)--State Employees CU of Maryland President/CEO Rod Staatz will testify on behalf of the Credit Union National Association (CUNA) during a Wednesday subcommittee hearing on legislative proposals to improve the structure of the Consumer Financial Protection Bureau (CFPB). The House Financial Services Financial Institutions & Consumer Credit Subcommittee hearing is scheduled to begin at 10 A.M. ET. Staatz, who serves on CUNA’s Board of Directors, has previously represented credit unions and CUNA during a 2009 House Financial Services Committee hearing on overdraft protection. Subcommittee Chairman Shelley Moore Capito (R-W.V.) said in a release that the hearing is meant to “review ways to make the CFPB more accountable and transparent.” One bill that the Wednesday hearing could focus on is H.R. 1121, the Responsible Consumer Financial Protection Regulations Act, which would create a five-person panel to head the Consumer Financial Protection Commission, to replace the single director as the current set up would require. H.R. 1351, the Consumer Financial Protection Safety and Soundness Improvement Act, may also be discussed during the hearing. This bill would allow the Financial Stability Oversight Council (FSOC) to set aside certain CFPB rules if two-thirds of the FSOC agrees to do so. The legislation would also direct the FSOC to take action to stay or set aside CFPB rules that are inconsistent with the safe and sound operation of U.S. financial institutions. The FSOC is chaired by Treasury Secretary Timothy Geithner and includes Federal Reserve Board Chairman Ben Bernanke as well as other key regulators from the National Credit Union Administration, Securities and Exchange Commission, and the Commodity Futures Trading Commission. The FSOC is tasked with monitoring markets for disturbances and promoting market discipline. Grand Rapids State Bank CEO Noah Wilcox and Consumer Bankers Association President Richard Hunt will join Staatz on his witness panel. Bank of Bennington CEO Leslie Andersen, Washington Gas Light FCU CEO Lynette Smith, and U.S. Chamber of Commerce Center for Capital Markets Competitiveness Director Jess Sharp will testify during an earlier panel.

Inside Washington (04/04/2011)

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* WASHINGTON (4/5/11)--The National Credit Union Administration’s (NCUA) multi-media initiative to educate consumers about the safety of money deposited in federally insured credit unions has touched more than 150 million consumers, including 60 million television viewers, the agency said on Monday. In six months, the “NCUA-Safe” public education effort has exceeded $6 million in free publicity, according to NCUA. In October, the agency kicked off a campaign to remind the public that NCUA does for federally insured credit unions what the Federal Deposit Insurance Corp. does for banks: insure consumers’ savings up to $250,000 per individual depositor. The “NCUA-Safe” campaign features Suze Orman, a personal finance expert millions of Americans rely on for advice. The campaign’s free 30- and 60-second television and radio public service announcements (PSA), plus indoor and outdoor posters touting the safety of NCUA credit union insurance protection, have generated an estimated $4.3 million in free publicity through April 1. In addition to PSAs featured on television, cable, radio and out-of-home outlets, the campaign has generated more than $1.7 million in exposure from other outreach efforts, including news releases and radio media tours. The campaign included a free PSA that appeared twice each hour on an electronic billboard in New York City’s Times Square between Thanksgiving and New Year’s Day … * WASHINGTON (4/5/11)--Banks may be required to contribute billions of dollars into a fund that would pay homeowners to settle ownership disputes that emerge during foreclosure proceedings over documentation issues, Sheila Bair, the chair of the Federal Deposit Insurance Corp. (FDIC), told CBS' "60 Minutes" on Sunday (The Hill April 4). Blair said the creation of such a fund becomes more likely as banks struggle with foreclosure documentation problems resulting from the subprime mortgage crisis. Blair said mismanaged paperwork could lead to lawsuits. To discourage litigation, Bair suggested banks should kick in to a fund, which would pay for disputes related to paperwork irregularities … * WASHINGTON (4/5/11)--The Federal Reserve allowed big banks to convert more than $118 billion worth of junk bonds, defaulted debt, securities of unknown ratings and stocks into cash during the recent financial crisis, according to documents released Thursday (American Banker April 4). Low-rated collateral accounted for 72% of the $164.3 billion in market-rate securities pledged to the Fed on Sept. 29, 2008, documents indicated. The assets exceeded the loan value by 5.49%, according to the Fed data. Equities accounted for $71.7 billion, or 43.6% of the total. High-yield debt, including the defaulted issues, was $18.4 billion, or 11.2%. Collateral of unknown rating made up $28 billion, or 17%. The Fed allowed borrowers to use $929 million in market-valued debt that had gone into default as collateral, exceeding the $905.5 million in Treasuries pledged, the Fed said …

Matz named chair of FFIEC

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WASHINGTON (4/5/11)--The Federal Financial Institutions Examination Council (FFIEC) has named National Credit Union Administration (NCUA) Chairman Debbie Matz as its new leader. Matz will serve a two-year term at the helm of the council established in 1978 to promote uniformity in financial institution regulation. Matz’s acceptance of the FFIEC chairmanship results in placing the NCUA in the lead position for the first time in more than 20 years. Although the chairmanship is assigned on a rotating basis among the heads of the five member agencies, the NCUA has declined the position in the last two decades, according to the NCUA. Although the NCUA did not comment on why past chairman declined the role of FFIEC, a sposkesman said Matz accepted the responsibility because she is "committed to promoting consensus among financial regulators as they work to implement new rules protecting the safety and soundness of the financial services industry." The FFIEC is comprised of the leaders of the NCUA, the Federal Reserve Board, the office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp. (FDIC). Matz succeeds FDIC Chairman Sheila Bair in the FFIEC position. “First, I want to thank Sheila Bair for her outstanding leadership of FFIEC during the last two years,” said Matz in a statement Monday. “FFIEC’s leadership transition from the FDIC to NCUA comes at an extraordinarily important time for the regulation of all insured financial institutions. I look forward to working with my distinguished colleagues in continuing the FFIEC mandate of promoting uniformity in the supervision of these institutions. I am confident that, working together, we will address many of the challenges now facing consumers and the financial services industry.” In 2006, the State Liaison Committee (SLC) chairman was made a voting member of the FFIEC. The SLC consists of five representatives of state financial institution regulatory agencies, and members are designated from the Conference of State Bank Supervisors, the American Council of State Savings Supervisors, the National Association of State Credit Union Supervisors, and the FFIEC for two-year terms.

CUNA celebrates a decade of CU Run support

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WASHINGTON (4/4/11)—A cadre of volunteers from the Credit Union National Association were among those that helped set the stage for Sunday’s Credit Union Cherry Blossom 10-mile run.
Click for slide showCUNA volunteers were on the National Mall bright and early Sunday to show support for the Credit Union Cherry Blossom 10K Race by stowing racers' gear. This was CUNA's tenth year of involvement in the event that has raised $5 million for Children's Hospitals. (CUNA Photo)
The CUNA volunteers braved the relatively cold temperatures, and an early wake up call, to work the bag check tent for this year’s race. CUNA vice president of communications and media outreach Pat Keefe said that the volunteer efforts of CUNA and other credit unions again demonstrated "the credit union difference" to those running the race. This is the tenth straight year that CUNA has supported the race. A total of 15,000 runners took part in this year’s run, and race organizers said that over 28,000 prospective runners applied for a spot in the race. More than 600 members and staffers from Capitol Hill participated in the race. Around 1,000 soldiers and civilians overseas also took part in a “satellite” race at Camp Arifjan in Kuwait. The race continued to attract elite competition, with three-time winners Lineth Chepkurui and John Korir returning to compete for a $45,000 race purse, the largest fee to be awarded in race history. Ethiopian Lelisa Desisa won the mens competition, tying the course record of 45:37. Julliah Tinega placed first in the womens race. Former record-holding marathoner Bill Rodgers also again took part in this year’s race. Ninety-one members of Congress from 30 separate states served as honorary race chairs. CUNA President/CEO Bill Cheney helped to kick off the event Friday by participating, with other credit union officials, in a "play day" with patients at Washington Children's Hospital--meant to be a visible sign of credit union commitment to working in support Children's Miracle Network Hospitals and their mission of supporting childrens' hospitals nationwide. ALso, at a press conference at the hospital, Cheney noted that credit unions have had a major role in helping to raise $5 million for sick children over 10 years through support of the Credit Union Cherry Blossom Race. Cheney and CUNA Board Cairman Harriet May also particpated in the race day events.

CUNA urges FTC to protect auto loan consumers

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WASHINGTON (4/4/11)--The Credit Union National Association last week came out in support of the Federal Trade Commission’s (FTC) proposed efforts to protect consumers with respect to motor vehicle loans, and urged the FTC to apply consistent consumer protection rules for motor vehicle dealers offering motor vehicle financing. CUNA in its comment letter noted that auto dealers, who are often the single point of contact for consumers during an auto purchase, are not always concerned with consumer protection. “Motor vehicle dealers provide a significant portion of all motor vehicle loans and should not have a special exemption to inflate rates, charge hidden fees, or engage in other harmful practices,” the letter adds. Providing consistent consumer protection rules would ensure a level playing field for all financial entities that provide motor vehicle lending or lease arrangements. CUNA noted that credit unions provide both direct and indirect loans to prospective motor vehicle purchasers, and said that 95% of credit unions nationwide are involved in the auto loan business. Loans for new and used motor vehicles represent about 29% of all loans at credit unions. Consumers that use credit union loans instead of bank-originated loans to purchase a new vehicle worth $30,000 would save an average of $1,300 over the span of a five year loan, according to CUNA estimates. For the full CUNA comment letter, use the resource link.

Inside Washington (04/01/2011)

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* WASHINGTON (4/4/11)--As talks between state attorneys general (AG) and mortgage servicers, regarding best practices for the servicing industry, seem to drag on, federal regulators are expected to move ahead on their own with cease-and-desist actions targeting 14 servicers (American Banker April 1). The enforcement orders are likely to spell out best practices on such things as documentation verification procedures, oversight from third parties and additional legal counsel, limitations for dual tracking foreclosures and modifications simultaneously, and a comprehensive look back to uncover prior mistakes. While some observers remarked that a comprehensive settlement would be preferable to individual actions, they agreed that the regulators need to perform oversight of the banks where there are determined weaknesses. But others said the separate enforcements benefit the servicers by giving more leverage to push back against the state AGs … * WASHINGTON (4/4/11)--Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), said he is concerned that pending House legislation aimed at an overhaul of compensation levels for Fannie Mae and Freddie Mac employees could carry great risks for the conservatorships, and thereby to the American taxpayer. The legislation would apply a federal pay system to nonfederal employees at Freddie and Fannie (American Banker April 1). DeMarco said the bill would make it harder for the government-sponsored enterprises (GSE) to retain employees. He also maintained it would have the ironic effect of spurring more complaints about the size of the two housing-related GSEs. DeMarco cited other concerns regarding some of the eight GSE reform bills introduced last week by House Republicans. In a separate story, American Banker reported on an inspector general report released Thursday that questions whether the FHFA, as regulator of Freddie and Fannie, should do more to trim executive compensation packages at both GSEs. Fannie and Freddie CEOs combined received about $17 million in 2009 and 2010, the report noted. At the same time, the top six officers at the GSEs received more than $35 million total compensation. The IG report also notes that the U.S. Treasury Department, to date, has spent $153 billion to stabilize Freddie and Fannie …

NCUA NGN sales now total 24B

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ALEXANDRIA, Va. (4/4/11)--The National Credit Union Administration's (NCUA) tenth sale of NCUA Guaranteed Notes (NGNs) was completed last week, and the sale of NGNs has netted nearly $24 billion since it began last October. The most recent transaction yielded $1.5 billion in proceeds. The NGNs were priced at 38 basis points over LIBOR, which the NCUA said is an indication of “strong investor interest.” This latest offering of NGNs is comprised of previously issued residential mortgage-backed securities, the agency said. NCUA Chairman Debbie Matz in a release said that the NCUA securitization program “continues to perform well.” The NGNs are comprised of $35 billion of distressed legacy assets that were conserved from failed and conserved corporate credit unions, and are fully backed by the U.S. Government. The NCUA has amended its definition of low-risk assets to allow credit unions to invest in NGNs. The NCUA said it has securitized 85% of these legacy assets, and expects to sell off the rest of these assets within the next two months. For the full NCUA release, use the resource link.

House to roll out MBL cap lift bill this week

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WASHINGTON (4/4/11)—A House version of legislation that would lift the credit union member business lending (MBL) cap to 27.5% of total assets will be introduced this week, with Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) serving as the leading co-sponsors. The bill will be known as the Small Business Lending Enhancement Act. The bill is similar to Senate legislation offered by Sens. Mark Udall (D-Colo.) and Olympia Snowe (R-Maine) last month. The Credit Union National Association (CUNA) has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. The House members in a statement said that the MBL cap lift legislation “will be an important step in shifting our current economic path and putting Americans back to work.” Royce, a friend of credit unions, earlier this year told attendees of CUNA’s 2011 Governmental Affairs Conference that increasing the amount of credit available to small businesses is a key way to build communities. Royce is a longtime member of the House Financial Services Committee. McCarthy is a key cosponsor of a House bill that would delay the implementation of the Federal Reserve’s planned interchange cap. She also currently serves as the ranking minority member of the House Financial Services Committee’s subcommittee on international monetary policy and trade. Both House members have previously backed an MBL cap lift for credit unions. Udall spoke in support of his bill on the Senate floor last week, calling on his fellow Senators to help him "get government out of the way" and allow credit unions to increase their lending to small businesses. The Senate bill had 18 co-sponsors as of late last week, and Senate Banking Chairman Tim Johnson (D-S.D.) has said he is interested in examining the MBL legislation in his committee.

Interchange delay bill Co-sponsor list growing

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WASHINGTON (4/4/11)—The ranks of House interchange delay supporters grew to 64 late last week, and support for an examination of interchange fee cap legislation is growing as the July 21 effective date comes ever nearer. Similar Senate legislation boasted 17 total sponsors last week. The House and Senate bills listed 42 and 13 cosponsors, respectively, as of March 21. Notable new cosponsors include James Sensenbrenner (R-Wisc.) in the House and Bill Nelson (D-Fla.) in the Senate. The House and Senate bills, which were introduced by Rep. Shelley Moore Capito (R-W.V.) and Sen. Jon Tester (D-S.D.), respectively, would delay implementation of the Federal Reserve’s proposed interchange fee regulations and order a study of the new rules impact on consumers, financial institutions, and merchants. The House bill proposes a one year delay, while the Senate bill would push the effective date back by two years. A vote on the Senate delay legislation could happen early this week if the legislation is attached to a pending small business bill. However, a vote may not happen for several weeks. Credit union backers nationwide stressed the need for delay to their legislators during the recent district work period, which took place between March 21 and 25. Texas was one of the front lines for credit union / congressional interaction, with local credit union chapters meeting with Sens. John Cornyn (R) and Kay Bailey Hutchison (R). San Antonio, Texas-based credit union representatives also met with House cosponsors Henry Cuellar (D) and Quico Canseco (R). The Michigan Credit Union League was also active during the week, meeting with Rep. Sander Levin (D) and other congressional representatives. The Credit Union National Association continues to urge credit union backers to continue to contact their representatives via CapWiz. A total of 55,000 separate interchange contacts had been made through this system as of last week. To contact your local legislator, use the resource link.