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CUs key relief bill introduced in Senate

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WASHINGTON (5/2/08)--Sen. Joseph Lieberman (I-Conn.) introduced a Senate version of the Credit Union Regulatory Improvements Act (CURIA, S. 2957) Thursday, putting the key credit union legislation a giant step forward in the legislative process. The Credit Union National Association (CUNA) lauded Lieberman’s action saying the senator has “demonstrated determination and conviction in his support for consumer-owned credit unions” by introducing his bill. CUNA President/CEO Dan Mica said, “Through his action, consumers have the hope of more choices in services, as well as the promise of continued strength, for the credit unions that they own and direct. “Our sincere thanks and gratitude to Sen. Lieberman. We look forward to working with him, and other senators, as this important legislation gains support and eventual passage in the Senate,” said Mica.
Click to view larger image U.S. Sen. Joe Lieberman (I-Conn.), left, and CUNA President/CEO Dan Mica backstage before Lieberman addressed the March 6 closing closing general session of the 2008 CUNA Governmental Affairs Conference in Washington. (Photo provided by Robert Knudsen)
It was at the CUNA Governmental Affairs Conference in March that Lieberman said he recognized the importance of the Credit Union Regulatory Improvements Act to credit unions and pledged to be an original sponsor of a Senate version of H.R. 1537. The House bill currently sports the names of 149 members of the House as its official sponsors. Among changes proposed by the bill, which is substantively identical to the House version, CURIA would:
* Clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit; * Increase the current cap on loans to members for business purposes (MBLs) from 12.25% to 20% of assets, allowing credit unions to assist more members start and expand small businesses and to promote economic growth. The bill would also exempt loans under $100,000 and those to nonprofit religious organizations from the MBL calculation; * Establish additional consumer safeguards in the event of a credit union conversion to another form of financial institution; and * Reform the National Credit Union Administration's original prompt corrective action system to a risk-based approach more closely resembling the current Federal Deposit Insurance Corp. capital standard for banks.

bNEW CURIA bill introduced in Senateb

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WASHINGTON (5/1/08, UPDATED 3 p.m. ET)--Sen. Joseph Lieberman (I-Conn.) introduced a Senate version of the Credit Union Regulatory Improvements Act (CURIA, S. 2957) Thursday, putting the key credit union legislation a giant step forward in the legislative process. The Credit Union National Association (CUNA) lauded Lieberman’s action saying the senator has “demonstrated determination and conviction in his support for consumer-owned credit unions” by introducing his bill. CUNA President/CEO Dan Mica said, “Through his action, consumers have the hope of more choices in services, as well as the promise of continued strength, for the credit unions that they own and direct. “Our sincere thanks and gratitude to Sen. Lieberman. We look forward to working with him, and other senators, as this important legislation gains support and eventual passage in the Senate,” said Mica.
Click to view larger image U.S. Sen. Joe Lieberman (I-Conn.), left, and CUNA President/CEO Dan Mica backstage before Lieberman addressed the March 6 closing closing general session of the 2008 CUNA Governmental Affairs Conference in Washington. (Photo provided by Robert Knudsen)
It was at the CUNA Governmental Affairs Conference in March that Lieberman said he recognized the importance of the Credit Union Regulatory Improvements Act to credit unions and pledged to be an original sponsor of a Senate version of H.R. 1537. The House bill currently sports the names of 149 members of the House as its official sponsors. Among changes proposed by the bill, which is substantively identical to the House version, CURIA would:
* Clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit; * Increase the current cap on loans to members for business purposes (MBLs) from 12.25% to 20% of assets, allowing credit unions to assist more members start and expand small businesses and to promote economic growth. The bill would also exempt loans under $100,000 and those to nonprofit religious organizations from the MBL calculation; * Establish additional consumer safeguards in the event of a credit union conversion to another form of financial institution; and * Reform the National Credit Union Administration's original prompt corrective action system to a risk-based approach more closely resembling the current Federal Deposit Insurance Corp. capital standard for banks.

FDIC plan places U.S. as direct lender

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WASHINGTON (5/2/08)—The Federal Deposit Insurance Corp. is asking Congress to consider a whole new approach to helping homeowners with mortgages that have become unaffordable: Allow the U.S. Treasury Department to make direct loans to help pay down as much as 20 % of the principal of a troubled loan. FDIC Chairman Sheila Bair said in a statement that her plan is “scaleable, administratively simple, and will avoid unnecessary foreclosures to help stabilize mortgage and housing prices.” Under the proposal, which Bair said is designed to result in no cost to the government, the Treasury could provide Home Ownership Preservation (HOP) loans. Eligible, unaffordable mortgages could be paid down to the cap and restructured into fully-amortized, fixed-rate loans for the balance of the original loan term at the lower balance. The new interest rate would be capped at Freddie Mac 30-year fixed rate and the restructured mortgages could not exceed a debt-to-income ratio for all housing-related expenses greater than 35% of the borrower's verified current gross income. Prohibited would be such things as prepayment penalties, deferred interest, or negative amortization are barred. The FDIC indicated that mortgage investors would pay the first five years of interest due to Treasury on the HOP loans when they enter the program. After 5 years, borrowers would begin repaying the HOP loan at fixed Treasury rates. Servicers would agree to periodic special audits by a federal banking agency. Some observers were reported (American Banker, May 1) as noting that the FDIC plan comes too late in the government’s process of developing plans to deal with the subprime mortgage situation to be able to get much traction. They opined that some version of the FHA plan backed by both House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn,) is more likely to be passed by Congress.

NCUA issues joint plan on unfair deceptive practices

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WASHINGTON (5/2/08) — The National Credit Union Administration (NCUA) Thursday approved a joint proposed rule to ban unfair and deceptive credit card and overdraft practices under the Federal Trade Commission Act. Once the proposal is published in the Federal Register, it will be open for public comment for 75 days. The Office of Thrift Supervision approved a substantively identical plan for thrifts and the Federal Reserve Board was expected to follow with a similar action for banks within a day. The proposal is similar to recent bills introduced in Congress and intended to address certain credit card practices. The Credit Union National Association’s regulatory advocacy staff is reviewing the regulatory proposal in detail, but it appears upon initial review that not all of the provisions would impact credit unions, according to Jeffrey Bloch, senior assistant general counsel. Bloch also noted that Congress has urged opt-in provisions for overdraft programs and the regulatory proposal does not go that far. It instead proposes to give accountholders and opportunity to opt out of such programs. The joint plan is intended to address practices that have raised concern about fairness and transparency. For credit cards, the proposal would address the following seven areas:
* Unfair time periods for making payments; * Unfair payment allocations; * Unfair interest rate increases on outstanding balances; * Unfair fees from credit holds; * Unfair methods of computing balances; * Unfair security deposits and fees charged to an account for the issuance of credit; and * Deceptive offers of credit.
For overdraft protection services on deposit accounts, the proposed rule would address:
* A consumer’s ability to opt out of overdraft services; and * Unfair fees for debit holds.
As each agency approves the plan, they will post the proposal to their respective websites. The NCUA indicated the plan will be available this afternoon at approximately 2:30 p.m. on NCUA’s website. Although the Federal Trade Commission has authority in this area over state-chartered credit unions and will not be issuing a proposal at this time, it is anticipated that state-chartered credit unions will likely be expected to follow the new rule. CUNA’s Consumer Protection Subcommittee will review the joint proposal closely to assess whether the means of allowing the overdraft program opt-out do not impose unnecessary burdens on credit unions. Also, the subcommittee will review the proposed banned credit card practices to determine if there will be unanticipated consequences for credit unions and their members.

Political issues rally all cooperatives says Mica

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WASHINGTON (5/2/08)--Credit Union National Association (CUNA) President/CEO Dan Mica thanked the co-op community for its grassroots support of the Credit Union Regulatory Relief Act (CURRA, H.R. 5519) and urged the co-ops to continue to make their voices heard on political issues of concern.
Click to view larger image CUNA) President/CEO Dan Mica speaks Thursday at the National Cooperative Business Association annual meeting. (Photo provided by NCBA)
Addressing the National Cooperative Business Association (NCBA) annual meeting in Washington, Mica noted NCBA CEO Paul Hazen put out a call to action early this week to the association’s members, which include not only credit unions but co-ops from all sectors, including agriculture, energy, food, and housing. NCBA members responded with energy and enthusiasm. Although no floor vote occurred after CURRA was taken off the House suspension calendar, Mica stressed the lobbying efforts continue. “It’s not over; we will win the battle,” he said, adding that the banks have no cause to celebrate. “The bankers were denied a victory when their regulatory relief bill got pulled first.” The bankers’ bill never made it to the suspension calendar after they had decided to oppose CURRA. Mica also offered strong praise for the cooperative business model. “The private sector cannot succeed if society fails,” he said, quoting former United Nations Secretary General and world leader Kofi Annan. Added Mica: “We’re part of what brings society together. We are driven by different motives.” Asked to give a political prognostication on the 2008 race, the CUNA leader said if the election were held today he believes House Democrats would pick up 25 to 30 seats, Senate Democrats would pick up five to seven seats, and U.S. Sen. John McCain (R-AZ) would be elected president due to the damage Democratic Sens. Hillary Clinton and Barack Obama are inflicting on one another. But, referring to a point he made in one of the monthly "K Street Insider" columns he writes for The Hill newspaper, Mica emphasized the unpredictability of politics and that today's likely scenario could change "a dozen more times" between now and election day. At the time he wrote that column in The Hill back in November, Mica recalled, the wisdom of the day was that Clinton was a sure thing and former New York Governor Rudy Guiliani would get the Republican nomination. He closed by calling on the co-op representatives to stay politically active and involved. Referring to credit unions’ 90 million members he said, “It’s not millions; it’s people being involved, one at a time, making a difference.”

Compliance More hold notices not necessarily a nightmare

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WASHINGTON(5/2/08)—The rising number of exception hold notices to members, and the attendant recordkeeping, does not mean a credit union manager is doomed to be buried in paperwork, according to the Credit Union National Association’s Compliance Challenge. A recent Challenge points out that the pertinent regulation does not require that every piece of paper in such a transaction end up in the files. The credit union must retain a record of each exception hold notice only when it invokes the “reasonable cause to doubt collectibility exception.” At issue is Regulation CC Section 229.13(g)(1). It requires credit unions to provide a notice to members when the credit union extends the time when funds will be available based on one of the exceptions, such as new accounts, large deposits, redeposited checks, repeated overdrafts, or when there is reasonable cause to doubt collectibility. The section requires the notice be provided to the member at the time of the deposit, unless the deposit is not made to an employee of the credit union, or if facts on which upon which the decision to invoke an exception hold do not become known until after the deposit. If the credit union invokes the questionable collectibility standard, it must retain a record describing the circumstances that led to the decision. The record must be kept for two years.

Inside Washington (05/01/2008)

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* WASHINGTON (5/2/08)--The National Association of State Credit Union Supervisors (NASCUS) and state regulators worry that a proposal by the National Credit Union Administration could damage the state-chartered credit union system. NASCUS and 28 agencies signed a comment letter to NCUA emphasizing the proper role of state authority in regards to an NCUA Advanced Notice of Public Rulemaking (ANPR). The ANPR seeks comment on whether the NCUA should set rules on mergers, conversions and termination of insurance for credit unions that are federally insured. There is no authority for application of the ANPR to state-chartered credit unions and the proposal could damage state law and the dual chartering system, the letter said. Some state issues are “better left to state laws and regulation,” the agencies said ...

FinCEN warns of money laundering trend

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WASHINGTON (5/2/08)—Suspicious activity reporting by credit unions and banks has enabled the Financial Crimes Enforcement Network (FinCEN) to identify a new money laundering trend involving the residential real estate industry. A recent FinCEN study has confirmed an increase in the number of Suspicious Activity Reports (SARs) that indicate suspected money laundering in the industry which tracks closely with the past expansion of the real estate market, especially in the 2004-2005 period. FinCEN noted in a release that its previous studies have found similar trends in mortgage lending where criminals seek to profit by committing mortgage fraud. In contrast, FinCEN said, the new trend involves those who seek to launder money through residential real estate and generally intend to make timely payments. They strive to make their transactions appear as unremarkable as possible in order to disguise the source of their funds Nichole Seabron, federal compliance counsel for the Credit Union National Association, said Thursday that the FinCEN's report shows that U.S. financial institutions have been able to identify possible instances of money laundering through residential real estate. The report, she added, is intended to help raise awareness of this vulnerability and to assist credit unions, banks and thrifts to better recognize the risks involved in this activity.

House committee votes yes on housing assistance bill

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WASHINGTON (5/2/08)—With a 46-21 vote, the House Financial Services Committee Thursday approved the FHA Housing and Homeowner Retention Act (H.R. 5830). The bill, first announced by the committee’s chairman, Rep. Barney Frank (D-Mass.) in March, proposes to expand the Department of Housing and Urban Development's FHA program to help refinance at-risk borrowers into viable mortgages. H.R. 5830 would provide funding for the refinancing of up to $300 billion in existing mortgages that are considered foreclosure risks. It would also require the Federal Reserve Board to conduct a study on the need for an auction or bulk refinancing mechanism. Frank issued the following statement after the vote: “It is important that we reduce the number of foreclosures both as a matter of alleviating the pain for some individuals and stabilizing some neighborhoods. It is my hope that this legislation will restore some stability to the housing market, put liquidity back in the market, and not interfere with the market, but help restore it. “Servicers should put a pause in some foreclosures until they can wait to see exact details of this as it moves forward. If after this we continue to get very little participation by servicers, I can guarantee you that the servicer industry will look very different a year from now than they do today. If after everything we do in this cooperative way falls short, then you are going to see legislation that puts some very real restrictions on the role of servicers and give many more rights to the borrowers.” The bill is expected to go to a vote on the House floor next week.