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Final CFPB Remittance Rule Is Effective Oct 28

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WASHINGTON (5/1/13)--Oct. 28 will be the effective date for the Consumer Financial Protection Bureau's final remittance regulations, the bureau announced Tuesday.

The Credit Union National Association had urged a substantial delay in the original Feb. 7 effective date of the final rule, and the CFPB's action yesterday, in effect, granted an eight-month delay.

Under the final rule, remittance transfer providers are required to provide prepayment and receipt disclosures to the consumer sender that include the exchange rate, certain fees and taxes associated with a transfer, and the amount of money that will be received on the other end of the transfer. Remittance transfer providers will also be required to investigate disputes and correct errors.

CUNA's International Remittances Working Group has met with CFPB Director Richard Cordray and his senior staff and CUNA senior staff have had numerous meetings and telephone conversations with CFPB officials to advocate for credit unions on remittance issues.

"In our several meetings with Director Cordray and his senior staff, we urged flexibility for credit unions using open networks, such as ACH, to send their members' transfers," said Mary Dunn, CUNA deputy general counsel, upon reviewing the rule. "The final provides that by eliminating the requirement that fees charged by recipient institutions should be disclosed unless the institution is acting as the provider's agent."

CUNA also urged no liability when the consumer provides wrong information and the final rule provides for that as it applies to an incorrect account number or recipient institution number. However, the rule does require an investigation must be conducted.

CUNA advocated for a number of other beneficial changes that have been added to the rule. The final rule provides additional flexibility for credit unions and other remittance transfer providers by:

  • Making optional, in certain circumstances, the requirement to disclose fees imposed by a designated recipient's institution;
  • Making optional the requirement to disclose taxes collected by a person other than the remittance transfer provider; and
  • Revising resolution provisions that apply when a remittance transfer is not delivered to a designated recipient due to sender error.
Unfortunately, CUNA noted, the agency did not revisit the 100 transfers-per-year exemption threshold. "We continue to urge the CFPB to revisit these rules and to make additional changes to facilitate remittance transfers for credit unions," Dunn said.

Remittance rule revisions addressing fees and foreign tax disclosures and how financial institutions will cope with account or routing number errors were also released on Tuesday.

OCC, FDIC Order Restitution For Overdraft Violations

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WASHINGTON (5/1/13)--RBS Citizens, N.A. has been ordered to pay $2.5 million in total restitution to 265,000 customers under an overdraft settlement announced Tuesday by the Office of the Comptroller of the Currency.

The OCC has also assessed a $5 million civil money penalty against the bank for alleged violations of section 5 of the Federal Trade Commission (FTC) Act. According to the OCC, RBS employees made inaccurate or misleading statements about:
  • Overdraft protection programs;
  • The rebate qualification requirements of the bank's checking rewards program; and
  • The bank's ability to process stop payments requested by customers.
The alleged violations took place between September 2007 and September 2011.

Customers that were wrongfully charged as a result of these practices will be reimbursed, with interest. The OCC has also ordered RBS Citizens to take actions to ensure this issue does not recur. Those actions include:
  • Correcting violations;
  • Enhancing compliance risk management programs, policies and procedures; and
  • Ensuring compliance with the FTC Act and other consumer protection laws.
RBS Citizens' state bank affiliate, Citizens Bank of Pennsylvania, has also been ordered to pay $1.4 million in restitution to more than 75,000 consumers for similar violations. The Federal Deposit Insurance Corp. order also imposed $5 million in civil penalties.

For more on the settlements, use the resource link.

The Credit Union National Association has frequently noted that reasonable overdraft protection plans help assure consumers will have access to funds when they need them. Because of their cooperative structure, credit unions do not have financial incentives to charge members the high fees that banks frequently do in order to maximize profits for shareholders, CUNA said.

Reps. Carolyn Maloney (D-N.Y.) and Maxine Waters (D-Calif.) in mid-March introduced legislation that would cap overdraft fees, impose a limit on the number of overdrafts that a member could use per year, and require financial institutions to post credits and debits in a particular order. CUNA said the bill "seems to address a problem that doesn't exist in the credit union system," and has encouraged legislators and regulators to note the credit union difference as they move to regulate overdraft protection programs.

Overall, credit unions charge less for the service than banks. A recent Moebs Services survey shows that the average charge for an overdrawn account of $40 was $30 at banks, but $27 at credit unions. Overdraft revenue at banks, credit unions and thrift institutions totaled $32 billion last year, up $400 million or 1.3% from 2011, said the study. (Use the resource link to read April 2 News Now story: One-fourth Of Consumers With Checking Accounts Have Overdrafts.)

CUNA Monitors Tax Policy Report, CU Issues When Congress Returns

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WASHINGTON (5/1/13)--Many members of the U.S. Congress have returned to their home districts, but the Credit Union National Association is tracking a number of key credit union issues ahead of their scheduled return next week.

A three-week legislative session will be held ahead of the planned Memorial Day break.

Of the many issues CUNA will be monitoring on behalf of credit unions, the Joint Committee on Taxation's tax reform report, expected out on Monday, takes top billing.

The Joint Committee early next week is expected to deliver the report to the House Ways and Means Committee. The report will likely broach a broad spectrum of tax issues, including those impacting credit unions. However, CUNA does not expect the report to contain any policy recommendations.

Early last month, CUNA and other stakeholders met with the House Ways and Means Committee's  financial services tax reform working group members to brief them on the public policy reasons backing the credit union federal tax exemption.

House and Senate floor schedules, as well as committee and subcommittee agendas, are unknown at this point. CUNA will keep an eye on the progress of:

  • Regulatory relief measures, including the "Community Lending Enhancement and Regulatory Relief Act (CLEAR Relief Act) (H.R. 1750)," which would aid credit unions and other community-based financial institutions by providing regulatory relief in the mortgage area and eliminating a requirement that privacy notices be sent on an annual basis;
  • Too Big To Fail action, including the Terminating Bailouts for Taxpayer Fairness Act (S. 798), which would require banks with more than $500 billion in assets to maintain a capital ratio of at least 15%; and
  • House (H.R. 1553) and Senate (S. 727) bills that would enhance safety and soundness by increasing the consistency and fairness of the regulatory examination system.
Several cybersecurity bills and financial literacy efforts are also being monitored by CUNA.

NEW: Obama Nominates Watt To Lead FHFA

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WASHINGTON (UPDATED: 5/1/13, 3:15 P.M. ET)--Rep. Mel Watt (D-N.C.) has been nominated to serve as the next Federal Housing Finance Agency Director by President Barack Obama.

Obama made the announcement in remarks at the White House this afternoon.

The congressman "has a strong understanding of financial services issues and has been willing to listen to credit unions and consider our issues throughout the years," Credit Union National Association President/CEO Bill Cheney said Wednesday.

Watt has served in the U.S. Congress since 1992, and is a veteran member of the House Financial Services Committee. If confirmed by the Senate, he would replace FHFA Acting Director Edward DeMarco, who has led that agency since Sept. 1, 2009.

Many in Congress have called for Obama to remove DeMarco and nominate a replacement. Obama in 2011 nominated former N.C. bank commissioner Joseph Smith to serve as full-time director, but that nomination was not confirmed.

NCUA Prohibition Orders Include Three Big-Time Thieves

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ALEXANDRIA, Va. (5/1/13)--Sharon Broadway, the former manager and sole employee who allegedly stole more than $2 million from her now defunct credit union, United Catholic CU, Monroe, Mich., is one of five individuals recently banned from future credit union work by the National Credit Union Administration.

Broadway earlier this year was sentenced to at least 45 months in prison and ordered to pay nearly $2.6 million in restitution by Monroe County's 38th Circuit Court. The 62 year-old allegedly began embezzling funds from her credit union in 1985, using what has been called a complex money-laundering scheme involving multiple aliases and forged checks to hide the thefts.

The alleged theft was discovered during a routine examination by the Michigan Office of Financial and Insurance Regulation.

Two former employees of Enterprise (Kan.) CU will also be prohibited from future credit union work after both plead guilty to embezzlement charges. The employees, Deborah Bomia and Pamela Emig, worked together to operate a check-kiting scheme, the Associated Press reported. Both women allegedly kited checks between credit union accounts in their names to create fictitious balances. Bomia was sentenced to two years of probation and ordered to pay $85,233.75 in restitution. Emig was sentenced to three years in prison, two years supervised release and ordered to pay $819,405.15 in restitution.

Others issued NCUA prohibition orders include:

  • Ashley Ayotte, a former employee of SeaComm FCU, Massena, N.Y., pleaded guilty to the charge of grand larceny. Ayotte was sentenced to five years of probation and ordered to pay $23,500 in restitution; and
  • Georgia Schwartz, a former employee of Glen Ullin CU, Glen Ullin, N.D., was adjudged guilty of embezzlement and misapplication from a credit union. Schwartz was sentenced to time served, three years supervised release and ordered to pay $130,119.19 in restitution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.
For more on the orders, use the resource link.