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CUs must pay for NFCC counseling line in July

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WASHINGTON (5/11/11)--The National Foundation for Credit Counseling (NFCC) on Tuesday said that it and various member agencies “can no longer bear the full cost of operating the NFCC CARD Act National Locator Line (NLL)” and would begin charging for the service on July 1. The NLL is a third-party service that provides credit union members and other financial services consumers with a list of local credit counselors. The NLL provides these local counselors after cardholders call a toll-free phone number and input their zip code into the automated NLL system. The caller is then supplied with the name, address, phone number and Web site address of three nonprofit credit counseling agencies that have been approved by a United States bankruptcy trustee or bankruptcy administrator. Credit unions and other financial institutions are required to prominently display on their statements a toll-free number providing cardholders information about accessing debt management services and credit counseling with nonprofit credit counseling agencies. This information has been required since Feb. 22, 2010. The requirement is a result of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. Creditors are allowed to provide their own toll-free services or to engage with third-party providers. The NFCC and others offered the service for free during the first 14 months following its release, but said that use of the NFCC CARD Act NLL will soon cost a minimum of $80 per month when prepaid for 12 months. The NLL program served over 430 institutions since it started, and many credit unions nationwide are signed on to use this service. "Not only will this information help make consumers aware that help is available, but it will add a layer of protection by directing them to government-approved nonprofit counseling agencies for assistance," NFCC said.

Judge inclined to uphold Vensure conservatorship

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WASHINGTON (5/11/11)--U.S. District Court for the District of Columbia Judge Rosemary Collyer Wednesday said that she is initially inclined to rule in favor of the National Credit Union Administration (NCUA) and let its conservatorship of Vensure FCU stand but will consider an additional written filing by the credit union before making a final ruling. On April 15, the NCUA placed the Mesa-Ariz. credit union into conservatorship after it had failed over time to diversify its business. The NCUA determined the credit union relied solely on income from processing online gambling transactions to survive, and the agency had recommended it build a loan program. Although Vensure took steps to build such a program, it did not have any loans at the time that the U.S. Attorney for the Southern District of New York indicated it would freeze a multi-million dollar online gambling account that was used to cover rejected ACH transactions. The NCUA was concerned, records show, that the credit union could not survive independently if it had to cover rejected ACH transactions from its retained earnings, especially because it did not have any other lines of business that could support its operations. The court convened yesterday to hear arguments regarding a request to the court by Vensure to enjoin the NCUA’s April 15 conservatorship. The credit union has argued, in part, that the NCUA "took possession of the very financial records [the credit union] needs to demonstrate that conservatorship is improper." The case is known as Vensure Federal Credit Union v. National Credit Union Administration. In her comments, Collyer underscored that over the remaining course of the trial her sentiments could change, but she said that the facts presented to date make her currently inclined to uphold the conservatorship and rule that the NCUA was not “arbitrary and capricious” in its action, as the credit union has charged. She said she would allow Vensure one week to file a written response, and would give the NCUA a week after that to reply to the credit union’s filing.

NCUA again expands disaster relief area

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ALEXANDRIA, Va. (5/12/11)--The National Credit Union Administration (NCUA) on Wednesday expanded the scope of its disaster relief policy as severe flooding now threatens parts of Missouri, North Dakota and Minnesota. The agency earlier this week activated its disaster relief policy in Tennessee, Mississippi, Kentucky, Louisiana and Iowa. The National Weather Service on Wednesday issued flood warnings along the majority of the Mississippi river, with those warnings stretching far to the north. The river is expected to continue to rise, and the National Weather Service has predicted that it will crest at 64 feet on May 21. Reuters earlier this week reported that 3 million acres have been inundated in Arkansas, Tennessee, and Mississippi. The NCUA expanded its own policy to mirror recent additions to the list of federally-mandated disaster areas. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses. Under the policy, the agency will, where necessary, encourage credit unions to make loans with special terms and reduced documentation to affected members, reschedule some credit union examinations, guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund, and make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility. NCUA examiners will survey credit unions operating in flood- and storm-affected counties and parishes. For more on the NCUA’s disaster relief efforts, see the NCUA’s release and prior News Now coverage.

CUNA backs NFIP amendment ahead of markup

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WASHINGTON (5/12/11)--The Credit Union National Association (CUNA) has backed a National Flood Insurance Plan (NFIP) amendment that would preserve the rights of credit unions to protect their collateral from flood hazards. The amendment is expected to be proposed by Rep. Frank Lucas (R-Okla.) during a House Financial Services Committee markup session scheduled for today. H.R. 1309, the Flood Insurance Reform Act of 2011, is set to be marked up. Several bills that would reform portions of the planned Consumer Financial Protection Bureau are also set to be discussed by the committee. The flood insurance-related amendment would clarify that flood insurance purchased by credit unions “would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period.” Credit unions are currently required to force place flood insurance when a borrower fails to maintain the required coverage during the term of the loan. If the credit union determines that the borrower allowed the flood insurance coverage to lapse, the credit union must notify the borrower that he must obtain the insurance. If the borrower does not provide evidence of insurance coverage within 45 days of the notification, the credit union is required to force place the insurance on the borrower’s behalf and may charge the borrower for the cost of the premiums and fees. For the full letter, use the resource link.

Inside Washington (05/11/2011)

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* WASHINGTON (5/12/11)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) said Tuesday, said he would not negotiate with Republicans over changes to the Consumer Financial Protection Bureau (CFPB) (American Banker May 11). Forty-four GOP senators signed a letter last week vowing to block the nomination of the CFPB director unless changes are made to the agency’s structure. Republicans demanded that the CFPB’s director be replaced with a board, that the bureau be subject to an appropriations process, and that banking regulators have power to override the CFPB. Johnson said the demands were too steep and said the President Obama should make the final decision on the bureau’s structure … * WASHINGTON (5/12/11)--The Federal Deposit Insurance Corp. (FDIC) board will seek comment on new capital and margin requirements for retail futures and options in the foreign exchange (forex) market falling below a certain threshold (American Banker May 11). The measure would affect the retail market for futures and options--those involving individuals with less than $10 million invested, or less than $5 million in certain cases. Banks participating in retail Forex transactions would have to advertise that the transactions are not covered by FDIC insurance. An institution would require a customer to post a margin of 2% for major currencies such as the dollar and 5% for other currencies. The measure wouldn’t apply to foreign currency forwards or spot transactions that banks engage in with business customers to hedge foreign exchange risk. FDIC Chairman Sheila Bair said while the proposal wouldn’t affect many banks at the current time, it is meant to provide a regulatory framework should more banks enter the market in the future … * WASHINGTON (5/12/11)--Eliminating a set asset value to make the money market industry more stable during times of stress was among the topics addressed during a Securities and Exchange Commission Roundtable discussion Tuesday. But some market observers felt such fears were overstated (American Banker May 11). John Hawke, a partner at Arnold & Porter and former Comptroller of the Currency, said money market funds have been successful on a historical basis, and are not susceptible to fluctuations during good and bad markets. Federal Deposit Insurance Corp. Chairman Sheila Bair noted the Reserve Primary Fund fell below to below a dollar per share, nearly causing investors to redeem their holdings. To stop the run, the government initiated a program that would restore a covered fund’s net asset value if it fell below a dollar. Hawke said re-engineering the money market fund industry could have unintended consequences …

CU-filed SARs increased in 2010 with big results

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WASHINGTON (5/12/11)—While the total number of Suspicious Activity Reports (SAR) filed by depository institutions continued to decrease in 2010, the Financial Crimes Enforcement Network (FinCEN) noted that the percentage of filings from credit unions continued to rise, a trend that first started in 2001. Specifically, the number of financial institutions that claimed the National Credit Union Administration (NCUA) as their primary regulator in SAR reports increased by 4% over 2009’s numbers. SARs listing all other regulators decreased, and the total number of SARS filed by financial institutions fell by 3% when compared to 2009’s numbers. Just over nine out of ten financial crimes reported in financial institution-issued SARs were related to some sort of money laundering. Fraud related activities accounted for 26% of SARs filed in 2010, FinCEN said. Fraud related to checks, commercial loans, consumer loans, credit cards, and wire transfer all fell, while the number of debit card and mortgage-related fraud cases increased slightly. Check fraud cases showed the biggest numerical decline, dropping by 12,000 between 2010 and 2009, while commercial loans showed the largest percentage decline: 21%. Reported incidents of money laundering, counterfeiting and terrorist financing also increased during 2010. New York, California and Florida had the highest number of reported incidents. The report also noted an instance in which a credit union’s SARs uncovered a bribery scheme amongst public utilities employees. The credit union’s repeated SAR filings caught the eye of investigators, with a subsequent investigation leading to more than 10 individuals pleading guilty to charges related to soliciting and accepting more than $1 million in kickbacks from a contractor in connection with construction projects, FinCEN said. For the full FinCEN reports, use the resource link.