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Inside Washington (05/12/2011)

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* WASHINGTON (5/13/11)--House Democrats made efforts Wednesday to stop a bill that would delay the derivatives provisions of the Dodd-Frank Act. A day before a House Financial Services Committee vote on derivatives legislation, Democrats said the bill would weaken the regulatory reform law American Banker May 12). Rep. Barney Frank (D-Mass.) and other Democrats argued that Republicans were only seeking a delay in the hopes they could kill the new rules if they win in the 2012 elections. The derivatives bill, sponsored by Rep. Frank Lucas (R-Okla.) had been gaining momentum in the House. It passed the House Agriculture Committee by voice vote on May 4. The House Financial Services Committee was scheduled to vote Thursday on the bill and on measures to restructure the Consumer Financial Protection Bureau … * WASHINGTON (5/13/11)--A federal appeals court cited the Dodd-Frank Act in deciding a national bank will not have to comply with a Florida consumer protection statute that limits bank fees American Banker May 12. The 11th Circuit Court of Appeals affirmed a lower court’s decision to dismiss a case claiming JP Morgan Chase Bank was in violation of a state law prohibiting banks from charging check-cashing fees. Chief Judge Joel F. Dubina cited the Dodd-Frank Act, which referred to the Barnett standard established by the Supreme Court in 1996. Under the Barnett standard, state law cannot interfere with the business of banking. A lower court found that Office of Comptroller of Currency rules allow national banks to charge customers non-interest charges and fees. Dubina said the court adopted the reasoning of the Fifth Circuit Court’s decision in Wells Fargo Bank of Texas N.A. v. James, which employed the Barnett standard to determine that OCC rules preempted a similar statute in Texas …

CU rep among 15 new members of SBA panel

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WASHINGTON (5/13/11)—Hutchinson CU’s LeeAnn Marker is one of 15 individuals that were named to the U.S. Small Business Administration’s (SBA) Council on Underserved Communities (CUC) on Thursday. Marker serves as a business advisor at the Hutchinson, Kansas-based credit union. The SBA in a release said that the CUC “will provide input, advice and recommendations on strategies to help strengthen competitiveness and sustainability for small businesses in underserved communities. These strategies will be focused on increasing entrepreneurship and technical assistance, creating new and strengthening existing outreach and training, and raising awareness in underserved communities of SBA programs and services. “ SBA Deputy Administrator Marie Johns said that the CUC "will provide valuable insight and advice into how [the SBA] can ensure that small businesses in these communities throughout the country have access to the tools they need to grow, create jobs and win the future.”

Joint fair value guidance completed released

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WASHINGTON (5/13/11)--The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on Thursday released new guidance on fair value measurement and disclosure requirements for International Financial Reporting Standards (IFRSs) and U.S. generally accepted accounting principles (GAAP). FASB in a release said that the requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. IFRS 13, Fair Value Measurement, will improve consistency and reduce complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs, according to the release. FASB’s GAAP update clarifies portions of its existing guidance to better align with portions of IFRS, and “reflects FASB’s consideration of the different characteristics of public and non-public entities and the needs of users of their financial statements.” Many of the new disclosure requirements will not impact non-public entities. The release of this guidance follows more than five years of work related to disclosure requirements and fair value measurements. The harmonization of these requirements is a central part of the accounting regulators’ response to the financial crisis, and FASB Chairman Leslie Seidman said that the update “represents another positive step toward the shared goal of globally converged accounting standards. “Having a consistent meaning of the term ‘fair value’ will improve the consistency of financial information around the world,” she added. FASB and IASB also continue to work on a single standard on accounting for financial instruments and recently extended the timetable for finalizing the standard from the first to the second half of 2011. For more on the joint FASB/IASB release, use the resource link.

NCUA issues prohibition order (05/12/2011)

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ALEXANDRIA, Va. (5/13/11)—The National Credit Union Administration (NCUA) on Thursday prohibited Vicki Lynn Weidenhof, a former employee of Sitka, Alaska-based ALPS FCU, from future work at any federally insured financial institution. Weidenhof was convicted of credit union theft, embezzlement, and misapplication of funds by an officer or employee and was sentenced to 24 months imprisonment and five years of supervised release. She will also pay $187,348 in restitution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full release, use the resource link.

Fed seeks comment on remittance rule changes

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WASHINGTON (5/13/11)--The Federal Reserve Board is seeking comment on a proposal to create new protections for consumers who send "remittance transfers" to recipients located in a foreign country. If finalized as proposed, the rule would apply to virtually all cross-border, consumer-initiated electronic funds transfers other than plastic cards, including international wire transfers and international ACH transfers. The Fed’s proposed rule would require that remittance transfer providers make certain disclosures to senders of remittance transfers, including information about fees and the exchange rate, as applicable, and the amount of currency to be received by the recipient. It also would provide error resolution and cancellation rights for senders of remittance transfers. In addition, the proposal states that Article 4A of the Uniform Commercial Code, the law enacted in virtually all states to regulate wire-transfers between depository institutions, would no longer apply to consumer-initiated international wire transfers if the rule is finalized in its current form. The proposal, being made under the Fed’s Regulation E (Electronic Fund Transfers), is in response to new remittance requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which CUNA work to improve prior to its passage last summer. As a result of CUNA lobbying efforts, international wire transfers initated from accounts at federally insured credit unions would be exempt from many of the cost estimate requirements until at least 2015, and credit union international ACH transfers are proposed to be permanently exempted from those requirements. However, credit union international wire and ACH transfers would not be exempted from some of the error resolution and cancellation requirements. CUNA's Consumer Protection Subcommittee, World Leadership Development Committee, and Payments Subcommittee all will review the proposal and provide input for CUNA's comments to the Fed. A CUNA Comment Call will be posted on CUNA's Regulatory Advocacy website, and CUNA plans to pursue credit unions' concerns about this proposal with both the Federal Reserve and with the U.S. Congress. Comments are due to the Fed by July 20. Use resource link below to view the full proposal and for instructions on how to submit a comment.

Bernanke Good reason for interchange concerns

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WASHINGTON (5/13/11)—Federal Reserve Chairman Ben Bernanke yesterday reiterated that he is not sure that the small institution exemption in pending interchange fee cap regulations would work as planned, adding that there “is good reason to be concerned” about its effectiveness. Appearing before a Senate Banking Committee hearing on the implementation of the Dodd-Frank Wall Street Reform Act, the Fed Chairman, in response to questions from Sen. Jon Tester (D-Mont.), added that the pending interchange cap would affect revenues of smaller issuers and “could result in some smaller [financial institutions] being less profitable or even failing” if the proposed exemption for institutions with under $10 billion in assets does not work. Tester is the author of Credit Union National Association (CUNA)-backed legislation to delay the proposed interchange rules for two years to allow further study. Federal Deposit Insurance Corp. Chairman Sheila Bair later told legislators that the interchange changes would likely result in higher fees for financial services customers, and said that the income cuts for small issuers would cause significant stress for those institutions. Under requirements of the Dodd-Frank Wall Street Reform Act, the Federal Reserve Board has proposed a debit card interchange limit that would top such fees at 12 cents. The law intends to exempt credit unions and other small institutions with assets of $10 billion or less from fee cap. However, the effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. CUNA supports House and Senate legislation that would delay the implementation of the interchange regulations and order a study of their impact on consumers, financial institutions, and merchants. Bair and Bernanke were joined during the hearing by U.S. Treasury Deputy Secretary Neal Wolin, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler, and Acting Comptroller of the Currency John Walsh. Bernanke in prepared testimony added that the Fed would further address the separate issue of too-big-to-fail banks by “developing more-stringent prudential standards for large banking organizations” such as “enhanced risk-based capital and leverage requirements, liquidity requirements, and single-counterparty credit limits.” The standards, which Bernanke said are expected to be released for comment this summer, will also require systemically important financial firms to create “living wills.” Bernanke said that the Fed’s goal “is to produce a well-integrated set of rules that meaningfully reduces the probability of failure of our largest, most complex financial firms, and that minimizes the losses to the financial system and the economy if such a firm should fail.”

CUNA Interchange income pays for card security

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WASHINGTON (5/13/11)--In the aftermath of Michaels stores recent consumer data breach, the Credit Union National Association (CUNA) again reminded legislators that it is interchange fees that allow credit unions to cover the costs of dealing with these sorts of mercantile mistakes. The letter was sent to Senators Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), the two original cosponsors of Senate legislation that would delay interchange fee cap implementation by two years. The Fed interchange fee cap regulations would become law on July 21, absent a delay. While a final version of the interchange cap regulations has not yet been issued, it is expected to be released before July 21. Michaels, a nationwide big-box craft store, this week notified customers of data breaches that occurred in 20 states. CUNA noted that while customers will likely have their debit cards reissued, at no cost, as a result, credit unions and other financial institutions, and not the retailer, will pay for the new cards. “What makes it possible for card issuers to cover this cost – as well as the cost of any fraudulent transactions which may occur as a result of the breach – is the interchange revenue merchants pay card issuers as their fair share of the cost of the payments system,” CUNA said. If the Federal Reserve’s proposed interchange fee cap becomes effective as scheduled, consumers will “face new or additional fees to use their debit cards and their personal data will continue to be lost by merchants who bear no responsibility to reimburse those impacted by their data breaches,” CUNA added. The CUNA letter said that the proposed delay will give legislators and regulators the time needed to study the impact of the interchange fee cap on consumers, debit card issuers and merchants, and for Congress to address potential changes to the law as a result of this study. The Conference of State Bank Supervisors (CSBS) and the National Association of State Credit Union Supervisors (NASCUS) also spoke up in support of this delay in their own letter to Congress. The regulators said that the potential economic impact of the cap, along with safety and soundness concerns, were reasons to delay implementation. Placing an artificial limit on interchange fees will “incentivize further consolidation among debit card issuers and potentially drive bank customers and credit union members to alternative products outside of the banking system.” This action could also force credit unions and banks to stop issuing debit cards, as “their costs do not utilize the same economies of scale as larger financial institutions,” the letter added. For the full CUNA letter and the joint NASCUS/CSBS letter, use the resource links.