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New credit rules should follow federal regs CUNA says

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WASHINGTON (5/14/2009)—The Credit Union National Association (CUNA) on Wednesday urged each member of the Senate to help financial institutions control their compliance costs by patterning any upcoming anti credit card abuse legislation on the requirements that regulators will impose on both banks and credit unions, starting next year. In the May 13 letter, CUNA reiterated its position that, while it generally supports H.R. 627 as passed by the House, any attempts at reforming existing credit card rules should be balanced to “avoid unintended consequences which would ultimately be adverse to consumers.” Credit unions may waste valuable time and money changing their software and data processing systems if potential changes to the minimum payment warnings that are required on periodic financial statements differ significantly from the changes already proposed by recent federal regulations, the letter added. CUNA also asked senators for some leeway regarding schedules and effective dates. The 90-day adoption schedule that may be required by some portions of the bill may be an “impossible compliance burden given the timeframe,” the letter said. Additionally, the letter said that legislation that would require lenders to reassess a cardholders’ account every six months if the interest rate on that account has been raised would present a “significant compliance burden and expense for credit unions.” Instead, CUNA suggested, such reviews could be completed every 12 to 18 months.

Sen. Harkin Banks can take a lesson from CUs

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WASHINGTON (5/14/09)—Sen. Tom Harkin (D-Iowa) on May 13 suggested that banks could “take a lesson” from credit unions that have been able to provide a “viable, good service” to millions of Americans without harming the safety or soundness of their institutions. In remarks delivered on the Senate floor, Harkin said that larger credit card issuers and banks should be able to operate under potential federal interest rate restrictions, as credit unions have been able to thrive under similar rules without negatively impacting access to credit for credit union members. While he supports the overall goal of H.R. 627, the Credit Cardholders' Bill of Rights Act, the legislation as currently presented does not address the larger problem of “usurious” interest rates, Harkin said. An amendment that would have imposed a 15% interest rate cap for credit cards was defeated late Wednesday afternoon. However, Sen. Chris Dodd (D-Conn.) said that the concept of an interest rate cap for credit cards should still be considered by the Senate. The Federal Credit Union Act imposes a 15% ceiling for all loans and lines of credit advances that are serviced by federal credit unions, but it allows the National Credit Union Administration (NCUA) to make adjustments up to 21%. Currently, the federal regulator has set the rate at 18% and is scheduled to reconsider the cap on Sept. 10, or it will revert to 15%.

Kanjorski offers corporate CU stabilization bill

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WASHINGTON (5/14/09)—Rep. Paul Kanjorski (D-Pa.), a longtime supporter of the credit union movement, has introduced legislation that will “recapitalize the credit union deposit insurance system to ensure the long-term stability of the credit union system.” H.R. 2351, the Credit Union Share Insurance Stabilization Act, which Kanjorski hailed as a “viable, effective, and appropriate response” to the problems currently faced by credit unions, would create a temporary corporate credit union stabilization fund. This fund would merge with the National Credit Union Share Insurance Fund (NCUSIF) once the current rescue funding crisis has passed. As introduced, the bill would increase the amount that the National Credit Union Administration (NCUA) may borrow from the U.S. Treasury Department from $100 million to $6 billion and would allow NCUA to borrow as much as $30 billion in funds in the event of an emergency. This emergency borrowing authority would extend until Dec. 31, 2010 and would only apply “under certain circumstances and procedures.” Additionally, H.R. 2351 would allow credit unions to spread the cost of NCUSIF replenishment over an eight-year period when the insurance funds fall below a certain level. Currently, credit unions are paying into the NCUSIF in the form of assessments that are collected as one lump sum. Reps. Luis V. Gutierrez (D-Ill.), Ed Royce (R-Calif.), David Scott (D-Ga.), and Steven LaTourette (R-Ohio) joined Kanjorski in introducing the legislation. The structural changes to the corporate credit union setup suggested by this bill are “essential going forward,” Rep. Royce said. The bill has bipartisan support, and Kanjorski said he is confident that the legislation would be enacted this year. In a statement following the introduction of the bill, NCUA Chairman Michael Fryzel expressed his “deep appreciation” for H.R. 2351, legislation that would maintain the “momentum” created by the recent Senate passage of the NCUA Corporate Credit Union Stabilization Program and move “NCUA and the credit union industry another step closer to creating a real and pragmatic solution to the corporate credit union situation.” Credit Union National Association (CUNA) President/CEO Dan Mica praised the bill, stating that spreading the “cost of government assistance to the corporate credit union sector” over a longer time period “will give all federally insured credit unions more resources in hand to lend back into their communities and help foster economic growth.” Kanjorski’s bill closely mirrors portions of S. 896, the Helping Families Save Their Homes Act, which passed the Senate by an 86 vote margin late last week. (See related May 7 story: CU stabilization, insurance fund mods clear Senate.) CUNA, the NCUA, and other credit union industry representatives will testify at a May 20 House Financial Services subcommittee hearing on NCUA’s corporate credit union stabilization plan. (See related May 13 story: House panel to discuss corporate stabilization.)

Inside Washington (05/13/2009)

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* WASHINGTON (5/14/09)--Bill Seidman, former Federal Deposit Insurance Corp. (FDIC) Chairman, died Wednesday at the age of 88. Seidman, who served as chair of the FDIC from 1985 to 1991, noted publicly in 2002 that credit unions have one of the most powerful political organizations (News Now Sept. 27, 2002) ... * WASHINGTON (5/14/09)--National Credit Union Association (NCUA) Vice Chairman Rodney Hood met with the Credit Union Association of New Mexico last week during a town hall meeting to talk about the Corporate Credit Union Stabilization Program. Hood said some suggested that the corporates be allowed to fail, but “failures aren’t an option in my book. There would have been chaos if we allowed that failure,” he said. Hood also said NCUA is improving transparency about the plans after criticism that natural person credit unions were kept in the dark about the corporate situation. NCUA also is hiring a new group to oversee the corporates, including adding a director of corporate credit unions, director of capital markets and director of risk management. From left are Scott Connely, CEO of Sandia Area FCU, Albuquerque, and Hood. (Photo provided by the Credit Union Association of New Mexico) ... * WASHINGTON (5/14/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair and Comptroller of the Currency John Dugan have opposite views on regulatory restructuring. Bair has asked Congress to give the FDIC enhanced resolution powers and create a council made up of regulators to assess systemic risk. Dugan, who sits on the FDIC board, has argued that the FDIC is not qualified to resolve systemically significant institutions and said the Federal Reserve Board should supervise the largest institutions (American Banker May 13). The FDIC can handle institutions that have slowed down, but in cases when the government decides to keep up a failed institution, the FDIC should only help if the institution in need is a banking institution, Dugan said. Bair said the FDIC could resolve any company without compromising its mission, and should be able to do so because it is the only agency with relevant experience helping troubled firms ... * WASHINGTON (5/14/09)--Senate Banking Committee Chair Christopher Dodd (D-Conn.) indicated Tuesday that he may not have enough time to work on mortgage lending reform this year (American Banker May 13). The issue is likely to be controversial and will need a lot of time, the senator said. Dodd also noted that his committee will have to tackle regulatory reform and expedite a bill that would allow the government to take control of failing systemic firms. Dodd also noted that the kind of “loose” mortgage lending that triggered the financial crisis has ceased and other issues he’s dealing with are more current ... * WASHINGTON (5/14/09)--The Federal Deposit Insurance Corp. (FDIC) announced it will open a temporary satellite office this fall in Jacksonville, Fla., to manage receiverships and to liquidate assets from failed financial institutions in eastern states. The office will provide facilities for up to 500 nonpermanent staff and contractors. Staffing will be based on workload needs. The FDIC expects to gradually begin moving in the space in mid-September ... * WASHINGTON (5/14/09)--The federal government has paid out less than 6% of the $787 billion economic stimulus package approved by President Barack Obama in February (The New York Times May 13). The administration said the program is moving along as scheduled, although it has not spent much money. The stimulus bill put $45.6 billion into the economy for Medicaid and unemployment so far. The Obama administration has committed 70% of the money to be spent in the first two years, but some states have complained the money hasn’t reached them yet. Economists also have questioned if the package really will create or save 150,000 jobs, as Obama said the package intended to do. However, the government spent more than $10 billion in stimulus funds last week, and the speed could build as the program grows, according to officials. Vice President Joe Biden said in an interview that the “velocity” would increase not just “arithmetically, but geometrically” ... * WASHINGTON (5/14/09)--The Small Business Administration’s (SBA) loan programs are re-energizing after temporary changes to lending programs were placed in President Barack Obama’s stimulus package, according to SBA Administrator Karen Mills. The package was signed into law Feb. 17. About 361 lenders have made new loans for the first time since last September, and of those, 166 had not made a loan since December 2007. Mills said SBA will work with the Treasury to create a program to use $15 billion from the Troubled Asset Relief Program to fund direct government purchases of SBA loan-backed securities from broker-dealers (American Banker May 14). The Credit Union National Association (CUNA) has been in touch with the SBA to urge the agency to remove structural roadblocks to programs like its 7 (a) guaranteed lending program to enable more credit unions to participate. Credit unions have about 7,096 SBA loans with a balance of $519,308,696. The average loan size is $73,183, according to CUNA research ...

CUNA supports UIGEA delay

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WASHINGTON (5/14/09)—The Credit Union National Association (CUNA) expressed its support for recently introduced legislation that would delay implementation of rules aimed at policing illegal gambling, and called upon Congress to enact the legislation as soon as possible. In a May 12 letter written to Rep. Barney Frank (D-Mass.), CUNA said that the regulations proposed by the Unlawful Internet Gambling Enforcement Act (UIGEA) represent “unreasonable policing requirements” that would be “difficult, if not impossible, for financial institutions to meet” and would “divert credit unions from their intended purpose of providing financial services to their members.” H.R. 2266, introduced by Rep. Barney Frank (D-Mass.) on May 6, would prevent the Secretary of the Treasury and the Federal Reserve from taking any action on UIGEA until December 2010. UIGEA would force financial institutions to identify and block various online gambling transactions. Financial institutions could create their own anti-gambling policies or rely on the policies and procedures created by the payments system. Rules implementing UIGEA are currently set to go into effect on Dec. 1, 2009. In related news, Frank, who is chairman of the House Financial Services Committee, on May 6 also introduced legislation that would legalize internet gambling by allowing licensed and federally regulated online gambling operators to accept wagers and bets from U.S. citizens. (See related May 7 story: New Internet gambling bills unveiled.)