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Lieberman thanks CUNA for support

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WASHINGTON (5/23/08)--Sen. Joseph Lieberman (I-Conn.) Thursday sent a letter of gratitude to Credit Union National Association (CUNA) President/CEO Dan Mica regarding the support CUNA members have expressed to Lieberman since he introduced the Credit Union Regulatory Improvements Act (CURIA) in the Senate. The senator introduced the bill May 1. Lieberman noted that he looks forward to working with CUNA members to get CURIA passed. Credit unions are a critical component of the U.S. financial landscape, he said. “Throughout the credit crisis plaguing our financial sector over the last ten months, credit unions have been among the few lenders in the financial industry demonstrating the resiliency and strength to continue lending to both consumers and local small businesses,” Lieberman wrote. “There is no doubt that with the depth and breadth of support from the membership of CUNA and their accountholders, we have a real opportunity to approve legislation that will positively affect the micro-level economic conditions in communities across America,” he added. CURIA proposes, in part, to:
* Modernize credit union capital standards to permit more efficient capital management while allowing more earnings to be returned to members in lower costs and expanded services; * Expand the ability of credit unions to make loans to finance their members’ local small businesses; and * Permit more credit unions to offer needed services in lower-income communities that are not adequately served by other depository institutions.
Senate rules prevent Lieberman from responding to mail, emails and phone calls he has received from outside of Connecticut. To read the full letter, use the link.

Inside Washington (05/22/2008)

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* WASHINGTON (5/23/08)--The Education Department Wednesday announced a plan that would use Treasury funds to purchase private student loans. The plan, which aims to increase liquidity in the market, would encourage lenders to participate in the Federal Family Education Loan Program (FFELP) and would allow them to make FFELP loans until Sept. 30, 2009 (American Banker May 22). The department plans to purchase the loans at par value, a 1% origination fee, accrued interest and a fixed amount of $75 per day for administrative costs ... * WASHINGTON (5/23/08)--The Federal Deposit Insurance Corp. is expected to release its banking profile for the first quarter on May 29 (American Banker May 22). In February, the agency reported banks earned $5.8 billion for the fourth quarter, which was the lowest number in 16 years. It also placed 76 financial institutions on its “problem list” ... * WASHINGTON (5/23/08)--Regulators are expected to take a closer look at financial institutions that rely mostly on brokered deposits (American Banker May 22). Four of five recent bank failures were attributed to the deposits, and Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said last week that institutions relying on the deposits will be scrutinized more closely. Though brokered deposits aren’t necessarily risky themselves, they can signal future problems if an institution is experiencing growth too quickly, according to some regulators ... * WASHINGTON (5/23/08)--Federal Reserve Gov. Kevin Warsh said Wednesday that he is open to talking about reform for financial regulation, but noted that the process to reform federal regulatory agencies will take awhile (American Banker May 22). Warsh acknowledged the efforts of some for prioritizing reform at the top, and said discussions likely will take place with congressional members. In March, Treasury Secretary Henry Paulson released a blueprint that would overhaul regulation for financial institutions. Credit Union National Association President/CEO Dan Mica sent Paulson a letter stating that CUNA was concerned the reform would eliminate credit unions as they function today ... * WASHINGTON (5/23/08)--The Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration yesterday issued a joint statement with final illustrations for helping consumers understand certain hybrid adjustable-rate mortgage (ARM) products. The illustrations are intended to help financial institutions provide clear, balanced and timely information to consumers about the benefits and risks of ARM products. The illustrations, which financial institutions are not required to use, will be available in English and Spanish ...

NCUA votes 2-1 for data collection plan

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ALEXANDRIA, Va. (5/23/08)—The National Credit Union Administration (NCUA) Board yesterday adopted a plan by a vote of 2-1 to adopt a recommendation regarding the collection of membership data in part to assess federal credit union membership profiles. The Board did not discuss the senior executive compensation issues. Rodney Hood, NCUA vice chairman, reflected concerns the Credit Union National Association (CUNA) has raised about the data collection. Hood thanked the task force for their work, but noted that he couldn’t support the initiative because it “teetered on the brink” of and shared similarities with the Community Reinvestment Act. “Credit unions do not divert resources outside of members,” he said. He also noted concerns about the timing of the initiative, given a sluggish economy. The NCUA plan is based on the recommendations of the Outreach Task Force (OTF), chaired by Board Member Gigi Hyland. The OTF recommended that NCUA:
* Collect federal credit union membership profile data through the AIRES download; * Collect data on financial services offered at federal credit unions through the 5300 report; * Publish aggregate data on membership profiles and financial services; and * Develop a mechanism for each federal credit union to obtain its proprietary membership profile data.
Beginning in January 2009, NCUA will begin analyzing federal credit union membership profiles using AIRES download, after a credit union's examination has been completed. The agency said it would take up to 24 months to complete this process for all federal credit unions. The agency will also modify the 5300 report to add a schedule of services that federal credit unions will complete. Comment will be solicited from federal credit unions on the 5300 changes. CUNA President/CEO Dan Mica questioned the need for the data collection program, saying, “CUNA is unconvinced that a data collection process is necessary.” However, he acknowledged the number of clarifications approved by NCUA Chairman JoAnn Johnson and Hyland in voting for the program. “It is clear that they were listening to us and acted on several of our concerns (such as assuring credit unions that examiners will not be able to use the data to create 'report cards' on individual credit unions, and delaying the start of the program until the beginning of next year,” Mica said in a statement. NCUA also clarified that the information will only be published in the aggregate. The Board indicated that the data could be used by NCUA as a trigger to obtain further information from an individual credit union if there are questions about qualifications or a low-income designation or an application for an underserved area. During the Member Service Assessment Pilot Program in 2006, NCUA identified 39 credit unions that could have had a low-income designation but which had never applied. “Many credit unions have expressed to us their own concerns about data collection, and it is our intention to recognize and honor their apprehensions,” Mica said. CUNA’s Examination and Supervision Subcommittee, along with CUNA staff, will take a key role in monitoring the development of the program, Mica added. The NCUA published a Q&A on the data collection plan, based on Hyland’s exchange with NCUA staff during the board meeting. To see her comments, use the link.

NCUA considering expanding clarifying permissible services

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ALEXANDRIA, Va. (5/23/08)—The National Credit Union Administration Thursday proposed amendments to its incidental powers regulation (Section 721) to clarify and update definitions of permissible activities in correspondent and operational programs, and finder activities. One of the amendments would acknowledge that federal credit unions may provide correspondent services to foreign and federal or state-chartered credit unions. Another amendment would clarify that finder activities include a federal credit union's negotiation of group discounts, and the performance of administrative functions for outside vendors. The NCUA set a 60-day comment period for the new rule. “These amendments will provide useful information to federal credit unions by clarifying and updating the illustrations regarding permissible activities,” the agency said. The proposed amendment also would add language stating that vendors may provide non-financial products or financial products, including insurance. The same proposal would add payroll services to the operational programs category. NCUA has already recognized in a 2006 legal opinion that payroll services are related to other permissible activities, such as electronic financial services and payroll deductions.

Patelco CU to absorb Cal State 9

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ALEXANDRIA, Va. (5/23/08)--The National Credit Union Administration (NCUA) yesterday selected Patelco CU, San Francisco, to purchase the assets and assume the shares of Cal State 9 CU, Concord, Calif. Patelco CU will serve Cal State 9 members after the absorption. NCUA has overseen Cal State 9’s operations since November 2007, when the State of California Department of Financial Institutions appointed NCUA as its conservator. According to Andy Hunter, CEO at Patelco, there are no plans to close any of the five Cal State 9 branch offices. He said the purchase and assumption is expected to be completed by June 30. In the meantime, Patelco will have oversight of Cal State 9 under a management agreement. Patelco noted that Cal State 9 reported $54.5 million in loan and lease losses in its September 2007 quarterly report on file with the state. In the previous quarter, it reported $17 million in losses, Patelco said in a press release. Patelco CU is a state-chartered credit union with $4.1 billion in assets. Cal State 9, originally chartered to serve University of California employees, has assets of $339 million and serves 29,000 members.

NCUA looking at new rules on underserved areas

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ALEXANDRIA, Va. (5/23/08)---The National Credit Union Administration (NCUA) issued a 60-day comment period regarding proposed changes to the existing process of approving multiple group credit unions’ service to underserved areas under the Chartering and Field of Membership Manual for Federal Credit Unions. While the proposal is pending, NCUA has indicated that the 18 current applications for underserved areas would remain in the pipeline. The proposal:
* Requests comments on whether a supporting letter should be necessary when a multiple group credit union seeks to add an underserved area; * Would change the criteria for “economic distress” for determining if the community is an investment area so that it would be more compatible with the criteria used by the Community Development Financial Institutions Fund; * Would also require a one-page narrative statement that describes significant unmet needs for loans or other financial services in the proposed area; and * Would not apply to applications that already have been approved.
CUNA's Federal Credit Union Subcommittee will be reviewing the proposal and developing CUNA's comments.

NCUA briefed on deceptive card practices proposal

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ALEXANDRIA, Va. (5/23/08)--The National Credit Union Administration (NCUA) Board was briefed Thursday on a recently approved proposal that would restrict certain practices for credit cards and overdraft protection plans by designating them as “unfair and deceptive practices.” No action was taken at the meeting on the proposal since it already has been approved. The NCUA will receive comments on it until Aug. 4. NCUA, the Federal Reserve Board, and the Office of Thrift Supervision proposed the rules to crack down on deceptive credit card practices. The proposed rules address credit card billing, payment and overdraft policies. They also address unfair practices such as providing insufficient time to make payments. Other credit card practices targeted in the rules include failing to provide reasonable allocation of payments among balances with different interest rates and retroactively applying interest rate increases to pre-existing balances. The recommendation also would require a federal credit union to provide an opportunity for a consumer to opt out of an overdraft protection program, and would prohibit a federal credit union from charging a fee for an overdraft caused by a hold placed on consumer funds in connection with the use of a debit card.