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30000 Ohio CU members urge interchange action

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WASHINGTON (5/4/11)--Nearly 30,000 Ohio credit union members this week stepped up their efforts to urge a delay of a government-set debit card interchange fee cap. They signed a petition asking Sen. Sherrod Brown (D-Ohio) to stop, study and start over on interchange regulations. The Ohio Credit Union League said that the petition was signed by members of more than 50 credit unions throughout the state. An additional 7,000 pro-interchange delay emails, letters and phone calls have made their way to Ohio legislators, and credit union representatives met with several of those same legislators during the just-completed two week district work period. Darrick Weeks, chief operations officer of Fairborn, Ohio-based Wright-Patt CU said in a league release that the response that Ohio credit unions are seeing from their members “proves their desire to see Congress stop, study, and start over." Members, leagues, and credit unions nationwide have made similar efforts over the last two weeks, and Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill said that credit union supporters must not “ease up" if they want to ensure that the momentum that interchange implementation delay legislation has gained in recent weeks will continue to build. 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. CUNA earlier this week also noted in a comment letter to the Fed that that agency has the authority to delay portions of the interchange proposal that would address exclusivity arrangements and routing restrictions. CUNA suggested that these provisions could be delayed by up to 24 months. (See related May 3 story: Fed can delay some interchange provisions: CUNA.)

CUNA NCUA credit-rating changes could harm CUs

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WASHINGTON (5/4/11)--The Credit Union National Association (CUNA) has said it is concerned with the potential unintended effects of the National Credit Union Administration’s (NCUA) proposal to completely prohibit credit unions from relying on credit ratings to assess credit risk. CUNA in a recent comment letter said that the Dodd-Frank Act “does not require that regulators preclude the institutions they oversee from relying on credit ratings.” Credit ratings “can be useful to credit unions as part of a comprehensive approach to assessing credit risk,” the letter adds. CUNA has urged the NCUA to consider permitting credit unions to rely on credit ratings “as long as the credit union also conducts further reasonable and appropriate due diligence.” The Dodd-Frank Act requires federal financial regulators to replace references to or requirements in their regulations regarding credit ratings with new standards of creditworthiness as established by each agency. The NCUA’s suggested method for replacing these ratings may create issues for credit unions, CUNA noted. The NCUA has proposed replacing the current requirement that a security be assigned a specific grade (such as AA, A, or BB) to be a permissible investment, with the requirement that the security satisfy a narrative standard on credit quality. The narrative must generally include an internal analysis of the issuer of a given security, with a statement showing that the credit union considers the security provider to be capable of meeting its financial commitments. CUNA said that the subjective nature of the NCUA’s proposed narrative standard “may cause confusion as to whether the standard has been met.” CUNA also suggested that the NCUA provide additional supervisory guidance on the indicators that support a determination that an issuer has the capacity needed to meet its financial commitments before the rule goes final. Further, CUNA’s letter stated that CUNA does not believe “credit unions or their advocacy organizations can fully assess the implications of these provisions and provide meaningful comments beyond superficial reactions without being able to review the guidance on these issues that NCUA has indicated it will develop.” The guidance should also be open to comment from the public. For the full CUNA comment letter, use the resource link. The National Association of State Credit Union Supervisors (NASCUS) has also commented on the NCUA proposal, encouraging the agency to clarify the proposal’s treatment of municipal securities. NASCUS in a release noted that the proposed municipal security concentration limits “raises several concerns” for federally insure state credit unions “and the application of non-conforming investment reserve requirements. “If NCUA chooses to expand the municipal security concentration limits to state-chartered credit unions for reserving, NCUA should consider the potential utility of such holdings to state-chartered credit unions, including the tax status and low level of risk,” NASCUS Said.

Inside Washington (05/03/2011)

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* WASHINGTON (5/4/11)--Banks are more willing to make consumer installment loans than at any other time since 1994, according to the Federal Reserve’s senior loan officer survey, released Monday. About 20% of banks reported having eased standards for approving credit card applications, with most of the easing concentrated at large banks. Standards for loans to purchase new and used autos were eased by about 15% of banks. Roughly 25% of banks reported that demand for auto loans had strengthened. Standards on prime closed-end residential real estate loans and home equity lines of credit were unchanged during the first quarter. The April survey showed that 15% of banks reported having eased standards on commercial and industrial loans to large and middle-market firms and to small firms in the first quarter, as did 20% of foreign banks. The summary is based on responses from 55 domestic banks and 22 U.S. branches and agencies of foreign banks. Increasing the member business lending cap for credit unions from to 27.5% of assets from 12.25% remains a top priority for the Credit Union National Association (CUNA). CUNA economists have estimated that increasing the cap would add $13 billion in small business loans in the first year alone and create over 140,000 new jobs, at no cost to taxpayers … * ALEXANDRIA, Va. (5/4/11)--National Credit Union Administration (NCUA) Board Member Gigi Hyland participated in a podcast on April 15 regarding current issues facing the credit union system. The podcast was hosted by Tom Field, editorial director, Information Security Media Group Corp., and covered the state of the nation’s credit unions today; which current information security threats pose the biggest challenges; how Dodd-Frank and other regulatory reforms impact security and risk management; and how pending Federal Financial Institutions Examinations Council guidance on authentication and online banking will help institutions improve security and fight fraud. In response to a question about which types of fraud are impacting credit unions the most, Hyland remarked, “In the area of electronic fraud, plastic card fraud and member identity theft are by far the largest threat and concern for credit unions. We have tracked some limited breaches, but the control of non-public information and protection of the member’s private information is the greatest challenge, and what seems to be the area of greatest exposure for credit unions” …