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Comment sought on draft Form 990 instructions

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WASHINGTON (5/12/08)—The Credit Union National Association (CUNA) has identified concerns with the Internal Revenue Service (IRS) draft instructions for a newly redesigned Form 990 and is asking credit unions to comment. The new IRS form, Return of Organization Exempt from Income Tax, is effective for the 2008 tax year, for returns filed in 2009. State chartered credit unions are required to file Form 990 with the IRS annually, although a few states still permit group 990 filings. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes. These new draft instructions are more comprehensive than earlier ones and have been modified to reflect the new format of Form 990. CUNA’s concerns include the following issues:
* The thresholds for reporting employee compensation is too low; * The definition of “key employee” is too broad and may unintentionally include non-crucial employees without sufficient authority; * For group returns, the special instructions regarding the compensation section should include an option to aggregate information from all organizations included in the return; and * Also for group returns, parent organizations should be permitted to change the option regarding the method of filing without having to receive IRS consent. Alternatively, providing a notice of change to the IRS should be sufficient.
CUNA is seeking comments by May 23. Comments are due to the IRS by June 1. Use the resource link below to access CUNA’s complete comment call.

Joint plan would require risk-based notices

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WASHINGTON (5/12/08)--The Federal Reserve Board and the Federal Trade Commission last week asked for comment on a joint plan to require disclosures when a consumer is receiving credit on less favorable terms than other consumers with better borrowing histories. The proposal would implement section 311 of the Fair and Accurate Credit Transactions (FACT) Act of 2003, which amended the Fair Credit Reporting Act. If adopted, the plan would continue to allow creditors to offer risk-based pricing of loans, offering less favorable terms to borrowers with such things as low credit scores. However, under the rule a risk-based pricing notice would generally be provided to the consumer after the terms of credit have been set, but before the consumer becomes contractually obligated on the credit transaction. The proposal provides a number of different approaches that creditors may use to identify the consumers to whom they must provide risk-based pricing notices. In addition, it includes certain exceptions to the notice requirement. The most significant of the exceptions permits creditors to provide all of their consumers with their credit scores and explanatory information rather than providing a risk-based pricing notice to those consumers who receive less favorable terms. There will be a 90-day period for public comment once the proposal is published in the Federal Register, likely to happen within the next few weeks. The joint proposal is one of the more controversial rules that has been issued under the FACT Act. Jeffrey Bloch, senior assistant general counsel of the Credit Union National Association, has noted concern with these FACT Act provisions and will be looking closely at the proposal to see to what extent they have been addressed “We have been concerned about how to decide who gets the required notices stating that they are going to get credit terms that are less favorable that what is being offered to others. We have also been concerned about how members will react towards their credit union if they receive such a notice,” Bloch said Friday.

FDIC increases reserves for bank failures

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WASHINGTON (5/12/08)--The Federal Deposit Insurance Corp. (FDIC) increased its reserves for anticipated bank failures by 370%, according to a letter to stakeholders released Wednesday. During the first quarter of 2008, the FDIC raised its reserves from $124 million to $583 million. The increase is “due to the continued deterioration in the banking industry’s financial conditions,” wrote FDIC Chairman Sheila Bair. The FDIC also increased its provision for insurance losses by 819%. The provision was $525 million in the first quarter of 2008, compared with -$73 million at the same time in 2007. The FDIC plans to increase staffing in the Division of Resolutions and Receiverships by up to 60% to handle a likely increase in bank failures and prepare for expected retirements in the division’s workforce, Bair added. “We are focusing on maintaining the safety and soundness of the institutions we insure and are prepared to move promptly to handle any bank failures that may occur,” Bair said. For more information, use the link.

Inside Washington (05/09/2008)

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* WASHINGTON (5/12/08)--A recent two-day conference on financial education held by the Treasury Department and the Organization for Economic Cooperation and Development attracted speakers and attendees from more than 40 different countries. The conference was held at the Organization of American States building in Washington, D.C. Pictured are (from left): Juri Valdov, senior vice president of external affairs at Northwest FCU, Herndon, Va., chair of the Credit Union National Association’s (CUNA) Governmental Affairs Committee, and former CUNA chairman; and Pete Crear, president/CEO of the World Council of Credit Unions (WOCCU). Crear described WOCCU’s initiatives to address the lack of financial education in developing countries. “No credit should be given without its accompanying education,” he said. (Photo provided by the Credit Union National Association) * WASHINGTON (5/12/08)--Just a few months ago, presidential candidates Hillary Clinton (D-N.Y.), Barack Obama (D-Ill.) and John McCain (R-Ariz.) made major speeches on the problems in the struggling housing market. But the candidates’ attention to the housing market has shifted to other issues--such as gasoline cost and taxes (American Banker May 9). At a panel last week with the Securities Industry and Financial Markets Association that featured all three campaigns’ economic advisers, no audience members posed questions about the mortgage market. The focus was on tax issues. The candidates likely will focus on housing again, because the market’s downturn affects each region of the country, said Michael S. Barr, a University of Michigan Law professor who worked as a special assistant to former Treasury Secretary Robert Rubin. This week, the House approved a package of bills that would provide relief to some borrowers in foreclosure. The package must receive Senate approval, however it has been threatened by a White House veto ...