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Washington Archive

Washington

IRS form will report inflated compensation says CUNA

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WASHINGTON (6/2/08)--Proposed changes to instructions for filing an Internal Revenue Service (IRS) form that reports the pay of executives at state chartered credit unions will result in filers reporting “inflated figures” that do not reflect true compensation, the Credit Union National Association (CUNA) told the tax-collecting agency in a comment letter. CUNA was commenting on the IRS draft instructions and schedules to the redesigned Form 990, “Return of Organization Exempt from Income Tax,” which also includes reporting of the compensation of executive staff. Only state-chartered credit unions must file the forms; federal credit unions are exempt. In noting that the proposed instructions would result in inflated compensation figures for executives, CUNA suggested that nontaxable expense reimbursements and fringe benefits should not be included as “compensation.” Additionally, CUNA suggested setting compensation thresholds that are adjusted geographically to reflect differences in cost of living. CUNA also stated that the threshold for reporting compensation for employees other than executives is too low, and would inaccurately include employees without “sufficient authority or control in the workplace.” In other comments, CUNA suggested:
* “Central organizations” should be allowed to aggregate compensation information from subordinate groups; * The requirement to itemize specific data on group returns is unnecessary; * Providing a notice of change of the method of filing to the IRS on group returns should be sufficient, rather than seeking agency consent; * The definition of “key employee” is too broad, and could result in unintentionally including compensation information of such personnel as department heads, middle managers and others who lack responsibilities, power or influence of “key employees.”
Access the complete text of CUNA’s comment letter using the link below.

Inside Washington (05/30/2008)

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* WASHINGTON (6/2/08)--Investment banks need greater oversight, said Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair. In an interview last week, Bair suggested that Congress devise a system to close an investment bank in an orderly fashion should it become insolvent (American Banker May 30). The FDIC’s ability to create bridge banks to take over and sell assets of failed lenders is a “good model” to help investment banks, she said. If investment banks can access Federal Reserve loans, regulators should be able to watch over how the banks manage risk, she added ... * WASHINGTON (6/2/08)--A new study from the Urban Institute indicates that consumer confusion about the home buying process often leads to higher closing costs. The study found significant disparities in closing costs even when it compared borrowers with identical credit scores, loan terms and mortgage amounts. The study analyzed more than 7,500 mortgages originated in May and June 2001. The Department of Housing and Urban Development (HUD) is proposing to improve disclosures of the loan terms and closing costs consumers pay when they buy or refinance a home. HUD also is proposing that all lenders and brokers provide consumers with a standard good faith estimate ...

Reg Zs open-end credit rules under review

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WASHINGTON (6/2/08)--Credit unions can comment on the Federal Reserve Board proposed amendments to open-end credit rules under Regulation Z, which includes changes related to credit cards and merchant-specific credit plans. This proposal revises the comprehensive open-end proposal that was issued last year in order to complement and be consistent with the proposals issued recently by the National Credit Union Association, the Fed, and the Office of Thrift Supervision. The proposal addresses unfair and deceptive practices related to credit cards and overdraft protection plans. Use the resource link for more information and to access CUNA's Regulatory Comment Call.

Growth involvement highlighted in 2007 CUNA annual

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WASHINGTON (6/2/08)--The 2007 Credit Union National Association (CUNA) Annual Report and audited financial statements now are available online. A printed version of the report will accompany each copy of the June edition of Credit Union Magazine Paramount objectives for CUNA during 2007 were growth and member involvement--most notably as part of CUNA's expanded financial literacy programs, said CUNA Chairman Tom Dorety, who also is president/CEO of Suncoast Schools FCU, Tampa, Fla. He details some of last year's challenges and accomplishments in CUNA's 2007 Annual Report. "Economic anxieties bred new political pressures. We were ready. We beefed up our political action programs to help Congress assess proposed legislative responses to the emergency. We joined with credit union colleagues, within and outside of CUNA, to assure absolute unity in coping with the stresses,” said Dorety. "We continued last year to convince Members of Congress that the pending CURIA--Credit Union Regulatory Improvements Act--legislation will help us better serve their people back home," he continued, noting that congressional sponsors rose to 143 during the year, from the previous year's 125. Use the resource link below to access the report, financial statements, and year-in-review video.

Real estate loans hobble bank profits

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WASHINGTON (5/30/08)--Troubled real estate loans reduced commercial bank and thrift net income to $19.3 billion in the first quarter of 2008--down from the $35.6 billion the industry earned in the first quarter of 2007. The Federal Deposit Insurance Corp. (FDIC) yesterday cited higher provisions for loan losses as the primary reason for the drop in industry profits. The size of the earnings decline was attributed mainly to a few large institutions, but more than half of all insured institutions reported lower net income in the first quarter. The FDIC said bank and thrift noncurrent loans still are rising sharply. Loans 90 days or more past due increased by $26 billion (or 24%) to $136 billion during the first quarter. That followed a $27 billion increase in the fourth quarter of 2007. The FDIC said real estate loans comprised almost 90% of the increase in noncurrent loans during the first quarter, but noncurrent levels increased in all major loan categories. At the end of the first quarter, 1.7% of the industry's loans and leases were noncurrent. By comparison, credit unions have shown a special capability to make solid loans. While the National Credit Union Administration shows net charge-offs rose to 0.67% in first-quarter 2008 from 0.50% in fourth-quarter 2007, credit union charge-offs still are lower than banks'. Banks' net charge-offs reached a five-year high of 0.99% in first-quarter 2008, up from 0.83% in fourth-quarter 2007, reports the Federal Deposit Insurance Corp. FDIC Chairman Sheila C. Bair said the banks and thrifts being closely monitored “are those with high levels of exposure to subprime and nontraditional mortgages, with concentrations of construction loans in overbuilt markets, and institutions that get a large share of their revenues from market-related activities, such as from securities trading."

New House members poised for banking panel seats

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WASHINGTON (5/30/08)--After winning recent special elections, several new members of Congress may take seats on the House Financial Services Committee. According to Congressional Quarterly, the House Democratic Steering and Policy Committee recommended Financial Services assignments for these most recent election victors:
* Jackie Speier (D-Calif.) won the seat formerly held by Tom Lantos (D-Calif.), who died of cancer on Feb. 11; * Don Cazayoux (D-La.) won the seat formerly held by Republican Richard Baker, who resigned in February to join a hedge fund trade association; and * Travis W. Childers (D-Miss.) won the seat formerly held by Republican Roger Wicker, who was appointed to the Senate in December.
Earlier this year, U.S. Reps. Bill Foster (D-Ill.) and André Carson (D-Ind.) were appointed to the House Financial Services Committee. The changes could occur after Congress returns from the Memorial Day recess. That’s when the full Democratic Caucus will vote on the nominations, reports Congressional Quarterly

Inside Washington (05/29/2008)

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* WASHINGTON (5/30/08)--It’s important to foster relationships with government-insured depository institutions with the means to provide the underserved with the opportunity to save, borrow, invest and build solid credit files, National Credit Union Administration (NCUA) Vice Chairman Rodney Hood said at a general forum this week. The forum was organized by the Boston and Worcester Alliances for Economic Inclusion (AEI) at Brandeis University. Hood applauded Dan Egan, president of the Massachusetts Credit Union League, and Ann Clancy, league senior vice president and general counsel, for their attendance and participation with AEI. Hood discussed the danger of predatory lending and said credit unions are working to combat the problem. He also emphasized the NCUA’s Office of Small Credit Union Initiatives, which offers assistance through community development initiatives, grants and loans at 1% interest, student internships and volunteer income tax assistance. Hood recognized the partnerships credit unions are creating with Operation Hope, the Federal Home Loan Banks, the Department of Housing and Urban Development, the Department of Treasury’s Community Development Financial Institutions fund and the Internal Revenue Service ...

Comments welcome on overdraft protection regs

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WASHINGTON (5/29/08)--Credit unions can comment on a Federal Reserve Board proposal to amend Regulation DD, the Truth in Savings Act (TISA), to require additional disclosures about account terms and costs associated with overdraft protection plans. Although credit unions will not be subject to the Fed’s proposal, TISA requires the National Credit Union Administration (NCUA) to issue a substantially similar rule, according to Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn. She expects NCUA to issue its rule shortly after the Fed finalizes its proposal. The Fed’s proposal is intended to complement and be consistent with the proposal that has also been issued recently by NCUA, the Fed, and the Office of Thrift Supervision that addresses unfair and deceptive practices as they pertain to credit cards and overdraft protection plans. Use the resource link for more information.

Senate to consider NCUA Board nominee next week

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WASHINGTON (5/28/08)—The Senate Banking Committee on Tuesday will conduct a hearing on the nomination of Michael E. Fryzel, an Illinois real estate lawyer and former director of the state's Department of Financial Institutions, to become a member of the National Credit Union Administration (NCUA) board of directors, and ultimately to be its chairman. President George W. Bush in December sent Fryzel's name to the Senate for confirmation. If confirmed, Fryzel will replace JoAnn Johnson as chairman. Johnson's term expired in August of 2007. She has been on the NCUA board since 2002 and has served as chairman since 2004. Johnson has indicated she will likely remain as chairman until her successor makes it through the nominating process. Fryzel was with the Illinois Department of Financial Institutions from 1977 to 1989 and headed the agency from 1982 to 1989. Integral to that job, according to his resume, was the licensing and regulation of more than 700 state-chartered credit unions with assets exceeding $4.3 billion. Upon leaving that position, Fryzel founded his private law practice, the Law Offices of Michael Fryzel, which specializes in financial regulatory and real estate law. Listed among his profressional affiliation, Fryzel said he is a member of the Governor's Board of CU Advisors and has been since 1992. He received his bachelor's degree from Valparaiso University, his MBA from the University of Chicago, and his JD from Loyola University of Chicago School of Law.

Inside Washington (05/28/2008)

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* WASHINGTON (5/29/08)--The Office of Federal Housing Enterprise Oversight (OFHEO) should withdraw the appraisal standards Fannie Mae and Freddie Mac agreed to in March with New York Attorney General Andrew Cuomo, said Comptroller of the Currency John Dugan in a a letter. The code will undermine the reliability of appraisals, raise mortgage origination costs for lenders, disrupt mortgage appraisal processes, and conflict with federal efforts to restore credit availability and confidence in the housing market, Dugan wrote. The Office of the Comptroller of the Currency thinks that real estate appraisals should be conducted without influence--and this can be achieved with enforcement by federal and state regulators, he said ... * WASHINGTON (5/29/08)--The Federal Reserve Bank of New York announced Tuesday that it launched a pro bono pilot program, Lawyers’ Foreclosure Intervention Network (LFIN), to help distressed homeowners. The program will train lawyers to prevent unnecessary foreclosures in New York City. LFIN is co-sponsored by the City Bar Justice Center, the legal services arm of the New York City Bar. The effort is part of the Federal Reserve’s Homeownership and Mortgage Initiative, a comprehensive strategy across the Federal Reserve System to provide information and outreach to prevent unnecessary foreclosures and to stabilize communities ... * WASHINGTON (5/29/08)--Federal Reserve Gov. Frederic Mishkin will leave his position in August and return to Columbia University in New York (The Wall Street Journal May 28). Mishkin has been on leave from the university’s business school since he was appointed to his position at the Fed in 2006. After Mishkin leaves, there will be four governors out of a possible seven. The Fed has five governors now because of nominations that have been stalled in the Senate. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) also has not scheduled a vote to nominate Gov. Randall Kroszner to a new term. Senate Democrats attempted to negotiate with the Bush administration to temporarily fill the empty spots until a new president is elected. Mishkin’s term expires in 2014 ...

CU-backed candidate wins Idaho Senate primary

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WASHINGTON (5/29/08)--With backing from credit unions, Idaho Lt. Gov. Jim Risch won Tuesday’s Republican primary in his bid to fill the retiring Larry Craig’s (R-Idaho) U.S. Senate seat. Risch will face Democrat Larry LaRocco--a former American Bankers Association lobbyist--in the fall general election. In a field of eight GOP candidates, Risch garnered more than 65% of the votes. The Credit Union Legislative Action Council and the Idaho Credit Union League participated in Risch’s campaign.

June 1 is deadline for comments on IRS Form 990

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WASHINGTON (5/28/08)—-Monday is the deadline for credit unions to voice concerns about the Internal Revenue Service (IRS) draft instructions for a newly redesigned Form 990. 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. The Credit Union National Association (CUNA) has identified some concerns with the draft instructions. Among them:
* 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.
Comments are due to the IRS by June 1. Use the resource link below to access CUNA's complete comment call.

Inside Washington (05/27/2008)

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* WASHINGTON (5/28/08)—-Under Secretary for Domestic Finance Robert K. Steel will deliver remarks at the Treasury Department today during the President's Council on Financial Literacy subcommittee meeting on the Future of Responsible Subprime Lending. The meeting's opening session will feature remarks from Steel, Comptroller John Dugan from the Office of the Comptroller of the Currency, and Commissioner Paul Atkins of the Securities and Exchange Commission…

Inside Washington (05/23/2008)

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* WASHINGTON (5/27/08)--At a House Financial Services Committee hearing Thursday, lawmakers questioned why the temporary increase in Fannie Mae and Freddie Mac’s conforming loan limits haven’t done much to help the mortgage market. Committee Chairman Rep. Barney Frank (D-Mass.) noted his disappointment in the minimal impact (American Banker May 23). The increase in the limits to $729,750 was made three months ago and will expire at the end of this year. Vince Malta, chairman of the National Association of Realtors public policy coordinating committee, said there hasn’t been enough time to see an impact ... * WASHINGTON (5/27/08)--Comptroller of the Currency (OCC) John Dugan said Thursday that home equity loans should be tightened. He encouraged lenders to improve the measures they use to verify income and analyze collateral (American Banker May 27). Loose underwriting and dropping home values triggered big losses--$2.7 billion in the first quarter of 2008 compared with the first quarter of 2007, he said. Lenders also should avoid interest-only loans, because they shift larger levels of debt to borrowers and hamper their ability to make payments, he added ... * WASHINGTON (5/27/08)--Steven Preston, the Bush administration’s pick for head of the Department of Housing and Urban Development, was briefed on the difficulty of the housing job at his confirmation hearing last week before the Senate Banking Committee. Preston would be expected to implement a mortgage rescue program. Senators at the hearing also pushed Preston to approve a bill that would let the Federal Housing Administration back mortgages for more than the homes' value. Sen. Christopher Dodd (D-Conn.) and Sen. Richard Shelby (D-Ala.) both said Preston would need to implement the plan, though the Bush administration has not yet approved it ... * WASHINGTON (5/27/08)--National Credit Union Administration Vice Chairman Rodney Hood spoke to 55 Connecticut credit union leaders at a luncheon May 14 in Berlin, Conn. He reviewed mortgage relief, risk-based capital and member business-lending legislation. He also talked about his new initiative, “Blueprint for 2020: A Plan to Strengthen the Future of Credit Unions,” which addresses succession planning and the challenges credit unions face in recruiting candidates from Generations X and Y. In development is an internship program that would involve colleges and universities working with credit unions. Pictured are (from left): Anthony L. Emerson, Credit Union League of Connecticut president/CEO; Kelly R. Fuhlbrigge, league vice president, government relations; and Hood. (Photo provided by the Connecticut Credit Union League) ... * WASHINGTON (5/27/08)--Members United Corporate FCU, Warrenville, Ill., sponsored its first annual cooperative “Hike the Hill” in Washington, D.C. May 13-14. Over 30 visits were made with legislators and their staff to better acquaint lawmakers about Members United, the credit union network and its functionality, and current legislation of special interest to all credit unions. Members United representatives were joined by leaders from the New York State Credit Union League, New Jersey Credit Union League, Credit Union Association of Rhode Island, Indiana Credit Union League, Mid-America Credit Union Association, Illinois Credit Union League, Association of Corporate Credit Unions and the Credit Union National Association. “This was a great opportunity to walk the halls of our lawmakers with our league and association partners as it clearly demonstrated the cooperative spirit of credit unions,” said Joseph P. Herbst, CEO, Members United, who noted "we were pleased with the very positive reception we received from the legislators and their staff as we discussed the foundations of the Credit Union Network and the vital role it plays with regard to serving American consumers.” Pictured are: (from left) John Fenton, president/CEO, Affinity FCU; Herbst; Rep. Albio Sires (D-N.J.); Paul Gentile, president/CEO, New Jersey league; and Brad Miller, executive director, Association of Corporate Credit Unions. (Photo provided by Members United Corporate FCU) ...

CU compliance audio conference Thursday

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WASHINGTON (5/27/08)--The Credit Union National Association's (CUNA) regulatory affairs staff will provide information on several key compliance topics during an audio conference Thursday at 2 p.m. EDT. Kathy Thompson, senior vice president for compliance and associate general counsel; Valerie Moss, director of compliance information; Nichole Seabron, federal compliance counsel; and Michael McLain, assistant general counsel and senior compliance counsel, will be a part of the discussion panel. The agenda for the conference is divided into two parts. Part I includes: * Approaching mandatory compliance dates: Fair and Accurate Credit Transactions Act (FACTA) identity theft red flag and affiliate marketing regulations; * National Credit Union Administration examiners’ focus on due diligence with third party vendors; * Points of interest from CUNA’s Bank Secrecy Act conference, which wrapped up last week; and * How to safely use Social Security deposits for overdrafts and overdraft fees. Part II includes:
* New FACTA proposal on risk-based pricing; * Update on the status of the proposed Internet gambling regulation; * The Financial Crimes Enforcement Network’s proposal to amend Currency Transaction Reporting exemption regulations; * Proposed interagency Unfair or Deceptive Credit Card Practice Rule; * The Department of Housing and Urban Development’s proposed amendments to the Real Estate Settlement Procedures Act; and * Other legislative and regulatory developments of interest, such as mortgage reform, flood insurance, regulatory relief, and others.
For more information, use the link.

NCUA Share growth surges in first quarter

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ALEXANDRIA, Va. (5/27/08)--Federally insured credit unions reported significant share growth in the first three months of 2008, the National Credit Union Administration (NCUA) said Thursday. The data were taken from NCUA’s Call Report, which is based on data submitted by the nation’s 8,049 federally insured credit unions. Total shares increased 5.6%, for an annualized 22.4% in the first quarter. Every category of savings, except non-member deposits, grew by annualized double digits. Loan growth was 1.1%, or an annualized 4.5%. “The influx of shares in the first quarter illustrates that credit unions are providing their members with competitive savings products,” said NCUA Chairman JoAnn Johnson in a statement. “Federally insured credit unions reported a 4.8% increase in first-mortgage real estate loans in the first three months of 2008.” Net charge-offs increased to 0.67% from 0.50%, resulting in the loan delinquency ratio declining from 0.93% to 0.91%. The data indicate adverse real estate delinquency trends, Johnson said. But the trends are not indicative of systemic problems in the overall safety, soundness and stability of the credit union industry, she added. “(The trends) underscore the importance of proactivity, diligence and care in credit union underwriting and management of real estate loan portfolios,” Johnson said. Other findings from the report:
* Assets increased 5.1% to $792.2 billion from $753.4 billion; * Loans rose 1.1% to $532.8 billion from $526.9 billion; * Investments were up 8.5% to $154.6% from $142.5 billion; * Shares increased 5.6% to $667.7 billion from $632.4 billion; * Net worth went up 1.8 % to $87.7 billion from $86.2 billion; and * Membership rose 0.8% to 87.5 million members
In large lending categories:
* Total real estate loans increased 3.1% to $279.6 billion; * Used-auto loans increased 0.7% to $89.7 billion; * New-auto loans declined 3.2% to $84.1 billion; and * Unsecured credit card loans declined 1.2% to $29.7 billion.
With the exception of first-mortgage real estate loans, lending was curtailed during the quarter, and the influx of shares resulted in several investment categories expanding significantly, NCUA noted in its statement. Available-for-sale securities increased 16.9 % to $67.9 billion, and deposits in commercial banks, savings and loans, and savings banks grew 27.7% to $21.0 billion. Regarding share growth:
* Money market shares grew 7.9% to $119.9 billion; * Share drafts grew 6.9% to $75.8 billion; * Regular shares grew 5.1% to $177.6 billion; * Share certificates grew 4.6% to $226.1 billion; and * Individual retirement accounts and Keogh accounts were up 4.2% to $59.3 billion for the quarter.
The return on average assets ratio declined to 0.60% from 0.64% at year-end 2007 because of an increase in the provision for loan and lease losses expense from 0.44% to 0.55% as credit unions account for potential loan losses, the NCUA said. Details of first-quarter 2008 data are available in a consolidated balance sheet and a March 2008 Facts/Summary posted online. For more information, use the link.

Johnson Safe money management link available

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ALEXANDRIA, Va. (5/27/08)--National Credit Union Administration (NCUA) Chairman JoAnn Johnson announced that a National Hurricane Center link will be available on the MyMoney.gov website in light of National Hurricane Preparedness Week. The link is available on the “What’s New” section of the main page of the MyMoney.gov website. It provides consumers with information about safe money management in the event of a natural disaster and emergency. “This educational resource not only contains useful and important financial information, it could also save lives,” Johnson said in a statement. She encouraged credit unions to continue playing an active role in helping Americans with the information they need to protect their families and finances in the event of a natural disaster. National Hurricane Preparedness Week will continue through Saturday.

BSA conference provides 100 with regulatory overview

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WASHINGTON (5/27/08)--Roughly 100 credit union professionals received a regulatory overview on the Bank Secrecy Act (BSA) at a recent conference held by the Credit Union National Association (CUNA) and the National Association of State Credit Union Supervisors (NASCUS) in Washington, D.C. last week. The conference was held May 18-22. It featured a number of experts in the field, including representatives from the Financial Crimes Enforcement Network, Office of Foreign Assets Control (OFAC) and the National Credit Union Administration (NCUA). Matt Biliouris, NCUA program officer, gave participants a heads-up on some of the most common BSA violations credit unions still make, including lack of training or failing to document the training, lack of internal controls (such as not having a back-up BSA officer), and failing to conduct independent testing every 12-18 months. "Participants also learned the answers to some of the most frequently asked BSA and OFAC compliance questions, the importance of member due diligence, how to mitigate the risks associated with offering various payment alternatives, handling operating cash transfers and currency transaction reports, and much more," said Valerie Moss, CUNA director of compliance information. Moss, along with Nichole Seabron, CUNA federal compliance counsel, provided a three-hour overview of BSA issues for attendees taking CUNA’s BSA specialist certification exam. Other speakers included:
* Mark Ennis, compliance project officer, Financial Crimes Enforcement Network; * Lorraine Lawlor, OFAC; * Laura Pizzarelli, Credit Union Service Corporation (CUSC); * Frank Drake, Smith Debnam Narron Wyche Saintsing & Myers LL; * Mary Lou Heighes, Compliance Plus, Inc.; * David Abshier, Secura Group; * Carol Van Cleef, Bryan Cave LLP; * Tim McLeod, senior vice president, Singing River FCU, Moss Point, Miss.; and * Andrew King and Jamie King, Verafin.
CUNA’s next BSA conference is scheduled for Oct. 19-22 in Atlanta.

Second UBIT lawsuit makes strong case says CUNA

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WASHINGTON (5/27/08)--The second lawsuit to be filed over policies imposed by federal tax collectors on payment of unrelated business income tax (UBIT) makes a strong case, said a representative of the UBIT Steering Committee last week. Bellco CU, Greenwood Village, Colo., filed what is now the second lawsuit this year over the UBIT policies. It filed a complaint against the Internal Revenue Service (IRS) May 21. The credit union is seeking a refund of $199,000, based on UBIT taxes paid for 2000, 2001 and 2003. "Bellco CU has made a strong case in its complaint, taking a critical stop toward compelling the tax agency to adopt a more reasonable position,” said Eric Richard, Credit Union National Association (CUNA) general counsel and executive vice president, speaking on behalf of the UBIT Steering Committee. “Bellco deserves the gratitude of the credit union system for taking on this important policy issue, essentially seeking to right a wrong that IRS has committed by forcing cooperatively owned, not-for-profit credit unions to pay tax on some of the financial services they offer,” Richard said. CUNA and the UBIT Steering Committee support Bellco’s position in the case. The UBIT Steering Committee comprises representatives from CUNA, CUNA Mutual Group, the American Association of Credit Union Leagues and the National Association of State Credit Union Supervisors. The Colorado credit union refund claim is based on income generated primarily through sales of credit life and credit disability insurance over those three tax years. Revenue generated from sales of accidental death and disability insurance, and the credit union’s involvement with CFS Member Financial Services, a credit union service organization, were included under the 2003 refund claim. The lawsuit contends that the revenue is substantially or otherwise related to the exempt purposes and functions of the credit union as a tax-exempt, state-chartered credit union. Bellco has asserted that no portion of the taxes paid were legally due. In January, a Wisconsin credit union filed a complaint against IRS seeking a refund of $54,000 in taxes paid in UBIT on income from several insurance products. The Wisconsin lawsuit also contends that the revenue from sale of the products is "substantially related" to the purposes and functions of the tax-exempt, state chartered credit union.

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 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.

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.

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 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.

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.

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 ...

CUNA sends letter to Frank on Internet gambling bill

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WASHINGTON (5/22/08)--The Credit Union National Association (CUNA) Tuesday sent a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.) supporting a bill, H.R. 5767, which would place a moratorium on the implementation of regulation regarding the Unlawful Internet Gambling Enforcement Act (UIGEA). On April 2, Harriet May, CUNA board secretary, testified before the House Financial Services Committee Subcommittee, saying that UIGEA and regulations proposed by the Department of Treasury and the Board of Governors of the Federal Reserve System would impose a set of unreasonable policing requirements that would be difficult for financial institutions to meet. Credit unions could be swamped by the compliance burden associated with UIGEA, May said. Under the Internet gambling law, financial institutions must establish and implement policies and procedures to identify and block restricted transactions or rely on those established by the payments system (News Now April 3). Credit unions fear that they already are burdened with heavy policing responsibilities under the Bank Secrecy Act and Office of Foreign Asset Control rules, she added. CUNA also is concerned that the act would pose technological limitations and statutory ambiguity. “These new burdens would without question divert credit unions from their intended purpose of providing financial services to their members,” wrote CUNA President/CEO Dan Mica in the letter. CUNA does not condone illegal Internet gambling, and does not want to see it continue or grow. However, the statute and implementing proposal represent an inappropriate and overly burdensome regulatory compliance issue that concerns CUNA, Mica added. In the April hearing, May noted that any final rule should:
* Provide a mechanism to verify when a payment transaction is intended for illegal Internet gambling; * Define what is meant in its directive that covered entities address “due diligence"; * Clarify what the due diligence requirements are; and * Provide financial institutions with at least 18 months to determine how to meet the new requirements.
She also said that CUNA supports the Internet Gambling Regulation and Enforcement Act, H.R. 2046, which would require Internet gaming businesses to be licensed and pay user fees to the Finance Crimes Enforcement Network.

Inside Washington (05/21/2008)

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* ALEXANDRIA, Va. (5/22/08)--The National Credit Union Administration (NCUA) Tuesday issued orders prohibiting seven individuals from participating in the affairs of a federally insured financial institution. Jason Stewart Dodge, a former employee of now-defunct Huron River Area CU, Ann Arbor, Mich., pleaded no contest to embezzlement and identity theft. He was sentenced to eight months in prison, 36 months probation and was ordered to pay $204,944 in restitution to the credit union. Lisa L. Holmes, former supervisor at Baylands FCU, West Point, Va., pleaded guilty to embezzlement. She was sentenced to serve one year of a 60-year sentence, up to 40 years probation and ordered to pay $37,000 in restitution. Mark E. Kasson, former CEO, Credit Union Group CU, Lawrence, Kan., pleaded guilty to falsifying credit union records and was sentenced to three months in prison followed by two years probation and a $1,000 fine. Credit Union Group CU is now Free State CU. Four individuals consented to the prohibition orders without admitting or denying fault. William A. Hamler III, a former employee of Syracuse (N.Y.) Cooperative FCU; Deanne Hall, a former teller at Nor-Car FCU, Easton, Pa.; Linda Leathersich, former teller at 1st Priority CU, Rochester, N.Y.; and Mark F. LeCain, former president/CEO of Sunshine State CU, Tallahassee, Fla. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million ... * WASHINGTON (5/22/08)--The Federal Register Wednesday published The Department of Housing and Urban Development (HUD)'s comment request for Federal Housing Administration-Insured Mortgage Loan Servicing of Delinquent, Default and Foreclosure with Service Members Act. Comments are due by July 21 ... * WASHINGTON (5/22/08)--Congressional members are wondering what’s next for a government-sponsored enterprises (GSE) reform bill that the Senate Banking Committee passed with a vote of 19 to 2 yesterday (American Banker May 21). House Democrats have said they are concerned about the differences in their version, which they passed two weeks ago, and the Senate’s version of the bill. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and ranking Sen. Richard Shelby (R-Ala.) created a compromise bill Friday. The final version likely will reflect the Senate bill, according to Sen. Mel Martinez (R-Fla.) and Jaret Seiberg, Stanford Group Co. analyst. Sen. Jack Reed (D-R.I.), who developed the compromise--which would make the housing fund created by the bill permanent but would move the fund to cover Federal Housing Administration expenses--noted that it’s too soon to know which version will come out ahead ... * WASHINGTON (5/22/08)--Republican Senators Tuesday said they were worried about a deal that was made between New York Attorney General Andrew Cuomo, Fannie Mae, and Freddie Mac (American Banker May 21). The agreement would create appraisal standards that must be followed by lenders who sell to Fannie and Freddie. Industry groups have supported an amendment that would set the rules at the federal level; however, the amendment was not considered when the Senate Banking Committee approved the measure Tuesday. Sen. Elizabeth Dole (R-N.C.) and Sen. Richard Shelby (R-Ala.) said they were still examining the issue. Sen. Charles Schumer (D-N.Y.), said Cuomo stepped in where regulation was needed. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said the appraisal agreement should not be altered without alternate appraisal guidelines ... * WASHINGTON (5/22/08)--The Senate Judiciary Committee has approved a measure introduced by Sen. Charles Schumer (D-N.Y.) that revises the Fair and Accurate Credit Transaction Act. It would prohibit retailers from printing credit card expiration dates or more than five digits of account numbers on receipts (Bloomberg.com May 21). Violators would be subject to fines ranging between $100 to $1,000 ...

NCUA meeting today to focus on task force report

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ALEXANDRIA, Va. (5/22/08)--The National Credit Union Administration (NCUA) Board is scheduled to consider its Outreach Task Force's recommendations on data collection of membership profiles and services at its open meeting today. The Credit Union National Association (CUNA) has raised a number of concerns about the data collection, in light of credit unions’ anxieties as to how NCUA would treat the information, according to Mary Dunn, CUNA deputy general counsel. CUNA also has opposed the ability of examiners to micromanage credit unions with the data and has seriously questioned why NCUA must pursue the recommendations during this period of economic and regulatory uncertainty, Dunn added. No official comment period is expected for the data collection item. The board also will consider a proposal regarding the addition of underserved areas for multiple group credit unions. The rule was changed in 2006. “CUNA’s regulatory advocacy group and federal credit union subcommittee will scrutinize the proposal very carefully,” Dunn said. CUNA President/CEO Dan Mica will send a summary of the board’s action to NewsWatch readers shortly after the meeting. For a full NCUA agenda, use the link.

CU-backed candidate wins Oregon Democratic primary

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WASHINGTON (5/22/08)--A candidate supported by the Credit Union National Association (CUNA) and the Credit Union Association of Oregon (CUAO) has won the Oregon Democratic primary. Sen. Kurt Schrader (D-Ore.) Wednesday won the Democratic primary for the 5th Congressional District and will compete to fill the seat that will be left vacant by Rep. Darlene Hooley (D-Ore.) in November. He received the maximum $5,000 from the Credit Union Legislative Action Council (CULAC). Schrader will face a tight, closely fought election in November against Republican Mike Erickson, according to Trey Hawkins, CUNA political director. Hooley has worked on legislation and chaired a task force dealing with identity theft and security issues.

CU House event draws congressional leaders

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House Majority Leader Steny Hoyer (D-Md.) spoke at a recent Democratic Congressional Campaign Committee event held at Credit Union House. Also attending the event was Rep. Maxine Waters (D-Calif.)
WASHINGTON (5/22/08)--A May 14 event at Credit Union House in Washington, D.C. brought together a number of congressional leaders and included representation from staff at the Credit Union National Association (CUNA). The Democratic Congressional Campaign Committee event was sponsored by the Minority Hotel Owners and Operators, and hosted by Rep. Maxine Waters (D-Calif.), a member of the House Financial Services Committee. Waters extended her gratitude toward credit union people for having a nice venue that she could use for the event.
(From left) Rep. Al Green (D-Texas) talks with Ryan Donovan, Credit Union National Association vice president of legislative affairs, at a recent Credit Union House event.
Speaker of the House Nancy Pelosi (D-Calif.) addressed attendees at the event, and also commented positively on Credit Union House. Congressional members present at the event included: House Majority Leader Steny Hoyer (D-Md.); House Ways and Means Committee Chair Charles Rangel (D-N.Y.); Rep Joe Crowley, Ways and Means Committee member (D-N.Y.); Rep. Al Green, Financial Services Committee member (D-Texas); Rep. Barbara Lee (D-Calif.); Rep. John Conyers, Judiciary Committee Chairman (D-Mich,); and Delegate Donna Christensen (D-Vt.).
Speaker of the House Nancy Pelosi (D-Calif.) addressed attendees at a recent Democratic Congressional Campaign Committee event held at Credit Union House. Pictured are Pelosi and Ryan Donovan, Credit Union National Association vice president of legislative affairs. (Photos provided by the Credit Union National Association)
CUNA was the only group outside of the sponsors present at the event. Ryan Donovan, CUNA vice president of legislative affairs, had a chance to interact with Waters and Hoyer. Trey Hawkins, CUNA political director; and Anne Foley, CUNA political program specialist, also attended. Credit Union House was established by the CUNA and the state leagues in 2001. It was designed, in part, to provide CUNA members with quick access to lawmakers' offices, as well as a home away from home for both work and rest during Hill visits. It also is intended to offer a convenient and inviting place to hold events.

Inside Washington (05/20/2008)

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* WASHINGTON (5/21/08)--A Federal Reserve Bank of Chicago conference hosted last week illustrated the difference of opinions shared between industry representatives and Congress on dealing with the mortgage market (American Banker May 20). James Rohr, chairman/CEO of PNC Financial Services Group, said legislation is not necessary and the market will take care of itself. He said the industry contributed to the mortgage crisis through poor underwriting standards and noted that banks must improve their due diligence. Richard Cantor, managing director of credit policy and research at Moody’s, blamed regulators, saying more transparency is needed. Ben Bernanke, Federal Reserve Board chairman, encouraged financial institutions to beef up their capital, and said that international regulators are working on Basel II. David Llewellyn, banking and finance professor at Loughborough University in the United Kingdom, said raising capital and liquidity could create a safe banking system, but also a useless system ... * WASHINGTON (5/21/08)--The Department of Housing and Urban Development announced Monday that it has launched a national public service announcement (PSA) campaign that will educate the public about their rights under the lending provisions of the federal Fair Housing Act. The PSA features actor Dennis Haysbert of the television show, “24.” Radio and newspaper ads aim to illustrate the challenges minority homeowners face when attempting to purchase a home. The campaign is available in English and Spanish. The Fair Housing Act makes it unlawful to discriminate in the sale and financing of a home on the basis of race, color, religion, sex, national origin, disability and familial status ... * WASHINGTON (5/21/08)--The House Financial Services Committee is scheduled to hold a hearing Thursday to discuss the impact of the conforming loan limits of government-sponsored enterprises Fannie Mae and Freddie Mac on the housing market. The hearing will focus on the development of the market for “expanded conforming” mortgages created under the Recovery Rebate and Economic Stimulus for the American People Act, which became law in February of this year. Members also will examine what steps different market participants have taken to implement the new loan products and what obstacles stand in the way of the act’s broader acceptance, according to a statement on the committee’s website . A witness list has yet to be announced ... * WASHINGTON (5/21/08)--The Consumer Advisory Council is scheduled to meet June 19. The council is expected to discuss proposed rules regarding credit card and overdraft services, proposed rules on risk-based pricing notices, and the Federal Reserve Board’s proposal under the Federal Trade Commission Act to prohibit unfair or deceptive acts or practices by banks in connection with credit card accounts and overdraft services for deposit accounts ...

Senate Banking Committee OKs GSE reform bill

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WASHINGTON (5/21/08)--The Credit Union National Association (CUNA) supports the intent of a bill passed yesterday to reform the oversight and operations of Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks, but is concerned about several of its provisions. The Senate Banking Committee yesterday passed the Federal Housing Finance Regulatory Reform Act of 2008, which also would create a new Federal Housing Administration program to refinance hundreds of billions of dollars in troubled mortgages. CUNA is still studying the details of the 68-page compromise bill, which was released to the public Monday, according to John Hildreth, CUNA senior legislative representative. The compromise bill is an amendment to a larger, 387-page bill. The bill would require the registration of financial institution employees that originate mortgages. “We have concerns that this provision may be overly burdensome on credit unions,” Hildreth said. “We will be following this issue closely as the bill proceeds through the legislative process. “We support congressional efforts to remove bad apples from the mortgage lending system, but the registration process will impost additional compliance responsibilities and costs on credit unions,” he added. CUNA is looking at the confidentiality provisions and issues involving public access to employee information. It also is concerned with provisions that provide for a regulatory comment period and approval process for new government-sponsored enterprise products and services. “Credit unions, especially smaller ones, rely heavily on access to these products and services to underwrite home mortgages for their members,” Hildreth said. Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said he hoped to have an agreement on the bill with the Senate within the next month. Last week, CUNA President/CEO Dan Mica sent a letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.) regarding the bill, emphasizing the importance of the secondary mortgage market to credit union members.

Appeals court Paper currency discriminates vs. the blind

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WASHINGTON (5/21/08)--A federal appeals court in Washington Tuesday upheld a lower court's ruling that the nation's paper currency system discriminates against the blind people. In a 2-1 ruling, the U.S. Court of Appeals for the District of Columbia Circuit said the paper currency is discriminatory because bills of different denominations are the same size, shape and color, and cannot easily be distinguished. The decision could force the Treasury Department to introduce bills of different sizes or print them with distinguishable features, such as raised print (The Washington Post May 20). The department had considered making bills different sizes but ran into opposition from manufactures of vending and change machines, who say it could cost billions to redesign vending machines (Associated Press May 20). The suit was filed by the American Council for the Blind six years ago. According to the decision, the government argued that although the currency design hinders blind people, they have adapted. Some fold each denomination different, while others rely on store clerks to help or use credit cards. The court ruled such adaptations are insufficient under the Rehabilitation Act and that the Treasury must find a way to accommodate the needs of the visually impaired. In the decision, the court said the government could have avoided some of the cost of changing the currency if it had accommodated the visually impaired when it added anti-counterfeiting features to bills in 1996 and 2004. Treasury Department spokeswoman Brookly McLaughlin said the department was reviewing the opinion. The Bureau of Engraving and Printing, which prints the currency, recently hired a contractor to consider ways to help the blind, and a report will be available early next year, she told Associated Press. Not all blind people agree that the currency should be changed. In a press release, the National Federation of the Blind said hundreds of thousands of blind people use paper money every day without difficulty. "We hope that this ruling will not have the unintended consequence of reinforcing society's misconception that blind people are unable to function in the world as it currently is. Identifying items by touch (including currency) is convenient, but not essential…," said federation President Dr. Marc Maurer.

Comment sought for proposed rules on credit overdraft programs

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WASHINGTON (5/21/08)--The Federal Register Monday published four call-for-comment letters regarding proposed rules for credit and overdraft programs. They include:
* A joint proposal by the National Credit Union Administration (NCUA) and the Federal Trade Commission (FTC) to ban unfair and deceptive credit card and overdraft practices (see related story). Comments must be received by Aug. 4; * A Fed proposal to amend Regulation DD, which implements the Truth in Savings Act. The amendment would require that financial institutions disclose periodically the dollar amounts charged for overdraft fees and returned-item fees, monthly and yearly. Comments are due by July 18; * A Fed proposal to amend Regulation Z, which implements the Truth in Lending Act, and staff commentary to the regulation. The revisions address disclosures provided with credit card applications and solicitations. Comments are due by July 18; and * A joint proposal by the Federal Reserve Board and the FTC that would implement Section 311 of the Fair and Accurate Credit Transactions Act (FACT) of 2003, which amended the Fair Credit Reporting Act (see related story). Comments are due by Aug. 18.
The Credit Union National Association has written comment letters on FACT and Regulation Z. For more information, use the links.

Swan notes higher losses for still-strong NCUSIF

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WASHINGTON (5/21/08)--The provision for loss reserve account for the National Credit Union Share Insurance Fund (NCUSIF) is more than $200 million so far in 2008, according to Alonzo Swan, National Credit Union Administration (NCUA) regional director. Swan spoke Tuesday afternoon at the CUNA CFO Council's 14th annual conference and roundtable in Fort Myers, Fla. Nevertheless, Swan said a recent stress analysis of the insurance fund shows it’s much stronger now than it has ever been and able to absorb the expected losses. Swan outlined seven areas of risk NCUA examiners will be focusing on as they examine credit unions. He placed four of those risks in the “high” category and three in the “moderate” category. The risks in the high category are:
* Credit risk due to rising delinquencies and losses on real estate loans, increased member business lending activity, and a growing number of loan participations. * Interest rate risk due to a higher concentration of real estate loans funded by rate-sensitive shares. In 1996, real estate loans represented 33% of total loans. By 2007, real estate loans represented 51% of total loans. “Borrowing is becoming a more common funding strategy,” according to Swan. “And there’s growing stress on balance sheets from illiquid investments.” * Strategic risk due to weak overall earnings performance and growing dollar losses among larger credit unions. Seventy-one credit unions had net losses of more than $1 million in 2007, with an average loss of $5.1 million, according to Swan. By comparison, only 33 credit unions had net losses of more than $1 million in 2006, with an average loss of $3.6 million. “Our view of earnings has changed—-we’re now happy with anything on the positive side,” Swan joked. * Transaction risk due to fraud and due-diligence exposures. Swan said the evaluation of third-party relationships will be “a huge area of focus for examiners” in the future.
The three risks in the moderate category were:
* Liquidity risk due to the growing ratio of rate-sensitive shares credit unions hold. Thirty-five percent of credit union deposits are now rate-sensitive, according to Swan. * Compliance risk due to high-levels of Congressional interest. * Reputation risk that could suffer in the event of negative media coverage.
Despite Swan’s concerns, he said, “Real estate lending is a very good product and I see a lot of opportunity for credit unions right now. Member business lending represents additional fertile grounds for credit unions.”

CUNA comments on flood-insurance-QandA changes

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WASHINGTON (5/20/08)--The Credit Union National Association (CUNA) yesterday submitted a comment letter on proposed changes to the National Credit Union Administration’s (NCUA) questions and answers (Q&A) regarding flood insurance. The proposed changes include new questions and answers on second lien mortgages, civil money penalties, loan participations, construction loans and condominiums. The changes are intended to provide clearer guidance and clarify areas of potential misunderstanding. CUNA’s comments on the proposed changes include a clarification of the term “overall value,” which is referenced in Questions 7, 10 and 12. NCUA currently defines the term as the overall value of the property securing the designated loan minus the value of the land on which the property is located. CUNA suggested a modification of Question 31, which references flood insurance requirements for home equity loans, lines of credit, subordinate liens and other security interests in collateral. The question should be clarified to indicate that a loan application does not trigger a flood determination, CUNA said. CUNA also encouraged NCUA to ensure that the Q&A is easy for credit unions to find on the website. “Credit unions are increasingly relying on NCUA’s website for regulatory and other information that affects them, and their reliance is expected to increase,” wrote Jeffrey Bloch, CUNA senior assistant general counsel. The Q&As, originally published in 1997 by the NCUA and other federal financial institution regulators, are meant to serve as a guideline on flood insurance requirements for financial institutions, agency personnel and the public. For the full text of CUNA’s letter, use the link.

Inside Washington (05/19/2008)

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* WASHINGTON (5/20/08)--The Federal Deposit Insurance Corp. (FDIC) is closely monitoring financial institutions that rely mostly on deposits for growth, FDIC Chairman Sheila Bair said after a speech Friday at the Brookings Institution (American Banker May 19). Brokered deposits can help institutions that perhaps shouldn’t be growing fast, grow quickly, she said. Earlier this month, ANB Financial of Bentonville, Ark., failed after losing money on a number of development and construction loans. It had backed the loans with $1.6 billion in brokered deposits, which equaled roughly 86% of its total deposits. The bank was closed by the Office of the Comptroller of the Currency ... * WASHINGTON (5/20/08)--National Credit Union Administration (NCUA) Vice Chairman Rodney Hood Thursday visited with more than 65 New Jersey credit union leaders to discuss current issues at NCUA and trends in the credit union movement. During the interactive session, Hood acknowledged the safety and soundness of New Jersey’s credit unions, noting that they have the highest capital level in the country at 12.3%. He said he is hopeful for the passage of the Credit Union Regulatory Relief Act and also acknowledged the burden of the Bank Secrecy Act (BSA). “If I could wave a wand on BSA I would,” he said. He also addressed several projects including, “Blueprint for 2020: A Plan to Strengthen the Future of Credit Unions.” The program aims to increase student membership, employment and participation in the credit union industry through credit union internships and mentoring opportunities for college students. “It is refreshing to see a regulator be so open about very important issues facing New Jersey credit unions and all credit unions,” said Paul Gentile, New Jersey Credit Union League president/CEO. Pictured are: (from left) Steve Schlundt, chairman of the New Jersey Credit Union League, Hood, and Gentile. (Photo provided by the New Jersey Credit Union League) … * WASHINGTON (5/20/08)--President Bush Monday said he will not support legislation to bail out lenders. Laws shouldn’t bail out lenders; rather, the government should help people stay in their homes, he said (The New York Times May 19). Senate leaders are working on a bipartisan bill that would help troubled borrowers receive government-backed mortgages. Bush also noted that it’s too early to tell if a second economic stimulus is needed. Stimulus checks began arriving for Americans earlier this month ...

CUNA monitoring several hearings this week

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WASHINGTON (5/20/08)--The Credit Union National Association (CUNA) is following several congressional hearings scheduled for this week that are relevant to credit unions. Today, the Senate Banking Committee is scheduled to hold a confirmation hearing for Steven Preston, who has been nominated by President Bush to be the Secretary of Housing and Urban Development. Preston currently serves as the administrator of the Small Business Administration. The Senate Banking Committee today also is expected to mark up a housing bill that includes significant reform for government-sponsored enterprises (GSEs). CUNA last week wrote a letter to committee head Sen. Christopher Dodd (D-Conn.) regarding the bill (see related story). Other hearings this week:
* The Housing Oversight and Government Reform Committee Wednesday is slated to hold a hearing entitled, “Neighborhoods: The Blameless Victims of the Subprime Mortgage Crisis”; * The House Small Business Committee Thursday is scheduled to hold a hearing on the Real Estate Settlement Procedures Act and its impact on small business; * The House Financial Services Committee Thursday is expected to hold a hearing on the impact of conforming loan limit increases on homebuyers and housing markets; and * The House Financial Services Committee and the House Oversight and Government Reform Committee Thursday is scheduled to hold a joint hearing entitled, “Targeting Federal Aid to Neighborhoods Distressed by the Subprime Mortgage Crisis.”

Senate Banking Committee to mark up GSE reform bill today

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WASHINGTON (5/20/08)--The Senate Banking Committee today is expected to mark up a housing bill, the Federal Housing Finance Regulatory Reform Act of 2008, which includes significant reform of the government-sponsored enterprises (GSEs). Yesterday, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.) announced an agreement that would create a new regulator for Fannie Mae and Freddie Mac, and a multi-billion dollar mortgage rescue fund (Reuters May 19). "To have Chairman Dodd and Ranking Member Shelby come to agreement on an issue as important as GSE reform is very significant,” said Ryan Donovan, CUNA vice president of legislative affairs. “It certainly makes the prospects of enactment of comprehensive housing legislation more realistic. We will be reviewing this legislation closely." Last week, CUNA President/CEO Dan Mica wrote a letter to Dodd and Shelby commending the committee for ensuring the safety and soundness of Fannie Mae and Freddie Mac. In the letter, Mica noted that credit unions rely on access to the secondary mortgage market--Fannie Mae and Freddie Mac--and the 12 Federal Home Loan Banks. He said CUNA believes changes in oversight of the GSEs must ensure that:
* Changes do not curtail the use of the automated underwriting systems developed by Freddie Mac and Fannie Mae and the arrangements in which lenders enter into commitments with the GSEs for the purchase of a fixed amount of mortgage loans at a particular rate before the specific loans are identified or closed; * Restrictions on the ability of the GSEs to offer new programs do not result in a regulatory process that hinders the development of programs, activities or products that benefit the marketplace or the participation of credit unions in the marketplace; and * Guarantee fees are not based on factors such as capital or volume of lending activity that may have the effect of favoring large lenders.
For the full text of the letter, use the link.

Data collection on Thursday NCUA agenda

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ALEXANDRIA, Va. (5/19/08)--The National Credit Union Administration’s (NCUA’s) has four items on its open meeting agenda this week, including an Outreach Task Force (OTF) recommendation on data collection on credit union membership profiles and possible changes to criteria used to approve service to underserved areas. Mary Dunn, deputy general counsel of the Credit Union National Association (CUNA), said Friday that CUNA feels strongly that such initiatives should not be undertaken during the current economic environment and that if NCUA does proceed, data collection is a matter that credit unions should be allowed to comment on. “We will be closely scrutinizing how NCUA handles this matter as well as NCUA’s proposed action on underserved areas.” Dunn said. Other aspects of the task force report, including executive compensation, could be discussed during the meeting Thursday. At its April open meeting, the NCUA board proposed action on the first of the recommendations of its OTF, which was to change the agency’s low-income designation to consider different income patterns in metropolitan area. Also on the May 22 agenda:
* Board Briefing: Proposed Rule - Part 706 of NCUA’s Rules and Regulations, Unfair or Deceptive Acts or Practices; and * Proposed Rule: Part 721 of NCUA’s Rules and Regulations, Incidental Powers.

Compliance Tips for affiliate marketing

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WASHINGTON(5/16/08)—The compliance folks of the Credit Union National Association (CUNA) remind credit unions that the Fair and Accurate Credit Transactions Act’s (FACTA) affiliate marketing rules only apply when credit unions and their credit union service organizations (CUSOs) share “eligibility information” for marketing purposes. Eligibility information includes a person’s transaction and experience information, such as account history, with the credit union or affiliate, and certain “other” information submitted on consumer reports and applications. Beginning on Oct. 1, if a credit union shares eligibility information with an affiliated CUSO, the CUSO cannot use that information to make a solicitation for marketing purposes, unless three conditions exist:
* A consumer must be provided with a notice that the information may be used for marketing solicitations. * An individual must be given a reasonable opportunity to “opt-out” of these solicitations. * A consumer must not have “opted out.”
A credit union or CUSO would not have to comply with these requirements for marketing communications directed to the general membership since no eligibility information sharing is involved. Additionally, affiliates may “constructively share” eligibility information without triggering the affiliate marketing rules. One possibility is where an affiliated CUSO develops specific eligibility criteria without using any information received from the credit union. The CUSO provides its criteria to the credit union, and asks the credit union to identify members that meet the criteria, and send the CUSO’s marketing materials to those members. When a member returns a coded response form to the CUSO, the member’s response provides the CUSO with discernible eligibility information. For more compliance gems, use the resource link below to visit CUNA’s Compliance Challenge.

Inside Washington (05/16/2008)

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* WASHINGTON (5/19/08)--In a speech before attendees of the Federal Reserve Bank of Chicago’s Annual Conference on Bank Structure and Competition, Federal Reserve Board Chairman Ben Bernanke strongly urged financial institutions to remain proactive in their capital-raising efforts. Financial institutions also should pay attention to the value of proper risk identification and measurement, the need for robust and objective valuation methods, the importance of preparing for liquidity disruption, and the role of strong oversight by senior managers, he added. During his speech, Bernanke focused on some lessons learned regarding trouble in the financial markets and pointed to items financial institutions should focus on in the future. Improvement in banks’ risk management will provide a more stable financial system and help make firms more resilient to shocks, he said. “Supervisors must insist on effective risk management and provide as much support as possible for the implementation of needed changes,” he advised. The Fed also is considering additional supervisory guidance regarding risk management, and is working to implement the International Basel II capital accord. Basel II will enhance the quality of risk management by tying regulatory capital more closely to institutions’ underlying risks and requiring stronger systems to evaluating credit, he said ... ` * WASHINGTON (5/19/08)--Donna J. Gambrell, director of the U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund, joined Reps. Nydia M. Velazquez (D-N.Y.) and Edolphus Towns (D-N.Y.) to celebrate the opening of Brooklyn Cooperative FCU’s first new branch office in Bedford-Stuyvesant. The celebration was held Saturday ... * WASHINGTON (5/19/08)--Amy L. Taylor has been selected as chief information officer (CIO) and associate director of technology solutions and services at the Financial Crimes Enforcement Network (FinCEN), effective immediately, James H. Freis Jr., FinCEN director, announced Friday. Taylor joined FinCEN in April 2007 as assistant director for customer relations management. She has served as acting CIO for the past three months. She has more than 17 years of experience in federal government, supporting technology in the Department of Defense ...

CUNA urges HUD to fix RESPA rules

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WASHINGTON (5/16/08)—The Credit Union National Association (CUNA) believes proposed rules to streamline RESPA are likely to have the opposite effect. The changes were recommended by the Department of Housing and Urban Development (HUD). CUNA said the HUD recommendations would make the settlement process more complex and inconvenient for the mortgage buyer. It made the observation in a letter to the housing agency. The letter said CUNA was especially concerned about the proposal to increase to four pages from one page the Good Faith Estimate (GFE) form. “This will not benefit borrowers, who we feel, will be confused, overwhelmed, and possibly intimidated by the additional information,” the letter said. CUNA also stressed that whatever GFE form HUD finally adopts should include the annual percentage rate as required information. It said this would be helpful to borrowers who want to compare loan terms with other lenders. The letter also questioned the wording of a proposed rule that would require certain settlement costs on the GFE to be accurate within certain thresholds, unless there are “unforeseeable circumstances.” “CUNA requests clarification that ‘unforeseeable circumstances’ include circumstances that are unforeseeable by the lender, even if they are foreseeable by the borrower,” the letter added. Other points in the RESPA letter:
* The proposal to allow lenders to remedy violations by reimbursing borrowers for closing costs above the required threshold has merit, although we believe lenders should have 30 days, rather than the proposed 14 days, after closing to provide the reimbursement; * A requirement that lenders must ensure borrowers receive a notice of loan rejection within one day after the decision is not sufficient time to allow the lender to verify the borrower has received the notice; and * CUNA urges HUD to coordinate with the Federal Reserve Board to ensure that it is consistent with related mortgage loan regulations to be revised by the Fed.

Inside Washington (05/15/2008)

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* WASHINGTON (5/16/08)--An expansion of the Federal Reserve Board’s powers could threaten its independence--which is integral to the central responsibility of the Fed, said Paul Volcker, former Fed chairman, in a speech before the Joint Economic Committee Wednesday. Issues facing the troubled financial market need to be resolved through legislation, he said. The Federal Reserve Board recently expanded its “safety net” to help those strained by the problems in the market, that included providing direct support for Bear Stearns Co., which nearly collapsed last month. The Fed’s intervention was justified because of “extreme and unsettling market disturbances,” Volcker said, but he questioned how far regulation and supervision should go. He encouraged cooperation, saying “the critical pressures on our financial markets are not unique, nor can an approach to dealing with those pressures be successful in isolation.”... * WASHINGTON (5/16/08)--Changes to the Federal Reserve Board’s remittance plan, announced Tuesday, could open the door for banks to offer their corporate clients new electronic services. By 2010, the Fed plans to allow domestic transfers and will make them compatible with European standards (American Banker May 15). The changes would align the Fed with the Society for Worldwide Interbank Financial Telecommunications and the Clearing House Interbank Payments System. The Fed also plans to insert a 10,000-character data field into the format. Bankers have argued for a long time that allowing remittance details in transfers would encourage more companies to compensate each other electronically. George Doolittle, managing director at Wachovia Corp., said the changes could revamp the way transfers are used. Banks could manage the liquidity of their corporate clients and could package remittances from travelers and immigrants for a quick settlement ... * WASHINGTON (5/16/08)--Promoting thrift among consumers was the focus of Credit Union National Association General Counsel Eric Richard’s remarks during a conference this week in Washington with members of a coalition of consumer advocates, public policy groups and academics looking at the issue.
Richard’s address to the coalition, organized by the Institute for American Values, centered on a recently released 68-page report, "For a New Thrift: Confronting the Debt Culture,” which prominently featured credit unions. The report recommended combating an over-dependence on credit through credit unions, which offer lower-cost financial products. The report also backed expansion and innovation for credit unions. Organizations mounting the effort include: the Institute for American Values, the Institute for Advanced Studies in Culture, the New American Foundation, Public Agenda, the Consumer Federation of America and the National Federation of Community Development Credit Unions. The conference, “Confronting a Debt Culture: A National Conference,” concluded Tuesday. Other speakers included Rep. Jim Cooper (D-Tenn.); Kenneth W. Eiden, CEO, Prospera CU, Appleton, Wis.; and Barbara Dafoe Whitehead, co-director of the National Marriage Project at Rutgers University and author of "For a New Thrift: Confronting the Debt Culture.” (Photo provided by the Credit Union National Association) ... * WASHINGTON (5/16/08)--The nomination hearing for Steven Preston, President Bush’s top choice to lead the Department of Housing and Urban Development (HUD), has been scheduled for Tuesday with the Senate. The Credit Union National Association has said it supports Preston’s nomination for the position because he could bring several key problem-solving skills to the agency. Preston has been the head at the Small Business Administration for two years. Former HUD chief Alphonso Jackson’s resignation was effective May 9 ...

Mica denounces interchange fee bill

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WASHINGTON (5/16/08)—President/CEO Dan Mica of the Credit Union National Association (CUNA) Thursday said legislation that would impose government controls over credit card interchange fees is bad for consumers, business, and the economy. Mica expressed credit union concerns as the House Judiciary Committee conducted a public hearing on the controversial bill, H.R. 5546, The Credit Card Fair Fee Act. Earlier this week, CUNA made the same points in a full page letter in a Capitol Hill journal. Joining with other financial services groups, CUNA urged members of Congress to reject the legislation. “CUNA opposes the bill because it would inject government controls into the market in the midst of economic uncertainty, and adversely affect consumers,” Mica said in the statement. “Consumers stand to lose the most if it becomes law,” he added. “No one expects merchants to lower their prices because the government-controlled interchange rate is less. And financial institutions will have to find ways to cover the cost of the payment system.” Mica said the overall result is that controls would make convenient credit more expensive for consumers, and in some cases--less available. He said the interchange regulatory bill imposes unnecessary regulation over the card transaction interchange fee process by establishing an expensive government tribunal to enforce it. Mica said the system is more appropriately regulated by the market, and that government interference will harm all participants.

Data collection on NCUA agenda

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ALEXANDRIA, Va. (5/16/08) The National Credit Union Administration’s (NCUA’s) Outreach Task Force (OTF) recommendation on data collection on credit union membership profiles is among the items on the agency’s open board meeting agenda for May 22. The issue of credit union senior executive compensation is not on the agenda as had been previously reported by News Now. However, other aspects of the task force report, including executive compensation, could be discussed. At its April open meeting, the NCUA board proposed action on the first of the recommendations of its OTF, which was to change the agency’s low-income designation to consider different income patterns in metropolitan area. Also on the May agenda:
* Board Briefing: Proposed Rule - Part 706 of NCUA’s Rules and Regulations, Unfair or Deceptive Acts or Practices; * Proposed Rule: Part 701 of NCUA’s Rules and Regulations, Interpretive Ruling and Policy Statement (IRPS) 08-2, Criteria to approve service to underserved areas; and; * Proposed Rule: Part 721 of NCUA’s Rules and Regulations, Incidental Powers.
Mary Dunn, deputy general counsel of the Credit Union National Association (CUNA), said Friday that CUNA will be closely scrutinizing NCUA’s proposed action on underserved areas.

FinCEN improves web site data

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WASHINGTON (5/15/08)—The Financial Crimes Enforcement Network (FinCEN) disclosed that it has reorganized and expanded its website in response to recommendations from financial institutions. It said the goal was to improve informational content, and make it more user-friendly. FinCen said the redesigned web site has a standardized format, and restructured navigation system. It also promised “convenient category headings” for depository institutions and other users. The agency said the new format allows financial institutions to click on one place to view news, rules, guidance, and other regulatory information. It also includes a new “Quick Links” option on the right side of most pages to allow for fast access, and more supplemental information, according to the announcement. “We have listened to the suggestions and comments from our partners in the financial industry, and we have implemented changes that they have requested to make a better website,” said FinCEN director James Freis. He said this included displaying more efficiently on the homepage some of the some of the “most requested information” from financial institutions. The announcement also said under the new format, case examples of law enforcement successes facilitated by the Bank Secrecy Act are more prominently displayed and retrieveable. The Credit Union National Association is a member of FinCEN's Bank Secrecy Act (BSA) Advisory Group, a group established by COngress in 1992 to recommend ways to enhance the utility of BSA records and reports.

NCUA intends new ROA letter this summer

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WASHINGTON (5/15/08)—Dave Marquis, director of National Credit Union Administration’s (NCUA's) Office of Examination and Insurance, said Wednesday that his agency intends to release more guidance for credit unions regarding appropriate levels of return on assets. Marquis said the agency wants to emphasize that while credit unions clearly need ROA relief, they have a responsibility in turn to execute careful strategic planning and balance sheet management. During a recent Credit Union National Association (CUNA) ROA webinar, Marquis referred to an NCUA August 2006 evaluation of earnings letter, which clarified agency examiners' expectations regarding ROA. The letter said examiners are instructed to evaluate each credit union’s earnings level relative to net worth needs, as opposed to a fixed numerical target such as 1%. Marquis noted that if the letter was written today, the agency might envision ever lower levels of ROA than it did then. On Wednesday Marquis said he would expect the agency’s further guidance to be available this summer. He advised that credit unions must be prepared to identify how they manage their ROA. “(Credit unions) have a responsibility to manage it instead of just letting it happen,” Marquis told CUNA’s News Now. “This is really good news for credit unions,” said CUNA Chief Economist Bill Hampel. “This doesn’t give credit unions license to ignore ROA. A credit union will need to be able to justify why it is managing to a lower level of net income. “But this at least clear’s the path for a credit union to prudently follow an appropriate net income strategy. In today’s economy, a credit union with a high capital ratio needn’t penalize members with unattractive pricing just to maintain a higher-than-necessary ROA.” Use the resource link below to register for archived webinars.

Foster joins NCUA Congressional affairs staff

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WASHINGTON (5/15/08)—Treasury official Robert U. Foster III will join the National Credit Union Administration (NCUA) as deputy director of the Office of Public & Congressional Affairs effective May 19, the NCUA announced. Foster presently is deputy assistant Treasury Secretary for Legislative Affairs for banking and finance. In his new job, Foster will work with NCUA’s Public and Congressional Affairs Director John McKechnie. Foster joins the regulatory agency after 19 years of government service, and a stint in private industry, the announcement said. He is a native of Purcellville, Va., and holds a B.A. degree in Economics from Virginia Tech University.

CUNA advises on electronic Form 990 filings

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WASHINGTON (5/15/08)—Any state-chartered credit union with gross income from an unrelated trade or business of $1,000 or more must file an Internal Revenue Service Form 990-T with the IRS annually, the Credit Union National Association (CUNA) is notifying credit unions. Responding to inquiries, CUNA has noted that the IRS requires institutions with more than $10 million in assets, and which file at least 250 IRS returns, to file some 990 forms electronically (including the IRS Form 990). However, CUNA has confirmed that the 990-T is not required to be filed electronically for tax year 2007. In fact, Form 990-T is not yet available for electronic filing with the IRS.

Inside Washington (05/14/2008)

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* WASHINGTON (5/15/08)--The Treasury Department and the Internal Revenue Services yesterday issued new guidance on the maximum contribution levels for Health Savings Accounts (HSAs) and out-of-pocket spending limits for high-deductible health plans used with HSAs. Next year, the maximum HSA contribution for an eligible individual with self-only coverage is $3,000. For family coverage, the maximum is $5,950. Catch-up contribution for individuals 55 or older will increase to $1,000 for 2009 and all years going forward ... * WASHINGTON (5/15/08)--Market participants will have to address the fundamental sources of financial strains, Federal Reserve Board Chairman Ben Bernanke said in a speech Tuesday. The Fed has taken various measures to boost liquidity, but it will be up to the industry to solve the market’s problems. Participants should deleverage, raise new capital and improve risk management, he said. Once the market’s financial conditions become more normal, the extraordinary provision of liquidity by the Federal Reserve will not be needed, he concluded ... * WASHINGTON (5/15/08)--The Senate Tuesday approved a measure that would lengthen a flood insurance program, covering homes against floods until 2013. The measure also would forgive $17 billion in debt from Hurricane Katrina (Reuters May 14). The Senate rejected a provision for wind damage coverage. The House voted last year to lengthen the program, approved wind coverage, but voted against forgiving the debt. The two parties must reconcile on the bill before it is sent to the president. The Bush administration has said it will veto the House bill. The insurance industry argues that the wind coverage would be too risky ... * WASHINGTON (5/15/08)--Of the 37,313 suspicious activity reports (SARs) filed in 2006 regarding mortgage fraud, mortgage brokers initiated the loans on 58% of the SARs sampled for a report by Financial Crimes Enforcement Network (FinCEN). There was a 44% increase in SARs from the year before. States with the greatest increases in fraud filings were Illinois, 76%; California, 71%; Florida, 53%; Michigan, 52%; and Arizona, 49% ... * WASHINGTON (5/15/08)--The Office of Thrift Supervision (OTS) announced that it launched the Consumer Response Center for consumers to receive information about or file a complaint against an institution regulated by OTS. The center can be reached at 800-842-6929 ... * WASHINGTON (5/15/08)--NACHA, the Electronic Payments Association, selected Janet O. Estep, an executive vice president with U.S. Bank, to serve as CEO. Estep replaces Elliott McEntee, who will retire at the end of this year. Estep will serve as president and chief operating officer, and McEntee will continue as chief executive officer. Estep was responsible for the Transaction Services Division at U.S. Bank. She joined the bank in 1997 as senior vice president and worked for IBM for 15 years. Her sensitivity to community banks and credit unions in the payments system ensures that NACHA and the automated clearinghouse network will benefit all stakeholders, said Mike Bilski, NACHA board member, who served on the CEO search committee ...

Push by CUNA continues against interchange bill

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WASHINGTON (5/14/08)—Allowing bureaucrats to set credit card interchange fees would harm consumers and disrupt a competitive balance in the financial services industry, the Credit Union National Association (CUNA) told lawmakers in a full-page open letter ad Tuesday. The ad, featured in Politico, a Washington-based daily political journal, was the latest weapon added to CUNA’s fight against a House bill that proposes government intervention in the setting of interchange fees. The letter was backed by CUNA, the National Association of Federal Credit Unions, community banks, state banking associations and companies that make up the Electronic Payments Coalition. The letter warns lawmakers that H.R. 5546, The Credit Card Fair Fee Act, threatens to shift the cost of doing business onto the shoulders of consumers. “American consumers would ultimately feel the most pain from price control legislation. As the market would likely shrink to a handful of larger institutions that could continue to offer card products in a price-controlled environment, consumer will have fewer payment options and reduced access to affordable debit and credit cards,” says the letter address to Members of Congress. Furthermore, the ad notes, such a plan would “harm the competitive balance in the financial services industry” and have a “disproportionate effect on smaller financial institutions…” “These institutions depend on interchange revenue to be able to provide a unique and localized brand of customer or member service.” CUNA also has been actively opposing government intervention in interchange fees in the House and the Senate. CUNA worked closely with the Electronic Payments Coalition on testimony to oppose the House bill before the House Judiciary Committee this week. Also, CUNA participated in a Senate Judiciary Committee briefing on the issue. CUNA has also advised credit union representatives engaging in Hike the Hill visits to their federal lawmakers to reiterate their opposition to the House plan.

CUSO MBL service role clarified

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ALEXANDRIA, Va. (5/14/08)—If a credit union service organization (CUSO) is compensated through a fee structure in which the CUSO is paid primarily when a member business loan (MBL) is funded, then there may be a conflict of interest which could prohibit the CUSO from fulfilling the MBL expertise requirement for a credit union, according to the National Credit Union Administration (NCUA). In a legal opinion letter dated May 1, the NCUA noted that credit unions are permitted to use a third party to meet the minimum two-year direct experience requirement of the MBL rule if the third party is independent from the transaction. Generally, the letter said, a third party is considered independent from a transaction if, with respect to a loan it is responsible for reviewing, it does not have a participation in the loan or an interest in the collateral securing the loan. If a CUSO does not satisfy those requirements, the NCUA wrote, a credit union should address any questions or concerns regarding the nature of its arrangement or specific transactions with the appropriate regional director.

Comment requested on card overdraft rules

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WASHINGTON (5/14/08)—The Credit Union National Association (CUNA) is concerned about the scope of a regulatory proposal dealing with deceptive practices for credit cards, and overdraft protection plans and is seeking credit union comments. The drafts were published by the National Credit Union Administration (NCUA), along with the Federal Reserve Board and the Office of Thrift Supervision. CUNA will work with its Federal Credit Union Subcommittee, Consumer Protection Subcommittee, and Payments Subcommittee to identify which, if any of the proposals we oppose, support, or recommend be modified. For credit cards, the proposal addresses time periods for making payments, payment allocations, interest rate increases on outstanding balances, fees resulting from credit holds, methods for computing balances subject to interest charges, excessive security deposits and fees charged when credit is issued, and advertisement that include multiple interest rates and multiple credit limits. On overdraft protection plans, the draft requires consumers to be given an opportunity to “opt-out” of the plan, and addresses fees resulting from holds on debit card transactions. CUNA is seeking comment by July 18. Among the questions to be considered:
* Should states be permitted to seek an exemption from the unfair and deceptive practices proposal if the state law provides greater or a substantially similar level of protection, or will this undermine the uniform application of Federal standards? * Regarding the proposal to provide consumers reasonable time to make credit card payments, what is the number of days after the closing date of the billing cycle that you typically mail or deliver periodic statements? * What percentage of your members receive credit card statements by mail and electronically, and what percentage make payments by mail electronically, telephone, or through other means? * Will the 21-day deadline give consumers sufficient time to review the statements and make payments?

Inside Washington (05/13/2008)

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* WASHINGTON (5/14/08)--ANB Financial’s downfall may predict other bank collapses, said industry observers Monday (American Banker May 12). About 80% of ANB’s loans were of construction and development loans. Combined with brokered deposits and some activity in out-of-state markets, ANB’s portfolio proved to be troublesome. Other banks may find themselves in the same situation as ANB, according to Peyton Green, an analyst at First Horizon National Corp.’s FTN Midwest Securities Corp. Some failures are likely to occur this year and next year, he said. ANB’s failure also is affecting other institutions. Great Southern Bancorp, Springfield, Mo., said it would charge off $35 million of loans made to ANB Financial. The amount is equivalent to nine months of revenue. The Office of the Comptroller of the Currency and other regulators have warned banks to beef up portfolios ... * WASHINGTON (5/14/08)--Sen. Christopher Dodd (D-Conn.), chair of the Senate Banking Committee, is working to secure support from Republicans for his housing bill. Sen. Mel Martinez (R-Fla.) is expected to review the bill’s draft (American Banker May 12). Sen. Elizabeth Dole (R-N.C.), Martinez and Sen. Tom Carper (D-Del.) offered an amendment which would modernize the Federal Housing Administration. Dodd has not yet won support from Sen. Richard Shelby (R-Ala.), the ranking Republican on the panel. Dodd introduced his bill Monday. It would create a regulator for the Federal Home Loan Banks, Fannie Mae, and Freddie Mac ... * WASHINGTON (5/14/08)--The Federal Reserve Board approved amendments to Appendix A of Regulation CC. The amendments reflect the restructuring of the Federal Reserve’s check-processing operations in the Sixth and Eighth districts. The approval was announced yesterday. As of July 19, the Memphis branch of the Federal Reserve Bank of St. Louis will no longer process checks, and banks served by that office will be reassigned to the Federal Reserve Bank of Atlanta. The reserve banks also plan to cease check-processing operations at all of their check processing offices by 2010 except in Philadelphia, Cleveland, Atlanta and Dallas, according to the Fed’s statement ...

UBIT trial scheduled for next May

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WASHINGTON (5/15/08)—Federal Judge William Griesbach has set May 11, 2009 as the trial date for a Wisconsin credit union’s challenge of an Internal Revenue Service (IRS) determination that certain insurance products fall outside the credit union’s main mission. The IRS ruled the products were therefore subject to unrelated business income taxes (UBIT). The suit was filed by state-chartered Appleton, Wis., Community First CU on Jan. 15. Community First is requesting a refund of about $54,000 in taxes paid in 2006 on income from several insurance products. The U.S. attorney’s office has asked that the suit be dismissed. In addition to setting a trial date, Judge Griesbach released a schedule for the conduct of discovery, which is to be completed by early December 2008. However, CUNA General Counsel Eric Richard noted that both the trial date, and its expected duration, are subject to change as events may dictate. For instance, he pointed out, it could be delayed by a contentious discovery process, which could cause the court to decide that additional time was needed to ensure a fair trial. The UBIT litigation has been widely hailed by credit unions. Notably, Community First CEO Cathie Tierney received a standing ovation from her peers at the Wisconsin CU League's annual Governmental Affairs Conference just 10 days after the credit union filed its lawsuit. Credit unions' support was displayed on an even larger scale when Tierney received an ovation by thousands of credit union representatives attending CUNA's Governmental Affairs Conference here earlier this month. The case is being followed by a coalition of credit union organizations, known as the UBIT Steering Committee that includes: CUNA; CUNA MUTUAL; American Association of Credit Union Leagues, and the National Association of State Credit Union Supervisors. Community First Credit Union has informed the steering committee that it expects the trial could last up to a week.

NCUA closes 1.2 million-asset Father Burke FCU

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ALEXANDRIA, Va. (12/14/08)-- The National Credit Union Administration (NCUA) has closed a $1.2 million-asset community development credit union in Bronx, N.Y. noting that the credit union is insolvent and has no prospects for restoring viable operations. The credit union, Father Burke FCU, had 510 members and one employee, according to its Website, and served members of the Blessed Sacrament Catholic Church. NCUA’s Asset Management and Assistance Center will issue checks to members holding verified share accounts within one week of the May 12 closing. . Through NCUA’s National Credit Union Share Insurance Fund, credit union member deposits are insured up to at least $100,000 per account. NCUA chartered Father Burke Federal Credit Union in 1971 to serve members of the Blessed Sacrament Catholic Church located in Bronx, New York.

Inside Washington (05/12/2008)

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* WASHINGTON (5/13/08)--The Office of the Comptroller of the Currency Friday closed AMB Financial of Bentonville, Ark. The Federal Deposit Insurance Corp. was named as the receiver of AMB.Pulaski Bank and Trust Company, Little Rock, assumed AMB’s insured deposits. The bank’s nine offices reopened today as branches of Pulaski Bank. Depositors of ANB Financial will be depositors of the assuming bank ... * WASHINGTON (5/13/08)--The Office of Thrift Supervision (OTS) did not respond adequately to warning signs at NetBank Inc., which failed in September, indicated a Treasury Department report (American Banker May 12). The agency should have acted sooner, the report said. OTS downgraded the thrift’s Camels rating to a 3. Scott Polakoff, OTS deputy director, said the OTS’ enforcement order against NetBank was issued appropriately. The failure cost the Federal Deposit Insurance Corp. fund $150 million ... *
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WASHINGTON (5/13/08)--“Ken’s Saladbar,” a team of members from Sen. Ken Salazar’s (D-Colo.) office, posted the fastest time in the “Capitol Hill Competition” of the Credit Union Cherry Blossom 10-Mile Run April 6. Salazar’s team was presented with the Credit Union Cup to mark the achievement. Sponsors making the presentation of the cup are (top, from left) team captain Andrew Yarbrough; Susan Enis, president/CEO, U.S. Senate FCU, Alexandria, Va.; John Hayes, U.S. Senate FCU; Dillon Shea, National Association of Federal Credit Unions; and Phil Drager, Credit Union National Association. Pictured are “Saladbar” team members (from left) Hayes, Enis, Shea, Drager, Yarborough, Katharine Ferguson, Salazar, Matt Lee-Ashley, Anne Terry and James Koehler. (Photos provided by the Credit Union National Association) ...

Hikes add new issues

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WASHINGTON (5/13/08)--Members United Corporate CU and Mid-America CU Association representatives will hike Capitol Hill today and tomorrow to discuss their opposition to legislative limits on interchange fees in addition to seeking Senate co-sponsors for the Credit Union Regulatory Improvements Act (CURIA). This week, the House Judiciary Committee is expected to take up discussion on H.R. 5546, the Credit Card Fair Fee Act. The Credit Union National Association (CUNA) opposes the credit card legislation because it would “impose unnecessary regulation over the card transaction interchange fee process by establishing a costly governmental tribunal that would be authorized to impose its decisions on a system that is more appropriately governed by the market.” (See related story this issue: CUNA targets interchange issue) Next week, representatives from credit unions in South Carolina and Texas are scheduled to hike Capitol Hill. At least 24 hill hikes are scheduled through September. Members United is located in Warrenville, Ill. Mid-America, located in Bismarck, N.D., represents credit unions in the Dakotas.

CUNA targets interchange issue

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WASHINGTON (5/13/08)—The House and Senate are in session this week and the upcoming hearing of interest to credit unions is the one planned by the House Judiciary Committee on credit card interchange fees. The House panel is scheduled to hear testimony Thursday on H.R. 5546, The Credit Card Fair Fee Act, which the Credit Union National Association (CUNA) strongly opposes. CUNA has been working closely with the Electronic Payments Coalition on testimony to oppose the bill under which interchange rates and terms would be determined by Electronic Payment System Judges, to be appointed by the Department of Justice Antitrust Division and the Federal Trade Commission. CUNA believes that the free market should set the interchange fees, not the government, according to Ryan Donovan, CUNA vice president of legislative affairs. He noted that interchange fees assist the growth of universal acceptance of cards and the innovation of super-fast authorization technology and enhanced security measures. Donovan said CUNA has been active on the interchange issue on the Senate side, as well. While there is no bill introduced in that body, Donovan said CUNA has participated in a Senate Judiciary Committee briefing on the issue. “The Senate is aware that the subject has generated a lot of interest in the House and is looking into the issues involved,” he explained. Donovan said that if the bill progresses through the House Judiciary Committee, other House panels may claim some authority over the legislation. He said that both the House Financial Services Committee and, perhaps, House Energy and Commerce might assert jurisdiction over the measure.

CUs reactions to new FinCEN rules sought by CUNA

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WASHINGTON (5/13/08)--The Credit Union National Association (CUNA) is asking credit unions for comments on a regulatory proposal intended to simplify current Customer Transaction Report (CTR) exemption rules for credit unions and other depository institutions. The rule changes were proposed May 6 by the Financial Crimes Enforcement Network (FinCEN) and CUNA requests comments by June 6. They are due to FinCEN by June 23. Bank Secrecy Act (BSA) regulations require that each financial institution, including every credit union, file a CTR of each transaction involving currency of more than $10,000, but exceptions are allowed. One of the major changes proposed by FinCEN to the exemption rule would excuse depository institutions from completing FinCEN Form 110, for certain Phase I members/ customers , now required for all Phase I members/customers. FinCEN proposes to exclude depository institutions, federal, state, or local governments, or entities exercising governmental authority from the requirement. Another FinCEN amendment would abolish the annual review of information supporting the listed Phase I eligible members/ customers. Additionally, FinCEN is proposing to ease its depository institution requirements for Phase II members/customers, which includes businesses that are not listed under Phase I but are eligible for exemption. Under the proposed rule, financial institutions no longer would be required to wait 12 months before designating eligible Phase II customers for exemption. Instead, institutions could institute a risk-based approach to determine how much time to maintain an account before an initial Phase II exemption could be provided to the customer. FinCEN also is considering an alternative proposal that would set a shorter length of time to consider Phase II entities. Other issues on which CUNA asked for guidance dealt with FinCEN’s contemplated changes in such areas as, factors to be considered in conducting a risk-based assessment, and situations where there is a filing of revocation of exemption. Use the resource link below for more information on the CUNA comment call.

Audio briefing on vendor due diligence today

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WASHINGTON (5/13/08)—The Credit Union National Association (CUNA) is conducting an audio conference today on due diligence pertaining to third-party vendors—an issue which federal regulators continue to emphasize. The program is scheduled for 1:00-2:30 p.m. (CT). The telephone conference will examine requirements and solutions from practitioners that are working for credit unions. Speakers include CUNA’s Deputy General Counsel Mary Dunn, Marcia Barron, CPA and director of internal audits for CUNA and CUNA Strategic Services (CSS), Inc., and Julie Esser, director of new alliances for CSS. Dunn said Monday that the conference is intended to add to information on this subject that was highlighted during the National Credit Union Administration’s (NCUA’s) Webinar last month. “NCUA has made it clears that a key priority for its examiners in 2008 is evaluating credit unions’ due diligence with their third party vendors,” she said. The agency has stressed that it is especially interested in how credit unions handle relationships related to lending services, auditing and management consulting services, and asset liability management.

iWashington Posti writer CUs great for promoting thrift

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WASHINGTON (5/13/08)—A personal finance columnist for The Washington Post backed a new idea Sunday to launch a national thrift campaign and noted credit unions should be featured as an important tool to fight consumers’ excessive reliance on credit. Michelle Singletary, who writes "The Color of Money" column for the publication, noted a movement afoot by a coalition of consumer advocates, public policy groups and academics. They want to attack the country's dependence on debt by “creating a national campaign much like the one used to curb smoking.” The organizations mounting the effort include the Institute for American Values, the Institute for Advanced Studies in Culture, the New American Foundation, Public Agenda, the Consumer Federation of American and the National Federation of Community Development Credit Unions. The coalition is holding a conference in Washington this week and has issued a 68-page report, "For a New Thrift: Confronting the Debt Culture." Eric Richard, general counsel of the Credit Union National Association, is scheduled to address the group today. The report, Singletary wrote, “merely lists the many ways debt has taken down so many people.” However, credit unions figure prominently among the report’s proposals to promote a culture of thrift to replace a reliance on too much debt. “To combat the culture of credit, the coalition has come up with a number of proposals,” Singletary wrote. They include:
* Promote the use of credit unions, which often offer lower-cost financial products. (The report also supports credit union “expansion and innovation.”) * Encourage financial institutions to move into low- to moderate-income neighborhoods and provide low-interest consumer loans. For example, in Appleton, Wis., the Prospera CU has teamed up with Goodwill Industries of North Central Wisconsin to create GoodMoney, where consumers can get short-term loans that are much cheaper than they can get from a payday lender. * Create a Financial Product Safety Commission modeled after the Consumer Product Safety Commission.

Ala. primary candidates get CUNA league backing

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WASHINGTON (5/13/08)--The Credit Union National Association and the Alabama CU League have backed state Rep. Jay Love in his race for a U.S. House seat vacated by retiring Rep. Terry Everett (R-Ala.). The groups also endorsed Wayne Packer, who is running for the seat held by Rep. Robert "BUd" Cramer, a Democrat who also announced his retirement. Each candidate received $5,000 from CUNA’s Credit Union Legislative Action Council. (CULAC), the maximum contribution allowed under federal law. Among Love’s opponents is state Sen. Harri Anne Smith, a community banker. “Rep. Love has shown tremendous knowledge of how credit unions operate, and how they serve their members, as well as the challenges they face. We are eager to work with him for years to come as a member of the United States Congress,” said President/CEO Gary Wolter, of the Alabama league in a release Monday. “For credit unions, the choice could not be more clear.” Of Parker, Wolter said, “Wayne has gone to great lengths to learn more about credit unions and their issues, and to meet with representatives from the league and individual credit unions in the district. “He has been very supportive about addressing the needs of credit unions as we work to serve our members and communities and meet their growing needs.” League board Chairman Steve Swofford said, “Developments in Congress related to CURRA (Credit Union Regulatory Relief Act) and CURIA (Credit Union Regulatory Improvements Act) prove that the credit union movement must step up its political emphasis, and just increasing campaign contributions isn't enough. “With this action, the Alabama Credit Union League states that we plan on becoming more involved in the campaigns of candidates not just favorable to credit unions, but willing to make our issues a priority.”

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.

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.

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 ...

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 (05/08/2008)

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* WASHINGTON (5/9/08)--Lenders need to expand their loan modification efforts, Treasury Department officials said during a private meeting with top lenders Tuesday. Attendees of the meeting talked about how to broaden loan modification criteria to include more borrowers. One proposal was to drop FICO scores. However, no proposal was finalized (American Banker May 8). One suggestion involved giving borrowers temporary approval for the modifications, with the opportunity for loan servicers to revise the approval later. Tuesday’s meeting was called by Treasury Secretary Henry Paulson as a follow-up to a meeting he held earlier with top mortgage lenders in April ... * NEW YORK (5/9/08)--The Federal Home Loan Bank (FHLB) of New York and Magyar Bank are providing $6 million to fund an initiative that aims to help homeowners in New Jersey facing foreclosure. The initiative, the Housing Assistance and Recovery Program (HARP), will purchase homes in foreclosure and lease them back to homeowners for a defined period of time. Homeowners will stay in the homes, pay rent, and have an opportunity to improve credit and re-purchase the property. Magyar Bank will provide 70% of the funding with FHLB funds. HARP was launched May 1 and will be used to immediately assist 15 families. Homeowners are eligible for the program if they complete a financial planning and education program ... * WASHINGTON (5/9/08)--The Securities and Exchange Commission (SEC) will begin requiring that investment banks on Wall Street disclose their liquidity and capital levels (Reuters May 8). The increased scrutiny comes after Bear Stearns Cos. nearly collapsed when its liquidity dropped in March. At a conference Wednesday, SEC Chairman Christopher Cox said the agency will not wait on new, internationally accepted standards for liquidity and capital ...

SBA Patriot Loans hit 135 in 10 months

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WASHINGTON (5/09/08)—The U.S. Small Business Administration (SBA) Thursday announced that in the 10 months since it has launched it Patriot Express Program, it has produced 1,304 guaranteed loans to the military community. More than 15% of the $135 million in loans were dispersed to military spouses. The SBA used the fact that May 9 marks National Military Spouse Day as its springboard for the announcement reminding service families of the program. Others eligible for the loans are veterans, service-disabled veterans, service members leaving active duty, Reservists and National Guard members, current spouses of any of the above, and the surviving spouse of a servicemember who died while serving or of a service-connected disability. Since June 2007, credit unions and other lenders could start submitting applications for funds under the SBA’s Patriot Express pilot program. The program features a streamlined loan product based on the agency's SBA Express Program, but with enhanced guaranty and interest rate features. The loans may be used for most business purposes and have been approved in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and Guam. They currently range from $5,000 to $375,000 in individual loan amounts, but can be approved for up to $500,000.

House approves help to troubled borrowers

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WASHINGTON (5/09/08)—The House approved two housing measures Thursday including a major rescue bill (H.R. 3221) that would establish a $300 billion fund for mortgage insurance. The comprehensive measure combined a cluster of bills that have been wending their ways through the legislative process. They include:
*H.R. 5720, the Housing Assistance Tax Act of 2008; * H.R. 5830, the Federal Housing Administration Housing (FHA) and Homeowner Retention Act; * H.R. 1852, the Expanding American Homeownership Act of 2007; * H.R. 1427, the Federal Housing Finance Reform Act of 2007; and * H.R. 5579, the Emergency Mortgage Loan Modification Act of 2008.
Under provisions of the final bill, the mortgage insurance fund would be under the authority of the Department of Housing and Urban Development’s Federal Housing Administrating (FHA). It is expected to provide aid for approximately half a million borrowers struggling to hang onto their homes. The program would allow certain mortgage holders to get an FHA guarantee on a loan if they write down the principal amount. The other housing bill passed by the House yesterday was H.R. 5818, the Neighborhood Stabilization Act, which would provide states and cities with funds to help prevent rising foreclosures in neighborhoods. The bills now must go to the Senate for a vote. If passed by the Senate, they must be signed by the President to become law. However, the White House has made it clear that it has strong reservations about some provisions in the larger housing package.

HSA hearing coming

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WASHINGTON (5/09/08)—Rep. Pete Stark (D-Calif), chairman of a House Ways and Means subcommittee on health, has scheduled a hearing on Health Savings Accounts (HSAs) and high-deductible health plans (HDHPs). The hearing is scheduled for May 14. In a hearing notice, Stark noted that proponents of the savings plans argue that they help control overall health spending because individuals have a significant financial stake in the cost of their care. The Credit Union National Association (CUNA) supports the availability of HSAs for consumers and backs the expansion of these accounts. Noting that there are nearly seven million HSA account holders in the United States, CUNA believes HSAs are a way of providing credit union members with a means to build wealth while also better managing personal medical costs. CUNA also supports an aggressive effort to encourage credit unions to offer HSAs, as only about 600 credit unions currently offer these accounts. However, opponents of the accounts argue that they have the opposite of their intended effect. Stark noted an April 2008 Government Accountability Office (GAO) study that found, in part, that average HSA enrollees had incomes nearly three times the average income of other tax filers and that HSA contributions were almost twice that of withdrawals. “Simply stated, these policies are designed to help those who can afford to put money away to do so, but only serve to put health care further out of reach for those with high medical costs and/or modest incomes,” Stark said. He added his concern that “these plans may discourage consumers from seeking treatment and obtaining preventive care, and total health spending could even increase if people defer or delay needed preventive care or initial treatment.” An official witness list was not yet available.

IRS advises on removing stimulus payments from IRAs

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WASHINGTON (5/8/08)--The Internal Revenue Service (IRS) released guidance for taxpayers and financial institutions about withdrawals of 2008 tax rebates that are directly deposited into individual retirement accounts (IRAs), Coverdell education savings accounts (ESAs), and health savings accounts (HSAs). Taxpayers who told the IRS on their 2007 income tax return to deposit all tax refunds into a tax-advantaged account--such as an IRA, Coverdell ESA, or HSA--have discovered that the IRS also deposits their tax rebate to the same account. Announcement 2008-44 permits taxpayers in this situation to withdraw from the IRA, Coverdell ESA, or HSA an amount less than or equal to the Economic Stimulus payment tax- and penalty-free. A withdrawal of the tax rebate from an IRA or HSA must be made by the filing deadline for the 2008 federal income tax return, plus extensions. The withdrawal deadline for a Coverdell ESA is May 31, 2009 or the designated beneficiary’s extended filing deadline, whichever is later. Unlike other withdrawals of contributions prior to the filing deadline, the income attributable is not computed or withdrawn under this rule, according to Dennis Zuehlke, compliance manager for CUNA Mutual Group, which serves 80% of credit unions offering IRA programs. Credit unions receiving direct deposits of tax rebates and their subsequent withdrawals should report the contribution and withdrawal in the usual manner:
* The deposit will be reported as a regular contribution on Form 5498; and * The withdrawal will be reported as a regular withdrawal (distribution code 1, 3 or 7) on Form 1099-R.
Taxpayers will be required to follow the instructions in their Form 1040 package to report the withdrawal and avoid taxes and penalties on the amount withdrawn. By not requiring a separate reporting scheme, credit unions will not have to incur additional expenses to adapt their data processing systems to report these one-time distributions, and members will be able to withdraw their tax rebates with relative ease, said Zuehlke.

Treasury wants ideas to improve financial education

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WASHINGTON (5/8/08)--The Department of the Treasury wants public comments about how to improve financial education efforts in the United States. The President’s Advisory Council on Financial Literacy will use the comments to advise President George W. Bush and Treasury Secretary Henry Paulson on the state of financial literacy, means to improve financial education efforts and strengthen financial education programs. Specifically, the council wants to know:
* Youth Financial Literacy: How can financial literacy among young people be improved? * Financial Education in the workplace: How can financial education be provided in the workplace? What financial education issue should be addressed in the workplace? * Financial access for underserved markets: How can access to financial services be increased in underserved markets? What markets are underserved for financial services? * Financial literacy research: What question should be answered to provide a thorough understanding of the current state of financial literacy in the country? What are the gaps in existing research on financial literacy? * Outreach and awareness: What are the best ways to communicate to those who lack awareness of financial education resources?
Comments are due May 23 and can be e-mailed to financialliteracycouncil@do.treas.gov, or mailed in triplicate form to the President’s Advisory Council on Financial Literacy, Office of Financial Education, Room 1332, Department of the Treasury, 1500 Pennsylvania Ave NW, Washington, DC 20220.

Indiana credit unions back winners in primaries

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INDIANAPOLIS (5/8/08)--Two incumbent Congressmen won elections in the Indiana Primary Tuesday with support from the Indiana League and Hoosier credit unions. In Indiana’s 5th Congressional District Republican Primary, Congressman Dan Burton won by 52% to 45%. With the Indianapolis television and radio media covering his remarks live, he thanked credit unions within the first few sentences of his victory speech.
Congressman Dan Burton, left, and Indiana League President John McKenzie. (Photo provided by the Indiana Credit Union League)
League President John McKenzie attended the Burton Campaign’s election night gathering and said, “Credit unions had an opportunity to help his campaign in an unusual year when his re-election was not assured, so it was great to be able to help such a strong credit union supporter.” The league held a luncheon with Burton in March, where the Burton Campaign was able to raise significant campaign funds from representatives of credit unions and the league. Burton is one of only three current members of Congress who was an original co-sponsor of the Credit Union Membership Access Act (H.R. 1151) in 1997 and is now an original co-sponsor of the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537). In Indiana’s 7th Congressional District Democratic Primary, Congressman Andre Carson won a tough four-way race. Carson holds a seat on the House Financial Services Committee which was previously held by the late Julia Carson, his grandmother. Indiana credit unions supported Andre Carson before the special election he won in March, and again in the primary. “When we met with him in February prior to the special election, and since he began serving in Congress these past few months, Rep. Carson has expressed support for credit unions and has responded very positively to our views during legislative developments,” said McKenzie. “We look forward to building further on our good relationship with him.” The Credit Union Legislative Action Council gave each campaign $10,000.

Inside Washington (05/07/2008)

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* WASHINGTON (5/8/08)--Matthew Feldman was appointed Tuesday as president/CEO of the Chicago Federal Home Loan Bank (FHLB) after serving as interim president. On April 11, Mike Thomas, FHLB Chicago’s previous CEO, resigned after merger discussions with FHLB Chicago and FHLB Dallas ended. Feldman previously worked as vice president of operations and administration. He joined the bank in 2003 ...

CU support helps in latest elections

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WASHINGTON (5/7/08)—Two new House members from Louisiana, one a Democrat, the other a Republican, who won their special elections contests over the weekend each had support from the Credit Union National Association (CUNA). Newly elected Reps. Steve Scalise, a Metairie Republican, and Don Cazayoux, a New Roads Democrat, will be sworn in this week after winning special elections last Saturday. Both new House members had strong backing from the Louisiana Credit Union League, and CULAC, the CUNA’s political action committee (PAC). CULAC contributed $10,000 to Scalise’s effort and $5,000 to Cazayoux’s campaign. While Scalise easily won his general election against Democrat Gilda Reed with 75% of the vote, CUNA Political Director Trey Hawkins said credit unions’ support was crucial in an earlier competitive GOP primary in April. Cazayoux’s narrow victory, winning 49% - 46% over Republican Woody Jenkins, was the subject of broad national attention. The victory placed into the hands of Democrats a Louisiana seat that long has been held by the GOP. It was the second Democratic pickup of a Republican-held seat in recent months. Hawkins said this week that, in both the Scalise and Cazayoux elections, credit unions’ backing of the winners should help Louisiana’s credit unions begin their relationships with the newest members of their delegation on a strong footing. Both elections were prompted by vacancies in Louisiana’s congressional delegation. Scalise is filling the First District seat vacated when Bobby Jindal was sworn in as Governor. Cazayoux will complete the term of Sixth District Rep. Richard Baker, who resigned earlier this year to take a job as CEO of a trade association in Washington.

NCUA closes St. Luke Baptist FCU

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ALEXANDRIA, Va. -- The National Credit Union Administration (NCUA) placed St. Luke Baptist FCU of Laurelton, New York, into liquidation May 3. NCUA announced that its Asset Management and Assistance Center will issue checks to members holding verified share accounts in the St. Luke Baptist FCU within one week. Through NCUA’s National Credit Union Share Insurance Fund, credit union member deposits are insured up to at least $100,000 per account. NCUA made the decision to liquidate St. Luke Baptist and discontinue its operations after determining the credit union is insolvent. It has no prospects for restoring viable operations. At the time of liquidation, the credit union served 162 members and had assets of approximately $49,734. Chartered in 1976, the credit union served members of the St. Luke Baptist Church located in Laurelton, N.Y.

NCUA One percent ROA not holy grail

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WASHINGTON (5/7/08)—-In the current economic environment, the National Credit Union Administration (NCUA) expects credit unions to have lower return-on-average-asset (ROA) ratios--and that’s OK. “Credit unions have high net worth, and using your capital appropriately to deal with this very severe market dislocation is OK,” said NCUA Board Member Gigi Hyland during a CUNA webinar titled, “CU Response to the Current Economy: NCUA/Compliance.” NCUA Director of the Office of Examination and Insurance Dave Marquis and CUNA Chief Economist Bill Hampel also participated in the Friday event, which now is archived. “One percent ROA is not and cannot be a holy grail anymore, especially in this market,” said Hyland, who reiterated the agency’s August 2006 evaluation of earnings letter to credit unions. That NCUA supervisory letter clarified that agency examiners are expected to evaluate each credit union's earnings level relative to net worth needs, financial and operational risk exposures, the current economic climate, and the institution's strategic plans. Overall, U.S. credit union net worth is expected to fall to about 11% by December 2008, which remains “a very strong capital cushion, putting credit unions in a very good position,” according to CUNA’s Hampel. This cushion will be important as credit union return on average assets dips. ROA at the end of 2007 was 64 basis points--a decline from 82 basis points at the end of 2006. However, the economist noted that in the fourth quarter of 2007 alone, loan loss provisions drove ROA down to 0.32%. Hampel projects year-end ROA of 0.53% in 2008 and 0.70% in 2009. Hyland said the agency is “very keen and supportive” of credit unions continuing to be the trusted financial partner of their members. “If you have an opportunity to help a member in need, we urge you to rework their loan in the context of the credit unions business policies and also that fits the member’s needs,” said Hyland, who reiterated that credit unions are not part of the current mortgage problem because they have appropriately focused on members. In his economic analysis, CUNA’s Hampel said the U.S. economy, for all practical purposes, is in a recession for the first half of this year. “For most of this year and most of next year, the economy is going to look and feel very weak--much like a recession,” he said. “Therefore your members will act as if we’re in a recession--that’s what matters.” The credit crunch--a condition where even people with good credit have difficulty getting a loan-—has spread to the rest of the economy. “This has made things worse,” said Hampel. However, noted the economist, this condition has created an opportunity for credit unions. “If other lenders are less willing to lend to good credits, there may be opportunities for credit unions to lend to those members who otherwise would have borrowed from someplace else,” said Hampel. The recovery should begin in the second half of this year, mostly fueled with Federal tax rebates. Hampel warned however that once consumers spend the rebates, the economy could sputter again. Hampel’s outlook for credit unions through 2009:
* Faster saving and asset growth; * Slower loan growth; * Significant increases in loan delinquencies and losses; * Substantial downward pressure on net income; and * Falling net worth ratios.
Looking forward, Hyland said the agency’s two areas of exam focus will be strategic planning and the evaluation of third party relationships. The credit union products currently showing the most signs of stress are home equity lines of credit--especially variable rate loans--mostly in areas where home values have dropped, according to NCUA’s Dave Marquis. Under the risk focused exam process, Marquis said the NCUA is shifting resources to areas hardest hit, especially California, Florida, Nevada and Arizona. Use the link below to access the complete archived CUNA webinar.

Inside Washington (05/06/2008)

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* WASHINGTON (5/7/08)--Top mortgage lenders were scheduled yesterday to meet privately with the Treasury Department to discuss second liens. Servicers were expected to suggest trading second liens so first-lien holders can tackle their outstanding debts (American Banker May 6). Second liens must be eliminated before a primary mortgage loan is modified. Yesterday’s meeting follows up an April 24 meeting called by Treasury Secretary Henry Paulson. Paulson met with Treasury undersecretary Robert Steel and with executives from several top mortgage lenders ... * WASHINGTON (5/7/08)--A package of mortgage reforms could be enacted as early as June, said House Financial Services Committee Chairman Barney Frank (D-Mass.) at a Mortgage Bankers Association conference this week (American Banker May 6). A package of bills containing reform for the Federal Housing Administration and the government-sponsored enterprises, and a bill that would allow lenders to write down mortgages to help troubled borrowers refinance, are expected to hit the House floor today. Frank also noted at the conference that he wants to hold a hearing later this month with the Securities Industry and Financial Markets Association ... * WASHINGTON (5/7/08)--The Office of Federal Housing Enterprise Oversight (OFHEO) Tuesday reduced Fannie Mae’s minimum capital requirements to 15% from 20%, which resulted in Fannie rising 8.9%. On the same day, Fannie posted a quarterly loss of $2.19 billion before preferred dividends. The enterprise reduced its dividend to 25 cents from 35 cents and plans to sell $4 billion of common and convertible preferred shares (Bloomberg May 6). OFHEO also lifted Fannie’s 2006 Consent Order ... * WASHINGTON (5/7/08)--Congress needs to be more flexible with federal agencies as they oversee the troubled mortgage market, said Federal Reserve Chairman Ben Bernanke at a Columbia Business School event in New York (The New York Times May 6). Agencies should be more innovative in helping the market, and should give the Federal Housing Administration more power to set standards and adjust rates for owners who want to refinance their mortgages, he said. Bernanke also added that Fannie Mae and Freddie Mac could help the market by raising money to help borrowers facing foreclosure ...

WSJ says this is big year for Little Guy

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WASHINGTON (5/6/08)--The weekend edition of The Wall Street Journal highlighted the Credit Union National Association’s grassroots efforts, calling 2008 a “big year for the Little Guy.”
Click to view larger imageThe May 3-4 weekend edition of the Wall Street Journal noted the CUNA's grassroots clout and included an image of the Little Guy--CUNA's iconic character that represents the working men and women of America from all walks of life who are credit union members--the owners and focus of credit union service.
The story included a picture of CUNA’s “The Little Guy.” The current economic climate and worries of working Americans have come to the forefront during this election year, according to the Journal. This has changed lobbying strategies for many groups in Washington. “Folks beat money anytime in a political fight,” House Financial Services Committee Chairman Barney Frank (D-Mass.) was quoted in the story. The current political and public backlash against “Big Banks, Big Oil, and Big Business,” has resulted in many lobbying groups putting their “members and dependents out front—the more Main Street they are, the better,” said the Journal. For example, even the American Bankers Association has begun emphasizing its “local” roots by stressing it represents thousands of community banks that become members after the ABA merged with America’s Community Banks, according to the report. The story called CUNA “a mammoth of the grass roots,” and noted CUNA President/CEO Dan Mica’s heated reaction to the U.S. Treasury’s plan to overhaul the financial regulatory structure. That plan would eliminate the credit union charter as well as the National Credit Union Administration. Mica said any implementation of such a plan would result in the “nuclear option”--a request to all 85 million credit union members to “rally on Capitol Hill, jam lawmakers’ phone lines and inboxes.”

Mica named a top Washington lobbyist

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WASHINGTON (5/6/08)--Dan Mica, president/CEO of the Credit Union National Association (CUNA), has again been named as one of Washington’s top lobbyists by The Hill newspaper’s list. This is the sixth consecutive year Mica has been named to the list. The Hill noted that Mica is working to get legislation passed that would improve the regulation of credit unions. The Credit Union Regulatory Improvements Act (CURIA), supported by CUNA, is H.R. 1537 in the House and was introduced last week in the Senate by Sen. Joseph Lieberman (I-Conn.) as S. 2957. Mica also has spoken out against a Treasury blueprint that would place credit unions and banks under the same regulator and charter. Mica garnered press attention from major media outlets such as The New York Times, The Washington Post, The Associated Press, The Wall Street Journal, CongressDaily and Politico. The Hill’s list of top lobbyists is created based on conversations with aides, other lobbyists and members of Congress. The newspaper covers lobbying and Capitol Hill activities. It is read largely by congressional members and lobbying organizations (News Now May 4, 2007). Other lobbyists to make this year’s list include: Steve O’Connor, Mortgage Bankers Association; Ed Yingling, American Bankers Association; Dan Berger, National Association of Federal Credit Unions; and Camden Fine, Independent Community Bankers of America.

Senators support for CURIA urged

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WASHINGTON (5/6/08)—Each member of 110th Senate is being sent a letter from the Credit Union National Association (CUNA) urging them to support and co-sponsor S. 2957, the Credit Union Regulatory Improvements Act (CURIA). The key credit union legislation was introduced for the first time in the Senate last week by Sen. Joseph Lieberman (I-Conn.). A House version of the regulatory improvements package carries the names of 149 official backers. In urging Senate support, CUNA President/CEO Dan Mica wrote that by co-sponsoring CURIA, lawmakers will be “helping credit unions continue their mission of serving working families, making needed services available to lower-income or underserved consumers, and helping promote economic growth and well being in our nation’s communities.” Beyond that, Mica noted, CURIA will also improve the quality of services to credit union members by updating or removing other burdensome regulations. The letter included an attachment with specific information about important reforms within CURIA. “Credit unions work every day to help improve the lives of millions of Americans from all walks of life. At a credit union, every customer is a member and owner,” Mica told each Senator. “ The mission of credit unions is to serve their members, and as our economy struggles, this mission is more important than ever. We appreciate your past support of credit unions and urge you to show your continuing support by co-sponsoring CURIA,” the letter concluded. Specifically, 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.

House to act on housing bills this week

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WASHINGTON (5/6/08)--Two housing bills aimed at helping troubled borrowers refinance their mortgages are expected to hit the House floor this week. The House goal is to approve its bills in plenty of time to go to conference with the Senate before Memorial Day, according to Ryan Donovan, Credit Union National Association vice president of legislative affairs. Because there are differences between proposed House and Senate legislation, the differences would have to be worked out through a conference committee before the bills could receive final approval and be sent to the White House for the President’s signature. One of the bills headed for House action is H.R. 5818, the Neighborhood Stabilization Act. Introduced by Rep. Maxine Waters (D-Calif.), the bill would provide states and cities with funds to help prevent rising foreclosures in neighborhoods. The second measure would combine:
* H.R. 5720, the Housing Assistance Tax Act of 2008; * H.R. 5830, the Federal Housing Administration Housing (FHA) and Homeowner Retention Act; * H.R. 1852, the Expanding American Homeownership Act of 2007; * H.R. 1427, the Federal Housing Finance Reform Act of 2007; and * H.R. 5579, the Emergency Mortgage Loan Modification Act of 2008.
H.R. 1852 and H.R. 1724 passed the House and H.R. 5579 passed through the House Financial Services Committee April 23. H.R. 1427 deals with government-sponsored enterprises reform, H.R. 1852 deals with FHA reform and H.R. 5579 would provide a legal safe harbor for lenders who modify loan terms for mortgages that have been securitized. H.R. 5720 would give first-time home buyers help making a down payment on a home by giving them a refundable tax credit equal to an interest-free loan to 10% of the home purchase price. H.R. 5830, introduced by House Financial Services Committee Chairman Barney Frank (D-Mass.), would expand the Department of Housing and Urban Development’s program to help at-risk borrowers refinance into more affordable mortgages. The measure was approved by Frank’s committee Thursday.

Inside Washington (05/05/2008)

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* WASHINGTON (5/6/08)--The credit card industry’s increasing complexity urged regulators to create rules that define deceptive and unfair card practices, Federal Reserve Board Chairman Ben Bernanke said (American Banker May 5). The Fed Friday proposed a plan that would protect cardholders from unexpected rate increases on pre-existing card balances. The rules are open for public comment under the Federal Trade Commission Act. Because the rules could potentially increase the cost of credit to consumers, the comment period for the proposal is important, said Donald Kohn, Fed vice chairman ... * WASHINGTON (5/6/08)--The Federal Bureau of Investigation (FBI) and the Internal Revenue Service have created a new task force to investigate mortgages made without solid proof of borrowers’ earnings or assets, a government official said Sunday (The New York Times May 5). The task force also will investigate how brokers and mortgage lenders handled low- and no-documentation loans, and how loans were packaged into securities. The agencies’ original task force, created in January, recently expanded its investigation after information regarding write-downs from bad mortgages began to surface. The group has investigated lending practices of 14 unnamed mortgage companies. In March, the FBI and Justice Department began investigating Countrywide Financial Corp. for financial misrepresentation ... * WASHINGTON (5/6/08)—U.S. Treasury Secretary Henry Paulson Jr. and Charles Schwab, chairman of the President's Advisory Council on Financial Literacy, announced the appointment of several key council officers Monday, including Ted Beck as head of the Committee on Outreach. Beck is CEO of the National Endowment for Financial Education (NEFE)—the Credit Union National Association’s eight-year partner in financial literacy efforts. Monday’s meeting was the second for the 20-member President’s Council, whose mission is to focus exclusively on economic empowerment issues. Also named to leadership positions were: Tahira Hira, Committee on Financial Education Research; John Bryant, Committee on Underserved Populations; Janet Parker, Committee on Financial Education in the Workplace; and Laura Levine, Committee on Financial Education for Youth. Schwab said of the appointments, "The council's new liaison to the commission will help maintain open lines of communication between the private sector and the federal government, and ensure that the two panels are working together toward a common goal."…

Inside Washington (05/02/2008)

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* WASHINGTON (5/5/08)--A vote on a bill that would call for the overhaul of regulation on government-sponsored enterprises (GSEs) was delayed Thursday. The bill was scheduled to be voted on Tuesday (American Banker May 2). Senate Banking Committee Chairman Christopher Dodd (D-Conn.) sent a draft of the bill to Sen. Richard Shelby (R-Ala.) Thursday, but the vote was cancelled. The cancellation also pushes back a separate measure to help borrowers who can’t afford to pay their mortgages on properties worth more than they owe. Shelby is expected to continue working with Dodd to reach a bipartisan consensus on GSE issues ... * WASHINGTON (5/5/08)--Banking industry representatives are working toward legally challenging an agreement Fannie Mae and Freddie Mac made with New York Attorney General Andrew Cuomo (American Banker May 2). The agreement would create new appraisal standards for the enterprises, and in the process of doing so, would violate the Financial Institutions Reform Recovery and Enforcement Act, representatives argued in a comment letter. The Office of Thrift Supervision called the agreement flawed and encouraged the enterprises and the Office of Housing Enterprise Oversight to reconsider. Cuomo has said much of the feedback received on the agreement has been positive ... * WASHINGTON (5/5/08)--Many of the problems from last year’s subprime mortgage debacle have dissipated, Federal Deposit Insurance Corp. Chairman Sheila Bair said Thursday. Bair was a guest on CNBC’s “Squawk Box” (American Banker May 2). The country is likely to continue seeing challenges regarding credit quality, but Bair said she couldn’t predict what would happen next. Last week, Bair proposed a plan that would allow the Treasury to lend to borrowers facing foreclosure, which would let services write down some loans up to 20% ... * WASHINGTON (5/5/08)--Sixteen North Carolina credit union representatives hiked Capitol Hill last week to meet with congressional members. The timing of the meetings with legislators and the debate in the House over the Credit Union Regulatory Relief Act (CURRA) was a coincidence, said Dan Schline, North Carolina Credit Union League senior vice president of association services (Weekly Update May 2). “It adds a real layer of urgency to be able to walk the halls of Congress to make the case for legislation,” he said. On Thursday, Sen. Joseph Lieberman (I-Conn.) introduced the Credit Union Regulatory Improvements Act (CURIA) in the Senate. Credit union representatives from New York, New Jersey, Rhode Island and the Mid-America Credit Union Association will hike the Hill May 13-14. Representatives from Texas and South Carolina will hike the Hill May 20-22 ...

CUNA NAFCU file brief in conversion lawsuit

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WASHINGTON (5/5/08)—A lower court ruling dismissing the Coalition for Credit Union Charter Option’s (CCUCO’s) legal challenge against the National Credit Union Administration (NCUA) should be upheld on appeal, said the Credit Union National Association (CUNA) and the National Association of Federal Credit Union (NAFCU) in a joint amicus brief. CUNA General Counsel Eric Richard said of the case, “So far, CCUCO's lawsuit has gotten nowhere, and we think that is for good reason. We are urging the Fourth U.S. Circuit Court of Appeals to affirm the decision of the district court." The brief, filed Friday, noted that the plaintiff has repeatedly failed to show it has standing in the case that challenges the NCUA’s conversion regulations. CCUCO, it argues, has not produced a single member that has been or will be injured by the NCUA conversion rule CCUCO is protesting in court. The joint brief says that CCUCO has failed to:
* Demonstrate that it is an organization capable of asserting associational standing; and * Identify a single credit union member that would have standing in its own right.
“The Coalitions’ complaint did not identify any of its alleged credit union members, let alone any specific members that have been injured by the challenged regulations,” the amicus brief argues. “Nor did the Coalition disclose to the district court (or to this court) that its ‘members’ also include banks and companies serving banks.” Those omissions, the brief asserts, may “suggest the possibility that the Coalition is not acting as a representative of its alleged credit union members but rather is a stalking horse for members of the thrift banking and mutual savings bank conversion industries that seek to encourage credit unions to convert to banks.”

Mica outlines next step for CURRA

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WASHIGNTON (5/5/08)—The Credit Union National Association (CUNA) met Friday with House Financial Services Committee Chairman Barney Frank (D-Mass.) and his staff to address the next steps for the Credit Union Regulatory Relief Act (CURRA, H.R. 5519). CUNA President/CEO Dan Mica said the session was productive and discussions lasted about an hour. Mica noted after the meeting that the bill now is in the hands of the committee chairman. “There is nothing more we can do at this time for CURRA,” Mica said. “Our focus has turned completely to the broader Credit Union Regulatory Improvements Act, known as CURIA in both the House and Senate.” The package has 149 sponsors in the House and was introduced in the Senate just last week by Sen. Joseph Lieberman (I-Conn.).

Political issues rally all cooperatives says Mica

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WASHINGTON (5/2/08)--Credit Union National Association (CUNA) President/CEO Dan Mica thanked the co-op community for its grassroots support of the Credit Union Regulatory Relief Act (CURRA, H.R. 5519) and urged the co-ops to continue to make their voices heard on political issues of concern.
Click to view larger image CUNA) President/CEO Dan Mica speaks Thursday at the National Cooperative Business Association annual meeting. (Photo provided by NCBA)
Addressing the National Cooperative Business Association (NCBA) annual meeting in Washington, Mica noted NCBA CEO Paul Hazen put out a call to action early this week to the association’s members, which include not only credit unions but co-ops from all sectors, including agriculture, energy, food, and housing. NCBA members responded with energy and enthusiasm. Although no floor vote occurred after CURRA was taken off the House suspension calendar, Mica stressed the lobbying efforts continue. “It’s not over; we will win the battle,” he said, adding that the banks have no cause to celebrate. “The bankers were denied a victory when their regulatory relief bill got pulled first.” The bankers’ bill never made it to the suspension calendar after they had decided to oppose CURRA. Mica also offered strong praise for the cooperative business model. “The private sector cannot succeed if society fails,” he said, quoting former United Nations Secretary General and world leader Kofi Annan. Added Mica: “We’re part of what brings society together. We are driven by different motives.” Asked to give a political prognostication on the 2008 race, the CUNA leader said if the election were held today he believes House Democrats would pick up 25 to 30 seats, Senate Democrats would pick up five to seven seats, and U.S. Sen. John McCain (R-AZ) would be elected president due to the damage Democratic Sens. Hillary Clinton and Barack Obama are inflicting on one another. But, referring to a point he made in one of the monthly "K Street Insider" columns he writes for The Hill newspaper, Mica emphasized the unpredictability of politics and that today's likely scenario could change "a dozen more times" between now and election day. At the time he wrote that column in The Hill back in November, Mica recalled, the wisdom of the day was that Clinton was a sure thing and former New York Governor Rudy Guiliani would get the Republican nomination. He closed by calling on the co-op representatives to stay politically active and involved. Referring to credit unions’ 90 million members he said, “It’s not millions; it’s people being involved, one at a time, making a difference.”

Inside Washington (05/01/2008)

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* WASHINGTON (5/2/08)--The National Association of State Credit Union Supervisors (NASCUS) and state regulators worry that a proposal by the National Credit Union Administration could damage the state-chartered credit union system. NASCUS and 28 agencies signed a comment letter to NCUA emphasizing the proper role of state authority in regards to an NCUA Advanced Notice of Public Rulemaking (ANPR). The ANPR seeks comment on whether the NCUA should set rules on mergers, conversions and termination of insurance for credit unions that are federally insured. There is no authority for application of the ANPR to state-chartered credit unions and the proposal could damage state law and the dual chartering system, the letter said. Some state issues are “better left to state laws and regulation,” the agencies said ...

FinCEN warns of money laundering trend

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WASHINGTON (5/2/08)—Suspicious activity reporting by credit unions and banks has enabled the Financial Crimes Enforcement Network (FinCEN) to identify a new money laundering trend involving the residential real estate industry. A recent FinCEN study has confirmed an increase in the number of Suspicious Activity Reports (SARs) that indicate suspected money laundering in the industry which tracks closely with the past expansion of the real estate market, especially in the 2004-2005 period. FinCEN noted in a release that its previous studies have found similar trends in mortgage lending where criminals seek to profit by committing mortgage fraud. In contrast, FinCEN said, the new trend involves those who seek to launder money through residential real estate and generally intend to make timely payments. They strive to make their transactions appear as unremarkable as possible in order to disguise the source of their funds Nichole Seabron, federal compliance counsel for the Credit Union National Association, said Thursday that the FinCEN's report shows that U.S. financial institutions have been able to identify possible instances of money laundering through residential real estate. The report, she added, is intended to help raise awareness of this vulnerability and to assist credit unions, banks and thrifts to better recognize the risks involved in this activity.

bNEW CURIA bill introduced in Senateb

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WASHINGTON (5/1/08, UPDATED 3 p.m. ET)--Sen. Joseph Lieberman (I-Conn.) introduced a Senate version of the Credit Union Regulatory Improvements Act (CURIA, S. 2957) Thursday, putting the key credit union legislation a giant step forward in the legislative process. The Credit Union National Association (CUNA) lauded Lieberman’s action saying the senator has “demonstrated determination and conviction in his support for consumer-owned credit unions” by introducing his bill. CUNA President/CEO Dan Mica said, “Through his action, consumers have the hope of more choices in services, as well as the promise of continued strength, for the credit unions that they own and direct. “Our sincere thanks and gratitude to Sen. Lieberman. We look forward to working with him, and other senators, as this important legislation gains support and eventual passage in the Senate,” said Mica.
Click to view larger image U.S. Sen. Joe Lieberman (I-Conn.), left, and CUNA President/CEO Dan Mica backstage before Lieberman addressed the March 6 closing closing general session of the 2008 CUNA Governmental Affairs Conference in Washington. (Photo provided by Robert Knudsen)
It was at the CUNA Governmental Affairs Conference in March that Lieberman said he recognized the importance of the Credit Union Regulatory Improvements Act to credit unions and pledged to be an original sponsor of a Senate version of H.R. 1537. The House bill currently sports the names of 149 members of the House as its official sponsors. Among changes proposed by the bill, which is substantively identical to the House version, CURIA would:
* Clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit; * Increase the current cap on loans to members for business purposes (MBLs) from 12.25% to 20% of assets, allowing credit unions to assist more members start and expand small businesses and to promote economic growth. The bill would also exempt loans under $100,000 and those to nonprofit religious organizations from the MBL calculation; * Establish additional consumer safeguards in the event of a credit union conversion to another form of financial institution; and * Reform the National Credit Union Administration's original prompt corrective action system to a risk-based approach more closely resembling the current Federal Deposit Insurance Corp. capital standard for banks.

NCUA issues joint plan on unfair deceptive practices

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WASHINGTON (5/2/08) — The National Credit Union Administration (NCUA) Thursday approved a joint proposed rule to ban unfair and deceptive credit card and overdraft practices under the Federal Trade Commission Act. Once the proposal is published in the Federal Register, it will be open for public comment for 75 days. The Office of Thrift Supervision approved a substantively identical plan for thrifts and the Federal Reserve Board was expected to follow with a similar action for banks within a day. The proposal is similar to recent bills introduced in Congress and intended to address certain credit card practices. The Credit Union National Association’s regulatory advocacy staff is reviewing the regulatory proposal in detail, but it appears upon initial review that not all of the provisions would impact credit unions, according to Jeffrey Bloch, senior assistant general counsel. Bloch also noted that Congress has urged opt-in provisions for overdraft programs and the regulatory proposal does not go that far. It instead proposes to give accountholders and opportunity to opt out of such programs. The joint plan is intended to address practices that have raised concern about fairness and transparency. For credit cards, the proposal would address the following seven areas:
* Unfair time periods for making payments; * Unfair payment allocations; * Unfair interest rate increases on outstanding balances; * Unfair fees from credit holds; * Unfair methods of computing balances; * Unfair security deposits and fees charged to an account for the issuance of credit; and * Deceptive offers of credit.
For overdraft protection services on deposit accounts, the proposed rule would address:
* A consumer’s ability to opt out of overdraft services; and * Unfair fees for debit holds.
As each agency approves the plan, they will post the proposal to their respective websites. The NCUA indicated the plan will be available this afternoon at approximately 2:30 p.m. on NCUA’s website. Although the Federal Trade Commission has authority in this area over state-chartered credit unions and will not be issuing a proposal at this time, it is anticipated that state-chartered credit unions will likely be expected to follow the new rule. CUNA’s Consumer Protection Subcommittee will review the joint proposal closely to assess whether the means of allowing the overdraft program opt-out do not impose unnecessary burdens on credit unions. Also, the subcommittee will review the proposed banned credit card practices to determine if there will be unanticipated consequences for credit unions and their members.

Compliance More hold notices not necessarily a nightmare

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WASHINGTON(5/2/08)—The rising number of exception hold notices to members, and the attendant recordkeeping, does not mean a credit union manager is doomed to be buried in paperwork, according to the Credit Union National Association’s Compliance Challenge. A recent Challenge points out that the pertinent regulation does not require that every piece of paper in such a transaction end up in the files. The credit union must retain a record of each exception hold notice only when it invokes the “reasonable cause to doubt collectibility exception.” At issue is Regulation CC Section 229.13(g)(1). It requires credit unions to provide a notice to members when the credit union extends the time when funds will be available based on one of the exceptions, such as new accounts, large deposits, redeposited checks, repeated overdrafts, or when there is reasonable cause to doubt collectibility. The section requires the notice be provided to the member at the time of the deposit, unless the deposit is not made to an employee of the credit union, or if facts on which upon which the decision to invoke an exception hold do not become known until after the deposit. If the credit union invokes the questionable collectibility standard, it must retain a record describing the circumstances that led to the decision. The record must be kept for two years.

House committee votes yes on housing assistance bill

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WASHINGTON (5/2/08)—With a 46-21 vote, the House Financial Services Committee Thursday approved the FHA Housing and Homeowner Retention Act (H.R. 5830). The bill, first announced by the committee’s chairman, Rep. Barney Frank (D-Mass.) in March, proposes to expand the Department of Housing and Urban Development's FHA program to help refinance at-risk borrowers into viable mortgages. H.R. 5830 would provide funding for the refinancing of up to $300 billion in existing mortgages that are considered foreclosure risks. It would also require the Federal Reserve Board to conduct a study on the need for an auction or bulk refinancing mechanism. Frank issued the following statement after the vote: “It is important that we reduce the number of foreclosures both as a matter of alleviating the pain for some individuals and stabilizing some neighborhoods. It is my hope that this legislation will restore some stability to the housing market, put liquidity back in the market, and not interfere with the market, but help restore it. “Servicers should put a pause in some foreclosures until they can wait to see exact details of this as it moves forward. If after this we continue to get very little participation by servicers, I can guarantee you that the servicer industry will look very different a year from now than they do today. If after everything we do in this cooperative way falls short, then you are going to see legislation that puts some very real restrictions on the role of servicers and give many more rights to the borrowers.” The bill is expected to go to a vote on the House floor next week.

CUs key relief bill introduced in Senate

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WASHINGTON (5/2/08)--Sen. Joseph Lieberman (I-Conn.) introduced a Senate version of the Credit Union Regulatory Improvements Act (CURIA, S. 2957) Thursday, putting the key credit union legislation a giant step forward in the legislative process. The Credit Union National Association (CUNA) lauded Lieberman’s action saying the senator has “demonstrated determination and conviction in his support for consumer-owned credit unions” by introducing his bill. CUNA President/CEO Dan Mica said, “Through his action, consumers have the hope of more choices in services, as well as the promise of continued strength, for the credit unions that they own and direct. “Our sincere thanks and gratitude to Sen. Lieberman. We look forward to working with him, and other senators, as this important legislation gains support and eventual passage in the Senate,” said Mica.
Click to view larger image U.S. Sen. Joe Lieberman (I-Conn.), left, and CUNA President/CEO Dan Mica backstage before Lieberman addressed the March 6 closing closing general session of the 2008 CUNA Governmental Affairs Conference in Washington. (Photo provided by Robert Knudsen)
It was at the CUNA Governmental Affairs Conference in March that Lieberman said he recognized the importance of the Credit Union Regulatory Improvements Act to credit unions and pledged to be an original sponsor of a Senate version of H.R. 1537. The House bill currently sports the names of 149 members of the House as its official sponsors. Among changes proposed by the bill, which is substantively identical to the House version, CURIA would:
* Clarify the 1998 Credit Union Membership Access Act to allow all credit unions, regardless of charter type, to serve those in underserved areas. The bill would also update the definition of an underserved area, incorporating definitions from the Community Development Financial Institutions Act and the New Markets Tax Credit; * Increase the current cap on loans to members for business purposes (MBLs) from 12.25% to 20% of assets, allowing credit unions to assist more members start and expand small businesses and to promote economic growth. The bill would also exempt loans under $100,000 and those to nonprofit religious organizations from the MBL calculation; * Establish additional consumer safeguards in the event of a credit union conversion to another form of financial institution; and * Reform the National Credit Union Administration's original prompt corrective action system to a risk-based approach more closely resembling the current Federal Deposit Insurance Corp. capital standard for banks.

FDIC plan places U.S. as direct lender

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WASHINGTON (5/2/08)—The Federal Deposit Insurance Corp. is asking Congress to consider a whole new approach to helping homeowners with mortgages that have become unaffordable: Allow the U.S. Treasury Department to make direct loans to help pay down as much as 20 % of the principal of a troubled loan. FDIC Chairman Sheila Bair said in a statement that her plan is “scaleable, administratively simple, and will avoid unnecessary foreclosures to help stabilize mortgage and housing prices.” Under the proposal, which Bair said is designed to result in no cost to the government, the Treasury could provide Home Ownership Preservation (HOP) loans. Eligible, unaffordable mortgages could be paid down to the cap and restructured into fully-amortized, fixed-rate loans for the balance of the original loan term at the lower balance. The new interest rate would be capped at Freddie Mac 30-year fixed rate and the restructured mortgages could not exceed a debt-to-income ratio for all housing-related expenses greater than 35% of the borrower's verified current gross income. Prohibited would be such things as prepayment penalties, deferred interest, or negative amortization are barred. The FDIC indicated that mortgage investors would pay the first five years of interest due to Treasury on the HOP loans when they enter the program. After 5 years, borrowers would begin repaying the HOP loan at fixed Treasury rates. Servicers would agree to periodic special audits by a federal banking agency. Some observers were reported (American Banker, May 1) as noting that the FDIC plan comes too late in the government’s process of developing plans to deal with the subprime mortgage situation to be able to get much traction. They opined that some version of the FHA plan backed by both House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn,) is more likely to be passed by Congress.