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Inside Washington (05/29/2009)

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* WASHINGTON (6/1/09)--The Obama administration has sent up a “trial balloon” for a plan to revamp regulation of the nation’s financial institutions into a single entity, and critics have rendered it as “dead on arrival.” In a Tuesday interview, House Financial Services Chairman Barney Frank (D-Mass.) said there is little chance Congress would pass such a plan (American Banker May 29). Under the Treasury Department’s plan, the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board would continue to exist, but would have other responsibilities, though FDIC would continue to insure deposits. The American Banker article explored the issue in a “frequently asked questions” format. It asked how the plan would undermine the dual banking system and how it would be better than the current system in place ... * NORWALK, Conn. (6/1/09)--The Financial Accounting Standards Board (FASB) may not issue a final rule on enhanced disclosures for fair value measurements until mid-November, although its original intent was to have it out either the second or third quarter of the year. FASB’s technical director said May 27 that the board’s plan to debut the strengthened disclosures during an informal trail period would push back the originally planned timeframe. The test disclosure documents have yet to be drafted. The idea behind the trail is to discover, prior to a final vote, whether the revised disclosure requirements would be practicable for a range of entities. (BNA, Inc. Daily Report for Executives May 28)… * WASHINGTON (6/1/09)--The Federal Reserve Board’s Consumer Advisory Council will meet June 18. As time permits, the council will discuss the following subjects: The future of the Community Reinvestment Act; the impact of credit scoring on the credit environment, and related issues; neighborhood and community stabilization strategies; foreclosure prevention, the performance of modified mortgages, and other issues related to foreclosures; and reports by committees and other matters. The advisory council’s main function is to advise the Fed board on its responsibilities under various consumer financial services laws… * WASHINGTON (6/1/09)--The Federal Deposit Insurance Corp. (FDIC) has tightened its rate restrictions for institutions that are less than well capitalized. The Federal Deposit Insurance Act requires the FDIC to prevent banks that are less than well capitalized from seeking deposits at rates significantly higher than prevailing rates. Currently, the FDIC ties these permissible interest rates on deposits solicited nationally to the comparable maturity Treasury yield. Interest rates on deposits solicited locally are tied to undefined prevailing local interest rates. “The subjectivity in our current rule is allowing some weak banks to drive up costs for the rest of the industry,” said FDIC Chairman Sheila Bair in a release. “Supervisors and banks need a simpler and more objective tool for achieving the statutory goal. “Starting Jan. 1, the FDIC’s final rule will define nationally prevailing deposit rates as a direct calculation of those national averages, as computed and published by the FDIC based on data available to it. The rule applies only to the small minority of banks that are less than well capitalized… * WASHINGTON (6/1/09)--The Small Business Administration (SBA) announced Thursday it will guarantee loans to finance inventory for auto, recreational vehicle, boats and other dealerships beginning July 1. The Dealer Floor Plan can “offer some dealerships the opportunity to get through these tough economic times by allowing them to keep their inventory and cash flow intact, as well as save the jobs these small businesses provide,” said SBA Administrator Karen Mills. The program will be available through Sept. 30, 2010, when SBA will decide whether to continue the program. Loans will be available for a minimum of $500,000 up to $2 million under the 7(a) program ... * WASHINGTON (6/1/09)--Clara Pratte will serve as national director for the Small Business Administration’s Office of Native American Affairs. Pratte will work to ensure that American Indians, Native Alaskans and Native Hawaiians have the tools they need to create, develop and expand small businesses. Pratte previously worked for the Navajo Nation as a policy analyst and legislative liaison. She also was employed by the Department of Commerce at the International Trade Administration as a trade specialist in the U.S. Foreign and Commercial Service. She is an enrolled member of the Navajo Nation ... * WASHINGTON (6/1/09)--The Federal Deposit Insurance Corp. (FDIC) board approved creating an FDIC advisory committee on community banking to provide the agency with guidance on policy issues that impact small community banks. The committee is expected to look into issues including examination policies and procedures, credit and lending practices, deposit insurance assessments, insurance coverage issues, regulatory compliance matters and obstacles preventing the growth of the banks. Paul Nash, deputy to the chairman for external affairs, has been named as the designated federal official for the committee ...

NCUA sets webinar on new law implementation

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ALEXANDRIA, Va. (6/1/09)--The National Credit Union Administration (NCUA) will present its guidance on implementing its new corporate credit union stabilization plan in a webinar scheduled for June 24. The webinar will follow the NCUA’s June 18 board meeting, and will give participating credit unions an opportunity to have their questions answered directly by NCUA staff. NCUA Chief Financial Officer Mary Ann Woodson has said that she would analyze the financial impact that the newly enacted provisions would have on the agency. Once completed, the results of this analysis will be reported to the NCUA board, and will also be released to the public. The corporate stabilization plan, which President Barack Obama signed into law as part of S. 896, increases NCUA’s borrowing authority to $6 billion, with a possible further extension to $30 billion under exigent circumstances. The stabilization plan will also allow credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) 1% deposit replenishment over seven years. Credit unions will also be granted up to eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Additionally, any impairments related to the NCUSIF replenishment may be booked over a seven-year period. The NCUA has provided the Credit Union National Association (CUNA) with further information the estimated credit losses sustained due to WesCorp and U.S. Central’s investments in mortgage-backed and asset-backed securities after CUNA submitted a request under the Freedom of Information Act. CUNA is also filing a follow-up request that would seek more data on the losses.

CUNA to CUs Compliance efforts should focus on new card rules

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WASHINGTON (6/1/09)—Recently enacted credit card laws overlap with the Federal Reserve’s Regulation Z rules and the National Credit Union Administration’s (NCUA) unfair and deceptive acts or practices rules (UDAP) that were issued last year. The Credit Union National Association (CUNA) recommends that credit unions focus on the new law with regard to their efforts to be in compliance with Reg. Z amendments and UDAP requirements. Portions of the credit card law, which was signed by President Barack Obama in May, contain requirements that are similar to those set forth by Regulation Z. Reg Z provides guidelines for the disclosure of the terms and cost of many types of consumer loans, and UDAP, which seeks to govern certain credit card and loan business practices. However, the new law will also push many effective dates forward, with some provisions entering into force in 9 months and others becoming effective within 90 days. Also, the requirements under the new law will be implemented under the Truth in Lending Act, and not under the UDAP statute. "Credit unions should focus now on complying with the new credit card law and follow these provisions to the extent that they differ from the rules that were issued last year, while also keeping in mind the new effective dates," CUNA Senior Assistant General Counsel Jeffrey Bloch has advised. He has noted that the Fed is expected to review and make changes to their new rules as part of the normal rulemaking process. However, specific guidance is not expected before that time. The Fed, the NCUA, and the Office of the Comptroller of the Currency are holding ongoing discussions on the status of the recent UDAP rules, which may include withdrawing the UDAP rules. The UDAP rules, if they remain in place, would have to be reworked to ensure consistency with the new laws. The agencies could work together or work separately to discuss any conflicts within the rules. The Fed has said that they are receptive to any questions or comments that may arise and they will work with CUNA to resolve possible compliance issues for credit unions. CUNA will hold an audio conference call on these issues on June 18. CUNA is also working on resource materials comparing elements of Reg. Z and UDAP to the new credit card laws, and will present them shortly.

CUNA CEO addresses CU stabilization plan concerns

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WASHINGTON (6/1/09)—Although he said he could not fully predict what the implementation of the National Credit Union Administration’s (NCUA) corporate stabilization plan would mean for credit unions, Credit Union National Association (CUNA) President/CEO Dan Mica answered some of the most frequently mentioned concerns in a recent letter to credit union officials. The NCUA’s current plan, which was signed into law by President Barack Obama on May 21, would allow credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time, with a total of eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. In the letter, Mica estimated that credit unions could be charged a premium of 10-15 basis points of insured shares this year. The amount of future insurance premiums could increase, decrease, or remain the same. The exact amount of the premiums would “depend on what the actual losses turn out to be on the securities held by the corporates, and by the extent of insurance losses from any difficulties that arise from natural person credit unions,” according to CUNA estimates. While many credit unions have said that they would “just as soon pay the losses” and write down their NCUSIF-related costs all at once, CUNA believes that spreading out the cost over time is doing a service to all credit unions, including those that have been hit hard by the economic crisis. Also, any write downs that have already been made will likely need to be reversed, as the affected deposits will no longer be impaired. NCUA has not announced exactly when credit unions will need to make any adjustments to their accounting, but CUNA believes that all federally insured credit unions will apply the same accounting methods to their NCUSIF costs by years end. The NCUA is expected to address NCUSIF implementation at its next board meeting, scheduled for June 18.

CUNA analyzes new Fed check processing changes

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WASHINGTON (6/1/09)—An analysis of a final rule addressing restructuring of the Federal Reserve’s check processing operations in regions 4 and 9 is now available on the Credit Union National Association’s (CUNA) website. The CUNA analysis addresses the Fed’s recently issued final rule amending appendix A of Regulation CC to rework some of the Fed’s check processing operations. Appendix A of Regulation CC helps financial institutions divide local from non-local checks by providing a routing number guide. Under the Fed amendments, a check processing facility in Minneapolis, Minn., which is located within federal reserve region 9, will be closed, and all checks that were routed to that processing facility will now instead be routed to the Cleveland Reserve Bank, which is in fed region 4, effective July 25, 2009. This change is expected to shorten the permissible hold period of some checks from that region, and some credit unions may need to change their availability schedules and related disclosures. Credit unions may also need to notify their members of these changes. Use the resource link below for the full analysis.

Inside Washington (05/28/2009)

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* WASHINGTON (5/29/09)--The Federal Reserve Board is not releasing details from regulatory reports that Discover Financial Services filed during the first quarter (American Banker May 28). Discover--a bank holding company as of December--told the Fed it will include information in its filing that is not already public. The Fed said in a letter May 19 that it would grant Discover confidentiality treatment regarding the card company’s first-quarter financials report. The Fed has taken similar actions with GMAC ... * WASHINGTON (5/29/09)--Treasury Secretary Tim Geithner Wednesday announced $1.5 billion in New Markets Tax Credit (NMTC) awards for 32 organizations. Among the recipients are JPMorgan Chase and Co. and Capital One Financial Corp. The NMTC Program injects private-sector capital investment into communities to create jobs, stimulate economic growth and jumpstart the lending necessary for financial stability. The NMTC Program, established by Congress in December 2000, permits individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in Community Development Entities ...

Remittance GSEs future are hearing topics

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WASHINGTON (5/29/09)—House Financial Service subcommittees will soon begin discussions on a pair of issues of importance to credit unions, with hearings scheduled for Wednesday, June 3. The first hearing, entitled "Remittances: Regulation and Disclosure in a New Economic Environment," will be held before the House subcommittee on financial institutions and consumer credit at 10 a.m. IRNet, a remittance service created by a World Council of Credit Unions (WOCCU)-related services group in 2001, currently serves 109 U.S. credit unions and has facilitated the transfer of $80 million in 148,000 separate remittance transactions between credit unions in the U.S. and foreign nations. WOCCU last week predicted that the total number of remittances to the Caribbean and Latin America would likely decline in 2009 due to the global economic downturn. (See related May 21 story: Expect decline in remittances for 2009.) A second hearing, scheduled by the House subcommittee on capital markets, insurance, and government-sponsored enterprises, will discuss the current and future condition of government-backed mortgage lenders Fannie Mae and Freddie Mac. The hearing will take place in the Rayburn House Office Building at 2 p.m. Witness lists for both hearings were not available to the public at press time.

CUNA Would account date improve credit reports

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WASHINGTON (5/29/09)—Tucked into recently approved final rules to improve the accuracy of consumer credit reports, federal financial regulators included guidelines on developing procedures to ensure the integrity of information provided to credit bureaus. The regulators seek comment on those guidelines. The final rules were developed under the Fair and Accurate Credit Transactions (FACT) Act, which also required the National Credit Union Administration (NCUA), the other federal financial institution regulators, and the Federal Trade Commission to issue policy and procedure guidelines. The Credit Union National Association (CUNA) is asking credit unions to comment on the agencies’ advance notice of proposed rulemaking (ANPR) on the guidelines. The ANPR specifically requests comment on whether furnishers of consumer information should provide to credit bureaus the date that an account is opened in order to promote the integrity of the information since this may indicate a long-standing credit history, which may result in a higher credit score for the consumer. The ANPR also requests whether comment on what other information should be provided as a means to ensure the integrity of the credit information. Comments are due to CUNA by July 20. Use the resource link below to read CUNA’s complete Comment Call.

New CU reporting regs should treat training security concerns

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WASHINGTON (5/29/09)—Although the Credit Union National Association (CUNA) supports the gains in efficiency, accuracy, and security that the National Credit Union Administration’s (NCUA) plan to modernize the credit union reporting system intends to create, CUNA has asked the NCUA to ensure that any potential deficiencies in software or personnel training will be addressed. In a recent comment letter, CUNA said that NCUA should grant credit unions the time needed to sufficiently train their employees on how to best use the new system, which will require federally-backed credit unions to submit their reports and other information to NCUA over the internet. According to NCUA’s proposed adoption schedule, natural person credit unions will adopt the new system during the third quarter of this year, with corporate credit unions set to adopt sometime in 2010. NCUA should also provide technical support, even if that support is only available during the early implementation stages of the new program. CUNA also supports NCUA policies that would ensure that the sensitive information held by federally-insured credit unions is properly secured throughout the reporting process. Use the resource link below to access the complete CUNA comment letter.

CUNA issues comment call for new SBA rules

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WASHINGTON (5/29/09)—The Credit Union National Association (CUNA) has issued a regulatory comment call on the U.S. Small Business Administration's (SBA) proposal to change the size criteria of businesses eligible for the SBA’s 7(a) guaranteed business loan program. The revised rule would extend 7(a) loans to small businesses with a net worth of $8.5 million or less, a move that could grant eligibility to as many as 70,000 additional small businesses. The changed standard would only apply until Sept. 30, 2010. CUNA is asking for industry comment on whether or not credit unions support this changed size requirement and if the changed rules should be extended beyond September 2010. Comments are due to CUNA by July 22. For more information, use the link.

Adjusted ROA shows slightly negative results

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ALEXANDRIA, Va. (5/29/09) The National Credit Union Administration (NCUA) issued an adjusted first-quarter credit union financial report Thursday that shows the return on average assets (ROA)—with corporate credit union stabilization expenses factored out—would be very slightly negative at 0.01 %. The revised release clarifies that when federally insured credit unions’ National Credit Union Share Insurance Fund (NCUSIF) costs associated with corporate stabilization expenses are taken out, the return on average assets would be negative 0.01%. The NCUA said it considers the revised ROA figure “indicative of credit union performance.” Provisions within the Helping Families Save Their Homes Act, signed into law May 21, allow credit unions to spread the cost of NCUSIF replenishment over a longer period of time, with a total of eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period.

Membership assets savings up net worth drops as expected

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ALEXANDRIA, Va. (5/28/2009)—Although fewer loans were issued, the National Credit Union Administration (NCUA) Wednesday reported a double-digit increase in overall member share accounts among its 7,749 federally insured credit unions during the first three months of 2009. The NCUA also reported the return-on-average-assets (ROA) ratio declined from negative 0.01% at yearend 2008 to negative 1.51% at the end of March. However, the NCUA’s reported ROA decline does not consider what earnings would have been absent the NCUA’s corporate stabilization costs, which can be spread out under provisions signed into law last week. CUNA economists estimate with that taken into account, ROA would have been close to break even. Lending growth overall was essentially flat, with mortgage lending staying apace with other loan products that showed little or negative growth, primarily as a result of historically low home loan rates. Yet, credit unions continued to maintain strong capital levels, at close to 10%, despite a slow economy and the expense of the corporate stabilization program. In a statement accompanying the release of the quarterly figures, NCUA Chairman Michael Fryzel said that credit union members were “strong depositors, posting gains in every category” of member share and savings accounts during the 2009 first quarter. Fryzel noted that credit unions’ continued strong capital levels came despite negative effects of the still-troubled economy and the estimated costs associated with National Credit Union Share Insurance Fund replenishment for corporate stabilization costs. Credit union financial positions overall will be substantially improved by the aforementioned, recently signed law that allows credit unions to spread costs associated with the NCUA’s stabilizations efforts over seven and eight years. Also noted in the report, the net worth of federally insured credit unions declined by 3.9% percent during the quarter, to a total of $83.1 billion. By the numbers, the total assets held by federally chartered credit unions increased by 5.6% to a total of $856.4 billion. Total investments increased by 14.5%t and shares increased by 6.4%, for totals of $189.8 billion and $724.5 billion, respectively. Share drafts increased by 6.7%, regular shares increased by 7.9%, money market shares increased 8.2%, share certificates grew 3.9%, and IRA/KEOGH accounts rose by 6.5%, NCUA said. Credit unions’ overall loan delinquency rate showed the smallest quarterly increase in more than a year, to 1.44% at March 31 up from 1.37% at year-end 2008.

Inside Washington (05/27/2009)

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* WASHINGTON (5/28/09)--The Federal Reserve Board Wednesday approved amendments to Appendix A of Regulation CC regarding the restructuring of check processing operations. On July 25, the banks will transfer the check-processing operations of the head office of the Federal Reserve Bank of Minneapolis to the head office of the Federal Reserve Bank of Cleveland ... * WASHINGTON (5/28/09)--In advance of the Treasury’s anticipated July release of a regulatory restructuring package, an independent and nonpartisan research organization offered a list of 57 recommendations for financial structure (American Banker May 27). The Committee on Capital Markets Regulation, which comprises 25 leaders from the investor, business, finance law accounting and academia communities, recommends establishing a Financial Services Authority to oversee the financial system and giving the Fed the power to oversee systemically important institutions. It also calls for increasing disclosures for investors and of bank metrics, and listing and trading of credit default swaps on exchanges ... * WASHINGTON (5/28/09)--Sen. Jack Reed (D-R.I.) expressed concerns about private-equity firms purchasing failing banks in a letter he sent to banking regulators and the Treasury Department last week. The purchases represent another “dangerous” example of institutions and firms shopping around a risky activity until they find a regulator who will allow it, he said. Last week, the Federal Deposit Insurance Corp. said it would provide guidance on the matter ... * WASHINGTON (5/28/09)--About 102 lenders have been kicked out of the Federal Housing Administration’s (FHA) single-family mortgage insurance program for violations. The Department of Housing and Urban Development (HUD) said it would crack down on lenders who do not meet high standards of conduct (National Mortgage News May 27). For example, Hogar Mortgage and Financial Services Inc. was suspended by HUD from making loans for five years. The lender also must pay a $151,000 fine. Hogar violated FHA underwriting requirements. Of its 680 FHA loans, 19 defaulted or resulted in a claim ... * WASHINGTON (5/28/09)--In a op-ed Wednesday, Washington Post business and economic columnist Steven Pearlstein blasted Comptroller of the Currency John Dugan for saying that a special assessment by the Federal Deposit Insurance Corp. (FDIC) was unfair to large banks, and for “running interference for the big banks he is supposed to regulate.” Dugan remains in denial about his agency’s role in the financial crisis, according to Pearlstein. Dugan had rejected an idea by FDIC Chair Sheila Bair to impose an assessment fee to replenish the FDIC reserve fund, which has been depleted by bank failures. It irked Dugan that the burden for supporting the fund would be placed on the bigger banks instead of on community and regional institutions, Pearlstein said ... * WASHINGTON (5/28/09)--Some banks are asking the government if they can use public money to purchase bad bank assets. The banks are lobbying to bid on assets for sale under the government’s Public Private Investment Program (PPIP). Specifically, the banks are interested in the Legacy Loans Program, which will use the PPIP infusion to sell whole loans, including commercial and residential mortgages (The Wall Street Journal May 27). Officials haven’t said if banks can buy and sell loans yet. Some critics say that if banks are allowed to bid on the assets, they will benefit from taxpayer money. PPIP, expected to launch this summer, was established to sell bad bank assets to private investors in exchange for financial aid ...

Bank earnings low but best in a year

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WASHINGTON (5/28/09)—Although bank and thrift earnings were down more than 60% from a year ago, the Federal Deposit Insurance Corp. (FDIC) reported Wednesday that net income for its federally insured institutions for the first quarter of 2009 was the best it’s been in four quarters. Net income for the January 1-to-March 31 period was $7.6 billion, down $11.7 billion, or 60.8%, from the $19.3 billion the industry earned in the first quarter of 2008. However, the picture looks brighter when compared to the reported $36.9 billion of losses in the fourth quarter of last year. The FDIC attributed the year-to-year earnings drop, in part, to higher loan-loss provisions, increased goodwill write-downs, and reduced income from securitization activities. The agency said three out of five insured institutions reported lower net income in the first quarter and one in five was unprofitable. The FDIC’s Quarterly Banking Profile also reported that the agency’s Deposit Insurance Fund (DIF) reserve ratio fell to 0.27%, a decline from 0.36% of insured deposits. Other points of interest:
* The FDIC has set aside $28 billion in reserve to cover projected losses for the next 12 months; * The FDIC will collect more than $8 billion in premiums during the second quarter, including $5.6 billion from the special assessment the FDIC Board approved on May 22; and * Insured deposits increased 1.7% in the quarter -- approximately $82 billion -- and are up 9% over the last 12 months.
FDIC Chairman Sheila Bair said in a release that the growth in insured deposits is a “vote of confidence from bank customers” who “obviously see the value of the FDIC guarantee." The National Credit Union Administration released comparable figures regarding first-quarter performance by federally insured credit unions Wednesday. (See related story: CU membership, assets, savings grow; net income down.)

Discord could delay regulatory reforms

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WASHINGTON (5/28/09)-- U.S. Treasury Secretary Timothy Geithner has promised to present a comprehensive blueprint for regulatory reform in the coming weeks, saying in a recent interview with Bloomberg TV that he wanted people to “be able to look at the whole” plan all at once instead of breaking the potential regulatory changes into smaller “pieces.” However, American Banker on May 27 reported that institutional infighting, a loaded legislative calendar, and simple differences in regulatory approach may prevent lawmakers and other government officials from completing any substantive regulatory reform in the near future. President Barack Obama’s administration has not yet spelled out how it thinks the current regulatory structure should be reformatted, although late-breaking stories last night said senior administration officials are considering a single agency to regulate the banking industry. The Washington Post, for instance, said the administration may push legislative reforms that would create a new, single authority to police risks to the financial system, as well as a new agency to oversee consumer protections. Still, as the American Banker noted, whatever form a new regulatory scheme takes, the administration and influential congressmen have different views on how to tackle the reform legislatively. House Financial Services Committee Chairman Barney Frank (D-Mass.) has suggested that the larger task of governmental agency consolidation could be treated separately from a bill aimed at enhancing oversight of “systemically important institutions.” Frank has publicly supported allowing the Federal Reserve to oversee said institutions. However, Sen. Chris Dodd (D-Conn.) and others favor an all-in-one approach to regulatory reform, noting how difficult it can often be to get a single bill passed, not to mention multiple bills, the paper reported. Washington turf wars could also forestall any regulatory progress, as various regulatory agencies may fight over what role they would take on in an altered regulatory landscape. Recently, Securities and Exchange Commission (SEC) Chairman Mary Schapiro said she would question any regulatory model that would shift investor protection functions to another oversight body. The article also noted some speculation during the past few weeks that Sen. Richard Durbin (D-Ill.) could advocate for the creation of a financial products safety commission similar to the current Consumer Products Safety Commission.

CUNA seeks limit on student loan disclosures for CUs

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WASHINGTON (5/28/09)—The Credit Union National Association (CUNA) has asked the Federal Reserve to limit the scope of new disclosure requirements for private student loans under Regulation Z to those loans that only have “the common characteristics” of traditional student loans. As currently constructed, the new Regulation Z disclosures would apply to any loans for “private education” and “postsecondary educational expenses.” In a recent comment letter, CUNA Senior Assistant General Counsel Jeffrey Bloch said that these overly broad terms could lead to loans that are only “tangentially related to student lending” being covered under these regulatory requirements. As a result, “credit unions that do not view themselves as private student lenders may not be aware that they may have to comply with these new rules,” Bloch added. Restricting the purview of Regulation Z to traditional student loans would allow credit unions to continue their current lending activities while providing consumers with the same level of protections that are currently required under Regulation Z. Consumers should also be limited to a three-day cancellation period for any student loan, CUNA added. Further, CUNA said, credit unions should be given one full year to prepare for compliance with this new rule after it is issued in final form.

Overdraft disclosure plan needs new look CUNA

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WASHINGTON (5/28/09)—The Credit Union National Association (CUNA) has said that the National Credit Union Administration (NCUA) should ask all credit unions for further input before potentially expanding its overdraft protection disclosure requirements under the altered Truth in Savings rules. In a recent comment letter, CUNA said that expanding disclosure requirements to credit unions that do not “promote the payment” of overdrafts will likely not be helpful, but would provide “another example of information overload that is confusing to consumers.” The NCUA should work with credit unions to “determine if some flexibility is possible for credit unions to disclose this information in a less burdensome manner,” the CUNA letter said. The level of customer service demonstrated my many credit unions in the event of an overdraft or repeated returned checks “justifies an exemption for credit unions with regard to these new disclosure requirements,” the letter added. Elsewhere in the letter, CUNA stated that it supports proposals to require electronic transmission of Truth-in-Savings-related disclosures. CUNA also supports NCUA’s determination that funds that are accessible under overdraft protection plans should not be counted as a credit union member’s available balance when that member makes an account balance inquiry. Use the resource link below to access the complete CUNA comment letter.

Inside Washington (05/26/2009)

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* WASHINGTON (5/27/09)--The Federal Reserve Board Friday announced a rule that will allow bank holding companies to include senior perpetual preferred stock issued to the Treasury under the Troubled Asset Relief Program (TARP) in their Tier 1 capital. Bank holding companies that are S-Corps can include in Tier 1 capital all subordinated debt issued to Treasury under TARP also, and small bank holding companies that are S-Corps or organized in mutual form can exclude subordinated debt issued to Treasury under TARP from treatment as debt ... * WASHINGTON (5/27/09)--In a Friday letter to bank regulators and Treasury Secretary Timothy Geithner, Sen. Jack Reed (D-R.I.) encouraged the Treasury and regulators to use their leverage to retain Troubled Asset Relief Program (TARP) warrants even if bankers repay their rescue capital (American Banker May 26). Banking groups have encouraged the Treasury to eliminate the warrants so they can exit TARP more easily, but Reed said retaining the warrants could help ensure taxpayers are compensated. Reed said he would monitor the purchases of the warrants and said no legal authority exists to surrender the warrants without requiring adequate compensation ... * WASHINGTON (5/27/09)--Joseph Smith was named chairman of the Conference of State Bank Supervisors. Smith is the North Carolina banking commissioner, a post he has held since 2002 (American Banker May 26). He will serve as chair of the conference until May 2010 ...

Whats next in Congress

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WASHINGTON (5/27/09)—Though many pressing economic issues were addressed by the recent passage of mortgage and credit card reforms, finance should likely remain a focus for the 111th Congress during this summers’ work periods. The U.S. Congress is currently out of session for a Memorial Day District Work Session and will return next week. Both House and Senate then recess on or about June 29 for a July Fourth break. However, according to the Credit Union National Association’s Ryan Donovan, regulatory restructuring could become a frequent topic of discussion for both House and Senate committees during the work periods on Capitol Hill. While the exact makeup of such legislation cannot be predicted, some regulatory changes could see action on the House and Senate floors as early as September, Donovan said. House members may soon hold hearings on H.R. 1479, the Community Reinvestment Modernization Act of 2009, which, as currently written, would broaden the reach of Community Reinvestment Act requirements to more entities, including credit unions. The bill, which was introduced by Rep. Eddie Bernice Johnson (D-Texas) earlier this month, has been referred to the House Financial Services Committee and the House Rules Committee. CUNA continues to monitor any action on this issue. In other matters, although the full content of a bill is not known at this time, portions of an upcoming financial services appropriations bill may also be of interest to credit unions. A more immediate issue that will unquestionably impact credit unions is the confirmation of potential National Credit Union Association (NCUA) Chairman Debbie Matz, which should occur later this summer. Matz, who was selected for nomination by President Barack Obama late last week, has held prior positions as a NCUA board member and as executive vice president and chief operating officer of Suitland, Md.'s Andrews FCU. On a broader schedule, Sen. Charles Schumer (D-N.Y.) has announced plans to draft a bill that would lift the member business lending (MBL) cap for credit unions. Rep. Brad Sherman (D-Calif.) has also come out in favor of lifting the MBL cap, and recently stated that he'd support allowing credit unions to issue alternative capital, another move that would free up credit unions to grant more loans to their members.

Compliance Determining ineligible revenues for CTR exemptions

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WASHINGTON (5/27/09)—It is not always easy to determine if a business member can qualify for a Phase II Currency Transaction Report (CTR) exemption when that member engages some “ineligible” business activities. But according to Financial Crimes Enforcement Agency guidance (FIN-2009-G001), a business “may qualify for an exemption as a non-listed business provided that no more than 50% of its annual gross revenues are derived from one or more ineligible business activities.” For instance, imagine a situation where a federal credit union has a business account related to a small “full-service” real estate company that handles real estate sale/purchase transactions, does title searches, provides real estate brokerage services, and so on. The business engages in a number of large cash transactions during each month that require currency transaction reporting. To determine if the business member qualifies for a CTR exemption, the credit union must make a “reasonable determination” that the member derives no more than 50% of its annual gross revenues from ineligible business activities. To make this determination, the credit union could take into account member certifications regarding annual gross revenues, review the business’ audited financial statements, or review the business’ most recent tax returns. If the business' gross annual revenues derived from the real estate brokerage business activity is less than half the total, then the business should qualify for the exemption. For more on this and other compliance topics, visit the Credit Union National Association’s Compliance Challenge using the link below.

FDIC premium assessments could continue chair says

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WASHINGTON (5/27/09)—The Federal Deposit Insurance Corporation (FDIC) late last week voted to assess a five basis point premium on banks, with FDIC Chair Sheila Bair saying that additional special assessment may be needed later in the year. According to the FDIC, the charges will be assessed on assets minus Tier 1 capital rather than domestic deposits. However, the assessment will be capped at 10 basis points of a given financial institution's domestic deposits. Comptroller of the Currency John Dugan has opposed the FDIC’s plan, stating that public comment on the proposal reinforced his belief that the assessment was too high and could cause duress. The FDIC also should not “create a presumption of special assessments whenever the fund is projected to fall below zero.” Additionally, while supporters of the assessment claimed that there was strong public sentiment for their support, that support came mainly from small banks rather than a broad swath of banks of all sizes, he added. Smaller banks stand to gain the most from this decision, Dugan said.

Inside Washington (05/25/2009)

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* WASHINGTON (5/26/09)--Fifteen North Carolina credit union representatives traveled to Capitol Hill to listen in on a House Subcommittee on Financial Institutions hearing on provisions of the Credit Union Share Insurance Stabilization Act, according to the North Carolina Credit Union League (Weekly Update May 22). The provisions passed as a part of the Helping Families Save Their Homes Act (S. 896), which was signed into law by President Barack Obama Thursday. Credit union representatives also discussed interchange fees, raising caps on member business lending and the Community Reinvestment Act (CRA) with their delegates. Credit union representatives emphasized that CRA would be unproductive. “Complying with CRA would do nothing more than divert resources and ultimately distract credit unions from the work they are already doing to deliver affordable financial services to their members, including low-income individuals within their field of membership,” said Dan Schline, North Carolina league senior vice president of association services ... * WASHINGTON (5/26/09)--Life at the National Credit Union Administration continues to get high marks from its employees, with the agency placing as No. 23 in the small agencies section of a recent survey on the best places to work in the federal government. The agency ranked eighth overall in the teamwork category, 12th in employee skills / mission match, and 14th in support for diversity. The rankings, which draw on responses from 200,000 civil servants at 279 federal entities, were compiled by American University’s analysis of the Office of Personnel Management’s Federal Human Capital Survey... * WASHINGTON (5/26/09)--On Thursday, the Senate Banking Committee signed off on four appointments by the Obama administration, including one for the Department of Housing and Urban Development (HUD) and for the Treasury (American Banker May 22). Michael Barr, a former Treasury official during the Clinton administration, was approved for Treasury assistant secretary for financial institutions. Sandra Henriquez was approved for assistant secretary for public and Indian housing at HUD. She is the administrator and CEO of the Boston Housing Authority. The full Senate must approve the nominees ...

NCUA issues guidance on PIC MCA updates corporate status

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ALEXANDRIA, Va. (5/26/09)—The National Credit Union Administration on Friday issued guidance on matters relating to paid-in capital (PIC) and membership capital (MCA). According to the guidance, corporate credit unions have no obligation to restore exhausted PIC or MCA, regardless of whether or not the PIC or MCA is classified as a liability or equity under generally accepted accounting principles, even if the retained earnings “substantially improve.” NCUA also advised that it is “impermissible” to pay dividends to the holders of outstanding PIC and MCA based on the balance of depleted PIC or MCA. NCUA also said that credit union directors and management must judge for themselves whether their PIC and MCA are impaired and whether that possible impairment is “other-than-temporary.” Full text of the guidance can be found at NCUA’s web site, www.ncua.gov. In its most recent update on the status of the corporates, NCUA said that reviews of all private label mortgage backed securities held by U.S. Central FCU and Western Corporate FCU (WesCorp) have been completed. The results of these reviews should be released to their members soon. U.S. Central’s other-than-temporary impairment charges have been determined, and retail corporate credit unions will be required to write down 100% of their PIC investments and 23% of MCA investments as a result. Only one retail corporate credit union should have negative retained earnings as a result of its investments at U.S. Capital, NCUA added. The board also predicted that recent actions aimed at enhancing the Temporary Corporate Credit Union Share Guarantee Program and the Temporary Corporate Credit Union Liquidity Guarantee Program should help corporates maintain their liquidity “going forward.”

As expected Justice seeks UBIT reversal

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WASHINGTON (5/26/09)—The U.S. Department of Justice, defendant in a Wisconsin court case challenging the government’s interpretation of unrelated business income tax (UBIT), has asked a federal judge to toss out the jury’s ruling in favor of the credit union. The request for reversal posits that there was no “legally sufficient basis” for a “reasonable” jury to have found in favor of Community First CU in its challenge of the Internal Revenue Service's (IRS) interpretation of UBIT assessments as it related to three insurance products. An eight-member jury, deliberating less than two hours, sided with the Appleton, Wis. credit union’s argument that all the insurance products are related to all of the credit union's purposes under Wisconsin law; that the insurance and GAP products are a source of credit with fair and reasonable rates and are directly connected to the loans made; and that the credit union educated members about the products to improve their financial conditions. The government’s request for reversal did not introduce any new arguments. Notably, prior to the outset of the court’s proceeding, U.S. District Court Judge William Griesbach questioned aspects of the government's then intended line of testimony to support the IRS. In part, Griesbach wrote: "The unstated, but apparent, premise of the government's argument is that credit life and GAP insurance could (emphasis is the judge's) be substantially related to a credit union's tax-exempt purposes if they were offered at lowered rates. That is, no one argues that credit and GAP insurance isn't related to the business of credit unions—the argument is simply that the premiums charged are too high.' Community First filed its suit in January 2008 in the U.S. District Court for the Eastern District of Wisconsin against the United States seeking a refund of $54,000 in taxes paid in UBIT on income from several insurance products. The credit union is expected to respond to the government’s latest request, but a timeframe had not yet been made public.

NCUA guarantees two-years for Community Investment CDs

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ALEXANDRIA, Va. (5/26/09)— The National Credit Union Administration (NCUA) will now guarantee all principal and quarterly fixed-rate dividend payments on new two-year certificates of deposit (CDs) in the National Credit Union Foundation’s (NCUF) Community Investment Fund (CIF). CIF allows members of corporate credit unions to earn dividends while donating to credit union charitable organizations--without creating an expense on the donors’ balance sheets. New deposits in CIF will help reduce all credit unions’ expenses for NCUA’s Corporate Stabilization Program. “We commend NCUA for taking action to offer credit union investors an attractive new option to earn federally guaranteed dividends while donating to credit union charities,” said Steve Bosack, NCUF deputy director. “Increasing deposits in the Community Investment Fund will provide critically needed programs and grants to more credit union members across America.” Half of CIF dividends are donated to NCUF. NCUF dedicates half of those donations to fund national programs including REAL Solutions, Credit Union Development Education, Innovation Grants, Biz Kid$, and CUAid. NCUF grants the other half of CIF donations to each investor’s state credit union foundation or league. State credit union organizations use their CIF grants for charitable activities including financial education, training, credit union membership outreach, small credit union development, affordable housing, disaster relief, and more. CIF provides about two-thirds of revenues for NCUF and many state credit union foundations. Recognizing CIF’s unique structure and widespread impact, the Association of Fundraising Professionals honored CIF with its Award for Fundraising Excellence. For investors with tight liquidity, CIF is also available in special S-115 share accounts at corporate credit unions. NCUA will guarantee all principal and variable-rate dividend payments in CIF share accounts throughout the course of NCUA’s rolling guarantee program. Given today’s steep yield curve, share accountholders can more than triple their dividends by transferring to fixed-rate CIF CDs (C-40 accounts). The other CIF options are three-year CDs and five-year CDs. Both offer higher dividends than the new federally guaranteed two-year CIF CDs because their longer terms stretch beyond NCUA’s current guarantee program. Normally, CIF share account holders are required to give 90 days' notice before withdrawing. But NCUA has authorized corporate credit unions to waive the 90-day notice requirement when share accountholders transfer directly to CIF CDs. Credit unions interested in the latest rates or CIF investment options can contact NCUF or a corporate credit union. For more information, use the resource link below.

Top lobbyists list Mica effective for CUs

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WASHINGTON (5/26/09)--Dan Mica, president/CEO of the Credit Union National Association (CUNA), remains on the list of Washington's top lobbyists named annually by The Hill newspaper. It’s the seventh year in a row that Mica has been named to the list. The Hill noted Mica’s long and successful history of advocating for the credit union movement: “Mica is a former member (of Congress) who has been pushing credit union interests effectively for more than a decade.” Under Mica’s watch in 2008, credit unions witnessed such developments as:
* A delay in an ultimately unsuccessful bill that would give merchants an antitrust exemption to negotiate interchange fees; * Regulatory relief measures for credit unions; and * The beginning efforts that resulted in the corporate credit union stabilization plan signed into law just last week.
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.

Cardholder rights bill signed into law

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WASHINGTON (5/26/09)—A series of sweeping new credit card industry reforms aimed at protecting consumers became law after President Barack Obama on Friday signed H.R. 627, the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The bill, known by the partial acronym the “Credit CARD Act,” was approved by the Senate last week. It will prevent lenders from such things as making arbitrary changes to the interest rates and terms associated with a card that holds an existing balance. While the new rules should "help rein in" many abusive credit card practices, Credit Union National Association (CUNA) President/CEO Dan Mica has said that some portions of the bill could "have the unintended consequence of raising compliance costs and making credit more expensive and less available to consumers." The bill, which suddenly moved with remarkable speed and strong support through both the Senate and House after years of work, also will require card issuers to notify a cardholder at least 45 days in advance of increasing the annual percentage rate (APR) or fees. The APR generally will not be allowed to increase on existing balances, unless covered by an exception specified in the law, such as for cards with variable rates or when the cardholder is more than 60 days late in making a payment. The provisions in the new law are generally effective in 9 months, but two of the provisions will be effective Aug. 20. Starting this summer, credit unions will have to give the 45-day written notice before any increase in the APR or fees, and will have to make sure that they mail credit card periodic statements at least 21 days before any due date in order to assess late payment penalties. CUNA has scheduled an audio-conference on June 18 to discuss the requirements of the law. Details and registration procedures will be available later this week. The new law raises questions about what happens to the Regulation Z amendments and the unfair and deceptive practices rules that the Federal Reserve Board (Fed) and the National Credit Union Administration have finalized on credit card programs, which are scheduled to go into effect on July 1, 2010. “Obviously, the agencies are going to have to revisit their credit card rules to incorporate the new statutory requirements -- and adopt new effective dates,” said Kathy Thompson, CUNA’s senior vice president for compliance. Although the law does not mandate any changes in interchange fees, it directs the Government Accountability Office (GAO) to complete a study on this issue in six month. CUNA has opposed any legislation restricting interchange fees. Congress has instructed the GAO to look at nine areas, including “the extent to which interchange fees allow smaller financial institutions and credit unions to offer payment cards and compete against larger financial institutions.” Additional provisions in the new law include:
* A credit card cannot be issued to anyone under the age of 21 unless someone over that age agrees to be jointly liable (and authorizes any increase in the card’s limit), or the young person can demonstrate he has independent means to repay the debt. Limits are placed on college students being given inducements to apply for credit cards, and colleges will be required to publicly disclose any contracts they have for marketing credit cards; * If a creditor increases the APR on a credit card, it must at least every six months review the account to see if conditions warrant reducing the APR; * When an account has balances subject to different APRs, payments have to first be allocated to the balance with the higher APR; * No over-the-limit fee can be charged by the card issuer unless it has disclosed the service fee and the cardholder has elected (“opted in”) to permit such transactions for a fee; * The Fed must adopt regulations on what are “reasonable and proportional” fees associated with credit cards; * Credit card contracts will have to be posted on the card issuer’s website and provided to the Fed, and the Fed is to establish a public repository of all credit card agreements; and * Gift cards will be subject to restrictions on inactivity fees and expiration dates.
For CUNA's comprehensive summary and the language of the "Credit CARD Act," see the resource links below.

CU vet Deborah Matz could chair NCUA

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WASHINGTON (5/26/09)--Former National Credit Union Administration (NCUA) Board member Deborah Matz is expected to again bring her extensive industry and public service experience to that board after President Barack Obama on Thursday announced his intent to nominate her to chair the NCUA. Matz, who served as a NCUA board member from March 2002 until September 2005, has recently served as executive vice president and chief operating officer of Suitland, Md.’s Andrews FCU, which holds $800 million in total assets. Matz also has an extensive background in public service, with past roles at the U.S. Department of Agriculture and the Congressional Joint Economic Committee. Current NCUA Chairman Michael Fryzel, whose term extends to 2013, may continue to serve on the board. In a recent release, Fryzel said that President Obama’s selection spoke well of Matz’s “past service and future performance.” The outgoing NCUA chairman said it “has been a true privilege and honor” to serve as NCUA chair, even with the recent difficulties that have made the last 10 months “the most difficult period in the first century of the credit union movement.” Board member Gigi Hyland, whose term ends in 2011, could also continue to serve on the board. Vice chair Rodney Hood, who filled in following the departure of Dennis Dollar, will leave the board. Hood's term expired in April. If confirmed, Matz will chair the board until April 10, 2015.

Matz to be nominated as NCUA chair

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WASHINGTON (5/22/09)—Debbie Matz is President Barack Obama’s choice to become the new chair of the National Credit Union Administration (NCUA), the White House announced Thursday. Matz is a former member of the NCUA board, confirmed by the Senate on March 22, 2002 for a term ending August 2005, although she remained a few months longer to assure a smooth transition to a new member. Matz was executive vice president and chief operating officer of $800 million-in-assets Andrews FCU, in Suitland, Md., until June 2008. Credit Union National Association President/CEO Dan Mica said Thursday, “Our sincere thanks to President Obama for ensuring the NCUA board has its full complement to face the many critical issues now before credit unions. Ms. Matz has strong credit union credentials and, from our past experience with her, we know her as a solid and competent regulator. “We look forward to working with her. We thank Rodney Hood for his service on the board, as well as to Michael Fryzel for his tenure as board chairman.” Hood, was nominated to the NCUA to fill a vacancy when Dennis Dollar left his position more than a year earlier. Hood’s term expired in April. The two remaining board members are current Chairman Michael Fryzel, who took the position in August 2008 and whose term extends in to 2013, and Gigi Hyland, confirmed at the same time as Hood, and whose term ends in 2011. Obama, who announced his intention to nominate several other nominees at the same time as Matz--including Winslow Sargeant, as chief counsel for advocacy for the U.S. Small Business Administration-- said of his candidates: “I'm grateful that such experienced and dedicated individuals have joined my administration at a time when our nation faces great challenges. Their deep commitment to their individual areas of work gives me confidence that they will help us put America back on a path to prosperity and security. I thank them for their service and look forward to working alongside them in the years to come." The president’s nominees must go through the confirmation process, which includes a nomination and confirmation hearing, and, if approved, a formal swearing in.

Inside Washington (05/21/2009)

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* WASHINGTON (5/22/09)--A discussion on how to reform the U.S. financial system’s regulatory structure took different directions at a Wednesday Senate Banking Committee hearing. Sen. Bob Corker (R-Tenn.) said he was opposed to legislation that would give the government resolution powers over systemically important financial institutions. The Treasury should be given the power to resolve the institutions on a case-by-case basis, he said (American Banker May 21). Sen. Richard Shelby (R-Ala.) said he was against any plan that would give the Federal Reserve Board more power over systemic risk. Treasury Secretary Timothy Geithner said he was open to re-evaluating every regulator--including the Fed--for reform. He also defended the Fed, saying the central bank has policies to prevent any conflict of interest and that the directors do not have a role in supervision or in the Fed’s money programs. Shelby disagreed, saying banks supervised by the Fed choose presidents of the 12 Fed banks by their board representation. The Obama administration is expected to release more details about its restructuring plan, though debates have sprung up regarding which agency should receive power. Some also have suggested that a new council to oversee systemic risk should be created ... * WASHINGTON (5/22/09)--The Federal Deposit Insurance Corp. (FDIC) is expected to vote on a rule today regarding a special assessment fee that would be charged to financial institutions based on their asset sizes. In February, the FDIC said it would charge 20 basis points per $100 of second-quarter domestic deposits to raise $15 billion for the Deposit Insurance Fund (American Banker May 21). The fee is expected to total $6 billion ... * WASHINGTON (5/22/09)--The Federal Reserve Board Wednesday approved final amendments to Regulation D--Reserve Requirements of Depository Institutions--which would allow banks to earn interest on their excess reserves and liberalize the types of transfers consumers can make from savings deposits. The Fed said in a release that it is authorizing excess balance accounts to relieve pressure on correspondent-respondent business relationships in the financial environment. It also will evaluate the need for the accounts as market conditions evolve ... * WASHINGTON (5/22/09)--On Wednesday, the White House sent a memo to all executive departments and agencies asking them to review pre-emption doctrines (American Banker May 21). The memo did not mention banks or bank regulators, but the Supreme Court next month is expected to decide the case of Cuomo v. Clearing House LLC., which will determine whether states can enforce their own laws over national banks. In the case, justices will decide if the Office of the Comptroller of the Currency overshot its pre-emption interpretation of visitorial powers in 2004 ... * WASHINGTON (5/22/09)--A Treasury Inspector General report indicated that it was alarmed that officials at the Office of Thrift Supervision (OTS) directed or approved backdating of capital at six thrifts--including IndyMac Bank, which failed in July (Reuters May 21). The other five thrifts were unnamed, but the report said backdating took place from January 2007 to August 2008. Backdating allowed IndyMac to remain “well-capitalized” and avoid a requirement that could have prevented it from taking on risky deposits. The OTS, in its response, said it has devoted resources to the issue of backdating, and provided guidance to staff and the institutions it oversees about proper capital contribution recognition. Scott Polakoff, OTS director, was placed on leave because of allegations of backdating last year. The report by the Inspector General did not release details on the review of those allegations ...

NCUA approves credit reporting act changes

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ALEXANDRIA, Va. (5/22/09)—A rule change to existing Fair Credit Reporting Act regulations that would allow consumers to take their disputes directly to the furnishers of credit report information rather than acting solely through a credit reporting agency was unanimously approved by the board of the National Credit Union Administration Thursday. Overall, the final rule, as approved, will implement portions of the Fair and Accurate Credit Transactions Act that seek to improve the accuracy and integrity of credit reports. At the meeting, NCUA staff said that reassessment and possible reform of the existing rule will begin immediately and will be ongoing. The rule will also be reexamined every three years, NCUA staff said. The resulting guidelines will be flexible and will allow organizations to determine which portions of the guidelines best apply to their individual needs. The rule will apply to federally chartered credit unions, and a separate, nearly identical Federal Trade Commission rule will apply to state-chartered credit unions. As a counterpart to the accuracy of information guidelines, the board also unanimously approved a sixty-day comment period to gather outside input on whether or not the furnishers of credit reports should promote the integrity of the information in those reports by disclosing the opening date of a given account. The NCUA will also ask for opinions on any additional information that could help ensure the integrity of the credit information.

NCUA extends corporate CU liquidity guarantee program

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ALEXANDRIA, Va. (5/22/09)—The National Credit Union Administration’s Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP ) will now provide greater liquidity and “low-cost stable” funding sources to eligible corporate credit unions over a longer period of time after the NCUA board Thursday voted to revise parts of the program during a closed meeting. The TCCULGP provides a National Credit Union Share Insurance Fund (NCUSIF) guarantee of principal and interest for debt issued under the program. As modified, the issuance period ending date of TCCULGP funds will be extended until June 30, 2010 and guaranteed debt will not expire until June 30, 2017. The fees paid on existing debts will also change, with debts with a maturity of up to two years being subject to an annualized assessment rate of 10 basis points. Debts with a maturity of six to seven years will be charged 35 basis points, yearly, with graduated price points for many dates in between. This fee structure should “provide sufficient income to fund any losses related to the TCULGP,” NCUA Chairman Michael Fryzel said in a statement accompanying the release. The revised terms would also restrict the amount of NCUSIF-covered debt that corporate credit unions could issue. Corporate credit unions looking to take part in the TCCULGP must execute a new TCCULGP Agreement. Eligible creditors must ensure that a given debt obligation qualifies for coverage under the newly-revised TCCULGP and must also “obtain and record” confirmation that the participating credit union “intends that particular obligation to be guaranteed by the NCUA“ to cover any debt obligation issued after June 30, 2009, the NCUA release said.

CU SIP investments excluded from fidelity bond calculations

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ALEXANDRIA, Va. (5/22/09)—Credit unions may now exclude from their total assets, for purposes of calculating minimum fidelity bond coverage, any outstanding investments in the Credit Union System Investment Program (CU SIP). Under CU SIP, the NCUA's Central Liquidity Facility (CLF) makes a secured, one-year advance to the natural person credit union. The credit union must concurrently invest the amount of the advance in a fixed-rate, matched-term, guaranteed note that is issued by the participating corporate credit unions. Corporate credit unions use the funds to retire borrowings from outside the credit union system. The NCUA has been working to remove impediments to participation in the program. By approving an “order to exclude” at its open board meeting Thursday, the NCUA board changed part of rule 12 C.F.R. §713.5, which set the requirement for minimum fidelity bond coverage. The waiver specifically states that all other provisions of the regulation “shall remain in effect and unchanged.” Use the resource link below to read the board action memorandum.

Impact of stabilization law being weighed by NCUA

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ALEXANDRIA, Va. (5/22/09)—National Credit Union Administration (NCUA) Chief Financial Officer Mary Ann Woodson will launch an analysis of the cost effect to the agency of newly enacted provisions to create a corporate credit union stabilization program. Just one day after President Barack Obama signed S. 896, the Helping Families Save Their Homes Act, into law, NCUA Vice Chairman Rodney Hood inquired during an open board meeting what the financial impact would to the agency. Woodson said she needed to complete her analysis of the final bill and would report back to the board. Although she did not address the timing of that report, Woodson did tell News Now that the information would be made public when available. Under S. 896, NCUA borrowing authority is increased to $6 billion, with a possible further extension to $30 billion under exigent circumstances. Credit unions may also spread the cost of National Credit Union Share Insurance Fund (NCUSIF) 1% deposit replenishment over seven years, and have up to eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. The Credit Union Naitonal Association also is discussing the impact of the legislation on credit unions and the agency with NCUA and with accounting professionals. Also at the NCUA meeting, Woodson, during her regular NCUSIF monthly report to the board, noted a recent accounting change she executed, which removed $7.9 million from income. That income was associated with the agency's Temporary Corporate CU Liquidity Guarantee Program (TCCULGP), and the change was made to bring NCUA practices in line with those of the Federal Deposit Insurance Corp. TCCULGP provides an NCUSIF guarantee of principal and interest for debt issued under the program. Woodson noted the change was not significant enough to impact the NCUSIF net worth ratio. Other points of interest in the monthly report:
* There was a slight net loss of $2.5 million to the NCUSIF during April; the insurance fund remains in the black for the year-to-date; * The ending reserve balance is $5.4 billion, and reflects, in part, losses associated with the corporate credit unions; * There is a slight increase in low-ranked, CAMEL 4/5 credit unions, up 17 to 288 from the previous month, although up 49 from a year ago. Of the 288, 60% have assets less than $10 million, 30% have assets between $10 million and $100 million, and just 1.5% have $1 billion or more in assets. The remaining 8.5% fall in the $100 million to $1 billion category.
The monthly NCUSIF report is available online. Use the resource link below for access.

Fryzel S. 896 is a turning point for CUs

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ALEXANDRIA, Va. (5/22/09)—Wednesday’s presidential signing of S. 896, the Helping Families Save Their Homes Act, “marked the culmination of a very difficult chapter” in the National Credit Union Administration’s ongoing efforts to "resolve the difficulties facing corporate credit unions, and the credit union industry as a whole,” NCUA Chairman Michael Fryzel said in a statement Thursday. The enactment of S. 896 and the corporate credit union stabilization plans contained therein provide “a responsible and pragmatic mechanism for credit unions to maintain a strong federal insurance fund in a financially manageable manner,” Fryzel added. S. 896, which passed both legislative branches on May 19, will allow credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time, with a total of eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. The bill also extended the $250,000 share and deposit insurance coverage ceiling for credit unions through 2013 and increased NCUA’s borrowing authority to $6 billion, with a possible further extension to $30 billion under exigent circumstances. Further, Fryzel said that the interest shown at a May 20 House Financial Institutions subcommittee hearing on NCUA’s corporate credit union stabilization plan was “a further indication of the importance Congress has placed on the NCUA and the industry joining together to find workable solutions.” (See related May 21 story: CUNA urges Congress to address CU capital) Fryzel asked for credit unions and politicians’ input going forward, and “underscore[d]” his recent subcommittee testimony, saying that NCUA will put its recent, hard-learned lessons “to good use” as it moves forward with corporate credit union reforms. “The industry that we all care so much about, and that has served America’s consumers so well for the past century, deserves nothing less, and I look forward to the task ahead with optimism and a sense of purpose,” he added.

Presidents pen turns corporate stabilization bill into law

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WASHINGTON (5/21/09)—In a ceremony held at the White House on May 20, President Barack Obama signed S. 896, the Helping Families Save Their Homes Act, into law.
CU League of Connecticut President/CEO Tony Emerson (pictured left, at White House) attended the bill-signing ceremony for S. 896 as a guest of cosponsor Sen. Christopher Dodd (D-Conn.) CUNA President/CEO Dan Mica said that Emerson's invitation by Dodd is a "perfect illustration of the vital role state leagues have in advocacy for the CU movement." (Photo courtesy of Sen. Dodd's office)
Of interest to credit unions are portions of the bill that will create a corporate credit union stabilization program to help credit unions weather the ongoing financial crisis and extend the $250,000 share and deposit insurance coverage ceiling through 2013. Credit Union League of Connecticut President/CEO Tony Emerson attended the signing ceremony as a guest of S. 896 cosponsor Sen. Christopher Dodd (D-Conn.) The House and Senate approved the bill on May 19. Under S. 896, the National Credit Union Administration's (NCUA) borrowing authority will be extended to $6 billion, with a possible further extension to $30 billion under exigent circumstances. Credit unions may also spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time, with a total of eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. Representatives from CUNA, the NCUA, and other industry groups also discussed the corporate credit union stabilization plan in a hearing before the House Financial Services subcommittee on financial institutions and consumer credit. President Obama will have more on his desk by Memorial Day, as the House today voted 361 to 64 to approve H.R. 627, the Credit Cardholders' Bill of Rights. Once enacted, the bill will rein in many abusive or deceptive credit card practices.

Inside Washington (05/20/2009)

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* WASHINGTON (5/21/09)--The Federal Reserve Board could respond the week of June 8 to bankers’ requests to repay Troubled Asset Relief Program funds (American Banker May 20). Regulators intend to make announcements each month on requests from the nation’s 19 biggest banks on repayments. Because of discussions on the approval procedures, it may be about three weeks before Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase and Co. receive answers to their applications to refund $45 billion of government funds ... * WASHINGTON (5/21/09)--Legacy assets will be included in the Term Asset-Backed Securities Loan Facility (TALF), the Federal Reserve Board said Tuesday. It also said it expanded the number of rating companies that can rate assets for TALF (American Banker May 20). The inclusion of older securities was determined after investors were disappointed with a May 1 announcement that TALF only would include new commercial mortgage-backed securities. Investors will have until late July to apply for loans to buy commercial mortgage-backed securities ... * WASHINGTON (5/21/09)--The nation’s largest banks have bolstered their balance sheets by $56 billion since financial stress tests were unveiled several weeks ago, said Treasury Secretary Timothy Geithner. He testified before the Senate Banking Committee this week in Washington. About $48 billion of the funds comes from the 10 banks that needed to boost their capital levels, he said (The New York Times May 21). Geithner also said there are indications that the financial system is starting to “heal.” The lending markets are stabilizing and interest rates that businesses pay to raise money from bond buyers have fallen. Geithner also updated the committee on the $700 billion government bailout fund. Less than $100 billion fund remains. The government anticipates receiving $25 billion in repayments, he said ... * WASHINGTON (5/21/09)--Securities and Exchange Commission (SEC) Chairman Mary Schapiro does not support a plan proposed by President Barack Obama to create a new financial watchdog. The watchdog would reduce SEC’s powers and damage investors’ government protection, she said (The Associated Press May 20). The Obama administration is expected to release details about its plan in the next few weeks as it attempts to reform the nation’s financial regulatory system. Some industry groups have already said they oppose the plan. Earlier this year, Sens. Richard Durbin (D-Ill.), Edward Kennedy (D-Mass.) and Charles Schumer (D-N.Y.) introduced a bill that would create a commission to oversee consumer products. Elizabeth Warren, who oversees the Congressional Oversight Panel, also supports a commission approach. Creating a commission could involve the combining of several federal agencies and their powers ... * WASHINGTON (5/21/09)--The Federal Housing Finance Agency (FHFA) was awarded with a Certificate of Excellence in Accountability Reporting (CEAR) for its 2008 Performance and Accountability Report. The report combined information from the former Office of Federal Housing Enterprise Oversight (OFHEO), the former Federal Housing Finance Board (FHFB) and the FHFA. The agency was one of 17 to receive the award from the Association of Government Accountants (AGA). The FHFA, which supplanted OFHEO and the FHFB, was created July 30 under the Housing and Economic Recovery Act of 2008 ...

CUNA urges Congress to address CU capital

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WASHINGTON (5/21/09)—Just hours before a bill with corporate credit union stabilization provisions was signed into law, representatives from the Credit Union National Association (CUNA) and the National Credit Union Administration (NCUA) joined other industry groups to testify Wednesday on a broad slate of natural person and corporate credit union issues. At the hearing conducted by the House Financial Services
Click to view larger image Bill Lavage, president/CEO of Service 1st FCU, Danville, Pa., testified on CUNA’s behalf that "the capital of some credit unions is being wiped out on the basis of estimates.” CUNA Chief Economist Bill Hampel is seated behind Lavage.(CUNA photo)
“ subcommittee on financial institutions and consumer credit, Bill Lavage, president/CEO of Service 1st FCU, Danville, Pa., testified on CUNA’s behalf that "the capital of some credit unions is being wiped out on the basis of estimates.” The NCUA’s current corporate credit union stabilization plan calls for a $1 billion infusion and estimates that a further $3.7 billion would be needed to guarantee current corporate credit union deposits. Under this plan, the NCUA estimates that it would require $5.9 billion in total funds to restore the National Credit Union Share Insurance Fund to its normal operating equity ratio level of 1.3%. “We need a mechanism [so that] if the estimates are wrong, the capital can be returned [to credit unions]," Lavage urged the subcommittee. The hearing, which centered on the NCUA’s corporate credit union stabilization plan, was also attended by representatives from the National Association of State Credit Union Supervisors and the National Association of Federal Credit Unions. Although the original goal of the hearing was to discuss H.R. 2351, the Credit Union Share Insurance Stabilization Act, many of the details addressed by that bill were included in S. 896, the Helping Families Save Their Homes Act, which President Barack Obama signed into law yesterday. (See related story: President's pen turns corporate stabilization bill into law) Therefore, the focus of the hearings “shifted to ensuring the efficient implementation” of the corporate stabilization plans, Rep. Paul Kanjorski (D-Pa.) explained in his opening statement. Regarding the NCUA estimated shortfall, the agency based its $5.9 billion share insurance deficit on estimates by the Pacific Investment Management Company, LLC that predicted that corporate credit unions would lose as much as $16 billion on some securities investments. However, more recent estimates have predicted a lower total, which could change the total needed to replenish the share insurance fund. Lavage asked the NCUA to provide greater detail regarding the underlying assumptions used to arrive at these numbers. As it reacts in the aftermath of the current economic downturn, NCUA Chairman Michael Fryzel testified that pending NCUA regulations could limit the types of investments that corporate credit unions are allowed to take part in to help avoid potentially dangerous economic situations in the future. The NCUA could also investigate the investments of corporate credit unions to ensure that their investment profiles are substantially diversified, he added. Rep. Brad Sherman (D-Calif.) during the hearing stated that he’d support allowing credit unions to issue alternative capital, a move that would free up credit unions to grant more loans to their members. Credit unions could also be permitted to issue subordinated debt at zero risk or cost to the government, Sherman added.

Financial crimes enforcement bill awaits signing

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WASHINGTON (5/21/09)—The Fraud Enforcement and Recovery Act of 2009 cleared both the House and Senate this week and has been sent to the White House to await the president’s signature. The measure, known as FERA, amends the federal criminal code and expands its definition of “financial institution” to include “a mortgage lending business or any person or entity that makes, in whole or in part, a federally related mortgage loan.” If signed into law, the act will:
* Extend the prohibition against making false statements in a mortgage application to employees and agents of a mortgage lending business; * Apply a prohibition against defrauding the federal government to fraudulent activities involving the Troubled Assets Relief Program (TARP) or a federal economic stimulus, recovery, or rescue plan; * Expand securities fraud provisions to cover fraud involving options and futures in commodities; and * Expand the concept of monetary proceeds, for purposes of enforcing prohibitions against money laundering, to include gross receipts.
The legislation also would create an independent commission charged with studying the causes of the country’s current financial crisis. Use the resource link below to read more of the bill’s provisions.

Next Treasury Fin Lit meeting is May 27

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WASHINGTON (5/21/09)-- The U.S. Treasury Department announced this week that the next open meeting of its Financial Literacy and Education Commission (FLEC) will be held May 27. FLEC is a 20-agency commission lead by the U.S. Treasury Secretary. It was created by Congress in 2003 to create a national strategy for financial education and the National Credit Union Administration (NCUA) is represented among its members. An agenda for the meeting next week has not yet been made public, but Treasury did supply details in its Federal Registerdocument published Wednesday of how to register to attend the meeting. It is to be held in the Cash Room at the Treasury Building. Use the resource link below to access the Federal Register announcement.

Inside Washington (05/19/2009)

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* WASHINGTON (5/20/09)--Neal S. Wolin was confirmed by the Senate Monday to serve as deputy secretary to the Treasury Department. Wolin was named deputy assistant to the president and deputy counsel to the president for economic policy in February. From 2001 to 2008, he served as president/CEO for property and casualty operations at the Hartford Financial Services Group. He also served as general counsel to the Treasury from 1999 to 2001 and deputy general counsel from 1995 to 1999 ... * WASHINGTON (5/20/09)--A Small Business Administration program--America’s Recovery Capital--expected to begin mid-June could run out of funds quickly. Tony Wilkinson, president, National Association of Government Guaranteed Lenders, said there will be a lot of demand for the program and more demand than available funds (American Banker May 19). The program will provide no-interest, deferred-payment loans to help small businesses. The loans will be disbursed over a six-month period. Payments will be deferred for one year, and after the deferral period ends, borrowers will repay the loan over five years. Commercial lenders, including credit unions, will make the loans ... * WASHINGTON (5/20/09)--Treasury Secretary Timothy Geithner said he does not believe the government should set caps on executive pay. Rather, constraints should be placed on the incentives compensation systems create. The financial crisis was magnified by people who paid to take a large amount of short-term risk, he added (American Banker May 19). Geithner spoke at the National Press Club in Washington, D.C., on Monday. The Treasury is expected to release executive compensation rules next week as required under a stimulus amendment by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) ... * WASHINGTON (5/20/09)--Darryl Tait has joined the Credit Union National Association (CUNA) as Communication Specialist. He is based in CUNA's Washington, D.C. office. Tait will contribute to News Now, NewsWatch and other special projects produced by the communications department. Prior to joining CUNA, Tait worked for several publications at Falls Church, Va.-based Tax Analysts, including Financial Reporting Watch and World Tax Daily. He graduated with a bachelor of arts degree in English from the University of North Carolina at Greensboro ...

Credit card practices bill approved by Senate

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WASHINGTON (5/20/09)—The Senate on Tuesday voted 90-5 to approve H.R. 627, the Credit Cardholders' Bill of Rights, which would prohibit lenders from making arbitrary changes to the interest rates and terms associated with a card that holds an existing balance. Under the provisions of the bill, lenders must maintain low introductory rates for six months and may not increase the annual percentage rate (APR) on a credit card for the first year that the credit account is open. If a lender chooses to raise a cardholder’s interest rate, the lender must inform the cardholder 45 days before that rate is raised. Card issuers would also be prevented from changing the payment conditions of any credit card. However, lenders would be allowed to increase interest rates once an account has been delinquent for 60 days. In a May 19 statement, Senator and bill co-sponsor Christopher Dodd (D-Conn.) said the bill “will insist on consumer protections that are strong and reliable, rules that are transparent and fair, and statements that are clear and informative.” While the bill as passed by the Senate would “help rein in” many abusive credit card practices, CUNA President/CEO Dan Mica said Tuesday he was concerned that some portions of the bill could “have the unintended consequence of raising compliance costs and making credit more expensive and less available to consumers.” Legislation mirroring the existing regulation that has been adopted by federal bank and credit union regulatory agencies would have been more palatable for credit unions, the CUNA statement said. The bill, as currently amended, does not address interchange fees, but will commission a study of interchange fees by the Government Accountability Office. CUNA has consistently opposed any changes to the current interchange fee regulations, and said Tuesday that “efforts to affect interchange and other elements of the payment processing system would have detrimental effects on the credit unions who issue debit cards and credit cards for their members.” CUNA said the decision to begin a GAO study of interchange rates was “a more prudent approach” than hastily moving legislation. The House version of the bill passed 357-70 in late April. It is believed that portions of the bill were crafted to ensure quick passage, and Congress will now try and reconcile any differences between the two bills. President Barack Obama has asked Congress to deliver the final legislation to his desk by Memorial Day.

CUNA supports NCUA appropriations requests

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WASHINGTON (5/20/09)—The Credit Union National Association on May 19 declared its support for the National Credit Union Administration’s (NCUA) request for continued authority to allow the Central Liquidity Facility (CLF) to lend to its statutory cap of $41 billion. In a letter sent to ranking House Financial Services Subcommittee members Jose Serrano (D-N.Y.) and Jo Ann Emerson (R-Mo.), CUNA also asked the reps. to consider allowing the CLF to lend directly to corporate credit unions. Committee members should also “consider ways to make the CLF a more efficient liquidity tool for corporate credit unions,” the letter added. CUNA also suggested that legislators expand the use of Community Development Revolving Loan Funds (CDRLF) by asking NCUA to allow smaller community development credit unions to use these funds as secondary capital. Such a move would allow these credit unions to absorb the costs of National Credit Union Share Insurance Fund replenishment while continuing to provide much needed services to their members. The CDRLF provides grants and low-interest loans to designated low-income credit unions. NCUA and the National Federation of Community Development Credit Unions should be able to allow the use of CDRLF funds as secondary capital without harming the “safety and soundness” of related institutions or “unduly constraining the operations of this important group of credit unions,” CUNA said. NCUA should also be granted $1 million in CDRLF funding, the letter added.

Management failed to control Norlarco risk OIG

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ALEXANDRIA, Va. (5/20/09)—Sounding hauntingly familiar, the National Credit Union Administration’s (NCUA’s) Office of Inspector General (OIG) found blame for the failure of Norlarco CU could be placed squarely on the shoulders of credit union management, and that state and federal regulators could have acted more definitively. Norlarco, of Fort Collins, Colo., was placed into conservatorship by state regulators in May 2007 after a number of its construction loans issued in Lee County, Fla., became delinquent. In July, the NCUA took control of the credit union and removed its board of directors. And in 2008, Public Service CU, Denver, successfully bid to purchase the assets and assume the shares of Norlarco. The OIG’s assessment of what went wrong at Norlarco was very similar to the finding in its study to determine reasons behind the 2007 failure of Huron River Area CU of Ann Arbor, Mich. Regarding credit union management, both reviews found that credit risk and strategic risk were major factors in the credit union failures and that, in both cases, management did not adequately manage and monitor the credit risk within its loan programs. Regarding the new report on Norlarco, the OIC said specifically that management:
* Failed to conduct a due diligence review of its relationship with its third party vendor, First American Funding, LLC1 (First American); * Failed to adequately oversee the Residential Commercial Lending (RCL) program; * Created a concentration risk by committing to fund $30 million per month in construction loans; * Failed to develop an adequate asset-liability management (ALM) policy; and * Failed to develop adequate policies and a strategic plan to guide the credit union and the RCL program.
“In addition, we determined Norlarco management took undue advantage of its field of membership to grow the RCL program,” the OIG said in its executive summary. The report also faulted regulators, state and federal. The OIG determined that examiners “did not adequately evaluate the safety and soundness of Norlarco's loan participation program.” That lapse, the study said, resulted in a missed opportunity to slow the RCL programs growth, which might have mitigated the loss to the National Credit Union Share Insurance Fund. Even so, the OIG made no formal recommendations to NCUA in the report. It noted, instead, that Norlarco clearly failed to follow NCUA guidance available at the time; and further noted that NCUA has added to that guidance since. The NCUA had no comment on the report.

House Senate pass corporate stabilization bill

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WASHINGTON (5/20/09)—The House and Senate on May 19 approved S. 896, the Helping Families Save Their Homes Act, which would extend $250,000 share and deposit insurance coverage and help credit unions manage the impact of the financial crisis on the credit union system through a corporate stabilization program. The bill, which passed the House yesterday afternoon on a 367-54 vote, would extend the $250,000 federal share and deposit insurance ceiling until 2013. This ceiling is set to expire at the end of the current year. Just hours after the House vote, the Senate approved the bill by unanimous consent. The bill now goes to the President, who is expected to sign it before the end of the month. Under S. 896, the National Credit Union Administration's (NCUA) borrowing authority would also be extended to $6 billion, with a possible further extension to $30 billion under exigent circumstances, under the provisions of the bill. The legislation, as passed, would also permit credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer time period. Credit unions would be given eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Credit unions also would be allowed to book any impairments related to the NCUSIF replenishment over a seven-year period. The NCUA’s corporate credit union stabilization plan will be discussed today in a hearing before the House Financial Services subcommittee on financial institutions and consumer credit, with Service 1st FCU President/CEO Bill Lavage speaking on behalf of the Credit Union National Association. NCUA Chairman Michael Fryzel will also represent the regulator in a separate panel during the hearing. Credit Union National Association President/CEO Dan Mica in a statement yesterday had urged the Senate to approve S. 896 quickly. “This important legislation will help credit unions continue to help their members weather the financial crisis and maintain member confidence in credit unions," Mica said. After the House vote, NCUA's Fryzel issued a statement, which said, "Congress has acted quickly and appropriately in helping NCUA and the credit union industry deal with the corporate situation through the Corporate Stabilization Program." He added that he hoped the bill would quickly be enacted into law.

Inside Washington (05/18/2009)

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* WASHINGTON (5/19/09)--The Term Asset-Backed Securities Loan Facility could attract more demand next month, according to Federal Reserve Board Chairman Ben Bernanke (American Banker May 18). In a letter to Rep. Keith Ellison (D-Minn.), he said the Federal Reserve Bank of New York received $10.9 billion of loan requests under the program compared with $1.7 billion in April. Ellison had written Bernanke for information on how healthy the financial markets are regarding asset-backed securities and asked how the Fed could trust the triple-A ratings attached to the collateral under the facility. Bernanke said the market is improving ... * WASHINGTON (5/19/09)--Newsweek interviewed Treasury Secretary Timothy Geithner Monday at the National Press Club in Washington, D.C., about the economy and Troubled Asset Relief Program funds. Newsweek hosted the event live via Facebook. Roughly 950 individuals indicated via Facebook that they planned to watch the interview ...

SBA to launch no-fee guaranteed loan program

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WASHINGTON (5/19/09)—Credit unions are among the lenders that may participate in a new U.S. Small Business Administration (SBA) guaranteed loan program, one that features interest-free loans and deferred payments of up to $35,000. The SBA announced Monday that its new program, America’s Recovery Capital(ARC), will begin June 15. It was created under the 2008 Housing and Economic Recovery Act. ARC will provide no-interest, deferred payment loans to help small businesses that have a history of good performance, but which are struggling to keep up with payments because of the tough economy. The ARC loans will be disbursed over a six-month period. The funds may be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities. Repayment is not required until 12 months after the loan’s final disbursement. After the 12-month deferral period, borrowers will pay back the loan principal over a period of five years. ARC loans will be made by commercial lenders, not the SBA directly. The loans are 100% guaranteed by the SBA, and have no SBA fees associated with them.

Congress may complete housing credit bills this week

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WASHINGTON (5/19/09)—The Senate will resume its discussion of H.R. 627 today. Among the items to be debated are amendments addressing credit card protections for small businesses, issues surrounding stored value gift cards, and an amendment addressing specific interest rate issues in the state of Arkansas. There may also be a “manager’s amendment.” The bill could see a final Senate vote later this week. The House may consider Senate amendments to H.R. 627 late in the week, but it is believed that Congress is crafting the bill to limit disagreements between the two legislative bodies and ensure quick passage. President Barack Obama has asked Congress to have the final legislation to his desk by Memorial Day. The House Rules Committee on May 18 considered Senate amendments to S. 896, the Helping Families Save Their Homes Act, and the House could offer further amendments this week. The Senate could then pass the final bill by the end of this week, with or without any potential House modifications. The National Credit Union Administration's (NCUA) corporate credit union stabilization plan will be discussed in a May 20 hearing before the House Financial Services subcommittee on financial institutions and consumer credit. Service 1st FCU President/CEO Bill Lavage will represent the Credit Union National Association (CUNA) on the panel. (See related story: Lavage is CUNA witness on corporate stabilization. The House will also hold hearings on “Capital Loss, Corruption, and the Role of Western Financial Institutions”, “approaches to Improving Credit Rating Agency Regulation”, and student loan reforms during the coming week. U.S. Treasury Secretary Timothy Geithner will appear before the House to discuss the Treasury Department on May 21. Secretary Geithner will also discuss oversight of the Troubled Asset Relief Program before a Senate subcommittee on Wednesday.

Fair Credit Reporting among NCUA agenda items

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ALEXANDRIA, Va. (5/19/09)—The National Credit Union Administration’s (NCUA) agenda for the upcoming May 21 board meeting includes two Fair Credit Reporting Act (FCRA) actions that were removed from last month’s agenda. During the early session, NCUA will discuss a final rule governing the accuracy of information that is furnished to consumer reporting agencies. The rule should also address consumers' direct disputes with furnishers of credit report information. NCUA may also issue an Advance Notice of Proposed Rulemaking addressing Part 717, Subpart E, Sections 717.40-717.43, Appendix E of NCUA regs. This proposed rule would seek to clarify the definition of "integrity" under FCRA and would set out the standards that would make a credit report have integrity. The NCUA will also consider its monthly Insurance Fund Report at this week's meeting. As is routine, a closed session of the NCUA board will follow the early open session.

NCUA launches revamped home page

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ALEXANDRIA, Va. (5/19/09)—The National Credit Union Administration’s (NCUA) homepage will feature a changed look and enhanced navigability beginning today. The redesigned NCUA.gov will contain a series of drop-down menus
Click to view larger image NCUA’s new home on the web.
that will allow users to access most of the information on the site, including NCUA publications, outside resources, data and services for NCUA constituents, and more general topical information. The most recent NCUA developments will be displayed under the “Latest Headlines” banner, in the center of the page. There will also be a right-hand column with information on upcoming events and share insurance. Content on the right hand column will change as needed. For a preview of the new look of ncua.gov, see the accompanying picture.

Lavage is CUNA witness on corporate stabilization

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WASHINGTON (5/19/09)—When a House Financial Services subcommittee turns its attention Wednesday to the Credit Union Share Insurance Stabilization Act, Bill Lavage, president/CEO of Service 1st FCU, Danville, Pa., will be testifying on behalf of the Credit Union National Association (CUNA). The bill, H.R.2351, was introduced by Rep. Paul Kanjorski (D-Pa.). It proposes to increase the borrowing authority of the National Credit Union Administration and establish a National Credit Union Share Insurance Fund restoration plan period. It also would assess insured credit unions for the costs associated with the corporate credit union stabilization effort on an anti-cyclical basis. Lavage will tell the subcommittee that CUNA strongly supports the legislation—considers it critical and timely. The CUNA testimony will spotlight the continued underlying strength of the credit union system, but will remind lawmakers that credit unions, and particularly corporate credit unions, have been buffeted by the economic conditions that have caused broad turmoil. If enacted into law, the provisions of H.R. 2351 would help ensure that credit unions remain a bulwark for the 92 million individuals and small businesses that look to them for financial strength and support, CUNA will point out. The National Credit Union Administration confirmed Monday that its chairman, Michael Fryzel, would be testifying on his agency’s behalf. Also expected to testify are representatives of the National Association of State Credit union Supervisors and the National Association of Federal Credit Unions.

Stabilization plans must address CU concerns--CUNA

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WASHINGTON (5/18/09)—Credit Union National Association President/CEO Dan Mica on May 15 urged the National Credit Union Administration (NCUA) to “act favorably and expeditiously” to address concerns that credit unions nationwide have raised about NCUA’s efforts to stabilize the corporate credit union system. Citing recent discussions with credit union league presidents, the Association of Corporate Credit Unions, and representatives from various state and federal credit unions, CUNA has asked NCUA to provide credit unions with more detailed information on the assumptions used to determine estimated losses related to mortgage- and asset-backed securities. Additionally, CUNA recommended that the NCUA waive any penalties that may be assessed on credit unions whose payments into the National Credit Union Share Insurance Fund cause their net worth ratios to fall. CUNA also called on the NCUA to support the use of the Central Liquidity Facility to provide greater liquidity to corporate credit unions. Existing plans to “extinguish” all capital accounts in WesCorp FCU and all paid-in capital and 63 percent of member capital shares at U.S. Central Corporate FCU could prevent account holders from benefiting from any potential recovery of these credit unions’ mortgage- and asset-backed securities. In the letter, CUNA also suggested that NCUA grant a share of any recovery that is gained from these mortgage- and asset-backed securities to capital holders.

Inside Washington (05/15/2009)

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* WASHINGTON (5/18/09)--Questions have arisen from financial industry critics about whether the Federal Reserve System should be revamped. Among the suggestions: downsizing the role of the 12 Fed regional banks to make them work with other field offices, or changing the Fed’s corporate governance framework (American Banker May 15). The Fed has always had an “odd” role, according to Douglas Landy, a Allen & Overy partner and former New York Fed lawyer. The Fed is owned by its members, but it also has supervision powers, he said. Two weeks ago, House Financial Services Committee Chairman Barney Frank (D-Mass.) said he wanted to examine conflict-of-interest issues at the Fed banks but it would need to wait until after the financial crisis has passed ... * WASHINGTON (5/18/09)--The Securities and Exchange Commission (SEC) has proposed amendments to increase protections for investors who entrust their money to investment advisers. The measures are intended to ensure that advisers who have “custody” of clients’ funds and securities are properly handling those assets. In recent enforcement actions, firms and principals have been charged with misusing clients’ money and covering it up by distributing false account statements. Investment advisers generally don’t have physical custody of funds or securities--instead, assets are maintained with a broker-dealer or a bank, called a “qualified custodian.” The amendments, if adopted, would promote independent custody and allow independent public accountants to act as third-party monitors, the SEC said ... * WASHINGTON (5/18/09)--Sen. Charles Schumer (D-N.Y.) and the office of Sen. Kirsten Gillibrand (D-N.Y.) met with New York State credit union representatives during meetings coordinated by the Credit Union Association of New York. The groups discussed the National Credit Union Administration’s (NCUA) Corporate Stabilization Program, and other credit union issues. Accompanying the group was Association President/CEO William Mellin, Senior Vice President and General Counsel Michael Lanotte and Vice President of Governmental Affairs Amy Cramer. In addition to meeting with Schumer (pictured) and staff from Gillibrand’s office, the group met with these representatives from New York’s congressional delegation: Gary Ackerman (D-Metropolitan), Michael Arcuri, (D-Utica-Rome), Timothy Bishop (D-Long Island), Yvette Clarke (D-Metropolitan), Eliot Engel (D-Metropolitan/Westchester-Rockland), Brian Higgins (D-Buffalo/Jamestown), Steve Israel (D-Long Island), Peter King (R-Long Island), Christopher Lee (R-Buffalo/Niagara/Rochester), Nita Lowey (D-Catskill-Hudson), Daniel Maffei (D-Central New York), Carolyn Maloney (D-Metropolitan), Gregory Meeks (D-Metropolitan), Paul Tonko (D-Capital), and Nydia Velazquez (D-Metropolitan). They also met with NCUA Chairman Michael Fryzel and his staff. (Photo provided by CUNA) ...

NCUA guidance on PIC MCA out this week

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ALEXANDRIA, Va. (5/18/09)—The National Credit Union Administration said it will explain the implications of exhausted and depleted paid-in-capital (PIC) and membership capital accounts (MCA) in guidance that will be released later this week. NCUA on May 13 addressed revisions to the Temporary Corporate Credit Union Share Guarantee Program in a letter that was issued to corporate credit unions. The NCUA Board could also soon make changes to the Temporary Corporate Credit Union Liquidity Guarantee Program. These changes would aim to enhance liquidity by providing longer term funding options for all corporate credit unions, NCUA said. In its weekly media release on the corporates, NCUA also updated the financial status of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union. WesCorp’s year-end audited financial statements are due out soon, and its financial statements for the quarter ended March 31, 2009, were posted on May 1, 2009. U.S. Central released its most recent financial statements on May 13, 2009, and is in the process of finalizing its audit procedures. Its year-end financial statements should be released by mid June. The best estimate of U.S. Central Federal Credit Union’s credit losses remains at $2.3 billion. However, U.S. Central’s other than temporary impairment charges drop to $1.8 billion when its cash flows from these losses are discounted under Generally Accepted Accounting Principles. This accounting difference means that U.S. Central’s MCAs are depleted by 23 percent, not the 63 percent total that was reported on April 30. Both WesCorp and U.S. Central will publicly discuss their situations this week.

Rouge Employees CU is liquidated

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ALEXANDRIA, Va. (5/18/09)—Rouge Employees Credit Union, a 6200-member, Dearborn, Mich.-based credit union holding $23 million in assets, was liquidated on May 15, the National Credit Union Administration reported. Rouge Employee’s members will be served by the larger Chief Financial FCU, of Pontiac, Mich., effective May 18. Members will have uninterrupted access to their assets. Chief Financial holds nearly $83 million in assets and currently serves 13,480 total members from local employee groups, associations, and underserved portions of the greater Detroit area.

Compliance Challenge CUs and paper statements

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WASHINGTON (5/18/09)--In this month’s Compliance Challenge, a credit union asks if it can eliminate mailing paper statements to reduce costs. But does this affect statements for open-end loans such as credit card accounts and home equity lines of credit (HELOCs)? The credit union only has to provide a periodic statement for a credit card, HELOC, or other open-end account if a finance charge is imposed during the billing cycle or if a credit or debit balance exists of more than $1, according to the Credit Union National Association. If there is no activity, no balance, no finance charge, or no credit or debit balance exceeding $1, then no periodic statement would be required for that particular account, according to Regulation Z, Section 226.5 (b)(2). However, since many credit unions provide a periodic statement that includes share account activity and Reg. E transactions in addition to loan balances, they will provide a periodic statement anyway even if a particular loan balance meets the above criteria and no statement would be required for that particular open-end loan. Otherwise, the statement could indicate a zero balance for the loan or not include the loan information at all. A periodic statement need not be sent for an account if it is considered as uncollectible by the credit union, or if delinquency collection proceedings have been instituted, or if furnishing the statement would violate federal law. For more information, use the links.

Inside Washington (05/14/2009)

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* WASHINGTON (5/15/09)-- The U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund announced Thursday it had received a 249 applications under the 2009 round of the New Markets Tax Credit (NMTC) program. The applicants requested a total of more than $22 billion in NTMC allocation authority. A total of $5 billion of allocation authority is available this round including the $1.5 billion in additional allocation authority authorized through the American Recovery and Reinvestment Act of 2009. The NMTC program was established by Congress in December of 2000 and is administered by Treasury’s Community Development Financial Institution (CDFI) program. It permits individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in investment vehicles known as Community Development Entities (CDEs)… * WASHINGTON (5/15/09)--An amendment that would allow visitors to carry guns in national parks could delay the enactment of legislation to curb abusive credit card practices (American Banker May 14). The amendment was introduced by Sen. Tom Coburn (R-Okla.). The addition of the gun amendment will make it tougher for the card bill’s sponsors, Sens. Richard Shelby (R-Ala.) and Christopher Dodd (D-Conn.) to keep the legislation narrow. President Barack Obama has said he wanted to sign a card bill by Memorial Day. Though the gun amendment could slow the passage of card legislation, it won’t necessarily derail it. Brian Gardner, KBW Inc. analyst, said the bill should be signed by July 4. The legislation was expected to be taken up in the Senate Thursday ... * WASHINGTON (5/15/09)--On Wednesday, Treasury Secretary Timothy Geithner called for legislation that would require many derivatives to be traded on clearinghouses or exchanges instead of over the counter (OTC). Banks argue that regulation on OTC derivatives would drive up prices and reduce earnings. Regulators, however, worry that banks’ exposure to OTC derivatives could hurt the financial system. If a large dealer fails, it could affect the entire industry (Reuters May 14). Derivatives are contracts with values that depend on a commodity, currency, bond or stock. A derivative can be tailored to a customer’s individual needs. As such, they can be hard to trade unless another party shares the same needs ...

Incentives added to Making Home Affordable program

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WASHINGTON (5/15/09)--Several incentives have been added for short sales and home price declines under President Barack Obama’s Making Home Affordable (MHA) program. The program, announced in February, aims to stabilize the housing market and offer assistance to seven to nine million homeowners by reducing house payments to affordable levels and preventing avoidable foreclosures. Short sales incentives include:
* Up to $1,000 for successful completion of a short sale or deeds-in-lieu (DIL); * Up to $1,500 for borrowers to help with relocation; and * A shared cost with Treasury for junior lien holders to release their claims--matching $1 for every $2 paid by investors--up to $1,000.
A lender may consider a short sale--or if that is unsuccessful, a DIL--when a borrower meets eligibility requirements for a Home Affordable Modification but not for a modification or cannot maintain payments during the modification trial period. Each successful modification for a home price decline also will be eligible for a Home Price Decline Protection (HPDP) incentive. MHA will pay up to $10 billion to encourage lenders to modify rather than foreclose. Payments will be based on the number of modified loans that successfully complete the modification trial period and remain in the program. If a trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to two years. Incentive payments will be made at the end of the first and second year of modification. Between loans covered by servicers or those securitized by Fannie Mae or Freddie Mac, more than 75% of all loans nationwide are covered by MHA. For more information, use the links.

Fryzel encourages CDFI participation

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ALEXANDRIA, Va. (5/15/09)--National Credit Union Administration Chairman Michael Fryzel encouraged credit unions to use Community Development Financial Institutions (CDFI) funds to enhance delivery of financial products and services. “Credit unions have received more than $14 million from the CDFI Fund over the past three years,” Fryzel said. “Credit unions are well-suited to benefit from the programs offered by the CDFI Fund.” The fund, created in 1994 under the Treasury, certifies and invests in financial institutions that provide financial products and services primarily to low-income communities or low-income people. Credit unions may apply for up to $100,000 in Technical Assistance grant funding to build internal capacity or to achieve CDFI certification. Certified CDFI credit unions may apply for up to $2 million in Financial Assistance for capitalization funds to support their overall business plan. Through the American Recovery and Reinvestment Act of 2009, the CDFI Fund received another $98 million to make awards. Funding is also anticipated for 2010 programs, expected to be announced this fall.

Youth Week noted in ICongressional RecordI

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WASHINGTON (5/15/09)--The Credit Union National Association’s (CUNA) National Credit Union Youth Week was noted in extended remarks of the Congressional Record, which was published Wednesday. The Congressional Record is the official record of the proceedings and debates of the U.S. Congress. It is published daily when Congress is in session. Youth Week was highlighted by the Hon. Ruben Hinojosa in the House during remarks he made supporting Financial Literacy Month, which took place in April. Hinojosa said, “Staff from America’s credit unions made presentations to young people at local schools on financial topics such as student loans, balancing a checkbook, and auto loans during National Credit Union Youth Week, April 19-25.” It’s important for Congress to support the goals and ideals of Financial Literacy Month, including raising public awareness about financial education, he added. Hinojosa ended with a statement by President Barack Obama in which Obama said financial literacy awareness and education must extend beyond Financial Literacy Month. CUNA has sponsored Youth Week since 2002. This year, CUNA’s National Saving Challenge, which ran for the entire month of April, exceeded last year’s deposit record by more than double. During the challenge, participating credit unions nationwide encourage youth to deposit their money into savings accounts.

New credit rules should follow federal regs CUNA says

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

Sen. Harkin Banks can take a lesson from CUs

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

Kanjorski offers corporate CU stabilization bill

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

Inside Washington (05/13/2009)

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

CUNA supports UIGEA delay

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

House panel to discuss corporate stabilization

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WASHINGTON (5/13/09)—A House Financial Services subcommittee will discuss the National Credit Union Administration’s (NCUA) corporate credit union stabilization plan in a May 20 hearing. The Credit Union National Association (CUNA) will be among those testifying before the House Financial Services subcommittee on domestic and international monetary policy, trade and technology. The witness panel is also expected to include representatives from the National Association of Federal Credit Unions and the National Association of State Credit Union Supervisors. Representatives from the NCUA will testify separately, prior to the CUNA panel. The hearing follows Senate deliberation on S. 896, the Helping Families Save Their Homes Act, which passed by an 86 vote margin late last week. (See related May 7 story: CU stabilization, insurance fund mods clear Senate.) That bill included language that would increase the National Credit Union Share Insurance Fund’s (NCUSIF) borrowing authority to $6 billion and allow credit unions to spread the cost of NCUSIF replenishment over a longer time period. Currently, NCUA does not feel that it has the authority to spread out NCUSIF related costs to federally insured credit unions. Credit unions are paying into the NCUSIF in the form of assessments that are collected as one lump sum. CUNA President/CEO Dan Mica has called upon Congress to extend the time period for paying these assessments, as such a move would allow credit unions to increase their consumer lending activities. A corporate credit union stabilization plan that was presented by NCUA in February calls for a $1 billion infusion and an initial estimate of $3.70 billion to guarantee current corporate credit union deposits. Under this plan, NCUA estimated that it would require $5.9 billion in total funds to restore the NCUSIF to its normal operating equity ratio level of 1.3%.

Inside Washington (05/12/2009)

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* WASHINGTON (5/13/09)--A deal between Sen. Richard Shelby (R-Ala.) and Senate Banking Committee Chair Christopher Dodd (D-Conn.) could push a bill forward that would crack down on abusive credit card practices. The bill passed the House April 30 and is expected to be taken up in the Senate this week. The senators’ deal incorporates tougher changes than those President Barack Obama sought. The changes include requiring credit card companies to get cardholders’ permission before charging cardholders over-the-limit fees (American Banker May 12). The deal allows card companies to increase interest rates if the consumer is 60 days late on payments, but they would have to re-evaluate if the cardholder’s credit improved. The legislation’s effective date would be 90 days after enactment, although the industry has argued that it would not be ready to implement before July 2010. Shelby said he compromised on the bill because card reform is “overdue.” He included a provision requiring the Federal Reserve Board to report to Congress every two years on the cost and availability of credit ... * WASHINGTON (5/13/09)--The Federal Reserve Board’s estimates of needed capital buffers are “appropriately conservative,” said Ben Bernanke, Fed president, during a speech at a Federal Reserve Bank of Atlanta conference. Bernanke was referring to stress tests that were given to 19 of the nation’s largest banks. Results of the tests were released last week and indicated that several banks may need to raise more capital. Bernanke cautioned that the tests did not address some risks that institutions will have to cover in their own internal tests--such as operational, liquidity and reputational risks. “The stress used in the assessment program should be part of a broader palette of internal stress tests conducted by firms,” he said ... * WASHINGTON (5/13/09)--The Office of Management and Budget (OMB) and the Federal Deposit Insurance Corp. (FDIC) have conflicting estimates regarding bank failure-related expenses (American Banker May 12). The OMB said the expenses would cost $91 billion through 2010, while the FDIC projected net losses of $65 billion through 2013. The Obama administration likely weighs systemic risk more heavily than the FDIC, said George Pennachi, finance professor at the University of Illinois at Urbana-Champaign and former OMB consultant. However, the OMB also projected revenue into the FDIC that could offset some costs. The FDIC is expected to earn $21 billion through assessments this year and $24 billion next year. It also could raise $27 billion from regular premiums and a 20-basis point special assessment to cover losses to the Deposit Insurance Fund ...

NCUA details latest semiannual regulatory agenda

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WASHINGTON (5/12/09)—In its latest semiannual regulatory agenda, the National Credit Union Administration (NCUA) plans to review elements of its rules regarding the confidentiality of suspicious activity reports (SARS). The regulatory agenda, published in the Federal Register, details upcoming regulatory developments within the NCUA. As part of its triennial review of existing regulations, the NCUA plans to examine its current SARS provisions to identify ways to “clarify the scope” of its current confidentiality rules. A notice of proposed rulemaking (NPRM) will be issued this June, according to the release. The Credit Union National Association (CUNA) has recently asked for comments on proposed rule changes that would clarify the scope of confidentiality prohibitions for SARs, address a prohibition against the disclosure of a SAR by the government, clarify that standards applicable to government SAR disclosures are consistent with the goals of the Banker Secrecy Act (BSA), and incorporate elements of the USA Patriot Act into current safe harbor provisions. The NCUA is also working to “update, clarify and improve existing part 705” of its rules governing its Community Development Revolving Loan Fund and to remove any “unnecessary detail” from the rule. The NPRM for these rules has already been issued, and the comment period for this NPRM will end on Nov. 30, the release said.

NCUA requests CLF CDRLF FY 2010 funding

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ALEXANDRIA, Va. (5/12/09)-- The National Credit Union Administration (NCUA) has requested $1 million in funding for its Community Development Revolving Loan Fund program (CDRLF) for 2010, which is the same level appropriated for FY 2009. The program is used to provide low-interest loans and technical assistance grants to low-income designated credit unions. These small credit unions offer services like free income tax preparation and financial literacy classes. Within NCUA, the Office of Small Credit Union Initiatives administers the fund. The NCUA has also requested that Congress approve a continuation for 2010 of the removal of the borrowing cap for the Central Liquidity Facility (CLF). That action would, in effect, mean the CLF could borrow and lend approximately $41.5 billion in liquidity for credit unions. Credit unions operate under a three-tiered approach for their liquidity needs. Credit unions can access the CLF, as a back-up liquidity provider, when corporate credit unions and other correspondent funding is unavailable. The higher funding level for the CLF in the upcoming year is particularly important because the facility has been tasked by NCUA to mitigate the effects of the housing crisis on corporate credit unions, natural person credit unions, and individual credit union members. The appropriations request must be approved by both house of the U.S. Congress to become law.

CUNA asks Senators to oppose interchange fee amendment

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WASHINGTON (5/12/2009)—The Credit Union National Association (CUNA) on May 11 joined a trio of other financial services associations in opposing potential amendments to H.R. 627 that would affect current regulations on interchange fees, which is the fee paid by merchants for the benefits of card acceptance. Sens. Richard Durbin (D-Ill.) and Kit Bond (R-Mo.) are expected to offer an amendment that its supporters claim is intended to facilitate discounts on different types of payment transactions. However, CUNA warns the amendment would actually permit merchants to discriminate against payment cards issued by a particular financial institution, including community banks and credit unions. Merchants would be able to drive consumers to use of a certain type of card--perhaps a card issued by a “preferred” institution with which the merchant has an agreement, CUNA said in a letter sent to each member of the U.S. Senate. The letter was co-signed by the National Association of Federal Credit Unions, the American Bankers Association, and the Independent Community Bankers of America. It maintained that the interchange fee amendment could “reduce credit and the choices available to consumers.” It would do so by reducing the income that covers the extensive infrastructure costs, fraud risk, and nonpayment possibilities that are assumed by financial institutions involved in the payment system and therefore possibly force credit unions and community banks out of the credit card business altogether, the letter said. Rather than simply adopting the amendment, CUNA and its cosigners have asked the Senate, at a minimum, to agree to a Government Accountability Office study of interchange fees, as detailed in Sen. Chris Dodd’s (D-Conn.) substitute amendment to H.R. 627. CUNA has previously stated its opposition to any changes to interchange fee rules, saying that allowing the government to interfere in what should be a free market issue would harm consumers, merchants and financial institutions.

Senate could finish credit bill of rights this week

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WASHINGTON (5/12/2009)—The Senate on May 11 began discussion of H.R. 627, the Credit Cardholders' Bill of Rights Act, with Sen. Chris Dodd (D-Conn.) offering a substitute version of the legislation for debate. The Senate bill would prevent lenders from making arbitrary changes to the interest rates or terms associated with a card that holds an existing balance. The bill would also require lenders to maintain any lower, so-called “teaser” rates for six months and would prevent lenders from increasing the yearly annual percentage rate (APR) on a credit card for the first year that the account is open. Additionally, card issuers would not be permitted to change the payment conditions of a given card. While the amendment, as introduced, would not take any immediate action on interchange fees, it would commission the Government Accountability Office to study interchange fees. A House version of the credit card bill did not address such things as the interest rate increases on existing balances. It did, however, propose gift card restrictions. According to the Credit Union National Association (CUNA), Sen. Richard Durbin (D-Ill.) could present amendments on interchange fees and usury ceilings. (See related story: CUNA asks Senators to oppose interchange fee amendment) It is also thought that Durbin could advocate for the creation of a financial products safety commission. This amendment, if presented, could be similar to S. 566, the Financial Product Safety Commission Act of 2009, which establishes a one-stop regulator for regulate financial products, similar to the current Consumer Products Safety Commission. CUNA is concerned that this regulatory agency could add unneeded complexity and compliance costs on top of those already imposed by the current regulatory scheme. The Senate is widely expected to complete its debate and act on this bill soon, as President Barack Obama this weekend urged Congress to take swift action on credit card legislation so that he could sign the bill into law by Memorial Day. The president will also discuss more broad credit-related issues at a town hall meeting scheduled for later this week.

Inside Washington (05/11/2009)

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* WASHINGTON (5/12/09)--The Washington Post profiled National Institutes of Health FCU President Juli Anne Callis in its May 11 edition of its ongoing series "New at the Top." Callis, a credit union movement veteran who recently joined NIHFCU from California-based KeyPoint CU, said that her goal as NIHFCU president is to “improve [the] financial health” of the employees who help the NIH improve the health of all Americans … * WASHINGTON (5/12/09)--Results of stress tests at 19 of the nation’s largest banks are raising doubts that the government’s plan to help banks get rid of bad assets may not be needed. The results indicate that 10 banks need more capital, but only a few need to raise a significant amount (American Banker May 11). This means the government program, the Public Private Investment Program (PPIP), may not be needed, said Chris Low, FTN Financial economist. Bank of America, GMAC LLC and Wells Fargo, which need the most capital according to stress tests, have not indicated they intend to participate in PPIP. However, Mark Zandi, chief economist and founder of Moody’s Economy.com, said PPIP could help institutions other than the 19 that were stress tested. A lot of other banks would welcome the ability to sell their assets in a reasonable way, he said. Robert Hartheimer, former Federal Deposit Insurance Corp. director of resolutions, said PPIP could be “life-saving” for community banks ... * WASHINGTON (5/12/09)--Mary Schapiro, Securities and Exchange Commission chairman, indicated her support for a regulators council to oversee risk in the financial markets during a speech Friday. The council was proposed by Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair last week. Regardless of the council’s form, Schapiro said “it should have access, largely through the functional regulators, to sufficient information to provide a view of the financial system as a whole. And it should have sufficient power to direct prudential regulators to strengthen capital requirements and to direct institutions they regulate to reduce leverage as circumstances require. That said, there are many important issues around the definition of authority for such a regulator... I have long been concerned about excessive concentration of point of view--in a single regulator,” she said ...

Inside Washington (05/08/2009)

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* WASHINGTON (5/11/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel Thursday reiterated his support for maintaining an independent federal credit union regulator and share insurance function. However, he said he recognizes the “significant policy benefit” that an expanded systemic risk regulator could have on standard setting and financial oversight. Fryzel said the NCUA should be included as a member if Congress moves toward a plan, suggested in testimony last week by Federal Deposit Insurance Corp. Chairman Sheila Bair, to establish a broad-based, systemic risk council aimed at monitoring financial entities that are “too big to fail” ... * WASHINGTON (5/11/09)--Federal Reserve Board Chairman Ben Bernanke said the Fed hopes that Congress will consider revising provisions of the Gramm-Leach-Bliley Act to ensure that supervisors of financial institutions have all of the resources they need to address safety and soundness concerns. Bernanke spoke at the Federal Reserve Bank of Chicago Conference on Bank Structure and Competition via satellite Wednesday. The Gramm-Leach-Bliley Act, which allowed investment and commercial banks to consolidate, contains provisions that limit the Fed from obtaining reports from or taking action with respect to subsidiaries supervised by other agencies. The controls have helped “clarify the protocols for relying on other supervisors and identify cases in which we need to take a more active role,” but the restrictions present challenges because of different supervisory models, Bernanke said. “For example, those favored by bank supervisors and those used by regulators of insurance and securities subsidiaries and differences in supervisory timetables resources and priorities,” he added. The Fed last year issued guidance on compliance risk, which stresses the need for supervisors and bankers to understand risks within and across business lines, legal entities and jurisdictions ... * WASHINGTON (5/11/09)--If the Obama administration’s strategy was procrastination when it ordered stress tests at 19 of the nation’s largest banks, its strategy may have worked, according to Kip Weissman, partner at Luse Gorman Pomerenk and Schick PC. Banks have more options than they did two months ago, he said (American Banker May 8). The tests bought time, agreed Chris Low, chief economist at FTN Financial. However, time is an enemy, noted Cornelius Hurley, professor of the Graduate Program in Banking and Financial Law at Boston University. The release of the results also could lead the public to believe they deserve greater disclosure going forward, said Wayne Rushton, managing director at Promontory Financial Group. Douglas Landy, partner at Allen and Overy, said bank exams shouldn’t be used for investor information and that other banks could view the tests as a precedent ...

CUNA represents CUs at White House meeting

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WASHINGTON (5/11/09)--Credit Union National Association President/CEO Dan Mica Friday attended a White House meeting with a group of about 10 financial industry CEOs addressing financial regulatory reform issues. Senior administration officials, including U.S. Treasury Secretary Timothy Geithner, met with key players in the financial services industry to address such topics as: additional oversight of nonreporting entities; enhanced disclosure and consumer protections; and a need for global communication and coordination. Also participating in the meeting were senior White House official Pat Parkinson, who is working with Geithner on regulatory reform, and Diana Farrell, a deputy director of the administration’s National Economic Council. Mica said the meeting resulted in productive discussion and a good exchange of ideas. “We appreciated being invited, as part of a select group, as the representative of the credit union industry.” This was the second time this year CUNA was asked to the White House to deliver the credit union message on financial services topics. In March, Mica and CUNA Deputy General Counsel Mary Dunn, attending the unveiling of this administration's small business initiatives, told the president that credit unions want to help small businesses. The Friday meeting is also a follow up to a meeting Mica had in December with the new administration’s Transition Team, which at the time was reviewing all federal agencies, including the National Credit Union Administration. Based on what he heard at the Friday meeting on regulatory reform, Mica concluded, “The administration is serious about moving forward, moving thoughtfully, and moving quickly.”

Short term-loans could increase CU market share Hood says

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WASHINGTON (5/11/09)—The current economic climate presents Credit Unions with a “unique opportunity” to gain crucial market share by helping current payday loan customers transition into credit union members, National Credit Union Administration (NCUA) Vice Chairman Rodney Hood said. In a May 8 release detailing recent comments delivered to the 2009 meeting of the National Association of Credit Union Service Organizations (NACUSO), Hood said that CUs and related service organizations could “play a vital role in ending the downward cycle for consumers involved in payday lending,” by serving as a “dependable and honest partner” to consumers. Adding current payday loan customers to the ranks of credit union members would not only offer increased options to borrowers with short-term financial needs, but could also create a new revenue stream for CUs, Hood added.

Fed approves Reg Z disclosure changes

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WASHINGTON (5/11/09)—The Federal Reserve Board on May 8 approved revisions to its Regulation Z mortgage disclosure requirements that will implement provisions of the Mortgage Disclosure Improvement Act (MDIA). Under the MDIA, lenders would be required to provide full loan cost estimates to potential homebuyers before the lender could receive any form of payment, outside of credit check charges, from the borrower. The rules would also enact current MDIA rules that impose a weeklong waiting period between the aforementioned cost estimate and the closing of the mortgage. Additionally, lenders would need to provide new disclosures, including a revised annual percentage rate, if the existing interest rate significantly changes between the time that the first estimate is given and the closing date. Borrowers may also change the timing of the loan disclosures or the closing of the loan, in the event of a so-called “financial emergency.” In a comment letter sent earlier this year, the Credit Union National Association (CUNA) suggested that some of the timing restrictions on creditors should be relaxed if the changed APR results in an interest rate reduction. CUNA also asked the Fed to replace the two definitions of “business day” that were in the proposed rule with a single definition, consistent across all provisions of Reg Z. CUNA will examine the final rule to ensure that these and other concerns have been addressed, Assistant General Counsel Jeffrey Bloch said. Though a May 8 Fed press release said that the new rules would apply to all mortgage applications received on or before July 30, 2009, the regulations, as officially presented in the Federal Register, would apply to all mortgage applications dated July 30, 2009 or later. The Fed is currently working on further revisions to the Regulation Z disclosure requirements for closed-end rules, including rules addressing mortgages. A larger, more comprehensive proposal on these rules should be issued in the coming months.

NCUA issues another advisory about corporate losses

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ALEXANDRIA, Va. (5/11/09)--The National Credit Union Administration’s (NCUA) latest advisory reiterates that the agency plans to issue guidance in the form of a letter to credit unions for account holders of paid-in-capital (PIC) and membership capital accounts (MCA) at U.S. Central and WesCorp. The letter will address the impact of the losses that were reflected in March 2009 financial statements on capital holders at these corporates. According to NCUA--based on its loss estimates--WesCorp has exhausted its PIC and MCAs and U.S. Central has exhausted its PIC and 63% of its MCAs, according to WesCorp’s financial statement was posted May 1. U.S. Central’s was set to be posted Friday. The Credit Union National Association (CUNA) and credit union leagues have been very concerned about NCUA's earlier indication that the capital accounts in WesCorp are “extinguished” and that 100% of the PIC and 63% of the member capital shares have been “extinguished” in U.S. Central. Though Friday’s NCUA advisory did not use the term “extinguished,” CUNA President/CEO Dan Mica said CUNA remains concerned and takes the position that the agency should not indicate capital holders at the time of conservatorships may not be able to share in any future recoveries on the corporates’ mortgage-backed securities. Mica and CUNA staff have spoken with Fryzel, NCUA Board Member Gigi Hyland and senior staff at NCUA about the situation. “We have provided to NCUA an economic and legal rationale for allowing the capital holders at the time of the conservatorships to benefit from recoveries on the mortgage-backed securities," he said.

Obama 2010 budget could eliminate FFELP funding

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WASHINGTON (5/11/09)—The Department of Education’s Federal Family Education Loans Program (FFELP) could be eliminated if portions of President Obama’s fiscal 2010 budget aimed at reducing entitlement spending are retained. The Obama Administration estimates that opting for private contractor assistance and eliminating the subsidies provided under FFELP could save over $4 billion, annually. The $4 billion surplus created by the policy changes would be used to provide need-based Pell Grants to low-income students. The Credit Union National Association (CUNA) “continues to meet with key members of Congress to explain the importance of the FFELP and the critical role credit unions play in the program," senior legislative representative Phil Drager said. CUNA has previously warned that the elimination of FFELP could jeopardize student lending at more than 1,000 credit unions throughout the country, and may end student lending by credit unions altogether. If adopted, the changes would take place beginning with the 2010-2011 academic year. Lenders that are currently providing loans via the FFELP program will continue to receive subsidies for their outstanding loans and for loans that were originated during the 2009-2010 academic year.

Inside Washington (05/07/2009)

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* WASHINGTON (5/8/09)--South Carolina credit unions hiked Capitol Hill Wednesday and attended a Credit Union House evening reception. Ten credit union CEOs and several credit union members were at the Hill hike event. The group met with Reps. Joe Wilson (R), John Spratt (D) and J. Gresham Barrett (R). During the hike, credit unions weighed in on the Corporate Stabilization Package--which passed the Senate Wednesday--and briefed their legislators on regulatory and National Credit Union Administration issues.
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Credit unions also noted members’ concerns regarding interchange fees, the Community Reinvestment Act, and member business lending. From left are: David Casey, Family Trust FCU; Garry Parks, president/CEO of the South Carolina Credit Union League; Scott Weaver, Carolina Foothills FCU; Bill Love, MTC FCU; Matt Tebbetts, Greenville FCU; Brandon Pugh, league director of communications and public relations; Steve Fowler, league executive vice president of advocacy; Jim Nunamaker, league director of governmental relations; Beverly Ellis, Family Trust FCU; Paul Hughes, Greenville FCU; and Smokey Childers, Family Trust FCU. (Photo provided by CUNA) ... * WASHINGTON (5/8/09)--The Internal Revenue Service (IRS) recently sent a reminder to tax-exempt organizations with $25,000 or less in total yearly gross receipts to file their Form 990-N, or e-Postcards, by May 15. According to the Credit Union National Association’s economics and statistics department, about 300 small, state-chartered credit unions are likely to need to file the e-Postcards, started last year. Credit unions that are subject to this reporting requirement should already have been notified … * WASHINGTON (5/8/09)--A bill by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) that would triple the Federal Deposit Insurance Corp.’s (FDIC) credit line was approved by the Senate Wednesday. The FDIC also would be restricted from using funds to help a Treasury program to allow investors to buy troubled bank loans (American Banker May 7). The bill would extend the FDIC temporary insurance increase of $250,000 per account to the end of 2013. The same bill includes provisions to create a temporary Corporate Credit Union Stabilization Fund and permit credit unions to spread the cost of National Credit Union Share Insurance Fund replenishment over a longer period of time (News Now May 7). Another provision important to credit unions would extend--for four years--the higher, $250,000 federal share and deposit insurance ceiling due to expire at the end of the year. The bill will be sent back to the House to work out differences between the House and Senate versions ... * WASHINGTON (5/8/09)--Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair said Wednesday that Congress should create a council to oversee financial institutions deemed “too big to fail.” The council could be made up of the nation’s top financial regulators (The New York Times May 7). Bair also said Congress should give incentives to make “too big to fail” institutions smaller, and those institutions could set aside extra capital or put money into insurance programs in case they have trouble again ... * WASHINGTON (5/8/09)--President Barack Obama Thursday released details of his plan to cut $17 billion from the budget in an effort to save money as government costs for health care, wars and bailouts continue to add up (The New York Times May 7). The $17 billion would be saved by reducing or eliminating 121 federal programs. Some of the cuts include eliminating a $35 million radio navigation system that has been rendered obsolete, absorbing a literacy program into other Education Department programs, and eliminating an education attache position for the United Nations Educational, Scientific and Cultural Organization (UNESCO). The president said the savings would be enough for $2,500 tuition tax credits for millions of students for larger Pell grants ... * WASHINGTON (5/8/09)--Stress test results indicate that the nation’s largest banks will need $75 billion to survive potential losses from the economic recession. The results, released Thursday afternoon, were based on tests conducted at 19 banks (The Washington Post May 7). Nine of the 19 banks do not need new capital, including Goldman Sachs and JPMorgan Chase. Eight can raise the capital they need by private money or common stock conversions. Wells Fargo needs $13.7 billion and Bank of America needs $33.9 billion. GMAC, the financing arm of General Motors, needs $9.1 billion in new capital, and Regions Financial Corp. of Alabama needs $400 million. Wells Fargo announced it would raise $6 billion through stock sales, and Morgan Stanley--which needs $1.8 billion--said it would raise $2 billion by selling stock ...

House mortgage reforms would limit abusive lending

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WASHINGTON (5/8/09)—The U.S. House of Representatives on Thursday voted 300-114 to approve H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act. A goal of the legislation, sponsored by Rep. Brad Miller (D-N.C.), is to persuade lenders to abandon more complex loan structures by returning to mortgages with simple fixed rates and adequate documentation. Creditors would be required to retain at least 5% of the balance of a mortgage loan that isn't a "qualified mortgage," a term defined to exclude loans with negative amortization, that aren't fully amortized and have balloon payments, that exceed certain interest rates, that have monthly payments that exceed a certain percentage of the borrower's monthly income (as determined by regulation), or that exceed 30 years. However, regulators would be able to adjust any of these restrictions if consistent with the intent of the law. Federal credit unions, which have authority to make loans for 40 years, would likely choose to seek relief from the 30-year restriction. The bill also looks to ban yield-spread premiums and other compensation structures that may be abused by loan originators, and, more generally, would force loan originators to disclose how they are compensated to homebuyers. House members also agreed to amendments that would standardize mortgage forms and strengthen rules regarding income verification for potential borrowers. The bill would also suspend revised Real Estate Settlement Procedures Act (RESPA) rules, scheduled to go into effect Jan. 1, 2010. Instead, if the bill is enacted into law, HUD and the Fed must within six months jointly issue proposed rules for providing compatible disclosures for borrowers to receive at the time of mortgage application and at the time of closing. Rep. Barney Frank (D-Mass.) promised to clarify portions of the bill, saying that he and others would work to better “spell out what is permitted” before the bill can be put into law. A number of representatives agreed that work should also be done to clarify any potential jurisdictional misunderstandings between federal and state authorities. The Credit Union National Association (CUNA) has previously said that while it supports the bill's intent, lawmakers should resist pressing for additional laws before assessing the effectiveness of a series of regulatory actions currently underway to address mortgage lending problems and concerns. There is no comparable bill in the Senate at this time. CUNA will be closely monitoring developments in the Senate in order to give credit unions some guidance this summer on the impact on their RESPA compliance programs.

Obama budget seeks big CDFI hike

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WASHINGTON (5/8/09)--The $234.6 million in Community Development Financial Institution (CDFI) funds contained in President Obama’s fiscal 2010 budget should be a boon to Credit Unions that lend to individuals and businesses in economically distressed areas. According to a May 7 release from the U.S. Department of Treasury, the new federal budget represents a 127 percent increase from the $107 million granted to CDFIs by the 2009 budget. Over $113 million of the fiscal 2010 total will be specifically targeted to treating financial issues in underserved communities, the release added. A further $80 million of the CDFI funds will go to the newly-established Capital Magnet Fund, a program aimed at enhancing investments in affordable housing opportunities for the very poorest Americans. The Treasury Department's CDFI Fund is designed to offer affordable sources of credit to small businesses, individual consumers, and potential homebuyers that could otherwise be excluded. CUNA, the National Federation of Community Development Credit Unions, and the Coalition of Community Development Financial Institutions have been steadfast in their efforts to increase CDFIF funding. Treasury currently extends CDFI certification to many non-government based financiers that work in targeted communities. The Treasury is holding a series of conference calls for financial institutions that may be interested in CDFI certification. For information on CDFI certification, see the resource link below.

Senate holds on credit reform bill for now

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WASHINGTON (5/8/09)—Credit Unions can expect a vote on pending credit card reform legislation sometime next week, Credit Union National Association (CUNA) Director of Federal Legislative Affairs Michele Johnson said on May 7. Any further discussion on S. 414, also known as the Credit CARD Act of 2009, has been pushed back for the time being, as the Senate instead began debate on S. 454, the Weapon Systems Acquisition Reform Act of 2009. However, Senate Majority Leader Harry Reid (D-Nev.) on Thursday told Reuters that Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and ranking minority member Richard Shelby (R-Ala.) have reached consensus on the language of the credit card legislation. A house bill (H.R. 627) containing similar credit reform measures passed by a 287 vote margin late last week. Under this legislation, many current business practices, including double-cycle billing, prolonged payment periods, and universal default, would be banned. The legislation would also limit the fees that credit issuers can charge and would enhance protections for younger credit card users. CUNA generally supported the House bill because the legislation largely mirrored regulations promulgated by the Federal Reserve and National Credit Union Administration in December 2008. These rules go into effect in June 2010. During the committee consideration of H.R. 627, CUNA supported an amendment, which was approved, that extended the effective date of the legislation to one year after passage or June 1, 2010.

Inside Washington (05/06/2009)

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* WASHINGTON (5/7/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel said the Senate’s 91-5 vote in favor of the agency’s Corporate Credit Union Stabilization Fund and accompanying provisions such as increased borrowing authority was “an unmistakable affirmation by lawmakers that the credit union industry can and will take care of its own problems.” In a statement Fryzel lauded the strong support given to the Stabilization Program by the credit union movement and added, “As the legislation moves to the House, I encourage a similar level of activism by credit union leaders across the country.”… * WASHINGTON (5/7/09)--Any action on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009, will have to wait until today after the House on Wednesday moved to postpone a vote on the bill. The bill, introduced by Reps. Brad Miller (D-N.C.) and Mel Watt (D-N.C.) in late March, would fight against some predatory lending practices and attempt to push the mortgage market toward more conventional fixed rate mortgages … * WASHINGTON (5/7/09)--Federal Reserve Board Chairman Ben Bernanke said Tuesday during testimony to the Joint Economic Committee that the Fed would release more information on how many institutions borrow money from its lending facilities and what kinds of collateral they are using (American Banker May 6). Bernanke’s announcement comes after policymakers complained about the Fed’s cash infusion to markets without congressional input. The Fed chief also told the committee that the central bank is committed to transparency and openness and continues to expand the range of information available on its website as its review of disclosure practices proceeds. Bernanke did not reveal results of banks’ stress tests during the testimony, but said that any bank needing more capital will be able to receive it from stock conversions and private sources--but not from the Treasury ... * WASHINGTON (5/7/09)--Federal regulators were faulted for the failure of Alpha Bank and Trust last October in Alpharetta, Ga., by a watchdog report issued Tuesday. The Federal Deposit Insurance Corp.’s inspector general said regulators should have been worried that the bank was growing beyond its business plan (American Banker May 6). When it failed, Alpha had $334 million in assets after being in business for 29 months. Poor underwriting, a reliance on high-cost funding, concentration on high-risk construction and residential development loans, and few risk management controls caused it to fail ... * WASHINGTON (5/7/09)--Richard Hunt is the new president of the Consumer Bankers Association (CBA), the trade group announced Tuesday. His role will be effective June 1. He succeeds former president Joe Belew, who died in January ... * WASHINGTON (5/7/09)--The public’s attention to stress tests conducted at 19 of the nation’s largest banks may negate the “whole point of stress testing,” according to Jaidev Iyer, a former risk management chief at Citigroup. The results are expected to be released today. Discussion of the tests from the Obama Administration to others could prevent regulators from being candid, said Bradley Sabel, former bank supervisor with the Federal Reserve Bank of New York. There is value to keeping discussions between banks and examiners private, and that fear of a market panic could prevent regulators from telling banks to make significant operational changes, he said. Simon Johnson, former chief economist with the International Monetary Fund, said the tests were a “clever stalling action.” Others, including Kevin T. Jacques, finance professor and former Treasury employee, said the Treasury may have been backed into a corner and felt that if it didn’t release the test results, the public would wonder what it was hiding ...

CUNA seeks comment on SAR confidentiality plan

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WASHINGTON (5/7/09)--The Credit Union National Association (CUNA) has issued a comment call on a proposed rule change that would clarify the scope of confidentiality prohibitions for Suspicious Activity Reports (SARs) and harmonize the current regulations. The changes, proposed by the Financial Crimes Enforcement Network (FinCEN), would also address a prohibition against the disclosure of a SAR by the government, clarify that standards applicable to government SAR disclosures are consistent with the goals of the Banker Secrecy Act (BSA), and incorporate elements of the USA Patriot Act into current safe harbor provisions. FinCEN has also proposed separate guidance addressing the sharing of SARs with some affiliates. Under the proposal, individuals and organizations would be prohibited from disclosing the existence of a SAR target or any information regarding a SAR filing to any person or organization, with, however, limited exceptions. Potential exceptions to this rule include the disclosure of any underlying information that could be discoverable under the Federal Rules of Civil Procedure and any information that should be used to fulfill financial reporting or Bank Secrecy Act (BSA) monitoring needs. The proposal would also prevent financial institutions and their employees from using SAR confidentiality prohibitions to obstruct the investigations of regulators or federal, state or local law enforcement. Among the issues CUNA is asking credit unions to comment on are:
* Whether the terms or provisions used for consistency across financial institutions are inappropriate for any one type of financial institution based on its specific characteristics; * If any important provisions from the existing regulations have been unintentionally or inappropriately eliminated or confused by the proposed regulations; * What additional or alternative methods could be used to strengthen the confidentiality of SARs; and * If some of the regulations should be revised to increase consistency between the various rules.
Financial institutions are required to file a SAR if any insider abuse, money laundering, or other violations of the BSA are discovered or suspected. Comments are due to CUNA by May 22. They are due to FinCEN by June 8. To read CUNA's Comment Call or the SAR report proposal, use the links below.

New Internet gambling bills unveiled

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WASHINGTON (5/7/09)—Rep. Barney Frank (D-Mass.) is launching a new attempt to revise conditions imposed by a controversial 2006 law that, in part, forces financial institutions to block restricted Internet gambling transactions. Under the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), financial institutions must establish and implement policies and procedures to identify and block certain online gambling transactions, or rely on those established by the payments system. The Credit Union National Association (CUNA), and many others in the financial services industry, have warned that aspects the 2006 law are difficult, if not impossible, to implement. CUNA has also warned that an increased policing role, as demanded by UGIEA, could interfere with financial institutions' fundamental business to provide financial services to their communities. Frank introduced two bills Wednesday, one of which would delay the implementation of UIGEA rules for a year beyond their current effective date of Dec. 1, 2009. A companion bill, The Internet Gambling Regulation, Consumer Protection, and Enforcement Act of 2009, would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States, according to a release from Frank. The Massachusetts Democrat is chairman of the House Financial Services Committee. CUNA Vice President of Legislative Affairs Ryan Donovan said Wednesday that CUNA would strongly support the one-year moratorium for the effective date. He reiterated that while CUNA remains neutral on the issue of whether online gambling should or shouldn’t be legal, the group strongly opposes forcing credit unions being placed in a position to police the activity. He said Frank’s second bill “doesn't put us in the position of enforcing the law.” CUNA's Valerie Moss, director of compliance information, said—from a compliance angle--credit unions should keep an eye on the bills’ progress. “However, they should not postpone moving ahead with compliance efforts at this point in the hope that the UIGEA requirements will be delayed or eliminated. Unfortunately, we can't count on that happening,” she said. Use the resource link below to read details of Frank’s bills and to access background information on UIGEA.

CU stabilization insurance fund mods clear Senate

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WASHINGTON (5/7/09)—The Senate on Wednesday voted 91-5 to approve S. 896, the Helping Families Save Their Homes Act, which now includes provisions to create a temporary Corporate Credit Union Stabilization Fund and permit credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time. The bill next will be sent back to the House to work out differences between the Senate bill and the House version, H.R. 1106. The National Credit Union Administration’s (NCUA) plan for a stabilization fund wasn’t included in the House package; however key members said last week that they would favor acting expeditiously and including the language in a final bill. Credit Union National Association (CUNA) President/CEO Dan Mica said Wednesday that time is of the essence for final passage: “Credit unions are covering the costs related to stabilizing corporate credit unions, and the legislation will allow them to spread this cost out over time rather than in just one lump sum this year.” “Spreading these costs over multiple years means that credit unions can use the funds, that otherwise would have been used to pay the assessment immediately, to make credit available to their members right away – a needed component to help our economy get back on its feet,” Mica said, adding, “We now urge the House to just as quickly take up and adopt the Senate legislation.” Other credit union provisions in S. 896, adopted as an amendment offered by Sens. Christopher Dodd (D-Conn.) and Richard Shelby (R-Ala.), would raise the NCUA’s borrowing authority to $6 billion, from the current ceiling of $100 million. They also would authorize $30 billion in NCUA emergency borrowing authority. Another provision important to credit unions, the bill would extend—for four years—the higher, $250,000 federal share and deposit insurance ceiling due to expire at the end of the year. The Senate vote followed a grassroots call to action by CUNA and the leagues that resulted in an estimated 20,000 contacts from credit unions to Capitol Hill in support of the Senate language mitigating the corporate costs. Though S. 896 contains many legislative changes that are of great importance to credit unions, the bill is mainly aimed at helping homeowners avoid foreclosure by encouraging loan modifications for at risk mortgages. In earlier comments delivered on the Senate floor, Sen. Richard Durbin (D-Ill.) said he was “not giving up” on judicial mortgage modification provisions that were defeated by a six-vote margin late last month. The mortgage provisions, also known as the cramdown amendment, would have allowed bankruptcy judges to modify the terms of existing mortgages.

Senate housing vote moved to today

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WASHINGTON (5/6/09)—The Senate late Tuesday recessed for the evening without completing work on its housing bill, the Helping Families Save Their Homes Act (S. 896). The Senate will reconvene this morning at 9:30 and is expected to take a series of up to ten roll call votes on remaining amendments to the bill—and then a final vote on the package. The bill is expected to pass and be the vehicle for several important credit unions provisions, such as:
* Creation of a temporary Corporate Credit Union Stabilization Fund; * Authorization for credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time; * Raising the National Credit Union Administration’s (NCUA) borrowing authority to $6 billion, from the current ceiling of $100 million, and also authorize $30 billion in NCUA emergency borrowing authority; and * Extension—for four years--the higher, $250,000 federal share and deposit insurance ceiling due to expire at yearend.
If approved by the Senate, the bill would next be sent back to the House in an attempt to address differences between the Senate’s version and the House-approved H.R. 1106. The NCUA plan for a stabilization fund wasn’t included in the House package; however key members said last week that they would favor acting expeditiously and including the language in a final bill.

Fee relief will promote CU investment

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WASHINGTON (5/6/09)--The Credit Union National Association (CUNA) this week praised a proposed rule change that would allow credit unions to remove investments in CU SIP or CU HARP from their total operating fee calculations. The Credit Union System Investment Program (CU SIP) and the Credit Union Homeowners Affordability Relief Program (CU HARP) were created by the National Credit Union Administration (NCUA) to prop up the corporate credit union system. Under CU SIP, credit unions may invest funds that are borrowed from a Central Liquidity Facility (CLF) in corporate credit union. CU HARP allows credit unions to invest money borrowed from the CLF in two-year guaranteed CU HARP notes that are issued by corporate credit unions. These funds may then be used to modify at-risk mortgages. Although NCUA continues to encourage credit union participation in these programs, the agency has said that increased operating fees could prevent some credit unions from participating. In a comment letter posted Monday, CUNA said that removing these investments from operating fee calculations would “facilitate participation in the [CU SIP and CU HARP] programs by removing the disincentive related to the calculation of the operating fee.” CUNA asked for individual credit unions to provide their comments on the proposal in a March 25 comment call. To read more about CUNA’s comment letter, use the resource link below.

Inside Washington (05/05/2009)

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* WASHINGTON (5/6/09)--An amendment that would have narrowed a “safe harbor” to protect mortgage servicers who modify troubled loans was defeated by the Senate Tuesday (Reuters May 5). If the safe harbor amendment had passed, some mortgage investors could have sued mortgage servicers for lowering a borrower’s monthly loan payment. Mortgage investors usually lose money when terms of a mortgage are modified, so some investors worried that mortgage servicers would modify loans without regard for investors ... * WASHINGTON (5/6/09)--Results of the Federal Reserve Board’s April 2009 Senior Loan Officer Opinion Survey on Banking Lending Practices released Monday indicate that a significant majority of banks expect that credit quality for all types of loans likely will deteriorate over the year if the economy progresses according to consensus forecasts. The survey addressed changes in the supply of, and demand for, loans to businesses and households over the previous three months. Respondents indicated that demand for loans from both businesses and households continued to weaken for nearly all types of loans over the survey period, except demand for prime mortgages. About 50% of domestic respondents indicated that they had tightened their lending standards on prime mortgages the previous three months, and about 65% of the 25 banks that originated nontraditional residential mortgage loans during the survey period reported tightening their lending standards on such loans. About 35% of domestic respondents saw stronger demand, for prime residential mortgage loans during the previous three months, compared with the roughly 10% that reported weaker demand in the January survey ... * WASHINGTON (5/6/09)--In a speech Monday, Federal Reserve Bank of Kansas City President Thomas Hoenig said that breaking up large companies may be an option to prevent “such institutions from holding us hostage in the future.” Commenting on the notion that some banks are perceived as “too big to fail,” Hoenig said some institutions should be subject to size or activity limit, higher capital requirements and other limitations on the systemic risks they impose on the financial system. “I fear that if we pour in enough public funds to see us through the current crisis, we will then breathe a sigh of relief and back off from implementing any comprehensive solutions to controlling the use of government guarantees and to addressing the problems posed by systemically important institutions,” he added ...

Interchange fee reg changes opposed in CUNA ad

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WASHINGTON (5/6/09)--The Credit Union National Association (CUNA) continued to oppose legislation that would potentially affect merchant-paid interchange fees by running a May 5 ad in the Washington Post. The ad, which will also appear at other times in select Washington-based publications, online media outlets, and some nationwide markets in the coming weeks, voices credit union opposition to any legislative action involving interchange fees. The credit card billing practices legislation, S. 414, the Credit
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Card Accountability, Responsibility and Disclosure Act (CARD Act), currently calls for a General Accounting Office study of interchange. CUNA is concerned that a senator could offer an amendment that would substantially change the payment processing system and reduce the interchange that credit unions rely on to offer debit and credit cards to their members. Merchants could ask the government to intervene by capping the fees that payment networks charge merchants for each credit or debit card transaction. Such a move would enhance retailers’ profits while costing consumers an estimated $400 in additional annual expenses on a per-household basis, the CUNA ad said. CUNA believes that such legislation would also limit consumer options and would harm competition. Further, CUNA has said that allowing the government to interfere in what should be a free market issue would equally harm consumers, merchants and financial institutions. Other trade groups in the Electronic Payments Coalition, of which CUNA is a member, plan to run ads opposing any changes to the interchange fee regulations.

Economy key factor in CUNA 08 financial results

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WASHINGTON (5/6/09)—The Credit Union National Association (CUNA) finished 2008 with a positive operating margin of $221,000, but the down economy’s impact on investments and the association’s employee pension plan resulted in an $8 million adjustment to assets from unrealized losses and accounting adjustments. CUNA President/CEO Dan Mica noted that at a time when national associations, as well as the members they represent, are facing financial challenges from the strains of a prolonged recession, CUNA implemented a number of measures to reduce costs and increase efficiency, resulting in the positive operating margin for the year. “The area where we, as a management team, have direct control is on operating results,” he noted. Further, Mica noted that CUNA continues to follow a policy in which all dues revenue ($21.6 million in 2008) goes to support CUNA’s advocacy functions—legislative and regulatory affairs, compliance, political action, public relations and communications, research and economics. However, the declining value of CUNA’s investment portfolio and accounting adjustments related to the continued decline in the funding status of CUNA’s defined benefits plan resulted in a change in restricted net assets of $7.9 million. Mica said CUNA is evaluating actions it can take this year to help address the situation, which also could be aided if, as many economists currently forecast, the economy begins to improve later in 2009. Full details of CUNA’s 2008 year-end financial results will be in the association’s annual report, which will be distributed with the June issue of Credit Union Magazine and posted online.

Loan mod scam hearing today

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WASHINGTON (5/6/09)—Loan modification and foreclosure rescue scams are the topic of a hearing today by the House Financial Institutions subcommittee on housing and community opportunity. The subcommittee will focus its attention primarily on legislative proposals that would fight such fraud schemes. The subcommittee is not alone in its concern that struggling homeowners are being swindled by pseudo help plans. The Financial Crimes Enforcement Network (FinCEN) issued a warning in April that growing numbers of unscrupulous persons or companies could attempt to abuse the Obama administration’s loan modification and foreclosure prevention programs. FinCEN asked credit unions and other financial institutions to help law enforcement identify such crimes via their suspicious activity report (SAR) filings. FinCEN, backed by an alert from the National Credit Union Administration, asked financial institutions to be on the look out for such things as a statements by homeowners that they have been making payments to a party other than the mortgage holder or servicer, among other things. FinCEN Director James Freis is among those scheduled to testify. Use the resource link below to see the full list of witnesses.

Inside Washington (05/04/2009)

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* WASHINGTON (5/5/09)--Stress-test results for 19 of the nation’s largest banks have been pushed back until Thursday, federal regulators said (CNNMoney.com). The results are expected to come in Thursday afternoon. The delay was triggered by a disagreement among some banks over the results of the tests. Last Friday, regulators began notifying participating institutions of the results, according to Austan Goolsbee, an economic adviser for President Barack Obama. Goolsbee emphasized that the tests were not pass/fail. Instead, the tests were designed to determine each institution’s health and need for additional capital ... * WASHINGTON (5/5/09)--The failure of Silverton Bank of Atlanta could lead to more scrutiny of the Office of the Comptroller of the Currency and its decision to allow the institution to convert to a national bank (American Banker May 4). The OCC said Friday that the institution had a business plan that the agency thought was workable and that the bank was supervised. Silverton failed on Friday, leaving behind 1,000 customers and 400 stockholders. Its operations had been folded into a bridge bank by the Federal Deposit Insurance Corp. ... * WASHINGTON (5/5/09)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said Monday that Michael Bradfield will be the agency’s new general counsel. As general counsel, Bradfield will oversee the legal division, which is responsible for legal work on regulatory issues, FDIC transactions, litigation, corporate and commercial claims. Bradfield formerly served as general counsel for the Federal Reserve Board ...

House members promise action on bill with NCUA stabilization plan

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WASHINGTON (5/5/09)--House financial leaders, including Rep. Barney Frank (D-Mass.), have promised to act quickly on H.R. 1106, Helping Families Save Their Homes Act, once the bill returns to the House. The Senate was expected to vote on its version of the bill, S. 896, late last week, but Senate Banking Committee Chairman Christopher Dodd (D-Conn.) on Friday elected to push the vote back. The Senate is expected to vote on the bill starting today. In a recent letter to Dodd, Rep. Frank, along with cosigners Paul Kanjorski (D-Pa.) and Luis Gutierrez (D.-Ill.), supported Dodd’s efforts to include the temporary corporate credit union stabilization fund as part of H.R. 1106. The stabilization legislation, introduced by the National Credit Union Administration (NCUA), would enable credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time. According to the letter, credit unions would pay a 99 basis point charge for every $100 in deposits if the current law is not changed. This one-time charge could cause an estimated two-thirds of credit unions to report negative earnings for 2009 and could harm 225 federally-insured credit unions that would fall below the necessary level of capitalization. Rep. Kanjorski plans to introduce NCUA’s stabilization plan to the House “in the very near future.” Rep. Gutierrez, who currently chairs the House Financial subcommittee on financial institutions and consumer credit, also plans to have his subcommittee review the proposal before the end of the month. Gutierrez will also discuss potential changes to NCUA’s regulation of corporate credit unions, the letter added.

Instead of CRA make banks more like CUs federation says

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WASHINGTON (5/5/09)—The head of the National Federation of Community Development Credit Unions reiterated the group’s long-held position that Community Reinvestment Act (CRA) requirements are unnecessary for credit unions, in response to a recent blog posting. The federation was established in 1974 to represent credit unions with a specialized mission of serving low- and moderate-income people and communities. Executive Director Clifford Rosenthal highlighted in his comments that credit unions last year, despite the unprecedented crisis that rocked the financial system, “actually increased their mortgage lending and auto lending, while banks (freeze) out millions of Americans.” An earlier blog posting had alleged that a fear of CRA was a primary factor in credit unions not taking federal funds, like the Troubled Asset Relief Program (TARP) funds being poured into banks. Rosenthal noted that credit unions were split over the issue of federal funds, but he emphasized that CRA was “very much a subordinate concern.” More key to the debate, he said, were credit union concerns about increased federal taxes, as well as the pride the credit union movement takes in never having taken taxpayer funds in the past. He noted that the federation was on the side of credit unions who worked to be included as eligible for federal funds. Rosenthal also pointed out the credit union movement was itself bearing the cost of the National Credit Union Administration’s (NCUA’s) corporate credit union stabilization efforts. Even with legislation currently being considered to allow the cost to credit unions to be spread out over time, the “burden” is borne by credit unions. Responding to the blog post's question of how the federation can support CRA in general but not for credit unions, Rosenthal stated, "If the goal is to achieve a kind of parity or symmetry between banks and credit unions, I would suggest a far better solution would be to make banks more like credit unions." Such parity, he explained, would entail a system where all banks were not-for-profit, transparent, locally controlled, directly accountable to those they serve, steered by democratically elected boards, limited in the compensation of senior management, focused on providing small, unsecured credit on affordable terms, and lending 70% or more of their assets back to their customers. "These are the basic characteristics of credit unions in the United States," he added.

Card bill brings usury ceiling interchange concerns CUNA

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WASHINGTON (5/5/09)—When the Senate completes consideration of S. 896, the Helping Families Save Their Homes Act, that body is expected to proceed to consideration of S. 414, the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act), according to the Credit Union National Association (CUNA). Ryan Donovan, CUNA vice president of legislative affairs, noted Monday that CUNA will be closely monitoring the credit card bill’s progress for a number of reasons. First, he said, is CUNA’s concern that there is a balance to the bill that avoids unintended consequences that ultimately would be adverse to consumers, including making credit more expensive and less available for consumers. CUNA generally supported a version of the bill approved in April by the House Financial Services Committee because it closely mirrored new regulations credit unions will have to follow beginning July 2010. Donovan said CUNA could have concerns with any legislation that goes further than the new rules. “Additionally, we are concerned that amendments related to the regulation of interchange fees and imposing a national usury ceiling may be offered as the bill is being considered,” Donovan said. “We strongly oppose all amendments related to the regulation of interchange fees; and we also oppose the usury ceiling legislation that could be offered as an amendment,” Donovan said.

Fryzel encourages dialogue with NCUA CUs on corporates

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ALEXANDRIA, Va. (5/5/09)--National Credit Union Administration (NCUA) Chairman Michael Fryzel encouraged credit unions to continue dialogue with NCUA on reforms to the corporate system. Credit unions can take the challenges presented by market turmoil and turn them into an opportunity to “revamp, refine and improve the forms and functions of corporate credit unions,” Fryzel said in a speech to 150 credit union officials during the Illinois Credit Union System’s Governmental Affairs and Legislative Day in Springfield, Ill. NCUA’s Corporate Stabilization Plan is pending Congressional approval. The plan is an “immediate priority,” according to Fryzel. The goal is to create an improved corporate credit union system that can meet the needs of credit unions and their members, he said. Noting that he has repeatedly expressed his intention to preserve the safety and soundness of credit unions, Fryzel said: “NCUA’s recent actions have instilled confidence in a corporate network that has experienced considerable stress. Credit unions should be reassured by this and should know that, working cooperatively; credit unions can not only deal with problems, but also emerge a stronger and more valuable asset to America’s consumers.”

CUNA seeks comment on Reg Z changes

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WASHINGTON (5/4/09)--The Credit Union National Association (CUNA) is seeking comments on the Federal Reserve Board’s proposed amendments regarding open-end credit rules under Regulation Z. The proposed changes--effective July 1, 2010--would affect disclosures for credit cards and other credit plans. In December, the Fed issued a final rule that changes the open-end credit rules under Reg Z. The proposed changes are intended to resolve uncertainties and make other technical changes to the rule, although they are not intended to change the level of protection. Comments are due to CUNA by May 22. Among the changes, the proposal would:
* Clarify that an issuer offering a deferred or waived interest plan may not disclose this with an annual percentage rate (APR) of 0% due to the possibility that the consumer may not need to pay the interest if the balance is paid before a certain date; * Provide an exception to listing a specific APR in account-opening disclosures when the rate varies on a consumer’s creditworthiness; * Continue deferred and waived interest programs as long as they comply with the other requirements under Reg Z and the unfair and deceptive acts of practices final rule. However, the programs would have added disclosure requirements--including the amount of the deferred or waived interest balance and interest charges and fees for the statement period and the calendar year-to-date; * Provide an exception for the rule issued last year that requires creditors to provide a 45-day notice of a change in a term disclosed in the account-opening summary table. Under the proposal, the requirement would not apply when the change is applicable only to checks that access a credit card account; * Clarify an exception to a 45-day notice requirement when an interest rate is increased due to a consumer’s delinquency or default. The exception would apply when there are temporary hardship arrangements where the rate is lowered; * Underscore that during an investigation of unauthorized transactions, a creditor may require a consumer to sign a statement supporting the claim; * Implement and clarify advertising requirements for deferred or waived interest programs in which interest does not need to be paid if the balance is paid by a certain date. Model language is also included in the proposal for creating the disclosures.
For more information, use the link.

Inside Washington (05/01/2009)

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* WASHINGTON (5/4/09)--Mark-to-market accounting did not have a big impact on banks’ first-quarter financial results, according to several large financial institutions (American Banker May 1). James Dimon, JPMorgan Chase and Co. chairman and CEO, said the rules ended up being “a big hullabaloo about nothing.” Wells Fargo and Co. said the rule change shrank its securities losses by $4.4 billion without affecting earnings. But despite the initial comments from banks, some financial observers say that because the adjustments impacted the balance sheet instead of the income statement, investors still do not know how the change impacted banks that adopted the rule in the first quarter. Some investors say the accounting change helped banks minimize losses. But Scott Marcello, U.S. deputy leader of financial services at KPMG, says the results indicate that fair value accounting will have staying power. The change, known as FAS 157-4, provided new guidance for financial institutions on how to determine if a market is still active. FAS 157-4 also changed how companies can value illiquid assets ... * WASHINGTON (5/4/09)--Many programs created to prevent the nation’s financial system from collapsing last year were put together quickly, with a short-term focus, according to three designers of the Troubled Asset Relief Program (TARP). David Nason, former Treasury assistant secretary for financial institutions; Kevin Fromer, former assistant secretary for legislative affairs; and Phillip Swagel, former assistant secretary for economic policy, spoke at a conference Wednesday about TARP (American Banker May 4). Many Treasury officials, in designing the programs to help the economy, didn’t have time to second-guess, according to Nason. Even when officials tried to anticipate market reactions, they were often wrong, Swagel added. The officials noted their disappointment with some institutions’ failure to take the Treasury’s offers to buy their illiquid assets--which were then liquidated for less ... * WASHINGTON (5/4/09)--Starting in June, commercial mortgage-backed securities and securities backed by insurance premium finance loans will be eligible collateral under the Term Asset Backed Securities Loan Facility (TALF), according to a policy statement released Friday by the Federal Reserve Board. The Fed also said it would continue to evaluate the $100 billion limit that TALF loans with five-year maturities carry. Some of the interest on collateral financed with a five-year loan could be diverted toward an accelerated repayment plan. The policy statement indicates that the Fed could be backing off because few investors have participated in the program, according to Chris Low, chief economist, First Horizon National Corp. (American Banker May 1). Oliver Ireland, former Fed lawyer, said the statement shows that the Fed is thinking more realistically and is looking for other ways to fund retail credit and foster lending ...

SBA expands eligibility for 7a loans

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WASHINGTON (5/4/09)--The Small Business Administration (SBA) has expanded the eligibility for 7(a) loans, effective this week through Sept. 30, 2010. As a result of the change, SBA expects that more than 70,000 additional small businesses could be eligible for the loans. The temporary 7(a) loan size standard will parallel the standard for the agency’s 504 Certified Development Company loan, and will allow businesses to qualify based on net worth and average income. The net worth for the company and its affiliates cannot exceed $8.5 million and average net income after federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years cannot exceed $3 million. “This is just one more step we are taking to make sure small businesses have access to capital to keep their doors open and employees working during these tough economic times,” SBA Administrator Karen Mills said. “We have seen signs that small businesses that are just outside the traditional 7(a) size standard are being shut out of the conventional lending market. This temporary change will help those businesses weather these tough times and help move our nation closer to economic recovery.” With the change, more small businesses also can receive benefits made possible through the Recovery Act. On March 16, the SBA implemented two key provisions of the Recovery Act that raised the guarantee on 7(a) loans to 90 percent and reduced fees for borrowers. Since then, average weekly 7(a) loan volume has increased by more than 25% and new SBA loans made by nearly 450 lenders who had not made loans since October 2008. Credit unions are ready to help the nation’s small businesses jumpstart the economy, Credit Union National Association President/CEO Dan Mica has said. CUNA has been in regular contact in recent years with the SBA urging the agency to remove structural roadblocks to programs like its 7 (a) guaranteed lending program to enable more credit unions to participate. As of December, 204 credit unions had SBA loans outstanding. Credit unions have 7,096 loans with a balance of $519,308,696. The average loan size is $73,183, according to CUNA research.

Power Breakfast puts CUs close to political action

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WASHINGTON (5/04/09)—Once again, credit unions gained broad exposure before a vital audience in the nation's capital during a popular "Power Breakfast," organized by National Journal. The Credit Union National Association (CUNA) co-sponsors the series, and a couple hundred Capitol Hill staffers, lobbyists and reporters attended the event Friday featuring Senate Majority Leader Harry Reid of Nevada.
Click for slide show Senate Majority Leader Harry Reid (second from left) spoke with CUNA Senior Vice President of Political Affairs Richard Gose (right) at the CUNA-co-sponsored Power Breakfast. (National Journal photo)
Reid, addressing financial services regulation in response to a question, said regulatory reform is certainly on the Senate agenda this year. He cautioned, however, that the U.S. Congress should not overact to current problems and “overdo” its response. A danger there, he said, is killing off innovations. Reid’s wide-ranging remarks addressed not only financial services regulations, but also health care reform, the budget, and Iraq, among other things. The Senate leader also assessed other politicians. A former boxer, Reid said most politicians are either a “boxer” or a “slugger.” A boxer is one who shows finesse and is cool in times of stress. A “slugger” takes a confrontations al approach. When asked to assess President Barack Obama’s style, Reid said the 44th president is “definitely a boxer.”

NCUA releases results of MBS reviews

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WASHINGTON (5/4/09)--On Friday, the National Credit Union Administration (NCUA), in its weekly media release on the corporates, released the results of the analyses of all private label mortgage-backed securities at WesCorp and U.S. Central. According to the analyses--by Clayton Fixed Income Services, Inc.-- the range of estimated credit losses for U.S. Central under optimistic, base and pessimistic scenarios are $0.6 billion, $2.2 billion, and $6.5 billion, respectively. WesCorp has an optimistic loss level of $3.0 billion, a base of $5.6 billion and a pessimistic loss level of $7.9 billion. The Other-Than-Temporary-Impairment (OTTI) charges to be reflected on the March 31 statements for U.S. Central and WesCorp are $2.3 billion and $5.8 billion, respectively. This will result in an extinguishment of all Paid-in-Capital (PIC) and Membership Capital Accounts (MCA) at WesCorp. For U.S. Central, all PIC and 63% of MCAs will be exhausted. The March 31 financial statements are expected to be released by each corporate this week, NCUA said. The agency also noted that renewed liquidity pressures are mounting from normal seasonal outflows. Both credit unions have worked to establish contingent market funding sources, which remain limited due to the broader problems in the credit markets. NCUA continues to make contingency plans for potential liquidity needs, according to NCUA Chairman Michael Fryzel. At its May meeting, the NCUA board plans to consider changes to the Temporary Corporate Credit Union Liquidity Guarantee Program to provide longer term funding options. “I encourage all credit unions to continue to support liquidity needs by keeping all surplus funds within the credit union system,” Fryzel said. CUNA continues to make every effort to urge NCUA to consider alternative approaches to extinguishment.

FTC red flags rule for state-chartereds delayed again

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WASHINGTON (5/4/09)--State-chartered credit unions will have more time to comply with the Federal Trade Commission (FTC)’s identity theft “red flags” rule after the FTC announced that it will extend the date to August 1 from May 1. This is the second delay the FTC has issued for enforcement of the rules. Federal credit unions were required to comply with NCUA's red flag regulations on Nov. 1, 2008. Some state regulators expected state-chartered credit unions to comply at the same time as the federal credit unions--Nov. 1--regardless of the FTC's enforcement delay. Credit unions can check with their state examiners to confirm compliance dates. The FTC said it delayed enforcement to give institutions subject to the FTC’s oversight more time to develop and implement written identity theft prevention programs. The delay, like the one issued by the FTC in October, is limited to the ID theft red flags rule. It does not extend to the regulation regarding address discrepancies applicable to users of consumer reports, or to the rule regarding changes of address applicable to card issuers. The mandatory compliance date for these requirements was Nov. 1, 2008 for both federal and state chartered credit unions. The red flags rule was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. FACTA directed financial regulatory agencies, including the FTC, to promulgate rules requiring those under its supervision that have covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. Last month, the FTC launched a website to help entities covered by the red flags rule develop and implement identity theft prevention programs. The site features a publication, “Fighting Fraud with the Red Flags Rule: A How-To Guide for Business.” In addition, the FTC's extended enforcement policy indicates that FTC staff plan to publish a "red flag" template to enable smaller, low-risk entities to prepare their programs without undue burden. For more information, use the links.

Senate vote on housing bill moves to this week

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WASHINGTON (5/4/09)—Senate leadership has pushed back consideration until early this week of S. 896—a housing bill that may be a vehicle for an important credit union provision to address the cost of the corporate credit union stabilization plan. The bill's delay, in part, was meant to give the legislation's sponsors a chance to get a handle on the number of amendments that are being proffered for consideration. A vote on S. 896, the Helping Families Save Their Homes Act, had been expected Friday. The bill is primarily intended to help more homeowners stave off foreclosure, but it has been drawing broad attention from lawmakers wanting to add other provisions. Sen. Christopher Dodd, a Democrat from Connecticut and chairman of the Senate Banking Committee, declared on the Senate floor earlier Friday that there would be no votes in the Senate that day. Important to credit unions, Dodd also underscored the importance of the proposed amendment that would allow credit unions to spread out over eight years the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Dodd said Senate votes would resume Monday, and the housing bill may be voted Tuesday. The bill is also expected to carry an extension of the federal share and deposit insurance increased ceiling to $250,000, which was approved on a temporary basis in 2008 and due to expire at year-end.