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Washington Archive

Washington

NCUAs Matz backs small biz MBL cap lift

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ALEXANDRIA, Va. (6/1/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz, marking the end of National Small Business Week on Friday, praised small businesses as vital contributors to job creation and again spoke in favor of increasing the current cap on credit union member business lending (MBL). “An enhanced ability for credit unions to lend for business purposes – if properly regulated, with appropriate safeguards – can become an even greater spur to job creation in the future,” Matz said, adding that the NCUA would “promptly revise” its regulation “to ensure that additional capacity in the credit union system would not result in unintended safety and soundness concerns” if the MBL cap was lifted. The Treasury last week sent its own proposed legislation that could lift the MBL cap to as high as 27.5% of a credit union’s assets, and Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, recently said that his committee would soon hold a hearing on MBLs. The Credit Union National Association has steadfastly supported lifting the MBL cap, saying that increasing the current 12.25% of assets loan ceiling to 25% would inject over $10 billion in assets into the economy, creating as many as 100,000 new jobs.

Inside Washington (05/31/2010)

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* WASHINGTON (6/1/10)--The battle over preemption continues as the Office of the Comptroller of the Currency (OCC) and banking industry representatives back the Senate version of the regulatory reform bill, saying it more explicitly restores the Barnett standard. State regulators and consumer groups support the House provision, which they said is more flexible and would require the OCC to take additional steps before preempting a law, said American Banker (May 28). Under the Barnett standard, the OCC can preempt state laws on a case-by-case basis. The House version said the OCC can preempt a law if it prevents, interferes with or impairs banking. The House version also would require OCC to prove that a federal law already exists that addresses the issue the state law is trying to address. The OCC and bankers said if the Senate version were adopted, they would have a better chance of winning court battles on preemption. The two versions also differ in how much power they give state attorneys general. The House bill would allow state attorneys general to enforce any federal law against national banks, while the Senate bill would only allow states to enforce federal rules from a new consumer protection regulator. It also limits attorneys general’s actions to their own states ... * WASHINGTON (6/1/10)--The Obama administration is focused on several provisions within the regulatory reform bill: ensuring the Volcker rule is part of the final bill, subjecting retail brokers to a fiduciary duty and preventing auto dealers from being exempted from consumer protection (American Banker May 28). Neal Wolin, Treasury deputy secretary, said the administration will work to ensure the Volcker rule’s ban on proprietary trading is in the final bill. The administration also wants to maintain safeguards to prevent resolution authority from being used unless necessary. However, he avoided taking a position on a provision of the Senate bill by Sen. Blanche Lincoln (R-Ark.) that would force banks to divest their swap desks ...

CUNA CUs continue interchange push

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WASHINGTON (6/1/10)—The Credit Union National Association (CUNA) continues its push to have interchange fee legislation removed. The interchange amendment was included in the Senate version of the regulatory reform package, S. 3217, the Restoring American Financial Stability Act (RAFSA), which passed the Senate earlier this month by a 59-39 vote. However, the House version of regulatory reform, which was passed late last year, does not address interchange fees. CUNA, associated credit union leagues, and credit union employees and members are all working over the Memorial Day recess, which lasts until June 7, to spread their anti-interchange-legislation message throughout various congressional district meetings. A toll free action line created by CUNA is available for credit unions and their members to use to call their legislators' offices. That line can be reached by calling 877-223-5275. CUNA and credit union leagues have also provided other means of contact for credit union backers at http://capwiz.com/cuna/home/(Use the resource link). CUNA and the leagues' efforts, as well as outreach by individual credit union members, have resulted in 60,000 individual contacts with legislators as of Friday. More direct action will follow next week, with CUNA and the leagues backing a nationwide fly-in and another round of CUNA's National Hike the Hill on June 8, 9 and 10.

Despite House approval NFIP some SBA programs to lapse

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WASHINGTON (6/1/10)--Although the House on Friday approved legislation that would extend the National Flood Insurance Program (NFIP) and some fee eliminations and increased guarantees for Small Business Administration (SBA) 7(a) and 504 loans, both of those programs will still lapse for a minimum of a week. The legislation, known as the "American Jobs and Closing Tax Loopholes Act of 2010,” still requires Senate approval, and that body of Congress will not return to Washington until June 7. Both the NFIP and SBA programs that are addressed in this legislation expired on Monday. The extender legislation, once approved, would extend these programs until Dec. 31. The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Since flood insurance is unavailable in many parts of the country, the NFIP is an important resource to credit unions and other lenders.

Fed releases Reg DD E clarifications

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WASHINGTON (6/1/10)--The Federal Reserve last week clarified some aspects of its Regulation E, Electronic Fund Transfers, and Regulation DD, Truth in Savings, that address overdraft services. The Fed made slight alterations to Reg E, which requires consumers' affirmative consent (opt-in) before institutions could charge overdraft fees for ATM and one-time debit card transactions. The Fed has clarified that institutions “cannot assess a fee for the payment of ATM and one-time debit card overdrafts” if consumers do not opt-in to their overdraft programs, “even if the institution has a policy and practice of declining ATM and one-time debit card transactions upon a reasonable belief that an account has insufficient funds.” "The final rule does not provide any exceptions for allowing overdraft fees for ATM and one-time debit card transactions to be imposed without consumer consent,” the Fed added. According to the Fed, “adopting exceptions to the fee prohibition would undermine the consumer’s ability to understand the institution’s overdraft practices and to make an informed choice.” This prohibition applies to all financial institutions, the Fed release said. The Fed release also addressed opt-in confirmation, stating that institutions must provide their consumers or members with written documentation of their opt-in choice in written form. These disclosures may not be made orally, the Fed said. Overall, the Fed said that its Regulation E final rule applies “solely to overdraft fees imposed in connection with ATM and one-time debit card transactions,” not overdraft fees that are related to check, ACH and recurring debit card transactions. Addressing Reg DD, the Fed clarified that section 230.11(c) of that rules does not require institutions “to exclude from the consumer’s balance funds that may be transferred from another account” under retail sweep programs. Consumers that take part in retail sweep programs “may reasonably expect to see a single balance combining the funds in the transaction subaccount and the savings subaccount when they request an account balance.” The Fed also amended the effective date of Section 230.11(a)(1)(i), which requires financial institutions to use the term "total overdraft fees" on their periodic statements, pushing it back to Oct. 1. The remainder of the rule will come into effect on July 1. For the Fed releases in full, use the resource link.

New FASB GAAP plan would affect CUs over 10M

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WASHINGTON (5/28/10)--The Financial Accounting Standards Board (FASB) this week proposed changes that would, among other things, greatly expand the range of financial instruments that are to be measured at market value, including loans. The FASB exposure draft would also provide that loan loss reserves be measured on a forward-looking “expected loss” basis. This differs from the current method, which uses a historical “incurred loss” approach. The Credit Union National Association’s (CUNA) Accounting Subcommittee has been weighing-in with FASB regarding this proposal on accounting for financial instruments over the past year. Following his speech at CUNA’s Governmental Affairs Conference this past February, several members of the Subcommittee and CUNA staff met with FASB Chairman Robert Herz to discuss a range of accounting issues and concerns of the credit union industry, including the subject of this week’s exposure draft. FASB in a release said that the objective of the new accounting standard “is to provide financial statement users a more timely, transparent, and representative depiction of an entity’s exposure to risk from financial instruments based on how they are utilized in an entity’s business model.” The proposed changes would modify U.S. Generally Accepted Accounting Principles (GAAP); credit unions over $10 million in assets are required to comply with GAAP. Once adopted, FASB expects the rule to take effect sometime in 2013. However, non-public entities with less than $1 billion in assets will be permitted a four-year deferral from certain requirements, such as those relating to loans. Herz encouraged all that would be affected by the proposal to “carefully review the proposal.” “Through its due process, the FASB will ensure that it obtains and considers a broad range of input on this important proposal,” Herz added. FASB will accept comments on the exposure draft through September 30. In addition, the International Accounting Standards Board (IASB), the international accounting standard-setter, has a similar proposal out for comment. The two Boards are working together and hope to ultimately adopt a single standard for accounting for financial instruments. However, a number of inconsistencies between the proposals may prevent such convergence. CUNA’s Accounting Subcommittee will thoroughly examine this issue in the near future. A CUNA-led audio conference tentatively scheduled for late July will feature several accounting professionals, and will likely include staff from the National Credit Union Administration and Financial Accounting Foundation, the organization that oversees FASB. CUNA representatives said that they would do all that they could to "minimize the impact of this proposal on the credit union industry.”

Inside Washington (05/27/2010)

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* WASHINGTON (5/28/10)--Michael Barr, Treasury assistant secretary of financial institutions, did not take a position on several key issues in the regulatory reform bill during a briefing this week. Barr said the Obama administration has no preference whether a proposed consumer financial protection division is housed as a separate agency or inside the Fed. The administration is “fine” with either approach, Barr said American Banker (May 27). Regarding a provision by Sen. Blanche Lincoln (R-Ark.) that would force banks to divest their derivatives operations to prevent them from taking risks, Barr said the goal of the provision may be better dealt with in the Volcker Rule. The Volcker Rule would limit investments in private-equity firms and hedge funds, and ban proprietary trading. Barr also failed to comment on Sen. Richard Durbin’s (D-Ill.) measure that would require the Fed to make sure interchange fees on debit cards are “reasonable” and allow merchants to give discounts on particular forms of payment--such as cash. The provision is not in the House version. The Credit Union National Association (CUNA) has said it would not support the interchange measure. CUNA wrote to House members urging them not to support the interchange amendment because it would dramatically alter the electronic payments system, and make it very difficult for card-issuing credit unions and community banks to continue to provide a wide array of products and services to consumers ... * WASHINGTON (5/28/10)--The Federal Deposit Insurance Corp. (FDIC) and China are working to better coordinate their resolution functions after United Commercial Bank of San Francisco failed in November. The bank had operations in China. The agreement between the FDIC and the China Banking Regulatory Commission says the two will: improve mutual understanding about their respective national regulations and laws on bank insolvency; cooperate in developing resiliency and resolution plans for banks operating in both the U.S. and China; conduct joint contingency planning to improve readiness for any future resolutions; enhance information exchanges about developing issues and cross-border financial institutions during periods of financial stress; and develop closer coordination to implement their resolution responsibilities in future crisis involving banks operating in both countries ...

CUNA leagues rally CUs to action on interchange

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WASHINGTON (5/28/10)—As the effort to affect interchange legislation continues, the Credit Union National Association (CUNA) and credit union leagues are encouraging credit union employees and members to contact their congressional representatives over the upcoming memorial day recess. CUNA and the Leagues are working to help spread credit unions’ anti-interchange-legislation message throughout next week’s scheduled congressional district meetings, where credit union supporters will be able to directly address the interchange issue with their representatives. Credit union backers can also reach their representatives via letter, which CUNA has provided talking points for at http://capwiz.com/cuna/home/ . More direct action will follow in June, with CUNA and the credit union leagues backing a nationwide fly-in and another round of CUNA’s National Hike the Hill set to take place on June 8, 9 and 10. The interchange amendment was included in the Senate version of the regulatory reform package, S. 3217, the Restoring American Financial Stability Act (RAFSA), which passed the Senate earlier this month by a 59-39 vote. However, the House version of regulatory reform, which was passed late last year, does not address interchange fees. As the House and Senate move forward to design a single bill that both houses of Congress can ratify, CUNA will continue its push against the interchange language and urge federal lawmakers to drop any such provision out of a final bill. CUNA President/CEO Dan Mica has called on credit unions to “engage at the grassroots level right away.” For more materials to help in this coordinated effort, use the resource link.

Consumer choice imperiled by interchange amendment CUNAICBA

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WASHINGTON (5/28/10)--Consumers could lose important card choices if the U.S. Congress allows government intervention in setting interchange fees, and the Credit Union National Association (CUNA) and Independent Community Bankers of America (ICBA) urged House members to reject interchange provisions in a final financial regulatory reform bill. The joint letter, signed by CUNA President/CEO Dan Mica and ICBA President/CEO Camden Fine and sent today, reaches House legislators as they suit up to reconcile differences between the House-approved reg reform bill and one approved just last week by the Senate, which included an interchange provision. The interchange amendment would dramatically alter the electronic payments system, the letter warns lawmakers, and make it very difficult for card-issuing credit unions and community banks to continue to provide a wide array of products and services to consumers. Furthermore, the missive says, the Senate adopted the amendment without any hearing on its on consumers or the market, and in the face of tremendous political pressure from merchants “intent on passing their costs off on others,” including consumers. On the latter point, the trade groups describe a long history of the merchants trying to do just that: “Whether through pending class action litigation in federal court, legislation in the states, or pending bills in the House, the merchants have pursued a number of different attacks on our institutions’ ability to serve consumers, in addition to the recent expansive and harmful Senate amendment.” The Senate interchange language would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, which, the letter says, forces the Fed into the role of a price-fixing body, when interchange fees sound be driven by market forces. “Our institutions—with their exclusive focus on local communities, underserved populations, and rural areas—issue debit and credit cards as a service to their local customers, and they continue to do so fairly and honestly, often with better rates and terms than can be found at larger institutions. “The key that makes this possible is the existing interchange system, which allows community banks and credit unions to compete directly with the largest banks in the debit and credit card marketplace,” the joint letter argues. For more, use the resource link below.

Treasury sends bill to lift MBL cap to Capitol Hill

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WASHINGTON (5/28/10)--Legislation that would lift the cap on member business lending (MBL) for credit unions could see congressional action soon after the Treasury this week said it “could support proposals to increase credit union [MBL] provided safety and soundness concerns are addressed” and forwarded its own MBL proposal to the hill. Commenting on the Treasury proposal, the Credit Union National Association's (CUNA) Senior Vice President of Legislative Affairs John Magill said that CUNA has been "working on this language for months with Senators and Treasury officials, and we are very pleased that this seems to be moving forward." Rep. Paul Kanjorski (D-Penn.) and Sen. Mark Udall (D-Colo.), in their respective congressional bodies, have introduced legislation that would lift the MBL cap. The Treasury’s comments came in the form of a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.), wherein Treasury Secretary Tim Geithner said that the Treasury would work with Congress and would seek to ensure that any MBL reforms “are not done in a way that inappropriately introduces more risk to credit union members, the credit union system, the National Credit Union Share Insurance Fund, or the financial system as a whole.” CUNA has estimated that lifting the MBL cap to 25% of a credit union’s assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers. The Treasury’s proposed legislation would establish a maximum MBL limit of 27.5% of a credit union’s total assets. The proposal also states that the growth of a given credit union’s MBL portfolio may be no more than 30% annually. Credit unions that wish to lift their MBL cap must be well capitalized, must be lending at a ratio near the current cap for the previous four quarters, must have a minimum of five years of underwriting and servicing MBLs, and must demonstrate sufficient experience in managing these types of loans. The National Credit Union Administration would also be granted the authority to “set rules creating intermediate [MBL] limits and to require approval before any credit union can move to the next higher limit.” The Treasury also called on the NCUA to “be vigilant and carefully oversee implementation” of the MBL program by reporting on MBL “activity and loan performance.” The Obama administration earlier this month voiced support for raising credit unions' business lending capacity, and House Financial Services Committee Chairman Barney Frank (D-Mass.) said his committee would consider an administration proposal to that effect--in a markup--"fairly soon." That markup has not yet been scheduled.

SBA reactivates recovery loan queue

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WASHINGTON (5/27/10)--Small Business Administrator Karen Mills on Wednesday announced that the Small Business Administration (SBA) has “reactivated” its recovery loan queue. In a press release, Mills said that a key piece of President Barack Obama’s “aggressive” small business agenda is “a longer-term extension of these increased guarantees and reduced fees.” Mills urged Congress to “move quickly to continue these critical programs.” Obama last month authorized $80 million "to continue enhancements" to the SBA's 7(a) and 504 loan programs. Specifically, the funds provide higher guarantees on some SBA-backed loans and relief from some small business fees. H.R. 4213, the American Jobs and Closing Tax Loopholes Act, would extend increased guarantees for SBA 7(a) and 504 loans that are scheduled to expire on May 31. That legislation is currently awaiting House action and, if approved, would move on to the Senate. The Credit Union National Association has offered its own solution to small business funding shortages, heavily publicizing the fact that lifting the current 12.25% cap on member business loans to 25% of a credit union’s total assets could create up to $10.8 billion in new funds. These funds, which could create as many as 100,000 new jobs, would come at no cost to taxpayers. For the SBA release, use the resource link.

FTC releases final rule on insurance disclosures

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WASHINGTON (5/27/10)—Credit unions and other financial institutions that are backed by private insurance will now be required to more fully disclose that fact after the Federal Trade Commission (FTC) on Wednesday released its final rule on depository institution disclosures. The new rule will require non-federally insured financial institutions to disclose their insurance status and state clearly that they are not federally insured and that share or deposit accounts they hold are not backed by federal government guarantee. The required disclosures must be made on account statements, in advertising and inside branches at the deposit window. While the new rule will require non-federally-insured financial institutions to disclose their insurance status, that disclosure is not required to appear “in a sign, document, or other item that has the institution’s name but no information about the institution’s products or services or information otherwise promoting the institution.” However, the institution must “conspicuously disclose” that it is not federally insured wherever deposits are received as well as on its web site. National Credit Union Administration (NCUA) Chairman Debbie Matz applauded the FTC decision, saying in a Wednesday release that “effective consumer protection starts with relevant, practical information, and the FTC has taken an important step to equip members of non-federally insured institutions with essential details about their accounts.” “In these uncertain and difficult economic times, consumers should know more about how their money is insured, and should know that the federal deposit insurance provided by the National Credit Union Share Insurance Fund is the best option for credit union members," she added. The FTC release noted that commenters were most concerned by disclosure requirements for institutions participating in shared branching networks and service centers and “the timing of signed acknowledgment requirements.” Commenters were also reportedly concerned that the new rules would require federally insured institutions in shared branching networks to post Federal Deposit Insurance Corporation Improvement Act (FDICIA) disclosures on behalf of each of the non-federally ensured entities in those networks. “Both federally and non-federally insured institutions argued that such a requirement would be unreasonable” and, potentially, confusing for customers, the release added. Many also suggested that the FTC could “rely on recent disclosure requirements issued by the NCUA for such networks in lieu of imposing a separate disclosure requirement.” Commenters argued that the NCUA disclosure provides a clear explanation to consumers and that any FTC disclosure could cause confusion. The final rule will become effective 30 days after it is published in the Federal Register.

iCNNMoney.comi CUs among winners in reg reform battle

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WASHINGTON (5/27/10)--Although the credit union world is closely focused on the next round of the interchange legislation fight, a CNNMoney.com story has listed credit unions as one of the winners of the recent regulatory reform battle based on how credit unions fare in other elements of the wide-ranging reform legislation. Among the victories cited by the CNN story was the continuation of the National Credit Union Administration (NCUA) as the enforcement authority for credit unions under $10 billion for rules promulgated by the new consumer finance protection body that would be established under the legislation. Both the House and Senate bills would allow the NCUA to retain this authority. CNN also noted portions of the House bill that allow credit unions and community banks to avoid paying into the $150 failed institution resolution fund. CNN counted big banks, MasterCard and Visa as the biggest losers of the regulatory reform fight, with the legislation potentially forcing the banks to “beef up capital cushions and cut down on leverage and risky moves.” Visa and MasterCard’s profits will also be adversely affected by a late amendment to the bill that would allow the Federal Reserve to determine the amount that card issuers may charge for a given purchase. The Credit Union National Association remains opposed to the interchange rules, and CUNA, credit union leagues, and individual credit unions are intently focused on efforts to remove the interchange language from the final version of the bill.

CUNA holds natl call-in on interchange today for CUs

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WASHINGTON (5/27/10)—As part of its all-out assault to block interchange language from being included in a final financial regulatory reform bill, the Credit Union National Association (CUNA) is sponsoring a national conference call today to outline issues and needed action for leagues and credit unions. CUNA has reserved 3,000 lines for participants of the 2 p.m. (ET), half-hour call-in, during which President/CEO Dan Mica will describe credit union concerns regarding an interchange amendment currently included in the Senate version of the regulatory reform package, S. 3217, the Restoring American Financial Stability Act (RAFSA). The Senate passed that bill earlier this month by a 59-39 vote. "Credit unions must engage at the grassroots level right away. Our call will outline the actions credit unions must take to reach our goal of removing the interchange amendment from the financial reform legislation before it is enacted into law," said CUNA’s Mica. "We know this is short notice, but I urge all credit unions to dial into today's call. Next week's Memorial Day recess gives us an immediate opportunity to deliver our message to members of Congress while they are back home." The House-approved version of a comprehensive financial reform bill, the Wall Street Reform and Consumer Protection Act (H.R. 4173), approved last December, has no interchange provision. However, as the Senate worked toward a vote on its bill, an amendment was added that would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions. As the House and Senate move forward to design a single bill that both houses of Congress can ratify, CUNA will continue its push against the interchange language and urge federal lawmakers to drop any such provision out of a final bill. To that end, CUNA’s has launched a comprehensive offensive, which includes the national call-in, a call for grassroots action, and written material to support a grassroots effort. As the House and Senate name their conferees, CUNA will enlist the aid of credit unions to keep pressure on these and all federal lawmakers to surgically remove the interchange language. To learn more about this key issue, use the resource link below to register for the CUNA call-in. CUNA requests one line-use per credit union because of likely demand.

Inside Washington (05/26/2010)

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* WASHINGTON (5/27/10)--A permanent increase in the deposit insurance limit is likely on the backburner, said American Banker (May 26). Some lawmakers hoped to address the limit--temporarily at $250,000 per account until 2013--in the regulatory reform bill the Senate passed May 20. Some financial observers say the limit should be permanent because the previous $100,000 limit had not been changed in 30 years and returning to that level could trigger a liquidity shock. Sen. Ben Cardin (D-Md.) had introduced an amendment in the regulatory reform bill to make the increase permanent, but it failed. Some observers say the increase will be added by those working on the House and Senate reform bills. Financial institutions were granted the $250,000 limit under S. 896, "Helping Families Save Their Homes Act of 2009.” Credit unions also were granted coverage up to $250,000 per account, a move that the Credit Union National Association supported ... * WASHINGTON (5/27/10)--House Financial Services Committee Chairman Barney Frank (D-Mass.) said Tuesday that forcing banks to divest their swap desks “goes too far.” Frank supports stopping banks from engaging in risky trading practices but opposes the spinoff plan--which was championed by Senate Agriculture Committee Chairman Blanche Lincoln (R-Ark.) Frank supports the Volcker Rule--which aims to ban risky trading--and Frank’s support will increase its chances of being added to the final regulatory reform bill, which could be signed into law by July 4, said American Banker (May 26). Frank has said banks should be able to hedge their own risks ... * WASHINGTON (5/27/10)--The Obama administration Tuesday again pushed its proposal for a $30 billion fund to encourage small business lending (American Banker May 26). President Barack Obama, who proposed the fund, said in a speech earlier this week in the Rose Garden that the fund would target only small community and neighborhood banks and would help these institutions increase small business lending. The Credit Union National Association (CUNA) is also working to increase available credit to small businesses. CUNA supports legislation that would increase the cap on credit unions’ member business lending to 25% of assets from 12.25%. CUNA figures show the cap increase would bring $10 billion in new credit and create more than 100,000 new jobs ...

Regulator response to Eastern Financial inadequate NCUA IG

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ALEXANDRIA, Va. (5/26/10)—The National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) in a recently completed report found that NCUA and Florida State Supervisory Authority (SSA) efforts to oversee the financial goings on of the now-failed Eastern Financial Florida CU (EEFCU) were “not adequate or timely.” The NCUA OIG in its report noted that it “found no evidence that the Florida SSA adequately evaluated compliance of EFFCU’s collateralized debt obligation (CDO) policies or initial CDO purchases with the provisions in the SSA letter.” EFFCU’s investments in CDOs, which totaled $149.2 million at one point, ultimately resulted in $149.2 million in total losses and precipitated the failure of the credit union and its eventual merger into Space Coast CU. The examiners also “should have deemed the planned CDO investment activity as a higher risk warranting greater supervisory efforts,” and should have sought outside expertise to deal with these investments, if needed. In a letter responding to the report, NCUA Executive Director David Marquis said that the NCUA recognizes that “there were early opportunities to better understand the depth of the risks” and to increase supervisory efforts” of the credit union. Following EEFCU’s issues, the NCUA has “intensified its monitoring and supervision efforts,” Marquis added. The Florida SSA also responded, telling News Now that the report “fails to recognize and take into account that the crash of the real estate market in 2007 was unforeseen by almost everyone including rating agencies, professional investors, private investors and mainstream America; regulators were no exception.” The report did note the role that the alarming and suddent market changes had in EFFCU’s deteriorating financial state. The Florida SSA said that it did “take every opportunity” to learn from these market changes and does “take them into consideration” as it enforces its statutes and works to “ensure proper policies and procedures are in place to help credit unions manage risks.” For the full NCUA release, use the resource link.

CUNA defines issues continues interchange fight

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WASHINGTON (5/26/10)--With conferees for the upcoming congressional regulatory reform conference being announced this week, the Credit Union National Association (CUNA) will again urge legislators to drop interchange provisions in the current Senate bill, because they would increase costs and reduce choice for consumers. The interchange provisions, which were introduced by Sen. Richard Durbin (D-Ill.) during the recently concluded amendatory process, would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure that they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction. Although Durbin’s amendment exempts credit unions with under $10 billion in assets, CUNA remains opposed to the interchange provision and is very concerned about unintended consequences for credit unions. Under the Durbin provision, big issuers would be forced to charge a presumably lower rate set by the Federal Reserve, while credit unions and other small issuers would continue at their current interchange rates for debit card transactions. While CUNA acknowledges that the exemption seems good in theory, the group identifies a major loophole as written: Nothing in the amendment would require the payment card networks to operate a two-rate system, and there is no reason to believe they would do so absent a mandate. Therefore, CUNA believes that, ultimately, the payment card networks would simply lower small issuer debit interchange rates to match the rates set by the Federal Reserve for large issuers. Another competitive advantage for larger issuers could be potential preferential treatment for lower-cost card transactions by large retailers. CUNA is also concerned that merchants would discriminate against credit unions by providing certain discounts for cash and check payments. The merchant groups that have promoted changes to interchange rules have claimed that their backers would return any interchange savings to their paying customers. However, a pair of amendments that would have statutorily required retailers to pass those savings along to consumers were opposed by retailer groups and, ultimately, failed to be included in the final legislation. Further, any savings that are seen by consumers would likely be negated by new charges that lenders will assess on individual accounts. “Consumers will pay either way,” according to CUNA Chief Economist Bill Hampel. CUNA remains opposed to the legislation. Though the legislation will require larger credit issuers to lower their rates to a reduced rate established by the Federal Reserve, credit unions and other small financial institutions would continue to offer their current interchange rates. Further, nothing in the amendment would require large credit networks to operate a dual-rate credit system. Another competitive advantage for larger issuers would be potential preferential treatment from large retailers. CUNA is also concerned that merchants would discriminate against credit unions by providing certain discounts for cash and check payments. The merchant groups that have promoted changes to interchange rules have claimed that their backers would return any interchange savings to their paying customers. However, a pair of amendments that would have statutorily required retailers to pass those savings along to consumers were opposed by retailer groups and, ultimately, failed to be included in the final legislation. Further, any savings that are seen by consumers would likely be negated by new charges that lenders will assess on individual accounts. Interchange legislation was not included in the House’s financial regulatory restructuring bill, and the Senate interchange amendment will come up for debate during the House/Senate conference sessions. The Senate on Tuesday announced that Democrats Chris Dodd (D-Conn.), Blanche Lincoln (D-Ark.), Tim Johnson (D-S.D.), Charles Schumer (D-N.Y.), Tom Harkin (D-Iowa) and Jack Reed (D-R.I.) and Republicans Richard Shelby (R-Ala.), Saxby Chambliss (R-Ga.), Mike Crapo (R-Idaho), Judd Gregg (R-N.H.) and Bob Corker (R-Tenn.) are being considered to be among the conferees. CUNA’s grassroots advocacy strategy will cast a wide net, asking credit union representatives to contact their respective members of Congress, no matter what their level of conference participation.

New FCU chartered in Michigan

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ALEXANDRIA, Va. (5/26/10)--The National Credit Union Administration (NCUA) on Tuesday announced that it has approved the charter for Chippewa Eagle FCU of Mount Pleasant, Mich. The credit union, which will serve the 7,800 members or employees of the Saginaw Chippewa Indian Tribe, expects to begin operating in August. The credit union will offer share accounts, club accounts, money market shares, share certificates, and share drafts, as well as personal loans, including signature, used automobile, and recreational vehicle loans.The credit union will also offer credit cards, unsecured lines of credit, residential mortgage loans, individual retirement accounts, and member business accounts in the future, the NCUA said. “The credit union will also offer financial educational opportunities in conjunction with existing tribal programs,” the NCUA added. NCUA Chairman Debbie Matz said she is “pleased” to welcome the credit union “into today’s thriving credit union community.” The NCUA earlier this year approved the charter of Battle Creek, Mich.’s Inspire Community Development FCU. For the full NCUA release, use the resource link.

NCUA sounds alarm on fraudulent email to CU members

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ALEXANDRIA, Va. (5/26/10)—It’s always “phishing” season, and the National Credit Union Administration (NCUA) Tuesday issued an alert about a new scam targeting credit unions members. The agency warned of fraudulent emails pretending to come from the NCUA and asking credit union member participation in an “Online Survey” or “Member Survey.” The emails even promise a nice $40 compensation as an inducement to respond to the email. The emails are fraudulent, the NCUA warns, and may be an attempt to obtain confidential member information. The agency does not solicit such information from credit union members. “This is a phishing activity with no NCUA activity or approval. If you have received these emails please do not respond. If you have any questions or concerns please email NCUA” at this address, pacamail@ncua.gov., an agency alert said.

Fed launches online database on consumer card terms

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WASHINGTON (5/26/10)—As required by the new credit card law, the Federal Reserve this week launched an online database that lists terms and conditions of more than 300 credit card issuers. The database is intended to help consumers find a card that best suits their personal finance needs. The database features the terms of more than 1,000 agreements from the 300 issuers, and lists them alphabetically. Credit union issuers are among those whose terms are displayed, but not all consumer credit card agreements are available in the database. The Fed’s rules, implementing the Credit Card Accountability, Responsibility and Disclosure Act, exempted issuers with fewer than 10,000 open credit card accounts from submission because, a Fed release noted, the overwhelming majority of credit card accounts are held by issuers that have more than 10,000 open accounts. The database will be updated quarterly. The next submission deadline is Aug. 2.

Inside Washington (05/25/2010)

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* WASHINGTON (5/26/10)--The New York Times reported Tuesday that the “Volcker Rule,” an Obama administration plan to ban banks from certain high-risk trading practices, is “very likely” to be included in the final financial regulatory reform bill that is expected to be worked out between House and Senate conferees by summer. The article said that while House Financial Services Committee Chairman Barney Frank (D-Mass.), a key player in reconciling the House and Senate versions of financial reform law, gave the Volcker rule high odds for being included, he on the other hand said a separate provision to force banks to spin off their derivatives businesses "goes too far." His pointed opposition reduces that provisions chances of making it in to the final package, at least in an unaltered state. Frank said banks would be prohibited from very risky derivatives activities by the Volcker Rule and that the derivative spin-off just wouldn’t be necessary… * WASHINGTON (5/26/10)—When the House and Senate conference committee meets to work out a final financial regulatory reform bill, Sen. Carl Levin (D-Mich.) wants to work in a provision to bar any financial firm that underwrites an asset-backed security from betting against that security.(American Banker May 25) On the Senate floor Monday, Levin said financial firms cannot be allowed to continue this practice, which, he said, has undermined the U.S. financial markets. He said the out-right ban could be added by strengthening the proprietary trading provisions offered by Sen. Christopher Dodd (D-Conn.) and therefore could be taken up by the conference committee. Under conference rules, lawmakers may work out differences between a House bill and a Senate bill, but no provision can be added if related language does not already exist in one version…

NEW CUNA interchange alert includes natl call-in for CUs tomorrow

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WASHINGTON (5/26/10)—As part of its all-out assault to block interchange language from being included in a final financial regulatory reform bill, the Credit Union National Association (CUNA) is sponsoring a national conference call tomorrow, May 27, to outline issues and needed action for leagues and credit unions. CUNA has reserved 3,000 lines for participants of the 2 p.m. (ET), half-hour call-in, during which President/CEO Dan Mica will describe credit union concerns regarding an interchange amendment currently included in the Senate version of the regulatory reform package, S. 3217, the Restoring American Financial Stability Act (RAFSA). The Senate passed that bill earlier this month by a 59-39 vote. "Credit unions must engage at the grassroots level right away. Our call will outline the actions credit unions must take to reach our goal of removing the interchange amendment for the financial reform legislation before it is enacted into law," said CUNA President/CEO Dan Mica. "We know this is short notice, but I urge all credit unions to dial into tomorrow's call. Next week's Memorial Day recess gives us an immediate opportunity to deliver our message to members of Congress while they are back home." The House-approved version of a comprehensive financial reform bill, the Wall Street Reform and Consumer Protection Act (H.R. 4173), approved last December, has no interchange provision. However, as the Senate worked toward a vote on its bill, an amendment was added that would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions. As the House and Senate move forward to design a single bill that both houses of Congress can ratify, CUNA will continue its push against the interchange language and urge federal lawmakers to drop any such provision out of a final bill. To that end, CUNA’s has launched a comprehensive offensive, which includes the national call-in, a call for grassroots action, and written material to support a grassroots effort. To learn more about this key issue, use the resource link below to register for the CUNA call-in. CUNA requests one line-use per credit union because of likely demand.

Inside Washington (05/24/2010)

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* WASHINGTON (5/25/10)--National Credit Union Administration (NCUA) Board Member Michael Fryzel praised the Michigan Credit Union League’s commitment to credit unions and their members at the league’s annual convention in Detroit Friday. He also discussed corporate credit unions, member business lending, legacy assets, 12-month examinations and assessments. Last week “the administration joined numerous members of Congress who have said they support raising the cap on member business loans. In fact, as federal regulator and insurer, NCUA has said the cap should be totally eliminated and the agency should be given authority to set the rules that govern how much individual credit unions can lend. These rules will be based on a credit union’s safety and soundness, capital structure and ability to be involved in that product” ... * WASHINGTON (5/25/10)--President Barack Obama proclaimed May 23-29 as National Small Business Week. The U.S. Small Business Administration observes National Small Business Week in Washington, D.C., May 23-25. “Small business owners embody the spirit of entrepreneurship and strong work ethic that lie at the heart of the American dream,” he said. “They are the backbone of our nation’s economy, they employ tens of millions of workers, and in the past 15 years, they have created the majority of new private sector jobs.” Obama has proposed creating a $30 billion lending fund to help increase the flow of credit to small businesses and called on Congress to pass the legislative quickly. Also during the week, entrepreneurs are honored with awards, including the National Small Business Person of the Year for 2010, and state small business winners ... * WASHINGTON (5/25/10)--The Treasury Department has lowered its estimate of the cost to taxpayers for the Troubled Asset Relief Program (TARP) to $105.4 billion, down from its most recent estimate of $117 billion (Dow Jones May 24). Treasury Secretary Timothy Geithner had predicted earlier this month that TARP would cost less than $100 billion. The latest revision reflects rising prices for Citigroup common stock, of which Treasury is a major holder. On Friday, shares closed at $3.75. When Treasury obtained 7.7 billion Citigroup shares each had a value of $3.25 ... * WASHINGTON (5/25/10)--The regulatory reform bill the Senate passed last week will do little to restructure financial regulatory framework, with the exception of eliminating the Office of Thrift Supervision (OTS), said American Banker (May 24). Many financial observers had said the reform legislation was a good opportunity to rework the supervisory structure, which currently includes four banking regulators. However, the administration had other priorities, said Michael Barr, Treasury assistant secretary. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) originally proposed combining the regulators into one agency in his initial regulatory reform bill last fall. However, after revisions, the bill this spring only would eliminate the OTS and strip the Federal Reserve Board of most of its supervisory powers. The powers have since been restored. The Credit Union National Association (CUNA) also successfully lobbied on behalf of credit unions in regards to the bill to ensure the National Credit Union Administration would remain the prudential regulator for credit unions ...

Senate House prep next step of reg restructuring debate

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WASHINGTON (5/25/10)--With the Senate last week approving its version of financial regulatory reform, that legislation is now awaiting conference action between members of the House and the Senate. The Senate had not determined its conferees at press time, but the Credit Union National Association expects that list to include Senate Banking Committee Chairman Chris Dodd (D-Conn.), ranking committee member Richard Shelby (R-Ala.), Blanche Lincoln (D-Ark.), and Saxby Chambliss (R-Ga.). The House may not determine its own conferees this week, opting instead to appoint them following the upcoming memorial day break. House Financial Services Committee Chairman Barney Frank (D-Mass.), ranking committee member Spencer Bachus (R-Ala.) will likely be among the House conferees. The conference session could take as little as two days. In a related event, late Monday the Senate passed a motion 60-30 to instruct its eventual conferees to accept the House language exempting auto dealers from the reg restructuring bill. For this week, the most meaningful issues, for the finance industry at least, will arise before the House Financial Services Committee. On Tuesday, the panel will conduct a hearing on the Obama administration's plans to preserve and transform public and assisted housing. Housing will also be a central aspect of a Wednesday House Financial Serivices subcommittee on capital markets hearing on Federal Housing Finance Agency oversight. This hearing will be one of many on the housing financing system, and Rep. Paul Kanjorski (D-Pa.), who will chair the hearing, said Monday that Congress "must work as quickly as possible to reform our housing finance system in a way that will limit taxpayer risk and establish a more stable, long-term funding source. "Future hearings will explore important issues like the role and regulation of mortgage insurance, the housing finance systems of other countries, and the structure and function of guarantee fees,” Kanjorski added. A House finance committee subcommittee on oversight and investigation will also discuss the impact that efforts to block terrorist financing have had on lawful charities on Wednesday.

Guidance for June 1 UIGEA compliance CUNA

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WASHINGTON (5/25/10)--The Credit Union National Association (CUNA) this week will address the myriad questions regarding the pending Unlawful Internet Gambling Enforcement Act (UIGEA) regulations during a May 27 audio conference. The UIGEA regulations, which will become effective on June 1, will require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. During the audio conference, CUNA’s director of compliance information Valerie Moss and CUNA Mutual Group’s Ann Davidson will cover how credit unions can create disclosures or addendums to their membership agreements, how to identify the ACH-related risks that UIGEA presents, and examine how to avoid potential risks to card programs. Basic staff training on the rules of UIGEA will also be covered during the conference. The Federal Reserve late last week issued its own guidance for examiners ahead of the UIGEA implementation date. To view the Fed release and sign up for CUNA’s audio conference, use the resource links.

CUNA RegFlex plan needs big changes

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WASHINGTON (5/25/10)--The Credit Union National Association (CUNA) has urged the National Credit Union Administration (NCUA) to revise or to simply not adopt the recently proposed changes to its RegFlex program. The NCUA proposal, which was announced in March, would eliminate RegFlex authority for credit unions in regard to the 5% limit on fixed asset investments, the requirement for the personal guarantees of borrowers for member business loans (MBLs), stress testing of certain investments, and discretionary control of investments. While CUNA agreed that all NCUA programs “should be monitored and reviewed periodically to ensure they are meeting their objectives,” CUNA strongly supports the RegFlex program and has urged the agency not to undermine it with this proposal. CUNA in a comment letter said that if the agency is convinced changes in the RegFlex program are called for, it should address them in a “more targeted” manner that would not jeopardize the overall program. Specifically, CUNA senior vice president and deputy general counsel Mary Dunn recommended that NCUA consider whether the provisions regarding revocation of RegFlex authority for specific exemptions should be strengthened as opposed to eliminating RegFlex authority for all federal credit unions in key areas. Such steps could include setting aside more capital by credit unions that are experiencing material problems or “instituting increased safety and soundness procedures at the credit union,” when there are significant safety and soundness issues, CUNA added. CUNA also addressed a number of specific concerns regarding RegFlex authority with respect to MBLs and fixed assets. On MBLs, CUNA said rather than forcing RegFlex credit unions to require personal guarantees from borrowers that receive credit union MBLs, the NCUA should “address MBL concerns on an individual credit union basis." The letter also notes that "NCUA has authority now to direct any RegFlex credit union that is experiencing unacceptably high levels of defaults with MBLs to forfeit its RegFlex eligibility as it relates to MBLs” until the credit union “can demonstrate it is able to manage the risks." In addition, CUNA noted that MBL lending should be facilitated for well-managed credit unions in order to assist small business, communities and the economic recovery. Proposed changes that would impose a 5% fixed asset investment limit on currently exempt RegFlex credit unions “could negatively impact credit unions' planned branching activities” and be “very problematic for RegFlex credit unions that are about to begin, or have already begun, the construction phase of branch expansion,” CUNA added. CUNA further recommended that regarding investment authority delegation under the RegFlex program, NCUA consider a lower level of delegation authority rather than eliminating it altogether. The NCUA should also request further credit union comment on potential changes to rules governing the delegation of investment authority before taking any action, CUNA said. CUNA also noted that while federal credit union officials generally backed “some stress testing of the securities that a credit union is holding,” they did not agree that the NCUA “should totally eliminate flexibility for well- managed credit unions regarding such testing.” The letter also notes that CUNA is reviewing credit unions regulatory burdens and will be accumulating information and sharing it with policymakers in the coming months. For the full CUNA comment letter, use the resource link.

Inside Washington (05/21/2010)

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* WASHINGTON (5/24/10)--After the Senate Friday approved a regulatory reform bill, the National Association of State Credit Union Supervisors (NASCUS) said it will continue to encourage the House and Senate to defend against further federal preemption, to ensure a seat at the table on systemic risk for state regulators and encourage partnership with the states on consumer protection. “As the [House and Senate] bills are reconciled, NASCUS is hopeful we can ensure state regulators are part of mechanisms for systemic risk mitigation and that preemption of state consumer protection laws is not taken any further,” said NASCUS President/CEO Mary Martha Fortney. “It is critical that the state financial system is upheld and state regulators continue to play a role in consumer protection issues, systemic risk and national regulatory policy. State regulators’ local and regional supervisory roles are critical to the safety and soundness of our financial services system” ... * WASHINGTON (5/24/10)--Fannie Mae and Freddie Mac are not only de facto legislators of standards for home appraisals, they soon will also be enforcers, said American Banker. On Thursday, the Federal Housing Finance Agency (FHFA) said the two enterprises will field complaints from consumers, appraisers and others about violations to the Home Valuation Code of Conduct. The enterprises plan to create a way for people to submit complaints online (American Banker May 21). Originally an independent entity, with seed money from Fannie and Freddie, was going to police the complaints as part of a March 2008 agreement with New York Attorney General Andrew Cuomo. However, the enterprises can’t fund an independent entity. An FHFA spokesperson said Cuomo has agreed to the plans ... * WASHINGTON (5/24/10)--Financial industry lobbyists already are focusing on flaws they’d like to fix in the regulatory reform bill--passed by the Senate Friday--before it is enacted. The bill arrived to the floor without a bipartisan agreement, so some amendments were added with little debate, said American Banker (May 20). Some provisions the lobbyists hope to eliminate include an amendment by Sen. Dick Durbin (D-Ill.) that would require the Federal Reserve Board to make sure interchange fees on debit cards are reasonable; Sen. Susan Collins’ (R-Maine) measure to prevent banks from counting trust-preferred securities as Tier 1 capital; and a provision from the Senate Agriculture Chairman, Blanche Lincoln (R-Ark.) that would force banks to give up their swaps desks. The Credit Union National Association (CUNA) said it is concerned about interchange. CUNA cannot support the interchange provisions included in the Senate bill and must do all it can “to remove or improve them,” said CUNA President/CEO Dan Mica. CUNA supported the intent of the regulatory reform bill, noting that financial regulation needs to be improved (SEE RELATED: “Mica: Interchange amendment hurts CU capital condition” ...

CUNA update on Senate amendments

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WASHINGTON (5/24/10)—While interchange provisions in last week’s Senate-passed financial regulatory restructuring bill received most of the attention, there were a number of other provisions addressed in the bill of interest to credit unions. A total of 434 amendments were filed to be added to the bill, but only 43 of those came up for Senate discussion, and many of those amendments did not directly impact credit unions. However, a few of the amendments did matter to credit unions. Following is a rundown of the provisions, and their disposition, following last week’s action on the Restoring American Financial Stability Act (RAFSA):
* Limit on ATM Fees (Disposition: Not included in the bill): Would have imposed an arbitrary limit on the fee for an ATM transaction of 50 cents. The Credit Union Association (CUNA) strongly opposed it, and the amendment was not offered prior to Senate passage of the legislation. * Exemption for auto dealers (Disposition: Not included in the bill): Would have exempted auto dealers from the regulations, supervision and enforcement of the Bureau of Consumer Financial Protection. CUNA opposed it and the amendment was withdrawn. Note: CUNA expects Sen. Sam Brownback (R-Kan.) to offer a motion to instruct conferees on this subject next week. * Banks operating 529 Loan Programs (Disposition: Not included in the bill): Filed, but not offered, this amendment would have allowed banks to operate 529 student loan plans, but did not extend the same power to credit unions. The Missouri Credit Union Association has been working with amendment sponsor Sen. Claire McCaskill (D-Mo.) to make modifications to this amendment in the event that the language is considered during the conference. * Removal of requirement for deposit account data collection (Disposition: Included in the bill): Struck from the bill a section requiring the collection of deposit account data. Backed by CUNA, this amendment was approved by the Senate on a voice vote. * Mortgage Lending (Disposition: Included in the bill): Limits yield spread premiums and requires lenders to verify a borrower's ability to repay a mortgage loan (passed 63-36.) CUNA understands that there may be some concern regarding this amendment, especially as it relates to certain government loan guarantee programs.CUNA is analyzing and will work on it as the legislation is conferenced. * Risk Retention (Disposition: Included in the bill): Exempts certain qualified mortgages from the credit risk-retention requirements. Supported by CUNA, it passed the Senate by unanimous consent.
Other provisions of interest that were not in the Senate-approved bill but supported by CUNA included:
* Permanent $250,000 share insurance coverage for the National Credit Union Share Insurance Fund (NCUSIF) (of two amendments filed, neither was offered; CUNA will continue to pursue in conference); * Fixing remittance language (CUNA is looking for conference committee to address); and * Including the National Credit Union Administration on Financial Stability Oversight Council (amendment not offered).

Mica Interchange amendment hurts CU capital condition

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WASHINGTON (5/24/10)--In a Friday letter sent to U.S. Treasury Secretary Tim Geithner, Credit Union National Association (CUNA) President/CEO Dan Mica said that Sen. Richard Durbin’s (D-Ill.) interchange amendment would “not only exacerbate” capital pressures for many credit unions, “but also will severely limit the ability to build and maintain capital of all the approximately 5,000 well-capitalized credit unions that offer debit cards.” While the majority of the regulatory restructuring legislation “will result in a balanced approach to a range of issues involving consumer protection and proper oversight of financial activities and large banks,” Mica said that CUNA “cannot support the interchange provisions included in the Senate bill” and must do all it can “to remove or improve them.” Again noting the “balance” that was achieved in many parts of the bill, Mica encouraged Geithner to help credit unions “pursue a favorable outcome on the interchange amendment.” Mica also urged the Treasury to support CUNA's efforts to protect credit unions to ensure consumers have viable choices in the financial marketplace. One step that CUNA is taking to respond to the Senate-passed legislation is encouraging credit union supporters to engage their elected representatives and urge them to oppose the interchange alterations. (See related story, Credit unions prepare full grassroots alert over interchange) Mica’s letter was also sent to House Financial Services Chairman Rep. Barney Frank (D-Mass.), House Capital Markets Subcommittee Chairman Rep. Paul Kanjorski (D-Pa.), National Credit Union Administration Chairman Debbie Matz, and Treasury Assistant Secretary for Financial Institutions Michael Barr. The letter noted that CUNA has “tried hard to avoid emotionalism and hyperbole in the deliberations regarding the regulatory restructuring bill.” However, Mica said, “It is no exaggeration that the impact of the interchange amendment will be severe across the credit union system and will result in limiting consumer choices in some areas.” Mica also called for more “meaningful capital reform” for credit unions to grant credit unions “a better definition of capital and mechanisms to raise additional capital.” For the full letter, use the resource link.

Credit unions prepare full grassroots alert over interchange

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WASHINGTON (5/24/10)--Credit unions should be prepared this week for a full grassroots action alert to both the entire Senate and House on interchange legislation once a conference committee on the regulatory restructuring legislation is "instructed," the Credit Union National Association (CUNA) advised its members Friday. In a preliminary message, CUNA advised all credit union leagues that the message to lawmakers would be, once the trigger is pulled on the alert, that:
* Conferees should be urged to oppose the Senate interchange amendment; and * Lawmakers should not support a financial regulatory restructuring bill that includes changes to the card payment system.
The Senate last Thursday approved S.3217, the Restoring American Financial Stability Act (RAFSA), a sweeping restructuring of the financial regulatory system. The Senate-approved bill, however, contains provisions that, in the view of credit unions, impose changes to the card payments system on interchange, which will increase costs and reduce choice for consumers. CUNA opposes the legislation as long as it contains the interchange provisions. “We will very likely be asking credit unions to mobilize their own members in this effort,” said Richard Gose, CUNA senior vice president of political affairs. “Our goal will be to show the Congress, and particularly the Senate-House conferees, how important this issue is to credit unions.” Gose added that credit unions will also likely be asked to contact their representatives and senators about the interchange issue over the Memorial Day district work period, when many lawmakers will be in their states and districts.

Inside Washington (05/20/2010)

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* WASHINGTON (5/21/10)--The Senate rejected a credit card amendment from Sen. Sheldon Whitehouse (D-R.I.) that would require national banks to offer borrowers credit based on interest rate limits in their states. The amendment failed 60 to 35. Whitehouse said he intended for the measure to bar any lender from exporting interest rate rules from states in which they are based for non-mortgage based consumer credit offers (American Banker May 20). He also said his provision aimed to separate consumer advocates from bank defenders. The amendment’s vote came after a failed move to invoke cloture on the regulatory reform bill. Sen. Maria Cantwell (D-Wash.) was one of two Democrats to vote against the cloture, saying the reform bill is too soft on derivatives. All swaps should be cleared, she said ... * WASHINGTON (5/21/10)--The Federal Deposit Insurance Corp. (FDIC) is receiving help from private investors after the agency shouldered the cost of 240 bank failures by tapping into its deposit insurance fund--which has sunk into the red, said The New York Times (May 19). The investors are taking over troubled banks to ease the burden on the government. On Thursday, FDIC was expected to announce that it would reduce the amount it puts aside to cover future losses by more than $3 billion during the first quarter. This would be the first reduction it has experienced since second quarter 2007. Seventy-two banks have failed this year, and industry representatives worry that more will follow. The agency--which previously predicted that 1,000 banks could fail--now foresees about 500 or 750 failures ...

Program extensions may be voted by House next week

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WASHINGTON (5/21/10)—It is expected that as early as next week the U.S. House may vote on a package of government funding extensions, which carries a number of provisions of specific interest to credit unions. The American Jobs and Closing Tax Loopholes Act (H.R. 4213) is comprehensive legislation designed to extend unemployment insurance, COBRA benefits, and certain tax credit among, other items. The bill also features provisions that would affect:
* The U.S. Small Business Administration (SBA): The bill extends the 2009 Stimulus Act SBA provisions, such as certain fee eliminations and increased guarantees for SBA 7(a) and 504 loans. These program enhancements currently are set to expire on May 31; * The National Flood Insurance Program (NFIP): The bill extends NFIP authorization to Dec. 31. It currently expires on May 31; * The Tax-free Individual Retirement Account Distributions for Charitable Donations: The bill would re-establish this provision and extend it to Dec. 31. The authority expired the end of last year, and reauthorization is likely to be made retroactive to the first of this year; * New Markets Tax Credit: The bill would extend this credit through the end of 2010; and * Single Employer Pension Plan Relief: The bill allows defined benefit plans to extend the period to amortize any shortfalls. Plan administrators would be able to choose to increase the amortization period from seven to nine years, and in some situations 15 years, subject to new requirements.
If approved by the House, the bill would then go to the Senate for consideration.

CUs win Ky. Supreme court FOM case

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WASHINGTON (5/21/10)—A field-of-membership lawsuit that has been winding its way through the Kentucky court system since 2006 was decided favorably for credit unions by that state’s Supreme Court. The state high court overturned a lower court ruling that came as a blow to credit unions when it sided with bankers’ arguments that the Kentucky Department of Financial Institutions (DFI) lacked authority to grant FOMs based on the state's Area Development Districts (ADD). The case was brought by Home Federal Savings and Loan Association against the Kentucky regulator and is known as Home Fed. Sav. & Loan v. Kentucky. The bankers in the case argued that state law does not permit community-based FOMs for state-chartered credit unions. They argued that the ADD would equal a community charter. While the lower court agreed that when the state legislature narrowed the language of its definition of who can be a credit union member it meant to expressly forbid community charters, the Supreme Court on May 20 said the argument “is not convincing.” The court noted that the broader language existed in the Model Credit Union Act for 60 years before the General Assembly streamlined it. The decision said: “Rather, the difference between the former and current versions of the statute is the primary indicator of the legislature's intent to change the statute's meaning. “ When the legislature amended the statute in 1984, it moved from specific, narrow allowable categories to more generic language. This indicates a legislative intent to broaden the allowable categories of membership, which would include at least those areas previously allowed, so long as they could reasonably be understood to fit within the current language of the statute.” The Credit Union National Association (CUNA) filed a "friend of the court" brief in April 2008. General Counsel Eric Richard said at the time that CUNA got involved in the case because the lawsuit was part of a pattern in which bankers were challenging community charters in state courts around the country. In addition to Kentucky, Richard noted, multiple cases had been brought in Missouri, since resolved by state legislation, and in Pennsylvania. Richard said of the May 20 ruling, “Credit unions can really welcome this court’s push-back of the bankers’ misguided attacks trying to throw up unnecessary obstacles in front of Americans who want to enjoy the benefits of credit unions membership. Richard said Thursday, “The Kentucky court ruling is even more important now than when the case started in 2006 as so many Americans have reacted to the turbulent economic and financial conditions by moving their money to credit unions for safe, reliable financial services.” He added, "The Kentucky Supreme Court's decision shows that the court looked at the history of the credit union movement in great detail, both in Kentucky and elsewhere. It is not surprising that court concluded that the Kentucky legislature's amendments in 1984 were intended to broaden opportunities for geographic fields of credit union membership, not to eliminate geographic fields of membership as the bank plaintiff had argued." Wendell Lyons, president of the Kentucky CU League added, “It’s a great day for credit unions in Kentucky and for the dual chartering system in Kentucky--but more importantly for the millions of Kentuckians that will now be able to join a credit union.”

Senate clears reg reform CUNA opposed with interchange in

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WASHINGTON (5/21/10)—Despite achieving numerous improvements to the Restoring American Financial Stability Act (RAFSA), the Credit Union National Association (CUNA) ultimately opposed the financial regulatory reform package approved by the U.S. Senate late Thursday when it included provisions that would allow the government to intervene in setting interchange fees. The Senate voted 59 to 39 to pass the legislation, which was created in response to the economic crisis of 2008 and is intended, overall, to prevent a repeat in the future. CUNA backed the intent of the reform bill noting that as the nation recovers from the most significant financial crisis since the Great Depression, it was unquestionable that the statutory regime governing the regulation of financial services needed to be improved. Those improvements, CUNA urged however, must come in a balanced manner that corrects the shortcomings of the system that contributed to the crisis, protects the financial system from future systemic threats, and does not adversely affect those parts of the system that have performed well throughout the crisis, such as credit unions. CUNA worked closely with Senate lawmakers as they crafted their reform bill over many months, and sought many improvements on behalf of credit unions which were ultimately included in S.3217. The improvements included:
* Retention of the National Credit Union Administration (NCUA) as the prudential regulator of credit unions; * Inclusion of language that directs a new Bureau of Consumer Financial Protection to guard against burdening credit unions and other financial institutions with burdensome duplicative regulations by ensuring that outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens; and * Designating that the NCUA examine credit unions with less than $10 billion in total assets for compliance with consumer protection regulations.
CUNA opposed an amendment that would cap ATM-related fees at 50 cents. Those amendments were never successfully brought up for a vote. In a letter early this month, CUNA President/CEO Dan Mica wrote to all senators: "We do not dispute the need for financial regulatory reform legislation, and we recognize that much of this bill's focus is on correcting regulatory shortcomings that have little or nothing to do with credit unions." However, the CUNA leader warned at the time that if the Senate adopted interchange amendments drafted by Sen. Richard Durbin (D-Ill.), it would prompt CUNA to vigorously oppose the legislation. Mica said Thursday, "Although we worked with Sen. Durbin in good faith to make changes to the language passed by the Senate last week, and we believe Sen. Durbin is sincerely concerned about credit unions, an agreement that would satisfy credit unions concerns could not be reached." Specifically, CUNA is concerned that the Durbin amendment would allow merchants to discount among preferred networks and also provide certain discounts for cash, check and debit card payments. CUNA has urged changes that would ensure that merchants cannot discriminate based on the issuing institution. The regulatory reform package may now take one of two routes to become law. The House and Senate most likely will go to conference to work out differences between the Senate bill and a similar one approved by the House earlier this year. During this process, CUNA would continue to work to lessen the interchange amendment’s impact should it survive the conference process. Less likely but possible, the House could accept the Senate bill language and vote on that package. Either process requires that a bill is signed by the President to become law.

NCUA expenses 170M to cover future CU losses

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ALEXANDRIA, Va. (5/21/10)--The National Credit Union Administration (NCUA) on Thursday reported that it has expensed an additional $170 million from the National Credit Union Share Insurance Fund (NCUSIF) to its reserves to cover future losses related to natural person credit unions. The NCUSIF's reserves, which would be used to pay for future natural-person credit union losses when they occur, currently stand at $896.3 million total. NCUA Chief Financial Officer Mary Ann Woodson reported that the NCUSIF has incurred $177.4 million in total insurance loss expenses during 2010. The agency has expensed those funds for accounting purposes to set them aside to cover future losses related to credit union failures that may occur. Woodson reported little change in the number of CAMEL Code 3, 4 and 5 credit unions that were reported last month. THE distribution of assets in troubled, low-ranked CAMEL credit unions also hasn't changed much since January, Woodson added, and other NCUA staff indicated that the growth of troubled credit unions has slowed somewhat. NCUA staff also noted that there are several positive signs within the credit union system that indicate that the overall soundness of credit unions may be improving. However, they cautioned the board, saying that they would wait to see the next set of quarterly reports, which are due out on June 30, and continue to monitor the condition of troubled credit unions this summer before they can make a determination on the overall health of the credit union system. While NCUA staff noted that the NCUSIF and Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessments would likely amount to between 15 and 40 basis points combined, staff indicated that total expenses and share growth would factor into that decision. The total amount of reserves will also play a role in the NCUA’s determination, which is expected to be made this fall. The NCUA will also consider splitting the fees used to maintain its the NCUSIF and the TCCUSF at that time for billing purposes, according to NCUA Chairman Debbie Matz, in order to help clarify which assessed funds are for the TCCUSF to cover corporate credit union losses and which funds are for the NCUSIF to cover natural-person credit union losses. (See News Now, NCUA to consider splitting share insurance, corp. fees, May 14.)

NCUA releases SAFE Act rule extends TCCULGP dates

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ALEXANDRIA, Va. (5/21/10)—New issuances under the National Credit Union Administration’s (NCUA) Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) will continue to be permitted until at least Sept. 30, 2011 after the NCUA on Thursday approved a board action memorandum. In approving the memorandum, the NCUA also voted to limit the
Click to view larger imageAt an open board meeting Thursday, National Credit Union Administratin Chairman Debbie Matz (center) considers a plan to allow the Temporary Corporate Credit Union Liquidity Guarantee Program to continue though least Sept. 30, 2011. The three-member board voted in favor of the extension. (CUNA Photo)
maturity date of those new issuances to September 30, 2012. Debt that is issued after June 30 and has a maturity date that falls after Sept. 30, 2012 will not be covered by the TCCULGP. The board may elect to further extend the program at a later date. The NCUA during its board meeting was also briefed on a final rule that implements the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. Under the SAFE Act, credit union staffers that are involved in originating mortgage loans, including home equity loans, will be required to register with a new nationwide mortgage registry within six months after the registering procedures are established. Registering will require staff to provide finger prints and information for background checks and to obtain a unique identifying number. To be subject to these requirements, credit union employees will have to have made a minimum of five mortgage loans in a given year. While these NCUA rules will not apply to credit union service organizations (CUSOs), CUSOS and their employees must register, and be licensed, under the SAFE Act pursuant to state law. The rules will apply to credit union volunteers that process mortgages. If approved, the employee database would likely be “up and running” in 2011, NCUA staff said. The rules would likely apply to the approximately 3900 federally-insured credit unions which issue more than five mortgages a year, NCUA staff estimated. While the NCUA Board has already approved the final regulation, this is an interagency rule that has yet to be signed off by all the agencies charged with writing the regulations to implement the SAFE Act.

House panel OKs 30 billion fund for bank lending

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WASHINGTON (5/20/10)—Voting 42-23 in favor, the House Financial Services Committee Wednesday passed H.R. 5297, a bill that would establish a $30 billion fund for low-cost capital to small and mid-sized banks as incentives to increase lending. The bill, called the Small Business Lending Fund Act, is designed with hopes to boost lending to small businesses that, in turn, may look to hire and expand their operations. The bill gives oversight of the program to the U.S. Congress, the Government Accountability Office, and the U.S. Treasury Department’s Inspector General. The bill calls for the capital to be repaid by community banks over time During the markup process, the committee adopted several amendments, including one backed by the Credit Union National Association, which was introduced by Rep. Gary Peters (D-Mich.). The Peters amendment would provide federal funding for state lending programs that use small amounts of public resources to generate substantial private bank financing. According to a release from the committee, such programs would be intended to address many of the reasons banks are having trouble increasing lending to small businesses, including lenders’ desire to hold greater reserves against certain loans and concerns about collateral shortfalls on the part of borrowers. The next step for this bill would be a full House vote.

Frank Fin. Services will act on online gambling bill

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WASHINGTON (5/20/10)--Rep. Barney Frank (D-Mass.) on Wednesday said that his Financial Services Committee will act on H. R. 2267, the Internet Gambling Regulation Consumer Protection & Enforcement Act. That legislation, which was introduced by Frank and currently has 69 cosponsors, would give the U.S. Treasury the authority to license internet gambling operators to accept bets and wagers from U.S. citizens and to create regulations for those gambling operators. In a prepared statement submitted during a Wednesday House Ways and Means committee hearing on internet gambling, Frank said that enacting the legislation would bring the gambling industry “out of the shadows, benefit consumers and ensure that all of the revenue does not continue to exclusively benefit offshore operators.” The bill would also result in billions in currently uncollected taxes, Frank added. Similar legislation introduced by Rep. Jim McDermott would legalize many forms of online gambling and collect taxes on both winnings and on gambling account deposits. McDermott’s bill, the Internet Gambling Regulation and Tax Enforcement Act, would redirect 25% of those tax proceeds into foster care programs and could generate as much as $30 billion in funds for States and $41 billion in funds for the federal government. The Unlawful Internet Gambling Enforcement Act (UIGEA), which will become effective on June 1, will require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted Internet gambling transactions, or rely on those procedures established by the payments system.

CULAC-backed candidates move on to general elections

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WASHINGTON (5/20/10)--A pair of Credit Union National Association (CUNA)-backed congressional candidates moved forward to their respective general election contests after winning their individual primary contests on Tuesday. One of these candidates was Rand Paul, who will vie for Kentucky’s Senate seat later this year. Paul, who defeated Trey Grayson to become the Republican nominee, was backed by the Credit Union Legislative Action Council (CULAC) and the Kentucky Credit Union League, and also touted the support of over 700,000 Kentucky credit union members on his website. CULAC and the Pennsylvania CU Association united behind candidate Mark Critz (D), who soundly beat special election opponent Tim Burns (R) by 9% of total votes. Critz, who will now assume the late John Murtha’s (D) congressional seat, was supported by CULAC, with Pennsylvania credit unions also chipping in to hold organized events for Critz. Critz will serve the remainder of Murtha’s term and will face Burns for a second time in this fall’s general election contest. Longtime credit union supporter Paul Kanjorski (D-Penn.) will again defend his seat this fall after winning his own primary contest with 49% of the vote. In the most highly-watched election on Tuesday, incumbent Sen. Arlen Specter of Pennsylvania lost the Democratic primary to Rep. Joe Sestak (D-Pa.). While CULAC and the Pennsylvania Credit Union Association backed Sen. Specter as the incumbent, Rep. Sestak, a credit union supporter and CURIA cosponsor, had also received CULAC funding as a House candidate prior to challenging Sen. Specter. CULAC has also backed Sen. Blanche Lincoln (D-Ark.) throughout her Democratic primary campaign and will continue to support her as she moves toward a June 8 runoff election with Lieutenant Governor Bill Halter. "Credit unions had a big day Tuesday because they weren't afraid to get in early, roll up their sleeves, and help those candidates that are friendly to credit unions,” CUNA Vice President of Political Affairs Trey Hawkins said. ”As the election season progresses, we will continue working with leagues and credit unions to increase their involvement in key races," he added.

Inside Washington (05/19/2010)

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* WASHINGTON (5/20/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) introduced an amendment Tuesday that would give regulators the power to eliminate a proposed plan by Sen. Blanche Lincoln (R-Ark.) that would require banks to divest their swaps desks. Dodd’s measure would require the proposed Financial Stability Oversight Council to analyze the impact of the swaps ban within a year of enactment. After that, the Treasury secretary could decide to lift the ban if a “material adverse impact” on the markets is found (American Banker May 19) ... * WASHINGTON (5/20/10)--An amendment to the regulatory reform bill by Susan Collins (R-Maine) has raised concern among investors who argue that her provision would stop the use of trust-preferred securities as a form of Tier 1 capital for bank holding companies. The amendment, approved unanimously last week, would ultimately allow regulators to impose strict capital standards on banks and their holding companies, and nonbank firms considered systemically risky (American Banker May 19). Collins said she intended for the standards to apply to systemically important firms only, but as the amendment stands now, all bank holding companies would have to comply once the law is enacted. The amendment also would force banks with more than $250 billion in assets to meet capital requirements as strict as smaller banks’. It doesn’t make sense for capital and risk standards for big banks to be more lenient than those at smaller banks, she said last week in a statement ... * WASHINGTON (5/20/10)--An amendment approved Monday to the regulatory reform bill would give consumers free access to their credit scores if they are denied or given unfavorable terms on a loan, or if they are otherwise harmed because of poor credit. Financial industry observers say that forcing lenders to reveal credit information could cause there to be less competition. Citibank doesn’t want Capital One to know what its credit ranges are--and Capital One doesn’t want Discover to know what its credit ranges are, said John Ulzheimer, head of consumer education at Credit.com Inc. (American Banker May 19). Sen. Mark Udall (D-Colo.), who proposed the amendment, said he aimed to level the playing field for consumers so they have access to all the information they need to make smart financial decisions. Fair Isaac, which offers the FICO score--the mostly commonly used credit score--supports the amendment. It’s important for consumers to understand the industry and how the scores are used, said Lisa Nelson, vice president of scores at Fair Isaac ... * WASHINGTON (5/20/10)--The Senate Tuesday approved an amendment that would give federal regulators more room to pre-empt state laws but still give state attorneys general some enforcement power over national banks. The amendment, by Sen. Tom Carper (D-Del.), preserves state attorneys general’s role in protecting citizens against abusive practices, said Senate Banking Committee Chairman Christopher Dodd (D-Conn.), who authored the regulatory reform bill (American Banker May 19). Under Dodd’s bill, the Office of the Comptroller of the Currency (OCC) could follow the “Barnett” standard, which would allow OCC to pre-empt state laws case by case. Some industry representatives have said the provision would require the agency to take more steps, including proving that the issue a state law is addressing is already being addressed by a federal standard. Carper’s measure removes that language from the reform bill, giving the OCC more flexibility. The amendment “strikes a balance,” Dodd said ...

Senate reg reform cloture vote fails

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WASHINGTON (5/20/10)—The Senate’s financial regulatory reform package failed to move one step closer to potential passage on Wednesday when the Senate did not agree to bring the legislation to a final vote. The cloture vote, which was brought up by Sen. Majority Leader Harry Reid (D-Nev.) earlier this week, failed to pass by a three vote margin. It is not known when a final vote could happen. Debate on the legislation, which would have ended on Wednesday with the cloture vote, will now continue. One of the many amendments that were recently added would place new restrictions on interchange fees, and the Credit Union National Association is currently working to mitigate the amendment's effects on credit unions. That amendment, which was offered by Sen. Richard Durbin (D-Ill.), attempts to shield credit unions from the impact of the new interchange rules, but CUNA remains concerned over the potential impact that the on credit unions. CUNA is also opposing an amendment from Sen. Sheldon Whitehouse (D-R.I.) that would permit states to apply usury ceilings based on where the borrower resides rather than where the financial institution is located, as well as an amendment that would cap ATM-related fees at 50 cents. That amendment has not been successfully brought up for a vote. CUNA continues to pursue improvements to the legislation in the Senate, and will continue to do so as the bill is conferenced with the House-passed legislation.

NCUA plans to scrutinize SAFE Act rule today

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WASHINGTON (5/20/10)—The National Credit Union Administration (NCUA) later today will discuss a final rule that implements the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. While the NCUA Board has already approved the final regulation, this is an interagency rule that has yet to be signed off by all the agencies charged with writing the regulations to implement the SAFE Act. Under the SAFE Act, credit union staffers that are involved in originating mortgage loans, including home equity loans, will be required to register with a new nationwide mortgage registry within six months after the registering procedures are established. Registering will require staff to provide finger prints and information for background checks and to obtain a unique identifying number, according to the Credit Union National Association (CUNA). While the NCUA board had hinted that the final rule would be made publicly available ahead of the NCUA meeting, that document was not made available at press time. The NCUA will also discuss an extension of its Temporary Corporate Credit Union Liquidity Guarantee Program and will have its monthly report on the status of its National Credit Union Share Insurance Fund during the meeting. The agency earlier this week removed a Member Business Loan Waiver Appeal from the schedule for the closed portion of today’s meeting, and will only address some supervisory activities during that session.

Mica backs MBL cap lift on iFox Businessi

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WASHINGTON (5/19/10)--In a Tuesday appearance on Fox Business Channel, Credit Union National Association (CUNA) President/CEO Dan Mica spoke out against the “artificial” limits that have been imposed on credit union member business lending (MBL) and called on Congress to increase the MBL cap to 25% of a credit union’s total assets.

Credit unions are “well capitalized” and could “double the amount of loans” that they are currently servicing if that cap is lifted, Mica added. Mica also cited CUNA statistics that show that lifting the MBL cap would inject $10 billion in new funding into the economy and create as many as 100,000 new jobs, at no cost to taxpayers. Lifting the cap, which currently stands at 12.25% of assets, would not threaten the safety and soundness of credit unions or the credit union system, Mica added, as credit unions overall have a far lower loan default rate that that of banks. Mica on Tuesday also testified during a House Financial Services Committee hearing on increasing lending to small businesses. (See related story: MBLs: Mica testifies, Rep. Frank talks vote.) When asked about proposals to increase the amount of small business loans provided by banks, Mica said that if community banks need the aid of the government to spur on their own lending increases, he does not oppose them. However, Mica expressed puzzlement at banks’ continued opposition to allowing credit unions to increase their own small business lending capacity.

CU biz lending gets support from Obama administration markup coming

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WASHINGTON (5/19/10)--The Obama administration voiced support Wednesday for raising credit unions' business lending capacity, and House Financial Services Committee Chairman Barney Frank (D-Mass.) said his committee would consider an administration proposal to that effect--in a markup--"fairly soon." The support and the congressional action were noted during a Tuesday
Click to view larger imageCUNA President/CEO Dan Mica (right), testifying before the House Financial Services Committee on small business lending Tuesday, told lawmakers that credit unions could do a lot for the U.S. economy if the statutory cap on member business lending was increased. To Mica's right is Paul Atkins, a member of the Congressional Oversight Panel and former Securities and Exchange Commissioner. (CUNA Photo)
hearing before the House Financial Services Committee on promoting lending to small business. Credit Union National Association (CUNA) President/CEO Dan Mica--who testified at the hearing (the only credit union representative)--said after the hearing that he welcomed the administration's support for raising the business loan cap for credit unions, and thanked Frank for taking up the administration's proposal. "In announcing that there would soon be a committee vote on credit union business lending legislation, the chairman was giving his committee members a heads up," Mica said. "We appreciate that, and will work with him for smooth consideration of this proposal. Credit unions can help the nation get back on its economic feet by having more capacity to make business loans." Gene Sperling, counselor to U.S. Treasury Secretary Timothy Geithner, told Frank that the Obama administration supports the negotiated member business lending (MBL) proposal--the first time the administration has publicly expressed its support. Additionally, for the first time publicly, an administration representative stated the specifics of an MBL proposal. Among them:
* Raise the current 12.25% MBL cap to 27.5% (higher than the 25% now in the House and Senate MBL bills); * To go to the higher cap, credit unions would need to be well-capitalized (current 7% net worth ratio). If they fell below 7%, they would need to stop making new MBLs; and * Credit unions would also need five or more years of MBL experience, would have to demonstrate sound underwriting, and have strong management and adequate capacity in place.
Frank told the members of the committee that he was “putting everybody on notice” that he plans to schedule a committee vote on MBL legislation “fairly soon.”

Inside Washington (05/18/2010)

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* WASHINGTON (5/19/10)--The Treasury Department’s Community Development Financial Institutions (CDFI) Fund released the names of five organizations that will receive grants under the first round of the Financial Education and Counseling Pilot Program. The grants, totaling $2 million, will provide organizations with financial assistance to establish and expand financial education and counseling services for prospective homebuyers. The recipients are: Boulder County Housing Authority, Boulder, Colo.; Consumer Credit Counseling Service of WNC, Asheville, N.C.; Mission Economic Development Agency, San Francisco; New Hampshire Housing Finance Authority, Bedford, N.H.; and Resources for Residents and Communities of Georgia Inc., Atlanta. Each will receive $400,000 ... * WASHINGTON (5/19/10)--The Senate approved a proposal by Sen. Mark Udall (D-Colo.) that requires credit reports to include a numerical credit score, which ranges from 300 to 850. Obtaining a score from major credit reporting bureaus usually costs up to $15.95 for each score, said The New York Times (May 17). Udall said the measure will empower consumers and increase financial literacy. The Senate also approved an amendment to ease restrictions on investors who provide start-up capital to small businesses that do not have access to traditional financing. Other approved amendments include a measure by Sen. John D. Rockefeller IV (D-W.Va.) that would preserve the Federal Trade Commission’s authority to enforce consumer protection laws and require the commission to work with a new consumer financial protection bureau, and another measure to prevent federal money from being used by the International Monetary Fund to bail out foreign governments. Senate Majority Leader Harry Reid (D-Nev.) said he aims to finish the financial regulatory reform legislation this week ...

Hurricane preparations can include direct deposit

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WASHINGTON (5/19/10)--National Hurricane Preparedness Week is May 23-29, and credit unions, as well as other financial institutions, can help federal benefit check recipients by urging them to switch from paper checks to electronic payments. The U.S. Treasury Department is particularly urging federal benefit check recipients living along the Gulf Coast and Eastern Seaboard to disaster-proof their money by switching to direct deposit. The Treasury promotes direct deposit through its national Go Direct campaign. According to Treasury research, eight in 10 Americans understand that direct deposit is more reliable in the event of a disaster, such as a hurricane. However, Treasury says, about 10.5 million senior citizens, people with disabilities and others who receive federal benefit payments still rely on paper checks for their monthly Social Security and Supplemental Security Income (SSI) payments. Additionally, approximately 2.7 million Social Security and SSI checks are sent to people living in hurricane-prone states each month. Before hurricane seasons starts, Treasury’s Go Direct direct deposit campaign is urging its national partners, such as the Credit Union National Association and credit unions, to spread the word about the benefits of electronic checks. Go Direct notes that a recent report from the Colorado State University hurricane research team predicts that the Atlantic hurricane season will be stronger this year than in recent years. Leading researchers anticipate an above-average eight hurricanes this year, four of them major, posing a threat to the U.S. coastline. Use the resource link below for disaster preparedness tools.

Inside Washington (05/17/2010)

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* WASHINGTON (5/18/10)--The National Credit Union Administration (NCUA) has modified the agenda for its Thursday meeting. One item has been deleted from the previous agenda--the Member Business Loan Waiver Appeal, which was slated to be taken up during a closed session ... * WASHINGTON (5/18/10)--The Internal Revenue Service (IRS) has issued new guidance to make it easier for small businesses to determine whether they are eligible for the new health care tax credit under the Affordable Care Act, and how large of a credit they would receive. The guidance clarifies that small businesses receiving state health care tax credits may still qualify for the full federal tax credit. The guidance allows small businesses to receive the credit not only for regular health insurance but add-on dental and vision coverage. Included in the Affordable Care Act is a small business healthcare tax credit designed to encourage small employers to offer health insurance coverage ... * WASHINGTON (5/18/10)--The National Credit Union Administration (NCUA) has selected Lorraine Phillips as director of the Office of Human Resources, which was effective Monday. Phillips joins NCUA after serving as executive director for Human Resource Operations, Programs and Policy at U.S. Customs and Border Protection. Previously, she was director of Human Resources for Headquarters, Department of the Army ...

CUNA CEO Mica to testify today on MBL issue

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WASHINGTON (5/18/10)--Credit Union National Association (CUNA) President/CEO Dan Mica later today will testify before the House Financial Services Committee during a hearing entitled "Initiatives to Promote Small Business Lending, Jobs and Economic Growth." Mica’s prepared remarks will focus on the Administration’s proposed Small Business Lending Fund Act and the State Small Business Credit Initiative, along with legislation that would increase the credit union member business lending cap. In his remarks, Mica said that “the need for legislation to address the credit crunch facing small businesses is indisputable,” and credit unions “are well aware of the demand for business loans.” The proposed Small Business Lending Fund would provide $30 billion in low-cost capital to small and mid-sized banks and incentives to increase lending. While credit unions would not participate in the fund to serve the financial needs of their members, “if the Federal government intends to invest $30 billion of taxpayer money in the nation’s community banks to spur lending,” then the Congress “should also increase the credit union member business lending cap, permitting credit unions to serve their business-owning members in greater capacity.” CUNA has long advocated for lifting the current 12.25% of assets cap on member business lending, estimating that doing such could result in $10 billion in new funding for small businesses. This new funding could create as many as 108,000 new jobs, CUNA has said. Further, these new jobs would be created at no cost to taxpayers, according to CUNA. “Credit unions are not asking for a bailout and they have not needed bailout money throughout the crisis. They have capital to lend, but the law limits their ability to do so,” Mica adds.

NCUA shutters small N.Y.-based FCU

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ALEXANDRIA, Va. (5/18/10)--New York, N.Y.-based Convent FCU has been closed and liquidated, the National Credit Union Administration (NCUA) announced on Monday. In a release, the NCUA said that it elected to close the credit union, which held $173,000 in assets from 213 members, after it determined that the credit union was “insolvent” and had “no prospects for restoring viable operations.” The NCUA will issue checks to former members of the credit union “within one week.” Seven other federally-backed credit unions have been closed so far this year. For the NCUA release, use the resource link.

Senate reforms could see vote this week

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WASHINGTON (5/18/10)--A final vote on the Senate’s financial regulatory reform package could occur as soon as Friday, with a potential cloture vote taking place on Wednesday. Debate on some remaining amendments should continue through the early part of this week, with Sen. Chris Dodd (D-Conn.) expected to offer a manager’s amendment at some point. Sen. Richard Durbin late last week successfully added interchange fee restrictions to the Senate's financial regulatory reform package. The amendment attempts to shield credit unions from the impact of the new interchange rules, but the Credit Union National Association (CUNA) still has concerns about the impact on credit unions. CUNA is working to further mitigate the amendment's effects on credit unions and has already begun making contacts on Capitol Hill. CUNA has also written to oppose an amendment that would impose an arbitrary, 50-cent limit on automatic teller machine (ATM) transactions. And CUNA is opposing an amendment from Sen. Sheldon Whitehouse (D-R.I.) that would permit states to apply usury ceilings based on where the borrower resides rather than where the financial institution is located. CUNA continues to pursue improvements to the legislation in the Senate, and will continue to do so as the bill is conferenced with the House-passed legislation. The House will remain active this week, with a number of hearings scheduled. Top billing this week will go to a Tuesday House Financial Services Committee hearing on "Initiatives to Promote Small Business Lending, Jobs and Economic Growth." CUNA President/CEO Dan Mica will be among those testifying, a list that includes U.S. Treasury official Gene Sperling, Maryland Department of Business and Economic Development Secretary Christian Johansson, and former Securities and Exchange Commissioner Paul Atkins, among others. The House Ways and Means Committee will discuss tax proposals to legislation to legalize Internet Gambling, and the House Financial Services Committee subcommittee on capital markets, insurance and government-sponsored enterprises will close out the week by holding a hearing on "Accounting and Auditing Standards: Pending Proposals and Emerging Issues."

Inside Washington (05/14/2010)

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* WASHINGTON (5/17/10)--Fourteen representatives from North Carolina credit unions traveled to Washington, D.C., last week. The group met with Sen. Kay Hagan (D-N.C.), Rep. Howard Coble (R-N.C.), and an aide to Sen. Richard Burr (R-N.C.) Credit unions discussed interchange fees with the lawmakers just as Sen. Dick Durbin (D-Ill.) was on the Senate floor trying to build support for an amendment to the regulatory reform bill that would authorize government intervention in the payment card system. Durbin had tried to allay credit unions’ fears by increasing an exemption in the bill to institutions with less than $10 billion in assets, but credit unions were still fundamentally concerned, said the North Carolina Credit Union League (Weekly Update May 14). The Senate did pass the interchange amendment Friday. The Credit Union National Association said the amendment could negatively impact credit union interchange revenues and that it will continue to address its concerns with the measure ... * WASHINGTON (5/17/10)--A provision in the proposed regulatory reform bill that would require banks to divest their swaps trading desks would be counterproductive, Federal Reserve Board Chairman Ben Bernanke told three senators in a letter Wednesday. Bernanke sent a letter to Sens. Chris Dodd (D-Conn.); Richard Shelby (R-Ala.) and Kirsten Gillibrand (D-N.Y.). The provision would make the financial system more susceptible to systemic risk and would weaken risk-mitigation efforts of banks (American Banker May 14) ... * WASHINGTON (5/17/10)--Sen. Tom Carper (D-Del) and 13 co-sponsors are working toward an amendment to prevent state attorneys general from enforcing federal laws against national banks (American Banker May 14). Carper said the group is continuing to get co-sponsors. The White House has increased its opposition of the measure Thursday, saying that a strong patrol would ensure national banks would not engage in abusive lending. Under the current regulatory reform bill, state attorneys general could enforce federal and state laws against all banks, regardless of charter ... * WASHINGTON (5/17/10)--The central bank is working on getting banks to lend to small companies by urging examiners not to cause lenders to be too conservative, said Federal Reserve Board Chairman Ben Bernanke on Thursday. Examiners need to strike “the right balance” by not allowing terms that are too easy, but also not making it too tough to get credit, he said (American Banker May 14) ...

Matz backs adding NCUA to oversight panel

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ALEXANDRIA, Va. (5/17/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz this month urged senators to “help harmonize” House and Senate financial regulatory reform bills “with respect to oversight” by including the NCUA as a member of the Financial Stability Oversight Council proposed in the Senate’s reform legislation. The new oversight council would provide a forum for discussion between various regulatory agencies and would oversee the resolution of troubled financial institutions. The council would also evaluate rules set forth by the proposed Bureau of Consumer Financial Protection (BCFP). The BCFP, as currently constructed, would hold no power over credit unions with under $10 billion in assets. In a separate communication, Matz encouraged the Senate to “make permanent” the $250,000 share insurance coverage limit that is currently set to expire on Dec. 31, 2013. Matz said that making the coverage limit permanent, rather than allowing it to revert to $100,000, would “go far to ensure confidence in federally insured depository institutions and reduce any confusion on the part of consumers as to the safety of their accounts.” For the full NCUA release, use the resource link.

CUNA seeks comment on NCUA short-term loan proposal

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WASHINGTON (5/17/10)--The Credit Union National Association (CUNA) has issued a regulatory comment call on the National Credit Union Administration’s (NCUA) proposed plan to allow credit unions to charge a higher interest rate on short-term, small dollar loans. These short-term loans would be capped at a maximum interest rate of 10% above the NCUA's loan ceiling and would have a maximum amount of $1,000. The minimum amount for these payday alternative loans would be $200. The loans will not roll over, and credit unions would be permitted to charge late or default fees and a $20 per loan origination fee to cover costs. Comments are due to CUNA by June 25. Comments to the NCUA should be submitted by July 5. To view the CUNA comment call, use the link.

Interchange work will continue CUNA says

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WASHINGTON (5/17/10)--While Sen. Richard Durbin late last week succeeded in adding interchange fee restrictions to the Senate’s financial regulatory reform package, Credit Union National Association (CUNA) President/CEO Dan Mica on Friday said that “time remains to mitigate the effects” of Durbin’s amendment. In short, the interchange amendment offered by Durbin would assert government interventions on interchange fees. While CUNA’s attempt to defeat Durbin’s amendment altogether was not ultimately successful, CUNA and credit union representatives did convince Durbin to insert language clarifying that merchant discounts can only differentiate between card networks, not individual issuer’s cards. In a letter to credit union representatives, Mica said that it was important to note that Durbin views the issue “as one of big banks versus small businesses,” and “thought he was assisting credit unions in exempting financial institutions with assets of $10 billion or less from key requirements.” Durbin also worked with credit unions to remove language that would have made the amendment “even more onerous for credit unions.” “In particular, the amendment does nothing to restrict credit card interchange fees,” Mica noted. “Also, if a merchant sets a minimum credit card transaction amount, it has to be applied to all credit cards,” Mica said, adding that “these examples of changes made shortly before yesterday’s vote make clear that attaining further improvements is indeed possible.” The amendment “applies broadly to financial institutions and was not intended to single out credit unions.” However, Mica said, “the fact remains these amendments will negatively impact credit union interchange revenues.” For a credit-union specific summary of Durbin’s amendment, use the resource link.

SAFE Act TCCULGP on NCUA meeting agenda

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ALEXANDRIA, Va. (5/14/10)—The National Credit Union Administration (NCUA), at its upcoming board meeting at 10 a.m. ET next Thursday, will be briefed on a final rule related to the implementation of the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act. The SAFE Act will require all credit union staff involved in originating mortgage loans, including home equity loans, to register with a new nationwide mortgage registry within six months after the registering procedures are established. Registering will require staff to provide finger prints and information for background checks and to obtain a unique identifying number, according to the Credit Union National Association (CUNA). While the NCUA Board has already approved the final regulation, this is an interagency rule that has yet to be signed off by all the agencies charged with writing the regulations to implement the SAFE Act. CUNA staff said that changes are still possible because the Office of Management and Budget, which has had the regulation under review since the end of 2009, has yet to approve the final regulation. CUNA understands that the NCUA plans to make the final regulation publicly available before the board meeting next week. “What credit unions will really care about are the actual registration procedures, which are not part of the final SAFE regulations. These are still being developed, and CUNA anticipates that NCUA staff will provide some information about the registration timetable during the briefing next week,” CUNA Senior Vice President for Compliance Kathy Thompson said. CUNA will discuss the SAFE Act at a June 24 audio conference. NCUA also will discuss an extension of its Temporary Corporate Credit Union Liquidity Guarantee Program and will have its monthly report on the status of its National Credit Union Share Insurance Fund during the meeting. During the closed portion of the meeting, NCUA will discuss a member business loan waiver appeal and address some supervisory activities. NCUA on Thursday also announced that it has scheduled another in a series of webinars aimed at interacting with and answering questions for the credit union public. The webinar will take place on June 28 between 3 p.m. and 4:30 p.m. ET, and will be open to all who wish to sign up. There is no set agenda for the webinar at this time. For more on the upcoming board meeting, the CUNA audio conference, and the NCUA webinar, use the resource links.

NCUA to consider splitting share insurance corp. fees

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ALEXANDRIA, Va. (5/14/10)--Telling credit unions that the agency is “very mindful of the effect” that assessments have on their balance sheets, National Credit Union Administration (NCUA) Chairman Debbie Matz said that the NCUA would soon consider splitting the fees used to maintain its share insurance and corporate stabilization funds. The NCUA will also consider separating the timing of credit union payments for the National Credit Union Share Insurance Fund (NCUSIF) and the Temporary Corporate Credit Union Stabilization Fund, Matz added. Separating these two assessments--those that cover NCUSIF costs associated with problem natural person credit unions and those associated with NCUA's Corporate Stabilization Fund--would help improve the transparency of NCUA’s assessment process-–and, at the same time, improve the accuracy of credit unions’ budget estimates, Matz said. The NCUA chair emphasized that separating the funds would not change the total amount due from federally insured credit unions. Rather, the amount of the assessment for natural person credit union losses versus corporate stabilization costs would be clarified. CUNA has urged NCUA to take all appropriate steps to minimize federally insured credit unions' insurance and corporate stabilization costs, and commends the chairman for this development. CUNA will continue to follow up with NCUA staff on this and other mechanisms to contain such costs. The Temporary Corporate Credit Union Stabilization Fund covers corporate stabilization-related expenses, and also oversees the Temporary Corporate Credit Union Share Guarantee Program and the Temporary Corporate Credit Union Liquidity Guarantee Program. For the NCUA release, use the resource link.

Interchange vote forces CUNA opposition to Sen. reform bill

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WASHINGTON (5/14/10)—Late Thursday the U.S. Senate voted 64-33 in favor of including Sen. Richard Durbin’s (D-Ill.) interchange amendment in S. 3217, the Restoring American Financial Stability Act. Credit Union National Association (CUNA) President/CEO Dan Mica had vowed earlier in the day that credit unions would have “no choice but to vigorously oppose the financial regulatory reform bill” if the Senate adopted amendments that would require the government to regulate interchange fees. While one amendment offered by Sen. Durbin would ensure that the interchange provisions only applied to larger financial institutions, Mica said in a letter to each U.S. senator that while CUNA appreciates Durbin’s intention to “exempt credit unions from the harmful impact of his amendments,” his purported ‘carve out,’ “no matter how large,” would not do a great deal of good for credit union members and consumers. While CUNA in general has called for legislators to minimize the regulatory burdens and streamline requirements under which credit unions must operate as they move forward with regulatory reform, there has been selective criticism of other aspects of the bill and CUNA had called the bill, overall, a balanced approach to reform. CUNA Senior Vice President John Magill said last evening, “While we are clearly extremely disappointed, this is not the end of the road for the fight against these interchange provisions. There will be opportunities to affect this legislation as the Senate continues toward a final vote.” In related news, CUNA, in a separate letter sent to Senate Banking Committee leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.) earlier this week, also opposed "excluding any non-depository institution provider of financial products, including auto dealers, from the rules promulgated" by the proposed bureau of consumer financial protection (BCFP). Doing so would "defeat the purpose of creating the new consumer regulator, would put credit unions at a competitive disadvantage in the new regulatory regime," and could potentially "cause confusion for consumers of financial products," the letter added. The U.S. Treasury’s Assistant Secretary for Financial Institutions Michael Barr this week spoke out against that proposed amendment. “For the sake of responsible consumers--as well as for responsible community banks and credit unions--we must ensure that all businesses that are significantly engaged in providing consumer financial products and services play by the same basic rules of the road,” Barr said in a statement. Use the resource link below to read Barr’s statement.

CUNA report urges big changes to merger rules

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WASHINGTON (5/14/10)—The National Credit Union Administration (NCUA) needs to provide credit unions with more guidance on its assisted merger process and needs to make clear how credit unions may be considered as an acquiring credit union. Those points are just two of many found in the Credit Union National Association’s (CUNA’s) new Mergers Task Force report, submitted to the NCUA this week. The task force was formed early in 2010, in part, in recognition of the complex issues facing credit unions and the impact consolidations may have on the future of the overall credit union system. The task force, headed by Paul Mercer, president of the Ohio Credit Union League, also made these recommendations to the agency as it revises its merger rules. The NCUA’s proposed changes should:
* Address the agency’s criteria for using a purchase-and-assumption approach under which, for example, assets are sold to one or more credit unions, versus an assisted merger; * Address the role of the agency in assuming the success of the merger, including a transition period following the merger approval; * For state credit unions, address how NCUA shall coordinate with the state credit union supervisors; and * Solicit comments from the credit union system on the proposal.
The CUNA task force also suggested NCUA provide more information on its website regarding mergers, including the process for considering merger candidates and expectations for the acquiring credit union. Further, the NCUA, in conjunction with CUNA, should conduct a thorough study involving all issues surrounding mergers, including the long-term impact on the credit union system of the current pace of mergers, the report said. Such a report should be made available to the credit union system and updated periodically, CUNA added.

Inside Washington (05/13/2010)

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* WASHINGTON (5/14/10)--The Senate voted Wednesday to add an amendment that would require minimum mortgage standards for lenders and borrowers. The amendment, by Sens. Jeff Merkley (D-Ore.) and Amy Klobuchar (D-Minn.) would ban yield-spread premiums and require lenders to verify borrowers’ incomes (American Banker May 13). The measure also requires a proposed consumer protection bureau to write rules that guarantee a borrower can repay a mortgage. The measure, which was supported by consumer groups, would apply to all mortgages. It also would require lenders to ensure borrowers can repay a mortgage for five years based on verifiable income documentation ... * WASHINGTON (5/14/10)--A Congressional Oversight Panel study has found that the federal government’s Troubled Asset Relief Program (TARP) has done little to spur small business lending and has failed to restore stability to the smaller financial institutions that provide the bulk of small business loans. The study, which was released Thursday, concluded that the Treasury's new lending program for small banks, which would require Congressional action, would have only limited success, if enacted. The proposed Small Business Lending Fund would provide $30 billion in low-cost capital to small and mid-sized banks and incentives to increase lending. The program requires legislative approval, and even if Congress acts immediately, it may not be operational for some time, the panel said. Financial institutions also may shy away from the program for fear of being stigmatized by their association with TARP. They also may avoid taking on liabilities when their existing assets--such as commercial real estate--are troubled ... * WASHINGTON (5/14/10)--On Wednesday, the Senate voted 90-9 in favor of an amendment to keep the Federal Reserve’s current supervisory powers over state-chartered banks and holding companies. A few months ago, the Fed had been in danger of losing that oversight--which could have led to a consolidation of the Federal Home Loan Banks, said American Banker (May 13). The amendment was authored by Sen. Kay Bailey Hutchison (R-Texas). If the Fed’s powers are taken away, the regional banks won’t have any input about what’s going on in smaller communities, Hutchison said. Industry groups representing community financial institutions had lobbied in favor of the Fed keeping its supervisory powers ... * WASHINGTON (5/14/10)--The Internal Revenue Service (IRS) has named four new members to the Advisory Committee on Tax Exempt and Government Entities (ACT) for the term starting in 2010 and ending in 2012. “ACT members provide valuable feedback and insight on a wide variety of issues related to tax-exempt organizations and governmental entities,” said IRS Commissioner Doug Shulman when making the announcement. The new members are: David N. Levine, Washington, D.C. , a principal at Groom Law Group; Adam C. Pozek, Reading, Mass., vice president of consulting services for Sentinel Benefits & Financial Group; Karen A. Gries, Minneapolis, a principal with Larson Allen LLP; and Celia Roady, Washington, D.C., a partner in Morgan Lewis & Bockius, LLP…

6 more national groups oppose Sen. interchange plan

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WASHINGTON (5/13/10)—A letter opposing credit card interchange amendments to the Senate financial regulatory reform bill, and signed by leaders of six national organizations--representing African-American, Latino, women's, church and rural constituencies--was sent Wednesday to Senate leaders. The letter to Sens. Harry Reid (D-Nev.), who is Senate Majority Leader, and Mitch McConnell of Kentucky, the leading Republican of that body, said proposed interchange amendments to the Restoring American Financial Stability Act (S. 3217) could “cause financial harm to consumers, community banks and credit unions, and small business owners.” The Credit Union National Association (CUNA) has waged long-standing opposition to the efforts of some federal lawmakers to assert government interventions on interchange fees. Mirroring one of CUNA’s arguments, the coalition of national organizations wrote that credit unions, as well as community banks, “consistently report that government intervention in the interchange system could drive them out of the payment-card business, threatening the survival of these pillars of community economic activity--the vast majority of which had nothing to do with the recent financial crisis--and reducing credit availability to small business owners and entrepreneurs.” The letter was signed by: Hector Barreto, chairman of The Latino Coalition; Niel Ritchie, executive director of the League of Rural Voters; Roger Campos, president/CEO of the Minority Business RoundTable; Harry Alford, president/CEO of the National Black Chamber of Commerce; Rev. Miguel Rivera, president of the National Coalition of Latino Clergy & Christian Leaders (Coalition Nacional Latina de Ministros & Lideres Cristianos); and Dr. E Faye Williams, national chair of the National Congress of Black Women. CUNA joined other finance industry representatives last week in a letter to all U.S. senators that strongly opposed “any amendments to S. 3217 that seek to affect interchange rates and the rules established by payment card networks." Sen. Richard Durbin (D-Ill.) has filed a number of such amendments. The first would permit merchants to set a minimum or maximum transaction amount for payments by card; offer discounts for use of cash, check, debit card or stored-value card; and offer discounts to customers to use a competing card network. A second amendment would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure that they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction.

Matz encourages CUs to participate in IRS VITA program

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ALEXANDRIA, Va. (5/13/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz again encouraged “qualified credit unions” to apply for Volunteer Income Tax Assistance (VITA) grants from the Internal Revenue Service (IRS) and the NCUA. Matz earlier this year announced that the NCUA would expand its involvement in the VITA program. VITA is an IRS program that helps low- and moderate-income taxpayers complete their annual tax returns at no cost. Credit unions and community organizations receive IRS-provided training in the preparation of basic tax returns and establishment of tax preparation sites. “The more credit unions provide this service to underserved taxpayers, the greater the likelihood that low-income families can build a solid financial foundation for their future,” Matz added. The IRS recently announced that it would award just under $12 million in VITA-related funds would be made available during 2010. Credit unions that wish to apply for VITA grants must do so by July 9. According to the NCUA, there is no maximum grant amount, but applicants must be able to provide dollar-for-dollar matching funds for its VITA-related programs and appropriate documentation. The NCUA also administers its own VITA initiative. This initiative provides a total of $125,000 in funds for credit unions, which may receive up to $6,500 in funds for their individual requests. A total of 541 credit unions participated in the VITA program in 2009. Members of credit unions that participated in credit union-based VITA tax prep programs received $20.9 million in tax refunds during 2009. For the NCUA release, use the resource link.

Webinars prep CUs for compliance onslaught

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WASHINGTON (5/13/10)--The Credit Union National Association’s (CUNA) Center for Professional Development (CPD) has scheduled programs to help credit unions that are being bombarded with upcoming compliance deadlines to better understand regulator expectations. The National Credit Union Administration’s (NCUA) examination and insurance director, Melinda Love, will discuss agency expectations and concerns related to real estate modification options during a May 18 CUNA webinar, entitled “Regulatory & Credit Union Perspectives of Loan Modifications.” A number of other webinars and audio conferences have also been scheduled:
* May 25 “Regulation Z-–July 1 Open-end Credit Provisions” (webinar): Experts will review what steps credit unions need to take before the Truth in Lending revisions become effective-–and emphasize that compliance can’t simply be left to data processors and forms providers. * May 27 “Unlawful Internet Gambling–-Complying with the New Rule” (audio-conference): After postponing at the last minute the original December 2009 effective date, the Federal Reserve and the U.S. Treasury have recently confirmed that they are going forward with implementing their rules on June 1. CUNA’s program will review what changes are needed in policies, which members need special attention, automated clearinghouse (ACH) and wire transfer risks, and dealing with card processors. * June 24 “SAFE Act and Other Pressing Compliance Issues” (audio conference): SAFE will require new registration by all credit union staff involved in originating mortgage loans. While regulations are likely to be published by June, it’s uncertain when the actual registration procedures will be finalized. NCUA attorney Regina Metz will join CUNA’s compliance attorneys, and if all the SAFE details are finalized, the whole program will be turned over to discussing SAFE compliance.
Another compliance program that credit unions may want to attend is a free webinar offered by the Federal Reserve on May 20 when it will discuss a variety of compliance issues. During that webinar, a senior Fed compliance manager and a Fed examiner will cover the “top 10 things found in well-run compliance programs, the top 10 issues identified on recent examinations, and the top 10 things to know about consumer complaints.” However, the Fed release does not provide any details of which laws and regulations will actually be addressed. To register for the CUNA and Fed programs, use the resource links.

Inside Washington (05/12/2010)

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* WASHINGTON (5/13/10)--The Federal Deposit Insurance Corp. (FDIC) Tuesday pushed ahead with securitization restrictions and living wills for banks--two measures it says could prevent the next financial crisis. In the first measure, the FDIC would place restrictions on securitizations so lenders retain some of the risk of the loans they originate and sell to the secondary market (American Banker May 12). In the second measure, FDIC would require 30 of the nation’s biggest banks to detail how the government should unwind them if there were another financial crisis. At a board meeting, Chairman Sheila Bair said the FDIC can’t wait for Congress to act. The rulemaking process for a regulatory reform bill could take about 270 days, she said. “It’s time to move forward,” she added. Office of Thrift Supervision Director John Bowman and Comptroller of the Currency John Dugan objected to the securitization proposal, saying lawmakers should handle the issue. However, the proposal passed. The board was unanimous in supporting the proposal on wind-down plans, which has a 60-day comment period ... * WASHINGTON (5/13/10)--Treasury Secretary Timothy Geithner has appointed Richard Gregg as fiscal assistant secretary. Gregg had been acting fiscal assistant secretary since May 2009, when his predecessor, Kenneth Carfine, was on medical leave. Gregg will report to the undersecretary for domestic finance, will be responsible for developing policy on payments, collections, debt financing operations, electronic commerce, government wide accounting, and government investment fund management. The responsibility also includes managing the government's daily cash position, and producing the cash and debt forecasts used to determine the size and timing of the government's financing operations ... * WASHINGTON (5/13/10)--The Financial Crimes Enforcement Network this week released issue 17 of its Suspicious Activity Report (SAR) Activity Review. The latest issue centers on the casino and gambling industry, and includes a detailed assessment of SARs that were filed by casinos and card clubs, as well as calls to the FinCEN regulatory helpline. The review also contains Internal Revenue Service guidance on how casino examiners may use Bank Secrecy Act information when conducting their examinations. FinCEN’s SAR review can be found online at the link ...

CUNA Interchange not just a big bank issue

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WASHINGTON (5/13/10)--In a Wednesday letter, the Independent Community Bankers of America (ICBA) joined the Credit Union National Association (CUNA) to oppose an interchange amendment that would “do nothing but increase costs and reduce choice for Main Street consumers and their local financial institutions.” Sen. Richard Durbin’s (D-Ill.) latest amendment is a combination of two earlier amendments, and would “have the government regulate interchange rates so big-box merchants can increase their profits by getting all of the benefits of debit acceptance for next to nothing, while simultaneously eroding the rules that force merchants to be fair to consumers.” Durbin introduced two amendments recently, one of which would have permitted merchants to set a minimum or maximum transaction amount for payment by card; offer discounts for use of cash, check, debit card or stored-value card; and offer discounts to customers to use a competing card network. A second amendment offered by Durbin would have directed the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure that they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction. The CUNA letter, which was sent to Senate leaders Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), added that while the new amendment appears to impact only larger banks, offering a carveout for credit unions and community banks, the legislation still makes credit union debit cards “the most expensive for a merchant to accept--something the market will not tolerate for long.” “To make matters worse, nothing would stop Visa and MasterCard from simply applying the artificially lowered interchange rates across the board to all issuers, regardless of size, forcing many credit unions and community banks to re-evaluate their ability to offer debit cards,” the letter added. CUNA and the ICBA also noted that interchange “is not a ‘big bank’ issue.” “The fact is, interchange revenue--and the network rules supporting the electronic payments system--is vastly more important to small issuers, which rely on this income and structure to meet their customers’ and members’ needs and product expectations,” the letter added. For the full letter, use the resource link.

Inside Washington (05/11/2010)

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* WASHINGTON (5/12/10)--The Federal Reserve could begin testing a program as early as June to extract excess cash from the financial system, the central bank said Monday. The announcement signals that Europe’s debt problems are not preventing the Fed from unwinding a stimulus plan, said American Banker (May 11). The Fed has authorized up to five small offerings of term deposits. The term deposit facility could provide an extra incentive for banks to keep their money at the Fed instead of lending it out--which could help control inflation, the publication said. The Fed had flooded the system with cash by purchasing assets, leading banks to shore up $1.1 trillion in extra reserves. The Fed holds those funds in overnight accounts. Now that the economy is on a more solid foundation, the Fed is looking to remove its emergency support to tighten credit. In a statement, the Fed said the offerings are part of “prudent planning” and do not have any implications for “near-term conduct” of monetary policy ... * WASHINGTON (5/12/10)--The Federal Reserve has decided to reopen swap lines with the European Central Bank and banks in Canada, the United Kingdom, Japan and Switzerland. The decision places the central bank in a “delicate political position,” said American Banker (May 11). Fed officials dispute that they re-opened the lines so they could bail out foreign banks. Instead, they said they want to improve liquidity conditions in the U.S. dollar funding markets and to prevent troubles in Europe from spreading. In the swap lines, the Fed lends to foreign central banks, which then use the money to make U.S. dollar loans to financial institutions in their home markets ... * WASHINGTON (5/12/10)--Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) Monday released language to strengthen the Volcker Rule--named after former Federal Reserve president Paul Volcker--which would ban proprietary trading by banks and also crack down on investments in private equity ventures and hedge funds (American Banker May 11). The amendment would allow banks to continue proprietary trading for buying and selling activities that do not result in a conflict of interest. Under the amendment, banks also could provide advisory services to hedge funds as long as they do not create taxpayer bailout risk. Regulators must adopt rules that impose higher capital standards on systemically significant companies and nonbanks ...

NCUA invokes disaster relief for Tenn. CUs and members

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ALEXANDRIA, Va. (5/12/10)--The National Credit Union Administration (NCUA) yesterday encouraged credit unions “to make loans with special terms and reduced documentation” to members that have been affected by the recent severe weather in Tennessee. The NCUA will also take its own actions in response to the floods, tornadoes, and severe thunderstorms which resulted in portions of that state being declared federal disaster areas by the President. The NCUA has offered to “reschedule routine examinations of affected credit unions,” to fully back lines of credit for credit unions through its National Credit Union Share Insurance Fund (NCUSIF), and to “make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility.” The NCUA also works to “determine the safety of credit union staff and operational condition of credit unions,” to “provide needed material and technical assistance to affected credit unions,” and to “return credit unions to normal operations as quickly as possible” following disaster conditions. For the full NCUA release, use the resource link.

CUNA Auto dealer BCFP exemption could kill balance

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WASHINGTON (5/12/10)--The Credit Union National Association (CUNA) urged lawmakers to oppose any regulatory reform amendments that would “upset the balance” of proposed consumer protections, as the trade group continued to provide input as reform process moves forward in the Senate. In a letter to Senate Banking Committee leaders Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.), CUNA opposed “excluding any non-depository institution provider of financial products, including auto dealers, from the rules promulgated” by the proposed bureau of consumer financial protection (BCFP). Doing so would “defeat the purpose of creating the new consumer regulator, would put credit unions at a competitive disadvantage in the new regulatory regime,” and could potentially “cause confusion for consumers of financial products,” the letter added. The BCFP would write and regulate rules for financial firms and, as currently constructed, would oversee credit unions with over $10 billion in assets. CUNA has asked that the National Credit Union Administration be allowed to retain full authority over the credit union system, regardless of asset size. Dodd, who introduced his Senate regulatory package earlier this year, said that he could back an amendment introduced by Sen. Susan Collins (R-Me.) that would instruct federal regulators to tighten capital requirements for financial institutions.

Compliance Which new rules apply to branded gift cards

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WASHINGTON (5/12/10)--Recent Federal Reserve amendments to Regulation E that restrict dormancy, inactivity and service fees and expiration dates that apply to store gift cards also cover card network-branded gift cards, according to the Credit Union National Association. In the May edition of CUNA’s compliance challenge, CUNA advises credit unions that the same rules that apply to gift certificates and general use prepaid cards that are used for personal, family or household purposes will also apply to branded cards, which are linked to companies such as Visa and Mastercard and are redeemable by retailers that accept the card brand. These cards are sold by many credit unions. The new rules governing gift cards will be implemented alongside a number of other provisions set forth by the Credit Card Accountability Responsibility and Disclosure Act of 2009. Under the CARD Act, gift cards that are sold on or after August 22 must "fully comply" with the new rules. However, CUNA adds, state laws that provide greater consumer protection regarding fees or expiration dates on gift cards will not be preempted by these new rules. Another Challenge Q&A explains that the Reg E overdraft rules do not require credit unions to send written confirmations to members when they elect to revoke their access to overdraft services for ATM and one-time debit card transactions. “The credit union only has to provide confirmation of the member's affirmative consent (opt-in) to the credit union’s overdraft service for ATM and one-time debit card transactions,” CUNA added. For this months compliance challenge, use the resource link.

Inside Washington (05/10/2010)

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* WASHINGTON (5/11/10)--The Obama administration last week revealed a plan to provide additional funding to state and local programs that assist small business owners. The plan, as reported in American Banker, would provide community banks with capital that could then be used to service small business loans. Sen. Carl Levin (D-Mich) called the program “a great step forward.” The Credit Union National Association is reviewing the proposal and should comment on it soon ... * WASHINGTON (5/11/10)--The chairman of the House Financial Services subcommittee on capital markets, insurance, and government-sponsored enterprises has scheduled a hearing today to study what caused the dramatic drop last Thursday of the stock market indices, which then quickly rebounded. In announcing his panel’s hearing, Rep. Paul Kanjorski said, “Within a matter of minutes, we faced a market that seemed just as volatile as it did in the fall of 2008.” He said the country cannot allow “technological problems, regulatory loopholes, or human blunders to spook the markets and cause panic.” He said that with the current use of complex technology, ”we should be able to make sure that our financial markets are effectively monitored and investors are protected.” He urged the U.S. Securities and Exchange Commission (SEC) to investigate this occurrence. “My hearing will also ensure that we thoroughly examine this situation in a public forum to maintain the integrity of the markets and promote investor confidence,” Kanjorski said. Witnesses will include: Mary L. Schapiro, chairman, SEC; Gary Gensler, chairman, U.S. Commodity Futures Trading Commission; Lawrence Leibowitz, chief operating officer, NYSE Euronext; Eric Noll, executive vice president, NASDAQ Transaction Services; and Terrence A. Duffy, executive chairman, CME Group Inc. …

Frank bill would maintain NFIP

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WASHINGTON (5/11/10)--Rep. Barney Frank (D-Mass.) has introduced a new bill to address issues surrounding the National Flood Insurance Program (NFIP). The legislation is the second part of a two-pronged approach that Frank said is meant to assure continuity and stability" in the flood insurance program and in the nation’s housing markets, while also focusing on "the comprehensive reform and long-term reauthorization of the NFIP.” Frank’s bill would extend the NFIP through Sept. 30, giving the U.S. Congress a greater period of time to work on legislation that would lengthen coverage under the NFIP for another five years. Frank is chairman of the House Financial Services Committee. H.R. 5114, which was introduced by Rep. Maxine Waters (D-Calif.) and approved by the committee last month, would extend the NFIP for a further five years. The NFIP is currently reliant on temporary month-to-month extensions and will expire on May 31 without further congressional action. The NFIP, which the finance committee has said provides "reliable, affordable flood insurance coverage for millions of American homes and businesses," is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. In a release, both Frank and Waters said that they were “hopeful” that the full House and later the Congress would “act promptly” to “provide much needed, comprehensive reform and long-term reauthorization of the NFIP.”

NMTC electronic allocation application is available

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WASHINGTON (5/11/10)--The Community Development Financial Institutions Fund (CDFI Fund) has followed its April introduction of the 2010 round of the New Markets Tax Credit (NMTC) Program by releasing the online Allocation Application and instructions. The NMTC application, which is now available through all myCDFIFund accounts, will be discussed during conference calls on May 13 and 19. Potential applicants can also learn more about the program and the application process via online instructions and an archived webcast, both of which are located on the CDFI Funds website. Credit unions are among those eligible to participate in the NMTC, which seeks to spur the investment of new private sector capital into low-income communities by permitting individual or corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments. Those investments must be made in designated Community Development Entities. Organizations that have received credits through the NMTC program, which has been given $5 billion in tax credit authority for 2010, have raised $15.8 billion in equity investments since the program began in 2002, the CDFI recently said. The Treasury's CDFI Fund allocates the tax credits annually through a competitive application process. For the full CDFI fund release, use the resource link.

Reg reform amendment process remains active

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WASHINGTON (5/11/10)--Debate over financial regulatory reform continues this week, and the Credit Union National Association (CUNA) continues to monitor the Senate situation for any developments of interest to credit unions. While over 180 amendments to this legislation have been filed, just under one-third of those would possibly directly impact credit unions, and many of the hundred will never come up for debate. Among the amendments being watched by CUNA are those that would significantly change the card payments system. CUNA opposes these amendments on interchange fees. CUNA President/CEO Dan Mica has said the proposed changes to current rules would "increase costs to and reduce choice for consumers" and would "give the largest merchants further leverage to harm small businesses, which are already under significant pressures in this difficult economy." CUNA has said that it would oppose the full regulatory package if these interchange provisions are added. CUNA has also opposed amendments thatwould:
* Exempt auto dealers from the regulations, examination and enforcement of a proposed new consumer bureau; and * Impose a limit on ATM fees.
CUNA strongly backs amendments that would make permanent the current increase in deposit and share insurance coverage enacted last year; would add the National Credit Union Administration chairman to the Financial Stability Oversight Council; and would increase the $10 billion examination and enforcement threshold for credit unions and community bank supervision by the consumer bureau. The full legislation should take another step toward a full Senate vote later this week if the Senate, as many are predicting, files cloture on Wednesday. Agreeing to cloture on this bill would limit the number of amendments that can be offered and would, in certain circumstances, raise the threshold necessary to secure passage to 60 votes. Elsewhere, House committees and subcommittees will hold hearings on TARP oversight, TARP-related fees, stock market conditions, and the use of credit-related information. A pair of finance-related House subcommittees will directly address regulatory reform in a Wednesday joint hearing entitled "Minorities and Women in Financial Regulatory Reform: The Need for Increasing Participation and Opportunities for Qualified Persons and Businesses."

Inside Washington (05/07/2010)

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* WASHINGTON (5/10/10)--The Senate shot down a measure that would cap the size of the nation’s largest banks. The measure, by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.), would have capped banks at 10% of the nation’s insured deposits. Banks’ nondeposit liabilities would have been limited to 2% of the nation’s gross domestic product and 3% for financial institutions that do not own a bank (American Banker May 7). Sen. Mark Warner (D-Va.) said that the cap was “not the appropriate restriction” because the existing regulatory reform bill already has a 10% total liability cap. Brown said his amendment was needed because institutions slated too big to fail are unfairly competitive in the market and too risky ... * WASHINGTON (5/10/10)--The U.S. was not ready for the financial crisis of 2007-2008 and underestimated its impact, according to Treasury Secretary Timothy Geithner and former Treasury Secretary Henry Paulson. Both testified before the Financial Crisis Inquiry Commission, which was appointed by Congress to determine the root of the crisis. Paulson said he knew of financial trouble when he took office in 2006 but was surprised by the severity of it (Reuters May 6). Geithner said there had been complacency in the financial system, which led participants and regulators to think they could handle the problems. If the government had acted more quickly to place constraints on risk-taking, the crisis would have been less severe, he said. Paulson added that he wished he’d been able to communicate with Americans better as to why the government bailouts were for them and not Wall Street. Also, Geithner warned against preventing banks from engaging in some risk-taking activity on behalf of customers ... * WASHINGTON (5/10/10)--The top Republican member of the House Financial Services Committee Friday proposed that the American public be given 30 days to review and comment upon the amended version of a financial regulatory reform bill prior to the U.S. Senate’s final vote on the package. Rep. Spencer Bachus, of Alabama, made the recommendation in letters sent to Senate Majority Leader Harry Reid (D-Nev.), Republican Leader Mitch McConnell, of Kentucky, and Sens. Christopher Dodd, of Connecticut, and Richard Shelby, of Alabama, the top Democrat and Republican, respectively, of the Senate Banking Committee. Bachus argued that the size and scope of the legislation “warrant a significant amount of transparency and time” for the public to read its content and assess its impact …

Senate bill gives balance to needed reforms CUNA

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WASHINGTON (5/10/10)—The Credit Union National Association (CUNA) Friday said that it believes the U.S. Senate's proposed financial regulatory reform bill, for the most part, presents a balanced approach to needed changes in the financial system. CUNA noted that much of the legislation's focus shows a recognition that the credit union system has performed well throughout the crisis and remains strong. As part of its ongoing efforts to affect the legislative discussion that is now forming the new structure of financial regulation into the future, CUNA sent a series of letters late last week to comment on the progress of a reform bill being debated in the U.S. Senate, S. 3217, the Restoring American Financial Stability Act (RAFSA). The U.S. House approved a similar bill last December, the Wall Street Reform and Consumer Protection Act (H.R. 4173). CUNA President/CEO Dan Mica wrote to all senators: “We do not dispute the need for financial regulatory reform legislation, and we recognize that much of this bill’s focus is on correcting regulatory shortcomings that have little or nothing to do with credit unions.“ He added that while CUNA does still have “a small number of outstanding concerns” with respect to the legislation, CUNA appreciates that many of the issues it has raised have been addressed. Currently, an issue that threatens to force CUNA to oppose the bill, Mica said, is the outcome of two amendments that would make changes to the card payments system. The amendments, SA 3769 and SA 3771, proposed by Sen. Richard Durbin (D-Ill.), would “increase costs and reduce choice for consumers” and would “give the largest merchants further leverage to harm small businesses, which are already under significant pressures in this difficult economy,” Mica wrote. If those provisions were to be adopted into the bills language, CUNA, Mica warned, would change course and “strongly oppose enactment of this legislation.” The bulk of the comprehensive Mica letter outlines the credit union provisions in S.3217 and notes the CUNA-backed changes that the federal lawmakers have made to original language. “While we will continue to seek improvements in this legislation, we believe that S. 3217 takes a balanced approach” and “corrects the shortcomings of the existing system that contributed to the crisis, protects the financial system from future systemic threats, and does not adversely affect those parts of the system that have performed well throughout the crisis.” Also on Friday, CUNA sent a letter to Senate lawmakers urging them to adopt an amendment (SA 3843) to permanently increase the National Credit Union Share Insurance Fund coverage amount to $250,000. Under the provisions of the Emergency Economic Stabilization Act, the higher share insurance coverage amount, like the federal bank insurance level, expires at the end of 2013. In a separate letter, CUNA continued to oppose an amendment that would impose an arbitrary, fifty-cents limit on the amount of an automatic teller machine (ATM) transaction. Use the resource link below to read the complete CUNA letters.

GAO issues recommendations on leveraging rules

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WASHINGTON (5/10/10)—The Government Accountability Office (GAO) Friday released results of a 2009 study of the role of leverage in the recent financial crisis and federal oversight of leverage. The results focus on three areas:
* How leveraging and de-leveraging by financial institutions may have contributed to the crisis; * How federal financial regulators limit the buildup of leverage; and * Limitations the crisis has revealed in regulatory approaches used to restrict leverage and regulatory proposals to address them.
The GAO made two recommendations. First, it backed the merit of establishing systemwide leverage oversight to a single regulator. Second, the GAO recommended that as Federal bank regulators assess the extent to which reforms under Basel II, the new risk-based capital framework, would address “risk evaluation and regulatory oversight concerns associated with advanced modeling approaches used for capital adequacy purposes.” Use the resource link to read the report.

Three banned from future CU work

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ALEXANDRIA, Va. (5/10/10)—Three former credit union employees have been banned from future work at any federally insured financial institution under prohibition orders issued by the National Credit Union Administration (NCUA). In its announcement Friday, the NCUA noted the following details of the enforcement orders:
* Mia Frances Chaney, a former employee of Magnolia FCU, Jackson, Miss., was convicted of bank fraud and sentenced to 12 months and a day imprisonment, three years supervised release, and she also was ordered to pay $46,063 in restitution; * Jolene Constantine, a former employee of Peoples 1st Choice FCU, Glen Rock, N.J., did not admit or deny fault, but signed an order of prohibition to avoid the time and cost of administrative litigation; and * Tammy Law, a former employee of Pioneer CU, Mountain Home, Idaho, was convicted of embezzlement and sentenced to 46 months imprisonment, 3 years supervised release and ordered to pay $564,215 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

May 17 is Form 990 deadline

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WASHINGTON (5/10/10)--State-chartered credit unions and other tax-exempt organizations must file their 990 forms by May 17 or risk losing their tax-exempt status, the Internal Revenue Service reminded on Friday. State-chartered credit unions are required to file Form 990 with the IRS annually, although a few states still permit group 990 filings. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes. Under the 2006 Pension Protection Act, Form 990-series information returns are due on the fifteenth day of the fifth month after an organization’s fiscal year ends, and many organizations use the calendar year as their fiscal year. That would make the form’s due-date May 15, but since that date falls this year on a Saturday, the IRS designated May 17 as the deadline. Organizations can request an extension of their filing date by filing Form 8868 by the original due date. However, the IRS warns in its release, absent a request for extension, there is no grace period from filing by the original due date. Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). Tax-exempts with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Any tax-exempt organization that has not filed the required form in three consecutive years automatically loses its tax-exempt status, effective as of the due date of the annual filing. The IRS revised its Form 990, also know as the Return of Organization Exempt from Income Tax, effective beginning the 2008 tax year. Use the resource links below for more information.

Inside Washington (05/06/2010)

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* WASHINGTON (5/7/10)--National Credit Union Administration (NCUA) board member Michael Fryzel met with credit union CEOs during the New York State Large Credit Union CEO Roundtable in West Point, N.Y. They discussed member business lending, 12-month examinations, alternative capital, corporate credit unions, legacy assets, mergers, private insurance, NCUA audits, NCUA’s Consumer Protection Office, community charters and state budgets. Fryzel emphasized the importance of open community between the regulator and the regulated. He also said NCUA is devoting time to dealing with corporate credit unions and its plan to remove the riskiest legacy assets from ongoing corporates. The roundtable began in the mid-1990s and takes place twice per year. CEOs from credit unions with $50 million or more in assets can attend ... * WASHINGTON (5/7/10)--Regional and community banks are dealing with some challenges as the number of those institutions considered weak is still increasing, and their loan losses likely will remain elevated this year, said Federal Reserve Board Chairman Ben Bernanke in a speech to the Federal Reserve Bank of Chicago Wednesday. “The most significant areas of concern are residential mortgages and commercial real estate loans. Also, with credit demand tepid and the economy still under stress, profitable lending opportunities have been relatively scarce for many of these banks,” he said. The Fed has not attempted to stress test the banks, but has worked with them individually to evaluate their capital needs. The results vary, but prospective losses indicate the institutions may need more capital over the next few years. However, smaller banks generally have fewer alternatives that big banks have to raise capital. “Recognizing these difficulties, we will continue to work closely with smaller banks as they rebuild their financial strength,” Bernanke said. “For example, we continue to receive numerous proposals from private equity investors to take stakes in regional and community banks, and over the past two years we have approved many of these proposals, including some that bring both new capital and management to the organization and some that provide new capital through minority investments” ... * WASHINGTON (5/7/10)--Sens. Jon Tester (D-Mont.) and Mark Pryor (D-Ark.) are working on a compromise to split the Fed’s authority with other regulators. Under their measure, the Fed would still oversee the nation’s 845 state-chartered banks, but its oversight of holding companies would go to other regulators (American Banker May 6). Under the current regulatory reform bill, the Fed would oversee only holding companies that have more than $50 billion in assets. Sen. Kay Bailey Hutchison (R-Texas) also has proposed an amendment that would allow the Fed to keep its authority over state-chartered banks and holding companies. She has 11 co-sponsors for her amendment ...

FTC tweaks merger rules

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WASHINGTON (5/7/10)--The Federal Trade Commission has granted waivers from the standard merger waiting period for several financial institution mergers and acquisitions, including a credit union merger between Detroit Edison CU and NuUnion CU. Credit unions are among the financial institutions that are covered by the FTC's pre-merger filing requirement under the Hart-Scott-Rodino Act Antitrust Act of 1976. The Hart-Scott-Rodino Act's pre-merger notification provisions require “persons contemplating certain mergers or acquisitions” to provide the FTC and the Assistant Attorney General of the United States with “advance notice” of the plans and “wait designated periods before consummation” of those plans. Portions of the act allow the FTC to “terminate this waiting period prior to its expiration” in certain cases. Credit unions may recall that the FTC, in 2007, increased its Hart-Scott-Rodino Act pre-merger filing fees for businesses, including credit unions. However, that fee applies to relatively few credit union mergers in practice because businesses below certain asset thresholds are exempted from the pre-merger filing requirement and many types of credit union assets do not count towards this threshold. Larger credit unions, however, are required to file the pre-merger notice with FTC and pay the filing fee. For the full FTC release, use the resource link.

CUNA urges senators opposition to interchange amendments

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WASHINGTON (5/7/10)--Finance industry representatives on Thursday joined the Credit Union National Association in expressing their “strong opposition to any amendments to S. 3217 that seek to affect interchange rates and the rules established by payment card networks.” Sen. Richard Durbin (D-Ill.) this week filed a pair of amendments. The first of these amendments would permit merchants to set a minimum or maximum transaction amount for payment by card, offer discounts for use of cash, check, debit card or stored-value card and offer discounts to customers to use a competing card network. That amendment is co-sponsored by Sens. Patrick Leahy (D-Vt.) and Mary Landrieu (D-La.). In the letter, which was delivered to members of the Senate on Thursday, CUNA said that this proposal would leave consumers “vulnerable to surprises” when their cards are rejected “because they spent too much or not enough” and when they learn that “their preferred cards will end up costing them more than other forms of payment.” A second amendment offered by Durbin would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure that they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction. “Every one of the approaches proposed by merchant lobbyists” would “deliver devastating consequences to community banks and credit unions, the very financial institutions most committed to building communities and serving local consumers,” the letter added. “By striking at the very core of our local economies, these small financial institutions will be squeezed out of the marketplace by a protected class of large retailers bent on reaping more profits.” The proposed changes would also weaken small institutions ability to compete with their larger counterparts, according to the letter. While CUNA opposes any changes to the current rules governing interchange, the letter urged legislators, at a minimum, to “appropriately examine the potentially devastating consequences of any amendments of this nature before taking action that would harm our nation’s small financial institutions, their customers, and our economic recovery.” The Senate has not held a hearing on interchange or its effects on financial or consumer markets. CUNA is also working with state credit union leagues and individual credit unions to oppose interchange through direct discussions with their individual Senators. Co-op financial services, a credit union service organization, has also urged its members to contact their Senators. Legislators have also introduced amendments that would limit the amount that financial institutions could charge for a single ATM transaction to 50 cents. Amendments that remove a proposed $50 billion resolution fund for failed entities and would prevent future taxpayer-funded bailouts of financial firms were also approved on Wednesday. CUNA continues to monitor the amendment process for any additional changes to S. 3217. For the full CUNA letter, use the resource link.

NCUA works on checks to St. Paul Croatia members

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ALEXANDRIA, Va. (5/7/10)—The National Credit Union Administration (NCUA) confirmed Thursday that progress is being made sorting out “recordkeeping difficulties” at the recently liquidated St. Paul Croatia FCU, and former members can expect reimbursement checks for their deposits soon. The Eastlake, Ohio-based credit was officially closed by the NCUA on May 1, about a week after it was placed into conservatorship by the agency. St. Paul's held $238.8 million in funds from 5,400 members at the time of its closing. The NCUA said it hoped to have checks to members “perhaps in the next few days.” When it closed the credit union, the NCUA said in a release that St Paul’s was insolvent and had "no prospects for restoring viable operations."

Inside Washington (05/05/2010)

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* WASHINGTON (5/6/10)--Support from lawmakers is growing for a provision that would tax the nation’s largest banks under regulatory reform legislation. Treasury Secretary Timothy Geithner endorsed adding the measure to legislation and he was supported by Sen. Charles Schumer (D-N.Y.), who said the tax would ensure banks pay for the costs of government bailouts (American Banker May 5). Geithner said the fee would apply to institutions with more than $50 billion in assets. Credit unions would not be included in the plan ... * WASHINGTON (5/6/10)--Banking industry representatives are fighting a plan that would force the divestment of swap desks. The provision would be counterproductive because it would increase risk by forcing derivatives trading to move offshore or to less regulated trading, such as hedge funds, representatives said. Sen. Judd Gregg (R-N.H.) is working on an amendment that would eliminate the measure but is concerned it may fail because of fears stemming from political backlash for supporting big banks. He said the provision would weaken the market and cause a “contraction in credit” (American Banker May 5). The provision, by Sen. Blanche Lincoln (D-Ark.), would require financial institutions that receive government support to divest their swaps trading desk ... * WASHINGTON (5/6/10)--Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.) are working on an amendment that would limit the size of the six biggest U.S. banks (American Banker May 5). The measure would impose a 10% cap on any bank holding company’s share of insured deposits. The amendment could be voted on this week as part of a debate on a regulatory reform bill by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) ... * WASHINGTON (5/6/10)--Sen. Arlen Specter (D-Pa.) is pushing for tougher penalties on investment bankers who mislead customers on investment decisions. Specter said a fine is insufficient because it can be calculated as a cost of doing business. Criminal convictions might be more appropriate, he said (American Banker May 5). Specter spoke during a hearing on Wall Street. He chairs the Senate Judiciary Subcommittee on Crime and Drugs ... * WASHINGTON (5/6/10)--The Treasury Department is poised today to generate about $172 million from its auction of warrants to buy shares of Comerica Inc. The Treasury expects to sell 11.48 million warrants to buy common shares for $15 each. The department received the warrants through the Troubled Asset Relief Program (Dow Jones May 5) ...

CU issues in Senate reform spotlight

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WASHINGTON (5/6/10)—The Senate on Wednesday agreed to remove language that would have required the proposed Bureau of Consumer Financial Protection (BCFP) to collect deposit account data by census tract. The agreement, which came in the form of an amendment from Sen. Olympia Snowe (R-Maine), was one of many that were voted on during a busy afternoon in the Senate. In a letter sent to Snowe earlier this week, the Credit Union National Association (CUNA) said that credit unions were concerned about the data collection provision, which was part of S. 3217, the Restoring American Financial Stability Act, as it "could increase credit unions' regulatory and reporting burdens." The Senate also approved amendments that remove a proposed $50 billion resolution fund for failed entities and would prevent future taxpayer-funded bailouts of financial firms. CUNA is also watching for amendments that would expand the scope of the authority of the prudential regulators to review regulations promulgated by the consumer bureau. Another amendment that would add the National Credit Union Administration to a proposed Financial Stability Oversight Council was offered by Sen. Susan Collins (R-Maine), and CUNA President/CEO Dan Mica in a letter thanked Collins for offering that amendment. In the letter, Mica said that while credit unions do not “impose any systemic risk on the overall financial system,” there would be “value in having the federal credit union regulator on the Council.” Collins’ bill would “ensure that the credit union regulator has a voice in the review of the consumer regulations,” the letter added. NCUA Chairman Debbie Matz also spoke in support of the Collins amendment, thanking the Senator and saying in a Wednesday letter that the amendment would “harmonize” the House and Senate financial regulatory reform proposals. For the CUNA letter, use the resource link.

House committee to discuss small biz help

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WASHINGTON (5/6/10)—The full House Financial Services Committee on May 11 will discuss initiatives to promote small business lending, jobs and economic growth. Witnesses for the hearing, which will be chaired by Committee leader Rep. Barney Frank (D-Mass.), have not been announced at press time. The Credit Union National Association has suggested that small businesses would be helped by lifting the current statutory cap on small business lending by credit unions from 12.25% to 25%. Doing so would inject as much as $10 billion in new funds into the economy and could create up to 108,000 jobs, at no cost to taxpayers, CUNA has said. Legislation that would lift the current MBL cap is active in both the House and Senate.

CULAC backs Ohio Indiana primary victors

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WASHINGTON (5/6/10)--A pair of Credit Union Legislative Action Council (CULAC)-backed primary candidates will move on to their respective general elections after declaring victory on Tuesday. In one such race, Ohio Lieutenant Governor Lee Fisher (D) overcame Secretary of State Jennifer Brunner (D) in the primary for the seat of retiring Sen. George Voinovich (R). Fisher won with 55% of the total vote. Fisher will face Republican Rob Portman, who has served in both the House and as former president George W. Bush’s Director of the Office of Management and Budget. Fisher won the Democratic primary with the support of the Ohio Credit Union League and the maximum contribution of $5,000 from CULAC. A recent poll published by Quinnipiac showed Fisher with a narrow three-point lead over Portman, and most observers anticipate it being among the most competitive races this fall. Congressional incumbent Dan Burton (R-Ind.), who was also supported by CULAC, narrowly defeated his six primary rivals this week, while aspiring House member and current Indiana State Senator Brandt Hershman (R) fell short in his bid to take on Democratic candidate David Sanders (D). Both Hershman and Burton were also supported by CULAC with maximum donations of $5,000 each, and had the full support of the Indiana Credit Union League. Tuesday's elections marked the first of twenty four primaries over the next two months, and many races will involve credit union allies, noted CUNA Vice President of Political Affairs Trey Hawkins. "We look forward to working with leagues and credit unions to help our friends win tight races."

Comments on NCUA small loan plan due July 6

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WASHINGTON (5/6/10)—Comments on the National Credit Union Administration’s (NCUA) proposal that would permit credit unions to charge higher interest rates on short-term, small dollar loans must be submitted to the Agency by July 6. The NCUA proposal, which was published for public comment in the Federal Register on Wednesday, would cap the interest rates and amounts for these types of loans at 10% above the NCUA's loan ceiling and $1,000, respectively. The NCUA has also stated that credit union members would only be permitted to take out one loan at a time, and that the maximum lifespan of that loan would be six months. The loans, which are consistent with the Federal Credit Union Act, would not roll over. However, late fees and default fees would be permitted. At last month’s NCUA board meeting, Chairman Debbie Matz asked that comments on the proposal focus on safety and soundness concerns. Matz also asked for credit unions that currently offer these types of loans to provide input on whatever difficulties they may have had. The Credit Union National Association’s (CUNA) federal credit union subcommittee will be reviewing the full NCUA proposal and will, along with the CUNA Lending Council, develop a response to the NCUA. For the NCUA proposal, as published in the Federal Register, use the resource link.

Inside Washington (05/04/2010)

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* WASHINGTON (5/5/10)--The Office of the Comptroller of the Currency (OCC) and financial institutions will likely face an uphill battle with Congress over federal preemption. The Senate regulatory reform bill--slated for debate this week--does not eliminate preemption, but requires the OCC to complete several legal steps before exempting national banks from complying with state law. One step includes proving that an existing federal rule addresses the issue a state aims to rectify (American Banker May 4). The Senate bill would revive the Barnett Supreme Court standard, which allowed the OCC to preempt state laws case-by-case. State regulators are pushing to revise the bill so that its language says state laws cannot be preempted unless they interfere with a national bank’s operations. Sen. Tom Carper (D-Del.) is working on an amendment to address the industry’s concerns about preemption. Financial observers also note that because community banks and other financial institutions have more pressing lobbying priorities, the OCC may be alone in its fight against federal preemption ...

Bank lending remains restrained Fed reports

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WASHINGTON (5/5/10)--The Federal Reserve’s survey of lending practices found that while “most banks kept their lending standards unchanged in the first quarter,” a number of banks “further tightened many terms on loans to businesses and households.” “For almost all loan categories for which the survey indicated a further net tightening of credit standards, the fraction of banks that reported having done so edged down and in a few categories banks eased standards, on net,” the Fed reported. “Modest net fractions” of banks “continued to tighten standards and terms on credit card loans,” the Fed continued. However, the Fed did find that many of the banks that reported easing their lending standards were larger banks, with those banks mainly easing their loan terms for “commercial and industrial loans to large and middle-market firms.” The Credit Union National Association (CUNA) has repeatedly promoted lifting the current cap on credit union member business lending to 25% of a credit union’s assets. According to CUNA estimates, such a lift would result in $10 billion in new capital for small businesses and create as many as 100,000 new jobs at no cost to American taxpayers. While the amount of small business loans would double to a total of 10% if the MBL cap is raised, the banking industry would still dominate the business loan market, with 90% of the total share of loans, CUNA has said. In a recent letter to their colleagues, a number of legislators said that "any future jobs-creation legislation that the House considers" should include MBL legislation. For the Fed release, use the resource link.

CUNA urges CU action against interchange amendments

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WASHINGTON (5/5/10)--The Credit Union National Association (CUNA) on Tuesday urged credit union advocates to contact their U.S. Senators and ask them to oppose amendments to financial regulatory reform legislation that would affect the debit and credit card system, Specifically, Sen. Richard Durbin (D-Ill.) filed a number of amendments on Monday, two of which are opposed by credit unions. The first amendment would permit merchants to set a minimum or maximum transaction amount for payment by card, offer discounts for use of cash, check, debit card or stored-value card and offer discounts to customers to use a competing card network. That amendment is co-sponsored by Sens. Patrick Leahy (D-Vt.) and Mary Landrieu (D-La.). A separate amendment would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction. According to CUNA, these amendments “are intended to disrupt the card payment system, with the goal of reducing the merchants’ financial responsibility for the benefits received from the card payment system.” In a release, CUNA said that it generally opposes “any amendment which would expand the scope of S. 3217, including new regulation of the card payment systems.” CUNA has provided a sample letter that can be sent to Senators, and hopes that this grassroots action will lead to at least 150 separate contacts with each Senator. (See related story: Reid pushes up timeline for reg reform vote.) For more on the CUNA action alert, use the resource link.

Reid pushes up timeline for reg reform vote

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WASHINGTON (5/5/10)--Sen. Harry Reid (D-Nev.) on Tuesday said that the U.S. Senate would finish the debate on financial regulatory reform by the end of next week, “one way or the other.” In opening statements delivered before the Senate on Tuesday, Reid also said that he would encourage his Senate Democratic colleagues to support a simple majority vote on the pending legislation, rather than requiring the 60 vote threshold that has become more common in the Senate. Under simple majority rules, legislation or amendments would only need 50 or more votes to count as passed. S. 3217, the Restoring American Financial Stability Act, would affect the credit union system by limiting the National Credit Union Administration's (NCUA) regulatory authority to credit unions with under $10 billion in assets. The regulatory reform package would also address many issues facing the broader financial services industry. Debate on a number of amendments began yesterday, and that debate should continue today. Among the amendments introduced for debate on the floor yesterday was a CUNA-supported amendment offered by Senator Olympia Snowe (R-Maine) which would eliminate a section of the bill requiring the collection of deposit account data. Other amendments which may be debated in the coming days include amendments that would establish a national usury ceiling, further regulate payday lending, and eliminate a payday loan alternative program from the bill. CUNA is also watching for a potential amendment that would add the NCUA to a proposed Financial Stability Oversight Council and give members of the Council greater ability to review regulations issued by the new consumer bureau. Amendments that would address interchange fees and exempt auto dealers from the scope of the consumer bureau regulation and enforcement may also be filed, and additional amendments could be filed as the debate continues to move forward. (See related story: CUNA urges CU action against interchange amendments.)

Compliance Internet gambling rules take effect June 1

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WASHINGTON (5/5/10)--The Credit Union National Association has confirmed with Federal Reserve Board staff that the Unlawful Internet Gambling Enforcement Act (UIGEA) regulations are on track for mandatory compliance on June 1. The Fed and the U.S. Treasury pushed back the compliance date from Dec. 1, 2009 to June 1, 2010 just days before credit unions were originally scheduled to comply with the new requirements. However, no additional delays are on the horizon. The rules require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted internet gambling transactions, or rely on those procedures established by the payments system. “Generally speaking, credit unions must have policies and procedures in place that demonstrate that they are exercising enhanced due diligence when opening business accounts to prevent illegal Internet gambling operations from setting up accounts at the credit union,” says CUNA director of compliance information Valerie Moss. “Credit unions must also have policies and procedures to prevent credit/debit card transactions from being made to unlawful Internet gambling operations – this applies to all accounts, not just business account owners,“ she added. The regulations designate payment systems that could be used in connection with a restricted Internet gambling transaction: automated clearing house (ACH) systems, card systems, check collection systems, money transmitting businesses, and wire transfer systems. Participants in card systems and money transfer business operators are covered by the rule. Many participants in ACH systems, check collection and wire transfer systems are exempt from the rule. However, the exemptions are complicated and contain a number of exceptions. Therefore, most credit unions are impacted by the rules to some extent, said Moss. For CUNA’s e-Guide to the internet gambling rules, use the resource link.

Region IIIs Swann is reassigned

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ALEXANDRIA, Va. (5/4/10)--The National Credit Union Administration (NCUA) late last week reassigned Alonzo Swann, who now serves as special assistant to Executive Director Dave Marquis. Swann had served as director of Region III, which counted St. Paul’s as one of the many credit unions under its supervision. Herb Yolles on Monday took over as Acting Region III Director. Yolles formerly served as the NCUA’s Region II Associate Regional Director of Operations. For the full NCUA release, use the resource link.

Inside Washington (05/03/2010)

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* WASHINGTON (5/4/10)--A bipartisan group of lawmakers is moving to restore the Federal Reserve Board’s powers over 800 state-chartered banks and 5,000 holding companies. Senate Banking Committee Chairman Christopher Dodd’s (D-Conn.) regulatory reform legislation would strip the Fed of its powers over all but 55 holding companies. Sen. Kay Bailey Hutchison (R-Texas) introduced an amendment Friday that would reverse Dodd’s measure. The amendment is backed by Sens. Bob Corker (R-Tenn.) and Jon Tester (D-Mont.), who said the Fed should “keep its window into smaller institutions” (American Banker May 3). Hutchison said excluding community banks from the Fed’s supervision would create inequality with larger institutions and give the impression that regulators believe some firms are too big to fail--which is what some lawmakers are “trying to get away from,” he said ... * WASHINGTON (5/4/10)--Last week, the Federal Reserve cleared its holdings of Commercial Paper Funding Facility (CPFF). The facility stopped lending on Feb. 1. CPFF was created in 2008 when companies struggled to obtain short-term loans, or commercial paper. Now, investors are willing to lend to companies that rely on commercial paper to pay their employees and landlords. Their need for such loans has fallen in the economy--and some have found better rates in the corporate bond market (Dow Jones May 3). Companies that used the CPFF include American Express Co., American International Group and General Electric Co. ... * WASHINGTON (5/4/10)--The Treasury Department sold PNC Financial Services Group Inc.’s bailout warrants for $324.2 million in the third-largest sale of TARP fund recipients’ warrants. The 16.9 million warrants from the banking company sold for $19.20 each, compared with the minimum bid of $15. PNC had granted the warrants and shares to Treasury in exchange for bailout money through the Troubled Asset Relief Program (TARP). The company received $7.58 billion in TARP funds, which it repaid in February ... * WASHINGTON (5/4/10)--The Federal Deposit Insurance Corp. (FDIC) has proposed to amend its regulations to revise how it assesses the premiums large financial institutions pay. The agency said it wishes to take a more forward view of risk and better account for losses the FDIC would incur if the institution fails (Federal Register May 3). Comments must be received in 60 days ...

NCUA shutters Ohio-based FCU

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ALEXANDRIA, Va. (5/4/10)--Eastlake, Ohio-based St. Paul’s Croatian FCU on Saturday was officially closed by the National Credit Union Administration (NCUA). The credit union was placed into conservatorship by the NCUA late last month. In a release, the NCUA said that the credit union was insolvent and had “no prospects for restoring viable operations.” St. Paul’s held $238.8 million in funds from 5400 members at the time of its closing. The NCUA will communicate directly with those members via a pending letter, and funds held by those members will be backed by the National Credit Union Share Insurance Fund’s typical $250,000 deposit guarantee. St. Paul’s was chartered in 1943 and served "members of St. Paul's Croatian Parish in Cleveland, Ohio, spouses of persons who died while in the field of membership of this credit union, employees of the credit union, persons retired as pensioners or annuitants from the credit union, members of their immediate families, and organizations of such persons." This was the ninth credit union to fail in 2010. For the NCUA release, use the resource link.

Amendments could alter Senate reg reform bill

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WASHINGTON (5/4/10)--Over 30 amendments to the financial regulatory restructuring bill have been filed as today the Senate, after numerous delays, resumes debate on the measure. The pending amendments, as the Senate resumes debate include a substitute amendment by Sens. Chris Dodd (D-Conn.) and Blanche Lincoln (D-Ark.) and a separate amendment by Sen. Barbara Boxer (D-Calif.) that would ensure that taxpayer funds are not used in any future corporate liquidations. The Credit Union National Association is also monitoring the Senate for any action on potential amendments that could establish a national usury ceiling, further regulate payday lending, eliminate portions of S. 3217 that require the collection of deposit account data, and eliminate a payday loan alternative program from the bill. CUNA is also watching for amendments that would expand the scope of the authority of the prudential regulators to review regulations promulgated by the consumer bureau, as well as possibly an amendment to add NCUA to the Financial Stability Oversight Council. Amendments that would address interchange fees and exempt auto dealers from the scope of the consumer bureau regulation and enforcement may also be filed, and additional amendments could be filed as the debate moves forward this week. CUNA commented directly on the amendment process on Monday, thanking Sen. Olympia Snowe (R-Maine) for introducing a measure that would prevent the proposed Bureau of Consumer Financial Protection (BCFP) from collecting deposit account data by census tract. In a letter sent to Snowe on Monday, CUNA said that credit unions have been concerned about the data collection provision, as it “could increase credit unions’ regulatory and reporting burdens.” Action in the House and committees will be considerably lighter, with the House on Thursday discussing H.R. 5019, the Home Star Energy Retrofit Act. The Senate Finance Committee later today will discuss proposed fees on financial institutions that take part in the Administration’s Troubled Asset Relief Program (TARP), with Treasury Secretary Tim Geithner scheduled to testify. A House Finance Committee subcommittee will also hold a hearing on debt and leverage later in the week. To see the full CUNA letter to Sen. Snowe, use the resource link.

Compliance Beware five UNtruths of new TIL rules

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WASHINGTON (5/4/10)--The Credit Union National Association (CUNA) is alerting credit union management to give appropriate time and attention to assuring timely compliance with new Federal Reserve Board changes that implement the first changes in a quarter of a century to Truth-in-Lending (TIL) Act rules. In the May 3 issue of Credit Union NewsWatch, CUNA warns of five ugly “Untruths” about new TIL rules. Stating five myths, misunderstandings and misperceptions about the new rules, CUNA then blasts those away with clear, concise, and accurate information. The “UNtruths” tackled in the article include:
* Untruth: Our data processor and forms supplier are taking care of everything that needs to be done by July 1 on the new Truth in Lending changes; * Untruth: The Federal Reserve Board didn’t eliminate multi-featured open-end lending (MFOEL), so my credit union doesn’t have to make any changes in our MFOEL program; * Untruth: We can make an automobile loan a closed-end sub-account under our open-end lending program; Untruth: We can just rely on our credit card vendor to handle all the Reg Z compliance requirements of the new Credit CARD rules; and Untruth: Once we get through next couple of months, things will settle down with Truth in Lending.
CUNA Senior Compliance Counsel Mike McLain reminds that in less than two months—by July 1—credit unions must make sure that open-end loans comply with the comprehensive changes made to account-opening disclosures, periodic statements, change-in-terms disclosures, and advertising, as well as credit card applications and solicitations. The article includes a box with extensive additional resources. Use the link below to access the article and resources.

Business group leader questions merchants interchange arguments

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WASHINGTON (5/4/10)—The president and chief executive of the Black Chamber of Commerce, writing to The New York Times, questioned why anyone would side with “giant retailers” on the issue of government controls on interchange fees. In his letter in the Sunday, May 3 issue, Harry C. Alford said those retailers are simply asking the U.S. Congress “to exempt them from antitrust laws so they can avoid paying market price for the use of credit card transactions.” He added, “The real truth: while everyone loves to grandstand when it comes to the credit card industry, its vast central nervous system drives much of today’s economy, allowing for efficient noncash transactions, better safety and recordkeeping, and convenience for consumers and retailers alike. The ‘interchange fee’ charged to retailers helps finance this global system.” Many retailers back legislation that would allow the government to limit the fees—known as interchange fees--that card issuers charge card processors for the ability to accept and process debit and credit card transactions. But Alford dismissed their claims that the "hidden" interchange fee system deprives customers of potential savings and cited a recent Government Accountability Office (GAO) report, which found, Alford noted, “that if giant retailers like Costco and Target are successful with this campaign, consumers could be hurt.” “Families would pay an estimated $400 a year that would otherwise be paid by the retailers. The retailers even opposed a (c)ongressional proposal that would ensure consumer benefit from any reduction in interchange fees,” Alford’s letter to the editor said. He was responding to an April 21 letter in support of the merchants’ position. Alford further pointed out that the GAO “found that retailers likely pocketed the $1 billion in ‘savings’ in Australia” when that government mandated lower interchange fees. The Credit Union National Association (CUNA), and other members of the Electronic Payment Coalition, have spoken in favor of the current interchange fee structure, saying that regulating interchange fees would adversely affect consumers, competition, and technological innovation. CUNA also has highlighted the positive aspects of interchange fees, saying that the fees help credit unions cover their expenses and losses while offering merchants a guaranteed source of payment at the time that the transaction is completed. CUNA continues its grassroots call to action urging credit unions to contact federal lawmakers to oppose efforts to change the interchange fee structure. As debate begins again this week on financial regulatory reform in the Senate, it is expected there will be amendments offered to address interchange issues. Also, in recent years there have been about a dozen merchant-backed interchange bills launched at the state level, but none of them have been enacted into law. Use the resource link below for resources on interchange.